Medicare Program; FY 2025 Inpatient Psychiatric Facilities Prospective Payment System-Rate Update, 23146-23224 [2024-06764]

Agencies

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

[Federal Register Volume 89, Number 65 (Wednesday, April 3, 2024)]
[Proposed Rules]
[Pages 23146-23224]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06764]



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Vol. 89

Wednesday,

No. 65

April 3, 2024

Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Part 412





Medicare Program; FY 2025 Inpatient Psychiatric Facilities Prospective 
Payment System--Rate Update; Proposed Rule

Federal Register / Vol. 89, No. 65 / Wednesday, April 3, 2024 / 
Proposed Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1806-P]
RIN 0938-AV32


Medicare Program; FY 2025 Inpatient Psychiatric Facilities 
Prospective Payment System--Rate Update

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of 
Health and Human Services (HHS).

ACTION: Proposed rule.

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SUMMARY: This rulemaking proposes to update the prospective payment 
rates, the outlier threshold, and the wage index for Medicare inpatient 
hospital services provided by Inpatient Psychiatric Facilities (IPF), 
which include psychiatric hospitals and excluded psychiatric units of 
an acute care hospital or critical access hospital. This rulemaking 
also proposes to revise the patient-level adjustment factors, the 
Emergency Department adjustment, and the payment amount for 
electroconvulsive therapy. These proposed changes would be effective 
for IPF discharges occurring during the fiscal year beginning October 
1, 2024 through September 30, 2025 (FY 2025). In addition, this 
proposed rule seeks to adopt a new quality measure and modify reporting 
requirements under the IPF Quality Reporting Program beginning with the 
FY 2027 payment determination. Furthermore, this proposed rule solicits 
comments through Requests for Information (RFIs) regarding potential 
future revisions to the IPF PPS facility-level adjustments and 
regarding the development of a standardized IPF Patient Assessment 
Instrument.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, by May 28, 2024.

ADDRESSES: In commenting, please refer to file code CMS-1806-P.
    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-1806-P, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    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-1806-P, 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: 
    Nick Brock (410) 786-5148, for information regarding the inpatient 
psychiatric facilities prospective payment system (IPF PPS).
    Kaleigh Emerson (470) 890-4141, for information regarding the 
inpatient psychiatric facilities quality reporting program (IPFQR).

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 commenter will take actions to harm an 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.
    Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a 
plain language summary of this rule may be found at https://www.regulations.gov/.

Availability of Certain Tables Exclusively Through the Internet on the 
CMS Website

    Addendum A to this proposed rule summarizes the proposed FY 2025 
Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS) 
payment rates, outlier threshold, cost of living adjustment factors for 
Alaska and Hawaii, national and upper limit cost-to-charge ratios, and 
adjustment factors. In addition, Addendum B to this proposed rule shows 
the complete listing of ICD-10 Clinical Modification and Procedure 
Coding System codes, the FY 2025 IPF PPS comorbidity adjustment, and 
electroconvulsive therapy procedure codes. The A and B Addenda are 
available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html.
    Tables setting forth the FY 2025 Wage Index for Urban Areas Based 
on Core-Based Statistical Area Labor Market Areas, the FY 2025 Wage 
Index Based on CBSA Labor Market Areas for Rural Areas, and a county-
level crosswalk of the FY 2024 CBSA Labor Market Areas to the FY 2025 
CBSA Labor Market Areas are available exclusively through the internet, 
on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/IPFPPS/WageIndex.html.

I. Executive Summary

A. Purpose

    This proposed rule would update the prospective payment rates, the 
outlier threshold, and the wage index for Medicare inpatient hospital 
services provided by Inpatient Psychiatric Facilities (IPFs) for 
discharges occurring during fiscal year (FY) 2025, (beginning October 
1, 2024 through September 30, 2025). We are proposing to adopt the 
Core-Based Statistical Area (CBSA) Labor Market Areas for the IPF PPS 
wage index as defined in the Office of Management and Budget (OMB) 
Bulletin 23-01. In addition, this rule includes a proposal to refine 
the patient-level adjustment factors and increase the payment amount 
for electroconvulsive therapy (ECT) treatments. We are not proposing 
changes to the facility-level adjustment factors for FY 2025; however, 
this proposed rule presents the results of our latest analysis and 
includes a request for information relating to those results. This rule 
also includes a clarification of the eligibility criteria for an IPF to 
be approved to file all-inclusive cost reports. In addition, this 
proposed rule includes a request for information regarding the creation 
of a patient assessment instrument (PAI) as mandated by Section 4125 of 
the Consolidated Appropriations Act (CAA), 2023 (hereafter referred to 
as CAA, 2023) (Pub. L. 117-328). Lastly, this proposed rule discusses 
quality measures and reporting requirements under the Inpatient 
Psychiatric

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Facilities Quality Reporting (IPFQR) Program.

B. Summary of the Major Provisions

1. Inpatient Psychiatric Facilities Prospective Payment System (IPF 
PPS)
    For the IPF PPS, we are:
     Proposing to revise the patient-level IPF PPS adjustment 
factors and increase the ECT per treatment payment amount.
     Proposing to update the IPF PPS wage index to use the 
CBSAs defined within OMB Bulletin 23-01.
     Clarifying the eligibility criteria for an IPF to be 
approved to file all-inclusive cost reports. Only a government-owned or 
tribally owned facility will be able to satisfy these criteria and will 
be eligible to file its cost report using an all-inclusive rate or no 
charge structure.
     Soliciting comments to inform elements to be included in 
the IPF patient assessment instrument, which the CAA, 2023 requires the 
Centers for Medicare & Medicaid Services (CMS) to develop for FY 2028.
     Soliciting comments to inform future refinements to the 
IPF PPS facility-level adjustment factors.
     Making technical rate setting updates: The IPF PPS payment 
rates are adjusted annually for inflation, as well as statutory and 
other policy factors. This rule proposes to update:
    ++ The IPF PPS Federal per diem base rate from $895.63 to $874.93.
    ++ The IPF PPS Federal per diem base rate for providers who failed 
to report quality data to $857.89.
    ++ The ECT payment per treatment from $385.58 to $660.30.
    ++ The ECT payment per treatment for providers who failed to report 
quality data to $647.45.
    ++ The labor-related share from 78.7 percent to 78.8 percent.
    ++ The wage index budget neutrality factor to 0.9998. This proposed 
rule would apply a refinement standardization factor of 0.9514.
    ++ The fixed dollar loss threshold amount from $33,470 to $35,590, 
to maintain estimated outlier payments at 2 percent of total estimated 
aggregate IPF PPS payments.
2. Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program
    For the IPFQR Program, we are proposing to:
     Adopt the 30-Day Risk-Standardized All-Cause Emergency 
Department (ED) Visit Following an IPF Discharge measure beginning with 
the FY 2027 payment determination; and
     Modify reporting requirements to require IPFs to submit 
patient-level data on a quarterly basis.
    We also refer readers to our RFI in which we solicit comments to 
inform elements to be included in the IPF patient assessment 
instrument, which the CAA, 2023 requires the Centers for Medicare & 
Medicaid Services (CMS) to develop and implement for Rate Year (RY) 
2028.

C. Summary of Impacts
[GRAPHIC] [TIFF OMITTED] TP03AP24.000

II. Background

A. Overview of the Legislative Requirements of the IPF PPS

    Section 124 of the Medicare, Medicaid, and State Children's Health 
Insurance Program Balanced Budget Refinement Act of 1999 (BBRA) (Pub. 
L. 106-113) required the establishment and implementation of an IPF 
PPS. Specifically, section 124 of the BBRA mandated that the Secretary 
of the Department of Health and Human Services (the Secretary) develop 
a per diem payment perspective system (PPS) for inpatient hospital 
services furnished in psychiatric hospitals and excluded psychiatric 
units including an adequate patient classification system that reflects 
the differences in patient resource use and costs among psychiatric 
hospitals and excluded psychiatric units. ``Excluded psychiatric unit'' 
means a psychiatric unit of an acute care hospital or of a Critical 
Access Hospital (CAH), which is excluded from payment under the 
Inpatient Prospective Payment System (IPPS) or CAH payment system, 
respectively. These excluded psychiatric units will be paid under the 
IPF PPS.
    Section 405(g)(2) of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173) extended the IPF 
PPS to psychiatric distinct part units of CAHs.
    Sections 3401(f) and 10322 of the Patient Protection and Affordable 
Care Act (Pub. L. 111-148) as amended by section 10319(e) of that Act 
and by section 1105(d) of the Health Care and Education Reconciliation 
Act of 2010 (Pub. L. 111-152) (hereafter referred to jointly as ``the 
Affordable Care Act'') added subsection (s) to section 1886 of the Act.
    Section 1886(s)(1) of the Act titled ``Reference to Establishment 
and Implementation of System,'' refers to section 124 of the BBRA, 
which relates to the establishment of the IPF PPS.
    Section 1886(s)(2)(A)(i) of the Act requires the application of the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act to the IPF PPS for the rate year (RY) beginning in 2012 (that 
is, a RY that coincides with a FY) and each subsequent RY.
    Section 1886(s)(2)(A)(ii) of the Act required the application of an 
``other adjustment'' that reduced any update to an IPF PPS base rate by 
a percentage point amount specified in section 1886(s)(3) of the Act 
for the RY beginning in 2010 through the RY beginning in 2019. As noted 
in the FY 2020 Inpatient Psychiatric Facilities Prospective Payment 
System and Quality Reporting Updates for fiscal year Beginning October 
1, 2019 final rule, for the RY beginning in 2019,

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section 1886(s)(3)(E) of the Act required that the other adjustment 
reduction be equal to 0.75 percentage point; that was the final year 
the statute required the application of this adjustment. Because FY 
2021 was a RY beginning in 2020, FY 2021 was the first year section 
1886(s)(2)(A)(ii) of the Act did not apply since its enactment.
    Sections 1886(s)(4)(A) through (D) of the Act require that for RY 
2014 and each subsequent RY, IPFs that fail to report required quality 
data with respect to such a RY will have their annual update to a 
standard Federal rate for discharges reduced by 2.0 percentage points. 
This may result in an annual update being less than 0.0 for a RY, and 
may result in payment rates for the upcoming RY being less than such 
payment rates for the preceding RY. Any reduction for failure to report 
required quality data will apply only to the RY involved, and the 
Secretary will not consider such reduction in computing the payment 
amount for a subsequent RY. Additional information about the specifics 
of the current IPFQR Program is available in the FY 2020 Inpatient 
Psychiatric Facilities Prospective Payment System and Quality Reporting 
Updates for fiscal year Beginning October 1, 2019 (FY 2020) final rule 
(84 FR 38459 through 38468).
    Section 4125 of the Consolidated Appropriations Act, 2023 (CAA, 
2023) (Pub. L. 117-328), which amended section 1886(s) of the Act, 
requires CMS to revise the Medicare prospective payment system for 
psychiatric hospitals and psychiatric units. Specifically, section 
4125(a) of the CAA, 2023 added section 1886(s)(5)(A) of the Act to 
require the Secretary to collect data and information, as the Secretary 
determines appropriate, to revise payments under the IPF PPS. CMS 
discussed this data collection last year in the FY 2024 IPF PPS final 
rule, as CMS was required to begin collecting this data and information 
not later than October 1, 2024. As discussed in that rule, the Agency 
has already been collecting data and information consistent with the 
types set forth in the CAA, 2023 as part of our extensive and years-
long analyses and consideration of potential payment system 
refinements. We refer readers to the FY 2024 Inpatient Psychiatric 
Facilities Prospective Payment System--Rate Update (FY 2024 IPF PPS) 
final rule (88 FR 51095 through 51098) where we discussed existing data 
collection and requested information to inform future IPF PPS 
revisions.
    In addition, section 1886(s)(5)(D) of the Act, as added by section 
4125(a) of the CAA, 2023 requires that the Secretary implement 
revisions to the methodology for determining the payment rates under 
the IPF PPS for psychiatric hospitals and psychiatric units, effective 
for RY 2025 (FY 2025). The revisions may be based on a review of the 
data and information collected under section 1886(s)(5)(A) of the Act. 
As discussed in section III.C of this FY 2025 IPF PPS proposed rule, we 
are proposing revisions to the IPF PPS patient-level adjustment factors 
based on a review of cost and claims data.
    Section 4125(b) of the CAA, 2023 amended section 1886(s)(4) of the 
Act by inserting a new subparagraph (E), which requires IPFs 
participating in the IPFQR Program to collect and submit to the 
Secretary standardized patient assessment data, using a standardized 
patient assessment instrument, for RY 2028 (FY 2028) and each 
subsequent rate year. IPFs must submit such data with respect to at 
least the admission and discharge of an individual, or more frequently 
as the Secretary determines appropriate. For IPFs to meet this new data 
collection and reporting requirement for RY 2028 and each subsequent 
rate year, the Secretary must implement a standardized patient 
assessment instrument that collects data with respect to the following 
categories: functional status; cognitive function and mental status; 
special services, treatments, and interventions; medical conditions and 
comorbidities; impairments; and other categories as determined 
appropriate by the Secretary. This patient assessment instrument must 
enable comparison of such patient assessment data that IPFs submit 
across all such IPFs to which such data are applicable.
    Section 4125(b) of the CAA, 2023 further amended section 1886(s) of 
the Act by adding a new subparagraph (6) that requires the Secretary to 
implement revisions to the methodology for determining the payment 
rates for psychiatric hospitals and psychiatric units (that is, payment 
rates under the IPF PPS), effective for RY 2031 (FY 2031), as the 
Secretary determines to be appropriate, to take into account the 
patient assessment data described in paragraph (4)(E)(ii).
    To implement and periodically update the IPF PPS, we have published 
various proposed and final rules and notices in the Federal Register. 
For more information regarding these documents, we refer readers to the 
CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/?redirect=/
InpatientPsychFacilPPS/.

B. Overview of the IPF PPS

    On November 15, 2004, we published the RY 2005 IPF PPS final rule 
in the Federal Register (69 FR 66922). The RY 2005 IPF PPS final rule 
established the IPF PPS, as required by section 124 of the BBRA and 
codified at 42 CFR part 412, subpart N. The RY 2005 IPF PPS final rule 
set forth the Federal per diem base rate for the implementation year 
(the 18-month period from January 1, 2005 through June 30, 2006) and 
provided payment for the inpatient operating and capital costs to IPFs 
for covered psychiatric services they furnish (that is, routine, 
ancillary, and capital costs, but not costs of approved educational 
activities, bad debts, and other services or items that are outside the 
scope of the IPF PPS). Covered psychiatric services include services 
for which benefits are provided under the fee-for-service Part A 
(Hospital Insurance Program) of the Medicare program.
    The IPF PPS established the Federal per diem base rate for each 
patient day in an IPF derived from the national average daily routine 
operating, ancillary, and capital costs in IPFs in FY 2002. The average 
per diem cost was updated to the midpoint of the first year under the 
IPF PPS, standardized to account for the overall positive effects of 
the IPF PPS payment adjustments, and adjusted for budget neutrality.
    The Federal per diem payment under the IPF PPS is comprised of the 
Federal per diem base rate described previously and certain patient- 
and facility-level payment adjustments for characteristics that were 
found in the regression analysis to be associated with statistically 
significant per diem cost differences, with statistical significance 
defined as p less than 0.05. A complete discussion of the regression 
analysis that established the IPF PPS adjustment factors can be found 
in the RY 2005 IPF PPS final rule (69 FR 66933 through 66936).
    The patient-level adjustments include age, Diagnosis-Related Group 
(DRG) assignment, and comorbidities, as well as adjustments to reflect 
higher per diem costs at the beginning of a patient's IPF stay and 
lower costs for later days of the stay. Facility-level adjustments 
include adjustments for the IPF's wage index, rural location, teaching 
status, a cost-of-living adjustment for IPFs located in Alaska and 
Hawaii, and an adjustment for the presence of a qualifying emergency 
department (ED).
    The IPF PPS provides additional payment policies for outlier cases, 
interrupted stays, and a per treatment

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payment for patients who undergo ECT. During the IPF PPS mandatory 3-
year transition period, stop-loss payments were also provided; however, 
since the transition ended as of January 1, 2008, these payments are no 
longer available.

C. Annual Requirements for Updating the IPF PPS

    Section 124 of the BBRA did not specify an annual rate update 
strategy for the IPF PPS and was broadly written to give the Secretary 
discretion in establishing an update methodology. Therefore, in the RY 
2005 IPF PPS final rule, we implemented the IPF PPS using the following 
update strategy:
     Calculate the final Federal per diem base rate to be 
budget neutral for the 18- month period of January 1, 2005 through June 
30, 2006.
     Use a July 1 through June 30 annual update cycle.
     Allow the IPF PPS first update to be effective for 
discharges on or after July 1, 2006 through June 30, 2007.
    The RY 2005 final rule (69 FR 66922) implemented the IPF PPS. In 
developing the IPF PPS, and to ensure that the IPF PPS can account 
adequately for each IPF's case-mix, we performed an extensive 
regression analysis of the relationship between the per diem costs and 
certain patient and facility characteristics to determine those 
characteristics associated with statistically significant cost 
differences on a per diem basis. That regression analysis is described 
in detail in our RY 2004 IPF proposed rule (68 FR 66923; 66928 through 
66933) and our RY 2005 IPF final rule (69 FR 66933 through 66960). For 
characteristics with statistically significant cost differences, we 
used the regression coefficients of those variables to determine the 
size of the corresponding payment adjustments.
    In the RY 2005 IPF final rule, we explained the reasons for 
delaying an update to the adjustment factors, derived from the 
regression analysis, including waiting until we have IPF PPS data that 
yields as much information as possible regarding the patient-level 
characteristics of the population that each IPF serves. We indicated 
that we did not intend to update the regression analysis and the 
patient-level and facility-level adjustments until we complete that 
analysis. Until that analysis is complete, we stated our intention to 
publish a notice in the Federal Register each spring to update the IPF 
PPS (69 FR 66966).
    On May 6, 2011, we published a final rule in the Federal Register 
titled, ``Inpatient Psychiatric Facilities Prospective Payment System--
Update for Rate Year Beginning July 1, 2011 (RY 2012)'' (76 FR 26432), 
which changed the payment rate update period to a RY that coincides 
with a FY update. Therefore, final rules are now published in the 
Federal Register in the summer to be effective on October 1st. When 
proposing changes in IPF payment policy, a proposed rule is issued in 
the spring, and the final rule in the summer to be effective on October 
1st. For a detailed list of updates to the IPF PPS, we refer readers to 
our regulations at 42 CFR 412.428. Beginning October 1, 2012, we 
finalized that we would refer to the 12-month period from October 1 
through September 30 as a ``fiscal year'' (FY) rather than a RY (76 FR 
26435). Therefore, in this final rule we refer to rules that took 
effect after RY 2012 by the FY, rather than the RY, in which they took 
effect.
    The most recent IPF PPS annual update was published in a final rule 
on August 2, 2023 in the Federal Register titled, ``Medicare Program; 
FY 2024 Inpatient Psychiatric Facilities Prospective Payment System--
Rate Update'' (88 FR 51054), which updated the IPF PPS payment rates 
for FY 2024. That final rule updated the IPF PPS Federal per diem base 
rates that were published in the FY 2023 IPF PPS Rate Update final rule 
(87 FR 46846) in accordance with our established policies.

III. Provisions of the Proposed Regulations

A. Proposed FY 2025 Market Basket Update and Productivity Adjustment 
for the IPF PPS

1. Background
    Originally, the input price index used to develop the IPF PPS was 
the Excluded Hospital with Capital market basket. This market basket 
was based on 1997 Medicare cost reports for Medicare-participating 
inpatient rehabilitation facilities (IRFs), IPFs, long-term care 
hospitals (LTCHs), cancer hospitals, and children's hospitals. Although 
``market basket'' technically describes the mix of goods and services 
used in providing health care at a given point in time, this term is 
also commonly used to denote the input price index (that is, cost 
category weights and price proxies) derived from that market basket. 
Accordingly, the term ``market basket,'' as used in this document, 
refers to an input price index.
    Since the IPF PPS inception, the market basket used to update IPF 
PPS payments has been rebased and revised to reflect more recent data 
on IPF cost structures. We last rebased and revised the IPF market 
basket in the FY 2024 IPF PPS rule, where we adopted a 2021-based IPF 
market basket, using Medicare cost report data for both Medicare 
participating freestanding psychiatric hospitals and psychiatric units. 
We refer readers to the FY 2024 IPF PPS final rule for a detailed 
discussion of the 2021-based IPF PPS market basket and its development 
(88 FR 51057 through 51081). References to the historical market 
baskets used to update IPF PPS payments are listed in the FY 2016 IPF 
PPS final rule (80 FR 46656).
2. Proposed FY 2025 IPF Market Basket Update
    For FY 2025 (beginning October 1, 2024 and ending September 30, 
2025), we are proposing to update the IPF PPS payments by a market 
basket increase factor with a productivity adjustment as required by 
section 1886(s)(2)(A)(i) of the Act. Consistent with historical 
practice, we are proposing to estimate the market basket update for the 
IPF PPS based on the most recent forecast available at the time of 
rulemaking from IHS Global Inc. (IGI). IGI is a nationally recognized 
economic and financial forecasting firm with which CMS contracts to 
forecast the components of the market baskets and productivity 
adjustment. For the proposed rule, based on IGI's fourth quarter 2023 
forecast with historical data through the third quarter of 2023, the 
2021-based IPF market basket increase factor for FY 2025 is 3.1 
percent.
    Section 1886(s)(2)(A)(i) of the Act requires that, after 
establishing the increase factor for a FY, the Secretary shall reduce 
such increase factor for FY 2012 and each subsequent FY, by the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act. Section 1886(b)(3)(B)(xi)(II) of the Act sets forth the 
definition of this productivity adjustment. The statute defines the 
productivity adjustment to be equal to the 10-year moving average of 
changes in annual economy-wide, private nonfarm business multifactor 
productivity (MFP) (as projected by the Secretary for the 10-year 
period ending with the applicable FY, year, cost reporting period, or 
other annual period) (the ``productivity adjustment''). The United 
States Department of Labor's Bureau of Labor Statistics (BLS) publishes 
the official measures of productivity for the United States economy. We 
note that previously the productivity measure referenced in section 
1886(b)(3)(B)(xi)(II) of the Act was published by BLS as private 
nonfarm business MFP. Beginning with the November 18, 2021 release of 
productivity data, BLS replaced the

[[Page 23150]]

term ``multifactor productivity'' with ``total factor productivity'' 
(TFP). BLS noted that this is a change in terminology only and will not 
affect the data or methodology. As a result of the BLS name change, the 
productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the 
Act is now published by BLS as private nonfarm business TFP. However, 
as mentioned previously, the data and methods are unchanged. We refer 
readers to www.bls.gov for the BLS historical published TFP data. A 
complete description of IGI's TFP projection methodology is available 
on the CMS website at https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information. In addition, in the FY 2022 IPF final rule 
(86 FR 42611), we noted that effective with FY 2022 and forward, CMS 
changed the name of this adjustment to refer to it as the productivity 
adjustment rather than the MFP adjustment.
    Section 1886(s)(2)(A)(i) of the Act requires the application of the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act to the IPF PPS for the RY beginning in 2012 (a RY that 
coincides with a FY) and each subsequent RY. For this proposed rule, 
based on IGI's fourth quarter 2023 forecast, the proposed productivity 
adjustment for FY 2025 (the 10-year moving average of TFP for the 
period ending FY 2025) is projected to be 0.4 percent. Accordingly, we 
are proposing to reduce the 3.1 percent IPF market basket increase by 
this 0.4 percentage point productivity adjustment, as mandated by the 
Act. This results in a proposed FY 2025 IPF PPS payment rate update of 
2.7 percent (3.1-0.4 = 2.7). We are also proposing that if more recent 
data become available, we would use such data, if appropriate, to 
determine the FY 2025 IPF market basket increase and productivity 
adjustment for the final rule.
    We solicit comment on the proposed IPF market basket increase and 
productivity adjustment for FY 2025.
3. Proposed FY 2025 IPF Labor-Related Share
    Due to variations in geographic wage levels and other labor-related 
costs, we believe that payment rates under the IPF PPS should continue 
to be adjusted by a geographic wage index, which would apply to the 
labor-related portion of the Federal per diem base rate (hereafter 
referred to as the labor-related share). The labor-related share is 
determined by identifying the national average proportion of total 
costs that are related to, influenced by, or vary with the local labor 
market. We are proposing to continue to classify a cost category as 
labor-related if the costs are labor-intensive and vary with the local 
labor market.
    Based on our definition of the labor-related share and the cost 
categories in the 2021-based IPF market basket, we are proposing to 
continue to include in the labor-related share the sum of the relative 
importance of Wages and Salaries; Employee Benefits; Professional Fees: 
Labor-Related; Administrative and Facilities Support Services; 
Installation, Maintenance, and Repair Services; All Other: Labor-
Related Services; and a portion of the Capital-Related relative 
importance from the 2021-based IPF market basket. For more details 
regarding the methodology for determining specific cost categories for 
inclusion in the labor-related share based on the 2021-based IPF market 
basket, we refer readers to the FY 2024 IPF PPS final rule (88 FR 51078 
through 51081).
    The relative importance reflects the different rates of price 
change for these cost categories between the base year (FY 2021) and FY 
2025. Based on IGI's fourth quarter 2023 forecast of the 2021-based IPF 
market basket, the sum of the FY 2025 relative importance moving 
average of Wages and Salaries; Employee Benefits; Professional Fees: 
Labor-Related; Administrative and Facilities Support Services; 
Installation, Maintenance, and Repair Services; All Other: Labor-
Related Services is 75.7 percent. We are proposing, consistent with 
prior rulemaking, that the portion of Capital-Related costs that are 
influenced by the local labor market is 46 percent. Since the relative 
importance for Capital-Related costs is 6.8 percent of the 2021-based 
IPF market basket for FY 2025, we are proposing to take 46 percent of 
6.8 percent to determine a labor-related share of Capital-Related costs 
for FY 2025 of 3.1 percent. Therefore, we are proposing a total labor-
related share for FY 2025 of 78.8 percent (the sum of 75.7 percent for 
the labor-related share of operating costs and 3.1 percent for the 
labor-related share of Capital-Related costs). We are also proposing 
that if more recent data become available, we would use such data, if 
appropriate, to determine the FY 2025 labor-related share for the final 
rule. For more information on the labor-related share and its 
calculation, we refer readers to the FY 2024 IPF PPS final rule (88 FR 
51078 through 51081).
    Table 1 shows the proposed FY 2025 labor-related share and the 
final FY 2024 labor-related share using the 2021- based IPF market 
basket relative importance.

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[GRAPHIC] [TIFF OMITTED] TP03AP24.001

    We solicit comment on the proposed labor-related share for FY 2025.

B. Proposed Revisions to the IPF PPS Rates for FY Beginning October 1, 
2024

    The IPF PPS is based on a standardized Federal per diem base rate 
calculated from the IPF average per diem costs and adjusted for budget 
neutrality in the implementation year. The Federal per diem base rate 
is used as the standard payment per day under the IPF PPS and is 
adjusted by the patient-level and facility-level adjustments that are 
applicable to the IPF stay. A detailed explanation of how we calculated 
the average per diem cost appears in the RY 2005 IPF PPS final rule (69 
FR 66926).
1. Determining the Standardized Budget Neutral Federal per Diem Base 
Rate
    Section 124(a)(1) of the BBRA required that we implement the IPF 
PPS in a budget neutral manner. In other words, the amount of total 
payments under the IPF PPS, including any payment adjustments, must be 
projected to be equal to the amount of total payments that would have 
been made if the IPF PPS were not implemented. Therefore, we calculated 
the budget neutrality factor by setting the total estimated IPF PPS 
payments to be equal to the total estimated payments that would have 
been made under the Tax Equity and Fiscal Responsibility Act of 1982 
(TEFRA) (Pub. L. 97-248) methodology had the IPF PPS not been 
implemented. A step-by-step description of the methodology used to 
estimate payments under the TEFRA payment system appears in the RY 2005 
IPF PPS final rule (69 FR 66926).
    Under the IPF PPS methodology, we calculated the final Federal per 
diem base rate to be budget neutral during the IPF PPS implementation 
period (that is, the 18-month period from January 1, 2005 through June 
30, 2006) using a July 1 update cycle. We updated the average cost per 
day to the midpoint of the IPF PPS implementation period (October 1, 
2005), and this amount was used in the payment model to establish the 
budget neutrality adjustment.
    Next, we standardized the IPF PPS Federal per diem base rate to 
account for the overall positive effects of the IPF PPS payment 
adjustment factors by dividing total estimated payments under the TEFRA 
payment system by estimated payments under the IPF PPS. The information 
concerning this standardization can be found in the RY 2005 IPF PPS 
final rule (69 FR 66932) and the RY 2006 IPF PPS final rule (71 FR 
27045). We then reduced the standardized Federal per diem base rate to 
account for the outlier policy, the stop loss provision, and 
anticipated behavioral changes. A complete discussion of how we 
calculated each component of the budget neutrality adjustment appears 
in the RY 2005 IPF PPS final rule (69 FR 66932 through 66933) and in 
the RY 2007 IPF PPS final rule (71 FR 27044 through 27046). The final 
standardized budget neutral Federal per diem base rate established for 
cost reporting periods beginning on or after January 1, 2005 was 
calculated to be $575.95.
    The Federal per diem base rate has been updated in accordance with 
applicable statutory requirements and 42 CFR 412.428 through 
publication of annual notices or proposed and final rules. A detailed 
discussion on the standardized budget neutral Federal per diem base 
rate and the ECT payment per treatment appears in the FY 2014 IPF PPS 
update notice (78 FR 46738 through 46740). These documents are 
available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/.
    As discussed in section III.B.2 of this proposed rule, we are 
proposing to revise the patient-level adjustment factors and increase 
the ECT payment amount for FY 2025. Section 1866(s)(5)(D)(iii) of the 
Act, as added by section 4125(a) of the CAA, 2023, requires that 
revisions to the IPF PPS adjustment factors must be made budget-
neutrally. Therefore, as discussed in section III.F of this proposed 
rule, we are proposing to apply a standardization factor to the FY 2025 
base rate that takes these refinements into account to keep total IPF 
PPS payments budget neutral.
2. Proposed Increase in the Electroconvulsive Therapy (ECT) Payment per 
Treatment
a. Background
    In the RY 2005 IPF PPS final rule (69 FR 66951), we analyzed the 
costs of IPF stays that included ECT treatment using the FY 2002 MedPAR 
data. based on comments we received on the RY 2005

[[Page 23152]]

IPF PPS proposed rule. Consistent with the comments we received about 
ECT, our analysis and review indicated that cases with ECT treatment 
are substantially more costly than cases without ECT treatment. Based 
on this analysis, in that final rule we finalized an additional payment 
for each ECT treatment furnished during the IPF stay. This ECT payment 
per treatment is made in addition to the per diem and outlier payments 
under the IPF PPS. To receive the payment per ECT treatment, IPFs must 
indicate on their claims the revenue code and procedure code for ECT 
(Rev Code 901; procedure code 90870) and the number of units of ECT, 
that is, the number of ECT treatments the patient received during the 
IPF stay.
    To establish the ECT per treatment payment, we used the pre-scaled 
and pre-adjusted median cost for procedure code 90870 developed for the 
Hospital Outpatient Prospective Payment System (OPPS), based on 
hospital claims data. We explained in the RY 2005 IPF PPS final rule 
that we used OPPS data because after a careful review and analysis of 
IPF claims, we were unable to separate out the cost of a single ECT 
treatment (69 FR 66922). We used the unadjusted hospital claims data 
under the OPPS because we did not want the ECT payment under the IPF 
PPS to be affected by factors that are relevant to OPPS, but not 
specifically applicable to IPFs. The median cost was then standardized 
and adjusted for budget neutrality. We also adjusted the ECT rate for 
wage differences in the same manner that we adjust the per diem rate.
    Since the ECT payment rate was established in the RY 2005 IPF PPS 
rule, it has been updated annually by application of each year's market 
basket, productivity adjustment, and wage index budget neutrality 
factor to the previous year's ECT payment rate (referred to as our 
``standard methodology'' in this section). While the ECT payment rate 
has been updated each year by these factors, we have not recalculated 
the ECT payment per treatment based on more recent cost data since the 
establishment of the IPF PPS.
b. Proposed Increase to the Electroconvulsive Therapy Payment per 
Treatment
    For this FY 2025 IPF PPS proposed rule, we analyzed data in both 
the IPF PPS and the OPPS. In the IPF PPS setting, our analysis of 
recent IPF PPS data indicates that IPF costs have increased for stays 
that include ECT treatments. As discussed in the next paragraph, our 
analysis of these costs leads us to consider whether the current 
payment per treatment for ECT is aligned with the additional costs 
associated with stays that include ECT treatments. We began by 
analyzing IPF stays with ECT treatment using the CY 2022 Medicare 
Provider and Analysis Review (MedPAR) data. IPF stays with ECT 
treatment comprised about 1.7 percent of all stays, which is a decrease 
from the FY 2002 MedPAR data discussed in the RY 2005 IPF PPS final 
rule, where stays with ECT treatment were 6.0 percent of all IPF stays. 
A total of 288 IPF facilities had stays with ECT treatment in 2022, 
with an average 6.7 units of ECT per stay. We compared the total cost 
for stays with and without ECT treatment, and found that IPF stays with 
ECT treatment were approximately three times more costly than IPF stays 
without ECT treatment ($44,687.50 per stay vs. $15,432.30 per stay). 
Most of the variance in cost was due to differences in the IPF length 
of stay (LOS) (28.00 days for stays with ECT treatment vs. 13.43 days 
for stays without ECT treatment). We note that the IPF PPS makes 
additional per diem payments for longer lengths of stay, which makes 
the total payment larger for a longer stay. However, we also observed 
that there are differences in the per-day cost for stays with and 
without ECT. We calculated the average cost per day for stays with and 
without ECT treatment and found that stays with ECT treatment have an 
average cost per day of $1,595.76, while stays without ECT treatment 
have an average cost per day of $1,149.51.
    Furthermore, as we discuss in section III.C.3.d.(2) of this 
proposed rule, our latest regression analysis includes a control 
variable to account for the presence of ECT during an IPF stay. That 
control variable indicates that, holding all other patient-level and 
facility-level factors constant, there is a statistically significant 
increase in cost per day for IPF stays that include ECT, further 
demonstrating that resource use is higher for IPF stays with ECT than 
those without ECT. As we previously noted in the RY 2005 IPF PPS final 
rule (69 FR 66922), IPF claims and cost data are not sufficiently 
granular to identify the per-treatment cost of ECT. Therefore, we 
examined the difference in ancillary costs for IPF stays with and 
without ECT treatment. In the CY 2022 MedPAR data, the ancillary costs 
per IPF stay with ECT treatment were $7,116.85 higher than ancillary 
costs per IPF stay without ECT treatment. The ancillary costs were 
calculated as follows: for each ancillary department (for example, 
drugs or labs), the charges were multiplied by the department-level 
CCR, and those department-level costs were summed across departments 
for each stay. The average ancillary costs per stay were calculated 
accordingly for stays with and without ECT treatment, revealing that 
average ancillary costs per day are three times higher for stays with 
ECT treatment: $99.36 for stays without ECT treatment versus $301.77 
for stays with ECT treatment. Accounting for differences in length of 
stay between stays with and without ECT, the average additional 
ancillary cost per ECT unit was approximately $849.72.
    Application of our standard methodology for updating the ECT 
payment would result in an FY 2025 payment of $377.54 per ECT treatment 
(based on the FY 2024 ECT payment amount of $385.58, increased by the 
market basket update of 2.7 percent and reduced by the FY 2025 wage 
index budget neutrality factor of 0.9998 and a refinement 
standardization factor of 0.9536, which is the standardization factor 
that would account for all other proposed refinements without 
increasing the ECT per treatment). As we noted above, this ECT payment 
would be added to the per diem and any applicable outlier payments for 
the entire stay. CMS considered this rate in proposing to adjust the 
ECT per treatment rate. However, the analysis of ancillary costs for 
IPF stays with ECT treatment suggested that a further increase to the 
current ECT payment amount per treatment could better align IPF PPS 
payments with the increased costs of furnishing ECT. The ancillary cost 
data show that costs for furnishing ECT have risen by a factor greater 
than the standard methodology for updating the rate would adjust for.
    It continues to be the case that, as we discussed in the RY 2005 
IPF PPS final rule, current IPF cost and claims data are not 
sufficiently granular to identify the per-treatment cost of ECT. We 
believe that using the costs in the OPPS setting are the most accurate 
for purposes of updating the ECT per treatment rate because we believe 
this treatment requires comparable resources when performed in 
outpatient and inpatient settings. Thus, we analyzed the most recent 
OPPS cost information to consider changes to the ECT payment per 
treatment for FY 2025.
    The original methodology for determining the ECT payment per 
treatment was based on the median cost for procedure code 90870 
developed for the OPPS, as discussed in the RY 2005 IPF PPS final rule 
(69 FR 66951). Since that time, the OPPS has adopted certain changes to 
its methodology for calculating costs. In the CY 2013 OPPS/ASC final 
rule with comment period (77

[[Page 23153]]

FR 68259 through 68270), CMS finalized a methodology for developing the 
relative payment weights for Ambulatory Payment Classifications using 
geometric mean costs instead of median costs. We explained that 
geometric means better capture the range of costs associated with 
providing services, including those cases where very efficient 
hospitals have provided services at much lower costs. While medians and 
geometric means both capture the impact of uniform changes, that is, 
those changes that influence all providers, only geometric means 
capture cost changes that are introduced slowly into the system on a 
case-by-case or hospital-by-hospital basis, allowing us to detect 
changes in the cost of services earlier.
    We believe the rationale for using geometric mean cost in the OPPS 
setting as the underpinning methodology for establishing payments 
applies equally to the costs of providing ECT on a per treatment basis 
under the IPF PPS. Therefore, in considering changes for the IPF PPS 
ECT payment per treatment for FY 2025, we compared the costs observed 
in the IPF setting to the geometric mean cost for an ECT treatment 
posted as part of the CY 2024 OPPS/ASC update, which is based on CY 
2022 outpatient hospital claims. Although we are proposing to increase 
the ECT payment with reference to the CY 2024 OPPS ECT geometric mean 
cost for FY 2025, we are not proposing to adopt the OPPS rate (which is 
distinct from the geometric mean cost) for the ECT payment per 
treatment for FY 2025 because the final OPPS rates include policy 
decisions and payment rate updates that are specific to the OPPS. We 
intend to continue to monitor the costs associated with ECT treatment 
and may propose adjustments in the future as needed.
    The pre-scaled and pre-adjusted CY 2024 OPPS geometric mean cost 
for ECT is $675.93. Comparatively, the FY 2024 IPF ECT payment rate was 
$385.58 (88 FR 51054). As discussed in the prior paragraphs, our 
analysis of updated ancillary cost data indicates that the IPF PPS ECT 
payment rate per treatment, when updated according to the standard 
methodology alone, has not kept pace with the cost of furnishing the 
treatment in the IPF setting. As we stated previously, we believe this 
treatment requires comparable resources when performed in outpatient 
and inpatient settings. Therefore, we are proposing to use the pre-
scaled and pre-adjusted CY 2024 OPPS geometric mean cost of $675.93 as 
the basis for the IPF PPS ECT payment per treatment in FY 2025, as 
discussed below. We are proposing to update $675.93 by the FY 2025 IPF 
PPS payment rate update of 2.7 percent (3.1 percent IPF market basket 
increase, reduced by the 0.4 percentage point productivity adjustment), 
and the wage index budget neutrality factor of 0.9998 for FY 2025, in 
alignment with our current standard methodology.
    To account for budget neutrality, as discussed in section III.F of 
this proposed rule, we are proposing to apply a refinement 
standardization factor to the FY 2025 IPF PPS Federal per diem base 
rate and to the ECT payment amount per treatment to account for this 
proposed change to the ECT payment amount per treatment and all 
proposed changes to the patient-level adjustment factors and to the ED 
adjustment factor for FY 2025. We note that this proposed increase to 
the ECT per treatment amount would be associated with a minor decrease 
to the IPF Federal per diem base rate as a result of the refinement 
standardization factor (0.9514 instead of 0.9536). We estimate that 
this change would increase payments for IPFs that provide ECT, and 
would decrease payments for IPFs that do not provide ECT. However, the 
decrease in payments associated with this change would be no more than 
approximately 0.2 percent, which would be offset by various other 
proposed changes such as the proposed wage index changes, proposed 
revisions to the IPF PPS patient-level adjustments, and the proposed 
market basket increase for FY 2025.
    We note that we have monitored the provision of ECT through 
analysis of claims data since the beginning of the IPF PPS, and have 
not observed any indicators that payment is inappropriately 
incentivizing the provision of ECT to IPF patients. We intend to 
continue monitoring the provision of ECT through further analysis of 
IPF PPS claims data.
    A detailed discussion of the distributional impacts of this 
proposed change is found in section VIII.C of this proposed rule. We 
welcome comments regarding our analysis, including any comments that 
could inform our understanding of where ECT costs are allocated in cost 
reports in order to potentially inform improved collection of data on 
ECT treatment costs in the IPF setting. We also welcome comments on 
whether it may be appropriate to collect additional ECT-specific costs 
on the hospital cost report. Lastly, we are proposing that if more 
recent data become available, we would use such data, if appropriate, 
to determine the FY 2025 Federal per diem base rate and ECT payment per 
treatment for the FY 2025 IPF PPS final rule.
    IPFs must include a valid procedure code for ECT services provided 
to IPF beneficiaries to bill for ECT services, as described in our 
Medicare Claims Processing Manual, Chapter 3, Section 190.7.3 
(available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf). There were no changes to the ECT 
procedure codes used on IPF claims in the final update to the ICD-10-
PCS code set for FY 2024. Addendum B to this proposed rule shows the 
ECT procedure codes for FY 2025 and is available on the CMS website at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html.
3. Proposed Update of the Federal per Diem Base Rate and 
Electroconvulsive Therapy Payment per Treatment
    The current (FY 2024) Federal per diem base rate is $895.63 and the 
ECT payment per treatment is $385.58. For the proposed FY 2025 Federal 
per diem base rate, we applied the payment rate update of 2.7 
percent,--that is, the proposed 2021-based IPF market basket increase 
for FY 2025 of 3.1 percent reduced by the proposed productivity 
adjustment of 0.4 percentage point--the proposed wage index budget 
neutrality factor of 0.9998 (as discussed in section III.D.1 of this 
proposed rule), and a proposed refinement standardization factor of 
0.9514 (as discussed in section III.F of this proposed rule) to the FY 
2024 Federal per diem base rate of $895.63, yielding a proposed Federal 
per diem base rate of $874.93 for FY 2025. As discussed in section 
III.B.2 of this proposed rule, we are proposing to increase the ECT 
payment per treatment for FY 2025 in addition to our routine updates to 
the rate. We applied the proposed 2.7 percent payment rate update, the 
proposed 0.9998 wage index budget neutrality factor, and the proposed 
0.9514 refinement standardization factor to the proposed payment per 
treatment based on the CY 2024 OPPS geometric mean cost of $675.93, 
yielding a proposed ECT payment per treatment of $660.30 for FY 2025.
    Section 1886(s)(4)(A)(i) of the Act requires that for RY 2014 and 
each subsequent RY, in the case of an IPF that fails to report required 
quality data with respect to such RY, the Secretary will reduce any 
annual update to a standard Federal rate for discharges during the RY 
by 2.0 percentage points. Therefore, we are applying a 2.0 percentage 
point reduction to the annual update to the Federal per diem

[[Page 23154]]

base rate and the proposed ECT payment per treatment as follows:
     For IPFs that fail to report required data under the IPFQR 
Program, we would apply a 0.7 percent payment rate update--that is, the 
proposed IPF market basket increase for FY 2025 of 3.1 percent reduced 
by the proposed productivity adjustment of 0.4 percentage point for an 
update of 2.7 percent, and further reduced by 2.0 percentage points in 
accordance with section 1886(s)(4)(A)(i) of the Act. We would also 
apply the proposed refinement standardization factor of 0.9514 and the 
proposed wage index budget neutrality factor of 0.9998 to the FY 2024 
Federal per diem base rate of $895.63, yielding a proposed Federal per 
diem base rate of $857.89 for FY 2025.
     For IPFs that fail to report required data under the IPFQR 
Program, we would apply the proposed 0.7 percent annual payment rate 
update, the proposed 0.9514 refinement standardization factor, and the 
proposed 0.9998 wage index budget neutrality factor to the proposed 
payment per treatment based on the CY 2024 OPPS geometric mean cost of 
$675.93, yielding a proposed ECT payment per treatment of $647.45 for 
FY 2025.
    We are proposing that if more recent data become available, we 
would use such data, if appropriate, to determine the FY 2025 Federal 
per diem base rate and ECT payment per treatment for the FY 2025 IPF 
final rule.

C. Proposed Updates and Revisions to the IPF PPS Patient-Level 
Adjustment Factors

1. Overview of the IPF PPS Adjustment Factors and Proposed Revisions
    The current (FY 2024) IPF PPS payment adjustment factors were 
derived from a regression analysis of 100 percent of the FY 2002 
Medicare Provider and Analysis Review (MedPAR) data file, which 
contained 483,038 cases. For a more detailed description of the data 
file used for the regression analysis, we refer readers to the RY 2005 
IPF PPS final rule (69 FR 66935 through 66936).
    For FY 2025, we are proposing to implement revisions to the 
methodology for determining payment rates under the IPF PPS. As we 
noted earlier in this FY 2025 IPF PPS proposed rule, section 
1886(s)(5)(D) of the Act, as added by section 4125(a) of the CAA, 2023 
requires that the Secretary implement revisions to the methodology for 
determining the payment rates under the IPF PPS for psychiatric 
hospitals and psychiatric units, effective for RY 2025 (FY 2025). The 
revisions may be based on a review of the data and information 
collected under section 1886(s)(5)(A) of the Act. Accordingly, we are 
proposing to revise the patient-level IPF PPS payment adjustment 
factors as discussed in section III.C.4. of this proposed rule, 
effective for FY 2025. We have developed proposed adjustment factors 
based on a regression analysis of IPF cost and claims data, which is 
discussed in greater detail in the following sections of this proposed 
rule. The primary sources of this analysis are CY 2019 through 2021 
MedPAR files and Medicare cost report data (CMS Form 2552-10, OMB No. 
0938-0050) \1\ from the FY 2019 through 2021 Hospital Cost Report 
Information System (HCRIS). For each year (2019 through 2021), if a 
provider did not have a Medicare cost report for that year, we used the 
provider's most recent available Medicare cost report prior to the year 
for which a Medicare cost report was missing, going back to as early as 
2018. Section III.C.3 of this proposed rule discusses the development 
of the proposed revised case-mix adjustment regression.
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    \1\ https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202206-0938-017.
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2. History of IPF PPS Cost and Claims Analyses
    In the FY 2023 IPF PPS proposed rule (87 FR 19428 through 19429), 
we briefly discussed past analyses and areas of interest for future 
refinement, about which we previously solicited comments. CMS also 
released a technical report posted to the CMS website \2\ accompanying 
the rule, summarizing these analyses. In that same proposed rule, we 
described the results of the agency's latest analysis of the IPF PPS 
and solicited comments on certain topics from the report. We summarized 
the considerations and findings related to our analyses of the IPF PPS 
adjustment factors in the FY 2023 IPF PPS final rule (46864 through 
46865).
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    \2\ https://www.cms.gov/files/document/technical-report-medicare-program-inpatient-psychiatric-facilities-prospective-payment-system.pdf.
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    In the FY 2024 IPF PPS proposed rule (88 FR 21269 through 21272), 
we requested information from the public to inform revisions to the IPF 
PPS required by the CAA, 2023. Specifically, we sought information 
about which data and information would be most appropriate and useful 
for the purposes of refining IPF PPS payments. We requested information 
related to the specific types of data and information mentioned in the 
CAA, 2023. We also solicited comments on the reporting of ancillary 
charges, such as labs and drugs, on IPF claims. Lastly, we presented 
and solicited comments on the latest results of our analysis of social 
drivers of health (SDOH).
    In response to the requests for information, commenters offered a 
number of suggestions for further analysis, including recommendations 
to consider adjusting payment for patients with sleep apnea, violent 
behavior, and patients that transfer from an acute care unit. We 
discuss the analysis conducted and our findings, as related to patient-
level adjustment factors, in section III.C.3 of this proposed rule.
    The primary goal in refining the IPF PPS payment adjustment factors 
is to pay each IPF an appropriate amount for the efficient delivery of 
care to Medicare beneficiaries. The system must be able to account 
adequately for each IPF's case-mix to allow for both fair distribution 
of Medicare payments and access to adequate care for those 
beneficiaries who require more costly care. As required by section 
1886(s)(5)(D)(iii) of the Act, as added by section 4125(a) of the CAA, 
2023, proposed revisions to the IPF PPS adjustment factors must be 
budget neutral. As discussed in section III.F of this proposed rule, we 
are applying a refinement standardization factor to the proposed IPF 
PPS payment rates to maintain budget neutrality for FY 2025.
3. Development of the Proposed Revised Case-Mix Adjustment Regression
    To ensure that the IPF PPS continues to account adequately for each 
IPF's case-mix, we performed an extensive regression analysis of the 
relationship between the per diem costs and both patient and facility 
characteristics to identify those characteristics associated with 
statistically significant cost differences. We discuss the results of 
this regression analysis in section III.C.3.e. of this proposed rule. 
We further discuss proposed revisions to the IPF PPS patient-level 
adjustment factors based on this regression analysis in section III.C.4 
of this proposed rule.
    As discussed in greater detail in section III.C.3.c. of this 
proposed rule, we computed a per diem cost for each Medicare inpatient 
psychiatric stay, including routine operating, ancillary, and capital 
components using information from the CY 2019 through CY 2021 MedPAR 
files and data from the 2019 through 2021 Medicare cost reports, 
backfilling with Medicare cost reports from the most recent prior year 
when necessary.
    We began with a 100 percent sample of the CY 2019 through CY 2021 
MedPAR data files, which contain a

[[Page 23155]]

total of 1,111,459 stays from 1,684 IPFs. As discussed in section 
III.C.3.b. of this proposed rule, we applied several data restrictions 
and exclusions to obtain the set of data used for our regression 
analysis. The MedPAR data files used for this regression analysis 
contain a total of 806,611 stays from 1,643 IPFs, which reflect the 
removal of 41 providers and 304,848 stays with missing or erroneous 
data. To include as many IPFs as possible in the regression, we used 
the cost report information for each provider corresponding to the year 
of claims, when available, and substituted the most recent prior 
available cost report information for routine cost and ancillary cost 
to charge ratios if the corresponding year's data was not available.
a. Data Sources
    For the regression analysis, we chose to use a combined set of CY 
2019 through 2021 MedPAR data. Our analysis showed that using a 
combined set of data from multiple years yields the most stable and 
consistent result. When we looked at the results for each year 
individually, we found that some DRGs and comorbidity categories were 
not statistically significant due in part to small sample size. In 
addition, during FY 2020, the U.S. healthcare system undertook an 
unprecedented response to the Public Health Emergency (PHE) declared by 
the Secretary of the Department of Health and Human Services on January 
31, 2020 in response to the outbreak of respiratory disease caused by a 
novel (new) coronavirus that has been named ``SARS CoV 2'' and the 
disease it causes, which has been named ``coronavirus disease 2019'' 
(abbreviated ``COVID-19''). We believe the aggregated three-year 
regression serves to smooth the impact of changes in utilization driven 
by the COVID-19 PHE, as well as significant changes in staffing and 
labor costs that commenters noted in response to the FY 2023 and FY 
2024 IPF PPS proposed rules. As discussed earlier in this proposed 
rule, we used 2019 through 2021 Medicare cost report data to retain as 
many records as possible for analysis.
    We also used several other data sources to identify the IPF 
population for analysis and to construct variables in the regression 
model:
     Provider of Services (POS) File: The POS file contains 
facility characteristics including name, address, and types of services 
provided.
     Provider Specific Data for Public Use Files for the IPF 
PPS: The Provider Specific File (PSF) contains data used to calculate 
COLA factors and identify the Core-Based Statistical Area (CBSA). CBSA 
is used to match providers with corresponding wage index data, which is 
used to adjust the calculation of the Federal per diem base rate to 
account for geographic differences in costs.
     Common Working File (CWF) Inpatient Claims Data: The CWF 
contains data regarding ECT treatments provided during an IPF stay.
    Among the 1,643 providers included in the regression analysis 
sample, the majority had their most recent Medicare cost report 
information corresponding to the year of the MedPAR data file. 
Specifically, for the CY 2019 MedPAR data file, 99.5 percent (1,551 
providers) used FY 2019 Medicare cost reports, and 0.5 percent (8 
providers) used FY 2018 Medicare cost reports. For CY 2020, 99.7 
percent (1,523 providers) used FY 2020 Medicare cost reports, and 0.3 
percent (5 providers) used FY 2019 Medicare cost reports. For CY 2021, 
97.6 percent (1,435 providers) used FY 2021 Medicare cost reports, and 
2.4 percent (35 providers) used FY 2020 Medicare cost reports. This 
approach allowed us to use the most current and relevant cost report 
data, ensuring the robustness and accuracy of our analysis.
b. Trims and Assumptions
    To identify the IPF population for analysis, we matched MedPAR 
records to facility-level information from Medicare cost reports, the 
POS file, and the PSF. We included MedPAR stays that met the following 
criteria:
     Hospital CMS Certification Number (CCN) contains ``40,'' 
``41,'' ``42,'' ``43,'' or ``44'' in the third and fourth position or a 
special unit code of ``S'' or ``M'' for psychiatric unit or psychiatric 
unit in a critical access hospital.
     Beneficiary primary payer code is equal to ``Z'' or blank, 
indicating Medicare is the primary payer.
     Group Health Organization (GHO) paid code is equal to zero 
or blank, indicating that a GHO has not paid the facility for the stay.
     National Claims History (NCH) claim type code is equal to 
``60,'' an inpatient claim.
     Number of utilization days was greater than zero.
    To promote the accuracy and completeness of data included in the 
regression model, we completed a series of trimming steps to remove 
missing and outlier data. Before any trims or exclusions were applied, 
there were 1,684 providers in the MedPAR data file. First, we matched 
facilities from the MedPAR dataset to the most recent Medicare cost 
report file available from CY 2018 to CY 2021, and excluded facilities 
that did not have a Medicare cost report available from 2018 to 2021. 
If facilities had more than one Medicare cost report in a given year, 
we used the Medicare cost report representing the longest time span. We 
identified 1 provider in CY 2019, 5 providers in CY 2020, and 4 
providers in CY 2021 that had no available Medicare cost report 
information. In total, we excluded data from 5 unique providers that 
had no available Medicare cost report information from CY 2019 to CY 
2021.
    Next, we trimmed facilities with extraordinarily high or low costs 
per day. We removed facilities with outlier routine per diem costs, 
defined as those falling outside of the range of the mean logarithm of 
routine costs per diem plus or minus 3.00 standard deviations. We also 
removed stays with outlier total per diem costs, defined as those 
falling outside the range of the mean per diem cost by facility type 
(psychiatric hospitals and psychiatric units) plus or minus 3.00 
standard deviations. The average and standard deviations of the total 
per diem cost (routine and ancillary costs) were computed separately 
for stays in psychiatric hospitals and psychiatric units because we did 
not want to systematically exclude a larger proportion of cases from 
one type of facility. In applying these trims across all three data 
years used in our regression model, there were 104 providers with 
routine per diem costs outside 3.00 standard deviations from the mean, 
and 47 providers with total per diem costs outside 3.00 standard 
deviations from the mean. Specifically, this includes 24 providers in 
CY 2019, 41 providers in CY 2020, and 39 providers in CY 2021 excluded 
for outlier routine per diem costs. We identified 25 providers in CY 
2019, 1 provider in CY 2020, and 21 providers in CY 2021 that we 
excluded for outlier total per diem costs. In total, we excluded data 
from 23 unique providers with outlier routine per diem costs and 8 
unique providers with outlier total per diem costs.
    We also removed stays at providers without a POS file or PSF. There 
were 5 providers without a POS file or PSF during the period CY 2019 to 
CY 2021; therefore, we are excluding data from these 5 providers. Only 
1 unique provider was entirely excluded with no POS file or PSF from CY 
2019 to CY 2021. Additionally, 1 provider was excluded because no stays 
had one of the recognized IPF PPS DRGs assigned.
    In summary, the application of these data preparation steps 
resulted in excluding 5 providers because they did not have a cost 
report available from 2018 to 2021, 23 providers with routine per diem 
costs outside 3.00 standard

[[Page 23156]]

deviations from the mean, and 8 providers with total per diem costs 
outside 3.00 standard deviations from the mean. We also excluded 1 
provider without a POS file or PSF, 1 provider with no stays with IPF 
PPS DRGs, and 3 providers based on IPF stays restrictions. In total, 
the exclusion of these 41 providers resulted in the removal of 304,848 
stays from our original total of 1,111,459 stays.
    We considered trimming stays from facilities where 95 percent or 
more of stays had no ancillary charges because we assumed that the cost 
data from these facilities were inaccurate or incomplete. This is the 
trimming methodology that we applied to the analysis described in the 
technical report released along with the FY 2023 IPF PPS proposed rule. 
As previously discussed, the IPF PPS regression model uses the sum of 
routine and ancillary costs as the dependent variable, and we assumed 
that data from facilities without ancillary charge data would be 
inadequate to capture variation in costs. When we examined the claims 
from 2018, which we used for prior analysis, this trimming step 
resulted in removing almost one-quarter of total stays from the 
unrestricted 2018 MedPAR dataset (82,491 out of 364,080 total stays). 
This trimming step also resulted in disproportionate exclusion of 
certain types of facilities, particularly freestanding psychiatric 
hospitals that were for-profit or government-operated, as well as all-
inclusive rate providers. Approximately 55 percent of stays from 
freestanding facilities would be removed, compared to just 0.3 percent 
of stays in psychiatric units. In the analysis described in the FY 2023 
IPF PPS proposed rule (87 FR 19429), we attempted to address this 
disproportionate removal of stays by facility type by applying weights 
by facility type and ownership in the regression model to account for 
excluded providers and to avoid biasing the sample towards stays from 
providers in psychiatric units.
    In response to the analysis described in the FY 2023 IPF PPS 
proposed rule (87 FR 19429), commenters raised concerns about the large 
number of stays excluded from the regression analysis, and questioned 
whether the ancillary charge data were truly missing, as all-inclusive 
rate providers are not required to report separate ancillary charges. 
We agree that this trimming step reduces the representativeness of the 
IPF population used in the regression model and may increase the 
potential for bias of the regression coefficients used for payment 
adjustments. Furthermore, as discussed in section III.E.4. of this 
proposed rule, we are clarifying cost reporting requirements and 
implementing operational changes that we believe will increase the 
accuracy of the cost information reported in the future. Specifically, 
CMS will issue instructions to the MACs and put in place edits for cost 
reporting periods beginning on or after October 1, 2024, ensuring that 
only government-owned or tribally owned IPF hospitals will be permitted 
to file an all-inclusive cost report. All other IPF hospitals would be 
required to have a charge structure and to report ancillary costs and 
charges on their cost reports. We expect that this proposed change 
would support increased accuracy of future payment refinements to the 
IPF PPS.
    When we examined the claims from CY 2019 to CY 2021, this trimming 
step would have resulted in a loss of a significant number of providers 
(324 providers in CY 2019, 330 providers in CY 2020, and 336 providers 
in CY 2021). Due to the concerns that commenters previously raised 
(which we summarized in the FY 2024 IPF PPS final rule (88 FR 51097 
through 51098)), and to include as many claims as possible in the 
regression analysis, we have not trimmed stays from facilities with 
zero or minimal ancillary charges. As a result, we observed a 
significant reduction in data loss when comparing our latest regression 
model with the model described in the FY 2023 IPF PPS proposed rule. By 
including, rather than trimming, facilities with low or no ancillary 
charge data, we prevented the loss of 288 providers across the three 
years, allowing for a more inclusive analysis. These providers 
accounted for approximately 194,673 stays included in our data set.
    We present our regression results in section III.C.3.e. of this 
proposed rule without the application of any trimming or subsequent 
weighting to account for the removal of stays from facilities with zero 
or minimal ancillary charges.
c. Calculation of the Dependent Variable
    The IPF PPS regression model uses the natural logarithm of per diem 
total cost as the dependent variable. We computed a per diem cost for 
each Medicare inpatient psychiatric stay, including routine operating, 
ancillary, and capital components, using information from the combined 
CY 2019 through 2021 MedPAR file and data from the 2018 through 2021 
Medicare cost reports. For each MedPAR CY, we examined the 
corresponding Medicare cost report, and if a provider's cost-to-charge 
ratio was missing from the matching year's cost report, we looked at 
the provider's cost report from the prior year to obtain the most 
recent cost-to-charge value for the provider. We applied a prior-year 
cost-to-charge ratio to 8 providers from the CY 2019 MedPAR claims, 5 
providers from the CY 2020 MedPAR claims, and 35 providers from the CY 
2021 MedPAR claims.
    To calculate the total cost per day for each inpatient psychiatric 
stay, routine costs were estimated by multiplying the routine cost per 
day from the IPF's Medicare cost report (Worksheet D-1, Part II, column 
1, line 38) by the number of Medicare covered days in the MedPAR stay 
record. Ancillary costs were estimated by multiplying each departmental 
cost-to-charge ratio (calculated by dividing the amount obtained from 
Worksheet C, columns 5, by the sum of Worksheet C, columns 6 and 7) by 
the corresponding ancillary charges in the MedPAR stay record. The 
total cost per day was calculated by summing routine and ancillary 
costs for the stay and dividing it by the number of Medicare covered 
days for each day of the stay.
    To address extreme cost-to-charge ratios, we winsorized the 
distributions of the 17 ancillary cost centers from Worksheet C of the 
cost report at the 2nd and 98th percentiles. That is, if the cost-to-
charge ratio was missing and there was a charge on the claim, the cost-
to-charge ratio was imputed to the calculated median value for each 
respective cost center.
    The total cost per day (also referred to as per diem cost) was 
adjusted for differences in cost across geographic areas using the FY 
2019 through 2021 IPF wage index and COLA corresponding to each MedPAR 
data year. We adjusted the labor-related portion of the per diem cost 
using the IPF wage index to account for geographic differences in labor 
cost and adjusted the non-labor portion of the per diem cost by the 
COLA adjustment factors for IPFs in Alaska and Hawaii. We used IPF PPS 
labor-related share and non-labor-related share finalized for each 
year, FY 2019 through FY 2021, to determine the amount of the per diem 
cost that is adjusted by the wage index and the COLA, respectively. We 
calculated the adjusted cost using the following formula:

Wage adjusted per diem cost = per diem cost/(wage index * labor-related 
share + COLA * (1-labor-related share)).
d. Independent Variables
    Independent variables in the regression model are patient-level and 
facility-level characteristics that affect

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the dependent variable in the model, which is per diem cost. As 
discussed in the following sections, the updated regression model for 
this proposed rule includes adjustment-related variables and control 
variables. Adjustment related variables are used for adjusting payment, 
and as we discuss in section III.C.4 of this proposed rule, we are 
proposing to revise the IPF PPS patient-level adjustment factors based 
on the regression results for many of the adjustment-related variables 
in the model. Control variables are used to account for variation in 
the dependent variable that is associated with factors outside the 
adjustment factors of the payment model.
(1) Adjustment-Related Variables
    Patient-level adjustment-related variables included in the 
regression model are variables for DRG assignment, comorbidity 
categories, age, and length of stay. We note that facility-level 
adjustment-related variables for rural status and teaching status are 
also included in the model; however, we are not proposing revisions to 
the rural or teaching adjustments for FY 2025. We discuss the latest 
results of the regression analysis for facility-level adjustments in 
greater detail in section IV.A. of this proposed rule.
(2) Control Variables
    The regression model used to determine IPF PPS payment adjustments 
in the RY 2005 IPF PPS final rule (69 FR 66922) included control 
variables to account for facilities' occupancy rate, a control variable 
to indicate if the patient received ECT, and a control variable for 
IPFs that do not bill for ancillary charges. In the updated regression 
model for this FY 2025 IPF PPS proposed rule, we have removed the 
occupancy control variables and the control variable for IPFs that do 
not bill for ancillary charges. In addition, we have retained the 
control variable for patients receiving ECT and added control variables 
for the data year. We also added a control variable for the presence of 
ED charges on the claim. We discuss considerations related to these 
control variables and others in the following paragraphs.
    The 2004 regression model included two control variables for 
occupancy rate. One was a continuous variable for the facility's 
logarithmic-transformed occupancy rate. The other was a categorical 
variable indicating a facility had an occupancy rate below 30 percent. 
Both of these variables were found to be associated with statistically 
significant increases in cost. In the RY 2005 IPF PPS final rule, we 
adopted the structural approach and included these control variables in 
the regression. We explained that it was appropriate to control for 
variations in the occupancy rate in estimating the effects of the 
payment variables on per diem cost to avoid compensating facilities for 
inefficiency associated with underutilized fixed costs (69 FR 66934). 
As we discussed in the FY 2023 IPF PPS proposed rule, our analysis 
found that the occupancy control variables were associated with rural 
status. We solicited comments on the potential removal of the occupancy 
control variables from the model (87 FR 19429). In response, we 
received several comments in support of removing the occupancy control 
variables, due to the relationship between these control variables and 
the rural adjustment (87 FR 46865). Commenters cited the importance of 
rural IPFs as the primary points of care and access for many Medicare 
beneficiaries who cannot travel to urban areas for mental health 
services. We considered the potential negative impact to rural 
facilities of retaining the occupancy control variables in the 
regression model. We agree with the commenters who noted the importance 
of maintaining stability in payments for rural IPFs; therefore, we did 
not include any occupancy control variables in our regression model.
    In addition, we considered including a control variable for IPFs 
that do not bill for ancillary services. As we discussed in the RY 2005 
IPF PPS final rule (69 FR 66936), we included variables in the 
regression to control for psychiatric hospitals that do not bill 
ancillary costs. However, at that time, the number of IPFs who did not 
bill for ancillary costs was relatively small and consisted mostly of 
government-operated facilities. As we discuss later in section III.E.4 
of this proposed rule, an increasing number of IPFs have stopped 
reporting ancillary charges on their claims, which means that ancillary 
cost information is not available for stays at these IPFs.
    We considered whether to include a control variable for facilities 
that do not report ancillary charges. We considered that the inclusion 
of a control variable would only account for differences in the level 
of cost between IPFs with and without reported ancillary costs and 
would not facilitate comparison of costs between all IPFs in our 
sample. In addition, we found that facilities that did not report 
ancillary charges also tended to have lower routine costs; that is, our 
analysis showed that these facilities would have overall lower costs 
per day, regardless of whether ancillary costs were considered in the 
cost variable. We considered that the inclusion of a control variable 
in the regression model would account for these differences in overall 
cost, which would impact the size of payment-related adjustment factors 
that are correlated with the prevalence of missing ancillary charge 
data. For this reason, in developing a regression model for proposing 
revisions to the IPF PPS, we did not include a control variable to 
account for facilities that report zero or minimal ancillary charges.
    As noted earlier, the original model also included a control 
variable for the presence of ECT. This is because ECT is paid on a per-
treatment basis under the IPF PPS. As discussed in more detail in 
section III.B.2. of this FY 2025 IPF PPS proposed rule, we continue to 
observe that IPF stays with ECT have significantly higher costs per 
day. We are proposing to continue paying for ECT on a per-treatment 
basis; therefore, we included a control variable to account for the 
additional costs associated with ECT, which would continue to be paid 
for outside the regression model.
    Similarly, we included a control variable for stays with emergency 
department (ED)-related charges. The original model did not include an 
ED control variable, because ED costs were excluded from the dependent 
variable of IPF per diem costs. Our regression model for this FY 2025 
IPF PPS proposed rule includes all costs associated with each IPF stay, 
including ED costs. As discussed in section III.D.4. of this proposed 
rule, we are proposing to calculate the ED adjustment in accordance 
with our longstanding methodology, separate from the regression model. 
However, we included a control variable for stays with ED charges to 
control for the additional costs associated with ED admissions, which 
are paid under the ED adjustment outside the regression model.
    Lastly, we included control variables for the data year. Because 
the model used a combined set of data from 3 years, these control 
variables are included in the model to account for differences in cost 
levels between 2019, 2020, and 2021, which would be driven by economic 
inflation and other external factors unrelated to the independent 
variables in the regression model.
e. Regression Results
    Table 2 presents the results of our regression model. We discuss 
these results and our related proposals to

[[Page 23158]]

revise the IPF PPS patient-level adjustment factors in section III.C.4 
of this proposed rule.
    This regression model includes a total of 806,611 stays, and the r-
squared value of the model is 0.32340, meaning that the independent 
variables included in the regression model can explain approximately 
32.3 percent of the variation in per diem cost among IPF stays.
    Except for the teaching variable, each of the adjustment factors in 
Table 2 is the exponentiated regression coefficient of our regression 
model, which as we previously noted uses the natural logarithm of per 
diem total cost as the dependent variable. We present the exponentiated 
regression results, as these most directly translate to the way that 
IPF PPS adjustment factors are calculated for payment purposes. That 
is, the exponentiated adjustment factors presented below represent a 
percentage increase or decrease in per diem cost for IPF stays with 
each characteristic. In the case of the teaching variable, the result 
in Table 2 is the un-exponentiated regression coefficient. As discussed 
in section III.D of this proposed rule, the current IPF PPS teaching 
adjustment is calculated as 1 + a facility's ratio of interns and 
residents to beds, raised to the power of 0.5150. The coefficient for 
teaching status presented in Table 2 can be interpreted in the same 
way.
    For certain categorical variables, including DRG, age, length of 
stay, and the year control variables, results for the reference groups 
are not shown in Table 2. The DRG reference group is DRG 885, because 
this DRG represents the majority of IPF PPS stays. The age reference 
group is the Under 45 category, because this group is associated with 
the lowest costs after accounting for all other patient characteristics 
in the model. The reference group for length of stay is 10 days, which 
corresponds to the reference group used in the original regression 
model from the RY 2005 IPF PPS final rule. Lastly, the year control 
reference group is CY 2021. Each of these reference groups not shown in 
Table 2 effectively has an adjustment factor of 1.00 in the regression 
model.
    As shown in Column 5 of Table 2, we considered the regression 
factors to be statistically significant when the p-value was less than 
or equal to the significance level of 0.05 (*), 0.01 (**), and 0.001 
(***). Columns 6 and 7 of Table 2 show the lower and upper bounds of 
the 95-percent confidence interval (CI).
BILLING CODE 4120-01-P
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[GRAPHIC] [TIFF OMITTED] TP03AP24.005

BILLING CODE 4120-01-C
4. Proposed Updates and Revisions to the IPF PPS Patient-Level 
Adjustments
    The IPF PPS includes payment adjustments for the following patient-
level characteristics: Medicare Severity Diagnosis Related Groups (MS-
DRGs) assignment of the patient's principal diagnosis, selected 
comorbidities, patient age, and the variable per diem adjustments. As 
discussed in section III.C.3. of this proposed rule, we are proposing 
to derive updated IPF PPS adjustment factors for FY 2025 using a 
regression analysis of data from the CY 2019 through 2021 MedPAR data 
files and Medicare cost report data from the 2018 through FY 2021 
Hospital Cost Report Information System (HCRIS). However, we have used 
more recent claims (specifically, the December, 2023 update of the FY 
2023 IPF PPS MedPAR claims) and cost data from the January, 2024 update 
of the provider-specific file (PSF) to simulate payments to finalize 
the outlier fixed dollar loss threshold amount and to assess the impact 
of the IPF PPS updates. More information about the data used for the 
impact simulations is found in section VIII.C of this FY 2025 IPF PPS 
proposed rule. As discussed in section III.C.3. of this proposed rule, 
by adjusting for DRGs, comorbidities, age, and length of the stay, 
along with the facility-level variables and control variables in the 
model, we were able to explain approximately 32.3 percent of the 
variation in per diem cost among IPF stays.
    In addition, we are proposing routine coding updates for FY 2025 
for our longstanding code first and IPF PPS comorbidities. Furthermore, 
as discussed in section III.C.4.a.(2) of this proposed rule, we are 
proposing to adopt a sub-regulatory process for future routine coding 
updates.
a. Proposed Updated and Revisions to MS-DRG Assignment
(1) Background
    We believe it is important to maintain for IPFs the same diagnostic 
coding and DRG classification used under the IPPS for providing 
psychiatric care. For this reason, when the IPF PPS was implemented for 
cost reporting periods beginning on or after January 1, 2005, we 
adopted the same diagnostic code set (ICD-9-CM) and DRG patient 
classification system (MS-DRGs) that were utilized at the time under 
the IPPS. In the RY 2009 IPF PPS notice (73 FR 25709), we discussed 
CMS's effort to better recognize resource use and the severity of 
illness among patients. CMS adopted the new MS-DRGs for the IPPS in the 
FY 2008 IPPS final rule with comment period (72 FR 47130). In the RY 
2009 IPF PPS notice (73 FR 25716), we provided a crosswalk to reflect 
changes that were made under the IPF PPS to adopt the new MS-DRGs. For 
a detailed description of the mapping changes from the original DRG 
adjustment categories to the current MS-DRG adjustment categories, we 
refer readers to the RY 2009 IPF PPS notice (73 FR 25714).
    The IPF PPS includes payment adjustments for designated psychiatric 
DRGs assigned to the claim based on the patient's principal diagnosis. 
The DRG adjustment factors were expressed relative to the most 
frequently reported psychiatric DRG in FY 2002, that is, DRG 430 
(psychoses). The coefficient values and adjustment factors were derived 
from the regression analysis discussed in detail in the RY 2004 IPF 
proposed rule (68 FR 66923; 66928 through 66933) and the RY 2005 IPF 
final rule (69 FR 66933 through 66960). Mapping the DRGs to the MS-DRGs 
resulted in the current 17 IPF MS-DRGs, instead of the original 15 
DRGs, for which the IPF PPS provides an adjustment.
    In the FY 2015 IPF PPS final rule published August 6, 2014 in the 
Federal Register titled, ``Inpatient Psychiatric Facilities Prospective 
Payment System--Update for FY Beginning October 1, 2014 (FY 2015)'' (79 
FR 45945 through 45947), we finalized conversions of the ICD-9-CM-based 
MS-DRGs to ICD-10-CM/PCS-based MS-DRGs, which were implemented on 
October 1, 2015. Further information on the ICD-10-CM/PCS MS-DRG 
conversion project can be found on the CMS ICD-10-CM website at https://www.cms.gov/medicare/coding-billing/icd-10-codes/icd-10-ms-drg-conversion-project.

[[Page 23162]]

(2) Proposal To Adopt Sub-Regulatory Process for Publication of Coding 
Changes
    As discussed in the FY 2015 IPF PPS proposed rule (79 FR 26047) 
every year, changes to the ICD-10-CM and the ICD-10-PCS coding system 
have been addressed in the IPPS proposed and final rules. The changes 
to the codes are effective October 1 of each year and must be used by 
acute care hospitals as well as other providers to report diagnostic 
and procedure information. In accordance with Sec.  412.428(e), we have 
historically described in the IPF PPS proposed and final rules the ICD-
10-CM coding changes and DRG classification changes that have been 
discussed in the annual proposed and final hospital IPPS regulations. 
This has typically involved a discussion in the proposed rule about 
coding updates to be effective October 1 of each year, with a summary 
of comments in the final rule along with a description of additional 
finalized codes for October.
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44950 through 
44956), we adopted an April 1 implementation date for ICD-10-CM 
diagnosis and ICD-10-PCS procedure code updates in addition to the 
annual October 1 update of ICD-10-CM diagnosis and ICD-10-PCS procedure 
codes, beginning with April 1, 2022. In that rule, we noted the intent 
of this April 1 implementation date is to allow flexibility in the ICD-
10 code update process. Currently, as noted earlier in this proposed 
rule, the IPF PPS uses the IPPS DRG assignments, which are applied to 
IPF PPS claims; these DRG assignments reflect the change in process 
that the IPPS adopted for FY 2022. To maintain consistency with IPPS 
policy, we are proposing to follow the same process beginning in FY 
2025. This means that for routine coding updates that incorporate new 
or revised codes, we are proposing to adopt these changes through a 
sub-regulatory process. Beginning in FY 2025, we would operationalize 
such coding changes in a Transmittal/Change Request, which would align 
with the way coding changes are announced under the IPPS.
    For example, we are proposing that for April 2025, we would adopt 
routine coding updates for the IPF PPS comorbidity categories, code 
first policy, ECT code list, and DRG assignment via sub-regulatory 
guidance. These coding updates would take effect April 1, 2025. In 
accordance with Sec.  412.428(e), we would describe these coding 
changes, along with any coding updates that would be effective for 
October 1, 2025, in the FY 2026 IPF PPS proposed rule. We would 
summarize and respond to any comments on these April and October coding 
changes in the FY 2026 IPF PPS final rule.
    The proposed update aims to allow flexibility in the ICD-10 code 
update process for the IPF PPS and reduces the lead time for making 
routine coding updates to the IPF PPS code first list, comorbidities, 
and ECT coding categories. In addition, the IPPS sub-regulatory process 
continues to manage DRG assignment changes which apply to the DRG 
assignments used in the IPF PPS. Finally, we are clarifying that we 
would only apply this sub-regulatory process for routine coding 
updates. Any future substantive revisions to the IPF PPS DRG 
adjustments, comorbidities, code first policy, or ECT payment policy 
would be proposed through notice and comment rulemaking. We solicit 
public comments on this proposal.
(3) Routine Coding Updates for DRG Assignments
    The diagnoses for each IPF MS-DRG will be updated as of October 1, 
2024, using the final IPPS FY 2025 ICD-10-CM/PCS code sets. The FY 2025 
IPPS/LTCH PPS final rule will include tables of the changes to the ICD-
10-CM/PCS code sets that underlie the proposed FY 2025 IPF MS-DRGs. 
Both the FY 2025 IPPS final rule and the tables of final changes to the 
ICD-10-CM/PCS code sets, which underlie the FY 2025 MS-DRGs, will be 
available on the CMS IPPS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.
(4) Code First
    As discussed in the ICD-10-CM Official Guidelines for Coding and 
Reporting, certain conditions have both an underlying etiology and 
multiple body system manifestations due to the underlying etiology. For 
such conditions, the ICD-10-CM has a coding convention that requires 
the underlying condition be sequenced first, followed by the 
manifestation. Wherever such a combination exists, there is a ``use 
additional code'' note at the etiology code, and a ``code first'' note 
at the manifestation code. These instructional notes indicate the 
proper sequencing order of the codes (etiology followed by 
manifestation). In accordance with the ICD-10-CM Official Guidelines 
for Coding and Reporting, when a primary (psychiatric) diagnosis code 
has a code first note, the provider will follow the instructions in the 
ICD-10-CM Tabular List. The submitted claim goes through the CMS 
processing system, which will identify the principal diagnosis code as 
non-psychiatric and search the secondary codes for a psychiatric code 
to assign a DRG code for adjustment. The system will continue to search 
the secondary codes for those that are appropriate for comorbidity 
adjustment. For more information on the code first policy, we refer 
readers to the RY 2005 IPF PPS final rule (69 FR 66945). We also refer 
readers to sections I.A.13 and I.B.7 of the FY 2020 ICD-10-CM Coding 
Guidelines, which is available at https://www.cdc.gov/nchs/data/icd/10cmguidelinesFY2020_final.pdf. In the FY 2015 IPF PPS final rule, we 
provided a code first table for reference that highlights the same or 
similar manifestation codes where the code first instructions apply in 
ICD-10-CM that were present in ICD-10-CM (79 FR 46009). In FY 2018, FY 
2019, and FY 2020, there were no changes to the final ICD-10-CM codes 
in the IPF Code First table. For FY 2021 and FY 2022, there were 18 
ICD-10-CM codes deleted from the final IPF Code First table. For FY 
2023, there were 2 ICD-10-CM codes deleted and 48 ICD-10-CM codes added 
to the IPF Code First table. For FY 2024, there were no proposed 
changes to the Code First Table.
    We are proposing to continue our existing code first policy. As 
outlined in our proposal to incorporate a sub-regulatory process for 
the publication of coding changes, we are proposing to adopt a sub-
regulatory approach to handle the coding updates, which removes the 
requirement to discuss coding updates in the Federal Register during 
regulatory updates prior to implementation, which would mirror the 
approach taken by the IPPS. The proposed FY 2025 Code First table is 
shown in Addendum B on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-forServicePayment/InpatientPsychFacilPPS/tools.html.
(5) Proposed Revisions to MS-DRG Adjustment Factors
    For FY 2025, we are proposing to revise the payment adjustments for 
designated psychiatric DRGs assigned to the claim based on the 
patient's principal diagnosis, following our longstanding policy of 
using the ICD-10-CM/PCS-based MS-DRG system. As discussed in the 
following paragraphs, we are proposing to maintain DRG adjustments for 
15 of the existing 17 IPF MS-DRGs for which we currently adjust payment 
in FY 2024. We are proposing to replace two existing DRGs with two new 
DRGs to reflect changes in coding practices over time and proposing to 
add two DRGs that are associated with poisoning. We are also proposing 
to

[[Page 23163]]

revise the adjustment factors for the DRG adjustments as described in 
Table 3, based on the results of our latest regression analysis 
described in Section III.C.3 of this proposed rule. Addendum A is 
available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets. The website includes the proposed DRG adjustment factors 
for FY 2025. In accordance with our longstanding policy, we are 
proposing that psychiatric principal diagnoses that do not group to one 
of the 19 proposed designated MS-DRGs would still receive the Federal 
per diem base rate and all other applicable adjustments; however, the 
payment would not include an MS-DRG adjustment.
(a) Proposed Replacement of DRGs
    We are proposing to remove DRGs 080 (Nontraumatic stupor & coma w 
MCC) and 081 (Nontraumatic stupor & coma w/o MCC), and to replace these 
with DRGs 947 (Signs and Symptoms w MCC) and 948 (Signs and Symptoms w/
out MCC). As previously discussed, we observed that the number of cases 
in DRGs 080 and 081 have decreased significantly since 2004. We 
selected DRGs 947 and 948 as the most clinically appropriate 
replacements, because most of the ICD-10-CM codes that previously 
grouped to DRGs 080 or 081 now group to DRGs 947 or 948. Table 3 
compares the current adjustment factors for DRGs 080 and 081 to the 
regression-derived adjustment factors for DRGs 947 and 948. As shown in 
Table 3, the proposed adjustment factors for DRGs 947 and 948 would 
each be greater than the current DRG adjustment for DRGs 080 and 081. 
Therefore, we are proposing that claims with DRGs 080 or 081 would 
still receive the Federal per diem base rate and all other applicable 
adjustments; however, the payment would not include an MS-DRG 
adjustment.
    As discussed in section III.F of this proposed rule, we are 
proposing to implement this revision to the DRG adjustments budget-
neutrally. A detailed discussion of the distributional impacts of this 
proposed change is found in section VIII.C of this proposed rule. 
Lastly, we are proposing that if more recent data become available, we 
would use such data, if appropriate, to determine the FY 2025 DRG 
adjustment factors.
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(b) Proposed Additions of DRGs
    We are proposing to recognize DRG adjustments for two DRGs 
associated with poisoning; specifically, DRG 917 (Poisoning and toxic 
effects of drugs w MCC) and 918 (Poisoning and toxic effects of drugs 
w/out MCC). As discussed earlier in this proposed rule, we have 
identified that a small but increasing number of IPF stays contain 
these poisoning-related DRG assignments, and that stays with these DRGs 
have increased costs per day that are statistically significant. Table 
4 summarizes the frequency of these stays and the proposed adjustment 
factors for FY 2025. As discussed in section III.F of this proposed 
rule, we are proposing to implement this revision to the DRG 
adjustments budget-neutrally. A detailed discussion of the 
distributional impacts of this proposed change is found in section 
VIII.C of this proposed rule.
    Lastly, we are proposing that if more recent data become available, 
we would use such data, if appropriate, to determine the FY 2025 DRG 
adjustment factors.

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(c) Proposed Revisions to Adjustment Factors for Existing DRG 
Adjustments
    We are proposing to revise the adjustment factors for the remaining 
15 of the existing 17 DRGs that currently receive a DRG adjustment in 
FY 2024. These proposed revisions are based on the results of our 
latest regression analysis described in section III.C.3 of this 
proposed rule.
    As previously discussed, our analysis found that some of the 
adjustment factors in the regression model for DRGs that currently 
receive an adjustment are no longer statistically significant. 
Specifically, we found that the adjustment factors for DRG 882 
(Neuroses except depressive), DRG 887 (Other mental disorder 
diagnoses), and DRG 896 (Alcohol, Drug Abuse or Dependence w/out rehab 
therapy w MCC) were not statistically significant. For each of these 
DRGs, we examined whether the current adjustment factor falls within 
the confidence interval for our latest regression analysis. The current 
adjustment for DRG 882 is 1.02, and this falls within the confidence 
interval of 0.96798 to 1.07811 for the latest regression model 
discussed in section III.C.3 of this proposed rule. We believe it would 
be appropriate to maintain the current adjustment factor of 1.02 for 
DRG 882, because the latest regression results indicate that the 
current adjustment factor would be a reasonable approximation of the 
increased costs associated with DRG 882. For DRGs 887 and 896; however, 
the current adjustment factors (0.92 and 0.88, respectively) do not 
fall within the confidence interval for each of these DRGs. Therefore, 
we are proposing to apply an adjustment factor of 1.00 for IPF stays 
with these DRGs.
    Table 5 summarizes the frequency of these stays and the proposed 
adjustment factors for FY 2025. As discussed in section III.F of this 
proposed rule, we are proposing to implement this revision to the DRG 
adjustments budget-neutrally. A detailed discussion of the 
distributional impacts of this proposed change is found in section 
VIII.C of this proposed rule.
    Lastly, we are proposing that if more recent data become available, 
we would use such data, if appropriate, to determine the FY 2025 DRG 
adjustment factors.
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BILLING CODE 4120-01-C
b. Proposed Payment for Comorbid Conditions
(1) Proposed Revisions to Comorbidity Adjustments
    The intent of the comorbidity adjustments is to recognize the 
increased costs associated with comorbid conditions by providing 
additional payments for certain existing medical or psychiatric 
conditions that are expensive to treat.
    Comorbidities are specific patient conditions that are secondary to 
the patient's principal diagnosis and that require treatment during the 
stay. Diagnoses that relate to an earlier episode of care and have no 
bearing on the current hospital stay are excluded and must not be 
reported on IPF claims. Comorbid conditions must exist at the time of 
admission or develop subsequently, and affect the treatment received, 
LOS, or both treatment and LOS.
    The current comorbidity adjustments were determined based on the 
regression analysis using the diagnoses reported by IPFs in FY 2002. 
The principal diagnoses were used to establish the DRG adjustments and 
were not accounted for in establishing the comorbidity category 
adjustments, except where ICD-9-CM code first instructions applied. In 
a code first situation, the submitted claim goes through the CMS 
processing system, which identifies the principal diagnosis code as 
non-psychiatric and searches the secondary codes for a psychiatric code 
to assign an MS-DRG code for adjustment. The system continues to search 
the secondary codes for those that are appropriate for a comorbidity 
adjustment.
    In our RY 2012 IPF PPS final rule (76 FR 26451 through 26452), we 
explained that the IPF PPS includes 17 comorbidity categories and 
identified the new, revised, and deleted ICD-9-CM diagnosis codes that 
generate a comorbid condition payment adjustment under the IPF PPS for 
RY 2012 (76 FR 26451).
    As discussed in section C.4.a.(1) of this proposed rule, it is our 
policy to

[[Page 23166]]

maintain the same diagnostic coding set for IPFs that is used under the 
IPPS for providing the same psychiatric care. The 17 comorbidity 
categories formerly defined using ICD-9-CM codes were converted to ICD-
10-CM/PCS in our FY 2015 IPF PPS final rule (79 FR 45947 through 
45955). The goal for converting the comorbidity categories is referred 
to as replication, meaning that the payment adjustment for a given 
patient encounter is the same after ICD-10-CM implementation as it 
would be if the same record had been coded in ICD-9-CM and submitted 
prior to ICD-10-CM/PCS implementation on October 1, 2015. All 
conversion efforts were made with the intent of achieving this goal.
    For each claim, an IPF may receive only one comorbidity adjustment 
within a comorbidity category, but it may receive an adjustment for 
more than one comorbidity category. Current billing instructions for 
discharge claims, on or after October 1, 2015, require IPFs to enter 
the complete ICD-10-CM codes for up to 24 additional diagnoses if they 
co-exist at the time of admission, or develop subsequently and impact 
the treatment provided.
    As previously discussed in section III.C.4.a.(2) of this proposed 
rule, we are proposing to adopt an April 1 implementation date for ICD-
10-CM diagnosis and ICD-10-PCS procedure code updates, in addition to 
the annual October 1 update, beginning with April 1, 2025 for the IPF 
PPS. For FY 2025 and future years, coding updates related to the IPF 
PPS comorbidity categories would be adopted following a sub-regulatory 
process as discussed earlier in this proposed rule.
    For FY 2025, we are proposing to revise the comorbidity adjustment 
factors based on the results of the 2019 through 2021 regression 
analysis described in section III.C.3.e. of this proposed rule. We are 
also proposing additions and changes to the comorbidity categories for 
which we adjust payment based on our analysis of ICD-10-CM codes 
currently included in each category as well as public comments received 
in response to the FY 2022 and FY 2023 IPF PPS proposed rules.
    Based on analysis of the ICD-10-CM codes, we considered the 
statistical significance of the adjustment factor and whether the 
current (FY 2024) adjustment factor fell within the confidence interval 
in the 2019 through 2021 regression to determine the FY 2025 IPF PPS 
proposed comorbidity categories and adjustment factors. As previously 
discussed for the DRG adjustment factors, when the regression factor is 
not statistically significant, but the current adjustment factor is 
within the confidence interval, we are proposing to maintain the 
current adjustment factor. When a regression factor is not 
statistically significant and the current adjustment factor is not 
within the confidence interval, we are proposing to remove the 
comorbidity category.
    Specifically, we are proposing to increase the adjustment factors 
for the Gangrene, Severe Protein Malnutrition, Oncology Treatment, 
Poisoning, and Tracheostomy comorbidity categories based on the 
adjustment factors derived from the regression analysis discussed in 
section III.C.3 of this proposed rule. For these comorbidity 
categories, the regression results produced a statistically significant 
increase in the adjustment factors.
    We are proposing to remove the comorbidity categories for the 
Coagulation Factor Deficit, Drug/Alcohol Induced Mental Disorders, and 
Infectious Diseases adjustment factors because the regression factor 
for the ICD-10-CM codes associated with Coagulation Factor Deficit and 
Infectious Diseases were not statistically significant, and the current 
adjustment factors did not fall within the confidence intervals in the 
2019 through 2021 regression.
    The current adjustment factor for Drug/Alcohol Induced Mental 
Disorders is 1.03; however, the adjustment factor derived from our 
latest regression results was statistically significant at 0.96084, 
meaning payments would be reduced if we applied the regression-derived 
adjustment factor as a comorbidity adjustment for this category. In 
order to understand the drivers of changing costs for the Drug/Alcohol 
Induced Mental Disorders comorbidity category, we examined a subset of 
ICD-10-CM codes within the comorbidity category associated with opioid 
disorders which make up the majority of stays that qualify for the 
current Drug/Alcohol Induced Mental Disorders comorbidity adjustment. 
These opioid disorder codes are listed in Table 6. When we separately 
analyzed these codes associated with opioid disorder, the results 
suggested that patients with opioid disorder are significantly less 
expensive than patients without opioid disorder. Because stays with 
opioid disorders make up the majority of stays in the Drug/Alcohol 
Induced Mental Disorders comorbidity category, we observe a 
statistically-significant negative adjustment factor for the 
comorbidity category overall. The application of a comorbidity 
adjustment derived from our latest regression analysis would result in 
reduced payments for all stays in this comorbidity category. We do not 
believe it is appropriate to apply negative adjustment factors (that 
is, adjustment factors less than 1.00) for comorbidities because that 
would result in reduced rather than increased payments. Although we 
apply adjustment factors less than 1.00 for DRGs, this is because the 
DRG adjustment reflects the cost of stays relative to stays with the 
baseline DRG 885. In contrast, comorbidity adjustments reflect the cost 
relative to a stay with no comorbidities. A negative payment adjustment 
would not be consistent with the intent of a comorbidity adjustment, 
which is intended to provide additional payments to providers to 
account for the costs of treating patients with comorbid conditions. 
Therefore, we have not historically included any negative adjustment 
factors for comorbid conditions.
    Therefore, we are proposing to remove the Drug/Alcohol Induced 
Mental Disorders comorbidity category beginning in FY 2025. IPF stays 
that include these codes as a non-principal diagnosis would no longer 
receive the current Drug/Alcohol Induced Mental Disorders comorbidity 
category adjustment factor of 1.03; nor would they receive a reduction 
in payment. However, many IPF stays that include these ICD-10-CM 
diagnosis codes as a principal diagnosis would continue to receive a 
DRG adjustment. We refer readers to section III.C.3.a of this proposed 
rule for a detailed discussion of proposed DRG adjustments under the 
IPF PPS.
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BILLING CODE 4120-01-C
    We believe removal of the Drug/Alcohol Induced Mental Disorders 
comorbidity category under the IPF PPS would more appropriately align 
payment with resource use, as reflected in the latest regression 
results. As previously discussed in section III.F of this proposed 
rule, all of these proposed revisions would be applied budget-
neutrally. Therefore, we believe the removal of the Drug/Alcohol 
Induced Mental Disorders comorbidity adjustment would appropriately 
increase the IPF PPS Federal per diem base rate and thereby increase 
payment for IPF stays that are costlier. However, we are soliciting 
comments on whether a lack of ancillary charge data may be contributing 
to the results of our regression analysis as it relates to opioid 
disorders. We note that our analysis of the ICD-10-CM codes associated 
with opioid disorder also indicates that there is significant overlap 
between facility characteristics and stays including opioid disorder 
diagnoses. In particular, for-profit freestanding IPFs were found to 
serve the majority of patients with opioid disorders. As discussed in 
section III.E.4 of this proposed rule, our ongoing analysis has found 
an increase in the number of for-profit freestanding IPFs that are 
consistently reporting no ancillary charges or very minimal ancillary 
charges on their cost report. As a result, we have previously noted 
that data that is necessary for accurate Medicare ratesetting is 
excluded from the information these facilities are reporting.
    As stated previously, the regression factor for Drug/Alcohol 
Induced Mental Disorders was statistically significant, but is less 
than 1, meaning payments would be reduced if we applied it as a 
comorbidity adjustment. We are interested in understanding whether 
there is data and information that could better inform our 
understanding of the costs of treating these conditions. In addition, 
we are interested in understanding whether commenters believe it may be 
more appropriate to maintain the existing Drug/Alcohol Induced Mental 
Disorders comorbidity category adjustment factor of 1.03, given that 
many providers that treat these patients also report minimal or no 
ancillary charges on their claims and cost reports. We note that if we 
were to maintain the adjustment factor of 1.03 for these IPF stays, we 
expect it would have a negative impact on the refinement 
standardization factor, thereby slightly reducing the IPF PPS Federal 
per diem base rate and ECT per treatment amount.
    We are also proposing to modify the Eating and Conduct Disorders 
comorbidity category and redesignate it as the Eating Disorders 
comorbidity category. That is, we are proposing to remove conduct 
disorders from the codes eligible for a comorbidity adjustment. When we 
separately analyzed the ICD-10-CM codes for eating disorders 
(specifically, F5000 Anorexia nervosa, unspecified, F5001

[[Page 23168]]

Anorexia nervosa, restricting type, F5002 Anorexia nervosa, binge 
eating/purging type, and F509 Eating disorder, unspecified) and conduct 
disorders (F631 Pyromania, F6381 Intermittent explosive disorder, and 
F911 Conduct disorder, childhood-onset type), our regression results 
identified a positive, statistically significant adjustment factor 
associated with eating disorders. In contrast, conduct disorders had a 
negative and non-significant factor. These results suggest that eating 
disorders are associated with an increased level of resource use 
compared to conduct disorders, and that only eating disorders have an 
increase resource use at a level that is statistically significant. 
Based on these findings, we are proposing to remove conduct disorders 
from the proposed newly designated Eating Disorders comorbidity 
category.
    In addition, we are proposing to modify the Chronic Obstructive 
Pulmonary Disease comorbidity category to include ICD-10-CM codes 
associated with sleep apnea (specifically, G4733 Obstructive sleep 
apnea (adult) (pediatric), 5A09357 Assistance with Respiratory 
Ventilation, <24 Hrs, CPAP, Z9981 Dependence on supplemental oxygen, 
and Z9989 Dependence on other enabling machines and devices). In 
response to the FY 2023 and FY 2024 IPF PPS proposed rules, commenters 
requested that CMS analyze the additional cost associated with patients 
with sleep apnea. Patients with sleep apnea often need to use a 
continuous positive airway pressure (CPAP) machine with a cord to 
manage their condition. Based on the clinical expertise of CMS Medical 
Officers, we determined that patients with sleep apnea in the IPF 
setting would have increased ligature risk (that is, anything that 
could be used to attach a cord, rope, or other material for the purpose 
of hanging or strangulation), similar to the risk associated with 
patients in the IPF setting that have chronic obstructive pulmonary 
disease. We expect the additional staffing resources involved in 
treating IPF patients with sleep apnea would be similar to the 
resources involved in treating IPF patients with chronic obstructive 
pulmonary disease, as patients with chronic obstructive pulmonary 
disease may also require the presence of an additional device with a 
cord in the patient's room, such as a bilevel positive airway pressure 
(BiPAP) machine. We evaluated adding codes associated with sleep apnea 
to our regression model, on the basis of our expectation that we would 
observe higher costs associated with these codes that would be 
comparable to the costs associated with chronic obstructive pulmonary 
disease. The results of our 2019 through 2021 regression model suggest 
that sleep apnea is in fact associated with an increased level of 
resource use. Therefore, we are proposing to redesignate the Chronic 
Obstructive Pulmonary Disease category as the Chronic Obstructive 
Pulmonary Disease and Sleep Apnea comorbidity category.
    Further, we analyzed costs associated with the ICD-10-CM codes in 
Table 7 that indicate high-risk behavior. In response to the FY 2023 
and FY 2024 IPF PPS proposed rules, commenters requested that CMS 
analyze the additional cost associated with patients exhibiting violent 
behavior during their stay in an IPF. We considered these comments in 
coordination with CMS Medical Officers, and determined that patients 
exhibiting violent behavior would require more intensive management 
during an IPF stay. We determined that certain ICD-10-CM codes could 
describe the types of high-risk behaviors that require intensive 
management during an IPF stay. These could include patients exhibiting 
violent behavior as well as other high-risk, non-violent behaviors. We 
examined ICD-10-CM codes in the R45 code family (Symptoms and Signs 
Related to Emotional State) that could indicate high-risk behavior 
during an IPF stay, which would lead to increased resource use. The 
regression analysis found that several codes, R451 Restlessness and 
agitation, R454 Irritability and anger, and R4584 Anhedonia codes are 
associated with a statistically significant adjustment factor. In other 
words, patients presenting with restlessness and agitation, 
irritability and anger, or anhedonia are more costly than patients who 
do not present these conditions. Therefore, we are proposing to add a 
new comorbidity category recognizing the costs associated with 
Intensive Management for High-Risk Behavior.
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    Lastly, we are proposing to maintain the adjustment factors for the 
Developmental Disabilities and Uncontrolled Diabetes comorbidity 
categories. Based on the regression analysis, the Developmental 
Disabilities comorbidity category adjustment factor was not 
statistically significant; however, the current adjustment factor is 
within the confidence interval. As discussed in section III.C.3.a of 
this proposed rule, a non-statistically significant adjustment factor 
within the confidence interval indicates that the current adjustment 
factor would be a reasonable approximation of the increased costs. The 
Uncontrolled Diabetes comorbidity category adjustment factor did not 
change from the current adjustment factor based on the 2019 through 
2021 regression.
    We are also proposing to decrease the adjustment factors for the 
following comorbidity categories: Renal Failure--Acute, Artificial 
Openings--Digestive & Urinary, Cardiac conditions, Renal Failure--
Chronic, Chronic Obstructive Pulmonary Disease, Infectious Diseases, 
and Severe Musculoskeletal & Connective Tissue Diseases.
    The regression analysis found the Renal Failure--Acute, Artificial 
Openings--Digestive & Urinary, Cardiac conditions, Renal Failure--
Chronic, Chronic Obstructive Pulmonary Disease, Infectious Diseases, 
and Severe Musculoskeletal & Connective Tissue Diseases comorbidity 
categories resulted in a statistically significant adjustment factor. 
While payment would still be increased when the claim includes one of 
these comorbidity categories, the proposed adjustment factors for FY 
2025 would be less than the current adjustment factors for these 
categories. The proposed FY 2025 comorbidity adjustment factors are 
displayed in Table 8, and can be found in Addendum A, available on the 
CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets.

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BILLING CODE 4120-01-C
    As discussed in section III.F of this proposed rule, we are 
proposing to implement revisions to the comorbidity category 
adjustments budget-neutrally. A detailed discussion of the 
distributional impacts of these proposed changes is found in section 
VIII.C of this proposed rule.
    We solicit comments on these proposed revisions to the comorbidity 
category adjustment factors. Lastly, we are proposing that if more 
recent data become available, we would use such data, if appropriate, 
to determine the final FY 2025 comorbidity category adjustment factors.
(2) Proposed Coding Updates for FY 2025
    For FY 2025, we are proposing to add 2 ICD-10-CM/PCS codes to the 
Oncology Treatment comorbidity category. The proposed FY 2025 
comorbidity codes are shown in Addenda B, available on the CMS website 
at https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets.
    In accordance with the policy established in the FY 2015 IPF PPS 
final rule (79 FR 45949 through 45952), we reviewed all new FY 2025 
ICD-10-CM codes to remove codes that were site ``unspecified'' in terms 
of laterality from the FY 2023 ICD-10-CM/PCS codes in instances where 
more specific codes are available. As we stated in the FY 2015 IPF PPS 
final rule, we believe that specific diagnosis codes that narrowly 
identify anatomical sites where disease, injury, or a condition exists 
should be used when coding patients' diagnoses whenever these codes are 
available. We finalized in the FY 2015 IPF PPS rule, that we would 
remove site ``unspecified'' codes from the IPF PPS ICD-10-CM/PCS codes 
in instances when laterality codes (site specified codes) are 
available, as the clinician should be able to identify a more specific 
diagnosis based on clinical assessment at the medical encounter. There 
were no proposed changes to the FY 2025 ICD-10-CM/PCS codes, therefore, 
we are not proposing to remove any of the new codes.
c. Proposed Patient Age Adjustments
    As explained in the RY 2005 IPF PPS final rule (69 FR 66922), we 
analyzed the impact of age on per diem cost by examining the age 
variable (range of ages) for payment adjustments. In general, we found 
that the cost per day increases with age. The older age groups are 
costlier than the under 45 age group, the differences in per diem cost 
increase for each successive age group, and the differences are 
statistically significant. While our regression analysis of CY 2019 
through CY 2021 data supports maintaining a payment adjustment factor 
based on age as was established in the RY 2005 IPF PPS final rule, the 
results suggest that revisions to the adjustment factor for age are 
warranted.
    For FY 2025, we are proposing to revise the patient age adjustments 
as shown in Addendum A of this proposed rule, which is available on the 
CMS website at (see https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets). 
We are proposing to adopt the patient age adjustments derived from the 
regression

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model using a blended set of 2019 through 2021 data, as discussed in 
section III.C.3 of this proposed rule. Table 9 summarizes the current 
and proposed patient age adjustment factors for FY 2025. As discussed 
in section III.F of this proposed rule, we are proposing to implement 
this revision to the patient age adjustments budget-neutrally. A 
detailed discussion of the distributional impacts of this proposed 
change is found in section VIII.C of this proposed rule.
    We solicit comment on these proposed revisions to the patient age 
adjustment factors. Lastly, we are proposing that if more recent data 
become available, we would use such data, if appropriate, to determine 
the final FY 2025 patient age adjustment factors.
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d. Proposed Variable Per Diem Adjustments
    We explained in the RY 2005 IPF PPS final rule (69 FR 66946) that 
the regression analysis indicated that per diem cost declines as the 
LOS increases. The variable per diem adjustments to the Federal per 
diem base rate account for ancillary and administrative costs that 
occur disproportionately in the first days after admission to an IPF. 
As discussed in the RY 2005 IPF PPS final rule, where a complete 
discussion of the variable per diem adjustments can be found, we used a 
regression analysis to estimate the average differences in per diem 
cost among stays of different lengths (69 FR 66947 through 66950). As a 
result of this analysis, we established variable per diem adjustments 
that begin on day 1 and decline gradually until day 21 of a patient's 
stay. For day 22 and thereafter, the variable per diem adjustment 
remains the same each day for the remainder of the stay. However, the 
adjustment applied to day 1 depends upon whether the IPF has a 
qualifying ED. If an IPF has a qualifying ED, it receives a 1.31 
adjustment factor for day 1 of each stay. If an IPF does not have a 
qualifying ED, it receives a 1.19 adjustment factor for day 1 of the 
stay. The ED adjustment is explained in more detail in section III.D.4 
of this proposed rule.
    For FY 2025, we are proposing to revise the variable per diem 
adjustment factors as indicated in the table below, and shown in 
Addendum A to this rule, which is available on the CMS website at 
https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets. We are proposing 
to increase the adjustment factors for days 1 through 9. As shown in 
Table 10, the results of the latest regression analysis indicate that 
there is not a statistically significant decrease in cost per day after 
day 10; therefore, we are proposing that days 10 and above would 
receive a 1.00 adjustment. Table 10 summarizes the current and proposed 
variable per diem adjustment factors for FY 2025. As discussed in 
section III.F of this proposed rule, we are proposing to implement this 
revision to the variable per diem adjustments budget-neutrally. A 
detailed discussion of the distributional impacts of this proposed 
change is found in section VIII.C of this proposed rule.
    We solicit comments on these proposed revisions to the variable per 
diem adjustment factors. Lastly, we are proposing that if more recent 
data become available, we would use such data, if appropriate, to 
determine the

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final FY 2025 variable per diem adjustment factors.
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D. Proposed Updates to the IPF PPS Facility-Level Adjustments

    The IPF PPS includes facility-level adjustments for the wage index, 
IPFs located in rural areas, teaching IPFs, cost of living adjustments 
for IPFs located in Alaska and Hawaii, and IPFs with a qualifying ED. 
We are proposing to use the existing regression-derived facility-level 
adjustment factors established in the RY 2005 IPF final rule for FY 
2025.
    As previously discussed, in section I.A of this proposed rule, we 
are proposing to revise the methodology for determining payments under 
the IPF PPS as required by the CAA, 2023. We are not proposing changes 
to the facility-level adjustment factors for rural location and 
teaching status for FY 2025; however, section IV.A of this proposed 
rule includes a request for information regarding potential future 
updates to these facility-level adjustments. We are particularly 
interested in comments on the results of our updated regression 
analysis as they apply to facility-level adjustors.
1. Wage Index Adjustment
a. Background
    As discussed in the RY 2007 IPF PPS final rule (71 FR 27061), and 
the RY 2009 IPF PPS (73 FR 25719) and RY 2010 IPF PPS notices (74 FR 
20373), to provide an adjustment for geographic wage levels, the labor-
related portion of an IPF's payment is adjusted using an appropriate 
wage index. Currently, an IPF's geographic wage index value is 
determined based on the actual location of the IPF in an urban or rural 
area, as defined in Sec.  412.64(b)(1)(ii)(A) and (C).
    Due to the variation in costs and because of the differences in 
geographic wage levels, in the RY 2005 IPF PPS final rule, we required 
that payment rates under the IPF PPS be adjusted by a geographic wage 
index. We proposed and finalized a policy to use the unadjusted, pre-
floor, pre-reclassified IPPS hospital wage index to account for 
geographic differences in IPF labor costs. We implemented use of the 
pre-floor, pre-reclassified IPPS hospital wage data to compute the IPF 
wage index since there was not an IPF-specific wage index available. We 
believe that IPFs generally compete in the same labor market as IPPS 
hospitals therefore, the pre-floor, pre-reclassified IPPS hospital wage 
data should be reflective of labor costs of IPFs. We believe this pre-
floor, pre-reclassified IPPS hospital wage index to be the best 
available data to use as proxy for an IPF-specific wage index. As 
discussed in the RY 2007 IPF PPS final rule (71FR 27061 through 27067), 
under the IPF PPS, the wage index is calculated using the IPPS wage 
index for the labor market area in which the IPF is located, without 
considering geographic reclassifications, floors, and other adjustments 
made to the wage index under the IPPS. For a complete description of 
these IPPS wage index adjustments, we refer readers to the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41362 through 41390). Our wage index 
policy at Sec.  412.424(a)(2) provides that we use the best Medicare 
data available to estimate costs per day, including an appropriate wage 
index to adjust for wage differences.
    When the IPF PPS was implemented in the RY 2005 IPF PPS final rule, 
with

[[Page 23173]]

an effective date of January 1, 2005, the pre-floor, pre-reclassified 
IPPS hospital wage index that was available at the time was the FY 2005 
pre-floor, pre-reclassified IPPS hospital wage index. Historically, the 
IPF wage index for a given RY has used the pre-floor, pre-reclassified 
IPPS hospital wage index from the prior FY as its basis. This has been 
due in part to the pre-floor, pre-reclassified IPPS hospital wage index 
data that were available during the IPF rulemaking cycle, where an 
annual IPF notice or IPF final rule was usually published in early May. 
This publication timeframe was relatively early compared to other 
Medicare payment rules because the IPF PPS follows a RY, which was 
defined in the implementation of the IPF PPS as the 12-month period 
from July 1 to June 30 (69 FR 66927). Therefore, the best available 
data at the time the IPF PPS was implemented was the pre-floor, pre-
reclassified IPPS hospital wage index from the prior FY (for example, 
the RY 2006 IPF wage index was based on the FY 2005 pre-floor, pre-
reclassified IPPS hospital wage index).
    In the RY 2012 IPF PPS final rule, we changed the reporting year 
timeframe for IPFs from a RY to FY, which begins October 1 and ends 
September 30 (76 FR 26434 through 26435). In that FY 2012 IPF PPS final 
rule, we continued our established policy of using the pre-floor, pre-
reclassified IPPS hospital wage index from the prior year (that is, 
from FY 2011) as the basis for the FY 2012 IPF wage index. This policy 
of basing a wage index on the prior year's pre-floor, pre-reclassified 
IPPS hospital wage index has been followed by other Medicare payment 
systems, such as hospice and inpatient rehabilitation facilities. By 
continuing with our established policy, we remained consistent with 
other Medicare payment systems.
    In FY 2020, we finalized the IPF wage index methodology to align 
the IPF PPS wage index with the same wage data timeframe used by the 
IPPS for FY 2020 and subsequent years. Specifically, we finalized the 
use of the pre-floor, pre-reclassified IPPS hospital wage index from 
the FY concurrent with the IPF FY as the basis for the IPF wage index. 
For example, the FY 2020 IPF wage index was based on the FY 2020 pre-
floor, pre-reclassified IPPS hospital wage index rather than on the FY 
2019 pre-floor, pre-reclassified IPPS hospital wage index.
    We explained in the FY 2020 proposed rule (84 FR 16973), that using 
the concurrent pre-floor, pre-reclassified IPPS hospital wage index 
will result in the most up-to-date wage data being the basis for the 
IPF wage index. We noted that it would also result in more consistency 
and parity in the wage index methodology used by other Medicare payment 
systems. We indicated that the Medicare skilled nursing facility (SNF) 
PPS already used the concurrent IPPS hospital wage index data as the 
basis for the SNF PPS wage index. We proposed and finalized similar 
policies to use the concurrent pre-floor, pre-reclassified IPPS 
hospital wage index data in other Medicare payment systems, such as 
hospice and inpatient rehabilitation facilities. Thus, the wage 
adjusted Medicare payments of various provider types are based upon 
wage index data from the same timeframe. For FY 2025, we are proposing 
to continue to use the concurrent pre-floor, pre-reclassified IPPS 
hospital wage index as the basis for the IPF wage index.
    In the FY 2023 IPF PPS final rule (87 FR 46856 through 46859), we 
finalized a permanent 5-percent cap on any decrease to a provider's 
wage index from its wage index in the prior year, and we stated that we 
would apply this cap in a budget neutral manner. In addition, we 
finalized a policy that a new IPF would be paid the wage index for the 
area in which it is geographically located for its first full or 
partial FY with no cap applied because a new IPF would not have a wage 
index in the prior FY. We amended the IPF PPS regulations at Sec.  
412.424(d)(1)(i) to reflect this permanent cap on wage index decreases. 
We refer readers to the FY 2023 IPF PPS final rule for a more detailed 
discussion about this policy.
    We are proposing to apply the IPF wage index adjustment to the 
labor-related share of the national IPF PPS base rate and ECT payment 
per treatment. The proposed labor-related share of the IPF PPS national 
base rate and ECT payment per treatment is 78.8 percent in FY 2025. 
This percentage reflects the labor-related share of the 2021-based IPF 
market basket for FY 2025 and is 0.1 percentage point higher than the 
FY 2024 labor-related share (see section III.A.3 of this proposed 
rule).
b. Office of Management and Budget (OMB) Bulletins
(1) Background
    The wage index used for the IPF PPS is calculated using the 
unadjusted, pre-reclassified and pre-floor IPPS wage index data and is 
assigned to the IPF based on the labor market area in which the IPF is 
geographically located. IPF labor market areas are delineated based on 
the Core-Based Statistical Area (CBSAs) established by the OMB.
    Generally, OMB issues major revisions to statistical areas every 10 
years, based on the results of the decennial census. However, OMB 
occasionally issues minor updates and revisions to statistical areas in 
the years between the decennial censuses through OMB Bulletins. These 
bulletins contain information regarding CBSA changes, including changes 
to CBSA numbers and titles. OMB bulletins may be accessed online at 
https://www.whitehouse.gov/omb/information-for-agencies/bulletins/. In 
accordance with our established methodology, the IPF PPS has 
historically adopted any CBSA changes that are published in the OMB 
bulletin that corresponds with the IPPS hospital wage index used to 
determine the IPF wage index and, when necessary and appropriate, has 
proposed and finalized transition policies for these changes.
    In the RY 2007 IPF PPS final rule (71 FR 27061 through 27067), we 
adopted the changes discussed in the OMB Bulletin No. 03-04 (June 6, 
2003), which announced revised definitions for Metropolitan Statistical 
Areas (MSAs), and the creation of Micropolitan Statistical Areas and 
Combined Statistical Areas. In adopting the OMB CBSA geographic 
designations in RY 2007, we did not provide a separate transition for 
the CBSA-based wage index since the IPF PPS was already in a transition 
period from TEFRA payments to PPS payments.
    In the RY 2009 IPF PPS notice, we incorporated the CBSA 
nomenclature changes published in the most recent OMB bulletin that 
applied to the IPPS hospital wage index used to determine the current 
IPF wage index and stated that we expected to continue to do the same 
for all the OMB CBSA nomenclature changes in future IPF PPS rules and 
notices, as necessary (73 FR 25721).
    Subsequently, CMS adopted the changes that were published in past 
OMB bulletins in the FY 2016 IPF PPS final rule (80 FR 46682 through 
46689), the FY 2018 IPF PPS rate update (82 FR 36778 through 36779), 
the FY 2020 IPF PPS final rule (84 FR 38453 through 38454), and the FY 
2021 IPF PPS final rule (85 FR 47051 through 47059). We direct readers 
to each of these rules for more information about the changes that were 
adopted and any associated transition policies.
    As discussed in the FY 2023 IPF PPS final rule, we did not adopt 
OMB Bulletin 20-01, which was issued March 6, 2020, because we 
determined this bulletin had no material impact on

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the IPF PPS wage index. This bulletin creates only one Micropolitan 
statistical area, and Micropolitan areas are considered rural for the 
IPF PPS wage index. That is, the constituent county of the new 
Micropolitan area was considered rural effective as of FY 2021 and 
would continue to be considered rural if we adopted OMB Bulletin 20-01.
    Finally, on July 21, 2023, OMB issued Bulletin 23-01, which revises 
the CBSA delineations based on the latest available data from the 2020 
census. This bulletin contains information regarding updates of 
statistical area changes to CBSA titles, numbers, and county or county 
equivalents.
(2) Proposed Implementation of New Labor Market Area Delineations
    We believe it is important for the IPF PPS to use, as soon as is 
reasonably possible, the latest available labor market area 
delineations to maintain a more accurate and up-to-date payment system 
that reflects the reality of population shifts and labor market 
conditions. We believe that using the most current delineations would 
increase the integrity of the IPF PPS wage index system by creating a 
more accurate representation of geographic variations in wage levels. 
We have carefully analyzed the impacts of adopting the new OMB 
delineations and find no compelling reason to delay implementation. 
Therefore, we are proposing to implement the new OMB delineations as 
described in the July 21, 2023, OMB Bulletin No. 23-01, effective 
beginning with the FY 2025 IPF PPS wage index. We are proposing to 
adopt the updates to the OMB delineations announced in OMB Bulletin No. 
23-01 effective for FY 2025 under the IPF PPS.
    As previously discussed, we finalized a 5-percent permanent cap on 
any decrease to a provider's wage index from its wage index in the 
prior year. For more information on the permanent 5-percent cap policy, 
we refer readers to the FY 2023 IPF PPS final rule (87 FR 46856 through 
46859). In addition, we are proposing to phase out the rural adjustment 
for IPFs that are transitioning from rural to urban based on these CBSA 
revisions, as discussed in section III.D.1.c. of this proposed rule.
(a) Micropolitan Statistical Areas
    OMB defines a ``Micropolitan Statistical Area'' as a CBSA 
associated with at least one urban cluster that has a population of at 
least 10,000, but less than 50,000 (75 FR 37252). We refer to these as 
Micropolitan Areas. After extensive impact analysis, consistent with 
the treatment of these areas under the IPPS as discussed in the FY 2005 
IPPS final rule (69 FR 49029 through 49032), we determined the best 
course of action would be to treat Micropolitan Areas as ``rural'' and 
include them in the calculation of each state's IPF PPS rural wage 
index. We refer readers to the FY 2007 IPF PPS final rule (71 FR 27064 
through 27065) for a complete discussion regarding treating 
Micropolitan Areas as rural. We are not proposing any changes to this 
policy for FY 2025.
(b) Change to County-Equivalents in the State of Connecticut
    The June 6, 2022 Census Bureau Notice (87 FR 34235 through 34240), 
OMB Bulletin No. 23-01 replaced the 8 counties in Connecticut with 9 
new ``Planning Regions.'' Planning regions now serve as county-
equivalents within the CBSA system. We have evaluated the changes and 
are proposing to adopt the planning regions as county equivalents for 
wage index purposes. We believe it is necessary to adopt this migration 
from counties to planning region county-equivalents to maintain 
consistency with OMB updates. We are providing the following crosswalk 
for each county in Connecticut with the current and proposed FIPS 
county and county-equivalent codes and CBSA assignments.
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(c) Urban Counties That Would Become Rural Under the Revised OMB 
Delineations
    As previously discussed, we are proposing to implement the new OMB 
labor market area delineations (based upon OMB Bulletin No. 23-01) 
beginning in FY 2025. Our analysis shows that a total of 53 counties 
(and county equivalents) and 15 providers are located in areas that 
were previously considered part of an urban CBSA but would be 
considered rural beginning in FY 2025 under these revised OMB 
delineations. Table 12 lists the 53 urban counties that would be rural 
if we finalize our proposal to implement the revised OMB delineations.
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    We are proposing that the wage data for all providers located in 
the counties listed above would now be considered rural, beginning in 
FY 2025, when calculating their respective state's rural wage index. 
This rural wage index value would also be used under the IPF PPS. We 
recognize that rural areas typically have lower area wage index values 
than urban areas, and providers located in these counties may 
experience a negative impact in their IPF payment due to the proposed 
adoption of the revised OMB delineations. However, as discussed in 
section III.D.1.c of this proposed rule, providers located in these 
counties would receive a rural adjustment beginning in FY 2025, which 
would mitigate the impact of decreases to the wage index for these 
providers. In addition, the permanent 5-percent cap on wage index 
decreases under the IPF PPS would further mitigate large wage index 
decreases for providers in these areas.
(d) Rural Counties That Would Become Urban Under the Revised OMB 
Delineations
    As previously discussed, we are proposing to implement the new OMB 
labor market area delineations (based upon OMB Bulletin No. 23-01) 
beginning in FY 2025. Analysis of these OMB labor market area 
delineations shows that a total of 54 counties (and county equivalents) 
and 10 providers are located in areas that were previously considered 
rural but would now be considered urban under the revised OMB 
delineations. Table 13 lists the 54 rural counties that would be urban 
if we finalize our proposal to implement the revised OMB delineations.

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    We are proposing that when calculating the area wage index, 
beginning with FY 2025, the wage data for providers located in these 
counties would be included in their new respective urban CBSAs. 
Typically, providers located in an urban area receive a wage index 
value higher than or equal to providers located in their state's rural 
area. We also note that providers located in these areas would no 
longer be considered rural beginning in FY 2025. We refer readers to 
section III.D.1.c of this proposed rule for a discussion of the 
proposed policy to phase out the payment of the rural adjustment for 
providers in these areas.
(e) Urban Counties That Would Move to a Different Urban CBSA Under the 
New OMB Delineations
    In certain cases, adopting the new OMB delineations would involve a 
change only in CBSA name and/or number, while the CBSA continues to 
encompass the same constituent counties. For example, CBSA 10540 
(Albany-Lebanon, OR) would experience a change to its name, and become 
CBSA 10540 (Albany, OR), while its one constituent county would remain 
the same. Table 14 shows the current CBSA code and our proposed CBSA 
code where we are proposing to change either the name or CBSA number 
only. We are not discussing further in this section these proposed 
changes because they are inconsequential changes with respect to the 
IPF PPS wage index.

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    In some cases, if we adopt the new OMB delineations, counties would 
shift between existing and new CBSAs, changing the constituent makeup 
of the CBSAs. We consider this type of change, where CBSAs are split 
into multiple new CBSAs, or a CBSA loses one or more counties to 
another urban CBSA to be significant modifications.

[[Page 23181]]

    Table 15 lists the urban counties that would move from one urban 
CBSA to another newly proposed or modified CBSA if we adopted the new 
OMB delineations.
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    We have identified 68 IPF providers located in the affected 
counties listed in Table 15. If providers located in these counties 
move from one CBSA to another under the revised OMB delineations, there 
may be impacts, either negative or positive, upon their specific wage 
index values.
c. Proposed Adjustment for Rural Location
    In the RY 2005 IPF PPS final rule, (69 FR 66954), we provided a 17-
percent payment adjustment for IPFs located in a rural area. This 
adjustment was based on the regression analysis, which indicated that 
the per diem cost of rural facilities was 17-percent higher than that 
of urban facilities after accounting for the influence of the other 
variables included in the regression. This 17-percent adjustment has 
been part of the IPF PPS each year since the inception of the IPF PPS. 
As discussed earlier in this rule, we are proposing a number of 
revisions to the patient-level adjustment factors as well as changes to 
the CBSA

[[Page 23188]]

delineations. In order to minimize the scope of changes that would 
impact providers in any single year, we are proposing to use the 
existing regression-derived adjustment factor, which was established in 
RY 2005, for FY 2025 for IPFs located in a rural area as defined at 
Sec.  412.64(b)(1)(ii)(C). See 69 FR 66954 for a complete discussion of 
the adjustment for rural locations. However, as discussed in the 
section IV.A of this FY 2025 IPF PPS proposed rule, we have completed 
analysis of more recent cost and claims information and are soliciting 
comments on those results.
    As proposed earlier in this proposed rule, the adoption of OMB 
Bulletin No. 23-01 in accordance with our established methodology would 
determine whether a facility is classified as urban or rural for 
purposes of the rural payment adjustment in the IPF PPS. Overall, we 
believe implementing updated OMB delineations would result in the rural 
payment adjustment being applied where it is appropriate to adjust for 
higher costs incurred by IPFs in rural locations. However, we recognize 
that implementing these changes would have distributional effects among 
IPF providers, and that some providers would experience a loss of the 
rural payment adjustment because of our proposals. Therefore, we 
believe it would be appropriate to consider, as we have in the past, 
whether a transition period should be used to implement these proposed 
changes.
    Prior changes to the CBSA delineations have included a phase-out 
policy for the rural adjustment for IPFs transitioning from rural to 
urban status. On February 28, 2013, OMB issued OMB Bulletin No. 13-01, 
which established revised delineations for Metropolitan Statistical 
Areas, Micropolitan Statistical Areas, and Combined Statistical Areas 
in the United States and Puerto Rico based on the 2010 Census. We 
adopted these new OMB CBSA delineations in the FY 2016 IPF final rule 
(80 FR 46682 through 46689), and identified 105 counties and 37 IPFs 
that would move from rural to urban status due to the new CBSA 
delineations. To reduce the impact of the loss of the 17-percent rural 
adjustment, we adopted a budget-neutral 3-year phase-out of the rural 
adjustment for existing FY 2015 rural IPFs that became urban in FY 2016 
and that experienced a loss in payments due to changes from the new 
CBSA delineations. These IPFs received two-thirds of the rural 
adjustment for FY 2016 and one-third of the rural adjustment in FY 
2017. For FY 2018, these IPFs did not receive a rural adjustment.
    For subsequent adoptions of OMB Bulletin No. 15-01 for FY 2018 (82 
FR 36779 through 36780), OMB Bulletin 17-01 for FY 2020 (84 FR 38453 
through 38454), and OMB Bulletin 18-04 for FY 2021 (85 FR 47053 through 
47059), we identified that fewer providers were affected by these 
changes than by the changes relating to the adoption of OMB Bulletin 
13-01. We did not phase out the rural adjustment when adopting these 
delineation changes.
    For facilities located in a county that transitioned from rural to 
urban in Bulletin 23-01, we considered whether it would be appropriate 
to phase out the rural adjustment for affected providers consistent 
with our past practice of using transition policies to help mitigate 
negative impacts on hospitals of OMB Bulletin proposals that have a 
material effect on a number of IPFs. Adoption of the updated CBSAs in 
Bulletin 23-01 will change the status of 10 IPF providers currently 
designated as ``rural'' to ``urban'' for FY 2025 and subsequent fiscal 
years. As such, these 10 newly urban providers will no longer receive 
the 17-percent rural adjustment. Consistent with the transition policy 
adopted for IPFs in FY 2016 (80 FR 46682 through 4668980 FR 46682 
through 46689), we are proposing a 3-year budget neutral phase-out of 
the rural adjustment for IPFs located in the 54 rural counties that 
will become urban under the new OMB delineations, given the potentially 
significant payment impacts for these IPFs. We believe that a phase-out 
of the rural adjustment transition period for these 10 IPFs 
specifically is appropriate because we expect these IPFs will 
experience a steeper and more abrupt reduction in their payments 
compared to other IPFs. Therefore, we are proposing to phase out the 
rural adjustment for these providers to reduce the impact of the loss 
of the FY 2024 rural adjustment of 17-percent over FYs 2025, 2026, and 
2027. This policy would allow IPFs that are classified as rural in FY 
2024 and would be classified as urban in FY 2025 to receive two-thirds 
of the rural adjustment for FY 2025. For FY 2026, these IPFs would 
receive one-third of the rural adjustment. For FY 2027, these IPFs 
would not receive a rural adjustment. We believe a 3-year budget-
neutral phase-out of the rural adjustment for IPFs that transition from 
rural to urban status under the new CBSA delineations would best 
accomplish the goals of mitigating the loss of the rural adjustment for 
existing FY 2024 rural IPFs. The purpose of the gradual phase-out of 
the rural adjustment for these providers is to mitigate potential 
payment reductions and promote stability and predictability in payments 
for existing rural IPFs that may need time to adjust to the loss of 
their FY 2024 rural payment adjustment or that experience a reduction 
in payments solely because of this re-designation. This policy would be 
specifically for rural IPFs that become urban in FY 2025. We are not 
proposing a transition policy for urban IPFs that become rural in FY 
2025 because these IPFs will receive the full rural adjustment of 17-
percent beginning October 1, 2024. We solicit comments on this proposed 
policy.
d. Proposed Wage Index Budget Neutrality Adjustment
    Changes to the wage index are made in a budget neutral manner so 
that updates do not increase expenditures. Therefore, for FY 2025, we 
are proposing to continue to apply a budget neutrality adjustment in 
accordance with our existing budget neutrality policy. This policy 
requires us to update the wage index in such a way that total estimated 
payments to IPFs for FY 2025 are the same with or without the changes 
(that is, in a budget neutral manner) by applying a budget neutrality 
factor to the IPF PPS rates. We are proposing to use the following 
steps to ensure that the rates reflect the FY 2025 update to the wage 
indexes (based on the FY 2021 hospital cost report data) and the labor-
related share in a budget neutral manner:
    Step 1: Simulate estimated IPF PPS payments, using the FY 2024 IPF 
wage index values (available on the CMS website) and labor-related 
share (as published in the FY 2024 IPF PPS final rule (88 FR 51054).
    Step 2: Simulate estimated IPF PPS payments using the proposed FY 
2025 IPF wage index values (available on the CMS website), and the 
proposed FY 2025 labor-related share (based on the latest available 
data as discussed previously).
    Step 3: Divide the amount calculated in step 1 by the amount 
calculated in step 2. The resulting quotient is the proposed FY 2025 
budget neutral wage adjustment factor of 0.9995.
    Step 4: Apply the FY 2025 budget neutral wage adjustment factor 
from step 3 to the FY 2024 IPF PPS Federal per diem base rate after the 
application of the IPF market basket increase reduced by the 
productivity adjustment described in section III.A of this proposed 
rule to determine the FY 2025 IPF PPS Federal per diem base rate. As 
discussed in section III.F of this proposed rule, we are also proposing 
to apply a refinement standardization

[[Page 23189]]

factor to determine the FY 2025 IPF PPS Federal per diem base rate.
2. Proposed Teaching Adjustment
Background
    In the RY 2005 IPF PPS final rule, we implemented regulations at 
Sec.  412.424(d)(1)(iii) to establish a facility-level adjustment for 
IPFs that are, or are part of, teaching hospitals. The teaching 
adjustment accounts for the higher indirect operating costs experienced 
by hospitals that participate in graduate medical education (GME) 
programs. The payment adjustments are made based on the ratio of the 
number of fulltime equivalent (FTE) interns and residents training in 
the IPF and the IPF's average daily census.
    Medicare makes direct GME payments (for direct costs such as 
resident and teaching physician salaries, and other direct teaching 
costs) to all teaching hospitals including those paid under a PPS and 
those paid under the TEFRA rate-of-increase limits. These direct GME 
payments are made separately from payments for hospital operating costs 
and are not part of the IPF PPS. The direct GME payments do not address 
the estimated higher indirect operating costs teaching hospitals may 
face.
    The results of the regression analysis of FY 2002 IPF data 
established the basis for the payment adjustments included in the RY 
2005 IPF PPS final rule. The results showed that the indirect teaching 
cost variable is significant in explaining the higher costs of IPFs 
that have teaching programs. We calculated the teaching adjustment 
based on the IPF's ``teaching variable,'' which is (1 + [the number of 
FTE residents training in the IPF's average daily census]). The 
teaching variable is then raised to the 0.5150 power to result in the 
teaching adjustment. This formula is subject to the limitations on the 
number of FTE residents, which are described in this section of this 
proposed rule.
    We established the teaching adjustment in a manner that limited the 
incentives for IPFs to add FTE residents for the purpose of increasing 
their teaching adjustment. We imposed a cap on the number of FTE 
residents that may be counted for purposes of calculating the teaching 
adjustment. The cap limits the number of FTE residents that teaching 
IPFs may count for the purpose of calculating the IPF PPS teaching 
adjustment, not the number of residents teaching institutions can hire 
or train. We calculated the number of FTE residents that trained in the 
IPF during a ``base year'' and used that FTE resident number as the 
cap. An IPF's FTE resident cap is ultimately determined based on the 
final settlement of the IPF's most recent cost report filed before 
November 15, 2004 (69 FR 66955). A complete discussion of the temporary 
adjustment to the FTE cap to reflect residents due to hospital closure 
or residency program closure appears in the RY 2012 IPF PPS proposed 
rule (76 FR 5018 through 5020) and the RY 2012 IPF PPS final rule (76 
FR 26453 through 26456).
    In the regression analysis that informed the FY 2004 IPF PPS final 
rule, the logarithm of the teaching variable had a coefficient value of 
0.5150. We converted this cost effect to a teaching payment adjustment 
by treating the regression coefficient as an exponent and raising the 
teaching variable to a power equal to the coefficient value. We note 
that the coefficient value of 0.5150 was based on the regression 
analysis holding all other components of the payment system constant. A 
complete discussion of how the teaching adjustment was calculated 
appears in the RY 2005 IPF PPS final rule (69 FR 66954 through 66957) 
and the RY 2009 IPF PPS notice (73 FR 25721).
    We are proposing to retain the coefficient value of 0.5150 for the 
teaching adjustment to the Federal per diem base rate as we are not 
proposing refinements to the facility-level payment adjustments for 
rural location or teaching status for FY 2025. As noted earlier, given 
the scope of changes to the wage index and patient-level adjustment 
factors, we believe this will minimize the total impacts to providers 
in any given year.
3. Proposed Cost of Living Adjustment for IPFs Located in Alaska and 
Hawaii
    The IPF PPS includes a payment adjustment for IPFs located in 
Alaska and Hawaii based upon the area in which the IPF is located. As 
we explained in the RY 2005 IPF PPS final rule, the FY 2002 data 
demonstrated that IPFs in Alaska and Hawaii had per diem costs that 
were disproportionately higher than other IPFs. As a result of this 
analysis, we provided a COLA in the RY 2005 IPF PPS final rule. We 
refer readers to the FY 2024 IPF PPS final rule for a complete 
discussion of the currently applicable COLA factors (88 FR 51088 
through 51089).
    We adopted a new methodology to update the COLA factors for Alaska 
and Hawaii for the IPF PPS in the FY 2015 IPF PPS final rule (79 FR 
45958 through 45960). For a complete discussion, we refer readers to 
the FY 2015 IPF PPS final rule.
    We also specified that the COLA updates would be determined every 4 
years, in alignment with the IPPS market basket labor-related share 
update (79 FR 45958 through 45960). Because the labor-related share of 
the IPPS market basket was updated for FY 2022, the COLA factors were 
updated in FY 2022 IPPS/LTCH rulemaking (86 FR 45547). As such, we also 
finalized an update to the IPF PPS COLA factors to reflect the updated 
COLA factors finalized in the FY 2022 IPPS/LTCH rulemaking effective 
for FY 2022 through FY 2025 (86 FR 42621 through 42622). This is 
reflected in Table 16 below. We are proposing to maintain the COLA 
factors in Table 16 for FY 2025 in alignment with the policy described 
in this paragraph.

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    The proposed IPF PPS COLA factors for FY 2025 are also shown in 
Addendum A to this proposed rule, which is available on the CMS website 
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html.
4. Proposed Adjustment for IPFs With a Qualifying ED
    The IPF PPS includes a facility-level adjustment for IPFs with 
qualifying EDs. As defined in Sec.  412.402, qualifying emergency 
department means an emergency department that is staffed and equipped 
to furnish a comprehensive array of emergency services and meets the 
requirements of 42 CFR 489.24(b) and Sec.  413.65.
    We provide an adjustment to the Federal per diem base rate to 
account for the costs associated with maintaining a full-service ED. 
The adjustment is intended to account for ED costs incurred by a 
psychiatric hospital with a qualifying ED, or an excluded psychiatric 
unit of an IPPS hospital or a critical access hospital (CAH), and the 
overhead cost of maintaining the ED. This payment applies to all IPF 
admissions (with one exception which we describe in this section), 
regardless of whether the patient was admitted through the ED. The ED 
adjustment is made on every qualifying claim except as described in 
this section of this proposed rule. As specified at Sec.  
412.424(d)(1)(v)(B), the ED adjustment is not made when a patient is 
discharged from an IPPS hospital or CAH, and admitted to the same IPPS 
hospital's or CAH's excluded psychiatric unit. We clarified in the RY 
2005 IPF PPS final rule (69 FR 66960) that an ED adjustment is not made 
in this case because the costs associated with ED services are 
reflected in the DRG payment to the IPPS hospital or through the 
reasonable cost payment made to the CAH.
a. Proposed Update for FY 2025
    For FY 2025, we are proposing to update the adjustment factor from 
1.31 to 1.53 for IPFs with qualifying EDs using the same methodology 
used to determine ED adjustments in prior years. Thus, we are proposing 
to use the following steps, as used in prior years, to calculate the 
updated ED adjustment factor. (A complete discussion of the steps 
involved in the calculation of the ED adjustment factors can be found 
in the RY 2005 IPF PPS final rule (69 FR 66959 through 66960) and the 
RY 2007 IPF PPS final rule (71 FR 27070 through 27072).)
    Step 1: Estimate the proportion by which the ED costs of a stay 
would increase the cost of the first day of the stay. Using the IPFs 
with ED admissions in years 2019 through 2021, we divided the average 
ED cost per stay when admitted through the ED ($519.97) by the average 
cost per day ($1,338.93), which equals 0.39.
    Step 2: Adjust the factor estimated in step 1 to account for the 
fact that we would pay the higher first day adjustment for all cases in 
the qualifying IPFs, not just the cases admitted through the ED. Since 
on average, 66 percent of the cases in IPFs with ED admissions are 
admitted through the ED, we multiplied 0.39 by 0.66, which equals 0.26.
    Step 3: Add the adjusted factor calculated in the previous 2 steps 
to the variable per diem adjustment derived from the regression 
equation that we used to derive our other payment adjustment factors. 
As discussed in section III.C.4.d. of this proposed rule, the proposed 
first day payment factor for FY 2025 is 1.27. Adding 0.26, we obtained 
a first day variable per adjustment for IPFs with a qualifying ED equal 
to 1.53.
    The ED adjustment is incorporated into the variable per diem 
adjustment for the first day of each stay for IPFs with a qualifying 
ED. We are proposing that those IPFs with a qualifying ED would receive 
an adjustment factor of 1.53 as the variable per diem adjustment for 
day 1 of each patient stay. If an IPF does not have a qualifying ED, we 
are proposing that it would receive an adjustment factor of 1.27 as the 
variable per diem adjustment for day 1 of each patient stay, as 
discussed in section III.C.4.d. of this proposed rule. As discussed in 
section III.F of this proposed rule, we are proposing to implement this 
revision to the ED adjustment budget--neutrally by applying a 
refinement standardization factor. A detailed discussion of the 
distributional impacts of this proposed change is found in section 
VIII.C of this proposed rule.
    We solicit comment on this proposal. Lastly, we are proposing that 
if more recent data become available, we would use such data, if 
appropriate, to determine the FY 2025 ED adjustment factor.
b. Alternatives Considered
    In response to the FY 2023 IPF PPS proposed rule (87 FR 19428 
through 19429) comment solicitation on our technical report describing 
the analysis of IPF PPS adjustments, two

[[Page 23191]]

commenters requested that we conduct further analysis related to the 
exception for the ED adjustment. These commenters indicated that 
patients transferred to an IPF from an acute care unit or hospital 
often have higher costs per stay than patients with similar 
comorbidities admitted from the community. Commenters requested that 
CMS analyze data related to source of admission and consider a payment 
adjustment to account for the resources used by these patients. In 
response to these comments, we conducted a regression analysis to 
investigate whether the source of admission is a statistically 
significant variable in the cost of a patient's care in an IPF. We 
analyzed the following sources of admission: clinic referral, transfer 
from hospital (different facility), transfer from a SNF or Intermediate 
Care Facility (ICF), transfer from another health care facility, court/
law enforcement, information not available, transfer from hospital 
inpatient in the same facility, transfer from ambulatory surgical 
center, and transfer from hospice. In this context, it is important to 
note that the source of admission indicator ``court/law enforcement'' 
is not the equivalent of an involuntary admission; we do not currently 
collect data on involuntary admissions.
    The regression analysis found that the source of admission was not 
a statistically significant factor in the cost of care. The results for 
the two source of admission variables that indicate higher costs 
(transfer from hospital inpatient in the same facility and transfer 
from ambulatory surgical center) are accounted for by the known 
difference in cost structures between hospital psychiatric units and 
freestanding psychiatric hospitals. We considered the results of our 
analysis, as well as the potential that adjusting payment based on 
source of admission could inadvertently create incentives for IPFs to 
prioritize certain admissions over others. Based on these 
considerations, we are not proposing to add additional payment 
adjustments based on source of admission (other than the existing 
adjustment for a qualifying ED) to the IPF PPS in FY 2025.

E. Other Proposed Payment Adjustments and Policies

1. Outlier Payment Overview
    The IPF PPS includes an outlier adjustment to promote access to IPF 
care for those patients who require expensive care and to limit the 
financial risk of IPFs treating unusually costly patients. In the RY 
2005 IPF PPS final rule, we implemented regulations at Sec.  
412.424(d)(3)(i) to provide a per case payment for IPF stays that are 
extraordinarily costly. Providing additional payments to IPFs for 
extremely costly cases strongly improves the accuracy of the IPF PPS in 
determining resource costs at the patient and facility level. These 
additional payments reduce the financial losses that would otherwise be 
incurred in treating patients who require costlier care; therefore, 
reduce the incentives for IPFs to under-serve these patients. We make 
outlier payments for discharges in which an IPF's estimated total cost 
for a case exceeds a fixed dollar loss threshold amount (multiplied by 
the IPF's facility-level adjustments) plus the federal per diem payment 
amount for the case.
    In instances when the case qualifies for an outlier payment, we pay 
80 percent of the difference between the estimated cost for the case 
and the adjusted threshold amount for days 1 through 9 of the stay 
(consistent with the median LOS for IPFs in FY 2002), and 60 percent of 
the difference for day 10 and thereafter. The adjusted threshold amount 
is equal to the outlier threshold amount adjusted for wage area, 
teaching status, rural area, and the COLA adjustment (if applicable), 
plus the amount of the Medicare IPF payment for the case. We 
established the 80 percent and 60 percent loss sharing ratios because 
we were concerned that a single ratio established at 80 percent (like 
other Medicare PPSs) might provide an incentive under the IPF per diem 
payment system to increase LOS to receive additional payments.
    After establishing the loss sharing ratios, we determined the 
current fixed dollar loss threshold amount through payment simulations 
designed to compute a dollar loss beyond which payments are estimated 
to meet the 2 percent outlier spending target. Each year when we update 
the IPF PPS, we simulate payments using the latest available data to 
compute the fixed dollar loss threshold so that outlier payments 
represent 2 percent of total estimated IPF PPS payments.
2. Proposed Update to the Outlier Fixed Dollar Loss Threshold Amount
    In accordance with the update methodology described in Sec.  
412.428(d), we are proposing to update the fixed dollar loss threshold 
amount used under the IPF PPS outlier policy. Based on the regression 
analysis and payment simulations used to develop the IPF PPS, we 
established a 2 percent outlier policy, which strikes an appropriate 
balance between protecting IPFs from extraordinarily costly cases while 
ensuring the adequacy of the federal per diem base rate for all other 
cases that are not outlier cases. We are proposing to maintain the 
established 2 percent outlier policy for FY 2025.
    Our longstanding methodology for updating the outlier fixed dollar 
loss threshold involves using the best available data, which is 
typically the most recent available data. We note that for FY 2022 and 
FY 2023 only, we made certain methodological changes to our modeling of 
outlier payments, and we discussed the specific circumstances that led 
to those changes for those years (86 FR 42623 through 42624; 87 FR 
46862 through 46864). We direct readers to the FY 2022 and FY 2023 IPF 
PPS proposed and final rules for a more complete discussion.
    We are proposing to update the IPF outlier threshold amount for FY 
2025 using FY 2023 claims data and the same methodology that we have 
used to set the initial outlier threshold amount each year beginning 
with the RY 2007 IPF PPS final rule (71 FR 27072 and 27073). For this 
FY 2025 IPF PPS rulemaking, consistent with our longstanding practice, 
based on an analysis of the latest available data (the December 2023 
update of FY 2023 IPF claims) and rate increases, we believe it is 
necessary to update the fixed dollar loss threshold amount to maintain 
an outlier percentage that equals 2 percent of total estimated IPF PPS 
payments. Based on an analysis of these updated data, we estimate that 
IPF outlier payments as a percentage of total estimated payments are 
approximately 2.1 percent in FY 2024. Therefore, we are proposing to 
update the outlier threshold amount to $35,590 to maintain estimated 
outlier payments at 2 percent of total estimated aggregate IPF payments 
for FY 2025. This proposed rule update is an increase from the FY 2024 
threshold of $33,470.
    Lastly, we are proposing that if more recent data become available 
for the FY 2025 IPF PPS final rule, we would use such data as 
appropriate to determine the final outlier fixed dollar loss threshold 
amount for FY 2025.
3. Proposed Update to IPF Cost-to-Charge Ratio Ceilings
    Under the IPF PPS, an outlier payment is made if an IPF's cost for 
a stay exceeds a fixed dollar loss threshold amount plus the IPF PPS 
amount. To establish an IPF's cost for a particular case, we multiply 
the IPF's reported charges on the discharge bill by its overall cost-
to-charge ratio (CCR). This approach to determining an IPF's cost is 
consistent with the approach

[[Page 23192]]

used under the IPPS and other PPSs. In the FY 2004 IPPS final rule (68 
FR 34494), we implemented changes to the IPPS policy used to determine 
CCRs for IPPS hospitals, because we became aware that payment 
vulnerabilities resulted in inappropriate outlier payments. Under the 
IPPS, we established a statistical measure of accuracy for CCRs to 
ensure that aberrant CCR data did not result in inappropriate outlier 
payments.
    As indicated in the RY 2005 IPF PPS final rule (69 FR 66961), we 
believe that the IPF outlier policy is susceptible to the same payment 
vulnerabilities as the IPPS; therefore, we adopted a method to ensure 
the statistical accuracy of CCRs under the IPF PPS. Specifically, we 
adopted the following procedure in the RY 2005 IPF PPS final rule:
     Calculated two national ceilings, one for IPFs located in 
rural areas and one for IPFs located in urban areas.
     Computed the ceilings by first calculating the national 
average and the standard deviation of the CCR for both urban and rural 
IPFs using the most recent CCRs entered in the most recent Provider 
Specific File (PSF) available.
    For FY 2025, we are proposing to continue following this 
methodology. To determine the rural and urban ceilings, we multiplied 
each of the standard deviations by 3 and added the result to the 
appropriate national CCR average (either rural or urban). The proposed 
upper threshold CCR for IPFs in FY 2025 is 2.3362 for rural IPFs, and 
1.8600 for urban IPFs, based on current CBSA-based geographic 
designations. If an IPF's CCR is above the applicable ceiling, the 
ratio is considered statistically inaccurate, and we assign the 
appropriate national (either rural or urban) median CCR to the IPF.
    We apply the national median CCRs to the following situations:
     New IPFs that have not yet submitted their first Medicare 
cost report. We continue to use these national median CCRs until the 
facility's actual CCR can be computed using the first tentatively or 
final settled cost report.
     IPFs whose overall CCR is in excess of three standard 
deviations above the corresponding national geometric mean (that is, 
above the ceiling).
     Other IPFs for which the Medicare Administrative 
Contractor (MAC) obtains inaccurate or incomplete data with which to 
calculate a CCR.
    We are proposing to update the FY 2025 national median and ceiling 
CCRs for urban and rural IPFs based on the CCRs entered in the latest 
available IPF PPS PSF.
    Specifically, for FY 2025, to be used in each of the three 
situations listed previously, using the most recent CCRs entered in the 
CY 2023 PSF, we provide an estimated national median CCR of 0.5720 for 
rural IPFs and a national median CCR of 0.4200 for urban IPFs. These 
calculations are based on the IPF's location (either urban or rural) 
using the current CBSA-based geographic designations. A complete 
discussion regarding the national median CCRs appears in the RY 2005 
IPF PPS final rule (69 FR 66961 through 66964).
    Lastly, we are proposing that if more recent data become available, 
we would use such data to calculate the rural and urban national median 
and ceiling CCRs for FY 2025.
4. Requirements for Reporting Ancillary Charges and All-Inclusive 
Status Eligibility Under the IPF PPS
a. Background
    As discussed in section III.E.4.b of this proposed rule, to analyze 
variation in cost between patients with different characteristics, it 
is crucial for us to have complete cost information about each patient, 
including data on ancillary services provided. Currently, IPFs and 
psychiatric units are required to report ancillary charges on cost 
reports. As specified at 42 CFR 413.20, hospitals are required to file 
cost reports on an annual basis and maintain sufficient financial 
records and statistical data for proper determination of costs payable 
under the Medicare program.
    However, our ongoing analysis has found a notable increase in the 
number of IPFs, specifically for-profit freestanding IPFs, that appear 
to be erroneously identifying on form CMS-2552-10, Worksheet S-2, Part 
I, line 115, as eligible for filing all-inclusive cost reports. These 
hospitals identifying as eligible for filing all-inclusive cost reports 
(indicating that they have one charge covering all services) are 
consistently reporting no ancillary charges or very minimal ancillary 
charges and are not using charge information to apportion costs in 
their cost report. Generally, based on the nature of IPF services and 
the conditions of participation applicable to IPFs, we expect to see 
ancillary services and correlating charges, such as labs and drugs, on 
most IPF claims.\3\
---------------------------------------------------------------------------

    \3\ IPFs are subject to all hospital conditions of 
participation, including 42 CFR 482.25, which specifies that ``The 
hospital must have pharmaceutical services that meet the needs of 
the patients,'' and 482.27, which specifies that ``The hospital must 
maintain, or have available, adequate laboratory services to meet 
the needs of its patients.''
---------------------------------------------------------------------------

    In the FY 2016 IPF PPS final rule (80 FR 46693 through 46694), we 
discussed analysis conducted to better understand IPF industry 
practices for future IPF PPS refinements. This analysis revealed that 
in 2012 to 2013, over 20 percent of IPF stays show no reported 
ancillary charges, such as laboratory and drug charges, on claims. In 
the FY 2016 IPF PPS final rule (80 FR 46694), FY 2017 IPF PPS final 
rule (81 FR 50513), FY 2018 IPF PPS final rule (82 FR 36784), FY 2019 
IPF PPS final rule (83 FR 38588), and FY 2020 IPF PPS final rule (84 FR 
38458), we reminded providers that we only pay the IPF for services 
furnished to a Medicare beneficiary who is an inpatient of that IPF, 
except for certain professional services, and payments are considered 
to be payments in full for all inpatient hospital services provided 
directly or under arrangement (see 42 CFR 412.404(d)), as specified in 
42 CFR 409.10.
    On November 17, 2017, we issued Transmittal 12, which made changes 
to the hospital cost report form CMS-2552-10 (OMB No. 0938-0050) and 
included cost report level 1 edit 10710S, effective for cost reporting 
periods ending on or after August 31, 2017. Edit 10710S required that 
cost reports from psychiatric hospitals include certain ancillary costs 
or the cost report will be rejected. On January 30, 2018, we issued 
Transmittal 13, which changed the implementation date for Transmittal 
12 to be for cost reporting periods ending on or after September 30, 
2017. CMS suspended edit 10710S effective April 27, 2018, pending 
evaluation of the application of the edit to all-inclusive rate 
providers. We issued Transmittal 15 on October 19, 2018, reinstating 
the requirement that cost reports from psychiatric hospitals, except 
all-inclusive rate providers, include certain ancillary costs. This 
requirement is still currently in place. For details, we refer readers 
to see these Transmittals, which are available on the CMS website at 
https://www.cms.gov/medicare/regulations-guidance/transmittals.
    Under IPF PPS regulations at 42 CFR 412.404(e), all inpatient 
psychiatric facilities paid under the IPF PPS must meet the 
recordkeeping and cost reporting requirements as specified at Sec.  
413.24. Historically, in accordance with Sec.  413.24(a)(1), most 
hospitals that were approved to file all-inclusive cost reports were 
Indian Health Services (IHS) hospitals, government-owned psychiatric 
and acute care hospitals, and nominal charge hospitals. Although IPFs 
are no longer reimbursed on the basis of reasonable costs, we continue 
to expect that most IPFs, other than government-owned or tribally owned

[[Page 23193]]

IPFs, should report cost data that is based on an approved method of 
cost finding and on the accrual basis of accounting. The option to 
elect to file an all-inclusive rate cost report is limited to providers 
that do not have a charge structure and that, therefore, must use an 
alternative statistic to apportion costs associated with services 
rendered to Medicare beneficiaries.
    Current cost reporting rules allow hospitals that do not have a 
charge structure to file an all-inclusive cost report using an 
alternative cost allocation method. We refer readers to the Provider 
Reimbursement Manual (PRM) 15-1; chapter 22, Sec.  2208 for detailed 
information on the requirements to file an alternative method.
b. Challenges Related to Missing IPF Ancillary Cost Data
    In general, most providers allocate their Medicare costs using 
costs and charges as described at Sec.  413.53(a)(1)(i) and referred to 
as the Departmental Method, which is the ratio of beneficiary charges 
to total patient charges for the services of each ancillary department. 
For cost reporting periods beginning on or after October 1, 1982, the 
cost report uses the Departmental Method to apportion the cost of the 
department to the Medicare program. Added to this amount is the cost of 
routine services for Medicare beneficiaries, determined based on a 
separate average cost per diem for all patients for general routine 
patient care areas as required at Sec.  413.53(a)(1)(i) and (e); and 
15-1, chapter 22, Sec.  2200.1.\4\
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    \4\ IPFs are subject to all hospital conditions of 
participation, including 42 CFR 482.25, which specifies that ``The 
hospital must have pharmaceutical services that meet the needs of 
the patients,'' and 482.27, which specifies that ``The hospital must 
maintain, or have available, adequate laboratory services to meet 
the needs of its patients.''
---------------------------------------------------------------------------

    We use cost-to-charge ratios (CCRs) from Medicare cost reports as 
the method of establishing reasonable costs for hospital services and 
as the basis for ratesetting for several hospital prospective payment 
systems. In general, detailed ancillary cost and charge information is 
necessary for accurate Medicare ratesetting. When hospitals identify as 
all-inclusive, they are excluded from ratesetting because they do not 
have CCRs but use an alternative basis for apportioning costs. When 
hospitals erroneously identify as all-inclusive but have a charge 
structure, data that is necessary for accurate Medicare ratesetting is 
improperly excluded.
    Since the issuance of Transmittal 15, we have continued to identify 
an increase in the number of IPFs, specifically for-profit freestanding 
IPFs, that appear to be erroneously identifying on form CMS- 2552-10, 
Worksheet S-2, Part I, line 115, as filing all-inclusive cost reports. 
In conjunction with the FY 2023 IPF PPS proposed rule (87 FR 19428 
through 19429), we posted a report on the CMS website that summarizes 
the results of the latest analysis of more recent IPF cost and claim 
information for potential IPF PPS adjustments and requested comments 
about the results summarized in the report. The report showed that 
approximately 23 percent of IPF stays were trimmed from the data set 
used in that analysis because they were stays at facilities where fewer 
than 5 percent of their stays had ancillary charges. The report is 
available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/ipf-reports-and-educational-resources.
    Section 4125 of the CAA, 2023 authorizes the Secretary to collect 
data and information, specifically including charges related to 
ancillary services, as appropriate to inform revisions to the IPF PPS.
    In the FY 2024 IPF PPS proposed rule (88 FR 21270 through 21272), 
we included a request for information (RFI) related to the reporting of 
charges for ancillary services, such as labs and drugs, on IPF claims. 
We were interested in better understanding IPF industry practices 
pertaining to the billing and provision of ancillary services to inform 
statutorily mandated IPF PPS refinements. We stated that we were 
considering whether to require charges for ancillary services to be 
reported on claims and potentially reject claims if no ancillary 
services are reported, and whether to consider payment for such claims 
to be inappropriate or erroneous and subject to recoupment.
    In response to the comment solicitation, we received a comment from 
MedPAC regarding facilities that do not report ancillary charges on 
most or any of their claims. MedPAC stated that it is not known: 
whether IPFs fail to report ancillary charges separately because they 
were appropriately bundled with all other charges into an all-inclusive 
per diem rate; if no ancillary charges were incurred because the IPF 
cares for a patient mix with lower care needs or inappropriately fails 
to furnish the kinds of care reflected in ancillary charges when 
medically necessary; or if ancillary charges for services furnished 
during the IPF stay are inappropriately billed outside of the IPF base 
rate (unbundling). MedPAC recommended CMS conduct further investigation 
into the lack of certain ancillary charges and whether IPFs are 
providing necessary care and appropriately billing for inpatient 
psychiatric services under the IPF PPS.
    MedPAC also encouraged CMS to require the reporting of ancillary 
charges and clarify the requirements related to IPFs' ``all-inclusive-
rate'' hospital status. MedPAC noted that it observed in cost report 
data that IPFs that previously were not all-inclusive-rate hospitals 
have recently changed to an all-inclusive-rate status. MedPAC noted 
that the timing of many of these changes appears to correspond to CMS's 
transmittals requiring ancillary services to be reported on cost 
reports for IPFs that do not have an all-inclusive rate.
    Other commenters, including IPFs and hospital associations, 
responded to the RFI stating that the lack of ancillary charges on 
claims does not indicate a lack of services being provided. The 
commenters strongly opposed any claim-level editing and stated that 
reporting ancillary charges at the claim level would be inefficient and 
burdensome, particularly for government and IHS all-inclusive 
hospitals.
c. Clarification of Eligibility Criteria for the Option To Elect To 
File an All-Inclusive Cost Report
    After taking into consideration the feedback we received from both 
MedPAC and IPF providers, for FY 2025 we are clarifying the eligibility 
criteria to be approved to file all-inclusive cost reports. Only 
government-owned or tribally owned facilities are able to satisfy these 
criteria, and thus only these facilities will be permitted to file an 
all-inclusive cost report for cost reporting periods beginning on or 
after October 1, 2024.
    We remind readers that in order to be approved to file an all-
inclusive cost report, hospitals must either have an all-inclusive rate 
(one charge covering all services) or a no-charge structure.\5\ We are 
clarifying that this does not mean any hospital can elect to have an 
all-inclusive rate or no-charge structure. Our longstanding policy as 
discussed in the PRM 15-1, chapter 22, Sec.  2208.1, only allows a 
hospital to use an all-inclusive rate or no charge structure if it has 
never had a charge structure in place. In addition, we are clarifying 
that our expectation is that any new IPF would have the ability to have 
a charge structure under which it could allocate

[[Page 23194]]

costs and charges. As previously stated, only a government-owned or 
tribally owned facility will be able to satisfy these criteria and will 
be eligible to file its cost report using an all-inclusive rate or no 
charge structure.
---------------------------------------------------------------------------

    \5\ PRM 15-1, chapter 22, Sec.  2208.1.
---------------------------------------------------------------------------

    For cost reporting periods beginning on or after October 1, 2024, 
we will issue instructions to the MACs and put in place edits to 
operationalize our longstanding policy that only government-owned or 
tribally owned IPF hospitals are permitted to file an all-inclusive 
cost report. All other IPF hospitals must have a charge structure and 
must report ancillary costs and charges on their cost reports. IPFs 
that have previously filed an all-inclusive cost report erroneously 
will no longer be able to do so. We further note that to the extent 
government-owned or tribally owned hospitals can report ancillary 
charges on their cost reports, we strongly encourage them to do so to 
allow CMS to review and analyze complete and accurate data.
    We believe clarifying the current eligibility criteria to be 
approved to file all-inclusive cost reports and implementing these 
operational changes will appropriately require freestanding IPFs with 
the ability to have a charge structure, that is, all IPFs other than 
those which are government-owned or tribally owned, to track and report 
ancillary charge information. In addition, we expect that more IPFs 
reporting ancillary charge information will result in an increase of 
IPFs having a CCR, which will in turn result in an increased number of 
IPFs being included in ratesetting. Therefore, we believe these 
operational changes will improve the quality of data reported, which 
will result in increased accuracy of future payment refinements to the 
IPF PPS.
    Furthermore, we believe collecting charges of ancillary services 
from freestanding IPFs supports the directive for competition under the 
Executive Order on Promoting Competition in the American Economy as it 
facilitates accurate payment, cost efficiency, and transparency.\6\
---------------------------------------------------------------------------

    \6\ https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/.
---------------------------------------------------------------------------

F. Refinement Standardization Factor

    Section 1886(s)(5)(D)(iii) of the Act, as added by section 4125(a) 
of the CAA, 2023, states that revisions in payment implemented pursuant 
to section 1886(s)(5)(D)(i) for a rate year shall result in the same 
estimated amount of aggregate expenditures under this title for 
psychiatric hospitals and psychiatric units furnished in the rate year 
as would have been made under this title for such care in such rate 
year if such revisions had not been implemented. We interpret this to 
mean that revisions in payment adjustments implemented for FY 2025 (and 
for any subsequent fiscal year) must be budget neutral.
    Historically, we have maintained budget neutrality in the IPF PPS 
using the application of a standardization factor, which is codified in 
our regulations at Sec.  412.424(c)(5) to account for the overall 
positive effects resulting from the facility-level and patient-level 
adjustments. As discussed in section III.B.1 of this proposed rule, 
section 124(a)(1) of the BBRA required that we implement the IPF PPS in 
a budget neutral manner. In other words, the amount of total payments 
under the IPF PPS, including any payment adjustments, must be projected 
to be equal to the amount of total payments that would have been made 
if the IPF PPS were not implemented. Therefore, we calculated the 
standardization factor by setting the total estimated IPF PPS payments, 
taking into account all of the adjustment factors under the IPF PPS, to 
be equal to the total estimated payments that would have been made 
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) 
(Pub. L. 97-248) methodology had the IPF PPS not been implemented. A 
step-by-step description of the methodology used to estimate payments 
under the TEFRA payment system appears in the RY 2005 IPF PPS final 
rule (69 FR 66926).
    We believe the budget neutrality requirement of section 4125(a) of 
the CAA, 2023 is consistent with our longstanding methodology for 
maintaining budget neutrality under the IPF PPS. Therefore, for FY 
2025, we are proposing to apply a refinement standardization factor in 
accordance with our existing policy at Sec.  412.424(c)(5). This policy 
requires us to update IPF PPS patient-level adjustment factors, ED 
adjustment, and ECT per treatment amount as proposed in this FY 2025 
IPF PPS proposed rule, in such a way that total estimated payments to 
IPFs for FY 2025 are the same with or without the changes (that is, in 
a budget neutral manner) by applying a refinement standardization 
factor to the IPF PPS rates. We are proposing to use the following 
steps to ensure that the rates reflect the FY 2025 update to the 
patient-level adjustment factors (as previously discussed in section 
III.C and III.D of this proposed rule, and summarized in Addendum A) in 
a budget neutral manner:
    Step 1: Simulate estimated IPF PPS payments using the FY 2024 IPF 
patient-level and facility-level adjustment factor values and FY 2024 
ECT payment per treatment (available on the CMS website).
    Step 2: Simulate estimated IPF PPS payments using the proposed FY 
2025 IPF patient-level and facility-level adjustment factor values (see 
Addendum A of this proposed rule, which is available on the CMS 
website) and ECT per treatment amount based on the CY 2022 geometric 
mean cost for ECT under the OPPS.
    Step 3: Divide the amount calculated in step 1 by the amount 
calculated in step 2. The resulting quotient is the proposed FY 2025 
refinement standardization factor of 0.9514.
    Step 4: Apply the FY 2025 refinement standardization factor from 
step 3 to the FY 2024 IPF PPS Federal per diem base rate and ECT per 
treatment amount (based on the CY 2022 geometric mean cost for ECT 
under the OPPS), after the application of the wage index budget 
neutrality factor and the IPF market basket increase reduced by the 
productivity adjustment described in section III.A of this proposed 
rule to determine the FY 2025 IPF PPS Federal per diem base rate and FY 
2025 ECT payment amount per treatment.

IV. Requests for Information (RFI) To Inform Future Revisions to the 
IPF PPS in Accordance With the CAA, 2023

    As discussed in the following sections, we are requesting 
information on two main topics to inform future revisions to the IPF 
PPS, in accordance with the CAA, 2023. First, we are requesting 
information regarding potential revisions to the IPF PPS facility-level 
adjustments. Second, we are requesting information regarding the 
development of a patient assessment instrument under the IPFQR program.
    Please note, each of these sections is a request for information 
(RFI) only. In accordance with the implementing regulations of the 
Paperwork Reduction Act of 1995 (PRA), specifically 5 CFR 1320.3(h)(4), 
this general solicitation is exempt from the PRA. Facts or opinions 
submitted in response to general solicitations of comments from the 
public, published in the Federal Register or other publications, 
regardless of the form or format thereof, provided that no person is 
required to supply specific information pertaining to the commenter, 
other than that necessary for self-identification, as a condition of 
the agency's full consideration, are not generally considered 
information collections and therefore not subject to the PRA.

[[Page 23195]]

Respondents are encouraged to provide complete but concise responses. 
This RFI is issued solely for information and planning purposes; it 
does not constitute a Request for Proposal (RFP), applications, 
proposal abstracts, or quotations. This RFI does not commit the U.S. 
Government to contract for any supplies or services or make a grant 
award. Further, CMS is not seeking proposals through this RFI and will 
not accept unsolicited proposals. Responders are advised that the U.S. 
Government will not pay for any information or administrative costs 
incurred in response to this RFI; all costs associated with responding 
to this RFI will be solely at the interested party's expense. Not 
responding to this RFI does not preclude participation in any future 
procurement, if conducted. It is the responsibility of the potential 
responders to monitor this RFI announcement for additional information 
pertaining to this request. Please note that CMS will not respond to 
questions about the policy issues raised in this RFI. CMS may or may 
not choose to contact individual responders. Such communications would 
only serve to further clarify written responses. Contractor support 
personnel may be used to review RFI responses. Responses to this notice 
are not offers and cannot be accepted by the U.S. Government to form a 
binding contract or issue a grant. Information obtained as a result of 
this RFI may be used by the U.S. Government for program planning on a 
non-attribution basis. Respondents should not include any information 
that might be considered proprietary or confidential. This RFI should 
not be construed as a commitment or authorization to incur cost for 
which reimbursement would be required or sought. All submissions become 
U.S. Government property and will not be returned. CMS may publicly 
post the comments received, or a summary thereof.

A. Request for Information Regarding Revisions to IPF PPS Facility-
Level Adjustments

    The CAA, 2023 added section 1886(s)(5)(D) to require CMS to revise 
the IPF PPS methodology for determining payment rates for FY 2025, and 
for any subsequent FY as determined appropriate by the Secretary. As 
detailed in sections III.C and III.D of this proposed rule, we are 
proposing to revise the patient-level payment adjustments in FY 2025 
and retain the current facility-level payment adjustments for rural 
location and teaching status. We have also conducted analysis of the 
IPF PPS facility-level adjustments using an updated regression analysis 
of cost and claims data for CY 2019 through 2021, as discussed in 
section III.C.3. of this proposed rule. The updated analysis identified 
potential changes in the regression factors for rural location and 
teaching status and suggests there may be value in including a new 
facility-level variable for safety net patient population, based on the 
Medicare Safety Net Index (MSNI) methodology developed by MedPAC for 
the IPPS. We note that the analysis of MSNI builds on prior analysis 
that CMS conducted regarding the applicability of an adjustment for 
disproportionate share intensity. Our review is ongoing and may be used 
to inform future rulemaking.
    In the following sections, we describe the results of our latest 
analysis and request public comment on them. We are interested in 
comments regarding whether it would be appropriate to consider 
proposing revisions to the IPF PPS facility-level adjustments in the 
future based on the results of our latest regression analysis in future 
years.
1. Adjustment for Rural Location
    In our MedPAR data set, which included data from CY 2019 through CY 
2021, 101,483 stays, or 12.6 percent of all stays, were at rural IPFs. 
Our analysis shows that the regression coefficient for rural stays is 
1.19. This means that holding all other variables constant and 
controlling for area wage differences, stays at rural IPFs have 
approximately 19-percent higher cost per day than stays at urban IPFs. 
As previously discussed, we did not include control variables in our 
regression model to account for occupancy rate. However, we note that 
if we included these control variables, we estimate the rural 
adjustment in the regression would decrease to approximately 1.13.
    In addition, as discussed later in section IV.A.3 of this proposed 
rule, we evaluated the potential inclusion of a new variable for 
facilities' safety net patient population, as measured by the MSNI 
ratio. We observe that the inclusion of the MSNI ratio in the 
regression model would have an impact on the rural adjustment factor. 
In the regression model that includes the MSNI ratio, the rural 
adjustment factor is 1.16. In other words, if we were to adopt an MSNI 
payment adjustment, our FY 2025 regression model indicates that the 
rural adjustment factor would decrease relative to the rural adjustment 
factor calculated without the MSNI variable. However, for rural 
facilities with a high level of safety net patients, the combined 
effect of the rural adjustment and a safety net adjustment would 
increase payments. These results are presented in Table 17, and we are 
seeking public comments on these results.
[GRAPHIC] [TIFF OMITTED] TP03AP24.028

    We have modeled informational impacts reflecting the potential 
change in payments, as discussed in section IV.A.4 of this proposed 
rule, though we note future additional data and analysis may produce 
results that differ from those presented in this proposed rule.
2. Teaching Adjustment
    In the IPF PPS payment methodology, the teaching status for each 
facility is calculated as one plus the facility's ratio of intern and 
resident FTEs to the average daily census (69 FR 66954 through 66955). 
The teaching variable used in the regression is the natural log of each 
facility's teaching status, resulting in a continuous variable with a 
distribution ranging from 0.0000 to 1.6079. The payment adjustment for 
teaching status, as explained in section III.D.2 of this proposed rule, 
is calculated by raising a facility's teaching ratio to the power of 
the teaching status coefficient derived from the regression analysis.
    In our updated regression analysis of data for CY 2019 through CY 
2021, there

[[Page 23196]]

were 155,458 stays in teaching facilities, comprising 19.3 percent of 
IPF stays for the time period. As previously discussed in this proposed 
rule, we found that the occupancy variables used in the original IPF 
PPS regression model were correlated with rural status, and have been 
removed in this updated model. We note that if we were to include 
occupancy control variables in the regression model, the adjustment for 
teaching status would increase to 1.0087.
    The teaching status variable continues to be statistically 
significant at the 0.001 level in all of our updated models; in other 
words, we found that a facility's teaching status explains differences 
in costs between IPF stays. As shown in Table 18, the teaching status 
coefficient would increase in either updated regression model compared 
to its current value.
[GRAPHIC] [TIFF OMITTED] TP03AP24.029

    As discussed in section IV.A.4. of this proposed rule, we have 
modeled informational impacts reflecting the potential change in 
payments from these adjustment factors. We are seeking public comment 
on these results. We note that future additional data and analysis may 
produce results that differ from those presented in this proposed rule.
3. Adjustment for Safety Net Patient Population
a. Prior Analysis of Disproportionate Share Hospital Status
    In contrast to other Medicare hospital payment systems, the IPF PPS 
does not have an adjustment that recognizes disproportionate share 
intensity. Section 1886(s) of the Act does not require any specific 
adjustment of this type, nor does it require the use of any particular 
methodology. In the past, we have explored the application of the 
disproportionate share hospital (DSH) variable used in other Medicare 
prospective payment systems (that is, the sum of the proportion of 
Medicare days of care provided to recipients of Supplemental Security 
Income and the proportion of the total days of care provided to 
Medicaid beneficiaries) for the IPF PPS. We refer readers to the RY 
2005 IPF PPS final rule (69 FR 66958 through 66959) and the FY 2023 IPF 
PPS final rule (87 FR 46865). For psychiatric units, both proportions 
are specific to the unit and not the entire hospital.
    In the RY 2005 IPF PPS final rule, we explained that the DSH 
variable was highly significant in our cost regressions; however, we 
found that facilities with higher DSH had lower per diem costs. We note 
that the previously cited study for the American Psychiatric 
Association also found the same results. The relationship of high DSH 
with lower costs cannot be attributed to downward bias in the Medicaid 
proportion due to the IMD exclusion. This is because public psychiatric 
hospitals already have lower costs on average than other types of IPFs. 
Therefore, if we had proposed a DSH adjustment based on the regression 
analysis, IPFs with high DSH shares would have been paid lower per diem 
rates (69 FR 66958).
    In the FY 2023 IPF PPS proposed rule, we summarized and discussed 
the results of more recent analysis using data from 2018 (87 FR 19428 
through 19429). In response to that proposed rule, commenters 
encouraged CMS to continue evaluating ways to increase IPF PPS payments 
for disproportionate share intensity. MedPAC recommended that we 
consider the applicability of the MSNI, which has previously been 
discussed in the context of the IPPS, to the IPF PPS. As discussed in 
the following paragraphs, we have conducted analysis of the MSNI and 
are soliciting comments on our findings.
b. Analysis of the Medicare Safety Net Index in the IPF PPS
(1) Background
    MSNI is an index that MedPAC developed as its recommended 
alternative to the current statutorily required methodology for 
disproportionate share payments to IPPS hospitals. In their March 2023 
Report to Congress, MedPAC recommend that MSNI would better target 
scarce Medicare resources to support hospitals that are key sources of 
care for low-income Medicare beneficiaries and may be at risk of 
closure.\7\ For further discussion of this safety net index in the 
context of the Medicare program, we refer readers to the FY 2024 IPPS 
final rule (88 FR 58640), which includes a discussion of how MSNI could 
be calculated for acute care hospitals and an RFI on the potential use 
of MSNI or other safety net indicators in the IPPS, such as the area 
deprivation index (ADI) or Social Deprivation Index (SDI).
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    \7\ Medicare Payment Advisory Commission. (2023). Report to the 
Congress: Medicare Payment Policy. Available at: https://www.medpac.gov/wp-content/uploads/2023/03/Ch3_Mar23_MedPAC_Report_To_Congress_SEC_v2.pdf. Accessed on January 
22, 2024.
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    For our analysis, we constructed an MSNI for each IPF in our data 
set, which we calculated as the sum of three ratios:
     The low-income subsidy (LIS) volume ratio, which is the 
ratio of total stays for low-income beneficiaries to a facility's total 
stays for Medicare beneficiaries. For our analysis, low-income 
beneficiaries are identified based on dual-enrollment or enrollment in 
Part D low-income subsidies, and stays are identified from MedPAR 
claims. This ratio was defined the same way in the FY 2024 IPPS final 
rule's discussion of MSNI (88 FR 59306).
     The proportion of revenue spent on uncompensated care 
(UCC), defined the same way as it was in the FY 2024 IPPS final rule's 
discussion of MSNI (88 FR 59306). UCC and total revenue are available 
data elements from the hospital cost report, but only for the acute 
care hospital. These elements are not currently detailed at the level 
of the IPF unit.
     The Medicare dependency ratio, which is a hospital's total 
covered days for Medicare patients divided by its total patient days. 
This information comes from the hospital cost report. We have also 
defined this ratio in the same way as it was defined in the FY 2024 
IPPS final rule's discussion of MSNI (88 FR 59306).
    The final MSNI score is calculated as: LIS Volume Ratio + 
Proportion of Revenue Spent on UCC ratio + 0.5 * Medicare Dependency 
Ratio. This formula follows MedPAC's methodology based on its analysis 
of data for the IPPS hospital setting. As discussed in its

[[Page 23197]]

March 2023 Report to Congress, the Medicare Dependency Ratio is 
multiplied by 0.5 because MedPAC's prior analysis of costs in the IPPS 
setting found that the Medicare Dependency Ratio had approximately half 
the effect on cost as the other two components of MSNI.
(2) Regression Analysis Results
    The adjusted r-square, a measure of how much of the variation in 
costs between stays our model can explain, increases by approximately 
2.8 percent when we add the variable for MSNI to the updated model 
analyzing cost and claims data for CY 2019 through CY 2021. The 
adjusted r-square for the model without the MSNI variable is 0.32340, 
while the adjusted r-square for the model with the MSNI variable is 
0.33250. Our regression analysis indicates an MSNI coefficient of 
0.5184, which is statistically significant at the .001 level.
[GRAPHIC] [TIFF OMITTED] TP03AP24.030

    Section 1886(s)(5)(D)(iii) of the Act, as added by section 4125(a) 
of the CAA, 2023, states that revisions in payment implemented pursuant 
to section 1886(s)(5)(D)(i) for a rate year shall result in the same 
estimated amount of aggregate expenditures under this title for 
psychiatric hospitals and psychiatric units furnished in the rate year 
as would have been made under this title for such care in such rate 
year if such revisions had not been implemented. Therefore, our 
estimates of payments associated with a potential MSNI payment 
adjustment include the application of a standardization factor, which 
we note would reduce the IPF PPS Federal per diem base rate by 
approximately $245. Total payments to IPFs would remain the same, but 
there would be significant distributional impacts, which would reduce 
payments to IPFs with a lower MSNI and increase payments to IPFs with a 
higher MSNI. We refer readers to section IV.A.4 of this proposed rule 
for informational analysis and discussion of the potential 
distributional impacts estimated for the MSNI payment adjustment.
    We note that for certain elements of the MSNI calculation, some 
data was not available for IPFs at the same level of detail available 
for IPPS hospitals. We also identified that for some elements, data 
reported by IPFs may be incomplete. First, as mentioned above, both UCC 
amounts and total revenue amounts are reported at the hospital level 
only. As a result, we were able to calculate a UCC ratio for IPF units 
based on the overall ratio of the hospital's UCC to its revenues. This 
assumes that a hospital's overall UCC ratio would be comparable to that 
of its IPF unit. However, because we lack unit-level data, we are not 
able to validate this assumption. Table 20 shows that most freestanding 
IPF hospitals are not reporting any UCC, which leads to lower MSNI 
values for these IPFs. We recognize that the absence of UCC for 
nonprofit IPFs, which we believe in fact provide a significant amount 
of UCC, may reflect differences in reporting, rather than provision of 
UCC.
[GRAPHIC] [TIFF OMITTED] TP03AP24.031

    There are also a number of key differences between our analysis and 
the way that MedPAC has recommended that MSNI be applied to payments in 
the IPPS setting. For the IPPS, MedPAC recommends to the Congress in 
their March 2023 report that they create an MSNI pool of funds for MSNI 
add-on payments of about $2 billion, which could be increased each year 
by the market basket update. MedPAC contemplates hospitals choosing 
between an MSNI payment and other special payment rates designed to 
protect access, for example, in rural areas, or the adoption of a 
percentage-based cap on all special payment rates.\8\ In contrast, our 
modeling of an MSNI payment adjustment in the IPF PPS, assumes that 
IPFs could be eligible for both an MSNI payment and the payment 
adjustment for rural location, for example, without a cap imposed. Our 
modeling also assumes that an MSNI payment adjustment would be budget 
neutral; in other words, the payment would not be an add-on. In 
contrast to the recommended approach for the IPPS, which would come 
from a new funding pool, we estimate that the application of an MSNI 
adjustment would affect the Federal IPF PPS per diem base rate. As a 
result, the MSNI payment in our model would represent a redistribution 
of funds within the IPF PPS, as is

[[Page 23198]]

statutorily required under section 4125(a) of the CAA, 2023.
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    \8\ Medicare Payment Advisory Commission. (2023). Report to the 
Congress: Medicare Payment Policy. Available at: https://www.medpac.gov/wp-content/uploads/2023/03/Ch3_Mar23_MedPAC_Report_To_Congress_SEC_v2.pdf. Accessed on January 
22, 2024.
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    We constructed the MSNI variable in our regression model similarly 
to the construction of the teaching adjustment (that is, as the natural 
log of a facility's MSNI ratio plus 1). Consequently, a payment 
adjustment derived from our regression results would work like the 
teaching status adjustment: the MSNI adjustment factor is expressed in 
an un-exponentiated form. A provider's MSNI factor plus one would be 
raised to the power of the MSNI adjustment factor to calculate the 
facility's MSNI payment adjustment.
    We are considering the potential operational changes that would be 
necessary to implement an adjustment for MSNI in the future. For 
example, we anticipate the need to periodically recalculate facilities' 
MSNI ratios, which could potentially correspond to a facility's cost 
report settlement process. We also anticipate the need to develop a 
reconciliation process, should such an adjustment for MSNI be 
implemented in the future. Further, we expect that because a facility's 
LIS ratio would not be an available data element on the hospital cost 
report, we may need to develop and publish a facility-level file with 
this information or consider collecting additional data on the hospital 
cost report. As discussed in the following section, we are seeking 
public comment on our regression results, as well as our methodology 
used to construct the MSNI variable for IPFs, and on the operational 
considerations we have noted. We note that future additional data and 
analysis produce results that differ from those presented in this 
proposed rule.
(3) Request for Information
    We are particularly seeking comment on the following questions:
     Should we consider adjusting payment using MedPAC's MSNI 
formula with adaptations, as described above? What, if any, changes to 
the methodology should we consider for the IPF setting? For example, 
should we develop a separate payment adjustment for each component 
(that is, the low-income ratio, uncompensated care ratio, and Medicare 
dependency ratio)?
     We note that our construction of the MSNI did not scale or 
index facility-level variables to a national standard or median value. 
We anticipate that doing so would result in less of a change to the IPF 
Federal per diem base rate but would still result in comparable 
distributional impacts (that is, IPFs with lower MSNIs would receive 
lower payments, and IPFs with higher MSNIs would receive higher 
payments). Should we consider scaling or indexing the MSNI to a 
national average MSNI for all IPFs?
     Is MedPAC's MSNI formula, as adapted, an accurate and 
appropriate measure of the extent to which an IPF acts as a safety-net 
hospital for Medicare beneficiaries?
     Should additional data be collected through the cost 
report to improve the calculation of MSNI, such as collecting UCC and 
revenue at the IPF unit level?
     Is the current cost report data submitted by IPFs 
sufficiently valid and complete to support the implementation of an 
MSNI payment? We note our concerns about the low or non-existent 
amounts reported for uncompensated care for freestanding IPFs and the 
use of hospital-level UCC and revenue amounts to calculate the UCC 
ratio for IPF units.
     What administrative burden or challenges might providers 
face in reporting their UCC and low-income patient stays?
     Would IPFs have the information necessary to report their 
low-income patient stays to CMS for the purpose of the MSNI 
calculation? What challenges might IPFs face in gathering and reporting 
this information?
     In the FY 2023 IPPS proposed rule, CMS noted that, when 
calculating the MSNI, the following circumstances may be encountered: 
new hospitals (for example, hospitals that begin participation in the 
Medicare program after the available audited cost report data), 
hospital mergers, hospitals with multiple cost reports and/or cost 
reporting periods that are shorter or longer than 365 days, cost 
reporting periods that span fiscal years, and potentially aberrant 
data. How should CMS consider addressing these circumstances when 
calculating the MSNI for IPFs?
4. Informational Impacts of Potential Facility-Level Revisions on IPF 
PPS Payments
    We estimate that an MSNI payment adjustment in concert with the 
potential rural payment adjustment and teaching adjustments detailed in 
this section would have a refinement standardization factor of 0.7202. 
In other words, adoption of these facility-level payment adjustments as 
described in this section of this proposed rule would decrease the 
Federal per diem base rate by $244.81. In contrast, we estimate that 
updating only the rural and teaching adjustments without MSNI would 
have a refinement standardization factor of 0.9926, which would 
decrease the Federal per diem base rate by $6.48.
    Estimates of distributional impacts by facility type, location, 
ownership, teaching status, and region are detailed in Table 21. We are 
seeking public comment on these informational impacts to potentially 
inform future rulemaking.
    To illustrate the impacts of these potential changes to the IPF PPS 
facility-level adjustments, our analysis begins with the same FY 2023 
IPF PPS claims (based on the 2023 MedPAR claims, December 2023 update) 
as discussed in section VIII.C of this proposed rule. We begin with 
estimated FY 2025 IPF PPS payments using these 2023 claims, the 
proposed FY 2025 IPF PPS Federal per diem base rate and ECT per 
treatment amount, the proposed refinements to the FY 2025 IPF PPS 
patient and facility level adjustment factors, and the proposed FY 2025 
IPF PPS wage index. At each stage, total outlier payments are 
maintained at 2 percent of total estimated FY 2025 IPF PPS payments.
    Each of the following changes is added incrementally to this 
baseline model in order for us to isolate the effects of each change:
     The potential updates to the IPF teaching adjustment and 
rural adjustment, without the addition of an adjustment for MSNI.
     Adding an adjustment for MSNI and reducing the IPF rural 
adjustment and teaching adjustment as shown in the third column of 
Tables 17 and 18 of this proposed rule.
BILLING CODE 4120-01-P

[[Page 23199]]

[GRAPHIC] [TIFF OMITTED] TP03AP24.032


[[Page 23200]]


[GRAPHIC] [TIFF OMITTED] TP03AP24.033

BILLING CODE 4120-01-C

B. Request for Information (RFI)--Patient Assessment Instrument Under 
IPFQR Program (IPF PAI) To Improve the Accuracy of the PPS

    Section 4125(b)(1) of CAA, 2023 amended section 1886(s)(4) of the 
Act, by inserting a new paragraph (E), to require IPFs participating in 
the IPFQR Program to collect and submit to the Secretary certain 
standardized patient assessment data, using a standardized patient 
assessment instrument (PAI) developed by the Secretary, for RY 2028 (FY 
2028) and each subsequent rate year. IPFs must submit such data with 
respect to at least the admission to and discharge of an individual 
from the IPF, or more frequently as the Secretary determines 
appropriate. For IPFs to meet this new data collection and reporting 
requirement for RY 2028 and each subsequent rate year, the Secretary 
must implement a standardized PAI that collects data with respect to 
the following categories: functional status; cognitive function and 
mental status; special services, treatments, and interventions for 
psychiatric conditions; medical conditions and comorbidities; 
impairments; and other categories as determined appropriate by the 
Secretary. This IPF-PAI must enable comparison of the patient 
assessment data across all IPFs which submit these data. In other 
words, the data must be standardized such that data from IPFs 
participating in the IPFQR Program can be compared; the IPF-PAI each 
IPF administers must be made up of identical questions and identical 
sets of response options to which identical standards and definitions 
apply.
    As we develop the IPF-PAI, in accordance with these new statutory 
requirements, we seek to collect information that will help us achieve 
the following goals: (1) improve the quality of care in IPFs, (2) 
improve the accuracy of the IPF PPS in accordance with section 
4125(b)(2) of CAA, 2023, and (3) improve health equity.\9\ In this 
Request for Information (RFI), we are soliciting comments for 
development of this IPF-PAI, in accordance with these new statutory 
requirements, and to achieve these goals.
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    \9\ For more information on our strategic goals to improve 
health equity by expanding the collection, reporting, and analysis 
of standardized data, we refer readers to Priority 1 of our 
Framework for Health Equity at https://www.cms.gov/priorities/health-equity/minority-health/equity-programs/framework.
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    This RFI consists of four sections. The first section discusses a 
general framework or set of principles for development of the IPF-PAI. 
The second section outlines potential approaches that could be used to 
develop the items or data elements that

[[Page 23201]]

make up the PAI. This section also discusses patient assessment data 
elements in use in PAIs for skilled nursing facilities and other 
healthcare settings that could potentially be adapted for use in the 
IPF-PAI. The third section outlines potential approaches that could be 
used to collect patient assessment data. Finally, the fourth section 
solicits public comment on the principles and approaches listed in the 
first three sections and seeks other input regarding the IPF-PAI.
1. Framework for Development of the IPF-PAI
    We considered similar legislatively derived PAIs previously 
implemented for certain post-acute care (PAC) providers to inform the 
goals and guiding principles for the IPF-PAI because of similarities of 
section 4125(b) of CAA, 2023 to the Improving Medicare Post-Acute Care 
Transformation Act of 2014 (IMPACT Act) (Pub. L. 113-185, October 6, 
2014), codified at section 1899B of the Act. Similar to section 4125(b) 
of CAA, 2023, section 1899B of the Act requires certain PAC providers, 
specifically home health agencies (HHAs), skilled nursing facilities 
(SNFs), inpatient rehabilitation facilities (IRFs), and long-term care 
hospitals (LTCHs), to submit certain standardized patient assessment 
data (as set forth at section 1899B(b)(1)(B)) using a standardized PAI 
under the PAC providers' respective quality reporting programs. While 
IPFs are acute care providers and not PAC providers, given the 
similarities between the CAA, 2023 and section 1899B of the Act, we 
considered the goals and guiding principles that we followed to 
implement section 1899B of the Act for certain PAC providers and 
examined their applicability and appropriateness for IPFs.
    We previously identified four key considerations when assessing 
Standardized Patient Assessment Data Elements for the PAC PAIs to 
collect: (1) Overall clinical relevance; (2) Interoperable exchange to 
facilitate care coordination during transitions in care; (3) Ability to 
capture medical complexity and risk factors that can inform both 
payment and quality; and (4) Scientific reliability and validity, 
general consensus agreement for its usability.\10\ For the reasons 
discussed in the following subsections, we believe that these 
considerations are also appropriate for the development of the IPF-PAI. 
In addition, we seek to balance the need to collect meaningful patient 
data to improve care with the need to minimize administrative burden. 
The remainder of this section describes each of these considerations in 
the context of the IPF-PAI. As we discuss in section IV.B.4.a of this 
proposed rule, we are soliciting comment on these considerations.
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    \10\ We refer readers to the Prospective Payment System and 
Consolidated Billing for Skilled Nursing Facilities; Updates to the 
Quality Reporting Program and Value-Based Purchasing Program for 
Federal fiscal year 2020 final rule (84 FR 38767); the Medicare 
Program; Inpatient Rehabilitation Facility (IRF) Prospective Payment 
System for Federal fiscal year 2020 and Updates to the IRF Quality 
Reporting Program final rule (84 FR 39110), the Medicare and 
Medicaid Programs; CY 2020 Home Health Prospective Payment System 
Rate Update; Home Health Value-Based Purchasing Model; Home Health 
Quality Reporting Requirements; and Home Infusion Therapy 
Requirements CY 2020 final rule (84 FR 60567), and the Medicare 
Program; Hospital Inpatient Prospective Payment Systems for Acute 
Care Hospitals and the Long-Term Care Hospital Prospective Payment 
System and Policy Changes and fiscal year 2020 Rates; Quality 
Reporting Requirements for Specific Providers; Medicare and Medicaid 
Promoting Interoperability Programs Requirements for Eligible 
Hospitals and Critical Access Hospitals final rule (84 FR 42537).
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a. Overall Clinical Relevance
    In each category of assessment required by section 
1886(s)(4)(E)(ii), as added by section 4125(b) of CAA, 2023, 
(functional status; cognitive function and mental status; special 
services, treatments, and interventions for psychiatric conditions; 
medical conditions and comorbidities; impairments, and other categories 
as determined appropriate by the Secretary), we seek to establish 
Standardized Patient Assessment Data Elements that providers can use to 
support high quality care and outcomes in the IPF setting. As we 
evaluate Standardized Patient Assessment Data Elements in PAIs designed 
for other care settings, we intend to work with CMS Medical Officers, 
including psychiatrists, to consider the clinical relevance for IPF 
patients as a determining factor in whether an item merits inclusion in 
the IPF-PAI. For an example of a PAI in use in another setting, we 
refer readers to the IRF-PAI instrument available at https://www.cms.gov/files/document/irf-pai-version-40-eff-10012022-final.pdf. 
We are particularly interested in learning about specific instruments 
and tools in each area of assessment that have high clinical relevance 
in the IPF setting and welcome comments regarding Standardized Patient 
Assessment Data Elements that may not be clinically relevant to the IPF 
setting.
    To ensure the clinical relevance of the instrument across a diverse 
group of IPF patients, we are considering structuring the assessment 
with conditional questions, so that certain sets of questions are only 
indicated if the questions are relevant to the patient. Furthermore, we 
note that some data elements may only be appropriate for collection at 
certain times during the patient's stay (for example, only at admission 
or only at discharge). We solicit comments regarding the most effective 
structure to employ in the development of the IPF-PAI.
b. Interoperability
    Interoperability is a key priority and initiative at CMS. Across 
the organization, we aim to promote the secure exchange, access, and 
use of electronic health information to support better informed 
decision making and a more efficient healthcare system. As a part of 
this effort, we make interoperability a priority for standardized data 
collection. We intend to ensure that the IPF-PAI meets Health Level 
7[supreg] (HL7[supreg]) Fast Healthcare Interoperability 
Resources[supreg] (FHIR[supreg]) standards.
    As part of our interoperability considerations, we are interested 
in whether Standardized Patient Assessment Data Elements already in use 
in the CMS Data Element Library (DEL) are appropriate and clinically 
relevant for the IPF setting. In CY 2021, approximately 8,000 
admissions to IPFs were individuals transferred from SNFs or IRFs. We 
are interested in whether Standardized Patient Assessment Data Elements 
already used in the DEL can be used to better support interoperability 
between providers, given the high number of transfers.
c. Ability To Capture Medical Complexity and Risk Factors
    We intend to expand our efforts to refine the IPF PPS to increase 
the accuracy of the payment system by better identifying patient 
characteristics that best predict resource use during an IPF stay. To 
identify Standardized Patient Assessment Data Elements that would help 
predict resource use, we intend to evaluate Standardized Patient 
Assessment Data Elements for their ability to explain medical 
complexity, the need for special services and treatments, and to 
measure case-mix differences that impact costs. It is our expectation 
that an IPF-PAI that effectively differentiates treatment needs between 
patients will also help IPFs plan and distribute their resources. Our 
hope is that the IPF-PAI can therefore integrate with IPFs' business 
practices. In addition, Standardized Patient Assessment Data Elements 
that capture patient risk factors can

[[Page 23202]]

contribute to quality of care and patient safety.
d. Scientific Reliability and Validity
    Standardized Patient Assessment Data Elements considered for 
inclusion in the IPF-PAI must be scientifically reliable and valid in 
IPF settings. We intend to draw on our significant experience in 
development of quality measures in the IPFQR Program and development of 
Standardized Patient Assessment Data Elements for other PAIs, such as 
the IRF-PAI and the Minimum Data Set (MDS) (the PAI for SNFs), in our 
development of Standardized Patient Assessment Data Elements for the 
IPF-PAI.\11\ It is important to note that the statutorily required 
timeframe for implementation of the IPF-PAI for RY 2028 limits our 
ability to develop and test a full battery of new Standardized Patient 
Assessment Data Elements for the launch of the IPF-PAI. We anticipate 
the need and opportunity for incremental revisions to the IPF-PAI in 
the future.
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    \11\ For more information on other PAIs, we refer readers to 
https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-rehabilitation/pai (for the IRF-PAI), to https://www.cms.gov/medicare/quality/home-health/oasis-data-sets (for the 
OASIS data set for HHAs), to https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-care-data-set-ltch-qrp-manual (for the 
CARE data set for LTCHs), and to https://www.cms.gov/medicare/quality/nursing-home-improvement/resident-assessment-instrument-manual (for the Minimum Data Set (MDS) Resident Assessment 
Instrument (RAI)).
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    We anticipate that our development process for new Standardized 
Patient Assessment Data Elements will include working with teams of 
researchers for each category including a group of advisors made up of 
clinicians and academic researchers for each team with expertise in 
IPFs. We expect to convene a Technical Expert Panel (TEP) to provide 
expert input on new and existing Standardized Patient Assessment Data 
Elements that merit consideration for inclusion and testing, including 
environmental scans and reviews of scientific literature. In an ideal 
scenario, Standardized Patient Assessment Data Elements would be tested 
in a representative sample of IPFs for appropriateness in different IPF 
settings and across a range of patients. Standardized Patient 
Assessment Data Elements would be tested for inter-rater (that is, 
consistency in results regardless of who is administering the 
assessment) and inter-organizational reliability, for validity in all 
IPF settings, for internal consistency, and for breadth of application 
among a range of IPF patients. We anticipate that Standardized Patient 
Assessment Data Elements would also need to be tested for their ability 
to detect differences among patients and costs of treatment. Due to the 
constraints of the statutorily required implementation timeframe, it 
may not be possible to complete all testing before launching the IPF-
PAI.
    The process for scientifically testing each question and set of 
responses is lengthy and resource-intensive. This process is based on 
the steps for quality measure development described in the Blueprint 
Measure Lifecycle,\12\ developed by the CMS Measures Management System. 
These steps include literature review and environmental scanning; 
various levels of field testing to understand the ``real world'' 
performance of the data elements; and iterative expert and interested 
parties engagement to include broader perspectives on topics, candidate 
data elements, and interpretation of testing results. If appropriate, 
using data currently collected by IPFs or Standardized Patient 
Assessment Data Elements that have been tested and validated for use in 
other clinical settings can reduce these timeframes because test data 
are already available.
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    \12\ https://mmshub.cms.gov/blueprint-measure-lifecycle-overview.
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e. Administrative Burden
    In evaluating Standardized Patient Assessment Data Elements for 
inclusion in the IPF-PAI, we are considering the burden of data 
collection through the PAI and aiming to minimize additional burden by 
considering whether any data that is currently collected through IPFQR 
Program measures or on IPF claims could be collected as Standardized 
Patient Assessment Data Elements to avoid duplication of data that IPFs 
are already reporting. We are also considering how collecting some data 
for some IPFQR Program measures through the IPF-PAI and collecting 
other data through the Hospital Quality Reporting (HQR) system would 
affect the reporting burden for participating IPFs. Licensing, 
permissions costs, or copyright restrictions that would add to 
administrative costs and burdens are also a consideration as we 
evaluate existing PAIs and mechanisms or tools for submitting IPF-PAI 
data.
    As we develop the IPF-PAI, we are interested in receiving 
information about how to find a balance between collecting the most 
relevant and useful information and the administrative burden of 
administering the assessment and submitting the assessment data.
2. Elements of the IPF-PAI
    Section 1886(s)(4)(E)(ii) of the Act, added by section 
4125(b)(1)(C) of the CAA, 2023, requires that the standardized patient 
assessment data to be collected in the IPF-PAI must be with respect to 
six enumerated categories.
a. Functional Status
    The first enumerated category of data for the IPF-PAI is functional 
status. Section 1886(s)(4)(E)(ii)(I) of the Act provides that 
functional status may include mobility and self-care at admission to a 
psychiatric hospital or unit and before discharge from a psychiatric 
hospital or unit. We note that information in this category is 
generally found in a patient's discharge summary and are interested in 
learning about standardized elements that correspond to functional 
status as relevant to IPFs. We are interested in what assessments may 
be currently in use in the IPF setting and meet criteria for inclusion 
in the IPF-PAI.
b. Cognitive Function and Mental Status
    The second enumerated category of data for the IPF-PAI is cognitive 
function and mental status. Section 1886(s)(4)(E)(ii)(II) of the Act 
provides that cognitive function may include the ability to express 
ideas and to understand, and mental status may include depression and 
dementia. We note that in the IPF setting, a patient's diagnoses, which 
can be abstracted from their medical chart, provide some information 
related to this category. We are aware that IPFs may be currently 
assessing cognitive function using existing instruments. We are 
interested in hearing from IPFs about which instruments are currently 
in use to measure cognitive function in IPFs and which have high 
clinical relevance for the IPF setting.
c. Special Services, Treatments, and Interventions
    The third enumerated category of data for the IPF-PAI is special 
services, treatments, and interventions for psychiatric conditions. 
Section 1886(s)(4)(E)(ii)(III) of the Act neither addresses what these 
terms mean nor provides any illustrative examples. As discussed in 
section V.C. of this rule, the IPFQR Program already collects 
information about the use of restraint and seclusion through quality 
measures (Hospital Based Inpatient Psychiatric Services (HBIPS)-2, 
Hours of Physical Restraint, and HBIPS-3, Hours of Seclusion Use), 
while claims include information about ECT treatments provided. Other 
areas of interest in this

[[Page 23203]]

category may include high-cost medications, use of chemical restraints, 
one-to-one observation, and high-cost technologies. We are interested 
in whether these or any other special services, treatments, or 
interventions should be considered for inclusion in the IPF-PAI.
d. Medical Conditions and Comorbidities
    The fourth enumerated category of data for the IPF-PAI is medical 
conditions and comorbidities. Section 1886(s)(4)(E)(ii)(IV) of the Act 
provides that medical conditions and comorbidities may include 
diabetes, congestive heart failure, and pressure ulcers. We note that 
IPF claims record a significant number of medical conditions and 
comorbidities to receive the payment adjustment for comorbidities in 
the IPF PPS and conditions that are relevant to the IPF stay. In 
reviewing Standardized Patient Assessment Data Elements listed in this 
category in PAIs in use in PAC settings, we observed that these PAIs 
include Standardized Patient Assessment Data Elements regarding pain 
interference in this category, such as the effect of pain on sleep, 
pain interference with therapy activities, and pain interference with 
day-to-day activities. We are interested in learning from commenters 
whether these existing data elements from the PAC settings would be 
clinically relevant for inclusion in this category for the IPF-PAI.
e. Impairments
    The fifth enumerated category of data for the IPF-PAI is 
impairments. Section 1886(s)(4)(E)(ii)(V) of the Act provides that 
impairments may include incontinence and an impaired ability to hear, 
see, or swallow. PAIs in use in other settings include Standardized 
Patient Assessment Data Elements regarding hearing and vision (for 
example, Section B, ``Hearing, Speech, and Vision'' of the IRF-PAI 
Version 4.2 (Effective October 1, 2024)).\13\ We are interested both in 
whether Standardized Patient Assessment Data Elements regarding 
additional impairments merit consideration for the IPF-PAI, and whether 
the Standardized Patient Assessment Data Elements regarding hearing and 
vision included in the IRF-PAI are appropriate for the IPF setting. We 
note that the Standardized Patient Assessment Data Element categories 
are not intended to be duplicative, so we would seek to avoid any 
overlap in measuring cognitive deficits in the Cognitive Function 
category with the Impairments category.
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    \13\ https://www.cms.gov/files/document/irf-pai-version-42-effective-10-01-24.pdf.
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f. Other Categories Deemed Appropriate
    The sixth enumerated category of data for the IPF-PAI is other 
categories as determined appropriate by the Secretary. We believe this 
provision allows for flexibility to include additional areas in the 
IPF-PAI.
    One of our strategic priorities, as laid out in the CMS Strategic 
Plan,\14\ reflects our deep commitment to improvements in health equity 
by addressing the health disparities that underlie our health system. 
In line with that strategic priority, we are interested in Standardized 
Patient Assessment Data Elements that would provide insight about any 
demographic factors (for example, race, national origin, primary 
language, ethnicity, sexual orientation, and gender identity) as well 
as SDOH (for example, housing status and food security) associated with 
underlying inequities. We are also interested in whether there are 
Standardized Patient Assessment Data Elements that would provide 
insight into special interventions that IPFs are providing to support 
patients after discharge which could serve to potentially reduce the 
incidence of readmissions.
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    \14\ The CMS Strategic Plan. Available at https://www.cms.gov/about-cms/what-we-do/cms-strategic-plan. Accessed February 20, 2024.
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    We note that, beginning with mandatory reporting of CY 2025 data 
for FY 2027 payment determination, the IPFQR Program includes the 
Screening for SDOH measure, which assesses the percentage of patients, 
aged 18 years and over at the time of admission, who are screened for 
five specific health-related social needs (HRSNs)--food insecurity, 
housing instability, transportation needs, utility difficulties, and 
interpersonal safety, but which does not require reporting of that 
information at the patient-level (88 FR 51117). Furthermore, we note 
that PAIs adopted for the PAC settings discussed previously include 
collection of SDOH data under section 1899B(b)(1)(B)(vi) of the Act, 
which contains a similar provision for other categories deemed 
appropriate by the Secretary.\15\
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    \15\ For further information detailing the rationale for 
adopting SDOH Standardized Patient Assessment Data Elements in these 
settings, we refer readers to the Prospective Payment System and 
Consolidated Billing for Skilled Nursing Facilities; Updates to the 
Quality Reporting Program and Value-Based Purchasing Program for 
Federal fiscal year 2020 final rule (84 FR 38805 through 38817); the 
Medicare Program; Inpatient Rehabilitation Facility (IRF) 
Prospective Payment System for Federal fiscal year 2020 and Updates 
to the IRF Quality Reporting Program final rule (84 FR 39149 through 
38161), the Medicare and Medicaid Programs; CY 2020 Home Health 
Prospective Payment System Rate Update; Home Health Value-Based 
Purchasing Model; Home Health Quality Reporting Requirements; and 
Home Infusion Therapy Requirements CY 2020 final rule (84 FR 60597 
through 60608), and the Medicare Program; Hospital Inpatient 
Prospective Payment Systems for Acute Care Hospitals and the Long-
Term Care Hospital Prospective Payment System and Policy Changes and 
fiscal year 2020 Rates; Quality Reporting Requirements for Specific 
Providers; Medicare and Medicaid Promoting Interoperability Programs 
Requirements for Eligible Hospitals and Critical Access Hospitals 
final rule (84 FR 42577 through 42588).
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    We note that, if we deem it appropriate to add a SDOH category for 
the IPF-PAI and these SDOH data are included as Standardized Patient 
Assessment Data Elements in the PAI, they could potentially be used to 
risk adjust or stratify measures collected for the IPFQR Program. We 
are interested in learning whether using some of these SDOH data 
adopted in other PAIs to risk adjust or stratify these measures would 
make the measures in the IPFQR Program more meaningful.
3. Implementation of the PAI--Data Submission
    We plan to develop flexible methods for providers to submit IPF-PAI 
data to CMS, including batch uploads in specified formats and a portal 
for submission of files. We welcome public comment on tools and methods 
for submission of data that balance administrative burden and ease of 
use.
4. Request for Information on IPF-PAI
    In this proposed rule, we are requesting information from the 
public to inform the selection of Standardized Patient Assessment Data 
Elements to be collected on the IPF-PAI and the implementation process. 
We are seeking information about PAIs IPFs currently use upon admission 
and discharge, as well as information about how IPFs estimate resource 
needs to determine capacity before a patient is admitted. We are also 
seeking information about methods for IPFs to submit patient assessment 
data and the potential administrative burden on IPFs, MACs, and CMS. 
Finally, we are seeking input on the relationship between the IPF-PAI 
and the measures within the IPFQR Program.
    We solicit comment on the following topics:
a. Principles for Selecting Standardized Patient Assessment Data 
Elements
     To what extent do you agree with the principles for 
selecting and developing Standardized Patient Assessment Data Elements 
for the IPF-PAI?
     What, if any, principles should CMS eliminate from the 
Standardized

[[Page 23204]]

Patient Assessment Data Element selection criteria?
     What, if any, principles should CMS add to the 
Standardized Patient Assessment Data Element selection criteria?
b. Patient Assessments Recommended for Use in the IPF-PAI
     Are there PAIs currently available for use, or that could 
be adapted or developed for use in the IPF-PAI, to assess patients': 
(1) functional status; (2) cognitive function and mental status; (3) 
special services, treatments, and interventions for psychiatric 
conditions; (4) medical conditions and comorbidities; (5) impairments; 
(6) health disparities; or (7) other areas not mentioned in this RFI?
c. Functional Status Standardized Patient Assessment Data Elements
     What aspects of function are most predictive of medical 
complexity or increased resource needs to treat a patient in the IPF 
setting?
     Which of the Standardized Patient Assessment Data Elements 
related to mobility (that is, the ability to toilet transfer, walk 10 
feet, car transfer, walk 10 feet on an uneven surface, 1 step up (that 
is, a curb), 4 steps up, 12 steps up, and pick up an object) currently 
collected by PAC settings in their respective PAIs are clinically 
relevant in the IPF setting? Do they otherwise meet the principles for 
inclusion in the IPF-PAI?
d. Cognitive Function and Mental Status Standardized Patient Assessment 
Data Elements
     What aspects of cognitive function and mental status are 
most predictive of medical complexity or increased resource needs to 
treat a patient in the IPF setting?
     What components or instruments are used to assess 
cognitive function, mental status, or a combination thereof upon 
admission? What, if any, differences are there between assessments 
administered at admission and at discharge? What are the components of 
the mental status assessments administered at admission and discharge?
e. Special Services, Treatments, and Interventions for Psychiatric 
Conditions Standardized Patient Assessment Data Elements
     What special services, treatments, and interventions are 
most predictive of increased resource intensity during an IPF stay?
     Do data currently collected as part of the IPFQR Program 
related to special services and treatments (such as HBIPS-2 Hours of 
Physical Restraint Use and HBIPS-3 Hours of Seclusion Use) meet the 
criteria for inclusion in the IPF-PAI?
f. Medical Conditions and Comorbidities Standardized Patient Assessment 
Data Elements
     Is the Standardized Patient Assessment Data Element 
regarding pain interference (effect on sleep, interference with therapy 
activities, interference with day-to-day activities) currently 
collected by PAC settings in their respective PAIs clinically relevant 
in the IPF setting? Does it otherwise meet the criteria for inclusion 
in the IPF-PAI?
     Do the medical conditions and comorbidities coded on IPF 
claims meet the criteria for inclusion in the IPF-PAI?
g. Impairments Standardized Patient Assessment Data Elements
     Are Standardized Patient Assessment Data Elements related 
to impairments (that is, the ability to hear and see in adequate light) 
currently collected PAC settings in their respective PAIs clinically 
relevant in the IPF setting? Do they otherwise meet the principles for 
inclusion in the IPF-PAI?
     What impairments are most predictive of increased resource 
intensity during an IPF stay?
h. Other Categories of Standardized Patient Assessment Data Elements
     What other assessment elements would contribute to the 
clinical utility of the IPF-PAI?
     What other assessment elements would best capture medical 
complexity in the interest of refining and improving the accuracy of 
the IPF PPS?
     What other assessment elements would inform CMS's 
understanding of health equity for IPF patients?
     Are there special interventions that IPFs provide which 
support patients after discharge, and which could serve to reduce the 
incidence of hospital readmissions for psychiatric conditions? What, if 
any, assessment elements would inform CMS's understanding of such 
interventions?
i. Implementation
     We anticipate that IPFs will need to make changes to 
systems and processes and train staff in order to administer the 
assessment and submit assessment data by the implementation date. What 
operational or practical limitations would IPFs face in making those 
necessary changes? Are there particular categories of Standardized 
Patient Assessment Data Elements that would be more or less feasible 
for IPFs to operationalize? We are particularly interested in impacts 
to facilities of varying sizes and ownership characteristics.
     What forms of training and guidance would be most useful 
for CMS to provide to support IPFs in the implementation of the IPF-
PAI?
j. Relationship to the IPFQR Program
     Would having some measures which require data submission 
through the HQR system and having other measures, which require data 
collection and submission through the IPF-PAI increase operational 
complexity or administrative burden? If so, how would you recommend 
mitigating this complexity or burden?
     Would any of the current chart-abstracted measures be 
easier to report through the IPF-PAI? If so, which measures?
     Would any of the current measures in the program be more 
meaningful if they were stratified or risk-adjusted using data from the 
required patient assessment categories or other categories not 
specified by the CAA, 2023 that should be added to the IPF-PAI?
     What new measure concepts, which would use data collected 
through Standardized Patient Assessment Data Elements in the IPF-PAI, 
should we consider?

V. Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program

A. Background and Statutory Authority

    The Inpatient Psychiatric Facility Quality Reporting (IPFQR) 
Program is authorized by section 1886(s)(4) of the Act, and it applies 
to psychiatric hospitals and psychiatric units paid by Medicare under 
the IPF PPS (see section II.A. of this proposed rule for a detailed 
discussion of entities covered under the IPF PPS). Section 
1886(s)(4)(A)(i) requires the Secretary to reduce by 2 percentage 
points the annual update to the standard Federal rate for discharges 
occurring during such rate year \16\ for

[[Page 23205]]

any IPF that does not comply with quality data submission requirements 
under IPFQR program, set forth in section 1886(s)(4)(C) of the Act, 
with respect to an applicable rate year.
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    \16\ We note that the statute uses the term ``rate year'' (RY). 
However, beginning with the annual update of the inpatient 
psychiatric facility prospective payment system (IPF PPS) that took 
effect on July 1, 2011 (RY 2012), we aligned the IPF PPS update with 
the annual update of the ICD codes, effective on October 1 of each 
year. This change allowed for annual payment updates and the ICD 
coding update to occur on the same schedule and appear in the same 
Federal Register document, promoting administrative efficiency. To 
reflect the change to the annual payment rate update cycle, we 
revised the regulations at 42 CFR 412.402 to specify that, beginning 
October 1, 2012, the IPF PPS RY means the 12-month period from 
October 1 through September 30, which we refer to as a ``fiscal 
year'' (FY) (76 FR 26435). Therefore, with respect to the IPFQR 
Program, the terms ``rate year,'' as used in the statute, and 
``fiscal year'' as used in the regulation, both refer to the period 
from October 1 through September 30. For more information regarding 
this terminology change, we refer readers to section III of the RY 
2012 IPF PPS final rule (76 FR 26434 through 26435).
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    Section 1886(s)(4)(C) of the Act requires IPFs to submit to the 
Secretary data on quality measures specified by the Secretary under 
section 1886(s)(4)(D) of the Act. Except as provided in section 
1886(s)(4)(D)(ii) of the Act, section 1886(s)(4)(D)(i) of the Act 
requires that any measure specified by the Secretary must have been 
endorsed by the consensus-based entity (CBE) with a contract under 
section 1890(a) of the Act. Section 1886(s)(4)(D)(ii) of the Act 
provides that, in the case of a specified area or medical topic 
determined appropriate by the Secretary for which a feasible and 
practical measure has not been endorsed by the CBE with a contract 
under section 1890(a) of the Act, the Secretary may specify a measure 
that is not endorsed as long as due consideration is given to measures 
that have been endorsed or adopted by a consensus organization 
identified by the Secretary.
    Section 4125(b)(1) of CAA, 2023 amended section 1886(s)(4) of the 
Act, by inserting a new paragraph (E), to require IPFs participating in 
the IPFQR Program to collect and submit to the Secretary certain 
standardized patient assessment data, using a standardized patient 
assessment instrument (PAI) developed by the Secretary, for RY 2028 (FY 
2028) and each subsequent rate year. We refer readers to section IV.B 
of this proposed rule in which we solicit public comment on the 
development of this PAI.
    We refer readers to the FY 2019 IPF PPS final rule (83 FR 38589) 
for a discussion of the background and statutory authority of the IPFQR 
Program. We have codified procedural requirements and reconsideration 
and appeals procedures for IPFQR Program decisions in our regulations 
at 42 CFR 412.433 and 412.434. Consistent with previous IPFQR Program 
regulations, we refer to both inpatient psychiatric hospitals and 
psychiatric units as ``facilities'' or ``IPFs.'' This usage follows the 
terminology in our IPF PPS regulations at Sec.  412.402.
    For additional information on procedural requirements related to 
statutory authority, participation and withdrawal, data submission, 
quality measure retention and removal, extraordinary circumstances 
exceptions, and public reporting we refer readers to 42 CFR 412.433 
Procedural requirements under the IPFQR Program.
    For the IPFQR Program, we refer to the year in which an IPF would 
receive the 2-percentage point reduction to the annual update to the 
standard Federal rate as the payment determination year. An IPF 
generally meets IPFQR Program requirements by submitting data on 
specified quality measures in a specified time and manner during a data 
submission period that occurs prior to the payment determination year. 
These data reflect a period prior to the data submission period during 
which the IPF furnished care to patients; this period is known as the 
performance period. For example, for a measure for which CY 2025 is the 
performance period which is required to be submitted in CY 2026 and 
affects FY 2027 payment determination, if an IPF did not submit the 
data for this measure as specified during CY 2026 (and meets all other 
IPFQR Program requirements for the FY 2027 payment determination) we 
would reduce by 2-percentage points that IPF's update for the FY 2027 
payment determination year.

B. Measure Adoption

    We strive to put patients and caregivers first, ensuring they are 
empowered to partner with their clinicians in their healthcare decision 
making using information from data driven insights that are 
increasingly aligned with meaningful quality measures. We support 
technology that reduces burden and allows clinicians to focus on 
providing high-quality healthcare for their patients. We also support 
innovative approaches to improve quality, accessibility, and 
affordability of care while paying particular attention to improving 
clinicians' and beneficiaries' experiences when interacting with our 
programs. In combination with other efforts across HHS, we believe the 
IPFQR Program helps to incentivize IPFs to improve healthcare quality 
and value while giving patients and providers the tools and information 
needed to make the best individualized decisions. Consistent with these 
goals, our objective in selecting quality measures for the IPFQR 
Program is to balance the need for information on the full spectrum of 
care delivery and the need to minimize the burden of data collection 
and reporting. We have primarily focused on measures that evaluate 
critical processes of care that have significant impact on patient 
outcomes and support CMS and HHS priorities for improved quality and 
efficiency of care provided by IPFs. When possible, we also propose to 
incorporate measures that directly evaluate patient outcomes and 
experience. We refer readers to the CMS National Quality Strategy,\17\ 
the Behavioral Health Strategy,\18\ the Framework for Health 
Equity,\19\ and the Meaningful Measures Framework \20\ for information 
related to our priorities in selecting quality measures.
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    \17\ Schreiber, M, Richards, A, et al. (2022). The CMS National 
Quality Strategy: A Person-Centered Approach to Improving Quality. 
Available at: https://www.cms.gov/blog/cms-national-quality-strategy-person-centered-approach-improving-quality.
    \18\ CMS. (2022). CMS Behavioral Health Strategy. Available at 
https://www.cms.gov/cms-behavioral-health-strategy.
    \19\ CMS. (2022). CMS Framework for Health Equity 2022-2032. 
Available at https://www.cms.gov/files/document/cms-framework-health-equity-2022.pdf.
    \20\ CMS. (2023). Meaningful Measures 2.0: Moving from Measure 
Reduction to Modernization. Available at https://www.cms.gov/medicare/quality/meaningful-measures-initiative/meaningful-measures-20. Accessed on March 20, 2024.
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1. Measure Selection Process
    Section 1890A(a) of the Act requires that the Secretary establish 
and follow a pre-rulemaking process, in coordination with the CBE 
contracted under 1890(a) of the Act, to solicit input from multi-
stakeholder groups on the selection of quality and efficiency measures 
for the IPFQR Program. Before being proposed for inclusion in the IPFQR 
Program, measures are placed on a list of Measures Under Consideration 
(MUC list), which is published annually. Following publication on the 
MUC list, a multi-stakeholder group convened by the CBE reviews the 
measures under consideration for the IPFQR Program, among other federal 
programs, and provides input on those measures to the Secretary. Under 
the Partnership for Quality Measurement (PQM), which is convened by the 
entity which currently holds the contract under 1890(a) of the Act, 
this process is known as the Pre-Rulemaking Measure Review (PRMR). We 
consider the input and recommendations provided by this multi-
stakeholder group in selecting all measures for the IPFQR Program, 
including the 30-Day Risk-Standardized All-Cause Emergency Department 
(ED) Visit Following an IPF Discharge measure discussed in this 
proposed rule.

[[Page 23206]]

2. Proposal To Adopt the 30-Day Risk-Standardized All-Cause ED Visit 
Following an IPF Discharge Measure Beginning With the CY 2025 
Performance Period/FY 2027 Payment Determination
a. Background
    We have consistently stated our commitment to identifying measures 
that examine the care continuum for patients with mental health 
conditions and substance use disorders and to quantify outcomes 
following IPF-discharge (see for example, the adoption of the 
Medication Continuation Following Hospitalization in an IPF measure in 
the FY 2020 IPF PPS Final Rule, 84 FR 38460 through 38462). Post-
discharge outcomes are an important part of our measurement strategy 
because patient-centered discharge planning and coordination of care 
for patients with any combination of mental health conditions and 
substance use disorders improves long-term outcomes, including reducing 
readmissions and other post-discharge acute care 
services.21 22
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    \21\ Nelson, E.A. Maruish, M.E., Axler, J.L. Effects of 
Discharge Planning with Outpatient Appointments on Readmission 
Rates. https://ps.psychiatryonline.org/doi/10.1176/appi.ps.51.7.885.
    \22\ Steffen S, K[ouml]sters M, Becker T, Puschner B. Discharge 
planning in mental health care: a systematic review of the recent 
literature. Acta Psychiatr Scand. 2009 Jul;120(1):1-9. doi: 10.1111/
j.1600-0447.2009.01373.x. Epub 2009 Apr 8. PMID: 19486329.
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    Although not all post-discharge acute care visits are preventable, 
there are actions that the IPF can take to maximize the chance for 
patients' successful community reintegration.\23\ For example, care 
transition models to reduce the need for additional acute care 
following an inpatient stay have been adapted to the inpatient 
psychiatric setting. To implement these models, IPFs may need to 
consider how to include the patient and their caregivers, including 
family, in discharge planning, how to communicate with post-discharge 
providers, and how to ensure whole-person care for patients during and 
following their discharge.\24\ Specifically, IPFs may need to assist 
patients in connecting with outpatient providers, such as coordinating 
with the patient and their caregiver to schedule the patient's first 
post-discharge follow-up appointment, arranging for the patient's 
intensive outpatient (IOP) care, or connecting to peer support 
services. Additionally, IPFs may need to identify and address barriers 
patients may face in accessing medications and adhering to scheduled 
post-discharge follow-up appointments. Barriers may include financial 
factors, transportation, and childcare, which may necessitate support 
from social services, beginning during hospitalization and continuing 
after discharge.25 26 Barriers may also include the 
patient's concerns regarding the stigmatization associated with seeking 
care post-discharge. This can be addressed through treatment provided 
during the IPF stay.27 28 Improvements in patient experience 
of care and patient-centeredness of care have been associated with 
improved follow-up post-discharge and a reduction in patients requiring 
post-discharge acute care.29 30 In summary, by proactively 
addressing potential barriers to post-charge care, improving patient 
experience of care and patient-centeredness of care, and implementing 
care transition models, IPFs can reduce the need for post-discharge 
acute care.
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    \23\ Haselden, M., Corbeil, T., Tang, F., Olfson, M., Dixon, 
L.B., Essock, S.M., Wall, M.M., Radigan, M., Frimpong, E., Wang, R., 
Lamberti, S., Schneider, M., & Smith, T.E. (2019). Family 
Involvement in Psychiatric Hospitalizations: Associations With 
Discharge Planning and Prompt Follow-Up Care. Psychiatric Services, 
70(10), 860-866. https://doi.org/10.1176/appi.ps.201900028.
    \24\ Pincus, Harold, Care Transition Interventions to Reduce 
Psychiatric Re-Hospitalizations. National Association of State 
Mental Health Program Directors. 2015. Available at https://nasmhpd.org/sites/default/files/Assessment%20%233_Care%20Transitions%20Interventions%20toReduce%20Psychiatric%20Rehospitalization.pdf. Accessed on January 23, 2024.
    \25\ Allen, E.M., Call, K.T., Beebe, T.J., McAlpine, D.D., & 
Johnson, P.J. (2017). Barriers to Care and Healthcare Utilization 
among the Publicly Insured. Medical Care, 55(3), 207-214. 
doi:10.1097/MLR.0000000000000644.
    \26\ Mutschler, C., Lichtenstein, S., Kidd, S.A., & Davidson, L. 
(2019). Transition experiences following psychiatric 
hospitalization: A systematic review of the literature. Community 
Mental Health Journal, 55(8), 1255-1274. doi:10.1007/s10597-019-
00413-9.
    \27\ Allen, E.M., Call, K.T., Beebe, T.J., McAlpine, D.D., & 
Johnson, P.J. (2017). Barriers to Care and Healthcare Utilization 
among the Publicly Insured. Medical Care, 55(3), 207-214. 
doi:10.1097/MLR.0000000000000644.
    \28\ Mutschler, C., Lichtenstein, S., Kidd, S.A., & Davidson, L. 
(2019). Transition experiences following psychiatric 
hospitalization: A systematic review of the literature. Community 
Mental Health Journal, 55(8), 1255-1274. doi:10.1007/s10597-019-
00413-9.
    \29\ Donisi V, Tedeschi F, Wahlbeck K, Haaramo P, Amaddeo F. 
Pre-discharge factors predicting readmissions of psychiatric 
patients: a systematic review of the literature. BMC Psychiatry. 
2016 Dec 16;16(1):449. doi: 10.1186/s12888-016-1114-0. PMID: 
27986079; PMCID: PMC5162092.
    \30\ Morgan C Shields, Mara A G Hollander, Alisa B Busch, Zohra 
Kantawala, Meredith B Rosenthal, Patient-centered inpatient 
psychiatry is associated with outcomes, ownership, and national 
quality measures, Health Affairs Scholar, Volume 1, Issue 1, July 
2023, qxad017, https://doi.org/10.1093/haschl/qxad017.
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    The IPFQR Program currently has three measures that assess post-
discharge outcomes: (1) Follow-up After Psychiatric Hospitalization 
(FAPH); (2) Medication Continuation Following Inpatient Psychiatric 
Discharge; and (3) Thirty Day All-Cause Unplanned Readmission Following 
Psychiatric Hospitalization (CBE #2860, the IPF Unplanned Readmission 
measure). Each of these measures serves a unique role in assessing care 
coordination and post-discharge outcomes.
    The FAPH measure, which we adopted in the FY 2022 IPF PPS Final 
Rule (86 FR 42640 through 42645), uses Medicare FFS claims to determine 
the percentage of inpatient discharges from an IPF stay for which the 
patient received a follow-up visit for treatment of mental illness. The 
FAPH measure represents an important component of post-discharge care 
coordination, specifically the transition of care to an outpatient 
provider. However, this measure does not quantify patient outcomes.
    The Medication Continuation Following Inpatient Psychiatric 
Discharge measure, which we adopted in FY 2020 IPF PPS Final Rule (84 
FR 38460 through 38465), assesses whether patients admitted to IPFs 
with diagnoses of Major Depressive Disorder (MDD), schizophrenia, or 
bipolar disorder filled at least one evidence-based medication prior to 
discharge or during the post-discharge period. Medication continuation 
is important for patients discharged from the IPF setting with these 
disorders because of significant negative outcomes associated with non-
adherence to medication regimes. However, this measure does not 
quantify patient outcomes with respect to the use of acute care 
services post-discharge.
    The IPF Unplanned Readmission measure, which we adopted in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57241 through 57246), assesses 
outcomes associated with worsening condition, potentially due to 
insufficient discharge planning and post-discharge care coordination, 
by assessing post-discharge use of acute care. The IPF Unplanned 
Readmission measure estimates the incidence of unplanned, all-cause 
readmissions to IPFs or short-stay acute care hospitals following 
discharge from an eligible IPF index admission. A readmission is 
defined as any admission that occurs within 3 to 30 days after the 
discharge date from an eligible index admission to an IPF, except those 
considered planned.\31\ However, this measure does not quantify the 
proportion of patients 18 and older with an ED visit, without

[[Page 23207]]

subsequent admission, within 30 days of discharge from an IPF. Without 
collecting this information in a measure, we believe there is a gap in 
our understanding regarding patients' successful reintegration into 
their communities following their IPF discharge.
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    \31\ https://p4qm.org/measures/2860.
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    To further understand this gap, we analyzed post-discharge outcomes 
using claims data. In this analysis, we determined that, for patients 
discharged from IPFs, the risk-adjusted rate of ED visits after an IPF 
discharge between June 1, 2019 and July 31, 2021 (excluding the first 
two quarters of 2020 due to the COVID-19 public health emergency) was 
20.7 percent. The rate of readmissions captured under the IPF Unplanned 
Readmission measure for this same period was 20.1 percent.\32\ This 
means that approximately 40 percent of patients discharged from an IPF 
had either an ED visit or an unplanned readmission within 30-days of 
IPF discharge, but only about half of those visits are being captured 
in the publicly reported IPF Unplanned Readmission measure. Visits to 
an ED within 30 days of discharge from an IPF (regardless of whether 
that visit results in a hospital readmission, observation stay, 
discharge, or patient leaving without being seen) often indicate 
deteriorating or heightened mental or physical health needs. That is, 
these visits often represent a patient seeking care for symptoms that 
were present during the patient's stay in the IPF, regardless of 
whether the symptom was the reason for the admission, that have become 
worse for the patient in the time since discharge. Therefore, we 
believe that IPFs and the public would benefit from having these data 
made publicly available to inform care decisions and quality 
improvement efforts. Specifically, members of the public could use 
these data to inform care decisions and IPFs could use these data to 
compare their performance to that of similar IPFs. For example, by 
having these data publicly reported IPFs could compare their 
performance with that of other IPFs with similar patient populations, a 
comparison which is not possible without this measure. If IPFs 
identified that other IPFs with similar patient populations had better 
rates of post-discharge ED visits (that is, other IPFs had fewer 
patients seek care in an ED within 30 days of discharge from the IPF), 
the IPF could identify a need to evaluate discharge planning and post-
discharge care coordination to identify process changes which could 
improve outcomes.
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    \32\ As depicted in the April 2023 file available at https://data.cms.gov/provider-data/archived-data/hospitals.
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    To address this gap, we developed and are proposing the inclusion 
of the new, claims-based 30-Day Risk-Standardized All-Cause ED Visit 
Following an IPF Discharge measure (the IPF ED Visit measure) in the 
IPFQR program beginning with the CY 2025 performance period/FY 2027 
payment determination. This proposed IPF ED Visit measure aims to 
provide information to patients, caregivers, other members of the 
public, and IPFs about the proportion of patients who seek care in ED 
in the 30 days following discharge from an IPF, but are not admitted as 
an inpatient to an acute care hospital or IPF. This proposed measure 
would assess the proportion of patients 18 and older with an ED visit, 
including observation stays, for any cause, within 30 days of discharge 
from an IPF, without subsequent admission.
    We recognize that not all post-discharge ED visits are preventable, 
nor are all post-discharge ED visits associated with the initial IPF 
admission. However, we developed an all-cause ED visit rate, as opposed 
to a more narrowly focused measure of ED admissions for mental health 
or substance use concerns, for three primary reasons. First, such a 
measure aligns most closely with the IPF Unplanned Readmission measure 
as this measure is also an all-cause measure. Second, an all-cause 
measure emphasizes the importance of whole-person care for patients. 
Whole-person care, during the inpatient stay and through referral at 
discharge, includes addressing the conditions that may jeopardize a 
patient's health, but are not the reason for admission to the IPF, if 
the IPF has reason to identify these conditions during the course of 
treatment. For example, if an IPF were to identify through metabolic 
screening that a patient has diabetes, it would be appropriate for that 
IPF to recommend appropriate follow-up for that patient, such as with a 
primary care provider, endocrinologist, or dietician. Such post-
discharge coordination of care could prevent the patient from seeking 
acute care after discharge from the IPF for complications of diabetes, 
such as diabetic ketoacidosis. Third, this measure includes ED visits 
for all conditions because patients visiting the ED may do so for 
physical symptoms associated with a mental health condition or 
substance use disorder. An example is a patient with anxiety that 
presents to the ED with chest pain and shortness of breath. If the 
clinician documents the primary diagnosis as chest pain (R07.9) or 
shortness of breath (R06.02), the patient would not be included in a 
mental health and substance use-specific IPF ED Visit measure, despite 
their history of anxiety (F41.9), a potential contributor to their 
presenting symptoms at the ED. We recognize that it is possible that 
such a visit may not be related to the patient's anxiety. However, 
while not all acute care visits after discharge from an IPF are 
preventable or necessarily related to the quality of care provided by 
the IPF, there is evidence that improvements in the quality of care for 
patients in the IPF setting can reduce rates of patients seeking acute 
care after discharge from an IPF, representing an improved outcome for 
patients.\33\
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    \33\ See for instance Chung, D.T., Ryan, C.J., Hadzi-Pavlovic, 
D., Singh, S.P., Stanton, C., & Large, M.M. (2017). Suicide rates 
after discharge from psychiatric facilities: A systematic review and 
meta-analysis. JAMA Psychiatry, 74(7), 694-702. https://doi.org/10.1001/jamapsychiatry.2017.1044 or Durbin, J., Lin, E., Layne, C., 
et al. (2007). Is readmission a valid indicator of the quality of 
inpatient psychiatric care? Journal of Behavioral Health Services 
Research, 34, 137-150. doi:10.1007/s11414- 007-9055-5.
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    Additionally, we considered whether 30 days was an appropriate 
timeframe for this measure. That is, we sought to identify whether a 
measure that assessed post-discharge ED visits over a period shorter or 
longer than 30 days would be more appropriate. Because IPFs are already 
familiar with interpreting data for the 30-day period in the IPF 
Unplanned Readmission measure, we determined that it would be 
appropriate to maintain the 30-day period for the IPF ED Visit measure. 
Additionally, by maintaining the same timeframe as the IPF Unplanned 
Readmission measure, we can provide IPFs and patients with a more 
complete picture of acute care among IPF patients after discharge from 
the IPF.
    Pursuant to the Meaningful Measures 2.0 Framework (a CMS initiative 
that identifies priority domains for measures within CMS Programs 
\34\), this measure addresses the ``Seamless Care Coordination'' and 
the ``Person-Centered Care'' quality domains by encouraging facilities 
to provide patient-centric discharge planning and support post-
discharge care transitions. The IPF ED Visit measure also aligns with 
the CMS National Quality Strategy Goals \35\ of ``Engagement'' and 
``Outcomes and Alignment.'' It supports outcomes and

[[Page 23208]]

alignment because this measure provides a quantified estimate of one 
post-discharge outcome that patients may experience, that is a post-
discharge acute care visit that does not result in an admission. It 
also supports the Behavioral Health Strategy \36\ domains of ``Quality 
of Care'' and ``Equity and Engagement'' because engaging patients to 
improve post-discharge outcomes is an element of providing quality 
care. Furthermore, similar to the Meaningful Measures domain of 
``Person-Centered Care,'' this measure supports the Universal 
Foundation domain of ``Person-Centered Care.''
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    \34\ https://www.cms.gov/medicare/quality/meaningful-measures-initiative/meaningful-measures-20.
    \35\ Schreiber, M, Richards, A, et al. (2022). The CMS National 
Quality Strategy: A Person-Centered Approach to Improving Quality. 
Available at: https://www.cms.gov/blog/cms-national-quality-strategy-person-centered-approach-improving-quality.
    \36\ CMS. (2022). CMS Behavioral Health Strategy. Available at 
https://www.cms.gov/cms-behavioral-health-strategy.
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b. Overview of Measure
    The IPF ED Visit measure was developed with input from clinicians, 
patients, and policy experts; the measure was subject to the pre-
rulemaking process required by section 1890A of the Act, as discussed 
further in section V.B.1 of this rule. Consistent with the CMS key 
elements of the CMS Measure Development Lifecycle,\37\ we began with 
measure conceptualization during which we performed a targeted 
literature review and solicited input from a behavioral health 
technical expert panel (TEP). This allowed us to ensure that this topic 
addresses a gap that is important to interested parties. After 
confirming this, we developed the measure specifications for the IPF ED 
Visit measure. With these specifications, we issued a 30-day call for 
public comment in the Federal Register and performed empirical testing 
using claims data, including modeling for risk-adjustment. After 
refining the measure specifications based on testing and public 
comment, we performed an equity analysis in which we tested the risk-
adjustment methodology to ensure that the measure does not reflect 
access issues related to patient demographics instead of quality of 
care. By following steps in accordance with the Measure Development 
Lifecycle, we sought to ensure that this is a vetted, valid, reliable, 
and ready-to-implement claims-based measure which would assess the 
proportion of patients 18 and older with an ED visit, including 
observation stays, for any cause, within 30 days of discharge from an 
IPF, without subsequent admission. By using the same definitions of 
index admission and patient populations as those used in the IPF 
Unplanned Readmission measure, we have designed the IPF ED Visit 
measure to complement the IPF Unplanned Readmission measure to the 
extent possible. We have also sought to minimize administrative burden 
by developing this as a claims-based measure so that it adds no 
information collection burden to clinicians and staff working in the 
IPF setting.
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    \37\ https://mmshub.cms.gov/blueprint-measure-lifecycle-overview.
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(1) Measure Calculation
    The focus population for this measure is adult Medicare FFS 
patients with a discharge from an IPF. The measure is based on all 
eligible index admissions from the focus population. An eligible index 
admission is defined as any IPF admission for which the patient meets 
the following criteria: (1) age 18 or older at admission; (2) 
discharged alive from an IPF; (3) enrolled in Medicare FFS Parts A and 
B during the 12 months before the admission date, the month of 
admission, and at least one month after the month of discharge from the 
index admission (that is, the original stay in an IPF); and (4) 
discharged with a principal diagnosis that indicates a psychiatric 
disorder. Excluded from the measure are patients discharged against 
medical advice (AMA) from the IPF index admission (because the IPF may 
not have had the opportunity to conduct full discharge planning for 
these patients); patients with unreliable data regarding death 
demographics or a combination thereof in their claims record (because 
these data are unreliable, they may lead to inaccuracies in the measure 
calculation); patients who expired during the IPF stay (because post-
discharge care is not applicable to these patients); patients with a 
discharge resulting in a transfer to another care facility (because the 
receiving care facility would be responsible for discharge planning for 
these patients); and patients discharged but readmitted within 3 days 
of discharge, also known as an interrupted stay (because interrupted 
stays are often reflective of patient needs outside of the IPF, such as 
treatment for another condition).
    To calculate the measure, we would use the following data sources 
which are all available from Medicare administrative records and data 
submitted by providers through the claims process: (1) Medicare 
beneficiary and coverage files, which provide information on patient 
demographic, enrollment, and vital status information to identify the 
measure population and certain risk factors; (2) Medicare FFS Part A 
records, which contain final action claims submitted by acute care and 
critical access hospitals, IPFs, home health agencies, and skilled 
nursing facilities to identify the measure population, readmissions, 
and certain risk factors; and (3) Medicare FFS Part B records, which 
contain final action claims submitted by physicians, physician 
assistants, clinical social workers, nurse practitioners, and other 
outpatient providers to identify certain risk factors. To ensure that 
diagnoses result from encounters with providers trained to establish 
diagnoses, this measure would not use claims for services such as 
laboratory tests, medical supplies, or other ambulatory services. Index 
admissions and ED visits would be identified in the Medicare FFS Part A 
records. Comorbid conditions for risk-adjustment would be identified in 
the Medicare Part A and Part B records in the 12 months prior to 
admission, including the index admission. Demographic and FFS 
enrollment data would be identified in the Medicare beneficiary and 
coverage files.
    To calculate the IPF ED Visit measure, CMS would: (1) identify all 
IPF admissions in the one-year performance period; (2) apply inclusion 
and exclusion criteria to identify index admissions; (3) identify ED 
visits and observation stays within 30 days of discharge from each 
index admission; (4) identify risk factors in the 12 months prior to 
index admission and during the index admission; and (5) run 
hierarchical logistic regression to compute the risk-standardized ED 
visit rate for each IPF.\38\ This hierarchical logistic regression 
would allow us to apply the risk-adjustment factors developed in 
measure testing to ensure that measure results are comparable across 
IPFs regardless of the clinical complexity of each IPF's patient 
population.
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    \38\ For an example of the hierarchal logistic risk-adjustment 
algorithm, we refer readers to the algorithm for the IPF Unplanned 
Readmission measure at https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/hospitalqualityinits/downloads/inpatient-psychiatric-facility-readmission-measure.zip.
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(2) Pre-Rulemaking Measure Review and Measure Endorsement
    As required under section 1890A of the Act, the CBE established the 
Partnership for Quality Measurement (PQM) to convene clinicians, 
patients, measure experts, and health information technology 
specialists to participate in the pre-rulemaking process and the 
measure endorsement process. The pre-rulemaking process, also called 
the Pre-Rulemaking Measure Review (PRMR), includes a review of measures 
published on the publicly available list of Measures Under 
Consideration (MUC List) by one of several committees convened by the 
PQM for the purpose

[[Page 23209]]

of providing multi-stakeholder input to the Secretary on the selection 
of quality and efficiency measures under consideration for use in 
certain Medicare quality programs, including the IPFQR Program. The 
PRMR process includes opportunities for public comment through a 21-day 
public comment period, as well as public listening sessions. The PQM 
posts the compiled comments and listening session inputs received 
during the public comment period and the listening sessions within five 
days of the close of the public comment period.\39\ More details 
regarding the PRMR process may be found in the CBE's Guidebook of 
Policies and Procedures for Pre-Rulemaking Measure Review and Measure 
Set Review, including details of the measure review process in Chapter 
3.\40\
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    \39\ These materials are available at the PRMR section of the 
PQM website: https://p4qm.org/PRMR.
    \40\ https://p4qm.org/sites/default/files/2023-09/Guidebook-of-Policies-and-Procedures-for-Pre-Rulemaking-Measure-Review-%28PRMR%29-and-Measure-Set-Review-%28MSR%29-Final_0.pdf.
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    The CBE-established PQM also conducts the measure endorsement and 
maintenance (E&M) process to ensure measures submitted for endorsement 
are evidence-based, reliable, valid, verifiable, relevant to enhanced 
health outcomes, actionable at the caregiver-level, feasible to collect 
and report, and responsive to variations in patient characteristics, 
such as health status, language capabilities, race or ethnicity, and 
income level, and are consistent across types of health care providers, 
including hospitals and physicians (see section 1890(b)(2) of the Act). 
The PQM convenes several E&M project groups twice yearly, formally 
called E&M Committees, each comprised of an E&M Advisory Group and an 
E&M Recommendations Group, to vote on whether a measure meets certain 
quality measure criteria. More details regarding the E&M process may be 
found in the E&M Guidebook, including details of the measure 
endorsement process in the section titled, ``Endorsement and Review 
Process.'' \41\
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    \41\ The Partnership for Quality Measurement. (October 2023). 
Endorsement and Maintenance (E&M) Guidebook. Available at: https://p4qm.org/sites/default/files/2023-12/Del-3-6-Endorsement-and-Maintenance-Guidebook-Final__0.pdf.
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    As part of the PRMR process, the IPF ED Visit measure was reviewed 
during the PRMR Hospital Recommendation Group meeting on January 18, 
2024. For the voting procedures of the PRMR and E&M process, the PQM 
utilized the Novel Hybrid Delphi and Nominal Group (NHDNG) multi-step 
process, which is an iterative consensus-building approach aimed at a 
minimum of 75 percent agreement among voting members, rather than a 
simple majority vote, and supports maximizing the time spent to build 
consensus by focusing discussion on measures where there is 
disagreement. For example, the PRMR Hospital Recommendation Group can 
reach consensus and have the following voting results: (A) Recommend, 
(B) Recommend with conditions (with 75 percent of the votes cast as 
recommend with conditions or 75 percent between recommend and recommend 
with conditions), and (C) Do not recommend. If no voting category 
reaches 75 percent or greater (including the combined [A] Recommend and 
[B] Recommend with conditions) the PRMR Hospital Recommendation Group 
did not come to consensus and the voting result is ``Consensus not 
reached.'' Consensus not reached signals continued disagreement amongst 
the committee despite being presented with perspectives from public 
comment, committee member feedback and discussion, and highlights the 
multi-faceted assessments of quality measures. More details regarding 
the PRMR voting procedures may be found in Chapter 4 of the PQM 
Guidebook of Policies and Procedures for Pre-Rulemaking Measure Review 
and Measure Set Review.\42\ More details regarding the E&M voting 
procedures may be found in the PQM Endorsement and Maintenance (E&M) 
Guidebook.\43\ The PRMR Hospital Recommendation Group \44\ reached 
consensus and recommended including this measure in the IPFQR Program 
with conditions.
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    \44\ We note that the PRMR Hospital Recommendation Group was 
previously the Measure Applications Partnership (MAP) Hospital 
Workgroup under the pre-rulemaking process followed by the previous 
CBE.
---------------------------------------------------------------------------

    Seven members of the group recommended adopting the measure into 
the IPFQR program without conditions; eleven members recommended 
adoption with conditions; and one committee member voted not to 
recommend the measure for adoption. Taken together, 94.73 percent of 
the votes were between recommend & recommend with conditions.
    The conditions specified by the PRMR Hospital Recommendation Group 
were: (1) that the measure be considered for endorsement by a 
consensus-based entity; and (2) further consideration of how the 
measure addresses 72-hour transfers to the ED. We have taken those 
considerations into account and are proposing this measure for adoption 
because we believe we have adequately addressed the concerns raised by 
those considerations.
    To address the first condition, we have submitted the measure to 
the CBE for consideration. For more information on submission to and 
consideration by the CBE we refer readers to section V.B.2.b.(3) of 
this rule.
    The second voting condition requested that we further consider how 
the measure addresses 72-hour transfers to the ED because of concerns 
that IPFs may appear to have worse performance if ``interrupted stays'' 
are not excluded from the measure. An ``interrupted stay'' occurs when 
a patient is discharged from an IPF and readmitted to the same IPF 
within 72 hours. This frequently occurs when a patient needs medical 
treatment that is beyond the scope of the IPF, such as care in an ED 
for an emergent health issue. We believe that this concern is 
sufficiently addressed in the ED Visit measure's specifications because 
these ``interrupted stays'' are excluded from the measure, as described 
in section V.B.2.b.(1) of this rule. This exclusion is defined as an 
index admission with a readmission on Days 0, 1, or 2 post-discharge. 
In other words, patients transferred to the ED and subsequently 
readmitted to the IPF within 72 hours are excluded from the measure. 
Therefore ``interrupted stays'' are excluded from the measure as per 
the group's recommendation.
(3) CBE Endorsement
    Section 1886(s)(4)(D)(i) of the Act generally requires that 
measures specified by the Secretary shall be endorsed by the entity 
with a contract under section 1890(a) of the Act (that is, the CBE). 
After a measure has been submitted to the CBE, the committee 
responsible for reviewing the measure evaluates the measure on five 
domains: (1) Importance; (2) Feasibility; (3) Scientific Acceptability 
(that is, reliability and validity); (4) Equity; and (5) Use and 
Usability. Committee members evaluate whether the measure the domain is 
``Met'', ``Not Met but Addressable'' or ``Not Met'' for each domain 
using a set of criteria provided by the CBE.\45\ When a measure is 
submitted it is assigned to one of the CBE's projects based on where in 
the patient's healthcare experience the measure has the most relevance. 
The five projects are (1) Primary Prevention; (2) Initial Recognition 
and Management; (3) Management of Acute Events, Chronic Disease, 
Surgery, Behavioral Health; (4) Advanced Illness and Post-Acute Care; 
and (5) Cost and Efficiency.
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    \45\ https://p4qm.org/EM.
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    The measure developer submitted the measure for CBE endorsement 
consideration in the Fall 2023 review

[[Page 23210]]

cycle. The measure was assigned to the Cost and Efficiency Project. The 
CBE Cost and Efficiency Endorsement committee met on January 31, 2024 
and did not reach consensus regarding the IPF ED Visit measure, with 
60.6 percent voting in favor of endorsement or endorsement with 
conditions and the remaining members voting to not endorse, which is 
below the 75 percent threshold necessary for the endorsement of the 
measure, as described in V.B.2.b. During the Cost and Efficiency 
Endorsement committee's meeting, members of the committee discussed 
whether an all-cause measure was appropriate and whether IPFs are able 
to implement interventions to reduce post-discharge acute care.\46\
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    \46\ For information about the Cost and Efficiency endorsement 
review we refer readers to the meeting summary, available at https://p4qm.org/sites/default/files/Cost%20and%20Efficiency/material/EM-Cost-and-Efficiency-Fall2023-Endorsement-Meeting-Summary.pdf.
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    As discussed in section V.B.2.a of this proposed rule, an all-cause 
measure would complement the IPF Unplanned Readmission measure, would 
emphasize whole-person care, and would capture visits to the ED for 
patients with physical symptoms associated with mental health 
conditions. Additionally, evidence shows that there are interventions 
that reduce post-discharge acute care. These include adopted care 
transition models, proactively connecting patients with post-discharge 
providers, identifying and addressing patients' barriers to post-
discharge care, and focusing on providing patient-centered care and 
improving patient experience of care.
    Although section 1886(s)(4)(D)(i) of the Act generally requires 
that measures specified by the Secretary shall be endorsed by the 
entity with a contract under section 1890(a) of the Act, section 
1886(s)(4)(D)(ii) of the Act states that, in the case of a specified 
area or medical topic determined appropriate by the Secretary for which 
a feasible and practical measure has not been endorsed by the entity 
with a contract under section 1890(a) of the Act, the Secretary may 
specify a measure that is not so endorsed as long as due consideration 
is given to a measure that has been endorsed or adopted by a consensus 
organization identified by the Secretary.
    We have determined that this is an appropriate topic for the 
adoption of a measure absent CBE endorsement because where possible we 
focus on measures that assess patient outcomes. Unplanned use of acute 
care after discharge from an IPF is often associated with worsening 
condition, potentially due to insufficient discharge planning and post-
discharge care coordination. While the IPFQR Program currently has a 
measure that assesses unplanned readmissions after discharge from an 
IPF, there is a gap in the measure set with respect to unplanned ED 
visits without a subsequent admission to an acute care hospital or IPF. 
The IPF ED Visit measure fills that gap. We also reviewed CBE-endorsed 
measures and were unable to identify any other CBE-endorsed measures 
that assess outcomes that solely result in a patient's ED visit after 
the patient's discharge from an IPF. The only endorsed measure that we 
identified that addresses an IPF patient seeking acute care after 
discharge is the IPF Unplanned Readmission measure. As we discussed 
previously, the IPF Unplanned Readmission measure does not assess ED 
visits that do not result in an admission. Therefore, we believe that 
the IPF ED Visit measure is an important complement to the IPF 
Unplanned Readmission measure. We did not find any other measures that 
assess post-discharge ED visits without a subsequent admission, and 
therefore the exception in section 1886(s)(4)(D)(ii) of the Act 
applies.
c. Data Collection, Submission, and Reporting
    Because all files used to calculate the IPF ED Visit measure are 
available on Medicare claims, this measure requires no additional data 
collection or submission by IPFs. We are proposing a reporting period 
beginning with data from CY 2025 performance period/FY 2027 payment 
determination year.

C. Summary of IPFQR Program Measures for the FY IPFQR Program

    We are proposing one new measure for the FY 2027 IPFQR Program. If 
we finalize adoption of this measure, the FY 2027 IPFQR Program measure 
set would include 16 mandatory and one voluntary measure. Table 22 sets 
forth the measures in the FY 2027 IPFQR Program.
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[GRAPHIC] [TIFF OMITTED] TP03AP24.034

BILLING CODE 4120-01-C

D. Proposal To Modify Data Submission Requirements for the FY 2027 
Payment Determination and Subsequent Years

    Section 1886(s)(4)(C) of the Act requires the submission of quality 
data in a form and manner, and at a time, specified by the Secretary. 
In the Medicare Program; Hospital Inpatient Prospective Payment Systems 
for Acute Care Hospitals and the Long-Term Care Hospital Prospective 
Payment System and fiscal year 2013 Rates; Hospitals' Resident Caps for 
Graduate Medical Education Payment Purposes; Quality Reporting 
Requirements for Specific Providers and for Ambulatory Surgical Centers 
(FY 2013 IPPS/LTCH PPS) final rule (77 FR 53655), we specified that 
data must be submitted between July 1 and August 15 of the calendar 
year preceding a given payment determination year (for example, data 
were required to be submitted between July 1, 2015 and August 15, 2015 
for the FY 2016 payment determination). In the Medicare Program; 
Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals 
and the Long-Term Care Hospital Prospective Payment System and fiscal 
year 2014 Rates; Quality Reporting Requirements for Specific Providers; 
Hospital Conditions of Participation; Payment Policies Related to 
Patient Status (FY 2014 IPPS/LTCH PPS) final rule (78 FR 50899), we 
clarified that this policy applied to all future years of data 
submission for the IPFQR Program unless we changed the policy through 
future rulemaking.
    In the FY 2018 IPF PPS final rule (82 FR 38472 through 38473) we 
updated this policy by stating that the data submission period will be 
a 45-day period beginning at least 30 days

[[Page 23212]]

following the end of the data collection period and that we will 
provide notification of the exact dates through subregulatory means.
    In the FY 2022 IPF PPS Final Rule (86 FR 42658 through 42661), we 
finalized voluntary patient-level data reporting for the FY 2023 
payment determination and mandatory patient-level data reporting for 
chart-abstracted measures within the IPFQR Program beginning with FY 
2024 payment determination and subsequent years. The measures currently 
in the IPFQR Program affected by this requirement are set forth in 
Table 23.
[GRAPHIC] [TIFF OMITTED] TP03AP24.035

    As we have gained experience with patient-level data submission for 
the IPFQR program, during the voluntary data submission period for FY 
2023 (which occurred in CY 2022) and the first mandatory data 
submission period for FY 2024 (which occurred in CY 2023), we have 
observed that annual data submission periods require IPFs to store 
large volumes of patient data to prepare for transmission to CMS. 
Furthermore, the volume of data associated with all IPFs reporting a 
full year of patient-level data during one data submission period 
creates the risk that systems will be unable to handle the volume of 
data.
    We have reviewed how other quality reporting programs that require 
patient-level data submission address these concerns and determined 
that the Hospital Inpatient Quality Reporting (IQR) Program (78 FR 
50811) and the Hospital Outpatient Quality Reporting (OQR) Program (72 
FR 66872) both require quarterly submission of patient-level data. As 
we considered requiring quarterly reporting for the IPFQR Program, we 
also determined that increasing the frequency of data submission would 
allow additional analysis of measure trends over time. We believe that 
having additional data points (from additional quarters of data) could 
allow for more nuanced analyses of the IPFQR Program's measures. 
Specifically, we would be able to better identify quarterly highs or 
lows that may be less apparent when data are combined over a full year. 
We recognize that, if we update data reporting requirements to require 
reporting four times per year instead of once per year, then IPFs would 
need to meet four incremental deadlines instead of one deadline, and 
that this increases the risk that an individual IPF may fail to submit 
data specified for the measures and not receive its full market basket 
update. However, we believe that this risk is low because IPFs already 
have experience submitting some data required by the IPFQR Program on a 
more frequent basis. Specifically, the COVID-19 Healthcare Personnel 
(HCP) Vaccination Measure is currently reported into the CDC's National 
Healthcare Safety Network (NHSN) for one week per month resulting in a 
quarterly measure result (as originally adopted in the FY 2022 IPF PPS 
final rule (86 FR 42636) and restated in the FY 2024 IPF PPS final rule 
(88 FR 51131 through 51132). In addition, if this proposal for 
quarterly data submission is finalized, data submission for each 
calendar quarter would be required during a period of at least 45 days 
beginning three months after the end of the calendar quarter. Table 24 
summarizes these proposed deadlines for the CY 2025 and CY 2026 
performance periods:

[[Page 23213]]

[GRAPHIC] [TIFF OMITTED] TP03AP24.036

    Furthermore, we are proposing that all data which continue to be 
reported on an annual basis (that is, non-measure data, aggregate 
measures, and attestations) would be required to be reported 
concurrently with the data from the fourth quarter of the applicable 
year. For example, data reflecting the entirety of CY 2025 (that is, 
non-measure data, aggregate measures, and attestations) would be 
required by the Q4 2025 submission deadline (that is, May 15, 2026).
    We welcome comments on this proposal.

VI. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), 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. For the purposes of the PRA and this section 
of the preamble, collection of information is defined under 5 CFR 
1320.3(c) of the PRA's implementing regulations.
    To fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment (see section VI.C of this proposed 
rule) on each of these issues for the following sections of this 
document that contain information collection requirements. Comments, if 
received, will be responded to within the subsequent final rule.
    The following changes will be submitted to OMB for review under 
control number 0938-1171 (CMS-10432). We are not proposing any changes 
that would change any of the data collection instruments that are 
currently approved under that control number.
    In section VI.2 of this proposed rule, we restate our currently 
approved burden estimates. In section VI.3 of this proposed rule, we 
estimate the changes in burden associated with update more recent wage 
rates. Then in section VI.4 of this proposed rule, we estimate the 
changes in burden associated with the policies proposed in this 
proposed rule.

A. Wage Estimates

    In the FY 2024 IPF PPS final rule, we utilized the median hourly 
wage rate for Medical Records Specialists, in accordance with the 
Bureau of Labor Statistics (BLS), to calculate our burden estimates for 
the IPFQR Program (88 FR 51145). While the most recent data from the 
BLS reflects a mean hourly wage of $24.56 per hour for all medical 
records specialists, $26.06 is the mean hourly wage for ``general 
medical and surgical hospitals,'' which is an industry within medical 
records specialists.\47\ We believe the industry of ``general medical 
and surgical hospitals'' is more specific to the IPF setting for use in 
our calculations than other industries that fall under medical records 
specialists, such as ``office of physicians'' or ``nursing care 
facilities (skilled nursing facilities).'' We calculated the cost of 
indirect costs, including fringe benefits, at 100 percent of the median 
hourly wage, consistent with previous years. This is necessarily a 
rough adjustment, both because fringe benefits and other indirect costs 
vary significantly by employer and methods of estimating these costs 
vary widely in the literature. Nonetheless, we believe that doubling 
the hourly wage rate ($26.06 x 2 = $52.12) to estimate total cost is a 
reasonably accurate estimation method. Accordingly, unless otherwise 
specified, we will calculate cost burden to IPFs using a wage plus 
benefits estimate of $52.12 per hour throughout the discussion in this 
section of this rule for the IPFQR Program.
---------------------------------------------------------------------------

    \47\ Medical Records Specialists (bls.gov).
---------------------------------------------------------------------------

    Some of the activities previously finalized for the IPFQR Program 
require beneficiaries to undertake tasks such as responding to survey 
questions on their own time. In the FY 2024 IPF PPS final rule, we 
estimated the hourly wage rate for these activities to be $20.71/hr (88 
FR 51145). We are updating that estimate to a post-tax wage of $24.04/
hr.

[[Page 23214]]

The Valuing Time in U.S. Department of Health and Human Services 
Regulatory Impact Analyses: Conceptual Framework and Best Practices 
identifies the approach for valuing time when individuals undertake 
activities on their own time.\48\ To derive the costs for 
beneficiaries, we used a measurement of the usual weekly earnings of 
wage and salary workers of $1,118, divided by 40 hours to calculate an 
hourly pre-tax wage rate of $27.95/hr.\49\ This rate is adjusted 
downwards by an estimate of the effective tax rate for median income 
households of about 14 percent calculated by comparing pre- and post-
tax income,\50\ resulting in the post-tax hourly wage rate of $24.04/
hr. Unlike our State and private sector wage adjustments, we are not 
adjusting beneficiary wages for fringe benefits and other indirect 
costs since the individuals' activities, if any, would occur outside 
the scope of their employment.
---------------------------------------------------------------------------

    \48\ https://aspe.hhs.gov/reports/valuing-time-us-department-health-human-services-regulatory-impact-analyses-conceptual-framework.
    \49\ https://www.bls.gov/news.release/pdf/wkyeng.pdf. Accessed 
January 1, 2024.
    \50\ https://www.census.gov/library/stories/2023/09/median-household-income.html. Accessed January 2, 2024.
---------------------------------------------------------------------------

B. Previously Finalized IPFQR Estimates

    We are finalizing provisions that impact policies beginning with 
the FY 2027 payment determination. For the purposes of calculating 
burden, we attribute the costs to the year in which the costs begin. 
Under our previously finalized policies, data submission for the 
measures that affect the FY 2027 payment determination occurs during CY 
2026 and generally reflects care provided during CY 2025. If we 
finalize our proposal to switch to quarterly reporting in section XX.X 
of this proposed rule, data submission for the FY 2027 payment 
determination would begin during CY 2025. Our currently approved burden 
for CY 2025 is set forth in Table 25.
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[[Page 23216]]


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C. Updates Due to More Recent Information

    In section VI.A of this proposed rule, we described our updated 
wage rates which increase from $44.86/hr to $52.12/hr (an increase of 
$7.26/hr) for activities performed by Medical Records Specialists and 
from $20.71/hr to $24.04/hr (an increase of $3.33/hr) for activities 
performed by individuals. The effects of these updates are set forth in 
Table 26.
[GRAPHIC] [TIFF OMITTED] TP03AP24.039

D. Updates Due to Proposals in This Proposed Rule

    In section V.B.2 of this proposed rule, we are proposing to adopt 
the 30-Day Risk-Standardized All-Cause ED Visit Following an IPF 
Discharge measure beginning with the CY 2025 performance period/FY 2027 
payment determination. As described in section V.B.2.c. of this 
preamble, we will calculate the 30-Day Risk-Standardized All-Cause ED 
Visit Following an Inpatient Psychiatric Facility Discharge measure 
using Medicare claims that IPFs and other providers submit for payment. 
Since this is a claims-based measure there is no additional burden 
outside of submitting a claim. The claim submission is approved by OMB 
under control number 0938-0050 (CMS-2552-10). This rule does not 
warrant any changes under that control number.
    In Section V.D. of this proposed rule, we are proposing to require 
IPFs to submit data on chart-abstracted measures quarterly. In CY 2025, 
this would equate to one additional data submission period (that is, 
the reporting period which would close on November 15, 2025 as set 
forth in Table 27). In CY 2026, there would be an additional two data 
submission periods (for a total of four annually). We estimate that the

[[Page 23217]]

increase in burden associated with the increase in data submission 
periods is approximately equal to the burden of reporting one 
attestation measure because both of these activities require logging 
into and interacting with user interfaces within the CMS data reporting 
system (that is, the Hospital Quality System--HQS). The effects of this 
increase on the IPFQR Program for CY 2025 are set forth in Table 27. 
The effects of this increase on the IPFQR Program for CY 2026 are set 
forth in Table 28.
[GRAPHIC] [TIFF OMITTED] TP03AP24.040

E. Consideration of Burden Related to Clarification of Eligibility 
Criteria for the Option To Elect To File an All-Inclusive Cost Report

    As discussed in section III.E.4 of this proposed rule, we are 
clarifying the eligibility criteria to be approved to file all-
inclusive cost reports. Only government-owned and tribally owned 
facilities are able to satisfy these criteria, and thus only these 
facilities will be permitted to file an all-inclusive cost report for 
cost reporting periods beginning on or after October 1, 2024.
    We do not estimate any change in the burden associated with the 
hospital cost report (CMS-2552-10) OMB control number 0938-0050. We 
anticipate that IPFs which are currently filing all-inclusive cost 
reports, but are not government-owned or tribally owned, would not 
incur additional burden related to the submission of the cost report. 
The approved burden estimate associated with the submission of the 
hospital cost report includes the same amount of burden for the 
submission of an all-inclusive cost report as for the submission of a 
cost report with a charge structure.
    We recognize that these IPFs would be required to track ancillary 
costs and charges using a charge structure; however, we expect that any 
burden associated with this tracking would be part of the normal course 
of a hospital's activities.

F. Submission of PRA-Related Comments

    We have submitted a copy of this proposed rule's information 
collection requirements to OMB for their review. The requirements are 
not effective until they have been approved by OMB.
    To obtain copies of the supporting statement and any related forms 
for the proposed collections discussed above, please visit the CMS 
website at https://www.cms.gov/regulationsand-guidance/legislation/paperworkreductionactof1995/pra-listing, or call the Reports Clearance 
Office at 410-786-1326.
    We invite public comments on these potential information collection 
requirements. If you wish to comment, please submit your comments 
electronically as specified in the DATES and ADDRESSES sections of this 
proposed rule and identify the rule (CMS-1806-P), the ICR's CFR 
citation, and OMB control number.

VII. 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.

VIII. Regulatory Impact Analysis

A. Statement of Need

    This rule proposes updates to the prospective payment rates for 
Medicare inpatient hospital services provided by IPFs for discharges 
occurring during FY 2025 (October 1, 2024 through September 30, 2025). 
We are proposing to apply the 2021-based IPF market basket increase of 
3.1 percent, reduced by the productivity adjustment of 0.4 percentage 
point as required by 1886(s)(2)(A)(i) of the Act for a proposed total 
FY 2025 payment rate update of 2.7 percent. In this proposed rule, we

[[Page 23218]]

are proposing to update the outlier fixed dollar loss threshold amount, 
update the IPF labor-related share, adopt new CBSA delineations based 
on OMB Bulletin 23-01, and update the IPF wage index to reflect the FY 
2025 hospital inpatient wage index. Section 1886(s)(4) of the Act 
requires IPFs to report data in accordance with the requirements of the 
IPFQR Program for purposes of measuring and making publicly available 
information on health care quality; and links the quality data 
submission to the annual applicable percentage increase.

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), Executive Order 14094 on Modernizing Regulatory 
Review (April 6, 2023), the Regulatory Flexibility Act (RFA) (September 
19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), and Executive Order 13132 on Federalism (August 
4, 1999).
    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, as amended by Executive Order 14094, 
defines a ``significant regulatory action'' as an action that is likely 
to result in a rule that may: (1) have an annual effect on the economy 
of $200 million or more (adjusted every 3 years by the Administrator of 
OIRA for changes in gross domestic product); or adversely affect in a 
material way the economy, a sector of the economy, productivity, 
competition, jobs, the environment, public health or safety, or State, 
local, territorial, or tribal governments or communities; (2) create a 
serious inconsistency or otherwise interfere with an action taken or 
planned by another agency; (3) materially alter the budgetary impacts 
of entitlements, grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raise legal or policy issues 
for which centralized review would meaningfully further the President's 
priorities or the principles set forth in Executive Order 12866. In 
accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.
    A regulatory impact analysis (RIA) must be prepared for regulatory 
actions that are significant under section 3(f)(1) of Executive Order 
12866. We estimate that the total impact of these changes for FY 2025 
payments compared to FY 2024 payments will be a net increase of 
approximately $70 million. This reflects a $75 million increase from 
the update to the payment rates (+$85 million from the 4th quarter 2023 
IGI forecast of the 2021-based IPF market basket of 3.1 percent, and -
$10 million for the productivity adjustment of 0.4 percentage point), 
as well as a $5 million decrease as a result of the update to the 
outlier threshold amount. Outlier payments are estimated to change from 
2.1 percent in FY 2024 to 2.0 percent of total estimated IPF payments 
in FY 2025.
    Based on our estimates, OMB's Office of Information and Regulatory 
Affairs has determined that this rulemaking is ``significant,'' though 
not significant under section 3(f)(1) of Executive Order 12866. 
Nevertheless, because of the potentially substantial impact to IPF 
providers, we have prepared a Regulatory Impact Analysis that to the 
best of our ability presents the costs and benefits of the rulemaking. 
OMB has reviewed these proposed regulations, and the Departments have 
provided the following assessment of their impact.
    Nevertheless, because of the potentially substantial impact to IPF 
providers, we have prepared a Regulatory Impact Analysis that to the 
best of our ability presents the costs and benefits of the rulemaking. 
Based on our estimates, OMB's Office of Information and Regulatory 
Affairs has determined that this rulemaking is ``significant.'' 
Therefore, OMB has reviewed these proposed regulations, and the 
Departments have provided the following assessment of their impact.

C. Detailed Economic Analysis

    In this section, we discuss the historical background of the IPF 
PPS and the impact of this proposed rule on the Federal Medicare budget 
and on IPFs.
1. Budgetary Impact
    As discussed in the RY 2005 and RY 2007 IPF PPS final rules, we 
applied a budget neutrality factor to the Federal per diem base rate 
and ECT payment per treatment to ensure that total estimated payments 
under the IPF PPS in the implementation period would equal the amount 
that would have been paid if the IPF PPS had not been implemented. This 
budget neutrality factor included the following components: outlier 
adjustment, stop-loss adjustment, and the behavioral offset. As 
discussed in the RY 2009 IPF PPS notice (73 FR 25711), the stop-loss 
adjustment is no longer applicable under the IPF PPS.
    As discussed in section III.D.1.d of this proposed rule, we are 
proposing to update the wage index and labor-related share, as well as 
update the CBSA delineations based on OMB Bulletin 23-01, in a budget 
neutral manner by applying a wage index budget neutrality factor to the 
Federal per diem base rate and ECT payment per treatment. In addition, 
as discussed in section III.F of this proposed rule, we are proposing 
to apply a refinement standardization factor to the Federal per diem 
base rate and ECT payment per treatment to account for the proposed 
revisions to the ECT per treatment amount, ED adjustment, and patient-
level adjustment factors (as previously discussed in sections III.B, 
III.C, and III.D of this proposed rule, and summarized in Addendum A), 
which must be made budget-neutrally. Therefore, the budgetary impact to 
the Medicare program of this proposed rule would be due to the proposed 
market basket update for FY 2025 of 3.1 percent (see section III.A.2 of 
this proposed rule) reduced by the productivity adjustment of 0.4 
percentage point required by section 1886(s)(2)(A)(i) of the Act and 
the update to the outlier fixed dollar loss threshold amount.
    We estimate that the FY 2025 impact would be a net increase of $70 
million in payments to IPF providers. This reflects an estimated $75 
million increase from the update to the payment rates and a $5 million 
decrease due to the update to the outlier threshold amount to set total 
estimated outlier payments at 2.0 percent of total estimated payments 
in FY 2025. This estimate does not include the implementation of the 
required 2.0 percentage point reduction of the productivity-adjusted 
market basket update factor for any IPF that fails to meet the IPF 
quality reporting requirements (as discussed in section III.B.2. of 
this proposed rule).
2. Impact on Providers
    To show the impact on providers of the changes to the IPF PPS 
discussed in this proposed rule, we compare estimated payments under 
the proposed IPF PPS rates and factors for FY 2025 versus those under 
FY 2024. We determined the percent change in the estimated FY 2025 IPF 
PPS payments compared to the estimated FY 2024 IPF PPS payments for 
each category of IPFs.

[[Page 23219]]

In addition, for each category of IPFs, we have included the estimated 
percent change in payments resulting from the proposed update to the 
outlier fixed dollar loss threshold amount; the proposed revisions to 
the patient-level adjustment factors, ED adjustment, and ECT per 
treatment amount; the updated wage index data including the proposed 
labor-related share and the proposed changes to the CBSA delineations; 
and the proposed market basket increase for FY 2025, as reduced by the 
proposed productivity adjustment according to section 1886(s)(2)(A)(i) 
of the Act.
    To illustrate the impacts of the proposed FY 2025 changes in this 
proposed rule, our analysis begins with FY 2023 IPF PPS claims (based 
on the 2023 MedPAR claims, December 2023 update). We estimate FY 2024 
IPF PPS payments using these 2023 claims, the finalized FY 2024 IPF PPS 
Federal per diem base rate and ECT per treatment amount, and the 
finalized FY 2024 IPF PPS patient and facility level adjustment factors 
(as published in the FY 2024 IPF PPS final rule (88 FR 51054)). We then 
estimate the FY 2024 outlier payments based on these simulated FY 2024 
IPF PPS payments using the same methodology as finalized in the FY 2024 
IPF PPS final rule (88 FR 51090 through 51092) where total outlier 
payments are maintained at 2 percent of total estimated FY 2024 IPF PPS 
payments.
    Each of the following changes is added incrementally to this 
baseline model in order for us to isolate the effects of each change:
     The proposed update to the outlier fixed dollar loss 
threshold amount.
     The proposed revisions to patient-level adjustment 
factors, ED adjustment, and the ECT per treatment amount.
     The proposed FY 2025 IPF wage index, the proposed changes 
to the CBSA delineations, and the proposed FY 2025 labor-related share 
(LRS).
     The proposed market basket increase for FY 2025 of 3.1 
percent reduced by the proposed productivity adjustment of 0.4 
percentage point in accordance with section 1886(s)(2)(A)(i) of the Act 
for a payment rate update of 2.7 percent.
    Our proposed column comparison in Table 29 illustrates the percent 
change in payments from FY 2024 (that is, October 1, 2023, to September 
30, 2024) to FY 2025 (that is, October 1, 2024, to September 30, 2025) 
including all the proposed payment policy changes.
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3. Impact Results
    Table 30 displays the results of our analysis. The table groups 
IPFs into the categories listed here based on characteristics provided 
in the Provider of Services file, the IPF PSF, and cost report data 
from the Healthcare Cost Report Information System:
     Facility Type.
     Location.
     Teaching Status Adjustment.
     Census Region.
     Size.
    The top row of the table shows the overall impact on the 1,430 IPFs 
included in the analysis. In column 2, we present the number of 
facilities of each type that had information available in the PSF, had 
claims in the MedPAR dataset for FY 2023. We note that providers are 
assigned urban or rural status in Table 30 based on the current CBSA 
delineations for FY 2024.
    In column 3, we present the effects of the update to the outlier 
fixed dollar loss threshold amount. We estimate that IPF outlier 
payments as a percentage of total IPF payments are 2.1 percent in FY 
2024. Therefore, we are proposing to adjust the outlier threshold 
amount to set total estimated outlier payments equal to 2.0 percent of 
total payments in FY 2025. The estimated change in total IPF payments 
for FY 2025, therefore, includes an approximate 0.1 percent decrease in 
payments because we would expect the outlier portion of total payments 
to decrease from approximately 2.1 percent to 2.0 percent.

[[Page 23222]]

    The overall impact of the estimated decrease to payments due to 
updating the outlier fixed dollar loss threshold (as shown in column 3 
of Table 30), across all hospital groups, is a 0.1 percent decrease. 
The largest decrease in payments due to this change is estimated to be 
0.2 percent for urban government IPF units, IPFs with more than 30 
percent interns and residents to beds, and IPF units with 76+ beds.
    In column 4, we present the effects of the proposed revisions to 
the patient-level adjustment factors, ED adjustment, and ECT per 
treatment amount and the application of the refinement standardization 
factor that is discussed in section III.F of this proposed rule. We 
estimate the largest payment increases would be for rural freestanding 
government-owned IPFs. Conversely, we estimate that for-profit IPF 
hospitals in rural areas would experience the largest payment decrease. 
Payments to IPF units in urban areas would increase by 0.4 percent, and 
payments to IPF units in rural areas would increase by 0.3 percent.
    In column 5, we present the effects of the proposed budget-neutral 
update to the IPF wage index, the proposed LRS, and the proposed 
changes to the CBSA delineations for FY 2025. In addition, this column 
includes the application of the 5-percent cap on any decrease to a 
provider's wage index from its wage index in the prior year as 
finalized in the FY 2023 IPF PPS final rule (87 FR 46856 through 
46859). The change in this column represents the effect of using the 
concurrent hospital wage data as discussed in section III.D.1.a of this 
proposed rule. That is, the impact represented in this column reflects 
the proposed update from the FY 2024 IPF wage index to the proposed FY 
2025 IPF wage index, which includes basing the FY 2025 IPF wage index 
on the FY 2025 pre-floor, pre-reclassified IPPS hospital wage index 
data, applying a 5-percent cap on any decrease to a provider's wage 
index from its wage index in the prior year, and updating the LRS from 
78.7 percent in FY 2024 to 78.8 percent in FY 2025. We note that there 
is no projected change in aggregate payments to IPFs, as indicated in 
the first row of column 5; however, there would be distributional 
effects among different categories of IPFs. For example, we estimate 
the largest increase in payments to be 2.9 percent for freestanding 
rural for-profit IPFs, and the largest decrease in payments to be 1.6 
percent for IPFs located in the Pacific region.
    Overall, IPFs are estimated to experience a net increase in 
payments of 2.6 percent as a result of the updates in this proposed 
rule. IPF payments are therefore estimated to increase by 2.4 percent 
in urban areas and 4.0 percent in rural areas. The largest payment 
increase is estimated at 5.0 percent for IPFs located in the East South 
Central region.
4. Effect on Beneficiaries
    Under the FY 2025 IPF PPS, IPFs will continue to receive payment 
based on the average resources consumed by patients for each day. Our 
longstanding payment methodology reflects the differences in patient 
resource use and costs among IPFs, as required under section 124 of the 
BBRA. We expect that updating IPF PPS rates in this rule will improve 
or maintain beneficiary access to high quality care by ensuring that 
payment rates reflect the best available data on the resources involved 
in inpatient psychiatric care and the costs of these resources. We 
continue to expect that paying prospectively for IPF services under the 
FY 2025 IPF PPS will enhance the efficiency of the Medicare program.
    As discussed in sections V.B.2 of this proposed rule, we expect 
that the proposed additional IPFQR Program measure will support 
improving discharge planning and care coordination to decrease the 
likelihood that a patient will need to seek emergency care within 30 
days of discharge from an IPF.
5. Effects of the Updates to the IPFQR Program
    In section V.B.2. of this rule, we are proposing the 30-Day Risk-
Standardized All-Cause ED Visit Following an Inpatient Psychiatric 
Facility Discharge measure beginning with data from the CY 2025 
performance period for the FY 2027 payment determination. We do not 
believe this update would impact providers' workflows or information 
systems to collect or report the data because this measure is 
calculated by CMS using information that IPFs already submit as part of 
the claims process. There may be some effects of this measure on IPF 
workflows and clinical processes to improve care coordination and 
discharge planning to improve performance on the measure.
    We are also proposing to adopt a quarterly data submission 
requirement for measures for which we require patient-level data. We 
believe there may be some non-recurrent costs associated with training 
staff and updating processes to submit these data more frequently. We 
believe that the recurring costs of these updates will be an increase 
of 800 hours across all IPFs, equating to change of $41,696.
    In accordance with section 1886(s)(4)(A) of the Act, we will apply 
a 2-percentage point reduction to the FY 2025 market basket update for 
IPFs that have failed to comply with the IPFQR Program requirements for 
FY 2025, including reporting on the mandatory measures. For the FY 2024 
payment determination, of the 1,568 IPFs eligible for the IPFQR 
Program, 194 IPFs did not receive the full market basket update because 
of the IPFQR Program; 42 of these IPFs chose not to participate and 152 
did not meet the requirements of the program.
    We intend to closely monitor the effects of the IPFQR Program on 
IPFs and help facilitate successful reporting outcomes through ongoing 
education, national trainings, and a technical help desk.
6. Regulatory Review Costs
    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this proposed rule, we 
should estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of entities 
that will be directly impacted and will review this proposed rule, we 
assume that the total number of unique commenters on the most recent 
IPF proposed rule will be the number of reviewers of this proposed 
rule. For this FY 2025 IPF PPS proposed rule, the most recent IPF 
proposed rule was the FY 2024 IPF PPS proposed rule, and we received 
2,506 unique comments on this proposed rule. We acknowledge that this 
assumption may understate or overstate the costs of reviewing this 
proposed rule. It is possible that not all commenters reviewed the FY 
2024 IPF proposed rule in detail, and it is also possible that some 
reviewers chose not to comment on that proposed rule. For these 
reasons, we thought that the number of commenters would be a fair 
estimate of the number of reviewers who are directly impacted by this 
proposed rule. We are soliciting comments on this assumption.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of this proposed rule; 
therefore, for the purposes of our estimate, we assume that each 
reviewer reads approximately 50 percent of this proposed rule.
    Using the May, 2022 mean (average) wage information from the BLS 
for medical and health service managers (Code 11-9111), we estimate 
that the cost of reviewing this proposed rule is $123.06 per hour, 
including other indirect costs https://www.bls.gov/oes/current/oes119111.htm. Assuming an

[[Page 23223]]

average reading speed of 250 words per minute, we estimate that it 
would take approximately 112 minutes (1.87 hours) for the staff to 
review half of this proposed rule, which contains a total of 
approximately 56,000 words. For each IPF that reviews the proposed 
rule, the estimated cost is (1.87 x $123.06) or $230.12. Therefore, we 
estimate that the total cost of reviewing this proposed rule is 
$576,680.72 ($230.12 x 2,506 reviewers).

D. Alternatives Considered

    The statute gives the Secretary discretion in establishing an 
update methodology to the IPF PPS. We continue to believe it is 
appropriate to routinely update the IPF PPS so that it reflects the 
best available data about differences in patient resource use and costs 
among IPFs, as required by the statute. Therefore, we are proposing to: 
update the IPF PPS using the methodology published in the RY 2005 IPF 
PPS final rule (our ``standard methodology'') pre-floor, pre-
reclassified IPPS hospital wage index as its basis, along with the 
proposed changes to the CBSA delineations. Additionally, we apply a 5-
percent cap on any decrease to a provider's wage index from its wage 
index in the prior year. Lastly, we are proposing to revise the 
patient-level adjustment factors, ED adjustment, and to increase the 
ECT per treatment amount for FY 2025 (reflecting the pre-scaled and 
pre-adjusted CY 2024 OPPS geometric mean cost).

E. Accounting Statement

    As required by OMB Circular A-4 (available at www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A4/a-4.pdf ), in Table 30, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with the updates to the IPF wage index and 
payment rates in this proposed rule. Table 30 provides our best 
estimate of the increase in Medicare payments under the IPF PPS as a 
result of the changes presented in this proposed rule and based on the 
data for 1,430 IPFs with data available in the PSF, with claims in our 
FY 2023 MedPAR claims dataset. Lastly, Table 30 also includes our best 
estimate of the costs of reviewing and understanding this proposed 
rule.
[GRAPHIC] [TIFF OMITTED] TP03AP24.043

F. Regulatory Flexibility Act

    The RFA requires agencies to analyze options for regulatory relief 
of small entities if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. 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 Small Business 
Administration (SBA) definition of a small business (having revenues of 
less than $47 million in any 1 year).
    According to the SBA's website at https://www.sba.gov/content/small-business-size-standards, IPFs falls into the North American Industrial 
Classification System (NAICS) code 622210, Psychiatric and Substance 
Abuse hospitals. The SBA defines small Psychiatric and Substance Abuse 
hospitals as businesses having less than $47 million.
    Because we lack data on individual hospital receipts, we cannot 
determine the number of small proprietary IPFs or the proportion of 
IPFs' revenue derived from Medicare payments. Therefore, we assume that 
all IPFs are considered small entities.
    The Department of Health and Human Services generally uses a 
revenue impact of 3 to 5 percent as a significance threshold under the 
RFA. As shown in Table 30, we estimate that the overall revenue impact 
of this proposed rule on all IPFs is to increase estimated Medicare 
payments by approximately 2.6 percent. As a result, since the estimated 
impact of this proposed rule is a net increase in revenue across almost 
all categories of IPFs, the Secretary has determined that this proposed 
rule will have a positive revenue 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 603 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 discussed in section 
VIII.C.2 of this proposed rule, the rates and policies set forth in 
this proposed rule will not have an adverse impact on the rural 
hospitals based on the data of the 199 rural excluded psychiatric units 
and 60 rural psychiatric hospitals in our database of 1,430 IPFs for 
which data were available. Therefore, the Secretary has determined that 
this proposed rule will not have a significant impact on the operations 
of a substantial number of small rural hospitals.

[[Page 23224]]

G. Unfunded Mandate 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 2023, that 
threshold is approximately $183 million. This proposed rule does not 
mandate any requirements for state, local, or tribal governments, or 
for the private sector. This proposed rule 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 
$183 million in any 1 year.

H. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule that imposes 
substantial direct requirement costs on state and local governments, 
preempts state law, or otherwise has Federalism implications. This 
proposed rule does not impose substantial direct costs on state or 
local governments or preempt state law.
    In accordance with the provisions of Executive Order 12866, this 
proposed regulation was reviewed by the Office of Management and 
Budget.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on March 22, 2024.

Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2024-06764 Filed 3-28-24; 4:15 pm]
BILLING CODE 4120-01-P