Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals; Changes to Medicare Graduate Medical Education Payments for Teaching Hospitals; Changes to Organ Acquisition Payment Policies, 73416-73519 [2021-27523]

Agencies

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

[Federal Register Volume 86, Number 245 (Monday, December 27, 2021)]
[Rules and Regulations]
[Pages 73416-73519]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27523]



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Vol. 86

Monday,

No. 245

December 27, 2021

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 412 and 413





Medicare Program; Hospital Inpatient Prospective Payment Systems for 
Acute Care Hospitals; Changes to Medicare Graduate Medical Education 
Payments for Teaching Hospitals; Changes to Organ Acquisition Payment 
Policies; Final Rule

Federal Register / Vol. 86 , No. 245 / Monday, December 27, 2021 / 
Rules and Regulations

[[Page 73416]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 412 and 413

[CMS-1752-FC3]
RIN 0938-AU44


Medicare Program; Hospital Inpatient Prospective Payment Systems 
for Acute Care Hospitals; Changes to Medicare Graduate Medical 
Education Payments for Teaching Hospitals; Changes to Organ Acquisition 
Payment Policies

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

ACTION: Final rule with comment period.

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SUMMARY: This final rule with comment period finalizes certain 
provisions of the fiscal year 2022 IPPS/LTCH PPS proposed rule. These 
provisions implement policies based on legislative changes relative to 
Medicare graduate medical education (GME) for teaching hospitals 
provided by sections 126, 127, and 131 of the Consolidated 
Appropriations Act (CAA), 2021; and changes, clarifications, and 
codifications for Medicare organ acquisition payment policies relative 
to organ procurement organizations (OPOs), transplant hospitals, and 
donor community hospitals. In addition, this final rule with comment 
period solicits comments on certain GME issues to inform potential 
future rulemaking

DATES: 
    Effective date: This final rule with comment period is effective 
February 25, 2022.
    Comment date: To be assured consideration, comments on the graduate 
medical education provisions discussed in sections II.B.3.b.(5), 
II.B.3.d.(2). and II.B.5.e. of this final rule with comment period must 
be received at one of the addresses provided below, by February 25, 
2022.

ADDRESSES: In commenting, please refer to file code CMS-1752-FC3.
    Comments, including mass comment submissions, must be submitted in 
one of the following three 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-1752-FC3, 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-1752-FC3, Mail Stop C4-26-05, 7500 
Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 
    Donald Thompson, (410) 786-4487, and Michele Hudson, (410) 786-
4487, Graduate Medical Education Issues.
    Katie Lucas, (410) 786-7723, Amanda Michael, (410) 786-5834, and 
Kellie Shannon (410) 786-0416, Organ Acquisition Payment Issues.

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 
website as soon as possible after they have been received: https://www.regulations.gov. Follow the search instructions on that website to 
view public comments. CMS will not post on Regulations.gov public 
comments that make threats to individuals or institutions or suggest 
that the individual will take actions to harm the individual. CMS 
continues to encourage individuals not to submit duplicative comments. 
We will post acceptable comments from multiple unique commenters even 
if the content is identical or nearly identical to other comments.

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
    Under various statutory authorities, we either discuss continued 
program implementation or are making changes to the Medicare IPPS, 
other related payment methodologies and programs and other policies and 
provisions included in this rule. The purpose of and the statutory 
authority(ies) for these changes include, but are not limited to, the 
following:
     Section 1886(d) of the Social Security Act (the Act), 
which sets forth a system of payment for the operating costs of acute 
care hospital inpatient stays under Medicare Part A (Hospital 
Insurance) based on prospectively set rates, including indirect medical 
education (IME) payments under section 1886(d)(5)(B) of the Act.
     The Consolidated Appropriations Act of 2021 relating to 
payments to hospitals for direct graduate medical education (GME) and 
indirect medical education (IME) costs. Section 1886(a)(4) of the Act, 
which specifies that costs of approved educational activities are 
excluded from the operating costs of inpatient hospital services. 
Hospitals with approved graduate medical education (GME) programs are 
paid for the direct costs of GME in accordance with section 1886(h) of 
the Act.
     Organ acquisition costs are reimbursed to transplant 
hospitals and kidney acquisition costs are reimbursed to organ 
procurement organizations under reasonable cost principles under 
section 1861(v) of the Act. Under 42 U.S.C. 273(b), organ procurement 
organizations must have an agreement with the Secretary to be 
reimbursed under title XVIII of the Social Security Act for the cost to 
procure kidneys.
2. Summary of the Provisions
    The following is a summary of the provisions in this final rule 
with comment period.
a. Implementation of Sections 126, 127, and 131 of the Consolidated 
Appropriations Act (CAA) of 2021
    We are finalizing provisions to implement sections 126, 127, and 
131 of the CAA. Section 126(a) of the CAA amended section 1886(h) of 
the Act by adding a new section 1886(h)(9) of the Act requiring the 
distribution of additional residency positions to qualifying hospitals. 
Section 127 of the CAA amended section 1886(h)(4)(H)(iv) of the Act to 
specify that in the case of a hospital not located in a rural area that 
established or establishes a medical residency training program (or 
rural track) in a rural area, the hospital, and each such hospital 
located in a rural area that participates in such a training, is 
allowed to receive an adjustment to its full-time equivalent (FTE) 
resident limit. Section 131 of the CAA amended section 1886(h)(2)(F) of 
the Act to provide an opportunity to hospitals with such extremely low 
or $0 per resident amounts (PRAs) that meet certain criteria to reset 
and establish new PRAs if the hospital trains resident(s) in a cost 
reporting period

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beginning on or after enactment (December 27, 2020) and before the date 
that is 5 years after enactment (December 26, 2025). Section 131 of the 
CAA also amended section 1886(h)(4)(H)(i) of the Act to provide an 
opportunity for hospitals that meet certain criteria and that have very 
small FTE resident caps to replace those caps if the Secretary 
determines the hospital begins training residents in a new program 
beginning on or after enactment (December 27, 2020) and before 5 years 
after enactment (December 26, 2025).
    In addition, this final rule with comment period solicits comments 
on certain issues to inform potential future rulemaking. Specifically, 
for the implementation of section 126 of the CAA regarding distribution 
of residency slots, we seek comment on using a measure of health care 
provided outside of a Health Professional Shortage Area (HPSA) to HPSA 
residents (as discussed in section II.B.3.b.(5) of the preamble of this 
final rule with comment period). For purposes of prioritizing hospitals 
awarded residency positions under section 126, we seek comment on 
feasible alternatives to HPSA scores as a proxy for health disparities 
(as discussed in section II.B.3.d.(2) of the preamble of this final 
rule). In addition, for the implementation of section 131, we seek 
comment on the review process to determine eligibility for per resident 
amount or full-time equivalent cap resets in situations where a 
hospital disagrees with the information on the cost report, in 
particular from cost reports that are no longer within the 3-year 
reopening period (as discussed in section II.B.5.e. of the preamble of 
this final rule).
    We refer readers to section II.B.2. of this final rule with comment 
period for a summary of the provisions of sections 126, 127, and 131 of 
the CAA that we are implementing in this final rule with comment 
period.
b. Changes to Organ Acquisition Payment Policy
    We proposed changes pertaining to Medicare's share of organ 
acquisition costs transplanted into Medicare beneficiaries. We also 
proposed changes to longstanding Medicare organ acquisition payment 
policies and changes pertaining to charges for services provided to 
cadaveric organ donors by donor community hospitals. After considering 
the numerous public comments received, at this time, we are not 
finalizing our proposal with respect to the organ counting policy for 
Medicare's organ acquisition payment purposes and the research organ 
counting policy. We are finalizing other longstanding Medicare organ 
acquisition payment policies with some modifications. We are also 
finalizing rules with respect to Medicare-certified non-transplant 
hospitals and transplant hospitals' charges for hospital services 
provided to cadaveric donors, effective for cost reporting periods 
beginning on or after the effective date of this final rule with 
comment period.
3. Summary of Costs, Savings, Benefits, and Transfers
    The following table provides a summary of the costs, savings, 
benefits associated with the provisions described in section I.A.2. of 
this final rule.

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                               Description of costs, transfers, savings,
    Provision description                     and benefits
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Implementation of Sections     Section 1886(h) of the Act, as amended by
 126, 127, and 131 of the       sections 126, 127, and 131 of the CAA,
 Consolidated Appropriations    provides for the distribution of
 Act (CAA) of 2021.             additional residency positions (section
                                126), promotes a rural hospital GME
                                funding opportunity (section 127), and
                                requires resetting PRAs and FTE resident
                                caps for certain hospitals after hosting
                                medical resident rotators for short
                                durations (section 131). We refer
                                readers to section II.B. of this final
                                rule with comment period for a summary
                                of the provisions of sections 126, 127
                                and 131 that we are implementing in this
                                final rule. We estimate that our
                                implementation of section 126 of the CAA
                                will result in an estimated cost of
                                approximately $1.830 billion from FY
                                2023 through FY 2031. We estimate that
                                our implementation of section 127 of the
                                CAA will result in an estimated cost of
                                approximately $0.130 billion from FY
                                2024 through FY 2031. We estimate our
                                implementation of section 131 of the CAA
                                will result in an estimated cost of
                                approximately $1.380 billion from FY
                                2022 through FY 2031.
Changes to Organ Acquisition   We refer readers to sections II.C.2.a.
 Payment Policy.                through g. and i through m. and II.C.3.
                                of this final rule with comment period
                                for a summary of organ acquisition
                                payment policies we are implementing in
                                this final rule. These final policies
                                are not expected to have an impact on
                                expenditures. However, the provisions in
                                sections II.C.2.b., e. and l. of this
                                final rule with comment period to the
                                extent that any of these provisions may
                                have an impact on expenditures, that
                                impact is not estimable without the
                                availability of the appropriate cost
                                information to calculate such impact.
------------------------------------------------------------------------

B. Background

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
    Section 1886(d) of the Act sets forth a system of payment for the 
operating costs of acute care hospital inpatient stays under Medicare 
Part A (Hospital Insurance) based on prospectively set rates. Section 
1886(g) of the Act requires the Secretary to use a prospective payment 
system (PPS) to pay for the capital-related costs of inpatient hospital 
services for these ``subsection (d) hospitals.'' Under these PPSs, 
Medicare payment for hospital inpatient operating and capital-related 
costs is made at predetermined, specific rates for each hospital 
discharge. Discharges are classified according to a list of diagnosis-
related groups (DRGs).
    The base payment rate is comprised of a standardized amount that is 
divided into a labor-related share and a nonlabor-related share. The 
labor-related share is adjusted by the wage index applicable to the 
area where the hospital is located. If the hospital is located in 
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the 
DRG relative weight.
    If the hospital is training residents in an approved residency 
program(s), it receives a percentage add-on payment for each case paid 
under the IPPS, known as the indirect medical education (IME) 
adjustment. This percentage varies, depending on the ratio of residents 
to beds.
    The existing regulations governing payments to hospitals under the 
IPPS are located in 42 CFR part 412, subparts A through M. The existing 
regulations governing the IME adjustment are located in Sec.  412.105.

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2. Payments for Graduate Medical Education (GME)
    Under section 1886(a)(4) of the Act, costs of approved educational 
activities are excluded from the operating costs of inpatient hospital 
services. Hospitals with approved graduate medical education (GME) 
programs are paid for the direct costs of GME in accordance with 
section 1886(h) of the Act. The amount of payment for direct GME costs 
for a cost reporting period is based on the hospital's number of 
residents in that period and the hospital's costs per resident in a 
base year. The existing regulations governing direct GME payments to 
the various types of hospitals are located in 42 CFR part 413.
3. Issuance of Proposed Rulemaking
    In the FY 2022 IPPS/LTCH PPS proposed rule appearing in the May 10, 
2021 Federal Register (86 FR 25070), we set forth proposed payment and 
policy changes to the Medicare IPPS for FY 2022 operating costs and 
capital-related costs of acute care hospitals and certain hospitals and 
hospital units that are excluded from IPPS. In addition, we set forth 
proposed changes to the payment rates, factors, and other payment and 
policy-related changes to programs associated with payment rate 
policies under the LTCH PPS for FY 2022.
    The following is a general summary of the changes that we proposed 
to make related to the provisions addressed in this final rule with 
comment period.
    In section V. of the preamble of the FY 2022 IPPS/LTCH PPS proposed 
rule, we discussed proposed changes to certain provisions of the 
regulations in 42 CFR parts 412 and 413, including proposals to 
implement provisions of the Consolidated Appropriations Act relating to 
payments to hospitals for direct graduate medical education (GME) and 
indirect medical education (IME) costs.
    Section X. of the preamble of the FY 2022 IPPS/LTCH PPS proposed 
rule included proposed changes pertaining to Medicare's share of organ 
acquisition costs for organs transplanted into Medicare beneficiaries 
and the charges for services provided to cadaveric organ donors by 
donor community hospitals and transplants hospitals.
    In Appendix A of the FY 2022 IPPS/LTCH PPS proposed rule, we set 
forth an analysis of the impact the proposed changes for the provisions 
listed would have on affected acute care hospitals, IPPS-excluded 
hospitals and other entities.
    We received approximately 28,000 timely pieces of correspondence in 
response to the FY 2022 IPPS/LTCH PPS proposed rule. Approximately 570 
items of the proposed rule's correspondence are addressed in this final 
rule with comment period.
    We also note that the FY 2022 IPPS/LTCH PPS final rule appeared in 
the August 13, 2021 Federal Register (86 FR 44774) and that final rule 
included the vast majority of the provisions of the proposed rule. This 
final rule with comment period finalizes the graduate medical education 
and certain organ acquisition payment policy provisions of the FY 2022 
IPPS/LTCH PPS proposed rule. As noted in section II.A. of this final 
rule with comment period, we are not addressing the proposed revisions 
to the regulations relating to the treatment of section 1115 waiver 
days for purposes of the disproportionate share hospital (DSH) 
adjustment in this final rule with comment period. We expect to revisit 
the issue of section 1115 waiver days in future rulemaking, and we 
encourage stakeholders to review any future proposal on this issue and 
to submit their comments at that time. As noted in section II.C. of 
this final rule with comment period, we are not addressing the proposed 
revisions to the Medicare organ counting policy in this final rule with 
comment period. We may revisit the Medicare organ counting policy in 
future rulemaking, and we encourage stakeholders to review any future 
proposal on this issue and to submit their comments at that time.

II. Provisions of the Final Rule With Comment Period

A. Medicare Disproportionate Share Hospital (DSH) Payments: Counting 
Days Associated With Section 1115 Demonstration Projects in the 
Medicaid Fraction (Sec.  412.106)

    In the FY 2022 IPPS/LTCH PPS proposed rule, we proposed revisions 
to the regulation relating to the treatment of section 1115 waiver days 
for purposes of the DSH adjustment (86 FR 25457 through 25459). In the 
FY 2022 IPPS/LTCH PPS final rule, we stated that due to the number and 
nature of the comments that we received on our proposal, we intended to 
address the public comments in a separate document (86 FR 45249). We 
thank the commenters for their input on the proposal, but after further 
consideration of the issue, we have determined not to move forward with 
the current proposal. We expect to revisit the issue of section 1115 
waiver days in future rulemaking, and we encourage stakeholders to 
review any future proposal on this issue and to submit their comments 
at that time.

B. Payment for Indirect and Direct Graduate Medical Education Costs 
(Sec. Sec.  412.105 and 413.75 Through 413.83)

1. Background
    Section 1886(h) of the Act, as added by section 9202 of the 
Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L. 
99-272) and as currently implemented in the regulations at 42 CFR 
413.75 through 413.83, establishes a methodology for determining 
payments to hospitals for the direct costs of approved graduate medical 
education (GME) programs. Section 1886(h)(2) of the Act sets forth a 
methodology for determining a hospital-specific base-period per 
resident amount (PRA) that is calculated by dividing a hospital's 
allowable direct costs of GME in a base period by its number of full-
time equivalent (FTE) residents in the base period. The base period is, 
for most hospitals, the hospital's cost reporting period beginning in 
FY 1984 (that is, October 1, 1983 through September 30, 1984). The base 
year PRA is updated annually for inflation. In general, Medicare direct 
GME payments are calculated by multiplying the hospital's updated PRA 
by the weighted number of FTE residents working in all areas of the 
hospital complex (and at nonprovider sites, when applicable), and the 
hospital's Medicare share of total inpatient days.
    Section 1886(d)(5)(B) of the Act provides for a payment adjustment 
known as the indirect medical education (IME) adjustment under the IPPS 
for hospitals that have residents in an approved GME program, in order 
to account for the higher indirect patient care costs of teaching 
hospitals relative to nonteaching hospitals. The regulations regarding 
the calculation of this additional payment are located at 42 CFR 
412.105. The hospital's IME adjustment applied to the DRG payments is 
calculated based on the ratio of the hospital's number of FTE residents 
training in either the inpatient or outpatient departments of the IPPS 
hospital to the number of inpatient hospital beds.
    The calculation of both direct GME payments and the IME payment 
adjustment is affected by the number of FTE residents that a hospital 
is allowed to count. Generally, the greater the number of FTE residents 
a hospital counts, the greater the amount of Medicare direct GME and 
IME payments the hospital will receive. In an attempt to end the 
implicit incentive for hospitals to increase the number of FTE 
residents, Congress, through the Balanced Budget Act of 1997 (Pub. L.

[[Page 73419]]

105-33), established a limit on the number of allopathic and 
osteopathic residents that a hospital could include in its FTE resident 
count for direct GME and IME payment purposes. Under section 
1886(h)(4)(F) of the Act, for cost reporting periods beginning on or 
after October 1, 1997, a hospital's unweighted FTE count of residents 
for purposes of direct GME may not exceed the hospital's unweighted FTE 
count for direct GME in its most recent cost reporting period ending on 
or before December 31, 1996. Under section 1886(d)(5)(B)(v) of the Act, 
a similar limit based on the FTE count for IME during that cost 
reporting period is applied, effective for discharges occurring on or 
after October 1, 1997. Dental and podiatric residents are not included 
in this statutorily mandated cap.
    Section 422 of Public Law 108-173, the Medicare Modernization Act 
(MMA), provided for the redistribution of unused residency positions 
effective for portions of cost reporting periods beginning on or after 
July 1, 2005. The policy implementing section 422 of the MMA was 
included in the August 11, 2004 FY 2005 IPPS final rule (69 FR 49112 
through 49169).
    The Affordable Care Act made a number of statutory changes relating 
to the determination of a hospital's FTE resident limit for direct GME 
and IME payment purposes and the manner in which FTE resident limits 
are calculated and applied to hospitals under certain circumstances.
    Section 5503(a)(4) of the Affordable Care Act added a new section 
1886(h)(8) to the Act to provide for the reduction in FTE resident caps 
for direct GME under Medicare for certain hospitals training fewer 
residents than their caps, and to authorize the redistribution of the 
estimated number of excess FTE resident slots to other qualified 
hospitals. In addition, section 5503(b) of the Affordable Care Act 
amended section 1886(d)(5)(B)(v) of the Act to require the application 
of the section 1886(h)(8) of the Act provisions in the same manner to 
the IME FTE resident caps. The policy implementing section 5503 of the 
Affordable Care Act was included in the November 24, 2010 CY 2011 OPPS/
ASC final rule with comment period (75 FR 72147 through 72212) and the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53424 through 53434). Section 
5506(a) of the Affordable Care Act amended section 1886(h)(4)(H) of the 
Act to add a new clause (vi) that instructs the Secretary to establish 
a process by regulation under which, in the event a teaching hospital 
closes, the Secretary will permanently increase the FTE resident caps 
for hospitals that meet certain criteria up to the number of the closed 
hospital's FTE resident caps. The policy implementing section 5506 of 
the Affordable Care Act was included in the November 24, 2010 CY 2011 
OPPS/ASC final rule with comment period (75 FR 72212 through 72238), 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53434 through 53448), and 
the FY 2015 IPPS/LTCH final rule (79 FR 50122 through 50140).
2. Provisions of the Consolidated Appropriations Act, 2021
    The Consolidated Appropriations Act, 2021 (CAA), division CC, 
contained 3 provisions affecting Medicare direct GME and IME payments 
to teaching hospitals. Section 126 of the CAA makes available 1,000 new 
Medicare-funded GME positions (but not more than 200 new positions for 
a fiscal year), to be distributed beginning in fiscal year 2023, with 
priority given to hospitals in 4 statutorily-specified categories. 
Section 127 of the CAA makes statutory changes relating to the 
determination of both an urban and rural hospital's FTE resident limit 
for direct GME and IME payment purposes with regard to residents 
training in an accredited rural training track (RTT), and the 3-year 
rolling average set out at section 1886(h)(4)(G)(i) of the Act used to 
calculate payments for these hospitals. Section 131 of the CAA makes 
statutory changes to the determination of direct GME PRAs and direct 
GME and IME FTE resident limits of hospitals that hosted a small number 
of residents for a short duration. We provided detailed proposals for 
implementing these three CAA provisions in the FY 2022 IPPS/LTCH PPS 
proposed rule (86 FR 25502 through 25523). In this section of this 
final rule with comment period, we discuss our proposals, respond to 
public comments received, and provide our final policies.
3. Distribution of Additional Residency Positions Under the Provisions 
of Section 126 of Division CC of the Consolidated Appropriations Act, 
2021 (CAA)
a. Overview
    As discussed in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 
25503 through 25504), section 126(a) of the CAA amended section 1886(h) 
of the Act by adding a new section 1886(h)(9) of the Act requiring the 
distribution of additional residency positions to qualifying hospitals. 
Section 1886(h)(9)(A) of the Act requires that for FY 2023, and for 
each succeeding fiscal year until the aggregate number of full-time 
equivalent (FTE) residency positions distributed is equal to 1,000, the 
Secretary shall initiate separate rounds of applications from hospitals 
for these additional residency positions. The Secretary is required, 
subject to certain provisions in the law, to increase the otherwise 
applicable resident limit for each qualifying hospital that submits a 
timely application by the number of positions that may be approved by 
the Secretary for that hospital. The Secretary is required to notify 
hospitals of the number of positions distributed to them by January 31 
of the fiscal year of the increase, and the increase is effective 
beginning July 1 of that fiscal year. Section 1886(h)(9)(A) of the Act 
also limits the aggregate number of such positions made available in a 
single fiscal year across all hospitals to no more than 200.
    In determining the qualifying hospitals for which an increase is 
provided, section 1886(h)(9)(B) of the Act requires the Secretary to 
take into account the ``demonstrated likelihood'' of the hospital 
filling the positions made available within the first 5 training years 
beginning after the date the increase would be effective, as determined 
by the Secretary.
    Section 1886(h)(9)(B) of the Act also requires a minimum 
distribution for certain categories of hospitals. Specifically, the 
Secretary is required to distribute at least 10 percent of the 
aggregate number of total residency positions available to each of four 
categories of hospitals. Stated briefly, and discussed in greater 
detail later in this final rule with comment period, the categories are 
as follows: (1) Hospitals located in rural areas or that are treated as 
being located in a rural area (pursuant to sections 1886(d)(2)(D) and 
1886(d)(8)(E) of the Act); (2) hospitals in which the reference 
resident level of the hospital is greater than the otherwise applicable 
resident limit; (3) hospitals in states with new medical schools or 
additional locations and branches of existing medical schools; and (4) 
hospitals that serve areas designated as Health Professional Shortage 
Areas (HPSAs). Section 1886(h)(9)(F)(ii) of the Act defines a 
qualifying hospital as a hospital in one of these four categories.
    Section 1886(h)(9)(C) of the Act places certain limitations on the 
distribution of the residency positions. First, a hospital may not 
receive more than 25 additional FTE residency positions in total. 
Second, no increase in the otherwise applicable resident limit of a 
hospital may be made unless the hospital agrees to increase the total 
number of FTE residency positions under the approved medical residency

[[Page 73420]]

training program of the hospital by the number of positions made 
available to that hospital.
b. Determinations Required for the Distribution of Residency Positions
(1) Determination That a Hospital Has a ``Demonstrated Likelihood'' of 
Filling the Positions
    Section 1886(h)(9)(B)(i) of the Act directs the Secretary to take 
into account the ``demonstrated likelihood'' of the hospital filling 
the positions made available within the first 5 training years 
beginning after the date the increase would be effective, as determined 
by the Secretary.
    Section 1886(h)(9)(A)(iii)(II) of the Act requires that the 
increase would be effective beginning July 1 of the fiscal year of the 
increase. For FY 2023, this means the additional positions would be 
effective July 1, 2023.
    In the FY 2022 IPPS/LTCH PPS proposed rule, we proposed that the 
application deadline for the additional positions available for a 
fiscal year would be January 31 of the prior fiscal year. However, as 
discussed later in this final rule with comment period, we are 
finalizing a deadline of March 31, such that the application deadline 
for the additional positions available for a fiscal year will be March 
31 of the prior fiscal year. Accordingly, for FY 2023, all references 
in section II.B.3. of this final rule with comment period to the 
application deadline are references to the application deadline of 
March 31, 2022.
    We proposed that a hospital would show a ``demonstrated 
likelihood'' of filling the additional positions (sometimes 
equivalently referred to as slots) for which it applies by 
demonstrating that it does not have sufficient room under its current 
FTE resident cap(s) to accommodate a planned new program or expansion 
of an existing program.
    In order to demonstrate that it does not have sufficient room under 
its current FTE resident cap(s), we proposed that a hospital would be 
required to submit copies of its most recently submitted Worksheets E, 
Part A and E-4 from the Medicare cost report (CMS-Form-2552-10) as part 
of its application for an increase to its FTE resident cap.
    We proposed that a hospital would demonstrate and attest to a 
planned new program or expansion of an existing program by meeting at 
least one of the following two criteria:
     ``Demonstrated Likelihood'' Criterion 1 (New 
Residency Program). The hospital does not have sufficient room under 
its FTE resident cap, and the hospital intends to use the additional 
FTEs as part of a new residency program that it intends to establish on 
or after the date the increase would be effective (that is, a new 
program that begins training residents at any point within the 
hospital's first 5 training years beginning on or after the date the 
increase would be effective).
    Under ``Demonstrated Likelihood'' Criterion 1, we proposed that the 
hospital would be required to meet at least one of the following 
conditions as part of its application:
    [squ] Application for approval of the new residency program has 
been submitted to the ACGME or the American Board of Medical 
Specialties (ABMS) by the application deadline for that year.
    [squ] The hospital has submitted an institutional review document 
or program information form concerning the new residency program in an 
application for approval of the new program by the application deadline 
for that year.
    [squ] The hospital has received written correspondence by the 
application deadline for that year from the ACGME or ABMS acknowledging 
receipt of the application for the new residency program, or other 
types of communication from the accrediting bodies concerning the new 
program approval process (such as notification of site visit).
     ``Demonstrated Likelihood'' Criterion 2 
(Expansion of an Existing Residency Program). The hospital does not 
have sufficient room under its FTE resident cap, and the hospital 
intends to use the additional FTEs to expand an existing residency 
training program within the hospital's first 5 training years beginning 
on or after the date the increase would be effective. Under 
``Demonstrated Likelihood'' Criterion 2, we proposed that the hospital 
would be required to meet at least one of the following conditions as 
part of its application:
    [squ] The hospital has approval by the application deadline from an 
appropriate accrediting body (the ACGME or ABMS) to expand the number 
of FTE residents in the program.
    [squ] The hospital has submitted by the application deadline an 
institutional review document or program information form for the 
expansion of the existing residency training program.
    Under ``Demonstrated Likelihood'' Criterion 2, we proposed that the 
hospital would be applying for an increase in its FTE resident cap in 
order to expand an existing residency program. We proposed that this 
would mean that as of the application deadline the hospital was either 
already training residents in this program, or, if the program existed 
at another hospital as of that date, the residents would begin to 
rotate at the applying hospital on or after the effective date of the 
increase.
    We note that section 1886(h)(9)(C)(ii) of the Act requires that if 
a hospital is awarded positions, that hospital must increase the number 
of its residency positions by the amount the hospital's FTE resident 
caps are increased based on the newly awarded positions under section 
126 of CAA. We therefore proposed that a hospital must, as part of its 
application, attest to increase the number of its residency positions 
by the amount the hospital's FTE resident caps are increased based on 
any newly awarded positions.
    We present a summary of the public comments and our responses to 
our proposals related to the determination that a hospital has a 
``demonstrated likelihood'' of filling the positions awarded under 
section 126 of the CAA.
    Comment: Several commenters expressed support for our proposed 
``Demonstrated Likelihood'' criteria.
    Response: We thank the commenters for their support.
    Comment: A commenter supported our proposal to award additional 
residency positions only for newly-created positions, rather than for 
existing positions that a hospital may already be funding in excess of 
its statutory FTE caps. Conversely, another commenter expressed concern 
that hospitals training residents over their caps are neglected by our 
proposed ``Demonstrated Likelihood'' criteria. This commenter 
questioned why such hospitals were not being prioritized in the 
distribution of additional residency positions, given the commenter's 
belief that there is almost certain likelihood that additional 
residency positions awarded to these hospitals would be immediately 
filled and utilized.
    Response: Section 1886(h)(9)(C)(ii) of the Act, as added by section 
126 of the CAA, prohibits an increase in the otherwise applicable 
resident limit of a hospital unless the hospital agrees to increase its 
total number of FTE residency positions. Our proposed ``Demonstrated 
Likelihood'' criteria thus reflect the requirements set forth in the 
statute, which preclude the use of additional residency positions to 
fund existing positions. In response to the comment that hospitals that 
do not have sufficient room under their current FTE resident cap(s) 
(that is, hospitals that are training at or above their Medicare GME 
cap(s) and do not have any remaining

[[Page 73421]]

Medicare funding for positions to train additional FTE residents) 
should be prioritized in the distribution of additional residency 
positions, we note, as discussed in this section, that HPSA scores, 
while not a perfect measure, provide the best prioritization approach 
available at this time. In addition, and as discussed later in this 
section, in order to be eligible for prioritization based on HPSA 
scores, hospitals must first qualify under one or more of Category One, 
Category Two, Category Three, or Category Four. Category Two consists 
of hospitals in which the reference resident level of the hospital is 
greater than the otherwise applicable resident limit. Therefore, 
hospitals that do not have sufficient room under their current FTE 
resident caps, may qualify to be prioritized for the distribution of 
additional residency positions based on our prioritization of 
applications from hospitals based on HPSA score final policy, discussed 
further in this section.
    Comment: A commenter suggested that hospitals should be able to 
meet the ``demonstrated likelihood'' requirement by showing that the 
number of residency positions currently filled for one or more programs 
at the hospital is less than the number of residents for which those 
programs have been accredited by the ACGME. Another commenter made a 
similar point by requesting that the number of residency positions 
distributed to a hospital take into account the hospital's ability to 
use those residency positions immediately through existing programs. 
Another commenter stated that the reason a hospital has unfilled 
accredited residency positions may be that the hospital would be unable 
to train the full complement of residents without exceeding its FTE 
caps; the commenter added that such hospitals would not actually need 
to establish a new residency program or expand an existing program in 
order to quickly put any additional residency positions awarded to them 
to use.
    Response: We agree that a hospital should be able to meet the 
``demonstrated likelihood'' requirement by showing that it has 
unfilled, previously accredited positions in its residency program, and 
that it is now seeking to fill those positions, as long as the hospital 
does not have sufficient room under its FTE resident cap(s) for the 
planned expansion. Therefore, we are modifying ``Demonstrated 
Likelihood'' Criterion 2 (Expansion of an Existing Residency Program) 
to include the scenario where a hospital currently has unfilled 
positions in its residency program that have previously been approved 
by the ACGME and is now seeking to fill those positions.
    Comment: Several commenters recommended that rural hospitals should 
only be awarded additional residency positions for the purpose of 
expanding existing programs, since such hospitals can already receive a 
cap adjustment whenever they establish a new program.
    Response: We believe rural hospitals should be given the option of 
receiving a permanent cap increase for a new program either under 
section 126 of the CAA, or under the existing 5-year cap-building 
process (42 CFR 413.70(e)). A rural hospital making this decision 
should carefully consider which option is more appropriate to its 
specific scenario.
    Comment: A commenter expressed concern that many small rural 
hospitals would be unlikely to meet the proposed requirements for 
residency positions under ``Demonstrated Likelihood'' Criterion 2 
(Expansion of an Existing Residency Program), since such hospitals 
often restrict the size of their programs for reasons other than 
funding, for example, because of teaching capacity or recruiting 
challenges. The commenter stated that only large rural hospitals with 
established programs would be likely to meet the proposed requirements 
under ``Demonstrated Likelihood'' Criterion 2.
    Response: We appreciate the concerns raised by the commenter about 
unique challenges that may be faced by small rural hospitals. However, 
the statute requires us to take into account the ``demonstrated 
likelihood'' of a hospital filling the positions. Expansion of an 
existing program is a valid way for a hospital to demonstrate the 
likelihood of filling the positions. We note that since we are adopting 
a criterion that 50 percent of the program's training take place in the 
HPSA and not at the applicant hospital as proposed (which is discussed 
in section II.B.3.d. of this final rule with comment period), a rural 
hospital may be able to more easily partner with other participating 
training sites to meet the 50 percent criterion and be able to apply 
(and meet the requirements for ``demonstrated likelihood'') for the 
amount of FTEs that will be training at its (the rural) hospital.
    Comment: Several commenters requested that we update our proposed 
``Demonstrated Likelihood'' criteria to be consistent with the 
terminology currently used by the ACGME and the ABMS. Specifically, 
commenters noted that the ACGME ``accredits'' new residency programs, 
whereas we used the term ``approval'' in our proposed criteria. In 
addition, the ACGME no longer employs the terms ``institutional review 
document'' or ``program information form.'' Rather, if an existing 
ACGME-accredited program seeks to expand, the program director would 
submit a request to the relevant specialty Review Committee for a 
permanent complement increase. Finally, commenters noted that ACGME 
accreditation deadlines occur multiple times per year, whereas in our 
proposal we referred to requirements that must be satisfied ``by the 
application deadline for that year''.
    Response: We thank commenters for bringing the terminology issues 
to our attention and are revising the language accordingly as 
summarized below. However, we believe that the commenters have 
misinterpreted our references to the ``application deadline'' as 
references to the ACGME accreditation deadlines. In the context of our 
proposed ``Demonstrated Likelihood'' criteria, the ``application 
deadline'' refers to the deadline for submitting applications to CMS 
for additional residency positions under section 126 of the CAA, not 
the deadline for submitting program materials to the ACGME or the ABMS, 
as the commenters stated. We are therefore also clarifying that the 
phrase ``application deadline'' used in this context refers to the 
deadline for submitting applications under section 126 of the CAA for a 
given fiscal year. (As noted previously, in this final rule with 
comment period we are revising this deadline to March 31 of the prior 
fiscal year.)
    In summary, after consideration of the public comments received, we 
are finalizing our proposed policy regarding the determination that a 
hospital has demonstrated a likelihood of filling the positions for 
``Demonstrated Likelihood'' Criterion 1 (New Residency Program) with 
modifications. Under the policy finalized in this final rule with 
comment period, as we proposed, a hospital will show a ``demonstrated 
likelihood'' of filling the additional positions (sometimes 
equivalently referred to as slots) for which it applies by 
demonstrating that it does not have sufficient room under its current 
FTE resident cap(s) to accommodate a planned new program or expansion 
of an existing program. To do so, as we proposed, we are finalizing a 
policy that a hospital will submit copies of its most recently 
submitted Worksheets E, Part A and E-4 from the Medicare cost report 
(CMS-Form-2552-10) as part of its application for an increase to its 
FTE resident cap, and will demonstrate and attest to a planned new 
program or

[[Page 73422]]

expansion of an existing program by meeting at least one of two 
``Demonstrated Likelihood'' criteria.
    Specifically, we are finalizing the following for ``Demonstrated 
Likelihood'' Criterion 1:
     ``Demonstrated Likelihood'' Criterion 1 (New 
Residency Program). The hospital does not have sufficient room under 
its FTE resident cap, and the hospital intends to use the additional 
FTEs as part of a new residency program that it intends to establish on 
or after the date the increase would be effective (that is, a new 
program that begins training residents at any point within the 
hospital's first 5 training years beginning on or after the date the 
increase would be effective). Under ``Demonstrated Likelihood'' 
Criterion 1, the hospital will be required to meet at least one of the 
following conditions as part of its application:
    [squ] Application for accreditation of the new residency program 
has been submitted to the ACGME (or application for approval of the new 
residency program has been submitted to the ABMS) by the application 
deadline.
    [squ] The hospital has received written correspondence from the 
ACGME (or ABMS) acknowledging receipt of the application for the new 
residency program, or other types of communication concerning the new 
program accreditation or approval process (such as notification of site 
visit) by the application deadline.
    For ``Demonstrated Likelihood'' Criterion 2, we are finalizing the 
following:
     ``Demonstrated Likelihood'' Criterion 2 
(Expansion of an Existing Residency Program). The hospital does not 
have sufficient room under its FTE resident cap, and the hospital 
intends to use the additional FTEs to expand an existing residency 
training program within the hospital's first 5 training years beginning 
on or after the date the increase would be effective. Under 
``Demonstrated Likelihood'' criterion 2, the hospital will be required 
to meet at least one of the following conditions as part of its 
application:
    [squ] The hospital has received approval by the application 
deadline from an appropriate accrediting body (the ACGME or ABMS) to 
expand the number of FTE residents in the program.
    [squ] The hospital has submitted a request by the application 
deadline for a permanent complement increase of the existing residency 
program.
    [squ] The hospital currently has unfilled positions in its 
residency program that have previously been approved by the ACGME and 
is now seeking to fill those positions.
    We are also finalizing, as we proposed, a policy that under 
``Demonstrated Likelihood'' Criterion 2, the hospital is applying for 
an increase in its FTE resident cap because it is expanding an existing 
residency program. This means that as of the application deadline the 
hospital is either already training residents in this program, or, if 
the program exists at another hospital as of that date, the residents 
will begin to rotate at the applying hospital on or after the effective 
date of the increase. In addition, we note that section 
1886(h)(9)(C)(ii) of the Act requires that if a hospital is awarded 
positions, that hospital must increase the number of its residency 
positions by the amount the hospital's FTE resident caps will increase, 
based on the newly awarded positions under section 126 of CAA. 
Therefore, we will require that a hospital must, as part of its 
application, attest to increase the number of its residency positions 
by the amount the hospital's FTE resident caps are increased based on 
any newly awarded positions in accordance with the provisions of 
section 1886(h)(9)(B)(i) of the Act.
(2) Determination of Hospitals That Are Located in a Rural Area or Are 
Treated as Being Located in a Rural Area (Category One)
    Section 1886(h)(9)(B)(ii) of the Act requires the Secretary to 
distribute not less than 10 percent of resident positions available for 
distribution to each of four categories of hospitals. Under section 
1886(h)(9)(B)(ii)(I) of the Act, the first of these categories consists 
of hospitals that are located in a rural area (as defined in section 
1886(d)(2)(D) of the Act) or are treated as being located in a rural 
area pursuant to section 1886(d)(8)(E) of the Act. We refer to this 
category as Category One.
    Section 1886(d)(2)(D)(ii) of the Act defines a rural area as any 
area outside a Metropolitan Statistical Area (MSA). Under the existing 
regulations at Sec.  412.64(b)(1)(ii), an ``urban area'' means an MSA 
or a Metropolitan Division (in the case where a Metropolitan 
Statistical Area is divided into Metropolitan Divisions), as defined by 
the Office of Management and Budget. Under existing Sec.  
412.64(b)(1)(ii)(C), a ``rural area'' means any area outside an urban 
area. Since FY 2005, we no longer use the term MSA, but instead use the 
term Core-Based Statistical Area (CBSA). Certain CBSAs are designated 
as urban, while those not designated as urban are considered rural. For 
purposes of section 1886(h)(9)(B)(ii) of the Act, in the FY 2022 IPPS/
LTCH PPS proposed rule (86 FR 25504), we proposed that a hospital with 
its main campus located in an area outside of an urban CBSA would be 
considered a rural hospital. We note that this definition of ``rural 
area'' is consistent with our policy concerning designation of rural 
areas for wage index purposes.
    Similar to our historical wage index policy of cross walking 
counties to CBSAs, CMS proposed to use the County to CBSA Crosswalk and 
Urban CBSAs and Constituent Counties for Acute Care Hospitals File, or 
successor files containing similar information, from the most recent FY 
IPPS final rule (or correction notice if applicable) to determine if a 
hospital is a rural hospital. (This file is available on the CMS 
website in approximately August of the year prior to the year of the 
application deadline. Under the file's current format, blank cells in 
Columns D and E indicate an area outside of a CBSA.)
    Under section 1886(d)(8)(E) of the Act, a subsection (d) hospital 
(that is, generally, an IPPS hospital) that is physically located in an 
urban area is treated as being located in a rural area for purposes of 
payment under the IPPS if it meets criteria specified in section 
1886(d)(8)(E)(ii) of the Act, as implemented in the regulations at 
Sec.  412.103. Under these regulations, a hospital may apply to CMS to 
be treated as located in a rural area for purposes of payment under the 
IPPS.
    Given the fixed number of available residency positions, it is 
necessary to establish a deadline by which a hospital must be treated 
as being located in a rural area for purposes of Category One. We 
proposed to use Table 2, or a successor table containing similar 
information, posted with the most recent IPPS final rule (or correction 
notice if applicable) to determine whether a hospital is reclassified 
to rural under Sec.  412.103. If a hospital is not listed as 
reclassified to rural on Table 2, but has been subsequently approved by 
the CMS Regional Office to be treated as being located in a rural area 
for purposes of payment under the IPPS as of the application deadline 
for additional positions for the fiscal year, we proposed that the 
hospital must submit its approval letter with its application in order 
to be treated as being located in a rural area for purposes of Category 
One.
    In this section we present a summary of the public comments and our 
responses to our proposals related to the determination of hospitals 
that are located in a rural area or are treated as

[[Page 73423]]

being located in a rural area (Category One).
    Comment: Several commenters expressed support for our proposed 
definition of Category One hospitals.
    Response: We thank the commenters for their support.
    Comment: A commenter supported our proposed definition of a rural 
area, but suggested that we expand it to include certain locations 
within MSAs that are considered rural by the Federal Office of Rural 
Health Policy. The same commenter recommended that we assign a lower 
priority to geographically urban hospitals that have been reclassified 
as rural for wage index purposes, stating that this reclassification is 
done for payment equity purposes and does not make such facilities 
rural in any meaningful sense.
    Response: Our proposed definition of a rural area is consistent 
with how that term is employed in the context of the Medicare statute. 
In particular, it is consistent with section 1886(h)(9)(B)(ii)(I) of 
the Act, as added by section 126 of the CAA, which refers specifically 
to the definition of a rural area at section 1886(d)(2)(D) of the Act. 
Furthermore, as we stated in the FY 2022 IPPS/LTCH PPS proposed rule, 
our definition is consistent with our policy concerning designation of 
rural areas for other purposes, including the wage index. For these 
reasons, we are not amending our definition of rural for purposes of 
section 126 of the CAA.
    With respect to the commenter's second point concerning rural 
reclassifications, we believe that the commenter may have 
misinterpreted our proposal. The commenter referred specifically to 
urban hospitals that have been reclassified as rural for wage index 
purposes. We believe that the commenter was referring to hospitals that 
have been reclassified as rural by the Medicare Geographic 
Classification Review Board (MGCRB). Under section 1886(d)(10) of the 
Act, as implemented at 42 CFR 412.230, the MGCRB may change the 
classification of a hospital for purposes of the wage index only. 
However, the legislation directs the Secretary to consider hospitals 
that are treated as being located in a rural area pursuant to section 
1886(d)(8)(E) of the Act, which is a separate provision. Section 
1886(d)(8)(E) of the Act, as implemented at Sec.  412.103, is 
applicable beyond the calculation of the wage index. In particular, 
under Sec.  412.103(a)(1), an urban hospital may apply to be 
reclassified as rural if it is located in a rural census tract of an 
MSA as determined by the Federal Office of Rural Health Policy. We 
believe that this is the same criterion that the commenter requested be 
consider in expanding our proposed definition of a rural area. 
Additionally, because section 1886(h)(9)(B)(ii)(I) of the Act 
references both hospitals that are located in a rural area (as defined 
in section 1886(d)(2)(D) of the Act) and those that are treated as 
being located in a rural area pursuant to section 1886(d)(8)(E) of the 
Act, we read the statutory language as intending for both groups of 
hospitals to receive equal treatment.
    With respect to hospitals that have reclassified as rural under 
Sec.  412.103 (section 1886(d)(8)(E) of the Act), we note that 
consistent with our past application of rural reclassification to GME 
payment policies, these hospitals are considered rural for IME payment 
purposes and urban for direct GME payment purposes. However, we believe 
the inclusion of these hospitals under section 126 of the CAA is 
intended only to deem these hospitals as eligible recipients of the 
additional slots being distributed under section 126 of the CAA. We do 
not believe section 126 of the CAA limits urban hospitals that have 
reclassified as rural to only receiving IME FTE residency positions. As 
such, these hospitals are eligible for both direct GME and IME FTE 
residency positions under section 126 of the CAA.
    Comment: Several commenters requested that we clarify whether rural 
referral centers are included in the definition of hospitals that are 
located in a rural area or are treated as being located in a rural 
area.
    Response: Generally, in order to qualify for rural referral center 
(RRC) status under the criteria set forth at 42 CFR 412.96, a hospital 
must be rural, that is, either located in a rural area, or treated as 
being located in a rural area under section 1886(d)(8)(E) of the Act. 
Most RRCs would therefore qualify under Category One as defined 
previously in this final rule with comment period. However, we permit 
hospitals that previously qualified as an RRC but lost their status due 
to the Office of Management and Budget (OMB) redesignation of the 
county in which they are located from rural to urban to be reinstated 
as an RRC (August 1, 2000 IPPS final rule (65 FR 47054, 47089)). 
Currently, there are a relatively small number of hospitals with RRC 
status that are neither located in a rural area nor treated as being 
located in a rural area under section 1886(d)(8)(E) of the Act 
(approximately 11 percent). We are clarifying that such hospitals, 
despite their status as RRCs, would not qualify under Category One.
    Comment: A commenter expressed concern that, as a result of our 
proposal to use the County to CBSA Crosswalk and Urban CBSAs and 
Constituent Counties for Acute Care Hospitals File, urban hospitals 
reclassified to rural may still be able to claim treatment as rural 
hospitals despite being located well within a CBSA. The same commenter 
also suggested what they characterized as a grammatical edit to our 
definition of rural for purposes of Category One. In the proposed rule, 
we proposed that a hospital with its main campus located in an area 
outside of an urban CBSA is a rural hospital. The commenter recommended 
that we revise this language to state that a hospital would be 
considered located in a rural area, or treated as such, if its main 
campus was located in an area outside of an urban CBSA and was 
classified as a rural hospital (that is, not reclassified as urban). 
The commenter added that this restriction would avoid allowing large 
urban rural referral centers to expand an existing program and take 
these residency positions from geographically rural hospitals, which 
would thwart what the commenter believes to be the legislative intent 
of the statute.
    Response: We believe the commenter is referring to hospitals that 
are located in urban CBSAs and have been reclassified as rural under 
section 1886(d)(8)(E) of the Act, as implemented in the regulations at 
42 CFR 412.103. As discussed previously, the statute explicitly refers 
to such reclassified hospitals among the categories of qualifying 
hospitals in section 1886(h)(9)(B)(ii)(I) of the Act. The preamble 
language cited by the commenter, and to which a grammatical edit was 
suggested, is only part of our proposed definition, which also includes 
hospitals reclassified as rural, as required by the statute. We further 
note that, as we proposed, such hospitals would not be identified using 
the County to CBSA Crosswalk and Urban CBSAs and Constituent Counties 
for Acute Care Hospitals File, but rather by consulting Table 2, or a 
successor table containing similar information, posted with the most 
recent IPPS/LTCH PPS final rule (or correction notice if applicable). 
If a hospital is not listed as reclassified to rural on Table 2, but 
has been subsequently approved by the CMS Regional Office to be treated 
as being located in a rural area for purposes of payment under the IPPS 
as of the application deadline for additional positions for the fiscal 
year, the hospital must submit its approval letter with its application 
in order to be treated as being located in a rural area for purposes of 
Category One.
    It also appears that the commenter may have conflated two distinct

[[Page 73424]]

categories of hospitals, namely, urban hospitals reclassified as rural 
under Sec.  412.103, and RRCs, which are governed by the regulations at 
Sec.  412.96. While an urban hospital reclassified as rural may elect 
to apply for RRC status if it meets the criteria set forth at Sec.  
412.96, such assignment is not automatic, and many RRCs are in fact 
geographically rural. Thus, as explained previously, many, but not all, 
RRCs may qualify as rural hospitals for purposes of section 126 of the 
CAA, depending on whether they otherwise satisfy the criteria for 
Category One.
    Comment: A commenter, located in an urban area within a largely 
rural state, requested that CMS reconsider our proposed definition of 
hospitals located in rural areas or treated as being located in rural 
areas. Another commenter, stated that despite being located in a rural 
area and serving a mostly rural population, they would not qualify 
under Category One since the zip code of the hospital itself is not 
located in a HPSA.
    Response: In response to the first commenter, we refer to the 
language of section 1886(h)(9)(B)(ii)(I) of the Act concerning rural 
hospitals, and note that a hospital located in an urban area cannot 
qualify under this category (Category One) unless it has reclassified 
as rural in accordance with the regulations at 42 CFR 412.103. We 
believe that the second commenter has conflated our proposals regarding 
two distinct statutory categories, namely, Category One (rural 
hospitals) and Category Four (hospitals that serve HPSAs). In response, 
we are clarifying that a hospital located in a rural area, or that is 
treated as being located in a rural area, qualifies under Category One 
whether or not it is physically located in a HPSA.
    Comment: A commenter requested that the states of Hawaii and 
Alaska, in addition to the U.S. territories of Guam, American Samoa, 
Commonwealth of the Northern Mariana Islands, Puerto Rico, and the U.S. 
Virgin Islands, be recognized as rural for any federal definition. The 
commenter stated that these areas face significant health care 
challenges as they are non-contiguous and distant from the rest of the 
United States, and that their health care systems are isolated and 
vulnerable.
    Response: Designating the states of Hawaii and Alaska, in addition 
to the U.S. territories of Guam, American Samoa, Commonwealth of the 
Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands, as 
rural for any federal definition is beyond the scope of this 
rulemaking. We note that hospitals in these states and territories that 
are located in a rural area or are treated as being located in a rural 
area, as applicable, are eligible to apply for residency positions 
under section 126.
    Comment: A commenter stated that we should revise our proposed 
definition of Category One to include the requirement that the majority 
of residents' training should take place in a rural area. The commenter 
argued that, if the goal is to train more physicians to remain and 
serve in communities of need, then the greatest priority should be 
given to hospitals and systems that themselves are located in rural 
areas, and in fact serve rural communities. According to the commenter, 
this should include caveats that the training itself take place in a 
``rural MSA,'' and residency positions should not be awarded to an 
organization that has a facility located in a rural MSA if that 
facility would not be the primary place of training.
    Response: We agree with the commenter that the training and 
retention of physicians in rural and underserved areas is an important 
goal. However, the law requires that hospitals that are located in a 
rural area (as defined in section 1886(d)(2)(D) of the Act) or are 
treated as being located in a rural area pursuant to section 
1886(d)(8)(E) of the Act are qualifying hospitals. Prioritization of 
applications is a separate issue from the definition of Category One 
(and is discussed in section II.B.3.d. of this final rule with comment 
period).
    After review of the public comments received, we are finalizing our 
proposal regarding the determination of hospitals that are located in a 
rural area or are treated as being located in a rural area (Category 
One) as proposed, without modification.
(3) Determination of Hospitals for Which the Reference Resident Level 
of the Hospital is Greater Than the Otherwise Applicable Resident Limit 
(Category Two)
    Under section 1886(h)(9)(B)(ii)(II) of the Act, the second category 
consists of hospitals in which the reference resident level of the 
hospital (as specified in section 1886(h)(9)(F)(iii) of the Act) is 
greater than the otherwise applicable resident limit. We refer to this 
category as Category Two.
    Under section 1886(h)(9)(F)(iii) of the Act, the term `reference 
resident level' means, with respect to a hospital, the resident level 
for the most recent cost reporting period of the hospital ending on or 
before the date of enactment of section 1886(h)(9) of the Act, December 
27, 2020, for which a cost report has been settled (or, if not, 
submitted (subject to audit)), as discussed in the FY 2022 IPPS/LTCH 
PPS proposed rule (86 FR 25505).
    Under section 1886(h)(9)(F)(iii) of the Act, the term `resident 
level' has the meaning given such term in paragraph (7)(C)(i). That 
section defines ``resident level'' as with respect to a hospital, the 
total number of full-time equivalent residents, before the application 
of weighting factors (as determined under paragraph (4)), in the fields 
of allopathic and osteopathic medicine for the hospital.
    Under section 1886(h)(9)(F)(i) of the Act, the term `otherwise 
applicable resident limit' means, with respect to a hospital, the limit 
otherwise applicable under subparagraphs (F)(i) and (H) of paragraph 
(4) on the resident level for the hospital determined without regard to 
the changes made by this provision of CAA 2021, but taking into account 
section 1886(h)(7)(A), (7)(B), (8)(A), and (8)(B) of the Act. These 
paragraphs all address the distribution of positions and redistribution 
of unused positions.
    In the CY 2011 OPPS final rule with comment period, we previously 
interpreted these terms when we implemented section 5503 of the 
Affordable Care Act. Under section 1886(h)(8)(H)(i) of the Act (as 
interpreted in the CY 2011 OPPS final rule (75 FR 46391)), the 
``reference resident level'' generally refers to the number of 
unweighted allopathic and osteopathic FTE residents who are training at 
a hospital in a given cost reporting period. That is, the ``reference 
resident level'' refers to a hospital's allopathic and osteopathic FTE 
resident count for a specific period. The definition can vary based on 
what calculation is being performed to determine the correct allopathic 
and osteopathic FTE resident count (see, for example, 42 CFR 
413.79(c)(1)(ii)). As noted previously, section 126 of the CAA, under 
new section 1886(h)(9)(F)(iii) of the Act defines the ``reference 
resident level'' as coming from the most recent cost reporting period 
of the hospital ending on or before the date of enactment of the CAA 
(that is, December 27, 2020).
    Under new section 1886(h)(9)(F)(i) of the Act, the term ``otherwise 
applicable resident limit'' is defined as ``the limit otherwise 
applicable under subparagraphs (F)(i) and (H) of paragraph (4) on the 
resident level for the hospital determined without regard to this 
paragraph but taking into account paragraphs (7)(A), (7)(B), (8)(A), 
and (8)(B).'' In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25505), 
we proposed to define this as the hospital's 1996 cap during its 
reference year,

[[Page 73425]]

adjusted for the following: New programs as defined at Sec.  413.79(e); 
participation in a Medicare GME affiliation agreement as defined at 
Sec. Sec.  413.75(b) and 413.79(f); participation in an Emergency 
Medicare GME affiliation agreement as defined at Sec.  413.79(f); 
participation in a hospital merger; whether an urban hospital has a 
separately accredited rural training track program as defined at Sec.  
413.79(k); applicable decreases or increases under section 422 of the 
MMA, applicable decreases or increases under section 5503 of the 
Affordable Care Act, and applicable increases under section 5506 of the 
Affordable Care Act.
    Regarding the term ``resident level'', in the CY 2011 OPPS final 
rule (75 FR 46391) we indicated that we generally refer to a hospital's 
number of unweighted allopathic and osteopathic FTE residents in a 
particular period as the hospital's resident level, which we proposed 
to define consistently with the definition in section 126 of the CAA; 
that is, the ``resident level'' under section 1886(h)(7)(c)(i) of the 
Act, which is defined as the total number of full-time equivalent 
residents, before the application of weighting factors (as determined 
under paragraph (4)), in the fields of allopathic and osteopathic 
medicine for the hospital.
    For the purposes of section 126 of the CAA we proposed that the 
definitions of the terms ``otherwise applicable resident level,'' 
``reference resident level,'' and ``resident level'' should be as 
similar as possible to the definitions those terms have in the 
regulations at Sec.  413.79(c) as developed in the CY 2011 OPPS 
rulemaking.
    The following is a summary of the public comments and our responses 
to our proposals related to the determination of hospitals for which 
the reference resident level of the hospital is greater than the 
otherwise applicable resident limit (Category Two).
    Comment: Several commenters expressed support for our proposed 
definition of Category Two hospitals.
    Response: We thank the commenters for their support.
    Comment: A few commenters requested that we clarify that a hospital 
qualifies under Category Two if it is over its direct GME cap, its IME 
cap, or both. Some commenters added that such an interpretation would 
be consistent with our implementation of the distribution process under 
section 5503 of Public Law 111-148.
    Response: We are clarifying that a hospital qualifies for direct 
GME residency positions under Category Two if it is over its direct GME 
cap; qualifies for IME residency positions under Category Two if it is 
over its IME cap; and qualifies for both direct GME and IME residency 
positions if it is over both its direct GME and IME caps. Furthermore, 
we are clarifying that a hospital may only apply for direct GME and/or 
IME residency positions if it does not have sufficient room to start a 
new program or expand an existing program under its existing direct GME 
and/or IME caps, respectively. For example, if a hospital has 
sufficient room under its IME cap to expand an existing program, but 
not under its direct GME cap, that hospital may only apply for direct 
GME residency positions, but not IME residency positions, to facilitate 
the planned expansion.
    Comment: A commenter expressed concern that Category Two may bias 
financing decisions toward larger hospitals that are more likely to be 
able to support residency positions in excess of their caps due to the 
training of more self-sustaining subspecialty physicians.
    Response: While we acknowledge the commenter's concern, we note 
that hospitals training residents in excess of their otherwise 
applicable resident limit or caps, are included among qualifying 
hospitals as defined by the statute, which also requires that we 
distribute at least 10 percent of the aggregate number of additional 
residency positions to hospitals that qualify under this category.
    After review of the public comments received, we are finalizing our 
proposal regarding the determination of hospitals for which the 
reference resident level of the hospital is greater than the otherwise 
applicable resident limit (Category Two) as proposed, without 
modification.
(4) Determination of Hospitals Located in States With New Medical 
Schools, or Additional Locations and Branch Campuses (Category Three)
    The third category specified in section 1886(h)(9)(B)(ii) of the 
Act, as added by section 126 of CAA, consists of hospitals located in 
States with new medical schools that received `Candidate School' status 
from the Liaison Committee on Medical Education (LCME) or that received 
`Pre-Accreditation' status from the American Osteopathic Association 
(AOA) Commission on Osteopathic College Accreditation (the COCA) on or 
after January 1, 2000, and that have achieved or continue to progress 
toward `Full Accreditation' status (as such term is defined by the 
LCME) or toward `Accreditation' status (as such term is defined by the 
COCA); or additional locations and branch campuses established on or 
after January 1, 2000, by medical schools with `Full Accreditation' 
status (as such term is defined by LCME) or `Accreditation' status (as 
such term is defined by the COCA). We note that the statutory language 
is specific with respect to these definitions. We refer to this 
category as Category Three.
    Based on research and assistance received from LCME and the COCA, 
we understand that each accrediting body administers a multi-step 
process for applicant medical schools to progress to fully accredited 
status within the first few years after they are established and begin 
training students. LCME grants candidate status to an applicant medical 
education program after it reviews and approves the medical school's 
data collection instrument and planning self-study; at this point, it 
determines that the school is ready for a survey visit, and the 
preliminary accreditation survey visit is scheduled. After that visit, 
LCME reviews the survey team's preliminary survey report and determines 
whether or not sufficient progress toward compliance with accreditation 
standards has been made and satisfactory plans for the medical 
education program have been developed.
    If LCME grants preliminary accreditation status, the school may 
begin accepting applications for enrollment. During the second year of 
the school's charter class, a school with preliminary accreditation 
status may submit information and receive a survey site visit to 
determine whether it meets criteria for provisional accreditation 
status. Finally, LCME grants full accreditation status to schools with 
provisional accreditation status, typically in the fourth teaching 
year, after determining the school is in compliance with or has made 
significant progress toward attaining compliance with all full 
accreditation standards.
    LCME defines a regional campus, comparable to ``additional 
locations and branch campuses'' in section 1886(h)(9)(B)(ii)(III)(bb) 
of the Act, as a site distinct from the main campus of the medical 
school where students spend at least 1 full year of the curriculum. 
Regional campuses of a medical education program receive accreditation 
status through the main campus of the program and are not separately 
accredited.
    The COCA may grant pre-accreditation status to a proposed college 
of osteopathic medicine (COM) that has achieved candidate status and 
meets the standards of pre-accreditation status. The pre-accreditation 
process starts with the submission of a pre-

[[Page 73426]]

accreditation self-study by a proposed COM; COCA staff then reviews the 
submission and conducts a site visit to examine the proposed COM's 
compliance with accreditation standards. Following the site visit, the 
COCA reviews the site visit report and other submitted information and 
grants pre-accreditation status to a proposed COM that meets the pre-
accreditation standards. Once a proposed COM receives pre-accreditation 
status, it may begin to recruit, accept applications from, and admit 
prospective students. We note that prior to 2017, the COCA used the 
term ``provisional status'' instead of ``pre-accreditation status.''
    The COCA may grant accreditation status to a COM that has achieved 
pre-accreditation status and meets the standards for accreditation. 
These accreditation statuses include accreditation with exceptional 
outcome, accreditation, accreditation with heightened monitoring, 
accreditation with warning, and accreditation with probation. Any 
accreditation status constitutes full accreditation, in contrast to 
pre-accreditation status or candidate status, which do not constitute 
full accreditation status.
    The COCA defines a branch campus as a geographically separate 
location apart from the COM's main campus that is: Permanent in nature; 
offers courses in educational programming leading to a doctorate in 
osteopathic medicine; has its own faculty and administrative or 
supervisory organization; and maintains its own budgetary and hiring 
authority. A COM that establishes a branch location must apply for and 
receive separate approval from the COCA; the application process has 
four steps: A written application and branch campus self-study, a 
progress report, a revised branch campus self-study and site visit, and 
a final, pre-operational site visit.
    The COCA defines an additional location as a location that is 
geographically separate from the main campus of a COM, but unlike a 
branch location, shares administration, faculty, curriculum, and 
budgetary authority with the main campus. Additional locations receive 
accreditation through the main campus of the COM following the review 
of documents and a survey site visit, after which a COM may enroll 
students in the additional location.
    Based on information gathered from LCME and the COCA about new 
medical schools, additional locations and branch campuses, in the FY 
2022 IPPS/LTCH PPS proposed rule (86 FR 25506), we proposed that 
hospitals located in the following 35 States and 1 territory, referred 
to as Category Three States, would be considered Category Three 
hospitals: Alabama, Arizona, Arkansas, California, Colorado, 
Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, 
Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Mississippi, 
Missouri, Nevada, New Jersey, New Mexico, New York, North Carolina, 
Ohio, Oklahoma, Pennsylvania, Puerto Rico, South Carolina, Tennessee, 
Texas, Utah, Virginia, Washington, West Virginia, and Wisconsin. We 
further stated that if a hospital is located in a state not listed 
here, but believes the state in which it is located should be on this 
list, the hospital could submit a formal comment on the proposed rule 
to make a change to this list, or could provide documentation with 
submission of its application to CMS that the state in which it is 
located has a medical school or additional location or branch campus of 
a medical school established on or after January 1, 2000. Pursuant to 
the statutory language, all hospitals in such states are eligible for 
consideration; the hospitals, themselves, do not need to meet the 
conditions of section 1886(h)(9)(B)(ii)(III)(aa) or (bb) of the Act in 
order to be considered.
    Comment: Several commenters expressed support for our proposed 
definition of Category Three hospitals.
    Response: We thank the commenters for their support.
    In addition, we did not receive any comments requesting that a 
state be added to the list of Category Three states.
    Therefore, after review of the public comments received, we are 
finalizing our proposal regarding the determination of hospitals 
located in states with new medical schools, or additional locations and 
branch campuses (Category Three) as proposed, without modification.
(5) Determination of Hospitals That Serve Areas Designated as Health 
Professional Shortage Areas Under Section 332(a)(1)(A) of the Public 
Health Service Act (Category Four)
    The fourth category specified in the law consists of hospitals that 
serve areas designated as health professional shortage areas under 
section 332(a)(1)(A) of the Public Health Service Act (PHSA), as 
determined by the Secretary. We refer to this category as Category 
Four.
    The Health Resources and Services Administration (HRSA) designates 
certain areas as health professional shortage areas (HPSAs). Section 
332(a)(1)(A) of the PHSA, states that a ``health professional shortage 
area'' is ``an area in an urban or rural area (which need not conform 
to the geographic boundaries of a political subdivision and which is a 
rational area for the delivery of health services) which the Secretary 
determines has a health manpower shortage''. HRSA designates HPSAs for 
primary care, mental health, and dental health.
    A geographic area may be designated as a HPSA under section 
332(a)(1)(A) of the PHSA only on the basis of a shortage of services 
for the entire population within that area (a ``geographic HPSA''). 
Subsequent clauses of 332(a)(1) refer to other types of HPSAs, to which 
we will return later in this final rule with comment period. The 
geographic area to which a geographic HPSA is assigned may be a single 
county, multiple counties, a county subdivision, census tract, or a 
group of census tracts.
    As we noted in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 
25506), section 126 of the CAA does not explicitly address the question 
of how HPSAs for different medical specialties should factor into 
determining which hospitals serve areas designated as HPSAs. In our 
consideration of this question, we began by examining the use of HPSAs 
in the HPSA Physician Bonus Program authorized under section 1833(m) of 
the Act. This program is relevant because Congress established the 
program as an incentive to attract new physicians to medically 
underserved communities and to encourage physicians in those areas to 
remain there (69 FR 47517 through 47518).
    The HPSA Physician Bonus Program was created by Section 4043 of the 
Omnibus Budget Reconciliation Act (OBRA) of 1987, which added section 
1833(m) to the Act. It provides incentive payments to physicians who 
furnish services to an individual in an area that is designated as a 
HPSA. Originally, under section 1833(m) of the Act, a 5 percent payment 
was added, beginning January 1, 1989, to the amounts otherwise payable 
to physicians who furnish services to Medicare patients in designated 
HPSAs. Section 6102 of OBRA 1989 further amended section 1833(m) of the 
Act to raise the amount of this incentive payment from 5 percent to 10 
percent for services furnished after December 31, 1990. The OBRA 1989 
amendment also expanded eligible service areas to include both rural 
and urban HPSAs.
    We first examined the role of primary care geographic HPSAs in the 
HPSA Physician Bonus program. Physicians furnishing services in a 
primary care geographic HPSA are eligible to receive the bonus payments 
and the payments apply to all physicians who perform covered services 
within a primary care

[[Page 73427]]

geographic HPSA, regardless of specialty. Similarly, section 126 of the 
CAA does not explicitly distinguish between physician specialties for 
purposes of allocating the additional residency positions. Therefore, 
in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25507), we proposed 
that primary care geographic HPSAs would be considered in determining 
what hospitals qualify under Category Four and that hospitals that have 
main campuses or provider-based facilities in these HPSAs may apply for 
additional residency positions for any specialty. We also note CMS used 
primary care HPSAs for the allocation of residency positions for 
purposes of section 5503 of the Affordable Care Act (75 FR 72147).
    We next considered the use under the HPSA Physician Bonus Program 
of areas that are solely mental health geographic HPSAs and not also 
primary care geographic HPSAs. We will refer to these areas as mental 
health only geographic HPSAs. The HPSA Physician Bonus Program provides 
incentive payments for services provided in mental health only 
geographic HPSAs, but only for services provided by psychiatry provider 
specialties. The distinction between primary care geographic HPSAs, in 
which all physician provider specialties, including psychiatry provider 
specialties, receive the incentive payments, and mental health only 
geographic HPSAs, in which only psychiatry provider specialties receive 
the incentive payments, is relevant to the question of how mental 
health only geographic HPSAs should factor into determining hospitals 
that serve areas designated as HPSAs for purposes of section 126 of the 
CAA. We believe that it is appropriate to incorporate this feature of 
the HPSA Physician Bonus Program as well, and proposed to use mental 
health only geographic HPSAs for mental health providers accordingly in 
the determination of hospitals that serve areas designated as HPSAs. 
Thus, we proposed that hospitals that only have main campuses or 
provider-based facilities in mental health only geographic HPSAs could 
only apply for residency positions for psychiatry residency programs.
    We next considered dental geographic HPSAs. Under section 
1886(h)(4)(F) of the Act, for cost reporting periods beginning on or 
after October 1, 1997, a hospital's unweighted FTE count of allopathic 
and osteopathic residents for purposes of direct GME may not exceed the 
hospital's unweighted FTE count for direct GME in its most recent cost 
reporting period ending on or before December 31, 1996. Under section 
1886(d)(5)(B)(v) of the Act, a similar limit based on the FTE count for 
IME during the same cost reporting period is applied effective for 
discharges occurring on or after October 1, 1997. Given that dental 
residents are not included in this statutory cap and that section 126 
of the CAA distributes additional residency positions in the context of 
the statutory cap, we did not propose that dental geographic HPSAs 
should factor into the determination of whether a hospital serves a 
HPSA for purposes of section 126 of the CAA.
    In summary, we proposed to consider geographic HPSAs for primary 
care and mental health providers for purposes of determining hospitals 
that serve areas designated as HPSAs. We proposed that hospitals that 
only have campuses or provider-based facilities in mental health only 
geographic HPSAs could only apply for positions for psychiatry 
residency programs. We did not propose to consider dental HPSAs as 
dental FTE residents are not subject to a hospital's IME and direct GME 
caps.
    We next considered what hospitals serving areas designated as 
primary care or mental health HPSAs means for purposes of Category 
Four. As with the question regarding the role of primary care, mental 
health, and dental HPSAs, section 126 of the CAA does not explicitly 
address this question.
    As discussed in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 
25507), there are many possible interpretations of what hospitals that 
serve areas designated as primary care or mental health HPSAs means for 
purposes of Category Four. The most expansive interpretation might be 
that this refers to the universe of hospitals where each hospital 
provides care to at least one patient that resides in a HPSA without 
regard to the location of the main campus of the hospital or of its 
other patient care locations. This interpretation could be made less 
expansive by developing a relative or absolute threshold for the number 
of patients of the hospital that reside in HPSAs. It could also be made 
less expansive by considering whether the physical location of the main 
campus of the hospital and/or its other patient care locations are 
inside of or proximate to a HPSA.
    In considering this issue, we prioritized objective factors that 
would maximize distribution of GME positions to residency programs 
serving underserved populations. (See section V.J.2.a.(4). of the 
preamble of the FY 2022 IPPS/LTCH PPS proposed rule for a further 
discussion of our proposals for prioritizing care to underserved 
populations.) To this end, we proposed that a hospital could qualify 
under Category Four if it had its main campus or a provider-based 
facility (under 42 CFR 413.65) physically located in a primary care or 
mental health only geographic HPSA. Additionally, as part of the 
qualification requirements under Category Four, in the residency 
program for which the hospital was applying, we proposed that at least 
50 percent of the residents' training time over the duration of the 
program would have to occur at those locations in the HPSA. We stated 
in the proposed rule that we believed it was important to avoid the 
possibility that a hospital with provider-based facilities in multiple 
locations, some of which may not be located in a HPSA, uses an 
additional residency position mostly or entirely to serve populations 
that face no health service shortage.
    We proposed that a Category Four hospital submit an attestation, 
signed and dated by an officer or administrator of the hospital who 
signs the hospital's Medicare cost report, that it has its main campus 
or a provider-based facility (under 42 CFR 413.65) physically located 
in a primary care or mental health only geographic HPSA, and in the 
program for which the hospital is applying, at least 50 percent of the 
residents' training time over the duration of the program occurs at 
those locations in the HPSA.
    For example under our proposal, Hospital A applies under Category 
Four for a psychiatry residency program. Its main campus is located in 
a non-HPSA area and it has one provider-based facility located in a 
mental health only geographic HPSA. Hospital A must attest that 
residents training in the psychiatry residency program spend at least 
50 percent of the duration of their training in the program at its 
provider-based facility located in the mental health only geographic 
HPSA.
    As another example, Hospital B applies for a residency program. Its 
main campus is located in a primary care geographic HPSA and it has two 
provider-based facilities, one in the same geographic HPSA as the main 
campus and one in a non-HPSA area. Hospital B must attest that 
residents training in the program will spend at least 50 percent of the 
duration of their training in the program on the main campus or at the 
provider-based facility located in the geographic HPSA, combined (for 
example, 30 percent of the time on the main campus and 20 percent at 
the provider-based facility).
    The following is a summary of the public comments and our responses 
to our proposals related to Category Four qualification requirements.

[[Page 73428]]

    Comment: Many commenters objected to the proposed requirement that 
a hospital or provider-based facilities be located in a primary care or 
mental health only geographic HPSA to be eligible under Category Four. 
Several commenters expressed concern that our proposed definition of 
Category Four limits hospitals from eligibility and that as a result, 
only a small number of hospitals would qualify for residency positions 
awarded under section 126 of the CAA. Other commenters argued that this 
constraint does not take into account that many geographic HPSA 
residents rely on health services provided outside of their HPSA. A 
commenter noted this is particularly true of certain specialty care 
services, such as mental health services, for which HPSA-residing 
patients are referred to academic medical centers located in urban 
areas. Several commenters suggested that it is for this reason that the 
statutory language describes hospitals that serve HPSAs rather than 
explicitly limiting eligibility under this category to hospitals 
physically located within the geographic boundaries of HPSAs.
    Many commenters believe Category Four should be interpreted to more 
generally include hospitals that play a meaningful role in providing 
health services to residents of shortage areas. These commenters 
suggested we modify our proposal to include both hospitals located 
within HPSAs and those within a reasonable distance of one. Several 
commenters provided specific recommendations on what would be 
considered within a reasonable distance of a HPSA, such as within one 
mile, 10 miles, 20 miles, and 25 miles. In addition, a commenter 
requested that CMS revise our proposed definition of Category Four so 
that a hospital may be eligible for section 126 of the CAA residency 
positions on the basis of serving either a geographic or ``population'' 
HPSA (the following link includes a brief description of HPSAs: https://bhw.hrsa.gov/workforce-shortage-areas/shortage-designation#hpsas). 
Another commenter noted that some underserved communities do not 
qualify for geographic or population HPSAs because of their proximity 
to wealthier areas, but face provider shortages that deserve 
recognition under Category Four. Some commenters recommended that we 
define Category Four in terms of the measure of the hospital's patient 
population that reside within geographic HPSAs, using either an 
absolute or proportionate threshold. A commenter requested flexibility 
in the data sources that hospitals may use to demonstrate they are 
serving or will at some point serve HPSA populations, including data 
from other government agencies and non-profit organizations.
    Many commenters opposed the proposed requirement that to qualify 
under Category Four, at least 50 percent of residents' training time in 
the program must occur in facilities located in the geographic HPSA. 
According to some commenters, this requirement would impede teaching 
hospitals' ability to structure programs to best meet the needs of the 
patients and communities they serve as well as to satisfy 
administrative obligations, including accreditation standards. 
Commenters also stated that the requirement that 50 percent or more of 
residents' time be spent in a HPSA, often in rural areas, would not be 
possible since supervising physicians and training schedules must be 
focused on population centers with patient and condition mixes that are 
necessary for training. A few commenters explained that the proposed 50 
percent requirement, in addition to the proposed requirement that 
hospitals or their facilities be physically located in a HPSA to 
qualify under Category Four, is too restrictive to meet the policy goal 
of directing new residency positions to areas that provide services to 
underserved populations and does not meet congressional intent.
    Several commenters, while supporting the proposed requirement that 
50 percent of resident training time in programs take place in 
locations in the HPSA, requested that nonprovider settings where 
hospitals may count training time for IME and direct GME purposes be 
counted. Commenters stated that community settings, such as critical 
access hospitals, Federally Qualified Health Centers (FQHCs), and rural 
health clinics (RHCs), are important contributors to the provision of 
services in HPSAs and to residency training. Several commenters added 
that, in their view, it was Congress's intent that FTEs awarded under 
section 126 of the CAA train at nonprovider settings in addition to 
hospital main campuses and provider-based facilities.
    Several commenters were opposed to the proposed 50 percent training 
time requirement because they believe it would impose a recordkeeping 
burden on hospitals that administer residency programs. A few 
commenters noted that normally, resident rotations are reported in the 
Intern and Resident Reporting System (IRIS) in aggregate, whereas the 
proposed 50 percent training time requirement would demand individual 
resident tracking and reporting. Commenters stated that to attest to 
meeting the requirement, teaching hospitals would need to develop a new 
system and process to document and track section 126 of the CAA funded 
residents that is separate from the system and process used to track 
residents funded by other sources.
    A commenter requested clarification on whether the proposed 
requirement that residents spend 50 percent or more of their training 
time in a geographic HPSA in order for the hospital to be eligible 
under Category Four is based on all residents in aggregate or to 
individual residents.
    Response: We appreciate commenters' feedback and concerns regarding 
the eligibility requirements under Category Four. After further 
consideration, as discussed in greater detail later in this section, we 
are modifying certain aspects of our proposal in response to public 
comments. These modifications are intended to provide additional 
flexibilities in meeting these requirements, while still targeting 
Category Four eligibility to hospitals that are most clearly serving 
HPSAs. We are persuaded by commenters' arguments and agree that 
training in settings other than hospital settings is consistent with 
our goal of maximizing distribution of GME positions to residency 
programs serving underserved populations, including serving those in 
community settings, and should be counted toward meeting Category Four 
eligibility requirements. Therefore, we are modifying our proposal. Any 
and all program training that occurs in a geographic HPSA at scheduled 
program training sites that are physically located in that HPSA and 
treat the HPSA's population, including nonprovider settings and 
Veterans Affairs facilities, will count towards meeting the 50 percent 
training requirement to qualify under Category Four. In addition, 
because we are revising our proposed definition of Category Four to 
allow all of these settings to be qualifying training sites, an 
applicant hospital (including any provider-based facilities) itself 
will not be required to be physically located in a geographic HPSA in 
order to be eligible under Category Four as proposed. Rather, as long 
as the hospital participates in training residents in a program where 
at least 50 percent of the training time occurs at scheduled training 
site(s) that are physically located in a geographic HPSA, that hospital 
is considered to be eligible under Category Four. We believe these 
changes will provide additional flexibility for teaching hospitals to 
design programs to effectively serve patients and communities and meet 
any administrative requirements while

[[Page 73429]]

targeting Category Four eligibility to hospitals that are most clearly 
serving HPSAs.
    Consider an example where Hospitals A, B, and C participate in 
training residents in an approved family medicine program. The program 
also has Training Site 1 as part of the rotation schedule (could be a 
nonprovider setting, a Veterans Affairs facility, or another community 
setting). Hospitals A and B are located in a primary care geographic 
HPSA as is Training Site 1. Hospital C is not located in the HPSA. 
Residents in the family medicine program spend 40 percent of their 
training time at Hospitals A and B, 40 percent of their training time 
at Hospital C, and 20 percent of their time training at Training Site 
1. Since at least 50 percent of the program's total training time is 
spent training at facilities located in the primary care geographic 
HPSA, Hospitals A, B, and C all qualify under Category Four.
    We appreciate commenters' suggestions to expand the proposed 
requirement for Category Four beyond a hospital's training sites that 
are physically located in HPSAs to include those within a certain 
distance of a HPSA. While we believe a distance or proximity threshold 
may warrant further consideration in the future for Category Four, we 
note the suggested distances by some commenters ranged anywhere between 
one mile to 25 miles. Based on these comments, a single uniform 
distance threshold may not always be appropriate in the context of 
section 126 of the CAA. For example, a single fixed mileage threshold 
may not equitably address tertiary care situations because hospitals 
providing equivalent tertiary care to residents of HPSAs may be located 
varying distances from those HPSAs. At this time, we believe the 
requirement that at least 50 percent of training time occurs at 
training sites that are physically located in a geographic HPSAs 
targets Category Four eligibility for hospitals that are most clearly 
serving HPSAs.
    We also appreciate comments recommending that we consider the 
measure of a hospital's patient population that resides within a HPSA 
to determine whether a hospital serves a HPSA, as well as the 
suggestion of using different data sources to establish whether a 
hospital serves a HPSA. We believe there should be a consistent method 
used for hospitals to demonstrate that they meet the definition of 
Category Four. We note, simultaneously allowing the use of different 
data sources to establish whether a hospital serves a HPSA would mean 
that we might compare applications supported by different data 
collection methods, different definitions, or different data 
altogether. As discussed earlier, at this time we believe requiring 
that at least 50 percent of the training time of the program the 
hospital participates in occurs at training site(s) that are physically 
located in a geographic HPSA targets Category Four eligibility to 
hospitals that are most clearly serving HPSAs. However, we continue to 
welcome further feedback on the dependence of geographic HPSA residents 
on health services provided outside of their HPSA and are seeking 
comment on appropriate summary measures of where HPSA residents seek 
medical care as a feasible alternative for potential use in future 
rulemaking.
    With regard to commenters' concern that the proposed definition of 
Category Four would limit the pool of eligible applicants relative to 
more expansive definitions, we appreciate the feedback. However, we do 
not believe the goal of Category Four should be to create the most 
expansive eligibility pool possible. Targeting Category Four 
eligibility to hospitals that are clearly serving HPSAs (as discussed 
previously) is entirely consistent with this statutory eligibility 
criterion and our policy objectives for section 126 of the CAA 
regarding medically underserved communities. In addition, as stated 
previously, we are seeking comments on potential alternative feasible 
definitions of Category Four to inform future rulemaking.
    With regard to the request to include population HPSAs in the 
definition of Category Four, we note that section 1886(h)(9)(B)(ii)(IV) 
of the Act specifies that Category Four consists of hospitals that 
serve areas designated as health professional shortage areas under 
section 332(a)(1)(A) of the PHSA, as determined by the Secretary. 
Paragraph (A) of section 332(a)(1) of the PHSA describes a geographic 
HPSA, as explained previously and in the proposed rule (86 FR 25506). A 
population HPSA is described by paragraph (B) of section 332(a)(1), as 
explained in section II.B.3.d. of this final rule with comment period 
and section V.J.2.a.(4).(a). of the preamble of the FY 2022 IPPS/LTCH 
PPS proposed rule (86 FR 25508). Therefore, we are not revising the 
definition of Category Four to include population HPSAs as requested by 
the commenter.
    In response to comments that including a training time requirement 
for qualification falls outside of the legislative intent of section 
126 of the CAA, we disagree. The statute at 1886(h)(9)(B)(2)(IV) limits 
Category Four eligibility to hospitals that serve areas designated as 
HPSAs under section 332(a)(1)(A) of the PHSA, as determined by the 
Secretary. As discussed in the proposed rule and in line with the 
Administration's support for advancing health equity in underserved 
communities, targeting Category Four eligibility to hospitals serving 
HPSAs is consistent with this statutory eligibility criterion and our 
policy objectives. We also note, as stated previously, we are seeking 
comment on potential alternative definitions of Category Four to inform 
future rulemaking.
    We disagree with the comments that a minimum rotation time 
requirement imposes a significant tracking or reporting requirement. We 
do not expect hospitals to establish entirely new training tracks or 
administrative structures to accommodate FTE slots awarded under 
section 126 of the CAA. Hospitals regularly develop rotation schedules 
to facilitate residents' training at participating sites and a 
program's participating site information is generally readily available 
on the ACGME website. As such, we are specifying that the percentage of 
training time that residents in the program spend in the HPSA for 
purposes of Category Four is required to be substantiated, utilizing 
resident rotation schedules (or similar documentation). Regarding IRIS, 
we do not expect the existing reporting requirements to change for 
hospitals that receive these residential slots. We note that the 50 
percent requirement applies to the program in its entirety, not to 
individual residents. As such, hospitals would not need to track the 
training time of individual residents to ensure each individual 
resident spends 50 percent or more of their training time in a 
geographic HPSA, so long as the program in its entirety meets the 
requirement.
    Comment: Several commenters objected to our approach to address the 
issue of how specialties factor into determining which hospitals serve 
areas designated as HPSAs. Commenters stated that our use of the HPSA 
Physician Bonus Program as a model for addressing this question is 
flawed because hospitals do not respond to incentives and cannot 
relocate to new areas or establish new operations in the same manner as 
individual physicians and physician practices. Additionally, commenters 
stated that unlike the bonus payments in the HPSA Physician Bonus 
Program, the proposed size of the FTE awards will be insufficient to 
incentivize the establishment of new training programs in HPSAs.

[[Page 73430]]

    Response: While we agree that the HPSA Physician Bonus Program and 
the Category Four eligibility of hospitals for additional GME residency 
positions target different types of entities, one being physicians and 
the other physician training programs, as we discussed in the proposed 
rule the policy objective underlying each is to strengthen the 
physician workforce in underserved areas. We therefore disagree with 
the comment that one is an unsuitable template upon which to build the 
other. However, as discussed in greater detail later in this section, 
we agree with commenters that the proposed 1.0 FTE per year limitation 
on FTE awards with no assurance of follow-on awards would be an 
insufficient incentive to encourage many hospitals to expand an 
existing or establish a new training program. As such, we are 
finalizing a policy to increase maximum award sizes to 5.0 FTEs per 
hospital per year, which we discuss in more detail in section 
II.B.3.c.(2). of this final rule with comment period.
    Comment: Several commenters stated that hospital applications 
associated with mental health only geographic HPSAs should not be 
limited to psychiatry training programs. The commenters stated that 
provider shortages in mental health only geographic HPSAs are not 
limited to psychiatric services and the expansion of service 
availability in any specialty would help address community health care 
challenges.
    A commenter objected to our inclusion of mental health only 
geographic HPSAs in the definition for Category Four. Instead, the 
commenter believed that eligibility under Category Four should only be 
met when a hospital's main campus or other facilities are in a primary 
care geographic HPSA. The commenter also stated that the new resident 
slots should only be used to fund training for primary care residents.
    Response: We appreciate the comments requesting that hospitals not 
be limited to psychiatry training programs for hospitals that apply 
under mental health only geographic HPSAs for Category Four. While we 
understand that such an expansion could help address health care 
challenges in underserved communities, we have no direct evidence of a 
shortage of other specialties in mental health only geographic HPSAs 
nor do we have a method at this time to uniformly measure a shortage of 
other, non-psychiatric specialty providers in mental health only 
geographic HPSAs. As we discussed in the proposed rule and previously, 
the HPSA Physician Bonus Program provides incentive payments for 
services provided in mental health only geographic HPSAs, but only for 
services provided by psychiatry provider specialties. We continue to 
believe that it is appropriate to use mental health only geographic 
HPSAs for mental health providers in the determination of hospitals 
that serve areas designated as HPSAs. Therefore, we disagree with the 
comment that we should exclude mental health only geographic HPSAs from 
the definition of Category Four and limit residency positions to 
primary care training programs. However, we also believe it is equally 
important to advance health equity in physical and mental health 
services in underserved areas. Therefore, we are therefore modifying 
our policy in this final rule with comment period to include 
psychiatric subspecialty residency programs in addition to psychiatric 
residency programs within the mental health only geographic HPSA 
category.
    Therefore, in this final rule with comment period, specific to 
mental health only geographic HPSAs, we are finalizing the policy that 
if a hospital participates in training residents in a psychiatric or a 
psychiatric subspecialty program, where at least 50 percent of the 
program's training time occurs in a training site(s) in the HPSA, the 
hospital is eligible under Category Four.
    Comment: Several commenters expressed support for our proposed 
definition of Category Four hospitals.
    Response: We thank the commenters for their support.
    In summary, after consideration of and in response to the public 
comments received, we are finalizing our proposed requirements for 
determining eligibility under Category Four with modification in this 
final rule with comment period. Under our final policy, an applicant 
hospital qualifies under Category Four if it participates in training 
residents in a program in which the residents rotate for at least 50 
percent of their training time to a training site(s) physically located 
in a primary care or mental health only geographic HPSA. Specific to 
mental health only geographic HPSAs, the program must be a psychiatric 
or a psychiatric subspecialty program. In addition, under this final 
policy, as proposed, a Category Four hospital must submit an 
attestation, signed and dated by an officer or administrator of the 
hospital who signs the hospital's Medicare cost report, that it meets 
the 50 percent requirement. We did not receive any comments on our 
proposal not to consider dental HPSAs, as dental FTE residents are not 
subject to a hospital's IME and direct GME caps. We are finalizing that 
policy as proposed.
(6) Determination of Qualifying Hospitals
    Section 1886(h)(9)(F)(ii) of the Act defines a qualifying hospital 
as a hospital described in any of the subclauses (I) through (IV) of 
subparagraph (B)(ii). As such, we proposed that a qualifying hospital 
is a Category One, Category Two, Category Three, or Category Four 
hospital, or one that meets the definitions of more than one of these 
categories.
    The following is a summary of the public comments and our responses 
to our proposals related to the determination of qualifying hospitals.
    Comment: A commenter supported our proposal for determining which 
hospitals are considered qualifying hospitals. Specifically, hospitals 
that meet the definitions of Category One, Category Two, Category 
Three, or Category Four, or hospitals that meet the definitions of more 
than one of these categories, are eligible for section 126 of the CAA 
residency positions.
    Response: We thank the commenter for their support.
    Comment: A commenter stated that the Department of Veterans Affairs 
should be included in future planning and evaluation of a more refined 
distribution approach for future years.
    Response: We thank the commenter for the feedback. We note that 
residency positions distributed under section 126 will not be 
distributed to Veterans Affairs hospitals. These hospitals are eligible 
for GME payments through the Veterans Access, Choice, and 
Accountability Act GME Expansion. However, we note that when 
considering the percentage of program training time that occurs in a 
HPSA for purposes of section 126, training time occurring at a Veterans 
Affairs facility physically located in a HPSA will be included in that 
percentage.
    Comment: Several commenters recommended adding eligibility criteria 
that would allow hospitals not meeting any of the definitions of 
Categories One through Four to qualify for residency positions awarded 
under section 126 of the CAA. Commenters recommended including the 
following eligibility categories: Small hospitals with fewer than 250 
beds, hospitals with single residency programs, Indian health care 
providers, safety-net providers, and hospitals that host residency 
programs whose graduates later practice in either predominantly rural 
states or states with a large proportion of rational service areas 
designated as HPSAs.

[[Page 73431]]

    Response: We appreciate the commenters' feedback and input on 
qualifying criteria. Section 1886(h)(9)(F)(ii) restricts eligibility to 
the four categories discussed previously. However, we agree with 
commenters that including hospitals with fewer than 250 beds in our 
final policy, may be useful in further prioritizing residency positions 
in certain instances. We refer commenters to the discussion in section 
II.B.3.d.(2). of this final rule with comment period, where we 
incorporate the suggested bed limit into our final policy. We also 
welcome further comment regarding whether the remaining priority 
hospitals or hospital characteristics identified by commenters should 
be addressed in other aspects of our policy in future years.
    Comment: A commenter requested that we issue a list of hospitals 
that are likeliest to obtain additional residency positions under our 
finalized criteria. The commenter stated that advance signaling of 
which hospitals are likely to receive FTE awards will help them plan 
for contingent expansions of existing programs or establishment of new 
programs.
    Response: We thank the commenter for the feedback. While we 
understand that significant planning resources are required to 
establish and expand training programs, we cannot anticipate changes to 
training program rotations between now and the start of the 2023 
program year that will affect applications or predict which hospitals 
have determined that it is in their interest to expand their training 
programs with distributions under section 126 of the CAA and will 
apply. Therefore, we are unable to provide a list of hospitals that are 
likeliest to be awarded residency positions before awards are made. 
However, we intend to make available relevant information regarding the 
distribution of positions at the completion of the distribution 
process.
    After consideration of comments received, we are finalizing our 
policy related to the determination of qualifying hospitals as 
proposed, without modification. Specifically, a qualifying hospital is 
a Category One, Category Two, Category Three, or Category Four 
hospital, or one that meets the definitions of more than one of these 
categories.
c. Number of Residency Positions Made Available to Hospitals and 
Limitation on Individual Hospitals
(1) Number of Residency Positions Made Available to Hospitals
    Section 1886(h)(9)(A)(ii)(II) limits the aggregate number of total 
new residency positions made available in a single fiscal year across 
all hospitals to no more than 200. In order to provide these additional 
residency positions to hospitals as quickly as possible, in the FY 2022 
IPPS/LTCH PPS proposed rule (86 FR 25508), we proposed to make 200 
residency positions available for FY 2023 and each subsequent year.
    In this section, we present a summary of the public comments and 
our responses to our proposals related to the number of residency 
positions made available to hospitals.
    Comment: A number of commenters supported our proposal to make 200 
residency positions available for FY 2023 and each subsequent year. A 
commenter recommended that we distribute all 200 residency positions 
each year even if fewer than 200 facilities apply, by allowing 
additional FTEs to be assigned to hospitals that do not apply; the 
commenter stated that this would fulfill the intent of Congress that 
200 residency positions are distributed in each of the years.
    Response: We thank the commenters for their support. With respect 
to the suggestion that we distribute all 200 residency positions each 
year even if fewer than 200 facilities apply, section 1886(h)(9)(A)(i) 
of the Act, as added by section 126 of the CAA, makes it clear that, in 
order to receive additional FTEs, a hospital must submit a timely 
application. The law does not grant us the authority to distribute 
residency positions to hospitals that do not apply. We also note that 
section 1886(h)(9)(A)(ii)(II) of the Act states that the aggregate 
number of residency positions made available shall not exceed 200 for a 
fiscal year; it does not require that all 200 residency positions to be 
distributed each year if there are insufficient numbers of applicant 
hospitals. Although we do not expect that there will be an insufficient 
number of applicant hospitals we intend to track progress in meeting 
all statutory requirements and evaluate the need for potential 
modifications in future rulemaking.
    Comment: A few commenters expressed support for the statutory limit 
on the aggregate number of residency positions. Conversely, a commenter 
stated that the distribution of 200 residency positions per year across 
potentially 50 states will likely have minimal impact, particularly 
after a 25-year wait given that caps were implemented based on the 
number of FTE residents hospitals trained in 1996.
    Response: The limit on the aggregate number of residency positions 
made available each year is set by the statute at 200.
    Comment: A commenter was concerned about the impact of the 
distribution of residency positions under section 126 of the CAA on 
Medicaid. The commenter stated that the immediate impact on Medicaid in 
its state is unclear as it is uncertain how many of the new residency 
positions will be awarded to hospitals in its state. However, the 
commenter further noted that since hospitals awarded residency 
positions under section 126 will likely be incurring new medical 
education costs, Medicaid expenditures would increase.
    Response: We are clarifying that residency positions under section 
126 of the CAA are related to Medicare GME payments, not Medicaid. 
However, to the extent hospitals awarded residency positions under 
section 126 and the partial Medicare funding of new residency positions 
in that state might indirectly be associated with additional 
expenditures under that state's Medicaid program, any additional 
Medicaid expenditures that might occur are inestimable because it is 
unknown what hospitals in what states will apply and be awarded 
additional residency positions under section 126.
    After consideration of comments received, we are finalizing our 
policy related to the number of residency positions made available to 
hospitals as proposed, without modification. Specifically, the 
aggregate number of total residency positions made available in a 
single fiscal year across all hospitals will be limited to no more than 
200. Additionally, in order to provide these additional residency 
positions to hospitals as quickly as possible, we are making 200 
residency positions available for FY 2023 and each subsequent year.
(2) Limitation on Individual Hospitals
    As discussed in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 
25508), we expect the demand from hospitals for the aggregate number of 
total residency positions made available for each fiscal year to 
significantly exceed the 200 maximum. For example, there are currently 
over 300 teaching hospitals that have their main campus located in a 
primary care or mental health only geographic HPSA. In that same 
proposed rule, we stated that we expect the majority of these hospitals

[[Page 73432]]

would apply for additional residency positions because they would 
qualify under our proposed Category Four. Even if we were to 
exclusively allocate the maximum 200 positions permitted under the 
statute each year to these hospitals, which are only a subset of 
Category Four hospitals (and Category Four itself is only one of four 
categories), it would still be insufficient to award even 1.0 FTE to 
each hospital each year. Therefore, in order to make additional 
residency positions available to more hospitals each year, we proposed 
to limit the increase in the number of residency positions made 
available to each individual hospital to no more than 1.0 FTE each 
year. We note that the proposal was not 1.0 FTE for each program at a 
hospital each year, but rather 1.0 FTE for each hospital each year.
    As noted earlier, section 1886(h)(9)(C)(i) of the Act places 
certain limitations on the distribution of the residency positions, one 
of which is that a hospital may not receive more than 25 additional FTE 
residency positions. Under our proposed 1.0 FTE limitation per hospital 
per year, no hospital would receive more than 25 additional FTE 
residency positions. Rather, under the proposed 1.0 FTE limitation, 
hospitals would receive a maximum of 5 additional FTE residency 
positions.
    The following is a summary of the public comments and our responses 
to our proposals related to the limitation on individual hospitals.
    Comment: A commenter supported our proposal to limit the size of 
awards to 1.0 FTE per hospital per year. This commenter stated that the 
more stringent limit was warranted since the demand for additional 
residency positions will far exceed the total number of residency 
positions available, and applying a 1.0 FTE limit would promote the 
distribution of additional residency positions across a wider range of 
qualifying hospitals. Furthermore, the commenter recommended that, in 
subsequent distribution cycles, we prioritize applications from 
hospitals that have not yet received residency positions, so that no 
hospital would be awarded a second residency position until all other 
qualifying hospitals have received their first award.
    Response: We thank the commenter for their support, however, as we 
explain in this section, we are modifying our policy in this final rule 
with comment period to allow hospitals to receive up to 5.0 FTEs per 
year. Regarding the recommendation that in subsequent distribution 
cycles, we prioritize applications from hospitals that have not yet 
received residency positions, we will take this recommendation under 
consideration for potential future rulemaking.
    Comment: A commenter requested CMS clarify whether or not the 
proposal would distribute 1.0 FTE for the duration of a program, which 
equates to 3-5 residency positions per FTE, without requiring hospitals 
to reapply each year; for example, a hospital applying for a 3-year 
Family Medicine program would receive 3 residency positions total, 
while a hospital applying for a 5-year General Surgery program would 
receive 5 residency positions. Similarly, another commenter stated that 
they support our proposed limit and requested that in addition to the 
proposal, the FTE be financed for the duration of their training rather 
than a separate FTE being awarded for each year of training, and that 
this consideration be taken into account in determining the aggregate 
limit of 1,000 FTEs.
    Response: We believe that the commenters have misconstrued our 
proposal, and that they are interpreting the term ``FTE'' to refer to 
the funding necessary to support one resident in each program year of a 
residency training program for the length of the program. On the 
contrary, the term ``FTE'' refers to the funding necessary to support 
one resident during a single year of training; this is the sense in 
which we employed the term in our proposal as written in the FY 2022 
IPPS/LTCH PPS proposed rule, as well as in previous rulemaking cycles. 
We did not propose to distribute additional residency positions in 
blocks of 3.0-5.0 FTEs in the manner requested by the commenters. 
However, as we explain later in this section, we are modifying our 
policy in this final rule with comment period to allow hospitals to 
receive up to 5.0 FTEs per application year.
    Comment: Many commenters strongly objected to our proposal to limit 
the size of awards to 1.0 FTE per hospital per year. Several commenters 
argued that the proposal is contrary to congressional intent, and that 
CMS was overstepping its authority by imposing a limit more stringent 
than what is specified in the law. Others stated that the proposed 
limit is inconsistent with the overall goal of increasing residency 
training levels, especially in rural areas, and that the proposal could 
significantly lessen the potential impact of the new legislation. A 
commenter worried that the nationwide physician shortage may be further 
exacerbated by the proposal to limit the size of awards to 1.0 FTE per 
year, and stated that it may not be capable of producing trained 
physicians to keep up with the need, if the cost burden for the 
residency training programs is not further shared with Medicare.
    Many commenters argued that an award of 1.0 FTE per hospital per 
year would be insufficient to establish a new residency program or 
meaningfully expand an existing program. With respect to new programs, 
commenters observed that the ACGME Program Requirements specify a 
minimum complement of two to four residents in each program year for 
most specialties. They argued that the minimum cohort size is intended 
to ensure an appropriate learning environment and to provide residents 
with a sufficient shared clinical and educational experience that 
promotes peer learning, teamwork, and coordination of care. 
Accordingly, some commenters feared that the proposed limit would 
threaten program continuity and disrupt the training of residents. 
Moreover, a commenter observed that many programs are dependent on 
other specialties for the education of residents, and that the proposed 
limit would hinder an institution's ability to support new or expanded 
residency programs as a result of their inability to simultaneously 
expand residencies in the specialties that support those programs.
    Several commenters were concerned that the proposed limit would not 
be economically feasible for many institutions, particularly smaller 
hospitals. A commenter estimated that five additional residency 
positions over 5 years might be sufficient to support some new 
fellowship programs, but would likely be insufficient to support even 
half of the FTEs for most new residency programs. Another commenter 
stated that receiving financial support for only one year of training 
would be untenable for most smaller institutions, and that only large 
hospitals with multiple programs could absorb the full cost of 
expanding a program by one resident per program year. Such 
considerations led a commenter to conclude that under our proposal the 
costs of starting or expanding a residency program would outweigh the 
benefits, while several others predicted that it would discourage small 
hospitals from submitting applications altogether.
    Numerous commenters worried that the proposal would result in an 
onerous and unpredictable annual application process, which again would 
disproportionately burden smaller hospitals. They observed that 
hospitals would be forced to submit applications year after year with 
no guarantee of

[[Page 73433]]

receiving awards in subsequent rounds and thus no guarantee of being 
able to fund a residency position for the full length of a program. As 
an example, a commenter envisioned the scenario of a hospital that 
receives 1.0 FTE to establish a new residency program and does not 
qualify for additional residency positions in subsequent years; 
assuming a program duration of 3 years and a cohort size of four 
residents, such a hospital might be responsible for self-funding 11.0 
additional FTEs in order to run the new program. Another commenter 
worried that hospitals may be forced to relocate residents if they are 
unable to secure funding for future years.
    Several commenters also maintained that the proposed limit would 
particularly disadvantage hospitals in rural and underserved areas. A 
commenter stated that many such hospitals have consistently operated 
over their caps, often to their severe financial detriment; these 
hospitals are especially in need of financial assistance, and the 
proposed limit establishes a detrimental ceiling on the level of 
support they would be able to receive. As a result, the commenter 
concluded, our proposal would be likely to favor hospitals located in 
densely-populated urban areas. Another commenter added that an award of 
1.0 FTE per year would risk limiting residency positions to existing 
programs, and would therefore disadvantage small institutions that are 
seeking to become teaching hospitals.
    Commenters suggested various alternatives to our proposed limit of 
1.0 FTE per hospital per year, with several saying that we should 
adhere to the statutory maximum of 25.0 FTEs. Among the most common 
recommendations was that we should tie the size of the award to the 
duration of the program for which a hospital is applying: For example, 
a hospital applying for a Family Medicine program would receive 3.0 
FTEs total (1.0 FTE x 3 years of training), while a hospital applying 
for a General Surgery program would receive 5.0 FTEs (1.0 FTE x 5 years 
of training). Several commenters stated that this should be considered 
a minimum allocation, and expressed their preference for a maximum 
award of 15.0 FTEs total, which would allow a hospital to meaningfully 
expand one or more programs over 5 years. Other recommendations we 
received include: Distributing at least 3.0 FTEs per hospital per year; 
at least 3.0 FTEs per year for new programs, and 1.0 FTE per year for 
existing programs; at least 5.0 FTEs per year, with a commenter again 
suggesting that the amount could be different for new and existing 
programs; awarding residency positions in groupings or blocks of 4.0 
FTEs; awarding up to 10.0 FTEs per hospital per year; and allowing 
hospitals to apply for up to three programs and no more than 15.0 FTEs 
each year.
    Several commenters recommended that, if we retain the limit of 1.0 
FTE per hospital per year, then we should streamline the application 
process to make it less burdensome and unpredictable for hospitals. All 
of these commenters suggested that hospitals that receive an award in a 
given fiscal year should be guaranteed to receive awards in subsequent 
application cycles, up to a certain minimum amount, which might be 
based on the duration of the training program. Such hospitals might be 
permitted to apply for all of their residency positions up front, 
without being required to submit further applications, or they might 
have the option of resubmitting less detailed applications in future 
years. Some commenters noted that under this model the minimum award 
might not be guaranteed in instances where a hospital initially applies 
for a program in one of the later application cycles, for example for 
FY 2026, assuming that all 1,000 residency positions are distributed 
over the course of 5 fiscal years. A commenter stated that, at a 
minimum, CMS should provide more clarity on the number of residency 
positions awarded over time to reduce the need for annual applications 
and to allow hospitals to better plan for their GME programs.
    Response: We disagree with commenters who asserted that our 
proposed limitation of 1.0 FTE per hospital per year is contrary to 
congressional intent. Section 1886(h)(9)(C)(i) of the Act specifies 
that a hospital may not receive more than 25 additional full-time 
equivalent residency positions under the provisions of section 126 of 
the CAA; it does not specify a minimum award size, and leaves the 
Secretary broad latitude in determining the number of residency 
positions that will be distributed to individual hospitals.
    However, after reviewing comments received, in particular the 
comments which expressed concern that our proposed limitation would be 
insufficient to establish a new program or meaningfully expand an 
existing program, that it would be impractical for many institutions, 
and that it would result in an unpredictable and burdensome application 
process, we have reconsidered our proposal. Therefore, in this final 
rule with comment period, we are modifying our proposal to adjust the 
size of the award to the length of the program for which a hospital is 
applying. Specifically, the maximum award amount is contingent on the 
length of the program for which a hospital is applying, with up to 1.0 
FTE being awarded per program year, not to exceed a program length of 5 
years or 5.0 FTEs. For example, a hospital applying to train residents 
in a program in which the length of the program is 3 years may request 
up to 3.0 FTEs per fiscal year.
    We understand that in many cases a limit of 5.0 FTEs per hospital 
per year may not be sufficient for a hospital to fully fund Medicare's 
portion of a new program or planned expansion of an existing program; 
however, we believe that the increased limitation will provide a 
meaningful level of financial support to hospitals that would otherwise 
have to rely solely on their own resources to develop their GME 
infrastructure. Based on the comments we received, we believe that a 
limitation of 5.0 FTEs per hospital per year will be a sufficient 
amount to fully fund at least one resident in each program year for 
most specialties.
    We note that if a hospital is applying for a program which has more 
than one participating site, the hospital should only request the FTE 
amount (not to exceed 1.0 FTE per program year) associated with the 
training time at its facilities (including any nonprovider settings 
consistent with 42 CFR 413.78).
    Given the limited number of residency positions available and the 
number of hospitals expected to apply, our focus under this 
modification continues to be on hospitals that are applying to 
establish or expand a single residency program. Therefore, we are 
finalizing our proposal that a hospital may not submit more than one 
application in any fiscal year. We continue to expect that a hospital 
would choose to apply for a program that serves the HPSA with the 
highest score among its programs, but a hospital is not required to do 
so. Hospitals that receive awards in a given round of applications will 
be able to reapply in subsequent years, either for the same program or 
for a different program, but with no guarantee of receiving additional 
residency positions.
    With respect to hospitals that are seeking to become teaching 
hospitals, we note that such hospitals are also eligible to establish a 
cap(s) under 42 CFR 413.79(e). We refer these hospitals to section 
II.B.5. of this final rule with comment period where we discuss the 
implementation of section 131 of the CAA, specifically the 1.0 FTE cost 
reporting threshold. We note that a

[[Page 73434]]

hospital that trains residents for the first time in an existing 
program or a new program will have a per resident amount (PRA) 
established for direct GME payment purposes, consistent with the 
regulations at 42 CFR 413.77(e). Such a hospital will also have a 
cap(s) established if the program in which it trains residents is a new 
program. We refer these hospitals to the August 31, 2012 Federal 
Register (77 FR 53416 through 53424), where we discuss the 5-year cap 
building period for new teaching hospitals.
    Comment: Several commenters recommended that the limit on the 
number of residency positions should be adjusted to reflect the 
demonstrated need of individual hospitals. For instance, a commenter 
believed that hospitals in areas of great medical need should be 
allowed to receive more than 1.0 FTE per year; another commenter argued 
that, since the need for residency positions and full-time employees is 
not uniform across HPSAs, hospitals should not be subjected to a 
uniform cap on the size of their awards. A commenter stated that the 
limit should apply only to hospitals that do not qualify under any of 
the four statutory priority categories.
    Response: We appreciate the commenters' concern for hospitals 
located in areas of high need, and believe these concerns are addressed 
by the statutory requirement which specifies that hospitals may qualify 
for additional residency positions by serving HPSAs, and that at least 
10 percent of the aggregate number of residency positions should be 
distributed to hospitals in this category. In addition, as explained 
previously, we are modifying our policy in this final rule with comment 
period to allow hospitals to receive up to 5.0 FTEs per fiscal year.
    With respect to the suggestion that the limit should apply only to 
hospitals that do not qualify under any of the four statutory priority 
categories, we note that section 1886(h)(9)(A)(i) of the Act directs 
the Secretary to distribute additional residency positions to 
qualifying hospitals, while section 1886(h)(9)(F)(ii) of the Act 
defines the term ``qualifying hospital'' as a hospital that satisfies 
the criteria of at least one of the four categories of hospitals 
described in subclauses (I) through (IV) of subparagraph (B)(ii). In 
other words, a hospital that does not qualify under any of the 
statutory categories would not be eligible to apply for and receive 
additional residency positions under section 126 of the CAA.
    Comment: A few commenters recommended that CMS should delay the 
implementation of the proposed limitation on individual hospitals and 
evaluate the results of the first round of applications to determine 
whether a limit below the statutory maximum is warranted.
    Response: As explained previously, we are modifying our policy in 
this final rule with comment period to allow hospitals to receive up to 
5.0 FTEs per year. Under this modification to allow up to 5.0 FTEs, our 
focus continues to be a single program given the limited number of 
residency positions available and the number of hospitals we expect to 
apply. Therefore, we are finalizing our proposal that a hospital may 
not submit more than one application in any fiscal year. We continue to 
expect that a hospital would choose to apply for a program that serves 
the HPSA with the highest score among its programs, but a hospital is 
not required to do so. We plan to evaluate the results of the first 
round of applications and to consider whether any changes to the 
limitation on individual hospitals should be adopted in future 
rulemaking.
    Additionally, as noted in the proposed rule and earlier in this 
section, section 1886(h)(9)(C)(i) of the Act places certain limitations 
on the distribution of the residency positions, one of which is that a 
hospital may not receive more than 25 additional FTE residency 
positions. Under our final policy to allow hospitals to receive up to 
5.0 FTEs per year, no hospital would receive more than 25 additional 
FTE residency positions.
    Comment: In considering our proposed limit of 1.0 FTE per hospital 
per year, a commenter stated that our proposal to prorate residency 
positions in case the number of hospitals with the same HPSA score 
exceeds the number of remaining residency positions will diminish the 
value of awards and increase the likelihood that the costs of creating 
a new program or expanding one would outweigh the benefits. Several 
commenters recommended that in case of a tie, rather than prorating 
residency positions, we should prioritize hospitals that are training 
residents in excess of their statutory FTE caps.
    Response: We thank the commenters for their suggestions. As 
explained previously, we are modifying our policy in this final rule 
with comment period to allow hospitals to receive up to 5.0 FTEs per 
year. We refer the commenters to our discussion of our final policy to 
distribute residency positions, including our policy should there be a 
situation where the number of FTEs requested by hospitals with the same 
HPSA score, exceeds the number of remaining positions, in section 
II.B.3.d.(2). of this final rule with comment period.
    In summary, we are modifying our proposal to account for the size 
of a hospital's award to the length of the program for which the 
hospital is applying, with a maximum award of 5.0 FTEs per hospital per 
year. We are also finalizing the portion of our proposal that a 
hospital may not submit more than one application in any fiscal year.
d. Prioritization of Applications From Hospitals for Residency Programs 
That Serve Underserved Populations
(1) Use of Geographic HPSAs and Population HPSAs
    The Executive Order on ``Ensuring an Equitable Pandemic Response 
and Recovery'' noted that the COVID-19 pandemic has exposed and 
exacerbated severe and pervasive health and social inequities in 
America (see https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/21/executive-order-ensuring-an-equitable-pandemic-response-and-recovery/.) As we stated in the FY 2022 IPPS/LTCH PPS 
proposed rule (86 FR 25508), in order to help address these exposed 
health inequities longer term, we believe that it would be appropriate 
to prioritize the applications from hospitals that will use the 
additional residency positions under section 126 of the CAA in 
residency programs serving underserved populations.
    This prioritization was already partially reflected in our proposed 
definition of Category Four, where we discussed maximizing the number 
of GME positions distributed to residency programs serving underserved 
populations in geographic HPSAs designated by HRSA under PHSA section 
332(a)(1)(A). However, under PHSA section 332(a)(1)(B), HRSA also 
designates HPSAs on the basis of a shortage of services for a specific 
subset of the population (``population HPSAs'') rather than the entire 
population in an area as is the case in geographic HPSAs. These 
population subsets include, but are not limited to: Low-income 
populations, Medicaid-eligible populations, Native American 
populations, homeless populations, and migrant farmworker populations. 
(For information on the location and types of population HPSAs see 
https://data.hrsa.gov/tools/shortage-area/hpsa-find).
    In order to more fully address health inequities for underserved 
populations, we believe that it also would be appropriate to prioritize 
the applications from hospitals that serve

[[Page 73435]]

the specific designated underserved population of a population HPSA.
    We have already discussed our proposed definition in Category Four 
of hospitals that serve the populations of geographic HPSAs. Similar to 
that approach, in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 
25508), we proposed that a hospital would be considered to serve a 
population HPSA if it has its main campus or a provider-based facility 
(under 42 CFR 413.65) physically located in a primary care or mental 
health population HPSA, and any such locations serve the designated 
underserved population of that HPSA. Additionally, we proposed that, as 
part of the qualification requirements under Category Four, in the 
residency program for which the hospital is applying, at least 50 
percent of the residents' training time over the duration of the 
program must occur at those locations in the HPSA. As with geographic 
HPSAs, we believe it is important to avoid the possibility that a 
hospital with provider-based facilities in multiple locations, some of 
which may not be located in a population HPSA or serve the designated 
population of that HPSA, uses an additional residency position mostly 
or entirely to serve populations that face no health service shortage.
    Also similar to our proposed use of geographic HPSAs, we proposed 
that hospitals that only have main campuses or provider-based 
facilities in mental health only population HPSAs may only apply for 
positions for psychiatry residency programs.
    We proposed that a hospital submit an attestation, signed and dated 
by an officer or administrator of the hospital who signs the hospital's 
Medicare cost report, that it has its main campus or a provider-based 
facility (under 42 CFR 413.65) physically located in a primary care or 
mental health population HPSA, any such locations serve the designated 
underserved population of that HPSA, and in the program for which the 
hospital is applying, the criterion that at least 50 percent of the 
residents' training time over the duration of the program occurs at 
those locations in the HPSA. We note that there is a difference between 
the Category Four qualification ``requirement'' and the prioritization 
``criterion'' that 50 percent of a program's training time occur at 
training sites physically located in a HPSA. Section 
1886(h)(9)(B)(ii)(IV) of the Act specifies that not less than 10 
percent of the residency positions distributed shall go to hospitals 
that serve areas designated as HPSAs under section 332(a)(1)(A) of the 
Public Health Service Act, as determined by the Secretary (that is, 
geographic HPSAs, as discussed previously). Since section 
1886(h)(9)(B)(ii)(IV) of the Act (referred to as Category Four in this 
preamble discussion) requires that not less than 10 percent of 
residency positions under section 126 of the CAA be awarded to 
hospitals that serve geographic HPSAs, our Category Four policy 
includes a ``requirement'' that the applicant hospital participates in 
training residents in a program in which the residents rotate for at 
least 50 percent of their training time to a training site(s) 
physically located in a primary care or mental health only geographic 
HPSA, as previously discussed. Separately, hospitals that qualify under 
categories One through Four are then subject to the prioritization 
criteria, including the ``criterion'' that at least 50 percent of a 
program's training time occur at facilities physically located in a 
geographic or population HPSA, as described in more detail later in 
this section. The HPSA training percentage under the prioritization 
``criterion,'' while not required by statute, is consistent with the 
Administration's policy to prioritize training programs that have a 
higher likelihood of training physicians that will practice in 
underserved communities with the greatest need.
    In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 22508 through 
25509), we explained that our proposed approach for population-based 
HPSAs means that we potentially would be awarding a residency position 
for the provision of care that is not exclusively provided to the 
designated underserved population for which the shortage exists. 
However, in the context of our proposal to use HPSA scores to 
prioritize applications by the severity of the shortages, our proposal 
to limit the number of additional residency positions awarded to 1.0 
FTE per hospital each year, and our proposed criterion that at least 50 
percent of the training time over the duration of the program occur at 
locations in the HPSA that serve the designated underserved population 
of that HPSA, we believe it is sufficient for the residents in a 
program to provide care to the designated underserved population of 
that HPSA, and it is not necessary for residents to provide care 
exclusively to that population.
    We note that HRSA also designates certain facilities as HPSAs under 
PHSA section 332(a)(1)(C) and the regulations at 42 CFR part 5. The 
process for facility HPSA designation is dissimilar from that for 
geographic and population HPSAs. Further, a HPSA score for a facility 
does not reflect on the adequacy of the health care workforce outside 
that facility in a geographic area, and so it is not comparable to 
geographic or population HPSAs. Therefore, we did not propose to use 
facility HPSA designations for the purposes of this rulemaking.
    We also note that there are teaching hospitals that may not have 
facilities in areas designated as geographic or population HPSAs, but 
that under their Medicare provider agreement operate one or more 
facilities that serve areas for which there exists a shortage of 
providers. If this is the case, we recommend that a hospital interested 
in applying for FTE resident cap positions under this section contact 
its state or territorial Primary Care Office (PCO) to receive 
information on the HPSA designation process. HRSA maintains cooperative 
agreements with the 54 state and territorial PCOs, which conduct needs 
assessments and submit applications to HRSA to designate areas as 
HPSAs. We refer interested parties to 42 CFR part 5 and 57 FR 2473 for 
information on procedures for HPSA designation for primary care and 
mental health HPSAs, respectively.
    In summary, we are finalizing without modification our proposal to 
prioritize applications from qualifying hospitals (that is, hospitals 
that qualify under categories One through Four, as previously 
described) for residency programs that serve underserved populations in 
geographic HPSAs or population HPSAs. In the next section we discuss 
our proposal and final policy for the use of HPSA scores for this 
purpose.
(2) Use of HPSA Scores for Prioritization
    HRSA assigns HPSA scores on a scale of 0 to 25 as a measure of the 
severity of a primary care or mental health provider shortage in a 
geographic area, with higher scores indicating a more severe health 
professional shortage. As we observed in the FY 2022 IPPS/LTCH PPS 
proposed rule (86 FR 25509), using HPSA scores to differentiate 
applications from hospitals that qualify under categories One through 
Four would allow us to optimize the use of the limited number of 
additional residency positions under section 126 of the CAA and best 
address health inequities by focusing those residency positions on 
underserved populations with the most need.
    In the proposed rule we stated that, in preparing its application 
for an additional residency position for a program, a hospital should 
refer to HRSA's HPSA Find Tool (https://data.hrsa.gov/tools/shortage-area/hpsa-find) to obtain the HPSA score of the HPSA served by the 
program and

[[Page 73436]]

include this score in its application. A HPSA is served by a program if 
that program meets the requirements discussed earlier. Given our 
proposal to limit the additional positions awarded to individual 
hospitals to 1.0 FTE for any given year, we proposed that a hospital 
may not submit more than one application in any fiscal year. Given the 
limited number of residency positions available and the number of 
hospitals we expect to apply, we expect that a hospital would choose to 
apply for a program that serves the HPSA with the highest score among 
its programs, but a hospital is not required to do so.
    We proposed to allocate 1.0 FTE to each hospital with the highest 
HPSA score, prorating only in the event that the number of hospitals 
with the highest score exceeds the number of residency positions 
available. If the number of hospitals with the highest score is less 
than the number of residency positions available, each hospital with 
the next highest score would receive 1.0 FTE, with proration again 
occurring only in the event that the number of hospitals with this 
score exceeds the number of positions remaining. We would continue in 
this manner, moving on to hospitals with the next highest score until 
all available positions are distributed. We noted that, under this 
proposal, hospitals applying for residency positions for programs that 
do not serve HPSAs would not be categorically excluded, but those 
applications would have the lowest priority.
    In the proposed rule we included the following as an illustrative 
example, assume the following hospitals apply, Hospitals A through HV. 
Assume there are 200 additional residency positions available. Under 
our proposal, Hospitals A through ET would each get 1.0 FTE, while 
Hospitals EU through HV would each get a prorated FTE award of 0.625, 
as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                                       FTEs
                          Hospital name                             HPSA score     FTEs awarded    distributed/
                                                                                                     remaining
----------------------------------------------------------------------------------------------------------------
A-AX (50 hospitals).............................................              25             1.0          50/150
AY-CV (50 hospitals)............................................              24             1.0          50/100
CW-ET (50 hospitals)............................................              21             1.0           50/50
EU-HV (80 hospitals)............................................              19           0.625            50/0
----------------------------------------------------------------------------------------------------------------

    In summary, we proposed that additional residency positions under 
section 126 of the CAA would be distributed to hospitals that qualify 
under categories One through Four based on the HPSA score of the HPSA 
served by the residency program for which each hospital is applying, 
with programs serving higher HPSA scores receiving higher 
prioritization. Hospitals applying for residency positions for programs 
that do not serve HPSAs would not be categorically excluded, but those 
applications would have the lowest priority.
    In this section, we present a summary of the public comments and 
our responses to our proposals related to the prioritization of 
applications from hospitals for residency programs that serve 
underserved populations.
    Comment: Some commenters expressed support for our proposal to use 
HPSA scores to prioritize applications from qualifying hospitals and 
the policy goal that underlies this approach, specifically that of 
addressing health disparities faced by underserved populations. 
Commenters supporting our proposal indicated that where residents train 
has an impact on where they practice. Some commenters stated that the 
proposed methodology is a fair approach to increasing access to care in 
rural and underserved areas. Some commenters indicated that the use of 
HPSA scores would help improve the distribution of physicians across 
the country.
    Response: We thank the commenters for their support.
    Comment: Some commenters agreed with CMS that a prioritization of 
applications by HPSA scores would likely result in the statutory 
minimum of at least 10 percent of total residency positions being 
awarded to each of the four categories in section 1886(h)(9)(B)(ii) of 
the Act. A commenter added that in the event minimum distributions to 
each category are not met, minor adjustments can be made to the 
methodology without substantially compromising the approach.
    Other commenters disagreed and indicated that our proposed approach 
would not result in the minimum statutory distributions being met. For 
example, some of these commenters believed that our proposed 
prioritization approach might result in the minimum only being met for 
Category Four.
    Response: We thank the commenters for their support. In response to 
the commenters that disagreed that our proposed approach would result 
in the minimum statutory distributions being met, we are finalizing our 
approach, as proposed, to collect information regarding qualification 
for all four categories in the application to allow us to track 
progress in meeting all statutory requirements, and evaluate the need 
to modify the distribution methodology in future rulemaking. However, 
we continue to believe that our proposed approach will most likely 
result in the statutory minimum 10 percent distributions being met for 
all four of the statutory categories by the end of the 5-year 
distribution process for the 1,000 FTE slots. Therefore, as described 
in more detail later in this section, we are finalizing our proposal 
that the residency positions will be distributed to qualifying 
applicant hospitals using a method that prioritizes allotments based on 
HPSA scores.
    Comment: Many commenters objected to some or all of the aspects of 
the proposed criterion that at least 50 percent of a program's training 
time occur at applicant hospital locations inside a HPSA in order for 
CMS to use that HPSA's score to prioritize the section 126 of the CAA 
application for that program. Some of these commenters stated that 
nonprovider settings inside the HPSA that are not applicant hospital 
locations, such as FQHCs and RHCs, are important contributors to care 
in the HPSA and training time at these sites should count. Several of 
these commenters added that training time in nonprovider settings 
counts for other GME purposes.
    Other commenters objected to the existence of a minimum training 
time criterion inside of a HPSA at all, regardless of what types of 
locations. These commenters argued that many HPSA residents rely on 
care provided outside of their HPSA. Some commenters noted this is 
particularly true for certain specialty care for which HPSA-residing 
patients are referred to teaching hospitals located outside the HPSA. 
Some of these commenters suggested we modify our proposal to include 
training locations within a HPSA and those within a reasonable

[[Page 73437]]

distance of one. Several commenters provided specific recommendations 
for a reasonable distance, such as within 1 mile, 10 miles, 20 miles, 
or 25 miles. A commenter requested that all Indian and Tribal 
facilities be considered for prioritization regardless of where they 
are located.
    According to some commenters, a minimum training time inside the 
HPSA would impede teaching hospitals' ability to structure programs to 
best meet the needs of the patients and the communities they serve, as 
well as make it difficult to satisfy administrative obligations such as 
accreditation standards. For example, some commenters indicated it 
would be impossible for some programs to satisfy this criterion because 
locations in a HPSA provide insufficient training opportunities for 
some specialties, and we would force hospitals to operate programs in 
areas that are ill-suited to sustain training programs.
    Some commenters were opposed to the minimum training time criterion 
because they believe it would impose a recordkeeping burden on 
hospitals. A few commenters noted that normally, resident rotations are 
reported in IRIS in aggregate, whereas the proposed 50 percent training 
time criterion would demand individual resident tracking and reporting. 
Commenters stated that to attest to meeting the criterion, teaching 
hospitals would need to develop a new system and process to document 
and track section 126 of the CAA funded residents that is separate from 
the system and process used to track residents funded by other sources.
    A commenter requested clarification on whether the minimum training 
time criterion is based on all residents in a program in aggregate or 
to individual residents.
    Response: We appreciate commenters' concerns regarding the proposed 
criterion that at least 50 percent of a program's training time occur 
at applicant hospital locations inside a HPSA in order for CMS to use 
that HPSA's score to prioritize the section 126 of the CAA application 
for that program. After consideration of these comments, we are 
modifying certain aspects of this prioritization criterion.
    After considering the comments received, we agree with commenters 
that training should not be limited to hospital settings physically 
located in the HPSA to the exclusion of other settings physically 
located in the HPSA. For a geographic HPSA, any and all program 
training based on resident rotation schedules (or similar 
documentation) that occurs in the HPSA at program training sites that 
are physically located in the HPSA and treat the HPSA's population, 
including nonprovider settings and Veterans Affairs facilities, will 
count towards meeting the 50 percent training criterion. For a 
population HPSA, any and all program training based on resident 
rotation schedules (or similar documentation) that occurs in the HPSA 
at program training sites that are physically located in the HPSA and 
treat the HPSA's designated population, including nonprovider settings 
and Veterans Affairs facilities, will count towards meeting the 50 
percent training criterion.
    We disagree with commenters who objected to the existence of a 
minimum training time criterion inside of a HPSA at all. We acknowledge 
that many HPSA residents receive care provided outside of their HPSA in 
areas where the physician shortages are less severe. However, with the 
limited FTE slots available under section 126 of the CAA we are 
choosing at this time to prioritize in a clear way the care provided 
inside of HPSAs in order to increase the likelihood of residents 
choosing to practice in areas with more severe shortages. We seek 
comment to inform potential future rulemaking on incorporating a 
measure of care provided outside of a HPSA to HPSA residents into the 
section 126 of the CAA methodology.
    We have considered the comment suggesting that all Indian and 
Tribal facilities be considered for prioritization regardless of where 
they are located. Given the unique relationship between the Medicare 
program and Indian and Tribal facilities, and the health care 
disparities that exist for the Indian and Tribal populations served by 
these facilities, we believe it would be appropriate to also prioritize 
applications for programs where the residents rotate into these 
facilities. Specifically, for purposes of prioritization we will allow 
the training time spent in Indian and Tribal facilities outside of a 
HPSA to count towards the minimum training time criterion for that 
HPSA, up to a maximum of 45 percentage points of the 50 percentage 
points required.
    We disagree with the commenters who claimed that the minimum 
training time criterion inside the HPSA forces a hospital to 
restructure its residency programs or operate programs that include 
training opportunities in areas that cannot support them. Section 126 
of the CAA is a voluntary program. Hospitals can choose to apply for 
additional residency positions or not. We developed a prioritization 
methodology because we anticipate that the number of FTE slots 
requested will exceed the number available. If that were not the case 
the minimum training time criterion would have no effect since even 
applications at the lowest priority level (that is, applications for 
programs that do not meet the minimum training time criterion for any 
HPSA) would receive the number of FTE slots requested assuming all 
other applicable requirements were met. We understand that some 
commenters disagree with a prioritization method based on HPSA scores, 
but that is different from the prioritization method forcing a hospital 
to restructure residency programs or operate them in areas that cannot 
support them.
    As noted in responses to similar comments on Category Four, we also 
disagree with the comments that a minimum rotation time criterion 
imposes a significant tracking or reporting requirement. We are not 
requiring hospitals to establish entirely new administrative structures 
to accommodate section 126 of the CAA FTEs. Hospitals regularly develop 
rotation schedules to facilitate residents' training at participating 
sites and a program's participating site information is generally 
readily available on the ACGME website. As such, we are specifying that 
the percentage of time that residents in the program spend in the HPSA 
and in Indian and Tribal facilities (if applicable) for purposes of 
prioritization is required to be based on resident rotation schedules 
(or similar documentation).
    Regarding IRIS, we do not expect the existing reporting 
requirements to change for hospitals that receive section 126 of the 
CAA FTEs. In response to the question regarding whether the minimum 
training time criterion applies to all residents in aggregate or to 
individual residents, the criterion applies to the program in its 
entirety, not to individual residents. As such, hospitals are not 
expected to track the training time of individual residents so long as 
the program in its entirety meets the criterion as demonstrated by the 
rotation schedule.
    Comment: Many commenters expressed concern about the accuracy of 
HPSA scores and appropriateness of their use. Several commenters stated 
that HPSA scores are not the most precise measures of barriers to 
access to care or health care workforce shortages. A commenter provided 
a link to a letter they had written to HRSA on recommendations to 
improve their HPSA scoring methodology, including counting residents 
and physicians differently in the population to provider ratio, 
including an older-adult measure

[[Page 73438]]

in the primary care HPSA score, and taking steps to smooth out the 
volatility of HPSA scores to improve predictability for providers in 
shortage areas.\1\ Another commenter provided a link to an academic 
article that argued HPSAs alone are an insufficient means to guide 
policies intended to address complex and interrelated health 
challenges.\2\ Some commenters stated that the provider to population 
ratio is an important component of HPSA scores while the travel time to 
care outside of a HPSA is not. Some commenters argued that HPSA scores 
do not provide information on the availability of non-physician 
clinicians, such as nurse practitioners and physician assistants, or on 
the availability of non-primary care specialties, such as general 
surgery. Thus, according to the commenters, the HPSA score reflects an 
incomplete picture of physician availability in an area. A commenter 
claimed that some states game their HPSA scores or submit faulty data 
that incidentally lifts their scores. A commenter referenced HRSA's 
June 2020 RFI that sought ideas on improving its HPSA scoring 
methodology as an acknowledgment that the current system does not 
accurately capture local access to care challenges.
---------------------------------------------------------------------------

    \1\ https://www.aha.org/system/files/media/file/2020/09/aha-comments-submitted-response-hrsas-rfi-health-professional-shortage-area-hpsa-scorin-9-18-20.pdf.
    \2\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7182224/.
---------------------------------------------------------------------------

    Response: We continue to believe that HPSA scores, while not a 
perfect measure, provide the best prioritization approach available at 
this time. They are transparent, widely used, publicly available, 
regularly updated, and have verifiable inputs for measuring the 
severity of a service area's need for additional providers. Consistent 
with the Administration's policy objectives and the authority provided 
to the Secretary under section 126 of the CAA, we have prioritized 
training programs that have a higher likelihood of training physicians 
that will practice in underserved communities with the greatest need.
    With regard to the comment that HPSAs do not take into account the 
availability of non-physician clinicians in shortage areas, we believe 
that since the residency positions distributed under section 126 of the 
CAA are not available to non-physician clinicians, our focus should be 
on measuring physician shortages. In response to the commenters who 
expressed concerns related to HPSA scores being based on primary care 
specialties and not non-primary care specialties, we acknowledge this 
concern but note that the statutory Physician Bonus program utilizes 
primary care HPSAs for non-primary care specialties and we believe 
provides a currently feasible and appropriate template here.
    Regarding the comment that claimed some states game their HPSA 
scores or submit faulty data that incidentally lifts their scores, the 
commenter did not provide any information to substantiate this claim.
    We encourage stakeholders to continue to work with HRSA to improve 
HPSAs as part of its Shortage Designation Modernization Project (SDMP), 
which has been ongoing since 2013. We are also seeking comment on 
feasible alternatives to HPSA scores as a proxy for health disparities 
to inform potential future rulemaking regarding prioritization.
    Comment: A commenter supported the use of geographic HPSA scores to 
prioritize applications, but opposed the use of population HPSA scores. 
The commenter indicated that population HPSA designations are sought by 
areas that do not meet the criteria for geographic HPSA designations 
and there are so many population HPSAs that their inclusion would 
undermine legislative intent to target the distribution of residency 
positions to areas with the greatest need.
    Response: Although we agree with the commenter's assessment that 
the inclusion of population HPSA scores changes the prioritization of 
some applications, we disagree with the commenter that the inclusion of 
population HPSAs undermines targeting the distribution of FTE slots to 
areas of greatest need. The more targeted underserved populations in 
population HPSAs are as equally deserving as the broader populations in 
geographic HPSAs, and the HPSAs scores for both types of HPSAs reflect 
the severity of the need. We also note that in the case of a population 
HPSA, the requisite amount of training time for the residency program 
must occur at facilities that treat the underserved population of the 
population HPSA.
    Comment: Several commenters argued that HPSAs are designed to 
inform about health professional shortages and do not reflect the 
capacity of hospitals to train residents.
    Response: Our use of HPSA scores for prioritization is not intended 
to measure a hospital's capacity to train residents. We rely on a 
training program's ACGME accreditation and the ``demonstrated 
likelihood'' criterion for that information.
    Comment: A commenter alleged that the example distribution table we 
provided in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25509) is 
invalid because the number of areas and specific HPSA scores 
represented in it do not reflect actual data. The commenter provided 
their own HPSA table that includes data from June 2020 and that 
indicates there are too few primary care geographic and population 
HPSAs with scores ranging from 21 to 25 to distribute all 1,000 
residency positions to hospitals that serve those HPSAs if award sizes 
are capped at 1.0 FTE, so that the majority of the awards would be made 
to hospitals that serve HPSAs with scores below 21.
    Response: The table provided in the preamble of the proposed rule 
was not designed to project the likely distribution of FTEs under 
section 126 of the CAA, but to illustrate how the prioritization 
methodology would be applied in practice based on hypothetical data. 
The minimum score for an application to receive sufficient 
prioritization to receive an award will not be known until all of the 
applications are received and evaluated for an application year.
    Comment: A commenter stated that HPSAs can overlap and expressed 
concern that hospitals may have trouble locating their HPSA scores. The 
commenter cautioned that unless CMS posts a list of HPSA scores, 
hospitals will not be able to assess the impact on residency training 
and ultimately on patients' access to physicians. Another commenter 
stated that we should be more transparent about HPSA scores and clearer 
about how HPSA scores will be assigned to applicant hospitals. A 
commenter stated that they performed a study of the HPSA scoring 
methodology that found that rural and frontier areas with populations 
less than 5,000 people received lower scores. The commenter concluded 
that the HPSA scoring system discriminates against populations at that 
level or lower.
    Response: A primary care HPSA, either a geographic or population 
one, cannot overlap with any other primary care HPSAs. Similarly, a 
mental health HPSA, either a geographic or population one, cannot 
overlap with any other mental health HPSAs. However, there are areas 
that are designated as both mental health and primary care HPSAs, and 
have different scores for each. Overlap between primary care and mental 
health HPSAs may be either complete or partial.

[[Page 73439]]

    Hospitals can find information about the HPSA or HPSAs associated 
with their training program locations using the HRSA search tool at: 
https://data.hrsa.gov/tools/shortage-area/by-address. When a hospital 
finds that its residency training program meets the requirement to be 
prioritized by more than one HPSA, it may choose which HPSA to use on 
its application. A hospital cannot choose more than one HPSA to 
prioritize its application. CMS does not assign a HPSA to prioritize an 
application.
    The HPSA scoring methodology is a relative measure that is applied 
uniformly and equitably regardless of the size of the underlying 
population. Hospitals that would like to learn more about how HRSA 
developed the HPSA scoring methodology through notice and comment 
rulemaking and how it calculates the HPSA scores can find out more by 
contacting HRSA or visiting this web page: https://www.hhs.gov/guidance/document/hpsa-and-muap-hpsa-scoring-criteria.
    Comment: Several commenters requested that CMS clarify whether 
there is any difference in prioritization between primary care or 
mental health only geographic HPSAs and population HPSAs.
    Response: There is no difference in prioritization with respect to 
the HPSA score of a primary care geographic HPSA, a mental health only 
HPSA, or a population HPSA. For example, a HPSA score of 21 is treated 
the same in the prioritization regardless of whether it is associated 
with a primary care geographic HPSAs, a mental health only HPSA, or a 
population HPSA.
    Comment: Some commenters recommended other methods of prioritizing 
applications to distribute FTE slots to areas that are in most need. A 
commenter recommended prioritizing applications by a composite of HPSA 
scores and Medically Underserved Area (MUA) scores. Another commenter 
suggested that for the 60 percent of residency positions not required 
to be allocated to hospitals that meet the statutory eligibility 
categories, priority should be given to hospitals that are located in 
MUAs, or service areas or populations designated as medically 
underserved by state health entities. A commenter urged CMS to 
prioritize applications for addiction medicine in mental health only 
HPSAs. Other commenters requested that any program for any physician 
specialty be allowed to use the score from a mental health only HPSA, 
with preference given to applications for psychiatry training programs. 
A commenter stated that CMS should use the Medicare disproportionate 
share hospital (DSH) patient percentage of the applicant hospital to 
prioritize applications. Some commenters indicated that CMS should 
prioritize applications from small hospitals with less than 250 beds, 
and hospitals with only one residency program.
    Response: We thank the commenters for their feedback. As indicated 
earlier, we continue to believe that HPSA scores, while not a perfect 
measure, provide the best prioritization approach available at this 
time. They are transparent, widely used, publicly available, regularly 
updated, uniformly calculated, and have verifiable inputs for measuring 
the severity of a service area's need for additional physicians. 
Different methodologies that would be used by individual states to 
designate areas or populations as underserved do not possess all of 
these characteristics.
    We also do not believe that MUAs are as appropriate as HPSAs for 
purposes of section 126 of the CAA. HPSAs were designed for the 
National Health Service Corps to distribute clinicians to where they 
are needed most, they form the statutory basis for the Medicare 
Physician Bonus Program, and geographic HPSAs are explicitly referenced 
in section 126 of the CAA. In contrast, MUAs were designed to help 
establish health maintenance organizations and community health 
centers,\3\ play no role in the Medicare Physician Bonus Program, and 
are not referenced in section 126 of the CAA.
---------------------------------------------------------------------------

    \3\ https://bhw.hrsa.gov/workforce-shortage-areas/shortage-designation#mups.
---------------------------------------------------------------------------

    We disagree that any residency training program regardless of 
specialty should be allowed to use the score from a mental health only 
HPSA for prioritization. These areas are only designated as shortage 
areas for mental health services and such a wide use would be broadly 
inconsistent with the Medicare Physician Bonus Program. Therefore, we 
are allowing only programs for Psychiatry and subspecialties of 
Psychiatry to use the score from a mental health only HPSA. We note 
that the subspecialties of Psychiatry include addiction psychiatry and 
multispecialty addiction medicine.
    We disagree with the commenter who stated that CMS should use the 
Medicare DSH patient percentage of the applicant hospital to prioritize 
applications. We believe that using the DSH patient percentage is a 
less targeted way to increase the likelihood of residents choosing to 
practice in areas with more severe shortages.
    We disagree with commenters who indicated that CMS should 
prioritize applications from small hospitals with less than 250 beds 
and generally smaller hospitals with only one residency program to the 
extent that the commenters meant irrespective of the HPSA scores 
associated with these applications. However, we do believe there is 
merit in considering smaller hospital size as a tiebreaker when 
prioritizing applications with equal HPSA scores in order to further 
reduce the impact of proration. Of the two suggestions by commenters, 
bed count is one of the most transparent and currently used measures of 
hospital size (42 CFR 412.105(b)). Therefore, if there are insufficient 
FTE slots remaining to distribute to applications with equal HPSA 
scores, we will first distribute FTE slots to applications from 
hospitals with less than 250 beds. If there are insufficient FTE slots 
to distribute to applications from hospitals with less than 250 beds, 
only then would we prorate among those applications. If there are 
sufficient slots to distribute to applications from hospitals with less 
than 250 beds, we would prorate the remaining slots among the 
applications from hospitals with 250 beds or more.
    Comment: Several commenters who otherwise supported the HPSA 
scoring methodology recommended the incorporation of an ``impact 
factor'' that measures the proportion of residents that ultimately go 
on to practice in HPSAs. The use of this additional factor, according 
to commenters, would help ensure that section 126 of the CAA 
distributions support physician pipelines that produce lasting benefits 
for underserved areas. A commenter noted that one research-focused non-
profit already documents the flow of residents to eventual practice 
locations for family medicine programs. Commenters also stated that the 
use of such an impact factor is aligned with the President's Executive 
Order on ``Advancing Racial Equity and Support for Underserved 
Communities Through the Federal Government,'' which calls on federal 
agencies to recognize and address policies and programs that serve as 
barriers to equal opportunity. Another commenter expressed a similar 
view, that hospitals should be given priority if their training 
programs have records of sending residents on to practice in provider 
shortage areas.
    Response: We thank the commenters for their feedback and agree that 
a measure of the extent to which residents later practice in 
underserved areas may be beneficial. In order to inform potential 
future rulemaking, we welcome further comment on how to best estimate 
the impact factor using appropriately comprehensive and

[[Page 73440]]

transparent data sources across physician specialties, and how to weigh 
an impact factor in the prioritization.
    Comment: A commenter expressed their opinion that if Congress 
passes new legislation increasing the number of available GME training 
residency positions, then the distribution process will need to be 
changed.
    Response: Because we consider this comment to be outside the scope 
of the section 126 proposals, we are not directly responding to this 
comment in this final rule with comment period. However, we appreciate 
the commenter's concern and expect that any future changes following 
new legislation would be made through notice and comment rulemaking.
    In summary, after considering the comments received, we are 
finalizing the following prioritization policy. Applications from 
hospitals for a fiscal year are grouped by the HPSA score of the 
application, with each grouping consisting of those hospitals with the 
same HPSA score. Applications are prioritized by descending HPSA score. 
Within each grouping, applications with equal priority (i.e., those 
with the same HPSA score) are next grouped by whether the application 
is from a hospital with a bed size of less than 250 beds, or 250 beds 
or more. Applications from hospitals with less than 250 beds are 
prioritized within each grouping. The number of beds in the hospital is 
determined in accordance with Sec.  412.105(b).
    If there are insufficient slots available to be distributed to all 
applications with both the same HPSA score and the same bed size 
grouping, the remaining available slots are prorated among those 
applications.
e. Alternative Considered for Prioritization
    As an alternative to our proposed prioritization approach, in the 
FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25509 through 25510), we 
considered a simpler prioritization approach for FY 2023 that would 
allow additional time to work with stakeholders to develop a more 
refined approach for future years. Under this alternative approach, CMS 
would distribute 200 additional residency positions for FY 2023 among 
hospitals that qualify in Category One, Category Two, Category Three, 
and/or Category Four, with higher priority given to applications from 
hospitals that qualify in more categories. That is, hospitals that 
qualify under all four categories would receive top priority, hospitals 
that qualify under any three of the four categories would receive the 
next highest priority, then any two of the four categories, and finally 
hospitals that qualify under only one category. Under this alternative 
proposal considered, in the proposed rule, we stated that we would 
distribute 1.0 FTE to each hospital that qualified under all four 
categories, prorating only in the event that the number of hospitals 
that qualified under all four categories exceeds 200. If the number of 
hospitals that qualified under all four categories is less than 200, 
each hospital that qualified under three out of four categories would 
receive 1.0 FTE, with proration again occurring only in the event that 
the number of hospitals that qualified under three out of four 
categories exceeds the number of positions remaining. We would continue 
in this manner, moving on to hospitals that qualified under two out of 
four and one out of four categories until all 200 positions are 
distributed.
    We sought comment on this alternative prioritization approach 
considered to allow for additional time to work with stakeholders to 
develop a more refined approach for future years.
    Comment: Many commenters supported the proposed alternative 
prioritization approach. Commenters stated it would be less burdensome, 
more straightforward, and better reflect Congressional intent. Some 
commenters indicated this was similar to part of the approach used for 
Section 5503 of the Affordable Care Act. Several commenters indicated 
that CMS should only use the alternative method for FY 2023 and should 
work with stakeholders to develop a better approach for future years. 
Some commenters indicated that because the four eligibility categories 
are treated equally in the statute, hospitals that qualify under each 
one should be equally positioned to receive FTE slots. Several 
commenters stated that our proposed prioritization method based on HPSA 
scores would disadvantage many hospitals that qualify only under 
Category One, Category Two, and/or Category Three, and therefore would 
be contrary to Congressional intent. Some commenters indicated that for 
applications from hospitals that qualify under the same number of 
statutory categories under the alternative method, we secondarily 
prioritize those applications from hospitals training 10 FTEs or more 
above their caps, with those most above their cap receiving slots 
first.
    Response: We thank the commenters for their feedback on the 
prioritization method described in the ``Alternatives Considered'' 
portion of the proposed rule.
    We acknowledge that our proposed method based on HPSA scores 
prioritizes applications for programs where the residents spend 
significant time in a geographic or population HPSA. This is 
intentional. It is appropriate and entirely consistent with the statute 
for CMS to establish a sufficiently focused prioritization methodology 
so that our policy objectives for section 126 of the CAA regarding 
reducing health care disparities for medically underserved communities 
are most likely to be achieved. We disagree with commenters who believe 
our proposed prioritization method based on HPSA scores is not likely 
to achieve those goals. The locations of residents' training affects 
where they practice, as noted by other commenters. We acknowledge some 
similarity between aspects of the alternative approach and part of the 
approach taken in the implementation of section 5503 of the Affordable 
Care Act, but believe our approach based on HPSA scores is a more 
targeted improvement over section 5503's approach. We also note that as 
discussed earlier, the vast majority of commenters strenuously opposed 
our proposed 1.0 FTE limit per hospital and in response to those 
comments we are increasing that limit in this final rule with comment 
period.
    We considered the comments that we should secondarily prioritize 
those applications from hospitals training 10 FTEs or more above their 
caps, with those most above their cap receiving slots first. We 
disagree with these comments because this secondary prioritization 
method would be less effective at increasing the likelihood of 
residents choosing to practice in areas with more severe shortages 
compared to using the method we are adopting for prioritization based 
on HPSA scores.
    Comment: Some commenters opposed the use of the alternative method 
and indicated it would exclude hospitals in states that do not have new 
medical schools or additional locations and branch campuses from top 
priority, disadvantaging many rural states. Commenters stated that some 
of those states have made efforts to address physician workforce 
shortages by increasing medical school class sizes rather than 
establishing new medical schools. Some commenters stated that new 
allopathic medical schools train fewer family physicians than older 
medical schools so the alternative method disadvantages primary care.
    Response: We agree with commenters that the alternative method 
would exclude hospitals in states that do not have new medical schools 
or additional

[[Page 73441]]

locations and branch campuses from top priority (that is, qualifying 
under all four categories) because those hospitals cannot qualify under 
Category Three. In addition, as several commenters pointed out, and as 
discussed earlier, section 126 of the CAA addresses a nationwide 
provider shortage and ensures minimum allotments to certain categories 
of hospitals; prioritization for all 1,000 residency positions 
distributed under this section to hospitals that meet all four 
statutory eligibility categories could lead to the possibility that 
hospitals located in the following 20 areas (15 states, one district 
and four territories) would be awarded zero positions: Alaska, American 
Samoa, Guam, Hawaii, Iowa, Maine, Maryland, Minnesota, Montana, 
Nebraska, New Hampshire, North Dakota, Northern Mariana Islands, 
Oregon, Rhode Island, South Dakota, U.S. Virgin Islands, Vermont, 
Washington DC, and Wyoming. We believe that prioritization according to 
the severity of the provider shortage is the more equitable approach to 
distribution. Therefore, after consideration of the comments received, 
and the reasons discussed, we are not finalizing the alternative 
methodology for FY 2023.
f. Distributing at Least 10 Percent of Positions to Each of the Four 
Categories
    Section 1886(h)(9)(B)(ii) of the Act requires the Secretary to 
distribute at least 10 percent of the aggregate number of total 
residency positions available to each of the following categories of 
hospitals discussed earlier: Category One, Category Two, Category 
Three, and Category Four.
    In the proposed rule (86 FR 25510), we stated that because it is 
possible for a hospital to be eligible for distribution of additional 
residency positions via more than one of the four categories, Category 
One, Two, Three or Four, there is a strong likelihood that by 
prioritizing applications by HPSA score the result will be that 10 
percent or more of the additional residency positions will be 
distributed to hospitals in each of the four categories. In the 
proposed rule (86 FR 25510), we proposed to collect information 
regarding qualification for all four categories in applications to 
allow us to track progress in meeting all statutory requirements, and 
evaluate the need to modify the distribution methodology in future 
rulemaking.
    We received no comments on this proposal. Therefore, we are also 
finalizing our plan as proposed to collect information regarding 
qualification for all four categories to allow us to track progress in 
meeting all statutory requirements, and evaluate the need to modify the 
distribution methodology in future rulemaking.
g. Hospital Attestation to National CLAS Standards
    In order to ensure that the residents are educated and trained in 
culturally and linguistically appropriate policies and practices, we 
proposed that all applicant hospitals would be required to attest that 
they meet the National Standards for Culturally and Linguistically 
Appropriate Services in Health and Health Care (the National CLAS 
Standards) to ensure the section 126 of the CAA additional residency 
position allocation broadens the availability of quality care and 
services to all individuals, regardless of preferred language, 
cultures, and health beliefs. (For more information on the CLAS 
standards, please refer to https://minorityhealth.hhs.gov/omh/browse.aspx?lvl=2&lvlid=53)
    Comment: Several commenters expressed support for our proposal that 
all applicant hospitals be required to attest that they meet the 
National Standards for Culturally and Linguistically Appropriate 
Services (CLAS) in Health and Health Care.
    Response: We thank the commenters for their support.
    Comment: A few commenters expressed support for the aims of the 
National CLAS Standards, but also raised concerns about requiring 
hospitals to attest to a uniform benchmark. A commenter argued that 
these criteria can be difficult to measure objectively, and recommended 
that CMS modify the application requirement so that hospitals are still 
eligible for residency positions if they attest that they support and 
are making progress toward meeting the National CLAS standards. Another 
commenter requested that hospitals be granted flexibility in 
demonstrating their commitment to culturally and linguistically 
appropriate training, and argued that many of the CLAS standards 
overlap with requirements that hospitals already meet, including the 
Internal Revenue Service (IRS) requirements for 501(c)(3) hospitals; 
the Joint Commission Standards related to language access and 
interpreter services; and ACGME core competency requirements. Another 
commenter cited similar requirements and provided several examples of 
initiatives that its own members have undertaken, but asserted that the 
concept of a national standardized or mandated curriculum is 
inappropriate, and that teaching hospitals should have the freedom to 
design and implement their own educational programs.
    Response: We appreciate commenters' feedback and support. We 
acknowledge that other accreditation boards list some of the same 
requirements as the National CLAS standards requirements, but we 
believe that the National CLAS standards are more aligned with the 
Administration's commitment to addressing healthcare barriers, which 
include that residents are educated and trained in culturally and 
linguistically appropriate policies and practices. However, we will 
continue to consider further adjustments going forward if appropriate. 
For additional information about implementing the National CLAS 
standards within your organization to help advance and sustain 
culturally and linguistically appropriate services, please visit 
https://thinkculturalhealth.hhs.gov/.
    After consideration of the comments we received, we are finalizing 
our proposal that all applicant hospitals would be required to attest 
that they meet the National CLAS Standards.
h. Payment for and Aggregation of Additional FTE Residency Positions 
Awarded Under Section 126 of the CAA
    Section 1886(h)(9)(D) requires that CMS pay a hospital for 
additional positions awarded under this paragraph using the hospital's 
existing direct GME PRAs for primary care and OB/GYN programs and non-
primary care programs consistent with the regulations at Sec.  413.77. 
However, similar to our implementation of section 5503 in the CY 2011 
OPPS final rule (75 FR 72192) with respect to the application of direct 
GME PRAs for primary care and nonprimary care residents, we proposed 
that a hospital that receives additional positions under section 126 of 
the CAA would be paid for FTE residents counted under those positions 
using the same primary care and nonprimary PRAs for which payment is 
made for FTE residents subject to the 1996 FTE cap.
    We received no comments on our proposal that additional positions 
received under section 126 of the CAA would be paid using the same 
primary care and nonprimary care PRAs which are used with respect to 
FTE residents subject to the 1996 cap, therefore we are finalizing as 
proposed. We will revise Worksheet E-4 to add a line on which hospitals 
will report the number of FTEs by which the hospital's FTE caps were 
increased for direct GME positions received under section 126 of the 
CAA.
i. Conforming Regulation Amendments for 42 CFR 412.105 and 42 CFR 
413.79
    Section 126 of the CAA, under subsection (b), amends section

[[Page 73442]]

1886(d)(5)(B) of the Act to provide for increases in FTE resident 
positions for IME payment purposes as well. Specifically, a new section 
1886(d)(5)(B)(xii) of the Act was added, stating that for discharges 
occurring on or after July 1, 2023, if additional payment is made for 
FTE resident positions distributed to a hospital for direct GME 
purposes under section 1886(h)(9) of the Act, the hospital will receive 
appropriate IME payment based on the additional residency positions 
awarded using the same IME adjustment factor used for the hospital's 
other FTE residents. We proposed conforming amendments to the IME 
regulations at 42 CFR 412.105 to specify that effective for portions of 
cost reporting periods beginning on or after July 1, 2023, a hospital 
may qualify to receive an increase in its otherwise applicable FTE 
resident cap if the criteria specified in 42 CFR 413.79(p) are met.
    We received no comments on our proposed amendments to 42 CFR 
412.105 to implement section 1886(d)(5)(B)(xii) of the Act with respect 
to IME payments. Therefore, we are finalizing our proposal to revise 42 
CFR 412.105 by specifying that effective for portions of cost reporting 
periods beginning on or after July 1, 2023, a hospital may qualify to 
receive an increase in its otherwise applicable FTE resident cap if the 
criteria specified in 42 CFR 413.79(p) are met. We will revise 
Worksheet E Part A to add a line on which hospitals will report the 
number of FTEs by which the hospital's FTE caps were increased for IME 
positions received under section 126 of the CAA.
    We also proposed to amend our regulations at 42 CFR 413.79 to 
specify that--(1) for portions of cost reporting periods beginning on 
or after July 1, 2023, a hospital may receive an increase in its 
otherwise applicable FTE resident cap (as determined by CMS) if the 
hospital meets the requirements and qualifying criteria under section 
1886(h)(9) of the Act and if the hospital submits an application to CMS 
within the timeframe specified by CMS; and (2) FTE resident cap 
positions added under section 126 of the CAA (Pub. L. 116-260) may be 
used in a Medicare GME affiliation agreement beginning in the 5th year 
after the effective date of those FTE resident cap positions.
    Comment: A commenter supported our proposal to allow residency 
positions added under section 126 of the CAA to be used in a Medicare 
GME affiliation agreement beginning in the 5th year after the effective 
date of the hospital's section 126 of the CAA award. Several commenters 
recommended additional regulatory action to ensure that after 5 years, 
residency positions remain allocated to programs where 50 percent of 
training takes place in a HPSA and be used for rural and primary care 
priorities. These commenters further recommended regulatory action to 
ensure that residency positions awarded under section 126 of the CAA 
not be repurposed for different strategic directions of the hospital. A 
commenter requested clarification whether residency positions, once 
awarded, are program-specific, and whether they may be used to support 
fellowships.
    Response: We thank the commenters for their feedback. When a 
hospital applies for residency positions under section 126 of the CAA, 
it is attesting that the residency positions will be used for a 
specific program. Therefore, the residency positions awarded under 
section 126 of the CAA should be used for training residents in the 
program associated with the hospital's section 126 of the CAA 
application. Furthermore, section 126 of the CAA requires that not 
later than September 30, 2025, and again not later than September 30, 
2027, the Comptroller General of the United States conduct a study and 
submit to Congress a report on the implementation of section 126 of the 
CAA.
    In response to the comment that CMS take regulatory action to 
ensure that after 5 years the awarded residency positions are not being 
used for purposes other than those for which they were awarded, at this 
time, we are not including any additional requirements that must be met 
5 years after the effective date of a hospital's section 126 award. 
However, we will consider additional guardrails for future rulemaking 
if residency positions awarded under section 126 are not being used for 
their intended purposes. In response to the question regarding 
fellowships, hospitals may apply for residency positions for 
fellowships under section 126.
    After consideration of the comments we received, and for the 
reasons previously discussed, we are finalizing our proposed amendments 
to 42 CFR 413.79.
j. Prohibition on Administrative and Judicial Review
    Section 126 of the CAA, under clause (c), prohibits review of 
section 1886(h)(9) of the Act. Specifically, it amends section 
1886(h)(7)(E) of the Act by inserting ``paragraph (9),'' after 
``paragraph (8),''. Therefore, we proposed that the determinations and 
distribution of residency positions under sections 1886(d)(5)(B)(xii) 
and 1886(h)(9) of the Act are final without administrative or judicial 
review.
    We received no comments on the proposal that determinations and 
distribution of residency positions under sections 1886(d)(5)(B)(xii) 
and 1886(h)(9) of the Act are final without administrative or judicial 
review, and therefore are finalizing our proposed policy.
k. Report by the Comptroller General
    We noted in the proposed rule that section 126(d) of the CAA 
requires the Comptroller General of the United States to conduct a 
study and submit to Congress two reports on section 126, after the 5-
year period of implementation is complete. No comments were received 
regarding this requirement.
l. Application Process for Receiving Increases in FTE Resident Caps
    In order for hospitals to be considered for increases in their FTE 
resident caps, each qualifying hospital must submit a timely 
application. In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25510 
through 25511), we proposed that an application would be considered 
timely for additional residency positions effective July 1 of a fiscal 
year if it is completely submitted by January 31 of the prior fiscal 
year. We also proposed that the following information be submitted on 
an application to be considered completely submitted:
     The name and Medicare provider number of the hospital.
     The name of the Medicare contractor to which the hospital 
submits its Medicare cost report.
     The residency program for which the hospital is applying 
to receive an additional position.
     FTE resident counts for direct GME and IME and FTE 
resident caps for direct GME and IME reported by the hospital in the 
most recent as-filed cost report. (Including copies of Worksheets E, 
Part A, and E-4).
     If the hospital qualifies under ``Demonstrated 
Likelihood'' Criterion 1 (New Residency Program), which of the 
following applies:
    [square] Application for approval of the new residency program has 
been submitted to the ACGME or the American Board of Medical 
Specialties (ABMS) by the application deadline for that year.
    [square] The hospital has submitted an institutional review 
document or program information form concerning the new residency 
program in an application for approval of the new

[[Page 73443]]

program by the application deadline for that year.
    [square] The hospital has received written correspondence by the 
application deadline for that year from the ACGME or ABMS acknowledging 
receipt of the application for the new residency program, or other 
types of communication from the accrediting bodies concerning the new 
program approval process (such as notification of site visit).
     If the hospital qualifies under ``Demonstrated 
Likelihood'' Criterion 2 (Expansion of an Existing Residency Program), 
which of the following applies:
    [square] The hospital has approval by the application deadline from 
an appropriate accrediting body (the ACGME or ABMS) to expand the 
number of FTE residents in the program.
    [square] The hospital has submitted by the application deadline an 
institutional review document or program information form for the 
expansion of the existing residency training program.
     Identification of the category that describes the hospital 
under section 126 of Division CC of the Consolidated Appropriations 
Act, 2021 (per section 1886(h)(9)(F)(ii) of the Social Security Act):
    [square] (I) The hospital is located in a rural area (as defined in 
section 1886(d)(2)(D) of the Social Security Act) or is treated as 
being located in a rural area pursuant to section 1886(d)(8)(E) of the 
Social Security Act.
    [square] (II) The reference resident level of the hospital (as 
specified in section 1886(h)(9)(F)(iii) of the Social Security Act) is 
greater than the otherwise applicable resident limit.
    [square] (III) The hospital is located in a State with a new 
medical school (as specified in section 1886(h)(9)(B)(ii)(III)(aa) of 
the Act), or with additional locations and branch campuses established 
by medical schools (as specified in section 1886(h)(9)(B)(ii)(III)(bb) 
of the Act) on or after January 1, 2000.
    [square] (IV) The hospital serves areas designated as health 
professional shortage areas (HPSAs) under section 332(a)(1)(A) of the 
Public Health Service Act, as determined by the Secretary.
     The HPSA (if any) served by the residency program for 
which the hospital is applying and the HPSA score for that HPSA.
     An attestation, signed and dated by an officer or 
administrator of the hospital who signs the hospital's Medicare cost 
report, of the following:
    ``I hereby certify that the hospital is a Qualifying Hospital under 
section 126 of Division CC of the Consolidated Appropriations Act, 2021 
(per section 1886(h)(9)(F)(ii) of the Social Security Act).
    ``I hereby certify the ``demonstrated likelihood'' that the 
hospital will fill the position made available under section 126 of 
Division CC of the Consolidated Appropriations Act, 2021 within the 
first 5 training years beginning after the date the increase would be 
effective, as determined by the Secretary (per section 1886(h)(9)(B)(i) 
of the Social Security Act).
    ``I hereby certify that the hospital agrees to increase the number 
of its residency positions by the amount the hospital's FTE resident 
caps are increased under section 126 of Division CC of the Consolidated 
Appropriations Act, 2021, if awarded positions (per section 
1886(h)(9)(C)(ii) of the Social Security Act).
    ``I hereby certify that if the residency program for which the 
hospital is applying serves a geographic or population Health 
Professional Shortage Area (HPSA), that the hospital has its main 
campus or a provider-based facility (under 42 CFR 413.65) physically 
located in that HPSA, any such locations serve the designated 
underserved population of that HPSA in the case of a population HPSA, 
and in the residency program for which the hospital is applying, at 
least 50 percent of the residents training time over the duration of 
the program occurs at those locations in the HPSA.
    ``I hereby certify that the hospital meets the National Standards 
for Culturally and Linguistically Appropriate Services in Health and 
Health Care (the National CLAS Standards).
    ``I hereby certify that I understand that misrepresentation or 
falsification of any information contained in this application may be 
punishable by criminal, civil, and administrative action, fine and/or 
imprisonment under federal law. Furthermore, I understand that if 
services identified in this application were provided or procured 
through payment directly or indirectly of a kickback or where otherwise 
illegal, criminal, civil, and administrative action, fines and/or 
imprisonment may result. I also certify that, to the best of my 
knowledge and belief, it is a true, correct, and complete application 
prepared from the books and records of the hospital in accordance with 
applicable instructions, except as noted. I further certify that I am 
familiar with the laws and regulations regarding Medicare payment to 
hospitals for the training of interns and residents.''
    We also proposed that the completed application be submitted to CMS 
using an online application system under development. A link to the 
online application system as well as instructions for accessing the 
system and completing the online application process will be made 
available on the CMS Direct GME website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/DGME.
    Comment: Many commenters expressed concern that an award 
notification date as late as January 31 of the fiscal year of the FTE 
increase would leave teaching hospitals without the time needed to 
recruit resident candidates that would be funded with those awards, as 
the recruitment process begins several months earlier. Some commenters 
noted that January 31 is the last day that hospitals can amend their 
residency quotas for national resident matching purposes; they argued 
that, without knowing in advance how many residency positions they will 
receive under section 126, hospitals would have difficulty adjusting 
their program sizes for the purposes of matching with residents, which 
would affect their ability to recruit new residents to their programs.
    Several commenters recommended approaches to better align the 
application and award process with the timing of accreditation 
decisions and the national residency matching timeline. Commenters also 
recommended flexibility where appropriate to accommodate differing 
fiscal years. All commenters that wrote about the notification date 
requested that it be moved forward and offered a range of alternative 
dates, from October 1 of the fiscal year in which the residency 
positions will be effective to no later than early or mid-December of 
the fiscal year the residency positions are effective. A commenter 
recommended postponing the application deadline for the first round to 
March 31, 2022.
    Response: We appreciate commenters bringing this issue to our 
attention. We agree with the suggested date of March 31st as the 
application deadline. With regards to the date of the announcement of 
residency positions distributed under section 126, the Secretary is 
required to notify hospitals of the number of positions distributed by 
January 31 of the fiscal year of the increase. However, in light of the 
commenters' concerns, we will consider completing this announcement 
earlier if possible.
    After incorporating the final policy described previously, in order 
to be considered for an increase in its FTE resident caps under section 
126, each qualifying hospital must submit a

[[Page 73444]]

complete and timely application. An application is considered timely 
for additional residency positions effective July 1 of the applicable 
fiscal year if it is submitted by March 31 of the prior fiscal year. 
(For example, for awarded residency positions which will be effective 
July 1, 2023 (FY 2023), the completed application must be submitted by 
March 31, 2022 and hospitals will be notified of the increases they are 
awarded by January 31, 2023.) The following information must be 
submitted on the application in order for it to be considered complete:
     The name and Medicare provider number (CCN) of the 
hospital.
     The name of the Medicare Administrative Contractor to 
which the hospital submits its Medicare cost report.
     The residency program for which the hospital is applying 
to receive an additional position(s).
     FTE resident counts for direct GME and IME and FTE 
resident caps for direct GME and IME reported by the hospital in the 
most recent as-filed cost report. (Including copies of Worksheets E, 
Part A, and E-4).
     If the hospital qualifies under ``Demonstrated 
Likelihood'' Criterion 1 (New Residency Program), which of the 
following applies:
    [square] Application for accreditation of the new residency program 
has been submitted to the Accreditation Council for Graduate Medical 
Education (ACGME) (or application for approval of the new residency 
program has been submitted to the American Board of Medical Specialties 
(ABMS)) by March 31, 2022.
    [square] The hospital has received written correspondence from the 
ACGME (or ABMS) acknowledging receipt of the application for the new 
residency program, or other types of communication concerning the new 
program accreditation or approval process (such as notification of site 
visit) by March 31, 2022.
     If the hospital qualifies under ``Demonstrated 
Likelihood'' Criterion 2 (Expansion of an Existing Residency Program), 
which of the following applies:
    [square] The hospital has received approval by March 31, 2022 from 
an appropriate accrediting body (the ACGME or ABMS) to expand the 
number of FTE residents in the program.
    [square] The hospital has submitted a request by March 31, 2022 for 
a permanent complement increase of the existing residency training 
program.
    [square] The hospital currently has unfilled positions in its 
residency program that have previously been approved by the ACGME and 
is now seeking to fill those positions.
     Identification of the categories that describe the 
hospital under section 126 of Division CC of the Consolidated 
Appropriations Act, 2021 (per section 1886(h)(9)(F)(ii) of the Social 
Security Act):
    [square] (I) The hospital is located in a rural area (as defined in 
section 1886(d)(2)(D) of the Social Security Act) or is treated as 
being located in a rural area pursuant to section 1886(d)(8)(E) of the 
Social Security Act.
    [square] (II) The reference resident level of the hospital (as 
specified in section 1886(h)(9)(F)(iii) of the Social Security Act) is 
greater than the otherwise applicable resident limit.
    [square] (III) The hospital is located in a State with a new 
medical school (as specified in section 1886(h)(9)(B)(ii)(III)(aa) of 
the Act), or with additional locations and branch campuses established 
by medical schools (as specified in section 1886(h)(9)(B)(ii)(III)(bb) 
of the Act) on or after January 1, 2000.
    [square] (IV) The hospital serves an area designated as a health 
professional shortage area (HPSA) under section 332(a)(1)(A) of the 
Public Health Service Act, as determined by the Secretary).
     The HPSA (if any) served by the residency program for 
which the hospital is applying and the HPSA ID for that HPSA.
     An attestation, signed and dated by an officer or 
administrator of the hospital who signs the hospital's Medicare cost 
report, of the following:
    ``I hereby certify that the hospital is a Qualifying Hospital under 
section 126 of Division CC of the Consolidated Appropriations Act, 2021 
(per section 1886(h)(9)(F)(ii) of the Social Security Act).''
    ``I hereby certify the ``demonstrated likelihood'' that the 
hospital will fill the position made available under section 126 of 
Division CC of the Consolidated Appropriations Act, 2021 within the 
first 5 training years beginning after the date the increase would be 
effective, as determined by the Secretary (per section 1886(h)(9)(B)(i) 
of the Social Security Act).''
    ``I hereby certify that if my application is for a currently 
accredited residency program, the number of full-time equivalent (FTE) 
positions requested by the hospital does not exceed the number of 
positions for which the program is accredited.''
    ``I hereby certify that if my hospital currently has unfilled 
positions in its residency program that have previously been approved 
by the ACGME, the number of FTE positions requested by the hospital 
does not exceed the number of previously approved unfilled residency 
positions.''
    ``I hereby certify that if my application is for a residency 
training program with more than one participating site, I am only 
requesting the FTE amount that corresponds with the training occurring 
at my hospital, and any FTE training occurring at nonprovider settings 
consistent with 42 CFR 413.78.''
    ``I hereby certify that the hospital agrees to increase the number 
of its residency positions by the amount the hospital's FTE resident 
caps are increased under section 126 of Division CC of the Consolidated 
Appropriations Act, 2021, if awarded positions (per section 
1886(h)(9)(C)(ii) of the Social Security Act).''
    ``I hereby certify that (choose one):

__ In the geographic HPSA the hospital is requesting that CMS use for 
prioritization of its application, at least 50 percent of the program's 
training time based on resident rotation schedules (or similar 
documentation) occurs at training sites that treat the population of 
the HPSA and are physically located in the HPSA.
__ In the population HPSA the hospital is requesting that CMS use for 
prioritization of its application, at least 50 percent of the program's 
training time based on resident rotation schedules (or similar 
documentation) occurs at training sites that treat the designated 
underserved population of the HPSA and are physically located in the 
HPSA.
__ In the geographic HPSA the hospital is requesting that CMS use for 
prioritization of its application, at least 5 percent of the program's 
training time based on resident rotation schedules (or similar 
documentation) occurs at training sites that treat the population of 
the HPSA and are physically located in the HPSA, and the program's 
training time at those sites plus the program's training time at Indian 
or Tribal facilities located outside of the HPSA is at least 50 percent 
of the program's training time.
__ In the population HPSA the hospital is requesting that CMS use for 
prioritization of its application, at least 5 percent of the program's 
training time based on resident rotation schedules (or similar 
documentation) occurs at training sites that treat the designated 
underserved population of the HPSA and are physically located in the

[[Page 73445]]

HPSA, and the program's training time at those sites plus the program's 
training time at Indian or Tribal facilities located outside of that 
HPSA is at least 50 percent of the program's training time.
__ None of the above apply.''

    ``I hereby certify that the hospital meets the National Standards 
for Culturally and Linguistically Appropriate Services in Health and 
Health Care (the National CLAS Standards).''
    ``I hereby certify that I understand that misrepresentation or 
falsification of any information contained in this application may be 
punishable by criminal, civil, and administrative action, fine and/or 
imprisonment under Federal law. Furthermore, I understand that if 
services identified in this application were provided or procured 
through payment directly or indirectly of a kickback or where otherwise 
illegal, criminal, civil, and administrative action, fines and/or 
imprisonment may result. I also certify that, to the best of my 
knowledge and belief, it is a true, correct, and complete application 
prepared from the books and records of the hospital in accordance with 
applicable instructions, except as noted. I further certify that I am 
familiar with the laws and regulations regarding Medicare payment to 
hospitals for the training of interns and residents.''
    The completed application must be submitted to CMS using an online 
application system. A link to the online application system as well as 
instructions for accessing the system and completing the online 
application process will be made available on the CMS Direct GME 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/DGME.
    We note that we have modified the application so that hospitals no 
longer need to furnish a HPSA score. Instead, when applicants include 
the HPSA ID associated with the geographic or population HPSA included 
in their application the HPSA score will automatically populate. In 
preparing its application for additional residency positions, hospitals 
should refer to HRSA's Find Shortage Areas by Address (https://data.hrsa.gov/tools/shortage-area/by-address) to obtain the HPSA ID of 
the HPSA served by the program and include this ID in its application. 
Using this HPSA Find Shortage Areas by Address, applicants may enter 
the address of a training location (included on the hospital's rotation 
schedule or similar documentation), provided the location chosen 
participates in training residents in a program where at least 50 
percent (5 percent if an Indian and Tribal facility is included) of the 
training time occurs in the HPSA. Each year in November, prior to the 
beginning of the application period, CMS will request HPSA ID and score 
information from HRSA so that recent HPSA information is available for 
use for the application period. CMS will only use this HPSA 
information, HPSA ID's and their corresponding HPSA scores, in order to 
review and prioritize applications. To assist hospitals in preparing 
for their applications, the HPSA information received from HRSA will 
also be posted when the online application system becomes available on 
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/DGME. The information will also be 
posted on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/IPPS-Regulations-and-Notices. 
Click on the link on the left side of the screen associated with the 
appropriate final rule home page or ``Acute Inpatient--Files for 
Download.''
    The burden associated with this information collection requirement 
is the time and effort necessary to review instructions and register 
for the electronic submission system as well as the time and effort to 
gather, develop and submit various documents associated with a formal 
request of resident position increases from teaching hospitals to CMS. 
The aforementioned burden is subject to the Paperwork Reduction Act 
(PRA); and as discussed in section III. of this final rule with comment 
period, the burden associated with these requests is captured in an 
information collection request currently available for public review 
and comment. The 60-day notice published on October 22, 2021 (86 FR 
58664).
    Lastly, we received public comments that were outside the scope of 
the GME proposals included in the FY 2022 IPPS/LTCH PPS proposed rule. 
These comments were related to: Medicare GME cap policies, promoting 
legislation to modernize and expand GME funding, incentivizing 
collaborative and team-based environments for health care 
practitioners, facilitating care delivery across states, funding for 
interprofessional primary care teams, rural recruitment and rotations 
for specialty residencies and fellowships, analysis of GME self-
funding, large primary care group practices and preceptorships. Because 
we consider these public comments to be outside the scope of the 
proposed rule, we are not addressing them in this final rule. We may 
consider these public comments for possible proposals in future 
rulemaking.
4. Implementation of Section 127 of the CAA, ``Promoting Rural Hospital 
GME Funding Opportunity''
    To encourage the training of residents in rural areas, section 
407(c) of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement 
Act of 1999 (Pub. L. 106-113) (BBRA) amended section 1886(h)(4)(H) of 
the Act to add a provision (subsection (iv)) stating that, in the case 
of a hospital that is not located in a rural area (an urban hospital) 
that establishes separately accredited approved medical residency 
training programs (or rural tracks) in a rural area, or has an 
accredited training program with an integrated rural track, the 
Secretary shall adjust the urban hospital's cap on the number of FTE 
residents under subsection (F), in an appropriate manner in order to 
encourage training of physicians in rural areas. Section 407(c) of 
Public Law 106-113 was effective for direct GME payments to hospitals 
for cost reporting periods beginning on or after April 1, 2000, and for 
IME payments applicable to discharges occurring on or after April 1, 
2000. We refer readers to the August 1, 2000 interim final rule with 
comment period (65 FR 47026, 47033 through 47037) and the FY 2002 IPPS 
final rule (66 FR 39828, 39902 through 39909) where we implemented 
section 407(c) of Public Law 106-113. The regulations for establishing 
rural track FTE limitations are located at 42 CFR 413.79(k) for direct 
GME and at 42 CFR 412.105(f)(1)(x) for IME.
    In the August 1, 2003 IPPS final rule (68 FR 45456 through 45457), 
we clarified our existing policy that although the rural track 
provision allows an increase to the urban hospital's FTE cap, sections 
1886(h)(4)(H)(iv) and 1886(d)(5)(B) of the Act do not provide for an 
exclusion from the rolling average for the urban hospital for those FTE 
residents training in a rural track. These provisions are interpreted 
to mean that, except for new rural track programs begun by urban 
teaching hospitals that are establishing an FTE cap for the first time, 
when an urban hospital with an FTE resident cap establishes a new rural 
track program or expands an existing rural track program, FTE residents 
in the rural track that are counted by the urban hospital are included 
in the hospital's rolling average calculation immediately. This policy 
is reflected in the regulation at Sec.  412.105(f)(1)(v)(F) for IME and 
Sec.  413.79(d)(7) for direct GME, and applies for IME and direct GME 
to cost

[[Page 73446]]

reporting periods beginning on or after April 1, 2000.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57027), we finalized 
a revision to the regulations at Sec.  413.79(k) (and which, in turn, 
affect IME adjustments under Sec.  412.105(f)(1)(x)) to permit that, in 
the first 5 program years (rather than the first 3 program years) of 
the rural track's existence, the rural track FTE limitation for each 
urban hospital would be the actual number of FTE residents training in 
the rural training track at the urban hospital, and beginning with the 
urban hospital's cost reporting period that coincides with or follows 
the start of the sixth program year of the rural training track's 
existence, the rural track FTE limitation would take effect. However, 
as previously stated, due to the statutory language at sections 
1886(d)(5)(B) and 1886(h)(4)(H)(iv) of the Act as implemented in our 
regulations at Sec. Sec.  412.105(f)(1)(v)(F) and 413.79(d)(7), except 
for new rural track programs begun by urban teaching hospitals that are 
establishing an FTE cap for the first time, FTE residents in a rural 
training track (RTT) program at the urban hospital are subject 
immediately to the 3-year rolling average for direct GME and IME. In 
addition, under the regulations at Sec.  412.105(a)(1)(i), no exception 
to the IME intern- and resident-to-bed (IRB) ratio cap is provided for 
residents in a rural track training program (except for new rural track 
programs begun by urban teaching hospitals that are establishing an FTE 
cap for the first time).
    Since implementation of the rural training track provision from the 
BBRA of 1999, stakeholders and advocates of residency training in rural 
areas have raised concerns about inequities and unintended consequences 
of the BBRA provision. First, the BBRA provision allows an urban 
hospital to receive additional cap slots based on the time that 
residents in the RTT train at the urban hospital. However, the 
provision does not specify that the Secretary provide a cap adjustment 
for rural hospitals participating in RTTs. As a result, unless the RTT 
program was new, the rural hospital could not receive FTE resident cap 
increases, resulting in direct GME and IME payments going only to the 
urban hospital for the urban portion of the training, with no attending 
funding going to the rural hospital for the rural portion of the 
training. Second, the statutory provision does not specify that the 
Secretary may provide a cap adjustment to urban hospitals or rural 
hospitals when an urban hospital adds additional rural locations to 
already existing RTTs. Third, the provision stated that the Secretary 
would adjust the caps of an urban hospital that establishes separately 
accredited approved medical residency training programs (or rural 
tracks) in a rural area. Historically, the Accreditation Council for 
Graduate Medical Education (ACGME) has separately accredited family 
medicine programs in the ``1-2 format'' (meaning, residents in the 1-2 
format receive their first year experience at a core family medicine 
program in an urban area, and their second and third year experiences 
at another site, which may or may not be rural). Because the ACGME has 
historically accredited family medicine programs in the 1-2 format, CMS 
interpreted the provision to mean that the development of rural tracks 
in specialties other than family medicine may not be feasible. Fourth, 
residents added to an RTT were previously not exempt from the 3-year 
rolling average for IME and direct GME. We believe that section 127 of 
the CAA remedies each of these concerns, as we explain in more detail 
in this final rule with comment period.
a. Cap Adjustment for Urban and Rural Hospitals Participating in Rural 
Training Track Programs
    As amended by the BBRA, section 1886(h)(4)(H)(iv) of the Act 
provided for IME and direct GME FTE resident cap adjustments for an 
urban hospital that establishes separately accredited rural tracks; 
however, the statute did not provide for a similar adjustment to rural 
hospitals participating in rural tracks. Specifically, section 
1886(h)(4)(H)(iv) of the Act refers to the case of a hospital that is 
not located in a rural area but establishes separately accredited 
approved medical residency training programs (or rural tracks) in a 
rural area. Because of this explicit incentive and permission for FTE 
resident cap adjustments for an urban hospital that establishes a rural 
track, the rural track does not need to be new for Medicare payment 
purposes, as it otherwise would in order for the urban hospital to 
qualify for the FTE resident cap adjustments. That is, under section 
1886(h)(4)(H)(iv) of the Act, if an urban hospital already had an 
accredited family medicine residency program, it could establish from 
that existing family medicine program, for the first time, a rural 
track, and, assuming all applicable requirements are met, that urban 
hospital could receive IME and direct GME FTE resident cap adjustments. 
However, with regard to a rural hospital participating in the second 
and third years of training in the rural track, since the BBRA language 
did not mention cap adjustments to rural hospitals, only if the program 
is new for Medicare payment purposes can the rural teaching hospital 
also receive an FTE resident cap adjustment for the program. Under 
Sec.  413.79(e)(3), any time that a rural hospital participates in 
training residents in a new program, the rural hospital may receive an 
increase to its FTE resident caps. We refer readers to the FY 2010 
IPPS/LTCH PPS final rule for the criteria identifying a new program for 
Medicare payment purposes (74 FR 43908 through 43917)). In this case, a 
rural track established from an already existing urban family medicine 
program would not meet the newness requirement for the rural hospital. 
Consequently, Division CC, section 127 of the CAA 2021 revised section 
1886(h)(4)(H)(iv) of the Act to state that in the case of a hospital 
not located in a rural area that established or establishes a medical 
residency training program (or rural tracks) in a rural area, the 
Secretary must adjust in an appropriate manner the limitation under 
subparagraph (F) for such hospital and each such hospital located in a 
rural area that participates in such a training. This revision provides 
for cap adjustments for both the urban teaching hospital and the rural 
teaching hospital(s). In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 
25513), we proposed that each time an urban hospital and rural hospital 
establish an RTT program for the first time, even if the RTT program 
does not meet the newness criteria for Medicare payment purposes, both 
the urban and rural hospitals may receive a rural track FTE limitation. 
For example, Urban Hospital A has an existing internal medicine 
program. In July 2023, it partners with Rural Hospital 1 to create a 
RTT from the existing internal medicine program. We proposed that both 
Urban Hospital A and Rural Hospital 1 may receive adjustments to their 
resident caps (rural track FTE limitations) to reflect their portions 
of FTE residents training in the RTT. We proposed to make various 
changes throughout the regulations text at 42 CFR 413.79(k) ``Residents 
training in rural track programs'' to accommodate the rural track FTE 
limitations for both urban and rural hospitals. We also provide 
examples in this final rule with comment period, regarding how the 
rural track FTE limitations are calculated, according to the same 
methodology already in place at 42 CFR 413.79(k)(1) and as previously 
explained in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57028).

[[Page 73447]]

b. Cap Adjustments When the Urban Hospital Adds Additional Rural 
Training Tracks
    As previously stated, under section 1886(h)(4)(H)(iv) prior to 
enactment of the CAA, if an urban hospital already had an accredited 
family medicine residency program, it could, for the first time, 
establish a rural track from that existing family medicine program and, 
assuming all applicable requirements were met, such hospital could 
receive the IME and direct GME FTE resident cap adjustments. Because 
section 1886(h)(4)(H)(iv) of the Act gave this explicit permission for 
FTE resident cap adjustments to an urban hospital that establishes a 
rural track, the rural track program does not need to be new for 
Medicare payment purposes in order for the urban hospital to qualify 
for the FTE resident cap adjustments. (We refer readers to the FY 2010 
IPPS/LTCH PPS final rule for the criteria identifying a new program for 
Medicare payment purposes (74 FR 43908 through 43917)). However, after 
establishing its first RTT, the urban hospital can receive a rural 
track limitation adjustment for additional established RTTs only if 
those additional programs are ``new'' for Medicare payment purposes. As 
we explained in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25513), 
we believe that section 127 of the CAA amends section 1886(h)(4)(H)(iv) 
of the Act such that it permits us to adjust the resident caps of an 
urban hospital wishing to create additional RTTs after establishing its 
first RTT, while also adjusting the resident caps of the rural 
hospital(s) added by creating the subsequent RTTs. Section 127 of the 
CAA amends section 1886(h)(4)(H)(iv) of the Act to add a new subclause 
which states that for cost reporting periods beginning on or after 
October 1, 2022, in the case of a hospital not located in a rural area 
that established or establishes a medical residency training program 
(or rural tracks) in a rural area . . . adjust in an appropriate manner 
the limitation under subparagraph (F) for such hospital and each such 
hospital located in a rural area that participates in such a training. 
Because the law now states ``established or establishes,'' both past 
tense and future tense, we believe the statute grants the Secretary 
unique authority not previously held; that is, the authority to 
prospectively allow (under certain circumstances) cap adjustments to 
existing RTTs expanded in a cost reporting period beginning on or after 
October 1, 2022. That is, the provision gives explicit permission to 
adjust the RTT limitations of an urban hospital wishing to create 
additional RTTs after establishing its first RTT, while also adjusting 
the resident caps of the additional rural hospital(s) added by creating 
the second (or third, etc.) RTT. We believe this new statutory 
authority is separate and distinct from the statute's requirement that, 
for IME and direct GME payment purposes, caps can be adjusted only for 
new teaching urban hospitals and for rural hospitals with new programs 
under section 1886(h)(4)(H)(i) of the Act. That is, in general, urban 
hospitals becoming teaching hospitals for the first time and rural 
hospitals may receive cap adjustments only if the program(s) in which 
they train residents is ``new'' in accordance with Medicare rules (as 
explained in detail at 74 FR 43908 through 43917). Therefore, under the 
explicit authority under section 127 of the CAA, in the FY 2022 IPPS/
LTCH PPS proposed rule (86 FR 25513) we proposed to prospectively allow 
increases to the IME and direct GME caps of both the participating 
urban and rural hospitals that expand a qualifying RTT. We proposed 
that if, in a cost reporting period beginning on or after October 1, 
2022, an urban hospital with an existing RTT (``hub'') adds an 
additional RTT (``spoke'') to the existing urban core program of the 
same specialty, the urban and rural hospitals may receive adjustments 
to their rural track FTE limitation. (For ease of reference, we are 
referring to the urban core hospital as the ``hub'' and the one or more 
RTTs as the ``spokes'' associated with that urban ``hub.'') For 
example, Urban Hospital A has an existing family medicine program. In 
2015, Urban Hospital A partnered with Rural Hospital 1 to create a RTT 
from the existing family medicine program and received a rural track 
FTE limitation to reflect the time that residents training in the RTT 
spent at its facility. In July 2023, Urban Hospital A partners with 
Rural Hospital 2 in a different rural area of the state, to create an 
additional family medicine RTT (adding another ``spoke'' to the 
existing urban program ``hub.'') We proposed that both Urban Hospital A 
and Rural Hospital 2 may receive adjustments to their resident caps 
(rural track FTE limitations) to reflect the portion of the time that 
FTE residents in the second family medicine RTT ``spoke'' spend at 
their respective facility. We believe that allowing prospective 
adjustments to RTT FTE limitations for additional RTT ``spokes'' added 
in cost reporting periods beginning on or after October 1, 2022 is an 
efficient means of addressing rural healthcare workforce shortages, by 
allowing already experienced and successful urban ``hub'' RTTs to 
branch out and partner with additional rural communities, rather than 
relying solely on starting RTTs from scratch. That is, with the ability 
for CMS to provide funding for additional spokes, it should be easier 
for urban hospitals that already have one RTT to reach rural areas more 
quickly and efficiently with the addition of more spokes, rather than 
starting brand new ``hubs''. However, we proposed to limit the 
increases to the urban and rural hospitals' RTT FTE limitations only in 
the instance where additional residents are recruited to add a new 
rural ``spoke'' RTT, and not to allow increases to the RTT FTE 
limitations in the instance where the urban and rural hospital add 
additional FTE residents to an existing rural RTT ``spoke.'' We believe 
it is appropriate to do so because section 127 of the CAA states that 
in the case of a hospital not located in a rural area that established 
or establishes a medical residency training program (or rural tracks) 
in a rural area or establishes an accredited program where greater than 
50 percent of the program occurs in a rural area, the Secretary shall 
consistent with the principles of subparagraphs (F) and (G) and subject 
to paragraphs (7) and (8), prescribe rules for the application of such 
subparagraphs with respect to such a program and, in accordance with 
such rules, adjust in an appropriate manner the limitation under 
subparagraph (F) for such hospital and each such hospital located in a 
rural area that participates in such a training. That is, the statute 
directs the Secretary to adjust the cap (the limitation under 
subparagraph (F)) in an appropriate manner. As we explained in the FY 
2022 IPPS/LTCH PPS proposed rule (86 FR 25514), we believe that 
``appropriate'' means not rendering the RTT FTE limitations 
meaningless. If we would allow adjustments to the RTT FTE limitations 
at any time, for any type or any amount of expansion even to already 
existing rural site ``spokes,'' there would, in essence, not be any RTT 
FTE limitation at all. As a matter of public policy, as long as the FTE 
resident caps (that is, the ``limitation under subparagraph (F)'') are 
in place, we believe that CMS should be judicious with providing for 
additional funded cap slots, as that, in turn, encourages thoughtful 
residency program expansion among hospital stakeholders. Therefore, we 
proposed to limit the provision of an increase to the urban and rural 
hospitals' RTT FTE limitations only to the instance where additional 
residents are recruited to add a new rural RTT ``spoke'' to the 
existing urban ``hub'', and not to allow increases

[[Page 73448]]

under this section to the RTT FTE limitations in the instance where the 
urban and rural hospital add additional FTE residents to an existing 
rural RTT ``spoke.'' As with the general FTE resident caps, since the 
slots associated with the RTT FTE limitation are fungible, urban and 
rural hospitals with multiple RTT ``spokes'' may reduce the number of 
FTE residents training at one track and ``spoke'' in order to 
accommodate an increase in training and funding at another track and 
``spoke.'' For example, Urban Hospital A has an existing family 
medicine program. In 2015, it partnered with Rural Hospital 1 to create 
a RTT from the existing family medicine program. Urban Hospital A 
received a cap/rural track FTE limitation to reflect residents in the 
RTT training at its facility. In July 2023, Urban Hospital A receives 
permission from the ACGME to permanently expand this family medicine 
RTT by 2 FTE residents, to train at both Urban Hospital A and Rural 
Hospital 1. We proposed NOT to allow an adjustment to the rural track 
FTE limitation of Urban Hospital A and Rural Hospital 1 for the 
addition of 2 FTE residents, because this would be an expansion of an 
already existing RTT ``spoke.''
    We also note that if the urban hospital already has an existing RTT 
in one specialty and an associated rural track FTE limitation, the 
urban hospital may also receive an adjustment to its rural track FTE 
limitation if it starts another RTT in a different specialty, because 
starting a RTT in a different specialty would not be an expansion of 
the already existing RTT. For example, Urban Hospital A has an existing 
family medicine program. In 2015, it partnered with Rural Hospital 1 to 
create a RTT from the existing family medicine program and, as a 
result, received a cap/rural track FTE limitation adjustment to reflect 
residents in the RTT training in its facility. In July 2023, Urban 
Hospital A partners once again with Rural Hospital 1 to create a RTT in 
internal medicine. We proposed that both Urban Hospital A and Rural 
Hospital 1 may receive adjustments to their cap/rural track FTE 
limitations to reflect the time that residents train in the internal 
medicine RTT ``spoke'' in their respective facilities. Thus, Urban 
Hospital A and Rural Hospital 1 would have cap/rural track FTE 
limitations reflecting FTE residents training in both a family medicine 
RTT and an internal medicine RTT.
c. Removal of Requirement That Rural Track Must Be ``Separately 
Accredited''
    Previously, section 1886(h)(4)(H)(iv) stated that the Secretary 
would adjust the caps of an urban hospital that establishes separately 
accredited approved medical residency training programs (or rural 
tracks) in a rural area. Historically, the ACGME has separately 
accredited family medicine programs in the ``1-2 format'' (meaning, 
residents in the 1-2 format receive their first year experience at a 
core family medicine program, and their second and third year 
experiences at another site, which may or may not be rural). Because 
the ACGME has only accredited family medicine programs in the 1-2 
format, hospitals have not been able to seek additional funding 
opportunities for rural tracks developed in specialties other than 
family medicine. Since implementation of the original BBRA provision, 
stakeholders have expressed concern that FTE cap adjustments have not 
been permitted for sending residents to rural areas if the program was 
not a separately accredited family medicine RTT. Section 127 of the CAA 
removes the requirement that the rural track be ``separately 
accredited.'' Specifically, section 1886(h)(4)(H)(iv)(II) now states 
that in the case of a hospital not located in a rural area that 
established or establishes a medical residency training program (or 
rural tracks) in a rural area, or establishes an accredited program 
where more than 50 percent of the training takes place in a rural area, 
the Secretary may adjust the resident cap in an appropriate manner. 
(Residency programs, whether they are ``rural tracks'' or any other 
program, must still be accredited under the law in order to receive IME 
and direct GME payments; see section 1886(h)(4)(H)(iv)(II) of the Act). 
Therefore, in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25514), we 
proposed that effective for cost reporting periods beginning on or 
after October 1, 2022, so long as the program in its entirety is 
accredited by the ACGME, regardless of the specialty, it may qualify as 
an RTT and urban and/or rural hospitals may receive rural track FTE 
limitations, assuming all other requirements are met.
d. Requirement That Greater Than 50 Percent of the Program Occurs in a 
Rural Area
    Under existing regulations at 42 CFR 413.79(k)(1) and (2), the 
urban hospital establishing the RTT may only receive a cap/rural track 
FTE limitation to count residents in the RTT if the urban hospital 
rotates residents to either a rural hospital or rural nonprovider site, 
for more than 50 percent of the duration of the program. As described 
in detail in rules implementing the original BBRA provision (see the 
August 1, 2000 interim final rule with comment period (65 FR 47033 
through 47037) and the FY 2002 IPPS final rule (66 FR 39902 through 
39909) where we implemented section 407(c) of Public Law 106-113), we 
adopted this greater than one-half duration rule based on the fact that 
residents training in separately accredited 1-2 family medicine RTTs 
spend greater than 50 percent of their training time in rural areas. We 
also wanted to ensure that cap adjustments would not be allowed for 
minimal rotations to rural areas. Section 1886(h)(4)(H)(iv)(II) is 
amended by section 127 of the CAA which states that in the case of a 
hospital not located in a rural area that established or establishes a 
medical residency training program (or rural tracks) in a rural area or 
establishes an accredited program where greater than 50 percent of the 
program occurs in a rural area, the Secretary shall, consistent with 
the principles of subparagraphs (F) and (G) and subject to paragraphs 
(7) and (8), prescribe rules for the application of such subparagraphs 
with respect to such a program. As discussed in the FY 2022 IPPS/LTCH 
PPS proposed rule (86 FR 25515), we believe section 127 of the CAA now 
requires in statute what CMS has required in regulation; that is, we 
proposed that in order for urban or rural hospitals to receive FTE cap 
adjustments for residents training in RTTs, the residents must be in 
``an accredited program where greater than 50 percent of the program 
occurs in a rural area.'' We believe that a ``medical residency 
training program (or rural tracks)'' refers to what the ACGME currently 
separately accredits as a 1-2 program; family medicine residencies that 
typically would have a first year in an urban hospital and second and 
third years in a rural hospital/setting. These separately accredited 1-
2 family medicine RTTs may continue to maintain their RTT FTE 
limitations, assuming all applicable requirements are met. However, we 
proposed that an ``accredited program where greater than 50 percent of 
the program occurs in a rural area'' is the new statutory authorization 
for development of rural tracks in specialties other than family 
medicine, because eligibility for cap adjustments is no longer tied 
exclusively to ``separately accredited'', 1-2 programs. Specifically, 
as long as a program in its entirety is accredited by the ACGME, 
whether the program is in family medicine or in another specialty,

[[Page 73449]]

and the residents spend more than 50 percent of the entire program in a 
rural area, then prospectively for cost reporting periods beginning on 
or after October 1, 2022, we proposed to also provide additional slots 
to any program in any specialty. Therefore, for all accredited 
specialties, we proposed to allow an urban hospital to include in its 
FTE count, not to exceed its rural track FTE limitation, residents 
training in the urban hospital that are designated to rotate to a rural 
area for greater than 50 percent of the duration of the particular 
program. In addition, we proposed that a rural hospital that is 
partnered with the urban hospital in the RTT would similarly include in 
its FTE count, not to exceed its rural track FTE limitation, the time 
residents train in the rural hospital only if the residents rotate to a 
rural area for greater than 50 percent of the duration of the 
particular program. For example, greater than 50 percent of the 
duration of a 3-year family medicine program would be more than 18 
months rotating to a rural area; greater than 50 percent of the 
duration of a 4-year psychiatry program would be more than 24 months 
training in a rural area.
e. Exemption From the 3-Year Rolling Average During the 5-Year Rural 
Track FTE Limitation Window
    In the August 1, 2003 IPPS final rule (68 FR 45456 through 45457), 
we clarified our existing policy that although the rural track 
provision allows an increase to the urban hospital's FTE cap, sections 
1886(h)(4)(H)(iv) and 1886(d)(5)(B) of the Act do not provide for an 
exclusion from the rolling average for the urban hospital for those FTE 
residents training in a rural track. These provisions are interpreted 
to mean that, except for new rural track programs begun by urban 
teaching hospitals that are establishing an FTE cap for the first time, 
when an urban hospital with an FTE resident cap establishes a new rural 
track program or expands an existing rural track program, FTE residents 
in the rural track that are counted by the urban hospital are included 
in the hospital's rolling average calculation immediately. This policy 
is reflected in the regulation at Sec.  412.105(f)(1)(v)(F) for IME and 
Sec.  413.79(d)(7) for direct GME, and applies for IME and direct GME 
to cost reporting periods beginning on or after April 1, 2000.
    In addition, as stated in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 57028), under the regulations at Sec.  412.105(a)(1)(i), no 
exception to the IME intern- and resident-to-bed (IRB) ratio cap is 
provided for residents in a rural track training program (except for 
new rural track programs begun by urban teaching hospitals that are 
establishing an FTE cap for the first time, or for rural hospitals, if 
the rural track meets the definition of a new program).
    As we explained in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 
25515), we believe that section 127 of the CAA amends section 
1886(h)(4)(H)(iv) of the Act to provide for an exemption from the 3-
year rolling average of the urban hospital and rural hospital during 
the 5-year growth window for FTE residents participating in rural 
tracks. Specifically, section 1886(h)(4)(H)(iv)(II) of the Act states 
that in the case of a hospital not located in a rural area that 
established or establishes a medical residency training program (or 
rural tracks) in a rural area or establishes an accredited program 
where greater than 50 percent of the program occurs in a rural area, 
the Secretary shall consistent with the principles of subparagraphs (F) 
and (G) and subject to paragraphs (7) and (8), prescribe rules for the 
application of such subparagraphs with respect to such a program. 
Subparagraph (F) is the FTE resident cap, and subparagraph (G) refers 
to the 3-year rolling average. This italicized language is the same as 
that used at section 1886(h)(4)(H)(i) regarding providing exemptions 
from the FTE resident cap and 3-year rolling average for new teaching 
hospitals starting new residency programs. That is, section 
1886(h)(4)(H)(i) states: ``(i) New facilities.--The Secretary shall, 
consistent with the principles of subparagraphs (F) and (G) and subject 
to paragraphs (7) and (8), prescribe rules for the application of such 
subparagraphs in the case of medical residency training programs 
established on or after January 1, 1995.'' The previous rural track 
language at section 1886(h)(4)(H)(iv) did not mention subparagraph (G); 
therefore, the law did not exempt from the rolling average any 
residents participating in a rural track, even during the cap building 
window as we explained in the August 1, 2003 IPPS final rule (68 FR 
45456 through 45457). Because section 127 of the CAA amends section 
1886(h)(4)(H)(iv) to add in new subclause (II) which contains language 
modeled on the language for providing for FTE resident cap and rolling 
average exemptions in the case of new programs started on or after 
January 1, 1995, we proposed that similarly, during the 5-year cap 
growth window for RTTs, the FTE residents participating in the RTT 
either at the urban hospital or a rural hospital would not be included 
in a hospital's 3-year rolling average calculation during the cost 
reporting periods prior to the beginning of the applicable hospital's 
cost reporting period that coincides with or follows the start of the 
sixth program year of each rural track. That is, just as residents in 
new programs are exempt from the 3-year rolling average until the cost 
reporting period that coincides with or follows the start of the sixth 
program year, similarly, effective for RTTs started in cost reporting 
periods beginning on or after October 1, 2022, for each rural track 
started, full-time equivalent residents at an urban hospital or rural 
hospital in a rural track program would be excluded from the rolling 
average calculation during the cost reporting periods prior to the 
beginning of the applicable hospital's cost reporting period that 
coincides with or follows the start of the sixth program year of each 
rural track.
f. Changes to the Regulations Text
    As discussed in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 
25516), although section 127 of the CAA directly amends section 1886(h) 
for direct GME, and does not specifically refer to amendments for IME, 
the existing language at section 1886(d)(5)(B)(viii) of the Act states 
that rules similar to the rules of subsection (h)(4)(H) shall apply for 
purposes of clauses (v) and (vi). Accordingly, the statutory authority 
to make corresponding changes to IME for rural tracks already exists. 
Clause (v) refers to the IME resident caps, and clause (vi) refers to 
the 3-year rolling average. Therefore, we proposed to apply to the IME 
payment the new authority under section 1886(h)(4)(H)(iv) of the Act to 
allow both urban and rural hospitals to receive IME rural track FTE 
limitations, as well as an exemption from the IME 3-year rolling 
average for FTE residents during the 5-year cap building window. We are 
making appropriate changes to the regulations text for IME at 42 CFR 
412.105(f)(1)(v)(F) and 412.105(f)(1)(x) to mirror the following 
proposed regulations text changes for direct GME:
     We proposed to modify the definition of Rural Track FTE 
limitation at 42 CFR 413.75(b) to add ``or rural hospital.''
     We proposed to remove the requirement at 42 CFR 
413.79(d)(7) that FTE residents in the rural track are included in the 
3-year rolling average during the 5-year cap building window.
     We proposed to make various changes throughout the 
regulations text at 42 CFR 413.79(k) ``Residents training in rural 
track programs.''

[[Page 73450]]

g. Documentation Required for Medicare Administrative Contractor (MAC) 
To Pay for RTTs
    We will amend or clarify as necessary the Medicare cost report, 
CMS-2552-10, Worksheets E, Part A for IME and E-4 for direct GME, to 
accommodate additional rural track limitations. With this new authority 
to pay for more Rural Track Programs (RTPs--see explanation in response 
to comments later in this section as to why CMS is using the term 
``RTP''), MACs may face an increase in requests for adjustments to 
interim rates as hospitals first build these programs. While, as with 
payment for any GME program, hospitals must maintain and, upon a MAC's 
request, submit applicable documentation, to make review and processing 
of these new RTP payment requests more manageable, we are reiterating 
the documentation requirements here. We proposed that the urban and 
rural hospitals must provide, upon request, to its MAC the following 
(Note: In response to a comment we received on the following bullet 
points, we have modified the language in these bullet points to reflect 
our response to that comment in this final rule with comment period):
     The ACGME accreditation for the program as a whole (that 
is, both urban and rural training components), and documents showing 
whether the urban and rural participating sites are starting the RTP 
for the first time in this particular specialty, or whether the urban 
and rural hospital already have an RTP in this specialty, but are 
adding additional participating sites to the RTP.
     A list of all urban and rural hospital and nonprovider 
training sites in the RTP.
     Resident rotation schedules (or similar documentation) 
showing that residents in the specified RTP spend greater than 50 
percent of their training in a geographically rural area in the 5-year 
growth window in order to receive IME and direct GME rural track FTE 
limitations. In the instance where only a subset of the residents in 
the particular program are participating in the RTP, and the training 
time of the RTP residents is included in the main rotation schedule for 
the entire program, the hospital must specifically highlight the names 
of the residents and their urban and rural training locations on the 
main rotation schedule, so that the MAC can easily identify which 
residents are training in the RTP, where they are training, and be able 
to verify that over 50 percent of their training time is spent in a 
rural area.
     The number of FTE residents and the amount of time 
training in all 5 program years at both the urban and rural settings 
since establishment of a Rural Track Program (based on the rotation 
schedules), so that this information is available to the MAC when 
needed in auditing the accuracy of the RTP FTE cap limitation 
established by the hospital in the cost reporting period that coincides 
with or follows the start of the sixth program year of the RTP.
    Following are examples of how the urban and rural hospital's rural 
track FTE limitations would be calculated:
    Example 1: Urban Hospital and Rural Hospital are participating 
sites in an accredited rural track program. The program is in internal 
medicine (3 years minimum accredited length), and is accredited for a 
total of 6 residents, 2 in each program year (PGY). The residents spend 
PGY1 at Urban Hospital, and then the PGY2s and PGY3s rotate to a rural 
area, to train at both Rural Hospital and Rural Clinic (a nonprovider 
site). The PGY2 and PGY3 residents, while mostly assigned to the rural 
area, do come back to the Urban Hospital for some required training. 
However, the residents spend more than 50 percent of the duration of 
the 3 year program in the rural area. Therefore, the Urban Hospital 
qualifies to receive a cap/rural track FTE limitation adjustment. Rural 
Hospital incurs the cost of the salaries and fringe benefits of the 
residents for the time spent training at Rural Clinic and meets other 
applicable requirements at Sec.  413.78(g) to be able to count the time 
residents spend training at the Rural Clinic. The rotations and the cap 
calculation are as follows:

----------------------------------------------------------------------------------------------------------------
             Year 1                     Year 2              Year 3              Year 4              Year 5
----------------------------------------------------------------------------------------------------------------
PGY1 2.0 Urban Hospital.........  PGY1 2.0 Urban      PGY1 2.0 Urban      PGY1 2.0 Urban      PGY1 2.0 Urban
                                   Hospital.           Hospital.           Hospital.           Hospital.
PGY2 0..........................  PGY2 2 @.90 Rural   PGY2 2 @.90 Rural   PGY2 2 @.90 Rural   PGY2 2 @.90 Rural
                                   Hospital and        Hospital and        Hospital and        Hospital and
                                   Rural Clinic        Rural Clinic        Rural Clinic        Rural Clinic
                                   (1.8), 2 @.10       (1.8), 2 @.10       (1.8), 2 @.10       (1.8), 2 @.10
                                   Urban Hospital      Urban Hospital      Urban Hospital      Urban Hospital
                                   (.20).              (.20).              (.20).              (.20).
PGY3 0..........................  PGY3 0............  PGY3 2 @.95 Rural   PGY3 2 @.95 Rural   PGY3 2 @.95 Rural
                                                       Hospital and        Hospital and        Hospital and
                                                       Rural Clinic        Rural Clinic        Rural Clinic
                                                       (1.9), 2 @.05       (1.9), 2 @.05       (1.9), 2 @.05
                                                       Urban Hospital      Urban Hospital      Urban Hospital
                                                       (.10).              (.10).              (.10).
Total 2.0.......................  TOTAL 4.0.........  TOTAL 6.0.........  TOTAL 6.0.........  TOTAL 6.0.
                                                                                              5 Year Total = 24.
----------------------------------------------------------------------------------------------------------------

Urban Hospital's 5 YEAR FTE TOTAL = 11.1
Rural Hospital's 5 YEAR FTE TOTAL (includes time at Rural Clinic) = 
12.9
5 Year FTE Total = 24

    Step 1: Highest number of FTE residents training in any program 
year during fifth year across all participating hospitals is 2.0:

PGY 1s = 2.0
PGY 2s = 2.0
PGY 3s = 2.0

    Step 2: 2.0 x 3 (minimum accredited length) = 6.
    Step 3: Urban Hospital's cap adjustment is based on the ratio of 
training at Urban Hospital over all 5 years to the total training that 
is occurring at all sites over all 5 years: 6 x [11.1/(24)] = 2.76.
    Step 4: Rural Hospital's cap adjustment is based on the ratio of 
training at Rural Hospital and Rural Clinic over all 5 years to the 
total training that is occurring at all sites over all 5 years: 6 x 
[12.9/(24)] = 3.24.
    2.76 + 3.24 = 6.0, the total cap assignment does not exceed the 
total number of accredited slots. Urban Hospital's rural track FTE 
limitation is 2.76. Rural Hospital's rural track FTE limitation is 
3.24. (We note that this calculation is done separately for IME and 
direct GME caps respectively. Also note that during these 5 program 
years, the Urban Hospital and Rural Hospital exclude the FTE residents 
from the 3-year rolling average calculation on their Medicare cost 
reports.)
    Example 2: Urban Hospital and Rural Hospital are participating 
sites in an accredited rural track program. The program is in 
psychiatry (4 years minimum accredited length), and is accredited for a 
total of 8 residents, 2 in each program year (PGY). The residents spend 
PGY1 at Urban Hospital, and then the PGY2s and PGY3s and PGY4s rotate 
to a rural area, to train at both Rural Hospital and Rural Clinic (a 
nonprovider site). The PGY2 and PGY3 and PGY4 residents, while mostly 
assigned to the rural area, do come back to the Urban Hospital for some 
required training. However, the residents spend more than 50 percent 
(that is, more than

[[Page 73451]]

24 months) of the duration of the 4 year program in the rural area. 
Rural Hospital incurs the cost of the salaries and fringe benefits of 
the residents for the time spent training at Rural Clinic and meets 
other applicable requirements at Sec.  413.78(g) to be able to count 
the time residents spend training at the Rural Clinic. The rotations 
and the cap calculation are as follows:

----------------------------------------------------------------------------------------------------------------
             Year 1                     Year 2              Year 3              Year 4              Year 5
----------------------------------------------------------------------------------------------------------------
PGY1 2.0 Urban Hospital.........  PGY1 2.0 Urban      PGY1 2.0 Urban      PGY1 2.0 Urban      PGY1 2.0 Urban
                                   Hospital.           Hospital.           Hospital.           Hospital.
PGY2 0..........................  PGY2 2 @.90 Rural   PGY2 2 @.90 Rural   PGY2 2 @.90 Rural   PGY2 2 @.90 Rural
                                   Hospital and        Hospital and        Hospital and        Hospital and
                                   Rural Clinic        Rural Clinic        Rural Clinic        Rural Clinic
                                   (1.8), 2 @.10       (1.8), 2 @.10       (1.8), 2 @.10       (1.8), 2 @.10
                                   Urban Hospital      Urban Hospital      Urban Hospital      Urban Hospital
                                   (.20).              (.20).              (.20).              (.20).
PGY3 0..........................  PGY3 0............  PGY3 2 @.95 Rural   PGY3 2 @.95 Rural   PGY3 2 @.95 Rural
                                                       Hospital and        Hospital and        Hospital and
                                                       Rural Clinic        Rural Clinic        Rural Clinic
                                                       (1.9), 2 @.05       (1.9), 2 @.05       (1.9), 2 @.05
                                                       Urban Hospital      Urban Hospital      Urban Hospital
                                                       (.10).              (.10).              (.10).
PGY4 0..........................  PGY4 0............  PGY4 0............  PGY4 2 @.90 Rural   PGY4 2 @.90 Rural
                                                                           Hospital and        Hospital and
                                                                           Rural Clinic        Rural Clinic
                                                                           (1.8), 2 @.10       (1.8), 2 @.10
                                                                           Urban Hospital      Urban Hospital
                                                                           (.20).              (.20)
Total 2.0.......................  TOTAL 4.0.........  TOTAL 6.0.........  TOTAL 8.0.........  TOTAL 8.0.
                                                                                              5 Year Total = 28.
----------------------------------------------------------------------------------------------------------------

Urban Hospital's 5 YEAR FTE TOTAL = 11.5
Rural Hospital's 5 YEAR FTE TOTAL (includes time at Rural Clinic) = 
16.5
5 Year FTE Total = 28

    Step 1: Highest number of FTE residents training in any program 
year during fifth year across all participating hospitals is 2.0:

PGY 1s = 2.0
PGY 2s = 2.0
PGY 3s = 2.0
PGY4s = 2.0

    Step 2: 2.0 x 4 (minimum accredited length) = 8.
    Step 3: Urban Hospital's cap adjustment is based on the ratio of 
training at Urban Hospital over all 5 years to the total training that 
is occurring at all sites over all 5 years: 8 x [11.5/(28)] = 3.29.
    Step 4: Rural Hospital's cap adjustment is based on the ratio of 
training at Rural Hospital and Rural Clinic over all 5 years to the 
total training that is occurring at all sites over all 5 years: 8 x 
[16.5/(28)] = 4.71.
    3.29 + 4.71 = 8.0, the total cap assignment does not exceed the 
total number of accredited slots. Urban Hospital's rural track FTE 
limitation is 3.29. Rural Hospital's FTE cap adjustment is 4.71. (We 
note that this calculation is done separately for IME and direct GME 
caps respectively. Also note that during these 5 program years, the 
Urban Hospital and Rural Hospital exclude the FTE residents from the 3-
year rolling average calculation on their Medicare cost reports.)
    Example 3: Refer to Example 1 (as previously described), where 
Urban Hospital and Rural Hospital are participating sites in an 
accredited internal medicine rural track program. The program is in 
internal medicine (3 years minimum accredited length), and is 
accredited for a total of 6 residents, 2 in each program year (PGY). 
Urban Hospital's rural track FTE limitation is 2.76. Rural Hospital's 
FTE cap adjustment is 3.24. In July 2023, Urban Hospital partners with 
Second Rural Hospital in a different rural part of the state to create 
another internal medicine RTT (that is, Urban Hospital internal 
medicine ``hub'' is adding another ``internal medicine RTT ``spoke''). 
Urban Hospital adds 2 FTE residents to train in PGY1 at the Urban 
Hospital, and then the PGY2s and PGY3s rotate to a rural area, to train 
at both Second Rural Hospital and Second Rural Clinic (a nonprovider 
site). The PGY2 and PGY3 residents, while mostly assigned to the rural 
area, do come back to the Urban Hospital for some required training. 
However, the residents spend more than 50 percent of the duration of 
the 3 year program in the rural area. Therefore, Urban Hospital 
qualifies to receive another rural track FTE limitation. Second Rural 
Hospital incurs the cost of the salaries and fringe benefits of the 
residents for the time spent training at Second Rural Clinic and meets 
other applicable requirements at Sec.  413.78(g) to be able to count 
the time residents spend training at the Second Rural Clinic. The 
rotations and the cap calculation are as follows:

----------------------------------------------------------------------------------------------------------------
             Year 1                     Year 2              Year 3              Year 4              Year 5
----------------------------------------------------------------------------------------------------------------
PGY1 2.0 Urban Hospital.........  PGY1 2.0 Urban      PGY1 2.0 Urban      PGY1 2.0 Urban      PGY1 2.0 Urban
                                   Hospital.           Hospital.           Hospital.           Hospital.
PGY2 0..........................  PGY2 2 @.90 Rural   PGY2 2 @.90 Rural   PGY2 2 @.90 Rural   PGY2 2 @.90 Rural
                                   Hospital and        Hospital and        Hospital and        Hospital and
                                   Rural Clinic        Rural Clinic        Rural Clinic        Rural Clinic
                                   (1.8), 2 @.10       (1.8), 2 @.10       (1.8), 2 @.10       (1.8), 2 @.10
                                   Urban Hospital      Urban Hospital      Urban Hospital      Urban Hospital
                                   (.20).              (.20).              (.20).              (.20).
PGY3 0..........................  PGY3 0............  PGY3 2 @.95 Rural   PGY3 2 @.95 Rural   PGY3 2 @.95 Rural
                                                       Hospital and        Hospital and        Hospital and
                                                       Rural Clinic        Rural Clinic        Rural Clinic
                                                       (1.9), 2 @.05       (1.9), 2 @.05       (1.9), 2 @.05
                                                       Urban Hospital      Urban Hospital      Urban Hospital
                                                       (.10).              (.10).              (.10).
Total 2.0.......................  TOTAL 4.0.........  TOTAL 6.0.........  TOTAL 6.0.........  TOTAL 6.0.
                                                                                              5 Year Total = 24.
----------------------------------------------------------------------------------------------------------------

Urban Hospital's 5 YEAR FTE TOTAL = 11.1

Second Rural Hospital's 5 YEAR FTE TOTAL (includes time at Second Rural 
Clinic) = 12.9
5 Year FTE Total = 24

    Step 1: Highest number of FTE residents training in any program 
year during fifth year across all participating hospitals is 2.0:

PGY 1s = 2.0
PGY 2s = 2.0
PGY 3s = 2.0

    Step 2: 2.0 x 3 (minimum accredited length) = 6.
    Step 3: Urban Hospital's cap adjustment is based on the ratio of 
training at Urban Hospital over all 5 years to the total training that 
is occurring at all sites over all 5 years: 6 x [11.1/(24)] = 2.76.
    Step 4: [Note: As we explain in the summary of comments and 
responses, as a result of responding to one comment, we realized that 
the original Step 4 as included in the proposed rule contained errors. 
Therefore, we are replacing the language of Step 4 of the proposed rule 
with the following corrected language in this final rule with comment 
period]. Second Rural Hospital's cap adjustment is based on

[[Page 73452]]

the ratio of training at Rural Hospital and Rural Clinic over all 5 
years to the total training that is occurring at all sites over all 5 
years: 6 x [12.9/(24)] = 3.24 2.76 + 3.24 = 6.0, the total cap 
assignment does not exceed the total number of accredited slots. Urban 
Hospital's rural track FTE limitation is 2.76. This second rural track 
FTE limitation is added to Urban Hospital's first rural track FTE 
limitation for a total rural track FTE limitation of 5.52 (2.76 + 
2.76). Second Rural Hospital's FTE cap adjustment is 3.24 (we note that 
Second Rural Hospital does not have a previous RTP FTE limitation). (We 
note that this calculation is done separately for IME and direct GME 
caps respectively. Also note that during these 5 program years, the 
hospitals exclude the FTE residents from the 3-year rolling average 
calculation and the cap on the IME IRB ratio on their Medicare cost 
reports.)
    We invited comments on our proposals. Following is a summary of the 
comments received and our responses to those comments.
    Comment: Commenters were overall very pleased with CMS's proposed 
implementation of section 127 of the CAA, and believe it addresses the 
teaching concerns of rural hospitals in a significant way. However, the 
commenters disputed CMS's concern that allowing expansion of existing 
programs might render RTT cap limitations meaningless. Commenters 
argued that nothing in section 127 of the CAA precludes CMS from 
providing a one-time adjustment opportunity to existing rural RTT 
spokes (rural providers). Commenters noted that CMS states in the IPPS 
proposed rule, ``Because the law now states `established or 
establishes,' both past tense and future tense, we believe the statute 
grants the Secretary unique authority not previously held; that is, the 
authority to prospectively allow (under certain circumstances) cap 
adjustments to existing RTTs expanded in a cost reporting period 
beginning on or after October 1, 2022'' (emphasis added; 86 FR 25513). 
Many commenters urged CMS to create an exceptions process that would 
allow hospitals with existing RTTs to demonstrate that the only way 
they could train more residents at a rural hospital was to expand an 
existing RTT. They suggested that CMS could consider making this a one-
time exception per program and limit the total number of residents 
allowed to 3.0 FTEs per program.
    Response: We appreciate the commenters' support for our proposals. 
However, we disagree with how the commenters are interpreting 
``established or establishes.'' We do not believe the past tense 
includes general expansions of existing programs. Rather, for the first 
time, the law allows adding additional sites to an already 
``established'' RTP. As we stated in the proposed rule, ``. . . the 
provision gives explicit permission to adjust the RTT limitations of an 
urban hospital wishing to create additional RTTs after establishing its 
first RTT, while also adjusting the resident caps of the additional 
rural hospital(s) added by creating the second (or third, etc.) RTT . . 
. Therefore, under the explicit authority under section 127 of the CAA, 
we are proposing to prospectively allow increases to the IME and direct 
GME caps of both the participating urban and rural hospitals that 
expand a qualifying RTT. We are proposing that if, in a cost reporting 
period beginning on or after October 1, 2022, an urban hospital with an 
existing RTT (``hub' '') adds an additional RTT (``spoke'') to the 
existing urban core program of the same specialty, the urban and rural 
hospitals may receive adjustments to their rural track FTE limitation'' 
(86 FR 25513). That is, the new authority not previously available 
allows for an expansion of an existing, already ``established'' RTT by 
adding additional participating sites (not previously allowed). Section 
127 of the CAA does not delineate an exceptions process as requested by 
commenters, even if an exception is limited to 3 FTEs or some other 
relatively small number. In the absence of such a delineation, we will 
not permit exceptions in some cases, but deny them in other cases. We 
interpret the clause in section 127 that the Secretary's rules shall be 
``consistent with the principles of subparagraph (F)'' as a 
demonstration of Congressional intent to retain the FTE caps. 
Furthermore, this interpretation is consistent with our past 
interpretations of the principles of subparagraph (F), under which we 
have not permitted the addition of residents to an already existing 
program, whether at an urban or a rural hospital (see for example, May 
12, 1998 (63 FR 26328, 26334, and 26335). Accordingly, we believe that 
allowing an exceptions process for expansions of RTPs at existing rural 
participating sites is inconsistent with our longstanding 
interpretations of subparagraph (F), and would render the FTE caps 
meaningless.
    Comment: Numerous commenters provided feedback on the terminology 
CMS used in the proposed rule to describe different constructs of rural 
training and the manner in which they are accredited. For example, 
several commenters noted that CMS uses multiple terms to refer to 
possibly the same concept regarding ``rural training track,'' or 
``rural training track program.'' The commenters recommend that CMS be 
careful in using these terms interchangeably, and define each 
separately, if they have a distinctive meaning for CMS. A commenter 
suggested that CMS clarify the difference between a separately 
accredited program and a track within a program that is already 
accredited, as follows:
     Separately accredited rural track programs (traditional 
`RTTs' or integrated rural tracks as described in the FY2003 Final 
Rule; or `RTPs,' Rural Track Programs in the new ACGME language just 
published in May 2021. (See https://acgme.org/What-We-Do/Accreditation/Medically-Underserved-Areas-and-Populations/))
     Urban programs with not-separately-accredited rural tracks 
(`RTs,' not programs)
     We consider `tracks' of urban programs that do not place 
residents for training in rural locations for >50 percent of their 
training time to be `pathways.'
    Response: We appreciate the comments encouraging consistent 
terminology, and we agree that in this final rule with comment period, 
we can improve the clarity and consistency in the language and the 
terms we used to describe programs in which residents rotate to rural 
areas. As pointed out in the comments, historically we have referred to 
the separately accredited family medicine programs which were eligible 
for the FTE cap adjustments under the BBRA of 1999 as ``Rural Training 
Tracks'' (RTTs), or ``Rural Training Track Programs.'' (See 65 FR 
47026, 47033 through 47037 August 1, 2000) and the FY 2002 IPPS final 
rule (66 FR 39828, 39902 through 39909) and (68 FR 45456 through 45457 
August 1, 2003). However, section 127 of the CAA shifts eligibility for 
FTE cap adjustments away from ``separate accreditation'' to an 
``accredited program where greater than 50 percent of the program 
occurs in a rural area.'' Accordingly, going forward, so long as the 
training is not an expansion of an existing site's program, CMS' and 
the MACs' focus for determining an urban and rural hospital's 
eligibility for FTE cap adjustments is documentation showing that 
specific residents actually spend greater than 50 percent of the 
duration of their training in the program in a geographically rural 
area. CMS and the MACs will no longer look for evidence of ``separate 
accreditation''. We have spoken with the ACGME and we have

[[Page 73453]]

reviewed the terminology on the ACGME's website, and we intend to use 
the terminology ``Rural Track Program'' (RTP) in this final rule with 
comment period to describe the type of program that could qualify for 
IME and direct GME FTE cap adjustments. Specifically, at https://acgme.org/What-We-Do/Accreditation/Medically-Underserved-Areas-and-Populations/, the ACGME defines Rural Track Program (RTP) as follows: 
ACGME Rural Track Program (RTP)--An ACGME-accredited program with a 
unique 10-digit identifier in which residents/fellows gain both urban 
and rural experience with more than half of the education and training 
for each resident/fellow taking place in a rural area (any area outside 
of a Core-Based Statistical Area (CBSA)).
    This definition of RTP includes the key point that the residents 
(or fellows, if applicable) spend more than half of their training in a 
geographically rural area. However, this current definition contains 
two points that CMS and the MACs will not require: (1) A unique 10-
digit identifier, which we understand is characteristic of the 
separately accredited 1-2 programs, and (2) that ``each'' resident/
fellow spends more than half of the education and training in a rural 
area. Our understanding is that, while it is certainly possible for a 
program to be designed such that ``each'' resident in the program is 
designated to spend more than 50 percent of the time in the rural area, 
it is also common for only a subset of residents within an entire 
accredited program to be designated for the rural training experience. 
Therefore, if only a subset of the number of residents for which a 
program is accredited is slated for the RTP, then, based on rotation 
schedules, the MAC would verify those residents and that their training 
experience consists of greater than 50 percent of the time in a rural 
area, and would calculate the FTE cap adjustment based on that 
proportion of FTEs spending more than 50 percent of their time in the 
rural area. Nevertheless, as stated previously, we are using the term 
RTP to refer to programs that, at least for a subset of the residents, 
meet the statutory requirement for greater than 50 percent of the 
training occurring in a rural area, and therefore, the urban and rural 
hospital could qualify for IME and direct GME rural track FTE 
limitations.
    We are adding a new definition to the regulations at 42 CFR 
413.75(b) for Rural Track Program as follows: ``Rural Track Program 
means, effective for cost reporting periods beginning on or after 
October 1, 2022, an ACGME-accredited program in which all, or some, 
residents/fellows gain both urban and rural experience with more than 
half of the education and training for the applicable resident(s)/
fellow(s) taking place in a rural area as defined at 42 CFR 
412.62(f)(iii). In the finalized regulations text at 42 CFR 
412.105(f)(1)(v) and (x) and 42 CFR 413.79(k), effective for a cost 
reporting period beginning on or after October 1, 2022, if those 
programs (either the whole program, or a subset of residents in the 
program) consist of greater than 50 percent of the training time in a 
rural area, we will use the term ``Rural Track Program''. Conversely, 
in the same regulations text, when referring to programs where less 
than 50 percent of the training occurs in a rural area, we will use the 
term ``program,'' with no mention of ``rural''.
    Comment: A commenter was concerned that in the absence of distinct 
ACGME criteria identifying programs where greater than 50 percent of 
the training occurs in a rural area, CMS should devise concrete 
criteria for identifying programs eligible for FTE cap adjustments. The 
commenter recommended that CMS require that a new `director' be named 
in supporting materials for any newly created RTP but allow the 
program's `director' to be any of the following in ACGME terms: A 
`Program Director,' an `Associate Program Director,' or even a 
participating `site director' of a rural track that is not separately 
accredited. The same commenter requested that CMS define a not 
separately accredited rural track as ``an organized and deliberate 
urban residency program strategy to produce physicians to rural 
practice as indicated by all the following:
     A name for the rural track
     A director;
     A program-specific goal or objective(s) to recruit, 
nurture, educate, train, or encourage residents toward rural practice, 
including a separate NRMP number or another process for assigning 
individual residents to this track early in the first program year; and
     A description that explicitly articulates a rural focus, 
including a rotation schedule that demonstrates how the track will meet 
the 50 percent threshold for assigned residents training in a rural 
location.''
    Response: In order to provide maximum flexibility to stakeholders, 
we believe it is appropriate for us to adhere to the criteria specified 
in section 127 of the CAA, rather than impose additional regulatory 
conditions for payment. We expect ACGME to develop additional criteria, 
which we believe is likely to occur in the coming years, as both the 
industry and the ACGME gain more experience with operating RTPs in a 
variety of specialties. Therefore, we are not adopting the commenter's 
suggested criteria.
    Comment: A commenter requested that CMS confirm that as long as the 
residency program in its entirety is accredited by ACGME, there is no 
separate accreditation requirement or designation or recognition for 
the program to qualify as an RTT, above and beyond what is required 
under Medicare regulations. The commenter also requested that CMS 
confirm how it intends to treat RTTs that become immediately eligible 
as of October 1, 2022, due to meeting all regulatory requirements with 
the exception of the ``separate accreditation'' requirement.
    Response: As we stated in response to the previous comment, we 
would use the ACGME's term ``Rural Track Program'' to refer to programs 
that are ACGME-accredited in their entirety, and where residents 
(either all, or a subset) spend greater than 50 percent of their 
training in the program in a rural area. We also do not understand why 
special consideration is needed for programs that become eligible for 
payment as an RTP immediately on October 1, 2022. As we stated, a 
hospital that believes it qualifies for an RTP FTE limitation should 
approach its MAC showing it meets the greater than 50 percent rural 
training requirement, and the MAC may adjust the hospital's interim 
rates so that effective for a cost report starting on or after October 
1, 2022, the hospital could receive increased IME and direct GME 
payment as appropriate.
    Comment: Some other commenters recommended using ACGME terms like 
``participating hospital'' and to avoid the term ``sponsor''. The 
commenters noted that many, if not most, residency programs involve 
multiple participating hospitals and both provider and non-provider 
ambulatory sites, and that the sponsoring institution may not 
necessarily be a hospital. Some commenters also noted that in the 
Examples 1 and 2 on pages 25516-18 of the proposed rule, CMS refers to 
hospitals that ``jointly sponsor'' programs. The commenters noted that 
the ACGME does not use the term ``joint sponsor,'' and instead refers 
to hospitals as ``participating sites'' in an accredited program. In 
Example 3, a commenter corrected CMS's wording to indicate that Urban 
Hospital partners with Second Urban Hospital in a different part of the 
State to ``create'', and not to ``sponsor,'' another internal medicine 
RTT. A commenter also noted that the ACGME only allows one organization 
to serve as the Sponsoring Institution of an ACGME-accredited program, 
and that

[[Page 73454]]

education and training in each accredited program takes place in 
participating sites. A couple of other commenters noted that use of the 
term ``core'' and ``hub'' for the urban hospital are unnecessarily 
urban-centric, and suggest that the language be changed instead to 
`networks' of multiple participating urban and rural hospitals and 
ambulatory sites.
    Response: We appreciate the commenters' corrections and have made 
the suggested corrections in Examples 1, 2, and 3. We have consulted 
the ACGME's ``Glossary of Terms,'' dated April 15, 2020 (https://www.acgme.org/portals/0/pdfs/ab_acgmeglossary.pdf). After considering 
the commenters' suggestions, we believe it is best to use terms that 
are already defined in the ACGME's Glossary. We found the following 
relevant definitions:
     Primary clinical site: The primary facility designated for 
clinical instruction in the program.
     Participating site: An organization providing educational 
experiences or educational assignments/rotations for residents/fellows. 
Examples of participating sites include: A university; a medical 
school; a teaching hospital, including its ambulatory clinics and 
related facilities; a private medical practice or group practice; a 
nursing home; a school of public health; a health department; a 
federally qualified health center; a public health agency; an organized 
health care delivery system; a health maintenance organization (HMO); a 
medical examiner's office; a consortium; or an educational foundation.
    Accordingly, in this final rule with comment period and going 
forward, rather than refer to the ``core'' and ``hub'' for the urban 
hospital, and ``spoke'' for the rural training sites, in this final 
rule with comment period, we instead will refer to the urban 
hospital(s) as the ``primary clinical site,'' and will refer to the 
various other training locations as either the ``rural hospital 
participating site,'' if the site is a rural hospital, or the ``rural 
non-provider participating site'' if the site is an ambulatory clinic, 
or some other non-hospital site. For illustrative purposes, had we used 
this new terminology in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 
25515), we would have written the language as follows:
    We are proposing that if, in a cost reporting period beginning on 
or after October 1, 2022, an urban hospital with an existing RTT RTP 
(``primary clinical site'') adds an additional RTT (``spoke'') rural 
``participating site'' to the existing urban core program RTP of the 
same specialty, the urban and rural hospitals may receive adjustments 
to their rural track FTE limitation. (For ease of reference, we are 
referring to the urban core hospital as the `hub'' and the one or more 
RTTs as the ``spokes'' associated with that urban ``hub.'' For example, 
Urban Hospital A (primary clinical site) has an existing family 
medicine program. In 2015, Urban Hospital A partnered with Rural 
Hospital 1 (rural hospital participating site) to create a RTT RTP from 
the existing family medicine program and received a rural track FTE 
limitation to reflect the time that residents training in the RTT RTP 
spent at its facility. In July 2023, Urban Hospital A (primary clinical 
site) partners with Rural Hospital 2 (an additional rural hospital 
participating site) in a different rural area of the State, to create 
an additional family medicine RTT RTP (adding another ``spoke'' to the 
existing urban program ``hub.'') We are proposing that both Urban 
Hospital A and Rural Hospital 2 may receive adjustments to their 
resident caps (rural track FTE limitations) to reflect the portion of 
the time that FTE residents in the second family medicine RTT ``spoke'' 
rural hospital participating site RTP spend at their respective 
facility.
    Comment: A commenter reviewed our proposed reiterated criteria for 
hospitals to seek MAC approval to receive payment for RTPs (see 86 FR 
25516), and made the following suggested edits:
    1. The accreditation for the ``spoke, ``Approval of the urban 
program's rural track from the ACGME and information whether the track 
is in the same specialty as an RTT/RTP program that the urban hospital 
already has, or whether the ``spoke'' track is a newly created RTT 
rural track in a different specialty.
    2. Intern and resident rotation schedules (or similar 
documentation) showing that residents in each particular RTT program 
(both hub and spokes overall) the specified rural track spend greater 
than 50 percent of their training in the initial residency period in a 
geographically rural area in order to receive IME and direct GME rural 
track FTE limitations.
    3. The number of FTE residents and the amount of time training in 
all program years at both the urban and rural settings since 
establishment of the particular ``spoke of any already accredited RTT/
RTP or approved not-separately-accredited RT, so that the MAC may be 
able to verify the RTT cap and appropriately adjust the rural FTE 
limitation.
    Response: We appreciate the commenter's suggestions, and will 
revise the criteria as follows:
     The ACGME accreditation for the program as a whole (that 
is, both urban and rural training components), and documents showing 
whether the urban and rural participating sites are creating the RTP 
for the first time in this particular specialty, or whether the urban 
and rural hospital already have an RTP in this specialty, but are 
adding additional participating sites to the RTP.
     Intern and resident rotation schedules (or similar 
documentation) showing that residents in the specified RTP spend 
greater than 50 percent of their training in a geographically rural 
area in the 5-year growth window order to receive IME and direct GME 
rural track FTE limitations. In the instance where only a subset of the 
residents in the particular program are participating in the RTP, and 
the training time of the RTP residents is included in the main rotation 
schedule for the entire program, the hospital must specifically 
highlight the names of the residents on the main rotation schedule, and 
highlight their urban and rural training locations, so that the MAC can 
easily identify which residents are training in the RTP, and be able to 
verify that over 50 percent of their training time is spent in a rural 
area.
     The number of FTE residents and the amount of time 
training in all 5 program years at both the urban and rural settings 
since establishment of a Rural Track Program (based on the rotation 
schedules), so that this information is available to the MAC when 
needed in auditing the accuracy of the RTP FTE cap limitation 
established by the hospital in the cost reporting period that coincides 
with or follows the start of the sixth program year of the RTP.
    We note that under the second bullet, we removed the phrase ``in 
the initial residency period'' and changed it to ``in the 5-year growth 
window'' because we believe that is what the commenter intended to say 
(we note the phrase ``initial residency period'' as defined at 42 CFR 
413.79(a) does not make sense in this context).
    Comment: A commenter requested that CMS confirm that a hospital 
that is physically located in an urban area but treated as rural for 
purposes of payment under the IPPS as implemented in Sec.  412.103 
would be considered urban for purposes of meeting the requirements for 
the RTT provision and would be eligible for both DGME and IME cap 
adjustments as an urban hospital should it successfully partner with a 
hospital physically located in a rural area.
    Response: Hospitals physically located in urban areas, but that are

[[Page 73455]]

reclassified to rural areas under 42 CFR 412.103 are treated as rural 
for IPPS payment purposes, which includes IME. This is because 42 CFR 
412.103 affects payments under section 1886(d) of the Act, which are 
the IPPS payments, and IME is an add-on to the teaching hospital's IPPS 
payment. However, 42 CFR 412.103 does not affect direct GME because 
direct GME is addressed under section 1886(h) of the Act. This means 
that such a hospital is rural for IME purposes, but it is urban for 
direct GME purposes (because it is still physically located in an urban 
area). Therefore, we are not confirming the commenter's statement that 
the urban hospital reclassified as rural under 42 CFR 412.103 would be 
considered urban for the purpose of meeting the RTP requirements. 
Rather, the hospital would be rural for IME and urban only for direct 
GME. We did not propose any changes to this policy. Thus, as long as an 
urban hospital retains its 412.103 reclassification, CMS would treat 
that hospital as rural for section 1886(d) purposes, which includes all 
ramifications to the IME adjustment.
    With regard to urban hospitals that are reclassified as rural under 
Sec.  412.103 and participate in RTPs, there are challenges associated 
with correctly determining the payment implications for an RTP that 
has, as its primary clinical site, or even as a participating site, a 
hospital that is rural for IME purposes, but is urban for direct GME 
purposes. For instance, in determining whether greater than 50 percent 
of residents' training time occurs in an urban area or a rural area, 
would the training that occurs in this hospital that is rural for IME 
but urban for direct GME be counted towards the urban portion or the 
rural portion? The answer is that for the purpose of qualifying for an 
adjustment to only the IME FTE limitation, the residents' training time 
spent in the urban hospital reclassified as rural under 42 CFR 412.103 
could count toward the rural portion of training time. However, the 
hospital would be in the awkward position of needing to send those same 
residents to train in a geographically rural participating site in 
order to separately meet the greater than 50 percent rural training 
requirement to qualify for the adjustment to the direct GME FTE 
limitation. Urban hospitals reclassified as rural under 42 CFR 412.103 
that wish to participate in RTPs may decide that it is preferable both 
from an educational and economic standpoint to synchronize the time 
spent in geographically rural participating sites, so that the IME and 
direct GME rotations would be synchronized as well. It would also be 
much easier to document the training time to the MAC for the purpose of 
receiving the IME and direct GME FTE limitation adjustment.
    Comment: A commenter noted that in the proposed rule, we stated 
that ``as with the general FTE resident caps, since the slots 
associated with the RTT FTE limitation are fungible, urban and rural 
hospitals with multiple RTT ``spokes'' may reduce the number of FTE 
residents training at one track and ``spoke'' in order to accommodate 
an increase in training and funding at another track and ``spoke'' (86 
FR 25514). The commenter requested clarification on how the 
``fungible'' aspect would work in the following example: Urban Hospital 
A and Rural Hospital 1 decide to adjust the RTT limitation partnership 
between the two hospitals by adding additional family medicine 
residents and reducing the number of internal medicine residents. The 
commenter requested confirmation that this single RTT cap limitation 
across two hospitals cross-training multiple specialties is what is 
intended by this example.
    The commenter also requested confirmation regarding a second 
example demonstrating the fungible nature of the rural track FTE 
limitation. The commenter noted that CMS includes a more formal example 
(Example 3, 86 FR 25518) later in the preamble. In Example 3, which 
builds on Example 1, Urban Hospital forms a second rural training track 
in internal medicine with ``Second Rural Hospital.'' According to 
Example 3, Urban Hospital's first rural track FTE limitation and second 
rural track FTE limitation are added together to form a single rural 
track FTE limitation for that particular specialty (internal medicine). 
CMS includes a note that the ``second rural track FTE limitation is 
added to Second Rural Hospital's first rural track FTE limitation for a 
total rural track FTE limitation of 6.48 (3.24 + 3.24)'' (emphasis by 
CMS; 86 FR 25519). However, there is no indication in the earlier part 
of Example 3 of the origin of Second Rural Hospital's first rural track 
FTE limitation, and in particular whether it came from the same 
specialty or a different specialty. The commenter believed the intent 
is to demonstrate that Second Rural Hospital's first rural track FTE 
limitation was in a different specialty (not internal medicine), and 
the two distinct specialty rural track FTE limitations get added 
together to, again, form a single RTT cap limitation that was created 
via multiple specialties. The commenter requested confirmation that 
this single RTT cap limitation for Second Rural Hospital across 
multiple specialties is what is intended by this example.
    Response: Regarding the first example, we partially confirm the 
commenter's general understanding, that if Urban Hospital A and Rural 
Hospital 1 receive RTP cap limitations for both family medicine and 
internal medicine, the two FTE cap limitations calculated as a result 
of each respective specialty may be added for a total RTP cap 
limitation at each respective hospital, not across both hospitals. 
Then, within each respective hospital's total RTP FTE cap limitation, 
the actual number of residents in each RTP may be reduced in one 
specialty, and increased in another specialty. For example, if a 
hospital has a total RTP FTE cap limitation of 6, consisting of 3 from 
a family medicine RTP, and 3 from an internal medicine RTP, the 
hospital could choose to reduce the family medicine RTP to 2 FTEs, and 
increase the internal medicine RTP to 4 FTEs, while still staying 
within the total RTP FTE cap limitation of 6. However, we disagree with 
the commenter's belief that a ``single RTT cap limitation across two 
hospitals cross-training multiple specialties'' is permissible. There 
is no ``single RTP cap limitation across two hospitals.'' Rather, each 
hospital, whether urban or rural, has its own IME and direct GME RTP 
FTE limitations; we are not creating Medicare GME affiliation 
agreements specific to sharing RTP FTE limitations. We note that, as 
with regular FTE caps, hospitals are free to increase or decrease FTE 
residents in any specialty at any location, but Medicare would only pay 
each hospital for no more FTEs than the amount in their RTP FTE 
limitations.
    Regarding the commenter's second request for confirmation 
referencing Example 3 on page 25518 and 25519 of the proposed rule, we 
have reviewed this Example 3, and realize that we made an error. As the 
commenter notes, Example 3 does build on Example 1. Urban Hospital 
forms a second rural track FTE limitation in internal medicine with 
``Second Rural Hospital.'' According to Example 3, Step 4, Urban 
Hospital's first rural track FTE limitation and second rural track FTE 
limitation are added together to form a single rural track FTE 
limitation for that particular specialty (internal medicine). CMS 
includes a note that the ``second rural track FTE limitation is added 
to Second Rural Hospital's first rural track FTE limitation for a total 
rural track FTE limitation of 6.48 (3.24 + 3.24)'' (emphasis by CMS; 86 
FR 25519). However, that is incorrect, because Second Rural Hospital 
had no previous

[[Page 73456]]

rural track FTE limitation (it was First Rural Hospital in Example 1 
that already had a rural track FTE limitation of 3.24, but First Rural 
Hospital is NOT part of Example 3; rather, Second Rural Hospital is at 
issue, and in fact is just receiving a rural track FTE limitation of 
only 3.24 for the first time). It is Urban Hospital that, under Example 
3, has two rural track FTE limitations which are added together to form 
a total rural track FTE limitation for Urban Hospital of 5.52 (2.76 + 
2.76). The intent of this Example 3 was to show how the limitations are 
calculated when ``Urban Hospital internal medicine ``hub'' adds another 
``internal medicine RTT `spoke' '' ((86 FR 25518) or, in terms used in 
this final rule with comment period, urban primary clinical site added 
a second rural hospital participating site but for the same specialty 
program). We are rewriting Step 4 of Example 3 in this final rule with 
comment period as follows:
    Step 4: Second Rural Hospital's cap adjustment is based on the 
ratio of training at Rural Hospital and Rural Clinic over all 5 years 
to the total training that is occurring at all sites over all 5 years: 
6 x [12.9/(24)] = 3.24. 2.76 + 3.24 = 6.0; therefore, the total cap 
assignment does not exceed the total number of accredited slots. Urban 
Hospital's rural track FTE limitation is 2.76. This second rural track 
FTE limitation is added to Urban Hospital's first rural track FTE 
limitation for a total rural track FTE limitation of 5.52 (2.76 + 
2.76). Second Rural Hospital's FTE cap adjustment is 3.24 (we note that 
Second Rural Hospital does not have a previous RTP FTE limitation). We 
note that this calculation is done separately for IME and direct GME 
caps respectively per 42 CFR 412.105(f)(1)(x) for IME and 42 CFR 
413.79(k) for direct GME. Also note that during these 5 program years, 
the hospitals exclude the FTE residents from the 3-year rolling average 
calculation and the cap on the IME IRB ratio on their Medicare cost 
reports.
    At this point, Urban Hospital has a RTP FTE limitation of 5.52, 
while First Rural Hospital from Example 1 has a RTP FTE limitation of 
4.71, and Second Rural Hospital from revised Example 3 has a RTP FTE 
limitation of 3.24. Each hospital's RTP FTE limitations for IME and 
direct GME respectively belong to each hospital, and are derived from a 
single specialty, internal medicine. Thus, there are not yet any slots 
to be fungible. The slots can be fungible when there is more than one 
specialty RTP. We can elaborate on Example 3 further, and imagine that 
Urban Hospital and First Rural Hospital decide to create a new RTP in 
pediatrics. Five years pass, and both Urban Hospital and First Rural 
Hospital receive RTP FTE limitations associated with the pediatrics 
RTP, and that Urban Hospital's RTP FTE limitation has increased from 
5.52 to 8.0, and First Rural Hospital's RTP FTE limitation increased 
from 3.24 to 6.0. After some more time, Urban Hospital and First Rural 
Hospital believe there is a need to expand their complement of 
residents training in their existing internal medicine RTP. However, 
since adjustments to RTP FTE limitations are not provided for 
expansions of existing programs, they decide to reduce the complement 
of pediatrics residents by 1.0, and increase the complement of internal 
medicine residents training in the RTP at Urban Hospital and First 
Rural Hospital by 1.0. Thus, both Urban Hospital and First Rural 
Hospital maintain training levels within their respective existing RTP 
FTE limitations. This demonstrates the fungible nature of each 
hospital's RTP FTE limitations, when there is more than one RTP 
specialty.
    Comment: A commenter requested that CMS comment on the following 
example. Urban Hospital A has an internal medicine RTT with two rural 
hospitals (Rural Hospital X and Rural Hospital Y). Urban Hospital A has 
an internal medicine RTT limitation of 5.0, which was established by 
expanding its internal medicine program by 15 rural track residents, 
training 5.0 FTE residents in Urban Hospital A and rotating 5.0 FTE 
residents to Rural Hospital X and 5.0 FTE residents to Rural Hospital 
Y. After the RTT cap for the program was established, Urban Hospital A 
decides to rotate more residents to Rural Hospital X (increase to 6.0) 
and fewer residents to Rural Hospital Y (decrease to 4.0). Rural 
Hospital X would be training above its internal medicine RTT 
limitation. Rural Hospital Y would be training below its internal 
medicine RTT limitation. The commenter believed that Urban Hospital A 
would retain its internal medicine RTT limitation of 5.0, even if the 
number of residents training in Rural Hospital X and Rural Hospital Y 
changed. The commenter also believed that Rural Hospital X and Rural 
Hospital Y could form an affiliated group and aggregate their FTE caps 
such that Rural Hospital X raises its FTE cap by 1.0 and Rural Hospital 
Y lowers its FTE cap by 1.0 to accommodate Urban Hospital A's rotation 
change. The commenter requested confirmation that an urban hospital's 
RTT cap limitation for a single specialty would not change, even if its 
spokes altered the amount of training occurring at each spoke hospital, 
and that the spoke hospitals may form a Medicare affiliated group 
agreement to share rural track FTE limitation ``space.''
    Response: In the situation where the FTEs at the Urban Hospital's 
portion of the RTP do not change, but there is a change at the Rural 
Hospitals, such that there is an increase of FTEs at one Rural Hospital 
with a decrease at another Rural Hospital, we agree that Urban 
Hospital's RTP FTE limitation and payment would not change, because it 
is still sending the same amount of FTEs to a rural area for greater 
than 50 percent of the program. However, payment to the Rural Hospitals 
would change. Rural Hospital X would be training in excess of its RTP 
FTE limitation, and would not be paid for the amount of FTEs in excess 
of its RTP FTE limitation. While Rural Hospital Y would now have 
``room'' under its RTP FTE limitation, it would receive payment only 
for the number of FTEs in the RTP it trains. As we mentioned 
previously, effective October 1, 2022, we are not permitting the 
formation of Medicare GME affiliated groups for the purpose of 
aggregating and cross-training RTP FTE limitations. First, we believe 
Medicare GME affiliated groups for RTPs are premature at this point, as 
only starting October 1, 2022 would hospitals have the first 
opportunity to add additional participating sites. Subsequently, there 
would be the 5-year cap building period in which Medicare GME 
affiliations are not permitted, even under existing Medicare GME 
affiliation agreement rules (42 CFR 413.79(f)). Second, before we 
create Medicare GME affiliation agreements unique to RTPs, we believe 
it would be best to first modify the Medicare cost report form to add 
spaces for the hospitals to indicate the number of any additional RTP 
FTEs, and the caps applicable to those FTEs. We also wish to assess 
flexibility within a hospital's own total RTP FTE limitation, before 
sharing those slots with other hospitals. We would need to be vigilant 
to ensure that the RTP FTE limitations are not comingled with regular 
FTE cap adjustments currently used in Medicare GME affiliation 
agreements. Therefore, we believe it is best to reassess allowing 
Medicare GME affiliation agreements for RTP FTE limitations at some 
point in the future.
    Comment: A commenter noted that CMS stated in the proposed rule 
that RTTs will be prospectively exempt from the rolling average ``for 
RTTs started in cost reporting periods beginning on or after October 1, 
2022'' (86 FR 25515). Several commenters believe this effective date 
will adversely impact

[[Page 73457]]

many programs just developed with HRSA funding this past 2 years, and 
special consideration should be given for 7 programs expected to begin 
July 1, 2022. The commenters recommended that the effective date should 
be aligned with the start of the academic year, so that the rolling 
average should instead be ``effective for RTTs starting in Academic 
Year 2022-23 (July 1, 2022) and beginning with their cost reports 
starting on or after October 1, 2022. . . .'' Another commenter 
suggested that FTEs in RTTs be prorated such that the rolling average 
would not apply for portions of cost reporting periods on or after 
October 1, 2022.
    Response: First, we acknowledge an error that we made in the 
proposed rule with regard to the effective date of the exemption from 
the rolling average. That is, a commenter noted that CMS stated in the 
proposed rule that RTTs will be prospectively exempt from the rolling 
average ``for RTTs started in cost reporting periods beginning on or 
after October 1, 2022'' (emphasis added, 86 FR 25515). In fact, section 
127 of the CAA states ``for cost reporting periods beginning on or 
after October 1, 2022 . . .;'' the law does not state that for RTTs 
``started in'' cost reporting periods beginning on or after October 1, 
2022. This means that even for RTTs started prior to October 1, 2022, 
so long as the urban hospital and rural hospital are within the 5-year 
growth window for FTE residents participating in the RTT, the earliest 
a hospital can first benefit from the rolling average exemption is a 
hospital's first cost reporting period beginning on or after October 1, 
2022. We also note that the law changes the heading at section 
1886(h)(4)(H)(iv)(I) to be ``cost reporting periods beginning before 
October 1, 2022,''; the statutory effective date is explicit. We cannot 
allow hospitals to prorate and exclude FTEs from the rolling average 
for the portion of the cost reporting period that occurs after October 
1, 2022, because the law does not say ``for portions of cost reporting 
periods on or after October 1, 2022.'' The law also does not specify 
that special consideration be given to programs with a start date of 
July 1, 2022. We understand any disappointment related to waiting for 
the rolling average exemption in the first cost reporting period 
starting on or after October 1, 2022, but we cannot alter this 
statutory effective date. Therefore, new programs started on July 1, 
2022 would still be subject to the rolling average for the cost 
reporting period that started prior to October 1, 2022. Only effective 
with a hospital's cost reporting period starting on or after October 1, 
2022 would the new rules regarding not needing separate accreditation 
for the RTT or exemption from the rolling average apply.
    Comment: A commenter pointed out that CMS uses the authority within 
section 1886(d)(5)(B)(viii) of the Act, which specifies ``[r]ules 
similar to the rules of subsection (h)(4)(H) shall apply for purposes 
of clauses (v) and (vi)'' to exempt new teaching hospitals from being 
held to the IME intern and resident-to-bed (IRB) ratio cap during the 
cap-building period. Since section 1886(d)(5)(B)(vi)(I) is the part of 
the statute that imposes the IRB ratio cap, the commenter believes that 
CMS has authority under section 1886(d)(5)(B)(viii) to also grant an 
exemption to RTTs from the IRB ratio cap during their cap-building 
windows and should exercise its authority to do so.
    Response: We agree that urban and rural hospitals within a 5-year 
cap building period for an RTP would not apply the IME IRB ratio cap 
during the cost reporting periods prior to the beginning of the 
applicable hospital's cost reporting period that coincides with or 
follows the start of the sixth program year of each RTP. The commenter 
refers to section 1886(h)(4)(H) of the Act, called ``Special rules for 
application of subparagraphs (F) and (G).'' Subparagraph (F) is the FTE 
resident cap for direct GME, and subparagraph (G) refers to the 3-year 
rolling average for direct GME. Section 1886(h)(4)(H) provides the 
authority for CMS to exempt new teaching hospitals first establishing 
new programs from applying the FTE caps and the 3-year rolling average 
during the 5-year cap building period. Section 1886(h)(4)(H)(iv) 
provides the special authority for exemptions for RTPs. Similarly, on 
the IME side, section 1886(d)(5)(B)(viii) refers to subsection 
(h)(4)(H) in order to exempt new teaching hospitals first establishing 
new programs from applying the IME FTE cap (section 1886(d)(5)(B)(v)), 
the IME 3-year rolling average (section 1886(d)(5)(B)(vi)(I)), and the 
IME IRB ratio cap (section 1886(d)(5)(B)(vi)(II)). Thus, by specifying 
that rules similar to the rules of subsection 1886(h)(4)(H) shall 
apply, the statute exempts RTPs within their 5-year cap building period 
from application of the FTE caps, the 3-year rolling average for IME 
and direct GME, and effective for cost reporting periods beginning on 
or after October 1, 2022, the IRB ratio cap for IME as well.
    Comment: A commenter expressed concern regarding the implementation 
of a new OMB definition of non-metropolitan (that is, `rural' and `not 
urban', (micropolitan = <100,000 population)), and how it may impact 
RTPs. The commenter suggested CMS outline a policy that covers RTPs and 
changes to CBSAs that inevitably occur every census from population 
change.
    Response: Currently, CMS has made no proposals to adopt such OMB 
changes. If and when CMS does propose changes similar to those proposed 
by OMB, we would address their ramifications in proposed rulemaking at 
the appropriate time. In the meantime, we refer readers to existing 
policy regarding changes resulting from census data; see 42 CFR 
413.79(k)(7), implemented in the August 22, 2014 IPPS final rule (79 FR 
50111 through 50117).
    Comment: Some commenters encouraged CMS to include RTT programs 
within consortium agreements with urban hospitals for inpatient 
rotations and FQHCs for outpatient clinics, as this would provide 
needed physicians for FQHCs with waiting lists of untreated patients, 
and would foster the training of primary care physicians.
    Response: CMS does not have any specific rules regarding RTPs and 
inclusion or exclusion within consortium agreements, so we are unclear 
as to why CMS would need to do so now. To the extent that there are 
FQHCs located in rural areas, RTP training time spent in such FQHCs 
would be counted in the portion of the RTP that is in the rural area.
h. Final Policies and Changes to the Regulations Text
    We are finalizing our proposed policies with minor adjustments but 
no substantive policy changes. We are also finalizing changes to the 
regulations text for IME at 42 CFR 412.105 to mirror regulations text 
changes for direct GME, and we are finalizing changes to the direct GME 
regulations as follows:
     We are adding a new definition of Rural Track Program at 
42 CFR 413.75(b).
     We are finalizing the modification to the definition of 
Rural Track FTE limitation at 42 CFR 413.75(b) to add ``or rural 
hospital''.
     We removed the requirement at 42 CFR 413.79(d)(7) that FTE 
residents in the RTP are included in the 3-year rolling average during 
the 5-year cap building window, and at 42 CFR 412.105(a)(1)(i), we are 
stating that in cost reporting periods beginning on or after October 1, 
2022, FTE residents in the RTP are exempt from the cap on the IRB ratio 
during the 5-year cap building window.
     We are finalizing various changes throughout the 
regulations text at 42

[[Page 73458]]

CFR 413.79(k) ``Residents training in rural track programs.''
    5. Implementation of Section 131 of the CAA; Addressing Adjustment 
of Low Per Resident Amounts (Direct GME) and Low FTE Resident Caps 
(Direct GME and IME) for Certain Hospitals
    Section 131 of the CAA provides us with the opportunity to reset 
the low or zero direct GME per resident amounts of certain hospitals, 
and to reset the low IME and direct GME FTE resident caps of certain 
hospitals. Regarding direct GME PRAs, section 1886(h)(2) of the Act 
sets forth a methodology for the determination of a hospital-specific 
base-period PRA that is calculated by dividing a hospital's allowable 
direct costs of GME in a base period by its number of full-time 
equivalent (FTE) residents in the base period. The base period is, for 
most hospitals, the hospital's cost reporting period beginning in FY 
1984 (that is, October 1, 1983 through September 30, 1984). For 
hospitals that became teaching hospitals after 1984, section 
1886(h)(2)(F) of the Act states that ``the Secretary shall, for the 
first such period for which it has such a residency training program 
and is participating under this title, provide for such approved FTE 
resident amount as the Secretary determines to be appropriate, based on 
approved FTE resident amounts for comparable programs.'' The 
regulations at 42 CFR 413.77(e)(1) implement this provision, stating 
that the per resident amount is based on the lower of the amount 
specified in paragraph (e)(1)(i) or paragraph (e)(1)(ii) of that 
section, subject to the provisions of paragraph (e)(1)(iii) of this 
section. In other words, the new teaching hospital's PRA generally will 
be based on the lower of its actual GME costs per FTE in its base 
period, or the weighted average PRA of existing teaching hospitals 
located in the same core-based statistical area (CBSA) as the new 
teaching hospital. Under section 1886(h)(2)(D) of the Act, once the PRA 
is established in a base period, no changes are made to it; it is only 
updated for inflation in each subsequent year.
    The calculations of both direct GME payments and the IME payment 
adjustment are affected by the number of FTE residents that a hospital 
is allowed to count. Congress, through the Balanced Budget Act of 1997 
(Pub. L. 105-33), established a limit on the number of allopathic and 
osteopathic residents that a hospital may include in its FTE resident 
count for direct GME and IME payment purposes. Under section 
1886(h)(4)(F) of the Act, for cost reporting periods beginning on or 
after October 1, 1997, a hospital's unweighted FTE count of residents 
for purposes of direct GME may not exceed the hospital's unweighted FTE 
count for direct GME in its most recent cost reporting period ending on 
or before December 31, 1996. Under section 1886(d)(5)(B)(v) of the Act, 
a similar limit based on the FTE count for IME during that cost 
reporting period is applied, effective for discharges occurring on or 
after October 1, 1997.
a. Background on Establishment of PRAs and FTE Resident Caps for 
Hospitals Hosting Residency Training
    Section 1886(h)(2)(F) of the Act does not require a hospital to 
incur costs, be the program sponsor, or train a certain minimum number 
of FTE residents, in order to become a teaching hospital. Accordingly, 
under the regulations at 42 CFR 415.152, ``Teaching hospital'' is 
defined as a hospital engaged in an approved GME residency program in 
medicine, osteopathy, dentistry, or podiatry. Our historical policy is 
that if a hospital has residents that are training in an approved GME 
residency program(s), and if the training is according to a planned and 
regular schedule (that is, not spontaneous or random), then we consider 
the hospital to be a teaching hospital, even if--
     It is not incurring the costs of the residents' salaries 
and fringe benefits,
     It is not the sponsor of the program,
     It is only training a very small number of FTE residents, 
and
     The program in which the residents are training does not 
have to be a ``new'' program under Medicare rules.
    As discussed in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 
25520), in the past, a number of hospitals have found themselves in the 
situation of establishment of a low PRA, when they served as a training 
site for only small numbers of residents from programs sponsored by a 
medical school or another hospital. In many cases, these hospitals did 
not incur any salaries for those residents and may have incurred only 
insignificant overhead costs associated with the residents' presence at 
their facilities and, therefore, their PRAs were either very low or $0. 
Such low PRAs preclude meaningful direct GME payment in the future if 
these hospitals expand their training of residents and incur 
significant costs associated with the training. Section 131(a) of the 
CAA amends section 1886(h)(2)(F) of the Act to direct the Secretary, 
for such hospitals with such extremely low or $0 PRAs that meet certain 
criteria, to establish new PRAs using the methodology described in 42 
CFR 413.77(e) if the hospital trains resident(s) in a cost reporting 
period beginning on or after its enactment (December 27, 2020) and 
before the date that is 5 years after enactment (December 26, 2025). In 
accordance with 42 CFR 413.77(e), a new teaching hospital's PRA is 
based on the lower of its actual GME costs per FTE during a specific 
base year, or the weighted average PRA of existing teaching hospitals 
located in the same core- based statistical area (CBSA) as the new 
teaching hospital. Similar to the establishment of low PRAs, in the 
past, a number of hospitals have found themselves in the situation of 
establishing low (but greater than zero) direct GME and IME FTE caps 
when they served as training sites for only small numbers of residents. 
The statute does not require that a hospital train a certain minimum 
number of FTE residents in order to establish permanent caps. Hospitals 
wishing subsequently to participate in training residents in a 
significant manner were precluded by low FTE resident caps from 
receiving meaningful IME and direct GME payments. Section 131(b) of the 
CAA addresses this problem by amending section 1886(h)(4)(H)(i) to add 
new subclauses (III) and (IV) to direct the Secretary, for hospitals 
that meet certain criteria and that have very low FTE resident caps, to 
``adjust''--that is, redetermine--those caps if the Secretary 
determines that the hospital begins training residents in a program 
year beginning on or after enactment (December 27, 2020) and before 5 
years after enactment (December 26, 2025).
b. Hospitals Qualifying To Reset Their PRAs
    Section 131(a) of the CAA also amends section 1886(h)(2)(F) of the 
Act to add a new clause (iii) to describe the categories of hospitals 
that qualify to receive a replacement PRA. For ease of reference, we 
will refer to these hospitals as Category A and Category B. As 
discussed in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25520), a 
Category A Hospital is one that, as of the date of enactment (December 
27, 2020), has a PRA that was established based on less than 1.0 FTE in 
any cost reporting period beginning before October 1, 1997. Typically, 
a Category A hospital is one that trained less than 1.0 FTE in its most 
recent cost reporting period ending on or before December 31, 1996, and 
received a very low or $0 PRA. A Category B Hospital is one that, as of 
the date of enactment (December 27, 2020), has a PRA that was 
established based on training of no more than 3.0 FTEs in any cost 
reporting period beginning on or

[[Page 73459]]

after October 1, 1997, and before the date of enactment (December 27, 
2020). This new subclause provides that the Secretary shall in lieu of 
these low PRAs, establish a new PRA in accordance with the process 
described in Sec.  413.77(e), for each such hospital if the hospital 
trains at least 1.0 FTE (in the case of a Category A hospital) or more 
than 3.0 FTEs (in the case of a Category B hospital) (emphasis added). 
The recalculation period begins on December 27, 2020, and ends 5 years 
later.
    In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25520 through 
25521), we proposed that to redetermine the PRA, the training occurring 
at a Category A Hospital or a Category B Hospital need not necessarily 
be training residents in a new program; the residents may be in either 
an approved program that is ``new'' for Medicare IME and direct GME 
purposes, or may be in an existing approved program. This is because 
the new subclause does not state that the training be in a ``new'' 
program, and furthermore, CMS's current policy is that for a hospital 
which starts training residents for the first time, the PRA can be 
established based on the training of residents in either a ``new'' 
approved program, or an existing approved program. However, for a 
Category A Hospital, we proposed not to reset its PRA until we 
determine that the Category A Hospital trains at least 1.0 FTE, and 
that training must occur in a cost reporting period beginning on or 
after December 27, 2020 (date of enactment) and before December 26, 
2025 (5 years after enactment). Similarly, for a Category B Hospital, 
we proposed not to reset its PRA until we determine that the Category B 
Hospital trains more than 3.0 FTEs, and that training must occur in a 
cost reporting period beginning on or after December 27, 2020 (date of 
enactment) and before December 26, 2025 (5 years after enactment). 
Because new section 1886(h)(2)(F)(iii) uses the word ``trains'', we 
interpret this to require ``continuous'' training, and therefore, we 
proposed that for both Category A and B Hospitals, it is not relevant 
whether they may have trained at least 1.0 FTE or more than 3.0 FTEs in 
a cost reporting period or periods prior to December 27, 2020. While we 
proposed that such previous training of at least 1.0 FTE or greater 
than 3.0 FTEs would not preclude resetting of a Category A Hospital's 
PRA or a Category B Hospital's PRA, we proposed that the relevant 
factor in determining when to reset their PRAs would be if and when the 
hospital trains the requisite amount of FTE residents in a cost 
reporting period beginning on or after December 27, 2020 (date of 
enactment) and 5 years after (December 26, 2025). For example, a 
Category A Hospital trains 6.05 FTEs in its cost reporting period 
beginning on January 1, 2020. The Category A Hospital trains 5.95 FTEs 
in its cost reporting period beginning on January 1, 2021. We proposed 
that we would reset this Category A Hospital's PRA effective with its 
cost reporting period beginning on January 1, 2021. In a second 
example, a Category B Hospital trains 6.05 FTEs in its cost reporting 
period beginning on January 1, 2020. The Category B Hospital trains 2.0 
FTEs in its cost reporting period beginning on January 1, 2021. Then 
the Category B Hospital trains 3.25 FTE in its cost reporting period 
beginning on January 1, 2022. We proposed that we would reset this 
Category B Hospital's PRA effective with its cost reporting period 
beginning on January 1, 2022. Once reset, in the absence of additional 
legislation, the PRAs for either a Category A Hospital or a Category B 
Hospital are permanent, subject to annual inflation updates under 42 
CFR 413.77(c)(1).
    We refer readers to section II.B.5.f. of this final rule with 
comment period for a summary of the policies we are finalizing after 
consideration of public comments, on redetermination of PRAs provided 
under section 131 of the CAA.
c. Calculating the Replacement PRA and Cost Reporting Requirements
    Consistent with the new statute, in the FY 2022 IPPS/LTCH PPS 
proposed rule (86 FR 25521), we proposed to calculate the replacement 
PRA using the existing regulations in place at 42 CFR 413.77(e). First, 
we proposed to use as the PRA base period the first cost reporting 
period beginning on or after December 27, 2020 in which either the 
Category A Hospital or Category B Hospital trains their requisite 
threshold FTEs; that is, at least 1.0 FTE is trained at Category A 
Hospital, and more than 3.0 FTEs are trained at Category B Hospital. 
Then, as 42 CFR 413.77(e)(1) states, we proposed to amend the 
regulations to add a new Sec.  413.77(e)(1)(iv) to establish the 
replacement PRA as the LOWER OF--
     The hospital's actual cost per resident incurred in 
connection with the GME program(s) based on the cost and resident data 
from the hospital's replacement base year cost reporting period; and
     The updated weighted mean value of per resident amounts of 
all hospitals located in the same geographic wage area is calculated 
using all per resident amounts (including primary care and obstetrics 
and gynecology and nonprimary care) and FTE resident counts from the 
most recently settled cost reports of those teaching hospitals.
     If there are fewer than three existing teaching hospitals 
with per resident amounts that can be used to calculate the weighted 
mean value per resident amount, for base periods beginning on or after 
October 1, 1997, the per resident amount equals the updated weighted 
mean value of per resident amounts of all hospitals located in the same 
census region as that term is used in subpart D of part 412 of this 
subchapter.
    We will issue instructions to the MACs and to hospitals to provide 
for an orderly process of request and review for the purpose of 
receiving replacement PRAs. When the hospital trained the requisite 
number of FTEs in a particular cost reporting period, upon submission 
of that cost report, the hospital will notify its MAC that it believes 
a replacement PRA can be determined. The MACs of the Category A and 
Category B Hospitals will review the GME costs and FTE counts reported 
in the Medicare cost report, rotation schedules supporting the FTE 
counts, etc. to determine at what point the requisite threshold of FTE 
residents are trained. As required under 42 CFR 413.20 and 413.24, 
hospitals must provide sufficient documentation to ensure proper 
payment (for GME, this includes, but is not limited to, rotation 
schedules and training agreements). We note that newly amended section 
1886(h)(2)(F) of Act makes two points regarding cost reporting. First, 
clause 1886(h)(2)(F)(ii) states that in the case of a hospital that 
trains residents and has not entered into a GME affiliation agreement 
(as defined by the Secretary for purposes of paragraph (4)(H)(ii)), on 
or after the date of enactment of this clause, the Secretary shall not 
establish an FTE resident amount until such time as the Secretary 
determines that the hospital has trained as least 1.0 FTE resident in 
an approved medical residency training program in a cost reporting 
period. Medicare GME affiliation agreements, as implemented in the 
regulations at 42 CFR 413.79(f), permit teaching hospitals that cross 
train residents in the same programs to aggregate and share their FTE 
resident caps to facilitate movement of residents and reimbursement for 
that training. Entering into a Medicare GME affiliation agreement is a 
voluntary and conscious action on the part of a hospital. Therefore, 
even if a hospital trains less than 1.0 FTE (and this would be any 
hospital, not just a Category A Hospital or a Category B Hospital), but 
has entered into a Medicare GME affiliation

[[Page 73460]]

agreement for that training, we stated in the proposed rule that we 
believe the law is directing the Secretary to establish a PRA for that 
hospital. Thus, effective for a cost reporting period beginning on or 
after enactment (December 27, 2020), we proposed to establish a PRA in 
the instance where a hospital trains less than 1.0 FTE and that 
hospital has entered into a Medicare GME affiliation agreement for that 
training. However, in the instance where a hospital did not enter into 
a Medicare GME affiliation agreement for that training, we proposed to 
establish a PRA only when a hospital trains at least 1.0 FTE. We 
proposed to amend the regulations at 42 CFR 413.79(f) to reflect this 
new provision.
    Second, section 1886(h)(2)(F)(iv) states that for purposes of 
carrying out this subparagraph for cost reporting periods beginning on 
or after the date of the enactment of this clause, a hospital shall 
report full-time equivalent residents on its cost report for a cost 
reporting period if the hospital trains at least 1.0 full-time 
equivalent resident in an approved medical resident training program or 
programs in such period. Accordingly, in the FY 2022 IPPS/LTCH PPS 
proposed rule (86 FR 25521 through 25522), we proposed that both a 
Category A Hospital and a Category B Hospital must accurately report 
FTEs on the IME Worksheet E, Part A and the direct GME Worksheet E-4 of 
CMS-Form-2552-10, when either category of hospital trains at least 1.0 
FTE on or after December 27, 2020. We further proposed that all 
hospitals, even if they do not classify as Category A or Category B 
Hospitals, must enter the FTE counts on Worksheets E, Part A and E-4 of 
the CMS-Form-2552-10, for cost reporting periods during which the 
hospital trains at least 1.0 FTE. In addition, the hospital must 
provide the information required by the Interns and Residents 
Information System (IRIS) software for a cost report that contains at 
least 1.0 FTE on Worksheets E, Part A (IME) and E-4 (direct GME). We 
proposed this rule regardless of whether or not such hospital incurs 
the costs or is the program sponsor, because we believe that a PRA is 
established when a hospital trains at least 1.0 FTE (or, if there is a 
Medicare GME affiliation agreement, even less than 1.0 FTE). We 
proposed to amend the regulations at 42 CFR 413.78(b), with a cross-
reference to 42 CFR 413.77(e) and 413.79(f), to require that effective 
for a cost reporting period beginning on or after December 27, 2020, a 
hospital must report FTE residents on its Medicare cost report for a 
cost reporting period if: (1) In the absence of a Medicare GME 
affiliation agreement, a hospital trains at least 1.0 FTE in an 
approved program or programs; or (2) if there is a Medicare GME 
affiliation agreement, a hospital trains less than 1.0 FTE in an 
approved program or programs. As we stated in the proposed rule, this 
proposed regulation would put hospitals on notice that they would 
establish a PRA when they report FTE residents on their Medicare cost 
report beginning on or after December 27, 2020.
    On a technical note, newly added clause1886(h)(2)(F)(v) states that 
as appropriate, the Secretary may consider information from any cost 
reporting period necessary to establish a new FTE resident amount. 
Keeping in mind the regulations regarding predicate facts at 42 CFR 
405.1885, our policy has been to refer, but not make changes, to a 
hospital's ``true'' base year under 42 CFR 413.77(e), even if that base 
year cost report is beyond the 3-year reopening rules. For example, if, 
in 2019, a MAC discovered that a hospital trained a small number of FTE 
residents in its 2005 cost reporting period, the MAC would use the 2005 
cost report and documentation to obtain direct GME costs (if any, or 
$0) and the FTE resident(s), determine a cost per FTE, and compare that 
to the 2005 weighted average PRA of the other teaching hospitals in the 
same CBSA, even though the 2005 cost report was beyond the 3-year 
reopening period. In accordance with 42 CFR 413.77(e), the MAC would 
establish the LOWER of the two amounts to be the hospital's base year 
PRA. In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25522), we 
proposed to continue to be consistent with our existing predicate fact 
regulations going forward, such that we would not reopen cost reports 
beyond their 3-year reopening period, but would refer to and use 
whatever contemporaneous documentation we would need to establish a 
PRA. However, because section 131 of the CAA directs the Secretary to 
replace a Category A Hospital's PRA or a Category B Hospital's PRA if 
the hospital trains at least 1.0 FTE or more than 3.0 FTEs in a cost 
reporting period beginning on or after such date of enactment and 
before the date that is 5 years after, we proposed to amend the 
regulations at 42 CFR 413.77(e) to use as the PRA base year for a 
Category A Hospital the cost reporting period beginning on or after 
December 27, 2020 and before December 26, 2025 in which that hospital 
trains at least 1.0 FTE, and for a Category B Hospital, the cost 
reporting period beginning on or after December 27, 2020 and before 
December 26, 2025 in which that hospital trains more than 3.0 FTEs. In 
determining whether a hospital trained the requisite thresholds of 1.0 
or more than 3.0 FTEs, we proposed not to round up; that is, an FTE 
count of 0.99 would not be rounded up to be at least 1.00 FTE. Rather, 
the FTE count would have to equal at least 1.00 without rounding 
applied. Similarly, an FTE count would have to add to be greater than 
3.00 without rounding rules applied.
d. Hospitals Qualifying To Reset Their FTE Resident Caps
    Section 131(b) of the CAA 2021 amends section 1886(h)(4)(H)(i) of 
the Act to add new subclauses (II) through (V) to describe the 
categories of hospitals that qualify to receive a replacement PRA. For 
ease of reference, we continue to refer to these hospitals as Category 
A and Category B. As explained in the FY 2022 IPPS/LTCH PPS proposed 
rule (86 FR 25522), a Category A Hospital is one that, as of the date 
of enactment (December 27, 2020), has an IME and/or direct GME FTE 
resident cap that was established based on less than 1.0 FTE in any 
cost reporting period beginning before October 1, 1997. Typically, a 
Category A hospital is one that did train less than 1.0 FTE in its most 
recent cost reporting period ending on or before December 31, 1996, and 
therefore, received FTE caps of less than 1.0 FTE (along with a very 
low or $0 PRA). A Category B Hospital is one that, as of the date of 
enactment (December 27, 2020), has an IME and/or direct GME FTE 
resident cap that was established based on training of no more than 3.0 
FTEs in any cost reporting period beginning on or after October 1, 
1997, and before the date of enactment (December 27, 2020). The new 
subparagraphs (III) and (IV) provide that the Secretary shall adjust 
the FTE resident cap in the manner applicable to a new approved medical 
residency training program, which under subparagraph (V), states that 
the adjustment to the FTE resident cap shall be made in a manner 
consistent with the methodology, as appropriate, in Sec.  413.79(e). 
The Secretary shall adjust the FTE resident caps if the hospital 
``begins training'' at least 1.0 FTE (in the case of Category A) or 
``begins training'' more than 3.0 FTEs (in the case of Category B) in a 
program year beginning on or after such date of enactment and before 
the date that is 5 years after such date of enactment (emphases added).
    Unlike our preceding proposal regarding resetting the PRAs of 
Category A and B Hospitals, where a training program does not 
necessarily need to be

[[Page 73461]]

new, in the case of resetting the FTE resident caps, we did propose 
that the FTE resident caps would only be reset when a Category A 
Hospital or Category B Hospital ``begins training'' FTE residents in a 
new residency program(s) (see our discussion of the definition of ``new 
program'' at 42 CFR 413.79(l) and 74 FR 43908 through 43917). 
Specifically, we emphasize that the new subparagraphs (III) and (IV) 
state that the Secretary shall adjust the FTE resident caps in the 
manner applicable to a new program if the Secretary determines the 
hospital ``begins training'' the requisite number of FTE residents 
(emphasis added). In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 
25522), we proposed that ``begins training'' means future training in a 
new program for the first time on or after enactment. We proposed that 
for both Category A and B Hospitals, it is not relevant whether they 
may have trained at least 1.0 FTE or more than 3.0 FTEs in a new 
program in a cost reporting period or periods prior to December 27, 
2020; rather, we proposed that the relevant factor in determining the 
timing of resetting their FTE resident caps would be if the hospital 
first begins training the requisite amount of FTE residents at some 
point in a cost reporting period beginning on or after December 27, 
2020 (date of enactment) and 5 years after (December 26, 2025). For 
example, a Category A Hospital trains 6.05 FTEs in a new program in its 
cost reporting period beginning on January 1, 2017. Category A Hospital 
trains 15.95 FTEs in its cost reporting period beginning on January 1, 
2021. We proposed that we would NOT reset this Category A Hospital's 
FTE resident caps effective with its cost reporting period beginning on 
January 1, 2021, because it first began training residents in a new 
program prior to its cost reporting period beginning on or after 
enactment, and continued to train FTE residents in the new program 
after enactment. Rather, in order to qualify for a replacement FTE 
resident cap, both a Category A Hospital and a Category B Hospital 
would have to wait to start training residents in a new program in a 
cost reporting period beginning on or after enactment; if they started 
training residents in a new program at some point prior to enactment, 
we proposed that they would not qualify to receive replacement FTE 
resident caps. For example, a Category A Hospital wanted to start 
training residents in a new program, but delayed doing so because it 
believed it could not support a new residency program with IME and 
direct GME FTE resident caps of less than 1.0. With the enactment of 
section 131 of the CAA, this Category A Hospital receives accreditation 
to start a new residency program, and begins to train at least 1.0 FTE 
resident in the new program on July 1, 2022. We proposed to replace the 
small FTE resident caps of this Category A Hospital with new FTE 
resident caps in accordance with the regulations for calculating FTE 
resident caps for new programs at 42 CFR 413.79(e). We proposed to 
apply the same policy for a Category B Hospital that waits to train 
more than 3.0 FTE residents in a new program in a cost reporting period 
on or after December 27, 2020.
e. Calculating the Replacement FTE Resident Caps and Cost Reporting 
Requirements
    Consistent with the new statutory provisions, in the FY 2022 IPPS/
LTCH PPS proposed rule (86 FR 25523), we proposed to calculate the 
replacement FTE resident caps using the existing regulations in place 
at 42 CFR 413.79(e)(1). First, we proposed to use the first program 
year of the 5-year cap building period in which either the Category A 
Hospital or Category B Hospital ``begins training'' their requisite 
threshold FTEs; that is, the program year beginning after December 27, 
2020 in which at least 1.0 FTE begins to train at Category A Hospital, 
and the program year beginning after December 27, 2020 in which more 
than 3.0 FTEs are trained at Category B Hospital. Then, as 42 CFR 
413.79(e)(1) states, we proposed to calculate the FTE resident caps 
based on the sum of the products of the highest number of FTE residents 
in any program year during the fifth year of the first new program's 
existence and the number of years in which residents are expected to 
complete the program based on the minimum accredited length for each 
type of program. The adjustment to each qualifying hospital's cap for 
new residency training program(s) would be equal to the sum of the 
products of--
     The highest total number of FTE residents trained in any 
program year during the fifth year of the first new program's existence 
at all of the hospitals to which the residents in the program rotate;
     The number of years in which residents are expected to 
complete the program, based on the minimum accredited length for each 
type of program.
     The ratio of the number of FTE residents in the new 
program that trained at the hospital over the entire 5-year period to 
the total number of FTE residents that trained at all hospitals over 
the entire 5-year period.
    We will issue instructions to the MACs and to hospitals to provide 
for an orderly process of request and review for the purpose of 
receiving replacement FTE resident caps. The MACs of the Category A and 
Category B Hospitals will review the FTEs reported in the Medicare cost 
reports, as well as rotation schedules, information regarding any 
nonprovider-site training, and accreditation information, etc.) to 
determine at what point the requisite threshold of FTE residents are 
trained. As required under 42 CFR 413.20 and 413.24, hospitals must 
provide sufficient documentation to ensure proper payment (for GME, 
this includes, but is not limited to, rotation schedules and training 
agreements, and ACGME accreditation information).
    Prospectively, consistent with new section 1886(h)(4)(H)(i)(II) of 
the Act, we proposed not to establish permanent FTE resident caps for 
hospitals training residents in new programs begun on or after December 
27, 2020, until we determine that in a cost reporting period beginning 
on or after December 27, 2020, the hospital trains at least 1.0 FTE in 
a new medical residency program. We proposed to amend the regulations 
at 42 CFR 413.79(e) to reflect this new provision. We proposed this for 
all hospitals that do not yet have caps triggered. Therefore, permanent 
FTE caps for new programs would no longer be triggered if the amount of 
FTEs being trained by a hospital in the new program equates to less 
than 1.0 FTE.
    As with the resetting of the PRAs, newly added section 
1886(h)(4)(H)(i)(V) states that as appropriate, the Secretary may 
consider information from any cost reporting period necessary to make 
such an adjustment to the limitation. Going forward, we proposed to 
continue to be consistent with our existing predicate fact regulations 
at 42 CFR 405.1885, such that we would not reopen cost reports beyond 
their 3-year reopening period, but would refer to and use whatever 
contemporaneous documentation we would need to establish the FTE 
resident caps.
    We invited comments on our proposals regarding resetting the 
applicable PRAs and FTE resident caps. Following are the comment 
summaries and our responses:
    Comment: Many commenters expressed support for our proposals for 
defining Category A and Category B hospitals and how we would reset PRA 
and cap.
    Response: We appreciate the commenters' support for our proposals.
    Comment: Several commenters were concerned with the CMS suggestion 
that Medicare Audit Contractors (MACs)

[[Page 73462]]

could use ``predicate facts'' to establish a new FTE resident amount, 
using whatever ``contemporaneous documentation we would need to 
establish a PRA'' or ``contemporaneous documentation we would need to 
establish the FTE resident caps.'' (p. 25522, 25524). This leads to 
confusion as to how and why CMS will decide which facts are predicate 
facts, and which ones are not. Commenters stated that hospitals may be 
discouraged from availing themselves of the opportunities set out in 
section 131 of the CAA if MACs may find records of past training that 
will leave them with an extremely low PRA or FTE cap. They requested 
clarification as to how CMS and the MACs will decide what predicate 
facts are relevant, as well as assurances that MACs will not be 
encouraged to search for predicate facts that may suppress hospitals' 
GME support from Medicare.
    Response: We believe the commenters misinterpreted the language in 
the proposed rule regarding ``predicate facts.'' In the proposed rule, 
we did not propose any new policy regarding predicate facts, nor did we 
propose any new review procedures that are different from already 
existing policy. In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 
25522), we merely proposed to ``continue to be consistent with our 
existing predicate fact regulations'' at 42 CFR 405.1885, under which 
our policy has been to refer, but not make changes, to a hospital's 
``true'' base year under 42 CFR 413.77(e), even if that base year cost 
report is beyond the 3-year reopening rules. . . . Going forward, we 
propose to continue to be consistent with our existing predicate fact 
regulations, such that we would not reopen cost report9s beyond their 
3-year reopening period, but would refer to and use whatever 
contemporaneous documentation we would need to establish a PRA'' 
(emphasis added). This means that the MACs are not hindered by the fact 
that a cost report is not reopenable, but instead have the flexibility 
to still consider documentation available from that time frame of that 
non-reopenable cost report. Accordingly, hospitals that believe they 
have PRAs set based on a small amount of FTEs, and/or have small FTE 
caps from a cost report prior to enactment more likely have nothing to 
lose, and would gain from providing contemporaneous documentation to 
the MAC for an assessment of its reset eligibility. If a hospital does 
not provide documentation and does not engage with the MAC at all, then 
it certainly would be left with a PRA or caps that it believes is 
``low''. The intent of section 131 of the CAA is to provide reset 
opportunities where there previously were none. Nevertheless, as with 
existing policy, documentation that hospitals provide to the MAC must 
meet sufficiency standards; newly added clause 1886(h)(2)(F)(v) does 
not include an exceptions language waiving otherwise standard 
documentation practices. In response to the following comments, we 
include more details on the types of documentation that we require or 
consider acceptable.
    Comment: Many commenters provided feedback regarding the review 
process CMS and the MACs would use to determine eligibility for PRA or 
FTE cap resets. Several commenters stated they believe the public 
should have an opportunity to comment on the process before it is 
finalized by CMS, perhaps even via an interim final rule with comment 
period. Commenters also expressed concerns and confusion as to which 
hospitals will be eligible for PRA or cap resets, and that hospitals 
that do meet the statutory criteria could be ``overlooked'' by the MACs 
for possible eligibility for a reset. Some commenters urged CMS to 
publish a list of all hospitals that may have inadvertently triggered a 
PRA or caps. The following are some scenarios that the commenters 
posited:
     What if a hospital did not report a small number of FTE 
residents on its cost report because it was under the impression that 
it had not established a new residency program and was not eligible for 
Medicare DGME or IME reimbursement, and the hospital has received a 
notice of provider reimbursement for that cost reporting period?
     How would CMS treat a hospital that did not report its low 
number of FTE residents on an old cost report because it did not 
believe it was eligible for DGME or IME reimbursement; or that did not 
report residents but if they had, would have a $0 or minimal PRA and 
low FTE cap?
     What does it mean to ``have'' a PRA or ``have'' FTE caps 
``as of enactment?''
     How would CMS treat hospitals that trained a resident but 
never reported FTEs on their cost reports?
     What if a hospital triggered a PRA but the MAC did not 
determine and finalize a PRA on a settled cost report?
     What if a hospital's cap building period was triggered 
prior to enactment, but the 5-year window closed in a cost report after 
enactment?
     What type of documentation would CMS require, given that 
the statutory provision stretches back to determinations made in 1996, 
and contemporaneous documentation from the time period of the cost 
report may be difficult to obtain?
    Response: We acknowledge there are complexities in implementing 
section 131 of the CAA, and believe the commenters raised fair points 
in their comments. In general, the primary challenges we and the MACs 
face in implementing section 131 of the CAA are managing myriads of 
review requests in an efficient and timely manner, competing MAC 
priorities for review, and dealing with old documentation, most likely 
from cost reports that are no longer within the 3-year reopening 
period. Our final policies try to balance these considerations. We 
believe that it is incumbent on a hospital to approach its MAC to 
request a PRA or cap reset; we are not instructing MACs to reach out to 
individual hospitals. We also distinguish between cost reports that are 
no longer reopenable, cost reports that have been settled but are still 
open or reopenable, and cost reports that have not yet been settled.

 Settled But Open or Reopenable Cost Reports

    First, in this final rule with comment period, to manage the volume 
of review requests, we are finalizing policies related to PRA and FTE 
cap determinations from cost reports that have been settled but are 
still open or reopenable, and cost reports that have not yet been 
settled, with one exception related to the 1996 FTE caps (explained in 
greater detail in this section). We believe the MACs' workload will be 
considerable from these relatively more recent categories of cost 
reports alone, and in order to spread the workload, we will instruct 
MACs to first only accept PRA or FTE cap review requests from hospitals 
where the base year or cap setting cost report is open or reopenable.
    We are seeking comment on how to handle reviews of PRAs or FTE caps 
from cost reports beyond the 3-year reopening period (with the 
exception of Category A and Category B hospitals that agree with the 
HCRIS posting, as discussed below).
(1) Use of HCRIS To Assist in Determining Reset Status
    On the points raised by commenters about which hospitals will be 
eligible for PRA or cap resets, and that CMS should publish a list of 
hospitals and their status, we will post a file on the CMS website 
containing an extract of the HCRIS cost report worksheets on which the 
FTE counts, caps, and PRAs, if any, would have been reported, starting 
with cost reports beginning in 1995 (although as we stated previously,

[[Page 73463]]

we are instructing MACs to only first accept reviews of PRAs or FTE 
caps from open or reopenable cost reports, with the exception of a 
Category A hospital or a Category B hospital that agrees with what is/
is not reported in the HCRIS posting). This file will be made available 
on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/IPPS-Regulations-and-Notices. Click 
on the link on the left side of the screen associated with the 
appropriate final rule home page or ``Acute Inpatient--Files for 
Download.'' This file will also be made available on the CMS website 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/DGME. Use of the HCRIS extract provides a national, 
standard source for MAC determinations.
    If a hospital wishes to receive a PRA or cap determination from its 
MAC for a possible reset of an open or reopenable cost report, the 
hospital must consult the web posting first. In cases where no PRA or 
caps are reported on a settled cost report, or when PRAs or caps are 
reported without any FTEs, and cost report is settled but reopenable, 
the hospital gets the benefit of a reset without further review by the 
MAC. Examples of hospitals that would qualify for a reset based on the 
HCRIS extract without need for further MAC review are as follows:
     The hospital's cost report in HCRIS that ended on or 
before December 31, 1996 shows an FTE count of less than 1.0 for either 
IME or direct GME (Category A).
     The hospital's cost report in HCRIS that began on or after 
October 1, 1997, and before enactment of section 131 of CAA shows an 
FTE count of not more than 3.0 for either IME or direct GME (Category 
B).
     A hospital's employee(s) recall that residents were 
trained at the hospital, but no FTEs were reported on any settled 
Medicare cost report, as shown in HCRIS.
     A hospital where FTEs are reported on a settled cost 
report, but the FTE cap lines are not filled (this hospital would be 
eligible for new FTE caps).
     A hospital with FTEs reported on a settled cost report, 
but the PRA lines are not filled in on that earliest cost report where 
FTEs are reported (this hospital would be eligible for a new PRA).
     A hospital with a PRA reported on a settled cost report, 
but no FTEs are reported on the earliest cost report in which the PRA 
is reported, so the amount of FTEs used to determine that PRA cannot be 
determined (this hospital would be eligible for a new PRA).
    We believe that allowing resets in the circumstances stated 
previously demonstrates our willingness to fulfill Congressional intent 
to allow eligible hospitals their second chance at meaningful IME and 
direct GME reimbursement, and further indicates that we and the MACs 
intend to be fair and reasonable throughout the implementation process. 
As we stated in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25523), 
MACs would calculate the replacement PRAs and/or FTE resident caps 
using the existing regulations in place at 42 CFR 413.77(e) and 42 CFR 
413.79(e)(1), but after the MAC confirms that either the Category A 
Hospital or Category B Hospital trains their requisite threshold FTEs 
in a new program(s) started after December 27, 2020.
(2) One-Time Deadline To Request Reconsideration and Review by the MAC 
for Possible Category B Hospitals
    If, for open or reopenable cost reports, there is a PRA and/or FTE 
caps reported on the HCRIS web posting, and the potential Category B 
hospital believes its PRA in fact was established based on not more 
than 3.0 FTEs, or its IME and/or direct GME FTE caps were based on not 
more than 3.0 FTEs, a hospital has a 1-time opportunity to request 
reconsideration by its MAC which must be submitted electronically and 
received by the MAC on or before July 1, 2022. We are providing this 
lead time for this 1-time submission to assist hospitals in ensuring 
that they include complete and unambiguous documentation supporting 
their assertion that the HCRIS cost report information is incorrect. We 
also believe this approach encourages only review requests with 
realistic chances for reset eligibility under section 131 of the CAA. 
(See response regarding documentation required). The MAC would review 
the information within a specified timeframe to be determined by CMS 
and make a determination as to the hospital's eligibility for a PRA 
and/or FTE cap reset based on the adequacy of the documentation 
submitted by July 1, 2022. The decision issued by the MAC to the 
hospital would be final. If the MAC determines that the FTEs reported 
are greater than 3.0 respectively, the hospital is NOT eligible for a 
PRA or FTE cap reset. Hospitals that disagree with the MAC's 
determination could appeal to the Provider Reimbursement Review Board 
for review, assuming that all conditions for appeal are met.
(3) Cost Reports Not in HCRIS or Not Yet Settled
    There may be situations where a cost report is not in HCRIS web 
posting, or even if the cost report is in the HCRIS web posting, there 
is no PRA or no FTE caps reported because the cost report has not yet 
been settled and/or the MAC has not yet determined the PRA or the FTE 
caps. Such a hospital must submit a request to the MAC by July 1, 2022 
requesting that the MAC issue a determination regarding possible reset 
eligibility for the PRA and/or FTE caps using cost reports that began 
prior to enactment. The review request must be received by July 1, 
2022, and must include complete and unambiguous documentation for FTE 
counts and for FTE cost and payment information (see response regarding 
documentation requirements). The MAC would use existing regulations at 
42 CFR 413.77(e) and 42 CFR 413.79(e)(1) to determine the hospital's 
PRA and FTE caps from the cost report(s).
    For cost reports that began during CY 2020 (but still prior to 
enactment of the CAA) and are subject to PHE submission deadlines, the 
hospital must file its cost report with complete and unambiguous 
supporting GME documentation to the MAC by July 1, 2022 in order to 
receive consideration for possible PRA or FTE cap reset. MACs will 
reject incomplete or untimely submissions, with no opportunity for a 
later or 2nd MAC review.
    If the MAC determines that the FTEs are greater than 3.0, the 
hospital is NOT eligible for a PRA or FTE cap reset. Hospitals that 
disagree with the MAC's determination may appeal to the Provider 
Reimbursement Review Board assuming that all conditions for appeal are 
met.
    Accordingly, for the purpose of implementing section 131 of the 
CAA, in response to the comment asking what it means to ``have'' a PRA 
or ``have'' FTE caps ``as of enactment,'' we are clarifying that 
``having a PRA'' means that there is a PRA reported in HCRIS from a 
cost reporting period beginning prior to enactment, or if not in HCRIS 
or not yet determined, the MAC determines the PRA based on the 
hospital's request by July 1, 2022, but from a cost reporting period 
beginning prior to enactment. If the PRA base period cost report begins 
prior to enactment, we believe it is acceptable if it ends after 
enactment. This is because section 131(a)(iii) states, '' . . . in the 
case of a hospital that, as of such date of enactment, has an approved 
FTE resident amount . . . in any cost reporting period beginning on or 
after

[[Page 73464]]

October 1, 1997, and before the date of enactment . . .'' (emphasis 
added). Thus, a hospital's PRA could have been initiated when training 
no more than 3.0 FTEs in a cost report beginning prior to enactment on 
May 1, 2020, and ending April 30, 2021 (after enactment). Similarly, we 
are clarifying that ``having FTE caps as of enactment'' means that the 
5-year cap building window would close in a cost reporting period that 
began before enactment, although the cost report may end after 
enactment. This is because section 131(b)(IV) states, ``in the case of 
a hospital that, as of the date of the enactment of this subclause, has 
a limitation under subparagraph (F), based on a cost reporting period 
beginning . . . before such date of enactment . . .'' (emphasis added). 
For example, if a hospital's 5-year cap building window closed June 30, 
2021, but that was during the hospital's cost report beginning October 
1, 2020 (prior to enactment) and ending September 30, 2021 (after 
enactment), this hospital would ``have'' FTE caps as of enactment.
(4) PRA Base Periods Initiated Prior to Enactment, With Cap-Building 
Period Ending After Enactment
    Commenters requested clarification regarding when a hospital's cap 
building period was triggered prior to enactment, but the 5-year window 
closes in a cost report with a start date after enactment. The 
following policies apply. As we stated previously, in response to the 
comment asking what is means to ``have'' a PRA and ``have'' FTE caps 
``as of enactment,'' if the PRA base period cost report begins prior to 
enactment, we believe it is acceptable if it ends after enactment. 
Similarly, ``having FTE caps as of enactment'' means that the 5-year 
cap building window would close in a cost reporting period that began 
before enactment, although the cost report may end after enactment. 
That is, the 5-year cap building window would have to close during a 
cost reporting period that started prior to enactment. For example, if 
a hospital's 5-year cap building window closed June 30, 2021, but that 
was during the hospital's cost report beginning October 1, 2020 (which 
started prior to enactment) and ending September 30, 2021 (after 
enactment), this hospital would ``have'' FTE caps as of enactment. 
Under existing regulations at 42 CFR 413.79(e)(1), the year for 
determining new program caps is the third year of the new program's 
existence for programs started prior to October 2012, and the fifth 
year of new program's existence for programs started after October 
2012. Therefore, only hospitals whose third or fifth program year ENDS 
in a cost reporting period that started PRIOR to enactment would 
qualify under section 131 of the CAA for a possible FTE cap reset. The 
law does not allow consideration for FTE cap reset for a hospital whose 
FTE cap setting year (that is, the cost report following the close of 
the 5-year cap building window) begins after enactment. Therefore, 
there can be situations where a hospital might be eligible for a PRA 
reset, as the PRA base period occurred prior to enactment, while the 
same hospital is NOT eligible for FTE cap resets, since the relevant 
cost reporting period for setting that hospital's FTE caps in 
accordance with 42 CFR 413.79(e)(1) would not even occur until some 
time after enactment. For example, a hospital for the first time trains 
2.0 FTE residents in a new program in its cost reporting period 
beginning January 1, 2019 and ending December 31, 2019. The new program 
started on July 1, 2019. This FYE December 31, 2019 would be the PRA 
base period, so the hospital would ``have'' a PRA ``as of enactment''. 
The 5-year cap building window would end on June 30, 2024, during the 
hospital's cost report that began January 1, 2024. Since the 5-year cap 
building window ends in a cost report that starts after enactment, this 
hospital does not have a FTE cap ``as of enactment,'' and would not 
qualify under section 131 for an FTE cap reset.
    Therefore, hospitals submitting documentation to their MACs by July 
1, 2022 for a determination regarding PRA or FTE cap reset must include 
documentation showing that the PRA base period started prior to 
December 27, 2020, and that the 5-year cap building window ended in a 
cost reporting period that started prior to December 27, 2020. Such 
documentation includes the following:
     The date that residents in a new program first rotated 
into this hospital (see August 27, 2009 IPPS final rule (74 FR 43908) 
for definition of new program).
     Whether that date was the first time residents began 
training at ANY rotational site for that program, or whether residents 
in that program had previously rotated to other sites before rotating 
into this hospital.
    Comment: A commenter requested clarification on what documentation 
would be needed to demonstrate/obtain eligibility for a PRA or cap 
reset. The commenter stated that they have cost reports, but no longer 
have records of IRIS reports or rotation schedules.
    Response: We are not creating new or different documentation 
requirements for the purpose of section 131 of the CAA, but continue to 
use our existing documentation requirements, discussed previously in 
the August 29, 1989 final rule (54 FR 40286, 40291 and 40304), the 
August 18, 2006 IPPS final rule (71 FR 47869, 48077), and implemented 
at 42 CFR 413.75(d). We stated that a rotation schedule is the primary 
documentation that can be used to support the direct GME and IME 
resident counts but other similar documentation may be acceptable (71 
FR 48077). The rotation schedule is prepared by the Program Director 
for each program for each program year. As such, there is only one 
rotation schedule for each approved program for each program year and 
all the hospitals to which the residents in that program rotate must 
use that same schedule. 42 CFR 413.78(d) states, ``The information must 
be certified by an official of the hospital and, if different, an 
official responsible for administering the residency program.'' If the 
hospitals to which the residents rotate have other than June 30 FYEs, 
the hospitals must use two rotation schedules which overlap that FYE.
    We are including a list of documents necessary to demonstrate the 
FTEs from which a PRA would have been calculated or from which a FTE 
cap would have been calculated. The main documentation needed for FTE 
cap support and for the FTEs claimed on the earliest cost report which 
will be used to determine if the hospital meets the less than 1.0 FTE 
or not more than 3 FTEs requirement for the PRA is: The program 
approvals; the rotation schedules showing the location of the 
residents, either within hospitals or nonprovider sites per 42 CFR 
413.78(g); the Intern and Resident Information System (IRIS) (to be 
used only as an audit tool until direct GME and IME counts on the IRIS 
and the cost report match); a resident's Foreign Medical Graduate 
Examination in the Medical Sciences certificate (FMGEMS) status for 
direct GME under 42 CFR 413.75(b) and 42 CFR 413.80; information 
whether the resident is full-time/part-time at the hospital; agreements 
between the hospitals and program approval if the resident is floating 
from another hospital's program.
    Documentation to establish a PRA includes payroll and employment 
data indicating payment of residents' salaries and fringe benefits if 
the hospital employs the residents, contracts with medical schools or 
other hospitals which employ the residents specifying the charges to 
the host hospital for these expenses and related invoices, evidence 
that the host hospital actually paid the

[[Page 73465]]

charges from the medical school or other hospital, documentation of the 
expenses the host hospital paid for the portion of the teaching 
physicians' compensation and fringe benefits related to teaching and 
supervision of the residents, and documentation supporting payment of 
other Medicare allowable costs that are directly related to operating 
the program (such as salaries of the program director and other office 
staff associated with operating the program, and operating and overhead 
costs directly attributable to training the residents).
    We understand that there may be some difficulty involved in 
procuring documentation in the case where the hospital seeking to reset 
its low PRA and FTE caps trained the residents for a minimal time, and 
may not have the official documents such as the rotation schedule. 
Nevertheless, we want to be clear that unofficial copies or deviations 
from the official program rotation schedule and other substitutions 
will not be accepted. Hospitals seeking PRA and cap resets still must 
meet standard documentation requirements (per 42 CFR 413.20 and 
413.24), and will have to work with the program primary clinical sites 
and program director to obtain definitive FTE information. In an effort 
to implement section 131 of the CAA in an accurate and administratively 
feasible manner, it is of utmost importance for hospitals to submit 
clear and acceptable documentation to their MACs by the July 1, 2022 
deadline. The MACs' determinations will be based on documentation 
received by that date. Hospitals may supplement their documentation up 
until the July 1, 2022 deadline, but not after that date. We reiterate 
that we are not creating new or different documentation requirements 
for the purpose of section 131 of the CAA, but continue to use our 
existing documentation requirements, discussed previously in the August 
29, 1989 final rule (54 FR 40291 and 40304), the August 18, 2006 IPPS 
final rule (71 FR 48077-78), and implemented at 42 CFR 413.75(d).
    Comment: A commenter believed it is not appropriate for CMS to 
require that a teaching hospital permitted to have its PRA reset use a 
base period that has already begun at the time of the release of the 
IPPS proposed rule. The commenter asserted that hospitals want to know 
how CMS proposes to implement this provision, then see how the rules 
are finalized, and then avail themselves of the opportunity for a reset 
as applicable. This commenter requested that CMS permit a hospital to 
use any base period within the statutory 5-year window, including a 
base period that begins: (1) After enactment of the CAA; (2) after 
publication of the IPPS proposed rule; (3) after publication of the 
IPPS final rule; and (4) after CMS issues instructions to the MAC and 
the community for carrying out this process. Then, the commenter 
recommended that CMS allow hospitals to request to have their PRAs 
reset based on an applicant hospital's next full cost reporting period 
following approval by CMS of its application and request.
    Response: We understand the commenter's point that although 
hospitals can avail themselves of a PRA reset as early as after the 
enactment of the CAA, that initial cost report overlapping with or 
immediately following CAA enactment would still be when the hospital is 
unaware of how CMS intends to implement section 131 of the CAA. We 
agree with the commenter that a hospital should have some flexibility 
in determining the timing of its new PRA base period, to the extent 
that the statute permits. However, we note, that clause (iii)(II) of 
section 131 of the CAA directs the Secretary to reset a PRA ``if the 
hospital trains at least 1.0'' FTE or ``more than 3.0'' FTE ``in a cost 
reporting period beginning on or after such date of enactment and 
before the date that is 5 years after such date of enactment.'' That 
is, the timing of the revised PRA base period is dependent upon when 
the hospital trains at least 1.0 FTE or more than 3.0 FTE (as 
applicable) in the time frame of after enactment and 5 years after 
that. We also note that clause (iii)(II) of section 131 of the CAA 
directs the Secretary to use the methodology in the regulations at 42 
CFR 413.77(e) to establish the revised PRA, which typically would mean 
use of the earliest cost report in which the hospital trains residents 
in an approved program. Therefore, we do not believe we can provide 
hospitals with the option to choose any cost reporting period occurring 
during the time frame of after enactment and 5 years after as the new 
PRA base period. However, we believe we can utilize the flexibility 
provided by section 131 of the CAA, clause (v), which states, ``As 
appropriate, the Secretary may consider information from any cost 
reporting period necessary to establish a new FTE resident amount as 
described in clause (iii)'' (emphasis added). Therefore, we believe it 
would be fair to allow a hospital to have the option of using as its 
new PRA base period cost report the first cost reporting period 
beginning after issuance of this final rule with comment period. That 
is, we are finalizing a policy that if the hospital already started 
training at least 1.0 FTE or more than 3.0 FTEs in a cost reporting 
period beginning immediately following enactment, the hospital could 
choose to use either that cost report as the PRA base period, or the 
hospital could wait to see if the first cost reporting period beginning 
after issuance of this final rule with comment period may result in a 
more favorable PRA. If a hospital does not even start training at least 
1.0 FTE or more than 3.0 FTEs until a cost reporting period that is 
after the first cost reporting period beginning after issuance of this 
final rule with comment period (but still within 5 years after 
enactment), then the hospital would not have a choice as to which cost 
reporting period to use as its new PRA base period; the hospital must 
use that second or subsequent cost reporting period after issuance of 
this final rule with comment period as its new PRA base period. We are 
revising the regulations at 42 CFR 413.77(e)(1)(iv) accordingly. We are 
also not requiring in the regulations at 42 CFR 413.77(e)(1) that 
residents be on duty during the first month of the PRA base period for 
teaching hospitals receiving a PRA reset, and for new teaching 
hospitals in general. We believe that requirement is no longer 
relevant, in light of the statutory focus on when at least 1.0 or more 
than 3.0 FTEs are trained.
    Comment: A commenter noted that throughout the discussion in the 
proposed rule regarding the opportunity for a hospital to adjust its 
small IME and direct GME FTE caps, CMS uses words like ``replace,'' or 
``reset,'' which implies that CMS would eliminate even the small amount 
of FTE cap that the hospital already has, and give a different cap. The 
commenter believed that Congress is directing CMS to allow a qualifying 
hospital to add to its existing direct GME or IME caps (not restart at 
zero).
    Response: We have reviewed the language of section 131 of the CAA, 
and we note that section 1886(h)(4)(H)(i)(III) of the Act, as added by 
subsection 131(b), states that ``the Secretary shall adjust the 
limitation''; it does not say `in lieu of'', as it does for the PRA, 
under clause 1886(h)(2)(F)(iii) of the Act, as added by subsection 
131(a) of the CAA. Accordingly, we agree with the commenter that an 
eligible hospital would keep its IME or direct GME FTE caps of less 
than 1.0 or not more than 3.0, and any cap amount based on new programs 
would be added to the original cap amounts. That is, new caps created 
based on new programs started after enactment and 5 years after would 
be

[[Page 73466]]

added to the hospital's original caps, while the original PRA would be 
replaced by a new PRA from a base year after enactment and 5 years 
after. We are revising the regulations text at 42 CFR 413.79(e)(1)(vi) 
accordingly, to state that the adjusted FTE cap is equal to the sum of 
the original FTE cap and the products of three factors based on the new 
program(s).
    Comment: A commenter expressed confusion regarding what situations 
CMS intends to exclude with the restriction that it would not reset the 
caps for a hospital that ``first began training residents in a new 
program prior to its cost reporting period beginning on or after 
enactment and continued to train FTE residents in the new program after 
enactment'' (86 FR 25522). The commenter was particularly concerned 
that CMS may be interpreting Congress's intent in using the phrase 
``begins training'' to restrict the applicability of section 131 of the 
CAA to a much smaller set of hospitals than they believe was intended. 
Other commenters argued that by adding the term ``first'' or ``first 
time'', in front of ``begins training'' CMS changes the entire meaning 
of the provision. These commenters asserted that the statute clearly 
indicates that beginning a new program should be the trigger, and they 
do not believe requiring a hospital to have never started a new program 
since its cap was set is in keeping with the statute. For example, it 
leaves hospitals with a cap of less than 3 (Category B hospitals) that 
started a new program after that cap was set, but before the law was 
enacted, with no recourse. The first commenter provided the following 
example and requested that CMS confirm their understanding that the 
section 131 of the CAA FTE cap resetting policy would be implemented 
for a hospital in this situation in the manner described.
    Example:
    Hospital A, which operates on a cost reporting period of July 1 
through June 30, trained residents for the first time as of July 2003. 
During that residency program year, 2.7 FTE residents from a new 
internal medicine program established at New Teaching Hospital B 
rotated to Hospital A.
     Hospital A continued to train that same number of FTE 
residents from that same program for the subsequent four residency 
program years. Hospital A did not train any additional residents in its 
hospital between July 2003 and June 2008. Hospital A had a DGME cap of 
2.7 set as of July 1, 2008.
     Hospital A continued to train 2.7 FTE residents from that 
same internal medicine program established at New Teaching Hospital B 
every year between July 2008 and June 2018.
     Beginning in July 2018 and during each residency year 
through June 2022, Hospital A trains 10.0 additional FTE residents from 
Existing Hospital C in the specialties of family medicine, emergency 
medicine, and general surgery. The family medicine residents are 
training in a newly established residency program that first began 
training residents in July 2018 while the emergency medicine and 
general surgery residents are training in and rotating from 
longstanding, existing residency programs.
     In its most recent cost report, Hospital A reports 
training 12.7 FTE residents and reports a DGME cap of 2.7.
     Hospital A applies to CMS to have its cap reset under 
section 131 of the CAA's provision (based on having a cap of 2.7).
     Beginning in July 2022, Hospital A establishes a new 
three-year family medicine program approved for 15 positions, with 5 
FTE residents in each program year with all FTE resident time countable 
and no rotations to any other hospitals.
     Beginning in July 2025, Hospital A establishes a second 
new program, a 5-year general surgery program approved for 30 
positions, with six FTE residents in its initial program year (July 
2025 to June 2026) with all FTE resident time countable and no 
rotations to any other hospitals.
    The commenter requests that CMS confirm that Hospital A's DGME cap 
would be reset as of July 2027 as follows:

2.7 (existing DGME cap prior to enactment of CAA)
+ 15 (representing cap adjustment for family medicine program started 
in July 2022)
+ 30 (representing cap adjustment for general surgery program started 
in July 2025)
= 47.7 (new DGME cap as of July 2027)

    Response: We have reviewed the statute and we are convinced by the 
commenters that the statute does not require that a hospital wait to 
begin a new program until after enactment in order to be considered an 
eligible Category A or Category B Hospital. We are changing our 
proposed policy to not disqualify a hospital that started a new program 
prior to enactment from being eligible for a cap reset, so long as it 
also starts a new program after enactment. However, we would only give 
the cap adjustment for new programs started after enactment, not before 
enactment. Thus, Hospital A in the commenter's example would qualify as 
a Category B hospital, but its FTE resident caps of 2.7 would be 
adjusted upward to reflect only the family medicine program and general 
surgery program started after enactment (in 2022 and 2025 
respectively), and NOT the family medicine program started in 2018.
    Comment: A commenter requests clarification on the possible 
confusion of the use of ``program year'' and ``cost reporting year'': 
In one part of the preamble, CMS states that ``adjustments will be 
available for a hospital that begins training more than 1.0 or 3.0 FTE 
in a program year beginning on or after the date section 131 of the CAA 
was enacted.'' The commenter stated this inconsistency is mirrored in 
the proposed regulatory changes to DGME and IME caps at 42 CFR 
413.79(e)(1)(vi) and 42 CFR 412.105(f)(1)(vii)(B). The commenter 
requested that this be remedied or explained.
    Response: We are not sure to which inconsistency the commenter is 
referring. We note that section 131 of the CAA specifically uses the 
term ``program year.'' That is, section 131(b) of the CAA (adding new 
section 1886(h)(4)(H)(i)(III) of the Act), states, ``In applying this 
clause in the case of a hospital that, as of the date of enactment of 
this subclause, has a limitation . . . of less than 1.0 full-time 
equivalent resident, the Secretary shall adjust the limitation . . . if 
. . . the hospital begins training at least 1.0 full time equivalent 
residents in a program year beginning on or after such date of 
enactment . . .'' (emphasis added). Similar language is at section 
1886(h)(4)(H)(i)(IV) of the Act, as added by the CAA, applicable when a 
hospital begins training more than 3.0 FTEs. Regardless, we are making 
changes to conform to our final policies at 42 CFR 413.79(e)(1)(vi) and 
412.105(f)(1)(vii)(B).
    Comment: Some commenters stated that CMS should ensure that the 
concept of ``community support and redistribution of costs'' not be 
applied under this provision. This principle, stating that Medicare 
will not reimburse for situations after another entity has paid for 
resident training, is not appropriate because it was statutory and 
regulatory actions that prevented hospitals from appropriate 
reimbursement for residency positions from Medicare. At a minimum, CMS 
should change its rules to allow hospitals in this situation to count 
the FTEs in the new program or programs established following enactment 
in setting its new cap during its 5-year cap-setting window.
    Response: We disagree with the commenters that we should (even if 
we

[[Page 73467]]

could) waive community support principles at 42 CFR 413.81, but also 
disagree with commenters that it would even be an obstacle. After all, 
the law would readjust the cap based on ``new'' programs started by the 
hospital and if the program is new and the hospital is incurring the 
cost from the start, then there is no concern of redistribution or 
community support.
    Comment: A few of the commenters argued that CMS's proposal limits 
eligibility to the Category A and Category B criteria set forth in 
subparagraphs iii and iv of CAA 2021 for hospitals that previously 
trained residents in the distant past. The commenters believed it was a 
critical omission, and that nothing in the drafting of subparagraphs 
ii, iii, and iv of the Act as added by the CAA indicates that a 
hospital's eligibility is conditioned solely on whether a hospital 
falls into Category A or Category B. Otherwise, any hospital that has 
ever reported FTE residents on a cost report but was unable to meet the 
technical requirements of Category A or Category B would be barred from 
establishing a new FTE resident cap, which we believe is contrary to 
the legislative intent of the Act. Therefore, the commenters requested 
that CMS clarify that a hospital that has previously reported FTE 
residents on a cost report may pursue a new FTE resident cap 
determination under a new residency program pursuant to subparagraph ii 
of the Consolidated Appropriations Act, 2021.
    Response: We do not believe Congress gave us the authority to 
provide relief or waivers to categories beyond A and B. We believe that 
the CAA is unequivocally clear about the size of the caps that would be 
eligible for a reset; that is, for hospitals with caps set based on its 
1996 cost report, the cap must be less than 1.0 FTE, and for hospitals 
with caps set in a cost reporting period between 1997 and prior to 
enactment, the cap must not be more than 3.0 FTE.
    Comment: A commenter noted that section 131 of the CAA states, ``A 
hospital shall report full-time equivalent residents on its cost report 
for a cost reporting period if the hospital trains at least 1.0 full-
time equivalent residents in an approved medical resident training 
program or programs in such period.'' The commenter questioned how a 
hospital would know that it ``shall'' and what happens if it does not. 
The commenter also questioned whether these hospitals would again have 
PRAs of $0 and acquire caps without knowing it, after the 5-year window 
included in the legislation.
    Another commenter stated that PRAs have not been proactively 
assigned to every hospital in the US, and under current regulations a 
PRA of $0 is only discovered and established when a resident is first 
reported on a cost report. The commenter requested that until such time 
as hospitals have the opportunity for a certified audit financed by CMS 
prior to training residents, we recommend that all hospitals without a 
PRA or cap be assigned a PRA that is ``the updated weighted mean value 
of per resident amounts of all hospitals located in the same census 
region as that term is used in subpart D of part 412 of this 
subchapter,'' or until a hospital can demonstrate its ability to train 
residents for less than that amount.
    Response: Regarding how to treat hospitals in the future that 
inadvertently train small numbers of residents, we note that section 
131 of the CAA specifies that ``for cost reporting periods beginning on 
or after enactment, a hospital shall report full-time equivalent 
residents on its cost report if the hospital trains at least 1.0 full-
time equivalent residents in an approved medical residency program or 
programs in such period.'' In the proposed rule, we interpreted this to 
mean that Congress was putting hospitals on notice that they are 
obligated to be aware of and report their residents to CMS on the cost 
report for training as minimal as 1.0 FTE. We also believe that section 
131 of the CAA is unequivocally clear that a qualifying hospital's cap 
or PRA must be in effect ``as of enactment,'' which means that it would 
have been (or should be determined) from a cost reporting period that 
started prior to enactment. Thus, we believe section 131 of the CAA is 
not meant to provide relief to hospitals that trigger low caps or PRAs 
after enactment. As stated previously, we are also no longer requiring 
in the regulations at 42 CFR 413.77(e)(1) that residents be on duty 
during the first month of the PRA base period for teaching hospitals 
receiving a PRA reset, and for new teaching hospitals in general. We 
are finalizing our proposed interpretation of these clauses, and 
accordingly, we do not believe we have flexibility to ``forgive'' or 
``ignore'' caps or PRAs triggered after enactment, even when the 
training is not more than 1.0 FTE.
    Regarding the comment that prior to the MAC audit for a new 
teaching hospital's PRA, the hospital should be assigned the census 
region PRA, we note that policy is already in effect per Transmittal 
1923, CR 10240 (page 5), which states: ``. . . the MAC shall use the 
latest available census region PRA issued by CMS for the census region 
in which the new teaching hospital is located, updated for inflation to 
the base period of the new teaching hospital, for the purpose of 
calculating and paying DGME interim rates. However, once the hospital 
submits its base year cost report, the MAC shall calculate and assign 
the appropriate PRA to the new teaching hospital (as part of the normal 
cost report settlement process for the new teaching hospital).''
    Comment: A commenter requested that once a hospital resets its FTE 
cap under section 131 of the CAA, it should have certainty that no 
audits will revisit prior training, while another commenter stated that 
redeterminations under section 131 of the CAA should be binding unless 
the provider concealed material information, or the provider appeals 
the determination. Another commenter recommended that hospitals with 
yet undiscovered low PRAs be subject to limited lookback (for example, 
3 years) and only set a PRA when beginning the training of residents in 
the future. An additional commenter noted that CMS requires records of 
cost reports to be retained in their original or legally reproduced 
form for 5 years after the closure of the cost report, and strongly 
recommended that CMS use the record retention requirements to set a 
lookback window of 5 years when evaluating the cost reports of 
hospitals that are seeking to set a new PRA under these rules.
    Response: As we stated in response to a previous comment, we must 
manage a significant workload resulting from implementation of section 
131 of the CAA, and therefore, we are taking steps to try to mitigate 
that workload, including instituting a one-time deadline of July 1, 
2022 for hospitals to request a reset for their PRAs or FTE caps. MACs 
will not consider late documentation, nor will MACs conduct second 
reviews. Hospitals that disagree with the MACs' determinations may 
appeal to the PRRB, assuming conditions to appeal are met. In addition, 
in this final rule with comment period, to manage the volume of review 
requests, we are finalizing policies related generally to more recent, 
open cost reports, and would accept comments after publication of this 
final rule with comment period regarding how to address the use of 
older cost reports to which some kind of limited ``look back'' policy 
could be applicable. Thus, we believe our final policy of one-time 
review is consistent with the commenters' requests that the MACs' 
determinations should not be revisited, and they should be binding,

[[Page 73468]]

unless fraud is suspected. With regard to hospitals with ``yet 
undiscovered low PRAs,'' these hospitals would follow the methodology 
outlined previously, where hospitals would use the HCRIS posting to 
determine their status (or follow the policy in the section regarding 
cost reports not yet in the HCRIS posting or not yet settled).
    A comment was submitted regarding the regulations related to new 
teaching hospitals and the impact of the ongoing pandemic and public 
health emergency (PHE). We are not addressing this comment at this 
time, as it is not in the scope of the proposed rule.
f. Summary of Finalized Policies With Regard to Section 131 of the CAA
    After consideration of comments we received, we are finalizing the 
following policies with regard to section 131 of the CAA:
     In this final rule with comment period, we are finalizing 
policies for resets related to cost reports that are open, reopenable, 
or not yet settled. We will post a file on the CMS website containing 
an extract of the HCRIS cost report worksheets on which the FTE counts, 
caps, and PRAs, if any, would have been reported, starting with cost 
reports beginning in 1995. We are also seeking public comment regarding 
how to handle reviews of PRAs or FTE caps from cost reports that are 
beyond the 3-year reopening period (with the exception of Category A 
and Category B hospitals that agree with the HCRIS posting).
     Hospitals must first consult the HCRIS posting on CMS's 
website to determine reset eligibility. MACs will not reach out to 
hospitals.
     In cases where no PRA or caps are reported on a settled 
cost report, or when PRAs or caps are reported without any FTEs, and a 
cost report is settled but reopenable, the hospital gets the benefit of 
a reset without further review by the MAC.
     If, for open or reopenable cost reports, there is a PRA 
and/or FTE caps reported on the HCRIS web posting, and the hospital 
believes its PRA in fact was established based on not more than 3.0 
FTEs, or its IME and/or direct GME FTE caps were based on not more than 
3.0 FTEs, a hospital has a 1-time opportunity to request 
reconsideration by its MAC which must be submitted electronically and 
received by the MAC on or before July 1, 2022.
     Hospitals that disagree with the 1-time MAC determination 
may appeal to the PRRB, assuming all conditions for appeal are met.
     Eligible hospitals for resets are those only that have a 
PRA base period that started prior to enactment and/or FTE cap building 
window that occurred/closed in a cost reporting period that started 
prior to enactment (December 27, 2020).
     FTE cap resets will only be based on new programs started 
after enactment and 5 years after (by December 26, 2025).
     Hospitals that qualify for a PRA reset may use as the new 
PRA base period either the earliest cost reporting period beginning 
between enactment and 5 years after in which they train FTES in a new 
program, or the first cost reporting period beginning after issuance of 
this final rule with comment period. In any case, residents need not be 
on duty during the first month of the cost reporting period from which 
the per resident amount is established.
     Effective with cost reporting periods beginning on or 
after December 27, 2020, a PRA would be established if a hospital 
trains less than 1.0 FTE as a result of participating in a Medicare GME 
affiliation agreement. Otherwise, no PRA would be established until a 
hospital trains at least 1.0 FTE. In any case, residents need not be on 
duty during the first month of the cost reporting period from which the 
per resident amount is established.
     Effective with cost reporting periods beginning on or 
after December 27, 2020, a hospital must report training of less than 
1.0 FTE on its Medicare cost report if that training is as a result of 
participating in a Medicare GME affiliation agreement. Otherwise, a 
hospital must report FTEs on its Medicare cost report when it trains at 
least 1.0 FTE.
     Hospitals eligible to reset their PRAs would get a new PRA 
replacing their old PRA(s); hospitals eligible to reset their FTE caps 
would receive an FTE cap adjustment equal to the sum of the original 
FTE cap and the new program FTE cap adjustment.
    We are finalizing regulation text changes to the following:
     42 CFR 413.77(e)(1)(iv) to reflect that hospitals 
qualifying for a PRA reset may use as the new PRA base period either 
the earliest cost reporting period beginning between enactment and 5 
years after in which they train FTEs in a new program, or the first 
cost reporting period beginning after issuance of this final rule with 
comment period.
     42 CFR 413.78(b) regarding when a hospital must report 
FTEs on its Medicare cost report.
     42 CFR 413.79(e)(1) and (8) to reflect the circumstances 
under which a new program FTE cap would be established, and how an 
adjusted FTE cap would be calculated.

C. Organ Acquisition Payment Policies

1. Background
a. History of Medicare Organ Acquisition Policies
    The Medicare Program supports organ transplantation by providing an 
equitable means of payment for the variety of organ acquisition 
services. Medicare excludes organ acquisition costs from the inpatient 
hospital prospective diagnosis-related group (DRG) payment for an organ 
transplant, and separately reimburses transplant hospitals \4\ (THs) 
for the organ acquisition costs on a reasonable cost basis (42 CFR 
412.2(e)(4) and 412.113(d)).\5\
---------------------------------------------------------------------------

    \4\ Under 42 CFR 482.70 a transplant hospital is a hospital that 
furnishes organ transplants and other medical and surgical specialty 
services required for the care of transplant patients.
    \5\ In accordance with 42 CFR 412.113(d), organ acquisition 
costs incurred by hospitals with approved transplant programs are 
paid for on a reasonable cost basis.
---------------------------------------------------------------------------

    Medicare's current organ acquisition policy is modeled after the 
kidney acquisition policy that was implemented for kidney transplants 
following the Social Security Amendments of 1972 (Pub. L. 92-603) that 
extended Medicare coverage to individuals with end stage renal disease 
(ESRD) who required dialysis or transplantation. In July 1973, CMS 
(then the Bureau of Health Insurance \6\ (BHI)) issued Intermediary 
Letters (ILs) which set forth procedures and policies for Medicare 
reimbursement for kidney transplants. The IL 73-25 \7\ (July 1, 1973) 
set forth policies for the reimbursement for kidney transplants and 
dialysis, including policies for hospital reimbursement for the 
acquisition of a kidney from cadaveric and living donors for transplant 
into a Medicare beneficiary. In IL 73-25, the BHI commented that as it 
received and analyzed data and studied reimbursement methodology, it 
would develop and issue more detailed reimbursement instructions to 
support the delivery of quality services in an efficient manner. In 
July 1974, the BHI issued IL 74-23,\8\ which set forth

[[Page 73469]]

additional policies for Medicare reimbursement of kidney acquisition 
costs, many of which remain in place currently. In 1978, to clarify 
that the Secretary of the Department of Health and Human Services (the 
Secretary) has authority and to provide reimbursement for the costs 
incurred in connection with kidney donations, Congress enacted 
legislation that added special provisions relating to coverage under 
the Medicare Program for ESRD (Pub. L. 95-292). This legislation added 
section 1881 to the Social Security Act that set forth Medicare payment 
for kidney transplantation and the coverage of kidney procurement costs 
and living donor expenses, including Part A and Part B benefits for the 
living donor.\9\ As CMS stated in the 1978 Federal Register (43 FR 
44803), the purpose of section 1881 of the Act was to encourage kidney 
transplantation and the scope of Medicare benefits to cover all 
reasonable preparatory, operation and post-operation expenses 
associated with a kidney donor, through the actual period of recovery.
---------------------------------------------------------------------------

    \6\ To implement the Medicare statute, the Social Security 
Administration was reorganized and the Bureau of Health Insurance 
(BHI) was established on July 30, 1965. The BHI then became 
responsible for the development of health insurance policy before 
the creation of the Health Care Financing Administration (HCFA), 
later renamed the Centers for Medicare & Medicaid (CMS). CMS 
Milestones 1937-2015 (July 2015).
    \7\ https://www.cms.gov/medicare/acute-inpatient-pps/fy-2022-ipps-proposed-rule-home-page.
    \8\ Id.
    \9\ H. Rep. 95-549 (July 29, 1977), section III.B.; S. Report 
95-714 (March 22, 1978), section III.B.
---------------------------------------------------------------------------

    Over the years through various rulings and national coverage 
determinations, Medicare has added coverage for transplantation of non-
renal organs such as heart, liver or lungs; we modeled our 
reimbursement for the acquisition costs for non-renal organs based on 
our earlier kidney acquisition policies. Medicare's organ acquisition 
payment policy is mostly set forth in CMS Pub. 15-1, chapter 31,\10\ 
the Provider Reimbursement Manual (herein referred to as PRM) and in 
Medicare regulations at 42 CFR 412.2(e)(4), 412.100, 412.113(d), 
413.200, 413.202, and 413.203. The entities involved in organ 
acquisition, which we will further define and discuss herein, are THs, 
donor community hospitals (Medicare-certified non-transplant 
hospitals), organ procurement organizations (OPOs), some of which are 
hospital-based OPOs (HOPOs), and histocompatibility laboratories.
---------------------------------------------------------------------------

    \10\ CMS Pub. 15-1, chapter 31 can be found at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021929) (Prior to the creation of chapter 31, the 
kidney acquisition policy was set forth in CMS Pub. 15-1, chapter 
27, Outpatient Maintenance Dialysis Reimbursement).
---------------------------------------------------------------------------

    Section 1102 of the Act authorizes the Secretary to publish rules 
and regulations necessary for the efficient administration of the 
functions with which the Secretary is charged under the Act. Section 
1871(a) of the Act authorizes the Secretary to prescribe such 
regulations as may be necessary to carry out the administration of the 
insurance programs under this title. In this final rule, we are 
codifying into the Medicare regulations some longstanding Medicare 
organ acquisition payment policies, with clarifications where 
necessary, and codifying some new organ acquisition payment policies 
with modifications based on public comments. We are finalizing our 
proposals to move existing organ acquisition payment regulations, or 
portions of existing kidney acquisition regulations, within title 42 of 
the CFR part 412, subpart G and part 413, subpart H, to a new part 413, 
subpart L, so that all organ acquisition payment policies are housed 
together. We are also finalizing our proposal to codify into new 
subpart L certain policies pertaining to organ acquisition, as set 
forth in section 733 of the Medicare Prescription Drug, Improvement and 
Modernization Act of 2003 (Pub. L. 108-173) and section 17006 of the 
21st Century Cures Act (Pub. L. 114-255), in accordance with their 
statutory effective dates. We are also finalizing our proposal to make 
conforming changes and technical corrections to the regulations, where 
necessary.
    We are aware of OIG audits reporting that some OPOs have billed the 
Medicare Program for unallowable expenditures.\11\ There have also been 
recent Congressional oversight interest and inquiries into OPO 
financial management.\12\ We believe the provisions that follow will 
provide clarity and allow providers and stakeholders to more easily 
locate and understand organ acquisition payment policy, resulting in 
more accurate payment based on reasonable cost principles.
---------------------------------------------------------------------------

    \11\ https://oig.hhs.gov/oas/reports/region9/90800033.pdf; 
https://oig.hhs.gov/oas/reports/region9/90900087.pdf; https://oig.hhs.gov/oas/reports/region9/90500034A.pdf; https://oig.hhs.gov/oas/reports/region9/91102039.pdf.
    \12\ https://oversight.house.gov/news/press-releases/oversight-subcommittee-launches-investigation-into-poor-performance-waste-and; 
https://www.young.senate.gov/newsroom/press-releases/young-joins-finance-committee-members-to-probe-us-organ-transplant-system; 
https://www.congress.gov/117/chrg/CHRG-117hhrg44569/CHRG-117hhrg44569.pdf.
---------------------------------------------------------------------------

b. Overview of Medicare Reimbursement in Transplantation
    Medicare reimburses THs for organ acquisition costs, the transplant 
surgery, inpatient, and post-transplant costs for the Medicare 
recipients, but through different payment systems. Medicare Part A pays 
for hospital costs of a transplant surgery and certain follow-up care 
through a DRG payment and the organ acquisition costs associated with a 
transplant on a reasonable cost basis. In general, Medicare Part B pays 
for the physician services and other services furnished to eligible 
Medicare beneficiaries. CMS established Conditions of Participation 
(CoP) for hospitals under 42 CFR part 482, subpart E. Transplant 
programs, located within a TH that has a Medicare provider agreement, 
must meet the applicable hospital CoPs at Sec. Sec.  482.1 through 
482.70 and the transplant program CoPs, located at Sec. Sec.  482.72 
through 482.104, and additional requirements in order to be eligible to 
participate in the Medicare Program.
    OPOs coordinate the procurement, preservation and transportation of 
organs from deceased donors, and maintain a system for locating 
prospective recipients for organ transplantation. Section 1138 of the 
Act sets forth hospital protocols for the identification of potential 
organ donors and the standards for OPOs. To be an OPO, an entity must 
meet the applicable requirements of both the Act and the Public Health 
Service Act (the PHS Act). The statutory functions of an OPO are also 
set forth in 42 U.S.C. 273; section 371 of the PHS Act. Section 1138(b) 
of the Act provides the statutory qualifications and requirements that 
an OPO must meet in order to be reimbursed under the Medicare or 
Medicaid Program for certain organ procurement costs. CMS established 
Conditions for Coverage (CfCs) OPOs must meet in order to receive 
payment under Medicare or Medicaid for organ procurement costs in the 
regulations at 42 CFR part 486, subpart G. Section 1138(b)(1)(A) of the 
Act specifies that payment may be made for organ procurement costs only 
if the agency is a qualified OPO operating under a grant made under 
section 371(a) of the PHS Act or has been certified or re-certified by 
the Secretary as meeting the standards to be a qualified OPO. Among 
those requirements, each OPO must be a member of, participate in, and 
abide by the rules and requirements of the Organ Procurement 
Transplantation Network (OPTN) that are approved by the Secretary (see 
42 CFR 486.320).
    Medicare reimburses THs for organ acquisition costs under 
reasonable cost principles \13\ under section 1861(v) of the Act, based 
on the TH's ratio of Medicare usable organs to total usable organs. 
Medicare authorizes payment to designated OPOs for kidney acquisition 
costs, under reasonable cost

[[Page 73470]]

principles \14\ in accordance with section 1861(v) of the Act, based on 
the OPO's ratio of Medicare usable kidneys to total usable kidneys (see 
section 1881(b)(2)(A) of the Act).
---------------------------------------------------------------------------

    \13\ See 42 CFR 412.113(d); HCFA Ruling 87-1 (April 1987); CMS 
Ruling 1543-R (December 2006).
    \14\ Id. Section 1138(b)(1)(F) of the Act; 42 CFR 
413.1(a)(1)(ii)(A); 413.200(a).
---------------------------------------------------------------------------

    Histocompatibility laboratories provide laboratory services to 
ensure compatibility between donor organs and potential recipients in 
preparation for transplants. Section 1881(b)(2)(A) of the Act 
authorizes Medicare reimbursement for the cost incurred by a 
histocompatibility laboratory in accordance with sections 1861(v) or 
1886 of the Act (if applicable). Histocompatibility laboratories are 
either independent or hospital-based. A histocompatibility laboratory 
is ``independent'' unless it is considered a department of the hospital 
and subject to control of the hospital.\15\ Section 413.200(a) requires 
the reasonable costs of services furnished by histocompatibility 
laboratories be reimbursed in accordance with the principles contained 
in 42 CFR 413.60 and 413.64.
---------------------------------------------------------------------------

    \15\ 43 FR 58371 (December 14, 1978).
---------------------------------------------------------------------------

2. Organ Acquisition Payment Policy
    We received approximately 400 timely pieces of correspondence 
regarding the proposals and policies discussed in this section of this 
final rule with comment period. Comment summaries and responses are 
included in each lettered section.
a. Terminology Notes and Proposed Definitions
(1) Use of Consistent Terminology
    Throughout this final rule, we will use consistent terminology such 
as ``transplant hospital'' and ``transplant program.'' These terms have 
been defined in other CMS regulations at 42 CFR 482.70 as follows:
    Transplant hospital means a hospital that furnishes organ 
transplants and other medical and surgical specialty services required 
for the care of transplant patients.
    Transplant program means an organ-specific transplant program 
within a transplant hospital (as defined in this section).
    The regulations in 42 CFR parts 412 and 413 had previously used 
``transplantation center'' to mean a ``transplant program.'' Our PRM 
also uses ``certified transplant center'' to mean a TH, but we proposed 
to use consistent language in this rule to avoid confusion. In section 
X.B.2.m.(1). of the preamble of the FY 2022 IPPS/LTCH PPS proposed 
rule, we proposed conforming changes to some existing regulations to 
ensure that ``transplant hospital'' and ``transplant program'' are used 
consistently and as described in this section.
    Comment: Some commenters expressed appreciation for CMS' use of 
consistent terminology.
    Response: We appreciate the commenters' support. Throughout this 
final rule, we will refer to a hospital that has an approved organ-
specific transplant program as a TH, and we will use ``transplant 
program'' to refer to the organ-specific program itself.
(2) Definitions
    In addition to the proposals to use consistent terminology, in the 
preamble to the proposed rule we proposed to add specific definitions 
into the regulations by adding Sec.  413.400, entitled ``Definitions,'' 
to new subpart L of 42 CFR, part 413. We also proposed to move all 
definitions in existing Sec.  413.200(b) ``Definitions,'' to new Sec.  
413.400 to maintain this regulation with all other organ acquisition 
regulations in proposed new subpart L of part 413. Further, we proposed 
to revise some of the definitions proposed to be moved from Sec.  
413.200(b) to new Sec.  413.400, as noted in the following discussion.
    We received no comments on our proposal to move all definitions in 
existing Sec.  413.200(b) to new Sec.  413.400, thus we are finalizing 
our proposal as proposed.
    For organ acquisition payment purposes, an ``organ'' means a human 
kidney, liver, heart, lung, pancreas, or intestine (or multivisceral 
organs when transplanted at the same time as an intestine) as defined 
in 42 CFR 486.302. Effective October 1, 2004, organs also include 
pancreata procured for the purpose of acquiring pancreatic islet cells 
for transplantation into individuals who are participating in a 
National Institute of Diabetes and Digestive and Kidney Diseases 
clinical trial. Section 733 of the Medicare Prescription Drug, 
Improvement and Modernization Act of 2003 (Pub. L. 108-173) requires 
Medicare to pay for items and services that are reasonable and 
necessary routine patient care costs related to acquisition and 
delivery of pancreatic islet cells for transplantation into Medicare 
beneficiaries included in a National Institute of Diabetes and 
Digestive and Kidney Diseases clinical trial of islet cell transplants.
    We proposed to codify our definition for ``organ'' in Sec.  
413.400, new subpart L. We noted that the proposed definition of organ 
is for Medicare organ acquisition payment purposes and differs from the 
definition set forth in 42 CFR 486.302 CfC for OPOs.
    The CMS OPO CfCs final rule (85 FR 77898 published December 2, 
2020) defines ``organ'' under 42 CFR 486.302, to mean a human kidney, 
liver, heart, lung, pancreas, or intestine (or multivisceral organs 
when transplanted at the same time as an intestine). The pancreas 
counts as an organ even if it is used for research or islet cell 
transplantation. The OPO CfC final rule (85 FR at 77947) describes the 
inclusion in the performance measures for OPO certification of 
pancreata used for research in the definition of organ as necessary in 
order to meet the statutory requirements of section 371(c) of the 
Public Health Service Act that provides that pancreata procured by an 
OPO and used for islet cell transplantation or research shall be 
counted for purposes of certification or recertification (85 FR 77902). 
However, for Medicare payment purposes, an organ procured for research 
is not counted as a Medicare organ in Medicare's share of organ 
acquisition costs, except where explicitly required by law. Therefore, 
in order to mitigate potential stakeholder confusion, we proposed a 
definition of ``organ'' for organ acquisition payment purposes that 
differs from the definition set forth in the OPO CfCs.
    Comment: Several commenters requested CMS expand the definition of 
``organ'' to include vascular composite allografts (VCAs), in alignment 
with the OPTN's definition of organ applicable to the OPTN under 42 CFR 
121.2, and be included in organ counts for OPOs and THs so Medicare can 
calculate a share of acquisition costs for VCAs. A few commenters 
suggested the proposed definition of organ reimbursement be expanded to 
include other clinical trials and disease states.
    Response: Our definition of organ in Sec.  413.400 is for organ 
acquisition payment purposes that are outlined in the statute or 
adopted through the regulatory process to be paid outside of the IPPS. 
We have historically not included VCAs in the definition of organ for 
OPO CfCs because VCA transplantation is generally very localized and 
rarely performed.\16\ According to OPTN data, in 2019, only 
approximately 15 such transplants occurred, the vast majority being the 
transplantation of a uterus (12 transplants). In 2020, there were five

[[Page 73471]]

VCA transplants; in 2021 (through November 19, 2021), there were four 
VCA transplants.\17\ Although it is not clear from the OPTN data 
whether these VCA transplant recipients were Medicare beneficiaries, 
inclusion of VCAs as organs would require a separate assessment of the 
impact throughout all CMS policies and regulations, and could lead to 
changes that would be beyond the scope of this rule. Although we may 
reconsider this issue in the future if VCA transplants become more 
common procedures, we are not expanding the definitions of ``organs'' 
to include VCAs for organ acquisition payment purposes in this final 
rule.
---------------------------------------------------------------------------

    \16\ See 85 FR 77906. The OPTN database was accessed on July 11, 
2020 and number of transplants for abdominal wall, head & neck 
(cranial facial), head & neck (scalp), GU: Penile, GU: Uterus, upper 
limb: Bilateral, upper limb: Unilateral, and VCA were counted for 
2018 and 2019. In 2018, there were 11 transplants.
    \17\ https://insights.unos.org/OPTN-metrics/.
---------------------------------------------------------------------------

    As noted, the proposed definition at Sec.  413.400 specifically 
included in the definition of ``organ'' pancreata procured on or after 
October 1, 2004, for the purpose of acquiring pancreatic islet cells 
for transplantation into individuals who are participating in a 
National Institute of Diabetes and Digestive and Kidney Diseases 
(NIDDK) clinical trial. This rule implements Medicare's payment for the 
acquisition and delivery of pancreatic islet cells for transplantation 
into Medicare beneficiaries included in a NIDDK clinical trial of islet 
cell transplants required by section 733 of the Medicare Prescription 
Drug, Improvement and Modernization Act of 2003 (Pub. L. 108-173). 
Section 733 requires routine costs, transplantation and appropriate 
related items and services for the acquisition and delivery of the 
pancreatic islet cell transplantation for Medicare beneficiaries who 
are participating in a clinical investigation of pancreatic islet cell 
transplantation. In light of this specific statutory requirement, we 
believe it would be inappropriate to expand the definition of organ in 
Sec.  413.400 to include other clinical trials and disease states as 
commenters suggested.
    After consideration of public comments, we are finalizing our 
definition of ``organ'' for acquisition payment purposes, as proposed, 
at Sec.  413.400, in new subpart L, with modifications based on 
comments received to clarify the definition of pancreata for organ 
acquisition payment purposes, by adding the public law citation to the 
definition. In this regard, we are finalizing that an organ, for organ 
acquisition payment purposes, includes pancreata procured on or after 
October 1, 2004, for the purpose of acquiring pancreatic islet cells 
for transplantation into individuals who are participating in a 
National Institute of Diabetes and Digestive and Kidney Diseases 
clinical trial in accordance with section 733 of the Medicare 
Prescription Drug, Improvement and Modernization Act of 2003.
    In the proposed rule, we proposed to include the definition of 
Organ Procurement Organization (OPO) as it currently exists in Sec.  
413.200(b). As defined in 42 CFR 486.302, an OPO means an organization 
that performs or coordinates the procurement, preservation, and 
transport of organs and maintains a system for locating prospective 
recipients for available organs. An OPO can be a HOPO or an independent 
OPO. An OPO is ``independent'' unless it is considered a department of 
the hospital and subject to control of the hospital.
    Comment: Several commenters also requested we amend the proposed 
definition of ``OPO'' to reflect that the OPTN, and not the OPO, 
maintains the system for identifying and locating prospective 
beneficiaries for available organs.
    Response: We appreciate the commenters' suggestion; however, we 
respectfully disagree with modifying the definition as commenters 
suggest. OPOs do have a system for locating prospective beneficiaries 
for available organs. We do not believe our definition will cause 
confusion with respect to the separate functions of the OPTN. After 
consideration of the public comments we received, we are finalizing our 
proposed definition of ``OPO'' as proposed.
    Additionally, we proposed to codify the definition of a hospital-
based organ procurement organization (HOPO) as an OPO that is 
considered a department of the TH and reports organ acquisition costs 
it incurs on the TH's Medicare cost report (MCR).\18\ The proposed 
definition is consistent with the description of HOPO in the PRM, and 
is commonly known in the organ acquisition and transplant community. We 
proposed to codify our proposed definition in Sec.  413.400, new 
subpart L. As of March 12, 2021, there are 7 HOPOs in operation.\19\
---------------------------------------------------------------------------

    \18\ Hospital and Health Care Complex Cost Report, currently 
Form CMS-2552, OMB No. 0938-0050.
    \19\ Information available at https://optn.transplant.hrsa.gov/members/; accessed March 12, 2021.
---------------------------------------------------------------------------

    We also proposed that a transplant hospital/HOPO (TH/HOPO) refers 
to a transplant hospital, or a transplant hospital that operates a HOPO 
(as defined previously in this section) and performs organ procurement 
activities as one entity reported on the transplant hospital's MCR. We 
proposed to codify our proposed definition in Sec.  413.400 new subpart 
L.
    Comment: A commenter recommended the definition of HOPO should be 
separate from the definition of TH/HOPO due to differences in various 
organ acquisition reporting and operational activity between a HOPO and 
a transplant program.
    Response: We agree that there are differences in various organ 
acquisition reporting and operational activity between a HOPO and a 
transplant program. We note that in the proposed rule, we proposed a 
separate definition for ``HOPO.'' However, we also proposed a 
definition of TH/HOPO, to indicate that a TH/HOPO means a transplant 
hospital and a transplant hospital with a hospital based OPO, which is 
an OPO owned and operated by the hospital. In this context, the HOPO is 
reimbursed through the transplant hospital's cost report as a 
department of the hospital and does not file a cost report separately 
from the transplant hospital nor is it reimbursed separately. We are 
codifying our proposed definitions of HOPO and TH/HOPO, as proposed, at 
Sec.  413.400, in new subpart L.
    In the proposed rule, we also proposed to revise the terminology 
``freestanding'' as it currently exists in 42 CFR 413.200(b) in 
relation to OPOs, to be ``independent OPO (IOPO)'' because this 
terminology is more widely used in the industry. We also proposed to 
revise the IOPO definition by adding a third distinguishing factor. The 
proposed definition for an IOPO will mean an OPO that files a MCR 
separate from a hospital and meets all of the following: (1) Is not 
subject to the control of a hospital with respect to the hiring, 
firing, training, and paying of employees; (2) is not considered as a 
department of a hospital for insurance purposes (including malpractice 
insurance, general liability insurance, worker's compensation 
insurance, and employee retirement insurance); and (3) reports organ 
acquisition costs it incurs on the IOPO MCR.\20\ In the preamble to the 
FY 2022 IPPS/LTCH PPS proposed rule, we proposed to clarify that an 
IOPO that wishes to have the cost of its pre-transplant services 
reimbursed under Medicare must agree to certain requirements specified 
in 42 CFR 413.200(c). If an IOPO operates a histocompatibility 
laboratory, the costs of its histocompatibility laboratory are included 
on the IOPO's MCR. We received no comments on this proposal;

[[Page 73472]]

therefore, we are codifying our proposed definition of IOPO, as 
proposed, at Sec.  413.400, in new subpart L.
---------------------------------------------------------------------------

    \20\ Organ Procurement Organizations and Histocompatibility 
Laboratory, currently Form CMS-216, OMB. No. 0938-0102.
---------------------------------------------------------------------------

    In the FY 2022 IPPS/LTCH PPS proposed rule, we stated that a 
histocompatibility laboratory performs laboratory services to determine 
the degree of histocompatibility between donor organs and potential 
recipients. We also proposed to include a definition of 
``histocompatibility laboratory'' as it currently exists in Sec.  
413.200(b) with a technical correction. We proposed to make a technical 
correction to the cross-reference to Sec.  413.2171(d) because this 
regulation citation is no longer correct. We proposed that 
``histocompatibility laboratory'' means a laboratory meeting the 
requirements set forth in 42 CFR 493.1227 and providing the services 
for the acquisition of kidneys or other organs for transplantation. We 
received no comments on this proposal; therefore, we are finalizing our 
proposed definition of histocompatibility laboratory, as proposed, at 
Sec.  413.400, in new subpart L.
    We proposed that standard acquisition charge (SAC) means a charge 
as defined in proposed new Sec.  413.404 in section II.C.2.c. of this 
final rule with comment period. We received no comments on this 
proposal; therefore, we are codifying our proposed definition of SAC, 
as proposed, at Sec.  413.400, in new subpart L.
    We also proposed to add the definitions for ``transplant hospital'' 
and ``transplant program'' that currently exist in 42 CFR 482.70 in 
Sec.  413.400, to new subpart L.
    Comment: A few commenters supported our clarification of transplant 
hospital and transplant program.
    Response: We thank the commenters for their support. We are 
codifying our proposed definitions for ``transplant hospital'' and 
``transplant program,'' as proposed, at Sec.  413.400, in new subpart 
L.
b. Provisions Related to Organ Acquisition Costs
(1) Proposed Items and Services Considered Organ Acquisition Costs
    In this final rule with comment period, we are adding Sec.  
413.402(a) to new subpart L to specify that costs incurred in the 
acquisition of organs from a living donor or a cadaveric donor by the 
hospital or by an OPO, as appropriate, are organ acquisition costs. To 
make necessary policy revisions and clarifications of acquisition costs 
for kidneys as well as for non-renal organs, in the proposed rule we 
proposed to revise Sec.  412.100(b), by removing the list of organ 
acquisition costs found in that paragraph and re-codifying them with 
some revisions by adding Sec.  413.402(b) to new subpart L.
    We proposed to codify at proposed Sec.  413.402(b) that the costs 
of acquiring organs (kidneys and non-renal organs) covered by Medicare 
Part A are: (1) Tissue typing, including tissue typing furnished by 
independent laboratories; (2) donor and beneficiary evaluation; (3) 
other costs associated with excising organs, such as general routine 
and special care services provided to the donor; (4) operating room and 
other inpatient ancillary services applicable to the donor; (5) 
preservation and perfusion costs; (6) OPTN registration fees; (7) 
surgeons' fees for excising cadaveric organs (currently limited to 
$1,250 for kidneys); (8) transportation of the excised organ to the TH; 
(9) costs of organs acquired from other hospitals or OPOs; (10) 
hospital costs normally classified as outpatient costs applicable to 
organ excisions (services include donor and recipient tissue typing, 
work-up, and related services furnished prior to admission); (11) costs 
of services applicable to organ excisions which are rendered by 
residents and interns not in approved teaching programs; and (12) all 
pre-admission services applicable to organ excisions, such as 
laboratory, electroencephalography, surgeons' fees for cadaveric 
excisions, and the costs of physicians' services.
    We proposed to apply the existing elements of kidney acquisition 
costs found in Sec.  412.100(b) to all organs, with clarifying 
revisions as described. These items and services are currently 
specified in Sec.  412.100(b) (for kidneys only) and also discussed in 
sections 3101, 3102, and 3103 of the PRM. We proposed to revise Sec.  
412.100(b) to reference that kidney acquisition costs are specified in 
new Sec.  413.402(b) of this chapter.
    We proposed to add Sec.  413.402(b)(6) to new subpart L to include 
the costs for the OPTN registration of a beneficiary for a kidney 
transplant as specified in Sec.  412.100(b)(6) and also include the 
costs for registration of a beneficiary for a non-renal transplant. The 
OPTN registration fee is assessed for all transplant candidates placed 
on the OPTN waiting list.\21\ We proposed to limit these registration 
fees to the OPTN registration fee. Reasonable cost principles, as set 
forth in section 1861(v) of the Act and as specified in 42 CFR 413.1(b) 
and 413.9, do not permit Medicare to pay for duplicate services. In the 
proposed rule, we asserted that any registration fee outside of the 
OPTN registration fee would be considered unnecessary and duplicative 
under reasonable cost principles for Medicare organ acquisition costs.
---------------------------------------------------------------------------

    \21\ The hospital CoPs at 42 CFR 482.45(b)(1) require each TH to 
be a member of the OPTN and abide by its rules, which for THs 
include registering potential transplant recipients on the OPTN 
registry as described in section 1.2.D of the OPTN Bylaws, available 
at https://optn.transplant.hrsa.gov/media/1201/optn_bylaws.pdf.
---------------------------------------------------------------------------

    Payment mechanisms for certain kidney acquisition costs differ 
depending on whether the donor is living or is cadaveric. Our provision 
will codify that surgeon fees are included as kidney acquisition costs 
paid through the Medicare cost report only when the kidney excision 
occurs with a cadaveric donor. When a living donor enters the hospital 
for the actual kidney excision--and the recipient is a Medicare 
beneficiary--surgeon fees for excising the kidney are still considered 
kidney acquisition costs, but are not included as kidney acquisition 
costs on the cost report or paid through the cost report. Instead, the 
surgeon bills these surgeon fees to Medicare Part B using the 
transplant recipient's Medicare Beneficiary Identifier (MBI), and 
Medicare pays for living kidney donor surgeon fees through the claims 
processing system. Congress enacted section 1881(d) of the Act in 1978, 
which (in part) entitled living donors to benefits under Medicare Part 
B with respect to the kidney donation, as if the donor were eligible 
for Medicare, and allowed the Secretary to prescribe in regulation how 
that would occur. CMS regulations at 42 CFR 410.55 and 410.163,\22\ 
require Medicare Part B to pay for medical and other health services 
furnished in connection with a kidney donation if the kidney is 
intended for a Medicare beneficiary with ESRD and without deductibles 
or co-insurance. As such, our proposed codification of Part A kidney 
acquisition costs related to donor surgeon fees only focuses on 
surgeons' fees for cadaveric excisions.
---------------------------------------------------------------------------

    \22\ 51 FR 41332.
---------------------------------------------------------------------------

    Section 371(b)(3)(F) of the PHS Act, 42 U.S.C. 273(b)(3)(F), 
requires that OPOs provide or arrange for the transportation of donated 
organs to transplant centers. We proposed to codify our longstanding 
policy in PRM section 3101 that Medicare covers the transportation of 
donated organs as an organ acquisition cost as authorized by section 
371(b)(3)(F) of Public Health Service Act.
    We proposed to add Sec.  413.402(b) to new subpart L to specify the 
acquisition costs given at Sec.  412.100(b) of this chapter, with minor 
clarifying revisions,

[[Page 73473]]

and to revise Sec.  412.100(b) to cross-reference Sec.  413.402(b). We 
also proposed to make additional revisions, technical corrections and 
conforming changes to Sec.  412.100 in sections II.C.2.b.(1). and 
II.C.2.m.(2). of this final rule with comment period.
    Finally, we have received inquiries over the years from various 
stakeholders about whether costs resulting from services to living 
kidney donors with complications are organ acquisition costs. We 
proposed to codify that policy in Sec.  413.402(c) in new subpart L, to 
provide greater clarity to stakeholders. We discuss details of our 
policy and proposed codification related to living donor complications 
in section II.C.2.e.(4). of this final rule with comment period.
    Comment: Many commenters appreciated our proposals to codify policy 
and to locate organ acquisition policies in a common location in the 
regulations. However, several commenters were concerned that our 
proposal to limit registry fees to the OPTN fee at proposed at Sec.  
413.402(b)(6) would shift costs of registry fees to transplant 
hospitals for living donors or donors participating in kidney-paired 
donations, would discourage living donor transplants, and could 
jeopardize health equity, particularly for kidney-only programs. 
Commenters requested that CMS not limit registry fees to the OPTN fee 
only and cited a 2014 letter from CMS that stated that transplant 
hospitals can engage in contracts with third-parties that provide 
services to facilitate transplantation and place the costs of those 
services on their cost reports. A commenter supported CMS not covering 
the fee charged by the current contractor that operates the OPTN, while 
other commenters supported CMS' covering that fee. A commenter objected 
to CMS referring to the OPTN contractor fee services as ``duplicative'' 
of the OPTN registry and described the services the contractor performs 
to facilitate and support organ transplantation.
    Response: We appreciate commenters' support for our proposals to 
codify organ acquisition cost policies in one location in the Code of 
Federal Regulations and thank commenters for sharing their concerns 
about the proposed registry fee costs. We agree that the OPTN 
contractor and other registries can provide valuable services that 
support and encourage transplantation. After further researching 
registry fee information provided in the comments, we are clarifying 
that we cover as registry fees only the reasonable fees for actually 
registering a potential recipient for an organ transplant.
    We also agree with commenters that the services other registries 
provide may differ from those provided by the OPTN. For example, we 
agree with commenters that third-party registries can provide services 
beyond those of the OPTN to facilitate living organ donation, 
particularly related to paired kidney donation, and increase a 
potential transplant recipient's ability to receive a living donor 
transplant. As such, we do not believe that all additional registry 
fees would be ``duplicative'' of the OPTN services. We believe covering 
the reasonable and necessary costs of registry fees that are not 
duplicative will support transplantation. Therefore, we are finalizing 
our proposal with modifications, so that Medicare covers as organ 
acquisition costs at Sec.  413.402(b)(6) the OPTN registration fee, and 
the reasonable and necessary cost of other fees, such as the 
registration fees for a kidney paired exchange, to register candidates 
for organ or kidney transplants. These allowable registry fees must 
support or promote organ transplantation and must not be duplicative in 
nature. We will monitor the registry fees reported and may refine our 
policy if needed in future rulemaking.
    Comment: Many commenters disagreed with our proposal at Sec.  
413.402(b)(8) that organ acquisition costs include costs to transport 
the excised organ to the transplant hospital, but excludes costs for 
transporting the cadaveric donor. Some commenters suggested that the 
exclusion of transportation costs for the cadaveric donor was a new 
policy proposal and believed that the proposal was eliminating costs 
for transportation of the cadaveric donor from the donor hospital to an 
OPO. Some commenters opined that the proposal would impede operations 
of OPOs that may operate organ recovery centers. Several commenters 
cited 42 U.S.C. 273(b)(3)(F), (requiring OPOs to provide or arrange for 
transportation of donated organs to transplant centers), and asserted 
that this section does not prohibit transportation of the donor (as 
opposed to individual organs) when the transportation is for the 
purpose of transplantation. A few commenters suggested that CMS permit 
transportation of the cadaveric donor to an off-site recovery facility 
when it could be proven that the overall costs of acquisition would be 
lower.
    Commenters raised three other scenarios where a cadaveric donor may 
require transportation to another hospital: (1) When the donor 
hospital's protocol does not permit organ excision when cardiac death 
has occurred; (2) when clinical outcomes could be compromised because 
the donor hospital is not geographically located within reasonable 
proximity to needed transportation infrastructure, such as an airport, 
when the organ must be flown to the intended recipient; and (3) where 
the donor hospital does not have the capacity at that time to 
accommodate organ procurement. The commenters opined that in these 
situations, transporting the donor avoided the loss of transplantable 
organs or increased the likelihood of the organs' viability. Another 
commenter requested clarification as to whether it was permissible for 
the donor to be moved from the donor hospital to the transplant 
hospital. A commenter requested that the proposed codification of 
transportation costs remain as it was written in Sec.  412.100(b).
    Finally, a commenter sought clarification of transportation costs 
for transporting non-renal organs. The commenter noted that the non-
renal organs travel with the surgeon on the plane, so there is no 
incremental cost for transportation of the organ. The commenter stated 
that it would be administratively burdensome for the OPO and the 
transplant hospital to apportion the transportation costs and requested 
exclusion of the non-renal transportation in this situation, as there 
is no ``cost'' associated with the organ transportation.
    Response: The current Medicare organ acquisition payment policy 
does not include transportation costs for a cadaveric donor. However, 
we agree with commenters that 42 U.S.C. 273(b)(3)(F) does not prohibit 
Medicare from covering transportation of the cadaveric donor. We 
appreciate the scenarios commenters provided relating to transportation 
of a cadaveric donor and believe that broadening coverage of 
transportation costs would more strongly support organ procurement and 
transplantation. We also agree with commenters that it would be 
reasonable to allow transportation costs of a cadaveric donor when that 
donor is transported to avoid loss of potentially transplantable 
organs, or to preserve clinical outcomes.
    The lack of clarity of the existing payment policy was evident in 
some of the comments, which is why we are being more specific in our 
codification of the payment policy regarding transportation costs. For 
the reasons noted in this section of this final rule with comment 
period, we are finalizing our proposed codification at Sec.  
413.402(b)(8) with modifications in

[[Page 73474]]

response to public comments, to cover as an organ acquisition cost 
transportation of the excised organ to the transplant hospital, and of 
the cadaveric donor to procure organs when it is necessary to preserve 
clinical outcomes or to avoid loss of potentially transplantable 
organs. We believe this modification to our current policy is 
responsive to commenters' concerns, and will support organ procurement, 
address potential disparities in rural areas, and improve clinical 
outcomes.
    Regarding the transportation of non-renal organs, the commenter 
described a scenario in which the commenter believed there is no 
additional cost incurred for organ transportation when the transplant 
team travels to procure and retrieve the organ. In this scenario we 
agree that there is not a transportation cost incurred for the organ 
and therefore no need to apportion the travel costs. However, under the 
general requirements at Sec. Sec.  413.20 and 413.24 to maintain 
records for items submitted on the Medicare cost report for proper cost 
finding and payment, the OPO and transplant hospital would have to 
maintain accurate records for the number of organs procured without 
transportation costs and the number of organs procured with 
transportation costs in order to properly allocate overhead costs. We 
note that when an OPO does not incur transportation costs for all 
organs, the transportation costs for kidneys would be reduced from the 
accumulated costs statistic in order to equitably allocate overhead 
costs.
    Comment: Commenters requested clarification of whether 
transportation of recovery staff, including donor family support staff, 
would be allowable organ acquisition costs. A different commenter 
referred to procuring multiple organs which had no incremental cost for 
transportation beyond the charter flight travel costs for the 
procurement team. This commenter stated that the OPO has no control 
over the cost of charter transportation, stating it would require 
contracts with multiple transportation providers that may not be known 
to the OPO until the transportation has been arranged.
    Response: We differentiate ``transportation'', which refers to the 
organ or the cadaveric donor, from ``travel,'' which includes travel 
costs of physicians or other practitioners that recover organs under 
contract or arrangement with the OPO, as well as recovery personnel if 
necessary, either from its own staff or under contract or arrangement, 
to ensure that all usable organs are recovered in a manner that, to the 
extent possible, preserves them for transplantation. These reasonable 
travel costs are allowable organ acquisition costs under Sec.  
413.402(b)(9) as they are costs of organs acquired from other hospitals 
or OPOs. If multiple organs are procured, the travel costs for the 
procurement team should be apportioned equitably to all organs.
    We are concerned by the commenter's statement that the OPO ``has no 
control'' over the cost of air charters, and we remind stakeholders 
that reasonable cost principles apply to all organ acquisition costs. 
Reasonable cost includes all necessary and proper costs incurred in 
furnishing the services, as defined in 42 CFR 413.9. For example, in 
this scenario an OPO might have contracts with multiple transportation 
providers and could negotiate a reasonable price for air charters.
    Comment: Several commenters were concerned that the specific 
language we used in proposing to codify allowable organ acquisition 
costs for proposed Sec.  413.402(b)(3) (other costs associated with 
excising organs, such as general routine and special care services) and 
proposed Sec.  413.402(b)(4) (operating room and other inpatient 
ancillary services) as set forth in section X.B.2.b.(1). of the 
preamble of the FY 2022 IPPS/LTCH PPS proposed rule, does not match the 
language that currently exists in the relevant sections of Chapter 31 
of the Provider Reimbursement Manual (PRM) or may be subject to 
misinterpretation by a MAC auditor to apply only to living donors. 
Commenters requested clarification of whether the organ acquisition 
costs incurred for these services will be covered for both living and 
cadaveric donors.
    Response: We agree with commenters that other costs associated with 
excising organs, such as general routine and special care services 
provided to the donor specified in proposed Sec.  413.402(b)(3) and 
operating room and other inpatient ancillary services applicable to the 
donor in proposed Sec.  413.402(b)(4) should be clarified to specify 
that they apply to both living and cadaveric donors. The commenters' 
suggestions are consistent with the existing policy and could avoid 
misinterpretation of the policy. Additionally, in reviewing the 
language, we realized that ``special care services'' was not clear, and 
we added language to give two examples (intensive care unit or critical 
care unit services) so providers could better understand.
    Therefore, in response to commenters and to clarify language, we 
are finalizing our proposed regulation text with modifications to 
clarify the regulation text at Sec.  413.402(b)(3) and Sec.  
413.402(b)(4). The final regulation at Sec.  413.402(b)(3) now 
specifies that other costs associated with excising organs, such as 
general routine and special care services (for example, intensive care 
unit or critical care unit services), provided to the living or 
cadaveric donor are organ acquisition costs. The final regulation at 
Sec.  413.402(b)(4) now specifies that operating room and other 
inpatient ancillary services applicable to the living or cadaveric 
donor are organ acquisition costs. After our regulations are effective, 
we will make conforming changes to the manual.
    Comment: A commenter requested that CMS consider the full spectrum 
of ``uncompensated costs'' related to organ procurement and 
transplantation, including overhead and administrative costs.
    Response: Overhead and administrative costs that may be allowable 
are allocated to allowable cost centers, including to organ acquisition 
cost centers. See 42 CFR 413.24(d), and also the cost reporting 
instructions for hospitals and for OPOs regarding how general and 
administrative (that is, overhead) costs are allocated (for hospitals, 
PRM 15-2, chapter 40, cost reporting instructions Sec.  4020, and for 
OPOs PRM 15-2, chapter 33, cost reporting instructions Sec.  3311, 
available online at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021935). We have 
clarified the regulation text at Sec.  413.402(a) to specify that there 
are administrative and general costs that may be allowable and included 
on the cost report for an OPO or TH/HOPO.
    Comment: A commenter questioned whether living donor specimen 
storage, recently required by the OPTN, will be covered as an organ 
acquisition cost.
    Response: Prior to the OPTN implementing policy changes to align 
with the 2020 Public Health Services guidelines, hospitals and OPOs 
should have been following the Public Health Services guidelines. This 
cost associated with this specimen storage should be treated similar to 
all other specimen storage and not included as an organ acquisition 
cost.
    Comment: A commenter requested that CMS consider ``uncompensated'' 
costs related to organ procurement and transplantation for pathologists 
and other specialists contracted under third party contracts that are 
indispensable to the organ recovery and transplantation process.
    Response: Regarding the costs of pathologists and other specialists 
under third-party contracts, we are unclear what commenters are 
referring to, and

[[Page 73475]]

without more context, are unable to modify the final rule to address 
this comment.
    Comment: Many commenters believed that some of our proposals were 
intended to be retroactive rules to codify existing organ acquisition 
payment policy. Other commenters believed that the rules would be 
prospective from the effective date of the final rule and that the 
agency did not intend to establish retroactive rules.
    Response: We did not propose to establish retroactive rules under 
section 1871(e)(1)(A) of the Act. Our final rules will generally be 
effective upon the effective date of the final rule. This FY 2022 IPPS 
final rule with comment period will be effective on the effective date 
specified in the DATES section of this final rule with comment period, 
unless a later date is specified. We note that a limited number of the 
final regulations expressly include the effective date of earlier 
statutes that have already established substantive standards. 
Specifically, the final rule at Sec.  413.406 includes an effective 
date of October 1, 2004, from section 733 the Medicare Modernization 
Act of 2003, as it relates to Medicare coverage of islet cell 
transplants. This is not a new policy change nor would it now result in 
a substantive change, as the statute was already effective.
(2) Cost Reporting, Billing, and Payment of Organ Acquisition Costs
    Both THs and OPOs can acquire organs for transplantation; 
therefore, both THs and OPOs can have organ acquisition costs. A TH can 
acquire organs from either a cadaveric donor or a living donor, while 
OPOs acquire organs from cadaveric donors. In accordance with 
requirements at Sec.  413.24(f), at the end of its fiscal year a TH/
HOPO files an annual hospital cost report (currently Form CMS-2552) 
\23\ and an IOPO files an annual OPO/histocompatibility cost report 
(currently Form CMS-216).\24\ Organ acquisition costs incurred by a TH/
HOPO are included on the appropriate organ acquisition cost center on 
its hospital MCR. Organ acquisition costs incurred by an IOPO (or by a 
histocompatibility laboratory, as authorized in section 1881(b)(2)(A) 
of the Act and discussed in section II.C.2.d.(3). of this final rule 
with comment period) are included in the appropriate organ acquisition 
cost center on its MCR.
---------------------------------------------------------------------------

    \23\ OMB No. 0938-0050, expires March 31, 2022.
    \24\ OMB No. 0938-0102, expires November 30, 2024.
---------------------------------------------------------------------------

    Currently, Medicare pays THs prospective payment amounts based on a 
DRG for the actual organ transplant; Medicare also reimburses THs for 
reasonable costs associated with acquiring organs for transplantation 
into Medicare beneficiaries (Sec.  412.113(d)). CMS excludes from the 
prospective payment amounts inpatient hospital organ acquisition costs 
for hearts, kidneys, livers, lungs, pancreas, and intestines (or 
multivisceral organs) incurred by approved THs, as specified in Sec.  
412.2(e)(4). Medicare makes payment for organ acquisition costs 
incurred by hospitals with approved transplantation programs on a 
reasonable cost basis, as specified in Sec.  412.113(d), and in 
accordance with the principles of reasonable cost as set forth in 
section 1861(v) of the Act and in 42 CFR 413.1 and 413.9.
    Currently, when the TH cost report is settled, the Medicare 
contractor calculates the Medicare organ acquisition costs by 
multiplying the total of all allowable organ acquisition costs by the 
ratio of Medicare usable organs to total usable organs, for each organ 
type. The contractor reconciles the TH's Medicare organ acquisition 
costs by comparing the total interim payment amounts paid for organ 
acquisition costs under Sec.  413.64(f) to the total actual Medicare 
organ acquisition costs, and either pays amounts owed or collects from 
the TH any overpayment.
    The statute at section 1881(b)(2)(A) of Act authorizes Medicare to 
pay THs for services provided by OPOs for kidney acquisition. Medicare 
does not directly reimburse OPOs as these services are not covered 
until the transplant occurs at the TH. OPOs receive an interim payment 
based on their kidney SAC which is paid directly to them by the TH that 
receives the kidney procured. Medicare pays IOPOs for kidney 
acquisition indirectly, through the reconciliation of actual costs 
incurred for kidney acquisition to actual kidney SAC payments received, 
as part of cost report settlement in accordance with Sec.  
413.200(e)(2), to ensure that the Medicare Program is paying its 
appropriate share. There is no explicit requirement for Medicare to pay 
IOPOs for non-renal organs in the same way; we do not currently 
reconcile and settle IOPO non-renal organ acquisition costs. Similar to 
kidney acquisition costs, IOPOs are paid an interim rate (SAC) directly 
by the TH (or other IOPO) which receives the non-renal organs the IOPO 
procures. Kidney and non-renal SACs are discussed in more detail in 
section II.C.2.c. of this final rule with comment period.
(3) Services Not Considered Organ Acquisition Costs
    Medicare does not pay for certain costs incurred by OPOs, in 
accordance with section 1861(v)(1)(A) of the Act, and in the proposed 
rule we proposed to establish rules identifying those specific items. 
These activities or services include incurred costs found to be 
unreasonable or unnecessary in the efficient delivery of health care 
services, and are not limited to: \25\
---------------------------------------------------------------------------

    \25\ PRM 15-1, ch 31, Sec.  3108.C.
---------------------------------------------------------------------------

     Burial and funeral expenses for the cadaveric donor, 
including transportation of the cadaveric donor before and after 
excision for funeral services or for burial (burials and funerals are 
not costs of acquiring organs and are not mentioned in section 
371(b)(3) of the PHS Act (42 U.S.C. 273(b)(3)), which lists a number of 
activities or services that OPOs perform); \26\
---------------------------------------------------------------------------

    \26\ 42 U.S.C. 273(b)(3).
---------------------------------------------------------------------------

     Costs associated with the transportation of a living donor 
\27\ (there are programs outside of Medicare that may pay for 
transportation costs for living donors); \28\
---------------------------------------------------------------------------

    \27\ 42 U.S.C. 273(b)(3)(F). This section requires OPOs to 
provide or arrange for the transportation of donated organs to 
transplant centers.
    \28\ 85 FR 59438, September 22, 2020; see also the National 
Living Donor Assistance Center website at https://www.livingdonorassistance.org/About-Us/Mission-Background.
---------------------------------------------------------------------------

     Costs incurred prior to a potential cadaveric donor being 
declared dead;
     Fees or in-center payments for donor referrals (all 
hospitals are required to timely notify OPOs of imminent deaths; \29\ 
PRM 15-2, chapter 40, section 4013 stipulates that, ``No amounts or 
fees paid to a donor, their estate, heirs, or assigns in exchange for 
an organ or for the right to remove or transplant an organ are included 
in organ acquisition costs.'');
---------------------------------------------------------------------------

    \29\ 42 CFR 482.45.
---------------------------------------------------------------------------

     Costs associated with OPO sponsored seminars where 
continuing education credits are given \30\ except when the attendee is 
an OPO staff member; and
---------------------------------------------------------------------------

    \30\ See CMS Pub. 15-1, chapter 4 for more information regarding 
allowable costs of educational activities.
---------------------------------------------------------------------------

     Certain costs incurred for administrator's duties 
associated with professional organizations (when these costs are not 
reasonable).
    Comment: A few commenters encouraged us to allow OPO-sponsored 
seminars with continuing education credits as allowable organ 
acquisition costs, noting that it would improve and advance the organ 
transplant system. Another commenter questioned whether

[[Page 73476]]

seminars without continuing education credits would be covered.
    Response: The reasonable cost of an OPO-sponsored seminar that 
provides continuing education credits, may be an allowable 
administrative and general cost (included as organ acquisition costs) 
limited to the OPO staff (as described at Sec.  486.326(b)) if the 
seminar is related to patient care and meets the requirements at Sec.  
413.9. The reasonable cost of an OPO-sponsored seminar that provides 
continuing education credits to attendees who are not on the OPO's 
staff is not an allowable organ acquisition cost as these costs are 
absorbed by the attendee or their employer and do not benefit the OPO.
    The reasonable cost of an OPO-sponsored seminar that does not 
provide continuing education credits, regardless of whether it is 
provided to the OPO staff, may be an allowable administrative and 
general cost to the OPO if it relates to patient care and meets the 
requirements at Sec.  413.9.
    OPO-sponsored seminar costs are the direct costs associated with 
providing the seminar such as retaining speakers, supplies, meeting 
room fees, and meals (excluding alcohol) where necessary.
    Based on comments received, we are codifying at Sec.  413.402(d) 
that organ acquisition costs do not include OPO-sponsored seminar costs 
associated with attendees who are not on the OPO's staff and receiving 
continuing education credits.
    Comment: A commenter requested that CMS clarify which 
Administrator's duties associated with professional organizations are 
not covered.
    Response: Regarding certain costs incurred for administrator's 
duties associated with professional organizations, Sec.  413.9(a) 
allows Medicare coverage of costs that are reasonable and related to 
the care of beneficiaries, as discussed in the previous comment 
response. The reasonable cost of membership in professional 
organizations would be allowable if the function and purpose of the 
organization can be reasonably related to the development and operation 
of patient care facilities and programs, or the rendering of patient 
care services (see PRM 15-1, Sec.  2138). Membership costs and costs 
related to the organization's meetings and conferences are allowable as 
described in Sec.  2138.1. However, Sec.  2138.4 notes that the 
Medicare Program will look to comparable providers as well as to the 
justification by the individual provider in determining the 
reasonableness of the claimed costs related to memberships. Costs to 
the Medicare Program for individuals serving in administrative roles 
for professional organizations may be more than the costs for an 
ordinary member of a professional organization, as those in 
administrative roles for the organization may have to attend additional 
meetings, etc. as part of their duties. However, professional 
organization costs for those in administrative roles that are 
unreasonable would not be allowable. An example of unreasonable costs 
would be if an individual in an administrative role for a professional 
organization attended a meeting held at a luxury resort, where lodging 
costs were substantially more expensive than usual (see 42 CFR 
413.9(c)(3)). We have revised the text in the preamble at II.C.2.b.(3) 
of this final rule with comment period to explain the rationale to 
exclude certain administrator duty costs that are not reasonable. As 
discussed at the end of section II.C.2.b.(3). of this final rule with 
comment period, after considering public comments, we have codified 
costs that are not related to organ acquisition at Sec.  413.402(d).
    Comment: Several commenters stated that CMS should revise the 
preamble language pertaining to costs not covered by Medicare that 
reads, ``Costs incurred prior to a potential donor being declared brain 
dead (healthcare costs incurred prior to declaration of death are the 
responsibility of the potential donor's health insurance).'' Commenters 
noted that some donors are declared dead based on cardiac or 
circulatory death, and the phrasing should not be limited to brain 
death only. Finally, we received several comments related to covering 
costs prior to declaration of death.
    Response: We agree with commenters and have corrected the preamble 
text in this final rule in response to these comments. We agree with 
the commenters who stated that our language in section X.B.2.b.(3). of 
the preamble of the FY 2022 IPPS/LTCH PPS proposed rule about costs 
incurred prior to a potential donor ``being declared brain dead'' 
should be revised to read ``being declared dead'', to include those 
donors who die from cardiac death. Finally, the summary of comments and 
responses related to covering costs prior to declaration of death are 
in section II.C.2.l. of this final rule with comment period.
    Comment: A commenter supported the continued exclusion from 
Medicare coverage of the transportation of the cadaveric donor for 
burials or funerals; another commenter challenged part of our rationale 
for non-coverage, writing that section 371(b)(3) of the PHS Act does 
not represent an all-inclusive list of allowable services for OPOs.
    Response: We thank the commenter for supporting our policy. 
Regarding our rationale for non-coverage of transportation of cadaveric 
donors for funeral services or for burial, our policies regarding items 
and services that are covered as organ acquisition costs are based, in 
general, on whether the item or service is related to acquiring organs 
for transplantation. We agree with the commenter who stated that 
section 371(b)(3) of the PHS Act does not specify every item or service 
covered as an organ acquisition cost. When an item is not explicitly 
cited, we must determine if it meets the general principle of being 
related to acquiring organs for transplantation. Costs of transporting 
a donor for burial or for a funeral are not cited in the PHS Act as 
covered costs, but are also not costs of acquiring organs for 
transplantation. Therefore, we are maintaining our policy that 
transporting a deceased donor for a funeral or for burial is not 
related to the acquisition of organs, and is not an allowable cost.
    In summary, effective for cost reporting periods beginning on or 
after the effective date of this final rule with comment period, we are 
finalizing the provisions made in section II.C.2.b. of this final rule 
with comment period as proposed, except for the following 
modifications:
     In Sec.  413.402(a) to specify that there are 
administrative and general costs that may be allowable and included on 
the cost report for an OPO or TH/HOPO.
     In Sec.  413.402(b)(3) to specify that organ acquisition 
costs include other costs associated with excising organs, such as 
general routine and special care services (for example, intensive care 
unit or critical care unit services), provided to the living or 
cadaveric donor.
     In Sec.  413.402(b)(4) to specify that organ acquisition 
costs include operating room and other inpatient ancillary services 
applicable to the living or cadaveric donor.
     In Sec.  413.402(b)(5) to clarify the regulation by adding 
the word ``organ'' so we are specifying that organ preservation and 
perfusion costs are organ acquisition costs.
     In Sec.  413.402(b)(6) to specify that organ acquisition 
costs include Organ Procurement and Transplantation Network 
registration fees and the reasonable and necessary cost of other fees 
to register candidates for organ transplants. These allowable registry 
fees must support or promote organ transplantation and must not be 
duplicative in nature.
     In Sec.  413.402(b)(8) to specify that organ acquisition 
costs include

[[Page 73477]]

transportation of the excised organ to the transplant hospital; and of 
the cadaveric donor to procure organs when it is necessary to improve 
clinical outcomes or to avoid loss of potentially transplantable 
organs.
     In Sec.  413.402(b)(12) to remove the reference to 
surgeons' fees for cadaveric excisions as it is duplicative of Sec.  
413.402(b)(7).
     In section II.C.2.b.(3). of this final rule with comment 
period, to change ``declared brain dead'' to read ``declared dead''.
     In section II.C.2.b.(3). of this final rule with comment 
period, to indicate that the cost of OPO-sponsored seminars that 
provide continuing education credits is not covered unless the attendee 
is an OPO staff member.
     In section II.C.2.b.(3). of this final rule with comment 
period, to revise the rationale for not covering certain costs of 
administrator duties for those in professional organizations to 
indicate that costs that are unreasonable would be excluded.
    While we did not propose to codify the items and services not 
covered as OPO organ acquisition costs described in the proposed rule, 
after consideration of the public comments we received seeking 
clarification or suggesting changes, we believe it is prudent to codify 
the list of examples of items and services not considered to be organ 
acquisition costs. As such, in this final rule we are codifying at 
Sec.  413.402(d), costs not related to organ acquisition in which we 
specify that items or services that are not related to acquiring an 
organ for transplantation, or that are not reasonable under section 
1861(v)(1)(A) of the Act, or that are non-allowable administrative and 
general costs, or that are not related to patient care under 42 CFR 
413.9 of the regulations are not considered organ acquisition costs. 
Examples of items or services that are not organ acquisition costs 
include, but are not limited to: Donor burial and funeral expenses, 
transportation of the cadaveric donor after organ procurement for 
funeral services or for burial; transportation costs for a living 
donor; fees or in-center payments for donor referrals; costs associated 
with and incurred for OPO-sponsored seminars where continuing education 
credits are given and where the attendee is not on the OPO's staff (as 
described at Sec.  486.326(b)); and unreasonable costs incurred for 
administrator's duties associated with professional organizations.
c. Provisions Related to Standard Acquisition Charges
    Because a number of the SAC comments received addressed proposals 
in multiple subsections, the comment summaries and our responses are at 
the end of section II.C.2.c. of this final rule with comment period.
(1) General
    We proposed to clarify and codify Medicare's policy regarding TH/
HOPO SACs in new subpart L, Sec.  413.404, as discussed herein. The IL 
74-23, issued in July 1974, set forth the policies and procedures for a 
hospital to develop standard kidney acquisition charges for the 
acquisition of kidneys from living or cadaveric donors. Over the years, 
as Medicare added coverage for non-renal transplants, Medicare used 
these same policies and procedures for THs to develop living and 
cadaveric SACs for non-renal organs and OPOs to develop cadaveric SACs 
for non-renal organs.
    A SAC for an organ is an amount that represents the estimated costs 
a TH or an OPO expects to incur to acquire an organ. The SAC does not 
represent the actual acquisition cost for an individual organ. Instead, 
the SAC generally represents the average of the total organ acquisition 
costs associated with procuring either cadaveric donor organs or living 
donor organs, by organ type.
    A TH or OPO cannot bill Medicare directly for the cost of procuring 
an organ because procuring an organ is not a covered service when 
performed independent of a Medicare covered transplant, and it is not 
always known at the time of organ procurement whether the potential 
recipient is a Medicare beneficiary. However, the reasonable costs of 
procuring an organ are reimbursable when billed in connection with a 
Medicare covered transplant. When a TH bills Medicare for the 
transplant, it bills the DRG charge for the organ transplant and uses 
its SAC to bill Medicare for the procured organ (currently using 
revenue code 081X).\31\ THs develop categories of living or cadaveric 
SACs, by organ type (for example, heart, liver or lung). When a TH/HOPO 
or IOPO furnishes an organ to another TH/HOPO or IOPO, we proposed that 
it must bill the receiving TH/HOPO or IOPO its SAC. We proposed to 
codify these provisions pertaining to SACs at proposed new Sec.  
413.404(a) in new subpart L.
---------------------------------------------------------------------------

    \31\ Medicare internet Only Manual 100-04, Medicare Claims 
Processing Manual, Chapter 3, Section 90, available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.
---------------------------------------------------------------------------

(2) Transplant Hospitals and HOPOs
    We proposed to codify provisions pertaining to SACs for TH/HOPOs 
for living and cadaveric donors at proposed new Sec.  413.404(b) in new 
subpart L, as described in this section.
(a) Living Donor Standard Acquisition Charge
    We proposed to codify Medicare's longstanding policy regarding a 
TH's standard acquisition charges for living donors at proposed new 
Sec.  413.404(b)(3)(i) in new subpart L as discussed herein, because 
these policies remain relevant. THs must develop a SAC for living donor 
organs, by organ type (for example kidney, liver, or lung). THs/HOPOs 
must develop a SAC for cadaveric organs, by organ type. The living 
donor SAC is an average organ acquisition cost the transplant hospital 
incurs to procure an organ from a living donor. As medicine and 
transplantation have advanced, Medicare now covers transplants into 
beneficiaries from living donors for kidneys, lungs, and portions of 
livers or intestines, and a living donor SAC must be established for 
each of these organs.
    A TH must establish a living donor SAC before the TH bills its 
first living donor transplant to Medicare. The TH develops the initial 
living donor SAC for each living donor organ type, by estimating the 
reasonable and necessary organ acquisition costs it expects to incur 
for services furnished to living donors, and pre-admission services 
furnished to recipients of living donor organs during the hospital's 
cost reporting period. The TH divides the estimated amount by the 
projected number of usable living donor organs to be procured by the TH 
during the hospital's cost reporting period. A TH calculates its 
subsequent years' living donor SAC for each living organ type by using 
the transplant hospital's actual organ acquisition costs for the living 
donor organ type from the prior year's MCR, adjusted for any changes in 
the current year. The TH divides these costs by the actual number of 
usable living donor organs procured by the TH during that prior cost 
reporting period. Currently, when a TH/HOPO furnishes an organ to 
another transplant hospital or OPO, it must bill the receiving TH or 
OPO its SAC, by organ type, or the hospital's standard departmental 
charges that are reduced to cost. The TH/HOPO includes the actual 
incurred cost for organ procurement services in the organ acquisition 
cost center on the hospital's MCR.
    We proposed that the costs that may be used to develop the living 
donor SAC

[[Page 73478]]

include, but are not limited to: Costs of tissue typing services, 
including those furnished by independent laboratories; costs of 
physician pre-admission transplant evaluation services; OPTN 
registration fees; costs for donor and recipient evaluation and workup 
furnished prior to admission for transplantation; other costs 
associated with procurement, for example, general routine and special 
care services related to the donor; costs of operating room and other 
inpatient ancillary services related to the donor; preservation and 
perfusion costs; and transportation costs of the excised organ. We 
proposed to codify these provisions at proposed new Sec.  
413.404(b)(3)(i) in new subpart L.
(b) Cadaveric Donor Standard Acquisition Charge
    In the proposed rule, we proposed to codify Medicare's longstanding 
policy regarding TH/HOPO standard acquisition charges for cadaveric 
donors and the costs that may be included in the cadaveric donor SAC in 
new subpart L, Sec.  413.404(b)(3)(ii) because these policies remain 
relevant. The cadaveric donor standard acquisition charge (cadaveric 
donor SAC) is an average cost that a TH/HOPO incurs to procure an organ 
from a cadaveric donor. The TH/HOPO calculates its initial cadaveric 
donor SAC for each cadaveric organ type, by estimating the reasonable 
and necessary costs it expects to incur in procuring cadaveric organs, 
combined with the expected costs of acquiring cadaveric organs from 
OPOs or other THs. The TH/HOPO divides this estimated amount by the 
projected number of usable cadaveric organs to be procured by the TH/
HOPO within the TH's cost reporting period.
    The TH/HOPO calculates its subsequent years' cadaveric donor SAC 
for each cadaveric organ type, by using the transplant hospital's 
actual organ acquisition costs for the cadaveric donor organ type from 
the prior year's Medicare cost report, adjusted for any changes in the 
current year. The TH/HOPO divides this estimated amount by the actual 
number of usable cadaveric donor organs procured by the TH/HOPO during 
that prior cost reporting period. ``Usable'' organs are discussed in 
section II.C.2.h.(2). of this final rule with comment period.
    Where the TH/HOPO furnishes the organ to an OPO or another TH, the 
TH/HOPO uses its cadaveric donor SAC to bill the OPO or the TH 
receiving the organ. We also proposed that costs that may be used to 
develop the cadaveric donor SAC include, but are not be limited to: 
Costs of organs acquired from other THs or OPOs; costs of 
transportation of the excised organs; surgeons' fees for excising 
cadaveric organs (currently limited to $1,250 for kidneys); costs of 
tissue typing services, including those furnished by independent 
laboratories; preservation and perfusion costs; general routine and 
special care service costs; and operating room other inpatient 
ancillary service costs.
(3) Independent OPO Standard Acquisition Charge
    In the proposed rule, we proposed that new Sec.  413.404(c) in new 
subpart L would specify Medicare's longstanding policy regarding IOPO 
standard acquisition charges for cadaveric donors because these 
policies remain relevant. An OPO is required under section 371(b)(1)(C) 
of the PHS Act (42 U.S.C. 273(b)(1)(C)) to have an agreement with the 
Secretary to be reimbursed under Medicare for the procurement of 
kidneys. The IOPO's Medicare contractor establishes the kidney SAC, 
which is considered an interim rate as currently specified in Sec.  
413.200(d) (proposed to be added to new subpart L as Sec.  413.420(d)), 
and which consists of an estimate of the reasonable and necessary costs 
the IOPO expects to incur procuring cadaveric kidneys during the IOPO's 
cost reporting period. The contractor divides the estimated amount by 
the projected number of usable \32\ cadaveric kidneys procured. The 
IOPO's Medicare contractor may adjust the kidney SAC during the year, 
if necessary, for cost changes. Because the contractor must establish 
and may adjust, if necessary, the kidney SAC, the IOPO cannot charge or 
change its kidney SAC without the contractor's approval.
---------------------------------------------------------------------------

    \32\ See discussion of usable organs in section II.C.2.h.(2). of 
this final rule with comment period.
---------------------------------------------------------------------------

    The Medicare contractor develops an IOPO's initial kidney SAC based 
on the IOPO's budget information. The kidney SAC for subsequent years 
is based on the IOPO's cost report, that is, costs of operating during 
its prior cost reporting year and the number of usable cadaveric 
kidneys procured during that cost reporting period. These standard 
charges are the basis for the interim rate (that is, the kidney SAC) 
paid by the TH to the IOPO. When the IOPO bills the TH for its kidney 
acquisition services, the TH is responsible for paying the IOPO's 
interim rate (that is, its kidney SAC). The IOPO's submitted cost 
report is used to reconcile kidney acquisition costs under Sec.  
413.200(d) (proposed to be added as Sec.  413.420(d)).
    An OPO is required under (42 U.S.C. 273(b)(1)(B)) to have 
accounting and other fiscal procedures (as specified by the Secretary) 
necessary to assure the fiscal stability of the organization. As such, 
an IOPO establishes non-renal SACs based on its costs of procuring 
organs, similar to procedures followed by transplant hospitals. An IOPO 
develops its SACs for each type of non-renal organ, by estimating the 
reasonable and necessary costs it expects to incur for services 
furnished to procure cadaveric donor non-renal organs during the IOPO's 
cost reporting period. The IOPO divides this estimated amount by the 
projected number of cadaveric donor non-renal organs the IOPO expects 
to procure within its cost reporting period.
    When an IOPO receives an organ from another IOPO, the receiving 
IOPO is responsible for paying the procuring IOPO's SAC. The IOPO uses 
its own SAC and not the SAC paid to another IOPO, when billing a TH 
receiving the organ. For example, IOPO A has a SAC of $35,000 and IOPO 
B has a SAC of $50,000. IOPO A receives an organ from IOPO B and pays 
IOPO B their SAC of $50,000. IOPO A furnishes the organ to the TH and 
bills the TH its SAC of $35,000.
    Comment: Some commenters provided feedback regarding ``imported'' 
organs, or organs one OPO receives from another OPO or from a 
transplant hospital. A commenter noted that when an OPO receives an 
organ from another OPO, the receiving OPO must pay the procuring OPO's 
SAC, but then only charge the TH its own SAC, regardless of whether the 
amount is higher or lower than the procuring OPO's SAC. The commenter 
opined that given the revised allocation methodologies now in use, 
there has been a dramatic increase in the number of organs exchanged 
between OPOs. Other commenters noted increased costs, such as 
transportation, due to the new allocation methodologies. A few 
commenters requested that an OPO's SAC for any imported organ (renal or 
non-renal) incorporate the cost of the imported organ to ensure that 
the OPO can bill the transplant hospital an amount sufficient to fully 
recoup the costs incurred for procuring the imported organ from another 
OPO. A commenter requested that CMS clarify whether OPOs will need to 
administratively handle all imported organs coming into the servicing 
OPO's area. By ``administratively handle,'' it seems the commenter 
refers to the OPO's arrangement for the acquisition, preservation and 
transportation of donated organs, and procedures to obtain payment for 
organs provided to transplant hospitals.

[[Page 73479]]

    Response: The costs of ``imported'' organs are recorded as organ 
acquisition costs, in accordance with the finalized rule at Sec.  
413.402(b)(9), since these are the costs of organs acquired from other 
hospitals or OPOs. If these costs are incorporated into the OPOs' SACs, 
the OPO should be able to recoup its costs for imported organs 
transplanted into Medicare beneficiaries. The MAC calculates the IOPO's 
kidney SAC based on its actual costs from the prior year. However, the 
IOPO can ask the MAC to adjust its kidney SAC during the year if it can 
support a change in the cost basis, such as might occur if the OPO has 
an increased amount of imported organ costs.
    Likewise, because the IOPO develops its own SACs for non-renal 
organs by estimating its expected costs for the coming year, it can 
include the estimated cost of non-renal organs received from another 
OPO or TH in its expected acquisition costs when developing its non-
renal SACs. We are clarifying that similar to our policy for IOPO 
kidney SACs, if an IOPO experiences cost changes, the IOPO is permitted 
to adjust the non-renal SAC amount during the year if it can support a 
change in the cost basis. Therefore, we are modifying the proposed 
regulation at Sec.  413.404(c)(1) to add paragraph (iii) to state that 
an IOPO may adjust its non-renal SACs during the year if necessary to 
account for cost changes.
    Finally, we are clarifying that our proposals did not make 
pronouncements as to whether an OPO is required to administratively 
process all imported organs coming into its servicing area. OPOs are 
required to administratively process organs pursuant to the allocation 
methodologies set forth by HRSA.
    Comment: A commenter noted that there is no comparable 
reconciliation for non-renal organs procured by OPOs as there is for 
kidneys. The commenter stated that the only way a divergence of SAC-
based revenue and actual costs is recognized is through the following 
year's estimated SAC, and was concerned that continuation of this 
policy may result in fewer non-renal organs being made available for 
transplant. The commenter suggested CMS consider the policy further 
before codifying in the Code of Federal Regulations.
    Response: We appreciate this comment, and agree that there is not 
currently a reconciliation for non-renal organs procured by OPOs as 
occurs with kidneys. Requiring reconciliation of non-renal organs could 
ensure that Medicare reasonable cost principles are followed, and may 
support non-renal organ transplantation. We did not propose to 
reconcile non-renal organs procured by OPOs; however, we will review 
this further and consider addressing in future rulemaking.
    Comment: A commenter stated that several OPOs charge a SAC fee with 
add-ons to their non-renal SAC amounts, such as additional surgeon 
fees, transportation, or other extra costs. The same commenter opined 
that some non-renal SACs are over-inflated and questioned if the MACs 
could approve and publish the non-renal SACs. This commenter noted that 
with limited regulations, these issues could only be referred to the 
Office of Inspector General (OIG).
    A different commenter provided an example where a transplant 
hospital may only receive $20,000 from the OPO for services to maintain 
the cadaveric donor when an OPO harvests two lungs, two kidneys and a 
heart; however, the OPO charges the hospital $70,000 for one kidney. 
Two commenters noted that transplant hospitals are sometimes paid by 
OPOs an amount far less than what their SAC payment at cost would 
warrant. A commenter opined that under current policy, the OPO 
underpayment does not negatively impact transplant hospitals because 
transplant hospitals must offset 100 percent of the revenue received 
from OPOs from allowable organ acquisition costs on the Medicare cost 
report. This commenter added that a transplant hospital could forego 
all payments from the OPO and would remain whole through its Medicare 
cost report filing.
    Response: Our final regulation at Sec.  413.404(a)(3) would require 
that an IOPO that furnishes an organ to a TH bill the TH its IOPO SAC. 
Billing amounts in addition to the SAC would be inappropriate as the 
SAC is developed by incorporating all the allowable costs of procuring 
an organ, and is an average charge rather than the actual cost of a 
particular procurement. As such, there should be no billing of the SAC 
plus additional amounts, nor any need to do so. As noted in a previous 
comment response in this section, if an IOPO experiences increased 
costs that the current SAC is not covering, the IOPO can ask its MAC to 
adjust its kidney SAC as specified in proposed Sec.  413.404(c)(2)(iv), 
or the IOPO can adjust its non-renal SAC amounts if needed due to cost 
changes.
    Additionally, an OPO is required under 42 U.S.C. 273(b)(1)(B) to 
have accounting and other fiscal procedures (as specified by the 
Secretary) necessary to assure the fiscal stability of the 
organization. These fiscal procedures could include carefully 
estimating costs for the upcoming year when developing its non-renal 
SAC, so that the non-renal SAC is an average charge sufficient to cover 
procurement costs of non-renal organs. The SAC should be a reasonable 
estimate of average costs rather than an inflated estimate of average 
costs.
    We believe codifying organ acquisition payment policies as we are 
doing in the regulation text is a step towards making our policies 
clearer to all stakeholders and to increasing compliance. If a MAC 
identifies systemic issues such as inappropriate or abusive fiscal 
procedures by OPOs, it can and should refer those OPOs to the OIG. We 
appreciate this comment about inflated SAC amounts and oversight of 
non-renal SACs, and are considering options for future rulemaking to 
strengthen policies where needed to ensure that organ acquisition costs 
are paid on a reasonable cost basis, and that inappropriate fiscal 
procedures do not impede organ procurement or transplantation.
    The commenter's example appears to be a situation where a 
transplant hospital provided services to a cadaveric donor, but did not 
procure the organs; in the example, the OPO arranged for the 
procurement. As such, it would not be appropriate for the TH to bill 
the OPO its SAC, as the TH is not procuring the organ. This is 
discussed further in section II.C.2.l. of this final rule with comment 
period pertaining to donor community hospitals and transplant hospitals 
that incur costs for providing services to a cadaveric donor, as 
authorized by the OPO so that an OPO can arrange for organ procurement. 
In the situation where a transplant hospital actually procures the 
organs and furnishes them to an IOPO, in accordance with the policy 
finalized at Sec.  413.404(a), the transplant hospital should bill its 
appropriate organ-specific SAC(s) to the IOPO, and the IOPO should pay 
the TH the billed SAC amount(s).
    Finally, if a TH were to forego all payments from an OPO for the 
services the TH provides, it could affect the hospital's cash flow and 
could affect the OPO's year-end reconciliation of kidney acquisition 
costs. However, we agree with the comment that THs must offset their 
acquisition costs by the revenue received from OPOs, and that the 
reconciliation process should ensure that THs remain whole.
    Comment: A commenter supported our efforts to standardize the way 
in which SACs for any organ are calculated. However, the commenter 
cautioned that inclusion of certain extraordinary expenses in SACs 
could result in inequitable allocation of costs

[[Page 73480]]

among providers, including Medicare, while being a possible barrier to 
innovation. The commenter suggested those extraordinary expenses be 
identified and segregated from the expenses included in the SAC. As an 
example, the commenter stated that perfusion technologies, (i.e. 
technologies that may be used to preserve, assess and in some cases 
recondition organs prior to transplantation), which are new and 
relatively expensive, have been costs historically borne by THs, but 
now are costs first borne by OPOs and passed to the TH as a charge in 
addition to the SAC. The commenter stated that requiring OPOs to 
include these charges in their SAC may not be financially feasible for 
the OPO, and may force the OPO to eliminate its offering of these new 
technologies. Similarly, the commenter stated that revised allocation 
methods result in organs traveling greater distances to recipients, 
requiring OPOs to incur higher transportation expenses. If these costs 
are included in the SAC, the commenter believes that communities with 
higher rates of donation will bear an inequitable share of significant 
transportation costs that should instead be charged directly to the 
transplant hospitals incurring the cost. The commenter believed that if 
OPOs are required to include all costs in the SAC, regardless of the 
amount or frequency of the expense, doing so could result in an 
inequitable yet material shift of expenses among providers and 
suggested CMS act to avoid that outcome.
    Response: We appreciate the commenter's support for our SAC 
proposals. However, we do not believe that an IOPO's inclusion of 
allowable procurement costs in its organ acquisition costs creates 
inequities, including costs for expensive items such as innovations or 
increased procurement-related travel. Costs that an IOPO incurs to 
procure an organ should be recorded by the IOPO, which would allow them 
to be included in the IOPO's organ-specific SAC amounts, pursuant to 
Sec. Sec.  413.402 and 413.404. The SAC calculation spreads the IOPO's 
total costs of procuring an organ over all the organs procured, as 
described in the proposed regulation at Sec.  413.404(c). Organ 
acquisition costs are passed on to the TH when the IOPO procures an 
organ for the TH and bills the TH its organ-specific IOPO SAC. Our 
payment system for organ procurement is designed to cover the costs of 
organ acquisition on a reasonable cost basis, and we believe it 
incentivizes innovation. Therefore, we are not adopting this 
commenter's suggestion about excluding certain extraordinary expenses 
from the SAC calculation. Finally, we note that the finalized 
regulation at Sec.  413.404(a)(3) requires the IOPO to bill the TH its 
SAC, not its SAC plus additional charges.
    In summary, we are finalizing our proposals as proposed in Sec.  
413.404 of subpart L, except for the following modifications and 
clarifications:
     In section II.C.2.b.(1). of this final rule, we modified 
the proposed registry fees and the proposed transportation costs 
covered as organ acquisition costs to provide expanded coverage of 
these costs. To conform to these final changes, we modified the SAC 
regulation text related to costs used to develop the living donor SAC 
at Sec.  413.404(b)(3)(i)(D)(3) to refer to registry fees specified at 
Sec.  413.402(b)(6), and at Sec.  413.404(b)(3)(i)(D)(8) to refer to 
transportation costs of the excised organ as specified at Sec.  
413.402(b)(8)(i). Similarly, we modified the SAC regulation text 
related to costs used to develop the cadaveric donor SAC at Sec.  
413.404(b)(3)(ii)(C)(2) to refer to transportation costs as specified 
at Sec.  413.402(b)(8).
     In Sec.  413.404(b)(3)(i)(D)(7) and Sec.  
413.404(b)(3)(ii)(C)(5), to add the word `organ' to conform to the 
final regulation text at Sec.  413.404(b)(5).
     In Sec.  413.404(c)(1) to add paragraph (iii) to specify 
that an IOPO may adjust its non-renal SACs during the year if necessary 
to account for cost changes.
     In Sec.  413.404(a)(2), we added `organ acquisition' to 
more clearly specify the total costs.
     In Sec.  413.404(b)(3)(i), we added `organ acquisition' to 
more clearly specify the average cost; and in Sec.  
413.404(b)(3)(i)(C)(1)(i), we added `organ acquisition' to more clearly 
specify the reasonable and necessary costs.
     In Sec.  413.404(a)(3), we removed the phrase `transplant 
hospital' and clarified that when a TH/HOPO or IOPO furnishes an organ 
to another TH/HOPO or IOPO, it bills its SAC to the TH/HOPO or IOPO 
receiving the organs.
     In Sec.  413.404(b)(2), we replaced `provides' with 
`furnishes,' and corrected the acronym OPO to change it to IOPO.
     In Sec.  413.404(b)(3)(i)(C)(1), we added `donor' to more 
clearly specify the living SAC, and in Sec.  
413.404(b)(3)(ii)(B)(2)(ii) we added `donor' to more clearly specify 
cadaveric organs;.
     In Sec.  413.404(b)(3)(i)(C)(2), we added `years' to more 
clearly specify the subsequent living donor SAC, and in Sec.  
413.404(b)(3)(ii)(B)(2) we added `years' to more clearly specify the 
subsequent cadaveric donor SAC; in Sec.  413.404(b)(3)(i)(D)(5), to 
clarify what special care services are we added a parenthetical phrase 
that gives intensive care unit or critical care unit services as 
examples of special care services.
     Corrected grammatical errors in the regulation text, to 
ensure that parallel structure exists, that singular pronouns describe 
singular nouns, and that subjects and verbs agree.
d. Accounting for Outpatient Costs and Laboratory Services
    In our proposed rule in section X.B.2.d. of the preamble of the FY 
2022 IPPS/LTCH PPS proposed rule (86 FR 25662), we explained that 
outpatient costs including pre-transplant evaluation service costs were 
described for kidneys in ILs, as well as in the Medicare Claims 
Processing Manual and in a CMS Change Request.\33\ After non-renal 
organs were covered for transplantation through a CMS Ruling (for heart 
transplants) and through NCDs (other non-renal organs),\34\ payment 
policies were subsequently implemented through notice-and-comment 
rulemaking.\35\
---------------------------------------------------------------------------

    \33\ Part A Intermediary Letter, July 01, 1973 No. 73-25 and 
Part B Intermediary Letter, No. 73-22; July 1973; Medicare Claims 
Processing Manual (IOM 100-04, chapter 3, section 90.1.1.A. 
(available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf); and change request 6978, available 
at (https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R2008CP.pdf).
    \34\ See CMS Ruling 87-1, April 1987; National Coverage 
Determinations Manual, IOM 100-03, chapter 1, Part 4, section 260 
(available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/ncd103c1_Part4.pdf).
    \35\ 52 FR 33034, September 1, 1987 (heart); 55 FR 8545, March 
8, 1990 and 56 FR 15013, April 12, 1991 (liver); 60 FR 6537, 
February 2, 1995 (lung); 64 FR 41497, July 30, 1999 (pancreas); 66 
FR 39828, August 1, 2001 (intestine, with reasonable cost coverage 
of acquisition costs beginning October 1, 2001).
---------------------------------------------------------------------------

(1) Outpatient Costs
    Section 3102.A. of the PRM describes how to account for certain 
hospital outpatient costs applicable to a potential organ transplant. 
The TH's organ acquisition costs include donor and recipient work-ups 
furnished prior to admission and costs of services rendered by interns 
and residents not in an approved teaching program. These costs would 
typically be billed to Medicare Part B. However, these costs are 
predominantly cadaveric donor related, incurred without an identifiable 
beneficiary, and are included in the TH's organ acquisition cost 
center.

[[Page 73481]]

(2) Pre-transplant Evaluation and Laboratory Services
    Section 3102.C. of the PRM specifies that pre-transplant evaluation 
services for recipients and donors provided by the TH, including 
laboratory services, are paid through the organ acquisition costs of 
the TH. When pre-transplant laboratory tests are performed by the TH, 
the TH accumulates these costs in its organ acquisition cost center. 
The TH also includes the reasonable charges paid for physician tissue 
typing services provided to living donors and recipients.
(3) Histocompatibility Laboratory Services
    Histocompatibility laboratories are required by the statute at 
section 1881(b)(2)(A) of the Act to be paid on a reasonable cost basis, 
in accordance with section 1861(v) of the Act. Section 413.200 sets 
forth the payment policy for services furnished by histocompatibility 
laboratories in connection with kidney acquisition and transplantation. 
When the laboratory services are performed by a histocompatibility 
laboratory, the Medicare contractor establishes interim rates which are 
used by the laboratory in billing a TH. The contractor disseminates 
information on the interim rates to all THs, OPOs, and other 
contractors, or posts the information on its website. The TH pays the 
laboratory the approved interim rate. When the laboratory bills an OPO 
for services, the OPO is responsible for paying the interim rate. The 
contractor determines the final payment to the histocompatibility 
laboratory for kidney-related transplant tests by reconciling interim 
payments and reasonable costs during final settlement of the MCR. We 
note that in section X.B.2.m.(6). of the preamble of the FY 2022 IPPS/
LTCH PPS proposed rule, we proposed to move revised text from Sec.  
413.200(b) to Sec.  413.400, and Sec.  413.200(a), and (c) through (g), 
to Sec.  413.420.
    Comment: A commenter stated that our proposed rule gave no 
consideration to the 50 separately certified freestanding 
Histocompatibility Laboratories (HLA). The commenter stated that these 
labs provide services to OPOs and Medicare-certified transplant centers 
for patients in all phases of the transplant process and the 
Coordination of Benefits process. The commenter stated there has been 
no discussion of how Medicare utilization is determined for final 
reimbursement nor has there been an analysis of the effect of the 
proposed regulatory change on the payments to the free-standing 
histocompatibility laboratories, and urged CMS to convene a working 
group about this.
    Response: We appreciate the work of HLAs, and believe that our 
final policies for OPOs should not impact HLAs because OPOs and TH/
HOPOs will continue to pay HLAs an interim rate that is established by 
the Medicare contractor for providing pre-transplant services. We did 
not make any proposals related to HLA operations or payment and 
appreciate the commenter's recommendation to convene a working group. 
However, we will monitor the effects of this final rule with comment 
period for any unintended consequences and consider changes impacting 
HLAs in future rulemaking.
    We are finalizing the policies as set forth in section X.B.2.d. of 
the preamble of the FY 2022 IPPS/LTCH PPS proposed rule without any 
changes.
e. Accounting for the Cost of Services Provided to Living Kidney Donors
    Section 1881(d) of the Act sets forth Medicare coverage for living 
kidney donors. Under section 1881(d) of the Act, any individual who 
donates a kidney for transplant surgery shall be entitled to benefits 
under parts A and B of Medicare with respect to such donation. The Act 
requires that reimbursement for the reasonable expenses incurred by 
such an individual with respect to a kidney donation shall be made 
(without regard to the deductible, premium, and coinsurance 
provisions), in such manner as may be prescribed by the Secretary in 
regulations,\36\ for all reasonable preparatory, operation, and post-
operation recovery expenses associated with such donation. It further 
provides that payments for post-operation recovery expenses shall be 
limited to the actual period of recovery. Medicare's coverage is 
limited to those donor expenses that are incurred directly in 
connection with the kidney donation.
---------------------------------------------------------------------------

    \36\ 42 CFR 409.18, 42 CFR 409.89 (Part A); 42 CFR 410.55, 42 
CFR 410.163 (Part B).
---------------------------------------------------------------------------

(1) Hospital Services to a Living Kidney Donor
    When a living donor receives hospital outpatient services (before 
admission for excising the donor kidney) for a medical evaluation in 
anticipation of a kidney donation, costs of all hospital services 
applicable to medical evaluation are considered kidney acquisition 
costs. When the living donor subsequently enters the hospital for the 
actual excision, the hospital costs of services rendered to the donor 
will continue to be treated as kidney acquisition costs under Part 
A.\37\
---------------------------------------------------------------------------

    \37\ 42 CFR 409.18.
---------------------------------------------------------------------------

    The donor of a kidney for a Medicare transplant is covered for an 
unlimited number of days of inpatient care in connection with the organ 
removal operation. Days of inpatient hospital care used by the donor in 
connection with the organ removal operation are not charged against 
either party's utilization record.
    Comment: A commenter objected to our use of ``admitted'' to 
describe a living kidney donor who receives a medical evaluation at the 
hospital in anticipation of kidney donation. The commenter stated that 
these pre-donation evaluations occur on an outpatient basis, therefore 
the patient is not ``admitted.''
    Response: We agree with this commenter, and have revised the 
language in this and in the following subsection accordingly.
(2) Physician Services to a Living Kidney Donor
    When a living donor receives hospital outpatient services (before 
admission for excising the donor kidney) for a medical evaluation in 
anticipation of a kidney donation, costs of all physicians' services 
applicable to medical evaluation are considered kidney acquisition 
costs. When a living donor is admitted to a hospital for the kidney 
excision, physician services are no longer considered kidney 
acquisition costs and are not reimbursable under Part A. Under the 
Medicare Physician Fee Schedule, surgical excision of living donor 
kidneys is included in the global surgery policy, with a reasonable 
post-surgical follow-up defined as 90 days.\38\ This standard 90-day 
post-operative period includes all services by the primary surgeon 
during this period unless the service is for a condition or issue 
unrelated to the diagnosis for which the surgery is performed or is for 
an added course of treatment other than normal recovery from the 
surgery. During the donor's inpatient stay for the excision surgery and 
during any subsequent donor inpatient stays resulting from a direct 
complication of the organ donation, physician services are billed under 
Part B. They are billed in the normal manner but under the recipient's 
MBI at 100 percent of the fee

[[Page 73482]]

schedule,\39\ with no deductible or coinsurance.\40\
---------------------------------------------------------------------------

    \38\ See Addendum B in 59 FR 63515, for CPT code 50320, which is 
for living donor kidney excision.
    \39\ 42 CFR 410.55 and 410.163.
    \40\ 42 CFR 410.55 and 410.163. See also the kidney policy for 
living donors, which is described in the Medicare Benefit Policy 
Manual 100-02, chapter 11, section 140.5, available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c11.pdf and billing instructions in the Medicare Claims 
Processing Manual 100-04, chapter 3, section 90.1.1.F. and G., 
available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.
---------------------------------------------------------------------------

(3) Living Kidney Donor Follow-Up
    Costs incurred by the TH for routine kidney donor follow-up care 
are included in the TH's organ acquisition cost center. For routine 
follow-up care, the period of postoperative recovery ceases when the 
donor no longer exhibits symptoms related to the kidney donation. 
Beyond the 90-day global payment period, routine follow-up services are 
billed to Part B using the recipient's MBI. Routine follow-up services 
billed to Medicare by a physician other than the operating physician 
for up to 3 months following donation surgery must be billed using the 
recipient's MBI. The Medicare Administrative Contractor will review 
claims for services rendered more than 3 months after kidney donation 
surgery. Medicare may cover routine follow-up examinations up to 6 
months after the kidney donation to monitor for possible complications. 
In all of these situations, the kidney donor is not responsible for co-
insurance or deductible amounts.\41\
---------------------------------------------------------------------------

    \41\ 42 CFR 410.163.
---------------------------------------------------------------------------

    The OPTN collects follow-up data at 6 months, 12 months, and 24 
months post-donation.\42\ Routine clinical visits to comply with the 
OPTN follow-up data collection are not allowable nor reportable as 
organ acquisition costs on the MCR and cannot be billed to Medicare. 
These follow-up visits are intended as a precautionary measure to 
provide proactive assessment of the organ function of a living donor in 
the near-term following removal of an organ intended for transplant. 
However, medical services for a living kidney donor who experiences a 
complication directly related to the kidney donation procedure can be 
billed under the Medicare transplant recipient's MBI. Also, as 
described in section II.C.2.e.(4) of this final rule with comment 
period, hospital services for a living non-renal organ donor who 
experiences complications directly related to the non-renal organ 
donation must be reported on the Medicare cost report as organ 
acquisition costs.
---------------------------------------------------------------------------

    \42\ Information from https://optn.transplant.hrsa.gov/resources/guidance/procedures-to-collect-post-donation-follow-up-data-from-living-donors/, accessed on March 16, 2021.
---------------------------------------------------------------------------

    Comment: Several commenters interpreted our proposal as eliminating 
payments for living donor follow-up. A commenter requested that CMS 
clarify that the 90-day reference is for physician services and that 
there is no specified time limit for hospital services to be considered 
allowable organ acquisition for routine living donor follow-up. Several 
commenters disagreed with our assertion that the living donor follow-up 
visits required by the OPTN were not for meeting the medical needs of 
the donor, and requested that CMS allow these costs.
    Response: We greatly appreciate living donors and their altruistic 
decision on behalf of another person. Given the confusion on our policy 
that was made clear in comments, we wish to clarify that payments for 
living donor follow-up are not being eliminated, and reiterate that we 
did not propose any changes to our existing policies related to living 
donor follow-up visits. We are also clarifying that our reference to 
the 90-day global payment period is referring to the surgeon's follow-
up period after surgery; Medicare may cover routine follow-up 
examinations up to 6 months after the kidney donation to monitor for 
possible complications. Finally, we continue to believe that the OPTN-
required living donor follow-up data collection is not primarily 
focused on the medical needs of individual living donors and that this 
data collection is primarily for collecting longer term data on the 
effects of living donation. While we appreciate that this data 
collection may benefit future living donors, we are continuing our 
existing policy that Medicare does not cover or pay for this OPTN-
required data collection.
(4) Provisions Related to Living Donor Complications
    In section X.B.2.e.(4). of the preamble of the FY 2022 IPPS/LTCH 
PPS proposed rule, we stated that living kidney donor complications 
related to the surgery to remove a kidney, which occur after the date 
of discharge, are not considered kidney acquisition costs. Living 
kidney donor complications are statutorily authorized to be paid under 
Part A or Part B in section 1881(d) of the Act, with no liability for 
deductibles or coinsurance.\43\ Under 42 CFR 409.18, Medicare covers 
costs incurred for living kidney donor complications only if they are 
directly related to the kidney donation. Rather than being paid as 
kidney acquisition costs, costs incurred for complications arising 
after the kidney donor's discharge date are billed under the Medicare 
transplant recipient's MBI, including facility costs and physician 
services. The contractor reviews costs for kidney donor complications 
billed under the transplant recipient's MBI. We proposed to codify this 
longstanding policy by adding 42 CFR 413.402(c) to new subpart L.
---------------------------------------------------------------------------

    \43\ Section 1881(d) of the Act; 42 CFR 409.18, 409.89 for Part 
A costs; 42 CFR 410.55 and 410.163 for Part B costs.
---------------------------------------------------------------------------

    Comment: A commenter was concerned that CMS is narrowing the 
definition of complications by underscoring in proposed Sec.  
413.402(c)(2) the requirement that any complications be directly 
attributable to a kidney donation. The commenter did not find a 
specific basis for such a narrow scope in section 1881(d) of the Act. 
The commenter stated that the language in Sec.  413.402(c) could be 
confusing as proposed paragraph (c)(1) notes that certain complications 
post-discharge are not kidney acquisition costs, which could have a 
``chilling effect.'' The commenter suggested CMS change ``directly 
attributable'' to ``reasonably related.''
    Response: We proposed to codify the existing policy for living 
kidney donor complications in accordance with our statutory authority 
section 1881(d) of the Act. Section 1881(d) of the Act entitles an 
individual who donates a kidney for transplant surgery to Medicare 
benefits under parts A and B, for all reasonable preparatory, 
operation, and post-operation recovery expenses, limited to the actual 
period of recovery, associated with such donation. Prior to the 
enactment of section 1881 of the Act, Medicare covered post donation 
complications for living kidney donors, as outlined in the IL 74-23.
    Regarding the commenter's opposition to our using the phrase 
``directly attributable'' in the regulation text, we are changing the 
language in the final regulation at Sec.  413.402(c)(1) to replace 
``directly attributable'' with ``directly related'' to match the 
language used in 42 CFR 409.18(b), which specifies that Medicare pays 
for postoperative recovery services directly related to the kidney 
donation. We disagree with the commenter that there is no specific 
basis for such a narrow scope in section 1881(d) of the Act, as we do 
not believe that our original language or this revised language is a 
stricter policy than that permitted by the statutory language, and note 
that the statute explicitly permits the Secretary to define how 
reimbursement occurs for the reasonable expenses incurred by a

[[Page 73483]]

living donor with respect to a kidney donation in regulations.
    We believe our proposed regulation text at Sec.  413.402(c)(1) that 
living kidney donor complications are not considered organ acquisition 
costs, was unclear and was misunderstood. Living kidney donor 
complications are organ acquisition costs, but they are not reported on 
the cost report or paid through the cost report as organ acquisition 
costs, because of the statutory authority in section 1881(d) of the 
Act. Instead, the costs of living kidney donor complications are 
billable under Medicare Part A and B using the Medicare kidney 
transplant recipient's MBI as established by regulations. The costs and 
charges associated with the living kidney donor complications are 
reported on the cost report as normal patient care expenses and not 
organ acquisition costs or charges. Payment is made through the claims 
processing system. Therefore, we make a distinction about covered organ 
acquisition costs that are paid through the Medicare cost report as 
organ acquisition costs. To make this distinction clearer, we are 
removing language that living kidney donor complications are not 
considered kidney acquisition costs from the proposed regulation text 
at Sec.  413.402(c)(1), and specifying that costs of living kidney 
donor complications must not be reported as kidney acquisition costs on 
the Medicare cost report.
    Comment: Several commenters were concerned that CMS' proposed 
codification of the payment policy for living kidney donor 
complications only focused on kidneys and did not address living donor 
complications associated with non-renal organs. Commenters noted that 
our proposed language generally followed the language in PRM 15-1, 
Sec.  3105.B, but changed the word ``organ'' to ``kidney.'' Commenters 
requested that CMS affirm that it will continue covering post-discharge 
complications related to living organ donation for all organs furnished 
to Medicare beneficiaries. Commenters stated that the policy given in 
PRM 15-1 Sec.  3105 is not specific to kidney and that if coverage of 
living donor complications for non-renal organs were to cease, it could 
limit the availability of living donor non-renal organs.
    Response: We appreciate this comment and believe that covering 
living donor complications for all organs, renal and non-renal, more 
strongly supports living organ donation. As discussed in a previous 
comment response, we have explicit statutory authority to cover living 
kidney donor complications in accordance with section 1881(d) of the 
Act. Living kidney donor complications are separately billable under 
Medicare Part A and B using the Medicare kidney transplant recipient's 
MBI. The payment for living kidney donor complications is made through 
the claims processing system, and living kidney donor complications are 
not reported as kidney acquisition costs on the cost report.
    While we do not have a similar statutory authority to pay for 
living non-renal donor complications in the same manner, we do consider 
the hospital costs related to living non-renal donor complications to 
be organ acquisition costs. We recognize that there was a change to our 
policy manuals that resulted in this confusion on how to bill, report, 
or obtain payment for living non-renal donor complications.
    Therefore, we are clarifying that certain costs for living non-
renal donor complications are included in organ acquisition costs when 
the living non-renal donor complication is directly related to the 
living non-renal organ donation. These hospital costs for living non-
renal donor complications are not separately billable to Medicare using 
the recipient's MBI, but must be reported and paid through the 
hospital's MCR as organ acquisition costs. We believe these 
clarifications in response to comments will expand our proposed 
codification to cover both living kidney donor complications and 
hospital costs related to living non-renal donor complications, but 
through different reporting and payment mechanisms.
    In response to public comments, we are modifying our proposal to 
codify living kidney donor complications and based on comments received 
to clarify appropriate billing, reporting and payment under Sec.  
413.402(c)(1) to specify that living kidney donor complications 
directly related to the kidney donation, which occur after the date of 
the donor's discharge, must not be reported as kidney acquisition costs 
on the Medicare cost report. We are also codifying our proposals under 
Sec.  413.402(c)(1)(A) to specify that Medicare covers reasonable costs 
incurred for living kidney donor complications only if they are 
directly related to a kidney donation for a covered transplant into a 
Medicare beneficiary and Sec.  413.402(c)(1)(B) to specify that living 
kidney donor complications are paid through the claims processing 
system under Medicare Part A or Part B, as applicable for the services 
provided, with no donor liability for deductibles or coinsurance. 
Living kidney donor complications are billed under the MBI of the 
transplant recipient.
    Based on comments received, we are also codifying a provision for 
living non-renal donor complications under Sec.  413.402(c)(2) to 
specify that hospital costs incurred for living non-renal donor 
complications directly related to the non-renal organ donation, which 
occur after the date of the donor's discharge, are not paid through the 
claims processing system but are reported as organ acquisition costs on 
the hospital's Medicare cost report. In response to comments, we are 
also codifying under Sec.  413.402(c)(2)(A) to specify that Medicare 
covers reasonable hospital costs incurred for living non-renal organ 
donor complications only if they are directly related to a non-renal 
organ donation for a covered transplant into a Medicare beneficiary and 
Sec.  413.402(c)(2)(B) to specify that hospital costs incurred for 
living non-renal organ donor complications are reported as organ 
acquisition costs on the hospital's Medicare cost report, and paid 
through the cost report on a reasonable cost basis.
    We believe that finalizing these modifications to our proposed 
regulation text at Sec.  413.402(c) is responsive to commenters, 
clarifies the regulations, and supports living organ donation.
    Comment: Commenters were also concerned that CMS did not specify an 
effective date and thus perceived the proposal to be effective 
retroactively. Commenters requested that CMS clarify that these 
policies are effective October 1, 2021.
    Response: As discussed previously, the proposals being finalized in 
section II.C.2. of this final rule with comment period are effective 
for cost reporting periods beginning on or after the effective date of 
this final rule with comment period, unless otherwise specified. None 
of our proposals were proposed to be retroactive except for the 
codification of two statutory provisions, which were effective in 
accordance with their statutory effective dates and which are discussed 
in a response in section II.C.2.b.(1). of this final rule with comment 
period. We are finalizing our proposals in section II.C.2.e. of this 
final rule with comment period with modifications, effective for cost 
reporting periods beginning on or after the effective date of this 
final rule with comment period.
f. Accounting for the Cost of Services Provided to Transplant 
Recipients
    Certain costs related to organ transplant recipients are not organ 
acquisition costs, but instead are billed

[[Page 73484]]

under Part B to the transplant recipient's MBI. These costs include 
standard backbench preparation services; physician services for the 
surgeon who performs the transplant (and sometimes performs other 
surgical procedures at the time of the transplant) and provides 90 days 
of post-operative surgical care; \44\ and/or immunosuppressant therapy 
management; and recipient laboratory services which occur after 
discharge from the hospital. See the Medicare Claims Processing Manual, 
IOM 100-04, chapter 12, sections 30.6.3, 40.1, and 40.4 for more 
details on these services.\45\
---------------------------------------------------------------------------

    \44\ See Addendum B in 59 FR 63516, for CPT codes 50360 and 
50365 for kidney transplantation.
    \45\ Available online at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c12.pdf.
---------------------------------------------------------------------------

    We received no comments on this section.
g. Codification of Statutory Provisions Related to Pancreata Used for 
Pancreatic Islet Cell Transplants
    Our longstanding policies related to pancreata used for pancreatic 
islet cell transplants were discussed in our proposed rule. Section 733 
of the Medicare Prescription Drug, Improvement and Modernization Act of 
2003 \46\ (MMA) requires Medicare to pay for items and services that 
are reasonable and necessary routine patient care costs related to 
acquisition on or after October 1, 2004, and delivery of pancreatic 
islet cells for transplantation into Medicare beneficiaries 
participating in a National Institute of Diabetes and Digestive and 
Kidney Diseases clinical trial of islet cell transplants. The pancreata 
procured for islet cell transplants require the same quality and care 
to procure as pancreata procured for solid organ transplants. 
Therefore, as described in section II.C.2.a.(2). of this final rule 
with comment period, we are defining for organ acquisition payment 
purposes, pancreata, procured on or after October 1, 2004, for the 
purpose of acquiring pancreatic islet cells for transplantation into 
individuals who are participating in a National Institute of Diabetes 
and Digestive and Kidney Diseases clinical trial, to be an organ. 
Accordingly, pancreata procured for islet cell transplants are treated 
as solid organs for procurement purposes, and pancreata procured for 
covered islet cell transplants must be assigned a full standard 
acquisition charge. We proposed to codify this policy by adding Sec.  
413.406 in part 413, new subpart L, in accordance with the statute. 
There are other clinical trials of islet cell transplants that are not 
funded by the National Institute of Diabetes and Digestive and Kidney 
Diseases, but section 733 of the MMA does not authorize Medicare 
coverage for those trials under title XVIII of the Act.
---------------------------------------------------------------------------

    \46\ Section 733 of the Medicare Prescription Drug, Improvement 
and Modernization Act of 2003 (Pub. L. 108-173); 42 U.S.C. 1395l.
---------------------------------------------------------------------------

    We received no comments on this section, and are finalizing this 
rule as proposed, with clarifying modifications to add the statutory 
effective date (for pancreata procured on or after October 1, 2004) to 
the regulation text at Sec.  413.406(a). We are also adding language to 
Sec.  413.406(b) to clarify that pancreata procured under paragraph (a) 
of Sec.  413.406, for covered islet cell transplants, must be assigned 
a full standard acquisition charge and be treated as solid organs for 
procurement purposes.
h. Calculation of Medicare's Share of Organ Acquisition Costs, Counting 
of Organs
(1) General
    Medicare currently calculates its share of organ acquisition costs 
for THs/HOPOs by multiplying the total allowable organ acquisition 
costs by the ratio of Medicare usable organs (the numerator) to total 
usable organs (the denominator) reported on the Medicare hospital cost 
report.\47\ To ensure that a TH/HOPO's organ acquisition costs are 
accurately allocated to the Medicare Program, THs/HOPOs must accurately 
count and report Medicare usable organs and total usable organs on 
their MCRs.
---------------------------------------------------------------------------

    \47\ CMS Pub. 15-2, chapter 40, section 4028.
---------------------------------------------------------------------------

    For IOPOs, Medicare currently calculates its share of kidney 
acquisition costs by multiplying the total allowable kidney acquisition 
costs by the ratio of Medicare usable kidneys (the numerator) to total 
usable kidneys (the denominator) reported on the Medicare IOPO cost 
report.\48\ Similarly, IOPOs must accurately count and report on their 
MCRs the number of kidneys they procure and furnish to THs or other 
OPOs, to ensure that kidney acquisition costs are accurately allocated 
to the Medicare Program.
---------------------------------------------------------------------------

    \48\ CMS Pub. 15-2, chapter 33, section 3312.
---------------------------------------------------------------------------

(2) Medicare Usable Organs, Total Usable Organs, Medicare Usable 
Kidneys, and Total Usable Kidneys
    Currently, Medicare reimburses THs/HOPOs for their reasonable costs 
incurred to acquire ``Medicare usable organs.'' For Medicare to 
calculate its share of organ acquisition costs, currently the THs/HOPOs 
must include the following as Medicare usable organs: \49\ (1) Organs 
transplanted into Medicare beneficiaries; (2) organs transplanted into 
Medicare beneficiaries that were partially paid by a primary insurance 
payor in addition to Medicare; (3) organs furnished to other THs or 
IOPOs; (4) kidneys transplanted into Medicare Advantage (MA) 
beneficiaries for dates of service on or after January 1, 2021; \50\ 
(5) kidneys furnished to United States military renal transplant 
centers (MRTCs) with a reciprocal sharing agreement with the HOPO in 
effect prior to March 3, 1988, and approved by the contractor; and (6) 
pancreata procured on or after October 1, 2004, for the purpose of 
acquiring pancreatic islet cells for transplantation into Medicare 
beneficiaries participating in a National Institute of Diabetes and 
Digestive and Kidney Diseases clinical trial in accordance with section 
733 of the MMA, as discussed in section II.C.2.g. of this final rule 
with comment period.\51\ (For counting purposes, the TH/HOPO does not 
count pancreata procured for islet cell transplant as a solid organ, 
but counts the number of Medicare beneficiaries who received these 
islet cell injections as the proxy for Medicare usable organs. For 
example, if a TH/HOPO procured pancreata for islet cell transplant and 
injected these islet cells into three Medicare beneficiaries and four 
non-Medicare patients during its cost reporting period, the TH/HOPO 
enters three in the Medicare usable organ count, and seven in the total 
usable organ count, on its Medicare hospital cost report.)
---------------------------------------------------------------------------

    \49\ In accordance with PRM Sec.  3115.A. and CMS Pub. 15-2, 
chapter 40, section 4028.3.
    \50\ Section 17006 of the 21st Century Cures Act, (Pub. L. 114-
255). Section 17006(c) of the Cures Act amended section 
1852(a)(1)(B)(i) of the Act to exclude coverage for organ 
acquisitions for kidney transplants from the Medicare benefits an MA 
plan is required to cover for an MA enrollee, including as covered 
under section 1881(d) of the Act. Effective January 1, 2021, these 
costs will be covered under the original Medicare FFS program. The 
MA kidney transplants will be included in the numerator and 
denominator on the MCR to determine Medicare's share of kidney 
acquisition costs. (85 FR 33796, 33824, June 2, 2020).
    \51\ Section 733 of the Medicare Prescription Drug, Improvement 
and Modernization Act of 2003 (Pub. L. 108-173)); 42 U.S.C. 1395l.
---------------------------------------------------------------------------

    In our proposed rule, we stated that Medicare does not intend to 
share in the cost of acquiring organs not transplanted into Medicare 
beneficiaries (except those organs designated for transplant but 
subsequently determined to be unusable). To calculate Medicare's share, 
organs not transplanted into Medicare beneficiaries must be counted as 
total usable organs in the denominator of the fraction of Medicare 
usable organs to total usable organs.

[[Page 73485]]

THs/HOPOs must include the following as total usable organs: (1) 
Medicare usable organs; (2) organs excised with the intention to be 
used for research; (3) organs excised and either transplanted or 
furnished to other THs or OPOs; (4) organs obtained from another OPO or 
transplant hospital and either transplanted or furnished to other THs 
or OPOs; (5) organs furnished to veterans' hospitals or organs sent 
outside the United States under 42 CFR 413.203; (6) organs transplanted 
into non-Medicare beneficiaries, under Sec.  413.203; (7) organs for 
which the transplant was totally or partially paid by primary insurance 
other than Medicare; (8) organs for which the transplant was covered by 
a MA plan for dates of service prior to January 1, 2021; (9) kidneys 
furnished to United States MRTCs with or without a contractor-approved 
reciprocal sharing agreement with the HOPO in effect prior to March 3, 
1988; and (10) pancreata procured on or after October 1, 2004, for the 
purpose of acquiring pancreatic islet cells for transplantation into 
participants in a National Institute of Diabetes and Digestive and 
Kidney Diseases clinical trial in accordance with the MMA,\52\ as 
discussed in section II.C.2.g. of this final rule with comment period.
---------------------------------------------------------------------------

    \52\ Id.
---------------------------------------------------------------------------

    Medicare also currently reimburses IOPOs for their reasonable costs 
incurred to procure ``Medicare kidneys.'' Organ acquisition costs are 
not paid directly by Medicare to an IOPO. The IOPO is reimbursed for 
its services by the TH, subject to later reconciliation by Medicare for 
kidneys. Medicare currently calculates its share of kidney acquisition 
costs by multiplying the total allowable kidney acquisition costs by 
the ratio of Medicare usable kidneys (the numerator) to total usable 
kidneys (the denominator) reported on the Medicare IOPO cost report. 
For Medicare to calculate its share of Medicare kidney acquisition 
costs, the IOPO must include the following as Medicare kidneys: (1) 
Kidneys furnished to THs; (2) kidneys furnished to OPOs; and (3) 
kidneys furnished to United States MRTCs with a reciprocal sharing 
agreement with the IOPO in effect prior to March 3, 1988, and approved 
by the contractor. Medicare kidneys do not include kidneys furnished to 
VA hospitals, military hospitals, or kidneys furnished to foreign 
countries or transplanted into non-Medicare beneficiaries, in 
accordance with 42 CFR 413.202.
    IOPOs must also count total usable kidneys in the denominator of 
the fraction of Medicare usable kidneys to total usable kidneys. IOPOs 
must include the following in total usable kidneys: (1) Medicare usable 
kidneys; (2) kidneys procured with the intention to be used for 
research; (3) kidneys procured and furnished to other THs or OPOs; (4) 
kidneys procured from another OPO or transplant hospital and either 
transplanted or furnished to other THs or OPOs; (5) kidneys furnished 
to veterans' hospitals or organs sent outside the United States in 
accordance with 42 CFR 413.203; (6) kidneys for which the transplant 
was covered by a MA plan for dates of service prior to January 1, 2021; 
and (7) kidneys furnished to United States MRTCs with or without a 
contractor-approved reciprocal sharing agreement with the IOPO in 
effect prior to March 3, 1988. Currently, organs excised by THs/HOPOs 
that are furnished to other THs or IOPOs, or kidneys furnished to MRTCs 
under an approved reciprocal sharing agreement in effect prior to March 
3, 1988, are presumed to be transplanted into Medicare beneficiaries, 
even if they are not. Similarly, some kidneys that an IOPO procures and 
furnishes to other IOPOs, THs, or MRTCs under an approved reciprocal 
sharing agreement in effect prior to March 3, 1988, are presumed to be 
transplanted into Medicare beneficiaries, even if they are not. These 
categories do not have a distinction to determine whether the organs 
are actually transplanted into Medicare beneficiaries. In this regard, 
Medicare organ acquisition payment policy includes the presumption that 
some organs are transplanted into Medicare beneficiaries, despite the 
category name that suggests organs and kidneys are transplanted into 
Medicare beneficiaries: ``Medicare usable organs'' or ``Medicare 
kidneys.'' As a result, through unintended consequences, Medicare 
currently shares in the organ acquisition costs for some organs that 
are not actually transplanted into Medicare beneficiaries.
    When Medicare added the ESRD benefit to Medicare coverage in 1972, 
Medicare presumed that most kidney transplant recipients would be 
Medicare beneficiaries receiving the ESRD benefit, and thus Medicare 
would pay a larger share of kidney acquisition costs.\53\ As Medicare 
added benefits for transplantation of non-renal organs and included the 
costs to procure non-renal organs, Medicare cost reporting instructions 
incorporated the presumption that the ultimate transplant recipient was 
unknown, but likely a Medicare beneficiary. Thus, when a TH furnishes 
an organ to another TH or to an OPO, or when an OPO furnishes an organ 
to another OPO or TH, Medicare assumed that some of the unknown 
transplant recipients are Medicare beneficiaries, and permits those 
organs to be counted as Medicare usable organs in the numerator of the 
fraction for Medicare usable organs to total usable organs, to be 
assured that Medicare is paying its share of organ acquisition costs.
---------------------------------------------------------------------------

    \53\ Intermediary Letter 73-25 (July 1973) and 54 FR 5619, 
February 6, 1989.
---------------------------------------------------------------------------

    However, Medicare declared its intention and a methodology to 
calculate its share of acquisition costs, for kidneys transplanted into 
Medicare beneficiaries only, in a 1978 Federal Register final rule with 
comment.\54\ Specifically, for each kidney transplant performed on a 
Medicare beneficiary, the transplanting hospital shall receive a 
prescribed amount of reimbursement from Medicare for the pre-
transplantation services of an OPA [organ procurement organization] or 
laboratory having such an agreement. The 1978 final rule set forth that 
an OPO's cost report must provide a complete accounting of the cost 
incurred by the agency or laboratory in providing covered services, the 
total number of Medicare beneficiaries for whom services were furnished 
by the agency or laboratory, and any other necessary data to enable the 
intermediary to determine the reasonable cost of covered services to 
Medicare beneficiaries. [Emphasis added.] Additionally, if the 
intermediary determines that the interim rate payments exceeded the 
reasonable cost of the services furnished, then the OPA or 
histocompatibility laboratory must pay the excess amount per Medicare 
patient to the intermediary. [Emphasis added.] These multiple 
declarations in the 1978 final rule establish Medicare's intention to 
pay for kidney acquisition costs incurred for kidneys transplanted into 
Medicare beneficiaries and were originally codified at 42 CFR 405.436 
and later moved to 42 CFR 413.178 (currently reserved).
---------------------------------------------------------------------------

    \54\ 43 FR 58370, December 14, 1978.
---------------------------------------------------------------------------

    The longstanding policy that Medicare must only share in organ and 
kidney acquisition costs for Medicare beneficiaries is also set forth 
in 42 CFR 413.202 and 413.203. Section 413.202 requires OPOs to 
separate from Medicare allowable costs, acquisition costs for procuring 
kidneys furnished to foreign transplant centers and kidneys 
transplanted in non-Medicare patients. Similarly, Sec.  413.203 
requires THs to

[[Page 73486]]

separate from Medicare allowable costs, acquisition costs for procuring 
organs furnished to foreign transplant centers and organs transplanted 
in non-Medicare patients. In a 1988 proposed rule, CMS expressed belief 
that allowing all kidneys to be counted as Medicare kidneys was not 
aligned with anti-cross subsidization principles set forth in section 
1861(v)(1)(A) of the Act. 53 FR 6672 at 6673 (March 2, 1988). CMS 
stated that the Medicare Program has always paid the total costs of 
OPAs [OPOs] because we assumed that all kidneys procured were for 
Medicare beneficiaries. However, we now realize that this assumption is 
incorrect and that technology has allowed a significant number of 
kidneys to be shipped overseas. Since the Medicare Program has been 
paying the cost of procuring kidneys shipped overseas or transplanted 
into non-Medicare beneficiaries, we believe that some action needs to 
be taken. We believe it is necessary to amend the regulations in order 
to effectuate the statutory principles embodied in section 
1861(v)(1)(A) of the Act. Section 1861(v)(1)(A) of the Act requires 
that the cost of services be borne by the appropriate payor. 
Accordingly, the cost associated with the kidneys not used by Medicare 
beneficiaries must be borne by the responsible individual or third-
party payor. Medicare is precluded from paying any costs associated 
with kidneys not used by Medicare beneficiaries. 53 FR 6672 at 6673 
(March 2, 1988).
    Medicare's decades-old presumption that most kidney transplant 
recipients are Medicare beneficiaries was also applied to non-renal 
organs because of the lack of organ tracking capabilities over the 
years and has led Medicare to reimburse THs and OPOs for organ 
acquisition costs for organs that were not actually transplanted into 
Medicare beneficiaries. Similar to the beliefs expressed in the 1988 
proposed rule, we believe that organ tracking capabilities allow 
transplant hospitals and OPOs to discern organ recipients' health 
insurance payor information so that organ acquisition costs can be more 
appropriately assigned to the Medicare Program for organs transplanted 
into Medicare beneficiaries. The Scientific Registry of Transplant 
Recipients (SRTR) \55\ collects and maintains data from the OPTN that 
identifies, among other things, transplant recipients and their health 
insurance payors. Data obtained from SRTR show the percentage of 
transplants where Medicare was the recipients' payor to all transplant 
recipients' payors, by organ type. We compared the SRTR data for years 
2017 and 2018, to the Medicare share ratio for Medicare usable organs 
(including kidneys) to total usable organs, for 2017 and 2018. Table 1 
reflects these data. In the majority of organ types, the SRTR 
percentages of transplant recipients who were actual Medicare 
beneficiaries were lower than the Medicare share percentages for those 
same years. Although there is a difference in the calendar year data 
from SRTR and the cost reporting fiscal year data from the MCR, these 
data show that the majority of SRTR's percentage of Medicare transplant 
recipients was less than the percentages of Medicare's share compared 
to 2017 and 2018 submitted MCR data from the Worksheet D-4.
---------------------------------------------------------------------------

    \55\ Section 373 of the Public Health Service (PHS) Act requires 
the operation of Scientific Registry of Transplant Recipients (SRTR) 
to support ongoing evaluation of the scientific and clinical status 
of solid organ transplantation. The U.S. Congress passed the 
National Organ Transplant Act (NOTA; Pub. L. 98-507) in 1984.

Table 1--Overall Organ-Specific Ratios, Medicare Share From Cost Report Data vs. SRTR Medicare Payor Ratio, 2017
                                                   and 2018 *
----------------------------------------------------------------------------------------------------------------
                                     2017 Medicare                           2018 Medicare
                                    ratio (Medicare   2017 SRTR ratio of    ratio (Medicare   2018 SRTR ratio of
           Organ type               usable organs/    actual transplants    usable organs/    actual transplants
                                     total usable      with Medicare as      total usable      with Medicare as
                                      organs) (%)          payor (%)          organs) (%)          payor (%)
----------------------------------------------------------------------------------------------------------------
Kidney..........................                68.2                58.9                67.8                58.6
Heart...........................                42.0                31.6                42.8                33.0
Liver...........................                39.1                28.4                38.6                29.2
Lung............................                44.2                43.9                46.6                45.7
Pancreas........................                61.6                49.1                58.0                45.8
Intestine.......................                18.1                14.7                14.9                15.4
----------------------------------------------------------------------------------------------------------------
* Scientific Registry of Transplant Recipients. Request for Information. Requested on 01/29/2021.

    Data from the OPTN also show the percentage of organs transplanted 
in 2018, by organ type, that were paid by Medicare, including Medicare 
Fee-For-Service and Medicare Choice, and other non-Medicare payor 
categories. These data are reflected in Table 2.

                         Table 2--Overall Organ-Specific Payor Ratios Including Non-Medicare Payors', From OPTN 2018 [supcaret]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Private      Medicaid/CHIP     Medicare      Medicare FFS
                     Organ type (%)                        insurance (%)        (%)         Choice (%)          (%)         Other * (%)      Total (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Kidney..................................................            30.2             7.1            14.0            42.7             6.0          100.00
Liver...................................................            48.2            18.4            10.7            18.6             4.2          100.00
Pancreas................................................             9.8             4.2             1.1             3.3          **81.6          100.00
Heart...................................................            44.7            18.2            15.0            17.9             4.1          100.00
Lung....................................................            41.5             9.3            22.4            23.3             3.5          100.00
Intestine...............................................            40.4            37.5             7.7             7.7             6.7          100.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
[supcaret] Organ Procurement and Transplantation Network. Accessed on 09/13/2021.
Note: Combination transplants (heart/lung, kidney/pancreas) are included under each affected organ type.
* Other includes transplants covered by donations, foreign governments, free care, Veteran's Administration, other government, self-pay, or unknown.

[[Page 73487]]

 
** This percentage is due to 833 kidney/pancreas transplants that were in the OPTN database with ``unknown'' as the payor type.

    We believe that the capability exists to track the location and 
disposition of organs, from the time organs are excised from donors 
until they are transplanted into recipients. Organ tracking capability 
may allow THs and OPOs the ability to know the identity of all organ 
transplant recipients and the donor from whom the recipient's 
transplanted organ was excised. Knowing the identity of all organ 
transplant recipients, and the donor from whom the recipient's 
transplanted organ was excised, allows THs and OPOs the ability to also 
know whether a transplant recipient is a Medicare beneficiary. OPTN 
policy provides that OPOs use organ tracking capability,\56\ and some 
THs also optionally use organ tracking capability. Per OPTN policies, 
THs and OPOs report information to the OPTN on the identity of 
transplant recipients and donors.\57\ Additionally, the OPTN data 
collection forms show what data elements are currently being 
collected.\58\ The Data System for Organ Procurement and 
Transplantation Network,\59\ (OMB form No. 0915-0157, expiration August 
31, 2023), collects the recipient's and payor's information for the 
transplant. The identity of the recipient and the recipient's payor is 
required to be reported. THs, histocompatibility laboratories, and 
organ procurement organizations submit required information to the 
OPTN's organ matching system that links all 57 OPOs, 254 THs and 150 
histocompatibility labs to list patients for transplant, and matches 
patients with available donor organs.\60\
---------------------------------------------------------------------------

    \56\ OPTN Policy 16, https://optn.transplant.hrsa.gov/media/1200/optn_policies.pdf.
    \57\ OPTN Policy 18, https://optn.transplant.hrsa.gov/media/1200/optn_policies.pdf.
    \58\ https://unos.org/data/data-collection/.
    \59\ https://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=0915-0157#.
    \60\ https://optn.transplant.hrsa.gov/members/.
---------------------------------------------------------------------------

    By way of knowing the identity of the recipient, the providers can 
further discern whether a recipient is a Medicare beneficiary by 
contacting the recipient TH or OPO to discern such payor information. 
Therefore, we believe it is possible for THs and OPOs to report, on 
their respective MCRs, the number of organs and kidneys transplanted 
into Medicare beneficiaries, eliminating the reason for Medicare organ 
acquisition payment policy to presume that some organs and kidneys are 
transplanted into Medicare beneficiaries, when they are not.
    We believe it is necessary to update Medicare organ acquisition 
payment policy to recognize organ tracking capabilities and the ability 
for OPOs and THs/HOPOs to discern the identity of the recipient into 
whom the excised organ is transplanted, and whether that recipient is a 
Medicare beneficiary. Doing so will result in Medicare more accurately 
paying its share of organ acquisition costs. We believe it is necessary 
to require that THs and OPOs report on their cost reports only organs 
and kidneys transplanted into Medicare beneficiaries as Medicare usable 
organs and Medicare kidneys, respectively. Doing so will also help 
safeguard the Medicare Trust Fund and ensure that Medicare 
appropriately pays only its share of organ acquisition costs, and that 
acquisition costs for organs not transplanted into Medicare 
beneficiaries are not borne by Medicare. The Medicare reasonable cost 
principles, upon which Medicare organ acquisition payment policy is 
based, and the prohibition of cross-subsidization articulated in 
section 1861(v) of the Act require the cost of services be borne by the 
appropriate payor.
    While all OPOs, and some THs, use an organ tracking capability, we 
believe that THs that do not use an organ tracking capability can also 
ascertain the exact recipient, and thus recipient's payor, when an 
organ is excised in their hospital and furnished to another TH or OPO. 
We understand that some THs that do not use an organ tracking 
capability still track organs they furnish to other THs or OPOs by 
using manual, written methodologies. In this regard, THs can determine 
the organ recipient from their records and by verifying the insurance 
payor of the recipient with the transplant recipient's hospital. 
Additionally, THs can contact the OPO to which they furnished the 
organ, and because the OPTN directs OPOs to use an organ tracking 
system, the OPO can relay the recipient's information and recipient's 
payor to the TH. Likewise, Medicare contractors, who review MCRs 
submitted by THs and OPOs, can confirm Medicare usable organs and 
Medicare usable kidneys reported by THs and OPOs with supporting 
documentation from provider's records.
    Medicare kidneys include, for cost reporting statistical purposes 
and counting, kidneys procured by an OPO and furnished to a MRTC for 
transplant, in accordance with certain longstanding arrangements that 
existed before March 3, 1988, approved by the contractor. However, due 
to organ tracking capability, and to achieve equitable treatment among 
all OPOs (for OPOs that do not have long-standing arrangements with 
military THs), and to also achieve appropriate Medicare expenditures 
for kidney acquisition costs, we no longer believe it is appropriate to 
allow such kidneys to be designated as Medicare kidneys under such 
arrangements. Because organ tracking capability permits OPOs the 
ability to know a donor's transplant recipient, and thus their payor's 
identity, it is no longer necessary for Medicare to continue to apply 
its longstanding policy to deem and count all kidneys an OPO excises 
at, or furnishes to, a MRTC as Medicare kidneys for purposes of 
apportioning Medicare's share of the kidney acquisition costs.
    In the proposed rule we proposed to add Sec.  413.408(a) to new 
subpart L to specify that THs/HOPOs must accurately count and report 
Medicare usable organs and total usable organs on their Medicare 
hospital cost reports to ensure that costs to acquire Medicare usable 
organs are accurately allocated to Medicare for services provided to 
Medicare beneficiaries. We also proposed to add Sec.  413.408(b) to new 
subpart L to specify that for cost reporting periods beginning on or 
after October 1, 2021, for THs/HOPOs, Medicare usable organs include 
only organs transplanted into Medicare beneficiaries (including kidneys 
for MA beneficiaries with dates of service after January 1, 2021), 
organs for which Medicare has a secondary payer liability \61\ for the 
organ transplant, and pancreata procured for the purpose of acquiring 
pancreatic islet cells acquired for transplantation into Medicare 
beneficiaries participating in a National Institute of Diabetes and 
Digestive and Kidney Diseases clinical trial.
---------------------------------------------------------------------------

    \61\ Medicare secondary payer is governed by section 1862(b)(2) 
of the Act and 42 CFR 411.20 through 411.39.
---------------------------------------------------------------------------

    We also proposed to add Sec.  413.408(c) to new Subpart L to 
specify that for cost reporting periods beginning on or after October 
1, 2021, for THs/HOPOs, total usable organs include: (1) Medicare 
usable organs; (2) organs excised with the intention to be used for 
research; (3) organs excised and either transplanted or furnished to 
other transplant hospitals or OPOs; (4) organs obtained from another 
OPO or transplant hospital and either transplanted or furnished to 
other transplant hospitals or OPOs; (5) organs furnished to veterans' 
hospitals

[[Page 73488]]

or organs sent outside the United States; (6) organs transplanted into 
non-Medicare beneficiaries; (7) organs for which the transplant was 
totally or partially paid by primary insurance other than Medicare; (8) 
organs for which the transplant was covered by a MA plan for dates of 
service prior to January 1, 2021; (9) kidneys furnished to United 
States MRTCs with or without a contractor-approved reciprocal sharing 
agreement with the HOPO in effect prior to March 3, 1988; and (10) 
pancreata procured for the purpose of acquiring pancreatic islet cells 
for transplantation into participants in a National Institute of 
Diabetes and Digestive and Kidney Diseases clinical trial.
    We also proposed to remove Sec.  413.203, and add Sec.  413.408(d) 
to new subpart L, so that all organ acquisition policies are housed 
together, to specify that a TH's total costs for all organs are reduced 
by the costs associated with procuring organs that are furnished to 
foreign transplant centers or transplanted in patients other than 
Medicare beneficiaries; and to specify that THs must separate costs for 
procuring organs that are furnished to foreign transplant centers and 
organs transplanted in patients other than Medicare beneficiaries from 
Medicare allowable costs prior to final cost settlement by the Medicare 
contractors. The separation of cost is achieved using the Medicare 
ratio set forth in proposed Sec.  413.408(e).
    We also proposed to add Sec.  413.408(e) to new subpart L to 
specify that for cost reporting periods beginning on or after October 
1, 2021, Medicare's share of organ acquisition costs for a TH/HOPO is 
calculated by multiplying the total allowable organ acquisition costs 
by the ratio of Medicare usable organs transplanted into Medicare 
beneficiaries, as specified in proposed Sec.  413.408(b), to total 
usable organs, as specified in proposed Sec.  413.408(c).
    For rules pertaining to counting kidneys and calculating Medicare's 
share of kidney acquisition costs for IOPOs, in the proposed rule, we 
proposed to add Sec.  413.410(a) to new subpart L to specify that IOPOs 
must accurately count and report Medicare usable kidneys and total 
usable kidneys on their Medicare IOPO cost reports to ensure that costs 
to acquire Medicare usable kidneys are accurately allocated to 
Medicare. We also proposed to add Sec.  413.410(b) to new subpart L to 
specify that, for cost reporting periods beginning on or after October 
1, 2021, for IOPOs, Medicare kidneys include only kidneys transplanted 
into Medicare beneficiaries.
    We also proposed to add Sec.  413.410(c) to new subpart L to 
specify that for cost reporting periods beginning on or after October 
1, 2021, for IOPOs, total usable kidneys include: (1) Medicare usable 
kidneys; (2) kidneys procured with the intention to be used for 
research; (3) kidneys procured and furnished to other transplant 
hospitals or OPOs; (4) kidneys procured from another OPO or transplant 
hospital and either transplanted or furnished to other transplant 
hospitals or OPOs; (5) kidneys furnished to veterans' hospitals or 
organs sent outside the United States; (6) kidneys for which the 
transplant was covered by a MA plan for dates of service prior to 
January 1, 2021; and (7) kidneys furnished to United States MRTCs with 
or without a contractor-approved reciprocal sharing agreement with the 
IOPO in effect prior to March 3, 1988.
    We proposed to remove Sec.  413.202 and add Sec.  413.410(d) to new 
subpart L, to specify that an IOPO's total costs for all kidneys is 
reduced by the costs associated with procuring kidneys furnished to 
foreign transplant centers or transplanted in patients other than 
Medicare beneficiaries; and to specify that IOPOs must separate costs 
for procuring kidneys furnished to foreign transplant centers and 
kidneys transplanted in patients other than Medicare beneficiaries from 
Medicare allowable costs prior to final settlement by the Medicare 
contractors. The separation of cost is achieved using the Medicare 
ratio set forth in proposed Sec.  413.410(e).
    We also proposed to add Sec.  413.410(e) to new subpart L to 
specify that for cost reporting periods beginning on or after October 
1, 2021, Medicare's share of kidney acquisition costs is calculated by 
multiplying the total allowable kidney acquisition costs by the ratio 
of Medicare usable kidneys, as specified in proposed Sec.  413.410(b), 
to total kidneys, as specified in proposed Sec.  413.410(c).
    Comment: Commenters overall were not supportive of CMS' proposals 
for THs and OPOs to count only organs and kidneys transplanted into 
Medicare beneficiaries as Medicare usable organs and Medicare usable 
kidneys, to calculate Medicare's share of organ acquisition costs for 
THs and kidney acquisition costs for OPOs. Many commenters, including 
children's hospitals, stated they would experience a loss of revenue. 
Some commenters opined that this proposal would shift costs to others 
within the organ acquisition and transplantation ecosystem, and have 
the effect of raising procurement costs, although details on 
specifically how or which costs would increase, or how a shift in cost 
would occur were not provided. A commenter suggested that the policy 
proposal will inappropriately transfer organ acquisition costs for some 
Medicare beneficiaries from Medicare to the transplant hospitals that 
excise organs and furnish them to other THs or OPOs.
    Response: We appreciate the lifesaving contributions that THs and 
OPOs make within the transplant community and we understand commenters' 
concerns over the potential loss of revenue they may experience 
stemming from our proposal to limit Medicare's organ acquisition costs 
to costs incurred for organs actually transplanted into Medicare 
beneficiaries. After consideration of the public comments we received, 
we believe these concerns warrant further review; therefore, we are not 
finalizing our proposed policy with respect to counting organs for 
determination of Medicare's share of organ acquisition costs as 
proposed at Sec. Sec.  413.408 and 413.410, but may consider this 
policy in future rulemaking.
    Commenters did not provide substantive information or data to 
explain how or why they believe costs to acquire organs would increase 
under our proposed policy and it is not clear to us how such costs 
would increase absent revenue from Medicare for organ acquisition costs 
for organs not transplanted into Medicare beneficiaries. We do not 
believe that the proposed policy would inappropriately transfer organ 
acquisition costs for some Medicare beneficiaries from Medicare to the 
transplant hospitals that excise organs and furnish them to other THs 
or OPOs.
    When a TH excises and furnishes an organ to another TH or OPO, or 
when an OPO furnishes an organ to a TH or another OPO, the TH or OPO 
furnishing the organ currently receives revenue from the recipient TH 
to which the organ was furnished; the recipient TH is in turn 
reimbursed by the transplant recipient's payor. Even when the 
transplant recipient is not a Medicare beneficiary, the TH that excises 
and furnishes the organ to the recipient TH receives an additional 
payment from Medicare, because the current Medicare organ counting 
policy allows that organ to be counted as a Medicare usable organ and 
assumes that the organ is transplanted into a Medicare beneficiary. (If 
the organ is a kidney, the OPO receives a reconciliation payment from 
Medicare based on the assumption that the kidney was transplanted into 
a Medicare beneficiary.) If a TH incurs costs to provide services to 
maintain a cadaveric donor after declaration of

[[Page 73489]]

death and consent to donate is given, then the TH accumulates and 
enters those charges as organ acquisition costs on the TH's cost 
report, charges the OPO for the services rendered, and offsets the 
revenue received from the OPO for the organ acquisition costs 
associated with organs furnished to Medicare beneficiaries. In this 
regard, the TH receives revenue for its costs incurred in exchange for 
providing the services to the cadaveric donor, either from the OPO to 
which the organ was furnished, or as an amount included in its 
acquisition costs on its cost report.
    If all payors within the transplant ecosystem are paying their 
share of organ acquisition costs for organs acquired for transplant 
into their insured recipients or Medicare beneficiaries, then there 
should not be an increase of an amount of unreimbursed acquisition 
costs.
    We understand commenters' views that this proposal would result in 
organ acquisition costs that have been historically paid by Medicare to 
no longer be paid by Medicare if the organs were not transplanted into 
Medicare beneficiaries and that THs and OPOs will need to modify their 
organ tracking and billing processes in order to recoup any loss of 
revenue they may experience. We also acknowledge commenters' pointing 
out that children's hospitals may experience a loss of revenue because 
they traditionally have very low Medicare utilization. Specifically, we 
acknowledge that they noted that under the proposal, children's 
hospitals would experience a loss of revenue because they will only be 
able to count organs actually transplanted into Medicare beneficiaries, 
which occurs rarely with pediatric organs transplanted into adults.
    In response to this proposal to count only organs transplanted into 
Medicare beneficiaries as Medicare usable organs, we have heard 
stakeholders' concerns that the process of tracking organs, to report 
only organs transplanted into Medicare beneficiaries on the Medicare 
cost report, is perceived to be burdensome. We have also heard 
stakeholders' concerns regarding the financial impacts from the loss of 
revenue from Medicare stemming from this policy proposal and the value 
of studying impacts to patients. We are not finalizing this proposal at 
this time to allow more time to better understand these and other 
concerns that commenters have raised, including those related to organ 
tracking processes, as we continue our efforts to ensure Medicare more 
accurately pays its share of organ acquisition costs as well as adhere 
to the statutory prohibition of cross-subsidization articulated in 
section 1861(v) of the Act.
    Comment: Many commenters suggested either a withdrawal of the 
proposal or a delayed implementation date to allow THs additional time 
to re-negotiate contracts with other payors to make up for the 
decreased revenue they may experience stemming from the proposal. Some 
commenters requested that CMS delay implementation to conduct a study 
on the financial impact upon the transplant community as a result of 
the proposal. Some commenters believed that Medicare's impact estimate 
was underestimated and imprecise when using SRTR data reflecting organs 
transplanted into Medicare beneficiaries; in this regard, commenters 
believed the SRTR data to be underreported with recipients' payor 
information from transplanting THs. A commenter suggested that CMS 
calculate and use an ``in-house'' Medicare ratio for THs, as a proxy to 
apply to the number of organs the TH/HOPO furnishes to other hospitals 
or OPOs which are transplanted into Medicare beneficiaries. Other 
commenters requested that Medicare study and publish a hospital 
specific impact analysis resulting from these proposals.
    Response: We thank commenters for sharing their concerns and 
requests for a delayed implementation of the proposed policy so that 
stakeholders may renegotiate their contracts with other payors, or 
conduct further analyses of their financial impacts. We agree that 
additional time may be needed for stakeholders to renegotiate their 
contracts and update their tracking and billing processes; therefore, 
we are not finalizing our policies proposed at Sec. Sec.  413.408 and 
413.410 at this time in order to further consider the public comments 
and financial impacts as a consequence of those proposed policies.
    In response to comments about the impact analysis included in the 
proposed rule, we note that our impact estimate in the proposed rule 
was projected as a savings to the Medicare Program and was based on 
data collected by the OPTN and reported by the SRTR that categorizes 
transplant recipients by payor. THs and OPOs are required to submit 
information to the OPTN that are used to match donors and recipients, 
including the recipient's primary payor information at the time of the 
recipient's registration. The OPTN requires the organ recipient's payor 
information be updated by the transplanting hospital at the time of 
transplant. The SRTR derives its data from the OPTN database and we 
believe that these data were the best available data and a reasonable 
proxy for Medicare's share of organ acquisition costs for organs a TH 
excises and furnishes to other THs or OPOs. (See the FY 2022 IPPS/LTCH 
PPS proposed rule (86 FR 25665.) We also acknowledge commenters' 
suggestions that we could estimate the percent of organs a TH furnishes 
to other THs or OPOs that are transplanted into Medicare beneficiaries, 
by using a TH's data to calculate an in-house ratio of organs 
transplanted into Medicare beneficiaries within the TH's own hospital, 
and by applying that in-house Medicare ratio, as a proxy, to the organs 
a transplant hospital furnishes to other THs or OPOs.
    In response to commenters' requests that CMS conduct additional 
analyses, we will conduct additional analyses of impacts upon THs, 
children's hospitals, and OPOs before we consider revising this policy 
in future rulemaking on counting organs as proposed at Sec. Sec.  
413.408 and 413.410.
    Comment: Some commenters stated that Medicare's current organ 
acquisition payment policy was intentionally devised decades ago to 
ensure that Medicare provided an incentive to hospitals to participate 
in organ transplantation. A few commenters provided copies of a 1995 
letter authored by CMS personnel that explained cost reporting 
instructions and audit adjustments for recording organs procured by 
hospitals and HOPOs, (and kidneys procured by OPOs), that were 
furnished to other hospitals and OPOs as Medicare usable organs and 
Medicare usable kidneys. Commenters opined that the methodologies 
discussed in the 1995 letter were an incentive for hospitals and OPOs 
to procure organs.
    Response: We appreciate commenters bringing to our attention a 1995 
letter authored by CMS personnel, however, we believe this letter 
explains the Medicare usable organ and Medicare usable kidney 
acquisition policies as they existed when the letter was authored. The 
1995 letter explains that a TH or OPO that excises kidneys and 
furnishes them to other THs and OPOs do not have control over the 
disposition of the kidneys, and do not know whether these kidneys are 
actually transplanted, and if they are transplanted, whether they are 
transplanted into Medicare beneficiaries. We understand that commenters 
may perceive the policies outlined in the 1995 letter as providing a 
financial incentive for OPOs and THs to excise and furnish organs to 
other THs and OPOs. This was not the intention. Medicare has allowed 
THs

[[Page 73490]]

and OPOs to count all organs and kidneys excised and furnished to other 
THs and OPOs as Medicare usable organs or Medicare usable kidneys and 
required the offset of revenue; however, when revenue did not reflect 
the actual costs incurred, Medicare likely paid for more than its 
share. As we discussed in the preamble to the proposed rule, capability 
now exists to track the location and disposition of organs, from the 
time organs are excised from donors until they are transplanted into 
recipients. As such, we no longer believe the methodology outlined in 
the 1995 letter aligns with Medicare's anti-cross subsidization 
principles, as well as reasonable cost principles upon which Medicare's 
organ acquisition cost reimbursement policies are based. As stewards of 
the Medicare Trust Fund, it is important to establish and maintain 
policies that align with Medicare's anti-cross subsidization principles 
to ensure that Medicare pays for costs incurred for the care of 
Medicare beneficiaries. Other payors that may be responsible for organ 
acquisition costs for organs transplanted into their patients must 
likewise bear the cost of organ acquisition costs for their patients. 
Although we no longer believe the methodology outlined in the 1995 
letter aligns with Medicare's anti-cross subsidization principles, or 
reasonable cost principles upon which Medicare's organ acquisition cost 
reimbursement policies are based, we understand stakeholders' concerns 
regarding loss of revenue and the perceived burdens to implement this 
proposal warrant further consideration and thus we are not finalizing 
the organ counting proposal. We may revisit this proposal in future 
rulemaking.
    Comment: Many commenters expressed appreciation for the 
clarification and codification of organ acquisition payment policies 
and CMS's goal to make more precise payments for organ acquisition 
costs from the Medicare Trust Fund. A commenter who supported the 
proposal stated that the current Medicare usable organ counting policy 
was adopted 35 years ago when most organ donors were trauma patients at 
a transplant center but stated today less than a third of donors are 
trauma patients. It seems the commenter was suggesting that organs are 
procured from trauma patients at a transplant center less frequently 
today and more organs are being procured from other hospitals or by 
OPOs and sent to THs or OPOs for transplant elsewhere.
    Response: We appreciate commenters' support of our intention to 
clarify and codify organ acquisition payment policies and our goal to 
make more precise payments for organ acquisition costs from the 
Medicare Trust Fund. We agree that over the past 35 years, the 
transplant ecosystem and circumstances have changed, such that more 
organs today are excised at one location and transported elsewhere for 
transplant.
    Comment: Many commenters expressed concern with THs and OPOs having 
to track organs and report on the Medicare cost report only organs 
transplanted into Medicare beneficiaries, as Medicare usable organs. 
Some commenters stated that their administrative costs would increase 
under the proposed policy. Some commenters suggested that CMS develop a 
centralized organ tracking system and other commenters suggested that 
the OPTN allow all THs and OPOs access to a centralized database with 
updated recipients' payor information. Some commenters stated that THs 
were not required to update OPTN data with recipients' payor 
information at the time of transplant, resulting in outdated OPTN payor 
data for transplant recipients and likely underreporting Medicare as a 
payor. Some commenters opined that a TH that excised and furnished 
organs to other THs or OPOs would be unable to have access to organ 
recipients' payor data in the OPTN database. Other commenters suggested 
that the OPTN require THs to update their OPTN data with their 
transplant recipients' payor information at the time of transplant to 
avoid having outdated payor information if a recipient's payor status 
changed at the time of transplant. Some commenters opined that a TH 
that excises and furnishes organs to other THs or OPOs would be unable 
to have access to organ recipients' payor data in the OPTN database. 
Some commenters stated that a recipient's insurance information is 
entered into the OPTN database when the recipient is first placed on a 
waiting list for an organ, but the recipient's insurance status may 
change over time and not be updated in the OPTN database, remaining the 
same as when the recipient was first placed on the waiting list. A 
commenter suggested that the Medicare contractor provide verification 
as to whether a Medicare usable organ recorded on the cost report was 
actually transplanted into a beneficiary. Another commenter suggested 
that the Medicare contractor routinely provide beneficiary insurance 
status to the OPOs, instead of the OPOs contacting the transplant 
center to which they furnished the organ to discern whether the organ 
recipient was a Medicare beneficiary.
    Response: We appreciate commenters' concerns regarding the burden 
in implementing this policy and accordingly have decided not to issue a 
final rule on counting of organs as proposed at Sec. Sec.  413.408 and 
413.410 at this time.
    Although we are not finalizing our proposals at Sec. Sec.  413.408 
and 413.410, we are aware that OPOs have access to the OPTN database 
and to the identity of the recipients of each organ procured by that 
OPO. We also understand that all THs know the correct up-to-date 
primary payor of each of their transplant recipients (and the Medicare 
beneficiary status) at the time of transplant as this information is 
necessary for the TH to accurately submit its claim for reimbursement 
for the procedure. We note that OPOs, donor hospitals, and THs rely on 
a close collaborative relationship involving information sharing to 
ensure that organs are successfully procured and appropriately placed 
with transplant recipients. Many OPO commenters acknowledged that they 
are in contact with recipient transplant hospitals to which the organ 
was furnished. We believe that during these communications, 
collaborations and encounters, when OPOs and THs coordinate the organ 
acquisition and transportation between the OPO and the TH, the OPO 
could reasonably determine whether the organ recipient is a Medicare 
beneficiary.
    OPTN rules require that THs update their OPTN data with their 
transplant recipients' payor information at the time of hospital 
discharge but no later than six weeks after the recipient's transplant. 
Under 42 CFR 121.11(b)(2), OPOs and THs are required to submit to the 
OPTN, and the Scientific Registry, as appropriate, and to the Secretary 
information regarding transplant candidates, transplant recipients, 
donors of organs, transplant program costs and performance, and other 
information that the Secretary deems appropriate. Additionally, the 
OPTN Policy 18 sets forth data submission requirements regarding 
transplant recipients that THs must submit, with accuracy, to the OPTN 
following the organ transplant. The Data System for Organ Procurement 
and Transplantation Network,\62\ (OMB 0915-0157, expiration August 31, 
2023), collects information on recipients and recipients' payors for 
the organ transplant. The OPTN data collection system contains data 
entry fields to capture a recipient's primary payor information. We 
understand that an OPO or TH that excises and furnish organs to a 
recipient TH or OPO, may not have access to the OPTN data for the organ 
recipient in order to determine

[[Page 73491]]

the primary payor and realize that more work may be needed to ensure 
that the excising TH or OPO have access to this OPTN data in the future 
to discern the organ recipient's payor identity.
---------------------------------------------------------------------------

    \62\ https://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=0915-0157#.
---------------------------------------------------------------------------

    We do not believe it is the role of the Medicare contractors to 
provide verification or payor information for a TH or OPO to discern 
whether an organ may be considered a Medicare usable organ and recorded 
as such on the Medicare cost report. A framework to discern a 
recipient's payor status already exists within the OPTN database. We 
note that 42 CFR 413.20 sets forth requirements that providers maintain 
sufficient financial records and statistical data for proper 
determination of costs payable under the Medicare Program and must 
furnish such information to the contractor as necessary to assure 
proper payment from Medicare.
    We acknowledge the concerns raised by commenters warrant further 
consideration and thus we are not finalizing the organ counting 
proposal and may revisit this proposal in future rulemaking.
    Comment: A commenter indicated that the proposal was contrary to 42 
CFR 412.113(d), which sets forth that payment for organ acquisition 
costs incurred by hospitals with approved transplant centers are made 
on a reasonable cost basis.
    Response: We do not believe our proposals are contrary to Sec.  
412.113(d), which describes other payments made to hospitals under the 
prospective payment systems, and sets forth that payment for organ 
acquisition costs incurred by hospitals with approved transplant 
centers are made on a reasonable cost basis. Under the proposal, costs 
incurred by hospitals with approved transplant centers will continue to 
be paid by Medicare on a reasonable cost basis for the acquisition of 
organs transplanted into Medicare beneficiaries.
    Comment: A commenter requested that CMS make a policy declaration 
with respect to revenue offsets under this proposal for organs that a 
TH/HOPO excises and furnishes to other THs or OPOs, or kidneys that an 
IOPO furnishes to THs or other OPOs, that would not be counted as 
Medicare usable organs. This commenter pointed out that there would be 
an underpayment of the organ acquisition costs attributable to Medicare 
beneficiaries if a revenue offset were required for organs that are not 
transplanted into Medicare beneficiaries. Under the current policy, 
because organs that a TH/HOPO excises and furnishes to other THs or 
OPOs are deemed or assumed to be Medicare usable organs, the revenue 
the excising TH/HOPO or OPO receives from the OPO or TH to which the 
organ is furnished must be offset from the excising TH/HOPO's organ 
acquisition costs. However, if an organ is not a Medicare usable organ, 
the revenue the excising TH/HOPO or IOPO receives must not be offset or 
deducted from the excising TH/HOPO's or the IOPO's organ acquisition 
costs.
    Response: We agree with the commenter's concerns regarding revenue 
offsets that are not required for organs that are not transplanted into 
Medicare beneficiaries. Current Medicare hospital and IOPO cost 
reporting instructions require a TH that excises and furnishes, or an 
IOPO that furnishes, organs to other OPOs or THs, to offset or reduce 
its organ acquisition costs by the amount of revenue received from the 
TH or OPO, to which the organ was furnished when the organ is a 
Medicare usable organ.\63\ Although we are not finalizing the organ 
counting policies as proposed in Sec. Sec.  413.408 and 413.410, 
Medicare still requires these revenue offsets in the Medicare cost 
report. Doing so will accurately account for the organ acquisition 
costs attributable to Medicare.
---------------------------------------------------------------------------

    \63\ For Medicare hospital cost reports, see CMS Pub. 15-2, 
chapter 40, section 4028.3. For IOPO cost reports, see CMS Pub. 15-
2, chapter 33, sections 3309 and 3311.
---------------------------------------------------------------------------

    Comment: Some commenters stated that the proposed policy presented 
privacy or Health Insurance Portability and Accountability Act of 1996 
(HIPAA) concerns with THs and OPOs disclosing or receiving the payor 
status of an organ recipient.
    Response: Although we are not finalizing our proposed rule at 
Sec. Sec.  413.408 and 413.410 at this time, we do not believe there 
should be uncertainties regarding information sharing, privacy, or 
HIPAA concerns, especially considering the numerous consent forms 
patients sign as a matter of course for medical treatment. The HIPAA 
Privacy Rule permits disclosure of information, without an individual's 
authorization, for payment related operations. Medicare is seeking to 
make more accurate payments for organ acquisition costs by proposing to 
pay acquisition costs for organs that are actually transplanted into 
Medicare beneficiaries. We believe that a patient's disclosure of their 
payor information is consistent with Medicare's payment goals and is 
the minimum necessary information required to ensure accurate payment 
from Medicare. We believe that disclosure that an organ recipient is a 
Medicare beneficiary is permissible under the HIPAA Rule. Additionally, 
patient consent forms should allow for OPOs or THs to discern whether a 
recipient was a Medicare beneficiary without invoking HIPAA Privacy 
Rule violations because the patient has provided consent for such 
disclosure. Under regulations at 45 CFR 164.501 that set forth the 
privacy of individually identifiable health information, the definition 
of payment means activities undertaken by a health care provider to 
obtain or provide reimbursement for the provision of health care. Thus, 
the disclosure of the organ recipient's payor status falls within this 
scope of payment, such that there would be no HIPAA Privacy Rule 
violations for a TH or OPO to disclose a recipient's payor information 
to another TH or OPO. We believe that any information sharing, privacy 
or HIPAA regulatory concerns can be abated with amendments to existing 
financial consent forms, if necessary, whereby organ transplant 
recipients can consent to have their health insurance payor information 
released.
    Comment: Some commenters questioned how they could determine 
whether Medicare has a secondary payer liability to count an organ as a 
Medicare usable organ. Several commenters disagreed with the proposal 
they perceived as requiring a TH that excises and furnishes organs to 
another TH or OPO to count those organs as Medicare usable organs when 
Medicare has a secondary payer liability.
    Response: We appreciate commenters' concerns. Although we are not 
finalizing the organ counting proposals in proposed Sec. Sec.  413.408 
and 413.410 in this final rule with comment period, we wish to clarify 
for commenters that our proposals to codify, at Sec.  413.414, our 
longstanding manual provisions with respect to organ acquisition costs 
and counting organs when Medicare is a secondary payer pertains only to 
a TH that performs the transplant. In this regard, a TH that excises 
and furnishes an organ to another TH or OPO does not have a possibility 
of a secondary payer payment from Medicare because the excising TH did 
not perform the transplant and receive the DRG payment. Thus, the 
transplanting TH, not the excising TH that furnishes organs to others, 
needs to compare the total cost of the transplant DRG amount and the 
organ acquisition costs, to the payment received from the primary payer 
to determine if there is a secondary payer liability from Medicare for 
the transplanting TH's organ acquisition costs. The Medicare secondary 
payer provisions with respect

[[Page 73492]]

to how the TH would determine whether Medicare has secondary payer 
liability for organ acquisition costs are discussed in II.C.2.j. of 
this final rule with comment period.
    Comment: A commenter suggested that the proposals could lead to 
more widespread use of organ recovery centers. Stakeholder sentiment is 
that the current policy has served as a disincentive to transport 
deceased donors from THs to organ recovery centers. This is because a 
TH cannot include on its Medicare cost report organs excised at an ORC 
from a cadaveric donor that was transported from the TH to the ORC for 
removal of the organs in the ORC. A commenter misconstrued the proposal 
as permitting THs to count as Medicare usable organs, those organs 
transplanted into Medicare beneficiaries that had been recovered in an 
OPO's organ recovery center from a cadaveric donor that had been 
transported from the TH to the OPO's organ recovery center. A commenter 
requested that CMS finalize a policy that allows THs to include as 
Medicare usable organs, any organs recovered in an OPO's organ recovery 
center from cadaveric donors that were transported from the TH to the 
organ recovery center.
    Response: We appreciate commenters' concerns. However, an OPO's 
operation of an organ recovery center is outside of the scope of our 
proposals.
    Comment: Some commenters suggested that the proposal to count only 
organs transplanted into Medicare beneficiaries as Medicare usable 
organs will increase wait times, waitlist mortality and morbidity for 
ESRD-eligible Medicare beneficiaries. Many commenters opined that the 
proposal would decrease organ supply and limit the number of organs 
that can be procured or procured ``in a financially sustainable'' 
manner.
    Response: We appreciate commenters' concerns. Although we are not 
finalizing the organ counting proposal at this time and may further 
consider in future rulemaking, our proposal was intended to ensure that 
Medicare pays its share of organ acquisition costs for organs procured 
and transplanted into Medicare beneficiaries, protect the Medicare 
Trust Fund, and not impede organ supply or transplantation. Commenters 
did not provide specific details to support their assertion that these 
policy proposals would increase wait times, waitlist mortality and 
morbidity for ESRD-eligible Medicare beneficiaries and decrease organ 
supply. However, we interpret the comments to mean that THs and OPOs 
may be less likely to procure organs as a result of any decrease in 
revenue they may experience from the proposal to count as Medicare 
usable organs only organs transplanted into Medicare beneficiaries, 
even when organs are furnished to transplant recipients for whom 
financial responsibility rests with other payors. We note that OPOs 
have existing statutory duties, under 42 U.S.C 273, to conduct and 
participate in systematic efforts to acquire all useable organs from 
potential donors. OPOs also must meet the CfCs under 42 CFR 486.344 
that require them to have written protocols for donor evaluation and 
management and organ placement and recovery that must meet current 
standards of practice and that are designed to maximize organ quality 
and optimize the number of donors and the number of organs recovered 
and transplanted per donor.
    On December 2, 2020, CMS published a final rule that finalized two 
new outcome measures for OPOs, the organ donation rate and 
transplantation rate measures, with the goal of increasing the supply 
of organs available for transplants (85 FR 77898). We believe that 
these outcome measures will incentivize OPOs to recover more organs 
that will ultimately be available for transplantation. However, if an 
OPO's performance on the outcome measures does not improve 
sufficiently, CMS will open the designated service area (DSA) and allow 
other high performing OPOs to compete for the open DSA.
    We also note that pursuant to the finalized SAC policy at Sec.  
413.404, THs establish SACs by organ type prior to their first 
transplant.\64\ If the TH believes their SACs are insufficient, they 
have the ability to increase their SACs \65\ or negotiate with other 
payors to avoid cost reimbursement disparities.
---------------------------------------------------------------------------

    \64\ See 413.404(b)(3)(i)(C)(1) and 413.404(b)(3)(ii)(B)(1).
    \65\ See 413.404(b)(3)(i)(C)(2) and 413.404(b)(3)(ii)(B)(2).
---------------------------------------------------------------------------

    Comment: A few commenters opined that our proposal was ``to only 
reimburse kidney transplants for MA patients starting January 1, 2021'' 
and opined that CMS proposed retroactive policy provisions at proposed 
Sec. Sec.  413.408(b)(1) and (c)(8) and 413.410(b) and (c)(6) without 
explanation. The commenters seemed to question why only kidneys, and 
not all organs, transplanted into MA beneficiaries were included in the 
calculation of Medicare's share of organ acquisition costs for THs and 
OPOs.
    Response: Although we are not finalizing our proposed rule at 
Sec. Sec.  413.408 and 413.410 at this time, we wish to clarify that we 
did not propose in a retroactive manner, to include kidneys 
transplanted into MA beneficiaries as Medicare usable kidneys for 
purposes of calculating Medicare's share of kidney acquisition costs. 
In the preamble to the proposed rule, we proposed to codify, (at 
proposed Sec. Sec.  413.408(b)(1) and (c)(8) and 413.410(b) and 
(c)(6)), the statutory provision that requires Medicare to pay for 
kidney acquisition costs for MA beneficiaries on a reasonable cost 
basis for dates of service starting on January 1, 2021.\66\
---------------------------------------------------------------------------

    \66\ See 86 FR 25664, and 25702, and 25703.
---------------------------------------------------------------------------

    The provisions of the 21st Century Cures Act, passed in 2016 (Pub. 
L. 114-255), changed Medicare's reimbursement methodology for the 
acquisition costs of kidneys transplanted into MA beneficiaries. In the 
preamble to the FY 2022 IPPS/LTCH PPS proposed rule, we explained in a 
footnote the genesis for this statutory provision (see 86 FR 25664). 
Section 17006(c) of Public Law 114-255 amended section 1852(a)(1)(B)(i) 
of the Act to exclude coverage for organ acquisitions for kidney 
transplants from the Medicare benefits an MA plan is required to cover 
for an MA enrollee, including as covered under section 1881(d) of the 
Act. As such, effective January 1, 2021, in accordance with the 
statutory provisions these costs are covered under the original 
Medicare FFS program and paid on a reasonable cost basis. (For more 
information, see the June 2, 2020 final rule (85 FR 33824). Kidneys 
procured for MA beneficiaries are included as Medicare usable kidneys, 
and are included in the numerator and denominator on the MCR to 
determine Medicare's share of kidney acquisition costs, despite our not 
finalizing Sec. Sec.  413.408 or 413.410 at this time. Procurement 
costs for non-renal organs and transplants continue to follow existing 
reimbursement methodologies through MA for MA beneficiaries.
    Comment: A commenter suggested that proposed Sec.  413.408(d) may 
lead to doubling the estimated non-Medicare organ and kidney 
acquisition costs because the proposed regulation at Sec.  413.408(d) 
proposes to reduce the costs associated with procuring organs furnished 
to foreign transplant centers or costs associated with transplanting 
organs in patients other than Medicare beneficiaries, and the Medicare 
ratio that is applied to total costs already removes these non-Medicare 
costs. The commenters suggested removing proposed Sec.  413.408(d), as 
it appears to be unnecessary since the calculation of

[[Page 73493]]

Medicare allowable costs is achieved through proposed Sec.  413.408(b), 
(c), and (e).
    Response: We appreciate commenters' concerns and note this comment 
also applies to proposed Sec.  413.410(d) pertaining to Medicare's 
share of kidney acquisition costs. We are not finalizing the proposed 
counting policy in Sec. Sec.  413.408 and 413.410, we may further 
consider this issue as we consider additional rulemaking.
i. Provisions Related to Intent To Transplant, and Counting En Bloc, 
Research, and Discarded Organs
    In the FY 2022 IPP/LTCH PPS proposed rule, we set forth our policy, 
pertaining to intent to transplant, counting en bloc organs, research 
organs, and discarded organs for THs and OPOs (86 FR 25667 through 
25668). These policies provide for the proper calculation of Medicare's 
share of organ acquisition costs that are used for the appropriate 
allocation of organ acquisition costs on the MCR. The calculation of 
Medicare's share of organ acquisition costs is discussed in section 
II.C.2.h.(1). of this final rule with comment period. The methodology 
of counting organs to calculate Medicare's share of organ acquisition 
costs is used for the allocation of organ acquisition costs on the MCR 
and differs from Medicare's organ counting policy to assess OPOs' 
performance, which is set forth under the OPO CfCs, 42 CFR part 486, 
subpart G. To calculate Medicare's share of organ acquisition costs, 
when organ procurement is attempted, but no organ is actually retrieved 
(or the organ is instead discarded), proper counting of the organ must 
occur to ensure that overhead costs are appropriately allocated to 
Medicare and non-Medicare payors. However, cost allocation is not a 
factor when counting organs for evaluating an OPO's performance under 
the CfCs.
(1) Principle of Intent To Transplant
    Medicare presumes that THs and OPOs intend to procure all donor 
organs that are medically suitable for transplant.\67\ We proposed to 
add Sec.  413.412(a)(1) to new subpart L, to specify, for organ 
acquisition payment purposes, an organ is intended for transplant when 
the OPO or TH designates it for transplant prior to the time the donor 
enters the hospital's operating room for surgical excision/recovery of 
the organ(s). Regardless of whether the OPO or TH procures organs for 
transplant, it incurred cost in attempting to procure organs.\68\ We 
proposed to add Sec.  413.412(a)(2) to new subpart L, to specify, OPOs 
and THs must identify the costs associated with the recovered and 
unrecovered organs and apportion those costs to the appropriate cost 
centers by organ type.
---------------------------------------------------------------------------

    \67\ 86 FR 25668.
    \68\ 86 FR 25668.
---------------------------------------------------------------------------

    Comment: A commenter appreciated CMS clarifying and codifying long-
standing CMS policy regarding intent to transplant, counting en bloc, 
research and discarded organs because it will help ensure more accurate 
reporting of total usable organs, Medicare usable organs, and organ 
statistics on the MCR.
    Response: We appreciate the commenter's support for our 
clarifications of the policy regarding intent to transplant, counting 
en bloc, research and discarded organs. For additional clarity, we also 
note that an OPO or TH can demonstrate that it did not intend to 
procure a particular organ, if an instance such as one of the following 
occurs: The donor does not meet the criteria for eligible death as 
specified by the OPTN; the organ has been eliminated for eligibility 
because of donor information; the organ has been ruled out by 
laboratory data prior to the donor entering the operating room for 
excision of organs; the family does not provide consent to donate the 
organ or the donor is not a registered organ donor; or the search for a 
recipient for that particular organ has ended unsuccessfully prior to 
the donor's entrance into the operating room.
    After consideration of the public comments we received, we are 
finalizing our proposals regarding intent to transplant under Sec.  
413.412(a).
(2) Counting and Cost Allocation of En Bloc Organs
    In the proposed rule, we set forth our policy for counting en bloc 
organs for cost allocation purposes (86 FR 25668). We proposed to add 
Sec.  413.412(b) to new subpart L, to specify our policy for counting 
en bloc organs for Medicare cost allocation purposes and to specify 
that en bloc organs can be en bloc lungs or en bloc kidneys.
    We proposed to add Sec.  413.412(b)(1) to new subpart L to specify 
that OPOs and THs count en bloc lungs or en bloc kidneys procured and 
transplanted en bloc (two organs transplanted as one unit) as one total 
usable organ. En bloc organs transplanted into a Medicare beneficiary 
count as one Medicare usable organ or one Medicare usable kidney.
    We proposed to add Sec.  413.412(b)(2) to new subpart L to specify 
that OPOs and THs count en bloc lungs and en bloc kidneys procured en 
bloc but separated and transplanted into two different recipients as 
two total usable organs. For each organ transplanted into a Medicare 
beneficiary, count each as one Medicare usable organ or one Medicare 
usable kidney.
    Comment: A commenter suggested CMS' proposals relative to counting 
en bloc organs does not take into consideration added costs of 
procuring and transplanting multiple organs. This commenter perceived 
our proposal to codify our longstanding policy for counting en bloc 
organs procured for transplant as a change in policy. The commenter 
further indicated that this policy will reduce Medicare reimbursement 
and is inconsistent with Congressional intent to ensure Medicare 
payment policies expand access to transplantation-related services.
    Response: We did not propose changes to Medicare's policy for 
counting en bloc organs for organ acquisition payment purposes. Our 
proposals are intended to codify our longstanding policy for counting 
en bloc organs procured for transplant as was previously set forth in 
manual provisions. In this regard, we did not propose changes that 
would change or affect how Medicare's share of costs is calculated to 
acquire en bloc organs for transplant. Our intent is to ensure that 
Medicare pays only its fair share of en bloc organ acquisition costs.
    After consideration of the public comments we received, we are 
finalizing our proposals regarding counting of en bloc organs under 
Sec.  413.412(b), with modification to remove the references to Sec.  
413.408(b) and Sec.  413.410(b) because those provisions are not being 
finalized.
(3) Research Organs
    In the proposed rule, we set forth our policy regarding counting of 
organs excised and used for research for Medicare cost allocation 
purposes (86 FR 25668). We proposed to clarify that for organ 
acquisition cost allocation purposes, a ``research organ'' is an organ 
procured and used for research regardless of whether it is transplanted 
as part of clinical care (with the exception of pancreata previously 
discussed in section II.C.2.h.(2). of this final rule with comment 
period). We proposed to add Sec.  413.412(c) to new subpart L to 
specify that organs used for research are not counted as Medicare 
usable organs in Medicare's share of organ acquisition costs (except 
pancreata previously discussed in section II.C.2.h.(2). of this final 
rule with comment period). We also proposed to clarify that Medicare 
shares

[[Page 73494]]

in the costs of organs that are designated for transplant prior to the 
time the donor entered the hospital's operating room, but subsequently 
determined to be unusable and donated to research. The costs incurred 
are allocated among all remaining usable organs.
    We proposed to add Sec.  413.412(c)(1)(i) to new subpart L to 
specify that OPOs and THs do not count organs designated for research 
activities prior to the time the donor entered the hospital's operating 
room for surgical removal of the organs as Medicare usable organs. We 
proposed to add Sec.  413.412(c)(1)(ii) to specify that OPOs and THs 
count organs designated for research activities prior to the time the 
donor entered the hospital's operating room for surgical removal of the 
organs, as total usable organs.
    We proposed to add Sec.  413.412(c)(2) to new subpart L to specify 
that OPOs and THs do not count organs designated for transplant prior 
to the time the donor entered the hospital's operating room for 
surgical removal of the organs but subsequently determined to be 
unusable and donated to research, as Medicare usable organs or total 
usable organs.
    Comment: Overall, commenters disagreed with CMS' proposal relative 
to counting organs intended for research (excluding certain pancreata 
procured to acquire pancreatic islet cells for transplantation under 
proposed Sec.  413.408) and suggested our proposal reflects a change in 
CMS' current policy. Several of these commenters requested we exclude 
organs designated for research from the count of total usable organs 
for the purpose of allocating costs.
    A few commenters noted that the instructions in the IOPO MCR manual 
would need to be updated if our proposal was finalized because 
currently IOPOs are instructed to exclude organs intended for research 
from total organs and offset the revenue received from these organs 
against allowable cost. A commenter suggested that including organs 
intended for research in total usable organs results in a duplicative 
removal of costs for these organs because of the current MCR 
instructions. This commenter questioned whether CMS intended to include 
research organs in the allocation of all organ costs (hospital related 
organ procurement costs, organ acquisition overhead costs, and 
Medicare's share of total organ costs); and suggested the proposed rule 
would lower the costs reimbursed by Medicare, resulting in higher 
acquisition fees for research organs.
    Several commenters requested clarification on the application of 
our proposed policy relative to organs intended for research. One such 
commenter requested examples of factual scenarios, similar to those CMS 
provided in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25669 
through 25673) for accounting of kidney paired donation.
    Response: We acknowledge commenters' concerns with our proposal for 
counting organs including research organs. Our proposal was intended to 
clarify the current policy for counting research organs to ensure that 
Medicare pays its fair share of organ acquisition costs and does not 
fund non-reimbursable activities such as research. Under 42 CFR 
413.90(a), costs incurred for research purposes, over and above usual 
patient care, are not includable as Medicare allowable costs.
    After consideration of the public comments received, we are not 
finalizing our proposed policy with respect to counting research organs 
in total usable organs, as proposed under Sec.  413.412(c)(1) and (2), 
and may consider it in future rulemaking. However, we are finalizing at 
Sec.  413.412(c) that the only research organs that may be included as 
Medicare usable organs are pancreata procured for the purpose of 
acquiring pancreatic islet cells for transplantation into Medicare 
beneficiaries who are participating in a National Institute of Diabetes 
and Digestive and Kidney Diseases clinical trial of islet cell 
transplantation in accordance with section 733 of the Medicare 
Prescription Drug, Improvement and Modernization Act of 2003.
    Comment: Many commenters disagreed with the impact our proposal 
would have on Medicare's share of organ acquisition costs. These 
commenters indicated under the current policy Medicare covers certain 
donor-related costs such as testing, hospitalization, or operating room 
costs. These commenters claimed CMS's proposal would shift donor-
related expenses and organ acquisition costs to research organizations 
and would negatively impact the affordability and availability of 
research organs and the advancement of clinical research. Several 
commenters also suggested our proposed policy stands at direct odds 
with the Biden Administration's commitment to advance clinical 
research.
    Several commenters requested CMS not finalize the policy because of 
the financial impact and the impact on the availability of organs for 
research. Commenters suggested an impact analysis is needed on the 
potential negative effects of the proposed changes. A few commenters 
requested we delay the implementation of this proposal by one year, so 
as not to hinder medical research and to allow OPOs time to reapportion 
this significant shift in acquisition costs for research organs and 
medical research institutions to attempt to redirect financial 
resources to cover this additional cost.
    Response: We acknowledge the commenters' concerns. Our proposals 
were not intended to impact the affordability and availability of 
organs used for research. However, we recognize that our proposals may 
impact the cost researchers and other institutions face for research 
organs, and may require them to pursue other methods of funding. In 
accordance with 42 CFR 413.90(b)(1), funds for research activities are 
provided under many Federal programs and by other tax supported 
agencies. Also, many foundations, voluntary health agencies, and other 
private organizations, as well as individuals, sponsor or contribute to 
the support of medical and related research.
    We appreciate the commenters' concerns that our proposals relative 
to counting organs intended for research for cost allocation purposes 
may impede the continuation of research or clinical advancement. CMS 
supports efforts to advance clinical research and understands that 
providing organs for research supports researchers in discovering new 
treatments. We note that OPOs are required to conduct and participate 
in systemic efforts, including professional education, to acquire all 
usable organs from potential donors. (42 U.S.C. 273(b)(3)(B)). CMS's 
recent regulatory amendments for OPOs is aimed at increasing organ 
supply and transplantations.
    We acknowledge the commenters' requests not to finalize the policy 
because of the financial impact and the impact on the availability of 
organs for research. We also acknowledge commenters' requests that we 
delay the implementation of this proposal by one-year and allow OPOs 
time to redirect financial resources to cover the costs associated with 
research organs.
    After consideration of the public comments received, we are not 
finalizing our proposed policy at Sec.  413.412(c)(1) and (2) with 
respect to THs or OPOs counting organs used for research, as Medicare 
usable organs or total usable organs, depending upon whether the organs 
were originally designated for research or designated for transplant. 
Additionally, as discussed in section II.C.2.h. of this final rule with 
comment period, we are not finalizing our proposal at Sec.  
413.408(c)(2) to require

[[Page 73495]]

TH/HOPOs to include organs excised with the intention to be used for 
research in total usable organs. We are also not finalizing our 
proposal at Sec.  413.410(c)(2) to require OPOs to include organs 
excised with the intention to be used for research in total usable 
organs. We may consider these issues further as we consider future 
rulemaking.
    In this final rule with comment period, we are finalizing our 
proposal under Sec.  413.412(c) to require that organs used for 
research are not counted as Medicare usable organs in Medicare's share 
of organ acquisition costs (except pancreata for islet cell transplants 
as specified in Sec.  413.406(a)) and kidneys used for research are not 
counted as Medicare usable kidneys in Medicare's share of kidney 
acquisition costs.
    Comment: A commenter questioned whether the collection for 
umbilical cords (currently, not classified as human organs) for 
research is impacted by our proposal.
    Response: Our proposal was specific to organs defined in Sec.  
413.400 of this final rule with comment period, which does not include 
umbilical cords. Accordingly, this comment is outside of the scope of 
this rule.
    Comment: A commenter requested CMS clarify that organs intended for 
research will not count towards its denominator in the donation rate 
and transplantation rate measures. This commenter requested CMS explain 
how OPOs would know whether patients that are participating in the 
``two kidney trials'' would continue to be reimbursed by Medicare.
    Response: Comments on donation and transplantation rate measures 
relate to CfCs and are outside of the scope of this rule. Our 
proposals, which we are not finalizing, were related to counting organs 
to determine Medicare's share of organ acquisition costs and differ 
from counting organs for evaluating an OPO's performance under the 
outcome measures at Sec.  486.318. We are unclear to which ``two kidney 
trials'' the commenter is referring. Currently, as required under 
section 733 of the MMA, Medicare pays for the cost to acquire 
pancreatic islet cells for transplantation into Medicare beneficiaries 
participating in a NIDDK clinical trial.
(4) Counting and Cost Allocation of Discarded/Unusable Organs
    In the proposed rule, we set forth our policy regarding counting of 
discarded/unusable organs for Medicare cost allocation purposes (86 FR 
25668). In the proposed rule, we proposed to add Sec.  413.412(d) to 
new subpart L, to specify that an organ is not counted as a Medicare 
usable organ or a total usable organ if the excising surgeon 
determines, upon initial inspection or after removal of the organ, that 
the organ is not viable and not medically suitable for transplant and 
the organ is determined to be unusable and discarded. This includes 
organs that are determined to be unusable and subsequently donated to 
research as previously described in section II.C.2.i.(3). of this final 
rule with comment period.
    Comment: A commenter suggested that the proposed policy requires 
unrecovered organs be counted in the denominator of the Medicare 
fraction, which results in allocation of all related costs to non-
Medicare payors; however, organs that are recovered but determined to 
be unusable or discarded are excluded from the denominator. This 
commenter suggested that both unrecovered organs, and unusable or 
discarded organs should be excluded from the denominator of the 
Medicare fraction and the costs should be treated as overhead costs of 
the Program and allocated pro rata between Medicare and other payors. 
Another commenter requested we count organs intended for transplant at 
the time of entry into the operating room and subsequently determined 
to be unusable and donated for research as Medicare usable organs. A 
commenter also questioned whether allowable costs for obtaining organs 
that are discarded without being used for research will be paid or if 
such costs can be included in our MCR or SAC calculations.
    Response: We thank the commenters for their comments and appreciate 
their recommendations. We are clarifying our longstanding policy that 
organs determined to be unusable or discarded are not included in the 
count of Medicare usable or total usable organs. The cost of 
unrecovered organs, and unusable or discarded organs must be included 
in the appropriate organ cost center on the Medicare cost report. In 
addition, the costs associated with unusable or discarded organs are 
equitably allocated amongst the remaining usable organs and included in 
the SAC calculation set forth in Sec.  413.404.
    In light of the numerous comments received surrounding the 
treatment of research organs, we are finalizing our proposal under 
Sec.  413.412(d) with modification to require that an organ is not 
counted as a Medicare usable organ or a total usable organ if the 
excising surgeon determines, upon initial inspection or after removal 
of the organ, that the organ is not viable and not medically suitable 
for transplant and the organ is determined to be unusable and discarded 
and removing the language relative to organs that are determined to be 
unusable and subsequently donated to research. We may consider 
addressing organs subsequently donated to research in future 
rulemaking.
    Comment: A commenter suggested that the proposed changes to the 
calculation of Medicare's share of organ acquisition costs discourages 
the procurement of marginal organs that may end up being unusable 
organs.
    Response: We disagree with the commenter. Our longstanding policy 
requires THs and OPOs to exclude unusable organs or organs procured and 
subsequently determined unusable from the numerator and the denominator 
of the Medicare share calculation. Excluding these organs from the 
count allows the costs to be included and spread out amongst all the 
remaining transplantable organs and shared by all payors. We 
acknowledge that this policy was not clear in the treatment of organs 
determined unusable and subsequently donated to research; however, our 
proposal was to treat these organs the same way we treat unusable 
organs. We received numerous comments on the treatment of research 
organs in general, and on the counting of research organs and; 
therefore, decided not to finalize this portion of our proposal. As 
such, we are finalizing our proposal under Sec.  413.412(d) with 
modification to remove the language relative to organs that are 
determined to be unusable and subsequently donated to research. We may 
consider addressing organs subsequently donated to research in future 
rulemaking.
    Comment: A commenter noted IOPOs have always been required to 
report organs intended for research or transplant but discarded on the 
appropriate MCR worksheets for cost allocation purposes. This commenter 
requested we revise the IOPO cost report (CMS-216) accordingly.
    Response: We acknowledge the commenter's request; however, because 
we are not finalizing our policy as proposed, we are not revising the 
Medicare cost report, (CMS-216) as the commenter suggested. We are 
finalizing our proposal under Sec.  413.412(d) with modification to 
require that an organ is not counted as a Medicare usable organ or a 
total usable organ if the excising surgeon determines, upon initial 
inspection or after removal of the organ, that the organ is not viable 
and not medically suitable for transplant and the organ is determined 
to be unusable and discarded, and removed the language relative to 
organs that are determined to be unusable and subsequently donated

[[Page 73496]]

to research. We may consider addressing organs subsequently donated to 
research in future rulemaking.
j. Provisions Related to Medicare as Secondary Payer--Organ Acquisition 
Costs and Medicare Organ Count
    If a Medicare beneficiary has a primary health insurer other than 
Medicare and that primary health insurer has primary liability for the 
transplant and organ acquisition costs, the Medicare Program may share 
a liability for organ acquisition costs as a secondary payer in certain 
instances. Medicare prohibits secondary payment if the provider is 
either obligated to accept, or voluntarily accepts, as payment in full, 
a primary payment that is less than its charges. See 42 CFR 411.32(b). 
When a provider or supplier is obligated to accept as full payment an 
amount less than its charges, Medicare considers that lower amount to 
be the provider's charges. (For more information see the October 11, 
1989, final rule (54 FR 41728)). In this final rule, we are codifying 
into the regulations the organ acquisition cost reimbursement policy 
with regard to Medicare secondary payer policy.
    To determine whether the provider is contractually obligated to 
accept the primary insurer's payment as payment in full, and thus 
whether Medicare has zero liability as a secondary payer, it is 
necessary to review the provider or supplier's agreement with the 
primary insurer. If the primary insurer's agreement requires the TH to 
accept the primary insurer's payment as payment in full for the 
transplant and the associated organ acquisition costs, Medicare has 
zero liability as a secondary payer with no payment obligation for the 
transplantation costs or the organ acquisition costs, and the organ at 
issue is not counted as a Medicare usable organ.
    When the primary insurer's agreement does not require the provider 
to accept the payment from the primary insurer as payment in full and 
the payment the provider receives from the primary insurer for the 
transplant and the organ acquisition costs is insufficient to cover the 
entire cost, Medicare may have a secondary payer liability for the 
organ acquisition costs. To determine whether Medicare has a secondary 
payer liability, it is necessary for the provider to submit a bill to 
its Medicare contractor and to compare the total cost of the 
transplant, including the transplant DRG amount and the organ 
acquisition costs, to the payment received from the primary payer. The 
provider's Medicare remittance advice may or may not show that Medicare 
has a liability because the remittance advice only reflects the 
transplant portion of the payment. Thus, the provider will need to 
compare the total Medicare cost (the transplant DRG and the organ 
acquisition costs) to the payment from the primary payer to determine 
whether Medicare has a liability for the organ acquisition costs. If 
the payment from the primary payer is greater than the cost of the 
transplant DRG and the organ acquisition costs, there is no Medicare 
liability and the organ must not be counted as a Medicare usable organ. 
If the payment from the primary payer is less than the transplant DRG 
and the organ acquisition costs, there is a Medicare secondary payer 
liability and the organ is counted as a Medicare usable organ. In this 
circumstance, the payment from the primary payer is pro-rated between 
the transplant DRG payment and the organ acquisition payment. If the 
organ is counted as Medicare usable, the organ acquisition portion of 
the primary payment must be included on the appropriate line as a 
revenue offset on the TH's MCR (currently Form CMS-2552). This is 
consistent with the cost reporting instructions in CMS Pub. 15-2, (PRM-
2) chapter 40, section 4028.
    Consider the following example as an illustration of Medicare's 
payment of organ acquisition costs as a secondary payer. A TH 
transplants a patient that has private health insurance and Medicare. 
The private health insurance is primary and Medicare is secondary. The 
private health insurance pays the TH $70,000 for the transplant and the 
organ acquisition costs; there is no requirement in the primary 
insurer's agreement with the provider for the TH to accept this payment 
as payment in full. If Medicare was the primary payer, the combined 
payment to the TH would have been $100,000 ($60,000 for the transplant 
and $40,000 for the organ acquisition costs). The TH compares the 
primary payer payment to the total amount Medicare would have paid if 
it had been primary (the transplant DRG and organ acquisition costs). 
The TH prorates the primary payer's payment of $70,000 between a 
portion of the transplant DRG and a portion of the organ acquisition 
costs. The TH determines the primary payer amount for the transplant 
DRG payment is $42,000 ($70,000 payment from the primary payer x 
[$60,000 for the transplant portion from Medicare/$100,000 combined 
Medicare payment]) and for organ acquisition costs is $28,000 ($70,000 
payment from the primary payer x [$40,000 for the organ acquisition 
portion from Medicare/$100,000 combined Medicare payment]). The TH 
counts the organ as a Medicare usable organ on its MCR and offsets the 
primary payment amount ($28,000) as revenue received, thereby reducing 
Medicare's liability.
    In the proposed rule, we proposed to add Sec.  413.414(a) to new 
subpart L to set forth the general principle that if a Medicare 
beneficiary has a primary health insurer other than Medicare and that 
primary health insurer has primary liability for the transplant and 
organ acquisition costs, the Medicare Program may share a liability for 
organ acquisition costs as a secondary payer in certain instances. To 
determine whether Medicare has liability as a secondary payer for organ 
acquisition costs, it is necessary to review the TH's agreement with 
the primary insurer. In the proposed rule, we also proposed to add 
Sec.  413.414(b) to new subpart L to set forth the circumstances when 
Medicare has no secondary payer liability for organ acquisition costs. 
If the primary insurer's agreement requires the TH to accept the 
primary insurer's payment as payment in full for the transplant and the 
associated organ acquisition costs, Medicare has zero liability as a 
secondary payer with no payment obligation for the transplantation 
costs or the organ acquisition costs, and the organ at issue is not a 
Medicare usable organ. We also proposed to add Sec.  413.414(c) to new 
subpart L to set forth the policy for when Medicare may have a 
secondary payer liability for organ acquisition costs, which is based 
upon the provider's agreement with the primary insurer that does not 
require the provider to accept the payment from the primary insurer as 
payment in full, and the payment from the primary payer for the 
transplant and the organ acquisition costs is less than the provider's 
costs for the transplant and the organ acquisition costs. When the 
primary insurer's agreement does not require the TH that performs the 
transplant to accept the payment from the primary insurer as payment in 
full and the payment the TH receives from the primary insurer for the 
transplant and organ acquisition costs is insufficient to cover the 
entire cost, Medicare may have a secondary payer liability for the 
organ acquisition costs. To determine whether Medicare has a secondary 
payer liability for the organ acquisition costs, it is necessary for 
the TH that performs the transplant to submit a bill to its Medicare 
contractor and to compare the total cost of the transplant, including 
the transplant DRG amount and the organ acquisition costs, to the 
payment received from the

[[Page 73497]]

primary payer. If the payment from the primary payer is greater than 
the cost of the transplant DRG and the organ acquisition costs, there 
is no Medicare liability and the organ cannot be counted as a Medicare 
usable organ. If the payment from the primary payer is less than the 
transplant DRG and the organ acquisition costs, there is a Medicare 
secondary payer liability and the organ is counted as a Medicare usable 
organ. In this circumstance, the payment from the primary payer is pro-
rated between the transplant DRG payment and the organ acquisition 
payment and the portion of the payment applicable to organ acquisition 
will be used on the cost report to reduce the Medicare organ 
acquisition costs.
    Comment: A commenter suggested that when Medicare is required to 
pay for medical services furnished in connection with a kidney donation 
for a Medicare beneficiary with ESRD, the kidney should also be counted 
as a Medicare usable organ, regardless of whether the provider is 
``either obligated to accept, or voluntarily accepts, as payment in 
full, a primary payment that is less than its charges.'' This commenter 
suggested that the proposal to codify the Medicare secondary payer 
provisions with respect to organ transplants is inconsistent with the 
statute or Congressional intent. This commenter stated that many 
commercial payers make no separate payment, nor identify a prorated 
amount, for organ acquisition costs outside of a DRG, and suggested 
that when Medicare pro-rates the primary payer's reimbursement between 
the transplant DRG and the organ acquisition payment, Medicare reduces 
its responsibility for organ acquisition cost. The commenter disagreed 
with this approach and believes it is arbitrary and capricious to allow 
third-party payers to dictate the level of liability Medicare has for 
organ acquisition costs.
    Response: We appreciate the commenter's perspective; however, we 
note that the Medicare secondary payer policy is well established in 
statute at section 1862(b) of the Act and in the regulations at Sec.  
411.32, and applies to many aspects of Medicare reimbursement outside 
of transplant and organ acquisition cost reimbursement. We note that 
Medicare secondary payer policy is independent of commercial payers' 
approach to organ acquisition costs. As discussed in the proposed rule, 
Sec.  411.32 sets forth the basis for Medicare secondary payments, and 
establishes that Medicare prohibits secondary payment if the provider 
is either obligated to accept, or voluntarily accepts, as payment in 
full, a primary payment that is less than its charges. In the proposed 
rule, we proposed to codify Medicare's longstanding policy with respect 
to Medicare secondary payer and organ acquisition costs so that THs 
that perform transplants can discern whether Medicare has a secondary 
payer liability for organ acquisition costs incurred by the 
transplanting hospital.
    In section II.C.2.h.(2). of this final rule with comment period, we 
also addressed comments received pertaining to counting organs as 
Medicare usable organs when Medicare has secondary payer liability, in 
which we explained that only the transplant hospital that performs the 
transplant counts as a Medicare usable organ, an organ transplanted for 
which Medicare has a secondary payer liability for the organ 
transplant.
    After consideration of the public comments we received, we are 
codifying the provisions related to Medicare as secondary payer for 
organ acquisition costs and counting Medicare usable organs as proposed 
at Sec.  413.414 in new subpart L, with modifications at Sec.  
413.414(c)(3)(ii) to clarify that only the TH that performs the 
transplant counts the organ as a Medicare usable organ when there is a 
Medicare secondary payer liability.
k. Proposed Organ Acquisition Charges for Kidney Paired Exchanges
    In a directed living kidney donation, the donor names a specific 
recipient who will receive the donor's kidney.\69\ Because the donor 
and recipient are known prior to the organ excision and 
transplantation, the organ acquisition costs can be appropriately and 
accurately matched to the recipient's account. In a non-directed 
donation, the donor does not name a specific recipient for the kidney 
and instead, the donor is matched with a recipient in need.\70\ Kidney 
paired exchanges are similar to directed living donations; however, 
when the living donor and recipient do not match, they can consent to 
participate in a kidney paired exchange program. Kidney paired 
exchanges can occur when two or more living donor/recipient pairs match 
each other and the donated kidneys from two or more donors are 
exchanged so each recipient receives a compatible kidney for 
transplantation.
---------------------------------------------------------------------------

    \69\ https://www.kidney.org/transplantation/livingdonors/general-information-living-donation.
    \70\ Id.
---------------------------------------------------------------------------

    In a kidney paired exchange, the living donor and matched recipient 
may have their procedures performed at different THs. When a recipient 
and donor elect to participate in a kidney paired exchange, the costs 
of the initial living donor evaluations are incurred by the originally 
intended recipient's TH, regardless of whether the living donor 
actually donates to their originally intended recipient, a kidney 
paired exchange recipient, or does not donate at all. The Medicare 
organ acquisition payment policy for kidney paired donations is 
currently set forth at PRM section 3106. In the proposed rule, we 
proposed to codify Medicare's organ acquisition payment policy with 
respect to KPD transactions to ensure that the kidney acquisition costs 
in a kidney paired exchange are documented so that the kidney 
acquisition costs are appropriately and accurately assigned to the 
transplant recipient's account, and appropriate organ acquisition 
payment outcomes are achieved, consistent with a directed donation.
    The costs of all hospital and physician services for pre-transplant 
living donor and recipient evaluations become acquisition costs and are 
included in the MCR of the recipient's TH, regardless of whether the 
recipient is a Medicare beneficiary. Additionally, all total usable 
kidneys and all Medicare usable kidneys are recorded by the transplant 
hospital on its MCR so that Medicare's share of kidney acquisition 
costs can be computed; this is true regardless of whether the 
transplant results from a KPD or from a directed donation. In a kidney 
paired exchange, once the donor and recipient are matched, any 
additional tests requested by the recipient's TH, and performed by the 
donor's TH, are billed to the recipient's TH as charges reduced to cost 
(using the donor's TH's cost to charge ratio) and included as 
acquisition costs on the recipient TH's MCR, regardless of whether an 
actual donation occurs, and regardless of whether the recipient is a 
Medicare beneficiary. When a donor's TH procures and furnishes a kidney 
to a recipient's TH, the donor's TH bills the recipient's TH the donor 
TH's kidney SAC, or alternatively, its standard departmental charges 
reduced to cost, for the reasonable costs associated with procuring, 
packaging and transporting the kidney. The donor's TH records these 
costs on its MCR as kidney acquisition costs and offsets any payments 
received from the recipient's TH against its kidney acquisition costs. 
The recipient's TH records as part of its kidney acquisition costs, the 
amounts billed by the donor's TH for the reasonable costs associated 
with procuring, packaging, and transporting the organ, as well as any 
additional

[[Page 73498]]

testing performed and billed by the donor's TH.
    In the scenario where a donor's TH does not procure a kidney, and 
instead the donor travels to the recipient's TH and the recipient's TH 
procures the organ from the donor, the reasonable costs associated with 
the organ procurement are included on the MCR of the recipient's TH. As 
discussed in section II.C.2.b.(3). of this final rule with comment 
period, transportation and travel expenses of the living donor are not 
allowable Medicare costs. Programs outside of Medicare, such as that of 
the National Living Donor Assistance Center,\71\may pay for 
transportation costs for living donors.
---------------------------------------------------------------------------

    \71\ https://www.livingdonorassistance.org/; accessed on 
November 30, 2021.
---------------------------------------------------------------------------

    Example. The following is an example of the accounting of organ 
acquisition costs in a kidney paired exchange for Medicare cost 
reporting purposes.
    (Step 1), the Participants. There are 4 THs: TH A, TH B, TH C, and 
TH D. Each TH has a potential transplant recipient in need of a kidney 
and each recipient has a willing, but poorly matched, donor; thus, all 
donors and recipients enter into a kidney paired exchange. Each 
recipient and donor pair have been evaluated at their respective TH.
     TH A. Recipient A is a patient of TH A. TH A evaluates 
three potential living donors for Recipient A before a donor, Donor A, 
is identified. The costs of these evaluations are reported as kidney 
acquisition costs on TH A's cost report. Recipient A and Donor A do not 
match each other but both agree to participate in a KPD exchange.
     TH B. Recipient B is a patient of TH B. TH B evaluates two 
potential living donors for Recipient B before a donor, Donor B, is 
identified. The costs of these evaluations are reported as kidney 
acquisition costs on TH B's cost report. Recipient B and Donor B do not 
match each other but both agree to participate in a KPD exchange.
     TH C. Recipient C is a patient of TH C. TH C evaluates 
three potential living donors for Recipient C before a donor, Donor C, 
is identified. The costs of these evaluations are reported as kidney 
acquisition costs on TH C's cost report. Recipient C and Donor C do not 
match each other but both agree to participate in a KPD exchange.
     TH D. Recipient D is a patient of TH D. TH D evaluates 
three potential living donors for Recipient D before a donor, Donor D, 
is identified. The costs of these evaluations are reported as kidney 
acquisition costs on TH D's cost report. Recipient D and Donor D do not 
match each other but both agree to participate in a KPD exchange.
    (Step 2), the KPD Match. Through the KPD exchange it is determined 
that Recipient A matches Donor C; Recipient B matches Donor D; 
Recipient C matches Donor A; and Recipient D matches Donor B.
    (Step 3), After the KPD Match.
     Recipient C's TH requests Donor A's TH perform an 
additional test that was not included in Donor A's initial evaluation. 
Donor A's TH performs the additional test and bills Recipient's C's TH, 
charges reduced to cost, for the additional tests of Donor A. The 
amounts billed by TH A to TH C are included in TH C's MCR as organ 
acquisition costs for Recipient C.
     Donor B elects to travel to TH D for the procurement and 
any additional testing. (Note: The cost of travel for a living donor is 
not an allowable organ acquisition cost.)
     Donor A, Donor C, and Donor D remain at their original 
intended recipients' THs (TH A, TH C and TH D, respectively) where they 
were evaluated and where their organ procurement will occur.
    (Step 4), Procuring, Packaging and Transporting the Kidneys.
     TH A procures Donor A's kidney and packages and transports 
it to TH C for Recipient C. TH A bills TH C, charges reduced to cost, 
for the reasonable costs associated with procuring, packaging and 
transporting the kidney as well as any additional testing requested by 
TH C that was not included in the initial evaluation of Donor A. Donor 
A's TH records these costs on its MCR as kidney acquisition costs and 
offsets any payments received from TH C against its kidney acquisitions 
costs.
     TH B does not procure a kidney. Donor B elects to travel 
to TH D for the procurement. TH D procures Donor B's kidney and records 
these costs on its cost report as kidney acquisition costs. TH B 
receives a kidney from TH D for transplant into recipient B. TH B 
records the amounts it pays to TH D on TH B's MCR as kidney acquisition 
costs.
     TH C procures Donor C's kidney and packages and transports 
it to TH A for Recipient A. TH C bills TH A, charges reduced to cost, 
for the reasonable costs associated with procuring, packaging and 
transporting the kidney as well as any additional testing requested by 
TH A that was not included in the initial evaluation of Donor C. Donor 
C's TH records these costs on its MCR as kidney acquisition costs and 
records any payments received from TH A on TH C's MCR to offset its 
kidney acquisitions costs.
     TH D procures Donor D's kidney and packages and transports 
it to TH B for recipient B. TH D bills TH B, charges reduced to cost, 
for the reasonable costs associated with procuring, packaging and 
transporting the kidney, as well as any additional testing requested by 
TH B that was not included in the initial evaluation of Donor D. Donor 
D's TH records these costs on its MCR as kidney acquisition costs and 
records any payments received from TH B on TH D's MCR to offset its 
kidney acquisitions costs. TH B records the amounts it pays to TH D for 
Donor D's kidney on TH B's MCR as kidney acquisition costs.
    The following tables summarize the KPD exchange described 
previously.

                           Table 3--Summary of Kidney Paired Donation Exchange Example
----------------------------------------------------------------------------------------------------------------
                                         TH A                TH B                TH C                TH D
----------------------------------------------------------------------------------------------------------------
            Recipient                 Recipient A         Recipient B         Recipient C         Recipient D
----------------------------------------------------------------------------------------------------------------
Number of evaluations...........  Evaluates 3         Evaluates 2         Evaluates 3         Evaluates 3
                                   potential donors    potential donors    potential donors    potential donors
                                   before Donor A is   before Donor B is   before Donor C is   before Donor D is
                                   identified.         identified.         identified.         identified.
----------------------------------------------------------------------------------------------------------------
Donor...........................  Donor A: Recipient  Donor B: Recipient  Donor C: Recipient  Donor D: Recipient
                                   A and Donor A do    B and Donor B do    C and Donor C do    D and Donor D do
                                   not match each      not match each      not match each      not match each
                                   other but agree     other but agree     other but agree     other but agree
                                   to a KPD exchange.  to a KPD exchange.  to a KPD exchange.  to a KPD
                                                                                               exchange.
KPD match.......................  Recipient A         Recipient B         Recipient C         Recipient D
                                   matches with        matches with        matches with        matches with
                                   Donor C.            Donor D.            Donor A.            Donor B.

[[Page 73499]]

 
After the match.................  TH A performs       TH B does not       TH C procures       TH D procures
                                   additional tests    procure kidney      kidney from Donor   kidney from Donor
                                   and procures        from Donor B for    C for TH A.         D for TH B. Donor
                                   kidney from Donor   TH D. Donor B                           B travels to TH D
                                   A for TH C.         travels to TH D.                        for the kidney
                                                                                               procurement.
----------------------------------------------------------------------------------------------------------------


                         Table 4--Summary of Accounting for Kidney Pair Donation Example
----------------------------------------------------------------------------------------------------------------
                                                   Accounting
-----------------------------------------------------------------------------------------------------------------
                                   $12,000 incurred   $9,000 incurred by   $15,000 incurred    $20,000 incurred
       Cost of evaluations              by TH A              TH B               by TH C             by TH D
----------------------------------------------------------------------------------------------------------------
Counting Medicare usable kidneys  2 Medicare usable   1 Medicare usable   2 Medicare usable   2 Medicare usable
                                   kidneys: 1 kidney   kidney: 1 kidney    kidneys: 1 organ    kidneys: 1 kidney
                                   procured/           received/           procured/           procured/
                                   furnished and 1     transplanted.       furnished and 1     furnished and 1
                                   kidney received/                        kidney received/    kidney procured/
                                   transplanted.                           transplanted.       transplanted.
Donor costs associated with       TH A bills TH C     No bills sent to    TH C bills TH A     TH D bills TH B
 procuring, packaging and          $18,000 for costs   TH D.               $10,000 for costs   $14,000 for costs
 transporting the kidney to the    incurred to                             incurred to         incurred to
 recipient THs.                    procure Donor A's                       procure Donor C's   procure Donor D's
                                   kidney.                                 kidney.             kidney.
Recipient costs associated with   TH A receives a     TH B receives a     TH C receives a     No bills received
 procuring, packaging and          bill from TH C      bill from TH D      bill from TH A      from TH B. TH D
 transporting the kidney bill by   for $10,000 for     for $14,000 for     for $18,000 for     claims all costs
 Donor THs.                        costs incurred to   costs incurred to   costs incurred to   after initial
                                   procure Donor C's   procure Donor D's   procure Donor A's   evaluation for
                                   kidney.             kidney.             kidney.             Donor B.
Kidney acquisition costs          $12,000 evaluation  $9,000 evaluation   $15,000 evaluation  $20,000 evaluation
 recorded on MCR.                  costs of TH A.      costs of TH B.      costs of TH C.      costs of TH D.
                                  $18,000 for costs   ..................  $10,000 for costs   $14,000 for costs
                                   billed to TH C.                         billed to TH A.     billed to TH B.
                                  $10,000 billed      $14,000 billed      $18,000 billed      $8,000 for costs
                                   from TH C.          from TH D.          from TH A.          incurred to
                                                                                               procure Donor B's
                                                                                               kidney at TH D.
                                 -------------------------------------------------------------------------------
    Subtotal....................  $40,000...........  $23,000...........  $43,000...........  $42,000.
Offset on MCR amounts received    ($18,000) received  No payment          ($10,000) received  ($14,000) received
 from recipient TH. Amounts in (   from TH C.          received from TH    from TH A.          from TH B.
 ) denote a negative number.                           D.
                                 -------------------------------------------------------------------------------
    Net cost recorded on MCR....  $22,000...........  $23,000...........  $33,000...........  $28,000.
----------------------------------------------------------------------------------------------------------------

    In the proposed rule, we proposed to codify into the regulations 
the Medicare organ acquisition payment policy for kidney paired 
exchanges, as set forth in PRM section 3106. Consistent with this 
provision, we also proposed to add Sec.  413.416(a) to new subpart L to 
specify that when a recipient and donor elect to participate in a 
kidney paired exchange, the costs of the initial living donor 
evaluations are incurred by the originally intended recipient's TH, 
regardless of whether the living donor actually donates to their 
originally intended recipient, a kidney paired exchange recipient, or 
does not donate at all. We also proposed to add Sec.  413.416(b) to new 
subpart L to specify that in a kidney paired exchange, regardless of 
whether an actual donation occurs, once the donor and recipient are 
matched, any additional tests requested by the recipient's TH and 
performed by the donor's TH, are billed to the recipient's TH as 
charges reduced to cost (using the donor's TH's cost to charge ratio) 
and included as acquisition costs on the recipient TH's MCR. We also 
proposed to add Sec.  413.416(c) to new subpart L to specify that in a 
kidney paired exchange, when a donor's TH procures and furnishes a 
kidney to a recipient's TH, all costs must be reasonable and necessary 
and (1) the donor's TH bills the recipient's TH the donor TH's charges 
reduced to cost or the TH's applicable SAC for the reasonable costs 
associated with procuring, packaging and transporting the kidney; (2) 
the donor's TH records these costs associated with procuring, packaging 
and transporting the kidney on its MCR as kidney acquisition costs and 
offsets any payments received from the recipient's TH against these 
kidney acquisition costs; and (3) the recipient's TH records as part of 
its kidney acquisition costs, the amounts billed by the donor's TH for 
the reasonable costs associated with procuring, packaging, and 
transporting the organ as well as any additional testing performed and 
billed by the donor's TH. We also proposed to add Sec.  413.416(d) to 
new subpart L to specify that, in a kidney paired exchange--(1) when a 
donor's TH does not procure a kidney, but the donor travels to the 
recipient's TH for the organ procurement, the reasonable costs 
associated with the organ procurement are included on the MCR of the 
recipient's TH; and (2) travel expenses of the living donor are not 
allowable Medicare costs. In section II.C.2.c.(2). of this final rule 
with comment period, we finalized the proposal to add Sec.  
413.404(b)(2) to specify that when a TH/HOPO furnishes an organ to 
another TH or IOPO, it must bill the receiving TH or IOPO its SAC by 
organ type, or the hospital's standard departmental charges that are 
reduced to cost.
    We did not receive comments on the proposal to codify Medicare's 
organ acquisition payment policy with respect to KPD transactions and 
as such, we are

[[Page 73500]]

finalizing these provisions as proposed in Sec.  413.416.
l. Provisions Requiring Donor Community Hospitals to Charge OPOs 
Reasonable Costs, Charges Reduced to Cost
    Medicare-certified hospitals that are not THs but collaborate with 
OPOs to procure organs from cadaveric donors for transplantation are 
hereinafter referred to as ``donor community hospitals''. To 
participate in the Medicare Program, donor community hospitals and THs 
have organ procurement responsibilities and must have an agreement with 
a designated OPO to timely notify the OPO of individuals whose death is 
imminent or who have died in the hospital (42 CFR 482.45(a)(1)). The 
OPO then implements its donation protocol and, when appropriate (after 
declaration of death and consent to donate), will arrange for the 
procurement of all medically suitable cadaveric donor organs for 
transplant, at the donor community hospital or TH. In this regard, 
donor community hospitals and THs may incur costs for services provided 
to cadaveric organ donors following declaration of death and consent to 
donate through the procurement of the organs (for example, use of the 
hospitals operating room, staff, and ventilators to maintain the 
viability of the cadaveric donor organs).
    Currently, when a donor community hospital incurs costs for 
services provided to the cadaveric donor, as authorized by the OPO 
following the declaration of death and consent to donate, it bills the 
OPO its customary charges (not reduced to cost) or a negotiated rate. 
(PRM-1 section 3107). Donor community hospital billing procedures are 
described in IL 74-23, published July 1, 1974, which provides, ``where 
the excising hospital is not a TH, it will bill its customary charges 
for those services used in excising the cadaver kidney.'' Thereafter, 
the OPO includes the charges from the donor community hospital on its 
cost report as part of the OPO's organ acquisition costs. At the end of 
its accounting period, the TH/HOPO uses these amounts to calculate its 
renal and non-renal SAC amounts for the following year, and the IOPO 
uses these amounts to calculate its non-renal SAC amounts for the 
following year. Medicare contractor's also use these amounts to 
calculate the IOPO's kidney SAC for the following year.
    When the IOPO furnishes an organ to a TH (or other OPO), the IOPO 
bills the TH (or other OPO) the IOPO's SAC for the specific organ type. 
Currently, when a TH/HOPO furnishes an organ to another TH or OPO, it 
must bill its SAC or its standard departmental charges reduced to cost. 
The OPO's SAC is a charge which reflects an average of the total actual 
costs the OPO incurs to furnish an organ and reflects amounts the OPO 
is charged by the donor community hospital for services the donor 
community hospital provides to cadaveric donors. THs then include these 
SACs they have paid to OPOs to procure organs as allowable acquisition 
costs in their bills to Medicare, which Medicare pays. Therefore, 
because the OPO's incurred costs are passed on to and paid by the TH, 
and because the TH then includes these amounts as organ acquisition 
costs on its cost report, this chain of incurred costs results in 
Medicare paying these donor hospital charges (that are not reduced to 
cost) when it reconciles the organ acquisition costs on the TH cost 
report.
    Stakeholders have made CMS aware that some donor community 
hospitals are charging OPOs amounts that are in excess of reasonable 
costs for services provided to cadaveric organ donors, resulting in 
Medicare paying more than reasonable costs for the acquisition of 
cadaveric donor organs for transplant. In one instance, an OPO 
identified a donor community hospital in its designated service area 
that billed amounts in excess of reasonable costs. CMS reviewed the 
donor community hospital's bills to the OPO and the donor community 
hospital's MCR information to evaluate the costs associated with those 
charges. CMS computed, using the hospitals cost-to-charge ratios (CCR), 
that the charges billed by the donor community hospital in the amount 
of $194,000, equated to a cost of $11,000. Thus, the donor community 
hospital's actual costs were approximately 6 percent of their billed 
charges.
    Organ acquisition costs are reimbursed under Medicare's principles 
of reasonable cost established under section 1861(v) of the Act. Donor 
community hospitals (and THs) are Medicare-certified hospitals and must 
follow Medicare's reasonable cost principles under section 1861(v) of 
the Act. Because the services donor community hospitals provide to 
cadaveric donors, and thus charge to OPOs, are included as organ 
acquisition costs on OPOs' cost reports, these charges are also subject 
to Medicare's principles of reasonable cost established under section 
1861(v) of the Act, and 42 CFR 413.5 and 413.9.
    In a 1978 final rule with comment, CMS similarly noted that THs 
have no basis for determining the reasonableness of the charges made by 
the OPO.\72\ CMS observed that services furnished by OPOs, if they are 
not part of the transplant hospital, are billed to transplant 
hospitals, which pay the charges shown on the bill. The charges then 
become allowable costs of the hospitals.\73\ When donor community 
hospitals charge OPOs amounts not reduced to costs, and the OPOs pay 
the charges shown on the bill, those charges become incorporated as 
organ acquisition costs to the TH and are subsequently shared by 
Medicare; thus, Medicare's reasonable cost principles applicable to 
organ acquisition costs are not observed. We note that organs recovered 
from donor community hospitals comprised 62 percent of all transplanted 
organs in 2017 and 2018.\74\ We recognize that because THs bill the 
OPOs' charges to Medicare, Medicare is paying more than reasonable 
costs for these services that become organ acquisition costs.
---------------------------------------------------------------------------

    \72\ 43 FR 58370 (December 14, 1978).
    \73\ Id.
    \74\ Scientific Registry of Transplant Recipients. Request for 
Information. Requested on 02/08/2021.
---------------------------------------------------------------------------

    Because these charges become allowable organ acquisition costs of 
the TH, we believe that donor community hospitals should be required to 
reduce their charges to cost for services provided to cadaveric donors 
and billed to OPOs, in accordance with reasonable cost principles given 
in section 1861(v) of the Act and in our regulations at 42 CFR 413.5 
and 413.9. Doing so will result in conformance to Medicare reasonable 
cost principles, and result in reduced costs to the OPOs, subsequently 
reducing cadaveric donor SACs billed to THs or OPOs, which may benefit 
other payors, as well as Medicare. Donor community hospitals are 
reimbursed either a DRG payment by Medicare (if the patient is a 
Medicare beneficiary), or a payment from other payers, for services 
provided to a potential organ donor prior to declaration of death and 
consent to donate. For services provided after declaration of death and 
consent to donate, if our provision is implemented, donor hospitals 
will be reimbursed by OPOs for their reasonable costs in accordance 
with Medicare's principles of reimbursement. Therefore, a donor 
community hospital would see a reduction in reimbursement from OPOs, 
because the donor hospital was previously permitted to bill the OPO its 
customary charges or negotiated rates. However, donor community 
hospitals would still have their reasonable costs reimbursed.
    We believe that an equitable and accurate methodology to reduce a 
donor

[[Page 73501]]

community hospital's charges to cost would be to use the most recently 
available hospital-specific CCR. Using the hospital-specific CCR would 
be unique to each donor community hospital and would more accurately 
compensate them for services provided to cadaveric organ donors, as 
opposed to using an alternative like the statewide CCR. Because 
contractors recalculate each hospital's specific CCR on an ongoing 
basis, whenever more recent cost report data is available, the 
hospital's specific CCR is arguably more accurate and more closely 
aligned with creating a uniform charge to cost structure.
    One methodology we considered to reduce a donor community 
hospital's charges to cost was to require the donor community hospital 
to use its statewide average operating CCR and apply this statewide 
average CCR to its charges. The statewide average operating CCR is 
updated annually in the FY IPPS/LTCH rule and is a transparent source 
of data. We note that the statewide average operating CCR published in 
the FY 2021 IPPS/LTCH final rule was 0.272 for urban hospitals and 
0.336 for rural hospitals. Using a statewide average CCR would even out 
any instances in which a hospital's operating costs fall above or below 
established parameters. However, because it is an average, it would not 
accurately represent the variability in actual hospital specific CCRs. 
Therefore, using a statewide CCR may not adequately serve the purpose 
of reducing charges to cost.
    Stakeholders have suggested that some donor community hospitals are 
improperly billing OPOs for services provided to cadaveric donors prior 
to the declaration of death and consent to donate. This would be 
inappropriate because hospital services provided prior to declaration 
of death and consent to donate are billable to the donor's insurance in 
the same manner hospital services are billable to an individual 
receiving services, regardless of whether the payor is Medicare. We 
reiterate that when a donor community hospital or TH incurs costs for 
providing services to a cadaveric donor, as authorized by the OPO, only 
those costs incurred after the declaration of the donor's death and 
consent to donate are permitted to be billed to the OPO. The OPO must 
accept bills from donor community hospitals and THs for costs only 
incurred after the declaration of death and consent to donate. 
Contractors will review OPO cost reports to ensure that donor community 
hospitals and THs charge OPOs for cadaveric donor costs incurred after 
declaration of death and consent to donate.
    We proposed to add Sec.  413.418(a) in new subpart L, to specify 
that a donor community hospital (a Medicare-certified non-transplant 
hospital) incurs organ acquisition costs for donor organ procurement 
services, authorized by the OPO following declaration of death and 
consent to donate.
    We proposed to add Sec.  413.418(b) in new subpart L, to specify 
that for cost reporting periods beginning on or after October 1, 2021, 
when a donor community hospital incurs costs for services furnished to 
a cadaveric donor, as authorized by the OPO, the donor community 
hospital must bill the OPO its customary charges that are reduced to 
cost by applying its most recently available hospital specific cost-to-
charge ratio for the period in which the service was rendered.
    Comment: A few commenters suggested that if Medicare does not cover 
expenses prior to a donor's death, there would be uncompensated donor 
testing which may become the responsibility of the donor's family or 
other third-party payers.
    Response: OPOs and THs are responsible for all costs for donor 
evaluation and medical management once declaration of death and consent 
for donation occurs. Generally, Medicare does not cover costs of 
services incurred for a potential organ donation as organ acquisition 
costs unless those costs occur after the declaration of death and 
consent to donate is obtained. Therefore, costs of services incurred 
for a potential organ donor prior to declaration of death and consent 
to donate must not be included on the OPO cost report.
    Comment: A commenter supported our proposal and noted when entities 
continue to engage in improper billing they violate CMS reasonable cost 
principles, and drive up the overall cost of organ donation and 
procurement. Several commenters appreciated our concerns that some 
donor community hospitals bill OPOs more than cost for services 
provided to cadaveric donors and generally supported our proposal to 
require donor community hospitals to bill the OPO its customary charges 
reduced to cost for such services. However, some of these supporters 
that were OPOs indicated they have successfully negotiated competitive 
``per-case'' rates with donor hospitals and stated there may be 
instances where OPOs have negotiated lower ``per-case'' rates than 
charges reduced to cost. These commenters suggested that our policy, if 
finalized as proposed, would unintentionally interfere with 
longstanding arrangements many OPOs have with donor community 
hospitals. Some supporters of our proposal underscored the importance 
of considering stakeholder input to create evidence-based policy.
    Response: We appreciate the commenter's support for our proposal. 
We agree that when entities continue to engage in improper billing they 
violate CMS reasonable cost principles, and drive up the overall cost 
of organ donation and procurement. Our proposal was not intended to 
interfere with longstanding arrangements whereby OPOs and donor 
community hospitals have negotiated per-case rates that align with 
Medicare's reasonable cost principles. We agree that flexibility should 
be afforded to OPOs and donor community hospitals by allowing for 
alternative charge arrangements like per-case rates currently in place 
between some OPOs and donor community hospitals, however, as long as 
the amount is less than customary charges adjusted to cost.
    Comment: Several commenters disagreed with our proposal and claimed 
it would increase administrative burden, which could delay payment. A 
commenter suggested to reduce donor community hospital administrative 
burden, donor community hospitals could continue normal billing 
practices, and either the OPOs or CMS could apply a cost to charge 
calculation using the public CCRs found in the IPPS Impact Files.
    Response: We disagree with commenters' assertions that our proposal 
would increase administrative burden. We also disagree with the 
suggestion that OPOs or CMS should apply the CCR on behalf of the donor 
community hospitals. The current policy allows donor community 
hospitals to bill customary charges (or negotiated rates) to OPOs for 
services provided to the cadaveric donor; therefore, these hospitals 
have established billing practices in place and will not incur added 
burden as a result of our proposal. In addition, 42 CFR 413.24(f) 
requires all Medicare-certified donor community hospitals to file an 
MCR on an annual basis. Therefore, the information required to reduce 
charges to cost is readily available to donor community hospitals.
    Comment: Some commenters claimed limiting amounts paid to donor 
community hospitals would limit the number of organs available for 
transplant. Another commenter stated when donor community hospitals 
charge, and OPOs pay amounts greater than cost, the policy provides a 
clear financial benefit to these hospitals. Another commenter stated 
because donor community hospitals are not

[[Page 73502]]

reimbursed for organ acquisition-related costs on the MCR they will 
have no incentive to support the costs associated with a deceased 
donor.
    Several commenters suggested concern that some donor community 
hospitals may not work cooperatively with OPOs as a result of this 
proposal. One of these commenters acknowledged reports of some donor 
community hospitals billing ``outlandishly high charges'' for costs 
associated with organ recovery, but indicated their experience with 
donor community hospitals works because of negotiated acquisition fees 
in place. This commenter acknowledged that Medicare's CoPs require 
cooperation between hospital staff and OPOs, but questioned whether 
enforcement of those cooperation requirements is a priority.
    Response: We appreciate commenters' concerns that the proposal 
would limit amounts paid to donor community hospitals. We acknowledge 
that when donor community hospitals bill, and OPOs pay, amounts greater 
than cost, the donor community hospital benefits financially. In the 
proposed rule, we noted that a donor community hospital would see a 
reduction in reimbursement from OPOs, because the donor community 
hospital was previously permitted to bill the OPO its customary charges 
or negotiated rates. However, donor community hospitals will still be 
paid for their services provided to potential donors, at amounts that 
recognize Medicare's reasonable cost principles.
    In addition, donor community hospitals must work with OPOs per the 
Medicare requirements for CoPs at 42 CFR 482.45. These regulations 
require that donor community hospitals notify OPOs, in a timely manner, 
of individuals whose death is imminent or who have died in the hospital 
to assure that the OPO can determine medical suitability for organ 
donation. The regulations also require that the hospital work 
cooperatively with its designated OPO to educate staff on donation 
issues and maintain potential donors while necessary testing and 
placement of potential donated organs, tissues, and eyes take place. 
Our proposal to require donor community hospitals to charge OPOs 
amounts that are reduced to its cost does not impede hospitals' 
compliance with Medicare CoPs. Hospitals will still be paid for their 
services provided to potential donors, at amounts that recognize 
Medicare's reasonable cost principles. As such, we believe that our 
proposal should not impact the number of organs available for 
transplant or cooperation between OPOs and donor community hospitals 
because OPOs and donor community hospitals must continue to work 
together, as required under Medicare CoPs, to procure all available 
organs for transplant.
    Comment: Many commenters suggested alternatives to our proposal to 
require donor community hospitals to bill OPOs charges reduced to cost. 
These commenters suggested that CMS require donor community hospitals 
to bill OPOs an amount no more than customary charges adjusted to cost, 
but allow for alternative charge arrangements like per-case rates 
currently in place between some OPOs and donor community hospitals, as 
long as the amount is less than customary charges adjusted to cost. A 
few commenters suggested CMS establish a maximum price ceiling instead 
of a universal price so that these per-case rates, often perceived to 
be more competitive, can remain in place. A commenter requested we 
temporarily withdraw the proposal and develop a donor community 
hospital SAC methodology that would permit such hospitals to charge 
(and OPOs to pay) rates above actual, reasonable cost. A few commenters 
suggested CMS work with stakeholders to develop a model to account for 
the cost of delayed or canceled operating room procedures and use this 
model when an OPO and a donor community hospital do not have a 
negotiated a standard acquisition charge. Finally, several commenters 
requested our proposals be delayed to allow time for an impact 
analysis.
    Response: We appreciate commenters' suggestions to withdraw the 
proposed policy and develop a SAC for donor community hospitals that 
would permit OPOs to pay charges greater than cost, but respectfully 
disagree. The SAC generally represents the average of the total actual 
costs associated with procuring either cadaveric donor organs or living 
donor organs and is based on Medicare's reasonable cost principles, 
which do not allow for payment of amounts greater than reasonable cost. 
We believe that flexibility should be afforded to OPOs and donor 
community hospitals and THs by allowing for alternative charge 
arrangements like per-case rates currently in place between some OPOs 
and donor community hospitals, as long as the amount is less than 
customary charges adjusted to cost. Because of this flexibility, we do 
not believe that we need to develop a model, as commenters suggest, to 
account for the cost of delayed or canceled operating room procedures 
and to use this model when an OPO and a donor community hospital do not 
have a negotiated standard acquisition charge. We also do not believe 
that our proposals should be delayed so that an impact analysis can be 
conducted. As we discussed in the proposed rule, we believe the impact 
is not estimable because we do not have information to calculate the 
effects on revenue and costs to donor community hospitals, OPOs, or 
transplant hospitals.
    Comment: A few commenters suggested that CMS should specify that 
the proposal to require that donor community hospitals bill OPOs 
customary charges that are reduced to cost should not apply only to 
donor community hospitals, but also to THs that bill OPOs for services 
provided to cadaveric donors. A commenter claimed our proposal is 
inconsistent with past position on hospitals maintaining uniform and 
customary charge structures that apply universally to all payers and 
requested we withdraw our proposal.
    Response: We agree that THs provide services to cadaveric donors, 
placing them in a similar situation as donor community hospitals when 
billing amounts to OPOs for services provided to cadaveric donors 
following the declaration of death and consent to donate, as authorized 
by the OPO. We believe that a TH must bill the OPO its customary 
charges that are reduced to cost by applying its most recently 
available hospital-specific CCR for the period in which the service was 
rendered, or a negotiated rate. We note that charges for services 
provided to cadaveric donors become organ acquisition costs, and 
payment for such aligns with Medicare's reasonable cost principles 
under which organ acquisition costs are paid and does not run afoul of 
CMS requirements for hospitals to maintain uniform and customary charge 
structures. As such, we do not believe it is necessary to withdraw our 
proposal.
    Comment: Some commenters suggested CMS institute an oversight 
mechanism for enforcing our proposal, as they perceive no requirement 
for donor community hospitals to negotiate rates with OPOs.
    Response: Providers under the Medicare program are required to 
submit Medicare cost reports on an annual basis 42 CFR 413.24(f). We 
believe that Medicare contractors' review and audit of hospitals' 
submitted cost reports serve as an existing oversight mechanism for 
enforcing our proposal.
    Comment: Some commenters requested specific instructions be issued 
to hospitals for the appropriate billing of their charges reduced to 
cost, and questioned which hospital CCRs should

[[Page 73503]]

be used in the calculation, and whether it should be based on final 
cost reports or on interim cost reports. Other commenters questioned 
whether OPOs will be required to validate the CCRs used by hospitals, 
where CMS will publish the hospital specific files, or if hospitals 
will be required to furnish their hospital specific CCR in cases where 
they have case rates or flat rates with the OPO. A commenter stated 
that use of the most recently available MCR could understate costs due 
to increasing healthcare costs. A commenter suggested, when the most 
recently available MCR is used, an update factor should be applied to 
ensure the cost represents the costs for the period in which the 
service was actually provided. Another commenter questioned whether 
hospitals should bill OPOs for physician professional fees at cost, or 
whether OPOs should pay physician charges based on the Medicare 
physician fee schedule to ensure that OPOs are not overpaying hospitals 
for physician services.
    Response: We are clarifying that a donor community hospital must 
use the most recently available hospital specific CCR, included in the 
provider-specific file published on the CMS website, \75\ for the 
period in which the service was rendered. The hospital-specific CCR is 
the same CCR that is used in the IPPS outlier calculation. A donor 
community hospital must provide, upon request from the OPO or TH, its 
hospital-specific CCR for review, or comparison in cases where they 
have case rates or flat rates with the OPO. If the donor community 
hospital or TH believes its most recently available CCR does not 
convert charges to reflect its actual cost, we believe instead of 
applying an update factor, it would be reasonable for the hospital to 
follow the procedures outlined in the Medicare Claims Processing 
Manual, (CMS Pub. 100-04), chapter 3, section 20.1.2.1. for use of an 
alternative CCR. Finally, we appreciate the commenters' concern about 
OPOs overpaying hospitals for physician services; however, we believe 
that OPOs either employ or contract with physicians to provide services 
in a donor community hospital. In addition, our proposal only addressed 
charges as they relate to hospital services provided to cadaveric 
donors.
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    \75\ https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ProspMedicareFeeSvcPmtGen/psf_text.
---------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
finalizing our proposal with modifications based on comments received 
to specify at Sec.  413.418(a) in new subpart L, that a donor community 
hospital (a Medicare-certified non-transplant hospital) and a 
transplant hospital incur organ acquisition costs for donor organ 
procurement services, authorized by the OPO following declaration of 
death and consent to donate. We are also finalizing our proposal with 
modifications, to specify at Sec.  413.418(b) that for cost reporting 
periods beginning on or after the effective date of this final rule 
with comment period, when a donor community hospital or a transplant 
hospital incurs costs for services furnished to a cadaveric donor, as 
authorized by the OPO, the donor community hospital or transplant 
hospital must bill the OPO the lesser of its customary charges that are 
reduced to cost by applying its most recently available hospital 
specific cost-to-charge ratio for the period in which the service was 
rendered, or a negotiated rate.
m. Revisions, Technical Corrections, and Conforming Changes to 42 CFR 
Part 412, Subparts A, E, G, and H and to Part 413, Subparts A, C, and H
(1) Conforming Changes to Terminology in 42 CFR Parts 412 and 413
    In section X.B.2.a.(1). of the preamble of the FY 2022 IPPS/LTCH 
PPS proposed rule and in section II.C.2.a.(1). of this final rule with 
comment period, we noted terminology differences in the use of 
``transplantation center'', where the regulations in 42 CFR part 412, 
subparts A, E, G, and H and in Part 413, subparts A, C, and H use the 
term to mean an organ-specific transplantation program that is within a 
TH. We proposed to conform the language in the regulation text to the 
terminology used in the CoPs at Sec.  482.70 by replacing the term 
``transplantation center'' and its various permutations with the term 
``transplant program'' and its various permutations. We proposed to 
make this conforming change in the text of the following regulations: 
Sec. Sec.  412.1(a)(1)(ii), 412.2(e)(4), 412.71(b)(3), 412.90(d), 
412.100 (in the title and in the text at Sec. Sec.  412.100(a)(1)), 
412.113(d), 412.116(c), and 413.40(a)(3). We also proposed to update 
the terminology to replace ``organ procurement agency'' and its various 
permutations with ``organ procurement organization'' and its various 
permutations. Further, we proposed to replace the acronym ``OPAs'' with 
``OPOs''. We proposed to make these terminology changes to the 
regulation text at Sec. Sec.  412.100(b) and 413.1(a)(2)(v) to conform 
to the terminology used in the CoPs found in 42 CFR part 482. Finally, 
we proposed to change ``renal'' to ``kidney'' in Sec. Sec.  
412.71(b)(3), 412.90(d), in the title and paragraph (a) of Sec.  
412.100, and in Sec.  412.116(c), to conform to the terminology used in 
the CoPs at Sec.  482.104.
    We did not receive comments on these proposals and are finalizing 
these provisions as proposed.
(2) Revisions, Technical Corrections, and Conforming Changes to Sec.  
412.100
    In the proposed rule, we proposed to revise the text currently 
found in Sec.  412.100(a) and (b) to change ``expenses'' to ``costs'' 
and to remove the word ``estimated'' from Sec.  412.100(a)(1). We also 
proposed to make a technical correction to remove from Sec.  
412.100(a)(1) cross-references to CoPs which no longer exist, and 
replace them with Sec.  482.104, and proposed to add language to 
clarify that CMS adjusts inpatient prospective payment system (IPPS) 
rates for inpatient operating costs. We proposed to revise Sec.  
412.100(a)(1) to state that CMS adjusts the inpatient prospective 
payment system (IPPS) rates for inpatient operating costs determined 
under subparts D and E of this part for hospitals with approved kidney 
transplant programs (discussed at Sec.  482.104) to remove the net 
costs associated with kidney acquisition.
    Additionally, we proposed to revise Sec.  412.100(a)(2) to clarify 
the language, and to specify that Medicare payment for kidney 
acquisition costs includes only those costs for kidneys transplanted 
into Medicare beneficiaries. We proposed to revise Sec.  412.100(a)(2) 
to specify the following:
     Payment for Medicare kidney acquisition costs, as set 
forth in subpart L of part 413 of this chapter, is made on a reasonable 
cost basis apart from the prospective payment rate for inpatient 
operating costs.
     IPPS payment to the hospital is adjusted in each cost 
reporting period to reflect an amount necessary to compensate the 
hospital for reasonable costs of Medicare kidney acquisition.
    In section X.B.2.b.(1). of the preamble of the FY 2022 IPPS/LTCH 
PPS proposed rule, we proposed to revise Sec.  412.100(b) by revising 
and relocating the list of organ acquisition costs given in that 
paragraph and adding the list as paragraph (b) in proposed Sec.  
413.402 of new subpart L. Further, we proposed to revise Sec.  
412.100(b) to make it clearer that kidney acquisition costs must be 
incurred. Finally, we proposed to revise Sec.  412.100(b) to add 
language that the items and services covered as kidney acquisition 
costs are specified in Sec.  413.402(b).

[[Page 73504]]

    We did not receive comments on the proposals made in section 
X.B.2.m.(2). of the preamble of the FY 2022 IPPS/LTCH PPS proposed 
rule, and are finalizing our provisions as proposed.
(3) Revisions and Conforming Changes to 42 CFR 412.113(d)
    In addition to the conforming change discussed in section 
X.B.2.m.(1). of the preamble of the FY 2022 IPPS/LTCH PPS proposed 
rule, we proposed to revise the regulation text at Sec.  412.113(d) to 
reference the organ acquisition policies given in new subpart L of part 
413, rather than to maintain the existing cross-reference to the 
definition of organ given in Sec.  486.302.
    We did not receive comments on this proposal and are finalizing the 
provision as proposed.
(4) Technical Corrections and Conforming Changes to Sec.  413.1
    In addition to the conforming change discussed in section 
X.B.2.m.(1). of the preamble of the FY 2022 IPPS/LTCH PPS proposed 
rule, we revised the text in Sec.  413.1(d)(2)(i) to put it into list 
form. We also proposed to revise the text related to kidney acquisition 
costs to refer to organ acquisition costs as specified in part 413 
subpart L.
    We did not receive comments on this proposal and are finalizing the 
provision as proposed.
(5) Revisions to 42 CFR 413.40(a)(3)
    In addition to the proposed conforming changes discussed in section 
X.B.2.m.(1). of the preamble of the FY 2022 IPPS/LTCH PPS proposed 
rule, we set forth a technical correction and a revision to paragraph 
(a)(3) of Sec.  413.40. We proposed to revise the regulation text that 
references heart, kidney, and liver acquisition costs to refer to organ 
acquisition costs as specified in part 413 subpart L so that the 
language reflects all solid organs for which Medicare covers organ 
acquisition costs and directs readers to the organ acquisition cost 
regulations in part 413, subpart L.
    We did not receive comments on this proposal and are finalizing the 
provision as proposed.
(6) Regulatory Changes to Sec.  413.200
    We proposed to remove the regulation found at 42 CFR 413.200 
specifying payment of independent organ procurement organizations and 
histocompatibility laboratories. We proposed to add Sec.  413.400 to 
contain revised text from Sec.  413.200(b), and to add Sec.  413.420 to 
contain the remaining regulation text from Sec.  413.200 (a) and (c) 
through (g), along with a revised title, so that the content of Sec.  
413.200, with revisions, is located with other regulations specific to 
organ acquisition in part 413, new subpart L. We proposed to make a 
technical correction or revisions to two of the three definitions found 
in Sec.  413.200(b), as described in section II.C.2.a.(2). of this 
final rule with comment period. We proposed to add these definitions to 
proposed Sec.  413.400, as described in section II.C.2.a.(2). of this 
final rule with comment period.
    We proposed to relocate and revise the regulation title and 
regulation text currently existing in Sec.  413.200 in paragraphs (a), 
and (c) through (g), by adding Sec.  413.420 to specify payment to 
independent organ procurement organizations and histocompatibility 
laboratories for kidney acquisition costs and by adding paragraphs (a), 
and (c) through (g) with the text from those same paragraphs in Sec.  
413.200. We proposed to make conforming changes to the regulation text 
in Sec.  413.420(a), and (c) through (g), to distinguish independent 
OPOs (IOPOs) from all OPOs where appropriate, in accordance with the 
proposed definition of IOPO in Sec.  413.400. We also proposed to add 
paragraph (b) to Sec.  413.420 to provide a cross-reference to the 
definitions in Sec.  413.400 of new subpart L. Therefore, the proposed 
new Sec.  413.420 would maintain the same paragraph structure as the 
existing Sec.  413.200. Finally, we proposed minor revisions to clarify 
the regulation text, including changing language from passive to active 
tense, changing verbs from future tense to present tense, and editing 
to improve readability.
    We did not receive comments on these proposals and are finalizing 
the provisions as proposed.
3. Solicitation of Comments Regarding Surgeon Fees for Cadaveric Donor 
Excisions
    Since 1987, we have limited the amount an OPO may reimburse a 
physician for cadaveric kidney donor retrieval services. Chapters 27 
and 31 of the PRM limit the physician payment for cadaveric kidney 
retrieval to $1,250 per donor (one or two kidneys). The history behind 
the limitation on physician payment may be based on a July 1974 $400 
physician services limitation on excising kidneys in community 
hospitals that do not participate in Medicare, which was noted in a 
Part A Intermediary Letter (IL No. 74-23, July 1974); it may also be 
based in part on the 1983 median cost paid by OPOs for surgical 
excision of cadaveric kidneys, which was approximately $800.\76\ 
Although the payments made to physicians for organ retrieval services 
associated with other types of organ transplants have increased, 
cadaveric kidney retrieval rates have remained capped at $1,250. We 
have received several requests to change the amount we pay for 
cadaveric kidney retrievals. In the CY 2009 Revisions to Payment 
Policies Under the Physician Fee Schedule and Other Revisions to Part B 
for CY 2009 (hereafter, Physician's Fee) proposed rule (73 FR 38580 and 
38581), we solicited public comments and data that are reflective of 
organ retrieval service costs for all types of organs. At that time, we 
did not have data upon which to base a change in payment. We stated 
that we may use this information to determine the extent to which a 
recalculation of the payment for cadaveric organ retrieval services 
performed by a physician is warranted and to inform any future 
rulemaking on this subject. We received four timely public comments in 
response to our request for information and data for use in updating 
the organ retrieval physician payment amount included in organ 
acquisition costs, which were discussed in detail in the CY 2009 
Physicians Fee Schedule final rule (73 FR 69864). However, we did not 
receive any data that would be useful in evaluating the appropriateness 
of the $1,250 per donor surgeon fee limit for cadaveric kidney 
retrievals.
---------------------------------------------------------------------------

    \76\ Organ Transplants: Hearings before the Subcommittee on 
Investigations and Oversight, of the House Committee on Science and 
Technology. 98th Cong. 43 (1983) (testimony of Carolyne K. Davis, 
Ph.D., Administrator, Health Care Financing Administration).
---------------------------------------------------------------------------

    For this final rule, we used 2017 cost report data from 48 OPOs to 
calculate a surgeon fee cost per local kidney for each provider, by 
dividing the kidney surgeon fee costs reported on Worksheet A-2, line 
13, column 3 of the MCR by the number of local kidneys reported on 
Worksheet S-1, Part 1, Line 1, column 1 of the MCR. Excluding three 
providers with extremely low surgeon fees per local kidney (ranging 
from $0 to $231), the average surgeon fee cost per local kidney was 
$745. These provider-reported data suggest that the $1,250 limit on 
surgeon fees for cadaveric donor kidney retrievals is sufficient and 
allows for some higher cost excisions. However, we have received 
comments suggesting that this limit needs to be reconsidered.
    While we did not propose to change the physician payment limit for 
cadaveric kidney retrieval, we solicited information on the physician 
effort and resources required to procure a

[[Page 73505]]

cadaveric kidney for transplantation. Specifically, we solicited data 
or other information on surgical time, dry runs (number and percentage 
of retrievals in which an organ is not recovered), travel and wait 
times, as well as the incremental time required for extended criteria 
donors and donors after cardiac death. Additionally, we solicited 
resource information to determine the difference in procuring one 
kidney or a pair of kidneys from a single donor. We indicated in the 
proposed rule that the comments we received may inform development of 
future proposals related to surgeon fee payment for organ retrieval 
from cadaveric donors.
    Comment: Commenters were generally appreciative of this comment 
solicitation. A commenter did not support increasing surgeon fees for 
cadaveric kidney removal, and stated that CMS should consider whether 
an increase to surgeon fees and the additional cost burden to the 
Medicare Trust Fund would result in an increase in the number of 
kidneys available for transplant. This commenter stated that many 
existing OPO practices already maximize kidney donation within the 
current payment limit and without incurring additional costs, and those 
practices should not be disrupted.
    Some commenters supported increasing surgeon fees. Most of these 
commenters stated that the current limit of $1,250 is inadequate 
relative to the surgical, travel, dry run, and wait times. Some 
commenters cited increased travel costs resulting from new kidney 
allocation policies, and medical and technological advancements in 
donor management which have added to the cost of surgical procurement. 
A commenter noted that procuring marginal kidneys increases the 
complexity of organ recovery and the frequency of intra-operative 
findings that result in the abandonment of the effort. Some commenters 
added that DCD procurements add complexity to the procurement process 
and require surgeons to learn new skills. A commenter stated that the 
entire vasculature (including the aorta and vena cava) and en-bloc 
kidneys are dissected out and removed from the donor body, and then 
separated outside.
    A commenter stated that an OPO sometimes pays more than $1,250 to 
ensure surgeons are readily available to excise kidneys; the commenter 
stated amounts over $1,250 are not reimbursable and must be absorbed by 
other non-renal or tissue revenue, with this cost shift increasing SAC 
fees for non-renal organs, or, when covered by tissue revenue, 
requiring the OPO to pay for costs that are a result of services 
provided to a Medicare beneficiary. This commenter encouraged CMS to 
ensure that the costs attributable to Medicare beneficiaries are 
appropriately covered.
    A commenter questioned if the cadaveric kidney retrieval cap of 
$1,250 also applies to the transplant hospitals, and if so, how the 
retrieval cap applies when multiple organs are excised. This commenter 
also questioned if CMS has an established cap on surgeon fees for the 
excision of other organs.
    Another commenter stated that CMS' use of 2017 cost report data is 
flawed, as most OPOs only contract and pay their kidney surgeons $1,250 
per donor (due to Medicare's limitation), so the cost report worksheet 
A-2 data would only reflect the limitation on surgeon fees as cost, and 
the average kidney surgeon fee cost per kidney should be around $1,250.
    A few commenters suggested that CMS formally survey transplant 
programs to collect the data necessary to rebase payments for this 
service. Another suggested CMS establish an annual process to solicit 
stakeholder input to update pricing. A commenter recommended that CMS 
apply at least an inflationary increase to the historical $1,250 rate 
while continuing to collect community data to support an updated fee. 
Another commenter welcomed additional opportunities for OPOs to collect 
and provide relevant data beyond this 60-day comment window.
    Response: We appreciate these comments, and may consider them if we 
undertake future rulemaking related to surgeon fees for recovering 
cadaveric kidneys.

III. Collection of Information Requirements

A. Statutory Requirement for Solicitation of Comments

    Under the Paperwork Reduction Act (PRA) of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the PRA of 1995 requires that 
we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In the FY 2022 IPPS/LTCH PPS proposed rule, we solicited public 
comment on the following provision of this final rule comment period 
that contain information collection requirements (ICRs).
    As discussed in section II.B.3. of this final rule with comment 
period, teaching hospitals would be able to submit electronic 
applications to CMS for resident slot increase requests. The burden 
associated with these requests is captured in an information collection 
request currently available for public review and comment. The 60-day 
notice published on October 22, 2021 (86 FR 58664). We note that the 
application included in this information collection has yet to be 
approved. Comments can be submitted as part of October 22, 2021 60-day 
notice or as part of the subsequent 30-day Federal Register notice. We 
will review and respond to any comments received on either notice.

IV. Regulatory Impact Analysis

A. Statement of Need

1. Changes to the IME and Direct GME Payments
    This final rule with comment period is necessary in order to make 
Medicare payment and policy changes to the statutory methodology for 
determining payments to hospitals for the direct costs of approved GME 
programs and the IME adjustment under the IPPS for hospitals that have 
residents in an approved GME program, as described in more detail in 
section IV.C. of this final rule with comment period. The primary 
objective of the IPPS is to create incentives for hospitals to operate 
efficiently and minimize unnecessary costs, while ensuring that 
payments are sufficient to adequately compensate hospitals for their 
legitimate costs in delivering necessary care to Medicare 
beneficiaries. In addition, we share national goals of preserving the 
Medicare Hospital Insurance Trust Fund.
    In this final rule with comment period, we are finalizing policies 
to implement sections 126, 127, and 131 of the CAA of 2021. Section 126 
makes available 1,000 new Medicare-funded GME positions (but not more 
than 200 new positions for a fiscal year), to be distributed beginning 
in FY 2023, with priority given to hospitals in 4 statutorily-specified 
categories. Section 127 of the CAA makes statutory changes relating to 
the determination of both an urban and rural hospital's FTE resident 
limit for direct GME and IME payment purposes with regard to residents

[[Page 73506]]

training in an accredited rural training track, and to the 3-year 
rolling average used to calculate payments for these hospitals. Section 
131 of the CAA makes statutory changes to the determination of direct 
GME PRAs and direct GME and IME FTE resident limits of hospitals that 
hosted a small number of residents for a short duration. We expect 
these changes will make appropriate Medicare GME payments to hospitals 
for Medicare's share of the direct costs to operate the hospital's 
approved medical residency program, and for IPPS hospitals the indirect 
costs associated with residency programs that may result in higher 
patient care costs, consistent with the law.
    We expect that these changes will ensure that the outcomes of these 
Medicare payment policies are reasonable and provide equitable 
payments, while avoiding or minimizing unintended adverse consequences.
2. Changes to the Organ Acquisition Payment Policies
    In the FY 2022 IPPS/LTCH/PPS proposed rule, we proposed Medicare 
payment and policy changes to the methodology for counting Medicare 
organs by transplant hospitals, and Medicare kidneys by OPOs, for 
calculation of Medicare's share of organ acquisition costs, however, in 
this final rule with comment period, we are not finalizing the proposed 
organ counting policy, and may revisit the policy in future rulemaking. 
Therefore, the Medicare organ counting policy is not addressed in the 
regulatory impact analysis of this final rule with comment period.
    In this final rule with comment period, we are finalizing certain 
longstanding organ acquisition payment policies to better support organ 
availability and transplantation. We are finalizing a policy related to 
amounts billed to OPOs for organ acquisition costs when a donor 
community hospital or transplant hospital incurs costs for services 
furnished to a cadaveric donor, to ensure that billing is in accord 
with reasonable cost principles. We are also finalizing existing 
payment policies to clarify and codify definitions, organ acquisition 
costs, and examples of items or services that are not organ acquisition 
costs; to allow certain additional registry fees and transportation 
costs; to codify existing policies related to living organ donor 
complications and clarify accounting and payment methods; to codify 
existing policies related to standard acquisition charges, acquisition 
of pancreata for islet cell transplants, Medicare as a secondary payor, 
kidney-paired donations, and payment to independent OPOs and 
histocompatibility laboratories for kidney acquisition costs. We expect 
these codifications will provide greater understanding of organ 
acquisition payment policies to the organ procurement and transplant 
community, and that our allowing certain additional costs will support 
organ transplantation and improve health equity. We expect these 
changes will result in clarity and consistency with Medicare's 
reasonable cost principles.

B. Overall Impact

    We have examined the impacts 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 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). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) Having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with significant regulatory action(s) and/or with economically 
significant effects ($100 million or more in any 1 year). Based on our 
estimates, OMB's Office of Information and Regulatory Affairs has 
determined this rulemaking is ``economically significant'' as measured 
by the $100 million threshold, and hence also a major rule under 
Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 
1996 (also known as the Congressional Review Act). Accordingly, we have 
prepared a RIA that to the best of our ability presents the costs and 
benefits of the rulemaking.
    The analysis in this RIA, in conjunction with the remainder of this 
document, demonstrates that this final rule with comment period is 
consistent with the regulatory philosophy and principles identified in 
Executive Orders 12866 and 13563, the RFA, and section 1102(b) of the 
Act. This final rule with comment period would affect payments to a 
substantial number of small rural hospitals, as well as other classes 
of hospitals, and the effects on some hospitals may be significant. 
Finally, in accordance with the provisions of Executive Order 12866, 
the Executive Office of Management and Budget has reviewed this final 
rule with comment period.

C. Detailed Economic Analysis

1. Effects of the Changes to IME and Direct GME Payments
    The CAA of 2021 contained 3 provisions affecting Medicare direct 
GME and IME payments to teaching hospitals. Section 126 of the CAA 
makes available 1,000 new Medicare-funded GME positions, with 200 slots 
to be distributed in 5 rounds over 5 years starting in FY 2023, with 
priority given to hospitals in 4 categories. Section 127 of the CAA, 
effective for cost reporting periods beginning on or after October 1, 
2022, makes changes relating to the determination of both an urban and 
rural hospital's FTE resident limit for direct GME and IME payment 
purposes with regard to residents training in an accredited rural 
training track, and the application of the 3-year rolling average to 
the payment calculation of these hospitals. Section 131 of the CAA 
makes changes to the determination of direct GME PRAs and direct GME 
and IME FTE resident limits of hospitals that hosted a small number of 
residents for a short duration, based on new programs started on or 
after enactment (December 27, 2020) and 5 years after (December 26, 
2025). We provided details for implementing these 3 GME CAA provisions 
in section II.B. of this final rule with comment period. Following is a 
table showing the

[[Page 73507]]

estimated cost of implementation of these 3 GME CAA provisions:

                                 Table 5--Cost Impact of CAA 2021 GME Provisions
                                                 [In $millions]
----------------------------------------------------------------------------------------------------------------
                               FY                                   Section 126     Section 127     Section 131
----------------------------------------------------------------------------------------------------------------
2021............................................................               0               0              10
2022............................................................               0               0              30
2023............................................................              10               0              60
2024............................................................              60              10              90
2025............................................................             120              10             130
2026............................................................             180              10             150
2027............................................................             240              20             170
2028............................................................             290              20             180
2029............................................................             300              20             180
2030............................................................             310              20             190
2031............................................................             320              20             190
----------------------------------------------------------------------------------------------------------------

    In summary, the Office of the Actuary estimates an increase of $10 
million in Medicare payments to teaching hospitals for FY 2021, an 
increase in Medicare payments to teaching hospitals of $860 million for 
FYs 2022 through 2026 (over 5 years). In total, for FYs 2021 through 
2031, Medicare payments to teaching hospitals are estimated to increase 
by $3.30 billion.
2. Effects of the Organ Acquisition Payment Policy
    In section X.C.2. of the preamble of the FY 2022 IPPS/LTCH PPS 
proposed rule, we proposed to codify into the Medicare regulations some 
longstanding Medicare organ acquisition payment policies, with 
clarifications where necessary, and to codify some new organ 
acquisition payment policies. In section II.C.2.a of this final rule 
with comment period, we discuss clarifications and codification of 
longstanding definitions related to organ acquisition. These final 
policies are not expected to have an impact on expenditures because the 
finalized policies pertain to changes to definitions and usage of 
consistent terminology. In section II.C.2.b of this final rule with 
comment period, we discuss the revisions to and codification of 
longstanding policies related to items or services that are organ 
acquisition costs, which we are modifying to allow certain additional 
organ recipient registry fees and cadaveric donor transportation costs. 
To the extent that these provisions have an impact on expenditures, 
that impact is not estimable because we do not have information to 
calculate the change in registry fee costs or transportation costs. In 
sections II.C.2.c. and II.C.2.d. of this final rule with comment 
period, we discuss our final policies related to standard acquisition 
charges and outpatient costs and laboratory services related to organ 
acquisition, however, these final policies are not expected to have an 
impact on expenditures.
    In section II.C.2.e. this final rule with comment period, we also 
discuss revisions to and codification of longstanding policies related 
to Medicare coverage of living donor complications. To the extent that 
these provisions have an impact on expenditures, that impact is not 
estimable because we do not have cost data pertaining to non-renal 
living donors to calculate the increase in cost from codifying policies 
specifying reporting and payment of costs for non-renal living donor 
complications. In sections II.C.2.f. and II.C.2.g. of this final rule 
with comment period, we discuss final policies related to services to 
transplant recipients and the codification of a statutory policy 
related to pancreatic islet cell transplants, which are not expected to 
have an impact on expenditures.
    In section II.C.2.h. of this final rule with comment period, we 
discuss the organ counting policy, however, we are not finalizing our 
proposed policy and as such, there are no impacts on expenditures. In 
section II.C.2.i. of this final rule with comment period, we discuss 
final policies related to intent to transplant, and counting en bloc, 
research, and discarded organs which are not expected to have an impact 
on expenditures. In sections II.C.2.j. and II.C.2.k. of this final rule 
with comment period, we discuss the codification of longstanding organ 
acquisition policies related to Medicare as a secondary payor and 
accounting for kidney-paired donations, respectively, which are not 
expected to have an impact on expenditures.
    Additionally, in section II.C.2.l. of this final rule with comment 
period, we discuss finalized policy codifications for donor community 
hospitals' (Medicare-certified non-transplant hospitals) and THs' 
charges for services provided to cadaveric donors. To the extent that 
these provisions have an impact on expenditures, that impact is not 
estimable because we do not have information, such as the cost of 
services and number of cadaveric donors to whom services are provided 
to calculate the effects on donor community hospitals, or transplant 
hospitals for services provided to organ procurement organizations. 
Based on the Scientific Registry of Transplant Recipient (SRTR) data, 
we recognize that organs recovered from donor community hospitals 
comprised 62 percent of all transplanted organs in 2017 and 2018.\77\ 
Under the current policy, donor community hospitals bill customary 
charges or negotiated rates and not charges reduced to cost. Because 
our final policy requires donor community hospitals and THs to bill the 
lesser of charges reduced to cost or a negotiated rate, we anticipate a 
cost savings to the Medicare Trust Fund.
---------------------------------------------------------------------------

    \77\ Scientific Registry of Transplant Recipients. Request for 
Information. Requested on 02/08/2021.
---------------------------------------------------------------------------

    In section II.C.2.m. of this final rule with comment period, we 
finalized technical corrections, clarifications, conforming changes, 
and redesignations in the regulations, which are not expected to have 
an impact on expenditures. Finally, in section II.C.3. of this final 
rule with comment period, we solicited comments on the existing cap on 
surgeon fees for cadaveric kidney excisions and provided a summary of 
the comments received; there is no expected impact of the comment 
solicitation.
    Comment: With regard to the organ counting proposal, some 
commenters believed that Medicare's impact

[[Page 73508]]

estimate was underestimated and imprecise when using SRTR payor data to 
estimate organs transplanted into Medicare beneficiaries. One commenter 
suggested we calculate and use an ``in-house'' Medicare ratio for TH/
HOPOs, as a proxy to apply to the number of organs the TH/HOPO 
furnishes to other hospitals or OPOs which are transplanted into 
Medicare beneficiaries. Other commenters requested that Medicare study 
and publish a hospital specific impact analysis resulting from these 
proposals. Some commenters also raised concerns about the effects of 
this proposal on children's transplant hospitals.
    Response: We thank commenters for bringing to our attention the 
need for additional analyses to better understand the effects of the 
Medicare usable organ and kidney counting proposal. Our proposed rule 
impact estimation methodology determined Medicare organ acquisition 
costs using 2018 cost data by organ type, by multiplying total 
acquisition costs by the SRTR payor data ratio for Medicare as the 
payor. We summed these organ-specific Medicare organ acquisition costs, 
and compared that total with the total Medicare organ acquisition costs 
calculated using the same methodology, but using the Medicare ratio 
from the cost report data rather than the SRTR ratio; the difference 
between the two Medicare organ acquisition cost amounts was the 
estimated savings for a single year.
    After consideration of the public comments we received, we are not 
finalizing our organ counting proposals, and may revisit this proposal 
in future rulemaking.

D. Regulatory Review Cost Estimation

    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this proposed or final 
rule, we should estimate the cost associated with regulatory review. 
Due to the uncertainty involved with accurately quantifying the number 
of entities that will review the rule, we assume that the total number 
of unique commenters on last year's proposed rule will be the number of 
reviewers of this proposed rule. We acknowledge that this assumption 
may understate or overstate the costs of reviewing this rule. It is 
possible that not all commenters reviewed last year's rule in detail, 
and it is also possible that some reviewers chose not to comment on the 
proposed rule. For these reasons we believe that the number of past 
commenters would be a fair estimate of the number of reviewers of this 
rule. We welcomed any public comments on the approach in estimating the 
number of entities that would review the proposed rule. We did not 
receive any public comments specific to our solicitation.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of this proposed rule, 
and therefore for the purposes of our estimate we assume that each 
reviewer reads approximately 50 percent of the rule. We sought public 
comments on this assumption. We did not receive any public comments 
specific to our solicitation.
    Using the wage information from the BLS for medical and health 
service managers (Code 11-9111), we estimate that the cost of reviewing 
this rule is $114.24 per hour, including overhead and fringe benefits 
https://www.bls.gov/oes/current/oes_nat.htm. Assuming an average 
reading speed, we estimate that it would take approximately 4.16 hours 
for the staff to review half of this final rule with comment period. 
For each entity that reviews the rule, the estimated cost is $475.24 
(4.16 hours x $114.24). Therefore, we estimate that the total cost of 
reviewing this rule is $270,886.80 ($475.24 x 570).

E. Alternatives Considered

    This final rule with comment period contains a range of policies. 
It also provides descriptions of the statutory provisions that are 
addressed, identifies the finalized policies, and presents rationales 
for our decisions and, where relevant, alternatives that were 
considered.
1. Alternatives Considered for Distribution of Additional Residency 
Positions Under the Provisions of Section 126 of the CAA
    Section 126(a) of the CAA amended section 1886(h) of the Act by 
adding a new section 1886(h)(9) of the Act requiring the distribution 
of additional residency positions to qualifying hospitals. Section 
1886(h)(9)(A) of the Act requires that for FY 2023, and for each 
succeeding fiscal year until the aggregate number of FTE residency 
positions distributed is equal to 1,000, the Secretary shall initiate 
separate rounds of applications from hospitals for these additional 
residency positions.
    After consideration of public comments, we are finalizing our 
proposal with modifications, that applicant hospitals are eligible for 
distribution of residency positions under section 126 if they meet the 
definition of any one or more of the statutory categories, Category 
One, Category Two, Category Three, or Category Four, as described in 
section II.B.3. of this final rule with comment period. Based on the 
residency training program for which the hospital is applying, the 
hospital will choose, if applicable, either a geographic or population 
HPSA where residents spend at least 50 percent of their training time. 
Hospitals will attest to meeting this 50 percent training criterion.
    The HPSA scores associated with the geographic or population HPSAs 
chosen by hospitals that qualify under the aforementioned criteria will 
be ranked from highest to lowest and the 200 residency positions 
available for each FY will be prioritized in this manner, with each 
applicant hospital receiving up to 5.0 FTEs based on the length of the 
program associated with the hospital's application.
    We considered alternative approaches for distribution of additional 
residency positions under the provisions of section 126 of the CAA. An 
alternative we considered was to distribute 200 additional residency 
positions for FY 2023 entirely among hospitals that qualify in Category 
One, Category Two, Category Three, and/or Category Four, with higher 
priority given to applications from hospitals that qualify in more 
categories. We would distribute 1.0 FTE to each hospital that qualified 
under all four categories, prorating only in the event that the number 
of hospitals that qualified under all four categories exceeds 200. 
However, given that we believe the additional residency positions 
distributed under section 126 of the CAA should be consistent with the 
Administration's goal of advancing health equity in underserved 
communities, we believe prioritizing applications based on HPSA scores 
is a feasible means to achieve this goal. Therefore, we are not 
finalizing our proposed alternative.
2. Alternatives Considered for Counting Organs Used To Determine 
Medicare's Share of Organ Acquisition Costs
    After consideration of public comments, we considered two 
alternatives for counting organs used to determine Medicare's share of 
organ acquisition costs: (1) Withdrawing the proposal; or (2) 
finalizing the proposal but with a delay or a delay with a transition. 
Although we believe our proposed organ counting policy is appropriate 
and consistent with Medicare's anti cross-subsidization principles at 
section 1861(v) of the Act, and our regulations at 42 CFR 413.5, which 
do not permit the Medicare program to bear the costs of non-Medicare 
patients, we have decided to not finalize the proposal to allow more 
time to better understand concerns that

[[Page 73509]]

commenters have raised. We would like more time to thoroughly evaluate 
some of the concerns raised by commenters, such as those related to 
tracking the payor status of the organ recipients, to ensure that the 
policy can be operationalized by all OPOs and THs without a disruption 
to the transplantation ecosystem. We also recognize commenters' 
concerns about other changes occurring in the transplantation ecosystem 
which compete for time and resources, such as adapting to the new organ 
allocation system and initiatives to increase kidney transplantation. 
Therefore, we decided we are not finalizing our proposal at this time, 
and may revisit this proposal in future rulemaking.

F. Accounting Statement and Table

    As required by OMB Circular A-4 (available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A4/a-4.pdf), we have prepared an accounting statement in Table 6 showing the 
classification of the impact associated with the provisions of this 
final rule with comment period as they relate to Medicare GME payments 
to hospitals from FY 2021 to FY 2031. Table 6 provides our best 
estimate of the change in Medicare payments to providers as a result of 
the changes to the Medicare GME payments presented in this final rule 
with comment period. All expenditures are classified as transfers to 
Medicare providers.

 Table 6--Accounting Statement: Classification of Estimated Expenditures
                         From FY 2021 to FY 2031
------------------------------------------------------------------------
            Category               7% Discount rate    3% Discount rate
------------------------------------------------------------------------
Annualized Monetized Transfers..  $245.25 Million...  $277.30 Million.
                                 ---------------------------------------
From Whom to Whom?..............  Federal Government to Medicare
                                   Providers (Teaching Hospitals).
------------------------------------------------------------------------

G. Regulatory Flexibility Act (RFA)

    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small government 
jurisdictions. We estimate that most hospitals and most other providers 
and suppliers are small entities as that term is used in the RFA. The 
great majority of hospitals and most other health care providers and 
suppliers are small entities, either by being nonprofit organizations 
or by meeting the SBA definition of a small business. Table 7 details 
the size standards for those industries that may be affected by this 
rule, though we expect that General Medical and Surgical Hospitals 
would be most affected.

              Table 7--Size Standards by Affected Industry
------------------------------------------------------------------------
                                      NAICS industry       Size standard
           NAICS Code                  description         (in millions)
------------------------------------------------------------------------
622110.........................  General Medical and               $41.5
                                  Surgical Hospitals.
622210.........................  Psychiatric and                    41.5
                                  Substance Abuse
                                  Hospitals.
622310.........................  Specialty (except                  41.5
                                  Psychiatric and
                                  Substance Abuse)
                                  Hospitals.
------------------------------------------------------------------------

    For purposes of the RFA, all hospitals and other providers and 
suppliers are considered to be small entities. Because all hospitals 
are considered to be small entities for purposes of the RFA, the 
hospital impacts described in this final rule with comment period are 
impacts on small entities. Individuals and States are not included in 
the definition of a small entity. MACs are not considered to be small 
entities because they do not meet the SBA definition of a small 
business.
    HHS's practice in interpreting the RFA's reference to a 
``significant economic impact on a substantial number of small 
entities'' is to consider effects economically ``significant'' if 
greater than 5 percent of small providers reach a threshold of 3 to 5 
percent or more of total revenue or total costs. Based on our analysis 
described in section IV.C. this final rule with comment period, we 
believe that the overall impact on hospitals as a whole, and thus on 
small entities specifically, of the provisions of this final rule with 
comment period will not exceed the 3 to 5 percent threshold discussed 
previously. Therefore, the Secretary has determined that this final 
rule with comment period will not have significant economic impact on a 
substantial number of small entities. We note that for some hospitals, 
these estimates may represent the total expected impact on their 
inpatient hospital revenue; for other hospitals, this represents only a 
portion of the total expected impact, as much of their revenue comes 
from non-Medicare cases. We estimate that hospitals will experience a 
net benefit resulting from the GME provisions of this final rule with 
comment period, as such we do not expect small entities to incur 
significant costs.
    This final rule with comment period contains a range of policies. 
It provides descriptions of the statutory provisions that are 
addressed, identifies the policies, and presents rationales for our 
decisions and, where relevant, alternatives that were considered, 
including those alternatives discussed in section IV.E. of this final 
rule with comment period. The analyses discussed in this RIA and 
throughout the preamble of this final rule with comment period 
constitutes our regulatory flexibility analysis. We solicited public 
comments on our estimates and analysis of the impact of our policies on 
small entities. We received no public comments on those estimates and 
analysis other than the comments noted in section IV.C.1. and IV.C.2. 
of this final rule with comment period. As discussed in section IV.C.2. 
of this final rule with comment period, there is no impact on hospitals 
or OPOs in FY 2022 from the final organ acquisition policies discussed 
in this final rule with comment period. Also, as discussed previously, 
in this final rule with comment period we are finalizing policies to 
implement section 126 of the CAA of 2021, which makes available 1,000 
new Medicare-funded GME positions (but not more than 200 new positions 
for a fiscal year), to be distributed beginning in FY 2023. A separate 
round of applications from hospitals will be initiated for these

[[Page 73510]]

additional residency positions, and hospitals must be notified of the 
number of positions distributed to them by January 31 of the fiscal 
year, effective beginning July 1 of that fiscal year.
    Teaching hospitals that apply timely and are awarded FTE residency 
positions will experience an increase in their Medicare GME payments 
once the hospital fills the positions. However, until hospitals submit 
applications requesting the FTE residency positions and submit 
documentation demonstrating they meet the eligibility criteria and 
other requirements, we do not know which hospitals or what types of 
hospitals will receive additional FTE residency positions under this 
provision. To the extent that small rural hospitals apply for and 
receive FTE residency positions under this provision, they will 
experience an increase in their GME payments. Therefore, the Secretary 
has certified that this final rule with comment period will have a 
significant economic impact on a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. As explained previously, 
to the extent that small rural hospitals apply for and receive FTE 
residency positions, they will experience an increase in their GME 
payments. Therefore, the Secretary has certified that this final rule 
with comment period will have a significant impact on the operations of 
a substantial number of small rural hospitals.
    However, we note that the organ acquisition policies for transplant 
hospitals will not have a significant impact, as no certified 
transplant hospitals are small rural hospitals. Additionally, while 
some donor community hospitals may be small rural hospitals, we are 
making changes to their billing practices which should not affect 
hospital operations as donor community hospitals will be paid the 
lesser of their reasonable cost or a negotiated rate.
    We assume that the costs for reviewing this rule is the same for 
small entities as it is for larger entities. For each entity that 
reviews the rule, the estimated cost is $475.24 (4.16 hours x $114.24). 
Therefore, we estimate that the total cost of reviewing this rule is 
$270,886.80 ($475.24 x 570).

H. Unfunded Mandates Reform Act (UMRA)

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 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 2021, that 
threshold is approximately $158 million. This final rule with comment 
period would not impose a mandate that will result in the expenditure 
by State, local, and Tribal Governments, in the aggregate, or by the 
private sector, of more than $158 million in any 1 year.

I. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule with comment period) that imposes substantial direct 
requirement costs on state and local governments, preempts state law, 
or otherwise has Federalism implications. This rule will not have a 
substantial direct effect on state or local governments, preempt 
states, or otherwise have a Federalism implication.
    This final rule with comment period is subject to the Congressional 
Review Act provisions of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (5 U.S.C. 801 et seq.) and has been transmitted to 
the Congress and the Comptroller General for review.

V. 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.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on December 14, 2021.

List of Subjects

42 CFR Part 412

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

42 CFR Part 413

    Diseases, Health facilities, Medicare, Puerto Rico, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
and Medicaid Services is amending 42 CFR Chapter IV as set forth below:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

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

    Authority: 42 U.S.C. 1302 and 1395hh.


0
2. Section 412.1 is amended by revising paragraph (a)(1)(ii) to read as 
follows:


Sec.  412.1  Scope of part.

    (a) * * *
    (1) * * *
    (ii) Payment for other costs related to inpatient hospital services 
is made on a reasonable cost basis as follows:
    (A) Organ acquisition costs incurred by hospitals with approved 
organ transplant programs.
    (B) The costs of qualified nonphysician anesthetist's services, as 
described in Sec.  412.113(c).
    (C) Direct costs of approved nursing and allied health educational 
programs.
    (D) Costs related to hematopoietic stem cell acquisition for the 
purpose of an allogeneic hematopoietic stem cell transplant as 
described in Sec.  412.113(e).
* * * * *

0
3. Section 412.2 is amended by revising paragraph (e)(4) to read as 
follows:


Sec.  412.2  Basis of payment.

* * * * *
    (e) * * *
    (4) The acquisition costs of hearts, kidneys, livers, lungs, 
pancreas, and intestines (or multivisceral organs) incurred by approved 
transplant programs.
* * * * *

0
4. Section 412.71 is amended by revising paragraph (b)(3) to read as 
follows:


Sec.  412.71  Determination of base-year inpatient operating costs.

* * * * *
    (b) * * *
    (3) Kidney acquisition costs incurred by hospitals with approved 
kidney transplant programs as described in Sec.  412.100. Kidney 
acquisition costs in the base year are determined by multiplying the 
hospital's average kidney acquisition cost per kidney times the number 
of kidney transplants

[[Page 73511]]

covered by Medicare Part A during the base period.
* * * * *

0
5. Section 412.90 is amended by revising paragraph (d) to read as 
follows:


Sec.  412.90  General rules.

* * * * *
    (d) Kidney acquisition costs incurred by hospitals with approved 
kidney transplant programs. CMS pays for kidney acquisition costs 
incurred by kidney transplant programs on a reasonable cost basis. The 
criteria for this special payment provision are set forth in Sec.  
412.100.
* * * * *

0
6. Section 412.100 is revised to read as follows:


Sec.  412.100  Special treatment: Kidney transplant programs.

    (a) Adjustments for kidney transplant programs. (1) CMS adjusts the 
inpatient prospective payment system (IPPS) rates for inpatient 
operating costs determined under subparts D and E of this part for 
hospitals with approved kidney transplant programs (discussed at Sec.  
482.104 of this chapter) to remove the net costs associated with kidney 
acquisition.
    (2)(i) Payment for Medicare kidney acquisition costs, as set forth 
in subpart L of part 413 of this chapter, is made on a reasonable cost 
basis apart from the prospective payment rate for inpatient operating 
costs.
    (ii) IPPS payment to the hospital is adjusted in each cost 
reporting period to reflect an amount necessary to compensate the 
hospital for reasonable costs of Medicare kidney acquisition.
    (b) Costs of kidney acquisition. Kidney acquisition costs include 
costs incurred in the acquisition of a kidney from a living or a 
cadaveric donor, by the hospital or an organ procurement organization, 
as appropriate. These costs are listed in Sec.  413.402(b) of this 
chapter.

0
7. Section 412.105 is amended by:
0
a. Revising paragraph (a)(1)((i);
0
b. Adding paragraph (f)(1)(iv)(C)(3); and
0
c. Revising paragraphs (f)(1)(v)(F), (f)(1)(vii), and (f)(1)(x).
    The addition and revisions read as follows:


Sec.  412.105  Special treatment: Hospitals that incur indirect costs 
for graduate medical education programs.

    (a) * * *
    (1) * * *
    (i) Except for the special circumstances for Medicare GME 
affiliated groups, emergency Medicare GME affiliated groups, and new 
programs described in paragraphs (f)(1)(vi) and (f)(1)(vii) of this 
section for cost reporting periods beginning on or after October 1, 
1997, and for the special circumstances for closed hospitals or closed 
programs described in paragraph (f)(1)(ix) of this section for cost 
reporting periods beginning on or after October 1, 2002, and for Rural 
Track Programs within their 5-year cap building period described in 
paragraph (f)(1)(x)(B) in cost reporting periods beginning on or after 
October 1, 2022, this ratio may not exceed the ratio for the hospital's 
most recent prior cost reporting period after accounting for the cap on 
the number of allopathic and osteopathic full-time equivalent residents 
as described in paragraph (f)(1)(iv) of this section, and adding to the 
capped numerator any dental and podiatric full-time equivalent 
residents.
* * * * *
    (f) * * *
    (1) * * *
    (iv) * * *
    (C) * * *
    (3) Effective for portions of cost reporting periods beginning on 
or after July 1, 2023, a hospital may qualify to receive an increase in 
its otherwise applicable FTE resident cap if the criteria specified in 
Sec.  413.79(p) of this subchapter are met.
* * * * *
    (v) * * *
    (F)(1) Subject to the provisions of paragraph (f)(1)(x) of this 
section, effective for cost reporting periods beginning on or after 
April 1, 2000, and beginning before October 1, 2022, full-time 
equivalent residents at an urban hospital in a rural track program are 
included in the urban hospital's rolling average calculation described 
in paragraph (f)(1)(v)(B) of this section.
    (2) Subject to the provisions of paragraph (f)(1)(x) of this 
section, for cost reporting periods beginning on or after October 1, 
2022, full-time equivalent residents at an urban hospital or rural 
hospital in a Rural Track Program are excluded from the rolling average 
calculation described in paragraph (f)(1)(v)(B) of this section during 
the cost reporting periods prior to the beginning of the applicable 
hospital's cost reporting period that coincides with or follows the 
start of the sixth program year of each rural track.
* * * * *
    (vii)(A) If a hospital establishes a new medical residency training 
program, as defined in Sec.  413.79(l) of this subchapter, the 
hospital's full-time equivalent cap may be adjusted in accordance with 
the provisions of Sec.  413.79(e) of this subchapter.
    (B)(1) A hospital that, as of December 27, 2020, has a full-time 
equivalent cap of less than 1.0 FTE based on a cost reporting period 
beginning before October 1, 1997, that begins training residents in a 
new medical residency training program, as defined at Sec.  413.79(l) 
of this subchapter, in a cost reporting period beginning on or after 
December 27, 2020, and before December 26, 2025, may receive an 
adjustment to its full-time equivalent cap when it trains at least 1.0 
FTE in such new medical residency training program(s), to be calculated 
in accordance with Sec.  413.79(e) of this subchapter.
    (2) A hospital that has a full-time equivalent cap of no more than 
3.0 FTEs based on a cost reporting period beginning on or after October 
1, 1997, and before December 27, 2020, that begins training residents 
in a new medical residency training program, as defined at Sec.  
413.79(l) of this subchapter, in a cost reporting period beginning on 
or after December 27, 2020 and before December 26, 2025, may receive an 
adjustment to its full-time equivalent cap when it trains more than 3.0 
FTE in such new medical residency training program(s), to be calculated 
in accordance with the provisions of Sec.  413.79(e) of this 
subchapter.
* * * * *
    (x)(A) For rural track programs started in a cost reporting period 
beginning before October 1, 2022, an urban hospital that establishes a 
new residency program (as defined in Sec.  413.79(l) of this 
subchapter), or has an existing residency program, with a rural track 
(or an integrated rural track) may include in its FTE count residents 
in those rural tracks in accordance with the applicable provisions of 
Sec.  413.79(k) of this subchapter.
    (B) For cost reporting periods beginning on or after October 1, 
2022, an urban hospital or rural hospital that establishes a new 
residency program (as defined in Sec.  413.79(l) of this subchapter) 
that is a Rural Track Program (as defined at Sec.  413.75(b) of this 
subchapter), or adds an additional site to a Rural Track Program, may 
include in its FTE count residents in the Rural Track Program in 
accordance with the applicable provisions of Sec.  413.79(k) of this 
subchapter.
* * * * *

0
8. Section 412.113 is amended by revising paragraph (d) to read as 
follows:


Sec.  412.113  Other payments.

* * * * *

[[Page 73512]]

    (d) Organ acquisition. Payment for organ acquisition costs as 
specified in part 413, subpart L, incurred by hospitals with approved 
transplant programs is made on a reasonable cost basis.
* * * * *

0
8. Section 412.116 is amended by revising paragraph (c) to read as 
follows:


Sec.  412.116  Method of payment.

* * * * *
    (c) Special interim payments for certain costs. For capital-related 
costs for cost-reporting periods beginning before October 1, 1991, and 
the direct costs of medical education, which are not included in 
prospective payments but are reimbursed as specified in Sec. Sec.  
413.130 and 413.85 of this chapter, respectively, interim payments are 
made subject to final cost settlement. Interim payments for capital-
related items for cost-reporting periods beginning before October 1, 
1991, and the estimated cost of approved medical education programs 
(applicable to inpatient costs payable under Medicare Part A and for 
kidney acquisition costs in hospitals with approved kidney transplant 
programs) are determined by estimating the reimbursable amount for the 
year based on the previous year's experience and on substantiated 
information for the current year and divided into 26 equal biweekly 
payments. Each payment is made 2 weeks after the end of a biweekly 
period of services, as described in Sec.  413.64(h)(5) of this 
subchapter. The interim payments are reviewed by the intermediary at 
least twice during the reporting period and adjusted if necessary.
* * * * *

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
PAYMENT RATES FOR SKILLED NURSING FACILITIES

0
9. The authority citation for part 413 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), 
(i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww.


0
10. Section 413.1 is amended by revising paragraphs (a)(2)(v) and 
(d)(2)(i) to read as follows:


Sec.  413.1  Introduction.

    (a) * * *
    (2) * * *
    (v) Organ procurement organizations (OPOs) and histocompatibility 
laboratories.
* * * * *
    (d) * * *
    (2) * * *
    (i) Payment for the following is described in Sec.  412.113 of this 
chapter:
    (A) Capital related costs for cost reporting periods beginning 
before October 1991.
    (B) Medical education costs.
    (C) Organ acquisition costs as specified in part 413, subpart L.
    (D) The costs of certain anesthesia services.
* * * * *

0
11. Section 413.40 is amended by revising paragraph (a)(3) to read as 
follows:


Sec.  413.40  Ceiling on the rate of increase in hospital inpatient 
costs.

    (a) * * *
    (3) Net inpatient operating costs include the costs of certain 
preadmission services as specified in paragraph (c)(2) of this section, 
the costs of routine services, ancillary services, and intensive care 
services (as defined in Sec.  413.53(b)) incurred by a hospital in 
furnishing covered inpatient services to Medicare beneficiaries. Net 
inpatient operating costs exclude capital-related costs as described in 
Sec.  413.130, the costs of approved medical education programs as 
described in Sec. Sec.  413.75 through 413.83 and 413.85, and organ 
acquisition costs as specified in subpart L of this part incurred by 
approved transplant programs. These costs are identified and excluded 
from inpatient operating costs before the application of the ceiling.
* * * * *

0
12. In Sec.  413.75 amend paragraph (b) by:
0
a. In the definition of ``Rural track FTE limitation'', by removing the 
phrase ``urban hospital may include in its'' and adding in its place 
the phrase ``urban hospital or rural hospital may include in its'';
0
b. Revising the definition of ``Rural track or integrated rural 
track''; and
0
c. Adding in alphabetical order the definition of ``Rural Track 
Program''.
    The addition and revision read as follows:


Sec.  413.75  Direct GME payments: General requirements.

* * * * *
    (b) * * *
    Rural track or integrated rural track means, for programs started 
in cost reporting periods prior to October 1, 2022, an approved medical 
residency training program established by an urban hospital in which 
residents train for a portion of the program at the urban hospital and 
then rotate for a portion of the program to a rural hospital(s) or a 
rural nonhospital site(s).
    Rural Track Program means, effective for cost reporting periods 
beginning on or after October 1, 2022, an ACGME-accredited program in 
which residents/fellows gain both urban and rural experience with more 
than half of the education and training for a resident/fellow taking 
place in a rural area as defined at 42 CFR 412.62(f)(iii).
* * * * *

0
13. Section 413.77 is amended by revising paragraph (e)(1)(iii) and 
adding paragraphs (e)(1)(iv) and (v) to read as follows:


Sec.  413.77  Direct GME payments: Determination of per resident 
amounts.

* * * * *
    (e) * * *
    (1) * * *
    (iii) If, under paragraph (e)(1)(ii)(A) or (B) or (e)(1)(iv)(B) of 
this section, there are fewer than three existing teaching hospitals 
with per resident amounts that can be used to calculate the weighted 
mean value per resident amount, for base periods beginning on or after 
October 1, 1997, the per resident amount equals the updated weighted 
mean value of per resident amounts of all hospitals located in the same 
census region as that term is used in subpart D of part 412 of this 
subchapter.
    (iv) A hospital that, as of December 27, 2020, has a per resident 
amount based on less than 1.0 FTE in any cost reporting period 
beginning before October 1, 1997, may choose to receive a recalculated 
per resident amount either when it trains at least 1.0 FTE in the 
earliest cost reporting period beginning on or after December 27, 2020, 
and before December 26, 2025, or when it trains at least 1.0 FTE in the 
first cost reporting period beginning after December 27, 2021. A 
hospital that, as of December 27, 2020, has a per resident amount based 
on no more than 3.0 FTEs in any cost reporting period beginning on or 
after October 1, 1997, and before December 27, 2020, may choose to 
receive a recalculated per resident amount either when it trains more 
than 3.0 FTEs in the earliest cost reporting period beginning on or 
after December 27, 2020 and before December 26, 2025, or when it trains 
more than 3.0 FTE in the first cost reporting period beginning after 
December 27, 2021. In either case, residents need not be on duty during 
the first month of the cost reporting period. The recalculated per

[[Page 73513]]

resident amount is based on the lower of--
    (A) The hospital's actual cost per resident incurred in connection 
with the GME program(s) based on the cost and resident data from the 
hospital's base year cost reporting period, which is, for hospitals 
with a per resident amount previously based on less than 1.0 FTE, 
either when it trains at least 1.0 FTE in the earliest cost reporting 
period beginning on or after December 27, 2020, and before December 26, 
2025, or when it trains at least 1.0 FTE in the first cost reporting 
period beginning after December 27, 2021; and for hospitals with a per 
resident amount previously based on not more than 3.0 FTEs, either when 
it trains more than 3.0 FTEs in the earliest cost reporting period 
beginning on or after December 27, 2020 and before December 26, 2025, 
or when it trains more than 3.0 FTE in the first cost reporting period 
beginning after 
; or
    (B) The updated weighted mean value of per resident amounts of all 
hospitals located in the same geographic wage area is calculated using 
all per resident amounts (including primary care and obstetrics and 
gynecology and nonprimary care) and FTE resident counts from the most 
recently settled cost reports of those teaching hospitals.
    (v) Effective for a cost reporting periods beginning on or after 
December 27, 2020, a per resident amount must be established if a 
hospital trains less than 1.0 FTE resident and this training results 
from the hospital's participation in a Medicare GME affiliation 
agreement under Sec.  413.79(f). Effective for a cost reporting period 
beginning on or after December 27, 2020, a per resident amount must 
only be established when the hospital trains at least 1.0 FTE and does 
not participate in a Medicare GME affiliation agreement under Sec.  
413.79(f) for that training. Residents need not be on duty during the 
first month of the cost reporting period from which the per resident 
amount is established.
* * * * *

0
14. Section 413.78 is amended by revising paragraph (b) to reads as 
follows:


Sec.  413.78  Direct GME payments: Determination of the total number of 
FTE residents.

* * * * *
    (b)(1) No individual resident may be counted as more than one FTE 
based on the total time spent in training at all sites. A hospital 
cannot claim the time spent by residents training at another hospital, 
except as provided in paragraph (i) of this section. Except as provided 
in paragraphs (c), (d), and (e) of this section, if a resident spends 
time in more than one hospital or in a non-provider setting, the 
resident counts as partial FTE based on the proportion of time worked 
at the hospital to the total time worked. A part-time resident counts 
as a partial FTE based on the proportion of allowable time worked 
compared to the total time necessary to fill a full-time internship or 
residency slot.
    (2) Effective for a cost reporting period beginning on or after 
December 27, 2020, a hospital must report FTE residents on its Medicare 
cost report for a cost reporting period if it does not participate in a 
Medicare GME affiliation agreement (as defined under Sec.  413.75(b)), 
and the hospital trains at least 1.0 FTE in an approved program or 
programs, or, if the hospital trains less than 1.0 FTE residents in an 
approved program or programs and this training results from the 
hospital's participation in a Medicare GME affiliation agreement (as 
defined under Sec.  413.75(b)).
* * * * *

0
15. Section 413.79 is amended by--
0
a. Revising paragraph (c)(2) introductory text;
0
b. Revising paragraph (d)(7);
0
c. Adding paragraphs (e)(1)(vi), (e)(6), and (f)(8);
0
d. Revising paragraphs (k) introductory text, (k)(1), (k)(2) 
introductory text, (k)(2)(i), and (k)(3);
0
e. Adding paragraph (k)(4)(i)(C);
0
f. Revising paragraph (k)(4)(ii) introductory text;
0
g. Adding (k)(4)(ii)(C);
0
h. In paragraph (k)(5)(i), removing the phrase ``An urban hospital may 
not include in its rural track FTE limitation or (assuming the urban 
hospital's FTE'' and adding in its place the phrase ``A hospital may 
not include in its rural track FTE limitation or (assuming the 
hospital's FTE'';
0
i. In paragraph (k)(5)(ii), removing the phrase ``The hospital'' and 
adding in its place the phrase ``Each hospital''; and
0
j. Adding paragraphs (k)(5)(iv) and (p).
    The revisions and additions read as follows:


Sec.  413.79   Direct GME payments: Determination of the weighted 
number of FTE residents.

* * * * *
    (c) * * *
    (2) Determination of the FTE resident cap. Subject to the 
provisions of paragraphs (c)(3) through (6) and (m) through (p) of this 
section and Sec.  413.81, for purposes of determining direct GME 
payment--
* * * * *
    (d) * * *
    (7)(i) Subject to the provisions under paragraph (k) of this 
section, effective for cost reporting periods beginning on or after 
April 1, 2000 and before cost reporting periods beginning on or after 
October 1, 2022, FTE residents in a rural track program at an urban 
hospital are included in the urban hospital's rolling average 
calculation described in this paragraph (d).
    (ii) Subject to the provisions under paragraph (k) of this section, 
effective for rural track programs started in a cost reporting period 
beginning on or after October 1, 2022, FTE residents in a rural track 
program at an urban hospital or rural hospital are excluded from 
rolling average calculation described in this paragraph (d) during the 
cost reporting periods prior to the beginning of the applicable 
hospital's cost reporting period that coincides with or follows the 
start of the sixth program year of each rural track.
    (e) * * *
    (1) * * *
    (vi) In the case of a hospital that, as of December 27, 2020, has a 
FTE cap based on the training of less than 1.0 FTE in any cost 
reporting period beginning before October 1, 1997; or based on the 
training of no more than 3.0 FTEs in on a cost reporting period 
beginning on or after October 1, 1997, and before December 27, 2020, if 
such a hospital begins training residents in a new approved program (as 
defined under Sec.  413.79(l)) in a program year beginning on or after 
December 27, 2020 and before December 26, 2025, the hospital with a 
previous FTE cap of less than 1.0 FTE may receive an adjusted FTE cap 
when it begins to train at least 1.0 FTE in a new program(s); and the 
hospital with a previous FTE cap of no more than 3.0 FTEs may receive 
an adjusted FTE cap when it begins to train more than 3.0 FTEs in a new 
program(s). The adjusted FTE cap is equal to the sum of the original 
FTE cap and the products of the following three factors (limited to the 
number of accredited slots for each program):
    (A) The highest total number of FTE residents trained in any 
program year during the fifth year of the first new program's existence 
started in a program year beginning on or after December 27, 2020 and 
before December 26, 2025, at all of the hospitals to which the 
residents in the program rotate;
    (B) The number of years in which residents are expected to complete 
the program, based on the minimum accredited length for each type of 
program.
    (C) The ratio of the number of FTE residents in the new program 
that trained at the hospital over the entire 5-

[[Page 73514]]

year period to the total number of FTE residents that trained at all 
hospitals over the entire 5-year period.
* * * * *
    (6) Effective for a cost reporting period beginning on or after 
December 27, 2020, FTE resident caps must be established when the 
hospital trains 1.0 or more FTE residents in a new medical residency 
program (as defined under paragraph (l) of this section).
    (f) * * *
    (8) FTE resident cap slots added under section 126 of Public Law 
116-260 may be used in a Medicare GME affiliation agreement beginning 
in the fifth year after the effective date of those FTE resident cap 
slots.
* * * * *
    (k) Residents training in rural track programs. Subject to the 
provisions of Sec.  413.81, an urban hospital that establishes a new 
residency program, or has an existing residency program, with a rural 
track (or an integrated rural track) may add the rotations of the 
residents in those rural tracks to its FTE cap specified under 
paragraph (c) of this section. An urban hospital (or, effective for a 
cost reporting period beginning on or after October 1, 2022, a rural 
hospital) with a Rural Track Program (as defined at section 413.75(b) 
of this subchapter) may count residents in those Rural Track Programs 
up to a rural track FTE limitation if the hospital complies with the 
conditions specified in paragraphs (k)(2) through (7) of this section.
    (1) If an urban hospital rotates residents to a separately 
accredited rural track program at a rural hospital(s) for two-thirds of 
the duration of the program for cost reporting periods beginning on or 
after April 1, 2000, and before October 1, 2003, or for more than one-
half of the duration of the program for cost reporting periods 
beginning on or after October 1, 2003, and before October 1, 2022, the 
urban hospital may include those residents in its FTE count for the 
time the rural track residents spend at the urban hospital, not to 
exceed its rural track FTE limitation. For cost reporting periods 
beginning on or after October 1, 2022, if an urban hospital rotates 
residents to a Rural Track Program (as defined at section 413.75(b) of 
this subchapter) at a rural hospital(s) for more than one-half of the 
duration of the program, both the urban and the rural hospital may 
include those residents in their FTE counts for the time the rural 
track residents spend at the urban and rural hospital, respectively, 
not to exceed their rural track FTE limitations. The rural track FTE 
limitation is determined as follows:
    (i) For rural track programs started prior to October 1, 2012, for 
the first 3 years of the rural track's existence, the rural track FTE 
limitation for each urban hospital will be the actual number of FTE 
residents, subject to the rolling average at paragraph (d)(7) of this 
section, training in the rural track at the urban hospital. For rural 
track programs started on or after October 1, 2012, and before October 
1, 2022, prior to the start of the urban hospital's cost reporting 
period that coincides with or follows the start of the sixth program 
year of the rural track's existence, the rural track FTE limitation for 
each urban hospital will be the actual number of FTE residents, subject 
to the rolling average at paragraph (d)(7) of this section, training in 
the rural track at the urban hospital. For cost reporting periods 
beginning on or after October 1, 2022, before the start of the urban or 
rural hospital's cost reporting period that coincides with or follows 
the start of the sixth program year of the Rural Track Program's 
existence, the rural track FTE limitation for each hospital will be the 
actual number of FTE residents training in the Rural Track Program at 
the urban or rural hospital.
    (ii) For rural track programs started prior to October 1, 2012, 
beginning with the fourth year of the rural track's existence, the 
rural track FTE limitation is equal to the product of the highest 
number of residents, in any program year, who during the third year of 
the rural track's existence are training in the rural track at the 
urban hospital and are designated at the beginning of their training to 
be rotated to the rural hospital(s) for at least two-thirds of the 
duration of the program for cost reporting periods beginning on or 
after April 1, 2000, and before October 1, 2003, or for more than one-
half of the duration of the program for cost reporting periods 
beginning on or after October 1, 2003, and the number of years those 
residents are training at the urban hospital. For rural track programs 
started on or after October 1, 2012 and before October 1, 2022, 
beginning with the start of the urban hospital's cost reporting period 
that coincides with or follows the start of the sixth program year of 
the rural track's existence, the rural track FTE limitation is 
calculated in accordance with paragraph (e)(1) of this section. For 
Rural Track Programs started on or after October 1, 2022, beginning 
with the start of the urban or rural hospital's cost reporting period 
that coincides with or follows the start of the sixth program year of 
the rural track's existence, the rural track FTE limitation is 
calculated in accordance with paragraph (e)(1) of this section.
    (2) If an urban hospital rotates residents to a separately 
accredited rural track program at a rural nonprovider site(s) for two-
thirds of the duration of the program for cost reporting periods 
beginning on or after April 1, 2000, and before October 1, 2003, or for 
more than one-half of the duration of the program for cost reporting 
periods beginning on or after October 1, 2003, the urban hospital may 
include those residents in its FTE count, subject to the requirements 
under Sec.  413.78(d) through (g). For cost reporting periods beginning 
on or after October 1, 2022, if an urban or rural hospital rotates 
residents to a Rural Track Program (as defined at section 413.75(b) of 
this subchapter) at a rural nonprovider site for more than one-half of 
the duration of the program, the urban or rural hospital may include 
those residents in its FTE count, subject to which hospital meets the 
requirements under Sec.  413.78(g), not to exceed their rural track FTE 
limitations. The rural track FTE limitation is determined as follows:
    (i) For rural track programs started prior to October 1, 2012, for 
the first 3 years of the rural track's existence, the rural track FTE 
limitation for each urban hospital will be the actual number of FTE 
residents, subject to the rolling average specified in paragraph (d)(7) 
of this section, training in the rural track at the urban hospital and 
the rural nonprovider site(s). For rural track programs started on or 
after October 1, 2012, and before October 1, 2022, prior to the start 
of the urban hospital's cost reporting period that coincides with or 
follows the start of the sixth program year of the rural track's 
existence, the rural track FTE limitation for each urban hospital will 
be the actual number of FTE residents, subject to the rolling average 
specified in paragraph (d)(7) of this section, training in the rural 
track at the urban hospital and the rural nonprovider site(s). For 
Rural Track Programs prior to the start of the urban or rural 
hospital's cost reporting period that coincides with or follows the 
start of the sixth program year of the rural track's existence, the 
rural track FTE limitation for each respective hospital will be the 
actual number of FTE residents training in the Rural Track Program at 
the hospital and, subject to the requirements under Sec.  413.78(g), in 
the rural nonprovider site(s).
* * * * *
    (3) For rural track programs started prior to October 1, 2012, if 
an urban hospital rotates residents in the rural track program to a 
rural hospital(s) for

[[Page 73515]]

less than two-thirds of the duration of the program for cost reporting 
periods beginning on or after April 1, 2000, and before October 1, 
2003, or for one-half or less than one-half of the duration of the 
program for cost reporting periods beginning on or after October 1, 
2003, the rural hospital may not include those residents in its FTE 
count (unless the rural track is a new program under paragraph (e)(3) 
of this section, or the rural hospital's FTE count does not exceed that 
hospital's FTE cap), nor may the urban hospital include those residents 
when calculating its rural track FTE limitation. For rural track 
programs started on or after October 1, 2012, if an urban hospital 
rotates residents in the rural track program to a rural hospital(s) for 
one-half or less than one-half of the duration of the program, the 
rural hospital may not include those residents in its FTE count (unless 
the rural track is a new program under paragraph (e)(3) of this 
section, or the rural hospital's FTE count does not exceed that 
hospital's FTE cap), nor may the urban hospital include those residents 
when calculating its rural track FTE limitation. For cost reporting 
periods beginning on or after October 1, 2022, if less than or equal to 
50 percent of the duration of the training program occurs in a rural 
area, neither the urban or rural hospital may receive a rural track FTE 
limitation.
    (4) * * *
    (i) * * *
    (C) For programs started in a cost reporting period beginning on or 
after October 1, 2022, if less than or equal to 50 percent of the 
duration of the training program occurs in a rural area, neither the 
urban or rural hospital may receive a rural track FTE limitation.
    (ii) For rural track programs started on or after October 1, 2012 
and prior to October 1, 2022, if an urban hospital rotates residents in 
the rural track program to a rural nonprovider site(s) for one-half or 
less than one-half of the duration of the program, the urban hospital 
may include those residents in its FTE count, subject to the 
requirements under Sec.  413.78(g). The urban hospital may include in 
its FTE count those residents in the rural track, not to exceed its 
rural track limitation, determined as follows:
* * * * *
    (C) For cost reporting periods beginning on or after October 1, 
2022, if less than or equal to 50 percent of the duration of the 
training program occurs in a rural area, neither the urban or rural 
hospital may receive a rural track FTE limitation.
    (5) * * *
    (iv) Effective for cost reporting periods beginning on or after 
October 1, 2022, in order for an urban or rural hospital to receive a 
rural track FTE limitation, greater than 50 percent of the program must 
occur in a rural area.
* * * * *
    (p) Determination of an increase in the otherwise applicable 
resident cap under section 126 of the Consolidated Appropriations Act 
(Pub. L. 116-260). For portions of cost reporting periods beginning on 
or after July 1, 2023, a hospital may receive an increase in its 
otherwise applicable FTE resident cap (as determined by CMS) if the 
hospital meets the requirements and qualifying criteria under section 
1886(h)(9) of the Act and if the hospital submits an application to CMS 
within the timeframe specified by CMS.

Subpart H--Payment for End-Stage Renal Disease (ESRD) Services

0
16. The subpart heading for Subpart H is revised to read as set forth 
above.


Sec. Sec.  413.200   [Removed and Reserved]

0
17. Section 413.200 is removed and reserved.

0
18. Subpart L is added to read as follows:

Subpart L--Payment of Organ Acquisition Costs for Transplant 
Hospitals, Organ Procurement Organizations, and Histocompatibility 
Laboratories

Sec.
413.400 Definitions.
413.402 Organ acquisition costs.
413.404 Standard acquisition charge.
413.406 Acquisition of pancreata for islet cell transplant.
413.408 [Reserved]
413.410 [Reserved]
413.412 Intent to transplant, and counting en bloc, research, and 
discarded organs.
413.414 Medicare secondary payer and organ acquisition costs.
413.416 Organ acquisition charges for kidney-paired exchanges.
413.418 Amounts billed to organ procurement organizations by donor 
community hospitals and transplant hospitals for hospital services 
provided to cadaveric donors in the hospital and included as organ 
acquisition costs.
413.420 Payment to independent organ procurement organizations and 
histocompatibility laboratories for kidney acquisition costs.

Subpart L--Payment of Organ Acquisition Costs for Transplant 
Hospitals. Organ Procurement Organizations, and Histocompatibility 
Laboratories


Sec.  413.400   Definitions.

    As used in this subpart:
    Histocompatibility laboratory means a laboratory meeting the 
requirements set forth in Sec.  493.1227 of this chapter and providing 
the services for the acquisition of kidneys or other organs for 
transplantation.
    Hospital-based organ procurement organization (HOPO) means an organ 
procurement organization that is considered a department of the 
transplant hospital and reports organ acquisition costs it incurs on 
the transplant hospital's Medicare cost report.
    Independent organ procurement organization (IOPO) means an organ 
procurement organization that files a Medicare cost report separate 
from a hospital and meets all of the following:
    (1) Is not subject to the control of a hospital with respect to the 
hiring, firing, training, and paying of employees.
    (2) Is not considered as a department of a hospital for insurance 
purposes (including malpractice insurance, general liability insurance, 
worker's compensation insurance, and employee retirement insurance).
    (3) Reports organ acquisition costs it incurs on the IOPO Medicare 
cost report.
    Organ, for Medicare organ acquisition payment purposes, means:
    (1) A human kidney, liver, heart, lung, pancreas, or intestine (or 
multivisceral organs when transplanted at the same time as an 
intestine).
    (2) Pancreata procured on or after October 1, 2004, for the purpose 
of acquiring pancreatic islet cells for transplantation into 
individuals who are participating in a National Institute of Diabetes 
and Digestive and Kidney Diseases clinical trial in accordance with 
section 733 of the Medicare Prescription Drug, Improvement and 
Modernization Act of 2003.
    Organ procurement organization (OPO) means an organization defined 
in Sec.  486.302 of this chapter. OPOs can be independent or hospital 
based.
    Standard acquisition charge (SAC) means a charge as defined in 
Sec.  413.404 of this chapter.
    Transplant hospital means a hospital that furnishes organ 
transplants and other medical and surgical specialty services required 
for the care of transplant patients.

[[Page 73516]]

    Transplant hospital/HOPO (TH/HOPO) refers to a transplant hospital, 
or a transplant hospital that operates a HOPO (as previously defined in 
this section) and performs organ procurement activities as one entity 
reported on the transplant hospital's Medicare cost report.
    Transplant program means an organ-specific transplant program 
within a transplant hospital (as defined in this section).


Sec.  413.402   Organ acquisition costs.

    (a) Costs related to organ acquisition. Costs recognized in 
paragraph (b) of this section are costs incurred in the acquisition of 
organs from a living donor or a cadaveric donor, by the hospital or an 
organ procurement organization, as appropriate. Additionally, there are 
administrative and general costs that may be allowable and included on 
the cost report for an OPO or TH/HOPO.
    (b) Types of costs. Organ acquisition costs are as follows:
    (1) Tissue typing, including tissue typing furnished by independent 
laboratories.
    (2) Donor and beneficiary evaluation.
    (3) Other costs associated with excising organs, such as general 
routine and special care services (for example, intensive care unit or 
critical care unit services), provided to the living or cadaveric 
donor.
    (4) Operating room and other inpatient ancillary services 
applicable to the living or cadaveric donor.
    (5) Organ preservation and perfusion costs.
    (6) Organ Procurement and Transplantation Network registration 
fees, and the reasonable and necessary cost of other fees, such as the 
registration fees for a kidney paired exchange, to register candidates 
for organ transplants. These allowable registry fees must support or 
promote organ transplantation and must not be duplicative in nature.
    (7) Surgeons' fees for excising cadaveric organs (currently limited 
to $1,250 for kidneys).
    (8) Transportation of the:
    (i) Excised organ to the transplant hospital; and
    (ii) Cadaveric donor to procure organs when it is necessary to 
preserve clinical outcomes or to avoid loss of potentially 
transplantable organs.
    (9) Costs of organs acquired from other hospitals or organ 
procurement organizations.
    (10) Hospital costs normally classified as outpatient costs 
applicable to organ excisions (services include donor and recipient 
tissue typing, work-up, and related services furnished prior to 
inpatient admission).
    (11) Costs of services applicable to organ excisions which are 
rendered by residents and interns not in approved teaching programs.
    (12) All pre-admission services applicable to organ excisions, such 
as laboratory, electroencephalography, and the costs of physicians' 
services.
    (c) Living donor complications. (1) Living kidney donor 
complications. Living kidney donor complications directly related to 
the kidney donation, which occur after the date of the donor's 
discharge, must not be reported as kidney acquisition costs on the 
Medicare cost report.
    (A) Medicare covers reasonable costs incurred for living kidney 
donor complications only if they are directly related to a kidney 
donation for a covered transplant into a Medicare beneficiary.
    (B) Living kidney donor complications are paid through the claims 
processing system under Medicare Part A or Part B, as applicable for 
the services provided, with no donor liability for deductibles or 
coinsurance. Living kidney donor complications are billed under the 
Medicare Beneficiary Identifier of the transplant recipient.
    (2) Living non-renal donor complications. Hospital costs incurred 
for living non-renal donor complications directly related to the non-
renal organ donation, which occur after the date of the donor's 
discharge are not paid through the claims processing system but are 
reported as organ acquisition costs on the hospital's Medicare cost 
report.
    (A) Medicare covers reasonable hospital costs incurred for living 
non-renal organ donor complications only if they are directly related 
to a non-renal organ donation for a covered transplant into a Medicare 
beneficiary.
    (B) Hospital costs incurred for living non-renal organ donor 
complications are reported as organ acquisition costs on the Medicare 
cost report, and paid through the cost report on a reasonable cost 
basis.
    (d) Costs not related to organ acquisition. (1) Items or services 
that are not related or reasonable to acquire an organ for 
transplantation, non-allowable administrative and general costs, or 
costs that are not related to patient care, are not considered organ 
acquisition costs.
    (2) Examples of items or services that are not organ acquisition 
costs include, but are not limited to the following:
    (i) Donor burial and funeral expenses.
    (ii) Transportation costs of the cadaveric donor after organ 
procurement for funeral services or for burial.
    (iii) Transportation costs for a living donor.
    (iv) Fees or in-center payments for donor referrals.
    (v) Costs associated with and incurred for OPO-sponsored seminars 
where continuing education credits are given and where the attendee is 
not on the OPO's staff (as described at Sec.  486.326(b)).
    (vi) Unreasonable costs incurred for administrator's duties 
associated with professional organizations.


Sec.  413.404   Standard acquisition charge.

    (a) General. (1) Procuring an organ is not a covered service when 
performed independent of a Medicare covered transplant, however, the 
reasonable costs to procure an organ are reimbursable when billed in 
connection with a Medicare covered transplant.
    (2) The SAC represents the average of the total organ acquisition 
costs associated with procuring either cadaveric donor organs or living 
donor organs, by organ type.
    (3) When a TH/HOPO or IOPO furnishes an organ to another TH/HOPO or 
IOPO, it bills its SAC to the TH/HOPO or IOPO receiving the organ.
    (b) THs/HOPOs SACs. (1) A TH/HOPO must develop a SAC for each organ 
type (for example heart, liver, or lung).
    (2) When a TH/HOPO furnishes an organ to another transplant 
hospital or IOPO, it must bill the receiving transplant hospital or 
IOPO its SAC by organ type, or the hospital's standard departmental 
charges that are reduced to cost.
    (3) A transplant hospital must establish SACs for living donor 
organs. A TH/HOPO must establish SACs for cadaveric donor organs.
    (i) Living donor SAC for transplant hospitals--(A) Definition. The 
living donor SAC is an average organ acquisition cost that a transplant 
hospital incurs to procure an organ from a living donor.
    (B) Establishment of living donor SAC. A transplant hospital must 
establish a living donor SAC (living SAC) before the transplant 
hospital bills its first living donor transplant to Medicare.
    (C) Calculating the living donor SAC--(1) Initial living donor SAC. 
A transplant hospital calculates its initial living donor SAC for each 
living organ type as follows:
    (i) By estimating the reasonable and necessary organ acquisition 
costs it expects to incur for services furnished to living donors, and 
pre-admission

[[Page 73517]]

services furnished to recipients of living donor organs during the 
hospital's cost reporting period.
    (ii) By dividing the estimated amount described in paragraph 
(b)(3)(i)(C)(1)(i) of this section by the projected number of usable 
living donor organs to be procured by the transplant hospital during 
the transplant hospital's cost reporting period.
    (2) Subsequent living donor SAC. A transplant hospital calculates 
its subsequent years' living donor SAC for each living organ type as 
follows:
    (i) By using the transplant hospital's actual organ acquisition 
costs for the living donor organ type from the prior year's Medicare 
cost report, adjusted for any changes in the current year.
    (ii) Dividing the costs in paragraph (b)(3)(i)(C)(2)(i) of this 
section by the actual number of usable living donor organs procured by 
the transplant hospital during that prior cost reporting period.
    (D) Costs used to develop the living donor SAC. Costs that may be 
used to develop the living donor SAC include, but are not limited to 
the following:
    (1) Costs of tissue typing services, including those furnished by 
independent laboratories.
    (2) Costs of physician pre-admission transplant evaluation 
services.
    (3) Registry fees as specified at Sec.  413.402(b)(6) of this 
subpart.
    (4) Costs for donor and recipient evaluations and workups furnished 
prior to admission for transplantation.
    (5) Other costs associated with procurement, for example, general 
routine and special care services (for example, intensive care unit or 
critical care unit services), related to the donor.
    (6) Costs of operating room and other inpatient ancillary services 
related to the donor.
    (7) Organ preservation and perfusion costs.
    (8) Transportation costs of the excised organ as specified in Sec.  
413.402(b)(8)(i) of this subpart.
    (ii) Cadaveric donor SAC for THs/HOPOs--(A) Definition. The 
cadaveric donor SAC is an average cost that a TH/HOPO incurs to procure 
a cadaveric donor organ.
    (B) Calculating the cadaveric SAC--(1) Initial cadaveric donor SAC. 
A TH/HOPO calculates its initial cadaveric SAC for each cadaveric organ 
type as follows:
    (i) By estimating the reasonable and necessary costs it expects to 
incur to procure cadaveric organs, combined with the expected costs of 
acquiring cadaveric organs from OPOs or other transplant hospitals.
    (ii) By dividing the estimated amount described in paragraph 
(b)(3)(ii)(B)(1)(i) of this section by the projected number of usable 
cadaveric organs to be procured by the TH/HOPO within the transplant 
hospital's cost reporting period.
    (2) Subsequent cadaveric donor SAC. A TH/HOPO calculates its 
subsequent years' cadaveric donor SAC for each cadaveric organ type as 
follows:
    (i) By using the transplant hospital's actual organ acquisition 
costs for the cadaveric donor organ type from the prior year's Medicare 
cost report, adjusted for any changes in the current year.
    (ii) By dividing the costs in paragraph (b)(3)(ii)(B)(2)(i) of this 
section by the actual number of usable cadaveric donor organs procured 
by the TH/HOPO during that prior cost reporting period.
    (C) Costs to develop the cadaveric donor SAC. Costs that may be 
used to develop the cadaveric donor SAC include, but are not limited to 
the following:
    (1) Costs of organs acquired from other transplant hospitals or 
OPOs.
    (2) Costs of transportation as specified in Sec.  413.402(b)(8) of 
this subpart.
    (3) Surgeons' fees for excising cadaveric organs (currently limited 
to $1,250 for kidneys).
    (4) Costs of tissue typing services, including those furnished by 
independent laboratories.
    (5) Organ preservation and perfusion costs.
    (6) General routine and special care service costs (for example, 
intensive care unit or critical care unit services related to the 
donor).
    (7) Operating room and other inpatient ancillary service costs.
    (c) Independent OPO SACs--(1) Non-renal SAC. An IOPO establishes 
non-renal SACs based on its costs of procuring non-renal organs for 
each organ type, by--
    (i) Estimating the reasonable and necessary costs it expects to 
incur for services furnished to procure cadaveric donor non-renal 
organs during the IOPO's cost reporting period; and
    (ii) Dividing the amount estimated in paragraph (c)(1)(i) of this 
section by the projected number of cadaveric donor non-renal organs the 
IOPO expects to procure within its cost reporting period.
    (iii) An IOPO may adjust its non-renal SACs during the year if 
necessary to account for cost changes.
    (2) Kidney SAC. (i) General. An IOPO's Medicare contractor 
establishes the kidney SAC based on an estimate of, initial year 
projected or subsequent years' actual, reasonable and necessary costs 
the IOPO expects to incur to procure cadaveric kidneys during the 
IOPO's cost reporting period, divided by the, initial year projected or 
subsequent years' actual, number of usable cadaveric kidneys the IOPO 
expects to procure.
    (ii) Initial year. The Medicare contractor develops the IOPO's 
initial kidney SAC based on the IOPO's budget information.
    (iii) Subsequent years. The kidney SAC for subsequent years is 
computed using the IOPO's costs related to kidney acquisition that were 
incurred in the prior cost reporting period and dividing those costs by 
the number of usable cadaveric kidneys procured during that cost 
reporting period. The SAC is the basis for the interim payments by the 
transplant hospital to the IOPO, as set forth in Sec.  413.420(d).
    (iv) The IOPO's Medicare contractor may adjust the kidney SAC 
during the year, if necessary, for cost changes.
    (v) The IOPO cannot use or change its kidney SAC without the 
contractor's approval.
    (3) Billing SACs for organs generally. When an IOPO obtains an 
organ from another IOPO, the receiving IOPO is responsible for paying 
the procuring IOPO's SAC. The receiving IOPO uses its SAC for each 
organ type and not the procuring IOPO's SAC when billing the transplant 
hospital receiving the organ.


Sec.  413.406   Acquisition of pancreata for islet cell transplant.

    (a) Medicare only covers and pays for reasonable costs of 
acquisition on or after October 1, 2004, of pancreata for islet cell 
transplants into Medicare beneficiaries participating in a National 
Institute of Diabetes and Digestive and Kidney Diseases clinical trial 
of islet cell transplantation in accordance with section 733 of the 
Medicare Prescription Drug, Improvement and Modernization Act of 2003.
    (b) Pancreata procured under paragraph (a), for covered islet cell 
transplants must be assigned a full standard acquisition charge and be 
treated as solid organs for procurement purposes.


Sec.  413.408   [Reserved]


Sec.  413.410   [Reserved]


Sec.  413.412   Intent to transplant, and counting en bloc, research, 
and discarded organs and kidneys.

    (a) Principle of intent to transplant for organ acquisition payment 
purposes. (1) An organ is intended for transplant when the OPO or TH 
designates it for transplant prior to the time the donor enters the 
hospital's operating room for surgical excision/recovery of the 
organ(s).
    (2) OPOs and THs must identify the costs associated with the 
recovered and

[[Page 73518]]

unrecovered organs and apportion those costs to the appropriate cost 
centers by organ type.
    (b) Counting en bloc organs. En bloc organs can be en bloc lungs or 
en bloc kidneys. For Medicare cost allocation purposes, OPOs and THs 
count--
    (1) En bloc lungs or en bloc kidneys procured and transplanted en 
bloc (two organs transplanted as one unit) as one total usable organ. 
En bloc organs transplanted into a Medicare beneficiary count as one 
Medicare usable organ or one Medicare usable kidney.
    (2) En bloc lungs and en bloc kidneys procured en bloc but 
separated and transplanted into two different recipients as two total 
usable organs. For each organ transplanted into a Medicare beneficiary, 
count each as one Medicare usable organ or one Medicare usable kidney.
    (c) Research organs. For Medicare cost allocation purposes, organs 
used for research are not counted as Medicare usable organs in 
Medicare's share of organ acquisition costs (except pancreata for islet 
cell transplants as specified in Sec.  413.406(a)) and kidneys used for 
research are not counted as Medicare usable kidneys in Medicare's share 
of kidney acquisition costs.
    (d) Counting of discarded/unusable organs. An organ is not counted 
as a Medicare usable organ or a total usable organ if the excising 
surgeon determines, upon initial inspection or after removal of the 
organ, that the organ is not viable and not medically suitable for 
transplant and the organ is determined to be unusable and discarded.


Sec.  413.414   Medicare secondary payer and organ acquisition costs.

    (a) General principle. If a Medicare beneficiary has a primary 
health insurer other than Medicare and that primary health insurer has 
primary liability for the transplant and organ acquisition costs, the 
Medicare Program may share a liability for organ acquisition costs as a 
secondary payer to the transplant hospital that performs the transplant 
in certain instances. To determine whether Medicare has liability to 
the transplant hospital that performs the transplant as a secondary 
payer for organ acquisition costs, it is necessary for the transplant 
hospital that performs the transplant to review the transplant 
hospital's agreement with the primary insurer.
    (b) Medicare has no secondary payer liability for organ acquisition 
costs. If the primary insurer's agreement requires the transplant 
hospital to accept the primary insurer's payment as payment in full for 
the transplant and the associated organ acquisition costs, Medicare has 
zero liability as a secondary payer with no payment obligation for the 
transplantation costs or the organ acquisition costs, and the organ at 
issue is not a Medicare usable organ.
    (c) Medicare may have secondary payer liability for organ 
acquisition costs. When the primary insurer's agreement does not 
require the transplant hospital that performs the transplant to accept 
the payment from the primary insurer as payment in full, and the 
payment the transplant hospital receives from the primary insurer for 
the transplant and organ acquisition costs is insufficient to cover the 
entire cost, Medicare may have a secondary payer liability to the 
transplant hospital that performs the transplant for the organ 
acquisition costs.
    (1) To determine whether Medicare has a secondary payer liability 
for the organ acquisition costs, it is necessary for the transplant 
hospital that performs the transplant to submit a bill to its Medicare 
contractor and to compare the total cost of the transplant, including 
the transplant DRG amount and the organ acquisition costs, to the 
payment received from the primary payer.
    (2) If the payment from the primary payer is greater than the cost 
of the transplant DRG and the organ acquisition costs, there is no 
Medicare liability and the transplant hospital must not count the organ 
as a Medicare usable organ.
    (3) If the payment from the primary payer is less than the 
transplant DRG and the organ acquisition costs, there is a Medicare 
secondary payer liability and all of the following must occur:
    (i) The transplant hospital must pro-rate the payment from the 
primary payer between the transplant DRG payment and the organ 
acquisition payment.
    (ii) Only the transplant hospital that performs the transplant 
counts the organ as a Medicare usable organ.
    (iii) The portion of the payment applicable to organ acquisition is 
used on the cost report to reduce the Medicare organ acquisition costs.


Sec.  413.416   Organ acquisition charges for kidney-paired exchanges.

    (a) Initial living donor evaluations. When a recipient and donor 
elect to participate in a kidney paired exchange, the costs of the 
initial living donor evaluations are incurred by the originally 
intended recipient's transplant hospital, regardless of whether the 
living donor actually donates to their originally intended recipient, a 
kidney paired exchange recipient, or does not donate at all.
    (b) Additional tests after a match. In a kidney paired exchange, 
regardless of whether an actual donation occurs, once the donor and 
recipient are matched, any additional tests requested by the 
recipient's transplant hospital and performed by the donor's transplant 
hospital, are billed to the recipient's transplant hospital as charges 
reduced to cost (using the donor's transplant hospital's cost to charge 
ratio) and included as acquisition costs on the recipient transplant 
hospital's Medicare cost report.
    (c) Procurement and transport of a kidney. When a donor's 
transplant hospital procures and furnishes a kidney to a recipient's 
transplant hospital all of the following are applicable:
    (1) All costs must be reasonable and necessary.
    (2)(i) The donor's transplant hospital bills the recipient's 
transplant hospital.
    (ii) The donor's transplant hospital bills its charges reduced to 
cost, or bills its applicable kidney SAC for the reasonable costs 
associated with procuring, packaging, and transporting the kidney.
    (3) The donor's transplant hospital records the costs described in 
paragraph (c)(2)(ii) of this section on its Medicare cost report as 
kidney acquisition costs and offsets any payments received from the 
recipient's transplant hospital against its kidney acquisition costs.
    (4) The recipient's transplant hospital records as part of its 
kidney acquisition costs--
    (i) The amounts billed by the donor's transplant hospital for the 
reasonable costs associated with procuring, packaging, and transporting 
the organ; and
    (ii) Any additional testing performed and billed by the donor's 
transplant hospital.
    (d) Donor's procurement occurs at recipient transplant hospital. In 
a kidney-paired exchange--
    (1) When a donor's transplant hospital does not procure a kidney, 
but the donor travels to the recipient's transplant hospital for the 
organ procurement, the reasonable costs associated with the organ 
procurement are included on the Medicare cost report of the recipient's 
transplant hospital; and
    (2) The travel expenses of the living donor are not allowable 
Medicare costs.

[[Page 73519]]

Sec.  413.418   Amounts billed to organ procurement organizations by 
donor community hospitals and transplant hospitals for hospital 
services provided to cadaveric donors in the hospital and included as 
organ acquisition costs.

    (a) General. A donor community hospital (a Medicare-certified non-
transplant hospital) and a transplant hospital incur organ acquisition 
costs for donor organ procurement services, authorized by the OPO 
following declaration of death and consent to donate.
    (b) Amounts billed for organ acquisition costs. For cost reporting 
periods beginning on or after February 25, 2022, when a donor community 
hospital or a transplant hospital incurs costs for services furnished 
to a cadaveric donor, as authorized by the OPO, the donor community 
hospital or transplant hospital must bill the OPO the lesser of its 
customary charges that are reduced to cost by applying its most 
recently available hospital specific cost-to-charge ratio for the 
period in which the service was rendered, or a negotiated rate.


Sec.  413.420   Payment to independent organ procurement organizations 
and histocompatibility laboratories for kidney acquisition costs.

    (a) Principle. (1) Covered services furnished after September 30, 
1978, by OPOs and histocompatibility laboratories in connection with 
kidney acquisition and transplantation are reimbursed under the 
principles for determining reasonable cost contained in this part.
    (2) Services furnished by IOPOs and histocompatibility 
laboratories, that have an agreement with the Secretary in accordance 
with paragraph (c) of this section, are paid directly by the transplant 
hospital using a kidney SAC (for an IOPO) or contractor-established 
rates (for a histocompatibility laboratory). (The reasonable costs of 
services furnished by HOPOs or laboratories are reimbursed in 
accordance with the principles contained in Sec. Sec.  413.60 and 
413.64.)
    (b) Definitions. Definitions relevant to this section can be found 
in Sec.  413.400.
    (c) Agreements with IOPOs and laboratories. (1) Any IOPO or 
histocompatibility laboratory that wishes to have the cost of its pre-
transplant services reimbursed under the Medicare program must file an 
agreement with CMS under which the IOPO or laboratory agrees to do all 
of the following:
    (i) To file a cost report in accordance with Sec.  413.24(f) within 
5 months following the close of the period covered by the report.
    (ii) To permit CMS to designate a contractor to determine the 
interim reimbursement rate payable by the transplant hospitals for 
services provided by the IOPO or laboratory and to determine the 
reasonable cost based upon the cost report filed by the IOPO or 
laboratory.
    (iii) To provide such budget or cost projection information as may 
be required to establish an initial interim reimbursement rate.
    (iv) To pay to CMS amounts that have been paid by CMS to transplant 
hospitals and that are determined to be in excess of the reasonable 
cost of the services provided by the IOPO or laboratory.
    (v) Not to charge any individual for items or services for which 
that individual is entitled to have payment made under section 1861 of 
the Act.
    (2) The initial cost report due from an IOPO or laboratory is for 
its first fiscal year during any portion of which it had an agreement 
with the Secretary under paragraphs (c)(1) and (2) of this section. The 
initial cost report covers only the period covered by the agreement.
    (d) Interim reimbursement. (1) Transplant hospitals with approved 
kidney transplant programs pay the IOPO or histocompatibility 
laboratory for their pre-transplantation services on the basis of an 
interim rate established by the contractor for that IOPO or laboratory.
    (2) The interim rate is based on a kidney SAC or contractor 
established rates, associated with procuring a kidney for 
transplantation, incurred by an IOPO or laboratory respectively, during 
its previous fiscal year. If there is not adequate cost data to 
determine the initial interim rate, the Medicare contractor determines 
it according to the IOPO's or laboratory's estimate of its projected 
costs for the fiscal year.
    (3) Payments made by transplant hospitals on the basis of interim 
rates are reconciled directly with the IOPO or laboratory after the 
close of its fiscal year, in accordance with paragraph (e) of this 
section.
    (4) Information on the interim rate for all IOPOs and 
histocompatibility laboratories must be disseminated to all transplant 
hospitals and contractors.
    (e) Retroactive adjustment--(1) Cost reports. Information provided 
in cost reports by IOPOs and histocompatibility laboratories must meet 
the requirements for cost data and cost finding specified in Sec.  
413.24. These cost reports must provide the following:
    (i) A complete accounting of the cost incurred by the IOPO or 
laboratory in providing covered services, the total number of Medicare 
beneficiaries who received those services.
    (ii) Any other data necessary to enable the contractor to determine 
the reasonable cost of covered services provided to Medicare 
beneficiaries.
    (2) Audit and adjustment. A cost report submitted by an IOPO or 
histocompatibility laboratory is reviewed by the contractor and a new 
interim reimbursement rate for kidney acquisition costs for the 
subsequent fiscal year is established based upon this review.
    (i) A retroactive adjustment in the amount paid under the interim 
rate is made in accordance with Sec.  413.64(f).
    (ii) If the determination of reasonable cost reveals an overpayment 
or underpayment resulting from the interim reimbursement rate paid to 
transplant hospitals, a lump sum adjustment is made directly between 
that contractor and the IOPO or laboratory.
    (f) Payment requirements. For services furnished on or after April 
1, 1988, no payment may be made for services furnished by an IOPO that 
does not meet the requirements of part 486, subpart G, of this chapter.
    (g) Appeals. If the amount in controversy is $1,000 or more, any 
IOPO or histocompatibility laboratory that disagrees with a 
contractor's cost determination under this section is entitled to a 
contractor hearing, in accordance with the procedures set forth in 
Sec. Sec.  405.1811 through 405.1833 of this chapter.

Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2021-27523 Filed 12-17-21; 4:15 pm]
BILLING CODE 4120-01-P