Medicare and Medicaid Programs and the Children's Health Insurance 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 2025 Rates; Quality Programs Requirements; and Other Policy Changes, 68986-70046 [2024-17021]

Agencies

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

[Federal Register Volume 89, Number 167 (Wednesday, August 28, 2024)]
[Rules and Regulations]
[Pages 68986-70046]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-17021]



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Vol. 89

Wednesday,

No. 167

August 28, 2024

Part II

Book 2 of 2 Books

Pages 68985-70094





Department of Health and Human Services





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Centers for Medicare and Medicaid Services



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42 CFR Parts 412, et al.



Medicare and Medicaid Programs and the Children's Health Insurance 
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 2025 Rates; Quality Programs 
Requirements; and Other Policy Changes; Final Rule

Federal Register / Vol. 89 , No. 167 / Wednesday, August 28, 2024 / 
Rules and Regulations

[[Page 68986]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 412, 413, 431, 482, 485, 495, and 512

[CMS-1808-F]
RIN 0938-AV34


Medicare and Medicaid Programs and the Children's Health 
Insurance 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 2025 Rates; Quality 
Programs Requirements; and Other Policy Changes

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

ACTION: Final rule.

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SUMMARY: This final rule revises the Medicare hospital inpatient 
prospective payment systems (IPPS) for operating and capital-related 
costs of acute care hospitals; makes changes relating to Medicare 
graduate medical education (GME) for teaching hospitals; updates the 
payment policies and the annual payment rates for the Medicare 
prospective payment system (PPS) for inpatient hospital services 
provided by long-term care hospitals (LTCHs); and makes other policy-
related changes.

DATES: With the exception of instruction 2 (Sec.  405.1845), 
instruction 29 (Sec.  482.42(e)) and instruction 31 (Sec.  485.640(d)), 
this final rule is effective October 1, 2024. The regulation at Sec.  
405.1845 is effective January 1, 2025. The regulations at Sec. Sec.  
482.42(e) and 485.640(d) are effective on November 1, 2024.

FOR FURTHER INFORMATION CONTACT: 
    Donald Thompson, and Michele Hudson, (410) 786-4487 or 
[email protected], Operating Prospective Payment, MS-DRG Relative 
Weights, Wage Index, Hospital Geographic Reclassifications, Graduate 
Medical Education, Capital Prospective Payment, Excluded Hospitals, 
Medicare Disproportionate Share Hospital (DSH) Payment Adjustment, Sole 
Community Hospitals (SCHs), Medicare-Dependent Small Rural Hospital 
(MDH) Program, Low-Volume Hospital Payment Adjustment, and Inpatient 
Critical Access Hospital (CAH) Issues.
    Emily Lipkin, and Jim Mildenberger, [email protected], Long-Term Care 
Hospital Prospective Payment System and MS-LTC-DRG Relative Weights 
Issues.
    Lily Yuan, [email protected], New Technology Add-On Payments 
Issues.
    Mady Hue, [email protected], and Andrea Hazeley, 
[email protected], MS-DRG Classifications Issues.
    Jonathan Rudy, [email protected], Rural Community Hospital 
Demonstration Program Issues.
    Jeris Smith, [email protected], Frontier Community Health 
Integration Project (FCHIP) Demonstration Issues.
    Lang Le, [email protected], Hospital Readmissions Reduction 
Program--Administration Issues.
    Ngozi Uzokwe, [email protected], Hospital Readmissions 
Reduction Program--Measures Issues.
    Jennifer Tate, [email protected], Hospital-Acquired 
Condition Reduction Program--Administration Issues.
    Ngozi Uzokwe, [email protected], Hospital-Acquired Condition 
Reduction Program--Measures Issues.
    Julia Venanzi, [email protected], Hospital Inpatient 
Quality Reporting Program and Hospital Value-Based Purchasing Program--
Administration Issues.
    Melissa Hager, [email protected], and Ngozi Uzokwe, 
[email protected]--Hospital Inpatient Quality Reporting Program 
and Hospital Value-Based Purchasing Program--Measures Issues Except 
Hospital Consumer Assessment of Healthcare Providers and Systems 
Issues.
    Elizabeth Goldstein, [email protected], Hospital 
Inpatient Quality Reporting and Hospital Value-Based Purchasing--
Hospital Consumer Assessment of Healthcare Providers and Systems 
Measures Issues.
    Jennifer Tate, [email protected], PPS-Exempt Cancer 
Hospital Quality Reporting--Administration Issues.
    Kristina Rabarison, [email protected], PPS-Exempt 
Cancer Hospital Quality Reporting Program--Measure Issues.
    Lorraine Wickiser, [email protected], Long-Term Care 
Hospital Quality Reporting Program--Administration Issues.
    Jessica Warren, [email protected] and Elizabeth Holland, 
[email protected], Medicare Promoting Interoperability 
Program.
    Bridget Dickensheets, [email protected] and Mollie 
Knight, [email protected], LTCH Market Basket Rebasing.
    Benjamin Cohen, [email protected], Provider Reimbursement 
Review Board.
    Nicholas Bonomo, [email protected] and Tracy Smith, 
[email protected], Payment Error Rate Measurement Program.
    [email protected], Transforming Episode Accountability Model 
(TEAM).
    Lauren Blum, [email protected], and Kristin Shifflett, 
[email protected], Conditions of Participation Requirements 
for Hospitals and Critical Access Hospitals to Report Acute Respiratory 
Illnesses.

SUPPLEMENTARY INFORMATION: 

Tables Available on the CMS Website

    The IPPS tables for this fiscal year (FY) 2025 final rule are 
available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link 
on the left side of the screen titled ``FY 2025 IPPS Final Rule Home 
Page'' or ``Acute Inpatient--Files for Download.'' The LTCH PPS tables 
for this FY 2025 final rule are available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/ under the list item for Regulation 
Number CMS-1808-F. For further details on the contents of the tables 
referenced in this final rule, we refer readers to section VI. of the 
Addendum to this FY 2025 IPPS/LTCH PPS final rule.
    Readers who experience any problems accessing any of the tables 
that are posted on the CMS websites, as previously identified, should 
contact Michael Treitel, [email protected].

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
    This FY 2025 IPPS/LTCH PPS final rule makes payment and policy 
changes under the Medicare inpatient prospective payment system (IPPS) 
for operating and capital-related costs of acute care hospitals as well 
as for certain hospitals and hospital units excluded from the IPPS. In 
addition, it makes payment and policy changes for inpatient hospital 
services provided by long-term care hospitals (LTCHs) under the long-
term care hospital prospective payment system (LTCH PPS). This final 
rule also makes policy changes to

[[Page 68987]]

programs associated with Medicare IPPS hospitals, IPPS-excluded 
hospitals, and LTCHs. In this FY 2025 final rule, we are finalizing our 
proposal to continue policies to address wage index disparities 
impacting low wage index hospitals. We are also finalizing our proposed 
changes relating to Medicare graduate medical education (GME) for 
teaching hospitals and new technology add-on payments.
    We are finalizing our proposal of a separate IPPS payment for 
establishing and maintaining access to essential medicines.
    In the Hospital Value-Based Purchasing (VBP) Program, we are 
finalizing our proposal to modify scoring of the Person and Community 
Engagement Domain for the FY 2027 through FY 2029 program years to only 
score six unchanged dimensions of the Hospital Consumer Assessment of 
Healthcare Providers and Systems (HCAHPS) Survey measure, and we are 
finalizing our proposal to adopt the updated HCAHPS Survey measure in 
the Hospital VBP Program beginning with the FY 2030 program year after 
the updated measure has been publicly reported under the Hospital 
Inpatient Quality Reporting (IQR) Program for 1 year. We are also 
finalizing our proposal to modify scoring on the HCAHPS Survey measure 
beginning with the FY 2030 program year to incorporate the updated 
HCAHPS Survey measure into nine survey dimensions. Lastly, we provide 
previously and newly established performance standards for the FY 2027 
through FY 2030 program years for the Hospital VBP Program.
    In the Hospital IQR Program, we are finalizing our proposals to add 
seven new measures, with modifications to our proposal to adopt the 
Patient Safety Structural measure, modify two existing measures 
including the HCAHPS Survey measure, and remove five measures. We are 
also finalizing our proposed changes to the validation process for the 
Hospital IQR Program data. We are finalizing the proposed reporting and 
submission requirements for electronic clinical quality measures 
(eCQMs) with modifications.
    In the PPS-Exempt Cancer Hospital Quality Reporting Program 
(PCHQR), we are finalizing the adoption of the Patient Safety 
Structural measure with modification beginning with the CY 2025 
reporting period/FY 2027 program year. We are also finalizing our 
proposed changes to the HCAHPS Survey measure and our proposal to move 
up the start date for publicly displaying hospital performance on the 
Hospital Commitment to Health Equity measure.
    In the LTCH Quality Reporting Program (QRP), we are finalizing our 
proposals to add four assessment items to the LTCH Continuity 
Assessment Record and Evaluation (CARE) Data Set (LCDS) and modify one 
assessment item on the LCDS beginning with the FY 2028 LTCH QRP. 
Additionally, we are finalizing our proposal to extend the admission 
assessment window for the LCDS beginning with the FY 2028 LTCH QRP. 
Finally, we summarize the feedback we received on our requests for 
information on future measure concepts for the LTCH QRP and a future 
LTCH Star Rating system.
    In the Medicare Promoting Interoperability Program, we are 
finalizing our proposal to separate the Antimicrobial Use and 
Resistance (AUR) Surveillance measure into two measures, an 
Antimicrobial Use (AU) Surveillance measure and an Antimicrobial 
Resistance (AR) Surveillance measure, beginning with the electronic 
health record (EHR) reporting period in CY 2025. We are also finalizing 
the following proposals to: increase the performance-based scoring 
threshold from 60 points to 70 points for the EHR reporting period in 
CY 2025 and from 70 points to 80 points beginning with the EHR 
reporting period in CY 2026; adopt two new eCQMs and modify one eCQM, 
in alignment with the Hospital IQR Program; and change the reporting 
and submission requirements for eCQMs with modifications, in alignment 
with the Hospital IQR Program.
    We proposed the creation and testing of a new mandatory alternative 
payment model called the Transforming Episode Accountability Model 
(TEAM). The intent of TEAM is to improve beneficiary care through 
financial accountability for episodes categories that begin with one of 
the following procedures: coronary artery bypass graft surgery (CABG), 
lower extremity joint replacement (LEJR), major bowel procedure, 
surgical hip/femur fracture treatment (SHFFT), and spinal fusion. TEAM 
will test whether financial accountability for these episode categories 
reduces Medicare expenditures while preserving or enhancing the quality 
of care for Medicare beneficiaries. We anticipated that TEAM would 
benefit Medicare beneficiaries through improving the coordination of 
items and services paid for through Medicare fee-for-service (FFS) 
payments, encouraging provider investment in health care infrastructure 
and redesigned care processes, and incentivizing higher value care 
across the inpatient and post-acute care settings for the episode. We 
proposed to test TEAM for a 5-year model performance period, beginning 
January 1, 2026, and ending December 31, 2030. Under the Quality 
Payment Program (QPP), we anticipated that TEAM would be an Advanced 
Alternative Payment Model (APM)for Track 2 and Track 3 and a Merit-
based Incentive Payment System (MIPS) APM for all participation tracks. 
We are finalizing some policies as proposed and we are finalizing 
others with modification. There are also certain proposed policies that 
we are not finalizing, and we will instead go through future rulemaking 
to promulgate new policies before the model start date.
    We are also finalizing the proposal requiring respiratory illness 
reporting for hospitals and critical access hospitals as a condition of 
participation following the expiration of the COVID-19 public health 
emergency requirements.
    Under various statutory authorities, we either discuss continued 
program implementation or make changes to the Medicare IPPS, the LTCH 
PPS, other related payment methodologies and programs for FY 2025 and 
subsequent fiscal years, and other policies and provisions included in 
this rule. These statutory authorities include, but are not limited to, 
the following:
     Section 1886(d) of the Social Security Act (the Act), 
which sets forth a system of payment for the operating costs of acute 
care hospital inpatient stays under Medicare Part A (Hospital 
Insurance) based on prospectively set rates. Section 1886(g) of the Act 
requires that, instead of paying for capital-related costs of inpatient 
hospital services on a reasonable cost basis, the Secretary use a 
prospective payment system (PPS).
     Section 1886(d)(1)(B) of the Act, which specifies that 
certain hospitals and hospital units are excluded from the IPPS. These 
hospitals and units are: rehabilitation hospitals and units; LTCHs; 
psychiatric hospitals and units; children's hospitals; cancer 
hospitals; extended neoplastic disease care hospitals; and hospitals 
located outside the 50 States, the District of Columbia, and Puerto 
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa). Religious nonmedical 
health care institutions (RNHCIs) are also excluded from the IPPS.
     Sections 123(a) and (c) of the Balanced Budget Refinement 
Act of 1999 (BBRA) (Public Law (Pub. L.) 106-113) and section 307(b)(1) 
of the Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 
106-554) (as codified under section 1886(m)(1) of the

[[Page 68988]]

Act), which provide for the development and implementation of a 
prospective payment system for payment for inpatient hospital services 
of LTCHs described in section 1886(d)(1)(B)(iv) of the Act.
     Section 1814(l)(4) of the Act requires downward 
adjustments to the applicable percentage increase, beginning with FY 
2015, for CAHs that do not successfully demonstrate meaningful use of 
certified electronic health record technology (CEHRT) for an EHR 
reporting period for a payment adjustment year.
     Section 1886(a)(4) of the Act, which specifies that costs 
of approved educational activities are excluded from the operating 
costs of inpatient hospital services. Hospitals with approved graduate 
medical education (GME) programs are paid for the direct costs of GME 
in accordance with section 1886(h) of the Act. Hospitals paid under the 
IPPS with approved GME programs are paid for the indirect costs of 
training residents in accordance with section 1886(d)(5)(B) of the Act.
     Section 1886(d)(5)(F) of the Act provides for additional 
Medicare IPPS payments to subsection (d) hospitals that serve a 
significantly disproportionate number of low-income patients. These 
payments are known as the Medicare disproportionate share hospital 
(DSH) adjustment. Section 1886(d)(5)(F) of the Act specifies the 
methods under which a hospital may qualify for the DSH payment 
adjustment.
     Section 1886(b)(3)(B)(viii) of the Act, which requires the 
Secretary to reduce the applicable percentage increase that would 
otherwise apply to the standardized amount applicable to a subsection 
(d) hospital for discharges occurring in a fiscal year if the hospital 
does not submit data on measures in a form and manner, and at a time, 
specified by the Secretary.
     Section 1886(b)(3)(B)(ix) of the Act, which requires 
downward adjustments to the applicable percentage increase, beginning 
with FY 2015 (and beginning with FY 2022 for subsection (d) Puerto Rico 
hospitals), for eligible hospitals that do not successfully demonstrate 
meaningful use of CEHRT for an EHR reporting period for a payment 
adjustment year.
     Section 1866(k) of the Act, which provides for the 
establishment of a quality reporting program for hospitals described in 
section 1886(d)(1)(B)(v) of the Act, referred to as ``PPS-exempt cancer 
hospitals.''
     Section 1886(n) of the Act, which establishes the 
requirements for an eligible hospital to be treated as a meaningful EHR 
user of CEHRT for an EHR reporting period for a payment adjustment year 
or, for purposes of subsection (b)(3)(B)(ix) of the Act, for a fiscal 
year.
     Section 1886(o) of the Act, which requires the Secretary 
to establish a Hospital Value-Based Purchasing (VBP) Program, under 
which value-based incentive payments are made in a fiscal year to 
hospitals based on their performance on measures established for a 
performance period for such fiscal year.
     Section 1886(p) of the Act, which establishes a Hospital-
Acquired Condition (HAC) Reduction Program, under which payments to 
applicable hospitals are adjusted to provide an incentive to reduce 
hospital-acquired conditions.
     Section 1886(q) of the Act, as amended by section 15002 of 
the 21st Century Cures Act, which establishes the Hospital Readmissions 
Reduction Program. Under the program, payments for discharges from an 
applicable hospital as defined under section 1886(d) of the Act will be 
reduced to account for certain excess readmissions. Section 15002 of 
the 21st Century Cures Act directs the Secretary to compare hospitals 
with respect to the number of their Medicare-Medicaid dual-eligible 
beneficiaries in determining the extent of excess readmissions.
     Section 1886(r) of the Act, as added by section 3133 of 
the Affordable Care Act, which provides for a reduction to 
disproportionate share hospital (DSH) payments under section 
1886(d)(5)(F) of the Act and for an additional uncompensated care 
payment to eligible hospitals. Specifically, section 1886(r) of the Act 
requires that, for fiscal year 2014 and each subsequent fiscal year, 
subsection (d) hospitals that would otherwise receive a DSH payment 
made under section 1886(d)(5)(F) of the Act will receive two separate 
payments: (1) 25 percent of the amount they previously would have 
received under the statutory formula for Medicare DSH payments in 
section 1886(d)(5)(F) of the Act if subsection (r) did not apply (``the 
empirically justified amount''), and (2) an additional payment for the 
DSH hospital's proportion of uncompensated care, determined as the 
product of three factors. These three factors are: (1) 75 percent of 
the payments that would otherwise be made under section 1886(d)(5)(F) 
of the Act, in the absence of section 1886(r) of the Act; (2) 1 minus 
the percent change in the percent of individuals who are uninsured; and 
(3) the hospital's uncompensated care amount relative to the 
uncompensated care amount of all DSH hospitals expressed as a 
percentage.
     Section 1886(m)(5) of the Act, which requires the 
Secretary to reduce by 2 percentage points the annual update to the 
standard Federal rate for discharges for a long-term care hospital 
(LTCH) during the rate year for LTCHs that do not submit data on 
quality measures in the form, manner, and at a time, specified by the 
Secretary.
     Section 1886(m)(6) of the Act, as added by section 
1206(a)(1) of the Pathway for Sustainable Growth Rate (SGR) Reform Act 
of 2013 (Pub. L. 113-67) and amended by section 51005(a) of the 
Bipartisan Budget Act of 2018 (Pub. L. 115-123), which provided for the 
establishment of site neutral payment rate criteria under the LTCH PPS, 
with implementation beginning in FY 2016. Section 51005(b) of the 
Bipartisan Budget Act of 2018 amended section 1886(m)(6)(B) by adding 
new clause (iv), which specifies that the IPPS comparable amount 
defined in clause (ii)(I) shall be reduced by 4.6 percent for FYs 2018 
through 2026.
     Section 1899B of the Act, which provides for the 
establishment of standardized data reporting for certain post-acute 
care providers, including LTCHs.
     Section 1115A of the Act authorizes the testing of 
innovative payment and service delivery models that preserve or enhance 
the quality of care furnished to Medicare, Medicaid, and Children's 
Health Insurance Program (CHIP) beneficiaries while reducing program 
expenditures.
     Sections 1866 and 1902 of the Act, which requires 
providers of services seeking to participate in the Medicare or 
Medicaid program, or both, to enter into an agreement with the 
Secretary or the state Medicaid agency, as appropriate. Hospitals (all 
hospitals to which the requirements of 42 CFR part 482 apply, including 
short-term acute care hospitals, LTC hospitals, rehabilitation 
hospitals, psychiatric hospitals, cancer hospitals, and children's 
hospitals) and critical access hospitals (CAHs) seeking to be Medicare 
and Medicaid providers of services under 42 CFR part 485, subpart F, 
must be certified as meeting Federal participation requirements 
(conditions of participation (CoPs) and conditions for coverage 
(CfCs)). Section 1861(e) of the Act provides the patient health and 
safety protections established by the Secretary for hospital CoPs. 
Section 1820(e) of the Act provides similar authority for CAHs.
2. Summary of the Major Provisions
    The following is a summary of the major provisions in this final 
rule. In

[[Page 68989]]

general, these major provisions are being finalized as part of the 
annual update to the payment policies and payment rates, consistent 
with the applicable statutory provisions. A general summary of the 
changes in this final rule is presented in section I.D. of the preamble 
of this final rule.
a. Continuation of the Low Wage Index Hospital Policy
    To help mitigate growing wage index disparities between high wage 
and low wage hospitals, in the FY 2020 IPPS/LTCH PPS rule (84 FR 42326 
through 42332), we adopted a policy to increase the wage index values 
for certain hospitals with low wage index values (the low wage index 
hospital policy). This policy was adopted in a budget neutral manner 
through an adjustment applied to the standardized amounts for all 
hospitals. We indicated our intention that this policy would be 
effective for at least 4 years, beginning in FY 2020, in order to allow 
employee compensation increases implemented by these hospitals 
sufficient time to be reflected in the wage index calculation. As 
discussed in section III.G.5. of the preamble of this final rule, while 
we are using the FY 2021 cost report data for the FY 2025 wage index, 
we are unable to comprehensively evaluate the effect, if any, the low 
wage index hospital policy had on hospitals' wage increases during the 
years the COVID-19 public health emergency (PHE) was in effect. We 
believe it is necessary to wait until we have useable data from fiscal 
years after the PHE before reaching any conclusions about the efficacy 
of the policy. Therefore, after consideration of public comments, we 
are finalizing our proposal that the low wage index hospital policy and 
the related budget neutrality adjustment would be effective for at 
least 3 more years, beginning in FY 2025.
b. Separate IPPS Payment for Establishing and Maintaining Access to 
Essential Medicines
    As discussed in section V.J. of the preamble of this final rule, 
the Biden-Harris administration has made it a priority to strengthen 
the resilience of medical supply chains and support reliable access to 
products for public health, including through prevention and mitigation 
of medical product shortages. As a first step in this initiative, we 
proposed to establish a separate payment for small, independent 
hospitals for the IPPS shares of the additional resource costs to 
voluntarily establish and maintain a 6-month buffer stock of one or 
more of 86 essential medicines, either directly or through contractual 
arrangements with a pharmaceutical manufacturer, distributor, or 
intermediary. For the purposes of this policy, eligibility is limited 
to small, independent hospitals as hospitals with 100 beds or fewer 
that are not part of a chain organization. We are finalizing our 
proposal to make this separate payment in a non-budget neutral manner 
under section 1886(d)(5)(I) of the Act. We are also finalizing our 
proposal that the payment adjustments would commence for cost reporting 
periods beginning on or after October 1, 2024.
c. DSH Payment Adjustment, Additional Payment for Uncompensated Care, 
and Supplemental Payment
    Under section 1886(r) of the Act, which was added by section 3133 
of the Affordable Care Act, starting in FY 2014, Medicare 
disproportionate share hospitals (DSHs) receive 25 percent of the 
amount they previously would have received under the statutory formula 
for Medicare DSH payments in section 1886(d)(5)(F) of the Act. The 
remaining amount, equal to 75 percent of the amount that would have 
been paid as Medicare DSH payments under section 1886(d)(5)(F) of the 
Act if subsection (r) did not apply, is paid as additional payments 
after the amount is reduced for changes in the percentage of 
individuals that are uninsured. Each Medicare DSH that has 
uncompensated care will receive an additional payment based on its 
share of the total amount of uncompensated care for all Medicare DSHs 
for a given time period. This additional payment is known as the 
uncompensated care payment.
    In this final rule, we are finalizing the proposed update to our 
estimates of the three factors used to determine uncompensated care 
payments for FY 2025. We also proposed to continue to use uninsured 
estimates produced by CMS' Office of the Actuary (OACT) as part of the 
development of the National Health Expenditure Accounts (NHEA) in 
conjunction with more recently available data in the calculation of 
Factor 2, and we are finalizing this approach. Consistent with the 
regulation at Sec.  412.106(g)(1)(iii)(C)(11), which was adopted in the 
FY 2023 IPPS/LTCH PPS final rule, for FY 2025, we will use the 3 most 
recent years of audited data on uncompensated care costs from Worksheet 
S-10 of the FY 2019, FY 2020, and FY 2021 cost reports to calculate 
Factor 3 in the uncompensated care payment methodology for all eligible 
hospitals.
    Beginning with FY 2023 (87 FR 49047 through 49051), we also 
established a supplemental payment for IHS and Tribal hospitals and 
hospitals located in Puerto Rico. In section IV.D. of the preamble of 
this final rule, we summarized the ongoing methodology for supplemental 
payments.
    In this final rule, we are finalizing our proposal to calculate the 
per-discharge amount for interim uncompensated care payments for FY 
2025 and subsequent fiscal years with modification. Specifically, for 
FY 2025, we will calculate the per-discharge amount for interim 
uncompensated care payments using the average of the most recent 2 
years of discharge data. In light of the commenters' concerns regarding 
a trend of decreasing discharge volume and possible overestimation of 
discharges in recent years, we believe that, on balance, omitting FY 
2021 data from the calculation of interim uncompensated care payments 
is likely to more accurately estimate FY 2025 discharges. Therefore, we 
are finalizing our proposal with modification. We are modifying the 
text of Sec.  412.106(i)(1) to state that for FY 2025, interim 
uncompensated care payments will be calculated based on an average of 
the most recent 2 years of available historical discharge data, and, 
consistent with the proposed rule,, interim uncompensated care payments 
for FY 2026 and subsequent fiscal years will be calculated based on an 
average of the most recent 3 years of available historical discharge 
data.
d. Adoption of the Patient Safety Structural Measure in the Hospital 
IQR Program and PCHQR Program
    The Patient Safety Structural measure is an attestation-based 
measure that assesses whether hospitals have a structure and culture 
that prioritizes safety as demonstrated by the following five domains: 
(1) leadership commitment to eliminating preventable harm; (2) 
strategic planning and organizational policy; (3) culture of safety and 
learning health system; (4) accountability and transparency; and (5) 
patient and family engagement. Hospitals will attest to whether they 
engage in specific evidence-based best practices within each of these 
domains to achieve a score from zero to five out of five points. We 
proposed that hospitals would be required to report this measure 
beginning with the CY 2025 reporting period/FY 2027 program year for 
the PCHQR Program and for the CY 2025 reporting period/FY 2027 payment 
determination for the Hospital IQR Program. We are finalizing this 
proposal, with a modification to one of the domains.

[[Page 68990]]

e. Updated Hospital Consumer Assessment of Healthcare Providers and 
Systems (HCAHPS) Survey Measure in the Hospital IQR Program, Hospital 
VBP Program, and PCHQR Program
    The updated version of the HCAHPS Survey measure aligns with the 
National Quality Strategy goal to bring patient voices to the forefront 
by incorporating feedback from patients and caregivers. We proposed 
that the updated HCAHPS Survey measure would be adopted for the 
Hospital IQR and PCHQR Programs beginning with the CY 2025 reporting 
period/FY 2027 payment determination and the CY 2025 reporting period/
FY 2027 program year, respectively. For the Hospital VBP Program, we 
proposed to modify scoring on the Person and Community Engagement 
Domain for the FY 2027 through FY 2029 program years to only score the 
six dimensions of the HCAHPS Survey measure that would remain unchanged 
from the current version of the survey. We proposed to adopt the 
updated HCAHPS Survey measure beginning with the FY 2030 program year, 
which would result in nine HCAHPS Survey measure dimensions for the 
Person and Community Engagement Domain. We also proposed to modify 
scoring of the Person and Community Engagement Domain beginning with 
the FY 2030 program year to account for the proposed updates to the 
HCAHPS Survey measure. We are finalizing all of these proposals.
f. Hospital Value-Based Purchasing (VBP) Program
    Section 1886(o) of the Act requires the Secretary to establish a 
Hospital VBP Program under which value-based incentive payments are 
made in a fiscal year to hospitals based on their performance on 
measures established for a performance period for such fiscal year. We 
proposed to modify scoring on the Person and Community Engagement 
Domain for the FY 2027 through FY 2029 program years while the updated 
HCAHPS Survey measure would be publicly reported under the Hospital IQR 
Program. In addition, we proposed to adopt the updated HCAHPS Survey 
measure beginning with the FY 2030 program year and modify scoring 
beginning with the FY 2030 program year to account for the updated 
HCAHPS Survey measure. We are finalizing these proposals.
g. Hospital Inpatient Quality Reporting (IQR) Program
    Under section 1886(b)(3)(B)(viii) of the Act, subsection (d) 
hospitals are required to report data on measures selected by the 
Secretary for a fiscal year in order to receive the full annual 
percentage increase. In the FY 2025 IPPS/LTCH PPS proposed rule, we 
proposed several changes to the Hospital IQR Program. We proposed the 
adoption of seven new measures: (1) Patient Safety Structural measure 
beginning with the CY 2025 reporting period/FY 2027 payment 
determination; (2) Age Friendly Hospital measure beginning with the CY 
2025 reporting period/FY 2027 payment determination; (3) Catheter-
Associated Urinary Tract Infection (CAUTI) Standardized Infection Ratio 
Stratified for Oncology Locations beginning with the CY 2026 reporting 
period/FY 2028 payment determination; (4) Central Line-Associated 
Bloodstream Infection (CLABSI) Standardized Infection Ratio Stratified 
for Oncology Locations beginning with the CY 2026 reporting period/FY 
2028 payment determination; (5) Hospital Harm--Falls with Injury eCQM 
beginning with the CY 2026 reporting period/FY 2028 payment 
determination; (6) Hospital Harm--Postoperative Respiratory Failure 
eCQM beginning with the CY 2026 reporting period/FY 2028 payment 
determination; and (7) Thirty-day Risk-Standardized Death Rate among 
Surgical Inpatients with Complications (Failure-to-Rescue) measure 
beginning with the July 1, 2023-June 30, 2025 reporting period/FY 2027 
payment determination. We also proposed refinements to two measures 
currently in the Hospital IQR Program measure set: (1) Global 
Malnutrition Composite Score (GMCS) eCQM, beginning with the CY 2026 
reporting period/FY 2028 payment determination; and (2) the HCAHPS 
Survey beginning with the CY 2025 reporting period/FY 2027 payment 
determination. In addition, we proposed the removal of five measures: 
(1) Death Among Surgical Inpatients with Serious Treatable 
Complications (CMS PSI 04) measure beginning with the July 1, 2023-June 
30, 2025 reporting period/FY 27 payment determination; (2) Hospital-
level, Risk-Standardized Payment Associated with a 30-Day Episode-of-
Care for Acute Myocardial Infarction (AMI) measure beginning with the 
July 1, 2021-June 30, 2024 reporting period/FY 2026 payment 
determination; (3) Hospital-level, Risk-Standardized Payment Associated 
with a 30-Day Episode-of-Care for Heart Failure (HF) measure beginning 
with the July 1, 2021-June 30, 2024 reporting period/FY 2026 payment 
determination; (4) Hospital-level, Risk-Standardized Payment Associated 
with a 30-Day Episode-of-Care for Pneumonia (PN) measure beginning with 
July 1, 2021-June 30, 2024 reporting period/FY 2026 payment 
determination, and (5) Hospital-level, Risk-Standardized Payment 
Associated with a 30-Day Episode-of-Care for Elective Primary Total Hip 
Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) measure 
beginning with the April 1, 2021-March 31, 2024 reporting period/FY 
2026 payment determination. We are finalizing all of these proposals as 
proposed with the exception of the Patient Safety Structural measure, 
which we are finalizing with modifications.
    Lastly, we proposed to modify eCQM data reporting and submission 
requirements by proposing a progressive increase in the number of 
mandatory eCQMs a hospital would be required to report on beginning 
with the CY 2026 reporting period/FY 2028 payment determination. We 
also proposed two changes to current policies related to validation of 
hospital data: (1) to implement eCQM validation scoring based on the 
accuracy of eCQM data beginning with the validation of CY 2025 eCQM 
data affecting the FY 2028 payment determination; and (2) modification 
of the data validation reconsideration request requirements to make 
medical records submission optional for reconsideration requests 
beginning with CY 2023 discharges/FY 2026 payment determination. We are 
finalizing all of these proposals as proposed with the exception of the 
proposed progressive increase in the number of mandatory eCQMs, which 
we are finalizing with modifications.
h. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
    Section 1866(k)(1) of the Act requires, for purposes of FY 2014 and 
each subsequent fiscal year, that a hospital described in section 
1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH) 
submit data in accordance with section 1866(k)(2) of the Act with 
respect to such fiscal year. In the FY 2025 IPPS/LTCH PPS proposed 
rule, we proposed the following:
     To adopt the Patient Safety Structural measure beginning 
with the CY 2025 reporting period/FY 2027 program year.
     To modify the HCAHPS Survey measure beginning with the CY 
2025 reporting period/FY 2027 program year.
     To move up the start date for publicly displaying hospital 
performance on the Hospital Commitment to Health Equity measure from 
July 2026 to January 2026 or as soon as feasible thereafter.
    We are finalizing all of these proposals as proposed with the

[[Page 68991]]

exception of the Patient Safety Structural measure, which we are 
finalizing with modifications.
i. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    We proposed and are finalizing the following changes to the LTCH 
QRP: (1) add four assessment items to the LCDS beginning with the FY 
2028 LTCH QRP; (2) modify one item on the LCDS beginning with the FY 
2028 LTCH QRP; and (3) extend the admission assessment window for the 
LCDS from 3 days to 4 days beginning with the FY 2028 LTCH QRP. We also 
summarize the feedback we received on requests for information in the 
proposed rule on future measure concepts for the LTCH QRP and a future 
LTCH Star Rating system.
j. Medicare Promoting Interoperability Program
    In section X.F. of the preamble of the proposed rule, we proposed 
several changes to the Medicare Promoting Interoperability Program. 
Specifically, we proposed: (1) to separate the Antimicrobial Use and 
Resistance (AUR) Surveillance measure into two measures, an 
Antimicrobial Use (AU) Surveillance measure and an Antimicrobial 
Resistance (AR) Surveillance measure, beginning with the EHR reporting 
period in CY 2025; to add a new exclusion for eligible hospitals or 
critical access hospitals (CAHs) that do not have a data source 
containing the minimal discrete data elements that are required for AU 
or AR Surveillance reporting; to modify the existing exclusions for the 
AUR Surveillance measure to apply to the proposed AU Surveillance and 
AR Surveillance measures, respectively; and to treat the AU 
Surveillance and AR Surveillance measures as new measures with respect 
to active engagement beginning with the EHR reporting period in CY 
2025; (2) to increase the performance-based scoring threshold for 
eligible hospitals and CAHs reporting under the Medicare Promoting 
Interoperability Program from 60 points to 80 points beginning with the 
EHR reporting period in CY 2025; (3) to adopt two new eCQMs that 
hospitals can select as one of their three self-selected eCQMs 
beginning with the CY 2026 reporting period: the Hospital Harm--Falls 
with Injury eCQM and the Hospital Harm--Postoperative Respiratory 
Failure eCQM; (4) beginning with the CY 2026 reporting period, to 
modify one eCQM, the Global Malnutrition Composite Score eCQM; and (5) 
to modify eCQM data reporting and submission requirements by proposing 
a progressive increase in the number of mandatory eCQMs eligible 
hospitals and CAHs would be required to report on beginning with the CY 
2026 reporting period. We are finalizing all proposals as proposed, 
with the exception of our proposals to increase the performance-based 
scoring threshold for eligible hospitals and CAHs, and to progressively 
increase the number of mandatory eCQMs required for reporting, which we 
are finalizing with modification. We are finalizing, with modification, 
an increase to the performance-based scoring threshold for eligible 
hospitals and CAHs from 60 points to 70 points for the EHR reporting 
period in CY 2025 and from 70 points to 80 points beginning with the 
EHR reporting period in CY 2026, and finalizing, with modification, the 
regulatory text accordingly. We are also finalizing, with modification, 
our proposal to increase the eCQM reporting requirements in the 
Medicare Promoting Interoperability Program for the CY 2026, CY 2027, 
CY 2028, and subsequent years' reporting periods. Specifically, 
eligible hospitals and CAHs will be required to report a total of eight 
eCQMs for the CY 2026 reporting period, a total of nine eCQMs for the 
CY 2027 reporting period, and a total of eleven eCQMs beginning with 
the CY 2028 reporting period.
k. Proposed Distribution of Additional Residency Positions Under the 
Provisions of Section 4122 of Subtitle C of the Consolidated 
Appropriations Act, 2023 (CAA, 2023)
    In the proposed rule, we included a proposal to implement section 
4122 of the CAA, 2023. Section 4122(a) of the CAA, 2023, amended 
section 1886(h) of the Act by adding a new section 1886(h)(10) of the 
Act requiring the distribution of additional residency positions (also 
referred to as slots) to hospitals. After consideration of public 
comments, we are finalizing this proposal, with minor modifications. We 
refer readers to section V.F.2. of the preamble of this final rule for 
a summary of the provisions of section 4122 of the CAA, 2023 that we 
are implementing in this final rule.
l. Extension of the Medicare-Dependent, Small Rural Hospital (MDH) 
Program and the Temporary Changes to the Low-Volume Hospital Payment 
Adjustment
    The Consolidated Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-
42), enacted on March 9, 2024, extended the MDH program and the 
temporary changes to the low-volume hospital qualifying criteria and 
payment adjustment under the IPPS for a portion of FY 2025. 
Specifically, section 306 of the CAA, 2024, further extended the 
modified definition of low-volume hospital and the methodology for 
calculating the payment adjustment for low-volume hospitals under 
section 1886(d)(12) of the Act through December 31, 2024. Section 307 
of the CAA, 2024, extended the MDH program under section 1886(d)(5)(G) 
of the Act through December 31, 2024. Prior to enactment of the CAA, 
2024, the low-volume hospital qualifying criteria and payment 
adjustment were set revert to the statutory requirements that were in 
effect prior to FY 2011 at the end of FY 2024 and beginning October 1, 
2024, the MDH program would have no longer been in effect.
    We recognize the importance of these extensions with respect to the 
goal of advancing health equity by addressing the health disparities 
that underlie the health system is one of CMS' strategic pillars \1\ 
and a Biden-Harris Administration priority.\2\ These provisions are 
projected to increase payments to IPPS hospitals by approximately $137 
million in FY 2025.
---------------------------------------------------------------------------

    \1\ https://www.cms.gov/about-cms/what-we-do/cms-strategic-plan.
    \2\ https://www.whitehouse.gov/priorities/.
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m. Transforming Episode Accountability Model (TEAM)
    As discussed in section X.A. of the preamble of this final rule, we 
are finalizing the Transforming Episode Accountability Model (TEAM). 
TEAM will be a 5-year mandatory model tested under the authority of 
section 1115A of the Act, beginning on January 1, 2026, and ending on 
December 31, 2030. The intent of TEAM is to improve beneficiary care 
through financial accountability for episode categories that begin with 
one of the following procedures: coronary artery bypass graft surgery 
(CABG), lower extremity joint replacement (LEJR), major bowel 
procedure, surgical hip/femur fracture treatment (SHFFT), and spinal 
fusion. TEAM will test whether financial accountability for these 
episode categories reduces Medicare expenditures while preserving or 
enhancing the quality of care for Medicare beneficiaries.
    Under Traditional Medicare, Medicare makes separate payments to 
providers and suppliers for the items and services furnished to a 
beneficiary over the course of an episode of care. Because providers 
and suppliers are paid for each individual item or service delivered, 
providers may not be incentivized to invest in quality improvement and 
care coordination

[[Page 68992]]

activities. As a result, care may be fragmented, unnecessary, or 
duplicative. By holding hospitals accountable for all items and 
services provided during an episode, providers would be better 
incentivized to coordinate patient care, avoid duplicative or 
unnecessary services, and improve the beneficiary care experience 
during care transitions.
    Under TEAM, all acute care hospitals, with limited exceptions, 
located within the mandatory Core-Based Statistical Areas (CBSAs) that 
CMS selected for model implementation will be required to participate 
in TEAM. CMS will allow a one-time opportunity for hospitals that 
participate until the last day of the last performance period in the 
BPCI Advanced model or the last day of the last performance year of the 
CJR model, that are not located in a mandatory CBSA selected for TEAM 
participation to voluntarily opt into TEAM.\3\ TEAM will have a 1-year 
glide path opportunity for all TEAM participants and a 3-year glide 
path opportunity for TEAM participants that are safety net hospitals, 
which will allow TEAM participants to ease into full financial risk. 
Episodes will include non-excluded Medicare Parts A and B items and 
services and would begin with an anchor hospitalization or anchor 
procedure and will end 30 days after hospital discharge. The following 
episode categories, when furnished by a TEAM participant, will initiate 
an episode in TEAM: lower extremity joint replacement, surgical hip 
femur fracture treatment, spinal fusion, coronary artery bypass graft, 
and major bowel procedure.
---------------------------------------------------------------------------

    \3\ For the BPCI Advanced model, the last day of the last 
performance period is December 31, 2025. For the CJR model, the last 
day of the last performance year is December 31, 2024.
---------------------------------------------------------------------------

    TEAM participants will continue to bill Medicare FFS as usual but 
will receive target prices for episodes prior to each performance year. 
Target prices will be based on 3 years of baseline data, prospectively 
trended forward to the relevant performance year, and calculated at the 
level of MS-DRG/HCPCS episode type and region. Target prices will also 
include a discount factor, normalization factor, retrospective trend 
adjustment factor, and beneficiary and provider level risk-adjustment. 
Performance in the model will be assessed by comparing TEAM 
participants' actual Medicare FFS spending during a performance year to 
their reconciliation target price as well as by performance on three 
quality measures. TEAM participants will earn a payment from CMS, 
subject to a quality performance adjustment, if their spending is below 
the reconciliation target price. TEAM participants will owe CMS a 
repayment amount, subject to a quality performance adjustment, if their 
spending is above the reconciliation target price. In section X.A. of 
the preamble of this final rule some policies as proposed, and we are 
finalizing others with modification. There are also certain proposed 
policies that we are not finalizing, and we will instead go through 
rulemaking in the future to promulgate new policies before the model 
start date.
n. Maternity Care Request for Information (RFI)
    In alignment with the Biden-Harris Administration's commitment to 
addressing the maternal health crisis, this RFI sought to gather 
information on differences between hospital resources required to 
provide inpatient pregnancy and childbirth services to Medicare 
patients as compared to non-Medicare patients. To the extent that the 
resources required differ between patient populations, we also wanted 
to gather information on the extent to which non-Medicare payers, or 
other commercial insurers may be using the IPPS as a basis for 
determining their payment rates for inpatient pregnancy and childbirth 
services and the effect, if any, that the use of the IPPS as a basis 
for determining payment by those payers may have on maternal health 
outcomes. We summarize the comments received in section X.C. of the 
preamble of this final rule.
o. Conditions of Participation Requirements for Hospitals and Critical 
Access Hospitals To Report Acute Respiratory Illnesses
    In section X.F. of the preamble of the proposed rule, we proposed 
to update the hospital and CAH infection prevention and control and 
antibiotic stewardship programs conditions of participation (CoPs) to 
extend a limited subset of the current COVID-19 and influenza data 
reporting requirements. These proposed reporting requirements ensure 
that hospitals and CAHs have appropriate insight related to evolving 
infection control needs. Specifically, we proposed to replace the 
COVID-19 and Seasonal Influenza reporting standards for hospitals and 
CAHs with a new standard addressing acute respiratory illnesses to 
require that, beginning on October 1, 2024, hospitals and CAHs would 
have to electronically report information about COVID-19, influenza, 
and RSV. We also proposed that outside of a public health emergency 
(PHE), hospitals and CAHs would have to report these data on a weekly 
basis. In section X.F. of the preamble of this final rule, we are 
finalizing these proposals with revisions.
p. Changes to the Severity Level Designation for Z Codes Describing 
Inadequate Housing and Housing Instability
    As discussed in section II.C. of the preamble of this final rule, 
we are finalizing the proposed change to the severity level designation 
for the social determinants of health (SDOH) diagnosis codes describing 
inadequate housing and housing instability from non-complication or 
comorbidity (NonCC) to complication or comorbidity (CC) for FY 2025. 
Consistent with our annual updates to account for changes in resource 
consumption, treatment patterns, and the clinical characteristics of 
patients, we recognize inadequate housing and housing instability as 
indicators of increased resource utilization in the acute inpatient 
hospital setting.
    Consistent with the Administration's goal of advancing health 
equity for all, including members of historically underserved and 
under-resourced communities, as described in the President's January 
20, 2021 Executive Order 13985 on ``Advancing Racial Equity and Support 
for Underserved Communities Through the Federal Government,'' \[1]\ we 
also continue to be interested in receiving feedback on how we might 
further foster the documentation and reporting of the diagnosis codes 
describing social and economic circumstances to more accurately reflect 
each health care encounter and improve the reliability and validity of 
the coded data including in support of efforts to advance health 
equity.
---------------------------------------------------------------------------

    \[1]\ Available at 86 FR 7009 (January 25, 2021) (https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government).
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3. Summary of Costs, Transfers, Savings, and Benefits
    The following table provides a summary of the costs, transfers, 
savings, and benefits associated with the major provisions described in 
section I.A.2. of the preamble of this final rule.
BILLING CODE 4120-01-P

[[Page 68993]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.000


[[Page 68994]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.001


[[Page 68995]]


BILLING CODE 4120-01-C

B. Background Summary

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
    Section 1886(d) of the Act sets forth a system of payment for the 
operating costs of acute care hospital inpatient stays under Medicare 
Part A (Hospital Insurance) based on prospectively set rates. Section 
1886(g) of the Act requires the Secretary to use a prospective payment 
system (PPS) to pay for the capital-related costs of inpatient hospital 
services for these ``subsection (d) hospitals.'' Under these PPSs, 
Medicare payment for hospital inpatient operating and capital-related 
costs is made at predetermined, specific rates for each hospital 
discharge. Discharges are classified according to a list of diagnosis-
related groups (DRGs).
    The base payment rate is comprised of a standardized amount that is 
divided into a labor-related share and a nonlabor-related share. The 
labor-related share is adjusted by the wage index applicable to the 
area where the hospital is located. If the hospital is located in 
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the 
DRG relative weight.
    If the hospital treats a high percentage of certain low-income 
patients, it receives a percentage add-on payment applied to the DRG-
adjusted base payment rate. This add-on payment, known as the 
disproportionate share hospital (DSH) adjustment, provides for a 
percentage increase in Medicare payments to hospitals that qualify 
under either of two statutory formulas designed to identify hospitals 
that serve a disproportionate share of low-income patients. For 
qualifying hospitals, the amount of this adjustment varies based on the 
outcome of the statutory calculations. The Affordable Care Act revised 
the Medicare DSH payment methodology and provides for an additional 
Medicare payment beginning on October 1, 2013, that considers the 
amount of uncompensated care furnished by the hospital relative to all 
other qualifying hospitals.
    If the hospital is training residents in an approved residency 
program(s), it receives a percentage add-on payment for each case paid 
under the IPPS, known as the indirect medical education (IME) 
adjustment. This percentage varies, depending on the ratio of residents 
to beds.
    Additional payments may be made for cases that involve new 
technologies or medical services that have been approved for special 
add-on payments. In general, to qualify, a new technology or medical 
service must demonstrate that it is a substantial clinical improvement 
over technologies or services otherwise available, and that, absent an 
add-on payment, it would be inadequately paid under the regular DRG 
payment. In addition, certain transformative new devices and certain 
antimicrobial products may qualify under an alternative inpatient new 
technology add-on payment pathway by demonstrating that, absent an add-
on payment, they would be inadequately paid under the regular DRG 
payment.
    The costs incurred by the hospital for a case are evaluated to 
determine whether the hospital is eligible for an additional payment as 
an outlier case. This additional payment is designed to protect the 
hospital from large financial losses due to unusually expensive cases. 
Any eligible outlier payment is added to the DRG-adjusted base payment 
rate, plus any DSH, IME, and new technology or medical service add-on 
adjustments and, beginning in FY 2023 for IHS and Tribal hospitals and 
hospitals located in Puerto Rico, the new supplemental payment.
    Although payments to most hospitals under the IPPS are made on the 
basis of the standardized amounts, some categories of hospitals are 
paid in whole or in part based on their hospital-specific rate, which 
is determined from their costs in a base year. For example, sole 
community hospitals (SCHs) receive the higher of a hospital-specific 
rate based on their costs in a base year (the highest of FY 1982, FY 
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the 
standardized amount. SCHs are the sole source of care in their areas. 
Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a 
hospital that is located more than 35 road miles from another hospital 
or that, by reason of factors such as an isolated location, weather 
conditions, travel conditions, or absence of other like hospitals (as 
determined by the Secretary), is the sole source of hospital inpatient 
services reasonably available to Medicare beneficiaries. In addition, 
certain rural hospitals previously designated by the Secretary as 
essential access community hospitals are considered SCHs.
    With the recent enactment of section 307 of the CAA, 2024, under 
current law, the Medicare-dependent, small rural hospital (MDH) program 
is effective through December 31, 2024. For discharges occurring on or 
after October 1, 2007, but before January 1, 2025, an MDH receives the 
higher of the Federal rate or the Federal rate plus 75 percent of the 
amount by which the Federal rate is exceeded by the highest of its FY 
1982, FY 1987, or FY 2002 hospital-specific rate. MDHs are a major 
source of care for Medicare beneficiaries in their areas. Section 
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is 
located in a rural area (or, as amended by the Bipartisan Budget Act of 
2018, a hospital located in a State with no rural area that meets 
certain statutory criteria), has not more than 100 beds, is not an SCH, 
and has a high percentage of Medicare discharges (not less than 60 
percent of its inpatient days or discharges in its cost reporting year 
beginning in FY 1987 or in two of its three most recently settled 
Medicare cost reporting years). As section 307 of the CAA, 2024, 
extended the MDH program through the first quarter of FY 2025 only, 
beginning on January 1, 2025, the MDH program will no longer be in 
effect absent a change in law. Because the MDH program is not 
authorized by statute beyond December 31, 2024, beginning January 1, 
2025, all hospitals that previously qualified for MDH status under 
section 1886(d)(5)(G) of the Act will no longer have MDH status and 
will be paid based on the IPPS Federal rate.
    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient hospital services in accordance with 
a prospective payment system established by the Secretary. The basic 
methodology for determining capital prospective payments is set forth 
in our regulations at 42 CFR 412.308 and 412.312. Under the capital 
IPPS, payments are adjusted by the same DRG for the case as they are 
under the operating IPPS. Capital IPPS payments are also adjusted for 
IME and DSH, similar to the adjustments made under the operating IPPS. 
In addition, hospitals may receive outlier payments for those cases 
that have unusually high costs.
    The existing regulations governing payments to hospitals under the 
IPPS are located in 42 CFR part 412, subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
    Under section 1886(d)(1)(B) of the Act, as amended, certain 
hospitals and hospital units are excluded from the IPPS. These 
hospitals and units are: Inpatient rehabilitation facility (IRF) 
hospitals and units; long-term care hospitals (LTCHs); psychiatric 
hospitals and units; children's hospitals; cancer hospitals; extended 
neoplastic disease care hospitals, and hospitals located outside the 50 
States, the District of Columbia, and Puerto Rico (that is, hospitals 
located in the U.S. Virgin

[[Page 68996]]

Islands, Guam, the Northern Mariana Islands, and American Samoa). 
Religious nonmedical health care institutions (RNHCIs) are also 
excluded from the IPPS. Various sections of the Balanced Budget Act of 
1997 (BBA) (Pub. L. 105-33), the Medicare, Medicaid and SCHIP [State 
Children's Health Insurance Program] Balanced Budget Refinement Act of 
1999 (BBRA, Pub. L. 106-113), and the Medicare, Medicaid, and SCHIP 
Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106-554) 
provide for the implementation of PPSs for IRF hospitals and units, 
LTCHs, and psychiatric hospitals and units (referred to as inpatient 
psychiatric facilities (IPFs)). (We note that the annual updates to the 
LTCH PPS are included along with the IPPS annual update in this 
document. Updates to the IRF PPS and IPF PPS are issued as separate 
documents.) Children's hospitals, cancer hospitals, hospitals located 
outside the 50 States, the District of Columbia, and Puerto Rico (that 
is, hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa), and RNHCIs continue to be paid 
solely under a reasonable cost-based system, subject to a rate-of-
increase ceiling on inpatient operating costs. Similarly, extended 
neoplastic disease care hospitals are paid on a reasonable cost basis, 
subject to a rate-of-increase ceiling on inpatient operating costs.
    The existing regulations governing payments to excluded hospitals 
and hospital units are located in 42 CFR parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
    The Medicare prospective payment system (PPS) for LTCHs applies to 
hospitals described in section 1886(d)(1)(B)(iv) of the Act, effective 
for cost reporting periods beginning on or after October 1, 2002. The 
LTCH PPS was established under the authority of sections 123 of the 
BBRA and section 307(b) of the BIPA (as codified under section 
1886(m)(1) of the Act). Section 1206(a) of the Pathway for SGR Reform 
Act of 2013 (Pub. L. 113-67) established the site neutral payment rate 
under the LTCH PPS, which made the LTCH PPS a dual rate payment system 
beginning in FY 2016. Under this statute, effective for LTCH's cost 
reporting periods beginning in FY 2016 cost reporting period, LTCHs are 
generally paid for discharges at the site neutral payment rate unless 
the discharge meets the patient criteria for payment at the LTCH PPS 
standard Federal payment rate. The existing regulations governing 
payment under the LTCH PPS are located in 42 CFR part 412, subpart O. 
Beginning October 1, 2009, we issue the annual updates to the LTCH PPS 
in the same documents that update the IPPS.
4. Critical Access Hospitals (CAHs)
    Under sections 1814(l), 1820, and 1834(g) of the Act, payments made 
to critical access hospitals (CAHs) (that is, rural hospitals or 
facilities that meet certain statutory requirements) for inpatient and 
outpatient services are generally based on 101 percent of reasonable 
cost. Reasonable cost is determined under the provisions of section 
1861(v) of the Act and existing regulations under 42 CFR part 413.
5. Payments for Graduate Medical Education (GME)
    Under section 1886(a)(4) of the Act, costs of approved educational 
activities are excluded from the operating costs of inpatient hospital 
services. Hospitals with approved graduate medical education (GME) 
programs are paid for the direct costs of GME in accordance with 
section 1886(h) of the Act. The amount of payment for direct GME costs 
for a cost reporting period is based on the hospital's number of 
residents in that period and the hospital's costs per resident in a 
base year. The existing regulations governing payments to the various 
types of hospitals are located in 42 CFR part 413. Section 
1886(d)(5)(B) of the Act provides that prospective payment hospitals 
that have residents in an approved GME program receive an additional 
payment for each Medicare discharge to reflect the higher patient care 
costs of teaching hospitals relative to non-teaching hospitals. The 
additional payment is based on the indirect medical education (IME) 
adjustment factor, which is calculated using a hospital's ratio of 
residents to beds and a multiplier, which is set by Congress. Section 
1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges 
occurring during FY 2008 and fiscal years thereafter, the IME formula 
multiplier is 1.35. The regulations regarding the indirect medical 
education (IME) adjustment are located at 42 CFR 412.105.

C. Summary of Provisions of Recent Legislation That Are Implemented in 
This Final Rule

1. The Consolidated Appropriations Act, 2023 (CAA 2023; Pub. L. 117-
328)
    Section 4122 of the CAA, 2023, amended section 1886(h) of the Act 
by adding a new section 1886(h)(10) of the Act requiring the 
distribution of additional residency positions (also referred to as 
slots) to hospitals. Section 1886(h)(10)(A) of the Act requires that 
for FY 2026, the Secretary shall initiate an application round to 
distribute 200 residency positions. At least 100 of the positions made 
available under section 1886(h)(10)(A) of the Act shall be distributed 
for psychiatry or psychiatry subspecialty residency training programs. 
The Secretary is required, subject to certain provisions in the law, to 
increase the otherwise applicable resident limit for each qualifying 
hospital that submits a timely application by the number of positions 
that may be approved by the Secretary for that hospital. The Secretary 
is required to notify hospitals of the number of positions distributed 
to them by January 31, 2026, and the increase is effective beginning 
July 1, 2026.
    In determining the qualifying hospitals for which an increase is 
provided, section 1886(h)(10)(B)(i) of the Act requires the Secretary 
to take into account the ``demonstrated likelihood'' of the hospital 
filling the positions made available within the first 5 training years 
beginning after the date the increase would be effective, as determined 
by the Secretary.
    Section 1886(h)(10)(B)(ii) of the Act requires a minimum 
distribution for certain categories of hospitals. Specifically, the 
Secretary is required to distribute at least 10 percent of the 
aggregate number of total residency positions available to each of four 
categories of hospitals. Stated briefly, and discussed in greater 
detail later in this final rule, the categories are as follows: (1) 
hospitals located in rural areas or that are treated as being located 
in a rural area (pursuant to sections 1886(d)(2)(D) and 1886(d)(8)(E) 
of the Act); (2) hospitals in which the reference resident level of the 
hospital is greater than the otherwise applicable resident limit; (3) 
hospitals in States with new medical schools or additional locations 
and branches of existing medical schools; and (4) hospitals that serve 
areas designated as Health Professional Shortage Areas (HPSAs). Section 
1886(h)(10)(F)(iii) of the Act defines a qualifying hospital as a 
hospital in one of these four categories.
    Section 1886(h)(10)(B)(iii) of the Act further requires that each 
qualifying hospital that submits a timely application receive at least 
1 (or a fraction of 1) of the residency positions made available under 
section 1886(h)(10) of the Act before any qualifying hospital receives 
more than 1 residency position.
    Section 1886(h)(10)(C) of the Act places certain limitations on the 
distribution of the residency positions.

[[Page 68997]]

First, a hospital may not receive more than 10 additional full-time 
equivalent (FTE) residency positions. Second, no increase in the 
otherwise applicable resident limit of a hospital may be made unless 
the hospital agrees to increase the total number of FTE residency 
positions under the approved medical residency training program of the 
hospital by the number of positions made available to that hospital. 
Third, if a hospital that receives an increase to its otherwise 
applicable resident limit under section 1886(h)(10) of the Act is 
eligible for an increase to its otherwise applicable resident limit 
under 42 CFR 413.79(e)(3) (or any successor regulation), that hospital 
must ensure that residency positions received under section 1886(h)(10) 
of the Act are used to expand an existing residency training program 
and not for participation in a new residency training program.
2. The Consolidated Appropriations Act, 2024 (CAA, 2024; Pub. L. 118-
42)
    Section 306 of the CAA, 2024, extended through the first 3 months 
of FY 2025 the modified definition of a low-volume hospital and the 
methodology for calculating the payment adjustment for low-volume 
hospitals in effect for FYs 2019 through 2024. Specifically, under 
section 1886(d)(12)(C)(i) of the Act, as amended, for FYs 2019 through 
2024 and the portion of FY 2025 occurring before January 1, 2025, a 
subsection (d) hospital qualifies as a low-volume hospital if it is 
more than 15 road miles from another subsection (d) hospital and has 
less than 3,800 total discharges during the fiscal year. Under section 
1886(d)(12)(D) of the Act, as amended, for discharges occurring in FYs 
2019 through December 31, 2024, the Secretary determines the applicable 
percentage increase using a continuous, linear sliding scale ranging 
from an additional 25 percent payment adjustment for low-volume 
hospitals with 500 or fewer discharges to a zero percent additional 
payment for low-volume hospitals with more than 3,800 discharges in the 
fiscal year.
    Section 307 of the CAA, 2024, amended sections 1886(d)(5)(G)(i) and 
1886(d)(5)(G)(ii)(II) of the Act to provide for an extension of the MDH 
program through the first 3 months of FY 2025 (that is, through 
December 31, 2024).

D. Issuance of a Notice of Proposed Rulemaking and Summary of the 
Proposed Provisions

    The FY 2025 IPPS/LTCH PPS proposed rule appeared in the May 2, 
2024, Federal Register (89 FR 35934). In this proposed rule, we set 
forth proposed payment and policy changes to the Medicare IPPS for FY 
2025 operating costs and capital-related costs of acute care hospitals 
and certain hospitals and hospital units that are excluded from IPPS. 
In addition, we set forth proposed changes to the payment rates, 
factors, and other payment and policy-related changes to programs 
associated with payment rate policies under the LTCH PPS for FY 2025.
    The following is a general summary of the changes that we proposed 
to make:
1. Proposed Changes to MS-DRG Classifications and Recalibrations of 
Relative Weights
    In section II. of the preamble of the proposed rule, we included 
the following:
     Proposed changes to MS-DRG classifications based on our 
yearly review for FY 2025.
     Proposed recalibration of the MS-DRG relative weights.
     A discussion of the proposed FY 2025 status of new 
technologies approved for add-on payments for FY 2024, a presentation 
of our evaluation and analysis of the FY 2025 applicants for add-on 
payments for high-cost new medical services and technologies (including 
public input, as directed by the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) Public Law 108-173, 
obtained in a town hall meeting for applications not submitted under an 
alternative pathway), and a discussion of the proposed status of FY 
2025 new technology applicants under the alternative pathways for 
certain medical devices and certain antimicrobial products.
     A proposed change to the April 1 cutoff to October 1 for 
determining whether a technology would be within its 2- to 3-year 
newness period when considering eligibility for new technology add-on 
payments, beginning in FY 2026, effective for those technologies that 
are approved for new technology add-on payments starting in FY 2025 or 
a subsequent year (as discussed in II.E.8. of the preamble of the 
proposed rule).
     A proposal that, beginning with new technology add-on 
payment applications for FY 2026, we will no longer consider a hold 
status to be an inactive status for the purposes of eligibility for the 
new technology add-on payment (as discussed in section II.E.9. of the 
preamble of the proposed rule).
     A proposal that, subject to our review of the new 
technology add-on payment eligibility criteria, for certain gene 
therapies approved for new technology add-on payments in the FY 2025 
IPPS/LTCH final rule that are indicated and used specifically for the 
treatment of sickle cell disease (SCD), effective with discharges on or 
after October 1, 2024, and concluding at the end of the 2- to 3-year 
newness period for such therapy, we would temporarily increase the new 
technology add-on payment percentage to 75 percent (as discussed in 
section II.E.10. of the preamble of the proposed rule).
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
    In section III. of the preamble of the proposed rule, we proposed 
revisions to the wage index for acute care hospitals and the annual 
update of the wage data. Specific issues addressed include, but are not 
limited to, the following:
     Proposed changes in core-based statistical areas (CBSAs) 
as a result of new OMB labor market area delineations and proposed 
policies related to the proposed changes in CBSAs.
     The proposed FY 2025 wage index update using wage data 
from cost reporting periods beginning in FY 2019.
     Calculation, analysis, and implementation of the proposed 
occupational mix adjustment to the wage index for acute care hospitals 
for FY 2025 based on the 2022 Occupational Mix Survey.
     Proposed application of the rural, imputed and frontier 
State floors, and continuation of the low wage index hospital policy.
     Proposed revisions to the wage index for acute care 
hospitals, based on hospital redesignations and reclassifications under 
sections 1886(d)(8)(B), (d)(8)(E), and (d)(10) of the Act.
     Proposed adjustment to the wage index for acute care 
hospitals for FY 2025 based on commuting patterns of hospital employees 
who reside in a county and work in a different area with a higher wage 
index.
     Proposed labor-related share for the FY 2025 wage index.
3. Payment Adjustment for Medicare Disproportionate Share Hospitals 
(DSHs) for FY 2025
    In section IV. of the preamble of this proposed rule, we discuss 
the following:
     Proposed calculation of Factor 1 and Factor 2 of the 
uncompensated care payment methodology.
     Proposed methodological approach for determining Factor 3 
of the uncompensated care payment for FY 2025, which is the same 
methodology that was used for FY 2024.

[[Page 68998]]

     Proposed methodological approach for determining the 
amount of interim uncompensated care payments using the average of the 
most recent 3 years of discharge data.
4. Other Decisions and Proposed Changes to the IPPS for Operating Costs
    In section V. of the preamble of the proposed rule, we discussed 
proposed changes or clarifications of a number of the provisions of the 
regulations in 42 CFR parts 412 and 413, including the following:
     Proposed inpatient hospital update for FY 2025.
     Proposed updated national and regional case-mix values and 
discharges for purposes of determining RRC status and clarification of 
the qualification under the discharge criterion for osteopathic 
hospitals.
     Proposed implementation of the statutory extension of the 
temporary changes to the low-volume hospital payment adjustment through 
December 31, 2024, the statutory expiration beginning January 1, 2025, 
and the proposed payment adjustments for low-volume hospitals for FY 
2025.
     Proposed implementation of the statutory extension of the 
MDH program through December 31, 2024, and the statutory expiration 
beginning January 1, 2025.
     A proposal to implement a provision of the Consolidated 
Appropriations Act relating to payments to hospitals for GME and IME 
costs, proposed direct graduate medical education (DGME) and IME policy 
modifications to the criteria for new residency programs; technical 
fixes to the DGME regulations; and a notice of closure of two teaching 
hospitals and opportunities to apply for available slots and a reminder 
of CBSA changes and application to GME policies.
     Proposed nursing and allied health education program 
Medicare Advantage (MA) add-on rates and direct GME MA percent 
reductions for CY 2023.
     Proposed update to the payment adjustment for certain 
clinical trial and expanded access use immunotherapy cases.
     Proposed separate IPPS payment for establishing and 
maintaining access to essential medicines.
     Proposed update to the estimate of the financial impacts 
for the FY 2025 Hospital Readmissions Reduction Program.
     Proposed modifications to the scoring of the Person and 
Community Engagement Domain in the Hospital VBP Program.
    ++ For the FY 2027 through FY 2029 program years to only score on 
six unchanged dimensions of the HCAHPS Survey.
    ++ Beginning with the FY 2030 program year to account for the 
proposed updated HCAHPS Survey.
     Updating the proposed estimate of the financial impacts 
for the FY 2025 Hospital-Acquired Conditions Reduction Program.
     Discussion of and proposed changes relating to the 
implementation of the Rural Community Hospital Demonstration Program in 
FY 2025.
5. Proposed FY 2025 Policy Governing the IPPS for Capital-Related Costs
    In section VI. of the preamble of the proposed rule, we discussed 
the proposed payment policy requirements for capital-related costs and 
capital payments to hospitals for FY 2025.
6. Proposed Changes to the Payment Rates for Certain Excluded 
Hospitals: Rate-of-Increase Percentages
    In section VII. of the preamble of the proposed rule, we discussed 
the following:
     Proposed changes to payments to certain excluded hospitals 
for FY 2025.
     Proposed continued implementation of the Frontier 
Community Health Integration Project (FCHIP) Demonstration.
7. Proposed Changes to the LTCH PPS
    In section VIII. of the preamble of the proposed rule, we proposed 
to rebase and revise the LTCH market basket to reflect a 2022 base 
year, which includes a proposed update to the LTCH PPS labor-related 
share. In section VIII. of the preamble of the proposed rule, we set 
forth proposed changes to the LTCH PPS Federal payment rates, factors, 
and other payment rate policies under the LTCH PPS for FY 2025. We also 
proposed a technical clarification to the regulations for hospitals 
seeking to be classified as an LTCH.
8. Proposed Changes Relating to Quality Data Reporting for Specific 
Providers and Suppliers
    In section IX. of the preamble of the proposed rule, we addressed 
the following:
     Solicitation of comment on adopting measures across the 
hospital quality reporting and value-based purchasing programs which 
capture more forms of unplanned post-acute care and encourage hospitals 
to improve discharge processes.
     Proposed changes to the requirements for the Hospital IQR 
Program.
     Proposed changes to the requirements for the PCHQR 
Program.
     Proposed adoption of the Patient Safety Structural measure 
in the Hospital IQR Program and the PCHQR Program.
     Proposed updated HCAHPS Survey measure in the Hospital IQR 
Program, PCHQR Program, and Hospital VBP Program.
     Proposed changes to the requirements for the LTCH QRP, and 
requests for information on future measure concepts for the LTCH QRP 
and a star rating system for the LTCH QRP.
     Proposed changes to requirements pertaining to eligible 
hospitals and CAHs participating in the Medicare Promoting 
Interoperability Program.
9. Other Proposals and Comment Solicitations Included in the Proposed 
Rule
    Section X. of the preamble of the proposed rule includes the 
following:
     Proposed implementation of TEAM that would test whether an 
episode-based pricing methodology linked with accountability for 
quality measure performance for select acute care hospitals reduces 
Medicare program expenditures while preserving or improving the quality 
of care for Medicare beneficiaries.
     Proposed changes to permit a Provider Reimbursement Review 
Board (PRRB) member to serve up to 3 consecutive terms (9 consecutive 
years total), and up to 4 consecutive terms (12 consecutive years 
total) in cases where a PRRB Member who, in their second or third 
consecutive term, is designated as Chairperson, to continue serving as 
Chairperson in the fourth consecutive term.
     Solicitation of comments to gather information on 
differences between hospital resources required to provide inpatient 
pregnancy and childbirth services to Medicare patients as compared to 
non-Medicare patients.
     Solicitation of comments to gather information on 
potential solutions that can be implemented through the hospital CoPs 
to address well-documented concerns regarding maternal morbidity, 
mortality, disparities, and maternity care access in the United States. 
See the calendar year (CY) 2025 Outpatient Prospective Payment System 
(OPPS) proposed rule (89 FR XXXXX) for more information about this RFI.
     Proposal to remove the exclusion of Puerto Rico from the 
Payment Error Rate Measurement (PERM) program found at 42 CFR 
431.954(b)(3).
     Proposal for a new hospital CoP to replace the COVID-19 
and Seasonal Influenza reporting standards for

[[Page 68999]]

hospitals and CAHs that were created during PHE.
10. Other Provisions of the Proposed Rule
    Section XI.A. of the preamble of the proposed rule includes our 
discussion of the MedPAC Recommendations.
    Section XI.B. of the preamble of the proposed rule includes a 
descriptive listing of the public use files associated with this 
proposed rule.
    Section XII. of the preamble of the proposed rule includes the 
collection of information requirements for entities based on our 
proposals.
    Section XIII. of the preamble of the proposed rule includes 
information regarding our responses to public comments.
11. Determining Prospective Payment Operating and Capital Rates and 
Rate-of-Increase Limits for Acute Care Hospitals
    In sections II. and III. of the Addendum of the proposed rule, we 
set forth proposed changes to the amounts and factors for determining 
the proposed FY 2025 prospective payment rates for operating costs and 
capital-related costs for acute care hospitals. We proposed to 
establish the threshold amounts for outlier cases. In addition, in 
section IV. of the Addendum of the proposed rule, we addressed the 
proposed update factors for determining the rate-of-increase limits for 
cost reporting periods beginning in FY 2025 for certain hospitals 
excluded from the IPPS.
12. Determining Prospective Payment Rates for LTCHs
    In section V. of the Addendum of the proposed rule, we set forth 
proposed changes to the amounts and factors for determining the 
proposed FY 2025 LTCH PPS standard Federal payment rate and other 
factors used to determine LTCH PPS payments under both the LTCH PPS 
standard Federal payment rate and the site neutral payment rate in FY 
2025. We proposed to establish the adjustments for the wage index 
(including proposed changes to the LTCH PPS labor market area 
delineations based on the new OMB delineations), labor-related share, 
the cost-of-living adjustment, and high-cost outliers, including the 
applicable fixed-loss amounts and the LTCH cost-to-charge ratios (CCRs) 
for both payment rates.
13. Impact Analysis
    In Appendix A of the proposed rule, we set forth an analysis of the 
impact the proposed changes would have on affected acute care 
hospitals, CAHs, LTCHs and other entities.
14. Recommendation of Update Factors for Operating Cost Rates of 
Payment for Hospital Inpatient Services
    In Appendix B of the proposed rule, as required by sections 
1886(e)(4) and (e)(5) of the Act, we provided our recommendations of 
the appropriate percentage changes for FY 2025 for the following:
     A single average standardized amount for all areas for 
hospital inpatient services paid under the IPPS for operating costs of 
acute care hospitals (and hospital-specific rates applicable to SCHs 
and MDHs).
     Target rate-of-increase limits to the allowable operating 
costs of hospital inpatient services furnished by certain hospitals 
excluded from the IPPS.
     The LTCH PPS standard Federal payment rate and the site 
neutral payment rate for hospital inpatient services provided for LTCH 
PPS discharges.
15. Discussion of Medicare Payment Advisory Commission Recommendations
    Under section 1805(b) of the Act, MedPAC is required to submit a 
report to Congress, no later than March 15 of each year, in which 
MedPAC reviews and makes recommendations on Medicare payment policies. 
MedPAC's March 2024 recommendations concerning hospital inpatient 
payment policies address the update factor for hospital inpatient 
operating costs and capital-related costs for hospitals under the IPPS. 
We addressed these recommendations in Appendix B of the proposed rule. 
For further information relating specifically to the MedPAC March 2024 
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's website at https://www.medpac.gov.

E. Public Comments Received in Response to the FY 2025 IPPS/LTCH PPS 
Proposed Rule

    We received approximately 6,180 timely pieces of correspondence 
containing multiple comments on the proposed rule that appeared in the 
May 2, 2024 Federal Register (89 FR 39534) titled ``Medicare and 
Medicaid Programs and the Children's Health Insurance 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 2025 Rates; Quality Programs Requirements; and Other 
Policy Changes'' (hereinafter referred to as the FY 2025 IPPS/LTCH PPS 
proposed rule). We note that some of these public comments were outside 
of the scope of the proposed rule. These out-of-scope public comments 
are not addressed with policy responses in this final rule. Summaries 
of the public comments that are within the scope of the proposed rule 
and our responses to those public comments are set forth in the various 
sections of this final rule under the appropriate heading.

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

A. Background

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

B. Adoption of the MS-DRGs and MS-DRG Reclassifications

    For information on the adoption of the MS-DRGs in FY 2008, we refer 
readers to the FY 2008 IPPS final rule with comment period (72 FR 47140 
through 47189).
    For general information about the MS-DRG system, including yearly 
reviews and changes to the MS-DRGs, we refer readers to the previous 
discussions in the FY 2010 IPPS/rate year (RY) 2010 LTCH PPS final rule 
(74 FR 43764 through 43766) and the FYs 2011 through 2023 IPPS/LTCH PPS 
final rules (75 FR 50053 through 50055; 76 FR 51485 through 51487; 77 
FR 53273; 78 FR 50512; 79 FR 49871; 80 FR 49342; 81 FR 56787 through 
56872; 82 FR

[[Page 69000]]

38010 through 38085; 83 FR 41158 through 41258; 84 FR 42058 through 
42165; 85 FR 58445 through 58596; 86 FR 44795 through 44961; and 87 FR 
48800 through 48891, respectively).
    For discussion regarding our previously finalized policies 
(including our historical adjustments to the payment rates) relating to 
the effect of changes in documentation and coding that do not reflect 
real changes in case mix, we refer readers to the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 48799 through 48800).
    Comment: Several commenters requested that CMS make a positive 
adjustment to the standardized amount to restore the full amount of the 
documentation and coding recoupment adjustments, which they asserted is 
required under section (7)(B)(2) and (4) of the TMA [Transitional 
Medical Assistance], Abstinence Education, and QI [Qualifying 
Individuals] Programs Extension Act of 2007 (Pub. L. 110-90). 
Commenters stated that the statute is explicit that CMS may not carry 
forward any documentation and coding adjustments applied in fiscal 
years 2010 through 2017 into IPPS rates after FY 2023. Commenters 
contended that CMS, by its own admission, has restored only 2.9588 
percentage points of a total 3.9 percentage point reduction. By not 
fully restoring the total reductions, commenters believe that CMS is 
improperly extending payment adjustments beyond the FY 2023 statutory 
limit.
    Response: As of FY 2023, CMS completed the statutory requirements 
of section 7(b)(1)(B) of Public Law 110-90 as amended by section 631 of 
the American Taxpayer Relief Act of 2012 (ATRA, Pub. L. 112-240), 
section 404 of the Medicare Access and CHIP Reauthorization Act of 2015 
(MACRA), and section 15005 of the 21st Century Cures Act (Pub. L. 114-
255). As we discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 
44794 through 44795), the FY 2021 IPPS/LTCH PPS final rule (85 FR 58444 
through 58445) and in prior rules, we believe section 414 of the MACRA 
and section 15005 of the 21st Century Cures Act set forth the levels of 
positive adjustments for FYs 2018 through 2023. We are not convinced 
that the adjustments prescribed by MACRA were predicated on a specific 
adjustment level estimated or implemented by CMS in previous 
rulemaking. We see no evidence that Congress enacted these adjustments 
with the intent that CMS would make an additional +0.7 percentage point 
adjustment in FY 2018 to compensate for the higher than expected final 
ATRA adjustment made in FY 2017, nor are we persuaded that it would be 
appropriate to use the Secretary's exceptions and adjustments authority 
under section 1886(d)(5)(I) of the Act to adjust payments in FY 2025 to 
restore any additional amount of the original 3.9 percentage point 
reduction, given Congress' directive regarding prescriptive adjustment 
levels under section 414 of the MACRA and section 15005 of the 21st 
Century Cures Act. Accordingly, in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38009), we implemented the required +0.4588 percentage point 
adjustment to the standardized amount for FY 2018. In the FY 2019 IPPS/
LTCH PPS final rule (FY 2019 final rule) (83 FR 41157), the FY 2020 
IPPS/LTCH PPS final rule (FY 2020 final rule) (84 FR 42057), the FY 
2021 IPPS/LTCH PPS final rule (FY 2021 final rule) (85 FR 58444 and 
58445), the FY 2022 IPPS/LTCH PPS final rule (FY 2022 final rule) (86 
FR 44794 and 44795), and the FY 2023 IPPS/LTCH PPS final rule (FY 2023 
final rule) (87 FR 48800), consistent with the requirements of section 
414 of the MACRA, we implemented 0.5 percentage point positive 
adjustments to the standardized amount for FY 2019, FY 2020, FY 2021, 
FY 2022 and FY 2023, respectively. As discussed in the FY 2023 final 
rule, the finalized 0.5 percentage point positive adjustment for FY 
2023 is the final adjustment prescribed by section 414 of the MACRA.

C. Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for FY 2025 MS-DRG 
Updates
a. Conversion of MS-DRGs to the International Classification of 
Diseases, 10th Revision (ICD-10)
    As of October 1, 2015, providers use the International 
Classification of Diseases, 10th Revision (ICD-10) coding system to 
report diagnoses and procedures for Medicare hospital inpatient 
services under the MS-DRG system instead of the ICD-9-CM coding system, 
which was used through September 30, 2015. The ICD-10 coding system 
includes the International Classification of Diseases, 10th Revision, 
Clinical Modification (ICD-10-CM) for diagnosis coding and the 
International Classification of Diseases, 10th Revision, Procedure 
Coding System (ICD-10-PCS) for inpatient hospital procedure coding, as 
well as the ICD-10-CM and ICD-10-PCS Official Guidelines for Coding and 
Reporting. For a detailed discussion of the conversion of the MS-DRGs 
to ICD-10, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56787 through 56789).
b. Basis for FY 2025 MS-DRG Updates
    As discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 
28127) and final rule (87 FR 48800 through 48801), beginning with FY 
2024 MS-DRG classification change requests, we changed the deadline to 
request changes to the MS-DRGs to October 20 of each year to allow for 
additional time for the review and consideration of any proposed 
updates. We also described the new process for submitting requested 
changes to the MS-DRGs via a new electronic application intake system, 
Medicare Electronic Application Request Information SystemTM 
(MEARISTM), accessed at https://mearis.cms.gov. We stated 
that effective with FY 2024 MS-DRG classification change requests, CMS 
will only accept requests submitted via MEARISTM and will no 
longer consider requests sent via email. Additionally, we noted that 
within MEARISTM, we have built in several resources to 
support users, including a ``Resources'' section available at https://mearis.cms.gov/public/resources with technical support available under 
``Useful Links'' at the bottom of the MEARISTM site. 
Questions regarding the MEARISTM system can be submitted to 
CMS using the form available under ``Contact'', also at the bottom of 
the MEARISTM site. Accordingly, interested parties had to 
submit MS-DRG classification change requests for FY 2025 by October 20, 
2023.
    We note that the burden associated with this information collection 
requirement is the time and effort required to collect and submit the 
data in the request for MS-DRG classification changes to CMS. The 
aforementioned burden is subject to the Paperwork Reduction Act (PRA) 
of 1995 and approved under OMB control number 0938-1431, and has an 
expiration date of 09/30/2025.
    As noted previously, interested parties had to submit MS-DRG 
classification change requests for FY 2025 by October 20, 2023. As we 
have discussed in prior rulemaking, we may not be able to fully 
consider all of the requests that we receive for the upcoming fiscal 
year. We have found that, with the implementation of ICD-10, some types 
of requested changes to the MS-DRG classifications require more 
extensive research to identify and analyze all of the data that are 
relevant to evaluating the potential change. In the proposed rule, we 
noted those topics for which further research and analysis

[[Page 69001]]

are required, and which we will continue to consider in connection with 
future rulemaking as summarized in the discussion that follows.
    As discussed in the proposed rule, we received four requests to 
modify the GROUPER logic in a number of cardiac MS-DRGs under Major 
Diagnostic Category (MDC) 05 (Diseases and Disorders of the Circulatory 
System). Specifically, we received requests to:
     Modify the GROUPER logic of new MS-DRG 212 (Concomitant 
Aortic and Mitral Valve Procedures) to be defined by cases reporting 
procedure codes describing a single open mitral or aortic valve 
replacement/repair (MVR or AVR) procedure, plus an open coronary artery 
bypass graft procedure (CABG) or open surgical ablation or cardiac 
catheterization procedure plus a second concomitant procedure.
     Modify the GROUPER logic of new MS-DRG 212 by redefining 
the procedure code list that describes the performance of a cardiac 
catheterization by either removing the ICD-10-PCS codes that describe 
plain radiography of coronary artery codes from the logic list or 
adding ICD-10-PCS procedure codes that involve computed tomography (CT) 
or magnetic resonance imaging (MRI) scanning using contrast to the 
list. This requestor also suggested that CMS add ICD-10-PCS procedures 
codes that describe endovascular valve replacement or repair procedures 
into the GROUPER logic of MS-DRG 212.
     Modify the GROUPER logic of new MS-DRGs 323, 324, and 325 
(Coronary Intravascular Lithotripsy with Intraluminal Device with MCC, 
without MCC, and without Intraluminal Device, respectively). In two 
separate but related requests, the requestors suggested that we add 
procedure codes that describe additional percutaneous coronary 
intervention (PCI) procedures such as percutaneous coronary rotational, 
laser, and orbital atherectomy to the GROUPER logic of new MS-DRGs 323, 
324, and 325.
    In the proposed rule, we stated that we appreciated the submissions 
and related analyses provided by the requestors for our consideration 
as we reviewed MS-DRG classification change requests for FY 2025; 
however, we also noted the complexity of the GROUPER logic for these 
MS-DRGs in connection with these requests requires more extensive 
analyses to identify and evaluate all of the data relevant to assessing 
these potential modifications. Specifically, we noted the list of 
procedure codes that describe the performance of a cardiac 
catheterization is in the definition of multiple MS-DRGs in MDC 05. 
Analyzing the impact of revising this list would necessitate evaluating 
the impact across numerous other MS-DRGs in MDC 05 that also include 
this list in their definition, in addition to new MS-DRG 212. Secondly, 
as discussed further in section II.C.4.c. of the preamble of the 
proposed rule, we stated that our analysis continues to indicate that, 
when performed, open cardiac valve replacement and supplement 
procedures are clinically different from endovascular cardiac valve 
replacement and supplement procedures in terms of technical complexity 
and hospital resource use. Lastly, as we have stated in prior rule 
making (88 FR 58708), atherectomy is distinct from coronary lithotripsy 
in that each of these procedures are defined by clinically distinct 
definitions and objectives. Additional analysis to assess for 
unintended consequences across the classification is needed as we have 
made a distinction between the root operations used to describe 
atherectomy (Extirpation) and the root operation used to describe 
lithotripsy (Fragmentation) in evaluating other requests in rulemaking. 
We stated we will need to consider the application of these two root 
operations in other scenarios where we have also specifically stated 
that Extirpation is not the same as Fragmentation and do not warrant 
similar MS-DRG assignment (85 FR 58572 through 58573). Furthermore, as 
MS-DRG 212 and MS-DRGs 323, 324, and 325 recently became effective on 
October 1, 2023 (FY 2024), we stated additional time is needed to 
review and evaluate extensive modifications to the structure of these 
MS-DRGs.
    Comment: Commenters stated that they appreciated CMS' decision to 
await further data before analyzing the impact of the requested changes 
to MS-DRG 212 and MS-DRGs 323, 324, and 325, and agreed that any 
changes to these MS-DRGs should be carefully reviewed, as they stated 
these changes could have a significant impact on the remaining MS-DRGs 
in MDC 05. While thanking CMS for the continued consideration of 
appropriate MS-DRG assignment for concomitant open cardiac procedures, 
many commenters reiterated the request to modify the GROUPER logic of 
new MS-DRG 212. Some commenters stated it would be more impactful if 
cases reporting a single valve procedure, a coronary artery bypass 
grafting (CABG) procedure, and a procedure code describing surgical 
ablation were assigned to MS-DRG 212 (Concomitant Aortic and Mitral 
Valve Procedures). Other commenters stated that they believe that the 
logic of MS-DRG 212 should be modified to recognize an open aortic 
valve repair or replacement procedure or a mitral valve repair or 
replacement procedure when performed with any of the other concomitant 
procedures currently listed in the logic for MS-DRG 212. Another 
commenter suggested that MS-DRG 212 be defined by cases reporting 
either a mitral valve repair or replacement (MVR) procedure or an 
aortic valve repair or replacement (AVR) procedure, plus two other 
concomitant cardiac procedures such as surgical ablation, coronary 
artery bypass graft surgery, pulmonary valve replacement, or tricuspid 
valve replacement. This commenter stated that they performed their own 
analysis of recent MedPAR data, and stated they found that cases for 
beneficiaries who are not treated for their atrial fibrillation (AF) 
during open MVR or AVR (or CABG) procedures (currently assigned to MS-
DRGs 216, 217, 218, 219, 220, and 221 (Cardiac Valve & Other Major 
Cardiothoracic Procedure with and without Cardiac Catheterization, with 
MCC, with CC, and without CC/MCC, respectively)) may have as much as 
$7,000 in incremental hospital index costs and 1.6 extra hospital stay 
days compared to similar non-AF patients during their open MVR or AVR 
procedures.
    Some commenters were not supportive of the suggestion to assign 
cases reporting a single AVR or MVR procedure and another concomitant 
procedure to MS-DRG 212. These commenters stated that assigning cases 
reporting a single AVR or MVR procedure and another concomitant 
procedure to MS-DRG 212 would have a significant negative impact on the 
remaining MS-DRGs, notably MS-DRG 216. Other commenters suggested that 
CMS consider moving the aortic and mitral valve procedure codes with 
the root operations of ``Creation'', ``Release'', ``Restriction'' and 
``Supplement,'' that are currently listed under the Concomitant 
Procedures list in the GROUPER logic for MS-DRG 212 in the ICD-10 MS-
DRG Definitions Manual Version 41.1 to the appropriate logic list of 
aortic valve or mitral valve procedures. This commenter stated that 
procedure codes with these other root operations also represent types 
of valvular repairs and should be included on the aortic valve 
procedures and mitral valve procedures logic lists rather than the 
``Concomitant Procedure'' logic list. A few commenters urged CMS to 
devise a broader, more inclusive, supplemental payment mechanism to 
facilitate incremental payment when

[[Page 69002]]

two major procedures are performed during the same hospital admission.
    In regard to the request to modify the GROUPER logic of new MS-DRGs 
323, 324, and 325 (Coronary Intravascular Lithotripsy with Intraluminal 
Device with MCC, without MCC, and without Intraluminal Device, 
respectively), some commenters stated they agreed with CMS' assessment 
that atherectomy and coronary lithotripsy are mechanistically and 
clinically distinct. A commenter specifically noted that this 
distinction is supported by scientific literature and applauded CMS for 
demonstrating consistency on these questions and awareness of their 
impact across MDC 05. Other commenters stated they were disappointed 
that CMS did not propose to modify MS-DRGs 323, 324, and 325 to add 
procedure codes describing complex PCI procedures, including 
percutaneous coronary atherectomy procedures for FY 2025. A commenter 
stated that they offer a broad portfolio of products across the 
percutaneous coronary intervention space and believe they can provide 
additional input and data for consideration that would be helpful to 
CMS in evaluating potential modifications to the GROUPER logic to 
include orbital atherectomy procedures in the newly created MS-DRGs. 
Another commenter noted that the pipeline for additional technologies 
in the atherectomy family is expanding and recommended that CMS 
undertake an analysis of all ICD-10-PCS codes for atherectomy. A 
commenter questioned if Extirpation was the appropriate root operation 
to describe rotational and orbital atherectomy, as in their view, the 
procedures themselves are not removing calcified material. This 
commenter stated that in prior rulemaking CMS has stated procedures 
such as rotational and orbital atherectomy are reported with the root 
operation Extirpation because both techniques cut up the calcified 
material into small particles that are removed from the blood stream by 
the normal hemofiltration process and noted that in lithotripsy 
procedures, which are reported with the root operation Fragmentation, 
the normal hemofiltration process also removes the fragmented calcified 
material from the blood stream and suggested that CMS reconsider the 
root operation of atherectomy procedures as Fragmentation rather than 
Extirpation.
    Response: We thank the commenters for sharing their feedback on 
these requests. As discussed in the proposed rule, we have found that 
with the implementation of ICD-10, some types of requested changes to 
the MS-DRG classifications require more extensive research to identify 
and analyze the relevant data for evaluating a potential change. The 
comments received in response to our proposed rule discussion of the 
requests to modify the GROUPER logic of new MS-DRG 212, specifically, 
illustrate the complexity of the analysis and evaluation required to 
address these requests. Notably, many commenters believe that a 
modification to the logic of MS-DRG 212 may be warranted but differ 
greatly in the solution they believe would best address the concerns 
noted. We appreciate the public comments we received on these requests 
and will take these suggestions under consideration as we continue to 
monitor for impacts in MDC 05 and across the MS-DRGs to avoid 
unintended consequences or missed opportunities in most appropriately 
capturing the resource utilization and clinical coherence for these 
subsets of procedures. We note that we would address any proposed 
modifications to the existing logic in future rulemaking.
    As discussed in the proposed rule, as we continue the analysis of 
the claims data with respect to MS-DRGs in MDC 05, we welcome public 
comments and feedback on other factors that should be considered in the 
potential restructuring of these MS-DRGs. Feedback and other 
suggestions may be directed to MEARISTM at: https://mearis.cms.gov/public/home. Interested parties should submit any MS-DRG 
classification change requests, including any comments and suggestions 
for FY 2026 consideration by October 20, 2024 via MEARISTM 
at: https://mearis.cms.gov/public/home.
    As we did for the FY 2024 IPPS/LTCH PPS proposed rule, for the FY 
2025 IPPS/LTCH PPS proposed rule we provided a test version of the ICD-
10 MS-DRG GROUPER Software, Version 42, so that the public can better 
analyze and understand the impact of the proposals included in the 
proposed rule. We noted that this test software reflected the proposed 
GROUPER logic for FY 2025. Therefore, it included the new diagnosis and 
procedure codes that are effective for FY 2025 as reflected in Table 
6A.--New Diagnosis Codes--FY 2025 and Table 6B.--New Procedure Codes--
FY 2025 that were associated with the proposed rule, and does not 
include the diagnosis codes that are invalid beginning in FY 2025 as 
reflected in Table 6C.--Invalid Diagnosis Codes--FY 2025, and Table 
6D.--Invalid Procedure Codes--FY 2025 associated with the proposed 
rule. Those tables were not published in the Addendum to the proposed 
rule, but are available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html 
as described in section VI. of the Addendum to the proposed rule. 
Because the diagnosis codes no longer valid for FY 2025 are not 
reflected in the test software, we made available a supplemental file 
in Table 6P.1a and 6P.1b that includes the mapped Version 42 FY 2025 
ICD-10-CM and ICD-10-PCS codes and the deleted Version 41 FY 2024 ICD-
10-CM codes and V41.1 ICD-10-PCS codes that should be used for testing 
purposes with users' available claims data. Therefore, users had access 
to the test software allowing them to build case examples that reflect 
the proposals that were included in the proposed rule. In addition, 
users were able to view the draft version of the ICD-10 MS-DRG 
Definitions Manual, Version 42.
    Comment: A commenter expressed its appreciation that we provided a 
test version of the ICD-10 MS-DRG GROUPER Software, Version 42, 
however, the commenter stated that this version essentially only allows 
for a case-by-case analysis and a minimal batch analysis. The commenter 
stated that it would be more beneficial to have a Batch z/OS version of 
the test GROUPER so that it could be better utilized for broader and 
more meaningful analysis purposes. The commenter requested that 
availability of a Batch z/OS version of the test GROUPER be made 
publicly available for all future rulemaking.
    Response: We appreciate the commenter's feedback and will take the 
suggestion into consideration.
    We noted in the proposed rule that in the FY 2024 IPPS/LTCH PPS 
final rule (88 FR 58764), as discussed in the CY 2024 Outpatient 
Prospective Payment System and Ambulatory Surgical Center (OPPS/ASC) 
proposed rule (CY 2024 OPPS/ASC proposed rule) (88 FR 49552, July 31, 
2023), we stated that, consistent with the process that is used for 
updates to the ``Integrated'' Outpatient Code Editor (I/OCE) and other 
Medicare claims editing systems, we proposed to address any future 
revisions to the IPPS Medicare Code Editor (MCE), including any 
additions or deletions of claims edits, as well as the addition or 
deletion of ICD-10 diagnosis and procedure codes to the applicable MCE 
edit code lists, outside of the annual IPPS rulemakings. As discussed 
in the CY 2024 OPPS/ASC proposed rule, we proposed to remove discussion 
of the IPPS MCE from the annual IPPS rulemakings, beginning with the FY 
2025 rulemaking, and to generally address future changes or updates to 
the MCE through instruction to the

[[Page 69003]]

Medicare administrative contractors (MACs). We encouraged readers to 
review the discussion in the CY 2024 OPPS/ASC proposed rule and submit 
comments in response to the proposal by the applicable deadline by 
following the instructions provided in that proposed rule.
    As also discussed in the proposed rule, in the CY 2024 OPPS/ASC 
final rule (88 FR 82121 through 82124), after consideration of the 
public comments we received, we finalized the proposal to remove 
discussion of the MCE from the annual IPPS rulemakings, beginning with 
FY 2025 rulemaking, and to generally address future changes or updates 
to the MCE through instruction to the MACs. We also stated that, 
beginning with FY 2025, in association with the annual proposed rule, 
we are making available a draft version of the Definitions of Medicare 
Code Edits (MCE) Manual to provide the public with an opportunity to 
review any changes that will become effective October 1 for the 
upcoming fiscal year. In addition, as a result of new and modified code 
updates approved after the annual spring ICD-10 Coordination and 
Maintenance Committee meeting, any further changes to the MCE will be 
reflected in the finalized Definitions of Medicare Code Edits (MCE) 
Manual, made available in association with the annual final rule. As 
such, we made available the draft FY 2025 ICD-10 MCE Version 42 Manual 
file on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software.
    We noted in the proposed rule that the MCE manual is comprised of 
two chapters: Chapter 1: Edit code lists provides a listing of each 
edit, an explanation of each edit, and as applicable, the diagnosis 
and/or procedure codes for each edit, and Chapter 2: Code list changes 
summarizes the changes in the edit code lists (for example, additions 
and deletions) from the prior release of the MCE software. We also 
stated that the public may submit any questions, comments, concerns, or 
recommendations regarding the MCE to the CMS mailbox at 
[email protected] for our review and consideration.
    Comment: Several commenters requested that CMS reconsider including 
updates to the MCE as part of the IPPS rulemaking process. A commenter 
stated that it recognized the importance of the MCE and expressed 
concern with the removal of MCE proposals from IPPS rulemaking. The 
commenter stated that identifying key considerations and mitigating 
unintended consequences are a key benefit of public review and 
consideration of stakeholder comments. The commenter stated that the 
proposed process is not transparent on key areas such as when the 
manual will be updated, effective dates, or the ability to provide 
feedback with timely responses. Other commenters stated that the MCE 
and related proposals include essential topics that warrant thorough 
review and consideration specific to inpatient hospital admissions and 
operational processes. The commenters asserted that these topics are 
vital to coding, clinical documentation, and revenue cycle 
professionals to ensure awareness and understanding ahead of 
implementation and historically allowed the opportunity for comment as 
applicable. According to the commenters, MCE change updates managed 
outside the IPPS rulemaking process create a strong potential for 
missed opportunities for pertinent public review and comment. The 
commenters stated these missed opportunities will create the potential 
for unintended consequences and administrative burdens for hospital 
teams. The commenters also stated that a historical review of IPPS 
comments in response to MCE proposals includes feedback on unacceptable 
principal diagnoses, age edits, and especially comments that affected 
the proposal and final implementation of CMS's unspecified code edit 
implemented in FY 2022.
    The commenters stated that the draft version of the Definitions of 
Medicare Code Edits (MCE) Manual file made available in association 
with the proposed rule is a helpful reference, however revisions should 
be explicitly stated as proposed revisions or additions for 
consideration. According to the commenters, as currently written, the 
changes are not listed as proposals within the manual and are implied 
as changes that have already been decided and will be effective with 
the upcoming fiscal year. Another commenter expressed appreciation that 
CMS stated it will make available a draft version of the Definitions of 
Medicare Code Edits (MCE) Manual file in association with the annual 
proposed rule to provide the public with an opportunity to review any 
changes that will become effective October 1 for the upcoming fiscal 
year. However, the commenter also stated that it is difficult to 
identify the changes in the draft version of the MCE Manual and 
recommended that CMS provide a list of the draft MCE changes each year 
(including any additions or deletions of diagnosis or procedure codes 
or MCE edits).
    Response: We appreciate the commenters' feedback. As stated in the 
CY 2024 OPPS/ASC final rule (88 FR 82121 through 82124), in the 
preamble of the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 35949), and 
previously described in the preamble of this final rule, after 
consideration of the public comments we received, we finalized the 
proposal to remove discussion of the MCE from the annual IPPS 
rulemakings, beginning with FY 2025 rulemaking. In the FY 2025 IPPS/
LTCH PPS proposed rule (89 FR 35949), we stated that beginning with FY 
2025, in association with the annual proposed rule, we are making 
available a draft version of the Definitions of Medicare Code Edits 
(MCE) Manual to provide the public with an opportunity to review any 
changes that will become effective October 1 for the upcoming fiscal 
year.
    We noted in the proposed rule, and as previously described in this 
final rule, that the MCE manual is comprised of two chapters: Chapter 
1: Edit code lists provides a listing of each edit, an explanation of 
each edit, and as applicable, the diagnosis and/or procedure codes for 
each edit, and Chapter 2: Code list changes summarizes the changes in 
the edit code lists (for example, additions and deletions) from the 
prior release of the MCE software. We believe that Chapter 2: Code list 
changes in the MCE manual is clear as it lists the specific edit, 
followed by the list of codes that were added or deleted. The draft 
version of the Definitions of Medicare Code Edits (MCE) Manual will 
continue to be made publicly available in association with the annual 
proposed rulemaking, and it is referred to as a ``draft version''. 
However, the Chapter 2: Code list changes are not ``draft'' MCE 
changes. Rather, consistent with our established process to assign MS-
DRGs to new diagnosis codes and new procedures codes, for which we 
examine the MS-DRG assignment for the predecessor code to determine the 
most appropriate MS-DRG assignment, we have historically used, and will 
continue to use, a similar process in the assignment of new diagnosis 
codes and new procedure codes to the edit codes lists under the MCE. 
Specifically, we review the predecessor code to determine if there are 
edits under the MCE for which the predecessor code is listed to 
determine which edit lists may be appropriate for the newly created 
codes.
    As discussed in prior rulemaking (88 FR 58764), as a result of new 
and modified code updates approved after the annual spring ICD-10 
Coordination

[[Page 69004]]

and Maintenance Committee meeting, we routinely make changes to the MCE 
without discussion in IPPS rulemaking. In the past, in both the IPPS 
proposed and final rules, we have only provided the list of changes to 
the MCE that were brought to our attention after the prior year's final 
rule. We historically have not listed all of the changes we have made 
to the MCE because of the new and modified codes approved after the 
annual spring ICD-10 Coordination and Maintenance Committee meeting. We 
stated that these changes are, and would still be, approved too late in 
the rulemaking schedule for inclusion in the proposed rule. 
Furthermore, although in the past our MCE policies have been described 
in our proposed and final rules, we have not provided the detail of 
each new or modified diagnosis and procedure code edit in the final 
rule.
    Therefore, although we published, and will continue to publish, the 
edit code list changes in the ``draft version'' of the MCE manual, 
because discussion of the MCE has been removed from IPPS rulemakings, 
beginning with FY 2025 rulemaking as previously described, the edit 
code lists that appear in the ``draft version'' of the MCE manual in 
association with the proposed rule are considered final at the time of 
the development of the proposed rule. While the public may continue to 
submit any questions, comments, concerns, or recommendations regarding 
the MCE to the CMS mailbox at [email protected] for 
our review and consideration, we will continue to make available on the 
CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software 
the changes to the edit code lists for both the draft version (at the 
time of the development of the proposed rule) and finalized version of 
the Definitions of Medicare Code Edits (MCE) file, in association with 
the annual IPPS proposed and final rules.
    Comment: Some commenters encouraged CMS to delay, revisit, and 
provide details of specific code changes and the deactivation of edits. 
The commenters also stated that the edits are an additional quality 
assurance mechanism to ensure appropriate ICD-10-CM/PCS assignment for 
accurate and timely claims submission. The commenters further stated 
that the edits help to prevent added administrative burden associated 
with unnecessary claims rework and resubmission.
    Response: We thank the commenters for their feedback. We believe 
that the FY 2025 MCE updates reflect our established process as 
previously described in this final rule, as well as address concerns 
related to claims processing discussed in prior rulemaking (88 FR 
58768). We will continue to monitor these updates and consider issuing 
additional provider guidance to ensure accurate claims submission and 
processing.
    Comment: Similar to the discussion in the FY 2024 IPPS/LTCH PPS 
final rule (88 FR 58789), a commenter requested that CMS implement an 
edit for claims that group to MS-DRG 014 (Allogeneic Bone Marrow 
Transplant), that would reject claims when an inpatient type of bill 
11X claim is received without charges mapped to revenue code 0815, 
which is intended to capture the costs of donor search and cell 
acquisition activities for allogeneic hematopoietic stem cell 
transplants. The commenter stated that mandatory reporting of the 
revenue code on inpatient claims would have several benefits, including 
increasing the accuracy of claims reporting by transplant centers, 
ensuring the accuracy of CMS's budget neutrality calculations, and 
helping to ensure that CMS does not inappropriately generate outlier 
payment on MS-DRG 014 claims (given that CMS removes costs associated 
with revenue code 0815 from its outlier calculation). The commenter 
stated it would also mirror the edit established under the outpatient 
code editor.
    Response: We appreciate the commenter's feedback. As stated in the 
FY 2024 IPPS/LTCH PPS final rule (88 FR 58789), we may consider 
provider education materials regarding the reporting of Allogeneic Stem 
Cell Acquisition/Donor Services in the future. We continue to believe 
that the suggested claims processing edit is not necessary at this time 
and expect providers to appropriately report charges associated with 
revenue code 0815.
    Comment: A commenter stated it supported the removal of the 
vascular dementia codes from the Unacceptable Principal Diagnosis edit 
code list and that doing so will reduce administrative challenges with 
billing for services, improve the clinical accuracy of medical records 
and encourage appropriate care for this set of patients.
    Response: We appreciate the commenter's support.
    In summary, we thank the commenters for their views and feedback. 
Because we finalized the proposal to remove discussion of the MCE from 
the annual IPPS rulemakings beginning with FY 2025 rulemaking, the 
public may submit any future questions, comments, concerns, or 
recommendations regarding the MCE to the CMS mailbox at 
[email protected] for our review and consideration.
    In association with the proposed rule, we made available the test 
version of the ICD-10 MS-DRG GROUPER Software, Version 42, the draft 
version of the ICD-10 MS-DRG Definitions Manual, Version 42, the draft 
version of the Definitions of Medicare Code Edits Manual, Version 42, 
and the supplemental mapping files in Table 6P.1a and 6P.1b of the FY 
2024 and FY 2025 ICD-10-CM diagnosis and ICD-10-PCS procedure codes 
which are available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
    Following are the changes that we proposed to the MS-DRGs for FY 
2025. We invited public comments on each of the MS-DRG classification 
proposed changes, as well as our proposals to maintain certain existing 
MS-DRG classifications discussed in the proposed rule. In some cases, 
we proposed changes to the MS-DRG classifications based on our analysis 
of claims data and clinical appropriateness. In other cases, we 
proposed to maintain the existing MS-DRG classifications based on our 
analysis of claims data and clinical appropriateness. As discussed in 
the FY 2025 IPPS/LTCH PPS proposed rule, our MS-DRG analysis was based 
on ICD-10 claims data from the September 2023 update of the FY 2023 
MedPAR file, which contains hospital bills received from October 1, 
2022, through September 30, 2023. In our discussion of the proposed MS-
DRG reclassification changes, we referred to these claims data as the 
``September 2023 update of the FY 2023 MedPAR file.''
    As explained in previous rulemaking (76 FR 51487), in deciding 
whether to propose to make further modifications to the MS-DRGs for 
particular circumstances brought to our attention, we consider whether 
the resource consumption and clinical characteristics of the patients 
with a given set of conditions are significantly different than the 
remaining patients represented in the MS-DRG. We evaluate patient care 
costs using average costs and lengths of stay and rely on clinical 
factors to determine whether patients are clinically distinct or 
similar to other patients represented in the MS-DRG. In evaluating 
resource costs, we consider both the absolute and percentage 
differences in average costs between the cases we select for review and 
the

[[Page 69005]]

remainder of cases in the MS-DRG. We also consider variation in costs 
within these groups; that is, whether observed average differences are 
consistent across patients or attributable to cases that are extreme in 
terms of costs or length of stay, or both. Further, we consider the 
number of patients who will have a given set of characteristics and 
generally prefer not to create a new MS-DRG unless it would include a 
substantial number of cases.
    In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58448), we finalized 
our proposal to expand our existing criteria to create a new 
complication or comorbidity (CC) or major complication or comorbidity 
(MCC) subgroup within a base MS-DRG. Specifically, we finalized the 
expansion of the criteria to include the NonCC subgroup for a three-way 
severity level split. We stated we believed that applying these 
criteria to the NonCC subgroup would better reflect resource 
stratification as well as promote stability in the relative weights by 
avoiding low volume counts for the NonCC level MS-DRGs. We noted that 
in our analysis of MS-DRG classification requests for FY 2021 that were 
received by November 1, 2019, as well as any additional analyses that 
were conducted in connection with those requests, we applied these 
criteria to each of the MCC, CC, and NonCC subgroups. We also noted 
that the application of the NonCC subgroup criteria going forward may 
result in modifications to certain MS-DRGs that are currently split 
into three severity levels and result in MS-DRGs that are split into 
two severity levels. We stated that any proposed modifications to the 
MS-DRGs would be addressed in future rulemaking consistent with our 
annual process and reflected in Table 5--Proposed List of Medicare 
Severity Diagnosis Related Groups (MS-DRGs), Relative Weighting 
Factors, and Geometric and Arithmetic Mean Length of Stay for the 
applicable fiscal year.
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798), we finalized 
a delay in applying this technical criterion to existing MS-DRGs until 
FY 2023 or future rulemaking, in light of the public health emergency 
(PHE). Interested parties recommended that a complete analysis of the 
MS-DRG changes to be proposed for future rulemaking in connection with 
the expanded three-way severity split criteria be conducted and made 
available to enable the public an opportunity to review and consider 
the redistribution of cases, the impact to the relative weights, 
payment rates, and hospital case mix to allow meaningful comment prior 
to implementation.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48803), we also 
finalized a delay in application of the NonCC subgroup criteria to 
existing MS-DRGs with a three-way severity level split in light of the 
ongoing PHE and until such time additional analyses can be performed to 
assess impacts, as discussed in response to public comments in the FY 
2022 and FY 2023 IPPS/LTCH PPS final rules.
    In association with our discussion of application of the NonCC 
subgroup criteria in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26673 through 26676), we provided an alternate test version of the ICD-
10 MS-DRG GROUPER Software, Version 41.A, reflecting the proposed 
GROUPER logic for FY 2024 as modified by the application of the NonCC 
subgroup criteria to existing MS-DRGs with a three-way severity level 
split, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software. 
Therefore, users had access to the alternate test software allowing 
them to build case examples that reflect the proposals included in the 
proposed rule with application of the NonCC subgroup criteria. We also 
provided additional files including an alternate Table 5--Alternate 
List of Medicare Severity Diagnosis Related Groups (MS-DRGs), Relative 
Weighting Factors, and Geometric and Arithmetic Mean Length of Stay, an 
alternate Length of Stay (LOS) Statistics file, an alternate Case Mix 
Index (CMI) file, and an alternate After Outliers Removed and Before 
Outliers Removed (AOR_BOR) file. The files are available in association 
with the FY 2024 IPPS/LTCH PPS proposed rule on the CMS website at: 
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps. We stated that the alternate test software and 
additional files were made available so that the public could better 
analyze and understand the impact on the proposals included in the 
proposed rule if the NonCC subgroup criteria were to be applied to 
existing MS-DRGs with a three-way severity level split. We refer 
readers to the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26673 through 
26676) for further discussion of the alternate test software and 
additional files that were made available.
    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58655 through 
58661), we finalized to delay the application of the NonCC subgroup 
criteria to existing MS-DRGs with a three-way severity level split for 
FY 2024. We stated that we would continue to review and consider the 
feedback we had received in response to the additional information we 
made available in association with the FY 2024 IPPS/LTCH PPS proposed 
rule for our development of the FY 2025 proposed rule.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 35950), we noted 
that the IPPS Payment Impact File made available in connection with our 
annual IPPS rulemakings includes information used to categorize 
hospitals by various geographic and special payment consideration 
groups, including geographic location (urban or rural), teaching 
hospital status (that is, whether or not a hospital has GME residency 
programs and receives an IME adjustment), DSH hospital status (that is, 
whether or not a hospital receives Medicare DSH payments), special 
payment groups (that is, SCHs, MDHs, and RRCs) and other categories 
reflected in the impact analysis generally shown in Appendix A of the 
annual IPPS rulemakings. The IPPS Payment Impact File associated with 
the FY 2024 IPPS/LTCH PPS final rule can be found on the CMS website 
at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/fy-2024-ipps-final-rule-home-page#Data.
    We proposed to continue to delay application of the NonCC subgroup 
criteria to existing MS-DRGs with a three-way severity level split for 
FY 2025, as we continue to consider the public comments received in 
response to the FY 2024 rulemaking. In addition, we encouraged 
interested parties to review the impacts and other information made 
available with the alternate test software (V41.A) and other additional 
files provided in connection with the FY 2024 IPPS/LTCH PPS proposed 
rule, as previously discussed, and stated that we continue to welcome 
feedback for consideration for future rulemaking.
    Comment: Numerous commenters supported the proposal to continue to 
delay application of the NonCC subgroup criteria to existing MS-DRGs 
with a three-way severity level split for FY 2025.
    Response: We thank the commenters for their support.
    Comment: Several commenters expressed appreciation that CMS 
provided the meaningful data analysis and availability of the version 
41.A alternate test GROUPER in association with the FY 2024 proposed 
rule, however, the commenters stated that the ability to utilize an 
updated alternate test software and a current batch GROUPER along with 
additional

[[Page 69006]]

streamlined data by hospital type is needed. According to the 
commenters, updated test software and an available batch GROUPER would 
allow hospitals to further analyze the operational and monetary impact 
of this type of proposed change more thoroughly and over a longer time 
span.
    Response: We appreciate the commenters' feedback. As we noted in 
the proposed rule, the IPPS Payment Impact File made available in 
connection with our annual IPPS rulemakings includes information used 
to categorize hospitals by various geographic and special payment 
consideration groups and other categories reflected in the impact 
analysis generally shown in Appendix A of the annual IPPS rulemakings. 
We will consider the commenters' request to provide updated test 
software and a batch GROUPER for future rulemaking.
    Comment: A commenter who agreed with the proposal to delay 
application of the NonCC subgroup criteria stated that CMS did not 
provide any new information from, or analysis of, the FY 2023 MedPAR 
file as it related to base, deleted, or new MS-DRGs related to the 
application of the NonCC subgroup criteria. The commenter stated that 
new data should have been included with the proposed rule to continue 
efforts to view the impact of the policy.
    Response: We appreciate the commenter's support and feedback. In 
response to the commenter's request that we provide the potential 
impacts using the FY 2023 claims data, we are making it available in 
Table 6P.4 on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps in association with 
this final rule.
    We note that we did not propose to apply the NonCC subgroup 
criteria to existing MS-DRGs with a three-way severity level split for 
FY 2025. Moreover, as noted, we are continuing to consider comments 
received in response to FY 2024 rulemaking.
    Comment: A commenter stated it utilized the files provided by CMS 
to analyze the impact of application of the NonCC subgroup criteria 
based on its own hospital volumes. The commenter reported that while it 
found some positive impacts to the relative weight of the MS-DRGs 
impacted when applying the NonCC subgroup criteria, they continue to 
have concerns regarding the variations in claims data from year-to-year 
that may be used in the proposed MS-DRG restructuring. The commenter 
stated it agreed with comments in prior years from various professional 
organizations that have noted the variability in claims data and, thus, 
case mix variations from year-to-year.
    Response: We appreciate the commenter's feedback.
    Comment: A few commenters expressed concern that application of the 
NonCC subgroup criteria to existing MS-DRGs with a three-way severity 
level split will reduce the impact of CCs. The commenters noted from 
prior year's analyses findings that there are a number of MS-DRGs that 
would potentially be consolidated to reflect the two-way severity split 
for ``with MCC'' and ``without MCC'' and there were not any that 
reflected a ``with CC/MCC'' and ``without CC/MCC'' severity level 
split. The commenters stated that the impact of CCs would decrease as a 
result of the application of the expanded criteria, meaning that 
conditions designated as CC would increasingly need to be MCCs in order 
to impact case complexity and severity.
    Response: We thank the commenters for their feedback. We disagree 
that application of the NonCC subgroup criteria specifically reduces 
the impact of CCs. Rather, we believe that application of the criteria 
combines the subset of cases that may or may not report a CC into one 
MS-DRG grouping that reflects the average costs and length of stay for 
that subset. Because the IPPS MS-DRGs are a system of averages, the 
cases reporting a CC continue to impact the average costs and average 
length of stay within the subgroup. We note that in the majority of the 
MS-DRGs where we previously assessed the impact of application of the 
NonCC subgroup criteria to existing MS-DRGs with a three-way severity 
level split and provided the potential MS-DRG changes, the volume of 
cases in the CC subgroup was significantly greater than those in the 
NonCC subgroup, thus contributing more to the overall average costs and 
average length of stay of the ``potential'' new MS-DRG structure. We 
also note that providers have the ability to identify the subset of 
cases reporting a CC within the existing ``with MCC'' and ``without 
MCC'' MS-DRGs construct within their respective facilities.
    After consideration of the public comments we received, and for the 
reasons discussed, we are finalizing our proposal to delay the 
application of the NonCC subgroup criteria to existing MS-DRGs with a 
three-way severity level split for FY 2025 as we continue to consider 
the public comments received in response to the FY 2024 rulemaking. We 
also continue to encourage interested parties to review the impacts and 
other information made available with the alternate test software 
(V41.A) and other additional files provided in connection with the FY 
2024 IPPS/LTCH PPS proposed rule, as previously discussed. We continue 
to welcome feedback for consideration for future rulemaking that may be 
directed to MEARISTM at https://mearis.cms.gov/public/home.
    As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58661), 
we continue to apply the criteria to create subgroups, including 
application of the NonCC subgroup criteria, in our annual analysis of 
MS-DRG classification requests, consistent with our approach since FY 
2021 when we finalized the expansion of the criteria to include the 
NonCC subgroup for a three-way severity level split. Accordingly, in 
our analysis of the MS-DRG classification requests for FY 2025 that we 
received by October 20, 2023, as well as any additional analyses that 
were conducted in connection with those requests, we applied these 
criteria to each of the MCC, CC, and NonCC subgroups, as described in 
the following table.

[[Page 69007]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.002

    In general, once the decision has been made to propose to make 
further modifications to the MS-DRGs as described previously, such as 
creating a new base MS-DRG, or in our evaluation of a specific MS-DRG 
classification request to split (or subdivide) an existing base MS-DRG 
into severity levels, all five criteria must be met for the base MS-DRG 
to be split (or subdivided) by a CC subgroup. We note that in our 
analysis of requests to create a new MS-DRG, we typically evaluate the 
most recent year of MedPAR claims data available. For example, we 
stated earlier that for the FY 2025 IPPS/LTCH PPS proposed rule, our 
MS-DRG analysis was based on ICD-10 claims data from the September 2023 
update of the FY 2023 MedPAR file. However, in our evaluation of 
requests to split an existing base MS-DRG into severity levels, as 
noted in prior rulemaking (80 FR 49368), we typically analyze the most 
recent two years of data. This analysis includes two years of MedPAR 
claims data to compare the data results from one year to the next to 
avoid making determinations about whether additional severity levels 
are warranted based on an isolated year's data fluctuation and also, to 
validate that the established severity levels within a base MS-DRG are 
supported. The first step in our process of evaluating if the creation 
of a new CC subgroup within a base MS-DRG is warranted is to determine 
if all the criteria is satisfied for a three-way split. In applying the 
criteria for a three-way split, a base MS-DRG is initially subdivided 
into the three subgroups: MCC, CC, and NonCC. Each subgroup is then 
analyzed in relation to the other two subgroups using the volume 
(Criteria 1 and 2), average cost (Criteria 3 and 4), and reduction in 
variance (Criteria 5). If the criteria fail, the next step is to 
determine if the criteria are satisfied for a two-way split. In 
applying the criteria for a two-way split, a base MS-DRG is initially 
subdivided into two subgroups: ``with MCC'' and ``without MCC'' (1_23) 
or ``with CC/MCC'' and ``without CC/MCC'' (12_3). Each subgroup is then 
analyzed in relation to the other using the volume (Criteria 1 and 2), 
average cost (Criteria 3 and 4), and reduction in variance (Criteria 
5). If the criteria for both of the two-way splits fail, then a split 
(or CC subgroup) would generally not be warranted for that base MS-DRG. 
If the three-way split fails on any one of the five criteria and all 
five criteria for both two-way splits (1_23 and 12_3) are met, we would 
apply the two-way split with the highest R2 value. We note that if the 
request to split (or subdivide) an existing base MS-DRG into severity 
levels specifies the request is for either one of the two-way splits 
(1_23 or 12_3), in response to the specific request, we will evaluate 
the criteria for both of the two-way splits; however, we do not also 
evaluate the criteria for a three-way split.
    Comment: A commenter recommended that CMS consider patient risk 
adjustment as a criterion for creating CC and MCC subgroups, including 
the impact of multiple comorbidities. According to the commenter, 
published literature suggests that as comorbidity status increases, 
patient risk of clinical events increase, as well as potential resource 
use. For example, the commenter stated that studies suggest that in 
patients with one presenting risk factor/comorbidity (either 
hypertension, congenital heart disease, previous stroke, or diabetes), 
compared to patients without these risks, that the risk of future 
stroke was 1.96 greater.\4\ According to the commenter, the authors 
also found patients with 2 or more of these risk factors to have an 
increased risk of future stroke at 2.87 greater the risk of patients 
without risk factors and stated that these results suggest the 
cumulative effect of multiple CCs can dramatically impact a patient's 
risk and resource use in the absence of an MCC. The commenter suggested 
that CMS should consider the impact of multiple CCs (heart failure, AF, 
etc.) as a criterion when grouping an inpatient procedure to an MCC 
grouping in the absence of MCC.
---------------------------------------------------------------------------

    \4\ Zhang Y, et al. Association of total pre-existing 
comorbidities with stroke risk: a large-scale community-based cohort 
study from China. BMC Public Health. 2021; 21(1):1910.
---------------------------------------------------------------------------

    Response: We appreciate the commenter's input and will take it 
under consideration as we continue to consider feedback associated with 
application of the NonCC subgroup criteria.
    We are making the FY 2025 ICD-10 MS-DRG GROUPER and Medicare Code 
Editor (MCE) Software Version 42, the ICD-10 MS-DRG Definitions Manual 
files Version 42 and the Definitions of Medicare Code Edits Manual 
Version 42 available to the public on our CMS

[[Page 69008]]

website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software.
2. Pre-MDC MS-DRG 018 Chimeric Antigen Receptor (CAR) T-Cell and Other 
Immunotherapies
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 35951 through 
35952), we discussed a request we received to revise the title of Pre-
MDC MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell and Other 
Immunotherapies) in connection with an ICD-10-PCS procedure code 
request that was submitted via MEARISTM by the December 1, 
2023 deadline for consideration as an agenda topic to be discussed at 
the March 19-20, 2024 ICD-10 Coordination and Maintenance Committee 
meeting. The procedure code request involves the application of an 
autologous genetically engineered cell-based gene therapy, prademagene 
zamikeracel (PZ), that is indicated in the treatment of recessive 
dystrophic epidermolysis bullosa (RDEB), an extremely rare genetic 
disease of the skin that leads to large chronic wounds. The proposal 
was presented and discussed at the March 19-20, 2024, ICD-10 
Coordination and Maintenance Committee meeting. We refer the reader to 
the CMS website at https://www.cms.gov/medicare/coding-billing/icd-10-codes/icd-10-coordination-maintenance-committee-materials for 
additional detailed information regarding the request, including a 
recording of the discussion and the related meeting materials. Public 
comments in response to the code proposal were due by April 19, 2024. 
The requestor suggested that if finalized, a new procedure code to 
identify the application of PZ should be assigned to Pre-MDC MS-DRG 018 
and that the title for Pre-MDC MS-DRG 018 be revised to reflect 
``Chimeric Antigen Receptor (CAR) T and Other Autologous Gene and Cell 
Therapies''.
    Because the diagnosis and procedure code proposals that are 
presented at the March ICD-10-CM Coordination and Maintenance Committee 
meeting for an October 1 implementation (upcoming FY) are not finalized 
in time to include in Table 6A.--New Diagnosis Codes and Table 6B.--New 
Procedure Codes in association with the proposed rule, as we have noted 
in prior rulemaking, we use our established process to examine the MS-
DRG assignment for the predecessor codes to determine the most 
appropriate MS-DRG assignment. Specifically, we review the predecessor 
code and MS-DRG assignment most closely associated with the new 
procedure code, and in the absence of claims data, we consider other 
factors that may be relevant to the MS-DRG assignment, including the 
severity of illness, treatment difficulty, complexity of service and 
the resources utilized in the diagnosis and/or treatment of the 
condition. We have noted in prior rulemaking that this process does not 
automatically result in the new procedure code being assigned to the 
same MS-DRG or to have the same designation (O.R. versus Non-O.R.) as 
the predecessor code. Under this established process, the MS-DRG 
assignment for the upcoming fiscal year for any new diagnosis or 
procedure codes finalized after the March meeting would be reflected in 
Table 6A.--New Diagnosis Codes and Table 6B.--New Procedure Codes 
associated with the final rule for that fiscal year. Accordingly, we 
stated that the MS-DRG assignment for any new procedure codes 
describing PZ, if finalized following the March meeting, would be 
reflected in Table 6B.--New Procedure Codes associated with the final 
rule for FY 2025. As noted in prior rulemaking (87 FR 28135), the codes 
that are finalized after the March meeting are specifically identified 
with a footnote in Table 6A.--New Diagnosis Codes and Table 6B.--New 
Procedure Codes that are made publicly available in association with 
the final rule on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps. The public may 
provide feedback on these finalized assignments, which is then taken 
into consideration for the following fiscal year.
    We note that the proposal to create new procedure codes that 
describe the application of PZ as discussed at the March 19-20, 2024, 
ICD-10 Coordination and Maintenance Committee meeting was approved and 
finalized as reflected in the FY 2025 ICD-10-PCS Code Update files that 
were made publicly available on the CMS website on June 5, 2024 at 
https://www.cms.gov/medicare/coding-billing/icd-10-codes/2025-icd-10-pcs.
    We stated in the proposed rule that we did not agree with the 
request to revise the title for Pre-MDC MS-DRG 018 for FY 2025 as 
requested because the logic for Pre-MDC MS-DRG 018 is intended to 
include other immunotherapies and is not restricted to CAR T-cell and 
autologous gene and cell therapies. As discussed in the FY 2022 IPPS/
LTCH PPS final rule (86 FR 44798 through 44806), we finalized our 
proposal to revise the title of Pre-MDC MS-DRG 018 to include ``Other 
Immunotherapies'' to better reflect the cases reporting the 
administration of non-CAR T-cell therapies and other immunotherapies 
that would also be assigned to this MS-DRG, in addition to CAR T-cell 
therapies. We noted that the term ``Other Immunotherapies'' is intended 
to encompass the group of therapies that are currently available and 
being utilized today (for which codes have been created for reporting 
in response to industry requests or are being considered for 
implementation), and to enable appropriate MS-DRG assignment for any 
future therapies that may also fit into this category and are not 
specifically identified as a CAR T-cell product, that may become 
available (for example receive marketing authorization or a newly 
established procedure code in the ICD-10-PCS classification).
    In the proposed rule we also noted that, as discussed in prior 
rulemaking, this category of therapies continues to evolve, and we are 
in the process of carefully considering the feedback we have previously 
received about ways in which we can continue to appropriately reflect 
resource utilization while maintaining clinical coherence and stability 
in the relative weights under the IPPS MS-DRGs. We stated we will 
continue to examine these complex issues in connection with future 
rulemaking and acknowledged that there may be distinctions to account 
for as we continue to gain more experience in the use of these 
therapies and have additional claims data to analyze.
    Therefore, we did not propose to revise the title for Pre-MDC MS-
DRG 018 to reflect ``Chimeric Antigen Receptor (CAR) T and Other 
Autologous Gene and Cell Therapies'' and proposed to maintain the 
existing title to Pre-MDC MS-DRG 018, ``Chimeric Antigen Receptor (CAR) 
T-cell and Other Immunotherapies'' for FY 2025.
    Comment: Commenters expressed support for the proposal to maintain 
the existing title to Pre-MDC MS-DRG 018, ``Chimeric Antigen Receptor 
(CAR) T-cell and Other Immunotherapies'' for FY 2025.
    Response: We thank the commenters for their support.
    Comment: A commenter stated that application of PZ (prademagene 
zamikeracel) seems to differ significantly in terms of clinical 
coherence and resource utilization from other therapies currently 
mapped to MS-DRG 018, specifically in that it requires an operating 
room and subsequent post-surgical care. According to the commenter, 
although CMS did not specifically propose to map cases reporting the 
application of PZ to Pre-MDC MS-DRG 018 for FY

[[Page 69009]]

2025, PZ does not appear to be a match for the technologies currently 
included in Pre-MDC MS-DRG 018 since it is not an immunotherapy and 
would be the only surgical episode of care in the MS-DRG. The commenter 
requested that CMS not finalize the mapping for application of PZ to 
Pre-MDC MS-DRG 018 due to differences in resource use.
    Another commenter stated that if CMS were to continue to assign 
new, higher volume, lower cost therapies to MS-DRG 018, it could 
potentially distort the relative weight of the MS-DRG, resulting in 
inadequate payment for CAR T-cell therapies. This commenter also 
recommended that CMS not map cases reporting application of PZ to Pre-
MDC MS-DRG 018 due to clinical resource differences with other 
therapies currently mapped to Pre-MDC MS-DRG 018. The commenter further 
stated that given the important role CAR T-cell therapies play, and 
will continue to play for cancer patients, CMS should clarify its 
methodology for the inclusion of new procedure codes within Pre-MDC MS-
DRG 018 and consider the resource costs and needs of potential new 
therapies to this MS-DRG so as not to limit access to current 
therapies. Other commenters recommended that CMS provide transparency 
in the assignment of therapies to Pre-MDC MS-DRG 018 to ensure 
accurate, predictable, and appropriate payment, including consideration 
of comparable resource use to existing therapies currently mapped to 
Pre-MDC MS-DRG 018.
    Another commenter requested that CMS map the new procedure codes 
describing application of PZ to Pre-MDC MS-DRG 018, given the clinical 
characteristics and resource intensity of the gene and cellular 
therapy. According to the commenter, administration of both autologous 
CAR T-cell therapies and PZ is initiated through the collection of a 
sample of the patient's own cells. The commenter stated the cells are 
then modified as part of a complex and resource intensive process 
requiring the insertion of a new gene into the patient's own cells 
before administering them back to the patient. Specifically, the 
commenter stated that the keratinocyte cells (that is, the most 
prominent cells in the epidermis) of patients diagnosed with RDEB are 
collected via a ``punch'' biopsy procedure and transduced with a 
functional COL7A1 transgene using a retroviral vector, which is 
intended to result in adequate expression and secretion of the type VII 
collagen protein critical to anchoring the epidermis and facilitating 
wound healing. The commenter stated the transduced cells are then 
expanded, matured, and processed into sheets through an approximate 25-
day process before they can be delivered to the hospital site and 
applied to the patient. The commenter stated that this process mirrors 
the CAR T-cell therapy development and administration process, where 
cells are harvested from the patient's blood, the patient's T-cells are 
isolated through a leukapheresis procedure, and the T-cells then are 
transduced with a CAR-encoding viral vector and expanded over an 
approximate month-long period before being returned to the treatment 
center for administration to the patient. The commenter also stated 
that the application of PZ shares other similarities with the 
technologies currently assigned to Pre-MDC MS-DRG 018, including the 
need for an inter-disciplinary team of health care personnel, and an 
extended length of stay following treatment. According to the 
commenter, from a resource perspective, like other therapies currently 
assigned to Pre-MDC MS-DRG 018, the main driver of resource utilization 
for an inpatient stay is the administration of the technology.
    Response: We appreciate the commenters' feedback. In response to 
the commenters who requested that CMS not finalize the mapping for 
application of PZ to Pre-MDC MS-DRG 018 due to the belief that there 
are differences in resource use when compared to other therapies 
currently mapped to Pre-MDC MS-DRG 018, we note that the commenters did 
not indicate whether they believed the differences in resource use for 
application of PZ are higher or lower in comparison to the other 
therapies currently mapped to Pre-MDC MS-DRG 018, nor did the 
commenters offer any alternative MS-DRG suggestions for CMS's 
consideration. We acknowledge that application of PZ requires use of an 
operating room and the administration of other therapies currently 
assigned to Pre-MDC MS-DRG 018 do not. We also note that consistent 
with our established process for assigning new diagnosis or new 
procedure codes to MDCs, MS-DRGs, and the associated attributes 
(severity level and O.R. status), we examined the MDCs, MS-DRG 
assignment and O.R. status of the predecessor procedure codes to inform 
our assignments and designations. As discussed in prior rulemaking and 
previously in the preamble of this final rule, we review the 
predecessor code and MS-DRG assignment most closely associated with the 
new diagnosis or procedure code, and in the absence of claims data, we 
consider other factors that may be relevant to the MS-DRG assignment, 
including the severity of illness, treatment difficulty, complexity of 
service and the resources utilized in the diagnosis and/or treatment of 
the condition. We have previously noted that this process does not 
automatically result in the new diagnosis or procedure code being 
assigned to the same MS-DRG or to have the same designation as the 
predecessor code. In our evaluation of MS-DRG classification requests 
under the IPPS MS-DRGs, consideration is also given to the similarities 
and differences in resource utilization among patients in each MS-DRG 
and we strive to ensure that resource utilization is relatively 
consistent across patients in each MS-DRG. However, some variation in 
resource intensity will remain among the patients in each MS-DRG 
because the definition of the MS-DRG is not so specific that every 
patient is identical, rather the average pattern of resource intensity 
of a group of patients in an MS-DRG can be predicted.
    We note that historically, in the development of the DRGs, the 
initial step in the determination of the DRG had been the assignment of 
the appropriate MDC based on the principal diagnosis, however, 
beginning with the eighth version of the GROUPER (CMS 8.0), the initial 
step in DRG assignment was based on the procedure being performed, thus 
the creation of the Pre-MDC DRGs, where the patient is assigned to 
these DRGs independent of the MDC of the principal diagnosis. 
Therefore, while the existing therapies (that is, CAR T-cell and non-
CAR T-cell) currently mapped to Pre-MDC MS-DRG 018 may be indicated in 
the treatment of patients with cancer, the logic for case assignment to 
Pre-MDC MS-DRG 018 does not preclude the assignment of other therapies 
indicated in the treatment of patients that do not have a diagnosis of 
cancer. In our review of the MS-DRG assignment for application of PZ, 
we recognized that this technology is defined as an investigational 
genetically engineered autologous cell therapy. We also note that 
similar to the discussions in prior rulemaking with respect to the 
difficulty in predicting what the associated costs will be in the 
future for CAR T-cell and other immunotherapies that remain under 
development (87 FR 48806), it is also difficult to predict what the 
associated costs will be in the future for cell and gene therapies that 
remain under development or in clinical trials.
    We further note that, in response to the President's Executive 
Order 14087, ``Lowering Prescription Drug Costs for Americans'', a Cell 
and Gene Therapy

[[Page 69010]]

(CGT) Access Model was developed, which could help inform future 
inpatient payment policy for cell and gene therapies more generally. 
For additional information on the CGT Access Model, we refer the reader 
to the CMS website at https://www.cms.gov/priorities/innovation/innovation-models/cgt.
    Until such time additional data becomes available, we believe it is 
appropriate to map cases reporting the application of PZ to Pre-MDC MS-
DRG 018 for FY 2025 based on the information currently available 
indicating similar utilization of resources for other cases currently 
mapped to MS-DRG 018 with regard to patients' severity of illness, 
treatment difficulty, and complexity of service.
    In response to concerns that the assignment of new, higher volume, 
lower cost therapies to MS-DRG 018 could potentially distort the 
relative weight of the MS-DRG resulting in inadequate payment for CAR 
T-cell therapies, we note that in the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 48807), we addressed similar comments and also noted that we 
provided detailed summaries and responses to these same or similar 
comments in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798 through 
44806). We also refer the reader to the discussion in the FY 2025 IPPS/
LTCH PPS proposed rule (89 FR 36018 through 36020), and in section 
II.D.2.b. of this final rule, regarding the proposed and finalized 
relative weight methodology for cases mapping to Pre-MDC MS-DRG 018 
effective October 1, 2024, for FY 2025.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the existing title to Pre-MDC MS-
DRG 018, ``Chimeric Antigen Receptor (CAR) T-cell and Other 
Immunotherapies'' for FY 2025. We are also finalizing the assignment of 
the eight procedure codes describing the use of PZ to Pre-MDC MS-DRG 
018 as reflected in Table 6B.--New Procedure Codes, in association with 
this final rule and available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.
3. MDC 01 (Diseases and Disorders of the Nervous System)
a. Logic for MS-DRGs 023 Through 027
    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58661 through 
58667), we discussed a request to reassign cases describing the 
insertion of a neurostimulator generator into the skull in combination 
with the insertion of a neurostimulator lead into the brain from MS-DRG 
023 (Craniotomy with Major Device Implant or Acute Complex CNS 
Principal Diagnosis with MCC or Chemotherapy Implant or Epilepsy with 
Neurostimulator) to MS-DRG 021 (Intracranial Vascular Procedures with 
Principal Diagnosis Hemorrhage with CC) or reassign all cases currently 
assigned to MS-DRG 023 that involve a craniectomy or a craniotomy with 
the insertion of device implant and create a new MS-DRG for these 
cases.
    We stated the requestor acknowledged that the relatively low volume 
of cases that only involve the insertion of a neurostimulator generator 
into the skull in combination with the insertion of a neurostimulator 
lead into the brain in the claims data was likely not sufficient to 
warrant the creation of a new MS-DRG. The requestor further stated 
given the limited options within the existing MS-DRG structure that fit 
from both a cost and clinical cohesiveness perspective, they believed 
that MS DRG 021 was the most logical fit in terms of average costs and 
clinical coherence for reassignment even though, according to the 
requestor, the insertion of a neurostimulator generator into the skull 
in combination with the insertion of a neurostimulator lead into the 
brain is technically more complex and involves a higher level of 
training, extreme precision and sophisticated technology than 
performing a craniectomy for hemorrhage.
    We noted that while our data findings demonstrated the average 
costs are higher for the cases with a principal diagnosis of epilepsy 
with a neurostimulator generator inserted into the skull and insertion 
of a neurostimulator lead into brain when compared to all cases in MS-
DRG 023, these cases represented a small percentage of the total number 
of cases reported in this MS-DRG. We stated that while we appreciated 
the requestor's concerns regarding the differential in average costs 
for cases describing the insertion of a neurostimulator generator into 
the skull in combination with the insertion of a neurostimulator lead 
into the brain when compared to all cases in their assigned MS-DRG, we 
believed additional time was needed to evaluate these cases as part of 
our ongoing examination of the case logic to the MS-DRGs for craniotomy 
and endovascular procedures, which are MS-DRG 023, MS-DRG 024 
(Craniotomy with Major Device Implant or Acute Complex CNS Principal 
Diagnosis without MCC), and MS-DRGs 025, 026, and 027 (Craniotomy and 
Endovascular Intracranial Procedures with MCC, with CC, and without CC/
MCC, respectively).
    As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48808 
through 48820), in connection with our analysis of cases reporting 
laser interstitial thermal therapy (LITT) procedures performed on the 
brain or brain stem in MDC 01, we stated we have started to examine the 
logic for case assignment to MS-DRGs 023 through 027 to determine where 
further refinements could potentially be made to better account for 
differences in the technical complexity and resource utilization among 
the procedures that are currently assigned to those MS-DRGs. We stated 
that specifically, we were in the process of evaluating procedures that 
are performed using an open craniotomy (where it is necessary to 
surgically remove a portion of the skull) versus a percutaneous burr 
hole (where a hole approximately the size of a pencil is drilled) to 
obtain access to the brain in the performance of a procedure. We stated 
we were also reviewing the indications for these procedures, for 
example, malignant neoplasms versus epilepsy to consider if there may 
be merit in considering restructuring the current MS-DRGs to better 
recognize the clinical distinctions of these patient populations in the 
MS-DRGs.
    As part of this evaluation, as discussed in the FY 2024 IPPS/LTCH 
PPS final rule, we have begun to analyze the ICD-10 coded claims data 
to determine if the patients' diagnoses, the objective of the procedure 
performed, the specific anatomical site where the procedure is 
performed or the surgical approach used (for example, open, 
percutaneous, percutaneous endoscopic, among others) demonstrates a 
greater severity of illness and/or increased treatment difficulty as we 
consider restructuring MS-DRGs 023 through 027, including how to better 
align the clinical indications with the performance of specific 
intracranial procedures. We referred the reader to Tables 6P.2b through 
6P.2f associated with the FY 2024 IPPS/LTCH PPS proposed rule 
(available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps) for data analysis 
findings of cases assigned to MS-DRGs 023 through 027 from the 
September 2022 update of the FY 2022 MedPAR file as we continue to look 
for patterns of complexity and resource intensity.
    In summary, we stated that while we agreed that neurostimulator 
cases can have average costs that are higher than the average costs of 
all cases in their respective MS-DRGs, in our analysis of this issue, 
it was difficult to detect

[[Page 69011]]

patterns of complexity and resource intensity. Therefore, for the 
reasons discussed, we finalized our proposal to maintain the current 
assignment of cases describing a neurostimulator generator inserted 
into the skull with the insertion of a neurostimulator lead into the 
brain for FY 2024.
    In the FY 2024 IPPS/LTCH PPS final rule, we stated we continue to 
believe that additional time is needed to evaluate these cases as part 
of our ongoing examination of the case logic for MS-DRGs 023 through 
027. As part of our ongoing, comprehensive analysis of the MS-DRGs 
under ICD-10, we stated we would continue to explore mechanisms to 
ensure clinical coherence between these cases and the other cases with 
which they may potentially be grouped. We stated that the data analysis 
as displayed in Tables 6P.2b through 6P.2f associated with the FY 2024 
IPPS/LTCH PPS proposed rule was displayed to provide the public an 
opportunity to review our examination of the procedures by their 
approach (open versus percutaneous), clinical indications, and 
procedures that involve the insertion or implantation of a device and 
to reflect on what factors should be considered in the potential 
restructuring of these MS-DRGs. We welcomed further feedback on how CMS 
should define technical complexity, what factors should be considered 
in the analysis, and whether there are other data not included in 
Tables 6P.2b through 6P.2f that CMS should analyze. We also stated we 
are interested in receiving feedback on where further refinements could 
potentially be made to better account for differences in the technical 
complexity and resource utilization among the procedures that are 
currently assigned to these MS-DRGs.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 35952 through 
35953), we discussed two comments we received by the October 20, 2023 
deadline in response to this discussion in the FY 2024 IPPS/LTCH PPS 
final rule. A commenter recommended that CMS not use surgical approach 
(for example, open versus percutaneous) as a factor to reclassify MS-
DRGs 023 through 027. The commenter stated whether the opening is 
created via a drill into the skull percutaneously or through a larger 
incision in the skull for a craniotomy, both approaches involve the 
risk of intracranial bleeding, infection, and brain swelling. The 
commenter further stated they do not support a consideration of the 
reassignment of the ICD-10-PCS procedure codes describing LITT, 
currently assigned to MS-DRGs 025 through 027, based on the diagnosis 
being treated. The commenter stated that the LITT procedure requires 
the same steps, time, and clinical resources when performed for brain 
cancer or epilepsy. In the commenter's view, differences in the disease 
causing the tumors or lesions do not affect the resources used for 
performing the procedure or the post-operative care for the patient. 
Lastly, the commenter stated they support the current structure of MS-
DRGs 023 and 024 based on an acute complicated principal diagnosis, or 
chemotherapy implant, or epilepsy with neurostimulator. The commenter 
stated these diagnoses represent severe complex conditions that require 
immediate and urgent intervention.
    Another commenter stated that the current logic for MS-DRGs 023 
through 027 is sufficient and supports the clinical and resource 
similarities of the procedures reflected in these MS-DRGs. The 
commenter performed its own analysis and stated they found that 
realignment based on surgical approach or root operation could create 
significant new inequities. The commenter recommended that CMS maintain 
the current logic for MS-DRGs 025 through 027, as making changes could 
be disruptive to hospitals and create challenges for Medicare 
beneficiary access to life-saving technologies. The commenter stated 
they strongly believe that maintaining the current structure provides 
payment stability and integrity of these procedures over time.
    In this final rule, we summarize the additional comments we 
received in response to this discussion in the FY 2025 IPPS/LTCH PPS 
proposed rule.
    Comment: Commenters stated they support CMS' decision to continue 
to monitor the case logic for MS-DRGs 023 through 027 to determine if 
future changes are warranted. A commenter specifically stated in their 
review, they were unable to detect misalignment in patterns of 
complexity or resource intensity within MS-DRGs 023 through 027 and 
noted the procedures are well-established. Another commenter stated 
they appreciate CMS reviewing the craniotomy MS-DRGs and stated that 
CMS should ensure that MS-DRG assignments fully reflect all costs for 
very resource-intensive craniotomy procedures. This commenter also 
recommended that CMS expand its review of the craniotomy MS-DRGs to 
include MS-DRGs 020, 021, and 022 (Intracranial Vascular Procedures 
with Principal Diagnosis Hemorrhage with MCC, with CC, and without CC/
MCC, respectively) and stated that the payments for these MS-DRGs have 
been highly variable in recent years, notably being proposed to reduce 
by more than 7 percent for FY 2025, and may fail to adequately reflect 
the resources associated with care for patients with diagnoses such as 
aneurysms. The commenter encouraged CMS to examine these MS-DRGs with 
the goal of providing more stable payments for hospitals that furnish 
intensive craniotomy procedures and to mitigate the financial impact of 
large payment declines. Several other commenters expressed caution, 
however, and stated that CMS should allow providers more time to 
identify which diagnoses support this procedure code and as such do not 
agree with moving it to MS-DRG 021.
    Response: We thank the commenters and appreciate the commenters' 
support and feedback. CMS will continue to monitor and analyze the 
claims data with respect to MS-DRGs 023 through 027 and we will take 
the recommendation to also review MS-DRGs 020, 021, and 022 into 
consideration as we further examine the logic for case assignment to 
the craniotomy MS-DRGs. We note that we did not propose or finalize a 
change to the GROUPER logic of MS-DRGs 020, 021, and 022 in FY 2024 
IPPS/LTCH PPS rulemaking, nor did we propose a change to the GROUPER 
logic of these MS-DRGS in the FY 2025 IPPS/LTCH PPS proposed rule, 
therefore, the difference in the relative weights reflected in Table 
5--List of Medicare Severity Diagnosis Related Groups (MS-DRGs), 
Relative Weighting Factors, and Geometric and Arithmetic Mean Length of 
Stay associated with FY 2025 proposed rule for MS-DRGs 020, 021, and 
022 can be attributed to changes in the underlying data.
    In response to the comments suggesting that CMS allow more time, it 
is unclear which diagnosis code and which procedure code the commenters 
were referring to as CMS did not propose to move any codes to MS-DRG 
021 in the FY 2025 IPPS/LTCH proposed rule, and the commenters did not 
specifically identify any ICD-10 codes for CMS to consider.
    CMS appreciates the comments submitted in response to the request 
for feedback in the FY 2024 IPPS/LTCH PPS final rule, as well as the 
comments submitted in response to the discussion in the FY 2025 IPPS/
LTCH PPS proposed rule. As we continue analysis of the claims data with 
respect to MS-DRGs 023 through 027, we continue to seek public comments 
and feedback on other factors that should be considered in the 
potential restructuring of these MS-DRGs. As stated in prior

[[Page 69012]]

rulemaking, we recognize the logic for MS-DRGs 023 through 027 has 
grown more complex over the years and believe there is opportunity for 
further refinement. We refer the reader to the ICD-10 MS-DRG 
Definitions Manual, Version 42 (available on the CMS website at: 
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete 
documentation of the GROUPER logic for MS-DRGs 023 through 027 for FY 
2025. Feedback and other suggestions may continue to be directed to 
MEARISTM, discussed in section II.C.1.b. of the preamble of 
this final rule at: https://mearis.cms.gov/public/home.
b. Intraoperative Radiation Therapy (IORT)
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
35953 through 35956), we received a request to add ICD-10-PCS procedure 
codes D0Y0CZZ (Intraoperative radiation therapy (IORT) of brain) and 
D0Y1CZZ (Intraoperative radiation therapy (IORT) of brain stem), to the 
Chemotherapy Implant logic list in MS-DRG 023 (Craniotomy with Major 
Device Implant or Acute Complex CNS Principal Diagnosis with MCC or 
Chemotherapy Implant or Epilepsy with Neurostimulator). According to 
the requestor, intraoperative radiation therapy (IORT) for the brain is 
always performed as part of the surgery to remove a brain tumor during 
the same operative episode. The requestor stated that once maximal safe 
tumor resection is achieved, the tumor cavity is examined for active 
egress of cerebrospinal fluid or bleeding. Next, intraoperative 
measurements are made using neuro-navigation or intraoperative imaging 
such as magnetic resonance imaging (MRI) or computed tomography (CT) to 
ensure safe distance to organs or tissues at risk, aid in appropriate 
dose calculation, and selection of proper applicator size. The 
applicator is then implanted into the tumor cavity and the radiation 
dose is delivered. The requestor stated that delivery time can be up to 
40 minutes and upon completion of the treatment, the source is removed, 
and the cavity is re-inspected for active egress of cerebrospinal fluid 
and bleeding.
    As discussed in the proposed rule, the requestor stated that 
currently the ICD-10-PCS procedure codes for excision of a brain tumor, 
00B00ZZ (Excision of brain, open approach) and 00B70ZZ (Excision of 
cerebral hemisphere, open approach) map to both sets of craniotomy MS-
DRGs. Specifically, MS-DRG 023 (Craniotomy with Major Device Implant or 
Acute Complex CNS Principal Diagnosis with MCC or Chemotherapy Implant 
or Epilepsy with Neurostimulator) and MS-DRG 024 (Craniotomy with Major 
Device Implant or Acute Complex CNS Principal Diagnosis without MCC), 
and MS-DRGs 025, 026, and 027 (Craniotomy and Endovascular Intracranial 
Procedures with MCC, with CC, and without CC/MCC, respectively). 
However, the requestor also stated that the procedure codes describing 
IORT (D0Y0CZZ or D0Y1CZZ) are not listed in the GROUPER logic and do 
not affect MS-DRG assignment. Therefore, cases reporting a procedure 
code describing excision of a brain tumor (00B00ZZ or 00B70ZZ) with 
IORT currently map to MS-DRGs 025, 026, and 027. The requestor 
suggested that cases reporting a procedure code describing excision of 
a brain tumor (00B00ZZ or 00B70ZZ) with IORT (D0Y0CZZ or D0Y1CZZ) 
should map to MS-DRG 023 because of the higher costs associated with 
the addition of IORT to the excision of brain tumor surgery. According 
to the requestor, MS-DRG 023 includes complicated craniotomy cases 
involving the placement of radiological sources and chemotherapy 
implants. The requestor stated that because IORT involves a full course 
of radiation therapy delivered directly to the tumor bed via an 
applicator that is implanted into the tumor cavity during the same 
surgical session and is clinically similar to two other procedures 
listed in the Chemotherapy Implant logic list, it should also be 
included in the Chemotherapy Implant logic list. Specifically, the 
requestor stated procedure code 00H004Z (Insertion of radioactive 
element, cesium-131 collagen implant into brain, open approach) and 
procedure code 3E0Q305 (Introduction of other antineoplastic into 
cranial cavity and brain, percutaneous approach) also involve the 
delivery of either radiation or chemotherapy directly after tumor 
resection. According to the requestor, the resources involved in 
placing the delivery device are similar for all three procedures and 
the distinction is that the procedures described by codes 00H004Z and 
3E0Q305 involve the insertion of devices that deliver radiation or 
chemotherapy over a period of time, whereas IORT delivers the entire 
dose of radiation during the operative session. As such, the requestor 
asserted that IORT is clinically aligned with the other procedures from 
a therapeutic and resource utilization perspective.
    We noted in the proposed rule that the requestor performed its own 
analysis using the FY 2022 MedPAR file that was made available in 
association with the FY 2024 IPPS/LTCH PPS final rule and stated it 
found fewer than 11 cases reporting IORT in MS-DRGs 025, 026, and 027, 
with the majority of those cases mapping to MS-DRG 025. According to 
the requestor, the volume of claims reporting IORT is anticipated to 
increase as appropriate use of the technology is adopted.
    We also noted in the proposed rule that the requestor is correct 
that currently, the logic for case assignment to MS-DRG 023 includes a 
Chemotherapy Implant logic list and the procedure codes that identify 
IORT (D0Y0CZZ and D0Y1CZZ) are not listed in the GROUPER logic and do 
not affect MS-DRG assignment as the procedures are designated as non-
O.R. procedures. The requestor is also correct that cases reporting a 
procedure code describing excision of a brain tumor (00B00ZZ or 
00B70ZZ) with IORT currently map to MS-DRGs 025, 026, and 027. We refer 
the reader to the ICD-10 MS-DRG Definitions Manual Version 41.1 
(available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete documentation of the GROUPER logic.
    As discussed in the proposed rule, we analyzed claims data from the 
September 2023 update of the FY 2023 MedPAR file for MS-DRGs 023, 024, 
025, 026, and 027 and for cases reporting excision of brain tumor and 
IORT. We identified claims reporting excision of brain tumor with 
procedure code 00B00ZZ or 00B70ZZ and identified claims reporting IORT 
with procedure code D0Y0CZZ or D0Y1CZZ. The findings from our analysis 
are shown in the following table. We note that there were no cases 
found to report IORT of brain (D0Y0CZZ) or brain stem (D0Y1CZZ) with 
excision of brain (00B00ZZ) or excision of cerebral hemisphere 
(00B70ZZ).
BILLING CODE 4120-01-P

[[Page 69013]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.003

BILLING CODE 4120-01-C
    As the data show, there were no cases found to report the use of 
IORT in the performance of a brain tumor excision; therefore, we are 
unable to evaluate whether the use of IORT directly impacts resource 
utilization. For this reason, we proposed to maintain the current 
structure of MS-DRGs 023, 024,

[[Page 69014]]

025, 026, and 027 for FY 2025. We stated that we would continue to 
monitor the claims data in consideration of any future modifications to 
the MS-DRGs for which IORT may be reported.
    Comment: Commenters supported the proposal to maintain the current 
structure of MS-DRGs 023, 024, 025, 026, and 027 for FY 2025.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current structure of MS-DRGs 
023, 024, 025, 026, and 027 for FY 2025.
4. MDC 05 (Diseases and Disorders of the Circulatory System)
a. Concomitant Left Atrial Appendage Closure and Cardiac Ablation
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
35956 through 35959), we received a request to create a new MS-DRG to 
better accommodate the costs of concomitant left atrial appendage 
closure and cardiac ablation for atrial fibrillation in MDC 05 
(Diseases and Disorders of the Circulatory System). Atrial fibrillation 
(AF) is an irregular and often rapid heart rate that occurs when the 
two upper chambers of the heart experience chaotic electrical signals. 
AF presents as either paroxysmal (lasting < 7 days), persistent 
(lasting > 7 day, but less than 1 year), or long standing persistent 
(chronic)(lasting > 1 year) based on time duration and can increase the 
risk for stroke, heart failure, and mortality. Management of AF has two 
primary goals: optimizing cardiac output through rhythm or rate control 
and decreasing the risk of cerebral and systemic thromboembolism. Among 
patients with AF, thrombus in the left atrial appendage (LAA) is a 
primary source for thromboembolism. Left Atrial Appendage Closure 
(LAAC) is a surgical or minimally invasive procedure to seal off the 
LAA to reduce the risk of embolic stroke.
    According to the requestor, the manufacturer of the 
WATCHMANTM Left Atrial Appendage Closure (LAAC) device, 
patients who are indicated for a LAAC device can also have symptomatic 
AF. For these patients, performing a cardiac ablation and LAAC 
procedure at the same time is ideal. Cardiac ablation is a procedure 
that works by burning or freezing tissue on the inside of the heart to 
disrupt faulty electrical signals causing the arrhythmia, which can 
help the heart maintain a normal heart rhythm. In the proposed rule, we 
noted the requestor highlighted a recent study (Piccini et al. Left 
atrial appendage occlusion with the WATCHMANTM FLX and 
concomitant catheter ablation procedures. Heart Rhythm Society Meeting 
2023, May 19, 2023; New Orleans, LA.). According to the requestor, the 
results of this study indicate that when LAAC is performed 
concomitantly with cardiac ablation, the outcomes are comparable to 
patients who have undergone these procedures separately.
    As discussed in the proposed rule, the requestor identified the 
following potential procedure code combination that would comprise a 
concomitant left atrial appendage closure and cardiac ablation 
procedure: ICD-10-PCS procedure code 02L73DK (Occlusion of left atrial 
appendage with intraluminal device, percutaneous approach), that 
identifies the WATCHMANTM device, in combination with 
02583ZZ (Destruction of conduction mechanism, percutaneous approach). 
We noted in the proposed rule that the requestor performed its own 
analysis of this procedure code combination and stated that it found 
the average costs of cases reporting concomitant left atrial appendage 
closure and cardiac ablation procedures were consistently higher 
compared to the average costs of other cases within their respective 
MS-DRG, which it asserted could limit beneficiary access to these 
procedures. The requestor asserted that improved Medicare payment for 
providers who perform these procedures concomitantly would help 
Medicare patients to gain better access to these lifesaving and 
quality-improving services and decrease the risk of future readmissions 
and the need for future procedures.
    We reviewed this request and in the proposed rule noted concerns 
regarding making proposed MS-DRG changes based on a specific, single 
technology (the WATCHMANTM Left Atrial Appendage Closure 
(LAAC) device) identified by only one unique procedure code versus 
considering proposed changes based on a group of related procedure 
codes that can be reported to describe the same type or class of 
technology, which is more consistent with the intent of the MS-DRGs. 
Therefore, in reviewing this request, in the proposed rule we stated we 
identified eight additional ICD-10-PCS procedure codes that describe 
LAAC procedures and included these codes in our analysis. The nine 
codes we identified are listed in the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.004

    Similarly, as noted previously, the requestor identified code 
02583ZZ (Destruction of conduction mechanism, percutaneous approach) to 
describe cardiac ablation. In our review of the ICD-10-PCS 
classification, in the proposed rule we stated we identified 26 
additional ICD-10-PCS codes that describe cardiac ablation that we also 
examined. The 27 codes we included in our analysis are listed in the 
following table.

[[Page 69015]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.005

    In the ICD-10 MS-DRGs Definitions Manual Version 41.1, for 
concomitant left atrial appendage closure and cardiac ablation 
procedures, the GROUPER logic assigns MS-DRGs 273 and 274 (Percutaneous 
and Other Intracardiac Procedures with and without MCC, respectively) 
depending on the presence of any additional MCC secondary diagnoses. We 
stated in the proposed rule that we examined claims data from the 
September 2023 update of the FY 2023 MedPAR file for all cases in MS-
DRGs 273 and 274 and compared the results to cases reporting procedure 
codes describing concomitant left atrial appendage closure and cardiac 
ablation. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.006

    As shown in the table, in MS-DRG 273, we identified a total of 
7,250 cases with an average length of stay of 5.4 days and average 
costs of $35,197. Of those 7,250 cases, there were 80 cases reporting 
procedure codes describing concomitant left atrial appendage closure 
and cardiac ablation with average costs higher than the average costs 
in the FY 2023 MedPAR file for MS-DRG 273 ($70,447 compared to $35,197) 
and a slightly longer average length of stay (5.8 days compared to 5.4 
days). In MS-DRG 274, we identified a total of 47,801 cases with an 
average length of stay of 1.4 days and average costs of $29,209. Of 
those 47,801 cases, there were 781 cases reporting procedure codes 
describing concomitant left atrial appendage closure and cardiac 
ablation, with average costs higher than the average costs in the FY 
2023 MedPAR file for MS-DRG 274 ($66,277 compared to $29,209) and a 
slightly longer average length of stay (1.5 days compared to 1.4 days).
    In the proposed rule we stated we reviewed these data and noted, 
clinically, the management of AF by performing concomitant left atrial 
appendage closure and cardiac ablation can improve symptoms, prevent 
stroke, and reduce the risk of bleeding compared with oral 
anticoagulants. We stated the data analysis clearly shows that cases 
reporting concomitant left atrial appendage closure and cardiac 
ablation procedures have higher average costs and slightly longer 
lengths of stay compared to all the cases in their assigned MS-DRG. For 
these reasons, we proposed to create a new MS-DRG for cases reporting a 
LAAC procedure and a cardiac ablation procedure.

[[Page 69016]]

    As discussed in the proposed rule, to compare and analyze the 
impact of our suggested modifications, we ran a simulation using the 
claims data from the September 2023 update of the FY 2023 MedPAR file. 
The following table illustrates our findings for all 1,723 cases 
reporting procedure codes describing concomitant left atrial appendage 
closure and cardiac ablation. We stated we believed the resulting 
proposed MS-DRG assignment is more clinically homogeneous, coherent and 
better reflects hospital resource use.
[GRAPHIC] [TIFF OMITTED] TR28AU24.007

    We applied the criteria to create subgroups in a base MS-DRG as 
discussed in section II.C.1.b. of the FY 2025 IPPS/LTCH PPS proposed 
rule. As shown in the table that follows, a three-way split of the 
proposed new MS-DRGs failed the criterion that there be at least 500 
cases for each subgroup due to low volume. Specifically, for the ``with 
MCC'' split, there were only 268 cases in the subgroup.
[GRAPHIC] [TIFF OMITTED] TR28AU24.008

    We noted that we then applied the criteria for a two-way split for 
the ``with CC/MCC'' and ``without CC/MCC'' subgroups and found that the 
criterion that there be at least a 20% difference in average cost 
between subgroups could not be met. The following table illustrates our 
findings.
[GRAPHIC] [TIFF OMITTED] TR28AU24.009

    We also applied the criteria for a two-way split for the ``with 
MCC'' and ``without MCC'' subgroups and found that the criterion that 
there be at least 500 or more cases in each subgroup similarly could 
not be met. The criterion that there be at least a 20% difference in 
average costs between the subgroups also was not met. The following 
table illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TR28AU24.010

    Therefore, for FY 2025, we did not propose to subdivide the 
proposed new MS-DRG for cases reporting procedure codes describing 
concomitant left atrial appendage closure and cardiac ablation into 
severity levels.
    In summary, for FY 2025, taking into consideration that it 
clinically requires greater resources to perform concomitant left 
atrial appendage closure and cardiac ablation procedures, we proposed 
to create a new base MS-DRG for cases reporting a LAAC procedure and a 
cardiac ablation procedure in MDC 05. The proposed new MS-DRG is 
proposed new MS-DRG 317 (Concomitant Left Atrial Appendage Closure and 
Cardiac Ablation). We also proposed to include the nine ICD-10-PCS 
procedure codes that describe LAAC procedures and the 27 ICD-10-PCS 
procedure codes that describe cardiac ablation listed previously in the 
logic for assignment of cases reporting a LAAC procedure and a cardiac 
ablation procedure for the proposed new MS-DRG.
    Comment: Many commenters expressed support for the proposal to 
create new base MS-DRG 317 for cases reporting a LAAC procedure and a 
cardiac ablation procedure in MDC 05. Commenters stated the creation of 
MS-DRG 317 is timely and will ensure more patients have access to 
needed care during a single hospital stay, reducing the need for 
additional admissions. Other commenters agreed that some patients with 
AF undergoing ablation are also candidates for LAAC procedures and 
stated combining the procedures is feasible, efficacious, and simple to 
employ. Several commenters stated that the proposal is a significant 
step forward to support better disease management for some of the most 
comorbid patients and likely will reduce downstream healthcare costs. A 
few commenters specifically stated they appreciate CMS' continued 
evaluation and acknowledgement of the increased resources required for 
patients requiring multiple procedures during a single inpatient 
hospitalization. While supporting the proposal to create MS-DRG 317, 
some commenters suggested that CMS devise a broader, more inclusive, 
supplemental payment mechanism to facilitate incremental payment when 
two major procedures are performed during the same hospital admission.
    Response: We appreciate the commenters' support and the feedback 
regarding payment when two major

[[Page 69017]]

procedures are performed during the same hospital admission.
    Comment: Another commenter recommended that CMS delay creation of 
proposed new MS-DRG 317 for concomitant LAAC and cardiac ablation. 
While expressing support for proposals that will improve patient 
outcomes and increase efficiencies in the health care system, the 
commenter stated they believe it is premature for CMS to develop a new 
MS-DRG at this time. The commenter expressed concern that the evidence 
to support the safety, effectiveness, and workflow of these two 
procedures when performed concomitantly has not been well established 
and suggested that the results of two ongoing randomized control trials 
(RCTs) focusing on LAAC and ablation should be considered before CMS 
moves forward to develop a new MS-DRG.
    Response: We thank the commenter for their feedback. In response to 
the suggestion that CMS delay implementation of proposed new MS-DRG 317 
for concomitant LAAC and cardiac ablation, we reviewed the commenters' 
concern and do not agree that a delay is necessary or appropriate. As 
stated earlier, the data analysis clearly shows that cases reporting 
concomitant LAAC and cardiac ablation procedures have higher average 
costs and slightly longer lengths of stay compared to all the cases in 
their assigned MS-DRG. For these reasons, we proposed to create a new 
MS-DRG for cases reporting a LAAC procedure and a cardiac ablation 
procedure. We will continue to monitor the claims data and perform 
additional analysis if any evidence is presented to us regarding the 
clinical efficacy of concomitant left atrial appendage closure and 
cardiac ablation procedures. We would address any modifications to the 
logic in future rulemaking.
    Comment: Other commenters noted a difference in case volume between 
the table CMS stated reflected the cases reporting procedure codes 
describing concomitant LAAC and cardiac ablation in MS-DRGs 273 and 274 
and the table which CMS stated illustrated the findings for all cases 
reporting procedure codes describing concomitant LAAC and cardiac 
ablation found in the claims data from the September 2023 update of the 
FY 2023 MedPAR file. Specifically, the commenters noted that 861 cases 
reporting procedure codes describing concomitant LAAC and cardiac 
ablation were found in MS-DRGs 273 and 274, while 1,723 cases reporting 
procedure codes describing concomitant LAAC and cardiac ablation were 
found in the simulation using the claims data from the September 2023 
update of the FY 2023 MedPAR file. The commenters stated it is unclear 
from the tables and data associated with the proposed rule where the 
additional 862 cases are currently assigned. These commenters performed 
their own analysis of the supplemental After Outliers Removed (AOR)/
Before Outliers Removed (BOR) file available in association with the FY 
2025 IPPS/LTCH PPS proposed rule on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps and recommended that CMS consider that cases reporting 
procedure codes describing concomitant LAAC and cardiac ablation group 
to other MS-DRGs, and should be incorporated into the analysis based on 
volume differences they noted in the AOR/BOR file.
    Response: We thank the commenters for their feedback.
    In response to suggestion that CMS provide insight regarding the 
difference in case volume between the table which we stated reflects 
our examination of the claims data from the September 2023 update of 
the FY 2023 MedPAR file for all cases in MS-DRGs 273 and 274, compared 
to the results for cases reporting procedure codes describing 
concomitant LAAC and cardiac ablation in those MS-DRGs, and the table 
which we stated illustrated our findings for all 1,723 cases reporting 
procedure codes describing concomitant LAAC and cardiac ablation, we 
note that as stated in the proposed rule, for concomitant LAAC and 
cardiac ablation procedures, the GROUPER logic assigns MS-DRGs 273 or 
274 (Percutaneous and Other Intracardiac Procedures with or without 
MCC, respectively) depending on the presence of any additional MCC 
secondary diagnoses. Therefore, we focused our examination of claims 
data from the September 2023 update of the FY 2023 MedPAR file for all 
cases in MS-DRGs 273 and 274 and compared the results to cases 
reporting procedure codes describing concomitant LAAC and cardiac 
ablation.
    While not explicitly stated, assignment to MS-DRGs 273 or 274 is 
also dependent on the absence of other procedure codes that could 
affect MS-DRG assignment on the claim. If other procedure codes that 
could affect MS-DRG assignment are also reported on the claim along 
with procedure codes describing concomitant left atrial appendage 
closure and ablation, the MS-DRG assignment can vary depending on the 
procedure codes reported.
    As discussed in section II.C.14. of the preamble of the proposed 
rule and this final rule, in our proposal to revise the surgical 
hierarchy for the MS-DRGs in MDC 05, we proposed to sequence proposed 
new MS-DRG 317 (Concomitant Left Atrial Appendage Closure and Cardiac 
Ablation) above MS-DRG 275 (Cardiac Defibrillator Implant with Cardiac 
Catheterization and MCC) and below MS-DRGs 231, 232, 233, 234, 235, and 
236 (Coronary Bypass with or without PTCA, with or without Cardiac 
Catheterization or Open Ablation, with and without MCC, respectively). 
Under this proposal, if procedure codes describing concomitant LAAC and 
cardiac ablation are reported, the GROUPER logic would assign new MS-
DRG 317 in the absence of other procedure codes that could affect MS-
DRG assignment to an MS-DRG that would be sequenced higher in the 
surgical hierarchy than MS-DRG 317 in MDC 05. The table which we stated 
illustrated our findings for all 1,723 cases reporting procedure codes 
describing concomitant LAAC and cardiac ablation includes cases that 
are anticipated to potentially shift or be redistributed as a result of 
the proposal to 1) create a new base MS-DRG 317 and 2) the proposal to 
sequence the new MS-DRG above MS-DRG 275 and below MS-DRGs 231, 232, 
233, 234, 235, and 236 in MDC 05.
    To illustrate these shifts for this final rule, we again analyzed 
the September 2023 update of the FY 2023 MedPAR file for cases 
reporting procedure codes describing concomitant LAAC and cardiac 
ablation. We then examined the redistribution of cases that is 
anticipated to occur as a result of the proposal to create a new base 
MS-DRG 317 by processing the claims data from the September 2023 update 
of the FY 2023 MedPAR file through the ICD-10 MS-DRG GROUPER Version 41 
and then processing the same claims data through the ICD-10 MS-DRG 
GROUPER Version 42 for comparison. The number of cases from this 
comparison that result in different MS-DRG assignments is the number of 
the cases that are anticipated to potentially shift or be 
redistributed. Our findings are shown in the following table.
BILLING CODE 4120-01-P

[[Page 69018]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.011

    As stated in the proposed rule and reflected in the previous table, 
we found 1,723 cases reporting procedure codes describing concomitant 
LAAC and cardiac ablation that are anticipated to potentially shift or 
be redistributed into MS-DRG 317. The largest number of cases moving 
into new MS-DRG 317 are moving out of MS-DRGs 274, 229, 228 and 273. In 
response to the suggestion that CMS incorporate other MS-DRGs into our 
analysis, we examined the claims data from the September 2023 update of 
the FY 2023 MedPAR file to identify the average length of stay and 
average costs for all cases in MS-DRGs 228, 229, 242, 243, 244, 245, 
267, 268, 269, 270, 271, 272, 273, 274, 275, 276, 277, 319, and 320. 
Our findings are shown in the following table.

[[Page 69019]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.012

BILLING CODE 4120-01-C
    In reviewing the data analysis performed, the 1,723 cases 
anticipated to potentially shift or be redistributed into MS-DRG 317 
have higher average costs when compared to all the cases in MS-DRGs 
228, 229, 273, and 274 ($54,629 versus $44,565, $28,987, $35,197, and 
$29,209, respectively). The 1,723 cases anticipated to potentially 
shift or be redistributed into MS-DRG 317 have an average length of 
stay that is shorter than the average length of stay for all the cases 
in MS-DRGs 228, 229, and 273 (3.1 days versus 8.7 days, 3.3 days, and 
5.4 days, respectively) and a longer average length of stay when 
compared to all the cases in MS-DRG 274 (3.1 days versus 1.4 days). We 
note that the 1,723 cases anticipated to potentially shift or be 
redistributed into MS-DRG 317 have lower average costs when compared to 
all the cases in MS-DRGs 275, 268, and 276 ($54,629 versus $63,181, 
$59,383, and $54, 993, respectively), however only seven cases reported 
procedure codes describing concomitant left atrial appendage closure 
and cardiac ablation in these MS-DRGs. We also note that the 1,723 
cases anticipated to potentially shift or be redistributed into MS-DRG 
317 have a longer average length of stay when compared to all the cases 
in MS-DRGs 244, 272, 269, and 267 (3.1 days versus 2.5 days, 2.3 days, 
2 days, and 1.5 days, respectively), however only 20 cases reported 
procedure codes describing concomitant left atrial appendage closure 
and cardiac ablation in these MS-DRGs. We reviewed these data and 
believed the proposal to create new base MS-DRG 317 for cases reporting 
procedure codes describing concomitant LAAC and cardiac ablation in MDC 
05 and the proposed revision to the surgical hierarchy leads to a 
grouping that is more coherent and better reflects the clinical 
severity and resource use involved in these cases.
    Comment: In reviewing the list of nine ICD-10-PCS procedure codes 
that describe LAAC procedures that were proposed to be included in the 
logic for assignment of cases reporting procedure codes describing 
concomitant LAAC and cardiac ablation for the proposed new MS-DRG, a 
commenter noted these nine codes are designated as non-O.R. procedures 
affecting the MS-DRG. The commenter also noted that codes 02570ZK 
(Destruction of left atrial appendage, open approach), 02573ZK 
(Destruction of left atrial appendage, percutaneous approach), and 
02574ZK (Destruction of left atrial appendage, percutaneous endoscopic 
approach) included in the list of 27 ICD-10-PCS procedure codes that 
describe cardiac ablation proposed to be included in the logic for 
assignment to the proposed new MS-DRG, are also designated as non-O.R. 
procedures affecting the MS-DRG. The commenter stated that LAAC 
procedures and cardiac ablation procedures performed by an open or 
percutaneous endoscopic approach should be designated as operating room 
procedures to account for the resource utilization required to perform 
them as these procedures require the use of specialized equipment or 
devices.
    Response: We thank the commenter for their feedback.
    We agree that in the ICD-10 MS-DRGs Definitions Manual Version 
41.1, the nine ICD-10-PCS procedure codes that describe LAAC procedures 
are recognized as non-O.R. procedures affecting the MS-DRGs to which 
they are assigned. We refer the reader to Section II.C.10 in the 
proposed rule and this final rule for the complete discussion of the 
designations each ICD-10-PCS code has under the IPPS MS-DRGs that 
determine whether and in what way the presence of that procedure code 
on a claim impacts the MS-DRG assignment. In the FY 2022 IPPS/LTCH PPS 
final rule (86 FR 44898 through 44899) we reviewed these nine ICD-10-
PCS procedure codes that

[[Page 69020]]

describe LAAC procedures and stated we believe the current designation 
of LAAC procedures as non-O.R. procedures that affect the assignment 
for MS-DRGs 273 and 274 is clinically appropriate to account for the 
subset of patients undergoing left atrial appendage closure 
specifically. We further stated that we believed that circumstances in 
which a patient is admitted for a principal diagnosis outside of MDC 05 
and a left atrial appendage closure is performed as the only surgical 
procedure in the same admission are infrequent, and if they do occur, 
the LAAC procedure would not be a significant contributing factor in 
the increased intensity of resources needed for facilities to manage 
these complex cases.
    We continue to believe that circumstances in which a patient is 
admitted for a principal diagnosis outside of MDC 05 and LAAC is 
performed as the only surgical procedure in the same admission are 
infrequent, and that the current designation of LAAC procedures as non-
O.R. procedures that affect the assignment for MS-DRGs 273 and 274, and 
now MS-DRG 317, is clinically appropriate to account for the subset of 
patients undergoing left atrial appendage closure specifically.
    Similarly, we agree that in the ICD-10 MS-DRGs Definitions Manual 
Version 41.1, procedure codes 02570ZK, 02573ZK, and 02574ZK are 
recognized as non-O.R. procedures affecting the MS-DRGs as reflected in 
the following table, specifically.
[GRAPHIC] [TIFF OMITTED] TR28AU24.013

    We believe that circumstances in which a patient is admitted for a 
principal diagnosis outside of MDC 05 and a cardiac ablation is 
performed as the only surgical procedure in the same admission are 
infrequent, and that the current designation of 02570ZK, 02573ZK, and 
02574ZK as non-O.R. procedures that affect the assignment for the MS-
DRGs reflected in the previous table, and now MS-DRG 317, is clinically 
appropriate to account for the subset of patients undergoing cardiac 
ablation specifically.
    Comment: A commenter suggested that ICD-10-PCS codes 02590ZZ 
(Destruction of chordae tendineae, open approach), 02593ZZ (Destruction 
of chordae tendineae, percutaneous approach), and 02594ZZ (Destruction 
of chordae tendineae, percutaneous endoscopic approach) describing 
ablation of the chordae tendineae be removed from the list of cardiac 
ablation procedures for MS-DRG 317 as the chordae tendineae would not 
be ablated in relation to cardiac ablation procedures, and instead they 
would be ablated in relation to cardiac valve repair or replacement 
procedures.
    Response: We appreciate the feedback from the commenter.
    As noted previously, atrial fibrillation (AF) is an irregular and 
often rapid heart rate that occurs when the two upper chambers of the 
heart experience chaotic electrical signals. Cardiac ablation is a 
procedure that is performed to correct a disturbance in the conduction 
system of the heart by damaging small areas of tissue using 
radiofrequency energy or freezing so that the damaged tissue can no 
longer generate or conduct electrical impulses. We agree that ablation 
of the chordae tendineae, which are the strong, fibrous connections 
between the valve leaflets and the papillary muscles, is not performed 
to stop abnormal electrical pathways as the cardiac conduction system 
does not pass through the chordae tendineae.
    We examined claims data from the September 2023 update of the FY 
2023 MedPAR file to evaluate the frequency with which ablation of the 
chordae tendineae is reported with left atrial appendage closure, and 
found one case reporting procedure codes 02590ZZ (Destruction of 
chordae tendineae, open approach) and 02L70ZK (Occlusion of left atrial 
appendage, open approach) in MS-DRG 219 (Cardiac Valve and Other Major 
Cardiothoracic Procedures without Cardiac Catheterization with MCC) 
with a length of stay of 7 days and costs of $28,989.
    We note that assignment of this one case to MS-DRG 219 indicates 
that other procedure code(s) assigned to the GROUPER logic of MS-DRG 
219 were reported in addition to procedure codes 02590ZZ and 02L70ZK to 
drive assignment to this MS-DRG. We reviewed these data and because our 
analysis identified only one case reporting ablation of the chordae 
tendineae and left atrial appendage closure, and recognizing that 
ablation of the chordae tendineae is not performed to stop abnormal 
electrical pathways, we agree that procedure codes 02590ZZ, 02593ZZ, 
and 02594ZZ should be removed from the list of 27 ICD-10-PCS procedure 
codes that describe cardiac ablation listed previously in the proposed 
logic for assignment of cases reporting a LAAC procedure and a cardiac 
ablation procedure for the proposed new MS-DRG.
    Comment: Many commenters noted that procedure code 02583ZF 
(Destruction of conduction mechanism using irreversible 
electroporation, percutaneous approach) to identify irreversible 
electroporation for cardiac ablation was finalized effective April 1, 
2024 as reflected in the FY 2024 ICD-10-PCS Code Update files that were 
made publicly available on the CMS website at https://www.cms.gov/Medicare/Coding/ICD10 on December 19, 2023. The new procedure code is 
also reflected in Table 6B.--New Procedure Codes, in association with 
the proposed rule and available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS, including the MS-DRG assignments for the new code 
for FY 2025.
    These commenters noted that cardiac ablation procedures performed 
with the PulseSelectTM Pulsed Field Ablation (PFA) System 
for the treatment of paroxysmal (PAF) or persistent (PsAF) atrial 
fibrillation can also be performed concomitantly with left atrial 
appendage closure and recommended that procedure code 02583ZF also be 
assigned to new MS-DRG 317 (Concomitant Left Atrial Appendage Closure 
and Cardiac Ablation) in MDC 05. However, another commenter noted that 
there is limited data on combining the new pulse field ablation 
modality with LAAC and suggested that CMS continue to evaluate evidence 
on the safety and efficacy of using this new modality in concomitant 
procedures

[[Page 69021]]

before assigning procedure code 02583ZF to new MS-DRG 317.
    Response: We thank the commenters for their feedback.
    We note that irreversible electroporation for cardiac ablation, 
also referred to as pulsed field ablation, delivers electrical pulses 
that result in destruction of selected cardiac tissue by irreversibly 
increasing the porosity of the cell membranes, inducing cell death, and 
can be used as a treatment for paroxysmal and persistent atrial 
fibrillation. As a procedure code that also describes the performance 
of cardiac ablation, we agree that procedure code 02583ZF should be 
added to the list of ICD-10-PCS procedure codes that describe cardiac 
ablation listed previously in the proposed logic for assignment of 
cases reporting a LAAC procedure and a cardiac ablation procedure for 
the proposed new MS-DRG. In response to the suggestion that CMS 
continue to evaluate evidence on the safety and efficacy of using this 
new modality in concomitant procedures before assigning procedure code 
02583ZF to new MS-DRG 317, we note that procedure code 02583ZF 
describes a procedure that is clinically coherent with the other 
procedure codes proposed for assignment to MS-DRG 317, so it is 
reasonable that cases reporting procedure code 02583ZF and a procedure 
code describing LAAC group to the same MS-DRG.
    Therefore, after consideration of the public comments we received, 
and for the reasons discussed, we are finalizing our proposal to create 
new MS-DRG 317 (Concomitant Left Atrial Appendage Closure and Cardiac 
Ablation) in MDC 05, with modification, effective October 1, 2024, for 
FY 2025. Specifically, we are modifying the proposed list of ICD-10-PCS 
procedure codes that describe cardiac ablation in the Version 42 
GROUPER logic of new MS-DRG 317 by removing ICD-10-PCS codes 02590ZZ 
(Destruction of chordae tendineae, open approach), 02593ZZ (Destruction 
of chordae tendineae, percutaneous approach), and 02594ZZ (Destruction 
of chordae tendineae, percutaneous endoscopic approach) and adding ICD-
10-PCS procedure code 02583ZF (Destruction of conduction mechanism 
using irreversible electroporation, percutaneous approach), as 
discussed previously.
    The 25 ICD-10-PCS procedure codes that describe cardiac ablation 
that we are finalizing in the logic for assignment of cases reporting a 
LAAC procedure and a cardiac ablation procedure for FY 2025 are listed 
in the following table. This assignment is reflected in the final 
Version 42 GROUPER logic.
[GRAPHIC] [TIFF OMITTED] TR28AU24.014

    Table 6B.--New Procedure Codes, associated with this final rule 
reflects the modification to the MS-DRG assignments for procedure code 
02583ZF for FY 2025. We refer the reader to section II.C.13. of the 
preamble of this final rule for further information regarding the 
table.
    Lastly, we are finalizing the inclusion of the nine ICD-10-PCS 
procedure codes that describe LAAC procedures listed previously in the 
logic for assignment of cases reporting a LAAC procedure and a cardiac 
ablation procedure for new MS-DRG 317, without modification, for FY 
2025. We refer the reader to section II.C.15. of the preamble of this 
final rule for the discussion of the surgical hierarchy and the 
complete list of our proposed modifications to the surgical hierarchy 
as well as our finalization of those proposals.
b. Neuromodulation Device Implant for Heart Failure 
(BarostimTM Baroreflex Activation Therapy)
    The BAROSTIMTM system is the first neuromodulation 
device system designed to trigger the body's main cardiovascular reflex 
to target symptoms of heart failure. The system consists of an 
implantable pulse generator (IPG) that is implanted subcutaneously in 
the upper chest below the clavicle, a stimulation lead that is sutured 
to either

[[Page 69022]]

the right or left carotid sinus to activate the baroreceptors in the 
wall of the carotid artery, and a wireless programmer system that is 
used to non-invasively program and adjust BAROSTIMTM therapy 
via telemetry. The BAROSTIMTM system is indicated for the 
improvement of symptoms of heart failure in a subset of patients with 
symptomatic New York Heart Association (NYHA) Class III or Class II 
(who had a recent history of Class III) heart failure, with a low left 
ventricular ejection fraction, who also do not benefit from guideline 
directed pharmacologic therapy or qualify for Cardiac Resynchronization 
Therapy (CRT). The BAROSTIMTM system was approved for new 
technology add-on payments for FY 2021 (85 FR 58716 through 58717) and 
FY 2022 (86 FR 44974). The new technology add-on payment was 
subsequently discontinued effective FY 2023 (87 FR 48916).
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48837 through 
48843), we discussed a request we received to reassign the ICD-10-PCS 
procedure codes that describe the implantation of the 
BAROSTIMTM system from MS-DRGs 252, 253, and 254 (Other 
Vascular Procedures with MCC, with CC, and without MCC respectively) to 
MS-DRGs 222, 223, 224, 225, 226, and 227 (Cardiac Defibrillator Implant 
with and without Cardiac Catheterization with and without AMI/HF/Shock 
with and without MCC, respectively). The requestor stated that the 
subset of patients that have an indication for the implantation of a 
BAROSTIMTM system also have indications for the implantation 
of Implantable Cardioverter Defibrillators (ICD), Cardiac 
Resynchronization Therapy Defibrillators (CRT-D) and/or Cardiac 
Contractility Modulation (CCM) devices, all of which also require the 
permanent implantation of a programmable, electrical pulse generator 
and at least one electrical lead. The requestor further stated that the 
average resource utilization required to implant the 
BAROSTIMTM system demonstrates a significant disparity 
compared to all procedures within MS-DRGs 252, 253, and 254.
    In the FY 2023 IPPS/LTCH PPS final rule, we stated that the results 
of the claims analysis demonstrated we did not have sufficient claims 
data on which to base and evaluate any proposed changes to the current 
MS-DRG assignment. We also expressed concern in equating the 
implantation of a BAROSTIMTM system to the placement of ICD, 
CRT-D, and CCM devices as these devices all differ in terms of 
technical complexity and anatomical placement of the electrical 
lead(s). We noted there is no intravascular component or vascular 
puncture involved when implanting a BAROSTIMTM system. In 
contrast, the placement of ICD, CRT-D, and CCM devices generally 
involve a lead being affixed to the myocardium, being threaded through 
the coronary sinus or crossing a heart valve and are procedures that 
involve a greater level of complexity than affixing the stimulator lead 
to either the right or left carotid sinus when implanting a 
BAROSTIMTM system. We stated that we believed that as the 
number of cases reporting procedure codes describing the implantation 
of neuromodulation devices for heart failure increases, a better view 
of the associated costs and lengths of stay on average will be 
reflected in the data for purposes of assessing any reassignment of 
these cases. Therefore, after consideration of the public comments we 
received, and for the reasons stated earlier, we finalized our proposal 
to maintain the assignment of cases reporting procedure codes that 
describe the implantation of a neuromodulation device in MS-DRGs 252, 
253, and 254 for FY 2023.
    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58712 through 
58720), we discussed a request we received to add ICD-10-CM diagnosis 
code R57.0 (Cardiogenic shock) to the list of ``secondary diagnoses'' 
that grouped to MS-DRGs 222 and 223 (Cardiac Defibrillator Implant with 
Cardiac Catheterization with Acute Myocardial Infarction (AMI), Heart 
Failure (HF), or Shock with and without MCC, respectively). During our 
review of the issue, we noted that the results of our claims analysis 
showed that in procedures involving a cardiac defibrillator implant, 
the average costs and length of stay were generally similar without 
regard to the presence of diagnosis codes describing AMI, HF, or shock. 
We stated we believed that it may no longer be necessary to subdivide 
MS-DRGs 222, 223, 224, 225, 226, and 227 based on the diagnosis codes 
reported. After consideration of the public comments we received, and 
for the reasons stated in the rule, we finalized our proposal to delete 
MS-DRGs 222, 223, 224, 225, 226, and 227. We also finalized our 
proposal to create new MS-DRG 275 (Cardiac Defibrillator Implant with 
Cardiac Catheterization and MCC), new MS-DRG 276 (Cardiac Defibrillator 
Implant with MCC) and new MS-DRG 277 (Cardiac Defibrillator Implant 
without MCC) in MDC 05 for FY 2024.
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
35959 through 35962), we received a similar request to again review the 
MS-DRG assignment of the ICD-10-PCS procedure codes that describe the 
implantation of the BAROSTIMTM system. Specifically, the 
requestor recommended that CMS consider reassigning the ICD-10-PCS 
procedure codes that describe the implantation of the 
BAROSTIMTM system from MS-DRGs 252, 253, and 254 (Other 
Vascular Procedures with MCC, with CC, and without MCC respectively) to 
MS-DRGs 275 (Cardiac Defibrillator Implant with Cardiac Catheterization 
and MCC), MS-DRG 276, and 277 (Cardiac Defibrillator Implant with MCC 
and without MCC respectively); or to other more clinically coherent MS-
DRGs for implantable device procedures indicated for Class III heart 
failure patients. The requestor stated in their analysis the number of 
claims reporting procedure codes that describe the implantation of the 
BAROSTIMTM system has been consistently growing over the 
past few years. The requestor acknowledged that the implantation of the 
BAROSTIMTM system is predominantly performed in the 
outpatient setting but noted that a significant number of severely sick 
patients with multiple comorbidities (such as chronic kidney disease, 
end stage renal disease (ESRD), chronic obstructive pulmonary disease 
(COPD), and AF) are treated in an inpatient setting. The requestor 
stated in their experience, hospitals that have performed 
BAROSTIMTM procedures have stopped allowing patients to 
receive the device in the inpatient setting due to the high losses for 
each Medicare claim. The requestor asserted it is critically important 
to allow very sick and fragile patients access to the 
BAROSTIMTM procedure in an inpatient setting and stated 
these patients should not be denied access by hospitals due to the 
perceived gross underpayment of the current MS-DRG.
    In the proposed rule we noted that the requestor stated the 
BAROSTIMTM procedure is not clinically coherent with other 
procedures assigned to MS-DRGs 252, 253, and 254 (Other Vascular 
Procedures) as the majority of the ICD-10-PCS codes assigned to MS-DRGs 
252, 253, and 254 describe procedures to identify, diagnose, clear and 
restructure veins and arteries, excluding those that require 
implantable devices. Furthermore, the requestor stated the costs of the 
implantable medical devices used for the BAROSTIMTM system 
(that is, the electrical pulse generator and electrical lead) alone far 
exceed the

[[Page 69023]]

average costs of other cases assigned to MS-DRGs 252, 253, and 254.
    The following ICD-10-PCS procedure codes uniquely identify the 
implantation of the BAROSTIMTM system: 0JH60MZ (Insertion of 
stimulator generator into chest subcutaneous tissue and fascia, open 
approach) in combination with 03HK3MZ (Insertion of stimulator lead 
into right internal carotid artery, percutaneous approach) or 03HL3MZ 
(Insertion of stimulator lead into left internal carotid artery, 
percutaneous approach).
    We stated in the proposed rule that to analyze this request, we 
first examined claims data from the September 2023 update of the FY 
2023 MedPAR file for MS-DRGs 252, 253, and 254 to identify cases 
reporting procedure codes describing the implantation of the 
BAROSTIMTM system with or without a procedure code 
describing the performance of a cardiac catheterization as MS-DRG 275 
is defined by the performance of cardiac catheterization and a 
secondary diagnosis of MCC. Our findings are shown in the following 
table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.015

    As shown in the table, in MS-DRG 252, we identified a total of 
18,964 cases with an average length of stay of 8 days and average costs 
of $30,456. Of those 18,964 cases, there was one case reporting 
procedure codes describing the implantation of the 
BAROSTIMTM system with a procedure code describing the 
performance of a cardiac catheterization with costs higher than the 
average costs in the FY 2023 MedPAR file for MS-DRG 252 ($110,928 
compared to $30,456) and a longer length of stay (9 days compared to 8 
days). There were 12 cases reporting procedure codes describing the 
implantation of the BAROSTIMTM system without a procedure 
code describing the performance of a cardiac catheterization, with 
average costs higher than the average costs in the FY 2023 MedPAR file 
for MS-DRG 252 ($66,291 compared to $30,456) and a slighter shorter 
average length of stay (7.8 days compared to 8 days). In MS-DRG 253, we 
identified a total of 15,551 cases with an average length of stay of 
5.2 days and average costs of $22,870. Of those 15,551 cases, there 
were seven cases reporting procedure codes describing the implantation 
of the BAROSTIMTM system without a procedure code describing 
the performance of a cardiac catheterization, with average costs higher 
than the average costs in the FY 2023 MedPAR file for MS-DRG 253 
($52,788 compared to $22,870) and a shorter average length of stay (4 
days compared to 5.2 days). We found zero cases in MS-DRG 253 reporting 
procedure codes describing the implantation of a BAROSTIMTM 
system with a procedure code describing the performance of a cardiac 
catheterization. In MS-DRG 254, we identified a total of 5,973 cases 
with an average length of stay of 2.3 days and average costs of 
$15,778. Of those 5,973 cases, there were three cases reporting 
procedure codes describing the implantation of the 
BAROSTIMTM system without a procedure code describing the 
performance of a cardiac catheterization, with average costs higher 
than the average costs in the FY 2023 MedPAR file for MS-DRG 254 
($29,740 compared to $15,778) and a shorter average length of stay (1.3 
days compared to 2.3 days). We found zero cases in MS-DRG 254 reporting 
procedure codes describing the implantation of a BAROSTIMTM 
system with a procedure code describing the performance of a cardiac 
catheterization.
    As stated in the proposed rule, we then examined claims data from 
the September 2023 update of the FY 2023 MedPAR file for MS-DRGs 275, 
276, and 277. Our findings are shown in the following table.

[[Page 69024]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.016

    As the table shows, for MS-DRG 275, there were a total of 3,358 
cases with an average length of stay of 10.3 days and average costs of 
$63,181. For MS-DRG 276, there were a total of 3,264 cases with an 
average length of stay of 8.2 days and average costs of $54,993. For 
MS-DRG 277, there were a total of 3,840 cases with an average length of 
stay of 4.2 days and average costs of $42,111.
    In exploring mechanisms to address this request, in the proposed 
rule we noted in total, there were only 23 cases reporting procedure 
codes describing the implantation of a BAROSTIMTM system in 
MS-DRGs 252, 253, and 254 (13, 7, and 3, respectively). We stated we 
reviewed these data, and stated while we recognize that the average 
costs of the 23 cases reporting procedure codes describing the 
implantation of a BAROSTIMTM are greater when compared to 
the average costs of all cases in MS-DRGs 252, 253, and 254, the number 
of cases continued to be too small to warrant the creation of a new MS-
DRG for these cases.
    In the proposed rule we further noted, that of the 23 cases 
reporting procedure codes describing the implantation of a 
BAROSTIMTM system identified in MS-DRGs 252, 253, and 254, 
only one case reported the performance of cardiac catheterization. As 
discussed in the FY 2024 IPPS/LTCH PPS final rule, when reviewing the 
consumption of hospital resources for the cases reporting a cardiac 
defibrillator implant with cardiac catheterization during a hospital 
stay, the claims data clearly showed that the cases reporting secondary 
diagnoses designated as MCCs were more resource intensive as compared 
to other cases reporting cardiac defibrillator implant. Therefore, we 
finalized the creation of MS-DRG 275 for cases reporting a cardiac 
defibrillator implant with cardiac catheterization and a secondary 
diagnosis designated as an MCC. In the proposed rule we stated that of 
the 23 cases reporting procedure codes describing the implantation of a 
BAROSTIMTM system, there was only one case reporting a 
procedure code describing the performance of cardiac catheterization 
and a secondary diagnosis designated as an MCC, and we noted that there 
may have been other factors contributing to the higher costs of this 
one case. We stated that the results of the claims analysis 
demonstrated we did not have sufficient claims data on which to base 
and propose a change to the current MS-DRG assignment of cases 
reporting procedure codes describing the implantation of a 
BAROSTIMTM system from MS-DRGs 252, 253, and 254 to MS-DRG 
275.
    As stated in the proposed rule, further analysis of the claims data 
demonstrated that the 23 cases reporting procedure codes describing the 
implantation of a BAROSTIMTM system had an average length of 
stay of 5.8 days and average costs of $59,355, as compared to the 3,264 
cases in MS-DRG 276 that had an average length of stay of 8.2 days and 
average costs of $54,993. We stated that while the cases reporting 
procedure codes describing the implantation of a BAROSTIMTM 
system had average costs that were $4,362 higher than the average costs 
of all cases in MS-DRG 276, as noted, there were only a total of 23 
cases, and there may have been other factors contributing to the higher 
costs. In the proposed rule we noted, however, if we were to reassign 
all cases reporting procedure codes describing the implantation of a 
BAROSTIMTM system to MS-DRG 276, even if there is not a MCC 
present, the cases would receive higher payment and the reassignment 
could better account for the differences in resource utilization of 
these cases than in their respective MS-DRG.
    In the proposed rule we stated we reviewed the clinical issues and 
the claims data, and while we continue to note that there is no 
intravascular component or vascular puncture involved when implanting a 
BAROSTIMTM system, and that the implantation of a 
BAROSTIMTM system is distinguishable from the placement of 
ICD, CRT-D, and CCM devices, as these devices all differ in terms of 
technical complexity and anatomical placement of the electrical 
lead(s), as discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
48837 through 48843), we agreed that ICD, CRT-D, and CCM devices and 
the BAROSTIMTM system are clinically coherent in that they 
share an indication of heart failure, a major cause of morbidity and 
mortality in the United States, and that these cases demonstrate 
comparable resource utilization. Based on our review of the clinical 
issues and the claims data, and to better account for the resources 
required, we proposed to reassign the cases reporting procedure codes 
describing the implantation of a BAROSTIMTM system to MS-DRG 
276, even if there is no MCC reported, to better reflect the clinical 
severity and resource use involved in these cases.
    Therefore, for FY 2025, we proposed to reassign all cases with one 
of the following ICD-10-PCS code combinations capturing cases reporting 
procedure codes describing the implantation of a BAROSTIMTM 
system, to MS-DRG 276, even if there is no MCC reported:
     0JH60MZ (Insertion of stimulator generator into chest 
subcutaneous tissue and fascia, open approach) in combination with 
03HK3MZ (Insertion of stimulator lead into right internal carotid 
artery, percutaneous approach); and
     0JH60MZ (Insertion of stimulator generator into chest 
subcutaneous tissue and fascia, open approach) in combination with 
03HL3MZ (Insertion of stimulator lead into left internal carotid 
artery, percutaneous approach).
    We also proposed to change the title of MS-DRG 276 from ``Cardiac 
Defibrillator Implant with MCC'' to ``Cardiac Defibrillator Implant 
with MCC or Carotid Sinus Neurostimulator'' to reflect the proposed 
modifications to MS-DRG assignments. We refer the reader to section 
II.C.15. of the preamble of this final rule for the discussion of the 
surgical hierarchy and the complete list of our proposed modifications 
to the surgical hierarchy as well as our finalization of those 
proposals.
    Comment: Commenters expressed overwhelming support for the proposal 
to reassign cases reporting a procedure code combination describing the 
implantation of a BAROSTIMTM system to MS-DRG 276, even if 
there is no MCC reported. Commenters also expressed support for the 
proposal to change the title of MS-DRG 276 from ``Cardiac Defibrillator 
Implant with MCC'' to ``Cardiac Defibrillator Implant with MCC or 
Carotid Sinus Neurostimulator'' to reflect the proposed modifications 
to MS-DRG assignments. Many commenters stated this reassignment would 
ensure continued access of this very important therapy to eligible 
Medicare patients. A commenter specifically stated that assignment to 
MS-DRG 276 is appropriate on a clinical basis and would also better 
account for the differences in resource

[[Page 69025]]

utilization of these cases as compared to their current assignments.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to reassign cases reporting one of the 
previously listed ICD-10-PCS code combinations describing the 
implantation of a BAROSTIMTM system to MS-DRG 276, even if 
there is no MCC reported, without modification, effective October 1, 
2024, for FY 2025. We are also finalizing the change to the title of 
MS-DRG 276 from ``Cardiac Defibrillator Implant with MCC'' to ``Cardiac 
Defibrillator Implant with MCC or Carotid Sinus Neurostimulator'' to 
reflect the modifications to MS-DRG assignments.
c. Endovascular Cardiac Valve Procedures
    The human heart contains four major valves--the aortic, mitral, 
pulmonary, and tricuspid valves. These valves function to keep blood 
flowing through the heart. When conditions such as stenosis or 
insufficiency/regurgitation occur in one or more of these valves, 
valvular heart disease may result. Intervention options, including 
surgical aortic valve replacement or transcatheter aortic valve 
replacement can be performed to treat diseased or damaged aortic heart 
valves. Surgical aortic valve replacement (SAVR) is a traditional, 
open-chest surgery where an incision is made to access the heart. The 
damaged valve is replaced, and the chest is surgically closed. Since 
SAVR is a major surgery that involves an incision, recovery time tends 
to be longer. Transcatheter aortic valve replacement (TAVR) is a 
minimally invasive procedure that involves a catheter being inserted 
into an artery, without an incision for most cases, and then guided to 
the heart. The catheter delivers the new valve without the need for the 
chest or heart to be surgically opened. Since TAVR is a non-surgical 
procedure, it is generally associated with a much shorter recovery 
time.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49892 through 
49893), we discussed a request we received to create a new MS-DRG that 
would only include the various types of cardiac valve replacements 
performed by an endovascular or transcatheter technique. We reviewed 
the claims data and stated the data analysis showed that cardiac valve 
replacements performed by an endovascular or transcatheter technique 
had a shorter average length of stay and higher average costs in 
comparison to all of the cases in their assigned MS-DRGs, which were 
MS-DRGs 216, 217, 218, 219, 220, and 221 (Cardiac Valve & Other Major 
Cardiothoracic Procedure with and without Cardiac Catheterization, with 
MCC, with CC, and without CC/MCC, respectively). In the FY 2015 IPPS/
LTCH PPS final rule we stated that patients receiving endovascular 
cardiac valve replacements were significantly different from those 
patients who undergo an open chest cardiac valve replacement and noted 
that patients receiving endovascular cardiac valve replacements are not 
eligible for open chest cardiac valve procedures because of a variety 
of health constraints, which we stated highlights the fact that peri-
operative complications and post-operative morbidity have significantly 
different profiles for open chest procedures compared with endovascular 
interventions. We further noted that separately grouping these 
endovascular valve replacement procedures provides greater clinical 
cohesion for this subset of high-risk patients. Therefore, we finalized 
our proposal to create MS-DRGs 266 and 267 (Endovascular Cardiac Valve 
Replacement, with MCC and without MCC, respectively) for FY 2015.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42080 through 
42089), we discussed a request we received to modify the MS-DRG 
assignment for transcatheter mitral valve repair (TMVR) with implant 
procedures. We reviewed the claims data and stated based on our data 
analysis, transcatheter cardiac valve repair procedures and 
transcatheter (endovascular) cardiac valve replacement procedures are 
more clinically coherent in that they describe endovascular cardiac 
valve interventions with implants and were similar in terms of average 
length of stay and average costs to cases in MS-DRGs 266 and 267 when 
compared to other procedures in their current MS-DRG assignment. For 
the reasons described in the rule and after consideration of the public 
comments we received, we finalized our proposal to modify the structure 
of MS-DRGs 266 and 267 by reassigning the procedure codes that describe 
transcatheter cardiac valve repair (supplement) procedures, to revise 
the title of MS-DRG 266 from ``Endovascular Cardiac Valve Replacement 
with MCC'' to ``Endovascular Cardiac Valve Replacement and Supplement 
Procedures with MCC'' and to revise the title of MS-DRG 267 from 
``Endovascular Cardiac Valve Replacement without MCC'' to 
``Endovascular Cardiac Valve Replacement and Supplement Procedures 
without MCC'', to reflect the finalized restructuring.
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
35962 through 35966), we received a request to delete MS-DRGs 266 and 
267 and to move the cases reporting transcatheter aortic valve 
replacement or repair (supplement) procedures currently assigned to 
those MS-DRGs into MS-DRGs 216, 217, 218, 219, 220, and 221. The 
requestor asserted that under the current IPPS payment methodology, 
TAVR procedures are not profitable to hospitals and when patients are 
clinically eligible for both a TAVR and SAVR procedures, factors beyond 
clinical appropriateness can drive treatment decisions. According to 
the requestor (the manufacturer of the SAPIENTM family of 
transcatheter heart valves) sharing a single set of MS-DRGs would 
eliminate the current disincentives hospitals face and create financial 
neutrality between the two lifesaving treatment options. The requestor 
stated the current disincentives are increasingly problematic because 
they contribute to treatment disparities among certain racial, 
socioeconomic, and geographic groups.
    As discussed in the proposed rule, the requestor noted that 
currently surgical cardiac valve replacement and supplement procedures, 
such as SAVR, are assigned to MS-DRGs 216, 217, 218, 219, 220, and 221, 
and endovascular cardiac valve replacement and supplement procedures, 
such as TAVR, are assigned to MS-DRGs 266 and 267. The requestor stated 
that both sets of MS-DRGs address valve disease and include valve 
repair or replacement procedures for any of the four heart valves. 
According to the requestor, while the sets of MS-DRGs involve 
clinically similar cases their payment rates differ which may be 
unintentionally influencing clinical decision-making by incentivizing 
hospitals to choose more invasive SAVR procedures over less-invasive 
TAVR procedures.
    As mentioned earlier, the requestor recommended that CMS delete MS-
DRGs 266 and 267 and move the cases reporting transcatheter aortic 
valve replacement or repair (supplement) procedures currently assigned 
to those MS-DRGs into MS-DRGs 216, 217, 218, 219, 220, and 221. We 
stated in the proposed rule that the requestor performed its own 
analysis and stated that the models of this suggested solution 
indicated the change would result in moderate differences in per case 
payments by case type and would

[[Page 69026]]

not increase overall Medicare spending. The requestor noted that while 
their requested solution would potentially decrease payment to cases 
currently assigned to MS-DRGs 216, 217, 218, 219, 220, and 221, while 
at the same time increasing the payment to cases reporting endovascular 
cardiac valve replacement and supplement procedures, the results of 
their claim analysis demonstrated that the net difference in total 
payments across all cases would increase by approximately $6.5 million. 
The requestor stated that they anticipate that their proposed solution 
could increase Medicare patients' access to innovative endovascular 
cardiac valve procedures by establishing payment neutrality between 
SAVR and TAVR procedures.
    As discussed in the proposed rule, we reviewed this request and 
noted the requestor was correct that in Version 41.1 cases reporting 
procedure codes that describe endovascular cardiac valve replacement 
and supplement procedures, including TAVR, group to MS-DRGs 266 and 
267. We stated that the requestor was also correct that cases reporting 
procedure codes that describe surgical cardiac valve replacement and 
supplement procedures, including SAVR, group to MS-DRGs 216, 217, 218, 
219, 220, and 221. We refer the reader to the ICD-10 MS-DRG Definitions 
Manual Version 41.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete 
documentation of the GROUPER logic for MS-DRGs 216, 217, 218, 219, 220, 
221, 266, and 267.
    As discussed in the proposed rule, to begin our analysis, we 
identified the ICD-10-PCS procedure codes that describe endovascular 
(transcatheter) cardiac valve replacement and supplement procedures and 
the ICD-10-PCS procedure codes that describe surgical cardiac valve 
replacement and supplement procedures. We also identified the ICD-10-
PCS codes that describe cardiac catheterization, as MS-DRGs 216, 217, 
and 218 (Cardiac Valve and Other Major Cardiothoracic Procedures with 
Cardiac Catheterization with MCC, with CC, and without CC/MCC, 
respectively) are defined by the performance of cardiac 
catheterization. We refer the reader to Table 6P.2a, Table 6P.2b, and 
Table 6P.2c, respectively, associated with the proposed rule and this 
final rule (available at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps) for the lists of the 
ICD-10-PCS procedure codes that we identified that describe 
endovascular cardiac valve replacement and supplement procedures, 
surgical cardiac valve replacement and supplement procedures, and 
cardiac catheterization procedures.
    As discussed in the proposed rule, we then examined the claims data 
from the September 2023 update of the FY 2023 MedPAR file for all cases 
in MS-DRGs 216, 217, 218, 219, 220, and 221 and compared the results to 
cases reporting surgical cardiac valve replacement and supplement 
procedures in MS-DRG 216, 217, 218, 219, 220, and 221. The following 
table shows our findings:
[GRAPHIC] [TIFF OMITTED] TR28AU24.017

    As shown in the table, in MS-DRG 216, we identified a total of 
5,033 cases with an average length of stay of 13.9 days and average 
costs of $84,176. Of those 5,033 cases, there were 2,973 cases 
reporting surgical cardiac valve replacement and supplement procedures, 
with average costs higher than the average costs in the FY 2023 MedPAR 
file for MS-DRG 216 ($87,497 compared to $84,176) and a longer average 
length of stay (16.8 days compared to 13.9 days). In MS-DRG 217, we 
identified a total of 1,635 cases with an average length of stay of 7.2 
days and average costs of $58,381. Of those 1,635 cases, there were 867 
cases reporting surgical cardiac valve replacement and supplement 
procedures, with average costs lower than the average costs in the FY 
2023 MedPAR file for MS-DRG 217 ($56,829 compared to $58,381) and a 
longer average length of stay (9.5 days compared to 7.2 days). In MS-
DRG 218, we identified a total of 275 cases with an average length of 
stay of 3.4 days and average costs of $54,624. Of those 275 cases, 
there were 60 cases reporting surgical cardiac valve replacement and 
supplement procedures, with average costs lower than the average costs 
in the FY 2023 MedPAR file for MS-DRG 218 ($45,096 compared to $54,624) 
and a longer average length of stay (6.7 days compared to 3.4 days). In 
MS-DRG 219, we identified a total of 12,458 cases with an average 
length of stay of 10.5 days and average costs of $67,228. Of those 
12,458 cases, there were 9,780 cases reporting surgical cardiac valve 
replacement and supplement procedures, with average costs lower than 
the average costs in the FY 2023 MedPAR file for MS-DRG 219 ($64,954

[[Page 69027]]

compared to $67,228), and a slightly shorter average length of stay 
(10.3 days compared to 10.5 days). In MS-DRG 220, we identified a total 
of 9,829 cases with an average length of stay of 6.3 days and average 
costs of $47,242. Of those 9,829 cases, there were 7,841 cases 
reporting surgical cardiac valve replacement and supplement procedures, 
with average costs lower than the average costs in the FY 2023 MedPAR 
file for MS-DRG 220 ($46,245 compared to $47,242)and a slightly longer 
average length of stay (6.4 days compared to 6.3 days). In MS-DRG 221, 
we identified a total of 1,242 cases with an average length of stay of 
3.8 days and average costs of $41,539. Of those 1,242 cases, there were 
627 cases reporting surgical cardiac valve replacement and supplement 
procedures, with average costs lower than the average costs in the FY 
2023 MedPAR file for MS-DRG 221 ($39,081 compared to $41,539) and a 
longer average length of stay (4.9 days compared to 3.8 days).
    Next, as discussed in the proposed rule, we examined claims data 
from the September 2023 update of the FY 2023 MedPAR file for MS-DRGs 
266 and 267. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.018

    As noted in the proposed rule, because there is a two-way split 
within MS-DRGs 266 and 267 and there is a three-way split within MS-
DRGs 216, 217, and 218, and MS-DRGs 219, 220, and 221 (Cardiac Valve 
and Other Major Cardiothoracic Procedures without Cardiac 
Catheterization with MCC, with CC, and without CC/MCC, respectively), 
we also analyzed the cases reporting a code describing an endovascular 
cardiac valve replacement and supplement procedure with a procedure 
code describing the performance of a cardiac catheterization for the 
presence or absence of a secondary diagnosis designated as a 
complication or comorbidity (CC) or a major complication or comorbidity 
(MCC). We also analyzed the cases reporting a code describing an 
endovascular cardiac valve replacement and supplement procedure without 
a procedure code describing the performance of a cardiac 
catheterization for the presence or absence of a secondary diagnosis 
designated as a CC or an MCC.
[GRAPHIC] [TIFF OMITTED] TR28AU24.019

    As shown in the table, the data analysis performed indicates that 
the 5,443 cases in MS-DRG 266 reporting endovascular cardiac valve 
replacement and supplement procedures with a procedure code describing 
the performance of a cardiac catheterization, and with a secondary 
diagnosis code designated as an MCC have an average length of stay that 
is shorter than the average length of stay (7.9 days versus 16.8 days) 
and lower average costs ($63,128 versus $87,497) when compared to the 
cases in MS-DRG 216 reporting surgical cardiac valve replacement and 
supplement procedures with a procedure code describing the performance 
of a cardiac catheterization, and with a secondary diagnosis code 
designated as an MCC. The 4,761 cases in MS-DRG 267 reporting 
endovascular cardiac valve replacement and supplement procedures with a 
procedure code describing the performance of a cardiac catheterization, 
and with a secondary diagnosis code designated as a CC have an average 
length of stay that is shorter than the average length of stay (2 days 
versus 9.5 days) and lower average costs ($42,163 versus $56,829) when 
compared to the cases in MS-DRG 217 reporting surgical cardiac valve 
replacement and supplement procedures with a procedure code describing 
the performance of a cardiac catheterization, and with a secondary 
diagnosis code designated as an CC. The 1,386 cases in MS-DRG 267 
reporting

[[Page 69028]]

endovascular cardiac valve replacement and supplement procedures with a 
procedure code describing the performance of a cardiac catheterization, 
and without a secondary diagnosis code designated as a CC or MCC have 
an average length of stay that is shorter than the average length of 
stay (1.3 days versus 6.7 days) and lower average costs ($39,709 versus 
$45,096) when compared to the cases in MS-DRG 218 reporting surgical 
cardiac valve replacement and supplement procedures with a procedure 
code describing the performance of a cardiac catheterization, without a 
secondary diagnosis code designated as a CC or MCC.
    The 14,493 cases in MS-DRG 266 reporting endovascular cardiac valve 
replacement and supplement procedures without a procedure code 
describing the performance of a cardiac catheterization, and with a 
secondary diagnosis code designated as an MCC have an average length of 
stay that is shorter than the average length of stay (3.5 days versus 
10.3 days) and lower average costs ($50,831 versus $64,954) when 
compared to the cases in MS-DRG 219 reporting surgical cardiac valve 
replacement and supplement procedures without a procedure code 
describing the performance of a cardiac catheterization, and with a 
secondary diagnosis code designated as an MCC. The 22,996 cases in MS-
DRG 267 reporting endovascular cardiac valve replacement and supplement 
procedures without a procedure code describing the performance of a 
cardiac catheterization, and with a secondary diagnosis code designated 
as a CC have an average length of stay that is shorter than the average 
length of stay (1.5 days versus 6.4 days) and lower average costs 
($43,637 versus $46,245) when compared to the cases in MS-DRG 220 
reporting surgical cardiac valve replacement and supplement procedures 
without a procedure code describing the performance of a cardiac 
catheterization, and with a secondary diagnosis code designated as an 
CC. The 7,522 cases in MS-DRG 267 reporting endovascular cardiac valve 
replacement and supplement procedures without a procedure code 
describing the performance of a cardiac catheterization, and without a 
secondary diagnosis code designated as a CC or MCC have an average 
length of stay that is shorter than the average length of stay (1.2 
days versus 4.9 days) and higher average costs ($42,472 versus $39,081) 
when compared to the cases in MS-DRG 221 reporting surgical cardiac 
valve replacement and supplement procedures without a procedure code 
describing the performance of a cardiac catheterization, without a 
secondary diagnosis code designated as a CC or MCC.
    We stated in the proposed rule that this data analysis shows the 
cases in MS-DRG 266 and 267 reporting endovascular cardiac valve 
replacement and supplement procedures with a procedure code describing 
the performance of a cardiac catheterization when distributed based on 
the presence or absence of a secondary diagnosis designated as a CC or 
a MCC have average costs lower than the average costs of cases 
reporting surgical cardiac valve replacement and supplement procedures 
with a procedure code describing the performance of a cardiac 
catheterization in the FY 2023 MedPAR file for MS-DRGs 216, 217, and 
218 respectively, and the average lengths of stay are shorter. 
Similarly, the cases in MS-DRG 266 and 267 reporting endovascular 
cardiac valve replacement and supplement procedures without a procedure 
code describing the performance of a cardiac catheterization when 
distributed based on the presence or absence of a secondary diagnosis 
designated as a CC or a MCC generally have average costs lower than the 
average costs of cases reporting surgical cardiac valve replacement and 
supplement procedures without a procedure code describing the 
performance of a cardiac catheterization in the FY 2023 MedPAR file for 
MS-DRGs 219, 220, and 221 respectively, and the average lengths of stay 
are shorter.
    We stated in the proposed rule that for patients with an indication 
for cardiac valve replacement, clinical and anatomic factors must be 
considered when decision-making between procedures such as TAVR and 
SAVR. We noted that SAVR is not a treatment option for patients with 
extreme surgical risk (that is, high probability of death or serious 
irreversible complication), severe atheromatous plaques of the 
ascending aorta such that aortic cross-clamping is not feasible, or 
with other conditions that would make operation through sternotomy or 
thoracotomy prohibitively hazardous. We stated that we agreed that the 
endovascular or transcatheter technique presents a viable option for 
high-risk patients who are not candidates for the traditional open 
surgical approach, however we also noted that TAVR is not indicated for 
every patient. TAVR is contraindicated in patients who cannot tolerate 
an anticoagulation/antiplatelet regimen, or who have active bacterial 
endocarditis or other active infections, or who have significant 
annuloplasty ring dehiscence.
    In the proposed rule, we stated we had concern with the assertion 
that clinicians perform more invasive surgical procedures, such as SAVR 
procedures, only to increase payment to their facility where minimally 
invasive TAVR procedures are also viable option. The choice of SAVR 
versus TAVR should not be based on potential facility payment. Instead, 
the decision on the procedural approach to be utilized should be based 
upon an individualized risk-benefit assessment that includes reviewing 
factors such as the patient's age, surgical risk, frailty, valve 
morphology, and presence of concomitant valve disease or coronary 
artery disease. As we have stated in prior rulemaking (83 FR 41201), it 
is not appropriate for facilities to deny treatment to beneficiaries 
needing a specific type of therapy or treatment that involves increased 
costs. Conversely, it is not appropriate for facilities to recommend a 
specific type of therapy or treatment strictly because it may involve 
higher payment to the facility.
    Also, we stated we had concern with the requestor's assertion that 
sharing a single set of MS-DRGs could eliminate any perceived 
disincentives hospitals may face and create financial neutrality 
between the two lifesaving treatment options. In the proposed rule, we 
noted that the data analysis shows that cases reporting surgical 
cardiac valve replacement and supplement procedures have higher costs 
and longer lengths of stay. We stated that if clinical decision-making 
is being driven by financial motivations, as suggested by the 
requestor, in circumstances where the decision on which approach is 
best (for example, TAVR or SAVR) is left to the providers' discretion, 
it is unclear how reducing payment for surgical cardiac valve 
replacement and supplement procedures would eliminate possible 
disincentives, or not have the opposite effect, and instead incentivize 
endovascular cardiac valve replacement and supplement procedures.
    As discussed in the proposed rule, the MS-DRGs are a classification 
system intended to group together diagnoses and procedures with similar 
clinical characteristics and utilization of resources and are not 
intended to be utilized as a tool to incentivize the performance of 
certain procedures. When performed, surgical cardiac valve replacement 
and supplement procedures are clinically different from endovascular 
cardiac valve replacement and supplement procedures in terms of 
technical complexity and hospital

[[Page 69029]]

resource use. In the FY 2015 IPPS/LTCH PPS final rule, we stated that 
separately grouping endovascular valve replacement procedures provides 
greater clinical cohesion for this subset of high-risk patients. In the 
FY 2025 IPPS/LTCH PPS proposed rule, we stated our claims analysis 
demonstrates that this continues to be substantiated by the difference 
in average costs and average lengths of stay demonstrated by the two 
cohorts. We stated we continue to believe that endovascular cardiac 
valve replacement and supplement procedures are clinically coherent in 
their currently assigned MS-DRGs. Therefore, we proposed to maintain 
the structure of MS-DRGs 266 and 267 for FY 2025.
    Comment: Many commenters expressed support for the proposal to 
maintain the structure of MS-DRGs 266 and 267 for FY 2025. A commenter 
stated it is unclear why the requestor would imply that there is any 
type of bias in patient selection of surgical cardiac valve replacement 
and repair procedures over endovascular cardiac valve replacement and 
supplement procedures, and stated in their experience, the decision to 
perform endovascular or surgical cardiac valve replacement and 
supplement procedures is typically made by the heart team based on the 
patient's individualized risk-benefit and associated factors such as 
the patient's age, surgical risk, frailty, valve morphology, and 
presence of concomitant valve disease or coronary artery disease. A 
commenter specifically stated while they firmly believe that procedures 
such as TAVR should be paid at a rate that makes them efficacious for 
hospitals to perform, given the analysis provided by CMS, the requested 
MS-DRG modification may not be the best path to this end. Another 
commenter stated they agreed with CMS that although both types of 
cardiac valve interventions treat the same type of disease, the work 
and resource utilization associated with the procedures is 
significantly different and noted that surgical cardiac replacement or 
repair procedures typically require more resources such as increased 
operating room time, additional supportive staff for the procedure and 
longer lengths of stay. Another commenter stated in addition to the 
important points that CMS made in the proposed rule regarding the lack 
of cost coherence between TAVR and SAVR procedures, in their own 
analysis, the impact of moving TAVR cases into MS-DRGs 216, 217, 218, 
219, 220, and 221 (Cardiac Valve & Other Major Cardiothoracic Procedure 
with and without Cardiac Catheterization, with MCC, with CC, and 
without CC/MCC, respectively) would cause a 12 percent decrease in 
average costs and a 9 percent decrease in relative weight in MS-DRGs 
216, 217, 218, 219, 220, and 221.
    Response: We appreciate the commenters' support and feedback.
    Comment: A commenter (the requestor) disagreed with the proposal to 
maintain the structure of MS-DRGs 266 and 267 and stated appropriate 
payment under the IPPS is critical to improving access to TAVR 
procedures for all eligible patients and ensuring timely access to 
valve replacement therapies. This commenter stated they continue to 
maintain that incentives for valve replacement procedures strongly 
favor SAVR over TAVR due to the payment differential between the two 
procedures. While acknowledging that SAVR cases have increased clinical 
labor and indirect costs, the commenter again asserted that merging the 
procedures into a single set of MS-DRGs would establish better 
financial neutrality between the procedure options by creating more 
similarity between TAVR and SAVR contribution margins as hospitals 
measure per-case profitability. Lastly, the commenter noted in their 
own analysis, payment rates for MS-DRGs 266 and 267 have declined 
approximately 6 percent from 2022 to 2025, while the payments rates for 
MS-DRGs 216, 217, 218, 219, 220, and 221 have increased by 8 percent in 
the same time frame and stated that the years of declining TAVR payment 
rates while SAVR payment rates increased do influence hospital 
decisions about whether to expand their structural heart programs to 
include TAVR procedures, particularly in hospitals located in 
geographic areas with low wage indexes.
    Response: We appreciate the commenter's feedback. With respect to 
changes in payment rates in the referenced MS-DRGs, each year we 
calculate the relative weights by dividing the average cost for cases 
within each MS-DRG by the average cost for cases across all MS-DRGs. We 
believe any weight changes observed by the commenter over time to be 
appropriately driven by the underlying data in the years since CMS 
began using the ICD-10 data in calculating the relative weights. We 
also note that over the past five years, there have been changes to the 
hierarchy and structure of certain MS-DRGs in MDC 05. It is to be 
expected that when MS-DRGs are restructured, such as when procedure 
codes are reassigned or the hierarchy within an MDC is revised, 
resulting in a different case-mix within the MS-DRGs, the relative 
weights of the MS-DRGs will change as a result. Therefore, the data 
appear to reflect that the differences in the relative weights 
reflected in Table 5-List of Medicare Severity Diagnosis Related Groups 
(MS-DRGs), Relative Weighting Factors, and Geometric and Arithmetic 
Mean Length of Stay associated with the final rule for each applicable 
fiscal year can be attributed to the fact that the finalization of 
these proposals resulted in a different case-mix within the MS-DRGs, 
which is then being reflected in the relative weights. We refer readers 
to section II.D.2. of the preamble of this final rule for a discussion 
of the relative weight calculations.
    As stated in prior rulemaking (88 FR 58730), the MS-DRGs were 
developed as a patient classification scheme consisting of patients who 
are similar clinically and with regard to their consumption of hospital 
resources. While all patients are unique, groups of patients have 
diagnostic and therapeutic attributes in common that determine their 
level of resource intensity. Similar resource intensity means that the 
resources used are relatively consistent across the patients in each 
MS-DRG. When performed, surgical cardiac valve replacement and 
supplement procedures are clinically different from endovascular 
cardiac valve replacement and supplement procedures in terms of 
technical complexity and hospital resource use. We continue to believe 
that endovascular cardiac valve replacement and supplement procedures 
are clinically coherent in their currently assigned MS-DRGs.
    As stated earlier, the MS-DRGs are not intended to be utilized as a 
tool to incentivize the performance of certain procedures. As we have 
stated in prior rulemaking, we rely on providers to assess the needs of 
their patients and provide the most appropriate treatment. It is not 
appropriate for facilities to deny treatment to beneficiaries needing a 
specific type of therapy or treatment that potentially involves 
increased costs (86 FR 44847). It would also not be appropriate to 
consider modifications to the MS-DRG assignment of cases reporting the 
performance of a specific procedure solely as an incentive for 
providers to perform one procedure over another.
    Therefore, after consideration of the public comments we received, 
and for the reasons stated earlier, we are finalizing our proposal to 
maintain the structure of MS-DRGs 266 and 267, without modification, 
for FY 2025.

[[Page 69030]]

d. MS-DRG Logic for MS-DRG 215
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 35966 through 
35968), we discussed a request we received to review the GROUPER logic 
for MS-DRG 215 (Other Heart Assist System Implant) in MDC 05 (Diseases 
and Disorders of the Circulatory System). The requestor stated that 
when the procedure code describing the revision of malfunctioning 
devices within the heart via an open approach is assigned, the 
encounter groups to MS-DRG 215. The requestor stated that, in their 
observation, ICD-10-PCS code 02WA0JZ (Revision of synthetic substitute 
in heart, open approach) can only be assigned if a more specific 
anatomical site is not documented in the operative note. The requestor 
further stated they interpreted this to mean that an ICD-10-PCS 
procedure code describing the open revision of a synthetic substitute 
in the heart can only apply to the ventricular wall or left atrial 
appendage and excludes the atrial or ventricular septum or any valve to 
qualify for MS-DRG 215 and recommended that CMS consider the expansion 
of the open revision of heart structures to include the atrial or 
ventricular septum and heart valves.
    In the proposed rule we stated that to begin our analysis, we 
reviewed the GROUPER logic. We stated that the requestor is correct 
that ICD-10-PCS procedure code 02WA0JZ is currently one of the listed 
procedure codes in the GROUPER logic for MS-DRG 215. While the 
requestor stated that when procedures codes describing the revisions of 
malfunctioning devices within the heart via an open approach are 
assigned, the encounter groups to MS-DRG 215, we stated we wished to 
clarify that the revision codes listed in the GROUPER logic for MS-DRG 
215 specifically describe procedures to correct, to the extent 
possible, a portion of a malfunctioning heart assist device or the 
position of a displaced heart assist device. Further, we stated it was 
unclear what was meant by the requestor's statement that ICD-10-PCS 
code 02WA0JZ can only be assigned if more specific anatomical site is 
not documented in the operative note, as ICD-10-PCS code 02WA0JZ is 
used to describe the open revision of artificial heart systems. We 
noted that total artificial hearts are pulsating bi-ventricular devices 
that are implanted into the chest to replace a patient's left and right 
ventricles and can provide a bridge to heart transplantation for 
patients who have no other reasonable medical or surgical treatment 
options. We refer the reader to the ICD-10 MS-DRG Definitions Manual 
Version 41.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete documentation of the 
GROUPER logic for MS-DRG 215. We encouraged the requestor and any 
providers that have cases involving heart assist devices for which they 
need ICD-10 coding assistance and clarification on the usage of the 
codes, to submit their questions to the American Hospital Association's 
Central Office on ICD-10 at https://www.codingclinicadvisor.com/.
    As previously noted, as discussed in the proposed rule, the 
requestor recommended that we consider expansion of the open revision 
of heart structures to include the atrial or ventricular septum and 
heart valves. The requestor did not provide a specific list of 
procedure codes involving the open revision of heart structures. While 
not explicitly stated, we stated we understood this request to be for 
our consideration of the reassignment of the procedure codes describing 
the open revision of devices in the heart valves, atrial septum, or 
ventricular septum to MS-DRG 215, therefore, we stated we reviewed the 
ICD-10-PCS classification and identified the following 18 procedure 
codes. These 18 codes are all assigned to MS-DRGs 228 and 229 (Other 
Cardiothoracic Procedures with and without MCC, respectively) in MDC 05 
in Version 41.1.
[GRAPHIC] [TIFF OMITTED] TR28AU24.020

    Next, in the proposed rule we stated we examined claims data from 
the September 2023 update of the FY 2023 MedPAR file for MS-DRG 228 and 
229 to identify cases reporting one of the 18 codes listed previously 
that describe the open revision of devices in the heart valves, atrial 
septum, or ventricular septum. Our findings are shown in the following 
table:

[[Page 69031]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.021

    As shown in the table, in MS-DRG 228, we identified a total of 
4,391 cases with an average length of stay of 8.7 days and average 
costs of $44,565. Of those 4,391 cases, there were 12 cases reporting a 
procedure code describing the open revision of devices in the heart 
valves, atrial septum, or ventricular septum, with average costs higher 
than the average costs in the FY 2023 MedPAR file for MS-DRG 228 
($51,549 compared to $44,565) and a longer average length of stay (15.7 
days compared to 8.7 days). In MS-DRG 229, we identified a total of 
5,712 cases with an average length of stay of 3.3 days and average 
costs of $28,987. Of those 5,712 cases, there was one case reporting a 
procedure code describing the open revision of devices in the heart 
valves, atrial septum, or ventricular septum with costs lower than the 
average costs in the FY 2023 MedPAR file for MS-DRG 229 ($11,322 
compared to $28,987) and a shorter length of stay (1 day compared to 
3.3 days).
    We stated we then examined claims data from the September 2023 
update of the FY 2023 MedPAR for MS-DRG 215. Our findings are shown in 
the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.022

    In the proposed rule we stated our analysis indicates that the 
cases assigned to MS-DRG 215 have much higher average costs than the 
cases reporting a procedure code describing the open revision of 
devices in the heart valves, atrial septum, or ventricular septum 
currently assigned to MS-DRGs 228 and 229. Instead, the average costs 
and average length of stay for case reporting a procedure code 
describing the open revision of devices in the heart valves, atrial 
septum, or ventricular septum appear to be generally more aligned with 
the average costs and average length of stay for all cases in MS-DRGs 
228 and 229, where they are currently assigned.
    In addition, based on our review of the clinical considerations, we 
stated we did not believe the procedure codes describing the open 
revision of devices in the heart valves, atrial septum, or ventricular 
septum are clinically coherent with the procedure codes currently 
assigned to MS-DRG 215. We noted that heart assist devices, such as 
ventricular assist devices and artificial heart systems, provide 
circulatory support by taking over most of the workload of the left 
ventricle. Blood enters the pump through an inflow conduit connected to 
the left ventricle and is ejected through an outflow conduit into the 
body's arterial system. Heart assist devices can provide temporary 
left, right, or biventricular support for patients whose hearts have 
failed and can also be used as a bridge for patients who are awaiting a 
heart transplant. In the proposed rule we stated that devices placed in 
the heart valves, atrial septum, or ventricular septum do not serve the 
same purpose as heart assist devices and we stated we did not believe 
the procedure codes describing the revision of these devices should be 
assigned to MS-DRG 215. Further, we stated that the various indications 
for devices placed in the heart valves, atrial septum or ventricular 
septum are not aligned with the indications for heart assist devices. 
We stated we believe that patients with indications for heart assist 
devices tend to be more severely ill and these inpatient admissions are 
associated with greater resource utilization. Therefore, for the 
reasons stated previously, we proposed to maintain the GROUPER logic 
for MS-DRG 215 for FY 2025.
    Comment: Many commenters agreed with CMS' proposal to maintain the 
GROUPER logic for MS-DRG 215 for FY 2025. A commenter stated that they 
agreed with CMS that, in general, most patients with indications for 
heart assist devices tend to be more severely ill and will require 
greater resource utilization than patients that are admitted for open 
revision of devices related to heart valves, atrial septum, or 
ventricular septum.
    Response: We appreciate the commenters' support.
    Therefore, after consideration of the public comments we received, 
we are finalizing our proposal to maintain the GROUPER logic for MS-DRG 
215 for FY 2025, without modification.
5. MDC 06 (Diseases and Disorders of the Digestive System): Excision of 
Intestinal Body Parts
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
35968 through 35969), we identified a replication issue from the ICD-9 
based MS-DRGs to the ICD-10 based MS-DRGs regarding the assignment of 
eight ICD-10-PCS codes that describe the excision of intestinal body 
parts by open, percutaneous, or percutaneous endoscopic approach. Under 
the Version 32 ICD-9 based MS-DRGs, ICD-9-CM procedure code 45.33 
(Local excision of lesion or tissue of small intestine, except 
duodenum) was designated as an O.R. procedure and was assigned to MDC 
06 (Diseases and Disorders of the Digestive System) in MS-DRGs 347, 
348, and 349 (Anal and Stomal Procedures with MCC, with CC, and without 
CC/MCC, respectively).
    In the proposed rule, we noted that there are eight ICD-10-PCS code 
translations that provide more detailed and specific information for 
ICD-9-CM code 45.33 that also currently group to MS-DRGs 347, 348, and 
349 in the ICD-10 MS-DRGs Version 41.1. These eight procedure codes are 
shown in the following table:

[[Page 69032]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.023

    In the proposed rule we stated we noted during our review of this 
issue that under ICD-9-CM, procedure code 45.33 did not differentiate 
the specific type of approach used to perform the procedure. This is in 
contrast to the eight comparable ICD-10-PCS code translations listed in 
the previous table that do differentiate among various approaches 
(open, percutaneous, and percutaneous endoscopic). We also noted that 
there are four additional ICD-10-PCS code translations that provide 
more detailed and specific information for ICD-9-CM code 45.33, however 
these four codes currently group to MS-DRGs 329, 330, and 331 (Major 
Small and Large Bowel Procedures with MCC, with CC, and without CC/MCC, 
respectively), and not MS-DRGs 347, 348, and 349, in the ICD-10 MS-DRGs 
Version 41.1. These four procedure codes are shown in the following 
table:
[GRAPHIC] [TIFF OMITTED] TR28AU24.024

    We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 
41.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete documentation of the GROUPER 
logic for MS-DRGs 329, 330, 331, 347, 348, and 349.
    Next, as discussed in the proposed rule we examined claims data 
from the September 2023 update of the FY 2023 MedPAR file for MS-DRG 
347, 348, and 349 to identify cases reporting one of the eight codes 
listed previously that describe excision of intestinal body parts by an 
open, percutaneous, or percutaneous endoscopic approach. Our findings 
are shown in the following table:
[GRAPHIC] [TIFF OMITTED] TR28AU24.025

    As shown in the table, in MS-DRG 347, we identified a total of 752 
cases with an average length of stay of 7.6 days and average costs of 
$21,462. Of those 752 cases, there were 66 cases reporting one of eight 
procedure codes describing the excision of intestinal body parts by an 
open, percutaneous, or percutaneous endoscopic approach, with average 
costs higher than the average costs in the FY 2023 MedPAR file for MS-
DRG 347 ($27,081 compared to $21,462) and a longer average length of 
stay (8.5 days compared to 7.6 days). In MS-DRG 348, we identified a 
total of 1,580 cases with an average length of stay of 4.2 days and 
average costs of $12,020. Of those 1,580 cases, there were 192 cases 
reporting one of eight procedure codes describing the excision of 
intestinal body parts by an open, percutaneous, or percutaneous 
endoscopic approach, with average costs higher than the average costs 
in the FY 2023 MedPAR file for MS-DRG 348 ($17,063 compared to $12,020) 
and a longer average length of stay (4.9 days compared to 4.2 days). In 
MS-DRG 349, we identified a total of 644 cases with an average length 
of stay of 2.2 days and average costs of $9,095. Of those 644 cases, 
there were 117 cases reporting one of eight procedure codes describing 
the excision of intestinal body parts by an open, percutaneous, or 
percutaneous endoscopic approach, with average

[[Page 69033]]

costs higher than the average costs in the FY 2023 MedPAR file for MS-
DRG 349 ($14,612 compared to $9,095),and a longer average length of 
stay (3 days compared to 2.2 days).
    We stated we then examined claims data from the September 2023 
update of the FY 2023 MedPAR for MS-DRGs 329, 330, and 331. Our 
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.026

    While the average costs for all cases in MS-DRGs 329, 330, and 331 
are higher than the average costs of the cases reporting one of eight 
procedure codes describing the excision of intestinal body parts by an 
open, percutaneous, or percutaneous endoscopic approach, we stated the 
data suggest that overall, cases reporting one of eight procedure codes 
describing the excision of intestinal body parts by an open, 
percutaneous, or percutaneous endoscopic approach may be more 
appropriately aligned with the average costs of the cases in MS-DRGs 
329, 330, and 331 in comparison to MS-DRGs 347, 348, and 349, even 
though the average lengths of stay are shorter.
    In the proposed rule we stated we reviewed this grouping issue, and 
our analysis indicates that the eight procedure codes describing the 
excision of intestinal body parts by an open, percutaneous, or 
percutaneous endoscopic approach were initially assigned to the list of 
procedures in the GROUPER logic for MS-DRGs 347, 348, and 349 as a 
result of replication in the transition from ICD-9 to ICD-10 based MS-
DRGs. We also noted that procedure codes 0DB83ZZ, 0DBA3ZZ, 0DBA4ZZ, 
0DBB3ZZ, 0DBB4ZZ, 0DBC0ZZ, 0DBC3ZZ, and 0DBC4ZZ do not describe 
procedures on a stoma, which is an artificial opening on the abdomen 
that can be connected to either the digestive or urinary system to 
allow waste to be diverted out of the body, or the anus. We stated we 
supported the reassignment of codes 0DB83ZZ, 0DBA3ZZ, 0DBA4ZZ, 0DBB3ZZ, 
0DBB4ZZ, 0DBC0ZZ, 0DBC3ZZ, and 0DBC4ZZ for clinical coherence and that 
we believe these eight procedure codes should be appropriately grouped 
along with the four other procedure codes that describe excision of 
intestinal body parts by an open, or percutaneous endoscopic approach 
currently assigned to MS-DRGs 329, 330, and 331.
    Accordingly, because the procedures described by the eight 
procedure codes that describe excision of intestinal body parts by an 
open, percutaneous, or percutaneous endoscopic approach are not 
clinically consistent with procedures on the anus or stoma, and it is 
clinically appropriate to reassign these procedures to be consistent 
with the four other procedure codes that describe excision of 
intestinal body parts by an open, or percutaneous endoscopic approach 
in MS-DRGs 329, 330, and 331, we proposed the reassignment of procedure 
codes 0DB83ZZ, 0DBA3ZZ, 0DBA4ZZ, 0DBB3ZZ, 0DBB4ZZ, 0DBC0ZZ, 0DBC3ZZ, 
and 0DBC4ZZ from MS-DRGs 347, 348, and 349 (Anal and Stomal Procedures 
with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 329, 
330, and 331 (Major Small and Large Bowel Procedures with MCC, with CC, 
and without CC/MCC, respectively) in MDC 06, effective FY 2025.
    Comment: Commenters supported the proposal to reassign the eight 
procedure codes that describe the excision of intestinal body parts by 
an open, percutaneous, or percutaneous endoscopic approach from MS-DRGs 
347, 348, and 349 to MS-DRGs 329, 330, and 331. A commenter thanked CMS 
for this review and stated that they agreed that the proposed 
reassignment would correct an error that was made during the transition 
from the ICD-9 based MS-DRGs to the ICD-10 based MS-DRGs. Other 
commenters stated that these procedure codes do not belong in the MS-
DRGs they are currently assigned to, and that reassignment will 
appropriately group these procedures based on the body part involved.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to reassign procedure codes 0DB83ZZ, 0DBA3ZZ, 
0DBA4ZZ, 0DBB3ZZ, 0DBB4ZZ, 0DBC0ZZ, 0DBC3ZZ, and 0DBC4ZZ from MS-DRGs 
347, 348, and 349 (Anal and Stomal Procedures with MCC, with CC, and 
without CC/MCC, respectively) to MS-DRGs 329, 330, and 331 (Major Small 
and Large Bowel Procedures with MCC, with CC, and without CC/MCC, 
respectively) in MDC 06, without modification, effective October 1, 
2024, for FY 2025.
6. MDC 08 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue)
a. MS-DRG Logic for MS-DRGs 456, 457, and 458
    In the proposed rule we discussed an inconsistency in the GROUPER 
logic for MS-DRGs 456, 457, and 458 (Spinal Fusion Except Cervical with 
Spinal Curvature, Malignancy, Infection or Extensive Fusions with MCC, 
with CC, and without CC/MCC, respectively) related to ICD-10-CM 
diagnosis codes describing deforming dorsopathies. The logic for case 
assignment to MS-DRGs 456, 457, and 458 as displayed in the ICD-10 MS-
DRG Definitions Manual Version 41.1 (which is available on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software) is 
comprised of four logic lists. The first logic list is entitled 
``Spinal Fusion Except Cervical'' and is defined by a list of procedure 
codes designated as O.R. procedures that describe spinal fusion 
procedures of the thoracic, thoracolumbar, lumbar, lumbosacral, 
sacrococcygeal, coccygeal, and sacroiliac joint. The second logic list 
is entitled ``Spinal Curvature/Malignancy/Infection'' and is defined by 
a list of diagnosis codes describing spinal curvature, spinal 
malignancy, and spinal infection that are used to define the logic for 
case assignment when any one of the listed diagnosis codes is reported 
as the principal diagnosis. The third logic list is entitled ``OR 
Secondary Diagnosis'' and is defined by a list of diagnosis codes 
describing curvature of the spine that are used to define the logic for 
case assignment when any one of the listed codes is reported as a 
secondary diagnosis. The fourth logic list is entitled ``Extensive 
Fusions'' and is defined by a list of procedure codes designated as 
O.R. procedures that describe extensive spinal fusion procedures. We 
refer the reader to the ICD-10 MS-DRG Definitions Manual Version 41.1, 
(available on the CMS website at: https://www.cms.gov/medicare/payment/
prospective-payment-systems/

[[Page 69034]]

acute-inpatient-pps/ms-drg-classifications-and-software) for complete 
documentation of the GROUPER logic for MS-DRGs 456, 457, and 458.
    In the second logic list entitled ``Spinal Curvature/Malignancy/
Infection'' there are a subset of six diagnosis codes describing other 
specified deforming dorsopathies as shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.027

    In the third logic list entitled ``OR Secondary Diagnosis'' there 
are currently 14 diagnosis codes listed, one of which is diagnosis code 
M43.8X9 (Other specified deforming dorsopathies, site unspecified) as 
shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.028

    In the proposed rule we stated that we recognized that the five 
diagnosis codes describing deforming dorsopathies of specific anatomic 
sites that are listed in the second logic list entitled ``Spinal 
Curvature/Malignancy/Infection'' are not listed in the third logic list 
entitled ``OR Secondary Diagnosis'', rather, only diagnosis code 
M43.8X9 (Other specified deforming dorsopathies, site unspecified) 
appears in both logic lists. Therefore, we considered if it was 
clinically appropriate to add the five diagnosis codes describing 
deforming dorsopathies of specific anatomic sites that are listed in 
the second logic list entitled ``Spinal Curvature/Malignancy/
Infection'' to the third logic list entitled ``OR Secondary 
Diagnosis''.
    A deforming dorsopathy is characterized by abnormal bending or 
flexion in the vertebral column. All spinal deformities involve 
problems with curve or rotation of the spine, regardless of site 
specificity. In the proposed rule we stated our belief that the five 
diagnosis codes describing deforming dorsopathies of specific anatomic 
sites are clinically aligned with the diagnosis codes currently 
included in the ``OR Secondary Diagnosis'' logic list. Therefore, for 
clinical consistency we proposed to add diagnosis codes M43.8X4, 
M43.8X5, M43.8X6, M43.8X7, and M43.8X8 to the ``OR Secondary 
Diagnosis'' logic list for MS-DRGs 456, 457, and 458, effective October 
1, 2024, for FY 2025.
    Comment: Commenters supported the proposal to add diagnosis codes 
M43.8X4, M43.8X5, M43.8X6, M43.8X7, and M43.8X8 to the ``OR Secondary 
Diagnosis'' logic list for MS-DRGs 456, 457, and 458.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add diagnosis codes M43.8X4, M43.8X5, 
M43.8X6, M43.8X7, and M43.8X8 to the ``OR Secondary Diagnosis'' logic 
list for MS-DRGs 456, 457, and 458 effective October 1, 2024, for FY 
2025.
b. Interbody Spinal Fusion Procedures
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 35971 through 
35985), we discussed a request we received to reassign cases reporting 
spinal fusion procedures using an aprevoTM customized 
interbody fusion device from the lower severity MS-DRG 455 (Combined 
Anterior and Posterior Spinal Fusion without CC/MCC) to the higher 
severity MS-DRG 453 (Combined Anterior and Posterior Spinal Fusion with 
MCC), from the lower severity MS-DRG 458 (Spinal Fusion Except Cervical 
with Spinal Curvature, Malignancy, Infection or Extensive Fusions 
without CC/MCC) to the higher severity level MS-DRG 456 (Spinal Fusion 
Except Cervical with Spinal Curvature, Malignancy, Infection or 
Extensive Fusions with MCC) when a diagnosis of malalignment is 
reported, and from MS-DRGs 459 and 460 (Spinal Fusion

[[Page 69035]]

Except Cervical with MCC and without MCC, respectively) to MS-DRG 456. 
We referred the reader to the ICD-10 MS-DRG Definitions Manual Version 
41.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete documentation of the GROUPER 
logic.
    In the proposed rule we noted that this topic has been discussed 
previously in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26726 
through 26729) and final rule (88 FR 58731 through 58735, as corrected 
in the FY 2024 final rule correction notice at 88 FR 77211). We also 
noted that the aprevoTM Intervertebral Body Fusion Device 
technology was approved for new technology add-on payments for FY 2022 
(86 FR 45127 through 45133). We further noted that, as discussed in the 
FY 2023 IPPS/LTCH PPS final rule (87 FR 49468 through 49469), CMS 
finalized the continuation of the new technology add-on payments for 
this technology for FY 2023. In the FY 2024 IPPS/LTCH PPS final rule 
(88 FR 58802), we finalized the continuation of new technology add-on 
payments for the transforaminal lumbar interbody fusion (TLIF) 
indication for aprevoTM for FY 2024, and the discontinuation 
of the new technology add-on payments for the anterior lumbar interbody 
fusion (ALIF) and lateral lumbar interbody fusion (LLIF) indications 
for FY 2024. We referred the reader to section II.E. for discussion of 
the FY 2025 status of technologies receiving new technology add-on 
payments for FY 2024, including the status for the aprevoTM 
technology.
    Additionally, in the proposed rule we noted that in the FY 2024 
IPPS/LTCH PPS proposed rule (88 FR 26726 through 26729) and final rule 
(88 FR 58731 through 58735), effective October 1, 2021 (FY 2022), we 
implemented 12 new ICD-10-PCS procedure codes to identify and describe 
spinal fusion procedures using the aprevoTM customized 
interbody fusion device. We noted that the manufacturer expressed 
concerns that there may be unintentional miscoded claims from providers 
with whom they do not have an explicit relationship and that following 
the submission of the request for the FY 2024 MS-DRG classification 
change for cases reporting the performance of a spinal fusion procedure 
utilizing an aprevoTM customized interbody spinal fusion 
device, it submitted a code proposal requesting a revision to the title 
of the procedure codes that were finalized effective FY 2022. We also 
noted that, as discussed in the FY 2024 IPPS/LTCH PPS final rule, a 
proposal to revise the code title for the procedure codes that identify 
and describe spinal fusion procedures using the aprevoTM 
customized interbody fusion device was presented and discussed as an 
Addenda item at the March 7-8, 2023 ICD-10 Coordination and Maintenance 
Committee meeting and subsequently finalized.
    As discussed in the proposed rule, the code title changes for the 
12 ICD-10-PCS procedure codes to identify and describe spinal fusion 
procedures using the aprevoTM customized interbody fusion 
device were reflected in the FY 2024 ICD-10-PCS Code Update files 
available via the CMS website at: https://www.cms.gov/medicare/coding-billing/icd-10-codes/2024-icd-10-pcs, as well as in Table 6F.--Revised 
Procedure Code Titles--FY 2024 associated with the FY 2024 IPPS/LTCH 
PPS final rule and available via the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps. We noted that only the code titles were revised and the 
code numbers themselves did not change.
    Accordingly, effective with discharges on and after October 1, 2023 
(FY 2024), the 12 ICD-10-PCS procedure codes to identify and describe 
spinal fusion procedures using the aprevoTM customized 
interbody fusion device with their revised code titles are as follows:
BILLING CODE 4120-01-P

[[Page 69036]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.029

BILLING CODE 4120-01-C
    As stated in the proposed rule, as part of our analysis of the 
manufacturer's request to reassign cases involving the 
aprevoTM device as discussed in the FY 2024 proposed and 
final rules, we presented findings from our analysis of claims data 
from the September 2022 update of the FY 2022 MedPAR file for MS-DRGs 
453, 454, 455, 456, 457, 458, 459, and 460 and cases reporting any one 
of the 12 original procedure codes describing utilization of an 
aprevoTM customized interbody spinal fusion device. We 
stated that while we agreed that the findings from our analysis 
appeared to indicate that cases reporting the performance of a 
procedure using an aprevoTM customized interbody spinal 
fusion device reflected a higher consumption of resources, due to the 
concerns expressed with respect to suspected inaccuracies of the coding 
and therefore, reliability of the claims data, we would continue to 
monitor the claims data for resolution of the potential coding issues 
identified by the requestor (the manufacturer). We also stated that we 
continued to believe additional review of claims data was warranted and 
would be informative as we continued to consider cases involving this 
technology for future rulemaking. Specifically, we stated we believed 
it would be premature to propose any MS-DRG modifications for spinal 
fusion procedures using an aprevoTM customized interbody 
spinal fusion device for FY 2024 and finalized our proposal to maintain 
the structure of MS-DRGs 453, 454, 455, 456, 457, 458, 459, and 460, 
without modification, for FY 2024 (88 FR 58734 through 58735). As 
discussed further in the FY 2024 final rule correction, in response to 
the manufacturer's comment expressing concern about the reliability of 
the Medicare claims data in the MedPAR file used for purposes of CMS's 
claims data analysis, as compared to the manufacturer's analysis of its 
own customer claims data, we stated that in order for us to consider 
using non-MedPAR data, the non-MedPAR data must be independently 
validated, meaning when an entity submits non-MedPAR data, we must be 
able to independently review the medical records and verify that a 
particular procedure was performed for each of the cases that 
purportedly involved the procedure. We noted that, in this particular 
circumstance, where external

[[Page 69037]]

data for cases reporting the use of an aprevoTM spinal 
fusion device was provided, we did not have access to the medical 
records to conduct an independent review; therefore, we were not able 
to validate or confirm the non-MedPAR data submitted by the commenter 
for consideration in FY 2024. However, we also noted that our work in 
this area was ongoing, and we would continue to examine the data and 
consider these issues as we develop potential future rulemaking 
proposals. We referred readers to the FY 2024 IPPS/LTCH PPS correction 
notice (88 FR 77211) for further discussion.
    In the proposed rule, we noted that the manufacturer provided us 
with a list of the providers with which it indicated it has an explicit 
relationship, to assist in our ongoing review of its request for 
reassignment of cases reporting spinal fusion procedures using an 
aprevoTM interbody fusion device from the lower severity 
spinal fusion MS-DRGs to the higher severity level spinal fusion MS-
DRGs.
    As stated in the proposed rule, to continue our analysis of cases 
reporting spinal fusion procedures using an aprevoTM 
customized interbody fusion device, we first analyzed claims data from 
the September 2023 update of the FY 2023 MedPAR file for MS-DRGs 453, 
454, 455, 456, 457, 458, 459, and 460, and cases reporting any one of 
the previously listed procedure codes describing the performance of a 
spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device.\5\ Our findings are 
shown in the following tables.
---------------------------------------------------------------------------

    \5\ As noted earlier in the discussion, the code titles were 
updated but the code numbers themselves did not change.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU24.030


[[Page 69038]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.031

[GRAPHIC] [TIFF OMITTED] TR28AU24.032

[GRAPHIC] [TIFF OMITTED] TR28AU24.033

BILLING CODE 4120-01-C
    We identified the majority of cases reporting the performance of a 
spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device in MS-DRGs 453, 454, and 
455 with a total of 242 cases (26 + 129 + 87 = 242) with an average 
length of stay of 4.6 days and average costs of $68,526. The 26 cases 
found in MS-DRG 453 appear to have a comparable average length of stay 
(9.8 days versus 9.5 days) and higher average costs ($99,162 versus 
$80,420) compared to all the cases in MS-DRG 453, with a difference in 
average costs of $18,742 for the cases reporting the performance of a 
spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device. The 129 cases found in 
MS-DRG 454 appear to have a comparable average length of stay (4.9 days 
versus 4.3 days) and higher average costs ($71,527 versus $54,983) 
compared to all the cases in MS-DRG 454, with a difference in average 
costs of $16,544 for the cases reporting the performance of a spinal 
fusion procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device. The 87 cases found in MS-DRG 455 have 
an identical average length of stay of 2.6 days in comparison to all 
the cases in MS-DRG 455, however, the difference in average costs is 
$13,907 ($54,922-$41,015 = $13,907) for the cases reporting the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device.
    For MS-DRGs 456, 457, and 458, we found a total of 19 cases (2 + 11 
+ 6 = 19) reporting the performance of a spinal fusion procedure using 
an aprevoTM custom-made anatomically designed interbody 
fusion device with an average length of stay of 4.7 days and average 
costs of $51,384. The 2 cases found in MS-DRG 456 have a shorter 
average length of stay (8.5 days versus 12.6 days) and lower average 
costs ($69,009 versus $76,060) compared to all the cases in MS-DRG 456. 
The 11 cases found in MS-DRG 457 also have a shorter average length of 
stay (5.0 days versus 6.1 days) and lower average costs ($47,221 versus 
$52,179). For MS-DRG 458, we found 6 cases reporting the performance of 
a spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device with a comparable average 
length of stay (3.0 days versus 3.1 days) and higher average costs 
($53,140 versus $39,260) compared to the average costs of all the cases 
in MS-DRG 458, with a difference in average costs of $13,880 ($53,140-
$39,260 = $13,880) for the cases reporting the performance of a spinal 
fusion procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device.
    For MS-DRGs 459 and 460, we found a total of 65 cases reporting the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device with an 
average length of stay of 2.7 days and average costs of $57,128. The 
single case found in MS-DRG 459 had a longer length of stay (22 days 
versus 9.6 days) and higher costs ($288,499 versus $53,192) compared to 
the average costs of all the cases in MS-DRG 459. For MS-DRG 460, the 
64 cases reporting the performance of a spinal fusion procedure using 
an aprevoTM custom-made anatomically designed interbody 
fusion device had a shorter average length of stay (2.4 days versus 3.4 
days) and higher average cost ($53,513 versus $32,586), compared to

[[Page 69039]]

all the cases in MS-DRG 460, with a difference in average costs of 
$20,927 ($53,513-$32,586 = $20,927) for the cases reporting the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device.
    As discussed in the FY 2024 final rule, the manufacturer expressed 
concern that there may be unintentional miscoded claims from providers 
with whom they do not have an explicit relationship and, as previously 
discussed, subsequently provided the list of providers with which it 
indicated it has an explicit relationship to assist in our ongoing 
review. We noted in the proposed rule that in connection with the list 
of providers submitted, the manufacturer also resubmitted claims data 
from the Standard Analytical File (SAF) that included FY 2022 claims 
and the first two quarters (discharges beginning October 1, 2022 
through March 31, 2023) of FY 2023 from these providers. We stated that 
the list of providers the manufacturer submitted to us was considered 
applicable for the dates of service in connection with the resubmitted 
claims data. The manufacturer stated that the list of providers with 
which it has an explicit relationship is subject to change on a weekly 
basis as additional providers begin to use the technology. The 
manufacturer also clarified that the external customer data it had 
previously referenced in connection with the FY 2024 rulemaking that 
was received directly from the providers with which it has an explicit 
relationship is Medicare data. As stated in the proposed rule, we 
reviewed the September update of the FY 2022 MedPAR file and compared 
it against the claims data file with the list of providers submitted by 
the manufacturer for FY 2022. We noted that with this updated analysis 
of the September update of the FY 2022 MedPAR claims data, we were able 
to confirm that the majority of the cases for the providers with which 
the manufacturer indicated it has an explicit relationship matched the 
claims data in our FY 2022 MedPAR file. However, we also stated that we 
identified 3 claims that appeared in the manufacturer's file that were 
not found in our FY 2022 MedPAR file and could not be validated. Next, 
we reviewed the September update of the FY 2023 MedPAR file and 
compared it against the claims data file with the list of providers 
submitted by the manufacturer for the first two quarters of FY 2023. We 
stated we were able to confirm that the majority of the cases for the 
providers with which the manufacturer indicated it has an explicit 
relationship matched the claims data in our FY 2023 MedPAR file. 
However, we also stated that we identified 2 claims that appeared in 
the manufacturer's file that were not found in our FY 2023 MedPAR file 
and could not be validated.
    As discussed in the proposed rule, in our analysis of the cases 
reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device in MS-DRGs 453, 454, 455, 456, 457, 458, 459, and 460 from the 
September update of the FY 2023 MedPAR file, we also reviewed the 
findings for cases identified based on the list of providers with which 
the manufacturer indicated it has an explicit relationship and cases 
based on other providers, (that is, those providers not included on the 
manufacturer's list), and compared those to the findings from all the 
cases we identified in the September update of the FY 2023 MedPAR file 
reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device in MS-DRGs 453, 454, 455, 456, 457, 458, 459, and 460. The 
findings from our analysis are shown in the following table. We noted 
that there were no cases found to report the performance of a spinal 
fusion procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device based on the list of providers 
submitted by the manufacturer in MS-DRG 456.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR28AU24.034


[[Page 69041]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.035

BILLING CODE 4120-01-C
    For MS-DRG 453, the data show that of the 26 cases found to report 
the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device from the FY 2023 MedPAR file, 10 cases were reported based on 
the manufacturer's provider list, and 16 cases were reported based on 
other providers. The average length of stay is longer (10.5 days versus 
9.4 days), and the average costs are higher ($118,863 versus $86,849) 
for the 10 cases reported based on the manufacturer's provider list 
compared to the 16 cases that were reported based on other providers. 
For MS-DRG 454,

[[Page 69042]]

the data show that of the 129 cases found to report the performance of 
a spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device from the FY 2023 MedPAR 
file, 48 cases were reported based on the manufacturer's provider list, 
and 81 cases were reported based on other providers. The average length 
of stay is longer (6.3 days versus 4.1 days), and the average costs are 
higher ($81,680 versus $65,510) for the 48 cases reported based on the 
manufacturer's provider list compared to the 81 cases that were 
reported based on other providers. For MS-DRG 455, the data show that 
of the 87 cases found to report the performance of a spinal fusion 
procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device from the FY 2023 MedPAR file, 14 cases 
were reported based on the manufacturer's provider list, and 73 cases 
were reported based on other providers. The average length of stay is 
shorter (2.5 days versus 2.6 days), and the average costs are higher 
($61,637 versus $53,634) for the 14 cases reported based on the 
manufacturer's provider list compared to the 73 cases that were 
reported based on other providers.
    For MS-DRG 456, the data show that of the 2 cases found to report 
the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device from the FY 2023 MedPAR file, there were no cases reported based 
on the manufacturer's provider list and the 2 cases reported were based 
on other providers. For MS-DRG 457, the data show that of the 11 cases 
found to report the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device from the FY 2023 MedPAR file, 2 cases were reported based on the 
manufacturer's provider list, and 9 cases were reported based on other 
providers. The average length of stay is shorter (4.5 days versus 5.1 
days), and the average costs are higher ($53,113 versus $45,912) for 
the 2 cases reported based on the manufacturer's provider list compared 
to the 9 cases that were reported based on other providers. For MS-DRG 
458, the data show that of the 6 cases found to report the performance 
of a spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device from the FY 2023 MedPAR 
file, 3 cases were reported based on the manufacturer's provider list, 
and 3 cases were reported based on other providers. The average length 
of stay is longer (3.3 days versus 2.7 days), and the average costs are 
lower ($52,760 versus $53,520) for the 3 cases reported based on the 
manufacturer's provider list compared to the 3 cases that were reported 
for other providers.
    For MS-DRG 459, the data show that the single case found to report 
the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device from the FY 2023 MedPAR file was based on the manufacturer's 
provider list. There were no cases reported based on other providers. 
For MS-DRG 460, the data show that of the 64 cases found to report the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device from the FY 
2023 MedPAR file, 13 cases were reported based on the manufacturer's 
provider list, and 51 cases were reported based on other providers. The 
average length of stay is comparable (2.6 days versus 2.3 days), and 
the average costs are higher ($62,829 versus $51,138) for the 13 cases 
reported based on the manufacturer's provider list compared to the 51 
cases that were reported from other providers.
    As discussed in the proposed rule, we considered these data 
findings with regard to the concerns expressed by the manufacturer that 
there may be unintentional miscoded claims reporting the performance of 
a spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device from providers with whom 
the manufacturer does not have an explicit relationship. Based on our 
review and analysis of the claims data, we stated that we are unable to 
confirm that the claims from these providers with whom the manufacturer 
indicated that it does not have an explicit relationship are miscoded.
    In the proposed rule we noted that, while a newly established ICD-
10 code may be associated with an application for new technology add-on 
payment, such codes are not generally established to be product 
specific. We stated that, if, after consulting the official coding 
guidelines, a provider determines that an ICD-10 code associated with a 
new technology add-on payment describes the technology that they are 
billing, the hospital may report the code and be eligible to receive 
the associated add-on payment. We noted that providers are responsible 
for ensuring that they are billing correctly for the services they 
render. In addition, as we noted in the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38012), coding advice is issued independently from payment 
policy. We also noted that, historically, we have not provided coding 
advice in rulemaking with respect to policy (82 FR 38045). We stated 
that as one of the Cooperating Parties for ICD-10, we collaborate with 
the American Hospital Association (AHA) through the Coding Clinic for 
ICD-10-CM and ICD-10-PCS to promote proper coding. We recommended that 
an entity seeking coding guidance submit any questions pertaining to 
correct coding to the AHA.
    Accordingly, after review of the list of providers and associated 
claims data submitted by the manufacturer, and our analysis of the 
MedPAR data, we stated we believed these MedPAR data are appropriate 
for our FY 2025 analysis. Therefore, in assessing the request for 
reassignment of cases reporting the performance of a spinal fusion 
procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device from the lower severity MS-DRG 455 to 
the higher severity MS-DRG 453, from the lower severity MS-DRG 458 to 
the higher severity level MS-DRG 456 when a diagnosis of malalignment 
is reported, and cases from MS-DRGs 459 and 460 to MS-DRG 456 for FY 
2025, we considered all the claims data reporting the performance of a 
spinal fusion procedure, including those spinal fusion procedures using 
an aprevoTM custom-made anatomically designed interbody 
fusion device as identified in the September update of the FY 2023 
MedPAR file for these MS-DRGs. Consequently, our analysis also included 
claims based on the list of providers submitted by the manufacturer as 
well as other providers.
    We stated in the proposed rule that, based on the findings from our 
analysis and clinical review, we do not believe the requested 
reassignments are supported. Specifically, we stated it would not be 
appropriate to propose to reassign the 87 cases reporting the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device from the 
lower severity level MS-DRG 455 (without CC/MCC) with an average length 
of stay of 2.6 days and average costs of $54,922 to the higher severity 
level MS-DRG 453 (with MCC) with an average length of stay of 9.5 days 
and average costs of $80,420. We noted that if we were to propose to 
reassign the 87 cases from the lower severity MS-DRG 455 to the higher 
severity MS-DRG 453, the MS-DRGs would no longer be clinically coherent 
with regard to severity of illness of the patients, and the cases would 
reflect a difference in resource utilization, as demonstrated by the 
difference in average costs of approximately $25,498

[[Page 69043]]

($80,420-$54,922 = $25,498), as well as a difference in average length 
of stay (2.6 days versus 9.5 days) compared to all the cases in MS-DRG 
453. Similarly, we stated it would not be appropriate to propose to 
reassign the 6 cases reporting the performance of a spinal fusion 
procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device from the lower severity level MS-DRG 
458 (without CC/MCC) with an average length of stay of 3.0 days and 
average costs of $53,140 to the higher severity level MS-DRG 456 (with 
MCC) with an average length of stay of 12.6 days and average costs of 
$76,060. We stated that if we were to propose to reassign the 6 cases 
from the lower severity MS-DRG 458 to the higher severity MS-DRG 456, 
the MS-DRGs would no longer be clinically coherent with regard to 
severity of illness of the patients and the cases would reflect a 
difference in resource utilization, as demonstrated by the difference 
in average costs of approximately $22,920 ($76,060-$53,140 = $22,920) 
as well as a difference in average length of stay (3.0 days versus 12.6 
days) compared to all the cases in MS-DRG 456. Finally, we stated it 
would not be appropriate nor consistent with the definition of the MS-
DRGs to propose to reassign the 65 cases reporting the performance of a 
spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device from MS-DRGs 459 and 460 
with an average length of stay of 2.7 days and average costs of $57,128 
to MS-DRG 456. In addition to the cases reflecting a difference in 
resource utilization as demonstrated by the difference in average costs 
of approximately $18,932 ($76,060-$57,128 = $18,932) as well as having 
a shorter average length of stay (2.7 days versus 12.6 days), we noted 
that the logic for case assignment to MS-DRGs 456, 457, and 458 is 
specifically defined by principal diagnosis logic. As such, cases 
grouping to this set of MS-DRGs require a principal diagnosis of spinal 
curvature, malignancy, or infection, or an extensive fusion procedure. 
We stated that it would not be clinically appropriate to propose to 
reassign cases from MS-DRGs 459 and 460 that do not have a principal 
diagnosis of spinal curvature, malignancy, or infection, or an 
extensive fusion procedure, and are not consistent with the logic for 
case assignment to MS-DRG 456.
    As discussed in the proposed rule, in light of the higher average 
costs of the cases reporting the performance of a spinal fusion 
procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device in MS-DRGs 453, 454, 455, 458, and 
460, we further reviewed the claims data for cases reporting the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device in these MS-
DRGs and identified a wide range in the average length of stay and 
average costs. For example, in MS-DRG 453, the average length of stay 
for the 26 cases reporting the performance of a spinal fusion procedure 
using an aprevoTM custom-made anatomically designed 
interbody fusion device ranged from 3.0 days to 27 days and the average 
costs ranged from $28,054 to $177,919. In MS-DRG 454, the average 
length of stay for the 129 cases reporting the performance of a spinal 
fusion procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device ranged from 1.0 day to 16 days and the 
average costs ranged from $10,242 to $316,780. In MS-DRG 455, the 
average length of stay for the 87 cases reporting the performance of a 
spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device ranged from 1.0 day to 
9.0 days and the average costs ranged from $7,961 to $216,200. In MS-
DRG 456, the length of stay for the 2 cases reporting the performance 
of a spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device were 8.0 days and 9.0 
days, respectively, with costs of $107,457 and $30,560, respectively. 
In MS-DRG 457, the average length of stay for the 11 cases reporting 
the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device ranged from 1.0 day to 17 days and the average costs ranged from 
$25,955 to $89,176. In MS-DRG 458, the average length of stay for the 6 
cases reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device ranged from 1.0 day to 5.0 days and the average costs ranged 
from $33,165 to $78,720. In MS-DRG 459, the length of stay for the 
single case reporting the performance of a spinal fusion procedure 
using an aprevoTM custom-made anatomically designed 
interbody fusion device was 22 days with a cost of $288,499, indicating 
it is an outlier. In MS-DRG 460, the average length of stay for the 64 
cases reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device ranged from 1.0 day to 8.0 days and the average costs ranged 
from $8,981 to $325,104.
    As discussed in the proposed rule, in our analysis of the claims 
data for MS-DRGs 453, 454, and 455, we also identified a number of 
cases for which additional spinal fusion procedures were performed, 
beyond the logic for case assignment to the respective MS-DRG. For 
example, the logic for case assignment to MS-DRGs 453, 454, and 455 
requires at least one anterior column fusion and one posterior column 
fusion (that is, combined anterior and posterior fusion). We noted that 
the aprevoTM custom-made anatomically designed interbody 
fusion device is used in the performance of an anterior column fusion. 
We stated that findings from our analysis of MS-DRG 453 show that of 
the 26 cases reporting a combined anterior and posterior fusion 
(including an aprevoTM custom-made anatomically designed 
interbody fusion device), 24 cases also reported another spinal fusion 
procedure. We categorized these cases as ``multiple level fusions'' 
where another procedure code describing a spinal fusion procedure was 
reported in addition to the combined anterior and posterior fusion 
procedure codes. We stated that findings from our analysis of MS-DRG 
454 show that of the 129 cases reporting a combined anterior and 
posterior fusion (including an aprevoTM custom-made 
anatomically designed interbody fusion device), 100 cases also reported 
another spinal fusion procedure. Lastly, we stated that findings from 
our analysis of MS-DRG 455 show that of the 87 cases reporting a 
combined anterior and posterior fusion (including an 
aprevoTM custom-made anatomically designed interbody fusion 
device), 51 cases also reported another spinal fusion procedure.
    We noted in the proposed rule that while the findings from our 
analysis indicate a wide range in the average length of stay and 
average costs for cases reporting the performance of a spinal fusion 
procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device, we believed the increase in resource 
utilization for certain cases may be partially attributable to the 
performance of multiple level fusion procedures and, specifically for 
MS-DRGs 453 and 454, the reporting of secondary diagnosis MCC and CC 
conditions. We noted that our analysis of the data for MS-DRGs 453 and 
454 show that the cases reporting the performance of a spinal fusion 
procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device also reported multiple MCC and CC 
conditions, which we believe may be an additional

[[Page 69044]]

contributing factor to the increase in resource utilization for these 
cases, combined with the reported performance of multiple level 
fusions.
    As discussed in the proposed rule, in our analysis of the data for 
MS-DRGs 453, 454, and 455 and cases reporting the performance of a 
spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device, we also identified other 
procedures that were reported, some of which are designated as 
operating room (O.R.) procedures, that we believed may be another 
contributing factor to the increase in resource utilization and 
complexity for these cases. (We noted that because a discectomy is 
frequently performed in connection with a spinal fusion procedure, we 
did not consider these procedures as contributing factors to 
consumption of resources in these spinal fusion cases). We provided a 
list of the top 5 MCC and CC conditions, as well as the top 5 O.R. 
procedures (excluding discectomy) reported in MS-DRGs 453, 454, and 455 
that we believed may be contributing factors to the increase in 
resource utilization and complexity for these cases as shown in the 
tables that follow. We noted that the logic for case assignment to MS-
DRG 453 includes the reporting of at least one secondary diagnosis MCC 
condition (``with MCC'') and cases that group to this MS-DRG may also 
report secondary diagnosis CC conditions. We provided the frequency 
data for both the top 5 secondary diagnosis MCC conditions and the top 
5 secondary diagnosis CC conditions, in addition to the top 5 O.R. 
procedures (excluding discectomy) that were reported for spinal fusion 
cases with an aprevoTM custom-made anatomically designed 
interbody fusion device in MS-DRG 453. We noted that because the logic 
for case assignment to MS-DRG 454 includes the reporting of at least 
one secondary diagnosis CC condition (``with CC'') we provided the top 
5 secondary diagnosis CC conditions and the top 5 O.R. procedures 
(excluding discectomy) that were reported for spinal fusion cases with 
an aprevoTM custom-made anatomically designed interbody 
fusion device in MS-DRG 454. We noted that the logic for case 
assignment to MS-DRG 455 is ``without CC/MCC'' and does not include any 
secondary diagnosis MCC or CC conditions, therefore, we only provided a 
table with the top 5 O.R. procedures (excluding discectomy) reported 
for that MS-DRG in addition to a spinal fusion procedure.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU24.036

[GRAPHIC] [TIFF OMITTED] TR28AU24.037

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[[Page 69045]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.040

[GRAPHIC] [TIFF OMITTED] TR28AU24.041

BILLING CODE 4120-01-C
    As previously summarized, our analysis of the claims data for cases 
reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device demonstrated a low volume of cases and higher average costs in 
comparison to all the cases in their respective MS-DRGs (that is, in 
MS-DRGs 453, 454, 455, 458, 459, and 460). Therefore, as stated in the 
proposed rule, we expanded our analysis to include all spinal fusion 
cases in MS-DRGs 453, 454, 455, 456, 457, 458, 459, and 460 to identify 
and further examine the cases reporting multiple level fusions versus 
single level fusions, multiple MCCs or CCs, and other O.R. procedures 
as we believed that clinically, all of these factors may contribute to 
increases in resource utilization, severity of illness and technical 
complexity.
    As stated in the proposed rule, we began our expanded analysis with 
MS-DRGs 453, 454, and 455. Based on the findings for a subset of the 
cases (that is, the subset of cases reporting the performance of a 
spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device) in these MS-DRGs as 
previously discussed, and our review of the logic for case assignment 
to these MS-DRGs, we developed three categories of spinal fusion 
procedures to further examine. The first category was for the single 
level combined anterior and posterior fusions except cervical, the 
second category was for the multiple level combined anterior and 
posterior fusions except cervical and the third category was for the 
combined anterior and posterior cervical spinal fusions. We refer the 
reader to Table 6P.2d for the list of procedure codes we identified to 
categorize the single level combined anterior and posterior fusions 
except cervical, Table 6P.2e for the list of procedure codes we 
identified to categorize the multiple level combined anterior and 
posterior fusions except cervical, and Table 6P.2f for the list of 
procedure codes we identified to categorize the combined anterior and 
posterior cervical spinal fusions in association with the proposed rule 
and available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.
    Findings from our analysis are shown in the following table.

[[Page 69046]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.042

    The data show that across MS-DRGs 453, 454, and 455, cases 
reporting multiple level combined anterior and posterior fusion 
procedures have a comparable average length of stay (9.6 days versus 
9.5 days, 4.8 days versus 4.3 days, and 3.0 days versus 2.6 days, 
respectively) and higher average costs ($91,358 versus $80,420, $64,065 
versus $54,983, and $50,097 versus $41,015) compared to all the cases 
in MS-DRGs 453, 454, and 455, respectively. The data also show that 
across MS-DRGs 453, 454, and 455, cases reporting multiple level 
combined anterior and posterior fusion procedures have a longer average 
length of stay (9.6 days versus 6.4 days, 4.8 days versus 3.4 days, and 
3.0 days versus 2.3 days, respectively) and higher average costs 
($91,358 versus $47,031, $64,065 versus $38,107, and $50,097 versus 
$33,010, respectively) compared to cases reporting a single level 
combined anterior and posterior fusion. For cases reporting a combined 
anterior and posterior cervical fusion across MS-DRGs 453 and 454, the 
data show a longer average length of stay (12.5 days versus 9.5 days, 
and 5.1 days versus 4.3 days, respectively) compared to all the cases 
in MS-DRGs 453 and 454 and a comparable average length of stay (2.9 
days versus 2.6 days) for cases reporting a combined anterior and 
posterior cervical fusion in MS-DRG 455. The data also show that across 
MS-DRGs 453, 454, and 455, cases reporting a combined anterior and 
posterior cervical fusion have higher average costs ($75,077 versus 
$47,031, $52,274 versus $38,107, and $37,515 versus $33,010, 
respectively) compared to the single level combined anterior and 
posterior fusion cases.
    The data also reflect that in applying the logic that was developed 
for the three categories of spinal fusion in MS-DRGs 453, 454, and 455 
(single level combined anterior and posterior fusion except cervical, 
multiple level combined anterior and posterior fusion except cervical, 
and combined anterior and posterior cervical fusion), there is a small 
redistribution of cases from the current MS-DRGs 453, 454, and 455 to 
other spinal fusion MS-DRGs because the logic for case assignment to 
MS-DRGs 453, 454, and 455 is currently satisfied with any one procedure 
code from the anterior spinal fusion logic list and any one procedure 
code from the posterior spinal fusion logic list, however, the logic 
lists that were developed for our analysis using the three categories 
of spinal fusion are comprised of specific procedure code combinations 
to satisfy the criteria for case assignment to any one of the three 
categories developed. For example, based on our analysis of MS-DRG 453 
using the September update of the FY 2023 MedPAR file, the total number 
of cases found in MS-DRG 453 is 4,066 and with application of the logic 
for each of the three categories, the total number of cases in MS-DRG 
453 is 4,042 (791 + 2,664 + 587 = 4,042), a difference of 24 cases. 
Using the September update of the FY 2023 MedPAR file, the total number 
of cases found in MS-DRG 454 is 20,425 and with application of the 
logic for each of the three categories, the total number of cases in 
MS-DRG 454 is 20,370 (6,481 + 12,498 + 1,391 = 20,370), a difference of 
55 cases. Lastly, using the September update of the FY 2023 MedPAR 
file, the total number of cases found in MS-DRG 455 is 17,000 and with 
application of the logic for each of the three categories, the total 
number of cases in MS-DRG 455 is 16,987 (9,763 + 6,879 + 345 = 16,987), 
a difference of 13 cases. Overall, a total of 92 cases are 
redistributed from MS-DRGs 453, 454,

[[Page 69047]]

and 455 to other spinal fusion MS-DRGs.
    We stated in the proposed rule that the findings from our analysis 
of MS-DRGs 453, 454, and 455 are consistent with the expectation that 
clinically, the greater the number of spinal fusion procedures 
performed during a single procedure (for example, intervertebral levels 
fused), the greater the consumption of resources expended. We also 
stated we believed the use of interbody fusion cages, other types of 
spinal instrumentation, operating room time, comorbidities, 
pharmaceuticals, and length of stay may all be contributing factors to 
resource utilization for spinal fusion procedures. In addition, it is 
expected that as a result of potential changes to the logic for case 
assignment to a MS-DRG, there will be a redistribution of cases among 
the MS-DRGs.
    We stated in the proposed rule that, based on our review and 
analysis of the spinal fusion cases in MS-DRGs 453, 454, and 455, we 
believe new MS-DRGs are warranted to differentiate between multiple 
level combined anterior and posterior spinal fusions except cervical, 
single level combined anterior and posterior spinal fusions except 
cervical, and combined anterior and posterior cervical spinal fusions, 
to more appropriately reflect utilization of resources for these 
procedures, including those performed with an aprevoTM 
custom-made anatomically designed interbody fusion device. We noted 
that the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device as identified by any one of the 12 previously listed procedure 
codes would not be reported for a cervical spinal fusion procedure as 
reflected in Table 6P.2f associated with the proposed rule and this 
final rule and available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.
    To compare and analyze the impact of our suggested modifications, 
we noted that we ran simulations using claims data from the September 
2023 update of the FY 2023 MedPAR file. The following table illustrates 
our findings for all 23,017 cases reporting procedure codes describing 
multiple level combined anterior and posterior spinal fusions.
[GRAPHIC] [TIFF OMITTED] TR28AU24.043

    We stated we applied the criteria to create subgroups in a base MS-
DRG as discussed in section II.C.1.b. of the preamble of the proposed 
rule and this final rule. We noted that, as shown in the table that 
follows, a three-way split of the proposed new base MS-DRG was met. The 
following table illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TR28AU24.044

    For the proposed new MS-DRGs, there is (1) at least 500 or more 
cases in the MCC group, the CC subgroup, and in the without CC/MCC 
subgroup; (2) at least 5 percent of the cases are in the MCC subgroup, 
the CC subgroup, and in the without CC/MCC subgroup; (3) at least a 20 
percent difference in average costs between the MCC subgroup and the CC 
subgroup and between the CC group and NonCC subgroup; (4) at least a 
$2,000 difference in average costs between the MCC subgroup and the 
with CC subgroup and between the CC subgroup and NonCC subgroup; and 
(5) at least a 3-percent reduction in cost variance, indicating that 
the proposed severity level splits increase the explanatory power of 
the base MS-DRG in capturing differences in expected cost between the 
proposed MS-DRG severity level splits by at least 3 percent and thus 
improve the overall accuracy of the IPPS payment system.
    As a result, for FY 2025, we proposed to create new MS-DRG 426 
(Multiple Level Combined Anterior and Posterior Spinal Fusion Except 
Cervical with MCC), new MS-DRG 427 (Multiple Level Combined Anterior 
and Posterior Spinal Fusion Except Cervical with CC), and new MS-DRG 
428 (Multiple Level Combined Anterior and Posterior Spinal Fusion 
Except Cervical without CC/MCC). The following table reflects a 
simulation of the proposed new MS-DRGs.
[GRAPHIC] [TIFF OMITTED] TR28AU24.045

    The next step in our analysis of the impact of our suggested 
modifications to MS-DRGs 453, 454, and 455 was to review the cases 
reporting single combined anterior and posterior cervical fusions. The 
following table

[[Page 69048]]

illustrates our findings for all 16,059 cases reporting procedure codes 
describing single level combined anterior and posterior spinal fusions.
[GRAPHIC] [TIFF OMITTED] TR28AU24.046

    We stated we applied the criteria to create subgroups in a base MS-
DRG as discussed in section II.C.1.b. of the preamble of the proposed 
rule and this final rule. We noted that, as shown in the table that 
follows, a three-way split of this proposed new base MS-DRG failed to 
meet the criterion that at least 5% or more of the cases are in the MCC 
subgroup. It also failed to meet the criterion that there be at least a 
20% difference in average costs between the CC and NonCC (without CC/
MCC) subgroup. The following table illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TR28AU24.047

    As discussed in section II.C.1.b. of the preamble of the proposed 
rule and this final rule, if the criteria for a three-way split fail, 
the next step is to determine if the criteria are satisfied for a two-
way split. We therefore applied the criteria for a two-way split for 
the ``with MCC and without MCC'' subgroups. We noted that, as shown in 
the table that follows, a two-way split of this base MS-DRG failed to 
meet the criterion that there be at least 5% or more of the cases in 
the with MCC subgroup.
[GRAPHIC] [TIFF OMITTED] TR28AU24.048

    We then applied the criteria for a two-way split for the ``with CC/
MCC and without CC/MCC'' subgroups. As shown in the table that follows, 
a two-way split of this base MS-DRG failed to meet the criterion that 
there be at least a 20% difference in average costs between the ``with 
CC/MCC and without CC/MCC'' subgroup.
[GRAPHIC] [TIFF OMITTED] TR28AU24.049

    We noted that because the criteria for both of the two-way splits 
failed a split (or CC subgroup) is not warranted for the proposed new 
base MS-DRG. As a result, for FY 2025, we proposed to create new base 
MS-DRG 402 (Single Level Combined Anterior and Posterior Spinal Fusion 
Except Cervical). The following table reflects a simulation of the 
proposed new base MS-DRG.
[GRAPHIC] [TIFF OMITTED] TR28AU24.050

    For the final step in our analysis of the impact of our suggested 
modifications to MS-DRGs 453, 454, and 455 we reviewed the cases 
reporting combined anterior and posterior cervical fusions. The 
following table illustrates our findings for all 2,323 cases reporting 
procedure codes describing combined anterior and posterior cervical 
spinal fusions.

[[Page 69049]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.051

    We stated we applied the criteria to create subgroups in a base MS-
DRG as discussed in section II.C.1.b. of the preamble of the proposed 
rule and this final rule. We noted that, as shown in the table that 
follows, a three-way split of this proposed new base MS-DRG failed to 
meet the criterion that that there be at least 500 cases in the NonCC 
subgroup.
[GRAPHIC] [TIFF OMITTED] TR28AU24.052

    As discussed in section II.C.1.b. of the preamble of the proposed 
rule and this final rule, if the criteria for a three-way split fail, 
the next step is to determine if the criteria are satisfied for a two-
way split. We therefore applied the criteria for a two-way split for 
the ``with MCC and without MCC'' subgroups. We note that, as shown in 
the table that follows, a two-way split of this proposed new base MS-
DRG was met. For the proposed MS-DRGs, there is at least (1) 500 or 
more cases in the MCC group and in the without MCC subgroup; (2) 5 
percent or more of the cases in the MCC group and in the without MCC 
subgroup; (3) a 20 percent difference in average costs between the MCC 
group and the without MCC group; (4) a $2,000 difference in average 
costs between the MCC group and the without MCC group; and (5) a 3-
percent reduction in cost variance, indicating that the proposed 
severity level splits increase the explanatory power of the base MS-DRG 
in capturing differences in expected cost between the proposed MS-DRG 
severity level splits by at least 3 percent and thus improve the 
overall accuracy of the IPPS payment system. The following table 
illustrates our findings for the suggested MS-DRGs with a two-way 
severity level split.
[GRAPHIC] [TIFF OMITTED] TR28AU24.053

    Accordingly, because the criteria for the two-way split were met, 
we stated we believed a split (or CC subgroup) is warranted for the 
proposed new base MS-DRG. As a result, for FY 2025, we proposed to 
create new MS-DRG 429 (Combined Anterior and Posterior Cervical Spinal 
Fusion with MCC) and new MS-DRG 430 (Combined Anterior and Posterior 
Cervical Spinal Fusion without MCC). The following table reflects a 
simulation of the proposed new MS-DRGs.
[GRAPHIC] [TIFF OMITTED] TR28AU24.054

    We then analyzed the cases reporting spinal fusion procedures in 
MS-DRGs 456, 457, and 458. As previously described, the logic for case 
assignment to MS-DRGs 456, 457, and 458 is defined by principal 
diagnosis logic and extensive fusion procedures. Cases reporting a 
principal diagnosis of spinal curvature, malignancy, or infection or an 
extensive fusion procedure will group to these MS-DRGs. We referred the 
reader to the ICD-10 MS-DRG Definitions Manual Version 41.1 available 
on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software for complete documentation of the GROUPER logic for MS-
DRGs 456, 457, and 458.
    As also previously described, in our initial analysis of cases 
reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device, the 13 cases we found in MS-DRGs 456 and 457 (2 + 11 = 13, 
respectively) appeared to be grouping appropriately, however, the 
average costs for the 6 cases found in MS-DRG 458 showed a difference 
of approximately $13,880. Because of the low volume of cases reporting 
the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device in the ``without CC/MCC'' MS-DRG 458, and the low volume of 
cases reporting the performance of a

[[Page 69050]]

spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device in MS-DRGs 456, 457, and 
458 overall (2 + 11 + 6 = 19), for this expanded review of the claims 
data, we shared the results of our analysis in association with cases 
reporting extensive fusion procedures in MS-DRGs 456, 457, and 458. Our 
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.055

    The data show that the 332 cases reporting an extensive fusion 
procedure in MS-DRG 456 have a shorter average length of stay (11.5 
days versus 12.6 days) and higher average costs ($89,773 versus 
$76,060) compared to all the cases in MS-DRG 456. For MS-DRG 457, the 
data show that the 171 cases reporting an extensive fusion have a 
comparable average length of stay (6.6 days versus 6.1 days) and higher 
average costs ($75,588 versus $52,179) compared to all the cases in MS-
DRG 457. Lastly, for MS-DRG 458, the data show that the 146 cases 
reporting an extensive fusion procedure have a comparable average 
length of stay (3.8 days versus 3.1 days) and higher average costs 
($48,035 versus $39,260) compared to all the cases in MS-DRG 458.
    In the proposed rule we stated we believe that over time, the 
volume of cases reporting the performance of a spinal fusion procedure 
using an aprevoTM custom-made anatomically designed 
interbody fusion device in MS-DRGs 456, 457, and 458 may increase and 
we could consider further in the context of the cases reporting an 
extensive fusion procedure. However, due to the logic for case 
assignment to these MS-DRGs also being defined by diagnosis code logic, 
additional analysis would be needed prior to considering any 
modification to the current structure of these MS-DRGs. We stated that 
as we continue to evaluate how we may refine these spinal fusion MS-
DRGs, we are also seeking public comments and feedback on other factors 
that should be considered in the potential restructuring of MS-DRGs 
456, 457, and 458. Thus, for FY 2025, we proposed to maintain the 
current structure of MS-DRGs 456, 457, and 458, without modification. 
Feedback and other suggestions for future rulemaking may be submitted 
by October 20, 2024 and directed to MEARISTM at https://mearis.cms.gov/public/home.
    Next, we performed an expanded analysis for spinal fusion cases 
reported in MS-DRGs 459 and 460. We noted that cases grouping to MS-DRG 
459 have at least one secondary diagnosis MCC condition reported 
(``with MCC'') and because MS-DRG 460 is ``without MCC'', cases 
grouping to this MS-DRG may include the reporting of at least one 
secondary diagnosis CC condition (in addition to cases that may not 
report a CC (for example, NonCC)). Based on the findings for a subset 
of the cases (that is, the subset of cases reporting the performance of 
a spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device) in these MS-DRGs as 
previously discussed, and our review of the logic for case assignment 
to these MS-DRGs, we developed two categories of spinal fusion 
procedures to further examine. The first category was for the single 
level spinal fusions except cervical, and the second category was for 
the multiple level spinal fusions except cervical. We refer the reader 
to Table 6P.2g for the list of procedure codes we identified to 
categorize the single level spinal fusions except cervical and Table 
6P.2h for the list of procedure codes we identified to categorize the 
multiple level spinal fusions except cervical in association with the 
proposed rule and available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps. 
Findings from our analysis are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.056


[[Page 69051]]


    The data show that the 2,069 cases reporting a multiple level 
spinal fusion except cervical in MS-DRG 459 have a longer average 
length of stay (10.1 days versus 9.6 days) and higher average costs 
($57,209 versus $53,192) when compared to all the cases in MS-DRG 459. 
The data also show that the 2,069 cases reporting a multiple level 
spinal fusion except cervical in MS-DRG 459 have a longer average 
length of stay (10.1 days versus 8.9 days) and higher average costs 
($57,209 versus $46,031) when compared to the 1,098 cases reporting a 
single level spinal fusion except cervical in MS-DRG 459. For MS-DRG 
460, the data show that the 14,677 cases reporting a multiple level 
spinal fusion except cervical have a comparable average length of stay 
(3.9 days versus 3.4 days) and higher average costs ($36,932 versus 
$32,586) when compared to all the cases in MS-DRG 460. The data also 
show that the 14,677 cases reporting a multiple level spinal fusion 
except cervical have a comparable average length of stay (3.9 days 
versus 3.0 days) and higher average costs ($36,932 versus $28,110) when 
compared to the 14,058 cases reporting a single level spinal fusion 
except cervical in MS-DRG 460.
    In the proposed rule we stated that based on our review and 
analysis of the spinal fusion cases in MS-DRGs 459 and 460, we believe 
new MS-DRGs are warranted to differentiate between multiple level 
spinal fusions except cervical and single level spinal fusions except 
cervical to more appropriately reflect utilization of resources for 
these procedures, including those performed with an aprevoTM 
custom-made anatomically designed interbody fusion device.
    To compare and analyze the impact of our suggested modifications, 
we ran simulations using claims data from the September 2023 update of 
the FY 2023 MedPAR file. The following table illustrates our findings 
for all 16,746 cases reporting procedure codes describing multiple 
level spinal fusions except cervical.
[GRAPHIC] [TIFF OMITTED] TR28AU24.057

    We stated we applied the criteria to create subgroups in a base MS-
DRG as discussed in section II.C.1.b. of the preamble of the proposed 
rule and this final rule. We noted that, as shown in the table that 
follows, a three-way split of this proposed new base MS-DRG failed to 
meet the criterion that there be at least a 20% difference in average 
costs between the CC and NonCC (without CC/MCC) subgroup. The following 
table illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TR28AU24.058

    As discussed in section II.C.1.b. of the preamble of the proposed 
rule and this final rule, if the criteria for a three-way split fail, 
the next step is to determine if the criteria are satisfied for a two-
way split. We therefore applied the criteria for a two-way split for 
the ``with MCC and without MCC'' subgroups. We noted that, as shown in 
the table that follows, a two-way split of this proposed new base MS-
DRG was met. For the proposed MS-DRGs, there is at least (1) 500 or 
more cases in the MCC group and in the without MCC subgroup; (2) 5 
percent or more of the cases in the MCC group and in the without MCC 
subgroup; (3) a 20 percent difference in average costs between the MCC 
group and the without MCC group; (4) a $2,000 difference in average 
costs between the MCC group and the without MCC group; and (5) a 3-
percent reduction in cost variance, indicating that the proposed 
severity level splits increase the explanatory power of the base MS-DRG 
in capturing differences in expected cost between the proposed MS-DRG 
severity level splits by at least 3 percent and thus improve the 
overall accuracy of the IPPS payment system. The following table 
illustrates our findings for the suggested MS-DRGs with a two-way 
severity level split.
[GRAPHIC] [TIFF OMITTED] TR28AU24.059

    As a result, for FY 2025, we proposed to create new MS-DRGs 447 
(Multiple Level Spinal Fusion Except Cervical with MCC) and new MS-DRG 
448 (Multiple Level Spinal Fusion Except Cervical without MCC). We also 
proposed to revise the title for existing MS-DRGs 459 and 460 to 
``Single Level Spinal Fusion Except Cervical with MCC and without 
MCC'', respectively. In the proposed rule we stated that this proposal 
would better differentiate the resource utilization, severity of 
illness and technical complexity between single level and multiple 
level spinal fusions that do not include cervical spinal fusions in the 
logic for case assignment. The following table reflects a simulation of 
the proposed new MS-DRGs.

[[Page 69052]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.060

    In conclusion, we proposed to delete MS-DRGs 453, 454, and 455 and 
proposed to create 8 new MS-DRGs. We proposed to create new MS-DRG 426 
(Multiple Level Combined Anterior and Posterior Spinal Fusion Except 
Cervical with MCC), MS-DRG 427 (Multiple Level Combined Anterior and 
Posterior Spinal Fusion Except Cervical with CC), MS-DRG 428 (Multiple 
Level Combined Anterior and Posterior Spinal Fusion Except Cervical 
without CC/MCC), MS-DRG 402 (Single Level Combined Anterior and 
Posterior Spinal Fusion Except Cervical), MS-DRG 429 (Combined Anterior 
and Posterior Cervical Spinal Fusion with MCC), MS-DRG 430 (Combined 
Anterior and Posterior Cervical Spinal Fusion without MCC), MS-DRG 447 
(Multiple Level Spinal Fusion Except Cervical with MCC) and MS-DRG 448 
(Multiple Level Spinal Fusion Except Cervical without MCC) for FY 2025. 
We proposed the logic for case assignment to these proposed new MS-DRGs 
as displayed in Table 6P.2d, Table 6P.2e, Table 6P.2f, Table 6P.2g, and 
Table 6P.2h in association with the proposed rule and available via the 
CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps. We also proposed to revise the 
title for MS-DRGs 459 and 460 to ``Single Level Spinal Fusion Except 
Cervical with MCC and without MCC'', respectively. Lastly, as discussed 
in section II.C.14 of the preamble of the proposed rule, we proposed 
conforming changes to the surgical hierarchy for MDC 08.
    Comment: Commenters supported the proposed restructuring for the 
spinal fusion MS-DRGs for FY 2025. A commenter stated that the existing 
MS-DRGs have not kept pace with the rapid advancements in spine fusion 
technology and techniques, leading to significant financial strain on 
hospitals. According to the commenter, the cost differences associated 
with performing a one-level lumbar fusion compared to a multi-level 
fusion are substantial, not only in terms of the surgical time and 
complexity but also in postoperative care and rehabilitation. The 
commenter stated that the proposal represents a much-needed advancement 
in the payment structure for hospitals supporting these complex 
surgeries and acknowledges the varied complexity and resources required 
for these distinct types of surgeries. The commenter also stated that 
the proposal ensures a comprehensive approach that addresses the full 
spectrum of spinal fusion procedures. In addition, the commenter stated 
that this refined categorization will enable hospitals to receive more 
appropriate payment, reflecting the specific nature of each procedure 
and the level of care provided to patients with diverse spinal 
conditions. The commenter also stated that by aligning MS-DRGs more 
closely with the actual costs incurred, the new structure will allow 
hospitals to allocate resources more effectively and continue investing 
in high-quality patient care. Lastly, the commenter stated that the 
proposed changes recognize the variations in patient populations, 
including the different needs and recovery trajectories of those 
undergoing non-cervical versus cervical spine fusion surgeries.
    Another commenter stated that currently, MS-DRGs 453 through 455 do 
not adequately differentiate between the complexity and relative 
resource use associated with multiple level procedures. The commenter 
stated that this adjustment will lead to more accurate payment, 
resource allocation, and further aligns with the clinical accuracy and 
medical advancements of these procedures.
    A commenter stated it supported the proposed changes as it would 
create further specificity in coding. Another commenter also expressed 
appreciation for CMS's efforts to update the spinal fusion MS-DRGs to 
better reflect current clinical practice delineating single versus 
multiple level procedures with the detailed analysis that outlined the 
proposed changes. This commenter stated they plan to monitor the impact 
of the proposed revisions, if finalized, for both its customers and 
patients.
    Response: We thank the commenters for their support.
    Comment: A commenter stated it reviewed the proposed spinal fusion 
MS-DRG changes and while it found that most of the redistribution 
appears appropriate, they have concerns about the proposed MS-DRG 402 
(Single Level Combined Anterior and Posterior Spinal Fusion Except 
Cervical) because the ability to capture the impact of a CC or MCC is 
not reflected. The commenter performed its own analysis and stated that 
the single level combined anterior and posterior fusion cases have 
longer lengths of stay and higher average costs when a CC or MCC is 
present. According to the commenter, its analysis showed that the 
proposed MS-DRG 402 does not adequately reflect the resource 
consumption for patients with significant comorbid conditions. The 
commenter recommended that MS-DRG 402 not be finalized as a single MS-
DRG and instead suggested it be established as a three-way split MS-DRG 
(with MCC, with CC and without CC/MCC, respectively).
    Response: We appreciate the commenter's analysis. As discussed in 
the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 35981), we applied the 
criteria to create subgroups for the proposed new base MS-DRG. The 
criteria for a three-way split and both two-way splits failed, 
therefore, only a proposed new base MS-DRG was supported.
    Comment: Several commenters stated they supported CMS's review of 
the spinal fusion MS-DRGs to consider potential logic revisions. The 
commenters expressed appreciation and support for the distinction that 
new, revised and expanded spinal fusion MS-DRGs can provide for data 
analysis, notably in instances where multiple and single-level 
anatomically different spinal level location procedures are performed 
during the same operative episode. However, the commenters stated that 
it is essential to address and consider the logic for all the spinal 
fusion MS-DRGs to maintain the stability of reporting and to ensure 
capture of the technical complexity and medical severity indications 
for these procedures. The commenters requested that CMS consider 
delaying the proposal and provide additional insight and rationale as 
to why MS-DRGs 456, 457, and 458 (Spinal Fusion Except Cervical with 
Spinal Curvature, Malignancy, Infection or Extensive Fusions with MCC, 
with CC, and without CC/MCC, respectively) and MS-DRGs 471, 472, and 
473 (Cervical Spinal Fusion with MCC, with CC, and without CC/MCC, 
respectively), were not incorporated into the analysis for FY 2025.
    Response: We appreciate the commenters' support. We note that in 
the preamble of the FY 2025 IPPS/LTCH

[[Page 69053]]

PPS proposed rule (89 FR 35971 through 35985) and in this final rule, 
as part of our ongoing analysis of the manufacturer's request to 
reassign cases involving the aprevoTM device, we presented 
findings from our analysis of claims data from the September 2023 
update of the FY 2023 MedPAR file for MS-DRGs 456, 457, and 458, and 
cases reporting any one of the procedure codes describing the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device. We stated 
that based on our findings, the 13 cases we found in MS-DRGs 456 and 
457 (2 + 11 = 13, respectively) appeared to be grouping appropriately, 
however, the average costs for the 6 cases found in MS-DRG 458 showed a 
difference of approximately $13,880. We also stated that, because of 
the low volume of cases reporting the performance of a spinal fusion 
procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device in the ``without CC/MCC'' MS-DRG 458, 
and the low volume of cases reporting the performance of a spinal 
fusion procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device in MS-DRGs 456, 457, and 458 overall 
(2 + 11 + 6 = 19), for the expanded review of the claims data, we were 
sharing the results of our analysis in association with cases reporting 
extensive fusion procedures in MS-DRGs 456, 457, and 458. We further 
stated that we believed over time, that the volume of cases reporting 
the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device in MS-DRGs 456, 457, and 458 may increase and we could consider 
further in the context of the cases reporting an extensive fusion 
procedure. However, we also noted that due to the logic for case 
assignment to these MS-DRGs being defined by diagnosis code logic, 
additional analysis would be needed prior to considering any 
modification to the current structure of these MS-DRGs. We stated that 
as we continue to evaluate how we may refine these spinal fusion MS-
DRGs, we are also seeking public comments and feedback on other factors 
that should be considered in the potential restructuring of MS-DRGs 
456, 457, and 458. Thus, for FY 2025, we proposed to maintain the 
current structure of MS-DRGs 456, 457, and 458, without modification. 
We noted that feedback and other suggestions for future rulemaking may 
be submitted by October 20, 2024 and directed to MEARISTM at 
https://mearis.cms.gov/public/home.
    With respect to the commenters' concerns that we excluded analysis 
of MS-DRGs 471, 472, and 473 for FY 2025, we note that the MS-DRG 
request under consideration for ongoing review was related to 
assignment of cases reporting procedures involving use of the 
aprevoTM custom-made anatomically designed interbody spinal 
fusion device technology that is used in the performance of a spinal 
fusion procedure and specifically indicated for treatment of the 
anterior column of the thoracolumbar, lumbar, or lumbosacral vertebra. 
The procedure codes describing a custom-made anatomically designed 
interbody fusion device are not listed in the logic for case assignment 
to MS-DRGs 471, 472, and 473 because the logic for those MS-DRGs is 
specifically indicated for the cervical vertebrae. While not 
specifically discussed in the proposed rule, the manufacturer of the 
aprevoTM custom-made interbody spinal fusion device 
technology received a second Breakthrough Device designation for its 
technology in September 2023 that is indicated specifically for the 
treatment of patients with cervical spine disease. We anticipate, 
similar to the approach utilized for the treatment of patients with 
lumbar spine disease, that it is possible the manufacturer may request 
a unique procedure code(s) to describe the use of the technology for 
the cervical spine with the potential of applying for a new technology 
add-on payment and subsequent MS-DRG classification changes. For these 
reasons, we believe additional time is necessary as we consider how we 
may refine the cervical spinal fusion MS-DRGs. We are also seeking 
feedback on factors that should be considered in the potential 
restructuring of MS-DRGs 471, 472, and 473 for future rulemaking. For 
example, are there other patient-specific spinal fusion technologies 
currently in development or in use and indicated for cervical spine 
disease that should also be evaluated and considered. Feedback and 
other suggestions for future rulemaking may be submitted by October 20, 
2024 and directed to MEARISTM at https://mearis.cms.gov/public/home.
    Comment: A few commenters who appreciated CMS's attempts to 
recognize the differences in complexity between single level and 
multiple level spinal fusion procedures stated their belief that 
additional time is needed for hospitals to assess the impact of the 
proposed changes. According to the commenters, the proposed changes may 
have a negative impact on community hospitals, which they stated tend 
to treat less-complex cases.
    A couple commenters stated that CMS has previously given two years 
notice to hospitals about potential changes and provided the example of 
CMS's request for public comments and feedback on potential 
restructuring for MS-DRGs 023 through 027, as discussed in FY 2024 and 
FY 2025 rulemaking. Another commenter stated that the proposed 
restructuring of the spinal fusion MS-DRGs is a major revision, and 
without any warning to hospitals. However, this commenter also stated 
that regardless of the outcome for the proposed reorganization of the 
spinal fusion MS-DRGs, CMS should address the resource utilization 
disparity related to the use of the aprevoTM custom-made 
anatomically designed spine fusion devices. According to the commenter, 
failure to implement this issue for FY2025 will create a financial 
disincentive for hospitals to utilize this innovative technology, thus 
eliminating access for patients. The commenter recommended CMS reassign 
cases reporting a custom-made anatomically designed interbody fusion 
device to MS-DRGs that address the higher resource utilization and to 
ensure continued access to the technology. This same commenter also 
stated its belief that the proposal should undergo a comprehensive 
review by a spine group to identify and mitigate any unintended 
consequences.
    Response: We appreciate the commenters' feedback. As discussed in 
prior rulemaking (86 FR 44878), the MS-DRG system is a system of 
averages and it is expected that within the diagnostic related groups, 
some cases may demonstrate higher than average costs, while other cases 
may demonstrate lower than average costs. It is generally expected that 
as a result of the annual MS-DRG reclassifications that are finalized, 
the experience of different categories of hospitals may differ based on 
the population of patients they treat and the services offered by the 
facility.
    With respect to the commenter's concern that hospitals had no 
warning regarding the proposed restructuring for a subset of the spinal 
fusion MS-DRGs, we note that in addition to proposing these changes in 
the FY 2025 IPPS/LTCH PPS proposed rule, we discussed this topic in the 
FY 2024 IPPS/LTCH PPS rulemaking, including noting that our work in 
this area was ongoing, and that we would continue to examine the data 
and consider these issues as we develop potential future rulemaking 
proposals. Providers have had the opportunity to consider how spinal 
fusion cases (including cases reporting

[[Page 69054]]

the use of a custom-made anatomically designed interbody fusion device) 
are reported in the claims data for their respective facilities and 
grouped under the IPPS MS-DRGs, as well as to submit requested changes 
to the classifications for these MS-DRGs for CMS's consideration. We 
further note that, as stated in the preamble of the annual IPPS 
rulemakings, section 1886(d)(4)(C) of the Act requires that the 
Secretary adjust the DRG classifications and relative weights at least 
annually to account for changes in resource consumption. These 
adjustments are made to reflect changes in treatment patterns, 
technology, and any other factors that may change the relative use of 
hospital resources. We include these changes as part of our annual IPPS 
rulemaking, which provides the public, including any particular 
interested parties, the opportunity to review and comment on these 
proposals.
    Comment: A few commenters who expressed appreciation for CMS's 
efforts to update the spinal fusion MS-DRGs to better reflect current 
clinical practice and facility costs more accurately stated they need 
more information about the potential impact of the proposed 
designations and the opportunity to study the proposed changes further. 
These commenters recommended that CMS not conduct this restructuring 
while also considering the spinal fusion episode accountability model 
under the Transforming Episode Accountability Model (TEAM).
    Response: We appreciate the commenters' feedback. We refer the 
reader to section X.A.3.b. of the preamble of this final rule for 
further discussion of how the proposed restructuring of the spinal 
fusion MS-DRGs may be considered in connection with the spinal fusion 
episode category under TEAM.
    Comment: A few commenters who expressed support for potential 
changes to the logic for case assignment to the spinal fusion MS-DRGs 
stated they reviewed data provided by CMS with the AOR/BOR (After 
Outliers Removed/Before Outliers Removed) version 41 and version 42 
files, and Table 5--Proposed List of Medicare Severity Diagnosis 
Related Groups (MS-DRGs), Relative Weighting Factors, and Geometric and 
Arithmetic Mean Length of Stay that was made available in association 
with the proposed rule. The commenters stated it was unclear if the 
current proposed spinal fusion MS-DRGs better reflect resource 
consumption based on its findings of a minimal change in the case mix 
index between version 41 (4.6504) and version 42 (4.6454). The 
commenters suggested further analysis of all the spinal fusion MS-DRGs 
should be considered.
    A commenter stated that the version 42 AOR table showed more spinal 
fusion cases in comparison to the total spinal fusion cases included in 
the rule discussion. The commenter questioned if there was duplication 
of the same patients being counted based on the logic lists for the 
proposal and stated it was not clear how duplications may have been 
handled in the data if there was both a multiple level fusion and 
single level fusion reported on the same case.
    Response: It is not entirely clear how the commenters performed the 
case-mix index calculations, however, based on the data table provided 
by the commenters, we believe the commenters used the case counts from 
the AOR file and relative weights to calculate a case-weighted average 
relative weight for the spinal fusion MS-DRGs and are referring to that 
as a case-mix index. We note that under the proposed restructuring, the 
same population of cases among the spinal fusion MS-DRGs is being 
redistributed, therefore, we would not expect a significant shift in 
the case-mix index.
    With respect to the differences in case counts between the version 
42 AOR table in comparison to the number of cases included in the rule 
discussion for the proposed spinal fusion MS-DRGs, we note that, as 
stated in the proposed rule, our MS-DRG analysis was based on ICD-10 
claims data from the September 2023 update of the FY 2023 MedPAR file, 
which contains hospital bills received from October 1, 2022, through 
September 30, 2023. In comparison, as also stated in the proposed rule, 
the FY 2023 MedPAR file used in developing the proposed MS-DRG relative 
weights for FY 2025 included discharges occurring on October 1, 2022, 
through September 30, 2023, based on bills received by CMS through 
December 31, 2023.
    Comment: A commenter noted that the titles of the ICD-10-PCS 
procedure codes that were created to report spinal fusion procedures 
using the aprevoTM customized interbody fusion device were 
revised, effective October 1, 2023, as a result of the manufacturer's 
concerns that some claims may have been unintentionally miscoded. The 
commenter stated that per the materials from the March 2023 ICD-10 
Coordination and Maintenance Committee meeting, the manufacturer 
requested the title revision to help minimize misinterpretation of the 
term ``customizable.'' The commenter remarked that CMS was unable to 
confirm that claims reporting any one of the codes created that 
describe use of the aprevoTM device had in fact been 
miscoded, and as discussed in the proposed rule, while a newly 
established ICD-10 code may be associated with an application for a new 
technology add-on payment, such codes are not generally established to 
be product specific. The commenter added that CMS further stated that 
if, after consulting the official coding guidelines, a provider 
determines that an ICD-10 code associated with a new technology add-on 
payment describes the technology that they are billing, the hospital 
may report the code and be eligible to receive the associated add-on 
payment. The commenter stated that some ICD-10-PCS codes are intended 
to be product specific, as the code title(s) often represent a 
manufacturer's specific technology, particularly in the New Technology 
section. The commenter added that the Coding Clinic for ICD-10-CM/PCS 
Editorial Advisory Board has determined that some ICD-10-PCS codes are 
only intended for a specific product and should not be used for other 
devices or substances.
    The commenter stated that in the case of the aprevoTM 
device, it is not clear why the titles of the associated procedure 
codes were revised to more clearly describe this specific device and 
address the manufacturer's concerns regarding miscoding, if it was 
appropriate to assign the codes for spinal fusion procedures using 
devices other than the aprevoTM device. The commenter 
further stated that absence of clarity regarding device specific codes 
may have an unintended effect on the use of new technology due to 
concerns regarding lack of payment, which they stated may have a 
negative impact on clinical outcomes.
    Response: We appreciate the commenter's feedback. With respect to 
the commenter's remarks about revisions made to the code title for the 
procedure codes describing spinal fusion procedures with an 
aprevoTM interbody fusion device, we note that we addressed 
this issue when we were made aware of it and believe the code title is 
now appropriate. It was brought to our attention that the term 
``customizable'' as reflected in the original code title was leading to 
confusion with devices that utilize expandable cages and are 
``customized'' to fit during the procedure. In response to the 
manufacturer's concerns regarding potential miscoded claims and its 
request to revise the original code descriptor to help minimize 
misinterpretation of the term ``customizable'' by providers' coding 
personnel, we presented and received

[[Page 69055]]

public support to finalize the proposed revision to the code titles. 
The intent was not to specifically limit the reporting of the code, 
since, as stated in the proposed rule, while a newly established ICD-10 
code may be associated with an application for a new technology add-on 
payment, such codes are not generally established to be product 
specific.
    We note that historically, our approach to proposing and finalizing 
new procedure codes through the ICD-10 Coordination and Maintenance 
Committee meeting process was largely built on the fact that the 
procedure classification system was designed to report the procedure 
performed, not the device or other specific technology used. However, 
we also note that with the implementation of the new technology add-on 
payment policy, aspects of that approach to creating new procedure 
codes have been become more complex. While we have strived to maintain 
consistency with that historical approach, we also recognize the 
responsibility to balance and support the requirements of the new 
technology add-on payment policy, which have continued to evolve since 
its inception.
    The commenter is correct that certain ICD-10-PCS codes located in 
the New Technology section of the ICD-10-PCS procedure classification, 
also known as ``Section X'', are product specific. For example, a 
procedure code request for the administration of a therapeutic agent, 
regardless of it being related to a new technology add-on payment 
application, is often presented as a proposal through the ICD-10 
Coordination and Maintenance Committee meeting process, and 
subsequently finalized (following review and consideration of the 
public comments) with the generic name of the agent in the code 
description (title). Oftentimes, there is a clinical need and several 
benefits to capture a certain level of specificity for purposes of data 
collection, such as tracking a particular patient population, or 
assessing clinical outcomes. We note that following the finalization of 
a new procedure code that is classified within the new technology 
section (Section X) of ICD-10-PCS, we discuss the disposition of that 
code after a 3-year period during a future ICD-10 Coordination and 
Maintenance Committee meeting, which also generally aligns with the 
expiration of a product's eligibility for an add-on payment under the 
new technology add-on payment policy. We also take this opportunity to 
point out that a procedure, service, or technology is not required to 
submit a new technology add-on payment application for consideration of 
a Section X code. As discussed in prior rulemaking (80 FR 49434 through 
49435), when the ICD-10-PCS New Technology section was under 
development, we established that the purpose of the New Technology 
section is to also provide a mechanism to capture services that would 
not normally be coded and reported in the inpatient setting.
    We appreciate the commenter's feedback on this topic and will 
continue to consider how to better address coding proposals in 
connection with new technologies for future discussion at the ICD-10 
Coordination and Maintenance Committee meeting.
    Comment: A commenter (the manufacturer of the aprevoTM 
custom-made anatomically designed interbody fusion device) stated that 
while CMS partially addressed the request to assign spinal fusion 
procedures reporting the use of a custom-made anatomically designed 
interbody fusion device to appropriate MS-DRGs that more closely align 
with the increase in resource utilization, the analysis under the 
proposed restructuring did not specifically reflect data related to the 
resource utilization for custom-made anatomically designed devices 
under the single level versus multiple level MS-DRG construct.
    The commenter provided a comprehensive list detailing the sequence 
of events related to prior rulemaking discussions involving custom-made 
anatomically designed interbody fusion devices including its approved 
eligibility for new technology add-on payments, revisions to the 
procedure code title to change the description from ``customizable'' to 
``custom-made anatomically designed'' interbody fusion device, and 
prior data analysis findings. The commenter also provided extensive 
clinical background on custom-made anatomically designed interbody 
fusion devices and reiterated the designation as an FDA Breakthrough 
technology. Additionally, the commenter stated that published clinical 
data has shown that custom-made anatomically designed interbody fusion 
devices improve care by delivering more precise patient specific 
alignment,6 7 which they stated has been proven to reduce 
the risk of revision surgery.
---------------------------------------------------------------------------

    \6\ Smith, et al. Global Spine J. 2023 Nov 21.
    \7\ Sadrameli S, et al. ISASS 2024.
---------------------------------------------------------------------------

    In response to publication of the FY 2025 IPPS/LTCH PPS proposed 
rule, the commenter stated its belief that 1.) CMS contradicted its 
position on the original description of the procedure codes by making 
the statement in the FY 2025 IPPS/LTCH PPS proposed rule that a newly 
established ICD-10 code may be associated with an application for new 
technology add-on payment and such codes are not generally established 
to be product specific and 2.) CMS acknowledged that the description 
used in the original ICD-10 code inadvertently described several types 
of technologies, and this likely contributed to the miscoded claims. 
According to the commenter, because CMS decided to consider resource 
utilization disparities for all cases reporting the use of a custom-
made anatomically designed interbody spinal fusion device in its 
analysis for FY 2025 (that is, they stated CMS did not limit its 
analysis to cases associated only with the list of providers provided 
by the manufacturer), the commenter's original requested reassignments 
are no longer supported by data and therefore, the commenter stated 
revised reassignments are appropriate to request.
    The commenter stated that CMS sought to find an alternative 
explanation for the resource incoherence demonstrated across the cases 
reporting any one of the 12 procedure codes describing a spinal fusion 
procedure with a custom-made anatomically designed interbody spinal 
fusion device and that the expanded analysis was unrelated to the 
original request because it did not provide data related to the use of 
custom-made anatomically designed devices under the proposed single 
level versus multiple level MS-DRG construct. The commenter further 
stated that the absence of this specific data (single level versus 
multiple level) in the proposed rule necessitated the submission of a 
revised request under the proposed new structure and the findings from 
its analysis for CMS's review and consideration.
    The commenter provided prior examples of MS-DRG classification 
requests comparing length of stay differences and low claims volume to 
demonstrate instances for which CMS reassigned cases from a lower 
severity level MS-DRG to a higher severity level MS-DRG, including the 
proposal regarding the Neuromodulation Device Implant for Heart Failure 
(BarostimTM Baroreflex Activation Therapy), as discussed in 
the preamble of the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 35959 
through 35962) and in section II.C.4.b. of the preamble of this final 
rule.
    The commenter also remarked on CMS's discussion of the data 
analysis presented in the proposed rule regarding the wide range in 
average costs for claims reporting the use of a

[[Page 69056]]

custom-made anatomically designed interbody fusion device. The 
commenter stated it engaged a contractor to assess the distribution of 
costs and length of stay for all spinal fusion cases and cases 
reporting the use of a custom-made anatomically designed interbody 
fusion device using FY 2023 Q1-Q4 inpatient standard analytical file 
(SAF) data. According to the commenter, the findings from its analysis 
demonstrate that cases reporting the use of a custom-made anatomically 
designed interbody fusion device consistently show higher average costs 
in comparison to the average costs of all spinal fusion cases in their 
respective MS-DRG, which they stated are an indication that the higher 
costs are not an artifact of a few cases.
    The commenter conducted additional analyses using the FY 2023 
MedPAR data with the logic lists from the tables provided in 
association with the proposed rule and stated that its findings 
demonstrate disparities in resource utilization for cases reporting use 
of a custom-made anatomically designed interbody fusion device among 
the proposed multiple level and single level spinal fusion MS-DRGs. 
Specifically, the commenter stated cases reporting the use of a custom-
made anatomically designed interbody fusion device under the proposed 
MS-DRG structure should be reassigned as shown in the table that 
follows.
[GRAPHIC] [TIFF OMITTED] TR28AU24.061

    According to the commenter, findings from its analysis under the 
proposed MS-DRG structure support the reassignment of cases reporting 
the use of a custom-made anatomically designed interbody fusion device 
from the lower severity proposed MS-DRGs to the higher severity level 
proposed MS-DRGs because the resource utilization of cases reporting 
the use of a custom-made anatomically designed interbody fusion device 
align more closely with the resource utilization of cases in the 
requested MS-DRG. The commenter stated that the requested reassignments 
are consistent with other MS-DRG classifications CMS has previously 
finalized and therefore, the precedent exists.
    The commenter also provided an alternative recommendation for CMS's 
consideration based on the current, existing spinal fusion MS-DRGs, 
with minor modifications from its initial FY 2024 request for the 
reassignment of cases reporting a custom-made anatomically designed 
interbody fusion device. Specifically, the commenter provided its 
analysis under the existing MS-DRGs and indicated that cases reporting 
the use of a custom-made anatomically designed interbody fusion device 
under the existing MS-DRG structure should be considered for 
reassignment as shown in the table that follows, if the proposed 
structure is not finalized.
[GRAPHIC] [TIFF OMITTED] TR28AU24.062

    Based on the findings from its analyses under the proposed and 
current MS-DRG structure for spinal fusions, the commenter asserted 
that reassignment of cases reporting the use of a custom-made 
anatomically

[[Page 69057]]

designed interbody fusion device is supported by compelling data that 
demonstrates a resource utilization disparity for cases reporting the 
technology. The commenter stated that without appropriate payment, 
Medicare beneficiaries will lose access to the technology, and stated 
they deserve continued access to the technology because it improves 
patient care. The commenter urged CMS to finalize the reassignment of 
these cases for FY 2025.
    Some commenters stated that the new technology add-on payment for 
custom-made anatomically designed interbody spinal fusion devices is 
ending on September 30, 2024, and if CMS decides to move forward with 
the proposed MS-DRG changes without the reassignment of the procedure 
codes describing the custom-made anatomically designed technology to 
more appropriate MS-DRGs, it would create a financial disincentive for 
hospitals and eliminate access to the breakthrough technology for 
patients. The commenters reiterated prior concerns raised in public 
comments by spine surgeons that were discussed in the FY 2024 
rulemaking and stated that without adequate payment, hospitals will not 
authorize use of the technology.
    A few commenters suggested that if CMS is going to finalize the 
proposed restructuring, consideration be given to deleting MS-DRGs 459 
and 460 and creating new MS-DRGs for single level spinal fusion except 
cervical with MCC and without MCC because they stated the proposed 
revisions would significantly change the types of cases classified to 
these MS-DRGs.
    Response: We appreciate the commenters' feedback. In response to 
the commenter's statement that CMS contradicted its position on the 
original description of the procedure codes, we note that the 
manufacturer contacted CMS about its concerns. CMS' actions were to 
provide clarity to all parties in light of concerns that the 
manufacturer raised. As a general matter, CMS aims to provide clarity 
when possible, and we recognized there could be impacts to coding, data 
collection, and payment, and therefore we took the opportunity to 
revise the code title in this case. Specifically, as stated above, in 
response to the manufacturer's concerns regarding potential miscoded 
claims and its request to revise the original code descriptor to help 
minimize misinterpretation of the term ``customizable'' by providers' 
coding personnel, we presented and received public support to finalize 
the proposed revision to the code titles. We wish to clarify that CMS 
did not specifically acknowledge that the description used in the 
original ICD-10 code inadvertently described several types of 
technologies, and that this likely contributed to the miscoded claims. 
As discussed in the proposed rule and previously in this final rule, we 
provided clarification that finalization of the revised code title was 
not intended to specifically limit the reporting of the code, since a 
newly established ICD-10 code that may be associated with an 
application for a new technology add-on payment is generally not 
established to be product specific.
    We disagree with the commenter's assertion that CMS contradicted 
its prior position on length of stay differences with respect to 
clinical coherence. We note that in the examples provided by the 
commenter of MS-DRG classification requests comparing length of stay 
differences and low claims volume to demonstrate instances for which 
CMS reassigned cases from a lower severity level MS-DRG to a higher 
severity level MS-DRG, the topics were discussed and considered in more 
than one rulemaking cycle prior to finalizing the reassignment of cases 
from the lower severity level to the higher severity level and length 
of stay was still a factor under consideration. We also note that 
because of the lag in claims data used in our analysis of MS-DRG 
classification requests, depending on the specific procedures and 
technology under consideration, it is not uncommon to delay a decision 
and continue to monitor the data until additional analysis can be 
performed.
    In this case, CMS performed additional analyses to examine if other 
factors could be identified as contributing to the increased resource 
utilization for cases reporting any one of the 12 procedure codes 
describing a spinal fusion procedure with a custom-made anatomically 
designed interbody spinal fusion device. We disagree that the expanded 
analysis was unrelated to the original request because it did not 
specifically provide data related to the use of custom-made 
anatomically designed devices under the proposed single level versus 
multiple level MS-DRG construct, however, we appreciate the commenter's 
submission of suggested alternative reassignments under the proposed 
new structure and optional consideration under the existing structure.
    In response to the commenter's request to reassign cases reporting 
the use of a custom-made anatomically designed interbody fusion device 
under the proposed restructuring for the spinal fusion MS-DRGs, we 
analyzed claims data from the September update of the FY 2023 MedPAR 
file for proposed MS-DRGs 402, 426, 427, 428, 447, 448, 459 and 460 and 
cases reporting spinal fusion using a custom-made anatomically designed 
interbody fusion device. Our findings are shown in the following table.

[[Page 69058]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.063

    The findings show that the 307 cases reporting a spinal fusion 
procedure using a custom-made anatomically designed interbody fusion 
device in MS-DRGs 402, 426, 427, 428, 447, 448, 459 and 460 have higher 
average costs in comparison to the average costs of all the cases in 
their respective proposed MS-DRG. We note, as shown in the table, that 
there were zero cases found to report the use of a custom-made 
anatomically designed interbody fusion device in proposed revised MS-
DRG 459. For proposed MS-DRGs 402 and 428, the findings show that the 
cases reporting the use of a custom-made anatomically designed 
interbody fusion device have a comparable average length of stay 
compared to all the cases in their respective proposed MS-DRG. The 
findings also show that for proposed MS-DRGs 426 and 427, the cases 
reporting the use of a custom-made anatomically designed interbody 
fusion device have a longer average length of stay compared to all the 
cases in their respective proposed MS-DRG. For proposed MS-DRG 447, we 
note that the single case reporting the use of a custom-made 
anatomically designed interbody fusion device is an outlier. For 
proposed MS-DRG 448 and proposed revised MS-DRG 460, cases reporting 
the use of a custom-made anatomically designed interbody fusion device 
have a shorter average length of stay compared to all the cases in 
their respective proposed MS-DRG.
    We reviewed the requested reassignment for the 66 cases from 
proposed MS-DRG 402 to proposed MS-DRG 428 and note that the logic for 
case assignment to proposed MS-DRG 428 is comprised of cases reporting 
a multiple level combined anterior and posterior fusion (except 
cervical) without a CC/MCC and the logic for case assignment for 
proposed MS-DRG 402 is comprised of cases reporting a single level 
combined anterior and posterior fusion (except cervical) that may also

[[Page 69059]]

have an MCC or CC reported since it is a proposed base MS-DRG that is 
not subdivided by severity. The proposed logic for case assignment to 
each of these proposed MS-DRGs includes the procedure codes describing 
the use of a custom-made anatomically designed interbody fusion device 
in the definition of the respective proposed MS-DRG. Therefore, the 
reassignment of cases reporting the use of a custom-made anatomically 
designed interbody fusion device from proposed MS-DRG 402 to proposed 
MS-DRG 428 would not be feasible and would not be consistent with the 
logic of the proposed MS-DRGs which is intended to differentiate a 
single level combined anterior and posterior fusion from a multiple 
level combined anterior and posterior spinal fusion.
    Next, we reviewed the requested reassignment for the 51 cases 
reporting the use of a custom-made anatomically designed interbody 
fusion device from proposed MS-DRG 428 (without CC/MCC) to proposed MS-
DRG 427 (with CC) and for the 101 cases from proposed MS-DRG 427 (with 
CC) to proposed MS-DRG 426 (with MCC). We note that because the 
proposed MS-DRGs are subdivided with a three-way split, it is not 
feasible to reassign cases reporting the use of a custom-made 
anatomically designed interbody fusion device as requested at this 
time. Generally, with a three-way split, the requested reassignment of 
cases can only be considered for movement from one severity level to 
the next highest severity level. For example, consideration could be 
given to reassign cases from the ``without CC/MCC'' severity level to 
the ``with CC'' severity level or from the ``with CC'' level to the 
``with MCC'' severity level. Because the proposed logic lists for case 
assignment to each of these proposed MS-DRGs includes the procedure 
codes describing the use of a custom-made anatomically designed 
interbody fusion device in the definition of the respective proposed 
MS-DRG, the GROUPER software is not able to exclude cases reporting a 
custom-made anatomically designed interbody fusion device from grouping 
to proposed MS-DRG 426 (``with MCC'') that would otherwise group to 
proposed MS-DRG 428 (``without CC/MCC'').
    We then reviewed the requested reassignment for the 38 cases 
reporting the use of a custom-made anatomically designed interbody 
fusion device from proposed revised MS-DRG 460 to proposed MS-DRG 447. 
We note that the logic for case assignment to proposed MS-DRG 447 is 
comprised of cases reporting a multiple level spinal fusion (except 
cervical) and the logic for case assignment for proposed revised MS-DRG 
460 is comprised of cases reporting a single level spinal fusion 
(except cervical). The proposed logic for case assignment to each of 
these proposed MS-DRGs includes the procedure codes describing the use 
of a custom-made anatomically designed interbody fusion device in the 
definition of the respective proposed MS-DRG. Therefore, the 
reassignment of the 38 cases reporting the use of a custom-made 
anatomically designed interbody fusion device from proposed revised MS-
DRG 460 to proposed MS-DRG 447 would not be feasible and would not be 
consistent with the logic of the proposed MS-DRGs which is intended to 
differentiate a single level spinal fusion from a multiple level spinal 
fusion.
    Lastly, we reviewed the requested reassignment for the 26 cases 
reporting the use of a custom-made anatomically designed interbody 
fusion device from proposed MS-DRG 448 to proposed MS-DRG 447. Based on 
the logic lists for case assignment and because these MS-DRGs are 
subdivided by a two-way split that both describe multiple level spinal 
fusion (except cervical), we determined it would be feasible to 
reassign cases from the ``without MCC'' severity level (MS-DRG 448) to 
the ``with MCC'' severity level (MS-DRG 447).
    As previously described, when MS-DRGs are subdivided with a three-
way split, the requested reassignment of cases can only be considered 
from one severity level to the next highest severity level. In our 
review of the data for proposed MS-DRGs 426, 427, and 428, we 
considered the average costs of the 24 cases found in proposed MS-DRG 
426 reporting the use of a custom-made anatomically designed interbody 
fusion device compared to the average cost of all the cases in proposed 
MS-DRG 426 ($103,956 versus $91,358) and the average costs of the 101 
cases found in proposed MS-DRG 427 reporting the use of a custom-made 
anatomically designed interbody fusion device compared to the average 
cost of all the cases in proposed MS-DRG 427 ($76,827 versus $64,065). 
Although the average length of stay for cases reporting a custom-made 
anatomically designed interbody fusion device in proposed MS-DRG 427 is 
shorter in comparison to the average length of stay of all the cases in 
proposed MS-DRG 426, we believe the reassignment of cases reporting the 
use of a custom-made anatomically designed interbody fusion device from 
proposed MS-DRG 427 (with CC) to proposed MS-DRG 426 (with MCC) is 
supported and better reflects the resource utilization and complexity 
of cases using the custom-made anatomically designed interbody fusion 
device technology in a multiple level combined anterior and posterior 
spinal fusion. We recognize that the 51 cases found in proposed MS-DRG 
428 reporting the use of a custom-made anatomically designed interbody 
fusion device have higher average costs compared to the average cost of 
all the cases in MS-DRG 428 ($64,038 versus $50,097), however, as 
previously described, we are unable to accommodate two severity level 
reassignment requests for an MS-DRG subdivided by a three-way split at 
this time.
    We noted earlier in this section of the preamble of this final 
rule, in our review of the requested reassignment of cases reporting 
the use of a custom-made anatomically designed interbody fusion device 
from proposed MS-DRG 448 to proposed MS-DRG 447 that the request was 
feasible based on the logic of the proposed MS-DRGs that are subdivided 
with a two-way split. In our review of the data for proposed MS-DRGs 
447 and 448, we considered the average costs of the 26 cases found in 
proposed MS-DRG 448 reporting the use of a custom-made anatomically 
designed interbody fusion device compared to the average cost of all 
the cases in proposed MS-DRG 448 ($62,831 versus $36,932). We also 
considered the one case found in proposed MS-DRG 447 reporting the use 
of a custom-made anatomically designed interbody fusion device to be an 
outlier with costs of $288,499 compared to the average costs of all the 
cases in proposed MS-DRG 447 ($57,209). We believe the reassignment of 
cases reporting the use of a custom-made anatomically designed 
interbody fusion device from proposed MS-DRG 448 (without MCC) to 
proposed MS-DRG 447 (with MCC) is supported and better reflects the 
resource utilization and complexity of cases using the custom-made 
anatomically designed interbody fusion device technology in a multiple 
level anterior and posterior spinal fusion.
    As previously discussed, we determined that the requested 
reassignment of cases reporting the use of a custom-made anatomically 
designed interbody fusion device from proposed revised MS-DRG 460 to 
proposed MS-DRG 447 would not be feasible based on the logic for case 
assignment. However, based on the data findings, we believe it is 
appropriate to consider the reassignment of cases reporting the use of 
a custom-made anatomically designed interbody fusion device from 
proposed revised MS-DRG

[[Page 69060]]

460 to proposed revised MS-DRG 459. In our review of the data for 
proposed revised MS-DRGs 459 and 460, we considered the average costs 
of the 38 cases found in proposed revised MS-DRG 460 reporting the use 
of a custom-made anatomically designed interbody fusion device compared 
to the average cost of all the cases in proposed revised MS-DRG 460 
($47,138 versus $32,586). While there were no cases found to report the 
use of a custom-made anatomically designed interbody fusion device in 
proposed revised MS-DRG 459, we considered the average costs of all the 
cases in proposed revised MS-DRG 459 ($53,192). While the average 
length of stay of the cases reporting a custom-made anatomically 
designed interbody fusion device are shorter (2.1 days versus 9.6 
days), we believe the reassignment of cases reporting the use of a 
custom-made anatomically designed interbody fusion device from proposed 
revised MS-DRG 460 (without MCC) to proposed revised MS-DRG 459 (with 
MCC) is supported and better reflects the resource utilization of cases 
using the custom-made anatomically designed interbody fusion device 
technology in a single level spinal fusion. As also previously 
discussed, a few commenters suggested that if the proposed 
restructuring was to be finalized, consideration be given to deleting 
proposed revised MS-DRGs 459 and 460 and creating new MS-DRGs for 
single level spinal fusion except cervical with MCC and without MCC, 
respectively, because the proposed revisions would significantly change 
the types of cases classified to these MS-DRGs. We agree with the 
commenters that the proposed revisions to the MS-DRG logic change the 
types of cases that would be classified to proposed revised MS-DRGs 459 
and 460. Specifically, because the logic for case assignment to 
existing MS-DRGs 459 and 460 was proposed to be restructured to better 
differentiate between single level spinal fusions (except cervical) and 
multiple level spinal fusions (except cervical), it would not be 
appropriate to retain the existing MS-DRG numbers 459 and 460 with 
revised titles. We proposed to create new MS-DRGs 447 and 448 to 
reflect multiple level spinal fusion procedures (except cervical) 
therefore, maintaining the existing MS-DRG numbers of 459 and 460 for 
the single level spinal fusions (except cervical) logic only could 
potentially result in confusion about the logic for case assignment. If 
users were to reference MS-DRG numbers 459 and 460 only, in the absence 
of the full MS-DRG titles, others may not be aware that the logic for 
case assignment to these MS-DRGs had changed effective FY 2025. As 
such, we agree that existing MS-DRG numbers 459 and 460 should be 
deleted.
    We recognize that with the requested reassignments the average 
length of stay for cases reporting a custom-made anatomically designed 
interbody fusion device varies from the average length of stay for all 
the cases in the requested MS-DRGs, and we continue to believe that 
length of stay is a factor in assessing clinical coherence, however, we 
also consider the use of a specific technology in the performance of a 
procedure as a measure of complexity in connection with resource 
consumption, particularly when that technology is indicated for a 
specific population. In the case of custom-made anatomically designed 
interbody fusion devices, the technology is indicated for patients who 
have complicated spinal anatomy necessitating individualized treatment 
plants to precisely address spinal alignment needs and reduce the risk 
of revision surgery.
    After consideration of the public comments we received, we are 
finalizing our proposal to delete MS-DRGs 453, 454, and 455 and to 
create new MS-DRGs 426, 427, and 428, with modification, for FY 2025. 
Specifically, we are finalizing our proposal with modification to 
assign cases reporting the use of a custom-made anatomically designed 
interbody fusion device with a CC to new MS-DRG 426. Conforming changes 
to the GROUPER logic are also are shown in Table 6P.2e associated with 
this final rule and available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps and also as reflected in the final version of ICD-10 MS-
DRG Definitions Manual, version 42, available in association with this 
final rule and available via the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software. Accordingly, the finalized MS-DRG 
titles are MS-DRG 426 ``Multiple Level Combined Anterior and Posterior 
Spinal Fusion Except Cervical with MCC or Custom-Made Anatomically 
Designed Interbody Fusion Device'', MS-DRG 427 ``Multiple Level 
Combined Anterior and Posterior Spinal Fusion Except Cervical with CC'' 
and MS-DRG 428 ``Multiple Level Combined Anterior and Posterior Spinal 
Fusion Except Cervical without CC/MCC'' effective October 1, 2024, for 
FY 2025.
    We are also finalizing our proposal to create new MS-DRGs 447 and 
448, with modification, for FY 2025. Specifically, we are finalizing 
our proposal with modification to assign cases reporting the use of a 
custom-made anatomically designed interbody fusion device without an 
MCC to MS-DRG 447. Conforming changes to the GROUPER logic are shown in 
Table 6P.2h associated with this final rule and available on the CMS 
website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps and also reflected in the final version of 
ICD-10 MS-DRG Definitions Manual, version 42, available in association 
with this final rule and available via the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software. Accordingly, the 
finalized MS-DRG titles are MS-DRG 447 ``Multiple Level Anterior and 
Posterior Spinal Fusion Except Cervical with MCC or Custom-Made 
Anatomically Designed Interbody Fusion Device'' and MS-DRG 448 
``Multiple Level Anterior and Posterior Spinal Fusion Except Cervical 
without MCC'' effective October 1, 2024, for FY 2025.
    As previously discussed, we stated we believe the reassignment of 
cases reporting the use of a custom-made anatomically designed 
interbody fusion device from proposed revised MS-DRG 460 (without MCC) 
to proposed revised MS-DRG 459 (with MCC) is supported and agree with 
the commenters that the proposed revisions to the MS-DRG logic change 
the types of cases that would be classified to MS-DRGs 459 and 460. As 
previously noted, the logic for case assignment to existing MS-DRGs 459 
and 460 was proposed to be restructured to better differentiate between 
single level and multiple level spinal fusions, therefore it would not 
be appropriate to retain the existing MS-DRG numbers 459 and 460 with 
revised titles because the cases that group to these MS-DRGs would 
change. Therefore, for FY 2025, we are deleting MS-DRGs 459 and 460, 
and finalizing the creation of MS-DRGs 450 and 451. The logic for case 
assignment to MS-DRGs 450 and 451 is comprised of the logic lists that 
were initially proposed for revised MS-DRGs 459 and 460, with 
modification. We are also finalizing the assignment of cases reporting 
the use of a custom-made anatomically designed interbody fusion device 
without an MCC to MS-DRG 450. Conforming changes to the GROUPER logic 
are shown in Table 6P.2g associated with this final rule and available 
on the CMS website at https://www.cms.gov/medicare/payment/prospective-
payment-systems/acute-

[[Page 69061]]

inpatient-pps and also reflected in the final version of ICD-10 MS-DRG 
Definitions Manual, version 42, available in association with this 
final rule and available via the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software. Accordingly, the finalized MS-DRG 
titles are MS-DRG 450 ``Single Level Spinal Fusion Except Cervical with 
MCC or Custom-Made Anatomically Designed Interbody Fusion Device'' and 
MS-DRG 451 ``Single Level Spinal Fusion Except Cervical without MCC'' 
effective October 1, 2024, for FY 2025.
    We are also finalizing our proposal to create new MS-DRG 402, and 
new MS-DRGs 429 and 430, without modification, for FY 2025. 
Accordingly, we are finalizing the proposed GROUPER logic for these MS-
DRGs as shown in Table 6P.2d and 6P.2f, respectively, associated with 
this final rule and available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps and as also reflected in the final version of ICD-10 MS-
DRG Definitions Manual, version 42, available in association with this 
final rule and available via the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software. The finalized MS-DRG titles are MS-
DRG 402 ``Single Level Combined Anterior and Posterior Spinal Fusion 
Except Cervical'', MS-DRG 429 ``Combined Anterior and Posterior 
Cervical Spinal Fusion with MCC'' and MS-DRG 430 ``Combined Anterior 
and Posterior Cervical Spinal Fusion without MCC'' effective October 1, 
2024, for FY 2025. We will continue to monitor the data for these 
finalized MS-DRGs and consider if any future modifications may be 
warranted.
7. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and 
Disorders): Resection of Right Large Intestine
    In the proposed rule, we noted that we identified an inconsistency 
in the MDC and MS-DRG assignment of procedure codes describing 
resection of the right large intestine and resection of the left large 
intestine with an open and percutaneous endoscopic approach. ICD-10-PCS 
procedure codes 0DTG0ZZ (Resection of left large intestine, open 
approach) and 0DTG4ZZ (Resection of left large intestine, percutaneous 
endoscopic approach) are currently assigned to MDC 10 in MS-DRGs 628, 
629, and 630 (Other Endocrine, Nutritional and Metabolic O.R. 
Procedures with MCC, with CC, and without CC/MCC, respectively). 
However, the procedure codes that describe resection of the right large 
intestine with an open or percutaneous endoscopic approach, 0DTF0ZZ 
(Resection of right large intestine, open approach) and 0DTF4ZZ 
(Resection of right large intestine, percutaneous endoscopic approach) 
are not assigned to MDC 10 in MS-DRGs 628, 629, and 630. To ensure 
clinical alignment and consistency, as well as appropriate MS-DRG 
assignment, we proposed to add procedure codes 0DTF0ZZ and 0DTF4ZZ to 
MDC 10 in MS-DRGs 628, 629, and 630 effective October 1, 2024, for FY 
2025.
    Comment: Commenters supported our proposal to add procedure codes 
0DTF0ZZ and 0DTF4ZZ to MDC 10 in MS-DRGs 628, 629, and 630. A commenter 
also suggested that CMS consider providing an index of ICD-10-PCS codes 
that are assigned to each MDC in the ICD-10 MS-DRG Definitions Manual 
in a ``reverse look up'' format that could be utilized to identify 
other potential omissions or inaccuracies such as the issues discussed 
in the proposed rule. The commenter urged CMS to make this information 
publicly available in a user-friendly format to enable interested 
parties to review the MDC and MS-DRG assignments more easily for ICD-
10-PCS procedure codes.
    Response: We thank the commenters for their support. With respect 
to the commenter's suggestion that CMS develop a ``reverse look up'' 
index of the ICD-10-PCS procedure codes to enable members of the public 
to more easily review the MDC and MS-DRG assignments of the procedure 
codes, we appreciate the feedback and will take the suggestion under 
advisement.
    After consideration of the public comments we received, we are 
finalizing our proposal to add procedure codes 0DTF0ZZ and 0DTF4ZZ to 
MDC 10 in MS-DRGs 628, 629, and 630 effective October 1, 2024, for FY 
2025.
8. MDC 15 (Newborns and Other Neonates With Conditions Originating in 
Perinatal Period): MS-DRG 795 Normal Newborn
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
35985 through 35991), we received a request to review the GROUPER logic 
that would determine the assignment of cases to MS-DRG 794 (Neonate 
with Other Significant Problems). The requestor stated that it appears 
that MS-DRG 794 is the default MS-DRG in MDC 15 (Newborns and Other 
Neonates with Conditions Originating in Perinatal Period), as the 
GROUPER logic for MS-DRG 794 displayed in the ICD-10 MS-DRG Version 
41.1 Definitions Manual is defined by a ``principal or secondary 
diagnosis of newborn or neonate, with other significant problems, not 
assigned to DRG 789 through 793 or 795''. The requestor expressed 
concern that defaulting to MS-DRG 794, instead of MS-DRG 795 (Normal 
Newborn), for assignment of cases in MDC 15 could contribute to 
overpayments in healthcare by not aligning the payment amount to the 
appropriate level of care in newborn cases. The requestor recommended 
that CMS update the GROUPER logic that would determine the assignment 
of cases to MS-DRGs in MDC 15 to direct all cases that do not have the 
diagnoses and procedures as specified in the Definitions Manual to 
instead be grouped to MS-DRG 795.
    Specifically, as discussed in the proposed rule, the requestor 
expressed concern that a newborn encounter coded with a principal 
diagnosis code from ICD-10-CM category Z38 (Liveborn infants according 
to place of birth and type of delivery), followed by code P05.19 
(Newborn small for gestational age, other), P59.9 (Neonatal jaundice, 
unspecified), Q38.1 (Ankyloglossia), Q82.5 (Congenital non-neoplastic 
nevus), or Z23 (Encounter for immunization) is assigned to MS-DRG 794. 
The requestor stated that they performed a detailed claim level study, 
and in their clinical assessment, newborn encounters coded with a 
principal diagnosis code from ICD-10-CM category Z38, followed by 
diagnosis code P05.19, P59.9, Q38.1, Q82.5, or Z23 in fact clinically 
describe normal newborn encounters and the case assignment should 
instead be to MS-DRG 795.
    We stated in the proposed rule that our analysis of this grouping 
issue confirmed that when a principal diagnosis code from MDC 15, such 
as a diagnosis code from category Z38 (Liveborn infants according to 
place of birth and type of delivery), is reported followed by ICD-10-CM 
code P05.19 (Newborn small for gestational age, other), Q38.1 
(Ankyloglossia) or Q82.5 (Congenital non-neoplastic nevus), the case is 
assigned to MS-DRG 794.
    However, as we examined the GROUPER logic that would determine an 
assignment of cases to MS-DRG 795, we noted in the proposed rule that 
the ``only secondary diagnosis'' list under MS-DRG 795 already includes 
ICD-10-CM codes P59.9 (Neonatal jaundice, unspecified) and Z23 
(Encounter for immunization). Therefore, when a principal diagnosis 
code from MDC 15, such as a diagnosis code from category

[[Page 69062]]

Z38 (Liveborn infants according to place of birth and type of delivery) 
is reported, followed by ICD-10-CM code P59.9 or Z23, the case is 
currently assigned to MS-DRG 795, not MS-DRG 794, as suggested by the 
requestor. We refer the reader to the ICD-10 MS-DRG Version 41.1 
Definitions Manual (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete 
documentation of the GROUPER logic for MS-DRGs 794 and 795.
    Next, we stated in the proposed rule that we reviewed the claims 
data from the September 2023 update of the FY 2023 MedPAR file; 
however, we found zero cases across MS-DRGs 794 and 795. We then 
examined the clinical factors. The description for ICD-10-CM diagnosis 
code P05.19 is ``Newborn small for gestational age, other'' and the 
inclusion term in the ICD-10-CM Tabular List of Diseases for this 
diagnosis code is ``Newborn small for gestational age, 2,500 grams and 
over.'' We noted in the proposed rule that ``small-for-gestational 
age'' is diagnosed by assessing the gestational age and the weight of 
the baby after birth. There is no specific treatment for small-for-
gestational-age newborns. Most newborns who are moderately small for 
gestational age are healthy babies who just happen to be on the smaller 
side. Unless the newborn is born with an infection or has a genetic 
disorder, most small-for-gestational-age newborns have no symptoms and 
catch up in their growth during the first year of life and have a 
normal adult height. Next, ICD-10-CM diagnosis code Q38.1 describes 
ankyloglossia, also known as tongue-tie, which is a condition that 
impairs tongue movement due to a restrictive lingual frenulum. We noted 
that in infants, tongue-tie is treated by making a small cut to the 
lingual frenulum to allow the tongue to move more freely. This 
procedure, called a frenotomy, can be done in a healthcare provider's 
office without anesthesia. Newborns generally recover within about a 
minute of the procedure, and pain relief is usually not indicated. 
Lastly, ICD-10-CM diagnosis code Q82.5 describes a congenital non-
neoplastic nevus. A congenital nevus is a type of pigmented birthmark 
that appears at birth or during a baby's first year. Most congenital 
nevi do not cause health problems and may only require future 
monitoring.
    In reviewing these three ICD-10-CM codes and the conditions they 
describe; we stated in the proposed rule that we believe these 
diagnoses generally do not prolong the inpatient admission of the 
newborn and newborns with these diagnoses generally receive standard 
follow-up care after birth. We stated clinically, we agreed with the 
requestor that newborn encounters coded with a principal diagnosis code 
from ICD-10-CM category Z38 (Liveborn infants according to place of 
birth and type of delivery), followed by code P05.19 (Newborn small for 
gestational age, other), Q38.1 (Ankyloglossia), or Q82.5 (Congenital 
non-neoplastic nevus) should not map to MS-DRG 794 (Neonate with Other 
Significant Problems) and should instead be assigned to MS-DRG 795 
(Normal Newborn). Therefore, for the reasons discussed, we proposed to 
reassign diagnosis code P05.19 from the ``principal or secondary 
diagnosis'' list under MS-DRG 794 to the ``principal diagnosis'' list 
under MS-DRG 795 (Normal Newborn). We also proposed to add diagnosis 
codes Q38.1 and Q82.5 to the ``only secondary diagnosis'' list under 
MS-DRG 795 (Normal Newborn). Under this proposal, cases with a 
principal diagnosis described by an ICD-10-CM code from category Z38 
(Liveborn infants according to place of birth and type of delivery), 
followed by codes P05.19, Q38.1, or Q82.5 will be assigned to MS-DRG 
795.
    In response to the recommendation that CMS update the GROUPER logic 
that would determine an assignment of cases to MS-DRGs in MDC 15, in 
the proposed rule we stated we agreed with the requestor that the 
GROUPER logic for MS-DRG 794 is defined by a ``principal or secondary 
diagnosis of newborn or neonate, with other significant problems, not 
assigned to DRG 789 through 793 or 795''. We acknowledged that MS-DRG 
794 utilizes ``fall-through'' logic, meaning if a diagnosis code is not 
assigned to any of the other MS-DRGs, then assignment ``falls-through'' 
to MS-DRG 794. As discussed in the proposed rule, we have started to 
examine the GROUPER logic that would determine the assignment of cases 
to the MS-DRGs in MDC 15, including MS-DRGs 794 and 795, to determine 
where further refinements could potentially be made to better account 
for differences in clinical complexity and resource utilization. 
However, as we have noted in prior rulemaking (72 FR 47152), we cannot 
adopt the same approach to refine the newborn MS-DRGs because of the 
extremely low volume of Medicare patients there are in these MS-DRGs. 
Additional time is needed to fully and accurately evaluate cases 
currently grouping to the MS-DRGs in MDC 15 to consider if 
restructuring the current MS-DRGs would better recognize the clinical 
distinctions of these patient populations. Any proposed modifications 
to these MS-DRGs will be addressed in future rulemaking consistent with 
our annual process.
    Comment: Many commenters expressed support for the proposal to 
reassign diagnosis code P05.19 from the ``principal or secondary 
diagnosis'' list under MS-DRG 794 to the ``principal diagnosis'' list 
under MS-DRG 795 (Normal Newborn) and the proposal to add diagnosis 
codes Q38.1 and Q82.5 to the ``only secondary diagnosis'' list under 
MS-DRG 795 (Normal Newborn) for FY 2025. Several commenters stated 
these updates are needed, are very timely, and will better align cases 
to the appropriate level of care. Other commenters stated they were 
committed to helping update the GROUPER logic for MS-DRG 794 and 
expressed their willingness to work with CMS. A commenter specifically 
stated they applaud CMS' initiation of an examination of the GROUPER 
logic that would determine the assignment of cases to the MS-DRGs in 
MDC 15 to determine where further refinements could potentially be made 
to better account for differences in clinical complexity and resource 
utilization.
    While indicating their support for the proposal, some commenters 
provided the following list of diagnoses which they stated also 
clinically describe normal newborn encounters when reported and 
therefore case assignment should also be to MS-DRG 795 instead of MS-
DRG 794.

[[Page 69063]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.064

    Response: We thank the commenters for their support for the 
proposal as well as for broader efforts to evaluate the assignment of 
cases to the MS-DRGs in MDC 15. In response to the list of diagnoses 
which commenters stated also clinically describe normal newborn 
encounters when reported and therefore assignment should be to MS-DRG 
795, we note that the ``principal diagnosis'' list under MS-DRG 795 
already includes ICD-10-CM codes P08.1 (Other heavy for gestational age 
newborn) and P08.21 (Post-term newborn). Additionally, the ``only 
secondary diagnosis'' list under MS-DRG 795 already includes ICD-10-CM 
codes Q82.8 (Other specified congenital malformations of skin), Z05.1 
(Observation and evaluation of newborn for suspected infectious 
condition ruled out), Z05.42 (Observation and evaluation of newborn for 
suspected metabolic condition ruled out), and Z28.82 (Immunization not 
carried out because of caregiver refusal). Therefore, when principal 
diagnosis code P08.1 or P08.21 is reported, the case is currently 
assigned to MS-DRG 795, not MS-DRG 794. Similarly, when a principal 
diagnosis code from MDC 15, such as a diagnosis code from category Z38 
(Liveborn infants according to place of birth and type of delivery) is 
reported, followed by ICD-10-CM code Q82.8, Z05.1, Z05.42, or Z28.82, 
the case is currently assigned to MS-DRG 795, not MS-DRG 794, as 
suggested by the commenters. We refer the reader to the ICD-10 MS-DRG 
Version 42 Definitions Manual (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete 
documentation of the GROUPER logic for MS-DRGs 794 and 795.
    We will review the remaining diagnoses suggested by the commenters 
as we examine the GROUPER logic that would determine the assignment of 
cases to the MS-DRGs in MDC 15, including MS-DRGs 794 and 795. We note 
that we would address any proposed modifications to the existing logic 
in future rulemaking.
    Comment: Other commenters disagreed with the proposal. A commenter 
noted that patients with ankyloglossia can struggle to breastfeed, are 
at risk of an early transition to formula, can be small for gestational 
age, and are at risk for malnutrition. Another commenter noted that 
contrary to statements in the proposed rule, frenotomy or frenectomy 
procedures are not as simple as once originally thought and can involve 
rare complications such as bleeding, airway obstruction, damage to 
surrounding structures, scarring, and oral aversion secondary to damage 
to the tongue, nerves, or salivary glands and further noted that when 
undergoing frenotomy without analgesia, researchers found that 18% of 
infants cried during and 60% cried after the procedure. This commenter 
stated that their analysis of claims from their facility indicated that 
of the approximately 1000 cases reporting a secondary diagnosis of 
ankyloglossia, frenectomy was performed in approximately 60 cases due 
to issues with breast feeding and 15% of those cases had a length of 
stay greater than or equal to 4 days.
    A commenter disagreed with the proposal to remove ICD-10-CM 
diagnosis code P05.19 (newborn small for gestation age, other) from the 
logic for MS-DRG 794 and stated that newborns that are small for 
gestational age must undergo hypoglycemia screening, which includes the 
monitoring of glucose levels at 1, 2, 3, 12, and 24 hours of life and 
are at increased risk for complications such as neonatal asphyxia, 
hypothermia, hypoglycemia, hypocalcemia, polycythemia, sepsis, and 
death. This commenter stated review of the neonatal admissions at their 
facility supports that these neonates often require longer lengths of 
stay and utilize increased resources as 5% of approximately 800 cases 
reporting a secondary diagnosis of P05.19 had a length of stay greater 
or equal to 4 days. This commenter stated that should diagnosis codes 
P05.19 and Q38.1 be removed from the logic of MS-DRG 794, a new MS-DRG 
should be created to capture newborns with minor problems.
    Response: We appreciate the commenters' feedback. We considered 
concerns expressed by the commenters and continue to believe that 
diagnoses P05.19 and Q38.1 generally do not prolong the inpatient 
admission of the newborn and newborns with these diagnoses generally 
receive standard follow-up care after birth. As discussed in the 
proposed rule, the description for ICD-10-CM diagnosis code P05.19 is 
``Newborn small for gestational age, other'' and the inclusion term in 
the ICD-10-CM Tabular List of Diseases for this diagnosis code is 
``Newborn small for gestational age, 2,500 grams and over.'' We 
continue to believe that most newborns who are moderately small for 
gestational age are healthy babies who just happen to be on the smaller 
side. We further note that under the proposal to reassign diagnosis 
code P05.19 from the ``principal or secondary diagnosis'' list under 
MS-DRG 794 to the

[[Page 69064]]

``principal diagnosis'' list under MS-DRG 795, cases reporting other 
codes from ICD-10-CM subcategory P05.1- (Newborns small for gestation 
age) describing newborns small for gestation age, 1999 grams or less, 
will continue to be assigned to MS-DRG 793 (Full Term Neonate with 
Major Problems). While we agree that newborns can require serial 
glucose monitoring after birth, blood glucose can be checked with just 
a few drops of blood, usually taken from the heel of the newborn and 
does not involve an invasive procedure.
    Similarly, in infants with ankyloglossia indicated for frenotomy, 
the frenotomy is generally a quick, non-invasive procedure that can be 
done in a healthcare provider's office without anesthesia. Should the 
uncommon postprocedural complications noted by the commenter arise when 
frenotomy is performed in the inpatient setting, those complications 
should be reported to fully reflect the severity of illness, treatment 
difficulty, complexity of service and the resources utilized in the 
diagnosis and/or treatment of the complication. We also note, as 
discussed in prior rulemaking (86 FR 44878), the MS-DRG system is a 
system of averages and it is expected that within the diagnostic 
related groups, some cases may demonstrate higher than average costs, 
while other cases may demonstrate lower than average costs. We also 
provide outlier payments to mitigate extreme loss on individual cases.
    We will review the suggestion to create an MS-DRG for newborns with 
minor problems as we examine the GROUPER logic that would determine the 
assignment of cases to the MS-DRGs in MDC 15 and would address any 
proposed modifications to the existing logic in future rulemaking.
    Therefore, after consideration of the public comments we received, 
and for the reasons discussed, we are finalizing our proposal to 
reassign diagnosis code P05.19 from the ``principal or secondary 
diagnosis'' list under MS-DRG 794 to the ``principal diagnosis'' list 
under MS-DRG 795 (Normal Newborn), without modification, effective 
October 1, 2024, for FY 2025. We are also finalizing our proposal to 
add diagnosis codes Q38.1 and Q82.5 to the ``only secondary diagnosis'' 
list under MS-DRG 795 (Normal Newborn), without modification, effective 
October 1, 2024, for FY 2025. Under these finalizations, cases with a 
principal diagnosis described by an ICD-10-CM code from category Z38 
(Liveborn infants according to place of birth and type of delivery), 
followed by codes P05.19, Q38.1, or Q82.5 will be assigned to MS-DRG 
795.
    As noted earlier and discussed in the proposed rule, we have 
started our examination of the GROUPER logic that would determine an 
assignment of cases to MS-DRGs in MDC 15. During this review, we stated 
in the proposed rule we noted the logic for MS-DRG 795 (Normal Newborn) 
includes five diagnosis codes from ICD-10-CM category Q81 
(Epidermolysis bullosa). We refer the reader to the ICD-10 MS-DRG 
Version 41.1 Definitions Manual (available via on the CMS website at: 
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete 
documentation of the GROUPER logic for MS-DRG 795. The five diagnosis 
codes and their current MDC and MS-DRG assignments are listed in the 
following table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.065

    In the proposed rule we stated we reviewed this grouping issue and 
noted that epidermolysis bullosa (EB) is a group of genetic (inherited) 
disorders that causes skin to be fragile, blister, and tear easily in 
response to minimal friction or trauma. In some cases, blisters form 
inside the body in places such as the mouth, esophagus, other internal 
organs, or eyes. When the blisters heal, they can cause painful 
scarring. In severe cases, the blisters and scars can harm internal 
organs and tissue enough to be fatal. Patients diagnosed with severe 
cases of EB have a life expectancy that ranges from infancy to 30 years 
of age.
    We noted in the proposed rule that EB has four primary types: 
simplex, junctional, dystrophic, and Kindler syndrome, and within each 
type there are various subtypes, ranging from mild to severe. A skin 
biopsy can confirm a diagnosis of EB and identify which layers of the 
skin are affected and determine the type of epidermolysis bullosa. 
Genetic testing may also be ordered to diagnose the specific type and 
subtype of the disease. In caring for patients with EB, adaptions may 
be necessary in the form of handling, feeding, dressing, managing pain, 
and treating wounds caused by the blisters and tears. If there is a 
known diagnosis of EB, but the neonate has no physical signs at birth, 
there will still need to be specialty consultation in the inpatient 
setting or referral for outpatient follow-up. We stated we believe the 
five diagnosis codes from ICD-10-CM category Q81 (Epidermolysis 
bullosa) describe conditions that require advanced care and resources 
similar to other conditions already assigned to the logic of MS-DRG 794 
and MS-DRGs 595 and 596 (Major Skin Disorders with MCC and without MCC, 
respectively), even in cases where the type of EB is unspecified.
    Therefore, for clinical consistency, we proposed to reassign ICD-
10-CM diagnosis codes Q81.0, Q81.1, Q81.2, Q81.8, and Q81.9 from MS-
DRGs 606 and 607 in MDC 09 (Diseases and Disorders of the Skin, 
Subcutaneous Tissue and Breast) and MS-DRG 795 (Normal Newborn) in MDC 
15 to MS-DRGs 595 and 596 in MDC 09 and MS-DRG 794 in MDC 15, effective 
October 1, 2024, for FY 2025.
    Comment: Commenters expressed support for the proposal to reassign 
ICD-10-CM diagnosis codes Q81.0, Q81.1, Q81.2, Q81.8, and Q81.9 from 
MS-DRGs 606 and 607 in MDC 09 (Diseases and Disorders of the Skin, 
Subcutaneous Tissue and Breast) and MS-DRG 795 (Normal Newborn) in MDC 
15 to MS-DRGs 595 and 596 in MDC 09 and MS-DRG 794 in MDC 15 for FY 
2025.
    Response: We appreciate the commenters support.
    After consideration of the public comments we received, we are 
finalizing our proposal to reassign ICD-10-CM diagnosis codes Q81.0, 
Q81.1, Q81.2, Q81.8, and Q81.9 from MS-DRGs 606 and 607 in MDC 09 
(Diseases and Disorders of the Skin, Subcutaneous Tissue and Breast) 
and MS-DRG 795

[[Page 69065]]

(Normal Newborn) in MDC 15 to MS-DRGs 595 and 596 (Major Skin Disorders 
with MCC and without MCC, respectively) in MDC 09 and MS-DRG 794 
(Neonate with Other Significant Problems) in MDC 15, without 
modification, effective October 1, 2024, for FY 2025.
9. MDC 17 (Myeloproliferative Diseases and Disorders, Poorly 
Differentiated Neoplasms): Acute Leukemia
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
35986 through 35991), we identified a replication issue from the ICD-9 
based MS-DRGs to the ICD-10 based MS-DRGs regarding the assignment of 
six ICD-10-CM diagnosis codes that describe a type of acute leukemia. 
We noted that under the Version 32 ICD-9-CM based MS-DRGs, the ICD-9-CM 
diagnosis codes as shown in the following table were assigned to 
surgical MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia with Major 
O.R. Procedures with MCC, with CC, and without CC/MCC, respectively), 
surgical MS-DRGs 823, 824, and 825 (Lymphoma and Non-Acute Leukemia 
with Other Procedures with MCC, with CC, and without CC/MCC, 
respectively), and medical MS-DRGs 840, 841, and 842 (Lymphoma and Non-
Acute Leukemia with MCC, with CC, and without CC/MCC, respectively) in 
MDC 17 (Myeloproliferative Diseases and Disorders, Poorly 
Differentiated Neoplasms). The six ICD-10-PCS code translations also 
shown in the following table, that provide more detailed and specific 
information for the ICD-9-CM codes reflected, also currently group to 
MS-DRGs 820, 821, 822, 823, 824, 825, 840, 841 and 842 in the ICD-10 
MS-DRGs Version 41.1. We refer the reader to the ICD-10 MS-DRG 
Definitions Manual Version 41.1 (available on the CMS website at: 
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete 
documentation of the GROUPER logic for MS-DRGs 820, 821, 822, 823, 824, 
825, 840, 841, and 842.
[GRAPHIC] [TIFF OMITTED] TR28AU24.066

    In the proposed rule we stated that during our review of this 
issue, we noted that under ICD-9-CM, the diagnosis codes as reflected 
in the table did not describe the acuity of the diagnosis (for example, 
acute versus chronic). This is in contrast to their six comparable ICD-
10-CM code translations listed in the previous table that provide more 
detailed and specific information for the ICD-9-CM diagnosis codes and 
do specify the acuity of the diagnoses.
    We noted in the proposed rule that ICD-10-CM codes C94.20, C94.21, 
and C94.22 describe acute megakaryoblastic leukemia (AMKL), a rare 
subtype of acute myeloid leukemia (AML) that affects megakaryocytes, 
platelet-producing cells that reside in the bone marrow. Similarly, 
ICD-10-CM codes C94.40, C94.41, and C94.42 describe acute panmyelosis 
with myelofibrosis (APMF), a rare form of acute myeloid leukemia 
characterized by acute panmyeloid proliferation with increased blasts 
and accompanying fibrosis of the bone marrow that does not meet the 
criteria for AML with myelodysplasia related changes. As previously 
mentioned, these six diagnosis codes are assigned to MS-DRGs 820, 821, 
822, 823, 824, 825, 840, 841, and 842. In the proposed rule, we noted 
that GROUPER logic lists for MS-DRGs 820, 821, and 822 includes 
diagnosis codes describing lymphoma and both acute and non-acute 
leukemias, however the logic lists for MS-DRGs 823, 824, 825, 840, 841, 
and 842 contain diagnosis codes describing lymphoma and non-acute 
leukemias. We stated that in our analysis of this grouping issue, we 
also noted that cases reporting a chemotherapy principal diagnosis with 
a secondary diagnosis describing acute megakaryoblastic leukemia or 
acute panmyelosis with myelofibrosis are assigned to MS-DRGs 846, 847, 
and 848 (Chemotherapy without Acute Leukemia as Secondary Diagnosis, 
with MCC, with CC, and without CC/MCC, respectively) in Version 41.1.
    Next, in the proposed rule we stated we examined claims data from 
the September 2023 update of the FY 2023 MedPAR file for MS-DRG 823, 
824, 825, 840, 841, and 842 to identify cases reporting one of the six 
diagnosis codes listed previously that describe acute megakaryoblastic 
leukemia or acute panmyelosis with myelofibrosis. We also examined MS-
DRGs 846, 847, and 848 (Chemotherapy without Acute Leukemia as 
Secondary Diagnosis, with MCC, with CC, and without CC/MCC, 
respectively). Our findings are shown in the following tables:

[[Page 69066]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.067

    As shown in the table, in MS-DRG 823, we identified a total of 
2,235 cases with an average length of stay of 14 days and average costs 
of $40,587. Of those 2,235 cases, there were two cases reporting a 
diagnosis code that describes acute megakaryoblastic leukemia or acute 
panmyelosis with myelofibrosis, with average costs higher than the 
average costs in the FY 2023 MedPAR file for MS-DRG 823 ($49,600 
compared to $40,587) and a longer average length of stay (31.5 days 
compared to 14 days). We found zero cases in MS-DRG 824 reporting a 
diagnosis code that describes acute megakaryoblastic leukemia or acute 
panmyelosis with myelofibrosis. In MS-DRG 825, we identified a total of 
427 cases with an average length of stay of 2.9 days and average costs 
of $10,959. Of those 427 cases, there was one case reporting a 
diagnosis code that describes acute megakaryoblastic leukemia or acute 
panmyelosis with myelofibrosis, with costs higher than the average 
costs in the FY 2023 MedPAR file for MS-DRG 825 ($17,293 compared to 
$10,959) and a longer length of stay (6 days compared to 2.9 days).
[GRAPHIC] [TIFF OMITTED] TR28AU24.068

    As shown in the table, in MS-DRG 840, we identified a total of 
7,747 cases with an average length of stay of 9.6 days and average 
costs of $26,215. Of those 7,747 cases, there were 12 cases reporting a 
diagnosis code that describes acute megakaryoblastic leukemia or acute 
panmyelosis with myelofibrosis, with average costs lower than the 
average costs in the FY 2023 MedPAR file for MS-DRG 840 ($21,357 
compared to $26,215) and a shorter average length of stay (8.7 days 
compared to 9.6 days). In MS-DRG 841, we identified a total of 5,019 
cases with an average length of stay of 5.3 days and average costs of 
$13,502. Of those 5,019 cases, there were six cases reporting a 
diagnosis code that describes acute megakaryoblastic leukemia or acute 
panmyelosis with myelofibrosis, with average costs lower than the 
average costs in the FY 2023 MedPAR file for MS-DRG 841 ($6,976 
compared to $13,502) and a shorter average length of stay (2.8 days 
compared to 5.3 days). We found zero cases in MS-DRG 842 reporting a 
diagnosis code that describes acute megakaryoblastic leukemia or acute 
panmyelosis with myelofibrosis.

[[Page 69067]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.069

    As shown in the table, in MS-DRG 847, we identified a total of 
7,329 cases with an average length of stay of 4.4 days and average 
costs of $11,250. Of those 7,329 cases, there were two cases reporting 
a chemotherapy principal diagnosis code with a secondary diagnosis code 
that describes acute megakaryoblastic leukemia or acute panmyelosis 
with myelofibrosis, with average costs lower than the average costs in 
the FY 2023 MedPAR file for MS-DRG 840 ($7,569 compared to $11,250) and 
a longer average length of stay (5 days compared to 4.4 days). We found 
zero cases in MS-DRGs 846 and 848 reporting a diagnosis code that 
describes acute megakaryoblastic leukemia or acute panmyelosis with 
myelofibrosis.
    As discussed in the proposed rule, next, we examined the MS-DRGs 
within MDC 17. Given that the six diagnoses codes describe subtypes of 
acute myeloid leukemia, we stated that we determined that the cases 
reporting a principal diagnosis of acute megakaryoblastic leukemia or 
acute panmyelosis with myelofibrosis would more suitably group to 
medical MS-DRGs 834, 835, and 836 (Acute Leukemia without Major O.R. 
Procedures with MCC, with CC, and without CC/MCC, respectively). 
Similarly, we stated cases reporting a chemotherapy principal diagnosis 
with a secondary diagnosis describing acute megakaryoblastic leukemia 
or acute panmyelosis with myelofibrosis would more suitably group to 
medical MS-DRGs 837, 838, and 839 (Chemotherapy with Acute Leukemia as 
Secondary Diagnosis, or with High Dose Chemotherapy Agent with MCC, 
with CC or High Dose Chemotherapy Agent, and without CC/MCC, 
respectively).
    We stated we then examined claims data from the September 2023 
update of the FY 2023 MedPAR for MS-DRGs 834, 835, 836, 837, 838, and 
839. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.070

    While the average costs for all cases in MS-DRGs 834, 835, 836, 
837, 838, and 839 are higher than the average costs of the small number 
of cases reporting a diagnosis code that describes acute 
megakaryoblastic leukemia or acute panmyelosis with myelofibrosis, or 
reporting a chemotherapy principal diagnosis with a secondary diagnosis 
describing acute megakaryoblastic leukemia or acute panmyelosis with 
myelofibrosis, and the average lengths of stay are longer, we noted 
that diagnosis codes C94.20, C94.21, C94.22, C94.40, C94.41, and C94.42 
describe types of acute leukemia. In the proposed rule we stated that 
for clinical coherence, we believe these six diagnosis codes would be 
more appropriately grouped along with other ICD-10-CM diagnosis codes 
that describe types of acute leukemia.
    We reviewed this grouping issue, and stated our analysis indicates 
that the six diagnosis codes describing the acute megakaryoblastic 
leukemia or acute panmyelosis with myelofibrosis were initially 
assigned to the list of diagnoses in the GROUPER logic for MS-DRGs 823, 
824, 825, 840, 841, and 842 as a result of replication in the 
transition from ICD-9 to ICD-10 based MS-DRGs. We also noted that 
diagnosis codes C94.20, C94.21, C94.22, C94.40, C94.41, and C94.42 do 
not describe non-acute leukemia diagnoses.
    Accordingly, because the six diagnosis codes that describe acute 
megakaryoblastic leukemia or acute panmyelosis with myelofibrosis are 
not clinically consistent with non-acute leukemia diagnoses, and it is 
clinically

[[Page 69068]]

appropriate to reassign these diagnosis codes to be consistent with the 
other diagnosis codes that describe acute leukemias in MS-DRGs 834, 
835, 836, 837, 838, and 839, we proposed the reassignment of diagnosis 
codes C94.20, C94.21, C94.22, C94.40, C94.41, and C94.42 from MS-DRGs 
823, 824, and 825 (Lymphoma and Non-Acute Leukemia with Other 
Procedures with MCC, with CC, and without CC/MCC, respectively), and 
MS-DRGs 840, 841, and 842 (Lymphoma and Non-Acute Leukemia with MCC, 
with CC, and without CC/MCC, respectively) to MS-DRGs 834, 835, and 836 
(Acute Leukemia without Major O.R. Procedures with MCC, with CC, and 
without CC/MCC, respectively) and MS-DRGs 837, 838, and 839 
(Chemotherapy with Acute Leukemia as Secondary Diagnosis, or with High 
Dose Chemotherapy Agent with MCC, with CC or High Dose Chemotherapy 
Agent, and without CC/MCC, respectively) in MDC 17, effective FY 2025. 
Under this proposal, diagnosis codes C94.20, C94.21, C94.22, C94.40, 
C94.41, and C94.42 will continue to be assigned to surgical MS-DRGs 
820, 821, and 822 (Lymphoma and Leukemia with Major O.R. Procedures 
with MCC, with CC, and without CC/MCC, respectively).
    Comment: Commenters supported our proposal to reassign diagnosis 
codes C94.20, C94.21, C94.22, C94.40, C94.41, and C94.42 from MS-DRGs 
823, 824, and 825 and MS-DRGs 840, 841, and 842 to MS-DRGs 834, 835, 
and 836 and MS-DRGs 837, 838, and 839 in MDC 17.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing our proposal to reassign diagnosis codes C94.20, C94.21, 
C94.22, C94.40, C94.41, and C94.42 from MS-DRGs 823, 824, and 825 
(Lymphoma and Non-Acute Leukemia with Other Procedures with MCC, with 
CC, and without CC/MCC, respectively), and MS-DRGs 840, 841, and 842 
(Lymphoma and Non-Acute Leukemia with MCC, with CC, and without CC/MCC, 
respectively) to MS-DRGs 834, 835, and 836 (Acute Leukemia without 
Major O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively) and MS-DRGs 837, 838, and 839 (Chemotherapy with Acute 
Leukemia as Secondary Diagnosis, or with High Dose Chemotherapy Agent 
with MCC, with CC or High Dose Chemotherapy Agent, and without CC/MCC, 
respectively) in MDC 17, without modification, effective October 1, 
2024, for FY 2025. Under this finalization, diagnosis codes C94.20, 
C94.21, C94.22, C94.40, C94.41, and C94.42 will continue to be assigned 
to surgical MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia with Major 
O.R. Procedures with MCC, with CC, and without CC/MCC, respectively).
    As discussed in the proposed rule, in our review of the MS-DRGs in 
MDC 17 for further refinement, we next examined the procedures 
currently assigned to MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia 
with Major O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively) and MS-DRGs 826, 827, and 828 (Myeloproliferative 
Disorders or Poorly Differentiated Neoplasms with Major O.R. Procedures 
with MCC, with CC, and without CC/MCC, respectively). We noted that the 
logic for case assignment to MS-DRGs 820, 821, 822, 826, 827, and 828 
is comprised of a logic list entitled ``Operating Room Procedures'' 
which is defined by a list of 4,320 ICD-10-PCS procedure codes, 
including 90 ICD-10-PCS codes describing bypass procedures from the 
cerebral ventricle to various body parts. We refer the reader to the 
ICD-10 MS-DRG Definitions Manual Version 41.1 (available on the CMS 
website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps) for complete documentation of the GROUPER 
logic for MS-DRGs 820, 821, 822, 826, 827, and 828.
    In the proposed rule we stated in our review of the procedures 
currently assigned to MS-DRGs 820, 821, 822, 826, 827, and 828, we 
noted 12 ICD-10-PCS procedure codes that describe bypass procedures 
from the cerebral ventricle to the subgaleal space or cerebral 
cisterns, such as subgaleal or cisternal shunt placement, that are not 
included in the logic for MS-DRGs 820, 821, 822, 826, 827, and 828. The 
12 procedure codes are listed in the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.071

    We noted in the proposed rule that a subgaleal shunt consists of a 
shunt tube with one end in the lateral ventricles while the other end 
is inserted into the subgaleal space of the scalp, while a ventriculo-
cisternal shunt diverts the cerebrospinal fluid flow from one of the 
lateral ventricles, via a ventricular catheter, to the cisterna magna 
of the posterior fossa. Both procedures allow for the drainage of 
excess cerebrospinal fluid. Indications for ventriculosubgaleal or 
ventriculo-cisternal shunting include acute head trauma, subdural 
hematoma, hydrocephalus, and leptomeningeal disease (LMD) in 
malignancies such as breast cancer, lung cancer, melanoma, acute 
lymphocytic leukemia (ALL) and non-hodgkin's lymphoma (NHL).
    Recognizing that acute lymphocytic leukemia (ALL) and non-hodgkin's 
lymphoma (NHL) are indications for ventriculosubgaleal or ventriculo-

[[Page 69069]]

cisternal shunting, in the proposed rule we stated we supported adding 
the 12 ICD-10-PCS codes identified in the table to MS-DRGs 820, 821, 
822, 826, 827, and 828 in MDC 17 for consistency to align with the 
procedure codes listed in the definition of MS-DRGs 820, 821, 822, 826, 
827, and 828 and also to permit proper case assignment when a principal 
diagnosis from MDC 17 is reported with one of the procedure codes in 
the table that describes bypass procedures from the cerebral ventricle 
to the subgaleal space or cerebral cisterns. Therefore, we proposed to 
add the 12 procedure codes that describe bypass procedures from the 
cerebral ventricle to the subgaleal space or cerebral cisterns listed 
previously to MS-DRGs 820, 821, 822, 826, 827, and 828 in MDC 17 for FY 
2025.
    Comment: Commenters agreed with the proposal to add the 12 
procedure codes that describe bypass procedures from the cerebral 
ventricle to the subgaleal space or cerebral cisterns to MS-DRGs 820, 
821, 822, 826, 827, and 828 in MDC 17.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the 12 procedure codes that describe 
bypass procedures from the cerebral ventricle to the subgaleal space or 
cerebral cisterns listed previously to MS-DRGs 820, 821, 822, 826, 827, 
and 828 in MDC 17, without modification, effective October 1, 2024, for 
FY 2025.
    Lastly, as discussed in the proposed rule, in our analysis of the 
MS-DRGs in MDC 17 for further refinement, we noted that the logic for 
case assignment to medical MS-DRGs 834, 835, and 836 (Acute Leukemia 
without Major O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively) as displayed in the ICD-10 MS-DRG Version 41.1 
Definitions Manual (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps) is comprised of a logic list entitled ``Principal 
Diagnosis'' and is defined by a list of 27 ICD-10-CM diagnosis codes 
describing various types of acute leukemias. We noted that when any one 
of the 27 listed diagnosis codes from the ``Principal Diagnosis'' logic 
list is reported as a principal diagnosis, without a procedure code 
designated as an O.R. procedure or without a procedure code designated 
as a non-O.R. procedure that affects the MS-DRG, the case results in 
assignment to MS-DRG 834, 835, or 836 depending on the presence of any 
additional MCC or CC secondary diagnoses. We noted however, that while 
not displayed in the ICD-10 MS-DRG Version 41.1 Definitions Manual, 
when any one of the 27 listed diagnosis codes from the ``Principal 
Diagnosis'' logic list is reported as a principal diagnosis, along with 
a procedure code designated as an O.R. procedure that is not listed in 
the logic list of MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia with 
Major O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively), the case also results in assignment to medical MS-DRG 
834, 835, or 836 depending on the presence of any additional MCC or CC 
secondary diagnoses.
    As medical MS-DRG 834, 835, and 836 contains GROUPER logic that 
includes ICD-10-PCS procedure codes designated as O.R. procedures, in 
the proposed rule we stated we examined claims data from the September 
2023 update of the FY 2023 MedPAR file for MS-DRG 834, 835, and 836 to 
identify cases reporting an O.R. procedure. Our findings are shown in 
the following table:
[GRAPHIC] [TIFF OMITTED] TR28AU24.072

    As shown by the table, in MS-DRG 834, we identified a total of 
4,094 cases, with an average length of stay of 16.3 days and average 
costs of $49,986. Of those 4,094 cases, there were 277 cases reporting 
an O.R. procedure, with higher average costs as compared to all cases 
in MS-DRG 834 ($92,246 compared to $49,986), and a longer average 
length of stay (28.2 days compared to 16.3 days). In MS-DRG 835, we 
identified a total of 1,682 cases with an average length of stay of 7.2 
days and average costs of $19,023. Of those 1,682 cases, there were 79 
cases reporting an O.R. procedure, with higher average costs as 
compared to all cases in MS-DRG 835 ($30,771 compared to $19,023), and 
a longer average length of stay (10.4 days compared to 7.2 days). In 
MS-DRG 836, we identified a total of 230 cases with an average length 
of stay of 4 days and average costs of $11,225. Of those 230 cases, 
there were 7 cases reporting an O.R. procedure, with higher average 
costs as compared to all cases in MS-DRG 836 ($17,950 compared to 
$11,225), and a longer average length of stay (5.9 days compared to 4 
days). We stated that the data analysis shows that the average costs of 
cases reporting an O.R. procedure are higher than for all cases in 
their respective MS-DRG.
    We stated in the proposed rule that the data analysis clearly shows 
that cases reporting a principal diagnosis code describing a type of 
acute leukemia with an ICD-10-PCS procedure code designated as O.R. 
procedure that is not listed in the logic list of MS-DRGs 820, 821, and 
822 have higher average costs and longer lengths of stay compared to 
all the cases in their assigned MS-DRG. For these reasons, we proposed 
to create a new surgical MS-DRG for cases reporting a principal 
diagnosis code describing a type of acute leukemia with an O.R. 
procedure.
    To compare and analyze the impact of our suggested modifications, 
as discussed in the proposed rule, we ran a simulation using the claims 
data from the September 2023 update of the FY 2023 MedPAR file. The 
following table illustrates our findings for all 367 cases reporting a 
principal diagnosis code describing a type of acute leukemia with an 
ICD-10-PCS procedure code designated as O.R. procedure that is not 
listed in the logic list of MS-DRGs 820, 821, and 822. We stated we 
believe the resulting proposed MS-DRG assignment, reflecting these 
modifications, is more clinically

[[Page 69070]]

homogeneous, coherent, and better reflects hospital resource use.
[GRAPHIC] [TIFF OMITTED] TR28AU24.073

    In the proposed rule, we stated we applied the criteria to create 
subgroups in a base MS-DRG as discussed in section II.C.1.b. of this FY 
2025 IPPS/LTCH PPS proposed rule. As shown in the table, we identified 
a total of 367 cases using the claims data from the September 2023 
update of the FY 2023 MedPAR file, so the criterion that there are at 
least 500 or more cases in each subgroup could not be met. Therefore, 
for FY 2025, we did not propose to subdivide the proposed new MS DRG 
for acute leukemia with other procedures into severity levels.
    In summary, for FY 2025, we proposed to create a new base surgical 
MS-DRG for cases reporting a principal diagnosis describing a type of 
acute leukemia with an ICD-10-PCS procedure code designated as an O.R. 
procedure that is not listed in the logic list of MS-DRGs 820, 821, and 
822 in MDC 17. The proposed new MS-DRG is proposed new MS-DRG 850 
(Acute Leukemia with Other Procedures). We proposed to add the 27 ICD-
10-CM diagnosis codes describing various types of acute leukemias 
currently listed in the logic list entitled ``Principal Diagnosis'' in 
MS-DRGs 834, 835, and 836 as well as ICD-10-CM codes C94.20, C94.21, 
C94.22, C94.40, C94.41, and C94.42 discussed earlier in this section to 
the proposed new MS-DRG 850. We also proposed to add the procedure 
codes from current MS-DRGs 823, 824, and 825 (Lymphoma and Non-Acute 
Leukemia with Other Procedures with MCC, with CC, and without CC/MCC, 
respectively) to the proposed new MS-DRG 850. In the proposed rule, we 
noted that in the current logic list of MS-DRGs 823, 824, and 825 there 
are 189 procedure codes describing stereotactic radiosurgery of various 
body parts that are designated as non-O.R. procedures affecting the MS-
DRG, therefore, as part of the logic for new MS-DRG 850, we also 
proposed to designate these 189 codes as non-O.R. procedures affecting 
the MS-DRG.
    In addition, we proposed to revise the titles for MS-DRGs 834, 835, 
and 836 by deleting the reference to ``Major O.R. Procedures'' in the 
title. Specifically, we proposed to revise the titles of medical MS-
DRGs 834, 835, and 836 from ``Acute Leukemia without Major O.R. 
Procedures with MCC, with CC, and without CC/MCC'', respectively to 
``Acute Leukemia with MCC, with CC, and without CC/MCC'', respectively 
to better reflect the GROUPER logic that will no longer include ICD-10-
PCS procedure codes designated as O.R. procedures. We refer the reader 
to section II.C.15. of the preamble of this final rule for the 
discussion of the surgical hierarchy and the complete list of our 
proposed modifications to the surgical hierarchy as well as our 
finalization of those proposals.
    Comment: Commenters supported the proposal to create new surgical 
MS-DRG 850 for cases reporting a principal diagnosis code describing a 
type of acute leukemia with an O.R. procedure in MDC 17. Commenters 
also supported the proposal to revise the titles of medical MS-DRGs 
834, 835, and 836 from ``Acute Leukemia without Major O.R. Procedures 
with MCC, with CC, and without CC/MCC'', respectively to ``Acute 
Leukemia with MCC, with CC, and without CC/MCC''. Several commenters 
stated they appreciate CMS' continued analysis and refinement in this 
MDC and the recognition of the increased resource intensity involved in 
acute leukemia cases with certain operating room procedures. Another 
commenter stated they appreciate the agency's detailed explanation and 
stated they support the changes as proposed.
    Response: We thank the commenters for their support.
    Comment: While supporting the creation of a new MS-DRG for cases 
reporting a principal diagnosis describing a type of acute leukemia 
with an ICD-10-PCS procedure code designated as O.R. procedure that is 
not listed in the logic list of MS-DRGs 820, 821, and 822 in MDC 17, a 
few commenters suggested that CMS reconsider the criteria for 
determining subgroups with small population MS-DRGs such as proposed 
new MS-DRG 850. According to these commenters, while the data clearly 
shows differences in the average costs and average lengths of stay in 
cases reporting secondary diagnoses designated as MCCs, CCs, and 
NonCCs, the criterion that there are at least 500 or more cases in each 
subgroup could not be met as only 367 cases were identified, therefore, 
CMS did not propose to subdivide the proposed new MS DRG for acute 
leukemia with other procedures into severity levels.
    Response: We thank the commenters for their support and feedback. 
With regard to the suggestion that CMS reconsider the criteria for 
determining subgroups with small population MS-DRGs, we note in the FY 
2021 IPPS/LTCH PPS final rule (85 FR 58448), we finalized our proposal 
to expand our existing criteria to create a new complication or 
comorbidity (CC) or major complication or comorbidity (MCC) subgroup 
within a base MS-DRG. Specifically, we finalized the expansion of the 
criteria to include the NonCC subgroup for a three-way severity level 
split. We stated we believed that applying these criteria to the NonCC 
subgroup would better reflect resource stratification as well as 
promote stability in the relative weights by avoiding low volume counts 
for the NonCC level MS-DRGs.
    As further discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
58659 through 58660), the minimum case volume requirements were 
established to avoid overly fragmenting the MS-DRG classification 
system. We stated that with smaller volumes, the MS-DRGs will be 
subject to stochastic (unpredictable) effects. We continue to believe 
that stability of MS-DRG payment is an important objective and 
therefore, that a volume criterion is a needed adjunct to cost 
differentiation. We established a 500-case minimum to support this 
stability. Additionally, we note that in examining the claims data from 
the September 2023 update of the FY 2023 MedPAR file to identify cases 
reporting an O.R. procedure and a principal diagnosis code describing 
various types of acute leukemias, there were only 7 cases reporting an 
O.R. procedure with a principal diagnosis code describing various types 
of acute leukemias, without reporting a secondary diagnosis designated 
as a CC or an MCC. As stated in the proposed rule (89 FR 36021), we set 
a threshold of 10 cases as the minimum number of

[[Page 69071]]

cases required to compute a reasonable weight for an MS-DRG. Fewer than 
10 cases does not provide sufficient data to set accurate and stable 
cost relative weights.
    We also note, as discussed in prior rulemaking (86 FR 44878), the 
MS-DRG system is a system of averages and it is expected that within 
the diagnostic related groups, some cases may demonstrate higher than 
average costs, while other cases may demonstrate lower than average 
costs. We also provide outlier payments to mitigate extreme loss on 
individual cases.
    We refer the reader to section II.C.1.b. of the preamble of this 
final rule for related discussion regarding our finalization of the 
expansion of the criteria to include the NonCC subgroup in the FY 2021 
final rule and our finalization of the proposal to continue to delay 
application of the NonCC subgroup criteria to existing MS-DRGs with a 
three-way severity level split for FY 2025.
    After consideration of the public comments we received, and for the 
reasons discussed, we are finalizing our proposal to create new base 
surgical MS-DRG 850 (Acute Leukemia with Other Procedures) for cases 
reporting a principal diagnosis describing a type of acute leukemia 
with an ICD-10-PCS procedure code designated as an O.R. procedure that 
is not listed in the logic list of MS-DRGs 820, 821, and 822 in MDC 17, 
without modification, effective October 1, 2024, for FY 2025. 
Accordingly for FY 2025, we are finalizing our proposal to add the 27 
ICD-10-CM diagnosis codes describing various types of acute leukemias 
currently listed in the logic list entitled ``Principal Diagnosis'' in 
MS-DRGs 834, 835, and 836 as well as ICD-10-CM codes C94.20, C94.21, 
C94.22, C94.40, C94.41, and C94.42 discussed earlier in this section to 
new MS-DRG 850. We are finalizing our proposal to add the procedure 
codes from current MS-DRGs 823, 824, and 825 (Lymphoma and Non-Acute 
Leukemia with Other Procedures with MCC, with CC, and without CC/MCC, 
respectively) to new MS-DRG 850. In addition, we are also finalizing 
our proposal to designate the 189 codes describing stereotactic 
radiosurgery of various body parts as non-O.R. procedures affecting the 
MS-DRG as part of the logic for new MS-DRG 850 for FY 2025.
    Lastly, we are finalizing our proposal to revise the titles for 
medical MS-DRGs 834, 835, and 836 from ``Acute Leukemia without Major 
O.R. Procedures with MCC, with CC, and without CC/MCC'', respectively 
to ``Acute Leukemia with MCC, with CC, and without CC/MCC'', 
respectively for FY 2025.
10. Review of Procedure Codes in MS-DRGs 981 Through 983 and 987 
Through 989
    We annually conduct a review of procedures producing assignment to 
MS-DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to 
Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) or MS-DRGs 987 through 989 (Non-Extensive O.R. Procedure 
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) on the basis of volume, by procedure, to see if it would 
be appropriate to move cases reporting these procedure codes out of 
these MS-DRGs into one of the surgical MS-DRGs for the MDC into which 
the principal diagnosis falls. The data are arrayed in two ways for 
comparison purposes. We look at a frequency count of each major 
operative procedure code. We also compare procedures across MDCs by 
volume of procedure codes within each MDC. We use this information to 
determine which procedure codes and diagnosis codes to examine.
    We identify those procedures occurring in conjunction with certain 
principal diagnoses with sufficient frequency to justify adding them to 
one of the surgical MS-DRGs for the MDC in which the diagnosis falls. 
We also consider whether it would be more appropriate to move the 
principal diagnosis codes into the MDC to which the procedure is 
currently assigned.
    Based on the results of our review of the claims data from the 
September 2023 update of the FY 2023 MedPAR file of cases found to 
group to MS-DRGs 981 through 983 or MS-DRGs 987 through 989, in the 
proposed rule (89 FR 35991) we stated we did not identify any cases for 
reassignment and did not propose to move any cases from MS-DRGs 981 
through 983 or MS-DRGs 987 through 989 into a surgical MS-DRGs for the 
MDC into which the principal diagnosis or procedure is assigned.
    In addition to the internal review of procedures producing 
assignment to MS-DRGs 981 through 983 or MS-DRGs 987 through 989, we 
also consider requests that we receive to examine cases found to group 
to MS-DRGs 981 through 983 or MS-DRGs 987 through 989 to determine if 
it would be appropriate to add procedure codes to one of the surgical 
MS-DRGs for the MDC into which the principal diagnosis falls or to move 
the principal diagnosis to the surgical MS-DRGs to which the procedure 
codes are assigned. As discussed in the proposed rule, we did not 
receive any requests suggesting reassignment.
    We also review the list of ICD-10-PCS procedures that, when in 
combination with their principal diagnosis code, result in assignment 
to MS-DRGs 981 through 983, or 987 through 989, to ascertain whether 
any of those procedures should be reassigned from one of those two 
groups of MS-DRGs to the other group of MS-DRGs based on average costs 
and the length of stay. We look at the data for trends such as shifts 
in treatment practice or reporting practice that would make the 
resulting MS-DRG assignment illogical. If we find these shifts, we 
would propose to move cases to keep the MS-DRGs clinically similar or 
to provide payment for the cases in a similar manner. Generally, we 
move only those procedures for which we have an adequate number of 
discharges to analyze the data.
    Additionally, we also consider requests that we receive to examine 
cases found to group to MS-DRGs 981 through 983 or MS-DRGs 987 through 
989 to determine if it would be appropriate for the cases to be 
reassigned from one of the MS-DRG groups to the other. Based on the 
results of our review of the claims data from the September 2023 update 
of the FY 2023 MedPAR file, in the proposed rule we stated we did not 
identify any cases for reassignment. We also did not receive any 
requests suggesting reassignment. Therefore, for FY 2025 we did not 
propose to move any cases reporting procedure codes from MS-DRGs 981 
through 983 to MS-DRGs 987 through 989 or vice versa.
    Comment: Commenters expressed support for CMS' proposal to not move 
any cases from MS-DRGs 981 through 983 or MS-DRGs 987 through 989 into 
a surgical MS-DRGs for the MDC into which the principal diagnosis or 
procedure is assigned. Commenters also expressed support for CMS' 
proposal to not move any cases reporting procedure codes from MS-DRGs 
981 through 983 to MS-DRGs 987 through 989 or vice versa.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to not move any cases 
from MS-DRGs 981 through 983 or MS-DRGs 987 through 989 into a surgical 
MS-DRGs for the MDC into which the principal diagnosis or procedure is 
assigned. We are also finalizing, without modification, our proposal to 
not move any cases reporting procedure codes

[[Page 69072]]

from MS-DRGs 981 through 983 to MS-DRGs 987 through 989 or vice versa.
11. Operating Room (O.R.) and Non-O.R. Procedures
a. Background
    Under the IPPS MS-DRGs (and former CMS MS-DRGs), we have a list of 
procedure codes that are considered operating room (O.R.) procedures. 
Historically, we developed this list using physician panels that 
classified each procedure code based on the procedure and its effect on 
consumption of hospital resources. For example, generally the presence 
of a surgical procedure which required the use of the operating room 
would be expected to have a significant effect on the type of hospital 
resources (for example, operating room, recovery room, and anesthesia) 
used by a patient, and therefore, these patients were considered 
surgical. Because the claims data generally available do not precisely 
indicate whether a patient was taken to the operating room, surgical 
patients were identified based on the procedures that were performed.
    Generally, if the procedure was not expected to require the use of 
the operating room, the patient would be considered medical (non-O.R.).
    Currently, each ICD-10-PCS procedure code has designations that 
determine whether and in what way the presence of that procedure on a 
claim impacts the MS-DRG assignment. First, each ICD-10-PCS procedure 
code is either designated as an O.R. procedure for purposes of MS-DRG 
assignment (``O.R. procedures'') or is not designated as an O.R. 
procedure for purposes of MS-DRG assignment (``non-O.R. procedures''). 
Second, for each procedure that is designated as an O.R. procedure, 
that O.R. procedure is further classified as either extensive or non-
extensive. Third, for each procedure that is designated as a non-O.R. 
procedure, that non-O.R. procedure is further classified as either 
affecting the MS-DRG assignment or not affecting the MS-DRG assignment. 
We refer to these designations that do affect MS-DRG assignment as 
``non O.R. affecting the MS-DRG.'' For new procedure codes that have 
been finalized through the ICD-10 Coordination and Maintenance 
Committee meeting process and are proposed to be classified as O.R. 
procedures or non-O.R. procedures affecting the MS-DRG, we recommend 
the MS-DRG assignment which is then made available in association with 
the proposed rule (Table 6B.--New Procedure Codes) and subject to 
public comment. These proposed assignments are generally based on the 
assignment of predecessor codes or the assignment of similar codes. For 
example, we generally examine the MS-DRG assignment for similar 
procedures, such as the other approaches for that procedure, to 
determine the most appropriate MS-DRG assignment for procedures 
proposed to be newly designated as O.R. procedures. As discussed in 
section II.C.13 of the preamble of this final rule, we are making Table 
6B.--New Procedure Codes--FY 2025 available on the CMS website at: 
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.html. We also refer readers to the ICD-10 MS-DRG Version 
41.1 Definitions Manual at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software.html for detailed information regarding the designation of 
procedures as O.R. or non-O.R. (affecting the MS- DRG) in Appendix E--
Operating Room Procedures and Procedure Code/MS-DRG Index.
    In the FY 2020 IPPS/LTCH PPS proposed rule, we stated that, given 
the long period of time that has elapsed since the original O.R. 
(extensive and non-extensive) and non-O.R. designations were 
established, the incremental changes that have occurred to these O.R. 
and non-O.R. procedure code lists, and changes in the way inpatient 
care is delivered, we plan to conduct a comprehensive, systematic 
review of the ICD-10-PCS procedure codes. This will be a multiyear 
project during which we will also review the process for determining 
when a procedure is considered an operating room procedure. For 
example, we may restructure the current O.R. and non-O.R. designations 
for procedures by leveraging the detail that is now available in the 
ICD-10 claims data. We refer readers to the discussion regarding the 
designation of procedure codes in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38066) where we stated that the determination of when a 
procedure code should be designated as an O.R. procedure has become a 
much more complex task. This is, in part, due to the number of various 
approaches available in the ICD-10-PCS classification, as well as 
changes in medical practice. While we have typically evaluated 
procedures on the basis of whether or not they would be performed in an 
operating room, we believe that there may be other factors to consider 
with regard to resource utilization, particularly with the 
implementation of ICD-10.
    We discussed in the FY 2020 IPPS/LTCH PPS proposed rule that as a 
result of this planned review and potential restructuring, procedures 
that are currently designated as O.R. procedures may no longer warrant 
that designation, and conversely, procedures that are currently 
designated as non-O.R. procedures may warrant an O.R. type of 
designation. We intend to consider the resources used and how a 
procedure should affect the MS-DRG assignment. We may also consider the 
effect of specific surgical approaches to evaluate whether to subdivide 
specific MS-DRGs based on a specific surgical approach. We stated we 
plan to utilize our available MedPAR claims data as a basis for this 
review and the input of our clinical advisors. As part of this 
comprehensive review of the procedure codes, we also intend to evaluate 
the MS-DRG assignment of the procedures and the current surgical 
hierarchy because both of these factor into the process of refining the 
ICD-10 MS-DRGs to better recognize complexity of service and resource 
utilization.
    In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58540 through 
58541), we provided a summary of the comments we had received in 
response to our request for feedback on what factors or criteria to 
consider in determining whether a procedure is designated as an O.R. 
procedure in the ICD-10-PCS classification system for future 
consideration. We also stated that in consideration of the PHE, we 
believed it may be appropriate to allow additional time for the claims 
data to stabilize prior to selecting the timeframe to analyze for this 
review.
    We stated in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58749) 
that we continue to believe additional time is necessary as we continue 
to develop our process and methodology. Therefore, we stated we will 
provide more detail on this analysis and the methodology for conducting 
this review in future rulemaking. In response to this discussion in the 
FY 2024 IPPS/LTCH PPS final rule, we received a comment by the October 
20, 2023 deadline. As discussed in the FY 2025 IPPS/LTCH PPS proposed 
rule (89 FR 35992), the commenter acknowledged that there is no easy 
rule that would allow CMS to designate certain surgeries as ``non-
O.R.'' procedures. The commenter stated that they believed that open 
procedures should always be designated O.R. procedures and approaches 
other than open should not be a sole factor in designating a procedure 
as non-O.R. as some minimally invasive procedures

[[Page 69073]]

using a percutaneous endoscopic approach require more training, 
specialized equipment, time, and resources than traditional open 
procedures. In addition, the commenter stated that whether a procedure 
is frequently or generally performed in the outpatient setting should 
not be used for determination of O.R. vs non-O.R. designation and noted 
that a surgery that can be performed in the outpatient setting for a 
clinically stable patient may not be able to be safely performed on a 
patient who is clinically unstable. The commenter also asserted that 
for procedures that can be performed in various locations within the 
hospital, that is, bedside vs operating room, there should be a 
mechanism to differentiate the setting of the procedure to determine 
the MS-DRG assignment, as in the commenter's assessment, the ICD-10 
classification does not provide a way to indicate the severity of 
certain conditions, or the complexity of procedures performed.
    As discussed in the proposed rule, CMS appreciates the commenter's 
feedback and recommendations as to factors to consider in evaluating 
O.R. designations. We stated we agree with the commenter and believe 
that there may be other factors to consider with regard to resource 
utilization. As discussed in the FY 2024 IPPS/LTCH PPS final rule, we 
have signaled in prior rulemaking that the designation of an O.R. 
procedure encompasses more than the physical location of the hospital 
room in which the procedure may be performed; in other words, the 
performance of a procedure in an operating room is not the sole 
determining factor we will consider as we examine the designation of a 
procedure in the ICD-10-PCS classification system. We are exploring 
alternatives on how we may restructure the current O.R. and non-O.R. 
designations for procedures by leveraging the detail that is available 
in the ICD-10 claims data.
    Comment: Many commenters supported CMS' plan to continue to conduct 
the comprehensive, systematic review of the ICD-10-PCS codes and to 
evaluate their current O.R. and non-O.R. designations. These commenters 
expressed that they were supportive of CMS' decision to continue to 
develop our process and methodology. Other commenters stated they 
agreed that the revolution in medical procedures in recent years may 
render the performance of a procedure in an O.R. a less critical 
distinction in driving payment policy. A commenter stated that because 
of technological advances, sophisticated, resource-intensive procedures 
are no longer confined to the O.R. setting and noted that in their 
observation, bi-plane radiology interventional suites and cardiac 
catheterization labs used for procedures such as mechanical 
thrombectomy or endovascular coiling for aneurysms can utilize more 
advanced equipment and supplies than a basic operating room with 
minimal installed equipment. Several commenters recommended that CMS 
provide detailed impact files prior to the adoption of changes to the 
designation of procedure codes in the ICD-10-PCS classification and 
stated that they look forward to commenting on CMS' data analysis and 
methodology in the future.
    As part of the broader and continuing conversation about the 
designations of procedures in the ICD-10-PCS classification system, a 
few commenters recommended that CMS work closely with physician 
specialty societies and industry stakeholders to identify the most 
important drivers of complexity and resource use in the hospital 
setting. A commenter specifically recommended that CMS consider a 
technical expert panel (TEP) made up of industry stakeholders and 
experts to review methodologies for determining the designation of 
procedure codes in the ICD-10-PCS classification system. Another 
commenter encouraged CMS to consider factors such as:
     whether the procedure involves either the intentional non-
transient alteration of structures of the body, or cutting into the 
body, or both;
     the surgical approach (e.g., open, percutaneous endoscopic 
or percutaneous approach);
     the requirement of either a surgeon or non-surgeon 
provider to be present during procedure;
     the complexity of procedures performed in an operating 
room, or a hybrid operating room, versus procedures performed in an 
electrophysiology laboratory;
     resource utilization requirements during the performance 
of the procedure in terms of the need for anesthesia and monitoring, 
etc.; and
     inpatient versus outpatient status.
    Response: We thank the commenters for their support. We also thank 
commenters for sharing their views and their willingness to provide 
feedback and recommendations as to what factors to consider in 
evaluating O.R. versus non-O.R. designations. We agree with commenters 
and believe that there may be other factors to consider with regard to 
resource utilization, particularly with the implementation of ICD-10. 
While CMS has already convened an internal workgroup comprised of 
clinicians, consultants, coding specialists and other policy analysts, 
as well as provided opportunity to provide feedback as to what factors 
to consider in evaluating O.R. versus non-O.R. designations, we look 
forward to further input and feedback from interested parties. As 
discussed in the proposed rule, we are considering the feedback 
received to date on what factors and/or criteria to consider in 
determining whether a procedure is designated as an O.R. procedure in 
the ICD-10-PCS classification system as we continue to develop our 
process and methodology and will provide more detail on this analysis 
and the methodology for conducting this comprehensive review in future 
rulemaking. We encourage the public to continue to submit comments on 
any other factors to consider in our refinement efforts to recognize 
and differentiate consumption of resources for the ICD-10 MS-DRGs for 
consideration.
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule, we did not 
receive any requests regarding changing the designation of specific 
ICD-10-PCS procedure codes from non-O.R. to O.R. procedures, or to 
change the designation from O.R. procedures to non-O.R. procedures by 
the October 20, 2023 deadline. In this section of this final rule, as 
we did in the proposed rule, we discuss the proposals we made based on 
our internal review and analysis and we discuss the process that was 
utilized for evaluating each procedure code. For each procedure, we 
considered--
     Whether the procedure would typically require the 
resources of an operating room;
     Whether it is an extensive or a non-extensive procedure; 
and
     To which MS-DRGs the procedure should be assigned.
    We note that many MS-DRGs require the presence of any O.R. 
procedure. As a result, cases with a principal diagnosis associated 
with a particular MS-DRG would, by default, be grouped to that MS-DRG. 
Therefore, we do not list these MS-DRGs in our discussion in this 
section of this final rule. Instead, we only discuss MS-DRGs that 
require explicitly adding the relevant procedure codes to the GROUPER 
logic in order for those procedure codes to affect the MS-DRG 
assignment as intended.
    For procedures that would not typically require the resources of an 
operating room, we determined if the procedure should affect the MS-DRG 
assignment. In cases where we proposed to change the designation of 
procedure codes from non-O.R. procedures to O.R. procedures, we also 
proposed one or more MS-DRGs with which these

[[Page 69074]]

procedures are clinically aligned and to which the procedure code would 
be assigned.
    In addition, cases that contain O.R. procedures will map to MS-DRGs 
981, 982, or 983 (Extensive O.R. Procedure Unrelated to Principal 
Diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS-
DRGs 987, 988, or 989 (Non-Extensive O.R. Procedure Unrelated to 
Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) when they do not contain a principal diagnosis that 
corresponds to one of the MDCs to which that procedure is assigned. 
These procedures need not be assigned to MS-DRGs 981 through 989 in 
order for this to occur. Therefore, we did not specifically address 
that aspect in summarizing the proposals we made based on our internal 
review and analysis in the proposed rule and in this section of this 
final rule.
b. Non-O.R. Procedures to O.R. Procedures
(1) Laparoscopic Biopsy of Intestinal Body Parts
    As discussed in the proposed rule (89 FR 35993), during our review, 
we noted inconsistencies in how procedures involving laparoscopic 
excisions of intestinal body parts are designated. Procedure codes 
describing the laparoscopic excision of intestinal body parts differ by 
qualifier. ICD-10-PCS procedure codes describing excisions of 
intestinal body parts with the diagnostic qualifier ``X'', are used to 
report these procedures when performed for diagnostic purposes. We 
identified the following five related codes:
[GRAPHIC] [TIFF OMITTED] TR28AU24.074

    In the proposed rule, we noted the ICD-10-PCS procedure codes 
describing the laparoscopic excision of intestinal body parts for 
diagnostic purposes listed previously have been assigned different 
attributes in terms of designation as an O.R. or non-O.R. procedure 
when compared to similar procedures describing the laparoscopic 
excisions of intestinal body parts for nondiagnostic purposes. We noted 
in the ICD-10 MS-DRGs Version 41, these ICD-10-PCS codes are currently 
recognized as non-O.R. procedures for purposes of MS-DRG assignment, 
while similar excision of intestinal body part procedure codes with the 
same approach but different qualifiers are recognized as O.R. 
procedures.
    As discussed in the proposed rule, upon further review and 
consideration, we stated we believe that procedure codes 0DBF4ZX, 
0DBG4ZX, 0DBL4ZX, 0DBM4ZX and 0DBN4ZX describing a laparoscopic 
excision of an intestinal body parts for diagnostic purposes warrant 
designation as an O.R. procedures consistent with other laparoscopic 
excision procedures performed on the same intestinal body parts for 
nondiagnostic purposes. We stated we also believe it is clinically 
appropriate for these procedures to group to the same MS-DRGs as the 
procedures describing excision procedures performed on the intestinal 
body parts for nondiagnostic purposes. Therefore, we proposed to add 
procedure codes 0DBF4ZX, 0DBG4ZX, 0DBL4ZX, 0DBM4ZX and 0DBN4ZX to the 
FY 2025 ICD-10 MS-DRG Version 42 Definitions Manual in Appendix E--
Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. 
procedures assigned to MS-DRG 264 (Other Circulatory System O.R. 
Procedures) in MDC 05 (Diseases and Disorders of the Circulatory 
System); MS-DRGs 329, 330, and 331 (Major Small and Large Bowel 
Procedures, with MCC, with CC, and without CC/MCC, respectively) in MDC 
06 (Diseases and Disorders of the Digestive System); MS-DRGs 820, 821, 
and 822 (Lymphoma and Leukemia with Major O.R. Procedures with MCC, CC, 
without CC/MCC, respectively) and MS-DRGS 826, 827, and 828 
(Myeloproliferative Disorders or Poorly Differentiated Neoplasms with 
Major O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively) in MDC 17 (Myeloproliferative Diseases and Disorders, 
Poorly Differentiated Neoplasms); MS-DRGs 907, 908, and 909 (Other O.R. 
Procedures for Injuries with MCC, with CC, and without CC/MCC, 
respectively) in MDC 21 (Injuries, Poisonings and Toxic Effects of 
Drugs); and MS-DRGs 957, 958, and 959 (Other O.R. Procedures for 
Multiple Significant Trauma with MCC, with CC, and without CC/MCC, 
respectively) in MDC 24 (Multiple Significant Trauma).
    Comment: Commenters supported the proposal to reclassify ICD-10-PCS 
procedure codes 0DBF4ZX (Excision of right large intestine, 
percutaneous endoscopic approach, diagnostic), 0DBG4ZX (Excision of 
left large intestine, percutaneous endoscopic approach, diagnostic), 
0DBL4ZX (Excision of transverse colon, percutaneous endoscopic 
approach, diagnostic), 0DBM4ZX (Excision of descending colon, 
percutaneous endoscopic approach, diagnostic), and 0DBN4ZX (Excision of 
sigmoid colon, percutaneous endoscopic approach, diagnostic) as O.R. 
procedures for the purposes of MS-DRG assignment for FY 2025. A 
commenter stated they believed that laparoscopic procedures--whether 
diagnostic or nondiagnostic--will always be performed in an O.R. The 
commenter further urged CMS to publish O.R. versus non-O.R. designation 
data on its website for all ICD-10-PCS codes, not just new codes, so 
that specialty societies can more easily review and identify possible 
errors.
    Response: We appreciate the commenters' support and thank the 
commenter for their feedback. We also appreciate the commenter's 
suggestion, however, as stated in the earlier in this section, and as 
we have signaled in prior rulemaking, the designation of an O.R. 
procedure encompasses more than the physical location of the hospital 
room in which the procedure may be performed. In other words, the 
performance of a procedure in an operating room is not the sole 
determining factor we consider as we examine the designation of a 
procedure in the ICD-10-PCS classification system. Additionally, we 
refer the commenter, and interested specialty societies, to Appendix E 
of the ICD-10 MS-DRG Version 42 Definitions Manual (which is available 
on the CMS website at: https://www.cms.gov/Medicare/Medicare-Feefor-
Service-Payment/AcuteInpatientPPS/MS-

[[Page 69075]]

DRGClassifications-and-Software) for a list of all the ICD-10-PCS 
procedure codes that affect MS-DRG assignment (that is, procedure codes 
designated as O.R. procedures or as non-O.R. procedures affecting the 
MS-DRG), the MDCs and MS-DRGs to which they are assigned, and a 
description of the surgical categories.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of procedure codes 
0DBF4ZX, 0DBG4ZX, 0DBL4ZX, 0DBM4ZX and 0DBN4ZX from non-O.R. procedures 
to O.R. procedures, without modification, effective October 1, 2024.
(2) Laparoscopic Biopsy of Gallbladder and Pancreas
    As discussed in the proposed rule (89 FR 35994), during our review, 
we noted inconsistencies in how procedures involving laparoscopic 
excisions of gallbladder or pancreas are designated. Procedure codes 
describing the laparoscopic excision of the gallbladder or pancreas 
differ by qualifier. The ICD-10-PCS procedure code describing an 
excision of the gallbladder and the procedure code describing an 
excision of the pancreas with the diagnostic qualifier ``X'', are used 
to report these procedures when performed for diagnostic purposes. We 
stated we identified the following two related codes:
[GRAPHIC] [TIFF OMITTED] TR28AU24.075

    In the proposed rule, we noted the ICD-10-PCS procedure codes 
describing the laparoscopic excision of the gallbladder or the pancreas 
for diagnostic purposes listed previously have been assigned different 
attributes in terms of designation as an O.R. or a non-O.R. procedure 
when compared to similar procedures describing the laparoscopic 
excisions of the gallbladder or the pancreas for nondiagnostic 
purposes. In the ICD-10 MS-DRGs Version 41, these ICD-10-PCS codes are 
currently recognized as non-O.R. procedures for purposes of MS-DRG 
assignment, while similar excision of the gallbladder or the pancreas 
procedure codes with the same approach but different qualifiers are 
recognized as O.R. procedures.
    As discussed in the proposed rule, upon further review and 
consideration, we stated we believe that procedure code 0FB44ZX 
describing a laparoscopic excision of the gallbladder for diagnostic 
purposes and procedure code 0FBG4ZX describing a laparoscopic excision 
of the pancreas for diagnostic purposes both warrant designation as an 
O.R. procedure consistent with other laparoscopic excision procedures 
performed on the same body parts for nondiagnostic purposes. We stated 
we also believe it is clinically appropriate for these procedures to 
group to the same MS-DRGs as the procedures describing excision 
procedures performed on the gallbladder or pancreas for nondiagnostic 
purposes. Therefore, we proposed to add procedure code 0FB44ZX to the 
FY 2025 ICD-10 MS-DRG Version 42 Definitions Manual in Appendix E--
Operating Room Procedures and Procedure Code/MS-DRG Index as an O.R. 
procedure assigned to MS-DRGs 411, 412, and 413 (Cholecystectomy with 
C.D.E., with MCC, with CC, and without CC/MCC, respectively) and MS-
DRGs 417, 418, and 419 (Laparoscopic Cholecystectomy without C.D.E., 
with MCC, with CC, and without CC/MCC, respectively) in MDC 07 
(Diseases and Disorders of the Hepatobiliary System and Pancreas); MS-
DRGs 820, 821, and 822 (Lymphoma and Leukemia with Major O.R. 
Procedures with MCC, with CC, and without CC/MCC, respectively) and MS-
DRGS 826, 827, and 828 (Myeloproliferative Disorders or Poorly 
Differentiated Neoplasms with Major O.R. Procedures with MCC, with CC, 
and without CC/MCC, respectively) in MDC 17 (Myeloproliferative 
Diseases and Disorders, Poorly Differentiated Neoplasms); MS-DRGs 907, 
908, and 909 (Other O.R. Procedures for Injuries with MCC, with CC, and 
without CC/MCC, respectively) in MDC 21 (Injuries, Poisonings and Toxic 
Effects of Drugs); and MS-DRGs 957, 958, and 959 (Other O.R. Procedures 
for Multiple Significant Trauma with MCC, with CC, and without CC/MCC, 
respectively) in MDC 24 (Multiple Significant Trauma).
    We also proposed to add procedure code 0FBG4ZX to the FY 2025 ICD-
10 MS-DRG Version 42 Definitions Manual in Appendix E--Operating Room 
Procedures and Procedure Code/MS-DRG Index as an O.R. procedure 
assigned to MS-DRGs 405, 406, and 407 (Pancreas, Liver and Shunt 
Procedures, with MCC, with CC, and without CC/MCC, respectively) in MDC 
06 (Diseases and Disorders of the Digestive System); MS-DRGs 628, 629 
and 630 (Other Endocrine, Nutritional and Metabolic O.R. Procedures 
with MCC, with CC, and without CC/MCC, respectively) in MDC 10 
(Endocrine, Nutritional and Metabolic Diseases and Disorders); MS-DRGs 
907, 908, and 909 (Other O.R. Procedures for Injuries with MCC, with 
CC, and without CC/MCC, respectively) in MDC 21 (Injuries, Poisonings 
and Toxic Effects of Drugs); and MS-DRGs 957, 958, and 959 (Other O.R. 
Procedures for Multiple Significant Trauma with MCC, with CC, and 
without CC/MCC, respectively) in MDC 24 (Multiple Significant Trauma).
    Comment: Commenters supported the proposal to reclassify ICD-10-PCS 
procedure codes 0FB44ZX (Excision of gallbladder, percutaneous 
endoscopic approach, diagnostic) and 0FBG4ZX (Excision of pancreas, 
percutaneous endoscopic approach, diagnostic) as O.R. procedures for 
the purposes of MS-DRG assignment for FY 2025.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of procedure codes 
0FB44ZX and 0FBG4ZX from non-O.R. procedures to O.R. procedures, 
without modification, effective October 1, 2024.
12. Changes to the MS-DRG Diagnosis Codes for FY 2025
a. Background of the CC List and the CC Exclusions List
    Under the IPPS MS-DRG classification system, we have developed a 
standard list of diagnoses that are considered CCs. Historically, we 
developed this list using physician panels that classified each 
diagnosis code based on whether the diagnosis, when present as a 
secondary condition, would be considered a substantial complication or 
comorbidity. A substantial complication or comorbidity was defined as a 
condition that, because of its presence with a specific principal 
diagnosis, would cause an increase in the length-of-stay by at least 1 
day in at least 75 percent of the patients. However, depending on the 
principal diagnosis of the patient, some diagnoses on the basic list of 
complications and comorbidities may be excluded if they are closely 
related to the principal

[[Page 69076]]

diagnosis. In FY 2008, we evaluated each diagnosis code to determine 
its impact on resource use and to determine the most appropriate CC 
subclassification (NonCC, CC, or MCC) assignment. We refer readers to 
sections II.D.2. and 3. of the preamble of the FY 2008 IPPS final rule 
with comment period for a discussion of the refinement of CCs in 
relation to the MS DRGs we adopted for FY 2008 (72 FR 47152 through 
47171).
b. Overview of Comprehensive CC/MCC Analysis
    In the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159), we described 
our process for establishing three different levels of CC severity into 
which we would subdivide the diagnosis codes. The categorization of 
diagnoses as a MCC, a CC, or a NonCC was accomplished using an 
iterative approach in which each diagnosis was evaluated to determine 
the extent to which its presence as a secondary diagnosis resulted in 
increased hospital resource use. We refer readers to the FY 2008 IPPS/
LTCH PPS final rule (72 FR 47159) for a complete discussion of our 
approach. Since the comprehensive analysis was completed for FY 2008, 
we have evaluated diagnosis codes individually when assigning severity 
levels to new codes and when receiving requests to change the severity 
level of specific diagnosis codes.
    We noted in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235 
through 19246) that with the transition to ICD-10-CM and the 
significant changes that have occurred to diagnosis codes since the FY 
2008 review, we believed it was necessary to conduct a comprehensive 
analysis once again. Based on this analysis, we proposed changes to the 
severity level designations for 1,492 ICD-10-CM diagnosis codes and 
invited public comments on those proposals. As summarized in the FY 
2020 IPPS/LTCH PPS final rule, many commenters expressed concern with 
the proposed severity level designation changes overall and recommended 
that CMS conduct further analysis prior to finalizing any proposals. 
After careful consideration of the public comments we received, as 
discussed further in the FY 2020 IPPS/LTCH PPS final rule, we generally 
did not finalize our proposed changes to the severity designations for 
the ICD-10-CM diagnosis codes, other than the changes to the severity 
level designations for the diagnosis codes in category Z16 (Resistance 
to antimicrobial drugs) from a NonCC to a CC. We stated that postponing 
adoption of the proposed comprehensive changes in the severity level 
designations would allow further opportunity to provide additional 
background to the public on the methodology utilized and clinical 
rationale applied across diagnostic categories to assist the public in 
its review. We refer readers to the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42150 through 42152) for a complete discussion of our response 
to public comments regarding the proposed severity level designation 
changes for FY 2020.
    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32550), to provide the public with more information on the CC/MCC 
comprehensive analysis discussed in the FY 2020 IPPS/LTCH PPS proposed 
and final rules, CMS hosted a listening session on October 8, 2019. The 
listening session included a review of this methodology utilized to 
mathematically measure the impact on resource use. We refer readers to 
https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/Downloads/10082019ListingSessionTrasncriptandQandAsandAudioFile.zip for 
the transcript and audio file of the listening session. We also refer 
readers to https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software for the 
supplementary file containing the mathematical data generated using 
claims from the FY 2018 MedPAR file describing the impact on resource 
use of specific ICD-10-CM diagnosis codes when reported as a secondary 
diagnosis that was made available for the listening session.
    In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58550 through 
58554), we discussed our plan to continue a comprehensive CC/MCC 
analysis, using a combination of mathematical analysis of claims data 
as discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235) 
and the application of nine guiding principles and plan to present the 
findings and proposals in future rulemaking. The nine guiding 
principles are as follows:
     Represents end of life/near death or has reached an 
advanced stage associated with systemic physiologic decompensation and 
debility.
     Denotes organ system instability or failure.
     Involves a chronic illness with susceptibility to 
exacerbations or abrupt decline.
     Serves as a marker for advanced disease states across 
multiple different comorbid conditions.
     Reflects systemic impact.
     Post-operative/post-procedure condition/complication 
impacting recovery.
     Typically requires higher level of care (that is, 
intensive monitoring, greater number of caregivers, additional testing, 
intensive care unit care, extended length of stay).
     Impedes patient cooperation or management of care or both.
     Recent (last 10 years) change in best practice, or in 
practice guidelines and review of the extent to which these changes 
have led to concomitant changes in expected resource use.
    We refer readers to the FY 2021 IPPS/LTCH PPS final rule for a 
complete summation of the comments we received for each of the nine 
guiding principles and our responses to those comments. In the proposed 
rule we noted that since the FY 2021 IPPS/LTCH PPS final rule we have 
continued to solicit feedback regarding the nine guiding principles, as 
well as other possible ways we can incorporate meaningful indicators of 
clinical severity. We have encouraged the public to provide a detailed 
explanation of how applying a suggested concept or principle would 
ensure that the severity designation appropriately reflects resource 
use for any diagnosis code when providing feedback or comments. In the 
FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26748 through 26750) we 
illustrated how the nine guiding principles might be applied in 
evaluating changes to the severity designations of diagnosis codes in 
our discussion of our proposed changes to the severity level 
designation for certain diagnosis codes that describe homelessness. In 
the proposed rule, we stated that we have not received any additional 
feedback or comments on the nine guiding principles since the FY 2021 
IPPS/LTCH PPS final rule; therefore, in the FY 2025 IPPS/LTCH PPS 
proposed rule we proposed to finalize the nine guiding principles as 
listed previously. We stated that under this proposal, our evaluations 
to determine the extent to which the presence of a diagnosis code as a 
secondary diagnosis results in increased hospital resource use will 
include a combination of mathematical analysis of claims data as 
discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235) and 
the application of the nine guiding principles.
    Comment: Many commenters supported our proposal to finalize the 
nine guiding principles. Commenters stated they continued to support 
CMS' consideration of the nine guiding principles in conjunction with 
its mathematical analysis of the data in

[[Page 69077]]

evaluating whether changes to the severity level designations of 
diagnoses are needed and to ensure the severity designations 
appropriately reflect resource use based on review of the claims data, 
as well as consideration of relevant clinical factors (for example, the 
clinical nature of each of the secondary diagnoses and the severity 
level of clinically similar diagnoses).
    Response: We thank the commenters for their support.
    Comments: Other commenters expressed concerns with the guiding 
principles. These commenters stated that the nine guiding principles 
appeared to be open to interpretation or differences in clinical 
opinion and noted a lack of detailed definitions and criteria for 
applying the guiding principles. Other commenters stated that it was 
not clear how CMS will apply the guiding principles in conjunction with 
the mathematical analyses of claims data to make decisions about 
severity levels. These commenters stated in their observation, CMS had 
not stated how it will handle conditions that might not fit any guiding 
principles, such as obstetrical diagnoses, congenital conditions, or 
potentially social determinants of health, but reflect mathematical 
data for the impact on resource use that could suggest a need for a 
change to the severity designation of the code. Several commenters 
stated they were unclear as to the impact finalizing the guiding 
principles would have on diagnosis codes that are currently designated 
as MCCs or CCs when reported as secondary diagnoses. These commenters 
stated that more information is needed to better understand CMS' 
process for decision making on the designation of diagnosis severity 
levels.
    Response: We thank the commenters for sharing their concerns.
    We note the focus of our analysis is on the appropriate severity 
level designation of individual ICD-10-CM codes as secondary diagnosis 
codes and how they relate to inpatient prospective payment and the 
resource utilization required while the patient is in the hospital. We 
wish to clarify for commenters that the application of the nine guiding 
principles is not a departure from our historic approach of considering 
both mathematical analysis and clinical factors as described in the FY 
2008 IPPS/LTCH PPS final rule. In the FY 2008 IPPS/LTCH PPS final rule 
(72 FR 47153 through 47154), we stated the need for a revised CC list 
prompted a reexamination of the secondary diagnoses that qualify as a 
CC and stated our intent was to better distinguish cases that are 
likely to result in increased hospital resource use based on secondary 
diagnoses. We stated that using a combination of mathematical data and 
the judgment of our medical advisors, we included the condition on the 
CC list if it could demonstrate that its presence would lead to 
substantially increased hospital resource use. We stated diagnoses may 
require increased hospital resource use because of a need for such 
services as:
     Intensive monitoring (for example, an intensive care unit 
(ICU) stay).
     Expensive and technically complex services (for example, 
heart transplant).
     Extensive care requiring a greater number of caregivers 
(for example, nursing care for a patient with quadriplegia).
    In reviewing the diagnosis codes that describe chronic diseases, we 
stated in the FY 2008 IPPS/LTCH PPS final rule that we made exceptions 
for diagnosis codes that indicate a chronic disease in which the 
underlying illness has reached an advanced stage or is associated with 
systemic physiologic decompensation and debility. We refer readers to 
the FY 2008 IPPS/LTCH PPS final rule (72 FR 47153 through 47154) for a 
complete discussion of our approach.
    The nine guiding principles were developed to build on the process 
we described in the FY 2008 IPPS/LTCH PPS final rule and are not 
intended to turn the analysis into a quantitative exercise, requiring 
that every diagnosis code satisfy each principle. Instead, as stated in 
prior rulemaking, the nine guiding principles are intended to provide a 
framework for assessing relevant clinical factors to help denote if, 
and to what degree, additional resources are required above and beyond 
those that are already being utilized to address the principal 
diagnosis or other secondary diagnoses that might also be present on 
the claim. In response to the commenter's concerns regarding a lack of 
detailed definition of each principle, we refer commenters to the FY 
2021 IPPS/LTCH PPS final rule (85 FR 58550 through 58554), for a 
complete discussion of our response to similar public comments 
regarding each of the nine guiding principles.
    Comment: Some commenters stated that the guiding principles 
appeared to be more applicable to MCC conditions, were too strict, and 
could potentially eliminate CC conditions. A commenter stated that the 
application of the guiding principles would represent a substantial 
revision to the definition of a CC, noting MS-DRG Definition Manual 
Version 41.1 provides the following definition: ``A substantial 
complication or comorbidity was defined as a condition that because of 
its presence with a specific principal diagnosis would cause an 
increase in length of stay by at least one day in at least 75 percent 
of the patients.''
    Response: We appreciate the commenters' feedback.
    We do not believe the nine guiding principles would be mostly 
applicable, or only applicable, to MCC conditions. In applying the nine 
guiding principles in our review of the appropriate severity level 
designation, the intention is not to require that a diagnosis code 
satisfy each principle, or a specific number of principles in assessing 
whether to designate a secondary diagnosis code as a NonCC versus a CC 
versus an MCC. Rather, the severity level determinations would be based 
on the consideration of the clinical factors captured by these 
principles as well as the empirical analysis of the additional 
resources associated with the secondary diagnosis.
    We wish to clarify that the definition of a ``substantial 
complication or comorbidity'' from the MS-DRG Definition Manual that 
the commenter referenced, is the definition of a CC that was used in 
Version 8 of the DRGs. In FY 2008, for Version 25 of the MS-DRGs, the 
diagnoses comprising the CC list were completely redefined and instead 
each CC was categorized as a major CC or a CC (that is, non-major CC) 
based on relative resource use. As stated previously, we refer readers 
to the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159) for a complete 
discussion of our approach.
    We note that in addition to the FY 2021 IPPS/LTCH PPS rule, in the 
FY 2022 IPPS/LTCH PPS final rule (86 FR 44915 through 44926), the FY 
2023 IPPS/LTCH PPS final rule (87 FR 48865 through 48872), the FY 2024 
IPPS/LTCH PPS final rule (88 FR 58753 through 58759), and in the FY 
2025 IPPS/LTCH PPS proposed rule (89 FR 35997 through 36001), we have 
illustrated how the guiding principles might be applied in evaluating 
changes to the severity designations of diagnosis codes. We have also 
continued to solicit feedback regarding the guiding principles, as well 
as other possible ways we can incorporate meaningful indicators of 
clinical severity. We note the commenters did not provide alternative 
principles for consideration, nor was feedback provided as to other 
possible ways we can incorporate meaningful indicators of clinical 
severity.
    As discussed in prior rulemaking, our intended approach is for CMS 
to first use these guiding principles in making an initial clinical 
assessment of the appropriate severity level designation

[[Page 69078]]

for each ICD-10-CM code as a secondary diagnosis. CMS will then use a 
mathematical analysis of claims data as discussed in the FY 2008 IPPS/
LTCH PPS final rule (72 FR 47159) to determine if the presence of the 
ICD-10-CM code as a secondary diagnosis appears to, or does not appear 
to, increase hospital resource consumption. There may be instances in 
which we would decide that the clinical analysis weighs in favor of 
proposing to maintain or proposing to change the severity designation 
of an ICD-10-CM code after application of the nine guiding principles. 
Any proposed modifications to the severity level designation of ICD-10-
CM codes would be addressed in future rulemaking consistent with our 
annual process.
    Therefore, after consideration of the public comments received, and 
for the reasons discussed, we are finalizing the nine guiding 
principles as listed previously in this FY 2025 IPPS/LTCH PPS final 
rule. Accordingly, our evaluations to determine the extent to which the 
presence of a diagnosis code as a secondary diagnosis results in 
increased hospital resource use will include a combination of 
mathematical analysis of claims data as discussed in the FY 2020 IPPS/
LTCH PPS proposed rule (84 FR 19235) and the application of the nine 
guiding principles. We thank commenters for sharing their views and 
their willingness to support CMS in our efforts to continue a 
comprehensive CC/MCC analysis.
    In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25175 through 
25180), as another interval step in our comprehensive review of the 
severity designations of ICD-10-CM diagnosis codes, we requested public 
comments on a potential change to the severity level designations for 
``unspecified'' ICD-10-CM diagnosis codes that we were considering 
adopting for FY 2022. Specifically, we noted we were considering 
changing the severity level designation of ``unspecified'' diagnosis 
codes to a NonCC where there are other codes available in that code 
subcategory that further specify the anatomic site. As summarized in 
the FY 2022 IPPS/LTCH PPS final rule, many commenters expressed concern 
with the potential severity level designation changes overall and 
recommended that CMS delay any possible change to the designation of 
these codes to give hospitals and their physicians time to prepare. 
After careful consideration of the public comments we received, we 
maintained the severity level designation of the ``unspecified'' 
diagnosis codes currently designated as a CC or MCC where there are 
other codes available in that code subcategory that further specify the 
anatomic site for FY 2022. We refer readers to the FY 2022 IPPS/LTCH 
PPS final rule (86 FR 44916 through 44926) for a complete discussion of 
our response to public comments regarding the potential severity level 
designation changes. Instead, for FY 2022, we finalized a new Medicare 
Code Editor (MCE) code edit for ``unspecified'' codes, effective with 
discharges on and after April 1, 2022. We stated we believe finalizing 
this new edit would provide additional time for providers to be 
educated while not affecting the payment the provider is eligible to 
receive. We refer the reader to section II.D.14.e. of the FY 2022 IPPS/
LTCH PPS final rule (86 FR 44940 through 44943) for the complete 
discussion.
    As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48866), 
we stated that as the new unspecified edit became effective beginning 
with discharges on and after April 1, 2022, we believed it was 
appropriate to not propose to change the designation of any ICD-10-CM 
diagnosis codes, including the unspecified codes that are subject to 
the ``Unspecified Code'' edit, as we continue our comprehensive CC/MCC 
analysis to allow interested parties the time needed to become 
acclimated to the new edit.
    Comment: A commenter stated that they were pleased that CMS 
continues to maintain the severity level designation of the 
``unspecified'' diagnosis codes, currently designated as a CC or MCC 
where there are other codes available in that code subcategory that 
further specify the anatomic site, that are subject to the 
``Unspecified Code'' edit. The commenter further stated that they 
agreed that maintaining this status quo will allow time for providers 
to be educated and adjust to the edit. Another commenter suggested that 
CMS provide data from the Medicare Code Editor (MCE) that identifies 
each provider reporting ``unspecified'' diagnosis codes with 
designations as a CC or MCC when there are other codes available in 
that code subcategory that further specify the anatomic site, which can 
be used to inform providers on the number of ``unspecified'' diagnosis 
codes being reported at their facility compared to their peers.
    Response: CMS appreciates the commenters' feedback and 
recommendations. We will give careful consideration to what additional 
information may be helpful in assisting to educate providers on the 
documentation required to report to the highest level of specificity as 
it relates to the laterality of the conditions treated in the inpatient 
setting as we continue to formulate future next steps in our 
comprehensive review of the severity designations of ICD-10-CM 
diagnosis codes.
    In the FY 2023 IPPS/LTCH proposed rule (87 FR 28177 through 28181), 
we also requested public comments on how the reporting of diagnosis 
codes in categories Z55-Z65 might improve our ability to recognize 
severity of illness, complexity of illness, and/or utilization of 
resources under the MS-DRGs. Consistent with the Administration's goal 
of advancing health equity for all, including members of historically 
underserved and under-resourced communities, as described in the 
President's January 20, 2021 Executive Order 13985 on ``Advancing 
Racial Equity and Support for Underserved Communities Through the 
Federal Government,'' \8\ we stated we were also interested in 
receiving feedback on how we might otherwise foster the documentation 
and reporting of the diagnosis codes describing social and economic 
circumstances to more accurately reflect each health care encounter and 
improve the reliability and validity of the coded data including in 
support of efforts to advance health equity.
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    \8\ Available at: https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
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    We noted that social determinants of health (SDOH) are the 
conditions in the environments where people are born, live, learn, 
work, play, worship, and age that affect a wide range of health, 
functioning, and quality-of-life outcomes and risks.\9\ The subset of Z 
codes that describe the social determinants of health are found in 
categories Z55-Z65 (Persons with potential health hazards related to 
socioeconomic and psychosocial circumstances). These codes describe a 
range of issues related--but not limited--to education and literacy, 
employment, housing, ability to obtain adequate amounts of food or safe 
drinking water, and occupational exposure to toxic agents, dust, or 
radiation.
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    \9\ Available at: https://health.gov/healthypeople/priority-areas/social-determinants-health.
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    We received numerous public comments that expressed a variety of 
views on our comment solicitation, including many comments that were 
supportive, and others that offered specific suggestions for our 
consideration in future rulemaking. Many commenters applauded CMS' 
efforts to encourage documentation and

[[Page 69079]]

reporting of SDOH diagnosis codes given the impact that social risks 
can have on health outcomes. These commenters stated that it is 
critical that physicians, other health care professionals, and 
facilities recognize the impact SDOH have on the health of their 
patients. Many commenters also stated that the most immediate and 
important action CMS could take to increase the use of SDOH Z codes is 
to finalize the evidence-based ``Screening for Social Drivers of 
Health'' and ``Screen Positive Rate for Social Drivers of Health'' 
measures proposed to be adopted in the Hospital Inpatient Quality 
Reporting (IQR) Program. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49202 through 49220), CMS finalized the ``Screening for Social Drivers 
of Health'' and ``Screen Positive Rate for Social Drivers of Health'' 
measures in the Hospital Inpatient Quality Reporting (IQR) Program. We 
refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 48867 
through 48872) for the complete discussion of the public comments 
received regarding the request for information on SDOH diagnosis codes.
    As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58755 
through 58759), based on our analysis of the impact on resource use for 
the ICD-10-CM Z codes that describe homelessness and after 
consideration of public comments, we finalized changes to the severity 
levels for diagnosis codes Z59.00 (Homelessness, unspecified), Z59.01 
(Sheltered homelessness), and Z59.02 (Unsheltered homelessness), from 
NonCC to CC. We stated our expectation that finalizing the changes 
would encourage the increased documentation and reporting of the 
diagnosis codes describing social and economic circumstances and serve 
as an example for providers that, when they document and report SDOH 
codes, CMS can further examine the claims data and consider future 
changes to the designation of these codes when reported as a secondary 
diagnosis. We further stated CMS would continue to monitor and evaluate 
the reporting of the diagnosis codes describing social and economic 
circumstances.
    We refer the reader to the following section of this final rule for 
discussion of our proposed changes to the severity level designation 
for the diagnosis codes that describe inadequate housing and housing 
instability for FY 2025, as well as our finalization of that proposal.
    We have updated the Impact on Resource Use Files on the CMS website 
so that the public can review the mathematical data for the impact on 
resource use generated using claims from the FY 2019 through the FY 
2023 MedPAR files. These files are posted on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software. As discussed in 
prior rulemaking, we also continue to be interested in receiving 
feedback on how we might further foster the documentation and reporting 
of the most specific diagnosis codes supported by the available medical 
record documentation and clinical knowledge of the patient's health 
condition to more accurately reflect each health care encounter and 
improve the reliability and validity of the coded data.
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
35997), for new diagnosis codes approved for FY 2025, consistent with 
our annual process for designating a severity level (MCC, CC, or NonCC) 
for new diagnosis codes, we first review the predecessor code 
designation, followed by review and consideration of other factors that 
may be relevant to the severity level designation, including the 
severity of illness, treatment difficulty, complexity of service and 
the resources utilized in the diagnosis or treatment of the condition. 
We note that this process does not automatically result in the new 
diagnosis code having the same designation as the predecessor code. We 
refer the reader to section II.C.13 of this final rule for the 
discussion of the finalized changes to the ICD-10-CM and ICD-10-PCS 
coding systems for FY 2025.
c. Changes to Severity Levels
1. SDOH--Inadequate Housing/Housing Instability
    As discussed earlier in this section and in the proposed rule (89 
FR 35997 through 35999), in continuation of our examination of the SDOH 
Z codes, we reviewed the mathematical data on the impact on resource 
use for the subset of ICD-10-CM Z codes that describe the social 
determinants of health found in categories Z55-Z65 (Persons with 
potential health hazards related to socioeconomic and psychosocial 
circumstances).
    As discussed in the proposed rule, the ICD-10-CM SDOH Z codes that 
describe inadequate housing and housing instability are currently 
designated as NonCCs when reported as secondary diagnoses. The 
following table reflects the impact on resource use data generated 
using claims from the September 2023 update of the FY 2023 MedPAR file. 
We refer readers to the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159) 
for a complete discussion of our historical approach to mathematically 
evaluate the extent to which the presence of an ICD-10-CM code as a 
secondary diagnosis resulted in increased hospital resource use, and a 
more detailed explanation of the columns in the table.

[[Page 69080]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.076

    The table shows that the C1 value is 2.63 for ICD-10-CM diagnosis 
code Z59.10 and 1.85 for ICD-10-CM diagnosis code Z59.19. A value close 
to 2.0 in column C1 suggests that the secondary diagnosis is more 
aligned with a CC than a NonCC. Because the C1 values in the table are 
generally close to 2, the data suggest that when these two SDOH Z codes 
are reported as a secondary diagnosis, the resources involved in caring 
for a patient experiencing inadequate housing support increasing the 
severity level from a NonCC to a CC. In contrast, the C1 value for ICD-
10-CM diagnosis code Z59.11 is 0.51 and is 0.99 for ICD-10-CM diagnosis 
code Z59.12. A C1 value generally closer to 1 suggests the resources 
involved in caring for patients experiencing inadequate housing in 
terms of environmental temperature and utilities are more aligned with 
a NonCC severity level than a CC or an MCC severity level.
    As discussed in the proposed rule, the underlying cause of the 
inconsistency between the C1 values for inadequate housing, unspecified 
and other inadequate housing and the two more specific codes that 
describe the necessities unavailable in the housing environment is 
unclear. We noted that diagnosis codes Z59.10 (Inadequate housing, 
unspecified), Z59.11 (Inadequate housing environmental temperature), 
Z59.12 (Inadequate housing utilities), and Z59.19 (Other inadequate 
housing) became effective on April 1, 2023 (FY 2023). In reviewing the 
historical C1 values for code Z59.1 (Inadequate housing), the 
predecessor code before the code was expanded to further describe 
inadequate housing and the basic necessities unavailable in the housing 
environment, we noted the mathematical data for the impact on resource 
use generated using claims from the FY 2019, FY 2020, FY 2021, and FY 
2022 MedPAR files reflects C1 values for code Z59.1 of 2.09, 1.73, 
2.04, and 2.69, respectively. We refer the reader to the Impact on 
Resource Use Files generated using claims from the FY 2019 through the 
FY 2022 MedPAR files posted on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software. We stated we believe the lower C1 
values for ICD-10-CM codes Z59.11 (Inadequate housing environmental 
temperature) and Z59.12 (Inadequate housing utilities) reflected in the 
mathematical data for the impact on resource use generated using claims 
from the FY 2023 MedPAR file may be attributed to lack of use or 
knowledge about the newly expanded codes, such that the data may not 
yet reflect the full impact on resource use for patients experiencing 
these circumstances.
    Similarly, the table shows that the C1 value is 1.97 for ICD-10-CM 
diagnosis code Z59.811. A value close to 2.0 in column C1 suggests that 
the secondary diagnosis is more aligned with a CC than a NonCC. Because 
the C1 value in the table is generally close to 2, the data suggest 
that when this SDOH Z code is reported as a secondary diagnosis, the 
resources involved in caring for a patient experiencing an imminent 
risk of homelessness support increasing the severity level from a NonCC 
to a CC. In contrast, the C1 value for ICD-10-CM diagnosis code Z59.812 
(Housing instability, housed, homelessness in past 12 months) and 
(Housing instability, housed unspecified) is 0.76 and is 0.92 for ICD-
10-CM diagnosis code Z59.819. A C1 value generally closer to 1 suggests 
the resources involved in caring for patients experiencing housing 
instability, with history of homelessness in the past 12 months or 
housing instability, unspecified are more aligned with a NonCC severity 
level than a CC or an MCC severity level. We stated in the proposed 
rule that the underlying cause of the inconsistency between the C1 
values for codes describing housing instability is unclear.
    In the proposed rule, we noted that diagnosis codes Z59.811, 
Z59.812, and Z59.819 became effective on October 1, 2021 (FY 2022). In 
reviewing the historical C1 values for code Z59.8 (Other problems 
related to housing and economic circumstances), the predecessor code 
before the code was expanded to further describe the

[[Page 69081]]

problems related to housing and economic circumstances, we noted the 
mathematical data for the impact on resource use generated using claims 
from the FY 2019 and FY 2020 MedPAR files reflects C1 values for code 
Z59.8 of 1.92 and 1.63, respectively. There were no data reflected for 
this code in the Impact on Resource Use File generated using claims 
from the FY 2021 MedPAR files. The mathematical data for the impact on 
resource use generated using claims from the FY 2022 MedPAR file 
reflects C1 values for codes Z59.811, Z59.812, and Z59.819 of 2.44, 
3.12, and 2.09, respectively. We stated we were uncertain if the 
fluctuations in the C1 values from year to year, or FY 2021, in 
particular, may reflect fluctuations that may be a result of the COVID-
19 public health emergency or even reduced hospitalizations of certain 
conditions. We stated we were also uncertain if the fluctuations may be 
attributed to lack of use or knowledge about the expanded codes, such 
that the data on the reporting of codes Z59.812 and Z59.819 may not yet 
reflect the full impact on resource use for patients experiencing these 
circumstances.
    As discussed in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58550 
through 58554), and earlier in this section, following the listening 
session on October 8, 2019, we reconvened an internal workgroup 
comprised of clinicians, consultants, coding specialists and other 
policy analysts to identify guiding principles to apply in evaluating 
whether changes to the severity level designations of diagnoses are 
needed and to ensure the severity designations appropriately reflect 
resource use based on review of the claims data, as well as 
consideration of relevant clinical factors (for example, the clinical 
nature of each of the secondary diagnoses and the severity level of 
clinically similar diagnoses) and improve the overall accuracy of the 
IPPS payments.
    In considering the nine guiding principles identified by the 
workgroup, as summarized previously, in the proposed rule we noted 
that, similar to homelessness, inadequate housing and housing 
instability are circumstances that can impede patient cooperation or 
management of care, or both. In addition, patients experiencing 
inadequate housing and housing instability can require a higher level 
of care by needing an extended length of stay.
    Inadequate housing is defined as an occupied housing unit that has 
moderate or severe physical problems (for example, deficiencies in 
plumbing, heating, electricity, hallways, and upkeep).10 11 
Features of substandard housing have long been identified as 
contributing to the spread of infectious diseases. Patients living in 
inadequate housing may be exposed to health and safety risks, such as 
vermin, mold, water leaks, and inadequate heating or cooling 
systems.12 13 An increasing body of evidence has associated 
poor housing conditions with morbidity from infectious diseases, 
chronic illnesses, exposure to toxins, injuries, poor nutrition, and 
mental disorders.\14\
---------------------------------------------------------------------------

    \10\ US Bureau of the Census. American Housing Survey (AHS). 
Washington, DC: US Bureau of the Census; 2010. Available at https://www.census.gov/hhes/www/housing/ahs/ahs.html.
    \11\ US Bureau of the Census. Codebook for the American Housing 
Survey, public use file: 1997 and later. Washington, DC: US Bureau 
of the Census; 2009. Available at https://www.huduser.org/portal/datasets/ahs/AHS_Codebook.pdf.
    \12\ Hern[aacute]ndez, D. (2016). Affording housing at the 
expense of health: Exploring the housing and neighborhood strategies 
of poor families. Journal of Family Issues, 37(7), 921-946. doi: 
10.1177/0192513X14530970.
    \13\ Joint Center for Housing Studies. (2020). The state of the 
nation's housing 2020. Harvard University. https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2020_Report_Revised_120720.pdf.
    \14\ Krieger J., Higgins D.L., Housing and health: time again 
for public health action. Am. J. Public Health. 2002 May;92(5):758-
68. doi: 10.2105/ajph.92.5.758. PMID: 11988443; PMCID: PMC1447157.
---------------------------------------------------------------------------

    As discussed in the proposed rule, housing instability encompasses 
a number of challenges, such as having trouble paying rent, 
overcrowding, moving frequently, or spending the bulk of household 
income on housing.\15\ These experiences may negatively affect physical 
health and make it harder to access health care. Studies have found 
moderate evidence to suggest that housing instability is associated 
with higher prevalence of overweight/obesity, hypertension, diabetes, 
and cardiovascular disease, worse hypertension and diabetes control, 
and higher acute health care utilization among those with diabetes and 
cardiovascular disease.\16\
---------------------------------------------------------------------------

    \15\ Office of Disease Prevention and Health Promotion. 
Retrieved on December 27, 2023 from https://health.gov/healthypeople/priority-areas/social-determinants-health/literature-summaries/housing-instability.
    \16\ Gu, K.D., Faulkner, K.C. & Thorndike, A.N. Housing 
instability and cardiometabolic health in the United States: a 
narrative review of the literature. BMC Public Health 23, 931 
(2023). https://doi.org/10.1186/s12889-023-15875-6.
---------------------------------------------------------------------------

    In reviewing the mathematical data for the impact on resource use 
generated using claims from the FY 2023 MedPAR file for the seven ICD-
10-CM codes describing inadequate housing and housing instability 
comprehensively and reviewing the potential impact these circumstances 
could have on patients' clinical course, we noted in the proposed rule 
that whether the patient is experiencing inadequate housing or housing 
instability, the patient may have limited or no access to prescription 
medicines or over-the-counter medicines, including adequate locations 
to store medications away from the heat or cold, and have difficulties 
adhering to medication regimens. Experiencing inadequate housing or 
housing instability may negatively affect a patient's physical health 
and make it harder to access timely health care.\12\ Delays in medical 
care may increase morbidity and mortality risk among those with 
underlying, preventable, and treatable medical conditions.\17\ In 
addition, we noted that findings also suggest that patients 
experiencing inadequate housing or housing instability are associated 
with higher rates of inpatient admissions for mental, behavioral, and 
neurodevelopmental disorders, longer hospital stays, and substantial 
health care costs.\18\
---------------------------------------------------------------------------

    \17\ Gertz A.H., Pollack C.C., Schultheiss M.D., Brownstein 
J.S., Delayed medical care and underlying health in the United 
States during the COVID-19 pandemic: A cross-sectional study. Prev 
Med Rep. 2022 Aug;28:101882. doi: 10.1016/j.pmedr.2022.101882. Epub 
2022 Jul 5. PMID: 35813398; PMCID: PMC9254505.
    \18\ Rollings KA, Kunnath N, Ryus CR, Janke AT, Ibrahim AM. 
Association of Coded Housing Instability and Hospitalization in the 
US. JAMA Netw Open. 2022;5(11):e2241951. doi:10.1001/
jamanetworkopen.2022.41951.
---------------------------------------------------------------------------

    Therefore, after considering the impact on resource use data 
generated using claims from the September 2023 update of the FY 2023 
MedPAR file for the seven ICD-10-CM diagnosis codes that describe 
inadequate housing and housing instability and consideration of the 
nine guiding principles, we proposed to change the severity level 
designation for diagnosis codes Z59.10 (Inadequate housing, 
unspecified), Z59.11 (Inadequate housing environmental temperature), 
Z59.12 (Inadequate housing utilities), Z59.19 (Other inadequate 
housing), Z59.811 (Housing instability, housed, with risk of 
homelessness), Z59.812 (Housing instability, housed, homelessness in 
past 12 months) and Z59.819 (Housing instability, housed unspecified) 
from NonCC to CC for FY 2025.
    Comment: Commenters expressed overwhelming support for our proposal 
to change the severity level designation for diagnosis codes Z59.10 
(Inadequate housing, unspecified), Z59.11 (Inadequate housing 
environmental temperature), Z59.12 (Inadequate housing utilities), 
Z59.19 (Other inadequate housing), Z59.811 (Housing instability, 
housed, with risk of homelessness), Z59.812 (Housing

[[Page 69082]]

instability, housed, homelessness in past 12 months) and Z59.819 
(Housing instability, housed unspecified) from NonCC to CC for FY 2025. 
These commenters stated this proposal acknowledges the significant 
impact these circumstances can have on patient outcomes and the 
increased resource allocation required to effectively manage the care 
of these patients in terms of increased severity of illness, 
readmissions resulting from lack of follow-up and continued medical 
treatment and delayed discharges. A commenter stated that changing the 
severity level of the seven ICD-10-CM diagnosis codes that describe 
inadequate housing and housing instability is not only appropriate, it 
is crucial in order to help address the complex needs of these 
patients. Commenters stated that this change is a critical step toward 
increasing health care access for underserved and under-resourced 
communities and in recognizing and addressing broader factors that 
impact patient health. A commenter specifically stated this proposal is 
another notable effort on CMS' part to recognize the interconnectedness 
of health and social needs. Another commenter stated this change will 
encourage providers to ask more detailed questions of patients to 
better understand their housing status, improving overall data quality.
    Response: We thank the commenters for their support.
    Comment: While commending CMS' efforts, many commenters noted an 
operational concern in that currently only 25 diagnoses are captured on 
the institutional electronic claim form and 19 diagnoses are captured 
on the paper bill. Many commenters stated this issue is becoming 
increasingly critical as Medicare and other payers move to implement 
new quality measures that emphasize the screening and identification of 
patient-level, health-related social needs, which will dictate the need 
for reporting additional codes. Commenters stated that documenting and 
reporting the social and economic circumstances patients may be 
experiencing can require a substantial number of SDOH Z codes, which 
could lead to the crowding out of other diagnosis codes that also need 
to be captured on the institutional claim form for both payment and 
quality measures. Commenters suggested that a factor that may be 
negatively impacting more comprehensive reporting of the diagnosis 
codes describing social and economic circumstances is the limit on the 
number of diagnoses that may be reported on an inpatient claim. A 
commenter stated they performed their own analysis of the FY 2021 
MedPAR file and found that 17 percent of inpatient claims reached the 
maximum limit of 25 diagnoses that can be reported on the claim. 
Another commenter stated at their facility approximately one-third of 
cases have 26 codes or more, with some cases reporting as many as 45 
codes. A few commenters suggested that CMS evaluate the potential to 
expand the number of diagnosis codes that can be submitted, or 
alternatively, design a separate way to report the Z codes on the claim 
form, separate and distinct from the fields for the diagnosis codes.
    Response: We thank the commenters for their continued feedback on 
this issue. We note that any proposed changes to the institutional 
claim form would need to be submitted to the National Uniform Billing 
Committee (NUBC) for consideration as the NUBC develops and maintains 
the Uniform Billing (UB) 04 data set and form, not CMS. The NUBC is a 
Data Content Committee named in the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA) and is composed of a diverse group 
of interested parties representing providers, health plans, designated 
standards maintenance organizations, public health organizations, and 
vendors.
    Comment: Another commenter expressed concern that CMS continues to 
delay the comprehensive analysis of the severity designation of all the 
diagnosis codes in the ICD-10-CM classification in favor of reviewing 
the subset of ICD-10-CM Z codes that describe the social determinants 
of health. The commenter stated in their view, ensuring MS-DRG payment 
is congruent with what it costs to care for patients should be CMS' 
primary objective. Many other commenters encouraged CMS to examine 
other SDOH Z codes that describe circumstances such as lack of adequate 
food and drinking water, extreme poverty, lack of transportation, and 
problems related to employment, physical environment, social 
environment, upbringing, primary support group, literacy, economic 
circumstances, and psychosocial circumstances to determine the hospital 
resource utilization related to addressing these factors and to analyze 
whether these SDOH Z codes should be considered for severity 
designation changes in future rulemaking as well. A commenter noted 
that these social needs create substantial barriers to healthcare and 
good health, both before and after receiving care.
    Specifically, many commenters stated that research has found a 
strong association between food insecurity and chronic conditions and 
encouraged CMS to examine the severity designation of ICD-10-CM SDOH Z 
code Z59.41 (Food insecurity). These commenters stated that food 
insecurity can be an indicator of food deprivation, malnutrition, or 
lack of access to healthy foods and diet, which could have differing 
impacts on a patient and could be associated with higher healthcare 
utilization and costs. A commenter stated that in their observation, 
many hospitals have built robust programs to address the food needs of 
inpatients and stated that several hospitals have even begun to provide 
patients with fresh fruit, vegetables, and other essential groceries to 
take home upon discharge without payment.
    Response: We appreciate the feedback.
    We note that as described in the FY 2024 IPPS/LTCH PPS final rule 
(88 FR 58761), CMS has undertaken interval steps towards a 
comprehensive CC/MCC analysis. We stated in the FY 2024 IPPS/LTCH PPS 
final rule, considering the potential impact of implementing a 
significant number of severity designation changes, and in light of the 
public health emergency (PHE) that was occurring concurrently from 2020 
until 2023, we believe these interval steps were appropriate as we plan 
to continue a comprehensive CC/MCC analysis, using a combination of 
mathematical analysis of claims data and the application of nine 
guiding principles. We refer the reader to the discussion earlier in 
this section where we discuss the finalization of the nine guiding 
principles for FY 2025.
    In response to comments that CMS examine the severity designation 
of ICD-10-CM code Z59.41 (Food insecurity), we note that ICD-10-CM code 
Z59.41 is currently designated as a NonCC when reported as a secondary 
diagnosis. The following table reflects the impact on resource use data 
generated using claims from the September 2023 update of the FY 2023 
MedPAR file for code Z59.41. We refer readers to the FY 2008 IPPS/LTCH 
PPS final rule (72 FR 47159) for a complete discussion of our 
historical approach to mathematically evaluate the extent to which the 
presence of an ICD-10-CM code as a secondary diagnosis resulted in 
increased hospital resource use, and a more detailed explanation of the 
columns in the table.

[[Page 69083]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.077

    The table shows that the C1 value is 0.9273 for ICD-10-CM diagnosis 
code is Z59.41. A C1 value generally closer to 1 suggests the resources 
involved in caring for patients experiencing food insecurity are more 
aligned with a NonCC severity level, as the code is currently 
designated, rather than a CC or an MCC severity level. This contrasts 
with the conclusions documented in research that has shown that food 
insecurity empirically can be associated with higher healthcare use and 
costs, even when accounting for other socioeconomic factors.\19\ We 
note that the table also shows that code Z59.41 was only reported in a 
total of 6,634 claims in the September 2023 update of the FY 2023 
MedPAR file.
---------------------------------------------------------------------------

    \19\ Berkowitz S.A., Seligman H.K., Meigs J.B., Basu S., Food 
insecurity, healthcare utilization, and high cost: a longitudinal 
cohort study. Am. J. Manag. Care. 2018 Sep;24(9):399-404. PMID: 
30222918; PMCID: PMC6426124.
---------------------------------------------------------------------------

    The impact on resource use data generated using claims from the 
September 2023 update of the FY 2023 MedPAR file for code Z59.41 again 
illustrates that if SDOH Z codes are not consistently reported in 
inpatient claims data, our methodology utilized to mathematically 
measure the impact on resource use, as described previously, may not 
adequately reflect what additional resources were expended by hospitals 
to address these circumstances. If SDOH Z codes are consistently 
reported in inpatient claims, the impact on resource use data may more 
adequately reflect what additional resources were expended to address 
these SDOH circumstances in terms of requiring clinical evaluation, 
extended length of hospital stay, increased nursing care or monitoring 
or both, and comprehensive discharge planning and we can re-examine 
these severity designations in future rulemaking.
    In Table 6P.3b associated with this final rule, we have made 
available the data generated using claims from the September 2023 
update of the FY 2023 MedPAR file describing the impact on resource use 
when reported as a secondary diagnosis for the ICD-10-CM codes 
describing various diagnoses and circumstances that commenters to the 
FY 2025 IPPS/LTCH proposed rule suggested CMS review to determine if 
changes to the severity level designations are warranted in future 
rulemaking. These data are consistent with data historically used to 
mathematically measure impact on resource use for secondary diagnoses, 
and the data which we will use in combination with application of the 
nine guiding principles as we continue the comprehensive CC/MCC 
analysis. We will examine these suggestions and determine if there are 
other diagnoses codes, including diagnosis codes that describe SDOH, 
that should also be considered further and will provide more detail in 
future rulemaking.
    Comment: Some commenters stated there continue to be many 
challenges for clinicians in documenting SDOH, such as the lack of 
knowledge surrounding these codes. Many commenters stated there was a 
lack of standard, nationally accepted definitions of the SDOH Z codes 
and that ambiguity between Z codes can lead to confusion among clinical 
staff. A commenter stated that CMS should engage with key stakeholders, 
including patients and diverse communities to establish a transparent 
process and timeline for updating Z code terms and definitions.
    Other commenters stated that healthcare providers may gravitate 
towards certain codes, while other, possibly more specific codes, may 
exist in the classification that could accurately describe similar 
situations. These commenters stated that this can lead to inconsistent 
code usage and can limit the ability to see any correlations between 
these particular conditions and the resulting patient complexity and 
additional cost of care. A commenter noted that the difference between 
the seven different codes describing inadequate housing and housing 
instability requires a nuanced understanding and stated that 
appropriately documenting the Z codes for inadequate housing and 
housing instability will require training of staff to understand the 
differences. Another commenter suggested that CMS focus on addressing 
infrastructural, technological, and knowledge gaps to facilitate use of 
Z codes and stated if CMS does not address these gaps, inequities 
between well-funded hospitals that can afford to train staff to 
document and report Z codes as compared to other struggling hospitals 
who lack the means or know-how will be exacerbated.
    A commenter expressed concern and stated that documentation of an 
SDOH circumstance does not always clearly demonstrate whether or how 
the SDOH impacts the patient's health. This commenter stated that while 
SDOH Z codes help with mapping the social factors afflicting a patient, 
that map does not (and cannot) fully describe the patient's life which 
can present a challenge for the provider when determining what factors 
to document, and for the coder, when deciding how to report that 
documentation using the appropriate SDOH Z code(s).
    Many other commenters also expressed concern and stated that while 
they support the use of Z codes to help identify the complexity of 
issues impacting patients, information about an individual's social 
risk and needs has been shown to be sensitive. Commenters stated that 
expressing certain circumstances, such as housing instability or 
inadequacy, can be uncomfortable for patients, which could result in 
underreporting. These commenters also stated they believed the 
descriptions of ICD-10-CM SDOH Z codes can be stigmatizing, and 
therefore the descriptions should be changed to be more patient 
friendly to protect the patient-provider relationship since patients 
can access their code assignments in after-visit summaries.
    Response: We appreciate the feedback. As discussed in section 
II.C.15 of the preamble of this final rule, the CDC/NCHS has lead 
responsibility for the diagnosis code classification. In response to 
the suggestion that transparent process and timeline be established for 
updating Z code terms

[[Page 69084]]

and definitions, we note there is an established process as the ICD-10 
Coordination and Maintenance Committee addresses updates to the ICD-10-
CM and ICD-10-PCS coding systems, as also discussed in section II.C.15 
of the preamble of this final rule. The ICD-10 Coordination and 
Maintenance Committee holds its meetings each spring and fall to update 
the codes and the applicable payment and reporting systems by October 1 
or April 1 of each year. Proposals for updates to the diagnosis codes, 
including diagnosis codes describing social determinants of health 
should be directed to cdc.gov">nchsicd10CM@cdc.gov for consideration at a future 
ICD-10 Coordination and Maintenance Committee meeting.
    We also note that the ICD-10-CM Official Guidelines for Coding and 
Reporting have been regularly revised to provide additional guidance as 
it relates to diagnosis codes describing social determinants of health. 
We encourage the commenters to review the Official ICD-10-CM Coding 
Guidelines, which can be found on the CDC website at: https://www.cdc.gov/nchs/icd/icd-10-cm/files.html. The American Hospital 
Association (AHA)'s Coding Clinic for ICD-10-CM/PCS publication has 
provided further clarification on the appropriate documentation and use 
of Z codes to enable hospitals to incorporate them into their 
processes. The AHA also offers a range of tools and resources for 
hospitals, health systems and clinicians to address the social needs of 
their patients. We believe these updates and resources will help 
alleviate the concerns expressed by these commenters. As one of the 
four Cooperating Parties for ICD-10, we will continue to collaborate 
with the AHA to provide guidance for coding problems or risk factors 
related to SDOH through the AHA's Coding Clinic for ICD-10-CM/PCS 
publication and to review the ICD-10-CM Coding Guidelines to determine 
where further clarifications may be made.
    Comment: Some commenters recommended that CMS consider payment 
incentives for documenting and reporting of SDOH Z codes. Several 
commenters encouraged CMS to explore additional incentives for Z code 
utilization that do not rely on a code-by-code approach. While 
applauding CMS proposing to change the severity designation of the 
seven ICD-10-CM diagnosis codes that describe inadequate housing and 
housing instability, a commenter stated they also believe it is 
imperative that CMS continue to take steps towards more fundamental 
payment and delivery reforms, such as by directly addressing the social 
drivers of health under alternative payment models (APM) or the 
Hospital Value-based Purchasing (HVBP) Health Equity Adjustment (HEA), 
to hold providers accountable for high value, whole person care.
    A few commenters stated that simply changing the severity 
designation of SDOH Z codes to CCs and marginally increasing payment 
will be inadequate to meaningfully drive CMS' stated equity mission. 
These commenters stated CMS' reporting and payment rules should better 
reflect and compensate hospitals for the multiple health-related social 
needs that patients experience to truly improve health outcomes and 
mitigate the current health disparities that exist. A commenter 
suggested that CMS consider an alternative policy that would provide 
increased payment for a CC designation only in certain MS-DRGs when 
certain Z codes are reported. Another commenter stated that they 
believed that the creation of a new Hierarchical Condition Category 
(HCC) for SDOH Z codes is needed to foster necessary support for 
delivering consistent levels of care and could help mitigate the 
challenges that social risk factors pose to creating effective 
treatment plans for patients. Some commenters suggested that CMS 
incentivize the use of patient self-report screening tools that are 
integrated within electronic health records to support the use of Z 
codes.
    Other commenters noted that currently, if another secondary 
diagnosis designated as a CC or MCC is documented and reported, there 
will be no additional payment if the clinician reports a diagnosis code 
describing inadequate housing and housing instability, potentially 
minimalizing the practical impact of changing the severity level 
designation of these codes. These commenters recommended CMS provide 
increased flexibility in payment to account for multiple CCs or MCCs 
that may be reported for a given patient who may be experiencing 
numerous health and social concerns at the same time, stating that it 
is almost impossible to isolate and address only one need and expect an 
improved health outcome in their view.
    Response: We thank commenters for sharing their views and 
recommendations. We will take the commenters' feedback into 
consideration in future policy development.
    After consideration of the public comments received, we are 
finalizing changes to the severity levels for diagnosis codes Z59.10, 
Z59.11, Z59.12, Z59.19, Z59.811, Z59.812, and Z59.819, from NonCC to CC 
for FY 2025, without modification. In addition, these diagnosis codes 
are reflected in Table 6J.1--Additions to the CC List--FY 2025 
associated with this final rule and available at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps. We 
refer the reader to section II.C.12.d of the preamble of the proposed 
rule and this final rule for further information regarding Table 6J.1.
    We hope and expect that this finalization will foster the increased 
documentation and reporting of the diagnosis codes describing social 
and economic circumstances and continue to serve as an example for 
providers that when they document and report Z codes, CMS can further 
examine the claims data and consider future changes to the designation 
of these codes when reported as a secondary diagnoses. As discussed in 
the FY 2023 IPPS/LTCH PPS final rule (87 FR 48868), if SDOH Z codes are 
not consistently reported in inpatient claims data, our methodology 
utilized to mathematically measure the impact on resource use, as 
described previously, may not adequately reflect what additional 
resources were expended by the hospital to address these SDOH 
circumstances in terms of requiring clinical evaluation, extended 
length of hospital stay, increased nursing care or monitoring or both, 
and comprehensive discharge planning. We will continue to monitor SDOH 
Z code reporting, including reporting based on SDOH screening performed 
as a result of quality measures in the Hospital Inpatient Quality 
Reporting program.
    Furthermore, we may consider proposing changes for other diagnosis 
codes, including SDOH codes, in the future based on our analysis of the 
impact on resource use, per our methodology, as previously described, 
and consideration of the guiding principles. We continue to be 
interested in receiving feedback on how we might otherwise foster the 
documentation and reporting of the diagnosis codes to more accurately 
reflect each health care encounter and improve the reliability and 
validity of the coded data.
    To inform future rulemaking, feedback and other suggestions may be 
submitted by October 20, 2024, and directed to MEARISTM at: 
https://mearis.cms.gov/public/home.
2. Causally Specified Delirium
    Additionally, as discussed in the FY 2025 IPPS/LTCH PPS proposed 
rule (89 FR 35999 through 36001), we received a request to change the 
severity level designations of the ICD-10-CM diagnosis codes that 
describe causally

[[Page 69085]]

specified delirium from CC to MCC when reported as secondary diagnoses. 
Causally specified delirium is delirium caused by the physiological 
effects of a medical condition, by the direct physiological effects of 
a substance or medication, including withdrawal, or by multiple or 
unknown etiological factors. The requestor noted that ICD-10-CM 
diagnosis codes G92.8 (Other toxic encephalopathy), G92.9 (Unspecified 
toxic encephalopathy) and G93.41 (Metabolic encephalopathy) are 
currently all designated as MCCs. According to the requestor, a 
diagnosis of delirium implies an underlying acute encephalopathy, and 
as such, the severity designation of the diagnosis codes that describe 
causally specified delirium should be on par with the severity 
designation of the diagnosis codes that describe toxic encephalopathy 
and metabolic encephalopathy. The requestor stated that toxic 
encephalopathy, metabolic encephalopathy, and causally specified 
delirium all describe core symptoms of impairment of level of 
consciousness and cognitive change caused by a medical condition or 
substance.
    As noted in the proposed rule, the requestor further stated that 
there is robust literature detailing the impact delirium can have on 
cognitive decline, rates of functional decline, subsequent dementia 
diagnosis, institutionalization, care complexity and costs, readmission 
rates, and mortality. The requestor considered each of the nine guiding 
principles discussed earlier in this section and noted how each of the 
principles could be applied in evaluating changes to the severity 
designations of the diagnosis codes that describe causally specified 
delirium in their request. Specifically, the requestor stated that 
delirium is a textbook example that maps to the nine guiding principles 
for evaluating a potential change in severity designation in that 
delirium (1) has a bidirectional link with dementia, (2) indexes 
physiological vulnerability across populations, (3) impacts healthcare 
systems across levels of care, (4) complicates postoperative recovery, 
(5) consigns patients to higher levels of care, and for longer, (6) 
impedes patient engagement in care, (7) has several recent treatment 
guidelines, (8) indicates neuronal/brain injury, and (9) represents a 
common expression of terminal illness.
    The requestor identified 37 ICD-10-CM diagnosis codes that describe 
causally specified delirium. In the proposed rule we stated we agree 
that these 37 diagnosis codes are all currently designated as CCs. We 
refer the reader to Appendix G of the ICD-10 MS-DRG Version 41.1 
Definitions Manual (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for the complete 
list of diagnoses designated as CCs when reported as secondary 
diagnoses, except when used in conjunction with the principal diagnosis 
in the corresponding CC Exclusion List in Appendix C.
    To evaluate this request, as discussed in the proposed rule, we 
analyzed the claims data in the September 2023 update of the FY 2023 
MedPAR file. The following table shows the analysis for each of the 
diagnosis codes identified by the requestor that describe causally 
specified delirium.
BILLING CODE 4120-01-P

[[Page 69086]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.078


[[Page 69087]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.079

BILLING CODE 4120-01-C
    As discussed in the proposed rule, we analyzed these data as 
described in FY 2008 IPPS final rule (72 FR 47158 through 47161). The 
table shows that the C1 values of the diagnosis codes that describe 
causally specified delirium range from a low of 0.35 to a high of 4.00. 
As stated earlier, a C1 value close to 2.0 suggests the condition is 
more like a CC than a NonCC but not as significant in resource usage as 
an MCC. On average, the C1 values of the diagnoses that describe 
causally specified delirium suggest that these codes are more like a 
NonCC than a CC. In the proposed rule, we noted diagnosis code F11.221 
(Opioid dependence with intoxication delirium) had a C1 value of 4.00, 
however our analysis reflects that this diagnosis code was reported as 
a secondary diagnosis in only 42 claims, and only one claim reported 
F11.221 as a secondary diagnosis with no other secondary diagnosis or 
with all other secondary diagnoses that are NonCCs.
    The C2 findings of the diagnosis codes that describe causally 
specified delirium range from a low of 0.28 to a high of 3.22 and the 
C3 findings range from a low of 1.25 to a high of 3.85. We stated that 
the data are clearly mixed between the C2 and C3 findings, and do not 
consistently support a change in the severity level. On average, the C2 
and C3 findings again suggest that these codes that describe causally 
specified delirium are more similar to a NonCC.
    As discussed in the proposed rule, in considering the nine guiding 
principles, as summarized previously, we note that delirium is a 
diagnosis that can impede patient cooperation or management of care or 
both. Delirium is a confusional state that can manifest as agitation, 
tremulousness, and hallucinations or even somnolence and decreased 
arousal. In addition, patients diagnosed with delirium can require a 
higher level of care by needing intensive monitoring, and a greater 
number of caregivers. Managing disruptive behavior, particularly 
agitation and combative behavior, is a challenging aspect in caring for 
patients diagnosed with delirium. Prevention and treatment of delirium 
can include avoiding factors known to cause or aggravate delirium; 
identifying and treating the underlying acute illness; and where 
appropriate using low-dose, short-acting pharmacologic agents.
    In the proposed rule we stated that after considering the C1, C2, 
and C3 values of the 37 ICD-10-CM diagnosis codes that describe 
causally specified delirium and consideration of the nine guiding 
principles, we believe these 37 codes should not be designated as MCCs. 
While there is a lack of consistent claims data to support a severity 
level change from CCs to MCCs, we stated we recognize patients with 
delirium can utilize increased hospital resources and can be at a 
higher severity level. Therefore, we proposed to retain the severity 
designation of the 37 codes listed previously as CCs for FY 2025.
    Comment: Some commenters agreed with CMS' proposal to retain the

[[Page 69088]]

severity designation of the 37 ICD-10-CM diagnosis codes that describe 
causally specified delirium as CCs for FY 2025.
    Response: We appreciate the commenters' support of our proposal.
    Comment: Many other commenters disagreed with the proposal and 
urged CMS to change the designation of the 37 ICD-10-CM diagnosis codes 
that describe causally specified delirium to MCC for FY 2025. 
Commenters stated that delirium is a complex condition to manage and 
stated the diagnosis fully satisfies CMS' nine guiding principles for 
re-evaluating changes to severity levels. Many commenters noted that 
the terms ``delirium'' and ``encephalopathy'' are often used 
interchangeably and refer to a shared set of acute neurocognitive 
conditions that require additional resources to treat. Some commenters 
stated that all diagnoses of delirium imply an underlying acute 
encephalopathy, while others stated acute encephalopathy is another 
name for delirium. A commenter noted that ICD-10-CM diagnosis codes 
G92.8 (Other toxic encephalopathy), G92.9 (Unspecified toxic 
encephalopathy) and G93.41 (Metabolic encephalopathy) have a higher 
severity level designation even though, in their view, the diagnosis 
codes that describe causally specified delirium provide even greater 
specificity. The commenter further stated that designating the 
diagnosis codes that describe causally specified delirium as MCCs is 
the logical conclusion of understanding the integrated nature of 
delirium and acute encephalopathy and is justified by a robust body of 
scientific literature and clinical practice guidelines.
    Some commenters stated that practitioners have been inclined to 
report the ICD-10-CM diagnosis codes that describe toxic or metabolic 
encephalopathy, that are designated as MCCs, rather than report 
diagnosis codes that describe delirium, which they state is the 
Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition, 
Text Revision (DSM-5-TR) preferred terminology to describe the syndrome 
of cognitive and behavioral changes that can occur in response to acute 
physical illness. Commenters stated that parity in the severity level 
designation of the codes that describe causally specified delirium with 
the severity level designation of the codes that describe acute 
encephalopathy is essential to enhancing awareness of the clinical and 
economic costs associated with managing delirium and will encourage 
widespread delirium prevention efforts. Another commenter stated that 
if parity is not achieved between the codes that describe causally 
specified delirium and codes that describe toxic or metabolic 
encephalopathy, clinicians will continue to favor reporting the 
relatively uninformative diagnoses of toxic or metabolic 
encephalopathy, thereby directing attention away from delirium 
guidelines and care pathways. Other commenters suggested that retaining 
the severity designation of delirium as a CC reinforces the stigma of 
mental health conditions, promotes the use of non-specific diagnoses 
that require no more than a cursory evaluation of mental status, 
directs clinicians away from the use of delirium clinical practice 
guidelines, stands against the broad consensus recommendation to use 
the term ``delirium'' across invested major medical specialty 
organizations, and discourages efforts to detect and manage delirium.
    Several commenters suggested that the mathematical analysis of the 
FY 2023 MedPAR file provided in the proposed rule is confounded given 
that delirium is being preferentially coded as toxic or metabolic 
encephalopathy. A commenter noted that there is robust literature 
detailing the impact of delirium on care complexity and costs, 
readmissions, rates of functional decline, institutionalization, 
cognitive decline, subsequent dementia diagnosis, and mortality and 
stated that the evidence suggests that delirium is underdiagnosed or 
being classified as encephalopathy and is having an impact on the data 
available for analysis.
    Another commenter stated that they believe the September 2023 
update of the FY 2023 MedPAR file generally supports the request to 
change delirium from a CC to an MCC in their review of the analyses for 
each of the diagnosis codes identified by the requestor that describe 
causally specified delirium presented in the proposed rule. 
Specifically, the commenter stated that based on their review of the 
C1, C2, and C3 values presented for ICD-10-CM code F05 (Delirium due to 
known physiological condition), which are 1.68, 2.46, and 3.38, 
respectively, F05 appears to be performing very similarly to many other 
conditions that are currently designated as MCCs. The commenter further 
stated that based on their analysis, the weighted average of the C1, 
C2, and C3 values of the 37 diagnosis codes that describe causally 
specified delirium are 1.68, 2.47, 3.38, respectively. This commenter 
stated they also reviewed the updated impact on resource use files 
provided on the CMS website so that the public can review the 
mathematical data for the impact on resource use generated using claims 
from the FY 2023 MedPAR file and stated that many codes currently 
designated as MCCs have C values similar to the values for causally 
specified delirium and stated on this basis alone, the severity 
designation of codes that describe causally specified delirium deserves 
to be changed from a CC to an MCC. The commenter specifically 
referenced the mathematical data for the impact on resource use 
generated using claims from the FY 2023 MedPAR file for the following 
codes that are designated as MCCs in Version 41.1:
[GRAPHIC] [TIFF OMITTED] TR28AU24.080


[[Page 69089]]


    Response: We appreciate the commenters sharing their concerns 
regarding the severity level designations of the ICD-10-CM diagnosis 
codes that describe causally specified delirium and thank the 
commenters for their feedback. We reviewed the commenters' concerns and 
while we recognize patients with delirium can utilize increased 
hospital resources, we continue to believe there is a lack of 
consistent claims data to support a severity level change of these 
diagnosis codes from CCs to MCCs for FY 2025.
    In response to the analysis of the impact on resource use files 
performed by the commenter, as stated in prior rulemaking (84 FR 
42150), C1, C2, and C3 values are a measure of the ratio of average 
costs for patients with these conditions to the expected average cost 
across all cases. We have stated a value close to 1.0 in the C1 field 
would suggest that the code produces the same expected value as a NonCC 
diagnosis. That is, average costs for the case are similar to the 
expected average costs for that subset and the diagnosis is not 
expected to increase resource usage. A higher value in the C1 (or C2 
and C3) field suggests more resource usage is associated with the 
diagnosis and an increased likelihood that it is more like a CC or 
major CC than a NonCC. Thus, a value close to 2.0 suggests the 
condition is more like a CC than a NonCC but not as significant in 
resource usage as an MCC. A value close to 3.0 suggests the condition 
is expected to consume resources more similar to an MCC than a CC or 
NonCC.
    Accordingly, the C1, C2, and C3 values highlighted by the commenter 
for the diagnosis codes reflected in the previous table currently 
designated as MCCs generally suggests that the conditions actually are 
more like CCs rather than NonCCs or MCCs and suggests the severity 
designation of the diagnoses designated as MCCs should be changed to 
CCs. We will consider these codes as we continue our comprehensive CC/
MCC analysis, using a combination of mathematical analysis of claims 
data and the application of nine guiding principles to determine the 
extent to which presence of each code as a secondary diagnosis results 
in increased hospital resource use and will provide more detail in 
future rulemaking.
    In response to the commenters that suggested that delirium ``fully 
satisfies CMS' nine guiding principles'', as stated earlier, the nine 
guiding principles are not intended to turn the analysis into a 
quantitative exercise, requiring that every diagnosis code satisfy each 
principle. As discussed in prior rulemaking and earlier in this 
section, our intended approach is first, CMS will use the guiding 
principles in making an initial clinical assessment of the appropriate 
severity level designation for each ICD-10-CM code as a secondary 
diagnosis. CMS will then use a mathematical analysis of claims data as 
discussed in the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159) to 
determine if the presence of the ICD-10-CM code as a secondary 
diagnosis appears to, or does not appear to, increase hospital resource 
consumption. There may be instances in which we would decide that the 
clinical analysis weighs in favor of proposing to maintain or proposing 
to change the severity designation of an ICD-10-CM code after 
application of the nine guiding principles. The nine guiding principles 
are intended to provide a framework for assessing relevant clinical 
factors to help denote if, and to what degree, additional resources are 
required above and beyond those that are already being utilized to 
address the principal diagnosis or other secondary diagnoses that might 
also be present on the claim.
    In response to the suggestion that clinicians favor reporting 
encephalopathy as opposed to delirium, we note that providers are 
responsible for ensuring that they are documenting as specifically and 
accurately as possible for the conditions they are treating and the 
services they render to correctly reflect the severity of illness and 
capture how truly sick a patient is when causally specified delirium or 
encephalopathy are present. In addition, as we noted in the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38012), coding advice is issued 
independently from payment policy. We also note that, historically, we 
have not provided coding advice in rulemaking with respect to policy 
(82 FR 38045). As one of the Cooperating Parties for ICD-10, we 
collaborate with the American Hospital Association (AHA) through the 
Coding Clinic for ICD-10-CM and ICD-10-PCS to promote proper coding. We 
recommend that an entity seeking coding guidance on reporting causally 
specified delirium or encephalopathy submit any questions pertaining to 
correct coding to the AHA.
    We consulted with the staff at the Centers for Disease Control's 
(CDC's) National Center for Health Statistics (NCHS), because NCHS has 
the lead responsibility for maintaining the ICD-10-CM diagnosis codes. 
The NCHS' staff acknowledged the terms delirium and encephalopathy are 
differentiated in the classification, such that coding would usually 
depend on the specific terms used in the medical record documentation. 
NCHS confirmed that they would consider further review of the 
classification, including review of the Excludes notes, for these two 
diagnoses. As such, we believe it would be appropriate to maintain the 
current severity level designations of the ICD-10-CM diagnosis codes 
that describe causally specified delirium at this time in order to 
further examine the relevant clinical factors and possible similarities 
in resource consumption in order to best represent this subset of 
patients within the MS-DRG classification.
    Therefore, after consideration of the public comments we received, 
and for the reasons discussed, we are finalizing our proposal, without 
modification, to maintain the current severity level designation of the 
37 ICD-10-CM diagnosis codes that describe causally specified delirium 
listed previously as CCs for FY 2025.
d. Additions and Deletions to the Diagnosis Code Severity Levels for FY 
2025
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36001), we noted 
the following tables identify the proposed additions and deletions to 
the diagnosis code MCC severity levels list and the proposed additions 
and deletions to the diagnosis code CC severity levels list for FY 2025 
and are available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html
    Table 6I.1--Proposed Additions to the MCC List--FY 2025;
    Table 6J.1--Proposed Additions to the CC List--FY 2025; and
    Table 6J.2--Proposed Deletions to the CC List--FY 2025
    Comment: Commenters agreed with the proposed additions and 
deletions to the MCC and CC lists as shown in tables 6I.1, 6J.1, and 
6J.2 associated with the proposed rule.
    Response: We appreciate the commenters' support.
    The following tables associated with this final rule reflect the 
finalized severity levels under Version 42 of the ICD-10 MS-DRGs for FY 
2025 and are available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS; Table 
6I.--Complete MCC List--FY 2025; Table 6I.1--Additions to the MCC 
List--FY 2025; Table 6I.2--Deletions to the MCC List--FY 2025; Table 
6J.--Complete CC List--FY 2025; Table 6J.1--Additions to the CC List--
FY 2025; and Table 6J.2--Deletions to the CC List--FY 2025.

[[Page 69090]]

e. CC Exclusions List for FY 2025
    In the September 1, 1987 final notice (52 FR 33143) concerning 
changes to the DRG classification system, we modified the GROUPER logic 
so that certain diagnoses included on the standard list of CCs would 
not be considered valid CCs in combination with a particular principal 
diagnosis. We created the CC Exclusions List for the following reasons: 
(1) to preclude coding of CCs for closely related conditions; (2) to 
preclude duplicative or inconsistent coding from being treated as CCs; 
and (3) to ensure that cases are appropriately classified between the 
complicated and uncomplicated DRGs in a pair.
    In the May 19, 1987 proposed notice (52 FR 18877) and the September 
1, 1987 final notice (52 FR 33154), we explained that the excluded 
secondary diagnoses were established using the following five 
principles:
     Chronic and acute manifestations of the same condition 
should not be considered CCs for one another;
     Specific and nonspecific (that is, not otherwise specified 
(NOS)) diagnosis codes for the same condition should not be considered 
CCs for one another;
     Codes for the same condition that cannot coexist, such as 
partial/total, unilateral/bilateral, obstructed/unobstructed, and 
benign/malignant, should not be considered CCs for one another;
     Codes for the same condition in anatomically proximal 
sites should not be considered CCs for one another; and
     Closely related conditions should not be considered CCs 
for one another.
    The creation of the CC Exclusions List was a major project 
involving hundreds of codes. We have continued to review the remaining 
CCs to identify additional exclusions and to remove diagnoses from the 
master list that have been shown not to meet the definition of a CC. We 
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541 
through 50544) for detailed information regarding revisions that were 
made to the CC and CC Exclusion Lists under the ICD-9-CM MS-DRGs.
    The ICD-10 MS-DRGs Version 41.1 CC Exclusion List is included as 
Appendix C in the ICD-10 MS-DRG Definitions Manual (available in two 
formats; text and HTML). The manuals are available on the CMS website 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) and includes two lists identified as Part 
1 and Part 2. Part 1 is the list of all diagnosis codes that are 
defined as a CC or MCC when reported as a secondary diagnosis. For all 
diagnosis codes on the list, a link is provided to a collection of 
diagnosis codes which, when reported as the principal diagnosis, would 
cause the CC or MCC diagnosis to be considered as a NonCC. Part 2 is 
the list of diagnosis codes designated as an MCC only for patients 
discharged alive; otherwise, they are assigned as a NonCC.
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
36002 through 36006), effective for the April 1, 2024, release of the 
ICD-10 MS-DRG Definitions Manual, Version 41.1, a new section has been 
added to Appendix C as follows:
Part 3: Secondary Diagnosis CC/MCC Severity Exclusions in Select MS-
DRGs
    Part 3 lists diagnosis codes that are designated as a complication 
or comorbidity (CC) or major complication or comorbidity (MCC) and 
included in the definition of the logic for the listed MS-DRGs. When 
reported as a secondary diagnosis and grouped to one of the listed MS-
DRGs, the diagnosis is excluded from acting as a CC/MCC for severity in 
DRG assignment.
    The purpose of this new section is to include the list of MS-DRGs 
subject to what is referred to as suppression logic. In addition to the 
suppression logic excluding secondary diagnosis CC or MCC conditions 
that may be included in the definition of the logic for a DRG, it is 
also based on the presence of other secondary diagnosis logic defined 
within certain base DRGs. Therefore, if a MS-DRG has secondary 
diagnosis logic, the suppression is activated regardless of the 
severity of the secondary diagnosis code(s) for appropriate grouping 
and MS-DRG assignment.
    In the proposed rule we noted that each MS-DRG is defined by a 
particular set of patient attributes including principal diagnosis, 
specific secondary diagnoses, procedures, sex, and discharge status. 
The patient attributes which define each MS-DRG are displayed in a 
series of headings which indicate the patient characteristics used to 
define the MS-DRG. These headings indicate how the patient's diagnoses 
and procedures are used in determining MS-DRG assignment. Following 
each heading is a complete list of all the ICD-10-CM diagnosis or ICD-
10-PCS procedure codes included in the MS-DRG. One of these headings is 
secondary diagnosis.
     Secondary diagnosis. Indicates that a specific set of 
secondary diagnoses are used in the definition of the MS-DRG. For 
example, a secondary diagnosis of acute leukemia with chemotherapy is 
used to define MS-DRG 839.
    The full list of MS-DRGs where suppression occurs is shown in the 
following table.

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
MS-DRG 008.
MS-DRG 010.
MS-DRG 019.
*MS-DRGs 082-084.
*MS-DRGs 177-179.
*MS-DRGs 280-282.
*MS-DRGs 283-285.
*MS-DRGs 456-458.
*MS-DRGs 582-583.
MS-DRG 768.
MS-DRG 790.
MS-DRG 791.
MS-DRG 792.
MS-DRG 793.
MS-DRG 794.
*MS-DRGs 796-798.
*MS-DRGs 805-807.
*MS-DRGs 837-839.
MS-DRG 927.
*MS-DRGs 928-929.
MS-DRG 933.
MS-DRG 934.
MS-DRG 935.
MS-DRG 955.
MS-DRG 956.
*MS-DRGs 957-959.
*MS-DRGs 963-965.
*MS-DRGs 974-976.
MS-DRG 977.
------------------------------------------------------------------------
* The MS-DRG(s) contain diagnoses that are specifically excluded from
  acting as a CC/MCC for severity in MS-DRG assignment.

    In the proposed rule we stated we believe this additional 
information about the suppression logic may further assist users of the 
ICD-10 MS-DRG GROUPER software and related materials.
    As noted in the proposed rule, during our review of the MS-DRGs 
containing secondary diagnosis logic in association with the 
suppression logic previously discussed, we identified another set of 
MS-DRGs containing secondary diagnosis logic in the definition of the 
MS-DRG. Specifically, we identified MS-DRGs 673, 674, and 675 (Other 
Kidney and Urinary Tract Procedures with MCC, with CC, and without CC/
MCC, respectively) in MDC 11 (Diseases and Disorders of the Kidney and 
Urinary Tract), as displayed in the ICD-10 MS-DRG Version 41.1 
Definitions Manual (which is available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) which contains 
secondary diagnosis logic.
    As stated in the proposed rule, of the seven logic lists included 
in the definition of MS-DRGs 673, 674, and 675, there are three ``Or 
Principal Diagnosis'' logic lists and one ``With

[[Page 69091]]

Secondary Diagnosis'' logic list. The first ``Or Principal Diagnosis'' 
logic list is comprised of 21 diagnosis codes describing conditions 
such as chronic kidney disease, kidney failure, and complications 
related to a vascular dialysis catheter or kidney transplant. The 
second ``Or Principal Diagnosis'' logic list is comprised of four 
diagnosis codes describing diabetes with diabetic chronic kidney 
disease followed by a ``With Secondary Diagnosis'' logic list that 
includes diagnosis codes N18.5 (Chronic kidney disease, stage 5) and 
N18.6 (End stage renal disease). These logic lists are components of 
the special logic in MS-DRGs 673, 674, and 675 for certain MDC 11 
diagnoses reported with procedure codes for the insertion of tunneled 
or totally implantable vascular access devices. The third ``Or 
Principal Diagnosis'' logic list is comprised of three diagnosis codes 
describing Type 1 diabetes with different kidney complications as part 
of the special logic in MS-DRGs 673, 674, and 675 for pancreatic islet 
cell transplantation performed in the absence of any other surgical 
procedure.
    Under the Version 41.1 ICD-10 MS-DRGs, diagnosis code N18.5 
(Chronic kidney disease, stage 5) is currently designated as a CC and 
diagnosis code N18.6 (End stage renal disease) is designated as an MCC. 
As discussed in the proposed rule, in our review of the MS-DRGs 
containing secondary diagnosis logic in association with the 
suppression logic, we noted that currently, when some diagnosis codes 
from the ``Or Principal Diagnosis'' logic lists in MS-DRGs 673, 674, 
and 675 are reported as the principal diagnosis and either diagnosis 
code N18.5 or N18.6 from the ``With Secondary Diagnosis'' logic list is 
reported as a secondary diagnosis, some cases are grouping to MS-DRG 
673 (Other Kidney and Urinary Tract Procedures with MCC) or to MS-DRG 
674 (Other Kidney and Urinary Tract Procedures with CC) in the absence 
of any other MCC or CC secondary diagnoses being reported.
    In our analysis of this issue as discussed in the proposed rule, we 
noted diagnosis codes N18.5 and N18.6 are excluded from acting as a CC 
or MCC, when reported with principal diagnoses from Principal Diagnosis 
Collection Lists 1379 and 1380, respectively, as reflected in Part 1 of 
Appendix C in the CC Exclusion List. We refer the reader to Part 1 of 
Appendix C in the CC Exclusion List as displayed in the ICD-10 MS-DRG 
Version 41.1 Definitions Manual (which is available on the CMS website 
at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for the 
complete list of principal diagnoses in Principal Diagnosis Collection 
Lists 1379 and 1380. Specifically, when codes N18.5 or N18.6 are 
reported as secondary diagnoses, we noted they are considered as NonCCs 
when the diagnosis codes from the ``Or Principal Diagnosis'' logic 
lists in MS-DRGs 673, 674, and 675 reflected in the following table are 
reported as the principal diagnosis under the CC Exclusion logic.
[GRAPHIC] [TIFF OMITTED] TR28AU24.081

    In the proposed rule, we also noted that currently, a subset of 
diagnosis codes from the first ``Or Principal Diagnosis'' logic list in 
MS-DRGs 673, 674, and 675 are not listed in Principal Diagnosis 
Collection Lists 1379 or 1380 for diagnosis codes N18.5 and N18.6, 
respectively. As a result, when one of the 13 diagnosis codes listed in 
the following table are reported as the principal diagnosis, and either 
diagnosis code N18.5 or N18.6 from the ``With Secondary Diagnosis'' 
logic list are reported as a secondary diagnosis, the cases are 
grouping to MS-DRG 673 (Other Kidney and Urinary Tract Procedures with 
MCC) or to MS-DRG 674 (Other Kidney and Urinary Tract Procedures with 
CC) when also reported with a procedure code describing the

[[Page 69092]]

insertion of a tunneled or totally implantable vascular access device.
[GRAPHIC] [TIFF OMITTED] TR28AU24.082

    We noted in the proposed rule that consistent with how other 
similar logic lists function in the ICD-10 GROUPER software for case 
assignment to the ``with MCC'' or ``with CC'' MS-DRGs, the logic for 
case assignment to MS-DRG 673 is intended to require any other 
diagnosis designated as an MCC and reported as a secondary diagnosis 
for appropriate assignment, and not the diagnoses currently listed in 
the logic for the definition of the MS-DRG. Likewise, the logic for 
case assignment to MS-DRG 674 is intended to require any other 
diagnosis designated as a CC and reported as a secondary diagnosis for 
appropriate assignment.
    Therefore, for FY 2025, we proposed to correct the logic for case 
assignment to MS-DRGs 673, 674, and 675 by adding suppression logic to 
exclude diagnosis codes N18.5 (Chronic kidney disease, stage 5) and 
N18.6 (End stage renal disease) from the logic list entitled ``With 
Secondary Diagnosis'' from acting as a CC or an MCC, respectively, when 
reported as a secondary diagnosis with one of the 13 previously listed 
principal diagnosis codes from the ``Or Principal Diagnosis'' logic 
lists in MS-DRGs 673, 674, and 675 for appropriate grouping and MS-DRG 
assignment. Under this proposal, when diagnosis codes N18.5 or N18.6 
are reported as a secondary diagnosis with one of the 13 previously 
listed principal diagnosis codes, the GROUPER will assign MS-DRG 675 
(Other Kidney and Urinary Tract Procedures without CC/MCC) in the 
absence of any other MCC or CC secondary diagnoses being reported. In 
the proposed rule we also noted that the current list of MS-DRGs 
subject to suppression logic as previously discussed and listed under 
Version 41.1 includes MS-DRGs that are not subdivided by a two-way 
severity level split (``with MCC and without MCC'' or ``with CC/MCC and 
without CC/MCC'') or a three-way severity level split (with MCC, with 
CC, and without CC/MCC, respectively), or the listed MS-DRG includes 
diagnoses that are not currently designated as a CC or MCC. To avoid 
potential confusion, we proposed to refine how the suppression logic is 
displayed under Appendix C--Part 3 to not display the MS-DRGs where the 
suppression logic has no impact on the grouping (meaning the logic list 
for the affected MS-DRG contains diagnoses that are all designated as 
NonCCs, or the MS-DRG is not subdivided by a severity level split) as 
reflected in the draft Version 42 ICD-10 MS-DRG Definitions Manual, 
which is available in association with the proposed rule at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.
    Comment: Commenters stated they did not agree with the proposed 
application of the suppression logic within MS-DRGs 673, 674, and 675 
when diagnosis codes N18.5 and N18.6 are reported as a secondary 
diagnosis in conjunction with one of the principal diagnosis codes 
listed in Part 1 of Appendix C in the CC Exclusion List. The commenters 
stated that ICD-10-CM codes N18.5 and N18.6 are the highest level of 
severity for kidney failure with end stage renal disease and stage 5, 
both of which require dialysis and/or kidney transplant. According to 
the commenters, the only principal diagnoses that could meet one of the 
five principles would be I12.0 (Hypertensive chronic kidney disease 
with stage 5 chronic kidney disease or end stage renal disease) or 
I13.11 (Hypertensive heart and chronic kidney disease without heart 
failure, with stage 5 chronic kidney disease or end-stage renal 
disease) as these two codes actually indicate stage 5 chronic kidney 
disease or end stage renal disease in the narrative description. The 
commenters stated their belief that the five conditions established for 
exclusions were not met for the majority of the diagnoses on the 
principal diagnosis list

[[Page 69093]]

and for that reason should not be subject to suppression logic.
    Response: We wish to clarify for the commenters that the 
suppression logic is not the same as the CC Exclusion List logic under 
Part 1 of Appendix C--CC Exclusion List in the ICD-10 MS-DRG 
Definitions Manual. As previously described, Part 1 of Appendix C is 
the list of all diagnosis codes that are defined as a CC or MCC when 
reported as a secondary diagnosis. For all diagnosis codes on the list, 
a link is provided to a collection of diagnosis codes which, when 
reported as the principal diagnosis, would cause the CC or MCC 
diagnosis to be considered as a NonCC. Separate from the CC Exclusion 
List logic, effective for the April 1, 2024, release of the ICD-10 MS-
DRG Definitions Manual, Version 41.1, a new section was added to 
Appendix C for the suppression logic as listed under Part 3 of Appendix 
C. As previously described, Part 3 lists diagnosis codes that are 
designated as a CC or MCC and are included in the definition of the 
logic for the listed MS-DRGs. As such, when reported as a secondary 
diagnosis, the diagnosis is intended to be excluded from acting as a CC 
or MCC for severity in DRG assignment. We stated in the proposed rule 
that, because the logic for case assignment to MS-DRGs 673, 674, and 
675 includes diagnosis codes N18.5 and N18.6 in the definition of the 
``With Secondary Diagnosis'' logic list, we were proposing to correct 
the logic for appropriate grouping, consistent with other secondary 
diagnosis logic. Therefore, when diagnosis codes N18.5 or N18.6 are 
reported as a secondary diagnosis with one of the 13 previously listed 
principal diagnosis codes from the ``Or Principal Diagnosis'' logic 
lists in MS-DRGs 673, 674, and 675, for appropriate grouping and 
consistency they should be excluded from acting as a CC or MCC.
    We note that, because the commenters raised concerns regarding the 
principal diagnoses listed under Part 1 of Appendix C--CC Exclusions 
List in Principal Diagnosis Collection Lists 1378 and 1379 that 
currently exclude diagnosis codes N18.5 and N18.6 from acting as a CC 
or MCC under the CC exclusion logic in accordance with the list of five 
principles established in 1987, we intend to perform a broad review of 
the conditions in these lists to determine if any modifications are 
warranted and to ensure they continue to be clinically appropriate. To 
inform future rulemaking, feedback and other suggestions may be 
submitted by October 20, 2024, and directed to MEARISTM at: 
https://mearis.cms.gov/public/home.
    After consideration of the public comments we received, and for the 
reasons discussed, we are finalizing our proposal to add suppression 
logic to exclude diagnosis codes N18.5 (Chronic kidney disease, stage 
5) and N18.6 (End stage renal disease) from the logic list entitled 
``With Secondary Diagnosis'' from acting as a CC or an MCC, 
respectively, when reported as a secondary diagnosis with one of the 13 
previously listed principal diagnosis codes from the ``Or Principal 
Diagnosis'' logic lists in MS-DRGs 673, 674, and 675, without 
modification, effective October 1, 2024 for FY 2025.
    We also note that during our review of the 37 diagnosis codes that 
describe causally specified delirium as discussed in section 
II.C.12.c.2. of the preamble of this final rule, we identified 
diagnosis code F05 (Delirium due to known physiological condition) as a 
condition that is listed on a subset of the Principal Diagnosis 
Collection Lists under Part 1 of Appendix C--CC Exclusions List. 
Specifically, we found diagnosis code F05 listed on Principal Diagnosis 
Collection List numbers 642, 643, 645, 646, and 647. Diagnosis code F05 
is listed on the Unacceptable Principal Diagnosis Code edit code list 
in the Medicare Code Editor and is not appropriate to report as a 
principal diagnosis according to the ICD-10-CM Tabular List of Diseases 
and Injuries instructional note to ``Code first the underlying 
physiological condition, such as: dementia (F03.9-)''. Consistent with 
the MCE Unacceptable Principal Diagnosis Code edit code list and the 
instructional note in the ICD-10-CM Tabular List of Diseases and 
Injuries, we are removing diagnosis code F05 from the previously listed 
Principal Diagnosis Collection Lists effective October 1, 2024, for FY 
2025.
    Lastly, we are finalizing our proposal to refine how the 
suppression logic is displayed under Appendix C--Part 3, without 
modification, effective October 1, 2024, for FY 2025. Under this 
finalization, MS-DRGs where the suppression logic has no impact on the 
grouping (meaning the logic list for the affected MS-DRG contains 
diagnoses that are all designated as NonCCs, or the MS-DRG is not 
subdivided by a severity level split) will not be displayed in Appendix 
C--Part 3 as reflected in the Version 42 ICD-10 MS-DRG Definitions 
Manual, which is available in association with this final rule at: 
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.
    In the FY 2025 IPPS/LTCH PPS proposed rule, we proposed additional 
changes to the ICD-10 MS-DRGs Version 42 CC Exclusion List based on the 
diagnosis code updates as discussed in section II.C.12. of the proposed 
rule and set forth in Tables 6G.1, 6G.2, 6H.1, and 6H.2 associated with 
the proposed rule and available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
    We did not receive any public comments opposing the proposed CC 
Exclusions List, however, during our internal review of the proposed CC 
Exclusions List we identified some inconsistencies with the 77 new 
Hodgkin lymphoma diagnosis codes that were proposed to be designated as 
a CC (based on the predecessor code designation and now finalized as 
reflected in Table 6A.- New Diagnosis Codes--FY 2025 associated with 
this final rule). We determined that clinically, all 77 Hodgkin 
lymphoma diagnosis codes should be excluded from acting as a CC when 
another Hodgkin lymphoma diagnosis code is reported as the principal 
diagnosis. Therefore, for FY 2025, we are finalizing, with 
modification, the CC exclusions for the 77 Hodgkin lymphoma codes after 
internal review as reflected in Tables 6G.1 and 6G.2 in association 
with this final rule.
    The finalized CC Exclusions List as displayed in Tables 6G.1, 6G.2, 
6H.1, 6H.2, and 6K, associated with this final rule reflect the 
severity levels under V42 of the ICD-10 MS-DRGs. We have developed 
Table 6G.1.--Secondary Diagnosis Order Additions to the CC Exclusions 
List--FY 2025; Table 6G.2.--Principal Diagnosis Order Additions to the 
CC Exclusions List--FY 2025; Table 6H.1.--Secondary Diagnosis Order 
Deletions to the CC Exclusions List--FY 2025; and Table 6H.2.--
Principal Diagnosis Order Deletions to the CC Exclusions List--FY 2025; 
and Table 6K. Complete List of CC Exclusions-FY 2025.
    For Table 6G.1, each secondary diagnosis code finalized for 
addition to the CC Exclusion List is shown with an asterisk and the 
principal diagnoses finalized to exclude the secondary diagnosis code 
are provided in the indented column immediately following it. For Table 
6G.2, each of the principal diagnosis codes for which there is a CC 
exclusion is shown with an asterisk and the conditions finalized for 
addition to the CC Exclusion List that will not count as a CC are 
provided in an indented column immediately following the affected 
principal diagnosis. For Table 6H.1, each secondary diagnosis code 
finalized for deletion from the CC Exclusion List is shown with an 
asterisk followed by the principal diagnosis

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codes that currently exclude it. For Table 6H.2, each of the principal 
diagnosis codes is shown with an asterisk and the finalized deletions 
to the CC Exclusions List are provided in an indented column 
immediately following the affected principal diagnosis. Tables 6G.1., 
6G.2., 6H.1., and 6H.2. associated with this final rule are available 
on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
13. Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
    To identify new, revised, and deleted diagnosis and procedure 
codes, for FY 2025, we have developed Table 6A.--New Diagnosis Codes, 
Table 6B.--New Procedure Codes, Table 6C.--Invalid Diagnosis Codes, 
Table 6D.--Invalid Procedure Codes, Table 6E.--Revised Diagnosis Code 
Titles, and Table 6F.--Revised Procedure Code Titles for this final 
rule.
    These tables are not published in the Addendum to the proposed rule 
or final rule, but are available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as described in section VI. of the 
Addendum to this final rule. As discussed in section II.C.15. of the 
preamble of the proposed rule and this final rule, the code titles are 
adopted as part of the ICD-10 (previously ICD-9-CM) Coordination and 
Maintenance Committee meeting process. Therefore, although we publish 
the code titles in the IPPS proposed and final rules, they are not 
subject to comment in the proposed or final rules.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36006), we 
proposed the MDC and MS-DRG assignments for the new diagnosis codes and 
procedure codes as set forth in Table 6A.--New Diagnosis Codes and 
Table 6B.--New Procedure Codes. We also stated that the proposed 
severity level designations for the new diagnosis codes are set forth 
in Table 6A. and the proposed O.R. status for the new procedure codes 
are set forth in Table 6B. Consistent with our established process, we 
examined the MS-DRG assignment and the attributes (severity level and 
O.R. status) of the predecessor diagnosis or procedure code, as 
applicable, to inform our proposed assignments and designations.
    Specifically, we reviewed the predecessor code and MS-DRG 
assignment most closely associated with the new diagnosis or procedure 
code, and in the absence of claims data, we considered other factors 
that may be relevant to the MS-DRG assignment, including the severity 
of illness, treatment difficulty, complexity of service and the 
resources utilized in the diagnosis and/or treatment of the condition. 
We noted that this process does not automatically result in the new 
diagnosis or procedure code being proposed for assignment to the same 
MS-DRG or to have the same designation as the predecessor code.
    In this FY 2025 IPPS/LTCH PPS final rule, we present a summation of 
the comments we received in response to the proposed assignments, our 
responses to those comments, and our finalized policies.
    Comment: Commenters expressed support for the finalization of three 
new ICD-10-CM diagnosis codes describing presymptomatic Type 1 diabetes 
mellitus by stage and three new codes describing hypoglycemia by level, 
as shown in the following table and reflected in Table 6A.--New 
Diagnosis Codes--FY 2025 in association with the proposed rule and 
available at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.
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    The commenters stated these new diagnosis codes are intended to 
facilitate standardized diabetes and hypoglycemia reporting and enable 
consistent quantification, tracking, and outcomes measurement. 
According to the commenters, the more granular presymptomatic diabetes 
diagnosis codes will help identify early disease progression and 
support appropriate intervention, including documentation of an 
individual's need for a continuous glucose monitor (CGM). The 
commenters urged CMS to incorporate these finalized diagnosis codes 
throughout Medicare payment and coverage policies.
    Response: We thank the commenters for their support.
    Comment: Commenters expressed support for the proposed CC status 
designation and proposed MS-DRG assignments under MDC 17 and MDC 25 for 
the diagnosis codes describing lymphoma in remission as reflected in 
Table 6A.--New Diagnosis Codes--FY 2025 in association with the 
proposed rule and available at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps. The commenters stated 
that patients with these diagnoses are generally more complex and 
resource-intensive, warranting the CC designation. The commenters 
requested that we finalize the proposed designation and MS-DRG 
assignments for FY 2025.
    Response: We thank the commenters for their support.
    Comment: A couple of commenters requested that CMS designate the 
following 16 new procedure codes that describe introduction of the 
AGENTTM Paclitaxel-Coated Balloon Catheter that is indicated 
to treat coronary in-stent restenosis (ISR) in patients with coronary 
artery disease as operating room (O.R.) procedures, with assignment to 
surgical MS-DRGs.
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    Specifically, the commenters requested assignment of the previously 
listed procedure codes to the following surgical MS-DRGs:

 MS-DRG 250 Percutaneous Cardiovascular Procedures without 
Intraluminal Device with MCC
 MS-DRG 251 Percutaneous Cardiovascular Procedures without 
Intraluminal Device without MCC
 MS-DRG 321 Percutaneous Cardiovascular Procedures with 
Intraluminal Device with MCC or 4+ Arteries/Intraluminal Devices
 MS-DRG 322 Percutaneous Cardiovascular Procedures with 
Intraluminal Device without MCC
 MS-DRG 323 Coronary Intravascular Lithotripsy with 
Intraluminal Device with MCC
 MS-DRG 324 Coronary Intravascular Lithotripsy with 
Intraluminal Device without MCC
 MS-DRG 325 Coronary Intravascular Lithotripsy without 
Intraluminal Device

    The commenters stated that based on the usual surgical hierarchy 
rules, the reporting of one of the vessel preparation steps (that is, 
angioplasty, atherectomy, or lithotripsy), or placement of a new stent 
in connection with the reported use of the AGENTTM 
Paclitaxel-Coated Balloon Catheter would mean the procedure would map 
to one of the previously listed surgical MS-DRGs. The commenters also 
stated their belief that designating the new procedure codes as O.R. 
procedures with assignment to the previously listed MS-DRGs would 
reflect the surgical nature and complexity of the procedure and would 
be appropriate for the time being.
    Response: The 16 new procedure codes describing use of the 
AGENTTM Paclitaxel-Coated Balloon Catheter were finalized 
following the March 19, 2024, ICD-10 Coordination and Maintenance 
Committee meeting and made available via the CMS website on June 5, 
2025, at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps. The procedure codes are also reflected in 
Table 6B--New Procedure Codes--FY 2025 associated with this final rule.
    Under our established process, we reviewed the predecessor code and 
MS-DRG assignment most closely associated with the new procedure codes. 
We note that because the procedure codes describing the use of an 
AGENTTM Paclitaxel-Coated Balloon Catheter are describing 
delivery of the paclitaxel to the coronary vessel(s), the predecessor 
code is 3E073GC (Introduction of other therapeutic substance into 
coronary artery, percutaneous approach), which is designated as a non-
O.R. procedure and does not affect MS-DRG assignment. As discussed at 
the March 19, 2024, ICD-10 Coordination and Maintenance Committee 
meeting and in the commenters' feedback, a preparatory step (that is, 
vessel preparation by either angioplasty, atherectomy, or lithotripsy) 
is required to be performed first, before

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the AGENTTM Paclitaxel-Coated Balloon Catheter is deployed. 
We note that each type of vessel preparation procedure is designated as 
an O.R. procedure and maps to one of the previously listed surgical MS-
DRGs. We also note that the commenters are correct that based on the 
surgical hierarchy, the reporting of one of the vessel preparation 
steps (that is, angioplasty, atherectomy, or lithotripsy), or placement 
of a new stent in connection with the use of the AGENTTM 
Paclitaxel-Coated Balloon Catheter would result in assignment to one of 
the previously listed surgical MS-DRGs. We note that use of the 
AGENTTM Paclitaxel-Coated Balloon Catheter to deliver the 
paclitaxel to the coronary vessel(s) cannot occur in the absence of a 
surgical vessel preparation and therefore, it is the vessel preparation 
procedure that will determine the surgical MS-DRG assignment to one of 
the previously listed surgical MS-DRGs. As such, we do not agree with 
designating the 16 new procedure codes as O.R. procedure codes since 
the resulting MS-DRG assignment is dependent on the surgical vessel 
preparation procedure that would be reported when the 
AGENTTM Paclitaxel-Coated Balloon Catheter is used to 
deliver the paclitaxel to the coronary vessel(s) and result in 
assignment to one of the previously listed surgical MS-DRGs regardless. 
We refer the reader to the ICD-10 MS-DRG Definitions Manual, Version 42 
available in association with this final rule on the CMS website at 
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps for complete documentation of the GROUPER logic for the 
previously listed surgical MS-DRGs under MDC 05. Accordingly, 
consistent with our established process and for the reasons discussed, 
we are designating the 16 new procedure codes describing use of the 
AGENTTM Paclitaxel-Coated Balloon Catheter as non-O.R. for 
FY 2025.
    Comment: A commenter expressed its appreciation to the ICD-10 
Coordination and Maintenance Committee for creating and implementing 
new ICD-10-CM Z codes to describe Duffy null status. The commenter 
stated that the new codes were requested to ensure that people who have 
lower absolute neutrophil count (ANC) due to Duffy phenotype are 
accurately documented within the medical record and are not considered 
to have ``abnormal'' ANC levels.
    The commenter indicated that the new codes will be critical for 
proper payment, accurate documentation, appropriate clinical care and 
management, and the ability to conduct research. The commenter also 
indicated that accurate documentation of the Duffy status will decrease 
duplicative testing and allow for more precise medication 
administration, consistent with need.
    Response: We thank the commenter for its support.
    Comment: Some commenters suggested that ICD-10-PCS procedure code 
02583ZF (Destruction of conduction mechanism using irreversible 
electroporation, percutaneous approach) also be added to proposed new 
MS-DRG 317 (Concomitant Left Atrial Appendage Closure and Cardiac 
Ablation) in MDC 05. A couple commenters stated that pulsed field 
ablation is becoming the standard of care for atrial fibrillation 
ablation, and it should be included in the proposed new MS-DRG if 
patients who have atrial fibrillation are to be effectively, safely, 
and efficiently managed.
    Response: We appreciate the commenters' feedback. As discussed in 
section II.C.4.a. of the preamble of this final rule, we are finalizing 
MS-DRG 317 for FY 2025. Upon review, we believe it is appropriate to 
add procedure code 02583ZF to the logic for case assignment to MS-DRG 
317 as the description of the code describes a type of cardiac ablation 
and is clinically coherent with the other procedure codes describing 
cardiac ablation that were proposed and finalized for assignment to MS-
DRG 317 effective for FY 2025. We are therefore, finalizing, with 
modification, the MS-DRG assignments for procedure code 02583ZF as 
reflected in Table 6B.--New Procedure Codes in association with this 
final rule.
    After consideration of the public comments received, we are 
finalizing the MDC and MS-DRG assignments for the new diagnosis codes 
and procedure codes as set forth in Table 6A.--New Diagnosis Codes and 
Table 6B.--New Procedure Codes associated with this final rule. In 
addition, the finalized severity level designations for the new 
diagnosis codes are set forth in Table 6A. and the finalized O.R. 
status for the new procedure codes are set forth in Table 6B associated 
with this final rule.
    In association with this final rule, we are making the following 
tables available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html:
     Table 6A.--New Diagnosis Codes--FY 2025;
     Table 6B.--New Procedure Codes--FY 2025;
     Table 6C.--Invalid Diagnosis Codes--FY 2025;
     Table 6D.--Invalid Procedure Codes--FY 2025;
     Table 6E.--Revised Diagnosis Code Titles--FY 2025;
     Table 6F.--Revised Procedure Code Titles--FY 2025;
     Table 6G.1.--Secondary Diagnosis Order Additions to the CC 
Exclusions List--FY 2025;
     Table 6G.2.--Principal Diagnosis Order Additions to the CC 
Exclusions List--FY 2025;
     Table 6H.1.--Secondary Diagnosis Order Deletions to the CC 
Exclusions List--FY 2025;
     Table 6H.2.--Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2025;
     Table 6I.--Complete MCC List--FY 2025;
     Table 6I.1.--Additions to the MCC List--FY 2025;
     Table 6J.1.--Complete CC List--FY 2025;
     Table 6J.1.--Additions to the CC List--FY 2025;
     Table 6J.2.--Deletions to the CC List--FY 2025; and
     Table 6K.--Complete List of CC Exclusions--FY 2025.
14. Changes to the Surgical Hierarchies
    Some inpatient stays entail multiple surgical procedures, each one 
of which, occurring by itself, could result in assignment of the case 
to a different MS-DRG within the MDC to which the principal diagnosis 
is assigned. Therefore, it is necessary to have a decision rule within 
the GROUPER by which these cases are assigned to a single MS-DRG. The 
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function. 
Application of this hierarchy ensures that cases involving multiple 
surgical procedures are assigned to the MS-DRG associated with the most 
resource-intensive surgical class.
    A surgical class can be composed of one or more MS-DRGs. For 
example, in MDC 11, the surgical class ``kidney transplant'' consists 
of a single MS-DRG (MS-DRG 652) and the class ``major bladder 
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
    Consequently, in many cases, the surgical hierarchy has an impact 
on more than one MS-DRG. The methodology for determining the most 
resource-intensive surgical class involves weighting the average 
resources for each MS-DRG by frequency to determine the weighted 
average resources for each surgical class.

[[Page 69097]]

For example, assume surgical class A includes MS-DRGs 001 and 002 and 
surgical class B includes MS-DRGs 003, 004, and 005. Assume also that 
the average costs of MS-DRG 001 are higher than that of MS-DRG 003, but 
the average costs of MS-DRGs 004 and 005 are higher than the average 
costs of MS-DRG 002. To determine whether surgical class A should be 
higher or lower than surgical class B in the surgical hierarchy, we 
would weigh the average costs of each MS-DRG in the class by frequency 
(that is, by the number of cases in the MS-DRG) to determine average 
resource consumption for the surgical class. The surgical classes would 
then be ordered from the class with the highest average resource 
utilization to that with the lowest, with the exception of ``other O.R. 
procedures'' as discussed in this final rule.
    This methodology may occasionally result in assignment of a case 
involving multiple procedures to the lower-weighted MS-DRG (in the 
highest, most resource-intensive surgical class) of the available 
alternatives. However, given that the logic underlying the surgical 
hierarchy provides that the GROUPER search for the procedure in the 
most resource-intensive surgical class, in cases involving multiple 
procedures, this result is sometimes unavoidable.
    We note that, notwithstanding the foregoing discussion, there are a 
few instances when a surgical class with a lower average cost is 
ordered above a surgical class with a higher average cost. For example, 
the ``other O.R. procedures'' surgical class is uniformly ordered last 
in the surgical hierarchy of each MDC in which it occurs, regardless of 
the fact that the average costs for the MS-DRG or MS-DRGs in that 
surgical class may be higher than those for other surgical classes in 
the MDC. The ``other O.R. procedures'' class is a group of procedures 
that are only infrequently related to the diagnoses in the MDC but are 
still occasionally performed on patients with cases assigned to the MDC 
with these diagnoses. Therefore, assignment to these surgical classes 
should only occur if no other surgical class more closely related to 
the diagnoses in the MDC is appropriate.
    A second example occurs when the difference between the average 
costs for two surgical classes is very small. We have found that small 
differences generally do not warrant reordering of the hierarchy 
because, as a result of reassigning cases on the basis of the hierarchy 
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered 
below it.
    Based on the changes that we proposed to make for FY 2025, as 
discussed in section II.C. of the preamble of the proposed rule and 
this final rule, we proposed to modify the existing surgical hierarchy 
for FY 2025 as follows.
    As discussed in section II.C.4.a. of the preamble of the proposed 
rule and this final rule, we proposed to revise the surgical hierarchy 
for the MDC 05 (Diseases and Disorders of the Circulatory System) MS-
DRGs as follows: In the MDC 05 MS-DRGs, we proposed to sequence 
proposed new MS-DRG 317 (Concomitant Left Atrial Appendage Closure and 
Cardiac Ablation) above MS-DRG 275 (Cardiac Defibrillator Implant with 
Cardiac Catheterization and MCC) and below MS-DRGs 231, 232, 233, 234, 
235, and 236 (Coronary Bypass with or without PTCA, with or without 
Cardiac Catheterization or Open Ablation, with and without MCC, 
respectively). As discussed in section II.C.4.b. of the preamble of the 
proposed rule and this final rule, we proposed to revise the title for 
MS-DRG 276 from ``Cardiac Defibrillator Implant with MCC'' to ``Cardiac 
Defibrillator Implant with MCC or Carotid Sinus Neurostimulator''.
    As discussed in section II.C.6.b. of the preamble of the proposed 
rule and this final rule, we proposed to delete MS-DRGs 453, 454, and 
455 (Combined Anterior and Posterior Spinal Fusion with MCC, with CC, 
and without CC/MCC, respectively). Based on the changes we proposed to 
make for those MS-DRGs in MDC 08 (Diseases and Disorders of the 
Musculoskeletal System and Connective Tissue), we proposed to revise 
the surgical hierarchy for MDC 08 as follows: In MDC 08, we proposed to 
sequence proposed new MS-DRGs 426, 427, and 428 (Multiple Level 
Combined Anterior and Posterior Spinal Fusion Except Cervical with MCC, 
with CC, and without CC/MCC, respectively) above proposed new MS-DRG 
402 (Single Level Combined Anterior and Posterior Spinal Fusion Except 
Cervical). We proposed to sequence proposed new MS-DRGs 429 and 430 
(Combined Anterior and Posterior Cervical Spinal Fusion with MCC and 
without MCC, respectively) above MS-DRGs 456, 457, and 458 (Spinal 
Fusion Except Cervical with Spinal Curvature, Malignancy, Infection or 
Extensive Fusions with MCC, with CC, and without CC/MCC, respectively) 
and below proposed new MS-DRG 402. We proposed to sequence proposed new 
MS-DRGs 447 and 448 (Multiple Level Spinal Fusion Except Cervical with 
MCC and without MCC, respectively) above proposed revised MS-DRGs 459 
and 460 (Single Level Spinal Fusion Except Cervical with and without 
MCC, respectively) and below MS-DRGs 456, 457, and 458.
    Lastly, as discussed in section II.C.9. of the preamble of the 
proposed rule and this final rule, we proposed to revise the surgical 
hierarchy for the MDC 17 (Myeloproliferative Diseases and Disorders, 
Poorly Differentiated Neoplasms) MS-DRGs as follows: For the MDC 17 MS-
DRGs, we proposed to sequence proposed new MS-DRG 850 (Acute Leukemia 
with Other Procedures) above MS-DRGs 823, 824, and 825 (Lymphoma and 
Non-Acute Leukemia with Other Procedures with MCC, with CC, and without 
CC/MCC, respectively) and below MS-DRGs 820, 821, and 822 (Lymphoma and 
Leukemia with Major O.R. Procedures with MCC, with CC, and without CC/
MCC, respectively).
    Our proposal for Appendix D MS-DRG Surgical Hierarchy by MDC and 
MS-DRG of the version of the ICD-10 MS-DRG Definitions Manual Version 
42 is illustrated in the following tables.
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    Comment: A few commenters stated that they acknowledged the 
proposed conforming changes to the surgical hierarchy in association 
with the proposed MS-DRG classification changes, and acknowledged that 
the MS-DRG weight impacts the cost analysis, which in turn affects the 
hierarchy in the GROUPER. Regarding the proposed changes to MDC 08, the 
commenters stated that it is important to consider that it is not all 
multiple level spinal fusion procedures that appear to have the 
greatest impact on the proposed surgical hierarchy sequencing, rather 
it appears that it is the combined spinal fusion procedures. The 
commenters specified that the four highest MS-DRG categories listed in 
the proposed surgical hierarchy table for MDC 08 reflect combined 
spinal fusion procedures (MS-DRGs 453, 454, 455, 426, 427, 428, 420, 
429, and 430). The commenters also remarked that proposed MS-DRGs 447 
and 448, which describe multiple level spinal fusion procedures, are 
proposed to be sequenced below proposed MS-DRG 402 that describes 
single level combined anterior and posterior spinal fusion procedures, 
and below existing MS-DRGs 456, 457, and 458 that include both single 
level and multiple level spinal fusion procedures. The commenters 
stated that although they agreed with the proposed surgical hierarchy, 
the data appear to indicate that it is not only the multiple level 
spinal fusion procedures that are impacting the length of stay and 
average costs among the proposed MS-DRGs since the proposed MS-DRGs 
describing combined spinal fusion procedures appear to warrant the 
highest hierarchy regardless of single level or multiple levels. 
According to the commenters, the discussion in the proposed rule 
suggested that the number of levels impacts resource utilization, 
however, the data to differentiate cases where both multiple and single 
level spinal fusion procedures were performed on the same patient or 
during the same operative episode did not appear to impact resource 
utilization based on the data analysis provided.
    Response: We appreciate the commenters' feedback and support. We 
note that while the commenters listed MS-DRGs 453, 454, and 455 among 
one

[[Page 69100]]

of the four categories reflecting combined spinal fusion procedures 
having the greatest impact in the proposed surgical hierarchy for MDC 
08, we believe that since those MS-DRGs were proposed to be deleted, 
the commenters' intent was for CMS to instead consider the three 
categories of proposed spinal fusion MS-DRGs (426, 427, and 428; 402; 
429 and 430) for which the proposed logic for case assignment was 
derived from MS-DRGs 453, 454, and 455. Because the proposed logic for 
case assignment to the three categories of proposed spinal fusion MS-
DRGs includes both concepts, (that is, multiple level combined spinal 
fusion procedures and single level combined spinal fusion procedures), 
we believe additional review is warranted with respect to the 
commenters' concerns regarding which aspect may have a greater impact 
on resource utilization. We intend to consider if the development of 
evaluation criteria would be useful for future proposed modifications 
to the surgical hierarchy for MS-DRGs that have meaningful changes to 
the clinical logic.
    In the absence of a specific example, we are unclear why the 
commenter referenced data to differentiate cases where both multiple 
and single level spinal fusion procedures were performed on the same 
patient or during the same operative episode and its impact on resource 
utilization with respect to the data analysis provided in the proposed 
rule since, as stated in the proposed rule, the spinal fusion cases 
(for example, from MS-DRGs 453, 454, and 455) were separated into three 
categories (single level combined anterior and posterior fusions except 
cervical, multiple level combined anterior and posterior fusions except 
cervical, and combined anterior and posterior cervical spinal fusions), 
according to the proposed logic lists made available in Tables 6P.2d, 
6P.2e, and 6P.2f in association with the proposed rule. The data 
analysis findings presented in the proposed rule show the difference in 
the number of cases, average length of stay, and average costs between 
multiple level and single level combined anterior and posterior spinal 
fusion cases. In consideration of the proposed logic, it would not be 
possible for a case to be reflected under both proposed MS-DRG 
categories at the same time.
    Therefore, after consideration of the public comments we received, 
and based on the changes that we are finalizing for FY 2025, as 
discussed in section II.C. of the preamble of this final rule, we are 
finalizing our proposals to modify the existing surgical hierarchy, 
effective with the ICD-10 MS-DRGs Version 42, with modification. As 
discussed in section II.C.6.b., we are deleting MS-DRGs 459 and 460 and 
creating new MS-DRGs 450 and 451 (Single Level Spinal Fusion Except 
Cervical with MCC and without MCC, respectively). The finalized 
surgical hierarchy for MDC 08 is shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.088

    For issues pertaining to the surgical hierarchy, as with other MS-
DRG related requests, we encourage interested parties to submit 
comments no later than October 20, 2024, via the Medicare Electronic 
Application Request Information SystemTM 
(MEARISTM) at https://mearis.cms.gov/public/home, so that 
they can be

[[Page 69101]]

considered for possible inclusion in the annual proposed rule. We will 
consider these public comments for possible proposals in future 
rulemaking as part of our annual review process.
15. Maintenance of the ICD-10-CM and ICD-10-PCS Coding Systems
    In September 1985, the ICD-9-CM Coordination and Maintenance 
Committee was formed. This is a Federal interdepartmental committee, 
co-chaired by the Centers for Disease Control and Prevention's (CDC) 
National Center for Health Statistics (NCHS) and CMS, charged with 
maintaining and updating the ICD-9-CM system. The final update to ICD-
9-CM codes was made on October 1, 2013. Thereafter, the name of the 
Committee was changed to the ICD-10 Coordination and Maintenance 
Committee, effective with the March 19-20, 2014 meeting. The ICD-10 
Coordination and Maintenance Committee addresses updates to the ICD-10-
CM and ICD-10-PCS coding systems. The Committee is jointly responsible 
for approving coding changes, and developing errata, addenda, and other 
modifications to the coding systems to reflect newly developed 
procedures and technologies and newly identified diseases. The 
Committee is also responsible for promoting the use of Federal and non-
Federal educational programs and other communication techniques with a 
view toward standardizing coding applications and upgrading the quality 
of the classification system.
    The official list of ICD-9-CM diagnosis and procedure codes by 
fiscal year can be found on the CMS website at: https://www.cms.gov/medicare/coding-billing/icd-10-codes/icd-9-cm-diagnosis-procedure-codes-abbreviated-and-full-code-titles.
    The official list of ICD-10-CM and ICD-10-PCS codes can be found on 
the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/.
    The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM 
diagnosis codes included in the Tabular List and Alphabetic Index for 
Diseases, while CMS has lead responsibility for the ICD-10-PCS and ICD-
9-CM procedure codes included in the Tabular List and Alphabetic Index 
for Procedures.
    The Committee encourages participation in the previously mentioned 
process by health-related organizations. In this regard, the Committee 
holds public meetings for discussion of educational issues and proposed 
coding changes. These meetings provide an opportunity for 
representatives of recognized organizations in the coding field, such 
as the American Health Information Management Association (AHIMA), the 
American Hospital Association (AHA), and various physician specialty 
groups, as well as individual physicians, health information management 
professionals, and other members of the public, to contribute ideas on 
coding matters. After considering the opinions expressed during the 
public meetings and in writing, the Committee formulates 
recommendations, which then must be approved by the agencies.
    The Committee presented proposals for coding changes for 
implementation in FY 2025 at a public meeting held on September 12-13, 
2023, and finalized the coding changes after consideration of comments 
received at the meetings and in writing by November 15, 2023.
    The Committee held its Spring 2024 meeting on March 19-20, 2024. 
The deadline for submitting comments on these code proposals was April 
19, 2024. It was announced at this meeting that any new diagnosis and 
procedure codes for which there was consensus of public support, and 
for which complete tabular and indexing changes would be made by June 
2024 would be included in the October 1, 2024 update to the ICD-10-CM 
diagnosis and ICD-10-PCS procedure code sets. As discussed in earlier 
sections of the preamble of this final rule, there are new, revised, 
and deleted ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes 
that are captured in Table 6A.--New Diagnosis Codes, Table 6B.--New 
Procedure Codes, Table 6C.--Invalid Diagnosis Codes, Table 6D.--Invalid 
Procedure Codes, Table 6E.--Revised Diagnosis Code Titles, and Table 
6F.--Revised Procedure Code Titles for this final rule, which are 
available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.
    The code titles are adopted as part of the ICD-10 Coordination and 
Maintenance Committee process. Therefore, although we make the code 
titles available for the IPPS proposed and final rules, they are not 
subject to comment in the proposed or final rule. Because of the length 
of these tables, they are not published in the Addendum to the proposed 
or final rule. Rather, they are available on the CMS website as 
discussed in section VI. of the Addendum to the proposed rule and this 
final rule.
    Recordings for the virtual meeting discussions of the procedure 
codes at the Committee's September 12-13, 2023 meeting and the March 
19-20, 2024 meeting can be obtained from the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials. The 
materials for the discussions relating to diagnosis codes at the 
September 12-13, 2023 meeting and March 19-20, 2024 meeting can be 
found at: https://www.cdc.gov/nchs/icd/icd-10-maintenance/meetings.html. These websites also provide detailed information about 
the Committee, including information on requesting a new code, 
participating in a Committee meeting, timeline requirements and meeting 
dates.
    We encourage commenters to submit questions and comments on coding 
issues involving diagnosis codes via Email to: nchsicd10cm@cdc.gov.
    Questions and comments concerning the procedure codes should be 
submitted via Email to: [email protected].
    As discussed in the proposed rule, CMS implemented 41 new procedure 
codes including the insertion of a palladium-103 collagen implant into 
the brain, the excision or resection of intestinal body parts using a 
laparoscopic hand-assisted approach, the transfer of omentum for 
pedicled omentoplasty procedures, and the administration of talquetamab 
into the ICD-10-PCS classification effective with discharges on and 
after April 1, 2024. The procedure codes are as follows:
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    The 41 procedure codes are also reflected in Table 6B--New 
Procedure Codes in association with the proposed rule and available on 
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. As with the other new procedure 
codes and MS-DRG assignments included in Table 6B in association with 
the proposed rule, we solicited public comments on the most appropriate 
MDC, MS-DRG, and operating room status assignments for these codes for 
FY 2025, as well as any other options for the GROUPER logic. We discuss 
the comments we received on these assignments in section II.C.13. of 
this final rule as well as our finalized assignments, including to add 
new procedure code 02583ZF to the logic for case assignment to new MS-
DRG 317 for FY 2025, as reflected in Table 6B.--New Procedure Codes in 
association with this final rule.
    In the proposed rule, we also noted that Change Request (CR) 13458, 
Transmittal 12384, titled ``April 2024 Update to the Medicare 
Severity--Diagnosis Related Group (MS-DRG) Grouper and Medicare Code 
Editor (MCE) Version 41.1'' was issued on November 30, 2023 (available 
on the CMS website at: https://www.cms.gov/regulations-and-guidance/guidance/transmittals/2023-transmittals/r12384cp) regarding the release 
of an updated version of the ICD-10 MS-DRG GROUPER and Medicare Code 
Editor software, Version 41.1, effective with discharges on and after 
April 1, 2024, reflecting the new procedure codes. The updated 
software, along with the updated ICD-10 MS-DRG Version 41.1 Definitions 
Manual and the Definitions of Medicare Code Edits Version 41.1 manual 
is available at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software.
    In the September 7, 2001 final rule implementing the IPPS new 
technology add-on payments (66 FR 46906), we indicated we would attempt 
to include proposals for procedure codes that would describe new 
technology discussed and approved at the Spring meeting as part of the 
code revisions effective the following October.
    Section 503(a) of the Medicare Modernization Act (Pub. L. 108-173) 
included a requirement for updating diagnosis and procedure codes twice 
a year instead of a single update on October 1 of each year. This 
requirement was included as part of the amendments to the Act relating 
to recognition of new technology under the IPPS. Section 503(a) of 
Public Law 108-173 amended section 1886(d)(5)(K) of the Act by adding a 
clause (vii) which states that the Secretary shall provide for the 
addition of new diagnosis and procedure codes on April 1 of each year, 
but the addition of such codes shall not require the Secretary to 
adjust the payment (or diagnosis-related group classification) until 
the fiscal year that begins after such date. This requirement improves 
the recognition of new technologies under the IPPS by providing 
information on these new technologies at an earlier date. Data will

[[Page 69105]]

be available 6 months earlier than would be possible with updates 
occurring only once a year on October 1.
    In the FY 2005 IPPS final rule, we implemented section 
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law 
108-173, by developing a mechanism for approving, in time for the April 
update, diagnosis and procedure code revisions needed to describe new 
technologies and medical services for purposes of the new technology 
add-on payment process. We also established the following process for 
making these determinations. Topics considered during the Fall ICD-10 
(previously ICD-9-CM) Coordination and Maintenance Committee meeting 
were considered for an April 1 update if a strong and convincing case 
was made by the requestor during the Committee's public meeting. The 
request needed to identify the reason why a new code was needed in 
April for purposes of the new technology process. Meeting participants 
and those reviewing the Committee meeting materials were provided the 
opportunity to comment on the expedited request. We refer the reader to 
the FY 2022 IPPS/LTCH PPS final rule (86 FR 44950) for further 
discussion of the implementation of this prior April 1 update for 
purposes of the new technology add-on payment process.
    However, as discussed in the FY 2022 IPPS/LTCH PPS final rule (86 
FR 44950 through 44956), we adopted an April 1 implementation date, in 
addition to the annual October 1 update, beginning with April 1, 2022. 
We noted that the intent of this April 1 implementation date is to 
allow flexibility in the ICD-10 code update process. With this new 
April 1 update, CMS now uses the same process for consideration of all 
requests for an April 1 implementation date, including for purposes of 
the new technology add-on payment process (that is, the prior process 
for consideration of an April 1 implementation date only if a strong 
and convincing case was made by the requestor during the meeting no 
longer applies). We are continuing to use several aspects of our 
existing established process to implement new codes through the April 1 
code update, which includes presenting proposals for April 1 
consideration at the September ICD-10 Coordination and Maintenance 
Committee meeting, requesting public comments, reviewing the public 
comments, finalizing codes, and announcing the new codes with their 
assignments consistent with the new GROUPER release information. We 
note that under our established process, requestors indicate whether 
they are submitting their code request for consideration for an April 1 
implementation date or an October 1 implementation date. The ICD-10 
Coordination and Maintenance Committee makes efforts to accommodate the 
requested implementation date for each request submitted. However, the 
Committee determines which requests are to be presented for 
consideration for an April 1 implementation date or an October 1 
implementation date. As discussed earlier in this section of the 
preamble of this final rule, there were code proposals presented for an 
April 1, 2024 implementation at the September 12-13, 2023 Committee 
meetings. Following the receipt of public comments, the code proposals 
were approved and finalized, therefore, there were new codes 
implemented April 1, 2024.
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule, consistent 
with the process we outlined for the April 1 implementation date, we 
announced the new codes in November 2023 and provided the updated code 
files in December 2023 and ICD-10-CM Official Guidelines for Coding and 
Reporting in January 2024. In the February 05, 2024 Federal Register 
(89 FR 7710), notice for the March 19-20, 2024 ICD-10 Coordination and 
Maintenance Committee Meeting was published that includes the tentative 
agenda and identifies which topics are related to a new technology add-
on payment application. By February 1, 2024, we made available the 
updated Version 41.1 ICD-10 MS-DRG GROUPER software and related 
materials on the CMS web page at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software.
    ICD-9-CM addendum and code title information is published on the 
CMS website at https://www.cms.gov/medicare/coding-billing/icd-10-codes/updates-revisions-icd-9-cm-procedure-codes-addendum. ICD-10-CM 
and ICD-10-PCS addendum and code title information is published on the 
CMS website at https://www.cms.gov/medicare/coding-billing/icd-10-codes. CMS also sends electronic files containing all ICD-10-CM and 
ICD-10-PCS coding changes to its Medicare contractors for use in 
updating their systems and providing education to providers. 
Information on ICD-10-CM diagnosis codes, along with the Official ICD-
10-CM Coding Guidelines, can be found on the CDC website at https://www.cdc.gov/nchs/icd/icd-10-cm/files.html. Additionally, information on 
new, revised, and deleted ICD-10-CM diagnosis and ICD-10-PCS procedure 
codes is provided to the AHA for publication in the Coding Clinic for 
ICD-10. The AHA also distributes coding update information to 
publishers and software vendors.
    In the proposed rule, we noted that for FY 2024, there are 
currently 74,044 diagnosis codes and 78,638 procedure codes. We also 
noted that as displayed in Table 6A.--New Diagnosis Codes and in Table 
6B.--New Procedure Codes associated with the proposed rule (and 
available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps), there are 252 new 
diagnosis codes that had been finalized for FY 2025 at the time of the 
development of the proposed rule and 41 new procedure codes that were 
effective with discharges on and after April 1, 2024.
    As discussed in section II.C.13 of the preamble of this final rule, 
we are making Table 6A.--New Diagnosis Codes, Table 6B.--New Procedure 
Codes, Table 6C.--Invalid Diagnosis Codes, Table 6D.--Invalid Procedure 
Codes, Table 6E.--Revised Diagnosis Code Titles and Table 6F.--Revised 
Procedure Code Titles available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps in association with this final rule. As shown in Table 
6B.--New Procedure Codes, there were procedure codes discussed at the 
March 19-20, 2024 ICD-10 Coordination and Maintenance Committee meeting 
that were not finalized in time to include in the proposed rule and are 
identified with an asterisk. We refer the reader to Table 6B.--New 
Procedure Codes associated with this final rule and available on the 
CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps for the detailed list of these 371 
new procedure codes finalized for FY 2025.
    We also note, as reflected in Table 6C.--Invalid Diagnosis Codes 
and in Table 6D.--Invalid Procedure Codes, there are a total of 36 
diagnosis codes and 61 procedure codes that will become invalid 
effective October 1, 2024. Based on these code updates, effective 
October 1, 2024, there are a total of 74,260 ICD-10-CM diagnosis codes 
and 78,948 ICD-10-PCS procedure codes for FY 2025 as shown in the 
following table.

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    As stated previously, the public is provided the opportunity to 
comment on any requests for new diagnosis or procedure codes discussed 
at the ICD-10 Coordination and Maintenance Committee meeting. The code 
titles are adopted as part of the ICD-10 Coordination and Maintenance 
Committee process. Thus, although we publish the code titles in the 
IPPS proposed and final rules, they are not subject to comment in the 
proposed or final rules.
16. Replaced Devices Offered Without Cost or With a Credit
a. Background
    In the FY 2008 IPPS final rule with comment period (72 FR 47246 
through 47251), we discussed the topic of Medicare payment for devices 
that are replaced without cost or where credit for a replaced device is 
furnished to the hospital. We implemented a policy to reduce a 
hospital's IPPS payment for certain MS-DRGs where the implantation of a 
device that subsequently failed or was recalled determined the base MS-
DRG assignment. At that time, we specified that we will reduce a 
hospital's IPPS payment for those MS-DRGs where the hospital received a 
credit for a replaced device equal to 50 percent or more of the cost of 
the device.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through 
51557), we clarified this policy to state that the policy applies if 
the hospital received a credit equal to 50 percent or more of the cost 
of the replacement device and issued instructions to hospitals 
accordingly.
b. Changes for FY 2025
    As discussed in section II.C.5. of the preamble of the proposed 
rule and this final rule, for FY 2025, we proposed to revise the title 
of MS-DRG 276 from ``Cardiac Defibrillator Implant with MCC'' to 
``Cardiac Defibrillator Implant with MCC or Carotid Sinus 
Neurostimulator''.
    As stated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24409), 
we generally map new MS-DRGs onto the list when they are formed from 
procedures previously assigned to MS-DRGs that are already on the list. 
Currently, MS-DRG 276 is on the list of MS-DRGs subject to the policy 
for payment under the IPPS for replaced devices offered without cost or 
with a credit as shown in the following table. Therefore, we proposed 
that if the applicable proposed MS-DRG changes are finalized, we would 
make conforming changes to the title of MS-DRG 276 as reflected in the 
table that follows. We also proposed to continue to include the 
existing MS-DRGs currently subject to the policy.
    As discussed in section II.C.5. of the preamble of this final rule, 
we are finalizing our proposal to revise the title of MS-DRG 276 from 
``Cardiac Defibrillator Implant with MCC'' to ``Cardiac Defibrillator 
Implant with MCC or Carotid Sinus Neurostimulator''. We did not receive 
any public comments opposing our proposal make conforming changes to 
the title of MS-DRG 276 in the list of MS-DRGs that will be subject to 
the replaced devices offered without cost or with a credit policy 
effective October 1, 2024. Additionally, we did not receive any public 
comments opposing our proposal to continue to include the existing MS-
DRGs currently subject to the policy. Therefore, we are finalizing the 
list of MS-DRGs in the following table that will be subject to the 
replaced devices offered without cost or with a credit policy effective 
October 1, 2024.
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    The final list of MS-DRGs subject to the IPPS policy for replaced 
devices offered without cost or with a credit will be issued to 
providers in the form of a Change Request (CR).
17. Out of Scope Public Comments Received
    We received public comments on MS-DRG related issues that were

[[Page 69109]]

outside the scope of the proposals included in the FY 2025 IPPS/LTCH 
PPS proposed rule.
    Because we consider these public comments to be outside the scope 
of the proposed rule, we are not addressing them in this final rule. As 
stated in section II.C.1.b. of the preamble of this final rule, we 
encourage individuals with comments about MS-DRG classifications to 
submit these comments no later than October 20, 2024, via the Medicare 
Electronic Application Request Information SystemTM 
(MEARISTM) at: https://mearis.cms.gov/public/home, so that 
they can be considered for possible inclusion in the annual proposed 
rule. We will consider these public comments for possible proposals in 
future rulemaking as part of our annual review process.

D. Recalibration of the FY 2025 MS-DRG Relative Weights

1. Data Sources for Developing the Relative Weights
    Consistent with our established policy, in developing the MS-DRG 
relative weights for FY 2025, we proposed to use two data sources: 
claims data and cost report data. The claims data source is the MedPAR 
file, which includes fully coded diagnostic and procedure data for all 
Medicare inpatient hospital bills. The FY 2023 MedPAR data used in this 
final rule include discharges occurring on October 1, 2022, through 
September 30, 2023, based on bills received by CMS through March 31, 
2024, from all hospitals subject to the IPPS and short-term, acute care 
hospitals in Maryland (which at that time were under a waiver from the 
IPPS).
    The FY 2023 MedPAR file used in calculating the relative weights 
includes data for approximately 6,916,571 Medicare discharges from IPPS 
providers. Discharges for Medicare beneficiaries enrolled in a Medicare 
Advantage managed care plan are excluded from this analysis. These 
discharges are excluded when the MedPAR ``GHO Paid'' indicator field on 
the claim record is equal to ``1'' or when the MedPAR DRG payment 
field, which represents the total payment for the claim, is equal to 
the MedPAR ``Indirect Medical Education (IME)'' payment field, 
indicating that the claim was an ``IME only'' claim submitted by a 
teaching hospital on behalf of a beneficiary enrolled in a Medicare 
Advantage managed care plan. In addition, the March 2024 update of the 
FY 2023 MedPAR file complies with version 5010 of the X12 HIPAA 
Transaction and Code Set Standards, and includes a variable called 
``claim type.'' Claim type ``60'' indicates that the claim was an 
inpatient claim paid as fee-for-service. Claim types ``61,'' ``62,'' 
``63,'' and ``64'' relate to encounter claims, Medicare Advantage IME 
claims, and HMO no-pay claims. Therefore, the calculation of the 
relative weights for FY 2025 also excludes claims with claim type 
values not equal to ``60.'' The data exclude CAHs, including hospitals 
that subsequently became CAHs after the period from which the data were 
taken. In addition, the data exclude Rural Emergency Hospitals (REHs), 
including hospitals that subsequently became REHs after the period from 
which the data were taken. We note that the FY 2025 relative weights 
are based on the ICD-10-CM diagnosis codes and ICD-10-PCS procedure 
codes from the FY 2023 MedPAR claims data, grouped through the ICD-10 
version of the FY 2025 GROUPER (Version 42).
    The second data source used in the cost-based relative weighting 
methodology is the Medicare cost report data files from the Healthcare 
Cost Report Information System (HCRIS). In general, we use the HCRIS 
dataset that is 3 years prior to the IPPS fiscal year. Specifically, 
for this final rule, we used the March 2024 update of the FY 2022 HCRIS 
for calculating the FY 2025 cost-based relative weights. Consistent 
with our historical practice, for this FY 2025 final rule, we are 
providing the version of the HCRIS from which we calculated these 19 
cost-to charge-ratios (CCRs) on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. Click on 
the link on the left side of the screen titled ``FY 2025 IPPS Final 
Rule Home Page'' or ``Acute Inpatient Files for Download.''
2. Methodology for Calculation of the Relative Weights
a. General
    We calculated the FY 2025 relative weights based on 19 CCRs. The 
methodology we proposed to use to calculate the FY 2025 MS-DRG cost-
based relative weights based on claims data in the FY 2023 MedPAR file 
and data from the FY 2022 Medicare cost reports is as follows:
     To the extent possible, all the claims were regrouped 
using the FY 2025 MS-DRG classifications discussed in sections II.B. 
and II.C. of the preamble of this final rule.
     The transplant cases that were used to establish the 
relative weights for heart and heart-lung, liver and/or intestinal, and 
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively) 
were limited to those Medicare-approved transplant centers that have 
cases in the FY 2023 MedPAR file. (Medicare coverage for heart, heart-
lung, liver and/or intestinal, and lung transplants is limited to those 
facilities that have received approval from CMS as transplant centers.)
     Organ acquisition costs for kidney, heart, heart-lung, 
liver, lung, pancreas, and intestinal (or multivisceral organs) 
transplants continue to be paid on a reasonable cost basis. Because 
these acquisition costs are paid separately from the prospective 
payment rate, it is necessary to subtract the acquisition charges from 
the total charges on each transplant bill that showed acquisition 
charges before computing the average cost for each MS-DRG and before 
eliminating statistical outliers.
    Section 108 of the Further Consolidated Appropriations Act, 2020 
provides that, for cost reporting periods beginning on or after October 
1, 2020, costs related to hematopoietic stem cell acquisition for the 
purpose of an allogeneic hematopoietic stem cell transplant shall be 
paid on a reasonable cost basis. We refer the reader to the FY 2021 
IPPS/LTCH PPS final rule for further discussion of the reasonable cost 
basis payment for cost reporting periods beginning on or after October 
1, 2020 (85 FR 58835 through 58842). For FY 2022 and subsequent years, 
we subtract the hematopoietic stem cell acquisition charges from the 
total charges on each transplant bill that showed hematopoietic stem 
cell acquisition charges before computing the average cost for each MS-
DRG and before eliminating statistical outliers.
     Claims with total charges or total lengths of stay less 
than or equal to zero were deleted. Claims that had an amount in the 
total charge field that differed by more than $30.00 from the sum of 
the routine day charges, intensive care charges, pharmacy charges, 
implantable devices charges, supplies and equipment charges, therapy 
services charges, operating room charges, cardiology charges, 
laboratory charges, radiology charges, other service charges, labor and 
delivery charges, inhalation therapy charges, emergency room charges, 
blood and blood products charges, anesthesia charges, cardiac 
catheterization charges, CT scan charges, and MRI charges were also 
deleted.
     At least 92.6 percent of the providers in the MedPAR file 
had charges for 14 of the 19 cost centers. All claims of providers that 
did not have charges greater than zero for at least 14

[[Page 69110]]

of the 19 cost centers were deleted. In other words, a provider must 
have no more than five blank cost centers. If a provider did not have 
charges greater than zero in more than five cost centers, the claims 
for the provider were deleted.
     Statistical outliers were eliminated by removing all cases 
that were beyond 3.0 standard deviations from the geometric mean of the 
log distribution of both the total charges per case and the total 
charges per day for each MS-DRG.
     Effective October 1, 2008, because hospital inpatient 
claims include a Present on Admission (POA) field for each diagnosis 
present on the claim, only for purposes of relative weight-setting, the 
POA indicator field was reset to ``Y'' for ``Yes'' for all claims that 
otherwise have an ``N'' (No) or a ``U'' (documentation insufficient to 
determine if the condition was present at the time of inpatient 
admission) in the POA field.
    Under current payment policy, the presence of specific HAC codes, 
as indicated by the POA field values, can generate a lower payment for 
the claim. Specifically, if the particular condition is present on 
admission (that is, a ``Y'' indicator is associated with the diagnosis 
on the claim), it is not a HAC, and the hospital is paid for the higher 
severity (and, therefore, the higher weighted MS-DRG). If the 
particular condition is not present on admission (that is, an ``N'' 
indicator is associated with the diagnosis on the claim) and there are 
no other complicating conditions, the DRG GROUPER assigns the claim to 
a lower severity (and, therefore, the lower weighted MS-DRG) as a 
penalty for allowing a Medicare inpatient to contract a HAC. While the 
POA reporting meets policy goals of encouraging quality care and 
generates program savings, it presents an issue for the relative 
weight-setting process. Because cases identified as HACs are likely to 
be more complex than similar cases that are not identified as HACs, the 
charges associated with HAC cases are likely to be higher as well. 
Therefore, if the higher charges of these HAC claims are grouped into 
lower severity MS-DRGs prior to the relative weight-setting process, 
the relative weights of these particular MS-DRGs would become 
artificially inflated, potentially skewing the relative weights. In 
addition, we want to protect the integrity of the budget neutrality 
process by ensuring that, in estimating payments, no increase to the 
standardized amount occurs as a result of lower overall payments in a 
previous year that stem from using weights and case-mix that are based 
on lower severity MS-DRG assignments. If this would occur, the 
anticipated cost savings from the HAC policy would be lost.
    To avoid these problems, we reset the POA indicator field to ``Y'' 
only for relative weight-setting purposes for all claims that otherwise 
have an ``N'' or a ``U'' in the POA field. This resetting ``forced'' 
the more costly HAC claims into the higher severity MS-DRGs as 
appropriate, and the relative weights calculated for each MS-DRG more 
closely reflect the true costs of those cases.
    In addition, in the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 
and subsequent fiscal years, we finalized a policy to treat hospitals 
that participate in the Bundled Payments for Care Improvement (BPCI) 
initiative the same as prior fiscal years for the IPPS payment modeling 
and ratesetting process without regard to hospitals' participation 
within these bundled payment models (77 FR 53341 through 53343). 
Specifically, because acute care hospitals participating in the BPCI 
Initiative still receive IPPS payments under section 1886(d) of the 
Act, we include all applicable data from these subsection (d) hospitals 
in our IPPS payment modeling and ratesetting calculations as if the 
hospitals were not participating in those models under the BPCI 
initiative. We refer readers to the FY 2013 IPPS/LTCH PPS final rule 
for a complete discussion on our final policy for the treatment of 
hospitals participating in the BPCI initiative in our ratesetting 
process. For additional information on the BPCI initiative, we refer 
readers to the CMS' Center for Medicare and Medicaid Innovation's 
website at https://innovation.cms.gov/initiatives/Bundled-Payments/ and to section IV.H.4. of the preamble of the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53341 through 53343).
    The participation of hospitals in the BPCI initiative concluded on 
September 30, 2018. The participation of hospitals in the BPCI Advanced 
model started on October 1, 2018. The BPCI Advanced model, tested under 
the authority of section 1115A of the Act, is comprised of a single 
payment and risk track, which bundles payments for multiple services 
that beneficiaries receive during a Clinical Episode. Acute care 
hospitals may participate in BPCI Advanced in one of two capacities: as 
a model Participant or as a downstream Episode Initiator. Regardless of 
the capacity in which they participate in the BPCI Advanced model, 
participating acute care hospitals will continue to receive IPPS 
payments under section 1886(d) of the Act. Acute care hospitals that 
are Participants also assume financial and quality performance 
accountability for Clinical Episodes in the form of a reconciliation 
payment. For additional information on the BPCI Advanced model, we 
refer readers to the BPCI Advanced web page on the CMS Center for 
Medicare and Medicaid Innovation's website at https://innovation.cms.gov/initiatives/bpci-advanced. Consistent with our 
policy for FY 2024, and consistent with how we have treated hospitals 
that participated in the BPCI Initiative, for FY 2025, we continue to 
believe it is appropriate to include all applicable data from the 
subsection (d) hospitals participating in the BPCI Advanced model in 
our IPPS payment modeling and ratesetting calculations because, as 
noted previously, these hospitals are still receiving IPPS payments 
under section 1886(d) of the Act. Consistent with the FY 2024 IPPS/LTCH 
PPS final rule, we also proposed to include all applicable data from 
subsection (d) hospitals participating in the Comprehensive Care for 
Joint Replacement (CJR) Model in our IPPS payment modeling and 
ratesetting calculations.
    The charges for each of the 19 cost groups for each claim were 
standardized to remove the effects of differences in area wage levels, 
IME and DSH payments, and for hospitals located in Alaska and Hawaii, 
the applicable cost-of-living adjustment. Because hospital charges 
include charges for both operating and capital costs, we standardized 
total charges to remove the effects of differences in geographic 
adjustment factors, cost-of-living adjustments, and DSH payments under 
the capital IPPS as well. Charges were then summed by MS-DRG for each 
of the 19 cost groups so that each MS-DRG had 19 standardized charge 
totals. Statistical outliers were then removed. These charges were then 
adjusted to cost by applying the national average CCRs developed from 
the FY 2022 cost report data.
    The 19 cost centers that we used in the relative weight calculation 
are shown in a supplemental data file, Cost Center HCRIS Lines 
Supplemental Data File, posted via the internet on the CMS website for 
this final rule and available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. The supplemental data file 
shows the lines on the cost report and the corresponding revenue codes 
that we used to create the 19 national cost center CCRs. We stated in 
the proposed rule that if we receive comments about the groupings in 
this

[[Page 69111]]

supplemental data file, we may consider these comments as we finalize 
our policy. However, we did not receive any comments on the groupings 
in this table, and therefore, we are finalizing the groupings as 
proposed.
    Consistent with historical practice, we account for rare situations 
of non-monotonicity in a base MS-DRG and its severity levels, where the 
mean cost in the higher severity level is less than the mean cost in 
the lower severity level, in determining the relative weights for the 
different severity levels. If there are initially non-monotonic 
relative weights in the same base DRG and its severity levels, then we 
combine the cases that group to the specific non-monotonic MS-DRGs for 
purposes of relative weight calculations. For example, if there are two 
non-monotonic MS-DRGs, combining the cases across those two MS-DRGs 
results in the same relative weight for both MS-DRGs. The relative 
weight calculated using the combined cases for those severity levels is 
monotonic, effectively removing any non-monotonicity with the base DRG 
and its severity levels. For this FY 2025 final rule, this calculation 
was applied to address non-monotonicity for cases that grouped to the 
following: MS-DRG 016 and MS-DRG 017, MS-DRG 095 and MS-DRG 096, MS-DRG 
504 and MS-DRG 505, MS-DRG 797 and MS-DRG 798. In the supplemental file 
titled AOR/BOR File, we include statistics for the affected MS-DRGs 
both separately and with cases combined.
    We invited public comments on our proposals related to 
recalibration of the proposed FY 2025 relative weights and the changes 
in relative weights from FY 2024.
    We received several comments that we consider to be out of scope. 
For example, a commenter requested a ``device intensive'' cost 
threshold. Because we consider these comments to be out of scope, we 
are not responding in this final rule.
    After consideration of the comments received, we are finalizing our 
proposals without modifications related to the recalibration of the FY 
2025 relative weights. We summarize and respond to comments relating to 
the methodology for calculating the relative weight for MS-DRG 018 in 
the next section of this final rule.
b. Relative Weight Calculation for MS-DRG 018
    In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58451 through 
58453), we created MS-DRG 018 for cases that include procedures 
describing CAR T-cell therapies. We also finalized our proposal to 
modify our existing relative weight methodology to ensure that the 
relative weight for MS-DRG 018 appropriately reflects the relative 
resources required for providing CAR T-cell therapy outside of a 
clinical trial, while still accounting for the clinical trial cases in 
the overall average cost for all MS-DRGs (85 FR 58599 through 58600). 
Specifically, we stated that clinical trial claims that group to new 
MS-DRG 018 would not be included when calculating the average cost for 
MS-DRG 018 that is used to calculate the relative weight for this MS-
DRG, so that the relative weight reflects the costs of the CAR T-cell 
therapy drug. We stated that we identified clinical trial claims as 
claims that contain ICD-10-CM diagnosis code Z00.6 or contain 
standardized drug charges of less than $373,000, which was the average 
sales price of KYMRIAH and YESCARTA, the two CAR T-cell biological 
products licensed to treat relapsed/refractory large B-cell lymphoma as 
of the time of the development of the FY 2021 final rule. In addition, 
we stated that (a) when the CAR T-cell therapy product is purchased in 
the usual manner, but the case involves a clinical trial of a different 
product, the claim will be included when calculating the average cost 
for new MS-DRG 018 to the extent such cases can be identified in the 
historical data, and (b) when there is expanded access use of 
immunotherapy, these cases will not be included when calculating the 
average cost for new MS-DRG 018 to the extent such cases can be 
identified in the historical data.
    We also finalized our proposal to calculate an adjustment to 
account for the CAR T-cell therapy cases identified as clinical trial 
cases in calculating the national average standardized cost per case 
that is used to calculate the relative weights for all MS-DRGs and for 
purposes of budget neutrality and outlier simulations. We calculate 
this adjustor by dividing the average cost for cases that we identify 
as clinical trial cases by the average cost for cases that we identify 
as non-clinical trial cases, with the additional refinements that (a) 
when the CAR T-cell therapy product is purchased in the usual manner, 
but the case involves a clinical trial of a different product, the 
claim will be included when calculating the average cost for cases not 
determined to be clinical trial cases to the extent such cases can be 
identified in the historical data, and (b) when there is expanded 
access use of immunotherapy, these cases will be included when 
calculating the average cost for cases determined to be clinical trial 
cases to the extent such cases can be identified in the historical 
data. We stated that to the best of our knowledge, there were no claims 
in the historical data used in the calculation of this adjustment for 
cases involving a clinical trial of a different product, and to the 
extent the historical data contain claims for cases involving expanded 
access use of immunotherapy we believe those claims would have drug 
charges less than $373,000.
    In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58842), we also 
finalized an adjustment to the payment amount for applicable clinical 
trial and expanded access use immunotherapy cases that group to MS-DRG 
018, and indicated that we would provide instructions for identifying 
these claims in separate guidance. Following the issuance of the FY 
2021 IPPS/LTCH PPS final rule, we issued guidance \20\ stating that 
providers may enter a Billing Note NTE02 ``Expand Acc Use'' on the 
electronic claim 837I or a remark ``Expand Acc Use'' on a paper claim 
to notify the MAC of expanded access use of CAR T-cell therapy. In this 
case, the MAC would add payer-only condition code ``ZB'' so that Pricer 
will apply the payment adjustment in calculating payment for the case. 
In cases when the CAR T-cell therapy product is purchased in the usual 
manner, but the case involves a clinical trial of a different product, 
the provider may enter a Billing Note NTE02 ``Diff Prod Clin Trial'' on 
the electronic claim 837I or a remark ``Diff Prod Clin Trial'' on a 
paper claim. In this case, the MAC would add payer-only condition code 
``ZC'' so that the Pricer will not apply the payment adjustment in 
calculating payment for the case.
---------------------------------------------------------------------------

    \20\ https://www.cms.gov/files/document/r10571cp.pdf.
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    In the FY 2022 IPPS/LTCH PPS final rule, we revised MS-DRG 018 to 
include cases that report the procedure codes for CAR T-cell and non-
CAR T-cell therapies and other immunotherapies (86 FR 44798 through 
44806). We also finalized our proposal to continue to use the proxy of 
standardized drug charges of less than $373,000 (86 FR 44965) to 
identify clinical trial claims. We also finalized use of this same 
proxy for the FY 2023 IPPS/LTCH PPS final rule (87 FR 48894).
    Following the issuance of the FY 2023 IPPS/LTCH PPS final rule, we 
issued guidance \21\ stating where there is expanded access use of 
immunotherapy, the provider may submit condition code ``90'' on the 
claim so that Pricer will apply the payment adjustment in

[[Page 69112]]

calculating payment for the case. We stated that MACs would no longer 
append Condition Code `ZB' to inpatient claims reporting Billing Note 
NTE02 ``Expand Acc Use'' on the electronic claim 837I or a remark 
``Expand Acc Use'' on a paper claim, effective for claims for 
discharges that occur on or after October 1, 2022.
---------------------------------------------------------------------------

    \21\ https://www.cms.gov/files/document/r11727cp.pdf.
---------------------------------------------------------------------------

    In the FY 2024 IPPS/LTCH PPS final rule, we explained that the 
MedPAR claims data now includes a field that identifies whether or not 
the claim includes expanded access use of immunotherapy. We stated that 
for the FY 2022 MedPAR claims data, this field identifies whether or 
not the claim includes condition code ZB, and for the FY 2023 MedPAR 
data and subsequent years, this field will identify whether or not the 
claim includes condition code 90. We further noted that the MedPAR 
files now also include a variable that indicates whether the claim 
includes the payer-only condition code ``ZC'', which identifies a case 
involving the clinical trial of a different product where the CAR T-
cell, non-CAR T-cell, or other immunotherapy product is purchased in 
the usual manner.
    Accordingly, and as discussed further in the FY 2024 IPPS/LTCH PPS 
final rule, we finalized two modifications to our methodology for 
identifying clinical trial claims and expanded access use claims in MS-
DRG 018 (88 FR 58791). First, we finalized to exclude claims with the 
presence of condition code ``90'' (or, for FY 2024 ratesetting, which 
was based on the FY 2022 MedPAR data, the presence of condition code 
``ZB'') and claims that contain ICD-10-CM diagnosis code Z00.6 without 
payer-only code ``ZC'' that group to MS-DRG 018 when calculating the 
average cost for MS-DRG 018. Second, we finalized to no longer use the 
proxy of standardized drug charges of less than $373,000 to identify 
clinical trial claims and expanded access use cases when calculating 
the average cost for MS-DRG 018. Accordingly, we finalized that in 
calculating the relative weight for MS-DRG 018 for FY 2024, only those 
claims that group to MS-DRG 018 that (1) contain ICD-10-CM diagnosis 
code Z00.6 and do not include payer-only code ``ZC'' or (2) contain 
condition code ``ZB'' (or, for subsequent fiscal years, condition code 
``90'') would be excluded from the calculation of the average cost for 
MS-DRG 018. Consistent with this, we also finalized modifications to 
our calculation of the adjustment to account for the CAR T-cell therapy 
cases identified as clinical trial cases in calculating the national 
average standardized cost per case that is used to calculate the 
relative weights for all MS-DRGs. We refer readers to the FY 2024 IPPS/
LTCH PPS final rule for further discussion of these modifications (88 
FR 58791).
    In the FY 2025 IPPS/LTCH PPS proposed rule, we proposed to continue 
to use our methodology as modified in the FY 2024 IPPS/LTCH PPS final 
rule for identifying clinical trial claims and expanded access use 
claims in MS-DRG 018. First, we exclude claims with the presence of 
condition code ``90'' and claims that contain ICD-10-CM diagnosis code 
Z00.6 without payer-only code ``ZC'' that group to MS-DRG 018 when 
calculating the average cost for MS-DRG 018. Second, we no longer use 
the proxy of standardized drug charges of less than $373,000 to 
identify clinical trial claims and expanded access use cases when 
calculating the average cost for MS-DRG 018. Accordingly, we proposed 
that in calculating the relative weight for MS-DRG 018 for FY 2025, 
only those claims that group to MS-DRG 018 that (1) contain ICD-10-CM 
diagnosis code Z00.6 and do not include payer-only code ``ZC'' or (2) 
contain condition code ``90'' would be excluded from the calculation of 
the average cost for MS-DRG 018.
    We also proposed to continue to use the methodology as modified in 
the FY 2024 IPPS/LTCH PPS final rule to calculate the adjustment to 
account for the CAR T-cell therapy cases identified as clinical trial 
cases in calculating the national average standardized cost per case 
that is used to calculate the relative weights for all MS-DRGs:
     Calculate the average cost for cases assigned to MS-DRG 
018 that either (a) contain ICD-10-CM diagnosis code Z00.6 and do not 
contain condition code ``ZC'' or (b) contain condition code ``90''.
     Calculate the average cost for all other cases assigned to 
MS-DRG 018.
     Calculate an adjustor by dividing the average cost 
calculated in step 1 by the average cost calculated in step 2.
     Apply the adjustor calculated in step 3 to the cases 
identified in step 1 as applicable clinical trial or expanded access 
use cases, then add this adjusted case count to the non-clinical trial 
case count prior to calculating the average cost across all MS-DRGs.
    Under our proposal to continue to apply this methodology, based on 
the December 2023 update of the FY 2023 MedPAR file used for the 
proposed rule, we estimated that the average costs of cases assigned to 
MS-DRG 018 that are identified as clinical trial cases ($116,831) were 
34 percent of the average costs of the cases assigned to MS-DRG 018 
that are identified as non-clinical trial cases ($342,684). 
Accordingly, as we did for FY 2024, we proposed to adjust the transfer-
adjusted case count for MS-DRG 018 by applying the proposed adjustor of 
0.34 to the applicable clinical trial and expanded access use 
immunotherapy cases, and to use this adjusted case count for MS-DRG 018 
in calculating the national average cost per case, which is used in the 
calculation of the relative weights. Therefore, in calculating the 
national average cost per case for purposes of the proposed rule, each 
case identified as an applicable clinical trial or expanded access use 
immunotherapy case was adjusted by 0.34. As we did for FY 2024, we 
applied this same adjustor for the applicable cases that group to MS-
DRG 018 for purposes of budget neutrality and outlier simulations. We 
also proposed to update the value of the adjustor based on more recent 
data for the final rule.
    Comment: A few commenters supported the proposal to continue to 
exclude CAR T-cell therapy clinical trial cases from the calculation of 
the relative weight for MS-DRG 018. A commenter stated that the 
proposal for CAR T-cell therapy payment is largely responsive to 
previous requests for a permanent reimbursement solution for CAR T-cell 
therapy in a manner that reflects the cost of care.
    Response: We thank commenters for their support and input on the 
proposed methodology.
    Comment: Some commenters expressed concern that CMS no longer uses 
the $373,000 threshold to identify clinical trial cases. The commenters 
stated that a small number of claims are still coded incorrectly, and 
that this has the potential to reduce the relative weight for MS-DRG 
018 due to the presence of lower cost cases that should be flagged as 
clinical trial cases. Another commenter expressed concern that CMS' 
methodology may not be accurately capturing some cases where the CAR T 
product is not purchased in the usual manner, such as when the patient 
receives the product as part of a patient assistance program. This 
commenter suggested that CMS establish a mechanism for hospitals to 
report when a product is obtained at no cost for reasons other than 
participation in a clinical trial or expanded access use. A commenter 
requested that CMS provide the proportion of cases with drug charges 
below $373,000 that do not have a clinical trial or expanded access use 
code.
    Response: As we stated in the FY 2024 IPPS/LTCH PPS final rule, 
while there continues to be a small percentage of claims that report 
standardized drug

[[Page 69113]]

charges of less than $373,000 and do not report ICD-10-CM code Z00.6, 
we do not believe it is necessary to continue the use of the proxy 
until the number of cases reaches zero. With respect to the commenter's 
suggestion regarding a mechanism for reporting products obtained at no 
cost for reasons other than participation in a clinical trial or 
expanded access use, we may consider this in the future. With respect 
to the commenter who requested that CMS provide the proportion of cases 
with drug charges below $373,000, that proportion is 4%, which is the 
same percentage as last year. We note that information on obtaining the 
MedPAR Limited Data Set is available on the CMS website, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/MEDPARLDSHospitalNational.
    After consideration of the public comments we received, we are 
finalizing our proposals without modifications regarding the 
calculation of the relative weight for MS-DRG 018. Applying this 
finalized methodology, based on the March 2024 update of the FY 2023 
MedPAR file used for this final rule, we estimated that the average 
costs of cases assigned to MS-DRG 018 that are identified as clinical 
trial cases ($111,211) were 33 percent of the average costs of the 
cases assigned to MS-DRG 018 that are identified as non-clinical trial 
cases ($334,119). Accordingly, as we did for FY 2024, we are finalizing 
our proposal to adjust the transfer-adjusted case count for MS-DRG 018 
by applying the adjustor of 0.33 to the applicable clinical trial and 
expanded access use immunotherapy cases, and to use this adjusted case 
count for MS-DRG 018 in calculating the national average cost per case, 
which is used in the calculation of the relative weights. Therefore, in 
calculating the national average cost per case for purposes of this 
final rule, each case identified as an applicable clinical trial or 
expanded access use immunotherapy case was adjusted by 0.33. As we did 
for FY 2024, we are applying this same adjustor for the applicable 
cases that group to MS-DRG 018 for purposes of budget neutrality and 
outlier simulations.
d. Cap for Relative Weight Reductions
    In the FY 2023 IPPS/LTCH PPS final rule, we finalized a permanent 
10-percent cap on the reduction in an MS-DRG's relative weight in a 
given fiscal year, beginning in FY 2023. We also finalized a budget 
neutrality adjustment to the standardized amount for all hospitals to 
ensure that application of the permanent 10-percent cap does not result 
in an increase or decrease of estimated aggregate payments. We refer 
the reader to the FY 2023 IPPS/LTCH PPS final rule for further 
discussion of this policy. In the Addendum to this IPPS/LTCH PPS final 
rule, we present the budget neutrality adjustment for reclassification 
and recalibration of the FY 2025 MS-DRG relative weights with 
application of this cap. We are also making available on the CMS 
website a supplemental file demonstrating the application of the 
permanent 10 percent cap for FY 2025. For a further discussion of the 
budget neutrality adjustment for FY 2025, we refer readers to the 
Addendum of this final rule.
3. Development of National Average Cost-to-Charge Ratios (CCRs)
    We developed the national average CCRs as follows:
    Using the FY 2022 cost report data, we removed CAHs, Indian Health 
Service hospitals, all-inclusive rate hospitals, and cost reports that 
represented time periods of less than 1 year (365 days). We included 
hospitals located in Maryland because we include their charges in our 
claims database. Then we created CCRs for each provider for each cost 
center (see the supplemental data file for line items used in the 
calculations) and removed any CCRs that were greater than 10 or less 
than 0.01. We normalized the departmental CCRs by dividing the CCR for 
each department by the total CCR for the hospital for the purpose of 
trimming the data. Then we took the logs of the normalized cost center 
CCRs and removed any cost center CCRs where the log of the cost center 
CCR was greater or less than the mean log plus/minus 3 times the 
standard deviation for the log of that cost center CCR. Once the cost 
report data were trimmed, we calculated a Medicare-specific CCR. The 
Medicare-specific CCR was determined by taking the Medicare charges for 
each line item from Worksheet D-3 and deriving the Medicare-specific 
costs by applying the hospital-specific departmental CCRs to the 
Medicare-specific charges for each line item from Worksheet D-3. Once 
each hospital's Medicare-specific costs were established, we summed the 
total Medicare-specific costs and divided by the sum of the total 
Medicare-specific charges to produce national average, charge-weighted 
CCRs.
    After we multiplied the total charges for each MS-DRG in each of 
the 19 cost centers by the corresponding national average CCR, we 
summed the 19 ``costs'' across each MS-DRG to produce a total 
standardized cost for the MS-DRG. The average standardized cost for 
each MS-DRG was then computed as the total standardized cost for the 
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The 
average cost for each MS-DRG was then divided by the national average 
standardized cost per case to determine the relative weight. The final 
FY 2025 cost-based relative weights were then normalized by an 
adjustment factor of 1.92336 so that the average case weight after 
recalibration was equal to the average case weight before 
recalibration. The normalization adjustment is intended to ensure that 
recalibration by itself neither increases nor decreases total payments 
under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act. 
We then applied the permanent 10-percent cap on the reduction in a MS-
DRG's relative weight in a given fiscal year; specifically for those 
MS-DRGs for which the relative weight otherwise would have declined by 
more than 10 percent from the FY 2024 relative weight, we set the final 
FY 2025 relative weight equal to 90 percent of the FY 2024 relative 
weight. The final relative weights for FY 2025 as set forth in Table 5 
associated with this final rule and available on the CMS website at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS reflect the application of this cap.
    The 19 national average CCRs for FY 2025 are as follows:

[[Page 69114]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.095

    Since FY 2009, the relative weights have been based on 100 percent 
cost weights based on our MS-DRG grouping system.
    When we recalibrated the DRG weights for previous years, we set a 
threshold of 10 cases as the minimum number of cases required to 
compute a reasonable weight. We proposed to use that same case 
threshold in recalibrating the proposed MS-DRG relative weights for FY 
2025. Using data from the FY 2023 MedPAR file, there were 8 MS-DRGs 
that contain fewer than 10 cases. For FY 2025, because we do not have 
sufficient MedPAR data to set accurate and stable cost relative weights 
for these low-volume MS-DRGs, we proposed to compute relative weights 
for the low-volume MS-DRGs by adjusting their final FY 2024 relative 
weights by the percentage change in the average weight of the cases in 
other MS-DRGs from FY 2024 to FY 2025. The crosswalk table is as 
follows.

[[Page 69115]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.096

    Comment: A commenter requested that CMS consider if there are 
mechanisms to reform the role of CCRs in the reimbursement methodology 
to prevent differential hospital charge practices from skewing 
reimbursement rates for hospitals--such as either eliminating the role 
of CCRs or creating a bridge or other CCR for gene and cell therapies 
that it stated could be used for more accurate rate-setting in the 
future. Another commenter requested that CMS utilize the ``other'' CCR 
for CAR T-cell therapy product charges as a strategy to address charge 
compression starting in FY 2025 and until CMS proposes an alternative 
payment solution.
    Response: We continue to believe it would not be appropriate to 
utilize the ``other'' CCR for CAR T-cell therapy product charges 
associated with revenue code 0891. Under our cost-based weight 
methodology, many revenue codes are mapped to each of the 19 cost 
centers. We believe that relative to those 19 cost centers, cellular 
therapies are most similar to drugs given that hospitals have generally 
calibrated their CAR T-cell therapy product charges to the ``drugs'' 
cost center CCR. To provide additional clarity, we have renamed the 
``drugs'' cost center to the ``drugs and cellular therapies'' cost 
center. We may consider changes to the CCRs used for gene and cellular 
therapies in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposals without modification.

E. Add-On Payments for New Services and Technologies for FY 2025

1. Background
    Effective for discharges beginning on or after October 1, 2001, 
section 1886(d)(5)(K)(i) of the Act requires the Secretary to establish 
(after notice and opportunity for public comment) a mechanism to 
recognize the costs of new medical services and technologies (sometimes 
collectively referred to in this section as ``new technologies'') under 
the IPPS. Section 1886(d)(5)(K)(vi) of the Act specifies that a medical 
service or technology will be considered new if it meets criteria 
established by the Secretary after notice and opportunity for public 
comment. Section 1886(d)(5)(K)(ii)(I) of the Act specifies that a new 
medical service or technology may be considered for new technology add-
on payment if, based on the estimated costs incurred with respect to 
discharges involving such service or technology, the DRG prospective 
payment rate otherwise applicable to such discharges under this 
subsection is inadequate. The regulations at 42 CFR 412.87 implement 
these provisions and Sec.  412.87(b) specifies three criteria for a new 
medical service or technology to receive the additional payment: (1) 
The medical service or technology must be new; (2) the medical service 
or technology must be costly such that the DRG rate otherwise 
applicable to discharges involving the medical service or technology is 
determined to be inadequate; and (3) the service or technology must 
demonstrate a substantial clinical improvement over existing services 
or technologies. In addition, certain transformative new devices and 
antimicrobial products may qualify under an alternative inpatient new 
technology add-on payment pathway, as set forth in the regulations at 
Sec.  412.87(c) and (d).
    We note that section 1886(d)(5)(K)(i) of the Act requires that the 
Secretary establish a mechanism to recognize the costs of new medical 
services and technologies under the payment system established under 
that subsection, which establishes the system for paying for the 
operating costs of inpatient hospital services. The system of payment 
for capital costs is established under section 1886(g) of the Act. 
Therefore, as discussed in prior rulemaking (72 FR 47307 through 
47308), we do not include capital costs in the add-on payments for a 
new medical service or technology or make

[[Page 69116]]

new technology add-on payments under the IPPS for capital-related 
costs.
    In this rule, we highlight some of the major statutory and 
regulatory provisions relevant to the new technology add-on payment 
criteria, as well as other information. For further discussion on the 
new technology add-on payment criteria, we refer readers to the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51572 through 51574), the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42288 through 42300), and the FY 2021 IPPS/
LTCH PPS final rule (85 FR 58736 through 58742).
a. New Technology Add-On Payment Criteria
(1) Newness Criterion
    Under the first criterion, as reflected in Sec.  412.87(b)(2), a 
specific medical service or technology will no longer be considered 
``new'' for purposes of new medical service or technology add-on 
payments after CMS has recalibrated the MS-DRGs, based on available 
data, to reflect the cost of the technology. We note that we do not 
consider a service or technology to be new if it is substantially 
similar to one or more existing technologies. That is, even if a 
medical product receives a new FDA approval or clearance, it may not 
necessarily be considered ``new'' for purposes of new technology add-on 
payments if it is ``substantially similar'' to another medical product 
that was approved or cleared by FDA and has been on the market for more 
than 2 to 3 years. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 
FR 43813 through 43814), we established criteria for evaluating whether 
a new technology is substantially similar to an existing technology, 
specifically whether: (1) a product uses the same or a similar 
mechanism of action to achieve a therapeutic outcome; (2) a product is 
assigned to the same or a different MS-DRG; and (3) the new use of the 
technology involves the treatment of the same or similar type of 
disease and the same or similar patient population. If a technology 
meets all three of these criteria, it would be considered substantially 
similar to an existing technology and would not be considered ``new'' 
for purposes of new technology add-on payments. For a detailed 
discussion of the criteria for substantial similarity, we refer readers 
to the FY 2006 IPPS final rule (70 FR 47351 through 47352) and the FY 
2010 IPPS/LTCH PPS final rule (74 FR 43813 through 43814).
(2) Cost Criterion
    Under the second criterion, Sec.  412.87(b)(3) further provides 
that, to be eligible for the add-on payment for new medical services or 
technologies, the MS-DRG prospective payment rate otherwise applicable 
to discharges involving the new medical service or technology must be 
assessed for adequacy. Under the cost criterion, consistent with the 
formula specified in section 1886(d)(5)(K)(ii)(I) of the Act, to assess 
the adequacy of payment for a new technology paid under the applicable 
MS-DRG prospective payment rate, we evaluate whether the charges of the 
cases involving a new medical service or technology will exceed a 
threshold amount that is the lesser of 75 percent of the standardized 
amount (increased to reflect the difference between cost and charges) 
or 75 percent of one standard deviation beyond the geometric mean 
standardized charge for all cases in the MS-DRG to which the new 
medical service or technology is assigned (or the case-weighted average 
of all relevant MS-DRGs if the new medical service or technology occurs 
in many different MS-DRGs). The MS-DRG threshold amounts generally used 
in evaluating new technology add-on payment applications for FY 2025 
are presented in a data file that is available, along with the other 
data files associated with the FY 2024 IPPS/LTCH PPS final rule and 
correction notification, on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.
    We note that, under the policy finalized in the FY 2021 IPPS/LTCH 
PPS final rule (85 FR 58603 through 58605), beginning with FY 2022, we 
use the proposed threshold values associated with the proposed rule for 
that fiscal year to evaluate the cost criterion for all applications 
for new technology add-on payments and previously approved technologies 
that may continue to receive new technology add-on payments, if those 
technologies would be assigned to a proposed new MS-DRG for that same 
fiscal year.
    As finalized in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41275), 
beginning with FY 2020, we include the thresholds applicable to the 
next fiscal year (previously included in Table 10 of the annual IPPS/
LTCH PPS proposed and final rules) in the data files associated with 
the prior fiscal year. Accordingly, the final thresholds for 
applications for new technology add-on payments for FY 2026 are 
presented in a data file that is available on the CMS website, along 
with the other data files associated with this FY 2025 final rule, by 
clicking on the FY 2025 IPPS Final Rule Home Page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.
    In the September 7, 2001 final rule that established the new 
technology add-on payment regulations (66 FR 46917), we discussed that 
applicants should submit a significant sample of data to demonstrate 
that the medical service or technology meets the high-cost threshold. 
Specifically, applicants should submit a sample of sufficient size to 
enable us to undertake an initial validation and analysis of the data. 
We also discussed in the September 7, 2001 final rule (66 FR 46917) the 
issue of whether the Health Insurance Portability and Accountability 
Act (HIPAA) Privacy Rule at 45 CFR parts 160 and 164, subparts A and E, 
applies to claims information that providers submit with applications 
for new medical service or technology add-on payments. We refer readers 
to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51573) for further 
information on this issue.
(3) Substantial Clinical Improvement Criterion
    Under the third criterion at Sec.  412.87(b)(1), a medical service 
or technology must represent an advance that substantially improves, 
relative to technologies previously available, the diagnosis or 
treatment of Medicare beneficiaries. In the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42288 through 42292), we prospectively codified in our 
regulations at Sec.  412.87(b) the following aspects of how we evaluate 
substantial clinical improvement for purposes of new technology add-on 
payments under the IPPS:
     The totality of the circumstances is considered when 
making a determination that a new medical service or technology 
represents an advance that substantially improves, relative to services 
or technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries.
     A determination that a new medical service or technology 
represents an advance that substantially improves, relative to services 
or technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries means--
    ++ The new medical service or technology offers a treatment option 
for a patient population unresponsive to, or ineligible for, currently 
available treatments;

[[Page 69117]]

    ++ The new medical service or technology offers the ability to 
diagnose a medical condition in a patient population where that medical 
condition is currently undetectable, or offers the ability to diagnose 
a medical condition earlier in a patient population than allowed by 
currently available methods, and there must also be evidence that use 
of the new medical service or technology to make a diagnosis affects 
the management of the patient.
    ++ The use of the new medical service or technology significantly 
improves clinical outcomes relative to services or technologies 
previously available as demonstrated by one or more of the following: a 
reduction in at least one clinically significant adverse event, 
including a reduction in mortality or a clinically significant 
complication; a decreased rate of at least one subsequent diagnostic or 
therapeutic intervention; a decreased number of future hospitalizations 
or physician visits; a more rapid beneficial resolution of the disease 
process treatment including, but not limited to, a reduced length of 
stay or recovery time; an improvement in one or more activities of 
daily living; an improved quality of life; or, a demonstrated greater 
medication adherence or compliance; or
    ++ The totality of the circumstances otherwise demonstrates that 
the new medical service or technology substantially improves, relative 
to technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries.
     Evidence from the following published or unpublished 
information sources from within the United States or elsewhere may be 
sufficient to establish that a new medical service or technology 
represents an advance that substantially improves, relative to services 
or technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries: clinical trials, peer reviewed journal 
articles; study results; meta-analyses; consensus statements; white 
papers; patient surveys; case studies; reports; systematic literature 
reviews; letters from major healthcare associations; editorials and 
letters to the editor; and public comments. Other appropriate 
information sources may be considered.
     The medical condition diagnosed or treated by the new 
medical service or technology may have a low prevalence among Medicare 
beneficiaries.
     The new medical service or technology may represent an 
advance that substantially improves, relative to services or 
technologies previously available, the diagnosis or treatment of a 
subpopulation of patients with the medical condition diagnosed or 
treated by the new medical service or technology.
    We refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42288 through 42292) for additional discussion of the evaluation of 
substantial clinical improvement for purposes of new technology add-on 
payments under the IPPS.
    We note, consistent with the discussion in the FY 2003 IPPS final 
rule (67 FR 50015), that while FDA has regulatory responsibility for 
decisions related to marketing authorization (for example, approval, 
clearance, etc.), we do not rely upon FDA criteria in our evaluation of 
substantial clinical improvement for purposes of determining what 
services and technologies qualify for new technology add-on payments 
under Medicare. This criterion does not depend on the standard of 
safety and effectiveness on which FDA relies but on a demonstration of 
substantial clinical improvement in the Medicare population.
b. Alternative Inpatient New Technology Add-On Payment Pathway
    Beginning with applications for FY 2021 new technology add-on 
payments, under the regulations at Sec.  412.87(c), a medical device 
that is part of FDA's Breakthrough Devices Program may qualify for the 
new technology add-on payment under an alternative pathway. 
Additionally, under the regulations at Sec.  412.87(d) for certain 
antimicrobial products, beginning with FY 2021, a drug that is 
designated by FDA as a Qualified Infectious Disease Product (QIDP), 
and, beginning with FY 2022, a drug that is approved by FDA under the 
Limited Population Pathway for Antibacterial and Antifungal Drugs 
(LPAD), may also qualify for the new technology add-on payment under an 
alternative pathway. We refer the reader to the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42292 through 42297) and the FY 2021 IPPS/LTCH PPS 
final rule (85 FR 58737 through 58739) for further discussion on this 
policy. We note that CMS reviews the application based on the 
information provided by the applicant only under the alternative 
pathway specified by the applicant at the time of application 
submission. To receive approval for the new technology add-on payment 
under that alternative pathway, the technology must have the applicable 
FDA designation and meet all other requirements in the regulations in 
Sec.  412.87(c) and (d), as applicable.
(1) Alternative Pathway for Certain Transformative New Devices
    For applications received for new technology add-on payments for FY 
2021 and subsequent fiscal years, a medical device designated under 
FDA's Breakthrough Devices Program that has received FDA marketing 
authorization will be considered not substantially similar to an 
existing technology for purposes of the new technology add-on payment 
under the IPPS, and will not need to meet the requirement under Sec.  
412.87(b)(1) that it represent an advance that substantially improves, 
relative to technologies previously available, the diagnosis or 
treatment of Medicare beneficiaries. Under this alternative pathway, a 
medical device that has received FDA marketing authorization (that is, 
has been approved or cleared by, or had a De Novo classification 
request granted by, FDA) as a Breakthrough Device, for the indication 
covered by the Breakthrough Device designation, will need to meet the 
requirements of Sec.  412.87(c). We note that in the FY 2021 IPPS/LTCH 
PPS final rule (85 FR 58734 through 58736), we clarified our policy 
that a new medical device under this alternative pathway must receive 
marketing authorization for the indication covered by the Breakthrough 
Devices Program designation. We refer the reader to the FY 2021 IPPS/
LTCH PPS final rule (85 FR 58734 through 58736) for further discussion 
regarding this clarification.
(2) Alternative Pathway for Certain Antimicrobial Products
    For applications received for new technology add-on payments for 
certain antimicrobial products, beginning with FY 2021, if a technology 
is designated by FDA as a QIDP and received FDA marketing 
authorization, and, beginning with FY 2022, if a drug is approved under 
FDA's LPAD pathway and used for the indication approved under the LPAD 
pathway, it will be considered not substantially similar to an existing 
technology for purposes of new technology add-on payments and will not 
need to meet the requirement that it represent an advance that 
substantially improves, relative to technologies previously available, 
the diagnosis or treatment of Medicare beneficiaries. Under this 
alternative pathway for QIDPs and LPADs, a medical product that has 
received FDA marketing authorization and is designated by FDA as a QIDP 
or approved under the LPAD pathway will need to meet the requirements 
of Sec.  412.87(d). We refer the reader to the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42292 through

[[Page 69118]]

42297) and FY 2021 IPPS/LTCH PPS final rule (85 FR 58737 through 58739) 
for further discussion on this policy.
    We note that, in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58737 
through 58739), we clarified that a new medical product seeking 
approval for the new technology add-on payment under the alternative 
pathway for QIDPs must receive FDA marketing authorization for the 
indication covered by the QIDP designation. We also finalized our 
policy to expand our alternative new technology add-on payment pathway 
for certain antimicrobial products to include products approved under 
the LPAD pathway and used for the indication approved under the LPAD 
pathway.
c. Additional Payment for New Medical Service or Technology
    The new medical service or technology add-on payment policy under 
the IPPS provides additional payments for cases with relatively high 
costs involving eligible new medical services or technologies, while 
preserving some of the incentives inherent under an average-based 
prospective payment system. The payment mechanism is based on the cost 
to hospitals for the new medical service or technology. As noted 
previously, we do not include capital costs in the add-on payments for 
a new medical service or technology or make new technology add-on 
payments under the IPPS for capital-related costs (72 FR 47307 through 
47308).
    For discharges occurring before October 1, 2019, under Sec.  
412.88, if the costs of the discharge (determined by applying operating 
cost-to-charge ratios (CCRs) as described in Sec.  412.84(h)) exceed 
the full DRG payment (including payments for IME and DSH, but excluding 
outlier payments), CMS made an add-on payment equal to the lesser of: 
(1) 50 percent of the costs of the new medical service or technology; 
or (2) 50 percent of the amount by which the costs of the case exceed 
the standard DRG payment.
    Beginning with discharges on or after October 1, 2019, for the 
reasons discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297 
through 42300), we finalized an increase in the new technology add-on 
payment percentage, as reflected at Sec.  412.88(a)(2)(ii). 
Specifically, for a new technology other than a medical product 
designated by FDA as a QIDP, beginning with discharges on or after 
October 1, 2019, if the costs of a discharge involving a new technology 
(determined by applying CCRs as described in Sec.  412.84(h)) exceed 
the full DRG payment (including payments for IME and DSH, but excluding 
outlier payments), Medicare will make an add-on payment equal to the 
lesser of: (1) 65 percent of the costs of the new medical service or 
technology; or (2) 65 percent of the amount by which the costs of the 
case exceed the standard DRG payment. For a new technology that is a 
medical product designated by FDA as a QIDP, beginning with discharges 
on or after October 1, 2019, if the costs of a discharge involving a 
new technology (determined by applying CCRs as described in Sec.  
412.84(h)) exceed the full DRG payment (including payments for IME and 
DSH, but excluding outlier payments), Medicare will make an add-on 
payment equal to the lesser of: (1) 75 percent of the costs of the new 
medical service or technology; or (2) 75 percent of the amount by which 
the costs of the case exceed the standard DRG payment. For a new 
technology that is a medical product approved under FDA's LPAD pathway, 
beginning with discharges on or after October 1, 2020, if the costs of 
a discharge involving a new technology (determined by applying CCRs as 
described in Sec.  412.84(h)) exceed the full DRG payment (including 
payments for IME and DSH, but excluding outlier payments), Medicare 
will make an add-on payment equal to the lesser of: (1) 75 percent of 
the costs of the new medical service or technology; or (2) 75 percent 
of the amount by which the costs of the case exceed the standard DRG 
payment. As set forth in Sec.  412.88(b)(2), unless the discharge 
qualifies for an outlier payment, the additional Medicare payment will 
be limited to the full MS-DRG payment plus 65 percent (or 75 percent 
for certain antimicrobial products (QIDPs and LPADs)) of the estimated 
costs of the new technology or medical service. We refer the reader to 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297 through 42300) for 
further discussion on the increase in the new technology add-on payment 
beginning with discharges on or after October 1, 2019.
    As discussed further in section II.E.10. of this final rule, we are 
finalizing our proposal that for certain gene therapies approved for 
new technology add-on payments in the FY 2025 IPPS/LTCH PPS final rule 
that are indicated and used specifically for the treatment of SCD, 
effective with discharges on or after October 1, 2024 and concluding at 
the end of the 2- to 3-year newness period for such therapy, if the 
costs of a discharge (determined by applying CCRs as described in Sec.  
412.84(h)) involving the use of such therapy for the treatment of SCD 
exceed the full DRG payment (including payments for IME and DSH, but 
excluding outlier payments), Medicare will make an add-on payment equal 
to the lesser of: (1) 75 percent of the costs of the new medical 
service or technology; or (2) 75 percent of the amount by which the 
costs of the case exceed the standard DRG payment. We note that these 
payment amounts would only apply to CasgevyTM (exagamglogene 
autotemcel) and LyfgeniaTM (lovotibeglogene autotemcel), 
when indicated and used specifically for the treatment of SCD, which 
CMS has determined in this FY 2025 IPPS/LTCH PPS final rule meet the 
criteria for approval for new technology add-on payment, as further 
discussed in section II.E.5. of this final rule.
    We note that, consistent with the prospective nature of the IPPS, 
we finalize the new technology add on payment amount for technologies 
approved or conditionally approved for new technology add-on payments 
in the final rule for each fiscal year and do not make mid-year changes 
to new technology add-on payment amounts. Updated cost information may 
be submitted and included in rulemaking to be considered for the 
following fiscal year.
    Section 503(d)(2) of the MMA (Pub. L. 108-173) provides that there 
shall be no reduction or adjustment in aggregate payments under the 
IPPS due to add-on payments for new medical services and technologies. 
Therefore, in accordance with section 503(d)(2) of the MMA, add-on 
payments for new medical services or technologies for FY 2005 and 
subsequent years have not been subjected to budget neutrality.
d. Evaluation of Eligibility Criteria for New Medical Service or 
Technology Applications
    In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we 
modified our regulation at Sec.  412.87 to codify our longstanding 
practice of how CMS evaluates the eligibility criteria for new medical 
service or technology add-on payment applications. That is, we first 
determine whether a medical service or technology meets the newness 
criterion, and only if so, do we then make a determination as to 
whether the technology meets the cost threshold and represents a 
substantial clinical improvement over existing medical services or 
technologies. We specified that all applicants for new technology add-
on payments must have FDA approval or clearance by July 1 of the year 
prior to the beginning of the fiscal year for which the application is 
being considered. In the FY 2021 IPPS/LTCH

[[Page 69119]]

PPS final rule, to more precisely describe the various types of FDA 
approvals, clearances and classifications that we consider under our 
new technology add-on payment policy, we finalized a technical 
clarification to the regulation to indicate that new technologies must 
receive FDA marketing authorization (such as pre-market approval (PMA); 
510(k) clearance; the granting of a De Novo classification request, or 
approval of a New Drug Application (NDA)) by July 1 of the year prior 
to the beginning of the fiscal year for which the application is being 
considered. Consistent with our longstanding policy, we consider FDA 
marketing authorization as representing that a product has received FDA 
approval or clearance when considering eligibility for the new 
technology add-on payment (85 FR 58742).
    Additionally, in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58739 
through 58742), we finalized our proposal to provide conditional 
approval for new technology add-on payment for a technology for which 
an application is submitted under the alternative pathway for certain 
antimicrobial products at Sec.  412.87(d) that does not receive FDA 
marketing authorization by July 1 prior to the particular fiscal year 
for which the applicant applied for new technology add-on payments, 
provided that the technology otherwise meets the applicable add-on 
payment criteria. Under this policy, cases involving eligible 
antimicrobial products would begin receiving the new technology add-on 
payment sooner, effective for discharges the quarter after the date of 
FDA marketing authorization, provided that the technology receives FDA 
marketing authorization before July 1 of the fiscal year for which the 
applicant applied for new technology add-on payments.
    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through 
58958), we finalized that, beginning with the new technology add-on 
payment applications for FY 2025, for technologies that are not already 
FDA market authorized for the indication that is the subject of the new 
technology add-on payment application, applicants must have a complete 
and active FDA market authorization request at the time of new 
technology add-on payment application submission and must provide 
documentation of FDA acceptance or filing to CMS at the time of 
application submission, consistent with the type of FDA marketing 
authorization application the applicant has submitted to FDA. See Sec.  
412.87(e) and further discussion in the FY 2024 IPPS/LTCH PPS final 
rule (88 FR 58948 through 58958). We also finalized that, beginning 
with FY 2025 applications, in order to be eligible for consideration 
for the new technology add-on payment for the upcoming fiscal year, an 
applicant for new technology add-on payments must have received FDA 
approval or clearance by May 1 (rather than July 1) of the year prior 
to the beginning of the fiscal year for which the application is being 
considered (except for an application that is submitted under the 
alternative pathway for certain antimicrobial products), as reflected 
at Sec. Sec.  412.87(f)(2) and (f)(3), as amended and redesignated in 
the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through 58958, 88 FR 
59331).
e. New Technology Liaisons
    Many interested parties (including device/biologic/drug developers 
or manufacturers, industry consultants, others) engage CMS for 
coverage, coding, and payment questions or concerns. In order to 
streamline engagement by centralizing the different innovation pathways 
within CMS including new technology add-on payments, CMS has 
established a team of new technology liaisons that can serve as an 
initial resource for interested parties. This team is available to 
assist with all of the following:
     Help to point interested parties to or provide information 
and resources where possible regarding process, requirements, and 
timelines.
     Coordinate and facilitate opportunities for interested 
parties to engage with various CMS components.
     Serve as a primary point of contact for interested parties 
and provide updates on developments where possible or appropriate.
    We receive many questions from parties interested in pursuing new 
technology add-on payments who may not be entirely familiar with 
working with CMS. While we encourage interested parties to first review 
our resources available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech, we know that there may 
be additional questions about the application process. Interested 
parties with further questions regarding Medicare's coverage, coding, 
and payment processes, and how they can navigate these processes, 
whether for new technology add-on payments or otherwise, should review 
the updated resource guide available at: https://www.cms.gov/medicare/coding-billing/guide-medical-technology-companies-other-interested-parties. Parties that would like to further discuss questions or 
concerns with CMS should contact the new technology liaison team at 
[email protected].
f. Application Information for New Medical Services or Technologies
    Applicants for add-on payments for new medical services or 
technologies for FY 2026 must submit a formal request, including a full 
description of the clinical applications of the medical service or 
technology and the results of any clinical evaluations demonstrating 
that the new medical service or technology represents a substantial 
clinical improvement (unless the application is under one of the 
alternative pathways as previously described), along with a significant 
sample of data to demonstrate that the medical service or technology 
meets the high-cost threshold. CMS will review the application based on 
the information provided by the applicant under the pathway specified 
by the applicant at the time of application submission. Complete 
application information, along with final deadlines for submitting a 
full application, will be posted as it becomes available on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html.
    To allow interested parties to identify the new medical services or 
technologies under review before the publication of the proposed rule 
for FY 2026, once the application deadline has closed, CMS will post on 
its website a list of the applications submitted, along with a brief 
description of each technology as provided by the applicant.
    As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48986 
through 48990), we finalized our proposal to publicly post online new 
technology add-on payment.
    Applications, including the completed application forms, certain 
related materials, and any additional updated application information 
submitted subsequent to the initial application submission (except 
certain volume, cost and other information identified by the applicant 
as confidential), beginning with the application cycle for FY 2024, at 
the time the proposed rule is published. We also finalized that with 
the exception of information included in a confidential information 
section of the application, cost and volume information, and materials 
identified by the applicant as copyrighted and/or not otherwise 
releasable to the public, the contents of the application and related 
materials may be posted publicly, and that we

[[Page 69120]]

will not post applications that are withdrawn prior to publication of 
the proposed rule. We refer the reader to the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 48986 through 48990) for further information 
regarding this policy.
    We note that the burden associated with this information collection 
requirement is the time and effort required to collect and submit the 
data in the formal request for add-on payments for new medical services 
and technologies to CMS. The aforementioned burden is subject to the 
PRA and approved under OMB control number 0938-1347 and has an 
expiration date of December 31, 2026.
2. Public Input Before Publication of a Notice of Rulemaking on Add-On 
Payments
    Section 1886(d)(5)(K)(viii) of the Act, as amended by section 
503(b)(2) of the MMA, provides for a mechanism for public input before 
publication of a notice of proposed rulemaking regarding whether a 
medical service or technology represents a substantial clinical 
improvement. The process for evaluating new medical service and 
technology applications requires the Secretary to do all of the 
following:
     Provide, before publication of a proposed rule, for public 
input regarding whether a new service or technology represents an 
advance in medical technology that substantially improves the diagnosis 
or treatment of Medicare beneficiaries.
     Make public and periodically update a list of the services 
and technologies for which applications for add-on payments are 
pending.
     Accept comments, recommendations, and data from the public 
regarding whether a service or technology represents a substantial 
clinical improvement.
     Provide, before publication of a proposed rule, for a 
meeting at which organizations representing hospitals, physicians, 
manufacturers, and any other interested party may present comments, 
recommendations, and data regarding whether a new medical service or 
technology represents a substantial clinical improvement to the 
clinical staff of CMS.
    In order to provide an opportunity for public input regarding add-
on payments for new medical services and technologies for FY 2025 prior 
to publication of the FY 2025 IPPS/LTCH PPS proposed rule, we published 
a notice in the Federal Register on September 28, 2023 (88 FR 66850) 
and held a virtual town hall meeting on December 13, 2023. In the 
announcement notice for the meeting, we stated that the opinions and 
presentations provided during the meeting would assist us in our 
evaluations of applications by allowing public discussion of the 
substantial clinical improvement criterion for the FY 2025 new medical 
service and technology add-on payment applications before the 
publication of the FY 2025 IPPS/LTCH IPPS proposed rule.
    Approximately 130 individuals registered to attend the virtual town 
hall meeting. We posted the recordings of the virtual town hall on the 
CMS web page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech. We considered each applicant's 
presentation made at the town hall meeting, as well as written comments 
received by the December 18, 2023 deadline, in our evaluation of the 
new technology add-on payment applications for FY 2025 in the 
development of the FY 2025 IPPS/LTCH PPS proposed rule. In response to 
the published notice and the December 13, 2023 New Technology Town Hall 
meeting, we received written comments regarding the applications for FY 
2025 new technology add on payments. As explained earlier and in the 
Federal Register notice announcing the New Technology Town Hall meeting 
(88 FR 66850 through 66853), the purpose of the meeting was 
specifically to discuss the substantial clinical improvement criterion 
with regard to pending new technology add-on payment applications for 
FY 2025. Therefore, we did not summarize any written comments in the 
proposed rule that were unrelated to the substantial clinical 
improvement criterion. In section II.E.5. of the preamble of the 
proposed rule, we summarized comments regarding individual 
applications, or, if applicable, indicated that there were no comments 
received in response to the New Technology Town Hall meeting notice or 
New Technology Town Hall meeting, at the end of each discussion of the 
individual applications.
3. ICD-10-PCS Section ``X'' Codes for Certain New Medical Services and 
Technologies
    As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49434), 
the ICD-10-PCS includes a new section containing the new Section ``X'' 
codes, which began being used with discharges occurring on or after 
October 1, 2015. Decisions regarding changes to ICD-10-PCS Section 
``X'' codes will be handled in the same manner as the decisions for all 
of the other ICD-10-PCS code changes. That is, proposals to create, 
delete, or revise Section ``X'' codes under the ICD-10-PCS structure 
will be referred to the ICD-10 Coordination and Maintenance Committee. 
In addition, several of the new medical services and technologies that 
have been, or may be, approved for new technology add-on payments may 
now, and in the future, be assigned a Section ``X'' code within the 
structure of the ICD-10-PCS. We posted ICD-10-PCS Guidelines on the CMS 
website at: https://www.cms.gov/Medicare/Coding/ICD10, including 
guidelines for ICD-10-PCS Section ``X'' codes. We encourage providers 
to view the material provided on ICD-10-PCS Section ``X'' codes.
4. FY 2025 Status of Technologies Receiving New Technology Add-On 
Payments for FY 2024
    In this section of the final rule, we discuss the FY 2025 status of 
31 technologies approved for FY 2024 new technology add-on payments, as 
set forth in the tables that follow. In the proposed rule, we presented 
our proposals to continue the new technology add-on payments for FY 
2025 for those technologies that were approved for the new technology 
add-on payment for FY 2024, and which would still be considered ``new'' 
for purposes of new technology add-on payments for FY 2025. We also 
presented our proposals to discontinue new technology add-on payments 
for FY 2025 for those technologies that were approved for the new 
technology add-on payment for FY 2024, and which would no longer be 
considered ``new'' for purposes of new technology add-on payments for 
FY 2025.
    Additionally, we noted that we conditionally approved 
DefenCath[supreg] (taurolidine/heparin) for FY 2024 new technology add-
on payments under the alternative pathway for certain antimicrobial 
products (88 FR 58942 through 58944), subject to the technology 
receiving FDA marketing authorization by July 1, 2024. 
DefenCath[supreg] (taurolidine/heparin) received FDA marketing 
authorization on November 15, 2023, and was eligible to receive new 
technology add-on payments in FY 2024 beginning with discharges on or 
after January 1, 2024. As DefenCath[supreg] (taurolidine/heparin) 
received FDA marketing authorization prior to July 1, 2024, and was 
approved for new technology add-on payments in FY 2024, we proposed and 
are finalizing to continue making new technology add-on payments for 
DefenCath[supreg] for FY 2025.
    Our policy is that a medical service or technology may continue to 
be

[[Page 69121]]

considered ``new'' for purposes of new technology add-on payments 
within 2 or 3 years after the point at which data begin to become 
available reflecting the inpatient hospital code assigned to the new 
service or technology. Our practice has been to begin and end new 
technology add-on payments on the basis of a fiscal year, and we have 
generally followed a guideline that uses a 6-month window before and 
after the start of the fiscal year to determine whether to extend the 
new technology add-on payment for an additional fiscal year. In 
general, we extend new technology add-on payments for an additional 
year only if the 3-year anniversary date of the product's entry onto 
the U.S. market occurs in the latter half of the fiscal year (70 FR 
47362).
    In the proposed rule, we provided a table listing the technologies 
for which we proposed to continue making new technology add-on payments 
for FY 2025 because they were still considered ``new'' for purposes of 
new technology add-on payments. This table also presented the newness 
start date, new technology add-on payment start date, 3-year 
anniversary date of the product's entry onto the U.S. market, relevant 
final rule citations from prior fiscal years, proposed maximum add-on 
payment amount, and coding assignments for each technology. We referred 
readers to the cited final rules in the following table for a complete 
discussion of the new technology add-on payment application, coding, 
and payment amount for these technologies, including the applicable 
indications and discussion of the newness start date.
    We invited public comments on our proposals to continue new 
technology add-on payments for FY 2025 for the technologies listed in 
Table II.E.-01 of the proposed rule.
    Comment: We received multiple comments in support of our proposed 
continuation of new technology add-on payments for FY 2025 for those 
technologies that were approved for the new technology add-on payment 
for FY 2024, and which would still be considered ``new'' for purposes 
of new technology add-on payments for FY 2025.
    Response: We appreciate the support of the commenters.
    Comment: A commenter restated a comment it made in response to 
previous proposed rules that requiring a manufacturer to submit 
information rebutting a presumption that the date of first availability 
is the date of FDA marketing authorization adds unnecessary burden and 
complexity to the new technology add-on payment application and review 
process. The commenter further stated that CMS did not appear to have 
applied this policy consistently and that it has defaulted to the FDA 
approval date despite other reasons being provided by applicants 
regarding the first date of commercial availability. The commenter 
believed that a more efficient and appropriate policy would be for the 
newness period to begin with the date of the first claim, which it 
stated is consistent with the definition of newness used in determining 
the period of eligibility for Transitional Pass-through status in the 
Hospital Outpatient Prospective Payment System (OPPS).
    Response: We thank the commenter for its feedback. As we discussed 
in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45136), regarding the 
commenter's belief that beginning the newness period on the date of 
first claim would be a more efficient and appropriate policy and is 
consistent with the definition of newness used in determining the 
period of eligibility for Transitional Pass-through status in OPPS, we 
note that ``newness'' for the purposes of the OPPS pass-through payment 
is separate and distinct from ``newness'' for the purposes of the IPPS 
new technology add-on payment. We note that ``newness'' for purposes of 
the OPPS pass-through payment refers to a drug, biological, or device's 
eligibility for pass-through payment status. In particular, under Sec.  
419.64(a), for a drug or biological's eligibility for OPPS pass-through 
payment (subject to certain exceptions), ``newness'' means that the 
drug or biological was first payable as an outpatient hospital service 
after December 31, 1996. Under Sec.  419.66(b), for a device's 
eligibility for OPPS pass-through payment, ``newness'' means that CMS 
received the applicant's pass-through application within 3 years from 
the date of the initial FDA marketing authorization, unless there is a 
documented, verifiable delay in U.S. market availability after FDA 
marketing authorization is granted, in which case CMS will consider the 
pass-through payment application if it is submitted within 3 years from 
the date of market availability for the device. However, it appears the 
commenter is referring not to ``newness'' in terms of eligibility for 
OPPS pass-through status, but rather to the limited two-to-three-year 
period of pass-through payment. Under Sec. Sec.  419.64(c)(2) and 
419.66(g), this pass-through payment period begins on the date on which 
CMS makes its first pass-through payment for a drug, biological, or 
device.
    For new technology add-on payments, as we have discussed in prior 
rulemaking (77 FR 53348), generally, our policy is to begin the newness 
period on the date of FDA approval or clearance or, if later, the date 
of availability of the technology on the U.S. market. Furthermore, as 
we have stated in prior rulemaking, the newness period does not 
necessarily start with the approval date for the medical service or 
technology. Instead, it begins with availability of the technology on 
the market, which is when data become available. We have consistently 
applied this standard, and believe that it is most consistent with the 
purpose of new technology add-on payments (69 FR 49003), because 
section 1886(d)(5)(K)(ii)(II) of the Act requires CMS to establish a 
mechanism to provide for the collection of data with respect to the 
costs of a new medical service or technology for a period of not less 
than two years and not more than three years beginning on the date on 
which an inpatient hospital code is issued for the service or 
technology. Our regulations at Sec.  412.87(b)(2), 412.87(c)(2), and 
412.87(d)(2) further allow new medical services and technologies to be 
considered new for the first 2 to 3 years after the point at which data 
begin to become available reflecting the inpatient hospital code 
assigned to the new service or technology, which is during the period 
when the costs of the new technology are not yet fully reflected in the 
DRG weights. The costs of the new medical service or technology, once 
paid for by Medicare for this 2-year to 3-year period, are accounted 
for in the MedPAR data that are used to recalibrate the DRG weights on 
an annual basis. Therefore, it is appropriate to limit the add-on 
payment window for those technologies to this 2-to 3-year timeframe. 
For these reasons, we continue to disagree that the appropriate policy 
would be for the newness period to begin with the date of the first 
claim.
    Comment: The applicant for REZZAYOTM (rezafungin for 
injection), submitted a comment regarding its newness start date of 
March 22, 2023, to explain why REZZAYOTM was not available 
on the US market until July 26, 2023. The applicant explained that the 
market entry for REZZAYOTM was delayed due to the steps 
needed to comply with FDA requirements. The applicant stated that 
REZZAYOTM received FDA approval on March 22, 2023, and that 
the product was subjected to a post marketing commitment (PMC) 
protocol. According to the applicant, the PMC stated that the 
manufacturer would complete necessary qualification and validation 
studies of the current assay high-performance

[[Page 69122]]

liquid chromatography analytical procedure to be used for the gross 
content and assay of reconstituted solution tests in the drug product 
specification, and update the relevant sections of Module 3 
accordingly. The applicant stated that FDA required this information be 
submitted to FDA via a Changes Being Effected in 0 Days Supplement 
(CBE-0). The applicant stated that to meet the requirements of the PMC 
and prepare the CBE-0 for submission, the manufacturer was unable to 
use anything more than a nominal amount of existing batches of product 
due to vial size differentials, which meant the manufacturer needed to 
manufacture new product for its analyses pursuant to the PMC, and that 
the applicant had to ensure that new product that met these 
requirements was created prior to launch. The applicant explained that 
due to the PMC requirements, REZZAYOTM needed to undergo an 
additional manufacturing cycle prior to launch, and the changes in vial 
size required changes to REZZAYO's labeling and packaging. The 
applicant stated that label and packaging changes alone can take an 
additional six weeks. The applicant stated that the manufacturer was 
able to complete the PMC requirements and submitted the CBE-0 on July 
19, 2023, and that REZZAYOTM was made available for sale to 
hospitals following the first sale and shipment to a wholesaler on July 
26, 2023, as reflected in the Medicaid Drug Rebate Program database.
    Response: We thank the applicant for its comment. As stated 
previously, while CMS may consider a documented delay in the 
technology's market availability in determining when the newness period 
begins, our policy for determining whether to extend new technology 
add-on payments for an additional year generally applies regardless of 
the volume of claims for the technology after the beginning of the 
newness period (83 FR 41280). We do not consider the date of first sale 
of a product as an indicator of the entry of a product onto the U.S. 
market. Although the applicant states that REZZAYOTM was 
made available for sale to hospitals following the first sale and 
shipment to a wholesaler on July 26, 2023, it is unclear from the 
information provided if the technology may have first became available 
on the market between the date of completion of the PMC and submission 
of the CBE-0 on July 19, 2023, and its first sale on July 26, 2023, as 
an applicant may commence distribution of a drug product manufactured 
using a change proposed in a CBE-0 supplement after FDA receives that 
supplement.\22\ Therefore, based on the information provided by the 
applicant regarding the documented delay in the technology's 
availability on the U.S. market, and absent additional information from 
the applicant, we consider the beginning of the newness period to 
commence on July 19, 2023.
---------------------------------------------------------------------------

    \22\ FDA--Drug Product Distribution After a Complete Response 
Action to a Changes Being Effected Supplement https://www.fda.gov/media/107451/download.
---------------------------------------------------------------------------

    Comment: We received multiple comments in support of our proposed 
continuation of new technology add-on payments for FY 2025 for the 
SAINT Neuromodulation System. A couple of commenters described their 
experiences and timelines for installation, training, and use of the 
SAINT Neuromodulation System at their hospitals. Commenters also 
supported modification of the technology's newness date to April 5, 
2024, to recognize the delay in commercial availability.
    In particular, the applicant for the SAINT Neuromodulation System 
submitted a comment to provide an update on its launch timeline and the 
commercial availability of technology in the provider market. The 
applicant confirmed that the SAINT Neuromodulation System is currently 
launching in the United States, and requested that CMS assign a newness 
date of April 5, 2024. The applicant stated that although SAINT 
received FDA clearance on September 1, 2022, there were significant 
product development, manufacturing design, and compliance steps that 
the company needed to complete before the device could become 
commercially available and be used to treat patients. It stated that 
initially, it had planned to develop and manufacture its own hardware; 
however, after much time and effort, it was determined in the second 
half of 2023 that the best course was to work with third-party 
manufacturers for the stimulator and neuronavigation hardware. The 
applicant provided a summary and timeline of all the activities that it 
completed prior to the device becoming commercially available to treat 
patients on April 5, 2024. The timeline also included information 
regarding the installation, training, and use of the SAINT 
Neuromodulation System at two hospitals after April 5, 2024.
    Response: We thank the applicant and commenters for their comments. 
In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58937 through 58938), we 
noted that the applicant stated that ICD-10-PCS code X0Z0X18 (Computer-
assisted transcranial magnetic stimulation of prefrontal cortex, new 
technology group 8) may be used to uniquely describe procedures 
involving the use of the SAINT Neuromodulation System, effective 
October 1, 2022. We note that between October 1, 2022 and April 4, 2024 
(inclusive), we identified 5 claims reporting this ICD-10-PCS code that 
were associated with an acute care hospital under the IPPS. Three of 
those claims were made in FY 2024, and all 3 received new technology 
add-on payment. Therefore, based on our review of the data, we cannot 
determine a newness date based on a documented delay in the 
technology's availability on the U.S. market. We continue to consider 
the beginning of the newness period to commence on September 1, 2022, 
the date of FDA marketing authorization for the indication covered by 
its Breakthrough Device designation.
    Comment: The applicant for DefenCath[supreg] (taurolidine/heparin), 
submitted a comment in support of our proposed continuation of new 
technology add-on payments for FY 2025 for DefenCath[supreg] and to 
update its Wholesale Acquisition Cost (WAC). The applicant noted that 
DefenCath[supreg] received conditional new technology add-on payment 
approval for FY 2024. The applicant stated that DefenCath[supreg] was 
approved by the FDA on November 15, 2023, via the Limited Population 
Pathway for Antibacterial and Antifungal Drugs (LPAD pathway), and that 
as such, hospitals were eligible to receive new technology add-on 
payments for DefenCath[supreg] as of January 1, 2024, which was the 
first date of the first quarter post FDA approval. The applicant stated 
that its original application included a WAC price of $390 per mL to 
determine reimbursement, which it stated was based upon market 
conditions at the time of the submission of the application. The 
applicant explained that after the submission of its application for FY 
2024, and following FDA approval of DefenCath[supreg], it performed 
additional market research and pricing analysis, and decided to launch 
with a WAC price that is significantly lower than what was originally 
submitted. The applicant stated that it launched DefenCath[supreg] on 
April 15, 2024, in the inpatient setting with the WAC price of $249.99 
per 3mL vial ($83.33 per mL), and urged CMS to finalize its proposal to 
continue making new technology add-on payments in FY 2025 for 
DefenCath[supreg].
    Another commenter also submitted a comment requesting that CMS 
reassess the new technology add-on payment

[[Page 69123]]

amount for DefenCath[supreg] based on the WAC price of $249.99 per 3mL 
vial, and expressed its concern about the impact DefenCath[supreg] will 
have on the Medicare program. The commenter stated that 
DefenCath[supreg] was late to the market with a clinical study using a 
control group which did not represent the current standard of care, and 
that it does not improve patient care or outcomes beyond the 
commenter's product, ClearGuardTM HD Antimicrobial Barrier 
Caps. The commenter also stated that DefenCath[supreg] requires 
additional labor resources to implement. Therefore, the commenter 
recommended that CMS monitor the value associated with 
DefenCath[supreg].
    Response: We thank the applicant and commenter for their comments 
and the updated cost information and recommendations. We have updated 
the new technology add-on payment amount for DefenCath[supreg] 
accordingly.
    Although the applicant states that DefenCath[supreg] was launched 
on April 15, 2024, we did not receive information regarding a 
documented delay in market availability, and absent additional 
information from the applicant, we cannot determine a newness date 
based on a documented delay in the technology's availability on the 
U.S. market. Therefore, we continue to consider the beginning of the 
newness period to commence on November 15, 2023, the date of FDA 
marketing authorization for the indication covered by its QIDP 
designation.
    DefenCath[supreg]'s current new technology add-on payment amount is 
$17,111.25, based on a WAC of $1,170 per 3mL vial. As we noted in the 
FY 2024 IPPS/LTCH PPS final rule (88 FR 58943), on average, patients 
would receive 9.75 HD treatments per inpatient stay based upon the 
average length of stay of 13.3 days, which would require 19.5 vials. 
For FY 2025, the maximum new technology add-on payment amount is 
$3,656.10, based on an updated WAC of $249.99 per 3mL vial, as 
reflected in Table II.E.-01 in this final rule.
    We further note that, as discussed in section II.E.5.d. of this 
final rule, because ELREXFIOTM and TALVEY\TM\ are 
substantially similar to TECVAYLI[supreg], we are using a single cost 
for purposes of determining the new technology add-on payment amount 
for ELREXFIOTM, TALVEY\TM\, and TECVAYLI[supreg] for FY 
2025. As discussed in section II.E.5.d. of this final rule, we 
determined a weighted average of the cost of ELREXFIOTM, 
TALVEY\TM\, and TECVAYLI[supreg] based upon the projected numbers of 
cases involving each technology to determine the maximum new technology 
add-on payment. To compute the weighted average cost, we summed the 
total number of projected cases for each technology provided by the 
applicants, which equaled 4,376 cases (152 cases for 
ELREXFIOTM plus 2,318 cases for TALVEY\TM\ plus 1,906 cases 
for TECVAYLI[supreg]). We then divided the number of projected cases 
for each of the technologies by the total number of cases, which 
resulted in the following case weighted percentages: 3.47 percent for 
ELREXFIOTM, 52.97 percent for TALVEY\TM\ and 43.56 percent 
for TECVAYLI[supreg]. For each technology, we then multiplied the 
estimated cost per patient by the case-weighted percentage (0.0347 * 
$15,112 = $524.39 for ELREXFIOTM, 0.5297 * $25,164.44 = 
$13,329.60 for TALVEY\TM\ and 0.4356 * $13,754.67 = $5,991.53 for 
TECVAYLI[supreg]). This resulted in a case-weighted average cost of 
$19,845.52 for the technology.
    Under Sec.  [thinsp]412.88(a)(2), we limit new technology add-on 
payments to the lesser of 65 percent of the average cost of the 
technology, or 65 percent of the costs in excess of the MS-DRG payment 
for the case. As a result, the maximum new technology add-on payment 
for a case involving the use of ELREXFIOTM, TALVEY\TM\, or 
TECVAYLI[supreg] is $12,899.59 for FY 2025, as reflected in Table 
II.E.-01 of this final rule.
    After consideration of the public comments we received, we are 
finalizing our proposals to continue new technology add-on payments for 
FY 2025 for the technologies that were approved for new technology add-
on payment for FY 2024 and would still be considered ``new'' for 
purposes of new technology add-on payments for FY 2025, as listed in 
the proposed rule and in the following Table II.E.-01 in this section 
of this final rule.
    We note that the following Table II.E.-01 is the same as Table 
II.E.-01 that was presented in the proposed rule, but Table II.E.-01 in 
this final rule includes the updated cost information for 
TECVAYLI[supreg] and DefenCath[supreg] and the updated newness start 
date for REZZAYOTM, as discussed previously. Table II.E.-01 
in this final rule also presents the newness start date, new technology 
add-on payment start date, 3-year anniversary date of the product's 
entry onto the U.S. market, relevant final rule citations from prior 
fiscal years, maximum add-on payment amount, and coding assignments for 
each technology. We refer readers to the final rules cited in the 
following table for a complete discussion of the new technology add-on 
payment application, coding, and payment amount for these technologies, 
including the applicable indications and discussion of the newness 
start date.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
    In the proposed rule, we provided Table II.E.-02 listing the 
technologies for which we proposed to discontinue making new technology 
add-on

[[Page 69126]]

payments for FY 2025 because they were no longer ``new'' for purposes 
of new technology add-on payments. This table also presented the 
newness start date, new technology add-on payment start date, the 3-
year anniversary date of the product's entry onto the U.S. market, and 
relevant final rule citations from prior fiscal years. We referred 
readers to the cited final rules in the following table for a complete 
discussion of each new technology add-on payment application and the 
coding and payment amount for these technologies, including the 
applicable indications and discussion of the newness start date.
    We invited public comments on our proposals to discontinue new 
technology add-on payments for FY 2025 for the technologies listed in 
Table II.E.-02 of the proposed rule.
    Comment: A commenter urged CMS to prevent new access hurdles from 
arising with newer treatments by continuing new technology add-on 
payments that are now in place for low volume inpatient stays until the 
MS-DRG calculations reflect the cost of the treatment, as the commenter 
asserted that is what the new technology add-on payment mechanism was 
intended to do.
    Response: As we have stated previously, our policy for determining 
whether to extend new technology add-on payments for an additional year 
generally applies regardless of the volume of claims for the technology 
after the beginning of the newness period. We do not believe that case 
volume is a relevant consideration for making the determination as to 
whether a product is considered ``new'' for purposes of new technology 
add-on payments. Consistent with the statute and our implementing 
regulations, a technology is no longer considered ``new'' once it is 
more than 2 to 3 years old, and the costs of the procedures are 
considered to be included in the relative weights irrespective of how 
frequently the technology has been used in the Medicare population (83 
FR 41280).
    Comment: The manufacturer of Intercept[supreg] Fibrinogen Complex 
(IFC), pathogen reduced cryoprecipitated fibrinogen complex (PRCFC), 
submitted a comment stating that due to manufacturing delays, its new 
technology add-on payment should be extended an additional year. The 
commenter explained that the IFC manufacturing process is unusual in 
that the IFC product must be made at blood centers, and that it has 
contracted with several blood centers. The commenter stated that each 
of these contracted blood centers must be licensed through FDA approval 
of a Biologics License Application (BLA) for manufacturing to ship the 
IFC product across state lines. The commenter stated that a complaint 
filed by a manufacturer of a competitive product resulted in FDA 
placing the BLA reviews of several of its contracted blood centers on 
hold and that the BLA reviews remain pending. The commenter stated that 
at the end of the first year of its new technology add-on payment (FY 
2022), only three blood centers were authorized to ship IFC across 
state lines, and that as of June 2024, it was still waiting for FDA 
clearance of four additional blood center contract manufacturing 
facilities, which would increase manufacturing capacity by another 100 
percent. The commenter stated that therefore, the majority of hospitals 
in the country did not have access to IFC in FY 2022 and FY 2023. The 
commenter asserted that its new technology add-on payment should be 
extended through FY 2025 given the significant delay in manufacturing 
due to the delay in BLA approvals and the resulting lack of national 
IFC availability.
    Response: We thank the commenter for its comment. Consistent with 
the statute and our implementing regulations, a technology is no longer 
considered as ``new'' once it is more than 2 to 3 years old, 
irrespective of how frequently the medical service or technology has 
been used in the Medicare population (70 FR 47349, 85 FR 58610). As 
such, once a technology has been available on the U.S. market for more 
than 2 to 3 years, we consider the costs to be included in the MS-DRG 
relative weights regardless of whether the technology's use in the 
Medicare population has been frequent or infrequent (88 FR 58802).
    After consideration of the public comments we received, we are 
finalizing our proposal to discontinue new technology add-on payments 
for the technologies as listed in the proposed rule and in the 
following Table II.E.-02 of this final rule for FY 2025 because they 
are no longer ``new'' for purposes of new technology add-on payments. 
This table also presents the newness start date, new technology add-on 
payment start date, the 3-year anniversary date of the product's entry 
onto the U.S. market, and relevant final rule citations from prior 
fiscal years. We refer readers to the final rules cited in the 
following table for a complete discussion of each new technology add-on 
payment application and the coding and payment amount for these 
technologies, including the applicable indications and discussion of 
the newness start date.
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BILLING CODE 4120-01-C
5. FY 2025 Applications for New Technology Add-On Payments (Traditional 
Pathway)
    As discussed previously, in the FY 2023 IPPS/LTCH PPS final rule, 
we finalized our policy to publicly post online applications for new 
technology add-on payment beginning with FY 2024 applications (87 FR 
48986 through 48990). As noted in the FY 2023 IPPS/LTCH PPS final rule, 
we are continuing to summarize each application in this final rule. 
However, while we are continuing to provide discussion of the concerns 
or issues we identified with respect to applications submitted under 
the traditional pathway, we are providing more succinct information as 
part of the summaries in the proposed and final rules regarding the 
applicant's assertions as to how the medical service or technology 
meets the newness, cost, and substantial clinical improvement criteria. 
We refer readers to https://mearis.cms.gov/public/publications/ntap for 
the publicly posted FY 2025 new technology add-on payment applications 
and supporting information (with the exception of certain cost and 
volume information, and information or materials identified by the 
applicant as confidential or copyrighted), including tables listing the 
ICD-10-CM codes, ICD-10-PCS codes, and/or MS-DRGs related to the 
analyses of the cost criterion for certain technologies for the FY 2025 
new technology add-on payment applications.
    We received 16 applications for new technology add-on payments for 
FY 2025 under the new technology add-on payment traditional pathway. As 
discussed previously, in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
58948 through 58958), we finalized that beginning with the new 
technology add-on payment applications for FY 2025, for technologies 
that are not already FDA market authorized for the indication that is 
the subject of the new technology add-on payment application, 
applicants must have a complete and active FDA market authorization 
request at the time of new technology add-on payment application 
submission and must provide documentation of FDA acceptance or filing 
to CMS at the time of application submission, consistent with the type 
of FDA marketing authorization application the applicant has submitted 
to FDA. See Sec.  412.87(e) and further discussion in the FY 2024 IPPS/
LTCH PPS final rule (88 FR 58948 through 58958). Of the 16 applications 
received under the traditional pathway, one applicant was not eligible 
for consideration for new technology add-on payment because it did not 
meet these requirements, and three applicants withdrew their 
application prior to the issuance of the proposed rule. In accordance 
with the regulations under Sec.  412.87(f), applicants for FY 2025 new 
technology add-on payments must have received FDA approval or clearance 
by May 1 of the year prior to the beginning of the fiscal year for 
which the application is being considered. Subsequently, prior to the 
issuance of this final rule, two additional applications were withdrawn 
for odronextamab (R/R DLBCL indication) and odronextamab (R/R FL 
indication). We are not including in this final rule the description 
and discussion of applications that were withdrawn or that are 
ineligible for consideration for FY 2025. We are addressing the 
remaining 10 applications. We note that the manufacturer for 
Casgevy\TM\ (exagamglogene autotemcel) submitted a single application, 
but for two separate indications, each of which is discussed separately 
in this section. We are not approving new technology add-on payments 
for 6 technologies: Casgevy\TM\ (exagamglogene autotemcel) for the 
indication of transfusion-dependent [beta]-thalassemia, 
DuraGraft[supreg], FloPatch FP120, LantidraTM (donislecel-
jujn (allogeneic pancreatic islet cellular suspension for hepatic 
portal vein infusion), AMTAGVITM (lifileucel), and Quicktome 
Software Suite, for the reasons discussed in the following sections. 
For the remaining 5 technologies, we are approving new technology add-
on payments for FY 2025 for CasgevyTM (examgamglogene 
autotemcel) for the indication of sickle cell disease, 
HEPZATOTM KIT (melphalan for injection/hepatic delivery 
system), and LyfgeniaTM (lovotibeglogene autotemcel). 
Because the remaining two technologies, ELREXFIOTM 
(elranatamab-bcmm) and TALVEYTM (talquetamab-tgvs), are 
considered substantially similar to TECVAYLITM (teclistamab-
cqyv), which was approved for new technology add-on payments for FY 
2024 and is still considered ``new'' for purposes of new technology 
add-on payments for FY 2025, these technologies are also eligible for 
the new technology add-on payment for FY 2025. A discussion of these 
applications is presented in the following sections.
a. CasgevyTM (exagamglogene autotemcel) First Indication: 
Sickle Cell Disease (SCD)
    Vertex Pharmaceuticals, Inc. submitted an application for new 
technology add-on payments for Casgevy\TM\ for FY 2025 for use in 
sickle cell disease. According to the applicant, Casgevy\TM\ is a one-
time, clustered regularly interspaced short palindromic repeats 
(CRISPR)/CRISPR-associated protein 9 (Cas9) modified autologous cluster 
of differentiation (CD)34+ hematopoietic stem & progenitor cell (HSPC) 
cellular therapy approved for the treatment of sickle cell disease 
(SCD) in patients 12 years and older with recurrent vaso-occlusive 
crises (VOC). Per the applicant, using a CRISPR/Cas9 gene editing 
technique, the patient's CD34+ HSPCs are edited ex vivo via Cas9, a 
nuclease enzyme that uses a highly specific guide ribonucleic acid 
(gRNA), at the critical transcription factor binding site GATA1 in the 
erythroid specific enhancer region of the B-cell lymphoma/leukemia 11A 
(BCL11A) gene. According to the applicant, as a result of the editing, 
GATA1 binding is irreversibly disrupted, and BCL11A expression is 
reduced, resulting in an increased production of fetal hemoglobin 
(HbF), and recapitulating a naturally occurring, clinically benign 
condition called hereditary persistence of fetal hemoglobin (HPFH) that 
reduces or eliminates SCD symptoms. As stated by the applicant, 
Casgevy\TM\ infusion induces increased HbF production in SCD patients 
to >=20 percent, which is known to be associated with fewer SCD 
complications via addressing the underlying cause of SCD by preventing 
RBC sickling. We note that the applicant is also seeking new technology 
add-on payments for Casgevy\TM\ for FY 2025 for use in treating 
transfusion-dependent beta thalassemia (TDT), as discussed separately 
later in this section.
    Please refer to the online application posting for Casgevy\TM\, 
available at https://mearis.cms.gov/public/publications/ntap/NTP2310171VPTU, for additional detail describing the technology and the 
disease treated by the technology.
    With respect to the newness criterion, according to the applicant, 
Casgevy\TM\ was granted Biologics License Application (BLA) approval 
from FDA on December 8, 2023, for treatment of SCD in patients 12 years 
of age or older with recurrent VOCs. According to the applicant, 
Casgevy\TM\ became commercially available immediately after FDA 
approval. Casgevy\TM\ is available in 20 mL vials containing 4 to 13 x 
10\6\ CD34+ cells/mL frozen in 1.5 to 20 mL of solution. The minimum 
dose is 3 x 10\6\ CD34+ cells per kg of body weight, which may be 
contained within multiple vials.
    Effective April 1, 2023, the following ICD-10-PCS codes may be used 
to uniquely describe procedures involving

[[Page 69129]]

the use of Casgevy\TM\: XW133J8 (Transfusion of exagamglogene 
autotemcel into peripheral vein, percutaneous approach, new technology 
group 8) and XW143J8 (Transfusion of exagamglogene autotemcel into 
central vein, percutaneous approach, new technology group 8). The 
applicant provided a list of ICD-10-CM diagnosis codes that may be used 
to identify this indication for Casgevy\TM\. Please refer to the online 
application posting for the complete list of ICD-10-CM codes provided 
by the applicant. We believe the relevant ICD-10-CM codes to identify 
the indication of SCD would be: D57.1 (Sickle-cell disease without 
crisis), D57.20 (Sickle-cell/Hb-C disease without crisis), D57.40 
(Sickle-cell thalassemia without crisis), D57.42 (Sickle-cell 
thalassemia beta zero without crisis), D57.44 (Sickle-cell thalassemia 
beta plus without crisis), or D57.80 (Other sickle-cell disorders 
without crisis). In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
36031), we invited public comments on the use of these ICD-10-CM 
diagnosis codes to identify the indication of SCD for purposes of the 
new technology add-on payment, if approved. We note that we did not 
receive any comments on the use of these codes.
    As previously discussed, if a technology meets all three of the 
substantial similarity criteria under the newness criterion, it would 
be considered substantially similar to an existing technology and would 
not be considered ``new'' for the purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that Casgevy\TM\ is not substantially similar to other 
currently available technologies, because Casgevy\TM\ is the first 
approved therapy to use CRISPR gene editing technology and no other 
approved technology uses the same or a similar mechanism of action; and 
therefore, the technology meets the newness criterion. The following 
table summarizes the applicant's assertions regarding the substantial 
similarity criteria. Please see the online application posting for 
Casgevy\TM\ for the applicant's complete statements in support of its 
assertion that Casgevy\TM\ is not substantially similar to other 
currently available technologies.
[GRAPHIC] [TIFF OMITTED] TR28AU24.100

    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
36032), we noted that CasgevyTM may have the same or similar 
mechanism of action to LyfgeniaTM, for which we also 
received an FY 2025 new technology add-on payment application. 
Casgevy\TM\ and Lyfgenia\TM\ are both gene therapies using modified 
autologous CD34+ HSPC therapies administered via stem cell 
transplantation for the treatment of SCD. LyfgeniaTM was 
approved by FDA for this indication on December 8, 2023. We noted that 
both technologies are autologous, ex-vivo modified hematopoietic stem-
cell biological products. For these technologies, patients are required 
to undergo CD34+ HSPC mobilization followed by apheresis to extract 
CD34+ HSPCs for manufacturing and then myeloablative conditioning using 
busulfan to deplete the patient's bone marrow in preparation for the 
technologies' modified stem cells to engraft to the bone marrow. Once 
engraftment occurs for both technologies, the patient's cells start to 
produce a different form of hemoglobin in order to reduce the sickling 
hemoglobin. We further noted that both technologies appeared to map to 
the same MS-DRGs, MS-DRGs 016 and 017 (Autologous Bone Marrow 
Transplant with CC/MCC, and without CC/MCC, respectively), and to treat 
the same or similar disease (SCD) in the same or similar patient 
population (patients 12 years of age and older who have a history of 
VOCs). Accordingly, as it appeared that Casgevy\TM\ and Lyfgenia\TM\ 
may use the same or similar mechanism of action to achieve a

[[Page 69130]]

therapeutic outcome (that is, to reduce the amount of sickling 
hemoglobin to reduce and prevent VOEs associated with SCD), were 
assigned to the same MS-DRGs, and treated the same or similar patient 
population and disease, we stated our belief that these technologies 
may be substantially similar to each other such that they should be 
considered as a single application for purposes of new technology add-
on payments. We noted that if we determined that this technology is 
substantially similar to LyfgeniaTM, we believed the newness 
period would begin on December 8, 2023, the date both Casgevy\TM\ and 
Lyfgenia\TM\ received FDA approval for SCD. We stated we were 
interested in information on how these two technologies may differ from 
each other with respect to the substantial similarity criteria and 
newness criterion, to inform our analysis of whether Casgevy\TM\ and 
Lyfgenia\TM\ are substantially similar to each other, and therefore, 
should be considered as a single application for purposes of new 
technology add-on payments.
    We invited public comments on whether Casgevy\TM\ meets the newness 
criterion, including whether Casgevy\TM\ is substantially similar to 
LyfgeniaTM and whether these technologies should be 
evaluated as a single technology for purposes of new technology add-on 
payments.
    Comment: The applicant for Casgevy\TM\ submitted a public comment 
regarding substantial similarity for LyfgeniaTM and 
CasgevyTM. The applicant asserted Casgevy\TM\ represents the 
first therapy approved to use CRISPR/Cas9 gene editing technology and 
stated that no other approved technologies use this mechanism of 
action, and CRISPR/Cas9 technology has never previously been used in 
humans outside of clinical trials. The applicant stated that 
Casgevy\TM\ is a one-time treatment that uses ex vivo non-viral CRISPR/
Cas9 to precisely edit the erythroid-specific enhancer region of BCL11A 
in CD34+ HSPCs. The applicant stated that, while other non-gene 
therapy-based therapeutic approaches impact production of HbF, no other 
approved technology has been able to reactivate production of 
endogenous HbF to levels known to eliminate disease complications (for 
example, VOC), consistent with individuals with a clinically benign 
condition called hereditary persistence of fetal hemoglobin (HPFH) who 
experience no or minimal disease complications from SCD when they co-
inherit both HPFH and SCD; therefore, it stated Casgevy\TM\ satisfies 
the newness criterion. The applicant stated that CMS focused on 
perceived similarities in treatment journey and categorical product 
characteristics between CasgevyTM and certain other 
technologies, but did not acknowledge material differences in the 
underlying technology which impact the safety and efficacy profile of 
these products. The applicant further explained that after 
CasgevyTM infusion, the edited CD34+ cells engraft in the 
bone marrow and differentiate to erythroid lineage cells with reduced 
BCL11A expression, and that this reduced BCL11A expression results in 
an increase in [gamma]-globin expression and HbF protein production in 
erythroid cells. The applicant stated that in patients with severe SCD, 
HbF expression reduces intracellular hemoglobin S (HbS) concentration, 
preventing the red blood cells from sickling and addressing the 
underlying cause of disease, thereby eliminating VOCs. The applicant 
stated that, as such, CasgevyTM is not similar to the 
current standard of care (bone marrow transplant), nor to other 
technologies used in the treatment of SCD, and that none of these 
treatments use a mechanism of action that relies on CRISPR gene editing 
to reduce intracellular HbS concentration in SCD patients. The 
applicant explained how LyfgeniaTM uses a separate 
technology, gene replacement therapy, that utilizes a viral-based 
mechanism to introduce exogenous genetic material into patients' HSPCs, 
to add functional copies of a modified [beta]A-globin gene into 
patients' hematopoietic stem cells (HSCs) through transduction of 
autologous CD34+ cells with B8305 lentiviral vector (LVV). The 
applicant stated that due to the LVV-based mechanism of action and the 
semi-random nature of viral integration, there is a potential risk of 
LVV-mediated insertional oncogenesis after treatment with 
LyfgeniaTM used in the treatment of SCD, as documented in 
FDA-approved labeling. The applicant stated that CasgevyTM, 
with its non-viral mechanism of action using CRISPR/Cas9 gene editing, 
does not employ a viral vector and does not insert a transgene; 
therefore, insertional oncogenesis cannot occur as a matter of 
scientific principle. The applicant further stated that Casgevy\TM\ 
uses a unique underlying technology and manufacturing process and has 
distinct product characteristics that differentiate it from other 
technologies used to treat SCD. The applicant asserted in its comments 
that if CMS were to consider gene replacement therapy and gene editing 
technologies to be substantially similar, it could set a precedent 
based on overgeneralization which could deter further innovation.
    Another commenter who is the manufacturer of Lyfgenia\TM\ also 
submitted a public comment regarding the newness criterion. With 
respect to mechanism of action, the applicant stated that 
LyfgeniaTM has a unique mechanism of action that differs 
from Casgevy\TM\'s because it is a one-time gene therapy that adds 
functional copies of the [beta]A-T87Q-globin gene into a 
patient's own HSCs ex-vivo through the transduction of autologous CD34+ 
cells with a BB305 LVV to durably produce HbA\T87Q\. The commenter 
added that HbA\T87Q\ is a modified adult hemoglobin (HbA) specifically 
designed to be anti-sickling while maintaining the same structure and 
function as naturally occurring HbA. According to the commenter, 
LyfgeniaTM consists of an autologous CD34+ cell-enriched 
population from patients with SCD that contains HSCs transduced with 
BB305 LVV encoding the [beta]A-T87Q-globin gene, suspended 
in a cryopreservation solution. The commenter stated the BB305 LVV 
encodes a single amino acid variant of [beta]-globin gene, 
[beta]A-T87Q-globin: a human [beta]-globin with a 
genetically engineered single amino acid change (threonine [Thr; T] to 
glutamine [Gin; Q] at position 87 (T87Q)). The commenter asserted 
HbA\T87Q\ is nearly identical to wildtype (or ``innate'') HbA, which is 
not prone to sickling. The commenter stated the T87Q substitution 
introduced in [beta]A-T87Q-globin is designed to physically 
block or sterically inhibit polymerization of hemoglobin, thus 
rendering further ``anti-sickling'' properties to 
[beta]A-T87Q-globin. According to the commenter, this 
results in a transgenic, non-immunogenic protein that can be measured 
in blood allowing for monitoring of the therapeutic protein in vivo and 
quantification relative to other globin species used to treat SCD. The 
commenter stated that LyfgeniaTM is not substantially 
similar to the CRISPR-Cas9 gene editing technique of 
CasgevyTM. The commenter also stated that, as described 
previously, LyfgeniaTM adds functional copies of a modified 
[beta]-globin (HBB) gene, [beta]A-T87Q globin gene, into 
patients' own HSCs to durably produce HbA\T87Q\, a modified adult HbA 
specifically designed to be anti-sickling while maintaining the same 
morphology and function as naturally occurring HbA. According to the 
commenter, the CRISPR/Cas9 gene editing technique mechanism of action 
described for CasgevyTM in the proposed rule differs 
substantially from LyfgeniaTM, as is evident by 
CasgevyTM's

[[Page 69131]]

unique editing approach in which GATA1 binding is irreversibly 
disrupted, and BCL11A expression is reduced, resulting in an increased 
production of HbF, and recapitulating a naturally occurring, clinically 
benign condition called HPFH that reduces or eliminates SCD symptoms.
    According to the commenter, increasing HbA\T87Q\ versus increasing 
HbF are fundamentally distinct mechanistic approaches. For individuals 
without SCD, HbF production is decreased shortly after birth, 
coinciding with an increase in HbA, and LyfgeniaTM is 
designed to replicate this natural state by introducing the production 
of HbA\T87Q\. The commenter stated HbA\T87Q\ is nearly identical to HbA 
in several keyways: sequence homology, protein structure, oxygen 
affinity and oxygen dissociation curves. The commenter stated that HbF 
has ~50 percent homology to HbA (two [beta] globin chains are replaced 
with two [gamma]-chains) and has a higher observed oxygen affinity and 
different oxygen unloading properties than HbA. According to the 
commenter, from a clinical perspective, current standard of care 
approaches (for example, the use of hydroxyurea) are available to 
increase levels of HbF with variable effectiveness, while the mechanism 
of action LyfgeniaTM affords is unique in increasing a 
modified HbA. The commenter commented that while both gene therapies 
are indicated for the treatment of SCD, the mechanistic approach of 
each is fundamentally and significantly different from the other, and 
therefore LyfgeniaTM and CasgevyTM are not 
substantially similar and should not be considered as a single 
application for the purposes of new technology add-on consideration.
    The commenter also described potential risks associated with 
consideration of the two technologies as a single application. 
Specifically, the commenter stated that if LyfgeniaTM and 
CasgevyTM are treated as a single application and paid under 
a single maximum new technology add-on payment amount, this could 
potentially undermine CMS's aim to improve timely, meaningful access to 
SCD gene therapies for Medicare patients. Per the commenter, not only 
do the two therapies have distinct mechanisms of action but they also 
differ in the length of follow-up and the features of the population in 
which they were studied (for example, the commenter stated that the 
LyfgeniaTM clinical trials did not exclude patients with a 
history of chronic pain and included some patients with a history of 
stroke), and patients should have a choice to work with physicians to 
decide which therapy is most appropriate, based solely on their 
specific individual clinical circumstances. The commenter further 
asserted that given these differences, the finalization of a single new 
technology add-on payment amount for both therapies could hamper 
patient access to the most appropriate gene therapy, and potentially 
create a fiscally problematic and financial loss for IPPS hospitals, 
given the difference in the wholesale acquisition costs of both 
therapies, and CMS could potentially over-pay for one product, while 
under-paying for the other through the use of the historical blended 
weighted average cost utilizing volume estimates. Therefore, the 
commenter stated that LyfgeniaTM is not substantially 
similar to CasgevyTM and should not be considered as a 
single application with CasgevyTM for the purposes of new 
technology add-on payments.
    Response: We thank the applicant and the other commenters for their 
comments. Based on our review of comments received and information 
submitted by the applicant as part of its FY 2025 new technology add-on 
payment application for Casgevy\TM\, we agree that Casgevy\TM\ and 
LyfgeniaTM do not have the same mechanism of action because 
CasgevyTM modifies a patients' own HSPCs to increase HbF 
expression to subsequently reduce the expression of intracellular 
sickled hemoglobin concentration, which is a distinct mechanism of 
action compared to LyfgeniaTM, which modifies a patients' 
own HSPCs to increase HbA\T87Q\ (modified adult hemoglobin). Therefore, 
we agree with the applicant that Casgevy\TM\ has a unique mechanism of 
action and is not substantially similar to existing treatment options 
for the treatment of SCD in patients 12 years of age or older with 
recurrent VOCs and meets the newness criterion. We consider the 
beginning of the newness period for Casgevy\TM\ to commence on December 
8, 2023, when Casgevy\TM\ was granted BLA approval from FDA for the 
treatment of SCD in patients 12 years of age or older with recurrent 
VOCs.
    With respect to the cost criterion, the applicant searched the FY 
2022 MedPAR file and provided multiple analyses to demonstrate that 
Casgevy\TM\ meets the cost criterion. The applicant included two 
cohorts in the analyses to identify potential cases representing 
patients who may be eligible for Casgevy\TM\: the first cohort included 
all cases in MS-DRG 014 (Allogeneic Bone Marrow Transplant) to account 
for the low volume of SCD or transfusion-dependent beta thalassemia 
(TDT) cases, and the second cohort included cases in MS-DRG 014 
(Allogeneic Bone Marrow Transplant) with any ICD-10-CM diagnosis code 
of SCD or TDT. The applicant explained that the cost analyses for SCD 
and TDT were combined because the volume of cases with a sickle cell 
disease or beta thalassemia diagnosis code was very low, and because it 
believed both indications would be approved in time for new technology 
add-on payment. In addition, the applicant noted that when searching 
for cases in MS-DRG 014 with SCD or beta thalassemia diagnosis codes, 
there were no beta thalassemia cases. The applicant noted that cases 
included in the analysis may not be a completely accurate 
representation of cases that will be eligible for Casgevy\TM\ but that 
the analyses were provided in recognition of the low volume of cases.
    The applicant performed two analyses for each cohort: one with all 
prior drug charges maintained, representing a scenario in which there 
is no change to patient drug regimen with the use of Casgevy\TM\; and 
another with all prior drug charges removed, representing a scenario in 
which no ancillary drugs are used in the treatment of Casgevy\TM\ 
patients. Per the applicant, this was done because some patients 
receiving Casgevy\TM\ could receive fewer ancillary drugs during the 
inpatient stay, but it was difficult to know with certainty whether 
this would be the case or to identify the exact differences in drug 
regimens between patients receiving Casgevy\TM\ and those receiving 
allogeneic bone marrow transplants. The applicant noted the analyses 
with drug charges removed were likely an over-estimation of the 
ancillary drug charges that would be removed in cases involving the use 
of Casgevy\TM\, but these were provided as sensitivity analyses.
    According to the applicant, eligible cases for Casgevy\TM\ will be 
mapped to either Pre-MDC MS-DRGs 016 or 017, depending on whether 
complications or comorbidities (CCs) or major complications or 
comorbidities (MCCs) are present. For each analysis, the applicant used 
the FY 2025 new technology add-on payment threshold for Pre-MDC MS-DRG 
016 for all identified cases, because it was typically higher than the 
threshold for Pre-MDC MS-DRG 017. Each analysis followed the order of 
operations described in the table later in this section.
    For the first cohort, the applicant included all cases associated 
with MS-DRG 014 (Allogeneic Bone Marrow Transplant). The applicant used 
the inclusion/exclusion criteria described in the following table and 
identified 996

[[Page 69132]]

claims mapping to MS-DRG 014. With all prior drug charges maintained 
(Scenario 1), the applicant calculated a final inflated average case-
weighted standardized charge per case of $12,325,062, which exceeded 
the average case-weighted threshold amount of $182,491. With all prior 
drug charges removed (Scenario 2), the applicant calculated a final 
inflated average case-weighted standardized charge per case of 
$12,181,526, which exceeded the average case-weighted threshold amount 
of $182,491.
    For the second cohort, the applicant searched for cases within MS-
DRG 014 with any ICD-10-CM diagnosis codes representing SCD or TDT. The 
applicant used the inclusion/exclusion criteria described in the 
following table and identified 11 claims mapping to MS-DRG 014. With 
all prior drug charges maintained (Scenario 3), the applicant 
calculated a final inflated average case-weighted standardized charge 
per case of $12,125,212, which exceeded the average case-weighted 
threshold amount of $182,491. With all prior drug charges removed 
(Scenario 4), the applicant calculated a final inflated average case-
weighted standardized charge per case of $12,086,551, which exceeded 
the average case-weighted threshold amount of $182,491.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant maintained that Casgevy\TM\ meets the cost 
criterion.
---------------------------------------------------------------------------

    \23\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
[GRAPHIC] [TIFF OMITTED] TR28AU24.101

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36034), we 
invited public comments on whether Casgevy\TM\ meets the cost 
criterion.
    Comment: The applicant reiterated that the cost criterion analyses 
submitted with the application demonstrate that Casgevy\TM\ meets the 
cost criterion.
    Response: We thank the applicant for its comments. We agree that 
the final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount in all scenarios. 
Therefore, Casgevy\TM\ meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that Casgevy\TM\ represents a substantial clinical 
improvement over existing technologies because it is anticipated to 
expand patient eligibility for potentially curative SCD therapies, have 
improved clinical outcomes relative to available therapies, and avoid 
certain serious risks or side effects associated with existing 
potentially curative treatment options for SCD. The applicant provided 
one study to support these claims, as well as eight background articles 
about clinical outcomes and safety risks of other SCD treatments.\24\ 
The following table summarizes the applicant's assertions regarding the 
substantial clinical improvement criterion. Please see the online 
posting for Casgevy\TM\ for the applicant's complete statements 
regarding the substantial clinical improvement criterion and the 
supporting evidence provided.
---------------------------------------------------------------------------

    \24\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.

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

[[Page 69133]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.102

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36035 through 
36036), after reviewing the information provided by the applicant, we 
stated we had the following concerns regarding whether Casgevy\TM\ 
meets the substantial clinical improvement criterion. We noted that the 
only assessment of the technology submitted was from conference 
presentations that provided data on the ongoing CLIMB-121 trial, a 
phase 1/2/3 single-arm trial assessing a single dose of Casgevy\TM\ in 
patients 12 to 35 years old with SCD and a history of two or more 
severe VOCs per year over 2 years. The most recent data presented at 
ASH in December 2023,\25\ which appears to supersede the earlier 
results from Locatelli, et al. (2023),\26\ indicated 44 participants 
received Casgevy\TM\ for SCD, of which only 30 participants were 
evaluable for the primary and key secondary endpoints because they were 
followed for at least 16 months (up to 45.5 months) post Casgevy\TM\ 
infusion. The applicant stated 96.7 percent of patients achieved the 
primary efficacy endpoint (free of severe VOCs for at least 12 
consecutive months) and 100 percent of patients achieved the key 
secondary efficacy endpoint (free from in-patient hospitalization for 
severe VOCs for at least 12 consecutive months). Additionally, the 
applicant noted a safety profile consistent with myeloablative busulfan 
and autologous HSCT and that there were no malignancies nor serious 
adverse events related to Casgevy\TM\. However, we noted that the 
provided evidence did not include peer-reviewed literature that 
directly assessed the use of Casgevy\TM\ for SCD. We questioned whether 
the small study population may limit the generalizability of these 
study outcomes to a Medicare population. In addition, from the evidence 
submitted, we noted we were unable to determine where the study took 
place (that is, within the United States (U.S.) or in locations outside 
the U.S), which may also limit generalizability to the Medicare 
population. Additionally, we questioned if the short follow-up duration 
was sufficient to assess improvements in long-term clinical outcomes.
---------------------------------------------------------------------------

    \25\ Frangoul H, et al. Presented at the 65th Annual American 
Society of Hematology. 11 Dec 2023.
    \26\ Locatelli F, et al. Presented at the 28th Annual European 
Hematology Association; 11 June 2023.
---------------------------------------------------------------------------

    Furthermore, the applicant asserted that Casgevy\TM\ significantly 
improves

[[Page 69134]]

clinical outcomes relative to services or technologies previously 
available. Regarding the claim that Casgevy\TM\ is the first gene 
therapy specifically approved for the treatment of SCD in patients 12 
years and older with recurrent VOCs, the applicant claimed it was first 
to submit and have its BLA accepted for a genetic therapy for treatment 
of SCD. The applicant stated the PDUFA date for Casgevy\TM\ was 
December 8, 2023, and the PDUFA data for another gene therapy for SCD 
was December 20, 2023, however, we note that Casgevy\TM\ and another 
product were both approved on December 8, 2023, as the first gene 
therapies for SCD. While this claim was made in support of the 
assertion that Casgevy\TM\ significantly improves clinical outcomes, we 
noted that the information submitted regarding PDUFA dates and FDA 
approvals did not appear to provide data regarding a significantly 
improved clinical outcome under Sec.  412.87(b)(1)(ii)(C).
    With regards to the claim that Casgevy\TM\ is expected to avoid 
certain serious risks or side effects associated with approved viral-
based gene therapies for SCD, the applicant cited the potential risk of 
insertional oncogenesis after treatment with LyfgeniaTM, 
listed per the package insert for this other gene therapy for SCD. We 
noted that because clinical trials are conducted under widely varying 
conditions, we questioned whether adverse reaction rates observed in 
the clinical trials of one drug can be directly compared to rates in 
the clinical trials of another drug. We also questioned if the follow-
up duration for patients treated with Casgevy\TM\ was sufficient to 
assess improvement in the rate of malignancy.
    With regard to the claim that Casgevy\TM\ is expected to avoid 
certain serious risks or side effects associated with existing 
potentially curative treatment options for SCD, the applicant stated 
that there are significant risks associated with allo-HSCT, including 
graft failure (up to 9 percent frequency), acute and chronic graft-
versus-host disease (GVHD) (with chronic GVHD up to 18 percent 
frequency), severe infection, hematologic malignancy, bleeding events, 
and death. In contrast, the applicant claimed Casgevy\TM\ does not 
require an allogeneic donor as each patient is their own donor, and 
therefore, does not have the risks of acute and chronic GVHD or the 
immunologic risks of secondary graft failure/rejection, in addition to 
not requiring post-transplant immunosuppressive therapies. However, we 
stated that we were interested in additional evidence regarding the 
frequency and clinical relevance of side effects such as severe 
infection, hematologic malignancy, bleeding events, and death for both 
therapies.
    We invited public comments on whether Casgevy\TM\ meets the 
substantial clinical improvement criterion.
    Comment: A few commenters, including the applicant, stated support 
for approval of Casgevy\TM\ for new technology add-on payments for the 
SCD indication and disagreed with CMS's concerns. A commenter stated 
that for beneficiaries with SCD, the available therapy of HSCT is a 
potentially curative treatment especially for patients with significant 
barriers to access such as lack of a matched sibling who could 
potentially serve as a donor and the potential increased risks from the 
side effects of stem cell transplant.
    Response: We thank the commenters for their input and have taken it 
into consideration in determining whether CasgevyTM meets 
the substantial clinical improvement criterion as discussed later in 
this section.
    Comment: In response to our concerns about the lack of any 
published, peer-reviewed studies that directly assessed the use of 
CasgevyTM within the U.S., the applicant provided additional 
information from a published phase 3, single-group, open-label study by 
Frangoul, et al. (2024) \27\ which assessed CasgevyTM in 
patients 12 to 35 years of age with SCD who had at least two severe 
VOCs in each of the 2 years before screening. The applicant stated that 
the study was conducted in both the U.S. and European Union in which a 
total of 44 patients received exagamglogene autotemcel, and the median 
follow-up was 19.3 months (range, 0.8 to 48.1). The applicant stated 
that of the 30 patients who had sufficient follow-up to be evaluated, 
29 (97 percent; 95 percent CI, 83 to 100) were free from VOCs for at 
least 12 consecutive months, and all 30 (100 percent; 95 percent Cl, 88 
to 100) were free from hospitalizations for VOCs for at least 12 
consecutive months (P<0.001 for both comparisons against the null 
hypothesis of a 50 percent response).
---------------------------------------------------------------------------

    \27\ Frangoul H., et al. Exagamglogene Autotemcel for Severe 
Sickle Cell Disease, New England Journal of Medicine, 390, 18, 
(1649-1662), (2024). doi/full/10.1056/NEJMoa2309676.
---------------------------------------------------------------------------

    In response to our concerns about providing peer-reviewed evidence 
of the safety profile of CasgevyTM, the applicant stated 
that the Frangoul, et al. (2024) study showed that the safety profile 
of CasgevyTM was generally consistent with that of 
myeloablative busulfan conditioning and autologous HSPC transplantation 
and that no cancers occurred. The applicant stated that, while patients 
treated with CasgevyTM experienced adverse effects, the 
adverse effects are consistent with the conditioning regimen, similar 
to adverse effects in autologous transplant. The applicant stated that 
in the CLIMB SCD-121 trial \28\ for SCD, the most common adverse events 
were stomatitis (55 percent), febrile neutropenia (48 percent), 
platelet count decrease (48 percent), and appetite decrease (41 
percent). The applicant stated that patients treated with 
CasgevyTM did not have any reported cases of graft-versus-
host-disease (GVHD), which is a common and potentially serious side 
effect that can be seen in allogeneic transplant.
---------------------------------------------------------------------------

    \28\ Frangoul H., et al. Exagamglogene Autotemcel for Severe 
Sickle Cell Disease, New England Journal of Medicine, 390, 18, 
(1649-1662), (2024). doi/full/10.1056/NEJMoa2309676.
---------------------------------------------------------------------------

    In response to our concern regarding oncogenesis with gene therapy, 
the applicant stated that the two primary potential mechanisms for 
oncogenesis post-treatment include a late effect of alkylating 
chemotherapy or oncogene activation from off-target editing or 
insertional oncogenesis, as seen in other technologies used in 
treatment of SCD. In Frangoul, et al. (2024) no off-target editing was 
found through multiple orthogonal approaches. The applicant clarified, 
however, that alkylating agents generally require 5 to 7 years before 
secondary malignancies occur, and although off-target genome editing 
was not observed in the edited CD34+ cells evaluated from healthy 
donors and patients, the risk of unintended, off-target editing in an 
individual's CD34+ cells cannot be ruled out due to genetic variants 
and therefore, the clinical significance of potential off-target 
editing is unknown. The applicant further stated that longest follow-up 
in both the CLIMB SCD-121 and CLIMB THAL-111 trials has surpassed 4 
years, and stated that it will continue to follow study patients for up 
to 15 years. The applicant further asserted that due to 
CasgevyTM's mechanism of action, which does not employ a 
viral vector and does not insert a transgene, insertional oncogenesis 
by definition cannot occur.
    In response to our concerns about sample size, the applicant stated 
its belief that the study sample sizes are appropriate. The applicant 
stated that SCD affects an estimated 100,000 Americans and that the 
sample size of the studies reflects the challenges

[[Page 69135]]

associated with enrolling larger studies for rare conditions, as well 
as significant challenges in conducting larger studies for autologous 
gene therapy that must be individualized to each patient.
    In response to our concern about the generalizability of the 
evidence to the Medicare population, the applicant commented that it 
believed the study population reflects the patient population for these 
medical conditions, including Medicare-covered patients who, as noted, 
may be dually eligible for Medicare and Medicaid (and thus often not 
over the age of 65). The commenter also stated that, as noted in the 
CMS SCD Action Plan,\29\ 11 percent of patients with SCD are enrolled 
in Medicare. The applicant stated that the CLIMB-121's study population 
is generalizable as it included patients aged 12-35, reflective of dual 
Medicare and Medicaid-eligible populations. The applicant stated that 
CMS has previously shared SCD prevalence data, indicating that more 
than 70 percent of Medicare fee-for-service beneficiaries with SCD are 
dual eligibles and more than 80 percent of these beneficiaries with SCD 
are covered under Medicare through disability insurance benefits.
---------------------------------------------------------------------------

    \29\ Centers for Medicare & Medicaid Services. CMS Sickle Cell 
Disease Action Plan. https://www.cms.gov/files/document/sickle-cell-disease-action-plan.pdf (September 2023).
---------------------------------------------------------------------------

    Response: We thank the applicant for the additional information and 
have taken it into consideration in determining whether 
CasgevyTM meets the substantial clinical improvement 
criterion, discussed later in this section.
    Comment: A commenter, who is the manufacturer of 
LyfgeniaTM, stated that it was not possible to make direct 
comparisons between the safety or efficacy of CasgevyTM and 
LyfgeniaTM. The commenter stated that while 
LyfgeniaTM's prescribing information includes a warning as 
to the potential risk of insertional oncogenesis after treatment, there 
have been no cases of insertional oncogenesis nor any positive results 
for replication competent lentivirus observed \30\ across the 
utilization of the BB305 vector across all clinical studies. The 
commenter also cited the prescribing information for Casgevy\TM\ 
stating: ``[a]lthough not observed in healthy donors and patients, the 
risk of unintended, off-target editing in CD34+ cells due to uncommon 
genetic variants cannot be ruled out.'' The commenter further stated 
that although no cases of insertional oncogenesis have been observed 
with BB305 across the clinical program, two cases of acute myeloid 
leukemia were observed in patients treated with an earlier version of 
LyfgeniaTM using a different manufacturing process and 
transplant procedure, and that patients treated with 
LyfgeniaTM may develop hematologic malignancies and should 
have lifelong monitoring.
---------------------------------------------------------------------------

    \30\ Kanter J, et al. 2023.
---------------------------------------------------------------------------

    Response: We thank the applicant and other commenters for their 
comments regarding the substantial clinical improvement criterion. 
Based on the additional information received, we agree with the 
applicant that Casgevy\TM\ represents a substantial clinical 
improvement over existing technologies because Casgevy\TM\ offers a 
treatment option for certain patients with SCD who are not eligible for 
bone marrow transplant due to a lack of HLA matching and who experience 
recurrent VOEs and have not been able to achieve adequate control of 
the condition with existing treatments such as hydroxyurea.
    After consideration of the public comments and the information 
included in the applicant's new technology add-on payment application, 
we have determined that Casgevy\TM\ for the indication of SCD meets the 
criteria for approval for new technology add-on payment. Therefore, we 
are approving new technology add-on payments for this technology for 
SCD for FY 2025.
    Cases involving the use of Casgevy\TM\ for the indication of SCD 
that are eligible for new technology add-on payments will be identified 
by ICD-10-PCS codes: XW133J8 (Transfusion of exagamglogene autotemcel 
into peripheral vein, percutaneous approach, new technology group 8) or 
XW143J8 (Transfusion of exagamglogene autotemcel into central vein, 
percutaneous approach, new technology group 8) in combination with one 
of the following ICD-10-CM codes: D57.1 (Sickle-cell disease without 
crisis), D57.20 (Sickle-cell/Hb-C disease without crisis), D57.40 
(Sickle-cell thalassemia without crisis), D57.42 (Sickle-cell 
thalassemia beta zero without crisis), D57.44 (Sickle-cell thalassemia 
beta plus without crisis), or D57.80 (Other sickle-cell disorders 
without crisis).
    In its application, the applicant estimated that the cost of 
Casgevy\TM\ is $2,200,000 per patient. As discussed in section II.E.10 
of the preamble of this final rule, we are revising the maximum new 
technology add-on payment percentage to 75 percent, for a medical 
product that is a gene therapy that is indicated and used specifically 
for the treatment of SCD and approved for new technology add-on 
payments for the treatment of SCD in the FY 2025 IPPS/LTCH PPS final 
rule. Accordingly, under Sec.  412.88(a)(2) as revised in this final 
rule, we limit new technology add-on payments to the lesser of 75 
percent of the average cost of the technology, or 75 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, the 
maximum new technology add-on payment for a case involving the use of 
Casgevy\TM\ for the treatment of SCD is $1,650,000 for FY 2025.
b. Casgevy\TM\ (exagamglogene autotemcel) Second Indication: 
Transfusion-Dependent [beta]-Thalassemia (TDT)
    Vertex Pharmaceuticals, Inc. submitted an application for new 
technology add-on payments for Casgevy\TM\ for FY 2025 for TDT. 
According to the applicant, Casgevy\TM\ is a one-time, clustered 
regularly interspaced short palindromic repeats (CRISPR)/CRISPR-
associated protein 9 (Cas9) modified autologous cluster of 
differentiation (CD)34+ hematopoietic stem & progenitor cell (HSPC) 
cellular therapy indicated for the treatment of TDT in patients 12 
years of age or older. Per the applicant, using a CRISPR/Cas9 gene 
editing technique, the patient's CD34+ HSPCs are edited ex vivo via 
Cas9, a nuclease enzyme that uses a highly-specific guide ribonucleic 
acid (gRNA), at the critical transcription factor binding site GATA1 in 
the erythroid specific enhancer region of the B-cell lymphoma/leukemia 
11A (BCL11A) gene. According to the applicant, as a result of the 
editing, GATA1 binding is irreversibly disrupted, and BCL11A expression 
is reduced, resulting in an increased production of fetal hemoglobin 
(HbF). As stated by the applicant, this increase in HbF recapitulates a 
naturally occurring, clinically benign condition called hereditary 
persistence of fetal hemoglobin (HPFH). The applicant stated that as a 
result, Casgevy\TM\ infusion induces increased HbF production in TDT 
patients so that circulating red blood cells (RBC) exhibit nearly 100 
percent HbF, eliminating the need for RBC transfusions. As previously 
discussed earlier in this section, the applicant is also seeking new 
technology add-on payments for Casgevy\TM\ for FY 2025 for use in 
treating SCD.
    Please refer to the online application posting for 
CasgevyTM, available at https://mearis.cms.gov/public/publications/ntap/NTP2310171VPTU, for additional detail describing the 
technology and the disease treated by the technology.
    With respect to the newness criterion, according to the applicant, 
CasgevyTM

[[Page 69136]]

was granted BLA approval from FDA on January 16, 2024, for the 
treatment of TDT in patients 12 years of age and older. The applicant 
also explained that the minimum dosage of CasgevyTM is 3 x 
106 CD34+ cells per kg of patient's weight. A single dose of 
CasgevyTM is supplied in one or more vials, with each vial 
containing 4 to 13 x 106 cells/mL suspended in 1.5 to 20 mL 
of cryo-preservative medium.
    Effective April 1, 2023, the following ICD-10-PCS codes may be used 
to uniquely describe procedures involving the use of 
CasgevyTM: XW133J8 (Transfusion of exagamglogene autotemcel 
into peripheral vein, percutaneous approach, new technology group 8) 
and XW143J8 (Transfusion of exagamglogene autotemcel into central vein, 
percutaneous approach, new technology group 8). The applicant provided 
a list of diagnosis codes that may be used to currently identify this 
indication for CasgevyTM under the ICD-10-CM coding system. 
Please refer to the online application posting for the complete list of 
ICD-10-CM codes provided by the applicant.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36036), we stated 
our belief that the relevant ICD-10-CM codes to identify the indication 
of TDT would be: D56.1 (Beta thalassemia), D56.2 (Delta-beta 
thalassemia), or D56.5 (Hemoglobin E-beta thalassemia). We invited 
public comments on the use of these ICD-10-CM diagnosis codes to 
identify the indication of TDT for purposes of the new technology add-
on payment, if approved.
    As previously discussed, if a technology meets all three of the 
substantial similarity criteria under the newness criterion, it would 
be considered substantially similar to an existing technology and would 
not be considered ``new'' for the purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that CasgevyTM is not substantially similar to 
other currently available technologies because CasgevyTM is 
the first approved therapy to use CRISPR gene editing as its mechanism 
of action, and therefore, the technology meets the newness criterion. 
The following table summarizes the applicant's assertions regarding the 
substantial similarity criteria. Please see the online application 
posting for CasgevyTM for the applicant's complete 
statements in support of its assertion that CasgevyTM is not 
substantially similar to other currently available technologies.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU24.103

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36037), we 
questioned whether CasgevyTM may be the same or similar to 
other gene

[[Page 69137]]

therapies used to treat TDT, specifically ZyntegloTM, which 
was approved for treatment of TDT on August 17, 2022. 
CasgevyTM and ZyntegloTM are both gene therapies 
using modified autologous CD34+ HSPC therapies administered via stem 
cell transplantation for the treatment of TDT. Both technologies are 
autologous, ex-vivo modified hematopoietic stem-cell biological 
products. For these technologies, patients are required to undergo 
CD34+ HSPC mobilization followed by apheresis to extract CD34+ HSPCs 
for manufacturing and then myeloablative conditioning using busulfan to 
deplete the patient's bone marrow in preparation for the technologies' 
modified stem cells to engraft to the bone marrow. Once engraftment 
occurs, the patient's cells start to produce a different form of 
hemoglobin to increase total hemoglobin and reduce the need for RBC 
transfusions. Therefore, we noted that it appeared as if 
CasgevyTM and ZyntegloTM would use a similar 
mechanism of action to achieve a therapeutic outcome for the treatment 
of TDT. Further, both technologies appeared to map to the same MS-DRGs, 
MS-DRG 016 (Autologous Bone Marrow Transplant with CC/MCC) and 017 
(Autologous Bone Marrow Transplant without CC/MCC), and to treat the 
same or similar disease (beta thalassemia) in the same or similar 
patient population (patients who require regular blood transfusions). 
Accordingly, we stated our belief that these technologies may be 
substantially similar to each other. We noted that if 
CasgevyTM is substantially similar to ZyntegloTM 
for the treatment of TDT, we believed the newness period for this 
technology would begin on August 17, 2022, the BLA approval date for 
ZyntegloTM.
    We invited public comments on whether CasgevyTM is 
substantially similar to existing technologies and whether 
CasgevyTM meets the newness criterion.
    Comment: The applicant objected to the use of the 
ZyntegloTM market entry date as the start of the newness 
period. With respect to substantial similarity, the applicant stated 
that CasgevyTM is a nonviral, autologous cell therapy that 
is designed to reactivate fetal hemoglobin production by means of ex 
vivo CRISPR/Cas9 gene editing at the erythroid enhancer region of 
BCL11A in a patient's own hematopoietic stem and progenitor cells 
(HSPCs). The applicant stated that after CasgevyTM infusion, 
the edited CD34+ cells engraft in the bone marrow and differentiate to 
erythroid lineage cells with reduced BCL11A expression. The applicant 
stated that reduced BCL11A expression results in an increase in 
[gamma]-globin expression and HbF protein production in erythroid 
cells. The applicant stated that in patients with TDT, [gamma]-globin 
production improves the [alpha]-globin to non-[alpha]-globin imbalance 
thereby reducing ineffective erythropoiesis and hemolysis and 
increasing total hemoglobin levels, addressing the underlying cause of 
disease, and eliminating the dependence on regular RBC transfusions. 
The applicant asserted that CasgevyTM is not similar to the 
current standard of care for TDT (non-curative, lifelong regular blood 
transfusions), nor to other technologies used in the treatment of TDT, 
because it relies on a completely different mechanism of action than 
either of these treatments and therefore, CasgevyTM 
satisfies the newness criterion.
    Another commenter, who is the manufacturer of 
ZyntegloTM, also stated that these technologies are not 
substantially similar to one another. The commenter stated the CRISPR/
Cas9 gene editing technique of CasgevyTM is not 
substantially similar to the gene editing approach used for 
ZyntegloTM, which works by adding functional copies of a 
modified form of the [beta]A-T87Q-globin gene into a 
patient's own HSPCs to allow them to make normal to near-normal levels 
of total hemoglobin without regular red blood cell transfusions.
    Response: Based on our review of comments received and information 
submitted by the applicant as part of its FY 2025 new technology add-on 
payment application for CasgevyTM, we agree with the 
applicant that CasgevyTM modifies HSPCs to stimulate 
production of endogenous HbF, and does not modify HSPCs to increase 
HbAT87Q (modified adult hemoglobin) as seen with 
ZyntegloTM, in order to increase total hemoglobin levels. 
Therefore, we agree with the applicant that CasgevyTM has a 
unique mechanism of action and is not substantially similar to existing 
treatment options for the treatment of TDT in patients 12 years of age 
and older and meets the newness criterion. We therefore consider the 
beginning of the newness period to commence on January 16, 2024, when 
CasgevyTM was granted BLA approval from FDA for the 
treatment of TDT in patients 12 years of age and older.
    With respect to the cost criterion, the applicant searched the FY 
2022 MedPAR file and provided multiple analyses to demonstrate that 
CasgevyTM meets the cost criterion. The applicant included 
two cohorts in the analyses to identify potential cases representing 
patients who may be eligible for CasgevyTM: the first cohort 
included all cases in MS-DRG 014 (Allogeneic Bone Marrow Transplant) to 
account for the low volume of SCD or TDT cases, and the second cohort 
included cases in MS-DRG 014 (Allogeneic Bone Marrow Transplant) with 
any ICD-10-CM diagnosis code of SCD or TDT. The applicant explained 
that the cost analyses for SCD and TDT were combined because the volume 
of cases with a sickle cell disease or beta thalassemia diagnosis code 
was very small, and because it believed both indications would be 
approved in time for new technology add-on payment. In addition, the 
applicant noted that when searching for cases in MS-DRG 014 with SCD or 
beta thalassemia diagnosis codes, there were no beta thalassemia cases. 
The applicant noted that cases included in the analysis may not be a 
completely accurate representation of cases that will be eligible for 
CasgevyTM but that the analyses were provided in recognition 
of the low volume of cases.
    The applicant performed two analyses for each cohort: one with all 
prior drug charges maintained, representing a scenario in which there 
is no change to patient drug regimen with the use of 
CasgevyTM; and the other with all prior drug charges 
removed, representing a scenario in which no ancillary drugs are used 
in the treatment of CasgevyTM patients. Per the applicant, 
this was done because some patients receiving CasgevyTM 
could receive fewer ancillary drugs during the inpatient stay, but it 
was difficult to know with certainty whether this would be the case or 
to identify the exact differences in drug regimens between patients 
receiving CasgevyTM and those receiving allogeneic bone 
marrow transplants. The applicant noted the analyses with drug charges 
removed were likely an over-estimation of the ancillary drug charges 
that would be removed in cases involving the use of 
CasgevyTM, but these were provided as sensitivity analyses.
    According to the applicant, eligible cases for Casgevy\TM\ will be 
mapped to either Pre-MDC MS-DRG 016 (Autologous Bone Marrow Transplant 
with CC/MCC) or Pre-MDC MS-DRG 017 (Autologous Bone Marrow Transplant 
without CC/MCC), depending on whether complications or comorbidities 
(CCs) or major complications or comorbidities (MCCs) are present. For 
each analysis, the applicant used the FY 2025 new technology add-on 
payment threshold for Pre-MDC MS-DRG 016 for all identified cases, 
because it was typically higher than the threshold for Pre-MDC MS-DRG 
017. Each analysis followed

[[Page 69138]]

the order of operations described in the table later in this section.
    For the first cohort, the applicant included all cases associated 
with MS-DRG 014 (Allogeneic Bone Marrow Transplant). The applicant used 
the inclusion/exclusion criteria described in the following table and 
identified 996 claims mapping to MS-DRG 014. With all prior drug 
charges maintained (Scenario 1), the applicant calculated a final 
inflated average case-weighted standardized charge per case of 
$12,325,062, which exceeded the average case-weighted threshold amount 
of $182,491. With all prior drug charges removed (Scenario 2), the 
applicant calculated a final inflated average case-weighted 
standardized charge per case of $12,181,526, which exceeded the average 
case-weighted threshold amount of $182,491.
---------------------------------------------------------------------------

    \31\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
---------------------------------------------------------------------------

    For the second cohort, the applicant searched for cases within MS-
DRG 014 (Allogeneic Bone Marrow Transplant) with any ICD-10-CM 
diagnosis codes representing SCD or TDT. The applicant used the 
inclusion/exclusion criteria described in the following table and 
identified 11 claims mapping to MS-DRG 014 (Allogeneic Bone Marrow 
Transplant). With all prior drug charges maintained (Scenario 3), the 
applicant calculated a final inflated average case-weighted 
standardized charge per case of $12,125,212, which exceeded the average 
case-weighted threshold amount of $182,491. With all prior drug charges 
removed (Scenario 4), the applicant calculated a final inflated average 
case-weighted standardized charge per case of $12,086,551, which 
exceeded the average case-weighted threshold amount of $182,491.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant asserted that Casgevy\TM\ meets the cost 
criterion.
[GRAPHIC] [TIFF OMITTED] TR28AU24.104

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36039), we 
invited public comments on whether Casgevy\TM\ meets the cost 
criterion.
    Comment: The applicant reiterated that the cost criterion analyses 
submitted with the application demonstrate that Casgevy\TM\ meets the 
cost criterion.
    Response: We thank the applicant for its comments. We agree that 
the final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount in all scenarios. 
Therefore, Casgevy\TM\ meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that Casgevy\TM\ represents a substantial clinical 
improvement over existing technologies because it is expected to avoid 
certain serious risks or side effects associated with the existing 
approved gene therapy for TDT, Zynteglo\TM\. The applicant provided one 
study to support these claims, as well as two package inserts.\32\ The 
following table summarizes the applicant's assertion regarding the 
substantial clinical improvement criterion. Please see the online 
posting for Casgevy\TM\ for the applicant's complete statements 
regarding the substantial clinical improvement criterion and the 
supporting evidence provided.
---------------------------------------------------------------------------

    \32\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.

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

[[Page 69139]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.105

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36039), after 
reviewing the information provided by the applicant, we stated we had 
the following concerns regarding whether Casgevy\TM\ meets the 
substantial clinical improvement criterion. We noted that the provided 
evidence did not include any peer-reviewed literature that directly 
assessed the use of Casgevy\TM\ for TDT. We noted that the only 
assessment of the technology submitted was from a conference 
presentation \33\ that provided data on the CLIMB-111 trial, an ongoing 
phase 1/2/3 single-arm trial assessing a single dose of Casgevy\TM\ in 
patients 12 to 35 years old with TDT. The data submitted by the 
applicant indicated that 48 participants aged 12 to 35 years received 
Casgevy\TM\ for TDT, of which only 27 participants were evaluable for 
the primary and key secondary endpoints because they were followed for 
at least 16 months (up to 43.7 months) after Casgevy\TM\ infusion. Per 
the applicant's conference presentation, 88.9 percent of participants 
achieved both the primary efficacy endpoint (transfusion independence 
for 12 consecutive months while maintaining a weighted average 
hemoglobin of at least 9 g/dL) and the key secondary efficacy endpoint 
(transfusion independence for 6 consecutive months while maintaining a 
weighted average hemoglobin of at least 9 g/dL). The applicant noted 
that two patients had serious adverse events related to Casgevy\TM\. 
Due to the small study population and the median age of participants in 
the study, we questioned if these study outcomes would be generalizable 
to a Medicare population. In addition, from the evidence submitted, we 
stated we were also unable to determine where the study took place 
(that is, within the U.S. or in locations outside the U.S.), which may 
also limit generalizability to the Medicare population. We also 
questioned if the short follow-up duration was sufficient to assess 
improvements in long-term clinical outcomes.
---------------------------------------------------------------------------

    \33\ Locatelli F, et al. Presented at the 28th Annual European 
Hematology Association; 11 June 2023.
---------------------------------------------------------------------------

    Furthermore, we stated that with regard to the claim that 
Casgevy\TM\ is expected to avoid certain serious risks or side effects 
associated with approved viral-based gene therapies for TDT, the 
applicant stated that Zynteglo\TM\ utilizes gene transfer to use a 
modified, inert lentivirus to add working exogenous copies of the 
[beta]-globin gene to increase functional hemoglobin A; due to this 
mechanism of action and the semi-random nature of viral integration, 
the applicant stated that treatment with Zynteglo\TM\ carries the risk 
of lentiviral vector (LVV)-mediated insertional oncogenesis after 
treatment. The applicant explained that Casgevy\TM\ is an autologous 
ex-vivo modified hematopoietic stem-cell biological product which uses 
a non-viral mechanism of action (CRISPR/Cas9 gene editing), and 
therefore, this technology does not carry a risk for insertional 
oncogenesis. The applicant also noted that gene editing approaches, 
including CRISPR/Cas9, have the potential to produce off-target edits, 
but in trials to date, off-target gene editing has not been observed in 
the edited CD34+ cells from healthy donors or patients. We noted that 
we were unclear regarding the frequency and related clinical relevance 
of LVV-mediated oncogenesis, and we questioned if the follow-up 
duration for patients treated with Casgevy\TM\ was sufficient to assess 
improvement in the rate of malignancy. We also noted we were interested 
in more information on the overall safety profile comparison between 
Casgevy\TM\ and Zynteglo\TM\, as well as any comparisons of Casgevy\TM\ 
to another potentially curative treatment, allogeneic hematopoietic 
stem cell transplant for patients with TDT.
    We invited public comments on whether Casgevy\TM\ meets the 
substantial clinical improvement criterion.
    Comment: A few commenters, including the applicant, stated support 
for approval of Casgevy\TM\ for new technology add-on payments for the 
TDT indication. A commenter further stated that it disagreed with CMS's 
concerns because for patients with TDT, available treatments have 
historically included regular blood transfusions or transplantation of 
bone marrow, options that present significant risk and complications; 
in the young population, bone marrow transplant results in a 23% 
rejection rate, which can ultimately become fatal. The commenter stated 
that for a large number of patients with TDT, a gene therapy is the 
only transformative, durable, and potentially curative treatment option 
and thus, represents a substantial improvement.
    The applicant submitted a public comment regarding the substantial 
clinical improvement criterion. The applicant stated that following its 
application submission, additional data were published in the peer-
reviewed New England Journal of Medicine for the TDT therapy indication 
which provides further support for why Casgevy\TM\ satisfies the 
substantial clinical improvement criterion, as well as further evidence 
of safety and effectiveness and the transformative potential of 
Casgevy\TM\ to treat TDT. The applicant stated that in Locatelli, et 
al. (2024), the authors directly assessed the use of Casgevy\TM\ for 
TDT in a phase 3, single-group, open-label study (CLIMB THAL-111) in 
patients 12 to 35 years of age with TDT and a [beta]\0\/[beta]\0\, 
[beta]\0\/[beta]\0\-like, or non-[beta]\0\/[beta]\0\-like genotype. The 
applicant stated that the study showed a total of 52 patients with TDT 
received exagamglogene-autotemcel and were included in this 
prespecified interim analysis; the median follow-up was 20.4 months 
(range, 2.1 to 48.1) and neutrophils and platelets were engrafted in 
each patient. Among the 35 patients with sufficient follow-up data for 
evaluation, transfusion independence occurred in 32 patients (91 
percent; 95 percent confidence interval, 77 to 98; P < 0.001 against 
the null hypothesis of a 50 percent response). During transfusion 
independence, the mean total hemoglobin level was 13.1 g per deciliter 
and the mean HbF level was 11.9 g per deciliter, and HbF had a 
pancellular distribution (>=94 percent of red cells). The authors of 
the study

[[Page 69140]]

reported that the safety profile of CasgevyTM was generally 
consistent with that of myeloablative busulfan conditioning and 
autologous HSPC transplantation and no deaths or cancers occurred.
    The applicant also stated that the study population from the CLIMB 
THAL-111 trial was generalizable to the Medicare population, stating 
that CasgevyTM was studied in trials conducted in the United 
States and the European Union. The applicant stated that the sample 
size for the studies were appropriate because TDT is a rare medical 
condition, and impacts only an estimated 1,000 to 1,500 Americans. The 
applicant stated that sample sizes of the studies involving 
CasgevyTM are reflective of the challenges associated with 
enrolling larger studies for rare conditions, as well as significant 
challenges in conducting larger studies for an autologous gene therapy 
that must be individualized to each patient. The applicant stated its 
belief that the study populations are reflective of the patient 
population for these conditions, including Medicare covered populations 
who will often be dual eligible (and thus often not over age 65).
    The applicant stated that peer-reviewed data demonstrates the well-
tolerated safety profile of Casgevy\TM\ for TDT. The applicant stated 
that while patients treated with CasgevyTM experienced 
adverse effects, the adverse effects are consistent with the 
conditioning regimen, similar to adverse effects in autologous 
transplant. The applicant stated that in the CLIMB THAL-111 trial for 
TDT, the most common adverse events were febrile neutropenia (54 
percent), stomatitis (40 percent), anemia (38 percent), and 
thrombocytopenia (35 percent), and that the patients treated with 
Casgevy\TM\ did not have any reported cases of graft-versus-host-
disease (GVHD), which is a common and potentially serious side effect 
associated with allogeneic stem cell transplant.
    The applicant stated that with respect to CMS's question about the 
length of the follow-up durations being studied, a long-term follow-up 
study is also continuing to monitor total and fetal hemoglobin levels 
and safety, including (but not limited to) the potential for secondary 
cancers, vaso-occlusive events, and markers of end-organ damage in 
patients who have completed the current study (CLIMB-131; NCT04208529); 
other studies are being conducted to assess the risk of secondary 
cancers and off-target effects after genome editing.
    In response to CMS's concern regarding oncogenesis with gene 
therapy, the applicant noted that the two primary potential mechanisms 
for oncogenesis post-treatment include a late effect of alkylating 
chemotherapy or oncogene activation from off-target editing or 
insertional oncogenesis, as seen in other technologies used in 
treatment of TDT. The applicant stated in newly published peer-reviewed 
research in New England Journal of Medicine,\34\ no off-target editing 
was found through multiple orthogonal approaches, but that alkylating 
agents, however, generally require five to seven years before secondary 
malignancies occur. The applicant stated that the longest follow-up in 
the CLIMB THAL-111 trial had surpassed four years, and that it would 
continue to follow study patients for up to 15 years.
---------------------------------------------------------------------------

    \34\ Frangoul H., et al. Exagamglogene Autotemcel for Severe 
Sickle Cell Disease. N Eng J Med. 2024;390:1649-62. doi/full/
10.1056/NEJMoa2309676.
---------------------------------------------------------------------------

    In response to CMS's concern regarding whether variations in 
clinical trial conditions allows for adequate comparison of adverse 
event rates between clinical trials with respect to the applicant's 
claim that CasgevyTM is expected to avoid potential risk 
associated with other technologies and allogenic bone marrow transplant 
procedures used in treatment of TDT, the applicant noted that the 
adverse event profile for Casgevy\TM\ in TDT is consistent with 
busulfan myeloablative conditioning and HSPC transplant. The applicant 
further stated that the Casgevy\TM\'s mechanism of action does not 
employ a viral vector and does not insert a transgene, and therefore, 
insertional oncogenesis, a documented risk found in FDA-approved 
labeling for other viral-based technologies used in the treatment of 
TDT, by definition, cannot occur as a matter of scientific principle. 
The applicant further stated that although off-target genome editing 
was not observed in the edited CD34+ cells evaluated from healthy 
donors and patients, or in clinical trials to date, the risk of 
unintended, off-target editing in an individual's CD34+ cells cannot be 
ruled out due to genetic variants. In addition, the applicant stated 
that the clinical significance of potential off-target editing is 
unknown. The applicant stated that as an autologous therapy, which is 
manufactured from the patient's own HSPCs, which are modified with 
CRISPR/Cas9 gene editing technology and administered to the patient, 
there is no risk of GVHD or graft rejection, nor a need for 
immunosuppressive drugs, because the drug product is based on the 
patient's own cells and, according to the applicant, this is supported 
by clinical data generated to date in the CLIMB SCD-121 and CLIMB THAL-
111 study, in which no GVHD or graft rejection/failure were observed. 
The applicant further stated that there are no clinical studies which 
exist to compare Casgevy\TM\ to other technologies and therefore, no 
comparisons or conclusions of comparable safety or efficacy can be 
made.
    Another commenter, the manufacturer of Zynteglo\TM\, commented on 
CMS's request for more information on the overall safety profile 
comparison between CasgevyTM and ZyntegloTM with 
regard to the applicant's claim that CasgevyTM is expected 
to avoid certain serious risks or side effects associated with approved 
viral-based gene therapies for TDT. The commenter stated that while the 
Warnings and Precautions section of the Zynteglo\TM\ package insert 
includes a warning as to the potential risk of insertional oncogenesis 
after treatment with Zynteglo\TM\, there have been no cases of 
insertional oncogenesis nor any positive results for replication 
competent lentivirus observed across the utilization of the BB305 
vector across all clinical studies.
    Response: We thank the applicant and commenters for the additional 
information. After further review, we continue to have concerns as to 
whether Casgevy\TM\ meets the substantial clinical improvement 
criterion. We continue to question whether there is evidence to 
demonstrate that CasgevyTM improves clinical outcomes 
relative to existing technologies because of the lack of comparison to 
allo-HSCT and Zynteglo\TM\, both of which are previously existing 
standard of care and potentially curative treatment options for this 
indication, and which treat the same condition in the same patient 
population. Without a comparison of outcomes between these existing 
therapies for TDT, we are unable to make a determination as to whether 
the technology significantly improves clinical outcomes relative to 
services or technologies previously available, as asserted by the 
applicant. We further note that the applicant's only assertion 
regarding whether CasgevyTM improves clinical outcomes for 
TDT was regarding the avoidance of a potential risk of a single side 
effect, and as a commenter stated, there have been no cases of 
insertional oncogenesis nor any positive results for replication 
competent lentivirus observed across the utilization of the BB305 
vector across all clinical studies. We remain unclear how the provided 
evidence supports this claim, given that the applicant did not

[[Page 69141]]

provide any evidence of this potential side effect occurring with use 
of the comparator technology. We continue to question if the follow-up 
duration for TDT patients treated with Casgevy\TM\ is sufficient to 
adequately support the applicant's single claim, given the lack of 
existing data presented to assess improvement in long-term clinical 
outcomes and reduction in clinically significant adverse events, such 
as the rate of malignancy, compared with existing treatments, 
especially given the risk of potential unintended off-target editing 
remains unknown.
    After review of the information submitted by the applicant as part 
of its FY 2025 new technology add-on payment application for 
Casgevy\TM\ for TDT and consideration of the comments received, we are 
unable to determine that Casgevy\TM\ for TDT meets the substantial 
clinical improvement criterion to be approved for new technology add-on 
payments for the reasons discussed in the proposed rule and in this 
final rule, and therefore, we are not approving new technology add-on 
payments for Casgevy\TM\ for TDT for FY 2025.
c. DuraGraft[supreg] (Vascular Conduit Solution)
    Marizyme, Inc. submitted an application for new technology add-on 
payments for DuraGraft[supreg] for FY 2025. According to the applicant, 
DuraGraft[supreg] is an intraoperative vein-graft preservation solution 
used during the harvesting and grafting interval during coronary artery 
bypass graft (CABG) surgery. The applicant stated that the use of 
DuraGraft[supreg] does not change clinical/surgical practice; it 
replaces solutions currently used for flushing and storage of the 
saphenous vein grafts (SVG) from harvesting through grafting, including 
tests for graft leakage. As noted in the FY 2024 IPPS/LTCH PPS proposed 
rule (88 FR 26795), Somahlution, Inc., acquired by Marizyme in 
2020,\35\ submitted and withdrew applications for new technology add-on 
payments for DuraGraft[supreg] for FY 2018 and FY 2019. The applicant 
also submitted an application for new technology add-on payments for FY 
2020, as summarized in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 
19305 through 19312), that it withdrew prior to the issuance of the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42180). We note that the applicant 
also submitted an application for new technology add-on payments for FY 
2024, as summarized in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26795 through 26803), that it withdrew prior to the issuance of the FY 
2024 IPPS/LTCH PPS final rule (88 FR 58804).
---------------------------------------------------------------------------

    \35\ NASDAQ. Marizyme, Inc. Completes Acquisition of 
Somahlution, Inc. and Raises $7.0 Million in Private Placement 
[verbar] Nasdaq (accessed 1/23/2023).
---------------------------------------------------------------------------

    Please refer to the online application posting for 
DuraGraft[supreg], available at https://mearis.cms.gov/public/publications/ntap/NTP231012EE9NW, for additional detail describing the 
technology and intraoperative ischemic injury.
    With respect to the newness criterion, according to the applicant, 
DuraGraft[supreg] was granted De Novo classification from FDA on 
October 4, 2023, for adult patients undergoing CABG surgeries and is 
intended for flushing and storage of SVGs from harvesting through 
grafting for up to 4 hours. In the FY 2025 IPPS/LTCH PPS proposed rule 
(89 FR 36040), we noted that, per the applicant, DuraGraft[supreg] was 
not yet commercially available due to a delay related to finalizing the 
label prior to manufacturing.
    The applicant stated that, effective October 1, 2017, the following 
ICD-10-PCS code may be used to uniquely describe procedures involving 
the use of DuraGraft[supreg]: XY0VX83 (Extracorporeal introduction of 
endothelial damage inhibitor to vein graft, new technology group 3). 
Please refer to the online application posting for the complete list of 
ICD-10-CM and -PCS codes provided by the applicant.
    As previously discussed, if a technology meets all three of the 
substantial similarity criteria under the newness criterion, it would 
be considered substantially similar to an existing technology and would 
not be considered ``new'' for the purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that DuraGraft[supreg] is not substantially similar to other 
currently available technologies because DuraGraft[supreg] is a first-
in-class product as a storage and flushing solution for vascular grafts 
used during CABG surgery and the components of DuraGraft[supreg] 
directly interfere with the mechanisms of oxidative damage, and that 
therefore, the technology meets the newness criterion. The following 
table summarizes the applicant's assertions regarding the substantial 
similarity criteria. Please see the online application posting for 
DuraGraft[supreg] for the applicant's complete statements in support of 
its assertion that DuraGraft[supreg] is not substantially similar to 
other currently available technologies.

[[Page 69142]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.106

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36040), we stated 
that in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26796), we 
expressed concern that the mechanism of action of DuraGraft[supreg] may 
be the same or similar to other vein graft storage solutions. 
Similarly, we noted that, according to the applicant, DuraGraft[supreg] 
prevents intraoperative ischemic injury to the endothelial layer of 
free vascular grafts, reducing the risks for post-CABG vein graft 
disease and graft failure, which are clinical manifestations of graft 
ischemia reperfusion injury (IRI), and we questioned whether 
DuraGraft[supreg] might have a similar mechanism of action as existing 
treatments for preventing ischemic injury of vein grafts during CABG 
surgery and reducing vein graft disease or its complications following 
CABG surgery. We invited public comments on whether DuraGraft[supreg] 
is substantially similar to existing technologies and whether 
DuraGraft[supreg] meets the newness criterion.
    Comment: The applicant stated that the mechanism of action of 
DuraGraft[supreg] is not substantially similar to other products on the 
market. The applicant asserted that by FDA definition of a de novo 
request, there are no other legally marketed treatments or products 
intended for treating or storing vascular grafts and that the 
technology has a novel intended use. Therefore, the applicant believed 
that DuraGraft[supreg] met the newness criterion because there no other 
legally marketed graft storage solutions on the market, there are no 
other products of this type with FDA market authorization, and that it 
has a novel intended use according to FDA.
    With respect to CMS's concern regarding existing treatments for 
preventing ischemic injury of vein grafts during CABG surgery, the 
applicant stated that is not clear which treatments CMS is referring to 
as there are no legally marketed treatments or products intended for 
treating or storing vascular grafts besides DuraGraft[supreg]. The 
applicant further stated that while vascular grafts are placed in a 
liquid, usually Ringers Lactate, Plasmalyte or Normosol, to keep them 
from drying out between harvesting and implantation, in no way should 
these liquids be compared to or considered similar to 
DuraGraft[supreg]. The applicant also stated that these liquids cannot 
prevent ischemic or oxidative damage to vascular grafts. The applicant 
provided a table showing the components of competing wetting solutions 
to demonstrate that the solutions do not have the same molecules needed 
to prevent oxidative damage as DuraGraft[supreg]. The applicant stated 
that on the other hand, the mechanism of action of DuraGraft[supreg] as 
stated in the Instructions for Use (IFU) is through reduction of 
oxidative damage to maintain the structural and functional integrity of 
vascular conduits. The applicant asserted that Duragraft[supreg]'s 
primary function is to provide a reducing environment for vascular 
grafts to prevent oxidative damage which occurs during ischemic storage 
of grafts, using a combination of L-glutathione and L-Ascorbic acid 
that is manufactured in such a way as to preserve these molecules in 
their reduced state. The applicant concluded that, based upon 
composition, the stated mechanism of action, and preclinical evidence 
showing maintenance of the graft's structural and functional integrity 
provided on the DuraGraft[supreg] label, there are no similar products.
    The applicant also stated that DuraGraft[supreg] is considered the 
first product of its type by FDA. Additionally, the applicant stated 
that in 2018, CMS established a new ICD-10-PCS code, XYOVX83 
(Extracorporeal introduction of endothelial damage inhibitor to vein 
graft, new technology group 3), to report DuraGraft[supreg] when used 
in CABG procedures. The applicant stated that this ICD-10-PCS code 
would not be used with other procedures, outside of a few isolated 
instances. The applicant stated that claims submitted with this ICD-10-
PCS code would be in error as DuraGraft[supreg] was not authorized or 
commercialized in the United States prior to October 2023.
    A few commenters submitted comments stating that the mechanism of 
action is not substantially similar to existing technologies and that 
DuraGraft[supreg] has a novel mechanism of action in preventing 
oxidative damage to prevent ischemic injury and subsequent Ischemic 
Reperfusion Injury (IRI).
    One commenter stated that they remained concerned that the 
information provided by the applicant does not show that 
DuraGraft[supreg] meets the newness criterion.
    Response: We thank the applicant and the commenters for their 
comments. Based on our review of comments received and information 
submitted by the applicant as part of its FY 2025 new technology add-on 
payment application for DuraGraft[supreg], we agree with the applicant 
and some of the commenters

[[Page 69143]]

that DuraGraft[supreg] has a unique mechanism of action compared to 
other vein graft storage solutions because it creates a reducing 
environment for vascular grafts to prevent oxidative damage which 
occurs during ischemic storage of grafts. Therefore, we agree with the 
applicant that DuraGraft[supreg] is not substantially similar to 
existing treatment options and meets the newness criterion.
    Comment: In response to our note in the proposed rule that 
DuraGraft[supreg] was not commercially available, the applicant 
responded that DuraGraft[supreg] is not yet commercially available but 
is expected to be available near the end of the second quarter of 2024.
    Response: We thank the applicant for their response. As discussed 
in prior rulemaking (86 FR 45132; 77 FR 53348), generally, our policy 
is to begin the newness period on the date of FDA approval or clearance 
or, if later, the date of availability of the product on the US market. 
At this time, as there is not sufficient information to determine a 
newness date based on a documented delay in the technology's 
availability on the U.S. market, we consider the newness date for this 
technology to be October 4, 2023, the date it was granted De Novo 
classification from FDA.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for DuraGraft[supreg], the 
applicant searched the FY 2022 MedPAR file for cases reporting a 
combination of ICD-10-CM/PCS codes that represent patients who 
underwent CABG procedures. Please see the online posting for 
DuraGraft[supreg] for a complete list of MS-DRGs and ICD-10-CM and -PCS 
codes provided by the applicant. Using the inclusion/exclusion criteria 
described in the following table, the applicant identified 33,511 cases 
mapping to 59 MS-DRGs, including MS-DRG 236 (Coronary Bypass Without 
Cardiac Catheterization Without MCC) representing 21.9 percent of the 
identified cases. The applicant followed the order of operations 
described in the following table and calculated a final inflated 
average case-weighted standardized charge per case of $321,620, which 
exceeded the average case-weighted threshold amount of $235,829. 
Because the final inflated average case-weighted standardized charge 
per case exceeded the average case-weighted threshold amount, the 
applicant asserted that DuraGraft[supreg] meets the cost criterion.
---------------------------------------------------------------------------

    \36\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the outline posting for the 
technology.
[GRAPHIC] [TIFF OMITTED] TR28AU24.107

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36041), we noted 
the following concerns regarding the cost criterion. Although the 
applicant did not remove direct or indirect charges related to the 
prior technology, we noted that the applicant indicated that the use of 
DuraGraft[supreg] replaces solutions currently used for flushing and 
storage of the SVGs harvested through grafting, including tests for 
graft leakage, in its discussion of the newness criterion. Therefore, 
we questioned whether the cost criterion analysis should remove charges 
for related or prior technologies, such as autologous heparinized 
blood, Plasmalyte/Normosol, Lactated Ringers, and heparinized saline.
    We invited public comments on whether DuraGraft[supreg] meets the 
cost criterion.
    Comment: The applicant conducted two new cost analyses to address 
CMS's concerns about not removing direct or indirect charges related to 
prior technology. Specifically, the applicant removed 25 percent of the 
medical supply's charges including Plasmalyte/Noromosol, Lactated 
Ringers and Heparinized saline, and separately removed all blood 
charges. Under the first analysis, DuraGraft[supreg] exceeded the

[[Page 69144]]

average case-weighted cost threshold amount by $75,125, and under the 
second analysis, Duragraft[supreg] exceeded the average case-weighted 
cost threshold amount by $85,777. The applicant stated that 
Duragraft[supreg] met the cost criterion as it exceeded the cost 
threshold with inclusion of the charges for related or prior 
technologies and when charges for the prior technologies are removed.
    Response: We thank the applicant for its comments and new cost 
analyses. We agree that the final inflated average case-weighted 
standardized charges per case exceeded the average case-weighted 
threshold amounts. Therefore, DuraGraft[supreg] meets the cost 
criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that DuraGraft[supreg] represents a substantial 
clinical improvement over existing technologies because there is no 
other product or technology that reduces the incidence of peri-
operative myocardial infarction. The applicant provided four studies to 
support this assertion, as well as 47 background articles about 
reducing major adverse cardiac events (MACE).\37\ The following table 
summarizes the applicant's assertions regarding the substantial 
clinical improvement criterion. Please see the online posting for 
DuraGraft[supreg] for the applicant's complete statements regarding the 
substantial clinical improvement criterion and the supporting evidence 
provided.
---------------------------------------------------------------------------

    \37\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P

[[Page 69145]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.108

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36042 through 
36043), after review of the information provided by the applicant, we 
stated we

[[Page 69146]]

had the following concerns regarding whether DuraGraft[supreg] meets 
the substantial clinical improvement criterion. As discussed in the FY 
2024 IPPS/LTCH PPS proposed rule (88 FR 26800 through 26801), we 
expressed concern regarding the relatively small sample sizes of the 
Szalkiewicz, et al. (2022) \38\ and Perrault, et al. (2021) \39\ 
studies, as compared to the number of potentially eligible patients for 
this technology, and relatively short follow-up periods. We continued 
to question whether the sample was representative of the number of 
Medicare beneficiaries potentially eligible for DuraGraft[supreg]. We 
referred readers to the FY 2024 IPPS/LTCH PPS proposed rule for further 
discussion of these concerns. We also stated that, for its FY 2025 
application, the applicant also cited Lopez-Menendez, et al. 
(2021),\40\ which we noted used a sample size of 180, and therefore we 
similarly questioned whether the results of this study would be 
replicated with a larger patient sample.
---------------------------------------------------------------------------

    \38\ Szalkiewicz, P, Emmert, MY, and Heinisch, PP, et al (2022). 
Graft Preservation confers myocardial protection during coronary 
artery bypass grafting. Frontiers in Cardiovascular Medicine, July 
2022, pp 1-10. DOI 10.3389/fcvm.2022.922357.
    \39\ Perrault, LP, Carrier, M, and Voisine, P, et al (2021). 
Sequential multidetector computed tomography assessments after 
venous graft treatment solution in coronary artery bypass grafting. 
Journal of Thoracis and Cardiovascular Surgery. Jan. 2021, Vol. 161, 
Number 1, 96-106. https://doi.org/10.1016/j.jtcvs.2019.10.115.
    \40\ Lopez-Menendez J, Castro-Pinto M, and Fajardo E, Miguelena 
J, et al. Vein graft preservation with an endothelial damage 
inhibitor in isolated coronary artery bypass surgery: an 
observational propensity score-matched analysis. J Thorac Dis 
2023;15(10):5549-5558.
---------------------------------------------------------------------------

    Similar to the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26800 
through 26801), we also questioned whether the results from the Haime, 
et al. (2018) \41\ study could be generalized to other patient groups, 
including non-Veterans, women, or those from other racial or ethnic 
groups. We continued to question whether the demographic profiles in 
the Perrault, Szalkiewicz, and Haime studies that the applicant 
submitted were comparable with those of the U.S. Medicare patients who 
underwent CABG surgery. For its FY 2025 application, the applicant also 
cited the Lopez-Menendez, et al. (2021) \42\ study, which was based on 
a European patient population that was predominantly male (82 percent 
to 90 percent). However, as we noted in the FY 2024 IPPS/LTCH PPS 
proposed rule (88 FR 26800 through 26801), among the Medicare fee-for-
service beneficiaries who underwent CABG surgery, male patients 
accounted for two-thirds (66 percent) of this population. Therefore, we 
stated that we continued to question whether the findings of these 
studies would be replicable among the Medicare population.
---------------------------------------------------------------------------

    \41\ Haime, M, McLean RR, and Kurgansky KE, et al (2018). 
Relationship between intra-operative vein graft treatment with 
DuraGraft[supreg] or saline and clinical outcomes after coronary 
artery bypass grafting, Expert Review of Cardiovascular Therapy, 
16:12, 963-970. DOI: 10.1080/14779072.2018.1532289.
    \42\ Lopez-Menendez J, Castro-Pinto M, and Fajardo E, Miguelena 
J, et al. Vein graft preservation with an endothelial damage 
inhibitor in isolated coronary artery bypass surgery: an 
observational propensity score-matched analysis. J Thorac Dis 
2023;15(10):5549-5558.
---------------------------------------------------------------------------

    We invited public comments on whether DuraGraft[supreg] meets the 
substantial clinical improvement criterion.
    Comment: The applicant reiterated the studies provided in its 
application in support of substantial clinical improvement for 
DuraGraft[supreg] and stated that the FDA label for DuraGraft[supreg] 
includes the following data from the Perrault study and the Internal 
Study Report: DuraGraft-treated SVGs had smaller wall thickness and 
lesser maximum focal narrowing at 12 months versus saline controls,\43\ 
and reduced all-cause mortality at 3 years for Duragraft patients 
compared to patients who received SOC.\44\
---------------------------------------------------------------------------

    \43\ Perrault et al.(2021) ``Sequential multidetector computed 
tomography assessments after venous graft treatment solution in 
coronary artery bypass grafting'' Journal of Cardiothoracic and 
Cardiovascular Surgery, 2021, Vol 161, Number 1, 96-106.
    \44\ Internal Study Report comparing mortality over three years 
in patients from the DuraGraft Registry undergoing isolated CABG to 
three-year mortality in standard of care patients from the Society 
of Thoracic Surgeons (STS) Registry. The data is reported in an 
Internal Study Report and is expected to be published by August 
2024.
---------------------------------------------------------------------------

    In response to CMS's concerns regarding small sample sizes in the 
Perrault, Szalkiewicz, and Lopez-Menendez studies, the applicant stated 
that the sample size for the Perrault study was typical for a Class 2 
medical device pivotal study under FDA, with 125 patients enrolled. The 
applicant stated that the study utilized a within-patient control 
design in that each patient received a DuraGraft[supreg] treated graft 
and a control graft, eliminating the need for a control group. The 
applicant also stated that the study was powered to observe changes in 
saphenous vein graft wall thickening, a surrogate endpoint in the 
pathophysiology of vein graft stenosis after CABG. Additionally, the 
applicant stated that the study, with each patient acting as their own 
control point, was powered to demonstrate a difference in the primary 
multidetector computed tomography (MDCT)-based endpoints. The applicant 
asserted that despite smaller sample sizes compared to those for drug 
studies, the size is typical for that of a medical device. Per the 
applicant, the study demonstrates important graft pathophysiology 
associated with the use of DuraGraft. The applicant further stated that 
the outcomes of each study are consistent with the growing body of data 
on DuraGraft[supreg] and is generalizable to the Medicare population. 
The applicant stated that the Szalkiewicz study was retrospective and 
powered to demonstrate the change in a surrogate endpoint of myocardial 
damage. The study was based on a sample size of 272 patients, with a 
mean age of 72 years (inter-quartile range (IQR): 62-75 years) in the 
DuraGraft[supreg] arm and 70 years (IQR: 61-76 years) in the control 
arm. The applicant stated the age is typical of CABG patients and the 
Medicare population. Regarding the Lopez-Menendez study, the applicant 
explained that this observational, prospective, single-center study had 
a follow-up period of 3 years and a sample size of 180 patients, 90 in 
the DuraGraft[supreg] arm and 90 in the control arm. The applicant 
stated that the study results showed a reduction of MACE in the 
DuraGraft[supreg] arm and, in a subset analysis, the use of 
DuraGraft[supreg] in diabetic patients was associated with better 
event-free survival. Additionally, the applicant stated that the 
observational study in the Marizyme internal study report had more than 
5,000 patients and demonstrated DuraGraft[supreg]'s long-term treatment 
effects by comparing 3-year mortality from CABG patients in the 
DuraGraft[supreg] registry to a propensity matched cohort from the STS 
registry. The applicant asserted that the overall sample size of the 
patients treated with DuraGraft[supreg] in these four studies was 
2,700.
    The applicant also commented on CMS's concerns about the 
differences in the distribution of demographic characteristics between 
the patients in the Perrault, Haime, and Szalkewicz studies and the 
U.S. Medicare population. To address this concern, the applicant 
highlighted a head-to-head comparison (described in the DuraGraft IFU) 
comparing CABG patients on the European DuraGraft[supreg] registry, who 
were exposed to DuraGraft[supreg], to those in the U.S. STS CABG 
registry, who were not. The applicant stated that outcomes from 
patients from the European DuraGraft[supreg] Registry (n=2522) were 
compared to randomly selected patients from the STS registry database 
in the U.S. who were operated on during the same period (n=294,725). 
The applicant stated that prior to propensity score

[[Page 69147]]

matching, women comprised only 23.9 percent of the population 
undergoing first-time CABG in the U.S. during the time of the study, 
while men made up 76.1 percent. The applicant stated that the 
percentages were also similar to those of Medicare beneficiaries with 
the top 15 DRGs associated with cardiac surgery in the CMS MedPAR file 
data from 2022. The applicant stated that after propensity score 
matching, the sex distribution of the U.S. cohort became comparable to 
that of the European cohort, with 82.5 percent male and 17.5 percent 
female. The applicant asserted that the sex distribution of the patient 
population in the study was similar to that of Medicare patients 
undergoing first time CABG procedures at the time of the study. The 
applicant stated that the primary endpoint for the study was mortality 
through 3 years of follow-up. The applicant stated that the STS 
database contains data through 30-days after CABG surgery, and the STS' 
data was merged by STS with the national Death Index, a database 
maintained by the National Center for Health Statistics (NCHS) which 
captures all death records for the U.S. and U.S. territories, allowing 
mortality to be assessed for most STS patients beyond 30 days. The 
applicant asserted that the study results demonstrated a reduced 
mortality estimate in DuraGraft[supreg] patients at 3 years compared to 
STS patients. The applicant stated that this additional information 
should address CMS's concerns regarding DuraGraft[supreg] studies' 
applicability to the female Medicare population.
    With respect to the Perrault study, the applicant stated it was a 
medical device study conducted with input from FDA, which involved 
radiologic assessment, using MDCT angiography, to evaluate graft 
morphology changes post-CABG comparing DuraGraft[supreg] treated grafts 
to saline controls. The applicant stated that some of the study 
results, reduction in wall thickening and reduction in maximal focal 
narrowing of the graft following use of DuraGraft[supreg], have been 
allowed in the DuraGraft[supreg] label. The applicant stated that the 
study patient population was 91.2 percent male and 8.8 percent female 
and somewhat under-represented Medicare eligible women 8.9 percent 
versus 23.9 percent based on data in the STS database and CMS data for 
the timeframe. The applicant stated that the study still represented a 
study that included women, and taken together with the European 
DuraGraft[supreg] registry described earlier in this section, it was 
the applicant's conclusion that together these studies are 
representative of the Medicare eligible population. Additionally, the 
applicant stated that the average age of the patients, 66.2, was 
consistent with the age of a Medicare beneficiary.
    With respect to the Haime study, the applicant stated that it was a 
single site study performed at the Boston Veterans Affairs (VA) 
hospital. According to the applicant, while the group was 99 percent 
male, the population of the VA hospitals typically represents one with 
elevated cardiac risk factors. The applicant stated that the 
characteristics of the study participants are typical for studies of 
CABG surgery and align with the Medicare population in terms of age, 
BMI, and presence of a diabetes diagnosis. The applicant stated that 
according to both CMS and STS data taken from the same time period in 
which both the Perrault and Registry comparison studies were performed, 
the percentage of Medicare eligible women undergoing CABG surgery 
ranges between 23.9 to 25.3 percent. The applicant stated that while 
the Perrault study included 8.9 percent women, the Registry comparison 
study patient population was 17.5 percent women. The applicant also 
stated that the percentage of women in the study reported by Lopez-
Menendez (2023) was 17.8 percent, only a few percentage points lower 
than the percentage of Medicare eligible women undergoing CABG surgery 
based on both CMS and STS data.
    The applicant commented that its current data does not allow an 
assessment of whether race changes the effect of DuraGraft[supreg] and 
acknowledged that the race of the patients in all the DuraGraft[supreg] 
studies was predominantly Caucasian. According to the applicant, in the 
Marizyme internal study report, it tried to isolate population 
differences and eliminate possible biases by propensity score matching 
based on 35 variables most strongly associated with surgical risk. The 
applicant cited the Shahian 2012 ASCERT study,\45\ which identified 
perioperative as well as longer-term predictors of mortality post-CABG. 
The applicant also asserted that race and sex have been demonstrated in 
these multiple studies as lesser determinants of post-CABG mortality 
compared to other important risk factors such as age, congestive heart 
failure, chronic obstructive pulmonary disease, renal failure, 
myocardial infarction, and emergent operative status.
---------------------------------------------------------------------------

    \45\ Shahian DM, O'Brian SM, Sheng S, et al. Predictors of long-
term survival after coronary artery bypass grafting surgery: Results 
from the Society of Thoracic Surgeons Adult Cardiac Surgery Database 
(The ASCERT Study). Circulation 2012; 125:1491-1500.
---------------------------------------------------------------------------

    Another commenter cited a study by Gaudino and team (2023),\46\ 
which examined outcomes in women undergoing CABG in the US from 2011-
2020. According to the commenter, the authors of the study acknowledged 
that women have been chronically underrepresented in cardiology 
studies, but stated that there is no biological evidence for gender-
based differential effect of DuraGraft[supreg] solution. The commenter 
further stated that CAD is becoming more common among women, which 
makes them amenable to medical and invasive treatment options, like 
CABG surgery. The commenter also referred to a Goldstein 2022 
study,\47\ which examined the effects of an external saphenous vein 
graft support device on reducing intimal hyperplasia and graft failure 
in patients undergoing CABG, and stated that 20.5 percent of the 
patients in that study were women.
---------------------------------------------------------------------------

    \46\ Gaudino M et al., Operative Outcomes of Women Undergoing 
Coronary Artery Bypass Surgery in the US, 2011 to 2020. JAMA Surg. 
2023 May 1;158(5):494-502. doi: 10.1001/jamasurg.2022.8156. PMID: 
36857059; PMCID: PMC9979009.
    \47\ Goldstein DJ et al., External Support for Saphenous Vein 
Grafts in Coronary Artery Bypass Surgery: A Randomized Clinical 
Trial. JAMA Cardiol. 2022 Aug 1;7(8):808-816. doi: 10.1001/
jamacardio.2022.1437. PMID: 35675092; PMCID: PMC9178499.
---------------------------------------------------------------------------

    One commenter stated that the study design for the Perrault study, 
in which each patient received a DuraGraft[supreg] treated graft and a 
control graft to control for patient-specific graft effects, obviated 
the need for a separate control patient cohort, thereby decreasing the 
sample size required for the study. The commenter asserted that the 
study was powered appropriately as the MDCT scanning measurements were 
taken every 10mm along the whole of the grafts at 1, 3, and 12 months 
for the endpoints of the study.
    One commenter expressed concern that the data received to date did 
not support the substantial clinical improvement criterion for 
DuraGraft[supreg].
    Response: We thank the applicant and the commenters for their 
additional input. After review of the comments and all data received to 
date, we continue to have concerns that the evidence submitted does not 
support that the technology meets the substantial clinical improvement 
criterion.
    We continue to question whether the patient samples in the studies 
provided are representative of the Medicare population, as this could 
impact the extent to which the results related to DuraGraft[supreg]'s 
effects on clinical outcomes could be generalized to the

[[Page 69148]]

Medicare population, including those who may potentially need CABG 
surgery or be eligible for DuraGraft[supreg]. According to the 
applicant, because the matched STS cohort, with 82.5 percent males and 
17.5 percent females, was equivalent to the European DuraGraft[supreg] 
Registry, it was very similar to the sex demographics of Medicare 
patients undergoing first time CABG procedures at the time of the 
study. However, as we noted in the FY 2024 and FY 2025 IPPS/LTCH PPS 
proposed rules (88 FR 26801 and 89 FR 36043), male patients accounted 
for only 66 percent of all CABG patients on Medicare, while women 
accounted for the remaining 34 percent, and statistics have shown that 
women tend to have poorer outcomes after CABG surgery. We are also 
concerned that study results, based on predominantly male and white 
samples, may not be replicable among the Medicare population, 
especially since the proportion of racial and ethnic minorities has 
continued to grow, from 20.9 percent in 2008 to 27.2 percent in 
2022.\48\ While the applicant asserted that race and sex were 
demonstrated in the studies provided to be lesser determinants of post-
CABG mortality compared to other important risk factors, such as age, 
congestive heart failure, chronic obstructive pulmonary disease, renal 
failure, myocardial infarction (MI) and emergent operative status, the 
applicant also commented that these factors were not well represented 
in the same studies, such that it is unclear how they could be 
accurately demonstrated as a lower determinant of mortality. We note 
that the poorer clinical outcomes of female and minority CABG patients 
are well-documented in the literature. Compared to male CABG patients, 
female CABG patients had worse post-CABG outcomes, including a higher 
rate of unplanned readmissions within 30 or 90 days post-discharge, 
inpatient mortality, major cardiovascular and cerebrovascular adverse 
events (MACCE), like non-fatal MI, transient ischemic attack, 
cardiovascular-related mortality, and all-cause 
mortality.49 50 51 Compared to white CABG patients, African 
American CABG patients have a higher risk for poor post-CABG outcomes, 
like longer length of inpatient stay, MACCE, and all-cause 
mortality.52 53 Study results based on patient samples in 
which women or racial and ethnic minorities were under-represented may 
limit our ability to generalize the findings to a population with 
different clinical characteristics.54 55
---------------------------------------------------------------------------

    \48\ KFF. Distribution of Medicare beneficiaries by race/
ethnicity (https://www.kff.org/medicare/state-indicator/medicare-beneficiaries-by-raceethnicity/?currentTimeframe=0&sortModel%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D, accessed 06/23/2024).
    \49\ Gupta S, Lui B, Ma X, et al. Sex differences in outcomes 
after coronary artery bypass grafting. Journal of Cardiothoracic and 
Vascular Anesthesia 34(2020) 3259-3266.
    \50\ Robinson NB, Naik A, Rahouma M, et al. Sex differences in 
outcomes following coronary artery bypass grafting: a meta-analysis. 
Interactive CardioVascular and Thoracic Surgery (2021) 841-847.
    \51\ Dassanayake MT, Norton EL, Ward AF, et al. Sex-specific 
disparities in patients undergoing isolated CABG. American Heart 
Journal Plus: Cardiology Research and Practice 35(2023) 100334.
    \52\ Zea-Vera R, Asokan S, Shah RM, et al. Racial/ethnic 
differences persist in treatment choice and outcomes in isolated 
intervention for coronary artery disease. The Journal of Thoracic 
and Cardiovascular Surgery 2022. 166(4). https://doi.org/10.1016/j.jtcvs.2022.01.034.
    \53\ Dokollari A, Sicouri S, Ramlawi B, et al. Risk predictors 
of race disparity in patients undergoing coronary artery bypass 
grafting: a propensity-matched analysis. Interdisciplinary 
CardioVascular and Thoracic Surgery 2024. 38(1), ivae002.
    \54\ Lala A, Louis C, Vervoort D, et al. Clinical trial 
diversity, equity, and inclusion: Roadmap of the Cardiothoracic 
Surgical Trials Network. The Annals of Thoracic Surgery 2024 https://doi.org/10.1016/j.athoracsur.2024.03.016
    \55\ Long C, Williams AO, McGovern AM, et al. Diversity in 
randomized clinical trials for peripheral artery disease: a 
systematic review. International Journal for Equity in Health 2024) 
Volume 23, article number 29.
---------------------------------------------------------------------------

    Furthermore, we continue to have concerns about the sample sizes in 
some of the studies referenced. Based on the information provided, we 
remain unclear about how the sample sizes were calculated and the 
parameters used in the calculations, such as the size of the 
populations that the samples represented, the effect size,\56\ and how 
much of a difference in outcomes was clinically meaningful and 
reflected a true effect between those who were exposed to 
Duragraft[supreg] and those who were not.\57\
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    \56\ Fleiss JL, Levin B, and Paik MC. Statistical Methods for 
Rates and Proportions. Third edition. 2003. John Wiley & Sons, Inc.
    \57\ Button KS, Ioannidis JP, Mokrysz C, et al. Power failure: 
why small sample size undermines the reliability of neuroscience. 
Nature Reviews Neuroscience. 14, 365-376. 2013.
---------------------------------------------------------------------------

    As noted, the applicant stated that the Perrault study showed that 
DuraGraft[supreg]-treated SVGs had smaller mean wall thickness and 
lesser maximum focal narrowing at 12 months versus saline controls, and 
that these results were included in the FDA label for 
DuraGraft[supreg]. The applicant stated that the Perrault study was 
powered to observe changes in SVG wall thickening, which it stated is a 
surrogate endpoint in the pathophysiology of vein graft stenosis. While 
we acknowledge that the study demonstrated smaller wall thickness and 
lesser maximum focal narrowing at 12 months for DuraGraft[supreg]-
treated SVGs versus saline controls, as included in the FDA label, we 
also agree that these are surrogate endpoints. As the study was not 
powered to demonstrate an improved clinical outcome as described under 
the regulations at 412.87(b)(1)(ii), we do not believe the inclusion of 
these findings from this study support a finding of substantial 
clinical improvement. We also note that we do not believe that the 
inclusion of outcomes on the FDA label by itself supports a finding of 
substantial clinical improvement. In addition, the Perrault study 
compared DuraGraft[supreg] to saline controls. However, as previously 
noted, there are other vein graft preservation solutions, including but 
not limited to Plasmalyte, Normosol, lactated ringers, and heparinized 
autologous blood, to which DuraGraft[supreg] was not compared. We 
further note that studies have shown that these solutions have 
differing effects on graft endothelium.58 59 We are unclear 
how improvements demonstrated by use of DuraGraft[supreg] as compared 
to saline controls demonstrate substantial clinical improvement over 
other existing technologies without an assessment of comparative 
outcomes to the other vein graft preservation solutions.
---------------------------------------------------------------------------

    \58\ Toto F, Torre T, Turchetto L, Lo Cicero V, Soncin S, Klersy 
C, Demertzis S, Ferrari E. Efficacy of Intraoperative Vein Graft 
Storage Solutions in Preserving Endothelial Cell Integrity during 
Coronary Artery Bypass Surgery. J Clin Med. 2022 Feb 18;11(4):1093. 
doi: 10.3390/jcm11041093. PMID: 35207364; PMCID: PMC8877698.
    \59\ Bernhard Winkler, David Reineke, Paul Philip Heinisch, 
Florian Sch[ouml]nhoff, Christoph Huber, Alexander Kadner, Lars 
Englberger, Thierry Carrel, Graft preservation solutions in 
cardiovascular surgery, Interactive CardioVascular and Thoracic 
Surgery, Volume 23, Issue 2, August 2016, Pages 300-309, https://doi.org/10.1093/icvts/ivw056.
---------------------------------------------------------------------------

    With regard to the applicant's assertions that results of the 
Marizyme internal study report showing reduced mortality at three years 
in DuraGraft[supreg] patients were included in the FDA label, we note 
that the primary endpoint was mortality through 1 year of follow up. 
While the applicant stated in its comment that the study results 
demonstrated a reduced mortality estimate at 3 years for 
Duragraft[supreg]-treated patients compared to SOC controls, we note 
that differences in mortality were not statistically significant at the 
primary endpoint of 1 year. Similarly, we do not believe the inclusion 
of outcomes on the FDA label by itself supports a finding of 
substantial clinical improvement. In addition, although we acknowledge 
that, as stated by the applicant, it tried to isolate population 
differences and eliminate possible biases by propensity score matching

[[Page 69149]]

based on 35 variables most strongly associated with surgical risk, we 
note that propensity scoring can only control for confounding factors 
that are measured. Unmeasured confounding factors could still impact 
the association between exposure to DuraGraft[supreg] and clinical 
outcomes. In particular, it does not appear that intra-operative or 
post-operative factors that could impact vein integrity or post-CABG 
outcomes were accounted for in this study (or in other studies provided 
by the applicant, as we had previously noted in the FY 2024 IPPS/LTCH 
PPS proposed rule (88 FR 26801)) including vein distention pressure, 
time of intra-operative SVG ischemia, or post-operative antiplatelet 
therapy or lipid-lowering drugs. We further note that the Marizyme 
internal study report is unpublished, and it is unclear from the report 
which vein preservation solutions were included in the control arm as 
the report only states that SOC solution was used. Further, the study 
only reports all-cause mortality and does not specify how many patients 
had mortality due to other causes that could not be attributed to use 
of a vein preservation solution other than DuraGraft[supreg]. 
Therefore, although the applicant stated that this additional 
information should address CMS's concerns regarding DuraGraft[supreg] 
studies' applicability to the female Medicare population, we continue 
to question the generalizability of any outcomes associated with use of 
DuraGraft[supreg].
    Therefore, after consideration of the public comments we received 
and based on the information stated previously, we are unable to 
determine that DuraGraft[supreg] represents a substantial clinical 
improvement over existing therapies, and we are not approving new 
technology add-on payments for DuraGraft[supreg] for FY 2025.
d. ELREXFIOTM (elranatamab-bcmm) and TALVEYTM 
(talquetamab-tgvs)
    Two manufacturers, Pfizer, Inc. and Johnson & Johnson Health Care 
Systems, Inc. submitted separate applications for new technology add-on 
payments for FY 2025 for ELREXFIOTM and TALVEYTM, 
respectively. Both of these technologies are bispecific antibodies 
(bsAb) used for the treatment of adults with relapsed or refractory 
multiple myeloma (RRMM) who have received at least four prior lines of 
therapy, including a proteasome inhibitor (PI), an immunomodulatory 
(IMiD), and an anti-CD38 monoclonal antibody (mAb). 
ELREXFIOTM is a B-cell maturation antigen (BCMA) directed 
cluster of differentiation (CD)3 T-cell engager. Per the applicant, 
ELREXFIOTM is a bispecific, humanized immunoglobulin 2-
alanine (IgG2[Delta]a) kappa antibody derived from two mAbs, 
administered as a fixed-dose, subcutaneous treatment. 
TALVEYTM is a G protein-coupled receptor, class C, group 5, 
member D (GPRC5D) targeting bsAb. GPRC5D is an orphan receptor 
expressed at a significantly higher level on malignant multiple myeloma 
(MM) cells than on normal plasma cells. We note that Pfizer, Inc. 
submitted an application for new technology add-on payments for 
ELREXFIOTM for FY 2024 under the name elranatamab, as 
summarized in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26803 
through 26809), but the technology did not meet the July 1, 2023, 
deadline for FDA approval or clearance of the technology and, 
therefore, was not eligible for consideration for new technology add-on 
payments for FY 2024 (88 FR 58804).
    In the FY 2025 IPPS/LTCH PPS proposed rule (86 FR 36043 through 
36052 and 36087 through 36092), we discussed these applications as two 
separate technologies. However, after further consideration and as 
discussed later in this section, we believe ELREXFIOTM and 
TALVEYTM are substantially similar to each other and that it 
is appropriate to evaluate both technologies as one application for new 
technology add-on payments under the IPPS.
    Please refer to the online application posting for 
ELREXFIOTM available at https://mearis.cms.gov/public/publications/ntap/NTP2310176PV9B, for additional detail describing the 
technology and the disease treated by the technology.
    Please refer to the online application posting for 
TALVEYTM, available at https://mearis.cms.gov/public/publications/ntap/NTP2310163HW2V, for additional detail describing the 
technology and the disease treated by the technology.
    With respect to the newness criterion, the applicant for 
ELREXFIOTM stated that ELREXFIOTM was granted 
Biologics License Application (BLA) approval from FDA on August 14, 
2023, for the treatment of adult patients with RRMM who have received 
at least four prior lines of therapy, including a PI, an IMiD, and an 
anti-CD38 mAb. According to the applicant, ELREXFIOTM was 
commercially available immediately after FDA approval. Per the 
applicant, the recommended doses of ELREXFIO\TM\ subcutaneous injection 
are step-up doses of 12 mg on day 1 and 32 mg on day 4, followed by a 
first treatment dose of 76 mg on day 8 and subsequent treatment doses 
as indicated on the label. The applicant noted that treatment doses may 
be administered in an inpatient or outpatient setting. Per the 
applicant, patients should be hospitalized for 48 hours after 
administration of the first step-up dose, and for 24 hours after 
administration of the second step-up dose. The applicant assumed that 
there would be a single inpatient stay, with one 44 mg vial used per 
dose, resulting in two doses (each a step-up dose) being administered.
    The applicant for TALVEYTM stated that 
TALVEYTM was granted BLA approval from FDA on August 9, 
2023, for the treatment of adult patients with RRMM who have received 
at least four prior lines of therapy, including a PI, an IMiD, and an 
anti-CD38 mAb. According to the applicant, TALVEYTM was 
commercially available immediately after FDA approval. Per the 
applicant, patients may be dosed on a weekly or bi-weekly dosing 
schedule. The applicant noted that patients on a weekly dosing schedule 
receive three weight-based doses--a 0.01 mg/kg loading dose, a 0.06 mg/
kg loading dose, and the first 0.40 mg/kg treatment dose--during the 
hospital stay; patients on a bi-weekly dosing schedule receive an 
additional 0.80 mg/kg treatment dose during the hospital stay.
    The applicant for ELREXFIOTM stated that effective 
October 1, 2023, the following ICD-10-PCS code may be used to uniquely 
describe procedures involving the use of ELREXFIOTM: XW013L9 
(Introduction of elranatamab antineoplastic into subcutaneous tissue, 
percutaneous approach, new technology group 9). The applicant stated 
that C90.00 (Multiple myeloma not having achieved remission), C90.01 
(Multiple myeloma in remission), C90.02 (Multiple myeloma in relapse), 
and Z51.12 (Encounter for antineoplastic immunotherapy) may be used to 
currently identify the indication for ELREXFIOTM under the 
ICD-10-CM coding system.
    The applicant for TALVEYTM submitted a request for 
approval for a unique ICD-10-PCS procedure code for TALVEYTM 
and was granted approval for the following procedure code effective 
April 1, 2024: XW01329 (Introduction of talquetamab antineoplastic into 
subcutaneous tissue, percutaneous approach, new technology group 9). 
The applicant stated that ICD-10-CM codes C90.00 (Multiple myeloma not 
having achieved remission) and C90.02 (Multiple myeloma in relapse) may 
be used to currently identify the indication for TALVEYTM.
    As stated earlier and for the reasons discussed further later in 
this section, we believe that ELREXFIOTM and

[[Page 69150]]

TALVEYTM are substantially similar to each other such that 
it is appropriate to analyze these two applications as one technology 
for purposes of new technology add-on payments, in accordance with our 
policy. We also discuss in this section the information provided by the 
applicants, as summarized in the proposed rule, regarding whether 
ELREXFIOTM and TALVEYTM are substantially similar 
to existing technologies. As discussed earlier, if a technology meets 
all three of the substantial similarity criteria, it would be 
considered substantially similar to an existing technology and would 
not be considered ``new'' for purposes of new technology add-on 
payments.
    With respect to the substantial similarity criteria, in its 
application for new technology add-on payments for FY 2025, the 
applicant for ELREXFIOTM asserted that ELREXFIOTM 
is not substantially similar to other currently available technologies 
because it is the only therapy approved for the treatment of patients 
with RRMM who have received four prior lines of therapy including a PI, 
IMiD, and mAb, that uses a humanized IgG2[Delta]a antibody for the 
mechanism of action. Per the applicant, it is also the only BCMA-
directed bsAb therapy with clinical study data in its prescribing 
information supporting its use in patients who have received prior 
BCMA-directed therapy and that, therefore, the technology meets the 
newness criterion. The following table summarizes the applicant's 
assertions regarding the substantial similarity criteria. Please see 
the online application posting for ELREXFIOTM for the 
applicant's complete statements in support of its assertion that 
ELREXFIOTM is not substantially similar to other currently 
available technologies.
BILLING CODE 4120-01-P

[[Page 69151]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.109

    With respect to the substantial similarity criteria, in its 
application for new technology add-on payments for FY 2025, the 
applicant for TALVEYTM asserted that TALVEYTM is 
not substantially similar to other currently

[[Page 69152]]

available technologies because it has a unique mechanism of action as a 
CD3 T-cell engaging bsAb targeting GPRC5D, and therefore, the 
technology meets the newness criterion. The following table summarizes 
the applicant's assertions regarding the substantial similarity 
criteria. Please see the online application posting for 
TALVEYTM for the applicant's complete statements in support 
of its assertion that TALVEYTM is not substantially similar 
to other currently available technologies.
[GRAPHIC] [TIFF OMITTED] TR28AU24.110

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (86 FR 36046 through 
36047 and 36088 through 36089), we stated that we believed 
ELREXFIOTM and TALVEYTM may be substantially 
similar to each other. We stated that per the applications for 
ELREXFIOTM AND TALVEYTM, both are bispecific 
antibodies approved for the treatment of adults with RRMM who have 
received at least four prior lines of therapy, including a PI, IMiD, 
and an antiCD38 monoclonal antibody. We noted that per the applicant 
for ELREXFIOTM, ELREXFIOTM is as a bsAb that uses 
binding domains that simultaneously bind the BCMA target on tumor cells 
and the CD3 T-cell receptor. We also noted that the applicant for 
TALVEYTM stated that TALVEYTM is the only 
medicine that targets GPRC5D on myeloma cells and that because 
TALVEYTM binds to different receptors, it has a different 
mechanism of action from ELREXFIOTM. However, we questioned 
how binding to a different protein (GPRC5D) on the tumor cell would 
result in a different mechanism of action compared to BCMA targeting 
bsAbs. Furthermore, we noted that the applicant for TALVEYTM 
claimed that GPRC5D, the target of TALVEYTM, has a unique 
tissue expression profile, which results in an adverse event profile 
distinct from those of the currently approved bsAb in RRMM

[[Page 69153]]

targeting BCMA. However, as this is related to the risk of adverse 
events from TALVEYTM administration but was not critical to 
the way the drug treats the underlying disease, we questioned whether 
this therefore related to an assessment of substantial clinical 
improvement rather than of substantial similarity. We stated that we 
would welcome additional information on how molecular differences, such 
as the regulation of expression of GPRC5D and BCMA on MM cells during 
treatment, should be considered in determining whether a technology 
utilizes a different mechanism of action to achieve a therapeutic 
outcome. Additionally, we noted that similar to TALVEYTM, 
the prescribing information for ELREXFIOTM includes a 
population with prior exposure to BCMA T-cell redirection therapy.
    Accordingly, we noted that, as it appears that 
ELREXFIOTM and TALVEYTM would use the same or 
similar mechanism of action to achieve a therapeutic outcome, would be 
assigned to the same MS-DRG, and would treat the same or similar 
disease in the same or similar patient population, we believed that 
these technologies may be substantially similar to each other such that 
they should be considered as a single application for purposes of new 
technology add-on payments. We noted that if ELREXFIOTM and 
TALVEYTM were determined to only be substantially similar to 
each other, we believed the newness period for ELREXFIOTM 
and TALVEYTM would begin on August 9, 2023, the date 
TALVEYTM received FDA approval.
    We also stated that we believed ELREXFIOTM and 
TALVEYTM may be substantially similar to TECVAYLI[supreg], 
for which we approved an application for new technology add-on payments 
for FY 2024 (88 FR 58891) for the treatment of adult patients with RRMM 
after four or more prior lines of therapy, including a PI, an IMiD, and 
an anti-CD38 mAb. We noted that TECVAYLI[supreg]'s mechanism of action 
is described as a bsAb, with binding domains that simultaneously bind 
the BCMA target on tumor cells and the CD3 T-cell receptor (88 FR 
58886). We stated that the applicant for ELREXFIOTM asserted 
that ELREXFIOTM has a unique CDR (the region of antibody 
that recognizes and binds to target epitopes) that is critical to the 
mechanism of action because it results in different targeted regions, 
impacting how the drug works to target the cancer cells. However, we 
noted it was unclear whether these differences result in a 
substantially different mechanism of action from TECVAYLI[supreg]. We 
stated that because of the apparent similarity with the bsAb for 
ELREXFIOTM that uses binding domains that simultaneously 
bind the BCMA target on tumor cells and the CD3 T-cell receptor, we 
believed that the mechanism of action for ELREXFIOTM may be 
the same or similar to that of TECVAYLI[supreg]. We noted that the 
applicant for ELREXFIOTM also asserted that 
ELREXFIOTM is different from TECVAYLI[supreg] because the 
two are based on different immunoglobulin isotypes, and with the lower 
effector function of IgG2, ELREXFIOTM should only activate 
T-cells in the presence of BCMA and thus should only stimulate an 
immune response in the tumor. Based on our understanding, however, that 
this may relate to the risk of adverse event from ELREXFIOTM 
administration but was not critical to the way the drug treats the 
underlying disease, we questioned whether this would therefore relate 
to an assessment of substantial clinical improvement, rather than of 
substantial similarity.
    We also noted that per the applicant for TALVEYTM, 
TALVEYTM has a different mechanism of action from 
TECVAYLI[supreg] or ELREXFIOTM because it binds to different 
receptors. The applicant for TALVEYTM noted that 
TALVEYTM is the only medicine that targets GPRC5D on myeloma 
cells. As we previously noted, TECVAYLI[supreg]'s mechanism of action 
is described as a bsAb, with binding domains that simultaneously bind 
the BCMA target on tumor cells and the CD3 T-cell receptor (88 FR 
58886). As discussed previously, the applicant asserted that 
TALVEYTM had a unique mechanism of action as compared to 
TECVAYLI[supreg] and ELREXFIOTM by binding to different 
receptors. However, we questioned how binding to a different protein 
(GPRC5D) on the tumor cell would result in a different mechanism of 
action compared to BCMA targeting bispecific antibodies. Furthermore, 
as we noted previously, the applicant for TALVEYTM claimed 
that the target of TALVEYTM, GPRC5D, has a unique tissue 
expression profile, which results in an adverse event profile distinct 
from those of the currently approved bispecific antibodies in RRMM 
targeting BCMA. However, we noted that this was related to the risk of 
adverse event from TALVEYTM administration but was not 
critical to the way the drug treats the underlying disease. As a 
result, we questioned whether this would therefore relate to an 
assessment of substantial clinical improvement rather than of 
substantial similarity. We also stated previously that we would welcome 
additional information on how molecular differences, such as the 
regulation of expression of GPRC5D and BCMA on MM cells during 
treatment, should be considered in determining whether a technology 
utilizes a different mechanism of action to achieve a therapeutic 
outcome.
    We also noted that ELREXFIOTM, TALVEYTM, and 
TECVAYLI[supreg] may treat the same or similar disease (RRMM) in the 
same or similar patient population (patients who have previously 
received a PI, IMiD, and an anti-CD38 mAb). The applicant for 
ELREXFIOTM claimed that ELREXFIOTM is different 
from TECVAYLI[supreg] because the prescribing information includes a 
new subpopulation: the patient population that had received prior BCMA-
directed therapy. However, we believed that the lack of inclusion of 
this population in the prescribing information for TECVAYLI[supreg] 
does not necessarily exclude the use of TECVAYLI[supreg] in this 
patient population, nor does FDA prescribing information for 
TECVAYLI[supreg] specifically exclude this patient population. As such, 
we stated it was unclear whether ELREXFIOTM would in fact 
treat a patient population different from TECVAYLI[supreg]. 
Accordingly, we noted that as it appears that ELREXFIOTM, 
TALVEYTM, and TECVAYLI[supreg] may be using the same or 
similar mechanism of action to achieve a therapeutic outcome, would be 
assigned to the same MS-DRG, and treat the same or similar patient 
population and disease, we believed that these technologies may be 
substantially similar to each other. We noted that if we determined 
that these technologies were substantially similar to TECVAYLI[supreg], 
we believed the newness period for these technologies would begin on 
November 9, 2022, the date TECVAYLI[supreg] became commercially 
available.
    We stated we were interested in receiving information on how these 
technologies may differ from each other with respect to the substantial 
similarity and newness criteria to inform our analysis of whether 
ELREXFIO TM, TALVEY TM, and TECVAYLI [supreg] are 
substantially similar to each other.
    We invited public comments on whether ELREXFIO TM and 
TALVEY TM are substantially similar to each other and/or 
existing technologies and whether ELREXFIO TM and TALVEY 
TM meet the newness criterion.
    Comments: The applicant for ELREXFIO TM submitted a 
comment regarding the newness criterion. The applicant stated that, 
based on CMS's newness criteria, it would agree ELREXFIO TM, 
TECVAYLI [supreg], and TALVEY TM are all substantially 
similar

[[Page 69154]]

according to new technology add-on guidelines because they all are bsAb 
therapies using a mechanism of action that simultaneously binds to a 
protein on the tumor cell and the CD3 T-cell receptor, bridging the two 
to kill the tumor cell. Additionally, the applicant commented that the 
indication statements for all the therapies are for the treatment of 
adult patients with RRMM who have received prior therapy and are all 
assigned to the same MS-DRG. The applicant commented that since 
TECVAYLI [supreg] was approved for new technology add-on payment status 
effective FY 2024 with a newness period beginning November 9, 2022, CMS 
should continue new technology add-on payment status for FY 2025 and 
extend that new technology add-on payment status to ELREXFIO 
TM.
    The applicant for TALVEY TM commented that it agreed 
with CMS that TALVEY TM, TECVAYLI[supreg], and ELREXFIO 
TM are all approved for the treatment of the same disease 
(RRMM) and in a similar patient population (patients receiving a PI, 
IMiD, and an anti-CD38 mAb. However, the applicant did not agree that 
TALVEY TM has a similar mechanism of action due to the 
targeting of different antigens on the surface of malignant plasma 
cells. According to the applicant, TALVEY TM is unique in 
targeting GPRC5D instead of BCMA and has demonstrated efficacy in 
patients who are naive to or exposed to prior bsAb and CAR T-cell 
therapy. According to the applicant, this emerging population of 
patients who have been exposed to all other major treatment classes 
(PI, IMiD, anti-CD38 mAb, and BCMA) is increasingly important, and 
TALVEY TM has demonstrated efficacy and safety in this 
growing patient population with an unmet medical need. While GPRC5D and 
BCMA may have similar expression on plasma cells, the applicant for 
TALVEYTM stated that the pattern of expression of GPRC5D and 
BCMA are independent of each other, making GPRC5D a distinct clinical 
target. Additionally, the applicant asserted that GPRC5D is primarily 
expressed on malignant plasma cells, while BCMA is also widely 
expressed on the surface of mature B cells and normal plasma cells, 
which differentiates the mechanism of action and AE profile of TALVEY 
TM from those of BCMA targeting therapies. The applicant 
also stated that TALVEY TM demonstrated an overall response 
rate of 72 percent (with a durable 9-month duration of response rate of 
59 percent) in 32 patients who had received prior T-cell redirection 
therapy, including 30 patients who had received a prior BCMA CAR-T or 
bispecific therapy. The applicant added that the limited expression of 
GPRC5D on normal B cells and plasma cells resulted in serious 
infections and grade 3-4 infections in 16 percent and 17 percent of 
patients respectively, compared to 30 percent and 34 percent for 
TECVAYLI TM and 31 percent and 42 percent for 
ELREXFIOTM.
    The applicant for TALVEY TM further commented that a 
recent publication by Firestone and team (2024) \60\ described antigen 
escape, or loss of target antigen, as a mechanism of resistance to 
BCMA-directed therapies in RRMM. The Firestone study stated that one of 
the patients who was BCMA refractory responded to TALVEY TM. 
The applicant for TALVEY TM asserted that because expression 
of GPRC5D is independent of BCMA, and those two bsAbs target distinct, 
independent antigens, TALVEY TM can be used to treat 
patients who have progressed on or do not respond to TECVAYLI [supreg].
---------------------------------------------------------------------------

    \60\ Firestone R, Socci N, Shekarkhand T, et al. Antigen escape 
as a shared mechanism of resistance to BCMA-directed therapies in 
multiple myeloma. Blood 2024 May 10:blood.2023023557. doi: 10.1182/
blood.2023023557.
---------------------------------------------------------------------------

    Response: We thank the applicants for their comments regarding the 
newness criterion for ELREXFIOTM and TALVEYTM. 
While we agree with the applicant for TALVEYTM that 
TALVEYTM treats a similar population to 
ELREXFIOTM and TECVAYLI[supreg], we disagree that 
TALVEYTM is unique in treating patients who are na[iuml]ve 
to or exposed to prior bsAb and CAR T-cell therapy. As previously 
discussed, ELREXFIOTM is also indicated for patients exposed 
to prior bsAb and CAR T-cell therapy. We also disagree with that 
TALVEYTM has a unique mechanism of action. While the 
applicant for TALVEYTM stated that GPRC5D is primarily 
expressed on malignant plasma cells and that BCMA is also widely 
expressed on the surface of mature B cells and normal plasma cells, the 
applicant for TALVEYTM did not demonstrate how this 
difference affects the mechanism of action by which patients are 
treated. We note that the applicant for TALVEYTM seemed to 
assert that a difference in clinical outcomes demonstrates a difference 
in the mechanism of action from existing technologies. However, we note 
that a difference in observed outcomes would relate to an assessment of 
substantial clinical improvement rather than the newness criterion. 
Therefore, we remain unclear how binding to a different protein 
(GPRC5D) on the tumor cell affects the downstream molecular process by 
which TALVEYTM treats the underlying disease compared to 
ELREXFIOTM and TECVAYLI[supreg].
    After consideration of the comments received, and for the reasons 
discussed, we believe that ELREXFIOTM, TALVEYTM, 
and TECVAYLI[supreg] use the same or a similar mechanism of action to 
achieve therapeutic outcomes. Furthermore, as discussed previously, 
ELREXFIOTM and TALVEYTM map to the same MS-DRG 
and treat the same patient population (adult patients with RRMM after 
four or more prior lines of therapy, including a PI, an IMiD, and an 
anti-CD38 mAb) as TECVAYLI[supreg]. Accordingly, because 
ELREXFIOTM and TALVEYTM meet all three of the 
substantial similarity criteria, we believe that both are substantially 
similar to TECVAYLI[supreg]. In accordance with our policy, because 
these technologies are substantially similar to each other, we use the 
earliest market availability date submitted as the beginning of the 
newness period for these technologies. Therefore, we consider the 
beginning of the newness period for ELREXFIOTM and 
TALVEYTM to be November 9, 2022, the date TECVAYLI[supreg] 
became commercially available.
    Consistent with our policy statements in the past regarding 
substantial similarity, we will not be making a determination on cost 
and substantial clinical improvement for ELREXFIOTM or 
TALVEYTM. Specifically, we have noted that approval of new 
technology add-on payments would extend to all technologies that are 
substantially similar, and if substantially similar technologies are 
submitted for review in different (and subsequent) years, we evaluate 
and make a determination on the first application and apply that same 
determination to the second application (85 FR 58679). Since 
TECVAYLI[supreg] was approved for new technology add-on payments for FY 
2024 and is still within its newness period for FY 2025, and we have 
determined that ELREXFIOTM and TALVEYTM are 
substantially similar to TECVAYLI[supreg], we apply that same approval 
for new technology add-on payments to ELREXFIOTM and 
TALVEYTM. We note that we received public comments with 
regard to the cost and substantial clinical improvement criteria for 
these technologies, but because the determination made in the FY 2024 
IPPS/LTCH PPS final rule for TECVAYLI[supreg] is applied to 
ELREXFIOTM and TALVEYTM due to their substantial 
similarity, we are not summarizing comments received or making a 
determination on those criteria in this final rule.
    Cases involving the use of ELREXFIOTM that are eligible 
for new

[[Page 69155]]

technology add-on payments will be identified by ICD-10-PCS code 
XW013L9 (Introduction of elranatamab antineoplastic into subcutaneous 
tissue, percutaneous approach, new technology group 9). Cases involving 
the use of TALVEYTM that are eligible for new technology 
add-on payments will be identified by ICD-10-PCS code XW01329 
(Introduction of talquetamab antineoplastic into subcutaneous tissue, 
percutaneous approach, new technology group 9).
    Each of the applicants submitted cost information for its 
application. The manufacturer of ELREXFIOTM estimated that 
the cost of ELREXFIOTM is $15,112 per patient. The 
manufacturer of TALVEYTM estimated that the cost of 
TALVEYTM is $25,164.44 per patient. Because 
ELREXFIOTM and TALVEYTM are substantially similar 
to TECVAYLI[supreg], we believe using a single cost for purposes of 
determining the new technology add-on payment amount is appropriate for 
ELREXFIOTM, TALVEYTM, and TECVAYLI[supreg], even 
though each technology will be identified by its own ICD-10-PCS code 
(87 FR 48925). We also believe using a single cost provides 
predictability regarding the add-on payment when using 
ELREXFIOTM, TALVEYTM, and TECVAYLI[supreg] for 
the treatment of patients with RRMM. As such, we believe that the use 
of a weighted average of the cost of ELREXFIOTM, 
TALVEYTM, and TECVAYLI[supreg] based upon the projected 
numbers of cases involving each technology to determine the maximum new 
technology add-on payment would be most appropriate. To compute the 
weighted average cost, we summed the total number of projected cases 
for each technology provided by the applicants, which equaled 4,376 
cases (152 cases for ELREXFIOTM plus 2,318 cases for 
TALVEYTM plus 1,906 cases for TECVAYLI[supreg]). We then 
divided the number of projected cases for each of the technologies by 
the total number of cases, which resulted in the following case 
weighted percentages: 3.47 percent for ELREXFIOTM, 52.97 
percent for TALVEYTM and 43.56 percent for TECVAYLI[supreg]. 
For each technology, we then multiplied the estimated cost per patient 
by the case-weighted percentage (0.0347 * $15,112 = $524.39 for 
ELREXFIOTM; 0.5297 * $25,164.44 = $13,329.60 for 
TALVEYTM; and 0.4356 * $13,754.67 = $5,991.53 for 
TECVAYLI[supreg]). This resulted in a case-weighted average cost of 
$19,845.52 for the technology.
    Under Sec.  [thinsp]412.88(a)(2), we limit new technology add-on 
payments to the lesser of 65 percent of the average cost of the 
technology, or 65 percent of the costs in excess of the MS-DRG payment 
for the case. As a result, the maximum new technology add-on payment 
for a case involving the use of ELREXFIOTM, 
TALVEYTM, or TECVAYLI[supreg] is $12,899.59 for FY 2025.
e. FloPatch FP120
    Flosonics Medical (R.A. 1929803 Ontario Corp.) submitted an 
application for new technology add-on payments for FloPatch FP120 for 
FY 2025. According to the applicant, FloPatch FP120 is a wireless, 
wearable, continuous wave (4 MHz) Doppler ultrasound device that 
adheres over peripheral vessels (that is, carotid and jugular) that 
assesses blood flow in the peripheral vessels, enabling rapid and 
repeatable dynamic assessments of both arterial and venous flow 
simultaneously. According to the applicant, FloPatch FP120 
cardiovascular blood flowmeter adheres to a patient's neck (or any 
other major vessel) and transmits Doppler-shifted ultrasonic waves from 
the transducer to the artery and vein at a fixed angle of insonation 
that are then reflected by moving blood cells back to the transducer. 
Per the applicant, the signal processing unit wirelessly outputs data 
to a secure iOS mobile medical application, which displays metrics from 
the Doppler signal, such as maximal velocity trace and corrected flow 
time, in a user-friendly interface. Per the applicant, FloPatch FP120 
will optimize clinical workflow, is easy-to-use and hands-free, cloud-
connected, and can be deployed in under one minute, providing 
instantaneous results.
    Please refer to the online application posting for FloPatch FP120, 
available at https://mearis.cms.gov/public/publications/ntap/NTP231017D56F4, for additional detail describing the technology and the 
types of conditions that the technology might help diagnose and/or 
treat.
    With respect to the newness criterion, according to the applicant, 
FloPatch FP120 received 510(k) clearance from FDA on May 3, 2023, for 
the noninvasive assessment of blood flow in the carotid artery. Per the 
applicant, in a more recent FDA 510(k) submission, the proposed 
indication is for use for the noninvasive assessment of blood flow in 
peripheral vasculature. In the FY 2025 IPPS/LTCH PPS proposed rule (89 
FR 36052), we stated that based on the application submitted by the 
applicant, the new technology add-on payment application for FloPatch 
FP120 is not eligible for consideration for FY 2025 for the proposed 
indication (for use for the noninvasive assessment of blood flow in 
peripheral vasculature) because documentation of FDA acceptance or 
filing of the marketing authorization request that indicates that FDA 
has determined that the application is sufficiently complete to allow 
for substantive review by FDA, was not provided to CMS at the time of 
new technology add-on payment application submission. As such, we 
stated that the new technology add-on payment application for FloPatch 
FP120 is only eligible for consideration for FY 2025 for the narrower 
indication for use for the noninvasive assessment of blood flow in 
carotid artery.
    In the proposed rule (89 FR 36052), we noted that prior to the May 
3, 2023, clearance, there were two FDA 510(k) clearances for FloPatch 
FP120; one obtained in 2022 and one in 2020. The indications in the 
2020, 2022, and 2023 clearances are identical, that is, for use for the 
noninvasive assessment of blood flow in the carotid artery.\61\ In 
addition, the 2020 clearance was based on substantial equivalence to 
the FloPatch FP110 device,\62\ which was an earlier version of FloPatch 
FP120 and was also FDA-cleared. According to the applicant, FloPatch 
FP120 was commercially available for this use as of January 1, 2023. 
However, we stated that, as noted earlier, the provided FDA 510(k) 
clearance was dated May 3, 2023. Because the market availability date 
as indicated by the applicant preceded the 2023 clearance date, and 
because the 2020 and 2022 clearances had the same indication as the 
2023 clearance, we questioned when the technology first became 
commercially available for use for the noninvasive assessment of blood 
flow in the carotid artery and requested additional information on the 
market availability date for this indication. Per the applicant, one 
FloPatch FP120 device would be used per inpatient stay.
---------------------------------------------------------------------------

    \61\ K223843, May 3, 2023; K222242, December 9, 2022; and 
K200337, March 24, 2020.
    \62\ K191388, June 21, 2019.
---------------------------------------------------------------------------

    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for FloPatch FP120 and was granted approval to use 
the following procedure code effective October 1, 2024: XX25X0A 
(Monitoring of blood flow, adhesive ultrasound patch technology, new 
technology group 10). The applicant provided a list of diagnosis codes 
that may be used to currently identify the indication for FloPatch 
FP120 under the ICD-10-CM coding system. Please refer to the online 
application posting for the complete list of ICD-10-CM codes provided 
by the applicant.
    As previously discussed, if a technology meets all three of the 
substantial similarity criteria under the

[[Page 69156]]

newness criterion, it would be considered substantially similar to an 
existing technology and would not be considered new for the purpose of 
new technology add-on payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that FloPatch FP120 is not substantially similar to other 
currently available technologies because FloPatch FP120 offers real-
time, non-invasive monitoring of hemodynamic changes of both the 
arterial and venous blood flow, improving fluid management decisions. 
Per the applicant, FloPatch FP120 surpasses current methods by 
providing continuous data, enhancing patient safety, and addressing 
unmet clinical needs for immediate, precise assessments, and therefore, 
the technology meets the newness criterion. The following table 
summarizes the applicant's assertions regarding the substantial 
similarity criteria. Please see the online application posting for 
FloPatch FP120, for the applicant's complete statements in support of 
its assertion that FloPatch FP120 is not substantially similar to other 
currently available technologies.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU24.111


[[Page 69157]]


BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36054), we noted 
the following concerns with regard to the newness criterion. With 
respect to the first substantial similarity criterion, whether FloPatch 
FP120 uses the same or similar mechanism of action for a therapeutic 
outcome when compared to existing technologies, we stated we had not 
received information from the applicant regarding predicate devices for 
FloPatch FP120 that were previously FDA-cleared in its discussion of 
existing technologies. We stated that there are three FDA 510(k) 
clearances for FloPatch FP120, with the same indication for use for the 
noninvasive assessment of blood flow in the carotid artery.\63\ In 
addition, the 2020 clearance was based on substantial equivalence to 
the FloPatch FP110 device,\64\ an earlier version of FloPatch FP120 
that was also FDA-cleared. We noted that all FloPatch FP120 FDA-cleared 
devices, as well as the FP110 version, had an identical method of 
attachment of the ultrasound probe to the human body, and the same 
intended use and indications for use. Accordingly, we stated that since 
the technology was already approved for use for this same indication 
outside of the 2- to 3-year newness period, it appeared that it would 
no longer be considered new for purposes of new technology add-on 
payments.
---------------------------------------------------------------------------

    \63\ K223843, May 3, 2023; K222242, December 9, 2022; and 
K200337, March 24, 2020.
    \64\ K191388, June 21, 2019.
---------------------------------------------------------------------------

    In addition, we questioned whether a different placement method or 
the addition of a wearable functionality for the noninvasive assessment 
of blood flow would constitute a different mechanism of action, and 
whether these differences may instead be relevant to the assessment of 
substantial clinical improvement, rather than of newness. For example, 
while the applicant described FloPatch FP120 as user-friendly, we 
questioned whether ease-of-use in itself represented a mechanism of 
action unique from existing technologies for a therapeutic outcome, as 
the primary underlying mechanism of action is still Doppler ultrasound 
technology.
    With respect to the second substantial similarity criterion, that 
is, whether a product is assigned to the same or a different MS-DRG, 
the applicant asserted that the device is new and has not undergone 
sufficient review to be recognized as a treatment within the existing 
MS-DRGs. However, we noted that the applicant also stated that FloPatch 
FP120 could be relevant to existing MS-DRGs that pertain to septicemia 
or severe sepsis for the assessment of volume responsiveness. We stated 
we believed that, based on its indication, cases involving the use of 
FloPatch FP120 would be assigned to the same MS-DRGs as those involving 
existing technologies used for invasive and non-invasive measurements 
of blood flow, such as for patients with septicemia or severe sepsis.
    With respect to the third substantial similarity criterion, that 
is, whether the technology involves treatment of the same or similar 
type of disease or patient population when compared to an existing 
technology, the applicant maintained that existing technologies do not 
provide clinicians with the information they need, and while FloPatch 
FP120 serves a similar purpose as existing technology, its process has 
been optimized by providing a safer, more accurate, and instantaneous 
method of assessment. While this may be relevant to the assessment of 
substantial clinical improvement, we stated it did not appear to be 
related to newness, and we remained unclear about how the patient 
population for which FloPatch FP120 is used differs from other patients 
for which existing non-invasive (for example, Doppler ultrasound 
devices) and invasive technologies are used for hemodynamic monitoring 
in a same or similar type of disease (such as septicemia or severe 
sepsis).
    Accordingly, we stated that as it appears that the May 3, 2023, FDA 
510(k) clearance and prior FDA 510(k) clearances for FloPatch FP120 may 
use the same or similar mechanism of action to achieve a therapeutic 
outcome, would be assigned to the same MS-DRG, and treat the same or 
similar patient population and disease, we believed that these 
technologies may be substantially similar to each other. We noted that 
if FloPatch FP120 as described in its 2023 FDA 510(k) clearance is 
substantially similar to prior versions as described in the 2022 and 
2020 FDA 510(k) clearances, we believed the newness period for this 
technology would begin on March 24, 2020, with the earliest FDA 510(k) 
clearance date for FloPatch FP120 (K200337) and therefore, because the 
3-year anniversary date of the technology's entry onto the U.S. market 
(March 24, 2023) occurred in FY 2023, the technology would no longer be 
considered new and would not be eligible for new technology add-on 
payments for FY 2025.
    We invited public comments on whether FloPatch FP120 is 
substantially similar to existing technologies and whether FloPatch 
FP120 meets the newness criterion.
    Comment: A commenter stated that CMS should deny the new technology 
add-on payment application because the many previous FDA clearances 
place the technology outside the FY 2025 eligibility period. The 
commenter stated that the technology is not new because it is the same 
technology as previously cleared products and noted the previous 
versions of FloPatch's 510(k) clearances in 2020 and 2022. The 
commenter also stated that, as CMS noted, Doppler ultrasound technology 
is the primary technology that FloPatch FP120 uses, and that many 
existing devices use the same or similar technology. In addition, the 
commenter stated that the applicant assertion that existing 
technologies do not provide clinicians with the information they need 
and that the current standard for assessing a patient's fluid 
responsiveness involves invasive cardiac output monitoring or clinical 
judgment without real-time objective data is not true because there are 
several existing products--such as (among others) point-of-care 
ultrasound, the Edwards's Hemosphere monitor, the Deltex TrueVue/ODM+, 
and the Caretaker Medical monitor--that use the same or similar 
technology to assess a patient's fluid responsiveness. The commenter 
also agreed with CMS that FloPatch FP120 would be assigned to the same 
MS-DRGs as those involving existing technologies used for invasive and 
non-invasive measurements of blood flow, such as for patients with 
septicemia or severe sepsis, and stated that many other technologies 
also do not require invasive procedures. The commenter further stated 
that it believed that FloPatch FP120 fails to meet the newness 
criterion because it uses the same technology (Doppler ultrasound) to 
perform the same task (monitor changes in blood flow) to assess the 
same reaction (response to fluid administration) to inform the same 
activity (fluid management) for patients with the same disease or 
condition (sepsis or septicemia) compared to those devices that are 
already available to Medicare beneficiaries.
    Response: We thank the commenter for its input. Based on the 
information submitted, we believe that the May 2, 2023, FDA-cleared 
FloPatch FP120 technology uses a similar or same mechanism of action as 
existing technologies, including the previously FDA-cleared FloPatch 
FP120 products and Doppler ultrasound. We agree with the commenter that 
cases involving the use of FloPatch FP120 are assigned to the same MS-
DRGs as those involving the use of the previously FDA-cleared

[[Page 69158]]

FloPatch products and other existing technologies for invasive and non-
invasive measurement of blood flow for patients with septicemia or 
severe sepsis. We also agree with the commenter that FloPatch FP120 
informs the same clinical activity (fluid management) for patients with 
the same disease or condition (sepsis and septicemia) as the previously 
FDA-cleared FloPatch products and other existing technologies.
    Because FloPatch FP120 meets all three of the substantial 
similarity criteria, we believe FloPatch FP120 is substantially similar 
to the version of FloPatch FP120 that was FDA-cleared on March 24, 
2020, an existing noninvasive technology that assesses blood flow in 
the carotid artery. Therefore, we consider the newness period for 
FloPatch FP120 to begin on the date it first received FDA 510(k) 
clearance for the noninvasive assessment of blood flow in the carotid 
artery. Since FloPatch FP 120 has been on the U.S. market since 2020, 
the 3-year anniversary date of its entry onto the market occurred prior 
to FY 2025. Therefore, FloPatch FP120 does not meet the newness 
criterion, and is not eligible for new technology add-on payments for 
FY 2025. We note that we received public comments with regard to the 
cost and substantial clinical improvement criteria for this technology, 
but because we have determined that the technology does not meet the 
newness criterion and therefore is not eligible for approval for new 
technology add-on payments for FY 2025, we are not summarizing comments 
received or making a determination on those criteria in this final 
rule.
f. HEPZATO TM KIT (Melphalan for Injection/Hepatic Delivery 
System)
    Delcath System submitted an application for new technology add-on 
payments for HEPZATO TM KIT for FY 2025. According to the 
applicant, HEPZATO TM KIT is a drug/device combination 
product consisting of melphalan and the Hepatic Delivery System (HDS), 
indicated as a liver-directed treatment for adult patients with uveal 
melanoma with unresectable hepatic metastases. Per the applicant, the 
HDS is used to perform percutaneous hepatic perfusion (PHP), an 
intensive local hepatic chemotherapy procedure, in which the alkylating 
agent melphalan hydrochloride is delivered intra-arterially to the 
liver with simultaneous extracorporeal filtration of hepatic venous 
blood return (hemofiltration).
    Please refer to the online application posting for 
HEPZATOTM KIT, available at https://mearis.cms.gov/public/publications/ntap/NTP2310160RLLX, for additional detail describing the 
technology and the disease treated by the technology.
    With respect to the newness criterion, according to the applicant, 
HEPZATOTM KIT was granted approval as a New Drug Application 
(NDA) from FDA on August 14, 2023, for use as a liver-directed 
treatment for adult patients with uveal melanoma with unresectable 
hepatic metastases affecting less than 50 percent of the liver and no 
extrahepatic disease or extrahepatic disease limited to the bone, lymph 
nodes, subcutaneous tissues, or lung that is amenable to resection or 
radiation. According to the applicant, the technology became available 
for sale on January 8, 2024, because manufacturing did not commence 
until after FDA approval was granted. Melphalan hydrochloride, a 
component of HEPZATO;TM KIT, is administered by intra-
arterial infusion into the hepatic artery at a dose of 3 mg/kg of body 
weight with a maximum dose of 220 mg during a single treatment. The 
drug is infused over 30 minutes, followed by a 30-minute washout 
period. According to the applicant, treatments should be administered 
every 6 to 8 weeks, but can be delayed until recovery from toxicities, 
and as per clinical judgement.
    The applicant stated that, effective October 1, 2023, the following 
ICD-10-PCS code may be used to uniquely describe procedures involving 
the use of HEPZATOTM KIT: XW053T9 (Introduction of melphalan 
hydrochloride antineoplastic into peripheral artery, percutaneous 
approach, new technology group 9). We note that we have also identified 
ICD-10-PCS code 5A1C00Z (Performance of biliary filtration, single), as 
an additional, relevant code, which may be used in combination with 
XW053T9 to more uniquely identify procedures involving the use of 
HEPZATO TM KIT. The applicant provided a list of diagnosis 
codes that may be used to currently identify the indication for 
HEPZATOTM KIT under the ICD-10-CM coding system. Please 
refer to the online application posting for the complete list of ICD-
10-CM and ICD-10-PCS codes provided by the applicant.
    As previously discussed, if a technology meets all three of the 
substantial similarity criteria under the newness criterion, it would 
be considered substantially similar to an existing technology and would 
not be considered ``new'' for the purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that HEPZATOTM KIT is not substantially similar to 
other currently available technologies because it offers the first 
liver-directed treatment option to patients with liver-dominant 
metastatic ocular melanoma (mOM) who may be poor candidates for liver 
resection and/or who may have difficulty tolerating systemic 
chemotherapy. According to the applicant, HEPZATOTM KIT uses 
a unique PHP procedure to isolate liver circulation and deliver a high 
concentration of melphalan to liver tumors via infusion followed by 
filtration of the hepatic venous flow to remove melphalan out of the 
blood with extracorporeal filters, and that therefore, the technology 
meets the newness criterion. The following table summarizes the 
applicant's assertions regarding the substantial similarity criteria. 
Please see the online application posting for HEPZATOTM KIT 
for the applicant's complete statements in support of its assertion 
that HEPZATOTM KIT is not substantially similar to other 
currently available technologies.
BILLING CODE 4120-01-P

[[Page 69159]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.112

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36060), we 
invited public comments on whether HEPZATOTM KIT is 
substantially

[[Page 69160]]

similar to existing technologies and whether HEPZATO TM KIT 
meets the newness criterion. We also invited public comments on drug-
device combination technology considerations for new technology add-on 
payments. Specifically, we stated that we were seeking comment on 
whether reformatting the delivery mechanism for a drug would represent 
a new mechanism of action for drug-device combination technologies, and 
on factors that should be considered when considering new technology 
add-on payments for technologies that may use a drug or device 
component that is no longer new in combination with a new drug or 
device component.
    Comment: We received several comments regarding the newness 
criterion stating general support for HEPZATOTM KIT as a new 
treatment for uveal melanoma patients.
    Response: We thank commenters for their input.
    Comment: The applicant submitted a public comment reiterating that 
HEPZATO TM KIT does not use the same or a similar mechanism 
of action when compared to existing technologies to treat mOM and uses 
a different and novel technology as compared to existing technologies. 
The applicant stated that HEPZATOTM KIT uses a liver-
directed PHP procedure to isolate liver circulation and deliver a high 
concentration of the chemotherapeutic drug melphalan to liver tumors 
via infusion, followed by filtration of the hepatic venous flow to 
remove melphalan from the blood with extracorporeal filters before 
returning the blood to the patient's systemic circulation. The 
applicant stated that HEPZATOTM KIT is the only FDA-approved 
product that saturates the entire liver with high-dose chemotherapy, 
thus allowing complete treatment of the liver metastases that are often 
the life-limiting component for mOM patients. The applicant further 
explained that melphalan was not approved by FDA to treat liver 
metastases from uveal melanoma until the approval of 
HEPZATOTM KIT.\65\ The applicant further asserted that other 
liver-directed treatments only treat specific liver tumors and do not 
treat smaller tumors or micro-metastases, which limits the efficacy and 
beneficial clinical outcomes of other treatments in many mOM patients. 
Therefore, by uniquely saturating the whole liver with a high dose of a 
proven chemotherapy agent, the applicant asserted that 
HEPZATOTM KIT treats not only specific liver tumors, but 
also the multiple small tumors and micro-metastases in mOM. The 
applicant also stated that another liver-directed therapy, 
transarterial chemoembolization (TACE), does not treat the whole liver, 
leaving the patient prone to disease progression due to the growth of 
the untreated, smaller lesions. The applicant further explained that, 
in contrast, HEPZATOTM KIT's extracorporeal hemofiltration 
allows for administration of up to 12 times the conventional 
intravenous melphalan dose, while limiting systemic toxicities to 
manageable levels.\66\
---------------------------------------------------------------------------

    \65\ Drugs Approved for Melanoma, National Cancer Institute, 
https://www.cancer.gov/about-cancer/treatment/drugs/melanoma (last 
updated April 1, 2024).
    \66\ Aronson JK. Meyler's side effects of drugs: The 
international encyclopedia of adverse drug reactions and 
interactions. Elsevier Science & Technology; 2015:822.
---------------------------------------------------------------------------

    The applicant also stated that by isolating the liver throughout 
the procedure and actively filtering out melphalan during the 30-minute 
infusion and subsequent 30-minute washout period, HEPZATOTM 
KIT creates an improved tumor response of 36.3 percent as compared to 
12.5 percent of best alternative care (BAC) patients (p=0.013), and 7.7 
percent of patients achieved a complete response in this difficult-to-
treat disease.\67\ Finally, the applicant stated that because treatment 
with HEPZATOTM KIT is minimally invasive, patients can 
receive multiple treatments extending the duration of response (DOR), 
resulting in patients with an objective response to treatment with 
HEPZATOTM KIT achieving responses that lasted for a median 
of 14 months compared to a reported median DOR of 11.1 months for 
patients treated with KIMMTRAK[supreg].
---------------------------------------------------------------------------

    \67\ Zager JS, Orloff M, Ferrucci PF, et al. Efficacy and Safety 
of the Melphalan/Hepatic Delivery System in Patients with 
Unresectable Metastatic Uveal Melanoma: Results from an Open-Label, 
Single-Arm, Multicenter Phase 3 Study. Ann Surg Oncol. Published 
online May 4, 2024. doi:10.1245/s10434-024-15293-x.
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    Response: We thank the applicant for its comments. Based on our 
review of comments received and information submitted by the applicant 
as part of its FY 2025 new technology add-on payment application for 
HEPZATOTM KIT, we agree with the applicant that 
HEPZATOTM KIT uses a unique mechanism of action because it 
is the only FDA-approved product that isolates the liver circulation 
and allows for the delivery of a high concentration of a 
chemotherapeutic agent to liver tumors while limiting systemic 
exposure. Therefore, we agree with the applicant that 
HEPZATOTM KIT is not substantially similar to existing 
treatment options and meets the newness criterion. We consider the 
beginning of the newness period to commence on January 8, 2024, when 
HEPZATOTM KIT became available for sale on the market.
    Comment: In response to the request for comments on drug-device 
combination technology considerations for new technology add-on 
payments, the applicant stated that CMS should consider whether the 
combination either offers a treatment option for a patient population 
unresponsive to, or ineligible for, currently available treatments or 
significantly improves clinical outcomes relative to technologies 
previously available. The applicant asserted that approving 
technologies like HEPZATOTM KIT signals CMS's support of 
finding new methodologies to repurpose older drugs that, under an 
existing technology, are not effective in treating specific cohorts of 
the targeted disease population. Another commenter expressed concern 
that there could be a scenario where a new drug-device combination 
product, with the potential to provide meaningful improvements to a 
specific patient population, is not approved for new technology add-on 
payment, limiting patient access to the treatment, despite meeting the 
substantial clinical improvement criterion because the newness 
criterion was not set up to evaluate the technology appropriately. The 
commenter further stated that if a substantial clinical improvement is 
not evaluated if the newness criterion is not satisfied, then there is 
a risk that treatments providing meaningful improvements could be 
overlooked. The commenter stated that the mechanism of action should be 
evaluated for the treatment provided by the drug-device combination, as 
a whole. Specifically, the commenter stated that if the mechanism of 
action for treatment provided with the drug-device combination is 
different from that of treatment with just the drug component that is 
no longer new, or that of treatment with the device component that is 
no longer new with a different drug, then it should not be considered 
substantially similar. The commenter also stated that the specific 
patient population that benefits from the drug-device combination 
should also be considered carefully when making a determination of 
substantial similarity, and that if the drug device combination 
provides treatment for the same type of disease as a drug or device 
component that is not considered new, the specific populations for both 
need to be compared. The commenter stated that if the drug-device 
combination provides

[[Page 69161]]

meaningful treatment to a broader or more specific patient population, 
it should not be considered substantially similar. Additionally, the 
commenter stated that if the drug device combination provides 
meaningful treatment to the same patients that are treated with the 
existing drug or device component that is not new, but the drug-device 
combination provides a new treatment option for patients that do not 
respond well to the existing treatment options, the drug-device 
combination should not be considered substantially similar. The 
commenter stated that these considerations align with the criteria 
currently used to evaluate if technologies applying for new technology 
add-on payment would be considered substantially similar to existing 
treatment options, but that the current language for the third 
criterion for substantial similarity (that is, the new use of the 
technology involves the treatment of the same or similar type of 
disease and patient population when compared to an existing technology) 
is broad enough to cause drug-device combinations to be overlooked 
without evaluating the clinical improvement they may provide for 
specific patients. The commenter stated that if a drug-device 
combination provides treatment for patients that do not respond well to 
existing treatment options, then the patient populations could be 
considered ``similar'', however, it is important to evaluate the 
clinical improvement of the drug-device combination to identify if it 
would serve as a potential new treatment for patients running out of 
treatment options with the long-term goal of reducing the number of 
treatments these patients need to try before finding an effective 
solution.
    Response: We thank the commenters for their feedback. We will 
continue to consider these issues relating to the assessment of the 
mechanism of action for a technology involving a drug-device 
combination. We agree that the specific patient population that 
benefits from the drug-device combination should be considered 
carefully, and that if the drug device combination provides treatment 
for the same type of disease as a drug or device component that is not 
considered new, the patient population being treated should be 
assessed. We note that the third criterion for substantial similarity 
(that is, the new use of the technology involves the treatment of the 
same or similar type of disease and patient population when compared to 
an existing technology) involves these considerations. However, where 
the commenter stated that if a new technology add-on payment 
applicant's technology is being assessed for substantial similarity 
with another technology, and the applicant technology treats a narrower 
population (and the technologies are otherwise the same or 
substantially similar under our criteria), we disagree that the 
applicant technology should be determined to not be substantially 
similar.
    Regarding the concern that the third criterion for substantial 
similarity is broad enough to cause drug-device combinations to be 
overlooked without evaluating the clinical improvement they may provide 
for specific patients, and also the applicant's comment that CMS should 
consider whether the combination either offers a treatment option for a 
patient population unresponsive to, or ineligible for, currently 
available treatments or significantly improves clinical outcomes 
relative to technologies previously available, we do not agree that we 
should evaluate clinical improvement while assessing the newness 
criterion. Rather, we follow a logical sequence of determinations, 
moving from the newness criterion to the cost criterion and finally to 
the substantial clinical improvement criterion, as discussed in the FY 
2006 IPPS final rule. Therefore, we are reluctant to import substantial 
clinical improvement considerations into the decision about whether 
technologies are new (70 FR 47348). Regarding patient populations 
unresponsive to, or ineligible for, currently available treatments, as 
noted, the third criterion for substantial similarity considers whether 
the new use of the technology involves the treatment of the same or 
similar type of disease and patient population when compared to an 
existing technology.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. For each 
analysis, the applicant searched the FY 2022 MedPAR file using a 
combination of ICD-10-CM and/or PCS codes to identify potential cases 
representing patients who may be eligible for HEPZATOTM KIT. 
The applicant explained that it used different codes to demonstrate 
different cohorts that may be eligible for HEPZATOTM KIT 
because it is indicated for a rare condition, hepatic-dominant mOM, 
which does not have a unique ICD-10-CM diagnosis code to identify 
potential cases with the specific diagnosis of interest, nor a unique 
ICD-10-PCS procedure code that would identify patients receiving this 
specific procedure. The applicant believed the cases identified in the 
analysis are the closest proxies to the cases potentially eligible for 
the use of HEPZATOTM KIT. Each analysis followed the order 
of operations described in the table later in this section.
    For the first analysis, the applicant searched for cases with ICD-
10-PCS code 3E05305 (Introduction of other antineoplastic into 
peripheral artery, percutaneous approach) for the PHP procedure, and 
ICD-10-CM code Z51.11 (Encounter for antineoplastic chemotherapy) as 
the primary diagnosis for the administration of chemotherapy during an 
inpatient stay. In addition, the applicant narrowed the analysis to 
cases with liver-dominant mOM using at least one secondary liver 
metastases diagnosis plus at least one ocular melanoma diagnosis. 
Please see the online posting for HEPZATOTM KIT for the 
complete list of codes provided by the applicant. The applicant used 
the inclusion/exclusion criteria described in the following table. 
Under this analysis, the applicant identified 11 claims mapping to one 
MS-DRG: 829 (Myeloproliferative Disorders or Poorly Differentiated 
Neoplasms with Other Procedures with CC/MCC). The applicant calculated 
a final inflated average case-weighted standardized charge per case of 
$1,068,530, which exceeded the average case-weighted threshold amount 
of $104,848.
    For the second analysis, the applicant searched for the following 
combination of ICD-10-CM diagnosis codes: Z51.11 (Encounter for 
antineoplastic chemotherapy) as the primary diagnosis code, in 
combination with at least one of the following secondary liver 
metastases codes: C78.7 (Secondary malignant neoplasm of liver and 
intrahepatic bile duct), or C22.9 (Malignant neoplasm of liver, not 
specified as primary or secondary). The applicant used the inclusion/
exclusion criteria described in the following table. Under this 
analysis, the applicant identified 1,134 claims mapping to nine MS-
DRGs, with 94 percent of identified cases mapping to three MS-DRGs: 829 
(Myeloproliferative Disorders or Poorly Differentiated Neoplasms with 
Other Procedures with CC/MCC), as well as 846 and 847 (Chemotherapy 
without Acute Leukemia as Secondary Diagnosis with MCC, and with CC, 
respectively). The applicant calculated a final inflated average case-
weighted standardized charge per case of $1,066,207, which exceeded the 
average case-weighted threshold amount of $81,652.
    For the third analysis, the applicant searched for cases where the 
ICD-10-CM code Z51.11 (Encounter for antineoplastic chemotherapy) is 
the primary diagnosis or the ICD-10 PCS code 3E05305 (Introduction of 
other

[[Page 69162]]

antineoplastic into peripheral artery, percutaneous approach) is 
reported. In addition, the case also needed to include at least one of 
the following secondary liver metastases codes: C78.7 (Secondary 
malignant neoplasm of liver and intrahepatic bile duct) or C22.9 
(Malignant neoplasm of liver, not specified as primary or secondary). 
The applicant used the inclusion/exclusion criteria described in the 
following table. Under this analysis, the applicant identified 1,277 
claims mapping to 12 MS-DRGs with 92 percent of identified cases 
mapping to three MS-DRGs: 829 (Myeloproliferative Disorders or Poorly 
Differentiated Neoplasms with Other Procedures with CC/MCC); as well as 
846 and 847 (Chemotherapy without Acute Leukemia as Secondary Diagnosis 
with MCC, and with CC, respectively). The applicant calculated a final 
inflated average case-weighted standardized charge per case of 
$1,067,772, which exceeded the average case-weighted threshold amount 
of $80,245.
    For the fourth analysis, the applicant searched for cases reporting 
the following combination of ICD-10-CM diagnosis codes: C78.7 
(Secondary malignant neoplasm of liver and intrahepatic bile duct) or 
C22.9 (Malignant neoplasm of liver), in combination with at least one 
ocular melanoma ICD-10-CM code. Please see the online posting for 
HEPZATOTM KIT for the complete list of codes provided by the 
applicant. The applicant used the inclusion/exclusion criteria 
described in the following table. Under this analysis, the applicant 
identified 1,059 claims mapping to 91 MS-DRGs with none exceeding 4.91 
percent. The applicant calculated a final inflated average case-
weighted standardized charge per case of $1,062,553, which exceeded the 
average case-weighted threshold amount of $66,104.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant asserted that HEPZATOTM KIT 
meets the cost criterion.
BILLING CODE 4120-01-P

[[Page 69163]]

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[[Page 69164]]


     
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    \68\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
[GRAPHIC] [TIFF OMITTED] TR28AU24.114

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36062), we 
invited public comments on whether HEPZATOTM KIT meets the 
cost criterion.
    Comment: Multiple commenters stated that DRG payment to the 
hospitals will not be sufficient to account for the cost of the 
HEPZATOTM KIT treatment. The applicant commented that the 
MS-DRG rate otherwise applicable to the HEPZATOTM KIT is 
inadequate, and stated that use of the HEPZATOTM KIT will 
likely fall within one of the following MS-DRGs where other 
chemotherapies administered during inpatient stays would also be 
assigned: 826 (Myeloproliferative Disorders or Poorly Differentiated 
Neoplasms with Major O.R. Procedures with MCC); 827 (Myeloproliferative 
Disorders or Poorly Differentiated Neoplasms with Major O.R. Procedures 
with CC); 828 (Myeloproliferative Disorders or Poorly Differentiated 
Neoplasms with Major O.R. Procedures without CC/MCC); 829 
(Myeloproliferative Disorders or Poorly Differentiated Neoplasms with 
other Procedures with CC/MCC); 830 (Myeloproliferative Disorders or 
Poorly Differentiated Neoplasms with other Procedures without CC/MCC); 
846 (Chemotherapy without Acute Leukemia as Secondary Diagnosis with 
MCC); 847 (Chemotherapy without Acute Leukemia as Secondary Diagnosis 
with CC); or 848 (Chemotherapy without Acute Leukemia as Secondary 
Diagnosis without CC/MCC). The applicant stated that the payment rate 
for each of these MS-DRGs is far below the cost of HEPZATOTM 
KIT, which is reported in REDBOOK as having a wholesale acquisition 
cost of $182,500 per 250 mg. The applicant stated that, as such, 
HEPZATOTM KIT clearly qualifies under the cost test for new 
technology add-on payment designation.
    Response: We thank commenters for their comments.
    We agree that the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all

[[Page 69165]]

the scenarios. Therefore, HEPZATOTM KIT meets the cost 
criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that HEPZATOTM KIT represents a 
substantial clinical improvement over existing technologies because it 
offers a minimally invasive, targeted, effective, and safe treatment 
option to patients with liver-dominant mOM who may be poor candidates 
for liver resection or who may have difficulty tolerating systemic 
chemotherapy which results in a substantial clinical improvement in 
response and survival rates over best available care (BAC) and quality 
of life compared to pre-treatment. The applicant provided 11 studies to 
support these claims, as well as one background article about use of 
chemosaturation with PHP (CS-PHP) as a palliative treatment option for 
patients with unresectable cholangiocarcinoma.\69\ The following table 
summarizes the applicant's assertions regarding the substantial 
clinical improvement criterion. Please see the online posting for 
HEPZATOTM KIT for the applicant's complete statements 
regarding the substantial clinical improvement criterion and the 
supporting evidence provided.
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    \69\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.
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BILLING CODE 4120-01-P

[[Page 69166]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.115


[[Page 69167]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.116

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36064 through 
36066), after review of the information provided by the applicant, we 
stated we had the following concerns regarding whether 
HEPZATOTM KIT meets the substantial clinical improvement 
criterion. With respect to the applicant's assertion that 
HEPZATOTM KIT offers a treatment option for a patient 
population unresponsive or ineligible for currently available 
treatments, while the applicant stated that HEPZATOTM KIT 
offers an additional treatment option to patients with liver-dominant 
mOM who may be poor candidates for liver resection or who may have 
difficulty tolerating systemic chemotherapy, we stated the applicant 
did not provide evidence in support of this assertion. We noted that we 
would be interested in information regarding whether there are 
potential Medicare patient populations that may have difficulty 
tolerating (or be unresponsive to) KIMMTRAK[supreg] or other currently 
available treatments but would be a good candidate for 
HEPZATOTM KIT.
    Regarding the claim that HEPZATOTM KIT improves survival 
over other treatment options, we stated that the applicant provided 
seven peer-reviewed cohort studies, summary material from an 
unpublished study, and one randomized controlled clinical study to 
support the claim. We noted that the seven peer reviewed cohort studies 
70 71 72 73 74 75 76 provided a range of results of overall 
survival as reported for patients treated with the HEPZATOTM 
KIT (median overall survival after first CS-PHP ranged from 9.6 months 
to 27.4 months depending on the study, and median 1-year overall 
survival rate raged from 44 percent to 77 percent depending on study). 
A few of the seven peer-reviewed cohort studies (Karydis et al. (2018); 
Tong et al. (2022); Meier et al. (2021)) reported statistically 
significant improvement in overall survival (OS) when compared to non-
responders or stable disease groups. Only one of the seven studies, 
Dewald et al. (2021), compared results to alternative treatments, but 
statistical significance was not achieved (P = 0.97) with CS-PHP 
resulting in a median OS of 24.1 months compared with 23.6 months for 
patients receiving other therapies. We noted that we believed 
additional evidence supporting that HEPZATOTM KIT offers a 
significant difference in OS rates compared to currently available 
treatments would be helpful in our evaluation of the applicant's 
assertion. We also stated that several of the studies provided as 
evidence include small, non-randomized studies without the use of 
comparators or controls, which may

[[Page 69168]]

affect the ability to draw meaningful conclusions about treatment 
outcomes from the results of the studies. We also noted that a majority 
of the studies provided (Bruning et al. (2020); Vogl et al. (2017); 
Dewald et al. (2021); Meijer et al. (2021); and Artzner et al. (2019)) 
were conducted outside the U.S. We questioned if there may be 
differences in treatment guidelines between these countries that may 
have affected clinical outcomes.
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    \70\ Bruning R, Tiede M, Schneider M, et al. Unresectable 
Hepatic Metastasis of Uveal Melanoma: Hepatic Chemosaturation with 
High-Dose Melphalan-Long-Term Overall Survival Negatively Correlates 
with Tumor Burden. Radiol Res Pract. 2020.
    \71\ Vogl TJ, Koch SA, Lotz G, et al. Percutaneous Isolated 
Hepatic Perfusion as a Treatment for Isolated Hepatic Metastases of 
Uveal Melanoma: Patient Outcome and Safety in a Multi-centre Study. 
Cardiovasc Intervent Radiol. Jun 2017;40(6):864-872.
    \72\ Dewald CLA, Hinrichs JB, Becker LS, et al. Chemosaturation 
with Percutaneous Hepatic Perfusion: Outcome and Safety in Patients 
with Metastasized Uveal Melanoma. Rofo. Aug 2021;193(8):928-936.
    \73\ Meijer TS, Burgmans MC, de Leede EM, et al. Percutaneous 
Hepatic Perfusion with Melphalan in Patients with Unresectable 
Ocular Melanoma Metastases Confined to the Liver: A Prospective 
Phase II Study. Ann Surg Oncol. Feb 2021;28(2):1130-1141.
    \74\ Karydis I, Gangi A, Wheater MJ, et al. Percutaneous hepatic 
perfusion with melphalan in uveal melanoma: A safe and effective 
treatment modality in an orphan disease. J Surg Oncol. May 
2018;117(6):1170-1178.
    \75\ Artzner C, Mossakowski O, Hefferman G, et al. 
Chemosaturation with percutaneous hepatic perfusion of melphalan for 
liver-dominant metastatic uveal melanoma: a single center 
experience. Cancer Imaging. Mayphip 30 2019;19(1):31.
    \76\ Tong TML, Samim M, Kapiteijn E, et al. Predictive 
parameters in patients undergoing percutaneous hepatic perfusion 
with melphalan for unresectable liver metastases from uveal 
melanoma: a retrospective pooled analysis. Cardiovasc Intervent 
Radiol. 2022;45(9):1304-1313.
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    We stated that the applicant also submitted summary presentation 
material evidence to support this claim in the form of a poster and 
slides for the FOCUS study,\77\ in which 144 patients were enrolled, 
with 91 patients receiving PHP treatment and 32 patients receiving BAC. 
According to the applicant, preliminary results from the phase III 
FOCUS Trial show that progression free survival (PFS) was 9.03 months 
among PHP patients and just over 3 months among BAC patients. OS among 
treated PHP patients was 19.25 months and among treated BAC patients 
was 14.49 months. However, this study had yet to be published and was 
not yet available for analysis and peer review. We stated that as of 
the time of the proposed rule, we were unable to verify the methods, 
results, and conclusions of this study as the applicant only provided 
evidence in the form of a poster and presentation. For example, one 
citation provided by the applicant in the form of a non-peer-reviewed 
conference presentation details preliminary results from the FOCUS 
Phase III Trial. We noted we would be interested in the statistical 
analysis (including p value and CI data) surrounding the OS rates. In 
addition, we stated that the poster notes that due to slow enrollment 
and patient reluctance to receive BAC treatment, the trial design was 
amended to a single arm design with all eligible patients receiving PHP 
after discussion with FDA. We noted we would be interested in detail 
about these specific eligibility requirements, as well as how the 
potential for confounding variables resulting from any differences in 
the resulting populations were identified and mitigated.
---------------------------------------------------------------------------

    \77\ Delcath ASCO 2022 FOCUS Trial Poster; FOCUS Trial Ongoing 
(See online posting for Hepzato\TM\ Kit).
---------------------------------------------------------------------------

    We further noted that in the published randomized clinical trial 
\78\ (RCT) provided by the applicant, the median hepatic progression 
free survival (hPFS), the primary endpoint of the trial, was 7.0 months 
for patients using HEPZATOTM KIT compared to 1.6 months for 
patients receiving BAC. However, the median overall survival (OS) with 
the treatment of HEPZATOTM KIT was 10.6 months (95 percent 
CI 6.9-13.6 months) compared to 10.0 months (95 percent CI 6.0-13.1 
months) for the group of patients who received BAC. We stated that the 
study notes that median OS was not significantly different (PHP-Mel 
10.6 months vs. BAC 10.0 months), but OS was 13.1 months (95 percent CI 
10.0-20.3 months) in BAC patients who crossed over and received 
treatment with PHP-Mel (n = 28, 57.1 percent). In the study discussion 
of OS, Hughes et al. concluded that the 57 percent of patients who were 
allowed to crossover confounded the ability to analyze any survival 
advantage associated with PHP Mel. We noted we would be interested in 
additional evidence in our evaluation of the applicant's assertion that 
HEPZATOTM KIT substantially improves survival over other 
treatment options.
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    \78\ Hughes MS, Zager J, Faries M, et al. Results of a 
Randomized Controlled Multicenter Phase III Trial of Percutaneous 
Hepatic Perfusion Compared with Best Available Care for Patients 
with Melanoma Liver Metastases. Ann Surg Oncol. Apr 2016;23(4):1309-
19.
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    Regarding the claim that HEPZATOTM KIT increases 
response rate over BAC, we noted that across the retrospective studies, 
response rates ranged from an overall response rate of 42.3 percent 
[Dewald et al (2021)] to a partial response of 89 percent [Vogl et al. 
(2017)] depending on the study. However, as the applicant cited many of 
the same retroactive studies that it referenced in support of the claim 
of improved survival [Bruning et al. (2020); Vogl et al. (2017); Dewald 
et al. (2021); Meijer et al. (2021); Artzner et al. (2019); Tong et al. 
(2022); Karydis et al. (2018)], we noted we had the same questions as 
discussed previously regarding the ability to draw meaningful 
conclusions from the results of these studies in evaluation of this 
claim.
    Regarding the unpublished FOCUS study (Delcath ASCO 2022 FOCUS 
Trial Poster),\79\ previously described, the applicant stated that in 
the preliminary results from the FOCUS Trial, the overall response rate 
(ORR) among PHP patients was 36.3 percent, nearly three times better 
than that of the 12.5 percent ORR among BAC patients. However, as 
previously noted, we stated we would be interested in details about the 
eligibility requirements, and how the potential for confounding 
variables resulting from any differences in the resulting populations 
were identified and mitigated.
---------------------------------------------------------------------------

    \79\ Delcath ASCO 2022 FOCUS Trial Poster; FOCUS Trial Ongoing 
(See online posting for Hepzato\TM\ Kit).
---------------------------------------------------------------------------

    Lastly, we stated that with regard to the assertion that 
HEPZATOTM KIT improves quality of life over pre-treatment, 
the applicant submitted the Vogl et al. (2017) study as evidentiary 
support. The study was a retrospective, multi-center study reporting 
outcome and safety after percutaneous isolated hepatic perfusion (PIHP) 
with Melphalan for patients with uveal melanoma and metastatic disease 
limited to the liver. Thirty-five PIHP treatments were performed in 18 
patients (8 male, 10 female) at seven hospitals across the U.S and 
Germany between January 2012 and December 2016. Patients' life quality 
was assessed using four-point scale questionnaires to rate overall 
health and life quality after therapy, how much their health and 
quality of life had changed after therapy, and how pleased they were 
with PIHP. We noted that the study used a subjective four-point 
measurement scale to determine quality-of-life used in the study. We 
stated that we questioned if a more objective assessment tool would be 
more helpful in evaluating a patient's quality of life. We noted it was 
unclear if the survey questions were asked verbally, and by whom, or if 
the survey was answered in writing by the patient alone. As the study 
was not randomized and the patients' responses were not anonymous, we 
noted that we questioned if there may have been resulting response 
bias, or interviewer bias that would impact our ability to draw 
meaningful conclusions about a subjective measurement of improved 
quality of life. In addition, we noted that the study utilized the 
Delcath Hepatic CHEMOSAT[supreg] Delivery System for Melphalan 
components as part of the treatment, and it was unclear if the 
technologies used in the study were the same as HEPZATOTM 
KIT, or what differences may exist between the technologies. We noted 
we would be interested in information about any differences between 
Delcath's HEPZATOTM KIT and the technologies used in this 
study for PIHP with Melphalan.
    We invited public comments on whether HEPZATOTM KIT 
meets the substantial clinical improvement criterion.
    Comment: The applicant submitted a public comment regarding the 
substantial clinical improvement criterion and provided responses to 
CMS's concerns from the proposed rule. The applicant asserted that 
HEPZATOTM KIT is the only FDA-approved therapy for the 
approximately 55 percent of patients with mOM who

[[Page 69169]]

are not eligible for KIMMTRAK[supreg] or whose disease has progressed 
despite using other therapies. The applicant further asserted that the 
mechanism of action in KIMMTRAK[supreg] depends on the presence of the 
HLA-A*02:01 allele and only approximately 45 percent of people in the 
U.S. are HLA-A*02:01-positive. Therefore, the applicant concluded that 
more than half of patients with mOM are ineligible for KIMMTRAK[supreg] 
treatment. The applicant also stated that all patients in the FOCUS 
study had unresectable liver metastases, and that accordingly, the 
FOCUS study results demonstrate efficacy for this patient population. 
The applicant stated that at the doses that patients can tolerate, 
systemic chemotherapy has been found to have low efficacy. The 
applicant also cited study results asserting that single-agent and 
combination chemotherapies have mostly been ineffective in patients 
with metastatic uveal melanoma, with ORRs ranging from zero to eight 
percent with the alkylating agents dacarbazine or temozolomide and up 
to 10 percent with fotemustine, and that most of these clinical studies 
have been nonrandomized single-arm trials, with only eight randomized 
trials evaluating systemic therapy alone completed since 2000.\80\ 
Lastly, the applicant asserted the evidence demonstrates that 
HEPZATOTM KIT is effective in Medicare beneficiaries who are 
unresponsive to, or have difficulty tolerating, other treatments. The 
applicant stated that a subgroup analysis of the FOCUS study 
demonstrates that HEPZATOTM KIT is a treatment option for 
Medicare-age patients, as there were similar ORR, OS, and PFS results 
in patients >=65 years old and <65 years old, and differences were not 
statistically significant. The applicant stated that a large proportion 
of Medicare-aged mOM patients first treated with KIMMTRAK[supreg] are 
likely to experience disease progression and leading immunotherapies 
have relatively short PFS in mOM patients; therefore, both categories 
of patients would be good candidates for treatment with 
HEPZATOTM KIT.
---------------------------------------------------------------------------

    \80\ Carvajal 2023, supra note 2, p. 107.
---------------------------------------------------------------------------

    The applicant noted that the previously unpublished FOCUS study 
(Delcath ASCO 2022 FOCUS Trial Poster) has since been published, but 
did not make the study available for review.\81\ In response to our 
interest in receiving additional detail about specific eligibility 
requirements and how potential for confounding variables resulting from 
any differences in the resulting populations were identified and 
mitigated, the applicant stated that the study began as a randomized 
trial with two treatment arms (HEPZATOTM KIT and BAC), but 
at the midpoint of the trial, many patients randomized to the BAC arm 
withdrew consent prior to treatment. Per the applicant, subsequent to 
discussion with FDA and investigators, all parties supported amending 
the trial to a single-arm design, in which all enrolled patients would 
receive melphalan/HDS treatment. The applicant stated that potential 
differences in demographic and baseline characteristics between 
patients in the two portions of the study were examined and no 
significant differences were found among potential confounding 
variables. Per the applicant, patients in the FOCUS study who had 
received prior therapy and patients who had not been treated for mOM 
experienced similar ORR (37.5 percent and 35.3 percent; p = 0.83), OS 
(20.83 months and 20.53 months; p = 0.499), and PFS (9.18 months and 
9.00 months; p = 0.86). The applicant also provided a subgroup analysis 
of patients in the FOCUS study >=65 years old and <65 years old and 
stated that there were statistically insignificant differences in ORR 
(30.0 percent and 39.3 percent; p = 0.488), OS (20.53 months and 20.83 
months; p = 0.574), and PFS (9.00 months and 9.07 months; p = 0.494). 
The applicant provided additional FOCUS study results, noting patients 
treated with HEPZATOTM KIT, who were treatment-naive (56.0 
percent) or previously treated (44.0 percent) and could have limited 
extrahepatic disease (29.7 percent), had an ORR of 36.3 percent (95 
percent CI: 26.44, 47.01) with 7.7 percent complete response and 28.6 
percent partial response; tumor responses were durable, with a median 
DOR of 14.0 months (95 percent CI: 8.31, 17.74); disease control rate 
was 73.6 percent (95 percent CI: 63.35, 82.31); median OS was 20.5 
months (95 percent CI: 16.79, 25.26); and median PFS was 9.0 months (95 
percent CI: 6.34, 11.56). Lastly, the applicant expressed its opinion 
that the retrospective single-center and multicenter investigations of 
mOM patients in Europe reinforce the conclusion of HEPZATOTM 
KIT's efficacy noting that in general, these studies have found ORR and 
PFS results that are similar to or exceed those reported in the FOCUS 
study and OS results similar to or exceeding the typical OS of mOM 
patients (approximately 12 months), with five of the seven studies 
reporting a median OS between 14.9 and 27.4 months.
---------------------------------------------------------------------------

    \81\ Zager JS, Orloff M, Ferrucci PF, et al. Efficacy and Safety 
of the Melphalan/Hepatic Delivery System in Patients with 
Unresectable Metastatic Uveal Melanoma: Results from an Open-Label, 
Single-Arm, Multicenter Phase 3 Study. Ann Surg Oncol. Published 
online May 4, 2024. doi:10.1245/s10434-024-15293-x.
---------------------------------------------------------------------------

    In response to CMS's request for additional evidence that 
HEPZATOTM KIT substantially improves survival over other 
treatment options, the applicant stated that the Dewald et al. (2021) 
study \82\ supports this claim and reported an ORR of 42.3 percent and 
disease control rate (DCR) of 80.8 percent, exceeding those reported in 
the literature for alternative treatments for mOM (DCR range of 64.7 
percent to 80.2 percent). The applicant cited another study, Dewald et 
al. (2022), which reports on a larger group of patients and treatments 
(66 patients, 145 treatments) that reported an ORR 59 percent, a DCR of 
93.4 percent, and a median OS of 18.4 months.\83\ The applicant also 
provided details on a post-hoc analysis of FOCUS study patients treated 
with HEPZATOTM KIT, in which Zager and colleagues (2024) 
reported that patients treated with HEPZATOTM KIT were found 
to have a statistically significant relationship between OS and best 
overall response. According to the applicant, the results from a post 
hoc analysis of the relationship between tumor response and survival 
demonstrated a statistically significant difference (p < 0.0001) 
between the patients who had a best overall response of partial 
response [median OS of 28.2 months (95 percent CI, 23.46-34.46 
months)], stable disease [median OS of 19.3 months (95 percent CI, 
15.90-23.00 months)], and progressive disease [median OS of 12.0 months 
(95 percent CI, 8.18-14.03 months)].\84\ According to the applicant, 
this correlation between response and survival suggests that the 
favorable response rate seen with HEPZATOTM KIT leads to 
beneficial survival outcomes relative to other treatments.
---------------------------------------------------------------------------

    \82\ Dewald CLA, Hinrichs JB, et al. Chemosaturation with 
Percutaneous Hepatic Perfusion: Outcome and Safety in Patients with 
Metastasized Uveal Melanoma. Rofo. 2021 Aug;193(8):928-936. English, 
German. doi: 10.1055/a1348-1932. Epub 2021 Feb 3.
    \83\ Dewald CLA, Warnke MM, et al. Percutaneous Hepatic 
Perfusion (PHP) with Melphalan in Liver-Dominant Metastatic Uveal 
Melanoma: The German Experience. Cancers (Basel). 2022 Jan; 14(1): 
118. doi:10.3390/cancers14010118.
    \84\ Zager JS, Orloff M, Ferrucci PF, et al. Efficacy and Safety 
of the Melphalan/Hepatic Delivery System in Patients with 
Unresectable Metastatic Uveal Melanoma: Results from an Open-Label, 
Single-Arm, Multicenter Phase 3 Study. Ann Surg Oncol. Published 
online May 4, 2024. doi:10.1245/s10434-024-15293-x.
---------------------------------------------------------------------------

    Regarding the claim that HEPZATOTM KIT improves quality 
of life over pre-treatment, the applicant stated that CMS questioned 
whether the Vogel study was

[[Page 69170]]

reliable, given that it was unclear whether the study survey questions 
were asked verbally, and by whom, or if the survey was answered in 
writing by the patient alone. The applicant acknowledged that the 
details related to the conduct of the survey were not reported in the 
2017 article by Vogel and colleagues, so response bias and interviewer 
bias cannot be ruled out. The applicant further stated that there is no 
reason to believe the study authors did not control for bias, and that 
the Vogel study is only one of many studies that demonstrated efficacy. 
The applicant cited a single-center, prospective cohort study of 
patient-reported quality of life assessments collected before and after 
treatment with CHEMOSAT[supreg] in which patients completed the 
European Organization for Research and Treatment of Cancer (EORTC) QLQ-
C30 version 3, a validated self-report questionnaire that assesses 
quality of life (QoL) in cancer patients and consists of a global 
health status scale, functional scales, and symptom scales.\85\ The 
study authors found that global health status 21 days after treatment 
with CHEMOSAT[supreg] was consistent with global health status pre-
treatment, despite temporary decreases in global health status scores 
at day \2/3\ and day 7 post-treatment. Specifically, the study authors 
concluded that CHEMOSAT[supreg] treatment has limited impact on QoL of 
patients with metastasized UM, and that the general GHS returns to 
baseline within 3 weeks despite moderate decline in fatigue and 
physical and role functioning scores. Regarding CMS's concern that it 
was unclear if the technologies used in the study are the same as 
HEPZATOTM KIT, or what differences may exist between the 
technologies (89 FR 36066), the applicant stated that in Europe the 
marketed product known as CHEMOSAT[supreg] uses the same procedural 
``Instructions for Use'' as the HEPZATOTM KIT. The applicant 
further stated that the only difference between CHEMOSAT[supreg] used 
in treatments outside the US and HEPZATOTM KIT used in the 
FOCUS study is that CHEMOSAT[supreg] is used in conjunction with the 
hospital's melphalan supply, whereas HEPZATOTM KIT is 
prepackaged with melphalan.
---------------------------------------------------------------------------

    \85\ Tong TML, Fiocco M, van Duijn-de Vreugd JJ, et al. Quality 
of life analysis of patients treated with percutaneous hepatic 
perfusion for uveal melanoma liver metastases. Cardiovasc Intervent 
Radiol. Published online April 8, 2024. doi:10.1007/s00270-024-
03713-0.
---------------------------------------------------------------------------

    We received several additional comments in support of the 
application for HEPZATOTM KIT. Generally, these additional 
commenters stated that HEPZATOTM KIT provides a clinically 
meaningful pathway for mOM patients who previously did not have an 
approved treatment option and asserted that such treatments will 
continue to improve outcomes and ultimately make mOM a survivable 
disease. The commenters asserted that approval would increase access to 
treatments for a patient population with very limited treatment 
options, and some of these commenters cited aforementioned study 
results, inclusive of the FOCUS trial response rates and noting a 
statistically significant relationship between overall survival and 
best overall response in patients treated with HEPZATOTM 
KIT.
    We also received one comment stating that it did not support 
approval of HEPZATOTM KIT. The commenter stated its belief 
that HEPZATOTM KIT is not necessarily safer or easier to 
tolerate because patients receiving treatment with HEPZATOTM 
KIT in the Zager et al. (2024) \86\ study experienced a higher rate of 
treatment discontinuation due to adverse events (17.9 percent) compared 
to patients in another study who received treatment with 
KIMMTRAK[supreg] (2 percent).\87\ The commenter also asserted that 
between these two studies, there was a 73 percent 1-year survival rate 
for KIMMTRAK[supreg] and 80 percent 1-year survival rate for 
HEPZATOTM KIT. However, the commenter stated that patients 
in the FOCUS trial had better ECOG performance statuses and more 
stringent exclusion criteria, including limitations on extrahepatic 
disease. Lastly, the commenter asserted that, other than HLA-A*02:01-
negative patients, there does not appear to be a population of mOM 
patients that would qualify for HEPZATOTM KIT therapy and 
not qualify for treatment with KIMMTRAK[supreg].
---------------------------------------------------------------------------

    \86\ Zager JS, Orloff M, Ferrucci PF, et al. Efficacy and Safety 
of the Melphalan/Hepatic Delivery System in Patients with 
Unresectable Metastatic Uveal Melanoma: Results from an Open-Label, 
Single-Arm, Multicenter Phase 3 Study. Ann Surg Oncol. Published 
online May 4, 2024. doi:10.1245/s10434-024-15293-x.
    \87\ Nathan et al, New England Journal of Medicine, 
2021;385:1196-1206.
---------------------------------------------------------------------------

    Response: We thank the applicant and other commenters for their 
comments regarding the substantial clinical improvement criterion. 
Based on review of the information submitted by the applicant and the 
additional information received, we agree with the applicant that 
HEPZATOTM KIT offers a treatment option for adult patients 
with uveal melanoma with unresectable hepatic metastases who are 
ineligible for existing therapies because they may be poor candidates 
for liver resection or who may have difficulty tolerating systemic 
chemotherapy and are HLA-A*02:01-negative and therefore ineligible for 
treatment with KIMMTRAK[supreg]. Therefore, we agree that 
HEPZATOTM KIT represents a substantial clinical improvement 
over existing technologies.
    After consideration of the public comments we received and the 
information included in the applicant's new technology add-on payment 
application, we have determined that HEPZATOTM KIT meets the 
criteria for approval for new technology add-on payment. Therefore, we 
are approving new technology add-on payments for this technology for FY 
2025. Cases involving the use of HEPZATOTM KIT that are 
eligible for new technology add-on payments will be identified by ICD-
10-PCS codes: XW053T9 (Introduction of melphalan hydrochloride 
antineoplastic into peripheral artery, percutaneous approach), in 
combination with 5A1C00Z (Performance of biliary filtration, single).
    In its application, the applicant stated that the cost of 
HEPZATOTM KIT is $182,500 per treatment and that patients 
will receive up to six treatments administered at a dose of 3 mg/kg of 
body weight, with a maximum dose of 220 mg in a single administration. 
The applicant anticipates an average of four treatments per patient 
(based on the median of four treatments per person in the FOCUS trial) 
but those treatments would be administered across four separate 
inpatient stays as treatment cycles must take place 6-8 weeks apart. 
The average cost will therefore be $182,500 per inpatient stay. Under 
Sec.  412.88(a)(2), we limit new technology add-on payments to the 
lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, the maximum new technology add-on payment for a case involving 
the use of HEPZATOTM KIT is $118,625 for FY 2025.
g. LantidraTM (donislecel-jujn (allogeneic pancreatic islet 
cellular suspension for hepatic portal vein infusion))
    CellTrans Inc. submitted an application for new technology add-on 
payments for LantidraTM for FY 2025. According to the 
applicant, LantidraTM is an allogeneic pancreatic islet 
cellular therapy indicated for the treatment of adults with Type 1 
diabetes (T1D) who are unable to approach target hemoglobin A1c (HbA1c) 
because of repeated episodes of severe hypoglycemia despite intensive 
diabetes management and education. Per the applicant, 
LantidraTM is used in

[[Page 69171]]

conjunction with concomitant immunosuppression. The applicant asserted 
that the route of administration for LantidraTM is infusion 
into the hepatic portal vein only. The applicant noted that following 
transplant, the patient is monitored for graft function and safety 
issues, including potential adverse reactions due to immunosuppression. 
The applicant stated that the primary mechanism of action for 
LantidraTM is the secretion of insulin by the beta cells 
within the infused allogeneic islet of Langerhans, which are 
responsible for regulating blood glucose levels in response to glucose 
stimulation.
    Please refer to the online application posting for 
LantidraTM, available at https://mearis.cms.gov/public/publications/ntap/NTP231017H5N2T, for additional detail describing the 
technology and the disease treated by the technology.
    With respect to the newness criterion, according to the applicant, 
LantidraTM was granted approval for a Biologics License 
Application (BLA) from FDA on June 28, 2023, for the treatment of 
adults with T1D who are unable to approach target HbA1c because of 
current repeated episodes of severe hypoglycemia despite intensive 
diabetes management and education. According to the applicant, the 
technology was commercially available on January 8, 2024. The applicant 
stated that the approved manufacturing site for LantidraTM 
is at the University of Illinois (UI) Health, UI in Chicago and time 
was needed to transfer islet cell transplant clinical protocols to the 
UI Health transplant division.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36066), we noted 
that under national coverage determination (NCD) 260.3.1 Islet Cell 
Transplantation in the Context of a Clinical Trial, Medicare will pay 
for the routine costs, as well as transplantation and appropriate 
related items and services, for Medicare beneficiaries participating in 
a National Institutes of Health (NIH)-sponsored clinical trial(s). 
Specifically, Medicare will cover transplantation of pancreatic islet 
cells, the insulin producing cells of the pancreas. Coverage may 
include the costs of acquisition and delivery of the pancreatic islet 
cells, as well as clinically necessary inpatient and outpatient medical 
care and immunosuppressants. Because LantidraTM may be 
covered by Medicare when it is used in the setting of a clinical trial, 
we stated we would evaluate whether LantidraTM is eligible 
for new technology add-on payments for FY 2025. We noted that any 
payment made under the Medicare program for services provided to a 
beneficiary would be contingent on CMS's coverage of the item, and any 
restrictions on the coverage would apply.
    The applicant stated that the recommended minimum dose is 5,000 
equivalent islet number (EIN)/kg for the initial infusion, and 4,500 
EIN/kg for subsequent infusion(s) in the same recipient. The maximum 
dose per infusion is dictated by the estimated tissue volume, which 
should not exceed 10 cc per infusion, and the total EIN present in the 
infusion bag (up to a maximum of 1 x 10 [caret] 6 EIN per bag). A 
second infusion may be performed if the patient does not achieve 
independence from exogenous insulin within 1-year post-infusion or 
within 1-year after losing independence from exogenous insulin after a 
previous infusion. A third infusion may be performed using the same 
criteria as for the second infusion.
    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for LantidraTM and was granted approval 
to use the following procedure code effective October 1, 2024: XW033DA 
(Introduction of donislecel-jujn allogeneic pancreatic islet cellular 
suspension into peripheral vein, percutaneous approach, new technology 
group 10).
    As previously discussed, if a technology meets all three of the 
substantial similarity criteria under the newness criterion, it would 
be considered substantially similar to an existing technology and would 
not be considered new for the purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that LantidraTM has not been assigned to the same 
MS-DRG when compared to an existing technology to achieve a therapeutic 
outcome. The following table summarizes the applicant's assertions 
regarding the substantial similarity criteria. Please see the online 
application posting for LantidraTM for the applicant's 
complete statements in support of its assertion that 
LantidraTM is not substantially similar to other currently 
available technologies.
[GRAPHIC] [TIFF OMITTED] TR28AU24.117


[[Page 69172]]


    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36067), we 
invited public comments on whether LantidraTM is 
substantially similar to existing technologies and whether 
LantidraTM meets the newness criterion.
    Comment: The applicant submitted a public comment regarding the 
newness criterion. The applicant stated that in its application, it 
should have responded no to the question, ``Does the use of the 
technology involve the treatment of the same/similar type of disease 
and the same/similar patient population when compared to an existing 
technology?'' The applicant further clarified that it did state in its 
application that, due to its minimally invasive administration, 
LantidraTM addresses an unmet need for a small distinct 
subset of patients with hard-to-control T1D complicated by severe 
hypoglycemia who cannot receive a whole pancreas transplant due to 
medical or surgical risk.
    Response: We thank the applicant for its clarification. Although 
the applicant states in its public comment that LantidraTM 
treats a new patient population because it addresses an unmet need for 
a small distinct subset of patients with hard-to-control T1D 
complicated by severe hypoglycemia who cannot receive a whole pancreas 
transplant due to medical or surgical risk, we note in addition to 
whole pancreas transplant, there are other existing technologies for 
managing glucose control and hypoglycemia. Technologies that are 
currently available for use in patients with hard-to-control T1D 
include continuous glucose monitors and automated insulin delivery 
systems, which can be utilized to manage or reduce severe hypoglycemic 
episodes, such as the Medtronic MiniMedTM 670G system, 
Medtronic MiniMedTM 780G, and Tandem Diabetes Care Control-
IQ[supreg] Technology. We therefore question the applicant's assertion 
that LantidraTM meets an unmet need for this specific 
patient population, given there are several other evidence-based 
treatment options available that may potentially manage the high 
glucose variability for this subset of patients.
    We also agree with the applicant that the underlying mechanism of 
action of LantidraTM is similar to that of whole pancreas 
transplant. However, we note that the mechanism of action for 
LantidraTM is different than that of the previously 
mentioned technologies used for treatment in the subset of patients 
with hard-to-control T1D complicated by severe hypoglycemia who cannot 
receive a whole pancreas transplant due to medical or surgical risk, as 
identified by the applicant.
    In addition, we note that although LantidraTM would map 
to a different MS-DRG than whole (solid) pancreas transplant, we 
believe that LantidraTM would map to the same MS-DRGs as 
existing insulin delivery therapies and technologies used to treat the 
subset of patients with hard-to-control T1D complicated by severe 
hypoglycemia who cannot receive a whole pancreas transplant due to 
medical or surgical risk.
    Therefore, based on our review of the comments received and 
information submitted by the applicant as part of its FY 2025 new 
technology add-on payment application for LantidraTM, we 
agree with the applicant that LantidraTM is not 
substantially similar to existing treatment options because it has a 
unique mechanism of action compared to existing insulin delivery 
therapies and technologies when used to treat the subset of patients 
with hard-to-control T1D complicated by severe hypoglycemia who cannot 
receive a whole pancreas transplant due to medical or surgical risk. 
Therefore, LantidraTM meets the newness criterion. We 
consider the beginning of the newness period to commence on January 8, 
2024, when LantidraTM became commercially available.
    With respect to the cost criterion, the applicant included the two 
most recent patient cases with charges of LantidraTM billed 
by a hospital that administered the technology, based on that 
hospital's billing data file on the undiscounted costs. The applicant 
stated that it attempted to identify potential cases representing 
patients who may be eligible for LantidraTM by searching the 
FY 2022 MedPAR file and the 100 percent sample FY 2022 Standard 
Analytical Files (SAF) for cases reporting ICD-10-CM/PCS codes and MS-
DRGs codes that were relevant to FDA-approved indication and 
administration of LantidraTM, however, it could not confirm 
if cost data from the two most recent patient cases were included in 
the FY 2022 MedPAR file or SAF. As a result, the applicant provided the 
charges billed by the hospital for these two cases. The applicant 
stated that the MS-DRG coded for the two cases was MS-DRG 639 (Diabetes 
without CC/MCC). The applicant followed the order of operations 
described in the following table and calculated a final inflated 
average case-weighted standardized charge per case of $374,547, which 
exceeded the average case-weighted threshold amount of $32,311. Because 
the final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount, the applicant 
asserted that LantidraTM meets the cost criterion.

[[Page 69173]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.118

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36067 through 
36068), we noted the following concerns regarding the cost criterion. 
We noted that the applicant did not remove any charges or indirect 
charges related to prior technology without providing further details. 
We stated we were interested in additional information regarding 
whether LantidraTM would replace any prior technology. We 
noted we were also interested in how the applicant estimated an 
inflation factor of 10 percent to apply to the standardized charges. 
With respect to the cases included in the cost analysis, we noted that 
the applicant limited the cost analysis to the two most recent patient 
cases with charges of LantidraTM billed by the hospital, 
which the applicant asserted were the best available data for the FY 
2022 cost analysis. We noted the MS-DRG coded for these two cases was 
MS-DRG 639 (Diabetes without CC/MCC). We stated we were interested in 
information as to whether cases in other MS-DRGs would be potentially 
eligible for LantidraTM and if these cases should also be 
included in the cost analysis by using appropriate inclusion/exclusion 
criteria based on reporting of ICD-10-CM/PCS codes.
    We invited public comments on whether LantidraTM meets 
the cost criterion.
    Comment: The applicant clarified that they used a close 
approximation of expected hospital charges for the administration of 
LantidraTM in the cost analysis. Specifically, it estimated 
the average unstandardized charge per case to be $63,211 (hospital room 
$6,122, drugs $23,200, laboratory tests $11,160, imaging $12,871, 
procedure $5,035, and physician services $4,823), which the applicant 
stated represented actual hospital charges for the administration of 
LantidraTM paid by the sponsor for two cases in 2022.
    With respect to the estimation of an inflation factor of 10 percent 
that the applicant applied to the standard charges, the applicant 
stated that, as claims data were not used in the cost analysis of 
LantidraTM, rather than applying the most recent final rule 
inflation factor, it used the 10 percent inflation factor in the cost 
threshold example tab in the FY2025 NTAP Cost Analysis spreadsheet.
    To address the request for additional analysis, the applicant 
performed four additional cost analyses. The applicant stated that each 
scenario and corresponding sensitivity analysis utilized the FY 2022 
MedPAR file and the results showed LantidraTM met the cost 
criterion. The applicant stated that cost-to-charge ratios (CCR) were 
used to estimate hospital charges in the additional analysis, which may 
inflate charges by a multiple of approximately five times the cost and 
may not represent actual estimated hospital charges for the 
administration of LantidraTM.
    Per the applicant, the first analysis was to evaluate cases 
identified by ICD-10-PCS code E033U1 (Introduction of nonautologous 
pancreatic islet cells into peripheral vein, percutaneous approach), 
which best describes procedures similar to the administration of 
LantidraTM. However, the applicant stated that no cases were 
identified and a cost analysis could not be performed.
    In the second analysis, the applicant evaluated cases with an ICD-
10-CM code E10649 (Type 1 diabetes mellitus with hypoglycemia without 
coma), regardless of MS-DRG assignment. The applicant stated this 
diagnosis code best describes patients that may be suitable to receive 
LantidraTM based on the labeled indication. The applicant 
identified 14,866 cases across 523 MS-DRGs. The applicant removed 100 
percent of all drug charges, which it stated was a conservative 
analysis as it is highly likely that patients would still receive some 
drugs as part of their hospital admission. The applicant stated since 
it could not identify which drugs LantidraTM would 
necessarily replace, the analysis removed all of the drug charges to 
provide a conservative cost estimate. The applicant stated the analysis 
estimated hospital charges associated with LantidraTM of 
$1,666,667 by dividing the per-administration wholesale acquisition 
cost (WAC) of $300,000 by the national average CCR for drugs provided 
in the CMS template (0.180).Using the CMS new technology add-on payment 
template for evaluating the cost criterion, the applicant estimated a 
final average inflated standardized charge per case of $1,759,387, 
which it stated is greater than the average case-weighted threshold 
amount of $80,720. The applicant conducted a sensitivity analysis by 
applying an estimated CAR-T CCR (0.2669) to the cost of 
LantidraTM, and stated that the final average case-weighted 
standardized charge per case exceeded the average case-weighted 
threshold amount ($1,216,737 and $80,720, respectively).
    In the third analysis, the applicant identified 67,277 cases in MS-
DRGs 637 (Diabetes with MCC), 638 (Diabetes with CC), and 639 (Diabetes 
without CC/MCC). Per the applicant, the majority of

[[Page 69174]]

LantidraTM cases are expected to be assigned to these MS-
DRGs. As in the second analysis, the applicant removed 100 percent of 
all drug charges for the reasons described earlier in this section. The 
applicant stated that using the CMS new technology add-on payment 
template for evaluating the cost criterion, this analysis resulted in a 
final average inflated standardized charge per case of $1,709,127, 
which is greater than the average case-weighted threshold amount of 
$49,659. The applicant conducted a sensitivity analysis by applying an 
estimated CAR-T CCR (0.2669) to the cost of LantidraTM, and 
stated that the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount 
($1,166,476 and $49,659, respectively).
    In the fourth analysis, to further refine the analysis to patients 
that may be eligible for LantidraTM, the applicant evaluated 
cases within MS-DRGs 637-639 with ICD-10-CM code E10649 (Type 1 
diabetes mellitus with hypoglycemia without coma), which, according to 
the applicant, is the most appropriate code for patients that may 
receive LantidraTM based on the labeled indication. The 
applicant identified 2,851 discharges and removed 100 percent of all 
drug charges for the reasons described previously. The applicant stated 
that using the CMS new technology add-on payment template for 
evaluating the cost criterion, this analysis resulted in a final 
average inflated standardized charge per case of $1,714,333, which is 
greater than the average case- weighted threshold amount of $51,535. 
The applicant conducted a sensitivity analysis by applying an estimated 
CAR-T CCR (0.2669) to the cost of LantidraTM, and stated 
that the final inflated average case-weighted standardized charge per 
case exceeded the average case-weighted threshold amount ($1,171,683 
and $51,535, respectively).
    The applicant stated that the final inflated average case-weighted 
standardized charge per case exceeded the average case-weighted 
threshold amount in all additional analyses. The applicant clarified 
that administration of LantidraTM is a minimally invasive 
procedure with moderate sedation and one night hospital stay, and 
asserted use of the CCR to approximate hospital charges may result in a 
large overestimation. The applicant stated that in the application, it 
added actual hospital charges from two cases in 2022 which resulted in 
an average standardized charge per case of $67,770 (excluding the cost 
of LantidraTM), and applied a 3-year rate of inflation 
factor of 1.18. Per the applicant, adding the cost of 
LantidraTM results in a final average inflated standardized 
charge per case of $374,547, which exceeds the average case-weighted 
threshold amounts in all the additional cost analyses provided by the 
applicant.
    Response: We thank the applicant for its comments and appreciate 
the updated cost analyses. We agree that the final inflated average 
case-weighted standardized charge per case exceeded the average case-
weighted threshold amount in the scenarios provided. Therefore, 
LantidraTM meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that LantidraTM represents a substantial 
clinical improvement over existing technologies. The applicant asserted 
that patients with the indication of T1D characterized by hypoglycemic 
unawareness are at risk of severe hypoglycemia, complications, and 
death, if untreated. According to the applicant, when intensive insulin 
therapy is not sufficient for addressing symptoms of severe 
hypoglycemia, LantidraTM infusion into the hepatic portal 
vein offers a safe and effective minimally invasive alternative with 
proven clinical outcomes, fewer complications, and similar overall 
costs to that of whole pancreas transplantation. The applicant also 
asserted that LantidraTM provides a treatment option for 
patients unresponsive to, or ineligible for, currently available 
treatments because whole pancreas transplant, a currently available 
treatment, is associated with greater surgical and post-procedural risk 
than pancreatic islet transplantation. Additionally, the applicant 
asserted that due to procedural risks, some patients may not be 
appropriate surgical candidates for whole pancreas transplantation.\88\ 
The applicant provided two patient testimonials, one study combining 
results of a Phase \1/2\ and a Phase 3 clinical study to support these 
claims, as well as one background article.\89\ The following table 
summarizes the applicant's assertions regarding the substantial 
clinical improvement criterion. Please see the online posting for 
LantidraTM for the applicant's complete statements regarding 
the substantial clinical improvement criterion and the supporting 
evidence provided.
---------------------------------------------------------------------------

    \88\ CellTrans Inc., Cellular, Tissue, and Gene Therapies 
Advisory Committee Briefing Document LantidraTM 
(donislecel) for the Treatment of Brittle Type 1 Diabetes Mellitus. 
https://www.fda.gov/media/147529/download April 15, 2021. Pages 22 
and 105.
    \89\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P

[[Page 69175]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.119

BILLING CODE 4120-01-C
    As stated in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36069), 
after review of the information provided by the applicant, we had the 
following concerns regarding whether LantidraTM meets the 
substantial clinical improvement criterion. We noted that we were 
interested in evidence on clinical outcomes based on a comparison of 
LantidraTM with currently available treatments, including 
whole pancreatic transplant or recent advances in glucose monitoring 
and insulin delivery systems that are FDA-approved. We also noted that 
according to the summary of the long-term 6-year follow-up of patients 
from the LantidraTM clinical trials,\90\ the number of 
evaluable patients was reduced from 30 at the baseline to 12 at year 6. 
We questioned whether the small number would impact the reliability of 
the conclusions about insulin independence and reduction in severe 
hypoglycemic events. Regarding the applicant's claim that 
LantidraTM patients achieved insulin independence, improved 
HbA1c endpoints, had fewer hypoglycemia episodes, and experienced 
improved quality of life, the applicant stated that the Phase \1/2\ and 
3 trials had over 10 years of extended follow-up, but specific results 
on long-term efficacy appear to be provided only up to six years post- 
the last transplant.\91\ We noted we were interested in learning about 
available results from any longer-term follow-up. In addition, we 
stated that we were interested in data demonstrating that 
LantidraTM results in improved clinical outcomes, like 
reduced mortality, to support an assessment of whether 
LantidraTM represents a substantial clinical improvement.
---------------------------------------------------------------------------

    \90\ CellTrans, Inc. 2021, Table 20, p. 60.
    \91\ Ibid.
---------------------------------------------------------------------------

    We invited public comments on whether LantidraTM meets 
the substantial clinical improvement criterion.
    Comment: The applicant submitted a public comment responding to 
CMS's concerns regarding the substantial clinical improvement 
criterion. With regard to the request for comparison of 
LantidraTM to currently available treatments, the applicant 
stated that patients with hard-to-control T1D are, by definition, 
unable to achieve adequate glycemic control despite currently available 
diabetes management technologies, such as continuous glucose monitors, 
insulin pumps, or closed-loop systems, also referred to as artificial 
pancreas (AP) systems. The applicant included references to studies in 
which patients were not able to control glucose levels using closed-
loop systems. For example, according to the applicant, a clinical trial 
by Anderson et al. (2019) \92\ demonstrated that the subcutaneous 
infusion of insulin with these AP systems is suboptimal, resulting in 
inferior insulin action and a hindrance of the ability of AP systems to 
cope with meals, exercise, and illness. The applicant stated that in 
subsequent studies by the Anderson team, in patients with T1D and with 
hypoglycemia unawareness and a

[[Page 69176]]

history of severe hypoglycemia followed over 1 month, the AP reduced 
the time that blood glucose was below 70 mg/dL by over three-fold, but 
did not completely normalize glycemic control, and did not restore 
hypoglycemia awareness or epinephrine response to hypoglycemia induced 
in a hospital setting. The applicant also cited a case study of sudden 
death associated with severe hypoglycemia in a patient with an advanced 
sensor-pump device.\93\ In addition, the applicant discussed a 
randomized controlled trial with an 18-month follow-up that tested a 
closed loop system where a subgroup (55 of 168) of patients in this 
iDCL Trial Protocol 3 \94\ (the largest AP study performed to date) who 
were at high risk for hypoglycemia at baseline (defined as >4% 
continuous glucose monitoring time below 70 mg/dL) showed improved 
overall glycemic control and time-in range (70-180 mg/dL), but still 
had residual hypoglycemia and their hypoglycemia awareness did not 
improve.\95\
---------------------------------------------------------------------------

    \92\ Anderson, S.M., et al., Hybrid Closed-Loop Control Is Safe 
and Effective for People with Type 1 Diabetes Who Are at Moderate to 
High Risk for Hypoglycemia. Diabetes Technol Ther, 2019. 21(6): p. 
356-363.
    \93\ Nishihama, K., et al., Sudden Death Associated with Severe 
Hypoglycemia in a Diabetic Patient During Sensor Augmented Pump 
Therapy with the Predictive Low Glucose Management System. Am J Case 
Rep, 2021. 22: p. e928090.
    \94\ Kovatchev, B., et al., Randomized Controlled Trial of 
Mobile Closed-Loop Control. Diabetes Care, 2020. 43(3): p. 607-615.
    \95\ Levy, C.J., et al., 100-LB: Closed-Loop Control Reduces 
Hypoglycemia without Increased Hyperglycemia in Subjects with 
Increased Prestudy Hypoglycemia: Results from the iDCL DCLP3 
Randomized Trial. Diabetes, 2020. 69(Supplement 1): p. 100-LB.
---------------------------------------------------------------------------

    The applicant reiterated that the hard-to-control T1D subgroup of 
patients does not adequately benefit from current diabetes management 
technologies, including AP systems. The applicant also cited studies 
that islet transplantation impacted health-related quality of life of 
patients by reducing fear of hypoglycemia, changing behaviors adopted 
to avoid hypoglycemia, reducing depression and confusion, or allowing 
patients to better engage in vacationing and vigorous physical 
activities such as hiking, sprinting, etc. For example, the applicant 
cited a study by H[auml]ggstr[ouml]m et al. (2011), in which 11 
patients who had received islet transplants at Uppsala University 
Hospital were surveyed about their fear of hypoglycemia, health-related 
quality of life, and social life situation in relation to their fear of 
hypoglycemia. The applicant asserted that while the results for health-
related quality of life were lower than in the normal population, 
changes in fear of hypoglycemia suggested an improvement for the 
patients who had undergone islet transplantation. The applicant stated 
that the patients felt they experienced improved control over their 
social situations.\96\ The applicant mentioned a study by Radosevich et 
al. (2013),\97\ in which 27 patients with T1D had undergone an islet 
transplant alone (ITA) procedure at the University of Minnesota. 
According to the applicant, ITA was found to be related to reductions 
in behaviors adopted to avoid hypoglycemia (P < 0.001) and attenuation 
in concerns about hypoglycemic episodes (P < 0.001). Further, the 
applicant stated that health status among the patients who had 
undergone ITA was also found to have improved, according to scores on 
the Euro Quality of Life scale (P = 0.002) and the Beck Depression 
Inventory scale (P = 0.003).
---------------------------------------------------------------------------

    \96\ H[auml]ggstr[ouml]m, E., M. Rehnman, and L. Gunningberg, 
Quality of life and social life situation in islet transplanted 
patients: time for a change in outcome measures? Int J Organ 
Transplant Med, 2011. 2(3): p. 117-25.
    \97\ Radosevich, D.M., et al., Comprehensive health assessment 
and five-yr follow-up of allogeneic islet transplant recipients. 
Clin Transplant, 2013. 27(6): p. E715-24.
---------------------------------------------------------------------------

    With regards to the concern about long term follow up and the small 
number of evaluable patients in the studies provided as evidence in the 
original application, the applicant explained that the number of 
evaluable patients decreases in each subsequent year after the last 
islet transplant in part because some of the patients had not yet 
reached yearly milestones at the time of data cutoff \98\ and because 
the follow up year resets for patients that receive an additional 
transplant. Per the applicant, this also accounts for the difference in 
the number of years of extended follow up referenced. The applicant 
stated that the statement in the application describing more than 10 
years of extended follow-up for patients in Phase \1/2\ and 3 clinical 
trials referred to their overall experience. The applicant further 
stated that although the number of patients in the clinical trials 
supporting LantidraTM is necessarily small, given the 
carefully limited subset of patients treated with this therapy, the 
efficacy outcomes are representative of larger studies and clinical 
data.
---------------------------------------------------------------------------

    \98\ Per the applicant, the data cutoff date was May 20, 2020, 
which is the date of BLA submission.
---------------------------------------------------------------------------

    The applicant stated that long term studies of more than 10 years 
have provided direct evidence that islet transplantation in patients 
with T1D can markedly improve metabolic control and suppress severe 
hypoglycemic events.99 100 According to the applicant, a 
Marfil-Garza et al. (2022) study published 20-year findings of 
pancreatic islet cell transplantation from the University of Alberta in 
Edmonton, Canada. The applicant stated that the cohort study included 
255 patients and illustrated the long-term safety of islet cell 
transplantation. The applicant stated that over the median follow-up of 
7.4 years, 90 percent of patients survived with a median islet 
transplant survival time of 5.9 years. The applicant asserted that 
patients with sustained graft survival demonstrated significantly 
higher rates of insulin independence as well as better sustained 
glycemic control compared with patients with non-sustained graft 
survival.\101\ The applicant stated that these outcomes were consistent 
with those of Hering et al (2022),\102\ who reported the outcomes of 
islet transplantation in 398 recipients with T1D complicated by severe 
hypoglycemic episodes reported to the Collaborative Islet Transplant 
Registry. Per the applicant, the Hering team identified age, islet 
dose, and concomitant immunosuppression protocols as factors associated 
with favorable outcomes, and demonstrated that when these factors were 
met, 53 percent of the patients were insulin independent at 5 years 
following transplant, 76% had an HbA1c under seven percent, and 95 
percent were free of severe hypoglycemic events.
---------------------------------------------------------------------------

    \99\ Vantyghem, Marie-Christine et al. ``Ten-Year Outcome of 
Islet Alone or Islet After Kidney Transplantation in Type 1 
Diabetes: A Prospective Parallel-Arm Cohort Study.'' Diabetes Care 
vol. 42,11 (2019): 2042-2049. doi:10.2337/dc19-0401.
    \100\ Czarnecka, Zofia et al. ``The Current Status of Allogenic 
Islet Cell Transplantation.'' Cells vol. 12,20 2423. 10 Oct. 2023, 
doi:10.3390/cells12202423.
    \101\ Marfil-Garza BA, Imes S, Verhoeff K, et al. Pancreatic 
islet transplantation in type 1 diabetes: 20-year experience from a 
single-centre cohort in Canada. Lancet Diabetes Endocrinol. 
2022;10(7):519-532. doi:10.1016/S2213-8587(22)00114-0.
    \102\ Hering, Bernhard J et al. ``Factors associated with 
favourable 5 year outcomes in islet transplant alone recipients with 
type 1 diabetes complicated by severe hypoglycaemia in the 
Collaborative Islet Transplant Registry.'' Diabetologia vol. 66,1 
(2023): 163-173. doi:10.1007/s00125-022-05804-4.
---------------------------------------------------------------------------

    The applicant concluded in its public comments that the clinical 
data supports the safety and efficacy of FDA-approved 
LantidraTM to address an unmet medical need for a small 
subset of patients with hard-to-control T1D complicated by severe 
hypoglycemic episodes.
    A commenter also submitted a public comment in support of 
LantidraTM. The commenter stated the benefits of 
LantidraTM include being available for patients with hard-
to-control diabetes. The commenter cited the unpublished results from a 
NIH-funded Phase 3 safety and efficacy study for islet cell 
transplantation as evidence to support the use of islet transplantation 
to improve the clinical outcomes of this

[[Page 69177]]

subgroup of patients. According to the commenter, 87.5 percent of 
patients in the NIH-funded study achieved glucose control and freedom 
from severe hypoglycemic events at 1 year and 71 percent at 2 years, 
while 52 percent of patients achieved insulin independence a year after 
transplant. The commenter stated that LantidraTM uniquely 
fills an unmet need and provides an important therapy option for T1D 
patients who are at an increased risk for severe morbidity and 
mortality.
    Response: We thank the applicant and the commenter for their 
comments regarding the substantial clinical improvement criterion. 
Based on the additional information received, we continue to have 
concerns as to whether Lantidra\TM\ meets the substantial clinical 
improvement criterion to be approved for new technology add-on 
payments. Regarding the applicant's assertion that patients with hard 
to control T1D are, by definition, unable to achieve glycemic control 
despite currently available diabetes management technologies such as 
continuous glucose monitors, insulin pumps, or closed-loop systems, we 
disagree that the data presented adequately supports this assertion. 
Specifically, we note the many technological advancements in glucose 
level detection and insulin delivery that have evolved since the 
beginning of islet cell transplantation. Continuous glucose monitoring 
systems with real time readings and alert systems can identify episodes 
of hyper- and hypoglycemia. Trend and pattern data can inform insulin 
dosing, and we note that severe hypoglycemic episodes and high glycemic 
variability can be prevented or significantly reduced by setting 
threshold alarms and having pumps that suspend and control insulin 
infusion with automated insulin delivery 
systems.103 104 105 106 It is not clear from the additional 
evidence presented by the applicant that patients eligible for 
treatment with LantidraTM could not be appropriately managed 
with the most recent diabetes management systems that are available.
---------------------------------------------------------------------------

    \103\ FDA Clears New Insulin Pump and Algorithm-Based Software 
to Support Enhanced Automatic Insulin Delivery https://www.fda.gov/news-events/press-announcements/fda-clears-new-insulin-pump-and-algorithm-based-software-support-enhanced-automatic-insulin-delivery.
    \104\ FDA approves first automated insulin delivery device for 
type 1 diabetes https://www.fda.gov/news-events/press-announcements/fda-approves-first-automated-insulin-delivery-device-type-1-diabetes.
    \105\ FDA Roundup: April 21, 2023 https://www.fda.gov/news-events/press-announcements/fda-roundup-april-21-2023.
    \106\ FDA authorizes first interoperable, automated insulin 
dosing controller designed to allow more choices for patients 
looking to customize their individual diabetes management device 
system https://www.fda.gov/news-events/press-announcements/fda-authorizes-first-interoperable-automated-insulin-dosing-controller-designed-allow-more-choices.
---------------------------------------------------------------------------

    In addition, while the applicant provided studies to demonstrate 
that current therapies are inadequate, we note that the Anderson et al. 
(2019) \107\ study cited by the applicant compared sensor-augmented 
pump (SAP) therapy to hybrid closed-loop control (HCLC), and per the 
study, HCLC reduced the risk and frequency of hypoglycemia while 
improving time in target range. We further note that with regard to the 
studies provided by the applicant to demonstrate that current therapies 
do not improve hypoglycemia unawareness, we are unclear how these 
studies demonstrate a patient population unresponsive to current 
therapies, particularly since the studies concluded that the therapies 
used improved hypoglycemia. We further note that the applicant did not 
assert or otherwise demonstrate that LantidraTM improves 
hypoglycemia unawareness. Additionally, the applicant provided a case 
study of a patient with an advanced sensor pump, and stated that the 
patient had sudden death due to severe hypoglycemia. However, we note 
that the study stated that it remained unclear whether hypoglycemia 
caused the sudden death, as the accuracy of glucose levels on these 
pumps during cardiopulmonary resuscitation was doubtful.\108\
---------------------------------------------------------------------------

    \107\ Anderson, S.M., et al., Hybrid Closed-Loop Control Is Safe 
and Effective for People with Type 1 Diabetes Who Are at Moderate to 
High Risk for Hypoglycemia. Diabetes Technol Ther, 2019. 21(6): p. 
356-363.
    \108\ Nishihama, K., et al., Sudden Death Associated with Severe 
Hypoglycemia in a Diabetic Patient During Sensor Augmented Pump 
Therapy with the Predictive Low Glucose Management System. Am J Case 
Rep, 2021. 22: p. e928090.
---------------------------------------------------------------------------

    With regard to the studies cited by the applicant that islet 
transplantation impacted health-related quality of life, and the study 
provided by the commenter regarding safety and efficacy of islet cell 
transplantation, we note that the additional data provided did not 
assess LantidraTM, but instead included data from other 
formulations of islet cells for transplantation. As a result, we are 
unclear how these formulations may compare to that of 
LantidraTM. We further note that the Hering et al. (2023) 
study \109\ cited by the applicant identified islet dose and 
concomitant immunosuppression protocols as factors that could affect 
outcomes; however we are unclear that data using other formulations of 
islet cells or transplant protocols, which may vary by clinical site, 
is relevant to the assessment of LantidraTM specifically.
---------------------------------------------------------------------------

    \109\ Hering, Bernhard J et al. ``Factors associated with 
favourable 5 year outcomes in islet transplant alone recipients with 
type 1 diabetes complicated by severe hypoglycaemia in the 
Collaborative Islet Transplant Registry.'' Diabetologia vol. 66,1 
(2023): 163-173. doi:10.1007/s00125-022-05804-4.
---------------------------------------------------------------------------

    We also remain concerned with regard to the generalizability of the 
outcomes given the small number of evaluable patients. We note the 
applicant stated that the number of evaluable patients decreased in 
each subsequent year after the last islet transplant in part because 
some of the patients had not yet reached yearly milestones at the time 
of data cutoff, and because the follow up year resets for patients that 
receive an additional transplant, and also the number of patients in 
the clinical trials supporting LantidraTM were necessarily 
small, given the carefully limited subset of patients treated with this 
therapy and the efficacy outcomes are representative of larger studies 
and clinical data. Regardless, we question whether the patients 
included in the UIH-001 and UIH-002 studies met the criteria for this 
specific subset of patients, defined as hard to control T1D complicated 
by severe hypoglycemia, given that at baseline, 37 percent of 
transplant recipients had a HbA1c at target, and 83 percent of patients 
in the trial did not have a documented severe hypoglycemic event in the 
year prior to transplant, according to the FDA panel review. According 
to the FDA BLA Clinical Review Memorandum,\110\ in the discussion of 
HbA1c: Of the thirty subjects, 11 (37 percent) had an HbA1c of <=7% 
prior to transplant, and 6 (20 percent) had an HbA1c <=6.5%, with 6.5% 
and 7% being accepted targets for good glycemic control in diabetic 
patients. Therefore, it is unclear that these patients would represent 
the narrower subset of patients, as described by the applicant.
---------------------------------------------------------------------------

    \110\ BLA Clinical Review Memorandum https://www.fda.gov/media/170827/download.
---------------------------------------------------------------------------

    In addition, in response to our question about the availability of 
evidence that LantidraTM improved clinical outcomes, like 
reduced mortality, to inform our assessment of whether 
LantidraTM represents a substantial clinical improvement, 
the applicant cited long-term studies of more than 10 years. According 
to the applicant, these studies provided direct evidence that islet 
transplantation in patients with T1D can markedly improve metabolic 
control and suppress severe hypoglycemic events. The applicant further 
cited a Marfil-Garza et

[[Page 69178]]

al. (2022) \111\ study which published 20-year findings of pancreatic 
islet cell transplantation from the University of Alberta in Edmonton, 
Canada. The applicant stated that the cohort study included 255 
patients and illustrated the long-term safety of islet cell 
transplantation. The applicant further stated that over the median 
follow-up of 7.4 years, 90 percent of patients survived with a median 
islet transplant survival time of 5.9 years. The applicant asserted 
that patients with sustained graft survival demonstrated significantly 
higher rates of insulin independence as well as better sustained 
glycemic control compared with patients with non-sustained graft 
survival. The applicant also stated that these outcomes were consistent 
with those of the Hering et al. (2023) study, who reported the outcomes 
of islet transplantation in 398 recipients with T1D complicated by 
severe hypoglycemic episodes reported to the Collaborative Islet 
Transplant Registry. Per the applicant, the Hering team identified age, 
islet dose, and concomitant immunosuppression protocols as factors 
associated with favorable outcomes, and demonstrated that when these 
factors were met, 53 percent of patients were insulin independent at 5 
years following transplant, 76 percent had an HbA1c under seven 
percent, and 95 percent were free of severe hypoglycemic events. With 
regards to the studies cited by the applicant, we note that the 
additional data provided did not assess the use of 
LantidraTM, and given the potential differences in the islet 
cell formulation used at different transfusion facilities and the 
potential differences in the various transplant protocols, we question 
whether the reported results are replicable or comparable to 
LantidraTM.
---------------------------------------------------------------------------

    \111\ Marfil-Garza BA, Imes S, Verhoeff K, et al. Pancreatic 
islet transplantation in type 1 diabetes: 20-year experience from a 
single-centre cohort in Canada. Lancet Diabetes Endocrinol. 
2022;10(7):519-532. doi:10.1016/S2213-8587(22)00114-0.
---------------------------------------------------------------------------

    After consideration of all the information received from the 
applicant, as well as the public comments we received, we are unable to 
determine that LantidraTM represents a substantial clinical 
improvement over existing technologies for the reasons discussed in the 
proposed rule and in this final rule, and therefore, we are not 
approving new technology add-on payments for LantidraTM for 
FY 2025.
h. AMTAGVITM (lifileucel)
    Iovance Biotherapeutics, Inc. submitted an application for new 
technology add-on payments for AMTAGVITM for FY 2025. 
According to the applicant, AMTAGVITM is a one-time, single-
dose autologous tumor-infiltrating lymphocyte (TIL) immunotherapy for 
the treatment of advanced (unresectable or metastatic) melanoma 
comprised of a suspension of TIL for intravenous infusion. We note that 
Iovance Biotherapeutics submitted an application for new technology 
add-on payments for AMTAGVITM for FY 2022 under the name 
lifileucel, as summarized in the FY 2022 IPPS/LTCH PPS proposed rule 
(86 FR 25272 through 25282) but withdrew the application prior to the 
issuance of the FY 2022 IPPS/LTCH PPS final rule (86 FR 44979). We also 
note that the applicant submitted an application for 
AMTAGVITM for FY 2023 under the name lifileucel, as 
summarized in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28244 
through 28257), that it withdrew prior to the issuance of the FY 2023 
IPPS/LTCH PPS final rule (87 FR 48920).
    Please refer to the online application posting for 
AMTAGVITM, available at https://mearis.cms.gov/public/publications/ntap/NTP231012V8Y9J, for additional detail describing the 
technology and the treatment of unresectable or metastatic melanoma.
    With respect to the newness criterion, according to the applicant, 
AMTAGVITM was granted Biologics License Application (BLA) 
approval from FDA on February 16, 2024, for treatment of adult patients 
with unresectable or metastatic melanoma previously treated with a 
programmed cell death protein 1 (PD-1) blocking antibody, and if B-raf 
proto-oncogene (BRAF) V600 mutation positive, a BRAF inhibitor with or 
without a mitogen-activated extracellular signal-regulated kinase (MEK) 
inhibitor. The applicant stated that AMTAGVITM has received 
Regenerative Medicine Advanced Therapy (RMAT), Orphan Drug, and Fast 
Track designations from FDA for the treatment of advanced melanoma. 
According to the applicant, AMTAGVITM was expected to be 
commercially available within 30-40 days post-FDA approval due to the 
need for the physician to prescribe AMTAGVITM, the treatment 
center to receive approval from the patient's insurer and to schedule 
and surgically resect the patient's tumor tissue, the 22-day TIL 
manufacturing process, and shipment/invoicing of AMTAGVITM 
to the treatment center for patient administration. In the FY 2025 
IPPS/LTCH PPS proposed rule (89 FR 36069), we stated we were interested 
in additional information regarding the delay in the technology's 
market availability, as it seems that the technology would need to be 
available for sale before a physician would be able to prescribe 
AMTAGVITM.
    According to the applicant, AMTAGVITM is provided as a 
single dose for infusion containing a suspension of TIL in up to four 
patient-specific intravenous (IV) infusion bag(s), with each dose 
containing 7.5 x 107 [caret] 9 to 72 x 10 [caret] 9 viable cells. The 
applicant further noted that there is a lymphodepleting regimen 
administered before infusion of AMTAGVITM, and post-
AMTAGVITM infusion, an interleukin 2 (IL-2) infusion at 
600,000 IU/kg is administered every 8 to 12 hours, for up to a maximum 
of 6 doses, to support cell expansion in vivo.
    The applicant stated that effective October 1, 2022, the following 
ICD-10-PCS codes may be used to uniquely describe procedures involving 
the use of AMTAGVITM: XW033L7 (Introduction of lifileucel 
immunotherapy into peripheral vein, percutaneous approach, new 
technology group 7), and XW043L7 (Introduction of lifileucel 
immunotherapy into central vein, percutaneous approach, new technology 
group 7). The applicant stated that all diagnosis codes under the 
category C43 (Malignant melanoma of skin) may be used to currently 
identify the indication for AMTAGVITM under the ICD-10-CM 
coding system.
    As previously discussed, if a technology meets all three of the 
substantial similarity criteria under the newness criterion, it would 
be considered substantially similar to an existing technology and would 
not be considered ``new'' for the purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that AMTAGVITM is not substantially similar to 
other currently available technologies because TIL immunotherapy with 
AMTAGVITM has a novel and unique mechanism of action that 
delivers a highly customized, personalized, and targeted, single-
infusion treatment for advanced melanoma, and AMTAGVITM is 
the first and only TIL immunotherapy approved for the treatment of 
advanced (unresectable or metastatic) melanoma, and that therefore, the 
technology meets the newness criterion. The following table summarizes 
the applicant's assertions regarding the substantial similarity 
criteria. Please see the online application posting for 
AMTAGVITM for the applicant's complete statements in support 
of its assertion that AMTAGVITM is not substantially similar

[[Page 69179]]

to other currently available technologies.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU24.120

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

    \112\ Olson D, et al. Immune checkpoint inhibitors (ICI) 
treatment after progression on anti-PD-1 therapy in advanced 
melanoma: a systematic literature review. National Comprehensive 
Care Network (NCCN) Annual Conference, Poster. March-April 2023.
    \113\ Schumacher TN, Schreiber RD: Neoantigens in cancer 
immunotherapy. Science 348:69-74, 2015.
    \114\ Simpson-Abelson MR, Hilton F, Fardis M, et al: Iovance 
generation-2 tumor-infiltrating lymphocyte (TIL) product is 
reinvigorated during the manufacturing process. Ann Oncol 31:S645-
S671, 2020 (suppl 4).
    \115\ Raskov H, et al. British Journal of Cancer (2021) 124:359-
367; https://doi.org/10.1038/s41416-020-01048-4.
    \116\ Fardis M, et al. Current and future directions for tumor 
infiltrating lymphocyte therapy for the treatment of solid tumors. 
Cell and Gene Therapy Insights, 2020; 6(6), 855-863.

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

[[Page 69180]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.121

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36071), we 
invited public comments on whether AMTAGVITM is 
substantially similar to existing technologies and whether 
AMTAGVITM meets the newness criterion.
    Comment: The applicant submitted a public comment regarding the 
newness criterion. The applicant reiterated that AMTAGVITM 
is the first and only one-time, individualized T-cell therapy to 
receive FDA approval as a treatment for a solid tumor cancer. The 
applicant stated that the proposed mechanism for AMTAGVITM 
offers a new cell therapy approach that deploys patient-specific T-
cells called TIL cells. The applicant stated that when cancer is 
detected, the immune system creates TIL cells to locate, attack, and 
destroy cancer and that TIL cells recognize distinctive tumor markers 
on the cell surface of each person's cancer. The applicant stated that 
when cancer develops and prevails, the body's natural TIL cells can no 
longer perform their intended function to fight cancer. The applicant 
asserted that TIL cell therapy with AMTAGVITM uses 
autologous T-cells isolated from the tumor tissue and expanded ex vivo 
using a centralized manufacturing process, maintaining the 
heterogeneous repertoire of T-cells without any prior selection or 
genetic modification. The applicant stated that by isolating autologous 
TIL from the tumor microenvironment and expanding them ex vivo in the 
presence of growth factors, the AMTAGVITM manufacturing 
process produces large numbers of reinvigorated T-cells. Further, the 
applicant asserted that following a one-time infusion of the 
personalized AMTAGVITM immunotherapy, the TIL migrates back 
into primary and metastatic tumors, where they amplify and rejuvenate 
the patient's own immune system, triggering specific tumor cell killing 
upon recognition of tumor antigens.
    The applicant also responded to CMS's request for additional 
information regarding the delay in the technology's market 
availability, stating that AMTAGVITM was granted FDA 
approval on February 16, 2024, and became immediately available for 
providers to order for patients. The applicant further stated that as a 
tumor-derived autologous T-cell immunotherapy that is individualized 
for each patient, there is a several-week process for each patient to 
receive AMTAGVITM. The applicant stated that 
AMTAGVITM is manufactured from resected patient tumor tissue 
prosected from one or more tumor lesions.\117\ The applicant stated 
that initially, it had targeted a 34-day turnaround time from the 
receipt of starting material at their centralized GMP facility to 
return shipment to the treatment center, which includes the 
AMTAGVITM manufacturing and testing/release processes. 
However, the applicant stated it expected this time to decrease as the 
product becomes more widely available. In addition, the applicant 
stated there is a 7-day preconditioning regimen prior to 
AMTAGVITM infusion, and as a result, the first 
AMTAGVITM shipment to a treatment center was on March 28, 
2024, and the first patient was infused on April 4, 2024. The applicant 
requested April 4, 2024, as the start of the AMTAGVITM 
newness period for the new technology add-on payment.
---------------------------------------------------------------------------

    \117\ FDA. https://www.fda.gov/media/176417/download?attachment--AMTAGVI prescribing information.
---------------------------------------------------------------------------

    Response: Based on our review of comments received and information 
submitted by the applicant as part of its FY 2025 new technology add-on 
payment application for AMTAGVITM, we agree with the 
applicant that AMTAGVITM is the first TIL therapy in the 
treatment of advanced melanoma and, therefore, has a new mechanism of 
action compared to existing technologies. We also believe that the use 
of AMTAGVITM would be assigned to a different MS-DRG than 
existing technologies to treat patients with advanced melanoma since 
AMTAGVITM maps to Pre-MDC MS-DRG 018 (Chimeric Antigen 
Receptor (CAR) T-cell and Other Immunotherapies). Therefore, we agree 
with the applicant that AMTAGVITM is not substantially 
similar to existing treatment options and meets the newness criterion.
    With respect to the applicant's request to start the 
AMTAGVITM newness period for the new technology add-on 
payment on April 4, 2024, we note that the timeframe that a new 
technology can be eligible to receive new technology add-on payments 
begins when data become available (69 FR 49003, 85 FR 58610). 
Consistent with the statute, a technology no longer qualifies as 
``new'' once it is more than 2 to 3 years old, irrespective of how 
frequently it has been used in the Medicare population.

[[Page 69181]]

Therefore, if a product is more than 2 to 3 years old, we consider its 
costs to be included in the MS-DRG relative weights whether its use in 
the Medicare population has been frequent or infrequent. While our 
policy is generally to begin the newness period on the date of FDA 
approval or clearance, we may consider a documented delay in a 
technology's market availability in our determination of newness (87 FR 
48977). However, we do not consider the date of first sale of a 
product, or first shipment of a product, as an indicator of the entry 
of a product onto the U.S. market; none of these dates indicate when a 
technology became available for sale (88 FR 58802). Similarly, the date 
of first infusion of a product does not indicate when a technology 
became available for sale. As the applicant noted, AMTAGVITM 
was granted FDA approval on February 16, 2024, and became immediately 
available for providers to order for patients. Therefore, it appears 
that AMTAGVITM was available for sale starting February 16, 
2024. We consider the beginning of the newness period to commence on 
February 16, 2024, when AMTAGVITM was granted BLA approval 
from FDA for treatment of adult patients with unresectable or 
metastatic melanoma previously treated with a PD-1 blocking antibody, 
and if BRAF V600 mutation positive, a BRAF inhibitor with or without a 
MEK inhibitor.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. For each 
analysis, the applicant searched the FY 2022 MedPAR file using 
different combinations of ICD-10-CM codes, ICD-10-PCS codes, and/or 
inpatient length-of-stay (LOS) of 10 or more days. The applicant 
explained that it used different combinations to demonstrate four 
different cohorts that may be eligible for the technology. According to 
the applicant, eligible cases for AMTAGVITM will be mapped 
to Pre-MDC MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell and Other 
Immunotherapies). For each analysis, the applicant used the FY 2025 new 
technology add-on payments threshold for Pre-MDC MS-DRG 018 for all 
identified cases. Each analysis followed the order of operations 
described in the table later in this section.
    For the first analysis, the applicant searched for potential cases 
for the following combination of ICD-10-CM diagnosis/procedure codes: 
any melanoma and metastasis diagnosis codes and any IL-2 or 
chemotherapy procedure codes. Please see the online posting for 
AMTAGVITM for the complete list of codes provided by the 
applicant. The applicant used the inclusion/exclusion criteria 
described in the following table. Under this analysis, the applicant 
identified 176 claims mapping to 16 MS-DRGs, with each MS-DRG 
representing 6.3 percent of identified cases. The applicant calculated 
a final inflated average case-weighted standardized charge per case of 
$2,150,682, which exceeded the average case-weighted threshold amount 
of $1,374,450.
    For the second analysis, the applicant searched for potential cases 
for the following ICD-10-CM diagnosis/procedure codes in combination 
with an inpatient LOS of 10 or more days: any melanoma and metastasis 
diagnosis codes and any IL-2 or chemotherapy procedure codes. Please 
see the online posting for AMTAGVITM for the complete list 
of codes provided by the applicant. The applicant used the inclusion/
exclusion criteria described in the following table. Under this 
analysis, the applicant identified 77 claims mapping to seven MS-DRGs, 
with each MS-DRG representing 14.3 percent of identified cases. The 
applicant calculated a final inflated average case-weighted 
standardized charge per case of $2,207,367, which exceeded the average 
case-weighted threshold amount of $1,374,450.
    For the third analysis, the applicant searched for potential cases 
for the following combination of ICD-10-CM diagnosis/procedure codes: a 
code describing primary or admitting diagnosis of melanoma and a 
metastasis diagnosis code. Please see the online posting for 
AMTAGVITM for the complete list of codes provided by the 
applicant. The applicant used the inclusion/exclusion criteria 
described in the following table. Under this analysis, the applicant 
identified 735 claims mapping to 64 MS-DRGs, with each MS-DRG 
representing 3.4 percent to 1.5 percent of identified cases. The 
applicant calculated a final inflated average case-weighted 
standardized charge per case of $2,017,903, which exceeded the average 
case-weighted threshold amount of $1,374,450.
    For the fourth analysis, the applicant searched for potential cases 
for the following combination of ICD-10-CM diagnosis/procedure codes: a 
code describing any diagnosis of melanoma and a metastasis diagnosis 
code. Please see the online posting for AMTAGVITM for the 
complete list of codes provided by the applicant. The applicant used 
the inclusion/exclusion criteria described in the following table. 
Under this analysis, the applicant identified 6,648 claims mapping to 
358 MS-DRGs, each MS-DRG representing 0.2 percent to 6.7 percent of 
identified cases. The applicant calculated a final inflated average 
case-weighted standardized charge per case of $2,018,905, which 
exceeded the average case-weighted threshold amount of $1,374,450.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant asserted that AMTAGVITM meets 
the cost criterion.
BILLING CODE 4120-01-P

[[Page 69182]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.122


[[Page 69183]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.123

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36074), we 
invited public comments on whether AMTAGVITM meets the cost 
criterion.
    We did not receive any comments on whether AMTAGVITM 
meets cost criterion. Based on the information submitted by the 
applicant as part of its FY 2025 new technology add-on payment 
application, as previously summarized, the final inflated average case-
weighted standardized charge per case exceeded the average case-
weighted threshold amount. Therefore, AMTAGVITM meets the 
cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that AMTAGVITM represents a substantial 
clinical improvement over existing technologies because the efficacy 
and safety profile of the single infusion of AMTAGVITM TIL 
immunotherapy addresses an important unmet need in the advanced 
(unresectable or metastatic) melanoma population who lack effective or 
approved treatment options after being previously treated with ICI 
therapy. The applicant asserted that the clinically meaningful and 
durable activity of AMTAGVITM represents a substantial 
clinical improvement over published outcomes for chemotherapy. The 
applicant provided four studies to support these claims, as well as 22 
background articles about treatments for advanced melanoma.\119\
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    \118\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
    \119\ Background articles are not included in the following 
table but can be accessed via the online posting for the technology.
---------------------------------------------------------------------------

    The following table summarizes the applicant's assertions regarding 
the substantial clinical improvement criterion. Please see the online 
posting for AMTAGVITM for the applicant's complete 
statements regarding the substantial clinical improvement criterion and 
the supporting evidence provided.
BILLING CODE 4120-01-P

[[Page 69184]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.124

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36075 through 
36076), after reviewing the information provided by the applicant, we 
stated we had the following concerns regarding whether 
AMTAGVITM meets the substantial clinical improvement 
criterion.
    In support of its application, the applicant provided data from the 
C-144-01 study, an ongoing phase two multicenter study (NCT02360579) to 
assess the efficacy and safety of autologous TIL in patients with stage 
IIIc-IV metastatic melanoma, which consisted of: Cohort 1 (n = 30 
generation 1 no-cryopreserved TIL product); Cohort 2 (n = 66 generation 
2 cryopreserved TIL product); Cohort 3 (a sub-sample of n = 10 from 
Cohorts 1, 2, and 4); and Cohort 4 (n = 75 generation 2 cryopreserved 
TIL product). Regarding the sample studied (Cohorts 2 & 4 combined) by 
Chesney, et al. (2022),\120\ similar to concerns raised in the FY 2022 
IPPS/LTCH PPS proposed rule (86 FR 25281), we stated that we continued 
to question the appropriateness of combining Cohorts 2 and 4 together. 
Furthermore, similar to concerns raised in the FY 2023 IPPS/LTCH PPS 
proposed rule (87 FR 28256 through 28257), we noted that in the study 
of Chesney, et al. (2022), 54 percent of the sample size included males 
with a median age of 56; data on race, ethnicity, and other 
demographics are not presented. Given that the average age of Medicare 
beneficiaries is substantially older, and that Medicare beneficiaries 
often have multiple comorbidities, we questioned whether the sample 
evaluated is appropriately representative of the Medicare population 
and whether this sample has a disease burden similar to that seen in 
Medicare beneficiaries.121 122 123 Thus,

[[Page 69185]]

similar to concerns raised in the FY 2023 IPPS/LTCH PPS proposed rule 
(87 FR 28256 through 28257), we stated we were concerned that the 
findings may not be generalizable to Medicare beneficiaries. 
Furthermore, as discussed in the FY 2023 IPPS/LTCH PPS proposed rule 
(87 FR 28256), we noted that we continued to question whether the 
patient sample evaluated in the Sarnaik et al. (2021) \124\ study is 
appropriately representative of the Medicare population and whether 
this sample has a disease burden similar to that seen in Medicare 
beneficiaries.
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    \120\ Chesney J, et al. J Immunother Cancer 2022;10:3005755. 
Doi:10.1136/jitc-2022-005755.
    \121\ https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Chronic-Conditions/Medicare_Beneficiary_Characteristics.
    \122\ Centers for Medicare and Medicaid Services. Chronic 
Conditions among Medicare Beneficiaries, Chartbook, 2012 Edition. 
Baltimore, MD. 2012. https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/chronic-conditions/downloads/2012chartbook.pdf.
    \123\ Cher, B., Ryan, A.M., Hoffman, G.J., & Sheetz, K.H. 
(2020). Association of Medicaid Eligibility With Surgical 
Readmission Among Medicare Beneficiaries. JAMA network open, 3(6), 
e207426. https://doi.org/10.1001/jamanetworkopen.2020.7426.
    \124\ Sarnaik A, et al. leucel, a tumor-infiltrating lymphocyte 
therapy, in metastatic melanoma. J Clin Oncol. 2021;39(24):2656-66. 
doi:10.1200/JCO.21.00612 (Published online first: 2021/05/13).
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    Second, similar to concerns raised in the FY 2022 IPPS/LTCH PPS 
proposed rule (86 FR 25279 through 25282) and the FY 2023 IPPS/LTCH PPS 
proposed rule (87 FR 28256 through 28257), we stated that we continued 
to note that while multiple background studies were provided in support 
of the applicant's claims for substantial clinical improvement, those 
that evaluate AMTAGVITM were based solely on the C-144-01 
trial. The background studies focus primarily on describing the 
limitations of other therapies rather than supporting the role of 
AMTAGVITM, and no direct comparisons to other existing 
therapies, such as targeted therapies with combination BRAF plus MEK 
inhibitors or nivolumab plus ipilimumab, were provided. Therefore, we 
stated that we would be interested in additional information comparing 
AMTAGVITM to existing treatments (for example, evidence 
comparing AMTAGVITM phase two studies to the phase two 
studies of existing or approved treatments by using meta-analysis after 
systematic review, or evidence based on retrospective cohort studies of 
the relevant patients to assess whether AMTAGVITM had 
significantly different impact on any outcomes compared to existing or 
approved treatments).
    Third, similar to concerns raised in the FY 2022 IPPS/LTCH PPS 
proposed rule (86 FR 25279 through 25282), and the FY 2023 IPPS/LTCH 
PPS proposed rule (87 FR 28256 through 28257), we noted that the 
Chesney et al. (2022) \125\ study uses a surrogate endpoint, ORR, which 
combines the results of complete and partial responders; we questioned 
whether this correlated to improvement in clinical outcomes such as 
overall survival (OS).
---------------------------------------------------------------------------

    \125\ Chesney J, et al. J Immunother Cancer 2022;10:3005755. 
Doi:10.1136/jitc-2022-005755.
---------------------------------------------------------------------------

    Finally, similar to concerns raised in the FY 2023 IPPS/LTCH PPS 
proposed rule (87 FR 28256 through 28257), we noted that according to 
the applicant, high-dose IL-2 has been used to treat metastatic 
melanoma in the past and is given as a post-treatment to 
AMTAGVITM. According to the applicant, the occurrence of 
grade 3 and 4 treatment-emergent adverse events (TEAEs) was early and 
consistent with the lymphodepletion regimen (NMA-LD) and known profile 
of IL-2. If AMTAGVITM is always given in conjunction with 
the pre- and post-treatments, we questioned how it is possible to 
determine the cause of the TEAEs which are categorized as severe based 
on the Common Terminology Criteria for Adverse Events v4.03. We noted 
that we continued to question whether the effect seen in C-144-01 is 
due to AMTAGVITM itself or due to other factors such as the 
use of IL-2, general changes in medical practice over time, and the 
specific sample identified for the trial at hand.
    We invited public comments on whether AMTAGVITM meets 
the substantial clinical improvement criterion.
    Comment: The applicant submitted a public comment regarding the 
substantial clinical improvement criterion and provided responses to 
CMS's concerns in the proposed rule. With regards to the 
appropriateness of combining cohorts in the C-144-01 study, the 
applicant stated that the findings for Cohorts 2 and 4 were presented 
separately as well as combined (pooled results), and that in both cases 
AMTAGVITM demonstrated a substantial clinical improvement in 
ORR over chemotherapy, which the applicant asserted offers poor ORR (4-
10%). Specifically, the applicant stated that Cohorts 2 and 4 provided 
ORRs of 34.8 percent and 28.7 percent, respectively, when assessed 
separately, and an ORR of 31.4 percent when combined.\126\ The 
applicant asserted that pooling efficacy and safety from Cohort 2 and 4 
increased the sample size and therefore supported confidence in the 
point estimates of efficacy (ORR and DOR) and better characterized the 
AMTAGVITM safety profile. Additionally, the applicant 
clarified that both cohorts used the same eligibility criteria and 
enrolled similar patient populations as demonstrated by the baseline 
disease characteristics, patient demographics and prior therapies 
received; and both cohorts had the same primary and secondary 
objectives. The applicant stated that to minimize investigator bias, 
both Cohort 2 and 4 evaluated the efficacy of AMTAGVITM in 
patients with unresectable or metastatic melanoma using the ORR. 
Lastly, the applicant stated that the investigational product used in 
Cohort 2 and 4 was manufactured using the same manufacturing process 
and was released using the same product specification. The applicant 
also provided the pooled efficacy results that were assessed by FDA 
that included 153 patients (from Cohorts 2 and 4). Therefore, the 
applicant concluded that pooling Cohorts 2 and 4 from Study C-144-01 
provided the most comprehensive dataset supporting the safety and 
efficacy of AMTAGVITM.
---------------------------------------------------------------------------

    \126\ C-144-01 Sources: Chesney J, et al. JITC 2022; Sarnaik A, 
et al, J Clin Oncol 2021; Sarnaik A, et al. SITC 2022. Chemotherapy 
Sources: Ribas A, et al. Lancet Oncol 2015; Larkin J, et al. J Clin 
Oncol 2018; Weichenthal M, et al. J Clin Oncol 2018.
---------------------------------------------------------------------------

    In addition, in response to CMS's concerns regarding whether the C-
144-01 study population age, demographics, and disease burden were 
representative of the Medicare population, the applicant provided 
information about the inclusion criteria for Cohorts 2 and 4. The 
applicant noted that Medicare beneficiaries with advanced melanoma 
qualify for Medicare coverage by age (65 or greater) or disability (any 
age insured by Social Security Disability Insurance, SSDI) as well as 
noting that the study C-144-01 population is extrapolatable across the 
advanced melanoma Medicare-age population, with 24 percent of enrollees 
in Cohorts 2 and 4 aged 66 years or older.127 128 The 
applicant stated that between Cohorts 2, 4 and the pooled cohorts, all 
patients had a high disease burden (median target lesion sum of 
diameters [SOD] was 98 mm) at baseline, and patients had received a 
median of 3 lines of prior therapies (range, 1 to 9). The applicant 
stated that all patients had a confirmed progressive disease on their 
prior therapy before study entry. The applicant stated that as reported 
by Chesney et al, 2022, response to AMTAGVITM was observed 
across all subgroups analyzed including by age group (<65 years and 
greater than or equal to 65 years), where ORR was similar, and that 
this data is most representative of the real-life population with 
advanced melanoma. The applicant stated that moreover, when creating 
its Category of Evidence 2A recommendation for AMTAGVITM, 
the

[[Page 69186]]

National Comprehensive Cancer Network (NCCN) Guidelines did not 
distinguish its recommendation by age. The applicant asserted that 
accessibility to AMTAGVITM treatment is highly important to 
all Medicare beneficiaries whether eligible by age or disability 
status; specifically, increasing age is associated with a higher 
incidence of melanoma death. The applicant also provided the study C-
144-01 inclusion requirements for additional context.
---------------------------------------------------------------------------

    \127\ Chesney J, et al. J Immunother Cancer 2022; 10 e005755. 
Doi:101136/jitc-2022-005755.
    \128\ Sarnaik A, et al. Oral presentation. 37th Annual Meeting 
and Pre-Conference Programs, Society for Immunotherapy of Cancer 
(SITC). November 10, 2022.
---------------------------------------------------------------------------

    Regarding CMS's interest in additional information comparing 
AMTAGVITM to existing treatment, the applicant stated that 
there are no approved therapies for the line of treatment for which 
AMTAGVITM was approved, and that chemotherapy is the most 
commonly used therapy for patients with advanced melanoma post-
progression. The applicant stated that most patients with advanced 
melanoma relapse on, or do not tolerate, treatment with ICls and BRAF-
targeted therapies and respond poorly to subsequent rounds of therapy 
with these agents. The applicant stated that primary resistance to 
immune checkpoint blockade occurs in approximately 40 to 65 percent of 
patients with melanoma treated with anti-PD-1 based therapy, depending 
on whether anti-PD-1 therapy is given upfront or after progression on 
other therapies, and in >70 percent of those treated with anti-CTLA-4 
therapy. The applicant stated that of those with initial disease 
control, 30 to 40 percent develop acquired resistance. The applicant 
stated that approximately 15 to 20 percent of BRAF V600 mutation-
positive patients fail to respond to targeted therapy initially, and 
only 22 percent remain progression-free at 3 years. The applicant noted 
that although primary resistance is lower in patients treated with 
anti-PD-1 therapy plus anti-CTLA-4 therapy, 38 percent of patients 
discontinue therapy because of treatmentemergent adverse events 
(TEAEs), with 88 percent developing immune-related adverse events 
(irAEs), many of these being persistent. The applicant further stated 
that before AMTAGVITM's approval, there were no FDA-approved 
treatment options for patients with advanced melanoma whose disease 
progressed following initial treatment with an immune checkpoint 
inhibitor and, if appropriate, targeted therapy. The applicant stated 
that in its FY 2025 new technology add-on payment application, ORR and 
OS results for C-144-01 were compared to chemotherapy and asserted that 
only 4 percent to 10 percent of advanced melanoma patients who progress 
after retreatment have objective responses to chemotherapy, with a 
median OS of 7 months. The applicant stated that in contrast, a single 
infusion of AMTAGVITM provides clinically meaningful and 
durable responses in patients with advanced melanoma previously treated 
with ICI therapy. The applicant stated that in a four-year analysis of 
C-144-01 submitted to CMS in February 2024 as supplemental information 
for its new technology add-on payment application, the longest duration 
of independent review committee (IRC)-assessed response was ongoing at 
55.8 months. The applicant stated that the median DOR was not reached; 
median OS was 13.9 months, with 1-, 2-, 3-, and 4-year OS rates of 
54.0%, 33.9%, 28.4%, and 21.9%, respectively. The applicant stated that 
no new late-onset AMTAGVITM-related serious AE was reported. 
The applicant stated that based on its estimation of ORR, the planned 
sample size of Cohort 2 was 66 patients, and the planned sample size 
for Cohort 4 was 75 patients to demonstrate statistical significance to 
the historical ORR. The applicant provided additional methodology for 
its hypothesis testing for the primary endpoint of Cohort 4 as assessed 
by the IRC. The applicant also stated that AMTAGVITM 
recently became the first and the only Category of Evidence 2A 
designated agent approved on-label for second line therapy in advanced 
melanoma in an April 2024 update to the NCCN Guidelines, as a preferred 
high-dose therapy as secondline or subsequent systemic therapy, as a 
component of TIL therapy unresectable disease, and after progression on 
anti-PD-1-based therapy and BRAF/MEK inhibitor therapy (if BRAF V600 
mutation positive). The applicant asserted that the clinically 
meaningful and durable responses following the single infusion of 
AMTAGVITM address the high unmet medical need in patients 
with advanced melanoma and high tumor burden, who are heavily pre-
treated and difficult-to-treat and have a poor prognosis with no 
treatment options available after progression on immunotherapy and 
targeted agents or who are primary refractory to anti-PD-1/PD-Ll 
therapy.
    In response to CMS's concern about using a surrogate endpoint, ORR, 
and whether it correlated to clinical outcomes such as OS, the 
applicant cited an analysis of C-144-01 in patients who achieved 
response at first assessment (6 weeks or approximately 1.5 months) and 
provided a Kaplan-Meier curve showing a statistically significant 
difference in overall survival between patients who achieved an early 
response versus non-responders.\129\ The applicant also referred to a 
public comment letter to CMS on June 17, 2021 from the principal 
investigator for the C-144-01 trial that directed CMS to FDA guidance 
to industry describing the significance of ORR as assessed by its 
magnitude and duration of effect. In addition, the applicant stated 
that the guidance states use of ORR can represent direct clinical 
benefit based on the specific disease, context of use, magnitude of 
effect, the number of complete responses, the durability of response, 
and other factors.\130\ The applicant stated that in addition to the 
association between early response and OS in the C-144-01 landmark 
analysis, further evidence was presented from a multicenter, randomized 
Phase 3 trial evaluating treatment with locally-produced TIL therapy 
versus ipilimumab (n=84 per arm) for advanced 
melanoma.131 132 The applicant indicated that in this study, 
the overall survival of responders compared to non-responders had a 
hazard ratio of 0.14 (95% CI: 0.06, 0.33, p < .001), favoring TIL 
responders, and provided additional results for the TIL study 
population. The applicant also stated that AMTAGVITM was 
approved under FDA's accelerated approval program, which allows for 
earlier approval of drugs that treat serious conditions and fill an 
unmet medical need, and can also be based on the effect on a 
``surrogate endpoint,'' such as ORR that is reasonably likely to 
predict clinical benefit. Finally, the applicant noted that CMS has a 
well-established history of granting new technology add-on payment 
status to drugs and biologics that receive FDA approval under the 
accelerated approval pathway. The applicant stated that based on a 
review of past IPPS/LTCH PPS final rules, effective in FY 2016 and 
extending through FY 2024, CMS had 10 approvals for new technology add-
on payments for new therapies approved under FDA's accelerated approval 
pathway for oncology and hematology uses, and the majority of these 
therapies were granted FDA accelerated approvals based on surrogate 
efficacy endpoints, including the same ORR and DOR endpoints used for 
accelerated approval

[[Page 69187]]

of AMTAGVITM. Another commenter emphasized the importance of 
the use of surrogate/intermediary endpoints within clinical trials for 
immunotherapy and that it is a critically important tool that 
emphasizes both patient access and scientific rigor.
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    \129\ Sarnaik A, et al. SITC 2022; Buysse M, Piedbois P. On the 
relationship between response to treatment and survival. Stat Med. 
1996;15:2797-2812.
    \130\ FDA. Clinical trial endpoints for the approval of cancer 
drugs and biologics. December 2018. https://www.fda.gov/media/71195/download.
    \131\ Haanen JBAG, et al. ESMO Congress 2022. September 2022.
    \132\ Rohaan MW, et al. N Engl J Med 2022;387:2113-25.
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    Regarding CMS's concerns related to the cause of grade 3 and 4 
TEAEs and questions about being able to distinguish the effect of 
AMTAGVITM from other factors that are part of the treatment 
process, the applicant asserted that the C-144-01 study and other 
publications have had consistent findings about the safety profile of 
the TIL regimen. The applicant stated that TEAEs associated with TIL 
treatment have been found to be largely due to the lymphodepleting 
preparative regimen or IL-2 components of the TIL regimen.\133\ The 
applicant stated that in C-144-01, the safety profile of the 
AMTAGVITM regimen is consistent with the underlying advanced 
disease and the known safety profiles of NMA-LD and IL-2, with no new 
safety signal identified during long-term follow-up, and that the 
safety profile was similar between cohorts 2 and 4. The applicant 
stated that most TEAEs were transient, expected, and manageable; the 
incidence decreased rapidly over the first two weeks after 
AMTAGVITM infusion. Furthermore, the applicant stated that 
the autologous nature of AMTAGVITM was associated with a low 
risk for off-target effects and no long-term toxicities related to the 
AMTAGVITM regimen have been noted. The applicant asserted 
that AMTAGVITM produced durable response and a favorable 
safety profile across subgroups of heavily pretreated patients with 
high tumor burden, regardless of age, BRAF mutation status, PD-L1 
status, baseline ECOG PS status, and presence of liver and/or brain 
lesions at baseline. With respect to the role of IL-2 in the 
AMTAGVITM regimen, the applicant stated IL-2 is not used for 
its antineoplastic effect but is intended to support the activation, 
proliferation, and cytolytic activity of AMTAGVITM. The 
applicant cited two post-hoc analyses of study C-144-01 by Hassel, et 
al. (2022) \134\ and Larkin, et al. (2023) \135\ which concluded that 
the abbreviated course of high-dose IL-2 (600,000 IU/kg, <=6 doses) 
used as part of the AMTAGVITM regimen to promote T-cell 
activity does not independently contribute to anti-neoplastic activity. 
Another commenter asserted that experiments in the commenter's lab were 
clear in demonstrating that the impact of IL-2 alone depends on the 
stimulation of endogenous T-cells with antitumor activity and stated 
that the AMTAGVITM therapy protocol involves giving cells 
with antitumor activity and then IL-2, so that IL-2 solely acts on the 
administered cells to mediate antitumor effects. This commenter further 
claimed that the efficacy and durability of TIL has been shown in 
patients who progressed after previous IL-2 monotherapy, and also 
asserted that the toxicities of TIL therapy have been extensively 
reported and are largely due to the lymphodepleting preparative regimen 
or IL-2.
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    \133\ Seitter SJ, et al. Clin Cancer Res. 2021;27(19):5289-5298.
    \134\ Hassel JC, et al. European Society for Medical Oncology 
(ESMO) Immunology Annual Congress. Oral presentation, December 2022.
    \135\ Larkin J, et al. European Society for Blood and Marrow 
Transplantation (EBMT) 49th Annual Meeting. Poster P223 supplement, 
April 2023.
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    We also received several additional comments in support of the 
application for AMTAGVITM that addressed points related to 
the substantial clinical improvement criterion. Several commenters 
indicated general support for AMTAGVITM as a therapy that 
can provide a new treatment option for individuals with advanced 
melanoma who have not responded to standard of care treatments. A 
commenter stated that FDA approval of AMTAGVITM reflects a 
significant advancement in TIL cell therapy, while another commenter 
stated its appreciation of CMS's efforts to improve patient access to 
novel cell therapies like AMTAGVITM. One commenter also 
encouraged CMS to assign new technology add-on payment status for new 
treatments and technologies supporting personalized medicine that meet 
the required criteria, including the application for 
AMTAGVITM as an example.
    Response: We thank the applicant and commenters for their comments 
regarding the substantial clinical improvement criterion. Based on the 
additional information received, we continue to have concerns as to 
whether AMTAGVITM meets the substantial clinical improvement 
criterion to be approved for new technology add-on payments. 
Specifically, it remains unclear if the use of AMTAGVITM 
significantly improves clinical outcomes over existing technologies and 
whether AMTAGVITM TIL immunotherapy offers a treatment 
option for a patient population unresponsive to, or ineligible for, 
currently available treatments for patients with advanced (unresectable 
or metastatic) melanoma who relapse on or do not tolerate current 
therapies. Although the applicant asserts that the clinically 
meaningful and durable responses following treatment with 
AMTAGVITM address an unmet medical need in patients with 
advanced melanoma and high tumor burden, who are heavily pre-treated 
and difficult-to-treat and have a poor prognosis with no treatment 
options available after progression on immunotherapy and targeted 
agents or who are primary refractory to anti-PD-1/PD-Ll therapy, we 
remain concerned that the evidence provided by the applicant did not 
sufficiently address our concern regarding the lack of comparison to 
other standard of care therapies used in the treatment of metastatic 
melanoma, to allow us to assess whether AMTAGVITM 
substantially improved outcomes compared to existing treatments for 
this heavily pre-treated and difficult-to-treat patient population. In 
addition, while the applicant stated that there are no treatment 
options available for this patient population, it appears there are a 
number of therapies that are FDA approved for unresectable or malignant 
melanoma that can be used in any line of therapy such as 
pembrolizumab,\136\ ipilimumab,\137\ and immunotherapy combinations 
such as nivolumab plus ipilimumab \138\ and nivolumab-relatlimab.\139\ 
Further, as these other treatments, as well as chemotherapy, are 
available therapies for patients with advanced melanoma, we remain 
unclear if there is a patient population that is eligible for 
AMTAGVITM that would be ineligible for other currently 
available treatments. In addition, although the applicant presented 
results from a multicenter, randomized Phase 3 trial from the 
Netherlands and Denmark that evaluated treatment with a locally-
produced TIL therapy versus ipilimumab for advanced melanoma, we note 
that the applicant did not address how the conditions of the study 
differed from that of the C-144-01 trial nor how the locally-produced 
TIL regimen used differed from AMTAGVITM.
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    \136\ https://www.accessdata.fda.gov/drugsatfda_docs/label/2023/125514s128lbl.pdf.
    \137\ https://www.accessdata.fda.gov/drugsatfda_docs/label/2020/125377s115lbl.pdf.
    \138\ https://www.accessdata.fda.gov/drugsatfda_docs/label/2020/125554s078lbl.pdf.
    \139\ https://www.fda.gov/drugs/resources-information-approved-drugs/fda-approves-opdualag-unresectable-or-metastatic-melanoma.
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    With respect to the applicant's assertion that CMS had previously 
approved new technology add-on payments for therapies approved under 
FDA's accelerated approval pathway for oncology and hematology uses, 
and the majority of these therapies were granted FDA accelerated 
approvals based on surrogate efficacy endpoints, including the same ORR 
and DOR endpoints used

[[Page 69188]]

for accelerated approval of AMTAGVITM, we note that, as 
previously stated, consistent with the discussion in the FY 2003 IPPS/
LTCH PPS final rule (67 FR 50015), we do not rely on FDA criteria in 
our evaluation of substantial clinical improvement for purposes of 
determining what drugs, devices, or technologies qualify for new 
technology add-on payments under Medicare. This criterion does not 
depend on the standard of safety and efficacy on which FDA relies but 
on a demonstration of substantial clinical improvement in the Medicare 
population. Therefore, we do not believe that the FDA approvals for 
these other technologies relate to an assessment of substantial 
clinical improvement for AMTAGVITM. We also note that we are 
unsure which technologies are being referenced by the applicant, and 
whether those technologies were determined to be a substantial clinical 
improvement because they improved the ORR, or whether the technologies 
demonstrated substantial clinical improvement under Sec.  
412.87(b)(1)(ii) through other claims that would not correlate with 
outcomes for AMTAGVITM.
    In addition, as described in the FY 2025 IPPS/LTCH PPS proposed 
rule (89 FR 36075 through 36076), we continue to have concerns that the 
patient population evaluated in the C-144-01, Chesney, et al. (2022), 
and Sarnaik, et al. (2021) studies are not appropriately representative 
of the Medicare population and the disease burden seen in Medicare 
beneficiaries. While the applicant provided clarifying information 
about the inclusion and exclusion criteria for the C-144-01 study, the 
applicant did not provide additional information about the race, 
ethnicity, or other demographics of these individuals to demonstrate 
general applicability to the Medicare population. In addition, while 
the applicant stated that all patients had a high disease burden, it 
did not comment on whether the study population had a disease burden 
inclusive of the comorbidities generally found in the Medicare 
population. Thus, we remain concerned that the findings may not be 
generalizable to Medicare beneficiaries and their disease burden.
    After consideration of all the information from the applicant, as 
well as the comments we received, we are unable to determine that 
AMTAGVITM represents a substantial clinical improvement over 
existing technologies for the reasons discussed in the proposed rule 
and in this final rule, and therefore we are not approving new 
technology add-on payments for AMTAGVITM for FY 2025.
i. LyfgeniaTM (lovotibeglogene autotemcel)
    Bluebird bio, Inc. submitted an application for new technology add-
on payments for LyfgeniaTM (lovotibeglogene autotemcel) for 
FY 2025. According to the applicant, LyfgeniaTM is an 
autologous hematopoietic stem cell-based gene therapy indicated for the 
treatment of patients 12 years of age or older with sickle cell disease 
(SCD) and a history of vaso-occlusive events (VOE). 
LyfgeniaTM, administered as a single-dose intravenous 
infusion, consists of an autologous cluster of differentiation 34+ 
(CD34+) cell-enriched population from patients with SCD that contains 
hematopoietic stem cells (HSCs) transduced with BB305 lentiviral vector 
(LVV) encoding the [beta]-globin gene ([beta]A-T87Q-globin 
gene), suspended in a cryopreservation solution. The applicant 
explained that LyfgeniaTM is designed to add functional 
copies of a modified form of the [beta]A-T87Q-globin gene 
into a patient's own HSCs, which allows their red blood cells to 
produce an anti-sickling adult hemoglobin (HbA\T87Q\), to reduce or 
eliminate downstream complications of SCD.
    Please refer to the online application posting for 
LyfgeniaTM, available at https://mearis.cms.gov/public/publications/ntap/NTP231013X3AK8, for additional detail describing the 
technology and the disease treated by the technology.
    With respect to the newness criterion, according to the applicant, 
LyfgeniaTM was granted BLA approval from FDA on December 8, 
2023, for the treatment of patients 12 years of age or older with SCD 
and a history of VOEs. The applicant stated that it anticipated that 
LyfgeniaTM would have become available for sale on April 16, 
2024, and that the first commercial claim for LyfgeniaTM 
would occur within approximately 130 days post-FDA approval to allow 
for the one-time activity to commercially qualify the contract 
manufacturer organization (CMO), followed by apheresis of the first 
patient at the qualified treatment center (QTC), where the personalized 
starting material will be shipped to the CMO for drug product 
manufacturing, release testing, and shipment of final product to the 
QTC for the one-time infusion. In the FY 2025 IPPS/LTCH PPS proposed 
rule (89 FR 36076), we stated that we were interested in additional 
information regarding the delay in the technology's market 
availability, as it appears that the technology would need to be 
available for sale prior to the enrollment of the first patient at the 
QTC. According to the applicant, LyfgeniaTM is provided in 
infusion bags containing 1.7 to 20 x 10\6\ cells/mL (1.4 to 20 x 10\6\ 
CD34+ cells/mL) in approximately 20 mL of solution and is supplied in 
one to four infusion bags. Per the applicant, the minimum dose is 3.0 x 
10\6\ CD34+ cells/kg patient weight.
    According to the applicant, as of October 1, 2023, there are 
currently two ICD-10-PCS procedure codes to distinctly identify the 
intravenous administration of LyfgeniaTM: XW133H9 
(Transfusion of lovotibeglogene autotemcel into central vein, 
percutaneous approach, new technology group 9) and XW143H9 (Transfusion 
of lovotibeglogene autotemcel into peripheral vein, percutaneous 
approach, new technology group 9). The applicant provided a list of 
diagnosis codes that may be used to currently identify the indication 
for LyfgeniaTM under the ICD-10-CM coding system. Please 
refer to the online application posting for the complete list of ICD-
10-CM codes provided by the applicant.
    As previously discussed, if a technology meets all three of the 
substantial similarity criteria under the newness criterion, it would 
be considered substantially similar to an existing technology and would 
not be considered ``new'' for the purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that LyfgeniaTM is not substantially similar to 
other currently available technologies, because LyfgeniaTM 
has a distinct mechanism of action, which converts SCD at the genetic, 
cellular, and physiologic level to a non-sickling phenotype through the 
expression of the gene therapy-derived anti-sickling 
[beta]A-T87Q-globin gene, and that therefore, the technology 
meets the newness criterion. Additionally, the applicant stated 
LyfgeniaTM is not substantially similar to other currently 
available therapeutic approaches indicated for SCD or to any drug 
therapy assigned to any MS-DRG in the 2022 MedPAR file data.
    The following table summarizes the applicant's assertions regarding 
the substantial similarity criteria. Please see the online application 
posting for LyfgeniaTM for the applicant's complete 
statements in support of its assertion that LyfgeniaTM is 
not substantially similar to other currently available technologies.
BILLING CODE 4120-01-P

[[Page 69189]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.125

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36077 through 
36078), we noted that LyfgeniaTM may have the same or 
similar mechanism of action to CasgevyTM, for which we also 
received an application for new technology add-on payments for FY 2025. 
We stated that LyfgeniaTM and CasgevyTM are both 
gene therapies using modified autologous CD34+ hematopoietic stem and 
progenitor cell (HSPC) therapies administered via stem cell 
transplantation for the treatment of SCD. Both technologies are 
autologous, ex-vivo modified hematopoietic stem-cell biological 
products. As previously discussed, CasgevyTM was approved by 
FDA for this indication on December 8, 2023. For these technologies, 
patients are required to undergo CD34+ HSPC mobilization followed by 
apheresis to extract CD34+ HSPCs for manufacturing and then 
myeloablative conditioning using busulfan to deplete the patient's bone 
marrow in preparation for the technologies' modified stem cells to 
engraft to the bone marrow. Once engraftment occurs for both 
technologies, the patient's cells start to produce a different form of 
hemoglobin to reduce the amount of sickling hemoglobin. Further, we 
noted that both technologies appear to map to the same MS-DRGs, MS-DRG 
016 (Autologous Bone Marrow Transplant with CC/MCC)

[[Page 69190]]

and 017 (Autologous Bone Marrow Transplant without CC/MCC), and to 
treat the same or similar disease (SCD) in the same or similar patient 
population (patients 12 years of age and older who have a history of 
VOEs). Accordingly, as it appeared that LyfgeniaTM and 
CasgevyTM may use the same or similar mechanism of action to 
achieve a therapeutic outcome (that is, to reduce the amount of 
sickling hemoglobin to reduce and prevent VOEs associated with SCD), 
would be assigned to the same MS-DRG, and treat the same or similar 
patient population and disease, we stated we believed that these 
technologies may be substantially similar to each other such that they 
should be considered as a single application for purposes of new 
technology add-on payments. We noted that if we determined that this 
technology is substantially similar to CasgevyTM, we 
believed the newness period would begin on December 8, 2023, the date 
both LyfgeniaTM and CasgevyTM received FDA 
approval for SCD. We stated we were interested in information on how 
these two technologies may differ from each other with respect to the 
substantial similarity criteria and newness criterion, to inform our 
analysis of whether LyfgeniaTM and CasgevyTM are 
substantially similar to each other and therefore should be considered 
as a single application for purposes of new technology add-on payments.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36078), we 
invited public comment on whether LyfgeniaTM meets the 
newness criterion, including whether LyfgeniaTM is 
substantially similar to CasgevyTM and whether these 
technologies should be evaluated as a single technology for purposes of 
new technology add-on payments.
    Comment: The applicant for Casgevy\TM\ submitted a public comment 
regarding substantial similarity for LyfgeniaTM and 
CasgevyTM. The commenter asserted Casgevy\TM\ represents the 
first therapy approved to use CRISPR/Cas9 gene editing technology and 
stated that no other approved technologies use this mechanism of 
action, and CRISPR/Cas9 technology has never previously been used in 
humans outside of clinical trials. The commenter stated that 
Casgevy\TM\ is a one-time treatment that uses ex vivo non-viral CRISPR/
Cas9 to precisely edit the erythroid-specific enhancer region of BCL11A 
in CD34+ HSPCs. The commenter stated that, while other non-gene 
therapy-based therapeutic approaches impact production of fetal 
hemoglobin (HbF), no other approved technology has been able to 
reactivate production of endogenous HbF to levels known to eliminate 
disease complications (for example, VOC), consistent with individuals 
with a clinically benign condition called hereditary persistence of 
fetal hemoglobin (HPFH) who experience no or minimal disease 
complications from SCD when they co-inherit both HPFH and SCD. The 
commenter stated that CMS focused on perceived similarities in 
treatment journey and categorical product characteristics between 
CasgevyTM and certain other technologies, but did not 
acknowledge material differences in the underlying technology which 
impact the safety and efficacy profile of these products. The commenter 
further explained that after CasgevyTM infusion, the edited 
CD34+ cells engraft in the bone marrow and differentiate to erythroid 
lineage cells with reduced BCL11A expression, and that this reduced 
BCL11A expression results in an increase in [gamma]-globin expression 
and HbF protein production in erythroid cells. The commenter stated 
that in patients with severe SCD, HbF expression reduces intracellular 
hemoglobin S (HbS) concentration, preventing the red blood cells from 
sickling and addressing the underlying cause of disease, thereby 
eliminating VOCs. The commenter stated that, as such, 
CasgevyTM is not similar to the current standard of care 
(bone marrow transplant), nor to other technologies used in the 
treatment of SCD, and that none of these treatments use a mechanism of 
action that rely on CRISPR gene editing to reduce intracellular HbS 
concentration in SCD patients. The commenter explained how 
LyfgeniaTM uses a separate technology, gene replacement 
therapy, that utilizes a viral-based mechanism to introduce exogenous 
genetic material into patients' HSPCs, to add functional copies of a 
modified [beta]A-globin gene into patients' HSCs through transduction 
of autologous CD34+ cells with B8305 lentiviral vector (LVV). The 
commenter stated that due to the LVV-based mechanism of action and the 
semi-random nature of viral integration, there is a potential risk of 
LVV-mediated insertional oncogenesis after treatment with 
LyfgeniaTM used in the treatment of SCD, as documented in 
FDA-approved labeling. The commenter stated that CasgevyTM, 
with its non-viral mechanism of action using CRISPR/Cas9 gene editing, 
does not employ a viral vector and does not insert a transgene; 
therefore, insertional oncogenesis cannot occur as a matter of 
scientific principle. The commenter further stated that Casgevy\TM\ 
uses a unique underlying technology and manufacturing process and has 
distinct product characteristics that differentiate it from other 
technologies used to treat SCD. The commenter asserted in its comments 
that if CMS were to consider gene replacement therapy and gene editing 
technologies to be substantially similar, it could set a precedent 
based on overgeneralization which could deter further innovation.
    The applicant also submitted a public comment regarding the newness 
criterion. With respect to mechanism of action, the applicant stated 
that LyfgeniaTM has a unique mechanism of action that 
differs from Casgevy\TM\'s because it is a one-time gene therapy that 
adds functional copies of the [beta]A-T87Q-globin gene into 
a patient's own HSCs ex-vivo through the transduction of autologous 
CD34+ cells with a BB305 LVV to durably produce HbA\T87Q\. The 
applicant added that HbA\T87Q\ is a modified adult hemoglobin (HbA) 
specifically designed to be anti-sickling while maintaining the same 
structure and function as naturally occurring HbA. According to the 
applicant, LyfgeniaTM consists of an autologous CD34+ cell-
enriched population from patients with SCD that contains HSCs 
transduced with BB305 LVV encoding the [beta]A-T87Q-globin 
gene, suspended in a cryopreservation solution. The applicant stated 
the BB305 LVV encodes a single amino acid variant of [beta]-globin 
gene, [beta]A-T87Q-globin: a human [beta]-globin with a 
genetically engineered single amino acid change (threonine [Thr; T] to 
glutamine [Gin; Q] at position 87 (T87Q)). The applicant asserted 
HbA\T87Q\ is nearly identical to wildtype (or ``innate'') HbA, which is 
not prone to sickling. The applicant stated the T87Q substitution 
introduced in [beta]A-T87Q-globin is designed to physically 
block or sterically inhibit polymerization of hemoglobin, thus 
rendering further ``anti-sickling'' properties to 
[beta]A-T87Q-globin. According to the applicant, this 
results in a transgenic, non-immunogenic protein that can be measured 
in blood allowing for monitoring of the therapeutic protein in vivo and 
quantification relative to other globin species used to treat SCD. The 
applicant stated that LyfgeniaTM is not substantially 
similar to the CRISPR-Cas9 gene editing technique of 
CasgevyTM. The applicant also stated that, as described 
previously, LyfgeniaTM adds functional copies of a modified 
[beta]-globin (HBB) gene, [beta]A-T87Q globin gene, into 
patients' own HSCs to durably produce HbA\T87Q\, a modified adult HbA 
specifically designed to be

[[Page 69191]]

anti-sickling while maintaining the same morphology and function as 
naturally occurring HbA. According to the applicant, the CRISPR/Cas9 
gene editing technique mechanism of action described for 
CasgevyTM in the proposed rule differs substantially from 
LyfgeniaTM, as is evident by CasgevyTM's unique 
editing approach in which GATA1 binding is irreversibly disrupted, and 
BCL11A expression is reduced, resulting in an increased production of 
HbF, and recapitulating a naturally occurring, clinically benign 
condition called HPFH that reduces or eliminates SCD symptoms.
    According to the applicant, increasing HbA\T87Q\ versus increasing 
HbF are fundamentally distinct mechanistic approaches. For individuals 
without SCD, HbF production is decreased shortly after birth, 
coinciding with an increase in HbA, and LyfgeniaTM is 
designed to replicate this natural state by introducing the production 
of HbA\T87Q\. The applicant stated HbA\T87Q\ is nearly identical to HbA 
in several ways: sequence homology, protein structure, oxygen affinity 
and oxygen dissociation curves. The applicant stated that HbF has ~50 
percent homology to HbA (two [beta] globin chains are replaced with two 
[gamma]-chains) and has a higher observed oxygen affinity and different 
oxygen unloading properties than HbA. According to the applicant, from 
a clinical perspective, current standard of care approaches (for 
example, the use of hydroxyurea) are available to increase levels of 
HbF with variable effectiveness, while the mechanism of action 
LyfgeniaTM affords is unique in increasing a modified HbA. 
The applicant commented that while both gene therapies are indicated 
for the treatment of SCD, the mechanistic approach of each is 
fundamentally and significantly different from the other, and therefore 
LyfgeniaTM and CasgevyTM are not substantially 
similar and should not be considered as a single application for the 
purposes of new technology add-on consideration.
    The applicant also described potential risks associated with 
consideration of the two technologies as a single application. 
Specifically, the applicant commented that if LyfgeniaTM and 
CasgevyTM were treated as a single application and paid 
under a single maximum new technology add-on payment amount, this could 
potentially undermine CMS's aim to improve timely, meaningful access to 
SCD gene therapies for Medicare patients. Per the applicant, not only 
do the two therapies have distinct mechanisms of action but they also 
differ in the length of follow-up and the features of the population in 
which they were studied (for example, the commenter stated that the 
LyfgeniaTM clinical trials did not exclude patients with a 
history of chronic pain and included some patients with a history of 
stroke), and patients should have a choice to work with physicians to 
decide which therapy is most appropriate for them, based solely on 
their specific individual clinical circumstances. The applicant further 
asserted that given these differences, the finalization of a single new 
technology add-on payment amount for both therapies could hamper 
patient access to the most appropriate gene therapy for them, and 
potentially create a fiscally problematic and financial loss for IPPS 
hospitals, given the difference in the wholesale acquisition costs of 
both therapies, and CMS could potentially over-reimburse for one 
product, while under-reimbursing for the other through the use of the 
historical blended weighted average cost utilizing volume estimates. It 
is for these reasons, the applicant further stated, that 
LyfgeniaTM is not substantially similar to 
CasgevyTM, and therefore should not be considered as a 
single application with CasgevyTM for the purposes of new 
technology add-on payments.
    The applicant also stated that provided that CMS finalize its 
policy to change the newness cutoff date from April 1 to October 1 to 
determine whether a new technology is within its 2- to 3-year newness 
period (as further described in section II.E.8 of the preamble of this 
final rule), the applicant would agree that it was reasonable to 
consider the start of LyfgeniaTM's newness period to be on 
the date of FDA approval, December 8, 2023. However, the applicant 
requested that should CMS not finalize its proposal and the cutoff date 
remains April 1, that CMS should establish the beginning of the newness 
period on the date of LyfgeniaTM's first commercial 
availability, as described in its new technology add-on payment 
application.
    Response: We thank the applicant and the commenter for their 
comments. Based on our review of comments received and information 
submitted by the applicant as part of its FY 2025 new technology add-on 
payment application for LyfgeniaTM, we agree that 
LyfgeniaTM, which modifies a patients' own HSCs to increase 
HbA\T87Q\ (modified adult hemoglobin), has a distinct mechanism of 
action compared to that of CasgevyTM, which uses a different 
mechanism of action of modifying a patients' HSPCs to increase 
expression of HbF to subsequently reduce the expression of 
intracellular sickled hemoglobin concentration. Therefore, we agree 
with the applicant that LyfgeniaTM utilizes a unique 
mechanism of action and is not substantially similar to existing 
treatment options and meets the newness criterion.
    With regards to the market availability of LyfgeniaTM, 
as we have discussed in prior rulemaking (86 FR 45132; 77 FR 53348), 
generally, our policy is to begin the newness period on the date of FDA 
approval or clearance or, if later, the date of availability of the 
product on the U.S. market. Although the applicant stated in its 
application that LyfgeniaTM would become available for sale 
on April 16, 2024, we noted that we were interested in additional 
information regarding any delay in the technology's market 
availability, as it appears that the technology would need to be 
available for sale prior to the enrollment of the first patient at the 
QTC, and we did not receive additional information regarding the delay. 
Therefore, at this time, there is not sufficient information to 
determine a newness date based on a documented delay in the 
technology's availability on the U.S. market. Absent additional 
information, we consider the beginning of the newness period to 
commence on December 8, 2023, when Lyfgenia\TM\ was granted BLA 
approval from FDA for the treatment of patients 12 years of age or 
older with SCD and a history of VOEs.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. For each 
analysis, the applicant searched the FY 2022 MedPAR file using 
different ICD-10-CM codes to identify potential cases representing 
patients who may be eligible for Lyfgenia\TM\. Per the applicant, 
Lyfgenia\TM\ is intended for patients who have not already undergone 
allogeneic bone marrow transplant or autologous bone marrow transplant. 
The applicant explained that it used different ICD-10-CM codes to 
demonstrate different cohorts of SCD patients that may be eligible for 
the technology.
    According to the applicant, eligible cases for Lyfgenia\TM\ will be 
mapped to either Pre-MDC MS-DRG 016 (Autologous Bone Marrow Transplant 
with CC/MCC) or 017 (Autologous Bone Marrow Transplant without CC/MCC). 
For each cohort, the applicant performed two sets of analyses using 
either the FY 2025 new technology add-on payments threshold for Pre-MDC 
MS-DRG 016 or Pre-MDC MS-DRG 017 for all identified cases. We noted 
that the FY 2025 new technology add-on payments thresholds for both 
Pre-MDC

[[Page 69192]]

MS-DRG 016 and Pre-MDC MS-DRG 017 are $182,491. Each analysis followed 
the order of operations described in the table later in this section.
---------------------------------------------------------------------------

    \140\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
---------------------------------------------------------------------------

    For the primary cohort, the applicant searched for an appropriate 
group of patients with any ICD-10-CM diagnosis code for SCD with 
crisis. Please see the online posting for LyfgeniaTM for the 
complete list of ICD-10-CM codes provided by the applicant. The 
applicant used the inclusion/exclusion criteria described in the 
following table. Under this analysis, the applicant identified 12,357 
claims mapping to 167 MS-DRGs, including MS-DRGs 811 and 812 (Red Blood 
Cell Disorders with MCC and without MCC, respectively) representing 
76.0 percent of total identified cases. The applicant calculated a 
final inflated average case-weighted standardized charge per case of 
$11,677,887, which exceeded the average case-weighted threshold amount 
of $182,491.
    For the sensitivity 1 cohort, the applicant searched for a narrower 
cohort of patients with the admitting or primary ICD-10-CM diagnosis 
codes of Hemoglobin-SS (Hb-SS) SCD with crisis for the most common 
genotype of SCD. Please see the online posting for 
LyfgeniaTM for a complete list of ICD-10-CM codes provided 
by the applicant. The applicant used the inclusion/exclusion criteria 
described in the following table. Under this analysis, the applicant 
identified 10,987 claims mapping to 160 MS-DRGs, including MS-DRGs 811 
and 812 (Red Blood Cell Disorders with and without MCC, respectively) 
representing 75.1 percent of total identified cases. The applicant 
calculated a final inflated average case-weighted standardized charge 
per case of $11,680,025, which exceeded the average case-weighted 
threshold amount of $182,491.
    For the sensitivity 2 cohort, the applicant searched for a broader 
cohort of patients with the primary or secondary ICD-10-CM diagnosis 
codes for SCD with or without crisis. Please see the online posting for 
LyfgeniaTM for a complete list of ICD-10-CM codes provided 
by the applicant. The applicant used the inclusion/exclusion criteria 
described in the following table. Under this analysis, the applicant 
identified 17,120 claims mapping to 453 MS-DRGs, including MS-DRGs 811 
and 812 (Red Blood Cell Disorders with and without MCC, respectively) 
representing 56.3 percent of total identified cases. The applicant 
calculated a final inflated average case-weighted standardized charge 
per case of $11,681,718, which exceeded the average case-weighted 
threshold amount of $182,491.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant maintained that Lyfgenia\TM\ meets the 
cost criterion.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU24.126


[[Page 69193]]


BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36079), we 
invited public comments on whether Lyfgenia\TM\ meets the cost 
criterion.
    Comment: The applicant commented that the cost criterion for 
Lyfgenia\TM\ was met for the primary cohort and two sensitivity cohorts 
of cases.
    Response: We thank the applicant for its comments. We agree that 
the final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount under all 
scenarios. Therefore, Lyfgenia\TM\ meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that Lyfgenia\TM\ represents a substantial clinical 
improvement over existing technologies, because Lyfgenia\TM\ is a one-
time administration gene therapy that uniquely impacts the 
pathophysiology of SCD at the genetic level and offers the potential 
for stable, durable production of anti-sickling hemoglobin HbA\T87Q\, 
with approximately 85 percent of RBCs producing HbA\T87Q\, leading to 
complete resolution of severe VOEs in patients with SCD through 5.5 
years of follow-up. The applicant asserted that for these reasons 
Lyfgenia\TM\ is a much-needed treatment option for a patient population 
ineligible for allo-HSCT or without a matched related donor and 
significantly improves health-related quality of life. The applicant 
provided seven studies on LyfgeniaTM to support these 
claims, as well as 22 background articles about SCD and its current 
treatments.\141\ The following table summarizes the applicant's 
assertions regarding the substantial clinical improvement criterion. 
Please see the online posting for Lyfgenia\TM\ for the applicant's 
complete statements regarding the substantial clinical improvement 
criterion and the supporting evidence provided.
---------------------------------------------------------------------------

    \141\ Background articles are not included in the following 
table but can be accessed via the online posting for the technology.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P

[[Page 69194]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.127

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36081), after 
reviewing the information provided by the applicant, we stated we had 
the

[[Page 69195]]

following concerns regarding whether Lyfgenia\TM\ meets the substantial 
clinical improvement criterion. With respect to the claim that 
Lyfgenia\TM\ presents an acceptable risk-benefit profile in terms of 
efficacy and safety for patients with SCD while allowing clinically 
meaningful improvements in HRQoL, the applicant stated the safety 
profile remains generally consistent with risk of autologous stem cell 
transplant, myeloablative conditioning, and underlying SCD. 
Additionally, the applicant mentioned that serious treatment-emergent 
adverse events (TEAEs) of grade 3 or higher TEAEs were reported, but no 
cases of veno-occlusive liver disease, graft failure, or vector-
mediated replication competent lentivirus were reported. Per the 
applicant, three patients had adverse events attributed to 
Lyfgenia\TM\, including 2 events deemed possibly related and 1 event 
deemed definitely related, with all 3 resolving within 1 week of onset. 
We noted that the applicant submitted one published article about Group 
C results, an interim analysis by Kanter, et al. (2022) \142\ in which 
Lyfgenia\TM\'s safety and efficacy were evaluated in a nonrandomized, 
open-label, single-dose phase 1-2 clinical trial (HGB-206) where 35 
Group C patients had received LyfgeniaTM infusion. Group C 
was established after optimizing the treatment process in the initial 
cohorts, Groups A (7 patients) and B (2 patients). There was also a 
more stringent inclusion criterion for severe vaso-occlusive events 
before enrollment for Group C. The median follow-up was 17.3 months 
(range, 3.7-37.6) and 25 patients met both the inclusion criteria for 
vaso-occlusive events before enrollment and a minimum 6-month follow-up 
required for assessment of vaso-occlusive events. After receiving 
Lyfgenia\TM\, 12 patients (34 percent) had at least one serious adverse 
event; the most frequently reported were abdominal pain, drug 
withdrawal syndrome (opiate), nausea, and vomiting (6 percent each). 
The two events that were deemed to be possibly related to 
LyfgeniaTM were grade 2 leukopenia and grade 1 decreased 
diastolic blood pressure and the one event that was deemed to be 
definitely related was grade 2 febrile neutropenia. Although this 
evidence was provided to assert LyfgeniaTM improves clinical 
outcomes relative to previously available therapies, we noted that the 
risk-benefit profile and HRQoL for LyfgeniaTM was not 
compared to existing therapies. We stated we were interested in 
additional information regarding the risk-benefit profile of 
LyfgeniaTM compared to existing therapies, including 
clarification regarding an acceptable risk-benefit profile for patients 
with SCD and whether Lyfgenia\TM\ fits this profile. We also questioned 
if the length of patient follow-up (median: 17.3 months, range: 3.7 to 
37.6) would be sufficient to assess long-term safety outcomes.
---------------------------------------------------------------------------

    \142\ Kanter, J., Walters, M.C., Krishnamurti, L., Mapara, M.Y., 
Kwiatkowski, J.L, Rifkin-Zenenberg, S., Aygun, B., Kasow, K.A., 
Pierciey, Jr., F.J., Bonner, M., Miller, A., Zhang, X., Lynch, J., 
Kim, D., Ribeil, J.A., Asmal, M., Goyal, S., Thompson, A.A., & 
Tisdale, J.F. (2022). Biologic and Clinical Efficacy of LentiGlobin 
for Sickle Cell Disease. The New England Journal of Medicine, 386, 
617-628. https://doi.org/10.1056/nejmoa2117175.
---------------------------------------------------------------------------

    Finally, with respect to the applicant's assertion that 
LyfgeniaTM improves clinical outcomes by halting SCD 
progression, presenting an acceptable risk-benefit profile with 
clinically meaningful improvement in HRQoL, and results in complete 
resolution of sVOEs, we noted that the applicant provided multiple 
sources of evidence that analyze the same phase 1-2 clinical study for 
LyfgeniaTM, HGB-206. We received an additional unpublished 
source \143\ that provided some data on the phase 3 HGB-210 trial and 
combined this with data from HGB-206 with a total of 34 patients being 
evaluable for efficacy and 47 for safety. The median age of these 47 
patients was 23 years. Due to the small study population and the median 
age of participants in the studies, we questioned if the safety and 
efficacy data from these studies would be generalizable to the Medicare 
population.
---------------------------------------------------------------------------

    \143\ Kanter J, et al. 65th ASH Annual Meeting and Exposition. 
December 9-12, 2023. Abstract 1051. Oral presentation (December 
11th).
---------------------------------------------------------------------------

    We invited public comments on whether Lyfgenia\TM\ meets the 
substantial clinical improvement criterion.
    Comment: The applicant submitted a public comment regarding the 
substantial clinical improvement criterion. In response to our concerns 
regarding the risk-benefit profile of LyfgeniaTM compared to 
existing therapies and whether the length of patient follow-up was 
sufficient to assess long-term safety outcomes, the applicant stated 
that within the efficacy and safety pools, among the 47 patients who 
received LyfgeniaTM, the median follow-up time was 35.5 
months; overall exposure was 126.2 patient years. The applicant stated 
the longest patient follow up was 61.0 months (5.1 years). Per the 
applicant, efficacy was sustained across the duration of follow up (up 
to 61 months); 30 of 34 evaluable patients (88.2 percent; 95 percent 
CI, 72.5-96.7) achieved complete resolution of VOEs (VOE-CR), the 
primary endpoint (evaluated at 6-18 months post infusion). The key 
secondary endpoint, complete resolution of severe VOE (sVOE-CR), was 
achieved by 32 of 34 evaluable patients (94.1 percent; 95 percent CI, 
80.3-99.3) in the same evaluation time period. The applicant reported 
that, at 36 months (N=20), clinically meaningful improvements occurred 
early and were sustained in pain intensity (57 percent), pain 
interference (64 percent), and fatigue (64 percent). The applicant 
further stated that the safety profile of LyfgeniaTM was 
consistent with underlying SCD and known effects of myeloablative 
conditioning, and there were no reports of graft failure or graft-
versus-host disease. The applicant stated that SCD is associated with 
progressive and significant morbidity and mortality, with the burden of 
disease increasing with age. Per the applicant, current therapies do 
not target the underlying cause of disease and significant unmet need 
persists. The applicant also emphasized that while allo-HSCT is a 
potentially curative option, only a small percentage of patients are 
eligible for this treatment option due to lack of a matched donor and 
other reasons, such as age.
    In response to our concern that the safety and efficacy data for 
LyfgeniaTM may not be generalizable to the Medicare 
population, the applicant explained that the overwhelming majority of 
Medicare beneficiaries with SCD were eligible because of disability 
(97.3 percent), not age. According to the applicant, Wilson-Frederick, 
et al. (2019) \144\ found that 85.8 percent of the Medicare SCD 
population were non-elderly (ages 18-64), and 14.2 percent were ages 
65-75 years, with ages 31- 45 years (36.4 percent) representing the 
largest Medicare-covered age category.
---------------------------------------------------------------------------

    \144\ Wilson-Frederick SM, et al. Prevalence of sickle cell 
disease among Medicare Fee-for-Service beneficiaries, age 18-75 
years, in 2016. CMS Data Highlight, No 15, June 2019.
---------------------------------------------------------------------------

    A few commenters commented in support of approving Lyfgenia\TM\. A 
commenter disagreed with CMS's concerns on substantial clinical 
improvement and discussed the barriers to access hematopoietic stem 
cell transplantation.
    Response: We thank the applicant and other commenters for their 
comments regarding the substantial clinical improvement criterion. 
Based on a review of all the clinical studies and information 
submitted, we agree with the applicant that LyfgeniaTM 
represents

[[Page 69196]]

a substantial clinical improvement over existing technologies because 
the technology offers a treatment option for certain patients with SCD 
who experience recurrent VOEs and who have not been able to achieve 
adequate control of the condition with existing treatments such as 
hydroxyurea and are ineligible for allo-HSCT due to the lack of a 
matched donor or other reasons (for example, age of the patients).
    After consideration of the public comments received, and the 
information included in the applicant's new technology add-on payment 
application, we have determined that LyfgeniaTM meets the 
criteria for approval for new technology add-on payment. Therefore, we 
are approving new technology add-on payments for this technology for FY 
2025. Cases involving the use of LyfgeniaTM that are 
eligible for new technology add-on payments will be identified by ICD-
10-PCS codes: XW133H9 (Transfusion of lovotibeglogene autotemcel into 
central vein, percutaneous approach, new technology group 9) or XW143H9 
(Transfusion of lovotibeglogene autotemcel into peripheral vein, 
percutaneous approach, new technology group 9).
    In its application, the applicant estimated that the cost of 
LyfgeniaTM is $3,100,000 per patient. As discussed in 
section II.E.10. of the preamble of this final rule, we are revising 
the maximum new technology add-on payment percentage to 75 percent, for 
a medical product that is a gene therapy that is indicated and used 
specifically for the treatment of SCD and approved for new technology 
add-on payments for the treatment of SCD in the FY 2025 IPPS/LTCH PPS 
final rule. Accordingly, under Sec.  412.88(a)(2) as revised in this 
final rule, we limit new technology add-on payments to the lesser of 75 
percent of the average cost of the technology, or 75 percent of the 
costs in excess of the MS--DRG payment for the case. As a result, the 
maximum new technology add-on payment for a case involving the use of 
LyfgeniaTM for the treatment of SCD is $2,325,000 for FY 
2025.
j. Quicktome Software Suite (Quicktome Neurological Visualization and 
Planning Tool)
    Omniscient Neurotechnology submitted an application for new 
technology add-on payments for Quicktome Software Suite for FY 2025. 
According to the applicant, Quicktome Software Suite is a cloud-based 
software that uses artificial intelligence (AI) tools and the 
scientific field of connectomics to analyze millions of data points 
derived from a patient's magnetic resonance imaging (MRI). Per the 
applicant, Quicktome Software Suite's proprietary Structural 
Connectivity Atlas (SCA) uses machine learning and tractographic 
techniques to create highly specific and personalized maps of a 
patient's brain or connectome from a standard MRI scan, regardless of 
brain shape, size, or physical distortion. The applicant asserted that 
the SCA is combined with a key refinement algorithm that identifies the 
location of parcels based on the specific structural characteristics of 
an individual's brain. The applicant asserted that Quicktome Software 
Suite uses resting-state functional MRI (rs-fMRI) to unveil the brain's 
network architecture or functional connectome by mapping blood oxygen 
level dependent (BOLD) signal correlations across brain parcels. Per 
the applicant, using data from a structural or a functional MRI (fMRI) 
scan, Quicktome Software Suite's proprietary AI allows clinicians to 
quickly and accurately assess the structural layout (that is, the 
locations and integrity) or the functional connectivity (that is, how 
different brain regions are working together) of a patient's brain.
    Please refer to the online application posting for Quicktome 
Software Suite, available at https://mearis.cms.gov/public/publications/ntap/NTP23101722NQE, for additional detail describing the 
technology and the disease for which the technology is used.
    With respect to the newness criterion, according to the applicant, 
Quicktome Software Suite received FDA 510(k) clearance on May 30, 2023. 
Per the FDA-cleared indication, Quicktome Software Suite is composed of 
a set of modules intended for the display of medical images and other 
healthcare data. It includes functions for image review, image 
manipulation, basic measurements, planning, three-dimensional (3D) 
visualization (multiplanar reconstructions (MPR) and 3D volume 
rendering), and the display of BOLD rs-MRI scan studies. The FDA 
clearance for Quicktome Software Suite was based on substantial 
equivalence to the legally marketed predicate device, StealthViz 
Advanced Planning Application with Stealth Diffusion Tensor Imaging 
(DTI)TM Package (hereafter referred to as 
StealthVizTM), as both of these devices allow the import and 
export of Digital Imaging and Communications in Medicine (DICOM) images 
to a hospital picture archiving and communication system (PACS); 
contain a graphical user interface to conduct planning and 
visualization; display MRI anatomical images, as well as tractography 
constructed from Diffusion Weighted Images, in two-dimensional (2D) and 
3D views; register tractography and an atlas to the underlying 
anatomical images; allow adding, removing, and editing of objects 
(including automatically segmented and manually defined regions of 
interest); and are delivered as software on an off-the-shelf hardware 
platform.\145\ Prior to the FDA 510(k) clearance of Quicktome Software 
Suite in 2023, the technology, under the trade name Quicktome, received 
FDA 510(k) clearance on March 9, 2021, based on substantial equivalence 
to StealthVizTM.\146\ StealthVizTM received FDA 
510(k) clearance on May 16, 2008, for use in 2D and 3D surgical 
planning and image review and analysis. According to the FDA 510(k) 
summary for StealthVizTM, it enables digital diagnostic and 
functional imaging datasets, reviewing and analyzing the data in 
various 2D and 3D presentation formats, performing image fusion of 
datasets, segmenting structures in the images with manual and automatic 
tools and converting them into 3D objects for display, and exporting 
results to other Medtronic Navigation planning applications, to a PACS 
or to Medtronic Navigation surgical navigation systems such as 
StealthStation System. According to the applicant, Quicktome Software 
Suite was commercially available immediately after FDA clearance.
---------------------------------------------------------------------------

    \145\ Food and Drug Administration (FDA). 510(k) Premarket 
notification for Medtronic Navigation, Inc.'s StealthViz Advanced 
Planning Application with StealthDTI Package. K081512. May 16, 2008.
    \146\ FDA. K203518. 2021.
---------------------------------------------------------------------------

    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for Quicktome Software Suite and was granted 
approval to use the following procedure code effective October 1, 2024: 
00K0XZ1 (Map brain using connectomic analysis, external approach). The 
applicant provided a list of diagnosis codes that it stated may 
currently be used to identify the indication for Quicktome Software 
Suite under the ICD-10-CM coding system. Please refer to the online 
application posting for the complete list of ICD-10-CM codes provided 
by the applicant.
    As previously discussed, if a technology meets all three of the 
substantial similarity criteria under the newness criterion, it would 
be considered substantially similar to an existing technology and would 
not be considered new for the purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted

[[Page 69197]]

that Quicktome Software Suite is not substantially similar to other 
currently available technologies because it is the first and only FDA-
cleared platform to enable connectomic analysis at an individual level 
using machine learning and tractographic techniques to create 
personalized maps of the human brain. In addition, the applicant 
asserted that Quicktome Software Suite is the first cleared 
neurological planning tool to offer rs-fMRI capabilities. Per the 
applicant, Quicktome Software Suite eliminates the need for highly 
trained personnel, who may not be available at most institutions, and 
therefore, the technology meets the newness criterion. The applicant 
further asserted that current technologies that rely on task-based fMRI 
(tb-fMRI) can be problematic in brain tumor patients who may be 
cognitively impaired because they may be unable to perform required 
tasks. The following table summarizes the applicant's assertions 
regarding the substantial similarity criteria. Please see the online 
application posting for Quicktome Software Suite for the applicant's 
complete statements in support of its assertion that Quicktome Software 
Suite is not substantially similar to other currently available 
technologies.
[GRAPHIC] [TIFF OMITTED] TR28AU24.128

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36083), we noted 
the following concerns regarding whether Quicktome Software Suite meets 
the newness criterion. With respect to the applicant's claim that 
Quicktome Software Suite does not use the same or similar mechanism of 
action as existing technologies to achieve a therapeutic outcome, we 
noted that, according to the 510(k) application, it appears that 
Quicktome Software Suite is equivalent to StealthVizTM, its 
predicate device. We stated it was unclear how Quicktome Software 
Suite's mechanism of action, which enables patient-specific connectomic 
analysis for neurological planning, is different from that of 
StealthVizTM. We noted that StealthVizTM received 
FDA 510(k) clearance on May 16, 2008, for use in 2D/3D surgical 
planning and image review and analysis, and therefore is no longer 
considered new for purposes of new technology add-on payments. 
According to the applicant, Quicktome Software Suite is the first and 
only FDA-cleared platform to enable brain network mapping and analysis 
at an individual level and provides clinicians with information that 
was previously only available in a research setting. We noted that we 
were interested in further information to support that Quicktome 
Software Suite does not use the same or similar mechanism of action as 
StealthVizTM to achieve a therapeutic outcome, including 
information regarding capabilities of Quicktome Software Suite not 
found in StealthVizTM, and whether and how those 
capabilities are the result of a new mechanism of action.
    In addition, we noted that there are several existing FDA-approved 
or cleared technologies (for example, StealthVizTM, 
Brainlab's Elements and iPlan products) that analyze fMRI and other 
medical imaging data to create 3D maps of a patient's brain, including 
white matter tracts. Furthermore, while the applicant asserted that 
Quicktome Software Suite is the only FDA-cleared device that uses a rs-
fMRI, we questioned whether other FDA-cleared neurosurgical planning 
and visualization technologies integrate rs-fMRI, or if the analysis of 
rs-fMRI for neurosurgical planning is a mechanism of action unique to 
Quicktome Software Suite. We noted that we were interested in more 
information on the relevant current standard of care and technologies 
utilized for neurosurgical planning and how the mechanism of action of 
Quicktome Software Suite compares to the mechanism of action of 
existing technologies and connectomics software.
    With respect to the third criterion, whether Quicktome Software 
Suite involves the treatment of the same or similar disease and patient 
population compared to existing technologies, we noted that according 
to the applicant, Quicktome Software Suite does not treat a new disease 
type or patient population but does provide new information for the 
treatment of existing patient populations. However, the provision of 
new information for the treatment of existing patient populations does 
not mean that the technology treats a new disease type or patient 
population, and

[[Page 69198]]

therefore, we noted that it was unclear what the basis is for the 
applicant's statement that the third criterion is not met. We stated we 
were interested in additional information to support whether and how 
Quicktome Software Suite may involve the treatment of a different type 
of disease or patient population.
    We stated that, as discussed in the FY 2022 IPPS/LTCH PPS final 
rule (86 FR 44981), we also continued to be interested in public 
comments regarding issues related to determining newness for 
technologies that use AI, an algorithm, or software. Specifically, we 
stated that we were interested in public comment on how these 
technologies may be considered for the purpose of identifying a unique 
mechanism of action; how updates to AI, an algorithm, or software would 
affect an already approved technology or a competing technology; 
whether software changes for an already approved technology could be 
considered a new mechanism of action; and whether an improved algorithm 
by competing technologies would represent a unique mechanism of action 
if the outcome is the same as an already approved AI new technology.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36083), we 
invited public comments on whether Quicktome Software Suite is 
substantially similar to existing technologies and whether Quicktome 
Software Suite meets the newness criterion.
    Comment: We received a few comments in support of new technology 
add-on payments for Quicktome Software Suite. The commenters stated 
that Quicktome Software Suite has a new mechanism of action because it 
distinguishes itself from existing technologies such as 
StealthVizTM by harnessing the power of AI, the structural 
connectivity atlas, and connectomics. The commenters further stated 
that unlike conventional methods, Quicktome Software Suite leverages AI 
algorithms to analyze complex structural and functional brain data, 
enabling the creation of comprehensive brain network maps that go 
beyond tractography. The commenters also stated that this approach, 
discussed in studies by Hendricks et al. (unpublished) \147\ and Morell 
et al. (2022),\148\ offers a more nuanced understanding of brain 
connectivity which includes higher order brain networks responsible for 
cognitive functions and emotion to which only Quicktome Software Suite 
can map. The commenters stated that existing technologies like 
StealthVizTM only go as far as tractography, which is able 
to map the white matter connections of the brain but does not delineate 
a patient's unique brain networks. The commenters stated that another 
of Quicktome Software Suite's hallmark features is its utilization of 
rs-fMRI for functional connectomic analysis, which is a mechanism of 
action that sets it apart from existing technologies. The commenters 
stated that studies such as the ones by Shimony et al. (2009),\149\ 
Hacker et al. (2019),\150\ and Lee et al. (2013) \151\ have 
demonstrated the unique efficacy of rs-fMRI in delineating functional 
brain networks, enabling surgeons to tailor their approaches to 
minimize damage to critical neural circuits. The commenters stated that 
Quicktome Software Suite is also set apart from existing technology 
because Quicktome Software Suite offers fully automated post-processing 
of rs-fMRI, eliminating the need for specialized radiology personnel 
who are typically only available at the most advanced academic centers.
---------------------------------------------------------------------------

    \147\ Hendricks B, Scherschinkski L, Jubran J, et al. 
Supratentorial Cavernous Malformation Surgery: The Seven Hotspots of 
Novel Cerebral Risk. Unpublished manuscript.
    \148\ Morell AA, Eichberg DG, Shah AH, et al. Using machine 
learning to evaluate large-scale brain networks in patients with 
brain tumors: Traditional and non-traditional eloquent areas. 
Neurooncol Adv. 2022 Sep 19;4(1):vdac142. Doi: 10.1093/noajnl/
vdac142. PMID: 36299797; PMCID: PMC9586213.
    \149\ Shimony J, Zhang D, Johnston JM, et al. Resting-state 
spontaneous fluctuations in brain activity: A new paradigm for 
presurgical planning using fMRI. Academic Radiology 16:578-583.
    \150\ Hacker CD, Roland JL, Kim AH, et al. Resting-state network 
mapping in neurosurgical practice: a review. Neurosurgical Focus 
December 2019. Volume 47.
    \151\ Lee MH, Smyser CD, and Shimony JS. Resting-state fMRI: A 
review of methods and clinical applications. American Journal of 
Neuroradiology Oct 2013. 34:1866-72
---------------------------------------------------------------------------

    The commenters also stated, with regard to whether Quicktome 
Software Suite treats the same or similar type of disease and patient 
population as existing technologies that analyze fMRI and other medical 
imaging data for neurologic planning, such as StealthVizTM, 
that the unique processing of rs-fMRI underscores Quicktome Software 
Suite's potential to revolutionize neurosurgical planning and improve 
patient outcomes for all Medicare patients, not just the ones at the 
most elite academic institutions. Per the commenters, this is a 
critical consideration for Medicare patients who suffer from cognitive 
or motor impairments and cannot fully cooperate with task-based 
protocols (which are the only pre-surgical functional imaging paradigms 
currently available outside of Quicktome Software Suite).
    A commenter stated that it is important to note that receiving 
clearance through a 510(k) should not be a definitive determination 
that a technology is substantially similar, particularly for one that 
has received FDA Breakthrough Device designation. The commenter further 
stated that over the last few years, CMS has approved a number of 
technologies for new technology add-on payments (thus having 
demonstrated newness) that received 510(k) clearance by demonstrating 
substantial equivalence to a previously approved or cleared technology.
    Response: We appreciate the additional information from the 
commenters with respect to whether Quicktome Software Suite is 
substantially similar to existing technologies. We note that the 
studies presented by commenters (Shimony et al. (2009),\152\ Hacker et 
al. (2019),\153\ and Lee et al. (2013) \154\) do not appear to discuss 
the specific mechanism of action of Quicktome Software Suite and how it 
represents a new mechanism of action compared to existing technologies, 
but rather more generally describe the potential uses of rs-fMRIs. We 
note that Quicktome was not mentioned in any of the three articles. We 
are unclear if the technology discussed in the articles was identical 
to Quicktome Software Suite, or rather, if it is an existing technology 
that would have a similar mechanism of action as Quicktome Software 
Suite. Absent additional information, we are unable to determine if 
Quicktome Software Suite's mechanism of action, which utilizes AI-based 
patient-specific analysis for neurological planning, is different from 
the mechanism(s) of action of existing technologies that analyze 
medical imaging data to create 3D maps of a patient's brain, including 
white matter tracts. While the commenters asserted Quicktome Software 
Suite distinguishes itself from existing technologies such as 
StealthVizTM by harnessing the power of AI, the structural 
connectivity atlas, and connectomics, it remains unclear specifically 
how this use of AI constitutes a unique mechanism of

[[Page 69199]]

action when compared to non-AI technologies used in the same way for 
neurosurgical planning and visualization. We also disagree with 
commenters that the fully automated post-processing of rs-MRIs offered 
by Quicktome Software Suites represents a new mechanism of action, as 
it appears to describe an ease-of-use feature that may instead relate 
to an assessment of substantial clinical improvement. As a result, we 
believe that Quicktome Software Suite uses the same or similar 
mechanism of action as existing technologies like 
StealthVizTM.
---------------------------------------------------------------------------

    \152\ Shimony J, Zhang D, Johnston JM, et al. Resting-state 
spontaneous fluctuations in brain activity: A new paradigm for 
presurgical planning using fMRI. Academic Radiology 16:578-583.
    \153\ Hacker CD, Roland JL, Kim AH, et al. Resting-state network 
mapping in neurosurgical practice: a review. Neurosurgical Focus 
December 2019. Volume 47.
    \154\ Lee MH, Smyser CD, and Shimony JS. Resting-state fMRI: A 
review of methods and clinical applications. American Journal of 
Neuroradiology Oct 2013. 34:1866-72.
---------------------------------------------------------------------------

    However, with regard to whether a technology treats the same or 
similar type of disease and patient population, we agree with the 
commenters that Medicare patients who suffer from cognitive or motor 
impairments and cannot cooperate with task-based protocols would 
represent a patient population that could not utilize existing 
technologies for patient-specific connectomic analysis for neurological 
planning. Therefore, based on our review of the comments received, we 
agree that Quicktome Software Suite is not substantially similar to 
existing technologies and meets the newness criterion. We consider the 
beginning of the newness period to commence on May 30, 2023, when 
Quicktome Software Suite received FDA market authorization.
    Comment: A few commenters responded to our request for comments 
regarding issues related to determining newness for technologies that 
use AI, an algorithm, or software. A commenter stated that FDA defines 
mechanism of action (referred to as mode of action) as ``the means by 
which a product achieves its intended therapeutic effect or action.'' 
\155\ Per the commenter, in reviewing Quicktome Software Suite and 
similar technologies that involved the use of AI, it is important to 
note that the AI, algorithm, or software do not represent the mechanism 
of action per se. The commenter stated that AI, algorithm, or software 
plays an important role, such as analyzing images and creating brain 
mapping, but that piece alone is not sufficient to achieve the clinical 
effect. It stated that the AI, algorithm, or software is a component of 
the technology, not the entirety of the technology itself. The 
commenter stated that technologies that incorporate AI, an algorithm or 
software should be evaluated for newness in the same way as CMS 
evaluates any other medical device applying for a new technology add-on 
payment. The commenter stated that CMS should not take a broad policy 
position on the newness of these types of technologies, but should use 
its existing criteria and existing framework in evaluating these 
technologies individually on a case-by-case basis.
---------------------------------------------------------------------------

    \155\ 21 CFR 3.2(k).
---------------------------------------------------------------------------

    Another commenter recommended that CMS consider revisions to the 
regulations for new technology add-on payments under 42 CFR 412.87 to 
establish an alternative pathway for high-value AI technologies. The 
commenter suggested that newness should be determined by whether the 
technology enables a clinically valuable task for the Medicare patient 
population not previously achievable without the technology. The 
commenter continued by stating that ``uniqueness'' should be determined 
by whether the technology addresses a high-value clinical use case not 
previously addressed by other available technologies or medical 
procedures. The commenter also stated CMS's understanding of ``value'' 
of the Medicare population should be guided primarily by input from 
physician-experts and/or specialists in the related fields as well as 
product performance data.
    Response: We thank the commenters for their input. We will continue 
to consider these comments as we gain more experience in this area and 
continue to welcome comments on determining newness and assessing 
mechanism of action for technologies that use AI, an algorithm or 
software.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for Quicktome Software Suite, 
the applicant searched 2020 Medicare Inpatient Hospitals--by Provider 
and Service data.\156\ The applicant included all cases from the 
following MS-DRGs: 025 (Craniotomy and Endovascular Intracranial 
Procedures with MCC), 026 (Craniotomy and Endovascular Intracranial 
Procedures with CC), and 027 (Craniotomy and Endovascular Intracranial 
Procedures without CC/MCC). Using the inclusion/exclusion criteria 
described in the following table, the applicant identified 28,401 cases 
mapping to these three craniotomy MS-DRGs, with 64 percent of the 
identified cases mapping to MS-DRG 025. The applicant followed the 
order of operations described in the following table and calculated a 
final inflated average case-weighted standardized charge per case of 
$179,317, which exceeded the average case-weighted threshold amount of 
$134,802. Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant asserted that Quicktome Software Suite meets the cost 
criterion.
---------------------------------------------------------------------------

    \156\ The Medicare Inpatient Hospitals by Provider and Service 
dataset provides information on inpatient discharges for Original 
Medicare Part A beneficiaries by IPPS hospitals. It includes 
information on the use, payment, and hospital charges for more than 
3,000 U.S. hospitals that received IPPS payments. The data are 
organized by hospital and Medicare Severity Diagnosis Related Group 
(DRG): https://data.cms.gov/provider-summary-by-type-of-service/medicare-inpatient-hospitals/medicare-inpatient-hospitals-by-provider-and-service.

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[[Page 69200]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.129

    We noted the following concerns regarding the cost criterion. We 
noted that the applicant limited its cost analysis to MS-DRGs 025, 026, 
and 027 because those three MS-DRGs represent brain tumor resection 
procedures, which are the first and most clearly established procedures 
for which the technology offers clinical utility. We stated that we 
were interested in information as to whether the technology would map 
to other MS-DRGs, such as 023 and 024 (Craniotomy with Major Device 
Implant or Acute Complex CNS PDX with MCC or Chemotherapy, or without 
MCC, respectively), or 054 and 055 (Nervous System Neoplasms with and 
without MCC, respectively), and if these MS-DRGs should also be 
included in the cost analysis. In addition, we questioned whether every 
case within MS-DRGs 025, 026, and 027 would be eligible for the 
technology and whether there would be any appropriate inclusion/
exclusion criteria by ICD-10-CM/PCS codes within these MS-DRGs to 
identify potential cases representing patients who may be eligible for 
Quicktome Software Suite.
    We invited public comments on whether Quicktome Software Suite 
meets the cost criterion.
    We did not receive any comments on whether the Quicktome Software 
Suite cost analysis should include other MS-DRGs, such as 023 and 024 
(Craniotomy with Major Device Implant or Acute Complex CNS PDX with MCC 
or Chemotherapy, or without MCC, respectively), or 054 and 055 (Nervous 
System Neoplasms with and without MCC, respectively), or if any 
additional inclusion/exclusion criteria should be applied to the MS-
DRGs the applicant included in its cost analysis, specifically MS-DRGs 
025, 026, and 027. As previously discussed, based on the information 
submitted by the applicant as part of its new technology add-on payment 
application, the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount for 
MS-DRGs 025, 026, and 027, which represent brain tumor resection 
procedures. Therefore, Quicktome Software Suite meets the cost 
criterion for use with brain tumor resection procedures mapping to MS-
DRGs 025, 026, and 027.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that Quicktome Software Suite represents a 
substantial clinical improvement over existing technologies because 
Quicktome Software Suite supports the visualization and brain mapping 
that improve clinical outcomes such as reducing the risk of an extended 
length of stay (LOS) and unplanned readmissions for craniotomy patients 
by reducing new postoperative neurological deficits that are caused by 
damage to brain networks or a patient's connectome. The applicant 
further asserted that Quicktome Software Suite is the first and only 
FDA-cleared platform to enable connectomic analysis at an individual 
level, enabling surgeons to visualize and avoid damaging these brain 
networks during surgery, thereby significantly improving clinical 
outcomes relative to services or technologies previously available. The 
applicant submitted three published studies and one unpublished study 
evaluating Quicktome Software Suite to support these claims, as well as 
four background articles about complications leading to unplanned 
readmissions after cranial surgery, factors associated with extended 
LOS in patients undergoing craniotomy for tumor resection, the 
association of incorporating fMRI in presurgical planning with 
mortality and morbidity in brain tumor patients, and the clinical 
importance of non-traditional, large-scale brain networks with respect 
to the potential adverse effects on patients when these networks

[[Page 69201]]

are disrupted during surgery.\157\ We noted in the FY 2025 IPPS/LTCH 
PPS proposed rule (89 FR 36085) that one of the articles submitted as a 
study using the technology, the Dadario and Sughrue (2022) \158\ study, 
should more appropriately be characterized as a background article 
because it does not directly assess the use of Quicktome Software 
Suite.
---------------------------------------------------------------------------

    \157\ Background articles are not included in the following 
table but can be accessed via the online posting for the technology.
    \158\ Dadario NB, Sughrue ME. Should Neurosurgeons Try to 
Preserve Non-Traditional Brain Networks? A Systematic Review of the 
Neuroscientific Evidence. Journal of Personalized Medicine. 2022; 
12(4):587. https://doi.org/10.3390/jpm12040587.
---------------------------------------------------------------------------

    The following table summarizes the applicant's assertions regarding 
the substantial clinical improvement criterion. Please see the online 
posting for Quicktome Software Suite for the applicant's complete 
statements regarding the substantial clinical improvement criterion and 
the supporting evidence provided.
[GRAPHIC] [TIFF OMITTED] TR28AU24.130

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36085 through 
36087), after our review of the information provided by the applicant, 
we stated that we had the following concerns regarding whether 
Quicktome Software Suite meets the substantial clinical improvement 
criterion. With respect to the applicant's claim that Quicktome 
Software Suite supports the visualization of brain networks and 
surgical planning to avoid damaging them during surgery, we stated we 
were concerned that the evidence does not appear to demonstrate that 
the Quicktome Software Suite's visualization and brain mapping 
techniques improve clinical outcomes relative to services or 
technologies already available by avoiding or reducing damage to the 
brain networks during surgery. For example, the Shah et al. (2023) 
\159\ study describes the use of connectomics in planning and guiding 
an awake craniotomy for a tumor impinging on the language area in a 31-
year-old bilingual woman. The authors stated that Quicktome Software 
Suite was used to generate preoperative connectome imaging for the 
patient, which helped in assessing the risk of functional deficits, 
guiding surgical planning, directing intraoperative mapping 
stimulation, and providing insights into postoperative function. The 
authors further described how preoperative imaging demonstrated 
proximity of the tumor to parcellations of the language area, and how

[[Page 69202]]

intraoperative awake language mapping was performed, revealing speech 
arrest and paraphasic errors at areas of the tumor boundary correlating 
to functional regions that explained these findings. However, we noted 
that we were concerned that the report is based on a single case, and 
we questioned whether these findings would be generalizable to the 
broader Medicare population. In addition, we noted that the applicant 
did not provide evidence based on comparison of the use of Quicktome 
Software Suite technology with currently available cranial mapping 
software or tractography tools, and we noted that we would be 
interested in comparisons that assess the use of Quicktome Software 
Suite technology to improve these clinical outcomes relative to 
currently available technologies, such as StealthVizTM or 
Brainlab's Elements and iPlan products.
---------------------------------------------------------------------------

    \159\ Shah HA, Ablyazova F, Alrez A, et al. Intraoperative awake 
language mapping correlates to preoperative connectomics imaging: An 
instructive case. Clin Neurol Neurosurg. 2023 Jun;229:107751. Doi: 
10.1016/j.clineuro.2023.107751. Epub 2023 Apr 29. PMID: 3714997. 2.
---------------------------------------------------------------------------

    In addition, we questioned whether the findings related to 
Quicktome Software Suite's efficacy were generalizable to the Medicare 
population. Specifically, the Wu et al. (2023) \160\ study examined the 
involvement of non-traditional brain networks in insulo-Sylvian gliomas 
and evaluated the potential of Quicktome Software Suite in optimizing 
surgical approaches to preserve cognitive function. The study included 
three parts. The first part involved a retrospective analysis of the 
location of insulo-Sylvian gliomas in 45 adult patients who underwent 
glioma surgery centered in the insular lobe. According to the research 
team, Quicktome Software Suite showed that 98 percent of the tumors 
involved a non-traditional eloquent brain network, which is associated 
with cognitive or neurological function. In part two, the research team 
prospectively collected neuropsychological data on seven patients to 
assess tumor-network involvement with change in cognition. Using 
Quicktome Software Suite, the research team found that all seven 
patients had a tumor involving a non-traditional eloquent brain 
network. Part three described how the research team used Quicktome 
Software Suite's network mapping capabilities to inform surgical 
decision-making and predict the preservation of cognitive function 
post-surgery for two prospective patients. We noted that while 
Quicktome Software Suite was used to assist surgical decision-making in 
two patients, as previously discussed, we questioned whether these 
limited findings would be generalizable to the broader Medicare 
population, and we stated that we would be interested in comparisons 
between Quicktome Software Suite and other currently available 
technologies to improve these clinical outcomes.
---------------------------------------------------------------------------

    \160\ Wu Z, Hu G, Cao B, Liu X, et al. Non-traditional cognitive 
brain network involvement in insulo-Sylvian gliomas: a case series 
study and clinical experience using Quicktome. Chin Neurosurg J. 
2023 May 26;9(1):16. Doi: 10.1186/s41016-023-00325-4 PMID: 37231522; 
PMCID: PMC10214670.
---------------------------------------------------------------------------

    We also questioned whether the use of Quicktome Software Suite had 
a direct impact on significantly reducing neurological or cognitive 
deficits post-surgery. The applicant cited Morell et al. (2022),\161\ a 
retrospective, single-center study of 100 patients who underwent 
surgery for brain tumor resection. The research team used Quicktome 
Software Suite to map and evaluate the integrity of nine large-scale 
brain networks in these patients. According to the research team, 
Quicktome Software Suite's analysis showed that for more than half of 
these patients, at least one of their brain networks were either 
affected during brain surgery or at risk of postsurgical deficits. 
Among those at risk of postsurgical deficits, their cortical regions or 
white matter fibers were either displaced by the mass effect of the 
tumor or damaged during surgery due to proximity to the tumor and/or 
planned transcortical trajectory. We noted that the primary focus of 
the study was to retrospectively map large-scale brain networks in 
brain tumor patients using Quicktome Software Suite platform, and 
therefore we stated that it did not appear to demonstrate that use of 
Quicktome Software Suite avoided damaging these networks during 
surgery.
---------------------------------------------------------------------------

    \161\ Morell AA, Eichberg DG, Shah AH, et al. Using machine 
learning to evaluate large-scale brain networks in patients with 
brain tumors: Traditional and non-traditional eloquent areas. 
Neurooncol Adv. 2022 Sep 19;4(1):vdac142. Doi: 10.1093/noajnl/
vdac142 PMID: 36299797; PMCID: PMC9586213.
---------------------------------------------------------------------------

    Similarly, we noted that the applicant cited Hendricks et al. 
(n.d.),\162\ which retrospectively analyzed the outcomes of 346 adult 
patients who underwent resection of superficial cerebral cavernous 
malformations from November 2008 through June 2021. We noted that the 
focus of the study was the use of Quicktome Software Suite to support 
the identification of areas of eloquent noneloquence, or cortex injured 
or transgressed that causes unexpected deficits. Therefore, we stated 
we remained interested in evidence that incorporating Quicktome 
Software Suite's analytics into surgical strategies and navigational 
tools during craniotomy surgery is associated with improved post-
surgical outcomes.
---------------------------------------------------------------------------

    \162\ Hendricks B, Scherschinkski L, Jubran J, et al. 
Supratentorial Cavernous Malformation Surgery: The Seven Hotspots of 
Novel Cerebral Risk (SUBMITTED MANUSCRIPT).
---------------------------------------------------------------------------

    With respect to the applicant's claim that damaging brain networks 
during surgery leads to neurologic complications, which are a leading 
contributor to increased length of stay (LOS), ICU admission, and 
readmissions, the applicant asserted that Quicktome Software Suite 
enables surgeons to visualize these brain networks and change their 
surgical approach as needed to avoid damages. We noted that the 
applicant submitted two documents in support of this claim, both of 
which are background documents rather than studies that evaluate 
clinical outcomes associated with the use of Quicktome Software Suite. 
In particular, the Elsamadicy et al. (2018) \163\ study showed that 
altered mental status and sensory or motor deficits were the primary 
complications of craniotomies. The Philips et al. (2023) \164\ study 
demonstrated that post-operative neurological deficits, caused by 
damage to brain networks or a patient's connectome were responsible for 
extended LOS. Although these studies supported the applicant's claim 
that damage to brain networks resulted in neurological complications, 
increasing LOS and inpatient service use, we noted that the evidence 
provided for this claim did not assess the use of Quicktome Software 
Suite to improve these clinical outcomes, nor did the evidence appear 
to demonstrate that use of the technology substantially improves these 
clinical outcomes relative to existing technologies, such as 
StealthVizTM or Brainlab's Elements and iPlan products. We 
stated that we would be interested in evidence demonstrating that 
utilization of Quicktome Software Suite improves clinical outcomes 
related to LOS, ICU admissions, and readmissions relative to existing 
technologies.
---------------------------------------------------------------------------

    \163\ Elsamadicy, AA, Sergesketter, A, Adogwa, O, et al. 
Complications and 30-Day readmission rates after craniotomy/
craniectomy: A single Institutional study of 243 consecutive 
patients, Journal of Clinical Neuroscience, Volume 47, 2018, Pages 
178-182, ISSN 0967-5868, https://doi.org/10.1016/.
    \164\ Phillips KR, Enriquez-Marulanda A, Mackel C, et al. 
Predictors of extended length of stay related to craniotomy for 
tumor resection. World Neurosurg X. 2023 Mar 31;19:100176. 
doi:10.1016/j.wnsx.2023.100176 PMID: 37123627; PMCID: PMC10139985.
---------------------------------------------------------------------------

    With respect to the applicant's claim that damaging brain networks 
during surgery has adverse effects for patients, including decreased 
quality of life and loss of function, the applicant asserted that 
Quicktome Software Suite enables surgeons to visualize brain networks

[[Page 69203]]

and change their surgical approach as needed to avoid damaging these 
networks. The applicant further asserted that while other techniques 
have enabled the visualization of tractography or of parts of eloquent 
networks, this is not an adequate substitute for the ability to review 
the entirety of a patient's connectome (networks such as motor, 
language, and vision). Per the applicant, Quicktome Software Suite is 
the first of its kind to show the location and function of these 
networks and that damage to these networks is associated with poor 
outcomes. The applicant cited Vysotski et al. (2019),\165\ who 
demonstrated that brain tumor patients who underwent a preoperative 
fMRI experienced significantly lower risks for mortality than those who 
did not. The applicant also cited Dadario and Sughrue (2022),\166\ who 
discussed the clinical importance of preserving non-traditional brain 
networks for neurosurgical patients. Similar to our previous concern, 
we noted that the evidence provided for this claim did not assess the 
use of Quicktome Software Suite to improve quality of life and loss of 
function, nor did the evidence appear to demonstrate that use of the 
technology substantially improves these clinical outcomes relative to 
existing technologies. Therefore, we stated that we continued to 
question whether there was evidence to assess the effectiveness of 
Quicktome Software Suite to reduce damage to brain networks during 
surgery.
---------------------------------------------------------------------------

    \165\ Vysotski S, Madura C, Swan B, et al. Preoperative FMRI 
Associated with Decreased Mortality and Morbidity in Brain Tumor 
Patients. Interdiscip Neurosurg. 2018 Sep;13:40-45. doi: 10.1016/
j.inat.2018.02.001 Epub 2018 Feb 14. PMID: 31341789; PMCID: 
PMC6653633.
    \166\ [thinsp]Dadario NB, Sughrue ME. Should Neurosurgeons Try 
to Preserve Non-Traditional Brain Networks? A Systematic Review of 
the Neuroscientific Evidence. Journal of Personalized Medicine. 
2022; 12(4):587. https://doi.org/10.3390/jpm12040587.
---------------------------------------------------------------------------

    We stated in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36087) 
that we were also interested in public comments related to how we 
should evaluate issues related to determining substantial clinical 
improvement for technologies that use AI, an algorithm or software, 
including issues related to algorithm transparency, and how CMS should 
consider these issues in our assessment of substantial clinical 
improvement, as we continue to gain experience in this area. We noted 
that algorithm transparency refers to whether, and the extent to which, 
clinical users are able to access a consistent, baseline set of 
information about the algorithms they use to support their decision 
making and to assess such algorithms for fairness, appropriateness, 
validity, effectiveness, and safety.\167\
---------------------------------------------------------------------------

    \167\ Department of Health and Human Services (December 13, 
2023). HHS Finalizes Rule to Advance Health IT Interoperability and 
Algorithm Transparency [verbar] HHS.gov, accessed 2/20/2024.
---------------------------------------------------------------------------

    We invited public comments on whether Quicktome Software Suite 
meets the substantial clinical improvement criterion.
    Comment: We received a few comments in support of new technology 
add-on payments for Quicktome Software Suite. The commenters stated 
that they believe Quicktome Software Suite provides a substantial 
clinical improvement over existing technologies. The commenters stated 
that out of the box, StealthViz TM does not allow a surgeon 
to visualize the patient's Default Mode Network (DMN) or the Dorsal 
Attention Network (DAN). Per the commenters, damage to the DMN can lead 
to memory loss and psychiatric disorders, and dysfunction of the DAN 
has been shown to be related to declines in cognitive abilities 
including attention and executive function. The commenters also stated 
if these higher order networks are damaged during surgery, deficits 
occur which can be just as debilitating to the patient as damage to the 
networks previously deemed eloquent--language, motor, and vision. In 
addition, the commenters stated that their own experiences support the 
assertion that Quicktome Software Suite's visualization and brain 
mapping techniques lead to tangible improvements in clinical outcomes 
by mitigating the risk of damage to vital brain networks during 
surgery. The commenters further stated that by providing surgeons with 
personalized insights into a patient's brain's structural and 
functional architecture, Quicktome Software Suite empowers them to 
navigate complex surgeries with greater confidence. A commenter 
additionally stated that it currently uses Quicktome Software Suite to 
improve outcomes from its brain tumor practice and would not go back to 
standard methodology. The commenters stated that they acknowledge the 
lack of randomized controlled trials evaluating the efficacy of 
Quicktome Software Suite technology, with a commenter stating that 
results from studies supporting the importance of preserving brain 
networks, such as the study by Hendricks, et al., can be conferred to 
Quicktome Software Suite, as it is the only technology that allows for 
the visualization of those brain networks. The commenters also wanted 
to point out the challenges associated with effectively studying a 
technology such as Quicktome Software Suite in large scale, randomized, 
long-term studies. The commenters further stated that aside from the 
difficulty getting patients to agree to be randomized to a control 
group (that is, not being treated using the latest tools and best 
information possible), it is challenging to distinguish the specific 
impact of tools from factors such as patient selection, case 
complexity, brain shift, and the myriad decisions made by a surgeon 
throughout a procedure. The commenters stated that in summary, the 
technology's integration of AI, the structural connectivity atlas, and 
connectomics, coupled with its unique utilization of rs-fMRI, positions 
it as a groundbreaking tool for improving patient outcomes and 
enhancing surgical precision.
    Response: We thank the commenters for their input. After further 
review, we continue to have concerns as to whether Quicktome Software 
Suite meets the substantial clinical improvement criterion as noted in 
the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36085 through 36087). 
Specifically, we continue to question whether Quicktome Software 
Suite's visualization and brain mapping techniques improve clinical 
outcomes by avoiding or reducing damage to the brain networks during 
surgery, thereby reducing neurological or cognitive deficits post-
surgery, as compared to services or technologies already available. We 
do not have information about the difference in outcomes, such as 
reduction in neurological complications, LOS, or inpatient service use, 
and other clinical outcomes, such as quality of life and loss of 
function, when Quicktome Software Suite versus similar technologies, 
such as StealthVizTM, earlier versions of Quicktome Software 
Suite, or other currently available cranial mapping software or 
tractography tools, are used. We further note that while the commenters 
have stated they have noted improved clinical outcomes with use of the 
technology, they did not describe the improved outcomes or provide 
evidence for CMS to evaluate regarding these improvements. In addition, 
we continue to question whether the findings related to the efficacy of 
Quicktome Software Suite are generalizable to the Medicare population 
due to the very limited number of patients in which Quicktome Software 
Suite was used to assist in surgical decision-making, as previously 
stated. Further, while we appreciate the challenges in designing trials 
that effectively study technologies such as

[[Page 69204]]

Quicktome Software Suite, as noted by the commenters, we note that 
without evidence to support a demonstration of improved clinical 
outcomes as compared to existing technologies, we are unable to make a 
determination regarding substantial clinical improvement.
    We did not receive comments relating to how we should evaluate 
issues related to determining substantial clinical improvement for 
technologies that use AI, an algorithm or software, including issues 
related to algorithm transparency, and how CMS should consider these 
issues in our assessment of substantial clinical improvement. We will 
continue to consider these questions as we gain more experience, and we 
continue to welcome comments in this area.
    After consideration of all the information submitted by the 
applicant as well as the comments we received, we are unable to 
determine that Quicktome Software Suite meets the substantial clinical 
improvement criterion for the reasons discussed in the proposed rule 
and in this final rule, and therefore, we are not approving new 
technology add-on payments for Quicktome Software Suite for FY 2025.
6. FY 2025 Applications for New Technology Add-On Payments (Alternative 
Pathways)
    As discussed previously, beginning with applications for FY 2021, a 
medical device designated under FDA's Breakthrough Devices Program that 
has received marketing authorization as a Breakthrough Device, for the 
indication covered by the Breakthrough Device designation, may qualify 
for the new technology add-on payment under an alternative pathway. 
Additionally, beginning with FY 2021, a medical product that is 
designated by the FDA as a Qualified Infectious Disease Product (QIDP) 
and has received marketing authorization for the indication covered by 
the QIDP designation, and, beginning with FY 2022, a medical product 
that is a new medical product approved under FDA's Limited Population 
Pathway for Antibacterial and Antifungal Drugs (LPAD) and used for the 
indication approved under the LPAD pathway, may also qualify for the 
new technology add-on payment under an alternative pathway. Under an 
alternative pathway, a technology will be considered not substantially 
similar to an existing technology for purposes of the new technology 
add-on payment under the IPPS and will not need to meet the requirement 
that it represents an advance that substantially improves, relative to 
technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries. These technologies must still be within the 2-
to-3-year newness period to be considered ``new,'' and must also still 
meet the cost criterion.
    As discussed previously, in the FY 2023 IPPS/LTCH PPS final rule, 
we finalized our proposal to publicly post online applications for new 
technology add-on payment beginning with FY 2024 applications (87 FR 
48986 through 48990). As noted in the FY 2023 IPPS/LTCH PPS final rule, 
we are continuing to summarize each application in this final rule. 
However, while we are continuing to provide discussion of the concerns 
or issues, we identified with respect to applications submitted under 
the alternative pathway, we are providing more succinct information as 
part of the summaries in the proposed and final rules regarding the 
applicant's assertions as to how the medical service or technology 
meets the applicable new technology add-on payment criteria. We refer 
readers to https://mearis.cms.gov/public/publications/ntap for the 
publicly posted FY 2025 new technology add-on payment applications and 
supporting information (with the exception of certain cost and volume 
information, and information or materials identified by the applicant 
as confidential or copyrighted), including tables listing the ICD-10-CM 
codes, ICD-10-PCS codes, and/or MS-DRGs related to the analyses of the 
cost criterion for certain technologies for the FY 2025 new technology 
add-on payment applications.
    We received 23 applications for new technology add-on payments for 
FY 2025 under the new technology add-on payment alternative pathway. As 
discussed previously, in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
58948 through 58958), we finalized that beginning with the new 
technology add-on payment applications for FY 2025, for technologies 
that are not already FDA market authorized for the indication that is 
the subject of the new technology add-on payment application, 
applicants must have a complete and active FDA market authorization 
request at the time of new technology add-on payment application 
submission and must provide documentation of FDA acceptance or filing 
to CMS at the time of application submission, consistent with the type 
of FDA marketing authorization application the applicant has submitted 
to FDA. See Sec.  412.87(e) and further discussion in the FY 2024 IPPS/
LTCH PPS final rule (88 FR 58948 through 58958). Of the 23 applications 
received under the alternative pathway, seven applications were not 
eligible for consideration for new technology add-on payment because 
they did not meet these requirements; and two applicants withdrew their 
applications prior to the issuance of the proposed rule, including the 
withdrawal of the application for DefenCathTM (taurolidine/
heparin), which received conditional approval for new technology add-on 
payments for FY 2024, subsequently received FDA approval in November 
2023, and therefore was eligible to receive new technology add-on 
payments beginning with discharges on or after January 1, 2024. As 
discussed in section II.E.4. of this final rule, we proposed and are 
finalizing to continue making new technology add-on payments for 
DefenCath[supreg] (taurolidine/heparin) for FY 2025. Subsequently, 
prior to the issuance of this final rule, three additional applicants 
withdrew their respective applications for restor3d TIDAL\TM\ Fusion 
Cage, Transdermal GFR Measurement System utilizing Lumitrace, and 
cefepime-taniborbactam. For the remaining 11 applications, we are 
approving 12 new technology add-on payments for FY 2025 (including 
ZEVTERA\TM\ (ceftobiprole medocaril) for which the applicant submitted 
a single application for multiple indications, and for which we are 
approving two separate new technology add-on payments). A discussion of 
these 11 applications is presented in this final rule, including 10 
technologies that have received a Breakthrough Device designation from 
FDA and 1 that was designated as a QIDP by FDA. We did not receive any 
applications for technologies approved through the LPAD pathway.
    In accordance with the regulations under Sec.  412.87(f)(2), 
applicants for new technology add-on payments for FY 2025 for 
Breakthrough Devices must have FDA marketing authorization by May 1 of 
the year prior to the beginning of the fiscal year for which the 
application is being considered. Under Sec.  412.87(f)(3), applicants 
for new technology add-on payments for FY 2025 for QIDPs and 
technologies approved under the LPAD pathway must have FDA marketing 
authorization by July 1 of the year prior to the beginning of the 
fiscal year for which the application is being considered. The policy 
finalized in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58742) 
provides for conditional approval for a technology for which an 
application is submitted under the alternative pathway for certain 
antimicrobial products (QIDPs and LPADs) at Sec.  412.87(d) that does 
not receive FDA

[[Page 69205]]

marketing authorization by July 1 prior to the particular fiscal year 
for which the applicant applied for new technology add-on payments, 
provided that the technology receives FDA marketing authorization 
before July 1 of the fiscal year for which the applicant applied for 
new technology add-on payments. We refer the reader to the FY 2021 
IPPS/LTCH final rule for a complete discussion of this policy (85 FR 
58737 through 58742).
    As we did in the FY 2024 IPPS/LTCH PPS proposed rule, for 
applications under the alternative new technology add-on payment 
pathway, in the FY 2025 IPPS/LTCH PPS proposed rule we proposed to 
approve or disapprove each of these 11 applications for FY 2025 new 
technology add-on payments. Therefore, in this section of the preamble 
of this final rule, we provide background information on each of the 
remaining alternative pathway applications and our determination on 
whether or not each technology is eligible for the new technology add-
on payment for FY 2025. We are not including in this final rule the 
description and discussion of applications that were withdrawn or that 
are ineligible for consideration for FY 2025.
    We refer readers to section II.H.8. of the preamble of the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42292 through 42297) and section II.F.6 
of preamble of the FY 2021 IPPS/LTCH PPS final rule (85 FR 58715 
through 58733) for further discussion of the alternative new technology 
add-on payment pathways for these technologies.
a. Annalise Enterprise Computed Tomography Brain (CTB) Triage--
Obstructive Hydrocephalus (OH)
    Annalise-Ai Pty Ltd submitted an application for new technology 
add-on payments for the Annalise Enterprise CTB Triage--OH for FY 2025. 
According to the applicant, the Annalise Enterprise CTB Triage--OH is a 
medical device software application used to aid in the triage and 
prioritization of studies with features suggestive of obstructive 
hydrocephalus (OH). Per the applicant, the device analyzes studies 
using an artificial intelligence (AI) algorithm to identify suspected 
OH findings in non-contrast computed tomography (NCCT) brain scans and 
makes study-level output available to an order and imaging management 
system for worklist prioritization or triage.
    Please refer to the online application posting for the Annalise 
Enterprise CTB Triage--OH available at https://mearis.cms.gov/public/publications/ntap/NTP231017D5AA7, for additional detail describing the 
technology and how it is used.
    According to the applicant, the Annalise Enterprise CTB Triage--OH 
received Breakthrough Device designation from FDA on February 17, 2023, 
for use in the medical care environment to aid in triage and 
prioritization of studies with features suggestive of OH. The device 
analyzes studies using an AI algorithm to identify findings. It makes 
study-level output available to an order and imaging management system 
for worklist prioritization or triage. The applicant stated that the 
technology received 510(k) clearance from FDA on August 15, 2023, for 
the same indication consistent with the Breakthrough Device 
designation. Per the applicant, the Annalise Enterprise CTB Triage--OH 
was not immediately available for sale because there were additional 
steps to be completed following 510(k) clearance prior to the product 
becoming commercially available. According to the applicant, these 
additional steps involved generating a new unique device identifier 
(UDI) to incorporate the recently cleared finding for OH, integrating 
this UDI into the device, and releasing it. Per the applicant, the 
Annalise Enterprise CTB Triage--OH became commercially available on 
October 10, 2023.
    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for the Annalise Enterprise CTB Triage--OH beginning 
in FY 2025 and was granted approval for the following procedure code 
effective October 1, 2024: XXE0X1A (Measurement of intracranial 
cerebrospinal fluid flow, computer-aided triage and notification, new 
technology group 10). The applicant provided a list of diagnosis codes 
that may be used to currently identify the indication for the Annalise 
Enterprise CTB Triage--OH under the ICD-10-CM coding system. Please 
refer to the online application posting for the complete list of ICD-
10-CM codes provided by the applicant.
    With respect to the cost criterion, the applicant provided three 
analyses to demonstrate that the technology meets the cost criterion. 
The applicant stated that for all three analyses, it used the 2021 
Standard Analytic Files (SAF) Limited Data Set (LDS) to identify the 
top admitting diagnosis codes for inpatient stays that were admitted 
from the emergency room (ER) and included a non-contrast CT head scan. 
Next, it searched the FY 2022 MedPAR data to identify applicable 
inpatient stays based on different sets of admitting diagnosis codes 
for each of the three analyses. The applicant explained that it used 
admitting diagnosis codes from the inpatient stays, rather than 
discharge diagnosis codes, because the Annalise Enterprise CTB Triage--
OH is an AI-based technology used to identify and prioritize patients 
suspected of OH. As a result, it will commonly be used in the ER before 
the doctor and/or the hospital has assigned the primary or secondary 
diagnosis for the inpatient stay. The applicant stated that admitting 
diagnosis codes may be better predictors for whether the Annalise 
Enterprise CTB Triage--OH service will be used, rather than primary or 
secondary diagnosis at discharge, which will likely represent 
information known after the procedure is performed. Per the applicant, 
for identifying the top admitting diagnosis codes, the inpatient stays 
were further narrowed down to only those where the patient had a 
physician claim during the inpatient stay or one day before for a non-
contrast CT head scan (defined as CPT codes 70450, 70480, 70486), or 
had an outpatient claim for a non-contrast CT head scan the day of 
admission or one day before. Each analysis followed the order of 
operations described in the table that follows later in this section.
    For the primary analysis, the applicant stated that it searched the 
FY 2022 MedPAR file for cases with emergency room charges (that is, 
emergency room charge amount greater than $0) and/or an inpatient 
admission type code (IP_ADMSN_TYPE_CD) equal to 1 for emergency, and 
reporting one of the top 25 diagnosis codes associated with 50 percent 
of all identified inpatient stays in the 2021 SAF. According to the 
applicant, it identified 2,206,036 claims mapping to 714 MS-DRGs, 
including MS-DRG 871 (Septicemia or Severe Sepsis without MV >96 Hours 
with MCC), which represented 16 percent of identified cases. The 
applicant stated that it calculated a final inflated average case-
weighted standardized charge per case of $80,407, which exceeded the 
average case-weighted threshold amount of $69,892.
    For the second analysis, the applicant stated that it conducted a 
sensitivity analysis using cases with emergency room charges (that is, 
emergency room charge amount greater than $0) and/or an inpatient 
admission type code (IP_ADMSN_TYPE_CD) equal to 1 for emergency, and 
reporting one of the top 186 admitting diagnosis codes associated with 
80 percent of all identified inpatient stays in the 2021 SAF LDS. The 
applicant noted that it identified 3,991,354 claims mapping to 739 MS-
DRGs, including MS-DRG 871

[[Page 69206]]

(Septicemia or Severe Sepsis without MV >96 Hours with MCC), which 
represented 11 percent of identified cases. The applicant noted that it 
calculated a final inflated average case-weighted standardized charge 
per case of $78,356, which exceeded the average case-weighted threshold 
amount of $68,660.
    For the third analysis, the applicant stated that it conducted a 
sensitivity analysis that identified cases using the same criteria as 
the primary analysis, and further limited it to cases that also 
incurred CT charges. Per the applicant, it performed this sensitivity 
analysis because although doctors are likely to order the Annalise AI 
technology when a NCCT head scan is performed and the patient is 
admitted through the emergency room, the MedPAR file variable for CT 
charges does not differentiate between contrast and NCCTs, or the area 
of the body where the CT is performed, and does not capture CT charges 
billed by physicians during the inpatient stay. As a result, it further 
limited the cases to those with charges for CT to assess if this would 
impact whether the technology would meet the cost criterion. Per the 
applicant, it identified 1,546,504 claims mapping to 702 MS-DRGs, 
including MS-DRG 871 (Septicemia or Severe Sepsis without MV >96 Hours 
with MCC), which represented 17 percent of identified cases. The 
applicant stated that it calculated a final inflated average case-
weighted standardized charge per case of $89,176, which exceeded the 
average case-weighted threshold amount of $71,344.
    The applicant asserted that because the final inflated average 
case-weighted standardized charge per case exceeded the average case-
weighted threshold amount in all scenarios, the Annalise Enterprise CTB 
Triage--OH meets the cost criterion.
---------------------------------------------------------------------------

    \168\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
[GRAPHIC] [TIFF OMITTED] TR28AU24.131

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36108), we noted 
the following concern regarding the cost criterion. According to the 
applicant, the technology is used to aid in the triage and 
prioritization of studies with features suggestive of OH. However, the 
diagnosis codes that the applicant used to identify eligible cases 
included non-neurologic diagnosis codes (for example, U071, R0602, 
J189). We questioned whether these diagnosis codes were applicable, and 
whether using neurologic diagnosis codes for diagnoses that exhibit 
symptoms similar

[[Page 69207]]

to OH would more accurately identify eligible cases.
    Subject to the applicant adequately addressing this concern, we 
agreed with the applicant that the technology meets the cost criterion 
and proposed to approve the Annalise Enterprise CTB Triage--OH for new 
technology add-on payments for FY 2025.
    Based on preliminary information from the applicant at the time of 
the proposed rule, the applicant anticipated the total cost of the 
Annalise Enterprise CTB Triage--OH to the hospital to be $371.37 per 
patient. According to the applicant, hospitals acquire the Annalise 
Enterprise CTB Triage--OH system on a subscription-based model, with an 
annual cost of $180,000 per hospital. The applicant stated that the 
average cost per patient per hospital will vary by the volume of the 
NCCT cases for which the software is used. To determine the cost per 
case, the applicant used the following methodology:
    First, the applicant conducted market research to estimate the 
percent of NCCT cases where this software would likely be ordered, 
which was estimated at 50 percent of NCCT head scans for older patients 
(>65 years of age) and 30 percent of NCCT head scans for younger 
patients (<65 years of age).
    Second, the applicant used the 2021 SAF LDS to identify total NCCT 
scans by hospital. To represent the full Medicare fee-for-service 
population, the applicant multiplied total NCCT head scans at each 
hospital from the data by 20.
    Third, to calculate the total number of NCCT head scans for each 
hospital, the applicant assumed that 56.5 percent of all NCCT scans are 
for Medicare beneficiaries, based on literature on trends in the 
utilization of head CT scans in the United States.\169\
---------------------------------------------------------------------------

    \169\ Selfi, A, Jafari, S, and Mirmoeeni, S et al. (June 16, 
2022) Trends in inpatient utilization of head computerized 
tomography scans in the United States: A brief cross-sectional 
study. Cureus 14(6): e26018. DOI 10.7759/cureus.26018.
---------------------------------------------------------------------------

    Fourth, to calculate the cost per case for each hospital, the 
applicant divided $180,000 by the estimated number of NCCT head scans 
analyzed by the technology for each hospital. Per the applicant, the 
average cost per case across all IPPS hospitals was then calculated at 
$371.37.
    The applicant asserted that calculating the cost per case across 
all IPPS hospitals was reasonable. The applicant noted that given its 
limited time on the market and low number of subscribers, it used all 
IPPS hospitals to calculate cost per case rather than limiting the 
analysis to current subscribers. The applicant mentioned that for 
technologies that are commercially available for a longer period of 
time and with more subscribers, it may make sense to limit the cost per 
case analysis to hospitals that are current subscribers rather than 
using all IPPS hospitals in the calculation.
    As we noted in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58630) 
and in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44983), we 
understand that there are unique circumstances with respect to 
determining a cost per case for a technology that utilizes a 
subscription for its cost and we will continue to consider the issues 
relating to calculation of the cost per unit of technologies sold on a 
subscription basis as we gain more experience in this area. In the FY 
2025 IPPS/LTCH PPS proposed rule (89 FR 36109), we stated that we 
continued to welcome comments from the public as to the appropriate 
method to determine a cost per case for such technologies, including 
comments on whether the cost analysis should be updated based on the 
most recent subscriber data for each year for which the technology may 
be eligible for add-on payment.
    We noted that the cost information for this technology may be 
updated in the final rule based on revised or additional information 
CMS receives prior to the final rule. Under Sec.  412.88(a)(2), we 
limit new technology add-on payments to the lesser of 65 percent of the 
average cost of the technology, or 65 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, we proposed that the 
maximum new technology add-on payment for a case involving the use of 
the Annalise Enterprise CTB Triage--OH would be $241.39 for FY 2025 
(that is, 65 percent of the average cost of the technology).
    We invited public comments on whether the Annalise Enterprise CTB 
Triage--OH meets the cost criterion and our proposal to approve new 
technology add-on payments for the Annalise Enterprise CTB Triage--OH 
for FY 2025 for use in the medical care environment to aid in triage 
and prioritization of studies with features suggestive of OH.
    Comment: The applicant submitted a public comment in response to 
our concern regarding the use of non-neurologic diagnosis codes to 
identify eligible cases of OH. The applicant stated that it 
intentionally included cases with non-neurological diagnosis codes to 
reflect patients who may have received the test based on the presenting 
symptoms in the Emergency Department because only a subset of those 
patients have an admitting diagnosis of OH or other neurological 
condition. The applicant explained that removing the inpatient stays 
with a non-neurological admitting diagnosis would undercount the 
inpatient stays and underestimate potential volume. However, in 
response to the request from CMS, the applicant stated that it 
conducted an additional sensitivity analysis by removing the non-
neurological diagnoses (for example, A41.9, R53.1, N39.9, N17.9, U07.1, 
R06.02, J18.9, E87.1, R07.9, R50.9, I21.4, J96.01, E86.0, I46.9) from 
the list of top 25 admitting diagnoses and re-ran analyses 1 and 3. The 
applicant stated that the remaining 11 admitting diagnoses mapped to 
651 and 640 MS-DRGs respectively, with the top 10 MS-DRGs representing 
about 43 percent of the total volume in both analyses. The applicant 
asserted that using the same methodology for the previously run 
analyses, it determined the final inflated average case-weighted 
standardized charge per case exceeded the average case-weighted 
threshold amount in all scenarios, and the Annalise Enterprise CTB 
Triage--OH meets the cost criterion.
    Response: We thank the applicant for its comment. We agree that the 
final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount. Therefore, 
Annalise Enterprise CTB Triage--OH meets the cost criterion.
    Comment: The applicant submitted a comment in response to the 
discussion in the proposed rule on the appropriate method to determine 
a cost per case for the technologies sold on a subscription basis. The 
applicant stated that calculating the cost per case across all IPPS 
hospitals was reasonable since there were not enough subscribers for 
Annalise Enterprise CTB Triage--OH at the time of the cost analysis. 
The applicant stated that Annalise Enterprise CTB Triage--OH had only 
been commercially available for less than 30 days prior to the new 
technology add-on payment application submission deadline.
    Response: We thank the applicant for its comment. We agree with the 
applicant's rationale in calculating the cost of the technology given 
the limited time that the technology has been on the market and small 
number of subscribers. We will continue to consider the issues relating 
to calculation of the cost per unit of technologies sold on a 
subscription basis as we gain more experience in this area. We also 
continue to welcome comments from the public as to the appropriate 
method to determine a cost per case for such technologies, including 
comments on

[[Page 69208]]

whether the cost analysis should be updated based on the most recent 
subscriber data for each year for which the technology may be eligible 
for add-on payment.
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comments we received, we believe the Annalise Enterprise CTB Triage--OH 
meets the cost criterion. The technology received 510(k) clearance on 
August 15, 2023 as a Breakthrough Device, with an indication for use in 
the medical care environment to aid in triage and prioritization of 
studies with features suggestive of OH, which is covered by its 
Breakthrough Device designation. Therefore, we are finalizing our 
proposal to approve new technology add-on payments for the Annalise 
Enterprise CTB Triage--OH for FY 2025. We consider the beginning of the 
newness period to commence on October 10, 2023, the date on which the 
technology became commercially available for the indication covered by 
its Breakthrough Device designation.
    Based on the information available at the time of this final rule, 
the cost per case of the Annalise Enterprise CTB Triage--OH is $371.37. 
Under Sec.  412.88(a)(2), we limit new technology add-on payments to 
the lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, we are finalizing that the maximum new technology add-on 
payment for a case involving the use of the Annalise Enterprise CTB 
Triage--OH is $241.39 for FY 2025 (that is, 65 percent of the average 
cost of the technology). Cases involving the use of the Annalise 
Enterprise CTB Triage--OH that are eligible for new technology add-on 
payments will be identified by ICD-10-PCS procedure code: XXE0X1A 
(Measurement of intracranial cerebrospinal fluid flow, computer-aided 
triage and notification, new technology group 10).
b. ASTar [supreg] System
    Q-linea submitted an application for new technology add-on payments 
for the ASTar [supreg] System for FY 2025. According to the applicant, 
the ASTar [supreg] System is a fully automated system for rapid 
antimicrobial susceptibility testing (AST). The applicant stated that 
the proprietary AST technology is based on broth microdilution (BMD), 
optimized for high sensitivity and short time-to-result, delivering 
phenotypic AST with true minimum inhibitory concentration (MIC) results 
in approximately six hours.
    Please refer to the online application posting for the ASTar 
[supreg] System, available at https://mearis.cms.gov/public/publications/ntap/NTP231013T7Y5F, for additional detail describing the 
technology and how it is used.
    According to the applicant, the ASTar [supreg] System consists of 
the ASTar [supreg] Instrument and the ASTar [supreg] BC G-Kit. 
According to the applicant, the ASTar [supreg] Instrument and ASTar 
[supreg] BC G-Kit, which includes the ASTar [supreg] BC G-Consumable 
Kit and the ASTar BC G-Frozen Insert, received Breakthrough Device 
designation from FDA on April 7, 2022. The ASTar [supreg] BC G-Kit is a 
multiplexed, in vitro, diagnostic test utilizing AST methods and is 
intended for use with the ASTar [supreg] Instrument. The ASTar [supreg] 
BC G-Kit is performed directly on positive blood cultures confirmed 
positive for Gram-negative bacilli only by Gram stain, and tests 
antimicrobial agents with nonfastidious and fastidious bacterial 
species. The technology received FDA 510(k) clearance on April 26, 2024 
with the following indication for use: the ASTar [supreg] System, 
comprised of the ASTar [supreg] Instrument with the ASTar [supreg] BC 
G-Kit (ASTar [supreg] BC G-Consumable kit, ASTar [supreg] BC G-Frozen 
insert, and ASTar [supreg] BC G-Kit software), utilizes high-speed, 
time-lapse microscopy imaging of bacteria for the in vitro, 
quantitative determination of antimicrobial susceptibility of on-panel 
gram-negative bacteria. The test is performed directly on positive 
blood culture samples signaled as positive by a continuous monitoring 
blood culture system and confirmed to contain gram-negative bacilli by 
Gram stain. Since the indication for which the technology received FDA 
510(k) clearance is included within the scope of the Breakthrough 
Device designation, we believe that the FDA 510(k) indication is 
appropriate for consideration for new technology add-on payment under 
the alternative pathway criteria. The applicant stated that it 
anticipates the technology will be available on the market immediately 
after 510(k) clearance from FDA.
    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for the ASTar[supreg] System beginning in FY 2025 
and was granted approval for the following procedure code effective 
October 1, 2024: XXE5X2A (Measurement of infection, phenotypic fully 
automated rapid susceptibility technology with controlled inoculum, new 
technology group 10). The applicant provided a list of diagnosis codes 
that may be used to currently identify the indication for the 
ASTar[supreg] System under the ICD-10-CM coding system. Please refer to 
the online application posting for the complete list of ICD-10-CM codes 
provided by the applicant.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. Each analysis 
used different ICD-10-CM codes to identify potential cases in the FY 
2022 MedPAR file representing patients who may be eligible for the 
ASTar[supreg] System. According to the applicant, Cohort 1 comprised 
patients with non-sepsis infections and Cohort 2 consisted of patients 
with sepsis resulting from bacteria identifiable by the ASTar[supreg] 
System. The applicant explained that these scenarios were separated as 
the applicant believed that charges and MS-DRG assignments may differ 
due to the resources required to treat sepsis patients compared to 
those required for less severe infections. Finally, Cohort 3 included 
all ICD-10-CM codes from Cohorts 1 and 2 because the applicant stated 
that the ASTar[supreg] System may be used to identify any infection 
caused by the bacteria listed in Cohorts 1 and 2. The applicant stated 
that in all three cohorts, the patients mapped to a large number of MS-
DRGs based on the listed ICD-10-CM codes. Therefore, in the analyses, 
the applicant only included the most common MS-DRGs, that is, the MS-
DRGs containing at least 1 percent of the potential case volume within 
each of the three cohorts, as these are the MS-DRGs to which potential 
ASTar[supreg] System cases would most closely map. The applicant used 
the inclusion/exclusion criteria described in the table that follows 
later in this section to identify claims for each cohort. Each analysis 
followed the order of operations described in the table that follows 
later in this section.
    For Cohort 1, the applicant identified 440,838 claims mapping to 14 
MS-DRGs, including MS-DRG 871 (Septicemia or Severe Sepsis with MV >96 
Hours with MCC) representing 25 percent of identified cases, and 
calculated a final inflated average case-weighted standardized charge 
per case of $85,525, which exceeded the average case-weighted threshold 
amount of $70,398.
    For Cohort 2, the applicant identified 224,825 claims mapping to 7 
MS-DRGs, including MS-DRG 871 (Septicemia or Severe Sepsis with MV >96 
Hours with MCC) representing 54 percent of identified cases, and 
calculated a final inflated average case-weighted standardized charge 
per case of $99,508, which exceeded the average case-weighted threshold 
amount of $82,171.

[[Page 69209]]

    For Cohort 3, the applicant identified 603,877 claims mapping to 13 
MS-DRGs, including MS-DRG 871 (Septicemia or Severe Sepsis with MV >96 
Hours with MCC) representing 34 percent of identified cases, and 
calculated a final inflated average case-weighted standardized charge 
per case of $88,395 which exceeded the average case-weighted threshold 
amount of $73,727.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all the three cohorts, the applicant asserted that the ASTar[supreg] 
System meets the cost criterion.
---------------------------------------------------------------------------

    \170\ Codes referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
[GRAPHIC] [TIFF OMITTED] TR28AU24.132

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36110), we agreed 
with the applicant that the ASTar[supreg] System meets the cost 
criterion and therefore proposed to approve the ASTar[supreg] System 
for new technology add-on payments for FY 2025, subject to the 
technology receiving FDA marketing authorization as a Breakthrough 
Device for the indication corresponding to the Breakthrough Device 
designation by May 1, 2024.
    Based on preliminary information from the applicant at the time of 
the proposed rule, the applicant anticipated the operating cost of the 
ASTar[supreg] System to the hospital to be $150 per patient, based on 
the operating component ASTar[supreg] BC G-Kit (composed of the 
ASTar[supreg] BC G-Consumable Kit ($141) and ASTar BC G-Frozen Insert 
($9)). The applicant also noted a capital cost of $200,000 for the 
ASTar[supreg] Instrument. Because section 1886(d)(5)(K)(i) of the Act 
requires that the Secretary establish a mechanism to recognize the 
costs of new medical services or technologies under the payment system 
established under that subsection, which establishes the system for 
payment of the operating costs of inpatient hospital services, we do 
not include capital costs in the add-on payments for a new medical 
service or technology or make new technology add-on payments under the 
IPPS for capital-related costs (86 FR 45145). As noted, the applicant 
stated that the cost of the ASTar[supreg] Instrument is a capital cost. 
Therefore, we stated that it appeared that this component was not 
eligible for new technology add-on payment because, as discussed in 
prior

[[Page 69210]]

rulemaking and as noted, we only make new technology add-on payments 
for operating costs (72 FR 47307 through 47308). We noted that any new 
technology add-on payment for the ASTar[supreg] System would include 
only the cost of ASTar[supreg] BC G-Kit ($150). We also noted that the 
cost information for this technology may be updated in the final rule 
based on revised or additional information CMS receives prior to the 
final rule. Under Sec.  412.88(a)(2), we limit new technology add-on 
payments to the lesser of 65 percent of the average cost of the 
technology, or 65 percent of the costs in excess of the MS-DRG payment 
for the case. As a result, we proposed that the maximum new technology 
add-on payment for a case involving the use of the ASTar[supreg] System 
would be $97.50 for FY 2025 (that is, 65 percent of the average cost of 
the technology).
    We invited public comments on whether the ASTar[supreg] System 
meets the cost criterion and our proposal to approve new technology 
add-on payments for the ASTar[supreg] System for FY 2025, subject to 
the technology receiving FDA marketing authorization as a Breakthrough 
Device for the indication corresponding to the Breakthrough Device 
designation by May 1, 2024.
    Comment: The applicant submitted a public comment expressing 
support for our proposal to approve new technology add-on payments for 
FY 2025 for the ASTar[supreg] System. The applicant reiterated that the 
ASTar[supreg] System meets the cost criterion and confirmed the maximum 
new technology add-on payment for the ASTar[supreg] System to cover the 
ASTar[supreg] BC G-Kit.
    Response: We thank the applicant for its support to approve the new 
technology add-on payments for the ASTar[supreg] System.
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comments we received, we believe the ASTar[supreg] System meets the 
cost criterion. The technology received 510(k) clearance on April 26, 
2024, as a Breakthrough Device, with the following indication for use: 
the ASTar[supreg] System, comprised of the ASTar[supreg] Instrument 
with the ASTar[supreg] BC G-Kit (ASTar[supreg] BC G-Consumable kit, 
ASTar[supreg] BC G-Frozen insert, and ASTar[supreg] BC G-Kit software), 
utilizes high-speed, time-lapse microscopy imaging of bacteria for the 
in vitro, quantitative determination of antimicrobial susceptibility of 
on-panel gram-negative bacteria. The test is performed directly on 
positive blood culture samples signaled as positive by a continuous 
monitoring blood culture system and confirmed to contain gram-negative 
bacilli by Gram stain. Since the indication for which the applicant 
received FDA 510(k) clearance is included within the scope of the 
Breakthrough Device designation, we are finalizing our proposal to 
approve new technology add-on payments for the ASTar[supreg] System for 
FY 2025. We consider the beginning of the newness period to commence on 
April 26, 2024, the date on which technology received FDA marketing 
authorization for the indication covered by its Breakthrough Device 
designation.
    Based on the information available at the time of this final rule, 
the cost per case of the ASTar[supreg] System is $150, based on the 
operating component ASTar[supreg] BC G-Kit (composed of the 
ASTar[supreg] BC G-Consumable Kit ($141) and ASTar BC G-Frozen Insert 
($9). Under Sec.  412.88(a)(2), we limit new technology add-on payments 
to the lesser of 65 percent of the average cost of the technology, or 
65 percent of the costs in excess of the MS-DRG payment for the case. 
As a result, we are finalizing that the maximum new technology add-on 
payment for a case involving the use of the ASTar[supreg] System is 
$97.50 for FY 2025 (that is, 65 percent of the average cost of the 
technology). Cases involving the use of the ASTar[supreg] System that 
are eligible for new technology add-on payments will be identified by 
ICD-10-PCS procedure code XXE5X2A (Measurement of infection, phenotypic 
fully automated rapid susceptibility technology with controlled 
inoculum, new technology group 10).
c. Edwards EVOQUE\TM\ Tricuspid Valve Replacement System (Transcatheter 
Tricuspid Valve Replacement System)
    Edwards Lifesciences LLC submitted an application for new 
technology add-on payments for the Edwards EVOQUE\TM\ Tricuspid Valve 
Replacement System (``EVOQUE\TM\ System'') for FY 2025. According to 
the applicant, the EVOQUE\TM\ System is a new, transcatheter treatment 
option for patients with at least severe tricuspid regurgitation. Per 
the applicant, the EVOQUE\TM\ System is designed to replace the native 
tricuspid valve and consists of a transcatheter bioprosthetic valve, a 
catheter-based delivery system, and supporting accessories.
    Please refer to the online application posting for the Edwards 
EVOQUE\TM\ Tricuspid Valve Replacement System, available at https://mearis.cms.gov/public/publications/ntap/NTP231013MRRBG, for additional 
detail describing the technology and the condition treated by the 
technology.
    According to the applicant, the EVOQUE\TM\ System received 
Breakthrough Device designation from FDA on December 18, 2019, for the 
treatment of patients with symptomatic moderate or above tricuspid 
regurgitation. The applicant stated that the technology received 
premarket approval from FDA on February 1, 2024 for a narrower 
indication for use, for the improvement of health status in patients 
with symptomatic severe tricuspid regurgitation despite optimal medical 
therapy, for whom tricuspid valve replacement is deemed appropriate by 
a heart team. In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36113), 
we noted that since the indication for which the applicant received 
premarket approval is included within the scope of the Breakthrough 
Device designation, it appears that the PMA indication is appropriate 
for consideration for new technology add-on payment under the 
alternative pathway criteria. According to the applicant, the 
EVOQUE\TM\ System was commercially available immediately after FDA 
approval.
    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for the EVOQUE\TM\ System beginning in FY 2025 and 
was granted approval for the following procedure code effective October 
1, 2024: X2RJ3RA (Replacement of tricuspid valve with multi-plane flex 
technology bioprosthetic valve, percutaneous approach, new technology 
group 10). The applicant stated that ICD-10-CM diagnosis codes I07.1 
(Rheumatic tricuspid insufficiency), I07.2 (Rheumatic tricuspid 
stenosis and insufficiency), I36.1 (Nonrheumatic tricuspid (valve) 
insufficiency), and I36.2 (Nonrheumatic tricuspid (valve) stenosis with 
insufficiency) may be used to currently identify the indication for the 
EVOQUE\TM\ System under the ICD-10-CM coding system.
    With respect to the cost criterion, the applicant provided two 
analyses to demonstrate that the technology meets the cost criterion. 
To identify potential cases representing patients who may be eligible 
for the EVOQUE\TM\ System, each analysis used the same ICD-10-CM 
diagnosis codes in different positions, with and without selected ICD-
10-PCS procedure codes, to identify relevant cases in the FY 2022 
MedPAR file. Each analysis followed the order of operations described 
in the table that follows later in this section.
    For the first analysis, the applicant searched for cases assigned 
to MS-DRGs 266 (Endovascular Cardiac Valve Replacement and Supplement 
Procedures with MCC) and 267 (Endovascular Cardiac Valve

[[Page 69211]]

Replacement and Supplement Procedures without MCC) that included one of 
the four ICD-10-CM diagnosis codes in any position, as listed in the 
table that follows later in this section. The applicant used the 
inclusion/exclusion criteria described in the table that follows later 
in this section. Under this analysis, the applicant identified 2,728 
claims mapping to the two MS-DRGs and calculated a final inflated 
average case-weighted standardized charge per case of $267,720, which 
exceeded the average case-weighted threshold amount of $194,848.
    For the second analysis, the applicant searched for the cases that 
included any of the ICD-10-PCS codes for percutaneous repair or 
replacement of the tricuspid valve in any position, in combination with 
one of the four ICD-10-CM codes for tricuspid valve insufficiency as 
the primary diagnosis, as listed in the table that follows later in 
this section. The applicant used the inclusion/exclusion criteria 
described in the table that follows later in this section. Under this 
analysis, the applicant identified 198 claims mapping to 6 MS-DRGs and 
calculated a final inflated average case-weighted standardized charge 
per case of $327,236, which exceeded the average case-weighted 
threshold amount of $219,225.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant asserted that the EVOQUE\TM\ System meets 
the cost criterion.
BILLING CODE 4120-01-P

[[Page 69212]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.133

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36114), we agreed 
with the applicant that the EVOQUE\TM\ System meets the cost criterion 
and therefore proposed to approve the EVOQUE\TM\ System for new 
technology add-on payments for FY 2025.
    Based on preliminary information from the applicant at the time of 
the proposed rule, the applicant anticipated the total cost of the 
EVOQUE\TM\ System to the hospital to be $49,000 per patient, which 
includes the following components: the EVOQUE\TM\ Tricuspid Delivery 
System, the EVOQUE\TM\ Dilator Kit, the EVOQUE\TM\ Loading System, the 
Stabilizer, Base, and Plate, and the EVOQUE\TM\ Valve. The applicant 
noted that the listed

[[Page 69213]]

components of the EVOQUETM System are sold together as one 
unit because they are all needed to perform the procedure, are all 
single patient use, and are not sold separately. We noted that the cost 
information for this technology may be updated in the final rule based 
on revised or additional information CMS receives prior to the final 
rule. Under Sec.  412.88(a)(2), we limit new technology add-on payments 
to the lesser of 65 percent of the average cost of the technology, or 
65 percent of the costs in excess of the MS-DRG payment for the case. 
As a result, we proposed that the maximum new technology add-on payment 
for a case involving the use of the EVOQUE\TM\ System would be $31,850 
for FY 2025 (that is, 65 percent of the average cost of the 
technology).
    We invited public comments on whether the EVOQUE\TM\ System meets 
the cost criterion and our proposal to approve new technology add-on 
payments for the EVOQUE\TM\ System for FY 2025 for the improvement of 
health status in patients with symptomatic severe tricuspid 
regurgitation despite optimal medical therapy, for whom tricuspid valve 
replacement is deemed appropriate by a heart team.
    Comment: The applicant and other commenters submitted public 
comments expressing support for the approval of the EVOQUE\TM\ System 
for new technology add-on payment for FY 2025.
    Response: We thank the commenters for their support.
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comments we received, we believe the EVOQUE\TM\ System meets the cost 
criterion. The technology received FDA premarket approval on February 
1, 2024 as a Breakthrough Device, with an indication for use for the 
improvement of health status in patients with symptomatic severe 
tricuspid regurgitation despite optimal medical therapy, for whom 
tricuspid valve replacement is deemed appropriate by a heart team, 
which is covered by its Breakthrough Device designation. Therefore, we 
are finalizing our proposal to approve new technology add-on payments 
for the EVOQUE\TM\ System for FY 2025. We consider the beginning of the 
newness period to commence on February 1, 2024, the date on which the 
technology received its FDA marketing authorization for the indication 
covered by its Breakthrough Device designation.
    Based on the information available at the time of this final rule, 
the cost per case of the EVOQUE\TM\ System is $49,000 per patient. 
Under Sec.  412.88(a)(2), we limit new technology add-on payments to 
the lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, we are finalizing that the maximum new technology add-on 
payment for a case involving the use of the EVOQUE\TM\ System is 
$31,850 for FY 2025 (that is, 65 percent of the average cost of the 
technology). Cases involving the use of the EVOQUE\TM\ System that are 
eligible for new technology add-on payments will be identified by ICD-
10-PCS procedure code: X2RJ3RA (Replacement of tricuspid valve with 
multi-plane flex technology bioprosthetic valve, percutaneous approach, 
new technology group 10).
d. GORE[supreg] EXCLUDER[supreg] Thoracoabdominal Branch Endoprosthesis 
(TAMBE Device)
    W.L. Gore & Associates, Inc. submitted an application for new 
technology add-on payments for the TAMBE Device for FY 2025. According 
to the applicant, the TAMBE Device is used for endovascular repair in 
patients with thoracoabdominal aortic aneurysms (TAAA) and high-
surgical risk patients with pararenal abdominal aortic aneurysms (PAAA) 
who have appropriate anatomy. Per the applicant, the TAMBE Device is 
comprised of multiple required components, including: (1) an Aortic 
Component, (2) Branch Components, (3) a Distal Bifurcated Component, 
and (4) Contralateral Leg Component. According to the applicant, these 
components together comprise the TAMBE Device.
    Please refer to the online application posting for the GORE[supreg] 
EXCLUDER[supreg] Thoracoabdominal Branch Endoprosthesis (TAMBE Device), 
available at https://mearis.cms.gov/public/publications/ntap/NTP231016DYQQX, for additional detail describing the technology and the 
condition treated by the technology.
    According to the applicant, the TAMBE Device received Breakthrough 
Device designation from FDA on October 1, 2021, for endovascular repair 
of thoracoabdominal and pararenal aneurysms in the aorta in patients 
who have appropriate anatomy. According to the applicant, the TAMBE 
Device received premarket approval (PMA) from FDA on January 12, 2024, 
for a slightly narrower indication for use, namely, TAAA and high-
surgical risk patients with PAAA who have appropriate anatomy. In the 
FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36115), we noted that since 
the indication for which the applicant received premarket approval is 
included within the scope of the Breakthrough Device designation, it 
appears that the PMA indication is appropriate for consideration for 
new technology add-on payment under the alternative pathway criteria. 
According to the applicant, the TAMBE Device is not yet available for 
sale due to the required lead time to train physicians on the TAMBE 
Device, and the first commercial device will only be implanted May 1, 
2024 or later. We stated in the proposed rule that we were interested 
in additional information regarding the delay in the technology's 
market availability, as we questioned whether the date the device first 
became available for sale would be the same as the date the first 
commercial device is implanted.
    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for the TAMBE Device beginning in FY 2025 and was 
granted approval for the following procedure code effective October 1, 
2024: X2VE3SA (Restriction of descending thoracic aorta and abdominal 
aorta using branched intraluminal device, manufactured integrated 
system, four or more arteries, percutaneous approach, new technology 
group 10). The applicant provided a list of diagnosis codes that may be 
used to currently identify the proposed indication for the TAMBE Device 
under the ICD-10-CM coding system. Please refer to the online 
application posting for the complete list of ICD-10-CM codes provided 
by the applicant.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for the TAMBE Device, the 
applicant searched the FY 2022 MedPAR file for claims that had at least 
one of the ICD-10-CM codes and at least one of the ICD-10-PCS codes as 
listed in the following table. Using the inclusion/exclusion criteria 
described in the following table, the applicant identified 1,005 claims 
mapping to 19 MS-DRGs, including MS-DRG 269 (Aortic and Heart Assist 
Procedures except Pulsation Balloon without MCC), which represented 
54.5 percent of the identified cases. The applicant followed the order 
of operations described in the following table and calculated a final 
inflated average case-weighted standardized charge per case of 
$448,347, which exceeded the average case-weighted threshold amount of 
$185,799. Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold

[[Page 69214]]

amount, the applicant asserted that the TAMBE Device meets the cost 
criterion.
---------------------------------------------------------------------------

    \171\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
[GRAPHIC] [TIFF OMITTED] TR28AU24.134

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36116), we agreed 
with the applicant that the TAMBE Device meets the cost criterion and 
therefore proposed to approve the TAMBE Device for new technology add-
on payments for FY 2025.
    Based on preliminary information from the applicant at the time of 
the proposed rule, the applicant anticipated the total cost of the 
TAMBE Device to the hospital to be $72,675 per patient. Per the 
applicant, the TAMBE Device has a number of required components, 
including the aortic component ($29,000), branch components ($3,355), 
distal bifurcated component (DBC) ($10,758), DBC extender component 
($3,037), contralateral leg endoprosthesis ($4,390), and iliac extender 
endoprosthesis ($3,037). The applicant stated that the actual type and 
number of components used varies by patient depending on their anatomy 
and the extent of the patient's aneurysm. The applicant determined the 
number and types of components that were used in an average patient 
based on a multicenter pivotal clinical trial conducted predominantly 
in the U.S. and calculated the case cost per component. We noted that 
the cost information for this technology may be updated in the final 
rule based on revised or additional information CMS receives prior to 
the final rule. Under Sec.  412.88(a)(2), we limit new technology add-
on payments to the lesser of 65 percent of the average cost of the 
technology, or 65 percent of the costs in excess of the MS-DRG payment 
for the case. As a result, we proposed that the maximum new technology 
add-on payment for a case involving the use of the TAMBE Device would 
be $47,238.75 for FY 2025 (that is, 65 percent of the average cost of 
the technology).
    We invited public comments on whether the TAMBE Device meets the 
cost criterion and our proposal to approve new technology add-on 
payments for the TAMBE Device for FY 2025, for endovascular repair in 
patients with thoracoabdominal aortic

[[Page 69215]]

aneurysms and high-surgical risk patients with pararenal aortic 
aneurysms who have appropriate anatomy.
    Comment: The applicant submitted a public comment in response to 
CMS's request for additional information regarding the delay in the 
technology's market availability. The applicant reiterated that it 
anticipated the device would become available for sale in early May 
2024, and the first implanted case would occur May 1, 2024 or later, as 
discussed in the proposed rule. The applicant stated that the first 
implant was conducted by the leading clinical investigator on May 10, 
2024, and the TAMBE Device became commercially available on May 10, 
2024, to U.S. physicians who have completed the necessary training. The 
applicant further stated that the FDA-approved Instructions for Use 
(IFU) requires that the TAMBE device should only be used by physicians 
who have successfully completed the appropriate physician training 
program. The applicant stated that to ensure high standards of care 
with this device, it had instituted a comprehensive clinical training 
program for physicians prior to implanting the device.
    The applicant and another commenter expressed support for our 
proposal to approve new technology add-on payments for FY 2025 for the 
TAMBE Device. The applicant also agreed with the proposed maximum new 
technology add-on payment amount for the TAMBE Device.
    Response: We thank the commenters for their comments. As discussed 
in prior rulemaking, we note that the timeframe that a new technology 
can be eligible to receive new technology add-on payments begins when 
data become available (69 FR 49003, 85 FR 58610). Specifically, Sec.  
412.87(c)(2) states that a new medical device that is part of FDA's 
Breakthrough Devices Program and has received marketing authorization 
for the indication covered by the Breakthrough Device designation may 
be considered new for not less than 2 years and not more than 3 years 
after the point at which data begin to become available reflecting the 
inpatient hospital code assigned to the new service or technology 
(depending on when a new code is assigned and data on the new service 
or technology become available for DRG recalibration). We do not 
consider the date of first sale of a product as an indicator of the 
entry of a product onto the U.S. market (87 FR 48911). Similarly, 
although the applicant states that the date of first implantation of 
the TAMBE device was May 10, 2024, and that the TAMBE Device became 
commercially available on May 10, 2024 to U.S. physicians who have 
completed the necessary training, it is unclear from the information 
provided when the technology first became available for sale. We note 
that the information provided by the applicant indicating that the FDA-
approved IFU requires that the TAMBE device should only be used by 
physicians who have successfully completed the appropriate physician 
training and that there was a comprehensive clinical training program 
for physicians prior to implanting the device, does not appear to 
address the delay in the technology's market availability, because the 
information provided identifies when the device was first able to be 
used by a physician, rather than when the device first became available 
for sale. Absent additional information from the applicant regarding 
when the technology first became available for sale, we cannot 
determine a newness date based on a documented delay in the 
technology's availability on the U.S. market.
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comments we received, we believe the TAMBE Device meets the cost 
criterion. The technology received FDA premarket approval on January 
12, 2024 as a Breakthrough Device, with an indication for endovascular 
repair in patients with TAAA and high-surgical risk patients with PAAA 
who have appropriate anatomy, which is covered by its Breakthrough 
Device designation. Therefore, we are finalizing our proposal to 
approve new technology add-on payments for the TAMBE Device for FY 
2025. As previously discussed, absent additional information from the 
applicant, we consider the beginning of the newness period to commence 
on January 12, 2024, the date on which the technology received FDA 
marketing authorization for the indication covered by its Breakthrough 
Device designation.
    Based on the information available at the time of this final rule, 
the cost per case of the TAMBE Device is $72,675, based on the average 
case cost per component for the: aortic component, branch components, 
distal bifurcated component (DBC), DBC extender component, 
contralateral leg endoprosthesis, and iliac extender endoprosthesis. 
Under Sec.  412.88(a)(2), we limit new technology add-on payments to 
the lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, we are finalizing that the maximum new technology add-on 
payment for a case involving the use of the TAMBE Device is $47,238.75 
for FY 2025 (that is, 65 percent of the average cost of the 
technology). Cases involving the use of the TAMBE Device that are 
eligible for new technology add-on payments will be identified by ICD-
10-PCS procedure code X2VE3SA (Restriction of descending thoracic aorta 
and abdominal aorta using branched intraluminal device, manufactured 
integrated system, four or more arteries, percutaneous approach, new 
technology group 10).
e. LimFlow TM System
    LimFlow Inc. submitted an application for new technology add-on 
payments for the LimFlow TM System for FY 2025. According to 
the applicant, the LimFlow TM System is a single-use, 
medical device system designed to treat patients who have chronic limb-
threatening ischemia with no suitable endovascular or surgical 
revascularization options and are at risk of major amputation. Per the 
applicant, the LimFlow TM System consists of LimFlow's 
Cylindrical and Conical Stent Grafts that are used in conjunction with 
a LimFlow TM Arterial Catheter, a LimFlow TM 
Venous Catheter, and a LimFlow TM Valvulotome. According to 
the applicant, the LimFlow TM System is used for 
transcatheter arterialization of the deep veins, a minimally invasive 
procedure that aims to restore blood flow to the ischemic foot by 
diverting a stream of oxygenated blood through tibial veins in order to 
permanently bypass heavily calcified and severely stenotic arteries 
defined as unreconstructable. We note that LimFlow Inc. submitted an 
application for new technology add-on payments for the LimFlow 
TM System for FY 2024 as summarized in the FY 2024 IPPS/LTCH 
PPS proposed rule (88 FR 26938 through 26940), but the technology did 
not meet the applicable deadline of July 1, 2023 for FDA approval or 
clearance of the technology and, therefore, was not eligible for 
consideration for new technology add-on payments for FY 2024 (88 FR 
58919).
    Please refer to the online application posting for the LimFlow 
TM System, available at https://mearis.cms.gov/public/publications/ntap/NTP23101627LXC, for additional detail describing the 
technology and the condition treated by the technology.
    According to the applicant, the LimFlow TM System 
received Breakthrough Device designation from FDA on October 3, 2017, 
for the treatment of critical limb ischemia by minimally invasively 
creating an

[[Page 69216]]

arterio-venous bypass graft to produce the venous arterialization 
procedure in the below-the-knee vasculature. The applicant stated that 
the technology was granted premarket approval from FDA on September 11, 
2023, for patients who have chronic limb-threatening ischemia with no 
suitable endovascular or surgical revascularization options and are at 
risk of major amputation. In the FY 2025 IPPS/LTCH PPS proposed rule 
(89 FR 36117), we noted that since the indication for which the 
applicant received premarket approval is considered equivalent to the 
Breakthrough Device designation, it appears that the premarket approval 
indication is appropriate for consideration for new technology add-on 
payment under the alternative pathway criteria. Per the applicant, the 
LimFlow TM System was not immediately available for sale 
because inventory build and ramp for commercial sales was set to 
commence following FDA approval to allow time for the conduct of 
surgeon training and medical education on patient selection, 
indications, and surgical technique. The applicant stated that the 
technology became commercially available on November 1, 2023.
    The applicant provided a list of ICD-10-PCS codes that, effective 
October 1, 2018, can be used to uniquely describe procedures involving 
the use of the LimFlowTM System under the ICD-10-PCS coding 
system. Please see the online posting for the LimFlowTM 
System for the complete list of ICD-10-PCS codes provided by the 
applicant. The applicant provided a list of diagnosis codes that may be 
used to currently identify the indication for the LimFlowTM 
System under the ICD-10-CM coding system. Please refer to the online 
application posting for the complete list of ICD-10-CM codes provided 
by the applicant.
    With respect to the cost criterion, the applicant provided three 
analyses to demonstrate that it meets the cost criterion. Each analysis 
used the same ICD-10-PCS codes to identify potential cases representing 
patients who may be eligible for the LimFlowTM System. The 
applicant stated that the selected claims represent the exact 
situations in which the LimFlowTM System would be used and 
represent the cost of care associated with the use of the 
LimFlowTM System. The applicant utilized a different year of 
MedPAR data in each analysis. According to the applicant, it used 
multiple years of data because the case count in each individual year 
was low. The applicant imputed a value of 11 cases for MS-DRGs with 
less than 11 cases. Each analysis followed the order of operations 
described in the table that follows later in this section.
    For the first analysis, the applicant searched FY 2022 MedPAR data 
for claims reporting at least one of the ICD-10-PCS codes listed in the 
table that follows later in this section to identify cases that may be 
eligible for the LimFlowTM System. The applicant used the 
inclusion/exclusion criteria described in the table that follows later 
in this section. Under this analysis, the applicant identified 88 
claims mapping to 8 MS-DRGs, with none exceeding more than 13 percent 
of the total identified cases. The applicant calculated a final 
inflated average case-weighted standardized charge per case of $307,461 
which exceeded the average case-weighted threshold amount of $124,971.
    For the second analysis, the applicant searched FY 2021 MedPAR data 
for claims reporting at least one of the ICD-10-PCS codes listed in the 
table that follows later in this section to identify cases that may be 
eligible for the LimFlowTM System. The applicant used the 
inclusion/exclusion criteria described in the table that follows later 
in this section. Under this analysis, the applicant identified 111 
claims mapping to 10 MS-DRGs, with none exceeding more than 11 percent 
of the total identified cases. The applicant calculated a final 
inflated average case-weighted standardized charge per case of 
$277,454, which exceeded the average case-weighted threshold amount of 
$116,278.
    For the third analysis, the applicant searched FY 2020 MedPAR data 
for claims reporting at least one of the ICD-10-PCS codes listed in the 
table that follows later in this section to identify cases that may be 
eligible for the LimFlowTM System. The applicant used the 
inclusion/exclusion criteria described in the table that follows later 
in this section. Under this analysis, the applicant identified 99 
claims mapping to 9 MS-DRGs, with none exceeding more than 12 percent 
of the total identified cases. The applicant calculated a final 
inflated average case-weighted standardized charge per case of $273,638 
which exceeded the average case-weighted threshold amount of $125,153.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant asserted that the LimFlowTM 
System meets the cost criterion.

[[Page 69217]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.135

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36118), we agreed 
with the applicant that the LimFlowTM System meets the cost 
criterion and therefore proposed to approve the LimFlowTM 
System for new technology add-on payments for FY 2025.
---------------------------------------------------------------------------

    \172\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
---------------------------------------------------------------------------

    Based on preliminary information from the applicant at the time of 
the proposed rule, the applicant anticipated the total cost of the 
LimFlowTM System to the hospital to be $25,000 per patient. 
According to the applicant, the LimFlowTM System is sold as 
a system, as such, the components of the LimFlowTM System 
are not priced or sold to hospitals independently. The applicant stated 
that all components of the LimFlowTM System are single-use 
and the entire system is an operating cost. We noted that the cost 
information for this technology may be updated in the final rule based 
on revised or additional information CMS receives prior to the final 
rule. Under Sec.  412.88(a)(2), we limit new technology add-on payments 
to the lesser of 65 percent of the average cost of the technology, or 
65 percent of the costs in excess of the MS-DRG payment for the case. 
As a result, we proposed that the maximum new technology add-on payment 
for a case involving the use of the LimFlowTM System would 
be $16,250 for FY 2025 (that is, 65 percent of the average cost of the 
technology).
    We invited public comments on whether the LimFlowTM 
System meets the cost criterion and our proposal to approve new 
technology add-on payments for the LimFlowTM System for FY 
2025 for patients who have chronic limb-threatening ischemia with no 
suitable endovascular or surgical revascularization options and are at 
risk of major amputation.

[[Page 69218]]

    Comment: Commenters, including the applicant, submitted public 
comments expressing support for the approval of the 
LimFlowTM System for new technology add-on payment for FY 
2025.
    The applicant stated that the LimFlowTM System addresses 
an unmet need in late-stage chronic limb-threatening ischemia patients, 
who are no longer candidates for conventional endovascular or open 
bypass surgery to resolve their artery blockage and face major 
amputation as their only therapeutic option. The applicant stated that 
the LimFlowTM System is the first and only FDA approved 
device for transcatheter arterialization of the deep veins. The 
applicant restated that the LimFlowTM System received 
Breakthrough Device designation from FDA on October 3, 2017, and the 
LimFlowTM System received FDA premarket approval on 
September 11, 2023. The applicant stated that the LimFlowTM 
System was not immediately available for sale after FDA approval 
because it had to modify its commercial manufacturing strategy at the 
end of the PMA review process. The applicant asserted that this 
manufacturing delay prevented the first commercial product from being 
available for sale until November 1, 2023. The applicant also included 
a letter from the treating physician who performed the first U.S. 
commercial case on November 2, 2023. The applicant reiterated that the 
LimFlowTM System meets the cost criterion and confirmed the 
proposed cost of the LimFlowTM System to the hospital of 
$25,000 per patient. The applicant agreed that the proposed maximum new 
technology add-on payment amount for a case involving the use of the 
LimFlowTM System would be $16,250 for FY 2025 (that is, 65 
percent of the average cost of the technology).
    Response: We thank the commenters for their support. Based on the 
information provided in the application for new technology add-on 
payments, and after consideration of the public comments we received, 
we believe the LimFlowTM System meets the cost criterion. 
The technology received FDA premarket approval on September 11, 2023, 
as a Breakthrough Device, with an indication for patients who have 
chronic limb-threatening ischemia with no suitable endovascular or 
surgical revascularization options and are at risk of major amputation, 
which is considered equivalent to the Breakthrough Device designation. 
Therefore, we are finalizing our proposal to approve new technology 
add-on payments for the LimFlowTM System for FY 2025. We 
consider the beginning of the newness period to commence on November 1, 
2023, the date on which the technology became commercially available 
for the indication covered by its Breakthrough Device designation.
    Based on the information available at the time of this final rule, 
the cost per case of the LimFlowTM System is $25,000. Under 
Sec.  412.88(a)(2), we limit new technology add-on payments to the 
lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, we are finalizing that the maximum new technology add-on 
payment for a case involving the use of the LimFlowTM System 
is $16,250 for FY 2025 (that is, 65 percent of the average cost of the 
technology). Cases involving the use of the LimFlowTM System 
that are eligible for new technology add-on payments will be identified 
by one of the following ICD-10-PCS procedure codes:
[GRAPHIC] [TIFF OMITTED] TR28AU24.136

f. ParadiseTM Ultrasound Renal Denervation System
    ReCor Medical submitted an application for new technology add-on 
payments for the ParadiseTM Ultrasound Renal Denervation 
System for FY 2025. According to the applicant, the 
ParadiseTM Ultrasound Renal Denervation System is an 
endovascular catheter-based system that delivers SonoWave360\TM\ 
ultrasound energy circumferentially, thermally ablating and disrupting 
overactive renal sympathetic nerves to lower blood pressure in adult 
(>=22 years of age) patients with uncontrolled hypertension who may be 
inadequately responsive to or who are intolerant to anti-hypertensive 
medications.
    Please refer to the online application posting for the 
ParadiseTM Ultrasound Renal Denervation System, available at 
https://mearis.cms.gov/public/publications/ntap/NTP23101772HBQ, for 
additional detail describing the technology and the condition treated 
by the technology.
    According to the applicant, the ParadiseTM Ultrasound 
Renal Denervation System received Breakthrough Device designation from 
FDA on December 4, 2020, for reducing blood pressure in adult (>=22 
years of age) patients with uncontrolled hypertension, who may be 
inadequately responsive to, or who are intolerant to anti-hypertensive 
medications. The applicant received FDA premarket approval for the 
technology on November 7, 2023, for reducing blood pressure as an 
adjunctive treatment in hypertension patients in whom lifestyle 
modifications and antihypertensive

[[Page 69219]]

medications do not adequately control blood pressure. In the FY 2025 
IPPS/LTCH PPS proposed rule (89 FR 36119), we noted that because we 
consider the indication for which the applicant received premarket 
approval to be within the scope of the Breakthrough Device designation, 
and FDA considers this marketing authorization to be for the 
Breakthrough Device designation,\173\ it appears that the premarket 
approval indication is appropriate for consideration for new technology 
add-on payment under the alternative pathway criteria. According to the 
applicant, the technology was commercially available immediately after 
FDA approval.
---------------------------------------------------------------------------

    \173\ List of Breakthrough Devices with Marketing Authorization: 
https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program.
---------------------------------------------------------------------------

    The applicant stated that effective October 1, 2023, the following 
ICD-10-PCS code may be used to uniquely describe procedures involving 
the use of the ParadiseTM Ultrasound Renal Denervation 
System: X051329 (Destruction of renal sympathetic nerve(s) using 
ultrasound ablation, percutaneous approach, new technology group 9). 
The applicant stated that ICD-10-CM codes I10 (Essential (primary) 
hypertension), I15.1 (Hypertension secondary to other renal disorders), 
I15.8 (Other secondary hypertension), I15.9 (Secondary hypertension, 
unspecified), and I1A.0 (Resistant hypertension) may be used to 
currently identify the indication for the ParadiseTM 
Ultrasound Renal Denervation System under the ICD-10-CM coding system.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. Each analysis 
used different MS-DRGs and/or ICD-10-CM codes to identify potential 
cases representing patients who may be eligible for the 
ParadiseTM Ultrasound Renal Denervation System. The 
applicant explained that it used different codes to demonstrate 
different cohorts that may be eligible for the technology. Each 
analysis followed the order of operations described in the table that 
follows later in this section.
    For the first analysis, the applicant searched the FY 2022 MedPAR 
file for all cases that map to MS-DRG 264 (Other Circulatory System 
O.R. Procedures). The applicant stated that medical MS-DRGs 304 and 305 
(Hypertension with MCC and without MCC) are specific to hypertension. 
However, given the nature of the procedure, the applicant's expectation 
is that the DRG Grouper logic would assign potential cases representing 
patients who may be eligible for the ParadiseTM Ultrasound 
Renal Denervation System to a surgical MS-DRG. To identify the surgical 
MS-DRG, the applicant identified ICD-10-PCS code 015M3ZZ (Destruction 
of abdominal sympathetic nerve, percutaneous approach) as the procedure 
most similar to the procedure performed using the ParadiseTM 
Ultrasound Renal Denervation System, and determined the specific MS-DRG 
to which that ICD-10-PCS code maps. The applicant used the inclusion/
exclusion criteria described in the table that follows later in this 
section. Under this analysis, the applicant identified 7,064 claims 
mapping to MS-DRG 264 (Other Circulatory System O.R. Procedures) and 
calculated a final inflated average case-weighted standardized charge 
per case of $357,807, which exceeded the average case-weighted 
threshold amount of $98,708.
    For the second analysis, as a sensitivity analysis the applicant 
searched the FY 2022 MedPAR file for all cases that map to MS-DRGs 304 
or 305 (Hypertension with MCC and without MCC), which are specific to 
hypertension. The applicant used the inclusion/exclusion criteria 
described in the table that follows later in this section. Under this 
analysis, the applicant identified 32,433 claims mapping to MS-DRG 304 
(Hypertension with MCC) or 305 (Hypertension without MCC) and 
calculated a final inflated average case-weighted standardized charge 
per case of $268,298, which exceeded the average case-weighted 
threshold amount of $46,986.
    For the third analysis, the applicant provided a sensitivity 
analysis that combined the first and second scenario together for a 
broader list of MS-DRGs. The applicant used the inclusion/exclusion 
criteria described in the table that follows later in this section. 
Under this analysis, the applicant identified 39,497 claims mapping to 
MS-DRGs 264 (Other Circulatory System O.R. Procedures), 304 
(Hypertension with MCC), or 305 (Hypertension without MCC) and 
calculated a final inflated average case-weighted standardized charge 
per case of $284,306, which exceeded the average case-weighted 
threshold amount of $56,237.
    For the fourth analysis, the applicant performed a sensitivity 
analysis to subset the cases assigned to MS-DRG 264 (Other Circulatory 
System O.R. Procedures) to those reporting the following ICD-10-CM 
codes: I10 (Essential (primary) hypertension), I15.1 (Hypertension 
secondary to other renal disorders), I15.8 (Other secondary 
hypertension), or I15.9 (Secondary hypertension, unspecified) in any 
position. The applicant used the inclusion/exclusion criteria described 
in the table that follows later in this section. Under this analysis, 
the applicant identified 1,477 claims mapping to MS-DRG 264 (Other 
Circulatory System O.R. Procedures) and calculated a final inflated 
average case-weighted standardized charge per case of $325,810, which 
exceeded the average case-weighted threshold amount of $98,708.
    For the fifth analysis, the applicant performed a sensitivity 
analysis to subset the cases assigned to MS-DRGs 264 (Other Circulatory 
System O.R. Procedures), 304 (Hypertension with MCC), or 305 
(Hypertension without MCC) to those reporting the following ICD-10-CM 
codes: I10 (Essential (primary) hypertension), I15.1 (Hypertension 
secondary to other renal disorders), I15.8 (Other secondary 
hypertension), or I15.9 (Secondary hypertension, unspecified) in any 
position. The applicant used the inclusion/exclusion criteria described 
in the table that follows later in this section. Under this analysis, 
the applicant identified 14,415 claims mapping to MS-DRGs 264 (Other 
Circulatory System O.R. Procedures), 304 (Hypertension with MCC), or 
305 (Hypertension without MCC) and calculated a final inflated average 
case-weighted standardized charge per case of $272,701, which exceeded 
the average case-weighted threshold amount of $50,817.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all analyses, the applicant asserted that the ParadiseTM 
Ultrasound Renal Denervation System meets the cost criterion.
BILLING CODE 4120-01-P

[[Page 69220]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.137

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36121), we agreed 
with the applicant that the ParadiseTM Ultrasound Renal 
Denervation System meets the cost criterion and therefore proposed to 
approve the ParadiseTM Ultrasound Renal Denervation System 
for new technology add-on payments for FY 2025.
---------------------------------------------------------------------------

    \174\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
---------------------------------------------------------------------------

    Based on preliminary information from the applicant at the time of 
the proposed rule, the applicant anticipated the total cost of the 
ParadiseTM Ultrasound Renal Denervation System to the 
hospital to be $23,000 per patient, based on single-use components 
including the operating costs of the catheter kit ($22,000), cable 
($250), and cartridge ($750). We noted that the cost information for 
this technology may be updated in the final rule based on revised or 
additional information CMS receives prior to the final rule. Under 
Sec.  412.88(a)(2), we limit new technology add-on payments to the 
lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, we proposed that the maximum new technology add-on payment for 
a case involving the use of the ParadiseTM Ultrasound Renal 
Denervation System would be $14,950 for FY 2025 (that is, 65 percent of 
the average cost of the technology).
    We invited public comments on whether the ParadiseTM 
Ultrasound

[[Page 69221]]

Renal Denervation System meets the cost criterion and our proposal to 
approve new technology add-on payments for the ParadiseTM 
Ultrasound Renal Denervation System for FY 2025 for reducing blood 
pressure as an adjunctive treatment in hypertension patients in whom 
lifestyle modifications and antihypertensive medications do not 
adequately control blood pressure, which corresponds to the 
Breakthrough Device designation.
    Comment: Multiple commenters including the applicant expressed 
support for approval of the ParadiseTM Ultrasound Renal 
Denervation System for new technology add-on payments for FY 2025. The 
applicant restated that the ParadiseTM Ultrasound Renal 
Denervation System received Breakthrough Device designation from FDA on 
December 4, 2020, and the ParadiseTM Ultrasound Renal 
Denervation System received FDA premarket approval on November 7, 2023, 
for the same indication as the Breakthrough Device designation. The 
applicant reaffirmed that the ParadiseTM Ultrasound Renal 
Denervation System is new for FY 2025, and acknowledged our proposed 
newness date as the date of FDA approval, when the technology became 
commercially available. The applicant reiterated that the 
ParadiseTM Ultrasound Renal Denervation System meets the 
cost criterion and agreed with the proposed maximum new technology add-
on payment amount for the ParadiseTM Ultrasound Renal 
Denervation System. The applicant requested that CMS finalize as 
proposed.
    Response: We thank the commenters for their support to approve new 
technology add-on payments for the ParadiseTM Ultrasound 
Renal Denervation System.
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comments we received, we believe the ParadiseTM Ultrasound 
Renal Denervation System meets the cost criterion. The technology 
received FDA premarket approval on November 7, 2023, as a Breakthrough 
Device, with an indication for reducing blood pressure as an adjunctive 
treatment in hypertension patients in whom lifestyle modifications and 
antihypertensive medications do not adequately control blood pressure, 
which is covered by its Breakthrough Device designation. Therefore, we 
are finalizing our proposal to approve new technology add-on payments 
for the ParadiseTM Ultrasound Renal Denervation System for 
FY 2025. We consider the beginning of the newness period to commence on 
November 7, 2023, the date on which technology received FDA marketing 
authorization for the indication covered by its Breakthrough Device 
designation.
    Based on the information available at the time of this final rule, 
the cost per case of the ParadiseTM Ultrasound Renal 
Denervation System is $23,000, based on single-use components including 
the operating costs of the catheter kit ($22,000), cable ($250), and 
cartridge ($750). Under Sec.  412.88(a)(2), we limit new technology 
add-on payments to the lesser of 65 percent of the average cost of the 
technology, or 65 percent of the costs in excess of the MS-DRG payment 
for the case. As a result, we are finalizing that the maximum new 
technology add-on payment for a case involving the use of the 
ParadiseTM Ultrasound Renal Denervation System is $14,950 
for FY 2025 (that is, 65 percent of the average cost of the 
technology). Cases involving the use of the ParadiseTM 
Ultrasound Renal Denervation System that are eligible for new 
technology add-on payments will be identified by ICD-10-PCS procedure 
code X051329 (Destruction of renal sympathetic nerve(s) using 
ultrasound ablation, percutaneous approach, new technology group 9).
g. PulseSelectTM Pulsed Field Ablation (PFA) Loop Catheter
    Medtronic, Inc. submitted an application for new technology add-on 
payments for the PulseSelectTM PFA Loop Catheter for FY 
2025. According to the applicant, the PulseSelectTM PFA Loop 
Catheter is used to perform pulmonary vein isolation in cardiac 
catheter ablation to treat atrial fibrillation. Per the applicant, 
unlike existing methods that rely on thermal energy (either 
radiofrequency or cryoablation), PulseSelectTM employs non-
thermal irreversible electroporation to induce cell death in cardiac 
tissue at the target site. According to the applicant, 
PulseSelectTM technology's non-thermal approach can avoid 
risks associated with existing thermal cardiac catheter ablation 
technologies.
    Please refer to the online application posting for the 
PulseSelectTM PFA Loop Catheter, available at https://mearis.cms.gov/public/publications/ntap/NTP231017BMQKQ, for additional 
detail describing the technology and the disease treated by the 
technology.
    According to the applicant, the PulseSelectTM PFA 
System, which includes a compatible Medtronic multi-electrode cardiac 
ablation catheter (the PulseSelectTM PFA Loop Catheter), 
received Breakthrough Device designation from FDA on September 27, 
2018, for the treatment of drug refractory recurrent symptomatic atrial 
fibrillation. The Medtronic multi-electrode cardiac ablation catheter 
is also intended to be used for cardiac electrophysiological (EP) 
mapping and measuring of intracardiac electrograms, delivery of 
diagnostic pacing stimuli and verifying electrical isolation post-
treatment. According to the applicant, the PulseSelectTM PFA 
System received premarket approval on December 13, 2023 for the 
following indication that reflects a slightly narrower patient 
population compared to the Breakthrough Device designation: for cardiac 
electrophysiological mapping (stimulation and recording) and for 
treatment of drug refractory, recurrent, symptomatic paroxysmal atrial 
fibrillation or persistent atrial fibrillation (episode duration less 
than 1 year). The applicant noted that the PulseSelectTM PFA 
System consists of two primary elements: the PulseSelectTM 
PFA Loop Catheter and the PulseSelectTM PFA Generator 
system, but that as capital equipment, the PulseSelectTM PFA 
Generator system is not the subject of this new technology add-on 
payment application. According to the applicant, the technology was 
commercially available immediately after FDA approval.
    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for the PulseSelectTM PFA System and was 
granted approval for the following procedure code effective April 1, 
2024: 02583ZF (Destruction of conduction mechanism using irreversible 
electroporation, percutaneous approach). The applicant provided a list 
of diagnosis codes that may be used to currently identify the 
indication for the PulseSelectTM PFA Loop Catheter under the 
ICD-10-CM coding system. Please refer to the online application posting 
for the complete list of ICD-10-CM codes provided by the applicant.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. The applicant 
stated that there is an expectation the PulseSelectTM PFA 
Loop Catheter will predominantly be used when both indicated uses are 
employed in a single patient case. Each analysis used different ICD-10-
CM codes to identify potential cases representing patients who may be 
eligible for the PulseSelectTM PFA Loop Catheter. The 
applicant explained that it used different codes to demonstrate 
different cohorts that may be eligible for the technology. Each 
analysis followed the order of operations described in the table that 
follows later in this section.

[[Page 69222]]

    For the first analysis, the applicant searched the FY 2022 MedPAR 
file for claims that had the ICD-10-PCS code 02583ZZ (Destruction of 
conduction mechanism, percutaneous approach) in any procedure code 
position on the claim and identified 98 MS-DRGs. The applicant limited 
the cost analysis to the top six MS-DRGs that had over 2 percent of 
cases in each MS-DRG (see the table that follows later in this section 
for a complete list of MS-DRGs provided by the applicant). According to 
the applicant, these six MS-DRGs represented 86 percent of all cardiac 
catheter ablation cases. Using the inclusion/exclusion criteria 
described in the table that follows later in this section, the 
applicant identified 14,695 claims mapping to these 6 MS-DRGs. The 
applicant followed the order of operations described in the table that 
follows later in this section and calculated a final inflated average 
case-weighted standardized charge per case of $176,942, which exceeded 
the average case-weighted threshold amount of $136,813.
    For the second analysis, the applicant searched the FY 2022 MedPAR 
file for claims that had the ICD-10-PCS code 02583ZZ (Destruction of 
conduction mechanism, percutaneous approach) in any procedure code 
position on the claim, and had one of the ICD-10-CM codes for atrial 
fibrillation listed in the table that follows later in this section. 
The applicant used the inclusion/exclusion criteria described in the 
table that follows later in this section. Under this analysis, the 
applicant identified 12,088 claims mapping to the top six MS-DRGs 
(representing 82.3 percent of all cases) and calculated a final 
inflated average case-weighted standardized charge per case of 
$179,931, which exceeded the average case-weighted threshold amount of 
$136,782.
    For the third analysis, the applicant searched the FY 2022 MedPAR 
file for claims that had the ICD-10-PCS code 02583ZZ (Destruction of 
conduction mechanism, percutaneous approach) in any procedure code 
position on the claim and had one of the ICD-10-CM codes for paroxysmal 
or persistent atrial fibrillation listed in the table that follows 
later in this section. The applicant used the inclusion/exclusion 
criteria described in the table that follows later in this section. 
Under this analysis, the applicant identified 9,446 claims mapping to 
the top six MS-DRGs (representing 64.3 percent of all cases) and 
calculated a final inflated average case-weighted standardized charge 
per case of $180,114, which exceeded the average case-weighted 
threshold amount of $136,193.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant asserted that the PulseSelectTM 
PFA Loop Catheter meets the cost criterion.
BILLING CODE 4120-01-P

[[Page 69223]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.138

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36123), we agreed 
with the applicant that the PulseSelectTM PFA Loop Catheter 
meets the cost criterion and therefore proposed to approve the 
PulseSelectTM PFA Loop Catheter for new technology add-on 
payments for FY 2025.
---------------------------------------------------------------------------

    \175\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
---------------------------------------------------------------------------

    Based on preliminary information from the applicant at the time of 
the proposed rule, the applicant anticipated the cost of the 
PulseSelectTM PFA Loop Catheter to the hospital to be $9,750 
per patient, and for the PulseSelectTM PFA Catheter 
Interface Cable to be $800 per patient, totaling $10,550 per inpatient 
stay. We noted that the cost information for this technology may be 
updated in the final rule based on revised or additional information 
CMS receives

[[Page 69224]]

prior to the final rule. We noted that the applicant stated that the 
PulseSelectTM Pulsed Field Ablation (PFA) Interface Cable is 
listed as a component of the PulseSelectTM Pulsed Field 
Ablation (PFA) Generator Reusable Accessories. However, we noted the 
submitted new technology add-on payment application is for the 
PulseSelectTM PFA Loop Catheter, and that the applicant had 
specified in its application that the PulseSelectTM PFA 
Generator System is not the subject of this new technology add-on 
payment application. Therefore, we believed the total cost per 
inpatient stay should be based only on the cost of the 
PulseSelectTM PFA Loop Catheter, which is $9,750 per the 
applicant. Under Sec.  412.88(a)(2), we limit new technology add-on 
payments to the lesser of 65 percent of the average cost of the 
technology, or 65 percent of the costs in excess of the MS-DRG payment 
for the case. As a result, we proposed that the maximum new technology 
add-on payment for a case involving the use of the 
PulseSelectTM PFA Loop Catheter would be $6,337.50 for FY 
2025 (that is, 65 percent of the average cost of the technology).
    We invited public comments on whether the PulseSelectTM 
PFA Loop Catheter meets the cost criterion and our proposal to approve 
new technology add-on payments for the PulseSelectTM PFA 
Loop Catheter for FY 2025 for cardiac electrophysiological mapping 
(stimulation and recording) and for treatment of drug refractory, 
recurrent, symptomatic paroxysmal atrial fibrillation or persistent 
atrial fibrillation (episode duration less than 1 year).
    Comment: The applicant submitted a public comment requesting that 
the cost of the PulseSelectTM PFA Catheter Interface Cable 
($800) be included as an operating cost rather than a capital cost, 
since it is a sterilized, one-time use connector between the 
PulseSelectTM PFA Loop Catheter and the 
PulseSelectTM PFA Generator System.
    Response: We thank the commenter for its comments. As we had noted 
in the proposed rule, the submitted new technology add-on payment 
application is for the PulseSelectTM PFA Loop Catheter, and 
not for the PulseSelectTM PFA System. As noted by the 
applicant, and in the FDA Summary of Safety and Effectiveness Data for 
the PulseSelectTM PFA System,\176\ the 
PulseSelectTM PFA Interface Cable is not a component of the 
PulseSelectTM PFA Loop Catheter. Therefore, we do not 
consider the cost of the PulseSelectTM PFA Catheter 
Interface Cable as an operating cost for the PulseSelectTM 
PFA Loop Catheter, and the PulseSelectTM PFA Catheter 
Interface Cable is not eligible to be included in new technology add-on 
payments.
---------------------------------------------------------------------------

    \176\ https://www.accessdata.fda.gov/cdrh_docs/pdf23/P230017B.pdf.
---------------------------------------------------------------------------

    Comment: The applicant submitted a public comment requesting that 
the PulseSelect TM PFA technology be the only product 
eligible for the new technology add-on payment designation and 
requested clarity on how eligibility for the new technology add-on 
payment would be properly determined on hospital claims. The applicant 
stated that CMS has established that a technology that is substantially 
similar to an existing technology approved for new technology add-on 
payment under the traditional pathway also qualifies for new technology 
add-on payment within the eligibility period, even if a specific 
application for that technology was not submitted and considered 
through rulemaking (82 FR 38110). The applicant also stated that CMS 
wrote in the FY 2023 IPPS/LTCH PPS final rule that ``. . . applications 
received for new technology add-on payments for FY 2021 and subsequent 
fiscal years for medical devices that are part of FDA's Breakthrough 
Devices Program and received FDA marketing authorization will be 
considered not substantially similar to an existing technology for 
purposes of the new technology add-on payment under the IPPS'' (87 FR 
48915). The applicant stated this language establishes that 
Breakthrough Devices approved for new technology add-on payment under 
the alternative pathway cannot be considered substantially similar to 
any other technologies, by definition. The applicant further stated 
that it was not evident how this distinction between new technology 
add-on payments approved under the traditional pathway and new 
technology add-on payments for Breakthrough Devices approved under the 
alternative pathway would be effectuated on a claim-by-claim basis, in 
instances when the same code may be used to describe procedures 
involving the new technology add-on payment-approved Breakthrough 
Device as well as other devices (which may or may not have Breakthrough 
Device status). The applicant stated it obtained a new ICD-10-PCS code 
for the PulseSelect TM PFA System, and that the code could 
be used to describe procedures involving at least one other 
irreversible electroporation device. The applicant requested that CMS 
clarify in the final rule that the PulseSelect TM PFA 
technology, as a Breakthrough device, is not substantially similar to 
any other technologies for purposes of new technology add-on payments 
under the alternative pathway, and provide guidance on how this policy 
will be effectuated in terms of claims processing to ensure the new 
technology add-on payment is triggered only in cases where the 
PulseSelect TM PFA System is used.
    Response: We thank the commenter for its comments. As we previously 
noted, under the alternative pathway, in evaluating eligibility for the 
new technology add-on payment, a medical device designated under FDA's 
Breakthrough Devices Program that has received FDA marketing 
authorization will be considered not substantially similar to an 
existing technology for purposes of the new technology add-on payment 
under the IPPS, and will not need to meet the requirement under Sec.  
[thinsp]412.87(b)(1) that it represent an advance that substantially 
improves, relative to technologies previously available, the diagnosis 
or treatment of Medicare beneficiaries.
    In addition, we note that procedure codes under the ICD-10-PCS are 
not manufacturer specific; rather, they are used to describe the 
hospital service that was performed. If, after consulting current 
official coding guidelines a hospital determines that an ICD-10-PCS 
procedure code associated with a new technology add-on payment 
describes the technology that it used in the performance of a 
procedure, the hospital may report the code and may be eligible to 
receive the associated new technology add-on payment. We note that 
similar procedures using the same device or technology may also be 
appropriately coded differently under the ICD-10-PCS classification. An 
entity that is seeking coding guidance may contact the American 
Hospital Association's Central Office on ICD-10-CM/PCS systems for such 
advice.\177\ Hospitals are responsible for ensuring that they are 
correctly billing for the services they render.
---------------------------------------------------------------------------

    \177\ https://www.aha.org/websites/2017-12-17-aha-central-office.
---------------------------------------------------------------------------

    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comments we received, we believe the PulseSelect TM PFA Loop 
Catheter meets the cost criterion. The technology received FDA 
premarket approval on December 13, 2023 as a Breakthrough Device, with 
an indication for use for cardiac electrophysiological mapping 
(stimulation and recording) and for treatment of drug refractory, 
recurrent, symptomatic paroxysmal atrial fibrillation or persistent 
atrial

[[Page 69225]]

fibrillation (episode duration less than 1 year), which is covered by 
its Breakthrough Device designation. Therefore, we are finalizing our 
proposal to approve new technology add-on payments for the PulseSelect 
TM PFA Loop Catheter for FY 2025. We consider the beginning 
of the newness period to commence on December 13, 2023, the date on 
which the technology received its FDA marketing authorization for the 
indication covered by its Breakthrough Device designation.
    Based on the information available at the time of this final rule, 
the cost per case of the PulseSelect TM PFA Loop Catheter is 
$9,750 per inpatient stay. Under Sec.  412.88(a)(2), we limit new 
technology add-on payments to the lesser of 65 percent of the average 
cost of the technology, or 65 percent of the costs in excess of the MS-
DRG payment for the case. As a result, we are finalizing that the 
maximum new technology add-on payment for a case involving the use of 
the PulseSelect TM PFA Loop Catheter is $6,337.50 for FY 
2025 (that is, 65 percent of the average cost of the technology). Cases 
involving the use of the PulseSelect TM PFA Loop Catheter 
that are eligible for new technology add-on payments will be identified 
by ICD-10-PCS procedure code: 02583ZF (Destruction of conduction 
mechanism using irreversible electroporation, percutaneous approach).
h. Symplicity Spyral TM Multi-Electrode Renal Denervation 
Catheter
    Medtronic submitted an application for new technology add-on 
payments for the Symplicity Spyral TM Multi-Electrode Renal 
Denervation Catheter for FY 2025. According to the applicant, the 
Symplicity Spyral TM Multi-Electrode Renal Denervation 
Catheter provides a treatment option for patients with uncontrolled 
hypertension, when used with the Symplicity G3 TM Generator, 
by delivering targeted radiofrequency energy to the renal nerves, 
safely disrupting overactive sympathetic signaling between the kidneys 
and brain, as a treatment for uncontrolled hypertension.
    Please refer to the online application posting for the Symplicity 
Spyral TM Multi-Electrode Renal Denervation Catheter, 
available at https://mearis.cms.gov/public/publications/ntap/NTP2310161U617, for additional detail describing the technology and the 
condition treated by the technology.
    According to the applicant, the Symplicity Spyral TM 
Multi-Electrode Renal Denervation System received Breakthrough Device 
designation from FDA on March 27, 2020, for the reduction of blood 
pressure in patients with uncontrolled hypertension despite the use of 
anti-hypertensive medications or in patients who may have documented 
intolerance to anti-hypertensive medications. The applicant received 
premarket approval for the technology on November 17, 2023, for 
reducing blood pressure as an adjunctive treatment in patients with 
hypertension in whom lifestyle modifications and antihypertensive 
medications do not adequately control blood pressure. In the FY 2025 
IPPS/LTCH PPS proposed rule (89 FR 36126), we noted that because we 
consider the indication for which the applicant received premarket 
approval to be within the scope of the Breakthrough Device designation, 
and FDA considers this marketing authorization to be for the 
Breakthrough Device,\178\ it appears that the premarket approval 
indication is appropriate for consideration for new technology add-on 
payment under the alternative pathway criteria. According to the 
applicant, the technology was commercially available immediately after 
FDA approval.
---------------------------------------------------------------------------

    \178\ List of Breakthrough Devices with Marketing Authorization: 
https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program.
---------------------------------------------------------------------------

    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for the Symplicity Spyral TM Multi-
Electrode Renal Denervation Catheter beginning in FY 2025 and was 
granted approval for the following procedure code effective October 1, 
2024: X05133A (Destruction of renal sympathetic nerve(s) using 
radiofrequency ablation, percutaneous approach, new technology group 
10). The applicant provided a list of diagnosis codes that may be used 
to currently identify the indication for the Symplicity Spyral 
TM Multi-Electrode Renal Denervation Catheter under the ICD-
10-CM coding system. Please refer to the online application posting for 
the complete list of ICD-10-CM codes provided by the applicant.
    With respect to the cost criterion, the applicant provided two 
analyses and two sensitivity analyses to demonstrate that it meets the 
cost criterion. Each analysis used a common set of ICD-10-CM codes but 
different criteria for the inclusion/exclusion of MS-DRGs and outlier 
cases to identify potential cases representing patients who may be 
eligible for the Symplicity Spyral TM Multi-Electrode Renal 
Denervation Catheter. The applicant explained that it used different 
codes to demonstrate different cohorts that may be eligible for the 
technology. Each analysis followed the order of operations described in 
the table that follows later in this section.
    For the first scenario (Cost Analysis #1), the applicant searched 
the FY 2022 MedPAR file for cases where essential (primary) 
hypertension was the reason for the admission, using at least one of 
the ICD-10-CM diagnosis codes in the table that follows later in this 
section. The applicant used the inclusion/exclusion criteria described 
in the table that follows later in this section. Under this analysis, 
the applicant identified 490,387 claims mapping to 99 MS-DRGs, 
including MS-DRG 291 (Heart Failure and Shock With MCC) representing 67 
percent of identified cases. The applicant calculated a final inflated 
average case-weighted standardized charge per case of $136,450, which 
exceeded the average case-weighted threshold amount of $62,312.
    The second scenario (Cost Analysis #1 with Outliers) was a 
sensitivity analysis that mirrored the first scenario, except that 
cases with outlier payments were included. The applicant used the 
inclusion/exclusion criteria described in the table that follows later 
in this section. Under this analysis, the applicant identified 501,760 
claims mapping to 101 MS-DRGs, including MS-DRG 291 (Heart Failure and 
Shock With MCC) representing 66.7 percent of identified cases. The 
applicant calculated a final inflated average case-weighted 
standardized charge per case of $145,001, which exceeded the average 
case-weighted threshold amount of $63,789.
    For the third scenario (Cost Analysis #2), the applicant searched 
the FY 2022 MedPAR file for claims reporting any of the ICD-10-CM 
diagnosis codes listed in the table that follows later in this section 
but limited the case selection to MS-DRGs where the principal diagnosis 
was essential hypertension, and no procedures were performed. Per the 
applicant, this list represents a subset of cases that were most likely 
to benefit from the new procedural treatment option for primary 
hypertension. The applicant used the inclusion/exclusion criteria 
described in the table that follows later in this section. Under this 
analysis, the applicant identified 390,384 claims mapping to 8 MS-DRGs, 
including MS-DRG 291 (Heart Failure and Shock With MCC) representing 
84.4 percent of identified cases. The applicant calculated a final 
inflated average case-weighted standardized charge per case of 
$124,525, which exceeded the average case-weighted threshold amount of 
$52,861.
    The fourth scenario (Cost Analysis #2 with Outliers) mirrored the 
third

[[Page 69226]]

scenario, except that cases with outlier payments were included. The 
applicant used the inclusion/exclusion criteria described in the table 
that follows later in this section. Under this analysis, the applicant 
identified 395,634 claims mapping to 8 MS-DRGs, including MS-DRG 291 
(Heart Failure and Shock With MCC) representing 84.5 percent of 
identified cases. The applicant calculated a final inflated average 
case-weighted standardized charge per case of $128,356, which exceeded 
the average case-weighted threshold amount of $52,873.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant asserted that the Symplicity Spyral\TM\ 
Multi-Electrode Renal Denervation Catheter meets the cost criterion.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU24.139


[[Page 69227]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.140

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36128), we agreed 
with the applicant that the Symplicity Spyral\TM\ Multi-Electrode Renal 
Denervation Catheter meets the cost criterion and therefore proposed to 
approve the Symplicity Spyral\TM\ Multi-Electrode Renal Denervation 
Catheter for new technology add-on payments for FY 2025.
---------------------------------------------------------------------------

    \179\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
---------------------------------------------------------------------------

    We noted in the proposed rule that an estimate for the cost of the 
Symplicity Spyral\TM\ Multi-Electrode Renal Denervation Catheter was 
not available for publication at the time of the proposed rule. We 
stated that we expected the applicant to release cost information prior 
to the final rule, and we would provide an update regarding the new 
technology add-on payment amount for the technology, if approved, in 
the final rule. The applicant stated that there would be two components 
for the cost of the technology, including operating costs for the 
Symplicity Spyral\TM\ Multi-Electrode Renal Denervation Catheter and 
capital costs for the Symplicity G3TM Generator. Because 
section 1886(d)(5)(K)(i) of the Act requires that the Secretary 
establish a mechanism to recognize the costs of new medical services or 
technologies under the payment system established under that 
subsection, which establishes the system for payment of the operating 
costs of inpatient hospital services, we do not include capital costs 
in the add-on payments for a new medical service or technology or make 
new technology add-on payments under the IPPS for capital-related costs 
(86 FR 45145). Based on the information from the applicant, it appeared 
that the Symplicity G3TM Generator is a capital cost. 
Therefore, it appeared that this component is not eligible for new 
technology add-on payment because, as discussed in prior rulemaking and 
as noted, we only make new technology add-on payments for operating 
costs (72 FR 47307 through 47308). Any new technology add-on payment 
for the Symplicity Spyral\TM\ Multi-Electrode Renal Denervation 
Catheter would be subject to our policy under Sec.  412.88(a)(2) where 
we limit new technology add-on payment to the lesser of 65 percent of 
the average cost of the technology, or 65 percent of the costs in 
excess of the MS-DRG payment for the case.
    We invited public comments on whether the Symplicity Spyral\TM\ 
Multi-Electrode Renal Denervation Catheter meets the cost criterion and 
our proposal to approve new technology add-on payments for the 
Symplicity Spyral\TM\ Multi-Electrode Renal Denervation Catheter for FY 
2025 for reducing blood pressure as an adjunctive treatment in patients 
with hypertension in whom lifestyle modifications and antihypertensive 
medications do not adequately control blood pressure, which corresponds 
to the Breakthrough Device designation.
    Comment: Multiple commenters including the applicant submitted 
public comments in support of our proposal to approve new technology 
add-on payments for FY 2025 for the Symplicity Spyral\TM\ Multi-
Electrode Renal Denervation Catheter. The applicant provided the cost 
of the Symplicity Spyral\TM\ Multi-Electrode Renal Denervation Catheter 
to the hospital of $16,000 per patient and requested that we finalize 
the proposed maximum new technology add-on payment amount of $10,400 
for FY 2025 (that is, 65 percent of the average cost of the 
technology).
    Response: We thank the commenters for their support to approve new 
technology add-on payments for the Symplicity Spyral\TM\ Multi-
Electrode Renal Denervation Catheter.
    Comment: A commenter expressed concerns regarding not disclosing 
cost information for the Symplicity Spyral\TM\ Multi-Electrode Renal 
Denervation Catheter at the time of the proposed rule. The commenter 
acknowledged that there was precedent to not disclose cost information 
where the technology has not received FDA marketing authorization at 
the time of the proposed rule. However, the commenter stated that given 
the Symplicity Spyral\TM\ Multi-Electrode Renal Denervation Catheter 
received FDA marketing authorization on November 17, 2023 and was 
immediately available for sale after FDA approval, they believed that 
the applicant could have estimated the cost of the Symplicity 
Spyral\TM\ Multi-Electrode Renal Denervation Catheter prior to December 
18, 2023, which is the deadline for submitting additional information 
for its application for new technology add-on payment. The commenter 
stated that not disclosing the technology's cost prevents stakeholders 
from submitting fully informed comments given the lack of information. 
The commenter stated that it is critically important that going 
forward, CMS consistently apply its requirements and processes across 
all applicants to ensure a level playing field.
    Response: We appreciate the commenter sharing its concern regarding 
not disclosing cost information for the Symplicity Spyral\TM\ Multi-
Electrode Renal Denervation Catheter at the time of the proposed rule. 
As stated by the commenter, we frequently do not have cost information 
from some applicants at the time of the proposed rule, and therefore do 
not include cost information on those applications in the proposed 
rule. As discussed in previous rulemaking (87 FR 48981), where cost 
information is not yet available at the time of the proposed rule, we 
note (in the proposed rule) our expectation that the applicant

[[Page 69228]]

will submit cost information prior to the final rule, and we indicate 
that we will provide an update regarding the new technology add-on 
payment amount for the technology, if approved, in the final rule. We 
further note that in assessing the cost criterion for new technology 
add-on payments, consistent with the formula specified in section 
1886(d)(5)(K)(ii)(I) of the Act, we assess the adequacy of the MS-DRG 
prospective payment rate otherwise applicable to discharges involving 
the new medical service or technology by evaluating whether the charges 
for cases involving the new technology exceed certain threshold 
amounts. As discussed in the proposed rule, we agreed that based on the 
applicant's cost analysis, the final inflated case-weighted average 
standardized charge per case for the technology exceeded the applicable 
average case-weighted threshold amount. We also note that we include 
descriptions of the cost analyses provided for all applications in the 
proposed rule to allow for public comments on how the applications meet 
the cost criterion. Nevertheless, we will continue to consider the 
commenter's concerns with respect to those applications for which 
information about the technology's cost is not included in the proposed 
rule.
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comments we received, we believe the Symplicity Spyral\TM\ Multi-
Electrode Renal Denervation Catheter meets the cost criterion. The 
technology received FDA premarket approval on November 17, 2023, as a 
Breakthrough Device, with an indication for reducing blood pressure as 
an adjunctive treatment in patients with hypertension in whom lifestyle 
modifications and antihypertensive medications do not adequately 
control blood pressure, which is covered by its Breakthrough Device 
designation. Therefore, we are finalizing our proposal to approve new 
technology add-on payments for the Symplicity Spyral\TM\ Multi-
Electrode Renal Denervation Catheter for FY 2025. We consider the 
beginning of the newness period to commence on November 17, 2023, the 
date on which technology received FDA marketing authorization for the 
indication covered by its Breakthrough Device designation.
    Based on the information available at the time of this final rule, 
the cost per case of the single-use Symplicity Spyral\TM\ Multi-
Electrode Renal Denervation Catheter is $16,000.00. Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
65 percent of the average cost of the technology, or 65 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, we are 
finalizing that the maximum new technology add-on payment for a case 
involving the use of the Symplicity Spyral\TM\ Multi-Electrode Renal 
Denervation Catheter is $10,400.00 for FY 2025 (that is, 65 percent of 
the average cost of the technology). Cases involving the use of the 
Symplicity Spyral\TM\ Multi-Electrode Renal Denervation Catheter that 
are eligible for new technology add-on payments will be identified by 
ICD-10-PCS procedure code X05133A (Destruction of renal sympathetic 
nerve(s) using radiofrequency ablation, percutaneous approach, new 
technology group 10).
i. TriClipTM G4
    Abbott submitted an application for new technology add-on payments 
for TriClip\TM\ G4 for FY 2025. According to the applicant, TriClip\TM\ 
G4 is intended for reconstruction of the insufficient tricuspid valve 
through tissue approximation via a transcatheter approach. The 
TriClip\TM\ G4 System consists of the TriClip\TM\ G4 Implant, Clip 
Delivery System and Steerable Guide. The applicant explained that the 
TriClip\TM\ G4 Implant is a percutaneously delivered mechanical implant 
that helps close the tricuspid valve leaflets resulting in fixed 
tricuspid leaflet approximation throughout the cardiac cycle. According 
to the applicant, TriClip\TM\ G4 is intended for the treatment of 
patients with symptomatic, severe tricuspid valve regurgitation, whose 
symptoms and tricuspid regurgitation (TR) severity persist despite 
being treated optimally with medical therapy.
    Please refer to the online application posting for TriClip\TM\ G4, 
available at https://mearis.cms.gov/public/publications/ntap/NTP231016N52MH, for additional detail describing the technology and the 
disease treated by the technology.
    According to the applicant, the TriClip\TM\ G4 System received 
Breakthrough Device designation from FDA on November 19, 2020, for the 
treatment of patients with symptomatic, severe tricuspid valve 
regurgitation, whose symptoms and TR severity persist despite being 
treated optimally with medical therapy. The technology received FDA 
premarket approval on April 1, 2024 as a Breakthrough Device, with an 
indication for improving the quality of life and functional status in 
patients with symptomatic severe tricuspid regurgitation despite 
optimal medical therapy, who are at intermediate or greater risk for 
surgery and in whom transcatheter edge-to-edge valve repair is 
clinically appropriate and is expected to reduce tricuspid 
regurgitation severity to moderate or less, as determined by a 
multidisciplinary heart team, which is covered by its Breakthrough 
Device designation.
    According to the applicant, the following ICD-10-PCS code may be 
used to describe procedures involving the use of TriClip\TM\ G4: 
02UJ3JZ (Supplement tricuspid valve with synthetic substitute, 
percutaneous approach). The applicant noted at the time of its 
application that there were no FDA-approved technologies using this 
procedure code. The applicant stated that ICD-10-CM diagnosis codes 
I07.1 (Rheumatic tricuspid insufficiency) and I36.1 (Nonrheumatic 
tricuspid (valve) insufficiency) may be used to currently identify the 
indication for TriClip\TM\ G4 under the ICD-10-CM coding system.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for TriClip\TM\ G4, the 
applicant searched the 2022 Medicare Inpatient Hospital Standard 
Analytical File (100%) for claims that had one of the following ICD-10-
CM codes, I07.1 (Rheumatic tricuspid insufficiency) or I36.1 
(Nonrheumatic tricuspid (valve) insufficiency) in the primary position, 
in combination with ICD-10-PCS code 02UJ3JZ (Supplement tricuspid valve 
with synthetic substitute, percutaneous approach). Using the inclusion/
exclusion criteria described in the following table, the applicant 
identified 235 claims mapping to two MS-DRGs, MS-DRG 266 (Endovascular 
Cardiac Valve Replacement and Supplement Procedures, with MCC), and 267 
(Endovascular Cardiac Valve Replacement and Supplement Procedures, 
without MCC). The applicant followed the order of operations described 
in the following table and calculated a final inflated average case-
weighted standardized charge per case of $313,389 which exceeded the 
average case-weighted threshold amount of $192,861.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant asserted that TriClip\TM\ G4 meets the cost criterion.
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BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36132), we agreed 
with the applicant that TriClip\TM\ G4 meets the cost criterion and 
therefore proposed to approve TriClip\TM\ G4 for new technology add-on 
payments for FY 2025, subject to the technology receiving FDA marketing 
authorization as a Breakthrough Device for the indication corresponding 
to the Breakthrough Device designation by May 1, 2024.
    Based on preliminary information from the applicant at the time of 
the proposed rule, the applicant anticipated the total cost of 
TriClip\TM\ G4 to the hospital to be $40,000 per procedure. According 
to the applicant, the TriClip\TM\ System is composed of multiple 
components: the TriClip\TM\ G4 Implant, Clip Delivery System, and 
Steerable Guide Catheter. The applicant stated that all the components 
typically required for a single procedure are sold together for a 
single operating cost (for example, it is the same cost per procedure 
whether the patient requires one or two implants). We noted that the 
cost information for this technology may be updated in the final rule 
based on revised or additional information CMS receives prior to the 
final rule. Under Sec.  412.88(a)(2), we limit new technology add-on 
payments to the lesser of 65 percent of the average cost of the 
technology, or 65 percent of the costs in excess of the MS-DRG payment 
for the case. As a result, we proposed that the maximum new technology 
add-on payment for a case involving the use of TriClip\TM\ G4 would be 
$26,000 for FY 2025 (that is, 65 percent of the average cost of the 
technology).
    We invited public comments on whether TriClip\TM\ G4 meets the cost 
criterion and our proposal to approve new technology add-on payments 
for TriClip\TM\ G4 for FY 2025, subject to the technology receiving FDA 
marketing authorization as a Breakthrough Device for the indication 
corresponding to the Breakthrough Device designation by May 1, 2024.
    Comment: We received multiple public comments in support of our 
proposal to approve new technology add-on payments for the 
TriClipTM G4 System. The commenters stated the technology 
meets FDA marketing authorization and cost criterion requirements for 
approval and also supported CMS's proposed maximum new technology add-
on payment.
    Response: We thank the commenters for their comments. Based on the 
information provided in the application for new technology add-on 
payments, and after consideration of the public comments we received, 
we believe TriClip\TM\ G4 meets the cost criterion. The technology 
received FDA premarket approval on April 1, 2024 as a Breakthrough 
Device, with an indication for improving the quality of life and 
functional status in patients with symptomatic severe tricuspid 
regurgitation despite optimal medical therapy, who are at intermediate 
or greater risk for surgery and in whom transcatheter edge-to-edge 
valve repair is clinically appropriate and is expected to reduce 
tricuspid regurgitation severity to moderate or less, as determined by 
a multidisciplinary heart team, which is covered by its Breakthrough 
Device designation. Therefore, we are finalizing our proposal to 
approve new technology add-on payments for TriClip\TM\ G4 for FY 2025. 
We consider the beginning of the newness period to commence on April 1, 
2024, the date on which the technology received its market 
authorization for the indication covered by its Breakthrough Device 
designation.
    Based on the information available at the time of this final rule, 
the cost per case of TriClip\TM\ G4 (composed of the

[[Page 69230]]

TriClipTM G4 Implant, Clip Delivery System, and Steerable 
Guide Catheter) is $40,000 per procedure. Under Sec.  412.88(a)(2), we 
limit new technology add-on payments to the lesser of 65 percent of the 
average cost of the technology, or 65 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, we are finalizing that 
the maximum new technology add-on payment for a case involving the use 
of TriClip\TM\ G4 is $26,000 for FY 2025 (that is, 65 percent of the 
average cost of the technology). Cases involving the use of TriClip\TM\ 
G4 that are eligible for new technology add-on payments will be 
identified by ICD-10-PCS procedure code 02UJ3JZ (Supplement tricuspid 
valve with synthetic substitute, percutaneous approach).
j. VADER[supreg] Pedicle System
    Icotec Medical, Inc. submitted an application for new technology 
add-on payments for the VADER[supreg] Pedicle System for FY 2025. 
According to the applicant, the VADER[supreg] Pedicle System is a 
pedicle screw system for standard posterior fixation of the spinal 
column used to provide stabilization of infected spinal segments after 
debridement of infectious tissues. According to the applicant, the 
VADER[supreg] Pedicle System is made from high strength carbon fiber 
reinforced polyether ether ketone, which provides low artifact imaging 
to allow for post-operative surveillance of the healing of the infected 
spinal segment.
    Please refer to the online application posting for the 
VADER[supreg] Pedicle System, available at https://mearis.cms.gov/public/publications/ntap/NTP231016CMGH3, for additional detail 
describing the technology and the condition treated by the technology.
    According to the applicant, the VADER[supreg] Pedicle System 
received Breakthrough Device designation from FDA on July 31, 2023 for 
stabilizing the thoracic and/or lumbar spinal column as an adjunct to 
fusion in patients diagnosed with an active spinal infection (for 
example, spondylodiscitis, osteomyelitis) who are at risk of spinal 
instability, progressive spinal deformity, or neurologic compromise, 
following surgical debridement. The applicant stated that the 
technology received 510(k) clearance from FDA on February 26, 2024, for 
the following indication, which is the subject of the new technology 
add-on payment application, and is consistent with the Breakthrough 
Device designation: to stabilize the thoracic and/or lumbar spinal 
column in patients who are or will be receiving concurrent medical 
treatment for an active spinal infection (for example, 
spondylodiscitis, osteomyelitis) that, without stabilization, could 
lead to deterioration of bony structures and misalignment with 
neurological compromise. In the FY 2025 IPPS/LTCH PPS proposed rule (89 
FR 36132), we noted that the VADER[supreg] Pedicle System has received 
FDA 510(k) clearance for multiple indications since 2019.\180\ We also 
noted that, under the eligibility criteria for approval under the 
alternative pathway for certain transformative new devices, only the 
use of the VADER[supreg] Pedicle System to stabilize the thoracic and/
or lumbar spine as an adjunct to fusion in patients with spinal 
infection, and the FDA Breakthrough Device designation it received for 
that use, are relevant for purposes of the new technology add-on 
payment application for FY 2025. According to the applicant, the 
technology was commercially available immediately after 510(k) 
clearance from FDA.
---------------------------------------------------------------------------

    \180\ K222789, January 9, 2023; K200596, October 13, 2020; 
K193423, May 22, 2020; and K190545, June 20, 2019.
---------------------------------------------------------------------------

    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for the VADER[supreg] Pedicle System beginning in FY 
2025 and was granted approval for the following procedure codes 
effective October 1, 2024:
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BILLING CODE 4120-01-C
    The applicant provided a list of diagnosis codes that may be used 
to currently identify the indication for the VADER[supreg] Pedicle 
System under the ICD-10-CM coding system, describing spinal infections 
including osteomyelitis, discitis, and spondylopathies of various 
vertebral spine body parts including the cervical, thoracic, and lumbar 
regions. Please refer to the online application posting for the 
complete list of ICD-10-CM codes provided by the applicant. As 
previously noted, only use of the technology for the indications 
corresponding to the Breakthrough Device designation would be relevant 
for new technology add-on payment purposes. Therefore, in the proposed 
rule (89 FR 36132) we stated that we believed that the relevant ICD-10-
CM codes to identify the Breakthrough Device-designated indication 
would be the codes included in category M46 (Other inflammatory 
spondylopathies) under the ICD-10-CM classification in subcategories: 
M46.2- (Osteomyelitis of vertebra), M46.3- (Infection of intervertebral 
disc (pyogenic)), M46.4- (Discitis, unspecified), M46.5- (Other 
infective spondylopathies), M46.8- (Other specified inflammatory 
spondylopathies), and M46.9- (Unspecified inflammatory spondylopathy). 
We invited public comment on the use of these ICD-10-CM diagnosis codes 
to identify the Breakthrough Device-designated indication for purposes 
of the new technology add-on payment, if approved.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for the VADER[supreg] Pedicle 
System, the applicant searched the FY 2022 MedPAR file for claims 
reporting a combination of ICD-10-CM/PCS codes as listed in the online 
posting for the VADER[supreg] Pedicle System. The applicant believes 
these cases represent patients who have undergone fusion procedures and 
have been diagnosed with an active spinal infection (such as 
spondylodiscitis or osteomyelitis), and these patients are at risk of 
spinal instability, progressive spinal deformity, or neurologic 
compromise following surgical debridement, making them suitable 
candidates for the use of the technology. Using the inclusion/exclusion 
criteria

[[Page 69232]]

described in the following table, the applicant identified 2,116 claims 
mapping to 22 MS-DRGs, with none exceeding more than 15 percent of the 
total identified cases. The applicant followed the order of operations 
described in the following table and calculated a final inflated 
average case-weighted standardized charge per case of $473,636, which 
exceeded the average case-weighted threshold amount of $197,922. 
Because the final inflated average case-weighted standardized charge 
per case exceeded the average case-weighted threshold amount, the 
applicant asserted that the VADER[supreg] Pedicle System meets the cost 
criterion.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU24.143

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36133), we agreed 
with the applicant that the VADER[supreg] Pedicle System meets the cost 
criterion and therefore proposed to approve the VADER[supreg] Pedicle 
System for new technology add-on payments for FY 2025.
---------------------------------------------------------------------------

    \181\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
---------------------------------------------------------------------------

    Based on preliminary information from the applicant at the time of 
the proposed rule, the applicant anticipated the total cost of the 
VADER[supreg] Pedicle System to the hospital to be $43,450 per patient. 
According to the applicant, the unit prices are $6,500 for a pedicle 
screw, $4,600 for a rod, and $350 for a set screw. The applicant stated 
that an average of five pedicle screws, two rods, and five set screws 
would be used for a spinal fusion procedure. The applicant calculated 
the total cost of the technology by multiplying the unit price of each 
component by the average number of that component used in the 
procedure. We noted that the cost information for this technology may 
be updated in the final rule based on revised or additional information 
CMS receives prior to the final rule. Under Sec.  412.88(a)(2), we 
limit new technology add-on payments to the lesser of 65 percent of the 
average cost of the technology, or 65 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, we proposed that the 
maximum new technology add-on payment for a case involving the use of 
the VADER[supreg] Pedicle System would be $28,242.50 for FY 2025 (that 
is, 65 percent of the average cost of the technology).
    We invited public comments on whether the VADER[supreg] Pedicle 
System meets the cost criterion and our

[[Page 69233]]

proposal to approve new technology add-on payments for the 
VADER[supreg] Pedicle System for FY 2025, when used to stabilize the 
thoracic and/or lumbar spinal column in patients who are or will be 
receiving concurrent medical treatment for an active spinal infection 
(for example, spondylodiscitis, osteomyelitis) that, without 
stabilization, could lead to deterioration of bony structures and 
misalignment with neurological compromise.
    Comment: We received comments supporting our proposal to approve 
new technology add-on payments for FY 2025 for the VADER[supreg] 
Pedicle System.
    Response: We thank the commenters for their support to approve new 
technology add-on payments for the VADER[supreg] Pedicle System.
    We note that we did not receive any public comments on the ICD-10-
CM diagnosis codes we provided in the proposed rule to identify the 
Breakthrough Device-designated indication for purposes of the new 
technology add-on payment.
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comments we received, we believe the VADER[supreg] Pedicle System meets 
the cost criterion. The technology received 510(k) clearance from FDA 
on February 26, 2024 as a Breakthrough Device, with an indication for 
use to stabilize the thoracic and/or lumbar spinal column in patients 
who are or will be receiving concurrent medical treatment for an active 
spinal infection (for example, spondylodiscitis, osteomyelitis) that, 
without stabilization, could lead to deterioration of bony structures 
and misalignment with neurological compromise, which is covered by its 
Breakthrough Device designation. Therefore, we are finalizing our 
proposal to approve new technology add-on payments for the 
VADER[supreg] Pedicle System for FY 2025. We consider the beginning of 
the newness period to commence on February 26, 2024, the date on which 
technology received FDA marketing authorization for the indication 
covered by its Breakthrough Device designation.
    Based on the information available at the time of this final rule, 
the cost per case of the VADER[supreg] Pedicle System is $43,450 per 
patient. Under Sec.  412.88(a)(2), we limit new technology add-on 
payments to the lesser of 65 percent of the average cost of the 
technology, or 65 percent of the costs in excess of the MS-DRG payment 
for the case. As a result, we are finalizing that the maximum new 
technology add-on payment for a case involving the use of the 
VADER[supreg] Pedicle System is $28,242.50 for FY 2025 (that is, 65 
percent of the average cost of the technology). As noted earlier in 
this section, the VADER[supreg] Pedicle System has received FDA 510(k) 
clearance for multiple indications since 2019, and only the use of the 
VADER[supreg] Pedicle System to stabilize the thoracic and/or lumbar 
spine as an adjunct to fusion in patients with spinal infection, and 
the FDA Breakthrough Device designation it received for that use, are 
relevant for purposes of the new technology add-on payment application 
for FY 2025. Therefore, cases involving the use of the VADER[supreg] 
Pedicle System that are eligible for new technology add-on payments 
will be identified by any of the ICD-10-PCS procedure codes listed in 
the following table, in combination with any one of the ICD-10-CM 
diagnosis codes listed in a following table.
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[[Page 69235]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.145


[[Page 69236]]


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BILLING CODE 4120-01-C
k. ZEVTERATM (ceftobiprole medocaril)
    Basilea Pharmaceutica International Ltd, Allschwil submitted an 
application for new technology add-on payments for ZEVTERA\TM\ 
(ceftobiprole medocaril) for FY 2025. According to the applicant, 
ZEVTERA\TM\ is an advanced intravenous cephalosporin antibiotic 
designed to combat infections caused by antibiotic resistant pathogens. 
The applicant stated that ZEVTERATM targets a wide range of 
Gram-positive and Gram-negative bacteria, including methicillin-
resistant Staphylococcus aureus (MRSA), Streptococcus pneumoniae, 
including penicillin-non-susceptible pneumococci (PNSP) and 
Enterococcus faecalis, as well as non-Extended Spectrum Beta-Lactamase 
(non-ESBL) producing Enterobacterales. The applicant noted that 
ZEVTERA\TM\'s bactericidal activity is achieved by binding to essential 
penicillin-binding proteins, disrupting the synthesis of the bacterial 
cell wall's peptidoglycan layer and leading to bacterial cell death, 
which differentiates it from other beta-lactams by effectively 
addressing MRSA. Per the applicant, ZEVTERA\TM\ is stable against 
certain beta-lactamases in both gram-positive and gram-negative 
bacteria. The applicant stated that Phase 3 studies submitted to the 
FDA demonstrate its non-inferiority compared to standard treatments in 
various infections, including Staphylococcus aureus bacteremia (SAB), 
acute bacterial skin and skin structure infections (ABSSSI), and 
community-acquired bacterial pneumonia (CABP).
    Please refer to the online application posting for ZEVTERA\TM\, 
available at https://mearis.cms.gov/public/publications/ntap/NTP2310161DBB8, for additional detail describing the technology and the 
disease treated by the technology.
    According to the applicant, ZEVTERA\TM\ received QIDP designations 
for CABP on July 20, 2015, for ABSSI on August 7, 2015, and for SAB on 
December 8, 2017. According to the applicant, ZEVTERA\TM\ would be 
commercially available immediately after FDA approval. In the FY 2025 
IPPS/LTCH PPS proposed rule (89 FR 36134), we noted that, as an 
application submitted under the alternative pathway for certain 
antimicrobial products at Sec.  412.87(d), ZEVTERA\TM\ is eligible for 
conditional approval for new technology add-on payments if it does not 
receive FDA marketing authorization by July 1, 2024, provided that the 
technology receives FDA marketing authorization before July 1 of the 
fiscal year for which the applicant applied for new technology add-on 
payments (that is, July 1, 2025), as provided in Sec.  412.87(f)(3). 
The technology was granted NDA approval from FDA on April 3, 2024, with 
indications for the treatment of: adults with SAB, including those with 
right-sided infective endocarditis; adults with ABSSSI; and adult and 
pediatric patients three months to less than 18 years old with CABP. 
According to the applicant, for CABP and ABSSSI, ZEVTERA\TM\ is dosed 
at 500mg and administered three times daily (Q8h) as a 2-hour 
intravenous infusion for 5-14 days. For SAB, it is administered four 
times daily (Q6h) for the first 8 days, followed by Q8h daily infusion 
for the subsequent days, up to a total of 42 days.
    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for ZEVTERA\TM\ beginning in FY 2025 and was granted 
approval for the following procedure codes effective October 1, 2024: 
XW0335A (Introduction of ceftobiprole medocaril anti-infective into 
peripheral vein, percutaneous approach) and XW0435A (Introduction of 
ceftobiprole medocaril anti-infective into central vein, percutaneous 
approach, new technology group 10). The applicant provided a list of 
diagnosis codes that may be used to currently identify the indication 
for ZEVTERA\TM\ under the ICD-10-CM coding system, describing SAB, 
ABSSSI, and CABP. Please refer to the online application posting for 
the complete list of ICD-10-CM (and PCS) codes provided by the 
applicant. In the proposed rule (89 FR 36134), we stated our belief 
that the relevant combination of ICD-10-CM codes to identify the 
indication of SAB would be: R78.81 (Bacteremia) in combination with 
B95.61 (Methicillin susceptible Staphylococcus aureus infection as the 
cause of diseases classified elsewhere) or B95.62 (Methicillin 
resistant Staphylococcus aureus infection as the cause of diseases 
classified elsewhere). We invited public comments on the use of these 
ICD-10-CM diagnosis codes to identify the indication of SAB for 
purposes of the new technology add-on payment, if approved.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. For each 
analysis, the applicant searched the FY 2022 MedPAR file using 
different sets of ICD-10-CM codes in the first five diagnosis positions 
to identify potential cases representing different cohorts of patients 
who may be eligible for ZEVTERA\TM\. The applicant performed the same 
analysis on ABSSSI, CABP, and SAB cases individually and for all 
indications combined.
    For the first analysis, the applicant searched for claims with a 
diagnosis code for ABSSSI using the ICD-10-CM codes listed in the 
online posting for ZEVTERA\TM\. The applicant used the inclusion/
exclusion criteria described in the table that follows later in this 
section. Under this analysis, the applicant identified 261,397 claims 
mapping to 663 MS-DRGs and calculated a final inflated average case-
weighted standardized charge per case of $114,279, which exceeded the 
average case-weighted threshold amount of $63,767.
    For the second analysis, the applicant searched for claims with a 
diagnosis code for CABP using the ICD-10-CM codes listed in the online 
posting for ZEVTERA\TM\. The applicant used the inclusion/exclusion 
criteria described in the table that follows later in this section. 
Under this analysis, the applicant identified 635,628 claims mapping to 
611 MS-DRGs and calculated a final inflated average case-weighted 
standardized charge per case of $143,456, which exceeded the average 
case-weighted threshold amount of $78,778.
    For the third analysis, the applicant searched for claims with a 
diagnosis code for SAB using the ICD-10-CM codes listed in the online 
posting for ZEVTERA\TM\. The applicant used the inclusion/exclusion 
criteria described in the table that follows later in this section. 
Under this analysis, the applicant identified 105,068 claims mapping to 
626 MS-DRGs and calculated a final inflated average case-weighted 
standardized charge per case of $165,809, which exceeded the average 
case-weighted threshold amount of $82,238.
    For the fourth analysis, the applicant searched for claims with 
diagnosis codes for ABSSSI, CABP, or SAB in the first five positions on 
a claim, using the ICD-10-CM codes listed in the online

[[Page 69237]]

posting for ZEVTERA\TM\. The applicant used the inclusion/exclusion 
criteria described in the table that follows later in this section. 
Under this analysis, the applicant identified 958,104 claims mapping to 
680 MS-DRGs and calculated a final inflated average case-weighted 
standardized charge per case of $137,861, which exceeded the average 
case-weighted threshold amount of $75,097.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant asserted that ZEVTERA\TM\ meets the cost 
criterion.
---------------------------------------------------------------------------

    \182\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included on the online posting for the 
technology.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU24.147

BILLING CODE 4120-01-C
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36135), we agreed 
with the applicant that ZEVTERA\TM\ meets the cost criterion and 
therefore proposed to approve ZEVTERA\TM\ for new technology add-on 
payments for FY 2025, subject to the technology receiving FDA marketing 
authorization for the indication corresponding to the QIDP designation 
by July 1, 2024. We noted as an application submitted under the 
alternative pathway for certain antimicrobial products at Sec.  
[thinsp]412.87(d), ZEVTERA\TM\ is eligible for conditional approval for 
new technology add-on payments if it does not receive FDA marketing 
authorization by July 1, 2024, provided that the technology receives 
FDA marketing authorization before July 1 of the fiscal year for which 
the applicant applied for new technology add-on payments (that is, July 
1, 2025), as provided in Sec.  412.87(f)(3). We stated that if 
ZEVTERA\TM\ receives FDA marketing authorization before July 1, 2025, 
the new technology add-on payment for cases involving the use of this 
technology would be made effective for discharges beginning in the 
first quarter after FDA marketing authorization is granted. We noted if 
FDA marketing authorization is received on or after July 1, 2025, no 
new technology add-on payments would be made for cases involving the 
use of ZEVTERA\TM\ for FY 2025.
    Based on preliminary information from the applicant at the time of 
the proposed rule, the pricing for this treatment is set at $125 per 
vial, and the recommended dosage varies depending on the condition 
being treated. The applicant stated that for ABSSSI and CABP, the 
suggested daily dose is 3 vials per day for a duration of 5-14 days, 
resulting in an estimated average cost of $3,750 for a 10-day therapy. 
The applicant noted that for SAB, the recommended dose is every 6 hours 
for the first 8 days, followed by every 8 hours for up to 42 days. The 
applicant made the assumption that patients would be inpatient for 28 
days and then continue the therapy as an outpatient for up to 42 days, 
which resulted in an average inpatient cost of $11,500. We noted that 
the cost information for this technology may be updated in the final 
rule based on revised or additional

[[Page 69238]]

information CMS receives prior to the final rule. Under Sec.  
412.88(a)(2), we limit new technology add-on payments for technologies 
designated as QIDPs to the lesser of 75 percent of the average cost of 
the technology, or 75 percent of the costs in excess of the MS-DRG 
payment for the case. As a result, we proposed that the maximum new 
technology add-on payment for a case involving the use of ZEVTERA\TM\ 
for FY 2025 would be $8,625.00 for the indication of SAB and $2,812.50 
for the indications of ABSSSI and CABP (that is, 75 percent of the 
average cost of the technology).
    We invited public comments on whether ZEVTERA\TM\ meets the cost 
criterion and our proposal to approve new technology add-on payments 
for ZEVTERA\TM\ for FY 2025 for SAB, ABSSSI, and CABP, subject to the 
technology receiving FDA marketing authorization consistent with its 
QIDP designations by July 1, 2024.
    We did not receive any comments related to ZEVTERA\TM\.
    Based on the information provided in the application for new 
technology add-on payments, we believe ZEVTERA\TM\ meets the cost 
criterion. The technology received NDA approval from FDA on April 3, 
2024, with indications for the treatment of: adults with SAB, including 
those with right-sided infective endocarditis; adults with ABSSSI; and 
adult and pediatric patients three months to less than 18 years old 
with CABP. Therefore, we are finalizing our proposal to approve 
ZEVTERA\TM\ for new technology add-on payments for FY 2025. We consider 
the beginning of the newness period to commence on April 3, 2024, the 
date on which the technology received its FDA marketing authorization 
for the indications covered by its QIDP designations.
    Based on the information available at the time of this final rule, 
the average inpatient cost per case of ZEVTERA\TM\ is $11,500 for the 
indication of SAB and $3,750 for the indication of ABSSSI and CABP. 
Under Sec.  412.88(a)(2), we limit new technology add-on payments to 
the lesser of 75 percent of the average cost of the technology, or 75 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, we are finalizing that the maximum new technology add-on 
payment for a case involving the use of ZEVTERA\TM\ is $8,625.00 for 
the indication of SAB and $2,812.50 for the indications of ABSSSI and 
CABP for FY 2025 (that is, 75 percent of the average cost of the 
technology).
    Cases involving the use of ZEVTERA\TM\ for the indications of 
ABSSSI and CABP that are eligible for new technology add-on payments 
will be identified by the following ICD-10-PCS procedure codes: XW0335A 
(Introduction of ceftobiprole medocaril anti-infective into peripheral 
vein, percutaneous approach) or XW0435A (Introduction of ceftobiprole 
medocaril anti-infective into central vein, percutaneous approach).
    Cases involving the use of ZEVTERA\TM\ for the indication of SAB 
that are eligible for new technology add-on payments will be identified 
by the following ICD-10-PCS procedure codes: XW0435A (Introduction of 
ceftobiprole medocaril anti-infective into central vein, percutaneous 
approach) or XW0435A (Introduction of ceftobiprole medocaril anti-
infective into central vein, percutaneous approach), in combination 
with ICD-10-CM codes R78.81 (Bacteremia), in combination with B95.61 
(Methicillin susceptible Staphylococcus aureus infection as the cause 
of diseases classified elsewhere) or B95.62 (Methicillin resistant 
Staphylococcus aureus infection as the cause of diseases classified 
elsewhere).
7. Other Comments
    We received several public comments requesting changes to the new 
technology add-on payment policies such as creating new alternative 
pathway categories for different FDA designations or types of 
treatments, expanding the conditional approval process to additional 
types of technologies or designations, moving to a biannual process 
that would set two annual deadlines for manufacturers to apply for new 
technology add-on payment, and requiring Medicare Advantage (MA) to 
provide new technology add-on payment. These comments were outside the 
scope of the proposals included in the FY 2025 IPPS/LTCH PPS proposed 
rule and we are therefore not addressing them in this final rule.
8. Change to the Method for Determining Whether a Technology Would Be 
Within Its 2- to 3-Year Newness Period When Considering Eligibility for 
New Technology Add-On Payments
    As discussed previously in this rule, section 1886(d)(5)(K)(i) of 
the Act requires the Secretary to establish (after notice and 
opportunity for public comment) a mechanism to recognize the costs of 
new medical services and technologies under the IPPS. Section 
1886(d)(5)(K)(vi) of the Act specifies that a medical service or 
technology will be considered new if it meets criteria established by 
the Secretary after notice and opportunity for public comment. The 
regulations at 42 CFR 412.87 implement these provisions. As further 
discussed in FY 2005 IPPS final rule (69 FR 49002), the intent of 
section 1886(d)(5)(K) of the Act and regulations under Sec.  
412.87(b)(2) is to pay for new medical services and technologies for 
the first 2 to 3 years that a product comes on the market, during the 
period when the costs of the new technology are not yet fully reflected 
in the DRG weights. Generally, we use the FDA marketing authorization 
date as the indicator of the time when a technology begins to become 
available on the market and data reflecting the costs of the technology 
begin to become available for recalibration of the DRG weights. In 
specific circumstances, we have recognized a date later than the FDA 
marketing authorization date as the appropriate starting point for the 
2- to 3-year newness period. For example, we have recognized a later 
date where an applicant could prove a delay in actual availability of a 
product after FDA approval or clearance. The costs of the new medical 
service or technology, once paid for by Medicare for this 2- to 3-year 
period, are accounted for in the MedPAR data that are used to 
recalibrate the DRG weights on an annual basis. Therefore, we stated it 
is appropriate to limit the add-on payment window for technologies that 
have passed this 2- to 3-year timeframe.
    As discussed previously in this rule, our policy is that a medical 
service or technology may continue to be considered ``new'' for 
purposes of new technology add-on payments within 2 or 3 years after 
the point at which data begin to become available reflecting the 
inpatient hospital code assigned to the new service or technology. Our 
practice has been to begin and end new technology add-on payments on 
the basis of a fiscal year, and we have generally followed a guideline 
that uses a 6-month window before and after the start of the fiscal 
year to determine whether to extend the new technology add-on payment 
for an additional fiscal year. In general, we extend new technology 
add-on payments for an additional year only if the 3-year anniversary 
date of the product's entry onto the U.S. market occurs in the latter 
half of the fiscal year, that is, after April 1 (70 FR 47362).
    We have not implemented a policy to stop new technology add-on 
payment in the middle of the fiscal year (for example, during the month 
that a technology reaches its three-year anniversary date of entry onto 
the U.S. market) because, as we discussed in the FY 2005 IPPS final 
rule, we believe that predictability is an important aspect of the 
prospective payment system

[[Page 69239]]

methodology. Accordingly, we believe that it is appropriate to apply a 
consistent payment methodology for new technologies throughout the 
fiscal year (69 FR 49016).
    As previously discussed, in the FY 2024 IPPS/LTCH PPS final rule 
(88 FR 58948 through 58958), we finalized that beginning with the new 
technology add-on payment applications for FY 2025, for technologies 
that are not already FDA market authorized for the indication that is 
the subject of the new technology add-on payment application, 
applicants must have a complete and active FDA marketing authorization 
request at the time of new technology add-on payment application 
submission and must provide documentation of FDA acceptance or filing 
to CMS at the time of application submission, consistent with the type 
of FDA marketing authorization application the applicant has submitted 
to FDA. We also finalized that, beginning with FY 2025 applications, in 
order to be eligible for consideration for new technology add-on 
payment for the upcoming fiscal year, an applicant for new technology 
add-on payments must have received FDA approval or clearance by May 1 
(rather than July 1) of the year prior to the beginning of the fiscal 
year for which the application is being considered (except for an 
application that is submitted under the alternative pathway for certain 
antimicrobial products).
    As we summarized in the FY 2024 IPPS/LTCH PPS final rule, 
commenters raised concerns that this policy would adversely impact 
their ability to receive maximum flexibility with respect to when to 
apply to FDA and when they apply for new technology add-on payment (88 
FR 58953). Many commenters expressed specific concerns regarding moving 
the FDA marketing authorization deadline to May 1 and the impact it 
would have on how long technologies may be eligible for new technology 
add-on payment. Several of the commenters asserted that this policy 
change would prevent a 3-year new technology add-on payment duration 
for almost all applicants, as only those technologies that receive FDA 
marketing authorization in April would be eligible for 3 years of new 
technology add-on payments, shortening the window from 3 months under 
the former policy (April 1 until July 1) to just 1 month (April 1 until 
May 1) (88 FR 58954). In response, we noted in that even under the 
former policy, not all applicants receive the full 3 years of new 
technology add on payments, and that there are many factors (including 
timing of interactions with the FDA and manufacturing readiness) that 
can delay a technology's approval by the FDA that would disrupt a 
technology's ability to receive the full 3 years of payment. However, 
we also noted the commenters' concerns regarding the shortened time 
period between April 1 and May 1 under the new policy and stated that 
we would consider for future rulemaking how we assess new technology 
add-on payment eligibility in the third year of newness, such as 
consideration of adjusting the April 1 cutoff to allow for a longer 
window of eligibility (88 FR 58955).
    In the proposed rule (89 FR 36136 through 36137), after further 
consideration of commenters' concerns that the policy we finalized in 
the FY 2024 IPPS/LTCH PPS final rule may limit the ability of new 
technology add-on payment applicants to be eligible for a third year of 
new technology add-on payments due to the shortened timeframe between 
April 1 and May 1, we stated that we agreed that there may be merit to 
modifying our current 6-month guideline to provide additional 
flexibility for applications submitted in accordance with this new 
policy. While technologies that are FDA approved or cleared in April, 
and technologies with a documented delay in availability on the U.S. 
market such that the product's entry onto the U.S. market falls within 
the second half of the fiscal year, would still be eligible for a third 
year of new technology add-on payments under current policy, we agreed 
that the change in the FDA marketing authorization deadline from July 1 
to May 1 may limit the ability of new technology add-on payment 
applicants to be eligible for 3 years of new technology add-on 
payments. Therefore, we proposed to change the April 1 cutoff for 
determining whether a technology would be within its 2- to 3-year 
newness period when considering eligibility for new technology add-on 
payments. We stated that we believed this proposed change would 
continue the flexibility applicants had with respect to when they apply 
to FDA and when they apply for new technology add-on payment, while 
preserving a predictable and consistent payment methodology for new 
technologies throughout the fiscal year.
    Specifically, we proposed that beginning with new technology add-on 
payments for FY 2026, in assessing whether to continue the new 
technology add-on payments for those technologies that are first 
approved for new technology add-on payments in FY 2025 or a subsequent 
year, we would extend new technology add-on payments for an additional 
fiscal year when the 3-year anniversary date of the product's entry 
onto the U.S. market occurs on or after October 1 of that fiscal year. 
We proposed that this policy change would become effective beginning 
with those technologies that are initially approved for new technology 
add-on payments in FY 2025 or a subsequent year to allow additional 
flexibility for those applications for new technologies which were 
first subject to the change in the deadline for FDA marketing 
authorization from July 1 to May 1. Therefore, for technologies that 
were first approved for new technology add-on payments prior to FY 
2025, including for technologies we determine to be substantially 
similar to those technologies, we stated we would continue to use the 
midpoint of the upcoming fiscal year (April 1) when determining whether 
a technology would still be considered ``new'' for purposes of new 
technology add-on payments. Similarly, we also proposed that beginning 
with applications for new technology add-on payments for FY 2026, we 
would use the start of the fiscal year (October 1) instead of April 1 
to determine whether to approve new technology add-on payment for that 
fiscal year.
    We sought public comment on our proposal to change the April 1 
cutoff to October 1 for determining whether a technology would be 
within its 2- to 3-year newness period when considering eligibility for 
new technology add-on payments, beginning in FY 2026, effective for 
those technologies that are approved for new technology add-on payments 
starting in FY 2025 or a subsequent year.
    Comment: Commenters were supportive of our proposal to use the 
start of the fiscal year, October 1, instead of April 1, to determine 
whether a product is within its 2-to-3-year newness period for new 
technology add-on payment, and requested that CMS finalize this 
proposal. Commenters stated that they appreciated CMS's acknowledgement 
that the FY 2024 policy change in the FDA marketing authorization 
deadline may limit the ability of new technology add-on payment 
applicants to be eligible for 3 years of new technology add-on 
payments, and stated that the proposal would improve the flexibility 
for applicants with respect to FDA timing. Commenters stated that this 
proposal provided a more balanced and appropriate evaluation of whether 
a technology qualifies for a 2-year or 3-year period of new technology 
add-on payment. Another commenter agreed that predictability is an 
important aspect of the prospective payment system methodology and 
appreciated

[[Page 69240]]

CMS's application of consistent payment methodology for new 
technologies throughout the fiscal year.
    Commenters stated that the policy would allow more innovative 
technologies to receive new technology add-on payment for a third year. 
Commenters further stated that this would help to incentivize new 
treatment options and ensure continued access to breakthrough and life-
saving technologies for Medicare beneficiaries and their providers 
during the first years of product availability and with substantially 
reduced payment disincentives inherent in how IPPS payment rates are 
established. Commenters stated this would help more hospitals offer 
these technologies, which would improve the claims data for MS-DRG 
assignments and ensure appropriate MS-DRG recalibration following the 
new technology add-on payment period. Commenters were also supportive 
of the increased time for cost data collection, stating that it would 
be particularly helpful in accruing data for low-volume technologies 
and/or those with a significant delay between their newness date and 
the timeframe when claims began accumulating in the data.
    Response: We thank commenters for their support of our proposal, 
and agree that this proposal would provide additional flexibility for 
new technology add-on payment applications submitted in accordance with 
the change in the FDA marketing authorization deadline.
    Comment: Commenters also requested that CMS provide additional 
flexibility to guarantee a third year of new technology add-on payment 
for all technologies regardless of when they receive FDA marketing 
authorization. A commenter further stated that this would maximize 
patient access to future CAR T-cell therapies and other important 
technologies advancing personalized medicine. Other commenters 
requested that CMS guarantee a third year of new technology add-on 
payment for specific technologies, such as CAR-T cell therapies or cell 
and gene therapies. A commenter further explained that new cell and 
gene therapies technologies might take several months to gain market 
availability, post-FDA approval. The commenter stated that personalized 
medical technologies like cell and gene therapies are uniquely 
developed for each patient and, therefore, often have a delay in actual 
availability of a product after FDA approval or clearance, due to the 
time needed for development and administration. The commenter stated 
that ensuring a third year of add-on payment for using cell and gene 
therapies would accommodate the time required for patient-specific 
development while advancing patient access to innovative technologies. 
A commenter also requested that CMS create a five-year add-on payment 
period for autologous gene and cell therapy products that qualify for 
new technology add-on payment.
    Some commenters stated that this proposed policy would leave CMS 
with unreliable claims data for rate-setting at the expiration of new 
technology add-on payment because CMS uses MedPAR data from two years 
prior to the applicable fiscal year for ratesetting, and for services 
that use new technology with only 2 years of new technology add-on 
payment status, CMS is effectively relying on the first year of data to 
set rates for the first fiscal year following the end of new technology 
add-on payment status. Commenters stated that the first year of new 
technology add-on payment is typically when a technology is first 
coming to market and there are typically fewer claims reflecting use of 
the technology, especially for technologies that may not have received 
new technology add-on payment until a year or more after their FDA 
approval date, resulting in a small number of claims that may not be 
stable or reliable. Commenters stated that by granting all new 
technologies 3 years of new technology add-on payment status, CMS can 
ensure sufficient reliable claims data for ratesetting at the end of 
new technology add-on payment status, and that the applicable statute 
and regulations discuss newness in relation to the availability of 
claims data.
    Some commenters believed that this and other proposals did not 
adequately address what they described as the consistent and severe 
underfunding of gene therapies and breakthrough drugs. A commenter 
stated that although this change would enable more products to qualify 
for add-on payments during the third year, it did not guarantee that 
these products would benefit from a full three years of new technology 
add-on payment. The commenter stated that the proposal narrowly 
addresses the issue of timing but fails to expand the overall 
eligibility window in a meaningful way that would support a greater 
number of innovative products.
    A few commenters further stated that the proposal did not actually 
help the technologies impacted by the July 1 to May 1 FDA marketing 
authorization deadline change, as the only products for which this 
proposal would allow for an additional third year of new technology 
add-on payment are those products approved between October 1 and March 
31. The commenters stated that products approved April 1 to May 1 were 
not affected by the change in the FDA approval deadline and would not 
be impacted by this proposal. The commenters stated that products 
approved May 2 to July 1 lost a third year of new technology add-on 
payment status when the July 1 to May 1 rule was finalized and would 
not gain back the third year of new technology add-on payment status 
under CMS's proposal because their FDA approval date occurs before 
October 1 of what would be the third fiscal year. The commenters also 
stated that products approved July 1 to October 1 would continue to 
remain ineligible for the third year of new technology add-on payment. 
Therefore, commenters stated that granting all new technologies three 
years of payment would rectify the problem for technologies approved 
between May 1 and July 1.
    Some commenters also stated that the statute did not mention the 
FDA approval date, nor was there a statutory preclusion from granting 
all products a third year of payment. Another commenter asserted that 
CMS could statutorily grant three full years of new technology add-on 
payment status to new technologies based on the effective date of the 
ICD-10-PCS code that describes the service/technology, which could be 
set at October 1, the date that new technology add-on payment status 
begins, and that this approach was in line with how CMS makes 
passthrough payment under the OPPS. The commenter explained that FDA 
approvals can arbitrarily occur in the second half of the fiscal year, 
rather than in the first half of the following fiscal year, and that it 
is challenging to time FDA application submissions to try to get 
approval in the first half of the fiscal year, and that new therapeutic 
products approved between April 2 and September 30 face potentially 
slow uptake given the up to 17 months before new technology add-on 
payment adjustments would be effective.
    Response: We thank commenters for their feedback. However, we do 
not agree that we should guarantee a third year of new technology add-
on payment for all technologies regardless of when they receive FDA 
marketing authorization. The intent of our policy was not to ensure 
that more technologies would receive three years of new technology add-
on payments, but rather to address how the change in the FDA marketing 
authorization deadline, effective beginning with new technology add-on 
payment applications for FY 2025, may limit the ability of new 
technology add-on payment applicants to be eligible for a third year of 
new technology add-on

[[Page 69241]]

payments under our general practice for determining whether to extend 
the payment for an additional fiscal year, as described previously in 
this rule. We recognize that there may be a small subset of 
technologies that would not benefit from this proposal.
    As we stated in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58955), 
section 1886(d)(5)(K)(ii) of the Act establishes a period of not less 
than 2 years and not more than 3 years for the collection of data with 
respect to the costs of new services or technologies; a full 3 years is 
not required. As we had stated, consistent with the statute and our 
implementing regulations, a technology is no longer considered ``new'' 
once it is more than 2 to 3 years old, irrespective of how frequently 
the medical service or technology has been used in the Medicare 
population (70 FR 47349). As such, once a technology has been available 
on the U.S. market for more than 2 to 3 years, we consider the costs to 
be included in the MS-DRG relative weights regardless of whether the 
technology's use in the Medicare population has been frequent or 
infrequent. Therefore, we do not believe that 2 years' worth of data 
would be insufficient to inform rate-setting for the inpatient setting.
    We also disagree that this proposed policy would leave CMS with 
unreliable claims data for ratesetting for technologies that would be 
on the market for a year or more before they could begin receiving new 
technology add-on payment and receive payment for at most two years 
based on their FDA marketing authorization dates. As described in the 
FY 2005 IPPS final rule (69 FR 49003), even if a technology does not 
receive new technology add-on payments, CMS continues to pay for new 
technologies through the regular payment mechanism established by the 
DRG payment methodology. In addition, the costs incurred by the 
hospital for a case are evaluated to determine whether the hospital is 
eligible for an additional payment as an outlier case. This additional 
payment is designed to protect the hospital from large financial losses 
due to unusually expensive cases. Any eligible outlier payment is added 
to the DRG-adjusted base payment rate (88 FR 58648). We further note 
that whether a technology receives new technology add-on payments or 
not does not affect coverage of the technology or the ability for 
hospitals to provide a technology to patients where appropriate. 
Therefore, data reflecting the costs of a new technology begin to 
become available for recalibration of the DRG weights starting from 
when the technology became available on the U.S. market. As we 
previously stated, the newness period does not necessarily start with 
the approval date for the medical service or technology and does not 
necessarily start with the issuance of a distinct code. Instead, it 
begins with availability of the product on the market, which is when 
data become available (69 FR 49003).
    Comment: Some commenters also requested that CMS make the proposal 
effective immediately. Commenters recommended that CMS apply the 
proposal to other technologies that are currently receiving new 
technology add-on payment, such as to those for which the new 
technology add-on payment is set to expire in FY 2024, to those that 
first received new technology add-on payment for FY 2024, and to new 
technology add-on payment applications for FY 2025 that are determined 
to be substantially similar to technologies first approved for new 
technology add-on payments prior to FY 2025. A commenter stated that 
applying the proposal to technologies that are currently receiving new 
technology add-on payment that would qualify for a third year under the 
change would apply to only three technologies that CMS proposed to 
discontinue in FY 2025, and stated this would better serve Medicare 
beneficiaries, improve the quality of data, and capture more mature 
usage patterns for LIVTENCITYTM and other affected products 
to ensure more robust claims data for ratesetting.
    Another commenter further stated that CMS should finalize this 
proposal such that technologies that received a second year of new 
technology add-on payment status in FY 2024, receive a third year of 
new technology add-on payment status in FY 2025; technologies that 
received their first year of new technology add-on payment status in FY 
2024 would receive new technology add-on payment through FY 2026; and 
technologies first approved for new technology add-on payment in FY 
2025 and future years are automatically eligible for three full years 
of new technology add-on payment. The commenter suggested that if CMS 
were to move forward with its current proposal, it should be effective 
for applicants that first receive new technology add-on payment 
starting in FY 2024, rather than FY 2025, as otherwise CMS would be 
relying on the FY 2024 claims data for rate-setting in FY 2026, and 
there may be a low number of claims with significant variability in 
reported charges resulting in less reliable ratesetting.
    Response: We thank the commenters for their comments. As we 
previously noted, the intent of our proposal was not to ensure that 
more technologies would receive three years of new technology add-on 
payments. We had stated that, after further consideration of 
commenters' concerns that the policy we finalized in the FY 2024 IPPS/
LTCH PPS final rule may limit the ability of new technology add-on 
payment applicants to be eligible for a third year of new technology 
add-on payments due to the shortened timeframe between April 1 and May 
1, we agreed that there may be merit to modifying our current 6-month 
guideline to provide additional flexibility for applications submitted 
in accordance with this new policy (89 FR 36136). Applications 
submitted for new technology add-on payment prior to FY 2025 were not 
subject to the change in the deadline for FDA marketing authorization 
from July 1 to May 1 as finalized in the FY 2024 IPPS/LTCH PPS final 
rule. Similarly, for technologies that we determine to be substantially 
similar to technologies first approved for new technology add-on 
payments prior to FY 2025, under our longstanding policy, if 
substantially similar technologies are submitted for review in 
different (and subsequent) years, we evaluate and make a determination 
on the first application and apply that same determination to the 
second application (85 FR 58679), and we use the earliest market 
availability date submitted as the beginning of the newness period for 
both technologies (87 FR 48925). Therefore, we disagree with commenters 
that this proposal should be effective immediately or applied to other 
technologies outside of our proposal.
    Comment: Commenters offered additional suggestions as to how CMS 
could establish the newness period. A commenter stated that the period 
of ``newness'' for a technology or medical service to receive add-on 
payments is based generally on the date of FDA approval/clearance, 
which is not necessarily the date of commercial availability. 
Commenters suggested that CMS consider the date of assignment of a new 
ICD-10 code when determining a technology's date of commercial 
availability, with a commenter stating that it would be consistent with 
CMS's stated policy that a technology may continue to be considered 
``new'' for new technology add-on payment purposes ``within 2 or 3 
years after the point at which data begin to become available 
reflecting the inpatient hospital code assigned to the new service or 
technology.'' A commenter believed there was merit in considering the 
newness period to start on the date

[[Page 69242]]

of first sale or upon issuance of an ICD-10-PCS code, as otherwise, a 
technology may not be commercially available or without an ICD-10-PCS 
code that allows the collection of accurate cost data as the new 
technology is not identifiable in any claims data. A commenter also 
requested that CMS start the newness period at the date of first 
administration of the technology for autologous gene and cell therapy 
products that qualify for new technology add-on payment.
    Response: As we have stated in prior rulemaking, the newness period 
does not necessarily start with the approval date for the medical 
service or technology and does not necessarily start with the issuance 
of a distinct code. Instead, it begins with availability of the product 
on the market, which is when data become available. We have 
consistently applied this standard, and believe that it is most 
consistent with the purpose of new technology add-on payments (69 FR 
49003).
    We have also stated that for technologies that do not have a unique 
ICD-10 code, while it may be impossible to identify when a particular 
product was used because there is no unique code to identify it amongst 
other products in the category, the product is nonetheless used and 
paid for. In addition, hospital charges reflect the services provided 
to patients receiving the new service or device whether or not a 
specific code is assigned. Therefore, data containing payments for 
these new technologies are already in our MedPAR database and when DRG 
recalibration occurs these costs are accounted for. Furthermore, 
assignment of new codes can occur for many reasons other than the 
introduction of new procedures and technologies. For example, new codes 
can simply reflect more refined and discriminating descriptions of 
existing procedures and technologies (69 FR 49003).
    We also disagree that the newness period should start on the date 
of the first sale or at the first administration of a technology. As we 
previously noted, while CMS may consider a documented delay in a 
technology's availability on the U.S. market in determining when the 
newness period begins, under our historical policy, we do not consider 
how frequently the medical service or technology has been used in our 
determination of newness (70 FR 47349). Consistent with the statute, a 
technology no longer qualifies as new once it is more than 2 to 3 years 
old irrespective of how frequently it has been used in the Medicare 
population.
    Therefore, after consideration of the comments received, and for 
the reasons discussed previously and in the FY 2025 IPPS/LTCH PPS 
proposed rule, we are finalizing our proposal that, beginning with new 
technology add-on payments for FY 2026, in assessing whether to 
continue the new technology add-on payments for those technologies that 
are first approved for new technology add-on payments in FY 2025 or a 
subsequent year, we will extend new technology add-on payments for an 
additional fiscal year when the 3-year anniversary date of the 
product's entry onto the U.S. market occurs on or after October 1 of 
that fiscal year. This policy change will become effective beginning 
with those technologies that are initially approved for new technology 
add-on payments in FY 2025 or a subsequent year. For technologies that 
were first approved for new technology add-on payments prior to FY 
2025, including for technologies we determine to be substantially 
similar to those technologies, we will continue to use the midpoint of 
the upcoming fiscal year (April 1) when determining whether a 
technology would still be considered ``new'' for purposes of new 
technology add-on payments. Similarly, we are also finalizing that 
beginning with applications for new technology add-on payments for FY 
2026, we will use the start of the fiscal year (October 1) instead of 
April 1 to determine whether to approve new technology add-on payment 
for that fiscal year.
9. Change to the Requirements Defining an Active FDA Marketing 
Application for the Purpose of New Technology Add-On Payment 
Application Eligibility
    As previously discussed, in the FY 2024 IPPS/LTCH PPS final rule 
(88 FR 58948 through 58958), we finalized that beginning with the new 
technology add-on payment applications for FY 2025, for technologies 
that are not already FDA market authorized for the indication that is 
the subject of the new technology add-on payment application, 
applicants must have a complete and active FDA market authorization 
request at the time of new technology add-on payment application 
submission, and must provide documentation of FDA acceptance or filing 
to CMS at the time of application submission, consistent with the type 
of FDA marketing authorization application the applicant has submitted 
to FDA. See Sec.  412.87(e) and further discussion in the FY 2024 IPPS/
LTCH PPS final rule (88 FR 58948 through 58958).
    As we discussed further in the FY 2024 IPPS/LTCH PPS final rule, 
the documentation of FDA acceptance or filing of a marketing 
authorization request must be provided at the time of new technology 
add-on payment application, and be consistent with the type of FDA 
marketing authorization the applicant has submitted to FDA. We stated 
that we only accept new technology add-on payment applications once FDA 
has received all of the information necessary to determine whether it 
will accept (such as in the case of a 510(k) premarket submission or De 
Novo Classification request) or file (such as in the case of a PMA, 
NDA, or BLA) the application as demonstrated by documentation of the 
acceptance/filing that is provided by FDA. The applicant is required to 
submit documentation with its new technology add-on payment application 
to demonstrate that FDA has determined that the application is 
sufficiently complete to allow for substantive review by the FDA (88 FR 
58955).
    We also explained that, for the purposes of new technology add-on 
payment applications, we consider an FDA marketing authorization 
application to be in an active status when it has not been withdrawn, 
is not the subject of a Complete Response Letter or final decision from 
FDA to refuse to approve the application, and is not on hold (88 FR 
58955 through 58956).
    We stated in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36137) 
that, as noted in the FY 2024 IPPS/LTCH PPS final rule, we collaborated 
with FDA in developing the terminology used for purposes of this 
policy, and the intent behind using the terms we did was to ensure that 
the requirement could apply to and be inclusive of the various FDA 
applications and approval pathways for different types of drugs and 
devices. We stated in the proposed rule that, as such, we did not use 
terms defined in statute or existing regulations or terms defined by 
FDA (88 FR 58955). We stated that while FDA may consider an application 
for an FDA marketing authorization to be under active review despite a 
hold status, under our current policy we do not consider marketing 
authorization applications in a hold with FDA to be in an active status 
for the purposes of new technology add-on payment application 
eligibility. As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 
FR 58956) our intent with respect to considering applications that are 
on hold at the time of new technology add-on payment application 
submission to be inactive was to ensure that applicants are far enough 
along in the FDA review process that applicants would be able to 
reasonably provide sufficient information at the time of new technology 
add-on payment application submission for CMS to identify critical

[[Page 69243]]

questions regarding the technology's eligibility for add-on payments 
and to allow the public to assess the relevant new technology 
evaluation criteria in the proposed rule. We stated that, as noted in 
the FY 2024 IPPS/LTCH PPS final rule (88 FR 58956), we have received 
applications over the years for technologies that are in a hold status 
with up to 360 days allowed for submission of additional information.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36137 through 
36138), we stated that we also recognized that applications for FDA 
marketing authorization may go in and out of a hold status at various 
stages during the FDA application process and for various reasons. The 
maximum length of a hold status can vary based on the FDA approval 
pathway, such that the time remaining for an applicant to resolve the 
hold may vary from days to several months after the start of the new 
technology add-on payment application cycle, depending on the FDA 
pathway, reason(s) for the hold status, and how the timing of the hold 
coincides with the annual new technology add-on payment application 
submission date. Additionally, FDA may need to issue secondary letters 
of request for additional information, often depending on the quality 
of initial response from the applicant. Accordingly, we stated that 
while we continued to believe that an application that is in a hold 
status with FDA pending additional information may lack critical 
information that is needed to evaluate whether the technology meets the 
eligibility criteria, we also recognized the variability in the reasons 
for a hold and the varying lengths of time for which an application can 
be on hold with FDA, such that some applicants may be farther along in 
the process to obtain FDA marketing authorization at the time of the 
hold.
    Further, we stated that after further consideration, based on the 
variability in the timing of and reasons underlying hold statuses with 
FDA, we believed it was appropriate to propose to update our policy. 
Specifically, we proposed, beginning with new technology add-on payment 
applications for FY 2026, to no longer consider a hold status to be an 
inactive status for the purposes of eligibility for the new technology 
add-on payment. We stated we would continue to consider an application 
to be in an inactive status where it is withdrawn, the subject of a 
Complete Response Letter, or the subject of a final decision from FDA 
to refuse to approve the application. Because of the variety of 
circumstances for which a technology may be in a hold, as previously 
discussed, we noted that we may reassess this policy for future years, 
if finalized, based on ongoing experience.
    We invited public comments on our proposal to no longer consider a 
hold status to be an inactive status for the purposes of eligibility 
for new technology add-on payment, beginning with new technology add-on 
payment applications for FY 2026.
    Comment: Commenters overwhelmingly supported CMS's proposal to no 
longer consider a hold to be an inactive status for the purposes of new 
technology add-on payment eligibility. Commenters stated that the FDA 
application review process is dynamic and that applications may go in 
and out of a hold at various stages during the FDA application process 
and for various reasons including administrative reasons that might not 
necessarily be due to lack of critical information in the FDA 
application, such as user fee holds, incorrect eCopy, outdated 
submission templates, or omission of an administrative element, and 
that these holds may be resolved within days or months after the start 
of the new technology add-on payment application cycle. Commenters 
further stated that being on hold does not materially affect the 
ability for the technology to receive FDA authorization by the May 1 
new technology add-on payment deadline as some applicants may be 
farther along in the process to obtain FDA marketing authorization at 
the time of the hold. Commenters also stated that they believe that 
this proposed change would enhance the predictability of the new 
technology add-on payment process and ensure that new technology add-on 
payment applications are not inadvertently pushed back to a later new 
technology add-on payment application cycle, even though FDA may have 
continued reviewing the product's marketing application, despite a hold 
at the time the product's new technology add-on payment application is 
submitted to CMS. Commenters concluded that finalizing this proposal 
would remove a significant barrier for applications that may be placed 
on a brief hold status and would be rendered ineligible for new 
technology add-on payments for a full year.
    Response: We thank commenters for their support of our proposal to 
no longer consider a hold with FDA to be an inactive status for the 
purposes of eligibility for new technology add-on payment, beginning 
with new technology add-on payment applications for FY 2026.
    Comment: Many commenters also requested that CMS reverse other 
aspects of the policy finalized in the FY 2024 IPPS/LTCH PPS final rule 
including the requirement for a complete and active FDA marketing 
authorization application request at the time of new technology add-on 
payment application, the FDA documentation requirement, and moving the 
FDA marketing deadline from May 1 back to July 1. The commenters stated 
that these requirements are already disqualifying applicants and 
therefore delaying beneficiary access to innovative technologies in 
contradiction of the new technology add-on payment program goals. The 
commenters further stated that reversing the policy completely would 
give new technology add-on payment applicants the most flexibility. A 
few commenters specified that it is especially critical that CMS 
reverse the FDA market authorization requirement for particular 
application types such as Breakthrough Devices or those undergoing 
rolling review or real-time oncology review (RTOR) to prevent financial 
barriers to adoption of these new technologies and other access delays, 
and because these applications could become complete shortly after the 
application deadline. Some commenters further stated that applications 
with rolling review or RTOR are reserved for therapies with 
Breakthrough Therapy or Fast Track designations, or for therapies 
likely to demonstrate substantial clinical improvement and CMS should 
therefore reverse its policy for these therapies. A commenter also 
stated concerns specifically with the exact type of FDA documentation 
required at the time of new technology add-on payment submission 
because they said it has limited forecasting of final FDA approval by 
May 1 for the new technology add-on payment applicant, and recommended 
CMS rescind the FDA documentation requirement.
    Several commenters suggested that CMS should instead provide an 
alternate deadline to provide the necessary information regarding FDA 
marketing authorization, such as within 60 days after application 
submission, the December supplemental information deadline, or no 
earlier than March 1, and that CMS should make these changes via notice 
and comment rulemaking.
    Several commenters made additional requests from CMS, if CMS were 
to decide not to reverse the policy. A commenter requested that CMS 
provide an analysis of the impact of the FDA submission/authorization 
requirements on new technology add-on payment application volume, CMS 
workload, and the average time between marketing authorization and new 
technology add-

[[Page 69244]]

on payment availability for medical devices.
    Response: We thank the commenters for sharing their concerns, as 
well as their suggestions and recommendations. CMS shares the goal of 
ensuring Medicare beneficiaries and their providers have access to new 
technologies. However, as described in the FY 2005 IPPS final rule (69 
FR 49003 and 49009), patient access to these technologies should not be 
adversely affected if a technology does not qualify to receive new 
technology add-on payments, as CMS continues to pay for new 
technologies through the regular payment mechanism established by the 
MS-DRG methodology. In addition, the costs incurred by the hospital for 
a case are evaluated to determine whether the hospital is eligible for 
an additional payment as an outlier case. This additional payment is 
designed to protect the hospital from large financial losses due to 
unusually expensive cases. Any eligible outlier payment is added to the 
DRG-adjusted base payment rate (88 FR 58648). As noted in an earlier 
section, whether a technology receives new technology add-on payments 
or not does not affect coverage of the technology or the ability for 
hospitals to provide a technology to patients where appropriate. As 
stated in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58953), the new 
technology add-on payment application eligibility requirements related 
to FDA application status did not eliminate flexibilities built into 
the new technology add-on payment process, as FDA marketing 
authorization is not required at the time of application, and eligible 
applicants can continue to provide some information as it becomes 
available according to our standard processes (such as the December 
supplemental deadline and the public comment period). Although we 
continue to believe in providing maximum flexibility to applicants 
where feasible, the policy was put in place due to the increasing 
complexity and volume of applications lacking critical information that 
is needed to evaluate whether the technology meets the eligibility 
criteria at Sec.  412.87(b), (c), or (d). As discussed in the FY 2024 
IPPS/LTCH PPS final rule (88 FR 58949), in prior years, a significant 
number of applicants had submitted new technology add-on payment 
applications that resulted in information not being available for the 
proposed rule and during the comment period. Specifically, many 
applicants submitted new technology add-on payment applications prior 
to submitting a request to FDA for the necessary marketing 
authorization, and applicants have stated that information missing from 
their applications, which is needed to evaluate the technology for the 
add-on payment, will not become available until after submission to 
FDA. With regard to the alternative pathways, such applications may 
also be missing information that would help inform understanding of the 
details and interrelationship between the intended indication and FDA 
Breakthrough Device or QIDP designation, which is the basis for a 
product's eligibility for the alternative pathway. Ultimately, it is 
difficult for CMS to review and for interested parties to comment on a 
product that has not yet been submitted to FDA and for which FDA has 
not determined that the marketing authorization request is sufficiently 
complete to allow for substantive review by FDA (regardless of FDA 
Breakthrough Device designation, Breakthrough Therapy designation, Fast 
Track designation, or RTOR participation), as multiple sections of the 
new technology add-on payment applications lack preliminary information 
that is more likely to be available after an FDA submission. Public 
input is an important part of our assessment of whether a technology 
meets the new technology add-on payment criteria, particularly as 
technology becomes more complex and specialized. Thus, we believe that 
requiring applicants to have already submitted a marketing 
authorization request to FDA that FDA has determined is sufficiently 
complete to allow for substantive review by FDA at the time of 
submission of the new technology add-on payment application further 
increases transparency and improves the evaluation process, including 
the identification of critical questions in the proposed rule, 
particularly as the number and complexity of the applications have been 
increasing over time. We will therefore continue to require 
documentation of FDA acceptance (for a 510(k) premarket submission or 
De Novo Classification request) or FDA filing (for a PMA, NDA, or BLA) 
at the time of new technology add-on payment application submission, 
consistent with the type of FDA marketing authorization application the 
applicant has submitted to FDA. We still believe this approach provides 
the clearest and most effective means of documenting that the applicant 
has submitted a complete request to FDA (88 FR 58950). We continue to 
believe these policies facilitate a more transparent process that will 
improve public engagement and help improve and streamline our review 
processes. Many of these products are novel and complex, and CMS has a 
responsibility to appropriately and thoroughly review applications for 
eligibility for new technology add-on payments against our established 
eligibility criteria. As noted in the FY 2024 IPPS/LTCH PPS final rule 
(88 FR 58958), CMS will require documentation demonstrating that FDA 
has determined that the marketing authorization request is sufficiently 
complete to allow for substantive review by FDA (e.g., documentation of 
FDA acceptance or FDA filing, depending on the type of FDA marketing 
authorization application the applicant has submitted to FDA) at the 
time of submission of the new technology add-on payment application. We 
have not accepted and will not accept documentation in which the date 
that FDA made the determination to accept (for a 510(k) premarket 
submission or De Novo Classification request) or file (for a PMA, NDA, 
or BLA) the request occurred after new technology add-on payment 
application submission; such documentation could not have been provided 
at the time of new technology add-on payment application submission and 
therefore does not meet the requirement. Further, we note that while 
documentation of FDA acceptance/filing may also include the date of 
submission of the FDA marketing authorization request, for new 
technology add-on payment purposes this is not the date on which FDA 
determined the request is sufficiently complete for substantive review, 
and therefore, this does not meet the new technology add-on payment 
application FDA status requirement at Sec.  412.87(e)(2). For these 
reasons, we are not reversing other aspects of the policy finalized in 
the FY 2024 IPPS/LTCH PPS final rule.
    Comment: A few commenters expressed concern about applications for 
technologies that were determined to be ineligible for consideration 
for new technology add-on payments for FY 2025 at the time of 
application for new technology add-on payments. The commenters were 
concerned about the impact that the ineligibility determination would 
have on Medicare beneficiaries' access to these innovative technologies 
in the upcoming year, as well as the financial viability of these 
technologies. Some of the commenters suggested that CMS provide 
mitigating intervention for technologies that were found ineligible for 
new technology add-on payment consideration in FY 2025, such as 
reversing the ineligibility

[[Page 69245]]

and making an interim decision determination subject to public comment 
regarding overall qualification in this final rule using the ``good 
cause'' exception as provided in the APA; \183\ extended eligibility to 
three years of new technology add-on payments; or extension of an 
additional year of new technology add-on payments following review in 
FY 2026.
---------------------------------------------------------------------------

    \183\ Section 5 U.S.C. 553(b).
---------------------------------------------------------------------------

    Response: We thank the commenters for their comments and 
recommendations. We note that, as described previously, patient access 
to these technologies should not be adversely affected if a technology 
does not qualify to receive new technology add-on payments, as CMS 
continues to pay for new technologies through the regular payment 
mechanism established by the MS-DRG methodology. In addition, and as 
previously noted, a hospital may be eligible for additional payment for 
outlier cases. As also previously noted, whether a technology is 
approved for new technology add-on payments does not affect coverage of 
the technology or the ability for hospitals to provide a technology to 
patients where appropriate. We evaluated all applications for FY 2025 
that were submitted by the new technology add-on payment deadline under 
the applicable eligibility requirements, and we will continue to do so 
for applications that are submitted or resubmitted for FY 2026. We 
further note that submission of a new technology add-on payment 
application does not guarantee that a technology will be approved for a 
new technology add-on payment.
    Comment: A commenter stated that while this flexibility is an 
improvement, it applies mainly to devices and does not fully address 
challenges with CMS's new requirements for a ``complete and active'' 
FDA market authorization request. The commenter encouraged CMS to 
further clarify this language to ensure the gamut of personalized 
medicine treatments and technologies remain eligible for new technology 
add-on payments and reach patients who need them, without creating 
further delays in the availability of new technology add-on payment 
status.
    Response: We thank the commenter for their comment. As discussed 
previously, the intent behind using the terminology we did was to 
ensure that the requirement could apply to and be inclusive of the 
various FDA applications and approval pathways for different types of 
drugs and devices. We disagree with the commenter's assessment that 
this flexibility applies mainly to devices. We note that our current 
hold policy applies to all technologies, irrespective of category 
(drugs, devices) or pathway (alternative, traditional). Regarding the 
commenter's request for CMS to further clarify the requirements for a 
``complete and active'' FDA market authorization request, we note that, 
as discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 
through 58958), we consider an FDA marketing authorization application 
to be ``complete'' when the full application has been submitted to FDA 
(including all modules or all information following a rolling review or 
RTOR, where relevant) and FDA has provided documentation of acceptance 
(for a 510k application or De Novo Classification request) or filing 
(for a PMA, NDA, or BLA) to the applicant indicating that FDA has 
determined that the application is sufficiently complete to allow for 
substantive review by FDA. Applicants are required to provide this 
documentation of FDA acceptance (for a 510k application or De Novo 
Classification request) or filing (for a PMA, NDA, or BLA) of the 
request to CMS at the time of application submission, consistent with 
the type of FDA marketing authorization application the applicant has 
submitted to FDA. Additionally, as noted in the FY 2024 IPPS/LTCH PPS 
final rule (88 FR 58955 through 58956), for the purposes of new 
technology add-on payment applications, we consider an FDA marketing 
authorization application to be in an ``active'' status when the 
application has been determined by FDA to be sufficiently complete to 
permit substantive review by FDA, and when it is not in an ``inactive'' 
status at the time of new technology add-on payment application 
submission. We further note that ``active'' FDA status for the purposes 
of new technology add-on payment application eligibility begins once 
FDA has determined that the application is sufficiently complete to 
allow for substantive review by FDA, which as described earlier in this 
section, applicants must demonstrate at the time of new technology add-
on payment application submission by providing FDA's acceptance (for a 
510k application or De Novo Classification request) or filing (for a 
PMA, NDA, or BLA) of the request, consistent with the type of FDA 
marketing authorization application the applicant has submitted to FDA. 
We continue to consider an application to be in an inactive status 
where it is withdrawn, the subject of a Complete Response Letter, or 
the subject of a final decision from FDA to refuse to approve the 
application.
    After consideration of the public comments we received, we are 
finalizing our proposal that, beginning with new technology add-on 
payment applications for FY 2026, we will no longer consider an FDA 
hold to be an inactive status for the purposes of eligibility for the 
new technology add-on payment for technologies that are not already FDA 
market authorized for the indication that is the subject of the new 
technology add-on payment application. As previously noted, because of 
the variety of circumstances for which a technology may be on hold, we 
may reassess this policy for future years based on ongoing experience.
10. Change to the Calculation of the Inpatient New Technology Add-On 
Payment for Gene Therapies Indicated for Sickle Cell Disease
    As discussed previously in this section, section 
1886(d)(5)(K)(ii)(I) of the Act specifies that a new medical service or 
technology may be considered for a new technology add-on payment if, 
based on the estimated costs incurred with respect to discharges 
involving such service or technology, the DRG prospective payment rate 
otherwise applicable to such discharges under this subsection is 
inadequate. Under our current policy, as set forth in Sec.  
412.88(b)(2), unless the discharge qualifies for an outlier payment, 
the additional Medicare payment will be limited to the full MS-DRG 
payment plus 65 percent (or 75 percent for a medical product designated 
by the FDA as a Qualified Infectious Disease Product [QIDP] or approved 
under FDA's Limited Population Pathway for Antibacterial and Antifungal 
Drugs [LPAD]) of the estimated costs of the new technology or medical 
service.
    Since establishing the new technology add-on payment, we have been 
cautious about increasing the new technology add-on payment percentage. 
As stated in the May 4, 2001 proposed rule (66 FR 22695), we believe 
limiting the new technology add-on payment percentage would provide 
hospitals an incentive for continued cost-effective behavior in 
relation to the overall costs of the case. In the FY 2020 IPPS/LTCH PPS 
final rule, in adopting the general increase in the new technology add-
on payment percentage from 50 percent to 65 percent, we stated that we 
believed that 65 percent would be an incremental increase that would 
reasonably balance the need to maintain the incentives inherent to the 
prospective payment system while also encouraging the development and 
use of new

[[Page 69246]]

technologies. We continue to believe that it is important to balance 
these incentives in assessing any potential change to the new 
technology add-on payment calculation.
    In the FY 2020 IPPS/LTCH PPS final rule, we also finalized an 
increase in the new technology add-on payment percentage for QIDPs from 
65 percent to 75 percent. We stated that we shared commenters' concerns 
related to antimicrobial resistance and its serious impact on Medicare 
beneficiaries and public health overall. We noted that the Centers for 
Disease Control and Prevention (CDC) described antimicrobial resistance 
as ``one of the biggest public health challenges of our time.'' We 
stated that we believe that Medicare beneficiaries may be 
disproportionately impacted by antimicrobial resistance due in large 
part to the unique vulnerability to drug-resistant infections (for 
example, due to age-related and/or disease-related immunosuppression, 
greater pathogen exposure via catheter use) among individuals aged 65 
or older. We further stated that antimicrobial resistance results in a 
substantial number of additional hospital days for Medicare 
beneficiaries, resulting in significant unnecessary health care 
expenditures.
    To address the continued issues related to antimicrobial resistance 
resulting in a substantial number of increased hospital days and 
significant unnecessary health care expenditures for Medicare 
beneficiaries, in the FY 2021 IPPS/LTCH PPS final rule, we finalized a 
proposal to expand the alternative new technology add-on payment 
pathway for QIDPs to include products approved under the LPAD pathway 
and to increase the maximum new technology add-on payment percentage 
for a product approved under FDA's LPAD pathway, from 65 percent to 75 
percent, consistent with the new technology add-on payment percentage 
for a product that is designated by FDA as a QIDP, beginning with 
discharges occurring on or after October 1, 2020 (85 FR 58739).
    In the proposed rule (89 FR 36138 through 36139), we stated that 
since finalizing our current policy for QIDPs and LPADs, we continued 
to receive feedback from interested parties regarding the adequacy of 
new technology add-on payments for certain categories of technologies, 
including cell and gene therapies to treat sickle cell disease (SCD). 
We stated that although we still believe it is prudent to proceed 
cautiously with increasing the new technology add-on payment 
percentage, we recognize that SCD, the most common inherited blood 
disorder, has historically had limited treatment options. In addition, 
hospitalizations and other health episodes related to SCD cost the 
health system $3 billion per year.\184\ We further noted that the 
Administration has identified a need to address SCD and has made a 
commitment to improving outcomes for patients with SCD by facilitating 
access to cell and gene therapies that treat SCD.\185\
---------------------------------------------------------------------------

    \184\ Biden-Harris Administration Announces Action to Increase 
Access to Sickle Cell Disease Treatments https://www.hhs.gov/about/news/2024/01/30/biden-harris-administration-announces-action-increase-access-sickle-cell-disease-treatments.html.
    \185\ Biden-Harris Administration Announces Action to Increase 
Access to Sickle Cell Disease Treatments https://www.hhs.gov/about/news/2024/01/30/biden-harris-administration-announces-action-increase-access-sickle-cell-disease-treatments.html.
---------------------------------------------------------------------------

    Accordingly, we stated that we believe that further facilitating 
access to these gene therapies for Medicare beneficiaries with SCD may 
have the potential to simultaneously improve the health of impacted 
Medicare beneficiaries and potentially lead to long-term savings in the 
Medicare program. We also noted that some gene therapies that treat SCD 
are among the costliest treatments to date, and we were concerned about 
a hospital's ability to sustain a potential financial loss to provide 
access to such treatments. As we discussed when we increased the new 
technology add-on payment for QIDPs in the FY 2020 IPPS/LTCH PPS final 
rule and products approved under FDA's LPAD in the FY 2021 IPPS/LTCH 
PPS final rule from 65 percent to 75 percent, we stated that we believe 
that it may be appropriate to increase the maximum add-on amount in 
limited cases where the current new technology add-on payment does not 
provide a sufficient incentive for the use of a new technology, which 
we believed may be the case for gene therapies that treat SCD. 
Accordingly, and consistent with our new technology add-on payment 
policy for products designated by the FDA as a QIDP or LPAD, we stated 
that we believe there would be merit in also increasing the new 
technology add-on payment percentage for gene therapies that are 
indicated and used for the treatment of SCD to 75 percent.
    Therefore, we proposed that, subject to our review of the new 
technology add-on payment eligibility criteria, for certain gene 
therapies approved for new technology add-on payments in the FY 2025 
IPPS/LTCH PPS final rule for the treatment of SCD, effective with 
discharges on or after October 1, 2024 and concluding at the end of the 
2- to 3-year newness period for such therapy, if the costs of a 
discharge (determined by applying CCRs as described in 
Sec. [thinsp]412.84(h)) involving the use of such therapy for the 
treatment of SCD exceed the full DRG payment (including payments for 
IME and DSH, but excluding outlier payments), Medicare would make an 
add-on payment equal to the lesser of: (1) 75 percent of the costs of 
the new medical service or technology; or (2) 75 percent of the amount 
by which the costs of the case exceed the standard DRG payment. We 
stated that, if finalized, these payment amounts would only apply to 
any gene therapy indicated and used specifically for the treatment of 
SCD that CMS determines in the FY 2025 IPPS/LTCH PPS final rule meets 
the criteria for approval for new technology add-on payment. We also 
proposed to add new Sec.  412.88(a)(2)(ii)(C) and Sec.  
412.88(b)(2)(iv) to reflect this proposed change to the calculation of 
the new technology add-on payment amount, beginning in FY 2025 and 
concluding at the end of the 2- to 3-year newness period for each such 
therapy. With this incremental increase, we stated that we believe 
hospitals would continue to have an incentive to balance the 
desirability of using the new technology for patients as medically 
appropriate while also maintaining an incentive for continued cost-
effective behavior in relation to the overall costs of the case.
    We invited public comments on this proposal to temporarily increase 
the new technology add-on payment percentage to 75 percent for a gene 
therapy that is indicated and used for the treatment of SCD as 
described previously. We also sought comment on whether we should make 
this proposed 75 percent add-on payment percentage available only to 
applicants that meet certain additional criteria, such as attesting to 
offering and/or participating in outcome-based pricing arrangements 
with purchasers (without regard to whether the specific purchaser 
availed itself of the outcome-based arrangements), or otherwise 
engaging in behaviors that promote access to these therapies at lower 
cost.
    Comment: Some commenters were supportive of the proposal. 
Commenters were pleased that CMS is making efforts to improve access to 
this rapidly advancing area of medicine, and stated that increasing the 
add-on percentage to 75 percent for gene therapies for sickle cell 
disease reflects a targeted approach aligned with the Cell and Gene 
Therapy Access Model. Commenters stated that they appreciate the 
Agency's commitment to the SCD patient population which they stated has 
historically been marginalized, as

[[Page 69247]]

outlined in the SCD Action Plan. The commenters stated that the 
proposed payment policy represents a meaningful change for Medicare 
beneficiaries, as the increased add-on payment will incentivize 
hospital adoption and expand patient access to these critical 
technologies. A commenter stated that in addition to improving the 
lives of patients, investing in therapies that reduce the need for 
chronic care and, especially, costly hospitalizations for SCD patients 
has the potential for significant long-term savings for the Medicare 
program. Another commenter stated that incentivizing use of SCD gene 
therapies will reduce associated care costs for patients, providers, 
and payers by preventing the need for future medical services.
    Most of the commenters supporting the policy stated that they 
believed CMS should finalize as proposed, and also requested that CMS 
extend the policy further in various ways, while some stated they would 
support the proposal with varied modifications. Many of the commenters 
requested that CMS expand or modify the proposal to increase the add-on 
percentage to other therapies in addition to gene therapies treating 
SCD, stating that increasing the percentage allows for hospital 
adoption of groundbreaking therapies and advances the new technology 
add-on payment program's objective for expanding patient access to 
innovative new technologies. A commenter stated that while the focus on 
SCD is commendable, the narrow application of the proposal to specific 
therapies, and potentially only those engaged in value-based purchasing 
agreements, indicates a limited scope of financial support.
    A few of the commenters recommended that all technologies that meet 
the new technology add-on payment eligibility criteria should receive 
75 percent. A commenter stated that hospitals find the current 65 
percent add-on payment insufficient to cover the costs of using new 
technologies, and that 75 percent would mitigate losses and encourage 
adoption of new technologies. The commenter further stated that an 
analysis demonstrated that hospitals receive millions in outlier 
payments on the same cases that receive new technology add-on payment 
payments, highlighting how inadequate the new technology add-on payment 
is. Another commenter stated that a consistent payment percentage for 
all therapies would eliminate inequity for manufacturers, improve 
transparency, and reduce payment confusion for hospitals. One of these 
commenters stated that this piecemeal approach (that is, highlighting 
one group of technologies for a higher payment percentage) fails to 
recognize the financial difficulties that hospitals face in adopting 
other innovative technologies not yet reflected in Medicare rates. 
Other commenters believed that by having a higher payment percentage 
for select groups of technologies (such as SCD therapies or QIDP/
LPADs), CMS is making a value judgement that these therapies are more 
valuable than other qualifying technologies or medical conditions, and 
that this is beyond the purview of CMS and not the intent of the new 
technology add-on payment program. The commenters stated that while 
each technology has varying levels of impact on the Medicare 
population, once CMS has established that a technology meets the new 
technology add-on payment criteria, all drugs and devices should be 
treated equally. A few commenters also requested that CMS provide 
details regarding any criteria that CMS uses to determine which 
categories of technologies warrant increased payment levels, as well as 
the appropriate payment level for each class of technologies via 
rulemaking to allow for stakeholder input. A commenter further 
requested that as an alternative to raising the payment percentage to 
75 percent for all technologies, CMS should, at a minimum, establish a 
process and criteria by which manufacturers can request an enhanced new 
technology add-on payment percentage. The commenter stated that it is 
difficult to discern a clear and consistent set of criteria that were 
used to determine which technologies should receive enhanced payment 
from discussions of these decisions in the Federal Register, and 
whether the decisions resulted from manufacturer/stakeholder requests 
or from internal CMS requests. The commenter further stated that it 
believes that the lack of clear process and criteria for these 
decisions creates risk that the decisions will be viewed as arbitrary 
and capricious.
    A few commenters requested that CMS extend the 75 percent to 
therapies with regenerative medicine advanced therapy (RMAT) or 
Breakthrough Therapy designations; to those targeting rare diseases, 
unmet needs, or vulnerable groups; or to other transformative therapies 
that Medicare beneficiaries may have difficulty accessing. Some 
commenters requested that CMS extend an increased new technology add-on 
payment percentage to align with other Administration priorities, such 
as hospital preterm deliveries, very low birth weight babies, other 
critically ill pediatric patients, and maternal health technologies. A 
commenter requested that CMS extend the increased maximum percentage to 
transformative therapies as opportunities arise, and that CMS monitor 
when additional increases higher than 75 percent are warranted.
    Some of the commenters stated that all cell and gene therapies 
should receive the increase to 75 percent, stating that CMS's stated 
reasons for the proposal apply to these therapies as well, and that 
cell and gene therapies may pose similar beneficiary access challenges 
based on inadequate payment. Commenters cited as their rationales that 
these therapies are generally treating small patient populations, rare 
disease, certain cancers, underserved populations, and/or orphan 
indications with significant unmet medical need. A commenter explained 
that cell and gene therapies often require complex manufacturing 
processes, specialized infrastructure, and intensive monitoring, and 
that these costs are embedded in the cost of these products, making 
them more costly. The commenter added that these therapies often have 
no historical claims data to characterize resource use associated with 
the inpatient admissions since patients may not even have been admitted 
previously due to a lack of treatment options (as compared to other 
types of new technology add-on payment technologies that represent 
improvements on or alternatives to existing treatments), and that 
therefore new technology add-on payment is needed to compensate for the 
absence of any costs from the rate setting methodology. Another 
commenter added that cell and gene therapies cause a significant strain 
on hospital financial resources; even with a new technology add-on 
payment, these therapies are more likely than other inpatient stays to 
qualify for outlier payments. A commenter stated that there is a need 
to incentivize newly approved high-cost, high-reward cellular and gene 
therapies through new technology add-on payment as there continues to 
be insufficient inpatient reimbursement for autologous cellular 
therapies, like CAR T-cell therapies. Commenters stated that inpatient 
stays with cell and gene therapies are inadequately paid, even with new 
technology add-on payments, which could dissuade hospitals from 
providing these therapies. A commenter specified further that 
particularly cell and gene therapies that treat other inherited, 
debilitating, and under-treated conditions like hemophilia and Duchenne 
muscular dystrophy (DMD)

[[Page 69248]]

should receive this increase, stating that the significant costs and 
limited therapies to treat these patients justify an increase above 
other new technology add-on payment applicants. Commenters also 
requested that therapies that share characteristics with gene therapies 
for SCD should be included in the proposal, including the significant 
up-front costs to hospitals and significant reduction in chronic care 
needs and costs to the Medicare program on an ongoing basis. A 
commenter stated that reductions in chronic care costs accrue to 
Medicare rather than providers, and new technology add-on payment is a 
pathway to bridge the gap by providing support for hospitals that incur 
the up-front cost of purchasing these therapies. Another commenter also 
stated that increasing the new technology add-on payment percentage for 
cell and gene therapies would, in addition to supporting Medicare 
beneficiary access to these therapies, be beneficial to Medicaid 
patients as many are dually eligible.
    Several commenters requested that CMS expand its proposal to 
include transfusion-dependent beta thalassemia (TDT). Commenters 
questioned why this proposal from CMS only applied to gene therapies 
for SCD and did not include FDA-approved gene therapies for TDT, which 
have the same public policy, pricing, and access concerns as SCD, and 
also have no curative alternatives. A commenter further stated that 
like SCD, historical treatment options for TDT also carry numerous 
limitations resulting in significantly under-served patient 
populations. The commenter also stated that extending enhanced new 
technology add-on payment to gene therapies used for TDT would be 
likely to have a minimal impact to the IPPS from a budget neutrality 
perspective because there was only an estimated 1,000 to 1,500 
individuals in the U.S. living with TDT, with a far smaller proportion 
of Medicare-eligible individuals.
    Response: We appreciate the commenters' feedback. We thank 
commenters for their support of the proposal. We continue to believe 
that the policy aligns with the Administration-identified commitment to 
improving outcomes for patients with SCD by facilitating access to gene 
therapies that treat SCD,\186\ and also balances the need to maintain 
the incentives inherent to the prospective payment system.
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    \186\ Biden-Harris Administration Announces Action to Increase 
Access to Sickle Cell Disease Treatments https://www.hhs.gov/about/news/2024/01/30/biden-harris-administration-announces-action-increase-access-sickle-cell-disease-treatments.html.
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    With regard to commenters requesting that the proposal include 
different groups of therapies or those with particular designations, or 
all therapies approved for new technology add-on payment, we recognize 
that the goal of facilitating access to new technologies for Medicare 
beneficiaries could also apply to other types of therapies. However, as 
discussed in the proposed rule (89 FR 36138), we focused our proposal 
on gene therapies for Medicare beneficiaries with SCD, as the most 
common inherited blood disorder, with historically limited treatment 
options and a significant clinical and financial impact on the 
healthcare system, and consistent with the Administration's commitment 
to improving outcomes for patients with SCD by facilitating access to 
gene therapies that treat SCD. We appreciate commenters' interest in 
improving access to these and other technologies through the new 
technology add-on payment program, and will continue to consider the 
interest areas raised by commenters.
    With respect to comments that stated hospitals receive millions in 
outlier payments on the same cases that receive new technology add-on 
payment payments, highlighting how inadequate the new technology add-on 
payment is, and that even with a new technology add-on payment, cell 
and gene therapies are more likely than other inpatient stays to 
qualify for outlier payments, we disagree that the existence of outlier 
payments for some new technology cases is evidence that those payments 
are necessarily inadequate, as there may be unrelated reasons why a 
hospital would receive outlier payments. There may also be 
circumstances where new technology payments and outlier payments work 
in a complementary manner for related reasons, that do not necessarily 
mean the appropriate policy is to increase new technology payments.
    Comment: Some of the commenters requested that CMS modify its 
proposal and finalize a maximum payment higher than 75 percent, stating 
that an increase of 10 percent would not adequately address the 
underlying problem of insufficient reimbursement. Many of these 
commenters stated that, considering the transformational potential of 
these therapies and the fact that these are among the costliest 
treatments to date, CMS should increase the percentage to 100 percent 
to provide a better incentive for hospitals to provide these therapies 
and not impede access for Medicare beneficiaries. Commenters stated 
that this is important since hospitals already incur losses on 
treatments that trigger new technology add-on payments, and these SCD 
therapies are even more costly. A commenter stated that in the absence 
of any other evaluation or discussion of reimbursement solutions, 
hospitals will be left to bear enormous losses for an essential therapy 
where there are no alternatives with similar outcomes, which would 
directly obstruct Medicare patients' access to gene therapies based on 
prices that are beyond the control of the provider and hinder future 
treatment options for this patient population. In addition, a commenter 
stated that Medicare payment policy sets the standard for other payers, 
so there would be a downstream effect of limited access if the policy 
is finalized as proposed at 75 percent. The commenter further stated 
that if these SCD therapies are not provided due to inadequate new 
technology add-on payment, there will be no data available to set 
appropriate rates after the new technology add-on payment period 
expires that include the costs of the therapies and associated 
inpatient costs. Another commenter stated that anything less than 100 
percent would be inadequate due to significant financial losses that 
would need to be absorbed on every case, particularly for high DSH 
hospitals, which many hospitals that treat SCD are likely to be. The 
commenters stated that a payment rate of 100 percent would allow CMS to 
most effectively incentivize the development of important new 
technologies like gene therapies, help ensure patient access, reduce 
health disparities, positively impact other payer coverage decisions, 
and appropriately recognize the durable and transformative value that 
gene therapies offer to patients, their families, and society. A 
commenter stated that a 100 percent payment rate would demonstrate the 
same commitment to equity in the Medicare FFS population that the Cell 
and Gene Therapy (CGT) Access Model demonstrates for the Medicaid 
population. The commenter stated that 100 percent is reasonable given 
that the costs may be lower than anticipated due to the limited number 
of patients who may be candidates for SCD gene therapy and the limited 
manufacturing capacity, which is estimated to be less than 200 
treatments per year.
    A commenter shared data modeling simulating potential payment 
scenarios to demonstrate the impact of the current methodology to 
hospitals and the impact of potential new technology add-on payment 
percentage amounts at 65 percent, 75 percent, 85 percent and 100

[[Page 69249]]

percent using claims in MS-DRG 016 from the FY 2023 MedPAR file. The 
commenter stated that new technology add-on payment amounts at or below 
75 percent would still leave hospitals severely under-reimbursed for 
the product and patient care costs, with a loss of over $700,000 with 
each case, which it stated would create vast barriers to utilization, 
no matter the clinical benefit. The commenter further asserted that 
even at 100 percent, some hospitals would lose over $250,000 or much 
more. The commenter explained that the analysis assumed that hospitals 
set charges for the gene therapy in line with the national average drug 
CCR of 0.182, which would be more than five times their cost. However, 
the commenter stated that in reality, hospitals do not markup higher 
cost drugs by that ratio, especially for gene therapies. The commenter 
stated that if SCD therapies had a 50 percent markup (for example, 
charging $3.3 million for a $2.2 million drug, reflecting a CCR of 
0.666), but CMS applied a much lower CCR of 0.182 to the $3.3 million 
charge, CMS would drastically underestimate the cost of the drug at 
$600,600, only 27 percent of the actual cost. The commenter explained 
that this calculation, combined with new technology add-on payment as 
the lesser of the 75 percent of cost of the drug or 75 percent of the 
amount by which costs of the case exceed the standard DRG payment, 
would mean that hospitals would receive much smaller new technology 
add-on payments than under its analysis, and urged CMS to consider 
these dynamics as it implements new technology add-on payment for SCD 
gene therapy. The commenter suggested that rather than using the 
``lesser of'' methodology, that CMS instead use the actual costs of 
such therapies, such as a percentage of wholesale acquisition costs 
(WAC) or the hospital's actual acquisition cost, as reported on the 
claims using value code 90.
    A commenter stated that CMS had the statutory authority to provide 
for additional payment beyond the proposed 75 percent. The commenter 
stated that for SCD gene therapy, CMS's new technology add-on payment 
mechanism fails to ``adequately reflect[ ] the estimated average cost 
of such service or technology'' as required by the applicable statute, 
and that payment based on a portion of charges reduced to costs under 
section 412.88 would result in significant financial losses for 
providers. Therefore, the commenter recommended that CMS temporarily 
adopt a 100 percent cost-based reimbursement methodology for SCD gene 
therapy and/or take other measures to ensure that the payment 
methodology fully recognizes the estimated average cost of the care.
    Another commenter stated that anything short of 100 percent 
reimbursement of acquisition costs would be inadequate for cell and 
gene therapies while eligible for new technology add-on payment. The 
commenter stated that increasing the payment to the full cost amount 
would ensure health equity and access. Another commenter suggested that 
CMS fully cover the costs of SCD gene therapy either by increasing the 
payment rate or through another innovative approach such as developing 
a new DRG with a higher base payment. A commenter also suggested that 
as an alternative to 100 percent payment, CMS should negotiate drug 
prices directly with drug manufacturers, or alternative pathways to 
support coverage and access. Another commenter advocated for a policy 
solution that would ensure providers recoup at least the invoice cost 
of high-cost therapies such as CasgevyTM and 
LyfgeniaTM, as the invoice cost of drugs is a factor over 
which providers have no control.
    A few commenters requested that CMS instead increase the marginal 
payment rate (which we understand to refer to the maximum new 
technology add-on payment percentage) to at least 80 percent to better 
account for the high costs of these therapies and to address the lack 
of significant payment proposals related to these therapies. A 
commenter who requested a marginal payment rate of 100 percent stated 
that a marginal cost factor of less than 100 percent encourages 
efficient selection of alternative existing treatments for a condition, 
but for this particular set of patients there is no alternative 
treatment that is equal to an effective cure. The commenter further 
stated that an argument for the efficient selection of alternative 
treatments for these patients is an argument for early adoption of 
advanced curative services.
    A few commenters who requested expansion of the proposal to 
additional therapies or a further increase in the payment percentage 
also commented on the short-term nature of the proposal, noting that 
there is no opportunity for other future new technology add-on payment-
approved therapies to receive the increased percentage. The commenters 
requested that CMS make any changes permanent rather than limiting it 
to therapies approved for new technology add-on payment for FY 2025.
    Response: We appreciate the commenters' feedback.
    With regard to the comments requesting an increase to the new 
technology add-on payment percentage above the proposed rate of 75 
percent, we acknowledge that SCD gene therapies are among the costliest 
therapies to date and there may be significant related costs associated 
with inpatient stays during which the therapies are provided. We also 
recognize that new technology add-on payment would not fully cover a 
hospital's costs, even with a 100 percent payment rate, due to the 
inherent design of the IPPS. At the same time, we note that we remain 
concerned about the extremely high cost of these products, and want to 
ensure we do not create incentives to increase prices. We continue to 
believe that limiting the new technology add-on payment percentage 
provides hospitals an incentive for continued cost-effective behavior 
in relation to the overall costs of the case. In response to commenters 
requesting a new technology add-on payment percentage of 100 percent, 
we believe that this would result in very little of the incentive for 
cost-effective behavior inherent to the prospective payment system. 
While we continue to believe that our standard add-on payment 
percentage is generally appropriate, due to the particular concerns 
related to SCD gene therapies previously discussed and confirmed by 
comments and consistent with the Administration's commitment to 
improving outcomes for patients with SCD by facilitating access to gene 
therapies that treat SCD, at this time we believe it is appropriate to 
apply a higher new technology add-on payment of 75 percent for SCD gene 
therapies approved for new technology add-on payment for FY 2025 during 
their new technology add-on payment period. We believe that the 
proposed 75 percent payment rate would reasonably address these 
concerns while also maintaining the incentives inherent to the 
prospective payment system, and it is consistent with our new 
technology add-on payment policy for QIDPs and LPADs. For these 
reasons, we are finalizing the increase in the new technology add-on 
payment percentage for cell and gene therapies that treat SCD as 
proposed.
    With respect to commenters' other requested changes to our current 
payment mechanisms, due to the relative newness of these gene therapies 
for SCD and our continued consideration of approaches and authorities 
to encourage value-based care and lower prices of costly

[[Page 69250]]

therapies, we believe it would be premature to adopt further structural 
changes to our existing payment mechanism specifically for these 
therapies. For these reasons, we disagree with the commenters' 
requested changes to our current payment mechanisms for FY 2025. For 
these same reasons, we also believe it would be premature to adopt a 
permanent increase in the new technology add-on payment percentage at 
this time. We will consider these comments should we develop additional 
policies and consider longer-term solutions related to SCD gene 
therapies in the future as we gain more experience with the unique 
considerations of these therapies. We also note that while Medicare 
payment policy may set the standard for other payers, payers consider 
many factors in designing and operating their programs.
    Comment: Commenters opposed limiting the increase in the new 
technology add-on payment percentage to applicants that met certain 
additional criteria, such as attesting to offering and/or participating 
in outcomes-based pricing arrangements. A few of the commenters stated 
that CMS should not require additional criteria beyond the existing 
criteria of newness, cost, and substantial clinical improvement. Other 
commenters stated that CMS did not provide sufficient information 
regarding the feedback it is requesting related to outcomes-based 
arrangements, details on how it would operationalize such a 
requirement, or discuss the potential impact on claims data. They 
further stated that CMS must describe what arrangements or behaviors it 
is considering, in addition to the rationale and legal basis for any 
related proposal, so that stakeholders can appropriately comment on a 
proposal that has sufficient detail for effective evaluation via notice 
and comment rulemaking. A commenter stated that CMS should also 
consider the variability in such arrangements, which could lead to 
substantial inequities in which therapy patients would be able to 
access if this was a requirement to receive the new technology add-on 
payment amount, as well as the competitive disadvantage that may occur. 
A commenter stated that any such restrictions as described in CMS's 
proposal would impact patient access to transformative therapies by 
placing undue burden on providers and payers. The commenter further 
stated that a variety of factors may inhibit a manufacturer's ability 
to offer or participate in such arrangements, including lack of clarity 
in best price reporting, limited resources available within states to 
establish such agreements, and time needed to measure outcomes for new 
products. A commenter explained that IPPS hospitals are operating 
within a ``buy-and-bill'' environment without access to alternative 
contracting mechanisms, outcomes-based pricing arrangements, or other 
opportunities to control these therapies' prices, and that unless CMS 
links the Center for Medicare & Medicaid Innovation's (CMS Innovation 
Center) CGT Access Model efforts to Medicare FFS beneficiaries, these 
considerations would not apply to its member providers and hospitals. 
Another commenter stated that the arrangements CMS describes are 
encouraged to take place under the CMS Innovation Center's CGT Access 
Model and new technology add-on payment should not be tied to 
participation in the model, which is still under development. A 
commenter also stated that mandates related to outcomes-based pricing 
arrangements are not provided in the new technology add-on payment 
statute, and there is currently no mechanism by which FFS Medicare can 
engage in value-based payment arrangements. A commenter stated that CMS 
should work closely with impacted stakeholders before considering 
developing an alternative pricing requirement in the future to ensure 
any proposal would align with the new technology add-on payment program 
goals. Some commenters further stated that it is not clear how such 
additional criteria relate to or advance the purpose of the new 
technology add-on payment program.
    Response: We appreciate the feedback from commenters. We note that 
we were seeking comments regarding other criteria that could 
demonstrate that applicants were engaging in behaviors that promote 
access to these therapies at lower cost, in alignment with the 
Administration's broader effort to further drive down prescription drug 
costs.\187\ Consistent with our concerns about incentives for 
manufacturers to increase prices, we continue to welcome comments on 
this topic for future consideration. At this time, we are not making 
this 75 percent add-on payment percentage available only to applicants 
that meet certain additional criteria, but we will continue to evaluate 
this topic and may consider changes in the future.
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    \187\ Biden-Harris Administration Announces Action to Increase 
Access to Sickle Cell Disease Treatments https://www.hhs.gov/about/news/2024/01/30/biden-harris-administration-announces-action-increase-access-sickle-cell-disease-treatments.html.
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    Comment: A few commenters disagreed with CMS's proposal, stating 
that a new technology add-on payment of 75 percent will not create 
access to gene therapies. The commenters stated that a new technology 
add-on payment rate of 75 percent for these costly therapies would 
still leave a significant burden of unreimbursed costs on hospitals, 
while keeping drug manufacturers financially whole. The commenters 
stated that this would represent an unsustainable model for 
reimbursement and may disincentivize hospitals from providing these 
therapies, potentially leading to access issues for patients.
    A commenter stated that CMS did not discuss its evaluation of any 
other solutions for improving the overall MS-DRG payment system, nor 
propose any other solutions for gene therapies, despite stakeholders 
having provided many ideas in the past. The commenter stated that CMS 
risked creating a two-tier system by fostering innovation for Medicaid 
patients via the CMS Innovation Center's new CGT Access Model, while 
offering no solutions for traditional Medicare FFS or Medicaid-Medicare 
dual-eligible patients with SCD or TDT, and did not view the proposal 
to be in harmony with the attention and effort being put into the CMS 
Innovation Center model. The commenter also asserted that the new 
technology add-on payment increase that CMS proposed does not address 
the series of compounding losses for hospitals that wish to provide 
these therapies: a low base MS-DRG payment rate, an inadequate new 
technology add-on payment percentage, the highest-ever fixed-loss 
threshold, and recovery of only 80 percent of remaining calculated 
costs through the outlier formula, which it stated directly obstruct 
Medicare patients' access to gene therapies. The commenter requested 
that CMS reimburse hospitals for 100 percent of their product 
acquisition costs related to gene therapies for SCD and TDT, 
potentially using CMS's adjustment authority under section 
1886(d)(5)(I) of the Act. The commenter stated that this request could 
be operationalized by requiring hospitals to use value code 90 to 
report the product acquisition cost, providing payment at 100 percent 
of the reported product cost, and remove the charges reported in 
revenue code 0892 when calculating total case payment in determining 
whether an outlier payment is warranted. The commenter explained that 
hospitals would still be incentivized to provide cost-effective care, 
as the MS-DRG payment and outlier calculations would still be 
applicable to the clinical care portion of the claim. The commenter 
also expressed concern that charge

[[Page 69251]]

compression, price transparency, and new technology add-on payment 
`lesser of' language combined to create a challenge that is impossible 
for hospitals to successfully navigate, as it stated that this required 
hospitals to mark-up multimillion dollar products, and was ineffective 
at achieving adequate reimbursement. The commenter asserted that if a 
hospital set charges for these therapies in accordance with its own 
CCR, it was entirely justifiable that a hospital would list the charges 
between $10 to 12 million, but was likely to be perceived as ethically 
problematic and predatory. In further support of its assertions, the 
commenter modeled the impact to hospitals using a simplified model of 
reimbursement for two hospitals, with one using a 10 percent policy and 
one using a CCR of 0.25 to mark-up the gene therapy product costs, to 
demonstrate that even hospitals that charged appropriately for these 
therapies and received the maximum 75 percent new technology add-on 
payment amount would face a significant financial loss. The commenter 
stated that the results showed that the hospitals had very different 
product charges, with different total claim charges--despite the fact 
that patient care charges are identical, leading CMS to compute a very 
different case cost estimate for each hospital. The commenter stated 
that the `lesser of' language used for new technology add-on payment 
meant that even when hospitals set their charges appropriately, they 
would be underpaid even the product acquisition cost, resulting in 
prohibitive financial choices, and where costs would largely be paid 
through outlier dollars. The commenter asserted that its proposal would 
have a limited total fiscal impact to CMS because of the limited number 
of treatments that will happen in the next few years, and the small 
percentage of applicable Medicare beneficiaries. The commenter 
referenced a prior letter from the American Hospital Association to 
CMS,\188\ asserting that CMS has not typically fully spent the pool of 
new technology add-on payment dollars it allocates. The commenter 
further stated that adopting its proposal would allow for claims data 
with information on case volume, clinical care costs, and transparent 
product acquisition costs that could be used at the new technology add-
on payment timeframe to create a new MS-DRG and/or an alternate payment 
mechanism to reflect the resources utilized to administer these 
therapies. Finally, the commenter noted a variety of suggestions it had 
previously provided, including Town Hall sessions, evaluating the 
creation of separate MS-DRGs for clinical care and product acquisition 
costs, creating a new MS-DRG, proposing new payment mechanism for 
acquisition of HSC gene therapy products, adding Medicare and dual-
eligible beneficiaries in the CMS Innovation Center's CGT Access Model, 
and using a temporary CCR, and stated it was not clear as to why the 
agency chose to propose an increase to the new technology add-on 
payment percentage instead.
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    \188\ American Hospital Association. AHA FY 2020 IPPS Proposed 
Rule Comment Letter; Analysis of data from FY 2013-FY 2018. June 24, 
2019. Online: https://www.aha.org/system/files/media/file/2019/06/aha-comments-cms-inpatient-pps-fy-2020-proposed-rule-6-24-2019.pdf.
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    Some commenters stated that, while they were supportive of the 
proposed increase in payment for SCD gene therapies, they were 
concerned that the change would not adequately address gaps in payment 
or access issues for these therapies. A commenter stated that the SCD 
gene therapies map to DRGs that have base rates far below the costs of 
these products, and that reimbursement only covers a minimal portion of 
the drug cost and no provider and facility costs for the 30-days of 
inpatient care.
    Multiple commenters also discussed similar concerns generally with 
new technology add-on payment methodology and in particular for costly 
therapies. They referenced the practice of ``charge compression'' due 
to CCRs and the way that the add-on payment amount is calculated as the 
``lesser of'' two different values, which they stated results in 
hospitals incurring at least 35 percent of the new technology costs 
even with the new technology add-on payment (based on a 65 percent 
maximum add-on payment). Another commenter also suggested that CMS 
should eliminate the ``lesser of'' new technology add-on payment 
methodology for gene therapies targeting SCD and other technologies, 
which it stated required hospitals to artificially inflate their 
charges to obtain appropriate reimbursement.
    Response: We appreciate the commenters' feedback. We note that the 
prospective payment system is an average-based system and it is 
expected that some cases may demonstrate higher than average costs, 
while other cases may demonstrate lower than average costs. In deciding 
which treatment is most appropriate for any particular patient, 
physicians are expected to balance the clinical needs of patients with 
the efficacy and costliness of particular treatments.
    We continue to believe that changing the ``lesser of'' methodology, 
using the acquisition costs, or otherwise further increasing the add-on 
payment percentage would remove consideration of the costs of new 
technology from treatment decisions, and that it is important to 
maintain some incentive to weigh the costs of new technology in making 
clinical decisions. Similar to our discussion in the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42299), we believe that paying hospitals for 100 
percent of their product acquisition costs related to gene therapies 
would result in very little of the incentives inherent to the 
prospective payment system.
    We also disagree with the commenter that this proposal, or other 
suggestions offered by other commenters, would have a limited total 
fiscal impact to CMS because of the limited number of treatments that 
will happen in the next few years and the small percentage of 
applicable Medicare beneficiaries. With regard to the commenter's 
statement regarding a pool of new technology add-on payment dollars 
that are allocated, we note that CMS does not allocate dollars to new 
technology add-on payments. We note that the citation provided by the 
commenter indicated that when implementing the new technology add-on 
payment in the September 7, 2001 final rule (66 FR 46902), CMS set a 
target limit for these payments at 1 percent of total operating 
prospective payments. However, the new mechanism was initially required 
to be implemented in a budget neutral manner, and as we had noted at 
that time, this limit was set to address CMS's concern that new 
technology add-on payments should not result in inappropriately large 
redistributions of payments from hospitals that do not employ new 
technology to those that do (66 FR 46920). In the FY 2005 IPPS final 
rule, we provided an update, that as a result of the enactment of 
section 503(d) of Public Law 108-173, we will no longer include the 
impact of additional payments for new medical services and technologies 
in the budget neutrality factor (69 FR 49084). Due to the high cost of 
these gene therapy technologies, and because the total number of 
patients that will receive these treatments and the amount of new 
technology add-on payments associated with care of these patients in 
the future is unknown, it is unclear to us that the fiscal impact to 
CMS would be limited. We also note that because new technology add-on 
payments are not administered in a budget neutral manner, by default, 
they have the potential to result in increases to Medicare spending 
that are unpredictable and beyond our control, which is why we have 
remained

[[Page 69252]]

cautious when assessing potential changes to the new technology add-on 
payment program to maintain the incentives inherent to the prospective 
payment system.
    Comment: Many commenters stated that the Agency should work with 
stakeholders to identify adequate and sustainable reimbursement 
mechanisms for covering payment of outlier drug acquisition costs for 
both SCD and for other life-saving cell and gene therapies. Commenters 
stated that the current payment system was not designed to address 
market developments including rapid introduction of therapies with high 
costs, and was not sufficient to appropriately reimburse hospitals. 
Some commenters were particularly concerned about Medicare payment for 
these therapies after the new technology add-on payment expires, 
stating that the current MS-DRGs assigned have reimbursement rates 
inadequate to reimburse these high-cost therapies. The commenters urged 
CMS to consider alternative methods of reimbursement to support 
appropriate patient access in accordance with the goals of this 
proposal such as a continued pass-through payment for the gene 
therapies or some other mechanism, stating that the MS-DRG system was 
not structured to support therapies as costly as these SCD gene 
therapies. A commenter further stated the need for CMS to develop 
longer-term solutions to ensure reimbursement sustainability, and that 
a CMS-convened Town Hall session may be beneficial to facilitate 
innovative solutions. Commenters also suggested other potential 
pathways such as the creation of new MS-DRGs for high-cost treatments, 
and changes to the role of cost-to-charge ratios (CCRs) in the 
reimbursement methodology, such as eliminating the role of CCRs or 
creating a new CCR for more accurate rate-setting. A commenter further 
stated that these options are already within CMS's statutory authority 
and implementable through notice and comment rulemaking. The commenter 
further believed Congress must permanently resolve how to pay for these 
therapies, preferably through broad-scale reform of national drug 
development, production, and distribution policies. The commenter 
recommended that in the meantime, CMS work with Congress on changes 
specific to coverage and payment, such as by carving payment for these 
products out of the DRG system, as currently done for solid organ and 
stem cell transplants, or other policies, including split-DRGs, that 
would enable hospitals to recoup all their costs for these therapies.
    A commenter voiced concerns over the rise of high-cost therapies 
generally and CMS's ability to appropriately account for their costs 
when determining payments to hospitals and health systems, urging CMS 
to examine the adequacy of its payments to hospitals. The commenter 
noted that many of these therapies' prices are beyond what would have 
been predicted when the inpatient PPS system was designed, and they are 
therefore adding to the existing and rising challenge of paying for a 
massive increase in high-cost therapies and technologies in health 
care.
    Response: We thank commenters for their feedback and suggestions. 
As noted by commenters, longer-term solutions are outside of the scope 
of the new technology add-on payment program and this rulemaking. We 
will continue to consider these issues.
    Therefore, after consideration of the public comments received, for 
the reasons discussed previously and in the FY 2025 IPPS/LTCH PPS 
proposed rule, we are finalizing our policy as proposed. We are 
finalizing that for certain gene therapies approved for new technology 
add-on payments in the FY 2025 IPPS/LTCH PPS final rule that are 
indicated and used specifically for the treatment of SCD, effective 
with discharges on or after October 1, 2024 and concluding at the end 
of the 2- to 3-year newness period for such therapy, if the costs of a 
discharge (determined by applying CCRs as described in 
Sec. [thinsp]412.84(h)) involving the use of such therapy for the 
treatment of SCD exceed the full DRG payment (including payments for 
IME and DSH, but excluding outlier payments), Medicare will make an 
add-on payment equal to the lesser of: (1) 75 percent of the costs of 
the new medical service or technology; or (2) 75 percent of the amount 
by which the costs of the case exceed the standard DRG payment. We note 
that these payment amounts would only apply to CasgevyTM 
(exagamglogene autotemcel) and LyfgeniaTM (lovotibeglogene 
autotemcel), when indicated and used specifically for the treatment of 
SCD, which CMS has determined in this FY 2025 IPPS/LTCH PPS final rule 
meet the criteria for approval for new technology add-on payment. We 
are also adding new Sec. [thinsp]412.88(a)(2)(ii)(C) and (b)(2)(iv) to 
reflect this change to the calculation of the new technology add-on 
payment amount, beginning in FY 2025 and concluding at the end of the 
2- to 3-year newness period for each such therapy. As noted earlier, we 
will continue to assess this policy and may propose changes in the 
future.

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

A. Background

1. Legislative Authority
    Section 1886(d)(3)(E) of the Act requires that, as part of the 
methodology for determining prospective payments to hospitals, the 
Secretary adjust the standardized amounts for area differences in 
hospital wage levels by a factor (established by the Secretary) 
reflecting the relative hospital wage level in the geographic area of 
the hospital compared to the national average hospital wage level. We 
currently define hospital labor market areas based on the delineations 
of statistical areas established by the Office of Management and Budget 
(OMB). A discussion of the FY 2025 hospital wage index based on the 
statistical areas appears under section III.B. of the preamble of this 
final rule.
    Section 1886(d)(3)(E) of the Act requires the Secretary to update 
the wage index annually and to base the update on a survey of wages and 
wage-related costs of short-term, acute care hospitals. CMS collects 
these data on the Medicare cost report, CMS Form 2552-10, Worksheet S-
3, Parts II, III, IV. The OMB control number for this information 
collection request is 0938-0050, which expires on September 30, 2025. 
Section 1886(d)(3)(E) of the Act also requires that any updates or 
adjustments to the wage index be made in a manner that ensures that 
aggregate payments to hospitals are not affected by the change in the 
wage index. The adjustment for FY 2025 is discussed in section II.B. of 
the Addendum to this final rule.
    As discussed in section III.I. of the preamble of this final rule, 
we also take into account the geographic reclassification of hospitals 
in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act 
when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of 
the Act, the Secretary is required to adjust the standardized amounts 
so as to ensure that aggregate payments under the IPPS after 
implementation of the provisions of sections 1886(d)(8)(B), 
1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate 
prospective payments that would have been made absent these provisions. 
The budget neutrality adjustment for FY 2025 is discussed in section 
II.A.4.b. of the Addendum to this final rule.
    Section 1886(d)(3)(E) of the Act also provides for the collection 
of data every 3 years on the occupational mix of employees for short-
term, acute care

[[Page 69253]]

hospitals participating in the Medicare program to construct an 
occupational mix adjustment to the wage index. The OMB control number 
for approved collection of this information is 0938-0907, which expires 
on January 31, 2026. A discussion of the occupational mix adjustment 
that we are applying to the FY 2025 wage index appears under section 
III.E. of the preamble of this final rule.
2. Core-Based Statistical Areas (CBSAs) for the FY 2025 Hospital Wage 
Index
    The wage index is calculated and assigned to hospitals on the basis 
of the labor market area in which the hospital is located. Under 
section 1886(d)(3)(E) of the Act, beginning with FY 2005 (69 FR 49026 
through 49032), we delineate hospital labor market areas based on OMB-
established Core-Based Statistical Areas (CBSAs). The current 
statistical areas (which were implemented beginning with FY 2021) are 
based on revised OMB delineations issued on Sept 14, 2018, in OMB 
Bulletin No. 18-04.\189\ OMB Bulletin No. 18-04 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 and the American Community 
Survey (ACS) and Census Bureau population estimates for 2015.
---------------------------------------------------------------------------

    \189\ We note that while OMB Bulletin 20-01 superseded Bulletin 
No. 18-04, it included no changes that required CMS to formally 
adopt the revisions.
---------------------------------------------------------------------------

    Historically, OMB issued major revisions to statistical areas every 
10 years, based on the results of the decennial census, and 
occasionally issues minor updates and revisions to statistical areas in 
the years between the decennial censuses through OMB Bulletins. On 
February 28, 2013, OMB issued Bulletin No. 13-01. CMS adopted these 
delineations, based on the results of the 2010 census, effective 
beginning with the FY 2015 IPPS wage index (79 FR 49951 through 49957). 
OMB subsequently issued Bulletin No. 15-01 on July 15, 2015, followed 
by OMB Bulletin No. 17-01 on August 15, 2017, which provided updates to 
and superseded OMB Bulletin No. 15-01. The attachments to OMB Bulletin 
No. 17-01 provided detailed information on the update to statistical 
areas since July 15, 2015, and were based on the application of the 
2010 Standards for Delineating Metropolitan and Micropolitan 
Statistical Areas to Census Bureau population estimates for July 1, 
2014, and July 1, 2015. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41362 through 41363), we adopted the updates set forth in OMB Bulletin 
No. 17-01 effective October 1, 2018, beginning with the FY 2019 wage 
index. OMB Bulletin No. 17-01 was superseded by the April 10, 2018, OMB 
Bulletin No. 18-03, and then by the September 14, 2018, OMB Bulletin 
No. 18-04. These bulletins established revised delineations for 
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and 
Combined Statistical Areas, and provided guidance on the use of the 
delineations of these statistical areas. In FY 2021, we adopted the 
updates set forth in OMB Bulletin No. 18-04 (85 FR 58743 through 
58753). Thus, most recently in the FY 2024 IPPS/LTCH PPS final rule, we 
continued to use the OMB delineations that were adopted beginning with 
FY 2015 (based on the revised delineations issued in OMB Bulletin No. 
13-01) to calculate the area wage indexes, with updates as reflected in 
OMB Bulletin Nos. 15-01, 17-01, and 18-04.
    In the July 16, 2021, Federal Register (86 FR 37777), OMB finalized 
a schedule for future updates based on results of the decennial Census 
updates to commuting patterns from the ACS. In accordance with that 
schedule, on July 21, 2023, OMB released Bulletin No. 23-01. A copy of 
OMB Bulletin No. 23-01 may be obtained at https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf. According to OMB, 
the delineations reflect the 2020 Standards for Delineating Core Based 
Statistical Areas (``the 2020 Standards''), which appeared in the 
Federal Register on July 16, 2021 (86 FR 37770 through 37778), and the 
application of those standards to Census Bureau population and journey-
to-work data (that is, 2020 Decennial Census, American Community 
Survey, and Census Population Estimates Program data).

B. Implementation of Revised Labor Market Area Delineations

    We believe that using the revised delineations based on OMB 
Bulletin No. 23-01 will increase the integrity of the IPPS wage index 
by creating a more accurate representation of current geographic 
variations in wage levels. Therefore, we proposed to implement the 
revised OMB delineations as described in the July 21, 2023, OMB 
Bulletin No. 23-01, beginning with the FY 2025 IPPS wage index. We 
proposed to use these revised delineations to calculate area wage 
indexes in a manner that is generally consistent with the CMS' 
implementation of CBSA-based wage index methodologies.
    CMS has recognized that hospitals in certain areas may experience a 
negative impact on their IPPS payment due to the proposed adoption of 
the revised OMB delineations, and has finalized transition policies to 
mitigate negative financial impacts and provide stability to year-to-
year wage index variations. We refer readers to the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 49956 through 49962) for discussion of the 
transition period finalized the last time CMS adopted revised OMB 
delineations after a decennial census, and to the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49018) for discussion of wage index transition 
policies that we finalized for FYs 2020, 2021, and 2022 to apply a 5 
percent cap on any decrease in a hospital's final wage index from the 
prior fiscal year. Beginning with FY 2023, we finalized and codified at 
42 CFR 412.64(h)(7) a permanent policy to apply a 5 percent cap on any 
decrease to a hospital's wage index from its wage index in the prior 
FY, regardless of the circumstances causing the decline (87 FR 49018-
49020). This 5 percent cap policy is discussed in further detail in 
section III.G.6 of the preamble of this final rule. We believe it is 
important for the IPPS to use the updated labor market area 
delineations to maintain a more accurate and up-to-date payment system 
that reflects the reality of current labor market conditions. We 
believe the 5 percent cap policy will sufficiently mitigate any 
potential significant disruptive financial impacts on hospitals that 
are negatively affected by the proposed adoption of the revised OMB 
delineations and thus, we did not propose a transition period for these 
hospitals.
    For the reasons described in this section, we are finalizing the 
use of the revised labor market area delineations based on OMB Bulletin 
No. 23-01 beginning with the FY 2025 IPPS hospital wage index as 
proposed.
1. Micropolitan Statistical Areas
    The OMB ``2020 Standards'' define a ``Micropolitan Statistical 
Area'' as being associated with at least one urban area that has a 
population of at least 10,000, but less than 50,000. A Micropolitan 
Statistical Area comprises the central county or counties containing 
the core, plus adjacent outlying counties having a high degree of 
social and economic integration with the central county or counties as 
measured through commuting (86 FR 37778). We refer to these areas as 
Micropolitan Areas. Since FY 2005, we have treated Micropolitan Areas 
as rural and included hospitals located in Micropolitan Areas in each 
State's rural wage index. We refer

[[Page 69254]]

readers to the FY 2005 IPPS final rule (69 FR 49029 through 49032) and 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 49952) for a complete 
discussion regarding this policy and our rationale for treating 
Micropolitan Areas as rural. Based upon the new 2020 Decennial Census 
data, a number of urban counties have switched status and have joined 
or became Micropolitan Areas, and some counties that once were part of 
a Micropolitan Area, under current OMB delineations, have become urban. 
Overall, there are a similar number of Micropolitan Areas (542) under 
the new OMB delineations based on the 2020 Census as existed under the 
latest data from the 2010 Census (541). We stated in the proposed rule 
that we believe that the best course of action would be to continue the 
policy established in the FY 2005 IPPS final rule and include hospitals 
located in Micropolitan Areas in each State's rural wage index. These 
areas continue to be defined as having relatively small urban cores 
(populations of 10,000-49,999). We do not believe it would be 
appropriate to calculate a separate wage index for areas that typically 
may include only a few hospitals for the reasons set forth in the FY 
2005 IPPS/LTCH PPS final rule (69 FR 49029 through 49032) and the FY 
2015 IPPS final rule (79 FR 49952). Therefore, in conjunction with our 
proposal to implement the new OMB statistical area delineations 
beginning in FY 2025, we proposed to continue to treat Micropolitan 
Areas as ``rural'' and to include Micropolitan Areas in the calculation 
of each state's rural wage index.
2. Metropolitan Divisions
    According to OMB's ``2020 Standards'' (86 FR 37776), a metropolitan 
division is a county or group of counties within a metropolitan 
statistical area (MSA) with a population of at least 2.5 million. Thus, 
MSAs may be subdivided into metropolitan divisions. A county qualifies 
as a ``main county'' of a metropolitan division if 65 percent or more 
of workers living in the county also work within the county and the 
ratio of the number of workers working in the county to the number of 
workers living in the county is at least 0.75. A county qualifies as a 
``secondary county'' if 50 percent or more, but less than 65 percent, 
of workers living in the county also work within the county and the 
ratio of the number of workers working in the county to the number of 
workers living in the county is at least 0.75. After all the main and 
secondary counties are identified and grouped, each additional county 
that already has qualified for inclusion in the MSA falls within the 
metropolitan division associated with the main/secondary county or 
counties with which the county at issue has the highest employment 
interchange measure. Counties in a metropolitan division must be 
contiguous. In the FY 2005 IPPS final rule (69 FR 49029), CMS finalized 
our policy to use the metropolitan divisions where applicable under the 
CBSA definitions. CMS concluded that including the metropolitan 
divisions in the CBSA definitions most closely approximated the labor 
market delineation from the ``Primary Metropolitan Statistical Areas'' 
delineations in place prior to FY 2005.
    Under the current delineations, 11 MSAs are subdivided into a total 
of 31 metropolitan divisions. The revised OMB delineations have 
subdivided two additional existing MSAs into metropolitan divisions 
relative to the previous delineations, resulting in 13 MSAs (the 11 
currently subdivided MSAs plus two additional MSAs) that are subdivided 
into 37 metropolitan divisions. Since the configurations of most 
subdivided MSAs remain substantially similar in the revised 
delineations compared to those used for the wage index in FY 2024, to 
maintain continuity and predictability in labor market delineations, we 
proposed to continue our policy to include metropolitan divisions as 
separate CBSAs for wage index purposes.
3. Change to County-Equivalents in the State of Connecticut
    In a June 6, 2022, Notice (87 FR 34235 through 34240), the Census 
Bureau announced that it was implementing the State of Connecticut's 
request to replace the 8 counties in the State with 9 new ``Planning 
Regions.'' Planning regions now serve as county-equivalents within the 
CBSA system. OMB Bulletin No. 23-01 is the first set of revised 
delineations that referenced the new county-equivalents for 
Connecticut. We have evaluated the change in hospital assignments for 
Connecticut hospitals and proposed to adopt the planning regions as 
county equivalents for wage index purposes. As all forthcoming county-
based delineation data will utilize these new county-equivalent 
definitions for Connecticut, we believe it is necessary to adopt this 
migration from counties to planning region county-equivalents to 
maintain consistency with OMB Bulletin No. 23-01 and future OMB 
updates. We are providing the following crosswalk for each hospital in 
Connecticut with the current and proposed Federal Information 
Processing Standard (FIPS) county and county-equivalent codes and CBSA 
assignments.
BILLING CODE 4120-01-P

[[Page 69255]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.148

BILLING CODE 4120-01-C
    We note that we proposed that a remote location of a multicampus 
hospital currently indicated with 07B033 would be located in the same

[[Page 69256]]

CBSA as the main provider (070033). Therefore, consistent with the 
policy for remote locations of multicampus hospitals discussed in the 
FY 2019 IPPS/LTCH PPS final rule (83 FR 41369 through 41374), it would 
no longer be necessary to identify this remote location separately from 
the main provider for wage index purposes.
    We also note, as discussed in Section III.B.3 of the preamble of 
this final rule, we proposed to add both of the newly proposed rural 
planning regions in Connecticut to the list of ``Lugar'' counties.
4. Urban Counties That Become Rural Under the Revised OMB Delineations
    As previously discussed, we proposed to implement the revised OMB 
statistical 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 33 hospitals that were once considered 
part of an urban CBSA would be considered to be located in a rural 
area, beginning in FY 2025, under these revised OMB delineations. The 
following chart lists the 53 urban counties that will become rural 
under the revised OMB delineations. We note that there are four cases 
(CBSA 14100 [Bloomsburg-Berwick, PA], CBSA 19180 [Danville, IL], CBSA 
20700 [East Stroudsburg, PA], and CBSA 35100 [New Bern, NC]) where all 
constituent counties in an urban CBSA become rural under the revised 
OMB delineations.
BILLING CODE 4120-01-P

[[Page 69257]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.149

BILLING CODE 4120-01-C
    We proposed that the wage data for all hospitals located in the 
counties listed in the chart above would now be considered when 
calculating their

[[Page 69258]]

respective State's rural wage index. We refer readers to section 
III.G.6 of the preamble of this final rule for a discussion of the 5 
percent cap policy. We believe that this policy, which caps any 
reduction in a hospital's wage index value at 5 percent of the prior 
year wage index value, provides an adequate transition to mitigate any 
potential sudden negative financial impacts due to the adoption of wage 
index policies, including the adoption of revised OMB labor market 
delineations.
    We also proposed revisions to the list of counties deemed urban 
under section 1886(d)(8)(B) of the Act, which would affect a number of 
the hospitals located in these proposed rural counties. We note that we 
proposed to add 17 of the 53 counties listed above to the list of 
``Lugar'' counties whose hospitals, pursuant to section 1886(d)(8)(B), 
are deemed to be in an urban area. We refer readers to section 
III.F.4.b for further discussion.
    In addition, we note the provisions of Sec.  412.102 of our 
regulations continue to apply with respect to determining DSH payments. 
Specifically, in the first year after a hospital loses urban status, 
the hospital will receive an adjustment to its DSH payment that equals 
two-thirds of the difference between the urban DSH payments applicable 
to the hospital before its redesignation from urban to rural and the 
rural DSH payments applicable to the hospital subsequent to its 
redesignation from urban to rural. In the second year after a hospital 
loses urban status, the hospital will receive an adjustment to its DSH 
payment that equals one third of the difference between the urban DSH 
payments applicable to the hospital before its redesignation from urban 
to rural and the rural DSH payments applicable to the hospital 
subsequent to its redesignation from urban to rural.
5. Rural Counties That Become Urban Under the Revised OMB Delineations
    As previously discussed, we proposed to implement the revised OMB 
statistical area delineations (based upon OMB Bulletin No. 23-01) 
beginning in FY 2025. Analysis of these OMB statistical area 
delineations shows that a total of 54 counties (and county equivalents) 
and 24 hospitals that were located in rural areas would be located in 
urban areas under the revised OMB delineations. The following chart 
lists the 54 rural counties that will be urban under the revised OMB 
delineations.
BILLING CODE 4120-01-P

[[Page 69259]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.150


[[Page 69260]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.151

BILLING CODE 4120-01-C
    We proposed that when calculating the area wage index, the wage 
data for hospitals located in these counties would be included in their 
new respective urban CBSAs. We also note that due to the proposed 
adoption of the revised OMB delineations, some CAHs that were 
previously located in rural areas may be located in urban areas. The 
regulations at Sec. Sec.  412.103(a)(6) and 485.610(b)(5) provide 
affected CAHs with a two-year transition period that begins from the 
date the redesignation becomes effective. The affected CAHs must 
reclassify as rural during this transition period to retain their CAH 
status after the two-year transition period ends. We refer readers to 
the FY 2015 IPPS/LTCH final rule (79 FR 50162 through 50163) for 
further discussion of the two-year transition period for CAHs. We also 
note that special statuses limited to hospitals located in rural areas 
(such as MDH or SCH status) may be terminated if hospitals are located 
in proposed urban counties. In these cases, affected hospitals should 
apply for rural reclassification status under Sec.  412.103 prior to 
October 1, 2024, to ensure no disruption in status.
6. Urban Counties That Move to a Different Urban CBSA Under the Revised 
OMB Delineations
    In addition to rural counties becoming urban and urban counties 
becoming rural, some urban counties shift from one urban CBSA to a new 
or existing urban CBSA under the new OMB delineations.
    In some cases, the change in CBSA extends only to a change in name. 
Revised CBSA names can be found in Table 3 of the addendum of the final 
rule. In other cases, the CBSA number also changes. For these CBSAs, 
the list of constituent urban counties in FY 2024 and FY 2025 is the 
same (except in instances where an urban county became rural, or a 
rural county became urban, as discussed in the previous section). The 
following table lists the CBSAs where, under the new delineations, the 
CBSA name and number change but the constituent counties do not change 
(not including instances where an urban county became rural, or a rural 
county became urban).
[GRAPHIC] [TIFF OMITTED] TR28AU24.152

    In some cases, all of the urban counties from a FY 2024 CBSA have 
moved and been subsumed by another CBSA in FY 2025. The following table 
lists the CBSAs that, under the new delineations, are subsumed by an 
another CBSA.

[[Page 69261]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.153

    In other cases, some counties shift between existing and new CBSAs, 
changing the constituent makeup of the CBSAs. For example, Calvert 
County, MD moved from the current CBSA 12580 (Washington-Arlington-
Alexandria, DC-VA-MD-WV) into proposed CBSA 30500 (Lexington Park, MD). 
The other constituent counties of CBSA 12580 are split into urban CBSAs 
47664 (Washington, DC-MD) and 11694 (Arlington-Alexandria-Reston, VA-
WV). The following chart lists the urban counties that split off from 
one urban CBSA and move to a newly proposed or modified urban CBSA 
under the revised OMB delineations.
BILLING CODE 4120-01-P

[[Page 69262]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.154


[[Page 69263]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.155

BILLING CODE 4120-01-C
    For hospitals located in these counties that move from one CBSA to 
another under the revised OMB delineations, there may be impacts, both 
negative and positive, upon their specific wage index values. We refer 
readers to section III.F.3.b.. of the preamble of this final rule for 
discussion of our proposals to address the assignment of MGCRB wage 
index reclassifications for hospitals currently reclassified to these 
modified CBSAs.
    Comment: Multiple commenters were broadly supportive of CMS's 
proposed

[[Page 69264]]

update to the IPPS wage index with the revised OMB delineations and the 
continuation of the policy to cap wage index decreases that a hospital 
can experience in a given year. MedPAC reiterated its concern with 
flaws in the wage index methodology, including continued concern with 
the rise in the number of MGCRB reclassifications. MedPAC urged CMS to 
improve the accuracy and equity of Medicare's wage index methodologies 
for IPPS hospitals and other providers by ensuring that wage indexes 
are less manipulable, more accurately and precisely reflect geographic 
differences in market-wide labor costs, and limit how much wage index 
values can differ among providers that are competing for the same pool 
of labor. MedPAC cited its June 2023 report to Congress, which 
recommended that Congress repeal the existing Medicare wage index 
statutes, including current exceptions, and require the Secretary to 
phase in new wage index methodologies for hospitals and other types of 
providers that:
     use all-employer, occupation-level wage data with 
different occupation weights for the wage index of each provider type;
     reflect local area level differences in wages between and 
within metropolitan statistical areas and statewide rural areas; and
     smooth wage index differences across adjacent local areas.
    Another commenter requested that CMS solicit input from the 
hospital community on reforms to the wage index and efforts to improve 
the sustainability of workforce, especially in rural and underserved 
communities.
    Response: We appreciate the comments supporting adoption of the 
revised OMB delineations and refer commenters to section III.G.2 of 
this final rule for additional discussion of the continuation of the 5 
percent annual cap on hospital wage index reductions. We appreciate 
commenters' continued concern and MedPAC's recommendations for 
Congressional action on wage index reform. In the 2012 Report to 
Congress: Plan to Reform the Medicare Wage Index, CMS addressed several 
of MedPAC's recommendations and found significant benefits to an 
alternative wage index methodology. However, CMS concluded that any 
potential changes must be considered in conjunction with the 
statutorily required reclassifications and adjustments that are 
applicable to the current wage index determinations. There are several 
statutory provisions that enable a hospital to receive a wage index 
other than that which is computed for its geographic area. We believe 
that these provisions, which may have been designed to ameliorate or 
correct perceived inequities that hospitals may experience, would 
complicate the implementation of the significant modifications to the 
current wage index framework described in MedPAC's June 2023 report to 
Congress.
    Comment: A commenter did not agree with CMS' adoption of OMB's CBSA 
delineation revisions. The commenter stated that OMB cautions that 
CBSAs are not intended for any non-statistical uses and should only be 
used with full consideration of the effects of using these delineations 
for such purposes. Further, the commenter stated that the Metropolitan 
Areas Protection and Standardization Act (MAPS Act) bars the automatic 
propagation of OMB revisions in CBSA delineations to geographic area 
determinations in non-statistical federal programs, and shall propagate 
for any non-statistical use only if the relevant agency determines that 
such a propagation supports the purposes of the program, is in the 
public interest, and adopts the change through notice-and-comment 
rulemaking. The commenter contends that if CMS chooses to adopt new OMB 
delineations, CMS must fully explain why reliance on the updated CBSAs 
as set forth by OMB is appropriate for purposes of the FY 2025 hospital 
wage index adjustments. The commenter stated that CMS has not provided 
an appropriate rationale for relying on the updated CBSAs and proposed 
to adopt the revised CBSAs by default. The commenter contends that CMS 
must make a fact-specific determination of those CBSAs' suitability for 
Medicare reimbursement purposes, including whether it would be 
appropriate to use additional data to modify OMB's delineations to 
ensure that such changes are appropriate for purposes of defining 
regional labor markets for hospital workers.
    Response: CMS acknowledges that the CBSA definitions and 
delineations were not specifically created for the purpose of 
determining a hospital wage index. However, based on the reasons stated 
in prior rulemaking, we continue to believe that these definitions and 
delineations, which are regularly reviewed and updated by OMB, are the 
best proxy for CMS to use to adjust hospital payment rates based on 
geographic variations in labor costs in accordance with the statute. 
Section 1886(d)(3)(E) of the Act requires that, as part of the 
methodology for determining prospective payments to hospitals, the 
Secretary must adjust the standardized amounts ``for area differences 
in hospital wage levels by a factor (established by the Secretary) 
reflecting the relative hospital wage level in the geographic area of 
the hospital compared to the national average hospital wage level.'' We 
refer readers to the FY 1985 IPPS final rule (50 FR 24375 through 
24377) and the FY 1995 IPPS final rule (60 FR 29218 through 29220) for 
a history of the outreach, consultation, and discussion of the 
challenges faced in defining appropriate labor market areas for 
purposes of the wage index methodology. As with any classification 
system in which boundaries must be established, it is impossible to 
designate boundaries that will be completely satisfactory to all 
concerned. There was no consensus among the interested parties on a 
choice for new labor market areas, and CMS concluded the adoption and 
continuation of an MSA-based framework was the most prudent course of 
action. We also refer readers to the FY 2005 rule (69 FR 49027 through 
49028) for further discussion regarding the process and outreach CMS 
undertook before initially adopting OMB CBSAs as the basis for the wage 
index methodology. We found that the CBSA framework offered a useful 
proxy for labor market area delineations and that none of the 
alternative labor market areas that were studied provided a distinct 
improvement over the use of MSAs.
    As stated previously, CMS continued to evaluate other potential 
methods to calculate variations in geographic labor markets in a manner 
that maintains or improves consistency and equity in hospital payments 
in response to recommendations from MedPAC. However, as stated in the 
2012 Report to Congress: Plan to Reform the Medicare Wage Index (on the 
web at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Reform), CMS has concluded that 
implementing any of the recommended revisions to wage index 
methodologies would require Congressional action. The commenter did not 
suggest any alternative method for defining geographic labor market 
areas and, given our decades long history of using OMB CBSA (and the 
prior Primary MSA) definitions and delineations for wage index 
purposes, we continue to believe adopting OMB revisions in a timely 
manner is essential to the IPPS wage index by creating a more accurate 
representation of geographic variations in wage levels. CMS is aware of 
the MAPS Act requirements for the adoption of CBSA definitions for non-
statistical use and believes that we have

[[Page 69265]]

provided an adequate rationale to support our proposed adoption through 
notice and comment rulemaking. As we stated in the proposed rule (89 FR 
36140), we believe that using the revised delineations based on OMB 
Bulletin No. 23-01 will increase the integrity of the IPPS wage index 
by creating a more accurate representation of current geographic 
variations in wage levels. While the adoption of the revised 
delineations will have both positive and negative impacts on specific 
hospitals and labor markets, we believe that periodically updating the 
labor market delineations using objective criteria and based on the 
most recently available commuting data will serve the public's interest 
in ensuring accurate Medicare payments to hospitals under the IPPS by 
more accurately reflecting current geographic variations in labor costs 
in the hospital payment methodology. While some CBSAs would be modified 
in significant ways, the criteria for MSA, Micropolitan Statistical 
Area, and Metropolitan Division definitions finalized by OMB are 
generally consistent with past updates, and we do not find that the 
adoption of these delineations will create extreme variations in 
payments to hospitals, especially when considering the impact of the 
policy to cap annual wage index reductions at 5 percent. On this basis, 
and for the reasons we stated in prior rulemaking as described above, 
we have determined that their use supports the purpose of adjusting 
hospital payment rates based on geographic variations in labor costs in 
accordance with the statute. We have reviewed our findings and impacts 
relating to the new OMB delineations and find no compelling reason to 
delay implementation. Therefore, we are finalizing the proposed 
policies implementing the revised OMB delineations, including the 
policy for the treatment of Micropolitan Statistical areas, 
Metropolitan divisions, and the change to county-equivalent definitions 
for the State of Connecticut.
7. Transition
    Overall, we believe implementing the new OMB labor market area 
delineations would result in wage index values being more 
representative of the actual current costs of labor in a given area. 
However, we recognize that some hospitals would experience decreases in 
wage index values as a result of our proposed implementation of the new 
labor market area delineations. We also realize that some hospitals 
would have higher wage index values due to our proposed implementation 
of the new labor market area delineations.
    In the past, we have provided for transition periods when adopting 
changes that have significant payment implications, particularly large 
negative impacts. When adopting new OMB delineations based on the 
decennial census for the 2005 and 2015 wage indexes, we applied a 3-
year transition for urban hospitals that became rural under the new 
delineations and a 50/50 blended wage index adjustment for all 
hospitals that would experience any decrease in their actual payment 
wage index (69 FR 49032 through 49034 and 79 FR 28060 through 28062).
    In connection with our adoption in FY 2021 of the updates in OMB 
Bulletin 18-04, which included more modifications to the CBSAs than are 
typical for OMB bulletins issued between decennial censuses, we adopted 
a policy to place a 5 percent cap on any decrease in a hospital's wage 
index from the hospital's final wage index in FY 2020 so that a 
hospital's final wage index for FY 2021 would not be less than 95 
percent of its final wage index for FY 2020 (85 FR 58753 through 
58755). Given the unprecedented nature of the COVID-19 public health 
emergency (PHE), we adopted a policy in the FY 2022 IPPS/LTCH PPS final 
rule (86 FR 45164 through 45165) to apply an extended transition to the 
FY 2022 wage index for hospitals affected by the transition in FY 2021 
to mitigate significant negative impacts of, and provide additional 
time for hospitals to adapt to, the CMS decision to adopt the revised 
OMB delineations. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 
through 49021), under the authority at sections 1886(d)(3)(E) and 
1886(d)(5)(I)(i) of the Act, we finalized a policy for FY 2023 and 
subsequent years to apply a 5 percent cap on any decrease to a 
hospital's wage index from its wage index in the prior FY, regardless 
of the circumstances causing the decline.
    We believe that this permanent cap policy, reflected at 42 CFR 
412.64(h)(7) and discussed in section in III.G.6. of the preamble of 
this final rule, sufficiently mitigates any large negative impacts of 
adopting the new delineations. As we stated when finalizing the 
permanent 5 percent cap policy in the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 49018 through 49021), we further considered the comments we 
received during the FY 2022 rulemaking recommending a permanent 5 
percent cap policy to prevent large year-to-year variations in wage 
index values as a means to reduce overall volatility for hospitals. We 
do not believe any additional transition period is necessary 
considering that the current cap on wage index decreases, which was not 
in place when we implemented the decennial census updates in FY 2005 
and FY 2015, ensures that a hospital's wage index would not be less 
than 95 percent of its final wage index for the prior year.
    Comment: A commenter requested that in addition to the permanent 
cap policy, CMS implement a 3-year wage index transition period 
consistent with prior updates to the CBSA categorizations made due to 
OMB updates.
    Response: We note that when we previously adopted revised OMB 
delineations, the majority of negatively impacted hospitals received a 
wage index adjustment for only one fiscal year via a 50/50 blend of 
wage index values using the then-current and newly adopted delineations 
(79 FR 49960). Hospitals that were reassigned from an urban to rural 
area as a result of our adoption of the revised OMB delineations 
received a 3-year transition from their previous urban area, as long as 
they did not obtain a new MGCRB reclassification during that time 
period. As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49018 through 49021), the 5 percent cap on annual wage index reductions 
was intended to make unnecessary any future transitions in connection 
with wage index policy implementations, including the adoption of 
revised labor market area definitions. Based on our analysis of wage 
index differences between FY 2024 and FY 2025, we estimate that only 
117 hospitals (less that 4 percent) will receive a wage index cap that 
did not receive the cap in FY 2024. This indicates any impact on 
overall wage index values that could be caused by the adoption of the 
revised delineations would be relatively small. Furthermore, given the 
iterative and interactive effects of different reclassification and 
wage index hold-harmless policies, it is difficult to isolate the 
effects on wage index values (both positive and negative) that are due 
solely to the adoption of the revised delineations. That is, hospitals 
may make different reclassification decisions based on the transition 
policy, rather than the actual impacts of the revised delineations. We 
believe that any attempt to tailor a transition policy specifically to 
the impacts of adopting revised labor market delineations is not likely 
to yield results that more accurately reflect current differences in 
area wages than the 5 percent cap policy. We believe the 5 percent cap 
policy ensures that hospitals will not experience large payment 
reductions as a result of annual changes in their wage index value,

[[Page 69266]]

allows adequate time for hospitals to evaluate reclassification 
options, and provides consistency and predictability in wage index 
values. Largely due to the modification of the rural wage index 
calculation finalized in FY 2024 IPPS/LTCH final rule (88 FR 58971 
through 58977), a much larger number of urban and rural hospitals 
within the same state (nearly 60 percent) receive identical wage index 
values (prior to the application of other policies, such as the 
outmigration adjustment, 5 percent cap on annual wage index decreases, 
and low-wage index hospital policy). This fact suggests that there is 
even less need for separate transition policies for urban and rural 
hospitals in response to changes in geographic delineations than there 
was previously. Furthermore, we did not receive a comment from any 
hospital (urban or rural) citing specific negative impacts due solely 
or primarily to the proposed adoption of the revised OMB delineations. 
For these reasons, we do not believe it is necessary to implement any 
additional or alternative transition policy to the 5 percent cap 
discussed in section III.G.6 of this final rule.

C. Worksheet S-3 Wage Data for the FY 2025 Wage Index

1. Cost Reporting Periods Beginning in FY 2021 for FY 2025 Wage Index
    The FY 2025 wage index values are based on the data collected from 
the Medicare cost reports submitted by hospitals for cost reporting 
periods beginning in FY 2021 (the FY 2024 wage indexes were based on 
data from cost reporting periods beginning during FY 2020).
    The FY 2025 wage index includes all of the following categories of 
data associated with costs paid under the IPPS (as well as outpatient 
costs):
     Salaries and hours from short-term, acute care hospitals 
(including paid lunch hours and hours associated with military leave 
and jury duty).
     Home office costs and hours.
     Certain contract labor costs and hours, which include 
direct patient care, certain top management, pharmacy, laboratory, and 
nonteaching physician Part A services, and certain contract indirect 
patient care services (as discussed in the FY 2008 final rule with 
comment period (72 FR 47315 through 47317)).
     Wage-related costs, including pension costs (based on 
policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586 
through 51590) and modified in the FY 2016 IPPS/LTCH PPS final rule (80 
FR 49505 through 49508)) and other deferred compensation costs.
    Consistent with the wage index methodology for FY 2024, the wage 
index for FY 2025 excludes the direct and overhead salaries and hours 
for services not subject to IPPS payment, such as skilled nursing 
facility (SNF) services, home health services, costs related to GME 
(teaching physicians and residents) and certified registered nurse 
anesthetists (CRNAs), and other subprovider components that are not 
paid under the IPPS. The FY 2025 wage index also excludes the salaries, 
hours, and wage-related costs of hospital-based rural health clinics 
(RHCs), and Federally Qualified Health Centers (FQHCs), because 
Medicare pays for these costs outside of the IPPS (68 FR 45395). In 
addition, salaries, hours, and wage-related costs of CAHs are excluded 
from the wage index for the reasons explained in the FY 2004 IPPS final 
rule (68 FR 45397 through 45398). Similar to our treatment of CAHs, as 
discussed later in this section, we proposed to exclude Rural Emergency 
Hospitals (REHs) from the wage index.
    For FY 2020 and subsequent years, other wage-related costs are also 
excluded from the calculation of the wage index. As discussed in the FY 
2019 IPPS/LTCH final rule (83 FR 41365 through 41369), other wage-
related costs reported on Worksheet S-3, Part II, Line 18 and Worksheet 
S-3, Part IV, Line 25 and subscripts, as well as all other wage-related 
costs, such as contract labor costs, are excluded from the calculation 
of the wage index.
    Comment: One commenter encouraged CMS needs to give consideration 
to policy options that can incentivize safe staffing practices, for the 
sake of Medicare patients, without simultaneously encouraging hospitals 
to pay excessively high wages for temporary staff. The commenter also 
asked that CMS include sick leave in the wage index with the 
expectation that hospitals and other facilities will allow payment for 
the entire uncapped time that staff are sick.
    Response: We include the categories of data listed above that are 
associated with costs paid under the IPPS, which includes temporary 
staff. We also include sick leave in the wage index. For complete 
detail on what is allowed to be included in the wage data, we refer the 
reader to the Provider Reimbursement Manual (PRM), Part 2 (Pub. 15-2), 
Chapter 40, sections 4005.2-4005.4. Also, we appreciate the commenters 
concern with regard to safe staffing practices. We note, that since the 
time the end of the COVID-19 PHE, hospitals have begun to reduce their 
reliance on temporary staff such as traveling nurses. Also, some states 
have begun to explore capping the wages charged by travel nursing 
agencies. We thank the commenter for their input on this matter.
2. Use of Wage Index Data by Suppliers and Providers Other Than Acute 
Care Hospitals Under the IPPS
    Data collected for the IPPS wage index also are currently used to 
calculate wage indexes applicable to suppliers and other providers, 
such as SNFs, home health agencies (HHAs), ambulatory surgical centers 
(ASCs), and hospices. In addition, they are used for prospective 
payments to IRFs, IPFs, and LTCHs, and for hospital outpatient 
services. We note that, in the IPPS rules, we do not address comments 
pertaining to the wage indexes of any supplier or provider except IPPS 
providers and LTCHs. Such comments should be made in response to 
separate proposed rules for those suppliers and providers.
3. Verification of Worksheet S-3 Wage Data
    The wage data for the FY 2025 wage index were obtained from 
Worksheet S-3, Parts II, III and IV of the Medicare cost report, CMS 
Form 2552-10 (OMB Control Number 0938-0050 with an expiration date 
September 30, 2025) for cost reporting periods beginning on or after 
October 1, 2020, and before October 1, 2021. For wage index purposes, 
we refer to cost reports beginning on or after October 1, 2020, and 
before October 1, 2021, as the ``FY 2021 cost report,'' the ``FY 2021 
wage data,'' or the ``FY 2021 data.'' Instructions for completing the 
wage index sections of Worksheet S-3 are included in the Provider 
Reimbursement Manual (PRM), Part 2 (Pub. 15-2), Chapter 40, Sections 
4005.2 through 4005.4. The data file used to construct the FY 2025 wage 
index includes FY 2021 data submitted to us as of June 2024. As in past 
years, we performed an extensive review of the wage data, mostly 
through the use of edits designed to identify aberrant data.
    Consistent with the IPPS and LTCH PPS ratesettings, our policy 
principles with regard to the wage index include generally using the 
most current data and information available, which is usually data on a 
4-year lag (for example, for the FY 2023 wage index we used cost report 
data from FY 2019). We stated in the FY 2023 IPPS/LTCH final rule (87 
FR 48994) that we will be looking at the differential effects of the 
COVID-19 PHE on the audited wage data in future fiscal years. We also 
stated we plan to review the audited

[[Page 69267]]

wage data, and the impacts of the COVID-19 PHE on such data and 
evaluate these data for future rulemaking. For the FY 2025 wage index, 
the best available data typically would be from the FY 2021 wage data.
    In the proposed rule we stated that in considering the impacts of 
the COVID-19 PHE on the FY 2021 wage data, we compared that data with 
recent historical data. Based on pre reclassified wage data, the 
changes in the wage data from FY 2020 to FY 2021 show the following 
compared to the annual changes for the most recent 3 fiscal year 
periods (that is, FY 2017 to FY 2018, FY 2018 to FY 2019 and FY 2019 to 
FY 2020):
     Approximately 91 percent of hospitals have an increase in 
their average hourly wage (AHW) from FY 2020 to FY 2021 compared to a 
range of 76-86 percent of hospitals for the most recent 3 fiscal year 
periods.
     Approximately 97 percent of all CBSA AHWs are increasing 
from FY 2020 to FY 2021 compared to a range of 84-91 percent of all 
CBSA AHWs for the most recent 3 fiscal year periods.
     Approximately 51 percent of all urban areas have an 
increase in their area wage index from FY 2020 to FY 2021 compared to a 
range of 36-43 percent of all urban areas for the most recent 3 fiscal 
year periods.
     Approximately 55 percent of all rural areas have an 
increase in their area wage index from FY 2020 to FY 2021 compared to a 
range of 31-46 percent of all rural areas for the most recent 3 fiscal 
year periods.
     The unadjusted national average hourly wage increased by a 
range of 2.4-5.4 percent per year from FY 2017-FY 2020. For FY 2021, 
the unadjusted national average hourly increased by 8.7 percent from FY 
2020.
    Similar to the FY 2024 wage index, we stated it is not readily 
apparent even if the comparison with the historical trends had 
indicated greater differences at a national level in this context, how 
any changes due to the COVID-19 PHE differentially impacted the wages 
paid by individual hospitals. Furthermore, even if changes due to the 
COVID-19 PHE did differentially impact the wages paid by individual 
hospitals over time, it is not clear how those changes could be 
isolated from changes due to other reasons and what an appropriate 
potential methodology might be to adjust the data to account for the 
effects of the COVID-19 PHE.
    Lastly, we also noted that we have not identified any significant 
issues with the FY 2021 wage data itself in terms of our audits of this 
data. As usual, the data was audited by the Medicare Administrative 
Contractors (MACs), and there were no significant issues reported 
across the data for all hospitals.
    Taking all of these factors into account, we stated that we believe 
the FY 2021 wage data is the best available wage data to use for FY 
2025 and proposed to use the FY 2021 wage data for FY 2025.
    We welcomed comments from the public with regard to the FY 2021 
wage data. We also noted, AHW data by provider and CBSA, including the 
data upon which the comparisons provided previously are based, is 
available in our Public Use Files released with each proposed and final 
rule each fiscal year. The Public Use Files for the respective FY Wage 
Index Home Page can be found on the Wage Index Files web page at 
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/wage-index-files.
    Comment: A commenter noted that for FY 2025, CMS proposed to use 
data from the FY 2021 cost reports to determine the area wage index 
modifications. The commenter stated that CMS is already using the FY 
2022 cost reports for rate setting and therefore CMS should use the FY 
2022 cost reports for area wage index modifications.
    Response: As discussed previously, the latest available audited 
wage data is from FY 2021. We do not possess audited wage data from a 
more recent period. We are uncertain to what the commenter meant to 
refer with respect to the use of FY 2022 cost reports for rate setting 
and are unable to respond further to the commenter's suggestion.
    Comment: One commenter stated that although CMS provides some 
information about this analysis, they recommend CMS provide additional 
information, such as specific tables or files for the public to review, 
to confirm the agency's conclusion. The commenter stated that they are 
skeptical of the agency's conclusion, as workforce costs continue to 
account for a substantial portion of hospital expenses, driven in part 
by use of contract labor and shortages that were accelerated by many of 
the impacts of the pandemic.
    Response: As stated above, AHW data by provider and CBSA, including 
the data upon which the comparisons as previously described are based, 
is available in our Public Use Files released with each proposed and 
final rule each fiscal year. The Public Use Files for the respective FY 
Wage Index Home Page can be found on the Wage Index Files web page at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files. Also, as usual, the data was 
audited by the MACs, and there were no significant issues reported 
across the data for all hospitals including contract labor.
    We did not receive any other comments regarding the use of the FY 
2021 wage data for FY 2025. We are finalizing as proposed to use the FY 
2021 wage data for the FY 2025 wage index.
    We requested that our MACs revise or verify data elements that 
resulted in specific edit failures. For the proposed FY 2025 wage 
index, we identified and excluded 69 providers with aberrant data that 
should not be included in the wage index. However, we stated that if 
data elements for some of these providers are corrected, we intend to 
include data from those providers in the final FY 2025 wage index. We 
also adjusted certain aberrant data and included these data in the wage 
index. For example, in situations where a hospital did not have 
documentable salaries, wages, and hours for housekeeping and dietary 
services, we imputed estimates, in accordance with policies established 
in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). We 
instructed MACs to complete their verification of questionable data 
elements and to transmit any changes to the wage data no later than 
March 20, 2024. After we issued the proposed rule, for the final FY 
2025 wage index, we restored the data of 8 hospitals to the wage index, 
because their data was either verified or improved and removed the data 
of 3 hospitals with aberrant data. Thus, 64 hospitals with aberrant 
data remain excluded from the FY 2025 wage index (69-8 + 3 = 64).
    Comment: One commenter stated that certain Medicare Administrative 
Contractors (MACs) may be taking different stances on whether to allow 
or how to calculate the allowable portion of contract labor when 
determining a hospital's wage index. The commenter indicated that 
although it seems some MACs have taken steps to correct this after 
hospitals have appealed such actions, CMS should ensure a uniform 
process is followed.
    Response: All hospitals and MACs are provided with the same 
instructions for reviewing the wage data, including instructions for 
determining the allowable portion of contract labor. Also, complete 
instructions with regard to what hospitals can and cannot include in 
the wage data and contract labor are in PRM, Part 2 (Pub. 15-2), 
Chapter 40, section 4005.2. Further, as the commenter mentions, if 
there is an issue during the review process,

[[Page 69268]]

hospitals can follow the appeal process described below.
    In constructing the proposed FY 2025 wage index, we included the 
wage data for facilities that were IPPS hospitals in FY 2021, inclusive 
of those facilities that have since terminated their participation in 
the program as hospitals, as long as those data did not fail any of our 
edits for reasonableness. We stated in the proposed rule (89 FR 36151-
36152) that we believe that including the wage data for these hospitals 
is, in general, appropriate to reflect the economic conditions in the 
various labor market areas during the relevant past period and to 
ensure that the current wage index represents the labor market area's 
current wages as compared to the national average of wages. However, we 
excluded the wage data for CAHs as discussed in the FY 2004 IPPS final 
rule (68 FR 45397 through 45398); that is, any hospital that is 
designated as a CAH by 7 days prior to the publication of the 
preliminary wage index public use file (PUF) is excluded from the 
calculation of the wage index. For the proposed FY 2025 wage index, we 
removed 8 hospitals that converted to CAH status on or after January 
23, 2023, the cut-off date for CAH exclusion from the FY 2024 wage 
index, and through and including January 24, 2024, the cut-off date for 
CAH exclusion from the FY 2025 wage index. We noted that we also 
removed 2 hospitals that converted to CAH status prior to January 23, 
2023. We did not receive any comments with regard to this proposal, and 
we are finalizing as proposed to exclude hospitals that have 
subsequently converted to CAH from the wage index calculation. Since 
the proposed rule, we learned of 1 more hospital that converted to CAH 
status on or after January 22, 2023, and through and including January 
23, 2024. We removed this additional hospital from the FY 2025 wage 
index due to its conversion to CAH status.
    The Consolidated Appropriations Act (CAA), 2021, was signed into 
law on December 27, 2020. Section 125 of Division CC (section 125) 
established a new rural Medicare provider type: Rural Emergency 
Hospitals (REHs). (We refer the reader to the CMS website at https://www.cms.gov/medicare/health-safety-standards/guidance-for-laws-regulations/hospitals/rural-emergency-hospitals for additional 
information on REHs.) In doing so, section 125 amended section 1861(e) 
of the Act, which provides the definition of a hospital and states that 
the term ``hospital'' does not include, unless the context otherwise 
requires, a critical access hospital (as defined in subsection (mm)(1)) 
or a rural emergency hospital (as defined in subsection (kkk)(2)). 
Section 125 also added section 1861(kkk) to the Act, which sets forth 
the requirements for REHs. Per section 1861(kkk)(2) of the Act, one of 
the requirements for an REH is that it does not provide any acute care 
inpatient services (other than post-hospital extended care services 
furnished in a distinct part unit licensed as a skilled nursing 
facility (SNF)). In the proposed rule we stated that, similar to CAHs, 
we believe hospitals that have subsequently converted to REH status 
should be removed from the wage index calculation, because they are a 
separately certified Medicare provider type and are not comparable to 
other short-term, acute care hospitals as they do not provide inpatient 
hospital services. For FY 2025, we proposed to treat REHs the same as 
CAHs and to exclude 15 REHs from the wage index. Accordingly, we 
proposed that, similar to our policy on CAHs, any hospital that is 
designated as a REH by 7 days prior to the publication of the 
preliminary wage index public use file (PUF) is excluded from the 
calculation of the wage index. We did not receive any comments with 
regard to this proposal, and we are finalizing as proposed to exclude 
hospitals that have subsequently converted to REH from the wage index 
calculation. Since the proposed rule, we learned of 4 more hospitals 
that converted to REH status on or after January 22, 2023, and through 
and including January 23, 2024, the cut-off date for REH exclusion from 
the FY 2025 wage index, for a total of 19 hospitals that were removed 
from the FY 2025 wage index due to conversion to REH status. In 
summary, we calculated the FY 2025 wage index using the Worksheet S-3, 
Parts II and III wage data of 3,074 hospitals.
    For the FY 2025 wage index, we allotted the wages and hours data 
for a multicampus hospital among the different labor market areas where 
its campuses are located using campus full-time equivalent (FTE) 
percentages as originally finalized in the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51591). Table 2, which contains the FY 2025 wage index 
associated with this final rule (available via the internet on the CMS 
website), includes separate wage data for the campuses of 26 
multicampus hospitals. The following chart lists the multicampus 
hospitals by CMS certification number (CCN) and the FTE percentages on 
which the wages and hours of each campus were allotted to their 
respective labor market areas:
BILLING CODE 4120-01-P

[[Page 69269]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.156

BILLING CODE 4120-01-C
    We note that, in past years, in Table 2, we have placed a ``B'' to 
designate the subordinate campus in the fourth position of the hospital 
CCN. However, for the FY 2019 IPPS/LTCH PPS proposed and final rules 
and subsequent rules, we have moved the ``B'' to the third position of 
the CCN. Because all IPPS hospitals have a ``0'' in the third position 
of the CCN, we believe that placement of the ``B'' in this third 
position, instead of the ``0'' for the subordinate campus, is the most 
efficient method of identification and interferes the least with the 
other variable digits in the CCN.
4. Process for Requests for Wage Index Data Corrections
a. Process for Hospitals To Request Wage Index Data Corrections
    The preliminary, unaudited Worksheet S-3 wage data files for the 
proposed FY 2025 wage index were made available on May 23, 2023, 
through the internet on the CMS website at https://www.cms.gov/medicare/medicare-fee-service-payment/acuteinpatientpps/wage-index-files/fy-2025-wage-index-home-page. We subsequently identified some 
providers that were inadvertently omitted from the FY 2025 preliminary 
Worksheet S-3 wage data file originally posted on May 23, 2023. 
Therefore, on July 12, 2023, we posted an updated FY 2025 preliminary 
Worksheet S-3 wage data file to include these missing providers. In 
addition, the Calendar Year (CY) 2022 occupational mix survey data was 
made available on July 12, 2023, through the internet on the CMS 
website at https://www.cms.gov/medicare/medicare-fee-service-payment/acuteinpatientpps/wage-index-files/fy-2025-wage-index-home-page. On 
August 14, 2023, we posted an updated CY 2022 Occupational Mix survey 
data file that includes survey data for providers that were 
inadvertently omitted from the file posted on July 12, 2023.
    On January 31, 2024, we posted a public use file (PUF) at https://www.cms.gov/medicare/medicare-fee-service-payment/acuteinpatientpps/wage-index-files/fy-2025-wage-index-home-page containing FY 2025 wage 
index data available as of January 31, 2024. This PUF contains a tab 
with the Worksheet S-3 wage data (which includes Worksheet S-3, Parts 
II and III wage data from cost reporting periods beginning on or after 
October 1, 2020, through September 30, 2021; that is, FY 2021 wage 
data), a tab with the occupational mix data (which includes data from 
the CY 2022 occupational mix survey, Form CMS-10079), a tab containing 
the Worksheet S-3 wage data of hospitals deleted from the January 31, 
2024 wage data PUF, and a tab containing the CY 2022 occupational mix 
data of the hospitals deleted from the January 31, 2024 occupational 
mix PUF. In a memorandum dated January 31, 2024, we instructed all MACs 
to inform the IPPS hospitals that they service of the availability of 
the January 31, 2024, wage index data PUFs, and the process and 
timeframe for requesting revisions in accordance with the FY 2025 
Hospital Wage Index Development Time Table available at https://www.cms.gov/files/document/fy2025-hospital-wage-index-development-timetable.pdf.
    In the interest of meeting the data needs of the public, beginning 
with the proposed FY 2009 wage index, we post an additional PUF on the 
CMS website that reflects the actual data that are used in computing 
the proposed wage index. The release of this file does not alter the 
current wage index process or schedule. We notify the hospital 
community of the availability of these data as we do with the current 
public use wage data files through our Hospital Open Door Forum. We 
encourage hospitals to sign up for automatic notifications of 
information

[[Page 69270]]

about hospital issues and about the dates of the Hospital Open Door 
Forums at the CMS website at https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums.
    In a memorandum dated May 4, 2023, we instructed all MACs to inform 
the IPPS hospitals that they service of the availability of the 
preliminary wage index data files and the CY 2022 occupational mix 
survey data files posted on May 23, 2023, and the process and timeframe 
for requesting revisions.
    If a hospital wished to request a change to its data as shown in 
the May 23, 2023, preliminary wage data files and occupational mix data 
files, the hospital had to submit corrections along with complete, 
detailed supporting documentation to its MAC so that the MAC received 
them by September 1, 2023. Hospitals were notified of these deadlines 
and of all other deadlines and requirements, including the requirement 
to review and verify their data as posted in the preliminary wage index 
data files on the internet, through the letters sent to them by their 
MACs.
    November 3, 2023, was the date by when MACs notified State hospital 
associations regarding hospitals that failed to respond to issues 
raised during the desk reviews. Additional revisions made by the MACs 
were transmitted to CMS throughout January 2024. CMS published the wage 
index PUFs that included hospitals' revised wage index data on January 
31, 2024. Hospitals had until February 16, 2024, to submit requests to 
the MACs to correct errors in the January 31, 2024, PUF due to CMS or 
MAC mishandling of the wage index data, or to revise desk review 
adjustments to their wage index data as included in the January 31, 
2024, PUF. Hospitals also were required to submit sufficient 
documentation to support their requests. Hospitals' requests and 
supporting documentation must have been received by the MAC by the 
February deadline (that is, by February 16, 2024, for the FY 2025 wage 
index).
    After reviewing requested changes submitted by hospitals, MACs were 
required to transmit to CMS any additional revisions resulting from the 
hospitals' reconsideration requests by March 20, 2024. Under our 
current policy as adopted in the FY 2018 IPPS/LTCH PPS final rule (82 
FR 38153), the deadline for a hospital to request CMS intervention in 
cases where a hospital disagreed with a MAC's handling of wage data on 
any basis (including a policy, factual, or other dispute) was April 3, 
2024. Data that were incorrect in the preliminary or January 31, 2024, 
wage index data PUFs, but for which no correction request was received 
by the February 16, 2024, deadline, are not considered for correction 
at this stage. In addition, April 3, 2024, was the deadline for 
hospitals to dispute data corrections made by CMS of which the hospital 
was notified after the January 31, 2024, PUF and at least 14 calendar 
days prior to April 3, 2024 (that is, March 20, 2024), that do not 
arise from a hospital's request for revisions. The hospital's request 
and supporting documentation must be received by CMS (and a copy 
received by the MAC) by the April deadline (that is, by April 3, 2024, 
for the FY 2025 wage index). We refer readers to the FY 2025 Hospital 
Wage Index Development Time Table for complete details.
    Hospitals were given the opportunity to examine Table 2 associated 
with the proposed rule, which is listed in section VI. of the Addendum 
to the proposed rule and available via the internet on the CMS website 
at https://www.cms.gov/medicare/medicare-fee-service-payment/acuteinpatientpps/wage-index-files/fy-2025-wage-index-home-page. Table 
2 associated with the proposed rule contained each hospital's proposed 
adjusted average hourly wage used to construct the wage index values 
for the past 3 years, including the proposed FY 2025 wage index, which 
was constructed from FY 2021 data. We noted in the proposed rule that 
the proposed hospital average hourly wages shown in Table 2 only 
reflected changes made to a hospital's data that were transmitted to 
CMS by early February 2024.
    We posted the final wage index data PUFs on April 29, 2024, on the 
CMS website at https://www.cms.gov/medicare/medicare-fee-service-payment/acuteinpatientpps/wage-index-files/fy-2025-wage-index-home-page. The April 2024 PUFs are made available solely for the limited 
purpose of identifying any potential errors made by CMS or the MAC in 
the entry of the final wage index data that resulted from the 
correction process (the process for disputing revisions submitted to 
CMS by the MACs by March 20, 2024, and the process for disputing data 
corrections made by CMS that did not arise from a hospital's request 
for wage data revisions as discussed earlier), as previously described.
    After the release of the April 2024 wage index data PUFs, changes 
to the wage and occupational mix data can only be made in those very 
limited situations involving an error by the MAC or CMS that the 
hospital could not have known about before its review of the final wage 
index data files. Specifically, neither the MAC nor CMS will approve 
the following types of requests:
     Requests for wage index data corrections that were 
submitted too late to be included in the data transmitted to CMS by the 
MACs on or before March 20, 2024.
     Requests for correction of errors that were not, but could 
have been, identified during the hospital's review of the January 31, 
2024, wage index PUFs.
     Requests to revisit factual determinations or policy 
interpretations made by the MAC or CMS during the wage index data 
correction process.
    If, after reviewing the April 2024 final wage index data PUFs, a 
hospital believes that its wage or occupational mix data are incorrect 
due to a MAC or CMS error in the entry or tabulation of the final data, 
the hospital is given the opportunity to notify both its MAC and CMS 
regarding why the hospital believes an error exists and provide all 
supporting information, including relevant dates (for example, when it 
first became aware of the error). The hospital was required to send its 
request to CMS and to the MAC so that it was received no later than May 
29, 2024. May 29, 2024, was also the deadline for hospitals to dispute 
data corrections made by CMS of which the hospital was notified on or 
after 13 calendar days prior to April 3, 2024 (that is, March 21, 
2024), and at least 14 calendar days prior to May 29, 2024 (that is, 
May 15, 2024), that did not arise from a hospital's request for 
revisions. (Data corrections made by CMS of which a hospital is 
notified on or after 13 calendar days prior to May 29, 2024 (that is, 
May 16, 2024), may be appealed to the Provider Reimbursement Review 
Board (PRRB)). In accordance with the FY 2025 Hospital Wage Index 
Development Time Table posted on the CMS website at https://www.cms.gov/files/document/fy2025-hospital-wage-index-development-timetable.pdf, the May appeals were required to be submitted to CMS 
through an online submission process or through email. We refer readers 
to the FY 2025 Hospital Wage Index Development Time Table for complete 
details.
    Verified corrections to the wage index data received timely (that 
is, by May 29, 2024) by CMS and the MACs were incorporated into the 
final FY 2025 wage index, which will be effective October 1, 2024.
    We created the processes previously described to resolve all 
substantive wage index data correction disputes before we finalize the 
wage and occupational mix data for the FY 2025 payment rates. 
Accordingly, hospitals

[[Page 69271]]

that do not meet the procedural deadlines set forth earlier will not be 
afforded a later opportunity to submit wage index data corrections or 
to dispute the MAC's decision with respect to requested changes. 
Specifically, our policy is that hospitals that do not meet the 
procedural deadlines as previously set forth (requiring requests to 
MACs by the specified date in February and, where such requests are 
unsuccessful, requests for intervention by CMS by the specified date in 
April) will not be permitted to challenge later, before the PRRB, the 
failure of CMS to make a requested data revision. We refer readers also 
to the FY 2000 IPPS final rule (64 FR 41513) for a discussion of the 
parameters for appeals to the PRRB for wage index data corrections. As 
finalized in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 
38156), this policy also applies to a hospital disputing corrections 
made by CMS that do not arise from a hospital's request for a wage 
index data revision. That is, a hospital disputing an adjustment made 
by CMS that did not arise from a hospital's request for a wage index 
data revision is required to request a correction by the first 
applicable deadline. Hospitals that do not meet the procedural 
deadlines set forth earlier will not be afforded a later opportunity to 
submit wage index data corrections or to dispute CMS' decision with 
respect to changes.
    Again, we believe the wage index data correction process described 
earlier provides hospitals with sufficient opportunity to bring errors 
in their wage and occupational mix data to the MAC's attention. 
Moreover, because hospitals had access to the final wage index data 
PUFs by late April 2024, they have an opportunity to detect any data 
entry or tabulation errors made by the MAC or CMS before the 
development and publication of the final FY 2025 wage index by August 
2024, and the implementation of the FY 2025 wage index on October 1, 
2024. Given these processes, the wage index implemented on October 1 
should be accurate. Nevertheless, in the event that errors are 
identified by hospitals and brought to our attention after May 29, 
2024, we retain the right to make midyear changes to the wage index 
under very limited circumstances.
    Specifically, in accordance with Sec.  412.64(k)(1) of our 
regulations, we make midyear corrections to the wage index for an area 
only if a hospital can show that: (1) The MAC or CMS made an error in 
tabulating its data; and (2) the requesting hospital could not have 
known about the error or did not have an opportunity to correct the 
error, before the beginning of the fiscal year. For purposes of this 
provision, ``before the beginning of the fiscal year'' means by the May 
deadline for making corrections to the wage data for the following 
fiscal year's wage index (for example, May 29, 2024, for the FY 2025 
wage index). This provision is not available to a hospital seeking to 
revise another hospital's data that may be affecting the requesting 
hospital's wage index for the labor market area. As indicated earlier, 
because CMS makes the wage index data available to hospitals on the CMS 
website prior to publishing both the proposed and final IPPS rules, and 
the MACs notify hospitals directly of any wage index data changes after 
completing their desk reviews, we do not expect that midyear 
corrections will be necessary. However, under our current policy, if 
the correction of a data error changes the wage index value for an 
area, the revised wage index value will be effective prospectively from 
the date the correction is made.
    In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and 
47485), we revised Sec.  412.64(k)(2) to specify that, effective on 
October 1, 2005, that is, beginning with the FY 2006 wage index, a 
change to the wage index can be made retroactive to the beginning of 
the Federal fiscal year only when CMS determines all of the following: 
(1) The MAC or CMS made an error in tabulating data used for the wage 
index calculation; (2) the hospital knew about the error and requested 
that the MAC and CMS correct the error using the established process 
and within the established schedule for requesting corrections to the 
wage index data, before the beginning of the fiscal year for the 
applicable IPPS update (that is, by the May 29, 2024, deadline for the 
FY 2025 wage index); and (3) CMS agreed before October 1 that the MAC 
or CMS made an error in tabulating the hospital's wage index data and 
the wage index should be corrected.
    In those circumstances where a hospital requested a correction to 
its wage index data before CMS calculated the final wage index (that 
is, by the May 29, 2024 deadline for the FY 2025 wage index), and CMS 
acknowledges that the error in the hospital's wage index data was 
caused by CMS' or the MAC's mishandling of the data, we believe that 
the hospital should not be penalized by our delay in publishing or 
implementing the correction. As with our current policy, we indicated 
that the provision is not available to a hospital seeking to revise 
another hospital's data. In addition, the provision cannot be used to 
correct prior years' wage index data; it can only be used for the 
current Federal fiscal year. In situations where our policies would 
allow midyear corrections other than those specified in Sec.  
412.64(k)(2)(ii), we continue to believe that it is appropriate to make 
prospective-only corrections to the wage index.
    We note that, as with prospective changes to the wage index, the 
final retroactive correction will be made irrespective of whether the 
change increases or decreases a hospital's payment rate. In addition, 
we note that the policy of retroactive adjustment will still apply in 
those instances where a final judicial decision reverses a CMS denial 
of a hospital's wage index data revision request.
b. Process for Data Corrections by CMS After the January 31 Public Use 
File (PUF)
    The process set forth with the wage index timetable discussed in 
section III.C.4. of the preamble of this final rule allows hospitals to 
request corrections to their wage index data within prescribed 
timeframes. In addition to hospitals' opportunity to request 
corrections of wage index data errors or MACs' mishandling of data, CMS 
has the authority under section 1886(d)(3)(E) of the Act to make 
corrections to hospital wage index and occupational mix data to ensure 
the accuracy of the wage index. As we explained in the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49490 through 49491) and the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56914), section 1886(d)(3)(E) of the Act 
requires the Secretary to adjust the proportion of hospitals' costs 
attributable to wages and wage-related costs for area differences 
reflecting the relative hospital wage level in the geographic areas of 
the hospital compared to the national average hospital wage level. We 
believe that, under section 1886(d)(3)(E) of the Act, we have 
discretion to make corrections to hospitals' data to help ensure that 
the costs attributable to wages and wage-related costs in fact 
accurately reflect the relative hospital wage level in the hospitals' 
geographic areas.
    We have an established multistep, 15-month process for the review 
and correction of the hospital wage data that is used to create the 
IPPS wage index for the upcoming fiscal year. Since the origin of the 
IPPS, the wage index has been subject to its own annual review process, 
first by the MACs, and then by CMS. As a standard practice, after each 
annual desk review, CMS reviews the results of the MACs' desk reviews 
and focuses on items flagged during the desk

[[Page 69272]]

review, requiring that, if necessary, hospitals provide additional 
documentation, adjustments, or corrections to the data. This ongoing 
communication with hospitals about their wage data may result in the 
discovery by CMS of additional items that were reported incorrectly or 
other data errors, even after the posting of the January 31 PUF, and 
throughout the remainder of the wage index development process. In 
addition, the fact that CMS analyzes the data from a regional and even 
national level, unlike the review performed by the MACs that review a 
limited subset of hospitals, can facilitate additional editing of the 
data the need for which may not be readily apparent to the MACs. In 
these occasional instances, an error may be of sufficient magnitude 
that the wage index of an entire CBSA is affected. Accordingly, CMS 
uses its authority to ensure that the wage index accurately reflects 
the relative hospital wage level in the geographic area of the hospital 
compared to the national average hospital wage level, by continuing to 
make corrections to hospital wage data upon discovering incorrect wage 
data, distinct from instances in which hospitals request data 
revisions.
    We note that CMS corrects errors to hospital wage data as 
appropriate, regardless of whether that correction will raise or lower 
a hospital's average hourly wage. For example, as discussed in section 
III.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41364), in situations where a hospital did not have documentable 
salaries, wages, and hours for housekeeping and dietary services, we 
imputed estimates, in accordance with policies established in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). Furthermore, 
if CMS discovers after conclusion of the desk review, for example, that 
a MAC inadvertently failed to incorporate positive adjustments 
resulting from a prior year's wage index appeal of a hospital's wage-
related costs such as pension, CMS would correct that data error, and 
the hospital's average hourly wage would likely increase as a result.
    While we maintain CMS' authority to conduct additional review and 
make resulting corrections at any time during the wage index 
development process, in accordance with the policy finalized in the FY 
2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156) and as first 
implemented with the FY 2019 wage index (83 FR 41389), hospitals are 
able to request further review of a correction made by CMS that did not 
arise from a hospital's request for a wage index data correction. 
Instances where CMS makes a correction to a hospital's data after the 
January 31 PUF based on a different understanding than the hospital 
about certain reported costs, for example, could potentially be 
resolved using this process before the final wage index is calculated. 
We believe this process and the timeline for requesting review of such 
corrections (as described earlier and in the FY 2018 IPPS/LTCH PPS 
final rule) promote additional transparency in instances where CMS 
makes data corrections after the January 31 PUF and provide 
opportunities for hospitals to request further review of CMS changes in 
time for the most accurate data to be reflected in the final wage index 
calculations. These additional appeals opportunities are described 
earlier and in the FY 2025 Hospital Wage Index Development Time Table, 
as well as in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 
38156).

D. Method for Computing the FY 2025 Unadjusted Wage Index

    The method used to compute the proposed FY 2025 wage index without 
an occupational mix adjustment follows the same methodology that we 
used to compute the wage indexes without an occupational mix adjustment 
in the FY 2021 IPPS/LTCH PPS final rule (see 85 FR 58758-58761), and we 
did not propose any changes to this methodology. We have restated our 
methodology in this section of this rule.
    Step 1.--We gathered data from each of the non-Federal, short-term, 
acute care hospitals for which data were reported on the Worksheet S-3, 
Parts II and III of the Medicare cost report for the hospital's cost 
reporting period relevant to the wage index (in this case, for FY 2025, 
these were data from cost reports for cost reporting periods beginning 
on or after October 1, 2020, and before October 1, 2021). In addition, 
we included data from hospitals that had cost reporting periods 
beginning prior to the October 1, 2020 begin date and extending into FY 
2021 but that did not have any cost report with a begin date on or 
after October 1, 2020 and before October 1, 2021. We include this data 
because no other data from these hospitals would be available for the 
cost reporting period as previously described, and because particular 
labor market areas might be affected due to the omission of these 
hospitals. However, we generally describe these wage data as data 
applicable to the fiscal year wage data being used to compute the wage 
index for those hospitals. We note that, if a hospital had more than 
one cost reporting period beginning during FY 2021 (for example, a 
hospital had two short cost reporting periods beginning on or after 
October 1, 2020, and before October 1, 2021), we include wage data from 
only one of the cost reporting periods, the longer, in the wage index 
calculation. If there was more than one cost reporting period and the 
periods were equal in length, we included the wage data from the later 
period in the wage index calculation.
    Step 2.--Salaries.--The method used to compute a hospital's average 
hourly wage excludes certain costs that are not paid under the IPPS. 
(We note that, beginning with FY 2008 (72 FR 47315), we included what 
were then Lines 22.01, 26.01, and 27.01 of Worksheet S-3, Part II of 
CMS Form 2552-96 for overhead services in the wage index. Currently, 
these lines are lines 28, 33, and 35 on CMS Form 2552-10. However, we 
note that the wages and hours on these lines are not incorporated into 
Line 101, Column 1 of Worksheet A, which, through the electronic cost 
reporting software, flows directly to Line 1 of Worksheet S-3, Part II. 
Therefore, the first step in the wage index calculation is to compute a 
``revised'' Line 1, by adding to the Line 1 on Worksheet S-3, Part II 
(for wages and hours respectively) the amounts on Lines 28, 33, and 
35.) In calculating a hospital's Net Salaries (we note that we 
previously used the term ``average'' salaries in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51592), but we now use the term ``net'' salaries) 
plus wage-related costs, we first compute the following: Subtract from 
Line 1 (total salaries) the GME and CRNA costs reported on CMS Form 
2552-10, Lines 2, 4.01, 7, and 7.01, the Part B salaries reported on 
Lines 3, 5 and 6, home office salaries reported on Line 8, and exclude 
salaries reported on Lines 9 and 10 (that is, direct salaries 
attributable to SNF services, home health services, and other 
subprovider components not subject to the IPPS). We also subtract from 
Line 1 the salaries for which no hours were reported. Therefore, the 
formula for Net Salaries (from Worksheet S-3, Part II) is the 
following:

((Line 1 + Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line 4.01 + 
Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)).

    To determine Total Salaries plus Wage-Related Costs, we add to the 
Net Salaries the costs of contract labor for direct patient care, 
certain top management, pharmacy, laboratory, and nonteaching physician 
Part A services (Lines 11, 12 and 13), home office salaries and wage-
related costs reported by the hospital on Lines 14.01, 14.02, and 15, 
and nonexcluded area wage-

[[Page 69273]]

related costs (Lines 17, 22, 25.50, 25.51, and 25.52). We note that 
contract labor and home office salaries for which no corresponding 
hours are reported are not included. In addition, wage-related costs 
for nonteaching physician Part A employees (Line 22) are excluded if no 
corresponding salaries are reported for those employees on Line 4. The 
formula for Total Salaries plus Wage-Related Costs (from Worksheet S-3, 
Part II) is the following:

((Line 1 + Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line 4.01 + 
Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)) + 
(Line 11 + Line 12 + Line 13 + Line 14.01 + 14.02 + Line 15) + (Line 17 
+ Line 22 + 25.50 + 25.51 + 25.52).

    Step 3.--Hours.--With the exception of wage-related costs, for 
which there are no associated hours, we compute total hours using the 
same methods as described for salaries in Step 2. The formula for Total 
Hours (from Worksheet S-3, Part II) is the following:

((Line 1 + Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line 4.01 + 
Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)) + 
(Line 11 + Line 12 + Line 13 + Line 14.01 + 14.02 + Line 15).

    Step 4.--For each hospital reporting both total overhead salaries 
and total overhead hours greater than zero, we then allocate overhead 
costs to areas of the hospital excluded from the wage index 
calculation. First, we determine the ``excluded rate'', which is the 
ratio of excluded area hours to Revised Total Hours (from Worksheet S-
3, Part II) with the following formula:

(Line 9 + Line 10)/(Line 1 + Line 28 + Line 33 + Line 35)-(Lines 2, 3, 
4.01, 5, 6, 7, 7.01, and 8 and Lines 26 through 43).

We then compute the amounts of overhead salaries and hours to be 
allocated to the excluded areas by multiplying the previously discussed 
ratio by the total overhead salaries and hours reported on Lines 26 
through 43 of Worksheet S-3, Part II. Next, we compute the amounts of 
overhead wage-related costs to be allocated to the excluded areas using 
three steps:
     We determine the ``overhead rate'' (from Worksheet S-3, 
Part II), which is the ratio of overhead hours (Lines 26 through 43 
minus the sum of Lines 28, 33, and 35) to revised hours excluding the 
sum of lines 28, 33, and 35 (Line 1 minus the sum of Lines 2, 3, 4.01, 
5, 6, 7, 7.01, 8, 9, 10, 28, 33, and 35). We note that, for the FY 2008 
and subsequent wage index calculations, we have been excluding the 
overhead contract labor (Lines 28, 33, and 35) from the determination 
of the ratio of overhead hours to revised hours because hospitals 
typically do not provide fringe benefits (wage-related costs) to 
contract personnel. Therefore, it is not necessary for the wage index 
calculation to exclude overhead wage-related costs for contract 
personnel. Further, if a hospital does contribute to wage-related costs 
for contracted personnel, the instructions for Lines 28, 33, and 35 
require that associated wage-related costs be combined with wages on 
the respective contract labor lines. The formula for the Overhead Rate 
(from Worksheet S-3, Part II) is the following:

(Lines 26 through 43-Lines 28, 33 and 35)/((((Line 1 + Lines 28, 33, 
35)-(Lines 2, 3, 4.01, 5, 6, 7, 7.01, 8, and 26 through 43))-(Lines 9 
and 10)) + (Lines 26 through 43-Lines 28, 33, and 35)).

     We compute overhead wage-related costs by multiplying the 
overhead hours ratio by wage-related costs reported on Part II, Lines 
17, 22, 25.50, 25.51, and 25.52.
     We multiply the computed overhead wage-related costs by 
the previously described excluded area hours ratio.
    Finally, we subtract the computed overhead salaries, wage-related 
costs, and hours associated with excluded areas from the total salaries 
(plus wage-related costs) and hours derived in Steps 2 and 3.
    Step 5.--For each hospital, we adjust the total salaries plus wage-
related costs to a common period to determine total adjusted salaries 
plus wage-related costs. To make the wage adjustment, we estimate the 
percentage change in the employment cost index (ECI) for compensation 
for each 30-day increment from October 14, 2020, through April 15, 
2022, for private industry hospital workers from data obtained from the 
Bureau of Labor Statistics' (BLS') Office of Compensation and Working 
Conditions. We use the ECI because it reflects the price increase 
associated with total compensation (salaries plus fringes) rather than 
just the increase in salaries. In addition, the ECI includes managers 
as well as other hospital workers. This methodology to compute the 
monthly update factors uses actual quarterly ECI data and assures that 
the update factors match the actual quarterly and annual percent 
changes. We also note that, since April 2006 with the publication of 
March 2006 data, the BLS' ECI uses a different classification system, 
the North American Industrial Classification System (NAICS), instead of 
the Standard Industrial Codes (SICs), which no longer exist. We have 
consistently used the ECI as the data source for our wages and salaries 
and other price proxies in the IPPS market basket, and we did not 
propose to make any changes to the usage of the ECI for FY 2025. The 
factors used to adjust the hospital's data are based on the midpoint of 
the cost reporting period, as indicated in this rule.
    Step 6.--Each hospital is assigned to its appropriate urban or 
rural labor market area before any reclassifications under section 
1886(d)(8)(B), 1886(d)(8)(E), or 1886(d)(10) of the Act. Within each 
urban or rural labor market area, we add the total adjusted salaries 
plus wage-related costs obtained in Step 5 for all hospitals in that 
area to determine the total adjusted salaries plus wage-related costs 
for the labor market area.
    Step 7.--We divide the total adjusted salaries plus wage-related 
costs obtained under Step 6 by the sum of the corresponding total hours 
(from Step 4) for all hospitals in each labor market area to determine 
an average hourly wage for the area.
    Step 8.--We add the total adjusted salaries plus wage-related costs 
obtained in Step 5 for all hospitals in the Nation and then divide the 
sum by the national sum of total hours from Step 4 to arrive at a 
national average hourly wage.
    Step 9.--For each urban or rural labor market area, we calculate 
the hospital wage index value, unadjusted for occupational mix, by 
dividing the area average hourly wage obtained in Step 7 by the 
national average hourly wage computed in Step 8.
    Step 10.--For each urban labor market area for which we do not have 
any hospital wage data (either because there are no IPPS hospitals in 
that labor market area, or there are IPPS hospitals in that area but 
their data are either too new to be reflected in the current year's 
wage index calculation, or their data are aberrant and are deleted from 
the wage index), we finalized in the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42305) that, for FY 2020 and subsequent years' wage index 
calculations, such CBSAs' wage index would be equal to total urban 
salaries plus wage-related costs (from Step 5) in the State, divided by 
the total urban hours (from Step 4) in the State, divided by the 
national average hourly wage from Step 8 (see 84 FR 42305 and 42306,). 
We stated that we believe that, in the absence of wage data for an 
urban labor market area, it is reasonable to use a statewide urban 
average, which is based on actual, acceptable wage data of hospitals in 
that State, rather than impute some other

[[Page 69274]]

type of value using a different methodology. For calculation of the FY 
2025 wage index, we note there is one urban CBSA for which we do not 
have IPPS hospital wage data. In Table 3 (which is available via the 
internet on the CMS website), which contains the area wage indexes, we 
include a footnote to indicate to which CBSA this policy applies. This 
CBSA's wage index is calculated as described, based on the FY 2020 
IPPS/LTCH PPS final rule methodology (84 FR 42305). Under this step, we 
also apply our policy with regard to how dollar amounts, hours, and 
other numerical values in the wage index calculations are rounded, as 
discussed in this section of this final rule.
    We refer readers to section II. of the Appendix of the final rule 
for the policy regarding rural areas that do not have IPPS hospitals.
    Step 11.--Section 4410 of Public Law 105-33 provides that, for 
discharges on or after October 1, 1997, the area wage index applicable 
to any hospital that is located in an urban area of a State may not be 
less than the area wage index applicable to hospitals located in rural 
areas in that State. The areas affected by this provision are 
identified in Table 2 listed in section VI. of the Addendum to the 
final rule and available via the internet on the CMS website.
    The following is our policy with regard to rounding of the wage 
data (dollar amounts, hours, and other numerical values) in the 
calculation of the unadjusted and adjusted wage index, as finalized in 
the FY 2020 IPPS/LTCH final rule (84 FR 42306). For data that we 
consider to be ``raw data,'' such as the cost report data on Worksheets 
S-3, Parts II and III, and the occupational mix survey data, we use 
such data ``as is,'' and do not round any of the individual line items 
or fields. However, for any dollar amounts within the wage index 
calculations, including any type of summed wage amount, average hourly 
wages, and the national average hourly wage (both the unadjusted and 
adjusted for occupational mix), we round the dollar amounts to 2 
decimals. For any hour amounts within the wage index calculations, we 
round such hour amounts to the nearest whole number. For any numbers 
not expressed as dollars or hours within the wage index calculations, 
which could include ratios, percentages, or inflation factors, we round 
such numbers to 5 decimals. However, we continue rounding the actual 
unadjusted and adjusted wage indexes to 4 decimals, as we have done 
historically.
    As discussed in the FY 2012 IPPS/LTCH PPS final rule, in ``Step 
5,'' for each hospital, we adjust the total salaries plus wage-related 
costs to a common period to determine total adjusted salaries plus 
wage-related costs. To make the wage adjustment, we estimate the 
percentage change in the ECI for compensation for each 30-day increment 
from October 14, 2020, through April 15, 2022, for private industry 
hospital workers from the BLS' Office of Compensation and Working 
Conditions data. We have consistently used the ECI as the data source 
for our wages and salaries and other price proxies in the IPPS market 
basket, and we did not propose any changes to the usage of the ECI for 
FY 2025. The factors used to adjust the hospital's data were based on 
the midpoint of the cost reporting period, as indicated in the 
following table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.157

    For example, the midpoint of a cost reporting period beginning 
January 1, 2021, and ending December 31, 2021, is June 30, 2021. An 
adjustment factor of 1.03606 was applied to the wages of a hospital 
with such a cost reporting period.
    Previously, we also would provide a Puerto Rico overall average 
hourly wage. As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56915), prior to January 1, 2016, Puerto Rico hospitals were paid 
based on 75 percent of the national standardized amount and 25 percent 
of the Puerto Rico-specific standardized amount. As a result, we 
calculated a Puerto Rico specific wage index that was applied to the 
labor-related share of the Puerto Rico-specific standardized amount. 
Section 601 of Division O, Title VI (section 601) of the Consolidated 
Appropriations Act, 2016 (Pub. L. 114-113) amended section 
1886(d)(9)(E) of the Act to specify that the payment calculation with 
respect to operating costs of inpatient hospital services of a 
subsection (d) Puerto Rico hospital for inpatient hospital discharges 
on or after January 1, 2016, shall use 100 percent of the national 
standardized amount. As we stated in the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 56915 through

[[Page 69275]]

56916), because Puerto Rico hospitals are no longer paid with a Puerto 
Rico specific standardized amount as of January 1, 2016, under section 
1886(d)(9)(E) of the Act, as amended by section 601 of the Consolidated 
Appropriations Act, 2016, there is no longer a need to calculate a 
Puerto Rico specific average hourly wage and wage index. Hospitals in 
Puerto Rico are now paid 100 percent of the national standardized 
amount and, therefore, are subject to the national average hourly wage 
(unadjusted for occupational mix) and the national wage index, which is 
applied to the national labor-related share of the national 
standardized amount. Therefore, for FY 2025, there is no Puerto Rico-
specific overall average hourly wage or wage index.
    Based on the previously discussed methodology, we stated in the 
proposed rule (89 FR 36159) that the proposed FY 2025 unadjusted 
national average hourly wage was $54.80.
    Based on the previously described methodology, the final FY 2025 
unadjusted national average hourly wage is the following:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Final FY 2025 Unadjusted National Average Hourly Wage..........   $55.03
------------------------------------------------------------------------

E. Occupational Mix Adjustment to the FY 2025 Wage Index

    As stated earlier, section 1886(d)(3)(E) of the Act provides for 
the collection of data every 3 years on the occupational mix of 
employees for each short-term, acute care hospital participating in the 
Medicare program, to construct an occupational mix adjustment to the 
wage index, for application beginning October 1, 2004 (the FY 2005 wage 
index). The purpose of the occupational mix adjustment is to control 
for the effect of hospitals' employment choices on the wage index. For 
example, hospitals may choose to employ different combinations of 
registered nurses, licensed practical nurses, nursing aides, and 
medical assistants for the purpose of providing nursing care to their 
patients. The varying labor costs associated with these choices reflect 
hospital management decisions rather than geographic differences in the 
costs of labor.
1. Use of New 2022 Medicare Wage Index Occupational Mix Survey for the 
FY 2025 Wage Index
    Section 304(c) of Appendix F, Title III of the Consolidated 
Appropriations Act, 2001 (Pub. L. 106-554) amended section 
1886(d)(3)(E) of the Act to require CMS to collect data every 3 years 
on the occupational mix of employees for each short-term, acute care 
hospital participating in the Medicare program and to measure the 
earnings and paid hours of employment for such hospitals by 
occupational category. As discussed in the FY 2022 IPPS/LTCH PPS 
proposed rule (86 FR 25402 through 25403) and final rule (86 FR 45173), 
we collected data in 2019 to compute the occupational mix adjustment 
for the FY 2022, FY 2023, and FY 2024 wage indexes. A new measurement 
of occupational mix is required for FY 2025.
    The FY 2025 occupational mix adjustment is based on a new calendar 
year (CY) 2022 survey. Hospitals were required to submit their 
completed 2022 surveys (Form CMS-10079, OMB Number 0938-0907, 
expiration date January 31, 2026) to their MACs by July 1, 2023. The 
preliminary, unaudited CY 2022 survey data were posted on the CMS 
website on July 12, 2023. As with the Worksheet S-3, Parts II and III 
cost report wage data, as part of the FY 2025 desk review process, the 
MACs revised or verified data elements in hospitals' occupational mix 
surveys that resulted in certain edit failures.
    Consistent with the IPPS and LTCH PPS ratesettings, our policy 
principles with regard to the occupational mix adjustment include 
generally using the most current data and information available, which 
is usually occupational mix data on a 3-year lag in the first year of 
the use of the occupational mix survey (for example, for the FY 2022 
wage index we used occupational mix data from 2019; we also used this 
data for the FY 2023 and FY 2024 wage indexes). In the FY 2024 IPPS/
LTCH final rule (88 FR 58969-58970), a commenter had concerns that the 
occupational mix data [that would be used for FY 2025?] may be skewed 
due to the COVID-19 PHE, and we stated that we planned to assess the CY 
2022 Occupational Mix Survey data in the FY 2025 IPPS final rule.
    In the proposed rule, we explained that based on pre-reclassified 
wage data, we computed the unadjusted and adjusted wage indexes for FY 
2025 using the 2022 occupational mix survey data. We then measured the 
increases and decreases by CBSA as a result of the 2022 occupational 
mix survey data. We compared this table to the same table for the FY 
2024 wage indexes, which used the 2019 occupational mix data, as well 
as the FY 2021 wage indexes, which used the 2016 occupational mix data. 
We stated that this table demonstrates the impact of the occupational 
mix adjusted wage data compared to unadjusted wage data for the most 
recent three occupational mix surveys using the 2022 survey data 
compared to the 2019 survey data and the 2016 survey data. That is, it 
shows whether hospitals' wage indexes will increase or decrease under 
the 2022 survey data as compared to the most recent years using the 
prior 2019 survey data and 2016 survey data respectively.
BILLING CODE 4120-01-P

[[Page 69276]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.158

BILLING CODE 4120-01-C
    Based on the table, we stated that increases and decreases by CBSA 
are alike across each year of occupational mix data. For example, 60.19 
percent of urban areas' wage indexes are increasing in FY 2025 due to 
the CY 2022 occupational mix data compared to 56.07 percent in FY 2024 
using CY 2019 occupational mix data. Similarly, 59.57 percent of rural 
areas' wage indexes are increasing in FY 2025 due to the CY 2022 
occupational mix data compared to 57.45 percent in FY 2024 using CY 
2019 occupational mix data. We also noted that similar to the wage 
data, it is not readily apparent, even if the comparison with the 
historical trends had indicated greater differences by CBSA in this 
context, how any changes due to the COVID-19 PHE differentially 
impacted the occupational mix adjusted wages paid in each CBSA. 
Furthermore, even if hypothetically changes due to the COVID-19 PHE did 
differentially impact the occupational mix adjusted wage index over 
time, it is not clear how those changes could be isolated from changes 
due to other reasons and what an appropriate potential methodology 
might be to adjust the data accordingly.
    Lastly, we also noted that we have not identified any significant 
issues with the 2022 occupational mix data itself in terms of our 
audits of this data. As usual, the data was audited by the MACs, and 
there were no significant issues reported across the data for all 
hospitals.
    Taking all these factors into account, we stated that we believe 
the CY 2022 occupational mix data is the best available data to use for 
FY 2025 and proposed to use the CY 2022 occupational mix data for FY 
2025.
    We did not receive any comments with regard to the use of the CY 
2022 occupational mix data for FY 2025.We are finalizing as proposed to 
use the CY 2022 occupational mix data for the FY 2025 wage index.
2. Calculation of the Occupational Mix Adjustment for FY 2025
    For FY 2025, we proposed to calculate the occupational mix 
adjustment factor using the same methodology that we have used since 
the FY 2012 wage index (76 FR 51582 through 51586) and to apply the 
occupational mix adjustment to 100 percent of the FY 2025 wage index. 
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42308), we modified our 
methodology with regard to how dollar amounts, hours, and other

[[Page 69277]]

numerical values in the unadjusted and adjusted wage index calculation 
are rounded, to ensure consistency in the calculation. According to the 
policy finalized in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42308 
and 42309), for data that we consider to be ``raw data,'' such as the 
cost report data on Worksheets S-3, Parts II and III, and the 
occupational mix survey data, we continue to use these data ``as is'', 
and not round any of the individual line items or fields. However, for 
any dollar amounts within the wage index calculations, including any 
type of summed wage amount, average hourly wages, and the national 
average hourly wage (both the unadjusted and adjusted for occupational 
mix), we round such dollar amounts to 2 decimals. We round any hour 
amounts within the wage index calculations to the nearest whole number. 
We round any numbers not expressed as dollars or hours in the wage 
index calculations, which could include ratios, percentages, or 
inflation factors, to 5 decimals. However, we continue rounding the 
actual unadjusted and adjusted wage indexes to 4 decimals, as we have 
done historically.
    Similar to the method we use for the calculation of the wage index 
without occupational mix, salaries and hours for a multicampus hospital 
are allotted among the different labor market areas where its campuses 
are located. Table 2 associated with this final rule (which is 
available via the internet on the CMS website), which contains the 
final FY 2025 occupational mix adjusted wage index, includes separate 
wage data for the campuses of multicampus hospitals. We refer readers 
to section III.C. of the preamble of this final rule for a chart 
listing the multicampus hospitals and the FTE percentages used to allot 
their occupational mix data.
    Because the statute requires that the Secretary measure the 
earnings and paid hours of employment by occupational category not less 
than once every 3 years, all hospitals that are subject to payments 
under the IPPS, or any hospital that would be subject to the IPPS if 
not granted a waiver, must complete the occupational mix survey, unless 
the hospital has no associated cost report wage data that are included 
in the proposed FY 2025 wage index. For the proposed FY 2025 wage 
index, we used the Worksheet S-3, Parts II and III wage data of 3,075 
hospitals, and we used the occupational mix surveys of 2,950 hospitals 
for which we also had Worksheet S-3 wage data, which represented a 
``response'' rate of 96 percent (2,950/3,075). For the proposed FY 2025 
wage index, we applied proxy data for noncompliant hospitals, new 
hospitals, or hospitals that submitted erroneous or aberrant data in 
the same manner that we applied proxy data for such hospitals in the FY 
2012 wage index occupational mix adjustment (76 FR 51586). As a result 
of applying this methodology, the proposed FY 2025 occupational mix 
adjusted national average hourly wage was $54.73.
    We did not receive any comments on our proposed calculation of the 
occupational mix adjustment to the FY 2025 wage index. Thus, for the 
reasons discussed in this final rule and in the FY 2025 IPPS/LTCH PPS 
proposed rule, we are finalizing our proposal without modification to 
calculate the occupational mix adjustment factor using the same 
methodology that we have used since the FY 2012 wage index and to apply 
the occupational mix adjustment to 100 percent of the FY 2025 wage 
index.
    Comment: A commenter asked CMS to consider not accepting 
occupational mix surveys that may show data that is detrimental to 
patient care. The commenter cited an example such as downgrading 
registered nurse (RN) positions to licensed practical nurse positions 
in a way that forces the ratio of RNs to patients to an unsafe level.
    Response: We thank the commenter for their comments. We understand 
the commenter has concerns with regard to hospital patient care. 
However, as stated previously, the purpose of the occupational mix 
adjustment is to control for the effect of hospitals' employment 
choices on the wage index; not to control for hospital patient care.
    Comment: We received a comment with regard to the methodology to 
compute the FY 2025 wage index advocating that CMS do so without an 
occupational mix adjustment.
    Response: Section 1886(d)(3)(E) of the Act requires CMS to collect 
data every 3 years on the occupational mix of employees for each short-
term, acute care hospital participating in the Medicare program, in 
order to construct an occupational mix adjustment to the wage index. 
Therefore, per current law, we must apply an occupational mix 
adjustment to the wage index. For the final FY 2025 wage index, we are 
using the Worksheet S-3, Parts II and III wage data of 3,074 hospitals, 
and we are using the occupational mix surveys of 2,956 hospitals for 
which we also had Worksheet S-3 wage data, which represented a 
``response'' rate of 96 percent (2,956/3,074). For the final FY 2025 
wage index, we are applying proxy data for noncompliant hospitals, new 
hospitals, or hospitals that submitted erroneous or aberrant data in 
the same manner that we applied proxy data for such hospitals in the FY 
2012 wage index occupational mix adjustment (76 FR 51586). As a result 
of applying this methodology, the final FY 2025 occupational mix 
adjusted national average hourly wage is the following:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Final FY 2025 Occupational Mix Adjusted National Average Hourly   $54.97
 Wage..........................................................
------------------------------------------------------------------------

3. Implementation of the Occupational Mix Adjustment and the FY 2025 
Occupational Mix Adjusted Wage Index
    As discussed in section III.E. of the preamble of this final rule, 
for FY 2025, we are applying the occupational mix adjustment to 100 
percent of the FY 2025 wage index. We calculated the occupational mix 
adjustment using data from the 2022 occupational mix survey, using the 
methodology described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51582--51586).
    Based on the 2022 occupational mix survey data, the FY 2025 
national average hourly wages for each occupational mix nursing 
subcategory as calculated in Step 2 of the occupational mix calculation 
are as follows:

[[Page 69278]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.159

    The national average hourly wage for the entire nurse category is 
computed in Step 5 of the occupational mix calculation. Hospitals with 
a nurse category average hourly wage (as calculated in Step 4) of 
greater than the national nurse category average hourly wage receive an 
occupational mix adjustment factor (as calculated in Step 6) of less 
than 1.0. Hospitals with a nurse category average hourly wage (as 
calculated in Step 4) of less than the national nurse category average 
hourly wage receive an occupational mix adjustment factor (as 
calculated in Step 6) of greater than 1.0.
    Based on the 2022 occupational mix survey data, we determined (in 
Step 7 of the occupational mix calculation) the following:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
National Percentage of Hospital Employees in the Nurse Category      45%
National Percentage of Hospital Employees in the All Other           55%
 Occupations Category..........................................
------------------------------------------------------------------------

F. Hospital Redesignations and Reclassifications

    The following sections III.F.1 through III.F.4 discuss revisions to 
the wage index based on hospital redesignations and reclassifications. 
Specifically, hospitals may have their geographic area changed for wage 
index payment by applying for urban to rural reclassification under 
section 1886(d)(8)(E) of the Act (implemented at Sec.  412.103), 
reclassification by the Medicare Geographic Classification Review Board 
(MGCRB) under section 1886(d)(10) of the Act, Lugar status 
redesignations under section 1886(d)(8)(B) of the Act, or a combination 
of the foregoing.
1. Urban to Rural Reclassification Under Section 1886(d)(8)(E) of the 
Act, Implemented at Sec.  412.103
    Under section 1886(d)(8)(E) of the Act, a qualifying prospective 
payment hospital located in an urban area may apply for rural status 
for payment purposes separate from reclassification through the MGCRB. 
Specifically, section 1886(d)(8)(E) of the Act provides that, not later 
than 60 days after the receipt of an application (in a form and manner 
determined by the Secretary) from a subsection (d) hospital that 
satisfies certain criteria, the Secretary shall treat the hospital as 
being located in the rural area (as defined in paragraph (2)(D)) of the 
State in which the hospital is located. We refer readers to the 
regulations at Sec.  412.103 for the general criteria and application 
requirements for a subsection (d) hospital to reclassify from urban to 
rural status in accordance with section 1886(d)(8)(E) of the Act (such 
hospitals are referred to herein as ``Sec.  412.103 hospitals''). The 
FY 2012 IPPS/LTCH PPS final rule (76 FR 51595 through 51596) includes 
our policies regarding the effect of wage data from reclassified or 
redesignated hospitals. We refer readers to the FY 2024 IPPS/LTCH final 
rule (88 FR 58971 through 58977) for a review of our policy finalized 
in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49004) to calculate the 
rural floor with the wage data of urban hospitals reclassifying to 
rural areas under Sec.  412.103, and discussion of our modification to 
the calculation of the rural wage index and its implications for the 
rural floor.
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41369 through 
41374), we codified certain policies regarding multicampus hospitals in 
the regulations at Sec. Sec.  412.92, 412.96, 412.103, and 412.108. We 
stated that reclassifications from urban to rural under Sec.  412.103 
apply to the entire hospital (that is, the main campus and its remote 
location(s)). We also stated that a main campus of a hospital cannot 
obtain Sole Community Hospital (SCH), Rural Referral Center (RRC), or 
Medicare Dependent Hospital (MDH) status, or rural reclassification 
under Sec.  412.103, independently or separately from its remote 
location(s), and vice versa. In the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 49012 and 49013), we added Sec.  412.103(a)(8) to clarify that 
for a multicampus hospital, approved rural reclassification status 
applies to the main campus and any remote location located in an urban 
area, including a main campus or any remote location deemed urban under 
section 1886(d)(8)(B) of the Act. If a remote location of a hospital is 
located in a different CBSA than the main campus of the hospital, it is 
CMS' longstanding policy to assign that remote location a wage index 
based on its own geographic area to comply with the statutory 
requirement to adjust for geographic differences in hospital wage 
levels (section 1886(d)(3)(E) of the Act). Hospitals are required to 
identify and allocate wages and hours based on FTEs for remote 
locations located in different CBSAs on Worksheet S-2, Part I, Lines 
165 and 166 of form CMS-2552-10. In calculating wage index values, CMS 
identifies the allocated wage data for these remote locations in Table 
2 with a ``B'' in the 3rd position of the CCN. These remote locations 
of hospitals with Sec.  412.103 rural reclassification status in a 
different CBSA are identified in Table 2, and hospitals should evaluate 
potential wage index outcomes for their remote location(s) when 
withdrawing or terminating MGCRB reclassification, or canceling Sec.  
412.103 rural reclassification status.
    We also note that in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
59038 through 59039), we changed the effective date of rural 
reclassification for a hospital qualifying for rural reclassification 
under Sec.  412.103(a)(3) by meeting the criteria for SCH status (other 
than being located in a rural area), and also applying to obtain SCH 
status under Sec.  412.92, where eligibility for SCH classification 
depends on a hospital merger. Specifically, we finalized that in these 
circumstances, and subject to the hospital meeting the requirements set 
forth at Sec.  412.92(b)(2)(vi), the effective date for rural 
reclassification will be the effective date set forth in Sec.  
412.92(b)(2)(vi).
    Finally, we remind hospitals currently located in rural areas 
becoming urban under the adoption of the revised OMB delineations that 
if they have SCH, MDH, or RRC status, they may choose to apply for a 
Sec.  412.103 urban to rural reclassification if qualifying criteria 
are met to maintain

[[Page 69279]]

the SCH, MDH, or RRC status. We advise hospitals to evaluate their 
options and if desired, apply for Sec.  412.103 urban to rural 
reclassification before the beginning of FY 2025, to avoid a lapse in 
SCH, MDH, or RRC status at the beginning of FY 2025 should we finalize 
our proposal to adopt the revised OMB delineations.
    Comment: A commenter suggested that CMS remove the 1 year waiting 
period required by Sec.  412.103(g)(4) for hospitals to cancel rural 
reclassification. The commenter stated that CMS' concern in 
promulgating the policy is no longer applicable due to its choice to 
link the rural floor and rural wage index as one calculation. The 
commenter asserted that this rule, which was finalized in FY 2022 IPPS 
rulemaking, was intended to disincentivize hospitals from cancelling 
their rural reclassification before the lock-in date at 412.103(b)(6), 
and then obtaining a new rural reclassification after the lock-in date, 
so the hospital could receive the rural wage index without having its 
wage data included in the rural wage index calculation (effectively 
receiving a higher rural wage index than if its wage data was 
included).
    Response: We appreciate the commenter's input. We did not propose 
any changes to Sec.  412.103(g)(4), because we still believe that the 1 
year waiting period to cancel rural reclassifications is relevant. 
While the incentive to game the rural wage index may be less now that 
the rural wage index is the same as the rural floor, as the commenter 
described, hospitals can still attempt to maximize payment by 
strategically timing cancellation of a Sec.  412.103 rural 
reclassification. Hospitals may choose to hold a Sec.  412.103 rural 
reclassification for a variety of reasons, such as the 340B drug 
pricing program administered by HRSA, SCH or RRC eligibility, or to use 
rural criteria for reclassifying through the MGCRB under Sec.  412.230. 
Without the minimum waiting period at Sec.  412.103(g)(4), such a 
hospital could cancel its Sec.  412.103 rural reclassification each 
year in time to not be included in the rural floor calculation (for 
example, if the hospital expects the inclusion of its wage data would 
lower the calculation), and then obtain a new Sec.  412.103 rural 
reclassification after the lock-in date. We continue to believe that 
including Sec.  412.103 rural reclassifications in the rural wage index 
calculation for at least one fiscal year before they may be canceled 
will help to ensure consistency and predictability of wage index 
values.
a. Update to Rural Criteria at Sec.  412.103(a)(1)
    Section 1886(d)(8)(E) of the Act describes criteria for hospitals 
located in urban areas to be treated as being located in a rural area 
of their state. The criterion at section 1886(d)(8)(E)(ii)(I) of the 
Act requires that the hospital be located in a rural census tract of a 
metropolitan statistical area (as determined under the most recent 
modification of the Goldsmith Modification, originally published in the 
Federal Register on February 27, 1992 (57 FR 6725)).
    This condition is implemented in the regulation at Sec.  
412.103(a)(1), which currently states: ``the hospital is located in a 
rural census tract of a Metropolitan Statistical Area (MSA) as 
determined under the most recent version of the Goldsmith Modification, 
the Rural-Urban Commuting Area codes, as determined by the Office of 
Rural Health Policy (ORHP) of the Health Resources and Services 
Administration (HRSA), which is available via the ORHP website at: 
https://www.ruralhealth.hrsa.gov or from the U.S. Department of Health 
and Human Services, Health Resources and Services Administration, 
Office of Rural Health Policy, 5600 Fishers Lane, Room 9A-55, 
Rockville, MD 20857.''
    The Goldsmith Modification \190\ was originally designed to 
identify rural census tracts located in Metropolitan counties for 
purposes of grant eligibility unrelated to the hospital IPPS but were 
incorporated by section 1886(d)(8)(E)(ii)(I) of the Act for purposes 
related to the hospital wage index.
---------------------------------------------------------------------------

    \190\ Known as the ``Goldsmith Modification'' for its principal 
developer, Harold F. Goldsmith, this method is described in detail 
in the paper ``Improving the Operational Definition of `Rural Areas' 
for Federal Programs'' available at https://www.ruralhealthinfo.org/pdf/improving-the-operational-definition-of-rural-areas.pdf.
---------------------------------------------------------------------------

    The Federal Office of Rural Health Policy (FORHP) (known as ORHP in 
Sec.  412.103) later funded development of Rural-Urban Commuting Area 
(RUCA) codes via the U.S. Department of Agriculture's (USDA) Economic 
Research Service as the latest version of the Goldsmith Modification, 
described in a May 3, 2007 Federal Register notice (72 FR 24589), to 
address limitations of the original Goldsmith Modification. RUCAs, like 
the Goldsmith Modification, are based on a sub-county unit, the census 
tract, permitting a finer delineation of what constitutes rural areas 
inside Metropolitan areas (72 FR 24590). In that notice, HRSA stated it 
believes that the use of RUCAs allows more accurate targeting of 
resources intended for the rural population to determine programmatic 
eligibility for rural areas inside of Metropolitan counties. Using data 
from the Census Bureau, every census tract in the United States is 
assigned a RUCA code. In the May 3, 2007 Federal Register, HRSA stated 
that FORHP considers all census tracts with RUCA codes 4-10 to be 
rural, plus an additional 132 large area census tracts with RUCA codes 
2 or 3 (72 FR 24591). They also stated that FORHP will continue to seek 
refinements in the use of RUCAs.
    FORHP has since published a revised definition of eligibility for 
rural health grants for FY 2022 in a January, 12, 2021 Federal Register 
Notice (86 FR 2418 through 2420). Specifically, FORHP added 
Metropolitan Statistical Area (MSA) counties that contain no Urbanized 
Area (UA) \191\ to the areas eligible for the rural health grant 
programs. FORHP did not remove any areas from the rural definition in 
the FY 2022 Federal Register Notice.
---------------------------------------------------------------------------

    \191\ UAs are defined by the Census Bureau as densely settled 
areas with a total population of at least 50,000 people (86 FR 
2418).
---------------------------------------------------------------------------

    It has come to our attention that our current regulation text at 
Sec.  412.103(a)(1) does not describe FORHP's expanded definition of a 
``rural area'' from the FY 2022 Federal Register Notice. In addition, 
Sec.  412.103(a)(1) contains a web link that is no longer active and 
requires updating. We believe the current rural definition used by 
FORHP for purposes of the rural health grant program constitutes ``the 
most recent modification of the Goldsmith Modification'' referred to in 
the statute, since the expanded definition of rural constitutes a 
refinement to the use of RUCA codes, which were developed as the latest 
version of the Goldsmith Modification. As stated in the FY 2022 Federal 
Register Notice (86 FR 2420), the expanded criteria reflect FORHP's 
desire to accurately identify areas that are rural in character using a 
data-driven methodology that relies on existing geographic identifiers 
and utilizes standard, national level data sources. Therefore, we 
proposed to amend our regulation text at Sec.  412.103(a)(1) to provide 
a reference to the most recent Federal Register notice issued by HRSA 
defining ``rural areas.'' In this way, there will be no need to update 
the Medicare regulations if FORHP develops a further modification of 
the Goldsmith Modification or if the weblink changes. FORHP has 
published the current link in the Federal Register notice (86 FR 2418-
2420) along with the most recent revisions to the current complete 
rural definition, and it is

[[Page 69280]]

available via the Rural Health Grants Eligibility Analyzer at https://data.hrsa.gov/tools/rural-health.
    We proposed to amend the regulation text at 412.103(a)(1) to read: 
the hospital is located in a rural census tract of a Metropolitan 
Statistical Area (MSA) as determined under the most recent version of 
the Goldsmith Modification, using the Rural-Urban Commuting Area codes 
and additional criteria, as determined by the Federal Office of Rural 
Health Policy (FORHP) of the Health Resources and Services 
Administration (HRSA), which is available at the web link provided in 
the most recent Federal Register notice issued by HRSA defining rural 
areas.
    We did not receive any comments on this proposal and are finalizing 
as proposed to amend the regulation text at Sec.  412.103(a)(1).
b. Policy for Canceling Sec.  412.103 Reclassifications of Terminated 
Providers
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49499 through 
49500), CMS discussed its longstanding policy to terminate MGCRB wage 
index reclassification status under section 1886(d)(10) of the Act for 
hospitals with terminated CMS certification numbers (CCN). We 
determined that it would be appropriate to terminate the MGCRB 
reclassification status for these hospitals (with a limited exception 
for certain locations acquired by another hospital in a different 
CBSA), as the hospital may no longer be able to make timely and 
informed decisions regarding reclassification statuses.
    At the time, we did not articulate a similar policy for hospitals 
reclassified as rural under Sec.  412.103. While policies regarding 
MGCRB reclassification were adopted for purposes related to the 
hospital wage index, Sec.  412.103 reclassifications may have broader 
implications. At the time the policy to terminate MGCRB 
reclassifications for hospitals with terminated CCNs was implemented, 
Sec.  412.103 reclassifications were less common, and generally had 
negligible effects on State rural wage index values. Prior to FY 2024, 
as a result of various wage index value hold-harmless policies, 
discussed in detail in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
58973-58974), Sec.  412.103 hospital data rarely affected a state's 
final rural wage index value. Under the current policy first 
implemented in FY 2024, however, Sec.  412.103 hospital data is only 
excluded from the rural wage index when indicated by the hold harmless 
provision at section 1886(d)(8)(C)(ii) of the Act. Hospitals 
reclassified under Sec.  412.103 now impact the rural wage index value 
of most states. We refer readers to the FY 2024 IPPS/LTCH final rule 
(88 FR 58973 through 58977) for discussion on how CMS finalized the 
current policy to include the wage index data for Sec.  412.103 
hospitals in more iterations of the rural wage index calculation. 
Furthermore, following the policy implemented in the April 21, 2016, 
interim final rule with comment period (IFC) (81 FR 23428 through 
23438), which allowed hospitals to maintain dual Sec.  412.103 and 
MGCRB reclassification status, the number of rural reclassifications 
has grown significantly. We now believe it is appropriate to propose a 
policy regarding terminated or ``tied-out'' hospitals, effective for FY 
2025, to address our concerns regarding the impacts these hospitals 
would have on rural wage index values. Therefore, we proposed that 
Sec.  412.103 reclassifications will be considered cancelled for the 
purposes of calculating the area wage index for any hospital with a CCN 
listed as terminated or ``tied-out'' as of the date that the hospital 
ceased to operate with an active CCN. We propose to obtain and review 
the best available CCN termination status lists as of the Sec.  
412.103(b)(6) ``lock-in'' date (60 days after the proposed rule for the 
FY is displayed in the Federal Register). The lock-in date is used to 
determine whether a hospital has been approved for Sec.  412.103 
reclassification in time for that status to be included in the upcoming 
year's wage index development. We believe using this date for 
evaluating CCN terminations would be consistent with the wage index 
development timeline.
    As stated previously, Sec.  412.103 reclassification may have other 
implications for hospital status and payment. Hospitals may obtain 
rural reclassification for several reasons, such as to convert to a 
Critical Access Hospital (CAH), or to obtain SCH status. Eligibility 
requirements for Rural Emergency Hospital (REH) qualification under 
section 1861(kkk)(3) of the Act included a reference to 
reclassification under section 1886(d)(8)(E) (implemented by Sec.  
412.103). We note that our proposal to consider Sec.  412.103 
reclassifications cancelled for the purposes of calculating area wage 
index for any hospital with a CCN listed as terminated or ``tied-out'' 
is not intended to alter or affect the qualification for such statuses 
or to have other effects unrelated to hospital wage index calculations. 
The rural reclassification status would remain in effect for any period 
that the original PPS hospital remains in operation with an active CCN. 
For REH qualification requirement purposes, this would include the date 
of enactment of the Consolidated Appropriations Act, 2021 (Pub. L. 116-
260), which was December 27, 2020. We believe this policy provides 
consistency and predictability in wage index values.
    Comment: Commenters were supportive of our proposed policy to 
cancel the rural reclassification status for hospitals with terminated 
(``tied-out'') CCNs. Commenters reiterated CMS' concern that these 
hospitals may no longer be able to make timely and informed decisions 
regarding their reclassification status.
    Response: We thank commenters for their support and are finalizing 
the proposed policy to consider rural reclassifications to be cancelled 
for the purposes of calculating the area wage index for any hospital 
with a CCN listed as terminated or ``tied-out'' as of the date that the 
hospital ceased to operate with an active CCN. CMS will obtain and 
review the best available CCN termination status lists as of the Sec.  
412.103(b)(6) ``lock-in'' date (60 days after the proposed rule for the 
FY is displayed in the Federal Register).
2. General Policies and Effects of MGCRB Reclassification and Treatment 
of Dual Reclassified Hospitals
    Under section 1886(d)(10) of the Act, the MGCRB considers 
applications by hospitals for geographic reclassification for purposes 
of payment under the IPPS. Hospitals must apply to the MGCRB to 
reclassify not later than 13 months prior to the start of the fiscal 
year for which reclassification is sought (usually by September 1). 
Generally, hospitals must be proximate to the labor market area to 
which they are seeking reclassification and must demonstrate 
characteristics similar to hospitals located in that area. The MGCRB 
issues its decisions by the end of February for reclassifications that 
become effective for the following fiscal year (beginning October 1). 
The regulations applicable to reclassifications by the MGCRB are 
located in Sec. Sec.  412.230 through 412.280. (We refer readers to a 
discussion in the FY 2002 IPPS final rule (66 FR 39874 and 39875) 
regarding how the MGCRB defines mileage for purposes of the proximity 
requirements.) The general policies for reclassifications and 
redesignations and the policies for the effects of hospitals' 
reclassifications and redesignations on the wage index are discussed in 
the FY 2012 IPPS/LTCH PPS final rule for the FY 2012 final wage index 
(76 FR 51595 and 51596).
    In addition, in the FY 2012 IPPS/LTCH PPS final rule, we discussed 
the effects on the wage index of urban

[[Page 69281]]

hospitals reclassifying to rural areas under Sec.  412.103. In the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42332 through 42336), we finalized 
a policy to exclude the wage data of urban hospitals reclassifying to 
rural areas under Sec.  412.103 from the calculation of the rural 
floor, but we reverted to the pre-FY 2020 policy in the FY 2023 IPPS/
LTCH PPS final rule (87 FR 49002 through 49004). Hospitals that are 
geographically located in States without any rural areas are ineligible 
to apply for rural reclassification in accordance with the provisions 
of Sec.  412.103.
    On April 21, 2016, we published an interim final rule with comment 
period (IFC) in the Federal Register (81 FR 23428 through 23438) that 
included provisions amending our regulations to allow hospitals 
nationwide to have simultaneous Sec.  412.103 and MGCRB 
reclassifications. For reclassifications effective beginning FY 2018, a 
hospital may acquire rural status under Sec.  412.103 and subsequently 
apply for a reclassification under the MGCRB using distance and average 
hourly wage criteria designated for rural hospitals. In addition, we 
provided that a hospital that has an active MGCRB reclassification and 
is then approved for redesignation under Sec.  412.103 will not lose 
its MGCRB reclassification; such a hospital receives a reclassified 
urban wage index during the years of its active MGCRB reclassification 
and is still considered rural under section 1886(d) of the Act for 
other purposes.
    We discussed that when there is both a Sec.  412.103 redesignation 
and an MGCRB reclassification, the MGCRB reclassification controls for 
wage index calculation and payment purposes. Prior to FY 2024, we 
excluded hospitals with Sec.  412.103 redesignations from the 
calculation of the reclassified rural wage index if they also have an 
active MGCRB reclassification to another area. That is, if an 
application for urban reclassification through the MGCRB is approved 
and is not withdrawn or terminated by the hospital within the 
established timelines, we consider the hospital's geographic CBSA and 
the urban CBSA to which the hospital is reclassified under the MGCRB 
for the wage index calculation. We refer readers to the April 21, 2016 
IFC (81 FR 23428 through 23438) and the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 56922 through 56930), in which we finalized the April 21, 
2016 IFC, for a full discussion of the effect of simultaneous 
reclassifications under both the Sec.  412.103 and the MGCRB processes 
on wage index calculations. For FY 2024 and subsequent years, we refer 
readers to section III.G.1 of the preamble of the FY 2024 IPPS/LTCH PPS 
final rule for discussion of our policy to include hospitals with a 
Sec.  412.103 redesignation that also have an active MGCRB 
reclassification to another area in the calculation of the reclassified 
rural wage index (88 FR 58971 through 58977).
    Comment: A commenter explained that due to the lag in IPPS 
rulemaking where the cost report data used to set rates can be from up 
to four years prior, there is a period of up to 4 years in which there 
is no AHW data associated with a newly created ``B'' campus in the case 
of a new multicampus hospital. The commenter encouraged CMS to close 
the lag of up to four years during which a newly merged provider is 
ineligible to receive a new MGCRB reclassification because there is no 
AHW data associated with the ``B'' provider number. The commenter 
suggested that CMS amend the regulations at Sec.  412.230(d)(2) to 
provide that when a new owner accepts assignment of the existing 
hospital's Medicare provider agreement, or in the case of a common 
ownership provider consolidation in which a new subcampus provider 
number is created, the wage data associated with the previous 
hospital's provider number can be used in calculating the new 
hospital's 3-year average hourly wage until such time as at least 1 
year of wage data is accumulated under the new subprovider.
    Response: We did not propose any modifications to the regulations 
at Sec.  412.230(d)(2) and consider this comment out of scope of the 
proposed rule. We may consider revisiting our policies in future 
rulemaking to address the scenario of newly merged providers. We note 
that, as described in section III.G.6, remote locations with ``B'' 
provider number are eligible to receive a 5 percent cap on annual wage 
index decreases relative to the wage index assigned in the prior fiscal 
year.
    Comment: A couple of commenters asked CMS to revise the regulations 
for appropriate proximity data at Sec.  412.230(c)(1) to include 
waterways travelled by ferry boat as travel over an improved road. 
These commenters stated that each year, the MGCRB denies 
reclassification requests based on use of a ferry route to meet the 
proximity criteria, and these decisions are overturned via 
administrative appeal. The commenters urged CMS to eliminate 
unnecessary appeals by clarifying in the regulations that distance 
traveled by ferry boats is included when calculating proximity for 
reclassification requests.
    Response: We agree with the commenter that a modification to Sec.  
412.230(c)(1) to address waterways travelled by ferry boat could reduce 
administrative appeals. However, we did not propose any modifications 
to the regulations at Sec.  412.230(c)(1) and are not finalizing any 
changes in this final rule. We note that a potential future proposal to 
modify Sec.  412.230(c)(1) could contemplate whether the MGCRB should 
include or exclude the distances traveled via ferry boats for purposes 
of determining proximity during its review of reclassification 
requests.
a. Revision To Allow Sec.  412.103 Hospitals To Use Geographic Area or 
Rural Area for Reclassification
    On May 10, 2021, we published an interim final rule with comment 
period (IFC) in the Federal Register (86 FR 24735 through 24739) that 
included provisions amending our regulations to allow hospitals with a 
rural redesignation to reclassify through the MGCRB using the rural 
reclassified area as the geographic area in which the hospital is 
located. We revised our regulation so that the redesignated rural area, 
and not the hospital's geographic urban area, is considered the area a 
Sec.  412.103 hospital is located in for purposes of meeting MGCRB 
reclassification criteria, including the average hourly wage 
comparisons required by Sec.  412.230(a)(5)(i) and (d)(1)(iii)(C). 
Similarly, we revised the regulations to consider the redesignated 
rural area, and not the geographic urban area, as the area a Sec.  
412.103 hospital is located in for purposes of applying the prohibition 
at Sec.  412.230(a)(5)(i) on reclassifying to an area with a pre-
reclassified average hourly wage lower than the pre-reclassified 
average hourly wage for the area in which the hospital is located. 
Effective for reclassification applications due to the MGCRB for 
reclassification beginning in FY 2023, a Sec.  412.103 hospital could 
apply for a reclassification under the MGCRB using the State's rural 
area as the area in which the hospital is located. We refer readers to 
the May 10, 2021 IFC (86 FR 24735 through 24739) and the FY 2022 IPPS/
LTCH PPS final rule (86 FR 45187 through 45190), in which we finalized 
the May 10, 2021 IFC, for a full discussion of these policies.
    In a comment on the May 10, 2021 IFC (86 FR 24735 through 24739), a 
commenter noted that the IFC states that a hospital reclassified under 
Sec.  412.103 could potentially reclassify to any area with a pre-
reclassified average hourly wage that is higher than the pre-
reclassified average hourly wage for the rural area of the state for 
purposes of the regulation at Sec.  412.230(a)(5)(i). The commenter 
asserted that CMS' use of

[[Page 69282]]

the word ``could'' in this context seems to suggest that CMS would 
allow the hospital to use either its home average hourly wage or the 
rural average hourly wage for purposes of the regulation at Sec.  
412.230(a)(5)(i). The commenter suggested that CMS allow both 
comparison options, because the rural average hourly wage may 
occasionally be higher than the hospital's home urban area's average 
hourly wage.
    In response, we clarified that the commenter's interpretation of 
our policy is correct. We stated that while the court's decision in 
Bates County Memorial Hospital v. Azar requires CMS to permit hospitals 
to reclassify to any area with a pre-reclassified average hourly wage 
that is higher than the pre-reclassified average hourly wage for the 
rural area of the state, we do not believe that we are required to 
limit hospitals from using their geographic home area for purposes of 
the regulation at Sec.  412.230(a)(5)(i). Therefore, we clarified that 
we would allow hospitals to reclassify to an area with an average 
hourly wage that is higher than the average hourly wage of either the 
hospital's geographic home area or the rural area (86 FR 45189).
    While we clarified our policy in response to the aforementioned 
comment, the regulation text inadvertently was not similarly clarified 
to reflect this policy. Therefore, we proposed to revise the regulation 
text at Sec.  412.230(a)(5)(i) to reflect our policy clarified in the 
FY 2022 IPPS/LTCH PPS final rule (86 FR 45189). While it has been CMS' 
policy to allow a Sec.  412.103 hospital to use either its geographic 
area or the rural area of the state for purposes of Sec.  
412.230(a)(5)(i), we believe that synchronizing the regulation text 
with our policy clarified in the FY 2022 IPPS/LTCH PPS final rule (86 
FR 45189) is necessary for consistency and to reduce unnecessary 
administrative appeals.
    Specifically, we proposed to replace the phrase in the regulation 
at Sec.  412.230(a)(5)(i) that reads ``in the rural area of the state'' 
with the phrase ``either in its geographic area or in the rural area of 
the state.'' Section 412.230(a)(5)(i) with this proposed revision would 
read: An individual hospital may not be redesignated to another area 
for purposes of the wage index if the pre-reclassified average hourly 
wage for that area is lower than the pre-reclassified average hourly 
wage for the area in which the hospital is located. An urban hospital 
that has been granted redesignation as rural under Sec.  412.103 is 
considered to be located either in its geographic area or in the rural 
area of the state for the purposes of this paragraph (a)(5)(i).
    Comment: A commenter supported this proposal to revise the 
regulations at Sec.  412.230(a)(5)(i), stating that it would promote 
consistency between CMS policy and MGCRB practice by eliminating 
unnecessary administrative appeals.
    Response: We appreciate the commenter's support. In consideration 
of the public comment received, we are finalizing our proposal to 
revise the regulations at Sec.  412.230(a)(5)(i) as proposed without 
modification.
3. MGCRB Reclassification Issues for FY 2025
a. FY 2025 Reclassification Application Requirements and Approvals
    As previously stated, under section 1886(d)(10) of the Act, the 
MGCRB considers applications by hospitals for geographic 
reclassification for purposes of payment under the IPPS. The specific 
procedures and rules that apply to the geographic reclassification 
process are outlined in regulations under 42 CFR 412.230 through 
412.280. There are 470 hospitals approved for wage index 
reclassifications by the MGCRB starting in FY 2025. Because MGCRB wage 
index reclassifications are effective for 3 years, for FY 2025, 
hospitals reclassified beginning in FY 2023 or FY 2024 are eligible to 
continue to be reclassified to a particular labor market area based on 
such prior reclassifications for the remainder of their 3-year period. 
There were 256 hospitals approved for wage index reclassifications in 
FY 2023 that will continue for FY 2025, and 352 hospitals approved for 
wage index reclassifications in FY 2024 that will continue for FY 2025. 
Of all the hospitals approved for reclassification for FY 2023, FY 
2024, and FY 2025, 1,078 hospitals (approximately 32.5 percent of IPPS 
hospitals) are in a MGCRB reclassification status for FY 2025 (with 237 
of these hospitals reclassified back to their urban geographic 
location). We refer readers to Section III.F.3.b of this final rule for 
information on the effects of implementation of new OMB labor market 
area delineations on reclassified hospitals.
    Under the existing regulations at Sec.  412.273, hospitals that 
have been reclassified by the MGCRB are permitted to withdraw their 
applications if the request for withdrawal is received by the MGCRB any 
time before the MGCRB issues a decision on the application, or after 
the MGCRB issues a decision, provided the request for withdrawal is 
received by the MGCRB within 45 days of the date that CMS' annual 
notice of proposed rulemaking is issued in the Federal Register 
concerning changes to the inpatient hospital prospective payment system 
and proposed payment rates for the fiscal year for which the 
application has been filed. Please note that Section III.F.3.c. of this 
final rule finalizes our proposal to change the deadline for the 
withdrawal requests to 45 days from the date of filing for public 
inspection of the proposed rule at the website of the Office of the 
Federal Register.
    For information about the current process for withdrawing, 
terminating, or canceling a previous withdrawal or termination of a 3-
year reclassification for wage index purposes, we refer readers to 
Sec.  412.273, as well as the FY 2002 IPPS final rule (66 FR 39887 
through 39888) and the FY 2003 IPPS final rule (67 FR 50065 through 
50066). Additional discussion on withdrawals and terminations, and 
clarifications regarding reinstating reclassifications and ``fallback'' 
reclassifications were included in the FY 2008 IPPS final rule (72 FR 
47333) and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38148 through 
38150).
    Applications for FY 2026 reclassifications are due to the MGCRB by 
September 1, 2024. This is also the current deadline for canceling a 
previous wage index reclassification withdrawal or termination under 
Sec.  412.273(d) for the FY 2025 cycle.
    Applications and other information about MGCRB reclassifications 
may be obtained beginning in mid-July 2024 via the internet on the CMS 
website at https://www.cms.gov/medicare/regulations-guidance/geographic-classification-review-board. This collection of information 
was previously approved under OMB Control Number 0938-0573, which 
expired on January 31, 2021. A reinstatement of this PRA package is 
currently being developed. The public will have an opportunity to 
review and submit comments regarding the reinstatement of this PRA 
package through a public notice and comment period separate from this 
rulemaking.
    Comment: A commenter asked that CMS issue additional guidance to 
provide clarity for the process and timeline of MGCRB decisions, noting 
that there is no limit in how early the MGCRB can issue its decisions. 
The commenter requested that CMS prohibit the MGCRB from issuing 
decisions prior to the first week of February to allow hospitals ample 
time to submit documentation of rural reclassification, SCH and RRC 
status in support of their reclassification applications, or to submit 
withdrawals based on the

[[Page 69283]]

January PUF. The commenter also suggested that to alleviate the burden 
of hospitals appealing MGCRB decisions, CMS could modify Sec.  
412.256(c) to provide for the MGCRB to also issue requests for 
additional information rather than deny applications due to incomplete 
information or if the MGCRB maps distance for proximity differently 
than the hospital's submission.
    Response: We disagree with the commenter that CMS should limit how 
early the MGCRB can issue its decisions to provide time for hospitals 
to submit additional documentation. According to Sec.  412.256(a)(2), a 
complete application must be received not later than the first day of 
the 13-month period preceding the Federal fiscal year for which 
reclassification is requested. Hospitals could avoid a denial due to 
incomplete information or avoid an administrative appeal by submitting 
a complete application at the time of filing, rather than relying on 
the MGCRB's current practice of accepting supporting documentation up 
until the date of review. Hospitals wishing to withdraw based on the 
January PUF can still withdraw after the MGCRB's decision in accordance 
with the regulations at Sec.  412.273.
    With regard to the commenter's suggested revision to the regulation 
at Sec.  412.256(c), we did not propose any modifications to the 
regulations at Sec.  412.256(c) and believe that the current regulation 
at Sec.  412.256(c) already provides for a robust and transparent 
process. Specifically, the regulation at 412.256(c)(1) states: ``The 
MGCRB will review an application within 15 days of receipt to determine 
if the application is complete. If the MGCRB determines that an 
application is incomplete, the MGCRB will notify the hospital, with a 
copy to CMS, within the 15 day period, that it has determined that the 
application is incomplete and may dismiss the application if a complete 
application is not filed by September 1.'' We reiterate that a hospital 
can avoid the administrative burden of an appeal by submitting a 
complete application at the time of filing.
b. Effects of Implementation of Revised OMB Labor Market Area 
Delineations on Reclassified Hospitals
(1) Background
    Reclassifications granted under section 1886(d)(10) of the Act are 
effective for 3 fiscal years, so that a hospital or county group of 
hospitals would be assigned a wage index based upon the wage data of 
hospitals in the labor market area to which it reclassified for a 3-
year period. Because hospitals that have been reclassified beginning in 
FY 2023, 2024, or 2025 were reclassified based on the current labor 
market delineations, under the revised OMB delineations based on the 
OMB Bulletin No. 23-01 beginning in FY 2025 the CBSAs to which they 
have been reclassified, or the CBSAs where they are located, may 
change. In the proposed rule, we encouraged hospitals with current 
reclassifications to verify area wage indexes in Table 2 in the 
appendix, and to confirm that the CBSAs to which they have been 
reclassified for FY 2025 would continue to provide a higher wage index 
than their geographic area wage index. Hospitals were able to withdraw 
or terminate their FY 2025 reclassifications by contacting the MGCRB 
within 45 days from the date the proposed rule was issued in the 
Federal Register (Sec.  412.273(c)).
(2) Assignment Policy for Hospitals Reclassified to a CBSA Where One or 
More Counties Move to the Rural Area or One or More Rural Counties Move 
Into the CBSA
    We proposed that in the case where a CBSA adds a current rural 
county, or loses a current constituent rural county, a hospital's 
current reclassification to the resulting CBSA would be maintained. In 
some cases, a hospital may be located in a rural county that would join 
the CBSA to which the hospital is reclassified. We note that in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 49977), CMS terminated 
reclassifications when, as a result of adopting the revised OMB 
delineations, a hospital's geographic county was located in the CBSA 
for which it was approved for MGCRB reclassification. At that time, 
there was no means for a hospital to obtain an MGCRB reclassification 
to its own geographic area (which we refer to as ``home area'' 
reclassifications). However, as discussed in the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 56925), ``home area'' reclassifications have since 
become possible as a result of the change in policy in the 2016 IFC (81 
FR 23428 through 23438) discussed earlier allowing for dual 
reclassifications. We therefore do not believe it is necessary to 
terminate these reclassifications as we did in FY 2015. In general, 
once the MGCRB has approved a reclassification in accordance with 
subpart L of 42 CFR part 412, that reclassification remains in place 
for 3 years (see Sec.  412.274(b)(2)) unless terminated by the hospital 
pursuant to Sec.  412.273, and CMS does not reevaluate whether the 
hospital continues to meet the criteria for reclassification during the 
three-year period. As such, we proposed to maintain these as ``home 
area'' reclassifications instead of terminating them.
    If a county is removed from a CBSA and becomes rural, a hospital in 
that county with a current ``home area'' reclassification would no 
longer be geographically located in the CBSA to which they are 
reclassified. We proposed that these reclassifications would no longer 
be considered ``home area'' reclassifications, and the hospital would 
be assigned the wage index applicable to other hospitals that 
reclassify into the CBSA (which may be lower than the wage index 
calculated for hospitals geographically located in the CBSA due to the 
hold harmless provision at section 1886(d)(8)(C)(i) of the Act).\192\
---------------------------------------------------------------------------

    \192\ In accordance with section 1886(d)(8)(C)(i) of the Act, 
the wage index for hospitals located in a geographic area cannot be 
reduced by the inclusion of reclassified hospitals. Therefore, if 
the inclusion of reclassified hospitals reduces the combined wage 
index by more than 1 percentage point, hospitals reclassified into 
the area would receive a wage index that includes their data, 
whereas hospitals geographically located there would receive a wage 
index that does not.
---------------------------------------------------------------------------

    Finally, as discussed in section III.B.4, all the constituent 
counties of CBSA 14100 (Bloomsberg-Berwick, PA), CBSA 19180 (Danville, 
IL), CBSA 20700 (East Stroudsburg, PA) and CBSA 35100 (New Bern, NC) 
become rural under the revised OMB delineations. There are 6 hospitals 
with reclassifications to these previously urban CBSAs.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR28AU24.160

BILLING CODE 4120-01-C
    As there is no sufficiently similar urban CBSA in the revised 
delineations, we proposed that hospitals' MGCRB reclassifications to 
these CBSAs would be terminated for FY 2025. The effect of such 
terminations would be that these hospitals would receive the wage index 
for the CBSA in which they are geographically located, or in the case 
of hospitals with Sec.  412.103 reclassification, the rural wage index. 
While we would prefer to maintain the remaining years of a MGCRB 
reclassification and transition these reclassified hospitals to the 
most appropriate CBSA under the revised delineations, because there are 
no urban counties remaining in the CBSAs listed above to which they are 
currently reclassified, there is no urban area to which they can be 
assigned that includes at least one county from the CBSA to which the 
MGCRB approved reclassification. We received no comments regarding our 
proposed policy to maintain MGCRB reclassification to a CBSA that 
either gains or loses one or more counties to or from a rural area, nor 
did we receive comments regarding our proposed policy for addressing 
home area reclassifications in these areas. We are finalizing these 
policies as proposed.
    Comment: A commenter described the treatment of the hospitals that 
had active MGCRB reclassifications through FY 2025 to CBSAs where all 
constituent counties become rural under the revised OMB delineations as 
unfair. The commenter stated the proposal to terminate these 
reclassifications without reassignment to another urban area 
disadvantages certain hospitals. The commenter contended that as many 
as four hospitals will be assigned a lower wage index based on their 
state's rural wage index or rural floor value. The commenter noted, as 
discussed above, that CMS does not generally reevaluate whether the 
hospital continues to meet the criteria for reclassification during the 
three-year period approved by the MGCRB. The commenter also cited 
impacts on the state rural wage index due to the requirement under 
section 1886(d)(8)(C)(ii) of the Act to exclude wage data for urban 
hospitals with dual Sec.  412.103 and MGCRB reclassifications in 
calculating the rural wage index unless doing reduces the rural wage 
index. The commenter stated that by terminating reclassifications in 
this manner, CMS has disadvantaged these hospitals by limiting their 
actions when it comes to their preferred wage index area. The commenter 
provided several alternative methods to assign the reclassification for 
these hospitals, including assigning the reclassification to their 
``home'' geographic area, the next closest CBSA, or another CBSA to 
which the hospital can demonstrate it would meet reclassification 
criteria, or would have a high level of commuting interchange.
    Response: We considered the commenter's concern and alternative 
suggestions to avoid terminating the MGCRB reclassifications. As we 
discussed previously, once approved by the MGCRB, a reclassification to 
the approved area is valid for a period of three fiscal years and 
generally is not subject to review. However, as discussed later in this 
section, we believe that when the CBSA to which reclassification was 
approved is substantially changed due to the adoption of revised labor 
market delineations, in order to continue to give effect to the 
approved reclassification, CMS should identify which area best 
represents the urban labor market to which a hospital's 
reclassification was approved. That is, when the labor market area 
delineations are updated, the new delineations may or may not contain a 
CBSA resembling that to which a hospital was previously reclassified. 
Where possible, CMS assigns a hospital's reclassification to a CBSA 
that contains the nearest urban county that was previously located in 
the CBSA to which the MGCRB approved reclassification or to another 
nearby CBSA that contains at least one urban county from the approved 
CBSA. In the case of these hospitals, which had reclassified to urban 
CBSAs, this is not possible, as no part of their approved CBSA would 
remain urban under the revised delineations. Furthermore, section 
1886(d)(10)(C) of the Act indicates that the Board is responsible for 
reviewing and approving MGCRB applications, and CMS's policy aims to 
give effect only to reclassifications approved by the Board. By 
assigning a reclassified hospital to a CBSA that contains at least one 
urban county from its previously approved CBSA, we believe that we are 
substantively maintaining an existing approved reclassification. We do 
not believe it would be possible to assign a hospital temporarily to 
another CBSA (as suggested by the commenter) in an equitable manner. 
Any number of hospitals might hypothetically be eligible for MGCRB 
reclassification to different labor markets due to changes to labor 
market delineations and would potentially request immediate 
reclassification by CMS, rather than waiting at least one fiscal year 
to apply to the MGCRB. As stated in the proposed rule, we believe that 
the 5 percent cap on annual decreases in wage index values provides for 
an adequate transition for any hospitals that are negatively affected 
by the adoption of the revised OMB labor market delineations. CMS 
evaluated the impacts on the hospitals that the commenter asserted 
would be negatively impacted by our proposal to terminate their MGCRB 
reclassifications (listed in the table above). We find minimal impact 
on their wage index values for FY 2025. The wage index values for the 
six hospitals for which we proposed to terminate the reclassification 
are all increasing in FY 2025 compared to FY 2024 (in amounts ranging 
from 1.7 to 9.7 percent). While some of these hospitals may have been 
able to obtain higher wage index values by having an MGCRB 
reclassification to another urban area, the overall benefits would be 
nominal.
    Furthermore, while we acknowledge that dual Sec.  412.103 and MGCRB 
reclassification status has an impact on the rural wage index, as 
described in detail in the FY 2024 final rule (88 FR 58971 through 
58977), we are not convinced that this impact warrants any special 
exception or treatment by CMS.

[[Page 69285]]

Section 1886(d)(8)(C)(ii) of the Act ensures that the effects of MGCRB 
and ``Lugar'' reclassification policies do not reduce the rural wage 
index. In the case of a dual reclass hospital losing its MGCRB 
reclassification, each hospital had adequate time to cancel its Sec.  
412.103 reclassification by the June 9, 2024 deadline, if preferred. We 
believe this option allowed hospitals to evaluate whether the benefits 
of rural reclassification outweighed any negative impact its wage data 
would have on the rural wage index calculation. We do not believe our 
approach of terminating the reclassifications of hospitals that had 
reclassified to CBSAs that have no comparator under the revised OMB 
delineations negatively impacts the overall accuracy of the IPPS wage 
index.
    For these reasons, CMS will not adopt any of the alternative 
reclassification assignment approaches suggested by the commenter. Each 
recommendation requires CMS to effectively initiate and approve a new 
MGCRB reclassification. In each recommended option, no part of any CBSA 
that could be assigned was included in the original application 
approved by the MGCRB. We are finalizing the policy to terminate MGCRB 
reclassifications in cases where the CBSA to which a hospital's 
reclassification was approved became rural under the revised OMB 
delineations adopted in this final rule.
(3) Assignment Policy for Hospitals Reclassified to a CBSA Where the 
CBSA Number Changes, or the CBSA Is Subsumed by Another CBSA
    We proposed that in the case of a CBSA that experiences a change in 
CBSA number, or where all urban counties in the CBSA are subsumed by 
another CBSA, MGCRB reclassifications approved to the FY 2024 CBSA 
would be assigned the revised FY 2025 CBSA (as described in the section 
III.B.6). In some cases, this reconfiguration of CBSAs would result in 
an MGCRB reclassification approved to a different area becoming a 
``home area'' reclassification, if a hospital's current geographic 
urban CBSA is subsumed by its reclassified CBSA. Otherwise, the current 
reclassification would continue to the proposed revised CBSA number.
    We did not receive any comments specific to this proposal and are 
finalizing this policy to assign the revised CBSA number to hospitals 
reclassified to a CBSA where the CBSA number changes, or the CBSA is 
subsumed by another CBSA.
(4) Assignment Policy for Hospitals Reclassified to CBSAs Where One or 
More Counties Move to a New or Different Urban CBSA
    In some cases, adopting the revised OMB delineations would result 
in one or more counties splitting apart from their current CBSAs to 
form new CBSAs, or counties shifting from one CBSA designation to 
another CBSA. If CBSAs are split apart, or if counties shift from one 
CBSA to another under the revised OMB delineations, for hospitals that 
have reclassified to these CBSAs we must determine which reclassified 
area to assign to the hospital for the remainder of a hospital's 3-year 
reclassification period.
    Consistent with the policy implemented in FY 2021 (85 FR 58743 
through 58753), we proposed to assign current ``home area'' 
reclassifications to these CBSAs to the hospital's geographic CBSA. 
That is, hospitals that were approved for MGCRB reclassification to the 
geographic area they are located in effective for FYs 2023, 2024, or 
2025 would continue to be assigned a reclassification to their 
geographic ``home area.'' The assigned ``home area'' reclassification 
CBSA may be different from previous years if the hospital is located in 
a county that was relocated to a new or different urban CBSA.
    The following is a table of hospitals with current ``home area'' 
reclassification to CBSAs where one or more counties move to a new or 
different urban CBSA under the revised OMB delineations. The 
reclassification noted by an asterisk on the ``MGCRB Case Number'' was 
withdrawn for FY 2025, but may be reinstated for FY 2026.
[GRAPHIC] [TIFF OMITTED] TR28AU24.161

    Consistent with the policy CMS implemented in the FY 2005 IPPS 
final rule (69 FR 49054 through 49056), the FY 2015 IPPS final rule (79 
FR 49973 through 49977), and in the FY 2021 IPPS/LTCH PPS final rule 
(85 FR 58743 through 58753), for FY 2025, if a CBSA would be 
reconfigured due to adoption of the revised OMB delineations and it 
would not be possible for the reclassification to continue seamlessly 
to the reconfigured CBSA (not including

[[Page 69286]]

``home area'' reclassifications, which were discussed previously), we 
believe it would be appropriate for us to determine the best 
alternative location to assign current reclassifications for the 
remaining 3 years. Therefore, to maintain the integrity of a hospital's 
3-year reclassification period, we proposed that current geographic 
reclassifications (applications approved effective for FY 2023, FY 
2024, or FY 2025) that would be affected by CBSAs that are split apart 
or counties that shift to another CBSA under the revised OMB 
delineations, would ultimately be assigned to a CBSA under the revised 
OMB delineations that contains at least one county (or county 
equivalent) from the reclassified CBSA under the current FY 2024 
delineations, and that would be generally consistent with rules that 
govern geographic reclassification. That is, consistent with the policy 
finalized in FY 2015 (79 FR 49973) we proposed a policy that other 
affected reclassified hospitals be assigned to a CBSA that would 
contain the most proximate county that (1) is located outside of the 
hospital's proposed FY 2025 geographic labor market area, and (2) is 
part of the original FY 2024 CBSA to which the hospital is 
reclassified. We believe that assigning reclassifications to the CBSA 
that contains the nearest county that meets the aforementioned criteria 
satisfies the statutory requirement at section 1886(d)(10)(D)(v) of the 
Act by maintaining reclassification status for a period of 3 fiscal 
years, while generally respecting the longstanding principle of 
geographic proximity in the labor market reclassification process. For 
county group reclassifications, we proposed that we would follow the 
same policy, except that we would reassign hospitals in a county group 
reclassification to the CBSA under the revised OMB delineations that 
contains the county to which the majority of hospitals in the group 
reclassification are geographically closest. We also proposed to allow 
such hospitals, or county groups of hospitals, to submit a request to 
the [email protected] mailbox for reassignment to another proposed 
CBSA that would contain a county that is part of the current CBSA to 
which it was approved to be reclassified (based on FY 2024 
delineations) if the hospital or county group of hospitals can 
demonstrate compliance with applicable reclassification proximity 
rules, as described later in this section.
    The following Table X provides a list of current FY 2024 CBSAs 
(column 1) where one or more counties would be relocated to a new or 
different urban CBSA under the proposed policy. Hospitals with active 
MGCRB reclassifications into the current FY 2024 CBSAs in column 1 
would be subject to the reclassification assignment policy described in 
this subsection. The third column of ``eligible'' CBSAs lists all 
proposed revised CBSAs that contain at least one county that is part of 
the current FY 2024 CBSA (in column 1).
[GRAPHIC] [TIFF OMITTED] TR28AU24.162

    We did not receive any comments regarding the MGCRB 
reclassification assignment and reassignment policy. We are finalizing 
the policy as proposed.
    We received five requests to reassign the assigned CBSA to a 
different eligible CBSA (as described in Table X). One request was 
related to the comment summarized above regarding the termination of 
reclassification for hospitals reclassified to areas where all counties 
in the CBSA would become rural. This hospital (CCN 140113) requested to 
have its MGCRB reclassification reassigned to its geographic ``home'' 
CBSA 16580. We did not propose this CBSA as eligible for reassignment 
and are denying this request for the reasons discussed earlier. We note 
that this hospital, by cancelling its current Sec.  412.103 rural 
reclassification, will receive the wage index for its geographic CBSA 
in FY 2025.The remaining requests are as follows:

[[Page 69287]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.163

    We note that MGCRB Case No. 25C0250 (CCN 490113) was a ``home 
area'' reclassification and was assigned its new geographic ``home 
area'' in the proposed rule. We did not explicitly address in the 
proposed rule whether hospitals with ``home area'' reclassifications to 
a CBSA that had one or more counties move to a new or different CBSA 
would be eligible to request reassignment to that new or different 
CBSA. However, we find that the case meets the proposed requirements 
for reassignment applicable generally to hospitals whose 
reclassifications are reassigned on the basis of changes to the CBSA 
under the revised OMB delineations, as the hospital is requesting to be 
reclassified to an area that is a) not its geographic CBSA and b) 
contains at least one county from its approved CBSA.
    After reviewing the submitted materials, we have determined these 
four requests meet the appropriate distance requirements for 
reassignment and have approved the requests as described.
    Table Y lists all hospitals subject to our reclassification 
assignment and reassignment policy and the CBSA assigned or reassigned 
for FY 2025 under this policy. Cases marked with an asterisk were 
withdrawn or terminated for FY 2025 but may be reinstated in FY 2026.
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[[Page 69288]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.164


[[Page 69289]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.165

BILLING CODE 4120-01-C
    We note that the Office of Hearings Case and Document Management 
System (OH CDMS) may not be updated to reflect different CBSA numbers 
for reclassification assignments and reassignments finalized in this 
rule. When making withdrawal, termination, or reinstatement requests 
for these cases, the original CBSA number may be displayed in the OH 
CDMS. If hospitals require further assistance in this matter, please 
contact [email protected].
(5) Assignment Policy for Hospitals Reclassified to CBSAs Reconfigured 
Due to the Migration to Connecticut Planning Regions
    As discussed in section III.B., CMS is adopting the revised OMB 
Bulletin No. 23-01 delineations, which use planning regions instead of 
counties as the basis for CBSA construction in the State of 
Connecticut. There are five current urban CBSAs that include at least 
one county in Connecticut. These are 14860 (Bridgeport-Stamford-
Norwalk, CT), 25540 (Hartford-East Hartford-Middletown, CT), 35300 (New 
Have-Milford, CT), 35980 (Norwich-New London, CT), and 49340 
(Worcester, MA-CT). In the FY 2025 CBSAs, based on the OMB Bulletin No. 
23-01 delineations, there are five CBSAs that will contain at least one 
county-equivalent ``planning region.'' The five CBSAs are 14860 
(Bridgeport-Stamford-Danbury, CT), 25540 (Hartford-West Hartford-East 
Hartford, CT), 35300 (New Haven, CT), 35980 (Norwich-New London-
Willimantic, CT), and 47930 (Waterbury-Shelton, CT).
    As there was significant reconfiguration of the CBSAs due to the 
transition from counties to planning regions, we proposed to adopt a 
similar assignment policy for hospitals reclassified to CBSAs that 
currently include Connecticut counties as we did for hospitals 
reclassified to CBSAs where one or more counties move to a new or 
different urban CBSA (described in the previous subsection).
    The following table lists all current ``home area'' 
reclassifications to one of the CBSAs that currently contain at least 
one county in Connecticut.

[[Page 69290]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.166

    The following table provides a list of current FY 2024 CBSAs 
(column 1) that contain at least one county in Connecticut. Under the 
proposal, hospitals with active MGCRB reclassifications into the CBSAs 
in column 1 would be subject to the reclassification assignment policy. 
The third column of ``eligible'' CBSAs lists all revised CBSAs that 
contain at least one planning region that is part of the current FY 
2025 CBSA (in column 1). Consistent with the policy discussed in the 
previous section, we proposed a policy that affected reclassified 
hospitals be assigned to a CBSA that would contain the most proximate 
planning region that (1) is located outside of the hospital's proposed 
FY 2025 geographic labor market area, and (2) contains a portion of a 
county included in the original FY 2024 CBSA to which the hospital is 
reclassified.
[GRAPHIC] [TIFF OMITTED] TR28AU24.167

    We believe that assigning reclassifications to the CBSA that 
contains the nearest county-equivalent planning region that meets the 
aforementioned criteria satisfies the statutory requirement at section 
1886(d)(10)(v) of the Act by maintaining reclassification status for a 
period of 3 fiscal years, while generally respecting the longstanding 
principle of geographic proximity in the labor market reclassification 
process. For county group reclassifications, we would follow our 
proposed policy, as previously discussed, except that we proposed to 
reassign hospitals in a county group reclassification to the CBSA under 
the revised OMB delineations that contains the county-equivalent to 
which the majority of hospitals in the group reclassification are 
geographically closest. We also proposed to allow such hospitals, or 
county groups of hospitals, to submit a request to the 
[email protected] mailbox for reassignment to another proposed CBSA 
that would contain a county that is part of the current CBSA to which 
it was approved to be reclassified (based on FY 2024 delineations) if 
the hospital or county group of hospitals can demonstrate compliance 
with applicable reclassification proximity rules.
    We did not receive any comments regarding the MGCRB 
reclassification assignment and reassignment policy due to the adoption 
of the revised Connecticut county-equivalents. We are finalizing the 
policy as proposed.
    We received two requests from hospitals affected by this policy to 
reassign the assigned CBSA to a different eligible CBSA (as described 
in Table X).
[GRAPHIC] [TIFF OMITTED] TR28AU24.168

    After reviewing the submitted materials, we have determined both 
requests meet the appropriate distance requirements for reassignment 
and have approved these requests.
    Table Y lists all hospitals subject to our reclassification 
assignment and reassignment policy for CBSAs reconfigured due to the 
migration to Connecticut planning regions and the CBSA assigned or 
reassigned for FY 2025 under this policy. Cases marked with an asterisk 
were withdrawn for FY 2025 but may be reinstated in FY 2026.

[[Page 69291]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.169

    We note that the OH CDMS may not be updated to reflect different 
CBSA numbers for reclassification assignments and reassignments 
finalized in this rule. When making withdrawal, termination, or 
reinstatement requests for these cases, the original CBSA number may be 
displayed in the OH CDMS. If hospitals require further assistance in 
this matter, please contact [email protected].
d. Change to Timing of Withdrawals at 412.273(c)
    As mentioned in section III.F.3.a of this final rule, under the 
regulations at Sec.  412.273, hospitals that have been reclassified by 
the MGCRB are permitted to withdraw or terminate an approved 
reclassification. The current regulations at Sec.  412.273(c)(1)(ii) 
and (c)(2) for withdrawals and terminations require the request to be 
received by the MGCRB within 45 days of the date that CMS' annual 
notice of proposed rulemaking is issued in the Federal Register 
concerning changes to the IPPS and proposed payment rates.
    In the 2018 IPPS/LTCH PPS Final Rule (82 FR 38148 through 38150), 
we finalized changes to the 45-day notification rules so that hospitals 
have 45 days from the public display of the annual proposed rule for 
the IPPS instead of 45 days from publication to inform CMS of certain 
requested changes relating to the development of the hospital wage 
index. We stated that we believe that the public has access to the 
necessary information from the date of public display of the proposed 
rule at the Office of the Federal Register and on its website to make 
the decisions at issue. While we finalized changes to the 45-day 
notification rules for decisions about the outmigration adjustment and 
waiving Lugar status, we did not finalize a change to the timing for 
withdrawing or terminating MGCRB decisions.
    Instead, in response to comments expressing concern that some 
hospitals may be disadvantaged if the Administrator's decision on a 
hospital's request for review of an MGCRB decision has not been issued 
prior to the proposed deadline for submitting withdrawal or termination 
requests to the MGCRB, we maintained our existing policy of requiring 
hospitals to request from the MGCRB withdrawal or termination of an 
MGCRB reclassification within 45 days of issuance in the Federal 
Register. We stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38149) that considering the usual dates of the MGCRB's decisions 
(generally early February) and of the public display of the IPPS 
proposed rule, the maximum amount of time for an Administrator's 
decision to be issued may potentially extend beyond the proposed 
deadline of 45 days from the date of public display.
    However, the MGCRB currently issues decisions earlier, in January, 
which mitigates this concern. For example, the MGCRB has sent decision 
letters to hospitals via email on January 23, 2024, for the FY 2025 
cycle and on January 31, 2023, for the FY 2024 cycle. We believe that 
the MGCRB will continue to issue its decisions in January, due to their 
upgrade to an electronic system that expedites processing applications 
and issuing decision letters efficiently. The regulations at Sec. Sec.  
412.278(a) and (b)(1) provide that a hospital may request the 
Administrator to review the MGCRB decision within 15 days after the 
date the MGCRB issues its decision. Under Sec.  412.278(f)(2)(i), the 
Administrator issues a decision not later than 90 days following 
receipt of the party's request for review. Consequently, MGCRB 
decisions could be issued as late as the end of January, and the 15 
days the hospital has to request the Administrator's review, plus the 
90 days the Administrator has to issue a decision, would result in 
hospitals receiving the results of the review prior to 45 days after 
display (which would be May 16th if the proposed rule is displayed on 
the target date of April 1, but later if there is a delay).
    While the current timing of MGCRB decisions in January allows for 
hospitals to receive the results of any review prior to 45 days after 
display of the proposed rule for the relevant FY, and we expect this 
timing to continue, we acknowledge that section 1886(d)(10)(C)(iii)(I) 
of the Act grants the MGCRB 180 days after the application deadline to 
render a decision. If the MGCRB were to delay issuing decisions until 
the last day possible according to the Statute, which is February 28th, 
a hospital requesting the Administrator's review may not receive the 
results of the review prior to 45 days after display.
    Therefore, we proposed to change the deadline for hospitals to 
withdraw or terminate MGCRB classifications from within 45 days of the 
date that the annual notice of proposed rulemaking is issued in the 
Federal Register to within 45 days of the public display of the annual 
notice of proposed rulemaking on the website of the Office of the 
Federal Register, or within 7 calendar days of receiving a decision of 
the Administrator in accordance with Sec.  412.278 of this part, 
whichever is later. This change will synchronize this deadline with 
other wage index deadlines, such as the deadlines for accepting the 
outmigration adjustment

[[Page 69292]]

and waiving or reinstating Lugar status. As hospitals typically know 
the results of the Administrator's decisions on reviews within 45 days 
of the public display of the proposed rule for the upcoming fiscal 
year, we believe hospitals have access to the information they need to 
make reclassification decisions. In the rare circumstance that a 
hospital would not receive the results of the review prior to 45 days 
of the public display date, or receives the results of the review less 
than 7 days before the deadline, the hospital would have 7 calendar 
days after receiving the Administrator's decision to request to 
withdraw or terminate MGCRB classification. While we do not anticipate 
frequent use of this extension, we believe this fully addresses the 
concern that some hospitals may be disadvantaged if the Administrator's 
decision on a hospital's request for review of an MGCRB decision has 
not been issued prior to the deadline for submitting withdrawal or 
termination requests to the MGCRB. We believe that 7 days after 
receiving the Administrator's decision affords hospitals adequate time 
to make calculated reclassification decisions.
    Specifically, we proposed to change the words ``within 45 days of 
the date that CMS' annual notice of proposed rulemaking is issued in 
the Federal Register'' in the regulation text at 412.273(c)(1)(ii) and 
412.273(c)(2) for withdrawals and terminations to ``within 45 days of 
the date of filing for public inspection of the proposed rule at the 
website of the Office of the Federal Register, or within 7 calendar 
days of receiving a decision of the Administrator in accordance with 
Sec.  412.278 of this part, whichever is later''.
    Comment: We received several comments opposing our proposal. 
Commenters expressed that the proposed change would give providers less 
time to analyze their reclassification options and to make appropriate 
elections. Some of the commenters pointed out that under CMS' proposal, 
hospitals would have less time to make decisions based on the final 
wage data PUF, which was issued this year on April 29. A commenter 
asked that if CMS finalizes this proposal, it should make available all 
relevant information for a hospital to make an informed decision by the 
same public display date, including: the final wage data PUF, an 
updated list of Administrator appeal decisions, and the MGCRB's listing 
of its FY 2025 group & individual decisions. Another commenter noted 
that the timeframe could be even tighter in future years if the target 
date of April 1st for issuing the IPPS proposed rule is met, which 
would give a hospital only 14 business days from the April 29th PUF 
until 45 days from display (May 16th) to make reclassification 
decisions.
    Response: We understand the commenters' concern that the proposal 
shortens the timeframe for hospitals to make reclassification 
decisions. However, we note that none of the commenters maintained that 
hospitals would not have access to the information necessary to make an 
informed decision, just that the timeframe would be shortened, which 
our proposal discusses is necessary to synchronize this deadline with 
other wage index deadlines. We also note that none of the commenters 
requested that we modify the proposed extended deadline of within 7 
calendar days of receiving a decision of the Administrator. Therefore, 
we continue to believe that the revised timeframe provides hospitals 
adequate time to access the information they need to make informed 
reclassification decisions. Furthermore, the other information that 
commenters requested be made available by the start of the 45-day 
timeframe, such as the final wage data PUF and administrative appeal 
decisions, is not necessarily available at the current start of the 45 
day timeframe. Hospitals currently expect to begin evaluating their 
reclassification options based on the best available information and 
may choose to finalize their decisions as more updated information 
becomes available during the timeframe for withdrawals. Other than 
adjusting to a shortened timeframe, we believe that this proposal does 
not create a new disadvantage for hospitals, nor does it prevent 
hospitals from making informed reclassification decisions since more 
updated information does become available during the timeframe for 
withdrawals. For the reasons enumerated in our proposal and in this 
response, we continue to believe that the revised timeline provides 
hospitals adequate time to make informed decisions about their 
reclassification options.
    Therefore, we are finalizing our proposed changes without 
modification to the regulations for withdrawals and terminations at 
Sec.  412.273(c)(1)(ii) & (c)(2).
4. Redesignations Under Section 1886(d)(8)(B) of the Act
a. Lugar Status Determinations
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through 
51600), we adopted the policy that, beginning with FY 2012, an eligible 
hospital that waives its Lugar status to receive the out-migration 
adjustment has effectively waived its deemed urban status and, thus, is 
rural for all purposes under the IPPS effective for the fiscal year in 
which the hospital receives the outmigration adjustment. In addition, 
in that rule, we adopted a minor procedural change that would allow a 
Lugar hospital that qualifies for and accepts the out-migration 
adjustment (through written notification to CMS within 45 days from the 
issuance of the proposed rule in the Federal Register) to waive its 
urban status for the full 3-year period for which its out-migration 
adjustment is effective. By doing so, such a Lugar hospital would no 
longer be required during the second and third years of eligibility for 
the out-migration adjustment to advise us annually that it prefers to 
continue being treated as rural and receive the out-migration 
adjustment. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56930), we 
further clarified that if a hospital wishes to reinstate its urban 
status for any fiscal year within this 3-year period, it must send a 
request to CMS within 45 days of the issuance of the proposed rule in 
the Federal Register for that particular fiscal year. We indicated that 
such reinstatement requests may be sent electronically to 
[email protected]. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38147 through 38148), we finalized a policy revision to require a Lugar 
hospital that qualifies for and accepts the out-migration adjustment, 
or that no longer wishes to accept the out-migration adjustment and 
instead elects to return to its deemed urban status, to notify CMS 
within 45 days from the date of public display of the proposed rule at 
the Office of the Federal Register. These revised notification 
timeframes were effective beginning October 1, 2017. In addition, in 
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38148), we clarified that 
both requests to waive and to reinstate ``Lugar'' status may be sent to 
[email protected]. To ensure proper accounting, we request 
hospitals to include their CCN, and either ``waive Lugar'' or 
``reinstate Lugar'', in the subject line of these requests. We received 
five timely requests for hospitals to accept the county out-migration 
adjustment in lieu of its ``Lugar'' reclassification. The requests were 
from CCNs 150030, 320033, 340126, 390183, and 390330. When applicable, 
the hospitals were informed that this election would result in a 
cancelation of their rural reclassification status under Sec.  412.103, 
effective Oct 1, 2024. We also informed hospital that for

[[Page 69293]]

the request to be approved, the hospital must withdraw or terminate any 
active MGCRB reclassification. All requests have been approved and will 
remain in effect for the remainder of the 3-year out-migration 
adjustment period.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42314 and 42315), we 
clarified that in circumstances where an eligible hospital elects to 
receive the outmigration adjustment within 45 days of the public 
display date of the proposed rule at the Office of the Federal Register 
in lieu of its Lugar wage index reclassification, and the county in 
which the hospital is located would no longer qualify for an 
outmigration adjustment when the final rule (or a subsequent correction 
notice) wage index calculations are completed, the hospital's request 
to accept the outmigration adjustment would be denied, and the hospital 
would be automatically assigned to its deemed urban status under 
section 1886(d)(8)(B) of the Act. We stated that final rule wage index 
values would be recalculated to reflect this reclassification, and in 
some instances, after taking into account this reclassification, the 
out-migration adjustment for the county in question could be restored 
in the final rule. However, as the hospital is assigned a Lugar 
reclassification under section 1886(d)(8)(B) of the Act, it would be 
ineligible to receive the county outmigration adjustment under section 
1886(d)(13)(G) of the Act.
b. Effects of Implementation of Revised OMB Labor Market Area 
Delineations on Redesignations Under Section 1886(d)(8)(B) of the Act
    As discussed in section III.A.2. of the preamble of this final 
rule, CMS is updating the CBSA labor market delineations to reflect the 
changes made in the July 15, 2023, OMB Bulletin 23-01. In that section, 
we noted that 54 currently rural counties will be added to new or 
existing urban CBSAs. Of those 54 counties, 22 are currently deemed 
urban under section 1886(d)(8)(B) of the Act. We proposed that 
hospitals located in such a ``Lugar'' county, barring another form of 
wage index reclassification, are assigned the reclassified wage index 
of a designated urban CBSA. Section 1886(d)(8)(B) of the Act defines a 
deemed urban county as a ``rural county adjacent to one or more urban 
areas'' that meets certain commuting thresholds. Since we proposed to 
modify the status of these 22 counties from rural to urban, they would 
no longer qualify as ``Lugar'' counties. Hospitals located within these 
counties would be considered geographically urban under the revised OMB 
delineations. The table in this section of this rule lists the counties 
that are no longer deemed urban under section 1886(d)(8)(B) of the Act 
under the revised OMB delineations. We note that in almost all 
instances, the ``Lugar'' county is joining the same (or a substantially 
similar) urban CBSA as it was deemed to in FY 2024.
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[GRAPHIC] [TIFF OMITTED] TR28AU24.170

BILLING CODE 4120-01-C
    We note that in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49973 
through 49977), when we adopted large scale changes to the CBSA labor 
market delineations based on the new 2010 decennial census, we also re-
evaluated the commuting data thresholds for all eligible rural counties 
in accordance with the requirement set forth in section 
1886(d)(8)(B)(ii)(II) of the Act to base the list of qualifying 
hospitals on the most recently available decennial population data. 
Therefore, we proposed to reevaluate the ``Lugar'' status for all 
counties in FY 2025 using the same commuting data table used to develop 
the OMB Bulletin No. 23-01 revised delineations. The data table is the 
``2016-2020 5-Year American Community Survey Commuting Flows'' 
(available on OMB's website: https://www.census.gov/data/tables/2020/demo/metro-micro/commuting-flows-2020.html). We also proposed to use 
the same methodology discussed in the FY 2020 IPPS/LTCH final rule (84 
FR 42315 through 42318) to assign the appropriate reclassified CBSA for 
hospitals in ``Lugar'' counties. That is, when assessing which CBSA to 
assign, we will sum the total number of workers that commute from the 
``Lugar'' county to both ``central'' and ``outlying'' urban counties 
(rather than just ``central'' county commuters).

[[Page 69294]]

    By applying the 2020 American Community Survey (ACS) commuting data 
to the updated OMB labor market delineations, we proposed the following 
changes to the current ``Lugar'' county list: 17 of the 53 urban 
counties that were proposed to become rural under the revised OMB 
delineations, and both newly created rural Connecticut planning region 
county-equivalents would qualify as ``Lugar'' counties. We also 
determined that, as proposed, 33 rural counties (an approximately 11 
hospitals) would lose ``Lugar'' status, as the county no longer meets 
the commuting thresholds or adjacency criteria specified in section 
1886(d)(8)(B) of the Act.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU24.171

    The following table lists all proposed ``Lugar'' counties for FY 
2025. We indicated additions to the list for FY 2025 with ``New'' in 
column 5.

[[Page 69295]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.172


[[Page 69296]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.173


[[Page 69297]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.174

BILLING CODE 4120-01-C
    We noted that Litchfield County, CT is no longer listed as a 
``Lugar'' county as it is not included in the revised CBSA 
delineations. The majority of Litchfield County is now within the 
Northwest Hills Planning Region county-equivalent, with some of the 
county's current constituent townships assigned to other urban county-
equivalents. We

[[Page 69298]]

also noted that in prior fiscal years, Merrimack County, NH was 
included as a ``Lugar'' redesignated county pursuant to the provision 
at Sec.  412.62(f)(1)(ii)(B), which deems certain rural counties in the 
New England region to be part of urban areas. Merrimack County now 
meets the commuting standards to be considered deemed urban under the 
``Lugar'' statute at section 1886(d)(8)(B) of the Act.
    We recognize that the changes to the ``Lugar'' list may have 
negative financial impacts for hospitals that lose deemed urban status. 
We believe that the 5 percent cap on negative wage index changes 
discussed in section III.G.6, would mitigate significant negative 
payment impacts for FY 2025, and would afford hospitals adequate time 
to fully assess any additional reclassification options available to 
them. We also note that special statuses limited to hospitals located 
in rural areas (such as MDH or SCH status) may be terminated if 
hospitals are deemed urban under section 1886(d)(8)(B) of the Act. In 
these cases, hospitals should apply for rural reclassification status 
under Sec.  413.103 prior to October 1, 2024, if they wish to ensure no 
disruption in status.
    We did not receive any comments regarding the implementation of 
revised OMB labor market area delineations for redesignations under 
section 1886(d)(8)(B) of the Act. We are finalizing without 
modification the list of proposed qualifying counties listed in the 
prior table.

G. Wage Index Adjustments: Rural Floor, Imputed Floor, State Frontier 
Floor, Out-Migration Adjustment, Low Wage Index, and Cap on Wage Index 
Decrease Policies

    The following adjustments to the wage index are listed in the order 
that they are generally applied. First, the rural floor, imputed floor, 
and state frontier floor provide a minimum wage index. The rural floor 
at section 4410(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33) 
provides that the wage index for hospitals in urban areas of a State 
may not be less than the wage index applicable to hospitals located in 
rural areas in that State. The imputed floor at section 
1886(d)(3)(E)(iv) of the Act provides a wage index minimum for all-
urban states. The state frontier floor at section 1886(d)(3)(E)(iii) of 
the Act requires that hospitals in frontier states cannot be assigned a 
wage index of less than 1.0000. Next, the out-migration adjustment at 
section 1886(d)(13)(A) of the Act is applied, potentially increasing 
the wage index for hospitals located in certain counties that have a 
relatively high percentage of hospital employees who reside in the 
county but work in a different county or counties with a higher wage 
index. The low-wage index hospital adjustment finalized in the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42325 through 42339) is then applied, 
which increases the wage index values for hospitals with wage indexes 
at or below the 25th percentile. Finally, all hospital wage index 
decreases are capped at 95 percent of the hospital's final wage index 
in the prior fiscal year, according to the policy finalized in the FY 
2023 IPPS/LTCH PPS final rule (87 FR 49018 through 49021).
1. Rural Floor
    Section 4410(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33) 
provides that, for discharges on or after October 1, 1997, the area 
wage index applicable to any hospital that is located in an urban area 
of a State may not be less than the area wage index applicable to 
hospitals located in rural areas in that State. This provision is 
referred to as the rural floor. Section 3141 of the Patient Protection 
and Affordable Care Act (Pub. L. 111-148) also requires that a national 
budget neutrality adjustment be applied in implementing the rural 
floor. Based on the FY 2025 wage index associated with this final rule 
(which is available via the internet on the CMS website), and based on 
the calculation of the rural floor including the wage data of hospitals 
that have reclassified as rural under Sec.  412.103, we estimate that 
771 hospitals would receive the rural floor in FY 2025. The budget 
neutrality impact of the proposed application of the rural floor is 
discussed in section II.A.4.e. of Addendum A of this final rule.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48784), CMS 
finalized a policy change to calculate the rural floor in the same 
manner as we did prior to the FY 2020 IPPS/LTCH PPS final rule, in 
which the rural wage index sets the rural floor. We stated that for FY 
2023 and subsequent years, we would include the wage data of Sec.  
412.103 hospitals that have no MGCRB reclassification in the 
calculation of the rural floor, and include the wage data of such 
hospitals in the calculation of ``the wage index for rural areas in the 
State in which the county is located'' as referred to in section 
1886(d)(8)(C)(iii) of the Act.
    In the FY 2024 IPPS/LTCH final rule (88 FR 58971-77), we finalized 
a policy change beginning that year to include the data of all Sec.  
412.103 hospitals, even those that have an MGCRB reclassification, in 
the calculation of the rural floor and the calculation of ``the wage 
index for rural areas in the State in which the county is located'' as 
referred to in section 1886(d)(8)(C)(iii) of the Act. We explained that 
after revisiting the case law, prior public comments, and the relevant 
statutory language, we agreed that the best reading of section 
1886(d)(8)(E)'s text that CMS ``shall treat the [Sec.  412.103] 
hospital as being located in the rural area'' is that it instructs CMS 
to treat Sec.  412.103 hospitals the same as geographically rural 
hospitals for the wage index calculation.
    Accordingly, in the FY 2024 IPPS/LTCH PPS final rule, we finalized 
a policy to include hospitals with Sec.  412.103 reclassification along 
with geographically rural hospitals in all rural wage index 
calculations, and to exclude ``dual reclass'' hospitals (hospitals with 
simultaneous Sec.  412.103 and MGCRB reclassifications) that are 
implicated by the hold harmless provision at section 1886(d)(8)(C)(ii) 
of the Act. (For additional information on these changes, we refer 
readers to the FY 2024 IPPS/LTCH PPS final rule (88 FR 58971 through 
58977).)
    Comment: Commenters supported CMS' continued treatment of hospitals 
reclassified as rural under Sec.  412.103 in the same manner as 
geographically rural hospitals for the rural wage index and rural floor 
calculations. A commenter specifically agreed with CMS' interpretation 
of case law as discussed in the proposed rule and stated that restoring 
equality between a state's rural floor and its rural wage index is an 
appropriate and fair implementation of the statute. One commenter 
requested that CMS confirm whether the pre-reclassified wage index for 
each hospital reflects if the hospital has reclassified under Sec.  
412.103.
    Multiple commenters expressed concern over the rural floor budget 
neutrality factor. A commenter disagreed with CMS' decision to budget 
neutralize the policy to include hospitals with simultaneous Sec.  
412.103 and MGCRB reclassifications in the rural wage index 
calculation. The commenter stated that some hospitals are paying a 
substantial cost for an artificial increase in the wage index of other 
hospitals, and that this cost escalates as hospitals around the country 
make reclassification decisions to take advantage of this policy 
change. Another commenter pointed out that the rural floor budget 
neutrality factor has more than doubled over the past decade, with the 
most notable increase occurring in FY 2024 due to CMS' decision to 
include Sec.  412.103 reclassifications along with geographically rural 
hospitals in the

[[Page 69299]]

rural wage index calculations. The commenter stated that the rural 
floor budget neutrality factor decreased IPPS payments by 2.87% that 
year, compared to 1.56% the year before. Similarly, a commenter 
requested that CMS provide an impact table with the FY 2025 final rule 
and with subsequent rulemakings showing the number of hospitals and 
total payments impacted by the policy, with results aggregated at the 
state level.
    Other commenters acknowledged CMS' statutory budget neutrality 
requirement but challenged CMS' application of the rural floor. These 
commenters argued that section 4410(b) of the Balanced Budget Act of 
1997 (BBA) exempts urban and reclassified rural hospitals that receive 
the rural floor from having their wage indexes reduced. According to 
these commenters, the rural floor budget neutrality adjustment should 
be applied only to the wage indexes of hospitals not receiving the 
rural floor (i.e.: non-reclassified rural hospitals, and urban 
hospitals with wage indexes above the rural floor).
    Response: While we did not propose any changes to the rural floor 
policy in the FY 2025 IPPS/LTCH PPS proposed rule, we appreciate the 
commenters' continued support.
    In response to the commenter asking for clarification about how 
Sec.  412.103 hospitals are reflected in the pre-reclassified wage 
index, we are clarifying that the pre-reclassified wage index reflects 
hospitals' locations prior to any form of reclassification for budget 
neutrality purposes.
    We understand the commenter's concerns regarding the effect that 
the rural floor budget neutrality factor has on some hospitals as other 
hospitals make reclassification decisions to take advantage of the 
rural floor policy. The commenter noting the increase in the rural 
floor budget neutrality factor in FY 2024 is correct that the budget 
neutrality factor increased by 2.87% that year, compared to 1.56% the 
year before. As we noted in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
58975), we expect that the number of IPPS hospitals assigned their 
State's rural wage index will increase in future years as hospitals 
adjust to the policy and as the relative value of States' rural wage 
index values increase due to the inclusion of hospitals that 
strategically obtain Sec.  412.103 reclassification. As a result, the 
majority of hospitals (if not all) will be assigned identical wage 
index values within their states. For example, for FY 2025, 58% of 
geographically urban hospitals are receiving a wage index equal to 
their State's rural floor, imputed floor, or frontier floor prior to 
any outmigration, low wage index hospital, or 5 percent decrease cap 
adjustments. As we stated in last year's IPPS/LTCH PPS final rule (88 
FR 58975), as substantially more hospitals receive the rural floor, 
there will be a consequently greater budget neutrality impact. However, 
we believe this result would be unavoidable given the requirement of 
section 1886(d)(8)(E) of the Act to treat Sec.  412.103 hospitals `as 
being located in the rural area' of the state, as well as the 
requirement at sections 4410(b) of the BBA 1997 and 3141 of the Patient 
Protection and Affordable Care Act (Pub. L. 111-148) that a uniform, 
national budget neutrality adjustment be applied in implementing the 
rural floor. With regard to the commenter requesting evaluation of the 
impacts of the policy at the hospital and state-specific levels, we 
refer the commenter to the IPPS Payment Impact File associated with 
this final rule (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/fy-2025-ipps-final-rule-home-page) and to section II.A.4.d. of the 
Addendum to this final rule for a discussion of the rural floor budget 
neutrality factor. The area wage index prior to the application of the 
rural floor is available in Table 3.
    With regard to the commenters' assertion that urban and 
reclassified rural hospitals that receive the rural floor should be 
excluded from the application of the rural floor budget neutrality 
factor, we considered this approach in the FY 2008 IPPS proposed and 
final rules (72 FR 24787 and 72 FR 47325) and believe we have applied 
the rural floor budget neutrality adjustment in a manner consistent 
with the statute. Specifically, in the FY 2008 IPPS proposed rule, we 
rejected a reading of section 4410(b) of the BBA requiring that the 
budget neutrality adjustment would be applied only to those hospitals 
that do not receive the rural floor, because urban hospitals receiving 
the rural floor would receive a higher wage index than the rural 
hospitals within the same State (because hospitals receiving the rural 
floor would not be subject to budget neutrality, whereas rural 
hospitals would be) (72 FR 24787). We continue to believe that such a 
reading would not be consistent with the best reading of the statute. 
The statute sets a floor for urban hospitals. The statute does not 
instruct CMS to pay urban hospitals a wage index higher than the wage 
index applicable to rural hospitals, and contains no suggestion that 
the general budget neutrality provisions of section 1886(d)(8)(D)--
which expressly apply to the adjustments made in section 1886(d)(C)--
should not apply . In the FY 2008 IPPS final rule, we adopted the 
current approach to implement rural floor budget neutrality by applying 
a uniform, national adjustment to the wage index (72 FR 47325). Since 
then, Congress specifically endorsed our approach in section 3141 of 
the Patient Protection and Affordable Care Act (Pub. L. 111-148), which 
requires that the rural floor budget neutrality adjustment be applied 
``in the same manner as the Secretary administered such [adjustment] 
for discharges occurring during fiscal year 2008 (through a uniform, 
national adjustment to the area wage index).''
    In addition, we note that section 4410 of the BBA to which the 
commenter refers provides that the rural floor is equal to ``the area 
wage index applicable under [section 1886(d)(3)(E) of the Social 
Security Act] to hospitals located in rural areas in the State.'' Under 
our existing policy, the rural floor and the rural wage index for the 
state are the same after application of the rural floor budget 
neutrality adjustment factor, and nothing in section 4410 of the BBA 
requires otherwise. Put differently, CMS' methodology amounts to merely 
calculating the amount of the rural floor such that it is the same as 
the final rural wage index for the state, rather than reducing the wage 
indices of low wage urban hospitals or reclassified rural hospitals 
that receive the rural floor relative to what they would be otherwise--
in that way it appropriately implements both section 4410 of the BBA 
and section 3141 of the ACA. Thus, consistent with our longstanding 
methodology for implementing the rural floor, we believe it is 
appropriate to continue to apply a budget neutrality adjustment to all 
hospitals' wage indexes.
2. Imputed Floor
    In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we 
adopted the imputed floor policy as a temporary 3-year regulatory 
measure to address concerns from hospitals in all-urban States that 
have stated that they are disadvantaged by the absence of rural 
hospitals to set a wage index floor for those States. We extended the 
imputed floor policy eight times since its initial implementation, the 
last of which was adopted in the FY 2018 IPPS/LTCH PPS final rule and 
expired on September 30, 2018. We refer readers to further discussions 
of the imputed floor in the IPPS/LTCH PPS final rules from FYs 2014 
through 2019 (78 FR 50589 through 50590, 79 FR 49969 through

[[Page 69300]]

49971, 80 FR 49497 through 49498, 81 FR 56921 through 56922, 82 FR 
38138 through 38142, and 83 FR 41376 through 41380, respectively) and 
to the regulations at Sec.  412.64(h)(4). For FYs 2019, 2020, and 2021, 
hospitals in all-urban states received a wage index that was calculated 
without applying an imputed floor, and we no longer included the 
imputed floor as a factor in the national budget neutrality adjustment.
    Section 9831 of the American Rescue Plan Act of 2021 (Pub. L. 117-
2), enacted on March 11, 2021, amended section 1886(d)(3)(E)(i) of the 
Act and added section 1886(d)(3)(E)(iv) of the Act to establish a 
minimum area wage index for hospitals in all-urban States for 
discharges occurring on or after October 1, 2021. Specifically, section 
1886(d)(3)(E)(iv)(I) and (II) of the Act provides that for discharges 
occurring on or after October 1, 2021, the area wage index applicable 
to any hospital in an all-urban State may not be less than the minimum 
area wage index for the fiscal year for hospitals in that State 
established using the methodology described in Sec.  412.64(h)(4)(vi) 
as in effect for FY 2018. Unlike the imputed floor that was in effect 
from FYs 2005 through 2018, section 1886(d)(3)(E)(iv)(III) of the Act 
provides that the imputed floor wage index shall not be applied in a 
budget neutral manner. Section 1886(d)(3)(E)(iv)(IV) of the Act 
provides that, for purposes of the imputed floor wage index under 
clause (iv), the term all-urban State means a State in which there are 
no rural areas (as defined in section 1886(d)(2)(D) of the Act) or a 
State in which there are no hospitals classified as rural under section 
1886 of the Act. Under this definition, given that it applies for 
purposes of the imputed floor wage index, we consider a hospital to be 
classified as rural under section 1886 of the Act if it is assigned the 
State's rural area wage index value.
    Effective beginning October 1, 2021 (FY 2022), section 
1886(d)(3)(E)(iv) of the Act reinstates the imputed floor wage index 
policy for all-urban States, with no expiration date, using the 
methodology described in Sec.  412.64(h)(4)(vi) as in effect for FY 
2018. We refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45176 through 45178) for further discussion of the original imputed 
floor calculation methodology implemented in FY 2005 and the 
alternative methodology implemented in FY 2013.
    Based on data available for this final rule, States that will be 
all-urban States as defined in section 1886(d)(3)(E)(iv)(IV) of the 
Act, and thus hospitals in such States that will be eligible to receive 
an increase in their wage index due to application of the imputed floor 
for FY 2025, are identified in Table 3 associated with this final rule. 
States with a value in the column titled ``State Imputed Floor'' are 
eligible for the imputed floor.
    The regulations at Sec.  412.64(e)(1) and (4) and (h)(4) and (5) 
implement the imputed floor required by section 1886(d)(3)(E)(iv) of 
the Act for discharges occurring on or after October 1, 2021. The 
imputed floor will continue to be applied for FY 2025 in accordance 
with the policies adopted in the FY 2022 IPPS/LTCH PPS final rule. For 
more information regarding our implementation of the imputed floor 
required by section 1886(d)(3)(E)(iv) of the Act, we refer readers to 
the discussion in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45176 
through 45178).
    Comment: We received comments supporting the application of the 
imputed floor. A commenter opposed the imputed floor stating that the 
imputed floor continues to unfairly manipulate the wage index to 
benefit a handful of only-urban states and territories.
    Response: We thank the commenters for their input. As discussed 
earlier, the imputed floor is a statutory requirement under section 
9831 of the American Rescue Plan Act of 2021 (Pub. L. 117-2) which 
requires the Secretary to establish a minimum area wage index for 
hospitals in all-urban States for discharges occurring on or after 
October 1, 2021. We did not propose any changes to the methodology for 
calculating the imputed floor as set forth in Sec.  412.64(e)(1) and 
(4) and (h)(4) and (5). Therefore, in accordance with the statute and 
existing regulations, we are applying the imputed floor for hospitals 
in all-urban States for FY 2025.
3. State Frontier Floor for FY 2025
    Section 10324 of Public Law 111-148 requires that hospitals in 
frontier States cannot be assigned a wage index of less than 1.0000. 
(We refer readers to the regulations at Sec.  412.64(m) and to a 
discussion of the implementation of this provision in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50160 through 50161).) In the FY 2025 IPPS/
LTCH PPS proposed rule, we did not propose any changes to the frontier 
floor policy for FY 2025. In the proposed rule we stated 41 hospitals 
would receive the frontier floor value of 1.0000 for their FY 2025 
proposed wage index. These hospitals are located in Montana, North 
Dakota, South Dakota, and Wyoming.
    We did not receive any public comments on the application of the 
State frontier floor for FY 2025. In this final rule, 41 hospitals will 
receive the frontier floor value of 1.0000 for their FY 2025 wage 
index. These hospitals are located in Montana, North Dakota, South 
Dakota, and Wyoming. We note that while Nevada meets the criteria of a 
frontier State, all hospitals within the State currently receive a wage 
index value greater than 1.0000.
    The areas affected by the rural and frontier floor policies for the 
final FY 2025 wage index are identified in Table 3 associated with this 
final rule, which is available via the internet on the CMS website.
4. Out-Migration Adjustment Based on Commuting Patterns of Hospital 
Employees
    In accordance with section 1886(d)(13) of the Act, as added by 
section 505 of Public Law 108-173, beginning with FY 2005, we 
established a process to make adjustments to the hospital wage index 
based on commuting patterns of hospital employees (the ``out-
migration'' adjustment). The process, outlined in the FY 2005 IPPS 
final rule (69 FR 49061), provides for an increase in the wage index 
for hospitals located in certain counties that have a relatively high 
percentage of hospital employees who reside in the county but work in a 
different county (or counties) with a higher wage index.
    Section 1886(d)(13)(B) of the Act requires the Secretary to use 
data the Secretary determines to be appropriate to establish the 
qualifying counties. When the provision of section 1886(d)(13) of the 
Act was implemented for the FY 2005 wage index, we analyzed commuting 
data compiled by the U.S. Census Bureau that were derived from a 
special tabulation of the 2000 Census journey-to-work data for all 
industries (CMS extracted data applicable to hospitals). These data 
were compiled from responses to the ``long-form'' survey, which the 
Census Bureau used at that time, and which contained questions on where 
residents in each county worked (69 FR 49062). However, the 2010 Census 
was ``short form'' only; information on where residents in each county 
worked was not collected as part of the 2010 Census. The Census Bureau 
worked with CMS to provide an alternative dataset based on the latest 
available data on where residents in each county worked in 2010, for 
use in developing a new out-migration adjustment based on new commuting 
patterns developed from the

[[Page 69301]]

2010 Census data beginning with FY 2016.
    To determine the out-migration adjustments and applicable counties 
for FY 2016, we analyzed commuting data compiled by the Census Bureau 
that were derived from a custom tabulation of the American Community 
Survey (ACS), an official Census Bureau survey, utilizing 2008 through 
2012 (5-year) Microdata. The data were compiled from responses to the 
ACS questions regarding the county where workers reside and the county 
to which workers commute. As we discussed in prior IPPS/LTCH PPS final 
rules, most recently in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
58983), we have applied the same policies, procedures, and computations 
since FY 2012. We refer readers to the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49500 through 49502) for a full explanation of the revised data 
source. We also stated that we would consider determining out-migration 
adjustments based on data from the next Census or other available data, 
as appropriate.
    As discussed earlier in section III.B., CMS proposed to adopt 
revised delineations from the OMB Bulletin 23-01, published July 21, 
2023. The revised delineations incorporate population estimates based 
on the 2020 decennial census, as well as updated journey-to-work 
commuting data. The Census Bureau once again worked with CMS to provide 
an alternative dataset based on the latest available data on where 
residents in each county worked, for use in developing a new out-
migration adjustment based on new commuting patterns. We analyzed 
commuting data compiled by the Census Bureau that were derived from a 
custom tabulation of the ACS, utilizing 2016 through 2020 data. The 
Census Bureau produces county level commuting flow tables every 5 years 
using non-overlapping 5-year ACS estimates. The data include 
demographic characteristics, home and work locations, and journey-to-
work travel flows. The custom tabulation requested by CMS was specific 
to general medical and surgical hospital and specialty (except 
psychiatric and substance use disorder treatment) hospital employees 
(hospital sector Census code 8191/NAICS code 6221 and 6223) who worked 
in the 50 States, Washington, DC, and Puerto Rico and, therefore, 
provided information about commuting patterns of workers at the county 
level for residents of the 50 States, Washington, DC, and Puerto Rico.
    For the ACS, the Census Bureau selects a random sample of addresses 
where workers reside to be included in the survey, and the sample is 
designed to ensure good geographic coverage. The ACS samples 
approximately 3.5 million resident addresses per year.\193\ The results 
of the ACS are used to formulate descriptive population estimates, and, 
as such, the sample on which the dataset is based represents the actual 
figures that would be obtained from a complete count.
---------------------------------------------------------------------------

    \193\ According to the Census Bureau, the effects of the PHE on 
ACS activities in 2020 resulted in a lower number of addresses (~2.9 
million) in the sample, as well as fewer interviews than a typical 
year.
---------------------------------------------------------------------------

    For FY 2025, and subsequent years, we proposed that the out-
migration adjustment will be based on the data derived from the 
previously discussed custom tabulation of the ACS utilizing 2016 
through 2020 (5-year) Microdata. As discussed earlier, we believe that 
these data are the most appropriate to establish qualifying counties, 
because they are the most accurate and up-to-date data that are 
available to us. Furthermore, we stated in the proposed rule (89 FR 
36183) that with the proposed transition of several counties in 
Connecticut to ``planning region'' county equivalents (discussed in 
section III.B.3. of the preamble the proposed rule), the continued use 
of a commuting dataset developed with expiring county definitions would 
be less accurate in approximating commuting flows. We proposed that the 
FY 2025 out-migration adjustments continue to be based on the same 
policies, procedures, and computation that were used for the FY 2012 
out-migration adjustment. We have applied these same policies, 
procedures, and computations since FY 2012, and we believe they 
continue to be appropriate for FY 2025. (We refer readers to a full 
discussion of the out-migration adjustment, including rules on deeming 
hospitals reclassified under section 1886(d)(8) or section 1886(d)(10) 
of the Act to have waived the out-migration adjustment, in the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51601 through 51602).) Table 2 of this 
final rule (which is available via the internet on the CMS website) 
lists the out-migration adjustments for the FY 2025 wage index.
    We did not receive any comments regarding the proposed policy to 
use the custom tabulations of the ACS 2016 through 2020 (5-year) 
Microdata as the basis for the out-migration adjustment. We are 
finalizing the policy as proposed. We also note that we published the 
raw data file received from the US Census Bureau on the FY 2025 IPPS 
Proposed Rule Home Page. The file is item 15 in the supplementary file 
section at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/fy-2025-ipps-proposed-rule-home-page.
5. Continuation of the Low Wage Index Hospital Policy and Budget 
Neutrality Adjustment
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42325 through 
42339), we finalized a policy to address the artificial magnification 
of wage index disparities, based in part on comments we received in 
response to our request for information included in our FY 2019 IPPS/
LTCH PPS proposed rule (83 FR 20372 through 20377). In the FY 2020 
IPPS/LTCH final rule, based on those public comments and the growing 
disparities between wage index values for high- and low-wage-index 
hospitals, we explained that those growing disparities are likely 
caused, at least in part, by the use of historical wage data to 
prospectively set hospitals' wage indexes. That lag creates barriers to 
hospitals with low wage index values being able to increase employee 
compensation, because those hospitals will not receive corresponding 
increases in their Medicare payment for several years (84 FR 42327). 
Accordingly, we finalized a policy that provided certain low wage index 
hospitals with an opportunity to increase employee compensation without 
the usual lag in those increases being reflected in the calculation of 
the wage index (as they would expect to do if not for the lag).\194\ We 
accomplished this by temporarily increasing the wage index values for 
certain hospitals with low wage index values and doing so in a budget 
neutral manner through an adjustment applied to the standardized 
amounts for all hospitals, as well as by changing the calculation of 
the rural floor. As explained in the FY 2020 IPPS/LTCH proposed rule 
(84 FR 19396) and final rule (84 FR 42329), we indicated that the 
Secretary has authority to implement the low wage index hospital policy 
proposal under both section 1886(d)(3)(E) of the Act and under his

[[Page 69302]]

exceptions and adjustments authority under section 1886(d)(5)(I) of the 
Act.
---------------------------------------------------------------------------

    \194\ In the FY 2020 IPPS/LTCH proposed rule, we agreed with 
respondents to a previous request for information who indicated that 
some current wage index policies create barriers to hospitals with 
low wage index values from being able to increase employee 
compensation due to the lag between when hospitals increase the 
compensation and when those increases are reflected in the 
calculation of the wage index. We noted that this lag results from 
the fact that the wage index calculations rely on historical data. 
We also agreed that addressing this systemic issue did not need to 
wait for comprehensive wage index reform given the growing 
disparities between low and high wage index hospitals, including 
rural hospitals that may be in financial distress and facing 
potential closure (84 FR 19394 and 19395).
---------------------------------------------------------------------------

    We increased the wage index for hospitals with a wage index value 
below the 25th percentile wage index value for a fiscal year by half 
the difference between the otherwise applicable final wage index value 
for a year for that hospital and the 25th percentile wage index value 
for that year across all hospitals (the low wage index hospital 
policy). We stated in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42326 
through 42328) our intention that this policy would be effective for at 
least 4 years, beginning in FY 2020, to allow employee compensation 
increases implemented by these hospitals sufficient time to be 
reflected in the wage index calculation.
    We note that the FY 2020 low wage index hospital policy and the 
related budget neutrality adjustment are the subject of pending 
litigation in multiple courts. On July 23, 2024, the Court of Appeals 
for the D.C. Circuit held that the Secretary lacked authority under 
1886(d)(3)(E) or 1886(d)(5)(I)(i) of the Act to adopt the low wage 
index hospital policy for FY 2020, and that the policy and related 
budget neutrality adjustment must be vacated. Bridgeport Hosp. v. 
Becerra, Nos. 22-5249, 22-5269, 2024 WL 3504407, at *7-*8 & n.6 (D.C. 
Cir. July 23, 2024). As of the date of this Rule's publication, the 
time to seek further review of the D.C. Circuit's decision in 
Bridgeport Hospital has not expired. See Fed. R. App. P. 40(a)(1). The 
government is evaluating the decision and considering options for next 
steps.
    As noted earlier, we finalized this policy in the FY 2020 IPPS/LTCH 
final rule to provide low wage index hospitals with an opportunity to 
increase employee compensation without the usual lag in those increases 
being reflected in the calculation of the wage index (as they would 
expect to do if not for the lag). This continues to be the purpose of 
the policy. We stated in the FY 2020 IPPS/LTCH PPS final rule our 
intention that it would be in effect for at least 4 years beginning 
October 1, 2019 (84 FR 42326). We also stated we intended to revisit 
the issue of the duration of this policy in future rulemaking as we 
gained experience under the policy. What could not have been 
anticipated at the time the policy was promulgated was that 
implementation of the policy would occur during the COVID-19 PHE, which 
was declared starting in January of 2020 and continued until May of 
2023. The effects of the COVID-19 PHE complicate our ability to 
evaluate the low wage index hospital policy and our ability to 
determine whether low-wage hospitals have been provided a sufficient 
opportunity to increase employee compensation under the policy without 
the usual lag.
    In the proposed rule, to help gauge the impact of the COVID-19 PHE 
relative to the impact of the low wage index hospital policy, we 
examined the aggregate revenue each hospital reported on their FY 2020 
cost reports from the COVID-19 PHE Provider Relief Fund, the Small 
Business Administration Loan Forgiveness program, and other sources of 
COVID-19 related funding such as payroll retention credits and state 
emergency relief funds. Specifically, we examined Worksheet G-3, lines 
24.50 through 24.60 for each IPPS hospital's 2020 cost report. We found 
that hospitals in the aggregate reported $31.1 billion in COVID-19 
related funding, and of that amount low-wage hospitals reported $3.6 
billion. These amounts are much larger than, and likely had a much 
greater impact on hospital operations, the approximately $230 million 
impact of the low wage index hospital policy.\195\ For example, COVID-
19 related funding impacted the ability of hospitals, both low-wage 
hospitals and non-low wage hospitals, to change employee compensation 
in ways that overshadowed any differential impact of the low wage index 
hospital policy between the two groups that may have occurred in the 
absence of the COVID-19 PHE.
---------------------------------------------------------------------------

    \195\ As discussed in the FY 2020 IPPS final rule, the low wage 
index hospital policy was implemented in a budget neutral manner. In 
order to ensure that the overall effect of the application of the 
low wage index hospital policy was budget neutral, we applied a 
budget neutrality factor of 0.997987 to the FY 2020 standardized 
amount (84 FR 42667). The IPPS spending associated with the 
accounting statement in the FY 2020 IPPS final rule was 
approximately $113 billion. Applying the budget neutrality 
adjustment to the IPPS spending associated with the accounting 
statement results in roughly a $230 million impact of the low wage 
index hospital policy.
---------------------------------------------------------------------------

    In addition to examining the COVID-19 related funding data, we also 
examined the wage index data itself. For the FY 2025 wage index the 
best available data typically would be from the FY 2021 wage data from 
hospital cost reports. As discussed earlier in more detail in section 
III.C, in considering the impacts of the COVID-19 PHE on the FY 2021 
hospital wage data, we compared that data with recent historical data. 
While there are some differences, in the proposed rule we stated that 
it is not readily apparent how any changes due to the COVID-19 PHE 
differentially impacted the wages paid by individual hospitals. 
Furthermore, even if changes due to the COVID-19 PHE did differentially 
impact the wages paid by individual hospitals over time, it is not 
clear how those changes could be isolated from changes due to other 
reasons and what an appropriate potential methodology might be to 
adjust the data to account for the effects of the COVID-19 PHE. Our 
inability to isolate the wage data changes due to the COVID-19 PHE and 
disentangle them from changes due to the low wage index hospital policy 
makes isolating and evaluating the impact of the low wage index 
hospital policy challenging. We reached similar conclusions with 
respect to the FY 2020 hospital wage data.
    To help further inform our FY 2025 rulemaking with respect to the 
low wage index hospital policy, in the proposed rule we stated that we 
also conducted an analysis of hospitals that received an increase to 
their wage index due to the policy in FY 2020 (referred to as the low 
wage index hospitals for brevity in the following discussion). 
Specifically, for each low wage index hospital we calculated the 
percent increase in its average hourly wages (AHWs) from FY 2019 to FY 
2021 based on dividing its FY 2021 average hourly wage (using the wage 
data one year after the low wage index hospital policy was implemented 
in FY 2020, available on the FY 2025 IPPS Proposed Rule web page) by 
its average hourly wage from the FY 2019 wage data (the wage data one 
year before the low wage index hospital policy was implemented in FY 
2020, available on the FY 2023 IPPS final rule web page). We performed 
the same calculation for the hospitals that were not low wage index 
hospitals. We then compared the distributions of the average hourly 
wage increases between the two groups. The results are shown in the 
following chart (Chart 1).

[[Page 69303]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.175

    In general, the chart shows that the distribution of the changes in 
the average hourly wages of the low wage index hospitals (mean=15.1%, 
standard deviation=11.0%) is similar to the distribution of the changes 
in the average hourly wages of the non-low wage index hospitals 
(mean=14.7%, standard deviation=8.9%). Although some low-wage hospitals 
have indicated to us that they did use the increased payments they 
received under the low wage index hospital policy to increase wages 
more than they otherwise would have, the similarity in the two 
distributions indicates that, based on the audited wage data available 
to us, the policy has generally not yet had the effect of substantially 
reducing the wage index disparities that existed at the time the policy 
was promulgated. Also, to the extent that wage index disparities for a 
subset of low wage index hospitals has diminished, it is unclear to 
what extent that is attributable to the low wage index hospital policy 
given the effects of the COVID-19 PHE (as discussed later in this 
section).
    The COVID-19 PHE ended in May of 2023. With regard to the wage 
index, 4 years is the minimum time before increases in employee 
compensation included in the Medicare cost report could be reflected in 
the wage index data. The first full fiscal year of wage data after the 
COVID-19 PHE is the FY 2024 wage data, which would be available for the 
FY 2028 IPPS/LTCH PPS rulemaking. As we explained earlier in this 
section, at the time the low wage index hospital policy was finalized, 
our intention was that it would be in effect for at least 4 fiscal 
years beginning October 1, 2019, and to revisit the issue of the 
duration of this policy as we gained experience under the policy. 
Because the effects of the COVID-19 PHE complicate our ability to 
evaluate the low wage index hospital policy and our ability to 
determine whether low-wage hospitals have been provided a sufficient 
opportunity to increase employee compensation under the policy without 
the usual lag, we proposed that the low wage index hospital policy and 
the related budget neutrality adjustment would be effective for at 
least three more years, beginning in FY 2025. We noted that this would 
result in the policy being in effect for at least 4 full fiscal years 
in total after the end of the COVID-19 PHE in May of 2023. We also 
stated that this will allow us to gain experience under the policy for 
the same duration and in an environment more similar to the one we 
expected at the time the policy was first promulgated.
    To offset the estimated increase in IPPS payments to hospitals with 
wage index values below the 25th percentile wage index value, for FY 
2025 and for subsequent fiscal years during which the low wage index 
hospital policy is in effect, we proposed to apply a budget neutrality 
adjustment in the same manner as we have applied it since FY 2020, as a 
uniform budget neutrality factor applied to the standardized amount. We 
refer readers to section II.A.4.f. of the Addendum to the proposed rule 
and this final rule for further discussion of the budget neutrality 
adjustment for FY 2025.
    Comment: Several commenters supported the proposed low wage index 
hospital policy and asked CMS to continue the policy. Commenters 
benefiting from the low wage policy indicated that the policy has been 
helpful in addressing wage disparities and supporting hospitals in 
economically challenged areas. Commenters also stated that the policy 
prioritizes patients, promoting health equity and benefitting millions 
of patients across the country. Commenters conveyed that the policy 
allows for the ability to further sustain and build the health care 
system our changing population deserves, and to rebalance the disparity 
of care that exists between economically diverse areas of our nation.
    Commenters indicated that the low wage index policy has helped to 
slightly level the playing field in Medicare reimbursement for rural 
hospitals and cautioned CMS that any efficacy analysis regarding the 
policy should recognize that the policy does not operate in a vacuum. 
According to commenters, low-wage hospitals face numerous challenges 
beyond just the wage index that make it difficult for them to 
significantly increase wages, particularly in relation to high-wage 
hospitals. Commenters stated that having a lower wage index over many 
years makes it difficult to ever catch up to high-wage hospitals. 
According to commenters, even though the wage index for many low-wage 
hospitals has increased since the policy began, their wage index 
remains significantly below the wage index for most high-wage 
hospitals.
    Commenters also expressed that beyond staffing issues, low-wage 
hospitals generally have higher Medicare utilization in relation to 
total patient volume, and as a result Medicare losses are a higher 
proportion of their operations. The commenters indicated these 
hospitals face difficulty in making up for these losses as they receive 
less utilization from patients with traditional third-party insurance 
payment.

[[Page 69304]]

Commenters explained that because of this, additional reimbursement 
provided by the low wage index hospital policy minimizes operating 
losses and allows operations to continue, thereby creating the 
potential for low-wage hospitals to be more competitive in recruiting 
staff than they would be absent the adjustment.
    Response: We thank the commenters for their support of the low wage 
index hospital policy and for the proposal to extend the policy for at 
least three more years, beginning in FY 2025. We also appreciate 
learning from the commenters that the policy has been meaningful and 
effective in reducing wage index disparities. We also thank commenters 
for their thoughts on the unique circumstances faced by low-wage 
hospitals compared to high-wage hospitals with respect to the wage 
index.
    Comment: Several commenters expressed their support for the 
continued implementation of the low wage index hospital policy but 
urged CMS to not include the budget neutral aspect, stating that CMS is 
not bound by statute to implement this policy in a budget neutral 
manner. A commenter stated that if low-wage hospitals were using 
increased payments associated with the low wage index hospital policy 
to increase wages at a rate faster than the national average (according 
to the commenter this would indicate the wage gap is closing), the 
budget neutrality adjustment associated with the policy should 
decrease, as it would cost less for CMS to maintain the policy over 
time as wages in bottom quartile markets converged with other CBSAs, 
compressing the wage index. According to this commenter, this is not 
happening as there has been a significant increase in the budget 
neutrality adjustment required to implement this policy in FY 2024 and 
FY 2025 suggesting that the bottom quartile policy has been 
ineffective. The commenter stated that they chose FY 2024 and FY 2025 
for their analysis because these FYs are the first to consist of wage 
data impacted by the low wage index hospital policy, as FY 2024 used FY 
2020 wage data, the FY the low wage index hospital policy was first 
effective, and FY 2025 uses FY 2021 wage data, the most current 
available FY wage data reflecting low wage index hospital policy data. 
Commenters also stated that the lever CMS has to pull to make the 
policy budget neutral, reducing the national standardized amount for 
all PPS hospitals nationally, intensifies historical Medicare 
underpayment and harms some of the very hospitals the policy is 
intended to help. Some commenters suggested that new funding replace 
the need for the policy to be budget neutral. These commenters stated 
that Medicare consistently reimburses inpatient PPS hospitals less than 
the cost of care and referenced that MedPAC estimates that hospitals' 
aggregate Medicare margins will be negative 13% in 2024 and that 
aggregate Medicare margins in 2022 were a negative 12.7% excluding 
federal relief funds. These commenters stated that these figures 
represent a continuance of a longstanding trend of substantially 
negative Medicare margins,\196\ suggesting a strong need to add funds 
into the system by implementing the low wage hospital policy in a non-
budget neutral manner. Commenters also stated that those hospitals that 
fall between approximately the 22nd and 25th percentile are receiving a 
reduction to the wage-adjusted standardized rate because the amount of 
benefit received is less than the cost to fund the benefit (the low 
wage index hospital policy budget neutrality factor applied is 
allegedly larger than the increase the hospital would receive due to 
the policy). These commenters suggested holding hospitals under the 
25th percentile harmless.
---------------------------------------------------------------------------

    \196\ MedPAC. (2024). March 2024 Report to the Congress: 
Medicare Payment Policy. Chapter 3--Hospital inpatient and 
outpatient services. https://www.medpac.gov/wp-content/uploads/2024/03/Mar24_Ch3_MedPAC_Report_To_Congress_SEC.pdf.
---------------------------------------------------------------------------

    Commenters also provided other suggestions for data and alternative 
methodologies to include: reducing the wage index for hospitals with 
values above the 75th percentile; working with Congress on a more 
permanent fix to address the disparities in the wage index by 
establishing a national floor for all hospitals; and seeking input from 
the hospital community on best overall reform options that will improve 
the sustainability of the workforce, especially in rural and 
underserved communities.
    Response: As discussed in previous rulemaking regarding the low 
wage index hospital policy in response to comments, we disagree with 
the commenters that the low wage index hospital policy should be 
implemented in a non-budget neutral manner. Specifically, as we stated 
in response to similar comments in the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42331 and 42332), the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45180), the FY 2023 IPPS/LTCH PPS final rule (87 FR 49007), and the FY 
2024 IPPS/LTCH PPS final rule (88 FR 58979), under section 
1886(d)(3)(E) of the Act, ``[a]ny adjustments or updates'' to the wage 
index are required to be implemented in a budget neutral manner. 
However, even if the wage index were not required to be budget neutral 
under section 1886(d)(3)(E) of the Act, we would consider it 
inappropriate to use the wage index to increase or decrease overall 
IPPS spending. As we stated in the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42331), the wage index is designed to be a relative measure of the 
wages and wage-related costs of subsection (d) hospitals. As a result, 
as we explained in the FY 2020 IPPS/LTCH PPS final rule, if it were 
determined that section 1886(d)(3)(E) of the Act does not require the 
wage index to be budget neutral, we invoke our authority at section 
1886(d)(5)(I) of the Act in support of such a budget neutrality 
adjustment.
    Regarding the comment stating that an increase in the budget 
neutrality adjustment required to implement the low wage index hospital 
policy in FY 2024 and FY 2025 suggests that the policy has been 
ineffective, we disagree. As discussed earlier in this section, the 
effects of the COVID-19 PHE complicate our ability to evaluate the low 
wage index hospital policy and our ability to determine whether low-
wage hospitals have been provided a sufficient opportunity to increase 
employee compensation under the policy without the usual lag. Because 
of this, we proposed that the low wage index hospital policy and the 
related budget neutrality adjustment would be effective for at least 
three more years, beginning in FY 2025. We noted that this would result 
in the policy being in effect for at least 4 full fiscal years in total 
after the end of the COVID-19 PHE in May of 2023. We also stated that 
this will allow us to gain experience under the policy for the same 
duration and in an environment more similar to the one we expected at 
the time the policy was first promulgated. For FY 2025 and for 
subsequent fiscal years during which the low wage index hospital policy 
is in effect, we also proposed to apply the associated budget 
neutrality adjustment in the same manner as we have applied it since FY 
2020, as a uniform budget neutrality factor applied to the standardized 
amount.
    With regard to the commenter's concern that application of the low 
wage index hospital policy may result in a reduction to overall payment 
if the amount of benefit received from the policy is less than the 
reduction to the standardized amount, as explained in response to 
comments in previous rulemaking, we believe we have applied both the 
quartile policy and the budget neutrality policy appropriately.

[[Page 69305]]

Specifically, as we explained most recently in response to comments in 
the FY 2024 IPPS/LTCH PPS final rule (88 FR 58979), the quartile 
adjustment is applied to the wage index, which results in an increase 
to the wage index for hospitals below the 25th percentile. The budget 
neutrality adjustment is applied to the standardized amount to ensure 
that the low wage index hospital policy is implemented in a budget 
neutral manner. Thus, consistent with our current methodology for 
implementing wage index budget neutrality under section 1886(d)(3)(E) 
of the Act and with how we implemented budget neutrality for the low 
wage index hospital policy in FY 2020, we believe it is appropriate to 
continue to apply a budget neutrality adjustment to the national 
standardized amount for all hospitals so that the low wage index 
hospital policy is implemented in a budget neutral manner for FY 2025.
    Regarding the comment suggesting funds be added to the wage index 
system through implementation of the low wage index hospital policy in 
a non-budget neutral manner to account for alleged Medicare 
reimbursement underpayments, we disagree. We believe it would be 
inappropriate to use the wage index to increase or decrease overall 
IPPS spending. As we discuss elsewhere in this section, the intent of 
the low wage index hospital policy is to increase the accuracy of the 
wage index as a technical adjustment, and not to use the wage index as 
a policy tool to address non-wage issues related to hospitals, or the 
laudable goals of the overall financial health of hospitals in low-wage 
areas or broader wage index reform.
    Regarding the comment about reducing the wage index for hospitals 
with values above the 75th percentile, as we discussed in our response 
to comments in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58979), in 
the FY 2020 IPPS/LTCH final rule (84 FR 42329), we noted that we 
originally proposed to reduce the wage index values for high wage index 
hospitals using a methodology analogous to the methodology used to 
increase the wage index values for low wage index hospitals, as 
described in section III.N.3.a. of the preamble of the proposed rule; 
that is, we proposed to decrease the wage index values for high wage 
index hospitals by a uniform factor of the distance between the 
hospital's otherwise applicable wage index and the 75th percentile wage 
index value for a fiscal year across all hospitals. In response to 
comments we received (84 FR 42329 and 42330), we acknowledged that some 
commenters presented reasonable policy arguments that we should 
consider further regarding the relationship between our proposed budget 
neutrality adjustment targeting high-wage hospitals and the design of 
the wage index to be a relative measure of the wages and wage-related 
costs of subsection (d) hospitals in the United States. Therefore, in 
the FY 2020 IPPS/LTCH final rule, we did not finalize our proposal to 
target that budget neutrality adjustment on high-wage hospitals (84 FR 
42331). Regarding the comment about the establishment of a national 
floor for all hospitals, as we pointed out in response to comments in 
the FY 2024 IPPS/LTCH PPS final rule (88 FR 58979 through 58980), we 
noted in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42338 through 
42339) that we do not have evidence a national rural labor market 
exists or would be created if we were to adopt this alternative, and 
this alternative would not increase the accuracy of the wage index. 
Also, we believe we have applied both the quartile policy and the 
budget neutrality policy appropriately, as we explained in response to 
comments in the FYs 2021, 2022 and 2023 IPPS/LTCH PPS final rules and 
most recently FY 2024 IPPS/LTCH PPS final rule (88 FR 58979 through 
58980). The quartile adjustment is applied to the wage index, which 
resulted in an increase to the wage index for hospitals below the 25th 
percentile. The budget neutrality adjustment is applied to the 
standardized amount to ensure that the low wage index hospital policy 
is implemented in a budget neutral manner.
    Comment: Several commenters opposed the low wage index hospital 
policy, stating that it is outside the agency's statutory authority 
under section 1886(d)(3)(E) of the Act. Specifically, some commenters 
expressed their belief that although the policy is intended to help 
rural hospitals, some rural hospitals in certain states do not benefit 
from this policy. Furthermore, commenters stated that the policy 
undermines the intent of the wage index by not recognizing real 
differences in labor costs.
    Similar to comments made on the low wage index hospital policy in 
the FY 2022 IPPS/LTCH PPS rulemaking (86 FR 45179), a commenter argued 
that the low wage index hospital policy is ineffective, pointing to an 
Office of Inspector General (OIG) report \197\ that suggests a 
complicated set of issues in local labor markets determines hospital 
wages in addition to Medicare payment rates. The commenter encouraged 
CMS to replicate the OIG's analysis using the most recently available 
audited wage data (FYs 2020 and 2021) and share the results in the 
final rule. According to the commenter, if the findings are the same as 
in the OIG's analysis, it will further demonstrate that the low wage 
index hospital policy has not had the intended effect and should not be 
continued.
---------------------------------------------------------------------------

    \197\ https://oig.hhs.gov/oas/reports/region1/12000502.asp.
---------------------------------------------------------------------------

    Response: As we stated in response to similar comments in the FY 
2024 IPPS/LTCH PPS final rule (88 FR 58980), we believe we addressed 
the stated concerns in our responses to comments when we first 
finalized the low wage index hospital policy and the related budget 
neutrality adjustment in the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42325 through 42332). Regarding the policy's effect on rural hospitals, 
as we stated in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42328), the 
wage index is a technical payment adjustment. The intent of the low 
wage index hospital policy is to increase the accuracy of the wage 
index as a technical adjustment, and not to use the wage index as a 
policy tool to address non-wage issues related to rural hospitals, or 
the laudable goals regarding the overall financial health of hospitals 
in low-wage areas or broader wage index reform. The low wage index 
hospital policy aims to increase the accuracy of the wage index as a 
relative measure, because it addresses barriers that low wage index 
hospitals face in increasing their employee compensation in ways that 
we would expect if there were no lag between the time a hospital 
increases employee compensation and the time these increases are 
reflected in the wage index, and allows those increases to be more 
timely reflected in the wage index. While one effect of the policy may 
be to improve the overall financial well-being of low-wage hospitals, 
and we would welcome that effect, it is not the rationale for our 
policy. In response to comments stating the policy exceeds CMS' 
statutory authority, we refer the commenters to our prior discussion of 
the authority for the policy in the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42326 through 42332).
    In response to the assertion that the low wage index hospital 
policy does not recognize real differences in labor costs, we continue 
to believe, for the reasons stated in the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42327 and 42328), that by preserving the rank order in wage 
index values, our policy continues to reflect meaningful distinctions 
between the employee compensation costs faced by hospitals in different 
geographic

[[Page 69306]]

areas. We note, as we have discussed earlier in this section, generally 
the wage index for the upcoming fiscal year is predictive in nature as 
wage index data that will be used for the upcoming fiscal year is the 
most current data and information available, which is usually 
historical data on a 4-year lag (for example, for the FY 2024 wage 
index we used cost report data from FY 2020). Thus, under the low wage 
index hospital policy, we believe the wage index for low wage index 
hospitals appropriately reflects the relative hospital wage level in 
those areas compared to the national average hospital wage level.
    Some commenters stated that our policy is ineffective, referencing 
the OIG report cited above. As we explained in our response to comments 
in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45179), we believe that 
the numerous comments we continue to receive in support of this policy 
indicate that many low-wage hospitals are indeed helped by this policy. 
Specifically, comments stating that the policy has been helpful in 
addressing wage disparities and allowing low wage hospitals to be more 
competitive in recruiting staff, indicate that the policy helped low 
wage hospitals to raise wages. In response to the commenter's 
suggestion to refine our criteria to target a subset of low-wage 
hospitals, such as low-wage hospitals that are rural or that have 
negative profit margins, we believe that this would not maintain the 
rank order in wage index values. As we stated earlier, we believe that 
maintaining the rank order of wage index values is important to reflect 
meaningful distinctions between the employee compensation costs faced 
by hospitals in different geographic areas. Even several commenters 
that disagreed with our policy stressed the need for the wage index to 
be an accurate measure of the relative level of wages in different 
areas. A highly targeted approach that selected individual hospitals 
for relief would not maintain the rank order of wage index values and 
thus would be inconsistent with the construction of a relative measure 
of area wage levels. While it might be possible to refine our criteria 
for a more targeted approach, we believe it is reasonable to conclude 
that our current policy will have the intended effect of providing the 
opportunity for low-wage hospitals to increase compensation. As we 
stated earlier in this section, the policy being in effect for at least 
4 full fiscal years in total after the end of the COVID-19 PHE will 
allow us to gain experience under the policy for the same duration and 
in an environment more similar to the one we expected at the time the 
policy was first promulgated. The availability of wage data from low-
wage hospitals applicable to this time period will help us assess our 
reasonable expectation that hospitals will increase their employee 
compensation as a result of wage index increases under this policy. 
Once the increased employee compensation is reflected in the wage data, 
there may be no need for the continuation of the policy, given that we 
would expect the resulting increases in the wage index to continue 
after the temporary policy is discontinued. Again, we refer readers to 
the FY 2022 IPPS/LTCH PPS final rule (86 FR 45179 through 45180) for 
more information regarding our summary of and response to public 
comments about the aforementioned OIG report.
    Comment: Many commenters noted that the low wage index hospital 
policy is currently the subject of pending litigation in Bridgeport. A 
few commenters urged CMS not to finalize the policy for FY 2025, or to 
wait until a final court decision is reached. Commenters suggested CMS 
should eliminate the budget neutrality adjustments for FYs 2020, 2021, 
2022, 2023 and 2024 in light of Bridgeport.
    Response: We appreciate the commenters' input. As noted previously, 
the FY 2020 low wage index hospital policy and the related budget 
neutrality adjustment are the subject of pending litigation in multiple 
courts. On July 23, 2024, the Court of Appeals for the D.C. Circuit 
held that the Secretary lacked authority under 1886(d)(3)(E) or 
1886(d)(5)(I)(i) of the Act to adopt the low wage index hospital policy 
for FY 2020, and that the policy and related budget neutrality 
adjustment must be vacated. Bridgeport Hosp. v. Becerra, Nos. 22-5249, 
22-5269, 2024 WL 3504407, at *7-*8 & n.6 (D.C. Cir. July 23, 2024). As 
of the date of this Rule's publication, the time to seek further review 
of the D.C. Circuit's decision in Bridgeport Hospital has not expired. 
See Fed. R. App. P. 40(a)(1). The government is evaluating the decision 
and considering options for next steps.
    Commenters: Many commenters agreed with CMS that there is currently 
insufficient data to support modifying or discontinuing the low wage 
index hospital policy because of the COVID-19 pandemic impacts on wage 
data. According to commenters, hospitals are still recognizing lasting 
impacts of the COVID-19 PHE and appreciate the agency identifying this 
as a reality. Commenters indicated that the continuation of this 
critical policy in FY 2025 and beyond will provide stability and allow 
hospitals with an ability to recruit and retain desperately needed 
health care staff. Commenters recommended an extension of the low wage 
index hospital policy through FY 2030, at minimum, to ensure there is 
adequate post-pandemic wage data to support keeping or ending the 
policy. Commenters supporting an extension of the policy through FY 
2030 referred to and supported CMS' acknowledgement that the first full 
FY of wage data after the COVID-19 PHE ended would not be available 
until the FY 2028 IPPS/LTCH PPS rulemaking given that the policy began 
in FY 2020. Commenters also noted that the policy should have a 
specific expiration date or definitive end date.
    Regarding CMS' comparison of the distribution of the percentage 
change in AHWs from FY 2019 to FY 2021 for low wage index hospitals and 
non-low wage index hospitals, commenters agreed with CMS that the 
analysis did not show a substantial effect on reducing wage 
disparities. However, commenters asked CMS to evaluate whether this is 
due to other factors, such as inflation and other market forces 
impacted by the effects of the COVID-19 PHE, which are not clearly 
accounted for or represented in the current low wage index hospital 
policy, or if this is due to the ineffectiveness of the low wage index 
hospital policy. Commenters submitted the results of a separate 
analysis to emphasize that wages across the board have increased in 
recent years. Specifically, commenters submitted an analysis from the 
Kaiser Family Foundation (KFF) and Peterson Center, which evaluated 
changes in hospital employment data, including wage data, from February 
2020 at the start of the COVID-19 pandemic through early 2024. 
Commenters stated that this analysis found that the average weekly 
earnings for healthcare employees had gone up 20.8% from $1,038 to 
$1,254 weekly in January 2024. Commenters further stated that even more 
specific to the IPPS, the report found that hospital workers wages saw 
a 20.3% increase between February 2020 to January 2024, going from 
$1,269 to $1,527 per week.\198\ Commenters pointed out that CMS also 
observed this shift in wages, as outlined in CMS' analysis of audited 
wage data for FY 2020 to 2021 in the

[[Page 69307]]

proposed rule, which saw larger increases in average hourly wages and 
wage indexes than compared to years prior and noted that CMS 
acknowledged that there are several challenges related to determining 
the cause of these changes, including uncertainty around the impact of 
the COVID-19 PHE. According to commenters, for a variety of reasons, 
including the COVID-19 PHE and other factors impacting wages, it is 
likely that changes observed in employee compensation may not be 
directly related to the low wage index hospital policy. These 
commenters urged CMS to tackle these issues in a more thoughtful and 
comprehensive manner that improves the standing of low wage index 
hospitals without impairing the standing of high wage index hospitals.
---------------------------------------------------------------------------

    \198\ ``What are the recent trends in health sector 
employment?'' Peterson-KFF Health System Tracker, March 27, 2024. 
https://www.healthsystemtracker.org/chart-collection/what-are-the-recent-trends-health-sectoremployment/#Cumulative%20%%20change%20in%20average%20weekly%20earnings,%20since%20February%202020%20-%20January%202024.
---------------------------------------------------------------------------

    According to some commenters, CMS misunderstands the various 
programs that provided financial support to hospitals during the COVID-
19 PHE. These commenters explained that all of the programs, including 
the Provider Relief Fund, state emergency relief funds and Small 
Business Administration Loan Forgiveness program, were intended in some 
fashion to replace some or all revenue hospitals lost due to decreases 
in demand associated with the COVID-19 PHE and cover the extraordinary 
costs hospitals incurred responding to the PHE that are not reimbursed 
through payments from Medicare, Medicaid, and commercial payers. The 
commenters stated that the funds from these programs were distributed 
using consistent criteria that applied to all eligible hospitals and 
therefore were not intended to advantage certain hospitals over others 
by increasing revenue for some hospitals and not others in a given 
category, as the low wage index hospital policy does. According to the 
commenters, the COVID-19 relief programs were intended to replace 
revenue that hospitals lost as a result of circumstances beyond their 
control and cover the extraordinary costs of saving patients' lives, 
mitigating the spread of a deadly pathogen, and protecting communities 
during a global pandemic. These commenters stated that if CMS was 
concerned data from the COVID-19 period were so flawed it could not 
determine the impact of the bottom quartile policy on impacted 
hospitals, it might stand to reason that the data would also be so 
flawed that they could not be used for payment updates. According to 
the commenters, CMS had enough confidence in the ``normalcy'' of data 
from years (federal and calendar) impacted by COVID-19 to use it to set 
MS-DRG weights, fixed-loss outlier thresholds, wage index values, and 
other key components of the IPPS in FY 2024 and it further proposes to 
use data from COVID-19 impacted years for the same functions in FY 
2025. Finally, the commenters explained that CMS even acknowledges this 
in the proposed rule by stating that while there are some differences, 
it is not readily apparent how any changes due to the COVID-19 PHE 
differentially impacted the wages paid by individual hospitals. 
According to the commenters, the proposed rule attempts to justify this 
continuation by discussing the challenges of normalizing hospital wage 
data to understand the impact of this policy if changes due to the 
COVID-19 PHE did differentially impact wages paid by hospitals over 
time. The commenters stated that if CMS is confident enough in the data 
to use them for rate setting, then it should be confident enough to 
assume there was no differential impact that would spoil an impact 
analysis of the bottom quartile policy.
    Response: We thank commenters for their input and concurrence 
regarding insufficient data to support modifying or discontinuing the 
policy because of the COVID-19 PHE impacts on wage data. We also thank 
the commenters for their support for this policy continuing for FY 2025 
and beyond. We continue to believe that the comments in support of the 
policy, specifically comments from relatively low-wage hospitals 
stating that the increased payments under the policy have allowed them 
stability and an ability to recruit and retain desperately needed 
health care staff, have reduced hiring and employment barriers for 
these hospitals. Regarding the requests by commenters to extend the 
policy until FY 2030 or to establish a definitive end or expiration 
date for the policy, as we mentioned in the proposed rule, the COVID-19 
PHE ended in May of 2023. Four years is the minimum time before 
increases in employee compensation included in the Medicare cost report 
could be reflected in the wage index data. The first full fiscal year 
of wage data after the COVID-19 PHE is the FY 2024 wage data, which 
would be available for the FY 2028 IPPS/LTCH PPS rulemaking. As we 
explained earlier in this section, at the time the low wage index 
hospital policy was finalized, our intention was that it would be in 
effect for at least 4 fiscal years beginning October 1, 2019, and to 
revisit the issue of the duration of this policy as we gained 
experience under the policy. Because the effects of the COVID-19 PHE 
complicate our ability to evaluate the low wage index hospital policy 
and our ability to determine whether low-wage hospitals have been 
provided a sufficient opportunity to increase employee compensation 
under the policy without the usual lag, we proposed that the low wage 
index hospital policy and the related budget neutrality adjustment 
would be effective for at least three more years, beginning in FY 2025. 
This would result in the policy being in effect for at least 4 full 
fiscal years in total after the end of the COVID-19 PHE in May of 2023. 
This will allow us to gain experience under the policy for the same 
duration and in an environment more similar to the one we expected at 
the time the policy was first promulgated. Until we are able to 
evaluate hospital wage data from the period after the end of the COVID-
19 PHE and gain experience under the low wage index hospital policy to 
determine the policy's effectiveness, we are not able to determine or 
project a definitive end date of the policy. Therefore, in this final 
rule, we are not extending the policy until FY 2030, nor establishing a 
definitive end or expiration date.
    Regarding the comments about CMS' attempt to gauge the impact of 
the COVID-19 PHE relative to the impact of the low wage index hospital 
policy by examining the aggregate revenue each hospital reported on 
their FY 2020 cost reports from the COVID-19 PHE Provider Relief Fund, 
the Small Business Administration Loan Forgiveness program, and other 
sources of COVID-19 related funding such as payroll retention credits 
and state emergency relief funds, we disagree with the commenters. Our 
intention was not to convey that the purpose of various COVID-19 
related funding opportunities was the same as the purpose of the low 
wage index hospital policy, but instead, to provide a statistical 
comparison examining the overall amount hospitals reported in COVID-19 
related funding to the portion of that amount the amount low-wage 
hospitals received. Our explanation in the proposed rule and earlier in 
this section also aimed to explain our thinking that COVID-19 related 
funding played a role in increasing hospital employee compensation, and 
since that was and remains the goal of the low wage index hospital 
policy, it was not possible to quantify which sources of funding, 
COVID-19 related or low wage index hospital policy, actually 
contributed to hospitals increasing employee compensation. In addition, 
as explained earlier in this section we compared FY 2021 wage data from 
hospital cost

[[Page 69308]]

reports and historical cost report data to consider the impacts of the 
COVID-19 PHE on the FY 2021 hospital wage data. In both comparisons, 
the COVID-19 related funding data comparison between all hospitals and 
low-wage hospitals and the comparison between FY 2021 wage data from 
hospital cost reports and historical cost report data, while there were 
differences noted, as we stated in the proposed rule and again earlier 
in this section, it is not readily apparent how any changes due to the 
COVID-19 PHE differentially impacted the wages paid by individual 
hospitals. Again, as we have stated earlier in this section, the 
effects of the COVID-19 PHE complicate our ability to evaluate the low 
wage index hospital policy and our ability to determine whether low-
wage hospitals have been provided a sufficient opportunity to increase 
employee compensation under the policy without the usual lag.
    We appreciate the comment concerning CMS' use of data from the 
COVID-19 PHE period for payment update purposes. However, the purpose 
of and data used for general payment updates is different than that of 
the low wage index hospital policy. We primarily use two data sources 
in the IPPS and LTCH PPS ratesetting: claims data and cost report data. 
The claims data source is the Medicare Provider Analysis and Review 
(MedPAR) file, which includes fully coded diagnostic and procedure data 
for all Medicare inpatient hospital bills for discharges in a fiscal 
year. The cost report data source is the Medicare hospital cost report 
data files from the most recent quarterly Healthcare Cost Report 
Information System (HCRIS) release. Our goal is always to use the best 
available data overall for ratesetting. However, due to the impact of 
the COVID-19 PHE on our ordinary payment update data, we finalized 
modifications to our usual payment update procedures in order to 
satisfy the purpose of updating payments, approximating the inpatient 
experience at IPPS hospitals and LTCHs in FY 2024 (88 FR 58651 through 
58553). As we discuss throughout this section, the purpose of the low 
wage index hospital policy is to provide low wage index hospitals with 
an opportunity to increase employee compensation without the usual lag 
in those increases being reflected in the calculation of the wage index 
(as they would expect to do if not for the lag). We also discussed 
earlier in this section that to the extent that wage index disparities 
for a subset of low wage index hospitals has diminished, it is unclear 
to what extent that is attributable to the low wage index hospital 
policy given the effects of the COVID-19 PHE (as discussed below). 
Again, as we stated earlier in this section, even if changes due to the 
COVID-19 PHE did differentially impact the wages paid by individual 
hospitals over time, it is not clear how those changes could be 
isolated from changes due to other reasons and what an appropriate 
potential methodology might be to adjust the data accordingly. 
Therefore, the concerns we identified about the use of data from the 
time period during the COVID-19 PHE are specific to the purpose of the 
low wage index hospital policy. Maintaining the policy for at least 4 
full fiscal years in total after the end of the COVID-19 PHE in May of 
2023 will allow us to gain experience under the policy for the same 
duration and in an environment more similar to the one we expected at 
the time the policy was first promulgated and will provide us with the 
best opportunity to evaluate the effectiveness of the policy.
    Regarding the commenters' thoughts on CMS' comparison of the 
distribution of the percentage change in AHWs from FY 2019 to FY 2021 
for low wage index hospitals and non-low wage index hospitals, we 
appreciate the separate analysis referenced by commenters that the 
commenters indicate confirms CMS' analysis that based on the data 
currently available, the low wage index hospital policy has not yet had 
the effect of substantially reducing the wage index disparities that 
existed at the time the policy was promulgated. We also appreciate the 
commenters' suggestions for further evaluation of data as it becomes 
available and acknowledgement of whether other factors may play a role 
in assessing the effectiveness of the low wage index hospital policy. 
As we explained earlier in this section, the uncertainty around the 
impact of the COVID-19 PHE and its effects on CMS' ability to assess 
and compare wage data make it difficult to sufficiently assess the 
effectiveness of the policy at this time. We also appreciate the input 
from commenters charging CMS to be as thoughtful and comprehensive as 
possible to address the effectiveness and implementation of this policy 
going forward. As we indicated in the proposed rule and previous 
rulemaking, we finalized this policy in the FY 2020 IPPS/LTCH final 
rule to provide low wage index hospitals with an opportunity to 
increase employee compensation without the usual lag in those increases 
being reflected in the calculation of the wage index (as they would 
expect to do if not for the lag). This continues to be the purpose of 
the policy. As we explained earlier in this section, at the time the 
low wage index hospital policy was finalized, our intention was that it 
would be in effect for at least 4 fiscal years beginning October 1, 
2019, and to revisit the issue of the duration of this policy as we 
gained experience under the policy. The effects of the COVID-19 PHE 
complicate our ability to evaluate the low wage index hospital policy 
and our ability to determine whether low wage hospitals have been 
provided a sufficient opportunity to increase employee compensation 
under the policy without the usual lag. As we discussed in the proposed 
rule, if the policy were to be in effect for at least 4 full fiscal 
years in total after the end of the COVID-19 PHE in May of 2023, it 
would allow us to gain experience under the policy for the same 
duration and in an environment more similar to the one we expected at 
the time the policy was first promulgated.
    Therefore, after consideration of the comments received, and for 
the reasons stated previously in the proposed rule, we are finalizing 
as proposed that the low wage index hospital policy and the related 
budget neutrality adjustment be effective for at least three more 
years, beginning in FY 2025. For purposes of the low wage index 
hospital policy, based on the data for this final rule, the table 
displays the 25th percentile wage index value across all hospitals for 
FY 2025.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
FY 2025 25th Percentile Wage Index Value.....................     0.9007
------------------------------------------------------------------------

6. Cap on Wage Index Decreases and Budget Neutrality Adjustment
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 through 
49021), we finalized a wage index cap policy and associated budget 
neutrality adjustment for FY 2023 and subsequent fiscal years. Under 
this policy, we apply a 5-percent cap on any decrease to a hospital's 
wage index from its wage index in the prior FY, regardless of the 
circumstances causing the decline. A hospital's wage index will not be 
less than 95 percent of its final wage index for the prior FY. If a 
hospital's prior FY wage index is calculated with the application of 
the 5-percent cap, the following year's wage index will not be less 
than 95 percent of the hospital's capped wage index in the prior FY. 
Except for newly opened hospitals, we apply the cap for a FY using the 
final wage index applicable to the hospital on the last day of the 
prior FY. A newly opened hospital will be paid the wage index for the 
area in

[[Page 69309]]

which it is geographically located for its first full or partial fiscal 
year, and it will not receive a cap for that first year, because it 
will not have been assigned a wage index in the prior year. The wage 
index cap policy is reflected at Sec.  412.64(h)(7). We apply the cap 
in a budget neutral manner through a national adjustment to the 
standardized amount each fiscal year. For more information about the 
wage index cap policy and associated budget neutrality adjustment, we 
refer readers to the discussion in the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 49018 through 49021).
    We explained in the proposed rule that for FY 2025, we would apply 
the wage index cap and associated budget neutrality adjustment in 
accordance with the policies adopted in the FY 2023 IPPS/LTCH PPS final 
rule. We noted that the budget neutrality adjustment will be updated, 
as appropriate, based on the final rule data. We refer readers to the 
Addendum of this final rule for further information regarding the 
budget neutrality calculations.
    Comment: Commenters thanked CMS for the 5% cap on all wage index 
decreases regardless of the circumstances causing the decline, 
including the adoption of revised CBSA delineations. Many commenters 
specifically stated that they appreciate CMS' recognition that 
significant year-over-year changes in the wage index can occur due to 
external factors beyond a hospital's control and that this policy 
increases predictability of IPPS payments. Many commenters supported 
the cap but urged CMS to apply this policy in a non-budget neutral 
manner. MedPAC supported the policy to cap wage index decreases, but 
urged CMS to apply a cap to wage index increases as well. A commenter 
stated that even a 5% decrease could be impactful to the financial 
stability of certain hospitals, and asked CMS to consider a smaller 
percentage point cap for safety net hospitals.
    Response: We thank the commenters for their support. We note that 
we did not propose any changes to this policy in the FY 2025 IPPS/LTCH 
PPS proposed rule. With regard to the commenters requesting that CMS 
apply this policy in a non-budget neutral manner, we refer readers to 
our response to similar comments in the FY 2024 IPPS/LTCH PPS final 
rule (88 FR 58981). We appreciate MedPAC's suggestion that the cap on 
wage index changes should also be applied to increases in the wage 
index. However, as we stated in the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 49021), one purpose of the proposed policy is to help mitigate 
the significant negative impacts of certain wage index changes. That 
is, we cap decreases because we believe that a hospital would be able 
to more effectively budget and plan when there is predictability about 
its expected minimum level of IPPS payments in the upcoming fiscal 
year. We do not have a policy to limit wage index increases because we 
do not believe such a policy is needed to enable hospitals to more 
effectively budget and plan their operations. Therefore, we believe it 
is appropriate for hospitals that experience an increase in their wage 
index value to receive that wage index value. With regard to the 
commenter's request for CMS to consider a smaller percentage point cap 
for safety net hospitals, we do not believe it is appropriate to 
bifurcate the policy to provide a greater benefit to specific 
hospitals, nor is it clear how CMS would define ``safety net 
hospitals'' for the specialized cap the commenter requested.

H. FY 2025 Wage Index Tables

    In this FY 2025 IPPS/LTCH PPS final rule, we have included the 
following wage index tables: Table 2 titled ``Case-Mix Index and Wage 
Index Table by CCN''; Table 3 titled ``Wage Index Table by CBSA''; 
Table 4A titled ``List of Counties Eligible for the Out-Migration 
Adjustment under Section 1886(d)(13) of the Act''; and Table 4B titled 
``Counties redesignated under section 1886(d)(8)(B) of the Act (Lugar 
Counties).'' We refer readers to section VI. of the Addendum to this 
final rule for a discussion of the wage index tables for FY 2025.

I. Labor-Related Share for the FY 2025 Wage Index

    Section 1886(d)(3)(E) of the Act directs the Secretary to adjust 
the proportion of the national prospective payment system base payment 
rates that are attributable to wages and wage-related costs by a factor 
that reflects the relative differences in labor costs among geographic 
areas. It also directs the Secretary to estimate from time to time the 
proportion of hospital costs that are labor-related and to adjust the 
proportion (as estimated by the Secretary from time to time) of 
hospitals' costs that are attributable to wages and wage-related costs 
of the DRG prospective payment rates. We refer to the portion of 
hospital costs attributable to wages and wage-related costs as the 
labor-related share. The labor-related share of the prospective payment 
rate is adjusted by an index of relative labor costs, which is referred 
to as the wage index.
    Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of 
the Act to provide that the Secretary must employ 62 percent as the 
labor-related share unless this would result in lower payments to a 
hospital than would otherwise be made. However, this provision of 
Public Law 108-173 did not change the legal requirement that the 
Secretary estimate from time to time the proportion of hospitals' costs 
that are attributable to wages and wage-related costs. Thus, hospitals 
receive payment based on either a 62-percent labor-related share, or 
the labor-related share estimated from time to time by the Secretary, 
depending on which labor-related share results in a higher payment.
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45194 through 
45208), we rebased and revised the hospital market basket to a 2018-
based IPPS hospital market basket, which replaced the 2014-based IPPS 
hospital market basket, effective beginning October 1, 2021. Using the 
2018-based IPPS market basket, we finalized a labor-related share of 
67.6 percent for discharges occurring on or after October 1, 2021. In 
addition, in FY 2022, we implemented this revised and rebased labor-
related share in a budget neutral manner (86 FR 45193, 86 FR 45529 
through 45530). However, consistent with section 1886(d)(3)(E) of the 
Act, we did not take into account the additional payments that would be 
made as a result of hospitals with a wage index less than or equal to 
1.0000 being paid using a labor-related share lower than the labor-
related share of hospitals with a wage index greater than 1.0000.
    The labor-related share is used to determine the proportion of the 
national IPPS base payment rate to which the area wage index is 
applied. We include a cost category in the labor-related share if the 
costs are labor intensive and vary with the local labor market. In the 
FY 2022 IPPS/LTCH PPS final rule (86 FR 45204 through 45207), we 
included in the labor-related share the national average proportion of 
operating costs that are attributable to the following cost categories 
in the 2018-based IPPS market basket: Wages and Salaries; Employee 
Benefits; Professional Fees: Labor-Related; Administrative and 
Facilities Support Services; Installation, Maintenance, and Repair 
Services; and All Other: Labor-Related Services. In the proposed rule, 
for FY 2025, we did not propose to make any further changes to the 
labor-related share. For FY 2025, we are finalizing the policy to 
continue to use a labor-related share of 67.6 percent for discharges 
occurring on or after October 1, 2024. We note that,

[[Page 69310]]

consistent with our established frequency of rebasing the IPPS market 
basket every 4 years, we anticipate proposing to rebase and revise the 
IPPS market basket in the FY 2026 IPPS/LTCH PPS proposed rule. Our 
preliminary evaluation of more recent Medicare cost report data for 
IPPS hospitals for 2022 indicates that the major IPPS market basket 
cost weights (particularly the compensation and drug cost weights) are 
similar to those finalized in the 2018-based IPPS market basket.
    As discussed in section V.B. of the preamble of this final rule, 
prior to January 1, 2016, Puerto Rico hospitals were paid based on 75 
percent of the national standardized amount and 25 percent of the 
Puerto Rico-specific standardized amount. As a result, we applied the 
Puerto Rico-specific labor-related share percentage and nonlabor-
related share percentage to the Puerto Rico-specific standardized 
amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. 
L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that 
the payment calculation with respect to operating costs of inpatient 
hospital services of a subsection (d) Puerto Rico hospital for 
inpatient hospital discharges on or after January 1, 2016, shall use 
100 percent of the national standardized amount. Because Puerto Rico 
hospitals are no longer paid with a Puerto Rico-specific standardized 
amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act as 
amended by section 601 of the Consolidated Appropriations Act, 2016, 
there is no longer a need for us to calculate a Puerto Rico-specific 
labor-related share percentage and nonlabor-related share percentage 
for application to the Puerto Rico-specific standardized amount. 
Hospitals in Puerto Rico are now paid 100 percent of the national 
standardized amount and, therefore, are subject to the national labor-
related share and nonlabor-related share percentages that are applied 
to the national standardized amount. Accordingly, for FY 2025, we did 
not propose a Puerto Rico-specific labor-related share percentage or a 
nonlabor-related share percentage.
    Tables 1A and 1B, which are published in section VI. of the 
Addendum to this FY 2025 IPPS/LTCH PPS final rule and available via the 
internet on the CMS website, reflect the national labor-related share. 
Table 1C, in section VI. of the Addendum to this FY 2025 IPPS/LTCH PPS 
final rule and available via the internet on the CMS website, reflects 
the national labor-related share for hospitals located in Puerto Rico. 
For FY 2025, for all IPPS hospitals (including Puerto Rico hospitals) 
whose wage indexes are less than or equal to 1.0000, we are applying 
the wage index to a labor-related share of 62 percent of the national 
standardized amount. For all IPPS hospitals (including Puerto Rico 
hospitals) whose wage indexes are greater than 1.000, for FY 2025, we 
are applying the wage index to a labor-related share of 67.6 percent of 
the national standardized amount.
    Comment: Several commenters recommended CMS raise the labor-related 
share from the current 67.6 percent to at least 72.8 percent, which is 
the figure CMS calculated for the proposed updated labor-related share 
for LTCHs for FY 2025. A commenter supported CMS not proposing to 
increase the labor-related share.
    Response: We did not propose to make any further changes to the 
labor related share for FY 2025. Also, we do not believe it would be 
appropriate to use the labor-related share for LTCHs, which was 
calculated specifically for the LTCH PPS instead of the labor related 
share computed for the hospitals paid under the IPPS. As discussed 
earlier, for FY 2025, we are continuing to use a labor-related share of 
67.6 percent for discharges occurring on or after October 1, 2024.

IV. Payment Adjustment for Medicare Disproportionate Share Hospitals 
(DSHs) for FY 2025 (Sec.  412.106)

A. General Discussion

    Section 1886(d)(5)(F) of the Act provides for additional Medicare 
payments to subsection (d) hospitals that serve a significantly 
disproportionate number of low-income patients. The Act specifies two 
methods by which a hospital may qualify for the Medicare 
disproportionate share hospital (DSH) adjustment. Under the first 
method, hospitals that are located in an urban area and have 100 or 
more beds may receive a Medicare DSH payment adjustment if the hospital 
can demonstrate that, during its cost reporting period, more than 30 
percent of its net inpatient care revenues are derived from State and 
local government payments for care furnished to patients with low 
incomes. This method is commonly referred to as the ``Pickle method.'' 
The second method for qualifying for the DSH payment adjustment, which 
is the more commonly used method, is based on a complex statutory 
formula under which the DSH payment adjustment is based on the 
hospital's geographic designation, the number of beds in the hospital, 
and the level of the hospital's disproportionate patient percentage 
(DPP).
    A hospital's DPP is the sum of two fractions: the ``Medicare 
fraction'' and the ``Medicaid fraction.'' The Medicare fraction (also 
known as the ``SSI fraction'' or ``SSI ratio'') is computed by dividing 
the number of the hospital's inpatient days that are furnished to 
patients who were entitled to both Medicare Part A and Supplemental 
Security Income (SSI) benefits by the hospital's total number of 
patient days furnished to patients entitled to benefits under Medicare 
Part A. The Medicaid fraction is computed by dividing the hospital's 
number of inpatient days furnished to patients who, for such days, were 
eligible for Medicaid, but were not entitled to benefits under Medicare 
Part A, by the hospital's total number of inpatient days in the same 
period.
[GRAPHIC] [TIFF OMITTED] TR28AU24.176


[[Page 69311]]


    Because the DSH payment adjustment is part of the IPPS, the 
statutory references to ``days'' in section 1886(d)(5)(F) of the Act 
have been interpreted to apply only to hospital acute care inpatient 
days. Regulations located at 42 CFR 412.106 govern the Medicare DSH 
payment adjustment and specify how the DPP is calculated as well as how 
beds and patient days are counted in determining the Medicare DSH 
payment adjustment. Under Sec.  412.106(a)(1)(i), the number of beds 
for the Medicare DSH payment adjustment is determined in accordance 
with bed counting rules for the IME adjustment under Sec.  412.105(b).
    Section 3133 of the Patient Protection and Affordable Care Act 
(Pub. L. 111-148), as amended by section 10316 of the same Act and 
section 1104 of the Health Care and Education Reconciliation Act (Pub. 
L. 111-152), added a section 1886(r) to the Act that modifies the 
methodology for computing the Medicare DSH payment adjustment. We refer 
to these provisions collectively as section 3133 of the Affordable Care 
Act. Beginning with discharges in FY 2014, hospitals that qualify for 
Medicare DSH payments under section 1886(d)(5)(F) of the Act receive 25 
percent of the amount they previously would have received under the 
statutory formula for Medicare DSH payments. This provision applies 
equally to hospitals that qualify for DSH payments under section 
1886(d)(5)(F)(i)(I) of the Act and those hospitals that qualify under 
the Pickle method under section 1886(d)(5)(F)(i)(II) of the Act.
    The remaining amount, equal to an estimate of 75 percent of what 
otherwise would have been paid as Medicare DSH payments, reduced to 
reflect changes in the percentage of individuals who are uninsured, is 
available to make additional payments to each hospital that qualifies 
for Medicare DSH payments and that has uncompensated care. The payments 
to each hospital for a fiscal year are based on the hospital's amount 
of uncompensated care for a given time period relative to the total 
amount of uncompensated care for that same time period reported by all 
hospitals that receive Medicare DSH payments for that fiscal year.
    Since FY 2014, section 1886(r) of the Act has required that 
hospitals that are eligible for DSH payments under section 
1886(d)(5)(F) of the Act receive 2 separately calculated payments:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Medicare DSH Payment.........  An empirically justified DSH payment
                                equal to 25% of the amount determined
                                under the statutory formula in section
                                1886(d)(5)(F) of the Act.
Medicare DSH Uncompensated     An uncompensated care payment determined
 Care Payment.                  as the product of 3 factors, as
                                discussed in this section.
------------------------------------------------------------------------

    Specifically, section 1886(r)(1) of the Act provides that the 
Secretary shall pay to such subsection (d) hospital 25 percent of the 
amount the hospital would have received under section 1886(d)(5)(F) of 
the Act for DSH payments, which represents the empirically justified 
amount for such payment, as determined by the MedPAC in its March 2007 
Report to Congress.\199\ We refer to this payment as the ``empirically 
justified Medicare DSH payment.''
---------------------------------------------------------------------------

    \199\ https://www.medpac.gov/document/march-2007-report-to-the-congress-medicare-payment-policy/.
---------------------------------------------------------------------------

    In addition to this empirically justified Medicare DSH payment, 
section 1886(r)(2) of the Act provides that, for FY 2014 and each 
subsequent fiscal year, the Secretary shall pay to such subsection (d) 
hospital an additional amount equal to the product of three factors. 
The first factor is the difference between the aggregate amount of 
payments that would be made to subsection (d) hospitals under section 
1886(d)(5)(F) of the Act if subsection (r) did not apply and the 
aggregate amount of payments that are made to subsection (d) hospitals 
under section 1886(r)(1) of the Act for such fiscal year. Therefore, 
this factor amounts to 75 percent of the payments that would otherwise 
be made under section 1886(d)(5)(F) of the Act.
    The second factor is, for FY 2018 and subsequent fiscal years, 1 
minus the percent change in the percent of individuals who are 
uninsured, as determined by comparing the percent of individuals who 
were uninsured in 2013 (as estimated by the Secretary, based on data 
from the Census Bureau or other sources the Secretary determines 
appropriate, and certified by the Chief Actuary of CMS) and the percent 
of individuals who were uninsured in the most recent period for which 
data are available (as so estimated and certified).
    The third factor is a percent that, for each subsection (d) 
hospital, represents the quotient of the amount of uncompensated care 
for such hospital for a period selected by the Secretary (as estimated 
by the Secretary, based on appropriate data), including the use of 
alternative data where the Secretary determines that alternative data 
are available which are a better proxy for the costs of subsection (d) 
hospitals for treating the uninsured, and the aggregate amount of 
uncompensated care for all subsection (d) hospitals that receive a 
payment under section 1886(r) of the Act. Therefore, this third factor 
represents a hospital's uncompensated care amount for a given time 
period relative to the uncompensated care amount for that same time 
period for all hospitals that receive Medicare DSH payments in the 
applicable fiscal year, expressed as a percent.
    For each hospital, the product of these three factors represents 
its additional payment for uncompensated care for the applicable fiscal 
year. We refer to the additional payment determined by these factors as 
the ``uncompensated care payment.'' In brief, the uncompensated care 
payment for an individual hospital is determined as the product of the 
following 3 factors:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Factor 1................  75% of the total amount of DSH payments that
                           would otherwise be made under section
                           1886(d)(5)(F) of the Act.
Factor 2................  1 minus the percent change in the percent of
                           individuals who are uninsured.
Factor 3................  The hospital's uncompensated care amount
                           relative to the uncompensated care amount for
                           all hospitals that receive DSH payments,
                           expressed as a percentage.
------------------------------------------------------------------------


[[Page 69312]]

    Section 1886(r) of the Act applies to FY 2014 and each subsequent 
fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620 
through 50647) and the FY 2014 IPPS interim final rule with comment 
period (78 FR 61191 through 61197), we set forth our policies for 
implementing the required changes to the Medicare DSH payment 
methodology made by section 3133 of the Affordable Care Act for FY 
2014. In those rules, we noted that, because section 1886(r) of the Act 
modifies the payment required under section 1886(d)(5)(F) of the Act, 
it affects only the DSH payment under the operating IPPS. It does not 
revise or replace the capital IPPS DSH payment provided under the 
regulations at 42 CFR part 412, subpart M, which was established 
through the exercise of the Secretary's discretion in implementing the 
capital IPPS under section 1886(g)(1)(A) of the Act.
    Finally, section 1886(r)(3) of the Act provides that there shall be 
no administrative or judicial review under section 1869, section 1878, 
or otherwise of any estimate of the Secretary for purposes of 
determining the factors described in section 1886(r)(2) of the Act or 
of any period selected by the Secretary for the purpose of determining 
those factors. Therefore, there is no administrative or judicial review 
of the estimates developed for purposes of applying the three factors 
used to determine uncompensated care payments, or of the periods 
selected to develop such estimates.

B. Eligibility for Empirically Justified Medicare DSH Payments and 
Uncompensated Care Payments

    The payment methodology under section 3133 of the Affordable Care 
Act applies to ``subsection (d) hospitals'' that would otherwise 
receive a DSH payment made under section 1886(d)(5)(F) of the Act. 
Therefore, hospitals must receive empirically justified Medicare DSH 
payments in a fiscal year to receive an additional Medicare 
uncompensated care payment for that year. Specifically, section 
1886(r)(2) of the Act states that, in addition to the empirically 
justified Medicare DSH payment made to a subsection (d) hospital under 
section 1886(r)(1) of the Act, the Secretary shall pay to ``such 
subsection (d) hospitals'' the uncompensated care payment. Section 
1886(r)(2)'s reference to ``such subsection (d) hospitals'' refers to 
hospitals that receive empirically justified Medicare DSH payments 
under section 1886(r)(1) for the applicable fiscal year.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY 
2014 IPPS interim final rule with comment period (78 FR 61193), we 
explained that hospitals that are not eligible to receive empirically 
justified Medicare DSH payments in a fiscal year will not receive 
uncompensated care payments for that year. We also specified that we 
would make a determination concerning eligibility for interim 
uncompensated care payments based on each hospital's estimated DSH 
status (that is, eligibility to receive empirically justified Medicare 
DSH payments) for the applicable fiscal year (using the most recent 
data that are available). For the FY 2025 IPPS/LTCH PPS proposed rule 
(89 FR 36188 through 36189), we estimated DSH status for all hospitals 
using the most recent available SSI ratios and information from the 
most recent available Provider Specific File. We noted that FY 2020 SSI 
ratios available on the CMS website were the most recent available SSI 
ratios at the time of developing the proposed rule.\200\ We stated that 
if more recent data on DSH eligibility became available before the 
final rule, we would use such data in the final rule. The FY 2021 SSI 
ratios are the most recent data available at the time of developing 
this FY 2025 IPPS/LTCH PPS final rule.
---------------------------------------------------------------------------

    \200\ https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.
---------------------------------------------------------------------------

    Our final determinations of a hospital's eligibility for 
uncompensated care and empirically justified Medicare DSH payments will 
be based on the hospital's actual DSH status at cost report settlement 
for FY 2025.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and in the 
rulemakings for subsequent fiscal years, we have specified our policies 
for several specific classes of hospitals within the scope of section 
1886(r) of the Act. Eligible hospitals include the following:
     Subsection (d) Puerto Rico hospitals that are eligible for 
DSH payments also are eligible to receive empirically justified 
Medicare DSH payments and uncompensated care payments under section 
1886(r) of the Act (78 FR 50623 and 79 FR 50006).
     Sole community hospitals (SCHs) that are paid under the 
IPPS Federal rate receive interim payments based on what we estimate 
and project their DSH status to be prior to the beginning of the fiscal 
year (based on the best available data at that time) subject to 
settlement through the cost report. If they receive interim empirically 
justified Medicare DSH payments in a fiscal year, they will also be 
eligible to receive interim uncompensated care payments for that fiscal 
year on a per discharge basis. Final eligibility determinations will be 
made at the end of the cost reporting period at settlement, and both 
interim empirically justified Medicare DSH payments and uncompensated 
care payments will be adjusted accordingly (78 FR 50624 and 79 FR 
50007).
     Medicare-dependent, small rural hospitals (MDHs) are paid 
based on the IPPS Federal rate or, if higher, the IPPS Federal rate 
plus 75 percent of the amount by which the Federal rate is exceeded by 
the updated hospital-specific rate from certain specified base years 
(76 FR 51684). The IPPS Federal rate that is used in the MDH payment 
methodology is the same IPPS Federal rate that is used in the SCH 
payment methodology. Because MDHs are paid based on the IPPS Federal 
rate, they continue to be eligible to receive empirically justified 
Medicare DSH payments and uncompensated care payments if their DPP is 
at least 15 percent, and we apply the same process to determine MDHs' 
eligibility for interim empirically justified Medicare DSH and interim 
uncompensated care payments as we do for all other IPPS hospitals. 
Recently enacted legislation has extended the MDH program through 
December 31, 2024. We refer readers to section V.F. of the preamble of 
this final rule for further discussion of the MDH program.
    Section 307 of the Consolidated Appropriations Act, 2024 extended 
the MDH program through December 31, 2024. We will continue to make a 
determination concerning an MDH's eligibility for interim empirically 
justified Medicare DSH and uncompensated care payments based on the 
hospital's estimated DSH status for the applicable fiscal year.
     IPPS hospitals that elect to participate in the Bundled 
Payments for Care Improvement Advanced (BPCI Advanced) model, will 
continue to be paid under the IPPS and, therefore, are eligible to 
receive empirically justified Medicare DSH payments and uncompensated 
care payments until the Model's final performance year, which ends on 
December 31, 2025. For further information regarding the BPCI Advanced 
model, we refer readers to the CMS website at https://innovation.cms.gov/innovation-models/bpci-advanced.
     IPPS hospitals that participate in the Comprehensive Care 
for Joint Replacement (CJR) Model's (80 FR 73300) continue to be paid 
under the IPPS and, therefore, are eligible to receive empirically 
justified Medicare DSH payments and uncompensated care

[[Page 69313]]

payments We refer the reader to the final rule that appeared in the May 
3, 2021, Federal Register (86 FR 23496), which extended the CJR Model 
for an additional three performance years. The Model's final 
performance year ends on December 31, 2024. For additional information 
on the CJR Model, we refer readers to the CMS website at https://www.cms.gov/priorities/innovation/innovation-models/CJR.
     Transforming Episode Accountability Model (TEAM) is a new 
episode-based payment model, which is discussed in section X.A. of the 
preamble of this final rule. Hospitals participating in TEAM would 
continue to be paid under the IPPS and, therefore, are eligible to 
receive empirically justified Medicare DSH payments and uncompensated 
care payments. The model's start date is January 1, 2026.
    Ineligible hospitals include the following:
     Maryland hospitals are not eligible to receive empirically 
justified Medicare DSH payments and uncompensated care payments under 
the payment methodology of section 1866(r) of the Act because they are 
not paid under the IPPS. As discussed in the FY 2019 IPPS/LTCH PPS 
final rule (83 FR 41402 through 41403), CMS and the State have entered 
into an agreement to govern payments to Maryland hospitals under a new 
payment model, the Maryland Total Cost of Care (TCOC) Model, which 
began on January 1, 2019. Under the Maryland TCOC Model, which 
concludes on December 31, 2026, Maryland hospitals are not paid under 
the IPPS and are ineligible to receive empirically justified Medicare 
DSH payments and uncompensated care payments under section 1886(r) of 
the Act.
     SCHs that are paid under their hospital-specific rate are 
not eligible for Medicare DSH and uncompensated care payments (78 FR 
50623 and 50624).
     Hospitals participating in the Rural Community Hospital 
Demonstration Program are not eligible to receive empirically justified 
Medicare DSH payments and uncompensated care payments under section 
1886(r) of the Act because they are not paid under the IPPS (78 FR 
50625 and 79 FR 50008). The Rural Community Hospital Demonstration 
Program was originally authorized for a 5-year period by section 410A 
of the Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (MMA) (Pub. L. 108-173).\201\ The period of participation for 
the last hospital in the demonstration under this most recent 
legislative authorization will end on June 30, 2028. Under the payment 
methodology that applies during this most recent extension of the 
demonstration program, participating hospitals do not receive 
empirically justified Medicare DSH payments, and they are excluded from 
receiving interim and final uncompensated care payments. At the time of 
development of this final rule, we believe 23 hospitals may participate 
in the demonstration program at the start of FY 2025.
---------------------------------------------------------------------------

    \201\ The Rural Community Hospital Demonstration Program was 
extended for a subsequent 5-year period by sections 3123 and 10313 
of the Affordable Care Act (Pub. L. 111-148). The period of 
performance for this 5-year extension period ended on December 31, 
2016. Section 15003 of the 21st Century Cures Act (Pub. L. 114 255), 
enacted on December 13, 2016, again amended section 410A of Public 
Law 108-173 to require a 10-year extension period (in place of the 
5-year extension required by the Affordable Care Act), therefore 
requiring an additional 5-year participation period for the 
demonstration program. Section 15003 of Public Law 114-255 also 
required a solicitation for applications for additional hospitals to 
participate in the demonstration program. The period of performance 
for this 5-year extension period ended December 31, 2021. The 
Consolidated Appropriations Act, 2021 (Pub. L. 116-260) amended 
section 410A of Public Law 108-173 to extend the demonstration 
program for an additional 5-year period.
---------------------------------------------------------------------------

    In response to our comment solicitation on these policies in the 
proposed rule, we received comments related to the eligibility of SCHs 
paid under hospital-specific rates and MDHs to receive empirically 
justified DSH and uncompensated care payments. Because we consider 
these public comments to be outside the scope of the proposed rule, we 
are not addressing them in this final rule.

C. Empirically Justified Medicare DSH Payments

    As we have discussed earlier, section 1886(r)(1) of the Act 
requires the Secretary to pay 25 percent of the amount of the Medicare 
DSH payment that would otherwise be made under section 1886(d)(5)(F) of 
the Act to a subsection (d) hospital. Because section 1886(r)(1) of the 
Act merely requires the Secretary to pay a designated percentage of 
these payments, without revising the criteria governing eligibility for 
DSH payments or the underlying payment methodology, we stated in the FY 
2014 IPPS/LTCH PPS final rule that we did not believe that it was 
necessary to develop any new operational mechanisms for making such 
payments.
    Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50626), 
we implemented this provision by advising Medicare Administrative 
Contractors (MACs) to simply adjust subsection (d) hospitals' interim 
claim payments to an amount equal to 25 percent of what would have been 
paid if section 1886(r) of the Act did not apply. We also made 
corresponding changes to the hospital cost report so that these 
empirically justified Medicare DSH payments could be settled at the 
appropriate level at the time of cost report settlement. We provided 
more detailed operational instructions and cost report instructions 
following issuance of the FY 2014 IPPS/LTCH PPS final rule that are 
available on the CMS website at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R5P240.html.
    In response to our comment solicitation on these policies in the 
proposed rule, a commenter stated that some subsection (d) hospitals' 
ability to meet the eligibility requirements for empirically justified 
DSH payments is at risk due to changes to the Medicaid fraction of 
their DPPs. The commenter explained that many hospitals will no longer 
be eligible for empirically justified payments as a result of the 
unwinding of the Medicaid continuous enrollment condition. The 
commenter also stated that the unexpectedly high rate of Medicaid 
beneficiaries losing coverage because of redeterminations is placing 
many hospitals at risk of falling below the 15 percent minimum DPP. The 
commenter requested that CMS allow hospitals whose eligibility for 
empirically justified payments has been impacted by unwinding to 
receive empirically justified payments, retroactively and in the 
future. Because we consider this public comment to be outside the scope 
of the proposed rule, we are not addressing this comment in this final 
rule.

D. Supplemental Payment for Indian Health Service (IHS) and Tribal 
Hospitals and Puerto Rico Hospitals

    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49047 through 
49051), we established a new supplemental payment for IHS/Tribal 
hospitals and hospitals located in Puerto Rico for FY 2023 and 
subsequent fiscal years. This payment was established to help to 
mitigate the impact of the decision to discontinue the use of low-
income insured days as a proxy for uncompensated care costs for these 
hospitals and to prevent undue long-term financial disruption for these 
providers. The regulations located at 42 CFR 412.106(h) govern the 
supplemental payment. In brief, the supplemental payment for a fiscal 
year is determined as the difference between the hospital's base year 
amount and its uncompensated care payment for the applicable fiscal 
year as determined under Sec.  412.106(g)(1). The base year

[[Page 69314]]

amount is the hospital's FY 2022 uncompensated care payment adjusted by 
one plus the percent change in the total uncompensated care amount 
between the applicable fiscal year (that is, FY 2025 for purposes of 
this rulemaking) and FY 2022, where the total uncompensated care amount 
for a fiscal year is determined as the product of Factor 1 and Factor 2 
for that year. If the base year amount is equal to or lower than the 
hospital's uncompensated care payment for the current fiscal year, then 
the hospital would not receive a supplemental payment because the 
hospital would not be experiencing financial disruption in that year as 
a result of the use of uncompensated care data from the Worksheet S-10 
in determining Factor 3 of the uncompensated care payment methodology.
    In the FY 2025 IPPS/LTCH PPS proposed rule, we did not propose any 
changes to the methodology for determining supplemental payments. For 
FY 2025, we will calculate the supplemental payments to eligible IHS/
Tribal and Puerto Rico hospitals consistent with the methodology 
described in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49047 through 
49051) and Sec.  412.106(h).
    As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49048 
and 49049), the eligibility and payment processes for the supplemental 
payment are consistent with the processes for determining eligibility 
to receive interim and final uncompensated care payments adopted in FY 
2014 IPPS/LTCH PPS final rule. We note that the MAC will make a final 
determination with respect to a hospital's eligibility to receive the 
supplemental payment for a fiscal year, in conjunction with its final 
determination of the hospital's eligibility for DSH payments and 
uncompensated care payments for that fiscal year.
    Comment: One commenter reiterated their recommendations that were 
submitted in response to the proposal to establish these supplemental 
payments in the FY 2023 IPPS/LTCH PPS proposed rule. The commenter 
recommended that CMS calculate the supplemental payment for Puerto Rico 
hospitals using a base year amount determined using a Medicare SSI days 
proxy of at least 42 percent of the hospital's Medicaid days, to 
reflect the local poverty level, instead of the current base year 
amount, which incorporates the proxy that was applied from FY 2017 
through FY 2022 of 14 percent of the hospital's Medicaid days and that 
was based on national data on the relationship between Medicare SSI 
days and Medicaid days. The commenter also requested that CMS extend 
eligibility for uncompensated care payments to all acute care hospitals 
in Puerto Rico, including those that do not qualify for empirically 
justified DSH payments, stating that it is consistent with the plain 
language and intent of Section 3133 of the Affordable Care Act. The 
commenter also stated that there are eight Puerto Rico hospitals that 
are projected to not receive empirically justified DSH payments for FY 
2025 and these hospitals may miss the qualifying threshold because of 
the lack of SSI coverage for residents of the U.S. territories. As an 
alternative to the recommended policy of extending eligibility for 
uncompensated care payments to all acute care hospitals in Puerto Rico, 
the same commenter proposed that CMS could determine a hospital's 
eligibility to receive uncompensated care payments and supplemental 
payments using the suggested proxy data for the hospitals' Medicare SSI 
days of 42 percent.
    Another commenter thanked CMS for continuing to provide 
supplemental payments but requested that CMS evaluate alternatives that 
would better support hospitals in Puerto Rico if uninsured days 
increased. This commenter asserted that the current supplemental 
payment policy only protects against the reduction of uncompensated 
care payments below FY 2022 levels. The commenter stated that the 
current policy is not helpful if uninsured patient volumes rise above 
FY 2022 levels. The same commenter further expressed that they would 
support a return to the prior method of using a proxy to determine 
uninsured days for hospitals in Puerto Rico given the challenges 
related to Worksheet S-10 data collection for hospitals in Puerto Rico.
    Response: We appreciate the concerns and input raised by commenters 
regarding the calculation of Factor 3 for hospitals in Puerto Rico and 
IHS and Tribal hospitals. We continue to recognize the unique financial 
circumstances and challenges faced by Puerto Rico hospitals related to 
uncompensated care cost reporting on Worksheet S-10.
    Regarding the commenter's request that all acute care hospitals in 
Puerto Rico receive uncompensated care payments regardless of DSH 
eligibility, we refer readers to the policy initially adopted in the FY 
2014 IPPS/LTCH PPS final rule (78 FR 50622 and 50623), which explains 
that hospitals, including Puerto Rico hospitals, must be eligible to 
receive empirically justified Medicare DSH payments to receive an 
uncompensated care payment for that fiscal year. As discussed earlier 
in this section of this final rule and in the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49048 and 49049), the processes for determining 
eligibility for supplemental payments and making interim and final 
payments are consistent with the processes for determining eligibility 
to receive interim and final uncompensated care payments adopted in the 
FY 2014 IPPS/LTCH PPS final rule and the approach used to make interim 
uncompensated care payments on a per discharge basis.
    With respect to the commenters who recommended that CMS determine 
eligibility for uncompensated care payments and supplemental payments 
using the suggested Medicare SSI days proxy of 42 percent and calculate 
the supplemental payment for Puerto Rico hospitals using a base year 
amount determined from that same Medicare SSI days proxy data, we note 
that in the FY 2025 IPPS/LTCH PPS proposed rule, we did not propose to 
adopt any changes to our policies for determining eligibility for 
uncompensated care payments or supplemental payments, nor did we 
propose changes to our methodology for calculating supplemental 
payments. We also note that we did not propose to adopt a proxy for 
Puerto Rico hospitals' Medicare SSI days for purposes of determining 
eligibility for empirically justified DSH payments. Therefore, we 
consider these comments to be outside the scope of the proposed rule. 
However, we refer readers to our responses to similar comments in the 
FY 2024 IPPS/LTCH PPS final rule (88 FR 58992 and 58993) and the FY 
2023 IPPS/LTCH PPS final rule (87 FR 49049 and 49050) for further 
discussion on these issues.
    Concerning the comment encouraging CMS to evaluate alternatives to 
supplemental payments to better support hospitals in the case of 
increasing uninsured days, including using a proxy to determine 
uninsured days for hospitals in Puerto Rico, we refer readers to our 
responses to similar comments in the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 48780) and the FY 2024 IPPS/LTCH PPS final rule (88 FR 58640). 
As we explained in those rulemakings, prior to FY 2023, we used low-
income insured days as a proxy for uncompensated care costs. 
Fluctuations in uninsured days were never a direct consideration in the 
calculation of uncompensated care payments. Therefore, we continue to 
believe that supplemental payments, which are based on the FY 2022 
uncompensated care payments calculated for Puerto

[[Page 69315]]

Rico hospitals and IHS and Tribal hospitals using low income insured 
days proxy data, are the appropriate approach for hospitals located in 
Puerto Rico and IHS and Tribal hospitals.
    As discussed earlier in this section, for FY 2025, we will 
calculate the supplemental payments to eligible IHS/Tribal and Puerto 
Rico hospitals consistent with the methodology described in the FY 2023 
IPPS/LTCH PPS final rule (87 FR 49047 through 49051) and Sec.  
412.106(h).

E. Uncompensated Care Payments

    As we discussed earlier, section 1886(r)(2) of the Act provides 
that, for each eligible hospital in FY 2014 and subsequent years, the 
uncompensated care payment is the product of three factors, which are 
discussed in the next sections.
1. Calculation of Factor 1 for FY 2025
    Section 1886(r)(2)(A) of the Act establishes Factor 1 in the 
calculation of the uncompensated care payment. The regulations located 
at 42 CFR 412.106(g)(1)(i) govern the Factor 1 calculation. Under a 
prospective payment system, we would not know the precise aggregate 
Medicare DSH payment amounts that would be paid for a fiscal year until 
cost report settlement for all IPPS hospitals is completed, which 
occurs several years after the end of the fiscal year. Therefore, 
section 1886(r)(2)(A)(i) of the Act provides authority to estimate this 
amount by specifying that, for each fiscal year to which the provision 
applies, such amount is to be estimated by the Secretary. Similarly, we 
would not know the precise aggregate empirically justified Medicare DSH 
payment amounts that would be paid for a fiscal year until cost report 
settlement for all IPPS hospitals is completed. Thus, section 
1886(r)(2)(A)(ii) of the Act provides authority to estimate this 
amount. In brief, Factor 1 is the difference between the Secretary's 
estimates of: (1) the amount that would have been paid in Medicare DSH 
payments for the fiscal year, in the absence of section 1886(r) of the 
Act; and (2) the amount of empirically justified Medicare DSH payments 
that are made for the fiscal year, which takes into account the 
requirement to pay 25 percent of what would have otherwise been paid 
under section 1886(d)(5)(F) of the Act.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36190), we 
proposed to continue the policy that has applied since the FY 2014 
final rule (78 FR 50627 through 50631): to determine Factor 1 from the 
most recently available estimates of the aggregate amount of Medicare 
DSH payments that would be made for FY 2025 in the absence of section 
1886(r)(1) of the Act and the aggregate amount of empirically justified 
Medicare DSH payments that would be made for FY 2025, both as 
calculated by CMS' Office of the Actuary (OACT). Consistent with the 
policy that has applied in previous years, these estimates will not be 
revised or updated subsequent to publication of our final projections 
in this FY 2025 IPPS/LTCH PPS final rule.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36190 through 
36192), to calculate both estimates, we used the most recently 
available projections of Medicare DSH payments for the fiscal year, as 
calculated by OACT using the most recently filed Medicare hospital cost 
reports with Medicare DSH payment information and the most recent DPPs 
and Medicare DSH payment adjustments provided in the IPPS Impact File. 
The projection of Medicare DSH payments for the fiscal year is also 
partially based on OACT's Part A benefits projection model, which 
projects, among other things, inpatient hospital spending. Projections 
of DSH payments additionally require projections of expected increases 
in utilization and case-mix. The assumptions that were used in making 
these inpatient hospital spending, utilization, and case-mix 
projections and the resulting estimates of DSH payments for FY 2022 
through FY 2025 are discussed later in this section and in the table 
titled ``Factors Applied for FY 2022 through FY 2025 to Estimate 
Medicare DSH Expenditures Using FY 2021 Baseline.''
    For purposes of calculating Factor 1 and modeling the impact of the 
FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36190 through 36192), we 
used OACT's January 2024 Medicare DSH estimates, which were based on 
data from the December 2023 update of the Medicare Hospital Cost Report 
Information System (HCRIS) and the FY 2024 IPPS/LTCH PPS final rule 
IPPS Impact File, published in conjunction with the publication of the 
FY 2024 IPPS/LTCH PPS final rule. Because SCHs that are projected to be 
paid under their hospital-specific rate are ineligible for empirically 
justified Medicare DSH payments and uncompensated care payments, they 
were excluded from the January 2024 Medicare DSH estimates. Because 
Maryland hospitals are not paid under the IPPS, they are also 
ineligible for empirically justified Medicare DSH payments and 
uncompensated care payments and were also excluded from OACT's January 
2024 Medicare DSH estimates.
    The 23 hospitals that CMS expects will participate in the Rural 
Community Hospital Demonstration Program in FY 2025 were also excluded 
from OACT's January 2024 Medicare DSH estimates because under the 
payment methodology that applies during the demonstration, these 
hospitals are not eligible to receive empirically justified Medicare 
DSH payments or uncompensated care payments.
    For the proposed rule, using the data sources previously discussed, 
OACT's January 2024 estimates of Medicare DSH payments for FY 2025 
without regard to the application of section 1886(r)(1) of the Act was 
approximately $13.943 billion. Therefore, also based on OACT's January 
2024 Medicare DSH estimates, the estimate of empirically justified 
Medicare DSH payments for FY 2025, with the application of section 
1886(r)(1) of the Act, was approximately $3.486 billion (or 25 percent 
of the total amount of estimated Medicare DSH payments for FY 2025). 
Under Sec.  412.106(g)(1)(i), Factor 1 is the difference between these 
two OACT estimates. Therefore, in the FY 2025 IPPS/LTCH PPS proposed 
rule (89 FR 35934), we proposed that Factor 1 for FY 2025 would be 
$10,457,250,000, which is equal to 75 percent of the total amount of 
estimated Medicare DSH payments for FY 2025 ($13.943 billion minus 
$3.486 billion). We noted that, consistent with our approach in 
previous rulemakings, OACT intended to use more recent data that may 
become available for purposes of projecting the final Factor 1 
estimates for the FY 2025 IPPS/LTCH PPS final rule (89 FR 36191).
    In the FY 2025 IPPS/LTCH PPS proposed rule, we noted that the 
Factor 1 estimates for IPPS/LTCH PPS proposed rules are generally 
consistent with the economic assumptions and actuarial analysis used to 
develop the President's Budget estimates under current law, and Factor 
1 estimates for IPPS/LTCH PPS final rules are generally consistent with 
those used for the Midsession Review of the President's Budget.\202\ 
Consistent with historical practice, we stated in the proposed rule 
that we expected the Midsession Review would have updated economic 
assumptions and actuarial analysis, which we would use for the

[[Page 69316]]

development of Factor 1 estimates in the FY 2025 IPPS/LTCH PPS final 
rule.
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    \202\ As we have in the past, for additional information on the 
development of the President's Budget, we refer readers to the 
Office of Management and Budget website at https://www.whitehouse.gov/omb/budget.
---------------------------------------------------------------------------

    For a general overview of the principal steps involved in 
projecting future inpatient costs and utilization, we referred readers 
to the ``2024 Annual Report of the Boards of Trustees of the Federal 
Hospital Insurance and Federal Supplementary Medical Insurance Trust 
Funds,'' available on the CMS website at https://www.cms.gov/oact/tr/2024 under ``Downloads.'' \203\ The actuarial projections contained in 
these reports are based on numerous assumptions regarding future trends 
in program enrollment, utilization and costs of health care services 
covered by Medicare, as well as other factors affecting program 
expenditures. In addition, although the methods used to estimate future 
costs based on these assumptions are complex, they are subject to 
periodic review by independent experts to ensure their validity and 
reasonableness. We also referred readers to the 2018 Actuarial Report 
on the Financial Outlook for Medicaid for a discussion of general 
issues regarding Medicaid projections (available at https://www.cms.gov/data-research/research/actuarial-studies/actuarial-report-financial-outlook-medicaid).
---------------------------------------------------------------------------

    \203\ We note that the annual reports of the Medicare Boards of 
Trustees to Congress represent the Federal Government's official 
evaluation of the financial status of the Medicare Program.
---------------------------------------------------------------------------

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36190 through 
36192), we included information regarding the data sources, methods, 
and assumptions employed by OACT's actuaries in determining our 
estimate of Factor 1. We indicated the historical HCRIS data update 
OACT used to estimate Medicare DSH payments; we explained that the most 
recent Medicare DSH payment adjustments provided in the IPPS Impact 
File were used, and we provided the components of all the update 
factors that were applied to the historical data to estimate the 
Medicare DSH payments for the upcoming fiscal year, along with the 
associated rationale and assumptions. The discussion also included 
descriptions of the ``Other'' and ``Discharges'' assumptions and 
provided additional information regarding how we address Medicaid 
expansion.
    We invited public comments on our proposed Factor 1 for FY 2025.
    Comment: As in previous years, some commenters expressed concerns 
and requested greater transparency in the methodology used by CMS and 
OACT to calculate Factor 1. A few commenters emphasized their inability 
to accurately replicate CMS' calculations without clarity on how 
inputs, such as the effects of the COVID-19 PHE on Medicare discharges, 
case mix, Medicaid enrollment, and subsequent disenrollment through 
redeterminations, impact Factor 1 estimates. Some of these commenters 
requested that CMS provide details of its Factor 1 calculation in 
advance of the publication of the IPPS/LTCH PPS final rule and in the 
IPPS/LTCH PPS proposed rule each year going forward, so that sufficient 
data is available to replicate CMS' DSH payment calculations and enable 
commenters to provide more informed comments in future years. Another 
commenter requested that CMS provide detailed explanations for how the 
agency calculates Factor 1 to ensure safety net providers are not being 
disproportionately impacted.
    A few commenters asserted that the lack of opportunity afforded to 
hospitals to review the data used in rulemaking is in violation of the 
Administrative Procedure Act. These commenters expressed concerns about 
the lack of transparency in how Factor 1 is calculated, arguing that 
hospitals cannot meaningfully comment on the Factor 1 calculation 
methodology given the lack of details provided by CMS in each IPPS/LTCH 
PPS proposed rule. In particular, these commenters stated that the FY 
2025 IPPS/LTCH PPS proposed rule provided neither sufficient details 
nor a complete explanation of the treatment of Medicaid expansions in 
the calculation for Factor 1.
    Additionally, while some commenters thanked CMS for increasing the 
``Other'' factor from the amount finalized in the FY 2024 final rule, 
several commenters stated that CMS failed to provide sufficient details 
on how the ``Other'' factor is calculated, including both the overall 
calculation and individual inputs used to determine the estimate. Some 
of these commenters requested that CMS publish a detailed methodology 
of its ``Other'' calculation, specifying how all components contribute 
to changes in its estimate from year to year. Other commenters 
expressed concern about the lack of clarity regarding the ending of 
COVID-19 PHE flexibilities, such as payment add-ons and the unwinding 
of the Medicaid continuous enrollment condition, and their impact on 
the ``Other'' factor. These commenters suggested that CMS address this 
issue by disaggregating the variables that contribute to the ``Other'' 
factor and then demonstrating the separate impacts of each of those 
variables on the final value. A couple of commenters requested that CMS 
clarify why the ``Other'' factor frequently varies in successive 
rulemaking cycles.
    Response: We thank the commenters for their input. We disagree with 
commenters' assertion regarding the lack of transparency with respect 
to the methodology and assumptions used in the calculation of Factor 1. 
As explained in the FY 2025 IPPS/LTCH PPS proposed rule and in this 
section of this final rule, we have been and continue to be transparent 
about the methodology and data used to estimate Factor 1. Regarding the 
commenters who reference the Administrative Procedure Act, we note that 
under the Administrative Procedure Act, a proposed rule is required to 
include either the terms or substance of the proposed rule or a 
description of the subjects and issues involved. In this case, the FY 
2025 IPPS/LTCH PPS proposed rule (86 FR 36190-36192) included a 
detailed discussion of our proposed Factor 1 methodology and the data 
sources that would be used in making our final estimate. Accordingly, 
we believe commenters were able to meaningfully comment on our proposed 
estimate of Factor 1.
    To provide additional context, and as we have explained in prior 
rulemakings (see example, 88 FR 58995), we note that Factor 1 is not 
estimated in isolation from other projections made by OACT. The Factor 
1 estimates for the proposed rules are generally consistent with the 
economic assumptions and actuarial analyses used to develop the 
President's Budget estimates under current law, and the Factor 1 
estimates for the final rule are generally consistent with those used 
for the Midsession Review of the President's Budget. As we have in the 
past, we refer readers to the ``Midsession Review of the President's FY 
2025 Budget'' for additional information on the development of the 
President's Budget and the specific economic assumptions used in the 
Midsession Review of the President's FY 2025 Budget, available on the 
Office of Management and Budget website at: https://www.whitehouse.gov/omb/budget. Consistent with our prior rulemakings, in the FY 2025 IPPS/
LTCH proposed rule, we indicated that we expected that the Midsession 
Review would have updated economic assumptions and actuarial analysis, 
which would be used in the development of Factor 1 estimates for this 
final rule. We recognize that our reliance on the economic assumptions 
and actuarial analyses used to develop the President's Budget and the 
Midsession Review of the President's Budget in estimating Factor 1 has 
an

[[Page 69317]]

impact on hospitals, health systems, and other impacted parties who 
wish to replicate the Factor 1 calculation by, for example, modeling 
the relevant Medicare Part A portion of the President's Budget. Yet, we 
believe commenters are able to meaningfully comment on our proposed 
estimate of Factor 1 without replicating the budget.
    For a general overview of the principal steps involved in 
projecting future inpatient costs and utilization, we refer readers to 
the ``2024 Annual Report of the Boards of Trustees of the Federal 
Hospital Insurance and Federal Supplementary Medical Insurance Trust 
Funds,'' available under ``Downloads'' on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/. We note that the annual reports 
of the Medicare Boards of Trustees to Congress represent the Federal 
Government's official evaluation of the financial status of the 
Medicare Program. The actuarial projections contained in these reports 
are based on numerous assumptions regarding future trends in program 
enrollment, utilization, and costs of health care services covered by 
Medicare, as well as other factors affecting program expenditures. In 
addition, given that the methods used to estimate future costs based on 
these assumptions are complex, they are subject to periodic review by 
independent experts to ensure their validity and reasonableness.
    Additionally, as described in more detail later in this section, in 
the FY 2025 IPPS/LTCH PPS proposed rule, we included information 
regarding the data sources, methods, and assumptions employed by the 
actuaries to determine the OACT's estimate of Factor 1. We explained 
that the most recent Medicare DSH payment adjustments provided in the 
IPPS Impact File were used, and we provided the components of all 
update factors that were applied to the historical data to estimate the 
Medicare DSH payments for the upcoming fiscal year, along with the 
associated rationale and assumptions. This discussion also included a 
description of the ``Other,'' ``Case-Mix,'' and ``Discharges'' 
assumptions, as well as additional information regarding the estimated 
impact of the COVID-19 PHE on our calculation of Factor 1. For 
additional context, our calculation of the ``Other'' factor for FY 2025 
reflects the expectation that DSH payments will grow faster than IPPS 
payments in 2025.
    Regarding the commenter who expressed concern that our proposed 
calculation of Factor 1 would disproportionately impact safety net 
providers, we continue to believe that estimating Factor 1 based on the 
economic data and assumptions detailed in this final rule and the FY 
2025 IPPS/LTCH PPS proposed rule is appropriate and consistent with the 
requirements of section 1886(r)(2)(A) of the Act.
    Comment: Many commenters requested that CMS provide additional 
detail on the calculations and assumptions related to the 
``Discharges'' component used in the Factor 1 formula. A couple 
commenters asked that CMS provide an explanation as to why the 
``Discharges'' component for FY 2023 and FY 2024 finalized in the FY 
2024 IPPS/LTCH PPS final rule decreased in the FY 2025 IPPS proposed 
rule. Several commenters questioned the actuarial assumption of 
``recent trends recovering back to the long-term trend and assumption 
related to how many beneficiaries will be enrolled in Medicare 
Advantage (MA) plans.'' A commenter requested that CMS ensure the 
``Discharges'' component of Factor 1 accurately reflects trends in 
Medicare Fee-for-Service (FFS) utilization in FY 2025, given concerns 
about the adequacy of the CY 2025 MA rate update and the recent trend 
of providers terminating contracts with MA plans due to excessive prior 
authorization denial rates and slow payments. The same commenter 
further detailed that these considerations would steer beneficiaries 
with greater health needs away from MA and into Medicare FFS. To 
address changing FFS utilization, the commenter recommended that CMS 
use more recent data to accurately reflect discharge volumes.
    Finally, a commenter commended CMS for increasing the Factor 1 
estimate for FY 2025, while another commenter requested that CMS 
increase the FY 2025 Factor 1 ``Update'' component consistent with the 
MedPAC recommended increases to the IPPS market basket used to estimate 
DSH payments for FY 2022, FY 2024, and FY 2025. This commenter cited 
MedPAC's March 2023 and March 2024 Reports to Congress, where the 
Commission recommended a 1.0 percent increase to the FY 2024 market 
basket percentage and a 1.5 percent increase to the FY 2025 market 
basket percentage increase.
    Response: We thank the commenters for their input. Regarding 
commenters' request for additional detail on the calculations and 
assumptions underlying the ``Discharges'' factor, we refer the 
commenters to the discussion elsewhere in this section of this final 
rule and the relevant discussion in the FY 2025 IPPS/LTCH PPS proposed 
rule (86 FR 36190-36192), which detail the calculations and assumptions 
we used to calculate the FY 2025 ``Discharges'' factor. We also note 
that in updating our estimate of Factor 1 for this final rule, we 
considered, as appropriate, the same set of factors that we used in the 
FY 2024 IPPS/LTCH PPS proposed rule and in prior rulemakings (see 
example, (88 FR 58993 through 58998)). As we stated we would do in the 
FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36191), we then updated our 
estimates for the FY 2025 ``Discharges'' component, and other Factor 1 
components, to incorporate the latest available data based on more 
recent economic assumptions and actuarial analyses.
    In response to commenters' request that CMS explain why the 
projection of the ``Discharges'' component in the FY 2025 IPPS/LTCH PPS 
proposed rule was lower than the projections for FY 2023 and FY 2024, 
we point commenters to discussion elsewhere in this section of this 
final rule and relevant discussion in the FY 2025 IPPS/LTCH PPS 
proposed rule (89 FR 36192), which detail the calculations and 
assumptions we used to calculate the FY 2025 ``Discharges'' factor. We 
also note that consistent with the policy that we have applied since FY 
2014 (see example, (78 FR 50628 through 50630 and 78 FR 61194)), our 
estimates for the ``Discharges'' component in our proposed and final 
rules are updated using the most recently available data and economic 
assumptions and actuarial analyses at the time of rulemaking.
    Regarding the comments on the impacts of MA enrollment on Medicare 
FFS discharge volume, we refer commenters to the actuarial projections 
and assumptions regarding future trends in Medicare FFS and MA program 
enrollment, utilization, and costs of health care services covered by 
Medicare, as well as other factors affecting Medicare FFS and MA 
program expenditures, contained in the ``2024 Annual Report of the 
Boards of Trustees of the Federal Hospital Insurance and Federal 
Supplementary Medical Insurance Trust Funds,'' available under 
``Downloads'' on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/, which we considered in developing our 
estimate of the ``Discharges'' factor for FY 2025. We also note that, 
consistent with prior years (see example, (88 FR 58997)) our estimate 
of the ``Discharges'' component for FY 2025 in this final rule 
incorporates only claims from the Medicare FFS program rather than 
claims from the MA program. Accordingly, we believe that the FY

[[Page 69318]]

2025 ``Discharges'' factor in this final rule accurately reflects 
trends in Medicare FFS discharges.
    Regarding the commenter who requested that CMS increase the FY 2025 
Factor 1 ``Update'' component consistent with the MedPAC recommended 
increases to the IPPS market basket used to estimate DSH payments for 
FY 2022, FY 2024, and FY 2025, we refer readers to the discussion in 
section V.B. of the preamble of this final rule. Consistent with the 
inpatient hospital update discussion in section V.B. of the preamble of 
this final rule, OACT is using the final inpatient hospital market 
basket update and productivity adjustment for FY 2025 based on the more 
recent data available for this final rule for the final FY 2025 
``Update'' component in the Factor 1 calculation.
    After consideration of the public comments we received, we are 
finalizing, as proposed, the methodology for calculating Factor 1 for 
FY 2025. We discuss the resulting Factor 1 amount for FY 2025 in this 
final rule. Consistent with prior rulemakings, for this final rule, 
OACT used the most recently submitted Medicare cost report data from 
the March 31, 2024, update of HCRIS to identify Medicare DSH payments 
and the most recent Medicare DSH payment adjustments provided in the 
Impact File and applied update factors and assumptions for projected 
changes in utilization and case-mix to estimate Medicare DSH payments 
for the upcoming fiscal year.
    The June 2024 OACT estimate for Medicare DSH payments for FY 2025, 
without regard to the application of section 1886(r)(1) of the Act, was 
approximately $14.013 billion. This estimate excluded Maryland 
hospitals, which participate in the Maryland Total Cost of Care Model 
and are not paid under the IPPS, hospitals participating in the Rural 
Community Hospital Demonstration, and SCHs paid under their hospital-
specific payment rate. Therefore, based on this June 2024 estimate, the 
estimate of empirically justified Medicare DSH payments for FY 2025, 
with the application of section 1886(r)(1) of the Act, was 
approximately $3.503 billion (or 25 percent of the total amount of 
estimated Medicare DSH payments for FY 2025). Under Sec.  
412.106(g)(1)(i), Factor 1 is the difference between these two OACT 
estimates. Therefore, the final Factor 1 for FY 2025 is 
$10,509,750,000, which is equal to 75 percent of the total amount of 
estimated Medicare DSH payments for FY 2025 ($14,013,000,000 minus 
$3,503,250,000).
    OACT's estimates for FY 2025 for this final rule began with a 
baseline of $13.401 billion in Medicare DSH expenditures for FY 2021. 
The following table shows the factors applied to update this baseline 
through the current estimate for FY 2025:
[GRAPHIC] [TIFF OMITTED] TR28AU24.177

    In this table, the discharges column shows the changes in the 
number of Medicare FFS inpatient hospital discharges. The discharge 
figures for FY 2022 and FY 2023 are based on Medicare claims data that 
have been adjusted by a completion factor to account for incomplete 
claims data. We note that these claims data reflect the impact of the 
COVID-19 pandemic. The discharge figure for FY 2024 is based on 
preliminary data. The discharge figure for FY 2025 is an assumption 
based on recent historical experience, an assumed partial return to 
pre-COVID 19 trends, and assumptions related to how many beneficiaries 
will be enrolled in MA plans. Accordingly, the discharge figures for FY 
2022 to FY 2025 incorporate the actual impact and estimated future 
impact of the COVID-19 pandemic.
    The case-mix column shows the estimated change in case-mix for IPPS 
hospitals. The case-mix figures for FY 2022 and FY 2023 are based on 
actual claims data adjusted by a completion factor to account for 
incomplete claims data. We note that these claims data reflect the 
impact of the COVID-19 pandemic. The case-mix figures for FY 2024 and 
for FY 2025 are assumptions based on the 2012 ``Review of Assumptions 
and Methods of the Medicare Trustees' Financial Projections'' report by 
the 2010-2011 Medicare Technical Review Panel.\204\
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    \204\ https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/reportstrustfunds/downloads/technicalpanelreport2010-2011.pdf.
---------------------------------------------------------------------------

    The ``Other'' column reflects the change in other factors that 
contribute to the Medicare DSH estimates. These factors include the 
difference between the total inpatient hospital discharges and IPPS 
discharges and various adjustments to the payment rates that have been 
included over the years but are not reflected in the other columns 
(such as the 20 percent add-on for COVID-19 discharges). In addition, 
the ``Other'' column includes a factor for the estimated changes in 
Medicaid enrollment through FY 2023. Based on the most recent available 
data, Medicaid enrollment is estimated to change as follows: +8.3 
percent in FY 2022, +5.2 percent in FY 2023, -11.9 percent in FY 2024, 
and -5.3 percent in FY 2025. In future IPPS rulemakings, our 
assumptions regarding Medicaid enrollment may change based on actual 
enrollment in the States.
    We note that, in developing their estimates of the effect of 
Medicaid expansion on Medicare DSH expenditures, our actuaries have 
assumed that the new Medicaid enrollees are healthier than the average 
Medicaid enrollee and, therefore, receive fewer hospital services.\205\ 
Specifically, based on the most recent

[[Page 69319]]

available data at the time of developing this final rule, OACT assumed 
per capita spending for Medicaid beneficiaries who enrolled due to the 
expansion to be approximately 80 percent of the average per capita 
expenditures for a pre-expansion Medicaid beneficiary, due to the 
better health of these beneficiaries. The same assumption was used for 
the new Medicaid beneficiaries who enrolled in 2020 and thereafter due 
to the COVID-19 pandemic. This assumption is consistent with recent 
internal estimates of Medicaid per capita spending pre-expansion and 
post-expansion. In future IPPS rulemakings, the assumption about the 
average per-capita expenditures of Medicaid beneficiaries who enrolled 
due to the COVID-19 pandemic may change.
---------------------------------------------------------------------------

    \205\ For a discussion of general issues regarding Medicaid 
projections, we refer readers to the 2018 Actuarial Report on the 
Financial Outlook for Medicaid, which is available at https://www.cms.gov/files/document/2018-report.pdf.
---------------------------------------------------------------------------

    The following table shows the factors that are included in the 
``Update'' column of the previous table:
[GRAPHIC] [TIFF OMITTED] TR28AU24.178

2. Calculation of Factor 2 for FY 2025
a. Background
    Section 1886(r)(2)(B) of the Act establishes Factor 2 in the 
calculation of the uncompensated care payment. Section 
1886(r)(2)(B)(ii) of the Act provides that, for FY 2018 and subsequent 
fiscal years, the second factor is 1 minus the percent change in the 
percent of individuals who are uninsured, as determined by comparing 
the percent of individuals who were uninsured in 2013 (as estimated by 
the Secretary, based on data from the Census Bureau or other sources 
the Secretary determines appropriate, and certified by the Chief 
Actuary of CMS) and the percent of individuals who were uninsured in 
the most recent period for which data are available (as so estimated 
and certified).
    We are continuing to use the methodology that was used in FY 2018 
through FY 2024 to determine Factor 2 for FY 2025--to use the National 
Health Expenditure Accounts (NHEA) data to determine the percent change 
in the percent of individuals who are uninsured. We refer readers to 
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38197 and 38198) for a 
complete discussion of the NHEA and why we determined, and continue to 
believe, that it is the data source for the rate of uninsurance that, 
on balance, best meets all our considerations and is consistent with 
the statutory requirement that the estimate of the rate of uninsurance 
be based on data from the Census Bureau or other sources the Secretary 
determines appropriate.
    In brief, the NHEA represents the government's official estimates 
of economic activity (spending) within the health sector. The NHEA 
includes comprehensive enrollment estimates for total private health 
insurance (PHI) (including direct and employer-sponsored plans), 
Medicare, Medicaid, the Children's Health Insurance Program (CHIP), and 
other public programs, and estimates of the number of individuals who 
are uninsured. The NHEA data are publicly available on the CMS website 
at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/.
    To compute Factor 2 for FY 2025, the first metric that is needed is 
the proportion of the total U.S. population that was uninsured in 2013. 
For a complete discussion of the approach OACT used to prepare the 
NHEA's estimate of the rate of uninsurance in 2013, including the data 
sources used, we refer readers to the FY 2024 IPPS/LTCH PPS final rule 
(88 FR 58998 and 58999).
    The next metrics needed to compute Factor 2 for FY 2025 are 
projections of the rate of uninsurance in both CY 2024 and CY 2025. On 
an annual basis, OACT projects enrollment and spending trends for the 
coming 10-year period. The most recent projections are for 2023 through 
2032 and were published on June 12, 2024. Those projections used the 
latest NHEA historical data that were available at the time of their 
construction (that is, historical data through 2022). The NHEA 
projection methodology accounts for expected changes in enrollment 
across all of the categories of insurance coverage previously listed. 
For a complete discussion of how the NHEA data account for expected 
changes in enrollment across all the categories of insurance coverage 
previously listed, we refer readers to the FY 2024 IPPS/LTCH PPS final 
rule (88 FR 58999).
b. Factor 2 for FY 2025
    Using these data sources and the previously described 
methodologies, at the time of developing the proposed rule and using 
the NHEA data for 2022 through 2031 that were published on June 14, 
2023, OACT estimated that the uninsured rate for the historical, 
baseline year of 2013 was 14 percent, and that the uninsured rates for 
CYs 2024 and 2025 were 8.5 percent and 8.8 percent, respectively (89 FR 
36193). As required by section 1886(r)(2)(B)(ii) of the Act, the Chief 
Actuary of CMS certified these estimates. We refer readers to OACT's 
Memorandum on Certification of Rates of Uninsured prepared for the FY 
2025 IPPS/LTCH PPS proposed rule for further details on the methodology 
and assumptions that were used in the projection of these rates of 
uninsurance.\206\
---------------------------------------------------------------------------

    \206\ https://www.cms.gov/files/document/certification-rates-uninsured-2025-proposed-rule.pdf.
---------------------------------------------------------------------------

    As with the CBO estimates on which we based Factor 2 for fiscal 
years before FY 2018, the NHEA estimates are for a calendar year. Under 
the approach originally adopted in the FY 2014 IPPS/LTCH PPS final 
rule, we have used a weighted average approach to project

[[Page 69320]]

the rate of uninsurance for each fiscal year. We continue to believe 
that, in order to estimate the rate of uninsurance during a fiscal year 
accurately, Factor 2 should reflect the estimated rate of uninsurance 
that hospitals will experience during the fiscal year, rather than the 
rate of uninsurance during only one of the calendar years that the 
fiscal year spans. Accordingly, in the FY 2025 IPPS/LTCH PPS proposed 
rule, we proposed to continue to apply the weighted average approach 
used in past fiscal years to estimate this final rule's rate of 
uninsurance for FY 2025.
    OACT certified the estimate of the rate of uninsurance for FY 2025 
determined using this weighted average approach to be reasonable and 
appropriate for purposes of section 1886(r)(2)(B)(ii) of the Act. In 
the proposed rule (89 FR 36193), we noted that we may also consider the 
use of more recent data that may become available for purposes of 
estimating the rates of uninsurance used in the calculation of the 
final Factor 2 for FY 2025.
    In the proposed rule, we outlined the calculation of the proposed 
Factor 2 for FY 2025 as follows:
     Percent of individuals without insurance for CY 2013: 14 
percent.
     Percent of individuals without insurance for CY 2024: 8.5 
percent.
     Percent of individuals without insurance for CY 2025: 8.8 
percent.
     Percent of individuals without insurance for FY 2025: 
(0.25 times 0.085) + (0.75 times 0.088) = 8.7 percent.
     Factor 2: 1 - [verbar]((0.14-0.087)/0.14)[verbar] = 1-
0.3786 = 0.6214 (62.14 percent).
    We proposed that Factor 2 for FY 2025 would be 62.14 percent.
    The proposed FY 2025 uncompensated care amount was equivalent to 
proposed Factor 1 multiplied by proposed Factor 2, which was 
$6,498,135,150.00.
    We invited public comments on our proposed Factor 2 for FY 2025.
    Comment: Most commenters discussed Factor 2 in the context of the 
impact of the temporary COVID-19 PHE provisions on the uninsured rate, 
such as the Families First Coronavirus Response Act's Medicaid 
continuous coverage provision and the American Rescue Plan's 
Marketplace enhanced premium tax credits. Many large and small 
healthcare organizations and associations disagreed with CMS' estimates 
for the FY 2025 uninsured rate and urged OACT to update its estimate of 
Factor 2 to account for the projected increases in the number of 
uninsured individuals as Medicaid unwinding continues and Medicaid 
redeterminations continue to be processed.
    A few commenters expressed their concern that the NHEA data source 
that CMS proposed to use for Factor 2 does not reflect current trends 
in the uninsured rate as the Medicaid continuous enrollment provisions 
unwind. Many commenters also indicated that they expect increases in 
the uninsured rates in their communities. Citing CMS' statement in the 
proposed rule that the agency could consider more recent data that may 
become available for the calculation of final Factor 2 for FY 2025, 
these commenters urged CMS to use more recent and accurate data sources 
to account for the anticipated increase in the uninsured rate. 
Considering the expiration of the COVID-19 PHE and the unwinding of the 
Medicaid continuous enrollment provisions, some of these commenters 
urged CMS to consider utilizing alternative data sources and 
calculations to ensure that the Factor 2 estimate accurately reflects 
the current coverage landscape, including uninsurance rates.
    Several commenters referenced data sources and analyses, such as 
analyses by the Kaiser Family Foundation (KFF) and the Urban Institute, 
that project that at least 22 million individuals will lose their 
Medicaid coverage in FY 2024, with the number expected to grow in FY 
2025. These commenters stated that they expect at least an additional 
5.0 million uninsured individuals for processed redeterminations and an 
additional 1.7 million for those yet to be processed. Another commenter 
cited an analysis by the Alliance of Safety-Net Hospitals that 
indicated that there will be 32.5 million uninsured individuals in FY 
2024, yielding an uninsurance rate of 9.6 percent for FY 2024. 
Accordingly, these commenters requested that CMS increase Factor 2 to 
reflect the anticipated increase in the uninsured population. A 
commenter recommended that CMS consider implementing a one-time 
increase in the percentage used in Factor 2 to account for the lag in 
data and anticipated rise in the uninsured rate as Medicaid unwinding 
continues in FY 2025.
    Several commenters indicated their support for CMS' proposed 
increases in FY 2025's Factor 2 and Medicare DSH uncompensated care 
payments, compared to the FY 2024 Factor 2 and Medicare DSH 
uncompensated care payments. Some commenters raised concerns regarding 
the proposed increase in uncompensated care payments for FY 2025, 
stating that an increase in uncompensated care payments in one year 
does not make up for underpayments in prior years. In addition, a few 
commenters asked CMS to increase the uncompensated care amount beyond 
the amount proposed in the FY 2025 IPPS/LTCH PPS proposed rule, while 
others urged CMS to increase the uncompensated care amount for 
community safety-net hospitals in particular given that these hospitals 
are already financially strained.
    A commenter requested that CMS ensure that the assumptions used for 
the FY 2025 IPPS/LTCH PPS proposed rule's Factor 1 are internally 
consistent with the assumptions used in the FY 2025 IPPS/LTCH PPS 
proposed rule's Factor 2. This commenter noted that CMS estimated an 
18.2 percentage point decline in Medicaid enrollment between FY 2023 
and FY 2025 when calculating Factor 1 but did not account for the same 
decline in the number of Medicaid beneficiaries when estimating the 
uninsured rate in Factor 2.
    Response: We thank the commenters for their input and diligence 
regarding the estimate of Factor 2 included in the proposed rule. In 
response to the comments concerning the NHEA data source used for 
calculating Factor 2 for FY 2025, we refer readers to the FY 2018 IPPS/
LTCH PPS final rule (82 FR 38197 and 38198) for a complete discussion 
of the NHEA and why we determined, and continue to believe, that it is 
the data source for the rate of uninsurance that, on balance, best meet 
all our considerations for ensuring that the data source meets the 
statutory requirement that the estimate be based on data from the 
Census Bureau, or other sources the Secretary determines appropriate. 
We continue to believe that the NHEA will provide reasonable estimates 
for the rate of uninsurance that are available in conjunction with the 
IPPS rulemaking cycle.
    In the FY 2025 IPPS/LTCH PPS proposed rule, we explained that we 
used the most recent available estimates from the NHEA at that time, 
and we refer readers to the relevant discussion in the proposed rule 
and OACT's Memorandum on Certification of Rates of Uninsured prepared 
for the proposed rule for further details on the methodology and 
assumptions used in the proposed rule's calculation of the projected 
uninsured rate. In brief, we indicated that our projection of the rates 
of uninsurance for CY 2024 and CY 2025 were from the latest NHEA 
historical data available and accounted for expected changes in 
enrollment across all categories of insurance coverage. Using estimates 
from the NHEA that were publicly available at the time of the proposed 
rule, OACT

[[Page 69321]]

estimated the legislative impacts and effects of the COVID-19 PHE on 
insurance coverage when it developed the estimate of rates of 
uninsurance included in the proposed rule. We note, in particular, that 
OACT's estimates in the proposed rule considered the COVID-19 PHE 
provisions and the latest available Medicaid projections publicly 
available at that time.
    In response to commenters who requested that we update the Factor 2 
estimates and account for any anticipated changes in the uninsured rate 
using more recent or alternative data sources, in the proposed rule (89 
FR 36193), we stated we may consider the use of more recent data that 
may become available for purposes of estimating the rates of 
uninsurance used in the calculation of the final Factor 2 for FY 2025. 
In this final rule, we are using the most recent NHEA estimates for the 
rate of uninsurance, which became available on June 12, 2024, and 
account for the legislative impacts of the expiration of the Families 
First Coronavirus Response Act's Medicaid continuous coverage 
provision, the extension of the American Rescue Plan's Marketplace 
enhanced premium tax credits via the Inflation Reduction Act, and the 
effects of the COVID-19 PHE on insurance coverage. Consistent with 
prior final IPPS/LTCH PPS rulemakings (see, e.g., the FY 2024 IPPS/LTCH 
PPS final rule (88 FR 59000)), we are using the updated NHEA data for 
the final Factor 2 calculation because we believe that it is the most 
appropriate measure of changes in the rate of uninsurance.
    Based on these latest projections, we note that the insured share 
of the population is expected to have been 93.1 percent in CY 2023. In 
CY 2024, a decrease in Medicaid enrollment on an average monthly basis 
of 10.2 million enrollees is expected, with an additional decline of 
1.6 million enrollees projected in CY 2025.\207\ Notably, many 
individuals who are being disenrolled as a result of Medicaid unwinding 
are expected to already have comprehensive coverage from another source 
(such as through an employer). Over 2023-2025, enrollment in direct-
purchased insurance, a category of insurance that includes Marketplace 
qualified health plans, is projected to increase by a total of 8.3 
million enrollees largely as a result of the Inflation Reduction Act's 
temporary extension of enhanced Marketplace subsidies and a temporary 
Special Enrollment Period for consumers losing Medicaid or Children's 
Health Insurance coverage due to Medicaid unwinding.
    Regarding the commenter who expressed concerns that there may be a 
discrepancy between assumptions regarding Medicaid enrollment used in 
FY 2025 IPPS/LTCH PPS proposed rule's Factor 1 and Factor 2, we note 
that the Medicaid enrollment data used for purposes of uninsured rate 
projections use the most recent available calendar year data and are 
generally consistent with the Federal fiscal year data used for 
purposes of the Factor 1 estimates.\208\
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    \208\ The projected decline in Medicaid enrollment from its 
monthly peak (or the month in which enrollment is at its highest 
level) is larger than when it is calculated on an average monthly 
enrollment basis, which conceptually reflects the summation of the 
monthly enrollment estimates for a given year and divided by 12. As 
a result, comparisons of Medicaid enrollment across months, or for 
FY versus CY, can differ notably. This partly explains the Medicaid 
enrollment estimate differences in the assumptions regarding 
Medicaid enrollment used in the proposed rule's Factor 1 and 2.
---------------------------------------------------------------------------

    These changes in enrollment, along with projected trends in other 
forms of coverage (e.g., employer-sponsored or direct purchase 
insurance), are expected to result in an insured share of the 
population of 92.7 percent in CY 2024 (a decrease from 93.1 percent in 
CY 2023) and 92.3 percent in CY 2025. We note that the most recent NHEA 
projections anticipate that the uninsured population will increase from 
22.8 million in CY 2023 and 24.4 million in CY 2024 to 26.1 million in 
CY 2025 and 29.6 million in CY 2026. The projected increase of the 
uninsured population in CY 2026 is related to the expiration of the 
enhanced Marketplace subsidies that year. For more detailed projections 
of health insurance enrollment that underlie the estimation of final 
Factor 2, we refer readers to NHEA's Table 17 Health Insurance 
Enrollment and Enrollment Growth Rates. (Available on the CMS website 
at: https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/projected)
    Regarding the comments requesting that CMS increase the 
uncompensated care amount for FY 2025, generally or for community 
safety-net hospitals in particular, we continue to believe that 
estimating Factor 2 based on the best available data is appropriate and 
consistent with the requirements of section 1886(r)(2)(B)(ii) of the 
Act.
    Comment: Several commenters urged CMS to be transparent in the 
calculation of Factor 2 and how it accounts for the expiration of the 
Medicaid continuous enrollment provisions, while others urged CMS to be 
transparent regarding the data sources used for calculating Factor 2 
and the assumptions behind the uninsured rate. Other commenters 
requested that CMS publish a detailed methodology on the calculation of 
the FY2025 proposed rule's Factor 2 and the NHEA projections.
    Response: In response to the comments concerning transparency, we 
note that the accompanying OACT memo contains additional background 
describing the methods used to derive the FY 2025 rate of uninsured for 
this final rule.\209\ We also note that section 1886(r)(2)(B)(ii) of 
the Act permits us to use a data source other than CBO estimates to 
determine the percent change in the rate of uninsurance beginning in FY 
2018. As explained elsewhere in this section of this final rule, the 
NHEA data and methodology that were used to estimate Factor 2 for this 
final rule are transparent and best meet all of our considerations for 
ensuring reasonable estimates for the rate of uninsurance that are 
available in conjunction with the IPPS/LTCH PPS rulemaking cycle, and 
we have concluded it is appropriate to update the projection of the FY 
2025 rate of uninsurance using the most recent NHEA data. For 
additional information on the projection of the uninsured, see page 28 
of the projection's methodology documentation. (Available on the CMS 
website at: https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/downloads/projectionsmethodology.pdf).
---------------------------------------------------------------------------

    \209\ OACT Memorandum on Certification of Rates of Uninsured. 
Available at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/disproportionate-share-hospital-dsh.
---------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
updating the calculation of Factor 2 for FY 2025 to incorporate more 
recent data from NHEA. The final estimates of the percent of uninsured 
individuals have been certified by the Chief Actuary of CMS. We note 
that the CY 2024 and CY 2025 uninsurance rates are projected to be 
higher than CY 2023's partly because of the expiration of the Medicaid 
continuous enrollment provisions and the projected declines in Medicaid 
enrollment in CY 2024 and CY 2025, which are also larger in the final 
rule than in the proposed rule. However, the lower projected rates of 
uninsurance in CY 2024 and CY 2025 in the final rule relative to the 
proposed rule largely reflect higher expected enrollment in direct-
purchase insurance in those years. This higher expected enrollment is 
associated with enrollment in Marketplace plans and is related to (i) 
the Inflation Reduction Act's extension of the American Rescue Plan 
Act's enhanced Marketplace premium subsidies through 2025 and (ii) a

[[Page 69322]]

Special Enrollment Period open to those who are no longer eligible for 
Medicaid coverage due to state-based redeterminations.
    The calculation of the final Factor 2 for FY 2025 using a weighted 
average of OACT's updated projections for CY 2024 and CY 2025 is as 
follows:
     Percent of individuals without insurance for CY 2013: 14.0 
percent.
     Percent of individuals without insurance for CY 2024: 7.3 
percent.
     Percent of individuals without insurance for CY 2025: 7.7 
percent,
     Percent of individuals without insurance for FY 2025: 
(0.25 times 0.073) + (0.75 times 0.077) = 7.6 percent.
     Factor 2: 1-[verbar]((0.076-0.14)/0.14)[verbar] = 1-0.457 
= 0.5429 (54.29 percent).
    Therefore, the final Factor 2 for FY 2025 is 54.29 percent. The 
final FY 2025 uncompensated care amount is $10,509,750, 000 * 0.5429 = 
$5,705,743,275.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Final FY 2025 Uncompensated Care Amount..............     $5,705,743,275
------------------------------------------------------------------------

3. Calculation of Factor 3 for FY 2025
a. General Background
    Section 1886(r)(2)(C) of the Act defines Factor 3 in the 
calculation of the uncompensated care payment. As we have discussed 
earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is equal 
to the percent, for each subsection (d) hospital, that represents the 
quotient of: (1) the amount of uncompensated care for such hospital for 
a period selected by the Secretary (as estimated by the Secretary, 
based on appropriate data (including, in the case where the Secretary 
determines alternative data are available that are a better proxy for 
the costs of subsection (d) hospitals for treating the uninsured, the 
use of such alternative data)); and (2) the aggregate amount of 
uncompensated care for all subsection (d) hospitals that receive a 
payment under section 1886(r) of the Act for such period (as so 
estimated, based on such data).
    Therefore, Factor 3 is a hospital-specific value that expresses the 
proportion of the estimated uncompensated care amount for each 
subsection (d) hospital and each subsection (d) Puerto Rico hospital 
with the potential to receive Medicare DSH payments relative to the 
estimated uncompensated care amount for all hospitals estimated to 
receive Medicare DSH payments in the fiscal year for which the 
uncompensated care payment is to be made. Factor 3 is applied to the 
product of Factor 1 and Factor 2 to determine the amount of the 
uncompensated care payment that each eligible hospital will receive for 
FY 2014 and subsequent fiscal years. In order to implement the 
statutory requirements for this factor of the uncompensated care 
payment formula, it was necessary for us to determine: (1) the 
definition of uncompensated care or, in other words, the specific items 
that are to be included in the numerator (that is, the estimated 
uncompensated care amount for an individual hospital) and the 
denominator (that is, the estimated uncompensated care amount for all 
hospitals estimated to receive Medicare DSH payments in the applicable 
fiscal year); (2) the data source(s) for the estimated uncompensated 
care amount; and (3) the timing and manner of computing the quotient 
for each hospital estimated to receive Medicare DSH payments. The 
statute instructs the Secretary to estimate the amounts of 
uncompensated care for a period based on appropriate data. In addition, 
we note that the statute permits the Secretary to use alternative data 
in the case where the Secretary determines that such alternative data 
are available that are a better proxy for the costs of subsection (d) 
hospitals for treating individuals who are uninsured. For a discussion 
of the methodology, we used to calculate Factor 3 for fiscal years 2014 
through 2022, we refer readers to the FY 2024 IPPS/LTCH final rule (88 
FR 59001 and 59002).
b. Background on the Methodology Used To Calculate Factor 3 for FY 2023 
and Subsequent Years
    Section 1886(r)(2)(C) of the Act governs the selection of the data 
to be used in calculating Factor 3 and allows the Secretary the 
discretion to determine the time periods from which we will derive the 
data to estimate the numerator and the denominator of the Factor 3 
quotient. Specifically, section 1886(r)(2)(C)(i) of the Act defines the 
numerator of the quotient as the amount of uncompensated care for a 
subsection (d) hospital for a period selected by the Secretary. Section 
1886(r)(2)(C)(ii) of the Act defines the denominator as the aggregate 
amount of uncompensated care for all subsection (d) hospitals that 
receive a payment under section 1886(r) of the Act for such period. In 
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50634 through 50647), we 
adopted a process of making interim payments with final cost report 
settlement for both the empirically justified Medicare DSH payments and 
the uncompensated care payments required by section 3133 of the 
Affordable Care Act. Consistent with that process, we also determined 
the time period from which to calculate the numerator and denominator 
of the Factor 3 quotient in a way that would be consistent with making 
interim and final payments. Specifically, we must have Factor 3 values 
available for hospitals that we estimate will qualify for Medicare DSH 
payments for a fiscal year and for those hospitals that we do not 
estimate will qualify for Medicare DSH payments for that fiscal year 
but that may ultimately qualify for Medicare DSH payments for that 
fiscal year at the time of cost report settlement.
    As described in the FY 2022 IPPS/LTCH PPS final rule, commenters 
expressed concerns that the use of only 1 year of data to determine 
Factor 3 would lead to significant variations in year-to-year 
uncompensated care payments. Some stakeholders recommended the use of 2 
years of historical data from Worksheet S-10 data of the Medicare cost 
report (86 FR 45237). In the FY 2022 IPPS/LTCH PPS final rule, we 
stated that we would consider using multiple years of data when the 
vast majority of providers had been audited for more than 1 fiscal year 
under the revised reporting instructions. Audited FY 2019 cost reports 
were available for the development of the FY 2023 IPPS/LTCH PPS 
proposed and final rules. Feedback from previous audits and lessons 
learned were incorporated into the audit process for the FY 2019 
reports.
    In consideration of the comments discussed in the FY 2022 IPPS/LTCH 
PPS final rule, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49036 
through 49047), we finalized a policy of using a multi-year average of 
audited Worksheet S-10 data to determine Factor 3 for FY 2023 and 
subsequent fiscal years. We explained our belief that this approach 
would be generally consistent with our past practice of using the most 
recent single year of audited data from the Worksheet S-10, while also 
addressing commenters' concerns regarding year-to-year fluctuations in 
uncompensated care payments. Under this policy, we used a 2-year 
average of audited FY 2018 and FY 2019 Worksheet S-10 data to

[[Page 69323]]

calculate Factor 3 for FY 2023. We also indicated that we expected FY 
2024 would be the first year that 3 years of audited data would be 
available at the time of rulemaking. For FY 2024 and subsequent fiscal 
years, we finalized a policy of using a 3-year average of the 
uncompensated care data from the 3 most recent fiscal years for which 
audited data are available to determine Factor 3. Consistent with the 
approach that we followed when multiple years of data were previously 
used in the Factor 3 methodology, if a hospital does not have data for 
all 3 years used in the Factor 3 calculation, we will determine Factor 
3 based on an average of the hospital's available data. For IHS and 
Tribal hospitals and Puerto Rico hospitals, we use the same multi-year 
average of Worksheet S-10 data to determine Factor 3 for FY 2024 and 
subsequent fiscal years as is used to determine Factor 3 for all other 
DSH-eligible hospitals (in other words, hospitals eligible to receive 
empirically justified Medicare DSH payments for a fiscal year) to 
determine Factor 3.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49033 through 
49047), we also modified our policy regarding cost reports that start 
in one fiscal year and span the entirety of the following fiscal year. 
Specifically, in the rare cases when we use a cost report that starts 
in one fiscal year and spans the entirety of the subsequent fiscal year 
to determine uncompensated care costs for the subsequent fiscal year, 
we would not use the same cost report to determine the hospital's 
uncompensated care costs for the earlier fiscal year. We explained that 
using the same cost report to determine uncompensated care costs for 
both fiscal years would not be consistent with our intent to smooth 
year-to-year variation in uncompensated care costs. As an alternative, 
we finalized our proposal to use the hospital's most recent prior cost 
report, if that cost report spans the applicable period.\210\
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    \210\ For example, in determining Factor 3 for FY 2023, we did 
not use the same cost report to determine a hospital's uncompensated 
care costs for both FY 2018 and FY 2019. Rather, we used the cost 
report that spanned the entirety of FY 2019 to determine 
uncompensated care costs for FY 2019 and used the hospital's most 
recent prior cost report to determine its uncompensated care costs 
for FY 2018, provided that cost report spanned some portion of FY 
2018.
---------------------------------------------------------------------------

(1) Scaling Factor
    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59003), we continued 
the policy finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49042) to address the effects of calculating Factor 3 using data from 
multiple fiscal years, in which we apply a scaling factor to the Factor 
3 values calculated for all DSH-eligible hospitals so that total 
uncompensated care payments to hospitals that are projected to be DSH-
eligible for a fiscal year will be consistent with the estimated amount 
available to make uncompensated care payments for that fiscal year. 
Pursuant to that policy, we divide 1 (the expected sum of all DSH-
eligible hospitals' Factor 3 values) by the actual sum of all DSH-
eligible hospitals' Factor 3 values and then multiply the quotient by 
the uncompensated care payment determined for each DSH-eligible 
hospital to obtain a scaled uncompensated care payment amount for each 
hospital. This process is designed to ensure that the sum of the scaled 
uncompensated care payments for all hospitals that are projected to be 
DSH-eligible is consistent with the estimate of the total amount 
available to make uncompensated care payments for the applicable fiscal 
year.
(2) New Hospital Policy for Purposes of Factor 3
    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59003), we continued 
our new hospital policy that was modified in the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49042) and initially adopted in the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42370 through 42371) to determine Factor 3 for 
new hospitals. Consistent with our policy of using multiple years of 
cost reports to determine Factor 3, we defined new hospitals as 
hospitals that do not have cost report data for the most recent year of 
data being used in the Factor 3 calculation. Under this definition, the 
cut-off date for the new hospital policy is the beginning of the fiscal 
year after the most recent year for which audits of the Worksheet S-10 
data have been conducted. For FY 2024, the FY 2020 cost reports were 
the most recent year of cost reports for which audits of Worksheet S-10 
data had been conducted. Thus, hospitals with CMS Certification Numbers 
(CCNs) established on or after October 1, 2020, were subject to the new 
hospital policy for FY 2024.
    Under our modified new hospital policy, if a new hospital has a 
preliminary projection of being DSH-eligible based on its most recent 
available disproportionate patient percentage, it may receive interim 
empirically justified DSH payments. However, new hospitals will not 
receive interim uncompensated care payments because we would have no 
uncompensated care data on which to determine what those interim 
payments should be. The MAC will make a final determination concerning 
whether the hospital is eligible to receive Medicare DSH payments at 
cost report settlement. In FY 2024, while we continued to determine the 
numerator of the Factor 3 calculation using the new hospital's 
uncompensated care costs reported on Worksheet S-10 of the hospital's 
cost report for the current fiscal year, we determined Factor 3 for new 
hospitals using a denominator based solely on uncompensated care costs 
from cost reports for the most recent fiscal year for which audits have 
been conducted. In addition, we applied a scaling factor to the Factor 
3 calculation for a new hospital.\211\
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    \211\ In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49042), we 
explained our belief that applying the scaling factor is appropriate 
for purposes of calculating Factor 3 for all hospitals, including 
new hospitals and hospitals that are treated as new hospitals, to 
improve consistency and predictability across all hospitals.
---------------------------------------------------------------------------

(3) Newly Merged Hospital Policy
    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59004), we continued 
our policy of treating hospitals that merge after the development of 
the final rule for the applicable fiscal year similar to new hospitals. 
As explained in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50021), for 
these newly merged hospitals, we do not have data currently available 
to calculate a Factor 3 amount that accounts for the merged hospital's 
uncompensated care burden. In the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50021 and 50022), we finalized a policy under which Factor 3 for 
hospitals that we do not identify as undergoing a merger until after 
the public comment period and additional review period following the 
publication of the final rule or that undergo a merger during the 
fiscal year will be recalculated similar to new hospitals.
    Consistent with the policy adopted in the FY 2015 IPPS/LTCH PPS 
final rule, in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59004), we 
stated that we would continue to treat newly merged hospitals in a 
similar manner to new hospitals, such that the newly merged hospital's 
final uncompensated care payment will be determined at cost report 
settlement where the numerator of the newly merged hospital's Factor 3 
will be based on the cost report of only the surviving hospital (that 
is, the newly merged hospital's cost report) for the current fiscal 
year. However, if the hospital's cost reporting period includes less 
than 12 months of data, the data from the newly merged hospital's cost 
report will be annualized for purposes of the Factor 3 calculation. 
Consistent

[[Page 69324]]

with the methodology used to determine Factor 3 for new hospitals 
described in section IV.E.3. of the preamble of this final rule, we 
continued our policy for determining Factor 3 for newly merged 
hospitals using a denominator that is the sum of the uncompensated care 
costs for all DSH-eligible hospitals, as reported on Worksheet S-10 of 
their cost reports for the most recent fiscal year for which audits 
have been conducted. In addition, we apply a scaling factor, as 
discussed in section IV.E.3. of the preamble of this final rule, to the 
Factor 3 calculation for a newly merged hospital. In the FY 2024 IPPS/
LTCH PPS final rule, we explained that consistent with past policy, 
interim uncompensated care payments for the newly merged hospital would 
be based only on the data for the surviving hospital's CCN available at 
the time of the development of the final rule.
(4) CCR Trim Methodology
    The calculation of a hospital's total uncompensated care costs on 
Worksheet S-10 requires the use of the hospital's cost to charge ratio 
(CCR). In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59004 through 
59005), we continued the policy of trimming CCRs, which we adopted in 
the FY 2023 IPPS/LTCH PPS final rule (87 FR 49043), for FY 2024. Under 
this policy, we apply the following steps to determine the applicable 
CCR separately for each fiscal year that is included as part of the 
multi-year average used to determine Factor 3:
    Step 1: Remove Maryland hospitals. In addition, we will remove all-
inclusive rate providers because their CCRs are not comparable to the 
CCRs calculated for other IPPS hospitals.
    Step 2: Calculate a CCR ``ceiling'' for the applicable fiscal year 
with the following data: for each IPPS hospital that was not removed in 
Step 1 (including hospitals that are not DSH-eligible), we use cost 
report data to calculate a CCR by dividing the total costs on Worksheet 
C, Part I, Line 202, Column 3 by the charges reported on Worksheet C, 
Part I, Line 202, Column 8. (Combining data from multiple cost reports 
from the same fiscal year is not necessary, as the longer cost report 
will be selected.) The ceiling is calculated as 3 standard deviations 
above the national geometric mean CCR for the applicable fiscal year. 
This approach is consistent with the methodology for calculating the 
CCR ceiling used for high-cost outliers. Remove all hospitals that 
exceed the ceiling so that these aberrant CCRs do not skew the 
calculation of the statewide average CCR.
    Step 3: Using the CCRs for the remaining hospitals in Step 2, 
determine the urban and rural statewide average CCRs for the applicable 
fiscal year for hospitals within each State (including hospitals that 
are not DSH-eligible), weighted by the sum of total hospital discharges 
from Worksheet S-3, Part I, Line 14, Column 15.
    Step 4: Assign the appropriate statewide average CCR (urban or 
rural) calculated in Step 3 to all hospitals, excluding all-inclusive 
rate providers, with a CCR for the applicable fiscal year greater than 
3 standard deviations above the national geometric mean for that fiscal 
year (that is, the CCR ``ceiling'').
    Step 5: For hospitals that did not report a CCR on Worksheet S-10, 
Line 1, we assign them the statewide average CCR for the applicable 
fiscal year as determined in step 3.
    After completing these steps, we re-calculate the hospital's 
uncompensated care costs (Line 30) for the applicable fiscal year using 
the trimmed CCR (the statewide average CCR (urban or rural, as 
applicable)).
(5) Uncompensated Care Data Trim Methodology
    After applying the CCR trim methodology, there are rare situations 
where a hospital has potentially aberrant uncompensated care data for a 
fiscal year that are unrelated to its CCR. Therefore, under the trim 
methodology for potentially aberrant uncompensated care costs (UCC) 
that was included as part of the methodology for purposes of 
determining Factor 3 in the FY 2021 IPPS/LTCH PPS final rule (85 FR 
58832), if the hospital's uncompensated care costs for any fiscal year 
that is included as a part of the multi-year average are an extremely 
high ratio (greater than 50 percent) of its total operating costs in 
the applicable fiscal year, we will determine the ratio of 
uncompensated care costs to the hospital's total operating costs from 
another available cost report, and apply that ratio to the total 
operating expenses for the potentially aberrant fiscal year to 
determine an adjusted amount of uncompensated care costs for the 
applicable fiscal year.\212\
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    \212\ For example, if a hospital's FY 2018 cost report is 
determined to include potentially aberrant data, data from its FY 
2019 cost report would be used for the ratio calculation.
---------------------------------------------------------------------------

    However, we note that we have audited the Worksheet S-10 data that 
will be used in the Factor 3 calculation for a number of hospitals. 
Because the UCC data for these hospitals have been subject to audit, we 
believe that there is increased confidence that if high uncompensated 
care costs are reported by these audited hospitals, the information is 
accurate. Therefore, as we explained in the FY 2021 IPPS/LTCH PPS final 
rule (85 FR 58832), we determined it is unnecessary to apply the UCC 
trim methodology for a fiscal year for which a hospital's UCC data have 
been audited.
    In rare cases, hospitals that are not currently projected to be 
DSH-eligible and that do not have audited Worksheet S-10 data may have 
a potentially aberrant amount of insured patients' charity care costs 
(line 23 column 2). In the FY 2024 IPPS/LTCH PPS final rule (88 FR 
59004), we stated that in addition to the UCC trim methodology, we will 
continue to apply an alternative trim specific to certain hospitals 
that do not have audited Worksheet S-10 data for one or more of the 
fiscal years that are used in the Factor 3 calculation. For FY 2023 and 
subsequent fiscal years, in the rare case that a hospital's insured 
patients' charity care costs for a fiscal year are greater than $7 
million and the ratio of the hospital's cost of insured patient charity 
care (line 23 column 2) to total uncompensated care costs (line 30) is 
greater than 60 percent, we will not calculate a Factor 3 for the 
hospital at the time of proposed or final rulemaking. This trim will 
only impact hospitals that are not currently projected to be DSH-
eligible; and therefore, are not part of the calculation of the 
denominator of Factor 3, which includes only uncompensated care costs 
for hospitals projected to be DSH-eligible. Consistent with the 
approach adopted in the FY 2022 IPPS/LTCH PPS final rule, if a hospital 
would be trimmed under both the UCC trim methodology and this 
alternative trim, we will apply this trim in place of the existing UCC 
trim methodology. We continue to believe this alternative trim more 
appropriately addresses potentially aberrant insured patient charity 
care costs compared to the UCC trim methodology, because the UCC trim 
is based solely on the ratio of total uncompensated care costs to total 
operating costs and does not consider the level of insured patients' 
charity care costs.
    Similar to the approach initially adopted in the FY 2022 IPPS/LTCH 
PPS final rule (86 FR 45245 and 45246), in the FY 2024 IPPS/LTCH PPS 
final rule (88 FR 59005), we also stated that we would continue to use 
a threshold of 3 standard deviations from the mean ratio of insured 
patients' charity care costs to total uncompensated care costs (line 23 
column 2 divided by line 30) and a dollar threshold that is the median 
total uncompensated care cost reported on

[[Page 69325]]

most recent audited cost reports for hospitals that are projected to be 
DSH-eligible. We stated that we continued to believe these thresholds 
are appropriate to address potentially aberrant data. We also continued 
to include Worksheet S-10 data from IHS/Tribal hospitals and Puerto 
Rico hospitals consistent with our policy finalized in the FY 2023 
IPPS/LTCH PPS final rule (87 FR 49047 through 49051). In addition, we 
continued our policy adopted in the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 49044) of applying the same threshold amounts originally 
calculated for the FY 2018 reports to identify potentially aberrant 
data for FY 2024 and subsequent fiscal years to facilitate transparency 
and predictability. If a hospital subject to this trim is determined to 
be DSH-eligible at cost report settlement, the MAC will calculate the 
hospital's Factor 3 using the same methodology used to calculate Factor 
3 for new hospitals.
c. Methodology for Calculating Factor 3 for FY 2025
    For FY 2025, consistent with Sec.  412.106(g)(1)(iii)(C)(11), we 
are following the same methodology as applied in FY 2024 and described 
in the previous section of this final rule to determine Factor 3 using 
the most recent 3 years of audited cost reports, from FY 2019, FY 2020, 
and FY 2021. Consistent with our approach for FY 2024, for FY 2025, we 
are also applying the scaling factor, new hospital, newly merged 
hospital, CCR trim methodology, UCC trim, and alternative trim 
methodology policies discussed in the previous section of this final 
rule. For purposes of the FY 2025 IPPS/LTCH PPS proposed rule, we used 
reports from the December 2023 HCRIS extract to calculate Factor 3. In 
the proposed rule, we noted that we intended to use the March 2024 
update of HCRIS to calculate the final Factor 3 for the FY 2025 IPPS/
LTCH PPS final rule.
    Thus, for FY 2025, we will use 3 years of audited Worksheet S-10 
data to calculate Factor 3 for all eligible hospitals, including IHS 
and Tribal hospitals and Puerto Rico hospitals that have a cost report 
for 2013, following these steps:
    Step 1: Select the hospital's longest cost report for each of the 
most recent 3 years of fiscal year (FY) audited cost reports (FY 2019, 
FY 2020, and FY 2021). Alternatively, in the rare case when the 
hospital has no cost report for a particular year because the cost 
report for the previous fiscal year spanned the more recent fiscal 
year, the previous fiscal year cost report will be used in this step. 
In the rare case that using a previous fiscal year cost report results 
in a period without a report, we would use the prior year report, if 
that cost report spanned the applicable period.\213\ In general, we 
note that, for purposes of the Factor 3 methodology, references to a 
fiscal year cost report are to the cost report that spans the relevant 
fiscal year.
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    \213\ For example, if a hospital does not have a FY 2020 cost 
report because the hospital's FY 2019 cost report spanned the FY 
2020 time period, we will use the FY 2019 cost report that spanned 
the FY 2020 time period for this step. Using the same example, where 
the hospital's FY 2019 report is used for the FY 2020 time period, 
we will use the hospital's FY 2018 report if it spans some of the FY 
2019 time period. We will not use the same cost report for both the 
FY 2020 and the FY 2019 time periods.
---------------------------------------------------------------------------

    Step 2: Annualize the UCC from Worksheet S-10 Line 30, if a cost 
report is more than or less than 12 months. (If applicable, use the 
statewide average CCR (urban or rural) to calculate uncompensated care 
costs.)
    Step 3: Combine adjusted and/or annualized uncompensated care costs 
for hospitals that merged using the merger policy.
    Step 4: Calculate Factor 3 for all DSH-eligible hospitals using 
annualized uncompensated care costs (Worksheet S-10 Line 30) based on 
cost report data from the most recent 3 years of audited cost reports 
(from Step 1, 2 or 3). New hospitals and other hospitals that are 
treated as if they are new hospitals for purposes of Factor 3 are 
excluded from this calculation.
    Step 5: Average the Factor 3 values from Step 4; that is, add the 
Factor 3 values, and divide that amount by the number of cost reporting 
periods with data to compute an average Factor 3 for the hospital. 
Multiply by a scaling factor, as discussed in the previous section of 
this final rule.
    We received comments regarding the definition of uncompensated care 
costs for purposes of the Factor 3 calculation, Worksheet S-10 cost 
report audits, the newly merged hospitals policy, and our Factor 3 
calculation instructions.
    Comment: Several commenters expressed their support for CMS' 
proposal to calculate Factor 3 for FY 2025 based on a three-year 
average of audited FY 2019, FY 2020, and FY 2021 Worksheet S-10 data 
and to use a three-year average of uncompensated care data from the 3 
most recent fiscal years for which audited data are available to 
determine Factor 3 in subsequent fiscal years. Commenters specified 
that the use of a multi-year average of Worksheet S-10 data minimizes 
year-to-year volatility in uncompensated care payments. For example, 
commenters mentioned that use of a three-year average will smooth out 
significant fluctuations in the data across the COVID-19 PHE years. A 
commenter noted their long-standing support for using audited Worksheet 
S-10 data to calculate Factor 3, which they stated promotes an accurate 
and consistent calculation of uncompensated care costs.
    Response: We are grateful to those commenters who expressed their 
support for our methodology of using a three-year average of audited FY 
2019, FY 2020, and FY 2021 Worksheet S-10 data to calculate Factor 3 
for FY 2025. As explained in the FY 2025 IPPS/LTCH PPS proposed rule 
(89 FR 36194, we believe that using a multi-year average of Worksheet 
S-10 data will help provide assurance that hospitals' uncompensated 
care payments remain stable and are not subject to unpredictable swings 
and anomalies in a hospital's uncompensated care costs.
    Comment: A commenter suggested alternative approaches to the 
uncompensated care payment calculation outside of the scope of 
methodological concepts concerning the blending of historical Worksheet 
S-10 data. The commenter recommended that CMS monitor changes in 
uncompensated care reported during the COVID-19 PHE to ensure Worksheet 
S-10 data accuracy and avoid large redistributions of Medicare DSH 
funding away from essential hospitals.
    Response: With regard to the commenter's suggestions unrelated to 
the previously discussed methodological concepts for the blending of 
historical Worksheet S-10 data, we consider these public comments to be 
outside the scope of the proposed rule, and we are not addressing them 
in this final rule. However, we appreciate the commenter's input and 
note that we may address it and other considerations in future 
rulemaking.
    Comment: A few commenters suggested approaches to mitigate the 
impact of the COVID-19 PHE on the three-year average of Worksheet S-10 
data. A few commenters recommended that CMS exclude FY 2020 data 
entirely from FY 2025 DSH calculations and instead use FY 2019, FY 
2021, and FY 2022 data, as FY 2020 data is flawed due to the impacts of 
the COVID-19 PHE. The same commenters stated that FY 2020 data should 
be excluded from FY 2025 DSH calculations because it was excluded from 
most quality reporting metrics. A commenter encouraged CMS to regularly 
assess and identify any unusual trends in the Worksheet S-10 data. 
Another commenter expressed concern about the use of FY 2021 and FY 
2022 data to

[[Page 69326]]

calculate Factor 3 and requested that CMS lessen the effect of any 
large reductions in uncompensated care costs due to the COVID-19 PHE. 
The same commenter suggested that CMS ensure that its use of FY 2020 
and FY 2021 Worksheet S-10 data for purposes of determining Factor 3 
for FY 2025 does not reduce Factor 3 amounts for essential health 
systems. One commenter requested that CMS refine its methodology to 
calculate Factor 3 to account for changes in uncompensated care costs 
and recommended that CMS mitigate the effect of anomalies in the cost 
report data for the COVID-19 PHE period.
    Response: Regarding requests for CMS to mitigate the impact of the 
COVID-19 PHE on the three-year average of Worksheet S-10 cost report 
data, we note that we will continue to use the three-year average of 
the most recently audited cost report data to determine Factor 3 for FY 
2025 and subsequent years, consistent with the policy finalized in the 
FY 2023 IPPS/LTCH PPS final rule (87 FR 49038) and Sec.  
412.106(g)(1)(iii)(C)(11). In response to the comments requesting that 
we exclude FY 2020 data, we continue to believe that using the three-
year average will smooth the variation in year-to-year uncompensated 
care payments and lessen the impacts of the COVID-19 PHE and future 
unforeseen events. We also note that the calculations for Factor 1 and 
Factor 2 for FY 2025 reflect the estimated impact of the COVID-19 PHE 
on DSH payments. Further, we anticipate that there will be less 
fluctuation in cost report data as the PHE disruptions on healthcare 
utilization stabilize. In response to the commenters who encouraged CMS 
to regularly assess and identify any unusual trends in the Worksheet S-
10 data and recommended that CMS mitigate the effect of anomalies in 
the cost report data for the COVID-19 PHE period, we note that the 
audit process for Worksheet S-10 cost reports will continue to be an 
important part of identifying potential irregularities in the data. We 
will continue to monitor the impacts of the PHE and will consider this 
issue further in future rulemaking, as appropriate.
    Comment: A commenter recommended changes to the definition of 
uncompensated care costs and requested that CMS ensure its Factor 3 
calculation methodology accurately captures the full range of 
uncompensated care costs that hospitals incur while providing care for 
disadvantaged patients. This commenter urged CMS to include all patient 
care costs in the cost-to-charge ratio (CCR), including teaching costs 
and costs for providing physician and other professional services, to 
ensure an accurate distribution of uncompensated care payments to 
hospitals with the highest levels of uncompensated care. This commenter 
stated that excluding Graduate Medical Education (GME) costs when 
calculating the CCR disproportionately impacts teaching hospitals. This 
commenter further suggested that CMS treat the unreimbursed portion of 
state or local indigent care as charity care. Finally, the commenter 
suggested that CMS revise the Worksheet S-10 data collected on Medicaid 
shortfalls to better capture actual shortfalls incurred by hospitals by 
allowing hospitals to deduct intergovernmental transfers (IGTs), 
certified public expenditures (CPEs), and provider taxes from their 
Medicaid revenue.
    Response: We appreciate the commenter's suggestions for revisions 
and/or modifications to Worksheet S-10. We will consider modifications 
as necessary to further improve and refine the information that is 
reported on Worksheet S-10 to support collection of the information 
regarding uncompensated care costs.
    Regarding the request to include costs for teaching and providing 
physician and other professional services, including GME costs, when 
calculating the CCR, we note that because the CCR on Line 1 of 
Worksheet S-10 is obtained from Worksheet C, Part I, and is also used 
in other IPPS rate setting contexts (such as high-cost outliers and the 
calculation of the MS-DRG relative weights) from which it is 
appropriate to exclude the costs associated with physician and 
professional services and GME costs, we remain reluctant to adjust CCRs 
in the narrower context of calculating uncompensated care costs. 
Therefore, as stated in past final rules, including the FY 2022 IPPS/
LTCH PPS final rule (86 FR 45241 and 45242) and the FY 2023 IPPS/LTCH 
PPS final rule (87 FR 49039), we continue to believe that it is not 
appropriate to modify the calculation of the CCR on Line 1 of Worksheet 
S-10 to include any additional costs in the numerator of the CCR 
calculation.
    With regard to the comments requesting that payment shortfalls from 
Medicaid and state and local indigent care programs be included in 
uncompensated care cost calculations, we have consistently explained in 
past final rules (see, e.g., the FY 2021 IPPS/LTCH PPS final rule (85 
FR 58826), the FY 2022 IPPS/LTCH PPS final rule (86 FR 45238), and the 
FY 2023 IPPS/LTCH PPS final rule (87 FR 49039)), in response to similar 
comments that we believe there are compelling arguments for excluding 
such shortfalls from the definition of uncompensated care. We refer 
readers to those prior rules for further discussion.
    Comment: A commenter expressed concern that insufficient Medicare 
DSH uncompensated care payments threaten to hamper CMS' focus on health 
equity efforts across certain programs, stating their belief that 
failing to keep pace with the need for uncompensated care resources 
affects safety-net hospitals that serve a disproportionate share of 
patients who experience inequitable health outcomes.
    Response: We thank the commenter for their concern regarding the 
impact of the distribution of uncompensated care payments on health 
equity efforts generally, and on safety-net hospitals, in particular. 
We may consider this issue in future rulemaking, as appropriate.
    Comment: Several commenters reiterated support for using audited 
Worksheet S-10 data to promote accuracy and consistency. They stated 
that use of audited Worksheet S-10 data results in uncompensated care 
data that is most appropriate for use in calculating uncompensated care 
payments. A commenter encouraged CMS to continue auditing Worksheet S-
10 data to ensure the most accurate information is used to calculate 
Factor 3. Another commenter commended CMS' revisions to the Worksheet 
S-10 audit protocols, stating that recent audits have been less 
resource intensive for hospitals compared to prior audit cycles, and 
that the adjustments after review were largely as expected or as 
requested.
    Other commenters proposed changes to the Worksheet S-10 audit 
process. For example, a commenter requested that CMS disseminate a 
comprehensive audit policy and protocols that must be employed by all 
auditors and MACs and disclose these through notice and comment 
rulemaking. The same commenter reiterated a previous request made in 
prior comments that CMS implement a workable appeal or review process 
to correct errors and inconsistent audit disallowances in a timely 
manner. A commenter encouraged CMS to work with auditors to streamline 
the audit process and improve consistency. Another commenter requested 
that CMS make audit protocols publicly available and ensure that 
Worksheet S-10 audits impose minimal burden and are equitable and 
uniform across hospitals.
    Response: We thank commenters for their feedback on the audits of 
the FY 2021 Worksheet S-10 data and their

[[Page 69327]]

recommendations for future audits, as well as their support for the 
changes CMS has made to the Worksheet S-10 audit protocols. As we have 
stated in previous rulemakings in response to comments regarding audit 
protocols (see, e.g., the FY 2024 IPPS/LTCH PPS final rule (88 FR 
59008)), the audit protocols are provided to the MACs in advance of the 
audit to ensure consistency and timeliness in the audit process. CMS 
began auditing the FY 2021 Worksheet S-10 data for selected hospitals 
last year so that the audited uncompensated care data for these 
hospitals would be available in time for use in the FY 2025 IPPS/LTCH 
PPS proposed rule. We chose to focus the audit on the FY 2021 cost 
reports in order to maximize the available audit resources. We also 
note that FY 2021 data are the most recent year of audited data under 
the revised cost report instructions that became effective on October 
1, 2018.
    We appreciate all commenters' input and recommendations on how to 
improve our audit process and reiterate our commitment to continue 
working with MACs and providers on audit improvements, which include 
making changes to increase the efficiency of the audit process, 
building on the lessons learned in previous audit years. We will take 
commenters' recommendations into consideration for future rulemaking.
    Regarding the request to make public the audit policies and 
protocols, as we previously explained in the FY 2024 IPPS/LTCH PPS 
final rule (88 FR 59008), the FY 2021 IPPS/LTCH PPS final rule (85 FR 
58822), the FY 2020 IPPS/LTCH PPS final rule (84 FR 42368), and the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56964) we do not make our 
protocols public as CMS desk review and audit protocols are 
confidential and are for CMS and MAC use only. In addition, there is no 
requirement under either the Administrative Procedure Act or the 
Medicare statute that CMS adopt audit policies or protocols through 
notice and comment rulemaking. As previously discussed in the FY 2024 
IPPS/LTCH PPS final rule (88 FR 59008) and the FY 2021 IPPS/LTCH PPS 
final rule (85 FR 58822), to most efficiently and appropriately utilize 
our limited audit resources, we do not plan on introducing an audit 
appeal process at this time.
    Comment: A commenter requested that CMS clarify the instructions 
for line 29 of Worksheet S-10 so that non-Medicare bad debt is not 
multiplied by the CCR. This commenter stated that while CMS' revised 
cost report instructions indicate that non-reimbursed Medicare bad debt 
is not multiplied by the CCR, CMS' September 2017 transmittal \214\ 
states that non-Medicare bad debt should be multiplied by the CCR.
---------------------------------------------------------------------------

    \214\ https://www.cms.gov/regulations-and-guidance/guidance/transmittals/2017downloads/r11p240.pdf.
---------------------------------------------------------------------------

    Response: We appreciate the commenter's concerns regarding the need 
for clarification of the Worksheet S-10 instructions. We reiterate our 
commitment to continuing to work with impacted parties to address their 
concerns regarding the Worksheet S-10 instructions through provider 
education and further refinement of the instructions, as appropriate. 
We also encourage providers to share with their respective MAC any 
questions they have regarding Worksheet S-10 instructions, reporting, 
and submission deadlines.
    We continue to believe our efforts to refine the Worksheet S-10 
instructions and related guidance have improved provider understanding 
of Worksheet S-10 and made the instructions clearer. We also recognize 
that there are continuing opportunities to further improve the accuracy 
and consistency of the information that is reported on the Worksheet S-
10, and to the extent that commenters have raised new questions and 
concerns regarding the reporting requirements, we will attempt to 
address them through future rulemaking and/or sub-regulatory guidance 
and subsequent outreach [to MACs and providers]. However, as stated in 
previous IPPS/LTCH PPS rulemakings (see, e.g., the FY 2024 IPPS/LTCH 
PPS final rule (88 FR 59008 and 59009)), we continue to believe that 
the Worksheet S-10 instructions are sufficiently clear and allow 
hospitals to accurately complete Worksheet S-10.
    Regarding the commenter's request that CMS clarify whether non-
Medicare bad debt is multiplied by CCR, we believe that the Worksheet 
S-10 instructions are clear and indicate that the CCR will not be 
applied to the deductible and coinsurance amounts for insured patients 
approved for charity care and non-reimbursed Medicare bad debt.
 New Hospital Policy for Purposes of Factor 3
    For purposes of identifying new hospitals, for FY 2025, the FY 2021 
cost reports are the most recent year of cost reports for which audits 
of Worksheet S-10 data have been conducted. Thus, hospitals with CCNs 
established on or after October 1, 2021, will be subject to the new 
hospital policy in FY 2025. If a new hospital is ultimately determined 
to be eligible for Medicare DSH payments for FY 2025, the hospital will 
receive an uncompensated care payment calculated using a Factor 3 where 
the numerator is the uncompensated care costs reported on Worksheet S-
10 of the hospital's FY 2025 cost report, and the denominator is the 
sum of the uncompensated care costs reported on Worksheet S-10 of the 
FY 2021 cost reports for all DSH-eligible hospitals. In addition, we 
will apply a scaling factor, as discussed previously, to the Factor 3 
calculation for a new hospital. As we explained in the FY 2024 IPPS/
LTCH PPS final rule (88 FR 59004), we believe applying the scaling 
factor is appropriate for purposes of calculating Factor 3 for all 
hospitals, including new hospitals and hospitals that are treated as 
new hospitals, to improve consistency and predictability across all 
hospitals.
 Newly Merged Hospital Policy for Purposes of Factor 3
    For FY 2025, the eligibility of a newly merged hospital to receive 
interim uncompensated care payments will be based on whether the 
surviving CCN has a preliminary projection of being DSH-eligible, and 
the amount of any interim uncompensated care payments will be based on 
the uncompensated care costs from the FY 2019, FY 2020, and FY 2021 
cost reports available for the surviving CCN at the time the final rule 
is developed. However, at cost report settlement, we will determine the 
newly merged hospital's final uncompensated care payment based on the 
uncompensated care costs reported on its FY 2025 cost report. That is, 
we will revise the numerator of Factor 3 for the newly merged hospital 
to reflect the uncompensated care costs reported on the newly merged 
hospital's FY 2025 cost report. The denominator will be the sum of the 
uncompensated care costs reported on Worksheet S-10 of the FY 2021 cost 
reports for all DSH-eligible hospitals, which is the most recent fiscal 
year for which audits have been conducted. We will also apply a scaling 
factor, as described previously.
    Comment: A few commenters expressed support for the uncompensated 
care payment policies currently in place for newly merged hospitals--
specifically, the policy stating that final uncompensated care payments 
for these hospitals will be determined during cost report settlement 
based on the surviving hospital's cost report for the applicable fiscal 
year. These commenters also indicated support for our policy whereby 
MACs make the final determination concerning whether new

[[Page 69328]]

hospitals are eligible to receive DSH payments at cost report 
settlement based on the new hospital's cost report for the respective 
fiscal year.
    Response: We appreciate the continued support for our policies for 
new and newly merged hospitals.
    For a hospital that is subject to either of the trims for 
potentially aberrant data (the UCC trim and alternative trim 
methodology explained in the previous section of this final rule) and 
is ultimately determined to be DSH-eligible at cost report settlement, 
its uncompensated care payment will be calculated only after the 
hospital's reporting of insured charity care costs on its FY 2025 
Worksheet S-10 has been reviewed. Accordingly, the MAC will calculate a 
Factor 3 for the hospital only after reviewing the uncompensated care 
information reported on Worksheet S-10 of the hospital's FY 2025 cost 
report. Then we will calculate Factor 3 for the hospital using the same 
methodology used to determine Factor 3 for new hospitals. Specifically, 
the numerator will reflect the uncompensated care costs reported on the 
hospital's FY 2025 cost report, while the denominator will reflect the 
sum of the uncompensated care costs reported on Worksheet S-10 of the 
FY 2021 cost reports of all DSH-eligible hospitals. In addition, we 
will apply a scaling factor, as discussed previously, to the Factor 3 
calculation for the hospital.
    We did not receive any comments on the discussion of the CCR trim 
methodology, the UCC trim methodology, or the alternative trim 
methodology.
    Under the CCR trim methodology, for purposes of this final rule, 
the statewide average CCR was applied to 10 hospitals' FY 2019 reports, 
of which 4 hospitals had FY 2019 Worksheet S-10 data. The statewide 
average CCR was applied to 8 hospitals' FY 2020 reports, of which 3 
hospitals had FY 2020 Worksheet S-10 data. The statewide average CCR 
was applied to 9 hospitals' FY 2021 reports, of which 4 hospitals had 
FY 2021 Worksheet S-10 data.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36197), we stated 
that for purposes of this FY 2025 IPPS/LTCH PPS final rule, consistent 
with our Factor 3 methodology since the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50642), we intended to use data from the March 2024 HCRIS 
extract for this calculation. We explained that the March 2024 HCRIS 
extract would be the latest quarterly HCRIS extract that would be 
publicly available at the time of the development of the FY 2025 IPPS/
LTCH PPS final rule.
    Regarding requests from providers to amend and/or reopen previously 
audited Worksheet S-10 data for the most recent 3 cost reporting years 
that are used in the methodology for calculating Factor 3, we noted 
that MACs follow normal timelines and procedures. We explained that for 
purposes of the Factor 3 calculation for the FY 2025 IPPS/LTCH PPS 
final rule, any amended reports and/or reopened reports would need to 
have completed the amended report and/or reopened report submission 
processes by the end of March 2024. In other words, if the amended 
report and/or reopened report was not available for the March HCRIS 
extract, then that amended and/or reopened report data would not be 
part of the FY 2025 IPPS/LTCH PPS final rule's Factor 3 calculation. We 
noted that the March HCRIS data extract would be available during the 
comment period for the proposed rule if providers wanted to verify that 
their amended and/or reopened data is reflected in the March HCRIS 
extract.
d. Per-Discharge Amount of Interim Uncompensated Care Payments for FY 
2025
    Since FY 2014, we have made interim uncompensated care payments 
during the fiscal year on a per-discharge basis. Typically, we use a 3-
year average of the number of discharges for a hospital to produce an 
estimate of the amount of the hospital's uncompensated care payment per 
discharge. Specifically, the hospital's total uncompensated care 
payment amount for the applicable fiscal year is divided by the 
hospital's historical 3-year average of discharges computed using the 
most recent available data to determine the uncompensated care payment 
per discharge for that fiscal year.
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45247 and 45248), we 
modified this calculation for FY 2022 to be based on an average of FY 
2018 and FY 2019 historical discharge data, rather than a 3-year 
average using the most recent 3 years of discharge data, which would 
have included data from FY 2018, FY 2019, and FY 2020. We explained our 
belief that computing a 3-year average with FY 2020 discharge data 
would underestimate discharges, due to the decrease in discharges 
during the COVID-19 pandemic. For the same reason, in the FY 2023 IPPS/
LTCH PPS final rule (87 FR 49045), we calculated interim uncompensated 
care payments based on the 3-year average of discharges from FY 2018, 
FY 2019, and FY 2021 rather than a 3-year average using the most recent 
3 years of discharge data.
    We explained in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59010) 
that we believed that computing a 3-year average using the most recent 
3 years of discharge data would potentially underestimate the number of 
discharges for FY 2024 due to the effects of the COVID-19 pandemic 
during FY 2020, which was the first year of the COVID-19 pandemic. We 
considered using an average of FY 2019, FY 2021, and FY 2022 discharge 
data to calculate the per-discharge amount for interim uncompensated 
care payments for FY 2024. However, we agreed with commenters that 
using FY 2019 data may overestimate discharge volume because updated 
claims data used to estimate the FY 2024 discharges in the Factor 1 
calculation indicated that discharge volumes were not expected to 
return to pre-pandemic levels during FY 2024. Therefore, for FY 2024, 
we finalized a policy of calculating the per-discharge amount for 
interim uncompensated care payments using an average of FY 2021 and FY 
2022 discharge data.
    For FY 2025 and subsequent fiscal years, we proposed to calculate 
the per-discharge amount for interim uncompensated care payments using 
the average of the most recent 3 years of discharge data. Accordingly, 
for FY 2025, we proposed to use an average of discharge data from FY 
2021, FY 2022, and FY 2023. We stated that we believed that our 
proposed approach would likely result in a better estimate of the 
number of discharges during FY 2025 and subsequent years for purposes 
of the interim uncompensated care payment calculation.
    As we explained in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50645), we generally believe that it is appropriate to use a 3-year 
average of discharge data to reduce the degree to which we would over- 
or under-pay the uncompensated care payment on an interim basis. In any 
given year, a hospital could have low or high Medicare utilization that 
differs from other years. For example, if a hospital had two Medicare 
discharges in its most recent year of claims data but experienced four 
discharges in FY 2025, during the fiscal year, we would pay two times 
the amount the hospital should receive and need to adjust for that at 
cost report settlement. Similarly, if a hospital had four Medicare 
discharges in its most recent year of claims data, but experienced two 
discharges in FY 2025, during the fiscal year, we would only pay half 
the amount the hospital should receive and need to adjust for that at 
cost report settlement.

[[Page 69329]]

    In the FY 2025 IPPS/LTCH PPS proposed rule, we stated that we 
believed that, generally, use of the most recent 3 years of discharge 
data, rather than older data, is more likely to reflect current trends 
in discharge volume and provide an approximate estimate of the number 
of discharges in the applicable fiscal year. In addition, we noted that 
including discharge data from FY 2023 to compute this 3-year average 
would be consistent with the proposed use of FY 2023 Medicare claims in 
the IPPS ratesetting, as discussed in section I.E. of the preamble of 
this FY 2025 IPPS/LTCH PPS final rule.
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule, we 
proposed to use the resulting 3-year average of the most recent years 
of available historical discharge data to calculate a per-discharge 
payment amount that would be used to make interim uncompensated care 
payments to each projected DSH-eligible hospital during FY 2025 and 
subsequent fiscal years. Interim uncompensated care payments made to a 
hospital during the fiscal year are reconciled following the end of the 
year to ensure that the final payment amount is consistent with the 
hospital's prospectively determined uncompensated care payment for the 
fiscal year.
    We proposed to make conforming changes to the regulations under 42 
CFR 412.106. Specifically, we proposed to modify paragraph (1) of Sec.  
412.106(i) to state that for FY 2025 and subsequent fiscal years, 
interim uncompensated care payments will be calculated based on an 
average of the most recent 3 years of available historical discharge 
data. We requested comments on this proposal.
    Comment: Several commenters requested that CMS use a two-year 
average of discharge data to estimate the per-discharge amount of 
interim uncompensated care payments for FY 2025 and/or for future 
fiscal years. One commenter suggested that CMS use an average of the 
two most recent years of discharge data. These commenters stated that a 
two-year average would better reflect anticipated FY 2025 discharges. 
Some commenters stated CMS overestimated discharge volume in its 
rulemaking in recent years. Some commenters stated that this 
overestimation depresses interim uncompensated care payments. A 
commenter urged CMS to modify its interim uncompensated care payment 
methodology to improve the effectiveness of DSH payments and reduce 
overreliance on the reconciliation process for uncompensated care 
payments. This commenter also stated that it is inconsistent for CMS to 
project a decline in discharges for the Factor 1 calculation while not 
assuming the same decline when projecting the discharges used to 
calculate the per-discharge amount. This same commenter stated there 
may be year-to-year variations in discharge volume, but there are also 
larger trends that reflect changing treatment patters, technology, 
Medicare Advantage penetration, and other factors. This same commenter 
supported a methodology that incorporates more than one year of data to 
appropriately temper volatility in year-to-year changes in discharge 
volume, but the commenter recommended to appropriately use more current 
data. This same commenter recommended using a two-year average of 
discharges to estimate the per-discharge amount of interim 
uncompensated care payments, in addition to incorporating a national 
adjustment factor so that the historical discharges can be trended 
forward to FY2025 estimate of discharges.
    Response: We thank commenters for their feedback on calculation of 
the per-discharge amount of interim uncompensated care payments for FY 
2025. In light of the commenters' concerns regarding a trend of 
decreasing discharge volume and possible overestimation of discharges 
in recent years, we believe that, on balance, omitting FY 2021 data 
from the calculation of interim uncompensated care payments is likely 
to more accurately estimate FY 2025 discharges. Therefore, we are 
finalizing our proposal with modification. Specifically, we will 
calculate the per-discharge amount of uncompensated care payments for 
FY 2025 using an average of the most recent 2 years of available 
historical discharge data: FY 2022 and FY 2023 discharge data. We are 
modifying the text of Sec.  412.106(i)(1) to state that for FY 2025, 
interim uncompensated care payments will be calculated based on an 
average of the most recent 2 years of available historical discharge 
data.
    Additionally, we believe using an average of the most recent 3 
years of available historical discharge data will appropriately reflect 
year-to-year variations in discharge volumes in FY 2026 and subsequent 
fiscal years. As explained earlier in this section of this final rule 
and in the proposed rule, the effect of the COVID-19 pandemic on 
discharges was the rationale for modifying the interim uncompensated 
care payment methodology in the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45247 and 45248). We believe the effect on discharge volume of the 
COVID-19 pandemic will likely be diminished beginning in FY 2026. 
Therefore, consistent with the proposed rule, we are modifying the text 
of Sec.  412.106(i)(1) to state that for FY 2026 and subsequent fiscal 
years, interim uncompensated care payments will be calculated based on 
an average of the most recent 3 years of available historical discharge 
data.
    At this time, we are not adopting a national adjustment approach 
because, as we explain more fully earlier in this section and in the 
proposed rule, we believe that in FY 2026 and subsequent years, using 
an average of the most recent 3 years of available discharge data will 
likely result in a reasonable estimate at the provider level, for 
purposes of interim uncompensated care payments. We will consider 
commenters' other suggested modifications to our interim uncompensated 
care payment policies, such as using a national adjustment factor, in 
future rulemaking.
    Further, as we explained in the FY 2025 IPPS/LTCH PPS proposed rule 
(89 FR 36198-36199), we finalized a voluntary process in the FY 2021 
IPPS/LTCH PPS final rule (85 FR 58833 and 58834), through which a 
hospital may submit a request to its MAC for a lower per-discharge 
interim uncompensated care payment amount, including a reduction to 
zero, once before the beginning of the fiscal year and/or once during 
the fiscal year. In conjunction with this request, the hospital must 
provide supporting documentation demonstrating that there would likely 
be a significant recoupment at cost report settlement if the per-
discharge amount is not lowered (for example, recoupment of 10 percent 
or more of the hospital's total uncompensated care payment, or at least 
$100,000). For example, a hospital might submit documentation showing a 
large projected increase in discharges during the fiscal year to 
support reduction of its per-discharge uncompensated care payment 
amount. As another example, a hospital might request that its per-
discharge uncompensated care payment amount be reduced to zero midyear 
if the hospital's interim uncompensated care payments during the year 
have already surpassed the total uncompensated care payment calculated 
for the hospital.
    Under the policy we finalized in the FY 2021 IPPS/LTCH PPS final 
rule (85 FR 58833 through 58834), the hospital's MAC will evaluate 
these requests and the supporting documentation before the beginning of 
the fiscal year and/or with midyear requests when the historical 
average number of discharges

[[Page 69330]]

is lower than the hospital's projected discharges for the current 
fiscal year. If, following review of the request and the supporting 
documentation, the MAC agrees that there likely would be significant 
recoupment of the hospital's interim Medicare uncompensated care 
payments at cost report settlement, the only change that will be made 
is to lower the per-discharge amount either to the amount requested by 
the hospital or another amount determined by the MAC to be appropriate 
to reduce the likelihood of a substantial recoupment at cost report 
settlement. If the MAC determines it would be appropriate to reduce the 
interim Medicare uncompensated care payment per-discharge amount, that 
updated amount will be used for purposes of the outlier payment 
calculation for the remainder of the fiscal year. We are continuing to 
apply this policy for FY 2025. We refer readers to the Addendum in the 
FY 2023 IPPS/LTCH final rule for a more detailed discussion of the 
steps for determining the operating and capital Federal payment rate 
and the outlier payment calculation (87 FR 49431 through 49432). No 
change would be made to the total uncompensated care payment amount 
determined for the hospital on the basis of its Factor 3. In other 
words, any change to the per-discharge uncompensated care payment 
amount will not change how the total uncompensated care payment amount 
will be reconciled at cost report settlement.
    We received comments related to the uncompensated care payment 
reconciliation process.
    Comment: A commenter recommended that CMS use the traditional 
payment reconciliation process to calculate final payments for 
uncompensated care costs pursuant to section 1886(r)(2) of the Act. 
This commenter did not object to CMS using prospective estimates, 
derived from the best data available, to calculate interim payments for 
uncompensated care costs. However, the commenter stated that interim 
payments should be subject to later reconciliation based on estimates 
derived from actual data from the fiscal year. This commenter also 
stated that CMS' current IPPS/LTCH PPS rulemaking process is flawed 
because CMS may use data and calculations in final rules that were not 
included in the relevant proposed rules without providing advance 
notice to hospitals, limiting their ability to provide informed 
comments. Several commenters stated that CMS fails to provide 
meaningful explanations of its uncompensated care payment calculations 
and is in violation of the Administrative Procedure Act. These 
commenters recommended that CMS satisfy its legal obligation by 
providing hospitals the opportunity to review and comment on the more 
recent data used to calculate Factors 1, 2, and 3 in each final 
rulemaking before the agency publishes the final rule.
    Response: Consistent with the position that we have taken in past 
rulemakings, we continue to believe that applying our best estimates of 
the three factors used in the calculation of uncompensated care 
payments to determine payments prospectively is most conducive to 
administrative efficiency, finality, and predictability in payments 
(e.g., the FY 2024 IPPS/LTCH PPS final rule (88 FR 59011). We continue 
to believe that, in affording the Secretary the discretion to estimate 
the three factors used to determine uncompensated care payments and by 
including a prohibition against administrative and judicial review of 
those estimates in section 1886(r)(3) of the Act, Congress recognized 
the importance of finality and predictability under a prospective 
payment system. As a result, we do not agree with the commenter's 
suggestion that we should establish a process for reconciling our 
estimates of uncompensated care payments, which would be contrary to 
the notion of prospectivity in a payment system. Furthermore, we note 
that this rulemaking has been conducted consistent with the 
requirements of the Administrative Procedure Act and Title XVIII of the 
Act. Under the Administrative Procedure Act, a proposed rule is 
required to include either the terms or substance of the proposed rule, 
or a description of the subjects and issues involved. In this case, the 
FY 2025 IPPS/LTCH PPS proposed rule (86 FR 369193-36199) included a 
detailed discussion of our proposed methodology for calculating Factor 
3 and the data that would be used. We made public the best data 
available at the time of the proposed rule to allow hospitals to 
understand the anticipated impact of the proposed methodology and 
submit comments, and we have considered those comments in determining 
our final policies for FY 2025.
e. Process for Notifying CMS of Merger Updates and To Report Upload 
Issues
    As we have done for every proposed and final rule beginning in FY 
2014, in conjunction with this final rule, we will publish on the CMS 
website a table listing Factor 3 for hospitals that we estimate will 
receive empirically justified Medicare DSH payments in FY 2025 (that 
is, those hospitals that will receive interim uncompensated care 
payments during the fiscal year), and for the remaining subsection (d) 
hospitals and subsection (d) Puerto Rico hospitals that have the 
potential of receiving an uncompensated care payment in the event that 
they receive an empirically justified Medicare DSH payment for the 
fiscal year as determined at cost report settlement. However, we note 
that a Factor 3 will not be published for new hospitals and hospitals 
that are subject to the alternative trim for hospitals with potentially 
aberrant data that are not projected to be DSH-eligible.
    We also will publish a supplemental data file containing a list of 
the mergers that we are aware of and the computed uncompensated care 
payment for each merged hospital. In the DSH uncompensated care 
supplemental data file, we list new hospitals and the 8 hospitals that 
would be subject to the alternative trim for hospitals with potentially 
aberrant data that are not projected to be DSH-eligible, with a N/A in 
the Factor 3 column.
    Hospitals had 60 days from the date of public display of the FY 
2025 IPPS/LTCH PPS proposed rule in the Federal Register to review the 
table and supplemental data file published on the CMS website in 
conjunction with the proposed rule and to notify CMS in writing of 
issues related to mergers and/or to report potential upload 
discrepancies due to MAC mishandling of Worksheet S-10 data during the 
report submission process.\215\ In the proposed rule, we stated that 
comments raising issues or concerns that are specific to the 
information included in the table and supplemental data file should be 
submitted by email to the CMS inbox at [email protected]. We 
indicated that we would address comments related to mergers and/or 
reporting upload discrepancies submitted to the CMS DSH inbox as 
appropriate in the table and the supplemental data file that we publish 
on the CMS website in conjunction with the publication of the FY 2025 
IPPS/LTCH PPS final rule. We also stated that all other comments 
submitted in response to our proposals for FY 2025 must be submitted in 
one of the three ways found in the ADDRESSES section of the proposed 
rule before the close of the comment period in order to be assured 
consideration. In addition, we noted that the CMS DSH inbox is not 
intended for Worksheet S-

[[Page 69331]]

10 audit process related emails, which should be directed to the MACs.
---------------------------------------------------------------------------

    \215\ For example, if the report does not reflect audit results 
due to MAC mishandling, or the most recent report differs from a 
previously accepted, amended report due to MAC mishandling.
---------------------------------------------------------------------------

F. Impact on Medicare DSH Payment Adjustment of Implementation of New 
OMB Labor Market Delineations

    As discussed in section III.B. of the preamble of this final rule, 
in the FY 2025 IPPS/LTCH PPS proposed rule, we proposed to implement 
the new OMB labor market area delineations (which are based on 2020 
Decennial Census data) for the FY 2025 wage index. We stated that this 
proposal also would have an impact on the calculation of Medicare DSH 
payment adjustments to certain hospitals. Hospitals that are designated 
as rural with less than 500 beds and are not rural referral centers 
(RRCs) or Medicare-dependent, small rural hospitals (MDHs) are subject 
to a maximum DSH payment adjustment of 12 percent. Accordingly, 
hospitals with less than 500 beds that are currently in urban counties 
that would become rural if we finalize our proposal to adopt the new 
OMB delineations, and that do not become RRCs or MDHs, would be subject 
to a maximum DSH payment adjustment of 12 percent. (We note, as 
discussed in section V.F.2. of the preamble of this final rule, under 
current law the MDH program will expire on December 31, 2024). We also 
note that urban hospitals are only subject to a maximum DSH payment 
adjustment of 12 percent if they have less than 100 beds.
    In that same proposed rule, we explained that our existing 
regulations at 42 CFR 412.102 will apply in FY 2025 with respect to the 
calculation of the DSH payments to hospitals that are currently located 
in urban counties that would become rural if we finalize our proposal 
to adopt the new OMB delineations. The provisions of 42 CFR 412.102 
specify that an urban hospital that was part of an MSA, but was 
redesignated as rural (as defined in the regulations), as a result of 
the most recent OMB standards for delineating statistical areas adopted 
by CMS, may receive an adjustment to its rural Federal payment amount 
for operating costs for two successive fiscal years. Specifically, the 
regulations state that, in the first year after a hospital loses urban 
status, the hospital will receive an additional payment that equals two 
thirds of the difference between the disproportionate share payments as 
applicable to the hospital before its redesignation from urban to rural 
and disproportionate share payments otherwise, applicable to the 
hospital subsequent to its redesignation from urban to rural. In the 
second year after a hospital loses urban status, the hospital will 
receive an additional payment that equals one-third of the difference 
between the disproportionate share payments applicable to the hospital 
before its redesignation from urban to rural and disproportionate share 
payments otherwise applicable to the hospital subsequent to its 
redesignation from urban to rural.
    Comment: Commenters generally supported the application of 42 CFR 
412.102 for urban hospitals located in an area that is redesignated as 
rural as a result of the most recent OMB standards for delineating 
statistical areas adopted by CMS. A few commenters expressed concern 
about the impact on DSH payments when an urban hospital becomes rural 
with the adoption of the updates to the CBSA designations. According to 
these commenters, rural hospitals are disadvantaged in the DSH 
statutory formula.
    Response: We appreciate the support of the commenters as well as 
the concerns raised by the commenters. As discussed in section III.B. 
of this preamble, after consideration of public comments, we are 
finalizing our proposal to implement the new OMB labor market area 
delineations for FY 2025. Therefore, 42 CFR 412.102 will apply to those 
urban hospitals currently located in an area that will be redesignated 
as rural beginning October 1, 2024. We believe the special treatment 
for these hospitals under the regulations at 42 CFR 412.102 helps 
mitigate the commenters' concerns as urban hospitals in areas that will 
be redesignated as rural due to the new OMB labor market area 
delineations may receive an additional payment for two years as 
described previously in this section.

G. Withdrawal of 42 CFR 412.106 (FY 2004 and Prior Fiscal Years) to the 
Extent it Included Only ``Covered Days'' in the SSI Ratio

    In Becerra v. Empire Health Foundation, for Valley Hospital Medical 
Center, 597 U.S. 424 (2022) (Empire Health), the Supreme Court 
addressed the question of whether Medicare patients remain ``entitled 
to benefits under part A'' when Medicare does not pay for their care, 
such as when they have exhausted their Medicare benefits for a spell of 
illness. Prior to fiscal year (FY) 2005, when we calculated a 
hospital's DSH adjustment we included in the Medicare fraction (also 
referred to as the Medicare-SSI fraction, SSI fraction, or SSI ratio) 
only ``covered'' Medicare patient days, that is, days paid by Medicare 
(see 42 CFR 412.106(b)(2)(i) (2003)). The ``covered'' days rule 
originated in the FY 1986 IPPS interim final rule (51 FR 16772 and 
16788) and originally appeared in Sec.  412.106(a)(1)(i) but was later 
re-numbered. The approach of excluding from the Medicare fraction 
patient days for which Medicare did not pay was based on an 
interpretation of the statute's parenthetical phrase ``(for such 
days).'' Section 1886(d)(5)(F)(vi)(I) of the Act. Following a series of 
judicial decisions rejecting a parallel interpretation of the same 
language in the numerator of the Medicaid fraction as counting only 
patient days actually paid by the Medicaid program, the Secretary 
revisited that approach in a 2004 rulemaking. Thus, the ``covered 
days'' rule was the relevant Medicare payment policy until it was 
revised and replaced by the FY 2005 IPPS final rule (69 FR 48916, 
49099, and 49246).
    The FY 2005 regulation at issue in Empire Health--codified in the 
FY 2005 IPPS final rule--interpreted the statute to mean that the 
Medicare fraction includes non-covered days in the SSI ratio. (For more 
information see 69 FR 48916, 49099, and 49246 (amending 42 CFR 
412.106(b)(2)(i) to include in the Medicare fraction all days 
associated with patients who were entitled to Medicare Part A during 
their hospital stays, regardless of whether Medicare paid for those 
days).) In Empire Health, the Supreme Court upheld the FY 2005 
regulation and held that the statute ``disclose[s] a surprisingly clear 
meaning,'' 597 U.S. at 434, namely that beneficiaries remain ``entitled 
to benefits under part A'' on days for which Medicare does not pay and 
thus the Medicare fraction includes total days, not only covered days. 
The Supreme Court also definitively resolved the meaning of the 
parenthetical phrase ``(for such days)'' in the Medicare fraction, 
rejecting the provider's contention that the phrase changed the 
consistent meaning of ``entitled to benefits under Part A'' from 
``meeting Medicare's statutory (age or disability) criteria on the days 
in question,'' to ``actually receiving Medicare payments.'' Id. at 440. 
The Court determined that the ``for such days'' parenthetical ``instead 
works as HHS says: hand in hand with the ordinary statutory meaning of 
`entitled to [Part A] benefits.' '' Id.
    The Supreme Court has concluded that the interpretation set forth 
in the FY 2005 IPPS final rule ``correctly construes the statutory 
language at issue.'' Empire Health, 597 U.S. at 434. Because the pre-FY 
2005 rule conflicts with the plain meaning of the statute, as confirmed 
by the Supreme Court, it cannot govern the calculation of DSH

[[Page 69332]]

payments for hospitals with properly pending claims in DSH appeals or 
open cost reports that include discharges that need to be determined 
pursuant to the statute, regardless of whether such discharges would 
otherwise pre-date the change in the regulation finalized by the FY 
2005 IPPS final rule. For that reason, we proposed to formally withdraw 
42 CFR 412.106 as it existed prior to the effective date of the FY 2005 
IPPS final rule to the extent it included only covered days in the SSI 
ratio. We will apply the statute as understood by the Supreme Court in 
Empire Health, instead of the pre-FY 2005 regulation, to any properly 
pending claim in a DSH appeal or open cost report to which that 
regulation would otherwise have applied. We do not believe this change 
constitutes an exercise of our ``retroactive'' rulemaking authority 
under section 1871(e)(1)(A) of the Act. Rather, we will apply the plain 
meaning of the statute (as it has existed unchanged, in relevant part, 
since its enactment on April 7, 1986). Moreover, because we are 
applying the substantive legal standard established by the statute 
itself, and not filling any gap therein, notice-and-comment rulemaking 
is not required by section 1871(e)(1)(A) of the Act, as construed in 
Azar v. Allina Health Services, 139 S. Ct. 1804 (June 3, 2019).
    The withdrawal of this regulation will not serve as a basis to 
reopen a CMS or contractor determination, a contractor hearing 
decision, a CMS reviewing official decision, or a decision by the 
Provider Reimbursement Review Board or the Administrator. We recognize 
that hospitals may have anticipated receiving greater Medicare 
reimbursement for still-open pre-FY 2005 cost reporting periods in 
circumstances where the ``covered'' days limitation would have resulted 
in a larger DSH adjustment. However, we are obliged to apply the 
statute as the Supreme Court determined Congress wrote it.
    Comment: A commenter opposed our proposal to withdraw 42 CFR 
412.106 for several reasons. The commenter stated that our proposal is 
based on a misreading of Empire Health. According to the commenter, the 
Supreme Court held that our interpretation of section 
1886(d)(5)(F)(vi)(I) of the Act to include unpaid patient days in the 
Medicare fraction is merely supported by the statute, not required by 
the statute. The commenter argued that the proposal rests on an 
interpretation not required by statute, citing Northeast Hospital Corp. 
v. Sebelius, 657 F.3d 1 (D.C. Cir. 2011), and is against the public 
interest, thus constituting improper retroactive rulemaking. The 
commenter further argued that our proposal would unfairly penalize 
affected hospitals and deprive them of fair notice and due process. In 
addition, the commenter argued our proposal would be unfair to 
hospitals that are still waiting to receive DSH payments calculated in 
accordance with the pre-FY 2005 version of 42 CFR 412.106 because other 
hospitals already received the benefit of that rule before the Supreme 
Court issued its decision in Empire Health. The commenter also asserted 
that we did not finalize the 2005 revision until 2007 with a technical 
correction to the regulation text.
    Response: We disagree with the commenter's reading of the Supreme 
Court's Empire Health decision. Empire Health addressed the question of 
whether, for purposes of calculating a hospital's DSH adjustment and 
Medicare fraction, Medicare patients remain ``entitled to benefits 
under part A'' when Medicare does not pay for their care, such as when 
they have exhausted their Medicare benefits for a spell of illness. As 
we explained in the proposed rule, prior to FY 2005, our approach to 
calculating a hospital's DSH adjustment, as provided in our regulations 
starting with the FY 1986 IPPS interim final rule (51 FR 16772 and 
16788), was to include in the Medicare fraction only ``covered'' 
Medicare patient days, that is, days paid by Medicare. The ``covered 
days'' approach was based on an interpretation of the statute's 
parenthetical phrase ``(for such days).'' Following a series of 
judicial decisions rejecting a parallel interpretation of the ``(for 
such days)'' language in the numerator of the Medicaid fraction as 
counting only patient days actually paid by the Medicaid program, we 
revised and replaced this rule in the FY 2005 IPPS final rule (69 FR 
48916, 49099, and 49246). We note that we further disagree with the 
commenter's assertion that we did not finalize this revision until 2007 
with a technical correction to the regulation text. Under the policy 
finalized in the FY 2005 IPPS final rule, we interpreted the statute to 
mean that the Medicare fraction includes covered and non-covered 
Medicare patient days (that is, ``total days'') because Medicare 
patients remain entitled to Part A benefits even on patient days not 
covered by Medicare. In upholding this reading of the statute, the 
Supreme Court in Empire Health did not conclude merely, as the 
commenter states, that the statute ``supported'' our interpretation. 
Rather, the Court concluded that ``being `entitled' to Medicare 
benefits . . . means--in the [DSH] fraction descriptions, as throughout 
the statute--meeting the basic statutory criteria, not actually 
receiving payment for a given day's treatment.'' 597 U.S. at 435. The 
Court reaffirmed that this was its own conclusion when it said 
elsewhere, ``The structure of the relevant statutory provisions 
reinforces our conclusion that `entitled to [Part A] benefits' means 
qualifying for those benefits, and nothing more.'' Id. at 442 
(alteration in original) (emphasis added). And the Court rejected the 
notion that the ``(for such days)'' parenthetical required a ``covered 
days'' approach, concluding instead that it ``works as HHS says: hand 
in hand with the ordinary statutory meaning of `entitled to [Part A] 
benefits.' '' Id. at 440 (alteration in original). We note that the 
Supreme Court's holding in Empire Health displaced Northeast Hospital 
Corp. v. Sebelius, 657 F.3d 1, 6-13 (D.C. Cir. 2011), to the extent 
that it supports a conclusion that the statutory language was ambiguous 
on the issue of ``covered days'' versus ``total days.'' Thus, in the 
wake of Empire Health, the commenter's reliance on Northeast in support 
of its opposition to our proposal is unfounded.
    We also disagree with the commenter's suggestion that Empire Health 
left a gap in the statute for the agency to fill that would require 
notice-and-comment rulemaking under the Supreme Court's earlier 
decision in Azar v. Allina Health Services, 587 U.S. 566 (2019). To the 
contrary, Empire Health made clear that the statute established the 
substantive legal standard that we articulated in the FY 2005 IPPS 
final rule (i.e., for purposes of the DSH adjustment calculation, 
Medicare patients are ``entitled to [Part A] benefits'' if they are 
qualified for those benefits, regardless of whether Medicare pays for 
their hospital stay, and all patient days associated with these 
patients are counted in the Medicare fraction). It follows from this, 
as we stated in the FY 2025 proposed rule, that the pre-FY 2005 rule 
that counted only covered days in the Medicare fraction conflicts with 
the plain meaning of the statute, and it should thus be withdrawn.
    Contrary to the commenter's contention and consistent with what we 
said in the proposed rule, we do not believe that withdrawing a 
regulation that conflicts with the governing statute constitutes an 
exercise of our ``retroactive'' rulemaking authority under section 
1871(e)(1)(A) of the Act. Rather, we are simply giving effect to the 
language of the statute as it has

[[Page 69333]]

existed throughout the relevant time period. Nonetheless, even if the 
withdrawal could be seen as an exercise of retroactive rulemaking, the 
Secretary has determined that the withdrawal is necessary to comply 
with statutory requirements; namely, the statutory requirement that we 
include in the Medicare fraction all patient days attributable to 
Medicare patients, regardless of whether Medicare paid for services on 
those days. As we stated in the proposed rule, we must follow the 
statute as the Supreme Court determined Congress wrote it. This would 
be a sufficient basis for us to engage in retroactive rulemaking, per 
section 1871(e)(1)(A)(i) of the Act, if this withdrawal could be seen 
as retroactive rulemaking, which it is not. As such, it is unnecessary 
for us to address the commenter's additional assertion that the 
Secretary is not authorized here, under section 1871(e)(1)(A)(ii) of 
the Act, to apply a change in regulations retroactively to further the 
public interest. We do not have authority to make DSH adjustments that 
do not comply with the statute as written by Congress and interpreted 
by the Supreme Court, and it would therefore be contrary to the public 
interest for us to maintain the rule in its pre-FY 2005 form. We also 
disagree with the commenter's claim that our proposed withdrawal of the 
pre-FY 2005 rule is contrary to the public interest because some 
hospitals' DSH adjustments will be reduced. Following the statute as 
written and in accordance with Supreme Court precedent is in the public 
interest, not contrary to it, even if it results in smaller DSH payment 
adjustments than some hospitals may have hoped for. Moreover, while we 
agree with the commenter that advance notice-and-comment rulemaking is 
generally both necessary and in the public interest, we have taken that 
interest into account here by finalizing the proposed withdrawal only 
after a notice-and-comment process. In any event, the commenter does 
not point to any authority for the proposition that the interest in 
advance notice-and-comment rulemaking, as they envision it, could 
permit us to keep on the books and follow a regulation that is contrary 
to the statute.
    We also disagree with the commenter's assertion that our proposal 
would penalize affected hospitals and deprive them of fair notice and 
due process. Our proposal applies the meaning of the statute as it was 
written in 1986, and the operative language has not changed in any 
material way since then. As we said in the proposed rule, we recognize 
that hospitals may have anticipated receiving greater Medicare 
reimbursement for their still-open pre-FY 2005 cost reporting periods 
in circumstances where the ``covered days'' limitation would have 
resulted in a larger DSH payment. Nonetheless, it would not be 
reasonable for those hospitals to expect us to ignore the statute and 
pay them more than Congress allowed or, to the extent their still-open 
DSH adjustments were already paid based on the pre-FY 2005 rule, allow 
them to retain overpayments not authorized by Congress, after the 
Supreme Court settled the plain meaning of the statute. Our proposal 
was not meant to penalize affected hospitals in any way, and it is not 
an enforcement action. Rather, our proposal was intended to ensure, 
going forward, that providers' DSH adjustments are paid in accordance 
with the statute.
    Finally, we disagree with the commenter's assertion that our 
proposal would be unfair to affected hospitals because other hospitals 
whose cost reporting periods were settled before the Supreme Court 
issued Empire Health received the benefit of the ``covered days'' 
limitation. That other hospitals were paid on the basis of ``covered 
days'' in the past cannot justify continuing to do so going forward now 
that the Supreme Court has settled the meaning of the statute. It is 
neither unfair nor unusual for cost reports to be finalized differently 
from one another with respect to a legal issue depending on the outcome 
of litigation raising that issue and the status of a hospital's cost 
report at the time of a final non-appealable decision. And while Empire 
Health did not specifically address the legality of the pre-FY 2005 
rule, that rule directly conflicts with the meaning of the statute as 
settled by the Supreme Court in that case. Further, to the extent the 
commenter argues that it is unfair that affected hospitals had to wait 
for years to receive their DSH adjustment payments and, in the process, 
lost the benefit of the ``covered days'' limitation that other 
hospitals already benefited from, we note that the wait was caused by 
protracted litigation over numerous aspects of the DSH calculation and 
the scope of the Medicare statute's rulemaking requirements, which 
significantly slowed (and, at times, ground to a halt) our ability to 
perform such calculations and enable our contractors to settle 
providers' open cost reports that were involved in, or affected by, 
such litigation.
    After considering the comment received, we are finalizing our 
proposal to formally withdraw 42 CFR 412.106 as it existed prior to the 
effective date of the FY 2005 IPPS final rule to the extent it included 
only covered days in the SSI ratio when calculating a hospital's DSH 
adjustment. The withdrawal of this regulation will not serve as a basis 
to reopen a CMS or contractor determination, a contractor hearing 
decision, a CMS reviewing official decision, or a decision by the 
Provider Reimbursement Review Board or the Administrator.
    We received several comments outside the scope of the proposed 
rule. These comments related to the exclusion of days associated with 
uncompensated care pools under section 1115 waivers from the numerator 
of the Medicaid fraction, requests for CMS to modernize DSH and work 
more closely with other agencies, Medicaid eligibility and 
redetermination, and concern over 340B eligibility. Because we consider 
these public comments to be outside the scope of the proposed rule, we 
are not addressing these comments in this final rule.

V. Other Decisions and Changes to the IPPS for Operating Costs

A. Changes to MS-DRGs Subject to Postacute Care Transfer Policy and MS-
DRG Special Payments Policies (Sec.  412.4)

1. Background
    Existing regulations at 42 CFR 412.4(a) define discharges under the 
IPPS as situations in which a patient is formally released from an 
acute care hospital or dies in the hospital. Section 412.4(b) defines 
acute care transfers, and Sec.  412.4(c) defines postacute care 
transfers. Our policy set forth in Sec.  412.4(f) provides that when a 
patient is transferred and his or her length of stay is less than the 
geometric mean length of stay for the MS-DRG to which the case is 
assigned, the transferring hospital is generally paid based on a 
graduated per diem rate for each day of stay, not to exceed the full 
MS-DRG payment that would have been made if the patient had been 
discharged without being transferred.
    The per diem rate paid to a transferring hospital is calculated by 
dividing the full MS-DRG payment by the geometric mean length of stay 
for the MS-DRG. Based on an analysis that showed that the first day of 
hospitalization is the most expensive (60 FR 45804), our policy 
generally provides for payment that is twice the per diem amount for 
the first day, with each subsequent day paid at the per diem amount up 
to the full MS-DRG payment (Sec.  412.4(f)(1)). Transfer cases also are 
eligible for outlier payments. In

[[Page 69334]]

general, the outlier threshold for transfer cases, as described in 
Sec.  412.80(b), is equal to (Fixed-Loss Outlier threshold for 
Nontransfer Cases adjusted for geographic variations in costs/Geometric 
Mean Length of Stay for the MS-DRG) * (Length of Stay for the Case plus 
1 day).
    We established the criteria set forth in Sec.  412.4(d) for 
determining which DRGs qualify for postacute care transfer payments in 
the FY 2006 IPPS final rule (70 FR 47419 through 47420). The 
determination of whether a DRG is subject to the postacute care 
transfer policy was initially based on the Medicare Version 23.0 
GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a 
DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is 
revised, we use the current version of the Medicare GROUPER and the 
most recent complete year of MedPAR data to determine if the DRG is 
subject to the postacute care transfer policy. Specifically, if the MS-
DRG's total number of discharges to postacute care equals or exceeds 
the 55th percentile for all MS-DRGs and the proportion of short-stay 
discharges to postacute care to total discharges in the MS-DRG exceeds 
the 55th percentile for all MS-DRGs, CMS will apply the postacute care 
transfer policy to that MS-DRG and to any other MS-DRG that shares the 
same base MS-DRG. The statute at subparagraph 1886(d)(5)(J) of the Act 
directs CMS to identify MS-DRGs based on a high volume of discharges to 
postacute care facilities and a disproportionate use of postacute care 
services. As discussed in the FY 2006 IPPS final rule (70 FR 47416), we 
determined that the 55th percentile is an appropriate level at which to 
establish these thresholds. In that same final rule (70 FR 47419), we 
stated that we will not revise the list of DRGs subject to the 
postacute care transfer policy annually unless we are making a change 
to a specific MS-DRG.
    To account for MS-DRGs subject to the postacute care policy that 
exhibit exceptionally higher shares of costs very early in the hospital 
stay, Sec.  412.4(f) also includes a special payment methodology. For 
these MS-DRGs, hospitals receive 50 percent of the full MS-DRG payment, 
plus the single per diem payment, for the first day of the stay, as 
well as a per diem payment for subsequent days (up to the full MS-DRG 
payment (Sec.  412.4(f)(6))). For an MS-DRG to qualify for the special 
payment methodology, the geometric mean length of stay must be greater 
than 4 days, and the average charges of 1-day discharge cases in the 
MS-DRG must be at least 50 percent of the average charges for all cases 
within the MS-DRG. MS-DRGs that are part of an MS-DRG severity level 
group will qualify under the MS-DRG special payment methodology policy 
if any one of the MS-DRGs that share that same base MS-DRG qualifies 
(Sec.  412.4(f)(6)).
    Prior to the enactment of the Bipartisan Budget Act of 2018 (Pub. 
L. 115-123), under section 1886(d)(5)(J) of the Act, a discharge was 
deemed a ``qualified discharge'' if the individual was discharged to 
one of the following postacute care settings:
     A hospital or hospital unit that is not a subsection (d) 
hospital.
     A skilled nursing facility.
     Related home health services provided by a home health 
agency provided within a timeframe established by the Secretary 
(beginning within 3 days after the date of discharge).
    Section 53109 of the Bipartisan Budget Act of 2018 amended section 
1886(d)(5)(J)(ii) of the Act to also include discharges to hospice care 
provided by a hospice program as a qualified discharge, effective for 
discharges occurring on or after October 1, 2018. In the FY 2019 IPPS/
LTCH PPS final rule (83 FR 41394), we made conforming amendments to 
Sec.  412.4(c) of the regulation to include discharges to hospice care 
occurring on or after October 1, 2018, as qualified discharges. We 
specified that hospital bills with a Patient Discharge Status code of 
50 (Discharged/Transferred to Hospice--Routine or Continuous Home Care) 
or 51 (Discharged/Transferred to Hospice, General Inpatient Care or 
Inpatient Respite) are subject to the postacute care transfer policy in 
accordance with this statutory amendment.
2. Changes for FY 2025
    As discussed in the proposed rule and section II.C. of the preamble 
this final rule, based on our analysis of FY 2023 MedPAR claims data, 
CMS proposed to make changes to a number of MS-DRGs, effective for FY 
2025. Specifically, we proposed the following changes:
     Adding ICD-10-PCS codes describing left atrial appendage 
closure (LAAC) procedures and cardiac ablation procedures to proposed 
new MS-DRG 317 (Concomitant Left Atrial Appendage Closure and Cardiac 
Ablation).
     Deleting existing MS-DRGs 453, 454, and 455 (Combined 
Anterior and Posterior Spinal Fusion with MCC, with CC, and without CC/
MCC, respectively) and to reassign procedures from the existing MS-
DRGs, 453, 454, and 455 and MS-DRGs 459 and 460 (Spinal Fusion Except 
Cervical with MCC and without MCC, respectively) to proposed new MS-DRG 
402 (Single Level Combined Anterior and Posterior Spinal Fusion Except 
Cervical), proposed new MS-DRGs 426, 427, and 428 (Multiple Level 
Combined Anterior and Posterior Spinal Fusion Except Cervical with MCC, 
with CC, without MCC/CC, respectively), proposed new MS-DRGs 429 and 
430 (Combined Anterior and Posterior Cervical Spinal Fusion with MCC 
and without MCC, respectively), and proposed new MS-DRGs 447 and 448 
(Multiple Level Spinal Fusion Except Cervical with MCC and without MCC, 
respectively). We also proposed to revise the title of MS-DRGs 459 and 
460 to ``Single Level Spinal Fusion Except Cervical with MCC and 
without MCC, respectively''. As discussed in section II.C. of the 
preamble of this final rule and later in this section, we are 
finalizing our proposals, with modification, to reflect the 
reassignment of cases reporting the use of a custom-made anatomically 
designed interbody fusion device and to delete MS-DRGs 459 and 460 and 
renumber as MS-DRGs 450 and 451.
     Reassigning cases that report a principal diagnosis of 
acute leukemia with an ``other'' O.R. procedure from MS-DRGs 834, 835, 
and 836 (Acute Leukemia without Major O.R. Procedures with MCC, with 
CC, and without CC/MCC, respectively) to new MS-DRG 850 (Acute Leukemia 
with Other O.R. Procedures). We note that we also proposed to revise 
the title of MS-DRGs 834, 835, and 836 from ``Acute Leukemia without 
Major O.R. Procedures with MCC, with CC, and without CC/MCC'', 
respectively to ``Acute Leukemia with MCC, with CC, and without CC/
MCC''.
    We noted in the proposed rule that proposed revised MS-DRGs 459 and 
460 are currently subject to the postacute care transfer policy. We 
stated that we believe it is appropriate to reevaluate the postacute 
care transfer policy status for MS-DRGs 459 and 460. When proposing 
changes to MS-DRGs that involve adding, deleting, and reassigning 
procedures between proposed new and revised MS-DRGs, we continue to 
believe it is necessary to evaluate all of the affected MS-DRGs to 
determine whether they should be subject to the postacute care transfer 
policy.
    We stated that MS-DRGs 834, 835, and 836 are currently not subject 
to the postacute care transfer policy. We noted that while we are 
proposing to reassign certain cases from these MS-DRGs to newly 
proposed MS-DRGs, we estimated that less than 5 percent of the current 
cases would shift from the current assigned MS-DRGs to the proposed new 
MS-DRGs. We stated that

[[Page 69335]]

we do not consider these proposed revisions to constitute a material 
change that would warrant reevaluation of the postacute care status of 
MS-DRGs 834, 835, and 836. CMS may further evaluate what degree of 
shifts in cases for existing MS-DRGs warrant consideration for the 
review of postacute care transfer and special payment policy status in 
future rulemaking.
    In light of the proposed changes to the MS-DRGs for FY 2025, 
according to the regulations under Sec.  412.4(d), we evaluated the MS-
DRGs using the general postacute care transfer policy criteria and data 
from the FY 2023 MedPAR file. If an MS-DRG qualified for the postacute 
care transfer policy, we also evaluated that MS-DRG under the special 
payment methodology criteria according to regulations at Sec.  
412.4(f)(6). We continue to believe it is appropriate to assess new MS-
DRGs and reassess revised MS-DRGs when proposing reassignment of 
procedure codes or diagnosis codes that would result in material 
changes to an MS-DRG.
    We stated that proposed new MS-DRGs 426, 427, 447, and 448 would 
qualify to be included on the list of MS-DRGs that are subject to the 
postacute care transfer policy. As described in the regulations at 
Sec.  412.4(d)(3)(ii)(D), MS-DRGs that share the same base MS DRG will 
all qualify under the postacute care transfer policy if any one of the 
MS-DRGs that share that same base MS-DRG qualifies. We therefore 
proposed to add proposed new MS-DRGs 426, 427, 428, 447, and 448 to the 
list of MS-DRGs that are subject to the postacute care transfer policy.
    We noted that MS-DRGs 459 and 460 are currently subject to the 
postacute care transfer policy. As a result of our review, these MS-
DRGs, as proposed to be revised, would not qualify to be included on 
the list of MS-DRGs that are subject to the postacute care transfer 
policy. We therefore proposed to remove revised MS-DRGs 459 and 460 
from the list of MS-DRGs that are subject to the postacute care 
transfer policy.
    As discussed in section II.C. of the preamble of this final rule, 
we are finalizing these proposed changes to the MS-DRGs, with 
modification, to delete MS-DRGs 459 and 460 and renumber these MS-DRGs 
as MS-DRGs 450 and 451. We therefore have evaluated the renumbered MS-
DRGs 450 and 451 in the updated analysis that follows.
    Using the March 2024 update of the FY 2023 MedPAR file, we have 
developed the following chart which sets forth the most recent analysis 
of the postacute care transfer policy criteria completed for this final 
rule with respect to each of these new or revised MS-DRGs.
BILLING CODE 4120-01-P

[[Page 69336]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.179


[[Page 69337]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.180

BILLING CODE 4120-01-C
    During our annual review of proposed new or revised MS-DRGs and 
analysis of the December 2023 update of the FY 2023 MedPAR file, we 
reviewed the list of proposed revised or new MS-DRGs that qualify to be 
included on the list of MS-DRGs subject to the postacute care transfer 
policy for FY 2025 to determine

[[Page 69338]]

if any of these MS-DRGs would also be subject to the special payment 
methodology policy for FY 2025.
    Based on our analysis of the proposed changes to MS-DRGs included 
in the proposed rule, we determined that proposed new MS-DRGs 426, 427, 
and 447 meet the criteria for the MS-DRG special payment methodology. 
As described in the regulations at Sec.  412.4(f)(6)(iv), MS-DRGs that 
share the same base MS-DRG will all qualify under the MS-DRG special 
payment policy if any one of the MS-DRGs that share that same base MS-
DRG qualifies. We proposed that MS-DRGs 426, 427, 428, 447, 448, would 
be subject to the MS-DRG special payment methodology, effective for FY 
2025. For this final rule, we updated this analysis using data from the 
March 2024 update of the FY 2023 MedPAR file.
[GRAPHIC] [TIFF OMITTED] TR28AU24.181

    Comment: We received a comment stating that the new MS-DRGs 
proposed as eligible for the postacute care policy are all related to 
spinal fusions. The commenter stated that these MS-DRGs have extremely 
high upfront costs. The commenter stated that CMS should not adopt this 
proposal due to the negative impact on hospitals that provide these 
services.
    Response: The spinal fusion MS-DRGs that were proposed to be added 
to the list of MS-DRGs subject to the postacute care transfer policy 
were also proposed to be added to the special payment policy. Under 
this policy, the transferring hospital would receive 50 percent of the 
full MS-DRG payment, plus a single per diem payment, for the first day 
of the stay, as well as a per diem payment for subsequent days (up to 
the full MS-DRG payment). The intent of the special payment policy is 
specifically to address MS-DRGs with high initial costs. We believe the 
proposed addition of MS-DRGs 426, 427, 428, 447, and 448 to the special 
payment policy adequately addresses the specific concerns expressed by 
the commenter.
    After consideration of the comment we received, we are finalizing 
our proposal to add MS-DRGs 426, 427, 428, 447, and 448 to the list of 
MS-DRGs subject to the postacute care and special payment policies. As 
noted, we proposed to remove MS-DRGs 459 and 460 from the list of MS-
DRGS subject to the postacute care policy. These MS-DRGs are being 
deleted and renumbered to MS-DRGs 450 and 451, which will not be added 
to the postacute care policy list.
    The postacute care transfer and special payment policy status of 
these MS-DRGs is reflected in Table 5 associated with this final rule, 
which is listed in section VI. of the Addendum to this final rule and 
available on the CMS website.

B. Changes in the Inpatient Hospital Update for FY 2025 (Sec.  
412.64(d))

1. FY 2025 Inpatient Hospital Update
    In accordance with section 1886(b)(3)(B)(i) of the Act, each year 
we update the national standardized amount for inpatient hospital 
operating costs by a factor called the ``applicable percentage 
increase.'' For FY 2025, we stated in the proposed rule that we are 
setting the applicable percentage increase by applying the adjustments 
listed in this section in the same sequence as we did for FY 2024. (We 
note that section 1886(b)(3)(B)(xii) of the Act required an additional 
reduction each year only for FYs 2010 through 2019.) Specifically, 
consistent with section 1886(b)(3)(B) of the Act, as amended by 
sections 3401(a) and 10319(a) of the Affordable Care Act, we stated 
that we are setting the applicable percentage increase by applying the 
following adjustments in the following sequence. The applicable 
percentage increase under the IPPS for FY 2025 is equal to the rate-of-
increase in the hospital market basket for IPPS hospitals in all areas, 
subject to all of the following:
     A reduction of one-quarter of the applicable percentage 
increase (prior to the application of other statutory adjustments; also 
referred to as the market basket update or rate-of-increase (with no 
adjustments)) for hospitals that fail to submit quality information 
under rules established by the Secretary in accordance with section 
1886(b)(3)(B)(viii) of the Act.
     A reduction of three-quarters of the applicable percentage 
increase (prior to the application of other statutory adjustments; also 
referred to as the market basket update or rate-of-increase (with no 
adjustments)) for hospitals not considered to be meaningful EHR users 
in accordance with section 1886(b)(3)(B)(ix) of the Act.
     An adjustment based on changes in economy-wide multifactor 
productivity (MFP) (the productivity adjustment).
    Section 1886(b)(3)(B)(xi) of the Act, as added by section 3401(a) 
of the Affordable Care Act, states that application of the productivity 
adjustment may result in the applicable percentage increase being less 
than zero.
    As published in the FY 2006 IPPS final rule (70 FR 47403), in 
accordance with section 404 of Public Law 108-173, CMS determined a new 
frequency for rebasing the hospital market basket of every 4 years. In 
compliance with section 404 of the of Public Law 108-173, in the FY 
2022 IPPS/LTCH PPS final rule (86 FR 45194 through 45204), we replaced 
the 2014-based IPPS operating and capital market baskets

[[Page 69339]]

with the rebased and revised 2018-based IPPS operating and capital 
market baskets beginning in FY 2022. Consistent with our established 
frequency of rebasing the IPPS market basket every 4 years, we plan on 
proposing to rebase and revise the IPPS market basket in the FY 2026 
IPPS/LTCH PPS proposed rule. We note that our preliminary evaluation of 
more recent Medicare cost report data for IPPS hospitals for 2022 
indicates that the major IPPS market basket cost weights (particularly 
the compensation and drug cost weights) are similar to those finalized 
in the 2018-based IPPS market basket.
    We proposed to base the FY 2025 market basket update used to 
determine the applicable percentage increase for the IPPS on IHS Global 
Inc.'s (IGI's) fourth quarter 2023 forecast of the 2018-based IPPS 
market basket rate-of-increase with historical data through third 
quarter 2023, which was estimated to be 3.0 percent. We also proposed 
that if more recent data subsequently became available (for example, a 
more recent estimate of the market basket update), we would use such 
data, if appropriate, to determine the FY 2025 market basket update in 
the final rule.
    Comment: Several commenters expressed concerns that the proposed FY 
2025 market basket update does not adequately reflect the rising 
inflation and costs that hospitals have faced over the last few years. 
Commenters stated that economy-wide inflation grew by 12.4 percent from 
2021 through 2023 (as measured by the Consumer Price Index (CPI)), more 
than two times faster than Medicare reimbursement for hospital 
inpatient care, which increased by 5.2 percent during the same time. 
Several commenters noted that the most recent CPI for March 2024 
reported nationwide inflation at 3.5 percent and inpatient hospital 
services inflation of 6.9 percent, outpacing Medicare's reimbursement.
    Many commenters stated that rapid and sustained growth in labor 
costs have put persistent cost pressure on hospitals. They also noted 
increases in drug prices, citing a recent study and a report by the 
Health and Human Services (HHS) Assistant Secretary for Planning and 
Evaluation which found that in 2022 and 2023, prices for nearly 2,000 
drugs increased faster than the rate of general inflation, with an 
average price increase of 15.2 percent. Several commenters also stated 
that hospitals have seen significant growth in administrative costs due 
to what they described as inappropriate practices by large commercial 
health insurers, including Medicare Advantage and Medicaid managed care 
plans, such as automatic claim denials and onerous prior authorization 
requirements. Several commenters also discussed the continued costs of 
addressing past and preventing future cyberattacks and a commenter 
stated they have seen significant increases in capital costs, 
particularly since the pandemic. A commenter stated that recently 
increased tariffs on imported supplies from China will result in 
substantial price increase for gloves, masks, needles, and other 
supplies. A commenter stated private equity firms continue to achieve 
greater penetration across healthcare markets and the costs of 
contracting with specialties such as physician practices has 
skyrocketed, which the commenter stated is not factored into CMS' 
payments. Commenters urged CMS to consider the changing health care 
environment which they state is putting enormous financial strain on 
hospitals and health systems and is expected to continue through 2025. 
A commenter stated that the net market basket update is too low, and 
that the budget neutrality impact of the low wage policy will 
exacerbate the insufficient market basket update for high wage areas.
    Several commenters proposed CMS apply a payment increase of at 
least 4.1 percent which is aligned with MedPAC's March 2024 Report to 
Congress, which recommended a 1.5 percentage points increase over the 
FY 2025 payment update. These commenters noted that this was the second 
year that MedPAC made a recommendation of increasing the market basket 
update. A commenter stated that, while they fully understand the need 
to protect the Medicare Hospital Insurance Trust Fund, they requested 
CMS review data beyond normal data and consider increasing the market 
basket amount to at least 3.5 percent to more realistically reflect 
inflation. Several commenters suggested various higher market basket 
increases, which they believe better reflects hospitals' input prices 
and the contract labor staffing challenge. A commenter encouraged CMS 
to consider, at a minimum, matching the 3.7 percent increase that the 
commenter stated Medicare Advantage will receive. A commenter supported 
an annual inflation-based payment update based on the full Medicare 
Economic Index.
    Several commenters recommended CMS look to alternative data sources 
that they asserted better reflect true labor and input cost increases 
in a timely manner. The commenters stated that the proposed payment 
update does not recognize these challenges, nor does it factor in the 
realities of inflation impacting operating costs. Commenters also 
stated CMS must use data that better reflects the input price inflation 
that hospitals have experienced and are projected to experience in FY 
2025. A commenter stated that they did not understand why the FY 2025 
market basket increase is lower than FY 2024. A commenter recommended 
CMS use more recent data to update adjustments to 2025 IPPS rates.
    Several commenters requested that CMS use its ``special exceptions 
and adjustments'' authority to implement a market basket adjustment 
that is more consistent with the significant cost increases that are 
being experienced by hospitals. They urged CMS to revisit its 
assumptions and focus on appropriately accounting for recent and future 
trends in inflationary pressure and cost increases in the hospital 
payment update, which they stated is essential to ensure that Medicare 
payments for acute care services more accurately reflect the cost of 
providing hospital care. A commenter urged CMS to adjust its 
methodology for calculating the annual payment update for FY 2025 to 
ensure it provides a robust payment update that adequately incorporates 
the effects of inflation and rising workforce costs on hospitals. A 
commenter asked that CMS, at a minimum, reconsider the proposed labor 
expense calculations to provide a more appropriate update based on 
growing and unsustainable costs. Several commenters recommended a 
comprehensive evaluation of the current rate-setting methodology to 
accurately capture the true costs of care delivery and provide a fair 
and sustainable reimbursement framework. A commenter stated it was 
unacceptable that CMS' payment update does not factor in changes in 
hospital admissions, case-mix intensity, or the mandatory 2 percent 
sequestration adjustment reductions.
    Many commenters noted their financial pressures due to the PHE, 
aging, more complex patients, negative Medicare margins of -12.7 
percent as estimated by MedPAC, and reliance on public payers. Several 
commenters noted that historically, hospitals mitigated losses incurred 
from serving underinsured patients by negotiating higher payment rates 
from commercial payors; however, due to high inflation and an 
increasing deficit generated by serving governmental payor patients, 
they stated hospitals can no longer rely on commercial payors to offset 
those losses. Several commenters urged CMS to consider and assess the 
financial position of hospitals, particularly those with low margins. A 
commenter

[[Page 69340]]

advocated for a comprehensive review of the Medicare margins and asked 
CMS increase rates to cover the cost of care for Medicare Advantage and 
Medicaid patients. Some commenters stated that hospitals will continue 
to face increased costs due to the Change Healthcare cyberattack, such 
as interest costs on loan payments for loans acquired during the 
cyberattack, expected denials that will require additional 
administrative costs, and manual processing of claims.
    Response: Section 1886(b)(3)(B)(iii) of the Act states the 
Secretary shall update IPPS payments based on a market basket 
percentage increase, which is defined as the percentage, estimated by 
the Secretary before the beginning of the period or fiscal year, by 
which the cost of the mix of goods and services (including personnel 
costs but excluding nonoperating costs) comprising routine, ancillary, 
and special care unit inpatient hospital services, based on an index of 
appropriately weighted indicators of changes in wages and prices which 
are representative of the mix of goods and services included in such 
inpatient hospital services, for the period or fiscal year will exceed 
the cost of such mix of goods and services for the preceding 12-month 
cost reporting period or fiscal year. We believe that the 2018-based 
IPPS market basket is consistent with the statute as it is a fixed-
weight, Laspeyres-type price index that measures the change in price, 
over time, while maintaining a mix of goods and services purchased by 
hospitals consistent with a base period. Therefore, the market basket 
is designed to measure price inflation for IPPS hospitals and would not 
reflect increases in costs associated with changes in the volume or 
intensity of input goods and services (such as the quantity of labor 
used). Regarding the commenter who stated that the budget neutrality 
adjustment from the low wage policy would exacerbate the inadequate 
market basket update, we note that the market basket update does not 
consider the impact of budget neutrality adjustments. We refer the 
reader to section IV.D. of the preamble of this final rule where we 
respond to comments about the low wage policy.
    CMS understands that the market basket updates may differ from 
other overall inflation indexes such as the topline CPI; however, we 
would reiterate that these topline indexes are not comparable since 
they measure different mixes of products, services, or wages than the 
legislatively defined CMS IPPS hospital market basket. In addition, the 
CPI for hospital inpatient services does not reflect the input price 
inflation facing hospitals, and in some instances can reflect hospital 
charges or list prices.
    We would highlight that the market basket percentage increase is a 
forecast of the price pressures that hospitals are expected to face in 
FY 2025. We also note that when developing its forecast for the ECI for 
hospital workers, IGI considers overall labor market conditions 
(including rise in contract labor employment due to tight labor market 
conditions) as well as trends in contract labor wages, which both have 
an impact on wage pressures for workers employed directly by the 
hospital. As projected by IGI and other independent forecasters, 
compensation growth and upward price pressures are expected to slow in 
2025 relative to 2023 and 2024.
    As is our general practice, we proposed that if more recent data 
became available, we would use such data, if appropriate, to derive the 
final FY 2025 IPPS market basket update for the final rule. We 
appreciate the commenters' concern regarding inflationary pressure and 
other rising costs and the request to use more recent data to determine 
the FY 2025 IPPS market basket update. For this final rule, we are 
using an updated forecast of the price proxies underlying the market 
basket that incorporates more recent historical data and reflects a 
revised outlook regarding the U.S. economy, including compensation and 
inflationary pressures.
    Based on the more recent IGI second quarter 2024 forecast with 
historical data through the first quarter of 2024, the projected 2018-
based IPPS market basket increase factor for FY 2025 is 3.4 percent, 
which is 0.4 percentage point higher than the projected FY 2025 market 
basket increase factor in the proposed rule and reflects an increase in 
compensation prices of 3.9 percent. We would note that the 10-year 
historical average (2014-2023) growth rate of the 2018-based IPPS 
market basket is 2.8 percent with compensation prices increasing 2.8 
percent.
    For these reasons, we believe that the 2018-based IPPS market 
basket continues to appropriately reflect IPPS cost structures, and we 
believe the price proxies used (such as those from BLS that reflect 
wage and benefit price growth) are an appropriate representation of 
price changes for the inputs used by hospitals in providing services. 
Given that we believe the 2018-based IPPS market basket reflects an 
index of appropriately weighted indicators of changes in wages and 
prices that are representative of the mix of goods and services 
included in such inpatient hospital services and the percentage change 
of the 2018-based IPPS market basket is based on IGI's more recent 
forecast reflecting the prospective price pressures for FY 2025, we do 
not believe it would be appropriate to use our exceptions and 
adjustment authority to create a separate payment that would have the 
effect of modifying the current law update.
    Comment: Many commenters expressed concerns with the Employment 
Cost Index (ECI) used to measure changes in labor compensation in the 
market basket, which they state may no longer accurately capture the 
changing composition and cost structure of the hospital labor market 
given the large increases in short-term contract labor use and its 
growing costs. The commenters stated labor costs have increased by more 
than 18 percent from CY 2020 to CY 2023. They attributed this increase 
to expensive contract labor costs (as a result of higher utilization 
rates and higher costs per hour) and faster growth in salaries for 
employed workers (reflecting sign-on and retention bonuses). They 
further stated that while salaries for contract nurses have decreased 
some from a peak in certain geographical areas, they still remained 
nearly 60 percent higher at the end of FY 2023 compared to the start of 
FY 2020. They further stated that CMS recognizes that the ECI does not 
capture shifts in composition of labor, and the commenters stated that 
by design, the ECI is not capturing the shifts that have occurred as 
hospitals have had to turn to contract labor to meet patient demand. 
Several commenters recommended that CMS use its exceptions and 
adjustments authority to adopt new or supplemental data sources, to 
ensure labor costs are adequately reflected in the payment update in 
the final rule. They further requested CMS utilize supplemental data 
sources to evaluate the accuracy of the ECI proxy and to modify 
methodologies, including adopting new or supplemental data, to 
calculate the payment update if its analysis determines that the ECI is 
not adequately capturing labor costs.
    Response: We believe that the ECI for wages and salaries for 
hospital workers is accurately reflecting the price change associated 
with the labor used to provide hospital care. The ECI appropriately 
does not reflect other factors that might affect the rate of price 
changes associated with labor costs, such as a shift in the occupations 
that may occur due to increases in case-mix or shifts in hospital 
purchasing decisions (for instance, to hire or to use contract labor). 
We believe that the

[[Page 69341]]

prices of employed staff and contract labor are influenced by the same 
factors and should generally grow at similar rates. In most periods 
when there are not significant occupational shifts or significant 
shifts between employed and contract labor, the data has shown that the 
growth in the ECI for wages and salaries for hospital workers has 
generally been consistent with overall hospital wage trends. For 
example, our analysis of the Medicare cost report data shows from 2011 
to 2019 the compound annual growth rate of both IPPS Medicare allowable 
salaries per hour and contract labor costs per hour was 2.5 percent, 
near the 2.0 percent growth rate of the ECI for wages and salaries for 
hospital workers over the same period (note the ECI would not reflect 
skill mix change whereas the salaries data would reflect these 
changes).
    From 2019 to 2022, however, as noted by the commenters, contract 
labor utilization increased and IPPS Medicare allowable salaries and 
contract labor costs per hour increased faster than prior historical 
periods. We note there has likely been a shift to higher-skilled 
occupations for the 2019 to 2022 period associated with a 6.5-percent 
increase in case mix for inpatient hospital services, with notable 
increases of 3.8 percent in 2020 and 2.9 percent in 2021 (see table 
IV.A.1. of the 2024 Medicare Trustees Report \216\); by comparison, 
case mix for inpatient hospital services increased 3.2 percent 
cumulatively from 2016 to 2019. The likely shift to more skilled 
occupations associated with the faster case mix increase over the last 
several years would also account for a portion of the difference 
between the growth in the ECI for wages and salaries for hospital 
workers and the growth in combined hospital salaries and contract labor 
costs per hour over this period.
---------------------------------------------------------------------------

    \216\ https://www.cms.gov/oact/tr/2024.
---------------------------------------------------------------------------

    For this final rule, based on the more recent IGI second quarter 
2024 forecast with historical data through the first quarter of 2024, 
the projected 2018-based IPPS market basket increase factor for FY 2025 
reflects a projected increase in compensation prices of 3.9 percent, 
which is 1.1 percentage points faster than the 10-year historical 
average (2014-2023) growth rate of compensation prices.
    Comment: A commenter recommended that CMS reevaluate the data 
sources it uses for rebasing its market basket and calculating the 
annual market basket update, including labor costs. They strongly 
encouraged CMS to adopt new or supplemental data sources in future 
rulemaking that more accurately reflect the costs to hospitals, such as 
through use of more real time data from the hospital community. They 
stated that they believe that the current market basket does not 
account for the higher costs of contract labor, which has become more 
common in hospitals in an era of clinical labor shortages. A commenter 
requested that CMS rebase the market baskets more frequently and at 
least every 3 years to ensure the market basket reflects the 
appropriate mix of services provided to Medicare beneficiaries.
    Response: We appreciate the commenter's request to rebase more 
frequently. Section 404 of Public Law 108-173 states the Secretary 
shall establish a frequency for revising the cost weights of the IPPS 
market basket more frequently than once every 5 years. We established a 
rebasing frequency of every 4 years, in part because the cost weights 
obtained from the Medicare cost reports typically do not indicate much 
of a change in the weights from year to year. The most recent rebasing 
of the IPPS market basket was for the FY 2022 payment update and 
reflected a base year of 2018 costs. We also regularly monitor the 
Medicare cost report data to assess whether a rebasing is technically 
appropriate, and we will continue to do so in the future. Based on 
preliminary analysis of the Medicare cost report data for IPPS 
hospitals for 2022 that became available for this final rule, there are 
small observed differences in the cost weights for 2022, as the IPPS 
compensation cost weight is estimated to be within roughly 1 percentage 
point of the 2018-based IPPS market basket compensation cost weight of 
53.0 percent (and reflects a combined decrease in the salary and 
benefit cost weights that is larger than the increase in the contract 
labor cost weight). In addition, there is an estimated increase in the 
cost weight for home office contract labor compensation cost weight of 
roughly 0.5 percentage point. As stated in the FY 2025 IPPS/LTCH PPS 
proposed rule (89 FR 36186), consistent with our established frequency 
of rebasing the IPPS market basket every 4 years, we anticipate 
proposing to rebase and revise the IPPS market basket in the FY 2026 
IPPS/LTCH PPS proposed rule.
    We believe the Medicare cost report data is the most complete, 
timely and relevant data source for the development of the cost 
weights. We also welcome information on alternative publicly available 
data sources.
    Comment: Commenters stated that since the COVID-19 PHE, IGI has 
shown a consistent 3-year trend of under-forecasting the market basket 
growth and expressed concern this may indicate a more systematic issue 
with IGI's forecasting. They stated that these missed forecasts are 
permanently established in the standard payment rate for IPPS and will 
continue to compound, which they estimate to be $4 billion.
    Several commenters, including many associations, urged CMS to use 
its special exceptions and adjustments authority under section 
1886(d)(5)(I)(i) of the Act to implement a retrospective one-time 
adjustment for FY 2025 to account for the underestimation of the market 
basket updates over the last several years. Commenters recommended that 
CMS implement various one-time adjustments to account for underpayments 
in 1 or more years between FY 2021 and FY 2023 as well as for 
forecasted underpayments for FY 2024. The commenters stated the 
underestimation is, in large part, because the market basket is a time-
lagged estimate that cannot fully account for unexpected changes that 
occur, such as historic inflation and increased labor and supply costs. 
They stated this is exactly what occurred at the end of the CY 2021 
into CY 2022, which resulted in a large forecast error in the FY 2022 
market basket update.
    Several commenters noted that CMS currently implements a capital 
IPPS market basket forecast error adjustment as well as SNF PPS market 
basket forecast error adjustment policy which resulted in FY 2024 and 
FY 2025 SNF forecast error adjustments of 3.6 percentage points and 1.7 
percentage points, respectively. They stated while CMS has not 
developed an analogous policy for the IPPS operating update, they 
believe such a forecast error adjustment to the FY 2025 IPPS operating 
update could be adopted under CMS' existing authority. They noted the 
forecast errors for FY 2021 through FY 2023 for IPPS exceeded the 0.5 
percentage point threshold that is used for the SNF forecast error 
adjustment policy. A commenter recommended CMS establish a forecast 
error threshold of 1.5 percentage points, and retroactively adjust 
payments for that year.
    Many commenters noted financial hardships, particularly in 2022 
with high inflation and workforce shortages. They noted that MedPAC 
found that all-payment operating and overall Medicare margins both fell 
to record lows, estimating Medicare hospital margins for FY 2022 of 
negative 12.7 percent. MedPAC's FY 2024 recommendation was to increase 
the market basket update by one percentage point and for FY 2025 
recommended that Congress increase the acute hospital market basket by 
1.5 percentage points over

[[Page 69342]]

current law. A commenter stated that, understanding the caveat that 
MedPAC was created specifically to advise Congress on issues impacting 
the Medicare program, it is disappointing that, following MedPAC's 
recommendation that Congress increase the IPPS market basket by an 
additional 1.5 percent, CMS proposed a smaller payment update than last 
year's 2.8 percent. Commenters further stated that margins at this 
level are simply unsustainable, and that hospitals in rural and 
underserved communities continue to close, with nine closing in FY 2023 
despite a new Medicare provider type that allows them to convert to a 
rural emergency hospital. Commenters also stated that the missed 
forecasts have a significant and permanent impact on hospitals as they 
are permanently established in the standard payment rate for IPPS and 
absent action from CMS will continue to compound.
    Response: While the projected IPPS hospital market basket updates 
have been under forecast (actual increases less forecasted increases 
were positive) for this most recent period, over longer periods the 
forecasts have generally averaged close to the historical measures (for 
instance, from FY 2014 through FY 2023 the cumulative forecast error 
was 0.0 percentage point). CMS will continue to monitor the methods 
associated with the market basket forecasts to ensure there are not 
underlying systematic issues in the forecasting approach.
    We note that the under forecast of the IPPS market basket increase 
in the recent time period was largely due to unanticipated inflationary 
and labor market pressures as the economy emerged from the COVID-19 
PHE. However, an analysis of the forecast error of the IPPS market 
basket over a longer period of time shows the forecast error has been 
both positive and negative. Only considering the forecast error for 
years when the final hospital market basket update was lower than the 
actual market basket update does not consider the full experience and 
impact of forecast error, in particular the numerous years that 
providers benefited from the forecast error. Relatedly, as we discussed 
in the FY 2024 IPPS/LTCH PPS final rule in response to similar comments 
(88 FR 59034), the capital IPPS and SNF PPS forecast error adjustments 
were adopted very early in both payment systems and, unlike what 
commenters are requesting here for the IPPS, forecast errors over many 
years have been consistently addressed within each of the Capital IPPS 
and SNF PPS.
    For these reasons, we continue to believe it is not appropriate to 
include adjustments to the market basket update for future years based 
on the difference between the actual and forecasted market basket 
increase in prior years. We thank the commenters for their comments. 
After consideration of the comments received and consistent with our 
proposal, we are finalizing to use more recent data to determine the FY 
2025 market basket update for the final rule. Specifically, based on 
more recent data available, we determined final applicable percentage 
increases to the standardized amount for FY 2025, as specified in the 
table that appears later in this section.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 
51692), we finalized our methodology for calculating and applying the 
productivity adjustment. As we explained in that rule, section 
1886(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the 
Affordable Care Act, defines this productivity adjustment as equal to 
the 10-year moving average of changes in annual economy-wide, private 
nonfarm business MFP (as projected by the Secretary for the 10-year 
period ending with the applicable fiscal year, calendar year, cost 
reporting period, or other annual period). The U.S. Department of 
Labor's Bureau of Labor Statistics (BLS) publishes the official 
measures of private nonfarm business productivity for the U.S. 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 multifactor productivity. Beginning with the November 
18, 2021, release of productivity data, BLS replaced the term 
multifactor productivity (MFP) 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 total factor 
productivity. However, as mentioned, the data and methods are 
unchanged. Please see 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, we note that beginning 
with the FY 2022 IPPS/LTCH PPS final rule, we refer to this adjustment 
as the productivity adjustment rather than the MFP adjustment, to more 
closely track the statutory language in section 1886(b)(3)(B)(xi)(II) 
of the Act. We note that the adjustment continues to rely on the same 
underlying data and methodology.
    For FY 2025, we proposed a productivity adjustment of 0.4 percent. 
Similar to the proposed market basket rate-of-increase, for the 
proposed rule, the estimate of the proposed FY 2025 productivity 
adjustment was based on IGI's fourth quarter 2023 forecast. As noted 
previously, we proposed that if more recent data subsequently became 
available, we would use such data, if appropriate, to determine the FY 
2025 productivity adjustment for the final rule.
    Comment: Several commenters expressed concerns about the 
application of the productivity adjustment particularly given the 
extreme pressures in which hospital and health systems operate. They 
stated the use of the private nonfarm business TFP is meant to capture 
gains from new technologies, economies of scale, business acumen, 
managerial skills and changes in productions. Thus, they stated this 
measure effectively assumes the hospital sector can mirror productivity 
gains from the private nonfarm business sector. They stated, however, 
in an economy marked by great uncertainty due to the PHE and labor and 
other productivity shocks, this assumption is significantly flawed. 
They further stated these assumed gains do not consider the impact of 
additional regulation and requirements on productivity. A commenter 
recommended CMS revisit the methodology for calculating the 
productivity adjustment or remove the measure entirely. Commenters 
requested CMS use its ``special exceptions and adjustments'' authority 
to eliminate the productivity adjustment for FY 2025. A commenter 
stated they do not understand why the productivity adjustment is higher 
than for FY 2024, and recommended CMS implement a productivity 
adjustment of no more than the 0.2 percentage point adjustment in FY 
2024.
    Response: Section 1886(b)(3)(B)(xi) of the Act requires the 
application of the productivity adjustment. As required by statute, the 
FY 2025 productivity adjustment is derived based on the 10-year moving 
average growth in economy-wide productivity for the period ending FY 
2025.
    As stated in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36204) 
and

[[Page 69343]]

described previously, BLS publishes the official measures of annual 
economy-wide, private nonfarm business total factor productivity. IGI 
forecasts total factor productivity (TFP) consistent with BLS 
methodology by forecasting the detailed components of TFP. (As noted 
previously, 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.) We believe our methodology for the 
productivity adjustment is consistent with the statute which states the 
productivity adjustment is equal to the 10-year moving average of 
changes in annual economy-wide private nonfarm business multi-factor 
productivity (as projected by the Secretary for the 10-year period 
ending with the applicable fiscal year, year, cost reporting period, or 
other annual period).
    The proposed FY 2025 productivity adjustment of 0.4 percent was 
based on IGI's forecast of the 10-year moving average of annual 
economy-wide private nonfarm business TFP, reflecting historical data 
through 2022 as published by BLS and forecasted TFP growth for 2023 
through 2025. Based on more recent data available, the final FY 2025 
productivity adjustment of 0.5 percent is based on IGI's forecast of 
the 10-year moving average of annual economy-wide private nonfarm 
business TFP, reflecting historical data through 2023 as published by 
BLS and forecasted TFP growth for 2024 through 2025. The higher 
productivity adjustment for FY 2025 (0.5 percent for the final rule) 
compared to FY 2024 (0.2 percent) is primarily a result of 
incorporating BLS's revised historical data through 2022 and a 
preliminary historical growth rate in TFP for 2023, as well as an 
updated forecast for TFP growth for 2024 reflecting higher expected 
growth in economic output.
    We thank the commenters for their comments. After consideration of 
the comments received and consistent with our proposal, we are 
finalizing as proposed to use more recent data to determine the FY 2025 
productivity adjustment for the final rule.
    In summary, based on more recent data available for this FY 2025 
IPPS/LTCH PPS final rule (that is, IGI's second quarter 2024 forecast 
of the 2018-based IPPS market basket rate-of-increase with historical 
data through the first quarter of 2024), we estimate that the FY 2025 
market basket update used to determine the applicable percentage 
increase for the IPPS is 3.4 percent. Based on more recent data 
available for this FY 2025 IPPS/LTCH PPS final rule (that is, IGI's 
second quarter 2024 forecast of the productivity adjustment), the 
current estimate of the productivity adjustment for FY 2025 is 0.5 
percentage point. Based on these data, we have determined four 
applicable percentage increases to the standardized amount for FY 2025, 
as specified in the following table:
[GRAPHIC] [TIFF OMITTED] TR28AU24.182

    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42344), we revised 
our regulations at 42 CFR 412.64(d) to reflect the current law for the 
update for FY 2020 and subsequent fiscal years. Specifically, in 
accordance with section 1886(b)(3)(B) of the Act, we added paragraph 
(d)(1)(viii) to Sec.  412.64 to set forth the applicable percentage 
increase to the operating standardized amount for FY 2020 and 
subsequent fiscal years as the percentage increase in the market basket 
index, subject to the reductions specified under Sec.  412.64(d)(2) for 
a hospital that does not submit quality data and Sec.  412.64(d)(3) for 
a hospital that is not a meaningful EHR user, less a productivity 
adjustment.
    As discussed in section V.F. of the preamble of this final rule, 
section 4102 of the Consolidated Appropriations Act (CAA), 2023 (Pub. 
L. 117-328) extended the MDH program through FY 2024 (that is, for 
discharges occurring on or before September 30, 2024). Subsequently, 
section 307 of the Consolidated Appropriations Act, 2024 (CAA, 2024) 
(Pub. L. 118-42), enacted on March 9, 2024, further extended the MDH 
program for FY 2025 discharges occurring before January 1, 2025. Prior 
to enactment of the CAA, 2024, the MDH program was only to be in effect 
through the end of FY 2024. Under current law, the MDH program will 
expire for discharges on or after January 1, 2025. We refer readers to 
section V.F. of the preamble of this final rule for further discussion 
of the MDH program.
    Section 1886(b)(3)(B)(iv) of the Act provides that the applicable 
percentage increase to the hospital-specific rates for SCHs and MDHs 
equals the applicable percentage increase set forth in section 
1886(b)(3)(B)(i) of the Act (that is, the

[[Page 69344]]

same update factor as for all other hospitals subject to the IPPS). 
Therefore, the update to the hospital-specific rates for SCHs and MDHs 
also is subject to section 1886(b)(3)(B)(i) of the Act, as amended by 
sections 3401(a) and 10319(a) of the Affordable Care Act.
    For FY 2025, we proposed the following updates to the hospital-
specific rates applicable to SCHs and MDHs: A proposed update of 2.6 
percent for a hospital that submits quality data and is a meaningful 
EHR user; a proposed update of 0.35 percent for a hospital that submits 
quality data and is not a meaningful EHR user; a proposed update of 
1.85 percent for a hospital that fails to submit quality data and is a 
meaningful EHR user; and a proposed update of -0.4 percent for a 
hospital that fails to submit quality data and is not an meaningful EHR 
user. As previously discussed, we proposed that if more recent data 
subsequently became available (for example, a more recent estimate of 
the market basket update and the productivity adjustment), we would use 
such data, if appropriate, to determine the market basket update and 
the productivity adjustment in the final rule.
    We did not receive any public comments on our proposed updates to 
hospital-specific rates applicable to SCHs and MDHs. The general 
comments we received on the proposed FY 2025 update (including the 
proposed market basket update and productivity adjustment) are 
discussed earlier in this section. For FY 2025, we are finalizing the 
proposal to determine the update to the hospital specific rates for 
SCHs and MDHs in this final rule using the more recent available data, 
as previously discussed.
    For this final rule, based on more recent available data, we are 
finalizing the following updates to the hospital specific rates 
applicable to SCHs and MDHs: An update of 2.9 percent for a hospital 
that submits quality data and is a meaningful EHR user; an update of 
2.05 percent for a hospital that fails to submit quality data and is a 
meaningful EHR user; an update of 0.35 percent for a hospital that 
submits quality data and is not a meaningful EHR user; and an update of 
-0.5 percent for a hospital that fails to submit quality data and is 
not a meaningful EHR user.
2. FY 2025 Puerto Rico Hospital Update
    Section 602 of Public Law 114-113 amended section 1886(n)(6)(B) of 
the Act to specify that subsection (d) Puerto Rico hospitals are 
eligible for incentive payments for the meaningful use of certified EHR 
technology, effective beginning FY 2016. In addition, section 
1886(n)(6)(B) of the Act was amended to specify that the adjustments to 
the applicable percentage increase under section 1886(b)(3)(B)(ix) of 
the Act apply to subsection (d) Puerto Rico hospitals that are not 
meaningful EHR users, effective beginning FY 2022. Accordingly, for FY 
2022, section 1886(b)(3)(B)(ix) of the Act in conjunction with section 
602(d) of Public Law 114-113 requires that any subsection (d) Puerto 
Rico hospital that is not a meaningful EHR user as defined in section 
1886(n)(3) of the Act and not subject to an exception under section 
1886(b)(3)(B)(ix) of the Act will have ``three-quarters'' of the 
applicable percentage increase (prior to the application of other 
statutory adjustments), or three-quarters of the applicable market 
basket rate-of-increase, reduced by 33\1/3\ percent. The reduction to 
three-quarters of the applicable percentage increase for subsection (d) 
Puerto Rico hospitals that are not meaningful EHR users increases to 
66\2/3\ percent for FY 2023, and, for FY 2024 and subsequent fiscal 
years, to 100 percent. (We note that section 1886(b)(3)(B)(viii) of the 
Act, which specifies the adjustment to the applicable percentage 
increase for ``subsection (d)'' hospitals that do not submit quality 
data under the rules established by the Secretary, is not applicable to 
hospitals located in Puerto Rico.) The regulations at 42 CFR 
412.64(d)(3)(ii) reflect the current law for the update for subsection 
(d) Puerto Rico hospitals for FY 2022 and subsequent fiscal years. In 
the FY 2019 IPPS/LTCH PPS final rule, we finalized the payment 
reductions (83 FR 41674).
    For FY 2025, consistent with section 1886(b)(3)(B) of the Act, as 
amended by section 602 of Public Law 114-113, we are setting the 
applicable percentage increase for Puerto Rico hospitals by applying 
the following adjustments in the following sequence. Specifically, the 
applicable percentage increase under the IPPS for Puerto Rico hospitals 
will be equal to the rate of-increase in the hospital market basket for 
IPPS hospitals in all areas, subject to a reduction of three-quarters 
of the applicable percentage increase (prior to the application of 
other statutory adjustments; also referred to as the market basket 
update or rate-of-increase (with no adjustments)) for Puerto Rico 
hospitals not considered to be meaningful EHR users in accordance with 
section 1886(b)(3)(B)(ix) of the Act, and then subject to the 
productivity adjustment at section 1886(b)(3)(B)(xi) of the Act. As 
noted previously, section 1886(b)(3)(B)(xi) of the Act states that 
application of the productivity adjustment may result in the applicable 
percentage increase being less than zero.
    In the FY 2025 IPPS/LTCH PPS proposed rule, based on IGI's fourth 
quarter 2023 forecast of the 2018-based IPPS market basket update with 
historical data through third quarter 2023, in accordance with section 
1886(b)(3)(B) of the Act, as discussed previously, for Puerto Rico 
hospitals we proposed a market basket update of 3.0 percent less a 
productivity adjustment of 0.4 percentage point. For FY 2025, depending 
on whether a Puerto Rico hospital is a meaningful EHR user, there are 
two possible applicable percentage increases that could be applied to 
the standardized amount. Based on these data, we determined the 
following proposed applicable percentage increases to the standardized 
amount for FY 2025 for Puerto Rico hospitals:
     For a Puerto Rico hospital that is a meaningful EHR user, 
we proposed a FY 2025 applicable percentage increase to the operating 
standardized amount of 2.6 percent (that is, the FY 2025 estimate of 
the proposed market basket rate-of-increase of 3.0 percent less 0.4 
percentage point for the proposed productivity adjustment).
     For a Puerto Rico hospital that is not a meaningful EHR 
user, we proposed a FY 2025 applicable percentage increase to the 
operating standardized amount of 0.35 percent (that is, the FY 2025 
estimate of the proposed market basket rate-of-increase of 3.0 percent, 
less an adjustment of 2.25 percentage points (the proposed market 
basket rate-of-increase of 3.0 percent x 0.75 for failure to be a 
meaningful EHR user), and less 0.4 percentage point for the proposed 
productivity adjustment).
    As noted previously, we proposed that if more recent data 
subsequently became available, we would use such data, if appropriate, 
to determine the FY 2025 market basket update and the productivity 
adjustment for the FY 2025 IPPS/LTCH PPS final rule. We did not receive 
any public comments on our proposed updates to the standardized amount 
for FY 2025 for Puerto Rico hospitals. The general comments we received 
on the proposed FY 2025 update (including the proposed market basket 
update and productivity adjustment) are discussed in greater detail 
earlier in this section. For FY 2025, we are finalizing the proposal to 
determine the update to the standardized amount for FY 2025 for Puerto 
Rico hospitals in this final rule using the more recent available data, 
as previously discussed.

[[Page 69345]]

    As previously discussed in section V.A.1. of the preamble of this 
final rule, based on more recent data available for this final rule 
(that is, IGI's second quarter 2024 forecast of the 2018-based IPPS 
market basket rate-of-increase with historical data through the first 
quarter of 2024), we estimate that the FY 2025 market basket update 
used to determine the applicable percentage increase for the IPPS is 
3.4 percent and a productivity adjustment of 0.5 percent. For FY 2025, 
depending on whether a Puerto Rico hospital is a meaningful EHR user, 
there are two possible applicable percentage increases that can be 
applied to the standardized amount. Based on these data, in accordance 
with section 1886(b)(3)(B) of the Act, we determined the following 
applicable percentage increases to the standardized amount for FY 2025 
for Puerto Rico hospitals:
     For a Puerto Rico hospital that is a meaningful EHR user, 
an applicable percentage increase to the operating standardized amount 
of 2.9 percent (that is, the FY 2025 estimate of the market basket 
rate-of-increase of 3.4 percent less an adjustment of 0.5 percentage 
point for the productivity adjustment).
     For a Puerto Rico hospital that is not a meaningful EHR 
user, an applicable percentage increase to the operating standardized 
amount of 0.35 percent (that is, the FY 2025 estimate of the market 
basket rate-of-increase of 3.4 percent, less an adjustment of 2.55 
percentage point (the market basket rate-of-increase of 3.4 percent x 
0.75 for failure to be a meaningful EHR user), and less an adjustment 
of 0.5 percentage point for the productivity adjustment).
[GRAPHIC] [TIFF OMITTED] TR28AU24.183

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

    Under the authority of section 1886(d)(5)(C)(i) of the Act, the 
regulations at Sec.  412.96 set forth the criteria that a hospital must 
meet in order to qualify under the IPPS as a rural referral center 
(RRC). RRCs receive special treatment under both the DSH payment 
adjustment and the criteria for geographic reclassification.
    Section 402 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Pub. L. 108-173) raised the DSH payment 
adjustment for RRCs such that they are not subject to the 12-percent 
cap on DSH payments that is applicable to other rural hospitals. RRCs 
also are not subject to the proximity criteria when applying for 
geographic reclassification. In addition, they do not have to meet the 
requirement that a hospital's average hourly wage must exceed, by a 
certain percentage, the average hourly wage of the labor market area in 
which the hospital is located.
    Section 4202(b) of the Balanced Budget Act of 1997 (Pub. L. 105-33) 
states, in part, that any hospital classified as an RRC by the 
Secretary for FY 1991 shall be classified as such an RRC for FY 1998 
and each subsequent fiscal year. In the August 29, 1997, IPPS final 
rule with comment period (62 FR 45999 through 46000), we reinstated RRC 
status for all hospitals that lost that status due to triennial review 
or MGCRB reclassification. However, we did not reinstate the status of 
hospitals that lost RRC status because they were now urban for all 
purposes because of the OMB designation of their geographic area as 
urban. Subsequently, in the August 1, 2000 IPPS final rule (65 FR 
47087), we indicated that we were revisiting that decision. 
Specifically, we stated that we would permit hospitals that previously 
qualified as an RRC and lost their status due to OMB redesignation of 
the county in which they are located from rural to urban, to be 
reinstated as an RRC. Otherwise, a hospital seeking RRC status must 
satisfy all of the other applicable criteria. We use the definitions of 
``urban'' and ``rural'' specified in subpart D of 42 CFR part 412. One 
of the criteria under which a hospital may qualify as an RRC is to have 
275 or more beds available for use (Sec.  412.96(b)(1)(ii)). A rural 
hospital that does not meet the bed size requirement can qualify as an 
RRC if the hospital meets two mandatory prerequisites (a minimum case-
mix index (CMI) and a minimum number of discharges), and at least one 
of three optional criteria (relating to specialty composition of 
medical staff, source of inpatients, or referral volume). (We refer 
readers to Sec.  412.96(c)(1) through (5) and the September 30, 1988, 
Federal Register (53 FR 38513) for additional discussion.) With respect 
to the two mandatory prerequisites, a hospital may be classified as an 
RRC if the hospital's--
     CMI is at least equal to the lower of the median CMI for 
urban hospitals in its census region, excluding hospitals with approved 
teaching programs, or the median CMI for all urban hospitals 
nationally; and
     Number of discharges is at least 5,000 per year, or, if 
fewer, the median number of discharges for urban hospitals in the 
census region in which the hospital is located. The number of 
discharges criterion for an osteopathic hospital is at least 3,000 
discharges per year, as specified in section 1886(d)(5)(C)(i) of the 
Act.
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45217), in light of 
the COVID-19 PHE, we amended the regulations at Sec.  412.96(h)(1) to 
provide for the use of the best available data rather than the latest 
available data in calculating the national and regional CMI criteria. 
We also amended the regulations at Sec.  412.96(c)(1) to indicate that 
the individual hospital's CMI value for discharges during the same 
Federal fiscal year used to compute the national and regional CMI 
values is used for purposes of determining whether a hospital qualifies 
for RRC classification.

[[Page 69346]]

We also amended the regulations Sec.  412.96(i)(1) and (2), which 
describe the methodology for calculating the number of discharges 
criteria, to provide for the use of the best available data rather than 
the latest available or most recent data when calculating the regional 
discharges for RRC classification.
1. Case-Mix Index (CMI)
    Section 412.96(c)(1) provides that CMS establish updated national 
and regional CMI values in each year's annual notice of prospective 
payment rates for purposes of determining RRC status. The methodology 
we used to determine the national and regional CMI values is set forth 
in the regulations at Sec.  412.96(c)(1)(ii). The national median CMI 
value for FY 2025 is based on the CMI values of all urban hospitals 
nationwide, and the regional median CMI values for FY 2025 are based on 
the CMI values of all urban hospitals within each census region, 
excluding those hospitals with approved teaching programs (that is, 
those hospitals that train residents in an approved GME program as 
provided in Sec.  413.75). These values are based on discharges 
occurring during FY 2023 (October 1, 2022 through September 30, 2023), 
and include bills posted to CMS' records through March 2024. We believe 
that this is the best available data for use in calculating the 
national and regional median CMI values and is consistent with our use 
of the FY 2023 MedPAR claims data for FY 2025 ratesetting.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36206), we 
proposed that, in addition to meeting other criteria, if rural 
hospitals with fewer than 275 beds are to qualify for initial RRC 
status for cost reporting periods beginning on or after October 1, 
2024, they must have a CMI value for FY 2023 that is at least--
     1.7764 (national--all urban); or
     The median CMI value (not transfer-adjusted) for urban 
hospitals (excluding hospitals with approved teaching programs as 
identified in Sec.  413.75) calculated by CMS for the census region in 
which the hospital is located. (We refer readers to the table set forth 
in the FY 2025 IPPS/LTCH PPS proposed rule at 89 FR 36207). In the 
proposed rule we stated that we intended to update the proposed CMI 
values in the FY 2025 IPPS/LTCH PPS final rule to reflect the updated 
FY 2023 MedPAR file, which contains data from additional bills received 
through March 2024.
    Comment: Commenters supported our proposal to use FY 2023 data to 
calculate the national and regional median CMI values for FY 2025.
    Response: We appreciate the commenters' support.
    Therefore, based on the best available data (FY 2023 bills received 
through March 2024), in addition to meeting other criteria, if rural 
hospitals with fewer than 275 beds are to qualify for initial RRC 
status for cost reporting periods beginning on or after October 1, 
2024, they must have a CMI value for FY 2023 that is at least:
     1.7789 (national--all urban); or
     The median CMI value (not transfer-adjusted) for urban 
hospitals (excluding hospitals with approved teaching programs as 
identified in Sec.  413.75) calculated by CMS for the census region in 
which the hospital is located.
    The final CMI values by region are set forth in the following 
table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.184

    A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its MAC. Data are 
available on the Provider Statistical and Reimbursement (PS&R) System. 
In keeping with our policy on discharges, the CMI values are computed 
based on all Medicare patient discharges subject to the IPPS MS-DRG-
based payment.
2. Discharges
    Section 412.96(c)(2)(i) provides that CMS set forth the national 
and regional numbers of discharges criteria in each year's annual 
notice of prospective payment rates for purposes of determining RRC 
status. As specified in section 1886(d)(5)(C)(ii) of the Act, the 
national standard is set at 5,000 discharges. In the FY 2025 IPPS/LTCH 
PPS proposed rule (89 FR 36207), we proposed to update the regional 
standards based on discharges for urban hospitals' cost reporting 
periods that began during FY 2022 (that is, October 1, 2021 through 
September 30, 2022). Because this is the latest available cost 
reporting data, we believe that this is the best available data for use 
in calculating the median number of discharges by region and is 
consistent with our finalized data proposal to use cost report data 
from cost reporting periods beginning during FY 2022 for FY 2025 
ratesetting. In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36207), 
we proposed that, in addition to meeting other criteria, a hospital, if 
it is to qualify for initial RRC status for cost reporting periods 
beginning on or after October 1, 2024, must have, as the number of 
discharges for its cost reporting period that began during FY 2022, at 
least--
     5,000 (3,000 for an osteopathic hospital); or
     If less, the median number of discharges for urban 
hospitals in the census region in which the hospital is located. (We 
refer readers to the table set forth in the FY 2025 IPPS/LTCH PPS 
proposed rule at 89 FR 36207). In the proposed rule, we stated that we

[[Page 69347]]

intended to update these numbers in the FY 2025 final rule based on the 
latest available cost report data.
    Comment: Commenters supported our proposal to use FY 2022 data to 
calculate median number of discharges by region for FY 2025.
    Response: We appreciate the commenters' support.
    Therefore, based on the best available discharge data at this time, 
that is, for cost reporting periods that began during FY 2022, the 
final median number of discharges for urban hospitals by census region 
are set forth in the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.185

    We note that because the median number of discharges for hospitals 
in each census region is greater than the national standard of 5,000 
discharges, under this final rule, 5,000 discharges is the minimum 
criterion for all hospitals, except for osteopathic hospitals for which 
the minimum criterion is 3,000 discharges.
3. Qualification Under the Discharge Criterion for Osteopathic 
Hospitals
    Section 1886(d)(5)(C) of the Act sets forth certain criteria that 
must be met for a hospital to be classified as a rural referral center, 
including a discharge criterion specifying the hospital has at least 
5,000 discharges a year or, if less, the median number of discharges in 
urban hospitals in the region in which the hospital is located. Section 
9106 of the Consolidated Omnibus Budget Reconciliation Act of 1985 
(Pub. L. 99-272) amended section 1886(d)(5)(C) of the Act to provide 
for a separate discharge criterion for an osteopathic hospital to 
qualify for classification as a rural referral center, effective for 
cost reporting periods beginning on or after January 1, 1986. To 
implement this statutory provision, in the FY 1987 IPPS final rule, we 
revised 42 CFR 412.96(c)(2) to specify that for cost reporting periods 
beginning on or after January 1, 1986 an osteopathic hospital, 
recognized by the American Osteopathic Hospital Association, that is 
located in a rural area must have at least 3,000 discharges during its 
most recently completed cost reporting period to meet the number of 
discharges criterion (51 FR 31471). In the FY 1996 IPPS final rule, in 
light of a name change of the American Osteopathic Hospital Association 
to the American Osteopathic Healthcare Association, we subsequently 
revised 42 CFR 412.96(c)(2) to specify that the osteopathic hospital 
must be recognized by the American Osteopathic Healthcare Association 
``(or any successor organization)'' (60 FR 45810).
    As we discussed in implementing the number of discharges criterion 
for osteopathic hospitals in the FY 1987 IPPS final rule, ``[b]ecause 
section 1886(d)(5)(C)(i) of the Act specifically limits this 
qualification to osteopathic hospitals, we do not believe that this 
standard should apply to all hospitals'' (51 FR 31473). Accordingly, to 
qualify under this lower number of discharges criterion, a hospital 
must be an osteopathic hospital. It has come to the attention of CMS 
that the successor organization to the American Osteopathic Healthcare 
Association, namely the Accreditation Commission for Health Care, 
accredits acute care hospitals, including hospitals that are not 
osteopathic. Thus, a hospital receiving an accreditation letter or 
certificate from the successor organization is not necessarily an 
osteopathic hospital. Therefore, we proposed to revise the regulations 
at 42 CFR 412.96(c)(2) to clarify that, to qualify for RRC 
classification based on the lower discharge criterion for osteopathic 
hospitals, a hospital must be an osteopathic hospital and by itself 
recognition (such as an accreditation letter) by a successor 
organization to the American Osteopathic Healthcare Association is not 
necessarily sufficient to demonstrate that a hospital is an osteopathic 
hospital.
    We proposed to amend our regulations at 42 CFR 412.96 by revising 
paragraph (c)(2)(ii) as follows: ``(ii) For cost reporting periods 
beginning on or after January 1, 1986, an osteopathic hospital, 
recognized by the American Osteopathic Healthcare Association (or any 
successor organization), that is located in a rural area must have at 
least 3,000 discharges during its cost reporting period that began 
during the same fiscal year as the cost reporting periods used to 
compute the regional median discharges under paragraph (i) of this 
section to meet the number of discharges criterion. A hospital applying 
for rural referral center status under the number of discharges 
criterion in this paragraph must demonstrate its status as an 
osteopathic hospital.'' Consistent with section 1886(d)(5)(C)(i) of the 
Act, evidence of osteopathic status may include, but is not limited to, 
the hospital's scope of services and its mix of medical specialties. 
CMS will consider the totality of the information demonstrating whether 
an applicant hospital is an osteopathic hospital. We sought comment on 
additional types of evidence we should consider in the determination of 
a hospital's osteopathic status.
    Comment: We received one comment on our proposed revisions to the 
regulations at 42 CFR 412.96(c)(2). The commenter requested that CMS 
consider more definitive measures of determining osteopathic status but 
cautioned that determination of a hospital's osteopathic status on the 
basis of offering osteopathic services or having osteopathic doctors on 
staff presents threshold related challenges. CMS did not receive any 
specific recommendations regarding the appropriate scope of services, 
mix of medical specialties, or any other

[[Page 69348]]

criterion for determining osteopathic status of a hospital applying for 
rural referral status under the reduced discharge criterion.
    Response: We thank the commenter for their feedback on our proposed 
revisions to the regulation text. CMS may consider further refinements 
in future rulemaking, such as more definitive measures, as we gain 
further experience with the types of evidence used by applicant 
hospitals to demonstrate their osteopathic status.
    After consideration of the comment received, we are finalizing our 
updates to the regulation text as proposed. CMS will determine 
osteopathic status of a hospital applying for rural referral status 
according to the totality of the information submitted.

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

1. Background
    Section 1886(d)(12) of the Act provides for an additional payment 
to each qualifying low-volume hospital under the IPPS beginning in FY 
2005. The low-volume hospital payment adjustment is implemented in the 
regulations at 42 CFR 412.101. The additional payment adjustment to a 
low-volume hospital provided for under section 1886(d)(12) of the Act 
is in addition to any payment calculated under section 1886 of the Act 
and is based on the per discharge amount paid to the qualifying 
hospital. In other words, the low-volume hospital payment adjustment is 
based on total per discharge payments made under section 1886 of the 
Act, including capital, DSH, IME, and outlier payments. For SCHs and 
MDHs, the low-volume hospital payment adjustment is based in part on 
either the Federal rate or the hospital-specific rate, whichever 
results in a greater operating IPPS payment. The payment adjustment for 
low-volume hospitals is not budget neutral.
    As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59041 
through 59045), section 4101 of the CAA, 2023 (Pub. L. 117-328) 
extended through FY 2024 the modified definition of a low-volume 
hospital and the methodology for calculating the payment adjustment for 
low-volume hospitals in effect for FYs 2019 through 2022. The 
Consolidated Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-42), 
enacted on March 9, 2024, extended the temporary changes to the low-
volume hospital qualifying criteria and payment adjustment under the 
IPPS for a portion of FY 2025. Specifically, section 306 of the CAA, 
2024 further extended the modified definition of low-volume hospital 
and the methodology for calculating the payment adjustment for low-
volume hospitals under section 1886(d)(12) through December 31, 2024. 
Beginning January 1, 2025, the low-volume hospital qualifying criteria 
and payment adjustment will revert to the statutory requirements that 
were in effect prior to FY 2011, and the preexisting low-volume 
hospital payment adjustment methodology and qualifying criteria, as 
implemented in FY 2005 and discussed later in this section, will 
resume. We discuss our proposals for the payment policies for FY 2025, 
which we are finalizing as proposed after consideration of public 
comments, in section V.E.2. of the preamble of this final rule.
[GRAPHIC] [TIFF OMITTED] TR28AU24.186

2. Extension of Temporary Changes to Low-Volume Hospital Payment 
Definition and Payment Adjustment Methodology and Conforming Changes to 
Regulations

    As discussed previously, section 4101 of the CAA, 2023 modified the 
definition of low-volume hospital and the methodology for calculating 
the payment adjustment for low-volume hospitals under section 
1886(d)(12) of the Act through September 30, 2024. Prior to the 
enactment of the CAA, 2024 (Pub. L. 118-42), the temporary changes to 
the low-volume hospital qualifying criteria and payment adjustment 
provided by section 4101 of CAA, 2023 were set to expire on October 1, 
2024. Section 306 of the CAA, 2024 extends the temporary changes to the 
low-volume hospital qualifying criteria and payment adjustment under 
the IPPS for the portion of FY 2025 beginning on October 1, 2024, and 
ending on December 31, 2024 (that is, for discharges occurring before 
January 1, 2025).
    Under section 1886(d)(12)(C)(i) of the Act, as amended by Public 
Law 118-42, for FYs 2019 through 2024 and the portion of FY 2025 
occurring before January 1, 2025, a subsection (d) hospital qualifies 
as a low-volume hospital if it is more than 15 road miles from another 
subsection (d) hospital and has less than 3,800 total discharges during 
the fiscal year. In accordance with the existing regulations at Sec.  
412.101(a), we define the term ``road miles'' to mean ``miles'' as 
defined at Sec.  412.92(c)(1). Under section 1886(d)(12)(D) of the Act, 
as amended, for discharges occurring in FY 2019 through December 31, 
2024, the Secretary determines the applicable percentage increase using 
a continuous, linear sliding scale ranging from an additional 25 
percent payment adjustment for low-volume hospitals with 500 or fewer 
discharges to a zero percent additional payment for low volume 
hospitals with more than 3,800 discharges in the fiscal year. 
Consistent with the requirements of section 1886(d)(12)(C)(ii) of the 
Act, the term ``discharge'' for purposes of these provisions refers to 
total discharges, regardless of payer (that is, Medicare and non-
Medicare discharges).
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41399), we specified 
a continuous, linear sliding scale formula to determine the low volume 
payment adjustment, as reflected in the regulations at Sec.  
412.101(c)(3)(ii). Consistent with the statute, we provided

[[Page 69349]]

that qualifying hospitals with 500 or fewer total discharges will 
receive a low-volume hospital payment adjustment of 25. For qualifying 
hospitals with fewer than 3,800 discharges but more than 500 
discharges, the low-volume payment adjustment is calculated by 
subtracting from 25 percent the proportion of payments associated with 
the discharges in excess of 500. For qualifying hospitals with fewer 
than 3,800 total discharges but more than 500 total discharges, the 
low-volume hospital payment adjustment is calculated using the formula 
at Sec.  412.101(c)(3)(ii) (which is shown in the Table V.E.-01). For 
this purpose, the term ``discharge'' refers to total discharges, 
regardless of payer (that is, Medicare and non-Medicare discharges). 
The hospital's most recently submitted cost report is used to determine 
if the hospital meets the discharge criterion to receive the low volume 
payment adjustment in the current year (Sec.  412.101(b)(2)(iii)). The 
low-volume hospital payment adjustment for FYs 2019 through 2024 is set 
forth in the regulations at Sec.  412.101(c)(3).
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36209), 
consistent with the extension of the methodology for calculating the 
payment adjustment for low-volume hospitals through FY 2024, we 
proposed to continue using the previously specified continuous, linear 
sliding scale formula to determine the low-volume hospital payment 
adjustment for the portion of FY 2025 occurring before January 1, 2025. 
We also proposed to make conforming changes to the regulation text in 
Sec.  412.101 to reflect the extensions of the changes to the 
qualifying criteria and the payment adjustment methodology for low-
volume hospitals in accordance with provisions of the CAA, 2024. 
Specifically, we proposed to make conforming changes to paragraphs 
(b)(2)(iii) and (c)(3) introductory text of Sec.  412.101 to reflect 
that the low-volume hospital payment adjustment policy in effect for 
the portion of FY 2025 through December 31, 2024, is the same low-
volume hospital payment adjustment policy in effect for FYs 2019 
through 2024 (as described in the FY 2019 IPPS/LTCH PPS final rule (83 
FR 41398 through 41399) and in the FY 2024 IPPS/LTCH final rule (88 FR 
59041 through 59045)). In addition, in accordance with the provisions 
of the CAA, 2024, we proposed to make conforming changes to paragraphs 
(b)(2)(i) and (c)(1) of Sec.  412.101 to reflect that for the portion 
of FY 2025 beginning on January 1, 2025 and for subsequent fiscal 
years, the low-volume hospital payment adjustment policy will revert 
back to the low-volume hospital payment adjustment policy in effect for 
FYs 2005 through 2010, as described in section V.E.3. of the preamble 
of this final rule. We further proposed that if the temporary changes 
to the low-volume payment adjustment were extended through legislation 
beyond December 31, 2024, we would make the conforming changes to the 
regulations at Sec.  412.101(b)(2)(i), (b)(2)(iii), (c)(1), and (c)(3) 
to reflect any further extension.
    Comment: Commenters supported the legislative extension of the 
temporary changes to the definition and payment adjustment for low-
volume hospitals through December 31, 2024, and expressed support for 
additional legislative extensions. Many commenters requested that CMS 
collaborate with Congress to extend or make permanent the temporary 
modifications to the low-volume hospital payment policy. A commenter 
asked CMS to clarify how it would handle any legislation that that 
would provide a continuation of the modified low-volume hospital 
payment policy beyond the end of the year. Another commenter urged CMS 
to expeditiously process claims and provide instructions to MACs for 
any subsequent extensions, especially in instances when extensions are 
made retroactively.
    Response: We appreciate the commenters sharing their support for 
legislative extension. As we have said in the past, we make every 
effort to implement any extension of the low-volume hospital payment 
policy as expeditiously as possible, however we believe it would be 
premature to opine on exactly how any subsequent extension would be 
implemented. As with past extensions, we would continue work to 
implement any subsequent extensions as quickly and seamlessly as 
possible based on the s specific legislative requirements of the 
particular extension.
    After consideration of the public comments we received regarding 
the temporary changes to the qualifying criteria and the payment 
adjustment methodology for low-volume hospitals through December 31, 
2024, we are finalizing our proposals on the extension of these changes 
without modification, including our proposal to codify these extensions 
in the regulation text at Sec.  412.101 without modification.
3. Payment Adjustment for the Portion of FY 2025 Beginning on January 
1, 2025, and Subsequent Fiscal Years
    In accordance with section 1886(d)(12) of the Act, as amended by 
section 306 of the CAA, 2024, beginning with FY 2025 discharges 
occurring on or after January 1, 2025, the low-volume hospital 
definition and payment adjustment methodology will revert to the 
statutory requirements that were in effect prior to the amendments made 
by the Affordable Care Act and subsequent legislation. Specifically, 
section 1886(d)(12)(B) of the Act requires, for discharges occurring in 
FYs 2005 through 2010, FY 2025 discharges occurring on or after January 
1, 2025 and subsequent years, that the Secretary determine an 
applicable percentage increase for these low-volume hospitals based on 
the ``empirical relationship'' between the standardized cost-per-case 
for such hospitals and the total number of discharges of such hospitals 
and the amount of the additional incremental costs (if any) that are 
associated with such number of discharges. The statute thus mandates 
that the Secretary develop an empirically justifiable adjustment based 
on the relationship between costs and discharges for these low-volume 
hospitals.
    Therefore, effective for the portion of FY 2025 beginning on 
January 1, 2025 and subsequent years, under current policy at Sec.  
412.101(b), to qualify as a low-volume hospital, a subsection (d) 
hospital must be more than 25 road miles from another subsection (d) 
hospital and have less than 200 discharges (that is, less than 200 
discharges total, including both Medicare and non-Medicare discharges) 
during the fiscal year. For the portion of FY 2025 beginning on January 
1, 2025, and subsequent years, the statute specifies that a low-volume 
hospital must have less than 800 discharges during the fiscal year. 
However, as required by section 1886(d)(12)(B)(i) of the Act, the 
Secretary has developed an empirically justifiable payment adjustment 
based on the relationship, for IPPS hospitals with less than 800 
discharges, between the additional incremental costs (if any) that are 
associated with a particular number of discharges. Based on an analysis 
we conducted for the FY 2005 IPPS final rule (69 FR 49099 through 
49102), a 25-percent low-volume adjustment to all qualifying hospitals 
with less than 200 discharges was found to be most consistent with the 
statutory requirement to provide relief for low-volume hospitals where 
there is empirical evidence that higher incremental costs are 
associated with low numbers of total discharges. (Under the policy we 
established in that same final rule, hospitals with between 200

[[Page 69350]]

and 799 discharges do not receive a low-volume hospital adjustment.)
    As discussed previously, for FYs 2005 through 2010 and FY 2019 and 
subsequent years, the discharge determination is made based on the 
hospital's number of total discharges, that is, Medicare and non-
Medicare discharges. The hospital's most recently submitted cost report 
is used to determine if the hospital meets the discharge criterion to 
receive the low-volume payment adjustment in the current year (Sec.  
412.101(b)(2)(i)). We use cost report data to determine if a hospital 
meets the discharge criterion because this is the best available data 
source that includes information on both Medicare and non-Medicare 
discharges. We note that, for FYs 2011 through 2018, we used the most 
recently available MedPAR data to determine the hospital's Medicare 
discharges because only Medicare discharges were used to determine if a 
hospital met the discharge criterion for those years.
    In addition to the discharge criterion, a hospital must also meet 
the mileage criterion to qualify for the low-volume payment adjustment. 
As specified by section 1886(d)(12)(C)(i) of the Act, a low-volume 
hospital must be more than 25 road miles (or 15 road miles for FYs 2011 
through 2024) from another subsection (d) hospital. Accordingly, for FY 
2025 and subsequent fiscal years, in addition to the discharge 
criterion, the eligibility for the low-volume payment adjustment is 
also dependent upon the hospital meeting the mileage criterion at Sec.  
412.101(b)(2)(i), which specifies that a hospital must be located more 
than 25 road miles from the nearest subsection (d) hospital, consistent 
with section 1886(d)(12)(C)(i) of the Act. We define, at Sec.  
412.101(a), the term ``road miles'' to mean ``miles'' as defined at 
Sec.  412.92(c)(1) (75 FR 50238 through 50275 and 50414). As previously 
noted, we proposed to make conforming changes to paragraphs (b)(2)(i) 
and (c)(1) of Sec.  412.101 to reflect that for the portion of FY 2025 
beginning on January 1, 2025, and subsequent fiscal years, the low-
volume hospital payment adjustment policy is the same as that in effect 
for FYs 2005 through 2010.
    On average, approximately 600 hospitals per year were eligible for 
the low-volume hospital payment adjustment for FYs 2019 through 2024 
under the temporary changes in the low-volume hospital payment policy 
as amended by section 50204 of the Bipartisan Budget Act of 2018 (Pub. 
L. 115-123), and section 4101 of the Consolidated Appropriations Act, 
2023 (CAA, 2023) (Pub. L. 117-328). As discussed previously, the CAA, 
2024 further extended the modified definition of low-volume hospital 
and the methodology for calculating the payment adjustment for low-
volume hospitals under section 1886(d)(12) through December 31, 2024. 
Therefore, for the portion of FY 2025 beginning on January 1, 2025 and 
for subsequent years the low-volume hospital qualifying criteria and 
payment adjustment will revert to the statutory requirements that were 
in effect prior to FY 2011. Based on historical data for hospitals that 
qualified during FYs 2005-2010, we estimate that fewer than 10 
hospitals would qualify for the low-volume hospital payment adjustment 
for the portion of FY 2025 beginning on January 1, 2025 under current 
law.
    Comment: Many commenters urged CMS to collaborate with Congress to 
make permanent the modifications to the low-volume hospital payment 
policy. Some commenters requested CMS continue the temporary changes to 
the definition and the methodology for calculating the payment 
adjustment for low-volume hospitals for the portion of FY 2025 
beginning on January 1, 2025 and subsequent years. Commenters stated 
that not continuing these temporary changes would result in significant 
reductions in payment that could impede the services hospitals, 
including those in rural communities, provide in the communities they 
serve.
    Response: We appreciate the feedback from commenters on 
continuation of the enhanced low-volume hospital payment policy for the 
portion of FY 2025 beginning on January 1, 2025 and subsequent years. 
As previously discussed, the statute only extends those temporary 
changes to the low-volume hospital policy through December 31, 2024. 
Therefore, in absence of subsequent legislation, beginning on January 
1, 2025, the low-volume hospital qualifying criteria and the amount of 
the payment adjustment to such hospitals will revert back to those 
policies that were in effect prior to the amendments made by recent 
legislation.
    Comment: For the portion of FY 2025 beginning on January 1, 2025 
and subsequent years, several commenters requested expanding low-volume 
hospital payment adjustment eligibility criteria to include hospitals 
with 200-799 discharges as provided by the statute. A commenter stated 
that under the originally established low-volume hospital adjustment 
policy only a small number of hospitals would qualify to receive the 
adjustment under the low-volume hospital payment policy beginning 
January 1, 2025. The impact, the commenter argued, would make nearly 
all rural hospitals ineligible to receive the low-volume hospital 
payment adjustment incurring a loss of several million dollars 
annually. The commenter stated that even if the low-volume hospital 
discharge criteria were expanded to less than 800 total discharges, 
more rural hospitals would qualify for low-volume payment adjustment 
which will help those communities maintain access to care.
    Response: As previously discussed, as required by section 
1886(d)(12)(B)(i) of the Act, we developed an empirically justifiable 
payment adjustment based on the relationship, for IPPS hospitals with 
less than 800 discharges, between the additional incremental costs (if 
any) that are associated with a particular number of discharges. Based 
on our analysis, a 25-percent low-volume adjustment to all qualifying 
hospitals with less than 200 discharges was found to be most consistent 
with the statutory requirement to provide relief for low-volume 
hospitals where there is empirical evidence that higher incremental 
costs are associated with low numbers of total discharges (69 FR 49099 
through 49102). In the future, we may reevaluate the low-volume 
hospital adjustment policy; that is, the definition of a low-volume 
hospital and the payment adjustment. However, we are not aware of any 
analysis or empirical evidence that would support expanding the 
originally established low-volume hospital adjustment policy. We 
further note that we did not make any proposals regarding the low-
volume hospital payment adjustment for the portion of FY 2025 beginning 
on January 1, 2025 and subsequent years.
    After consideration of the public comments we received, we are 
finalizing our proposals, without modification. Consistent with current 
law, effective beginning with the portion of FY 2025 beginning on 
January 1, 2025, the low-volume hospital definition and payment 
adjustment methodology will revert to the policy established under 
statutory requirements that were in effect prior to the amendments made 
by the Affordable Care Act and extended through subsequent legislation.
4. Process for Requesting and Obtaining the Low-Volume Hospital Payment 
Adjustment FY 2025
    In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275 
and 50414) and subsequent rulemaking, most recently in the FY 2024 
IPPS/LTCH PPS final rule (88 FR 59044 through 59045), we discussed the 
process for requesting and obtaining the low-volume hospital payment

[[Page 69351]]

adjustment. Under this previously established process, a hospital makes 
a written request for the low-volume payment adjustment under Sec.  
412.101 to its MAC. This request must contain sufficient documentation 
to establish that the hospital meets the applicable mileage and 
discharge criteria. The MAC will determine if the hospital qualifies as 
a low-volume hospital by reviewing the data the hospital submits with 
its request for low-volume hospital status in addition to other 
available data. Under this approach, a hospital will know in advance 
whether or not it will receive a payment adjustment under the low-
volume hospital policy. The MAC and CMS may review available data such 
as the number of discharges, in addition to the data the hospital 
submits with its request for low-volume hospital status, to determine 
whether or not the hospital meets the qualifying criteria. (For 
additional information on our existing process for requesting the low-
volume hospital payment adjustment, we refer readers to the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41399 through 41401).)
    As explained earlier, for FY 2019 and subsequent fiscal years, the 
discharge determination is made based on the hospital's number of total 
discharges, that is, Medicare and non-Medicare discharges, as was the 
case for FYs 2005 through 2010. Under Sec.  412.101(b)(2)(i) and (iii), 
a hospital's most recently submitted cost report is used to determine 
if the hospital meets the discharge criterion to receive the low-volume 
payment adjustment in the current year. As discussed in the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41399 and 41400), we use cost report 
data to determine if a hospital meets the discharge criterion because 
this is the best available data source that includes information on 
both Medicare and non-Medicare discharges. (For FYs 2011 through 2018, 
the most recently available MedPAR data were used to determine the 
hospital's Medicare discharges because non-Medicare discharges were not 
used to determine if a hospital met the discharge criterion for those 
years.) Therefore, a hospital must refer to its most recently submitted 
cost report for total discharges (Medicare and non-Medicare) to decide 
whether or not to apply for low-volume hospital status for a particular 
fiscal year.
    In addition to the discharge criterion, eligibility for the low-
volume hospital payment adjustment is also dependent upon the hospital 
meeting the applicable mileage criterion specified in section 
1886(d)(12)(C)(i) of the Act, which is codified at Sec.  412.101(b)(2), 
for the fiscal year. Specifically, to meet the mileage criterion to 
qualify for the low-volume hospital payment adjustment for the portion 
of FY 2025 beginning October 1, 2024 through December 31, 2024, a 
hospital must be located more than 15 road miles from the nearest 
subsection (d) hospital, as reflected in proposed revised Sec.  
412.101(b)(2). Additionally, to meet the mileage criterion to qualify 
for the low-volume hospital payment adjustment for the portion of FY 
2025 beginning January 1, 2025 through September 30, 2025, a hospital 
must be located more than 25 road miles from the nearest subsection (d) 
hospital. (We define in Sec.  412.101(a) the term ``road miles'' to 
mean ``miles'' as defined in Sec.  412.92(c)(1) (75 FR 50238 through 
50275 and 50414).) For establishing that the hospital meets the mileage 
criterion, the use of a web-based mapping tool as part of the 
documentation is acceptable. The MAC will determine if the information 
submitted by the hospital, such as the name and street address of the 
nearest hospital(s), location on a map, and distance from the hospital 
requesting low-volume hospital status, is sufficient to document that 
it meets the mileage criterion. If not, the MAC will follow up with the 
hospital to obtain additional necessary information to determine 
whether or not the hospital meets the applicable mileage criterion.
    In accordance with our previously established process, a hospital 
must make a written request for low-volume hospital status that is 
received by its MAC by September 1 immediately preceding the start of 
the Federal fiscal year for which the hospital is applying for low-
volume hospital status in order for the applicable low-volume hospital 
payment adjustment to be applied to payments for its discharges for the 
fiscal year beginning on or after October 1 immediately following the 
request (that is, the start of the Federal fiscal year). For a hospital 
whose request for low-volume hospital status is received after 
September 1, if the MAC determines the hospital meets the criteria to 
qualify as a low-volume hospital, the MAC will apply the applicable 
low-volume hospital payment adjustment to determine payment for the 
hospital's discharges for the fiscal year, effective prospectively 
within 30 days of the date of the MAC's low-volume status 
determination.
    Consistent with this previously established process, for FY 2025, 
we proposed that a hospital must submit a written request for low-
volume hospital status to its MAC that includes sufficient 
documentation to establish that the hospital meets the applicable 
mileage and discharge criteria (as described earlier). Specifically, 
for the portion of FY 2025 beginning October 1, 2024 through December 
31, 2024, a hospital must make a written request for low-volume 
hospital status that is received by its MAC no later than September 1, 
2024, in order for the low-volume, add-on payment adjustment to be 
applied to payments for its discharges beginning on or after October 1, 
2024. If a hospital's written request for low-volume hospital status 
for the portion of FY 2025 beginning October 1, 2024 through December 
31, 2024 is received after September 1, 2024, and if the MAC determines 
the hospital meets the criteria to qualify as a low-volume hospital, 
the MAC would apply the low-volume hospital payment adjustment to 
determine the payment for the hospital's FY 2025 discharges prior to 
January 1, 2025, effective prospectively within 30 days of the date of 
the MAC's low-volume hospital status determination.
    Additionally, we proposed that a hospital must also submit a 
written request for low-volume hospital status to its MAC that includes 
sufficient documentation to establish that the hospital continues to 
meet the applicable mileage and discharge criteria for the portion of 
FY 2025 beginning on January 1, 2025 through September 30, 2025 (as 
described earlier). Specifically, for the portion of FY 2025 beginning 
on January 1, 2025, a hospital must make a written request for low-
volume hospital status that is received by its MAC no later than 
December 1, 2024, in order for the 25-percent, low-volume, add-on 
payment adjustment to be applied to payments for its discharges 
beginning on or after January 1, 2025. If a hospital's written request 
for low-volume hospital status for the portion of FY 2025 beginning on 
January 1, 2025 is received after December 1, 2024, and if the MAC 
determines the hospital meets the criteria to qualify as a low-volume 
hospital, the MAC would apply the low-volume hospital payment 
adjustment to determine the payment for the hospital's FY 2025 
discharges on or after January 1, 2025, effective prospectively within 
30 days of the date of the MAC's low-volume hospital status 
determination.
    A hospital may choose to make a single written request for low-
volume hospital status to its MAC for both the portion of FY 2025 
beginning on October 1, 2024, and ending December 31, 2024, and the 
portion of FY 2025 beginning on January 1, 2025, through September 30, 
2025, by the September 1, 2024, deadline discussed previously. 
Alternatively, a hospital may choose to submit separate written 
requests, one for

[[Page 69352]]

the portion of FY 2025 beginning on October 1, 2024, and ending on 
December 31, 2024 (by the September 1, 2024, deadline discussed 
previously), and another for the portion of FY 2025 beginning on 
January 1, 2025, through September 30, 2025 (by the December 1, 2024 
deadline discussed previously).
    Under this process, a hospital that qualified for the low-volume 
hospital payment adjustment for FY 2024 may continue to receive a low-
volume hospital payment adjustment for FY 2025 without reapplying if it 
meets both the discharge criterion and the mileage criterion applicable 
for FY 2025 (that is, the discharge criterion and mileage criterion for 
the period beginning October 1, 2024 through December 31, 2024, as well 
as the discharge criterion and mileage criterion for the period 
beginning on January 1, 2025 through September 30, 2025, respectively). 
As discussed previously, for the portion of FY 2025 beginning on 
January 1, 2025, the discharge and the mileage criteria are reverting 
to the statutory requirements that were in effect prior to FY 2011, and 
to the preexisting low-volume hospital qualifying criteria, as 
implemented in FY 2005 and specified in the existing regulations at 
Sec.  412.101(b)(2)(i). As in previous years, we proposed that such a 
hospital must send written verification that is received by its MAC no 
later than September 1, 2024 or December 1, 2024, respectively, stating 
that it meets the mileage criterion for the applicable portion(s) of FY 
2025, as described previously. For example, for the portion of FY 2025 
beginning October 1, 2024 through December 31, 2024, the hospital must 
state it is located more than 15 road miles from the nearest 
``subsection (d)'' hospital. Similarly, for the portion of FY 2025 
beginning on January 1, 2025, the hospital must state it is located 
more than 25 road miles from the nearest ``subsection (d)'' hospital. 
For FY 2025, we further proposed that this written verification must 
also state, based upon the most recently submitted cost report, that 
the hospital meets the discharge criterion for the applicable 
portion(s) of FY 2025, as described previously. For example, for the 
portion of FY 2025 beginning October 1, 2024 through December 31, 2024, 
the hospital must have less than 3,800 discharges total, including both 
Medicare and non-Medicare discharges. Similarly, for the portion of FY 
2025 beginning on January 1, 2025, the hospital must have less than 200 
discharges total, including both Medicare and non-Medicare discharges. 
If a hospital's request for low-volume hospital status for FY 2025 is 
received after September 1, 2024, (or after December 1, 2024 for the 
portion of FY 2025 beginning on January 1, 2025) and if the MAC 
determines the hospital meets the criteria to qualify as a low-volume 
hospital, the MAC will apply the applicable low-volume add-on payment 
adjustment to determine the payment for the hospital's discharges for 
the applicable portion(s) of FY 2025, effective prospectively within 30 
days of the date of the MAC's low-volume hospital status determination.
    We did not receive any comments on our process for requesting and 
obtaining the low-volume payment adjustment for the portion of FY 2025 
beginning October 1, 2024 through December 31, 2024 or the portion of 
FY 2025 beginning on January 1, 2025. Therefore, we are finalizing our 
proposals, without modification.

E. Changes in the Medicare-Dependent, Small Rural Hospital (MDH) 
Program (Sec.  412.108)

1. Background for the MDH Program
    Section 1886(d)(5)(G) of the Act provides special payment 
protections, under the IPPS, to a Medicare-dependent, small rural 
hospital (MDH). (For additional information on the MDH program and the 
payment methodology, we refer readers to the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51683 through 51684).) As discussed in section V.B. 
of the preamble of this final rule, section 307 of the Consolidated 
Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-42), enacted on March 
9, 2024, extended the MDH program for FY 2025 discharges occurring 
before January 1, 2025. Prior to enactment of the CAA, 2024, the MDH 
program was only to be in effect through the end of FY 2024. Under 
current law, the MDH program provisions at section 1886(d)(5)(G) of the 
Act will expire for discharges on or after January 1, 2025. Beginning 
with discharges occurring on or after January 1, 2025, all hospitals 
that previously qualified for MDH status will be paid based on the 
Federal rate.
    Since the extension of the MDH program through FY 2012 provided by 
section 3124 of the Affordable Care Act, the MDH program had been 
extended by subsequent legislation as follows: section 606 of the 
American Taxpayer Relief Act (Pub. L. 112-240) extended the MDH program 
through FY 2013 (that is, for discharges occurring before October 1, 
2013). Section 1106 of the Pathway for SGR Reform Act of 2013 (Pub. L. 
113-67) extended the MDH program through the first half of FY 2014 
(that is, for discharges occurring before April 1, 2014). Section 106 
of the Protecting Access to Medicare Act (Pub. L. 113-93) extended the 
MDH program through the first half of FY 2015 (that is, for discharges 
occurring before April 1, 2015). Section 205 of the MACRA (Pub. L. 114-
10) extended the MDH program through FY 2017 (that is, for discharges 
occurring before October 1, 2017). Section 50205 of the Bipartisan 
Budget Act (Pub. L. 115-123) extended the MDH program through FY 2022 
(that is for discharges occurring before October 1, 2022). Section 102 
of the Continuing Appropriations and Ukraine Supplemental 
Appropriations Act, 2023 (Pub. L. 117-180) extended the MDH program 
through December 16, 2022. Section 102 of the Further Continuing 
Appropriations and Extensions Act, 2023 (Pub. L. 117-229) extended the 
MDH program through December 23, 2022. Section 4102 of the Consolidated 
Appropriations Act, 2023 (Pub. L. 117-328) extended the MDH program 
through FY 2024 (that is for discharges occurring before October 1, 
2024). Lastly, under current law, section 307 of the CAA, 2024 (Pub. L. 
118-42) extended the MDH program through December 31, 2024 (that is, 
for discharges occurring before January 1, 2025).
    For additional information on the extensions of the MDH program 
after FY 2012, we refer readers to the following Federal Register 
documents: The FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 
53405 and 53413 through 53414); the FY 2013 IPPS notice (78 FR 14689); 
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50647 through 50649); the 
FY 2014 interim final rule with comment period (79 FR 15025 through 
15027); the FY 2014 notice (79 FR 34446 through 34449); the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50022 through 50024); the August 2015 
interim final rule with comment period (80 FR 49596); the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57054 through 57057); the FY 2018 notice (83 
FR 18303 through 18305); the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41429); and the FY 2024 IPPS/LTCH PPS final rule (88 FR 59045).
2. Implementation of Legislative Extension of MDH Program
    Prior to the enactment of Public Law 118-42, under section 4102 of 
Public Law 117-328, the MDH program authorized by section 1886(d)(5)(G) 
of the Act was set to expire at the end of FY 2024. Section 307 of 
Public Law 118-42 amended sections 1886(d)(5)(G)(i) and 
1886(d)(5)(G)(ii)(II) of the Act by striking ``October 1, 2024'' and 
inserting ``January 1, 2025''. Section 307 of Public Law 118-42 also 
made

[[Page 69353]]

conforming amendments to sections 1886(b)(3)(D)(i) and 
1886(b)(3)(D)(iv) of the Act.
    Therefore, in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
36212), we proposed to make conforming changes to the regulations 
governing the MDH program at Sec.  412.108(a)(1) and (c)(2)(iii) and 
the general payment rules at Sec.  412.90(j) to reflect the extension 
of the MDH program through December 31, 2024.
    As a result of the extension of the MDH program through December 
31, 2024 as provided by section 307 of Public Law 118-42, a provider 
that is classified as an MDH as of September 30, 2024, will continue to 
be classified as an MDH as of October 1, 2024, with no need to reapply 
for MDH classification.
3. Expiration of the MDH Program
    Because section 307 of the CAA, 2024 extended the MDH program 
through December 31, 2024 only, beginning January 1, 2025, the MDH 
program will no longer be in effect. Since the MDH program is not 
authorized by statute beyond December 31, 2024, beginning January 1, 
2025, all hospitals that previously qualified for MDH status under 
section 1886(d)(5)(G) of the Act will no longer have MDH status and 
will be paid based on the IPPS Federal rate. There are currently 173 
MDHs, of which we estimate 117 would have been paid under the blended 
payment of the Federal rate and hospital-specific rate while the 
remaining 56 would have been paid based on the IPPS Federal rate. With 
the expiration of the MDH program, all these providers will all be paid 
based on the IPPS Federal rate beginning with discharges occurring on 
or after January 1, 2025.
    When the MDH program was set to expire at the end of FY 2012, in 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405), we 
revised our sole community hospital (SCH) policies to allow MDHs to 
apply for SCH status in advance of the expiration of the MDH program 
and be paid as such under certain conditions. We codified these changes 
in the regulations at Sec.  412.92(b)(2)(i) and (b)(2)(v). 
Specifically, the existing regulations at Sec.  412.92(b)(2)(i) and 
(b)(2)(v) allow for an effective date of an approval of SCH status that 
is the day following the expiration date of the MDH program. We note 
that these same conditions apply to MDHs that intend to apply for SCH 
status with the expiration of the MDH program on December 31, 2024. 
Therefore, in order for an MDH to receive SCH status effective January 
1, 2025, the MDH must apply for SCH status at least 30 days before the 
expiration of the MDH program; that is, the MDH must apply for SCH 
status by December 2, 2024. The MDH also must request that, if approved 
as an SCH, the SCH status be effective with the expiration of the MDH 
program; that is, the MDH must request that the SCH status, if 
approved, be effective January 1, 2025, immediately after its MDH 
status expires with the expiration of the MDH program on December 31, 
2024. We emphasize that an MDH that applies for SCH status in 
anticipation of the expiration of the MDH program would not qualify for 
the January 1, 2025 effective date for SCH status if it does not apply 
by the December 2, 2024 deadline. If the MDH does not apply by the 
December 2, 2024 deadline, the hospital would instead be subject to the 
usual effective date for SCH classification as specified at Sec.  
412.92(b)(2)(i); that is, as of the date the MAC receives the complete 
application from the provider.
    In the FY 2025 IPPS/LTCH PPS proposed rule, we proposed to make 
conforming changes to the regulations governing the MDH program at 
Sec.  412.108(a)(1) and (c)(2)(iii) and the general payment rules at 
Sec.  412.90(j) to reflect the extension of the MDH program through 
December 31, 2024. We further proposed that if the MDH program were to 
be extended by law beyond December 31, 2024, similar to how it was 
extended by prior legislation as described previously, we would, 
depending on timing of such legislation in relation to the final rule, 
modify our proposed conforming changes to the regulations governing the 
MDH program at Sec.  412.108(a)(1) and (c)(2)(iii) and the general 
payment rules at Sec.  412.90(j) to reflect any such further extension 
of the MDH program. We also noted that these modifications to our 
proposed conforming changes would only be made if the MDH program were 
to be extended by statute beyond December 31, 2024.
    Comment: Many commenters expressed support for extending the MDH 
program or making the MDH program permanent and noted that they would 
continue supporting congressional efforts to protect the MDH program. 
Some commenters also expressed support for increasing the base year for 
these hospitals. Others supported an additional base year for 
calculating MDH payments. Several state hospital associations expressed 
their concern that hospitals in their states would experience 
significant payment decreases as a result of the expiration of the MDH 
program. A few commenters urged CMS for action to be taken to ensure 
that the MDH program is extended.
    Response: While we appreciate the commenters' concerns about the 
expiration of the MDH program and the financial impact to affected 
providers if the MDH program is not extended beyond CY 2024, CMS does 
not have the authority under current law to extend the MDH program 
beyond the December 31, 2024 statutory expiration date. Similarly, 
Section 1886(b)(3)(D) of the Act specifies the applicable base years or 
``target amounts'' for hospitals classified as MDHs. These comments are 
similar to comments we received previously, prior to the statutory 
extension of the MDH program for FYs 2023 and 2024 provided by 
subsequent legislation, and discussed in the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49064).
    Comment: Several commenters expressed support for CMS' policy that 
allows MDHs to apply for SCH status in advance of the expiration of the 
MDH program and be paid as such under certain conditions. A commenter 
requested that CMS clearly communicate this option to rural hospitals 
in the event the designation lapses. Some commenters also requested 
that CMS automatically reinstate MDH status to all previously 
qualifying hospitals, including hospitals that became SCHs and 
hospitals that cancelled rural status in anticipation of the MDH 
program expiration, if a retroactive extension to the MDH program is 
made.
    Response: We appreciate the commenters' support of our policy 
allowing MDHs to apply for SCH status in advance of the expiration of 
the MDH program and to be paid as such under certain conditions and 
allow for a seamless transition from MDH classification to SCH 
classification. As we have done with prior legislative expirations of 
the MDH program, CMS will communicate this information to the provider 
community. In response to the suggestion that CMS provide former MDHs 
with ability to rescind their newly acquired SCH status and reinstate 
their MDH status in a seamless manner if a retroactive extension to the 
MDH program is made, we understand the desire on the part of hospitals 
for certainty in the face of MDH program expiration and will consider 
for future rulemaking any potential mechanisms to further streamline 
such transitions in connection with legislative extensions of the MDH 
program. We note that under the current regulations at Sec.  
412.108(b)(4), the effective date for MDH classification is as of the 
date the MAC receives the complete application.

[[Page 69354]]

A MDH that applied for and was classified as an SCH in advance of the 
MDH expiration per the regulations at Sec.  412.92(b)(2)(v) could 
request a cancellation of its SCH status and simultaneously re-apply 
for MDH status if the MDH program were to be extended, and the MDH 
classification would be effective as of the date that the MAC receives 
the complete application. In response to the suggestion that CMS 
automatically reinstate MDH status to providers that cancelled their 
rural status in anticipation of the MDH program expiration, we note 
that per the regulations at Sec.  412.103(g)(4), a hospital's 
cancellation of its rural classification is effective beginning with 
the next Federal fiscal year.
    Comment: Commenters urged CMS to expedite restoration of MDH 
status, should Congress act to extend these programs. They requested 
that CMS move expeditiously to restore payments and act quickly to 
retroactively address a program lapse in the event that the program is 
extended after December 31, 2024. A commenter requested that CMS 
clarify how it might handle the continuation of the program, should 
Congress enact legislation to extend it. A few commenters expressed 
appreciation for CMS' most recent implementation of the extension of 
the MDH program. A commenter expressed support for the decision to not 
require MDHs to reapply for classification for the period of October 1, 
2024 through December 31, 2024.
    Response: We appreciate the commenters' support for CMS' 
implementation of the most recent MDH extensions. We also appreciate 
the commenters' sharing their concerns relating to a retroactive 
restoration of the MDH program. As with past extensions, CMS will 
evaluate enacted legislation to determine the most appropriate approach 
to implement changes to the law, including instructions to the MACs to 
reinstate MDH status to eligible hospitals. As in the past, and as 
acknowledged by some of the commenters, we will make every effort to 
implement any extension of the MDH program as expeditiously as 
possible.
    In summary, under current law, beginning January 1, 2025, all 
hospitals that previously qualified for MDH status will no longer have 
MDH status.
    After consideration of the public comments we received, we are 
adopting as final the proposed conforming changes to the regulations 
text at Sec. Sec.  412.90 and 412.108 to reflect the extension of the 
MDH program through December 31, 2024 in accordance with section 307 of 
the CAA, 2024 (Pub. L. 118-42). We are finalizing the proposed changes 
in paragraphs (a)(1) and (c)(2)(iii) of Sec.  412.108 and paragraph (j) 
of Sec.  412.90 without modification.

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

1. Background
    Section 1886(h) of the Act, as added by section 9202 of the 
Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L. 
99-272) and as currently implemented in the regulations at 42 CFR 
413.75 through 413.83, establishes a methodology for determining 
payments to hospitals for the direct costs of approved graduate medical 
education (GME) programs. Section 1886(h)(2) of the Act sets forth a 
methodology for the determination of a hospital-specific base-period 
per resident amount (PRA) that is calculated by dividing a hospital's 
allowable direct costs of GME in a base period by its number of full-
time equivalent (FTE) residents in the base period. The base period is, 
for most hospitals, the hospital's cost reporting period beginning in 
FY 1984 (that is, October 1, 1983 through September 30, 1984). The base 
year PRA is updated annually for inflation. In general, Medicare direct 
GME payments are calculated by multiplying the hospital's updated PRA 
by the weighted number of FTE residents working in all areas of the 
hospital complex (and at nonprovider sites, when applicable), and the 
hospital's Medicare share of total inpatient days.
    Section 1886(d)(5)(B) of the Act provides for a payment adjustment 
known as the indirect medical education (IME) adjustment under the IPPS 
for hospitals that have residents in an approved GME program, in order 
to account for the higher indirect patient care costs of teaching 
hospitals relative to nonteaching hospitals. The regulations regarding 
the calculation of this additional payment are located at 42 CFR 
412.105. The hospital's IME adjustment applied to the DRG payments is 
calculated based on the ratio of the hospital's number of FTE residents 
training in either the inpatient or outpatient departments of the IPPS 
hospital (and, for discharges occurring on or after October 1, 1997, at 
non-provider sites, when applicable) to the number of inpatient 
hospital beds.
    The calculation of both direct GME payments and the IME payment 
adjustment is affected by the number of FTE residents that a hospital 
is allowed to count. Generally, the greater the number of FTE residents 
a hospital counts, the greater the amount of Medicare direct GME and 
IME payments the hospital will receive. In an attempt to end the 
implicit incentive for hospitals to increase the number of FTE 
residents, Congress established a limit on the number of allopathic and 
osteopathic residents that a hospital could include in its FTE resident 
count for direct GME and IME payment purposes in the Balanced Budget 
Act of 1997 (Pub. L. 105-33). Under section 1886(h)(4)(F) of the Act, 
for cost reporting periods beginning on or after October 1, 1997, a 
hospital's unweighted FTE count of residents for purposes of direct GME 
cannot exceed the hospital's unweighted FTE count for direct GME in its 
most recent cost reporting period ending on or before December 31, 
1996. Under section 1886(d)(5)(B)(v) of the Act, a similar limit based 
on the FTE count for IME during that cost reporting period is applied, 
effective for discharges occurring on or after October 1, 1997. Dental 
and podiatric residents are not included in this statutorily mandated 
cap.
    We received some IME and direct GME (DGME) related comments that 
were outside the scope of the proposed rule, including a comment 
related to the eligibility of SCHs paid under the hospital-specific 
rate and MDHs to receive IME payments. Because we consider these public 
comments to be outside the scope of the proposed rule, we are not 
addressing these comments in this final rule.
2. Distribution of Additional Residency Positions Under the Provisions 
of Section 4122 of Subtitle C of the Consolidated Appropriations Act, 
2023 (CAA, 2023)
a. Overview
    CMS has increased the overall number of slots available to teaching 
hospitals on several previous occasions. Notably, Congress authorized 
Medicare payment for one thousand additional FTE GME resident slots in 
section 126(a) of the Consolidated Appropriations Act, 2021, adding 
paragraph 1886(h)(9) to the Act.
    Most recently, section 4122(a) of the CAA, 2023 amended section 
1886(h) of the Act by adding a new section 1886(h)(10) of the Act 
requiring the distribution of additional residency positions (also 
referred to as slots) to hospitals. Section 1886(h)(10)(A) of the Act 
requires that for FY 2026, the Secretary shall initiate an application 
round to distribute 200 residency positions. At least 100 of the 
positions made available under section

[[Page 69355]]

1886(h)(10)(A) shall be distributed for psychiatry or psychiatry 
subspecialty residency training programs. The Secretary is required, 
subject to certain provisions in the law, to increase the otherwise 
applicable resident limit for each qualifying hospital that submits a 
timely application by the number of positions that may be approved by 
the Secretary for that hospital. The Secretary is required to notify 
hospitals of the number of positions distributed to them by January 31, 
2026, and the increase is effective beginning July 1, 2026.
    In determining the qualifying hospitals for which an increase is 
provided, section 1886(h)(10)(B)(i) of the Act requires the Secretary 
to take into account the ``demonstrated likelihood'' of the hospital 
filling the positions made available within the first 5 training years 
beginning after the date the increase would be effective, as determined 
by the Secretary.
    Section 1886(h)(10)(B)(ii) of the Act requires a minimum 
distribution for certain categories of hospitals. Specifically, the 
Secretary is required to distribute at least 10 percent of the 
aggregate number of total residency positions available to each of four 
categories of hospitals. Stated briefly, and discussed in greater 
detail later in this final rule, the categories are as follows: (1) 
hospitals located in rural areas or that are treated as being located 
in a rural area (pursuant to sections 1886(d)(2)(D) and 1886(d)(8)(E) 
of the Act); (2) hospitals in which the reference resident level of the 
hospital is greater than the otherwise applicable resident limit; (3) 
hospitals in states with new medical schools or additional locations 
and branches of existing medical schools; and (4) hospitals that serve 
areas designated as Health Professional Shortage Areas (HPSAs). Section 
1886(h)(10)(F)(iii) of the Act defines a qualifying hospital as a 
hospital in one of these four categories.
    Section 1886(h)(10)(B)(iii) of the Act further requires that each 
qualifying hospital that submits a timely application receive at least 
1 (or a fraction of 1) of the residency positions made available under 
section 1886(h)(10) of the Act before any qualifying hospital receives 
more than 1 residency position.
    Section 1886(h)(10)(C) of the Act places certain limitations on the 
distribution of the residency positions. First, a hospital may not 
receive more than 10 additional full-time equivalent (FTE) residency 
positions. Second, no increase in the otherwise applicable resident 
limit of a hospital may be made unless the hospital agrees to increase 
the total number of FTE residency positions under the approved medical 
residency training program of the hospital by the number of positions 
made available to that hospital. Third, if a hospital that receives an 
increase to its otherwise applicable resident limit under section 
1886(h)(10) of the Act is eligible for an increase to its otherwise 
applicable resident limit under 42 CFR 413.79(e)(3) (or any successor 
regulation), that hospital must ensure that residency positions 
received under section 1886(h)(10) of the Act are used to expand an 
existing residency training program and not for participation in a new 
residency training program.
b. Determinations Required for the Distribution of Residency Positions
(1) Determination That a Hospital Has a ``Demonstrated Likelihood'' of 
Filling the Positions
    Section 1886(h)(10)(B)(i) of the Act directs the Secretary to take 
into account the ``demonstrated likelihood'' of the hospital filling 
the positions made available within the first 5 training years 
beginning after the date the increase would be effective, as determined 
by the Secretary. In accordance with section 1886(h)(10)(A)(iv) of the 
Act, the increase would be effective beginning July 1 of the fiscal 
year of the increase; therefore, additional residency positions under 
section 1886(h)(10) of the Act would be effective July 1, 2026.
    Consistent with the application cycle established for section 126 
of the CAA, 2021 (86 FR 73419 through 73445) we proposed that the 
application deadline for the additional positions made available for a 
fiscal year be March 31 of the prior fiscal year; that is, for FY 2026, 
the application deadline would be March 31, 2025. Accordingly, all 
references in this section to the application deadline are references 
to the application deadline of March 31, 2025.
    We proposed that a hospital show a ``demonstrated likelihood'' of 
filling the additional positions (sometimes equivalently referred to as 
slots) for which it applies by demonstrating that it does not have 
sufficient room under its current FTE resident cap(s) to accommodate a 
planned new program or expansion of an existing program. In order to be 
eligible for additional positions, the new program or expansion of an 
existing program could not begin prior to July 1, 2026, the effective 
date of the section 4122 residency positions.
    In order to demonstrate that a hospital does not have sufficient 
room under its current FTE resident cap(s) for purposes of the 
prioritization discussed at section c.3. of this preamble, if 
applicable, we proposed that a hospital would be required to submit 
copies of its most recently submitted Worksheet E, Part A and Worksheet 
E-4 from the Medicare cost report (CMS-Form- 2552-10) as part of its 
application for an increase to its FTE resident cap(s). The hospital 
would demonstrate and attest to a planned new program or expansion of 
an existing program by meeting at least one of the following two 
``Demonstrated Likelihood'' criteria:
     ``Demonstrated Likelihood'' Criterion 1 (New Residency 
Program). The hospital does not have sufficient room under its FTE 
resident cap, is not a rural hospital eligible for an increase to its 
cap under 42 CFR 413.79(e)(3) (or any successor regulation), and 
intends to use the additional FTEs as part of a new residency program 
that it intends to establish on or after the date the increase would be 
effective (that is, a new program that begins training residents at any 
point within the hospital's first 5 training years beginning on or 
after the effective date of the increase). Under ``Demonstrated 
Likelihood'' Criterion 1, the hospital will be required to meet at 
least one of the following conditions as part of its application:
    ++ Application for accreditation of the new residency program has 
been submitted to the Accreditation Council for Graduate Medical 
Education (ACGME) (or application for approval of the new residency 
program has been submitted to the American Board of Medical Specialties 
(ABMS)) by the application deadline.
    ++ The hospital has received written correspondence from the ACGME 
(or ABMS) acknowledging receipt of the application for the new 
residency program, or other types of communication concerning the new 
program accreditation or approval process (such as notification of site 
visit) by the application deadline.
     ``Demonstrated Likelihood'' Criterion 2 (Expansion of an 
Existing Residency Program). The hospital does not have sufficient room 
under its FTE resident cap, and the hospital intends to use the 
additional FTEs to expand an existing residency training program within 
the hospital's first 5 training years beginning on or after the date 
the increase would be effective. Under ``Demonstrated Likelihood'' 
Criterion 2, the hospital will be required to meet at least one of the 
following conditions as part of its application:
    ++ The hospital has received approval by the application deadline 
from an appropriate accrediting body (the

[[Page 69356]]

ACGME or ABMS) to expand the number of FTE residents in the program.
    ++ The hospital has submitted a request by the application deadline 
for a permanent complement increase of the existing residency program.
    ++ The hospital currently has unfilled positions in its residency 
program that have previously been approved by the ACGME and is now 
seeking to fill those positions.
    Under ``Demonstrated Likelihood'' Criterion 2, the hospital is 
applying for an increase in its FTE resident cap because it is 
expanding an existing residency program. We proposed that as of the 
application deadline the hospital is either already training residents 
in this program, or, if the program exists at another hospital as of 
that date, the residents will begin to rotate to the applying hospital 
on or after the effective date of the increase. In addition, we note 
that section 1886(h)(10)(C)(ii) of the Act requires that if a hospital 
is awarded positions, that hospital must increase the number of its 
residency positions by the amount the hospital's FTE resident cap 
increases, based on the newly awarded positions under section 4122 of 
CAA, 2023. Therefore, we proposed that a hospital must, as part of its 
application, attest to increasing the number of its residency positions 
by the amount of the hospital's FTE resident cap increase based on any 
newly awarded positions, in accordance with the provisions of section 
1886(h)(10)(C)(ii) of the Act.
    In this section we present a summary of the public comments and our 
responses related to the proposal determining whether a hospital has a 
``demonstrated likelihood'' of filling the positions awarded under 
section 4122 of the CAA, 2023.
    Comment: A few commenters expressed concern that requiring a 
hospital to demonstrate that it does not have sufficient room under its 
current FTE cap to accommodate a program expansion or a new program 
would not benefit rural programs. The commenters stated that large 
academic medical centers generally have more resources and are better 
funded, thus they are able to take on additional residents above their 
Medicare FTE cap. The commenters stated that rural hospitals are 
unlikely to be able to take on residents that are not funded through 
Medicare GME. As a result, rural hospitals would be disadvantaged 
because they would not be seen as ``likely to fill'' additional slots 
since most rural hospitals are not training above their cap due to 
limited resources.
    A commenter asked that CMS reconsider the policy related to 
``demonstrated likelihood'' and allow for exceptions for certain unique 
situations where a hospital may be training under its cap at the time 
of the application but would be training at or over its cap by the time 
the additional slots under section 4122 would be effective. The 
commenter provided the example of a hospital training residents in a 
new residency program. In this example the hospital is operating below 
its cap because it is currently building the program, but the hospital 
expects to be operating above its cap when the additional section 4122 
slots would be effective. The commenter stated that such a hospital 
should be eligible for its full FTE request under section 4122.
    Response: We appreciate the commenters' concerns related to rural 
hospitals and hospitals with new programs potentially training below 
their FTE caps, and therefore being unable to demonstrate the need for 
an increase to their FTE caps. The comparison between a hospital's FTE 
count and its adjusted FTE cap will be made where we distribute any 
slots remaining by HPSA score after we distribute the ``up to 1.00 
FTE'' to each qualifying hospital. We did not propose to compare a 
hospital's FTE count to its adjusted FTE cap when awarding up to 1.00 
FTE to each qualifying hospital.
    Specifically, in the proposed rule we stated that ``in order to 
demonstrate that a hospital does not have sufficient room under its 
current FTE resident cap(s) for purposes of the prioritization 
discussed at section c.3. of this preamble, if applicable . . .'' (89 
FR 36214). Section c.3. referred to the section ``Prioritization of 
Applications by HPSA Score'', this is a separate section from the 
discussion of awarding each qualifying hospital up to 1.00 FTE, which 
was included at section c.2., ``Pro Rata Distribution and Limitation on 
Individual Hospitals''. We note that if we prioritize the distribution 
of any remaining slots by HPSA score, we would only consider the FTE 
cap and count information included on the cost report submitted with 
the application; we would not consider a future cost report as the 
commenter suggests. In addition to providing a level of efficiency with 
respect to the section 4122 application reviews, we attempt to limit 
the need to have decision criteria based on future expectations versus 
cost report data, as the latter can be audited under existing 
processes.
    Comment: One commenter requested clarification on the requirements 
to receive additional slots so that hospitals can accurately complete 
the application process. The commenter stated that guidance would be 
appreciated as to all program requirements, including specifically how 
hospitals can show a ``demonstrated likelihood'' that they will fill 
additional positions and that their current FTE caps leave insufficient 
room for new or expanded programs.
    Response: We refer the commenters to section j. of this preamble 
which discusses the ``Application Process for Receiving Increases in 
FTE Resident Caps''. This section lists the options for attesting to 
meeting Demonstrated Likelihood Criterion One or Two as part of the 
attestation that will be included with the section 4122 application 
module. Prior to the start of the application period, additional 
resources related to the section 4122 application process will be 
included on CMS' Direct Graduate Medical Education (DGME) website at 
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/direct-graduate-medical-education-dgme.
    After consideration of the comments received, we are finalizing our 
proposed policies related to the determination that a hospital has 
demonstrated a likelihood of filling the positions for ``Demonstrated 
Likelihood'' Criterion 1 (New Residency Program) or for ``Demonstrated 
Likelihood'' Criterion 2 (Expansion of an Existing Residency Program), 
without modification.
(2) Determination That a Hospital Is Located or Treated as Being 
Located in a Rural Area (Category One)
    Section 1886(h)(10)(B)(ii) of the Act requires the Secretary to 
distribute not less than 10 percent of resident positions available for 
distribution to each of four categories of hospitals. Under section 
1886(h)(10)(B)(ii)(I) of the Act, the first of these categories 
consists of hospitals that are located in a rural area (as defined in 
section 1886(d)(2)(D) of the Act) or are treated as being located in a 
rural area (pursuant to section 1886(d)(8)(E) of the Act). We refer to 
this category as Category One. We note that the definition of Category 
One for purposes of section 4122 of the CAA, 2023 mirrors the 
definition of Category One included under section 1886(h)(9)(B)(ii)(I) 
for purposes of section 126 of the CAA, 2021. Therefore, we proposed to 
determine Category One eligibility as discussed in the final rule 
implementing section 126 of the CAA, 2021 (86 FR 73422 through 73424).
    For purposes of determining whether a hospital is considered rural, 
we proposed to use the County to CBSA Crosswalk and Urban CBSAs and 
Constituent Counties for Acute Care Hospitals File, or successor files 
containing similar information, from the

[[Page 69357]]

most recent FY IPPS final rule (or correction notice if applicable). 
This file will be available on the CMS website in approximately August 
2024, the year prior to the year of the application deadline, March 31, 
2025. Under the file's current format, blank cells in Columns D and E 
indicate an area outside of a CBSA.
    Under section 1886(d)(8)(E) of the Act, a subsection (d) hospital 
(that is, generally, an IPPS hospital) that is physically located in an 
urban area is treated as being located in a rural area for purposes of 
payment under the IPPS if it meets criteria specified in section 
1886(d)(8)(E)(ii) of the Act, as implemented in the regulations at 
Sec.  412.103. Under these regulations, a hospital may apply to CMS to 
be treated as located in a rural area for purposes of payment under the 
IPPS. Given the fixed number of available residency positions, it is 
necessary to establish a deadline by which a hospital must be treated 
as being located in a rural area for purposes of Category One. We 
proposed to use Table 2, or a successor table containing similar 
information, posted with the most recent IPPS final rule, available on 
the CMS website in approximately August 2024, (or correction notice if 
applicable), to determine whether a hospital is reclassified to rural 
under Sec.  412.103. If a hospital is not listed as reclassified to 
rural on Table 2, but has been subsequently approved by the CMS 
Regional Office to be treated as being located in a rural area for 
purposes of payment under the IPPS as of the March 31, 2025 application 
deadline, the hospital would submit its approval letter with its 
application in order to be treated as being located in a rural area for 
purposes of Category One.
    In this section we present a summary of the public comments and our 
responses to the proposed determination of which hospitals are located 
in a rural area or are treated as being located in a rural area 
(Category One).
    Comment: Several commenters stated that although not referenced in 
these proposed rules, a change in rural categorization to eliminate 
hospitals ``treated as rural'' that are not in fact geographically 
rural is essential to increasing the number of geographically rural 
hospitals gaining new positions, and hopefully that change can be made 
in legislation if not in rules.
    A few commenters encouraged CMS to consider how to incentivize 
rural hospitals to apply for the section 4122 opportunity and award 
slots that will increase rural training.
    Response: We agree with the commenters that increasing the number 
geographically rural hospitals that receive additional slots is an 
essential goal. We note that the law requires that both hospitals that 
are located in a rural area (as defined in section 1886(d)(2)(D) of the 
Act) and hospitals that are treated as being located in a rural area 
(pursuant to section 1886(d)(8)(E) of the Act), qualify as Category One 
hospitals.
    In order to support geographically rural hospitals in the 
application process we anticipate continuing the outreach efforts that 
we have in place for the section 126 distribution, and adding outreach 
regarding the section 4122 distribution in these efforts. CMS has 
worked in conjunction with the Health Resources and Services 
Administration's (HRSA) Federal Office of Rural Health Policy to 
educate potential applicants about the section 126 application process. 
On February 13, 2023 and January 17, 2024, CMS participated with HRSA 
and Rural Residency Planning and Development--Technical Assistance 
Center (www.ruralgme.org) in webinars aimed at educating potential 
rural applicants about the section 126 application process. CMS has 
also participated in the rural health and hospital open door forums and 
is accessible to anyone who submits a question through our section 126 
email inbox at [email protected]. In addition, background 
information regarding the section 126 application process and 
frequently asked questions are posted on CMS' DGME website, https://
www.cms.gov/Medicare/payment/prospective-payment-systems/acute-
inpatient-pps/direct-graduate-medical-education-dgme. The DGME website 
also provides instructions on how to submit a question directly to CMS 
using the Medicare Electronic Application Request Information 
SystemTM (MEARISTM), the application module that 
will be used for both the section 126 and section 4122 application 
processes. We will be updating the CMS DGME website to include similar 
resources and communication tools for the section 4122 application 
process After consideration of the comments received, we are finalizing 
our policy with respect to Category One as proposed, without 
modification.
(3) Determination of Hospitals for Which the Reference Resident Level 
of the Hospital Is Greater Than the Otherwise Applicable Resident Limit 
(Category Two)
    Under section 1886(h)(10)(B)(ii)(II) of the Act, the second 
category consists of hospitals in which the reference resident level of 
the hospital (as specified in section 1886(h)(10)(F)(iv) of the Act) is 
greater than the otherwise applicable resident limit. We refer to this 
category as Category Two. We note the definition of Category Two under 
section 1886(h)(10)(B)(ii)(II) of the Act mirrors the definition of 
Category Two under section 1886(h)(9)(B)(ii)(II), section 126 of the 
CAA, 2021. Therefore, we proposed to determine Category Two eligibility 
as discussed in the final rule implementing section 126 of the CAA, 
2021 (86 FR 73424 through 73425) with adjustments to consider the 
provisions of sections 126, 127, and 131 of the CAA, 2021, as discussed 
later.
    Under section 1886(h)(10)(F)(iv) of the Act, the term ``reference 
resident level'' means, with respect to a hospital, the resident level 
for the most recent cost reporting period of the hospital ending on or 
before the date of enactment of section 1886(h)(10) of the Act, 
December 29, 2022, for which a cost report has been settled (or, if 
not, submitted (subject to audit)).
    Under section 1886(h)(10)(F)(v) of the Act, the term ``resident 
level'' has the meaning given such term in paragraph (7)(C)(i). That 
section defines ``resident level'' as with respect to a hospital, the 
total number of full-time equivalent residents, before the application 
of weighting factors (as determined under paragraph (4)), in the fields 
of allopathic and osteopathic medicine for the hospital.
    Under section 1886(h)(10)(F)(i) of the Act, the term ``otherwise 
applicable resident limit'' means, ``with respect to a hospital, the 
limit otherwise applicable under subparagraphs (F)(i) and (H) of 
paragraph (4) on the resident level for the hospital determined without 
regard to the changes made by this provision of the CAA, 2023, but 
taking into account section 1886(h)(7)(A), (7)(B), (8)(A), (8)(B), and 
(9)(A)'' of the Act. These cross-referenced sub-paragraphs all address 
the distribution of positions and redistribution of unused positions.
    As finalized for purposes of section 126 of the CAA, 2023, the 
``reference resident level'' refers to a hospital's allopathic and 
osteopathic FTE resident count for a specific period. The definition 
can vary based on what calculation is being performed to determine the 
correct allopathic and osteopathic FTE resident count (see, for 
example, 42 CFR 413.79(c)(1)(ii)) (86 FR 73424)). As noted previously, 
section 4122 of the CAA, 2023, under new section 1886(h)(10)(F)(iv) of 
the Act defines the ``reference resident level'' as coming from the 
most recent cost reporting period of the hospital ending

[[Page 69358]]

on or before the date of enactment of the CAA, 2023 (that is, December 
29, 2022).
    Under new section 1886(h)(10)(F)(i) of the Act, the term 
``otherwise applicable resident limit'' is defined as ``the limit 
otherwise applicable under subparagraphs (F)(i) and (H) of paragraph 
(4) on the resident level for the hospital determined without regard to 
this paragraph [that is, section 1886(h)(10) of the Act], but taking 
into account paragraphs (7)(A), (7)(B), (8)(A), (8)(B), and (9)(A).'' 
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 25505), we finalized for 
purposes of section 126 of the CAA, 2021, the definition of ``otherwise 
applicable resident limit'' as the hospital's 1996 cap during its 
reference year, adjusted for the following: ``new medical residency 
training programs'' as defined at Sec.  413.79(l); participation in a 
Medicare GME affiliation agreement as defined at Sec. Sec.  413.75(b) 
and referenced at 413.79(f); participation in an Emergency Medicare GME 
affiliation agreement as defined at Sec.  413.79(f); participation in a 
hospital merger; whether an urban hospital has a separately accredited 
rural training track program as defined at Sec.  413.79(k); applicable 
decreases or increases under section 422 of the MMA, applicable 
decreases or increases under section 5503 of the Affordable Care Act, 
and applicable increases under section 5506 of the Affordable Care Act. 
For purposes of section 4122 of the CAA, 2023, we proposed to use this 
same definition of ``otherwise applicable resident limit'' and adding 
to this definition the following: applicable increases or adjustments 
under sections 126, 127, and 131 of the CAA, 2021.
    Regarding the term ``resident level'', in the CY 2011 OPPS final 
rule (75 FR 46391) we indicated that we generally refer to a hospital's 
number of unweighted allopathic and osteopathic FTE residents in a 
particular period as the hospital's resident level, which we proposed 
to define consistently with the definition in section 4122 of the CAA, 
2023; that is, the ``resident level'' under section 1886(h)(7)(c)(i) of 
the Act, which is defined as the total number of full-time equivalent 
residents, before the application of weighting factors (as determined 
under paragraph 1886(h)(4) of the Act), in the fields of allopathic and 
osteopathic medicine for the hospital.
    For the purposes of section 4122 of the CAA, 2023 we proposed that 
the definitions of the terms ``otherwise applicable resident limit,'' 
``reference resident level,'' and ``resident level'' should be as 
similar as possible to the definitions those terms have in the 
regulations at Sec.  413.79(c), as initially set out in the CY 2011 
OPPS rulemaking, as revised for purposes of section 126 of the CAA, 
2021 (86 FR 73424) with adjustments made to the definition of 
``otherwise applicable resident limit'' for sections 126, 127, and 131 
of the CAA, 2021.
    We did not receive any public comments on our proposal for 
determining whether a hospital's refence resident level is greater than 
its otherwise applicable resident limit (Category Two). We are 
finalizing this policy as proposed.
(4) Determination of Hospitals Located in States With New Medical 
Schools, or Additional Locations and Branch Campuses (Category Three)
    The third category specified in section 1886(h)(10)(B)(ii)(III) of 
the Act, as added by section 4122 of CAA, 2023, consists of hospitals 
located in States with new medical schools that received ``Candidate 
School'' status from the Liaison Committee on Medical Education (LCME) 
or that received ``Pre-Accreditation'' status from the American 
Osteopathic Association (AOA) Commission on Osteopathic College 
Accreditation (the COCA) on or after January 1, 2000, and that have 
achieved or continue to progress toward ``Full Accreditation'' status 
(as such term is defined by the LCME) or toward ``Accreditation'' 
status (as such term is defined by the COCA); or additional locations 
and branch campuses established on or after January 1, 2000, by medical 
schools with ``Full Accreditation'' status (as such term is defined by 
LCME) or ``Accreditation'' status (as such term is defined by the 
COCA). We note that the statutory language is specific with respect to 
these definitions. We refer to this category as Category Three. We note 
that the definition of Category Three for purposes of section 4122 of 
the CAA, 2023, mirrors the definition of Category Three included under 
section 1886(h)(9)(B)(ii)(III) of the Act for purposes of section 126 
of the CAA, 2021. Therefore, we proposed to determine Category Three 
eligibility as discussed in the final rule implementing section 126 of 
the CAA, 2021 (86 FR 73425 through 73426).
    We proposed that the hospitals located in the following 35 States 
and one territory, referred to as Category Three States, would be 
considered Category Three hospitals: Alabama, Arizona, Arkansas, 
California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, 
Illinois, Indiana, Kansas, Kentucky, Louisiana, Massachusetts, 
Michigan, Mississippi, Missouri, Nevada, New Jersey, New Mexico, New 
York, North Carolina, Ohio, Oklahoma, Pennsylvania, Puerto Rico, South 
Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, 
and Wisconsin. If a hospital is located in a state not listed here, but 
it believes the state in which it is located should be on this list, 
the hospital may contact CMS through the MEARIS\TM\ application module 
to make a change to this list, or must provide documentation with 
submission of its application to CMS that the state in which it is 
located has a medical school or additional location or branch campus of 
a medical school established on or after January 1, 2000. Pursuant to 
the statutory language, all hospitals in such states are eligible for 
consideration; the hospitals, themselves, do not need to meet the 
conditions of section 1886(h)(10)(B)(ii)(III)(aa) or (bb) of the Act in 
order to be considered.
    In this section we present a summary of the public comments and our 
responses related to the proposal determining which hospitals are 
located in states with new medical schools or additional locations and 
branch campuses (Category Three).
    Comment: We received several requests to add states to the list of 
Category Three states. A commenter stated Minnesota has an additional 
branch campus of a medical school established after January 1, 2000. 
The commenter stated that beginning in the 2025-2026 academic year and 
as notified November 27, 2023, the University of Minnesota Medical 
School CentraCare Regional Campus St. Cloud formally expanded as a new 
regional campus of the University of Minnesota Medical School. Another 
commenter stated that Minnesota should be added to the list of Category 
Three states due to expansion of the University of Minnesota Medical 
School, which accepted its first medical school applications at a 
branch campus in May 2024.
    A commenter requested CMS amend the list of states where hospitals 
may qualify under Category Three to include Montana and Oregon. The 
commenter stated that colleges of osteopathic medicine locations in 
Montana and Oregon meet the definition of ``New Medical Schools, or 
Additional Locations and Branch Campuses''. The commenter noted that 
Western University of Health Sciences/College of Osteopathic Medicine 
of the Pacific- Northwest in Lebanon, Oregon, began operation in 2011, 
Touro College of Osteopathic Medicine Montana opened in 2023, and Rocky 
Vista University Montana College of Osteopathic Medicine opened in 
2023.

[[Page 69359]]

    Response: We thank the commenters for notifying us that these 
states should be added to the list of Category Three states. We are 
adding Minnesota, Montana, and Oregon to the list of Category Three 
states for purpose of section 4122. In addition, since the list of 
Category Three states for section 4122 mirrors the list of Category 
Three states for section 126, these states will be added to the list of 
Category Three states for round 4 of section 126 (FY 2026) and future 
rounds. Therefore, for both section 4122 and round 4 of section 126 and 
future rounds, hospitals in the following 38 States and one territory, 
referred to as Category Three States, would be considered Category 
Three hospitals: Alabama, Arizona, Arkansas, California, Colorado, 
Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, 
Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, 
Mississippi, Missouri, Montana, Nevada, New Jersey, New Mexico, New 
York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto 
Rico, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, 
West Virginia, and Wisconsin.
(5) Determination of Hospitals That Serve Areas Designated as Health 
Professional Shortage Areas Under Section 332(a)(1)(A) of the Public 
Health Service Act (Category Four)
    The fourth category specified in the law consists of hospitals that 
serve areas designated as HPSAs under section 332(a)(1)(A) of the 
Public Health Service Act (PHSA), as determined by the Secretary. 
Category Four for section 4122 of the CAA, 2023 mirrors the definition 
of Category Four included under section 1886(h)(9)(B)(ii)(IV) for 
purposes of implementing section 126 of the CAA, 2021. Therefore, we 
proposed to determine Category Four eligibility as discussed in the 
final rule implementing section 126 of the CAA, 2021 (86 FR 73426 
through 73430).
    We proposed that an applicant hospital qualifies under Category 
Four if it participates in training residents in a program in which the 
residents rotate for at least 50 percent of their training time to a 
training site(s) physically located in a primary care or mental-health-
only geographic HPSA. Specific to mental-health-only geographic HPSAs, 
we proposed that the program must be a psychiatry program or a 
subspecialty of psychiatry. In addition, a Category Four hospital must 
submit an attestation, signed and dated by an officer or administrator 
of the hospital who signs the hospital's Medicare cost report, that it 
meets the requirement that residents rotate for at least 50 percent of 
their training time to a training site(s) physically located in a 
primary care or mental-health-only geographic HPSA.
    In this section we present a summary of the public comments and our 
responses related to determining which hospitals serve areas designated 
as HPSAs under section 332(a)(1)(A) of the PHSA (Category Four).
    Comment: A commenter stated that CMS should adjust its definition 
of Category Four in light of the small number of programs that apply 
and meet this definition. The commenter stated that CMS should revise 
its requirement that at least 50 percent of the resident's training 
time must occur at facilities located in a HPSA. The commenter stated 
this change will provide programs with greater flexibility, 
particularly if some rotations are not located in a designated HPSA 
site.
    Response: We appreciate the commenter's suggestion to add 
flexibility to the qualifying criterion for Category Four. However, the 
language at section 1886(h)(10)(B)(ii)(IV) of the Act states 
``[h]ospitals that serve areas designated as health professional 
shortage areas under section 332(a)(1)(A) of the Public Health Service 
Act'' (emphasis added). We continue to believe that the inclusion of 
eligibility Category Four was meant to support residency training 
programs that aim to provide a considerable amount of training in 
primary care or mental-health-only geographic HPSAs and that any amount 
less than 50 percent is not sufficiently indicative of a program that 
adequately serves the needs of residents of these HPSAs. After 
consideration of the comments received, we are finalizing our policy 
with respect to Category Four as proposed, without modification.
(6) Determination of a Qualifying Hospital
    Section 1886(h)(10)(F)(iii) of the Act defines a ``qualifying 
hospital'' as ``a hospital described in any of the subclauses (I) 
through (IV) of subparagraph (B)(ii).'' As such, and consistent with 
the definition of ``qualifying hospital'' used for purposes of section 
126 of the CAA, 2021 (86 FR 73430 through 73431), we proposed to define 
a qualifying hospital as a Category One, Category Two, Category Three, 
or Category Four hospital, or one that meets the definitions of more 
than one of these categories.
    In this section we present a summary of the public comments and our 
responses related to determining whether a hospital is considered a 
qualifying hospital.
    Comment: A few commenters expressed support for hospitals that are 
training over their caps being able to qualify for additional residency 
slots under section 4122. One commenter stated that they support the 
eligibility categories, particularly Category Two. The commenter stated 
that this category would be crucial for allotting slots to hospitals 
that truly need them, particularly since these hospitals bear an 
additional financial burden for investing in the healthcare workforce. 
The commenter stated that when these hospitals are in areas with new 
medical schools, the need for additional training positions would be 
even more critical in order to accommodate growing the healthcare 
workforce.
    Response: We appreciate the commenters' support.
    After consideration of the comments received, we are finalizing our 
policy with respect to the definition of a qualifying hospital as 
proposed, without modification.
c. Number of Residency Positions Made Available to Hospitals and 
Limitation on Individual Hospitals
(1) Number of Residency Positions Made Available and Distribution for 
Psychiatry or Psychiatry Subspecialty Residencies
    Section 1886(h)(10)(A)(ii) of the Act limits the aggregate number 
of total new residency positions made available in FY 2026 across all 
hospitals to no more than 200. Section 1886(h)(10)(A)(iii) of the Act 
further specifies that at least 100 of the positions made available 
under section 1886(h)(10) must be distributed for a psychiatry or 
psychiatry subspecialty residency. The phrase ``psychiatry or 
psychiatry subspecialty residency'' is defined at section 
1886(h)(10)(F)(ii) of the Act to mean ``a residency in psychiatry as 
accredited by the Accreditation Council for Graduate Medical Education 
(ACGME) for the purpose of preventing, diagnosing, and treating mental 
health disorders.''
    We proposed that of the total residency slots distributed under 
section 4122 of the CAA, 2023, at least 100 but not more than 200 slots 
would be distributed to hospitals applying for residency programs in 
psychiatry and psychiatry subspecialties. For purposes of determining 
which programs are considered psychiatry subspecialties, we proposed to 
refer to the list included on ACGME website at https://www.acgme.org/ 
under the ``Specialties'' tab, currently: Addiction Medicine, Addiction 
Psychiatry, Brain Injury Medicine, Child and Adolescent Psychiatry, 
Consultation-Liaison

[[Page 69360]]

Psychiatry, Forensic Psychiatry, Geriatric Psychiatry, Hospice and 
Palliative Medicine, and Sleep Medicine. We note that the ACGME list of 
psychiatry subspecialties may change, and we proposed that the list of 
psychiatry subspecialties included on the ACGME website at the time of 
application submission would guide determination of which programs CMS 
would consider psychiatry subspecialties. In accordance with statute, 
the subspecialty would have to be accredited with psychiatry as a core 
specialty. We also proposed that the remaining non-psychiatric slots 
would be awarded to other approved medical residency programs under 42 
CFR 413.75(b).
    In this section we present a summary of public the comments and our 
responses related to the requirement that at least 100 but not more 
than 200 of the positions made available under section 4122 must be 
distributed for a psychiatry or psychiatry subspecialty residency.
    Comment: One commenter stated that they applaud the proposals that 
focus on areas of known need in their rural and underserved 
communities, particularly the needs surrounding psychiatric health 
disorders. The commenter stated that they stand ready to meet the needs 
of their communities under any slot expansions, including providing 
substance use disorder care.
    Response: We appreciate the commenter's support and their efforts 
in providing the necessary psychiatric health services to members of 
their community.
    Comment: Commenters requested that CMS clarify how they would 
address the situation if fewer than 100 positions are awarded to 
psychiatry or psychiatry subspecialty residences, requested that other 
specialties be prioritized, and requested an equivalent increase to 
hospitals' IPF teaching adjustments.
    A few commenters stated that CMS should consider scenarios under 
which the agency receives applications for fewer than 100 psychiatry 
FTEs for FY 2026. The commenters requested that in the final rule, CMS 
address two scenarios: (1) Where fewer than 100 FTEs are awarded to 
psychiatry or psychiatry subspecialty programs; and (2) Where fewer 
than 200 positions are awarded in total. The commenters stated that 
they interpret the statutory language in section 4122 to mean that 
slots will become effective as of ``July 1 of the fiscal year of the 
increase,'' which should allow CMS to award positions through another 
application cycle if fewer than 100 positions are awarded to psychiatry 
programs or fewer than 200 positions are awarded in total.
    Another commenter stated that it is not clear how CMS would proceed 
if it does not receive enough requests to allocate 100 slots to 
psychiatry or psychiatry subspecialty programs. The commenter stated 
that they recognize the need to train, recruit, and retain behavioral 
health providers, but believe that CMS should not reserve unfilled 
slots from this application round for any specialty for future rounds 
of distribution. As an example, if CMS receives applications for only 
90 psychiatry slots, those 10 remaining slots should be allocated to 
other programs that have submitted applications and qualify under the 
proposed eligibility criteria. The commenter stated that withholding 
slots for certain specialties would ignore the growing urgency of 
physician shortages across all specialties and therefore asked CMS to 
clarify what it intends to do if the psychiatry slots are not filled in 
a single round.
    Another commenter recommended that if CMS does not receive enough 
applications to distribute the 100 slots designated for psychiatry 
programs (or the full 200 slots more generally) in a single round, that 
CMS hold another application cycle to distribute the remaining slots.
    Response: The language that the commenter is referring to ``July 1 
of the fiscal year of the increase,'' refers to July 1, 2026, which is 
the effective date of the slots awarded under section 4122. However, we 
believe that while the statute only contemplates a single round for 
section 4122 occurring in FY 2026, the requirement that 200 slots be 
distributed and that 100 of the slots go to psychiatry residencies or 
subspecialties of psychiatry takes precedence. Therefore, in the 
situation where we are unable to distribute 200 slots and/or fewer than 
100 slots are going to psychiatry programs or subspecialties of 
psychiatry in FY 2026, we would initiate another round of section 4122 
distributions in order to meet these statutory criteria.
    Comment: A few commenters stated that the application for section 
4122 mirrors the application for section 126 in that psychiatry 
programs are required to subtract the time residents rotate to 
inpatient psychiatric facilities (IPFs) from their IME FTE requests for 
awards. Resident time at IPFs is removed from the IME application 
because IPF facilities and units file a separate cost report under the 
IPF PPS and receive a facility-level payment adjustment for teaching 
status. The commenters stated that the amount of required training time 
for psychiatry residents in inpatient or outpatient settings is 
significant and noted that the Accreditation Council on Graduate 
Medical Education (ACGME) requires psychiatry residents to receive 
between 6 months and 16 months of inpatient psychiatry training and at 
least 12 months of outpatient psychiatry experience. The commenters 
stated that while IME FTEs are capped by the Balanced Budget Act of 
1997, there is no statutory limitation on the number of FTE residents 
that CMS may reimburse IPFs for under the IPF PPS. The commenters 
stated that CMS has limited the number of residents that an IPF can 
count towards the teaching ratio, as a matter of policy, since the 
implementation of the IPF PPS in FY 2005.
    The commenters stated that awards made under section 4122 would 
likely represent the largest increase in Medicare-funded psychiatry or 
psychiatry subspecialty training since Congress capped hospitals' FTE 
counts in 1997. The commenters requested that because psychiatry 
residents often spend a significant amount of time training at IPF 
hospitals and units, CMS should use its authority to increase the 
number of FTEs at IPFs excluded from requests for increases for IPPS 
purposes, for slot distributions under section 4122 and section 126.
    Response: We understand the commenters' request to receive 
additional payment under the IPF PPS for residency training time spent 
in psychiatry distinct party units or psychiatric hospitals since this 
time is not countable for IME payment purposes. However, we did not 
propose any increases to the IPF teaching adjustment for purposes of 
section 4122 and therefore consider these comments to be out of scope 
and are not responding to them in this final rule. We will consider the 
issue of increases to the IPF teaching adjustment for future 
rulemaking.
    Comment: A commenter stated that they deeply appreciate CMS' focus 
on prioritizing the ongoing behavioral health crisis and on reducing 
disparities through its planned distribution of residency slots. The 
commenter stated that the COVID-19 pandemic emphasized the importance 
of mental health and having an adequate mental health care workforce. 
The commenter stated that addressing behavioral health workforce issues 
is critically important for those experiencing access issues, such as 
people living in rural areas, people of color, and people who identify 
as LGBTQ+. The commenter stated that the proposed rule helps

[[Page 69361]]

address that shortage by increasing the number of GME slots dedicated 
to psychiatry and related specialties, with a particular emphasis on 
improving access in areas with provider shortages. The commenter stated 
that while they understand that the proposed rule is limited to the 
additional GME slots allocated through section 4122 of the CAA, 2023, 
they urge CMS to adopt additional training requirements for GME slots 
to ensure that all trained physicians are able to provide culturally 
responsive care.
    Response: We appreciate the commenter's support related to the 
distribution of additional slots for psychiatry and subspecialties of 
psychiatry, with an emphasis on access to care in areas with provider 
shortages. We agree with the importance of requiring that all 
physicians are trained in providing culturally responsive care which is 
why we are requiring for both section 126 and section 4122 (see section 
e. below) that all applicant hospitals for slots allocated under these 
provisions are required to attest that they meet the National CLAS 
Standards to ensure that the these slot distributions broaden the 
availability of quality care and services to all individuals, 
regardless of preferred language, cultures, and health beliefs. The 
website https://thinkculturalhealth.hhs.gov, which provides guidance 
related to the National CLAS Standards, includes educational material 
designed to help providers provide culturally and linguistically 
appropriate services. Educational tools are provided for behavioral 
health services, which address all aspects of a provider's and client's 
cultural identity including geography, gender identity, race, and 
sexual orientation, see https://thinkculturalhealth.hhs.gov/education/behavioral-health.
    Comment: A commenter stated that while they understand that it is a 
statutory requirement that 50 percent of the additional residency 
positions are dedicated to psychiatry and psychiatry subspecialties, 
they remind CMS that specialties such as pathology are experiencing 
significant workforce shortages that need to be addressed in future 
rules, particularly for rural areas. The commenter stated that 
physician shortages in specialty care are significant and often 
overlooked by policy makers, for example, in recent years, annual 
demand for pathologists in the US has far outstripped the number of new 
pathologists entering the workforce. The commenter stated that in 2023, 
only 30% of pathology practice leaders who were seeking to hire at 
least one or more pathologists reported that they expected to fill all 
open positions. The commenter stated they believe that the CMS has not 
done enough to address the issue of physician shortages in the proposed 
rule. The commenter provided many examples of the influence of 
pathologists' services on clinical decision-making and stated these 
services are pervasive and constitute the critical foundation for 
appropriate patient care. The commenter urged CMS to create 
opportunities and incentives for the pathologist workforce to expand as 
needed to meet population growth and ageing.
    Another commenter stated that they recognize that CMS is required 
to prioritize distribution to psychiatry specialties and subspecialties 
to improve access to critical mental health services, however, they 
urged CMS to ensure that an adequate number of slots go towards primary 
care and other specialties with well documented shortages, like 
internal medicine, family medicine, and pediatrics. The commenter 
stated that it is important to note that primary care physicians play a 
significant role in providing mental health care services. The 
commenter referred to a cross-sectional study using Medical Expenditure 
Panel Survey data, which found that during the COVID-19 pandemic, 
primary care physicians provided a significant proportion of care for 
people with mental health disorders--nearly 40 percent of visits for 
depression, anxiety, and any mental illness were performed by primary 
care physicians. The commenter stated that primary care physicians also 
provided over one-third of the care and wrote a quarter of the 
prescribed medications for patients with severe mental illness. Another 
commenter stated that the forecasted insufficiency of primary care 
physicians in the future health care workforce makes this a pressing 
concern for public health agencies to take immediate action to 
prioritize educating and training the next generation of primary care 
physicians and providing sufficient resources to training centers to 
competently supervise and instruct these scarce professionals. The 
commenter recommended that primary care be prioritized in the 
distribution of the remaining 100 GME slots.
    A commenter stated that they support CMS' proposal to include 
Hospice and Palliative Medicine as a psychiatry subspecialty that may 
qualify for the reserved psychiatry GME positions under section 4122. 
The commenter stated that Hospice and Palliative Medicine is an 
important component of psychiatric care, and the prioritization of this 
subspecialty will help to build a workforce capable of addressing the 
needs of patients with serious illness through a psychiatric lens. The 
commenter requested that as CMS contemplates final policies for 
allocating the remaining, non-psychiatry GME positions, CMS add a 
method for prioritizing specialties that offer high value and/or 
demonstrate significant shortage, such as Hospice and Palliative 
Medicine. The commenter stated that programs that maintain partnerships 
with Hospice and Palliative Medicine fellowship programs, for example, 
surgery residencies that include a paired Hospice and Palliative 
fellowship track, should also be prioritized. The commenter stated that 
these changes would help build a physician workforce closely aligned 
with the nation's evolving healthcare needs and improve care and 
quality of life for millions of Americans facing serious illness, along 
with their families and caregivers.
    A commenter stated that CMS should enable applicants to tailor 
programs to support positions needed most in rural and underserved 
communities. The commenter stated that they commend the emphasis on 
behavioral health but that the dedication of at least one-half of the 
total number of positions to psychiatry or psychiatry subspecialty 
residencies may result in some slots going unused. The commenter stated 
that in Iowa and nationally, there are additional and significant 
specialty needs in family medicine, particularly in rural areas (but 
urban as well); OBGYN, and geriatrics, among others. The commenter 
stated that they discourage CMS from establishing a set-aside 
percentage for behavioral health and recommend that CMS defer to local 
needs.
    A commenter stated that while they understand the requirement to 
distribute at least 100 slots to psychiatry is statutory, the 
commenter's psychiatry programs are not full, and psychiatrists are 
permitted to start their practices without completing their last year 
of residency training. The commenter stated that they have not 
experienced the need for more slots to train psychiatry residents and 
requiring 100 slots to be dedicated to psychiatry means those slots 
cannot be allocated to other programs that are pushing hospitals over 
their caps.
    A commenter stated that they support the provision that directs 
half of the resident slots towards psychiatry or psychiatry 
subspecialities, but there is no assurance that these slots will go to 
the areas that need them most. The commenter stated that CMS should 
create guardrails to ensure the lack of

[[Page 69362]]

psychiatrists and related specialists in underserved areas throughout 
the country gets addressed. The commenter stated that if CMS is 
considering the allocation of GME FTE slots by specialty, it should 
implement this policy as a pilot project, gather validated data by 
specialty across the nation, then prioritize primary care physician and 
psychiatry shortages, and if successful, widely implement such a policy 
across all of GME.
    Response: We understand the commenters' concerns related to 
physician shortages in specialties in addition to psychiatry and we 
appreciate the commenters' efforts to address these shortages. We note 
that the requirement under section 4122 to distribute at least 100 
slots to psychiatry or psychiatry subspecialties is statutory and there 
is no statutory requirement for other specialties.
    After consideration of the comments received, we are finalizing the 
policy to distribute at least 100 slots to psychiatry or subspecialties 
of psychiatry as proposed, without modification.
(2) Pro Rata Distribution and Limitation on Individual Hospitals
    As noted earlier in this preamble, section 1886(h)(10)(B)(iii) of 
the Act requires that each qualifying hospital that submits a timely 
application under subparagraph 1886(h)(10)(A) of the Act would receive 
at least 1 (or a fraction of 1) of the positions made available under 
section 1886(h)(10) of the Act before any qualifying hospital receives 
more than 1 of such positions. Section 1886(h)(10)(C)(i) of the Act 
limits a qualifying hospital to receiving no more than 10 additional 
FTEs from those authorized under section 1886(h)(10) of the Act. As 
stated earlier in this preamble, we proposed that a qualifying hospital 
is a Category One, Category Two, Category Three, or Category Four 
hospital, or one that meets the definitions of more than one of these 
categories. For purposes of distributing residency slots under section 
4122 of the CAA, 2023, we proposed to first distribute slots by 
prorating the available 200 positions among all qualifying hospitals 
such that each qualifying hospital receives up to 1.00 FTE, that is, 
1.00 FTE or a fraction of 1.00 FTE. We proposed that if residency 
positions are awarded based on a fraction of 1.00 FTE, each qualifying 
hospital would receive the same FTE amount. Consistent with the number 
of decimal places used for the FTE slots awards in other distributions 
such as section 126 of the CAA, 2021, we proposed to prorate the slot 
awards under section 4122 of the CAA, 2023, rounded to two decimal 
places. The table later in this section provides examples of how the 
200 slots would be prorated based on the number of qualifying 
applicants. Given the limited number of residency positions available 
and the number of hospitals we expect to apply, we proposed that a 
hospital may not submit more than one application under section 4122 of 
the CAA, 2023.

------------------------------------------------------------------------
                                                          Pro rata share
            Number of qualifying  applicants                of 200 FTEs
------------------------------------------------------------------------
180.....................................................            1.00
200.....................................................            1.00
350.....................................................            0.57
1,000...................................................            0.20
------------------------------------------------------------------------

    We refer readers to further below in this section where we discuss 
an alternative we considered for the distribution of slots under 
section 4122 of the CAA, 2023 and present a summary of the public 
comments we received and our responses. We also refer readers to 
section I.O.6. of Appendix A of this final rule where we discuss the 
same alternative considered.
    In this section we present a summary of the public comments and our 
responses related to the requirement to distribute at least 1 (or a 
fraction of 1) of the positions made available under section 4122 of 
the CAA, 2023, before any qualifying hospital receives more than 1 
position.
    Comment: A few commenters supported the proposal to award each 
qualifying hospital up to 1.00 FTE. A commenter stated that unlike the 
formula for distribution of the 1,000 GME slots made available through 
the CAA, 2021, CMS did not propose a ``super-prioritization'' of HPSA-
designated hospitals for the CAA, 2023. The commenter stated that they 
support the equitable distribution methodology proposed for the 200 
slots created by the CAA, 2023, and encouraged CMS to take a similar 
approach with the slots created by the CAA, 2021. Another commenter 
stated that they believe the proposed methodology will allow for more 
participation from qualified providers versus a strictly HSPA-based 
approach.
    Response: We appreciate the commenters' support. We will not be 
applying this prorating methodology to section 126 of CAA, 2021 because 
the explicit instruction to award each qualifying hospital 1.00 FTE or 
a fraction of 1.00 is only included for purposes of the slot 
distribution under section 4122 of CAA, 2023.
    Comment: Several commenters expressed concerns regarding the 
proposal to award each qualifying hospital up to 1.00 FTE. A commenter 
stated they continue to support awards being aligned with program 
lengths, so that for example a hospital applying to train residents in 
a three-year program can request up to three FTE residents per fiscal 
year, as is the case for the policy finalized for purposes of section 
126 of the CAA, 2021. The commenter stated that they understand that 
for section 4122 of the CAA, 2023, subsection (B)(iii), ``Pro Rata 
Application'', may prevent CMS from being able to align hospital GME 
awards with program lengths and that if this is the case, they 
recommend CMS award a minimum of 1.00 FTE to qualifying hospitals and 
not award fractional positions. The commenter stated that they believe 
anything less than 1.00 FTE would harm family medicine residencies--
particularly small programs--as it would deter many programs from being 
able to expand. The commenter stated that while fractional FTE awards 
may be workable in large academic institutions where there are multiple 
funding options available, these FTE awards would be a barrier for 
small residencies that do not have similarly deep resources. The 
commenter urged CMS to support the sustainability of small programs by 
distributing a minimum of 1.00 FTE to qualifying residency programs.
    A few commenters expressed concern that awarding up to 1.00 FTE per 
hospital would dissuade rural programs from applying. The commenters 
noted that these programs are already deterred from applying for 
section 126 slots because of the HPSA score prioritization and that a 
disadvantageous pro rata distribution under section 4122 would add yet 
another barrier to applying. The commenters stated that some rural 
hospitals may not apply because they may not receive a full slot, or a 
full FTE. The commenters stated that one slot, or one FTE, covers the 
cost of training one resident for one year whereas a fraction of an FTE 
is not incentive enough for rural residency programs to apply because 
most of the resident's training would not be funded by Medicare. The 
commenter stated that rural residency programs are less able to 
shoulder unfunded training compared to large urban academic medical 
centers and that this situation makes CMS' decision on how to 
administer the pro rata distribution paramount.
    Several commenters expressed concern related to hospitals having to 
self-fund additional FTEs under the scenario where each qualifying 
hospital would receive up to 1.00 FTE. Commenters stated that as part 
of the proposal for section 126, CMS attempted to award slots in a 
similar

[[Page 69363]]

manner, limiting the award to each qualifying hospital to 1.00 FTE. The 
commenters stated that in this instance, there was also consensus from 
the GME community that the 1.00 FTE limitation on awards would not be a 
meaningful increase for institutions. The commenters stated that 
because of the longitudinal requirement to train residents over the 
course of several years, the limitation of 1.00 FTE would limit the 
development of a full complement in subsequent postgraduate years. The 
commenters stated that this policy would require hospitals awarded a 
pro-rata distribution of 1.00 FTE to self-fund full complement 
increases beyond the 1.00 FTE awarded.
    A commenter stated they have significant concerns that CMS' 
proposed methodology could result in many hospitals receiving only a 
1.00 FTE (or less) cap slot, which does not support expanding or 
starting a new multi-year residency program. The commenter stated they 
recognize that the language within section 4122 mandating awarding 
every applicant hospital that applies with up to 1.00 FTE presents 
certain implementation challenges, however, the commenter requested 
that CMS consider the implications of not tying the initial pro rata 
distribution for hospitals to the distribution of remaining slots to 
those same hospitals. The commenter stated that residency programs 
typically expand by the length of their program. For example, if a 
hospital with a four-year psychiatry program currently training 16 
residents applied to expand, it would normally do so for four positions 
(to become a 20-resident training program) or some multiple of four 
positions. The commenter stated that under CMS' proposal, if a hospital 
applied to expand a four-year psychiatry program and received only 1.00 
FTE under section 4122, the hospital would not receive any 
reimbursement for the three FTEs required to expand the program by one 
resident each year. The commenter stated that the only specialty 
training programs that could reasonably be expected to expand by one 
resident are transitional year programs and one-year fellowship 
programs. The commenter stated that while these are important 
specialties to expand, they do not believe it was Congress's intent to 
incentivize training in just these programs. The commenter stated that 
the CMS proposal leaves little incentive for hospitals to apply for 
these slots for psychiatry, primary care, general surgery, geriatrics, 
or other shortage specialties if hospitals are likely to be responsible 
for most of the cost of expanding or starting these programs. The 
commenter stated that they note that in a separate section of the 
proposed rule, which discusses how to evaluate new residency programs 
for rural-based or small programs, CMS states, ``[W]e solicit comment 
on defining a small residency program as a program accredited for 16 or 
fewer resident positions, because 16 positions would encompass the 
minimum number of resident positions required for accredited programs 
in certain specialties, such as primary care and general surgery, that 
have historically experienced physician shortages, and therefore have 
been prioritized by Congress and CMS for receipt of slots under 
sections 5503 and 5506 of the Affordable Care Act [emphasis added].'' 
The commenter stated they agree with CMS that Congress has repeatedly 
prioritized these specialty programs, and they encourage CMS to use the 
implementation of section 4122 to continue to prioritize these and 
other shortage specialty programs.
    Another commenter stated that if more than 200 applicants apply, 
the resulting award would be pro-rated FTEs and if the number of 
applicants exceed 400, the award would be virtually unworkable for many 
programs. The commenter stated that from a sustainability standpoint, 
it is operationally preferrable to have CMS guarantee an award of at 
least 1.00 FTE, and ideally to fund entirely in 1.00 FTE increments. 
Another commenter requested that CMS provide a minimum of 1.0 FTE to 
each qualifying hospital.
    Response: We understand the commenters' concerns that a fraction of 
an FTE does not provide for the resources necessary to allow for a 
significant expansion or for the establishment of a new program without 
additional funding sources. However, we note that we are bound by the 
language of section 1886(h)(10)(B)(iii), which states ``[t]he Secretary 
shall ensure that each qualifying hospital that submits a timely 
application under subparagraph (A) receives at least 1 (or a fraction 
of 1) of the positions made available under this paragraph before any 
qualifying hospital receives more than 1 of such positions.'' Given 
that there are over 1,000 teaching hospitals and the likelihood that 
many of these hospitals qualify for additional slots under at least one 
eligibility category, committing to a prorated distribution that 
exceeds 1.00 FTE may conflict with the statutory requirement to 
distribute at least a fraction of an FTE to each qualifying hospital. 
In addition, while we acknowledge the challenges associated with 
finding alternative funding streams, we note that the Medicare GME 
program, as currently structured in the statute, is not intended to 
function as the only financing source for residency training.
    After consideration of the comments received, we are finalizing our 
policies as proposed with respect to the pro rata distribution of slots 
under section 4122, without modification. Specifically, we will first 
distribute slots by prorating the available 200 positions among all 
qualifying hospitals such that each qualifying hospital receives up to 
1.00 FTE, that is, 1.00 FTE or a fraction of 1.00 FTE up to two decimal 
places. If residency positions are awarded based on a fraction of 1.00 
FTE, each qualifying hospital would receive the same FTE amount.
    The following section includes a summary of the comments and our 
responses related to the alternative considered for the prioritization 
of slots under section 4122 of the CAA, 2023. We considered an 
alternative approach to distributing the 200 residency slots under 
section 4122 of the CAA, 2023, which would place greater emphasis on 
the distribution of additional residency positions to hospitals that 
are training residents in geographic and population HPSAs. Under this 
approach, the statutory requirement that each qualifying hospital 
receive 1 slot or a fraction of 1 slot would be met by awarding each 
qualifying hospital 0.01 FTE. The remaining residency slots would be 
prioritized for distribution based on the HPSA score associated with 
the program for which each hospital is applying using the HPSA 
prioritization methodology we finalized for purposes of implementing 
section 126 of the CAA, 2021 (86 FR 73434 through 73440). To 
illustrate, if 1,000 qualifying hospitals were to apply under section 
4122 of the CAA, 2023, we would first award each qualifying hospital 
0.01 FTEs, resulting in the distribution of 10.00 FTEs (1,000 x 0.01). 
We would then distribute the remaining 190 slots (200-10) based on the 
HPSA prioritization method we finalized for implementation of section 
126 of the CAA, 2021, such that applications associated with higher 
HPSA scores would receive priority.
    We believed that under this alternative distribution methodology we 
would further the work achieved by section 126 of the CAA, 2021, by 
distributing residency slots to underserved areas in greatest need of 
additional physicians. Using this alternative distribution methodology, 
we would limit a qualifying hospital's total award under section 4122 
of the CAA, 2023, to 10.00 additional FTEs

[[Page 69364]]

consistent with section 1886(h)(10)(C)(i) of the Act. Consistent with 
the methodology we use for implementation of section 126 of the CAA, 
2021, as part of determining eligibility for additional slots, we would 
compare the hospital's FTE resident count to its adjusted FTE resident 
cap on the cost report worksheets submitted with its application. If 
the hospital's FTE count is below its adjusted FTE cap, the hospital 
would be ineligible for its full FTE request. We note that in 
calculating the adjusted FTE cap we do not consider adjustments for 
Medicare GME Affiliation Agreements, since these adjustments are 
temporary. We sought comment on this alternative proposal, including 
awarding each qualifying hospital 0.01 FTEs and use of HPSA scores to 
determine priority for remaining slots.
    Comment: Several commenters did not support CMS' alternative 
distribution proposal. According to commenters the alternative 
distribution proposal would award FTEs to qualifying hospitals in an 
amount that would be too low to meaningfully increase residency 
training in qualifying hospitals, particularly during a period of time 
with significant projected workforce shortages and would result in an 
overreliance on the HPSA prioritization methodology. Commenters also 
noted that the alternative distribution proposal, if implemented, would 
create an administrative burden on hospitals as they would have to 
potentially account for an increase of 0.01 FTE on their cost reports. 
Additionally, commenters referenced the statutory language under 
1886(h)(10)(C)(ii) which states that hospitals awarded slots under 
section 4122 agree to increase the total number of full-time equivalent 
residency positions under the approved medical residency training 
program of such hospital by the number of such positions made available 
by such increase under this paragraph. According to commenters, 
hospitals could be obligated to demonstrate an increase in the 
program's FTE resident count consistent with an award, even if the 
award was too minimal to represent a full FTE.
    A few commenters stated that although they believe that the 
alternative distribution proposal would not benefit the expansion of 
rural residency programs, it would provide rural hospitals with a 
better chance of receiving new positions. The commenters explained that 
if a high number of hospitals apply for residency positions under 
section 4122, under the alternative distribution methodology, there 
would be more slots leftover to be distributed to each of the four 
categories, prioritized by HPSA score compared to the other proposed 
distribution method. According to a commenter, the alternative 
distribution method creates more potential for rural hospitals to 
receive multiple slots whereas the other proposed distribution method 
would make it less likely that rural hospitals would receive more than 
1.0 FTE if 200 or more hospitals apply. Commenters referenced round 1 
of the distribution of residency positions under section 126, where 291 
hospitals applied for residency positions, to support their projection 
that 200 or more hospitals were likely to apply for the distribution of 
section 4122 residency positions. The commenters stated that rural 
hospitals likely need to receive 3-5 residency positions to fully fund 
a resident for an entire residency and that the alternative 
distribution methodology gives these hospitals the best chance for that 
outcome, whereas the other distribution methodology would provide each 
qualifying hospital with about 0.68 FTE with no remaining residency 
positions available for distribution.
    Response: We thank the commenters for their feedback on the 
prioritization method described in the ``Alternatives Considered'' 
portion of the proposed rule. For the commenters who stated that under 
the alternative considered rural hospitals may be able to receive more 
slots, we share the commenters' goal of ensuring hospitals with 
residency programs that are serving HPSAs are able to experience 
opportunities to grow and better meet the healthcare needs of the 
communities they serve. We encourage rural applicants to reach out to 
CMS directly with any questions or concerns related to the section 4122 
application process and as noted above, we will continue to engage with 
and provide outreach to potential rural applicants.
    For the several commenters opposed to the alternative considered, 
we agree that an increase of only 0.01 FTE may not make a significant 
enough impact to allow a program to begin or expand. We also agree that 
there is significant burden associated with having to account for 0.01 
FTE on a cost report and to attest that the hospital was able to meet 
the statutory requirement to increase the total number of FTE residency 
positions in their residency program by 0.01 FTE. Under the proposed 
methodology, applicants also have the potential to be awarded a 
fraction of an FTE, but that amount would likely be higher than 0.01 
(based on the number of qualifying hospitals that apply), and therefore 
provide a relatively larger FTE cap increase. We refer readers to the 
table earlier in this section which provides examples of how the 200 
slots would be prorated based on the number of qualifying applicants.
    After consideration of the comments received and the limited 
support for the alternative considered, we are not finalizing the 
alternative methodology.
(3) Prioritization of Applications by HPSA Score
    We proposed that if any residency slots remain after distributing 
up to 1.00 FTE to each qualifying hospital, we would prioritize the 
distribution of the remaining slots based on the HPSA score associated 
with the program for which each hospital is applying. Taking an example 
from the table in the previous section, if 180 qualifying hospitals 
apply under section 4122 of the CAA, 2023, each qualifying hospital 
would receive 1.00 FTE and the 20 remaining residency positions would 
be prioritized for distribution based on the HPSA score associated with 
the program for which each hospital is applying. We proposed the HPSA 
prioritization methodology would be the methodology we finalized for 
purposes of section 126 of the CAA, 2021 (86 FR 73434 through 73440). 
We believe including such a prioritization would further support the 
training of residents in underserved and rural areas thereby helping to 
address physician shortages and the larger issue of health inequities 
in these areas. Using this HPSA prioritization method, we proposed to 
limit a qualifying hospital's total award under section 4122 of the 
CAA, 2023, to 10.00 additional FTEs, consistent with section 
1886(h)(10)(C)(i) of the Act. Consistent with the methodology we use 
for implementing section 126 of the CAA, 2021, as part of determining 
eligibility for additional slots, we would compare the hospital's FTE 
resident count to its adjusted FTE resident cap on the cost report 
worksheets submitted with its application. If the hospital's FTE count 
is below its adjusted FTE cap, the hospital would be ineligible for its 
full FTE request, because the facility had not yet fully utilized the 
already-allotted slots. We note that in calculating the adjusted FTE 
cap we would not consider adjustments for Medicare GME Affiliation 
Agreements since these adjustments are temporary.
    We proposed that as finalized under section 126 of the CAA, 2021 
(86 FR 73435), for purposes of prioritization under section 4122 of the 
CAA, 2023, primary care and mental-health-only population and 
geographic HPSAs

[[Page 69365]]

would apply. As discussed in the final rule implementing section 126 of 
the CAA, 2021, each year in November, prior to the beginning of the 
application period, CMS would request HPSA ID and score information 
from HRSA so that recent HPSA information is available for use for the 
application period. CMS would only use this HPSA information, HPSA ID's 
and their corresponding HPSA scores, in order to review and prioritize 
applications. To assist hospitals in preparing for their applications, 
the HPSA information received from HRSA will also be posted when the 
online application system becomes available on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/DGME. The information would also be posted on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/IPPS-Regulations-and-Notices. Click on the 
link on the left side of the screen associated with the appropriate 
final rule home page or ``Acute Inpatient--Files for Download'' (86 FR 
73445).
    Given that residency slots under section 4122 of the CAA, 2023 are 
to be distributed in FY 2026, we proposed that the HPSA IDs and scores 
used for the prioritization of slots, if applicable, would be the same 
HPSA IDs and scores used for the prioritization of slots under round 4 
of section 126 of the CAA, 2021. This group would include HPSAs that 
are in designated or proposed for withdrawal status at the time the 
HPSA information is received from HRSA. As noted in section j. of this 
preamble, CMS would request HPSA data from HRSA in November 2024 to be 
used for purposes of section 4122 of the CAA, 2023.
    In this section we present a summary of the public comments and our 
responses related to prioritizing the distribution of slots by HPSA 
score for purposes of the section 4122, if any slots remain after 
awarding each qualifying hospital up to 1.00 FTE.
    Comment: A few commenters supported the proposal to prioritize the 
distribution of slots by HPSA score if any slots remain after awarding 
each qualifying hospital up to 1.00 FTE.
    A commenter stated they advocated for and are deeply supportive of 
CMS' proposal to apply the same methodology for distributing the new 
slots that was finalized for the slots enacted by section 126 of the 
2021 CAA, including the proposal to require hospitals that serve areas 
designated as HPSAs to have at least 50 percent of residents' training 
time occur at training locations within a primary care or mental 
health-only geographic HPSA in order to be able to apply for new GME 
slots. The commenter stated that they strongly believe continuing this 
equity-focused methodology would help mitigate health access 
disparities and more effectively address physician shortages.
    Another commenter stated that they encourage CMS to prioritize the 
distribution of slots by awarding to primary care programs and that 
they support the proposal to prioritize the distribution of remaining 
slots by HPSA score. The commenter stated that they believe such a 
prioritization would ensure that an appropriate number of the new 
residency positions would go to the hospitals where they would have the 
greatest impact on access to care--where there were well-documented 
shortages in primary care and other internal medicine subspecialties. 
The commenter stated that this HPSA-based approach would not only 
address the current maldistribution of the physician workforce and 
mitigate workforce shortages in primary care, including general 
internal medicine, but also address health inequities and reach 
underserved populations.
    Response: We appreciate the commenters' support. We note that while 
the law requires that at least half of the 200 slots be distributed to 
psychiatry programs or subspecialties of psychiatry, it does not limit 
the specialties or subspecialties that are eligible to apply for the 
remaining positions.
    Comment: A commenter stated that they agree the HPSA designation 
would be useful for identifying underserved geographies and some 
patient populations that are disproportionately impacted by the 
addiction crisis, such as people experiencing homelessness and those 
who are eligible for Medicaid. The commenter noted the exclusion of 
clinicians who specialize in treating substance use disorder (SUD) from 
the list of core health professionals used to define the current mental 
health HPSA designation. The commenter stated that this definition does 
not include addiction medicine physicians nor certified addiction 
registered nurses--advance practice (CARN-AP), despite areas with ``a 
high degree of substance abuse'' being included in the determination of 
``unusually high needs for mental health services'' criterion. The 
commenter urged Federal agencies, including CMS, to work with HRSA to 
revise the mental health HPSA definition and related criterion to 
include clinicians that specialize in treating SUD, particularly 
addiction medicine physicians and CARN-APs. The commenter stated that 
including these clinicians would more accurately measure the SUD 
treatment workforce and allow residency positions and other funding 
opportunities to be better targeted to underserved areas with high SUD 
and overdose burdens but limited treatment access.
    Response: We appreciate the commenter sharing their concerns 
related to the exclusion of clinicians who specialize in treating 
substance use disorder from the list of core health professionals used 
to define the current mental health HPSA designation. The list of core 
health professionals used to define the current mental health HPSA 
designation is outside the scope of this rulemaking, but we will share 
the commenter's concerns with HRSA.
    Comment: Numerous commenters expressed concern with the proposal to 
prioritize the distribution of slots by HPSA score if any slots remain 
after awarding each qualifying hospital up to 1.00 FTE. Commenters 
stated that the proposed HPSA prioritization is not consistent with 
legislative or statutory intent. A commenter stated that prioritizing 
hospitals located in HPSAs deviates from the statute, which states that 
slots are to be distributed to hospitals that serve HPSAs. The 
commenter stated that limiting distribution priority to hospitals 
located in HPSAs may inadvertently disqualify hospitals that 
disproportionately serve large numbers of low income and underserved 
individuals, particularly because HPSAs presumably do not have many 
access points for healthcare services.
    A commenter stated that they do not believe that Congress intended 
for CMS to revert to the methodology used under section 126. The 
commenter stated that Congress newly added the pro rata distribution in 
section 4122 as a directive to CMS to not simply use the same 
methodology as was used in section 126. The commenter stated that the 
fact CMS is using that same methodology after implementing the pro rata 
distribution seems to fly in the face of how Congress deliberately 
modified the distribution methodology for section 4122 from what was 
included in section 126. The commenter stated that had Congress wished 
to create a ``super prioritization'' and focus on hospitals that train 
residents in HPSAs, it would have done so. The commenter stated that 
prioritization using HPSAs favors rural areas over urban areas and that 
according to their analysis, 75.4 percent of HPSAs are rural or 
partially rural, and rural and partially rural HPSAs are 
disproportionately represented among those HPSAs with the highest 
scores. The commenter stated they do not

[[Page 69366]]

believe that it was the intention of section 4122 to prioritize rural 
applicants in this manner. Rather, Congress set up the prioritization 
among hospitals in creating the four categories of qualifying hospitals 
and specifying that a minimum of 10 percent of the slots must be 
distributed to hospitals in each of those four categories. The 
commenter stated that the only further prioritization needed for 
section 4122 was to determine how to prioritize applicant specialty 
programs as was done in section 5503 of the Affordable Care Act.
    Several commenters conveyed their opposition to what they believe 
is CMS' overreliance on HPSA scores in the distribution of slots and 
stated HPSAs should be used sparingly. The commenters stated the HPSA 
prioritization has no foundation in the enabling legislation and that 
it is inherently unfair to deserving hospitals that may qualify for new 
residency slots in the other three (nonHPSA) categories. The commenters 
stated that CMS noted in the past that its methodology does not intend 
to exclude hospitals that do not serve HPSAs from receiving new 
residency slots, but regardless of this intention, commenters argued 
this could ultimately be a result of continuing to rely so heavily on 
HPSAs. A few commenters referred to an analysis from the Alliance of 
Safety Net Hospitals, which found that giving exclusive priority to 
applications from hospitals with high HPSA scores would have this 
effect and that time has proven this analysis to be accurate; they 
suggested that this has made vast parts of the country virtually 
ineligible for new residency slots. The commenters further stated that 
this outcome does not reflect Congress's intention when it authorized 
the new residency slots.
    A commenter stated that for Pennsylvania, where HPSAs exist in all 
corners of the commonwealth but the individual HPSA scores are much 
lower than they are in other states, giving exclusive priority to 
applications from hospitals with high HPSA scores has the effect of 
excluding almost all Pennsylvania teaching hospitals from this program 
even when they meet the statutory criteria. The commenter stated that 
this outcome does not reflect Congress's intention when it authorized 
the new residency slots.
    A commenter stated that Wisconsin has currently seen no new slots 
awarded, despite having multiple entities that fit at least one, if not 
more, of the four criteria in statute. Rather, they state that the 
majority of slots CMS awarded so far were not distributed to 
geographically rural hospitals, but rather, urban and suburban 
hospitals that serve rural patients, and notes that this is not 
following Congressional intent.
    A commenter urged the agency to also consider the population and 
communities that a hospital system serves when awarding residency 
slots. The commenter stated that while it is headquartered in two small 
Wisconsin cities, its hospital system serves rural communities. The 
commenter stated that because of its headquarters, its hospital 
frequently does not score high enough to receive additional slots and 
requests CMS consider the hospital system's service area, not just the 
headquarters, when distributing the new residency positions.
    Response: We thank the commenters for their comments. We remind 
readers that the HPSA prioritization does not require that the 
applicant hospital be located in a HPSA. Rather, at least 50 percent of 
the training time associated with the program for which the hospital is 
applying must occur at training sites located within the primary care 
or mental-health-only population or geographic HPSA. Given the number 
of applications we have received under the first three rounds of 
section 126, which request a HPSA to be used for purposes of 
prioritization, we do not believe that there is a shortage of access 
points that can be used as training sites for purposes of meeting the 
50 percent HPSA prioritization criterion.
    In addition, we do not agree that the proposed methodology for the 
distribution of slots under section 4122 exhibits an overreliance on 
HPSA scores or is inconsistent with the law. The prioritization of HPSA 
scores is only part of the distribution process under section 4122 and 
applies after each qualifying hospital receives up to 1.00 FTE as 
required by statute, which means qualifying hospitals in states with 
limited HPSAs will still receive FTE cap increases under section 4122. 
As noted earlier, section 4122 added this requirement not found in 
section 126. There is no added provision of section 4122, which was 
enacted after our implementation of section 126, that precludes the use 
of HPSA scores for purposes of prioritization. If there are any 
remaining slots to be distributed after each qualifying hospital 
receives up to 1.00 FTE as required by statute, there needs to be some 
prioritization if the number of slots requested across all hospitals 
exceeds the number of slots authorized under section 4122. Allocation 
by the severity of the health professional shortage in a HPSA is a 
reasonable and transparent prioritization approach. If a program 
serving a particular HPSA, or programs serving HPSAs in a particular 
state, do not receive additional slots under section 4122 that does not 
mean that those areas have sufficient health professionals. Rather, it 
is a reflection that the number of slots authorized by section 4122 is 
less than the requested number of slots from applicant hospitals with 
teaching programs that serve HPSAs.
    Comment: Several commenters expressed concern that prioritization 
of applications by HPSA score may negatively impact rural hospitals. A 
few commenters stated that such a prioritization removes from the 
distribution some rural hospitals that are ready and able to grow their 
residency programs.
    A few commenters stated that during the first two rounds of the 
section 126 slot distributions, only 7 geographically rural hospitals 
received slots. The commenters stated that they believe high HPSA 
scores serve as a barrier to entry for rural hospitals seeking slots 
because HPSA scores often do not prioritize or accurately reflect the 
needs of areas with small populations. The commenters noted that three 
primary factors are used in scoring criteria across primary care, 
mental health, and dental HPSAs: population-to-provider ratio; poverty 
rates; and travel distance or time to the nearest accessible source of 
care. They further noted that there is no measure to account for 
rurality or unique access problems associated with rural areas. Another 
commenter questioned whether all states comprehensively and accurately 
survey and present data to have HSPAs be the best measure for rural 
health care access.
    Commenters opined that the health needs measured by HPSAs are not 
reflective of the needs of older populations. A commenter stated that 
the higher utilization of services by older adult populations in rural 
areas and their related risk factors are not accounted for in the 
current HPSA scoring methodology. Another commenter stated that the 
existing components that factor into a HPSA score are not reflective of 
access problems that many rural areas face. The commenter stated that 
the older adult populations of rural areas result in higher utilization 
of health services, and their respective risk factors are not accounted 
for in the existing HPSA formula. The commenter stated that unless the 
HPSA methodology is updated to reflect these concerns, they do not 
believe that basing distribution of the additional residency slots on 
the HPSA score alone will provide for GME

[[Page 69367]]

funding to go to areas that could most use the additional resources 
from CMS.
    A few commenters stated that if plans for section 4122 mirror 
section 126 there would be continued limits on allocations to 
geographically rural hospitals. Commenters stated that some 
geographically rural hospitals may have lower HPSA scores or be 
discouraged from applying when they are not located in a HPSA. 
Commenters stated that updating rurality to CMS defined criteria (that 
is, non-metropolitan training sites) and allocating at least 10 percent 
of those slots to rural areas regardless of HPSA score may better align 
with legislative intent. Commenters stated that equally important is 
eliminating the application of HPSA prioritization from within the 
rural category. Commenters stated that many rural hospitals are saddled 
with low HPSA scores as an artifact of the methodology for calculating 
those scores and are thus eliminated from consideration even though 
they are serving communities most in need of new physicians. Commenters 
asked CMS to consider changing the definition of which hospitals 
qualify for ``rural'' categorization to eliminate hospitals ``treated 
as rural'' that are not in fact geographically rural and include in the 
``rural'' categorization all hospitals located in rural geographic 
locations regardless of HPSA score. The commenters requested that if 
eliminating urban hospitals ``treated as rural'' is not possible, CMS 
continue the HPSA score prioritization for those urban hospitals.
    Another commenter stated they are concerned that the proposal to 
prioritize slots based on HPSA score will unnecessarily end up 
excluding hospitals that no longer reside in HPSAs due to HRSA's 
misguided shortage designation modernization project that, while well-
intended, is exacerbating challenges for rural hospitals. The commenter 
stated that, for example, around 25 Wisconsin hospitals lost their HPSA 
designations at the start of 2024 due to the way the HRSA updated its 
HPSA renewal process. The commenter stated that some applicants have 
reported their concerns that relying too much on HPSA scores has 
unfairly led to the exclusion of their GME slot applications from 
consideration and has further discouraged other interested applicants 
from expending resources on an application that is unlikely to result 
in an award.
    Another commenter stated that due to their smaller populations, 
rural communities that add new physicians as faculty and retain 
residents, can significantly shift their HPSA scores or lose their HPSA 
designation, which can prevent a hospital in a rural area from 
receiving GME slots based on current CMS policy.
    Response: We appreciate the detailed analysis submitted by the 
commenters regarding their concerns that prioritizing the distribution 
of slots by HPSA score may not benefit rural hospitals. We acknowledge 
that few geographically rural hospitals have submitted applications 
under rounds 1 and 2 of section 126. We believe, based on our 
experience to date under section 126, that the reasons for this may be 
more complex than the existence of the HPSA prioritization. For 
example, rural hospitals may be utilizing other opportunities to 
increase their FTE caps through section 127 of the CAA, 2021, which 
provides FTE cap increases for participation in rural training programs 
and the regulatory provision at section 413.79(e), which allows rural 
hospitals to receive an increase in their cap each time they 
participate in training residents in a new program. We acknowledge that 
rural hospitals may find these alternatives more worthwhile as they may 
allow for permanent FTE cap increases that exceed those available under 
section 126 and section 4122. We believe that continuing education and 
outreach regarding the opportunities available under both sections 126 
and 4122, rather than abandoning the HPSA prioritization method which 
has successfully allocated slots to programs serving underserved 
communities and populations, is the appropriate course of action at 
this point. We will continue to monitor this issue. As stated 
previously, we encourage rural hospitals to reach out to CMS directly 
with questions they have about the section 4122 application process.
    Comment: Several commenters stated that HPSAs are not necessarily 
the best measure of where residents should train. A commenter stated 
that HPSA scores were developed to determine priorities for the 
assignment of clinicians in a state, not to determine the ability of 
the hospitals in those states to train more residents or to provide 
care for patients who live in HPSAs. Another commenter stated that the 
HPSA designations are a measure of a shortage of providers but do not 
consider whether a hospital can train residents through academic 
medical programs within the HPSA area. The commenter stated that CMS 
should recognize that there is an overall shortage of physicians, 
particularly in psychiatry. The commenter stated that it should only 
matter that additional physicians are available to meet demand, not 
where the physicians are trained and that incentives directed towards 
newly trained physicians to practice in a HPSA is a more effective 
method to address the particularly high portion of the physician 
shortage experienced by HPSAs. Another commenter stated that while HPSA 
scores may adequately indicate places in the country where there is a 
need for more providers, they may not be the best representation of 
where hospitals are prepared to provide the best and most complete 
training environment. The commenter stated that they applaud CMS for 
focusing on underserved areas and strongly encouraged the agency not to 
rely too heavily on a single metric and ensure residents are given the 
best opportunity for a well-rounded training experience. Another 
commenter stated that over the last two distribution cycles, it has 
heard from many frustrated institutions that are adjacent to a HPSA, 
but resident training time does not take place in a HPSA. These 
institutions need additional slots to expand training and treat HPSA 
populations but are not eligible to receive prioritization in the 
distribution of section 126 awards.
    Response: We understand that training sites may be located adjacent 
to HPSAs and provide essential care for individuals living within those 
HPSAs. However, due to the limited number of FTE slots available under 
section 4122 that could be prioritized by HPSA score (after completion 
of the pro rata distribution requirement), we are choosing to 
prioritize training time in HPSAs in order to further support the 
likelihood of residents choosing to practice in these areas. While we 
disagree that hospitals located in HPSAs may not provide the best and 
most complete training environment, we note again that the applicant 
hospital itself is not required to be physically located in the HPSA in 
order for the program to meet the 50 percent criterion for HPSA 
prioritization. Furthermore, we believe that increasing residency 
training in non-provider sites outside of hospitals, such as community 
health clinics located in HPSAs, is an important tool in addressing the 
shortage of primary care providers in underserved areas. We continue to 
welcome ideas for a clear and accessible prioritization methodology, 
which would include providers located adjacent to a HPSA that provide 
significant patient care to individuals living within the HPSA.

[[Page 69368]]

    Comment: Commenters suggested that CMS consider alternatives to 
prioritizing slots based on HPSA score and advocated for relying more 
heavily on the other eligibility categories. A commenter stated that 
the HPSA construct is antiquated and that gaining HPSA status starts 
with a costly undertaking by state governments, and increasingly, state 
governments are proving reluctant to make this investment--and even 
when they do, the process is burdensome. The commenter stated that HPSA 
status depends in part on an area's level of poverty, but this is an 
uneven playing field because it costs more to live in high-cost areas. 
The commenter stated that using HPSAs as a major part of the criteria 
consequently favors--unfairly--some areas over others and therefore 
should be used sparingly, if at all, and it significantly undermines 
the other three criteria for additional residency slots. The commenter 
urged CMS to withdraw this proposal and develop an alternative 
methodology for distributing residency slots that does not rely so 
heavily on HPSAs and gives greater weight to the other three criteria 
for new slots.
    Several commenters stated that CMS should evaluate the application 
pool and, if able to meet the statutory distribution requirements, 
award all slots on a pro-rata basis. The commenters stated that if CMS 
is unable to meet the statutory requirements using this methodology, 
CMS should prioritize the remaining slots or pro rata slots to 
hospitals that meet all four qualifying categories listed above first; 
then hospitals that meet three criteria and so forth, until all slots 
are distributed.
    A commenter noted that they do not believe that training residents 
in HPSAs is an appropriate measure of reducing health inequities, which 
was CMS's stated goal in implementing this distribution methodology for 
section 126. The commenter stated that while they agree that HPSA 
designation is a good starting point for identifying an area that needs 
more physician services, the designation system for HPSAs is not 
without controversy. The commenter suggested that a more holistic 
approach to addressing the physician shortage would be to recognize 
medical education hubs such as those located in densely populated and 
diverse urban areas because training residents in densely populated 
urban areas with a diverse set of patients is the single best means of 
exposing physicians in training to the cultural complexities that CMS 
should want all physicians exposed to during their training to promote 
health equity. The commenter stated that CMS should review data 
indicating which areas of the country and which organizations are 
producing physicians for HPSAs. The commenter stated that New York's 
teaching hospitals for example are a major ``feeder'' for the rest of 
the nation's physician workforce and included data supporting their 
statement. The commenter stated that after the initial pro rata 
distribution is complete, CMS should prioritize making those 
applications more ``whole'' by awarding the applicant as many of the 
number of slots that is commensurate with their planned expansion of 
existing residency programs or establishment of new programs. The 
commenter stated that CMS should accomplish this process by 
prioritizing those hospitals that meet all four qualifying criteria 
first, and then hospitals that meet three criteria and so on until all 
slots are distributed. The commenter stated that if CMS determines that 
not enough slots remain to make all hospitals that received a pro rata 
distribution whole, it should prioritize doing so for psychiatry and 
psychiatry subspecialty programs. The commenter stated they believe 
that this approach would more closely align with the intent of the 
legislation to prioritize residency slots for psychiatry programs while 
also operating within the requirements that each applicant receive at 
least one (or a fraction of one) of the residency positions made 
available. The commenter stated that if there are not enough slots to 
make all hospitals that received a pro rata distribution whole, CMS 
should allow these hospitals to apply for the number of slots that 
would make the program whole in round five of the section 126 
distributions. These slots would be effective July 1, 2027. Using both 
distributions to make an application whole would allow hospitals to 
expand and start new programs more easily.
    A commenter stated that Congress has voiced concerns about a 
shortage of physicians serving rural areas and referred to data from 
U.S. House Committee on Ways & Means. The commenter stated they agree 
with the findings of the Committee on Ways & Means and believe that 
physicians who participate in rural residency programs are more likely 
to practice in underserved rural areas. The commenter encouraged CMS to 
implement a process by which the first round of slots are granted to 
hospitals located in areas that truly are rural. Once those slots have 
been awarded, they recommend CMS distribute remaining slots as 
proposed.
    A commenter recommended CMS consider distributing slots in areas 
where there are high rates of maternal mortality. The commenter stated 
that when considering residency and fellowship positions, they believe 
it would be beneficial to take this data into account, coupled with 
geographic areas with high rates of sickle cell diseases and other 
hemoglobinopathies. The commenter stated that this approach might not 
always align with traditional HPSA delineations, but they believe it is 
worth exploring given the serious hematologic needs of these patients.
    A commenter stated that they do not believe CMS should finalize a 
distribution for new residency positions that incorporates a HPSA 
prioritization and, consistent with their prior comments, they 
encourage CMS to work more closely with the GME community regarding 
distribution.
    A commenter urged CMS to consider historical state-by-state 
distribution of GME slots. The commenter stated that the caps 
established through the Balanced Budget Act of 1997 created an inequity 
in states that did not have robust residency programs at the time but 
have had significant population growth since the 1997 caps were 
implemented. The commenter stated that it is critical to develop a 
workforce that can meet the needs of a state's population and that 
around two-thirds of doctors live in the state they train in. The 
commenter stated that Florida, which will have an expected shortage of 
more than 18,000 physicians by 2035, is one of the nation's fastest 
growing states, and has the second largest number of Medicare 
beneficiaries in the country. The commenter stated that it is in the 
interest of the Medicare program to ensure that Florida has enough 
physicians, and this requirement could be met by increasing the number 
of physicians trained in the state. The commenter stated that CMS 
should give preferential consideration to states that are historically 
underserved by the Medicare GME program and states that have a large 
Medicare population.
    A commenter stated that CMS should prioritize the distribution of 
new resident slots to essential hospitals. The commenter stated that 
essential hospitals are committed to training the next generation of 
health professionals and equipping them with the necessary skills to 
provide culturally and linguistically competent care to all 
populations, including underrepresented and marginalized people. The 
commenter stated that because essential hospitals play such a unique 
and critical role in preparing

[[Page 69369]]

health care professionals to care for underserved populations, 
prioritizing the distribution of residency slots to essential hospitals 
would help advance CMS' equity goals. Another commenter stated that it 
is not located in a primary care or mental health HPSA. The commenter 
stated that assuming that this situation is likely the case for many 
other urban safety-net hospitals, these hospitals are categorically 
disadvantaged under the proposed distribution methodology. The 
commenter recommended that CMS adopt a distribution methodology that 
prioritizes hospitals that serve a high percentage of Medicare, 
Medicaid, and uninsured patients, or some other measure that accurately 
targets hospitals that serve low-income patients.
    Response: We appreciate the commenters' suggestions of additional 
ways to prioritize the distribution of slots under section 4122. 
However, as stated in the final rule implementing section 126, we 
continue to believe that HPSA scores, while not a perfect measure, 
provide the best prioritization approach available at this time. They 
are transparent, widely used, publicly available, regularly updated, 
and have verifiable inputs for measuring the severity of a service 
area's need for additional providers (86 FR 73438). We believe the 
continued use of HPSA scores for prioritization is consistent with the 
Administration's policy objective to increase residency training and 
thereby increase the number of physicians practicing in underserved 
areas.
    With respect to prioritizing by eligibility category such that the 
more eligibility categories the hospital meets the higher its 
prioritization, we do not believe that this methodology would provide a 
sufficient level of prioritization since our experience with section 
126 to date indicates that many applicants would meet two or three out 
of the four eligibility categories.
    While we agree with the comment suggesting that training residents 
in medical education hubs, located in densely populated and diverse 
urban areas, allows residents to gain experience caring for a diverse 
set of patients and promotes an understanding of cultural complexities 
necessary for well-rounded patient care, we believe that such a 
methodology would be limited in that it does not fully consider the 
advantages of training residents in rural areas.
    With respect to making a program whole in round 5 of section 126 if 
it did not receive all of the slots it was eligible for under section 
4122, we do not believe there is any statutory language precluding a 
hospital from applying for unfilled slots under round 5 of section 126 
if it applied for that same program under section 4122.
    With respect to prioritizing geographically rural hospitals for the 
distribution of slots under section 4122, while our goal is to support 
rural hospitals in applying for additional slots under section 4122, we 
do not believe we have the authority to distinguish between 
geographically rural hospitals and hospitals that have reclassified as 
rural when awarding slots since the statute considers both types of 
hospitals to be Category One hospitals.
    In response to the recommendation that CMS account for areas of 
high maternal mortality and areas with high rates of sickle cell 
diseases and other hemoglobinopathies in its prioritization, we agree 
that these geographic and population groups would benefit from an 
increased supply of physicians. We are currently unaware of a 
nationally defined measure that we could incorporate into the HPSA 
methodology to distribute any slots remaining after the pro-rata 
distribution of slots, and we welcome feedback on any available 
measures.
    Lastly, we support the general goal of increasing residency 
training at essential hospitals and safety-net hospitals since they are 
often the primary means of accessing healthcare for underserved members 
of the population. However, a lack of a specific, generally accepted, 
and existing definition of an ``essential hospital'' or ``safety-net 
hospital'' for purposes of GME makes it challenging to concretely 
incorporate these concepts currently into slot distributions under 
section 4122.
    After the consideration of the comments received, and for the 
reasons discussed above, we are finalizing our proposal without 
modification to prioritize the distribution of any remaining slots 
under section 4122 by HPSA score. Specifically, if any slots remain 
after awarding up to 1.00 FTE to each qualifying hospital, we will 
prioritize the distribution of the remaining slots by the HPSA score 
associated with the program for which the hospital is applying. Primary 
care and mental-health-only geographic HPSAs are applicable for this 
prioritization. If a hospital is applying using a mental-health-only 
HPSA, it must apply for slots for a psychiatry program or a 
subspecialty of psychiatry. We continue to welcome comments from the 
GME community related to an alternative means for distributing slots 
under section 126 and for potential future slot distributions.
(4) Requirement for Rural Hospitals To Expand Programs
    Section 1886(h)(10)(C)(iii) of the Act requires that if a hospital 
that receives an increase in the otherwise applicable resident limit 
under section 1886(h)(10) of the Act would be eligible for an 
adjustment to the otherwise applicable resident limit for participation 
in a new medical residency training program under 42 CFR 413.79(e)(3) 
(or any successor regulation), the hospital shall ensure that any 
positions made available under this paragraph are used to expand an 
existing program of the hospital, and not be utilized for new medical 
residency training programs. Under the regulations at 42 CFR 
413.79(e)(3), a rural hospital may receive an increase to its cap for 
participating in training residents in a new program, which is 
effective after a 5-year cap-building period for that new program. We 
note that if a rural hospital were to receive a cap increase for a new 
program under the 5-year cap-building period as well as a cap increase 
for the new program under section 4122 of the CAA, 2023, there may be 
duplicative awarding of cap slots for the same program. Therefore, we 
proposed to implement section 1886(h)(10)(C)(iii) of the Act by 
allowing rural hospitals to apply for slots to expand an existing 
program, but not for slots to begin a new program. We proposed that 
this policy apply to both geographically rural hospitals and hospitals 
that have reclassified as rural under 42 CFR 412.103, since both groups 
of hospitals are considered rural under section 1886(h)(10)(B)(ii)(I), 
which we refer to as Category One hospitals. Only geographically urban 
hospitals that have not reclassified as rural under 42 CFR 412.103 
would be permitted to apply for slots to begin a new program.
    In this section we present a summary of the public comments and our 
responses related to the requirement that if a hospital is eligible for 
a cap increase under 42 CFR 413.79(e)(3) (or any successor regulation), 
the hospital may only apply for section 4122 slots to expand an 
existing program.
    Comment: A few commenters disagreed with CMS' proposal to allow 
hospitals that have reclassified as rural to receive slots to expand an 
existing program, but not for a new program.
    A commenter stated that they support CMS' proposal that if a 
hospital is eligible for a cap adjustment for participation a new 
program (as is the case for rural hospitals and hospitals that have 
reclassified as rural), the hospital can only use awarded slots to 
expand an existing program and not for

[[Page 69370]]

a new program. However, the commenter stated that they believe that 
this limitation should only apply to IME cap adjustments for urban 
hospitals that have reclassified as rural. The commenter referred to 
the language in the proposed rule that states, ``We note that if a 
rural hospital were to receive a cap increase for a new program under 
the 5-year cap-building period as well as a cap increase for the new 
program under section 4122 of the CAA, 2023, there may be duplicative 
awarding of cap slots for the same program.'' The commenter stated that 
while they agree with this rationale, urban hospitals that have 
reclassified as rural only receive adjustments to their IME caps, not 
their DGME caps. The commenter recommended that CMS allow hospitals 
that have reclassified as rural to apply for new program slots, but to 
limit their application to only DGME slots. The commenter further 
stated that CMS' policy analysis also applies in the case of section 
126 of the CAA, 2021. The commenter stated that while Congress did not 
explicitly state within section 126 that newly awarded slots cannot be 
used to establish new programs in rural hospitals, they also did not 
state that newly awarded slots can be used for these purposes. The 
commenter urged CMS to use its discretion to apply this policy equally 
to the section 126 slot distribution.
    Another commenter stated that they disagree with CMS' proposed 
limitation on rural reclassified hospitals to apply only for slots to 
expand an existing program, but not for slots to begin a new program. 
The commenter stated that while they concur with the potential overlap 
of cap adjustments for geographically rural hospitals, rural 
reclassified hospitals cannot generate cap slots for DGME under the 
regulations at 42 CFR 413.79(e)(3). The commenter encouraged CMS to 
allow rural reclassified hospitals to apply for new program slots, but 
to limit their application to only DGME slots, similar to the current 
methodology employed for section 126.
    Response: We thank the commenters for their comments. The 
commenters are correct that hospitals that have reclassified as rural 
can receive IME but not DGME cap adjustments for new programs. The 
statutory provisions for both IME and rural reclassification are found 
at section 1886(d), whereas the statutory provision for DGME is 
included at section 1886(h). Therefore, hospitals that have 
reclassified as rural are considered rural for IME, but urban for DGME. 
However, we continue to believe that in including both geographically 
rural hospitals and hospitals that have reclassified as rural under 
Category One, the Congressional intent was to treat these two groups of 
hospitals in the same manner for purposes of cap increases under 
section 4122.
    After consideration of the comments received, we are finalizing our 
policy as proposed without modification; that is, both geographically 
rural hospitals and hospitals that have reclassified as rural may apply 
for section 4122 slots for a program expansion, however, they may not 
apply for slots for a new program. We are not extending this policy to 
section 126 because the statutory language that is explicit in section 
4122 is not included in section 126. We note that under both 
provisions, any hospital that is applying for slots for a new program 
must make sure that the slots for which they are applying are not 
duplicative of slots they will receive under the normal 5-year cap-
building process.
d. Distributing At Least 10 Percent of Positions to Each of the Four 
Categories
    Section 1886(h)(10)(B)(ii) of the Act requires the Secretary to 
distribute at least 10 percent of the aggregate number of total 
residency positions available to each of the following categories of 
hospitals discussed earlier. Given our experience with distributing 
slots under section 126 of the CAA, 2021, we expect many hospitals will 
meet the qualifications of more than one category. We proposed to 
collect information regarding qualification for all four categories in 
the distribution of slots under section 4122 of the CAA, 2023, to allow 
us to confirm that we have met this statutory requirement. Like the 
CAA, 2023 provision, section 1886(h)(9)(B)(ii) of the Act from 2021 
also requires the Secretary to distribute at least 10 percent of the 
aggregate number of total residency positions available to the same 
four categories of hospitals. Section 126 of the CAA, 2021, makes 
available 1,000 residency positions and therefore, at least 100 
residency positions must be distributed to hospitals qualifying in each 
of the four categories. In the final rule implementing section 126 of 
the CAA, 2021, we stated we would track progress in meeting all 
statutory requirements and evaluate the need to modify the distribution 
methodology in future rulemaking (86 FR 73441).
    To date, we have completed the distribution of residency slots 
under rounds 1 and 2 of the section 126 distributions (refer to CMS' 
DGME web page for links to the round 1 and 2 awards: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/direct-graduate-medical-education-dgme). In tracking the 
statutory requirement that at least 10 percent of the aggregate number 
of total residency positions (100 out 1,000 slots) be distributed to 
hospitals qualifying in each of the four categories, we have determined 
that in rounds 1 and 2, only 12.76 DGME slots and 18.06 IME slots were 
distributed to hospitals qualifying under Category Four. For each of 
the other 3 categories based on the slots awarded in rounds 1 and 2, we 
anticipate meeting the 10 percent requirement. For example, we have 
determined that in rounds 1 and 2, 374.59 DGME and 375.11 IME slots 
were distributed to hospitals qualifying under Category Three.
    As discussed in the final rule implementing section 126 of the CAA, 
2021, an applicant hospital qualifies under Category Four if it 
participates in training residents in a program in which the residents 
rotate for at least 50 percent of their training time to a training 
site(s) physically located in a primary care or mental-health-only 
geographic HPSA. Specific to mental-health-only geographic HPSAs, the 
program must be a psychiatric or a psychiatric subspecialty program (86 
FR 73430). Given that only 12.76 DGME slots and 18.06 IME slots have 
been distributed to hospitals qualifying under Category Four, we 
proposed an amendment to our prioritization methodology for rounds 4 
and 5 of section 126 of the CAA, 2021, to ensure that at least 100 
residency slots are distributed to these hospitals. We did not propose 
an amendment to our prioritization methodology for round 3 because the 
application period for round 3 runs from January 9, 2024 to March 31, 
2024, prior to the date any proposals in this rule might be finalized.
    Our current methodology for distributing residency slots under 
section 126 prioritizes slot awards based on the HPSA score associated 
with the program for which the hospital is applying, with higher scores 
receiving priority (86 FR 73434 through 73440). We proposed that in 
rounds 4 and 5 of section 126 of the CAA, 2021, we would prioritize the 
distribution of slots to hospitals that qualify under Category Four, 
regardless of HPSA score. The remaining slots awarded under rounds 4 
and 5 would be distributed using the existing methodology based on HPSA 
score (86 FR 73434 through 73440). That is, the remaining slots would 
be distributed to hospitals qualifying under Category One, Category 
Two, or Category Three, or hospitals that meet the definitions of more 
than one of these categories, based on the HPSA score

[[Page 69371]]

associated with the program for which each hospital is applying.
    In this section we present a summary of the public comments and our 
responses related to (1) distributing at least 10 percent of the 
aggregate number of total residency positions available to each of the 
four eligibility categories under section 4122 of the CAA, 2023; and 
(2) prioritizing the distribution of slots to hospitals that qualify 
under Category Four, regardless of HPSA score, for rounds 4 and 5 of 
section 126 of the CAA, 2021.
    Comment: A few commenters had concerns related to meeting the 
requirement that at least 10 percent of the total number of slots be 
distributed to each of the four eligibility categories under section 
4122 of the CAA, 2023. Commenters stated that CMS has not addressed the 
structural shortcoming of the HPSA prioritization distribution 
methodology and has not established how the agency would meet the 10 
percent statutory distribution requirement for section 4122 slots. 
Commenters stated that it is crucial for CMS to ensure that the 
distribution process is in full compliance with the law, as any 
deviation could have serious implications for the fairness and 
effectiveness of the program. A commenter emphasized the need to find 
another prioritization metric to avoid the maldistribution between 
categories of hospitals that occurred under section 126 when 
distributing section 4122 slots. Commenters stated that CMS' proposal 
to prioritize Category Four hospitals for rounds 4 and 5 of section 126 
could have been avoided if CMS had considered factors beyond HPSA 
scores as part of the section 126 distribution prioritization. 
Commenters stated that CMS would likely face the same issue with the 
section 4122 slot distribution and that CMS should explain to 
stakeholders how the agency would ensure that 10 percent of slots are 
distributed to the four categories of qualifying hospitals.
    Commenters stated that they were similarly concerned with CMS' 
proposal to prioritize hospitals serving HPSAs for rounds 4 and 5 of 
section 126. The commenters urged CMS to prioritize slot distribution 
based solely on the four categories included in the law because they 
believe such an approach was consistent with the statute, which would 
be less burdensome, and offer a much clearer metric for qualifying 
hospitals.
    Response: We thank the commenters for raising their concerns 
related to whether CMS can meet the statutory requirement to distribute 
at least 10 percent of section 4122 slots to each of the four 
categories of qualifying hospitals. We do not necessarily agree that we 
will be unable to meet this statutory requirement; the methodology for 
distributing section 4122 slots, as finalized in this rule, includes 
two parts--distributing up to 1.00 FTE to each qualifying hospital and 
then prioritizing the distribution of the remaining slots based on the 
HPSA score of the program for which the hospital is applying. However, 
in the event that we are unable to meet the statutory requirement in a 
single round, we would take a similar approach to the approach we are 
taking with section 126. We also note that we are not amending the 
prioritization methodology for rounds 4 and 5 of section 126 to 
consider the number of eligibility categories that a hospital meets. As 
stated above, we do not believe that this methodology would provide a 
sufficient level of prioritization since our experience with section 
126 to date indicates that many applicants would meet two or three out 
of the four eligibility categories.
    Comment: Several commenters generally supported the proposal to 
prioritize Category Four applicants in rounds 4 and 5 of section 126. A 
commenter stated that hospitals qualifying in the HPSA category 
(Category Four) have been left behind compared to hospitals that have 
qualified in the other categories. The commenter stated they appreciate 
CMS recognizing this discrepancy and prioritizing hospitals that 
qualify in this category regardless of their HSPA score for future 
distribution of residency slots. However, the commenter stated that 
they disagree with smaller hospitals being prioritized over larger 
hospitals in case of a tie when prioritizing applications with equal 
HPSA scores. The commenter stated they believe prioritizing smaller 
hospitals is doing a disfavor to future residents because larger 
hospitals are usually the primary teaching sites for programs, are 
better able to add residency positions, and provide more diverse and 
comprehensive training environments, and thus more training 
opportunities for residents.
    A few commenters suggested CMS prioritize applications from 
geographically rural hospitals regardless of HPSA score. One commenter 
stated that they appreciate CMS' careful tracking of the round 1 and 2 
slot distributions related to section 126 of the CAA, 2021. The 
commenter stated that while it is unfortunate that Category Four 
hospitals did not have their slots filled during rounds 1 or 2, the 
commenter is broadly supportive of CMS' proposed amendment to their 
prioritization methodology for rounds 4 and 5. However, the commenter 
stated that although they support the proposal to prioritize Category 
Four hospitals, the current HPSA methodology limits the ability of many 
geographically rural hospitals to receive slots, as their HPSA scores 
are not high enough or they are not located in a HPSA. The commenter 
stated that to better align with legislative intent going forward, CMS 
should consider updating its definition of rural to align with other 
CMS-defined criteria (all people and territory in an area with less 
than 50,000 people) and using that parameter to allocate at least 10 
percent of slots to rural areas, regardless of HPSA score. The 
commenter stated that they applaud the work CMS has undertaken in 
recent years to promote health and health equity in rural and 
underserved communities and believe this change would support goals of 
delivering better care where patients most need it. The commenter 
stated that evidence indicates that physicians typically practice 
within 100 miles of their residency program and therefore, the 
distribution of trainees in large academic hospitals leads to physician 
shortages in medically underserved and rural areas. The commenter 
stated that family medicine is also facing a particularly critical 
workforce shortage and directing Medicare GME resources to underserved 
areas is an essential strategy for advancing health equity.
    A commenter stated that the requirement that 10 percent of slots go 
to each of the four categories of qualifying hospitals helps to ensure 
appropriate distribution of training slots to the communities that need 
them, however, this goal should not be undermined by a policy design 
that results in positions being unallocated if there are insufficient 
applicants in a given category. The commenter stated they appreciate 
CMS modifying its methodology from the CAA 2021 to address this issue 
and they urge CMS to ensure that the policy finalized allows all funded 
slots to be distributed to programs. The commenter stated that they 
encourage CMS to perform a meaningful estimate of the future 
distribution of available slots to help ensure that another ``catch-
up'' change in priorities is not needed and hospitals have a consistent 
and clear metric for applying for new slots.
    Response: We thank the commenters for their support. In the FY 2022 
IPPS final rule with comment, we finalized the policy of prioritizing 
hospitals with less than 250 beds in the event a tiebreaker is needed 
to distribute slots

[[Page 69372]]

among hospitals with the same HPSA score (86 FR 73439). We included 
this provision in response to a commenter's recommendation that we 
prioritize the distribution of slots among hospitals with less than 250 
beds and hospitals with a single residency training program. Under this 
policy, we first distribute FTE slots to applications from hospitals 
with less than 250 beds. If there are insufficient FTE slots to 
distribute to applications from hospitals with less than 250 beds, we 
prorate among those applications. If there are sufficient slots to 
distribute to applications from hospitals with less than 250 beds, we 
prorate the remaining slots among the applications from hospitals with 
250 beds or more. We are not considering a change in this methodology 
at this time because we believe it may provide a benefit to small 
hospitals in rural and underserved areas that are seeking to expand 
their residency training.
    Similarly, we are not considering updating our definition of 
``rural'' for purposes of distributing slots under future rounds of 
section 126, as suggested by a commenter. The definition of rural that 
we use to implement section 126 is consistent with how that term is 
defined in the context of the Medicare statute, specifically section 
1886(h)(9)(B)(ii)(I) of the Act, as added by section 126, which refers 
to the definition of a rural area at section 1886(d)(2)(D) of the Act. 
Furthermore, as we stated in the December 27, 2021 Federal Register, 
this definition of ``rural'' is consistent with our policy concerning 
designation of rural areas for other purposes, including the wage index 
(86 FR 73423).
    In response to the comment recommending that CMS ensure the policy 
finalized allows all funded slots to be distributed and that CMS 
perform a meaningful estimate of the future distribution of available 
slots to help ensure that another change in priorities is not needed, 
we note that the requirement to distribute at least 10 percent of slots 
of hospitals in each eligibility category is statutory and we must 
therefore consider amending our distribution process if we anticipate 
that this requirement will not be met. However, as stated earlier, the 
section 4122 distribution methodology as finalized in this rule 
includes two processes for distributing slots and we do not believe we 
need to consider any further adjustments to the finalized methodologies 
at this time.
    Comment: Several commenters referenced their comments on the FY 
2022 IPPS proposed rule regarding the use of prioritizing by HPSA score 
for slot distributions under section 126 of the CAA. The commenters 
noted that they had urged the agency to prioritize slot distribution 
based solely on the four categories included in the law and give 
priority to hospitals that qualify in more than one, with the highest 
priority given to hospitals qualifying in all four categories. The 
commenters stated that they had warned CMS in prior comments that if 
the agency prioritized distributions based on HPSA score, it may result 
in qualifying hospitals not meeting the 10 percent statutory 
requirement by category. The commenters stated they continue to urge 
their original approach and believe that it would be less burdensome 
and offer a much clearer metric for qualifying hospitals. The 
commenters stated that such a policy is consistent with the statutory 
criteria, which do not place any additional emphasis on HPSA service or 
scores, and still supports teaching hospitals serving underrepresented 
and historically marginalized populations. A commenter urged CMS to 
examine whether previous awardees fall into more than one category and 
how many awardees may already fall into Category Four for which the 
agency has not accounted. Another commenter stated that they understand 
CMS' proposed change related to prioritizing eligibility Category Four 
applicants in the context of meeting the requirements of the law and 
asked CMS to comment in the final rule on how this change might 
disadvantage hospitals that may qualify under the other three 
categories.
    Response: We thank the commenters for continuing to note their 
concerns regarding prioritizing the distribution of section 126 awards 
by HPSA score. As noted previously, in most cases section 126 round 1 
and round 2 awardees qualified for more than one eligibility category. 
We believe we have accounted for the section 126 round 1 and round 2 
awardees that met eligibility Category Four as we verified the HPSAs 
each awardee selected to use for prioritization of their application 
with the HPSA Public ID and Score Information included on CMS' DGME 
website and the HPSA Find tool at https://data.hrsa.gov/tools/shortage-area/hpsa-find. We do not believe that prioritizing Category Four 
applicants regardless of HPSA score in rounds 4 and 5 of section 126 
will disadvantage applicants who fall into other categories as it is 
unlikely that an applicant would only qualify under eligibility 
Category Four.
    Comment: A commenter stated that it recognizes CMS' argument that 
(a) the statute mandates it shall distribute at least ten percent of 
new positions to each of the four categories, that (b) prior rounds did 
not achieve this requirement for Category Four, and therefore (c) the 
agency may deviate from the statutory criteria which assigns equal 
ranking to all categories by elevating Category Four for rounds 4 and 
5. The commenter stated that, however, they do not believe the 
conclusion follows from the premises, as Congress (a) did not 
contemplate this scenario in the statute, and therefore (b) did not 
permit the agency to deviate from the prescribed methodology of four 
equal eligibility categories ranked by HPSA score. The commenter stated 
they would consider deviation from the prescribed methodology if CMS 
demonstrated that a failure to distribute slots to Category Four 
applicants was undermining the success of section 126 in achieving 
Congressional goals, that is, failing to increase GME residencies in 
underserved areas, but CMS does not make that case in the proposed 
rule. The commenter stated that absent other compelling arguments 
justifying the elevation of Category Four applicants above all others, 
they strongly recommend the agency withdraw the proposal and proceed 
with rounds 4 and 5 of section 126 following the same protocols 
deployed in rounds 1 through 3.
    Response: We appreciate the commenter's analysis of the statutory 
requirements relative to section 126. While we do not believe that a 
failure to distribute slots to Category Four applicants is undermining 
the success of section 126 in achieving Congressional goals, we must 
adhere to the statutory requirement to distribute at least 10 percent 
of the total number of slots, or at least 100 slots, to hospitals 
qualifying in each eligibility category. While this requirement will 
most certainly be met with respect to the remaining three eligibility 
categories, under both rounds 1 and 2 of section 126, only 12.76 DGME 
slots and 18.06 IME slots have been distributed to hospitals qualifying 
under Category Four (89 FR 36218). As a result of the small number of 
FTEs being distributed to Category Four hospitals to date, we believe 
it is necessary to take action now to ensure we meet the statutory 10 
percent distribution requirement for Category Four upon completion of 
all rounds of section 126.
    Comment: A commenter stated that they are concerned that CMS may 
have determined the number of slots that have been distributed to 
hospitals qualifying under Category Four based on incomplete data. The 
commenter stated that because hospitals are limited

[[Page 69373]]

to selecting only one eligibility category (even if they qualify under 
multiple) when applying for section 126, CMS may not be considering the 
full population of hospitals that qualify for Category Four when 
calculating the number of slots that these hospitals have received. The 
commenter stated that CMS should provide additional detail regarding 
how it conducted the analysis to determine how many hospitals received 
slots under Category Four. The commenter stated that they suspect that 
some hospitals would have qualified under Category Four but self-
identified their qualifying hospital status using other categories. The 
commenter stated that CMS itself acknowledges that it needs more 
information to accurately identify how many slots are distributed to 
each eligibility category. The commenter stated that in the proposed 
rule, CMS proposes to collect information regarding qualification for 
all four categories in the distribution of slots under section 4122 of 
the CAA, 2023, based on its experience with many hospitals qualifying 
under more than one category for section 126 slots. The commenter 
encouraged CMS to also collect this information in future rounds of 
section 126 slot distributions and provide data in the final rules 
detailing its progress in meeting the 10 percent threshold in each 
eligibility category. The commenter also encouraged CMS to analyze 
awardee information from section 126, rounds 1 to 3 to get a more 
accurate picture of how many hospitals that received slots based on 
qualifying in other categories also qualified under Category Four.
    Response: We believe there may be a misunderstanding related to the 
section 126 application process. Hospitals are not limited to selecting 
a single eligibility category. In the MEARIS\TM\ application module, 
the screen that includes eligibility category selections is titled 
``[w]hich eligibility category or categories does your hospital meet?'' 
The following instruction is provided on the screen ``[s]elect all 
eligibility categories that apply to your hospital.'' We will further 
refine this instruction for future rounds of section 126 so that 
applicants understand that they are to select each eligibility category 
that applies to their application.
    As noted above, in order to check Category Four eligibility, we 
verified the HPSAs each awardee selected to use for prioritization of 
their application with the HPSA Public ID and Score Information 
included on CMS' DGME website and the HPSA Find tool at https://data.hrsa.gov/tools/shortage-area/hpsa-find. We are unsure what 
language the commenter is referring to when they state that CMS itself 
acknowledges that it needs more information to accurately identify how 
many slots are distributed to each eligibility category. In addition to 
verifying Category Four eligibility, we are able to verify that an 
applicant meets eligibility categories one through three by using Table 
2 posted with the most recent IPPS final rule associated with the 
application period for the specific section 126 round, using the cost 
report worksheets submitted with the application, and referring to the 
list of states included in the December 27, 2021, Federal Register (86 
73426). For rounds 1 and 2 of section 126, twelve awardee hospitals 
qualified under eligibility Category Four using the methodology noted 
above. Each of these hospitals qualified for at least one other 
eligibility category. For each section 126 awardee hospital we will 
continue to verify which eligibility categories the applicants qualify 
for instead of simply deferring to the selection made on the hospital's 
application. We will also verify this information for section 4122 
awardee hospitals.
    Information regarding progress towards meeting the 10 percent 
requirement for each category will be available on the CMS DGME 
website.
    Comment: Several commenters expressed concerns about the section 
126 distribution process in general. Commenters stated that CMS created 
an overall prioritization that has significantly disadvantaged many New 
Jersey teaching hospitals that were otherwise positioned to receive GME 
slots based on the statutory eligibility criteria. The commenters urged 
CMS to prioritize slot distribution solely based on the four categories 
in the law. The commenters stated that the reliance on HPSAs minimizes 
Congress' other priorities to expand training slots for hospitals in 
rural areas, hospitals training above their cap, and states with new 
medical schools.
    The commenters stated that the statute requires that 10 percent of 
the aggregate number of residency slots must go to each of the four 
eligible hospital categories, however, CMS' prioritization 
disproportionately impacts states like New Jersey in which the HPSA 
designation is not an accurate reflection of patient access to care. 
The commenters stated that as of March 2023, New Jersey has only one 
geographic HPSA and no population HPSAs while by comparison, it has 32 
medically underserved areas and 5 medically underserved populations. 
The commenters urged CMS to prioritize slot distribution based solely 
on the four categories included in the law but if the agency chooses to 
continue the practice of super-prioritization for round 3, the 
commenter requested that CMS either: (a) make exceptions for all-urban 
states for which a HPSA score is not an accurate measure of patient 
access; or (b) use a substitute measure that considers the unique 
population characteristics of those states. A commenter stated that 
they believe CMS' contention that it is satisfying Congressional intent 
is misplaced and instead CMS achieved a minimum 10 percent in three 
categories by coincidence, rather than the intent to prioritize 
hospitals across each of the four enumerated categories. The commenter 
stated that they urge CMS to reassess its HPSA prioritization and 
rebalance its methodology for assessing resident cap slot applications 
prior to the awarding of round 3 slots.
    A commenter stated that CMS not meeting the 10 percent statutory 
requirement for Category Four is likely due to CMS prioritizing 
applications based on both population and geographic HPSA scores. The 
commenter stated that in many cases it is easier to achieve a higher 
population HPSA score compared to a geographic HPSA score, therefore 
hospitals with a high HPSA score that have received slots are not 
serving a geographic HPSA because of how CMS is prioritizing 
applications. A few commenters stated that 7 geographically rural 
hospitals have received slots in the first two rounds of distribution 
of section 126 and that in the second round, only 3 programs that 
received slots trained for more than 50 percent of the time in a CMS or 
Federal Office of Rural Health Policy designated rural area. The 
commenters stated that these two programs include 2 geographically 
rural hospitals and 1 urban hospital serving as an urban partner in a 
Rural Track Program. The commenters stated that this analysis implies 
that reclassified hospitals are making up the bulk of those that 
receive slots set aside for rural hospitals. The commenters stated that 
limiting the rural set aside to geographically rural hospitals would 
align with the legislative intent of section 126 and the commenter 
stated they are committed to working with Congress and CMS on ensuring 
that rural hospitals receive future slots.
    Response: We appreciate the commenters sharing their concerns about 
the section 126 prioritization process. Although we proposed to 
prioritize Category Four hospitals regardless of HPSA score when 
awarding slots under rounds 4 and 5 of section 126, we did not propose 
any

[[Page 69374]]

additional changes to the section 126 prioritization process and 
therefore we consider these comments to be out of scope with respect to 
section 126 and we will consider them for future rulemaking. We note 
that the definition of Category One hospitals is statutory, and we do 
not have the authority to remove hospitals that have reclassified as 
rural from this eligibility category.
    After consideration of the comments received, we are finalizing our 
policy as proposed with respect to prioritizing hospitals that qualify 
under Category Four regardless of HPSA score for rounds 4 and 5 of 
section 126, without modification. The remaining slots awarded under 
rounds 4 and 5 will be distributed using the existing methodology based 
on HPSA score (86 FR 73434 through 73440). That is, the remaining slots 
will be distributed to hospitals qualifying under Category One, 
Category Two, or Category Three, or hospitals that meet the definitions 
of more than one of these categories, based on the HPSA score 
associated with the program for which each hospital is applying.
e. Hospital Attestation to National CLAS Standards
    For section 126 of the CAA, 2021, we previously finalized a policy 
that all applicant hospitals be required to attest that they meet the 
National Standards for Culturally and Linguistically Appropriate 
Services in Health and Health Care (the National CLAS Standards) (86 FR 
73441). This was to ensure that the section 126 distribution broadened 
the availability of quality care and services to all individuals, 
regardless of preferred language, cultures, and health beliefs. We 
stated in the final rule that the National CLAS standards are aligned 
with the Administration's commitment to addressing healthcare barriers, 
which include that residents are educated and trained in culturally and 
linguistically appropriate policies and practices. This continues to be 
the case today. Therefore, we proposed the same requirement for section 
4122 of the CAA, 2023, that we adopted for section 126 of the CAA, 
2021, for the same reason. Specifically, we proposed that in order to 
ensure that residents are educated and trained in culturally and 
linguistically appropriate policies and practices, all applicant 
hospitals for slots allocated under section 4122 of the CAA, 2023, 
would be required to attest that they meet the National CLAS Standards 
to ensure that the section 4122 distribution broadens the availability 
of quality care and services to all individuals, regardless of 
preferred language, cultures, and health beliefs. (For more information 
on the CLAS standards, please refer to https://thinkculturalhealth.hhs.gov/)
    We did not receive any public comments related to our proposal that 
all applicant hospitals be required to attest that they meet the 
National Standards for Culturally and Linguistically Appropriate 
Services in Health and Health Care (the National CLAS Standards). We 
are finalizing this policy as proposed.
f. Payment of Additional FTE Residency Positions Awarded Under Section 
4122 of the CAA, 2023
    Section 1886(h)(10)(D) requires that CMS pay a hospital for 
additional positions awarded under this paragraph using the hospital's 
existing direct GME nonprimary care PRAs consistent with the 
regulations at Sec.  413.77. We note that as specified in section 
1886(h)(2)(D)(ii) of the Act, for cost reporting periods beginning on 
or after October 1, 1993, through September 30, 1995, each hospital's 
PRA for the previous cost reporting period was not updated for 
inflation for any FTE residents who were not either a primary care or 
an obstetrics and gynecology resident. As a result, hospitals with both 
primary care and obstetrics and gynecology residents and nonprimary 
care residents in FY 1994 or FY 1995 have two separate PRAs: one for 
primary care and obstetrics and gynecology and one for nonprimary care. 
Those hospitals that only trained primary care and/or obstetrics and 
gynecology residents and those that did not become teaching hospitals 
until after this 2-year period, have a single PRA for direct GME 
payment purposes. Therefore, we proposed that for purposes of direct 
GME payments for section 4122 of the CAA, 2023, if a hospital has both 
a primary care and obstetrics and gynecology PRA and a nonprimary care 
PRA, the nonprimary care PRA will be used, and if a hospital has a 
single PRA, that PRA will be used. Furthermore, similar to the policy 
finalized for purposes of direct GME payments under section 126 of the 
CAA, 2021 (86 FR 73441), we proposed that a hospital that receives 
additional positions under section 4122 of the CAA, 2023, would be paid 
for the FTE residents counted under those positions using the PRAs for 
which payment is made for FTE residents subject to the 1996 FTE cap. We 
expect to revise Worksheet E-4 to add a line on which hospitals will 
report the number of FTEs by which the hospital's FTE caps were 
increased for direct GME positions received under section 4122 of the 
CAA, 2023.
    We did not receive any public comments related to our proposal for 
payment of additional FTE residency positions awarded under section 
4122 of the CAA, 2023. We are finalizing this policy as proposed.
g. Aggregation of Additional FTE Residency Positions Awarded Under 
Section 4122 of the CAA, 2023
    Section 1886(h)(10)(E) of the Act states that the Secretary shall 
permit hospitals receiving additional residency positions attributable 
to the increase provided under 1886(h)(10) to, beginning in the fifth 
year after the effective date of such increase, apply such positions to 
the limitation amount under paragraph (4)(F) that may be aggregated 
pursuant to paragraph (4)(H) among members of the same affiliated 
group. Therefore, we proposed that FTE resident cap positions added 
under section 4122 of the CAA, 2023, may be used in a Medicare GME 
affiliation agreement beginning in the 5th year after the effective 
date of the FTE resident cap positions consistent with the regulations 
at 42 CFR 413.75(b) and 413.79(f). We proposed to amend paragraph (8) 
at 42 CFR 413.79(f) to state that FTE resident cap slots added under 
section 4122 of Public Law 117-328 may be used in a Medicare GME 
affiliation agreement beginning in the fifth year after the effective 
date of those FTE resident cap slots.
    We did not receive any public comments related to our proposal for 
the aggregation of additional FTE residency positions awarded under 
section 4122 of the CAA, 2023. We are finalizing this policy as 
proposed.
h. Conforming Regulation Amendments for 42 CFR 412.105 and 42 CFR 
413.79
    Section 4122 of the CAA, 2023, under subsection (b), amends section 
1886(d)(5)(B) of the Act to provide for increases in FTE resident 
positions for IME payment purposes. Specifically, subsection (b) adds a 
new section 1886(d)(5)(B)(xiii) of the Act, which states that for 
discharges occurring on or after July 1, 2026, if additional payment is 
made for FTE resident positions distributed to a hospital for direct 
GME purposes under section 1886(h)(10) of the Act, the hospital will 
receive IME payments based on the additional residency positions 
awarded using the same IME adjustment factor used for the hospital's 
other FTE residents. We proposed conforming amendments to the IME 
regulations at 42 CFR 412.105(f)(1)(iv)(C)(4) to specify that effective 
for portions of cost reporting periods beginning on or after July 1, 
2026, a hospital may qualify to receive

[[Page 69375]]

an increase in its otherwise applicable FTE resident cap if the 
criteria specified in 42 CFR 413.79(q) are met. We expect to revise 
Worksheet E Part A to add a line on which hospitals will report the 
number of FTEs by which the hospital's FTE caps were increased for IME 
positions received under section 4122 of the CAA, 2023.
    We also proposed to amend our regulations at 42 CFR 413.79 by 
adding a paragraph (q) to specify that for portions of cost reporting 
periods beginning on or after July 1, 2026, a hospital may receive an 
increase in its otherwise applicable FTE resident cap (as determined by 
CMS) if the hospital meets the requirements and qualifying criteria 
under section 1886(h)(10) of the Act and if the hospital submits an 
application to CMS within the timeframe specified by CMS.
    We did not receive any public comments on our proposal related to 
the conforming amendments for 42 CFR 412.105 and 42 CFR 413.79. We are 
finalizing this policy as proposed.
i. Prohibition on Administrative and Judicial Review
    Section 4122 of the CAA, 2023, under subsection (c), prohibits 
administrative and judicial review of actions taken under section 
1886(h)(10) of the Act. Specifically, subsection (c) amends section 
1886(h)(7)(E) of the Act by inserting ``paragraph (10),'' after 
``paragraph (8),'' adding to the that paragraph to the list of 
residency distributions not subject to review. Therefore, we proposed 
that the determinations and distribution of residency positions under 
sections 1886(d)(5)(B)(xiii) and 1886(h)(10) of the Act would be final 
and could not be subject to administrative or judicial review.
    We did not receive any comments related to our proposal on the 
prohibition on administrative or judicial review. We are finalizing 
this policy as proposed.
j. Application Process for Receiving Increases in FTE Resident Caps
    All qualifying hospitals seeking increases in their FTE resident 
caps must submit timely applications for this distribution by March 31, 
2025. The completed application must be submitted to CMS using an 
online application system, the Medicare Electronic Application Request 
Information System\TM\ (MEARIS\TM\). The burden associated with this 
information collection requirement is the time and effort necessary to 
review instructions and register for MEARIS\TM\ as well as the time and 
effort to gather, develop and submit various documents associated with 
a formal request of resident position increases from teaching hospitals 
to CMS. The aforementioned burden is subject to the Paperwork Reduction 
Act (PRA); and as discussed in section XII.B. of this final rule, the 
burden associated with these requests will be captured under OMB 
control number 0938-1417 (expiration date March 31, 2025). We will 
submit a revised information collection estimate to OMB for approval 
under OMB control number 0938-1417 (expiration date March 31, 2025).
    We proposed that the following information be submitted as part of 
an application for the application to be considered complete:
     The name and Medicare provider number (CCN) of the 
hospital.
     The name of the Medicare Administrative Contractor to 
which the hospital submits its Medicare cost report.
     The residency program for which the hospital is applying 
to receive an additional position(s).
     FTE resident counts for direct GME and IME and FTE 
resident caps for direct GME and IME reported by the hospital in the 
most recent as-filed cost report. (Including copies of Worksheet E, 
Part A, and Worksheet E-4).
     If the hospital qualifies under ``Demonstrated 
Likelihood'' Criterion 1 (New Residency Program), which of the 
following applies:
    ++ Application for accreditation of the new residency program has 
been submitted to the Accreditation Council for Graduate Medical 
Education (ACGME) (or application for approval of the new residency 
program has been submitted to the American Board of Medical Specialties 
(ABMS)) by March 31, 2025.
    ++ The hospital has received written correspondence from the ACGME 
(or ABMS) acknowledging receipt of the application for the new 
residency program, or other types of communication concerning the new 
program accreditation or approval process (such as notification of a 
site visit) by March 31, 2025.
     If the hospital qualifies under ``Demonstrated 
Likelihood'' Criterion 2 (Expansion of an Existing Residency Program), 
which of the following applies:
    ++ The hospital has received approval by March 31, 2025 from an 
appropriate accrediting body (the ACGME or ABMS) to expand the number 
of FTE residents in the program.
    ++ The hospital has submitted a request by March 31, 2025 for a 
permanent complement increase of the existing residency training 
program.
    ++ The hospital currently has unfilled positions in its residency 
program that have previously been approved by the ACGME and is now 
seeking to fill those positions.
     Indication of the categories under section 
1886(h)(10)(F)(iii) of the Act under which the hospital believes itself 
to qualify:
    ++ (I) The hospital is located in a rural area (as defined in 
section 1886(d)(2)(D) of the Act) or is treated as being located in a 
rural area (pursuant to section 1886(d)(8)(E) of the Act).
    ++ (II) The reference resident level of the hospital (as specified 
in section 1886(h)(10)(F)(iv) of the Act) is greater than the otherwise 
applicable resident limit.
    ++ (III) The hospital is located in a State with a new medical 
school (as specified in section 1886(h)(10)(B)(ii)(III)(aa) of the 
Act), or with additional locations and branch campuses established by 
medical schools (as specified in section 1886(h)(10)(B)(ii)(III)(bb) of 
the Act) on or after January 1, 2000.
    ++ (IV) The hospital serves an area designated as a HPSA under 
section 332(a)(1)(A) of the Public Health Service Act, as determined by 
the Secretary.
     The HPSA (if any) served by the residency program for 
which the hospital is applying and the HPSA ID for that HPSA.
     An attestation, signed and dated by an officer or 
administrator of the hospital who signs the hospital's Medicare cost 
report, stating the following:
    ``I hereby certify that the hospital is a Qualifying Hospital under 
section 1886(h)(10)(F)(iii) of the Social Security Act, and that there 
is a ``demonstrated likelihood'' that the hospital will fill the 
position(s) made available under section 1886(h)(10) of the Act within 
the first 5 training years beginning after the date the increase would 
be effective.''
    ``I hereby certify that (choose if applicable):
    __If my application is for a currently accredited residency 
program, the number of full-time equivalent (FTE) positions requested 
by the hospital does not exceed the number of positions for which the 
program is accredited.
    __If my hospital currently has unfilled positions in its residency 
program that have previously been approved by the ACGME, the number of 
FTE positions requested by the hospital does not exceed the number of 
previously approved unfilled residency positions.

[[Page 69376]]

    __If my application is for a residency training program with more 
than one participating site, I am only requesting the FTE amount that 
corresponds with the training occurring at my hospital, and any FTE 
training occurring at nonprovider settings consistent with 42 CFR 
412.105(f)(1)(ii)(E) and 413.78(g).''
    ``I hereby certify that the hospital agrees to increase the number 
of its residency positions by the amount the hospital's FTE resident 
caps are increased under section 4122 of Subtitle C of the Consolidated 
Appropriations Act, 2023, if awarded positions under section 
1886(h)(10)(C)(ii) of the Act.''
    ``I hereby certify that (choose one):
    __In the geographic HPSA the hospital is requesting that CMS use 
for prioritization of its application, at least 50 percent of the 
program's training time based on resident rotation schedules (or 
similar documentation) occurs at training sites that treat the 
population of the HPSA and are physically located in the HPSA.
    __In the population HPSA the hospital is requesting that CMS use 
for prioritization of its application, at least 50 percent of the 
program's training time based on resident rotation schedules (or 
similar documentation) occurs at training sites that treat the 
designated underserved population of the HPSA and are physically 
located in the HPSA.
    __In the geographic HPSA the hospital is requesting that CMS use 
for prioritization of its application, at least 5 percent of the 
program's training time based on resident rotation schedules (or 
similar documentation) occurs at training sites that treat the 
population of the HPSA and are physically located in the HPSA, and the 
program's training time at those sites plus the program's training time 
at Indian or Tribal facilities located outside of the HPSA is at least 
50 percent of the program's training time.
    __In the population HPSA the hospital is requesting that CMS use 
for prioritization of its application, at least 5 percent of the 
program's training time based on resident rotation schedules (or 
similar documentation) occurs at training sites that treat the 
designated underserved population of the HPSA and are physically 
located in the HPSA, and the program's training time at those sites 
plus the program's training time at Indian or Tribal facilities located 
outside of that HPSA is at least 50 percent of the program's training 
time.
    __None of the above apply.''
    ``I hereby certify that the hospital meets the National Standards 
for Culturally and Linguistically Appropriate Services in Health and 
Health Care (the National CLAS Standards).''
    ``I hereby certify that I understand that misrepresentation or 
falsification of any information contained in this application may be 
punishable by criminal, civil, and administrative action, fine and/or 
imprisonment under Federal law. Furthermore, I understand that if 
services identified in this application were provided or procured 
through payment directly or indirectly of a kickback or where otherwise 
illegal, criminal, civil, and administrative action, fines and/or 
imprisonment may result. I also certify that, to the best of my 
knowledge and belief, it is a true, correct, and complete application 
prepared from the books and records of the hospital in accordance with 
applicable instructions, except as noted. I further certify that I am 
familiar with the laws and regulations regarding Medicare payment to 
hospitals for the training of interns and residents.''
    The completed application must be submitted to CMS using the online 
application system MEARIS\TM\. A link to the online application system 
as well as instructions for accessing the system and completing the 
online application process will be made available on the CMS Direct GME 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/DGME.
    We note that if the hospital is applying using a HPSA ID, the HPSA 
score associated with that ID will automatically populate in the 
application module. In preparing their applications for additional 
residency positions, hospitals should refer to HRSA's Find Shortage 
Areas by Address (https://data.hrsa.gov/tools/shortage-area/by-address) 
to obtain the HPSA ID of the HPSA served by the program and include 
this ID in its application. Using this HPSA Find Shortage Areas by 
Address, applicants may enter the address of a training location 
(included on the hospital's rotation schedule or similar 
documentation), provided the location chosen participates in training 
residents in a program where at least 50 percent (5 percent if an 
Indian and Tribal facility is included) of the training time occurs in 
the HPSA. In November 2024, prior to the beginning of the application 
period, CMS will request HPSA ID and score information from HRSA so 
that recent HPSA information is available for use for the application 
period. CMS will only use this HPSA information, HPSA IDs and their 
corresponding HPSA scores, in order to review and prioritize 
applications. To assist hospitals in preparing for their applications, 
the HPSA information received from HRSA will also be posted when the 
MEARIS\TM\ application module becomes available on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/DGME.
    The information will also be posted on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/IPPS-Regulations-and-Notices. Click on the link on 
the left side of the screen associated with the appropriate final rule 
home page or ``Acute Inpatient--Files for Download.''
    Comment: We did not receive any public comments with respect to the 
proposed application process for section 4122 of the CAA, 2023, and 
therefore we are finalizing the application process as proposed.
    However, we did receive comments asking CMS to provide guidance 
regarding the interaction between round 4 of section 126 of the CAA, 
2021 and section 4122 of the CAA, 2023, since slots for both of these 
provisions will be effective July 1, 2026. Specifically, commenters 
asked whether a hospital may: (1) apply for an increase through section 
126 round 4 and section 4122; and (2) apply for increases in the same 
residency program for both section 126 round 4 and section 4122. 
Another commenter asked whether the same provider site could apply for 
pediatrics FTE(s) under section 4122 and internal medicine FTE(s) under 
round 4 of section 126. The commenter asked, if such an application is 
allowed, whether there would be any impact in prioritization in dual 
applications.
    Response: We do not believe there is any language in the statute 
that precludes a hospital from applying for slots under both round 4 of 
section 126 and section 4122. However, the statute doesn't require us 
to, and we will not, award duplicative FTE cap slots for the same 
program under these provisions. We strongly recommend that if an 
applicant is applying for the same program (same ACGME accreditation 
number) under both round 4 of section 126 and section 4122, it submit 
with its application a note indicating as such. Lastly, if an applicant 
submits an application under both round 4 of section 126 and section 
4122, there is no impact on prioritization as the prioritization for 
awards is performed separately for these two provisions.

[[Page 69377]]

3. Proposed Modifications to the Criteria for New Residency Programs 
and Requests for Information
a. Summary
    Section 1886(h)(4)(H)(i) of the Act requires CMS to establish rules 
for applying the direct GME cap in the case of medical residency 
training programs established on or after January 1, 1995. Under 
section 1886(d)(5)(B)(viii) of the Act, this provision also applies for 
purposes of the IME adjustment. Accordingly, we issued regulations at 
Sec. Sec.  413.79(e)(1) through (3) discussing the direct GME cap 
calculation for a hospital that begins training residents in a new 
medical residency training program(s) on or after January 1, 1995. The 
same regulations apply for purposes of the IME cap calculation at Sec.  
412.105(f)(1)(vii). CMS implemented these statutory requirements in the 
August 29, 1997 Federal Register (62 FR 46005) and in the May 12, 1998 
Federal Register (63 FR 26333). The calculation of both the DGME cap 
and IME cap for new programs is discussed in the August 31, 2012 
Federal Register (77 FR 53416).
    Section 413.79(l) defines a new medical residency training program 
as ``a medical residency that receives initial accreditation by the 
appropriate accrediting body or begins training residents on or after 
January 1, 1995.'' In the August 27, 2009 Federal Register (74 FR 43908 
through 43917), CMS clarified the definition of a ``new'' residency 
program and adopted supporting criteria regarding whether or not a 
residency program can be considered ``new'' for the purpose of 
determining if a hospital can receive additional direct GME and/or IME 
cap slots for that program. CMS adopted these criteria in part to 
prevent situations where a program at an existing teaching hospital 
would be transferred to a new teaching hospital, resulting in cap slots 
created for the same program at two different hospitals. To be 
considered a ``new'' program for which new cap slots would be created, 
a previously non-teaching hospital would have to ensure that the 
program meets three primary criteria (74 FR 43912):
     The residents are new, and
     The program director is new, and
     The teaching staff are new.
    Over the years, we have received questions regarding the 
application of these criteria, such as whether CMS would still consider 
a program to be new for cap adjustment purposes if the three criteria 
were partially, but not fully, met. We have answered such questions by 
stating that, generally, a residency program's newness would not be 
compromised as long as the ``overwhelming majority'' of the residents 
or staff are not coming from previously existing programs in that same 
specialty.
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
36221), the question of what constitutes a ``new'' program for purposes 
of receiving additional Medicare-funded GME slots has taken on 
increasing significance in light of the ability of urban hospitals to 
reclassify as rural under 42 CFR 412.103 for IME purposes, and thus 
receive additional IME cap slots for any new program started. In the 
proposed rule, we stated that, to continue to ensure that newly funded 
cap slots are created appropriately, we ultimately would like to 
establish in rulemaking additional criteria for determining program 
newness. However, we also indicated that we were not yet certain about 
some of the criteria that should be proposed. Therefore, we proposed a 
policy for determining whether the residents in a program are genuinely 
new, while we solicited comments through a Request for Information 
(RFI) to gain additional clarity on best practices in other areas.
    We received many comments in response to our proposed criterion for 
ensuring newness of residents, and to our RFIs regarding criteria for 
program directors, teaching staff, and other issues such as commingling 
of residents. With regard to the RFIs, we will carefully consider 
comments received and will take them into account for future 
rulemaking. We acknowledge that the vast majority of commenters opposed 
any restrictions on the program director, faculty, comingling of 
residents, and one hospital sponsoring two programs in the same 
specialty.
    Regarding our proposed criterion for ensuring newness of residents, 
we received many wide-ranging comments and commenters did not arrive at 
a consensus on the best approach to this issue. Accordingly, at this 
time, we are not finalizing our proposal that at least 90 percent of 
the individual resident trainees (not FTEs) must not have previous 
training in the same specialty as the new program. Instead, in an 
effort to achieve greater consensus on this issue, we are initiating 
another RFI particularly focused on the criterion regarding newness of 
residents. Commenters should review and consider all of the comments 
summarized below when formulating responses to this RFI. We look 
forward to receiving additional feedback from commenters after they 
have had the opportunity to review the comments and suggestions of 
others.
a. Newness of Residents
    Generally, when a hospital is creating a new residency program, it 
recruits individuals that have recently graduated from medical school, 
have no previous residency training experience, and would be entering 
the program as first year (PGY1) residents. However, new programs 
sometimes receive inquiries from applicants that have training 
experience already, but for a variety of reasons need to transfer to 
another program. If the program that such a resident wishes to join is 
still within the 5-year cap building period, then, consistent with the 
criteria adopted in the August 27, 2009 final rule, the program 
director of this ``new'' program should be judicious with regard to 
accepting residents who have received previous training in the same 
specialty. In order to maintain the classification as a ``new'' 
residency program, the ``overwhelming majority'' of residents in the 
program must be new. In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
36222), we stated that we believe it would be useful for the provider 
community to have a concrete standard to refer to in determining 
whether the ``overwhelming majority'' of residents in a program are in 
fact new. Therefore, we proposed that, in order for a residency program 
to be considered new, at least 90 percent of the individual resident 
trainees (not FTEs) must not have previous training in the same 
specialty as the new program. For example, if there were 50 trainees 
(not FTEs) entering the program over the course of the 5-year cap 
building period, then at least 45 of the trainees (90 percent of 50) 
must enter the program as brand new first year residents in that 
particular specialty. If more than 10 percent of the trainees (not 
FTEs) transferred from another program at a different hospital/sponsor 
in the same specialty, even during their first year of training, we 
proposed that this would render the program ineligible for new cap 
slots. (We noted that we would apply standard rounding when 90 percent 
of a number does not equal a whole number, rounding down to the nearest 
whole number when the remainder is less than 0.5, and rounding up to 
the nearest whole number when the remainder is 0.5 or above. For 
example, if there were 48 trainees (not FTEs) entering the program over 
the course of the 5-year cap building period, then at least 43 of the 
trainees (90 percent of 48 = 43.2, which rounds down to 43) must enter 
the program as brand new first year residents in that particular

[[Page 69378]]

specialty. If there were 45 trainees (not FTEs) entering the program, 
then at least 41 of the trainees (90 percent of 45 = 40.5, which rounds 
up to 41) must enter the program as brand new first year residents in 
that particular specialty.)
    For example, if a new program is in internal medicine, then, under 
our proposal, at least 90 percent of the entering residents must not 
have previously enrolled and trained in an internal medicine program. 
If a resident was formally enrolled in an internal medicine program 
(either preliminary or categorical), even if that resident switched 
programs during their first year of training, then we would consider 
that resident to have had previous training in that same specialty. 
Conversely, if an individual was a resident in a specialty other than 
internal medicine, and that resident switched into the new internal 
medicine program and began training in the new internal medicine 
program as a PGY1, then that resident would not be considered to have 
had previous training in the same specialty, and would be counted as a 
brand new resident. (Note, we are distinguishing between a resident 
that is not enrolled in an internal medicine program but may have done 
a rotation in internal medicine as part of the requirements for a 
different specialty, from a resident that actually was enrolled and 
participated in an internal medicine program, consistent with the 
definition of ``resident'' at 42 CFR 413.75(b). In this example, we are 
generally focusing on individuals who were accepted, enrolled, and 
participated in internal medicine; we are generally not concerned with 
an individual that was enrolled, accepted, and participated in a 
program other than internal medicine but did a rotation in internal 
medicine.) We proposed that the proportion of brand new residents in a 
residency program would be determined by the MAC based on all the 
individuals (not FTEs) that enter the program as a whole at any point 
during the 5-year cap building period, after the end of the 5 years.
    We proposed a threshold of 90 percent for new residents as that is 
generally consistent with the concept of an ``overwhelming majority,'' 
and because we have precedent for such a threshold in the regulations 
for section 5506 of the Affordable Care Act, which state that a 
hospital is considered to have taken over an ``entire'' program from a 
closed hospital if it can demonstrate that it took in 90 percent or 
more of the FTE residents in that program. Accordingly, for a program 
to be considered ``new'' for the purpose of determining if a hospital 
can receive additional direct GME and/or IME cap slots for that 
program, we proposed that at least 90 percent of the individual 
resident trainees (not FTEs) in the program as a whole must not have 
had previous training in the same specialty as the new program. If more 
than 10 percent of the trainees (not FTEs) transferred from another 
program at a different hospital/sponsor in the same specialty, even 
during their first year of training, we proposed that this would render 
the program as a whole (but not the entire hospital or its other new 
programs, if applicable) ineligible for new cap slots.
    In addition, we stated in the proposed rule that we understand that 
there may be certain challenges that are unique to small or rural-based 
programs in developing new residencies, and that meeting a proposed 
threshold of 90 percent of resident trainees with no previous training 
experience in the specialty may be more difficult for those programs. 
Accordingly, we solicited comments on what should be considered a 
``small'' program and what percentage threshold or other approach 
regarding new resident trainees should be applied to these programs. We 
also solicited comment on defining a small residency program as a 
program accredited for 16 or fewer resident positions, because 16 
positions would encompass the minimum number of resident positions 
required for accredited programs in certain specialties, such as 
primary care and general surgery, that have historically experienced 
physician shortages, and therefore have been prioritized by Congress 
and CMS for receipt of slots under sections 5503 and 5506 of the 
Affordable Care Act.
b. Summary of Public Comments
    Several commenters expressed general opposition to our proposal, 
and to the suggestions presented in our Requests for Information, 
stating that these policies would be administratively burdensome, 
ineffective at preventing the transfer of existing programs or the 
duplication of FTE cap slots, and detrimental to graduate medical 
education in general and in particular to small and rural residency 
programs. Other commenters, while supportive in principle of the need 
for implementing more concrete standards, nevertheless expressed 
concern that any new guidelines should not adversely affect the 
educational quality of new programs or impede the establishment of new 
programs, which are critical to addressing workforce shortages. 
Furthermore, a number of commenters generally opposed the consideration 
of individuals' prior training or employment history in the 
determination of program newness, stating that these factors are 
extraneous to CMS's central concerns about whether a program has been 
transferred and whether FTE cap slots may have been duplicated. 
Commenters also argued that many of the issues addressed in the 
proposed rule and suggested policies, including the transfer of 
residents and recruitment of faculty and program directors, are already 
regulated by entities such as the ACGME, the ABMS, and the National 
Resident Matching Program (NRMP), and urged CMS to defer to the 
judgment and expertise of those organizations. For example, several 
commenters recommended that CMS generally defer to the assessment of 
the accrediting body and that the determining question in establishing 
newness should be whether the program has received initial 
accreditation for the first time from the ACGME. In addition to 
receiving initial accreditation for the first time from the ACGME, some 
commenters suggested that CMS could address its concerns if it 
undertook a ``cursory overview'' of the program and/or required an 
attestation from the hospital that the program has not been transferred 
and that it does not duplicate FTE cap slots associated with an 
existing program.
    A few commenters supported our proposal that at least 90 percent of 
FTE residents must not have previous training in the same specialty as 
the new program, stating that this policy would ensure that cap 
adjustments are granted to genuinely new programs while still providing 
for the limited inclusion of experienced residents. In addition, 
several commenters expressed support for our proposed 90 percent 
threshold, but recommended that we make exceptions for small or mid-
sized programs and for circumstances outside of a hospital's control 
(for example, situations in which departing residents are replaced by 
transfers from an existing program).
    A few commenters recommended that newness of residents should be 
established if the program fills most resident positions at the PGY 1 
level via a separate and distinct recruiting process (as evidenced, for 
example, by separate NRMP match numbers, or for fellowships, an 
applicable distinct process). However, commenters stressed that CMS 
should not penalize hospitals that attempt to fill PGY 1 positions via 
the National Resident Matching Program (NRMP), but that may need to 
fill positions in a different manner due to the results of the Match. 
Commenters

[[Page 69379]]

recommended that in such cases the hospital should be allowed to submit 
documentation demonstrating a program's original intent to satisfy the 
90 percent criterion.
    A few commenters supported the approach of defining a minimum 
threshold for new residents, but recommended adopting a more lenient 
standard, such as 75 percent or 70 percent, whereas other commenters 
recommended that our proposed 90 percent threshold should apply only to 
residents in their first year of training (that is, PGY 1). 
Alternatively, some commenters suggested that, in order to address the 
concern about the transfer of existing programs (or ``cannibalism''), 
CMS should focus on limiting the number of residents who all come from 
the same existing residency program. In addition, some commenters 
argued that the presence of experienced residents should not disqualify 
a program from being deemed new, but suggested that those residents 
could be excluded from the program's FTE cap calculation.
    Several commenters also requested that CMS clarify the methodology 
for determining the proportions of new and experienced residents, with 
some commenters specifically recommending that CMS make this 
calculation based on a count of all residents training over the course 
of the entire five-year cap-building period. Another commenter 
recommended that if CMS adopts a new resident threshold, it should 
count residents on the basis of FTEs rather than individual trainees as 
proposed, since a program's count could be skewed by enrolling a high 
proportion of partial FTEs. A few commenters also requested 
confirmation that fellows in subspecialty programs, residents who have 
completed transitional or preliminary year programs, and residents from 
closed programs would not be considered to have prior experience 
training in the same specialty.
    A number of commenters suggested alternative methods for assessing 
program newness that do not depend on the proportion of residents 
without previous experience training in the same specialty. Some 
commenters suggested that CMS consider the relationship between the 
``new'' program and the program that appears to have been transferred 
or duplicated. For example, if the original program remains open for a 
minimum of one full academic year, then the second program should be 
considered genuinely ``new.''
    A commenter recommended that CMS adopt a ``totality of 
circumstances'' approach in which we would assess various aspects of 
the program, such as its age and whether it has existed previously at 
another site, rather than focusing on rigid individual metrics. Another 
commenter stated that CMS should apply a ``reasonable person'' standard 
in determining whether a program is genuinely new. In addition, a few 
commenters stated that if CMS were to implement the proposed 90 percent 
threshold, then a program that fails to meet the threshold should be 
given the opportunity to demonstrate newness by other means, and that 
CMS should also consider mitigating factors such the size of the 
program or matched residents who did not disclose prior training 
experiences.
    In addition to the specific recommendations discussed above, 
commenters generally expressed concern that any criteria adopted should 
be objective, transparent and administratively feasible, especially 
given the significant costs and high financial stakes associated with 
developing a new residency program. A commenter also recommended that 
CMS should carry out periodic evaluations of newness during a program's 
five-year cap-building period to ensure that a hospital has time to 
make any changes necessary to bring the program into compliance.
    Commenters generally agreed that CMS should create exceptions to 
the newness criteria for small and rural programs; several commenters 
also argued that we should give similar consideration to programs in 
urban underserved areas. In particular, commenters noted that many 
small programs would fail to meet our proposed 90 percent threshold if 
they admitted even one experienced resident. Several commenters also 
reported that it is common for new rural programs, including Rural 
Track Programs, to accept a higher proportion of non-PGY 1 residents as 
a means of ``jump starting'' the program and promoting stability. A few 
commenters indicated that small and rural or urban underserved programs 
should be exempted from any restrictions on the recruitment of 
experienced residents (as well as on the recruitment of faculty and 
program directors). Although commenters agreed that our proposed 90 
percent new resident threshold would be too strict for such programs, 
there was no consensus as to a specific standard that would be 
appropriate: a few commenters recommended a much lower threshold of 25 
percent, while others suggested that 50 percent of PGY 1 residents 
should be new, with no restrictions on non-PGY 1 residents. Several 
commenters agreed with our suggestion that a small program should be 
defined as one accredited for 16 or fewer resident positions; however, 
a few commenters stated that for purposes of determining exceptions to 
the newness criteria a small program should also be required to train 
residents for greater than half the time in a rural area or an urban 
underserved area. Other commenters recommended lower thresholds for 
defining small programs, with specific suggestions including 12, 10, 6 
or 4 positions. A few commenters recommended that the newness of small 
programs be evaluated on a case-by-case basis, taking into account the 
totality of a hospital's financial, geographic and other circumstances.
    Several commenters stressed that any new policies should only apply 
to programs that begin training residents after the effective date of 
the final rule (that is, on or after October 1, 2024), so as not to 
adversely impact programs currently in their cap-building period.
    Some commenters also objected to CMS's administration and 
interpretation of the newness criteria promulgated in the August 27, 
2009 Federal Register (74 FR 43908 through 43917), describing CMS's 
approach as ``unnecessarily cynical'' and stating that the criteria for 
assessing program newness are not reflected in the statutes or 
regulations. Commenters also alleged that CMS has been interpreting the 
existing newness criteria in ways that differ substantially from how 
members of the provider community have been interpreting these 
policies. For example, a few commenters stated that it was not clear 
from August 27, 2009 Federal Register that teaching staff and program 
directors must have no prior experience in these roles for a program to 
be considered genuinely new.
c. Request for Information
    Section 1886(h)(4)(H)(i) of the Act states that the Secretary 
shall, consistent with the principles of subparagraphs (F) {Initial 
Residency Period{time}  and (G) {Period of Board Eligibility{time}  and 
subject to paragraphs (7) {Redistribution of Unused Residency 
Positions{time}  and (8) {Distribution of Additional Residency 
Positions{time} , prescribe rules for the application of such 
subparagraphs in the case of medical residency training programs 
established on or after January 1, 1995 (that is, new programs). In 
promulgating such rules for purposes of subparagraph (F), the Secretary 
shall give special consideration to facilities that meet the needs of 
underserved rural areas.
    Thus, the Secretary has broad statutory authority to prescribe 
rules for counting residents in new programs.

[[Page 69380]]

    As we stated at the beginning of this section, we received many 
wide-ranging comments and commenters did not arrive at a consensus on 
the best approach to the issue of the newness of residents. 
Accordingly, at this time, we are not finalizing our proposal that at 
least 90 percent of the individual resident trainees (not FTEs) must 
not have previous training in the same specialty as the new program. 
Instead, in an effort to achieve greater consensus on this issue, we 
are initiating another RFI seeking comment on the appropriate criterion 
regarding newness of residents. Commenters should review and consider 
the broad statutory authority provided to the Secretary in this area, 
our prior rulemaking on this issue, and all of the public comments on 
our proposal as summarized in Section F.3.b of this final rule when 
formulating responses to this RFI. We look forward to receiving 
additional feedback from commenters after they have had the opportunity 
to review the comments and suggestions of others. We also, in the 
interest of facilitating consensus, encourage commenters to provide 
feedback on what alternative to their primary recommended approach they 
would consider to be most acceptable among the different approaches 
suggested by commenters.
4. Technical Fixes to the DGME Regulations
    In the course of our ongoing implementation of policies concerning 
payment for graduate medical education, we have become aware of the 
existence of several technical errors in the direct GME regulations at 
42 CFR 413.75 through 413.83. In the FY 2025 IPPS/LTCH PPS proposed 
rule (89 FR 36224 through 36225), we proposed to correct the following 
technical errors:
a. Correction of Cross-References to Sec.  413.79(f)(7)
    In the FY 2010 IPPS final rule (74 FR 43918 and 44001, August 27, 
2009), we amended 42 CFR 413.79(f) by adding a new paragraph (f)(6) and 
redesignating existing paragraph (f)(6) as paragraph (f)(7). The new 
Sec.  413.79(f)(6) sets forth requirements for participation in a 
Medicare GME affiliated group by a hospital that is new after July 1 
and begins training residents for the first time after the July 1 start 
date of an academic year, while the redesignated Sec.  413.79(f)(7) 
contains the regulations pertaining to emergency Medicare GME 
affiliated groups.
    We have discovered that, after redesignating the former Sec.  
413.79(f)(6) as Sec.  413.79(f)(7), we inadvertently did not update the 
cross-references to this paragraph at Sec. Sec.  413.75(b) and 413.78. 
Accordingly, in the proposed rule, we proposed to revise the language 
of the definition of ``Emergency Medicare GME affiliated group'' under 
Sec.  413.75(b), as well as the language at Sec. Sec.  
413.78(e)(3)(iii) and (f)(3)(iii), by correcting the cross-references 
to read ``Sec.  413.79(f)(7).''
b. Removal of Obsolete Regulations Under Sec.  413.79(d)(6)
    Under 42 CFR 413.79(h), a hospital may receive a temporary 
adjustment to its FTE cap to reflect displaced residents added as a 
result of the closure of another hospital or residency training 
program. Furthermore, under Sec.  413.79(d)(6)(i) (previously Sec.  
413.79(d)(6)), displaced residents counted under a temporary cap 
adjustment are added to the receiving hospital's FTE count after 
application of the three-year rolling average for the duration of the 
time that the displaced residents are training at the receiving 
hospital.
    In the November 24, 2010 final rule (75 FR 72212 through 72238), we 
implemented the provisions of section 5506 of the Affordable Care Act, 
which directs the Secretary to redistribute Medicare GME residency 
slots from teaching hospitals that close after March 23, 2008. A 
hospital that had previously accepted residents displaced by a teaching 
hospital closure and received a temporary cap adjustment for training 
those residents under Sec.  413.79(h) may subsequently apply for a 
permanent cap increase under section 5506.
    As part of the implementation of section 5506, we finalized several 
ranking criteria to prioritize applications, and specified the dates on 
which awards would become effective for hospitals that apply under each 
of those criteria. In particular, we finalized Ranking Criteria One and 
Three, which describe applicant hospitals that take over, respectively, 
an entire residency program(s) or part of a residency program(s) from 
the closed hospital. Consistent with the policy finalized in the 
November 24, 2010 final rule, a permanent cap increase awarded under 
Ranking Criterion One or Three would generally override any temporary 
cap adjustment that the applying hospital may have received under Sec.  
413.79(h), with the result that those resident slots would immediately 
become subject to the three-year rolling average calculation (75 FR 
72224).
    We also stated, however, that we believed it would still be 
appropriate to allow a hospital that ultimately would qualify to 
receive slots permanently under any of the ranking criteria and that 
took in displaced residents to receive temporary cap adjustments and, 
in a limited manner, an exemption from the three-year rolling average. 
Therefore, we finalized a policy that, in the first cost reporting 
period in which the applying hospital takes in displaced residents and 
the hospital closure occurs, the applying hospital could receive a 
temporary cap adjustment and an exemption from the rolling average for 
the displaced residents. Then, effective beginning with the cost 
reporting period following the one in which the hospital closure 
occurred, the applying hospital's permanent cap increase would take 
effect, and there would be no exemption from the rolling average (75 FR 
72225 and 72263).
    Therefore, we amended Sec.  413.79(d) by redesignating the existing 
paragraph (d)(6) as (d)(6)(i) and by adding new (d)(6)(ii), which 
states stated that if a hospital received a permanent increase in its 
FTE resident cap under Sec.  413.79(o)(1) due to redistribution of 
slots from a closed hospital, the displaced FTE residents that the 
hospital received would be added to the FTE count after applying the 
averaging rules only in the first cost reporting period in which the 
receiving hospital trained the displaced FTE residents. In subsequent 
cost reporting periods, the displaced FTE residents would be included 
in the receiving hospital's rolling average calculation.
    Subsequently, in the FY 2013 IPPS final rule (77 FR 53437 through 
53443, August 31, 2012), we finalized revisions to our policy 
concerning the effective dates of section 5506 cap increases awarded 
under the various ranking criteria. In particular, we finalized a 
policy that slots awarded under Ranking Criteria One and Three become 
effective seamlessly with the expiration of temporary cap adjustments 
under Sec.  413.79(h) (that is, on the day after the graduation date(s) 
of the displaced residents). As stated in that final rule, under this 
revised policy, permanent cap increases under section 5506 would no 
longer ``replace'' temporary cap adjustments under Sec.  413.79(h), and 
exemptions from the three-year rolling average would no longer be 
suspended as a consequence of the receipt of permanent slots (77 FR 
53441).
    Under the policy finalized in the FY 2013 IPPS final rule, there is 
no longer any need for the regulation at Sec.  413.79(d)(6)(ii), which 
would apply in the situation where a permanent cap increase under 
section 5506 would otherwise have overridden a temporary cap adjustment 
for displaced residents under Sec.  413.79(h). Instead, our policy is 
that displaced residents are excluded

[[Page 69381]]

from the receiving hospital's rolling average calculation for the 
duration of the time that they are training at the receiving hospital, 
as specified at Sec.  413.79(d)(6)(i). However, we have discovered that 
we neglected to make the appropriate revisions to the regulations text 
to reflect our current policy.
    Accordingly, we proposed to amend Sec.  413.79(d)(6) by removing 
the no longer applicable paragraph (d)(6)(ii), and by redesignating 
existing (d)(6)(i) as (d)(6).
c. Correction of Typographical Errors at Sec.  413.79(k)(2)(i)
    In the final rule published on December 27, 2021, as part of the 
implementation of section 127 of the CAA, 2021 (Pub. L. 116-260), we 
finalized various changes throughout the regulations text at 42 CFR 
413.79(k), ``Residents training in rural track programs'' (86 FR 73445 
through 73457 and 73514 through 73515). We have discovered that the 
final sentence of Sec.  413.79(k)(2)(i), as amended in that rule, 
incorrectly states, ``For Rural Track Programs prior to the start of 
the urban or rural hospital's cost reporting period that coincides with 
or follows the start of the sixth program year of the rural track's 
existence . . .''
    The beginning of the quoted sentence should instead refer to ``cost 
reporting periods beginning on or after October 1, 2022,'' and should 
otherwise be analogous to the similar text that appears at Sec.  
413.79(k)(1)(i). Accordingly, we proposed to revise Sec.  
413.79(k)(2)(i) to read as follows: ``For cost reporting periods 
beginning on or after October 1, 2022, before the start of the urban or 
rural hospital's cost reporting period that coincides with or follows 
the start of the sixth program year of the Rural Track Program's 
existence, the rural track FTE limitation for each hospital will be the 
actual number of FTE residents training in the Rural Track Program at 
the urban or rural hospital and, subject to the requirements under 
Sec.  413.78(g), at the rural nonprovider site(s).''
    We did not receive any comments on our proposed technical revisions 
to the direct GME regulations. Therefore, we are finalizing the changes 
as proposed without modification.
5. Notice of Closure of Teaching Hospital and Opportunity To Apply for 
Available Slots
a. Background
    Section 5506 of the Patient Protection and Affordable Care Act 
(Pub. L. 111-148), as amended by the Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152) (collectively, 
``Affordable Care Act''), authorizes the Secretary to redistribute 
residency slots after a hospital that trained residents in an approved 
medical residency program closes. Specifically, section 5506 of the 
Affordable Care Act amended the Act by adding subsection (vi) to 
section 1886(h)(4)(H) of the Act and modifying language at section 
1886(d)(5)(B)(v) of the Act, to instruct the Secretary to establish a 
process to increase the FTE resident caps for other hospitals based 
upon the full-time equivalent (FTE) resident caps in teaching hospitals 
that closed on or after a date that is 2 years before the date of 
enactment (that is, March 23, 2008). In the CY 2011 Outpatient 
Prospective Payment System (OPPS) final rule with comment period (75 FR 
72264), we established regulations at 42 CFR 413.79(o) and an 
application process for qualifying hospitals to apply to CMS to receive 
direct GME and IME FTE resident cap slots from the hospital that 
closed. We made certain additional modifications to Sec.  413.79 in the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53434), and we made changes to 
the section 5506 application process in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50122 through 50134). The procedures we established apply 
both to teaching hospitals that closed on or after March 23, 2008, and 
on or before August 3, 2010, and to teaching hospitals that close after 
August 3, 2010 (75 FR 72215).
b. Notice of Closure of Sacred Heart Hospital Located in Eau Claire, 
WI, and the Application Process--Round 23
    CMS has learned of the closure of Sacred Heart Hospital, located in 
Eau Claire, WI (CCN 520013). Accordingly, this notice serves to notify 
the public of the closure of this teaching hospital and initiate 
another round (``Round 23'') of the application and selection process. 
This round will be the 23rd round (``Round 23'') of the application and 
selection process. The table in this section of this rule contains the 
identifying information and IME and direct GME FTE resident caps for 
the closed teaching hospital, which are part of the Round 23 
application process under section 5506 of the Affordable Care Act.
[GRAPHIC] [TIFF OMITTED] TR28AU24.187


[[Page 69382]]


d. Application Process for Available Resident Slots
    The application period for hospitals to apply for slots under 
section 5506 of the Affordable Care Act is 90 days following notice to 
the public of a hospital closure (77 FR 53436). Therefore, hospitals 
that wish to apply for and receive slots from the previously noted 
hospitals' FTE resident caps must submit applications using the 
electronic application intake system, Medicare Electronic Application 
Request Information SystemTM (MEARISTM), with 
application submissions for Round 23 due no later than October 30, 
2024. The Section 5506 application can be accessed at: https://mearis.cms.gov/public/home.
    CMS will only accept Round 23 applications submitted via 
MEARISTM. Applications submitted through any other method 
will not be considered. Within MEARISTM, we have built in 
several resources to support applicants:
     Please refer to the ``Resources'' section for guidance 
regarding the application submission process at: https://mearis.cms.gov/public/resources.
     Technical support is available under ``Useful Links'' at 
the bottom of the MEARISTM web page.
     Application related questions can be submitted to CMS 
using the form available under ``Contact'' at: https://mearis.cms.gov/public/resources.
    Application submission through MEARISTM will not only 
help CMS track applications and streamline the review process, but it 
will also create efficiencies for applicants when compared to a paper 
submission process.
    We have not established a deadline by when CMS will issue the final 
determinations to hospitals that receive slots under section 5506 of 
the Affordable Care Act. However, we review all applications received 
by the application deadline and notify applicants of our determinations 
as soon as possible.
    We refer readers to the CMS Direct Graduate Medical Education 
(DGME) website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/direct-graduate-medical-education-dgme. Hospitals should access this website for a list of additional 
section 5506 guidelines for the policy and procedures for applying for 
slots, and the redistribution of the slots under sections 
1886(h)(4)(H)(vi) and 1886(d)(5)(B)(v) of the Act.
6. Reminder of Core-Based Statistical Area (CBSA) Changes and 
Application to GME Policies
    In section III.B. of the preamble of this final rule, we discuss 
the proposed changes to the most recent OMB standards for delineating 
statistical areas announced in the July 21, 2023 OMB Bulletin No. 23-
01. We refer to these statistical areas as Core-Based Statistical Areas 
(CBSAs). As a result of the new OMB delineations, some teaching 
hospitals may be redesignated from location in a rural CBSA to an urban 
CBSA, or from location in an urban CBSA to a rural CBSA. In the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50111, August 22, 2014), we last 
discussed the effects of the CBSA changes on IME and DGME payment 
policy, as at that time, we implemented the changes to the statistical 
areas resulting from the February 28, 2013, OMB Bulletin No. 13-01. We 
refer readers to the FY 2015 IPPS/LTCH PPS final rule to learn more 
about CMS' policies regarding changes to the CBSAs and how IME and DGME 
payments are impacted. We emphasize that we did not propose any 
additional policies as a result of the latest CBSA changes; we are 
merely providing a reference for readers that may have questions about 
our existing policies. As a general overview, the FY 2015 IPPS/LTCH PPS 
final rule discusses the effect on the FTE caps of a hospital that was 
located in a rural CBSA, either at the time that it started training 
residents in a new residency program, or was located in a rural area 
when it received accreditation for a new program, but either prior to 
actually starting the program or during the 5-year cap building period, 
the CBSA in which the hospital was located became an urban CBSA (79 FR 
50111 through 50113). We also discussed what happens to a rural 
training track when a rural hospital that is participating as the rural 
site is redesignated as urban, either during the period when the rural 
track is being established, or after it has been established (79 FR 
50113). (Note that under 42 CFR 413.75(b) and 413.79(k), we now refer 
to rural training tracks as Rural Training Programs (RTPs)). We 
provided for a transition period, wherein either the redesignated urban 
hospital must reclassify as rural under Sec.  412.103 for purposes of 
IME payment only (in addition, this reclassification option only 
applies to IPPS hospitals (or CAHs under 42 CFR 412.103(a)(6)), not 
other nonprovider sites), or the ``original'' urban hospital must have 
found a new site in a geographically rural area that will serve as the 
rural site for purposes of the rural track in order for the 
``original'' urban hospital to receive payment under Sec.  413.79(k)(1) 
or (k)(2). Also see DGME regulations at 42 CFR 413.79(c)(6), 42 CFR 
413.79(k)(7), and for IME, at 42 CFR 412.105(f)(1)(iv)(D).
    Comment: We received one question related to DGME PRA determination 
of a hospital whose CBSA designation changes as a result of CBSA 
redesignations. The commenter noted that under 42 CFR 413.77, a new 
teaching hospital's PRA is determined based on the lower of the 
hospital's cost per FTE, or the weighted average PRA of other existing 
teaching hospitals in the same CBSA as the new teaching hospital. For a 
new teaching hospital whose CBSA changed status as a result of OMB 
changes, is the weighted average PRA based on the hospitals in the CBSA 
at the time the new teaching hospital first began training residents, 
or the CBSA in effect at the time the MAC audits and calculates the 
PRA?
    Response: The relevant CBSA for the purpose of the weighted average 
PRA calculation is the CBSA in which the new teaching hospital was 
located during its PRA base period, under 42 CFR 413.77(e)(1)(i).

G. Reasonable Cost Payment for Nursing and Allied Health Education 
Programs (Sec.  413.85 and 413.87)

1. General
    Under section 1861(v) of the Act, Medicare has historically paid 
providers for Medicare's share of the costs that providers incur in 
connection with approved educational activities. Approved nursing and 
allied health (NAH) education programs are those that are, in part, 
operated by a provider, and meet State licensure requirements, or are 
recognized by a national accrediting body. The costs of these programs 
are excluded from the definition of ``inpatient hospital operating 
costs'' and are not included in the calculation of payment rates for 
hospitals or hospital units paid under the IPPS, IRF PPS, or IPF PPS, 
and are excluded from the rate-of-increase ceiling for certain 
facilities not paid on a PPS. These costs are separately identified and 
``passed through'' (that is, paid separately on a reasonable cost 
basis). Existing regulations on NAH education program costs are located 
at 42 CFR 413.85. The most recent substantive rulemakings on these 
regulations were in the January 12, 2001 final rule (66 FR 3358 through 
3374), and in the August 1, 2003, final rule (68 FR 45423 and 45434).

[[Page 69383]]

2. Medicare Advantage Nursing and Allied Health Education Payments
    Section 541 of the Balanced Budget Refinement Act (BBRA) of 1999 
provides for additional payments to hospitals for costs of nursing and 
allied health education associated with services to Medicare+Choice 
(now called Medicare Advantage (MA\221\)) enrollees. Hospitals that 
operate approved nursing or allied health education programs and 
receive Medicare reasonable cost reimbursement for these programs may 
receive additional payments to account for MA enrollees. Section 541 of 
the BBRA limits total spending under the provision to no more than $60 
million in any calendar year (CY). (In this document, we refer to the 
total amount of $60 million or less as the payment ``pool''.) Section 
541 of the BBRA also provides that direct graduate medical education 
(GME) payments for Medicare+Choice utilization are reduced to the 
extent that these additional payments are made for nursing and allied 
health education programs. This provision was effective for portions of 
cost reporting periods occurring in a CY, on or after January 1, 2000.
---------------------------------------------------------------------------

    \221\ The M+C program in Part C of Medicare was renamed the 
Medicare Advantage (MA) Program under the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (MMA), which was 
enacted in December 2003.
---------------------------------------------------------------------------

    Section 512 of the Benefits Improvement and Protection Act (BIPA) 
of 2000 changed the formula for determining the additional amounts to 
be paid to hospitals for Medicare+Choice nursing and allied health 
costs. Under section 541 of the BBRA, the additional payment amount was 
determined based on the proportion of each individual hospital's 
nursing and allied health education payment to total nursing and allied 
health education payments made to all hospitals. However, this formula 
did not account for a hospital's specific Medicare+Choice utilization. 
Section 512 of the BIPA revised this payment formula to specifically 
account for each hospital's Medicare+Choice utilization. This provision 
was effective for portions of cost reporting periods occurring in a 
calendar year, beginning with CY 2001.
    The regulations at 42 CFR 413.87 codified both statutory 
provisions. We first implemented the BBRA NAH Medicare+Choice provision 
in the August 1, 2000 IPPS interim final rule with comment period (IFC) 
(65 FR 47036 through 47039), and subsequently implemented the BIPA 
provision in the August 1, 2001 IPPS final rule (66 FR 39909 and 
39910). In those rules, we outlined the qualifying conditions for a 
hospital to receive the NAH Medicare+Choice payment, how we would 
calculate the NAH Medicare+Choice payment pool, and how a qualifying 
hospital would calculate its ``share'' of payment from that pool. 
Determining a hospital's NAH Medicare+Choice payment essentially 
involves applying a ratio of the hospital-specific NAH Part A payments, 
total inpatient days, and Medicare+Choice inpatient days, to national 
totals of those same variables, from cost reporting periods ending in 
the fiscal year that is 2 years prior to the current calendar year. The 
formula is as follows:

(((Hospital NAH pass-through payment/Hospital Part A Inpatient Days) * 
Hospital MA\222\ Inpatient Days)/((National NAH pass-through payment/
National Part A Inpatient Days) * National MA Inpatient Days)) * 
Current Year Payment Pool.
---------------------------------------------------------------------------

    \222\ Formerly Medicare+Choice.

    With regard to determining the total national amounts for NAH pass-
through payment, Part A inpatient days, and Medicare+Choice inpatient 
days, we note that section 1886(l) of the Act, as added by section 541 
of the BBRA, gives the Secretary the discretion to ``estimate'' the 
national components of the formula noted previously. For example, 
section 1886(l)(2)(A) of the Act states that the Secretary would 
estimate the ratio of payments for all hospitals for portions of cost 
reporting periods occurring in the year under subsection 1886(h)(3)(D) 
of the Act to total direct GME payments estimated for the same portions 
of periods under section 1886(h)(3) of the Act.
    Accordingly, we stated in the August 1, 2000 IFC (65 FR 47038) that 
each year, we would determine and publish in a final rule the total 
amount of nursing and allied health education payments made across all 
hospitals during the fiscal year 2 years prior to the current calendar 
year. We would use the best available cost reporting data for the 
applicable hospitals from the Hospital Cost Report Information System 
(HCRIS) for cost reporting periods in the fiscal year that is 2 years 
prior to the current calendar year (65 FR 47038).
    To calculate the pool, in accordance with section 1886(l) of the 
Act, we stated that we would ``estimate'' a total amount for each 
calendar year, not to exceed $60 million (65 FR 47038). To calculate 
the proportional reduction to Medicare+Choice (now MA) direct GME 
payments, we stated that the percentage is estimated by calculating the 
ratio of the Medicare+Choice nursing and allied health payment ``pool'' 
for the current calendar year to the projected total Medicare+Choice 
direct GME payments made across all hospitals for the current calendar 
year. We stated that the projections of Medicare+Choice direct GME and 
Part A direct GME payments are based on the best available cost report 
data from the HCRIS (for example, for calendar year 2000, the 
projections are based on the best available cost report data from HCRIS 
1998), and these payment amounts are increased using the increases 
allowed by section 1886(h) of the Act for these services (using the 
percentage applicable for the current calendar year for Medicare+Choice 
direct GME and the Consumer Price Index (CPI-U) increases for Part A 
direct GME). We also stated that we would publish the applicable 
percentage reduction each year in the IPPS proposed and final rules (65 
FR 47038).
    Thus, in the August 1, 2000 IFC, we described our policy regarding 
the timing and source of the national data components for the NAH 
Medicare+Choice add-on payment and the percent reduction to the direct 
GME Medicare+Choice payments, and we stated that we would publish the 
rates for each calendar year in the IPPS proposed and final rules. 
While the rates for CY 2000 were published in the August 1, 2000 IFC 
(see 65 FR 47038 and 47039), the rates for subsequent CYs were only 
issued through Change Requests (CRs) (CR 2692, CR 11642, CR 12407). 
After recent issuance of the CY 2019 rates in CR 12407 on August 19, 
2021, we reviewed our update procedures, and were reminded that the 
August 1, 2000 IFC states that we would publish the NAH Medicare+Choice 
rates and direct GME percent reduction every year in the IPPS rules. 
Accordingly, for CY 2020 and CY 2021, we proposed and finalized the NAH 
MA add-on rates in the FY 2023 IPPS/LTCH PPS proposed and final rules. 
We stated that for CYs 2022 and after, we would similarly propose and 
finalize their respective NAH MA rates and direct GME percent 
reductions in subsequent IPPS/LTCH PPS rulemakings (see 87 FR 49073, 
August 10, 2022).
    In the FY 2025 IPPS/LTCH PPS proposed rule, we proposed the rates 
for CY 2023. Consistent with the use of HCRIS data for past calendar 
years, we proposed to use data from cost reports ending in FY 2021 
HCRIS (the fiscal year that is 2 years prior to CY 2023) to compile 
these national amounts: NAH pass-through payment, Part A Inpatient 
Days, MA Inpatient Days.

[[Page 69384]]

    For the proposed rule (89 FR 36227 through 36228), we accessed the 
FY 2021 HCRIS data from the fourth quarterly HCRIS update of 2023. 
However, to calculate the ``pool'' and the direct GME MA percent 
reduction, we ``project'' Part A direct GME payments and MA direct GME 
payments for the current calendar year, which in the proposed rule and 
in this final rule is CY 2023, based on the ``best available cost 
report data from the HCRIS'' (65 FR 47038). Next, consistent with the 
method we described previously from the August 1, 2000 IFC, we 
increased these payment amounts from midpoint to midpoint of the 
appropriate calendar year using the increases allowed by section 
1886(h) of the Act for these services (using the percentage applicable 
for the current calendar year for MA direct GME, and the Consumer Price 
Index-Urban (CPI-U) increases for Part A direct GME). For CY 2023, the 
direct GME projections are based on the fourth quarterly update of CY 
2021 HCRIS, adjusted for the CPI-U and for increasing MA enrollment.
    For CY 2023, the proposed national rates and percentages, and their 
data sources, are set forth in this table. We stated in the proposed 
rule that we intend to update these numbers in the FY 2025 final rule 
based on the latest available cost report data.
[GRAPHIC] [TIFF OMITTED] TR28AU24.188

    For this final rule, consistent with the use of HCRIS data for past 
calendar years, for CY 2023, we use data from cost reports ending in FY 
2021 HCRIS (the fiscal year that is 2 years prior to CY 2023) to 
compile these national amounts: NAH pass-through payment, Part A 
Inpatient Days, MA Inpatient Days. For this final rule, we accessed the 
HCRIS data from the first quarterly HCRIS update of 2024. However, to 
calculate the ``pool'' and the direct GME MA percent reduction, we 
project Part A direct GME payments and MA direct GME payments for the 
current calendar year, which in this final rule is CY 2023, based on 
the best available cost report data. Next, consistent with the method 
we described previously from the August 1, 2000 IFC, we increased these 
payment amounts from midpoint to midpoint of the appropriate calendar 
year using the increases allowed by section 1886(h) of the Act for 
these services (using the percentage applicable for the current 
calendar year for MA direct GME, and the Consumer Price Index-Urban 
(CPI-U) increases for Part A direct GME). For CY 2023, the direct GME 
projections are based on FY 2021 HCRIS, and the final national rates 
and percentages, and their data sources, are set forth in this table.
[GRAPHIC] [TIFF OMITTED] TR28AU24.189

    We only received comments on this section that were out of the 
scope of the proposal. In summary, we are finalizing our proposal to 
use NAH MA add-on rates as well as the direct GME MA percent reductions 
for CY 2023, based on sufficient HCRIS data to develop the rates for 
these years. We expect to propose to issue the rates for CY 2024 in the 
FY 2026 IPPS/LTCH PPS proposed rule, when sufficient HCRIS data is 
available to develop the rates for CY 2024.

H. Payment Adjustment for Certain Clinical Trial and Expanded Access 
Use Immunotherapy Cases (Sec. Sec.  412.85 and 412.312)

    Effective for FY 2021, we created MS-DRG 018 for cases that include 
procedures describing CAR T-cell therapies, which were reported using 
ICD-10-PCS procedure codes XW033C3 or XW043C3 (85 FR 58599 through 
58600). Effective for FY 2022, we revised MS-DRG 018 to include cases 
that report the procedure codes for CAR T-cell and non-CAR T-cell 
therapies and other immunotherapies (86 FR 44798 through 448106).
    Effective for FY 2021, we modified our relative weight methodology 
for MS-DRG 018 in order to develop a relative weight that is reflective 
of the typical costs of providing CAR T-cell therapies relative to 
other IPPS services. Specifically, under our finalized policy we do not 
include claims determined to be clinical trial claims that group to MS-
DRG 018 when calculating the average cost for MS-DRG 018 that is used 
to calculate the relative weight for this MS-DRG, with the additional 
refinements that: (a) when the CAR T-cell therapy product is purchased 
in the usual manner, but the case involves a clinical trial of a 
different product, the claim will be included when calculating the 
average cost for MS DRG 018 to the extent such claims can be identified 
in the historical data; and (b) when there is expanded access use of 
immunotherapy, these cases will not be included when calculating the 
average cost for MS-DRG 018 to the extent such claims can be identified 
in the historical data (85 FR 58600). The term ``expanded access'' 
(sometimes called ``compassionate use'') is a potential pathway for a 
patient with a serious or

[[Page 69385]]

immediately life-threatening disease or condition to gain access to an 
investigational medical product (drug, biologic, or medical device) for 
treatment outside of clinical trials when, among other criteria, there 
is no comparable or satisfactory alternative therapy to diagnose, 
monitor, or treat the disease or condition (21 CFR 312.305).\223\
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    \223\ https://www.fda.gov/news-events/expanded-access/expanded-access-keywords-definitions-and-resources.
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    Effective FY 2021, we also finalized an adjustment to the payment 
amount for applicable clinical trial and expanded access immunotherapy 
cases that group to MS-DRG 018 using the same methodology that we used 
to adjust the case count for purposes of the relative weight 
calculations (85 FR 58842 through 58844). (As previously noted, 
effective beginning FY 2022, we revised MS-DRG 018 to include cases 
that report the procedure codes for CAR T-cell and non-CAR T-cell 
therapies and other immunotherapies (86 FR 44798 through 448106).) 
Specifically, under our finalized policy we apply a payment adjustment 
to claims that group to MS-DRG 018 and include ICD-10-CM diagnosis code 
Z00.6, with the modification that when the CAR T-cell, non-CAR T-cell, 
or other immunotherapy product is purchased in the usual manner, but 
the case involves a clinical trial of a different product, the payment 
adjustment will not be applied in calculating the payment for the case. 
We also finalized that when there is expanded access use of 
immunotherapy, the payment adjustment will be applied in calculating 
the payment for the case. This payment adjustment is codified at 42 CFR 
412.85 (for operating IPPS payments) and 42 CFR 412.312 (for capital 
IPPS payments), for claims appropriately containing Z00.6, as described 
previously, and reflects that the adjustment is also applied for cases 
involving expanded access use immunotherapy, and that the payment 
adjustment only applies to applicable clinical trial cases; that is, 
the adjustment is not applicable to cases where the CAR T-cell, non-CAR 
T-cell, or other immunotherapy product is purchased in the usual 
manner, but the case involves a clinical trial of a different product. 
The regulations at 42 CFR 412.85(c) also specify that the adjustment 
factor will reflect the average cost for cases to be assigned to MS-DRG 
018 that involve expanded access use of immunotherapy or are part of an 
applicable clinical trial to the average cost for cases to be assigned 
to MS-DRG 018 that do not involve expanded access use of immunotherapy 
and are not part of a clinical trial (85 FR 58844).
    For FY 2025, we proposed to continue to apply an adjustment to the 
payment amount for expanded access use of immunotherapy and applicable 
clinical trial cases that would group to MS-DRG 018, as calculated 
using the same methodology, as modified in the FY 2024 IPPS/LTCH PPS 
final rule (88 FR 59062), that we proposed to use to adjust the case 
count for purposes of the relative weight calculations, as described in 
section II.D. of the preamble of this final rule.
    As discussed in the FY 2024 IPPS/LTCH PPS final rule, the MedPAR 
claims data now includes a field that identifies whether or not the 
claim includes expanded access use of immunotherapy. For the FY 2023 
MedPAR data and for subsequent years, this field identifies whether or 
not the claim includes condition code 90. The MedPAR files now also 
include information for claims with the payer-only condition code 
``ZC'', which is used by the IPPS Pricer to identify a case where the 
CAR T-cell, non-CAR T-cell, or other immunotherapy product is purchased 
in the usual manner, but the case involves a clinical trial of a 
different product so that the payment adjustment is not applied in 
calculating the payment for the case (for example, see Change Request 
11879, available at https://www.cms.gov/files/document/r10571cp.pdf). 
We refer the readers to section II.D. of the preamble of this final 
rule for further discussion of our methodology for identifying clinical 
trial claims and expanded access use claims in MS-DRG 018 and our 
methodology used to adjust the case count for purposes of the relative 
weight calculations, as modified in the FY 2024 IPPS/LTCH PPS final 
rule.
    Using the same methodology that we proposed to use to adjust the 
case count for purposes of the relative weight calculations, we 
proposed to calculate the adjustment to the payment amount for expanded 
access use of immunotherapy and applicable clinical trial cases as 
follows:
     Calculate the average cost for cases assigned to MS-DRG 
018 that either (a) contain ICD-10-CM diagnosis code Z00.6 and do not 
contain condition code ``ZC'' or (b) contain condition code ``90''.
     Calculate the average cost for all other cases assigned to 
MS-DRG 018.
     Calculate an adjustor by dividing the average cost 
calculated in step 1 by the average cost calculated in step 2.
     Apply this adjustor when calculating payments for expanded 
access use of immunotherapy and applicable clinical trial cases that 
group to MS-DRG 018 by multiplying the relative weight for MS-DRG 018 
by the adjustor.
    We refer the readers to section II.D. of the preamble of this final 
rule for further discussion of our methodology.
    Consistent with our calculation of the proposed adjustor for the 
relative weight calculations, for the proposed rule we proposed to 
calculate this adjustor based on the December 2023 update of the FY 
2023 MedPAR file for purposes of establishing the FY 2025 payment 
amount. Specifically, in accordance with 42 CFR 412.85 (for operating 
IPPS payments) and 42 CFR 412.312 (for capital IPPS payments), for the 
proposed rule, we proposed to multiply the FY 2025 relative weight for 
MS-DRG 018 by a proposed adjustor of 0.34 as part of the calculation of 
the payment for claims determined to be applicable clinical trial or 
expanded use access immunotherapy claims that group to MS-DRG 018, 
which includes CAR T-cell and non-CAR T-cell therapies and other 
immunotherapies. We also proposed to update the value of the adjustor 
based on more recent data for the final rule.
    We did not receive any comments specifically relating to the 
proposed payment adjustment for applicable clinical trial and expanded 
access use immunotherapy cases and are therefore finalizing our 
proposal without modification. We are also finalizing our proposal to 
update the value of this adjustor based on more recent data for this 
final rule. Therefore, using the March 2024 update of the FY 2023 
MedPAR data, we are finalizing an adjustor of 0.33 for FY 2025, which 
will be multiplied by the final FY 2025 relative weight for MS-DRG 018 
as part of the calculation of the payment for claims determined to be 
applicable clinical trial or expanded use access immunotherapy claims 
that group to MS-DRG 018.

I. Changes to the Calculation of the IPPS Add-On Payment for Certain 
End-Stage Renal Disease (ESRD) Discharges (Sec.  412.104)

    Under existing regulations at Sec.  412.104, we provide an 
additional payment to a hospital for inpatient services provided to 
certain Medicare beneficiaries with ESRD who receive a dialysis 
treatment during a hospital stay, if the hospital's ESRD Medicare 
beneficiary discharges, excluding discharges classified into the MS-
DRGs listed at Sec.  412.104(a), where the beneficiary received 
dialysis services during the inpatient stay, are 10 percent

[[Page 69386]]

or more of its total Medicare discharges. The additional payment 
(referred to as the ESRD add-on payment) is intended to lessen the 
impact of the added costs for hospitals that deliver inpatient dialysis 
services to a high concentration of ESRD Medicare beneficiaries (76 FR 
51692). The additional payment is based on the average length of stay 
for ESRD beneficiaries in the facility times a factor based on the 
average direct cost of furnishing dialysis services during a usual 
beneficiary stay (49 FR 34747). The payment to a hospital equals the 
average length of stay of ESRD beneficiaries in the hospital, expressed 
as a ratio to 1 week, times the estimated weekly cost of dialysis 
multiplied by the number of ESRD beneficiary discharges not excluded 
under Sec.  412.104(a). The average direct cost of dialysis was 
determined from data obtained in connection with establishing the 
composite rate reimbursement for outpatient maintenance dialysis (49 FR 
34747).
    On January 1, 2011, we implemented the ESRD PPS, a case-mix 
adjusted, bundled PPS for renal dialysis services furnished by ESRD 
facilities as required by section 1881(b)(14) of the Act, as added by 
section 153(b) of the Medicare Improvements for Patients and Providers 
Act of 2008 (MIPPA) (Pub. L. 110-275). Section 1881(b)(14)(F) of the 
Act, as added by section 153(b) of MIPPA, and amended by section 
3401(h) of the Patient Protection and Affordable Care Act (the 
Affordable Care Act) (Pub. L. 111-148), established that beginning CY 
2012, and each subsequent year, the Secretary of the Department of 
Health and Human Services (the Secretary) shall annually increase 
payment amounts by an ESRD market basket percentage increase, reduced 
by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act (74 FR 49927). The ESRD PPS replaced 
the basic case-mix adjusted composite rate payment system and the 
payment methodologies for separately billable outpatient renal dialysis 
items and services. Payment under Medicare Part B for outpatient renal 
dialysis services has been based entirely on the ESRD PPS since January 
1, 2014 (78 FR 72160). The ESRD PPS pays ESRD facilities a case-mix-
adjusted, bundled payment, which includes former composite rate 
services and ESRD-related drugs, laboratory services, and medical 
equipment and supplies (80 FR 68973). The ESRD PPS base rate is 
designed to reflect the average cost per-treatment of providing renal 
dialysis services.\224\ The per treatment payment amount (that is, the 
ESRD PPS base rate, subject to applicable adjustments)\225\ is 
typically applied to a regimen of three hemodialysis treatments per 
week. CMS updates the ESRD PPS base rate annually. We refer readers to 
the August 12, 2010, ESRD PPS final rule (75 FR 49030 through 49214) 
for additional details on the establishment of the ESRD PPS, including 
a discussion of the transition from the basic case-mix adjusted 
composite rate payment system to the ESRD PPS.
---------------------------------------------------------------------------

    \224\ 42 CFR 413.215(a) and 413.220.
    \225\ Sec.  413.230.
---------------------------------------------------------------------------

    As described previously, under current regulations the ESRD add-on 
payment is based on the average direct cost of furnishing dialysis 
services determined from data obtained in connection with establishing 
the composite rate. Under the current regulations, the average cost of 
dialysis is reviewed and adjusted, if appropriate, at the time the 
composite rate reimbursement for outpatient dialysis is reviewed. The 
last time CMS updated the composite rate was in the CY 2013 ESRD PPS 
final rule (77 FR 67454), as this was the final year in which payments 
to ESRD facilities were based on a blend of the composite rate and the 
ESRD PPS. In light of the time that has passed since the last update to 
the composite rate, we proposed to change the methodology used to 
calculate the ESRD add-on payment under current regulations to the ESRD 
PPS base rate used under the ESRD PPS. In addition, since the renal 
dialysis services reflected in the ESRD PPS base rate do not include 
those services that are not essential for the delivery of maintenance 
dialysis (see Sec.  413.171), using the ESRD PPS base rate to calculate 
the ESRD add-on payment would maintain consistency with the current 
calculation, which is based on the average costs determined to be 
directly related to the renal dialysis service, as determined from the 
composite rate.
    As described previously, under Sec.  412.104(b)(1), the ESRD add-on 
payment is based on the estimated weekly cost of dialysis and the 
average length of stay of ESRD beneficiaries for the hospital. In the 
FY2025 IPPS/LTCH PPS proposed rule (89 FR 35934), we proposed that 
effective for cost reporting periods beginning on or after October 1, 
2024, the estimated weekly cost of dialysis would be calculated as the 
applicable ESRD PPS base rate (as defined in 42 CFR 413.171) multiplied 
by three, which represents the typical number of dialysis sessions per 
week. The ESRD PPS base rate is applicable for renal dialysis services 
furnished during the calendar year (CY) (that is, effective January 1 
through December 31 each year) and updated annually (see Sec.  
413.196). In the FY 2025 IPPS/LTCH PPS proposed rule we proposed that 
the annual CY ESRD PPS base rate (as published in the applicable CY 
ESRD PPS final rule or subsequent corrections, as applicable) 
multiplied by three would be used to calculate the ESRD add-on payment 
for hospital cost reporting periods that begin during the Federal FY 
for the same year. For example, the CY 2025 ESRD PPS base rate would be 
used for all cost reports beginning during Federal FY 2025 (that is, 
for cost reporting periods starting on or after October 1, 2024, 
through September 30, 2025). The table that follows illustrates the 
applicable CY ESRD PPS base rate that would be used to determine the 
add-on amount for eligible discharges during the hospital's cost 
reporting periods beginning on or after October 1, 2024 (FY 2025) and 
on or after October 1, 2025 (FY 2026) under this methodology.
    In the FY 2025 IPPS/LTCH PPS proposed rule, we noted that use of 
the applicable CY ESRD PPS base rate to determine the add-on payment 
amount for the hospital's discharges occurring during the entire cost 
reporting period based on the cost report's begin date would be 
consistent with the determination of eligibility for the ESRD add-on 
payment, which occurs at cost report settlement and is based on the 
discharges that occur during that cost reporting period.

[[Page 69387]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.190

    In the FY 2025 IPPS/LTCH PPS proposed rule, we stated that the 
payment to a hospital would continue to be calculated as the average 
length of stay of ESRD beneficiaries in the hospital, expressed as a 
ratio to 1 week, multiplied by the estimated weekly cost of dialysis 
multiplied by the number of applicable ESRD beneficiary discharges. 
Specifically, for cost reporting periods beginning on or after October 
1, 2024, the payment to a hospital would equal the average length of 
stay of ESRD beneficiaries in the hospital, expressed as a ratio to 1 
week, multiplied by the estimated weekly cost of dialysis (calculated 
as the applicable ESRD PPS base rate (as defined in 42 CFR 413.171), 
multiplied by 3) multiplied by the number of ESRD beneficiary 
discharges except for those excluded under Sec.  412.104(a).
    In the FY2025 IPPS/LTCH PPS proposed rule, we proposed to revise 
the regulations under 42 CFR 412.104(b) to reflect this proposed change 
to the calculation of the payment amount for cost reporting periods 
beginning on or after October 1, 2024. We proposed to revise Sec.  
412.104(b)(2) to specify that, effective for cost reporting periods 
beginning on or after October 1, 2024, the estimated weekly cost of 
dialysis is calculated as 3 dialysis sessions per week multiplied by 
the applicable ESRD PPS base rate (as defined in 42 CFR 413.171) that 
corresponds with the fiscal year in which the cost reporting period 
begins. For example, the CY 2025 ESRD PPS base rate (multiplied by 3 to 
determine the estimated weekly cost of dialysis, as described 
previously) would apply for all hospital cost reporting periods 
beginning during FY 2025 (that is, for cost reporting periods beginning 
on or after October 1, 2024, through September 30, 2025). We proposed 
to make conforming changes to Sec.  412.104(b)(3) and Sec.  
412.104(b)(4) to reflect the proposed change in methodology for 
calculating the ESRD add-on payment amount for cost reporting periods 
beginning on or after October 1, 2024.
    Comment: Commenters supported our proposal to update the ESRD add-
on payment amount for cost reporting periods beginning on or after 
October 1, 2024 by using the applicable CY ESRD PPS base rate.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to update the ESRD add-
on payment methodology effective for cost reporting periods beginning 
on or after October 1, 2024 to use the annual CY ESRD PPS base rate (as 
published in the applicable CY ESRD PPS final rule or subsequent 
corrections, as applicable) multiplied by three to calculate the ESRD 
add-on payment for hospital cost reporting periods that begin during 
the Federal FY for the same year. We are also revising Sec. Sec.  
412.104(b)(2), (b)(3), and Sec.  412.104(b)(4), as proposed, to reflect 
the new methodology for calculating the ESRD add-on payment amount for 
cost reporting periods beginning on or after October 1, 2024.

J. Separate IPPS Payment for Establishing and Maintaining Access to 
Essential Medicines

1. Overview
    As discussed in the CY 2024 OPPS/ASC proposed rule (88 FR 49867), 
on January 26, 2021, President Biden issued Executive Order 14001, ``A 
Sustainable Public Health Supply Chain'' (86 FR 7219), which launched a 
whole-of-government effort to strengthen the resilience of medical 
supply chains, especially for pharmaceuticals and simple medical 
devices. This effort was bolstered subsequently by Executive Orders 
14005, 14017, and 14081 (86 FR 7475, 11849, and 25711, respectively). 
In June 2021, as tasked in Executive Order 14017 on ``America's Supply 
Chains,'' the Department of Health and Human Services released a review 
of pharmaceuticals and active pharmaceutical ingredients, analyzing 
risks in these supply chains and recommending solutions to increase 
their reliability.\226\ In July 2021, as tasked in Executive Order 
14001, the Biden-Harris Administration also released the National 
Strategy for a Resilient Public Health Supply Chain, which laid out a 
roadmap to support reliable access to products for public health in the 
future, including through prevention and mitigation of medical product 
shortages.\227\
---------------------------------------------------------------------------

    \226\ Department of Health and Human Services, Review of 
Pharmaceuticals and Active Pharmaceutical Ingredients (pp. 207-250), 
June 2021: https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf.
    \227\ Department of Health and Human Services, National Strategy 
for a Resilient Public Health Supply Chain, July 2021: https://www.phe.gov/Preparedness/legal/Documents/National-Strategy-for-Resilient-Public-Health-Supply-Chain.pdf.
---------------------------------------------------------------------------

    Over the last several years, shortages for critical medical 
products have persisted, with the average drug shortage lasting about 
1.5 years.\228\ For pharmaceuticals, even before the COVID-19 pandemic, 
nearly two-thirds of hospitals reported more than 20 drug shortages at 
any one time--from antibiotics used to treat severe bacterial 
infections to crash cart drugs necessary to stabilize and resuscitate 
critically ill adults.\229\ The frequency and severity of these supply 
disruptions has only been exacerbated over the last few years.\230\
---------------------------------------------------------------------------

    \228\ Senate Committee on Homeland Security & Governmental 
Affairs, Short Supply: The Health and National Security Risks of 
Drug Shortages, March 2023: https://www.hsgac.senate.gov/wp-content/uploads/2023-06-06-HSGAC-Majority-Draft-Drug-Shortages-Report.-FINAL-CORRECTED.pdf.
    \229\ Vizient, Drug Shortages and Labor Costs: Measuring the 
Hidden Costs of Drug Shortages on U.S. Hospitals, June 2019: https://wieck-vizient-production.s3.us-west-1.amazonaws.com/page-Brum/attachment/c9dba646f40b9b5def8032480ea51e1e85194129.
    \230\ Department of Health and Human Services, National Strategy 
for a Resilient Public Health Supply Chain, July 2021: https://www.phe.gov/Preparedness/legal/Documents/National-Strategy-for-Resilient-Public-Health-Supply-Chain.pdf.
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    Recent data suggests that hospitals are estimated to spend more 
than 8.6 million personnel hours and $360 million per year to address 
drug shortages,\231\ which will likely further

[[Page 69388]]

result in treatment delays and denials, changes in treatment regimens, 
medication errors,232 233 234 as well as higher rates of 
hospital-acquired infections and in-hospital 
mortality.235 236 The additional time, labor, and resources 
required to navigate drug shortages and supply chain disruptions also 
increase health care costs.237 238.
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    \231\ Vizient, Drug Shortages and Labor Costs: Measuring the 
Hidden Costs of Drug Shortages on U.S. Hospitals, June 2019: https://wieck-vizient-production.s3.us-west-1.amazonaws.com/page-Brum/attachment/c9dba646f40b9b5def8032480ea51e1e85194129.
    \232\ American Journal of Health System Pharmacology, National 
Survey on the Effect of Oncology Drug Shortages on Cancer Care, 
2013: https://pubmed.ncbi.nlm.nih.gov/23515514/.
    \233\ JCO Oncology Practice, National Survey on the Effect of 
Oncology Drug Shortages in Clinical Practice, 2022: https://pubmed.ncbi.nlm.nih.gov/35544740/.
    \234\ Journal of the American Medical Association, Association 
between U.S. Norepinephrine Shortage and Mortality Among Patients 
with Septic Shock, 2017: https://pubmed.ncbi.nlm.nih.gov/28322415/.
    \235\ Clinical Infectious Diseases, The Effect of a 
Piperacillin/Tazobactam Shortage on Antimicrobial Prescribing and 
Clostridium difficile Risk in 88 US Medical Centers, 2017: https://pubmed.ncbi.nlm.nih.gov/28444166/.
    \236\ New England Journal of Medicine, The Impact of Drug 
Shortages on Children with Cancer: The Example of Mechlorethamine, 
2012: https://pubmed.ncbi.nlm.nih.gov/23268661/.
    \237\ Senate Committee on Homeland Security & Governmental 
Affairs, Short Supply: The Health and National Security Risks of 
Drug Shortages, March 2023: https://www.hsgac.senate.gov/wp-content/uploads/2023-06-06-HSGAC-Majority-Draft-Drug-Shortages-Report.-FINAL-CORRECTED.pdf.
    \238\ Department of Health and Human Services, ASPE Report to 
Congress: Impact of Drug Shortages on Consumer Costs, May 2023: 
https://aspe.hhs.gov/reports/drug-shortages-impacts-consumer-costs.
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    Hospitals' procurement preferences can be leveraged to help foster 
a more resilient supply of lifesaving drugs and biologicals. With 
respect to shortages, supply chain resiliency includes having 
sufficient inventory that can be leveraged in the event of a supply 
disruption or demand increase--as opposed to relying on ``just-in-
time'' inventory-management efficiency at the manufacturer level that 
can leave supply chains vulnerable to shortage.239 240 This 
concept is especially true for essential medicines, which generally 
comprise products that are medically necessary to have available at all 
times in an amount adequate to serve patient needs and in the 
appropriate dosage forms. A hospital's resilient supply can also 
include essential medicines from multiple manufacturers, including the 
availability of domestic pharmaceutical manufacturing capacity, to 
diversify the sourcing of essential medicines. We stated that we 
believe it is necessary to support practices that can mitigate the 
impact of pharmaceutical shortages of essential medicines and promote 
resiliency to safeguard and improve the care hospitals are able to 
provide to beneficiaries. Additionally, sustaining sources of 
domestically sourced medical supplies can help support continued 
availability in the event of public health emergencies and other 
disruptions. This concept is consistent with our current policy for 
domestic National Institute for Occupational Safety and Health (NIOSH) 
approved surgical N95 respirators (87 FR 72037). Hospitals, as major 
purchasers and users in the U.S. of essential medicines, can support 
the existence of domestic sources by sourcing domestically made 
essential medicines.
---------------------------------------------------------------------------

    \239\ Department of Health and Human Services, Review of 
Pharmaceuticals and Active Pharmaceutical Ingredients (pp. 207-250), 
June 2021: https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf.
    \240\ Department of Health and Human Services, National Strategy 
for a Resilient Public Health Supply Chain, July 2021: https://www.phe.gov/Preparedness/legal/Documents/National-Strategy-for-Resilient-Public-Health-Supply-Chain.pdf.
---------------------------------------------------------------------------

    When hospitals have insufficient supply of essential medicines, 
such as during a shortage, care for Medicare beneficiaries can be 
negatively impacted. To mitigate negative care outcomes in the event of 
insufficient supply, hospitals can adopt procurement strategies that 
foster a consistent, safe, stable, and resilient supply of these 
essential medicines. Such procurement strategies can include provisions 
to maintain or otherwise provide for extra stock of product (for 
example, either to maintain or to hold directly at the hospital, 
arrange contractually for a distributor to hold off-site, or arrange 
contractually with a wholesaler for a manufacturer to hold product) 
which can act as a buffer in the event of an unexpected increase in 
product use or disruption to supply. In the event an essential medicine 
goes into shortage without existing procurement or substitution 
strategies for affected drugs, negative patient care outcomes can 
result in reduced quality of care and, in some instances, increased 
costs by the Medicare program to provide payment for unnecessary 
services that could have been avoided had the drug been available to 
the hospital.
    In the CY 2024 OPPS/ASC proposed rule (88 FR 49867), CMS requested 
public comments on a potential Medicare payment policy that would 
provide separate payment to hospitals under the IPPS for Medicare's 
share of the inpatient costs of establishing and maintaining access to 
a 3-month buffer stock of one or more of 86 essential medicines 
(referred to herein as the ``CY 2024 Request for Comment''). Under this 
potential policy, the allowable costs would have included the 
hospital's reasonable costs of establishing and maintaining buffer 
stock(s) of the essential medicines but not the cost of the medicines 
themselves. We stated that we expected that the resources required to 
establish and maintain access to a buffer stock of essential medicines 
would generally be greater than the resources required to establish and 
maintain access to these medicines without such a buffer stock. While 
CMS did not finalize any policy regarding payment under the IPPS and 
OPPS for establishing and maintaining access to essential medicines, we 
stated we intended to propose new Conditions of Participation in 
forthcoming notice and comment rulemaking addressing hospital processes 
for pharmaceutical supply and that we would continue to consider 
policies related to buffer stock.
    As discussed in the CY 2024 OPPS/ASC final rule, many commenters on 
the CY 2024 Request for Comment supported CMS's efforts to promote 
resiliency but expressed concerns regarding the potential for such a 
payment policy to induce or exacerbate drug shortages through demand 
shocks to the supply chain. Some commenters stated that a 3-month 
buffer stock may be inadequate to insulate hospitals from drug 
shortages, and that the policy may encourage hoarding behaviors and 
further fragment the existing supply of essential medicines, which 
would primarily disadvantage smaller, less resourced hospitals (88 FR 
82129 through 82130). While commenters stated that a 3-month buffer 
stock may be inadequate to insulate hospitals from shortages given the 
duration of many drug shortages, some commenters further stated that 
even a 6-month buffer stock may not fully protect hospitals in the 
event of a shortage. Commenters cautioned that drug shortages are 
difficult to predict and often due to problems at the manufacturer 
level, which can be compounded by panic buying and hoarding behaviors. 
Some commenters stated that any buffer stock would need to be 
sufficiently large to account for the ramp up time that manufacturers 
need to reestablish supply of a given drug in shortage.
    As a first step in this initiative, and based on consideration of 
the comments we received on the CY 2024 Request for Comment, for cost 
reporting periods beginning on or after October 1, 2024, we proposed to 
establish a separate payment under the IPPS to small (100 beds or 
fewer), independent hospitals for the estimated additional resource

[[Page 69389]]

costs of voluntarily establishing and maintaining access to 6 month 
buffer stocks of essential medicines to foster a more reliable, 
resilient supply of these medicines for these hospitals. This proposed 
separate payment could be provided biweekly or as a lump sum at cost 
report settlement. As discussed further in section V.J.3. of the 
preamble of this final rule, we focused this proposal on small, 
independent hospitals, many of which are rural, that may lack the 
resources available to larger hospitals and hospital chains to 
establish and maintain buffer stocks of essential medicines for use in 
the event of drug shortages. We stated that we believe we can also 
mitigate concerns raised by commenters regarding large demand driven 
shocks to the supply chain by limiting separate payment to smaller, 
independent hospitals.
    As stated in the proposed rule, the appropriate time to establish a 
buffer stock for a drug is before it goes into shortage or after a 
shortage period has ended. To further mitigate any potential for the 
proposed policy to exacerbate existing shortages or contribute to 
commenters' concerns of hoarding, if an essential medicine is listed as 
``Currently in Shortage'' on the FDA Drug Shortages Database,\241\ we 
proposed that a hospital that newly establishes a buffer stock of that 
medicine while it is in shortage would not be eligible for separate 
buffer stock payment for that medicine for the duration of the 
shortage. However, if a hospital had already established and was 
maintaining a buffer stock of that medicine prior to the shortage, we 
proposed that the hospital would continue to be eligible for separate 
buffer stock payment for that medicine for the duration of the 
shortage. We proposed that hospitals would continue to be eligible even 
if the number of months of supply of that medicine in the buffer stock 
were to drop to less than 6 months as the hospital draws down that 
buffer stock. We stated that once an essential medicine is no longer 
listed as ``Currently in Shortage'' in the FDA Drug Shortages Database, 
our proposed policy does not differentiate that essential medicine from 
other essential medicines and hospitals would be eligible to establish 
and maintain buffer stocks for the medicine as they would have before 
the shortage. We further stated that CMS will conduct provider 
education regarding additions and deletions to the publicly available 
FDA Drug Shortages Database to assist hospitals with this proposed 
policy.
---------------------------------------------------------------------------

    \241\ https://www.accessdata.fda.gov/scripts/drugshortages/default.cfm
---------------------------------------------------------------------------

    As described in sections V.J.2. and .4. of the preamble of this 
final rule, we proposed that if the number of months of supply of 
medicine in the buffer stock were to drop to less than 6 months for a 
reason other than the essential medicine(s) actively being listed as 
``Currently in Shortage,'' any separate payment to a hospital under 
this policy would be adjusted based on the proportion of the cost 
reporting period for which the hospital did maintain the 6-month buffer 
stock of that essential medicine.
    We proposed to make this separate payment under the IPPS for the 
additional resource costs of establishing and maintaining access to 
buffer stocks of essential medicines under section 1886(d)(5)(I) of the 
Act, which authorizes the Secretary to provide by regulation for such 
other exceptions and adjustments to the payment amounts under section 
1886(d) of the Act as the Secretary deems appropriate. We did not 
propose to make this payment adjustment budget neutral under the IPPS.
2. Proposed List of Essential Medicines
    The report Essential Medicines Supply Chain and Manufacturing 
Resilience Assessment, as developed by the U.S. Department of Health 
and Human Services (HHS) Office of the Assistant Secretary for 
Preparedness and Response (ASPR) with the Advanced Regenerative 
Manufacturing Institute's (ARMI's) Next Foundry for American 
Biotechnology, prioritized 86 essential medicines (hereinafter referred 
to as the ``ARMI List'' or ``ARMI's List'') from the Executive Order 
13944 List of Essential Medicines, Medical Countermeasures, and 
Critical Inputs (hereinafter referred to as the ``E.O. 13944 List''), 
as developed under the E.O. by the U.S. Food and Drug Administration 
(FDA).\242\
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    \242\ https://www.fda.gov/about-fda/reports/executive-order-13944-list-essential-medicines-medical-countermeasures-and-critical-inputs
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    The ARMI List is a prioritized list of 86 medicines that are either 
critical for minimum patient care in acute settings or important for 
acute care with no comparable alternatives available. The medicines 
included in the ARMI List were considered, by consensus, to be most 
critically needed for typical acute patient care. In this context, 
acute patient care was defined as: rescue use or lifesaving use or both 
(that is, Intensive Care Units, Cardiac/Coronary Care Units, and 
Emergency Departments), stabilizing patients in hospital continued care 
to enable discharge, and urgent or emergency surgery.
    Development of the ARMI List focused on assessing the clinical 
criticality and supply chains of small molecules and therapeutic 
biologics. The development of the ARMI List was informed by meetings 
with multiple key pharmaceutical supply chain stakeholders (for 
example, manufacturers, group purchasing organizations, wholesale 
distributors, providers, pharmacies), surveys and workshops with groups 
of clinicians and industry stakeholders, public feedback on the E.O. 
13944 List (provided during a public comment period starting in October 
2020), and other research.
    We proposed that for purposes of the separate payment under the 
IPPS, the costs of buffer stocks that would be eligible for separate 
payment are the additional resource costs of establishing and 
maintaining access to a 6-month buffer stock for any eligible medicines 
on ARMI's List of 86 essential medicines, including any subsequent 
revisions to that list of medicines. As previously discussed, the ARMI 
List represents a prioritized list of 86 medicines that were 
considered, by consensus, to be most critically needed for typical 
acute patient care. We stated that we believe that the ARMI List 
constitutes an appropriate set of medicines to initially prioritize 
under this proposed payment policy to help insulate small, independent 
hospitals, and the inpatient care they provide, from the negative 
effects of drug shortages.
    As noted earlier, the appropriate time to establish a buffer stock 
for a drug is before it goes into shortage or after a shortage period 
has ended. If an essential medicine is listed as ``Currently in 
Shortage'' on the FDA Drug Shortages Database, we proposed that a 
hospital that newly establishes a buffer stock of that medicine while 
it is in shortage would not be eligible for separate buffer stock 
payment for that medicine for the duration of the shortage. However, if 
a hospital had already established and was maintaining a buffer stock 
of that medicine prior to the shortage, we proposed that the hospital 
would continue to be eligible for separate buffer stock payment for 
that medicine for the duration of the shortage as the hospital draws 
down that buffer stock even if the number of months of supply of that 
medicine in the buffer stock were to drop to less than 6 months. By 
proposing to limit eligibility in this way, we stated that we believed 
that we can

[[Page 69390]]

both insulate smaller hospitals from short-term drug shortages and 
mitigate the potential for the proposed policy to exacerbate existing 
shortages or contribute to concerns of hoarding.
    As an illustrative example, suppose a hospital established and 
maintained 6-month buffer stocks for five essential medicines. However, 
one of those essential medicines was subsequently listed as ``Currently 
in Shortage'' on the FDA Drug Shortages Database. The hospital would no 
longer be required to maintain a 6-month buffer stock of the essential 
medicine that is in shortage to receive separate payment for 
maintaining the buffer stock of that essential medicine during the 
period of shortage. The hospital would continue to be eligible for the 
separate payment from CMS for the buffer stock for that medicine during 
the period of shortage as it draws down its established buffer stock of 
the medicine in shortage as needed. However, the hospital would be 
required to maintain buffer stocks of no less than 6 months for the 
other four essential medicines that are not in shortage to be eligible 
to receive separate payment for those four medicines.
    Because medicine can remain on the FDA Drug Shortage Database for 
years, we requested comments on the duration that CMS should continue 
to pay hospitals for the maintenance of a less than 6-month buffer 
stock of the essential medicine if it is ``Currently in Shortage.'' We 
also requested comments on if there is a quantity or dosage minimum 
floor where CMS should no longer pay to maintain a 6-month buffer stock 
of the essential medicine if it is ``Currently in Shortage.''
    We proposed that if the ARMI List is updated to add or remove any 
essential medicines, all medicines on the updated list would be 
eligible for separate payment under this policy for the IPPS shares of 
the costs of establishing and maintaining access to 6-month buffer 
stocks as of the date the updated ARMI List is published. To the extent 
that in the future other medicines or lists are identified for 
eligibility in future iterations of this policy, we sought comment on 
the potential mechanism and timing for incorporating those updates. We 
stated that comments could consider, among other factors, medicines 
that were excluded from the ARMI List, the E.O. 13944 List, or both. 
For example, some categories from the E.O. 13944 List--including Blood 
and Blood Products, Fractionated Plasma Products, Vaccines, and Volume 
Expanders--were excluded from the ARMI List due to differences in their 
supply chains. Additionally, other categories were identified as not 
needed for routine/typical acute patient care (that is, Biological 
Threat Medical Countermeasures, Burn and Blast Injuries, Chemical 
Threat Medical Countermeasures, Pandemic Influenza Medical 
Countermeasures, Radiologic-Nuclear Threat Medical Countermeasures). 
The ARMI List does not include certain medicines that have recently 
been in shortage and that may be considered essential and are more 
prevalent in specific care settings other than an inpatient hospital, 
such as drugs used in oncology care on an outpatient basis. Further, 
there are medicines that are not included on the ARMI List nor the E.O. 
13944 List, such as buprenorphine-based medications for treatment of 
substance use disorder. We sought comment on whether eligibility for 
separate payment for the IPPS share of the costs of establishing and 
maintaining access to 6-month buffer stocks of essential medicines 
should include oncology drugs or other types of drugs not currently on 
the ARMI List.
    We stated in the proposed rule that CMS would conduct provider 
education regarding additions and deletions to the publicly available 
FDA Drug Shortages Database to assist hospitals with this proposed 
policy.
3. Hospital Eligibility
    Commenters on the CY 2024 Request for Comment (88 FR 82129 through 
82130) raised a number of concerns relating to access to essential 
medicines for small hospitals and potential hoarding behaviors among 
better resourced hospitals. Commenters also cautioned against the 
potential for the policy to cause demand-driven shocks to the 
pharmaceutical supply chain, exacerbating pharmaceutical access issues 
for hospitals, which they claimed would disproportionately impact 
smaller hospitals due to their smaller purchasing power. As hospitals 
and hospital systems increase in size through expansion of bed count or 
consolidation or both and vertical integration with other hospitals and 
health systems, they accrue bargaining leverage for payment 
negotiations and thereby increase their purchasing power.\243\ Those 
smaller (and often rural) hospitals that lack this increased purchasing 
power are faced with potentially lower payments from payers and less 
operating capital.\244\ To address this concern, and attempt to better 
insulate these smaller, independent hospitals against future supply 
disruptions of essential medicines, we proposed to limit eligibility 
for separate payment for the resource costs of establishing and 
maintaining access to buffer stocks of essential medicines to small, 
independent hospitals that are paid under the IPPS, as defined later in 
this section. As many of these small, independent hospitals are located 
in rural areas, we stated that we also expect this policy to support 
rural hospitals, in line with the rural health strategy of the Biden-
Harris Administration.245 246
---------------------------------------------------------------------------

    \243\ U.S. Congress, U.S. House of Representatives Committee on 
Ways and Means, Subcommittee on Health, Health Care Consolidation: 
The Changing Landscape of the U.S. Health Care System, May 2023: 
https://www.rand.org/content/dam/rand/pubs/testimonies/CTA2700/CTA2770-1/RAND_CTA2770-1.pdf.
    \244\ American Hospital Association, Rural Hospital Closures 
Threaten Access: Solutions to Preserve Care in Local Communities, 
September 2022: https://www.aha.org/system/files/media/file/2022/09/rural-hospital-closures-threaten-access-report.pdf.
    \245\ The White House, The Biden-Harris Administration is taking 
actions to improve the health of rural communities and help rural 
health care providers stay open, November 2023: https://www.hhs.gov/about/news/2023/11/03/department-health-human-services-actions-support-rural-america-rural-health-care-providers.html.
    \246\ The White House, Fact Sheet: Biden Administration Takes 
Steps to Address Covid-19 in Rural America and Build Rural Health 
Back Better, August 2021: https://www.whitehouse.gov/briefing-room/statements-releases/2021/08/13/fact-sheet-biden-administration-takes-steps-to-address-covid-19-in-rural-america-and-build-rural-health-back-better/.
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    We stated that we believe that by focusing eligibility on small, 
independent hospitals, we can both support these types of hospitals in 
their efforts to provide patient care during drug shortages and lessen 
any potential demand shocks to the pharmaceutical supply chain because 
the buffer stocks these hospitals would require are likely smaller 
compared to larger hospitals and hospital chains. As discussed further 
in the regulatory impact analysis associated with this proposed policy 
in section I.G.6. of Appendix A of the proposed rule, we initially 
identified 493 potentially eligible hospitals based on FY 2021 hospital 
cost report data. Of these hospitals, 249 were identified as 
geographically rural, 6 were identified as geographically urban but 
reclassified as rural (under our reclassification regulations at Sec.  
412.103), and 238 were identified as geographically urban without a 
reclassification as rural. These hospitals had 216,557 Medicare 
discharges in total and an average of 442 Medicare discharges per 
hospital for the FY 2021 cost reporting year.
    Small Hospital: For the purposes of this policy, we proposed to 
define a small hospital as one with not more than 100 beds. This 
definition is consistent with the definition of a small

[[Page 69391]]

hospital used for Medicare-dependent, small rural hospitals (MDH) in 
section 1886(d)(5)(G)(iv)(II) of the Act. Consistent with the MDH 
regulations at Sec.  412.108(a)(1)(ii), we proposed that a hospital 
would need to have 100 or fewer beds as defined in Sec.  412.105(b) 
during the cost reporting period for which it is seeking the payment 
adjustment to be considered a small hospital for purposes of this 
payment adjustment. We requested comment on using criteria other than 
the MDH bed size criterion to identify small hospitals for the purposes 
of this proposed payment policy.
    Independent Hospital: For the purposes of this policy, we proposed 
to define an independent hospital as one that is not part of a chain 
organization, as defined for purposes of hospital cost reporting. A 
chain organization is defined as a group of two or more health care 
facilities which are owned, leased, or through any other device, 
controlled by one organization. This proposed definition is the 
definition of chain organization in CMS Pub 15-1, Provider 
Reimbursement Manual, Chapter 21, Cost Related to Patient Care Sec.  
2150: ``Home Office Costs--Chain Operations'' and used by a hospital 
when completing its cost report.
    Because this proposed definition is the definition of chain 
organization used by a hospital when filling out its cost report, to 
operationalize our proposed separate payment policy, we proposed that 
any hospital that appropriately answers ``yes'' (denoted ``Y'') to line 
140 column 1 or fills out any part of lines 141 through line 143 on 
Worksheet S-2, Part I, on Form CMS-2552-10 would be considered to be 
part of a chain organization and not independent, and therefore not 
eligible for separate payment under this proposal. Please see Table 
V.J.-01 for a partial example of this section of Form CMS-2552-10.
[GRAPHIC] [TIFF OMITTED] TR28AU24.191

    Thus, we proposed that to be eligible for this separate payment, 
under this policy, a hospital would need to be a small hospital with 
100 or fewer beds and meet the definition of independent described 
previously. We sought comment on our proposed eligibility criteria and 
proposed definition of a small, independent hospital.
    We note that critical access hospitals (CAHs) are paid for 
inpatient and outpatient services at 101 percent of Medicare's share of 
reasonable costs, including Medicare's share of the reasonable costs of 
establishing and maintaining access to buffer stocks of medicines. We 
sought comment on the use of buffer stocks by CAHs, including the 
medicines in the buffer stocks, the costs of establishing and 
maintaining the buffer stocks, whether CAHs tend to contract out this 
activity, and any barriers that CAHs may face in establishing and 
maintaining access to buffer stocks.
4. Size of the Buffer Stock
    As summarized in the CY 2024 OPPS/ASC final rule and section V.J.1. 
of the preamble of this final rule, some commenters on the CY 2024 
Request for Comment expressed concerns that a 3-month supply of 
essential medicines may not be sufficient to adequately insulate 
hospitals from the detrimental effects of future drug shortages. 
Commenters stated that drug shortages often persist for durations of 
time in excess of 3 months, such that a 3-month buffer stock may be 
inadequate to insulate hospitals from the longer-term effects of drug 
shortages. As noted in section V.J.1. of the preamble of this final 
rule, drug shortages generally persist for many months, and some 
research suggests that these shortages last for an average of 1.5 
years. Accordingly, we stated in the proposed rule that we believe a 
buffer stock of at least 6 months would better support small, 
independent hospitals in contending with future shortages. To better 
address commenters' concerns and hospital needs during drug shortages, 
we proposed separate payment for the costs of establishing and 
maintaining access to a buffer stock that is sufficient for no less 
than a 6-month period of time for each of one or more essential 
medicines. As discussed in section V.J.5 of the preamble of this final 
rule, we also sought comments on whether a phase-in approach that, for 
example, would provide separate payment for establishing and 
maintaining access to a 3-month supply for the first year in which the 
policy is implemented and a 6-month supply for all subsequent years 
would be appropriate.
    We stated in the proposed rule that in estimating the amount of a 
buffer stock needed for each essential medicine, the hospital should 
consider that the amount needed to maintain a buffer stock could vary 
month to month and

[[Page 69392]]

throughout the applicable months of the cost reporting period; that is, 
a hospital's historical use of a medicine may indicate that it is 
typically needed more often in January than June, for example. 
Accordingly, we stated the size of the buffer stock should reflect this 
anticipated variation and be based on a reasonable estimate of the 
hospital's need for that essential medicine in the upcoming 6-month 
period. We stated this estimate would be determined by the hospital and 
could be based on the historical usage of the essential medicine by the 
hospital for that 6-month period in a prior year, or another reasonable 
method to estimate its need for that upcoming period. We stated that if 
a hospital did not maintain a 6-month buffer stock of an essential 
medicine for an entire cost reporting period, any separate payment to 
the hospital under this policy would be adjusted based on the 
proportion of the cost reporting period for which the hospital did 
maintain the 6-month buffer stock of that essential medicine. As 
described in section V.J.2 of the preamble of this final rule, we 
stated in the proposed rule that in the event that a hospital is not 
able to maintain a buffer stock of at least 6 months due to one or more 
of their chosen medicine(s) being listed as ``Currently in Shortage'' 
on the FDA's Drug Shortage Database after establishment of the buffer 
stock under this policy, the hospital would continue to be eligible for 
the buffer stock payment for the medicine(s) in shortage as the 
hospital draws down the buffer stock even if the number of months of 
supply of that medicine in the buffer stock were to drop to less than 6 
months. We stated that hospitals would be permitted to use multiple 
contracts to establish and maintain at least a 6-month buffer stock for 
any given essential medicine.
5. Separate Payment Under IPPS for Establishing and Maintaining Access 
to Buffer Stocks of Essential Medicines
    As discussed in the CY 2024 Request for Comment, CMS requested 
public comments on a potential separate payment under the IPPS for the 
additional, reasonable costs of establishing and maintaining a 3-month 
buffer stock of one or more essential medicine(s). We stated that 
participating hospitals could establish and maintain their buffer 
stocks directly, or through contractual arrangements with 
pharmaceutical distributors, intermediaries, or manufacturers.
    We received comments in response to the CY 2024 Request for Comment 
stating that hospitals that maintain buffer stocks of essential 
medicines typically do so through upstream entities, such as 
pharmaceutical group purchasing organizations and manufacturers. 
Furthermore, these commenters stated that hospitals typically lack the 
capacity to stockpile large quantities of essential medicines directly. 
Some of these commenters stated that any buffer stocks established 
under the potential policy should be maintained by upstream 
intermediaries or a neutral third party instead of directly maintained 
by hospitals, as they stated that these upstream intermediaries are 
generally better positioned and equipped to maintain these buffer 
stocks. While other commenters were receptive to directly maintaining 
their buffer stock(s) or indicated that they already maintained 
substantial buffer stocks of medicines, these commenters were generally 
larger, better resourced hospitals or hospital systems.
    In this year's proposed rule, we stated that we agreed with 
commenters that pharmaceutical intermediaries and manufacturers are 
generally better positioned to establish and maintain larger (for 
example, 6-month or greater) buffer stocks of essential medicines, as 
small, independent hospitals may generally lack the space, staff, and 
specific equipment (like large-scale refrigeration and large, onsite 
storage) to directly maintain 6-month buffer stock(s) of essential 
medicine(s). While we stated that we anticipate that most hospitals 
that elect to establish and maintain buffer stocks under this policy 
will do so through contractual arrangements with pharmaceutical 
intermediaries, manufacturers, and distributors, we proposed that the 
additional resource costs associated with directly maintaining 6-month 
buffer stock(s) of essential medicine(s) would also be eligible for 
separate payment under this policy. Accordingly, we proposed that for 
purposes of the proposed separate payment under the IPPS to small, 
independent hospitals for the estimated additional resource costs of 
voluntarily establishing and maintaining access to 6-month buffer 
stocks of essential medicines, those costs associated with establishing 
and maintaining access to 6-month buffer stocks either directly or 
through contractual arrangements with pharmaceutical manufacturers, 
intermediaries, or distributors would be eligible for additional 
payment under this policy. These costs do not include the cost of the 
medicines themselves which would continue to be paid in the current 
manner. We also noted that the proposed payment is only for the IPPS 
share of the costs of establishing and maintaining access to buffer 
stock(s) of one or more essential medicine(s).
    We noted the costs associated with directly establishing and 
maintaining a buffer stock may include utilities like cold chain 
storage and heating, ventilation, and air conditioning, warehouse 
space, refrigeration, management of stock including stock rotation, 
managing expiration dates, and managing recalls, administrative costs 
related to contracting and record-keeping, and dedicated staff for 
maintaining the buffer stock(s). We requested comments on other types 
of costs intrinsic to directly establishing buffer stocks of essential 
medicines that should be considered eligible for purposes of separate 
payment under this policy. We also requested comment regarding whether 
staff costs would increase with the number of essential medicines in 
buffer stock, and whether there would be efficiencies if multiple 
hospitals elect to establish buffer stocks of essential medicines with 
the same pharmaceutical manufacturer, intermediary, or distributor.
    We also requested comment on whether this proposed policy should be 
phased in by the size of the buffer stock to address concerns about 
infrastructure investments that may be needed to store and maintain the 
supply. We also referred readers to the Collection of Information 
Requirements in section XII.B.2. of the preamble of the proposed rule 
regarding the estimated burden associated with this policy proposal and 
sought comment on whether there are any other potential methods for 
hospitals to report costs included under this policy besides the 
forthcoming supplemental cost reporting worksheet.
    Currently, payment for the resources required to establish and 
maintain access to medically reasonable and necessary drugs and 
biologicals is generally part of the IPPS payment. As noted in section 
V.J.2. of the preamble of this final rule, we expect that the resources 
required to establish and maintain access to buffer stocks of essential 
medicines will generally be greater than the resources required to 
establish and maintain access to these medicines without such buffer 
stocks. Given these additional resource costs and our concern that 
small, independent hospitals may lack the resources available to larger 
hospitals and hospital chains to establish buffer stocks of essential 
medicines, we stated that we believe it is appropriate to propose to 
pay these hospitals separately for the additional resource costs 
associated with voluntarily establishing and maintaining access,

[[Page 69393]]

either directly or through contractual arrangements, to buffer stocks 
of essential medicines. As also noted in section V.J.2 of the preamble 
of this final rule, we proposed that if the ARMI List is updated to add 
or remove any essential medicines, all medicines on the updated list 
would be eligible for separate payment under this policy for the IPPS 
shares of the costs of establishing and maintaining access to 6-month 
buffer stocks as of the date the updated ARMI List is published. Any 
medicine(s) that are removed from the ARMI List in any future updates 
to the list would no longer be eligible for separate payment under this 
policy for the IPPS shares of the costs of establishing and maintaining 
access to 6-month buffer stocks as of the date the updated ARMI List is 
published.
    CMS proposed to base the IPPS payment under this policy on the IPPS 
shares of the additional reasonable costs of a hospital to establish 
and maintain access to its buffer stock. The use of IPPS shares in this 
payment adjustment would be consistent with the use of these shares for 
the payment adjustment for domestic NIOSH approved surgical N95 
respirators, which is based on the IPPS and OPPS shares of the 
difference in cost between domestic and non-domestic NIOSH approved 
surgical N95 respirators for the cost reporting period in which costs 
are claimed (87 FR 72037). We stated that the hospital would report 
these costs to CMS on the forthcoming supplemental cost reporting 
worksheet associated with this proposed policy. The hospital's costs 
may include costs associated with contractual arrangements between the 
hospital and a manufacturer, distributor, or intermediary or costs 
associated with directly establishing and maintaining buffer stock(s). 
We further stated that these costs would not include the costs of the 
essential medicine itself, which would continue to be paid in the 
current manner.
    If a hospital establishes and maintains access to buffer stock(s) 
of essential medicine(s) through contractual arrangements with 
pharmaceutical manufacturers, intermediaries, or distributors, we 
stated that the hospital would be required to disaggregate the costs 
specific to establishing and maintaining the buffer stock(s) from the 
remainder of the costs present on the contract for purposes of 
reporting these disaggregated costs under this proposed policy. This 
disaggregated information, reported by the hospital on the new 
supplemental cost reporting worksheet, along with existing information 
already collected on the cost report, would be used to calculate a 
Medicare payment for the IPPS share of the hospital's costs of 
establishing and maintaining access to the buffer stock(s) of essential 
medicine(s).
    If a hospital contracts with one or more manufacturers or 
wholesalers or other intermediaries to establish and maintain 6-month 
buffer stocks of one or more essential medicines, we stated that the 
hospital must clearly identify those costs separately from the costs of 
other provisions of the contract(s). As a simplified example for 
purposes of illustration, suppose a hospital has a $500,000 contract 
with a pharmaceutical wholesaler. The contract is for pharmaceutical 
products, 50 of which are qualifying essential medicines. Additionally, 
the contract contains a provision for the wholesaler to establish and 
maintain 6-month buffer stocks of those 50 essential medicines on the 
hospital's behalf. The contract further specifies that $10,000 of the 
$500,000 is for the provision of the contract that establishes and 
maintains the 6-month buffer stocks of those 50 essential medicines. 
This $10,000 amount does not include any costs to the hospital for the 
drugs themselves which, as previously noted, would continue to be paid 
in the current manner. We explained that under this proposal, the 
hospital would report the $10,000 cost for establishing and maintaining 
the 6-month buffer stocks of the 50 essential medicines on the 
supplemental cost reporting worksheet. That $10,000 cost, in addition 
to other information already existing on the cost report, would be used 
to calculate the additional payment under this policy including the 
hospital-specific Medicare IPPS share percentage of this cost, 
expressed as the percentage of inpatient Medicare costs to total 
hospital costs. We stated that on average for the small, independent 
hospitals that are eligible for this policy, the Medicare IPPS share 
percentage is approximately 11 percent.
    If a hospital chooses to directly establish and maintain buffer 
stock(s) of one or more essential medicines under this policy, we 
stated that the hospital would be required to report the additional 
costs associated with establishing and maintaining its buffer stock(s) 
on the supplemental cost reporting form. We stated that the hospital 
should clearly specify the total additional resource costs to establish 
and maintain its 6-month buffer stock(s) of essential medicine(s). As 
in the previous example, this amount should not include the cost of the 
essential medicine(s) themselves and would be used, along with other 
information already existing on the cost report, to calculate the 
additional payment under this policy.
    Additionally, we stated that we would anticipate that when a 
hospital contracts with one or more manufacturers or wholesalers or 
other intermediaries to establish and maintain 6-month buffer stocks of 
one or more essential medicines, it would ensure that a discrete buffer 
stock is maintained for that hospital. For example, if two hospitals 
held contracts with a manufacturer arranging for 6-month buffer stocks 
of certain essential medicines, the hospitals would verify that the 
manufacturer is maintaining sufficient total buffer stock to account 
for the 6-month demand of both hospitals in aggregate.
    We stated that we seek to support the establishment of buffer 
stocks when drugs are not currently in shortage to promote the overall 
resiliency of drug supply chains. As previously discussed, we proposed 
that buffer stocks for any of the essential medicines on the ARMI List 
that are listed as ``Currently in Shortage'' on the FDA Drug Shortages 
Database would not be eligible for additional payment under this policy 
for a hospital's cost reporting period unless the hospital had already 
established and was maintaining a buffer stock of that medicine prior 
to the shortage. Additionally, we proposed that any essential 
medicine(s) for which a hospital has successfully established and 
maintained a buffer stock(s) of at least 6 months that is subsequently 
listed as ``Currently in Shortage'' on the FDA Drug Shortages Database 
would be exempt from the requirement to maintain a 6-month supply of 
such essential medicine(s) for the duration of the period in which the 
medicine is in shortage. We stated that we are interested in public 
comments on the burden associated with hospitals' monitoring of the FDA 
Drug Shortage Database, and excluding from the cost report any resource 
costs associated with maintaining a buffer stock of an essential 
medicine that was listed as ``Currently in Shortage,'' except where the 
hospital had already established and was maintaining a 6-month buffer 
stock of that medicine prior to the shortage. We stated that as of the 
date that medicine is no longer listed as ``Currently in Shortage,'' 
eligibility for separate payment to the hospital for the drug in 
shortage would be prospectively adjusted based on the proportion of the 
cost reporting period for which the hospital does maintain the 6-month 
buffer stock of that essential medicine. Once an essential medicine is 
no longer listed as ``Currently in Shortage'' in the FDA Drug Shortages 
Database, our

[[Page 69394]]

proposed policy does not differentiate that essential medicine from 
other essential medicines. However, we also sought comment on whether 
some minimum period, such as 6 months, should elapse after a shortage 
of a given essential medicine is resolved before that medicine can 
become eligible for separate payment under this proposed policy.
    We proposed to make separate payments for the IPPS shares of these 
additional resource costs of establishing and maintaining access to 
buffer stocks of essential medicines. Payment could be provided as a 
lump sum at cost report settlement or biweekly as interim lump-sum 
payments to the hospital, which would be reconciled at cost report 
settlement. In accordance with the principles of reasonable cost as set 
forth in section 1861(v)(1)(A) of the Act and in 42 CFR 413.1 and 
413.9, Medicare could make a lump-sum payment for Medicare's share of 
these additional inpatient costs at cost report settlement. 
Alternatively, a provider may make a request for biweekly interim lump 
sum payments for an applicable cost reporting period, as provided under 
42 CFR 413.64 (Payments to providers: Specific rules) and 42 CFR 
412.116(c) (Special interim payments for certain costs). These payment 
amounts would be determined by the Medicare Administrative Contractor 
(MAC) consistent with existing policies and procedures. In general, 
interim payments are determined by estimating the reimbursable amount 
for the year using Medicare principles of cost reimbursement and 
dividing it into 26 equal biweekly payments. The estimated amount would 
be based on the most current cost data available, which will be 
reviewed and, if necessary, adjusted at least twice during the 
reporting period. (See CMS Pub 15-1 Sec.  2405.2 for additional 
information). The MACs would determine the interim lump-sum payments 
based on the data the hospital may provide that reflects the 
information that would be included on the new supplemental cost 
reporting form. CMS is separately seeking comment through the Paperwork 
Reduction Act (PRA) process on a supplemental cost reporting form that 
would be used for this purpose. We stated that in future years, the 
MACs could determine the interim biweekly lump-sum payments utilizing 
information from the prior year's cost report, which may be adjusted 
based on the most current data available. This is consistent with the 
current policies for medical education costs, and bad debts for 
uncollectible deductibles and coinsurance paid on interim biweekly 
basis as noted in CMS Pub 15-1 Sec.  2405.2. It is also consistent with 
the payment adjustment for domestically sourced NIOSH approved surgical 
N95 respirators (87 FR 72037).
    We proposed to codify this payment adjustment in the regulations by 
adding new paragraph (g) to 42 CFR 412.113 to state the following:
     Essential medicines are the 86 medicines prioritized in 
the report Essential Medicines Supply Chain and Manufacturing 
Resilience Assessment developed by the U.S. Department of Health and 
Human Services Office of the Assistant Secretary for Preparedness and 
Response and published in May of 2022, and any subsequent revisions to 
that list of medicines. A buffer stock of essential medicines for a 
hospital is a supply, for no less than a 6-month period, of one or more 
essential medicines.
     The additional resource costs of establishing and 
maintaining access to a buffer stock of essential medicines for a 
hospital are the additional resource costs incurred by the hospital to 
directly hold a buffer stock of essential medicines for its patients or 
arrange contractually for such a buffer stock to be held by another 
entity for use by the hospital for its patients. The additional 
resource costs of establishing and maintaining access to a buffer stock 
of essential medicines does not include the resource costs of the 
essential medicines themselves.
     For cost reporting periods beginning on or after October 
1, 2024, a payment adjustment to a small, independent hospital for the 
additional resource costs of establishing and maintaining access to 
buffer stocks of essential medicines is made as described in paragraph 
(g)(4) of this section. For purposes of this section, a small, 
independent hospital is a hospital with 100 or fewer beds as defined in 
Sec.  412.105(b) during the cost reporting period that is not part of a 
chain organization, defined as a group of two or more health care 
facilities which are owned, leased, or through any other device, 
controlled by one organization.
     The payment adjustment is based on the estimated 
reasonable cost incurred by the hospital for establishing and 
maintaining access to buffer stocks of essential medicines during the 
cost reporting period.
    We also proposed to make conforming changes to 42 CFR 412.1(a) and 
412.2(f) to reflect this proposed payment adjustment for small, 
independent hospitals for the additional resource costs of establishing 
and maintaining access to buffer stocks of essential medicines.
    In summary, for cost reporting periods beginning on or after 
October 1, 2024, we proposed to establish a separate payment under the 
IPPS to small, independent hospitals for the additional resource costs 
involved in voluntarily establishing and maintaining access to 6-month 
buffer stocks of essential medicines, either directly or through 
contractual arrangements with a manufacturer, distributor, or 
intermediary. We proposed that the costs of buffer stocks that are 
eligible for separate payment are the costs of buffer stocks for one or 
more of the medicines on ARMI's List of 86 essential medicines. The 
separate payment would be for the IPPS share of the additional costs 
and could be issued in a lump sum, or as biweekly payments to be 
reconciled at cost report settlement. We proposed that the separate 
payment would not apply to buffer stocks of any of the essential 
medicines on the ARMI List that are currently listed as ``Currently in 
Shortage'' on the FDA Drug Shortages Database unless a hospital had 
already established and was maintaining a 6-month buffer stock of that 
medicine prior to the shortage. Once an essential medicine is no longer 
listed as ``Currently in Shortage'' in the FDA Drug Shortages Database, 
we stated that our proposed policy does not differentiate that 
essential medicine from other essential medicines and hospitals would 
be eligible to establish and maintain buffer stocks for the medicine as 
they would have before the shortage. CMS is separately seeking comment 
through the PRA process on a supplemental cost reporting form for this 
proposed payment.
    After consideration of the comments received on our proposal, which 
we summarize and respond to in the section that follows, we are 
finalizing the proposed separate payment under the IPPS to small, 
independent hospitals for the additional resource costs involved in 
voluntarily establishing and maintaining access to 6-month buffer 
stocks of essential medicines. In future years as we gain experience 
under this policy, we plan to assess the program's impact and consider 
revisions, where appropriate, to help ensure availability of essential 
medicines for patients.
6. Public Comments
    Comment: Overall, the majority of commenters were generally 
supportive of our proposed separate payment for a hospital's cost to 
maintain buffer stock. Those that were opposed to the policy generally 
expressed concerns regarding

[[Page 69395]]

potential ``unintended consequences'' that may arise from establishing 
separate stockpiles of essential medicines throughout the country. 
Commenters that were opposed to the policy generally echoed concerns 
that they previously expressed in their comments on our prior Request 
for Comment in the CY 2024 OPPS/ASC proposed rule, including that the 
proposed policy could contribute to fragmentation of the pharmaceutical 
supply chain and had the potential to induce new drug shortages or 
exacerbate existing shortages.
    Many commenters requested that we expand or otherwise modify our 
eligibility requirements of small, independent hospitals of 100 beds or 
fewer that are not part of a chain organization. Some commenters had 
specific recommendations for provider types that should be made 
eligible for the proposed policy, regardless of bed size or independent 
status, with particular emphasis on CAHs, MDHs, SCHs, children's 
hospitals, and various outpatient facilities. Several commenters 
requested that we remove entirely the independent status eligibility 
requirement, stating that hospitals that are part of chain 
organizations also face substantial financial obstacles. Other 
commenters requested that we expand the policy to make all Medicare 
providers eligible. A commenter requested that we further restrict the 
pool of eligible providers to test the effects of the proposed policy 
on the pharmaceutical supply chain.
    Some commenters, including MedPAC, indicated that Medicare payment 
policy is neither a sufficient, nor the best suited, mechanism to 
support adequate supplies of essential medicines. These commenters 
generally expressed support for broader policy initiatives beyond the 
Medicare program to address drug shortages.
    Response: We appreciate all the comments received on our proposed 
policy. We also recognize the general concerns of some commenters that 
the current lack of resiliency in the pharmaceutical supply chain makes 
it potentially sensitive to fragmentation or significant demand shocks 
from additional pharmaceutical purchasing. However, we continue to 
believe that our pool of eligible hospitals is sufficiently small and 
has significantly less purchasing power than larger hospitals and 
hospital chains, such that the policy would not create such demand 
shocks or result in fragmentation that would cause or exacerbate 
shortages. HHS will continue to monitor drug shortages,\247\ and will 
propose as needed appropriate modifications to the policy, if any, in 
future rulemaking.
---------------------------------------------------------------------------

    \247\ https://www.fda.gov/drugs/drug-safety-and-availability/drug-shortages
---------------------------------------------------------------------------

    For similar reasons, we disagree with commenters who requested that 
we expand the pool of eligible hospitals now in this initial 
implementation of the new policy. Without the benefit of actual 
experience under the policy, expansion of the policy at this time to 
include hospitals with greater purchasing power than small, independent 
hospitals could risk inducing or exacerbating drug shortages. 
Similarly, we disagree that we should restrict the policy to exclude 
some hospitals with lesser purchasing power, as this policy is meant to 
assist these hospitals in responding to future drug shortages, and at 
the same time, we continue to believe that their purchasing power is 
such that it would not significantly increase the risk of inducing or 
exacerbating drug shortages, as compared to those hospitals with 
greater purchasing power. Accordingly, we believe the current scope of 
identified eligible hospitals is appropriate for purposes of the first 
year of this policy. As noted, we may consider any future modifications 
to the scope of eligible hospitals, including potential expansions to 
hospitals with larger bed counts or certain provider types, as we gain 
experience under this policy.
    Furthermore, as stated in the proposed rule, we note that CAHs are 
already paid for inpatient and outpatient services at 101 percent of 
Medicare's share of reasonable costs, including Medicare's share of the 
reasonable costs of establishing and maintaining access to buffer 
stocks of medicines. We also note that MDHs and SCHs are not excluded 
from eligibility under this policy, provided they meet the bed size and 
independent status requirements. Children's hospitals are exempt from 
the IPPS and paid according to a hospital-specific target amount 
updated for inflation with the option to apply for a temporary or 
permanent adjustment to their target amount for the reasonable costs 
they incur in furnishing inpatient care to Medicare beneficiaries, 
including those costs attributable to buffer stocks of essential 
medicines.
    After consideration of the comments received, we are finalizing our 
criteria for eligible hospitals without modification.
    Comment: Some commenters asked that we shift the policy to a 
domestic add-on payment, similar to the domestic add-on payment for 
NIOSH-approved surgical N95 respirators. Commenters requested 
clarification on whether there is a domestic manufacturing requirement 
under this policy.
    Response: We note that HHS has taken significant actions to enable 
investment in domestic manufacturing of essential medicines, medical 
countermeasures, and other critical inputs, and will continue to do 
so.\248\ We note that while we continue to be supportive of domestic 
manufacturing of essential medicines, we are not requiring at this time 
that hospitals exclusively establish and maintain buffer stocks of 
domestically manufactured essential medicines to be eligible for 
separate payment under this policy. As we gain experience under our 
policy and as the domestic manufacturing capacity of essential 
medicines increases, we may consider the comments regarding domestic 
manufacturing requirements for future rulemaking.
---------------------------------------------------------------------------

    \248\ https://www.hhs.gov/about/news/2023/11/27/biden-harris-administration-announces-actions-bolster-medical-supply-chain.html
---------------------------------------------------------------------------

    Comment: Many commenters suggested phasing in the size of the 
buffer stock, with a 3-month minimum buffer stock size in the first 
year of implementation and a 6-month minimum buffer stock size in all 
subsequent years. These commenters stated that phasing in the policy 
may ease the upfront costs of establishing buffer stocks, as the costs 
of establishing a smaller initial buffer stock (e.g., a 3-month or 
similarly sized buffer stock) would pose lesser costs than a 6- month 
buffer stock. These commenters also stated that phasing in the policy 
would lessen any potential impacts to the pharmaceutical supply chain 
and better allow manufacturers to ramp up production of essential 
medicines. Some commenters requested that we reduce the minimum buffer 
stock size to 3 months, stating that the small, independent hospitals 
that we targeted for eligibility would have higher upfront costs than 
most larger hospitals and hospital chains and those upfront costs would 
be lower with a 3-month buffer stock. These commenters stated that 
small, independent hospitals would struggle to establish 6-month buffer 
stocks due to the associated costs. Several commenters suggested that 
we permit a range of buffer stock sizes, from 2- to 6-month buffer 
stocks for example, or that we permit hospitals to determine the 
appropriate size of buffer stock for their chosen essential medicines. 
Commenters also suggested that we

[[Page 69396]]

consider implementing a cap on the total volume of an applicable 
generic that any one hospital may obtain under our proposed policy.
    Response: We agree with commenters that there are multiple factors 
to consider in determining the appropriate size of the buffer stock for 
purposes of this policy. As stated in the preamble of the proposed rule 
and as emphasized by several commenters, a 6-month buffer stock is 
generally more effective at mitigating shortages than a 3-month buffer 
stock. A commenter also stated, and we agree, that buffer stocks are 
not necessarily meant to supply a hospital for the duration of a 
shortage, but are needed to give other manufacturers time to produce 
and deliver more of the affected medicine. As such, 6 months provides 
manufacturers more time to respond as compared to 3 months or some 
other, shorter period.
    However, we also recognize the concerns raised by commenters who 
believe a smaller buffer stock size would be more appropriate because 
the costs of establishing and maintaining buffer stocks of 6 months are 
greater than the costs for 3 months or other shorter periods. In 
weighing these competing concerns, at the present time we believe that 
providing separate payment for the longer 6-month buffer stock is the 
most appropriate policy because a longer period of buffer stock would 
better serve to bridge a drug shortage and provide manufacturers with 
more time to increase production of an affected medicine. However, as 
we gain experience under this policy, including the extent to which the 
size of the buffer stock may affect hospital participation, we may 
revisit this issue in future rulemaking.
    In response to commenters who suggested that we consider 
implementing a cap on the total volume of an applicable generic that 
any one hospital may obtain under our proposed policy, given that the 
eligible hospitals are those with lesser purchasing power we do not 
think these hospitals would use their comparatively limited financial 
resources to establish buffer stocks of excessive size that would make 
the establishment of such a cap on the size of the applicable buffer 
stock for purposes of separate payment under this policy necessary at 
this time. However, although we do not believe this to be a likely 
outcome of our policy, we may further consider this issue for future 
rulemaking as we gain experience under this policy. We reiterate that 
establishment of one or more buffer stock(s) is purely voluntary on the 
part of eligible hospitals.
    After consideration of the comments received, we are finalizing our 
proposal on the size of the buffer stock without modification.
    Comment: Many commenters expressed concern about the administrative 
burden associated with the policy as proposed. Commenters stated that 
small, independent hospitals would likely have the highest relative 
costs associated with establishing and maintaining buffer stock(s) of 
essential medicines, including the administrative and staffing costs of 
separately tracking and maintaining buffer stock established under the 
proposed policy, as well as tracking the shortage status of eligible 
essential medicines. Commenters were generally opposed to the use of a 
supplemental cost reporting form to report the costs associated with 
establishing and maintaining a buffer stock, stating that this would 
increase administrative and recordkeeping costs for participating 
hospitals. Some commenters requested that we instead permit contracted 
manufacturers, distributors, and intermediaries to directly report the 
costs associated with establishing and maintaining a buffer stock for a 
hospital to CMS in lieu of the supplemental cost reporting form, or to 
base payment to hospitals on an attestation from contracted 
manufacturers, distributors, or intermediaries.
    Response: We appreciate commenters' concerns regarding the 
administrative costs associated with separately reporting the costs of 
establishing and maintaining buffer stocks of essential medicines. 
However, as is the case for other Medicare payment policies based on 
reasonable cost, we continue to believe that the Medicare cost report 
is presently the most feasible and least burdensome method of 
collecting and being able to audit this cost information. While some 
commenters suggested CMS require contracted manufacturers, 
distributors, and intermediaries to report these costs directly to CMS, 
they did not suggest a mechanism for doing so.
    We also appreciate commenters sharing their concerns regarding the 
administrative burden of tracking shortage status of eligible essential 
medicines. To help mitigate concerns of added administrative burden 
associated with tracking the shortage status of a given essential 
medicine, in connection with this final policy, the MACs will inform 
hospitals of all eligible medicines and their associated shortage 
status on a calendar quarter basis on or about the start of each 
quarter. The shortage status information that the MACs will provide to 
the hospital will be based on the shortage status of each essential 
medicine(s) as reported on the FDA's Drug Shortage Database. For 
example, hospitals will be informed by the MACs on or about January 1st 
each year which essential medicines are considered in shortage for 
purposes of this policy for the calendar year quarter starting January 
1st. The MACs will similarly provide this information for the calendar 
year quarters beginning April 1st, July 1st, and October 1st.
    After consideration of the comments received, we are finalizing 
without modification our approach of using a supplemental cost 
reporting form to report the costs associated with establishing and 
maintaining a buffer stock, subject to the Paperwork Reduction Act 
Review of the supplemental cost reporting form itself.
    Comment: Commenters were divided on CMS's proposed approach to 
payment under this policy for buffer stocks of essential medicines in 
shortage. As stated in the preamble of the proposed rule, CMS would not 
pay for newly established buffer stocks of essential medicines that are 
listed as ``Currently in Shortage'' on the FDA's Drug Shortage 
Database. However, CMS would continue to pay for buffer stocks of 
essential medicines that had already been established under this policy 
prior to the medicine being listed as ``Currently in Shortage,'' even 
if those buffer stocks were drawn down to less than 6 months in size. 
While some commenters were supportive of these provisions in the 
proposed rule, some commenters stated that continuing to pay for any 
amount of a buffer stock after a drug is listed as ``Currently in 
Shortage'' incentivizes unnecessary retention of stock and potential 
for hoarding. Commenters stated that this incentive may adversely 
affect patient care, as hospitals may withhold medicines from patient 
care to maintain their 6-month stockpile of a given essential medicine.
    Regarding our request for comments on the duration of time that CMS 
should continue to pay for a buffer stock of an essential medicine 
after that medicine is listed as ``Currently in Shortage,'' several 
commenters stated that we should not limit the amount of time that CMS 
will continue to pay for the buffer stock. Several of these commenters 
stated that not applying a limit would be consistent with 
pharmaceutical purchasing and may promote resiliency in the 
pharmaceutical supply chain. Other commenters stated that CMS should 
consider paying for essential medicines that enter shortage on a pro-
rated basis. A commenter recommended that we limit payments to 6 months 
after

[[Page 69397]]

the drug has entered shortage. A commenter requested that we clarify if 
a hospital will continue to be eligible for the separate payment for a 
drug that has entered shortage even if the hospital does not draw its 
buffer stock down below 6 months in size.
    Response: We thank the commenters for their suggestions. We 
acknowledge the concerns of commenters regarding incentives for 
hospitals to stockpile a medicine during a shortage and thus 
potentially exacerbate that shortage. To reiterate, the intent of this 
buffer stock policy is to encourage hospitals to preventatively 
establish a buffer stock prior to a shortage occurring and then, in the 
event of a shortage, to draw down the buffer stock by administering 
needed drugs to patients. Further, similar to our earlier response to 
concerns raised more regarding the potential to induce or exacerbate 
shortages of essential medicines under this policy, we continue to 
believe that the pool of hospitals eligible for separate payment under 
this policy is sufficiently small, and has sufficiently less purchasing 
power than larger hospitals and hospital chains, that the ability of 
these hospitals to stockpile during a shortage is limited, and even if 
it were possible for them to stockpile, their ability to significantly 
exacerbate a shortage is limited. Finally, we believe it is unlikely 
that a small, independent hospital would withhold essential medicines 
from patient care during a shortage to maintain a 6-month buffer stock. 
As a practical matter, we expect that small, independent hospitals may 
be more likely to be in a position where they would need to draw down 
their buffer stock below a 6-month supply during a shortage because 
these hospitals may lack sufficient purchasing power to readily obtain 
these drugs, as compared to larger hospitals and hospitals that are 
part of chains. Taking these factors into account, we agree with 
commenters who supported continuing to separately pay for the 
reasonable costs of maintaining an already established buffer stock 
after a drug enters shortage as an appropriate approach, even if the 
number of months of supply of that medicine in the buffer stock drops 
to less than 6 months during the shortage. For the same reasons, we 
also agree with commenters who indicated that CMS should not limit the 
amount of time that it will continue to pay for the reasonable costs of 
maintaining the buffer stock after an essential medicine is listed as 
``Currently in Shortage.'' We believe that hospitals that voluntary 
establish and maintain a buffer stock of essential medicines may 
continue to incur additional, reasonable costs for the maintenance of 
that buffer stock during a shortage, even if the size of the buffer 
stocks drops below 6 months. Accordingly, we believe that these 
hospitals should continue to be able to receive separate payment for 
the IPPS shares of these additional costs for the duration of the 
shortage. However, as we gain additional experience under the policy, 
we may consider adjusting the amount of time that hospitals may 
continue to receive separate payment for maintaining buffer stocks of 
essential medicines that are subsequently listed as ``Currently in 
Shortage.'' After consideration of the comments received, we are 
finalizing as proposed to continue to separately pay for maintaining an 
already established buffer stock after a drug enters shortage, even if 
the number of months of supply of that medicine in the buffer stock 
drops to less than 6 months during the shortage. We note that larger 
hospitals and hospitals that are part of chains may have a greater 
ability to avoid drawing down their buffer stocks during a shortage, 
though they may also face some challenges. If we were to expand 
hospital eligibility in the future, we may revisit this aspect of the 
policy for these hospitals.
    Comment: While most commenters were supportive of not permitting 
hospitals to newly establish buffer stocks for medicines in shortage, 
some commenters stated that permitting hospitals to establish buffer 
stocks of drugs regardless of shortage status may contribute to 
stability in pharmaceutical purchasing in a manner similar to 
continuing to pay for buffer stocks after medicines enter shortage. 
Commenters also noted that regulatory flexibility exists for other 
entities, such as compounding pharmacies, to produce drugs that are 
listed as ``Currently in Shortage'' on the FDA's Drug Shortage 
Database. These commenters stated that, given the small pool of 
eligible hospitals, permitting hospitals to continue to establish 
buffer stocks of essential medicines in shortage would be unlikely to 
markedly exacerbate shortages.
    Response: We disagree with commenters who suggested that a hospital 
that failed to establish a buffer stock before a drug entered shortage 
be allowed to receive separate payment for subsequently establishing 
such a buffer stock during the shortage. As we stated in the proposed 
rule and continue to believe, the appropriate time to establish a 
buffer stock for a drug is before it goes into shortage or after a 
shortage period has ended, but not during a shortage. As a general 
matter, this policy was developed to support hospitals in establishing 
a buffer stock before a drug enters shortage, so that medicines remain 
available to patients while the shortage is in effect. Given that 
small, independent hospitals are less likely to be able to establish a 
buffer stock after a drug enters shortage, or as robust of a buffer 
stock even taking into account the potentially limited ability of a 
small, independent hospital to avail itself of compounding,\249\ not 
establishing a buffer stock of these medicines in advance of the 
shortage would generally mean that those drugs are not as available to 
their patients. Therefore, we continue to believe that the separate 
payment should be available only where the buffer stock is established 
prior to an essential medicine entering shortage.
---------------------------------------------------------------------------

    \249\ We remind hospitals that the costs of establishing and 
maintaining a buffer stock of an essential medicine do not include 
the cost of the essential medicine itself, meaning that the cost of 
compounding would not be included in the cost for establishing and 
maintaining a buffer stock of an essential medicine.
---------------------------------------------------------------------------

    After consideration of the comments received, we are finalizing as 
proposed to not separately pay for a buffer stock newly established 
after a drug goes into shortage.
    Comment: Many commenters supported the use of ASPR's ``ARMI'' list 
of essential medicines developed in 2022. Commenters stated that 
regular (for example, annual) review of this eligible medicines list, 
in consultation with stakeholders or under an established public-
private partnership, would be crucial to identifying other essential 
medicines and providing updates. A few commenters suggested expanding 
participation requirements, while narrowing payment-eligible medicines 
to better ensure the most needed buffer inventories are developed and 
maintained by the most appropriate type of facility. Other commenters 
proposed other lists, such as the Executive Order (E.O.) 13944 List of 
Essential Medicines, Medical Countermeasures and Critical Inputs List 
developed in 2020 under the E.O. by the U.S. Food and Drug 
Administration (hereafter referred to as the E.O. 13944 List), the 
World Health Organization's Essential Medicines List, American Society 
of Health-System Pharmacists Drug Shortages List, U.S. Pharmacopeia's 
Medicine Supply Map, and Vizient's Essential Medications For High-
Quality Patient Care. Some commenters stated the need to include 
certain products that are not included in the ARMI list (for example, 
oncology drugs; blood and blood products) and

[[Page 69398]]

thus stated the E.O. 13944 List might better serve this proposal's 
interests and, according to such commenters, is the most recognized 
among healthcare providers. Others asserted that ASPR's ARMI List was 
limited, left out critical medicines, should be harmonized with the 
E.O. 13944 List, and included many medicines for which it is 
impractical for eligible hospitals to establish a buffer stock. Some 
commenters recommended the creation of a separate list for the 
outpatient setting, including outpatient cancer care, physicians' 
offices, and infusion centers.
    Several commenters proposed the gradual expansion of eligible 
medicines that could be considered essential and provide care to unique 
patient populations that were otherwise not included. A few commenters 
also recommended that essential medical devices be included. Others 
suggested expanded medicines including chemotherapy and other cancer 
treatment drugs. A commenter suggested excluding immune globulin 
because these products share the unique supply chain of the excluded 
fractionated plasma products.
    Response: We appreciate the commenters' feedback and diverse 
clinical perspectives on defining an appropriate and effective list of 
essential medicines. As we discussed in the proposed rule, the ARMI 
List is a prioritized subset of 86 essential medicines from the E.O. 
13944 List that are either critical for minimum patient care in acute 
settings or important for acute care with no comparable alternatives 
available. The medicines included in the ARMI List were considered, by 
consensus, to be most critically needed for typical acute patient care. 
In this context, acute patient care was defined as: rescue use or 
lifesaving use or both (that is, Intensive Care Units, Cardiac/Coronary 
Care Units, and Emergency Departments), stabilizing patients in 
hospital continued care to enable discharge, and urgent or emergency 
surgery. Development of the ARMI List focused on assessing the clinical 
criticality and supply chains of small molecules and therapeutic 
biologics. The development of the ARMI List was informed by expert 
input and perspectives from multiple key pharmaceutical supply chain 
stakeholders (material suppliers, pharmaceutical manufacturers, group 
purchasing organizations, wholesale distributors) and clinical 
stakeholders (doctors, nurses, pharmacists, and public health experts 
representing major hospital systems, professional societies, and 
government agencies serving underrepresented populations). This 
involved conducting and analyzing data from more than 80 surveys, 
conducting more than 40 interviews, holding 4 workshops that combined 
clinical and industry expertise, and consulting more than 100 sources 
to clarify inputs from interview, surveys, and workshops. The ARMI List 
was also informed by public feedback on the E.O. 13944 List provided 
during a public comment period starting in October 2020
    Further, while the E.O. 13944 List includes blood and blood 
products, this policy is not intended to include medicines that would 
be used for longer-term chronic management, including those needed to 
cure a condition through weeks or months of outpatient treatment in the 
outpatient setting or chronic care (for example, oncology).
    Based on the comprehensive assessment and process followed to 
develop the ARMI List, as well as the inclusion of a variety of inputs 
and perspectives across the pharmaceutical supply chains--from industry 
to clinical community and the public at large--we believe that use of 
the ARMI List to identify essential medicines for purposes of this 
policy is appropriate to promote supply chain resilience. at this 
juncture. After consideration of the comments received, we are 
finalizing as proposed our use of the ARMI List.
    Comment: Commenters expressed concerns regarding the use of the 
FDA's Drug Shortage Database as a means of establishing the shortage 
status of a given essential medicine. Specifically, commenters stated 
that the list is not sensitive to regional shortages, such that it is 
possible that hospitals may have to draw down their buffer stock(s) 
below 6 months in size for a regional shortage, despite the medicine 
not being listed as ``Currently in Shortage'' on the FDA's Drug 
Shortage Database. Commenters also stated that the FDA's Drug Shortage 
Database tends to only capture the most extreme of shortages and may 
not be sensitive to other supply challenges that hospitals face. 
Commenters further stated that the FDA's Drug Shortage List tends to 
lag alternative sources of drug shortage status, such as the American 
Society of Health-System Pharmacists' (ASHP's) Drug Shortages List. For 
these reasons, commenters recommended that CMS consider modifying its 
proposal to adopt the ASHP Drug Shortages List as its source for 
determining shortage status of a given essential medicine.
    Commenters requested clarification on whether all formulations of a 
drug will be removed from eligibility if a common Active Pharmaceutical 
Ingredient (API) enters shortage.
    Response: We thank commenters for their feedback regarding our use 
of the FDA's Drug Shortage Database. We recognize that the purpose, 
audience, scope, source of information, methodology and timing for 
determining shortage status differs between the FDA's Drug Shortage 
Database and the ASHP's Drug Shortages List. These differences are also 
documented by researchers, ASHP, and others, and were reviewed by CMS 
in developing this policy.250 251 252 253
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    \250\ https://www.ashp.org/drug-shortages/current-shortages/fda-and-ashp-shortage-parameters?loginreturnUrl=SSOCheckOnly.
    \251\ https://newsroom.vizientinc.com/en-US/releases/blogs-the-source-of-truth-a-pharmacy-buyers-drug-shortage-list.
    \252\ https://aspe.hhs.gov/reports/global-drug-shortages.
    \253\ https://www.fda.gov/drugs/drug-shortages/frequently-asked-questions-about-drug-shortages.
---------------------------------------------------------------------------

    As described on the FDA's Drug Shortage Database website,\254\ the 
FDA Drug Shortage Database is maintained by a dedicated team within the 
agency and manufacturers are required to report drug shortages to the 
FDA. FDA defines a shortage as a period of time when the demand for a 
drug in the United States exceeds supply. FDA's definition considers 
the entire United States market supply from all manufacturers combined 
based on manufacturer reporting of their inventory and production for 
the potentially medically necessary use(s) at the patient level. FDA 
receives information from manufacturers about their ability to supply 
the market and uses this information to track shortages at the national 
level. Manufacturers provide FDA most drug shortage information, and 
FDA works closely with them to prevent or reduce the impact of 
shortages. When a shortage is listed as current on the FDA Drug 
Shortage Database, FDA is aware of the supply situation and works on 
efforts to mitigate the supply disruption. FDA also works with 
manufacturers on shortage prevention efforts for drugs not yet listed 
on the Drug Shortage Database.\255\
---------------------------------------------------------------------------

    \254\ https://www.fda.gov/drugs/drug-shortages/frequently-asked-questions-about-drug-shortages.
    \255\ https://www.fda.gov/drugs/drug-safety-and-availability/drug-shortages.
---------------------------------------------------------------------------

    By contrast, CMS understands the American Society of Health-System 
Pharmacists (ASHP) list defines a shortage as a supply issue that 
affects how a pharmacy prepares or dispenses a drug product, and would 
post a shortage if one manufacturer was out of stock even if the other 
manufacturers are able to cover the supply gap. This often leads to 
more drugs being declared in `shortage' by ASHP when compared

[[Page 69399]]

to FDA's definition of a shortage. For these reasons, we believe that 
the FDA's Drug Shortage Database is the most appropriate source for 
determining the shortage status of our eligible essential medicines for 
purposes of this policy.
    As discussed previously, in conjunction with this final policy, CMS 
will conduct provider outreach on a quarterly basis regarding essential 
medicines that are in shortage. We intend to make it clear to hospitals 
on or about the start of each calendar year quarter which drugs are or 
are not in shortage for the purposes of eligibility for separate 
payment for the costs of establishing or maintaining their respective 
buffer stocks. As discussed, we believe this provider outreach will 
help to mitigate concerns regarding the administrative burden on 
hospitals of tracking when a drug is considered in shortage under our 
policy.
    After consideration of the public comments received, we are 
finalizing as proposed our use of the FDA Drug Shortages Database as 
the basis for determining when an essential medicine is in shortage.
    Comment: Some commenters noted that some of the 86 essential 
medicines eligible under our policy are controlled substances. These 
commenters asked that CMS work with the Drug Enforcement Agency (DEA) 
to ensure that hospitals are able to adequately establish and maintain 
buffer stocks of these medicines under the policy.
    Response: All applicable DEA requirements with respect to any 
controlled substances that are essential medicines are unaltered by our 
policy and continue to apply. Changes to any DEA requirements are 
outside of the scope of this rulemaking. As we gain additional 
experience under the policy we may consider unique aspects, if any, of 
its applicability to controlled substances in future rulemaking.
    Comment: Some commenters also requested that CMS delay the 
effective date beyond October 1, 2024, to allow manufacturers to ramp 
up production.
    Response: As noted in our earlier responses, we continue to believe 
that our pool of eligible hospitals is sufficiently small, and that 
these hospitals have sufficiently less purchasing power than larger 
hospitals and hospital chains, such that the policy would not create 
demand shocks that would cause or exacerbate shortages. As such, we do 
not believe there is a need to delay the policy to permit manufacturers 
to increase production. We also note that the policy is entirely 
voluntary on the part of eligible hospitals and does not permit 
separate payment for newly establishing buffer stocks for drugs that 
are already in shortage.
    After consideration of the public comments received, we are 
finalizing as proposed the effective date of October 1, 2024.
    Comment: Some commenters requested we clarify if Medicare Advantage 
costs will be included as eligible costs for establishing the Medicare 
share of hospital costs.
    Response: The separate payment for establishing and maintaining 
access to essential medicines under this policy is for the costs that 
are currently bundled into the IPPS payments. Those IPPS payments do 
not include Medicare Advantage payments. Therefore, the Medicare 
inpatient share of costs under this policy appropriately does not 
include Medicare Advantage.
    Comment: Commenters requested that we clarify if eligible hospitals 
will be permitted to establish a shared buffer stock, or if each 
hospital will have to separately establish and maintain their 
respective buffer stock(s).
    Response: Eligible hospitals that elect to maintain a shared buffer 
stock of essential medicines with other eligible hospitals may receive 
separate payment for establishing and maintaining the shared buffer 
stock only if all of the requirements for payment under this policy are 
met independently by each hospital (for example, there is sufficient 
buffer stock that each hospital has access to a 6-month supply for 
itself if all the hospitals begin to access the buffer stock at the 
same time in the event of a shortage), and the costs associated with 
establishing and maintaining the shared buffer stock are reasonably 
allocated to each hospital without duplication of those costs (for 
example, the total costs reported to Medicare--in accordance with the 
principles of reasonable cost as set forth in section 1861(v)(1)(A) of 
the Act and in 42 CFR 413.9--across the hospitals for establishing and 
maintaining that shared buffer stock must equal the total costs of 
establishing and maintaining that buffer stock). If one or more of the 
buffer stock(s) of essential medicines that comprise the established 
shared buffer stock are subsequently listed as ``Currently in 
Shortage'' on the FDA's Drug Shortage Database, the buffer stock(s) of 
those essential medicines in shortage may remain eligible for separate 
payment under this policy for the duration of the shortage. Eligibility 
for separate payment for essential medicines that are ``Currently in 
Shortage'' will be maintained consistent with the manner in which 
individual buffer stocks of essential medicines remain eligible for 
payment after being listed as ``Currently in Shortage,'' as described 
previously.
    Comment: A commenter asked if internal compounding of an essential 
medicine in shortage will be permitted to build up a buffer stock of an 
essential medicine.
    Response: The appropriate clinical use of compounding and all 
applicable regulations and requirements associated with compounding are 
beyond the scope of this rulemaking. We remind hospitals, however, that 
the costs of establishing and maintaining a buffer stock of an 
essential medicine do not include the cost of the essential medicine 
itself, meaning that the cost of compounding would not be included in 
the cost for establishing and maintaining a buffer stock of an 
essential medicine.
    Comment: A commenter requested that we use Average Daily Census 
(ADC) data for the beginning of the cost reporting period to determine 
a given hospital's bed count.
    Response: We proposed to use the hospital bed count as established 
in accordance with Sec.  412.105(b), which is consistent with how bed 
count is established for other IPPS payment purposes. We do not see the 
need to establish an alternative methodology for determining hospital 
bed count specific to this policy. We are finalizing this aspect of the 
policy as proposed.
    Comment: A commenter requested that we clarify if CMS will provide 
an Explanation of Benefits with specific codes relevant to the payment 
adjustment.
    Response: There is no additional payment required of a beneficiary 
who, during their IPPS inpatient stay, receives an essential medicine 
from a hospital that receives separate payment for establishing and 
maintaining a buffer stock of that essential medicine under the IPPS. 
Information on which hospitals receive separate payment under the 
policy will be publicly available as part of the cost report 
information reported by hospitals.
    Comment: We received a number of comments requesting broader policy 
actions. Many commenters stated that addressing drug shortages will 
require actions beyond the Medicare program, including actions directed 
at pharmaceutical suppliers. Commenters asked that we seek legislative 
authority to make additional payments, including any potential 
expansion to the outpatient setting, in a non-budget neutral manner. 
Several commenters requested that we convene a technical workgroup to 
consult on the policy, with both federal and private-sector members. A 
commenter requested that

[[Page 69400]]

we require drug manufacturers to equitably disburse medicines to 
smaller hospitals, as these smaller hospitals often face difficulties 
in purchasing medicines. Commenters requested that we require drug 
manufacturers to produce more stock above and beyond their purchase 
demand, or that we directly pay distributors, manufacturers, or 
wholesalers to hold a national buffer supply for disbursement to 
hospitals. Some commenters requested that we establish measures to 
prevent hospitals participating in this policy from contracting with 
manufacturers that have outstanding pharmaceutical quality issues at 
their facilities. A commenter requested that we shift to stockpiling 
Active Pharmaceutical Ingredients (API) instead of Finished Drug Form 
(FDF) pharmaceuticals. Commenters requested that we direct Medicare 
Advantage, Medicaid Managed Care Organizations, and Children's Health 
Insurance Program Plans to release guidance waiving prior authorization 
for suitable alternatives to drugs in shortage.
    Response: We thank commenters for their feedback regarding broader 
policy actions to address drug shortages and supply chain resiliency, 
which we note are beyond the scope of this rulemaking.
7. Policy Summary
    After consideration of the public comments we received, we are 
finalizing our policy as proposed. In summary, for cost reporting 
periods beginning on or after October 1, 2024, we are establishing a 
separate payment under the IPPS to small, independent hospitals for the 
additional resource costs involved in voluntarily establishing and 
maintaining access to 6-month buffer stocks of essential medicines, 
either directly or through contractual arrangements with a 
manufacturer, distributor, or intermediary. The costs of buffer stocks 
that are eligible for separate payment are the costs of buffer stocks 
for one or more of the medicines on ARMI's List of 86 essential 
medicines. The separate payment will be for the IPPS share of the 
additional costs and could be issued in a lump sum, or as biweekly 
payments to be reconciled at cost report settlement. The separate 
payment will not apply to buffer stocks of any of the essential 
medicines on the ARMI List that are listed as ``Currently in Shortage'' 
on the FDA Drug Shortages Database, as communicated to hospitals by the 
MACs on a quarterly basis, unless a hospital had already established 
and was maintaining a 6-month buffer stock of that medicine prior to 
the shortage. Once an essential medicine is no longer in shortage, as 
communicated by the MACs for the calendar quarter, our policy does not 
differentiate that essential medicine from other essential medicines, 
and hospitals would be eligible to establish and maintain buffer stocks 
for the medicine as they would have before the shortage. We are also 
finalizing our proposal to codify this payment adjustment in the 
regulations by adding new paragraph (g) to 42 CFR 412.113, as well as 
our proposed conforming changes to 42 CFR 412.1(a) and 412.2(f), 
without modification. In future years as we gain additional experience 
under this policy, we plan to assess the program's impact and consider 
revisions.

K. Hospital Readmissions Reduction Program

1. Regulatory Background
    Section 3025 of the Patient Protection and Affordable Care Act, as 
amended by section 10309 of the Patient Protection and Affordable Care 
Act, added section 1886(q) to the Act, which establishes the Hospital 
Readmissions Reduction Program effective for discharges from applicable 
hospitals beginning on or after October 1, 2012. Under the Hospital 
Readmissions Reduction Program, payments to applicable hospitals may be 
reduced to account for certain excess readmissions. We refer readers to 
the FY 2016 IPPS/LTCH PPS final rule (80 FR 49530 through 49543) and 
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38221 through 38240) for a 
general overview of the Hospital Readmissions Reduction Program. We 
also refer readers to 42 CFR 412.152 through 412.154 for codified 
Hospital Readmissions Reduction Program requirements. Additionally, we 
refer readers to the CY 2025 OPPS/ASC proposed rule where we are 
soliciting input on potential future methodological modifications 
regarding the Safety of Care measure group within the Overall Hospital 
Quality Star Rating (89 FR 59509 through 59515).
2. Notice of No Program Proposals or Updates
    There were no proposals or updates in the FY 2025 IPPS/LTCH PPS 
proposed rule for the Hospital Readmissions Reduction Program (89 FR 
36238). We refer readers to section I.G.7. of Appendix A of the final 
rule for an updated estimate of the financial impact of using the 
proportion of dually eligible beneficiaries, ERRs, and aggregate 
payments for each condition/procedure and all discharges for applicable 
hospitals from the FY 2025 Hospital Readmissions Reduction Program 
applicable period (that is, July 1, 2020, through June 30, 2023).

L. Hospital Value-Based Purchasing (VBP) Program

1. Background
a. Overview
    For background on the Hospital VBP Program, we refer readers to the 
CMS website at: https://www.cms.gov/medicare/quality/initiatives/hospital-quality-initiative/hospital-value-based-purchasing. We also 
refer readers to our codified requirements for the Hospital VBP Program 
at 42 CFR 412.160 through 412.168. Additionally, we refer readers to 
the CY 2025 OPPS/ASC proposed rule where we are soliciting input on 
potential future methodological modifications regarding the Safety of 
Care measure group within the Overall Hospital Quality Star Rating (89 
FR59509 through 59515).
b. FY 2025 Program Year Payment Details
    Under section 1886(o)(7)(C)(v) of the Act, the applicable percent 
for the FY 2025 program year is 2.00 percent. Using the methodology we 
adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 
53573), we estimate that the total amount available for value-based 
incentive payments for FY 2025 is approximately $1.67 billion, based on 
the March 2024 update of the FY 2023 MedPAR file.
    As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53573 
through 53576), we will utilize a linear exchange function to translate 
this estimated amount available into a value-based incentive payment 
percentage for each hospital, based on its Total Performance Score 
(TPS). We published proxy value-based incentive payment adjustment 
factors in Table 16 associated with the FY 2025 IPPS/LTCH PPS proposed 
rule (which is available via the internet on the CMS website). We are 
publishing updated proxy value-based incentive payment adjustment 
factors in Table 16A associated with this final rule (which is 
available via the CMS website) to reflect changes based on the March 
2024 update to the FY 2023 MedPAR file. We note that these updated 
proxy adjustment factors will not be used to adjust hospital payments. 
These updated proxy adjustment factors were calculated using the 
historical baseline and performance periods for the FY 2024 Hospital 
VBP Program. These updated proxy adjustment factors were calculated 
using the March 2024 update to the FY 2023 MedPAR file. The slope of 
the linear exchange function used to calculate these proxy factors

[[Page 69401]]

was 4.7264532378, and the estimated amount available for value-based 
incentive payments to hospitals for FY 2025 is approximately $1.67 
billion. We will add a new table, Table 16B to display the actual 
value-based incentive payment adjustment factors, exchange function 
slope, and estimated amount available for the FY 2025 Hospital VBP 
Program. We expect that Table 16B will be posted on the CMS website in 
the fall of 2024.
2. Previously Adopted Quality Measures for the Hospital VBP Program
    We refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49110 through 49111) for summaries of previously adopted measures for 
the FY 2025 and FY 2026 program years and to the FY 2024 IPPS/LTCH PPS 
final rule for summaries of previously adopted measures beginning with 
the FY 2026 program year (88 FR 59081 through 59083). We did not 
propose any new measure adoptions or removals to the measure set in the 
FY 2025 IPPS/LTCH PPS proposed rule. Table V.L.-01 summarizes the 
previously adopted Hospital VBP Program measure set for the FY-2025 
program year.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU24.192

BILLING CODE 4120-01-C
    As discussed in section IX.B.2.g(2) of this final rule, we are 
finalizing the adoption of the updates to the HCAHPS Survey measure 
beginning with the FY 2030 program year. We are also finalizing the 
adoption of the updates to the HCAHPS Survey measure in the Hospital 
Inpatient Quality Reporting (IQR) Program, beginning with the FY 2027 
program year, as described in section IX.B.2.e. of this final rule. 
Additionally, we are finalizing the modification to the Hospital VBP 
Program's scoring of the HCAHPS Survey measure for the FY 2027 through 
FY 2029 program years to score hospitals on only those dimensions of 
the survey that will remain unchanged from the current version, as 
described in section IX.B.2.f. of this final rule. Lastly,

[[Page 69402]]

we are also finalizing the modification to the Hospital VBP Program's 
scoring of the HCAHPS Survey measure beginning in FY 2030 to account 
for the adoption of the modifications to the survey, which will result 
in a total of nine survey dimensions for the updated HCAHPS Survey 
measure in the Hospital VBP Program, as described in section 
IX.B.2.g(3) of this final rule. Table V.L.-02 summarizes the previously 
adopted Hospital VBP Program measures for the FY 2026 through FY 2030 
program years.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU24.193


[[Page 69403]]


3. Baseline and Performance Periods for the FY 2026 Through FY 2030 
Program Years
a. Background
    We refer readers to the FY 2024 IPPS/LTCH PPS final rule (88 FR 
59084 through 59087) for previously adopted baseline and performance 
periods for the FY 2025 through FY 2029 program years. We also refer 
readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56998) in which 
we finalized a schedule for all future baseline and performance periods 
for all measures.
b. Summary of Baseline and Performance Periods for the FY 2026 Through 
FY 2030 Program Years
    Tables V.L.-03, V.L.-04, V.L.-05, V.L.-06, and V.L.-07 summarize 
the baseline and performance periods that we have previously adopted.
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[[Page 69404]]


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[[Page 69405]]


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BILLING CODE 4120-01-C
4. Performance Standards for the Hospital VBP Program
a. Background
    We refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49115 through 49118) for previously established performance standards 
for the FY 2025 program year. We also refer readers to the FY 2024 
IPPS/LTCH PPS final rule (88 FR 59089 through 59090) for the previously 
established performance standards for the FY 2026 program year. We 
refer readers to the FY 2021 IPPS/LTCH PPS final rule for further 
discussion on performance standards for which the measures are 
calculated with lower values representing better performance (85 FR 
58855).

[[Page 69406]]

b. Previously and Newly Estimated Performance Standards for the FY 2027 
Program Year
    We have adopted certain measures for the Safety domain, Clinical 
Outcomes domain, and the Efficiency and Cost Reduction domain for 
future program years to ensure that we can adopt baseline and 
performance periods of sufficient length for performance scoring 
purposes. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45294 through 
45295), we established performance standards for the FY 2027 program 
year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-
HF, MORT-30-PN (updated cohort), MORT-30-COPD, MORT-30- CABG, and COMP-
HIP-KNEE) and the Efficiency and Cost Reduction domain measure (MSPB). 
We note that the performance standards for the MSPB Hospital measure 
are based on performance period data. Therefore, we are unable to 
provide numerical equivalents for the standards at this time. The 
previously established and newly estimated performance standards for 
the FY 2027 program year are set out in Tables V.L.-08 and V.L.-09.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU24.199

BILLING CODE 4120-01-C
    As discussed in section IX.B.2.f. of this final rule, we are 
finalizing a modification to the scoring of the HCAHPS Survey for the 
FY 2027 through FY 2029 program years while the updates to the survey 
are adopted and publicly reported under the Hospital IQR Program. 
Scoring will be modified to only score hospitals on the six Hospital 
VBP Program dimensions of the HCAHPS Survey that will remain unchanged 
from the current version. These six dimensions of the HCAHPS Survey for 
the Hospital VBP Program will be:
     ``Communication with Nurses,''
     ``Communication with Doctors,''
     ``Communication about Medicines,''
     ``Discharge Information,''
     ``Cleanliness and Quietness,'' and
     ``Overall Rating.''

[[Page 69407]]

    We are finalizing the proposal to exclude the ``Responsiveness of 
Hospital Staff'' and ``Care Transition'' dimensions from scoring in the 
Hospital VBP Program's HCAHPS Survey measure in the Person and 
Community Engagement domain for the FY 2027 through FY 2029 program 
years. This will allow hospitals to be scored on only those dimensions 
of the survey in the Hospital VBP Program that will remain unchanged 
from the current version of the survey while the updated HCAHPS Survey 
is publicly reported on under the Hospital IQR Program for one year as 
required by statute. We are also finalizing the proposal to adopt the 
updated version of the HCAHPS Survey measure for use in the Hospital 
VBP Program beginning in FY 2030 as outlined in section IX.B.2.g. of 
this final rule.
    Scoring will be modified such that for each of the six dimensions 
listed previously, Achievement Points (0-10 points) and Improvement 
Points (0-9 points) will be calculated, the larger of which will be 
summed across these six dimensions to create a pre-normalized HCAHPS 
Base Score of 0-60 points (as compared to 0-80 points with the current 
eight dimensions). The pre-normalized HCAHPS Base Score will then be 
multiplied by \8/6\ (1.3333333) and rounded according to standard rules 
(values of 0.5 and higher are rounded up, values below 0.5 are rounded 
down) to create the normalized HCAHPS Base Score. Each of the six 
dimensions will be of equal weight, so that, as currently scored, the 
normalized HCAHPS Base Score will range from 0 to 80 points. HCAHPS 
Consistency Points will be calculated in the same manner as the current 
method and will continue to range from 0 to 20 points. Like the Base 
Score, the Consistency Points Score will consider scores across the six 
unchanged dimensions of the Person and Community Engagement domain. The 
final element of the scoring formula, which will remain unchanged from 
the current formula, will be the sum of the HCAHPS Base Score and the 
HCAHPS Consistency Points Score for a total score that ranges from 0 to 
100 points. The method for calculating the performance standards for 
the six dimensions will remain unchanged. We refer readers to the 
Hospital Inpatient VBP Program final rule (76 FR 26511 through 26513) 
for our methodology for calculating performance standards. The 
estimated performance standards for the six dimensions that are 
finalized to be scored on for the FY 2027 program year are set out in 
Table V.L.-09.
[GRAPHIC] [TIFF OMITTED] TR28AU24.200

    We invited public comment on this proposal in the FY 2025 IPPS/LTCH 
PPS proposed rule and have summarized all comments and responses in 
section IX.B.2. of this final rule.
c. Previously Established Performance Standards for Certain Measures 
for the FY 2028 Program Year
    We have adopted certain measures for the Safety domain, Clinical 
Outcomes domain, and the Efficiency and Cost Reduction domain for 
future program years to ensure that we can adopt baseline and 
performance periods of sufficient length for performance scoring 
purposes. In the FY 2023 IPPS/LTCH PPS final rule (86 FR 49118), we 
established performance standards for the FY 2028 program year for the 
Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-HF, MORT-30-PN 
(updated cohort), MORT-30-COPD, MORT-30-CABG, and COMP-HIP-KNEE) and 
the Efficiency and Cost Reduction domain measure (MSPB Hospital). We 
note that the performance standards for the MSPB Hospital measure are 
based on performance period data. Therefore, we are unable to provide 
numerical equivalents for the standards at this time. The previously 
established performance standards for these measures are set out in 
Table V.L.-10.

[[Page 69408]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.201

d. Previously Established Performance Standards for Certain Measures 
for the FY 2029 Program Year
    We have adopted certain measures for the Safety domain, Clinical 
Outcomes domain, and the Efficiency and Cost Reduction domain for 
future program years to ensure that we can adopt baseline and 
performance periods of sufficient length for performance scoring 
purposes. In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59091 through 
59092), we established performance standards for the FY 2029 program 
year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-
HF, MORT-30-PN (updated cohort), MORT-30-COPD, MORT-30- CABG, and COMP-
HIP-KNEE) and the Efficiency and Cost Reduction domain measure (MSPB 
Hospital). We note that the performance standards for the MSPB Hospital 
measure are based on performance period data. Therefore, we are unable 
to provide numerical equivalents for the standards at this time. The 
previously established performance standards for these measures are set 
out in Table V.L.-11.

[[Page 69409]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.202

e. Newly Established Performance Standards for Certain Measures for the 
FY 2030 Program Year
    As discussed previously, we have adopted certain measures for the 
Clinical Outcomes domain (MORT-30- AMI, MORT-30-HF, MORT-30-PN (updated 
cohort), MORT-30-COPD, MORT-30-CABG, and COMP-HIP- KNEE) and the 
Efficiency and Cost Reduction domain (MSPB Hospital) for future program 
years to ensure that we can adopt baseline and performance periods of 
sufficient length for performance scoring purposes. In accordance with 
our methodology for calculating performance standards discussed more 
fully in the Hospital Inpatient VBP Program final rule (76 FR 26511 
through 26513), which is codified at 42 CFR 412.160, we are 
establishing the following performance standards for the FY 2030 
program year for the Clinical Outcomes domain and the Efficiency and 
Cost Reduction domain. We note that the performance standards for the 
MSPB Hospital measure are based on performance period data. Therefore, 
we are unable to provide numerical equivalents for the standards at 
this time. The newly established performance standards for these 
measures are set out in Table V.L.-12.

[[Page 69410]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.203

M. Hospital-Acquired Condition (HAC) Reduction Program

1. Regulatory Background
    We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50707 through 50709) for a general overview of the HAC Reduction 
Program and a detailed discussion of the statutory basis for the 
Program. We also refer readers to 42 CFR 412.170 through 412.172 for 
codified HAC Reduction Program requirements. Additionally, we refer 
readers to the CY 2025 OPPS/ASC proposed rule where we are soliciting 
input on potential future methodological modifications regarding the 
Safety of Care measure group within the Overall Hospital Quality Star 
Rating (89 FR 59509 through 59515).
2. Measures for FY 2025 and Subsequent Years in the HAC Reduction 
Program
    The previously finalized measures for the HAC Reduction Program are 
shown in table V.M.-01. Technical specifications for the CMS PSI 90 
measure can be found on the QualityNet website available at: https://qualitynet.cms.gov/inpatient/measures/psi/resources. Technical 
specifications for the CDC National Healthcare Safety Network (NHSN) 
healthcare-associated infection (HAI) measures can be found at the 
CDC's NHSN website at https://www.cdc.gov/nhsn/acute-care-hospital/ and on the QualityNet website available at: https://qualitynet.cms.gov/inpatient/measures/hai/resources. These web pages 
provide measure updates and other information necessary to guide 
hospitals participating in the collection of HAC Reduction Program 
data.

[[Page 69411]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.204

    We did not make any proposals or policy updates for the HAC 
Reduction Program in the FY 2025 IPPS/LTCH PPS proposed rule. We refer 
readers to section I.G.9. of Appendix A of this final rule for an 
updated estimate of the impact of the Program policies on the 
proportion of hospitals in the worst performing quartile of the Total 
HAC Scores for the FY 2025 HAC Reduction Program.
    While we did not make any proposals or policy updates to the HAC 
Reduction Program, we did receive comments from interested parties.
    Comment: Many commenters provided recommendations for program 
improvements and potential future measures, including the Hospital 
Harm--Falls with Injury electronic clinical quality measure (eCQM), a 
hospital-onset COVID-19 measure, the NHSN Hospital-Onset Bacteremia and 
Fungemia Outcome Measure, and endoscope-associated infection eCQMs. 
Many commenters recommended including a hospital-acquired COVID-19 
measure within the HAC Reduction Program to incentivize facilities to 
adopt mitigation approaches and prevent the transmission of COVID-19 in 
healthcare settings. Many commenters recommended that hospital-onset 
COVID should be defined as infections diagnosed after 5+ days of 
admission. Many commenters recommended providing financial support to 
hospitals for hospital-onset COVID-19 reporting efforts. Many 
commenters also recommended timely and accurate public reporting of 
hospital-onset COVID-19 data, aggregated by state and facility name, to 
aid patients in making informed decisions on where to receive care. 
Many commenters recommended incentivizing healthcare settings to 
implement preventative measures to reduce COVID-19 transmission, 
including requiring universal mask wearing, universal screening 
testing, and improved air quality. Many commenters expressed concern 
about COVID-19 as a health equity issue disproportionately impacting 
populations at higher risk, including people with disabilities, 
populations that have been historically marginalized, and communities 
that are under-resourced; and recommended aggregating the data by 
demographics, socio-economic status, and disability status.
    Response: We thank the commenters for these recommendations on 
potential future measures to include in the HAC Reduction Program and 
will consider them for future program years.

N. Rural Community Hospital Demonstration Program

1. Introduction
    The Rural Community Hospital Demonstration was originally 
authorized by section 410A of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). The 
demonstration has been extended three times since the original 5-year 
period mandated by the MMA, each time for an additional 5 years. These 
extensions were authorized by sections 3123 and 10313 of the Affordable 
Care Act (Pub. L. 111-148), section 15003 of the 21st Century Cures Act 
(Pub. L. 114-255) (Cures Act) enacted in 2016, and most recently, by 
section 128 of the Consolidated Appropriations Act of 2021 (Pub. L. 
116-260). In this final rule, we summarize the status of the 
demonstration program, and the current methodologies for implementation 
and calculating budget neutrality.
    We are also finalizing the amount to be applied to the national 
IPPS payment rates to account for the costs of the demonstration in FY 
2025, incorporating the reconciled amount of demonstration costs for FY 
2019 into the total offset the national IPPS payment rates for FY 2025.
2. Background
    Section 410A(a) of Public Law 108-173 required the Secretary to 
establish a demonstration program to test the feasibility and 
advisability of establishing rural community hospitals to furnish 
covered inpatient hospital services to Medicare beneficiaries. The 
demonstration pays rural community hospitals under a reasonable cost-
based methodology for Medicare payment purposes for covered inpatient 
hospital services furnished to Medicare beneficiaries. A rural 
community hospital, as defined in section 410A(f)(1) of Public Law 108-
173, is a hospital that--
     Is located in a rural area (as defined in section 
1886(d)(2)(D) of the Act) or is treated as being located in a rural 
area under section 1886(d)(8)(E) of the Act;
     Has fewer than 51 beds (excluding beds in a distinct part 
psychiatric or

[[Page 69412]]

rehabilitation unit) as reported in its most recent cost report;
     Provides 24-hour emergency care services; and
     Is not designated or eligible for designation as a CAH 
under section 1820 of the Act.
    Our policy for implementing the 5-year extension period authorized 
by Public Law 116-260 (the Consolidated Appropriations Act of 2021) 
follows upon the previous extensions under the ACA (Pub. L. 111-148) 
and the Cures Act (Pub. L.114-255). Section 410A of Public Law 108-173 
(MMA) initially required a 5-year period of performance. Subsequently, 
sections 3123 and 10313 of Public Law 111-148 required the Secretary to 
conduct the demonstration program for an additional 5-year period, to 
begin on the date immediately following the last day of the initial 5-
year period. In addition, Public Law 111-148 limited the number of 
hospitals participating to no more than 30. Section 15003 of the Cures 
Act required a 10-year extension period in place of the 5-year 
extension period under the ACA, thereby extending the demonstration for 
another 5 years. Section 128 of Public Law 116-260, in turn, revised 
the statute to indicate a 15-year extension period, instead of the 10-
year extension period mandated by the Public Law 114-159 (Cures Act). 
Please refer to the FY 2023 IPPS proposed and final rules (87 FR 28454 
through 28458 and 87 FR 49138 through 49142, respectively) for an 
account of hospitals entering and withdrawing from the demonstration 
with these re-authorizations. There are currently 22 hospitals 
participating in the demonstration.
2. Budget Neutrality
a. Statutory Budget Neutrality Requirement
    Section 410A(c)(2) of Public Law 108-173 requires that, in 
conducting the demonstration program under this section, the Secretary 
shall ensure that the aggregate payments made by the Secretary do not 
exceed the amount that the Secretary would have paid if the 
demonstration program under this section was not implemented. This 
requirement is commonly referred to as ``budget neutrality.'' 
Generally, when we implement a demonstration program on a budget 
neutral basis, the demonstration program is budget neutral on its own 
terms; in other words, the aggregate payments to the participating 
hospitals do not exceed the amount that would be paid to those same 
hospitals in the absence of the demonstration program. We note that the 
payment methodology for this demonstration, that is, cost-based 
payments to participating small rural hospitals, makes it unlikely that 
increased Medicare outlays will produce an offsetting reduction to 
Medicare expenditures elsewhere. Therefore, in the IPPS final rules 
spanning the period from FY 2005 through FY 2016, we adjusted the 
national inpatient PPS rates by an amount sufficient to account for the 
added costs of this demonstration program, thus applying budget 
neutrality across the payment system as a whole rather than merely 
across the participants in the demonstration program. (We applied a 
different methodology for FY 2017, with the demonstration expected to 
end prior to the Cures Act extension). As we discussed in the FYs 2005 
through 2017 IPPS/LTCH PPS final rules (69 FR 49183; 70 FR 47462; 71 FR 
48100; 72 FR 47392; 73 FR 48670; 74 FR 43922, 75 FR 50343, 76 FR 51698, 
77 FR 53449, 78 FR 50740, 77 FR 50145; 80 FR 49585; and 81 FR 57034, 
respectively), we believe that the statutory language of the budget 
neutrality requirements permits the agency to implement the budget 
neutrality provision in this manner.
    We resumed this methodology of offsetting demonstration costs 
against the national payment rates in the IPPS final rules from FY 2018 
through FY 2024. Please see the FY 2024 IPPS final rule for an account 
of how we applied the budget neutrality requirement for these fiscal 
years (88 FR 59114 through 59116).
b. General Budget Neutrality Methodology
    We have generally incorporated two components into the budget 
neutrality offset amounts identified in the final IPPS rules in 
previous years. First, we have estimated the costs of the demonstration 
for the upcoming fiscal year, generally determined from historical, 
``as submitted'' cost reports for the hospitals participating in that 
year. Update factors representing nationwide trends in cost and volume 
increases have been incorporated into these estimates, as specified in 
the methodology described in the final rule for each fiscal year. 
Second, as finalized cost reports became available, we determined the 
amount by which the actual costs of the demonstration for an earlier, 
given year differed from the estimated costs for the demonstration set 
forth in the final IPPS rule for the corresponding fiscal year, and 
incorporated that amount into the budget neutrality offset amount for 
the upcoming fiscal year. If the actual costs for the demonstration for 
the earlier fiscal year exceeded the estimated costs of the 
demonstration identified in the final rule for that year, this 
difference was added to the estimated costs of the demonstration for 
the upcoming fiscal year when determining the budget neutrality 
adjustment for the upcoming fiscal year. Conversely, if the estimated 
costs of the demonstration set forth in the final rule for a prior 
fiscal year exceeded the actual costs of the demonstration for that 
year, this difference was subtracted from the estimated cost of the 
demonstration for the upcoming fiscal year when determining the budget 
neutrality adjustment for the upcoming fiscal year.
    We note that we have calculated this difference for FYs 2005 
through 2018 between the actual costs of the demonstration as 
determined from finalized cost reports once available, and estimated 
costs of the demonstration as identified in the applicable IPPS final 
rules for these years.
c. Budget Neutrality Methodology for the Extension Period Authorized by 
Public Law 116-260
    For the most-recently enacted extension period, under the 
Consolidated Appropriations Act of 2021, we have continued upon the 
general budget neutrality methodology used in previous years, as 
described above in the citations to earlier IPPS final rules. Based on 
the methodology outlined in the FY 2025 proposed rule, we are 
finalizing the calculation of the offset amount to be applied to the 
national IPPS payment rates for FY 2025.
(1) Methodology for Estimating Demonstration Costs for FY 2025
    Consistent with the general methodology from previous years, we are 
estimating the costs of the demonstration for the upcoming fiscal year 
and incorporating this estimate into the budget neutrality offset 
amount to be applied to the national IPPS rates for the upcoming fiscal 
year, that is, FY 2025. We are conducting this estimate for FY 2025 
based on the 22 currently participating hospitals. The methodology for 
calculating this amount for FY 2025 proceeds according to the following 
steps:
    Step 1: For each of these 22 hospitals, we identify the reasonable 
cost amount calculated under the reasonable cost-based methodology for 
covered inpatient hospital services, including swing beds, as indicated 
on the ``as submitted'' cost report for the most recent cost reporting 
period available.

[[Page 69413]]

For each of these hospitals, the ``as submitted'' cost report is that 
with cost report period end date in CY 2022. We sum these hospital-
specific amounts to arrive at a total general amount representing the 
costs for covered inpatient hospital services, including swing beds, 
across the total 22 hospitals eligible to participate during FY 2025.
    Then, we multiply this amount by the FYs 2023, 2024, and 2025 IPPS 
market basket percentage increases, which are calculated by the CMS 
Office of the Actuary. (We are using the market basket percentage 
increase for FY 2025, which can be found at section II.B. of the 
preamble of this final rule). The result for the 22 hospitals is the 
general estimated reasonable cost amount for covered inpatient hospital 
services for FY 2025.
    Consistent with our methods in previous years for formulating this 
estimate, we are applying the IPPS market basket percentage increases 
for FYs 2023 through 2025 to the applicable estimated reasonable cost 
amount (previously described) in order to model the estimated FY 2025 
reasonable cost amount under the demonstration. We believe that the 
IPPS market basket percentage increases appropriately indicate the 
trend of increase in inpatient hospital operating costs under the 
reasonable cost methodology for the years involved.
    Step 2: For each of the participating hospitals, we identify the 
estimated amount that would otherwise be paid in FY 2025 under 
applicable Medicare payment methodologies for covered inpatient 
hospital services, including swing beds (as indicated on the same set 
of ``as submitted'' cost reports as in Step 1), if the demonstration 
were not implemented. We sum these hospital-specific amounts, and, in 
turn, multiply this sum by the FYs 2023, 2024, and 2025 IPPS applicable 
percentage increases. (For FY 2025, we are using the applicable 
percentage increase, per section V.B. of the preamble of this final 
rule). This methodology differs from Step 1, in which we apply the 
market basket percentage increases to the hospitals' applicable 
estimated reasonable cost amount for covered inpatient hospital 
services. We believe that the IPPS applicable percentage increases are 
appropriate factors to update the estimated amounts that generally 
would otherwise be paid without the demonstration. This is because IPPS 
payments constitute the largest part of the payments that would 
otherwise be made without the demonstration and the applicable 
percentage increase is the factor used under the IPPS to update the 
inpatient hospital payment rates.
    Step 3: We subtract the amount derived in Step 2 from the amount 
derived in Step 1. According to our methodology, the resulting amount 
indicates the total difference for the 22 hospitals (for covered 
inpatient hospital services, including swing beds), which will be the 
general estimated amount of the costs of the demonstration for FY 2025.
    For this final rule, the resulting amount is $49,914,526, to be 
incorporated into the budget neutrality offset adjustment for FY 2025. 
This estimated amount is based on the specific assumptions regarding 
the data sources used, that is, recently available ``as submitted'' 
cost reports and revised historical update factors for cost and payment 
for the FY 2025 IPPS final rule.
(2) Reconciling Actual and Estimated Costs of the Demonstration for 
Previous Years
    As described earlier, we have calculated the difference for FYs 
2005 through 2018 between the actual costs of the demonstration, as 
determined from finalized cost reports once available, and estimated 
costs of the demonstration as identified in the applicable IPPS final 
rules for these years.
    At this time, for the FY 2025 final rule, all of the finalized cost 
reports are available for the 27 hospitals that completed cost report 
periods beginning in FY 2019 under the demonstration payment 
methodology. We have determined the actual costs of the demonstration 
for FY 2019 based on these cost reports to be $40,429,606. (We note 
that the Medicare Administrative Contractors (MACs) have corrected the 
calculation of cost amounts under the demonstration for several of the 
participating hospitals, and that, although the MACs have not issued 
the final revised cost reports, we have included these revised cost 
amounts for these specific hospitals in our determination of the total 
cost amount for FY 2019).
    The estimated amount for the demonstration costs for FY 2019 that 
was incorporated into the finalized budget neutrality offset amount in 
the 2019 IPPS final rule was $70,929,313. (83 FR 41504). Therefore, the 
actual costs of the demonstration for FY 2019 as determined from 
finalized cost reports fell short of this estimated amount by 
$30,499,707. In keeping with previous policy, we are subtracting the 
amount of this difference for the prior year (that is, $30,499,707) for 
FY 2019) from the estimated amount of the costs of the demonstration 
for the upcoming fiscal year, (that is, $49,914,526 for FY 2025) in 
determining the total budget neutrality offset amount for FY 2025
(3) Total Budget Neutrality Offset Amount for FY 2025
    Therefore, for this FY 2025 IPPS/LTCH PPS final rule, the final 
budget neutrality offset amount for FY 2025 is the difference between: 
(1) $49,914,526, which is the amount determined under section II.A.4.h. 
of the Addendum of this final rule, representing the difference 
applicable to FY 2025 between the sum of the estimated reasonable cost 
amounts that would be paid under the demonstration for covered 
inpatient services to the 22 hospitals eligible to participate in the 
fiscal year and the sum of the estimated amounts that would generally 
be paid if the demonstration had not been implemented; and (2) 
$30,499,707, which is the difference between the estimated costs for 
the demonstration for FY 2019, which was incorporated into the 
finalized budget neutrality offset amount for 2019, and the actual 
costs of the demonstration for FY 2019, determined from finalized cost 
reports for the 27 hospitals that participated in FY 2019. This 
difference between (1) and (2) is $19,414,819, representing the budget 
neutrality offset amount to be applied to the national IPPS payment 
rates for FY 2025.
    Comment: The parent company for two of the participating hospitals 
expressed support for the continuation of the of the Rural Community 
Hospital Demonstration program, while noting that it does not offer 
long-term financial stability needed to maintain health care access in 
rural areas. The commenter requests that the demonstration be made a 
permanent program, and, in addition, that CMS institute an application 
process to ensure the demonstration meets program capacity. 
Furthermore, the commenter requests several technical adjustments to 
the administration of the demonstration that may enhance stability in 
the payment to the participating hospitals.
    Response: We appreciate the comments. We have conducted the 
demonstration program in accordance with Congressional mandates. Title 
XVIII does not extend authority to make the demonstration a permanent 
program. With regard to any further actions, we intend to work with the 
commenter and other rural stakeholders to examine the issues involved.

[[Page 69414]]

VI. Changes to the IPPS for Capital-Related Costs

A. Overview

    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient acute hospital services in 
accordance with a prospective payment system established by the 
Secretary. Under the statute, the Secretary has broad authority in 
establishing and implementing the IPPS for acute care hospital 
inpatient capital-related costs. We initially implemented the IPPS for 
capital-related costs in the FY 1992 IPPS final rule (56 FR 43358). In 
that final rule, we established a 10-year transition period to change 
the payment methodology for Medicare hospital inpatient capital-related 
costs from a reasonable cost-based payment methodology to a prospective 
payment methodology (based fully on the Federal rate).
    FY 2001 was the last year of the 10-year transition period that was 
established to phase in the IPPS for hospital inpatient capital-related 
costs. For cost reporting periods beginning in FY 2002, capital IPPS 
payments are based solely on the Federal rate for almost all acute care 
hospitals (other than hospitals receiving certain exception payments 
and certain new hospitals). (We refer readers to the FY 2002 IPPS final 
rule (66 FR 39910 through 39914) for additional information on the 
methodology used to determine capital IPPS payments to hospitals both 
during and after the transition period.)
    The basic methodology for determining capital prospective payments 
using the Federal rate is set forth in the regulations at 42 CFR 
412.312. For the purpose of calculating capital payments for each 
discharge, the standard Federal rate is adjusted as follows:
    (Standard Federal Rate) x (DRG Weight) x (Geographic Adjustment 
Factor (GAF) x (COLA for hospitals located in Alaska and Hawaii) x (1 + 
Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if 
applicable).
    In addition, under Sec.  412.312(c), hospitals also may receive 
outlier payments under the capital IPPS for extraordinarily high-cost 
cases that qualify under the thresholds established for each fiscal 
year.

B. Additional Provisions

1. Exception Payments
    The regulations at 42 CFR 412.348 provide for certain exception 
payments under the capital IPPS. The regular exception payments 
provided under Sec.  412.348(b) through (e) were available only during 
the 10-year transition period. For a certain period after the 
transition period, eligible hospitals may have received additional 
payments under the special exceptions provisions at Sec.  412.348(g). 
However, FY 2012 was the final year hospitals could receive special 
exceptions payments. For additional details regarding these exceptions 
policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51725).
    Under Sec.  412.348(f), a hospital may request an additional 
payment if the hospital incurs unanticipated capital expenditures in 
excess of $5 million due to extraordinary circumstances beyond the 
hospital's control. Additional information on the exception payment for 
extraordinary circumstances in Sec.  412.348(f) can be found in the FY 
2005 IPPS final rule (69 FR 49185 and 49186).
2. New Hospitals
    Under the capital IPPS, the regulations at 42 CFR 412.300(b) define 
a new hospital as a hospital that has operated (under previous or 
current ownership) for less than 2 years and lists examples of 
hospitals that are not considered new hospitals. In accordance with 
Sec.  412.304(c)(2), under the capital IPPS, a new hospital is paid 85 
percent of its allowable Medicare inpatient hospital capital related 
costs through its first 2 years of operation, unless the new hospital 
elects to receive full prospective payment based on 100 percent of the 
Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule 
(76 FR 51725) for additional information on payments to new hospitals 
under the capital IPPS.
3. Payments for Hospitals Located in Puerto Rico
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57061), we revised 
the regulations at 42 CFR 412.374 relating to the calculation of 
capital IPPS payments to hospitals located in Puerto Rico beginning in 
FY 2017 to parallel the change in the statutory calculation of 
operating IPPS payments to hospitals located in Puerto Rico, for 
discharges occurring on or after January 1, 2016, made by section 601 
of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113). Section 
601 of Public Law 114-113 increased the applicable Federal percentage 
of the operating IPPS payment for hospitals located in Puerto Rico from 
75 percent to 100 percent and decreased the applicable Puerto Rico 
percentage of the operating IPPS payments for hospitals located in 
Puerto Rico from 25 percent to zero percent, applicable to discharges 
occurring on or after January 1, 2016. As such, under revised Sec.  
412.374, for discharges occurring on or after October 1, 2016, capital 
IPPS payments to hospitals located in Puerto Rico are based on 100 
percent of the capital Federal rate.

C. Annual Update for FY 2025

    The annual update to the national capital Federal rate, as provided 
for in 42 CFR 412.308(c), for FY 2025 is discussed in section III. of 
the Addendum to this FY 2025 IPPS/LTCH PPS final rule.
    Comment: A commenter encouraged CMS to expand capital DSH 
eligibility to geographically rural hospitals. The commenter believes 
this would bolster the rural health care safety net. The commenter 
cited negative capital margins at geographically rural hospitals, low 
occupancy rates in geographically rural hospitals, as well as recent 
closure of geographically rural hospitals as reasons why expanding 
capital DSH eligibility to geographically rural hospitals would be 
justified.
    Response: We believe this comment is out of scope of this 
rulemaking. We thank the commenter for this suggestion and may consider 
it in future rulemaking. We note that the capital DSH payment 
adjustments were finalized in the FY 1992 IPPS final rule (56 FR 43377 
through 43379) based on a cost regression analysis.
    Comment: A commenter stated that the cost of capital improvements 
required to reduce the spread of airborne infections should be included 
under the capital IPPS.
    Response: We appreciate the commenter's interest in capital project 
investments related to airborne infections. The regulations on capital-
related costs can be found in subpart G of part 413 of Title 42 of the 
CFR. In general, we believe these regulations do not preclude such 
costs as being considered allowable capital-related costs. As described 
previously, the statute requires capital-related costs of inpatient 
acute hospital services be paid under a prospective payment system 
established by the Secretary. The basic methodology for determining 
prospective payments under the capital IPPS is set forth in the 
regulations at 42 CFR 412.312.

VII. Changes for Hospitals Excluded From the IPPS

A. Rate-of-Increase in Payments to Excluded Hospitals for FY 2025

    Certain hospitals excluded from a prospective payment system, 
including children's hospitals, 11 cancer

[[Page 69415]]

hospitals, and hospitals located outside the 50 States, the District of 
Columbia, and Puerto Rico (that is, hospitals located in the U.S. 
Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa) 
receive payment for inpatient hospital services they furnish on the 
basis of reasonable costs, subject to a rate-of-increase ceiling. A per 
discharge limit (the target amount, as defined in Sec.  413.40(a) of 
the regulations) is set for each hospital based on the hospital's own 
cost experience in its base year, and updated annually by a rate-of-
increase percentage. For each cost reporting period, the updated target 
amount is multiplied by total Medicare discharges during that period 
and applied as an aggregate upper limit (the ceiling as defined in 
Sec.  413.40(a)) of Medicare reimbursement for total inpatient 
operating costs for a hospital's cost reporting period. In accordance 
with Sec.  403.752(a) of the regulations, religious nonmedical health 
care institutions (RNHCIs) also are subject to the rate-of-increase 
limits established under Sec.  413.40 of the regulations discussed 
previously. Furthermore, in accordance with Sec.  412.526(c)(3) of the 
regulations, extended neoplastic disease care hospitals also are 
subject to the rate-of-increase limits established under Sec.  413.40 
of the regulations discussed previously.
    As explained in the FY 2006 IPPS final rule (70 FR 47396 through 
47398), beginning with FY 2006, we have used the percentage increase in 
the IPPS operating market basket to update the target amounts for 
children's hospitals, the 11 cancer hospitals, and RNHCIs.
    Consistent with the regulations at Sec. Sec.  412.23(g) and 
413.40(a)(2)(ii)(A) and (c)(3)(viii), we also have used the percentage 
increase in the IPPS operating market basket to update target amounts 
for short-term acute care hospitals located in the U.S. Virgin Islands, 
Guam, the Northern Mariana Islands, and American Samoa. In the FY 2018 
IPPS/LTCH PPS final rule, we rebased and revised the IPPS operating 
market basket to a 2014 base year, effective for FY 2018 and subsequent 
fiscal years (82 FR 38158 through 38175), and finalized the use of the 
percentage increase in the 2014-based IPPS operating market basket to 
update the target amounts for children's hospitals, the 11 cancer 
hospitals, RNHCIs, and short-term acute care hospitals located in the 
U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa for FY 2018 and subsequent fiscal years. As discussed in section 
IV. of the preamble of the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45194 through 45207), we rebased and revised the IPPS operating market 
basket to a 2018 base year. Therefore, we used the percentage increase 
in the 2018-based IPPS operating market basket to update the target 
amounts for children's hospitals, the 11 cancer hospitals, RNHCIs, and 
short-term acute care hospitals located in the U.S. Virgin Islands, 
Guam, the Northern Mariana Islands, and American Samoa for FY 2022 and 
subsequent fiscal years.
    For the FY 2025 IPPS/LTCH PPS proposed rule, based on IGI's 2023 
fourth quarter forecast, we estimated that the 2018-based IPPS 
operating market basket percentage increase for FY 2025 would be 3.0 
percent (that is, the estimate of the market basket rate-of-increase). 
Based on this estimate, the FY 2025 rate-of-increase percentage that we 
proposed to apply to the FY 2024 target amounts in order to calculate 
the FY 2025 target amounts for children's hospitals, the 11 cancer 
hospitals, RNCHIs, and short-term acute care hospitals located in the 
U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa was 3.0 percent, in accordance with the applicable regulations at 
42 CFR 413.40. However, we proposed that if more recent data became 
available for the FY 2025 IPPS/LTCH PPS final rule, we would use such 
data, if appropriate, to calculate the final IPPS operating market 
basket update for FY 2025. Based on more recent data available (IGI's 
second quarter 2024 forecast), we estimate that the 2018-based IPPS 
operating market basket percentage increase for FY 2025 is 3.4 percent 
(that is, the estimate of the market basket rate-of-increase). Based on 
this estimate, the FY 2025 rate-of-increase percentage that we will 
apply to the FY 2024 target amounts in order to calculate the FY 2025 
target amounts for children's hospitals, the 11 cancer hospitals, 
RNCHIs, and short-term acute care hospitals located in the U.S. Virgin 
Islands, Guam, the Northern Mariana Islands, and American Samoa is 3.4 
percent, in accordance with the applicable regulations at 42 CFR 
413.40.
    In addition, payment for inpatient operating costs for hospitals 
classified under section 1886(d)(1)(B)(vi) of the Act (which we refer 
to as ``extended neoplastic disease care hospitals'') for cost 
reporting periods beginning on or after January 1, 2015, is to be made 
as described in 42 CFR 412.526(c)(3), and payment for capital costs for 
these hospitals is to be made as described in 42 CFR 412.526(c)(4). 
(For additional information on these payment regulations, we refer 
readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38321 through 
38322).) Section 412.526(c)(3) provides that the hospital's Medicare 
allowable net inpatient operating costs for that period are paid on a 
reasonable cost basis, subject to that hospital's ceiling, as 
determined under Sec.  412.526(c)(1), for that period. Under Sec.  
412.526(c)(1), for each cost reporting period, the ceiling was 
determined by multiplying the updated target amount, as defined in 
Sec.  412.526(c)(2), for that period by the number of Medicare 
discharges paid during that period. Section 412.526(c)(2)(i) describes 
the method for determining the target amount for cost reporting periods 
beginning during FY 2015. Section 412.526(c)(2)(ii) specifies that, for 
cost reporting periods beginning during fiscal years after FY 2015, the 
target amount will equal the hospital's target amount for the previous 
cost reporting period updated by the applicable annual rate-of-increase 
percentage specified in Sec.  413.40(c)(3) for the subject cost 
reporting period (79 FR 50197).
    For FY 2025, in accordance with Sec. Sec.  412.22(i) and 
412.526(c)(2)(ii) of the regulations, for cost reporting periods 
beginning during FY 2025, the proposed update to the target amount for 
extended neoplastic disease care hospitals (that is, hospitals 
described under Sec.  412.22(i)) is the applicable annual rate-of-
increase percentage specified in Sec.  413.40(c)(3), which was 
estimated to be the percentage increase in the 2018-based IPPS 
operating market basket (that is, the estimate of the market basket 
rate-of-increase). Accordingly, the proposed update to an extended 
neoplastic disease care hospital's target amount for FY 2025 was 3.0 
percent, which was based on IGI's fourth quarter 2023 forecast. 
Furthermore, we proposed that if more recent data became available for 
the FY 2025 IPPS/LTCH PPS final rule, we would use such data, if 
appropriate, to calculate the IPPS operating market basket rate of 
increase for FY 2025. Based on more recent data available (IGI's second 
quarter 2024 forecast), we estimate that the 2018-based IPPS operating 
market basket percentage increase for FY 2025 is 3.4 percent (that is, 
the estimate of the market basket rate-of-increase). Accordingly, the 
FY 2025 rate-of-increase percentage that we will apply to the FY 2024 
target amounts in order to calculate the FY 2025 target amounts to an 
extended neoplastic disease care hospital is 3.4 percent, which is 
based on IGI's second quarter 2024 forecast.
    We received no comments on this proposal and therefore are 
finalizing

[[Page 69416]]

this provision without modification. Incorporating more recent data 
available for this final rule, as we proposed, we are adopting a 3.4 
percent update for FY 2025.

B. Report on Adjustment (Exception) Payments

    Section 4419(b) of Public Law 105-33 requires the Secretary to 
publish annually in the Federal Register a report describing the total 
amount of adjustment payments made to excluded hospitals and hospital 
units by reason of section 1886(b)(4) of the Act during the previous 
fiscal year.
    The process of requesting, reviewing, and awarding an adjustment 
payment is likely to occur over a 2-year period or longer. First, 
generally, an excluded hospital must file its cost report for the 
fiscal year in accordance with Sec.  413.24(f)(2) of the regulations. 
The MAC reviews the cost report and issues a notice of provider 
reimbursement (NPR). Once the hospital receives the NPR, if its 
operating costs are in excess of the ceiling, the hospital may file a 
request for an adjustment payment. After the MAC receives the 
hospital's request in accordance with applicable regulations, the MAC 
or CMS, depending on the type of adjustment requested, reviews the 
request and determines if an adjustment payment is warranted. This 
determination is sometimes not made until more than 180 days after the 
date the request is filed because there are times when the request 
applications are incomplete and additional information must be 
requested in order to have a completed request application. However, in 
an attempt to provide interested parties with data on the most recent 
adjustment payments for which we have data, we are publishing data on 
adjustment payments that were processed by the MAC or CMS during FY 
2023.
    The table that follows includes the most recent data available from 
the MACs and CMS on adjustment payments that were adjudicated during FY 
2023. As indicated previously, the adjustments made during FY 2023 only 
pertain to cost reporting periods ending in years prior to FY 2023. 
Total adjustment payments made to IPPS-excluded hospitals during FY 
2023 are $98,720,259.00. The table depicts for each class of hospitals, 
in the aggregate, the number of adjustment requests adjudicated, the 
excess operating costs over the ceiling, and the amount of the 
adjustment payments.
[GRAPHIC] [TIFF OMITTED] TR28AU24.205

B. Critical Access Hospitals (CAHs)

1. Background
    Section 1820 of the Act provides for the establishment of Medicare 
Rural Hospital Flexibility Programs (MRHFPs), under which individual 
States may designate certain facilities as critical access hospitals 
(CAHs). Facilities that are so designated and meet the CAH conditions 
of participation under 42 CFR part 485, subpart F, will be certified as 
CAHs by CMS. Regulations governing payments to CAHs for services to 
Medicare beneficiaries are located in 42 CFR part 413.
2. Frontier Community Health Integration Project Demonstration
a. Introduction
    The Frontier Community Health Integration Project Demonstration was 
originally authorized by section 123 of the Medicare Improvements for 
Patients and Providers Act of 2008 (Pub. L. 110-275). The demonstration 
has been extended by section 129 of the Consolidated Appropriations 
Act, 2021 (Pub. L. 116-260) for an additional 5 years. In this final 
rule, we are summarizing the status of the demonstration program, and 
the ongoing methodologies for implementation and budget neutrality for 
the demonstration extension period.
b. Background and Overview
    As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59119 
through 59122), section 123 of the Medicare Improvements for Patients 
and Providers Act of 2008, as amended by section 3126 of the Affordable 
Care Act, authorized a demonstration project to allow eligible entities 
to develop and test new models for the delivery of health care services 
in eligible counties to improve access to and better integrate the 
delivery of acute care, extended care and other health care services to 
Medicare beneficiaries. The demonstration was titled ``Demonstration 
Project on Community Health Integration Models in Certain Rural 
Counties,'' and commonly known as the Frontier Community Health 
Integration Project (FCHIP) Demonstration.
    The authorizing statute stated the eligibility criteria for 
entities to be able to participate in the demonstration. An eligible 
entity, as defined in section 123(d)(1)(B) of Public Law 110-275, as 
amended, is a Medicare Rural Hospital Flexibility Program (MRHFP) 
grantee under section 1820(g) of the Act (that is, a CAH); and is 
located in a state in which at least 65 percent of the counties in the 
state are counties that have 6 or less residents per square mile.
    The authorizing statute stipulated several other requirements for 
the demonstration. In addition, section 123(g)(1)(B) of Public Law 110-
275 required that the demonstration be budget neutral. Specifically, 
this provision stated that, in conducting the demonstration project, 
the Secretary shall ensure that the aggregate payments made by the 
Secretary do not exceed the amount which the Secretary estimates would 
have been paid if the demonstration project under the section were not 
implemented. Furthermore, section 123(i) of Public Law 110-275 stated 
that the Secretary may waive such requirements of titles XVIII and XIX 
of the Act as may be necessary and appropriate for the purpose of 
carrying out the demonstration project, thus allowing the waiver of 
Medicare payment rules encompassed in the demonstration. CMS selected 
CAHs to participate in four interventions, under which specific waivers 
of Medicare payment rules would allow for enhanced payment for 
telehealth, skilled nursing facility/nursing facility beds, ambulance 
services, and home health services. These waivers were formulated with 
the goal of increasing access to care with no net increase in costs.

[[Page 69417]]

    Section 123 of Public Law 110-275 initially required a 3-year 
period of performance. The FCHIP Demonstration began on August 1, 2016, 
and concluded on July 31, 2019 (referred to in this section of the 
final rule as the ``initial period''). Subsequently, section 129 of the 
Consolidated Appropriations Act, 2021 (Pub. L. 116-260) extended the 
demonstration by 5 years (referred to in this section of the final rule 
as the ``extension period''). The Secretary is required to conduct the 
demonstration for an additional 5-year period. CAHs participating in 
the demonstration project during the extension period began such 
participation in their cost reporting year that began on or after 
January 1, 2022.
    As described in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59119 
through 59122), 10 CAHs were selected for participation in the 
demonstration initial period. The selected CAHs were located in three 
states--Montana, Nevada, and North Dakota--and participated in three of 
the four interventions identified in the FY 2024 IPPS/LTCH PPS final 
rule. Each CAH was allowed to participate in more than one of the 
interventions. None of the selected CAHs were participants in the home 
health intervention, which was the fourth intervention.
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 
45328), CMS concluded that the initial period of the FCHIP 
Demonstration (covering the performance period of August 1, 2016, to 
July 31, 2019) had satisfied the budget neutrality requirement 
described in section 123(g)(1)(B) of Pub L. 110-275. Therefore, CMS did 
not apply a budget neutrality payment offset policy for the initial 
period of the demonstration.
    Section 129 of Public Law 116-260, stipulates that only the 10 CAHs 
that participated in the initial period of the FCHIP Demonstration are 
eligible to participate during the extension period. Among the eligible 
CAHs, five have elected to participate in the extension period. The 
selected CAHs are located in two states--Montana and North Dakota--and 
are implementing three of the four interventions. The eligible CAH 
participants elected to change the number of interventions and payment 
waivers they would participate in during the extension period. CMS 
accepted and approved the CAHs intervention and payment waiver updates. 
For the extension period, five CAHs are participants in the telehealth 
intervention, three CAHs are participants in the skilled nursing 
facility/nursing facility bed intervention, and three CAHs are 
participants in the ambulance services intervention. As with the 
initial period, each CAH was allowed to participate in more than one of 
the interventions during the extension period. None of the selected 
CAHs are participants in the home health intervention, which was the 
fourth intervention.
c. Intervention Payment and Payment Waivers
    As described in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59119 
through 59122), CMS waived certain Medicare rules for CAHs 
participating in the demonstration initial period to allow for 
alternative reasonable cost-based payment methods in the three distinct 
intervention service areas: telehealth services, ambulance services, 
and skilled nursing facility/nursing facility (SNF/NF) beds expansion. 
The payments and payment waiver provisions only apply if the CAH is a 
participant in the associated intervention. CMS Intervention Payment 
and Payment Waivers for the demonstration extension period consist of 
the following:
(1) Telehealth Services Intervention Payments
    CMS waives section 1834(m)(2)(B) of the Act, which specifies the 
facility fee to the originating site for Medicare telehealth services. 
CMS modifies the facility fee payment specified under section 
1834(m)(2)(B) of the Act to make reasonable cost-based reimbursement to 
the participating CAH where the participating CAH serves as the 
originating site for a telehealth service furnished to an eligible 
telehealth individual, as defined in section 1834(m)(4)(B) of the Act. 
CMS reimburses the participating CAH serving as the originating site at 
101 percent of its reasonable costs for overhead, salaries and fringe 
benefits associated with telehealth services at the participating CAH. 
CMS does not fund or provide reimbursement to the participating CAH for 
the purchase of new telehealth equipment.
    CMS waives section 1834(m)(2)(A) of the Act, which specifies that 
the payment for a telehealth service furnished by a distant site 
practitioner is the same as it would be if the service had been 
furnished in-person. CMS modifies the payment amount specified for 
telehealth services under section 1834(m)(2)(A) of the Act to make 
reasonable cost-based reimbursement to the participating CAH for 
telehealth services furnished by a physician or practitioner located at 
distant site that is a participating CAH that is billing for the 
physician or practitioner professional services. Whether the 
participating CAH has or has not elected Optional Payment Method II for 
outpatient services, CMS would pay the participating CAH 101 percent of 
reasonable costs for telehealth services when a physician or 
practitioner has reassigned their billing rights to the participating 
CAH and furnishes telehealth services from the participating CAH as a 
distant site practitioner. This means that participating CAHs that are 
billing under the Standard Method on behalf of employees who are 
physicians or practitioners (as defined in section 1834(m)(4)(D) and 
(E) of the Act, respectively) would be eligible to bill for distant 
site telehealth services furnished by these physicians and 
practitioners. Additionally, CAHs billing under the Optional Method 
would be reimbursed based on 101 percent of reasonable costs, rather 
than paid based on the Medicare physician fee schedule, for the distant 
site telehealth services furnished by physicians and practitioners who 
have reassigned their billing rights to the CAH. For distant site 
telehealth services furnished by physicians or practitioners who have 
not reassigned billing rights to a participating CAH, payment to the 
distant site physician or practitioner would continue to be made as 
usual under the Medicare physician fee schedule. Except as described 
herein, CMS does not waive any other provisions of section 1834(m) of 
the Act for purposes of the telehealth services intervention payments, 
including the scope of Medicare telehealth services as established 
under section 1834(m)(4)(F) of the Act.
(2) Ambulance Services Intervention Payments
    CMS waives 42 CFR 413.70(b)(5)(i)(D) and section 1834(l)(8) of the 
Act, which provides that payment for ambulance services furnished by a 
CAH, or an entity owned and operated by a CAH, is 101 percent of the 
reasonable costs of the CAH or the entity in furnishing the ambulance 
services, but only if the CAH or the entity is the only provider or 
supplier of ambulance services located within a 35-mile drive of the 
CAH, excluding ambulance providers or suppliers that are not legally 
authorized to furnish ambulance services to transport individuals to or 
from the CAH. The participating CAH would be paid 101 percent of 
reasonable costs for its ambulance services regardless of whether there 
is any provider or supplier of ambulance services located within a 35-
mile drive of the participating CAH or participating CAH-owned and 
operated entity. CMS would

[[Page 69418]]

not make cost-based payment to the participating CAH for any new 
capital (for example, vehicles) associated with ambulance services. 
This waiver does not modify any other Medicare rules regarding or 
affecting the provision of ambulance services.
(3) SNF/NF Beds Expansion Intervention Payments
    CMS waives 42 CFR 485.620(a), 42 CFR 485.645(a)(2), and section 
1820(c)(2)(B)(iii) of the Act which limit CAHs to maintaining no more 
than 25 inpatient beds, including beds available for acute inpatient or 
swing bed services. CMS waives 1820(f) of the Act permitting 
designating or certifying a facility as a critical access hospital for 
which the facility at any time is furnishing inpatient beds which 
exceed more than 25 beds. Under this waiver, if the participating CAH 
has received swing bed approval from CMS, the participating CAH may 
maintain up to ten additional beds (for a total of 35 beds) available 
for acute inpatient or swing bed services; however, the participating 
CAH may only use these 10 additional beds for nursing facility or 
skilled nursing facility level of care. CMS would pay the participating 
CAH 101 percent of reasonable costs for its SNF/NF services furnished 
in the 10 additional beds.
d. Budget Neutrality
(1) Budget Neutrality Requirement
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 
45328), we finalized a policy to address the budget neutrality 
requirement for the demonstration initial period. As explained in the 
FY 2022 IPPS/LTCH PPS final rule, we based our selection of CAHs for 
participation in the demonstration with the goal of maintaining the 
budget neutrality of the demonstration on its own terms meaning that 
the demonstration would produce savings from reduced transfers and 
admissions to other health care providers, offsetting any increase in 
Medicare payments as a result of the demonstration. However, because of 
the small size of the demonstration and uncertainty associated with the 
projected Medicare utilization and costs, the policy we finalized for 
the demonstration initial period of performance in the FY 2022 IPPS/
LTCH PPS final rule provides a contingency plan to ensure that the 
budget neutrality requirement in section 123 of Public Law 110-275 is 
met.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 through 
49147), we adopted the same budget neutrality policy contingency plan 
used during the demonstration initial period to ensure that the budget 
neutrality requirement in section 123 of Public Law 110-275 is met 
during the demonstration extension period. If analysis of claims data 
for Medicare beneficiaries receiving services at each of the 
participating CAHs, as well as from other data sources, including cost 
reports for the participating CAHs, shows that increases in Medicare 
payments under the demonstration during the 5-year extension period are 
not sufficiently offset by reductions elsewhere, we would recoup the 
additional expenditures attributable to the demonstration through a 
reduction in payments to all CAHs nationwide.
    As explained in the FY 2023 IPPS/LTCH PPS final rule, because of 
the small scale of the demonstration, we indicated that we did not 
believe it would be feasible to implement budget neutrality for the 
demonstration extension period by reducing payments to only the 
participating CAHs. Therefore, in the event that this demonstration 
extension period is found to result in aggregate payments in excess of 
the amount that would have been paid if this demonstration extension 
period were not implemented, CMS policy is to comply with the budget 
neutrality requirement finalized in the FY 2023 IPPS/LTCH PPS final 
rule, by reducing payments to all CAHs, not just those participating in 
the demonstration extension period.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 through 
49147), we stated that we believe it is appropriate to make any payment 
reductions across all CAHs because the FCHIP Demonstration was 
specifically designed to test innovations that affect delivery of 
services by the CAH provider category. We explained our belief that the 
language of the statutory budget neutrality requirement at section 
123(g)(1)(B) of Public Law 110-275 permits the agency to implement the 
budget neutrality provision in this manner. The statutory language 
merely refers to ensuring that aggregate payments made by the Secretary 
do not exceed the amount which the Secretary estimates would have been 
paid if the demonstration project was not implemented and does not 
identify the range across which aggregate payments must be held equal.
    In the FY 2023 IPPS/LTCH PPS final rule, we finalized a policy that 
in the event the demonstration extension period is found not to have 
been budget neutral, any excess costs would be recouped within one 
fiscal year. We explained our belief that this policy is a more 
efficient timeframe for the government to conclude the demonstration 
operational requirements (such as analyzing claims data, cost report 
data or other data sources) to adjudicate the budget neutrality payment 
recoupment process due to any excess cost that occurred as result of 
the demonstration extension period.
(2) FCHIP Budget Neutrality Methodology and Analytical Approach
    As explained in the FY 2022 IPPS/LTCH PPS final rule, we finalized 
a policy to address the demonstration budget neutrality methodology and 
analytical approach for the initial period of the demonstration. In the 
FY 2023 IPPS/LTCH PPS final rule, we finalized a policy to adopt the 
budget neutrality methodology and analytical approach used during the 
demonstration initial period to ensure budget neutrality for the 
extension period. The analysis of budget neutrality during the initial 
period of the demonstration identified both the costs related to 
providing the intervention services under the FCHIP Demonstration and 
any potential downstream effects of the intervention-related services, 
including any savings that may have accrued.
    The budget neutrality analytical approach for the demonstration 
initial period incorporated two major data components: (1) Medicare 
cost reports; and (2) Medicare administrative claims. As described in 
the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 45328), CMS 
computed the cost of the demonstration for each fiscal year of the 
demonstration initial period using Medicare cost reports for the 
participating CAHs, and Medicare administrative claims and enrollment 
data for beneficiaries who received demonstration intervention 
services.
    In addition, to capture the full impact of the interventions, CMS 
developed a statistical modeling, Difference-in-Difference (DiD) 
regression analysis to estimate demonstration expenditures and compute 
the impact of expenditures on the intervention services by comparing 
cost data for the demonstration and non-demonstration groups using 
Medicare administrative claims across the demonstration period of 
performance under the initial period of the demonstration. The DiD 
regression analysis would compare the direct cost and potential 
downstream effects of intervention services, including any savings that 
may have accrued, during the baseline and performance period for both 
the demonstration and comparison groups.
    Second, the Medicare administrative claims analysis would be 
reconciled

[[Page 69419]]

using data obtained from auditing the participating CAHs' Medicare cost 
reports. We would estimate the costs of the demonstration using ``as 
submitted'' cost reports for each hospital's financial fiscal year 
participation within each of the demonstration extension period 
performance years. Each CAH has its own Medicare cost report end date 
applicable to the 5-year period of performance for the demonstration 
extension period. The cost report is structured to gather costs, 
revenues and statistical data on the provider's financial fiscal 
period. As a result, we finalized a policy in the FY 2023 IPPS/LTCH PPS 
final rule that we would determine the final budget neutrality results 
for the demonstration extension once complete data is available for 
each CAH for the demonstration extension period.
e. Policies for Implementing the 5-year Extension and Provisions 
Authorized by Section 129 of the Consolidated Appropriations Act, 2021 
(Pub. L. 116-260)
    As stated in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59119 
through 59122), our policy for implementing the 5-year extension period 
for section 129 of Public Law 116-260 follows same budget neutrality 
methodology and analytical approach as the demonstration initial period 
methodology. While we expect to use the same methodology that was used 
to assess the budget neutrality of the FCHIP Demonstration during 
initial period of the demonstration to assess the financial impact of 
the demonstration during this extension period, upon receiving data for 
the extension period, we may update and/or modify the FCHIP budget 
neutrality methodology and analytical approach to ensure that the full 
impact of the demonstration is appropriately captured.
f. Total Budget Neutrality Offset Amount for FY 2025
    At this time, for the FY 2025 IPPS/LTCH PPS final rule, while this 
discussion represents our anticipated approach to assessing the 
financial impact of the demonstration extension period based on upon 
receiving data for the full demonstration extension period, we may 
update and/or modify the FCHIP Demonstration budget neutrality 
methodology and analytical approach to ensure that the full impact of 
the demonstration is appropriately captured.
    Therefore, we did not propose to apply a budget neutrality payment 
offset to payments to CAHs in FY 2025. This policy would have no impact 
for any national payment system for FY 2025. We received no comments on 
this provision and therefore are finalizing this provision without 
modification.

VIII. Changes to the Long-Term Care Hospital Prospective Payment System 
(LTCH PPS) for FY 2025

A. Background of the LTCH PPS

1. Legislative and Regulatory Authority
    Section 123 of the Medicare, Medicaid, and SCHIP (State Children's 
Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113), as amended by section 307(b) of the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA) (Pub. L. 106-554), provides for payment for both the operating 
and capital- related costs of hospital inpatient stays in long-term 
care hospitals (LTCHs) under Medicare Part A based on prospectively set 
rates. The Medicare prospective payment system (PPS) for LTCHs applies 
to hospitals that are described in section 1886(d)(1)(B)(iv) of the 
Act, effective for cost reporting periods beginning on or after October 
1, 2002.
    Section 1886(d)(1)(B)(iv)(I) of the Act originally defined an LTCH 
as a hospital that has an average inpatient length of stay (as 
determined by the Secretary) of greater than 25 days.
    Section 1886(d)(1)(B)(iv)(II) of the Act also provided an 
alternative definition of LTCHs (``subclause II'' LTCHs). However, 
section 15008 of the 21st Century Cures Act (Pub. L. 114-255) amended 
section 1886 of the Act to exclude former ``subclause II'' LTCHs from 
being paid under the LTCH PPS and created a new category of IPPS-
excluded hospitals, which we refer to as ``extended neoplastic disease 
care hospitals,'' to be paid as hospitals that were formally classified 
as ``subclause (II)'' LTCHs (82 FR 38298).
    Section 123 of the BBRA requires the PPS for LTCHs to be a ``per 
discharge'' system with a diagnosis-related group (DRG) based patient 
classification system that reflects the differences in patient resource 
use and costs in LTCHs.
    Section 307(b)(1) of the BIPA, among other things, mandates that 
the Secretary shall examine, and may provide for, adjustments to 
payments under the LTCH PPS, including adjustments to DRG weights, area 
wage adjustments, geographic reclassification, outliers, updates, and a 
disproportionate share adjustment.
    In the August 30, 2002, Federal Register (67 FR 55954), we issued a 
final rule that implemented the LTCH PPS authorized under the BBRA and 
BIPA. For the initial implementation of the LTCH PPS (FYs 2003 through 
2007), the system used information from LTCH patient records to 
classify patients into distinct long-term care-diagnosis-related groups 
(LTCDRGs) based on clinical characteristics and expected resource 
needs. Beginning in FY 2008, we adopted the Medicare severity-long-term 
care-diagnosis related groups (MS-LTC-DRGs) as the patient 
classification system used under the LTCH PPS. Payments are calculated 
for each MS-LTC-DRG and provisions are made for appropriate payment 
adjustments. Payment rates under the LTCH PPS are updated annually and 
published in the Federal Register.
    The LTCH PPS replaced the reasonable cost-based payment system 
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) 
(Pub. L. 97248) for payments for inpatient services provided by an LTCH 
with a cost reporting period beginning on or after October 1, 2002. 
(The regulations implementing the TEFRA reasonable-cost-based payment 
provisions are located at 42 CFR part 413.) With the implementation of 
the PPS for acute care hospitals authorized by the Social Security 
Amendments of 1983 (Pub. L. 98-21), which added section 1886(d) to the 
Act, certain hospitals, including LTCHs, were excluded from the PPS for 
acute care hospitals and paid their reasonable costs for inpatient 
services subject to a per discharge limitation or target amount under 
the TEFRA system. For each cost reporting period, a hospital specific 
ceiling on payments was determined by multiplying the hospital's 
updated target amount by the number of total current year Medicare 
discharges. (Generally, in this section of the preamble of this final 
rule, when we refer to discharges, we describe Medicare discharges.) 
The August 30, 2002, final rule further details the payment policy 
under the TEFRA system (67 FR 55954).
    In the August 30, 2002, final rule, we provided for a 5-year 
transition period from payments under the TEFRA system to payments 
under the LTCH PPS. During this 5-year transition period, an LTCH's 
total payment under the PPS was based on an increasing percentage of 
the Federal rate with a corresponding decrease in the percentage of the 
LTCH PPS payment that is based on reasonable cost concepts, unless an 
LTCH made a one-time election to be paid based on 100 percent of the 
Federal rate. Beginning with LTCHs' cost reporting periods beginning on 
or after

[[Page 69420]]

October 1, 2006, total LTCH PPS payments are based on 100 percent of 
the Federal rate.
    In addition, in the August 30, 2002, final rule, we presented an 
in-depth discussion of the LTCH PPS, including the patient 
classification system, relative weights, payment rates, additional 
payments, and the budget neutrality requirements mandated by section 
123 of the BBRA. The same final rule that established regulations for 
the LTCH PPS under 42 CFR part 412, subpart O, also contained LTCH 
provisions related to covered inpatient services, limitation on charges 
to beneficiaries, medical review requirements, furnishing of inpatient 
hospital services directly or under arrangement, and reporting and 
recordkeeping requirements. We refer readers to the August 30, 2002, 
final rule for a comprehensive discussion of the research and data that 
supported the establishment of the LTCH PPS (67 FR 55954).
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 
49623), we implemented the provisions of the Pathway for Sustainable 
Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67), which mandated 
the application of the ``site neutral'' payment rate under the LTCH PPS 
for discharges that do not meet the statutory criteria for exclusion 
beginning in FY 2016. For cost reporting periods beginning on or after 
October 1, 2015, discharges that do not meet certain statutory criteria 
for exclusion are paid based on the site neutral payment rate. 
Discharges that do meet the statutory criteria continue to receive 
payment based on the LTCH PPS standard Federal payment rate. For more 
information on the statutory requirements of the Pathway for SGR Reform 
Act of 2013, we refer readers to the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49601 through 49623) and the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 57068 through 57075).
    In the FY 2018 IPPS/LTCH PPS final rule, we implemented several 
provisions of the 21st Century Cures Act (``the Cures Act'') (Pub. L. 
114-255) that affected the LTCH PPS. (For more information on these 
provisions, we refer readers to (82 FR 38299).)
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41529), we made 
conforming changes to our regulations to implement the provisions of 
section 51005 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), 
which extends the transitional blended payment rate for site neutral 
payment rate cases for an additional 2 years. We refer readers to 
section VII.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule 
for a discussion of our final policy. In addition, in the FY 2019 IPPS/
LTCH PPS final rule, we removed the 25-percent threshold policy under 
42 CFR 412.538, which was a payment adjustment that was applied to 
payments for Medicare patient LTCH discharges when the number of such 
patients originating from any single referring hospital was in excess 
of the applicable threshold for given cost reporting period.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42439), we further 
revised our regulations to implement the provisions of the Pathway for 
SGR Reform Act of 2013 (Pub. L. 113-67) that relate to the payment 
adjustment for discharges from LTCHs that do not maintain the requisite 
discharge payment percentage and the process by which such LTCHs may 
have the payment adjustment discontinued.
2. Criteria for Classification as an LTCH
a. Classification as an LTCH
i. General
    Under the regulations at Sec.  412.23(e)(1), to qualify to be paid 
under the LTCH PPS, a hospital must have a provider agreement with 
Medicare. Furthermore, Sec.  412.23(e)(2)(i), which implements section 
1886(d)(1)(B)(iv) of the Act, requires that a hospital have an average 
Medicare inpatient length of stay of greater than 25 days to be paid 
under the LTCH PPS. In accordance with section 1206(a)(3) of the 
Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), as amended by 
section 15007 of Public Law 114-255, we amended our regulations to 
specify that Medicare Advantage plans' and site neutral payment rate 
discharges are excluded from the calculation of the average length of 
stay for all LTCHs, for discharges occurring in cost reporting period 
beginning on or after October 1, 2015.
ii. Proposed Technical Clarification
    As explained more fully previously, LTCHs are required to have an 
average length of stay (ALOS) of greater than 25 days. Prior to a 
hospital being classified as an LTCH, the hospital must first 
participate in Medicare as a hospital (typically a hospital paid under 
the IPPS) during which time ALOS data is gathered. This data is used to 
determine whether the hospital has an ALOS of greater than 25 days, 
which is required to be classified as an LTCH. We generally refer to 
the period during which a hospital seeks to establish the required ALOS 
as a ``qualifying period.'' The qualifying period is the 6-month period 
immediately preceding the hospital's conversion to an LTCH, and it has 
been our policy that the requisite ALOS must be demonstrated based on 
patient data from at least 5 consecutive months of this period. For 
example, for a hospital seeking to become an LTCH effective January 1, 
2025, the qualifying period would be July 1, 2024 through December 31, 
2024 (that is, the 6 months immediately preceding the conversion to an 
LTCH). In order for the hospital to convert to an LTCH, the ALOS must 
be demonstrated for a period of at least 5 consecutive months (for 
example, July 1, 2024 through November 30, 2024 or July 15, 2024 to 
December 14, 2024) of the 6 month qualifying period.
    It has been our general policy to allow a hospital to be classified 
as an LTCH after only the 6-month qualifying period (as opposed to 
requiring the completion of the more typical 12-month cost reporting 
period). We have also referred to the ability of a hospital to be 
classified as an LTCH after a 6-month qualifying period in preamble 
previously (73 FR 29705), and the Provider Reimbursement Manual at 
3001.4 refers to using data from a 6-month period for hospitals which 
have not yet filed a cost report. However, our regulations have never 
explicitly articulated how the qualifying period policy applies to a 
hospital seeking classification as an LTCH. Therefore, we proposed to 
revise our regulations at 42 CFR 412.23(e)(4) to explicitly state that 
a hospital that seeks to be classified as an LTCH may do so after 
completion of a 6-month qualifying period, provided that the hospital 
demonstrates an average length of stay (calculated under our existing 
regulations) of greater than 25 days during at least five consecutive 
months of the 6-month qualifying period (which is the same timeframe as 
the ``cure period'' for existing LTCHs). Specifically, we proposed to 
add new paragraph Sec.  412.23(e)(4)(iv) to explain the qualifying 
period for hospitals seeking LTCH classification.
    Further, we proposed to revise certain paragraphs and reorder 
certain paragraphs in Sec.  412.23(e) to improve the clarity of the 
regulation by clarifying how provisions apply to existing LTCHs and 
which provisions apply to hospitals seeking classification as an LTCH. 
First, we proposed to revise paragraph Sec.  412.23(e)(3)(i) to cross-
reference new subparagraphs Sec.  412.23(e)(4)(iv) and (e)(4)(v). 
Second, we proposed to revise paragraph Sec.  412.23(e)(3)(iii) to 
clarify that it applies in cases of hospitals that have already 
obtained LTCH classification when the LTCH would not otherwise maintain 
an average Medicare inpatient length of stay of greater than

[[Page 69421]]

25 days. Third, we proposed to reserve Sec.  412.23(e)(3)(iv) and move 
that text to new (e)(4)(v) to clarify that this regulation applies to 
hospitals seeking new LTCH classification. Fourth, we proposed to 
revise Sec.  412.23(e)(4) to clarify that the provisions of paragraph 
(e)(3), with the exception of subparagraphs (e)(3)(iii) and (v), apply 
to hospitals seeking new LTCH classification. Fifth, we proposed to 
revise paragraph Sec.  412.23(e)(4)(i) to reflect the addition of new 
Sec.  412.23(e)(4)(iv) and (e)(4)(v) and clarify existing regulatory 
language.
    We noted that none of these proposed revisions reflect a change to 
our existing policy; instead, we stated that we believe these revisions 
will improve the clarity of the regulatory text and better reflect our 
existing policy.
    Comment: Several commenters objected to our use of the word 
``consecutive'' in the proposed regulatory text revisions to codify our 
existing policy regarding the qualifying period for hospitals seeking 
to become LTCHs. These commenters believed that the use of the word 
``consecutive'' was both not in accordance with our historical policy 
and unnecessarily strict. Rather than finalizing the proposed revision, 
these commenters argued that we should finalize a policy under which, 
for the qualifying period, hospitals should be able to demonstrate 
compliance with the ALOS requirement using the average lengths of stay 
calculated for non-consecutive months.
    Response: While we acknowledge the concerns raised by the 
commenters, we believe that they have misunderstood our proposal. Our 
reference to ``at least five consecutive months'' is a reference to 
one, single, continuous period for which the ALOS would be calculated, 
just like the ALOS for an existing LTCH is calculated based on the 
entire cost reporting period, not each individual month therein, and 
the cure period for an LTCH which falls below the ALOS threshold for a 
cost reporting period is based on a single, continuous period of at 
least consecutive five months and not each individual month within that 
period. Further, we note that our proposed revision to the regulations 
refers specifically to ``an average length of stay'' (emphasis added) 
and not ``average lengths of stay,'' which would be how the regulation 
text for the calculation such as that opposed by commenters would be 
phrased. Our proposed revisions to the regulation text were not meant 
to reflect a policy under which the ALOS would be calculated during 5 
separate months and the ALOS for each month must be greater than 25 
days, as described by some commenters. Our proposed regulatory language 
was meant to reflect our current policy, under which the ALOS for the 
entire qualifying period, which must be at least 5 consecutive months, 
must be greater than 25 days.
    However, in considering this comment, we noticed that our existing 
regulation text at Sec.  412.23(e)(3)(iii) (which describes the ``cure 
period'' policy for when an existing LTCH's ALOS does not meet the 
greater than 25 days threshold for a cost reporting period), Sec.  
412.23(e)(4)(iii) (which describes the rules for provider based 
satellite facilities or remote locations of LTCHs becoming separately 
participating hospitals), Sec.  412.23(e)(4)(v) (which describes the 
rules for hospitals seeking to participate in Medicare as LTCHs which 
experience a change of ownership), as well as our proposed 
clarification to Sec.  412.23(e)(3)(iii), Sec.  412.23(e)(4)(iii), and 
Sec.  412.23(e)(4)(v) inadvertently omit the word ``consecutive'' when 
describing the time period for the calculation. We believe that this 
may be the source of commenters' confusion on our proposed regulatory 
language describing how the calculation is performed for the qualifying 
period; i.e., that by using the word ``consecutive'' in the proposed 
clarification for the qualifying period but not for the cure period, 
our policy for calculating the ALOS in these situations would not be 
the same and that the calculation for qualifying periods would be more 
stringent than our policy for cure periods, provider based facilities 
becoming separately participating hospitals, and hospitals seeking to 
participate in Medicare as LTCHs which experience a change of 
ownership. This was not our intention in making our proposed 
clarification; rather, our intention was to amend our regulations such 
that the policy for calculating the ALOS for the qualifying period for 
a hospital seeking LTCH classification would be consistent with our 
policy for calculating an existing LTCH's ALOS in other contexts. 
Therefore, in the interest of making our ALOS regulations as clear as 
possible, we believe it would be appropriate to make a conforming 
change to our proposed revisions to Sec.  412.23(e)(3)(iii), Sec.  
412.23(e)(4)(iii), and Sec.  412.23(e)(4)(v) to add the word 
``consecutive.'' Additionally, in the case of Sec.  412.23(e)(4)(iii), 
we are adding ``the period of at least'' to the regulation, consistent 
with our language at Sec.  412.23(e)(3)(iii) and Sec.  412.23(e)(4)(iv) 
and (v). With these additions, the regulation text will be consistent 
and, we believe, more fully and accurately reflect our current policy. 
We wish to reassure commenters that, just like the calculation of the 
ALOS for the qualifying period, this will not change our existing 
policy for calculating the ALOS for an LTCH's cure period. The cure 
period calculation at Sec.  412.23(e)(3)(iii) will continue to be based 
on one, single, continuous period that is at least 5 consecutive months 
long and there is no requirement for the ALOS in each individual month 
to be greater than 25 days.
    We believe that, consistent with the way the ALOS is calculated for 
existing LTCHs, whether for cost reporting periods or cure periods, the 
ALOS for a hospital's qualifying period should be calculated based on 
one, single, continuous period. For this reason, we believe that the 
inclusion of the word ``consecutive'' is both appropriate and necessary 
in the regulation text and are finalizing our proposed addition of new 
paragraph Sec.  412.23(e)(4)(iv). Moreover, for consistency with 
language used in Sec.  412.23(e)(3)(iii) and Sec.  412.23(e)(4)(iii), 
we are also adding ``the period of'' to the text of the finalized 
regulation. Additionally, in the interest of making our regulations 
consistent with each other and current policy, as discussed previously, 
we are adding the word ``consecutive'' to Sec.  412.23(e)(3)(iii) and 
Sec.  412.23(e)(4)(iii), and Sec.  412.23(e)(4)(v) as well as the words 
``the period of at least'' to Sec.  412.23(e)(4)(iii). We note, as 
stated previously, these changes do not represent a change from 
existing policy, and are instead merely a clarification of our existing 
policy. We will also clarify in our guidance subsequent to this rule 
that the requirement is that the ALOS for the qualifying period or cure 
period, as applicable, in its entirety needs to be greater than 25 
days, however it is not necessary for the ALOS in each individual month 
of that period be greater than 25 days.
    We received no other comments with respect to our proposed 
reordering of and revisions to other paragraphs in 412.23 and as such 
are finalizing those proposals without modification.
    Comment: Some commenters requested that we change the method by 
which we calculate the ALOS by excluding certain discharges, such as 
deaths and discharges associated with model demonstrations, from the 
calculation.
    Response: We consider these comments outside the scope of the 
proposed rule as we did not make any policy proposals related to the 
method by which the ALOS would be calculated; however, we will keep 
these comments in mind for future rulemaking.

[[Page 69422]]

b. Hospitals Excluded From the LTCH PPS
    The following hospitals are paid under special payment provisions, 
as described in Sec.  412.22(c) and, therefore, are not subject to the 
LTCH PPS rules:
     Veterans Administration hospitals.
     Hospitals that are reimbursed under State cost control 
systems approved under 42 CFR part 403.
     Hospitals that are reimbursed in accordance with 
demonstration projects authorized under section 402(a) of the Social 
Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b- 1), 
section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92-
603) (42 U.S.C. 1395b1 (note)) (Statewide-all payer systems, subject to 
the rate-of increase test at section 1814(b) of the Act), or section 
3021 of the Patient Protection and Affordable Care Act (Pub. L. 111-
148) (42 U.S.C. 1315a).
     Nonparticipating hospitals furnishing emergency services 
to Medicare beneficiaries.
3. Limitation on Charges to Beneficiaries
    In the August 30, 2002 final rule, we presented an in-depth 
discussion of beneficiary liability under the LTCH PPS (67 FR 55974 
through 55975). This discussion was further clarified in the RY 2005 
LTCH PPS final rule (69 FR 25676). In keeping with those discussions, 
if the Medicare payment to the LTCH is the full LTC-DRG payment amount, 
consistent with other established hospital prospective payment systems, 
Sec.  412.507 currently provides that an LTCH may not bill a Medicare 
beneficiary for more than the deductible and coinsurance amounts as 
specified under Sec. Sec.  409.82, 409.83, and 409.87, and for items 
and services specified under Sec.  489.30(a). However, under the LTCH 
PPS, Medicare will only pay for services furnished during the days for 
which the beneficiary has coverage until the short-stay outlier (SSO) 
threshold is exceeded. If the Medicare payment was for a SSO case (in 
accordance with Sec.  412.529), and that payment was less than the full 
LTC-DRG payment amount because the beneficiary had insufficient 
coverage as a result of the remaining Medicare days, the LTCH also is 
currently permitted to charge the beneficiary for services delivered on 
those uncovered days (in accordance with Sec.  412.507). In the FY 2016 
IPPS/LTCH PPS final rule (80 FR 49623), we amended our regulations to 
expressly limit the charges that may be imposed upon beneficiaries 
whose LTCHs' discharges are paid at the site neutral payment rate under 
the LTCH PPS. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57102), we 
amended the regulations under Sec.  412.507 to clarify our existing 
policy that blended payments made to an LTCH during its transitional 
period (that is, an LTCH's payment for discharges occurring in cost 
reporting periods beginning in FYs 2016 through 2019) are considered to 
be site neutral payment rate payments.
    Comment: A commenter requested that we provide additional payments 
for ESRD patients in LTCHs, similar to the ESRD add-on payment for IPPS 
hospitals.
    Response: We consider this comment outside the scope of the 
proposed rule. We did not make any proposals related to additional 
payments for ESRD patients in LTCHs; however, we will keep the 
commenter's request in mind for future rulemaking.

B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-LTC-
DRG) Classifications and Relative Weights for FY 2025

1. Background
    Section 123 of the BBRA required that the Secretary implement a PPS 
for LTCHs to replace the cost-based payment system under TEFRA. Section 
307(b)(1) of the BIPA modified the requirements of section 123 of the 
BBRA by requiring that the Secretary examine the feasibility and the 
impact of basing payment under the LTCH PPS on the use of existing (or 
refined) hospital DRGs that have been modified to account for different 
resource use of LTCH patients.
    Under both the IPPS and the LTCH PPS, the DRG-based classification 
system uses information on the claims for inpatient discharges to 
classify patients into distinct groups (for example, DRGs) based on 
clinical characteristics and expected resource needs. When the LTCH PPS 
was implemented for cost reporting periods beginning on or after 
October 1, 2002, we adopted the same DRG patient classification system 
utilized at that time under the IPPS. We referred to this patient 
classification system as the ``long-term care diagnosis-related groups 
(LTC-DRGs).'' As part of our efforts to better recognize severity of 
illness among patients, in the FY 2008 IPPS final rule with comment 
period (72 FR 47130), we adopted the MS-DRGs and the Medicare severity 
long-term care diagnosis-related groups (MS-LTC-DRGs) under the IPPS 
and the LTCH PPS, respectively, effective beginning October 1, 2007 (FY 
2008). For a full description of the development, implementation, and 
rationale for the use of the MS-DRGs and MS-LTC-DRGs, we refer readers 
to the FY 2008 IPPS final rule with comment period (72 FR 47141 through 
47175 and 47277 through 47299). (We note that, in that same final rule, 
we revised the regulations at Sec.  412.503 to specify that for LTCH 
discharges occurring on or after October 1, 2007, when applying the 
provisions of 42 CFR part 412, subpart O, applicable to LTCHs for 
policy descriptions and payment calculations, all references to LTC-
DRGs would be considered a reference to MS-LTC-DRGs. For the remainder 
of this section, we present the discussion in terms of the current MS-
LTC-DRG patient classification system unless specifically referring to 
the previous LTC-DRG patient classification system that was in effect 
before October 1, 2007.)
    Consistent with section 123 of the BBRA, as amended by section 
307(b)(1) of the BIPA, and Sec.  412.515 of the regulations, we use 
information derived from LTCH PPS patient records to classify LTCH 
discharges into distinct MS-LTC-DRGs based on clinical characteristics 
and estimated resource needs. As noted previously, we adopted the same 
DRG patient classification system utilized at that time under the IPPS. 
The MS-DRG classifications are updated annually, which has resulted in 
the number of MS-DRGs changing over time. For FY 2025, there will be 
773 MS-DRG, and by extension, MS-LTC-DRG, groupings based on the 
changes, as discussed in section II.E. of the preamble of this final 
rule.
    Although the patient classification system used under both the LTCH 
PPS and the IPPS are the same, the relative weights are different. The 
established relative weight methodology and data used under the LTCH 
PPS result in relative weights under the LTCH PPS that reflect the 
differences in patient resource use of LTCH patients, consistent with 
section 123(a)(1) of the BBRA. That is, we assign an appropriate weight 
to the MS-LTC-DRGs to account for the differences in resource use by 
patients exhibiting the case complexity and multiple medical problems 
characteristic of LTCH patients.
2. Patient Classifications Into MS-LTC-DRGs
a. Background
    The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under 
the LTCH PPS) are based on the CMS DRG structure. As noted previously 
in this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs 
although they are structurally identical to the MS-DRGs used under the 
IPPS.

[[Page 69423]]

    The MS-DRGs are organized into 25 major diagnostic categories 
(MDCs), most of which are based on a particular organ system of the 
body; the remainder involve multiple organ systems (such as MDC 22, 
Burns). Within most MDCs, cases are then divided into surgical DRGs and 
medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy 
that orders operating room (O.R.) procedures or groups of O.R. 
procedures by resource intensity. The GROUPER software program does not 
recognize all ICD-10-PCS procedure codes as procedures affecting DRG 
assignment. That is, procedures that are not surgical (for example, 
EKGs) or are minor surgical procedures (for example, a biopsy of skin 
and subcutaneous tissue (procedure code 0JBH3ZX)) do not affect the MS-
LTC-DRG assignment based on their presence on the claim.
    Generally, under the LTCH PPS, a Medicare payment is made at a 
predetermined specific rate for each discharge that varies based on the 
MS-LTC-DRG to which a beneficiary's discharge is assigned. Cases are 
classified into MS-LTC-DRGs for payment based on the following six data 
elements:
     Principal diagnosis.
     Additional or secondary diagnoses.
     Surgical procedures.
     Age.
     Sex.
     Discharge status of the patient.
    Currently, for claims submitted using the version ASC X12 5010 
standard, up to 25 diagnosis codes and 25 procedure codes are 
considered for an MS-DRG assignment. This includes one principal 
diagnosis and up to 24 secondary diagnoses for severity of illness 
determinations. (For additional information on the processing of up to 
25 diagnosis codes and 25 procedure codes on hospital inpatient claims, 
we refer readers to section II.G.11.c. of the preamble of the FY 2011 
IPPS/LTCH PPS final rule (75 FR 50127).)
    Under the HIPAA transactions and code sets regulations at 45 CFR 
parts 160 and 162, covered entities must comply with the adopted 
transaction standards and operating rules specified in subparts I 
through S of part 162. Among other requirements, on or after January 1, 
2012, covered entities are required to use the ASC X12 Standards for 
Electronic Data Interchange Technical Report Type 3--Health Care Claim: 
Institutional (837), May 2006, ASC X12N/005010X223, and Type 1 Errata 
to Health Care Claim: Institutional (837) ASC X12 Standards for 
Electronic Data Interchange Technical Report Type 3, October 2007, ASC 
X12N/005010X233A1 for the health care claims or equivalent encounter 
information transaction (45 CFR 162.1102(c)).
    HIPAA requires covered entities to use the applicable medical data 
code sets when conducting HIPAA transactions (45 CFR 162.1000). 
Currently, upon the discharge of the patient, the LTCH must assign 
appropriate diagnosis and procedure codes from the International 
Classification of Diseases, 10th Revision, Clinical Modification (ICD-
10-CM) for diagnosis coding and the International Classification of 
Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) for 
inpatient hospital procedure coding, both of which were required to be 
implemented October 1, 2015 (45 CFR 162.1002(c)(2) and (3)). For 
additional information on the implementation of the ICD-10 coding 
system, we refer readers to section II.F.1. of the preamble of the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56787 through 56790) and section 
II.E.1. of the preamble of this final rule. Additional coding 
instructions and examples are published in the AHA's Coding Clinic for 
ICD-10-CM/PCS.
    To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base 
DRGs were subdivided according to the presence of specific secondary 
diagnoses designated as complications or comorbidities (CCs) into one, 
two, or three levels of severity, depending on the impact of the CCs on 
resources used for those cases. Specifically, there are sets of MS-DRGs 
that are split into 2 or 3 subgroups based on the presence or absence 
of a CC or a major complication or comorbidity (MCC). We refer readers 
to section II.D. of the preamble of the FY 2008 IPPS final rule with 
comment period for a detailed discussion about the creation of MS-DRGs 
based on severity of illness levels (72 FR 47141 through 47175).
    Medicare Administrative Contractors (MACs) enter the clinical and 
demographic information submitted by LTCHs into their claims processing 
systems and subject this information to a series of automated screening 
processes called the Medicare Code Editor (MCE). These screens are 
designed to identify cases that require further review before 
assignment into a MS-LTC-DRG can be made. During this process, certain 
types of cases are selected for further explanation (74 FR 43949).
    After screening through the MCE, each claim is classified into the 
appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software on the 
basis of diagnosis and procedure codes and other demographic 
information (age, sex, and discharge status). The GROUPER software used 
under the LTCH PPS is the same GROUPER software program used under the 
IPPS. Following the MS-LTC-DRG assignment, the MAC determines the 
prospective payment amount by using the Medicare PRICER program, which 
accounts for hospital-specific adjustments. Under the LTCH PPS, we 
provide an opportunity for LTCHs to review the MS-LTC-DRG assignments 
made by the MAC and to submit additional information within a specified 
timeframe as provided in Sec.  412.513(c).
    The GROUPER software is used both to classify past cases to measure 
relative hospital resource consumption to establish the MS-LTC-DRG 
relative weights and to classify current cases for purposes of 
determining payment. The records for all Medicare hospital inpatient 
discharges are maintained in the MedPAR file. The data in this file are 
used to evaluate possible MS-DRG and MS-LTC-DRG classification changes 
and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during 
our annual update under both the IPPS (Sec.  412.60(e)) and the LTCH 
PPS (Sec.  412.517), respectively.
b. Changes to the MS-LTC-DRGs for FY 2025
    As specified by our regulations at Sec.  412.517(a), which require 
that the MS-LTC-DRG classifications and relative weights be updated 
annually, and consistent with our historical practice of using the same 
patient classification system under the LTCH PPS as is used under the 
IPPS, in this final rule, as we proposed, we updated the MS-LTC-DRG 
classifications effective October 1, 2024 through September 30, 2025 
(FY 2025) consistent with the changes to specific MS-DRG 
classifications presented in section II.F. of the preamble of this 
final rule. Accordingly, the MS-LTC-DRGs for FY 2025 are the same as 
the MS-DRGs being used under the IPPS for FY 2025. In addition, because 
the MS-LTC-DRGs for FY 2025 are the same as the MS-DRGs for FY 2025, 
the other changes that affect MS-DRG (and by extension MS-LTC-DRG) 
assignments under GROUPER Version 42, as discussed in section II.E. of 
the preamble of this final rule, including the changes to the MCE 
software and the ICD-10-CM/PCS coding system, are also applicable under 
the LTCH PPS for FY 2025.3. Development of the FY 2025 MS-LTC-DRG 
Relative Weights.

[[Page 69424]]

a. General Overview of the MS-LTC-DRG Relative Weights
    One of the primary goals for the implementation of the LTCH PPS is 
to pay each LTCH an appropriate amount for the efficient delivery of 
medical care to Medicare patients. The system must be able to account 
adequately for each LTCH's case-mix to ensure both fair distribution of 
Medicare payments and access to adequate care for those Medicare 
patients whose care is costlier (67 FR 55984). To accomplish these 
goals, we have annually adjusted the LTCH PPS standard Federal 
prospective payment rate by the applicable relative weight in 
determining payment to LTCHs for each case. Under the LTCH PPS, 
relative weights for each MS-LTC-DRG are a primary element used to 
account for the variations in cost per discharge and resource 
utilization among the payment groups (Sec.  412.515). To ensure that 
Medicare patients classified to each MS-LTC-DRG have access to an 
appropriate level of services and to encourage efficiency, we calculate 
a relative weight for each MS-LTC-DRG that represents the resources 
needed by an average inpatient LTCH case in that MS-LTC-DRG. For 
example, cases in an MS-LTC-DRG with a relative weight of 2 would, on 
average, cost twice as much to treat as cases in an MS-LTC-DRG with a 
relative weight of 1.
    The established methodology to develop the MS-LTC-DRG relative 
weights is generally consistent with the methodology established when 
the LTCH PPS was implemented in the August 30, 2002 LTCH PPS final rule 
(67 FR 55989 through 55991). However, there have been some 
modifications of our historical procedures for assigning relative 
weights in cases of zero volume or nonmonotonicity or both resulting 
from the adoption of the MS-LTC-DRGs. We also made a modification in 
conjunction with the implementation of the dual rate LTCH PPS payment 
structure beginning in FY 2016 to use LTCH claims data from only LTCH 
PPS standard Federal payment rate cases (or LTCH PPS cases that would 
have qualified for payment under the LTCH PPS standard Federal payment 
rate if the dual rate LTCH PPS payment structure had been in effect at 
the time of the discharge). We also adopted, beginning in FY 2023, a 
10-percent cap policy on the reduction in a MS-LTC-DRG's relative 
weight in a given year. (For details on the modifications to our 
historical procedures for assigning relative weights in cases of zero 
volume and nonmonotonicity or both, we refer readers to the FY 2008 
IPPS final rule with comment period (72 FR 47289 through 47295) and the 
FY 2009 IPPS final rule (73 FR 48542 through 48550). For details on the 
change in our historical methodology to use LTCH claims data only from 
LTCH PPS standard Federal payment rate cases (or cases that would have 
qualified for such payment had the LTCH PPS dual payment rate structure 
been in effect at the time) to determine the MS-LTC-DRG relative 
weights, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 
FR 49614 through 49617). For details on our adoption of the 10-percent 
cap policy, we refer readers to the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 49152 through 49154).)
    For purposes of determining the MS-LTC-DRG relative weights, under 
our historical methodology, there are three different categories of MS-
LTC-DRGs based on volume of cases within specific MS-LTC-DRGs: (1) MS-
LTC-DRGs with at least 25 applicable LTCH cases in the data used to 
calculate the relative weight, which are each assigned a unique 
relative weight; (2) low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs that 
contain between 1 and 24 applicable LTCH cases that are grouped into 
quintiles (as described later in this section in Step 3 of our 
methodology) and assigned the relative weight of the quintile); and (3) 
no-volume MS-LTC-DRGs that are cross-walked to other MS-LTC-DRGs based 
on the clinical similarities and assigned the relative weight of the 
cross-walked MS-LTC-DRG (as described later in this section in Step 8 
of our methodology). For FY 2025, we are continuing to use applicable 
LTCH cases to establish the same volume-based categories to calculate 
the FY 2025 MS-LTC-DRG relative weights.
b. Development of the MS-LTC-DRG Relative Weights for FY 2025
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36259 through 
36266), we presented our proposed methodology for determining the MS-
LTC-DRG relative weights for FY 2025.
    We received several comments requesting that CMS modify certain 
high-volume MS-LTC-DRGs to better account for the variation in patient 
severity and costs among the cases grouped to these MS-LTC-DRGs. Since 
these comments were primarily focused on the impact these high-volume 
MS-LTC-DRGs have on the FY 2025 outlier fixed-loss amount, we have 
summarized and responded to these comments in section V.D.3. of the 
Addendum to this final rule. We also received comments requesting CMS 
to modify our ratesetting methodologies to account for the impact of 
COVID-19 on the ratesetting data. Since these comments were primarily 
focused on the specific use of FY 2023 data when determining the FY 
2025 outlier fixed-loss amount, we also have summarized and responded 
to these comments in section V.D.3. of the Addendum to this final rule.
    After consideration of the comments we received, we are finalizing, 
without modification, our proposed methodology for determining the MS-
LTC-DRG relative weights for FY 2025. In the remainder of this section, 
we present our finalized methodology. We first list and provide a brief 
description of our steps for determining the FY 2025 MS-LTC-DRG 
relative weights. We then, later in this section, discuss in greater 
detail each step. We note that, as we did in FY 2024, we used our 
historical relative weight methodology as described in the FY 2021 
IPPS/LTCH PPS final rule (85 FR 58898 through 58907), subject to a ten 
percent cap as described in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49162).
     Step 1--Prepare data for MS-LTC-DRG relative weight 
calculation. In this step, we select and group the applicable claims 
data used in the development of the MS-LTC-DRG relative weights.
     Step 2--Remove cases with a length of stay of 7 days or 
less. In this step, we trim the applicable claims data to remove cases 
with a length of stay of 7 days or less.
     Step 3--Establish low-volume MS-LTC-DRG 
quintiles. In this step, we employ our established quintile methodology 
for low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs with fewer than 25 
cases).
     Step 4--Remove statistical outliers. In this step, we trim 
the applicable claims data to remove statistical outlier cases.
     Step 5--Adjust charges for the effects of Short Stay 
Outliers (SSOs). In this step, we adjust the number of applicable cases 
in each MS-LTC-DRG (or low-volume quintile) for the effect of SSO 
cases.
     Step 6--Calculate the relative weights on an iterative 
basis using the hospital-specific relative weights methodology. In this 
step, we use our established hospital-specific relative value (HSRV) 
methodology, which is an iterative process, to calculate the relative 
weights.
     Step 7--Adjust the relative weights to account for 
nonmonotonically increasing relative weights. In this step, we make 
adjustments that ensure that within each base MS-LTC-DRG, the relative 
weights increase by MS-LTC-DRG severity.

[[Page 69425]]

     Step 8--Determine a relative weight for MS-LTC-DRGs with 
no applicable LTCH cases. In this step, we cross-walk each no-volume 
MS-LTC-DRG to another MS-LTC-DRG for which we calculated a relative 
weight.
     Step 9--Budget neutralize the uncapped relative weights. 
In this step, to ensure budget neutrality in the annual update to the 
MS-LTC-DRG classifications and relative weights, we adjust the relative 
weights by a normalization factor and a budget neutrality factor that 
ensures estimated aggregate LTCH PPS payments will be unaffected by the 
updates to the MS-LTC-DRG classifications and relative weights.
     Step 10--Apply the 10-percent cap to decreases in MS-LTC-
DRG relative weights. In this step we limit the reduction of the 
relative weight for a MS-LTC-DRG to 10 percent of its prior year value. 
This 10-percent cap does not apply to zero-volume MS-LTC-DRGs or low-
volume MS-LTC-DRGs.
     Step 11--Budget neutralize the application of the 10-
percent cap policy. In this step, to ensure budget neutrality in the 
application of the MS-LTC-DRG cap policy, we adjust the relative 
weights by a budget neutrality factor that ensures estimated aggregate 
LTCH PPS payments will be unaffected by our application of the cap to 
the MS-LTC-DRG relative weights.
    We next describe each of the 11 steps for calculating the FY 2025 
MS-LTC-DRG relative weights in greater detail.
    Step 1--Prepare data for MS-LTC-DRG relative weight calculation.
    For the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36260), we 
obtained total charges from FY 2023 Medicare LTCH claims data from the 
December 2023 update of the FY 2023 MedPAR file and used proposed 
Version 42 of the GROUPER to classify LTCH cases. Consistent with our 
historical practice, we proposed that if better data become available, 
we would use those data and the finalized Version 42 of the GROUPER in 
establishing the FY 2025 MS-LTC-DRG relative weights in the final rule. 
Accordingly, for this final rule, we are establishing the FY 2025 MS-
LTC-DRG relative weights based on updated FY 2023 Medicare LTCH claims 
data from the March 2024 update of the FY 2023 MedPAR file, which is 
the best available data at the time of development of this final rule, 
and the finalized Version 42 of the GROUPER to classify LTCH cases.
    To calculate the FY 2025 MS-LTC-DRG relative weights under the dual 
rate LTCH PPS payment structure, as we proposed, we continue to use 
applicable LTCH data, which includes our policy of only using cases 
that meet the criteria for exclusion from the site neutral payment rate 
(or would have met the criteria had they been in effect at the time of 
the discharge) (80 FR 49624). Specifically, we began by first 
evaluating the LTCH claims data in the March 2024 update of the FY 2023 
MedPAR file to determine which LTCH cases would meet the criteria for 
exclusion from the site neutral payment rate under Sec.  412.522(b) or 
had the dual rate LTCH PPS payment structure applied to those cases at 
the time of discharge. We identified the FY 2023 LTCH cases that were 
not assigned to MS-LTC-DRGs 876, 880, 881, 882, 883, 884, 885, 886, 
887, 894, 895, 896, 897, 945, and 946, which identify LTCH cases that 
do not have a principal diagnosis relating to a psychiatric diagnosis 
or to rehabilitation; and that either--
     The admission to the LTCH was ``immediately preceded'' by 
discharge from a subsection (d) hospital and the immediately preceding 
stay in that subsection (d) hospital included at least 3 days in an 
ICU, as we define under the ICU criterion; or
     The admission to the LTCH was ``immediately preceded'' by 
discharge from a subsection (d) hospital and the claim for the LTCH 
discharge includes the applicable procedure code that indicates at 
least 96 hours of ventilator services were provided during the LTCH 
stay, as we define under the ventilator criterion. Claims data from the 
FY 2023 MedPAR file that reported ICD-10-PCS procedure code 5A1955Z 
were used to identify cases involving at least 96 hours of ventilator 
services in accordance with the ventilator criterion. (We note that 
section 3711(b)(2) of the CARES Act provided a waiver of the 
application of the site neutral payment rate for LTCH cases admitted 
during the COVID-19 PHE period. The COVID-19 PHE expired on May 11, 
2023. Therefore, all LTCH PPS cases in FY 2023 with admission dates on 
or before the PHE expiration date were paid the LTCH PPS standard 
Federal rate regardless of whether the discharge met the statutory 
patient criteria. However, for purposes of setting rates for LTCH PPS 
standard Federal rate cases for FY 2025 (including MS-LTC-DRG relative 
weights), we used FY 2023 cases that meet the statutory patient 
criteria without consideration to how those cases were paid in FY 
2023.)
    Furthermore, consistent with our historical methodology, we 
excluded any claims in the resulting data set that were submitted by 
LTCHs that were all-inclusive rate providers and LTCHs that are paid in 
accordance with demonstration projects authorized under section 402(a) 
of Public Law 90-248 or section 222(a) of Public Law 92-603. In 
addition, consistent with our historical practice and our policies, we 
excluded any Medicare Advantage (Part C) claims in the resulting data. 
Such claims were identified based on the presence of a GHO Paid 
indicator value of ``1'' in the MedPAR files.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49448), we discussed 
the abnormal charging practices of an LTCH (CCN 312024) in FY 2021 that 
led to the LTCH receiving an excessive amount of high cost outlier 
payments. In that rule, we stated our belief, based on information we 
received from the provider, that these abnormal charging practices 
would not persist into FY 2023. Therefore, we did not include their 
cases in our model for determining the FY 2023 outlier fixed-loss 
amount. In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59127 through 
59128), we stated that the FY 2022 MedPAR claims also reflect the 
abnormal charging practices of this LTCH. Therefore, we removed claims 
from CCN 312024 when determining the FY 2024 MS-LTC-DRG relative 
weights and from all other FY 2024 ratesetting calculations, including 
the calculation of the area wage level adjustment budget neutrality 
factor and the fixed-loss amount for LTCH PPS standard Federal payment 
rate cases. Given recent actions by the Department of Justice regarding 
CCN 312024 (see https://www.justice.gov/opa/pr/new-jersey-hospital-and-investors-pay-united-states-306-million-alleged-false-claims-related), 
as we proposed, we again removed claims from CCN 312024 when 
determining the FY 2025 MS-LTC-DRG relative weights and all other FY 
2025 ratesetting calculations, including the calculation of the area 
wage level adjustment budget neutrality factor and the fixed-loss 
amount for LTCH PPS standard Federal payment rate cases.
    In summary, in general, we identified the claims data used in the 
development of the FY 2025 MS-LTC-DRG relative weights in this final 
rule by trimming claims data that were paid the site neutral payment 
rate or would have been paid the site neutral payment rate had the 
provisions of the CARES Act not been in effect. We trimmed the claims 
data of all-inclusive rate providers reported in the March 2024 update 
of the FY 2023 MedPAR file and any Medicare Advantage claims data. 
There were no data from any LTCHs that are paid in accordance with a 
demonstration project reported in the March 2024 update of the FY 2023 
MedPAR file, but had there been any,

[[Page 69426]]

we would have trimmed the claims data from those LTCHs as well, in 
accordance with our established policy. We also removed all claims from 
CCN 312024.
    We used the remaining data (that is, the applicable LTCH data) in 
the subsequent steps to calculate the MS-LTC-DRG relative weights for 
FY 2025.
    Step 2--Remove cases with a length of stay of 7 days or less.
    The next step in our calculation of the FY 2025 MS-LTC-DRG relative 
weights is to remove cases with a length of stay of 7 days or less. The 
MS-LTC-DRG relative weights reflect the average of resources used on 
representative cases of a specific type. Generally, cases with a length 
of stay of 7 days or less do not belong in an LTCH because these stays 
do not fully receive or benefit from treatment that is typical in an 
LTCH stay, and full resources are often not used in the earlier stages 
of admission to an LTCH. If we were to include stays of 7 days or less 
in the computation of the FY 2025 MS-LTC-DRG relative weights, the 
value of many relative weights would decrease and, therefore, payments 
would decrease to a level that may no longer be appropriate. We do not 
believe that it would be appropriate to compromise the integrity of the 
payment determination for those LTCH cases that actually benefit from 
and receive a full course of treatment at an LTCH by including data 
from these very short stays. Therefore, as we proposed, consistent with 
our existing relative weight methodology, in determining the FY 2025 
MS-LTC-DRG relative weights, we removed LTCH cases with a length of 
stay of 7 days or less from applicable LTCH cases. (For additional 
information on what is removed in this step of the relative weight 
methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)
    Step 3--Establish low-volume MS-LTC-DRG quintiles.
    To account for MS-LTC-DRGs with low-volume (that is, with fewer 
than 25 applicable LTCH cases), consistent with our existing 
methodology, as we proposed, we are continuing to employ the quintile 
methodology for low-volume MS-LTC-DRGs, such that we grouped the ``low-
volume MS-LTC-DRGs'' (that is, MS-LTC-DRGs that contain between 1 and 
24 applicable LTCH cases into one of five categories (quintiles) based 
on average charges (67 FR 55984 through 55995; 72 FR 47283 through 
47288; and 81 FR 25148)).
    In this final rule, based on the best available data (that is, the 
March 2024 update of the FY 2023 MedPAR file), we identified 235 MS-
LTC-DRGs that contained between 1 and 24 applicable LTCH cases. This 
list of MS-LTC-DRGs was then divided into 1 of the 5 low-volume 
quintiles. We assigned the low-volume MS-LTC-DRGs to specific low-
volume quintiles by sorting the low-volume MS-LTC-DRGs in ascending 
order by average charge in accordance with our established methodology. 
Based on the data available for this final rule, the number of MS-LTC-
DRGs with less than 25 applicable LTCH cases was evenly divisible by 5. 
Therefore, the quintiles each contained 47 MS-LTC-DRGs (235/5 = 47). 
Since the number of MS LTC DRGs with less than 25 applicable LTCH cases 
was evenly divisible by 5, it was unnecessary to employ our historical 
methodology of assigning each remainder low-volume MS-LTC-DRG to the 
low-volume quintile that contains an MS-LTC-DRG with an average charge 
closest to that of the remainder low-volume MS-LTC-DRG. In cases where 
these initial assignments of low-volume MS-LTC-DRGs to quintiles 
results in nonmonotonicity within a base-DRG, as we proposed, we 
adjusted the resulting low-volume MS-LTC-DRGs to preserve monotonicity, 
as discussed in Step 7 of our methodology.
    To determine the FY 2025 relative weights for the low-volume MS-
LTC-DRGs, consistent with our historical practice, we used the five 
low-volume quintiles described previously. We determined a relative 
weight and (geometric) average length of stay for each of the five low-
volume quintiles using the methodology described in Step 6 of our 
methodology. We assigned the same relative weight and average length of 
stay to each of the low-volume MS-LTC-DRGs that make up an individual 
low-volume quintile. We note that, as this system is dynamic, it is 
possible that the number and specific type of MS-LTC-DRGs with a low-
volume of applicable LTCH cases would vary in the future. Furthermore, 
we note that we continue to monitor the volume (that is, the number of 
applicable LTCH cases) in the low-volume quintiles to ensure that our 
quintile assignments used in determining the MS-LTC-DRG relative 
weights result in appropriate payment for LTCH cases grouped to low-
volume MS-LTC-DRGs and do not result in an unintended financial 
incentive for LTCHs to inappropriately admit these types of cases.
    For this final rule, we are providing the list of the composition 
of the low-volume quintiles for low-volume MS-LTC-DRGs in a 
supplemental data file for public use posted via the internet on the 
CMS website for this final rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html to 
streamline the information made available to the public that is used in 
the annual development of Table 11.
    Step 4--Remove statistical outliers.
    The next step in our calculation of the FY 2025 MS-LTC-DRG relative 
weights is to remove statistical outlier cases from the LTCH cases with 
a length of stay of at least 8 days. Consistent with our existing 
relative weight methodology, as we proposed, we are continuing to 
define statistical outliers as cases that are outside of 3.0 standard 
deviations from the mean of the log distribution of both charges per 
case and the charges per day for each MS-LTC-DRG. These statistical 
outliers are removed prior to calculating the relative weights because 
we believe that they may represent aberrations in the data that distort 
the measure of average resource use. Including those LTCH cases in the 
calculation of the relative weights could result in an inaccurate 
relative weight that does not truly reflect relative resource use among 
those MS-LTC-DRGs. (For additional information on what is removed in 
this step of the relative weight methodology, we refer readers to 67 FR 
55989 and 74 FR 43959.) After removing cases with a length of stay of 7 
days or less and statistical outliers, in each set of claims, we were 
left with applicable LTCH cases that have a length of stay greater than 
or equal to 8 days. In this final rule, we refer to these cases as 
``trimmed applicable LTCH cases.''
    Step 5--Adjust charges for the effects of Short Stay Outliers 
(SSOs).
    As the next step in the calculation of the FY 2025 MS-LTC-DRG 
relative weights, consistent with our historical approach, as we 
proposed, we adjusted each LTCH's charges per discharge for those 
remaining cases (that is, trimmed applicable LTCH cases) for the 
effects of SSOs (as defined in Sec.  412.529(a) in conjunction with 
Sec.  412.503). Specifically, as we proposed, we made this adjustment 
by counting an SSO case as a fraction of a discharge based on the ratio 
of the length of stay of the case to the average length of stay of all 
cases grouped to the MS-LTC-DRG. This has the effect of proportionately 
reducing the impact of the lower charges for the SSO cases in 
calculating the average charge for the MS-LTC-DRG. This process 
produces the same result as if the actual charges per discharge of an 
SSO case were adjusted to what they would have been had the patient's 
length of stay been equal to the average length of stay of the MS-LTC-
DRG.
    Counting SSO cases as full LTCH cases with no adjustment in

[[Page 69427]]

determining the FY 2025 MS-LTC-DRG relative weights would lower the 
relative weight for affected MS-LTC-DRGs because the relatively lower 
charges of the SSO cases would bring down the average charge for all 
cases within a MS-LTC-DRG. This would result in an ``underpayment'' for 
non-SSO cases and an ``overpayment'' for SSO cases. Therefore, we are 
continuing to adjust for SSO cases under Sec.  412.529 in this manner 
because it would result in more appropriate payments for all LTCH PPS 
standard Federal payment rate cases. (For additional information on 
this step of the relative weight methodology, we refer readers to 67 FR 
55989 and 74 FR 43959.)
    Step 6--Calculate the relative weights on an iterative basis using 
the hospital-specific relative value methodology.
    By nature, LTCHs often specialize in certain areas, such as 
ventilator-dependent patients. Some case types (MS-LTC-DRGs) may be 
treated, to a large extent, in hospitals that have, from a perspective 
of charges, relatively high (or low) charges. This nonrandom 
distribution of cases with relatively high (or low) charges in specific 
MS-LTC-DRGs has the potential to inappropriately distort the measure of 
average charges. To account for the fact that cases may not be randomly 
distributed across LTCHs, consistent with the methodology we have used 
since the implementation of the LTCH PPS, in this FY 2025 IPPS/LTCH PPS 
final rule, as we proposed, we are continuing to use a hospital-
specific relative value (HSRV) methodology to calculate the MS-LTC-DRG 
relative weights for FY 2025. We believe that this method removes this 
hospital-specific source of bias in measuring LTCH average charges (67 
FR 55985). Specifically, under this methodology, we reduced the impact 
of the variation in charges across providers on any particular MS-LTC-
DRG relative weight by converting each LTCH's charge for an applicable 
LTCH case to a relative value based on that LTCH's average charge for 
such cases.
    Under the HSRV methodology, we standardize charges for each LTCH by 
converting its charges for each applicable LTCH case to hospital-
specific relative charge values and then adjusting those values for the 
LTCH's case-mix. The adjustment for case-mix is needed to rescale the 
hospital-specific relative charge values (which, by definition, average 
1.0 for each LTCH). The average relative weight for an LTCH is its 
case-mix; therefore, it is reasonable to scale each LTCH's average 
relative charge value by its case-mix. In this way, each LTCH's 
relative charge value is adjusted by its case-mix to an average that 
reflects the complexity of the applicable LTCH cases it treats relative 
to the complexity of the applicable LTCH cases treated by all other 
LTCHs (the average LTCH PPS case-mix of all applicable LTCH cases 
across all LTCHs). In other words, by multiplying an LTCH's relative 
charge values by the LTCH's case-mix index, we account for the fact 
that the same relative charges are given greater weight at an LTCH with 
higher average costs than they would at an LTCH with low average costs, 
which is needed to adjust each LTCH's relative charge value to reflect 
its case-mix relative to the average case-mix for all LTCHs. By 
standardizing charges in this manner, we count charges for a Medicare 
patient at an LTCH with high average charges as less resource-intensive 
than they would be at an LTCH with low average charges. For example, a 
$10,000 charge for a case at an LTCH with an average adjusted charge of 
$17,500 reflects a higher level of relative resource use than a $10,000 
charge for a case at an LTCH with the same case-mix, but an average 
adjusted charge of $35,000. We believe that the adjusted charge of an 
individual case more accurately reflects actual resource use for an 
individual LTCH because the variation in charges due to systematic 
differences in the markup of charges among LTCHs is taken into account.
    Consistent with our historical relative weight methodology, as we 
proposed, we calculated the FY 2025 MS-LTC-DRG relative weights using 
the HSRV methodology, which is an iterative process. Therefore, in 
accordance with our established methodology, for FY 2025, we continued 
to standardize charges for each applicable LTCH case by first dividing 
the adjusted charge for the case (adjusted for SSOs under Sec.  412.529 
as described in Step 5 of our methodology) by the average adjusted 
charge for all applicable LTCH cases at the LTCH in which the case was 
treated. The average adjusted charge reflects the average intensity of 
the health care services delivered by a particular LTCH and the average 
cost level of that LTCH. The average adjusted charge is then multiplied 
by the LTCH's case-mix index to produce an adjusted hospital-specific 
relative charge value for the case. We used an initial case-mix index 
value of 1.0 for each LTCH.
    For each MS-LTC-DRG, we calculated the FY 2025 relative weight by 
dividing the SSO-adjusted average of the hospital-specific relative 
charge values for applicable LTCH cases for the MS-LTC-DRG (that is, 
the sum of the hospital-specific relative charge value, as previously 
stated, divided by the sum of equivalent cases from Step 5 for each MS-
LTC-DRG) by the overall SSO-adjusted average hospital-specific relative 
charge value across all applicable LTCH cases for all LTCHs (that is, 
the sum of the hospital-specific relative charge value, as previously 
stated, divided by the sum of equivalent applicable LTCH cases from 
Step 5 for each MS-LTC-DRG). Using these recalculated MS-LTC-DRG 
relative weights, each LTCH's average relative weight for all of its 
SSO-adjusted trimmed applicable LTCH cases (that is, it's case-mix) was 
calculated by dividing the sum of all the LTCH's MS-LTC-DRG relative 
weights by its total number of SSO-adjusted trimmed applicable LTCH 
cases. The LTCHs' hospital-specific relative charge values (from 
previous) are then multiplied by the hospital-specific case-mix 
indexes. The hospital-specific case-mix adjusted relative charge values 
are then used to calculate a new set of MS-LTC-DRG relative weights 
across all LTCHs. This iterative process continued until there was 
convergence between the relative weights produced at adjacent steps, 
for example, when the maximum difference was less than 0.0001.
    Step 7--Adjust the relative weights to account for nonmonotonically 
increasing relative weights.
    The MS-DRGs contain base DRGs that have been subdivided into one, 
two, or three severity of illness levels. Where there are three 
severity levels, the most severe level has at least one secondary 
diagnosis code that is referred to as an MCC (that is, major 
complication or comorbidity). The next lower severity level contains 
cases with at least one secondary diagnosis code that is a CC (that is, 
complication or comorbidity). Those cases without an MCC or a CC are 
referred to as ``without CC/MCC.'' When data do not support the 
creation of three severity levels, the base MS-DRG is subdivided into 
either two levels or the base MS-DRG is not subdivided. The two-level 
subdivisions may consist of the MS-DRG with CC/MCC and the MS-DRG 
without CC/MCC. Alternatively, the other type of two-level subdivision 
may consist of the MS-DRG with MCC and the MS-DRG without MCC.
    In those base MS-LTC-DRGs that are split into either two or three 
severity levels, cases classified into the ``without CC/MCC'' MS-LTC-
DRG are expected to have a lower resource use (and lower costs) than 
the ``with CC/MCC'' MS-LTC-DRG (in the case of a two-level split) or 
both the ``with CC'' and the ``with MCC'' MS-LTC-DRGs (in the case of a 
three-level split). That is, theoretically, cases that are more severe

[[Page 69428]]

typically require greater expenditure of medical care resources and 
would result in higher average charges. Therefore, in the three 
severity levels, relative weights should increase by severity, from 
lowest to highest. If the relative weights decrease as severity 
increases (that is, if within a base MS-LTC-DRG, an MS-LTC-DRG with CC 
has a higher relative weight than one with MCC, or the MS-LTC-DRG 
``without CC/MCC'' has a higher relative weight than either of the 
others), they are nonmonotonic. We continue to believe that utilizing 
nonmonotonic relative weights to adjust Medicare payments would result 
in inappropriate payments because the payment for the cases in the 
higher severity level in a base MS-LTC-DRG (which are generally 
expected to have higher resource use and costs) would be lower than the 
payment for cases in a lower severity level within the same base MS-
LTC-DRG (which are generally expected to have lower resource use and 
costs). Therefore, in determining the FY 2025 MS-LTC-DRG relative 
weights, consistent with our historical methodology, as we proposed, we 
continued to combine MS-LTC-DRG severity levels within a base MS-LTC-
DRG for the purpose of computing a relative weight when necessary to 
ensure that monotonicity is maintained. For a comprehensive description 
of our existing methodology to adjust for nonmonotonicity, we refer 
readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43964 
through 43966). Any adjustments for nonmonotonicity that were made in 
determining the FY 2025 MS-LTC-DRG relative weights by applying this 
methodology are denoted in Table 11, which is listed in section VI. of 
the Addendum to this final rule and is available via the internet on 
the CMS website.
    Step 8--Determine a relative weight for MS-LTC-DRGs with no 
applicable LTCH cases.
    Using the trimmed applicable LTCH cases, consistent with our 
historical methodology, we identified the MS-LTC-DRGs for which there 
were no claims in the March 2024 update of the FY 2023 MedPAR file and, 
therefore, for which no charge data was available for these MS-LTC-
DRGs. Because patients with a number of the diagnoses under these MS-
LTC-DRGs may be treated at LTCHs, consistent with our historical 
methodology, we generally assign a relative weight to each of the no-
volume MS-LTC-DRGs based on clinical similarity and relative costliness 
(with the exception of ``transplant'' MS-LTC-DRGs, ``error'' MS-LTC-
DRGs, and MS-LTC-DRGs that indicate a principal diagnosis related to a 
psychiatric diagnosis or rehabilitation (referred to as the 
``psychiatric or rehabilitation'' MS-LTC-DRGs), as discussed later in 
this section of this final rule). (For additional information on this 
step of the relative weight methodology, we refer readers to 67 FR 
55991 and 74 FR 43959 through 43960.)
    Consistent with our existing methodology, as we proposed, we cross-
walked each no-volume MS-LTC-DRG to another MS-LTC-DRG for which we 
calculated a relative weight (determined in accordance with the 
methodology as previously described). Then, the ``no-volume'' MS-LTC-
DRG is assigned the same relative weight (and average length of stay) 
of the MS-LTC-DRG to which it was cross-walked (as described in greater 
detail in this section of this final rule).
    Of the 773 MS-LTC-DRGs for FY 2025, we identified 426 MS-LTC-DRGs 
for which there were no trimmed applicable LTCH cases. The 426 MS-LTC-
DRGs for which there were no trimmed applicable LTCH cases includes the 
11 ``transplant'' MS-LTC-DRGs, the 2 ``error'' MS-LTC-DRGs, and the 15 
``psychiatric or rehabilitation'' MS-LTC-DRGs, which are discussed in 
this section of this rule, such that we identified 398 MS-LTC-DRGs that 
for which, we assigned a relative weight using our existing ``no-
volume'' MS-LTC-DRG methodology (that is, 426-11-2-15 = 398). As we 
proposed, we assigned relative weights to each of the 398 no-volume MS-
LTC-DRGs based on clinical similarity and relative costliness to 1 of 
the remaining 347 (773-426 = 347) MS-LTC-DRGs for which we calculated 
relative weights based on the trimmed applicable LTCH cases in the FY 
2023 MedPAR file data using the steps described previously. (For the 
remainder of this discussion, we refer to the ``cross-walked'' MS-LTC-
DRGs as one of the 347 MS-LTC-DRGs to which we cross-walked each of the 
398 ``no-volume'' MS-LTC-DRGs.) Then, in general, we assigned the 398 
no-volume MS-LTC-DRGs the relative weight of the cross-walked MS-LTC-
DRG (when necessary, we made adjustments to account for 
nonmonotonicity).
    We cross-walked the no-volume MS-LTC-DRG to a MS-LTC-DRG for which 
we calculated relative weights based on the March 2024 update of the FY 
2023 MedPAR file, and to which it is similar clinically in intensity of 
use of resources and relative costliness as determined by criteria such 
as care provided during the period of time surrounding surgery, 
surgical approach (if applicable), length of time of surgical 
procedure, postoperative care, and length of stay. (For more details on 
our process for evaluating relative costliness, we refer readers to the 
FY 2010 IPPS/RY 2010 LTCH PPS final rule (73 FR 48543).) We believe in 
the rare event that there would be a few LTCH cases grouped to one of 
the no-volume MS-LTC-DRGs in FY 2025, the relative weights assigned 
based on the cross-walked MS-LTC-DRGs would result in an appropriate 
LTCH PPS payment because the crosswalks, which are based on clinical 
similarity and relative costliness, would be expected to generally 
require equivalent relative resource use.
    Then we assigned the relative weight of the cross-walked MS-LTC-DRG 
as the relative weight for the no-volume MS-LTC-DRG such that both of 
these MS-LTC-DRGs (that is, the no-volume MS-LTC-DRG and the cross-
walked MS-LTC-DRG) have the same relative weight (and average length of 
stay) for FY 2025. We note that, if the cross-walked MS-LTC-DRG had 25 
applicable LTCH cases or more, its relative weight (calculated using 
the methodology as previously described in Steps 1 through 4) is 
assigned to the no-volume MS-LTC-DRG as well. Similarly, if the MS-LTC-
DRG to which the no-volume MS-LTC-DRG was cross-walked had 24 or less 
cases and, therefore, was designated to 1 of the low-volume quintiles 
for purposes of determining the relative weights, we assigned the 
relative weight of the applicable low-volume quintile to the no-volume 
MS-LTC-DRG such that both of these MS-LTC-DRGs (that is, the no-volume 
MS-LTC-DRG and the cross-walked MS-LTC-DRG) have the same relative 
weight for FY 2025. (As we noted previously, in the infrequent case 
where nonmonotonicity involving a no-volume MS-LTC-DRG resulted, 
additional adjustments are required to maintain monotonically 
increasing relative weights.)
    For this final rule, we are providing the list of the no-volume MS-
LTC-DRGs and the MS-LTC-DRGs to which each was cross-walked (that is, 
the cross-walked MS-LTC-DRGs) for FY 2025 in a supplemental data file 
for public use posted via the internet on the CMS website for this 
final rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html to streamline the information made 
available to the public that is used in the annual development of Table 
11.
    To illustrate this methodology for determining the relative weights 
for the FY 2025 MS-LTC-DRGs with no applicable LTCH cases, we are 
providing the following example.

[[Page 69429]]

    Example: There were no trimmed applicable LTCH cases in the FY 2023 
MedPAR file that we are using for this final rule for MS-LTC-DRG 061 
(Ischemic stroke, precerebral occlusion or transient ischemia with 
thrombolytic agent with MCC). We determined that MS-LTC-DRG 064 
(Intracranial hemorrhage or cerebral infarction with MCC) is similar 
clinically and based on resource use to MS-LTC-DRG 061. Therefore, we 
assigned the same relative weight (and average length of stay) of MS-
LTC-DRG 064 of 1.3008 for FY 2025 to MS-LTC-DRG 061 (we refer readers 
to Table 11, which is listed in section VI. of the Addendum to this 
final rule and is available via the internet on the CMS website).
    Again, we note that, as this system is dynamic, it is entirely 
possible that the number of MS-LTC-DRGs with no volume would vary in 
the future. Consistent with our historical practice, as we proposed, we 
used the best available claims data to identify the trimmed applicable 
LTCH cases from which we determined the relative weights in the final 
rule.
    For FY 2025, consistent with our historical relative weight 
methodology, as we proposed, we are establishing a relative weight of 
0.0000 for the following transplant MS-LTC-DRGs: Heart Transplant or 
Implant of Heart Assist System with MCC (MS-LTC-DRG 001); Heart 
Transplant or Implant of Heart Assist System without MCC (MS-LTC-DRG 
002); Liver Transplant with MCC or Intestinal Transplant (MS-LTC-DRG 
005); Liver Transplant without MCC (MS-LTC-DRG 006); Lung Transplant 
(MS-LTC-DRG 007); Simultaneous Pancreas and Kidney Transplant (MS-LTC-
DRG 008); Simultaneous Pancreas and Kidney Transplant with Hemodialysis 
(MS-LTC-DRG 019); Pancreas Transplant (MS-LTC-DRG 010); Kidney 
Transplant (MS-LTC-DRG 652); Kidney Transplant with Hemodialysis with 
MCC (MS-LTC-DRG 650), and Kidney Transplant with Hemodialysis without 
MCC (MS LTC DRG 651). This is because Medicare only covers these 
procedures if they are performed at a hospital that has been certified 
for the specific procedures by Medicare and presently no LTCH has been 
so certified. At the present time, we include these 11 transplant MS-
LTC-DRGs in the GROUPER program for administrative purposes only. 
Because we use the same GROUPER program for LTCHs as is used under the 
IPPS, removing these MS-LTC-DRGs would be administratively burdensome. 
(For additional information regarding our treatment of transplant MS-
LTC-DRGs, we refer readers to the RY 2010 LTCH PPS final rule (74 FR 
43964).) In addition, consistent with our historical policy, we are 
establishing a relative weight of 0.0000 for the 2 ``error'' MS-LTC-
DRGs (that is, MS-LTC-DRG 998 (Principal Diagnosis Invalid as Discharge 
Diagnosis) and MS-LTC-DRG 999 (Ungroupable)) because applicable LTCH 
cases grouped to these MS-LTC-DRGs cannot be properly assigned to an 
MS-LTC-DRG according to the grouping logic.
    Additionally, we are establishing a relative weight of 0.0000 for 
the following ``psychiatric or rehabilitation'' MS-LTC-DRGs: MS-LTC-DRG 
876 (O.R. Procedures with Principal Diagnosis of Mental Illness); MS-
LTC-DRG 880 (Acute Adjustment Reaction & Psychosocial Dysfunction); MS-
LTC-DRG 881 (Depressive Neuroses); MS-LTC-DRG 882 (Neuroses Except 
Depressive); MS-LTC-DRG 883 (Disorders of Personality & Impulse 
Control); MS-LTC-DRG 884 (Organic Disturbances & Intellectual 
Disability); MS-LTC-DRG 885 (Psychoses); MS-LTC-DRG 886 (Behavioral & 
Developmental Disorders); MS-LTC-DRG 887 (Other Mental Disorder 
Diagnoses); MS-LTC-DRG 894 (Alcohol, Drug Abuse or Dependence, Left 
AMA); MS-LTC-DRG 895 (Alcohol, Drug Abuse or Dependence with 
Rehabilitation Therapy); MS-LTC-DRG 896 (Alcohol, Drug Abuse or 
Dependence without Rehabilitation Therapy with MCC); MS-LTC-DRG 897 
(Alcohol, Drug Abuse or Dependence without Rehabilitation Therapy 
without MCC); MS-LTC-DRG 945 (Rehabilitation with CC/MCC); and MS-LTC-
DRG 946 (Rehabilitation without CC/MCC). We are establishing a relative 
weight of 0.0000 for these 15 ``psychiatric or rehabilitation'' MS-LTC-
DRGs because the blended payment rate and temporary exceptions to the 
site neutral payment rate would not be applicable for any LTCH 
discharges occurring in FY 2025, and as such payment under the LTCH PPS 
would be no longer be made in part based on the LTCH PPS standard 
Federal payment rate for any discharges assigned to those MS-LTC-DRGs.
    Step 9--Budget neutralize the uncapped relative weights.
    In accordance with the regulations at Sec.  412.517(b) (in 
conjunction with Sec.  412.503), the annual update to the MS-LTC-DRG 
classifications and relative weights is done in a budget neutral manner 
such that estimated aggregate LTCH PPS payments would be unaffected, 
that is, would be neither greater than nor less than the estimated 
aggregate LTCH PPS payments that would have been made without the MS-
LTC-DRG classification and relative weight changes. (For a detailed 
discussion on the establishment of the budget neutrality requirement 
for the annual update of the MS-LTC-DRG classifications and relative 
weights, we refer readers to the RY 2008 LTCH PPS final rule (72 FR 
26881 and 26882).
    To achieve budget neutrality under the requirement at Sec.  
412.517(b), under our established methodology, for each annual update 
the MS-LTC-DRG relative weights are uniformly adjusted to ensure that 
estimated aggregate payments under the LTCH PPS would not be affected 
(that is, decreased or increased). Consistent with that provision, as 
we proposed, we continued to apply budget neutrality adjustments in 
determining the FY 2025 MS-LTC-DRG relative weights so that our update 
of the MS-LTC-DRG classifications and relative weights for FY 2025 are 
made in a budget neutral manner. For FY 2025, as we proposed, we 
applied two budget neutrality factors to determine the MS-LTC-DRG 
relative weights. In this step, we describe the determination of the 
budget neutrality adjustment that accounts for the update of the MS-
LTC-DRG classifications and relative weights prior to the application 
of the ten-percent cap. In steps 10 and 11, we describe the application 
of the 10-percent cap policy (step 10) and the determination of the 
budget neutrality factor that accounts for the application of the 10-
percent cap policy (step 11).
    In this final rule, to ensure budget neutrality for the update to 
the MS-LTC-DRG classifications and relative weights prior to the 
application of the 10-percent cap (that is, uncapped relative weights), 
under Sec.  412.517(b), we continued to use our established two-step 
budget neutrality methodology. Therefore, in the first step of our MS-
LTC-DRG update budget neutrality methodology, for FY 2025, we 
calculated and applied a normalization factor to the recalibrated 
relative weights (the result of Steps 1 through 8 discussed previously) 
to ensure that estimated payments are not affected by changes in the 
composition of case types or the changes to the classification system. 
That is, the normalization adjustment is intended to ensure that the 
recalibration of the MS-LTC-DRG relative weights (that is, the process 
itself) neither increases nor decreases the average case-mix index.
    To calculate the normalization factor for FY 2025, we used the 
following three steps: (1.a.) use the applicable LTCH cases from the 
best available data (that is, LTCH discharges from the FY 2023 MedPAR 
file) and group them

[[Page 69430]]

using the FY 2025 GROUPER (that is, Version 42 for FY 2025) and the 
recalibrated FY 2025 MS-LTC-DRG uncapped relative weights (determined 
in Steps 1 through 8 discussed previously) to calculate the average 
case-mix index; (1.b.) group the same applicable LTCH cases (as are 
used in Step 1.a.) using the FY 2024 GROUPER (Version 41) and FY 2024 
MS-LTC-DRG relative weights in Table 11 of the FY 2024 IPPS/LTCH PPS 
final rule and calculate the average case-mix index; and (1.c.) compute 
the ratio of these average case-mix indexes by dividing the average 
case-mix index for FY 2024 (determined in Step 1.b.) by the average 
case-mix index for FY 2025 (determined in Step 1.a.). As a result, in 
determining the MS-LTC-DRG relative weights for FY 2025, each 
recalibrated MS-LTC-DRG uncapped relative weight is multiplied by the 
normalization factor of 1.27408 (determined in Step 1.c.) in the first 
step of the budget neutrality methodology, which produces ``normalized 
relative weights.''
    In the second step of our MS-LTC-DRG update budget neutrality 
methodology, we calculated a budget neutrality adjustment factor 
consisting of the ratio of estimated aggregate FY 2025 LTCH PPS 
standard Federal payment rate payments for applicable LTCH cases before 
reclassification and recalibration to estimated aggregate payments for 
FY 2025 LTCH PPS standard Federal payment rate payments for applicable 
LTCH cases after reclassification and recalibration. That is, for this 
final rule, for FY 2025, we determined the budget neutrality adjustment 
factor using the following three steps: (2.a.) simulate estimated total 
FY 2025 LTCH PPS standard Federal payment rate payments for applicable 
LTCH cases using the uncapped normalized relative weights for FY 2025 
and GROUPER Version 42; (2.b.) simulate estimated total FY 2025 LTCH 
PPS standard Federal payment rate payments for applicable LTCH cases 
using the FY 2024 GROUPER (Version 41) and the FY 2024 MS-LTC-DRG 
relative weights in Table 11 of the FY 2024 IPPS/LTCH PPS final rule; 
and (2.c.) calculate the ratio of these estimated total payments by 
dividing the value determined in Step 2.b. by the value determined in 
Step 2.a. In determining the FY 2025 MS-LTC-DRG relative weights, each 
uncapped normalized relative weight is then multiplied by a budget 
neutrality factor of 0.9885836 (the value determined in Step 2.c.) in 
the second step of the budget neutrality methodology.
    Step 10--Apply the 10-percent cap to decreases in MS-LTC-DRG 
relative weights.
    To mitigate the financial impacts of significant year-to-year 
reductions in MS-LTC-DRGs relative weights, beginning in FY 2023, we 
adopted a policy that applies, in a budget neutral manner, a 10-percent 
cap on annual relative weight decreases for MS-LTC-DRGs with at least 
25 applicable LTCH cases (Sec.  412.515(b)). Under this policy, in 
cases where CMS creates new MS-LTC-DRGs or modifies the MS-LTC-DRGs as 
part of its annual reclassifications resulting in renumbering of one or 
more MS-LTC-DRGs, the 10-percent cap does not apply to the relative 
weight for any new or renumbered MS-LTC-DRGs for the fiscal year. We 
refer readers to section VIII.B.3.b. of the preamble of the FY 2023 
IPPS/LTCH PPS final rule with comment period for a detailed discussion 
on the adoption of the 10-percent cap policy (87 FR 49152 through 
49154).
    Applying the 10-percent cap to MS-LTC-DRGs with 25 or more cases 
results in more predictable and stable MS-LTC-DRG relative weights from 
year to year, especially for high-volume MS-LTC-DRGs that generally 
have the largest financial impact on an LTCH's operations. For this 
final rule, in cases where the relative weight for a MS-LTC-DRG with 25 
or more applicable LTCH cases would decrease by more than 10-percent in 
FY 2025 relative to FY 2024, as we proposed, we limited the reduction 
to 10-percent. Under this policy, we do not apply the 10 percent cap to 
the low-volume MS-LTC-DRGs identified in Step 3 or the no-volume MS-
LTC-DRGs identified in Step 8.
    Therefore, in this step, for each FY 2025 MS-LTC-DRG with 25 or 
more applicable LTCH cases (excludes low-volume and zero-volume MS-LTC-
DRGs) we compared its FY 2025 relative weight (after application of the 
normalization and budget neutrality factors determined in Step 9), to 
its FY 2024 MS-LTC-DRG relative weight. For any MS-LTC-DRG where the FY 
2025 relative weight would otherwise have declined more than 10 
percent, we established a capped FY 2025 MS-LTC-DRG relative weight 
that is equal to 90 percent of that MS-LTC-DRG's FY 2024 relative 
weight (that is, we set the FY 2025 relative weight equal to the FY 
2024 weight x 0.90).
    In section II.E. of the preamble of this final rule, we discuss our 
changes to the MS-DRGs, and by extension the MS-LTC-DRGs, for FY 2025. 
As discussed previously, under our current policy, the 10-percent cap 
does not apply to the relative weight for any new or renumbered MS-LTC-
DRGs. We did not propose any changes to this policy for FY 2025, and as 
such any new or renumbered MS-LTC-DRGs for FY 2025 were not eligible 
for the 10-percent cap.
    Step 11--Budget neutralize application of the 10-percent cap 
policy.
    Under the requirement at existing Sec.  412.517(b) that aggregate 
LTCH PPS payments will be unaffected by annual changes to the MS-LTC-
DRG classifications and relative weights, consistent with our 
established methodology, we continued to apply a budget neutrality 
adjustment to the MS-LTC-DRG relative weights so that the 10-percent 
cap on relative weight reductions (step 10) is implemented in a budget 
neutral manner. Therefore, we determined the budget neutrality 
adjustment factor for the 10-percent cap on relative weight reductions 
using the following three steps: (a) simulate estimated total FY 2025 
LTCH PPS standard Federal payment rate payments for applicable LTCH 
cases using the capped relative weights for FY 2025 (determined in Step 
10) and GROUPER Version 42; (b) simulate estimated total FY 2025 LTCH 
PPS standard Federal payment rate payments for applicable LTCH cases 
using the uncapped relative weights for FY 2025 (determined in Step 9) 
and GROUPER Version 42; and (c) calculate the ratio of these estimated 
total payments by dividing the value determined in step (b) by the 
value determined in step (a). In determining the FY 2025 MS-LTC-DRG 
relative weights, each capped relative weight is then multiplied by a 
budget neutrality factor of 0.9945741 (the value determined in step 
(c)) to achieve the budget neutrality requirement.
    Table 11, which is listed in section VI. of the Addendum to this 
final rule and is available via the internet on the CMS website, lists 
the MS-LTC-DRGs and their respective relative weights, geometric mean 
length of stay, and five-sixths of the geometric mean length of stay 
(used to identify SSO cases under Sec.  412.529(a)) for FY 2025. We 
also are making available on the website the MS-LTC-DRG relative 
weights prior to the application of the 10 percent cap on MS-LTC-DRG 
relative weight reductions and corresponding cap budget neutrality 
factor.

[[Page 69431]]

C. Changes to the LTCH PPS Payment Rates and Other Changes to the LTCH 
PPS for FY 2025

1. Overview of Development of the LTCH PPS Standard Federal Payment 
Rates
    The basic methodology for determining LTCH PPS standard Federal 
payment rates is currently set forth at 42 CFR 412.515 through 412.533 
and 412.535. In this section, we discuss the factors that we use to 
update the LTCH PPS standard Federal payment rate for FY 2025, that is, 
effective for LTCH discharges occurring on or after October 1, 2024, 
through September 30, 2025. Under the dual rate LTCH PPS payment 
structure required by statute, beginning with discharges in cost 
reporting periods beginning in FY 2016, only LTCH discharges that meet 
the criteria for exclusion from the site neutral payment rate are paid 
based on the LTCH PPS standard Federal payment rate specified at 42 CFR 
412.523. (For additional details on our finalized policies related to 
the dual rate LTCH PPS payment structure required by statute, we refer 
readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 
49623).)
    Prior to the implementation of the dual payment rate system in FY 
2016, all LTCH discharges were paid similarly to those now exempt from 
the site neutral payment rate. That legacy payment rate was called the 
standard Federal rate. For details on the development of the initial 
standard Federal rate for FY 2003, we refer readers to the August 30, 
2002 LTCH PPS final rule (67 FR 56027 through 56037). For subsequent 
updates to the standard Federal rate from FYs 2003 through 2015, and 
LTCH PPS standard Federal payment rate from FY 2016 through present, as 
implemented under 42 CFR 412.523(c)(3), we refer readers to the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42445 through 42446).
    In this FY 2025 IPPS/LTCH PPS final rule, we present our policies 
related to the annual update to the LTCH PPS standard Federal payment 
rate for FY 2025.
    The update to the LTCH PPS standard Federal payment rate for FY 
2025 is presented in section V.A. of the Addendum to this final rule. 
The components of the annual update to the LTCH PPS standard Federal 
payment rate for FY 2025 are discussed in this section, including the 
statutory reduction to the annual update for LTCHs that fail to submit 
quality reporting data for FY 2025 as required by the statute (as 
discussed in section VIII.C.2.c. of the preamble of this final rule). 
As we proposed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
36267), we also made an adjustment to the LTCH PPS standard Federal 
payment rate to account for the estimated effect of the changes to the 
area wage level for FY 2025 on estimated aggregate LTCH PPS payments, 
in accordance with 42 CFR 412.523(d)(4) (as discussed in section V.B. 
of the Addendum to this final rule).
2. FY 2025 LTCH PPS Standard Federal Payment Rate Annual Market Basket 
Update
a. Overview
    Historically, the Medicare program has used a market basket to 
account for input price increases in the services furnished by 
providers. The market basket used for the LTCH PPS includes both 
operating and capital-related costs of LTCHs because the LTCH PPS uses 
a single payment rate for both operating and capital-related costs. We 
adopted the 2017-based LTCH market basket for use under the LTCH PPS 
beginning in FY 2021 (85 FR 58907 through 58909). As discussed in 
section VIII.D. of the preamble of this final rule, we are finalizing 
our proposal to rebase and revise the 2017-based LTCH market basket to 
reflect a 2022 base year. For additional details on the historical 
development of the market basket used under the LTCH PPS, we refer 
readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53467 through 
53476), and for a complete discussion of the LTCH market basket and a 
description of the methodologies used to determine the operating and 
capital-related portions of the 2017-based LTCH market basket, we refer 
readers to the FY 2021 IPPS/LTCH PPS final rule (85 FR 58909 through 
58926).
    Section 3401(c) of the Affordable Care Act provides for certain 
adjustments to any annual update to the LTCH PPS standard Federal 
payment rate and refers to the timeframes associated with such 
adjustments as a ``rate year.'' We note that, because the annual update 
to the LTCH PPS policies, rates, and factors now occurs on October 1, 
we adopted the term ``fiscal year'' (FY) rather than ``rate year'' (RY) 
under the LTCH PPS beginning October 1, 2010, to conform with the 
standard definition of the Federal fiscal year (October 1 through 
September 30) used by other PPSs, such as the IPPS (75 FR 50396 through 
50397). Although the language of sections 3004(a), 3401(c), 10319, and 
1105(b) of the Affordable Care Act refers to years 2010 and thereafter 
under the LTCH PPS as ``rate year,'' consistent with our change in the 
terminology used under the LTCH PPS from ``rate year'' to ``fiscal 
year,'' for purposes of clarity, when discussing the annual update for 
the LTCH PPS standard Federal payment rate, including the provisions of 
the Affordable Care Act, we use ``fiscal year'' rather than ``rate 
year'' for 2011 and subsequent years.
b. Annual Update to the LTCH PPS Standard Federal Payment Rate for FY 
2025
    As previously noted, for FY 2025, we are finalizing our proposal to 
rebase and revise the 2017-based LTCH market basket to reflect a 2022 
base year. The 2022-based LTCH market basket is primarily based on the 
Medicare cost report data submitted by LTCHs and, therefore, 
specifically reflects the cost structures of LTCHs. As described in 
more detail in section VIII.D.1 of the preamble of this final rule, we 
used data from cost reporting periods beginning on and after April 1, 
2021, and prior to April 1, 2022 because these data reflect the most 
recent information that are most representative of FY 2022. We believe 
that the 2022-based LTCH market basket appropriately reflects the cost 
structure of LTCHs, as discussed in greater detail in section VIII.D. 
of the preamble of this final rule. Therefore, in this final rule, as 
we proposed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36267), 
we use the 2022-based LTCH market basket to update the LTCH PPS 
standard Federal payment rate for FY 2025.
    Section 1886(m)(3)(A) of the Act provides that, beginning in FY 
2010, any annual update to the LTCH PPS standard Federal payment rate 
is reduced by the adjustments specified in clauses (i) and (ii) of 
subparagraph (A), as applicable. Clause (i) of section 1886(m)(3)(A) of 
the Act provides for a reduction, for FY 2012 and each subsequent rate 
year, 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, as added by section 3401(a) of the Affordable Care Act, defines 
this productivity adjustment as equal to the 10-year moving average of 
changes in annual economy-wide, private nonfarm business multifactor 
productivity (as projected by the Secretary for the 10-year period 
ending with the applicable fiscal year, year, cost reporting period, or 
other annual period). The U.S. Department of Labor's Bureau of Labor 
Statistics (BLS) publishes the official measures of private nonfarm 
business productivity for the U.S. economy. We note that previously the 
productivity measure referenced in section 1886(b)(3)(B)(xi)(II) was 
published by

[[Page 69432]]

BLS as private nonfarm business multifactor productivity. Beginning 
with the November 18, 2021 release of productivity data, BLS replaced 
the 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) is now 
published by BLS as private nonfarm business total factor productivity. 
However, as mentioned, the data and methods are unchanged. Please see 
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. Clause (ii) of section 1886(m)(3)(A) of the Act provided 
for a reduction, for each of FYs 2010 through 2019, by the ``other 
adjustment'' described in section 1886(m)(4)(F) of the Act; therefore, 
it is not applicable for FY 2025.
    Section 1886(m)(3)(B) of the Act provides that the application of 
paragraph (3) of section 1886(m) of the Act may result in the annual 
update being less than zero for a rate year, and may result in payment 
rates for a rate year being less than such payment rates for the 
preceding rate year.
c. Adjustment to the LTCH PPS Standard Federal Payment Rate Under the 
Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    In accordance with section 1886(m)(5) of the Act, the Secretary 
established the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP). The reduction in the annual update to the LTCH PPS standard 
Federal payment rate for failure to report quality data under the LTCH 
QRP for FY 2014 and subsequent fiscal years is codified under 42 CFR 
412.523(c)(4). The LTCH QRP, as required for FY 2014 and subsequent 
fiscal years by section 1886(m)(5)(A)(i) of the Act, requires that a 
2.0 percentage points reduction be applied to any update under 42 CFR 
412.523(c)(3) for an LTCH that does not submit quality reporting data 
to the Secretary in accordance with section 1886(m)(5)(C) of the Act 
with respect to such a year (that is, in the form and manner and at the 
time specified by the Secretary under the LTCH QRP) (42 CFR 
412.523(c)(4)(i)). Section 1886(m)(5)(A)(ii) of the Act provides that 
the application of the 2.0 percentage points reduction may result in an 
annual update that is less than 0.0 for a year, and may result in LTCH 
PPS payment rates for a year being less than such LTCH PPS payment 
rates for the preceding year. Furthermore, section 1886(m)(5)(B) of the 
Act specifies that the 2.0 percentage points reduction is applied in a 
noncumulative manner, such that any reduction made under section 
1886(m)(5)(A) of the Act shall apply only with respect to the year 
involved and shall not be taken into account in computing the LTCH PPS 
payment amount for a subsequent year. These requirements are codified 
in the regulations at 42 CFR 412.523(c)(4). (For additional information 
on the history of the LTCH QRP, including the statutory authority and 
the selected measures, we refer readers to section IX. of the preamble 
of this final rule.)
d. Annual Market Basket Update Under the LTCH PPS for FY 2025
    Consistent with our historical practice, we estimate the market 
basket percentage increase and the productivity adjustment based on IHS 
Global Inc.'s (IGI's) forecast using the most recent available data. 
Based on IGI's fourth quarter 2023 forecast, the proposed FY 2025 
market basket percentage increase for the LTCH PPS using the proposed 
2022-based LTCH market basket was 3.2 percent. The proposed 
productivity adjustment for FY 2025 based on IGI's fourth quarter 2023 
forecast was 0.4 percentage point.
    For FY 2025, section 1886(m)(3)(A)(i) of the Act requires that any 
annual update to the LTCH PPS standard Federal payment rate be reduced 
by the productivity adjustment, described in section 
1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute, we 
proposed to reduce the FY 2025 market basket percentage increase by the 
FY 2025 productivity adjustment. To determine the proposed market 
basket update for LTCHs for FY 2025 we subtracted the proposed FY 2025 
productivity adjustment from the proposed FY 2025 market basket 
percentage increase. (For additional details on our established 
methodology for adjusting the market basket percentage increase by the 
productivity adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51771).) In addition, for FY 2025, section 1886(m)(5) 
of the Act requires that, for LTCHs that do not submit quality 
reporting data as required under the LTCH QRP, any annual update to an 
LTCH PPS standard Federal payment rate, after application of the 
adjustments required by section 1886(m)(3) of the Act, shall be further 
reduced by 2.0 percentage points.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36268), in 
accordance with the statute, we proposed to reduce the proposed FY 2025 
market basket percentage increase of 3.2 percent (based on IGI's fourth 
quarter 2023 forecast of the proposed 2022-based LTCH market basket) by 
the proposed FY 2025 productivity adjustment of 0.4 percentage point 
(based on IGI's fourth quarter 2023 forecast). Therefore, under the 
authority of section 123 of the BBRA as amended by section 307(b) of 
the BIPA, consistent with 42 CFR 412.523(c)(3)(xvii), we proposed to 
establish an annual market basket update to the LTCH PPS standard 
Federal payment rate for FY 2025 of 2.8 percent (that is, the proposed 
LTCH PPS market basket percentage increase of 3.2 percent less the 
proposed productivity adjustment of 0.4 percentage point). For LTCHs 
that fail to submit quality reporting data under the LTCH QRP, under 42 
CFR 412.523(c)(3)(xvii) in conjunction with 42 CFR 412.523(c)(4), we 
proposed to further reduce the annual update to the LTCH PPS standard 
Federal payment rate by 2.0 percentage points, in accordance with 
section 1886(m)(5) of the Act. Accordingly, we proposed to establish an 
annual update to the LTCH PPS standard Federal payment rate of 0.8 
percent (that is, the proposed 2.8 percent LTCH market basket update 
minus 2.0 percentage points) for FY 2025 for LTCHs that fail to submit 
quality reporting data as required under the LTCH QRP. Consistent with 
our historical practice, we proposed in the FY 2025 IPPS/LTCH PPS 
proposed rule (89 FR 36268) to use a more recent estimate of the market 
basket percentage increase and the productivity adjustment, if 
appropriate, to establish an annual update to the LTCH PPS standard 
Federal payment rate for FY 2025 in the final rule. We note that, 
consistent with historical practice, we also proposed to adjust the FY 
2025 LTCH PPS standard Federal payment rate by an area wage level 
budget neutrality factor in accordance with 42 CFR 412.523(d)(4) (as 
discussed in section V.B.5. of the Addendum to the proposed rule).
    Comment: Several commenters stated that the proposed LTCH PPS 
payment update is inadequate given that inflationary pressures persist 
and LTCHs are experiencing higher costs for items such as labor, 
medical supplies, drugs, cybersecurity, administrative burdens, and 
other operational costs. Commenters stated that the proposed payment 
increase falls below economywide inflation over the past

[[Page 69433]]

year (3.5 percent) and below what Medicare Advantage plans will receive 
for 2025 (3.7 percent). A few commenters stated concerns regarding 
access to care for Medicare beneficiaries treated in LTCHs given the 
inadequate proposed update for FY 2025. Other challenges cited by 
commenters included the impact of the implementation of the LTCH dual-
rate payment system and other market dynamics, including declines in 
patient volume, concentration of LTCH cases in fewer payment groupings, 
the growth in Medicare Advantage, and the resulting worsening financial 
situation.
    A commenter urged CMS to consider the effects of changing health 
care system dynamics and the unlikelihood of these dynamics returning 
to ``normal'' trends, which they stated are straining and will continue 
to strain hospitals and health systems. For example, commenters cited 
the disruption to the health care system from the cyberattack on Change 
Healthcare. The commenter urged CMS to focus on appropriately 
accounting for recent and future trends in inflationary pressures and 
cost increases in the hospital payment update, stating it is essential 
to ensure that Medicare payments for acute care services more 
accurately reflect the cost of providing hospital care.
    Commenters stated that labor costs, especially for clinicians, are 
continuing to increase at rates that are faster than what CMS factored 
into the proposed market basket update. A commenter claimed that CMS 
did not fully account for the increased labor costs that LTCHs are 
bearing and stated it is important that CMS modify its customary LTCH 
PPS rate setting methodology to account for the effects of these 
unprecedented labor costs on the cost to care for Medicare 
beneficiaries in LTCHs. The commenter stated that its labor costs (for 
both employed and contract labor) have been increasing at high rates. 
The commenter stated that increases in its compensation and total 
operating expenses have been significantly higher than the market 
basket increases from FY 2020 through FY 2022. The commenter stated 
that these data as well as other studies and reports highlight the need 
for additional increases in payments to cover the significant increases 
in costs that LTCHs have been experiencing. A commenter requested that 
CMS provide for a ``special'' increase to the proposed market basket 
update to account for significantly higher labor and supply costs 
incurred by LTCHs in recent years and in FY 2025.
    A commenter stated that the authorizing statutes for the LTCH PPS 
do not require or mention the use of an index for an annual update, 
therefore, CMS is not restrained by the use of the IGI price proxy 
forecasts or any index with similar data for an annual LTCH PPS rate 
update. In addition, the commenter noted the broad LTCH PPS authority 
in the statute to account for circumstances like higher labor and 
supply costs, stating that Congress would not have included this 
language in the statute if it did not expect CMS to make such 
adjustments when appropriate. According to the commenter it is entirely 
appropriate for CMS to use this broad authority to increase the market 
basket update to account for high labor and supply costs after the end 
of the COVID-19 pandemic that LTCHs continue to experience.
    Commenters stated that the cumulative impact of inflationary 
pressure coupled with the proposed low Medicare payment increases for 
FY 2025 will continue to have negative effects on LTCH PPS operating 
margins. The commenters urged CMS to use more current data that 
includes the recent inflationary increases in cost. In the absence of 
such data, they requested that CMS consider an alternative approach to 
better align the market basket increases with the rising cost of 
treating patients.
    Response: CMS has historically used a market basket to account for 
input price increases in the services furnished by fee-for-service 
providers. Since the inception of the LTCH PPS, the LTCH PPS standard 
Federal payment rates (with the exception of statutorily mandated 
updates) have been updated based on a projection of a market basket 
percentage increase. The LTCH market basket (as well as other CMS 
market baskets) is a fixed-weight, Laspeyres type index that measures 
price changes over time and does not reflect increases in costs 
associated with changes in the volume or intensity of input goods and 
services until the index is rebased. As such, the LTCH market basket 
update reflects the prospective price pressures described by the 
commenters as increasing during a high inflation period (such as faster 
wage growth or higher energy prices), but does not inherently reflect 
other factors that might increase the level of costs, such as the 
quantity of labor used. However, the impact of changes in quantity or 
use of services on the market basket cost weights are captured when the 
market basket is rebased.
    As discussed in section VIII. D. of this final rule, after 
consideration of public comments, we are finalizing our proposal to 
rebase and revise the LTCH market basket to reflect a 2022 base year. 
We appreciate the commenters' concern regarding inflationary pressure, 
including labor and supply costs, encountered by LTCHs. The 
compensation cost weight in the 2022-based LTCH market basket is 8.6 
percentage points higher than the compensation cost weight in the 2017-
based LTCH market basket, reflecting the faster labor cost growth 
relative to other input costs as noted by the commenters. We note that 
the market basket percentage increase is a forecast of the price 
pressures that LTCHs are expected to face in FY 2025, and the final FY 
2025 LTCH market basket percentage increase reflects IGI's (a 
nationally recognized economic and financial forecasting firm with 
which CMS contracts to forecast the price proxies of the market 
baskets) projected inflation and overall economic outlook. We also note 
that when developing its forecast for the ECI for hospital workers, IGI 
considers overall labor market conditions (including rise in contract 
labor employment due to tight labor market conditions) as well as 
trends in contract labor wages, both of which could potentially impact 
wages for workers employed directly by the hospital. As projected by 
IGI and other independent forecasters, compensation growth and upward 
price pressures are expected to slow in FY 2025 relative to FY 2023 and 
FY 2024.
    As is our general practice, we proposed that if more recent data 
became available, we would use such data, if appropriate, to derive the 
final FY 2025 LTCH market basket update for the final rule. For this 
final rule, we are using an updated forecast of the price proxies 
underlying the market basket that incorporates more recent historical 
data and reflects a revised outlook regarding the U.S. economy, 
including compensation and inflationary pressures. Based on IGI's 
second quarter 2024 forecast with historical data through the first 
quarter of 2024, the projected 2022-based LTCH market basket percentage 
increase factor for FY 2025 is 3.5 percent, which is 0.3 percentage 
point higher than the projected FY 2025 LTCH market basket percentage 
increase factor in the proposed rule, and reflects a projected increase 
in compensation prices of 4.0 percent. As discussed earlier, we believe 
the LTCH market basket percentage increase appropriately reflects the 
input price growth (including compensation price growth) that LTCHs 
incur in providing medical services. We would note that the 10-year 
historical average (2014-2023) growth rate of the 2022-based LTCH 
market basket is 2.8 percent

[[Page 69434]]

with compensation prices increasing 2.9 percent. For these reasons, as 
discussed previously, we believe the LTCH market basket is 
methodologically sound and uses the best available data for FY 2025. 
Therefore, we disagree with the commenters that CMS should increase the 
market basket update or apply a ``special'' payment adjustment to the 
LTCH PPS rates to account for or offset higher labor and supply costs 
or unprecedented inflation.
    Comment: Some commenters stated that since the COVID-19 PHE, IGI's 
forecasted growth for the LTCH market basket has shown a consistent 
trend of under-forecasting actual market basket growth. They stated 
they were cognizant of the fact that forecasts will always be 
imperfect, but the commenters claimed that in the past, they have been 
more balanced. However, with four straight years of under-forecasts, 
the commenters were concerned that there is a more systemic issue with 
IGI's forecasting. Many commenters stated that the missed forecasts 
have resulted in significant and permanent underpayments to LTCHs, 
through direct Medicare payments and through influence on other payers, 
and have improperly allowed Medicare to underpay LTCHs for the costs to 
care for Medicare beneficiaries for FY 2021 through FY 2024.
    Many commenters urged CMS to use the broad LTCH PPS statutory 
authority to implement forecasting error adjustments in FY 2025 to 
account for the differences in the market basket forecasts and actual 
increases since FY 2021, based on the most recent data. Some commenters 
stated that adopting a one-time forecast error adjustment is necessary 
to address unprecedented circumstances surrounding the COVID-19 PHE. 
One commenter urged CMS to increase the market basket whenever CMS 
determines that the actual market basket percentage increase exceeds 
the forecasted market basket percentage increase. A few commenters 
noted that CMS has made forecasting error adjustments for payments to 
other types of health care providers in the past, stating it would be 
appropriate to do so for LTCHs as well. Other commenters claimed that 
CMS wrongly dismissed the option of applying a special payment 
adjustment to the LTCH PPS rates that accounts for forecast errors in 
the FY 2023 IPPS/LTCH PPS final rule and FY 2024 IPPS/LTCH PPS final 
rule leading to underpayments for LTCHs. These commenters stated that a 
correction to the FY 2025 payment rate is required to prevent 
underpayments to LTCHs going forward.
    Commenters specifically requested that a forecast error adjustment 
of 4.3 percentage points be added to the FY 2025 annual update to 
account for the combined understatement of the FY 2021 through FY 2023 
LTCH market baskets. A few commenters also requested that, in addition 
to that estimated 4.3 percentage points forecast error adjustment, CMS 
also add an unspecified additional amount to compensate LTCHs for four 
years of underpayments. Other commenters requested that CMS add 3.0 
percentage points to the FY 2025 annual update to account for the 
difference between the market basket update that was implemented for FY 
2022 and the actual market basket for FY 2022. One commenter requested 
that this FY 2022 forecast error adjustment be applied retroactively to 
the FY 2024 update.
    Response: In responding to similar comments in the FY 2023 and FY 
2024 IPPS/LTCH PPS final rules (87 FR 49165, 88 FR 59136), we explained 
that under the law, the LTCH PPS is a per-discharge prospective payment 
system that uses a market basket percentage increase to set the annual 
update prospectively. This means that the update relies on a mix of 
both historical data for part of the period for which the update is 
calculated and forecasted data for the remainder. (For instance, the 
2022-based LTCH market basket growth rate for FY 2025 in this final 
rule is based on IGI's second quarter 2024 forecast with historical 
data through the first quarter of 2024.) While there is currently no 
mechanism to adjust for market basket forecast error in the LTCH PPS 
payment update, the forecast error for a market basket update is equal 
to the actual market basket percentage increase for a given year less 
the forecasted market basket percentage increase. Due to the 
uncertainty regarding future price trends, forecast errors can be both 
positive and negative.
    While the projected LTCH basket updates for FY 2021 through FY 2023 
were under forecast (actual increases less forecasted increases were 
positive), this was largely due to unanticipated inflation and labor 
market pressures as the economy emerged from the COVID-19 PHE. However, 
an analysis of the forecast error of the LTCH market basket over a 
longer period of time shows the forecast error has been both positive 
and negative. The 10-year cumulative forecast error for FY 2014 to FY 
2023 (excluding 2018 as the update was statutorily mandated) is +0.7 
percent. In addition, for each fiscal year from 2012 through 2020, the 
forecasted LTCH market basket update implemented in the final rule was 
shown to be higher than the actual LTCH market basket update once 
historical data were available. Only considering the forecast error for 
years when the final LTCH market basket update is lower than the actual 
LTCH market basket update would not adequately reflect the full impact 
of forecast error over the past 10 years. For these reasons, we are not 
adopting the commenters' requests to implement an adjustment for FY 
2025 to account for the difference between the actual and forecasted 
LTCH market basket updates for FYs 2021 through 2023, and, for the 
reasons stated previously, we disagree that we wrongly dismissed 
commenters' requests to apply an adjustment that accounts for forecast 
errors in the FY 2023 and FY 2024 IPPS/LTCH PPS final rules.
    Comment: A commenter stated it appreciated CMS' proposal to 
increase the market basket update by 3.2 percent for FY 2025. However, 
the commenter believed that LTCHs should be provided the full 3.2 
percent amount without a productivity adjustment. Several commenters 
stated that CMS should at least temporarily suspend the productivity 
adjustment due to declines in hospital productivity. A commenter 
requested that CMS provide more transparency about how the productivity 
adjustment is calculated. The commenter stated that besides CMS stating 
that it estimates the productivity adjustment based on IGI's forecast 
using the most recent available data, CMS does not provide any more 
information about the data or how it used the data to calculate a 0.4 
percentage point reduction to the market basket update. Some commenters 
urged CMS to eliminate the productivity adjustment for FY 2025.
    A commenter stated that the private nonfarm business TFP is 
intended to allow for productivity gains resulting from new 
technologies, economies of scale and changes in production, but because 
the factor is a 10-year moving average, the status of the current 
workforce is not appropriately reflected. The commenter further stated 
that hospitals continue to encounter staffing difficulties, such as 
obtaining nurses and nursing assistants to care for patients and 
actions to regulate staffing, which will lead to less efficiency, 
increased costs and recruitment difficulties and should be accounted 
for when determining a productivity factor. This commenter and other 
commenters urged CMS to use its broad LTCH PPS statutory authority to 
eliminate the productivity adjustment for FY 2025, particularly in 
light of inadequate market basket increases.

[[Page 69435]]

    Response: As set forth in section 1886(b)(3)(B)(xi) of the Act, the 
FY 2025 productivity adjustment is derived based on the 10-year moving 
average growth in economy-wide productivity for the period ending in FY 
2025. We recognize the concerns of the commenters regarding the 
appropriateness of the productivity adjustment; however, as we 
explained in response to similar comments in the FY 2023 and FY 2024 
IPPS/LTCH PPS final rules, section 1886(m)(3)(A)(i) of the Act requires 
the application of the specific productivity adjustment described in 
section 1886(b)(3)(B)(xi) of the Act.
    As stated in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36267), 
BLS publishes the official measures of annual economy-wide, private 
nonfarm business total factor productivity (TFP) (previously referred 
to as annual economy-wide, private nonfarm business multifactor 
productivity). IGI forecasts TFP consistent with BLS methodology by 
forecasting the detailed components of TFP. 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. We believe our methodology for the productivity adjustment 
is consistent with section 1886(b)(3)(B)(xi) of the Act which states 
that the productivity adjustment is equal to the 10-year moving average 
of changes in annual economy-wide private nonfarm business multi-factor 
productivity (as projected by the Secretary for the 10-year period 
ending with the applicable fiscal year, year, cost reporting period, or 
other annual period).
    The FY 2025 proposed productivity adjustment of 0.4 percent was 
based on IGI's forecast of the 10-year moving average of annual 
economy-wide private nonfarm business TFP, reflecting historical data 
through 2022 as published by BLS and forecasted TFP growth for 2023 
through 2025. The FY 2025 final productivity adjustment of 0.5 percent 
is based on IGI's forecast of the 10-year moving average of annual 
economy-wide private nonfarm business TFP, reflecting historical data 
through 2023 as published by BLS, and forecasted TFP growth for 2024 
through 2025.
    In response to commenters' request for more transparency regarding 
the productivity adjustment calculation, we have provided the following 
information on the CMS website and in the Federal Register regarding 
the general method for calculating the productivity adjustment. As 
stated in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36267), the 
most recent BLS historical TFP data can be downloaded from the BLS 
website at https://www.bls.gov/productivity. This allows interested 
parties to obtain TFP annual index levels for 1987 through 2023. The 
IGI projection model as described on the CMS website (https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information) is 
then used to derive annual TFP growth rates for 2024 and 2025, which 
are then applied to the historical BLS levels to obtain a projection of 
index levels for 2024 and 2025. As further described in the 
documentation on the CMS website at https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/medicareprogramratesstats/downloads/tfp_methodology.pdf, these annual 
index levels are then interpolated to quarterly levels. The FY 2025 
productivity adjustment is equal to the percent change in the 40-
quarter moving average projected level for the period ending September 
30, 2025 relative to the 40-quarter moving average projected level for 
the period ending September 30, 2024. If there are specific questions 
regarding the methodology for deriving the productivity adjustment, the 
public may email CMS at the email address provided on the CMS website 
([email protected]) to request clarification or more information on the 
market baskets and productivity adjustment calculations.
    After consideration of public comments, we are finalizing the LTCH 
PPS payment rate update using the most recent forecast of the 2022-
based LTCH market basket percentage increase and productivity 
adjustment. As such, based on IGI's second quarter 2024 forecast, the 
FY 2025 market basket percentage increase for the LTCH PPS using the 
2022-based LTCH market basket is 3.5 percent. The current estimate of 
the productivity adjustment for FY 2025 based on IGI's second quarter 
2024 forecast is 0.5 percentage point. Therefore, under the authority 
of section 123 of the BBRA as amended by section 307(b) of the BIPA, 
consistent with 42 CFR 412.523(c)(3)(xvii), we are establishing an 
annual market basket update to the LTCH PPS standard Federal payment 
rate for FY 2025 of 3.0 percent (that is, the most recent estimate of 
the LTCH PPS market basket percentage increase of 3.5 percent less the 
productivity adjustment of 0.5 percentage point). For LTCHs that fail 
to submit quality reporting data under the LTCH QRP, under 42 CFR 
412.523(c)(3)(xvii) in conjunction with 42 CFR 412.523(c)(4), as we 
proposed, we are further reducing the annual update to the LTCH PPS 
standard Federal payment rate by 2.0 percentage points, in accordance 
with section 1886(m)(5) of the Act. Accordingly, we are establishing an 
annual update to the LTCH PPS standard Federal payment rate of 1.0 
percent (that is, the 3.0 percent LTCH market basket update minus 2.0 
percentage points) for FY 2025 for LTCHs that fail to submit quality 
reporting data as required under the LTCH QRP.

D. Rebasing of the LTCH Market Basket

1. Background
    The input price index (that is, the market basket) that was used to 
develop the LTCH PPS for FY 2003 was the ``excluded hospital with 
capital'' market basket. That market basket was based on 1997 Medicare 
cost report data and included data for Medicare-participating IRFs, 
IPFs, LTCHs, cancer hospitals, and children's hospitals. Although the 
term ``market basket'' technically describes the mix of goods and 
services used in providing hospital care, this term is also commonly 
used to denote the input price index (that is, cost category weights 
and price proxies combined) derived from that mix. Accordingly, the 
term ``market basket,'' as used in this section, refers to an input 
price index.
    Since the LTCH PPS inception, the market basket used to update LTCH 
PPS payments has been rebased and revised to reflect more recent data. 
We last rebased and revised the market basket applicable to the LTCH 
PPS in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58909 through 
58926), where we adopted a 2017-based LTCH market basket. References to 
the historical market baskets used to update LTCH PPS payments are 
listed in the FY 2021 LTCH PPS final rule (85 FR 58909 through 58910).
    For the FY 2025 IPPS/LTCH proposed rule, we proposed to rebase and 
revise the 2017-based LTCH market basket to reflect a 2022 base year, 
which would maintain our historical frequency of rebasing the market 
basket every 4 years. The proposed 2022-based LTCH market basket is 
primarily based on Medicare cost report data for LTCHs for FY 2022, 
specifically for cost reporting periods beginning on and after April 1, 
2021, and prior to April 1, 2022. For the 2017-based LTCH market, we 
used Medicare cost report data for LTCHs from cost reporting periods 
beginning

[[Page 69436]]

on and after October 1, 2016, and before October 1, 2017, or reports 
that began in FY 2017. The majority of LTCHs have a cost report begin 
date of September 1 and so those LTCHs with a cost report begin date of 
September 1, 2021 have the majority of their expenses occurring in the 
FY 2022 time period. We proposed to use data from cost reporting 
periods beginning on and after April 1, 2021, and prior to April 1, 
2022 because these data reflected the most recent Medicare cost report 
data for LTCHs at the time of rulemaking where the majority of their 
costs are occurring in FY 2022 while still maintaining our historical 
frequency of rebasing the market basket every 4 years.
    At the time of proposed rulemaking, we were unable to use data from 
the FY 2022 HCRIS file, which reflects cost reporting periods beginning 
on and after October 1, 2021 and prior to September 30, 2022, as most 
reporters have a begin date of September 1, so the dataset in the file 
was not yet complete. In the interest of utilizing the most recent, 
complete data available, we proposed to combine data from multiple 
HCRIS files to obtain a 2022 base year. We proposed to use a composite 
timeframe of cost reporting periods beginning on and after April 1, 
2021 and prior to April 1, 2022, because April 1 reflects the middle of 
the fiscal year and this timeframe would allow data from 2022 to be 
included in this rebasing. Using this proposed method, the weighted 
average of costs occurring in FY 2022 (accounting for the distribution 
of providers by Medicare cost report begin date) is 82 percent. 
Therefore, we believe our proposed methodology of using Medicare cost 
report data based on cost reporting periods beginning on or after April 
1, 2021 and prior to April 1, 2022 reflects the most recent information 
that is most representative of FY 2022.
    As described in the FY 2023 IPPS/LTCH final rule (87 FR 49164 
through 49165), we received comments on the FY 2023 IPPS/LTCH PPS 
proposed rule where stakeholders expressed concern that the proposed 
market basket update was inadequate relative to input price inflation 
experienced by LTCHs, particularly as a result of the COVID-19 PHE. 
These commenters stated that the PHE, along with inflation, has 
significantly driven up operating costs. Specifically, some commenters 
noted changes to the labor markets that led to the use of more contract 
labor. As described in more detail later in this section, we verified 
this trend when analyzing the Medicare cost reports submitted by LTCHs 
through 2022. Therefore, we believe it is appropriate to incorporate 
more recent data to reflect updated cost structures for LTCHs, and so 
we proposed to use 2022 as the base year because we believe that the 
Medicare cost reports for this year represent the most recent, complete 
set of Medicare cost report data available for developing the proposed 
LTCH market basket at the time of this rulemaking. Given the recent 
trends in the major cost weights derived from the Medicare cost report 
data as discussed later in this section, we will continue to monitor 
these data going forward and any additional changes to the LTCH market 
basket will be proposed in future rulemaking.
    In the following discussion, we provide an overview of the proposed 
LTCH market basket, describe the proposed methodologies for developing 
the operating and capital portions of the proposed 2022-based LTCH 
market basket, and provide information on the proposed price proxies. 
In each section, we describe any comments received, responses to these 
comments, and our final policies for this final rule. We received the 
following comments on our proposal to rebase the LTCH market basket to 
a 2022 base year.
    Comment: A few commenters were supportive of CMS rebasing the 
market basket to reflect a 2022 base year. A commenter cited support 
for CMS' proposed approach of using Medicare cost report data for LTCHs 
collected between April 1, 2021 and April 1, 2022 stating that under 
this proposed approach, a significant portion of FY 2022 data would be 
included in this rebasing and CMS would be including the most recent 
and representative data in its rebasing process.
    However, a commenter stated that for FY 2025 payment rates, CMS 
proposed to return to its standard pre-pandemic rate setting 
methodologies (FY 2023 MedPAR file and FY 2022 HCRIS file) without any 
discussion of what are the ``best available'' data for the FY 2025 rate 
setting. The commenter stated that CMS is making an exception for the 
revised and rebased LTCH market basket where it proposed to use cost 
reports for periods beginning on or after April 1, 2021, and prior to 
April 1, 2022 to obtain a cost report dataset that is representative of 
FY 2022. The commenter claimed that based on its own experiences and 
analysis of its LTCH data, it is clear that LTCH utilization during the 
pandemic was not representative of typical LTCH utilization patterns. 
The commenter stated that the highest surge of COVID-19 
hospitalizations occurred during FY 2022; therefore, CMS erred by not 
considering this when deciding which data to use for rate setting in FY 
2025.
    Response: As stated in the FY 2025 IPPS/LTCH proposed rule (89 FR 
36268) and discussed previously in this final rule, the market basket 
used to update LTCH PPS payments has been periodically rebased and 
revised over the history of the LTCH PPS to reflect more recent data on 
LTCH cost structures. It has been our longstanding practice to rebase 
the market baskets using the most recent data that are available at the 
time of proposed rulemaking. For the FY 2025 IPPS/LTCH PPS proposed 
rule, we proposed to rebase and revise the LTCH market basket using 
2022 Medicare cost reports, defined as cost reports for periods 
beginning on or after April 1, 2021, and prior to April 1, 2022. Using 
this proposed method, the weighted average of costs occurring in FY 
2022 (accounting for the distribution of providers by Medicare cost 
report begin date) is 82 percent. This allowed us to obtain a cost 
report dataset that was complete and representative of FY 2022, which 
is the most recent year of complete data available at the time of 
rulemaking. Data for 2023 are incomplete at this time. The Medicare 
cost report data showed an increase in the Compensation cost weight 
from 2017 to 2022, which is consistent with comments received on the FY 
2024 IPPS/LTCH proposed rule (88 FR 59134) that stated the 2017-based 
LTCH market basket did not sufficiently account for the dramatic 
increases in labor costs that LTCHs were incurring. As we stated in 
that rule in response to public comments, we are continually monitoring 
the trends in the LTCH cost data to ensure the market basket reflects 
the costs faced by LTCHs in providing care. Thus, we believe it is more 
appropriate to update the base year cost weights to 2022 to reflect 
changes over this period rather than to delay the rebasing. It has been 
our longstanding practice to rebase the market basket on a regular 
basis to ensure it reflects the input cost structure of LTCHs. We will 
continue to monitor the Medicare cost report data as they become 
available and, if appropriate, propose any changes to the LTCH market 
basket in future rulemaking.
2. Overview of the 2022-Based LTCH Market Basket
    Similar to the 2017-based LTCH market basket, the proposed 2022-
based LTCH market basket is a fixed-weight, Laspeyres-type price index. 
A Laspeyres price index measures the change in price, over time, of the 
same mix of goods and services purchased in the base period. Any 
changes in the quantity or mix (that is, intensity) of

[[Page 69437]]

goods and services purchased over time relative to the base period are 
not measured. The index itself is constructed using three steps. First, 
a base period is selected (in the proposed rule, we proposed to use 
2022 as the base period) and total base period costs are estimated for 
a set of mutually exclusive and exhaustive spending categories, with 
the proportion of total costs that each category represents being 
calculated. These proportions are called cost weights. Second, each 
cost category is matched to an appropriate price or wage variable, 
referred to as a ``price proxy.'' In almost every instance, these price 
proxies are derived from publicly available statistical series that are 
published on a consistent schedule (preferably at least on a quarterly 
basis). Finally, the cost weight for each cost category is multiplied 
by the level of its respective price proxy. The sum of these products 
(that is, the cost weights multiplied by their price index levels) for 
all cost categories yields the composite index level of the market 
basket in a given period. Repeating this step for other periods 
produces a series of market basket levels over time. Dividing an index 
level for a given period by an index level for an earlier period 
produces a rate of growth in the input price index over that timeframe. 
As previously noted, the market basket is described as a fixed-weight 
index because it represents the change in price over time of a constant 
mix (quantity and intensity) of goods and services needed to furnish 
hospital services. The effects on total costs resulting from changes in 
the mix of goods and services purchased subsequent to the base period 
are not measured. For example, a hospital hiring more nurses to 
accommodate the needs of patients would increase the volume of goods 
and services purchased by the hospital but would not be factored into 
the price change measured by a fixed-weight hospital market basket. 
Only when the index is rebased would changes in the quantity and 
intensity be captured, with those changes being reflected in the cost 
weights. Therefore, we rebase the market basket periodically so that 
the cost weights reflect recent changes in the mix of goods and 
services that hospitals purchase to furnish inpatient care between base 
periods.
3. Development of the 2022-Based LTCH Market Basket Cost Categories and 
Weights
    We invited public comments on our proposed methodology, discussed 
in this section of this rule, for deriving the proposed 2022-based LTCH 
market basket.
a. Use of Medicare Cost Report Data
    The major types of costs underlying the proposed 2022-based LTCH 
market basket are derived from the Medicare cost reports (CMS Form 
2552-10, OMB Control Number 0938-0050) for LTCHs. Specifically, we use 
the Medicare cost reports for seven specific costs: Wages and Salaries, 
Employee Benefits, Contract Labor, Pharmaceuticals, Professional 
Liability Insurance (PLI), Home Office/Related Organization Contract 
Labor, and Capital. A residual category is then estimated and reflects 
all remaining costs not captured in the seven types of costs identified 
previously. The 2017-based LTCH market basket similarly used the 
Medicare cost reports.
    Medicare cost report data include costs for all patients (including 
but not limited to those covered by Medicare, Medicaid, and private 
insurance). Because our goal is to measure cost shares for facilities 
that serve Medicare beneficiaries and are reflective of case mix and 
practice patterns associated with providing services to Medicare 
beneficiaries in LTCHs, we proposed to limit our selection of Medicare 
cost reports to those from LTCHs that have a Medicare average length of 
stay (LOS) that is within a comparable range of their total facility 
average LOS. We define the Medicare average LOS based on data reported 
on the Medicare cost report (CMS Form 2552-10, OMB Control Number 0938-
0050) Worksheet S-3, Part I, line 14. We believe that applying the LOS 
edit results in a more accurate reflection of the structure of costs 
associated with Medicare covered days as our proposed edit excludes 
those LTCHs that had an average total facility LOS that were notably 
different than the average Medicare LOS. For the 2017-based LTCH market 
basket, we used the cost reports submitted by LTCHs with Medicare 
average LOS within 25 percent (that is, 25 percent higher or lower) of 
the total facility average LOS for the hospital. Based on our analysis 
of the 2022 Medicare cost reports, for the proposed 2022-based LTCH 
market basket, we proposed to again use the cost reports submitted by 
LTCHs with Medicare average LOS within 25 percent (that is, 25 percent 
higher or lower) of the total facility average LOS for the hospital. 
The universe of LTCHs had an average Medicare LOS of 26 days, an 
average total facility LOS of 35 days, and aggregate Medicare 
utilization (as measured by Medicare inpatient LTCH days as a 
percentage of total facility inpatient LTCH days) of 34 percent in 
2022. Applying the proposed trim excludes 11 percent of LTCH providers 
and results in a subset of LTCH Medicare cost reports with an average 
Medicare LOS of 26 days, average facility LOS of 30 days, and aggregate 
Medicare utilization (based on days) of 40 percent. The 11 percent of 
providers that are excluded had an average Medicare LOS of 29 days, 
average facility LOS of 71 days, and aggregate Medicare utilization of 
14 percent.
    We proposed to use the cost reports for LTCHs that meet this 
requirement to calculate the costs for the seven major cost categories 
(Wages and Salaries, Employee Benefits, Contract Labor, Professional 
Liability Insurance, Pharmaceuticals, Home Office/Related Organization 
Contract Labor, and Capital) for the market basket. Also, as described 
in section VIII.D.3.d. of the preamble of this final rule, and as done 
for the 2017-based LTCH market basket, we also proposed to use the 
Medicare cost report data to calculate the detailed capital cost 
weights for the Depreciation, Interest, Lease, and Other Capital-
Related cost categories.
(1) Wages and Salaries Costs
    We proposed to derive Wages and Salaries costs as the sum of 
routine inpatient salaries, ancillary salaries, and a proportion of 
overhead (or general service cost center) salaries as reported on 
Worksheet A, column 1. Because overhead salary costs are attributable 
to the entire LTCH, we proposed to only include the proportion 
attributable to the Medicare allowable cost centers. For the 2022-based 
LTCH market basket, we proposed that routine and ancillary Wages and 
Salaries costs would be equal to salary costs as reported on Worksheet 
A, column 1, lines 30 through 35, 50 through 76 (excluding 52 and 75), 
90 through 91, and 93. Then, we proposed to estimate the proportion of 
overhead salaries that are attributed to Medicare allowable costs 
centers. We proposed to first calculate overhead salaries as the sum of 
Worksheet A, column 1, lines 4 through 18. We then calculate the 
``Medicare allowable ratio'' equal to routine and ancillary Wages and 
Salaries divided by total non-overhead salaries (Worksheet A, column 1, 
line 200 less overhead salaries). We proposed to multiply this Medicare 
allowable ratio by overhead salaries to determine the overhead salaries 
attributed to Medicare allowable cost centers. The sum of routine 
salaries, ancillary salaries, and the estimated Medicare allowable 
portion of overhead salaries represent Wages and Salaries costs. A 
similar methodology was used to derive Wages and Salaries costs in the 
2017-based LTCH market basket.

[[Page 69438]]

(2) Employee Benefits Costs
    Similar to the 2017-based LTCH market basket, we proposed to 
calculate Employee Benefits costs using data from Worksheet S-3, part 
II, column 4, lines 17, 18, 20, and 22. The completion of Worksheet S-
3, part II is only required for IPPS hospitals. For 2022, we found that 
approximately 42 percent of LTCHs voluntarily reported the Employee 
Benefits data, which has increased from the approximately 20 percent of 
LTCHs that reported these data that were used for the 2017-based LTCH 
market basket. Our analysis of the Worksheet S-3, part II data 
submitted by these LTCHs indicates that we continue to have a large 
enough sample to enable us to produce a reasonable Employee Benefits 
cost weight. Specifically, we found that when we recalculated the cost 
weight after weighting to reflect the characteristics of the universe 
of LTCHs (such as by type of ownership--nonprofit, for-profit, and 
government--and by region), the recalculation did not have a material 
effect on the resulting cost weight. Therefore, we proposed to use 
Worksheet S-3, part II data (as was done for the 2017-based LTCH market 
basket) to calculate the Employee Benefits cost weight in the proposed 
2022-based LTCH market basket.
    We note that, effective with the implementation of CMS Form 2552-
10, OMB Control Number 0938-0050, we began collecting Employee Benefits 
and Contract Labor data on Worksheet S-3, part V, which is applicable 
to LTCHs. However, approximately 12 percent of LTCHs reported data on 
Worksheet S-3, part V for 2022, which has fallen since 2017 when 
roughly 17 percent of LTCHs reported these data. Because a greater 
percentage of LTCHs continue to report data on Worksheet S-3, part II 
than Worksheet S-3, part V, we did not propose to use the Employee 
Benefits and Contract Labor data reported on Worksheet S-3, part V to 
calculate the Employee Benefits and Contract Labor cost weights in the 
proposed 2022-based LTCH market basket. We continue to encourage all 
providers to report Employee Benefits and Contract Labor data on 
Worksheet S-3, part V.
(3) Contract Labor Costs
    Contract Labor costs reported on the Medicare cost reports are 
primarily associated with direct patient care services. Contract Labor 
costs for services such as accounting, billing, and legal are estimated 
using other government data sources as described in this section of 
this final rule. Approximately 40 percent of LTCHs voluntarily reported 
Contract Labor costs on Worksheet S-3, part II, which was similar to 
the percentage obtained from 2017 Medicare cost reports.
    As was done for the 2017-based LTCH market basket, we proposed to 
derive the Contract Labor costs for the proposed 2022-based LTCH market 
basket using voluntarily reported data from Worksheet S-3, part II. Our 
analysis of these data indicates that we have a large enough sample to 
enable us to produce a representative Contract Labor cost weight. 
Specifically, we found that when we recalculated the cost weight after 
weighting to reflect the characteristics of the universe of LTCHs by 
region, the recalculation did not have a material effect on the 
resulting cost weight. Therefore, we proposed to use data from 
Worksheet S-3, part II, column 4, lines 11 and 13 to calculate the 
Contract Labor cost weight in the proposed 2022-based LTCH market 
basket.
(4) Pharmaceuticals Costs
    We proposed to calculate Pharmaceuticals costs using non-salary 
costs reported for the pharmacy cost center (line 15) and drugs charged 
to patients cost center (line 73). We proposed to calculate these costs 
as Worksheet A, column 7, less Worksheet A, column 1 for each of these 
lines. A similar methodology was used for the 2017-based LTCH market 
basket.
(5) Professional Liability Insurance Costs
    We proposed that Professional Liability Insurance (PLI) costs 
(often referred to as malpractice costs) be equal to premiums, paid 
losses and self-insurance costs reported on Worksheet S-2, part I, 
columns 1 through 3, line 118. A similar methodology was used for the 
2017-based LTCH market basket.
(6) Home Office/Related Organization Contract Labor Costs
    We proposed to calculate the Home Office/Related Organization 
Contract Labor costs using data reported on Worksheet S-3, part II, 
column 4, lines 1401, 1402, 2550, and 2551 for those LTCH providers 
reporting total salaries on Worksheet S-3, part II, line 1. A similar 
methodology was used for the 2017-based LTCH market basket.
(7) Capital Costs
    We proposed that Capital costs be equal to Medicare allowable 
capital costs as reported on Worksheet B, part II, column 26, lines 30 
through 35, 50 through 76 (excluding 52 and 75), 90 through 91 and 93. 
A similar methodology was used for the 2017-based LTCH market basket.
b. Final Major Cost Category Computation
    After we derive costs for the major cost categories for each 
provider using the Medicare cost report data as previously described, 
we proposed to trim the data for outliers. For each of the seven major 
cost categories, we first proposed to divide the calculated costs for 
the category by total Medicare allowable costs calculated for the 
provider to obtain cost weights for the universe of LTCH providers. For 
the 2022-based LTCH market basket (similar to the approach used for the 
2017-based LTCH market basket), we proposed that total Medicare 
allowable costs would be equal to the total costs as reported on 
Worksheet B, part I, column 26, lines 30 through 35, 50 through 76 
(excluding 52 and 75), 90 through 91, and 93.
    For the Wages and Salaries, Employee Benefits, Contract Labor, 
Pharmaceuticals, Professional Liability Insurance, and Capital cost 
weights, after excluding cost weights that are less than or equal to 
zero, we proposed to then remove those providers whose derived cost 
weights fall in the top and bottom 5 percent of provider specific 
derived cost weights to ensure the exclusion of outliers. We note that 
missing values are assumed to be zero consistent with the methodology 
for how missing values were treated in the 2017-based LTCH market 
basket. After the outliers have been excluded, we sum the costs for 
each category across all remaining providers. We proposed to divide 
this by the sum of total Medicare allowable costs across all remaining 
providers to obtain a cost weight for the 2022-based LTCH market basket 
for the given category. This trimming process is done for each cost 
weight separately.
    For the Home Office/Related Organization Contract Labor cost 
weight, we proposed to apply a 1-percent top only trimming methodology. 
We believe, as the Medicare cost report data (Worksheet S-2, part I, 
line 140) indicate, that not all LTCHs have a home office. LTCHs 
without a home office can incur these expenses directly by having their 
own staff, for which the costs would be included in the Wages and 
Salaries and Employee Benefits cost weights. Alternatively, LTCHs 
without a home office could also purchase related services from 
external contractors for which these expenses would be captured in the 
residual ``All Other'' cost weight. We believe this 1-percent top-only 
trimming methodology is appropriate as it addresses outliers while 
allowing providers with zero Home Office/Related Organization Contract 
Labor costs to be included in

[[Page 69439]]

the Home Office/Related Organization Contract Labor cost weight 
calculation. If we applied both the top and bottom 5 percent trimming 
methodology, we would exclude providers who have zero Home Office/
Related Organization Contract Labor costs.
    Finally, we proposed to calculate the residual ``All Other'' cost 
weight that reflects all remaining costs that are not captured in the 
seven cost categories listed.
    We did not receive any specific comments on the proposed 
methodology to derive the major cost weights using the Medicare cost 
reports and therefore are finalizing this methodology without 
modification. We note that comments we received on the overall market 
basket method, transparency of the method, and resulting market basket 
updates and labor-related share are discussed later in section VIII.D.5 
and VIII.D.6 of the preamble of this final rule. We refer readers to 
Table EEEE 1 for the resulting proposed and final cost weights for 
these major cost categories.
[GRAPHIC] [TIFF OMITTED] TR28AU24.206

    The Wages and Salaries and Employee Benefits cost weights 
calculated from the Medicare cost reports for the 2022-based LTCH 
market basket are similar to the Wages and Salaries and Employee 
Benefits cost weights for the 2017-based LTCH market basket. The 
Contract Labor cost weight, however, is approximately 8 percentage 
points higher than the Contract Labor cost weight in the 2017-based 
LTCH market basket. The 2022-based Pharmaceuticals and Capital cost 
weights are lower than the 2017-based LTCH market basket by 1.7 
percentage points and 1.4 percentage points, respectively. The 2022-
based Home Office/Related Organization Contract Labor cost weight has 
increased by 1.8 percentage points compared to the 2017-based LTCH 
market basket.
    As we did for the 2017-based LTCH market basket, we proposed to 
allocate the Contract Labor cost weight to the Wages and Salaries and 
Employee Benefits cost weights based on their relative proportions 
under the assumption that Contract Labor costs are comprised of both 
Wages and Salaries and Employee Benefits. The Contract Labor allocation 
proportion for Wages and Salaries is equal to the Wages and Salaries 
cost weight as a percent of the sum of the Wages and Salaries cost 
weight and the Employee Benefits cost weight. This rounded percentage 
is 87 percent. Therefore, we proposed to allocate 87 percent of the 
Contract Labor cost weight to the Wages and Salaries cost weight and 13 
percent to the Employee Benefits cost weight. We received no comments 
on the proposed methodology to allocate the Contract Labor cost weight 
to the Wages and Salaries cost weight and Employee Benefits cost weight 
and therefore, are finalizing this methodology without modification. We 
refer readers to Table EEEE 2 that shows the proposed and final Wages 
and Salaries and Employee Benefits cost weights after Contract Labor 
cost weight allocation for both the 2022-based LTCH market basket and 
the 2017-based LTCH market basket.
[GRAPHIC] [TIFF OMITTED] TR28AU24.207

    After the allocation of the Contract Labor cost weight, the 2022-
based Wages and Salaries cost weight is 7.2 percentage points higher 
and the Employee Benefits cost weight is 1.4 percentage points higher, 
relative to the respective cost weights for the 2017-based LTCH market 
basket. As a result, in the 2022-based LTCH market basket, the 
compensation cost weight is 8.6 percentage points higher than the 
Compensation cost weight for the 2017-based LTCH market basket.

[[Page 69440]]

c. Derivation of the Detailed Operating Cost Weights
    To further divide the residual ``All Other'' cost weight estimated 
from the 2022 Medicare cost report data into more detailed cost 
categories, we proposed to use the 2017 Benchmark I-O ``The Use Table 
(Supply-Use Framework)'' data for NAICS 622000, Hospitals, published by 
the Bureau of Economic Analysis (BEA). These data are publicly 
available at the following website: https://www.bea.gov/industry/input-output-accounts-data. For the 2017-based LTCH market basket, we used 
the 2012 Benchmark I-O data, the most recent data available at the time 
(85 FR 58913).
    The BEA Benchmark I-O data are scheduled for publication every 5 
years with the most recent data available for 2017. The 2017 Benchmark 
I-O data are derived from the 2017 Economic Census and are the building 
blocks for BEA's economic accounts. Therefore, they represent the most 
comprehensive and complete set of data on the economic processes or 
mechanisms by which output is produced and distributed.\256\ BEA also 
produces Annual I-O estimates. However, while based on a similar 
methodology, these estimates reflect less comprehensive and less 
detailed data sources and are subject to revision when benchmark data 
becomes available. Instead of using the less detailed Annual I-O data, 
we proposed to inflate the 2017 Benchmark I-O data forward to 2022 by 
applying the annual price changes from the respective price proxies to 
the appropriate market basket cost categories that are obtained from 
the 2017 Benchmark I-O data, and calculated the cost shares that each 
cost category represents using the inflated data. These resulting 2022 
cost shares were applied to the residual ``All Other'' cost weight to 
obtain the detailed cost weights for the proposed 2022-based LTCH 
market basket. For example, the cost for Food: Direct Purchases 
represents 4.3 percent of the sum of the residual ``All Other'' 2017 
Benchmark I-O Hospital Expenditures inflated to 2022. Therefore, the 
Food: Direct Purchases cost weight represents 4.3 percent of the 
proposed 2022-based LTCH market basket's residual ``All Other'' cost 
category (20.8 percent), yielding a ``final'' Food: Direct Purchases 
proposed cost weight of 0.9 percent in the proposed 2022-based LTCH 
market basket (0.043 x 20.8 percent = 0.9 percent).
---------------------------------------------------------------------------

    \256\ https://www.bea.gov/papers/pdf/IOmanual_092906.pdf.
---------------------------------------------------------------------------

    Using this methodology, we proposed to derive seventeen detailed 
LTCH market basket cost category weights within the proposed 2022-based 
LTCH market basket residual ``All Other'' cost weight (20.8 percent). 
These categories are: (1) Electricity and Other Non-Fuel Utilities; (2) 
Fuel: Oil and Gas; (3) Food: Direct Purchases; (4) Food: Contract 
Services; (5) Chemicals; (6) Medical Instruments; (7) Rubber and 
Plastics; (8) Paper and Printing Products; (9) Miscellaneous Products; 
(10) Professional Fees: Labor-Related; (11) Administrative and 
Facilities Support Services; (12) Installation, Maintenance, and Repair 
Services; (13) All Other Labor-Related Services; (14) Professional 
Fees: Nonlabor-Related; (15) Financial Services; (16) Telephone 
Services; and (17) All Other Nonlabor-Related Services. We note that 
these are the same categories as were used in the 2017-based LTCH 
market basket (with several cost categories being renamed for 
clarification purposes).
    We did not receive any specific comments on the proposed 
methodology to derive the detailed operating cost weights and therefore 
are finalizing this methodology without modification. We note that 
general comments we received on the resulting market basket cost 
weights are discussed later in section VIII.D.5 and VIII.D.6 of the 
preamble of this final rule.
d. Derivation of the Detailed Capital Cost Weights
    As described in section VIII.D.3.b. of the preamble of this final 
rule, we proposed a Capital-Related cost weight of 8.5 percent in the 
proposed 2022-based LTCH market basket as calculated from the 2022 
Medicare cost reports for LTCHs after applying the proposed trims as 
previously described. We proposed to then separate this total Capital-
Related cost weight into more detailed cost categories. Using Worksheet 
A-7 in the 2022 Medicare cost reports, we are able to group capital-
related costs into the following categories: Depreciation, Interest, 
Lease, and Other Capital-Related costs, as shown in Table EEEE 3, which 
is the same methodology used for the 2017-based LTCH market basket.
    We also proposed to allocate lease costs, which are 65 percent of 
total capital costs in the proposed 2022-based LTCH market basket, 
across each of the remaining detailed capital-related cost categories 
as was done in the 2017-based LTCH market basket. This would result in 
three primary capital-related cost categories in the proposed 2022 
based LTCH market basket: Depreciation, Interest, and Other Capital-
Related costs. Lease costs are unique in that they are not broken out 
as a separate cost category in the proposed 2022-based LTCH market 
basket. Rather, we proposed to proportionally distribute these costs 
among the cost categories of Depreciation, Interest, and Other Capital-
Related, reflecting the assumption that the underlying cost structure 
of leases is similar to that of capital-related costs in general. As 
was done for the 2017-based LTCH market basket, we proposed to assume 
that 10 percent of the lease costs represents overhead and to assign 
those costs to the Other Capital-Related cost category accordingly. 
Therefore, we are assuming that approximately 6.5 percent (65.0 percent 
x 0.1) of total capital-related costs represent lease costs 
attributable to overhead, and we proposed to add this 6.5 percentage 
points to the 7.3 percent Other Capital-Related cost category weight. 
We also proposed to distribute the remaining lease costs (58.5 percent, 
or 65.0 percent less 6.5 percentage points) proportionally across the 
three cost categories (Depreciation, Interest, and Other Capital-
Related) based on the proportion that these categories comprise of the 
sum of the Depreciation, Interest, and Other Capital-Related cost 
categories (excluding lease expenses). For example, the Other Capital-
Related cost category represented 21.0 percent of all three cost 
categories (Depreciation, Interest, and Other Capital-Related) prior to 
any lease expenses being allocated. This 21.0 percent is applied to the 
58.5 percent of remaining lease expenses so that another 12.3 
percentage points of lease expenses as a percent of total capital-
related costs is allocated to the Other Capital-Related cost category. 
Therefore, the resulting proposed Other Capital-Related cost weight is 
26.1 percent (7.3 percent + 6.5 percent + 12.3 percent). This is the 
same methodology used for the 2017-based LTCH market basket. The 
proposed allocation of these lease expenses are shown in Table EEEE 3.
    Finally, we proposed to further divide the Depreciation and 
Interest cost categories. We proposed to separate Depreciation cost 
category into the following two categories: (1) Building and Fixed 
Equipment and (2) Movable Equipment. We also proposed to separate the 
Interest cost category into the following two categories: (1) 
Government/Nonprofit; and (2) For profit.
    To disaggregate the Depreciation cost weight, we needed to 
determine the percent of total depreciation costs for LTCHs (after the 
allocation of lease costs) that are attributable to Building and Fixed 
equipment, which we

[[Page 69441]]

hereafter refer to as the ``fixed percentage.'' We proposed to use 
depreciation and lease data from Worksheet A-7 of the 2022 Medicare 
cost reports, which is the same methodology used for the 2017-based 
LTCH market basket. Based on the 2022 LTCH Medicare cost report data, 
we have determined that depreciation costs for building and fixed 
equipment account for 39 percent of total depreciation costs, while 
depreciation costs for movable equipment account for 61 percent of 
total depreciation costs. As previously mentioned, we proposed to 
allocate lease expenses among the Depreciation, Interest, and Other 
Capital-Related cost categories. We determined that leasing building 
and fixed equipment expenses account for 94 percent of total leasing 
expenses, while leasing movable equipment expenses account for 6 
percent of total leasing expenses. We proposed to sum the depreciation 
and leasing expenses for building and fixed equipment, as well as sum 
the depreciation and leasing expenses for movable equipment. This 
results in the proposed Building and Fixed Equipment Depreciation cost 
weight (after leasing costs are included) representing 78 percent of 
total depreciation costs and the Movable Equipment Depreciation cost 
weight (after leasing costs are included) representing 22 percent of 
total depreciation costs.
    To disaggregate the Interest cost weight, we determine the percent 
of total interest costs for LTCHs that are attributable to government 
and nonprofit facilities, which we hereafter refer to as the 
``nonprofit percentage,'' because price pressures associated with these 
types of interest costs tend to differ from those for for-profit 
facilities. We proposed to use interest costs data from Worksheet A-7 
of the 2022 Medicare cost reports for LTCHs, which is the same 
methodology used for the 2017-based LTCH market basket. The nonprofit 
percentage determined using this method is 48 percent.
    We received no specific comments on the proposed methodology to 
derive the detailed capital cost weights and therefore are finalizing 
this methodology without modification. Table EEEE 3 provides the 
proposed and final detailed capital cost shares obtained from the 
Medicare cost reports. Ultimately, these detailed capital cost shares 
are applied to the total Capital-Related cost weight determined in 
section VIII.D.3.b. of the preamble of this final rule to separate the 
total Capital-Related cost weight of 8.5 percent into more detailed 
cost categories and weights.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU24.208

e. 2022-Based LTCH Market Basket Cost Categories and Weights
    Table EEEE 4 shows the cost categories and weights for the proposed 
and final 2022-based LTCH market basket compared to the 2017-based LTCH 
market basket.

[[Page 69442]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.209

BILLING CODE 4120-01-C
4. Selection of Price Proxies
    After developing the proposed cost weights for the 2022-based LTCH 
market basket, we selected the most appropriate wage and price proxies 
currently available to represent the rate of price change for each cost 
category. For the majority of the cost weights, we base the price 
proxies on U.S. Bureau of Labor Statistics (BLS) data and group them 
into one of the following BLS categories:
     Employment Cost Indexes. Employment Cost Indexes (ECIs) 
measure the rate of change in employment wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. ECIs are superior to Average Hourly Earnings (AHE) 
as price proxies for input price indexes because they are not affected 
by shifts in occupation or industry mix, and because they measure pure 
price change and are available by both occupational group and by 
industry. The industry ECIs are based on the NAICS and the occupational 
ECIs are based on the Standard Occupational Classification System 
(SOC).
     Producer Price Indexes. Producer Price Indexes (PPIs) 
measure the average change over time in the selling prices received by 
domestic producers for their output. The prices included in the PPI are 
from the first commercial transaction for many products and some 
services (https://www.bls.gov/ppi/).
     Consumer Price Indexes. Consumer Price Indexes (CPIs) 
measure the average change over time in the prices paid by urban 
consumers for a market basket of consumer goods and services (https://www.bls.gov/cpi/). CPIs are only used when the purchases are similar to 
those of retail consumers rather than purchases at the producer level, 
or if no appropriate PPIs are available.
    We evaluate the price proxies using the criteria of reliability, 
timeliness, availability, and relevance:
     Reliability. Reliability indicates that the index is based 
on valid statistical methods and has low sampling variability. Widely 
accepted statistical methods ensure that the data were

[[Page 69443]]

collected and aggregated in a way that can be replicated. Low sampling 
variability is desirable because it indicates that the sample reflects 
the typical members of the population. (Sampling variability is 
variation that occurs by chance because only a sample was surveyed 
rather than the entire population.)
     Timeliness. Timeliness implies that the proxy is published 
regularly, preferably at least once a quarter. The market baskets are 
updated quarterly, and therefore, it is important for the underlying 
price proxies to be up-to-date, reflecting the most recent data 
available. We believe that using proxies that are published regularly 
(at least quarterly, whenever possible) helps to ensure that we are 
using the most recent data available to update the market basket. We 
strive to use publications that are disseminated frequently, because we 
believe that this is an optimal way to stay abreast of the most current 
data available.
     Availability. Availability means that the proxy is 
publicly available. We prefer that our proxies are publicly available 
because this will help ensure that our market basket updates are as 
transparent to the public as possible. In addition, this enables the 
public to be able to obtain the price proxy data on a regular basis.
     Relevance. Relevance means that the proxy is applicable 
and representative of the cost category weight to which it is applied.
    We believe that the CPIs, PPIs, and ECIs that we have selected meet 
these criteria. Therefore, we believe that they continue to be the best 
measure of price changes for the cost categories to which they would be 
applied.
    Table EEEE 7 lists all price proxies that we proposed to use for 
the 2022-based LTCH market basket. The next section of the rule 
contains a detailed explanation of the price proxies we proposed for 
each cost category weight.
a. Price Proxies for the Operating Portion of the 2022-Based LTCH 
Market Basket
(1) Wages and Salaries
    We proposed to continue to use the ECI for Wages and Salaries for 
All Civilian workers in Hospitals (BLS series code CIU1026220000000I) 
to measure the wage rate growth of this cost category. This is the same 
price proxy used in the 2017-based LTCH market basket (85 FR 58917).
(2) Employee Benefits
    We proposed to continue to use the ECI for Total Benefits for All 
Civilian workers in Hospitals to measure price growth of this category. 
This ECI is calculated using the ECI for Total Compensation for All 
Civilian workers in Hospitals (BLS series code CIU1016220000000I) and 
the relative importance of wages and salaries within total 
compensation. This is the same price proxy used in the 2017-based LTCH 
market basket (85 FR 58917).
(3) Electricity and Other Non-Fuel Utilities
    We proposed to continue to use the PPI Commodity Index for 
Commercial Electric Power (BLS series code WPU0542) to measure the 
price growth of this cost category. This is the same price proxy used 
in the 2017-based LTCH market basket (85 FR 58917).
(4) Fuel: Oil and Gas
    For the 2022-based LTCH market basket, we proposed to use a blend 
of the PPI Industry for Petroleum Refineries (NAICS 3241), PPI for 
Other Petroleum and Coal Products (NAICS 32419) and the PPI Commodity 
for Natural Gas. Our analysis of the Bureau of Economic Analysis' 2017 
Benchmark I-O data for NAICS 622000 Hospitals shows that Petroleum 
Refineries expenses account for approximately 86 percent, Other 
Petroleum and Coal Products expenses account for about 7 percent and 
Natural Gas expenses account for approximately 7 percent of Hospitals' 
(NAICS 622000) total Fuel: Oil and Gas expenses. Therefore, we proposed 
to use a blend of 86 percent of the PPI Industry for Petroleum 
Refineries (BLS series code PCU324110324110), 7 percent of the PPI for 
Other Petroleum and Coal Products (BLS series code PCU32419) and 7 
percent of the PPI Commodity Index for Natural Gas (BLS series code 
WPU0531) as the price proxy for this cost category. The 2017-based LTCH 
market basket used a 90/10 blend of the PPI Industry for Petroleum 
Refineries and PPI Commodity for Natural Gas, reflecting the 2012 I-O 
data (85 FR 58917). We believe that the three proposed price proxies 
are the most technically appropriate indices available to measure the 
price growth of the Fuel: Oil and Gas cost category in the 2022-based 
LTCH market basket.
(5) Professional Liability Insurance
    We proposed to continue to use the CMS Hospital Professional 
Liability Index as the price proxy for PLI costs in the 2022-based LTCH 
market basket. To generate this index, we collect commercial insurance 
medical liability premiums for a fixed level of coverage while holding 
non-price factors constant (such as a change in the level of coverage). 
This is the same proxy used in the 2017-based LTCH market basket (85 FR 
58917).
(6) Pharmaceuticals
    We proposed to continue to use the PPI Commodity for 
Pharmaceuticals for Human Use, Prescription (BLS series code 
WPUSI07003) to measure the price growth of this cost category. This is 
the same proxy used in the 2017-based LTCH market basket (85 FR 58917).
(7) Food: Direct Purchases
    We proposed to continue to use the PPI Commodity for Processed 
Foods and Feeds (BLS series code WPU02) to measure the price growth of 
this cost category. This is the same price proxy used in the 2017-based 
LTCH market basket (85 FR 58917).
(8) Food: Contract Purchases
    We proposed to continue to use the CPI for Food Away From Home (BLS 
series code CUUR0000SEFV) to measure the price growth of this cost 
category. This is the same proxy used in the 2017-based LTCH market 
basket (85 FR 58917).
(9) Chemicals
    Similar to the 2017-based LTCH market basket, we proposed to use a 
four-part blended PPI as the proxy for the chemical cost category in 
the 2022-based LTCH market basket. The proposed blend is composed of 
the PPI Industry for Industrial Gas Manufacturing, Primary Products 
(BLS series code PCU325120325120P), the PPI Industry for Other Basic 
Inorganic Chemical Manufacturing (BLS series code PCU32518-32518), the 
PPI Industry for Other Basic Organic Chemical Manufacturing (BLS series 
code PCU32519-32519), and the PPI Industry for Other Miscellaneous 
Chemical Product Manufacturing (BLS series code PCU325998325998). For 
the 2022-based LTCH market basket, we proposed to derive the weights 
for the PPIs using the 2017 Benchmark I-O data. The 2017-based LTCH 
market basket used the 2012 Benchmark I-O data to derive the weights 
for the four PPIs (85 FR 58917 through 58918). We did not receive 
comments on the proposed methodology to derive the blended Chemicals 
price proxy using the 2017 Benchmark I-O and therefore are finalizing 
this methodology without modification. Table EEEE 5 shows the weights 
for each of the four PPIs used to create the proposed and final blended 
Chemicals proxy for the 2022-based LTCH market basket compared to the 
2017-based blended Chemicals proxy.

[[Page 69444]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.210

(10) Medical Instruments
    We proposed to use a blended price proxy for the Medical 
Instruments category. The 2017 Benchmark I-O data shows the majority of 
medical instruments and supply costs are for NAICS 339112--Surgical and 
medical instrument manufacturing costs (approximately 64 percent) and 
NAICS 339113--Surgical appliance and supplies manufacturing costs 
(approximately 36 percent). To proxy the price changes associated with 
NAICS 339112, we proposed to use the PPI for Surgical and medical 
instruments (BLS series code WPU1562). This is the same price proxy we 
used in the 2017-based LTCH market basket. To proxy the price changes 
associated with NAICS 339113, we proposed to use a 50/50 blend of the 
PPI for Medical and surgical appliances and supplies (BLS series code 
WPU1563) and the PPI for Miscellaneous products, Personal safety 
equipment and clothing (BLS series code WPU1571). We proposed to 
include the latter price proxy as it would reflect personal protective 
equipment including but not limited to face shields and protective 
clothing. The 2017 Benchmark I-O data does not provide specific 
expenses for these products; however, we recognize that this category 
reflects costs faced by LTCHs. For the 2017-based LTCH market basket, 
we used a blend composed of 57 percent of the commodity-based PPI 
Commodity for Surgical and Medical Instruments (BLS series code 
WPU1562) and 43 percent of the PPI Commodity for Medical and Surgical 
Appliances and Supplies (BLS series code WPU1563) reflecting the 2012 
Benchmark I-O data (85 FR 58918).
(11) Rubber and Plastics
    We proposed to continue to use the PPI Commodity for Rubber and 
Plastic Products (BLS series code WPU07) to measure price growth of 
this cost category. This is the same proxy used in the 2017-based LTCH 
market basket (85 FR 58918).
(12) Paper and Printing Products
    We proposed to use a 61/39 blend of the PPI Commodity for 
Publications Printed Matter and Printing Material (BLS Series Code 
WPU094) and the PPI Commodity for Converted Paper and Paperboard 
Products (BLS series code WPU0915) to measure the price growth of this 
cost category. The 2017 Benchmark I-O data shows that 61 percent of 
paper and printing expenses are for Printing (NAICS 323110) and the 
remaining expenses are for Paper manufacturing (NAICS 322). The 2017-
based LTCH market basket (85 FR 58918) used the PPI Commodity for 
Converted Paper and Paperboard Products (BLS series code WPU0915) as 
this comprised the majority of expenses as reported in the 2012 
Benchmark I-O data.
(13) Miscellaneous Products
    We proposed to continue to use the PPI Commodity for Finished Goods 
Less Food and Energy (BLS series code WPUFD4131) to measure the price 
growth of this cost category. This is the same proxy used in the 2017-
based LTCH market basket (85 FR 58918).
(14) Professional Fees: Labor-Related
    We proposed to continue to use the ECI for Total Compensation for 
Private Industry workers in Professional and Related (BLS series code 
CIU2010000120000I) to measure the price growth of this category. This 
is the same proxy used in the 2017-based LTCH market basket (85 FR 
58918).
(15) Administrative and Facilities Support Services
    We proposed to continue to use the ECI for Total Compensation for 
Private Industry workers in Office and Administrative Support (BLS 
series code CIU2010000220000I) to measure the price growth of this 
category. This is the same proxy used in the 2017-based LTCH market 
basket (85 FR 58918).
(16) Installation, Maintenance, and Repair Services
    We proposed to continue to use the ECI for Total Compensation for 
All Civilian workers in Installation, Maintenance, and Repair (BLS 
series code CIU1010000430000I) to measure the price growth of this cost 
category. This is the same proxy used in the 2017-based LTCH market 
basket (85 FR 58918).
(17) All Other: Labor-Related Services
    We proposed to continue to use the ECI for Total Compensation for 
Private Industry workers in Service Occupations (BLS series code 
CIU2010000300000I) to measure the price growth of this cost category. 
This is the same proxy used in the 2017-based LTCH market basket (85 FR 
58918).
(18) Professional Fees: Nonlabor-Related
    We proposed to continue to use the ECI for Total Compensation for 
Private Industry workers in Professional and Related (BLS series code 
CIU2010000120000I) to measure the price growth of this category. This 
is the same proxy used in the 2017-based LTCH market basket (85 FR 
58919).
(19) Financial Services
    We proposed to continue to use the ECI for Total Compensation for 
Private Industry workers in Financial Activities (BLS series code 
CIU201520A000000I) to measure the price growth of this cost category. 
This is the same proxy used in the 2017-based LTCH market basket (85 FR 
58919).
(20) Telephone Services
    We proposed to continue to use the CPI for Telephone Services (BLS 
series code CUUR0000SEED) to measure the price growth of this cost 
category. This is the same proxy used in the 2017-based LTCH market 
basket (85 FR 58919).
(21) All Other: Nonlabor-Related Services
    We proposed to continue to use the CPI for All Items Less Food and 
Energy

[[Page 69445]]

(BLS series code CUUR0000SA0L1E) to measure the price growth of this 
cost category. This is the same proxy used in the 2017-based LTCH 
market basket (85 FR 58919).
    We received the following comments on our proposed price proxies 
for the 2022-based LTCH market basket.
    Comment: A few commenters stated that the Bureau of Labor 
Statistics' Employment Cost Index (ECI) used by CMS to calculate the 
labor portion of hospital costs only considers the salary costs of 
hospitals' employed staff; it does not reflect the portion of labor 
costs associated with contract labor that have risen in recent years. 
The commenters stated that this has proven to be a significant 
problem--and a major shortcoming of the current approach to calculating 
rate increases.
    The commenters further stated that while the public health 
emergency has ended, LTCHs' reliance on contract staffing, and in 
particular contract nurses, has not ended, nor will it anytime soon. 
The commenters stated that while the need for such supplemental 
staffing has declined to a degree, it is not going away. The commenters 
stated their belief that CMS's calculation of Medicare LTCH rates 
should reflect this. For this reason, the commenters asked CMS to find 
new or additional data sources that capture this aspect of hospitals' 
labor costs when calculating future LTCH rate increases, including the 
final rate increase for FY 2025.
    Response: We believe that the ECI for wages and salaries for 
hospital workers is accurately reflecting the price change associated 
with the labor used to provide hospital care. We believe that the price 
of employed staff and contract labor are influenced by the same factors 
and should generally grow at similar rates. The ECI appropriately does 
not reflect other factors that might affect the rate of price changes 
associated with labor costs such as a shift in the occupations that may 
occur due to increases in case-mix or shifts in hospital purchasing 
decisions (for instance, to hire or to use contract labor). In most 
periods when there are not significant occupational shifts or 
significant shifts between employed and contract labor, the data has 
shown that the growth in the ECI for wages and salaries for hospital 
workers has generally been consistent with overall hospital wage 
trends. For example, our analysis of the Medicare cost report data 
shows from 2011 to 2019 the compound annual growth rate of both IPPS 
Medicare allowable salaries per hour and contract labor costs per hour 
was 2.5 percent, near the 2.0-percent growth rate of the ECI for wages 
and salaries for hospital workers over the same period (note the ECI 
would not reflect skill mix change whereas the salaries data would 
reflect these changes).
    From 2019 to 2022, however, as noted by the commenters, contract 
labor utilization increased and employed labor utilization decreased, 
the combination of which is reflected in the LTCH compensation cost 
weight for the proposed LTCH market basket. Over this same period, the 
ECI for hospital workers grew 3.6 percent, which is about 1.6 
percentage points faster than the 2011 to 2019 historical average 
growth rate, reflecting the recent wage price inflation cited by the 
commenters.
    For this final rule, based on the more recent IGI second quarter 
2024 forecast with historical data through the first quarter of 2024, 
the projected 2022-based LTCH market basket increase factor for FY 2025 
reflects an increase in compensation prices of 4.0 percent.
    After consideration of public comments, we are finalizing the price 
proxies for the operating portion of the 2022-based LTCH market basket 
as proposed without modification.
b. Price Proxies for the Capital Portion of the 2022-Based LTCH Market 
Basket
(1) Capital Price Proxies Prior to Vintage Weighting
    We proposed to continue to use the same price proxies for the 
capital-related cost categories as were applied in the 2017-based LTCH 
market basket, which are provided in Table EEEE 7 and described in this 
section of this rule. Specifically, we proposed to proxy:
     Depreciation: Building and Fixed Equipment cost category 
by BEA's Chained Price Index for Nonresidential Construction for 
Hospitals and Special Care Facilities (BEA Table 5.4.4. Price Indexes 
for Private Fixed Investment in Structures by Type).
     Depreciation: Movable Equipment cost category by the PPI 
Commodity for Machinery and Equipment (BLS series code WPU11).
     Nonprofit Interest cost category by the average yield on 
domestic municipal bonds (Bond Buyer 20-bond index).
     For-profit Interest cost category by the average yield of 
the iBoxx AAA Corporate Bond Yield index.
     Other Capital-Related cost category by the CPI-U for Rent 
of Primary Residence (BLS series code CUUS0000SEHA).
    We believe these are the most appropriate proxies for LTCH capital-
related costs that meet our selection criteria of relevance, 
timeliness, availability, and reliability. We also proposed to continue 
to vintage weight the capital price proxies for Depreciation and 
Interest in order to capture the long-term consumption of capital. This 
vintage weighting method is similar to the method used for the 2017-
based LTCH market basket and is described in section VIII.D.4.b.(2). of 
the preamble of this final rule.
    We received no comments on the proposed price proxies for the 
capital portion of the 2022-based LTCH market basket and therefore are 
finalizing the use of these price proxies without modification.
(2) Vintage Weights for Price Proxies
    Because capital is acquired and paid for over time, capital-related 
expenses in any given year are determined by both past and present 
purchases of physical and financial capital. The vintage-weighted 
capital-related portion of the proposed 2022-based LTCH market basket 
is intended to capture the long-term consumption of capital, using 
vintage weights for depreciation (physical capital) and interest 
(financial capital). These vintage weights reflect the proportion of 
capital-related purchases attributable to each year of the expected 
life of building and fixed equipment, movable equipment, and interest. 
We proposed to use vintage weights to compute vintage-weighted price 
changes associated with depreciation and interest expenses.
    Capital-related costs are inherently complicated and are determined 
by complex capital-related purchasing decisions, over time, based on 
such factors as interest rates and debt financing. In addition, capital 
is depreciated over time instead of being consumed in the same period 
it is purchased. By accounting for the vintage nature of capital, we 
are able to provide an accurate and stable annual measure of price 
changes. Annual nonvintage price changes for capital are unstable due 
to the volatility of interest rate changes and, therefore, do not 
reflect the actual annual price changes for LTCH capital-related costs. 
The capital-related component of the proposed 2022-based LTCH market 
basket reflects the underlying stability of the capital-related 
acquisition process.
    The methodology used to calculate the vintage weights for the 
proposed 2022-based LTCH market basket is the same as that used for the 
2017-based LTCH market basket with the only difference being the 
inclusion of more recent data. To calculate the vintage weights for 
depreciation and interest expenses, we first need a time series of 
capital-related purchases for building

[[Page 69446]]

and fixed equipment and movable equipment. We found no single source 
that provides an appropriate time series of capital-related purchases 
by hospitals for all of the previously mentioned components of capital 
purchases. The early Medicare cost reports did not have sufficient 
capital-related data to meet this need. Data we obtained from the 
American Hospital Association (AHA) do not include annual capital-
related purchases. However, the AHA does provide a consistent database 
of total expenses from 1963 to 2020--the latest available data. 
Consequently, we proposed to use data from the AHA Panel Survey and the 
AHA Annual Survey to obtain a time series of total expenses for 
hospitals. We also proposed to use data from the AHA Panel Survey 
supplemented with the ratio of depreciation to total hospital expenses 
obtained from the Medicare cost reports to derive a trend of annual 
depreciation expenses for 1963 through 2020. We proposed to separate 
these depreciation expenses into annual amounts of building and fixed 
equipment depreciation and movable equipment depreciation as previously 
determined. From these annual depreciation amounts we derive annual 
end-of-year book values for building and fixed equipment and movable 
equipment using the expected life for each type of asset category. 
While data are not available that are specific to LTCHs, we believe 
this information for all hospitals serves as a reasonable proxy for the 
pattern of depreciation for LTCHs.
    To continue to calculate the vintage weights for depreciation and 
interest expenses, we also needed to account for the expected lives for 
building and fixed equipment, movable equipment, and interest for the 
proposed 2022-based LTCH market basket. We proposed to calculate the 
expected lives using Medicare cost report data for LTCHs. The expected 
life of any asset can be determined by dividing the value of the asset 
(excluding fully depreciated assets) by its current year depreciation 
amount. This calculation yields the estimated expected life of an asset 
if the rates of depreciation were to continue at current year levels, 
assuming straight-line depreciation. Using this proposed method, we 
determined the average expected life of building and fixed equipment to 
be equal to 16 years, and the average expected life of movable 
equipment to be equal to 9 years. For the expected life of interest, we 
believe that vintage weights for interest should represent the average 
expected life of building and fixed equipment because, based on 
previous research described in the FY 1997 IPPS final rule (61 FR 
46198), the expected life of hospital debt instruments and the expected 
life of buildings and fixed equipment are similar. We note that for the 
2017-based LTCH market basket, we derived an expected average life of 
building and fixed equipment of 18 years and an expected average life 
of movable equipment of 9 years (85 FR 58920).
    Multiplying these expected lives by the annual depreciation amounts 
results in annual year-end asset costs for building and fixed equipment 
and movable equipment. Then we calculated a time series, beginning in 
1964, of annual capital purchases by subtracting the previous year's 
asset costs from the current year's asset costs.
    For the building and fixed equipment and movable equipment vintage 
weights, we proposed to use the real annual capital-related purchase 
amounts for each asset type to capture the actual amount of the 
physical acquisition, net of the effect of price inflation. These real 
annual capital-related purchase amounts are produced by deflating the 
nominal annual purchase amount by the associated price proxy as 
previously provided. For the interest vintage weights, we proposed to 
use the total nominal annual capital-related purchase amounts to 
capture the value of the debt instrument (including, but not limited 
to, mortgages and bonds). Using these capital-related purchase time 
series specific to each asset type, we proposed to calculate the 
vintage weights for building and fixed equipment, for movable 
equipment, and for interest.
    The vintage weights for each asset type are deemed to represent the 
average purchase pattern of the asset over its expected life (in the 
case of building and fixed equipment and interest, 16 years, and in the 
case of movable equipment, 9 years). For each asset type, we used the 
time series of annual capital-related purchase amounts available from 
2020 back to 1964. These data allow us to derive forty-two 16-year 
periods of capital-related purchases for building and fixed equipment 
and interest, and forty-nine 9-year periods of capital-related 
purchases for movable equipment. For each 16-year period for building 
and fixed equipment and interest, or 9-year period for movable 
equipment, we proposed to calculate annual vintage weights by dividing 
the capital-related purchase amount in any given year by the total 
amount of purchases over the entire 16-year or 9-year period. This 
calculation is done for each year in the 16-year or 9-year period and 
for each of the periods for which we have data. Then we proposed to 
calculate the average vintage weight for a given year of the expected 
life by taking the average of these vintage weights across the multiple 
periods of data.
    We received no comments on the proposed methodology to derive the 
vintage weights for the 2022-based LTCH market basket and therefore are 
finalizing these vintage weights without modification.
    The vintage weights for the capital-related portion of the proposed 
and final 2022-based LTCH market basket and the 2017-based LTCH market 
basket are presented in Table EEEE 6.
BILLING CODE 4120-01-P

[[Page 69447]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.211

    The process of creating vintage-weighted price proxies requires 
applying the vintage weights to the price proxy index where the last 
applied vintage weight in Table EEEE6 is applied to the most recent 
data point. We have provided on the CMS website an example of how the 
vintage weighting price proxies are calculated, using example vintage 
weights and example price indices. The example can be found at the 
following link: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html in the zip file titled ``Weight Calculations 
as described in the IPPS FY 2010 Proposed Rule.''
c. Summary of Price Proxies of the 2022-Based LTCH Market Basket
    Table EEEE 7 shows both the operating and capital price proxies for 
the proposed and final 2022-based LTCH market basket.

[[Page 69448]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.212

BILLING CODE 4120-01-C
5. FY 2025 Market Basket Update for LTCHs
    For FY 2025 (that is, October 1, 2024 through September 30, 2025), 
we proposed to use an estimate of the proposed 2022-based LTCH market 
basket to update payments to LTCHs based on the best available data. 
Consistent with historical practice, we estimate the LTCH market basket 
update for the LTCH PPS based on IHS Global, Inc.'s (IGI) forecast 
using the most recent available data. IGI is a nationally recognized 
economic and financial forecasting firm with which CMS contracts to 
forecast the components of the market baskets and total factor 
productivity (TFP).
    Based on IGI's fourth quarter 2023 forecast with history through 
the third quarter of 2023, the projected market basket update for FY 
2025 was 3.2 percent. This projected 2022-based LTCH market basket 
update reflected an increase in compensation prices (proxied by the 
ECIs for All Civilian workers in Hospitals) of 3.7 percent. IGI's 
forecast of the ECIs considers overall labor market conditions 
(including rise in contract labor employment due to tight labor market 
conditions) as well as trends in contract labor wages, which both have 
an impact on wage pressures for workers employed directly by the 
hospital.
    Consistent with our historical practice of estimating market basket 
increases

[[Page 69449]]

based on the best available data, we proposed a market basket update of 
3.2 percent for FY 2025. Furthermore, because the proposed FY 2025 
annual update is based on the most recent market basket estimate for 
the 12-month period (currently 3.2 percent), we also proposed that if 
more recent data became subsequently available (for example, a more 
recent estimate of the market basket), we would use such data, if 
appropriate, to determine the FY 2025 annual update in the final rule. 
(The proposed annual update to the LTCH PPS standard payment rate for 
FY 2025 is discussed in greater detail in section V.A.2. of the 
Addendum to the proposed rule.)
    Based on the more recent data available for this FY 2025 IPPS/LTCH 
final rule (that is, IGI's second quarter 2024 forecast of the 2022-
based LTCH market basket with historical data through the first quarter 
of 2024), we estimate that the FY 2025 market basket update is 3.5 
percent.
    Using the current 2017-based LTCH market basket and IGI's second 
quarter 2024 forecast for the market basket components, the FY 2025 
market basket update would be 3.4 percent (before taking into account 
any statutory adjustment). Therefore, the update based on the 2022-
based LTCH market basket is currently projected to be 0.1 percentage 
point higher for FY 2025 compared to the current 2017-based LTCH market 
basket. This higher update is primarily due to the higher Compensation 
cost weight in the 2022-based market basket (61.8 percent) compared to 
the 2017-based LTCH market basket (53.2 percent). This is partially 
offset by the lower cost weight associated with All Other Services 
(such as Professional Fees and Installation, Maintenance, and Repair 
Services) for the 2022-based LTCH market basket relative to the 2017-
based LTCH market basket. Table EEEE 8 compares the 2022-based LTCH 
market basket and the 2017-based LTCH market basket percent changes.
[GRAPHIC] [TIFF OMITTED] TR28AU24.213

    Over the historical time period covering FY 2020 through FY 2023, 
the average growth rate of the 2022-based LTCH market basket is the 
same as the average growth rate of the 2017-based LTCH market basket. 
Over the forecasted time period covering FY 2024 through FY 2027, the 
average growth rate of the 2022-based LTCH market basket is 0.1 
percentage point higher than the average growth rate of the 2017-based 
LTCH market basket. This is driven by higher projected growth for FY 
2024 and FY 2025 for the 2022-based LTCH market basket, which is 
primarily a result of the higher Compensation cost weight combined with 
faster projected growth in Compensation prices for FY 2024 and FY 2025 
relative to projected prices for All Other Services. In FY 2026 and FY 
2027 prices for these two aggregate cost categories are projected to 
grow at similar rates.
    We summarize the public comments we received on the adequacy of the 
proposed LTCH market basket increase and our responses in section 
VIII.C.2.d. of the preamble of this final rule. Below are comments we 
received regarding the proposed methods for deriving the LTCH market 
basket.
    Comment: Some commenters expressed concern that the proposed 3.2 
percent market basket update and the 4.3 percentage point increase in 
the labor-related share do not sufficiently account for the dramatic 
increase in labor costs that LTCHs are incurring. Several commenters 
stated that there were proposed increases in the cost category weights 
for Contract Labor (12.6 percent versus 4.4 percent currently) and Home 
Office/Related Organization Contract Labor (3.7 percent versus 1.9 
percent currently), but that CMS forecasted that the overall update 
will only be 0.1 percentage point higher for FY 2025 through FY 2027 
using this 2022-based market basket. The commenters stated that 
according to CMS, this is primarily due to the offset from the lower 
All Other cost category weight (20.8 percent versus 28.3 percent 
currently), which includes things such as Professional Fees and 
Installation, Maintenance, and Repair Services. The commenters claimed 
that CMS is saying that most of the increases in labor costs reflected 
in the updated market basket are effectively removed by the All Other 
cost category. A commenter stated that this would only be true if All 
Other costs decreased substantially in FY 2022 compared to FY 2017 and 
the commenter stated that it is not clear from the proposed rule that 
this is the case. A commenter stated that the assigned cost weights for 
labor costs and All Other costs only reflect the relative proportion of 
such costs in the market basket, not how much overall costs in those 
categories have grown since FY 2017. Commenters stated that a 0.1 
percentage point increase to the market basket update, using the 
rebased and revised LTCH market basket, does not reflect an overall 
increase in the cost of

[[Page 69450]]

LTCH goods and services, compared to the 2017-based market basket.
    Commenters stated that CMS needs to either modify the methodology 
it used to rebase and revise the market basket or apply a separate 
adjustment to the market basket rate to account for significantly 
higher labor and supply costs incurred by providers. Another commenter 
requested CMS adjust the market basket to reflect staffing levels and 
ratios as well as stated that it should also account for facilities 
using highly priced temporary staff during surges or staff shortages.
    Response: As stated previously, to derive the LTCH market basket 
for a specific base year, total base period costs are estimated for a 
set of mutually exclusive and exhaustive spending categories. Of those 
total costs, we estimate the proportion of total costs that each 
category represents, with these proportions called cost weights. 
Therefore, any changes in the cost weight from a prior base period will 
reflect the growth in the costs for that specific category relative to 
the growth in the costs for other categories. As a result, while costs 
for a particular category may have increased from 2017 to 2022, the 
cost weight (such as contract labor) would only increase if these 
specific costs increased faster than the increase in total costs from 
2017 to 2022. Therefore, we disagree with the commenter that a decrease 
in the All Other cost category would only occur if All Other costs 
decreased substantially in 2022 compared to 2017.
    As indicated by the commenters, the cost weights of the LTCH market 
basket are intended to reflect the relative proportion that specific 
costs represent of total costs, and not how much overall costs in those 
categories have increased since the prior base year. The LTCH market 
basket is described as a fixed-weight index because it represents the 
change in price over time of a constant mix (quantity and intensity) of 
goods and services needed to provide LTCH services. We believe that the 
proposed methodology to derive the cost categories and cost weights of 
the proposed market basket is detailed and robust and that this 
proposed method produces valid relative cost weights that are 
representative of LTCH cost structures. To allow for interested parties 
to evaluate this methodology, we have provided the detailed 
calculations including the data sources (such as the specific Medicare 
cost report fields) and trimming methodology so that commenters are 
able to replicate the methodology and provide specific comments on the 
derivation of these cost weights. We will continue to monitor the 
Medicare cost reports as new data becomes available, and any changes to 
the LTCH market basket will be proposed in future rulemaking.
    Comment: Some commenters requested that CMS publish additional 
information and underlying data regarding its market basket 
methodology, as they have been unable to replicate some of CMS' 
figures. A commenter was concerned about the lack of transparency from 
CMS regarding the rebased and revised market basket. The commenter 
stated that they conducted an independent analysis of the rebased 
market basket CMS proposed for FY 2025. The commenter stated that it 
was unclear how CMS arrived at the 3.2 percent market basket update 
from the revised market basket cost categories. The commenter stated 
that their analyst discovered that there were many uncertainties in the 
data that CMS used to rebase and revise the market basket, including 
whether the data accurately represents LTCH costs, how the data were 
trimmed, and the exact subcomponents of each cost category. 
Accordingly, the commenter requested that CMS provide more transparency 
in the final rule regarding the data used to rebase the market basket 
and how that data resulted in the proposed 3.2 percent market basket 
update for the FY 2025 LTCH PPS payment update.
    Response: In the FY 2025 IPPS/LTCH proposed rule (89 FR 36268 
through 36271), for each of the major cost categories of the market 
basket, we provided detailed descriptions of the Worksheet, column 
number, and line number on the Medicare cost report that we proposed to 
use to derive the costs for each category as well as for total Medicare 
allowable costs. For categories such as benefits and contract labor 
where data reporting is more limited, we performed detailed analysis of 
the data by reweighting the cost weights by ownership type using the 
distribution of the universe of LTCHs and compared these results to the 
proposed cost weights to help ensure that the data were representative 
of LTCHs, which we noted in the FY 2025 IPPS/LTCH proposed rule (89 FR 
36270). In addition, in the proposed rule, we provided descriptions of 
the trimming methods applied for each cost weight, which is again 
described in section VIII.D.3.b of the preamble of this final rule. We 
believe this information is sufficient to allow stakeholders to 
replicate the market basket cost weights that we proposed and are 
finalizing for the 2022-based LTCH market basket.
    Information on the CMS market baskets can be found at the CMS 
website: https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information. This website provides information including but not 
limited to how a top-line market basket level is derived from the 
detailed cost categories, how a four-quarter percent change moving 
average is calculated, and a link to a spreadsheet containing an 
example of how the detailed market basket cost weights are calculated 
for the 2006-based IPPS market basket, which is similar to the approach 
followed for the LTCH market basket as well as most of the other CMS 
market baskets. In addition, the latest, publicly available CMS market 
baskets are available at the CMS website: https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-data. We note that publicly available market 
baskets on the CMS website would reflect an updated forecast only after 
a proposed or final rule is published. Using these spreadsheets, 
stakeholders are able to replicate the top-line market basket index 
levels in the historical time period by multiplying the detailed index 
level for each cost category by the associated cost weight. These 
products (weight multiplied by index level) can then be summed up to 
derive the aggregate market basket index level. In response to the 
commenter's request for more transparency, in this final rule, we are 
also providing the projected increase for FY 2025 for some of the 
aggregated cost categories that underlie the most recent forecast of 
the FY 2025 LTCH market basket increase (3.5 percent). This detail is 
consistent with the level of information that we publish on the CMS 
website on a quarterly basis as described above. We note that prices 
for the compensation cost weight, which accounts for about 62 percent 
of the market basket are projected to increase 4.0 percent in FY 2025; 
prices for All Other Products and Services, which accounts for about 28 
percent of the market basket are projected to increase 2.8 percent; and 
prices for Capital-Related costs, which accounts for about 8.5 percent 
of the LTCH market basket are projected to increase 3.2 percent. 
Weighting the projected price increases for these aggregated categories 
(reflecting 98.5 percent of the LTCH market basket cost weights with 
the remaining 1.5 percent reflecting Utilities and PLI), we obtain a 
weighted average projected increase of 3.5 percent. While the projected 
market basket increase is calculated using the aggregation of the 
detailed price forecasts multiplied by

[[Page 69451]]

their respective cost weights for each of the 26 individual cost 
categories, we want to provide an estimate of how the broader cost 
categories are contributing to the overall increase. We strive for 
transparency regarding our methods and regularly respond to questions 
from stakeholders regarding the market baskets via email at 
[email protected].
    Comment: A few commenters requested CMS closely evaluate its 
current forecasting and market basket practices for further refinement. 
Commenters stated that during this period of high cost growth, Medicare 
payment updates for LTCHs have now shown a consistent pattern of 
failing to not only forecast, but also eventually capture this growth. 
The commenters stated that despite the high rates of medical inflation, 
LTCH payments have not kept up with general inflation. Commenters 
claimed that since fee-for-service Medicare patients make up more than 
half of all LTCH discharges, and other insurers adjust payment rates 
relative to Medicare reimbursement, these missed forecasts compound the 
obstacles facing LTCHs.
    Commenters also stated that it is confounding how hospitals, and 
especially labor-intensive LTCHs, could have a market basket that is 
significantly below general inflation. The commenters stated that there 
has been very large growth in LTCH costs in the last several years 
which has exceeded general inflation. However, they stated, even the 
actual market basket growth (not forecasts) was below general inflation 
during this time. The commenters stated that the market basket itself 
may have shortcomings that fail to properly capture growth.
    The commenters stated that there may be many overlapping, 
contributing factors to the market basket failing to capture 
inflationary factors. One such factor is the increased utilization in 
contract labor, which the Employment Cost Index does not capture. They 
encouraged CMS to thoroughly reexamine the market basket and its recent 
shortcomings to identify other potential areas for refinement and 
stated support for working with CMS to assist with such an endeavor.
    Response: Since the inception of the LTCH PPS, the LTCH payment 
rates (with the exception of statutorily-mandated updates) have been 
updated by a projection of a market basket percentage increase--
consistent with other CMS PPS updates (including the IPPS, SNF PPS, and 
Home Health PPS). The LTCH market basket (as well as other CMS market 
baskets) is a fixed-weight, Laspeyres-type index that measures price 
changes over time and would not reflect increases in costs associated 
with changes in the volume or intensity of input goods and services. As 
such, the LTCH market basket update would reflect the prospective price 
pressures described by the commenters as increasing during a high 
inflation period (such as faster wage growth or higher energy prices), 
but would not reflect other factors that might increase the level of 
costs, such as the quantity of labor used. The impact of changes in 
quantity or use of services on the market basket cost weights would be 
captured when the market basket is rebased.
    We note that the market basket percentage increase is a forecast of 
the price pressures that hospitals are expected to face in 2025. We 
also note that when developing its forecast for the ECI for hospital 
workers, IGI (a nationally recognized economic and financial 
forecasting firm with which CMS contracts to forecast the price proxies 
of the market baskets) considers overall labor market conditions 
(including rise in contract labor employment due to tight labor market 
conditions) as well as trends in contract labor wages, both of which 
could potentially impact wages for workers employed directly by the 
hospital. As projected by IGI and other independent forecasters, 
compensation growth and upward price pressures are expected to slow in 
2025 relative to 2022 and 2023. Therefore, we believe the projected 
increase in the LTCH market basket for FY 2025 is reflective of 
expectations for input price growth in FY 2025.
    As is our general practice, we proposed that if more recent data 
became available, we would use such data, if appropriate, to derive the 
final FY 2025 LTCH market basket update for the final rule. For this 
final rule, based on the more recent IGI second quarter 2024 forecast 
with historical data through the first quarter of 2024, the projected 
2022-based LTCH market basket increase factor for FY 2025 is 3.5 
percent, which is 0.3 percentage point higher than the projected FY 
2025 LTCH market basket increase factor in the proposed rule, and 
reflects an increase in compensation prices of 4.0 percent. We would 
note that the 10-year historical average (2014-2023) growth rate of the 
2022-based LTCH market basket is 2.8 percent with compensation prices 
increasing 2.9 percent. The final FY 2025 LTCH market basket increase 
reflects IGI's projected inflation and overall economic outlook.
6. FY 2025 Labor-Related Share
    As discussed in section V.B. of the Addendum to this final rule, 
under the authority of section 123 of the BBRA as amended by section 
307(b) of the BIPA, we established an adjustment to the LTCH PPS 
payments to account for differences in LTCH area wage levels (Sec.  
412.525(c)). The labor-related portion of the LTCH PPS standard Federal 
payment rate, hereafter referred to as the labor-related share, is 
adjusted to account for geographic differences in area wage levels by 
applying the applicable LTCH PPS wage index. 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. As discussed in more detail in this section of this rule and 
similar to the 2017-based LTCH market basket, we classify a cost 
category as labor-related and include it in the labor-related share if 
the cost category is defined as being labor-intensive and its cost 
varies with the local labor market. As stated in the FY 2024 IPPS/LTCH 
PPS final rule (88 FR 58988), the labor-related share for FY 2024 was 
defined as the sum of the FY 2024 relative importance of Wages and 
Salaries; Employee Benefits; Professional Fees: Labor-Related Services; 
Administrative and Facilities Support Services; Installation, 
Maintenance, and Repair Services; All Other: Labor-related Services; 
and a portion of the Capital-Related Costs from the 2017-based LTCH 
market basket.
    We proposed to continue to classify a cost category as labor-
related if the costs are labor-intensive and vary with the local labor 
market. Given this, based on our definition of the labor-related share 
and the cost categories in the 2022-based LTCH market basket, we 
proposed to include in the labor-related share for FY 2025 the sum of 
the FY 2025 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 cost weight from the 2022-based LTCH market basket.
    Similar to the 2017-based LTCH market basket, the 2022-based LTCH 
market basket includes two cost categories for nonmedical Professional 
fees (including but not limited to, expenses for legal, accounting, and 
engineering services). These are Professional Fees: Labor-Related and 
Professional Fees: Nonlabor-Related. For the 2022-based LTCH market 
basket, we proposed to estimate the labor-related percentage of non-
medical professional fees (and assign these expenses to the 
Professional Fees: Labor-Related

[[Page 69452]]

services cost category) based on the same method that was used to 
determine the labor-related percentage of professional fees in the 
2017-based LTCH market basket.
    As was done for the 2017-based LTCH market basket, we proposed to 
determine the proportion of legal, accounting and auditing, 
engineering, and management consulting services that meet our 
definition of labor-related services based on a survey of hospitals 
conducted by CMS in 2008. We notified the public of our intent to 
conduct this survey on December 9, 2005 (70 FR 73250) and did not 
receive any public comments in response to the notice (71 FR 8588). A 
discussion of the composition of the survey and post-stratification can 
be found in the FY 2010 IPPS/LTCH PPS final rule (74 FR 43850 through 
43856). Based on the weighted results of the survey, we determined that 
hospitals purchase, on average, the following portions of contracted 
professional services outside of their local labor market:
     34 percent of accounting and auditing services.
     30 percent of engineering services.
     33 percent of legal services.
     42 percent of management consulting services.
    For the 2022-based LTCH market basket, we proposed to apply each of 
these percentages to the respective 2017 Benchmark I-O cost category 
underlying the professional fees cost category to determine the 
Professional Fees: Nonlabor-Related costs. The Professional Fees: 
Labor-Related costs were determined to be the difference between the 
total costs for each Benchmark I-O category and the Professional Fees: 
Nonlabor-Related costs. This is the same methodology that we used to 
separate the 2017-based LTCH market basket professional fees category 
into Professional Fees: Labor-Related and Professional Fees: Nonlabor-
Related cost categories.
    Effective for transmittal 18 (https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Transmittals/r18p240i), the hospital 
Medicare Cost Report (CMS Form 2552-10, OMB No. 0938-0050) is 
collecting information on whether a hospital purchased professional 
services (for example, legal, accounting, tax preparation, bookkeeping, 
payroll, advertising, and management or consulting services or both) 
from an unrelated organization and if the majority of these expenses 
were purchased from unrelated organizations located outside of the main 
hospital's local area labor market. We encourage all providers to 
provide this information so we can potentially use these more recent 
data in future rulemaking to determine the labor-related share.
    In the 2022-based LTCH market basket, we proposed that nonmedical 
professional fees that were subject to allocation based on these survey 
results represent approximately 3.6 percent of total costs (and are 
limited to those fees related to Accounting and Auditing, Legal, 
Engineering, and Management Consulting services). Based on our survey 
results, we proposed to apportion approximately 2.3 percentage points 
of the 3.6 percentage point figure into the Professional Fees: Labor-
Related cost category and designate the remaining approximately 1.3 
percentage points into the Professional Fees: Nonlabor-Related cost 
category.
    In addition to the professional services as previously listed, for 
the 2022-based LTCH market basket, we proposed to allocate a proportion 
of the Home Office/Related Organization Contract Labor cost weight, 
calculated using the Medicare cost reports as previously stated, into 
the labor-related and nonlabor-related cost categories. We proposed to 
classify these expenses as labor-related and nonlabor-related as many 
facilities are not located in the same geographic area as their home 
office and, therefore, do not meet our definition for the labor-related 
share that requires the services to be purchased in the local labor 
market.
    Similar to the 2017-based LTCH market basket, we proposed for the 
2022-based LTCH market basket to use the Medicare cost reports for 
LTCHs to determine the home office labor-related percentages. The 
Medicare cost report requires a hospital to report information 
regarding their home office provider. Using information on the Medicare 
cost report, we compare the location of the LTCH with the location of 
the LTCH's home office. We proposed to classify a LTCH with a home 
office located in their respective labor market if the LTCH and its 
home office are located in the same Metropolitan Statistical Area 
(MSA). Then we determine the proportion of the Home Office/Related 
Organization Contract Labor cost weight that should be allocated to the 
labor-related share based on the percent of total Home Office/Related 
Organization Contract Labor costs for those LTCHs that had home offices 
located in their respective MSA of total Home Office/Related 
Organization Contract Labor costs for LTCHs with a home office. We 
determined a LTCH's and its home office's MSA using their zip code 
information from the Medicare cost report. Using this methodology with 
the 2022 Medicare cost reports, we determined that 4 percent of LTCHs' 
Home Office/Related Organization Contract Labor costs were for home 
offices located in their respective MSA, or local labor markets. 
Therefore, we are allocating 4 percent of the Home Office/Related 
Organization Contract Labor cost weight (0.1 percentage point = 3.7 
percent x 4 percent) to the Professional Fees: Labor-Related cost 
weight and 96 percent of the Home Office/Related Organization Contract 
Labor cost weight to the Professional Fees: Nonlabor-Related cost 
weight (3.6 percentage points = 3.7 percent x 96 percent). For 
comparison, for the 2017-based LTCH market basket we also allocated 4 
percent of the Home Office/Related Organization Contract Labor cost 
weight to the Professional Fees: Labor-Related cost weight (85 FR 
58924).
    In summary, based on the two allocations mentioned earlier, we 
proposed to apportion 2.4 percentage points (2.3 percentage points + 
0.1 percentage point) of the Professional Fees and Home Office/Related 
Organization Contract Labor cost weights into the Professional Fees: 
Labor-Related cost category. This amount was added to the portion of 
professional fees that we already identified as labor-related using the 
I-O data such as contracted advertising and marketing costs 
(approximately 0.6 percentage point of total costs) resulting in a 
total Professional Fees: Labor-Related cost weight of 3.0 percent.
    We summarize the public comments we received on our proposed 
methodology for deriving the proposed labor-related share for FY 2025 
and our responses here.
    Comment: A commenter appreciated the proposal to increase the 
labor-related share based on data that better reflect increased labor 
costs as a percentage of LTCH's overall cost structure. However, the 
commenter disagreed with CMS' assertion that some portion of 
professional contract labor costs is not subject to geographic 
variation in labor costs. The commenter requested that CMS allocate all 
3.6 percentage points for professional services costs to the 
Professional Services: Labor-Related Category for the final rule.
    The commenter claimed that CMS' assumption that fees for services 
provided by firms located outside of a hospital's core-based 
statistical area (CBSA) do not vary based on geography is invalid. The 
commenter stated that the implied underpinning of this assumption is 
that national and regional professional services firms do not compete 
with local professional services firms based in a hospital's CBSA.

[[Page 69453]]

However, the commenter stated that this is an erroneous assumption as 
hospitals seeking professional services solicit proposals for these 
services from local, regional, and national firms and therefore, 
regional and national firms have the incentive to adjust their pricing 
in response to local labor market conditions. The commenter stated that 
if the local labor market has lower wages than the national average--
which will influence the pricing of a local firm's response to a 
request for proposal from a hospital--regional and national firms must 
reduce the offered price of their services to be competitive with local 
firms that offer the same services. Conversely, the commenter stated, 
if the local labor market has higher wages than the national average, 
regional and national firms have every incentive to price accordingly 
to increase their profit margins on a given contract. Therefore, the 
commenter claimed that pricing for services offered by regional and 
national firms to hospitals in differing CBSAs will vary significantly 
based on local rates due to these firms competing with local firms that 
provide the same service.
    Therefore, the commenter asked CMS to provide evidence that pricing 
for professional services delivered by regional and national firms to 
hospitals is offered in a market that is not subject to geographic cost 
variation. The commenter stated that unless the agency can produce 
strong evidence that prices for professional services provided by firms 
outside of a hospital's local labor market are homogenous--that an LTCH 
in San Antonio, Texas, is charged the same hourly rates for audit 
services by the same national accounting firm as a hospital in 
Sacramento, Calif.--it asks CMS to restore the 1.3 percentage points it 
proposes to reclassify to Professional Services: Nonlabor-Related to 
the Professional Services: Labor-Related category. In the absence of 
data that show standardized pricing by regional and national 
professional services firms, the commenter stated that the Professional 
Services: Labor-Related category cost weight should be 3.6 percentage 
points.
    Response: We disagree with the commenter and believe it is 
appropriate that a proportion of Accounting & Auditing, Legal, 
Engineering, and Management Consulting services costs purchased by 
hospitals should be excluded from the labor-related share. Under the 
authority of section 123 of the BBRA, as amended by section 307(b) of 
the BIPA, we established an adjustment to the LTCH PPS standard Federal 
payment rate to account for differences in LTCH area wage levels under 
Sec.  412.525(c). The labor-related share of the LTCH PPS standard 
Federal payment rate is adjusted to account for geographic differences 
in area wage levels by applying the applicable LTCH PPS wage index.
    The purpose of the labor-related share is to reflect the proportion 
of the national PPS base payment rate that is adjusted by the 
hospital's wage index (representing the relative costs of their local 
labor market to the national average). Therefore, we include a cost 
category in the labor-related share if the costs are labor intensive 
and vary with the local labor market.
    As acknowledged by the commenter and confirmed by the survey of 
hospitals conducted by CMS in 2008 (as stated previously in this final 
rule), professional services can be purchased from local firms as well 
as national and regional professional services firms. It is not 
necessarily the case, as asserted by the commenter, that these national 
and regional firms have fees that match those in the local labor market 
even though providers have the option to utilize those firms. That is, 
fees for services purchased from firms outside the local labor market 
may differ from those that would be purchased in the local labor market 
for any number of reasons (including but not limited to, the skill 
level of the contracted personnel, higher capital costs, etc.). As 
noted earlier in this section of this final rule, the definition for 
the labor-related share requires the services to be purchased in the 
local labor market; therefore, CMS' allocation of approximately 64 
percent (2.3 percentage points of 3.6 percentage points) of the 
Professional Fees cost weight to Professional Fees: Labor-Related costs 
based on the 2008 survey results\257\ is consistent with the 
commenter's assertion that not all Professional Fees services are 
purchased in the local labor market. We believe it is reasonable to 
conclude that the costs of those Professional Fees services purchased 
directly within the local labor market are directly related to local 
labor market conditions and, thus, should be included in the labor-
related share. The remaining approximately 36 percent of Professional 
Fees costs, which are purchased outside the local labor market, reflect 
different and additional factors outside the local labor market and, 
thus, should be excluded from the labor-related share. In addition, we 
note the compensation costs of professional services provided by 
hospital employees (which would reflect the local labor market) are 
included in the labor-related share as they are included in the Wages 
and Salaries and Employee Benefits cost weights.
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    \257\ The 65 percent is based on a survey conducted by CMS in 
2008 as detailed in the FY 2010 IPPS/LTCH PPS final rule (74 FR 
43850 through 43856). This was also used to determine the 
Professional Fees: Labor-related cost weight in the 2017-based LTCH 
market basket.
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    Therefore, for the reasons discussed, we believe our proposed 
methodology of continuing to allocate only a portion of Professional 
Fees to the Professional Fees: Labor-Related cost category is 
appropriate. As stated previously, effective for transmittal 18 
(https://www.cms.gov/Regulations-andGuidance/Guidance/Transmittals/Transmittals/r18p240i), the hospital Medicare Cost Report (CMS Form 
2552- 10, OMB No. 0938-0050) is collecting information on whether a 
hospital purchased professional services (for example, legal, 
accounting, tax preparation, bookkeeping, payroll, advertising, and 
management or consulting services or both) from an unrelated 
organization and if the majority of these expenses were purchased from 
unrelated organizations located outside of the main hospital's local 
area labor market. We encourage all providers to provide this 
information so we can potentially use it in future rulemaking to 
determine the labor-related share.
    As previously stated, we proposed 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 cost weight from the 2022-based LTCH market basket. The 
relative importance reflects the different rates of price change for 
these cost categories between the base year (2022) and FY 2025. Based 
on IGI's fourth quarter 2023 forecast of the proposed 2022-based LTCH 
market basket, the sum of the FY 2025 relative importance for operating 
costs (Wages and Salaries, Employee Benefits, Professional Fees: Labor-
Related, Administrative and Facilities Support Services, Installation 
Maintenance and Repair Services, and All Other: Labor-Related Services) 
was 68.9 percent. The portion of Capital costs that is estimated to be 
influenced by the local labor market is 46 percent, which is the same 
percentage applied to the 2017-based LTCH market basket. Since the 
relative importance for Capital is 8.4 percent of the proposed 2022-
based LTCH market basket in FY 2025, we took 46 percent of 8.4 percent 
to determine the proposed labor-related

[[Page 69454]]

share of Capital for FY 2025 of 3.9 percent. Therefore, we proposed a 
total labor-related share for FY 2025 of 72.8 percent (the sum of 68.9 
percent for the operating cost and 3.9 percent for the labor-related 
share of Capital).
    Based on IGI's second quarter 2024 forecast of the 2022-based LTCH 
market basket, the sum of the FY 2025 relative importance for Wages and 
Salaries, Employee Benefits, Professional Fees: Labor-Related, 
Administrative and Facilities Support Services, Installation 
Maintenance & Repair Services, and All Other: Labor-Related Services is 
68.9 percent. The portion of Capital costs that is influenced by the 
local labor market is estimated to be 46 percent, which is the same 
percentage applied to the 2017-based LTCH market basket. Since the 
relative importance for Capital is 8.4 percent of the 2022-based LTCH 
market basket in FY 2025, we take 46 percent of 8.4 percent to 
determine the labor-related share of Capital for FY 2025 of 3.9 
percent. Therefore, using more recent data, the total labor-related 
share for FY 2025 is 72.8 percent (the sum of 68.9 percent for the 
operating cost and 3.9 percent for the labor-related share of Capital).
    We summarize the comments we received on the proposed FY 2025 
labor-related share and our responses here.
    Comment: A commenter does not support the proposed increase in the 
labor-related share, as any increase to the labor-related share 
percentage penalizes any facility that has a wage index less than 1.0. 
The commenter stated that across the country, there is a growing 
disparity between high-wage and low-wage states that harms hospitals in 
many rural and underserved communities. The commenter claimed that 
limiting the increase in the labor-related share would help mitigate 
that growing disparity. The commenter stated that they do not support 
any increases in the labor-related share percentages.
    Response: The total difference between the FY 2025 labor-related 
share using the proposed 2022-based LTCH market basket (72.8 percent) 
and the FY 2024 labor-related share using the 2017-based LTCH market 
basket (68.5 percent) is 4.3 percentage points and this difference is 
primarily attributable to the revision to the base year cost weights 
for those categories included in the labor-related share. We 
periodically rebase the LTCH market basket in order to reflect more 
recent data on LTCH cost structures. From 2017 to 2022, the Medicare 
cost report data showed a notable increase in the Compensation cost 
weight for LTCHs, which is consistent with comments that we received in 
prior rulemaking, specifically the FY 2024 IPPS/LTCH proposed rule 
comments (88 FR 59134) that stated the 2017-based LTCH market basket 
did not sufficiently account for the dramatic increases in labor costs 
that LTCHs were incurring. We believe incorporating these more recent 
data in the LTCH market basket is appropriate, and is in response to 
public comments, resulting in a corresponding increase in the labor-
related share. In addition, we proposed to use the FY 2025 relative 
importance values for the labor-related cost categories from the 2022-
based LTCH market basket because it accounts for more recent data 
regarding price pressures and cost structure of LTCHs. This methodology 
is consistent with the determination of the labor-related share since 
the implementation of the LTCH PPS. As stated in the FY 2025 IPPS/LTCH 
proposed rule, we also proposed that if more recent data became 
available, we would use such data, if appropriate, to determine the FY 
2025 labor-related share for the final rule. Based on IHS Global Inc.'s 
second quarter 2024 forecast with historical data through the first 
quarter of 2024, the FY 2025 labor-related share for the final rule is 
72.8 percent.
    After consideration of public comments, we are finalizing a FY 2025 
labor-related share of 72.8 percent.
    Table EEEE 9 shows the FY 2025 labor-related share using the 2022-
based LTCH market basket relative importance and the FY 2024 labor-
related share using the 2017-based LTCH market basket.
[GRAPHIC] [TIFF OMITTED] TR28AU24.214

    The total difference between the FY 2025 labor-related share using 
the 2022-based LTCH market basket (72.8 percent) and the FY 2024 labor-
related share using the 2017-based LTCH market basket (68.5 percent) is 
4.3 percentage points and this difference is primarily attributable to 
the revision to the base year cost weights for those categories 
included in the labor-related share. The 4.3 percentage points revision 
to the base year cost weights is a result of: (1) an 8.6 percentage 
points upward revision to the base year Compensation cost weight, which 
is derived using the LTCH Medicare cost report data; (2) a 3.6 
percentage points downward revision in the base year labor-related 
categories associated with incorporating the 2017 Benchmark I-O data; 
and (3) a 0.7 percentage point

[[Page 69455]]

downward revision in the base year labor-related portion of capital 
costs, which is derived using the LTCH Medicare cost report data.

IX. Quality Data Reporting Requirements for Specific Providers

A. Overview

    In section IX. of the proposed rule, we sought comment on and 
proposed changes to a number of Medicare quality reporting programs. 
Specifically,
     In section IX.B. of the proposed rule (89 FR 36284 through 
36306), we made the following crosscutting quality program proposals or 
request for comment:
    ++ Adoption of the Patient Safety Structural Measure in the 
Hospital IQR Program and PCHQR Program.
    ++ Modification to the Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) Survey Measure in the Hospital IQR 
Program, Hospital VBP Program, and PCHQR Program.
    ++ Advancing Patient Safety and Outcomes Across the Hospital 
Quality Programs--Request for Comment.
     In section IX.C. of the proposed rule (89 FR 36306 through 
36341), the Hospital IQR Program.
     In section IX.D. of the proposed rule (89 FR 36341 through 
36343), the PCHQR Program.
     In section IX.E. of the proposed rule (89 FR 36343 through 
36352), the LTCH QRP.
     In section IX.F. of the proposed rule (89 FR 36352 through 
36381), the Medicare Promoting Interoperability Program for eligible 
hospitals and critical access hospitals (CAHs) (previously known as the 
Medicare EHR Incentive Program).
    We respond to public comments on each of these sections below.

B. Crosscutting Quality Program Policies and Request for Comment

1. Adoption of the Patient Safety Structural Measure Beginning With the 
CY 2025 Reporting Period/FY 2027 Payment Determination for the Hospital 
Inpatient Quality Reporting (IQR) Program and the CY 2025 Reporting 
Period/FY 2027 Program Year for the PPS-Exempt Cancer Hospital Quality 
Reporting (PCHQR) Program
a. Background
    A foundational commitment of providing healthcare services is to 
ensure safety, as embedded in the centuries-old Hippocratic Oath, 
``First, do no harm.'' Yet, the landmark reports To Err is Human \258\ 
and Crossing the Quality Chasm \259\ surfaced major deficits in 
healthcare quality and safety. These reports resulted in widespread 
awareness of the alarming prevalence of patient harm and, over the past 
two decades, healthcare facilities implemented various interventions 
and strategies to improve patient safety, with some documented 
successes.\260\ However, progress has been slow, and preventable harm 
to patients in the clinical setting resulting in significant morbidity 
and mortality remains common. A recent systematic analysis of 
literature concluded that preventable mortality among inpatients 
results in approximately 22,165 preventable deaths annually.\261\ In 
another recent study, researchers identified adverse events in almost 
one-quarter of admissions and showed that more than one-fifth were 
deemed preventable and almost one-third were considered serious (that 
is, caused harm that required intervention or prolonged recovery).\262\
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    \258\ Institute of Medicine (US) Committee on Quality of Health 
Care in America, Kohn, L.T., Corrigan, J.M., & Donaldson, M.S. 
(Eds.). (2000). To Err is Human: Building a Safer Health System. 
National Academies Press (US).
    \259\ Institute of Medicine (US) Committee on Quality of Health 
Care in America. (2001). Crossing the Quality Chasm: A New Health 
System for the 21st Century. National Academies Press (US).
    \260\ Agency for Healthcare Research and Quality. (February 
2021). National Healthcare Quality and Disparities Report chartbook 
on patient safety. Rockville, MD. Available at: https://www.ahrq.gov/sites/default/files/wysiwyg/research/findings/nhqrdr/chartbooks/patientsafety/2019qdr-patient-safety-chartbook.pdf.
    \261\ Rodwin BA, Bilan VP, Merchant NB, Steffens CG, Grimshaw 
AA, Bastian LA, Gunderson CG. Rate of Preventable Mortality in 
Hospitalized Patients: a Systematic Review and Meta-analysis. J Gen 
Intern Med. 2020 Jul;35(7):2099-2106. doi: 10.1007/s11606-019-05592-
5. Epub 2020 Jan 21. PMID: 31965525; PMCID: PMC7351940.
    \262\ Bates DW, Levine DM, Salmasian H, et al. The Safety of 
Inpatient Health Care. New England Journal of Medicine. 
2023;388(2):142-153. https://doi.org/10.1056/nejmsa2206117.
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    Despite established patient safety protocols and quality measures, 
the COVID-19 public health emergency (PHE) strained the healthcare 
system substantially, introducing new safety risks and negatively 
impacting patient safety in the normal delivery of care. Since the 
onset of the COVID-19 PHE, the U.S. has seen marked declines in patient 
safety metrics, as evidenced by considerable increases in healthcare-
associated infections (HAIs).263 264 Studies found that 
central line-associated blood stream infections (CLABSIs) in hospitals 
were 60 percent higher than predicted in the absence of COVID-19, 
catheter-associated urinary tract infections (CAUTIs) were 43 percent 
higher, and methicillin-resistant Staphylococcus aureus (MRSA) 
bacteremia infections were 44 percent higher. Studies have shown that 
these results were likely due at least in part to disrupted routine 
infection control practices during the COVID-19 PHE.265 266 
Notably, recent reports demonstrate that some HAI rates have begun to 
decrease towards pre-PHE levels as the U.S. saw a 9 percent overall 
decrease in CLABSI, a 12 percent overall decrease in CAUTI and a 16 
percent overall decrease in hospital onset MRSA bacteremia between 2021 
and 2022 in acute care hospital settings.\267\
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    \263\ Lastinger LM, Alvarez CR, Kofman A, Konnor RY, Kuhar DT, 
Nkwata A, Patel PR, Pattabiraman V, Xu SY, Dudeck MA. Continued 
increases in the incidence of healthcare-associated infection (HAI) 
during the second year of the coronavirus disease 2019 (COVID-19) 
pandemic. Infect Control Hosp Epidemiol. 2023 Jun;44(6):997-1001. 
doi: 10.1017/ice.2022.116. Epub 2022 May 20. PMID: 35591782; PMCID: 
PMC9237489.
    \264\ Patel, PR, Weiner-Lastinger, LM, Dudeck, MA, et al. Impact 
of COVID-19 pandemic on central-line-associated bloodstream 
infections during the early months of 2020, National Healthcare 
Safety Network. Infect Control Hosp Epidemiol 2021. doi: 10.1017/
ice.2021.108.
    \265\ Baker MA, Sands KE, Huang SS, Kleinman K, Septimus EJ, 
Varma N, Blanchard J, Poland RE, Coady MH, Yokoe DS, Fraker S, 
Froman A, Moody J, Goldin L, Isaacs A, Kleja K, Korwek KM, Stelling 
J, Clark A, Platt R, Perlin JB; CDC Prevention Epicenters Program. 
The Impact of Coronavirus Disease 2019 (COVID-19) on Healthcare-
Associated Infections. Clin Infect Dis. 2022 May 30;74(10):1748-
1754. doi: 10.1093/cid/ciab688. PMID: 34370014; PMCID: PMC8385925.
    \266\ Centers for Disease Control and Prevention. (2021). 2021 
National and State Healthcare-Associated Infections Progress Report. 
Available at: https://www.cdc.gov/hai/data/archive/2021-HAI-progress-report.html#2018.
    \267\ Centers for Disease Control and Prevention. (2022). 2022 
National and State Healthcare-Associated Infections Progress Report. 
Available at: https://www.cdc.gov/healthcare-associated-infections/php/data/progress-report.html?CDC_AAref_Val=https://www.cdc.gov/hai/
data/portal/progress-report.html#cdc_report_pub_study_section_2-
2022-hai-progress-report.
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    As healthcare facilities struggled to address the challenges posed 
by the COVID-19 PHE, safety gaps and risks in healthcare delivery were 
illuminated,\268\ revealing a lack of resiliency in the healthcare 
system.269 270 Beyond HAIs, other preventable types of 
patient harm that were brought to the forefront by the

[[Page 69456]]

COVID-19 PHE include occurrences of pressure injuries \271\ and patient 
falls \272\ among hospitalized patients.
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    \268\ Agency for Healthcare Research and Quality. (2021). AHRQ 
PSNet Annual Perspective: Impact of the COVID-19 Pandemic on Patient 
Safety. https://psnet.ahrq.gov/perspective/ahrq-psnet-annual-perspective-impact-covid-19-pandemic-patient-safety.
    \269\ Fleisher, L.A., Schreiber, M.D., Cardo, D., and 
Srinivasan, M.D. (2022). Health care safety during the pandemic and 
beyond--building a system that ensures resilience. N Engl J Med, 
386: 609-611. https://www.nejm.org/doi/full/10.1056/NEJMp2118285.
    \270\ Implications of the COVID-19 pandemic for patient safety: 
a rapid review. Geneva: World Health Organization; 2022. Licence: CC 
BY-NC-SA 3.0 IGO.
    \271\ Li, Z., Lin, F., Thalib, L., & Chaboyer, W. (2020). Global 
prevalence and incidence of pressure injuries in hospitalised adult 
patients: A systematic review and meta-analysis. International 
Journal of Nursing Studies, Vol. 105. https://doi.org/10.1016/j.ijnurstu.2020.103546.
    \272\ Dykes, P. C., Curtin-Bowen, M., Lipsitz, S., Franz, C., 
Adelman, J., Adkison, L., Bogaisky, M., Carroll, D., Carter, E., 
Herlihy, L., Lindros, M. E., Ryan, V., Scanlan, M., Walsh, M. A., 
Wien, M., & Bates, D. W. (2023). Cost of Inpatient Falls and Cost-
Benefit Analysis of Implementation of an Evidence-Based Fall 
Prevention Program. JAMA Health Forum, 4(1), e225125. https://doi.org/10.1001/jamahealthforum.2022.5125.
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    In addition to safety issues illuminated during the COVID-19 PHE, 
two other key patient safety indicators that are worth noting for their 
prevalence are postoperative respiratory failure 273 274 275 
and acute kidney injuries (AKI).276 277
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    \273\ Sabate S., Mazo V., Canet J. (2014). Predicting 
Postoperative Pulmonary Complications: Implications for Outcomes and 
Costs. Case Reports in Anesthesiology. 27(2), 201-209.
    \274\ Rosen, A. K., Loveland, S., Shin, M., Shwartz, M., 
Hanchate, A., Chen, Q., Kaafarani, H. M., & Borzecki, A. (2013). 
Examining the impact of the AHRQ Patient Safety Indicators (PSIs) on 
the Veterans Health Administration: the case of readmissions.Medical 
Care,51(1), 37-44.
    \275\ Lawson E.H., Hall B.L., Louie R., et al. (2013). 
Association Between Occurrence of a Postoperative Complication and 
Readmission: Implications for Quality Improvement and Cost Savings. 
Annals of Surgery, 258(1),10-18.
    \276\ Thongprayoon, C., Hansrivijit, P., Kovvuru, K., Kanduri, 
S. R., Torres-Ortiz, A., Acharya, P., Gonzalez-Suarez, M. L., 
Kaewput, W., Bathini, T., & Cheungpasitporn, W. (2020). Diagnostics, 
Risk Factors, Treatment and Outcomes of Acute Kidney Injury in a New 
Paradigm. Journal of clinical medicine, 9(4), 1104.
    \277\ Hoste, E. A., & Schurgers, M. (2008). Epidemiology of 
acute kidney injury: how big is the problem? Critical care medicine, 
36(4 Suppl), S146-S151.
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    While the COVID-19 PHE may have disrupted routine infection control 
practices, these key patient safety indicators nevertheless show the 
importance of addressing gaps in safety to save lives, provide 
equitable medical care, and ensure that the U.S. healthcare system is 
resilient enough to withstand future challenges. Now is the time to 
recommit to better safety practices for both patients and healthcare 
workers, establish new protocols, and implement early interventions 
that would save many lives from preventable harms.
    To accomplish these goals, the federal government is taking a 
multi-pronged approach to improve safety and reduce preventable harm to 
patients. The Agency for Healthcare Research and Quality (AHRQ), on 
behalf of HHS, has established the National Action Alliance for Patient 
and Workforce Safety (the National Action Alliance) as a public-private 
collaboration to improve both patient and workforce safety.\278\ As 
described by AHRQ, the National Action Alliance is a partnership 
between HHS and its federal agencies and private stakeholders, 
including healthcare systems, clinicians, allied health professionals, 
patients, families, caregivers, professional societies, patient and 
workforce safety advocates, the digital healthcare sector, health 
services researchers, employers, and payors interested in recommitting 
the U.S. to advancing patient and workforce safety to move toward zero 
harm in healthcare.\279\
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    \278\ AHRQ. (2023). National Action Alliance for Patient and 
Workforce Safety. https://www.ahrq.gov/cpi/about/otherwebsites/action-alliance.html.
    \279\ AHRQ. (2023). National Action Alliance for Patient and 
Workforce Safety. https://www.ahrq.gov/cpi/about/otherwebsites/action-alliance.html.
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    In September 2023, the President's Council of Advisors on Science 
and Technology (PCAST) published the ``Report to the President: A 
Transformational Effort on Patient Safety,'' with a call to action to 
renew ``our nation's commitment to improving patient safety.'' \280\ 
The PCAST report put forth the following recommendations as a part of 
the call to action: (1) Establish and maintain federal leadership for 
the improvement of patient safety as a national priority; (2) Ensure 
that patients receive evidence-based practices for preventing harm and 
addressing risks; (3) Partner with patients and reduce disparities in 
medical errors and adverse outcomes; and (4) Accelerate research and 
deployment of practices, technologies, and exemplar systems of safe 
care.\281\
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    \280\ President's Council of Advisors on Science and Technology. 
(2023). Report to the President: A Transformational Effort on 
Patient Safety. https://www.whitehouse.gov/wp-content/uploads/2023/09/PCAST_Patient-Safety-Report_Sept2023.pdf.
    \281\ President's Council of Advisors on Science and Technology. 
(2023). Report to the President: A Transformational Effort on 
Patient Safety. https://www.whitehouse.gov/wp-content/uploads/2023/09/PCAST_Patient-Safety-Report_Sept2023.pdf.
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    As part of this national recommitment to safety in healthcare, we 
are promoting the use of safety measures throughout our quality 
programs to identify and measure quality gaps and processes, and to 
make that information transparent and available to the public. 
Effective measurement is paramount to monitoring harm events, 
identifying key gaps, and tracking progress toward safer, more reliable 
care. Within CMS' hospital quality measurement programs, there are 
several outcome and process measures in use that capture specific 
conditions or procedures such as the Severe Sepsis and Septic Shock: 
Management Bundle measure, Patient Safety and Adverse Events Composite 
measure, Severe Obstetric Complications electronic clinical quality 
measure (eCQM), and the Safe Use of Opioids--Concurrent Prescribing 
eCQM. While these metrics are important, they are not sufficient by 
themselves to measure and incentivize investment in a resilient safety 
culture or the infrastructure necessary for sustainable high 
performance within the broad and complex domain of patient safety. The 
systems-level approach to patient safety maintains that errors and 
accidents in medical care are a reflection of system-level failures, 
rather than failings on the part of individuals.\282\ There is a strong 
alignment among patient safety experts to shift to a more holistic, 
proactive, systems-based approach to patient 
safety.283 284 285 286 287 288 While each of our existing 
measures address processes and outcomes that encourage providers to 
improve patient safety for specific conditions or related to specific 
treatments, these measures do not address the overall culture in which 
the care is provided. Including a systems-level measure would 
contribute to a culture that improves performance on these individual 
metrics as well as improves safety for all care provided within the 
hospital.
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    \282\ Patient Safety Network. Systems Approach. Agency for 
Healthcare Research and Quality. Published September 7, 2019. 
https://psnet.ahrq.gov/primer/systems-approach.
    \283\ National Patient Safety Foundation. Free from Harm: 
Accelerating Patient Safety Improvement Fifteen Years after To Err 
Is Human. Boston, MA: National Patient Safety Foundation; 2015.
    \284\ Gandhi, T. K., Feeley, D., & Schummers, D. (2020b). Zero 
Harm in Health Care. NEJM Catalyst, 1(2). https://doi.org/10.1056/cat.19.1137.
    \285\ Pronovost, P. Transforming patient safety: A sector-wide 
systems approach. Published January 8, 2015.
    \286\ Frankel A, Haraden C, Federico F, Lenoci-Edwards J. A 
Framework for Safe, Reliable, and Effective Care. White Paper. 
Cambridge, MA: Institute for Healthcare Improvement and Safe & 
Reliable Healthcare; 2017. (Available on https://www.ihi.org/resources/white-papers/framework-safe-reliable-and-effective-care).
    \287\ American College of Healthcare Executives and IHI/NPSF 
Lucian Leape Institute. Leading a Culture of Safety: A Blueprint for 
Success. Boston, MA: American College of Healthcare Executives and 
Institute for Healthcare Improvement; 2017.
    \288\ National Steering Committee for Patient Safety. Safer 
Together: A National Action Plan to Advance Patient Safety. Boston, 
Massachusetts: Institute for Healthcare Improvement; 2020. 
(Available at www.ihi.org/SafetyActionPlan).
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    To drive action and improvements in safety and address this gap in 
systems-level measurement for safety within the Hospital IQR and PCHQR 
Programs, we proposed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
36284 through 36293) the adoption of the Patient Safety Structural 
measure, a new

[[Page 69457]]

attestation-based measure that assesses whether hospitals demonstrate a 
structure, culture, and leadership commitment that prioritize safety. 
The Patient Safety Structural measure includes five complementary 
domains, each containing a related set of statements that aim to 
capture the most salient, evidenced-based, structural, and cultural 
elements of safety. This measure is intended to be a foundational 
measure and designed to assess hospital implementation of a systems-
based approach to safety best practices, as demonstrated by: leaders 
who prioritize and champion safety; organizational policies, protocols, 
goals, and metrics reflecting safety as a core value; a diverse group 
of patients and families meaningfully engaged with healthcare providers 
as partners in safety; practices indicative of a culture of safety; 
accountability and transparency in addressing adverse events; and 
continuous learning and improvement. This Patient Safety Structural 
measure is informed by Safer Together: The National Action Plan to 
Advance Patient Safety,\289\ developed by the National Steering 
Committee for Patient Safety convened by the Institute for Healthcare 
Improvement (IHI), as well as scientific evidence from existing patient 
safety literature, and detailed input from patient safety experts, 
advocates, and patients. Combining this systems-level structural 
measure with other high priority safety outcome measures would result 
in a robust and complementary patient safety measure set.
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    \289\ National Steering Committee for Patient Safety. Safer 
Together: A National Action Plan to Advance Patient Safety. Boston, 
Massachusetts: Institute for Healthcare Improvement; 2020.
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    We note that other safety measures discussed in this FY 2025 IPPS/
LTCH PPS final rule complement the goals we have outlined for the 
Patient Safety Structural measure. Interested parties are encouraged to 
review our discussion of measures for Hospital Harm--Falls with Injury 
(section IX.C.5.c), Hospital Harm--Postoperative Respiratory Failure 
(section IX.C.5.d), and the adoption of two healthcare-associated 
infection measures (section IX.C.5.b).
b. Measure Alignment to Strategy
    In addition to the other federal safety initiatives noted 
previously, this measure also aligns with the CMS National Quality 
Strategy. Specifically, the CMS National Quality Strategy identifies 
four priority areas and eight goals, each with an identified objective, 
success target, and initial action steps for advancing a ``high-
quality, safe, equitable, and resilient health care system for all 
individuals.'' \290\ The Patient Safety Structural measure addresses 
the priority area Safety and Resiliency, and aligns with the goals to 
enable a responsive and resilient healthcare system to improve quality 
and to achieve zero preventable harm. For example, attestation 
statements within the measure require hospitals to confirm if their 
strategic plan includes publicly sharing their commitment to patient 
safety as a core value and outlines specific safety goals and 
associated metrics, including the goal of ``zero preventable harm.''
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    \290\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy Handout. Available at: https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
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    This measure aligns with our efforts under the CMS National Quality 
Strategy's goal of advancing equity and whole-person care.\291\ As 
stated in the measure attestation under Domain 2: Strategic Planning & 
Organizational Policy (see Table IX.B.1-01 of this final rule), 
``Patient safety and equity in care are inextricable, and therefore 
equity, with the goal of safety for all individuals, must be embedded 
in safety planning, goal-setting, policy and processes.'' This measure 
furthers a patient-centered approach by promoting conversations on 
equity among hospital staff, leadership, and patients and caregivers 
that consider the diverse communities served by participants in CMS 
programs and the particular needs of each hospital's own community.
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    \291\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy Handout. Available at: https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
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    The measure also aligns with our Meaningful Measures Framework, 
which identifies high-priority areas for quality measurement and 
improvement to assess core issues most critical to high-quality 
healthcare and improving patient outcomes.\292\ In 2021, we launched 
Meaningful Measures 2.0 to promote innovation and modernization of all 
aspects of quality, and to address a wide variety of settings, 
interested parties, and measure requirements.\293\ The Patient Safety 
Structural measure supports these efforts and is aligned with the 
Meaningful Measures Area of ``Safety'' and the Meaningful Measures 2.0 
goal to ``Ensure Safe and Resilient Health Care Systems.'' This measure 
also supports the Meaningful Measures 2.0 priority to ``promote a 
safety culture within a health care organization.'' This attestation 
measure focused on patient safety policies, processes, and activities 
aims to help hospitals better understand priorities for improving 
safety and serve as a prompt for action to invest in the infrastructure 
and safety culture necessary to reduce preventable harm to patients. 
When measure results are made public, patients and families would be 
able to make informed decisions on what facilities are best for them.
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    \292\ Centers for Medicare & Medicaid Services. Meaningful 
Measures Framework. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/meaningful-measures-20.
    \293\ Centers for Medicare & Medicaid Services. (2021). 
Meaningful Measures 2.0: Moving from Measure Reduction to 
Modernization. Available at: https://www.cms.gov/meaningful-measures-20-moving-measure-reduction-modernization. We note that 
Meaningful Measures 2.0 is still under development.
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c. Pre-Rulemaking Process and Measure Endorsement
    As required under section 1890A of the Act, the Consensus-Based 
Entity (CBE), currently Battelle, established the Partnership for 
Quality Measurement (PQM) to convene members comprised of 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, which we refer 
to as the Pre-Rulemaking Measure Review (PRMR), includes a review of 
measures published on the publicly available list of Measures Under 
Consideration (MUC List),294 295 by one of several 
committees convened by the PQM, for the purpose 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 PCHQR and Hospital IQR Programs. 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 5 
days of the close of the public comment period. More details regarding 
the PRMR process may be found in the PQM Guidebook of Policies and 
Procedures for Pre-Rulemaking Measure Review and Measure Set Review, 
available at: https://p4qm.org/PRMR,

[[Page 69458]]

including details of the measure review processes in Chapter 3.
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    \294\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \295\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
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    The CBE-established PQM also conducts the measure endorsement and 
maintenance (E&M) process to ensure a measure submitted for endorsement 
is 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 is 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 the 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 PQM Endorsement and Maintenance (E&M) 
Guidebook available at: https://p4qm.org/EM, including details of the 
measure endorsement process in the section titled, ``Endorsement and 
Review Process.''
    For the voting procedures of the PRMR and E&M processes, the PQM 
utilizes 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 casted 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. More details regarding the E&M voting 
procedures may be found in the PQM Endorsement and Maintenance (E&M) 
Guidebook.
(1) Recommendation From the Pre-Rulemaking and Measure Review Process
    As part of the PRMR process, the PRMR Hospital Recommendation Group 
reviewed the Patient Safety Structural measure (MUC2023-188) during a 
meeting on January 18 and 19, 2024. The Patient Safety Structural 
measure was included for consideration in the Hospital IQR and PCHQR 
Programs on the publicly available ``2023 Measures Under Consideration 
List'' (MUC List).\296\
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    \296\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
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    The voting results of the PRMR Hospital Recommendation Group for 
the Patient Safety Structural measure for the Hospital IQR Program 
were: eight members of the group recommended adopting the measure into 
the Hospital IQR Program without conditions; five members recommended 
adoption with conditions; three committee members voted not to 
recommend the measure for adoption. Additionally, nine members of the 
group recommended adopting the measure into the PCHQR Program without 
conditions; four members recommended adoption with conditions; three 
committee members voted not to recommend the measure for adoption. 
Taken together, 81.3 percent of the votes were recommended with 
conditions for each program. Thus, the committee reached consensus and 
recommended the Patient Safety Structural measure for the Hospital IQR 
Program and the PCHQR Program with conditions.
    The conditions recommended by the voting committee were: the 
publication of an implementation guide that clearly documents how 
safety is to be measured; and using data to narrow the scope before 
approving the measure for programs. An Attestation Guide was made 
available at the time of the publication of the proposed rule on the 
respective Hospital IQR Program and PCHQR Program pages on 
QualityNet.\297\ Data obtained from the measure's national use would 
allow us to evaluate the effectiveness of, and the potential to narrow 
the future scope of, the proposed attestations. Therefore, we have 
adequately addressed the conditions raised by the PRMR Hospital 
Recommendations Group and proposed this measure for adoption.
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    \297\ Centers for Medicare & Medicaid Services, Patient Safety 
Structural Measure Attestation Guide, available at: https://qualitynet.cms.gov/inpatient/iqr/measures and https://qualitynet.cms.gov/pch/measures. The draft Attestation Guide, 
version 1.0, was available at both: https://qualitynet.gov/inpatient/iqr/proposedmeasures and https://qualitynet.cms.gov/pch/pchqr/proposedmeasures at the time of the proposed rule. We note 
that examples provided in this guide are for illustrative purposes.
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    In addition to the formal voting results on the adoption of the 
Patient Safety Structural measure, we note that the majority of public 
comments received on this measure during the PRMR process were 
supportive, with 91 out of 97 public comments (94%) either supporting 
(81) adoption or supporting adoption with conditions (10). Comments in 
support of the proposal included the need for a zero preventable harm 
goal, robust hospital leadership, developing trust through 
transparency, and the involvement of patients and their families in 
safety work. We thank the large number of patients, family members, and 
other interested parties who publicly participated in the PRMR process.
(2) Endorsement and Measure Review
    We proposed to adopt this measure into the Hospital IQR Program and 
the PCHQR Program despite the measure not being endorsed by the CBE. 
Section 1886(b)(3)(B)(viii)(IX)(aa) of the Act requires that each 
measure specified by the Secretary for use in the Hospital IQR Program 
be endorsed by the entity with a contract under section 1890(a) of the 
Act, and section 1866(k)(3)(A) of the Act imposes the same requirement 
for measures specified for use in the PCHQR Program. Sections 
1886(b)(3)(B)(viii)(IX)(bb) and 1866(k)(3)(B) of the Act state, 
however, 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 reviewed measures endorsed by both the CBE which currently holds 
the contract under section 1890(a) of the Act and measures endorsed by 
the entity which formerly held that contract and were unable to 
identify any other CBE-endorsed measures on strategies and practices to 
strengthen hospitals' systems and culture for safety. Considering the 
lack of endorsed

[[Page 69459]]

measures on this specified area or medical topic, we have determined 
that it would be appropriate to use a measure that is not endorsed by 
the CBE. This measure is relevant to enhanced health outcomes. As 
described in the background section for this measure (section IX.B.1.a. 
of the preamble of this final rule), medical errors and adverse events 
occur frequently and lead to adverse patient outcomes. This measure is 
designed to identify hospitals that practice a system-based approach to 
safety and embrace the importance of a safety culture. Demonstrating a 
structure, culture, and leadership commitment that prioritizes safety 
can improve care and outcomes for all patients.\298\ The validity, 
feasibility and relevance of the measure have been thoroughly vetted by 
a Technical Expert Panel (TEP) convened by a CMS contractor and 
comprised of thought leaders in the field.\299\ In response to the 
question of whether the domains capture the most important elements for 
advancing patient safety, most TEP members agreed that they do.\300\ 
Furthermore, the measure developers engaged the members of the TEP for 
their operational and clinical expertise to assure that each domain was 
actionable and measurable.\301\ As noted, the PRMR Hospital Committee 
received a total of 91 public comments expressing support for the 
Patient Safety Structural measure.\302\ Most commenters were patients 
and family members who described their individual experiences with the 
medical system and preventable harms to which they were exposed. These 
commenters then emphasized the importance of the Patient Safety 
Structural measure's intent and domains for improving patient safety 
related to these experiences.\303\ Due to the rigorous alignment with 
patient safety guidelines and literature as noted within section 
IX.B.1.a. of the preamble of this final rule, as well as strong support 
from expert stakeholders, patients, and caregivers as noted previously, 
we are confident that the foundational principles are sound, and the 
specifications are attainable, measurable, and actionable. We intend to 
submit the measure for future CBE endorsement.
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    \298\ DiCuccio MH. The Relationship Between Patient Safety 
Culture and Patient Outcomes: A Systematic Review. J Patient Saf. 
2015;11(3):135-42. doi:10.1097/PTS.0000000000000058.
    \299\ Yale New Haven Health Services Corporation--Center for 
Outcomes Research and Evaluation. Summary of Technical Expert Panel 
(TEP) Meetings Patient Safety Structural Measure (PSSM). Available 
at: https://mmshub.cms.gov/sites/default/files/PSSM-TEP-Summary-Report-202306.pdf.
    \300\ Ibid.
    \301\ Ibid.
    \302\ Battelle--Partnership for Quality Measurement. Compiled 
MUC List Public Comment Posting. Available at: https://p4qm.org/sites/default/files/2024-01/Compiled-MUC-List-Public-Comment-Posting.xlsx.
    \303\ Battelle--Partnership for Quality Measurement. 2023 
Measures Under Consideration Public Comment Summary Hospital 
Committee. Available at: https://p4qm.org/sites/default/files/2024-01/PRMR-Hospital-Public-Comments-Final-Summary.pdf.
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d. Measure Overview
    The Patient Safety Structural measure is a structural measure 
developed to assess how well hospitals have implemented strategies and 
practices to strengthen their systems and culture for safety. The 
Patient Safety Structural measure comprises a set of complementary 
statements (or, attestations) that aim to capture the most salient, 
systems-oriented actions to advance safety. These statements should 
exemplify a culture of safety and leadership commitment to 
transparency, accountability, patient and family engagement, and 
continuous learning and improvement. Table IX.B.1-01 includes the five 
attestation domains and the corresponding attestation statements.
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e. Measure Calculation
    The Patient Safety Structural measure consists of five domains, 
each representing a complementary but separate safety commitment. Each 
of the five domains include five related attestation statements. 
Hospitals would need to evaluate and determine whether they can 
affirmatively attest to each domain. For a hospital to affirmatively 
attest to a domain, and receive a point for that domain, a hospital 
would evaluate and determine whether it engaged in each of the 
statements that comprise the domain (see Table IX.B.1-01), for a total 
of five possible points (one point per domain). A hospital would not be 
able to receive partial points for a domain.
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    \304\ Centers for Medicare & Medicaid Services, Patient Safety 
Structural Measure Attestation Guide, available at: https://qualitynet.cms.gov/inpatient/iqr/measures and https://qualitynet.cms.gov/pch/measures. The draft Attestation Guide, 
version 1.0, was available at both: https://qualitynet.gov/inpatient/iqr/proposedmeasures and https://qualitynet.cms.gov/pch/pchqr/proposedmeasures at the time of the proposed rule. We note 
that examples provided in this guide are for illustrative purposes.
    \305\ A ``just culture'' is defined by the Agency for Healthcare 
Research and Quality as a system that holds itself accountable, 
holds staff members accountable, and has staff members that hold 
themselves accountable. (The CUSP Method. https://www.ahrq.gov/hai/cusp/.)
    \306\ Agency for Healthcare Research and Quality. (2019, 
September 7). Root Cause Analysis. https://psnet.ahrq.gov/primer/root-cause-analysis.
    \307\ Agency for Healthcare Research and Quality. Federally-
Listed Patient Safety Organizations (PSOs). Retrieved January 5, 
2024, from https://pso.ahrq.gov/pso/listed?f%5B0%5D=resources_provided%3A2.
    \308\ Agency for Healthcare Research and Quality. (2022). 
Communication and Optimal Resolution (CANDOR). https://www.ahrq.gov/patient-safety/settings/hospital/candor/.
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    For example, for Domain 2 (``Strategic Planning & Organizational 
Policy''), a hospital would evaluate and determine whether it meets the 
statements related to its strategic plan (Statement A), its safety 
goals (Statement B), policies and protocols for a ``just culture'' 
(Statement C), a patient safety curriculum and competencies for all 
hospital staff (Statement D), and an action plan for workforce safety 
(Statement E) (see Table IX.B.1-01). If its plan meets all five of 
these statements, the hospital would attest ``yes'' to each of the five 
attestation statements and would receive one point for Domain 2. If, 
for example, its plan only meets Statement A and Statement B, but does 
not meet Statement C, Statement D, and Statement E, the hospital would 
attest ``yes'' to Statement A and Statement B, attest ``no'' to 
Statement C, Statement D, and Statement E, and receive zero points for 
Domain 2. The hospital's overall score for the Patient Safety 
Structural measure can range from a total of zero to five points. If a 
hospital is comprised of more than one acute care hospital facility 
under one CCN, all such facilities reporting under the same CCN would 
need to satisfy these criteria for the hospital to affirmatively attest 
and receive points.
    For more details on the measure specifications and the Attestation 
Guide for the Hospital IQR Program, we refer readers to the Web-Based 
Data Collection tab under the IQR Measures page and PCHQR measures page 
on QualityNet at both: https://qualitynet.cms.gov/inpatient/iqr/measures#tab2 and https://qualitynet.cms.gov/pch/measures, 
respectively. For more details on the measure specifications for the 
PCHQR Program, we refer readers to the Measures tab under the PCHQR 
page on QualityNet at: https://qualitynet.cms.gov/pch/measures.
f. Data Submission and Reporting
    Hospitals would be required to submit information for the Patient 
Safety Structural measure once annually using the data submission and 
reporting standard procedures set forth by the CDC for the National 
Healthcare Safety Network (NHSN). Presently, hospitals report measure 
data to the CDC NHSN on a monthly or quarterly basis, depending on the 
measure. Under the data submission and reporting process for the 
Patient Safety Structural measure, hospitals would be required to 
submit data once annually. We refer readers to the CDC's NHSN website 
(https://www.cdc.gov/nhsn/) for data submission and reporting

[[Page 69464]]

procedures; information more specific to the Patient Safety Structural 
measure would be available through NHSN before the first data 
submission period opens. We refer readers to sections IX.C.9. and 
IX.D.4 of the preamble of this final rule for more details on our 
previously finalized data submission and deadline requirements for 
structural measures in the Hospital IQR Program and PCHQR Program, 
respectively. We further refer readers to sections IX.C.9. and IX.D.4 
of the preamble of this final rule for more details on our previously 
finalized data submission requirements for measures submitted via the 
CDC NHSN in the Hospital IQR Program and PCHQR Program, respectively. 
We proposed to adopt the Patient Safety Structural measure in the 
Hospital IQR Program beginning with the CY 2025 reporting period/FY 
2027 payment determination and the PCHQR Program beginning with the CY 
2025 reporting period/FY 2027 program year. Hospitals participating in 
the Hospital IQR Program and the PCHQR Program would satisfy their 
reporting requirement for the measure if they attest ``yes'' or ``no'' 
to each attestation statement in all five domains.
    We proposed to publicly report the hospital's measure performance 
score, which would range from 0 to 5 points, on an annual basis on Care 
Compare beginning in Fall 2026 and on the Provider Data Catalog 
available at data.cms.gov for the PCHQR Program beginning in Fall 2026.
    We invited public comment on this proposal.
    Comment: Many commenters expressed support for the adoption of the 
Patient Safety Structural measure. Many commenters stated that this 
measure includes activities known to reduce harm, improve patient-
centered care, encourage patient involvement, and encourage 
transparency. Some commenters stated that the measure emphasizes the 
importance of a systems-level and non-punitive approach to patient 
safety. A commenter stated that the Patient Safety Structural measure 
is data-driven, actionable, and workable. A commenter stated that the 
measure received a positive response during the MUC review process and 
that the participants shared personal experiences related to the 
benefits of this measure in improving patient safety, indicating its 
importance.
    Response: We thank the commenters for their support for the 
adoption of the Patient Safety Structural measure and for their 
engagement in the PRMR process. We agree that the measure will provide 
greater transparency and encourage hospitals to implement activities to 
improve patient-centered care and reduce preventable harm to patients. 
We also agree that the measure will drive system-level changes that are 
actionable for hospitals. We also recognize and restate our 
appreciation for the public involvement in the PRMR meeting, including 
the personal experiences shared by patients and patient advocates that 
emphasized the importance of this measure.
    Comment: Several commenters stated that patient safety is an urgent 
topic and supported adoption of the Patient Safety Structural measure 
to address it. Some of these commenters stated that while many of the 
items in the Patient Safety Structural measure are known best 
practices, there has been a delay in implementing them. Some commenters 
stated that the Patient Safety Structural measure would address this by 
ensuring prioritization of these activities through sending a signal to 
hospital governance bodies and executive leadership. Other commenters 
stated that patient safety has been declining and that the COVID-19 PHE 
accelerated this decline. These commenters expressed the belief that 
the Patient Safety Structural measure would provide guidance towards 
delivering safer care and would create a way to recognize hospitals 
that are exemplars in patient safety. Some commenters stated that the 
domains identified in the measure are critical areas for hospitals to 
focus on for patient safety.
    Response: We thank the commenters for their support. We agree that 
it is important for hospitals to not delay adopting patient safety best 
practices and acknowledge that the COVID-19 PHE was disruptive for 
hospitals and illuminated gaps in patient safety. We agree that the 
domains of the Patient Safety Structural measure are critical areas of 
focus, and that the measure will offer guidance to hospitals on 
prioritizing patient safety in their organizational structure, culture, 
strategy, and overall care delivery.
    Comment: Several commenters expressed support for the Patient 
Safety Structural measure because it is an attestation-based structural 
measure. Several of these commenters stated that being an attestation 
measure, this measure would have relatively low reporting burden, and 
that the benefits of adopting this measure, including providing 
strategies for improved patient safety, would outweigh the additional 
burden of reporting the measure. A commenter stated that an 
attestation-based, structural measure is preferential to outcomes-based 
measures for driving patient safety improvements because outcomes-based 
measures are lagging indicators. Another commenter stated that the 
Patient Safety Structural measure complements patient safety indicators 
(PSIs) but emphasizes building a culture that would drive improvements 
in safety. Some commenters stated that structural measures can set new 
expectations for the development of evidence-based programs and 
processes that would support improvements in high impact areas. A few 
commenters stated that by adopting an attestation measure CMS would 
provide motivation for implementing these activities without impacting 
hospital payments. A commenter stated that the process of understanding 
and attesting to these statements would increase the focus on patient 
safety (regardless of whether hospitals can attest positively). A 
commenter expressed support for the Attestation Guide.
    Response: We thank the commenters for their support of the Patient 
Safety Structural measure as an attestation-based structural measure 
and for their support of the Attestation Guide. We agree with the 
importance of using attestation measures and encouraging hospitals to 
facilitate a culture to improve safety. We also agree that the 
attestation measure encourages hospitals to focus on safety regardless 
of how they score. We also agree that, while attestation measures do 
entail some burden, they are less demanding than requiring reporting of 
the data or details underlying each of the attestation statements. By 
adopting an attestation measure in combination with measures that 
specifically assess processes and outcomes, we seek to achieve a 
holistic, systematic approach to advancing patient safety which 
balances measure types and reporting burden. We further agree that 
adoption of this attestation measure will complement outcome and 
process measures currently in CMS' hospital quality measurement 
programs. We note that within CMS' hospital quality measurement 
programs, there are several outcome and process measures in use that 
capture specific conditions or procedures such as the Severe Sepsis and 
Septic Shock: Management Bundle measure, Patient Safety and Adverse 
Events Composite measure, Severe Obstetric Complications electronic 
clinical quality measure (eCQM), and the Safe Use of Opioids--
Concurrent Prescribing eCQM. Furthermore, we discuss Hospital Harm--
Falls with Injury (section IX.C.5.c), Hospital Harm--Postoperative 
Respiratory Failure (section IX.C.5.d), and the adoption of two 
healthcare-associated

[[Page 69465]]

infection measures (section IX.C.5.b) in this final rule.
    Comment: A few commenters supported adoption of the Patient Safety 
Structural measure because of its alignment with other guidance. A 
commenter specifically expressed support for the Patient Safety 
Structural measure's alignment with the IHI's National Action Plan for 
Advancing Patient Safety. This commenter emphasized that both the 
National Action Plan for Advancing Patient Safety and the Patient 
Safety Structural measure include interdependence among the categories.
    Response: We thank the commenters for their support and acknowledge 
that in developing the Patient Safety Structural measure, we strove to 
align it with other national efforts to advance patient safety.
    Comment: A commenter specifically supported public reporting of 
this measure to ensure transparency to patients, families, and 
community members.
    Response: We thank the commenter for their support of publicly 
reporting the Patient Safety Structural measure. We agree that 
providing publicly reported measure results on the Care Compare website 
for the Hospital IQR Program promotes transparency to patients, 
families, communities, and other interested parties, and will allow 
patients to make more informed decisions on their care. We note that 
the PCHQR Program publicly reports measure data on data.cms.gov.
    Comment: A few commenters expressed support for measures that 
address patient safety and specifically recommended measures to improve 
the accuracy of blood and blood culture tests. Some commenters 
specifically stated that quickly identifying and appropriately treating 
blood stream infections can reduce inappropriate treatment.
    Response: We thank the commenters for their support of safety 
measures. While the Patient Safety Structural measure does not directly 
assess the speed and accuracy with which hospitals identify and treat 
blood stream infections, establishing a structural, cultural, and 
leadership commitment to prioritizing safety can improve all elements 
of patient safety, including appropriate treatment of blood stream 
infections. We continually seek to develop and adopt quality measures 
that address important quality and patient safety aspects of care and 
may consider measures directly related to the speed and accuracy with 
which hospitals identify and treat blood stream infections as we review 
the Hospital IQR Program and the PCHQR Program in the future.
    Comment: A commenter stated that the Patient Safety Structural 
measure provides an opportunity to update the physician credentialing 
process to include a focus on safety behaviors as well as clinical 
competence.
    Response: We thank this commenter for their support of the Patient 
Safety Structural measure; however, we note that the physician 
credentialing process is outside the scope of the Hospital IQR Program 
and the PCHQR Program.
    Comment: A few commenters recommended adding domains to the Patient 
Safety Structural measure. Some of these commenters specifically 
recommended adding a domain related to workforce well-being and 
engagement which includes attestations related to soliciting ideas for 
improved care processes from the workforce and using closed-loop, 
transparent communications regarding improvement efforts. Other 
commenters recommended including diagnostic excellence as a domain.
    Response: We agree that workforce well-being and engagement is 
linked with a learning culture that prioritizes safety. We also agree 
that diagnostic excellence underlies safe and appropriate healthcare. 
However, the Patient Safety Structural measure was developed by 
identifying and focusing on the highest priority domains. This allows 
us to balance the total number of attestations and associated burden on 
hospitals. Most TEP members agreed that the domains capture the most 
important elements for advancing patient safety.\309\ As this measure 
was developed to capture the most important elements, it is appropriate 
to adopt the measure without additional domains or attestations. We 
will continue to evaluate the measure's performance and consider 
updating it if appropriate in the future.
---------------------------------------------------------------------------

    \309\ Yale New Haven Health Services Corporation--Center for 
Outcomes Research and Evaluation. Summary of Technical Expert Panel 
(TEP) Meetings Patient Safety Structural Measure (PSSM). Available 
at: https://mmshub.cms.gov/sites/default/files/PSSM-TEP-Summary-Report-202306.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters stated that some attestations are already 
covered by actions required of hospitals under the Conditions of 
Participation (CoPs) and recommended that CMS streamline the measure to 
eliminate duplication. Specifically, commenters stated that Domains 1 
and 2 are covered by the hospital CoPs related to quality assessment 
and performance improvement at 42 CFR 482.2
    1(a) through (e). A few commenters recommended aligning with 
existing requirements, such as those of The Joint Commission or 
counties or states.
    Response: We acknowledge that the hospital CoPs related to quality 
assessment and performance improvement (QAPI) programs at 42 CFR 
482.21(a) through (e) and requirements set forth by entities such as 
The Joint Commission and other regulatory entities (such as counties 
and states) address similar topics to the attestations required to 
report the Patient Safety Structural measure and helped inform its 
development. However, we disagree that the Patient Safety Structural 
measure is redundant to these CoPs and other requirements and maintain 
that it is complementary to them. While existing requirements may 
outline the minimum activities related to developing, implementing, and 
maintaining an effective, ongoing, hospital-wide, data-driven quality 
assessment and performance improvement program, the Patient Safety 
Structural measure requires hospitals to attest to whether they have 
built upon these minimum activities to exemplify a culture of safety 
and leadership with transparency, accountability, patient and family 
engagement, and continuous learning and improvement. In addition, the 
public display requirements of the Hospital IQR and PCHQR Programs 
provide for information on this measure to be available to patients, 
consumers, family and caregivers, and other interested parties. This 
transparency can further incentivize quality improvement.
    Comment: A few commenters recommended that CMS update the CoPs with 
the items from this measure instead of adopting a structural measure. 
Some of these commenters stated that this would allow hospitals to be 
assessed and receive feedback on their performance during the survey 
and certification process.
    Response: We agree that hospitals benefit from receiving feedback 
on their patient safety structures and other CoP requirements during 
the survey and certification process. However, measures are intended to 
evaluate, and this measure evaluates the current state of patient 
safety structures within hospitals. Through standardized measurement 
and transparency, the Patient Safety Structural measure can also 
encourage hospitals to build upon the activities already required under 
the CoPs to establish a culture of safety and leadership commitment to 
transparency, accountability, patient and family engagement, and 
continuous learning

[[Page 69466]]

and improvement. We also note that hospitals are surveyed for CoPs, on 
average, every three to five years and this quality measure provides 
more frequent updates to the public.
    Comment: Many commenters recommended updating the Attestation 
Guide. A few of these commenters suggested including examples provided 
through public comments to improve the Attestation Guide's ability to 
support reporting. A few commenters recommended providing detailed 
guidance on data collection, including how hospitals should document 
that they are satisfying each domain. Some of these commenters stated 
that additional guidance would improve the Patient Safety Structural 
measure's ability to support cross-hospital comparisons.
    Response: While we agree with commenters that examples can be 
meaningful and provide hospitals with information to help adopt these 
evidence-based practices, we also intend the Patient Safety Structural 
measure to maintain flexibility and allow each hospital to adopt 
practices that are most effective for its individual circumstances. 
Because these practices will not be identical across hospitals, the 
documentation supporting the practice may also vary. We will provide 
education and outreach materials to support hospitals in identifying 
additional evidence-based practices they could adopt and in documenting 
that they have adopted those practices. While we are not updating the 
Attestation Guide to add detailed documentation guidance, we have 
updated the Attestation Guide to provide some additional clarification 
on other topics based on the public comments we received. Version 2.0 
of the Attestation Guide is available at both: https://qualitynet.cms.gov/inpatient/iqr/measures and https://qualitynet.cms.gov/pch/measures.
    Comment: A commenter stated that these domains align with those in 
the Office of the National Coordinator for Health Information 
Technology's (ONC's) Safety Assurance Factors for EHR Resilience 
(SAFER) Guides and recommended adopting a staged approach, like the 
approach used for the SAFER Guides. Specifically, the commenter 
recommended a staged Yes/No attestation without any financial impacts 
the first year with expanded requirements in future years.
    Response: We agree with the commenter that the SAFER Guides 
complement the Patient Safety Structural measure. We note that the 
SAFER Guides are focused on optimizing the safety and safe use of EHRs 
\310\ while the Patient Safety Structural measure solicits information 
about whether hospitals have built upon these minimum activities to 
exemplify a culture of safety and leadership commitment to 
transparency, accountability, patient and family engagement, and 
continuous learning and improvement. In the FY 2024 IPPS/LTCH PPS final 
rule, we modified requirements for the SAFER Guides measure in the 
Medicare Promoting Interoperability Program to require eligible 
hospitals and critical access hospitals (CAHs) to attest ``yes'' to 
having conducted an annual self-assessment of all nine SAFER Guides at 
any point during the calendar year in which the EHR reporting period 
occurs, beginning with the EHR reporting period in CY 2024 (88 FR 59262 
through 59265). We note that, unlike the Medicare Promoting 
Interoperability Program, the Hospital IQR Program is a pay-for-
reporting program, which means that hospitals that report the required 
measure data in accordance with the form, manner, and timing policies 
specified by the Secretary are not subject to a financial penalty under 
this program and the PCHQR Program is a quality reporting program that 
does not have a financial penalty associated with it. Therefore, there 
will be no financial penalties for hospitals that attest either ``yes'' 
or ``no'' to each of the domains of the Patient Safety Structural 
measure.
---------------------------------------------------------------------------

    \310\ Office of the National Coordinator for Health Information 
Technology (ONC). SAFER Guides. Available at https://www.healthit.gov/topic/safety/safer-guides.
---------------------------------------------------------------------------

    Comment: A commenter stated that because this is a patient safety 
measure it would be appropriate to remove references to workforce 
safety and create a new measure to address those safety challenges, 
which the commenter stated are different than those faced by patients.
    Response: We agree that there are different safety challenges faced 
by healthcare workers than those faced by patients. However, not only 
is workforce safety an important component to identifying hospitals 
that exemplify a culture of safety and leadership commitment to 
transparency, accountability, patient and family engagement, and 
continuous learning and improvement, but it is also a precondition to 
advancing patient safety with a unified, total systems-based approach 
to eliminate harm to both patients and the workforce.\311\ Because 
workplace safety is a precondition to advancing patient safety, this 
measure necessarily includes attestations related to workforce safety. 
We thank the commenter for their suggestion for a new measure in CMS 
programs, as we recognize this as an important and ongoing concern for 
the healthcare workforce.
---------------------------------------------------------------------------

    \311\ AHRQ. Safer Together: A National Action Plan to Advance 
Patient Safety. Available at: https://www.ahrq.gov/patient-safety/reports/safer-together.html.
---------------------------------------------------------------------------

    Comment: A few commenters recommended renaming the measure 
``Patient and Workforce Safety Structural measure'' because items such 
as ``just culture'' apply to the workforce as well as patients.
    Response: We agree that many of the domains and attestations in the 
Patient Safety Structural measure apply to the workforce. While 
workforce safety is an important element of this measure, these 
elements are included because workforce safety is a precondition to 
advancing patient safety. Because the measure is focused on 
establishing structure, culture, and leadership commitment to 
prioritizing patient safety, it is appropriate for the measure title to 
focus on advancing patient safety.
    Comment: A commenter recommended refining the attestations to 
include efforts made by health systems instead of at the individual 
hospital level.
    Response: We agree that for hospitals that are part of health 
systems, there are many best practices and resources that can be shared 
among hospitals across the system. However, patient safety is 
ultimately the responsibility of the institution providing the care, in 
this case the individual hospital. Therefore, we encourage hospitals to 
use resources available through their health systems to meet these 
attestations, but our intention is that the attestation should 
represent the structure, culture, and leadership commitment to 
prioritizing safety at the individual hospital.
    Comment: A commenter recommended incentivizing voluntary safety 
initiatives as opposed to implementing an attestation measure.
    Response: The Hospital IQR Program is a pay-for-reporting program, 
which means that hospitals that report the required measure data in 
accordance with the form, manner, and timing policies specified by the 
Secretary are not subject to a financial penalty under this program. 
The PCHQR Program is a quality reporting program that does not have a 
financial penalty associated with it. A hospital's performance on the 
measure, which for the Patient Safety Structural measure is a score 
from 0 to 5 points, has no impact on a hospital's Medicare 
reimbursement. Therefore, the activities in the Patient Safety 
Structural measure are voluntary safety initiatives.

[[Page 69467]]

While we recognize that a hospital's performance on the measure may 
impact the hospital's reputation through public reporting, this 
reputational impact is a means of encouraging the voluntary adoption of 
safety related best practices.
    Comment: A commenter recommended CMS engage with leaders to 
identify barriers to improving safety.
    Response: We agree that hospital leaders are a critical source of 
information regarding barriers to improving safety. The Patient Safety 
Structural measure is informed by scientific evidence from existing 
patient safety research and literature, guidance from established 
healthcare quality and safety organizations, and detailed input from 
patient safety experts, advocates and patients. The TEP that provided 
detailed input on the Patient Safety Structural measure included 
clinicians and representatives of hospitals and healthcare systems. 
Because achieving zero preventable harm is part of our National Quality 
Strategy,\312\ we welcome additional ideas or input in how we can build 
on our current activities to increase our progress towards this goal.
---------------------------------------------------------------------------

    \312\ CMS. The CMS National Quality Strategy. Available at: 
https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
---------------------------------------------------------------------------

    Comment: A few commenters stated that hospitals are already engaged 
in efforts using meaningful, measurable data and that this measure 
would take away from that.
    Response: We disagree that the Patient Safety Structural measure 
will take away from efforts to use meaningful, measurable data to 
improve patient safety. Several of the attestations in this measure are 
related to the use of measurable data to inform patient safety 
improvement. For example, Domain 1 Statement B requires a hospital to 
attest to whether C-suite leaders oversee the development of specific 
improvement plans with metrics, Domain 3 Statement C requires a 
hospital to attest to whether it has a patient safety metrics 
dashboard; and Domain 3 Statement D includes the high reliability 
practice of a data infrastructure to measure safety. Therefore, efforts 
using meaningful, measurable data will likely be applicable to one or 
more of the attestation statements, such that hospitals already engaged 
in these efforts will be able to attest positively to one or more 
statements based on these efforts.
    Comment: Some commenters specifically expressed concern regarding 
what they characterize as a lack of standard definitions for terms 
within the attestation statements. Specifically, commenters recommended 
standard definitions for the following terms: (1) senior governing 
board, (2) regular board agenda, (3) annual leadership performance 
reviews and compensation, (4) serious safety event, (5) core 
institutional value, (6) action plan, and (7) free flow of information.
    Response: We thank commenters for these recommendations. We have 
intentionally left these terms undefined within this measure to 
maintain flexibility to allow each hospital to adopt practices that are 
most effective for its individual circumstances. However, common 
definitions currently used by safety experts in the field, which may 
guide hospitals attesting to this measure, are described in the 
Attestation Guide, available on the Web-Based Data Collection tab under 
the IQR Measures page and PCHQR Measures page on QualityNet at both: 
https://qualitynet.cms.gov/inpatient/iqr/measures#tab2 and https://qualitynet.cms.gov/pch/measures, respectively.
    The Attestation Guide provides a description of ``serious safety 
event'' (that is, an event judged by the clinical team OR the patient 
to be ``temporary major'' or greater). The Attestation Guide also 
provides more detail and examples of what will be characterized as an 
event that is greater than ``temporary major.'' Additionally, the 
Attestation Guide provides a description of the senior governing board 
(that is, ``the senior governing board is intended to be the body with 
fiduciary responsibility for the hospital, in charge of resource 
management, with ultimate authority. The senior governing board may or 
may not oversee other, subordinate hospital boards and committees''). 
We monitor measure performance for all of the measures in our quality 
reporting programs, and if we identify that there is a need for 
additional guidance, we provide it through our regular education and 
outreach efforts.
    Comment: Some commenters stated that there is a lack of empirical 
evidence due to insufficient hospital-specific field-testing. Some 
commenters specifically stated that entity level reliability testing 
was not performed, performance scores were not reported, and workflow 
analysis was not conducted.
    Response: We acknowledge the commenters' concern about hospital-
specific field-testing. Although entity level testing of this measure 
has not been conducted, we are confident that the foundational 
principles are sound, and the included specifications are attainable, 
measurable, and actionable. We refer readers to section IX B(1)(a) and 
the Background section of this finalized proposal for more discussion 
of the basis on which we determined this; specifically, we discuss the 
details of the patient safety guidelines and literature that informed 
this measure, the TEP input provided, and significant public comment 
support expressed from expert stakeholders, patients and caregivers. As 
data are obtained on this measure, we will continue to monitor and 
evaluate the measure.
    Comment: A few commenters recommended deferring public reporting 
for at least the first year. A commenter stated that the Hospital IQR 
Program does not usually publicly report scores of new measures and 
recommended aligning with that approach by delaying public reporting of 
the Patient Safety Structural measure.
    Response: While we do not expect all hospitals to achieve a score 
of five on the measure, the information collected under the Patient 
Safety Structural measure will provide valuable information for 
patients, families, and caregivers, as well as for healthcare 
researchers, providers and other members of the public. We note that we 
may delay public reporting for measures with an initial voluntary 
reporting period, or measures that may require more complicated 
implementation of data collection processes as is often the case with 
EHRs (for an example of a measure for which we have delayed public 
reporting, we refer readers to our adoption of the Hybrid Hospital-Wide 
Readmission measure (84 FR 42465 through 42479)), but an attestation-
based measure does not entail this level of complexity and hospitals 
have sufficient time to review and prepare an annual attestation that 
does not entail a large amount of detailed data.
    Comment: A few commenters stated that attestation to a structural 
measure does not provide actionable data because the improvement has 
already been achieved to be able to positively attest to the measure.
    Response: We agree that one value of an attestation measure is to 
encourage hospitals to update and improve structures so that they can 
positively attest to the measure. This measure may also serve to 
differentiate those hospitals that have already fully implemented the 
best practices identified. We note that an additional benefit of 
attestation measures is to provide valuable information for patients, 
families, and caregivers, as well as for healthcare researchers, 
providers, and other members of the

[[Page 69468]]

public on the distribution of these institutional practices.
    Comment: Many commenters expressed concern regarding reporting the 
measure through NHSN instead of the Hospital Quality Reporting (HQR) 
system. Some commenters stated that NHSN has operational challenges 
which could impact hospital reporting. Other commenters stated that 
this measure would be reported by different personnel than the data 
currently reported to NHSN and requiring these staff to get access to 
NHSN would increase the administrative burden.
    Response: We recognize that most current quality measures are 
reported through the HQR System and that because data currently 
reported through the NHSN are generally related to healthcare-
associated infections or vaccinations for healthcare personnel, these 
data may be collected and reported by different personnel within the 
hospital (for example, infection control personnel) than those 
personnel likely to be responsible for reporting the Patient Safety 
Structural measure. However, because the Patient Safety Structural 
measure is related to healthcare safety, and the NHSN collects 
information related to patient safety, reporting of the Patient Safety 
Structural measure through the NHSN will be most appropriate. We 
understand some hospitals may want additional staff to obtain access to 
the NHSN to report the Patient Safety Structural measure. We note that 
the CDC has streamlined the registration process for new NHSN users in 
recent years, and the process can often be completed in less than a 
week. Interested parties may wish to review the NHSN website for 
details of the latest registration process at: https://www.cdc.gov/nhsn/. The CDC is consistently working to further modernize 
the NHSN application in a constant effort to improve speed and 
functionality, as well as the user experience.
    In recognition that new users have faced challenges in the past, 
the CDC plans to open this measure for test access in NHSN several 
weeks before the submission period opens on April 1, 2026, to ensure 
new users have ample time to obtain and test their access to the system 
before the first reporting deadline of May 15, 2026. More details about 
test access outside of the submission period will be provided by NHSN 
through guidance at a later date.
    Comment: Several commenters recommended developing a monitoring, 
evaluation, and improvement plan to identify necessary clarifications 
or modifications for the Patient Safety Structural measure after 
implementation. A few commenters recommended monitoring for topped-out 
performance. These commenters also recommended removing the measure if 
it does not correlate with improved patient outcomes or if patients and 
families have difficulty interpreting the measure. A few commenters 
recommended ensuring there are no unintended consequences, such as 
limiting access or increasing health care costs.
    Response: We have a monitoring and evaluation process for both the 
Hospital IQR Program and the PCHQR Program. Therefore, we intend to 
monitor and evaluate the performance of the Patient Safety Structural 
measure in achieving our programmatic goals including encouraging 
hospital improvement on the measure and providing meaningful 
information to patients and their families. As part of our monitoring 
and evaluation efforts we continually evaluate measures for topped-out 
status, correlation with other measures, and unintended consequences. 
As we indicated in the proposed rule summary of the PRMR process (89 FR 
36287), as data is obtained, we intend to evaluate the effectiveness 
of, and the potential to narrow, the future scope of the attestations.
    Comment: Some commenters expressed concern that this measure adopts 
overly prescriptive policies. These commenters stated that it would be 
preferable to encourage ``safety via guided adaptability'' instead of 
``safety via control'' activities and stated that encouraging ``safety 
via guided adaptability'' would improve innovation in safety. These 
commenters further stated that public reporting, organizational 
accountability, and transparency have not worked and therefore adopting 
a measure based on public reporting would likely be ineffective.
    Response: The attestation statements within the five domains of the 
Patient Safety Structural measure were developed in collaboration with 
a TEP convened by a CMS contractor and comprised of thought leaders in 
the field.\313\ Most TEP members agreed that the domains capture the 
most important elements for advancing patient safety. Furthermore, the 
measure developers engaged the members of the TEP for their operational 
and clinical expertise to assure that each domain was actionable and 
measurable.\314\ Therefore, these domains and attestations are 
appropriate for encouraging establishment of a structure, culture, and 
leadership commitment to prioritizing safety. We note that the domains 
within Patient Safety Structural measure have been designed to be non-
prescriptive in how hospitals implement these policies and procedures 
and therefore provide flexibility for hospitals to establish ``safety 
via guided adaptability'' protocols within these domains.
---------------------------------------------------------------------------

    \313\ Yale New Haven Health Services Corporation--Center for 
Outcomes Research and Evaluation. Summary of Technical Expert Panel 
(TEP) Meetings Patient Safety Structural Measure (PSSM). Available 
at: https://mmshub.cms.gov/sites/default/files/PSSM-TEP-Summary-Report-202306.pdf.
    \314\ Yale New Haven Health Services Corporation--Center for 
Outcomes Research and Evaluation. Summary of Technical Expert Panel 
(TEP) Meetings Patient Safety Structural Measure (PSSM). Available 
at: https://mmshub.cms.gov/sites/default/files/PSSM-TEP-Summary-Report-202306.pdf.
---------------------------------------------------------------------------

    Comment: A commenter recommended that instead of attestation 
measures, CMS advance the use of Artificial Intelligence (AI) in its 
electronic measure reporting strategy to increase the availability of 
data and reduce provider burden and burnout.
    Response: While we recognize the future potential of advancing 
health quality, increasing data availability, and reducing provider 
burden using AI, this technology has not been sufficiently tested and 
validated to use for measures in our quality reporting programs.
    Comment: A commenter recommended combining multiple structural 
measures into one multi-dimensional, streamlined measure.
    Response: We appreciate the commenter's recommendation to combine 
multiple structural measures into one multi-dimensional, streamlined 
measure; however, we are concerned that such a measure may be 
administratively complex to report and challenging for interested 
parties to interpret. As we continue to evolve the Hospital IQR Program 
and the PCHQR Program we will seek to identify ways to streamline our 
measures, including potentially combining measures.
    Comment: Many commenters did not support adoption of the Patient 
Safety Structural measure because of the belief that the number of 
attestations is excessive. Some of these commenters stated that this 
appears to be a survey, not a quality measure because of the number of 
statements and stated that because it is a survey it is not meaningful 
in hospital measurement programs.
    Response: We disagree with commenters that the number of statements 
to which hospitals will need to attest is indicative that this measure 
is a survey because a survey is not

[[Page 69469]]

defined by the number of questions contained within.\315\ Survey 
research seeks to collect information from a sample of the population 
through responses to questions to understand the characteristics of a 
group.\316\ The Patient Safety Structural measure evaluates and 
publicly reports information about the quality of care in each hospital 
that participates in the Hospital IQR Program and the PCHQR Program. 
The Patient Safety Structural measure is not focused on the 
characteristics of hospitals as a group, but on the patient safety 
structures of each individual hospital and how that information can 
lead to patient safety improvement efforts and inform patient choice. 
We have adopted other structural measures which require hospitals to 
attest to specific statements to collect information about specific 
structures (for example, the Hospital Commitment to Health Equity 
measure finalized in the FY 2024 IPPS/LTCH PPS final rule (87 FR 49191 
through 49201)) to provide meaningful information to consumers 
regarding individual hospital characteristics.
---------------------------------------------------------------------------

    \315\ Ponto J. Understanding and Evaluating Survey Research. J 
Adv Pract Oncol. 2015 Mar-Apr;6(2):168-71. Epub 2015 Mar 1. PMID: 
26649250; PMCID: PMC4601897.
    \316\ Ponto J. Understanding and Evaluating Survey Research. J 
Adv Pract Oncol. 2015 Mar-Apr;6(2):168-71. Epub 2015 Mar 1. PMID: 
26649250; PMCID: PMC4601897.
---------------------------------------------------------------------------

    Comment: Many commenters did not support adoption of the Patient 
Safety Structural measure because it is an attestation measure which 
does not measure patient outcomes or patient care. Some of these 
commenters recommended that CMS identify measure gaps related to 
patient safety in the current quality reporting programs and develop 
measures to assess these gaps that would provide actionable data. Some 
commenters stated that CMS has not shown a link between the 
attestations and improved patient outcomes.
    Response: While this measure does not measure patient outcomes or 
specific activities of patient care, it does assess hospital 
implementation of a systems-based approach to safety best practices, 
which is applicable to all patient care activities and patient 
outcomes. Safety is a foundational aspect of high-quality care for all 
patients, regardless of their health condition or if they are at risk 
of experiencing a specific type of potential harm. Our measure 
inventory currently lacks measures that emphasize the importance of 
structure, culture, and leadership commitment to prioritizing safety. 
Therefore, we have identified that there is a patient safety measure 
gap in our current quality reporting programs. The Patient Safety 
Structural measure is informed by scientific evidence from existing 
patient safety research and literature, guidance from established 
healthcare quality and safety organizations, and detailed input from 
patient safety experts, advocates and patients. Statement-level review 
and input of each measure attestation was provided by a national TEP. 
We reiterate that research shows a link between these hospital 
characteristics and improved care and outcomes for 
patients.317 318
---------------------------------------------------------------------------

    \317\ DiCuccio MH. The Relationship Between Patient Safety 
Culture and Patient Outcomes: A Systematic Review. J Patient Saf. 
2015;11(3):135- 42. doi:10.1097/PTS.0000000000000058.
    \318\ Forbes J, Arrieta A Comparing hospital leadership and 
front-line workers' perceptions of patient safety culture: an 
unbalanced panel study BMJ Leader Published Online First: 03 April 
2024. doi: 10.1136/leader-2023-000922.
---------------------------------------------------------------------------

    Comment: Many commenters did not support adoption of the Patient 
Safety Structural measure because of the concern that attestation 
measures are subjective. These commenters stated that because of this 
subjectivity the Patient Safety Structural measure would not 
meaningfully distinguish between hospitals.
    Response: The Patient Safety Structural measure provides hospitals 
flexibility in meeting each of the attestations. We recognize that 
there is significant variation between hospitals and the local 
communities they serve, which means that policies and procedures that 
are effective in some hospitals may not be effective in other 
hospitals. Therefore, the attestations in the Patient Safety Structural 
measure have been developed to encourage hospitals to adopt policies 
and procedures consistent with a structure, culture, and leadership 
commitment to prioritizing safety; without being prescriptive in how 
hospitals implement these policies and procedures. We acknowledge 
commenters' concerns regarding the potential for there to be 
subjectivity in how hospitals interpret each attestation statement 
within the Patient Safety Structural measure. We have developed and 
provided the Attestation Guide to limit this subjectivity and to help 
hospitals accurately attest to this measure while still providing 
flexibility to hospitals. We further note the Patient Safety Structural 
measure is one measure within a larger portfolio of measures which 
balances more narrowly specified measures with broader measures. Some 
of these more narrowly specified measures specifically address patient 
safety (such as the measures for Hospital Harm--Falls with Injury 
(section IX.C.5.c) and Hospital Harm--Postoperative Respiratory Failure 
(section IX.C.5.d)).
    Comment: Many commenters did not support the Patient Safety 
Structural measure because of concerns that the attestations are 
difficult to implement and therefore hospitals would not be able to 
prepare for this measure prior to its adoption. Some commenters 
recommended delaying implementation of the measure to allow hospitals 
more time to prepare for reporting. A few commenters recommended 
revising the measure to focus on two to three items per domain. Some of 
these commenters recommended gradually increasing the number of 
attestations in future years.
    Response: We understand commenters' concerns that many hospitals 
will not be able to positively attest to all the statements for each 
domain prior to the Patient Safety Structural measure's implementation 
for the CY 2025 reporting period. We do not expect all hospitals to 
achieve a score of five on the measure, especially not in the first 
reporting year. This measure is intended to further the current state 
of patient safety structures within hospitals.\319\ By adopting the 
measure for the CY 2025 reporting period, we can establish a baseline 
of the current state of patient safety structures within hospitals, 
which we can use to understand change as hospitals seek to incorporate 
more of these practices because of the adoption of the Patient Safety 
Structural measure. Requiring attestation to just two or three items 
per domain would not be as effective at encouraging hospitals which 
have already adopted those patient safety structures to advance the 
state of patient safety as quickly or effectively as adopting all 
attestations in the first year.
---------------------------------------------------------------------------

    \319\ Were hospitals already scoring highly on the measure there 
would be no benefit to adopting it. See 42 CFR 412.140(g)(3)(i) 
(providing for the removal of measures on which hospitals are 
performing ``so high and unvarying that meaningful distinction and 
improvements in performance can no longer be made.'').
---------------------------------------------------------------------------

    Comment: Some commenters did not support the Patient Safety 
Structural measure due to concerns that hospitals already engage in the 
listed activities and that CMS has not shown that there are gaps in 
these practices. These commenters specifically stated that Patient and 
Family Advisory Councils (PFACs), PSO participation, participation in 
large-scale learning networks, and tracking progress against benchmarks 
are already common practice.

[[Page 69470]]

    Response: We acknowledge the commenters' concerns; however, the 
purpose of this measure is in part to uniformly assess whether 
hospitals perform these activities. Based on the information available 
to us, there are demonstrated gaps in hospital participation in 
meaningful data collection, reporting, and learning system activities 
that would make the uniform evaluation of hospital performance on 
patient safety improvement activities helpful. For example, hospital 
adoption of PFACs has waned in recent years, with the 2021 American 
Hospital Association (AHA) annual survey of over 6,200 U.S. hospitals 
finding that the number of hospitals with PFACs is 51 percent.\320\ A 
2019 OIG report found that only 59 percent of general acute care 
hospitals participating in Medicare work with a PSO.\321\
---------------------------------------------------------------------------

    \320\ Lewis B. Success of Patient and Family Advisory Councils: 
The Importance of Metrics. J Patient Exp. 2023 Apr 
10;10:23743735231167972. doi: 10.1177/23743735231167972. PMID: 
37064819; PMCID: PMC10103250.
    \321\ US Department of Health and Human Services; Office of the 
Inspector General, September 2019. OIG Report No. OEI-01-17-
00420.  https://oig.hhs.gov/oei/reports/oei-01-17-00420.asp.
---------------------------------------------------------------------------

    Comment: Several commenters did not support the Patient Safety 
Structural measure because of concerns regarding the reporting burden. 
These commenters stated that the benefits of the measure are not 
sufficient to offset the cost associated with determining and 
documenting whether a hospital's practices meet each attestation. Some 
of these commenters expressed concern that the time spent attesting to 
this measure would take away from patient care and could lead to 
patient harm.
    Response: We understand that there will be administrative burden 
with understanding each of the attestation statements and determining 
whether a hospital's patient safety structures are in alignment with 
the attestation statements. We further recognize that this 
administrative burden may be greater during the first reporting year as 
hospitals familiarize themselves with the attestation statements. 
However, we have concluded that the benefits of this measure justify 
its costs. Safety is a foundational aspect of high-quality care for all 
patients, regardless of their health condition or if they are at risk 
of experiencing a specific type of potential harm. By adopting the 
Patient Safety Structural measure, we not only assess hospital 
implementation of a systems-based approach to safety best practices but 
also promote such implementation. Therefore, the Patient Safety 
Structural measure has considerable benefit for all patients. While we 
understand that hospital staff will have to spend time reviewing the 
attestations and assessing their hospital's safety practices in light 
of the attestation statements, this activity will further encourage 
hospitals to understand and implement a systems-based approach to 
safety best practices, which will in turn improve patient care. We 
refer the readers to section XII.B.6. of this rule for our estimate of 
the expected cost for a hospital to report this measure.
    Comment: A commenter expressed concern that under-resourced 
hospitals (such as community and rural hospitals) would face greater 
challenges documenting and reporting than large hospital systems.
    Response: We understand that hospitals with fewer resources for 
identifying and implementing patient safety best practices may face 
additional challenges in documenting and reporting their practices. 
However, safety is a foundational aspect of high-quality care for all 
patients, regardless of the hospital in which they seek care. The 
reporting of this measure by all hospitals will provide valuable 
information and a considerable benefit to patients and encourages 
hospitals to establish a structural, cultural, and leadership 
commitment to prioritizing safety. Furthermore, we note that HHS 
provides resources to assist hospitals in their focus on patient safety 
including, for example, CMS's Quality Improvement Organization 
Program\322\ and AHRQ's patient safety resources.\323\
---------------------------------------------------------------------------

    \322\ For more information about the QIO Program we refer 
readers to: https://www.cms.gov/medicare/quality/quality-
improvement-organizations#:~:text=QIO%20Program%20priorities%3A&text=
Improve%20care%20coordination%20and%20the,Increase%20patient%20safety
.
    \323\ For AHRQ's patient safety resources, we refer readers to: 
https://www.ahrq.gov/patient-safety/resources/.
---------------------------------------------------------------------------

    Comment: Many commenters did not support this measure because of 
the scoring approach in which hospitals would not receive a point for a 
domain unless they could positively attest to all statements within the 
domain. A few commenters recommended allowing a hospital to receive 
credit for the domain by affirmatively attesting to a smaller number of 
practices within the domain (three or four, instead of all five). Some 
commenters recommended providing partial credit and stated that this 
would improve tracking over time.
    Response: We understand commenters' concerns that many hospitals 
will not be able to positively attest to all the statements for each of 
the domains, which will affect the hospital's score for the entire 
domain. Nonetheless, we intentionally chose to score the measure at the 
domain level, for a score of 0-5, instead of allowing partial credit. 
The Patient Safety Structural measure assesses hospitals in terms of 
their systemic approach to safety in five domains. Each action within a 
domain is an important best practice necessary to achieving a high 
level of performance through the domain on preventable harm reduction 
for patients. For this reason, a hospital must attest to all the 
actions within a domain to receive credit for the domain. We reiterate 
that we do not expect all hospitals to achieve a score of five on the 
measure, especially not in the first reporting year. The measure is 
intended to further the current state of patient safety structures 
within hospitals. Furthermore, requiring attestation to fewer items per 
domain would be less effective at furthering the current state of 
patient safety structures within hospitals that currently implement 
many important elements for advancing patient safety. The decision to 
use full point scoring is also intended to keep the level of complexity 
to a minimum and therefore ease the general public's ability to 
understand the measure.
    Comment: Several commenters stated that the measure results would 
be difficult for patients, the public, and staff to understand and 
recommended partnering with patients and families on what data 
regarding safety culture would be meaningful to them. A commenter 
recommended education and outreach for the public and healthcare 
community on the nature and purpose of structural measures. A few 
commenters recommended publicly reporting the results of this measure 
with additional granularity to identify quality improvement 
opportunities.
    Response: We note that the measure developer convened a TEP to 
inform development of the Patient Safety Structural measure. In 
addition to members of healthcare systems and patient safety experts, 
more than 50 percent of the TEP consisted of individuals that 
identified as patients or caregivers, some of whom were also 
representatives of patient and caregiver advocacy organizations. These 
TEP members provided input on what would be meaningful to patients and 
their families. The measure scoring structure was developed with their 
input. Furthermore, as part of the pre-rulemaking process the Patient 
Safety Structural measure received a total of 91 comments expressing 
support.\324\ Most

[[Page 69471]]

commenters were patients and family members who described their 
individual experiences with the medical system and preventable harms to 
which they were exposed. These commenters then emphasized the 
importance of the Patient Safety Structural measure's intent and 
domains for improving patient safety related to these experiences.\325\ 
We may consider potential reporting of more granular data that would 
allow identification of improvement opportunities. We note that each 
hospital will know how it attested to each statement and therefore 
would be able to determine which areas would be most appropriate for 
improvement opportunities.
---------------------------------------------------------------------------

    \324\ Battelle--Partnership for Quality Measurement. Compiled 
MUC List Public Comment Posting. Available at: https://p4qm.org/sites/default/files/2024-01/Compiled-MUC-List-Public-Comment-Posting.xlsx.
    \325\ Battelle--Partnership for Quality Measurement. 2023 
Measures Under Consideration Public Comment Summary Hospital 
Committee. Available at: https://p4qm.org/sites/default/files/2024-01/PRMR-Hospital-Public-Comments-Final-Summary.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters recommended developing a strategy to 
publicly report the results of this measure with results from safety 
outcome measures for comparison.
    Response: Section 1886(b)(3)(B)(viii)(VII) of the Act and section 
1866(k)(4) of the Act require the Secretary to report quality measures 
used in the Hospital IQR Program and the PCHQR Program, respectively, 
on a CMS website. Section 1886(b)(3)(B)(viii)(VII) of the Act and 
section 1866(k)(4) of the Act for the Hospital IQR Program and the 
PCHQR Program, respectively, also require that the Secretary establish 
procedures for making information regarding measures available to the 
public after ensuring that a hospital has the opportunity to review its 
data before they are made public. Our current policy is to report data 
from the Hospital IQR Program and PCHQR Program as soon as it is 
feasible on CMS websites such as the Compare tool hosted by HHS, 
currently available at: https://www.medicare.gov/care-compare, or its 
successor website, after a 30-day preview period (78 FR 50776 through 
50778). We refer readers to section IX.C.12 for more details on our 
public display requirement policies for the Hospital IQR Program. 
Consistent with this requirement, we will publicly report the results 
of the Patient Safety Structural measure on a CMS website on which we 
also publicly report the results of other measures in the relevant 
quality reporting programs (either the Hospital IQR Program or the 
PCHQR Program) including safety outcome measure. We thank commenters 
for their suggestion and encourage interested parties to access these 
data for comparison and analysis when they become publicly available.
    Comment: Some commenters stated that the existing patient safety 
measures, supplemented by other patient safety measures proposed in the 
FY 2025 IPPS/LTCH PPS proposed rule, are sufficient for measuring 
patient safety. A commenter stated that the CMS Hospital Star Ratings 
and condition-specific quality measures are already available to help 
patients make informed care decisions.
    Response: We agree that the existing patient safety measures, the 
Overall Hospital Quality Star Rating, and the condition-specific 
quality measures are valuable resources to help patients make informed 
care decisions. This measure is an important complement to these 
resources. Each of the existing patient safety measures serves an 
important purpose in assessing a specific element of patient safety, 
for example, a specific condition, procedure, or harm event (such as 
falls), but none of the existing patient safety measures provides a 
holistic view of a hospital's structural, cultural, and leadership 
commitment to prioritizing safety. These elements are critical aspects 
of ensuring safety for all patients regardless of their health 
condition or if they are at risk of experiencing a specific type of 
potential harm. We refer readers to the CY 2025 OPPS/ASC proposed rule 
where we are soliciting input on potential future methodological 
modifications regarding the Safety of Care measure group within the 
Overall Hospital Quality Star Rating (89 FR 59509 through 59515).
    Comment: Several commenters did not support the Patient Safety 
Structural measure because it has not been endorsed by a CBE.
    Response: While we recognize the value of measures undergoing CBE 
endorsement review, we need not adopt solely measures endorsed by a CBE 
(see section IX.B.1.c). Given the urgency of improving patient safety 
and the current lack of CBE-endorsed measures that address hospital 
structures for creating a culture of safety, we determined that it is 
appropriate to adopt this measure. This measure is designed to identify 
hospitals that practice a system-based approach to safety and embrace 
the importance of a safety culture. Demonstrating a structural, 
cultural, and leadership commitment that prioritizes safety can improve 
care and outcomes for all patients.\326\ Because of the measure's 
potential to improve care for all patients, we have determined that 
this is an appropriate topic for a measure for the Hospital IQR Program 
and the PCHQR Program. We reviewed measures endorsed by both the CBE 
which currently holds the contract under section 1890(a) of the Act and 
measures endorsed by the entity which formerly held that contract and 
did not identify any other CBE-endorsed measures on strategies and 
practices to strengthen hospitals' systems and culture for safety. In 
light of the lack of endorsed measures on this specified area or 
medical topic, we have determined that it is appropriate to use a 
measure that is not endorsed by the CBE. We intend to submit the 
measure for future CBE endorsement after endorsement criteria for 
structural measures have been made available.
---------------------------------------------------------------------------

    \326\ DiCuccio MH. The Relationship Between Patient Safety 
Culture and Patient Outcomes: A Systematic Review. J Patient Saf. 
2015;11(3):135- 42. doi:10.1097/PTS.0000000000000058.
---------------------------------------------------------------------------

    Comment: A commenter stated that they do not support the Patient 
Safety Structural measure and expressed the belief that it is a 
punitive measure tied to reimbursement.
    Response: The Hospital IQR Program is a pay-for-reporting program, 
which means that hospitals that report the required measure data in 
accordance with the form, manner, and timing policies specified by the 
Secretary are not subject to a financial penalty under this program. A 
hospital's performance on the measure, which for the Patient Safety 
Structural measure is a score from 0 to 5 points, has no impact on a 
hospital's Medicare reimbursement. We note that the PCHQR Program is a 
quality reporting program that does not have a financial penalty 
associated with it. The measure determines the level at which hospitals 
are performing these identified best practices and identifies 
opportunities for improvement in structural safety practices. We do not 
expect all hospitals to achieve a maximum score of five points on the 
measure, especially during the initial years of using the measure in 
these programs.
    Comment: Several commenters supported Domain 1 because of the goal 
of eliminating preventable harm. A commenter expressed support for 
Domain 1 Statement B, and specifically supported requiring hospitals to 
attest that their ``specific plans and metrics are widely shared''. A 
few commenters expressed support for Domain 1 Statement C. These 
commenters stated that leadership engagement would empower leadership 
to respond expeditiously. A few commenters expressed support for Domain 
1 Statement D, stating that it is important to encourage hospitals to 
use board meetings to discuss patient safety topics

[[Page 69472]]

because of the commenters' belief that this is not currently a 
widespread practice. A few commenters expressed support for Domain 1 
Statement E; some of these commenters expressed the belief that it is 
important for senior leaders to learn of patient safety events through 
internal channels as close to real-time as possible, even though the 
event review may not be complete until after the notification.
    Response: We thank the commenters for their support of Domain 1 and 
specifically Domain 1 Statements B, C, D, and E. We appreciate 
commenters' support for leveraging board meetings, developing targeted 
patient safety plans and metrics, and notifying senior leaders early 
during serious safety events. Domain 1 includes core activities that 
place patient safety at the forefront of governing boards and executive 
leadership's priorities for greater leadership accountability and 
prioritization in operational, financial, and strategic plans.
    Comment: A few commenters recommended linking the language 
describing Domain 1 Statements A and B with the statement in the 
Attestation Guide that ``no preventable harm'' is a long-term goal 
(which is currently associated with Domain 2 Statement A).
    Response: We thank commenters for this suggestion. While Domain 1 
is titled, ``Leadership Commitment to Eliminating Preventable Harm,'' 
Domain 1 Statements A and B do not include the phrases ``no preventable 
harm'' or ``zero preventable harm.'' Domain 2 Statement A does include 
this phrase, and thus Domain 2 Statement A remains an appropriate place 
for this language. We intend to monitor performance on the Patient 
Safety Structural measure and, if we identify that there is a need for 
additional guidance, provide it through our regular education and 
outreach efforts.
    Comment: A few commenters recommended ensuring accurate attestation 
to this measure by developing an audit plan.
    Response: We understand commenters' concerns regarding the accuracy 
of provider self-reported data and are continuously evaluating new ways 
to ensure accurate information is submitted to CMS and shared with the 
public. We do require all hospitals participating in the Hospital IQR 
Program and PCHs participating in the PCHQR Program to complete the 
Data Accuracy and Completeness Acknowledgement (DACA) each year, which 
requires an annual attestation that all the information reported to CMS 
for these respective programs is accurate and complete to the best of 
the submitters' knowledge because CMS expects all hospitals to submit 
complete and accurate data with respect to quality measures. For more 
information on the Hospital IQR Program's DACA requirements, we refer 
readers to section IX.C.11. of this final rule. For more information on 
the PCHQR Program's DACA requirements, we refer readers to 42 CFR 
412.24(c).
    Comment: A few commenters recommended updates to Domain 1. A few 
commenters recommended ensuring that hospitals include physicians and 
medical staff as part of operational and strategic planning. A 
commenter recommended changing the name to ``Leadership Commitment to 
Eliminating Preventable Harm and Creating an Environment of Ongoing 
Safety'' because the absence of measurable preventable harm does not 
always indicate a safe environment. A commenter recommended revising 
the language of Domain 1 to remove references to ``eliminate'' and 
replacing these references with ``engineer out'' to focus on the multi-
disciplinary approach to improving safety.
    Response: We thank commenters for their recommended updates to 
Domain 1. We note that statement-level review and input of each measure 
attestation was provided by a national TEP. Most TEP members agreed 
that the domains capture the most important elements for advancing 
patient safety.\327\ Furthermore, the Patient Safety Structural measure 
is intended to provide hospitals flexibility in meeting each of the 
attestations. We recognize that there is significant variation between 
hospitals, which means that policies and procedures that are effective 
in some hospitals may not be effective in other hospitals. Therefore, 
the attestations in the Patient Safety Structural measure have been 
developed to encourage hospitals to adopt policies and procedures 
consistent with a structure, culture, and leadership commitment to 
prioritizing safety, without being prescriptive in how hospitals 
implement these policies and procedures including specifying the staff 
responsible for engaging in operational and strategic planning.
---------------------------------------------------------------------------

    \327\ Yale New Haven Health Services Corporation--Center for 
Outcomes Research and Evaluation. Summary of Technical Expert Panel 
(TEP) Meetings Patient Safety Structural Measure (PSSM). Available 
at: https://mmshub.cms.gov/sites/default/files/PSSM-TEP-Summary-Report-202306.pdf.
---------------------------------------------------------------------------

    With respect to the specific recommendations raised by commenters, 
we agree that the absence of measurable preventable harm does not 
always indicate a safe environment but note that the domain refers to 
the elimination of preventable harm, regardless of whether and how that 
harm is measured. We disagree with the commenter that the term 
``engineer out'' more effectively conveys a multidisciplinary approach 
to safety than the term ``eliminate.'' We note that the term ``engineer 
out'' could be interpreted to compartmentalize responsibility for 
reducing preventable harm in a way that implies that the staff 
responsible for developing and implementing processes have 
responsibility for safety to the exclusion of staff responsible for 
other functions (such as staff responsible for operations).
    Comment: A few commenters recommended updates to specific 
attestation statements within Domain 1. These recommendations were:
     Statement A: Remove language related to annual performance 
reviews and compensation because of concerns that annual performance 
reviews are too infrequent to motivate change and that there may be 
unintended consequences (such as funding going to executive bonuses 
instead of safety initiatives).
     Statement B: Require each unit or department to set and 
publicly share a goal which supports the plans and metrics.
     Statement C: Require hospitals to attest that they embed 
patient safety into everyday clinical operations instead of that they 
ensure adequate resources to support patient safety.
     Statement D: Increase flexibility with respect to the 
percentage of regular board meetings focused on safety to allow quality 
and patient safety subcommittees to meet the requirement, to reduce the 
20 percent threshold dedicated to these topics during board meetings, 
and to not disadvantage hospitals that are required to have open board 
meetings (that is, public hospitals).
     Statement E: Shorten the timeframe for reporting serious 
safety events to the board. Require reporting of employee injuries to 
C-suite executives within 24 hours.
    Response: We thank commenters for these recommended updates. We 
reiterate that the Patient Safety Structural measure was developed with 
input from national experts to allow hospitals flexibility in how they 
meet each individual statement. With respect to Domain 1 Statement A, 
we understand commenters' concern that annual activities may be too 
infrequent for active learning, review, reprioritization, and problem 
solving. Often annual performance reviews include regular status checks

[[Page 69473]]

throughout the year to ensure progress and address barriers to 
achieving goals to allow for improved active learning, review, 
reprioritization, and problem solving. While we recognize it is 
possible that some hospitals or health systems may allocate funding 
that had previously been used for patient safety to increase executive 
pay due to the attestation in Domain 1 Statement A, we note that this 
will be reflected in other attestations in the Patient Safety 
Structural measure, such as Domain 1 Statement C, which requires 
attestation to whether the hospital governing board, in collaboration 
with leadership, ensures adequate resources to support patient safety 
(such as equipment, training, systems, personnel, and technology).
    We agree with the commenter that setting and publicly sharing a 
goal which supports the plans and metrics would be a way of ensuring 
that these plans and metrics are widely shared across the hospital and 
note that hospitals will have flexibility to implement this policy 
under Domain 1 Statement B.
    We note that Domain 1 refers to the Leadership Commitment to 
Eliminating Preventable Harm and that Statement C requires hospitals to 
attest to whether their hospital governing board, in partnership with 
leadership, ensures adequate resources to support patient safety. While 
ensuring adequate resources is a function of the governing board, in 
partnership with leadership, embedding patient safety into everyday 
clinical operations is a shared responsibility across the entire 
hospital workforce. Therefore, the recommended statement exceeds the 
scope of Domain 1.
    With respect to Domain 1 Statement D, we note that there is support 
for a 20 percent threshold for hospital leadership and board meetings 
in the Self-Assessment Tool created to complement the recommendations 
in Safer Together: A National Action Plan to Advance Patient Safety. In 
support of the report's recommendation to ensure safety is a 
``demonstrated core value,'' the National Steering Committee for 
Patient Safety provided the suggestion that hospitals could 
``[a]llocate and evaluate the effectiveness of time spent in leadership 
meetings and all board meetings to address quality and safety and share 
patient and family experiences with staff, leaders, and board members'' 
as a means of achieving this recommendation. In the Self-Assessment 
Tool, this committee of patient safety stakeholders and experts 
targeted 20 percent as the allocation of time that should be dedicated 
to these topics during leadership and board meetings, under the heading 
of ``Culture, Leadership, and Governance,'' awarding a score of 3 or 4 
(of 4) for hospitals at which ``At least 20 percent of all leadership 
and board meeting agendas are dedicated to review and discussion of 
safety.'' \328\ We understand commenters' concerns that public or 
government owned hospitals may be required to hold open board meetings. 
We note that there are benefits to open meetings including 
transparency, maintaining a close relationship with interested parties, 
generating trust, and fostering openness and accountability.\329\ We 
understand that some specific patient safety discussions such as those 
that include identifiable or protected information may be more 
appropriate for closed sessions. However, the patient safety benefits 
of allocating at least 20 percent of leadership and board meetings to 
patient safety topics extend to both public and private hospitals and 
warrant the inclusion of Domain 1 Statement D. Furthermore, while we 
understand that many hospitals have quality and patient safety 
subcommittees, because of the importance of safety, the awareness, 
discussion, and responsibility for understanding safety issues in the 
organization ultimately rests with the organization's leaders with 
fiduciary responsibility for the hospital. We encourage hospitals to 
address this attestation by integrating patient safety into other 
topics during board meetings where appropriate. We reiterate that there 
are no financial penalties for hospitals that attest either ``yes'' or 
``no'' to each of the attestation statements to calculate the 0-5-point 
score for the Patient Safety Structural measure.
---------------------------------------------------------------------------

    \328\ National Steering Committee for Patient Safety. Self-
Assessment Tool: A National Action Plan to Advance Patient Safety. 
Boston, Massachusetts: Institute for Healthcare Improvement; 2020.
    \329\ AHA. Sample Policy for Open Board Meetings. Available at: 
https://trustees.aha.org/sites/default/files/trustees/sample-policy-for-open-board-meetings-for-public-or-government-hospitals.pdf.
---------------------------------------------------------------------------

    With respect to Domain 1 Statement E, we agree with the commenter 
that it may be appropriate in some situations to notify C-suite 
executives and individuals on the governing board within 24 hours of 
employee injuries. However, we wanted to provide hospitals with some 
flexibility and did not identify a 24 hour deadline as a top priority 
for safety during our extensive literature review and interaction with 
patient safety experts, advocates, and patients. We support earlier 
reporting to the board for serious safety events and recognize that 
some state and local laws may require more immediate reporting. We 
reiterate that the Patient Safety Structural measure is intended to 
provide hospitals flexibility in meeting each of the attestations.
    Comment: A commenter requested clarification on Domain 1 Statement 
A, specifically regarding whether the performance review needs to cite 
specific metrics or only requires implementation of initiatives to 
improve quality and safety.
    Response: With respect to the elements of annual leadership 
performance reviews we have intentionally maintained flexibility to 
allow each hospital to adopt practices that are most effective for its 
individual circumstances; that is, we have not included a requirement 
that the performance review cite specific metrics. We monitor 
performance on all of the measures in our quality reporting programs 
and, if we identify that there is a need for additional guidance we 
provide it through our regular education and outreach efforts.
    Comment: A commenter recommended that leaders should be coached to 
improve performance on patient safety and patient safety structures, 
not penalized for poor performance.
    Response: We agree with the commenter that coaching is an effective 
means to improve performance. The Hospital IQR Program is a pay-for-
reporting program, which means that hospitals that report the required 
measure data in accordance with the form, manner, and timing policies 
specified by the Secretary are not subject to a financial penalty under 
this program, and the PCHQR Program is a quality reporting program that 
does not have a financial penalty associated with it. Therefore, there 
are no financial penalties for hospitals that attest either ``yes'' or 
``no'' to each of the attestation statements to calculate the 0-5-point 
score for the Patient Safety Structural measure. Therefore, there are 
no financial penalties associated with hospital performance on the 
Patient Safety Structural measure. However, the commenter may be 
referring to the Domain 1 Statement A attestation, which requires 
hospitals to attest whether ``Our hospital senior governing board 
prioritizes safety as a core value, holds hospital leadership 
accountable for patient safety, and includes patient safety metrics to 
inform annual leadership performance reviews and compensation.'' This 
attestation is not prescriptive in how the governing board should hold 
hospital leadership accountable for patient safety. Hospitals

[[Page 69474]]

retain the flexibility to use positive reinforcement strategies such as 
coaching and incentives.
    Comment: Many commenters did not support Domain 1 Statement E and 
expressed concern that the three-day timeline for notifying senior 
leaders of patient safety events would not provide adequate time for 
such notice. Many commenters stated that the three-day timeline was 
insufficient for serious events because of the complexity of analyzing 
the event and providing recommendations. Some of these commenters 
stated that reporting within three days would lead to superficial 
reviews which could lead to missed opportunities for meaningful impact 
and long-term improvement. A few commenters stated that the C-suite's 
role does not include operational oversight or root cause analysis and 
stated that presenting information to the board without an actionable 
plan may not be meaningful. A few commenters stated that this 
attestation contradicts the CoPs, specifically, 42 CFR 482.21(e)(3), 
which provides executives with the authority to set clear expectations 
for safety. These commenters stated that these clear expectations 
include the authority to set appropriate timelines and processes for 
reporting and therefore setting a specific timeline is contradictory. A 
commenter stated that the three-day deadline is not supported by safety 
science. Another commenter stated that their state requires reporting 
to the state within 15 days and recommended deferring to state 
timeframes when available.
    Response: We acknowledge the commenters' concern about a three-day 
timeline for notifying senior leaders of patient safety events; 
however, there is support for timely notification of hospital senior 
leadership in the Self-Assessment Tool created to complement the 
recommendations in Safer Together: A National Action Plan to Advance 
Patient Safety. In the Self-Assessment Tool, the National Steering 
Committee for Patient Safety, under the heading of ``Culture, 
Leadership, and Governance,'' determined it was appropriate to award a 
score of 3 or 4 (of 4) for hospitals at which ``The CEO and Board Chair 
are notified within 24 hours of a serious adverse event.'' \330\ To 
allow flexibility, consistent with the CoPs, and provide hospitals the 
ability to set the practices that make the most sense for their 
individual circumstances, the timeframe identified in Domain 1 
Statement E extends the timeframe from 24 hours to three business days. 
This will provide hospitals more time to report confirmed serious 
safety events while retaining a timely approach for informing hospital 
and board leadership. Because hospitals still retain flexibility within 
the three-day period and for setting other expectations with respect to 
safety, this is not contradictory to the CoP. Furthermore, we reiterate 
that the Patient Safety Structural measure builds upon the activities 
already required under the CoPs,\331\ therefore hospitals that do not 
choose to require executives be notified within 3 days of safety events 
can attest no to Domain 1 Statement E.
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    \330\ National Steering Committee for Patient Safety. Self-
Assessment Tool: A National Action Plan to Advance Patient Safety. 
Boston, Massachusetts: Institute for Healthcare Improvement; 2020.
    \331\ Center for Clinical Standards and Quality, Quality, Safety 
& Oversight Group. Revision to State Operations Manual (SOM), 
Hospital Appendix A--Interpretive Guidelines for 42 CFR 482.21, 
Quality Assessment & Performance Improvement (QAPI) Program.
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    Comment: A few commenters expressed support for Domain 2 Statement 
A because the commenters stated that setting a goal of zero harm is 
important to establish a culture that prioritizes safety. A few 
commenters expressed support for Domain 2 Statement C. These commenters 
stated that a ``just culture'' is foundational to patient safety and 
that, although training and collaboratives to produce a ``just 
culture'' exist, hospitals have been slow to implement these 
activities. A commenter expressed support for Domain 2 Statement D 
because of the importance of safety skills and competency assessments. 
A commenter expressed support for Domain 2 Statement E because of the 
commenter's concern about the risk of workplace violence.
    Response: We appreciate the commenters' support for Domain 2 
Statements A, C, D, and E. We agree that setting a goal of zero 
preventable harm, establishing a ``just culture'', requiring safety 
competence assessments, and mitigating workplace violence are all 
critical activities to hospitals establishing a culture of safety. 
These activities ensure that patient safety is a core value throughout 
an organization's strategy and policies.
    Comment: A few commenters recommended removing the phrase ``zero 
preventable harm'' from the description of Domain 2. These commenters 
stated that eliminating preventable harm should be a continuous 
aspirational aim instead of a part of a strategic plan that is 
regularly updated. Some commenters stated that use of the phrase ``zero 
preventable harm'' can lead to under reporting due to concern about 
``breaking the streak'' or overly complex efforts to determine whether 
an event was preventable. A few commenters recommended setting the goal 
of year-over-year improvement in rates of preventable harm to avoid 
gaming of the strict definition of zero preventable harm (that is, 
defining events as non-preventable or not reporting them).
    Response: We thank the commenters for their recommendation to 
remove the phrase ``zero preventable harm.'' The inclusion in the 
Patient Safety Structural measure of a goal of zero preventable harm 
was informed by extensive input from a TEP, and directly reflects the 
CMS National Quality Strategy Goal for Safety to ``Achieve zero 
preventable harm.'' \332\ While we agree that a year-over-year 
measurement approach may be attractive, it would not be appropriate to 
track improvement rates under the structure of this measure. We note 
that existing measures in the Hospital IQR Program and the PCHQR 
Program require reporting outcome data in the care environment.
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    \332\ Centers for Medicare and Medicaid Services. CMS National 
Quality Strategy. 2024. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
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    Comment: A few commenters recommended updates to specific 
attestation statements within Domain 2. These recommendations were:
     Statement A: Remove the term ``core value'' because core 
values are often differentiating factors, especially for faith-based 
organizations, and safety should be a universal aspiration integrated 
into all operations instead of creating value statements.
     Statement B: Add the phrase ``either alone or in 
partnership with community organizations'' after the phrase ``identify 
and address'' to reflect that many hospitals cannot address disparities 
in their communities due to resource limitations.
     Statement C: Expand to include a focus on psychological 
safety as part of a ``just culture.'' Discuss the proactive use of 
``just culture'' frameworks as part of intentional system design. 
Reword to read, ``Our hospital has written policies and protocols to 
cultivate a just culture that emphasizes learning, where frontline 
staff feel safe to speak up about the challenges they face in 
delivering care. In turn, hospital leadership demonstrates a commitment 
to those staff who take the time to report concerns by supporting those 
that experience errors, coaches well-intentioned but misaligned 
actions, and seeks corrective action for conscious, reckless choices 
that do not align with our organizational value'' to align with a 
systems view of safety.

[[Page 69475]]

     Statement D: Include a patient safety curriculum and 
competency assessment for all employees and all medical staff 
regardless of their role or where they work in the system to show that 
all employees are valued as part of achieving patient safety. Include 
examples of curricula and competencies to improve workforce safety and 
provide guidance on measuring these competencies. Rephrase to focus on 
advancing human factors and systems design improvements instead of 
specifically advancing skills and behaviors. Exclude C-suite executives 
and governing board members from the patient safety curriculum and 
competencies due to concerns that by including executive leaders in the 
training the training would be too high level to focus on operational 
issues affecting care providers.
     Statement E: Include ``safety for all'' instead of more 
narrowly focusing on workforce safety. Also address fatigue, mental 
health, and emotional wellbeing.
    Response: We thank commenters for these recommended updates. We 
reiterate that the Patient Safety Structural measure was developed with 
input from national experts to allow hospitals flexibility in how they 
meet each individual statement. We recognize that some hospitals, 
including faith-based organizations, may have other contexts for using 
the term ``core value.'' Therefore, we have intentionally not provided 
guidance or definitions for how a hospital would incorporate patient 
safety as a ``core institutional value.''
    We agree with the commenter that hospitals cannot address 
disparities in their communities without partnership with outside 
organizations. We note that Domain 2 Statement B specifically asks 
hospitals to attest whether their ``hospital safety goals include the 
use of metrics to identify and address disparities in safety outcomes 
based on the patient characteristics determined by the hospital to be 
most important to health care outcomes for the populations served.'' We 
note that in the Attestation Guide for Domain 2 Statement B we 
recommend potential harm indicators that hospitals can use to identify 
safety outcomes.\333\ These harm indicators include the AHRQ Patient 
Safety Indicators (PSI), which include items such as ``Death Rate in 
Low-Mortality Diagnosis Related Groups,'' ``Pressure Ulcer Rate,'' and 
``Death Rate Among Surgical Inpatients with Serious Treatable 
Conditions,'' among others,\334\ which are more significantly affected 
by hospital policies, procedures, and operations than patient risk 
factors or disparities within the community. Nevertheless, we recognize 
that there may be community factors which can increase some patients' 
risks for certain adverse safety outcomes and that it is appropriate 
for hospitals to work with community organizations to address those 
factors. We note that hospitals will be able to attest ``yes'' to this 
statement regardless of whether they partner with community 
organizations to identify and address disparities.
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    \333\ Centers for Medicare & Medicaid Services, Patient Safety 
Structural Measure Attestation Guide, available at: https://qualitynet.cms.gov/inpatient/iqr/measures and https://qualitynet.cms.gov/pch/measures.
    \334\ AHRQ. Quality Indicators. Available at: https://qualityindicators.ahrq.gov/Downloads/Modules/V2023/AHRQ_QI_Indicators_List.pdf.
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    We agree with commenters that the elements of a ``just culture'' 
would increase the likelihood of establishing an environment conducive 
to psychological safety. Specifically, because a ``just culture'' 
recognizes that individual practitioners should not be held accountable 
for system failings over which they have no control and recognizes that 
many individual or ``active'' errors represent predictable interactions 
between human operators and the systems in which they work,\335\ a 
``just culture'' can create an atmosphere in which there is a shared 
belief that it is permissible to express ideas, ask questions, and 
admit mistakes without a fear of negative consequences.\336\ Domain 2 
Statement C's reference to a ``just culture'' therefore necessarily 
incorporates considerations of psychological safety.
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    \335\ Centers for Medicare & Medicaid Services, Patient Safety 
Structural Measure Attestation Guide, available at: https://qualitynet.cms.gov/inpatient/iqr/measures and https://qualitynet.cms.gov/pch/measures.
    \336\ Gallo, A. What Is Psychological Safety. Harvard Business 
Review. Available at: https://hbr.org/2023/02/what-is-psychological-safety.
---------------------------------------------------------------------------

    We agree with the commenter that the use of ``just culture'' 
frameworks is part of intentional system design. We address the role of 
``just culture'' frameworks as part of intentional system design in the 
Attestation Guide by stating that, ``a just culture recognizes that 
individual practitioners should not be held accountable for system 
failings over which they have no control. A just culture also 
recognizes many individual or `active' errors represent predictable 
interactions between human operators and the systems in which they 
work.''
    The current language for Domain 2 Statement C is, ``Our hospital 
has implemented written policies and protocols to cultivate a ``just 
culture'' that balances no blame and appropriate accountability and 
reflects the distinction between human error, at-risk behavior, and 
reckless behavior.'' AHRQ defines a ``just culture'' as a system that 
holds itself accountable, holds staff members accountable, and has 
staff members that hold themselves accountable.\337\ Furthermore, the 
Attestation Guide states that a ``just culture'' ``recognizes that 
individual practitioners should not be held accountable for system 
failings over which they have no control. A just culture also 
recognizes many individual or `active' errors represent predictable 
interactions between human operators and the systems in which they 
work. However, in contrast to a culture that touts `no blame' as its 
governing principle, a `just culture' does not tolerate conscious 
disregard of clear risks to patients or gross misconduct (for example, 
falsifying a record, performing professional duties while 
intoxicated).'' This guidance on ``just culture'' provides an 
explanation of the practical application of a ``just culture'' in 
balancing accountability with encouraging staff to feel safe in 
addressing challenges they face.
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    \337\ AHRQ. The CUSP Method. Available at: https://www.ahrq.gov/hai/cusp/.
---------------------------------------------------------------------------

    With respect to Domain 2 Statement D, we agree with commenters that 
including all employees, even those who do not work in the hospital, in 
training with respect to a patient safety curriculum or competency 
assessment has the potential to show that they are valued members of 
the patient safety team. We note that this statement does include all 
clinical and non-clinical staff at the hospital to cover all hospital-
based employees. Hospitals and health systems that choose to include 
additional employees in the patient safety training and competency 
assessments will be able to do so.
    We agree that human factors and system design improvements are a 
vital part of advancing patient safety. As stated in the Attestation 
Guide, the development of the Patient Safety Structural measure is 
anchored in best practices and evidence for improving patient safety 
and reducing harm using a total systems framework that views patient 
safety events as a result of system failure rather than individual 
error and encourages a systems approach which takes the view that most 
errors reflect predictable human failings in the context of poorly 
designed systems.\338\ However, even within a well-designed system, 
individuals responsible for processes

[[Page 69476]]

need to have sufficient competencies to fulfill their responsibilities. 
Therefore, we designed Domain 2 Statement D to complement the other 
systems-based attestations within the Patient Safety Structural 
measure.
---------------------------------------------------------------------------

    \338\ Centers for Medicare & Medicaid Services, Patient Safety 
Structural Measure Attestation Guide, available at: https://qualitynet.cms.gov/inpatient/iqr/measures and https://qualitynet.cms.gov/pch/measures.
---------------------------------------------------------------------------

    We agree with commenters that patient safety curriculum and 
competencies for clinical and non-clinical staff would vary based on 
role. To avoid hospitals using trainings that are so high level that 
they do not address operational issues affecting care providers we 
refer readers to the following examples of validated, industry-standard 
trainings and competencies, which are also included in the Attestation 
Guide:
     ComprehensiveUnitbased Safety Program (CUSP); \339\
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    \339\ Agency for Healthcare Research and Quality. The 
Comprehensive Unitbased Safety Program. 2019. Accessed on 10/24/
2023. https://www.ahrq.gov/hai/cusp/
---------------------------------------------------------------------------

     AHRQ's Communication and Optimal Resolution (CANDOR) 
toolkit; \340\
---------------------------------------------------------------------------

    \340\ Agency for Healthcare Research and Quality. Communication 
and Optimal Resolution Toolkit. 2022 Accessed on 10/24/2023. https://www.ahrq.gov/patient-safety/settings/hospital/candor/modules.html.
---------------------------------------------------------------------------

     The CDC's Infection Control Assessment and Response 
program and tool; \341\
---------------------------------------------------------------------------

    \341\ Centers for Disease Control and Prevention. Infection 
Control Assessment and Response Tool for General Infection 
Prevention and Control. Accessed on 10/24/2023. https://www.cdc.gov/healthcare-associated-infections/?CDC_AAref_Val=https://www.cdc.gov/hai/prevent/infection%25C2%25ADcontrol%25C2%25ADassessment%25C2%25ADtools.html.
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     TeamSTEPPS communication framework; \342\
---------------------------------------------------------------------------

    \342\ Agency for Healthcare Research and Quality. Team 
Strategies & Tools to Enhance Performance and Patient Safety. 
2023.Accessed on 10/24/2023. https://www.ahrq.gov/teamstepps-program/.
---------------------------------------------------------------------------

     Institute for Healthcare Improvement's Root Cause Analyses 
and Action (RCA\2\) resources; \343\
---------------------------------------------------------------------------

    \343\ Institute for Healthcare Improvement. Root Cause Analyses 
and Actions to Prevent Harm. 2019. Accessed on 10/24/2023. https://www.ihi.org/resources/tools/rca2-improving-root-cause-analyses-and-actions-prevent-harm.
---------------------------------------------------------------------------

     Shared Decision Making; \344\
---------------------------------------------------------------------------

    \344\ Agency for Healthcare Research and Quality. The SHARE 
Approach. 2014. Accessed on 10/24/2023. https://www.ahrq.gov/health-literacy/professional-training/shared-decision/.
---------------------------------------------------------------------------

     Tools to reduce central line infections; \345\
---------------------------------------------------------------------------

    \345\ Agency for Healthcare Research and Quality. Tools for 
Reducing Central Line-Associated Blood Stream Infections. 2023. 
Accessed on 10/24/2023. https://www.ahrq.gov/hai/clabsi-tools/.
---------------------------------------------------------------------------

     Utilization of data analytics;
     Performance improvement methodologies such as 
PlanDoStudyAct; \346\ and
---------------------------------------------------------------------------

    \346\ Institute for Healthcare Improvement. PlanDoStudyAct 
Worksheet. 2023. Accessed on 10/24/2023. https://www.ihi.org/resources/tools/plan-do-study-act-pdsa-worksheet.
---------------------------------------------------------------------------

     Ethical standards.
    To allow hospitals flexibility with respect to the curricula they 
have selected and the competencies that they have determined are most 
critical to develop within their hospital we have intentionally 
maintained flexibility to allow each hospital to develop their own 
competency assessments. We intend to monitor measure performance on the 
Patient Safety Structural measure and, if we identify that there is a 
need for additional guidance, provide it through our regular education 
and outreach efforts.
    The statement to which hospitals will attest for Domain 2 Statement 
E is: ``Our hospital has an action plan for workforce safety with 
improvement activities, metrics and trends that address issues such as 
slips/trips/falls prevention, safe patient handling, exposures, sharps 
injuries, violence prevention, fire/electrical safety, and 
psychological safety.'' We note that the list of potential workforce 
safety elements is intended to be a set of examples, and not a 
comprehensive list of items affecting workforce safety.
    The intent of the Patient Safety Structural measure is to identify 
hospitals that exemplify a culture of safety and leadership commitment 
to transparency, accountability, patient and family engagement, and 
continuous learning and improvement to advance our goal of achieving 
zero preventable harm. We have focused Domain 2 Statement E on 
workforce safety, instead of the broader ``safety for all'' recommended 
by the commenter because workforce safety is a precondition to 
advancing patient safety with a unified, total systems-based approach 
to eliminate harm to both patients and the workforce.\347\ We note that 
hospitals maintain the flexibility to address ``safety for all'' under 
this attestation, as long as they include a focus on workforce safety 
within their broader strategy for ``safety for all.''
---------------------------------------------------------------------------

    \347\ AHRQ. Safer Together: A National Action Plan to Advance 
Patient Safety. Available at: https://www.ahrq.gov/patient-safety/reports/safer-together.html.
---------------------------------------------------------------------------

    Comment: Some commenters stated that introducing competency 
assessments for Domain 2 Statement D would be costly and 
administratively burdensome.
    Response: We understand that hospitals that do not currently have a 
structure in place for assessing staff competency with respect to 
patient safety would need to develop and implement a plan for these 
assessments to attest ``yes'' to this statement. While we acknowledge 
that adopting this practice may entail costs for such hospitals, the 
value of implementing these assessments justifies the investment 
required. We reiterate that we do not expect all hospitals to achieve a 
score of five on the measure, especially in the first year. Hospitals 
that are not able to adopt these assessments can attest to the other 
domains as appropriate and receive a score of 0-4 without any financial 
penalties.
    Comment: A commenter expressed support for Domain 3 because of the 
importance of creating a culture of patient safety in improving patient 
safety. A few commenters supported Domain 3 Statement A and stated that 
safety culture surveys are another established tool to provide feedback 
to leaders. A commenter expressed support for Domain 3 Statement C 
because of the use of external benchmarks. A few commenters supported 
Domain 3 Statement E because learning collaboratives are a proven way 
to spread innovation and improve outcomes.
    Response: We thank the commenters for their support of Domain 3, 
specifically Domain 3 Statements A, C, and E. We appreciate the 
commenters' support for activities that would foster a culture of 
safety and continuous learning systems, including external 
benchmarking, using tools to provide feedback to leaders, and 
participation in learning collaboratives. We note that culture of 
safety surveys have been shown to provide feedback to leaders and, with 
a structured debrief, to have a positive effect on working patterns and 
safety culture.\348\ These activities support evidence-based practices 
that encourage hospital-wide approaches to addressing safety.
---------------------------------------------------------------------------

    \348\ Bethune RM, Ball S, Doran N, Harris M, Medina-Lara A, 
Fornasiero M, Hill M, Lang I, McGregor-Harper J, Sheaff R. How 
Safety Culture Surveys Influence the Quality and Safety of 
Healthcare Organisations. Cureus. 2023 Sep 3;15(9):e44603. doi: 
10.7759/cureus.44603. PMID: 37795070; PMCID: PMC10546949.
---------------------------------------------------------------------------

    Comment: A few commenters recommended updates to specific 
attestation statements within Domain 3. These recommendations were:
     Statement A: Emphasize that the culture of safety survey 
should include psychological safety.
     Statement B: Clarify whether an analysis needs to be 
completed for every event or cluster, and encourage hospitals to 
perform analyses for events that do not reach the threshold of serious 
safety events. A commenter also recommended taking an approach of

[[Page 69477]]

prospective evaluation when things go correctly.
     Statement C: Transition from benchmarking on external 
metrics to benchmarking on zero harm to encourage high performing 
hospitals to continue to improve. Reframe safety as the capacity to 
make things go right instead of a count of the number of things that go 
wrong.
     Statement D: Require all the practices listed because they 
are interconnected and rely on one another. Rephrase as 
``characteristics of a learning and improving organization'' because 
high reliability is a framework but some of the elements included in 
the list are improvement methods. Refine the high reliability practices 
as follows:
    ++ Require safety and process improvement huddles to start at the 
unit level, cover all shifts, and roll up on Monday--Friday with 
additional safety huddles on weekends;
    ++ Require hospital leaders to participate in weekly safety related 
rounding to provide sufficient visibility;
    ++ Encourage coaching leaders between the care delivery personnel 
and executives on leading for safety and process improvement;
    ++ Expand from training on team communication and collaboration to 
include other training elements (specifically, personal habits and 
skills to reduce lapse, cognitive bias training, and tools to reduce 
bias);
    ++ Reframe training on team communication and collaboration to 
incorporate patient safety principles into leadership training to avoid 
over reliance on online modules;
    ++ Add a statement regarding a standard daily process improvement 
method for every work;
    ++ Add a statement regarding leadership skills training in leading 
a team to 100 percent performance on safety practices; and
    ++ Refine the description of defined improvement methods to ensure 
that the method is appropriate to the problem(s) being solved.
     Statement E: Remove this statement because many large-
scale learning networks are not PSOs and the commenters state that 
sharing data with these networks would be a violation of the Patient 
Safety and Quality Improvement Act of 2005 (PSQIA) (Pub. L. 109-41) for 
hospitals that report to PSOs.
    Response: We note that Statement A in Domain 3 requires hospitals 
to attest to whether they ``conduct a hospital-wide culture of safety 
survey using a validated instrument annually.'' In the Attestation 
Guide for this measure, we provide two examples of validated 
instruments which hospitals can use to conduct this survey.\349\ The 
AHRQ Survey on Patient Safety Culture includes 10 composite measures, 
including ``Response to Error,'' ``Communication About Error,'' and 
``Communication Openness.'' \350\ The Safety Attitude Questionnaire 
includes statements such as, ``It is easy for personnel here to ask 
questions when there is something that they do not understand,'' ``In 
this clinical area, it is difficult to discuss errors,'' and ``Morale 
in this clinical area is high.'' \351\ Therefore, while neither of 
these survey instruments specifically have a domain related to 
psychological safety, key elements of psychological safety are embedded 
in the existing domains and questions. While hospitals may choose to 
use other surveys, we intend the Patient Safety Structural measure to 
maintain flexibility to allow each hospital to adopt practices that are 
most effective for its individual circumstances.
---------------------------------------------------------------------------

    \349\ Centers for Medicare & Medicaid Services, Patient Safety 
Structural Measure Attestation Guide, available at: https://qualitynet.cms.gov/inpatient/iqr/measures and https://qualitynet.cms.gov/pch/measures.
    \350\ AHRQ. Hospital Survey on Patient Safety Culture. Topics 
Covered by the SOPS Hospital Survey 2.0. Available at: https://www.ahrq.gov/sops/surveys/hospital/.
    \351\ Safety Attitudes: Frontline Perspectives from this Patient 
Care Area. Available at: https://www.uth.edu/chqs/assets/docs/saq-short-form.pdf.
---------------------------------------------------------------------------

    Domain 3 Statement B requires hospitals to attest whether they have 
a ``dedicated team that conducts event analysis of serious safety 
events using an evidence-based approach, such as the National Patient 
Safety Foundation's Root Cause Analysis and Action.'' This statement 
does not introduce limitations or requirements on the activities of the 
dedicated team; instead, it requires hospitals to attest ``yes'' or 
``no'' as to whether the hospital has such a team. We agree with 
commenters that it would be worthwhile for these teams to also evaluate 
events that do not reach the threshold of serious safety events and to 
seek best practices from situations in which everything went correctly. 
However, we did not identify this as a top priority for safety during 
our extensive literature review and interaction with patient safety 
experts, advocates, and patients and therefore we are not currently 
requiring hospitals to attest to whether their dedicated teams evaluate 
these situations. We will monitor performance on the Patient Safety 
Structural measure, and if we identify opportunities for additional 
improvements in patient safety structures, we will consider these in 
future refinements.
    As more hospitals begin to benchmark based on external metrics and 
use those metrics to identify best practices, we anticipate that 
national performance on patient safety will improve. This improved 
national performance would, in turn, lead to a higher standard of 
patient safety in the external metrics that hospitals are using for 
benchmarking. High performing hospitals could benchmark on zero harm in 
addition to analyzing their performance on external metrics to further 
drive quality improvement.
    Consistent with AHRQ guidance, we consider patient safety to refer 
to freedom from accidental or preventable injuries produced by medical 
care.\352\ This includes both proactively following practices that 
ensure positive outcomes as well as implementing practices or 
interventions that reduce the occurrence of preventable adverse 
events.\353\
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    \352\ AHRQ. PSNet. Glossary: Patient Safety. Available at: 
https://psnet.ahrq.gov/glossary-0?f%5B0%5D=glossary_az_content_title%3AP.
    \353\ AHRQ. PSNet. Glossary: Patient Safety. Available at: 
https://psnet.ahrq.gov/glossary-0?f%5B0%5D=glossary_az_content_title%3AP.
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    The high reliability practices listed under Domain 3 Statement D 
reflect practices of high reliability organizations. These are 
organizations or systems that operate in hazardous conditions but have 
fewer adverse events than comparable organizations. With respect to 
patient safety, high reliability organizations are considered to 
operate with nearly failure-free performance records, not simply better 
than average ones.\354\ Therefore, these practices are not inherently 
interrelated; they are practices that are associated with consistently 
high performance. While we agree that implementing all of the listed 
practices would advance a hospital's commitment to patient safety, for 
the purposes of the Patient Safety Structural measure, a hospital may 
attest ``yes'' to Domain 3 Statement D as long as it has implemented at 
least four of the listed practices. Because the items listed under 
Domain 3 Statement D are practices associated with high reliability 
organizations it is appropriate and accurate to refer to them as high 
reliability. High reliability hospitals achieve safety, quality, and 
efficiency goals by applying five key principles: (1) sensitivity to 
operations (that is, heightened awareness of the state of relevant 
systems and processes); (2)

[[Page 69478]]

reluctance to simplify (that is, acceptance that work is complex, with 
the potential to fail in new and unexpected ways); (3) preoccupation 
with failure (that is, to view near misses as opportunities to improve, 
rather than proof of success); (4) deference to expertise (that is, to 
value insights from staff with the most pertinent safety knowledge over 
those with greater seniority); and (5) practicing resilience (that is, 
to prioritize emergency training for many unlikely, but possible, 
system failures).\355\ The listed items are consistent with the 
practices of these organizations and thus reflect appropriate and 
effective high reliability practices. We agree with commenters that a 
leadership process improvement method for every work unit and 
leadership skills training in leading a team to 100 percent performance 
are both practices with the potential to further improve a hospital's 
culture of safety; however, we did not identify them as consistent 
practices across organizations identified as high reliability 
organizations.
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    \354\ AHRQ. PSNet. Glossary: High Reliability Organization. 
Available at: https://psnet.ahrq.gov/glossary-0?f%5B0%5D=glossary_az_content_title%3AP.
    \355\ Centers for Medicare & Medicaid Services, Patient Safety 
Structural Measure Attestation Guide, available at: https://qualitynet.cms.gov/inpatient/iqr/measures and https://qualitynet.cms.gov/pch/measures. https://qualitynet.cms.gov/pch/measures.
---------------------------------------------------------------------------

    With respect to the concern that by submitting data to a PSO, 
hospitals would no longer be able to work with another large-scale 
learning network, we disagree. Some information becomes patient safety 
work product (PSWP) protected under the PSQIA when that information is 
submitted to a PSO. We refer readers to 42 CFR 3.20 for information 
regarding what constitutes PSWP. Depending on the individual 
circumstances of a hospital that chooses to work with both a PSO and a 
large-scale learning network that is not a PSO, the hospital could 
disclose other, non-PSWP information to the learning network or 
disclose non-identifiable PSWP consistent with its obligations under 
the PSQIA. Therefore, we are not modifying Domain 3 Statement E because 
there is sufficient flexibility for hospitals to work with large-scale 
learning networks of their choosing.
    Due to commenters' concerns regarding Domain 4 Statement B, 
discussed in detail below, we are modifying the attestation in Domain 4 
Statement B, to the following, ``Our hospital voluntarily works with a 
Patient Safety Organization listed by the Agency for Healthcare 
Research and Quality (AHRQ) \356\ to carry out patient safety 
activities as described in 42 CFR 3.20, such as, but not limited to, 
the collection and analysis of patient safety work product, 
dissemination of information such as best practices, encouraging a 
culture of safety, or activities related to the operation of a patient 
safety evaluation system.'' A hospital could positively attest to this 
revised statement even if it chooses to work with a large-scale 
learning network that is not a PSO to analyze and understand patient 
safety events and with a PSO for other patient safety activities. We 
note that if a hospital chooses to work with a large-scale learning 
network other than a PSO, information disclosed to that network does 
not become PSWP and is not subject to the confidentiality and privilege 
protections established by the PSQIA.
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    \356\ Agency for Healthcare Research and Quality. Federally-
Listed Patient Safety Organizations (PSOs). Retrieved January 5, 
2024, from https://pso.ahrq.gov/pso/listed?f%5B0%5D=resources_provided%3A2.
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    Comment: A commenter recommended creating a sense of urgency to 
improve workforce wellbeing because many staff do not feel heard and an 
annual survey, as described in Domain 3 Statement A, would not improve 
that.
    Response: While we agree that an annual survey, on its own, may not 
be sufficient to lead to a culture that encourages staff to express 
their concerns, this is not the only attestation in the Patient Safety 
Structural measure that addresses workforce safety and workforce 
wellbeing. Specifically, Domain 2 Attestation E focuses on the 
development of an action plan for workforce safety, and includes 
psychological safety as a potential area for improvement. Additionally, 
a positive attestation on Domain 2 Attestation C would require policies 
and protocols to cultivate a ``just culture,'' the cultivation of which 
can create an atmosphere in which there is a shared belief that it is 
permissible to express ideas, ask questions, and admit mistakes without 
a fear of negative consequences.\357\ An atmosphere in which it is 
permissible to express ideas and ask questions would also be an 
atmosphere which would improve staff feelings of being heard.
---------------------------------------------------------------------------

    \357\ Gallo, A. What Is Psychological Safety. Harvard Business 
Review. Available at: https://hbr.org/2023/02/what-is-psychological-safety.
---------------------------------------------------------------------------

    Comment: A few commenters recommended establishing a method to 
ensure that use of dashboards and benchmarking in Domain 3 Statement C 
does not allow staff to overlook harm, including potential harm, 
because the specific harm was not included on the dashboard.
    Response: We agree with commenters that it is important that staff 
does not overlook harm or potential harm that does not meet the 
threshold or criteria for specific dashboards. We note that the Patient 
Safety Structural measure is comprised of interrelated domains and 
attestations. Therefore, while harm or potential harm may not be 
identified because of its presence on a specific dashboard, activities 
to support the other attestations (including having a dedicated team 
that conducts event analysis, adopting high reliability practices, 
participating in large-scale learning networks, and engaging patients 
and their families as co-producers of safety and health) could minimize 
the likelihood that harm or potential harm is overlooked.
    Comment: A few commenters recommended providing information on the 
purpose and activities of a huddle, including clarifying that it is not 
just to encourage situational awareness but also to identify ongoing 
risk to patients and to engage leadership support, as needed, to 
improve consistent attestation for Domain 3 Statement D.
    Response: The first high reliability practice identified in Domain 
3 Statement D describes ``[t]iered and escalating (e.g., unit, 
department, facility, system) safety huddles at least 5 days a week, 
with 1 day being a weekend, that include key clinical and non-clinical 
(e.g., lab, housekeeping, security) units and leaders, with a method in 
place for follow-up on issues identified.'' In the Attestation Guide, 
we provide further information on the purpose and structure of a 
``tiered and escalating huddle'' system including clarifying that the 
purpose is to identify potential risk and engage leadership support. We 
specifically state that ```tiered and escalating huddle' system 
involves a series of brief, focused conversations, typically daily, 
that rapidly identify and escalate safety, quality, and operational 
issues from a broad array of frontline staff to a focused group of 
senior leaders.'' \358\
---------------------------------------------------------------------------

    \358\ Centers for Medicare & Medicaid Services, Patient Safety 
Structural Measure Attestation Guide, available at: https://qualitynet.cms.gov/inpatient/iqr/measures and https://qualitynet.cms.gov/pch/measures.
---------------------------------------------------------------------------

    Comment: A few commenters recommended providing additional guidance 
on how to use electronic medical records (EMRs) to identify and track 
safety events for the data infrastructure-related high reliability 
practice within Domain 3 Statement D.
    Response: While we agree with commenters that examples can be 
meaningful and provide hospitals with information to help adopt these

[[Page 69479]]

evidence-based practices, we also intend the Patient Safety Structural 
measure to maintain flexibility to allow each hospital to adopt 
practices that are most effective for its individual circumstances. 
Specifically, with respect to the use of EMRs to identify and track 
safety events, flexibility is appropriate so each hospital can work 
with its EMR vendor to establish the best methods for using the 
hospital's system to identify and track safety events. We note as an 
example that EMR-based tracking of healthcare-associated infections and 
other harms that hospitals are already collecting for reporting to the 
CDC's National Healthcare Safety Network or electronic clinical quality 
measures (eCQMs) used in the Hospital IQR and Promoting 
Interoperability Programs, respectively, could be part of an electronic 
data infrastructure to measure safety. Hospitals could similarly 
identify and track additional safety events that reflect the hospital's 
prioritized areas of focus and improvement.
    Comment: A commenter recommended clarifying that hospital staff are 
not responsible for device and equipment selection and therefore the 
high reliability practice of incorporating human factors engineering in 
device, equipment, and process design listed within Domain 3 Statement 
D would be more appropriate at the board level.
    Response: We note that the referenced high reliability practice in 
Domain 3 Statement D describes ``[t]he use of human factors engineering 
principles in selection and design of devices, equipment, and 
processes.'' We agree with commenters that hospital staff are usually 
not responsible for selecting or designing devices and equipment at the 
hospital. We did not specify who would be responsible for each of these 
activities because it may vary from hospital to hospital and the same 
employees may not be responsible for all these activities. For example, 
a senior leader may influence device and equipment purchases, while a 
frontline supervisor may be responsible for designing operational 
processes.
    Comment: A commenter stated that for Domain 3 Statement D it is not 
feasible for safety council leaders to round monthly on all units. This 
commenter also expressed the concern that while conducting rounds, if 
leaders specifically focus on safety, these leaders may overlook other 
potential concerns.
    Response: With regard to the high reliability practice in Domain 3 
Statement D on whether ``[h]ospital leaders participate in monthly 
rounding for safety on all units, with C-suite executives rounding at 
least quarterly, with a method in place for follow-up on issues 
identified,'' we understand that having each hospital leader round in 
every unit monthly would not be feasible for most hospitals. We have 
retained flexibility for hospitals to identify which leaders round in 
each unit, as long as leaders round in every unit and C-suite 
executives round at least quarterly. We also note that attesting to 
this high reliability practice would not require that these rounds be 
exclusive to safety and would recommend including other practices or 
concerns as appropriate.
    Comment: A commenter recommended removing practices that are 
already established as common practices from Domain 3 Statement D to 
further advance safety, so that hospitals are not rewarded for standard 
practices.
    Response: We reiterate that the Patient Safety Structural measure 
was developed with input from national experts and through this input 
we determined that these practices are highly indicative of a culture 
of safety and are therefore important to include, regardless of their 
current prevalence. We further note that to positively attest to Domain 
3 Statement D hospitals must implement a minimum of four of these 
practices, which will further encourage hospitals to adopt practices 
which are less well established.
    Comment: Several commenters expressed support for Domain 4 
Statement B. These commenters stated that this would incentivize 
hospitals and PSOs to engage in an activity that supports analysis of 
harm events. A commenter stated that this attestation would support the 
legislative purpose of the PSO program to become a national learning 
system. A commenter stated that use of the Network of Patient Safety 
Databases (NPSD) is crucial and that the potential increase in data 
submissions would improve inter-hospital collaboration on patient 
safety.
    Response: We thank the commenters for their support of Domain 4 
Statement B. We agree that hospitals voluntarily working with PSOs to 
track and report patient harm and safety events can be an important and 
effective activity to help analyze and learn from prior events. We also 
agree that increased use of the NPSD may further facilitate 
collaboration across hospitals and support the full potential of the 
important role that PSOs can play. While we continue to believe that 
working with a PSO that shares information with the NPSD is an 
important goal for hospitals to strive towards, we recognize that there 
are feasibility limitations that would make it difficult for most 
hospitals to positively attest yes to this domain at this time. 
Therefore, as discussed below, we are modifying Domain 4 Statement B to 
read, ``Our hospital voluntarily works with a Patient Safety 
Organization listed by the Agency for Healthcare Research and Quality 
(AHRQ) \359\ to carry out patient safety activities as described in 42 
CFR 3.20, such as, but not limited to, the collection and analysis of 
patient safety work product, dissemination of information such as best 
practices, encouraging a culture of safety, or activities related to 
the operation of a patient safety evaluation system.''
---------------------------------------------------------------------------

    \359\ Agency for Healthcare Research and Quality. Federally-
Listed Patient Safety Organizations (PSOs). Retrieved January 5, 
2024, from https://pso.ahrq.gov/pso/listed?f%5B0%5D=resources_provided%3A2.
---------------------------------------------------------------------------

    Comment: A few commenters expressed support for Domain 4 Statement 
D. Some of these commenters stated that it would be particularly 
important for patients experiencing harm to know there is a defined 
communication and resolution program in place. Another commenter noted 
that communication and resolution programs interrelate to the elements 
of the other domains, underscoring the importance of establishing a 
defined communication and resolution program. Other commenters stated a 
communication and resolution program would benefit healthcare personnel 
who are currently discouraged from discussing patient harm with 
patients. A commenter stated that there is a growing body of evidence 
to support Domain 4 Statement D and, as such, there are support 
materials available for hospitals seeking to implement communication 
and resolution programs.
    Response: We thank the commenters for their support of Domain 4 
Statement D. We agree that well-defined communications and resolution 
programs are critical for continued engagement and support of patients 
who experienced harm and would encourage healthcare staff to have 
transparent conversations with patients. Evidence-based resources, like 
AHRQ's Communication and Optimal Resolution (CANDOR) toolkit, are 
helpful tools for hospitals seeking to improve and implement 
communication and resolution programs.
    Comment: A few commenters recommended updates to specific 
attestation statements within Domain 4. These recommendations were as 
follows:
     Statement B: Remove the requirement that the PSO reports 
to NPSD and instead work with AHRQ to

[[Page 69480]]

increase the number of PSOs that participate in the NPSD prior to 
including this attestation. A commenter stated that their state 
requires reporting to a state-designated PSO, but not all state-
designated PSOs report to the NPSD so some hospitals in their state 
would be unable to attest positively to this statement. Replace the 
phrase ``voluntary reporting'' with ``voluntary aggregate reporting'' 
to demonstrate that data reported to the NPSD would be non-
identifiable.
     Statement C: Require hospitals to have patient safety 
metrics available upon request instead of publishing them to reduce 
operational complexity.
    Response: We understand that currently there are only a few PSOs 
that participate in voluntary reporting to the NPSD and agree with 
commenters that it would be appropriate for HHS to seek to increase 
that number. Because of concerns that very few hospitals would be able 
to positively attest to this statement, and that hospitals may be 
unable to improve performance by engaging with PSOs that voluntarily 
report to the NPSD because of insufficient numbers of such PSOs, we are 
modifying the attestation in Domain 4 Statement B to remove the portion 
of the attestation related to voluntary reporting to the NPSD. The 
attestation will thus focus instead on the beneficial activities 
possible through engagement with a PSO. Through this revision, a 
hospital that works with a PSO, including a state-designated PSO, from 
AHRQ's published list of PSOs \360\ to carry out patient safety 
activities as described in 42 CFR 3.20 will be able to positively 
attest to this statement.
---------------------------------------------------------------------------

    \360\ AHRQ's published list of PSOs is available at: https://pso.ahrq.gov/pso/listed.
---------------------------------------------------------------------------

    Commenters' concerns that data submitted by PSOs to the NPSD would 
be identifiable are misplaced. Before any PSWP is shared with the NPSD, 
a PSO submits the data to the PSO Privacy Protection Center \361\ to 
ensure all identifying information has been removed and the data are 
aggregated before transferring it to the NPSD. There is no cost to PSOs 
for these privacy protection services. Nonetheless, the revisions to 
Domain 4 Statement B mean that a hospital need not attest that its PSO 
voluntarily submits data to the NPSD. Although we are modifying Domain 
4 Statement B, we continue to encourage PSOs to voluntarily report 
serious safety events, near misses, and precursor events to the NPSD to 
increase the amount of nationally representative safety data for 
research and analyses (analogous to the National Transportation Safety 
Board's safety research of US civil aviation accident and injury data 
\362\).
---------------------------------------------------------------------------

    \361\ For additional information on the PSO Privacy Protection 
Center, we refer readers to https://www.psoppc.org/psoppc_web/.
    \362\ https://www.ntsb.gov/safety/Pages/default.aspx.
---------------------------------------------------------------------------

    With respect to the commenters' recommendation that we update 
Statement C to allow hospitals to make patient safety metrics available 
upon request instead of publishing them, we understand that hospitals 
seek to balance transparency and operational complexity. By 
establishing workflows to report and present safety data, hospitals 
establish an additional pathway to ensure continuing focus on patient 
safety. Furthermore, by reporting metrics to all clinical and non-
clinical staff and making these data public in hospital units, 
hospitals provide the opportunity for patients to have access to these 
important data without the potential for fear of reprisal that may be 
associated with having to request these data from hospital personnel.
    Comment: A commenter stated that under current regulations there 
are three options for patient safety improvement: (1) join a PSO; (2) 
create a PSO; or (3) use other non-PSO channels for similar functions. 
The commenter expressed concern that Domain 4 Statement B allows less 
flexibility without demonstrating that working with a PSO is preferable 
to other non-PSO channels.
    Response: We believe that the commenter is referring to the 
Medicare CoP for hospitals at 42 CFR 482.21 that requires the 
development, implementation, and maintenance of an effective, ongoing, 
hospital-wide, data-driven quality assessment and performance 
improvement program. The Patient Safety Structural measure does not 
make any changes to the requirements at 42 CFR 482.21 nor does it 
affect the voluntary nature of a hospital working with a PSO, creating 
a PSO, or choosing to not work with a PSO. While Domain 4 Statement B 
is intended to encourage hospitals to work with a PSO because evidence 
shows that most hospitals working with PSOs say that this work has 
helped them understand the causes of patient safety events and prevent 
future patient safety events,\363\ it does not mandate that all 
hospitals must work with a PSO, only to attest ``yes'' or ``no'' as to 
whether or not they work with a PSO. We note there is no financial 
penalty for attesting ``no''.
---------------------------------------------------------------------------

    \363\ Strategies to Improve Patient Safety: Final Report to 
Congress Required by the Patient Safety and Quality Improvement Act 
of 2005. Rockville, MD: Agency for Healthcare Research and Quality; 
December 2021. AHRQ Publication No. 22-0009. https://pso.ahrq.gov/sites/default/files/wysiwyg/strategies-improve-patient-safety-final.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters stated that the attestation statement in 
Domain 4 Statement B on whether a hospital reports serious safety 
events, near misses, and precursor events to a PSO that participates in 
voluntary reporting to the NPSD mandates hospitals to report to PSOs in 
violation of the PSQIA.
    Response: To avoid the risk of hospitals unintentionally disclosing 
PSWP, as discussed previously, we are modifying the Domain 4 Statement 
B attestation to more broadly describe working with a PSO. The modified 
statement, ``Our hospital voluntarily works with a Patient Safety 
Organization listed by the Agency for Healthcare Research and Quality 
(AHRQ) \364\ to carry out patient safety activities as described in 42 
CFR 3.20, such as, but not limited to, the collection and analysis of 
patient safety work product, dissemination of information such as best 
practices, encouraging a culture of safety, or activities related to 
the operation of a patient safety evaluation system,'' continues to 
encourage hospitals to work with PSOs without specifying any reporting 
of serious safety events, near misses, or precursor events to a PSO. 
Working with a PSO is a practice consistent with a culture of safety 
because evidence shows that most hospitals working with PSOs say that 
this work has helped them understand the causes of patient safety 
events and prevent future patient safety events.\365\ However, the 
modified statement does not require hospitals to attest whether they 
report patient safety event information to PSOs.
---------------------------------------------------------------------------

    \364\ Agency for Healthcare Research and Quality. Federally-
Listed Patient Safety Organizations (PSOs). Retrieved January 5, 
2024, from https://pso.ahrq.gov/pso/listed?f%5B0%5D=resources_provided%3A2.
    \365\ Office of the Inspector General. Patient Safety 
Organizations: Hospital Participation, Value, and Challenges. 
September 2019. Available at: https://oig.hhs.gov/oei/reports/oei-01-17-00420.pdf.
---------------------------------------------------------------------------

    Comment: Some of the commenters who were concerned about the 
attestation in Domain 4 Statement B expressed concern that adopting a 
measure with this attestation into CMS quality reporting programs would 
make reporting to a PSO mandatory by penalizing them and impacting 
hospital payment. Some of these commenters also expressed concern that 
hospitals would be penalized for not achieving a perfect score.
    Response: Domain 4 Statement B encourages hospitals to report to a 
PSO as this is an indicator of a hospital's

[[Page 69481]]

efforts to improve the quality of its care, as described elsewhere in 
this rule. Nonetheless, the revisions we have made to the statement 
provide hospitals with additional flexibility regarding how they work 
with PSOs and does not require that a hospital report PSWP to a PSO to 
be completed. No hospital is required by the Hospital IQR and PCHQR 
Programs to report to a PSO, nor is a hospital's Medicare payment 
affected by whether a hospital responds to Domain 4 Statement B in the 
affirmative or the negative. The Hospital IQR Program is a pay-for-
reporting program, which means that hospitals that report the required 
measure data in accordance with the form, manner, and timing policies 
specified by the Secretary are not subject to a financial penalty under 
this program. A hospital's performance on the measure, which for the 
Patient Safety Structural measure is a score from 0 to 5 points, has no 
impact on a hospital's Medicare reimbursement. Therefore, hospitals 
that choose not to work with a PSO can attest ``no'' to Domain 4 and 
can earn up to 4 points on the measure; there is no financial penalty 
for attesting ``no''. We note that the PCHQR Program is a quality 
reporting program that does not have a financial penalty associated 
with it.
    As we noted, this measure is intended to determine the level at 
which hospitals are performing these identified best practices and to 
identify opportunities for improvement in structural safety practices. 
Like other quality measures, we would not expect all hospitals to 
achieve a perfect or maximum score on the measure, especially during 
the initial years of using the measure in these programs. We proposed 
this measure for the Hospital IQR and PCHQR Programs because of the 
identified gaps and variation in the adoption of these safety practices 
across hospitals (89 FR 36285). We do want to encourage hospitals to 
improve their scores on measures over time as a fundamental goal to 
improve the quality of care. For the Patient Safety Structural measure, 
improvement on the measure could include hospitals working with PSOs if 
not already doing so. Furthermore, we note that the TEP included 
hospital representatives and clinicians who did not express concern 
that this statement created an implicit mandate for hospitals to report 
patient safety event information to PSOs.\366\
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    \366\ Yale New Haven Health Services Corporation--Center for 
Outcomes Research and Evaluation. Summary of Technical Expert Panel 
(TEP) Meetings Patient Safety Structural Measure (PSSM). Available 
at: https://mmshub.cms.gov/sites/default/files/PSSMTEP-Summary-Report-202306.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters expressed concern that the attestation in 
Domain 4 Statement B would make reporting to a PSO mandatory through 
impacting hospital reputations and that this would violate the PSQIA.
    Response: As modified, a hospital could respond to Domain 4 
Statement B in the affirmative without reporting serious safety events, 
near misses, or precursor events to a PSO so long as it performs other 
patient safety activities with a PSO. While we understand commenters' 
concerns about the potential negative impact on a hospital's reputation 
associated with public display of measure performance information of a 
score less than five out of five points, or a score that is less than 
other hospitals, we note the fundamental goal of both the Hospital IQR 
Program and the PCHQR Program is to drive quality improvement through 
measurement and transparency in the public display of quality 
information. Section 1886(b)(3)(B)(viii)(VII) of the Act and section 
1866(k)(4) of the Act require the Secretary to report quality measures 
used in the Hospital IQR Program and the PCHQR Program, respectively, 
on a CMS website (currently, the Compare tool on Medicare.gov). This 
public reporting of quality measures gives patients, consumers, and 
other interested parties access to important information to make 
informed healthcare decisions.
    For the Patient Safety Structural measure, we would publicly report 
each hospital's score for this measure, which would range from 0 to 5 
points, on the Compare tool. We would also publicly report the national 
average score and the average score in the hospital's state. Therefore, 
while public reporting of this score could encourage hospitals to work 
with a PSO if they are not already working with one (as well as 
encourage improvement upon the other safety practices asked about in 
the measure), the Patient Safety Structural measure does not require 
hospitals to achieve any of the listed attestations.
    Comment: A commenter stated their belief that including this 
attestation in the domain titled ``Accountability and Transparency'' 
indicates reporting to the PSO is being used for regulatory 
accountability in violation of the PSQIA which blocks federal oversight 
agencies from using PSOs as a federal reporting program.
    Response: We disagree with the commenters' characterization that 
the title of Domain 4 or the attestation in Statement B adds a 
regulatory accountability component beyond the statutory authorities of 
the Hospital IQR Program and the PCHQR Program or the PSQIA, or that a 
measure asking hospitals about reporting patient safety data to a PSO 
creates a federal PSO reporting program. The title of this domain was 
intended to emphasize the importance of accountability and transparency 
related to a broad range of a hospital's internal and external safety 
practices. We have no intention to establish a federal PSO reporting 
program through this or any other quality measure. Furthermore, as 
modified, a hospital could respond to Domain 4 Statement B in the 
affirmative without reporting serious safety events, near misses, or 
precursor events to a PSO so long as it performs other patient safety 
activities with a PSO.
    Comment: Some commenters stated their concern that Domain 4 
Statement B would compel PSOs that do not currently report to the NPSD 
to begin doing so, and that this amounts to governmental interference 
with private sector business operations. These commenters further 
stated that the government does not have the right to mandate 
government collection of the proprietary data collected by PSOs.
    Response: This measure does not affect the voluntary nature of a 
hospital working with a PSO, nor does it require a hospital to work 
with a specific PSO. The Patient Safety Structural measure seeks to 
evaluate and report information about practices that hospitals have in 
place which demonstrate a structure, culture, and leadership commitment 
that prioritizes safety and to encourage adoption of these practices. 
Nonetheless, we have modified Domain 4 Statement B to remove references 
to whether the hospital reports PSWP to a PSO and whether the PSO 
voluntarily reports information to the NPSD.
    Comment: Some commenters stated that CMS did not provide scientific 
evidence that this measure would improve the quality of hospital care. 
Some commenters specifically stated that CMS did not provide evidence 
that reporting to a PSO which reports to the NPSD is correlated with 
improved quality of hospital care. Some commenters expressed concern 
that CMS did not explain why participation in a PSO which reports to 
NPSD is preferential to participation in any other PSO.
    Response: The systems-level approach to patient safety maintains 
that errors and accidents in medical care are a reflection of system-
level failures, rather than failings on the part of

[[Page 69482]]

individuals.\367\ There is a strong alignment among patient safety 
experts to shift to a more holistic, proactive, systems-based approach 
to patient safety.368 369 370 371 372 373 This Patient 
Safety Structural measure supports and encourages this shift to a 
holistic, proactive, systems-based approach to patient safety by 
highlighting evidence-based practices that hospitals can implement to 
establish such an approach. We refer readers to the Background section 
of this discussion for the details of the patient safety guidelines and 
literature that informed this measure. Furthermore, evidence shows that 
most hospitals working with PSOs say that this work has helped them 
understand the causes of patient safety events and prevent future 
patient safety events.\374\ There are many ways in which PSOs engage 
their member hospitals to support improvement in patient safety. As an 
example, PSOs can offer root-cause analyses of specific events, or 
analysis of data aggregated across hospitals and other non-hospital 
providers. Through these analyses PSOs can show members how their 
safety compares to that of their peers. Among hospitals that receive 
that service, 96 percent of hospitals find the service helpful for 
improving quality and safety.\375\ By encouraging hospitals to work 
with PSOs if they do not already, we can expand the use of this 
valuable patient safety resource and improve quality at hospitals which 
do not currently use these services. As discussed, we are modifying the 
Domain 4 Statement B attestation to no longer include specific 
references to the reporting of PSWP to a PSO or references to PSO 
reporting to the NPSD. Still, we continue to encourage PSOs to 
voluntarily submit data to the NPSD. Nonidentifiable PSWP data reported 
to the NPSD can inform research that further improves the quality of 
clinical care while ensuring patient and provider confidentiality.\376\ 
Nationally representative safety data is vital to identifying and 
improving patient safety practices and driving innovation in quality 
improvement. It would also allow for the development of best practices 
which could then be implemented at hospitals to further improve patient 
safety and quality.
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    \367\ Patient Safety Network. Systems Approach. Agency for 
Healthcare Research and Quality. Published September 7, 2019. 
https://psnet.ahrq.gov/primer/systems-approach.
    \368\ National Patient Safety Foundation. Free from Harm: 
Accelerating Patient Safety Improvement Fifteen Years after To Err 
Is Human. Boston, MA: National Patient Safety Foundation; 2015.
    \369\ Gandhi, T.K., Feeley, D., & Schummers, D. (2020b). Zero 
Harm in Health Care. NEJM Catalyst, 1(2). https://doi.org/10.1056/cat.19.1137.
    \370\ Pronovost, P. Transforming patient safety: A sector-wide 
systems approach. Published January 8, 2015.
    \371\ Frankel A, Haraden C, Federico F, Lenoci-Edwards J. A 
Framework for Safe, Reliable, and Effective Care. White Paper. 
Cambridge, MA: Institute for Healthcare Improvement and Safe & 
Reliable Healthcare; 2017. (Available on https://www.ihi.org/resources/white-papers/framework-safe-reliable-and-effective-care).
    \372\ American College of Healthcare Executives and IHI/NPSF 
Lucian Leape Institute. Leading a Culture of Safety: A Blueprint for 
Success. Boston, MA: American College of Healthcare Executives and 
Institute for Healthcare Improvement; 2017.
    \373\ National Steering Committee for Patient Safety. Safer 
Together: A National Action Plan to Advance Patient Safety. Boston, 
Massachusetts: Institute for Healthcare Improvement; 2020. 
(Available at www.ihi.org/SafetyActionPlan).
    \374\ Office of the Inspector General. Patient Safety 
Organizations: Hospital Participation, Value, and Challenges. 
September 2019. Available at: https://oig.hhs.gov/oei/reports/oei-01-17-00420.pdf.
    \375\ Office of the Inspector General. Patient Safety 
Organizations: Hospital Participation, Value, and Challenges. 
September 2019. Available at: https://oig.hhs.gov/oei/reports/oei-01-17-00420.pdf.
    \376\ Strategies to Improve Patient Safety: Final Report to 
Congress Required by the Patient Safety and Quality Improvement Act 
of 2005. Rockville, MD: Agency for Healthcare Research and Quality; 
December 2021. AHRQ Publication No. 22-0009. https://pso.ahrq.gov/sites/default/files/wysiwyg/strategies-improve-patient-safety-final.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters expressed their concern that the measure 
would penalize hospitals for using PSOs that choose not to report to 
the NPSD. Some commenters also stated that this measure would limit 
membership to only certain PSOs which is not consistent with 
Congressional intent in establishing PSOs through the PSQIA.
    Response: As discussed previously, we are modifying the Domain 4 
Statement B attestation to no longer include references to PSO 
reporting to the NPSD, which will more broadly encourage hospitals to 
work with PSOs if they are not already doing so.
    Comment: A commenter stated that AHRQ is only authorized to collect 
nonidentifiable PSWP for the NPSD.
    Response: We agree that AHRQ is only authorized to share 
nonidentifiable PSWP through the NPSD. Specifically, before any PSWP is 
shared with the NPSD, a PSO submits the data to the PSO Privacy 
Protection Center \377\ to ensure all identifying information has been 
removed and the data are aggregated before transferring it to the NPSD. 
There is no cost to PSOs for these privacy protection services. We note 
that while we continue to encourage PSOs to voluntarily report PSWP to 
the NPSD, we have removed the reference to the NPSD from Domain 4 
Statement B.
---------------------------------------------------------------------------

    \377\ For additional information on the PSO Privacy Protection 
Center, we refer readers to https://www.psoppc.org/psoppc_web/.
---------------------------------------------------------------------------

    Comment: A commenter stated that this measure would make hospital 
reimbursement dependent on the actions of organizations outside the 
control of the hospital, specifically PSOs.
    Response: We disagree that this measure would make hospital 
reimbursement dependent on the actions of PSOs. The only effect this 
measure would have on hospital reimbursement from CMS would be if a 
hospital participating in the Hospital IQR Program chose not to report 
on the measure at all or did not submit the measure consistent with the 
form, manner, and timing specified.
    Comment: A few commenters expressed concern that mandatory 
reporting to PSOs for accountability may stifle voluntary exchange of 
patient safety information which could have a detrimental effect on 
innovation and learning systems. These commenters also expressed 
concern that if the measure requires reporting of patient safety data 
to the federal government, it may discourage hospitals from working 
with PSOs because of concerns that sensitive hospital information could 
be used in quality or accountability programs. These commenters stated 
that discouraging hospitals from working with PSOs would, in turn, 
limit the ability of PSOs and hospitals to improve healthcare quality 
and safety.
    Response: As discussed previously, we have modified the measure in 
a way that increases flexibility regarding hospital relationships with 
PSOs. We do agree with the commenter that an important element of the 
PSQIA is the voluntary exchange of patient safety information to 
support innovation and contribute to a learning health system aimed at 
reducing preventable harms. In light of PSQIA data protections, 
including the treatment of PSWP as privileged and confidential, we 
disagree that healthcare providers would stop working with PSOs if more 
PSOs voluntarily submit patient safety events to the NPSD. Furthermore, 
increased aggregation and analysis of more comprehensive, nationally 
representative patient safety data in the NPSD, which is non-
identifiable, could potentially help accelerate innovation and the 
identification of potential solutions to improve safety. The use of 
quality measures focused on safety, including the Patient Safety 
Structural measure, complements the important collaboration among 
hospitals and PSOs and helps set national priorities for safety in 
hospitals.
    Comment: Some commenters expressed concern regarding which entities 
voluntarily report to the NPSD.

[[Page 69483]]

Some of these commenters stated that many PSOs do not currently report 
patient safety events to the NPSD, and that many PSOs do not collect 
patient safety event data. These commenters were concerned that adding 
this attestation may compel PSOs to change their business models to 
avoid going out of business if hospitals select PSOs that do report to 
NPSD. Some commenters stated that some hospitals work with other 
entities that are not PSOs, such as insurers or Accountable Care 
Organizations, for analyzing data and developing best practices to 
ensure patient safety. Because insurers, among others, are not allowed 
to form PSOs, hospitals that work with insurers for risk management 
would not be able to have their data reported to the NPSD by their risk 
management organization. Other commenters stated that organizations 
other than PSOs, including healthcare providers, can report to the NPSD 
and adoption of this measure may limit hospital choices for how to 
report data to the NPSD if they choose to.
    Response: We recognize and applaud hospitals that have developed a 
multi-pronged approach for improving patient safety, including working 
with PSOs whether or not such PSOs voluntarily report to the NPSD, as 
well as working with other organizations and entities that are not 
PSOs, or also large-scale learning networks as described in Domain 3 
Statement E. We also understand that while some PSOs may focus on 
patient safety activities such as development and dissemination of best 
practices, all PSOs are required to collect and analyze PSWP.\378\ 
Because evidence shows that most hospitals working with PSOs say that 
this work has helped them understand the causes of patient safety 
events and prevent future patient safety events,\379\ we proposed to 
include in the measure an attestation statement specifically regarding 
the reporting of patient safety events to PSOs. Due to concerns about 
the availability of PSOs which report to the NPSD and to avoid the risk 
of hospitals unintentionally disclosing PSWP, we have modified the 
attestation in Domain 4 Statement B to allow a more flexible approach 
to PSO engagement.
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    \378\ 42 U.S.C. 299b-21(5)(B), 299b-24(a)(1)(A) and (2)(A).
    \379\ Strategies to Improve Patient Safety: Final Report to 
Congress Required by the Patient Safety and Quality Improvement Act 
of 2005. Rockville, MD: Agency for Healthcare Research and Quality; 
December 2021. AHRQ Publication No. 22-0009. https://pso.ahrq.gov/sites/default/files/wysiwyg/strategies-improve-patient-safety-final.pdf.
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    Comment: Some commenters also expressed concern that there is no 
standardized definition for the terms used in this measure 
(specifically, ``serious patient safety event'', ``precursor event'', 
and ``near miss''), which the commenters stated would affect how 
hospitals and PSOs interpret these terms and therefore make the measure 
less effective.
    Response: We intentionally left these terms undefined within this 
measure to maintain flexibility to allow each hospital to adopt 
practices that are most effective for its individual circumstances. 
However, Domain 4 Statement B has been modified and no longer includes 
these terms. Domain 4 Statement B now instead refers to patient safety 
activities as described in 42 CFR 3.20, such as, but not limited to, 
the collection and analysis of patient safety work product, 
dissemination of information such as best practices, encouraging a 
culture of safety, or activities related to the operation of a patient 
safety evaluation system. We made this change in recognition of the 
range of activities PSOs may engage in and to improve the clarity of 
the measure.
    Comment: Some commenters expressed concern that the measure would 
require hospitals and PSOs to use AHRQ's Common Formats to report 
patient safety data to the NPSD, and that this would disrupt existing 
data systems, including the risk of no longer being able to conduct 
long-term trend analyses, as well as add substantial time and expense 
for PSOs.
    Response: The modified Domain 4 Statement B no longer references 
submission of data to the NPSD, which will provide additional 
flexibility for hospitals and PSOs to establish reporting formats that 
are most effective for their relationships. Use of the AHRQ Common 
Formats is voluntary and available as a potential tool for hospitals 
(whether they work with a PSO or not). Common Formats for Event 
Reporting are presently required for submitting data to the PSO Privacy 
Protection Center for inclusion in the NPSD.\380\ The use of these 
formats improves the comparability of data across PSOs and ensures 
privacy protection.
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    \380\ AHRQ. AHRQ Common Formats for Event Reporting--Hospital 
Version 2.0a. Available at: https://www.psoppc.org/psoppc_web/DLMS/downloadDocument?groupId=1410&pageName=common%20formats%20Hospital%20V2.0a. Accessed on June 5, 2024.
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    Comment: A commenter expressed concern that the measure's TEP 
stated that this measure is part of a long-term strategy to generate 
data and convey priorities to Medicare providers, which the commenters 
interpreted to mean that CMS would include more requirements for 
hospital reporting through PSOs in the future.
    Response: The statement the commenters are referring to was made by 
several participants in the TEP that informed development of the 
Patient Safety Structural measure during an advocacy event for Patients 
for Patient Safety.\381\ This event was not an official part of the 
measure development process, and neither the event nor the statement 
was endorsed by CMS. The statements made at that event do not reflect 
CMS policy. For information about our strategy with respect to measure 
development and improving patient safety, we refer readers to the CMS 
National Quality Strategy \382\ and the specific action steps in the 
CMS National Quality Strategy: Quality in Motion document.\383\
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    \381\ The CMS Proposed Patient Safety Structural Measure (PSSM). 
A Patients for Patient Safety US Advocacy Event. December 6, 2023. 
Slides Available at: https://irp.cdn-website.com/812f414d/files/uploaded/PSSM%20PFPS%20US%20webinar%20120623.pdf
    \382\ CMS National Quality Strategy. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy. For specific information about our goals regarding 
patient safety, see the Safety Goal, ``Achieve Zero Preventable 
Harm'' Under the ``Ensure Safe and Resilient Health Care Systems'' 
domain.
    \383\ CMS. Quality in Motion: Acting on the CMS National Quality 
Strategy: April 2024. Available at https://www.cms.gov/files/document/quality-motion-cms-national-quality-strategy.pdf.
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    Comment: Some commenters were concerned that Domain 4 Statement B 
would be difficult to achieve because the technology to efficiently 
transmit serious safety events, precursor events, and near miss events 
to a PSO is not available so this would be administratively burdensome.
    Response: We have modified Domain 4 Statement B in a way that 
increases flexibility for hospitals to engage with PSOs. As modified, a 
hospital could respond to Domain 4 Statement B in the affirmative 
without reporting serious safety events, near misses, or precursor 
events to a PSO so long as it performs other patient safety activities 
with a PSO. Furthermore, we understand that there is considerable 
variation in how hospitals engage in patient safety related learning 
networks, including whether and how they work with a PSO. We also 
recognize that not all hospitals have established processes for 
transmitting serious safety events, precursor events, and near-miss 
events to their chosen PSO. While this practice is no longer specified 
in Domain 4 Statement B, and we acknowledge that adopting this practice 
may entail costs such as investment in a system to support

[[Page 69484]]

patient safety event reporting if a hospital does not already have such 
a system in place, the value of collecting and analyzing adverse events 
data to improve patient safety justifies any investment required as 
evidenced by the improvements in safety associated with the use of a 
PSO.\384\ We encourage hospitals that are seeking to establish a system 
for reporting these data to a PSO to use the tools available including 
the Common Formats \385\ and AHRQ's guidance on choosing a PSO \386\ to 
reduce the time and costs involved in establishing these systems.
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    \384\ Office of the Inspector General. Patient Safety 
Organizations: Hospital Participation, Value, and Challenges. 
September 2019. Available at: https://oig.hhs.gov/oei/reports/oei-01-17-00420.pdf.
    \385\ https://pso.ahrq.gov/common-formats.
    \386\ https://pso.ahrq.gov/sites/default/files/wysiwyg/pso-brochure.pdf.
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    Comment: A commenter supported Domain 5 Statement A and stated that 
adopting a PFAC is a good way to achieve diversity and equity goals. A 
few commenters expressed support for Domain 5 Statement C. These 
commenters stated that patient access to medical records is an 
important means of engaging patients in their care that further 
improves quality and safety. A commenter also stated that because of 
the 21st Century Cures Act there are readily available tools and 
resources to support patient access to their medical records. A few 
commenters expressed support for Domain 5 Statement D. These commenters 
specifically supported the use of patient complaints to prevent similar 
issues in the future. A few commenters expressed support for Domain 5 
Statement E. These commenters stated that patient engagement at the 
bedside is a longstanding best practice.
    Response: We thank the commenters for their support of Domain 5 and 
specific comments supporting Domain 5's Statements A, C, D and E. We 
reiterate that Domain 5 activities are aimed to improve equitable and 
effective engagement of patients, families, and caregivers to promote 
safer care. We agree a PFAC provides a pathway for patients, families, 
and caregivers to provide input on critical safety related activities. 
We also agree that there should be continuous improvement and learning 
from patient inputs on patient safety events or challenges and that 
patients should have comprehensive access to their own medical records 
to further facilitate their engagement in care. We encourage hospitals 
to implement evidence-based tools and best practices to provide safe, 
high-quality care to patients.
    Comment: A commenter stated the belief that there are situations in 
which patient, family, and caregiver involvement is inappropriate and 
recommended modifying the Domain 5 description to reflect that 
hospitals ``should'' involve patients, families, and caregivers instead 
of ``must'' involve patients, families, and caregivers.
    Response: While we acknowledge the possibility that there may be 
some specific situations in which involving patients, families, or 
caregivers is infeasible or inappropriate, we note that the Domain 5 
description represents the hospital's overall culture. Embedding 
patients, families, and caregivers through meaningful involvement in 
safety activities, quality improvement, and oversight is a critical 
practice to achieve safer, better care. Therefore, the possible 
existence of some situations in which this is impractical or 
inappropriate does not preclude establishing a culture that prioritizes 
such engagement. We note that the specific attestations for Domain 5 do 
not require patients, families, or caregivers to be involved in every 
element of the hospital's operations in order to attest ``yes,'' and 
that in situations where limitations may be necessary flexibility is 
provided. Specifically, we note that Domain 5 Statement E requires the 
hospital to attest to whether it ``supports the presence of family and 
other designated persons (as defined by the patient) as essential 
members of a safe care team and encourages engagement in activities 
such as bedside rounding and shift reporting, discharge planning, and 
visitation 24 hours a day, as feasible.'' (emphasis added).
    Comment: A few commenters recommended updates to specific 
attestation statements within Domain 5. These recommendations were:
     Statement A: Allow different structures for PFACs to 
address safety (such as at the system level or as a subset of another 
PFAC).
     Statement C: Include ``family caregivers or other 
parties'' because hospitalized patients may not be able to use the 
portal.
    Response: Domain 5 Statement A requires hospitals to attest whether 
``Our hospital has a Patient and Family Advisory Council that ensures 
patient, family, caregiver and community input to safety-related 
activities, including representation at board meetings, consultation on 
safety-goal setting and metrics, and participation in safety 
improvement initiatives.'' This attestation is not prescriptive of the 
form or structure for this PFAC and provides flexibility for hospitals 
and health systems to develop and adopt a PFAC structure that works for 
their individual circumstances.
    We agree with commenters that some hospitalized patients may not be 
able to use patient portals without assistance. In addition to 
providing and encouraging access to medical records and clinician notes 
via patient portals, to affirmatively attest to Domain 5 Statement C 
hospitals must both provide patients with other options for accessing 
these data and provide support to help patients interpret the 
information. Therefore, while expanding access to patient approved 
family caregivers or other parties is a means of engaging these 
parties, it is not necessary for a hospital to affirmatively attest to 
Domain 5 Statement C because patient access to medical information is 
otherwise addressed by the attestation's reference to additional 
options and support.
    Comment: A commenter expressed concern regarding Domain 5 Statement 
A that CMS had not provided evidence that a PFAC is associated with 
improved safety or quality.
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    \387\ Guide to Patient and Family Engagement in Hospital Quality 
and Safety. Content last reviewed March 2023. Agency for Healthcare 
Research and Quality, Rockville, MD. https://www.ahrq.gov/patient-safety/patients-families/engagingfamilies/.
    \388\ National Patient Safety Foundation's Lucian Leape 
Institute. Safety Is Personal: Partnering with Patients and Families 
for the Safest Care. Boston: National Patient Safety Foundation; 
2014.
    \389\ Johnson B, Abraham M, Conway J, et al. Bethesda, MD: 
Institute for Family-Centered Care; April 2008.
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    Response: Patients, caregivers, and family members offer critical 
vantage points that can help hospitals identify gaps and priorities for 
improving patient care. In particular, working with patients and 
families as advisors at the organizational level can help reduce 
medical errors and improve safety and quality of health 
care.387 388 389 Many leading healthcare quality and safety 
organizations advocate for the importance of patient and family 
engagement, and there is support for a safety focused PFAC in the Self-
Assessment Tool created and implemented to complement the 
recommendations in Safer Together: A National Action Plan to Advance 
Patient Safety. In the Self-Assessment Tool, the National Steering 
Committee for Patient Safety determined it was appropriate, under the 
heading of ``Patient and Family Engagement,'' to award a score of 2 (of 
4) for a hospital that has a PFAC and a score of 3 or 4 (of 4) for a 
hospital at which ``The organization has an actively engaged PFAC. 
Senior leaders ensure the PFAC informs an organization- or system-wide

[[Page 69485]]

strategy and measurement plan for patient engagement.'' \390\ For these 
reasons, the TEP informing development of this measure strongly 
supported attestation statements addressing PFAC.
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    \390\ National Steering Committee for Patient Safety. Self-
Assessment Tool: A National Action Plan to Advance Patient Safety. 
Boston, Massachusetts: Institute for Healthcare Improvement; 2020.
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    Comment: A few commenters expressed concern because of potential 
complexities related to establishing a PFAC. A commenter expressed 
concern that maintaining a PFAC could disproportionately burden small 
hospitals.
    Response: We recognize the concern that hospitals with fewer 
resources may face challenges instituting PFAC. However, engagement of 
patients, families, and caregivers is essential for improving safety 
and hospitals such that the long-term benefits would outweigh the 
costs. The TEP informing development of this measure strongly supported 
attestation statements addressing PFAC because patients, caregivers, 
and family members offer critical vantage points that can help 
hospitals identify gaps and priorities for improving patient care. In 
particular, working with patients and families as advisors at the 
organizational level can help reduce medical errors and improve safety 
and quality of health care.391 392 393
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    \391\ Guide to Patient and Family Engagement in Hospital Quality 
and Safety. Content last reviewed March 2023. Agency for Healthcare 
Research and Quality, Rockville, MD. https://www.ahrq.gov/patient-safety/patients-families/engagingfamilies/.
    \392\ National Patient Safety Foundation's Lucian Leape 
Institute. Safety Is Personal: Partnering with Patients and Families 
for the Safest Care. Boston: National Patient Safety Foundation; 
2014.
    \393\ Johnson B, Abraham M, Conway J, et al. Bethesda, MD: 
Institute for Family-Centered Care; April 2008.
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    Comment: A few commenters stated that providing access to patient 
information in Domain 5 Statement C is covered by the requirements of 
the Promoting Interoperability Program and required by the 21st Century 
Cures Act.
    Response: We believe that the commenters are referring to the 
Medicare Promoting Interoperability Program reporting requirement for 
the Provider to Patient Exchange objective, which requires that for at 
least one unique patient discharged from the eligible hospital or CAH 
inpatient or emergency department (Place of Service (POS) 21 or 23) the 
following apply: (1) the patient (or patient-authorized representative) 
is provided timely access to view online, download, and transmit their 
health information; and (2) the eligible hospital or CAH ensures the 
patient's health information is available for the patient (or patient-
authorized representative) to access using any application of their 
choice that is configured to meet the technical specifications of the 
application programming interface (API) in the eligible hospital's or 
CAH's certified electronic health record technology (CEHRT) (88 FR 
59273). While a large majority of hospitals are meeting this Medicare 
Promoting Interoperability Program requirement as part of the 
meaningful use of certified EHR technology, the attestation in Domain 5 
Statement C describes a broader approach to engaging patients as 
partners in their care. Under this attestation, hospitals would not 
only provide the patient access but would encourage them to review 
their data and support them in interpreting the information in a way 
that is culturally and linguistically appropriate. Hospitals would also 
help patients submit comments for potential corrections, which could be 
a vital element of patient safety if the patient's record were 
incomplete or inaccurate.
    After consideration of the public comments we received, we are 
finalizing adoption of the Patient Safety Structural measure in the 
Hospital IQR and PCHQR Programs with a modification to the attestation 
statement in Domain 4 Statement B. The attestation statements we are 
finalizing are set forth in Table IX.B.1-02.
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2. Modification of the Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) Survey Measure Beginning With the CY 
2025 Reporting Period/FY 2027 Payment Determination for the Hospital 
IQR Program, the CY 2025 Reporting Period/FY 2027 Program Year for the 
PCHQR Program, and the FY 2030 Program Year for the Hospital VBP 
Program
a. Background
    We refer readers to the FY 2024 IPPS/LTCH PPS final rule for our 
most recent updates to HCAHPS survey administration requirements and 
additional background information for the Hospital VBP Program, the 
Hospital IQR Program, and the PCHQR Program (88 FR 59083 through 59089, 
88 FR 59196 through 59201, and 88 FR 59229 through 59232, 
respectively). For more details including information about patient 
eligibility for the HCAHPS Survey, please refer to the current HCAHPS 
Quality Assurance Guidelines, which can be found on the official HCAHPS 
website at: https://hcahpsonline.org/en/quality-assurance/.
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    \394\ Centers for Medicare & Medicaid Services, Patient Safety 
Structural Measure Attestation Guide, available at: https://qualitynet.cms.gov/inpatient/iqr/measures and https://qualitynet.cms.gov/pch/measures. The draft Attestation Guide, 
version 1.0, was available at both: https://qualitynet.gov/inpatient/iqr/proposedmeasures and https://qualitynet.cms.gov/pch/pchqr/proposedmeasures at the time of the proposed rule. We note 
that examples provided in this guide are for illustrative purposes.
    \395\ A ``just culture'' is defined by the Agency for Healthcare 
Research and Quality as a system that holds itself accountable, 
holds staff members accountable, and has staff members that hold 
themselves accountable. (The CUSP Method. https://www.ahrq.gov/hai/cusp/.)
    \396\ Agency for Healthcare Research and Quality. (2019, 
September 7). Root Cause Analysis. https://psnet.ahrq.gov/primer/root-cause-analysis.
    \397\ Agency for Healthcare Research and Quality. Federally-
Listed Patient Safety Organizations (PSOs). Retrieved January 5, 
2024, from https://pso.ahrq.gov/pso/listed?f%5B0%5D=resources_provided%3A2.
    \398\ Agency for Healthcare Research and Quality. (2022). 
Communication and Optimal Resolution (CANDOR). https://www.ahrq.gov/patient-safety/settings/hospital/candor/.
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    The HCAHPS Survey measure (CBE #0166) asks recently discharged 
patients questions about aspects of their hospital inpatient experience 
that they are uniquely suited to respond to. The HCAHPS Survey as a 
whole is termed as a single ``measure'' for purposes of the Hospital 
IQR, PCHQR, and Hospital VBP Programs. We refer to the elements of the 
HCAHPS Survey that are publicly reported as ``sub-measures'' and to the 
questions within each sub-measure as survey ``questions,'' for the 
Hospital IQR and PCHQR Programs. Sub-measures are comprised of one, 
two, or three survey questions. For example, the sub-measure, ``Overall 
Hospital Rating,'' consists of one survey question and the sub-measure 
``Communication with Nurses'' consists of three survey questions. In 
the Hospital VBP Program, the sub-measures of the HCAHPS Survey are 
referred to as ``dimensions.'' We refer readers to the HCAHPS On-Line 
website, www.HCAHPSonline.org, for a map of each question on the HCAHPS 
Survey and its sub-measures.
    The current HCAHPS Survey measure consists of 29 survey questions 
that are organized into ten sub-measures in the Hospital IQR and PCHQR 
Programs, including 19 questions that ask ``how often'' or whether 
patients experienced a critical aspect of hospital care, rather than 
whether they were ``satisfied'' with their care. The current survey 
measure also includes three screener questions that direct patients to 
relevant questions, five questions to adjust for the mix of patients 
across hospitals, and two questions (race and ethnicity) that support 
Congressionally mandated reports outlined in the Healthcare Research 
and Quality Act of 1999 (Pub. L. 106-129).\399\ These components of the 
survey measure are used to construct the ten publicly reported HCAHPS 
Survey sub-measures in the Hospital IQR and PCHQR Programs. The survey 
questions are organized into eight dimensions in the Person and 
Community Engagement Domain for the Hospital VBP Program. We note that 
the Hospital VBP Program uses eight dimensions while the Hospital IQR 
and PCHQR Programs use 10 sub-measures because ``Cleanliness'' and 
``Quietness'' have been combined as a single dimension in the Hospital 
VBP Program for scoring purposes and the ``Recommend Hospital'' sub-
measure is not included in the Hospital VBP Program. The rationale for 
combining these elements of the survey is described further in section 
IX.B.2.g(3) of this final rule and can be found in the Hospital 
Inpatient VBP Program final rule (76 FR 26497 through 26526). The 
current HCAHPS Survey can be found at https://hcahpsonline.org/en/survey-instruments/.
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    \399\ Agency for Healthcare Research and Quality. (2023) 2023 
National Healthcare Quality and Disparities Report. Available at: 
https://www.ahrq.gov/research/findings/nhqrdr/nhqdr23/.
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b. Overview of the Modifications to the HCAHPS Survey Measure
    We proposed to adopt the updated HCAHPS Survey measure for the 
Hospital IQR, PCHQR, and Hospital VBP Programs in the FY 2025 IPPS/LTCH 
PPS proposed rule (89 FR 36298 through 36304). We proposed the updated 
HCAHPS Survey measure would result in a survey with 32 questions that 
make up a total of 11 sub-measures, with seven of those sub-measures 
being multi-question sub-measures and the other four sub-measures being 
single-question sub-measures. Four of the multi-question sub-measures 
and three of the single-question sub-measures in the updated version of 
the HCAHPS Survey measure would remain unchanged from those that are in 
the current version of the HCAHPS Survey measure. For the Hospital VBP 
Program, the 32-question survey in the updated HCAHPS Survey measure 
would be organized into nine dimensions. We outline the specific 
updates later in this section.
    We identified the need for the updates to the HCAHPS Survey measure 
through focus groups and cognitive interviews with patients and 
caregivers, discussions with technical experts, and literature reviews 
that were conducted by a CMS contractor who made recommendations to 
CMS. A literature scan was used to compile and review items from 
existing surveys, focusing on topics not covered in the current HCAHPS 
Survey measure. CMS, patients, and providers reviewed the questions 
identified through the scan. Four patient focus groups were conducted 
to assign importance to and inform the further development of potential 
new questions, while also refining existing questions. This replicates 
the approach taken during the original development of the HCAHPS Survey 
measure. The focus groups included people with both planned and 
unplanned hospital stays, a variety of racial and ethnic groups, and 
both older and younger adults. The focus groups used both an 
exploratory and confirmatory approach to explore new topics and confirm 
the topics we had identified through the survey literature. The group 
discussion explored what it means to have a quality patient experience 
and what participants thought of their hospital stay--what went well 
and what went poorly. Group discussions were conducted in English and 
Spanish.
    The findings from the focus group informed the development of the 
updates to the HCAHPS Survey questions, including the newly developed 
questions that were tested in cognitive interviews. Cognitive 
interviews were also conducted in English and in Spanish. Lastly, a CMS 
contractor convened a technical expert panel that provided feedback on 
the

[[Page 69490]]

current survey content and the new content areas.
    We have determined that adopting the updated version of the HCAHPS 
Survey measure would amount to a minimal change in burden because the 
combination of removals and additions of survey questions would result 
in only an additional 45 seconds to complete the survey. The time 
required to complete the 32-question survey is estimated to average 
eight minutes. Additionally, prior to the removal of the 
``Communication About Pain'' questions in the CY 2019 OPPS/ASC final 
rule (83 FR 59140 through 59149), the HCAHPS Survey measure previously 
included 32 questions. We refer readers to sections XII.B.4., XII.B.6., 
and XII.B.7. of this final rule for more information on our estimated 
changes to the information collection burden.
    The adoption of the updated version of the HCAHPS Survey measure 
would not result in any changes to the survey administration, the data 
submission and reporting requirements, or the data collection 
protocols. The updated version of the HCAHPS Survey measure includes 
three new sub-measures: the multi-item ``Care Coordination'' sub-
measure, the multi-item ``Restfulness of Hospital Environment'' sub-
measure, and the ``Information About Symptoms'' single-item sub-
measure. The updated HCAHPS Survey measure also removes the existing 
``Care Transition'' sub-measure and modifies the existing 
``Responsiveness of Hospital Staff'' sub-measure. The seven new 
questions are as follows:
     During this hospital stay, how often were doctors, nurses 
and other hospital staff informed and up-to-date about your care?
     During this hospital stay, how often did doctors, nurses 
and other hospital staff work well together to care for you?
     Did doctors, nurses or other hospital staff work with you 
and your family or caregiver in making plans for your care after you 
left the hospital?
     During this hospital stay, how often were you able to get 
the rest you needed?
     During this hospital stay, did doctors, nurses and other 
hospital staff help you to rest and recover?
     During this hospital stay, when you asked for help right 
away, how often did you get help as soon as you needed?
     Did doctors, nurses or other hospital staff give your 
family or caregiver enough information about what symptoms or health 
problems to watch for after you left the hospital?
    As discussed more fully later in this section, these new questions 
address aspects of hospital care identified by patients and then tested 
in the 2021 HCAHPS Survey large-scale mode experiment described in the 
FY 2024 IPPS/LTCH PPS final rule (88 FR 59196 through 59197) as 
important to measuring the quality of hospital care.
    The updated HCAHPS Survey measure would no longer include the 
following four questions:
     During this hospital stay, after you pressed the call 
button, how often did you get help as soon as you wanted it?
     During this hospital stay, staff took my preferences and 
those of my family or caregiver into account in deciding what my health 
care needs would be when I left.
     When I left the hospital, I had a good understanding of 
the things I was responsible for in managing my health.
     When I left the hospital, I clearly understood the purpose 
for taking each of my medications.
    In the updated HCAHPS Survey measure, the question on the use of 
the call button is removed in response to hospital input indicating 
that call buttons have been replaced by other mechanisms (such as a 
direct phone line). The other questions are removed because they do not 
follow standard Consumer Assessment of Healthcare Providers & Systems 
(CAHPS) question wording and were perceived as duplicative of existing 
and new survey questions by the patients who participated in our 
content testing.
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    We refer hospitals and HCAHPS Survey vendors to the official HCAHPS 
website at https://www.hcahpsonline.org for information regarding the 
HCAHPS Survey measure, its administration, oversight, and data 
adjustments. Detailed information on current HCAHPS Survey data 
collection protocols can be found in the HCAHPS Quality Assurance 
Guidelines, located at: https://www.hcahpsonline.org/en/quality-assurance/. The Draft Quality Assurance Guidelines for the proposed 
updated HCAHPS Survey measure were made available in May 2024 at the 
official HCAHPS website at: https://www.hcahpsonline.org/en/quality-assurance/.
c. Measure Alignment to Strategy
    The HCAHPS Survey measure produces systematic, standardized, and 
comparable information about patients' experience of hospital care and 
promotes person-centered care. We have identified that patient 
experience measures, including the HCAHPS Survey measure, are 
foundational metrics, known as the Universal Foundation of quality 
measures. The Universal Foundation is intended to focus provider 
attention, reduce burden, identify disparities in care, prioritize 
development of interoperable, digital quality measures, allow for 
cross-comparisons across programs, and help identify measurement 
gaps.\400\ One of the goals of the National Quality Strategy \401\ is 
to foster engagement and to bring the voices of patients to the 
forefront. As part of fostering engagement, it is critical to hear the

[[Page 69493]]

voices of individuals by obtaining feedback directly from patients on 
hospital performance and to incorporate their feedback as part of our 
comprehensive approach to quality.
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    \400\ Centers for Medicare & Medicaid Services (2023) Aligning 
Quality Measures Across CMS--the Universal Foundation. Available at: 
https://www.cms.gov/aligning-quality-measures-across-cms-universal-foundation.
    \401\ Centers for Medicare and Medicaid Services. (2024) CMS 
National Quality Strategy. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
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d. Pre-Rulemaking Process and Measure Endorsement
(1) Recommendation From Pre-Rulemaking and Measure Review Process
    We refer readers to section IX.B.1.c. of this final rule for 
details on the Pre-Rulemaking Measure Review (PRMR) process including 
the voting procedures the PRMR process uses to reach consensus on 
measure recommendations. The PRMR Hospital Committee, comprised of the 
PRMR Hospital Advisory Group and PRMR Hospital Recommendation Group, 
reviewed the proposed updated version of the HCAHPS Survey measure. The 
PRMR Hospital Recommendation Group reviewed the proposed updated HCAHPS 
Survey measure (MUC2023-146, 147, 148, 149) during a meeting on January 
18-19, 2024, to vote on a recommendation with regard to use of this 
measure for the PCHQR, Hospital IQR, and Hospital VBP Programs.
    The PRMR Hospital Recommendation Group reached consensus for each 
of the three programs. For each program, they recommended the updates 
to the HCAHPS Survey measure with conditions.\402\
---------------------------------------------------------------------------

    \402\ Battelle--Partnership for Quality Measurement. (2024). 
Pre-Rulemaking Measure Review Measures Under Consideration 2023 
Recommendations Report. Available at: https://p4qm.org/sites/default/files/2024-02/PRMR-2023-MUC-Recommendations-Report-Final.pdf.
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    The voting results of the PRMR Hospital Recommendation Group for 
the proposed updates to the HCAHPS Survey measure within the Hospital 
IQR Program were: nine members of the group recommended adopting the 
updates without conditions; eight members recommended adoption with 
conditions; and two committee members voted not to recommend the 
updates for adoption. Taken together, 89.5 percent of the votes were 
between ``recommend'' and ``recommend with conditions.'' Thus, the 
committee reached consensus and recommended the updates to the HCAHPS 
Survey measure within the Hospital IQR Program with conditions.
    The voting results of the PRMR Hospital Recommendation Group for 
the proposed updates to the HCAHPS Survey measure within the Hospital 
VBP Program were: ten members of the group recommended adopting the 
updates without conditions; seven members recommended adoption with 
conditions; and two committee members voted not to recommend the 
updates for adoption. Taken together, 89.5 percent of the votes were 
between ``recommend'' and ``recommend with conditions.'' Thus, the 
committee reached consensus and recommended the updates to the HCAHPS 
Survey measure within the Hospital VBP Program with conditions.
    The voting results of the PRMR Hospital Recommendation Group for 
the proposed updates to the HCAHPS Survey measure within the PCHQR 
Program were: eleven members of the group recommended adopting the 
updates without conditions; six members recommended adoption with 
conditions; and two committee members voted not to recommend the 
updates for adoption. Taken together, 89.5 percent of the votes were 
between ``recommend'' and ``recommend with conditions.'' Thus, the 
committee reached consensus and recommended the updates to the HCAHPS 
Survey measure within the PCHQR Program with conditions.
    The conditions that the committee recommended for all three 
programs were: CBE endorsement; consideration should be given to not 
extending the survey length and removal of overlapping items; use of 
adaptive questions in computerized administration to minimize items; 
and use of a mechanism to monitor trends in performance data over time.
    After taking these conditions into account, we proposed to adopt 
the updated HCAHPS Survey measure in all three programs. As noted in 
section IX.B.2.b. of this final rule and in response to the committee's 
condition that consideration be given to not extending the survey 
length, the updated HCAHPS Survey measure would result in only an 
additional 45 seconds to complete the survey. We have estimated that 
the total time required to complete the 32-question survey is, on 
average, eight minutes. Additionally, in response to the committee's 
condition that consideration be given to removing overlapping items, we 
note that similar or overlapping questions were identified and 
considered for removal during the development and testing of the 
updated HCAHPS Survey measure, as described further in section 
IX.B.2.b. of this final rule. By developing items with patients' and 
caregivers' input and then empirically testing the new questions, we 
have ensured that the questions in the updated HCAHPS Survey add 
unique, non-redundant information about key aspects of patient 
experience of care.\403\ The committee also raised the condition that 
the survey use adaptive questions in computerized administration to 
minimize items. However, adaptive questions in computerized 
administration would be infeasible in the mail mode of the HCAHPS 
Survey measure. Since all modes of survey administration that are 
available for the updated HCAHPS Survey (Mail Only, Phone Only, Mail-
Phone, Web-Mail, Web-Phone, and Web-Mail-Phone) must be parallel, 
adaptive questions in computerized modes would not be appropriate for 
this measure at this time. We will take this feedback into 
consideration for any future potential changes to survey 
administration. In response to the committee's condition that a 
mechanism to monitor trends in performance data over time be used, we 
note that as part of administering each of these quality programs, we 
regularly monitor and evaluate hospitals' performance data trends. We 
will continually monitor these trends in performance with the updated 
HCAHPS Survey measure. We address the committee's condition of CBE 
endorsement in the following section.
---------------------------------------------------------------------------

    \403\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
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(2) Measure Endorsement
    We refer readers to section IX.B.1.c. of this final rule for 
details on the endorsement and maintenance (E&M) process including the 
measure evaluation procedures the CBE's E&M Committees use to evaluate 
measures and whether they meet endorsement criteria. The HCAHPS Survey 
measure was first endorsed in 2005 by the former CBE, the National 
Quality Forum. The former CBE renewed its endorsement of the current 
HCAHPS Survey measure in 2009, 2015, and 2019. The current HCAHPS 
Survey measure was most recently submitted to the CBE for maintenance 
endorsement review in the Spring 2019 cycle (CBE #0166) and was 
endorsed on October 25, 2019.\404\ We note that the HCAHPS Survey 
measure remains an endorsed measure, and we intend to submit the 
updated HCAHPS Survey measure to the current CBE for endorsement in 
Fall 2025. Section 1886(b)(3)(B)(viii)(IX)(bb) of the Act states that 
in the case of a specified area or medical topic determined appropriate

[[Page 69494]]

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 endorsed as 
long as due consideration is given to measures that have been endorsed 
or adopted by a consensus organization identified by the Secretary. We 
have determined that the updates to the HCAHPS Survey measure are 
appropriately specified. The HCAHPS Survey measure remains endorsed, 
and the updated survey only modifies some of the questions and sub-
measures within the survey. The HCAHPS Survey measure is designed to 
produce standardized information about patients' perspectives of care 
that allow objective and meaningful comparisons of hospitals on topics 
that are important to consumers, and these updates would improve the 
feedback we receive directly from patients on hospital performance. 
Therefore, we proposed these updates to the measure before the updates 
received CBE endorsement.
---------------------------------------------------------------------------

    \404\ Battelle--Partnership for Quality Measurement. HCAHPS 
(Hospital Consumer Assessment of Healthcare Providers and Systems) 
Survey. Available at: https://p4qm.org/measures/0166.
---------------------------------------------------------------------------

e. Modification of the HCAHPS Survey Measure for the Hospital IQR 
Program Beginning With the CY 2025 Reporting Period/FY 2027 Payment 
Determination and the PCHQR Program Beginning With the CY 2025 
Reporting Period/FY 2027 Program Year
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36298 through 
36300), we proposed to update the current HCAHPS Survey measure in the 
Hospital IQR and PCHQR Programs by adding three new sub-measures:

 ``Care Coordination'' sub-measure
 ``Restfulness of Hospital Environment'' sub-measure
 ``Information About Symptoms'' sub-measure

    The updates also remove the existing ``Care Transition'' sub-
measure and modify the existing ``Responsiveness of Hospital Staff'' 
sub-measure. The new ``Care Coordination'' sub-measure encompasses and 
broadens the current ``Care Transition'' sub-measure and the new 
questions in the ``Care Coordination'' sub-measure are more congruent 
with the other survey questions. The updated measure replaces one of 
the two survey questions in the current ``Responsiveness of Hospital 
Staff'' sub-measure with a new survey question that strengthens this 
sub-measure. The updates to the HCAHPS Survey measure are detailed in 
section IX.B.2.b. of this final rule and we refer readers to the HCAHPS 
website at https://www.hcahpsonline.org for further details.
    In the FY 2025 IPPS/LTCH PPS proposed rule, we proposed that the 
updated HCAHPS Survey measure would be implemented in the Hospital IQR 
and PCHQR Programs beginning with patients discharged on January 1, 
2025 (89 FR 36298). Reporting of responses from the updated HCAHPS 
Survey measure for patients discharged between January 1, 2025, and 
December 31, 2025, would be used for the CY 2025 reporting period/FY 
2027 payment determination for the Hospital IQR Program and for the CY 
2025 reporting period/FY 2027 program year for the PCHQR Program. 
HCAHPS Survey sub-measures are publicly reported on a CMS website 
quarterly on a rolling basis, with the oldest quarter of data rolled 
off, and the most recent quarter rolled on with each refresh. As such, 
there would be a period during which some quarters of reporting data 
come from the current version of the HCAHPS Survey measure, and others 
come from the updated HCAHPS Survey measure. Through this time period, 
publicly reported HCAHPS Survey data for the Hospital IQR and PCHQR 
Programs would consist only of data from the eight unchanged sub-
measures in the current HCAHPS Survey measure. When four quarters of 
the updated HCAHPS Survey data have been submitted, public reporting 
would reflect all of the modifications in the updated HCAHPS Survey 
measure. The public reporting timeline of the updates to the HCAHPS 
Survey measure for the Hospital IQR and PCHQR Programs can be found in 
Table IX.B.2-02.
BILLING CODE 4120-01-P

[[Page 69495]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.224

BILLING CODE 4120-01-C
(1) Addition of the Care Coordination Sub-Measure in the Updated HCAHPS 
Survey Measure
    The ``Care Coordination'' sub-measure is a newly developed multi-
question sub-measure and is composed of three new survey questions that 
ask patients how often hospital staff were informed and up-to-date 
about the patient's care, how often hospital staff worked well together 
to care for the patient, and whether hospital staff worked with the 
patient and family or caregiver in making plans for the patient's care 
post-hospitalization. The new questions address aspects of hospital 
care identified by patients participating in focus groups as important 
to measuring the quality of hospital care. Cognitive testing 
demonstrated the new questions were accurately and consistently 
interpreted. The ``Care Coordination'' sub-measure was shown to have 
good measurement properties (hospital-level reliability is 0.792 and 
Cronbach's alpha is 0.765) and construct validity in the 2021 mode 
experiment.\405\ This sub-measure would fill a gap of furthering 
coordination efforts within the hospital setting and support our goals 
of including measures related to seamless care coordination and person-
centered care. Across multiple focus groups, patients indicated that 
how well doctors, nurses, and other staff work together or as a team in 
caring for a patient was the most important information to have to 
understand what their care would be like in one hospital versus 
another.
---------------------------------------------------------------------------

    \405\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

(2) Addition of the Restfulness of Hospital Environment Sub-Measure in 
the Updated HCAHPS Survey Measure
    The Restfulness of Hospital Environment--Hospital Patient sub-
measure would fill a gap related to providing a restful and healing 
environment within the hospital setting and support our goal of 
including measures related to person-centered care. The ``Restfulness'' 
sub-measure is a newly developed multi-question sub-measure comprised 
of three survey questions: two new questions that ask how often 
patients were able to get the rest they needed, and whether hospital 
staff helped the patient to rest and recover, and one current survey 
question that asks how often the area around the patient's room was 
quiet at night (``Quietness''). Cognitive testing demonstrated the new 
questions were accurately and consistently interpreted. The 2021 mode 
experiment established that the ``Restfulness'' sub-measure has good 
measurement properties (hospital-level reliability is 0.870 and 
Cronbach's alpha is 0.735) and construct validity.\406\ The existing 
``Quietness'' sub-measure

[[Page 69496]]

is currently a stand-alone question in the HCAHPS Survey measure. The 
updates to the HCAHPS Survey measure would move the stand-alone 
``Quietness'' sub-measure into the new Restfulness of Hospital 
Environment sub-measure. In the updated version of the HCAHPS Survey 
measure, the ``Quietness'' question itself would not change and would 
continue to be publicly reported.
---------------------------------------------------------------------------

    \406\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

(3) Addition of the Information About Symptoms Sub-Measure in the 
Updated HCAHPS Survey Measure
    The ``Information About Symptoms'' sub-measure is a newly developed 
single-question sub-measure that would fill a gap of providing 
instructions and information for family and caregivers to take care of 
patients after discharge and supports our goal of including measures 
related to person-centered care. The new question captures an aspect of 
hospital care identified by patients participating in focus groups as 
important, and cognitive testing demonstrated the question was 
accurately and consistently interpreted. The sub-measure is a stand-
alone question that asks the patient whether doctors, nurses, or other 
hospital staff gave the patient's family or caregiver enough 
information about symptoms or health problems to watch out for after 
the patient left the hospital. The sub-measure has good hospital level-
reliability (0.729) at the expected average number of completed surveys 
per hospital.\407\
---------------------------------------------------------------------------

    \407\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

(4) Modification of the Responsiveness of Hospital Staff Sub-Measure in 
the Updated HCAHPS Survey Measure
    The revisions to the ``Responsiveness of Hospital Staff'' sub-
measure would entail adding one new survey question to this sub-measure 
and removing one current survey question from this sub-measure. The 
current survey question that would be removed from the ``Responsiveness 
of Hospital Staff'' sub-measure is the ``Call Button'' question. Input 
from hospitals indicated that call buttons have largely been replaced 
by other mechanisms (such as a direct phone line), and qualitative 
testing demonstrated that the new question captures all modes of 
requesting help. The 2021 mode experiment established that the modified 
``Responsiveness of Hospital Staff'' sub-measure has good measurement 
properties (hospital-level reliability is 0.786 and Cronbach's alpha is 
0.749) and construct validity.\408\ Having patients report their 
experience of the responsiveness of hospital staff highlights an 
important aspect of hospital care from the patient's perspective about 
getting help for one's needs during a hospital stay, which is a 
component of person-centered care. These modifications to the 
``Responsiveness of Hospital Staff'' sub-measure would fill a gap 
related to the care by nursing and other staff within the hospital 
setting and support our goals of including measures assessing person-
centered care and the quality of hospital staff. The revised 
``Responsiveness of Hospital Staff'' sub-measure would be comprised of 
two survey questions: one current survey question that asks how often 
patients received help in getting to the bathroom or in using a bedpan 
as soon as they wanted, and one new survey question that asks how often 
patients got help as soon as they needed it when they asked for help 
right away.
---------------------------------------------------------------------------

    \408\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

(5) Removal of the Care Transition Sub-Measure in the Updated HCAHPS 
Survey Measure
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53513 through 
53516), we added the three-question ``Care Transition'' sub-measure 
(CTM-3) to the HCAHPS Survey measure in the Hospital IQR Program. We 
finalized the addition of the HCAHPS Survey measure, including the CTM-
3 sub-measure, for the PCHQR Program in the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50844 through 50845). The updates to the HCAHPS Survey 
measure would remove this three-question sub-measure from the HCAHPS 
Survey measure and replace it with a new ``Care Coordination'' sub-
measure, which would encompass and broaden the current ``Care 
Transition'' sub-measure and is more congruent with the other questions 
in the HCAHPS Survey measure in terms of question form and response 
options. For these reasons, the updated version of the HCAHPS Survey 
measure removes the ``Care Transition'' sub-measure.
(6) Modification to the ``About You'' Section for the Hospital IQR, 
PCHQR, and Hospital VBP Programs
    The ``About You'' questions are used either for patient-mix 
adjustment or for Congressionally-mandated reports.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36300), we 
proposed that the changes to the ``About You'' section of the updated 
HCAHPS Survey measure would be:
     replacing the existing ``Emergency Room Admission'' 
question with a new, ``Hospital Stay Planned in Advance'' question;
     reducing the number of response options for the existing 
``Language Spoken at Home'' question;
     alphabetizing the response options for the existing 
ethnicity question; and
     alphabetizing the response options for the existing race 
question.
    We note that to achieve the goal of fair comparisons across all 
hospitals that participate in HCAHPS Survey measure, it is necessary to 
adjust for factors that are not directly related to hospital 
performance but do affect how patients answer HCAHPS Survey questions. 
To ensure that differences in HCAHPS Survey measure results reflect 
differences in hospital quality only, HCAHPS Survey measure results are 
adjusted for patient-mix and mode of survey administration. Only the 
adjusted results are publicly reported and considered the official 
results. Information about the HCAHPS Survey patient-mix adjustment can 
be found at: https://hcahpsonline.org/en/mode--patient-mix-adj. We do 
not collect or adjust for patients' socioeconomic status, however, the 
HCAHPS Survey patient-mix adjustment does include patients' highest 
level of education, which can be related to socioeconomic status. 
Several questions on the HCAHPS Survey, as well as information drawn 
from hospital administrative data, are used for the patient-mix 
adjustment. The questions in the ``About You'' section of the survey 
that are used in patient-mix adjustment are:
     In general, how would you rate your overall health?
     In general, how would you rate your overall mental or 
emotional health?
     What is the highest grade or level of school that you have 
completed?
     What language do you mainly speak at home?
    Administrative data provided by hospitals are also used in patient-
mix adjustment, including patient's age, sex, and service line. Lag 
time, which is the number of days between a patient's discharge from 
the hospital and the return of the mail survey or the final disposition 
of the telephone or interactive voice recognition (IVR)

[[Page 69497]]

survey, is also used in patient-mix adjustment.\409\
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    \409\ Elliott, M.N., Zaslavsky, A.M., Goldstein, E. et al. 
(2009) Effects of Survey Mode, Patient Mix, and Nonresponse on CAHPS 
Hospital Survey Scores. Health Services Research. 44: 501-518. 
https://doi.org/10.1111/j.1475-6773.2008.00914.x.
---------------------------------------------------------------------------

    Neither patient race nor ethnicity is used to adjust HCAHPS Survey 
results; these questions are included on the survey to support 
Congressionally-mandated reports. The adjustment model also addresses 
the effects of non-response bias. More information about the patient-
mix adjustment coefficients for publicly reported HCAHPS Survey measure 
results can be found under ``Mode and Patient-Mix Adjustment'' at: 
https://www.hcahpsonline.org.
    The current ``About You'' survey question that asks whether the 
patient was admitted to the hospital through the emergency room would 
be replaced with a new question that asks whether this hospital stay 
was planned in advance. This ``Hospital Stay Planned in Advance'' 
question is being adopted for use as a patient-mix adjuster to 
distinguish between planned and unplanned stays. Cognitive testing 
indicated that ``Hospital Stay Planned in Advance'' is better 
understood as intended than the current admission through the emergency 
room question. Unplanned stays are not within the hospital's control 
but can result in worse patient experiences than hospital stays that 
had been planned. Accounting for these differences in this preadmission 
characteristic allows for fairer comparisons of hospital performance.
    To make survey administration more efficient and reduce respondent 
burden, especially in the telephone mode of survey administration, we 
proposed that the response options for the ``Language Spoken at Home'' 
question would be changed to: ``English,'' ``Spanish,'' ``Chinese,'' or 
``Another language'' (89 FR 36300). English, Spanish, and Chinese 
account for 98.2 percent of all HCAHPS Survey measure responses. The 
response options for the two race/ethnicity questions would be 
alphabetized to correspond to current best survey practices.
    These modifications would not be included in public reporting of 
the HCAHPS Survey measure and would not affect scoring under the 
Hospital VBP Program, but the ``Hospital Stay Planned in Advance'' 
question would be employed in the patient-mix adjustment of survey 
responses.
    In the FY 2025 IPPS/LTCH PPS proposed rule, we proposed to 
implement these changes along with the proposed updated version of the 
HCAHPS Survey measure for the Hospital IQR, PCHQR, and Hospital VBP 
Programs described in earlier sections (89 FR 36300).
    We received public comment on the overall updates to the HCAHPS 
Survey measure.
    Comment: Many commenters broadly supported adopting the updates to 
the HCAHPS Survey measure across the Hospital IQR, Hospital VBP, and 
PCHQR Programs as proposed because they stated that the updates 
modernize the survey, promote person-centered care, reflect new 
technology and the best practices for patient care, better align with 
CMS's quality strategies, and make the questions more relevant to 
patients and families while also being useful to hospitals. Several 
commenters commended CMS for the approach to align the updates across 
three programs, for considering stakeholder feedback in identifying 
opportunities for improvement, and for continuing to improve capturing 
patient experiences and the voice of the patient. Several commenters 
supported the removal of questions they deemed redundant and efforts to 
reduce survey length by limiting the number of supplemental items to 
manage survey burden. A few commenters supported the inclusion of 
family caregivers in the updated survey questions, and a few commenters 
specifically supported the staggered implementation of the updates in 
public reporting and in the Hospital VBP Program. A commenter supported 
CMS' efforts to refine measuring patient experience, while another 
commenter stated that the additional information from patients and 
caregivers would help hospital administrators ensure they are 
delivering high quality care.
    Response: We thank the commenters for their support. We agree with 
commenters that the updates align with our national quality strategies. 
As noted in the FY 2025 IPPS/LTCH PPS proposed rule, one of our key 
goals is to foster engagement and bring the voices of patients to the 
forefront (89 FR 36296). The updates to the HCAHPS Survey measure 
enable us to obtain feedback directly from patients on hospital 
performance and to incorporate their feedback as part of our 
comprehensive approach to quality.
    Comment: Several commenters requested clarifications on the updates 
to the HCAHPS Survey measure, with a few commenters requesting 
clarification on the overall testing of the updates, questioning 
whether the new components would be representative of a hospital making 
improvements. A few commenters supported the updates to the HCAHPS 
Survey measure but requested additional information on how the items 
were tested to help understand whether they measure hospitals 
accurately. A commenter recommended shortening the survey, removing 
redundant questions, and authorizing real-time survey alternatives 
because they gather broader patient feedback.
    Response: We thank the commenters for their support and refer them 
to the PRMR report that outlines the testing we conducted,\410\ which 
included a literature review, technical expert panels, focus groups and 
cognitive interviews with patients and caregivers, and a mode 
experiment in 2021 among 46 hospitals. We refer readers to the FY 2025 
IPPS/LTCH PPS proposed rule (89 FR 36293 through 36297) which outlines 
the content testing, hospital input, and patient focus groups that 
informed our updates to the survey. As described in the proposed rule, 
the patient focus groups identified the aspects of hospital care 
addressed in the new questions as important to measuring the quality of 
hospital care, and the updated sub-measures were tested for hospital-
level reliability and validity at the expected average number of 
completed surveys per hospital. We also refer readers to the FY 2025 
IPPS/LTCH PPS proposed rule (89 FR 36299) where we outline the 
reliability and validity testing of each sub-measure. Along with 
empirically testing these updates, the updates to this survey were 
developed with patients' and caregivers' input, and we have ensured 
that the questions in the updated HCAHPS Survey measure add unique, 
non-redundant information about key aspects of patient experience of 
care. We thank the commenter for the recommendation to continue 
reducing the question set, and we will continue to evaluate and test 
ways to improve the survey in future program years. We do not 
anticipate authorizing real-time survey alternatives at this time, but 
we will re-evaluate alternatives in future program years.
---------------------------------------------------------------------------

    \410\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters expressed support for the new web-first 
survey modalities and the extended 49-day window for survey responses 
because they stated they have been shown to increase survey response 
rates, especially among historically underrepresented populations.
    Response: We thank the commenters for their support. We wish to 
note that

[[Page 69498]]

the web-first survey modalities and 49-day window for survey responses 
were finalized in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59197 
through 59199).
    Comment: A few commenters generally did not support the updates to 
the HCAHPS Survey measure because they stated the addition of more 
questions would create resistance among patients who are already 
discouraged by the current number of questions.
    Response: We thank the commenters for their feedback. As discussed 
in the FY 2025 IPPS/LTCH PPS proposed rule, four patient focus groups 
were conducted to inform the development of the updates to the HCAHPS 
Survey (89 FR 36293). These patients identified the aspects of hospital 
care that were important to them when measuring the quality of care 
they received. As a result, we do not agree that the updates to the 
survey would create resistance among patients. Additionally, we did not 
receive negative feedback about the length of the survey that was 
tested in the 2021 HCAHPS mode experiment, which was 43 items compared 
to the updated HCAHPS Survey measure, which includes 32 items.\411\ The 
survey did not require multiple calls to complete, and respondents in 
the 2021 mode experiment did not have complaints about the time on the 
phone or the length of the interview. Moreover, interviewers did not 
report any challenges keeping respondents engaged through the end of 
the survey. Additionally, the updates to the HCAHPS Survey measure 
would create minimal change in burden because they result in only an 
additional 45 seconds to complete the survey, even without considering 
the reduction in total survey length that would result from the new 
limit on supplemental items. The 12-item limit on supplemental items, 
which was finalized in the FY 2024 IPPS/LTCH PPS final rule, 
effectively reduces the average length of the HCAHPS Survey measure (88 
FR 59199). Currently, the median number of supplemental items added to 
the HCAHPS Survey is 14, while 25 percent of hospitals add 30 or more 
extra items. The 12-item limit of supplemental items will help to 
reduce the length of the updated HCAHPS Survey measure.
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    \411\ HCAHPS Online. (2021) HCAHPS Mode Experiment Survey 
Instrument. Available at: https://hcahpsonline.org/globalassets/hcahps/whats-new/mode-experiment/hcahps-mode-experiment-survey-instrument.pdf.
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    Comment: A few commenters requested clarifications regarding the 
impact of the updates to the HCAHPS Survey measure on the Star Ratings, 
including how the HCAHPS Summary Star Rating would be calculated both 
during the transition period and after the new survey is publicly 
reported, how the abbreviated set of HCAHPS Survey measure scores 
released during the transition would be used to calculate the Overall 
Hospital Quality Star Rating, and how CMS would incorporate the new 
HCAHPS Survey measure scores into the Overall Hospital Quality Star 
Rating after the new survey is publicly reported. They also requested 
clarification on how the modified public reporting schedule might 
impact the inclusion of HCAHPS in Hospital Overall Stars.
    Response: In response to the requests for clarifications regarding 
the Star Ratings, the HCAHPS Summary Star Rating would continue to be 
the average of the publicly reported HCAHPS Survey measure as described 
in the Technical Notes for HCAHPS Star Ratings.\412\ During the 
transition period when the number of HCAHPS Survey sub-measures are 
reduced from 10 to 8 sub-measures, the HCAHPS Summary Star Rating would 
be constructed by averaging the Star Ratings from ``Communication with 
Nurses,'' ``Communication with Doctors,'' ``Communication about 
Medicines,'' ``Discharge Information,'' the average of the Star Ratings 
assigned to ``Cleanliness of Hospital Environment'' and ``Quietness of 
Hospital Environment,'' and the average of the Star Ratings assigned to 
``Hospital Rating'' and ``Recommend the Hospital.'' We will update the 
HCAHPS Star Rating Technical Notes on the official HCAHPS On-Line 
website (https://hcahpsonline.org/en/hcahps-star-ratings/) prior to the 
January 2026 public reporting on the Compare tool to describe how the 8 
sub-measures are used to calculate the HCAHPS Summary Star Rating.
---------------------------------------------------------------------------

    \412\ https://hcahpsonline.org/en/hcahps-star-ratings/#TechNotes.
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    The HCAHPS Star Rating Technical Notes will be updated again prior 
to the October 2026 public reporting on the Compare tool to describe 
the calculation of the HCAHPS Star Ratings when the number of publicly 
reported HCAHPS Survey sub-measures increases from 8 to 11. For the 
October 2026 public reporting and forward, the HCAHPS Summary Star 
Rating will be constructed by averaging the HCAHPS Star Ratings from 
``Communication with Nurses,'' ``Communication with Doctors,'' 
``Restfulness of Hospital Environment,'' ``Care Coordination,'' 
``Responsiveness of Hospital Staff,'' ``Communication about 
Medicines,'' ``Discharge Information,'' the average of the Star Ratings 
assigned to ``Cleanliness of Hospital Environment'' and ``Information 
About Symptoms,'' and the average of the Star Ratings assigned to 
``Hospital Rating'' and ``Recommend the Hospital.'' The weight of the 
Patient Experience measure group in the Overall Hospital Quality Star 
Rating, which includes the HCAHPS Survey measure, would not change 
without notice-and-comment rulemaking.
    Comment: Many commenters expressed concerns over the updates to the 
HCAHPS Survey measure. Several commenters stated the new length of the 
survey can have negative effects on patient completion such as 
increased burden, survey fatigue, and reduced response rates at a time 
when response rates are already trending downward. A few commenters 
requested clarification on whether the updated 32 question survey had 
been tested with patients to determine if the added length had any 
negative effects on the patient's likelihood of completing the survey. 
A commenter recommended limiting the Restfulness sub-measure to one 
question because they stated that including repetitive questions may 
decrease survey completion. A commenter expressed concern that the 
additional 45 seconds equates to a 10 percent extension. A commenter 
stated that the additions to the survey were outpacing the removal of 
items and recommended working with AHRQ to research longer term 
solutions to reduce length and improve response rates.
    Response: We have developed the new items with patients' and 
caregivers' input and empirically tested the new questions and sub-
measures. We refer readers to the FY 2025 IPPS/LTCH PPS proposed rule 
(89 FR 36293 through 36297) and this final rule which outlines the 
content testing, hospital input, and patient focus groups that informed 
our updates to the survey. The new items address those aspects of 
hospital care that patient focus groups identified as important to 
measuring the quality of hospital care, and the new sub-measures were 
tested for hospital-level reliability and validity at the expected 
average number of completed surveys per hospital.413 414 We 
refer

[[Page 69499]]

readers to the PRMR report for additional information on the testing we 
conducted.\415\ Therefore, we have ensured that the questions proposed 
in the updated HCAHPS Survey measure add unique, non-redundant 
information about key aspects of patient experience of care. 
Additionally, if we limited the Restfulness sub-measure to one 
question, the reliability of this sub-measure would be reduced. We have 
determined that the modified version of the HCAHPS Survey measure 
creates minimal change in burden because the updates result in only an 
additional 45 seconds to complete the survey. Limiting the supplemental 
items to no more than 12 will also effectively reduce the length of the 
survey. We also remind commenters that the HCAHPS Survey measure has 
previously included 32 questions--the same number of questions in the 
updated version. The previous 32 question version of the HCAHPS Survey 
measure did not negatively affect response rates. Prior CAHPS studies 
suggest that the effect of a three-item change in survey length on the 
response rate is less than one percentage point.416 417
---------------------------------------------------------------------------

    \413\ Crofton C, Darby C, Farquhar M, Clancy CM. (2005) The 
CAHPS Hospital Survey: development, testing, and use. Jt Comm J Qual 
Patient Saf. 31(11):655-9, 601. doi: 10.1016/s1553-7250(05)31084-1. 
PMID: 16335067.
    \414\ Giordano LA, Elliott MN, Goldstein E, Lehrman WG, and 
Spencer PA. (2010) Development, Implementation, and Public Reporting 
of the HCAHPS Survey. Medical Care Research and Review, 67 (1): 27-
37. https://journals.sagepub.com/doi/10.1177/1077558709341065.
    \415\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
    \416\ Burkhart Q, Orr N, Brown JA, et al. (2021) Associations of 
Mail Survey Length and Layout with Response Rates Medical Care 
Research and Review 78(4): 441-448. DOI: https://doi.org/10.1177/1077558719888407.
    \417\ Beckett MK, Elliott MN, Gaillot S, et al. (2016) 
Establishing limits for supplemental items on a standardized 
national survey. Public Opinion Quarterly 80(4): 964-976 DOI: 
https://doi.org/10.1093/poq/nfw028.
---------------------------------------------------------------------------

    Comment: A commenter questioned whether the data from the new sub-
measures could be used to improve performance because the measures are 
not based upon clinical practice guidelines.
    Response: The HCAHPS Survey measure is not intended to measure 
clinical outcomes. Rather, it is intended to measure patients' 
experiences of hospital care, a key metric in assisting healthcare 
organizations to move toward patient-centered care.
    Comment: A few commenters expressed concerns about the validity of 
the survey, believing that the survey may not measure quality of staff 
but rather capture wider system-level issues such as staffing 
shortages, and that there was limited evidence to demonstrate a 
relationship between patient satisfaction, care quality, and clinical 
outcomes.
    Response: With regard to concerns that the HCAHPS Survey measure 
results may be a reflection of system-wide issues, we agree that these 
issues, such as staffing shortages, can adversely affect patient 
experience; when that happens, HCAHPS accurately captures the impact of 
the system-wide issue on patient experience.\418\ Patient experience of 
care surveys, including the HCAHPS Survey measure, capture an 
independently important dimension of quality of care and are associated 
with better care and outcomes in other areas, such as lower hospital 
readmissions.419 420
---------------------------------------------------------------------------

    \418\ Elliott MN, Beckett MK, Cohea CW, et al. (2023) Changes in 
Patient Experiences of Hospital Care During the COVID-19 Pandemic. 
JAMA Health Forum 2023;4(8):e232766. DOI: https://doi.org/10.1001/jamahealthforum.2023.2766.
    \419\ Anhang-Price R, Elliott MN, et al. (2014) Examining the 
Role of Patient Experience Surveys in Measuring Health Care Quality. 
Medical Care Research and Review 71(5):522-54.-DOI: https://doi.org/10.1177/1077558714541480.
    \420\ Anhang Price R, Elliott MN, Cleary PD, Zaslavsky AM, Hays 
RD. (2015) Should Health Care Providers be Accountable for Patients' 
Care Experiences?. Journal of General Internal Medicine 30(2): 253-
6. DOI: https://doi.org/10.1007/s11606-014-3111-7.
---------------------------------------------------------------------------

    Comment: A commenter expressed concern that the changes to the 
survey may disrupt years of data and comparisons that have been used to 
judge improvements in patient satisfaction.
    Response: With regard to possible disruptions to survey continuity 
and hospitals' ability to compare results from the updated HCAHPS 
Survey measure with the current version, 8 of 10 current HCAHPS sub-
measures would be unchanged on the updated HCAHPS Survey measure (see 
Table IX.B.2-02); there would be no discontinuity in historical 
comparisons for these sub-measures. The ``Quietness'' question would be 
unchanged in the updated HCAHPS Survey measure but would be made part 
of the new ``Restfulness of Hospital Environment'' sub-measure. 
However, the ``Quietness'' question would be reported as a single 
question in both the preview reports hospitals receive before each 
public reporting and in the Provider Data Catalog, thus permitting 
continuous comparisons with historical data. Only one sub-measure, 
``Care Transition,'' and one substantive question, ``Call Button,'' 
would be removed from the survey.
    Comment: A commenter expressed that patient care needs were in 
direct conflict with the HCAHPS Survey's priorities, such as when a 
patient may require more intensive monitoring and regular 
interventions, and therefore interruptions, overnight. The commenter 
acknowledged that creating a restful environment is an important 
dimension of helping patients get better, but that restfulness cannot 
be prioritized to the detriment of patient needs and outcomes and 
recommended that CMS engage interested parties to determine how to 
better balance competing priorities.
    Response: In response to the request to engage interested parties, 
we note that we engaged multiple interested parties. Patients were 
engaged during initial work to identify concepts they deemed important 
in assessing quality of care during a hospital stay as well as concepts 
they deemed less important. Multiple audiences were included as 
technical experts in the technical expert panel convened by a CMS 
contractor, which included discussions of new content and priorities 
and trade-offs between new and existing content. In addition, multiple 
rounds of qualitative testing and discussions were conducted with 
patients and caregivers. We do not agree that the survey's priorities 
are in conflict with patient care because patient focus groups 
identified these aspects of care as important to measuring the quality 
of hospital care, and survey development and recent refinement took 
patient care needs, patient information needs, and input from 
interested parties into account when developing and refining the HCAHPS 
Survey measure.421 422
---------------------------------------------------------------------------

    \421\ Crofton C, Darby C, Farquhar M, Clancy CM. (2005) The 
CAHPS Hospital Survey: development, testing, and use. Jt Comm J Qual 
Patient Saf. 31(11):655-9, 601. doi: 10.1016/s1553-7250(05)31084-1. 
PMID: 16335067.
    \422\ Giordano LA, Elliott MN, Goldstein E, Lehrman WG, and 
Spencer PA. (2010) Development, Implementation, and Public Reporting 
of the HCAHPS Survey. Medical Care Research and Review, 67 (1): 27-
37. https://journals.sagepub.com/doi/10.1177/1077558709341065.
---------------------------------------------------------------------------

    Comment: Many commenters provided additional recommendations for 
the HCAHPS Survey measure including that CMS go further in expanding 
use of the survey to address challenges with under-reporting patient 
safety events and speeding up the process for integrating and reporting 
on the HCAHPS Survey measure changes because they are discouraged that 
the implementation for these updates is extended over several years.
    Response: We appreciate the commenters' recommendations and will 
consider additional ways to expand use of the HCAHPS Survey measure in 
future program years. While the HCAHPS Survey measure does not ask 
patients directly about patient safety events, the survey information 
could complement other patient safety data

[[Page 69500]]

collection. In regard to speeding up the process to integrate and 
report on the HCAHPS Survey measure, we note that changing the HCAHPS 
Survey entails thorough development and testing, followed by thorough 
vetting of the proposed changes through a number of internal, external, 
and rulemaking processes. Then, to publicly report HCAHPS sub-measures, 
four quarters of survey data must be collected. Lastly, the adoption of 
new or revised HCAHPS sub-measures into the Hospital VBP Program 
entails meeting the statutory requirements as outlined in section 
1886(o)(2)(C)(i) of the Act which precludes us from adopting a measure 
into the Hospital VBP Program until we have specified the updates under 
the Hospital IQR Program and included them on Care Compare for at least 
one year prior to the beginning of the performance period for such 
fiscal year. Therefore, we cannot speed the timeline up for 
implementation.
    Comment: Several commenters recommended additional testing and 
analyses to ensure that the updates reflect a streamlined approach to 
the survey before they are adopted in the CMS programs. Their 
recommendations included analyzing the reading levels of all the 
proposed new questions and modifying the wording as necessary, having a 
third party fully vet and endorse the updates before implementing them, 
conducting further validity and reliability testing, ensuring the 
questions are worded in a way that allows patients to assess an aspect 
of quality, and providing more information on the survey design process 
and the criteria used to determine when questions are considered to 
overlap.
    Response: Regarding the recommendation for additional testing and 
analyses when adopting the updates, we have conducted substantial 
testing through the 2021 mode experiment, patient focus groups, 
literature reviews, technical expert panels, and reliability and 
validity testing, as described in both the FY 2025 IPPS/LTCH PPS 
proposed rule (89 FR 36293 through 36299) and the PRMR report.\423\ 
Changing the HCAHPS Survey entails thorough development and testing, 
followed by thorough vetting of the proposed changes through a number 
of internal, external, and rulemaking processes. As such, we do not 
agree that additional testing is needed before adopting these updates.
---------------------------------------------------------------------------

    \423\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters offered recommendations for additional 
survey questions including a medication reconciliation question because 
medication errors are estimated to be the most common error made in 
hospitals, a patient consent question that would eliminate the need for 
organizations to add supplemental questions, and a question similar to 
one in the Medicare Advantage CAHPS Survey that addresses patients' 
perceptions of unfair or insensitive treatment during their hospital 
stay. A few commenters made recommendations around the languages 
offered for the HCAHPS Survey measure including expanding the approved 
HCAHPS languages, offering the survey in all approved languages for all 
survey modes similar to the Outpatient and Ambulatory Surgery CAHPS, 
reconsidering limiting the HCAHPS Survey measure to only support 
English and Spanish languages, and requiring hospitals to offer the 
survey in the language preferred by the patient or family member.
    Response: We thank commenters for their suggestions of additional 
questions to add to the HCAHPS Survey measure and we will consider 
testing and potentially adding these questions in future program years. 
We also thank the commenters for their recommendations regarding 
offering the HCAHPS Survey measure in additional languages, and we will 
take these recommendations into consideration for future program years.
    We note that the HCAHPS Survey measure is available in 8 official 
non-English translations, and that the official Spanish translation 
must be administered to all Spanish-preferring patients beginning in 
January 2025.\424\ We welcome suggestions for new translations in 
future program years.
---------------------------------------------------------------------------

    \424\ HCAHPS Quality Assurance Guidelines, V18.0. Available at: 
https://hcahpsonline.org/en/quality-assurance/.
---------------------------------------------------------------------------

    Comment: A few commenters recommended additional changes to the 
survey including changing the ``Likelihood to Recommend'' responses to 
``Net Promoter Score'' responses and adding ``Caregiver Status'' to the 
list of standardized patient assessment data elements for reporting.
    Response: We thank the commenters for their recommendations. In 
response to changing the ``Likelihood to Recommend'' (``Recommend 
Hospital'') responses to ``Net Promoter Score'' responses, the response 
options for the ``Recommend Hospital,'' which have been cognitively 
tested, empirically validated, and used in the HCAHPS Survey measure 
since its inception as well as in other CAHPS surveys, are appropriate 
for achieving the goals of the HCAHPS Survey measure. We understand 
that the Net Promoter Score is a popular surveying method to capture 
customer loyalty, however we disagree with using the Net Promoter Score 
because there is a lack of research to support the use of the Net 
Promoter Score as a primary metric of patient experience at this time, 
including information about validity and reliability in the hospital 
setting.\425\
---------------------------------------------------------------------------

    \425\ Adams C, Walpola R, Schembri AM, Harrison R. (2022) The 
ultimate question? Evaluating the use of Net Promoter Score in 
healthcare: A systematic review. Health Expect. (5):2328-2339. doi: 
10.1111/hex.13577.
---------------------------------------------------------------------------

    Comment: A few commenters stated that some questions are redundant 
or subjective, with a commenter believing that questions 20, 
``Information about Symptoms,'' and 23, ``Discharge Information in 
Writing'' both provide information about symptoms post-discharge. A few 
commenters also recommended combining or clarifying questions 20, 
``Information about Symptoms,'' and 23, ``Discharge Information in 
Writing'', and 19, ``Care Coordination Post-Hospital'' and 22, 
``Discharge Information Help'' to avoid redundancies, replacing 
``doctors, nurses, and other hospital staff'' to ``healthcare team'' 
throughout the survey because they stated that ``healthcare team'' 
encompasses all individuals who may care for a patient, and reviewing 
the ``Discharge Information'' questions, the ``Information About 
Symptoms'' question, and the new ``Care Coordination'' questions to 
determine how to incorporate the concept of language preferences. The 
commenters also requested clarification on whether the information 
being provided in response to the ``Discharge Information'' questions, 
the ``Information About Symptoms'' question, and the new ``Care 
Coordination'' questions is actually understood by the patient and 
family or caregiver and whether inclusion of both the ``Information 
About Symptoms'' and ``Discharge Information'' questions will provide 
enough differentiated information to warrant adding to the length of 
the survey. A few commenters requested clarification on what ``other 
hospital staff'' refers to in the ``Care Coordination'' sub-measure 
because not every individual in a hospital environment would have 
reason to be included in a patient's plan of care.

[[Page 69501]]

    Response: We note that we do not collect standardized patient 
assessment data or protected health information from patients or from 
hospitals and the HCAHPS Survey measure does not include patient 
assessment data, and therefore, we cannot add ``Caregiver Status'' to 
the list of standardized patient assessment data elements. We may 
consider developing and testing items about caregiver status for future 
use; however we also note that we have added questions about 
communicating with family and caregivers in both the new ``Care 
Coordination'' sub-measure and in the new ``Information about 
Symptoms'' single-item sub-measure. We also remind the commenter that a 
patient's proxy is permitted to respond to the HCAHPS Survey beginning 
with January 2025 discharges, as finalized in the FY 2024 IPPS/LTCH PPS 
final rule (88 FR 59198).
    Survey questions 20 and 23 differ in significant ways. Question 20, 
``Information About Symptoms,'' asks about the engagement of family 
members or caregivers, specifically whether the patient's family or 
caregiver received enough information about what symptoms or health 
problems to help watch for after the patient leaves the hospital. 
Patients identified information communicated to a patient's family 
members or caregivers as an aspect of care that is critical to 
measuring quality. In contrast, Question 23, ``Discharge Information in 
Writing,'' is specific to the patient's experience. It asks whether the 
patient received written information about symptoms or health problems 
to look out for after leaving the hospital, which patients also 
identified as an aspect of care that is important to measuring quality 
and is only asked of patients who go directly home after leaving the 
hospital. These are different topics and are measured via separate 
items to ensure that the data collected are actionable. Questions 20 
and 23 are also not empirically redundant. The empirical testing of the 
new questions for the updated HCAHPS Survey measure, both from their 
content and from statistical evidence, demonstrated that these 
questions address different aspects of patient care and that each 
question independently predicts the overall rating of the hospital. We 
refer the commenter to the PRMR report for additional information on 
the testing we conducted.\426\ Given these important differences, it is 
appropriate to maintain questions 20 and 23 as separate questions. 
Similarly, we have determined that the ``Information About Symptoms'' 
and ``Discharge Information'' questions use terms that are well 
understood by the patient and family or caregiver based on focus groups 
and cognitive interviews and therefore need not be clarified.
---------------------------------------------------------------------------

    \426\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

    Additionally, we do not agree with commenters' recommendations to 
combine questions 19 and 22 in the HCAHPS Survey measure because we 
have determined via qualitative and quantitative testing that these 
questions address different key aspects of care as identified by 
patients and caregivers. Question 19, the ``Care Coordination Post-
Hospital'' question, collects information on whether the patient's 
family or caregiver was involved in discussion of the patient's post-
discharge care needs, while question 22, the ``Discharge Information 
Help'' question, is specific to the patient's experience and asks 
patients who were discharged to their own home or someone else's home 
whether doctors, nurses or other hospital staff talked with them about 
whether they would have the needed level of help or support after 
leaving the hospital. As explained above, questions 20 and 23 similarly 
address different aspects of patient care, focusing on either the 
experience of the patient's family or caregiver (question 20) or the 
experience of the patient (question 23) in receiving information about 
symptoms or health problems to watch for after the patient leaves the 
hospital.
    Comment: A few commenters expressed concerns with the verbiage in 
the new ``Care Coordination'' sub-measure, with a commenter noting that 
the repetition of the language, ``doctors, nurses, and other hospital 
staff'' may confuse patients and instead recommended collapsing the 
list into ``hospital team'' to be more inclusive and aligned with 
health literacy standards. Another commenter expressed concern about 
the use of ``other hospital staff'' because they stated that other 
hospital staff should not be informed about a patient's care. The 
commenter recommended removing the term or better defining it in the 
question. A commenter also recommended modifying the question in the 
``Discharge Information'' sub-measure about whether patients have the 
help they need after they leave the hospital to address needed support 
for family caregivers. A commenter recommended limiting the addition of 
new questions to only those that provide meaningful and actionable data 
because they stated that repetitive questions can limit response rates.
    Response: The phrase ``doctors, nurses, and other hospital staff'' 
has been used since the inception of HCAHPS and was subject to multiple 
rounds of testing during HCAHPS development and the current refinement 
of HCAHPS content. These efforts confirmed that the phrase is clearly 
understood by patients. Cognitive testing indicated that patients 
understood that other hospital staff included staff such as individuals 
providing therapy who should be aware of the patient's condition.
    Patients indicated that how well ``doctors, nurses, and other staff 
work together or as a team'' in caring for a patient was the most 
important information to have in determining what their care would be 
like at a particular hospital. The term ``other hospital staff'' refers 
to anyone else involved in the patient's care during their hospital 
stay, including but not limited to those who take patients for X-rays 
or medical tests, individuals providing treatment or therapy during the 
in-patient stay, and those who participate in discharge planning. 
Cognitive testing indicates that repeated use of this phrase ensures 
that patients understand who is included; terms such as ``Care team'' 
and ``Hospital team'' are less familiar to patients. Based on these 
efforts, we determined that the survey language is clear and 
intelligible to patients.
    We agree with the commenter that the addition of new questions 
should be limited to only those that provide meaningful and actionable 
data and have identified that the updates to the HCAHPS Survey measure 
provide such data. A CMS contractor convened a technical expert panel 
that engaged physicians, nurses, academics, and representatives of 
hospitals, insurers, and patient advocacy groups to assess the 
actionability of all new items proposed for testing to ensure we 
focused the new content on actionable events, and we note that every 
proposed question had statistical evidence that it improved measurement 
of the sub-measure to which it belonged.\427\ We will consider how to 
incorporate the concept of language preferences into the sub-measures 
in future program years.
---------------------------------------------------------------------------

    \427\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

    Comment: A commenter did not support the ``Information About 
Symptoms'' sub-measure because they

[[Page 69502]]

believed it is substantially similar to the ``Discharge Information in 
Writing'' question. A commenter questioned the sub-measure's intent as 
they stated the question seems to be more about whether the hospital 
gave the patient information rather than whether the patient was able 
to understand the information. A few commenters made recommendations 
about the new ``Information About Symptoms'' question including 
modifying the question to focus more on the patient's understanding 
than on the task of handing over education, and explicitly mentioning 
the patient in the question to reinforce a patient-and-family centered 
care model. A commenter recommended modifying the ``Discharge 
Information in Writing'' question to incorporate information about 
systems and to say, ``in your preferred language in writing.''
    Response: We appreciate the commenter's concern; however, through 
our 2021 mode experiment, focus groups, technical expert panel, and 
literature review, we have ensured that the questions proposed, 
including the ``Information About Symptoms'' question, add unique, non-
redundant information about key aspects of patient experience of care. 
The ``Information About Symptoms'' sub-measure focuses on information 
communicated to a patient's family or caregiver, an aspect of care that 
patients identified as critical to measuring quality. In contrast, the 
``Discharge Information in Writing'' question asks about written 
information provided to the patient, which is also important to 
measuring quality. These are different topics and are measured via 
separate items to ensure that the data collected are actionable. We 
refer the commenter to the PRMR report for additional information on 
the testing we conducted.\428\
---------------------------------------------------------------------------

    \428\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

    We also note that the ``Information About Symptoms'' question 
captures an important aspect of hospital care identified by patients 
and caregivers participating in focus groups. Cognitive testing 
demonstrated that the ``Information About Symptoms'' question was 
accurately and consistently interpreted, as described in the FY 2025 
IPPS/LTCH PPS proposed rule (89 FR 36299). We agree that ensuring 
patient comprehension is important and will take this feedback into 
consideration, along with the suggestion to include ``in your preferred 
language in writing,'' in the ``Discharge Information in Writing'' 
question for future program years.
    Comment: A few commenters offered additional recommendations 
including that CMS report survey results by race and ethnicity to aid 
in reducing disparities. Another commenter recommended that CMS should 
talk to employers and other purchasers to utilize HCAHPS for their 
maternity populations.
    Response: We appreciate the commenters' recommendations. We will 
consider reporting survey results by race and ethnicity in future 
program years. Maternity patients have been eligible for the HCAHPS 
Survey measure since its inception. Our research indicates that 
maternity patients are particularly affected by mode of survey 
administration; we recommend that hospitals carefully choose the mode 
of HCAHPS administration that will fully capture their entire patient 
population.429 430
---------------------------------------------------------------------------

    \429\ Elliott MN, Brown JA, Hambarsoomian K, et al. (2024) 
Survey Protocols, Response Rates, and Representation of Underserved 
Patients: A Randomized Clinical Trial. JAMA Health Forum. 
5(1):e234929. doi: 10.1001/jamahealthforum.2023.4929.
    \430\ HCAHPS Online. (2022) ``Improving Representativeness of 
the HCAHPS Survey'' podcast. Available at: https://hcahpsonline.org/en/podcasts/#ImprovingRepresentativeness.
---------------------------------------------------------------------------

    Comment: A commenter recommended using Short Message Service (SMS) 
or other forms of text messages as an additional survey mode because 
they stated it would help increase response rates.
    Response: While the current web administration mode does not 
include a text message option, we will take these recommendations into 
consideration for future program years while also taking into 
consideration the Telephone Consumer Protection Act (TCPA) 
requirements. We evaluated the possibility of using text message as a 
mode for survey implementation but determined that varying standards 
across states, possible charges for text messages, as well as the 
requirements of TCPA, make a text survey infeasible for the national, 
standardized HCAHPS Survey measure at this time. However, we will 
continue to explore this as an option for the future.
    Comment: A commenter recommended additional financial support for 
under-resourced hospitals to help them move beyond process 
improvements.
    Response: We cannot provide additional financial support for under-
resourced hospitals as part of the HCAHPS Survey measure at this time.
    We also received public comments on the specific addition of the 
``Care Coordination'' sub-measure to the HCAHPS Survey measure.
    Comment: Many commenters specifically supported the adoption of the 
``Care Coordination'' sub-measure because they stated that it is 
broader and clearer than the ``Care Transition'' sub-measure, addresses 
important dimensions of patient experience not previously addressed, 
and provides information about how well a patient felt their care team 
worked together. Several commenters noted that the new ``Care 
Coordination'' sub-measure reflects CMS's commitment to the role of 
patient reported experiences and another commenter stated it would 
serve to reduce overlap between care transition and discharge 
information. A few commenters stated the new sub-measure would enhance 
the HCAHPS Survey measure, better capture patient experience of 
hospital care, and improve understanding of the challenges faced in 
coordinating care across the care continuum. A commenter expressed 
support for the ``Care Coordination'' measure because they stated it is 
broader than the ``Care Transition'' sub-measure but noted that care 
coordination is important at care transition.
    Response: We thank commenters for their support of the new ``Care 
Coordination'' sub-measure. We agree that care coordination is 
important at care transition, and have determined, through the four 
patient focus groups that were conducted before proposing these 
updates, that the updated question set captures the key aspects of 
patient experience of care including at the point of care transition. 
We reiterate that the new ``Care Coordination'' sub-measure focuses on 
how well hospital staff worked together and whether doctors and staff 
worked to make care transition plans for the patient post-
hospitalization.
    Comment: A commenter did not support removing the question, 
``During this hospital stay, staff took my preferences and those of my 
family or caregiver into account in deciding what my health care needs 
would be when I left,'' because the commenter stated the new ``Care 
Coordination'' questions do not inherently take personal preferences 
into account.'' The commenter recommended maintaining this question and 
the new ``Care Coordination'' questions.
    Response: We appreciate the commenter's concern, however, the 
question asking about preferences was removed because it was perceived 
by patients in the focus groups as

[[Page 69503]]

duplicative of existing and new survey questions, as described in the 
FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36294).
    Comment: A commenter recommended broadening the ``Care 
Coordination'' sub-measure to include whether family caregivers 
received any needed support to capture additional data on caregiver 
support.
    Response: We thank the commenter for the recommendation and will 
consider further broadening the ``Care Coordination'' sub-measure in 
future program years. We note patients and caregivers identified these 
questions, as written, as very important to addressing key aspects of 
patient care.
    We also received public comments on the specific addition of the 
``Restfulness of Hospital Environment'' sub-measure to the HCAHPS 
Survey measure.
    Comment: Several commenters supported the addition of the new 
``Restfulness'' sub-measure, believing that the questions would enhance 
the HCAHPS Survey measure and are significant contributions that 
reflect CMS's commitment to expanding the role of patient reported 
experiences. A commenter supported the ``Restfulness'' sub-measure 
because they stated that rest and sleep are foundational occupations 
that affect daily patient function and quality of life, and another 
supported the addition of the ``Restfulness'' sub-measure, but 
expressed concern that combining all hospital staff into a single 
question complicates hospitals' work. Another commenter supported the 
wording of ``doctors, nurses, and other hospital staff'' because they 
stated a patient may not always know what type of staff a specific 
person is, and thus the wording lessens the possibility of inaccurate 
survey responses. A commenter specifically supported the ``Quietness'' 
question because it enhances the HCAHPS Survey measure and better 
captures patient experience of hospital care.
    Response: We thank commenters for their support of the new 
``Restfulness'' sub-measure.
    Comment: A few commenters did not support the ``Restfulness'' sub-
measure because they stated the questions are too subjective and may 
create confusion. A few commenters also stated that hospitals by nature 
are not restful environments and proper care and safety should take 
precedence over rest. A few commenters expressed concern that the 
questions may divert attention from more critical elements of care. A 
few commenters requested additional testing information and data about 
how patients interpret the ``Restfulness'' sub-measure in light of 
their concerns that the questions are subjective and stated that there 
may be important reasons to interrupt a patient's rest. A commenter 
recommended that the sub-measure be sent to a workgroup to make changes 
to the questions to ensure there are no unintended consequences. A 
commenter recommended removing the ``Quietness'' question altogether.
    Response: Cognitive testing demonstrated that the new questions 
were accurately and consistently interpreted by patients. Additionally, 
we have identified the need for this sub-measure through focus groups 
and cognitive interviews with patients and caregivers, discussions with 
technical experts, and literature reviews that were conducted by a CMS 
contractor who made recommendations to CMS. ``Restfulness of Hospital 
Environment'' was deemed an important new topic to add to the HCAHPS 
Survey measure based on stakeholder feedback, including that from 
hospital staff and patient groups. Clinicians on our technical expert 
panel, patients, and patient advocates supported these questions. This 
sub-measure can be satisfied by avoiding needless disruptions and 
explaining to patients the importance of necessary ones. We have also 
conducted reliability and validity testing at the expected average 
number of completed surveys per hospital and therefore do not agree 
that additional review by a workgroup is necessary at this time. We 
refer the commenter to the PRMR report for additional information on 
the testing conducted on these updates, which did not identify any 
unintended consequences.\431\
---------------------------------------------------------------------------

    \431\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

    In response to the request to remove the ``Quietness'' question, we 
note that this question is already included in the current version of 
the HCAHPS Survey measure as a single-question sub-measure, and the 
question itself is not changing in the updated version of the survey.
    Comment: Several commenters expressed concerns about the 
``Restfulness'' sub-measure including concerns about the validity and 
reliability.
    Response: We appreciate the commenters' concerns. We reiterate that 
we identified the need for these updates through focus groups and 
cognitive interviews with patients and caregivers, discussions with 
technical experts, and literature reviews. The new questions within the 
``Restfulness'' sub-measure fill a gap related to providing a restful 
and healing environment within the hospital setting and support our 
goal of including measures related to person-centered care. We also 
reiterate that we have conducted reliability and validity testing at 
the expected average number of completed surveys per hospital. We refer 
the commenter to the PRMR report for additional information on the 
testing conducted on these updates, including testing specifically on 
the ``Restfulness'' sub-measure.\432\
---------------------------------------------------------------------------

    \432\ Ibid.
---------------------------------------------------------------------------

    Comment: A few commenters also requested clarification on the 
extent of the risk adjustment approach that may account for differences 
in the score of the ``Restfulness'' sub-measure.
    Response: We thank commenters for their request. The HCAHPS 
patient-mix adjustment (risk adjustment) approach accounts for factors 
not under a hospital's control that affect how patients answer survey 
items, such as, patients' service line by sex, age, education, language 
spoken at home, and self-rated overall and mental health. The same 
patient-mix model used for all other HCAHPS sub-measures was proposed 
for the ``Restfulness of Hospital Environment'' sub-measure. The 
current HCAHPS patient-mix adjustments can be found at https://hcahpsonline.org/en/mode--patient-mix-adj/#jan2023publiclyreported. An 
example of patient-mix adjustment for the updated HCAHPS Survey measure 
can be found at https://hcahpsonline.org/globalassets/hcahps/training-materials/2024_training-materials_slides.pdf.
    Comment: A few commenters expressed concerns that the sub-measure 
may result in providers prioritizing a quiet environment over providing 
necessary medical rounds, and that if certain services need to be 
provided overnight, the disruption may affect performance on the 
survey. A few commenters also expressed concern that the sub-measure 
may unfairly penalize or disadvantage certain hospitals such as 
quaternary hospitals with high acuity patients, hospitals in densely 
urban neighborhoods, and hospitals with dual occupancy rooms. A 
commenter supported the inclusion of the new ``Restfulness'' questions, 
but expressed concern that rooms with one or more other patients are 
hard to control and that prioritizing restfulness could lead hospitals 
to limit family visitations. Another commenter recommended monitoring 
implementation to ensure no unintended consequences. A

[[Page 69504]]

commenter recommended reconsidering implementation of the 
``Restfulness'' sub-measure because they stated that the practice of 
checking on patients regularly throughout the night could diminish with 
this sub-measure, which could lead to more falls. Another commenter 
recommended removing the ``Rest and Recover'' question, which asks, 
``During this hospital stay, did doctors, nurses, and other hospital 
staff help you rest and recover?'', because hospitals provide 24/7 
care, and providers often need to interrupt patients throughout the 
night for treatment or to take vitals.
    Response: The HCAHPS Survey measure is designed to produce 
standardized information about patients' perspectives of care that 
allows comparison of hospitals on topics that are important to 
consumers. While we acknowledge that commenters' concerns about 
prioritization of safe patient care practices is valid and that 
hospitals should be conducting necessary medical rounds, the survey is 
designed to measure patients' experience of care and the care should be 
provided to promote as restful an experience as possible while 
delivering the necessary clinical care. The goal of the ``Restfulness 
of the Hospital Environment'' items is not merely comfort, but to 
promote recovery. Restfulness can be accomplished with no reduction in 
rounding. We remind commenters that the HCAHPS Survey measure has 
always included the ``Quietness'' question, which would be retained in 
the updated HCAHPS Survey measure in the new ``Restfulness of Hospital 
Environment'' sub-measure. There is evidence that both quiet and rest 
are important for recovery.\433\ \434\ We are not aware of any 
unintended consequences from the ``Quietness'' question. ``Restfulness 
of the Hospital Environment,'' which is based on one current HCAHPS 
item and two new HCAHPS items, was deemed an important new topic to add 
to HCAHPS based on stakeholder feedback from hospital staff and patient 
groups. The concept of ``rest and recovery'' was important to the 
technical expert panel convened by a CMS contractor to provide feedback 
on updating the HCAHPS Survey measure. In particular, the panel 
encouraged CMS to add items that asked about rest and/or recovery, 
noting the concept is distinct from sleep, which is also important to 
recovery and is independently important in care. The items were 
designed and worded to acknowledge that activities such as rounding, 
tending to other patients, or managing emergencies are necessary. 
Cognitive testing suggests that if patients are told why they are being 
woken they do not rate this item negatively. The goal of this measure 
is to discourage needless disruptions and to encourage communication 
between providers and patients. Dual occupancy rooms, like hospitals 
with lower staffing, may result in poorer patient experience; the 
HCAHPS Survey measure seeks to measure and report actual performance.
---------------------------------------------------------------------------

    \433\ Stewart NH, Arora VM. (2022) Sleep in Hospitalized Older 
Adults. Sleep Med Clin. 17(2):223-232. doi: 10.1016/
j.jsmc.2022.02.002. Epub 2022 Apr 22. PMID: 35659075.
    \434\ Hedges C, Hunt C, Ball P. (2019) Quiet Time Improves the 
Patient Experience. J Nurs Care Qual. 34(3):197-202. doi: 10.1097/
NCQ.0000000000000363. PMID: 30198951.
---------------------------------------------------------------------------

    Comment: Several commenters offered recommendations to modify the 
``Restfulness'' questions. Their recommendations included removing the 
``Rest and Recover'' question (Question 18) because they stated it is 
unclear what ``rest and recover'' means and feedback around ``rest'' is 
captured by other questions in the ``Restfulness of the Hospital 
Environment'' sub-measure; combining questions 8, ``During this 
hospital stay, how often are you able to get the rest you needed?'' and 
18, ``During this hospital stay, did the doctors, nurses, and other 
hospital staff help you rest and recover?'' into one question asking if 
the hospital staff helped the patient rest and recover because they 
stated it speaks more to the care provided by the staff; modifying the 
language to say ``During this hospital stay, did your hospital team 
help you rest?'' because they stated a team approach prevents the 
possibility of incorrect survey responses; and asking patients to 
report the ability of the environment to support ``rest'' versus ``rest 
you need'' because they stated rest may come secondary to treatment 
needs and a patient may have difficulty getting a good night's sleep 
anywhere except their own bed. A few commenters expressed concerns with 
the term ``recover'' with one believing that rest and recovery are two 
different dimensions and another noting that not all inpatients are 
anticipated to recover from their condition. The commenters recommended 
removing the words, ``and recover'' to better focus on ``restfulness.''
    Response: We appreciate the commenters' recommendations. However, 
we wish to note that the questions as currently written were reviewed 
by patient focus groups and tested for reliability and validity, and we 
therefore do not agree with modifying the wording or combining the 
questions as the commenters have suggested earlier. Cognitive testing 
suggests that if patients are told why they are being woken they do not 
rate this item negatively. The goal of this measure is to discourage 
needless disruptions and to encourage communication between providers 
and patients. Empirical testing of the ``Restfulness of Hospital 
Environment'' sub-measure in the 2021 mode experiment provides strong 
support for each question in the sub-measure and the sub-measure as a 
whole. We note that the ``Quietness'' question has always been included 
in the HCAHPS Survey measure and will provide continuity in both public 
reporting and in the Hospital VBP program.
    We received public comments on the specific addition of the 
``Information about Symptoms'' sub-measure to the HCAHPS Survey 
measure.
    Comment: Several commenters expressed support for the adoption of 
the new ``Information About Symptoms'' single-item sub-measure because 
they stated the addition of the ``Information About Symptoms'' question 
is a significant contribution to committing to the role of patient 
reported experiences that would enhance the HCAHPS Survey measure. A 
few commenters supported the sub-measure with a commenter stating that 
it can provide important information about how well a patient felt that 
his or her care team assisted with post-discharge planning, and another 
commenter noting that the sub-measure has been shown to improve patient 
outcomes. A commenter recommended strengthening the question to also 
include information on how to address symptoms, such that the question 
would read, ``During this hospital stay, did doctors, nurses, or other 
hospital staff give your family enough information about what symptoms 
or health problems to watch for after you left the hospital and how to 
address them?'' because they stated that this revision would provide 
useful information for hospitals, consumers, and caregivers.
    Response: We thank the commenters for their support of the new 
``Information About Symptoms'' sub-measure, and we will continue to 
consider additional ways to strengthen the survey, including revising 
the question to include information on how to address a patient's 
symptoms in future program years. Any changes to a question's wording 
would need to be tested before we can consider incorporating them in 
future years.
    We also received public comments on the specific modification of 
the ``Responsiveness of Hospital Staff'' sub-

[[Page 69505]]

measure to the HCAHPS Survey measure.
    Comment: Several commenters supported adopting the modifications to 
the ``Responsiveness of Hospital Staff'' sub-measure because they 
enhance the person-centeredness of care, represent current workflows 
within hospitals, are more inclusive of different hospital strategies, 
and accurately measure the patient experience. A few commenters 
specifically supported the removal of the ``Call Button'' question 
because they stated that the technology is evolving, and the new 
questions better reflect current practices.
    Response: We thank the commenters for their support of the 
modifications to the Responsiveness of Hospital Staff sub-measure. We 
agree that the modifications are more inclusive and accurately measure 
the patient experience. We also appreciate the support of the removal 
of the ``Call Button'' question.
    Comment: A few commenters did not support the verbiage of ``right 
away'' and ``as soon as you needed'' in the new ``Responsiveness'' sub-
measure and recommended rewording or removing the questions because 
they stated the language is too subjective. Some commenters suggested 
that CMS should develop alternative phrasing to enhance clarity and 
accessibility such as replacing ``right away'' with ``quickly,'' while 
another commenter recommended removing the word ``right away'' entirely 
from the question because they stated that it makes the question too 
wordy and indicates that the question pertains only to those who need 
urgent help.
    Response: We thank the commenters for their suggestions regarding 
the wording of the ``Responsiveness of Hospital Staff'' sub-measure, 
however, we do not agree that the wording of the question should be 
changed. The terms ``right away'' and ``as soon as you needed'' are 
commonly used in CAHPS surveys to identify care needs that are time-
sensitive. We discussed the item wording and terms with patients in 
multiple focus groups and cognitive interviews and found that the uses 
of ``right away'' and ``as soon as you needed'' promote common, 
consistent interpretation of the survey item across patients. As part 
of the cognitive interviews, we discussed their understanding of the 
terms included in these questions and found no issues.
    Comment: A commenter also questioned whether patients tend to 
respond more positively to questions framed around immediate 
responsiveness versus those related to the call bell and recommended 
that CMS grant access to the research demonstrating the impact of the 
modified questions.
    Response: We refer the commenter requesting access to our research 
to the PRMR report for additional information on the testing we 
conducted on these updates.\435\ Because the ``Call Button'' question 
and the new ``Help Right Away'' question, which asks, ``During this 
hospital stay, when you asked for help right away, how often did you 
get help as soon as you needed?'' were not tested in the same study, it 
is not possible to confidently compare their mean scores. We do, 
however, have strong evidence of the reliability and validity of the 
new ``Help Right Away'' question, which was developed in response to 
stakeholder concerns about the ``Call Button'' question.
---------------------------------------------------------------------------

    \435\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

    We also received public comments on the specific removal of the 
``Care Transition'' sub-measure from the HCAHPS Survey measure.
    Comment: Several commenters supported the removal of the ``Care 
Transition'' sub-measure because they stated that the ``Care 
Coordination'' sub-measure encompasses a broader range of questions 
than ``Care Transition'' did and removing ``Care Transition'' would 
reduce repetitiveness and overlap. A commenter stated the changes would 
enhance the HCAHPS Survey measure and another commenter supported that 
the removal of the ``Care Transition'' sub-measure in conjunction with 
the adoption of the ``Care Coordination'' sub-measure would ensure 
there is not an increase to the survey's length.
    Response: We thank the commenters for their support of the removal 
of the ``Care Transition'' sub-measure and agree that the ``Care 
Coordination'' sub-measure broadens the current ``Care Transition'' 
sub-measure.
    Comment: A commenter recommended that the updates to the survey be 
delayed until the conclusion of the Magnet application period because 
the Magnet teams look closely at measures within the ``Care 
Transition'' dimension so the updates could impact entities undergoing 
Magnet submission.
    Response: We understand that outside credentialing programs, such 
as Magnet, may employ the HCAHPS Survey measure in their own 
eligibility, assessment, or credentialing processes. There are numerous 
credentials that hospitals can choose to pursue, and while we respect 
the commitment to excellence, we do not control or oversee such 
secondary uses and cannot base our implementation timelines on outside 
credentialing. We invite these organizations to familiarize themselves 
with the updated HCAHPS Survey measure to assess its suitability for 
their needs.
    We also received public comments on the specific modifications to 
the ``About You'' section of the HCAHPS Survey measure.
    Comment: A few commenters specifically supported the updates to the 
``About You'' section, with a few supporting the alphabetization of the 
response options for the race and ethnicity questions and one 
supporting the modified language spoken at home question because they 
stated it makes survey completion less burdensome. A commenter 
supported incorporating the ``Hospital Stay Planned in Advance'' 
question because they stated it more appropriately captures the reason 
for admission. Another commenter supported the updates but recommended 
aligning the HCAHPS Survey measure questions with the updated OMB 
standards for maintaining, collecting, and presenting federal data on 
race and ethnicity to reduce disparities and harmonize data collection 
across agencies.
    Response: We thank the commenters for their support of the updates 
to the ``About You'' section, and we agree that the updates make the 
survey less burdensome to complete. We appreciate the recommendation to 
align with the OMB standards and harmonize data collection across 
agencies. We will take this into consideration in future program years.
    Comment: A few commenters did not support the new ``Hospital Stay 
Planned in Advance'' question, with a commenter believing the new 
verbiage is ambiguous and may result in a lack of meaningful data, and 
another commenter expressed concern that the new question could have 
unintended consequences for how patient mix is adjusted and recommended 
not finalizing.
    Response: As described in the FY 2025 IPPS/LTCH PPS proposed rule, 
the new ``Hospital Stay Planned in Advance'' question would account for 
differences in this preadmission characteristic, as an unplanned 
hospital stay can result in worse patient experiences than if the 
hospital stay had been planned (89 FR 36300). The cognitive testing 
that we conducted indicated that the new question is better understood 
than the current

[[Page 69506]]

``Admission through the Emergency Room'' question.
    Comment: Several commenters expressed concerns about the updates to 
the ``About You'' section, including a few commenters who expressed 
concerns about limiting the number of language response options in the 
``About You'' section because they stated restricting the language 
options could undermine and underrepresent patient experiences, 
particularly when the release of the web-first modalities has been 
found to increase response rates for many of the language options that 
CMS is proposing to remove. A few commenters recommended maintaining or 
even expanding the range of languages identified in the survey because 
they stated it would provide a more accurate picture of enrollee 
demographics and inform decisions regarding survey translation. A 
commenter recommended monitoring the percent of responses in the 
``Other'' category and broadening the options again in the future.
    Response: We thank commenters for their feedback about limiting the 
number of language response options in the ``About You'' section. We 
note that reciting a long list of languages in question 29 increases 
survey burden for patients, especially in the telephone mode. 
Additionally, the response option, ``Another language,'' which remains 
available as a response option for anyone who does not speak English, 
Spanish, or Chinese, would more efficiently gather important 
information for use in patient-mix adjustment. Patient-mix adjustment 
of ``Language Spoken at Home'' will employ four categories: 
``English,'' ``Spanish,'' ``Chinese,'' and ``Another language.'' 
Because patient-mix adjustment combines all other languages into one 
category, the response option ``Another language'' will improve survey 
efficiency and reduce burden, especially on telephone surveys.\436\ 
Official translations of the HCAHPS Survey in Spanish, Chinese, 
Russian, Vietnamese, Portuguese, German, Tagalog, and Arabic will 
continue to be available for use, though only English and Spanish 
versions will be required. We also appreciate the recommendations to 
maintain or increase the range of language options, but we remind 
commenters that we identified these changes as an effort to make survey 
administration more efficient and reduce respondent burden, especially 
in the telephone mode of survey administration. Additionally, we will 
continue to monitor trends in patient language and will consider 
broadening the options again in the future.
---------------------------------------------------------------------------

    \436\ HCAHPS Online. (2023) Patient Mix Adjustment. Available 
at: https://hcahpsonline.org/en/mode--patient-mix-adj/#jan2023publiclyreported.
---------------------------------------------------------------------------

    Comment: A few commenters expressed concerns about the new 
``Hospital Stay Planned in Advance'' question because they stated the 
question may require more clarity and further guidance to ensure that 
patients understand the question as intended. A commenter expressed 
concern that the ``Hospital Stay Planned in Advance'' question has the 
possibility to be doubly adjusted with a service line adjustment for 
maternity and another potential adjustment for the admission being 
unplanned. Another commenter expressed concern that in cases related to 
hospital stays for childbirths, the hospital admission date for a 
vaginal delivery could be viewed by a patient as either unplanned or 
planned in advance. The commenter therefore recommended further 
guidance to survey respondents about how to answer the question, 
including covering the most common situations where there may be 
ambiguity.
    Response: We appreciate commenters' feedback about the new 
``Hospital Stay Planned in Advance'' question. Cognitive testing 
indicated that the question is well understood and is better understood 
than the current ``Admission Through the Emergency Room'' question. Our 
results from the 2021 mode experiment also indicate that adjusting for 
unplanned stays improves the accuracy of HCAHPS scores. Patient-mix 
adjustment is implemented via multiple regression in such a way that 
ensures that double adjustment does not occur. When an adjustor is 
added, any ``overlapping'' adjustment with other adjustors is 
automatically removed. Data collected in the 2021 mode experiment also 
indicated that maternity care is not often reported by patients as 
being unplanned. We note that the response options for the new 
``Hospital Stay Planned in Advance'' question offer patients the choice 
of selecting among ``Yes, definitely,'' ``Yes, somewhat,'' and ``No.'' 
The response option, ``Yes, somewhat,'' is available for hospital stays 
that were neither ``yes, definitely'' planned in advance, nor ``no,'' 
unplanned.
    Comment: A few commenters made recommendations about the ``About 
You'' section including a few commenters that made recommendations 
about race and ethnicity data. Their recommendations included 
implementing OMB's revised standards for the collection of race and 
ethnicity data, combining the two race and ethnicity questions into one 
question on both race and ethnicity, and adding a Middle Eastern or 
North African category. A commenter recommended that race and ethnicity 
be separated instead of grouped together.
    Response: We appreciate the commenters' recommendations for 
additional updates to the race and ethnicity questions and will take 
these into consideration in future program years.
    We also invited public comment on the proposed adoption of the 
updated HCAHPS Survey measure for the Hospital IQR Program beginning 
with the CY 2025 reporting period/FY 2027 payment determination and the 
PCHQR Program beginning with the CY 2025 reporting period/FY 2027 
program year.
    Comment: A commenter specifically supported the adoption of the 
updates to the HCAHPS Survey measure in the PCHQR Program but 
recommended examining whether ``Restfulness'' disproportionately 
penalizes urban hospitals.
    Response: We thank the commenter for their support of the adoption 
of the updates in the PCHQR Program. The ``Restfulness of Hospital 
Environment'' sub-measure was identified to have good hospital-level 
reliability (0.729) at the expected average number of completed surveys 
per hospital. Testing found no evidence that the measure is less 
accurate for urban than rural hospitals.
    Comment: A commenter specifically supported the modified public 
reporting schedule for the Hospital IQR Program.
    Response: We thank the commenter for their support of the public 
reporting schedule.
    Comment: A commenter recommended that CMS complete validity testing 
and receive CBE endorsement to understand the strength of the 
correlations of the multi-item and single-item measures with the 
overall measures before implementing the changes into the Hospital IQR 
Program.
    Response: We refer the commenter to the FY 2025 IPPS/LTCH PPS 
proposed rule (89 FR 36299) and this final rule where we outline the 
reliability and validity testing we conducted on all of the updates we 
proposed to the HCAHPS Survey measure. We will submit the updated 
HCAHPS Survey measure to the current CBE for endorsement in Fall 2025. 
We note that section 1886(b)(3)(B)(viii)(IX)(bb) 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

[[Page 69507]]

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. We have determined that the updates to the 
HCAHPS Survey measure are appropriately specified. The HCAHPS Survey 
measure remains endorsed, and the updated survey only modifies some of 
the questions and sub-measures within the survey. The HCAHPS Survey 
measure is designed to produce standardized information about patients' 
perspectives of care that allow objective and meaningful comparisons of 
hospitals on topics that are important to consumers, and these updates 
would improve the feedback we receive directly from patients on 
hospital performance. Therefore, we are adopting these updates to the 
measure before the updates receive CBE endorsement.
    Comment: A commenter recommended rolling out the new questions 
beginning with the CY 2026 discharges because health systems and 
vendors will only have about three months to transition to the new 
requirements once the final rule is released in August.
    Response: Since these updates to the HCAHPS Survey measure are 
limited to changes to some of the survey questions, we have identified 
that there would be sufficient time from public display of this final 
rule on or about August 1, 2024, and when the updated survey would 
begin to be administered to patients who are discharged in January 
2025. The updated HCAHPS Survey has been available in all survey modes 
on the official HCAHPS website since May 2024, including the official 
Spanish translation, and the Quality Assurance Guidelines for the 
updated HCAHPS Survey measure have been available since May 2024. As 
noted in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36294), the 
updated version of the HCAHPS Survey measure would not result in any 
changes to the survey administration or other reporting requirements. 
We note that changes to the administration of the survey were finalized 
in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59196 through 59201) and 
that approved HCAHPS Survey vendors were trained on the updated HCAHPS 
Survey measure in May 2024. We, therefore, have determined that 
hospitals would not need additional time before the updated survey is 
implemented.
    After consideration of the public comments received, we are 
finalizing adoption of the updated HCAHPS Survey measure in the 
Hospital IQR and PCHQR Programs as proposed.
f. Modifications To Scoring of the HCAHPS Survey Measure for the 
Hospital VBP Program for the FY 2027 Through FY 2029 Program Years
(1) Background
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule, we 
proposed to adopt an updated version of the HCAHPS Survey measure so 
that IPPS hospitals and PCHs can report patient responses to the 
updated survey for purposes of the Hospital IQR Program and PCHQR 
Program, respectively, beginning with January 1, 2025, discharges (89 
FR 36298 through 36300). We also proposed to adopt the updated version 
of the HCAHPS Survey measure for purposes of the Hospital VBP Program 
in section IX.B.2.g. of this final rule; however, section 
1886(o)(2)(C)(i) precludes us from doing so until we have specified the 
updates under the Hospital IQR Program and included them on Care 
Compare for at least one year prior to the beginning of the performance 
period for such fiscal year. For this reason, we proposed to adopt the 
updated version of the HCAHPS Survey measure beginning with the FY 2030 
program year in the Hospital VBP Program. However, to relieve hospitals 
of the burden of having to use two different versions of the survey 
between FY 2027 and FY 2029, we proposed that hospitals would be able 
to administer the updated version of the survey starting with January 
1, 2025 discharges, and for the purposes of the Hospital VBP Program, 
we would only score hospitals on the six dimensions of the HCAHPS 
Survey measure that would remain unchanged from the current version of 
the survey.
(2) Scoring Modification of the HCAHPS Survey Measure for the Hospital 
VBP Program for the FY 2027 Through FY 2029 Program Years
    In the FY 2025 IPPS/LTCH PPS proposed rule, we proposed to modify 
scoring to not include the ``Responsiveness of Hospital Staff'' and 
``Care Transition'' dimensions from scoring in the Hospital VBP 
Program's HCAHPS Survey measure in the Person and Community Engagement 
domain for the FY 2027 through FY 2029 program years (89 FR 36300 
through 36301). As noted earlier, we must collect and publicly report 
four quarters of data on the updated HCAHPS Survey measure before the 
updates can be adopted into the Hospital VBP Program. As described in 
section IX.B.2.g(2) of this final rule, the updates to the 
``Responsiveness of Hospital Staff'' dimension would be adopted in the 
Hospital VBP Program beginning with the FY 2030 program year along with 
the rest of the updates to the survey after the statutory requirements 
of section 1886(o)(2)(C)(i) of the Act have been met. As described in 
section IX.B.2.g(3) of this final rule, scoring on the updated 
``Responsiveness of Hospital Staff'' dimension would begin with the FY 
2030 program year. In addition, the ``Care Transition'' dimension in 
the current version of the survey would be removed permanently in the 
proposed updated HCAHPS Survey measure beginning with the FY 2030 
program year. Until these updates can be adopted in the Hospital VBP 
Program beginning in FY 2030, we are excluding these dimensions from 
scoring for the FY 2027 through FY 2029 program years.
    With the adoption of the proposal to not score the ``Care 
Transition'' and ``Responsiveness of Hospital Staff'' dimensions in the 
Person and Community Engagement domain for the FY 2027 through FY 2029 
program years, only six dimensions would continue to be used in the 
Hospital VBP Program for FY 2027, FY 2028, and FY 2029. By excluding 
these two dimensions from scoring within the Hospital VBP Program for 
the FY 2027 through FY 2029 program years, hospitals can continue to be 
scored on the remaining unchanged dimensions of the current HCAHPS 
Survey measure until the proposed updated HCAHPS Survey measure could 
be adopted for use in the Hospital VBP Program beginning in FY 2030.
    We proposed to score hospitals only on these six dimensions because 
we cannot score hospitals on any of the new or updated dimensions 
associated with the updated HCAHPS Survey measure until they have been 
adopted and reported in the Hospital IQR Program for one year prior to 
the beginning of the first performance period of their use in the 
Hospital VBP Program (89 FR 36300 through 36301). These six unchanged 
dimensions of the HCAHPS Survey measure would be:
     ``Communication with Nurses,''
     ``Communication with Doctors,''
     ``Communication about Medicines,''
     ``Discharge Information,''
     ``Cleanliness and Quietness,'' and
     ``Overall Rating.''
    We proposed to modify the scoring such that for each of these six 
dimensions, Achievement Points (0-10 points) and Improvement Points (0-
9 points) would be calculated, the larger of which would be summed 
across these six dimensions to create a pre-

[[Page 69508]]

normalized HCAHPS Base Score of 0-60 points (as compared to 0-80 points 
with the current eight dimensions). The pre-normalized HCAHPS Base 
Score would then be multiplied by \8/6\ (1.3333333) and then rounded 
according to standard rules (values of 0.5 and higher are rounded up, 
values below 0.5 are rounded down) to create the normalized HCAHPS Base 
Score. Each of the six unchanged dimensions would be of equal weight, 
so that, as currently scored, the normalized HCAHPS Base Score would 
range from 0 to 80 points. HCAHPS Consistency Points would be 
calculated using our current methodology and would continue to range 
from 0 to 20 points. Like the Base Score, the Consistency Points Score 
would only consider scores across the remaining six unchanged 
dimensions of the Person and Community Engagement domain. The final 
element of the scoring formula, which would remain unchanged from the 
current formula, would be the sum of the HCAHPS Base Score and the 
HCAHPS Consistency Points Score for a total score that ranges from 0 to 
100 points. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50065) and 
the FY 2016 IPPS/LTCH PPS final rule (80 FR 49565), we adopted a 
similar modified scoring methodology when the Care Transition sub-
measure was added to the current HCAHPS Survey measure in the Hospital 
VBP Program.
    This scoring modification would ensure that hospitals can continue 
to receive scores on the dimensions of the HCAHPS Survey measure that 
would remain unchanged in the current survey and would provide a period 
of transition until the Hospital VBP Program can adopt the updates to 
the survey. The updated version of the HCAHPS Survey measure would be 
adopted in the Hospital IQR and PCHQR Programs beginning with January 
1, 2025 discharges, however, those updated sub-measures would not be 
scored as dimensions for the Hospital VBP Program until the FY 2030 
program year. We reiterate that hospitals would only have to circulate 
one version of the HCAHPS Survey measure at a time.
    We invited public comment on this proposal to modify scoring on the 
HCAHPS Survey measure in the Hospital VBP Program for the FY 2027 
through FY 2029 program years to only score on the six dimensions 
discussed earlier.
    Comment: Many commenters expressed support for the proposal to 
modify scoring in the Hospital VBP Program for the FY 2027 through FY 
2029 program years because they stated it prevents duplicate, 
simultaneous survey reporting, minimizes burden and inconvenience, and 
allows hospitals to consistently administer a single survey under both 
the Hospital IQR and Hospital VBP Programs. A few commenters commended 
CMS for respecting statutory requirements, considering stakeholder 
feedback, and allowing hospitals time to implement the new survey. A 
commenter recognized that the modifications necessitate a commensurate 
adjustment to the Hospital VBP Program scoring methodology, and a 
commenter conditionally supported the scoring modifications with the 
recommendation that CMS ensure that the resulting scores of the 
modified HCAHPS Survey measure would still be reliable and valid.
    Response: We appreciate commenters' support of the scoring 
modifications for the FY 2027 through FY 2029 program years and agree 
that these modifications ensure that we meet statutory requirements and 
allow hospitals to consistently administer a single survey under both 
the Hospital IQR and Hospital VBP Programs. In response to the 
recommendation, we have determined that the resulting scores of the 
modified HCAHPS Survey measure would still be reliable and valid given 
that we are utilizing the normalization methodology, where, as 
described in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36300 
through 36301), for each of these six dimensions, Achievement Points 
(0-10 points) and Improvement Points (0-9 points) would be calculated, 
the larger of which would be summed across these six dimensions to 
create a pre-normalized HCAHPS Base Score of 0-60 points (as compared 
to 0-80 points with the current eight dimensions). Then, that pre-
normalized HCAHPS Base Score would be multiplied by \8/6\ (1.3333333) 
and rounded according to standard rules (values of 0.5 and higher are 
rounded up, values below 0.5 are rounded down) to create the normalized 
HCAHPS Base Score. Each of the six unchanged dimensions would thus be 
of equal weight, so that just as hospitals are currently scored, the 
normalized HCAHPS Base Score would range from 0 to 80 points. This 
normalization methodology ensures that the updated survey measure is 
scored on the same scale as it is on the current HCAHPS Survey measure 
and therefore reliable and viable.
    Comment: A commenter expressed concern that only using six HCAHPS 
Survey sub-measures places greater pressure on the scores in the 
existing dimensions which they stated creates performance stress for 
hospitals and payment implications. The commenter recommended delaying 
operationalizing the scoring modifications for a minimum of one 
additional year.
    Response: We appreciate the commenter's concern, but we disagree 
that the scoring modification would create performance stress for 
hospitals and payment implications. Normalizing the scores accounts for 
some of the differences in the number of dimensions. During the FY 2027 
through FY 2029 program years, the six unchanged dimensions will each 
equally account for 16.7 percent of the Person and Community Engagement 
domain, up from 12.5 percent under the current survey. However, we 
determined this was a smaller impact on hospitals than pausing scoring 
of the entire survey for the three transitional program years. We refer 
the commenter to the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36300 
through 36301) for additional information on how the scoring is 
modified and normalized. We adopted a similar normalization methodology 
in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50065) and the FY 2016 
IPPS/LTCH PPS final rule (80 FR 49565) when the Care Transition sub-
measure was added to the current HCAHPS Survey measure in the Hospital 
VBP Program.
    Comment: A commenter requested clarification on whether the domain 
weights for the domains in the Hospital VBP Program would remain the 
same through the FY 2027 through FY 2029 program years when the scoring 
of the HCAHPS Survey measure is modified.
    Response: We thank the commenter for their question and affirm that 
the domain weights for the Hospital VBP Program would remain unchanged, 
with each of the four domains in the program being weighted at 25 
percent as before.
    After consideration of the public comments received, we are 
finalizing adoption of the modifications to scoring in the Hospital VBP 
Program for the FY 2027 through FY 2029 program years as proposed.
g. Adoption of the Updated HCAHPS Survey Measure and Associated Scoring 
Modifications in the Hospital VBP Program Beginning With the FY 2030 
Program Year
(1) Background
    As described in the FY 2025 IPPS/LTCH PPS proposed rule and section 
IX.B.2.e. of this final rule, the modifications to the proposed updated 
version of the HCAHPS Survey measure include adding three new sub-
measures, ``Care Coordination,'' ``Restfulness of Hospital 
Environment,'' and ``Information About Symptoms'' to the survey (89 FR 
36298 through 36300).

[[Page 69509]]

The updates also include removing the existing ``Care Transition'' sub-
measure and modifying the existing ``Responsiveness of Hospital Staff'' 
sub-measure. Additionally, we proposed to adopt the updated HCAHPS 
Survey measure in the Hospital VBP Program beginning with the FY 2030 
program year and additional scoring modifications beginning with FY 
2030 (89 FR 36301 through 36304). This timeline would allow for the 
updated HCAHPS Survey measure to be adopted and publicly reported under 
the Hospital IQR Program for one year, as statutorily mandated. We 
describe the adoption of these updates and scoring modifications in the 
following sections.
(2) Adoption of the Updated HCAHPS Survey Measure in the Hospital VBP 
Program Beginning With the FY 2030 Program Year
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36301 through 
36304), we proposed to adopt the updated HCAHPS Survey measure in the 
Hospital VBP Program beginning with the FY 2030 program year to align 
with the adoption of the updated HCAHPS Survey measure that we proposed 
to adopt in the Hospital IQR Program, as described in section IX.B.2.e. 
of this final rule. Under this proposal, the updated HCAHPS Survey 
measure would have been publicly reported for one year in the Hospital 
IQR Program prior to the beginning of the performance period for the 
HCAHPS Survey measure in the Hospital VBP Program for the FY 2030 
program year, which consists of a performance period of CY 2028 and a 
baseline period of CY 2026.
    We note that the number and content of dimensions from the proposed 
updated HCAHPS Survey measure in the Person and Community Engagement 
Domain in the Hospital VBP Program in FY 2030 differs slightly from the 
number and content of the sub-measures in the Hospital IQR and PCHQR 
Programs. Namely, the ``Cleanliness'' and ``Information about 
Symptoms'' sub-measures are single-item sub-measures in the updated 
HCAHPS Survey measure in the Hospital IQR and PCHQR Programs, but they 
would be combined into one dimension in the updated HCAHPS Survey 
measure for the Hospital VBP Program beginning with the FY 2030 program 
year.
    The dimensions in the Person and Community Engagement Domain in the 
Hospital VBP Program beginning with the FY 2030 program year are:
     ``Communication with Nurses,''
     ``Communication with Doctors,''
     ``Responsiveness of Hospital Staff,''
     ``Communication about Medicines,''
     ``Cleanliness and Information About Symptoms,''
     ``Discharge Information,''
     ``Overall Rating of Hospital,''
     ``Care Coordination,'' and
     ``Restfulness of Hospital Environment.''
    We refer readers to Table IX.B.2-03 for the timelines for the 
current and newly adopted HCAHPS Survey dimensions for the Hospital VBP 
Program.
    In the updated HCAHPS Survey measure, the ``Care Transition'' 
dimension is removed. The new ``Care Coordination'' dimension and the 
new ``Information about Symptoms'' question, which is included in the 
new ``Cleanliness and Information about Symptoms'' dimension, encompass 
a broader depiction of person-centered care than does the ``Care 
Transition'' dimension. The updated HCAHPS Survey measure includes the 
new ``Care Coordination'' dimension, the new ``Restfulness of the 
Hospital Environment'' dimension, and the new ``Cleanliness and 
Information about Symptoms'' dimension. In the FY 2025 IPPS/LTCH PPS 
proposed rule, we proposed to begin using these three new dimensions in 
the Hospital VBP Program beginning with the FY 2030 program year (89 FR 
36301 through 36304). As noted in section IX.B.2.e(1) of this final 
rule, the ``Care Coordination'' dimension would further coordination 
efforts within the hospital setting and support our goals of including 
measures related to seamless care coordination and person-centered 
care. Additionally, the new ``Restfulness of the Hospital Environment'' 
dimension is comprised of three survey questions: two new questions 
that ask how often patients were able to get the rest they needed, and 
whether hospital staff helped the patient to rest and recover, and one 
current survey question that asks how often the area around the 
patient's room was quiet at night (``Quietness'').
    The updated version of the HCAHPS Survey measure further modifies 
the current ``Cleanliness and Quietness'' dimension in two ways. 
Beginning with the FY 2030 program year, the ``Quietness'' question 
would be removed from the ``Cleanliness and Quietness'' dimension and 
would instead be included in the new ``Restfulness of Hospital 
Environment'' dimension; however, the ``Quietness'' question itself 
would remain unchanged on the updated HCAHPS Survey measure. 
Additionally, beginning with the FY 2030 program year, we proposed to 
modify the ``Cleanliness and Quietness'' dimension to be called the 
``Cleanliness and Information About Symptoms'' dimension, which would 
include the existing ``Cleanliness'' question and the new ``Information 
About Symptoms'' question from the updated HCAHPS Survey measure (89 FR 
36301 through 36304). The newly developed ``Information About 
Symptoms'' question asks the patient whether doctors, nurses, or other 
hospital staff gave the patient's family or caregiver enough 
information about symptoms or health problems to watch out for after 
the patient left the hospital.
    We refer readers to section IX.B.2.b. of this final rule where we 
further describe the updates included in the updated HCAHPS Survey 
measure and to Table IX.B.2-03 for the timelines for the current and 
newly adopted HCAHPS Survey dimensions for the Hospital VBP Program.
BILLING CODE 4120-01-P

[[Page 69510]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.225

BILLING CODE 4120-01-C
    We invited public comment on the proposal to adopt the updated 
HCAHPS Survey measure in the Hospital VBP

[[Page 69511]]

Program beginning with the FY 2030 program year.
    Comment: Several commenters supported the Hospital VBP Program 
linking patient satisfaction to payment incentives. The commenters also 
commended CMS for considering stakeholder feedback and respecting 
statutory requirements.
    Response: We appreciate the commenters' support of the adoption of 
the updated HCAHPS Survey measure and linking the results to payment 
incentives through the Hospital VBP Program.
    Comment: A commenter did not support combining ``Information about 
Symptoms'' and ``Cleanliness'' as a single domain because they stated 
that the two sub-measures are not related.
    Response: While we understand the concern about combining the 
``Information About Symptoms'' and ``Cleanliness'' questions into a 
single dimension in the Hospital VBP Program, we proposed that these 
two questions be combined into one dimension because separating them 
into two single-question dimensions would give them each more weight 
than the rest of the HCAHPS Survey measure questions, which are 
organized into multi-question dimensions (with the exception of Overall 
Rating). If these questions were each separate dimensions, 
``Cleanliness,'' for example, as a single-question dimension, would 
receive as much weight as the ``Communication with Nurses'' dimension, 
which includes three questions. Therefore, we have determined that the 
combined ``Cleanliness and Information about Symptoms'' dimension as a 
two-question dimension is more comparable to the other HCAHPS Survey 
measure dimensions.
    Comment: A few commenters recommended, with respect to the Hospital 
VBP Program's adoption of the updates to the HCAHPS Survey measure, 
that CMS complete validity testing and receive CBE endorsement before 
implementing the changes in the Hospital VBP Program and that CMS send 
the questions to a workgroup to make appropriate changes and ensure 
that there are not unintended consequences for the Hospital VBP 
Program.
    Response: We appreciate the commenters' concerns, however, as 
described in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36299), we 
conducted validity testing on all of the updates. In addition, we 
intend to submit the updated HCAHPS Survey measure to the current CBE 
for endorsement in Fall 2025, so we anticipate the re-endorsement 
process would be completed well before the FY 2030 program year when 
the updates to the HCAHPS Survey measure are fully implemented in the 
Hospital VBP Program. We note that section 1886(b)(3)(B)(viii)(IX)(bb) 
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 endorsed as long as due consideration is given to measures 
that have been endorsed or adopted by a consensus organization 
identified by the Secretary. We have determined that the updates to the 
HCAHPS Survey measure are appropriately specified. The HCAHPS Survey 
measure remains endorsed, and the updated survey only modifies some of 
the questions and sub-measures within the survey. The HCAHPS Survey is 
designed to produce standardized information about patients' 
perspectives of care that allow objective and meaningful comparisons of 
hospitals on topics that are important to consumers, and these updates 
would improve the feedback we receive directly from patients on 
hospital performance. Therefore, we have determined it is appropriate 
to adopt these updates to the measure before the updates receive CBE 
endorsement.
    Comment: A commenter expressed concern with the dimensions of the 
HCAHPS Survey measure that should and should not be included in the 
Hospital VBP Program methodology for future program years.
    Response: We appreciate the commenter's concern; however, the 
dimensions of the HCAHPS Survey measure are made up of the same survey 
questions used in the Hospital IQR Program to ensure that hospitals 
only have to implement one version of the survey. We do not agree that 
only certain dimensions should be included in the Hospital VBP Program 
in future program years. We refer readers to the Hospital Inpatient VBP 
Program final rule in which we explain the inclusion of dimensions in 
the Hospital VBP Program (76 FR 26517 through 26520).
    Comment: A few commenters recommended, with respect to the Hospital 
VBP Program's adoption of the HCAHPS Survey measure updates, ensuring 
that the questions are worded in a way that allows patients to 
accurately assess an aspect of quality and testing the impact of the 
``Restfulness'' sub-measure before implementing these updates in the 
Hospital VBP Program.
    Response: We thank the commenters for their recommendations, but as 
we discussed above, we identified the need for these updates through 
focus groups and cognitive interviews with patients and caregivers, 
discussions with technical experts, and literature reviews. Therefore, 
the phrasing of the questions, including that of the ``Restfulness'' 
questions, has been tested with patients and the validity of the 
questions has been tested at the expected average number of completed 
surveys per hospital.
    After consideration of the public comments received, we are 
finalizing adoption of the updated HCAHPS Survey measure in the 
Hospital VBP Program beginning with the FY 2030 program year as 
proposed.
(3) Modification of the Scoring of the HCAHPS Survey Measure in the 
Hospital VBP Program Beginning With the FY 2030 Program Year
    In the FY 2025 IPPS/LTCH PPS proposed rule, we also proposed to 
adopt a new scoring methodology beginning with the FY 2030 program year 
(89 FR 36304). For each of the nine dimensions, Achievement Points (0-
10 points) and Improvement Points (0-9 points) would be calculated, the 
larger of which would be summed across the nine dimensions to create a 
pre-normalized HCAHPS Base Score of 0-90 points (as compared to 0-80 
points with the current eight dimensions). The pre-normalized HCAHPS 
Base Score would then be multiplied by \8/9\ (0.88888889) and rounded 
according to standard rules (values of 0.5 and higher are rounded up, 
values below 0.5 are rounded down) to create the normalized HCAHPS Base 
Score. Each of the nine dimensions would be of equal weight, so that, 
as currently scored, the normalized HCAHPS Base Score would range from 
0 to 80 points. HCAHPS Consistency Points would then be calculated in 
the same manner as with the original HCAHPS Survey measure in the 
Hospital VBP Program and would continue to range from 0 to 20 points. 
Like the Base Score, the Consistency Points Score would consider scores 
across all nine of the Person and Community Engagement domain 
dimensions. The final element of the scoring formula, which would 
remain unchanged from the current formula in the Hospital VBP Program, 
would be the sum of the HCAHPS Base Score and the HCAHPS Consistency 
Points Score for a total score that ranges from 0 to 100 points, as 
before. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50065) and the 
FY 2016 IPPS/LTCH PPS final rule (80 FR 49565), we adopted a similar

[[Page 69512]]

scoring methodology when the Care Transition dimension was added to the 
Person and Community Engagement domain in the Hospital VBP Program.
    Additionally, we note that in the scoring of the current HCAHPS 
Survey measure in the Hospital VBP Program, the ``Cleanliness and 
Quietness'' dimension is the average of the publicly reported stand-
alone ``Cleanliness'' and ``Quietness'' questions. As previously noted, 
the adoption of the updated HCAHPS Survey measure would result in 
``Quietness'' being removed from this dimension and included as a 
question in the new ``Restfulness of the Hospital Environment'' 
dimension, and ``Cleanliness'' would be combined with the new 
``Information about Symptoms.'' Therefore, ``Quietness'' would be 
scored as part of the ``Restfulness of the Hospital Environment'' 
dimension in conjunction with the other questions under that dimension. 
For the ``Cleanliness and Information about Symptoms'' dimension, we 
would take the average of the stand-alone ``Cleanliness'' and 
``Information about Symptoms'' questions to obtain a score for the 
``Cleanliness and Information about Symptoms'' dimension. For the 
purposes of the Hospital VBP Program, we proposed these two questions 
be combined so as not to put more weight on these questions compared to 
the rest of the HCAHPS Survey questions, which are included in multi-
question dimensions (with the exception of Overall Rating) (89 FR 
36304). If ``Cleanliness,'' and ``Information About Symptoms,'' were 
treated as single-question dimensions, ``Cleanliness,'' for example, 
would receive as much weight as the ``Communication with Nurses'' 
dimension, which includes three questions. Therefore, the combined 
``Cleanliness and Information about Symptoms'' dimension is more 
comparable to the other HCAHPS Survey dimensions.
    We invited public comment on this proposal to modify scoring of the 
HCAHPS Survey measure in the Hospital VBP Program beginning with the FY 
2030 program year to account for the adoption of the updated HCAHPS 
Survey measure.
    Comment: A few commenters supported the scoring changes beginning 
in the FY 2030 program year because they stated that the updates to the 
HCAHPS Survey measure would necessitate a commensurate adjustment to 
the scoring.
    Response: We appreciate the support of the scoring modifications 
beginning with the FY 2030 program year in the Hospital VBP Program.
    Comment: A commenter requested clarification on whether domain 
weights for the domains in the Hospital VBP Program would remain the 
same after implementation of the updated HCAHPS Survey measure.
    Response: We thank the commenter for their question and affirm that 
the domain weights for the Hospital VBP Program would remain unchanged, 
with each of the four domains in the program being weighted at 25 
percent as before.
    After consideration of the public comments received, we are 
finalizing adoption of the modification of the scoring of the HCAHPS 
Survey measure in the Hospital VBP Program beginning with the FY 2030 
program year as proposed.
3. Advancing Patient Safety and Outcomes Across the Hospital Quality 
Programs--Request for Comment
    The Hospital Readmissions Reduction Program was implemented to 
reduce excess readmissions effective for discharges from applicable 
hospitals beginning on or after October 1, 2012. The program uses six 
claims-based measures to track unplanned inpatient admissions within 30 
days following discharge. Using the data collected from these measures, 
we have observed that since the inception of the program, inpatient 
readmission rates for the conditions and procedures included in the 
program have gone down.\437\
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    \437\ Medicare Hospital Quality Chartbook. National Rates over 
Time. Available at: https://www.cmshospitalchartbook.com/visualization/national-rates-over-time. Accessed March 12, 2024.
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    However, studies have found a concurrent increase in patients who, 
after being discharged from an inpatient stay, visit the emergency 
department (ED) or receive observation services as an 
outpatient.438 439 440 441 442 As a result, we are concerned 
that our hospital quality reporting and value-based purchasing programs 
may not be adequately incentivizing hospitals to improve quality of 
care by accounting for more types of post-discharge events, such as a 
return to the ED or the receipt of observation services.
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    \438\ Nuckols TK, Fingar KR, Barrett ML, et al. Returns to 
Emergency Department, Observation, or Inpatient Care Within 30 Days 
After Hospitalization in 4 States, 2009 and 2010 Versus 2013 and 
2014. J Hosp Med. 2018;13(5):296-303.
    \439\ Shammas NW, Kelly R, Lemke J, et al. Assessment of Time to 
Hospital Encounter after an Initial Hospitalization for Heart 
Failure: Results from a Tertiary Medical Center. Cardiol Res Pract. 
2018; 2018:6087367.
    \440\ Sabbatini AK, Joynt-Maddox KE, Liao JM, et al. Accounting 
for the growth of observation stays in the assessment of Medicare's 
hospital readmissions reduction program. JAMA Netw Open. 
2022;5(11):e2242587.
    \441\ Sabbatini AK, Wright B. Excluding observation stays from 
readmission rates--what quality measures are missing. New Engl J 
Med. 2018;378(22):2062-2065.
    \442\ Wadhera RK, Joynt Maddox KE, Kazi DS, Shen C, Yeh RW. 
Hospital revisits within 30 days after discharge for medical 
conditions targeted by the Hospital Readmissions Reduction Program 
in the United States: national retrospective analysis. BMJ. 
2019;366: l4563.
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    From a patient perspective, unexpectedly returning to any acute 
care setting, including the ED, or receiving observation services after 
being discharged from an inpatient hospital stay,\443\ is an 
undesirable outcome of care. Patients who are discharged from an 
inpatient stay but then make an unplanned return to the hospital may 
incur higher healthcare costs than those who do not return to the 
hospital setting due to potential out-of-pocket charges for the 
unplanned follow-up care. Research has found that the median out-of-
pocket cost of observation services received by Medicare beneficiaries 
as outpatients was $448.94, with low-income beneficiaries being more 
likely to report being concerned about costs of follow-up care, as 
compared to higher income beneficiaries, and limiting health care 
utilization that could otherwise be deemed essential in response to 
higher out-of-pocket costs.\444\
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    \443\ Observation care is a well-defined set of specific, 
clinically appropriate services, which include ongoing short-term 
treatment, assessment, and reassessment before a decision can be 
made regarding whether patients will require further treatment as 
hospital inpatients or if they are able to be discharged from the 
hospital. Observation services are commonly ordered for patients who 
present to the emergency department and who then require a 
significant period of treatment or monitoring in order to make a 
decision concerning their admission or discharge. See additional 
explanation here: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c06.pdf.
    \444\ Goldstein, J.N., Schwartz, J.S., McGraw, P. et al. 
``Implications of cost-sharing for observation care among Medicare 
beneficiaries: a pilot survey''. BMC Health Serv Res 19, 149 (2019). 
https://doi.org/10.1186/s12913-019-3982-8.
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    While these unplanned returns to the hospital impose significant 
burden on patients, such visits can often be avoided with greater 
attention to care coordination.\445\ This coordination can include 
addressing barriers such as poor health literacy or social determinants 
of health that complicate a patient's ability to follow post-discharge 
instructions, fill prescriptions, or alert hospital staff to new 
symptoms.\446\ For example, in

[[Page 69513]]

one study, nurses implemented evidence-based practices for transition 
care, including engaging in patient education, providing clear post-
discharge instructions, and following up with patients via phone calls. 
The study found that 9.4 percent of patients who received such 
interventions were readmitted 30 days after discharge, compared to an 
18.8 percent readmission rate among patients not receiving such 
interventions. Similarly, 19.8 percent of patients receiving evidence-
based transitional care were readmitted within 90 days after discharge, 
compared to 31.5 percent among patients in the usual care group.\447\ 
These findings indicate that supporting patients' discharges by 
proactively addressing potential barriers is effective in reducing 
unplanned readmissions.
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    \445\ Kripalani S, Theobald CN, Anctil B, Vasilevskis EE. 
Reducing hospital readmission rates: current strategies and future 
directions. Annu Rev Med. 2014;65:471-85. doi: 10.1146/annurev-med-
022613-090415. Epub 2013 Oct 21.
    \446\ Hoyer EH, Brotman DJ, Apfel A, Leung C, Boonyasai RT, 
Richardson M, Lepley D, Deutschendorf A. Improving Outcomes After 
Hospitalization: A Prospective Observational Multicenter Evaluation 
of Care Coordination Strategies for Reducing 30-Day Readmissions to 
Maryland Hospitals. J Gen Intern Med. 2018 May; 33(5): 621-627. 
Published online 2017 Nov 27. doi: 10.1007/s11606-017-4218-4.
    \447\ Kripalani S, Chen G, Ciampa P, Theobald C, Cao A, McBride 
M, Dittus RS, Speroff T. A Transition Care Coordinator Model Reduces 
Hospital Readmissions and Costs. Contemp Clin Trials. 2019 Jun; 81: 
55-61.
    Published online 2019 Apr 25. doi: 10.1016/j.cct.2019.04.014.
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    Therefore, we are continually seeking ways to build on current 
measures in several quality reporting programs that account for 
unplanned patient hospital visits to encourage hospitals to improve 
discharge processes. Current measures include three Excess Days in 
Acute Care (EDAC) measures currently in the Hospital Inpatient Quality 
Reporting (IQR) Program, which estimate days spent in acute care within 
30 days post-discharge from an inpatient hospitalization for a 
principal diagnosis of the measure's specified condition. The acute 
care outcomes include ED visits, receipt of observation services, and 
unplanned readmissions.\448\ The measures are:
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    \448\ Centers for Medicare & Medicaid Services. 2023 MUC List. 
Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
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     Excess Days in Acute Care (EDAC) after Hospitalization for 
Acute Myocardial Infarction (AMI), adopted in the FY 2016 IPPS/LTCH PPS 
final rule beginning with the FY 2018 payment determination (80 FR 
49680 through 49682);
     Excess Days in Acute Care (EDAC) after Hospitalization for 
Heart Failure (HF), adopted in the FY 2016 IPPS/LTCH PPS final rule 
beginning with the FY 2018 payment determination (80 FR 49682 through 
49690); and
     Excess Days in Acute Care (EDAC) after Hospitalization for 
Pneumonia, adopted in the FY 2017 IPPS/LTCH PPS final rule beginning 
with the FY 2019 payment determination (81 FR 57142 through 57148).
    Another existing measure that we use to assess unplanned hospital 
returns is the Hospital Visits After Hospital Outpatient Surgery 
measure. We adopted this measure into the Hospital Outpatient Quality 
Reporting (OQR) Program in the CY 2017 OPPS/ASC final rule beginning 
with the CY 2020 reporting period (81 FR 79764 through 79771) and the 
Rural Emergency Hospital Quality Reporting (REHQR) Program in the CY 
2024 OPPS/ASC final rule beginning with the CY 2024 reporting period 
(88 FR 82064 through 82066). This measure's outcome includes any 
unplanned hospital visits (ED visits, receipt of observation services, 
or unplanned inpatient admissions) within seven days of outpatient 
surgery. The measure calculates facility-level measure scores based on 
the ratio of predicted to expected number of post-surgical hospital 
visits. By publicly reporting these scores, the measure encourages 
providers to engage in quality improvement activities to reduce 
unplanned follow-up visits (81 FR 79765).
    While our hospital quality reporting and value-based purchasing 
programs currently encourage hospitals to address concerns about 
unplanned returns through several existing measures, we recognize that 
these measures, taken together, do not comprehensively capture 
unplanned patient returns to inpatient or outpatient care after 
discharge. The EDAC measures currently in the Hospital IQR Program only 
cover patients with a primary discharge of AMI, HF, or Pneumonia. 
Meanwhile, the Hospital Visits After Hospital Outpatient Surgery 
measure only covers patients following outpatient surgeries. 
Furthermore, since both the Hospital IQR and Hospital OQR Programs are 
quality reporting programs, a hospital's performance on these measures 
is not tied to payment incentives.
    Therefore, we invited public comment on how these programs could 
further encourage hospitals to improve discharge processes, such as by 
introducing measures currently in quality reporting programs into 
value-based purchasing to link outcomes to payment incentives. We noted 
we were specifically interested in input on adopting measures which 
better represent the range of outcomes of interest to patients, 
including unplanned returns to the ED and receipt of observation 
services within 30 days of a patient's discharge from an inpatient 
stay.
    We invited public comment on this topic. The following provides a 
summary of the responses we received.
    Comment: Many commenters supported measuring a wider range of post-
discharge patient outcomes, including ED visits and observation 
services. Several commenters believed that these outcomes are more 
relevant to patients and would encourage hospitals to enhance discharge 
processes to improve patient outcomes. A few commenters also stated 
that including data on ED visits and observation services would allow 
for better analysis of post-discharge care, such as determining which 
visits and services were preventable.
    A few commenters supported having the Hospital Readmissions 
Reduction Program track ED visits and observation services in addition 
to inpatient readmissions, while others recommended only tracking post-
discharge observation services but not ED visits. A commenter 
recommended that CMS seek to modify the statutory language of the 
Hospital Readmissions Reduction Program if its current statute does not 
allow for the measurement of ED visits and observation services. A 
commenter noted that if the program's statute does not allow for 
reporting of observation services, CMS could minimize penalties under 
the program and instead focus on other quality measures and programs. A 
few commenters recommended that CMS adopt measures that focus on post-
discharge outcomes in value-based purchasing programs, to provide 
greater incentive for hospitals to reduce excess healthcare 
utilization.
    Several commenters supported the EDAC measures as a better measure 
of preventable hospital returns than CMS' readmission measures, but 
requested refinements to the EDAC measures first. For example, several 
commenters recommended that CMS introduce more comprehensive 
readmissions measures that would encourage involving patients and their 
caregivers in discharge planning. Another commenter suggested that CMS 
create a broader EDAC measure that can be segmented by condition and 
setting, or create an inpatient and outpatient version of this EDAC 
measure.
    Response: We appreciate the commenters' support and 
recommendations, including the recommendations to include measures that 
represent a wider range of outcomes of interest to patients, such as 
unplanned returns to the ED and receipt of observation services, and to 
adopt

[[Page 69514]]

measures that focus on post-discharge outcomes in the value-based 
purchasing programs. We will take this input into account for future 
notice-and-comment rulemaking.
    Comment: Many commenters expressed concerns with the potential 
unintended consequences of readmission measures for both hospitals and 
patients. Many commenters believed that readmission measures place the 
burden of patient outcomes on hospitals without appropriately 
accounting for factors outside of their control, such as the patient's 
condition severity, social determinants of health, and admissions for 
conditions unrelated to the initial admission. A few commenters urged 
CMS to ensure that measures capturing readmissions would not unfairly 
penalize hospitals that disproportionately serve populations with 
health-related social needs. Another concern from a few commenters was 
that including ED visits and observation services as unplanned 
readmissions could lead to physicians deferring timely evaluation of 
post-operative concerns or choosing healthier patients.
    Several commenters did not support adding the EDAC measures to the 
Hospital Readmissions Reduction Program. Several commenters stated that 
the definition of readmissions in the program's statute does not 
include observation services or ED visits, while one comment requested 
that CMS clarify its authority to introduce the EDAC measures into the 
program. A few other commenters had concerns about adopting the EDAC 
measures to the Hospital Value-Based Purchasing (VBP) Program, noting 
that it could lead hospitals to be penalized for some of the same 
readmissions as in the Hospital Readmissions Reduction Program. A 
commenter stated that CMS does not have the statutory authority to add 
EDAC measures to the Hospital VBP Program. A few of the commenters 
suggested that CMS instead introduce readmission measures into quality 
reporting programs because they do not have performance-based 
penalties. As an alternative to quality reporting, a commenter 
recommended addressing unplanned hospital visits through value-based 
care models such as the Comprehensive Care for Joint Replacement Model 
or the Bundled Payments for Care Improvement Advanced Model.
    Response: We thank the commenters for their feedback and share 
their concern for avoiding negative effects on patient care arising 
from measuring unplanned hospital returns. We currently use claims-
based readmission, mortality, complication, and EDAC measures (there 
are currently three EDAC measures in the Hospital IQR Program) to track 
important clinical conditions. As claims-based measures, they use 
claims and enrollment data that are already available and do not 
require any additional burden for hospitals to report. We continuously 
reevaluate the risk models to ensure they are as valid and reliable as 
possible, including considering additional data to augment existing 
definitions of frailty in these measures. We acknowledge that hospitals 
do not have control over all factors influencing patients' health 
outcomes. However, hospitals are usually one of the most resourced 
healthcare entities in their communities and, as such, have important 
influence over the health of their patients and the communities they 
serve.449 450 451 We continue to prioritize addressing 
health disparities through carefully considered approaches that aim to 
illuminate these disparities. Additionally, we acknowledge that the 
Hospital VBP Program cannot adopt readmission measures per section 
1886(o)(2)(A) of the Act. We will continue to take public feedback into 
account and evaluate ways to measure patient outcomes within the 
statutory limits of quality reporting and value-based purchasing 
programs.
---------------------------------------------------------------------------

    \449\ Z. Austrian, SE Alexander, M.C. Piazza, C. Clouse. 
Mission, vision, and capacity of place-based safety net hospitals: 
Leveraging the power of anchors to strengthen local economies and 
communities. Journal of Community Practice, 23 (3-4) (2015), pp. 
348-366. 10.1080/10705422.2015.1091416.
    \450\ Franz B, Skinner D, Kerr AM, Penfold R, Kelleher K. 
Hospital-Community Partnerships: Facilitating Communication for 
Population Health on Columbus' South Side. Health Commun. 2018 
Dec;33(12):1462-1474. doi: 10.1080/10410236.2017.1359033. Epub 2017 
Aug 29. PMID: 28850263.
    \451\ H.K. Koh, A. Bantham, A.C. Geller, M.A. Rukavina, K.M. 
Emmons, P. Yatsko, et al. Anchor institutions: Best practices to 
address social needs and social determinants of health. American 
Journal of Public Health, 110 (3) (2020), pp. 309-316, 10.2105/
AJPH.2019.305472.
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    We are also working to harmonize measurement across settings, as 
noted in the Universal Foundation approach that we published in 
2023.\452\ This will help align priorities and accountability across 
healthcare settings. We also note that any future proposal to implement 
a new measure or program modification would be announced through 
notice-and-comment rulemaking.
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    \452\ Douglas et al., Aligning Quality Measures across CMS--The 
Universal Foundation, N Engl J Med 2023;388:776-779 DOI: 10.1056/
NEJMp2215539, VOL. 388 NO. 9.
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    Comment: A few commenters suggested that the Hospital Readmissions 
Reduction Program shorten the 30-day timeframe of its current 
readmission measures to around seven days after discharge. The 
commenters stated that 30 days is too long to accurately assess care 
quality because it leaves too much time for extraneous factors to 
impact hospital readmissions.
    Several commenters offered ways for CMS to ensure better discharge 
care. A few commenters suggested that CMS reduce readmissions by 
measuring and promoting access to at home care such as the Acute 
Hospital Care at Home program. They cited that hospital at home results 
in fewer complications and improved discharge planning. To ensure more 
equitable outcomes, a few commenters urged CMS to promote more focus on 
social determinants of health at discharge, such as by updating Z code 
reporting. Another commenter recommended that CMS allow hospitals to 
report transitional care management codes for patients being discharged 
from the ED, so that patients can receive appropriate discharge care. A 
commenter emphasized the importance of patient, family, and caregiver 
engagement, as well as ensuring patient, family, and caregiver health 
literacy. To that end, the commenter requested that CMS issue guidance 
to hospitals on how to empower and engage these groups in the patient's 
care. A commenter suggested that CMS identify opportunities to provide 
additional financial support for hospitals to improve discharge 
planning, as financial constraints can pose a barrier to improvement 
efforts.
    A few commenters suggested that CMS consider other measures to 
reduce readmissions. A commenter suggested that CMS keep the 30-day 
episode-based cost measures in the Hospital IQR Program while adopting 
them in the Hospital VBP Program. The commenter believed that this 
would reduce readmissions because a significant portion of the 
variation in these measures is driven by readmissions and other returns 
to acute care. In another suggestion, a commenter recommended that CMS 
adopt the National Healthcare Safety Network (NHSN) Hospital-Onset 
Bacteremia & Fungemia Outcome measure into CMS quality reporting and 
value-based purchasing programs to enhance infection prevention efforts 
and thus reduce readmissions. Another commenter promoted the Medicare 
Spending Per Beneficiary measure in the Hospital VBP Program as a 
comprehensive evaluation of care transition efforts.
    A few commenters stated that the word ``readmissions'' should not 
be used in the rule to refer interchangeably

[[Page 69515]]

to inpatient stays, ED visits, and observation services. To support 
this, they cited other CMS regulations and resources which make a 
distinction between inpatient stays and outpatient stays, with 
emergency department visits and observation services being categorized 
as outpatient stays.
    A commenter asked that CMS quality measurement include public 
reporting on ED boarding, that is, when patients are held in the ED 
while there are no inpatient beds available. The commenter believed 
that public reporting would hold facilities accountable for long 
boarding times and make consumers aware of an important aspect of 
hospital quality of care. Another commenter stated that if CMS chooses 
to measure observation services in readmission measures, CMS should 
also include observation services under Medicare Part A payments, or 
eliminate observation status to create a single hospitalization status. 
They also suggested counting observation stays towards the skilled 
nursing facility 3-day rule.
    Response: We thank the commenters for their feedback regarding 
introducing quality measures that encourage hospitals to improve 
discharge processes. We also thank commenters for other suggestions on 
ways to reduce unplanned readmissions and improve patient post-
discharge outcomes. We will take this feedback into consideration as 
part of future notice-and-comment rulemaking. We also refer readers to 
section II.C.12., where the Center for Medicare (CM) is updating their 
Z code payment policy regarding homelessness and housing instability.

C. Requirements for and Changes to the Hospital Inpatient Quality 
Reporting (IQR) Program

1. Background and History of the Hospital IQR Program
    Through the Hospital IQR Program, we strive to ensure that 
patients, along with their clinicians, can use information from 
meaningful quality measures to make better decisions about their 
healthcare. 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, affordability, and equity of care while paying 
particular attention to improving clinicians' and beneficiaries' 
experiences when interacting with CMS programs. In combination with 
other efforts across the Department of Health and Human Services (HHS), 
the Hospital IQR Program incentivizes hospitals to improve healthcare 
quality and value, while giving patients the tools and information 
needed to make the best decisions for themselves.
    We seek to promote higher quality, equitable, and more efficient 
healthcare for Medicare beneficiaries. The adoption of widely agreed 
upon quality and cost measures supports this effort. We work with 
relevant interested parties to define measures in almost every care 
setting and currently measure some aspects of care for almost all 
Medicare beneficiaries. These measures assess clinical processes and 
outcomes, patient safety and adverse events, patient experiences with 
care, care coordination, and cost of care. We have implemented quality 
measure reporting programs for multiple settings of care. To measure 
the quality of hospital inpatient services, we implemented the Hospital 
IQR Program. We refer readers to the following final rules for detailed 
discussions of the history of the Hospital IQR Program, including 
statutory history, and for the measures we have previously adopted for 
the Hospital IQR Program measure set:
     The FY 2010 IPPS/LTCH PPS final rule (74 FR 43860 through 
43861);
     The FY 2011 IPPS/LTCH PPS final rule (75 FR 50180 through 
50181);
     The FY 2012 IPPS/LTCH PPS final rule (76 FR 51605 through 
61653);
     The FY 2013 IPPS/LTCH PPS final rule (77 FR 53503 through 
53555);
     The FY 2014 IPPS/LTCH PPS final rule (78 FR 50775 through 
50837);
     The FY 2015 IPPS/LTCH PPS final rule (79 FR 50217 through 
50249);
     The FY 2016 IPPS/LTCH PPS final rule (80 FR 49660 through 
49692);
     The FY 2017 IPPS/LTCH PPS final rule (81 FR 57148 through 
57150);
     The FY 2018 IPPS/LTCH PPS final rule (82 FR 38326 through 
38328 and 82 FR 38348);
     The FY 2019 IPPS/LTCH PPS final rule (83 FR 41538 through 
41609);
     The FY 2020 IPPS/LTCH PPS final rule (84 FR 42448 through 
42509);
     The FY 2021 IPPS/LTCH PPS final rule (85 FR 58926 through 
58959);
     The FY 2022 IPPS/LTCH PPS final rule (86 FR 45360 through 
45426);
     The FY 2023 IPPS/LTCH PPS final rule (87 FR 49190 through 
49310); and
     The FY 2024 IPPS/LTCH PPS final rule (88 FR 59144 through 
59203).
    We also refer readers to 42 CFR 412.140 for Hospital IQR Program 
regulations.
2. Retention of Previously Adopted Hospital IQR Program Measures for 
Subsequent Payment Determinations
    We refer readers to 42 CFR 412.140(g)(1) for our finalized measure 
retention policy. We first adopted these policies in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53512 through 53513) and codified them in 
the FY 2024 IPPS/LTCH PPS final rule (88 FR 59174 through 59175). 
Pursuant to this policy, when we adopt measures for the Hospital IQR 
Program beginning with a particular payment determination, we 
automatically readopt these measures for all subsequent payment 
determinations unless a different or more limited period is proposed 
and finalized. Measures are also retained unless we propose to remove, 
suspend, or replace the measures.
    We did not propose any changes to these policies in the proposed 
rule.
3. Removal of and Removal Factors for Hospital IQR Program Measures
    We refer readers to 42 CFR 412.140(g)(2) and (3) for the Hospital 
IQR Program's policy regarding the factors CMS considers when removing 
measures from the program. We first adopted these factors in the FY 
2019 IPPS/LTCH PPS final rule (83 FR 41540 through 41544) and codified 
them in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59174 through 
59175).
    We did not propose any changes to these policies in the proposed 
rule.
4. Considerations in Expanding and Updating Quality Measures
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53510 through 53512) for a discussion of the previous considerations we 
have used to expand and update quality measures under the Hospital IQR 
Program. We also refer readers to the CMS National Quality Strategy 
that we launched in 2022, with the aims of promoting the highest 
quality outcomes and safest care for all individuals.\453\
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    \453\ Centers for Medicare & Medicaid Services. (2022). What is 
the National Quality Strategy? Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/CMS-Quality-Strategy.
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    To comply with statutory requirements that the Secretary of HHS 
make publicly available certain quality and efficiency measures that 
the Secretary is considering for adoption through rulemaking under 
Medicare,\454\ the Consensus-Based Entity (CBE), currently Battelle, 
convenes the Partnership for Quality Measurement (PQM), which is 
comprised of clinicians, patients, measure experts, and health 
information technology specialists, to participate in the pre-
rulemaking process and the measure endorsement process. We refer 
readers

[[Page 69516]]

to the proposed Patient Safety Structural measure in section IX.B.1.c. 
of this final rule for more details on the updated pre-rulemaking 
measure reviews (PRMR) process, including the measure endorsement and 
maintenance (E&M) process, for the purpose of providing multi-
interested party input to the Secretary on the selection of quality and 
efficiency measures under consideration for use in certain Medicare 
quality programs, including the Hospital IQR Program.
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    \454\ See section 1890A(a)(2) of the Social Security Act (42 
U.S.C. 1395aaa-1(a)(2)).
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5. New Measures for the Hospital IQR Program Measure Set
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36284 through 
36293), we proposed to adopt seven new measures: (1) Patient Safety 
Structural measure beginning with the CY 2025 reporting period/FY 2027 
payment determination; (2) Age Friendly Hospital measure beginning with 
the CY 2025 reporting period/FY 2027 payment; (3) Catheter-Associated 
Urinary Tract Infection (CAUTI) Standardized Infection Ratio Stratified 
for Oncology Locations measure beginning with the CY 2026 reporting 
period/FY 2028 payment determination; (4) Central Line-Associated 
Bloodstream Infection (CLABSI) Standardized Infection Ratio Stratified 
for Oncology Locations measure beginning with the CY 2026 reporting 
period/FY 2028 payment determination; (5) Hospital Harm--Falls with 
Injury electronic clinical quality measure (eCQM) beginning with the CY 
2026 reporting period/FY 2028 payment determination; (6) Hospital 
Harm--Postoperative Respiratory Failure eCQM beginning with the CY 2026 
reporting period/FY 2028 payment determination; and (7) Thirty-day 
Risk-Standardized Death Rate among Surgical Inpatients with 
Complications (Failure-to-Rescue) measure beginning with the July 1, 
2023-June 30, 2025 reporting period/FY 2027 payment determination. We 
provide more details on these proposals in the subsequent sections of 
the preamble, and details on the proposed Patient Safety Structural 
measure are in section IX.B.1.
a. Adoption of Age Friendly Hospital Measure Beginning With the CY 2025 
Reporting Period/FY 2027 Payment Determination
(1) Background
    The U.S. population is aging rapidly, with nearly one in seven 
Americans at age 65 years or older in 2019.\455\ In the next 10 years, 
one in five Americans is estimated to be over 65 years old, reaching 
80.8 million by 2040.\456\ As the population ages, care can become more 
complex,\457\ with patients often developing multiple chronic 
conditions such as dementia, heart disease, arthritis, type 2 diabetes, 
and cancer.\458\ These chronic conditions are among the nation's 
leading drivers of illness, disability, and healthcare costs.\459\
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    \455\ Centers for Disease Control and Prevention. (September 
2022). Promoting Health for Older Adults. Retrieved from: https://www.cdc.gov/chronicdisease/resources/publications/factsheets/promoting-health-for-older-adults.htm">https://www.cdc.gov/chronic-disease/?CDC_AAref_Val=https://www.cdc.gov/chronicdisease/resources/publications/factsheets/promoting-health-for-older-adults.htm.
    \456\ Vespa, J., Armstrong, D.M., & Medina, L. (Rev Feb 2020). 
Demographic turning points for the United States: Population 
projections for 2020 to 2060. Washington, DC: U.S. Department of 
Commerce, Economics and Statistics Administration, U.S. Census 
Bureau.
    \457\ Qui[ntilde]ones, A.R., Markwardt, S., & Botoseneanu, A. 
(2016). Multimorbidity combinations and disability in older adults. 
Journals of Gerontology Series A: Biomedical Sciences and Medical 
Sciences, 71(6), 823-830.
    \458\ Centers for Disease Control and Prevention. (September 
2022). Promoting Health for Older Adults. Retrieved from: https://www.cdc.gov/chronicdisease/resources/publications/factsheets/promoting-health-for-older-adults.htm.
    \459\ Centers for Disease Control and Prevention. (September 
2022). Promoting Health for Older Adults. Retrieved from: https://www.cdc.gov/chronicdisease/resources/publications/factsheets/promoting-health-for-older-adults.htm">https://www.cdc.gov/chronic-disease/?CDC_AAref_Val=https://www.cdc.gov/chronicdisease/resources/publications/factsheets/promoting-health-for-older-adults.htm.
---------------------------------------------------------------------------

    Hospitals are increasingly faced with treating older patients who 
have complex medical, behavioral, and psychosocial needs that are often 
inadequately addressed by the current healthcare infrastructure.\460\ 
The Centers for Disease Control and Prevention (CDC), and other 
interested parties, have estimated that over 60 percent of Medicare 
beneficiaries have two or more chronic conditions.461 462 To 
address the challenges of delivering care to older adults with multiple 
chronic conditions from a hospital and health system perspective, 
multiple organizations, including American College of Surgeons (ACS), 
the Institute for Healthcare Improvement (IHI), and the American 
College of Emergency Physicians, collaborated to identify and establish 
age-friendly initiatives based on evidence-based best practices that 
provide goal centered, clinically effective care for older 
patients.463 464 These organizations define age-friendly 
care as: (1) following an essential set of evidence-based practices; 
(2) causing no harm; and (3) aligning with ``What Matters'' \465\ to 
the older adult and their family or other caregivers.\466\ Based on 
these age-friendly initiatives and definition, these organizations have 
developed a framework comprised of a set of four evidence-based 
elements of high-quality care to older adults, called the ``4 Ms'': 
What Matters, Medication, Mentation, and Mobility.\467\ The elements of 
the ``4 Ms'' help organize care for older adults wellness regardless of 
the number of chronic conditions, a person's culture, or their racial, 
ethnic, or religious background.\468\
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    \460\ Boyd, C., Smith, C. D., Masoudi, F. A., Blaum, C. S., 
Dodson, J. A., Green, A. R., ... & Tinetti, M. E. (2019). Decision 
making for older adults with multiple chronic conditions: executive 
summary for the American Geriatrics Society guiding principles on 
the care of older adults with multimorbidity. Journal of the 
American Geriatrics Society, 67(4), 665-673.
    \461\ Lochner KA, Cox CS. Prevalence of Multiple Chronic 
Conditions Among Medicare Beneficiaries, United States, 2010. Prev 
Chronic Dis 2013;10:120137. DOI: https://dx.doi.org/10.5888/pcd10.120137.
    \462\ Salive, M. E. (2013). Multimorbidity in older adults. 
Epidemiologic reviews, 35(1), 75-83.
    \463\ American Geriatrics Society Expert Panel on the Care of 
Older Adults with Multimorbidity. (2012). Guiding principles for the 
care of older adults with multimorbidity: an approach for 
clinicians. Journal of the American Geriatrics Society, 60(10), E1-
E25.
    \464\ Boyd, C., Smith, C. D., Masoudi, F. A., Blaum, C. S., 
Dodson, J. A., Green, A. R., ... & Tinetti, M. E. (2019). Decision 
making for older adults with multiple chronic conditions: executive 
summary for the American Geriatrics Society guiding principles on 
the care of older adults with multimorbidity. Journal of the 
American Geriatrics Society, 67(4), 665-673.
    \465\ Tinetti, M. (January 2019). [Blog] How focusing on What 
Matters simplifies complex care for older adults. Institute for 
Healthcare Improvement. Available at: https://www.ihi.org/insights/how-focusing-what-matters-simplifies-complex-care-older-adults.
    \466\ Institute for Healthcare Improvement. (2022). Age-friendly 
health systems: Guide to using the 4Ms in the care of older adults 
in hospitals and ambulatory practices. Available at: https://forms.ihi.org/hubfs/IHIAgeFriendlyHealthSystems_GuidetoUsing4MsCare.pdf.
    \467\ Ibid.
    \468\ Ibid.
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    The collective evidence from these age-friendly efforts 
demonstrates that hospitals should prioritize patient-centered care for 
aging patient populations with multiple chronic conditions. With CMS 
being the largest provider of healthcare coverage for the 65 years and 
older population, proposing a quality measure aimed at optimizing care 
for older patients, using a holistic approach to better serve the needs 
of this unique population, is timely. Although existing quality metrics 
have improved both the rate and reporting of clinical outcomes that are 
important to older individuals, these measures can be narrow in scope 
and may have limited long term effectiveness due to ceiling effects. We 
therefore proposed this attestation-based structural measure, the Age 
Friendly Hospital measure, for the Hospital IQR Program, beginning with 
the CY 2025 reporting period/FY 2027 payment determination in the FY 
2025 IPPS/

[[Page 69517]]

LTCH PPS proposed rule (89 FR 36307 through 36314). This structural 
measure seeks to ensure that hospitals are reliably implementing the 
``4 M's'', and thus providing evidence-based elements of high-quality 
care for all older adults.\469\ The elements in the Age Friendly 
Hospital measure align with IHI's and Hartford Foundation national 
initiative for Age Friendly Systems in which many hospitals already 
participate.\470\
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    \469\ Institute for Healthcare Improvement. (2022). Age-friendly 
health systems: Guide to using the 4Ms in the care of older adults 
in hospitals and ambulatory practices. Available at: https://forms.ihi.org/hubfs/IHIAgeFriendlyHealthSystems_GuidetoUsing4MsCare.pdf.
    \470\ Institute for Healthcare Improvement. (2022). Age-friendly 
health systems: Guide to using the 4Ms in the care of older adults 
in hospitals and ambulatory practices. Available at: https://forms.ihi.org/hubfs/IHIAgeFriendlyHealthSystems_GuidetoUsing4MsCare.pdf.
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    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27103 through 
27109), we solicited public comments about the potential inclusion of 
two geriatric care measures in the Hospital IQR Program measure set. 
These two potential geriatric care measures focused on ensuring 
hospitals were committed to implementing surgical, and general hospital 
best practices, for geriatric populations. Public commenters were 
largely in support of both geriatric care measures (88 FR 59185 through 
59193) and stated that measures focused on geriatric care would help a 
rapidly aging population with unique characteristics find the care they 
need. The two potential measures, Geriatric Hospital (MUC2022-112) and 
Geriatric Surgical (MUC2022-032), were included in the ``2022 Measures 
Under Consideration List'' (MUC List) \471\ and received significant 
support from the CBE, and it was recommended that the two measures be 
combined into one.\472\ In response to CBE and public feedback, we 
proposed this streamlined and combined version of the former two 
measures (88 FR 59185 through 59193). This structural measure applies a 
broad scope of evidence-based best practices, focused on goal centered, 
clinically effective care for older patients in the hospital inpatient 
setting.
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    \471\ Centers for Medicare & Medicaid Services. 2022 MUC List. 
Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \472\ Centers for Medicare & Medicaid Services. MAP 2022-2023 
Final Recommendations. Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
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    We note that past comments have reflected concerns regarding 
structural measures because they do not explicitly link to improved 
outcomes. This is because there is no existing validation process 
confirming the accuracy of hospitals' responses to these types of 
measures. Despite this, structural measures, over time and in select 
circumstances, have certain advantages over other types of measures. 
Structural measures provide a way to address a new topic for which no 
outcome measure exists, such as the Age Friendly Hospital measure, the 
Hospital Commitment to Health Equity measure (87 FR 49191 through 
49201), and the Maternal Morbidity structural measure (86 FR 45361 
through 45365). In these examples, structural measures set a new 
expectation for the development of evidence-based programs and 
processes that would support improvements in these high impact areas. 
In the future, these structural measures can also be linked to new 
outcome measures or included in the Hospital Star Ratings Program.
(2) Overview of Measure
    The Age Friendly Hospital measure assesses hospital commitment to 
improving care for patients 65 years or older receiving services in the 
hospital, operating room, or emergency department. This measure 
consists of five domains that address essential aspects of clinical 
care for older patients. Table IX.C.1 includes the five attestation 
domains and corresponding attestation statements.

[[Page 69518]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.226

(3) Measure Alignment to Strategy
    This measure aligns with our efforts under the CMS National Quality 
Strategy priority area of ``Equity and Engagement'' that seeks to 
advance equity and whole-person care as well as to engage individuals 
and communities to become partners in their care.\473\ This measure 
additionally aligns with the CMS National Quality Strategy priority 
area of ``Outcomes and Alignment'' that aims to improve quality and 
health outcomes across the care journey including the objective to 
improve quality in high-priority clinical areas and supportive 
services.\474\
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    \473\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy. Available at: https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
    \474\ Ibid.
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    The domains and attestation statements in this measure span the 
breadth of the clinical care pathway and, together, provide a framework 
for optimal care of the older adult patient. More specifically, the 
domains focus on patient goals, medication management, frailty, social 
vulnerability, and leadership/governance commitment. This structural 
measure identifies the best evidence-based practices for hospital 
leadership, operations, and high reliability across each domain, 
particularly with the unavailability of more direct metrics related to 
each of the domains. In addition, this measure complements current 
patient safety reporting, supports hospitals in improving the quality 
of care for a complex patient population, and furthers our commitment 
to advancing health equity among the diverse older communities served 
by participants in CMS programs.
(4) Pre-Rulemaking Process and Measure Endorsement
(a) Recommendation From the PRMR Process
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of the preamble of this final rule for details on 
the PRMR process including the voting procedures used to reach 
consensus on measure recommendations. The PRMR Hospital Committee met 
on January 18-19, 2024, to review measures included by the Secretary on 
a publicly available ``2023 Measures Under Consideration List'' (MUC 
List),475 476 including the Age Friendly Hospital measure 
(MUC2023-219), and to vote on a recommendation regarding use of this 
measure.
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    \475\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \476\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
---------------------------------------------------------------------------

    The PRMR Hospital Recommendation Group for the Age Friendly 
Hospital measure did not reach consensus and did not recommend 
including this measure in the Hospital IQR Program either with or 
without conditions. Eleven of the sixteen members of the group 
recommended adopting the

[[Page 69519]]

measure into the Hospital IQR Program without conditions; zero members 
recommended adoption with conditions; five committee members voted not 
to recommend the measure for adoption. No voting category reached 75 
percent or greater, including the combination of the recommend and the 
recommend with conditions categories. Thus, the committee did not reach 
consensus and did not recommend including this measure in the Hospital 
IQR Program either with or without conditions.
    Several PRMR Hospital Committee members applauded the intent of 
this measure and the push toward transparency and consistency in 
reporting, noting these types of measures signal to hospital leadership 
and governance the importance of prioritizing initiatives and 
implementing frameworks outlined in the measure, highlighting how 
important this specific measure is for prioritizing improving care for 
older patients.\477\ PRMR Hospital Committee members also commented on 
the measure's flexibility regarding screening tools noting it was not 
overly prescriptive.\478\ Several PRMR Hospital Committee members noted 
concerns about structural measures in general and whether they drive 
action.\479\ Specifically, PRMR Hospital Committee members expressed 
concerns that the measure domains were not tightly scoped enough to 
drive discrete action. We acknowledge the concerns identified by the 
PRMR Hospital Committee members. Nevertheless, we have concluded that 
this measure does support reliable practices that drive change, 
transparent reporting, and prioritization of resources to implement 
these best practices. The measure was developed from a large 
collaborative that has evaluated the elements incorporated into these 
domains across many different geographic locations, hospital sizes, and 
patient demographics. We also refer readers to the FY 2024 IPPS/LTCH 
PPS final rule (88 FR 59186) where we discussed previous CBE review of 
the Geriatric Hospital and Geriatric Surgical measures, which were 
combined by the measure developer based on previous CBE recommendations 
to create the Age Friendly Hospital measure. As previously discussed, 
this structural measure plays a role in establishing the foundation for 
health outcome quality measures, and this measure would support 
improvements in quality of care in hospitals participating in the 
Hospital IQR Program by filling gaps in care management for older 
adults.
---------------------------------------------------------------------------

    \477\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Final MUC Recommendation Report. Available at: https://p4qm.org/PRMR.
    \478\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Final MUC Recommendation Report. Available at: https://p4qm.org/PRMR.
    \479\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Final MUC Recommendation Report. Available at: https://p4qm.org/PRMR.
---------------------------------------------------------------------------

(b) Measure Endorsement
    The measure has not been submitted for CBE endorsement at this 
time. In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36307 through 
36314), we proposed adoption of this measure into the Hospital IQR 
Program despite the measure not yet being endorsed by the CBE. Although 
section 1886(b)(3)(B)(viii)(IX)(aa) of the Act requires that measures 
specified by the Secretary for use in the Hospital IQR Program be 
endorsed by the entity with a contract under section 1890(a) of the 
Act, section 1886(b)(3)(B)(viii)(IX)(bb) 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 measures that have been endorsed 
or adopted by a consensus organization identified by the Secretary. 
During measure endorsement, the CBE considers whether a measure ``is 
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 is consistent across types of health care providers, 
including hospitals and physicians (section 1890(b)(2)(A) and (B) of 
the Act).''
    We reviewed CBE-endorsed measures and were unable to identify any 
other CBE-endorsed measures on this topic. We are adopting this measure 
pursuant to section 1886(b)(3)(B)(viii)(IX)(bb) of the Act. As 
previously discussed, we have determined this an appropriate topic for 
a measure to be adopted absent endorsement because this measure is 
important for establishing a foundation for future health outcome 
measures and that this measure provides a framework of best practices 
for delivering care to older adults with multiple chronic conditions 
from a hospital and health system perspective.
(5) Measure Calculation
    The Age Friendly Hospital measure consists of five domains, each 
representing a separate domain commitment. Hospitals or health systems 
would need to evaluate and determine whether they can affirmatively 
attest to each domain, some of which have multiple attestation 
statements, for each hospital reported under their CMS certification 
number (CCN). For a hospital or a health system to affirmatively attest 
to a domain, and receive a point for that domain, a hospital or health 
systems would evaluate and determine whether it engaged in each of the 
elements that comprise the domain (see Table IX.C.1), for a total of 
five possible points (one point per domain).
    A hospital or health system would not be able to receive partial 
points for a domain. For example, for Domain 3 (``Frailty Screening and 
Intervention''), a hospital or health system would evaluate and 
determine whether their hospital or health system's processes meet each 
of the corresponding attestation statements described in (A), (B), (C), 
and (D) (see Table IX.C.1). If the hospital or health system's 
processes meet all four attestation statements in Domain 3, the 
hospital or health system would receive a point for that domain. 
However, if the hospital could only affirmatively attest to (B) and 
(C), for example, then no points could be earned for Domain 3. We note 
that because the Hospital IQR Program is a pay-for-reporting program, 
hospitals would receive credit for the reporting of their measure 
results regardless of their responses to the attestation questions.
    For more details on the measure specifications for the Hospital IQR 
Program, we refer readers to the Web-Based Data Collection tab under 
the Hospital IQR Program measures page on QualityNet at: https://qualitynet.cms.gov/inpatient/iqr/measures#tab1 (or other successor CMS 
designated websites).
(6) Data Submission and Reporting
    Hospitals and/or health systems are required to submit information 
for structural measures once annually using a CMS-approved web-based 
data collection tool available within the Hospital Quality Reporting 
(HQR) System. In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36307 
through 36314) we proposed the mandatory reporting of this measure 
beginning with the CY 2025 reporting period/FY 2027 payment 
determination. We refer readers to section IX.C.9. of the preamble of 
this final rule for more

[[Page 69520]]

details on our data submission and deadline requirements for structural 
measures. Specifications for the measure would also be posted on the 
QualityNet web page at: https://qualitynet.cms.gov/inpatient/iqr/measures#tab1 (or other successor CMS designated websites)
    We refer readers to section IX.C.9. of this final rule for our 
previously finalized structural measure reporting and submission 
requirements.
    We invited public comment on our proposal to adopt the Age Friendly 
Hospital measure beginning with CY 2025 reporting period/FY 2027 
payment determination.
    Comment: Many commenters supported our proposal to adopt the Age 
Friendly Hospital measure in the Hospital IQR Program. Many commenters 
noted this measure would address the care needed to improve outcomes 
for older and vulnerable patients. Many commenters expressed support on 
the basis that the measure is evidence-based and builds on guidelines 
established by several medical specialty societies focused on health 
care provisions for older adults. Many commenters specifically referred 
to the ``4 M's'' because the measure organizes care around what matters 
most to the patient, encourages review and reconciliation of 
medications, requires the assessment of mobility and mentation, and 
that these matters would benefit older adults and would result in 
improved outcomes and quality of care for older adults. Several 
commenters supported this measure and noted that it is a first step 
towards focusing on and measuring many aspects of geriatric care. A few 
commenters cited the improvements from this measure that would create a 
safer environment for older adults in the hospital.
    Response: We thank the commenters for their support. We agree that 
the measure's focus on patient goals, medication management, frailty, 
social vulnerability, and leadership/governance commitment would 
encourage improvements in care provided to older adults in the 
inpatient hospital setting. We also agree that this measure builds on 
evidence-based guidelines established from multiple organizations 
specializing in care delivery for older adults. Lastly, we agree with 
commenters that this measure would be an initial effort toward quality 
measures related to geriatric care in the hospital inpatient setting.
    Comment: A commenter supported this measure and the expected 
benefits of having emergency departments that focus on the care and 
needs of the geriatric population and recommend continuing to advance 
geriatric emergency care.
    Response: We thank the commenter for their support. We note that 
any future proposal to implement measures focused on geriatric care in 
the emergency department would be announced through notice-and-comment 
rulemaking.
    Comment: A commenter supported this measure and emphasized that 
Veterans are at a higher risk for developing dementia and suggested 
that this measure would encourage hospitals to treat the Veteran as a 
whole person.
    Response: We thank the commenter for their support. We agree that 
this measure would encourage hospitals to treat those at risk for 
cognitive changes as a whole person, including Veterans.
    Comment: A commenter supported the Age Friendly Hospital measure 
and stated that public reporting of this measure would help consumers 
select high-quality care.
    Response: We thank the commenter for their support of this measure. 
We agree that this measure would support consumers' identification of 
high-quality care.
    Comment: A few commenters recommended removing malnutrition 
screening under Domain 3 because it is not a standard requirement, and 
hospitals would need to reconsider and integrate this new element into 
the workflow.
    Response: We disagree with the recommendation to remove 
malnutrition screening discussed in Domain 3. Measure developers 
included nutrition screening as a part of delirium prevention because 
studies show that the implementation of cognitive screening and 
delirium prevention strategies such as education, sleep hygiene, 
reorientation, and attention to nutrition significantly decreases the 
number and duration of episodes of delirium in hospitalized 
patients.480 481 482 Thus, nutrition screening has 
significant value to providing high quality inpatient care for older 
populations and we will not be removing this language from the measure.
---------------------------------------------------------------------------

    \480\ Siddiqi N, Harrison JK, Clegg A, et al. Interventions for 
preventing delirium in hospitalised non-ICU patients. Cochrane 
Database Syst Rev. Mar 11 2016;3:CD005563. doi:10.1002/
14651858.CD005563.pub3.
    \481\ Inouye SK, Bogardus ST, Jr., Charpentier PA, et al. A 
multicomponent intervention to prevent delirium in hospitalized 
older patients. N Engl J Med. Mar 4 1999;340(9):669-76. doi:10.1056/
NEJM199903043400901.
    \482\ Park, C., et al. (2022). Association Between 
Implementation of a Geriatric Trauma Clinical Pathway and Changes in 
Rates of Delirium in Older Adults With Traumatic Injury. JAMA Surg 
157(8): 676-683.
---------------------------------------------------------------------------

    We also refer readers to sections IX.C.5.a.(1)., IX.C.5.a.(2)., and 
IX.C.5.a.(4). of the preamble of this final rule for more details on 
the guidelines and literature which informed this measure, the CBE 
input provided, and the significant public comment support expressed 
from experts, patients, and caregivers.
    Comment: A few commenters did not support the Age Friendly Hospital 
measure because they stated that some of the practices captured by the 
measure are duplicative of other reporting requirements, including 
aspects of accreditation by The Joint Commission or parts of Medicare's 
Conditions of Participation (CoPs).
    Response: We believe the commenters are referring to the Medicare 
CoP for hospitals related to quality assessment and improvement 
programs at 42 CFR 482.21(a) through (e). We disagree that the Age 
Friendly Hospital measure is redundant to the CoPs and maintain that it 
is complementary to them. While the CoPs set forth minimum activities 
related to developing, implementing, and maintaining an effective, 
ongoing, hospital-wide, data-driven quality assessment and performance 
improvement program, the elements of the Age Friendly Hospital measure 
requires hospitals to attest to whether hospitals have built upon these 
minimum activities to exemplify optimizing care for older patients with 
a multifaceted vulnerability profile through implementation of 
geriatric vulnerability screens, evaluation of patient social 
determinants of health, preventing the prescription of inappropriate 
medications, providing goal concordant care, and implementation of a 
quality framework for oversight of the care pathway for older patients.
    Additionally, we continually look for methods to minimize provider 
reporting burden and do not find that this measure is duplicative of 
other efforts or currently available measures in the Hospital IQR 
Program.
    Comment: A commenter had concerns about Domain 5, Age-Friendly Care 
Leadership, specifically the statement requiring a designated point 
person or interprofessional committee. The commenter suggested that 
this requirement is unnecessary and redundant as all phases of hospital 
care have the appropriate hierarchy and structures in place to ensure 
high quality standards without requiring them to be specifically stated 
for this measure.

[[Page 69521]]

    Response: We acknowledge the commenter's concerns regarding 
potentially duplicative processes and procedures that already exist in 
hospitals. We do not agree that the Age Friendly Hospital measure, 
Domain 5, is redundant and that all phases of hospital care in all 
hospitals have the appropriate structures in place to ensure high 
quality standards for older patients. Existing geriatric models of care 
have been shown to have multiple benefits for older hospitalized 
patients such as decreased rates of delirium, shorter lengths of stay, 
and improved function.483 484 485 486 487 This measure has 
been developed to ensure that implementation of quality improvement 
frameworks is championed by geriatric leadership and that this wide-
ranging initiative is lead in a unified manner and continually re-
evaluated for opportunities for clinical improvement for older 
patients. Clinical programs generally cannot succeed without dedicated 
leadership and ongoing quality monitoring and improvement. The pillars 
of quality improvement have been well established in the literature, 
including consistent data collection with continuous feedback allowing 
for the identification of areas for improvement in process, structure, 
and outcomes.\488\
---------------------------------------------------------------------------

    \483\ Inouye SK, Bogardus ST, Jr., Charpentier PA, et al. A 
multicomponent intervention to prevent delirium in hospitalized 
older patients. N Engl J Med. Mar 4 1999;340(9):669-76. doi:10.1056/
NEJM199903043400901.
    \484\ Barnes DE, Palmer RM, Kresevic DM, et al. Acute care for 
elders units produced shorter hospital stays at lower cost while 
maintaining patients' functional status. Health Aff (Millwood). Jun 
2012;31(6):1227-36. doi:10.1377/hlthaff.2012.0142.
    \485\ Landefeld CS, Palmer RM, Kresevic DM, Fortinsky RH, Kowal 
J. A randomized trial of care in a hospital medical unit especially 
designed to improve the functional outcomes of acutely ill older 
patients. N Engl J Med. May 18 1995;332(20):1338-44. doi:10.1056/
NEJM199505183322006.
    \486\ Inouye SK, Bogardus ST, Jr., Baker DI, Leo-Summers L, 
Cooney LM, Jr. The Hospital Elder Life Program: a model of care to 
prevent cognitive and functional decline in older hospitalized 
patients. Hospital Elder Life Program. J Am Geriatr Soc. Dec 
2000;48(12):1697-706. doi:10.1111/j.1532-5415.2000.tb03885.x.
    \487\ Capezuti E, Boltz M, Cline D, et al. Nurses Improving Care 
for Healthsystem Elders--a model for optimising the geriatric 
nursing practice environment. J Clin Nurs. Nov 2012;21(21-22):3117-
25. doi:10.1111/j.1365-2702.2012.04259.x.
    \488\ Ingraham AM, Richards KE, Hall BL, Ko CY. Quality 
improvement in surgery: the American College of Surgeons National 
Surgical Quality Improvement Program approach. Adv Surg. 
2010;44:251-67. doi:10.1016/j.yasu.2010.05.003.
---------------------------------------------------------------------------

    Comment: A few commenters recommended including patients 45 years 
or older instead of patients 65 years and older.
    Response: We thank the commenters for their recommendation and will 
share this feedback with the measure developers. While the measure does 
not include patients 45 years and older at this time, we note that 
hospitals are not prevented from implementing the activities described 
in the domains of this measure and the ensuing care improvements for 
patients younger than 65 years.
    Comment: A few commenters had concerns about the perceived lack of 
oversight for structural measures, including the Age Friendly Hospital 
measure. A commenter recommended a stronger audit function to 
strengthen the measure and ensure accurate reflection of what is 
occurring in the hospital. A commenter suggested that the measure may 
lack direct oversight and may not be easily audited, meaning that 
hospitals may attest to current practices and refuse to address domains 
that require significant time, effort, and resources.
    Response: We understand commenters' concerns regarding the accuracy 
of provider self-reported data and are continuously evaluating new 
ways, including but not limited to an audit plan, to ensure accurate 
information is submitted to CMS and shared with the public. We 
acknowledge that past comments have reflected concerns regarding 
structural measures because they do not explicitly link to improved 
outcomes. This is because there is no existing validation process 
confirming the accuracy of hospitals' responses to these types of 
measures. Despite this, structural measures, over time and in select 
circumstances, have certain advantages over other types of measures. 
Structural measures provide a way to address a new topic for which no 
outcome measure exists, such as the Age Friendly Hospital measure, the 
Hospital Commitment to Health Equity measure (87 FR 49191 through 
49201), and the Maternal Morbidity structural measure (86 FR 45361 
through 45365). In these examples, structural measures set a new 
expectation for the development of evidence-based programs and 
processes that would support improvements in these high impact areas. 
We note that we require all hospitals participating in the Hospital IQR 
Program to complete the Data Accuracy and Completeness Acknowledgement 
(DACA) each year, which requires an annual attestation that all the 
information reported to CMS for this program is accurate and complete 
to the best of the submitters' knowledge. CMS expects all hospitals to 
submit complete and accurate data with respect to quality measures. We 
refer readers to section IX.C.11. of this final rule for more details 
on the DACA policies for the Hospital IQR Program.
    Comment: Several commenters questioned the evidence that 
implementation of the measure would lead to better outcomes. A few 
commenters did not support this measure and recommended instead 
developing a geriatric-care surgical outcome-based measure that helps 
hospitals identify gaps in care for older adults. A commenter 
recommended evaluating gaps in quality and working with relevant 
parties to develop meaningful outcome measures for older populations. A 
few commenters called for an immediate adoption of this measure and 
encouraged CMS to move with urgency to further develop this into an 
outcome measure, given the vulnerability of older populations.
    Response: While this measure does not measure patient outcomes or 
specific activities of patient care, it assesses hospitals' 
implementation of a systems-based approach to age friendly care best 
practices, which is applicable to all older patient care activities and 
outcomes. Age friendly care is a top priority for the rapidly aging 
populations across the U.S. and although existing quality metrics have 
improved both the rate and reporting of clinical outcomes that are 
important to older adults, these measures may be narrow in scope. 
Optimizing care for older patients with multifaceted vulnerability 
profiles requires a holistic approach with the goal of improving the 
entire care pathway to better serve the needs of this unique 
population. Therefore, we have identified that there is a measure gap 
in our current quality reporting programs. That is, we have identified 
a gap in measures that emphasize the importance of complex medical, 
physiological, and psychosocial needs that are often inadequately 
addressed in the hospital inpatient infrastructure. Regarding commenter 
recommendations to develop geriatric-care surgical outcome-based 
measures, the Age Friendly Hospital measure plays a role in 
establishing the foundation for health outcome quality measures on this 
topic and this measure will support improvements in quality of care in 
hospitals participating in the Hospital IQR Program by filling gaps in 
care management for older adults. We also refer readers to sections 
IX.C.5.a.(1)., IX.C.5.a.(2)., and IX.C.5.a.(4). of the preamble of this 
final rule for more details on the guidelines and literature which 
informed this measure, the CBE input provided, and significant public

[[Page 69522]]

comment support expressed from experts, patients and caregivers.
    We thank commenters for their support regarding the inclusion of 
the Age Friendly Hospital measure and who recommended implementing it 
sooner than proposed. While we are not finalizing adoption of this 
measure before the CY 2025 reporting period/FY 2027 payment 
determination, this does not preclude hospitals from implementing the 
practices described in the measure sooner if not doing so already.
    Comment: A few commenters had concerns that attestations without 
quantitative metrics would not lead to quantifiable improvements in 
quality of care and patient outcomes and recommended continuing to work 
with interested parties on development of quantifiable metrics to 
inform data driven quality measures. Commenters noted that attestation 
measures do not have the same level of significance as outcome measures 
and do not provide meaningful, actionable data to be used for 
performance improvement, and are not specific enough to provide 
comparable information.
    Response: We acknowledge commenter concerns regarding whether 
structural measures explicitly link to quantifiable improvement in 
quality of care and patient outcomes, however, we disagree that 
structural measures do not hold the same level of significance as 
outcome measures. We note that structural measures, in selected 
circumstances, over time and with experience, offer certain advantages 
over other types of measures. Structural measures provide a way to 
address a new topic for which no outcome measure exists, such as the 
Age Friendly Hospital measure, the Hospital Commitment to Health Equity 
measure (87 FR 49191 through 49201), and the Maternal Morbidity 
Structural measure (86 FR 45361 through 45365). In these examples, 
structural measures set a new expectation for the development of 
evidence-based programs and processes that would support improvements 
in these high impact areas. Specifically, regarding the Age Friendly 
Hospital measure, this measure assesses whether the appropriate 
structures are in place to ensure high quality care for older patients. 
In the future, these can also be linked to new outcome measures or 
included in the Hospital Star Ratings Program. We will continue to 
engage interested parties as we continue to build on our efforts to 
address quality of care and patient outcomes for older patients.
    Comment: A few commenters had concerns or recommendations regarding 
the burden of implementing this measure in the timeline proposed. A few 
commenters had concerns about the financial and resource burden of 
implementing two new structural measures for CY 2025 reporting period. 
Another commenter recommended a transitional approach to implementing 
this measure by increasing the number of questions year over year. A 
commenter argued that the Age Friendly Hospital measure would adversely 
affect care delivery teams and cause additional stress through the 
expanded requirements for patient screenings in complex patient 
encounters. The commenter recommended postponing the measure's adoption 
until at least CY 2026. A commenter recommended a voluntary reporting 
period.
    Response: We understand commenters' concerns. However, we do not 
expect all hospitals to achieve a score of five out of five on the 
measure in the first reporting year. This measure is intended to 
advance the current state of age friendly care structures within 
hospitals. By adopting the measure for the CY 2025 reporting period, we 
establish a baseline measure performance, which we can use to 
understand changes in care practices as hospitals seek to incorporate 
more of the practices outlined in the measure's requirements. Requiring 
attestation to two or three items per domain would not allow 
establishment of a baseline, nor would it as effectively encourage 
increased adoption of age friendly initiatives within inpatient 
hospitals. Regarding commenters' concerns about additional burden and 
the stress this may place on their hospitals, we acknowledge that 
reporting this measure may increase administrative burden, and we refer 
readers to section XII.B.6.b. for our discussion of information 
collection burden. We also acknowledge that hospitals may have to 
invest in changes to their systems in order to be able to attest 
``yes'' to some domains. We reiterate that we do not expect all 
hospitals to achieve a score of five on the measure in the first year. 
Hospitals that are not able to attest positively to all the domains can 
still meet the measure reporting requirements; therefore, we are not 
including a voluntary reporting period for this measure. They may 
receive a score lower than five but would not be subject to a payment 
reduction so long as they attest to each domain (positively or 
negatively).
    Comment: A few commenters made recommendations to strengthen the 
measure's elements regarding cognitive changes. A few commenters 
suggested a requirement to establish a communication plan when 
cognitive changes have been identified during screening for dementia or 
cognitive dysfunction. A commenter recommended better cognitive tests 
for dementia. A few commenters recommended that this measure include 
education and training about cognitive changes. A commenter recommended 
hospitals should establish programs and protocols to identify health 
conditions that affect older populations, such as dementia and 
Alzheimer's.
    Response: We thank the commenters for their input and appreciate 
the many meaningful practices that could be utilized in hospitals 
across our nation and the commitment to care for those who are at risk 
of cognitive dysfunction, including dementia and Alzheimer's disease. 
While we will not be making the suggested recommendations at this time, 
we will share all feedback with the measure steward for the future. For 
this first version of the Age Friendly Hospital measure, the measure 
steward developed the measure to allow some flexibility in meeting the 
domains and not be overly prescriptive. Any future proposals to 
implement such a measure, or to substantively modify the measure to 
include these recommendations, would be announced through notice-and-
comment rulemaking.
    Comment: A commenter recommended that CMS consider adding language 
to the measure to account for the functions of health systems rather 
than only individual hospitals.
    Response: As described in the FY 2025 IPPS/LTCH PPS proposed rule 
(89 FR 36307 through 36311), we developed this measure to address the 
challenges of delivering care to older adults with multiple chronic 
conditions from both a hospital and health system perspective. Multiple 
organizations, including American College of Surgeons (ACS), the 
Institute for Healthcare Improvement (IHI), and the American College of 
Emergency Physicians (ACEP), collaborated to identify and establish 
age-friendly initiatives based on evidence-based best practices that 
provide goal centered, clinically effective care for older 
patients.489 490

[[Page 69523]]

The elements in the Age Friendly Hospital measure align with IHI's and 
Hartford Foundation's national initiative for Age Friendly Systems 
which has been implemented in hospitals of various sizes, including 
health systems.\491\ For the Hospital IQR Program, hospitals should 
report the measure to CMS' Hospital Quality Reporting (HQR) System 
based on their CMS Certification Number (CCN).
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    \489\ American Geriatrics Society Expert Panel on the Care of 
Older Adults with Multimorbidity. (2012). Guiding principles for the 
care of older adults with multimorbidity: an approach for 
clinicians. Journal of the American Geriatrics Society, 60(10), E1-
E25.
    \490\ Boyd, C., Smith, C.D., Masoudi, F.A., Blaum, C.S., Dodson, 
J.A., Green, A.R., . . . & Tinetti, M.E. (2019). Decision making for 
older adults with multiple chronic conditions: executive summary for 
the American Geriatrics Society guiding principles on the care of 
older adults with multimorbidity. Journal of the American Geriatrics 
Society, 67(4), 665-673.
    \491\ Institute for Healthcare Improvement. (2022). Age-friendly 
health systems: Guide to using the 4Ms in the care of older adults 
in hospitals and ambulatory practices. Available at: https://forms.ihi.org/hubfs/IHIAgeFriendlyHealthSystems_GuidetoUsing4MsCare.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters expressed concern about Domain 4, Social 
Vulnerability. A commenter had concerns about hospitals that serve 
disadvantaged, rural, or low socioeconomic status communities may be 
unfairly penalized in element (b) of this Domain. The commenters noted 
the importance of ensuring that patients are connected to resources to 
address social vulnerabilities; however, hospitals treating 
disproportionate numbers of these patients may not have adequate access 
to such resources to attest ``yes'' to this portion of the measure, or 
there could be a lack of available resources in a particular community 
that is beyond the control of the hospital. A commenter appreciated 
that element (a) of Domain 4 considers screening for caregiver stress 
and recommended including ``appropriate referrals and resources for 
patients' family caregivers, as applicable'' to element (b) of Domain 
4, to be inclusive of caregivers for all elements of Domain 4.
    Response: We acknowledge commenters' concerns regarding hospitals 
that serve historically underserved, rural, or low socioeconomic status 
communities being unfairly penalized in element (b) of this Domain. We 
acknowledge that facilitating quality improvement for rural hospitals 
and small hospitals can present unique challenges and is a high 
priority under the CMS National Quality Strategy.\492\ We continue to 
consider ways to support small and rural hospital efforts toward 
achieving health equity. We note that during development of this 
measure, we gave this topic significant consideration, and the intent 
of Domain 4 is to promote adoption of social vulnerability screening of 
older adults and to emphasize the importance of having systems in place 
to ensure that social issues are identified and addressed as a part of 
the care plan, not to impose undue strain on hospitals treating 
disproportionate numbers of patients that may not have adequate access 
to such resources.
---------------------------------------------------------------------------

    \492\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy. Available at: https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
---------------------------------------------------------------------------

    We acknowledge commenter concerns about public reporting of their 
score on this measure through Care Compare if a hospital is unable to 
attest ``yes'' to a domain. While we recognize that a hospital's 
performance on the measure may impact the hospital's reputation through 
public reporting, this reputational impact is a means of encouraging 
the adoption of frameworks centered around providing high quality care 
to vulnerable elderly patients with multiple medical, psychological, 
and social needs at highest risk for adverse events after major health 
events requiring hospitalization. Further, we believe public reporting 
of healthcare quality data promotes transparency in the delivery of 
care by increasing the involvement of leadership in healthcare quality 
improvement, creating a sense of accountability, helping to focus 
organizational priorities, and providing a means of delivering 
important healthcare information to consumers.\493\ Lastly, this 
measure is intended to provide information to hospitals on high yield 
points of intervention for older adults who are admitted to a hospital 
or an emergency department and provide a framework for the optimal care 
of the older adult patient (89 FR 36307 through 36311).
---------------------------------------------------------------------------

    \493\ Centers for Medicare & Medicaid Services Quality Net. 
Public Reporting Overview. Available at: https://qualitynet.cms.gov/inpatient/public-reporting.
---------------------------------------------------------------------------

    We note that the Hospital IQR Program is a pay-for-reporting 
program, and hospitals' payments are not based on their performance on 
quality measures. Hospitals would receive credit for successful 
reporting of their measure results regardless of whether they 
positively or negatively attest to each statement within a domain. We 
refer readers to section IX.C.5.a.(6). of this final rule for 
information on the submission and reporting requirements for this 
measure. We thank the commenter for their recommendation to include 
providing referrals to caregivers in element (b) in Domain 4 and will 
share all feedback with the measure steward.
    Comment: A few commenters expressed concern regarding the ``all or 
nothing'' scoring methodology regarding the five domain attestations 
and recommended considering partial credit, noting this would enable 
hospitals to better understand barriers and where to prioritize efforts 
for quality improvement.
    Response: We understand commenters' concerns that many hospitals 
will not be able to positively attest to all the statements for each of 
the domains, which will affect the hospital's score for the entire 
domain. However, the measure steward intentionally chose to score on a 
zero to five basis at the domain level instead of allowing partial 
credit (allowing a hospital to receive credit for each positively 
attested statement) to emphasize the interdependencies of the 
statements within each domain. Because the Age Friendly Hospital 
measure assesses hospitals in terms of their systemic approach to age 
friendly care, it is important to achieve all the actions within each 
domain, rather than to only meet several items. We reiterate that we do 
not expect all hospitals to achieve a score of five on the measure in 
the first reporting year. Furthermore, requiring attestation to fewer 
items per domain would be less effective at furthering the current 
state of age friendly structures within hospitals. In addition, full 
point scoring is also intended to keep the level of complexity to a 
minimum and therefore ease the general public's ability to understand 
the measure. We reiterate that the Hospital IQR Program is a pay-for-
reporting program, and hospitals would receive credit for the reporting 
of their measure results regardless of their responses to the 
attestation questions.
    Comment: A few commenters did not support this measure and had 
concerns regarding elements included in Domain 3. Specifically, a few 
commenters had concerns regarding the transfer of older patients out of 
the emergency room within eight hours of arrival or three hours of 
decision to admit as factors that are influenced beyond the control of 
the hospital. A few commenters questioned the wait time element used in 
this domain because of workforce shortages, unforeseen hastened 
disposition of patients, and lack of acceptable boarding time 
parameters recommendations.
    Response: We acknowledge commenters' concerns regarding elements 
included in Domain 3 that would require attestation to the transfer of 
older patients out of the emergency room within eight hours of arrival 
or three hours of the decision to admit. We understand that there may 
be many factors, including work shortages, that are outside of the 
control of the hospital that can delay transfer from the emergency 
room, and that this may be especially true for rural hospitals. 
However, we remain concerned about

[[Page 69524]]

patients being subjected to lengthy waiting periods for hospital care, 
and this element of Domain 3 would encourage hospitals to review their 
practices, especially for older patients, to ensure that patients are 
seen as quickly as is reasonable.
    Comment: Several commenters had concerns about the limited 
performance gap for this measure during its testing and stated that 
reporting on this measure would waste a hospital's limited resources 
because of the limited potential for performance improvement. A 
commenter had concerns that this measure would quickly ``top out,'' 
leaving no room for improvement across hospitals.
    Response: We disagree with the concern that this measure has 
limited potential for improvement across hospitals. The measure 
developer's initial pilot study showed significant variation in 
hospital performance. The majority of institutions reported completing 
some or all of the domains, but there was a wide range between 
partially and fully attesting to each element across the five domains 
of this measure. Rates of full compliance on domains ranged from 12.5 
percent to 87.5 percent, while rates of partial compliance were higher 
than the rates of full compliance, accounting for the relatively low 
noncompliance rates. As with all Hospital IQR Program measures, we will 
monitor performance on the measure carefully and will consider removing 
the measure in the future if it becomes topped-out.
    Comment: Several commenters had concerns that this measure may be 
prone to inconsistent interpretations and therefore be implemented and 
reported differently across hospitals. A few commenters were concerned 
that this measure may be inconsistently reported across hospitals that 
patients and their families may misinterpret the results of this 
measure when they are publicly reported. A commenter conveyed that the 
attestations in this measure are not specific enough to ensure that 
hospitals are reporting comparable information and that the measure 
therefore is unlikely to lead to improvement in care for this 
population.
    Response: We acknowledge commenters' concern about public reporting 
of this measure and interpretation by the public. We refer readers to 
sections IX.C.5.a.(5).and IX.C.5.a.(6). (Measure Calculation and Data 
Submission and Reporting, respectively) of this final rule for detailed 
descriptions of how we calculate and publicly report this measure on 
the Compare tool hosted by HHS, currently available at: https://www.medicare.gov/care-compare. This measure includes five attestation-
based questions, each representing a separate domain of commitment. 
Hospitals receive one point for each domain to which they attest 
``yes'' stating they are meeting the required competencies. For each 
domain there are between one and four associated yes or no sub-
questions for related structures or activities within the hospital. 
Hospitals will only receive a point for each domain if they attest 
``yes'' to all related elements in a domain. A hospital's score can 
range from a total of zero to five points. For more details on the 
measure specifications for this measure, we refer readers to the Web-
Based Data Collection tab under the Hospital IQR Program measures page 
on QualityNet at: https://qualitynet.cms.gov/inpatient/iqr/measures#tab1 (or other successor CMS designated websites). We intend 
to provide educational materials as part of our outreach and public 
reporting of this measure to ensure understanding and interpretation of 
publicly reported data. For measures that are submitted annually, we 
strive to have educational materials related to publicly reported data 
available to hospitals the following fall. For example, public 
reporting related educational materials for measures with a CY 2025 
performance period will be available in the fall of CY 2026.
    Regarding commenters concerns about the specificity of this measure 
and concerns about meaningful improvements, this measure has been 
developed to provide insightful information to healthcare providers and 
the public on the number of hospitals currently participating in age 
friendly care including social vulnerability screening for older 
adults, ensuring consistent quality care of older patients by ensuring 
hospitals have an age friendly champion or interprofessional committee, 
frailty screening for geriatric issues, eliciting patient health 
related care goals and treatment preferences, and responsible 
medication management. We also refer readers to sections IX.C.5.a.(1)., 
IX.C.5.a.(2)., and IX.C.5.a.(4). of the preamble of this final rule for 
more details on the guidelines and literature which informed this 
measure, the CBE input provided, and significant public comment support 
expressed from experts, patients and caregivers.
    Comment: A few commenters recommended providing detailed and clear 
guidance on data collection and data entry to help facilitate 
meaningful reporting, including how hospitals should document whether 
they are satisfying each domain, and how it would be published for the 
public if finalized. A commenter requested guidance on the scope and 
depth of interventions required to get a point for Domain 3. A 
commenter requested data specifications or required elements for 
frailty screenings, medication management, malnutrition, and cognitive 
impairment, as well as clarity of scope for those requirements. A 
commenter expressed concern over the lack of definition of ``evidence'' 
in Domain 1.
    Response: The Age Friendly Hospital measure is intended to provide 
hospitals flexibility in meeting each of the attestations and allow 
each hospital to adopt practices that are most effective for its 
individual circumstances. We recognize that there is significant 
variation among hospitals, which means that policies and procedures 
that are effective in some hospitals may not be effective in other 
hospitals. Because these practices would not be identical across 
hospitals the documentation supporting the practice may also vary. 
Therefore, the attestations in the Age Friendly Hospital measure have 
been developed to encourage hospitals to adopt policies and procedures 
consistent with a structure, culture, and leadership commitment to age 
friendly structures without being overly prescriptive in how hospitals 
implement these policies and procedures.
    Regarding the request for data specifications and clarification on 
required elements for frailty screenings, medication management, 
malnutrition, and cognitive impairment, and clarity of scope for those 
requirements, we remind readers that the Hospital IQR Program is a pay-
for-reporting program, and therefore, there are no set performance 
targets. We refer readers to the measure specifications at https://qualitynet.cms.gov/inpatient/iqr/ ``resources'' tab for more details.
    We wish to clarify that we will provide educational and training 
materials to help with consistent implementation which will be conveyed 
through routine communication channels to hospitals, vendors, and QIOs, 
including, but not limited to, issuing memos, emails, and notices on 
the QualityNet website. Additionally, we will provide education and 
outreach materials to support hospitals in identifying additional 
evidence-based practices they could adopt and in documenting that they 
have adopted those practices. For more details on measure 
specifications, we also refer readers to the Web-Based Data Collection 
tab under the IQR Measures

[[Page 69525]]

page on QualityNet at: https://qualitynet.cms.gov/inpatient/iqr/measures#tab2.
    Comment: A few commenters did not support this measure, noting that 
structural measures are burdensome to implement. A commenter stated 
that the benefits of adopting the measure do not sufficiently outweigh 
the burden of reporting it and suggested that we consider additions to 
the Conditions of Participation instead.
    Response: We understand that there would be administrative burden 
with understanding each of the attestation statements and determining 
whether a hospital's age friendly structures are in alignment with the 
attestation statements. We acknowledge that reporting this measure may 
increase administrative burden, and we refer readers to section 
XII.B.6.b. of this final rule for our discussion of information 
collection burden. We further recognize that this administrative burden 
may be more significant during the first reporting year as hospitals 
familiarize themselves with the attestation statements. However, 
implementing evidence-based practices for high-quality care for older 
adult patients with multiple complex medical conditions is essential to 
avoiding unnecessary harm such as mortality and loss of function. By 
adopting the Age Friendly Hospital measure, we are not only assessing 
hospital implementation of a systems-based approach that spans the 
breadth of the care pathway, we are also promoting such implementation. 
Therefore, we expect the Age Friendly Hospital measure to have 
significant benefits for a large portion of the U.S. patient 
population. While we understand that hospital staff and leaders will 
have to spend time reviewing the attestations and assessing their 
hospital's practices in relation to the attestation statements, this 
measure assessment will further encourage hospitals to understand and 
consider implementing systems-based approaches to older patient best 
practices if they are not already doing so, which will in turn, improve 
patient care and outcomes.
    Comment: Several commenters did not support this measure and 
recommended that this measure receive endorsement from the CBE prior to 
adoption into the Hospital IQR Program. A few commenters had concerns 
that the PRMR Hospital Committee did not reach consensus on this 
measure and suggested that the measure should be reviewed in more 
detail before its adoption.
    Response: We thank commenters for their recommendation to submit 
this measure to the CBE for endorsement. While we recognize the value 
of measures undergoing CBE endorsement review, given the importance of 
this health topic and, as there are currently no CBE-endorsed measures 
that address age friendly hospital care from a hospital and healthcare 
system level, it is important to implement this measure as soon as 
possible. Although section 1886(b)(3)(B)(viii)(IX)(aa) of the Act 
requires that measures specified by the Secretary for use in the 
Hospital IQR Program be endorsed by the entity with a contract under 
section 1890(a) of the Act, section 1886(b)(3)(B)(viii)(IX)(bb) 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 
measures that have been endorsed or adopted by a consensus organization 
identified by the Secretary. During measure endorsement, the CBE 
considers whether a measure is 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 is consistent 
across types of health care providers, including hospitals and 
physicians (section 1890(b)(2)(A) and (B) of the Act).''
    We reviewed CBE-endorsed measures and were unable to identify any 
other CBE-endorsed measures on this topic. We are adopting this measure 
pursuant to section 1886(b)(3)(B)(viii)(IX)(bb) of the Act. As 
previously discussed, we have determined this an appropriate topic for 
a measure to be adopted absent endorsement because this measure is 
important for establishing a foundation for future health outcome 
measures and that this measure provides a framework of best practices 
for delivering care to older adults with multiple chronic conditions 
from a hospital and health system perspective.
    We acknowledge commenters concerns regarding the PRMR Hospital 
Committee not reaching consensus. We note that this measure has been 
developed to provide insightful information to healthcare providers and 
the public on the number of hospitals currently participating in age 
friendly care including social vulnerability screening for older 
adults, ensuring consistent quality care of older patients through 
ensuring hospitals have an age friendly champion or interprofessional 
committee, frailty screening for geriatric issues, eliciting patient 
health related care goals and treatment preferences, and responsible 
medication management. We agree that the potential for unintended 
consequences exists and note that we consistently monitor all the 
measures in the Hospital IQR Program for unintended consequences. 
Furthermore, we note that under our previously finalized measure 
removal policy, codified at 42 CFR 412.140(g)(2) and (3) (88 FR 59144), 
if we were to identify unintended consequences related to this measure 
we would consider it for removal. We also refer readers to sections 
IX.C.5.a.(1)., IX.C.5.a.(2)., and IX.C.5.a.(4). of the preamble of this 
final rule for more details on the guidelines and literature which 
informed this measure, the CBE input provided, and significant public 
comment support expressed from experts, patients and caregivers.
    After consideration of the public comments we received, we are 
finalizing the Age Friendly Hospital measure as proposed beginning with 
the CY 2025 reporting period/FY 2027 payment determination.
b. Adoption of Two Healthcare-Associated Infection (HAI) Measures 
Beginning With the CY 2026 Reporting Period/FY 2028 Payment 
Determination
    Healthcare-associated infections (HAIs) are a major cause of 
illness and death in hospitals, posing a significant threat to patient 
safety. One in 31 hospital patients in the U.S. have an HAI at any 
given time, totaling about 687,000 cases per year.\494\ The CDC 
estimated that about 72,000 patients die from HAIs per year.\495\ HAIs 
not only put patients at risk, but also increase the hospitalization 
days required for patients and add considerably to healthcare costs. 
The CDC estimates that HAIs cost the U.S. healthcare system $28.4 
billion per year.\496\ Statistics on preventability vary but suggest 
that 55-70 percent of HAIs could be prevented through evidence-based 
practices including hand hygiene, cleaning

[[Page 69526]]

surfaces with an appropriate antiseptic, and wearing gowns and 
gloves.\497\
---------------------------------------------------------------------------

    \494\ CDC. (2024). HAI Data Portal. Available at: https://www.cdc.gov/healthcare-associated-infections/php/data/.
    \495\ Ibid.
    \496\ CDC. (2021). Health Topics--Healthcare-associated 
Infections (HAI). Available at: https://www.cdc.gov/policy/polaris/
healthtopics/hai/
index.html#:~:text=HAIs%20in%20U.S.%20hospitals%20have,least%20%2428.
4%20billion%20each%20year.
    \497\ Bearman, G., Doll, M., Cooper, K. et al. Hospital 
Infection Prevention: How Much Can We Prevent and How Hard Should We 
Try? Curr Infect Dis Rep 21, 2. (2019). https://doi.org/10.1007/s11908-019-0660-2.
---------------------------------------------------------------------------

    Given the high risk to patient safety, we previously adopted the 
National Healthcare Safety Network (NHSN) Catheter-Associated Urinary 
Tract Infection (CAUTI) and NHSN Central Line-Associated Bloodstream 
Infection (CLABSI) measures in various quality reporting programs that 
measure the annual risk-adjusted standardized infection ratio (SIR) 
among adult inpatients. The measures were originally introduced in the 
Hospital IQR Program in the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50200 through 50202) and the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51617 through 51618). In the FY 2014 IPPS/LTCH PPS final rule, the 
CAUTI and CLABSI measures were then adopted in the Hospital-Acquired 
Condition (HAC) Reduction Program (78 FR 50717) and the Hospital Value-
Based Purchasing (VBP) Program (78 FR 50681 through 50687).
    Patients with cancer are especially vulnerable to developing HAIs. 
Chemotherapy, a common treatment for patients with cancer, can weaken 
patients' immune systems and leave them vulnerable to opportunistic 
infections.\498\ Cancer treatment may also require major surgeries or 
invasive devices, which can act as another vector for infections.\499\ 
It is estimated that 10.5 percent of patients undergoing major cancer 
surgery contract a HAI, compared to only three percent of patients 
undergoing elective surgeries.\500\ Researchers from the same study 
also found that patients undergoing major cancer surgery who contracted 
a HAI were significantly more likely to die in the hospital than 
patients who did not contract a HAI.\501\ In another study, researchers 
found that developing a HAI was linked to higher costs of care and 
longer lengths of stay for patients with cancers of the lip, oral 
cavity, and pharynx.\502\ Therefore, in the FY 2013 IPPS/LTCH PPS final 
rule, beginning with the FY 2014 program year, we adopted the CAUTI and 
CLABSI measures in the PPS-Exempt Cancer Hospital Quality Reporting 
(PCHQR) Program (77 FR 53557 through 53559).
---------------------------------------------------------------------------

    \498\ da Silva R, Casella T. (2022). Healthcare-associated 
infections in patients who are immunosuppressed due to chemotherapy 
treatment: a narrative review. J Infect Dev Ctries 16:1784-1795. 
doi: 10.3855/jidc.16495.
    \499\ Biscione A, Corrado G, Quagliozzi L, Federico A, Franco R, 
Franza L, Tamburrini E, Spanu T, Scambia G, Fagotti A. Healthcare 
associated infections in gynecologic oncology: clinical and economic 
impact. Int J Gingerol Cancer. 2023 Feb 6;33(2):278-284. doi: 
10.1136/ijgc-2022-003847. PMID: 36581487.
    \500\ Sammon, J., Trinh, V.Q., Ravi, P., Sukumar, S., Gervais, 
M.-K., Shariat, S.F., Larouche, A., Tian, Z., Kim, S.P., Kowalczyk, 
K.J., Hu, J.C., Menon, M., Karakiewicz, P.I., Trinh, Q.-D. and Sun, 
M. (2013), Health care-associated infections after major cancer 
surgery. Cancer, 119: 2317-2324. https://doi.org/10.1002/cncr.28027.
    \501\ Ibid.
    \502\ Sankaran SP, Villa A, Sonis S. Healthcare-associated 
infections among patients hospitalized for cancers of the lip, oral 
cavity and pharynx. Infect Prev Pract. 2021 Jan 13;3(1):100115. doi: 
10.1016/j.infpip.2021.100115. PMID: 34368735; PMCID: PMC8336044.
---------------------------------------------------------------------------

    While many oncology services have transitioned to outpatient 
settings, acute care hospitals continue to specialize in the treatment 
of certain types of patients with cancer, for example, patients who 
have received a hematopoietic stem cell transplant and patients who 
have febrile neutropenia.\503\ Based on an internal CMS analysis, in 
2019 there were 321,961 Medicare beneficiaries with a primary diagnosis 
of cancer who received some portion of their care in an inpatient 
hospital setting. Within these inpatient settings, most Medicare 
beneficiaries with a primary diagnosis of cancer received their care at 
National Cancer Institute (NCI)-designated hospitals or other acute 
care hospitals, while only about four percent of Medicare beneficiaries 
received care at PPS-exempt cancer hospitals (PCHs). Additionally, 
based on internal CMS analysis, a portion of these Medicare 
beneficiaries who received care at a PCH also received at least some of 
their inpatient care at non-PCHs (NCI-affiliated or other hospitals).
---------------------------------------------------------------------------

    \503\ CDC. (2024). Basic Infection Control and Prevention Plan 
for Outpatient Oncology Settings. Available at: https://www.cdc.gov/healthcare-associated-infections/hcp/prevention-healthcare/outpatient-oncology.html.
---------------------------------------------------------------------------

    The Biden-Harris administration's Cancer Moonshot Program has put a 
renewed focus on improving outcomes for patients with cancer.\504\ 
Under this initiative, we seek to ensure that patients with cancer 
treated at hospitals reporting to the Hospital IQR Program are able to 
benefit from public reporting of hospital safety data and choose the 
best provider for their needs. In the FY 2025 IPPS/LTCH PPS proposed 
rule (89 FR 36311 through 36317), we proposed to adopt the Catheter-
Associated Urinary Tract Infection (CAUTI) Standardized Infection Ratio 
Stratified for Oncology Locations and the Central Line-Associated 
Bloodstream Infection (CLABSI) Standardized Infection Ratio Stratified 
for Oncology Locations (hereinafter referred to as the CAUTI-Onc 
measure and CLABSI-Onc measure, respectively), beginning with the CY 
2026 reporting period/FY 2028 payment determination. These measures 
would supplement, not duplicate, the existing hospital CAUTI and CLABSI 
measures, as the original hospital CAUTI and CLABSI measures look at 
hospital inpatients except for those in oncology wards, and the CAUTI-
Onc and CLABSI-Onc measures look only at patients in oncology wards. 
Our proposals to adopt the CAUTI-Onc and CLABSI-Onc measures are part 
of our renewed effort to improve patient safety. We refer readers to 
the proposed Patient Safety Structural measure in section IX.B.1. for 
more information.
---------------------------------------------------------------------------

    \504\ The White House. Cancer Moonshot. https://www.whitehouse.gov/cancermoonshot/.
---------------------------------------------------------------------------

(1) Adoption of CAUTI-Onc Measure Beginning With the CY 2026 Reporting 
Period/FY 2028 Payment Determination
(a) Background
    Urinary tract infections (UTIs) are a common type of HAI and come 
with many risks to patients. About 12-16 percent of adult patients in 
inpatient hospitals will have a urinary catheter at some point during 
their hospital stay, and almost all healthcare associated UTIs are 
introduced through instrumentation in the urinary tract.\505\ 
Furthermore, each day the indwelling urinary catheter remains, a 
patient has between a three and seven percent increased risk of 
acquiring a catheter-associated urinary tract infection.\506\ Based on 
data from the NHSN, the CDC reported that among the 3,780 general acute 
care hospitals that reported data in 2022, there were 20,237 CAUTIs in 
that year.\507\
---------------------------------------------------------------------------

    \505\ CDC. (2024). Urinary Tract Infection (Catheter-Associated 
Urinary Tract Infection [CAUTI] and Non-Catheter-Associated Urinary 
Tract Infection [UTI]) Events. Available at: https://www.cdc.gov/nhsn/pdfs/pscmanual/7psccauticurrent.pdf.
    \506\ Ibid.
    \507\ CDC. (2022). Antibiotic Resistance & Patient Safety 
Portal: Catheter-Associated Urinary Tract Infections. Available at: 
https://arpsp.cdc.gov/profile/nhsn/cauti.
---------------------------------------------------------------------------

    CAUTIs can lead to many negative consequences for patients 
including cystitis, pyelonephritis, gram-negative bacteremia, 
endocarditis, vertebral osteomyelitis, septic arthritis, 
endophthalmitis, and meningitis.\508\ Other consequences of CAUTIs 
include prolonged hospital stays, higher healthcare costs, and an 
increased likelihood of mortality.\509\
---------------------------------------------------------------------------

    \508\ CDC. (2024). Urinary Tract Infection (Catheter-Associated 
Urinary Tract Infection [CAUTI] and Non-Catheter-Associated Urinary 
Tract Infection [UTI]) Events. Available at: https://www.cdc.gov/nhsn/pdfs/pscmanual/7psccauticurrent.pdf.
    \509\ Ibid.
---------------------------------------------------------------------------

    However, CAUTIs can often be prevented by following guidelines for

[[Page 69527]]

urinary catheter use, insertion, and maintenance. At a large academic 
hospital system, a study investigated the effects of implementing a 
CAUTI prevention bundle in the intensive care unit (ICU). Prevention 
practices in this bundle included reducing unnecessary catheter use, 
following proper catheter maintenance, and ordering a urine culture 
only when warranted by a clear indication. The research team also 
updated the electronic health record (EHR) system to support compliance 
with these prevention guidelines. Researchers found that the CAUTI 
rates in the ICU decreased from 6.0 CAUTIs per 1,000 urinary catheter 
days to 0.0. The rest of the hospital then implemented the CAUTI 
prevention bundle, leading to a decrease in CAUTI rates from 2.0 cases 
per 1,000 catheter days to 0.6 cases per 1,000 catheter days.\510\
---------------------------------------------------------------------------

    \510\ Sampathkumar, P., Barth, J.W., Johnson, M., Marosek, N., 
Johnson, M., Worden, W., Lembke, J., Twing, H., Buechler, T., 
Dhanorker, S., Keigley, D., & Thompson, R. (2016). Mayo Clinic 
Reduces Catheter-Associated Urinary Tract Infections Through a 
Bundled 6-C Approach. Joint Commission journal on quality and 
patient safety, 42(6), 254-261. https://doi.org/10.1016/s1553-7250(16)42033-7.
---------------------------------------------------------------------------

    In another study, nurses at a large urban teaching hospital 
implemented CAUTI prevention protocols, including removing catheters 
from patients no longer needing them and finding alternatives to 
indwelling urinary catheters. As a result of this initiative, catheter 
days decreased by 11.8 percent and CAUTI rates declined by 38 
percent.\511\ More information on the prevention of CAUTIs is available 
at the CDC's Guideline for Prevention of Catheter-associated Urinary 
Tract Infections, including recommendations regarding who should 
receive a catheter, catheter insertion, proper insertion techniques, 
maintenance, quality improvement, and surveillance.\512\
---------------------------------------------------------------------------

    \511\ Baker, Susan BSN, RN; Shiner, Darcy BSN, RN; Stupak, Judy 
MSN, RN, CNRN; Cohen, Vicki MSN, RN, CNRN; Stoner, Alexis BSN, RN. 
Reduction of Catheter-Associated Urinary Tract Infections: A 
Multidisciplinary Approach to Driving Change. Critical Care Nursing 
Quarterly 45(4):p 290-299, October/December 2022. [verbar] DOI: 
10.1097/CNQ.0000000000000429.
    \512\ CDC. (2024). Guideline for Prevention of Catheter-
Associated Urinary Tract Infections. Available at: https://www.cdc.gov/infection-control/hcp/cauti/.
---------------------------------------------------------------------------

    To encourage the use of best practices for urinary catheters and 
reduce the incidence of CAUTIs, we previously adopted the CAUTI measure 
(CBE #0138) in several quality reporting and value-based payment 
programs, including the Hospital IQR, Hospital VBP, and HAC Reduction 
Programs (76 FR 51617 through 51618, 78 FR 50681 through 50687, and 78 
FR 50717, respectively), as discussed earlier. We adopted the measure 
as part of the HHS Action Plan to Prevent HAIs, as this measure was 
included among the prevention metrics established in the plan which is 
available at: https://www.hhs.gov/oidp/topics/health-care-associated-infections/hai-action-plan/. Eventually, in the FY 2019 IPPS/
LTCH PPS final rule (83 FR 41547 through 41553), we removed the CAUTI 
measure from the Hospital IQR Program beginning with the CY 2019 
reporting period/FY 2021 payment determination to streamline reporting 
through the HAC Reduction Program.
    As noted earlier, the CAUTI measure used in the HAC Reduction and 
Hospital VBP Programs does not include inpatients in oncology wards. 
Because patients with cancer are especially vulnerable to developing 
HAIs like CAUTIs,\513\ it is important to implement quality reporting 
for patients with cancer, as we have done in adopting the CAUTI measure 
in the PCHQR Program. Significant associations have been found between 
UTIs and post-surgery complications, longer hospitalizations, and 
higher hospital costs among patients with cancer,\514\ and post-surgery 
CAUTI incidence has been found to be as high as 12.5 percent in 
specific cancer populations.\515\ Therefore, it is important to address 
the needs of this high-risk population and adopt the CAUTI-Onc measure 
to the Hospital IQR Program. The adoption of this measure would also 
provide more data to compare CAUTI rates between PCHs and non-PCHs.
---------------------------------------------------------------------------

    \513\ da Silva R, Casella T. (2022). Healthcare-associated 
infections in patients who are immunosuppressed due to chemotherapy 
treatment: a narrative review. J Infect Dev Ctries 16:1784-1795. 
doi: 10.3855/jidc.16495.
    \514\ Chan JY, Semenov YR, Gourin CG. Postoperative urinary 
tract infection and short-term outcomes and costs in head and neck 
cancer surgery. Otolaryngol Head Neck Surg. 2013 Apr;148(4):602-10. 
doi: 10.1177/0194599812474595. Epub 2013 Jan 24. PMID: 23348871.
    \515\ Mercadel, A.J., Holloway, S.B., Saripella, M., & Lea, J.S. 
(2023). Risk factors for catheter-associated urinary tract 
infections following radical hysterectomy for cervical cancer. 
American journal of obstetrics and gynecology, 228(6), 718.e1-
718.e7. https://doi.org/10.1016/j.ajog.2023.02.019.
---------------------------------------------------------------------------

(b) Overview of Measure
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36312 through 
36314), we proposed to adopt the CAUTI-Onc measure for the Hospital IQR 
Program beginning with the CY 2026 reporting period/FY 2028 payment 
determination. The purpose of this measure is to encourage the use of 
best practices for urinary catheters as set by the CDC and to reduce 
the incidence of CAUTIs for patients with cancer. To report this 
measure, hospitals would need to verify that all locations, including 
those housing oncology patients, are correctly mapped in NHSN.
    Reducing CAUTI incidence through the adoption of this measure could 
lead to improved cancer patient outcomes, including reduced morbidity 
and mortality, less need for antimicrobials, and reduced patient length 
of stays and medical costs.\516\
---------------------------------------------------------------------------

    \516\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
---------------------------------------------------------------------------

(c) Measure Alignment to Strategy
    The proposal to adopt the CAUTI-Onc measure supports the CMS 
National Quality Strategy priority area of ``Safety and Resiliency.'' 
\517\ Specifically, this supports our safety goal to ``achieve zero 
preventable harm,'' and to expand the collection and use of safety 
indicator data across programs for key areas to improve tracking and 
show progress toward reducing harm. The adoption of this measure 
additionally supports the ``Outcomes and Alignment'' priority area in 
the CMS National Quality Strategy by collaborating with other federal 
agencies, namely the CDC, to promote alignment in quality measurement 
and close the existing reporting gap among vulnerable patients with 
cancer in inpatient settings.\518\ This proposal to adopt the CAUTI-Onc 
measure not only supports two of the CMS National Quality Strategy 
priority areas, it also supports the Biden-Harris Administration's 
Cancer Moonshot program that aims to improve outcomes for patients with 
cancer.
---------------------------------------------------------------------------

    \517\ CMS National Quality Strategy. (2023). Available at: 
https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
    \518\ Ibid.
---------------------------------------------------------------------------

(d) Pre-rulemaking Process and Measure Endorsement
(i) Recommendation from the PRMR Process
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of the preamble of this final rule for details on 
the PRMR process, including the voting procedures used to reach 
consensus on measure recommendations. The PRMR Hospital Committee met 
on January 18-19, 2024, to review measures included by the Secretary on 
a publicly available ``2023 Measures Under Consideration List'' (MUC 
List), including the CAUTI-Onc measure (MUC2023-220),519 520 
and

[[Page 69528]]

to vote on a recommendation regarding use of this measure.\521\
---------------------------------------------------------------------------

    \519\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \520\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
    \521\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Pre-Rulemaking Measure Review (PRMR) Meeting Summary: 
Hospital Committee. Available at: https://p4qm.org/sites/default/files/2024-02/PRMR-Hospital-Recommendation-Group-Meeting-Summary-Final.pdf.
---------------------------------------------------------------------------

    The PRMR Hospital Committee reached consensus and recommended 
including this measure in the Hospital IQR Program with conditions. 
Fourteen members of the group recommended adopting the measure into the 
Hospital IQR Program without conditions; four members recommended 
adoption with conditions; and one committee member voted not to 
recommend the measure for adoption. Taken together, 94.7 percent of the 
votes recommended this measure in the Hospital IQR Program with 
conditions.\522\
---------------------------------------------------------------------------

    \522\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Final MUC Recommendation Report. Available at: https://p4qm.org/sites/default/files/2024-02/PRMR-2023-MUC-Recommendations-Report-Final-.pdf.
---------------------------------------------------------------------------

    Four members of the voting committee recommended the adoption of 
this measure into the Hospital IQR Program with the first condition 
being that CMS consider expanding the reporting period. This would 
increase the patient volume included in the denominator and increase 
precision. We have reviewed this recommendation and concluded that 
expanding the reporting period would result in a critical loss in the 
ability to observe changes in the SIR over time. Obscuring any 
observable changes in the SIR would degrade the measure's ability to 
assess prevention efforts and further drive quality improvement. 
Therefore, we proposed this measure for adoption without the 
modification suggested by four committee members to preserve the 
measure's ability to observe changes in the SIR more quickly.
    The second condition the PRMR Hospital Committee recommended for 
the Hospital IQR Program was that the measure should evaluate data by 
oncology unit type, such as hematology-oncology versus solid 
organ.\523\ We acknowledge this condition and may consider it for 
future rulemaking. We proposed to adopt the CAUTI-Onc measure in the 
Hospital IQR Program having taken into consideration the conditions 
raised by the PRMR Hospital Committee.
---------------------------------------------------------------------------

    \523\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Pre-Rulemaking Measure Review (PRMR) Meeting Summary: 
Hospital Committee. Available at: https://p4qm.org/sites/default/files/2024-02/PRMR-Hospital-Recommendation-Group-Meeting-Summary-Final.pdf.
---------------------------------------------------------------------------

    The measure received strong support from the committee as it 
addresses an important patient safety concern. During the PRMR Hospital 
Committee's discussion, some expressed concern about the burden of 
manual abstraction. Others asked about the measure's validity, and 
whether the measure should include risk adjustments when HAIs are an 
issue across the board.
(ii) Measure Endorsement
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this final rule for details on the E&M process 
including the measure evaluation procedures the E&M Committees use to 
evaluate measures and whether they meet endorsement criteria. The CAUTI 
measure was most recently submitted to the CBE for endorsement review 
in the Spring 2019 cycle (CBE #0138) and was endorsed on October 23, 
2019.\524\ In the submission of the CAUTI-Onc measures to the 2023 MUC 
list, the CDC provided additional oncology-only reliability testing 
based on existing data submitted to the CDC's NHSN. Because the CAUTI-
Onc measure has the same specifications as the CAUTI measure, with the 
only difference being that it is stratified for oncology locations, 
additional endorsement of the oncology specific locations is not 
necessary. The calculations pertinent to those locations are inherently 
part of the endorsement performed for the CAUTI measure, and the 
measure (that is, numerator/denominator) is endorsed across all 
inpatient hospital settings, including oncology locations. The 
calculation of the SIR includes and accounts for the location of the 
patient within the facility. The CDC would incorporate information on 
the stratification by oncology patients during the regularly scheduled 
measure maintenance re-endorsement process.
---------------------------------------------------------------------------

    \524\ Battelle--Partnership for Quality Measurement. NHSN 
Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure. 
Available at: https://p4qm.org/measures/0138.
---------------------------------------------------------------------------

(e) Measure Specifications
    For this measure, the NHSN calculates the quarterly risk-adjusted 
SIR of CAUTIs among inpatients at acute care hospitals who are in 
oncology wards.\525\ The CDC then calculates the SIR using all four 
quarters of data from the reporting period year, which CMS uses for 
performance calculation and public reporting purposes. The CDC defines 
an oncology ward as an area for the evaluation and treatment of 
patients with cancer. For more details, we refer readers to the CDC 
Locations and Descriptions and Instructions for Mapping Patient Care 
Locations document.\526\
---------------------------------------------------------------------------

    \525\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \526\ CDC. (2024). CDC Locations and Descriptions and 
Instructions for Mapping Patient Care Locations. Available at: 
https://www.cdc.gov/nhsn/pdfs/pscmanual/15locationsdescriptions_current.pdf.
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    The numerator is the number of annually observed CAUTIs among acute 
care hospital inpatients in oncology wards. The denominator is the 
number of annually predicted CAUTIs among acute care hospital 
inpatients in oncology wards. By dividing the number of observed CAUTIs 
by the number of predicted CAUTIs, the SIR compares the actual number 
of cases to the expected number of cases. However, this does not 
preclude SIRs from being ranked. The SIR is calculated when there is at 
least one predicted CAUTI, to achieve a minimum level of 
precision.\527\
---------------------------------------------------------------------------

    \527\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
---------------------------------------------------------------------------

    The measure requires a facility to have at least one predicted 
CAUTI before calculating the SIR because the precision of a facility's 
CAUTI rate can vary, especially in low volume hospitals. For this 
reason, the NHSN calculates the SIR instead of reporting the CAUTI rate 
directly. A facility's SIR is not meant to be compared directly to that 
of another facility. Rather, the primary role of the SIR is to compare 
a facility's CAUTI rate to the national rate after adjusting for 
facility- and patient-level risk factors.\528\
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    \528\ CDC. (2024). NHSN SIR Guide. Available at: https://www.cdc.gov/nhsn/pdfs/ps-analysis-resources/nhsn-sir-guide.pdf.
---------------------------------------------------------------------------

    The numerator and denominator exclude the following because they 
are not considered indwelling catheters by NHSN definitions: suprapubic 
catheters, condom catheters, ``in and out'' catheters, and nephrostomy 
tubes. If a patient has either a nephrostomy tube or a suprapubic 
catheter and has an indwelling urinary catheter, the indwelling urinary 
catheter would be included in the CAUTI surveillance.\529\
---------------------------------------------------------------------------

    \529\ Battelle--Partnership for Quality Measurement. NHSN 
Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure. 
Available at: https://p4qm.org/measures/0138.
---------------------------------------------------------------------------

    The SIR also adjusts for various facility and patient-level factors 
that

[[Page 69529]]

contribute to HAI risk within each facility. For more information on 
the risk adjustment methodology please reference the CDC website at: 
https://www.cdc.gov/nhsn/2022rebaseline/.
(f) Data Submission and Reporting
    We proposed to collect data for the CAUTI-Onc measure via the NHSN, 
consistent with the current approach for HAI reporting for the HAC 
Reduction and Hospital VBP Programs. The NHSN is a secure, internet-
based surveillance system maintained and managed by the CDC and 
provided free of charge to providers. To report to the NHSN, hospitals 
must first agree to the NHSN Agreement to Participate and Consent form, 
which specifies how NHSN data would be used, including fulfilling CMS's 
quality measurement reporting requirements for NHSN data.\530\
---------------------------------------------------------------------------

    \530\ CDC. (2023). FAQs About NHSN Agreement to Participate and 
Consent. Available at: https://www.cdc.gov/nhsn/about-nhsn/faq-agreement-to-participate.html.
---------------------------------------------------------------------------

    Beginning in 2012, hospitals participating in the Hospital IQR 
Program began reporting CAUTIs in all adult, pediatric, and neonatal 
intensive care locations followed by reporting all adult and pediatric 
medical, surgical, and medical/surgical wards in 2015 using NHSN. 
According to a 2022 CDC report, 3,780 hospitals are reporting CAUTI 
data to NHSN; of these, 478 hospitals reported CAUTI data from at least 
one oncology location.\531\ We anticipate that because most of the 
hospitals which would begin to report the CAUTI-Onc measure for the 
Hospital IQR Program are already reporting via NHSN for CAUTI in other 
locations as well as other measures, they have already set up an 
account. Hospitals currently reporting CAUTI must verify that locations 
housing oncology patients are correctly mapped as an oncology location 
based on NHSN's location mapping guidance for accurate event location 
attribution.
---------------------------------------------------------------------------

    \531\ CDC. (2024). National and State Healthcare-associated 
Infections Progress Report. Available at: https://www.cdc.gov/healthcare-associated-infections/php/data/progress-report.html.
---------------------------------------------------------------------------

    Hospitals would report their data for the CAUTI-Onc measure on a 
quarterly basis for the purposes of Hospital IQR Program requirements. 
Presently, hospitals report CAUTI data to the NHSN monthly and the SIR 
is calculated on a quarterly basis. Under the data submission and 
reporting process, hospitals would collect the numerator and 
denominator for the CAUTI-Onc measure each month and submit the data to 
the NHSN. The data from all 12 months would be calculated into 
quarterly reporting periods which would then be used to determine the 
SIR for CMS performance calculation and public reporting purposes. We 
refer readers to the NHSN website for further information about NHSN 
reporting requirements. We refer readers to the FY 2024 IPPS/LTCH PPS 
final rule (88 FR 59141) for information on data submission and 
reporting requirements for our most recent updates to data submission 
and reporting requirements for measures submitted via the CDC NHSN.
    We invited public comment on our proposal to adopt the CAUTI-Onc 
measure beginning with the CY 2026 reporting period/FY 2028 payment 
determination. We received one comment specifically on the CAUTI-Onc 
measure.
    Comment: A commenter stated that requiring culturing to test for 
CAUTI in febrile oncology patients would be of questionable value to 
patients and lead to inappropriate culturing stewardship.
    Response: We thank the commenter for sharing their feedback. 
However, we respectfully disagree that culturing is unnecessary for 
determining if oncology patients have CAUTIs or that adopting the 
CAUTI-Onc measure would lead to inappropriate culturing. Identifying an 
eligible positive urine culture is important as the first step for 
determining if a UTI event occurred. If a patient is febrile but the 
urine culture does not meet the criteria, then a UTI event did not 
occur according to the NHSN definition. Furthermore, facilities 
determine culture ordering policies, and inappropriate culturing 
practices should be addressed by individual facilities.\532\
---------------------------------------------------------------------------

    \532\ CDC. (2024). Urinary Tract Infection (Catheter-Associated 
Urinary Tract Infection [CAUTI] and Non-Catheter-Associated Urinary 
Tract Infection [UTI]) Events. Available at: https://www.cdc.gov/nhsn/pdfs/pscmanual/7psccauticurrent.pdf.
---------------------------------------------------------------------------

    We respond to comments that address both the CAUTI-Onc and CLABSI-
Onc measures in the following subsection that discusses adoption of the 
CLABSI-Onc measure.
(2) Adoption of CLABSI-Onc Measure Beginning With the CY 2026 Reporting 
Period/FY 2028 Payment Determination
(a) Background
    Central venous catheters (CVCs) are a crucial aspect of hospital 
care for administering medications, fluids, and nutrients to patients, 
as well as running medical tests.\533\ However, they also carry the 
risk of introducing infections, referred to as central line-associated 
bloodstream infections (CLABSIs).\534\ CLABSIs are a leading cause of 
HAIs and are associated with increased morbidity and mortality, 
prolonged hospitalization, and increased costs.\535\
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    \533\ Medical News Today. (2023). What are central venous 
catheters? Available at: https://www.medicalnewstoday.com/articles/central-venous-catheters.
    \534\ CDC. (2024). Central Line-associated Bloodstream 
Infections: Resources for Patients and Healthcare Providers. 
Available at: https://www.cdc.gov/clabsi/about/.
    \535\ Novosad, S.A., Fike, L., Dudeck, M.A., Allen-Bridson, K., 
Edwards, J.R., Edens, C., Sinkowitz-Cochran, R., Powell, K., & 
Kuhar, D. (2020). Pathogens causing central-line-associated 
bloodstream infections in acute-care hospitals-United States, 2011-
2017. Infection control and hospital epidemiology, 41(3), 313-319. 
https://doi.org/10.1017/ice.2019.303.
---------------------------------------------------------------------------

    According to one study, the development of bloodstream infections 
(BSIs) after CVC insertion was associated with longer hospital stays of 
on average seven additional days and a three times higher risk of death 
during the patient's hospital stay.\536\ Additionally, a single CLABSI 
episode costs hospitals an estimated $48,108 on average.\537\ While the 
CLABSI SIR has declined by 16 percent since 2015, CLABSIs still remain 
prevalent.\538\ Based on data from the NHSN, the CDC reported that 
among the 3,728 general acute care hospitals that reported data in 
2022, there were 23,389 CLABSIs in that year.\539\
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    \536\ Brunelli, S.M., Turenne, W., Sibbel, S., Hunt, A., 
Pfaffle, A. (2016). Clinical and economic burden of bloodstream 
infections in critical care patients with central venous catheters. 
Journal of Critical Care, 35, 69-74. https://doi.org/10.1016/j.jcrc.2016.04.035.
    \537\ Agency for Healthcare Research and Quality. (2017). 
Estimating the Additional Hospital Inpatient Cost and Mortality 
Associated With Selected Hospital-Acquired Conditions. Available at: 
https://www.ahrq.gov/hai/pfp/haccost2017-results.html.
    \538\ CDC. (2022). Antibiotic Resistance & Patient Safety 
Portal: Central Line-Associated Bloodstream Infections. Available 
at: https://arpsp.cdc.gov/profile/nhsn/clabsi.
    \539\ Ibid.
---------------------------------------------------------------------------

    In one study conducted on a group of academic medical centers 
across a three-year period, the overall CLABSI rate was 1.73 cases per 
1,000 central-line days.\540\ Another study, retrospectively conducted 
on patients with a CVC in four U.S. hospitals within the same health 
system, found that patients with a CVC who developed a CLABSI had a 
36.6 percent higher likelihood of mortality, and 37 percent higher 
chance of being readmitted compared to patients who did not develop a 
CLABSI. The study also found that the average hospital length of stay 
in patients who developed a CLABSI increased by two

[[Page 69530]]

days when compared to patients without a CLABSI.\541\
---------------------------------------------------------------------------

    \540\ DiBiase, L., Summerlin-Long, S., Stancill, L., Vavalle, 
E., Teal, L., & Weber, D. (2023). Examining CLABSI rates by central-
line type. Antimicrobial Stewardship & Healthcare Epidemiology, 
3(S2), S48-S49. doi:10.1017/ash.2023.288.
    \541\ Chovanec, K., Arsene, C., Gomez, C., Brixey, M., Tolles, 
D., Galliers, J.W., Kopaniasz, R., Bobash, T., & Goodwin, L. (2021). 
Association of CLABSI With Hospital Length of Stay, Readmission 
Rates, and Mortality: A Retrospective Review. Worldviews on 
evidence-based nursing, 18(6), 332-338. https://doi.org/10.1111/wvn.12548.
---------------------------------------------------------------------------

    Following evidence-based guidelines when inserting and maintaining 
central lines can help prevent the occurrence of CLABSIs.\542\ Proper 
central line insertion practices include applying skin antiseptic, 
ensuring proper hand hygiene, using sterile barrier precautions, and 
ensuring the skin preparation agent has dried completely before 
insertion.\543\ One study of 30 long-term acute care hospitals found 
that adoption of a catheter maintenance bundle led to the CLABSI rate 
decreasing by 29 percent.\544\ In another study, researchers 
implemented the standard CDC bundle along with additional measures in a 
large acute care hospital. As a result, the CLABSI rate decreased by 68 
percent from 2013 to 2017.\545\ Despite a large body of evidence 
indicating that adopting a central line bundle decreases CLABSI rates, 
adoption of these best practices remains inconsistent. A systematic 
review of the available literature on hospital adherence to the CDC's 
central line bundle checklist found that none of the medical facilities 
in the studies followed all elements of the bundle, and compliance 
rates remained low in follow-up studies.\546\ For more information on 
the standard CDC bundle, we refer readers to the Guidelines for the 
Prevention of Intravascular Catheter-Related Infections.\547\
---------------------------------------------------------------------------

    \542\ Bell, T., & O'Grady, N.P. (2017). Prevention of Central 
Line-Associated Bloodstream Infections. Infectious disease clinics 
of North America, 31(3), 551-559. https://doi.org/10.1016/j.idc.2017.05.007.
    \543\ CDC. (2011). Guidelines for the Prevention of 
Intravascular Catheter-Related Infections. Available at: https://www.cdc.gov/infection-control/media/pdfs/Guideline-BSI-H.pdf.
    \544\ Grigonis, A.M., Dawson, A.M., Burkett, M., Dylag, A., 
Sears, M., Helber, B., & Snyder, L.K. (2016). Use of a Central 
Catheter Maintenance Bundle in Long-Term Acute Care Hospitals. 
American journal of critical care: an official publication, American 
Association of Critical-Care Nurses, 25(2), 165-172. https://doi.org/10.4037/ajcc2016894.
    \545\ Wei, A.E., Markert, R.J., Connelly, C., & Polenakovik, H. 
(2021). Reduction of central line-associated bloodstream infections 
in a large acute care hospital in Midwest United States following 
implementation of a comprehensive central line insertion and 
maintenance bundle. Journal of infection prevention, 22(5), 186-193. 
https://doi.org/10.1177/17571774211012471.
    \546\ Burke, C., Jakub, K., & Kellar, I. (2021). Adherence to 
the central line bundle in intensive care: An integrative review. 
American journal of infection control, 49(7), 937-956. https://doi.org/10.1016/j.ajic.2020.11.014.
    \547\ CDC. (2024). Guidelines for the Prevention of 
Intravascular Catheter-Related Infections. Available at: https://www.cdc.gov/infection-control/hcp/intravascular-catheter-related-infection/.
---------------------------------------------------------------------------

    To encourage adherence to best practices for central line use and 
to reduce the incidence of CLABSIs, we previously adopted the CLABSI 
measure (CBE #0139) in several quality reporting and value-based 
payment programs, including the Hospital IQR, Hospital VBP, and HAC 
Reduction Programs (75 FR 50200 through 50202, 78 FR 50681 through 
50687, and 78 FR 50717, respectively), as discussed earlier. We adopted 
the measure as part of the HHS Action Plan to Prevent HAIs, as this 
measure was included among the prevention metrics established in the 
plan which is available at: https://www.hhs.gov/oidp/topics/health-care-associated-infections/hai-action-plan/. In the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41547 through 41553), we removed the 
CLABSI measure from the Hospital IQR Program beginning with the CY 2019 
reporting period/FY 2021 payment determination to streamline reporting 
through the HAC Reduction Program.
    Currently, the CLABSI measure used in the HAC Reduction and 
Hospital VBP Programs does not include inpatients in oncology wards. 
Because patients with cancer are especially vulnerable to developing 
HAIs like CLABSIs,\548\ it is important to implement quality reporting 
for patients with cancer, as we have done in adopting the CLABSI 
measure in the PCHQR Program. While central lines are a crucial 
component of cancer treatment, they are also associated with at least 
400,000 bloodstream infections in oncology patients every year in the 
U.S.\549\ CLABSIs in patients with cancer may lead to sepsis, require 
interruptions in chemotherapy, and increase the hospital length of 
stay.\550\ CLABSIs among patients with cancer also incur a high 
economic burden, costing the U.S. healthcare system over $18 billion 
annually.\551\ Therefore, it is important to address the needs of this 
high-risk population and adopt the CLABSI-Onc measure to the Hospital 
IQR Program. The adoption of this measure would also provide more data 
to compare CLABSI rates between PCHs and non-PCHs.
---------------------------------------------------------------------------

    \548\ Page, J., Tremblay, M., Nicholas, C., & James, T.A. 
(2016). Reducing Oncology Unit Central Line-Associated Bloodstream 
Infections: Initial Results of a Simulation-Based Educational 
Intervention. Journal of oncology practice, 12(1), e83-e87. https://doi.org/10.1200/JOP.2015.005751.
    \549\ Raad, I., & Chaftari, A.M. (2014). Advances in prevention 
and management of central line-associated bloodstream infections in 
patients with cancer. Clinical infectious diseases: an official 
publication of the Infectious Diseases Society of America, 59 Suppl 
5, S340-S343. https://doi.org/10.1093/cid/ciu670.
    \550\ Page, J., Tremblay, M., Nicholas, C., & James, T.A. 
(2016). Reducing Oncology Unit Central Line-Associated Bloodstream 
Infections: Initial Results of a Simulation-Based Educational 
Intervention. Journal of oncology practice, 12(1), e83-e87. https://doi.org/10.1200/JOP.2015.005751.
    \551\ Raad, I., & Chaftari, A.M. (2014). Advances in prevention 
and management of central line-associated bloodstream infections in 
patients with cancer. Clinical infectious diseases:an official 
publication of the Infectious Diseases Society of America, 59 Suppl 
5, S340-S343. https://doi.org/10.1093/cid/ciu670.
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(b) Overview of Measure
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36314 through 
36317), we proposed to adopt the CLABSI-Onc measure to the Hospital IQR 
Program beginning with the CY 2026 reporting period/FY 2028 payment 
determination. The purpose of this measure is to promote CLABSI 
prevention activities and reduce the incidence of CLABSIs for patients 
with cancer. Unlike the version of the measure previously in the 
Hospital IQR Program and that is currently in the HAC Reduction and 
Hospital VBP Programs, this version we proposed to adopt is limited to 
inpatients at acute care hospitals in oncology wards. To report this 
measure, hospitals would need to verify that all locations, including 
those housing oncology patients, are correctly in NHSN.
    Reducing the CLABSI incidence through the adoption of this measure 
could lead to improved cancer patient outcomes, including reduced 
morbidity and mortality, less need for antimicrobials, and reduced 
patient length of stays and medical costs.\552\
---------------------------------------------------------------------------

    \552\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
---------------------------------------------------------------------------

(c) Measure Alignment to Strategy
    The proposal to adopt the CLABSI-Onc measure supports the CMS 
National Quality Strategy priority area of ``Safety and Resiliency.'' 
Specifically, this supports our safety goal to ``achieve zero 
preventable harm,'' and to expand the collection and use of safety 
indicator data across programs for key areas to improve tracking and 
show progress toward reducing harm. The adoption of this measure 
additionally supports the ``Outcomes and Alignment'' priority area in 
the CMS National Quality Strategy by collaborating with other federal 
agencies, namely the CDC, to promote alignment in quality measurement 
and close the existing reporting gap among vulnerable patients

[[Page 69531]]

with cancer in inpatient settings.\553\ This proposal to adopt CLABSI-
Onc not only supports two of the CMS National Quality Strategy priority 
areas, it also supports the Biden-Harris Administration's Cancer 
Moonshot program that aims to improve outcomes for patients with 
cancer.
---------------------------------------------------------------------------

    \553\ CMS National Quality Strategy. (2023). Available at: 
https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
---------------------------------------------------------------------------

(d) Pre-rulemaking Process and Measure Endorsement
(i) Recommendation From the PRMR Process
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this final rule for details on the PRMR process 
including the voting procedures the PRMR process uses to reach 
consensus on measure recommendations. The PRMR Hospital Committee met 
on January 18-19, 2024, to review measures included by the Secretary on 
a publicly available ``2023 Measures Under Consideration List'' (MUC 
List), including the CLABSI-Onc measure (MUC2023-
219),554 555 and to vote on a recommendation regarding use 
of this measure.\556\
---------------------------------------------------------------------------

    \554\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \555\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
    \556\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Pre-Rulemaking Measure Review (PRMR) Meeting Summary: 
Hospital Committee. Available at: https://p4qm.org/sites/default/files/2024-02/PRMR-Hospital-Recommendation-Group-Meeting-Summary-Final.pdf.
---------------------------------------------------------------------------

    The committee reached consensus and recommended including this 
measure in the Hospital IQR Program with conditions. Fourteen members 
of the group recommended adopting the measure into the Hospital IQR 
Program without conditions; four members recommended adoption with 
conditions; and one committee member voted not to recommend the measure 
for adoption. Taken together, 94.7 percent of the votes recommended the 
measure.\557\
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    \557\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Final MUC Recommendation Report. Available at: https://p4qm.org/sites/default/files/2024-02/PRMR-2023-MUC-Recommendations-Report-Final-.pdf.
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    Four members of the voting committee recommended the adoption of 
this measure into the Hospital IQR Program, with the first condition 
being that CMS consider expanding the reporting period. This would 
increase the patient volume included in the denominator and increase 
precision. We have reviewed this recommendation and concluded that 
expanding the reporting period would result in a critical loss in the 
ability to observe changes in the SIR over time. Obscuring any 
observable changes in the SIR would degrade the measure's ability to 
assess prevention efforts and further drive quality improvement. 
Therefore, we proposed this measure for adoption without the 
modification suggested by four committee members to preserve the 
measure's ability to observe changes in the SIR more quickly.
    The second condition the committee recommended for the Hospital IQR 
Program was that the measure should evaluate data by oncology unit 
type, such as hematology-oncology versus solid organ.\558\ We 
acknowledge this condition and may consider it for future rulemaking. 
We proposed to adopt the CLABSI-Onc measure in the Hospital IQR Program 
having taken into consideration the conditions raised by the PRMR 
Hospital Recommendation Committee.
---------------------------------------------------------------------------

    \558\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Pre-Rulemaking Measure Review (PRMR) Meeting Summary: 
Hospital Committee. Available at: https://p4qm.org/sites/default/files/2024-02/PRMR-Hospital-Recommendation-Group-Meeting-Summary-Final.pdf.
---------------------------------------------------------------------------

    The measure received strong support from the committee as it 
addresses an important patient safety concern. During the committee's 
discussion, some expressed concern about the burden of manual 
abstraction. Others asked about the measure's validity, and whether the 
measure should include risk adjustments when HAIs are an issue across 
the board.
(ii) Measure Endorsement
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this final rule for details on the E&M process 
including the measure evaluation procedures the E&M Committees use to 
evaluate measures and whether they meet endorsement criteria. The 
CLABSI measure was most recently submitted to the CBE for endorsement 
review in the Spring 2019 cycle (CBE #0139) and was endorsed on October 
23, 2019.\559\ In the submission of the CLABSI-Onc measure to the 2023 
MUC list, the CDC provided additional oncology-only reliability testing 
based on existing data submitted to the CDC's NHSN. Because the CLABSI-
Onc measure has the same specifications as the CLABSI measure, with the 
only difference being that it is stratified for oncology locations, 
additional endorsement of CLABSI-Onc is not necessary. The calculations 
pertinent to those locations are inherently part of the endorsement 
performed for the CLABSI measure, and the measure (that is, numerator/
denominator) is endorsed across all inpatient hospital settings, 
including oncology locations. The calculation of the SIR includes and 
accounts for the location of the patient within the facility. The CDC 
would incorporate information on the stratification by oncology 
patients during the regularly scheduled measure maintenance re-
endorsement process.
---------------------------------------------------------------------------

    \559\ Battelle--Partnership for Quality Measurement. NHSN 
Central Line-Associated Bloodstream Infection (CLABSI) Outcome 
Measure. Available at: https://p4qm.org/measures/0139.
---------------------------------------------------------------------------

(e) Measure Specifications
    For this measure, the NHSN calculates the quarterly risk-adjusted 
SIR of CLABSIs among inpatients at acute care hospitals who are in 
oncology wards.\560\ The CDC then calculates the SIR using all four 
quarters of data from the reporting period year, which CMS uses for 
performance calculation and public reporting purposes. The CDC defines 
an oncology ward as an area for the evaluation and treatment of 
patients with cancer. For more details, we refer readers to the CDC 
Locations and Descriptions and Instructions for Mapping Patient Care 
Locations document.\561\
---------------------------------------------------------------------------

    \560\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \561\ CDC. (2024). CDC Locations and Descriptions and 
Instructions for Mapping Patient Care Locations. Available at: 
https://www.cdc.gov/nhsn/pdfs/pscmanual/15locationsdescriptions_current.pdf.
---------------------------------------------------------------------------

    The numerator is the number of annually observed CLABSIs among 
acute care hospital inpatients in oncology wards. The denominator is 
the number of annually predicted CLABSIs among acute care hospital 
inpatients in oncology wards. By dividing the number of observed 
CLABSIs by the number of predicted CLABSIs, the SIR compares the actual 
number of cases to the expected number of cases. However, this does not 
preclude SIRs from being ranked. The SIR is calculated when there is at 
least one predicted CLABSI, to achieve a minimum level of 
precision.\562\
---------------------------------------------------------------------------

    \562\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
---------------------------------------------------------------------------

    The measure requires a facility to have at least one predicted 
CLABSI before calculating the SIR because the precision of a facility's 
CLABSI rate can

[[Page 69532]]

vary, especially in low volume hospitals. For this reason, the NHSN 
calculates the SIR instead of reporting the CLABSI rate directly. A 
facility's SIR is not meant to be compared directly to that of another 
facility. Rather, the primary role of the SIR is to compare a 
facility's CLABSI rate to the national rate after adjusting for 
facility- and patient-level risk factors.\563\
---------------------------------------------------------------------------

    \563\ CDC. (2024). NHSN SIR Guide. Available at: https://www.cdc.gov/nhsn/pdfs/ps-analysis-resources/nhsn-sir-guide.pdf.
---------------------------------------------------------------------------

    The numerator and denominator exclude the following devices because 
they are not considered central lines: arterial catheters (unless in 
the pulmonary artery, aorta or umbilical artery), arteriovenous 
fistula, arteriovenous graft, atrial catheters (also known as 
transthoracic intra-cardiac catheters, those catheters inserted 
directly into the right or left atrium via the heart wall), 
extracorporeal membrane oxygenation (ECMO), hemodialysis reliable 
outflow (HERO) dialysis catheter, intra-aortic balloon pump (IABP) 
devices, peripheral IV or midlines, or ventricular assist devices 
(VAD). Additionally, CLABSI events reported to the NHSN as mucosal 
barrier injury laboratory-confirmed bloodstream infections (MBI-LCBIs) 
are excluded from the SIR.\564\
---------------------------------------------------------------------------

    \564\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
---------------------------------------------------------------------------

    The SIR also adjusts for various facility and patient-level factors 
that contribute to HAI risk within each facility. For more information 
on the risk adjustment methodology please reference the CDC website at: 
https://www.cdc.gov/nhsn/2022rebaseline/.
(f) Data Submission and Reporting
    We proposed to collect data for the CLABSI-Onc measure via the 
NHSN, consistent with the current approach for HAI reporting for the 
HAC Reduction and Hospital VBP Programs. The NHSN is a secure, 
internet-based surveillance system maintained and managed by the CDC 
and provided free of charge to providers. To report to the NHSN, 
hospitals must first agree to the NHSN Agreement to Participate and 
Consent form, which specifies how NHSN data would be used, including 
fulfilling CMS's quality measurement reporting requirements for NHSN 
data.\565\
---------------------------------------------------------------------------

    \565\ CDC. (2023). FAQs About NHSN Agreement to Participate and 
Consent. Available at: https://www.cdc.gov/nhsn/about-nhsn/faq-agreement-to-participate.html.
---------------------------------------------------------------------------

    Starting in 2011, facilities operating under the Hospital IQR 
Program began reporting CLABSIs in all adult, pediatric, and neonatal 
intensive care locations followed by reporting all adult and pediatric 
medical, surgical, and medical/surgical wards in 2015 using NHSN. 
According to a 2022 CDC report, 3,728 hospitals are reporting CLABSI 
data to NHSN; of these, 488 hospitals reported data from at least one 
oncology location.\566\ We anticipate that because most of the 
hospitals which would begin to report the CLABSI-Onc measure for the 
Hospital IQR Program are already reporting via NHSN for other measures, 
they have already set up an account. Hospitals currently reporting 
CLABSI must verify that locations housing oncology patients are 
correctly mapped as an oncology location based on NHSN's location 
mapping guidance for accurate event location attribution.
---------------------------------------------------------------------------

    \566\ CDC. (2024). National and State Healthcare-associated 
Infections Progress Report. Available at: https://www.cdc.gov/healthcare-associated-infections/php/data/progress-report.html.
---------------------------------------------------------------------------

    Hospitals would report their data for the CLABSI-Onc measure on a 
quarterly basis for the purposes of Hospital IQR Program requirements. 
Presently, hospitals report CLABSI data to the NHSN monthly and the SIR 
is calculated on a quarterly basis. Under the data submission and 
reporting process, hospitals would collect the numerator and 
denominator for the CLABSI-Onc measure each month and submit the data 
to the NHSN. The data from all 12 months would be calculated into 
quarterly reporting periods which would then be used to determine the 
SIR for CMS performance calculation and public reporting purposes. We 
refer readers to the NHSN website for further information about NHSN 
reporting requirements. We refer readers to the FY 2024 IPPS/LTCH PPS 
final rule (88 FR 59141) for information on data submission and 
reporting requirements for our most recent updates to data submission 
and reporting requirements for measures submitted via the CDC NHSN.
    We invited public comment on our proposal to adopt the CLABSI-Onc 
measure beginning with the CY 2026 reporting period/FY 2028 payment 
determination. We received two comments specifically on the CLABSI-Onc 
measure. Because many commenters discussed the two proposed oncology-
specific measures (CAUTI-Onc and CLABSI-Onc) together, we summarize 
their comments and provide our responses after our discussion of 
CLABSI-specific public comments.
    Comment: A commenter supported CMS's proposal to adopt the CLABSI-
Onc measure, noting that many patients suffer from CLABSIs each year, 
that the mortality rate is high, and that CLABSIs extract a high cost 
on the healthcare system. The commenter stated that the measure would 
reduce CLABSI incidence and lead to improved outcomes for patients with 
cancer. The commenter also recommended that CMS adopt other measures 
designed to improve quality of care for patients requiring CVCs.
    Response: We thank the commenters for their feedback. We agree that 
the CLABSI-Onc measure can help prevent CLABSIs and improve outcomes 
for patients with cancer. We will also take the feedback to adopt 
additional measures into account for future rulemaking.
    Comment: A commenter recommended that CMS exclude Mucosal Barrier 
Injury (MBI) confirmed bloodstream infections from the measure 
definition.
    Response: We thank the commenter for sharing this recommendation. 
We wish to clarify that the CLABSI-Onc measure does exclude events that 
meet the definition of an MBI. This exclusion is applied regardless of 
patient care location or setting.\567\
---------------------------------------------------------------------------

    \567\ CDC. (2024). Bloodstream Infection Event (Central Line-
Associated Bloodstream Infection and Non-central Line Associated 
Bloodstream Infection). Available at: https://www.cdc.gov/nhsn/pdfs/pscmanual/4psc_clabscurrent.pdf.
---------------------------------------------------------------------------

    In addition to a few commenters who specifically discussed either 
the CAUTI-Onc or CLABSI-Onc measure, many commenters discussed these 
two proposed oncology-specific measures together. We summarize their 
comments below and provide our responses.
    Comment: Many commenters supported adoption of the CAUTI-Onc and 
CLABSI-Onc measures because of their potential to improve care quality 
by promoting prevention practices and reducing CAUTI and CLABSI 
incidence. Commenters also stated that these measures would fill a gap 
in quality reporting for patients with cancer, who are particularly 
vulnerable to developing HAIs.
    Response: We thank the commenters for their feedback. We agree that 
the CAUTI-Onc and CLABSI-Onc measures can improve care quality for 
patients with cancer and would allow more of them to be covered under 
quality reporting.
    Comment: Several commenters supported the measure but had feedback 
or questions regarding the methodology of the measures. A few 
commenters asked CMS to conduct an analysis prior to public reporting 
to ensure equitable comparisons across hospitals. A commenter requested 
more information

[[Page 69533]]

on how SIRs would be calculated at the unit level.
    Response: We thank the commenters for their feedback and provide 
additional information in response to their concerns. The CDC developed 
a risk adjustment methodology for these measures to ensure equitable 
comparisons across hospitals. To calculate risk adjustments, the NHSN 
relies on facility survey data and designation of patient care 
locations to serve as high-level surrogate markers for patient acuity. 
While using patient-level data may better characterize the patient 
population, the NHSN uses uniformly reported data on patient care 
locations to determine an appropriate risk adjustment without 
significantly increasing hospitals' data collection burden.
    Regarding the commenter's question about how SIRs would be 
calculated, the SIR is a scalable, risk-adjusted metric. In CAUTI and 
CLABSI SIRs, risk adjustment is applied at the individual location 
level, resulting in a count of infection events (SIR numerator) and 
predicted number of infections (SIR denominator). In CAUTI and CLABSI 
SIRs, risk adjustment is applied at the individual location level, 
resulting in a count of infection events (SIR numerator) and predicted 
number of infections (SIR denominator). The NHSN then aggregates 
location-specific results for all of a facility's locations prior to 
calculating the SIR.
    Comment: A commenter requested clarification on the quarterly 
submission process and the impact of a ``not applicable'' response for 
hospitals.
    Response: We thank the commenter for their questions. Since the 
NHSN does not have an option to submit a ``not applicable'' response 
when reporting these measures, hospitals that do not have oncology 
wards do not have a place to specify that within NHSN. Therefore, these 
location types are left blank within the system. In this case, the NHSN 
is not able to calculate a SIR and the hospital's data would not be 
publicly reported. Hospitals may indicate that they do not have any 
locations mapped as an oncology ward on the Measure Exception form, as 
applicable. If a hospital indicates this on the form, the hospital need 
not report zero cases to NHSN, but completion of the Measure Exception 
form is required to avoid a penalty through a reduction in a hospital's 
annual payment update (APU) for failing to report the measure. For more 
information about the submission process, we refer readers to the CDC's 
operational guidance for reporting CAUTI and CLABSI data, available at: 
https://www.cdc.gov/nhsn/cms/ach.html.
    Comment: A few commenters expressed concern that the smaller 
denominators for these measures could lead to low volume bias and asked 
CMS to ensure statistical reliability and validity.
    Response: We wish to clarify that the calculated SIR for the CAUTI-
Onc and CLABSI-Onc measures are adjusted for volume. The SIR compares 
the actual number of cases to the predicted number of cases. The SIR is 
calculated when there is at least one predicted infection event, to 
achieve a minimum level of precision. The measures require a facility 
to have at least one predicted event before calculating the SIR because 
the precision of a facility's infection rate can vary, especially in 
low volume hospitals. For this reason, the NHSN calculates the SIR 
instead of reporting the rate directly. Using the SIRs, we determine 
and publicly report each hospital's national percentile ranking. While 
a direct comparison between hospitals' infection rates would be subject 
to low volume bias, the SIRs account for this bias by comparing the 
observed to the expected rate.
    Comment: A few commenters did not support the measures because they 
stated that the risk adjustment does not adequately reflect the 
immunosuppression of patients with cancer. Another commenter objected 
to the risk adjustment methodology for these measures, stating that the 
difficulty in preventing HAIs for certain patients does not justify 
adjustments that hide these difficult cases.
    Response: We thank the commenters for sharing their concerns. 
However, we disagree that the measures do not provide adequate risk 
adjustment to account for the immunosuppression of patients with 
cancer. To calculate risk adjustments, the NHSN relies on facility 
survey data and designation of patient care locations to serve as high-
level surrogate markers for patient acuity. Risk adjustment relies on 
patient location to account for risk factors such as immunosuppression 
in patients with cancer. It is important for the measures to stratify 
by location to account for patient risk factors which are not within a 
hospital's control and ensure that measure results represent each 
hospital's performance. We will continue to collaborate with the CDC to 
review and refine this measure, including the risk adjustment model, as 
part of our measure maintenance and evaluation.
    Comment: Several commenters offered suggestions for ensuring the 
effectiveness of the measures in promoting patient safety and 
transparent reporting. A few commenters requested that CMS continue to 
verify the reliability and validity of the measures. A few commenters 
urged CMS to monitor for unintended consequences, including using 
publicly reported SIR information to make inappropriate comparisons 
between facilities. A commenter suggested that CMS provide more 
background information about airborne infections and preventive 
practices when discussing these measures.
    Response: We appreciate this input and will take it into account. 
We also note that the measures have been tested and were recommended 
for inclusion in the Hospital IQR Program by the PRMR Hospital 
Committee.\568\ Additionally, we will continue to monitor the CAUTI-Onc 
and CLABSI-Onc measures in the Hospital IQR Program to ensure that the 
publicly reported data are helpful to consumers when choosing the best 
hospital for their needs.
---------------------------------------------------------------------------

    \568\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Final MUC Recommendation Report. Available at: https://p4qm.org/sites/default/files/2024-02/PRMR-2023-MUC-Recommendations-Report-Final-.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters expressed concerns about the burden of 
measure reporting, stating that these measures would impose workloads 
on hospital staff that outweigh the reporting benefits. One commenter 
recommended that CMS provide facilities with sufficient time to prepare 
for collecting data on the CAUTI-Onc and CLABSI-Onc measures.
    A commenter stated that the CAUTI-Onc measure should be combined 
with the CAUTI measure, and the CLABSI-Onc measure should be combined 
with the CLABSI measure. According to the commenter, the oncology-
specific measures are duplicative and dividing reporting between 
oncology wards and other locations creates additional burden for 
hospitals.
    Response: We appreciate commenters sharing their concerns about the 
measure reporting burden. We carefully consider the benefit of adopting 
new measures with attention to the burden on hospitals. We do not agree 
that the burden of measure reporting for these measures outweighs the 
reporting benefits. While the measures would require staff time to 
report, we are adopting the measures because of their ability to 
encourage the use of best practices and thus reduce the incidence of 
HAIs for patients with cancer. With measure reporting beginning with 
the CY 2026 reporting period/FY 2028 payment determination, hospitals 
should have sufficient time to prepare

[[Page 69534]]

for reporting. We note that hospitals are already reporting the CAUTI 
and CLABSI measures, which have the same specifications as the CAUTI-
Onc and CLABSI-Onc measures, the only difference being the locations at 
which the measures stratify. In 2022, 3,780 hospitals reported CAUTI 
events \569\ and 3,728 reported CLABSI events.\570\ In addition, 488 
hospitals have already reported data from at least one oncology 
location.\571\
---------------------------------------------------------------------------

    \569\ CDC. (2022). Antibiotic Resistance & Patient Safety 
Portal: Catheter-Associated Urinary Tract Infections. Available at: 
https://arpsp.cdc.gov/profile/nhsn/cauti.
    \570\ CDC. (2022). Antibiotic Resistance & Patient Safety 
Portal: Central Line-Associated Bloodstream Infections. Available 
at: https://arpsp.cdc.gov/profile/nhsn/clabsi.
    \571\ CDC. (2024). National and State Healthcare-associated 
Infections Progress Report. Available at: https://www.cdc.gov/healthcare-associated-infections/php/data/progress-report.html.
---------------------------------------------------------------------------

    We further note that since the NHSN system currently collects 
CAUTI-Onc and CLABSI-Onc data, hospitals that have not been reporting 
such data could begin to do so now in preparation for when the data 
would be reported to CMS for the Hospital IQR Program beginning with 
the CY 2026 reporting period.
    With regard to the suggestion to combine the oncology-specific 
measures with the CAUTI and CLABSI measures, we considered this in the 
development of the proposed rule; however, in collaboration with the 
CDC, we proposed the CAUTI-Onc and CLABSI-Onc measures as separate 
measures from the CAUTI and CLABSI measures in the Hospital VBP Program 
and HAC Reduction Program because patients with cancer are especially 
vulnerable to HAIs and this can greatly affect measure results. We 
therefore proposed oncology-specific measures so that they can provide 
a stratified risk-adjusted measure and report data in the context of 
the patient population. This would also allow more direct comparison 
with the CAUTI-Onc and CLABSI-Onc measures used in the PCHQR Program.
    Comment: Several commenters expressed concern about the CAUTI-Onc 
and CLABSI-Onc measures on the basis that many hospitals do not have 
defined oncology wards and thus would not be able to report the 
measures. A few commenters requested further clarification on how 
oncology wards would be defined by NHSN. Another commenter stated that 
defining oncology locations according to the 80 percent rule as listed 
by the CDC Locations and Descriptions and Instructions for Mapping 
Patient Care Locations \572\ would exclude some oncology patients from 
public reporting. A few commenters asked if the measures would 
distinguish between oncology ward characteristics, such as whether they 
serve pediatric or adult patients.
---------------------------------------------------------------------------

    \572\ CDC. (2024). CDC Locations and Descriptions and 
Instructions for Mapping Patient Care Locations. Available at: 
https://www.cdc.gov/nhsn/pdfs/pscmanual/15locationsdescriptions_current.pdf.
---------------------------------------------------------------------------

    Response: We thank the commenters for their input and questions 
about identifying oncology wards. The CAUTI-Onc and CLABSI-Onc measures 
allow for the reporting of HAIs for patients with cancer in hospitals 
that are not PCHs, and the NHSN has developed a location mapping 
methodology for these measures that allows the model to consider the 
hospital locations that have higher incidences of HAIs. As currently 
established by the CDC for reporting to the NHSN, the CLABSI-Onc and 
CAUTI-Onc measures are collected under a location-based surveillance 
method, using the CDC's location definitions. Patients with cancer 
receiving care in other non-oncology inpatient locations would not be 
captured by the oncology-specific measures. CDC location codes are 
determined by the type of patient that makes up 80 percent or more of 
the location's population. This 80 percent rule is standard across all 
healthcare settings to define hospital locations and does not single 
out any specific location type. Per the CDC's location definitions, 
hospitals can report CLABSI and CAUTI data for pediatric oncology 
locations separately from adult oncology locations.\573\
---------------------------------------------------------------------------

    \573\ CDC. (2024). CDC Locations and Descriptions and 
Instructions for Mapping Patient Care Locations. Available at: 
https://www.cdc.gov/nhsn/pdfs/pscmanual/15locationsdescriptions_current.pdf.
---------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
finalizing the CAUTI-Onc and CLABSI-Onc measures as proposed beginning 
with the CY 2026 reporting period/FY 2028 payment determination.
c. Adoption of Hospital Harm--Falls With Injury eCQM Beginning With the 
CY 2026 Reporting Period/FY 2028 Payment Determination
(1) Background
    Patient falls are among the most common hospital harms reported and 
can increase length of stay and patient costs.574 575 576 It 
has been estimated that there are 700,000-1,000,000 inpatient falls in 
the U.S. annually, with more than one-third resulting in injury and up 
to 11,000 resulting in patient death.577 578 Protocols and 
prevention measures to reduce patient falls with injury include using 
fall risk assessment tools to gauge individual patient risk, 
implementing fall prevention protocols directed at individual patient 
risk factors, and implementing environmental rounds to assess and 
correct environmental fall hazards.\579\ There is wide variation in 
fall rates between hospitals which suggests that this is an area where 
quality measurement and further improvement is still 
needed.580 581 582 583
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    \574\ Bysshe, T., Gao, Y., Heaney-Huls, K., et al. (2017). Final 
Report Estimating the Additional Hospital Inpatient Cost and 
Mortality Associated with Selected Hospital Acquired Conditions.
    \575\ Morello, R.T., Barker, A.L., Watts, J.J., Haines, T., 
Zavarsek, S.S., Hill, K.D., Brand, C., Sherrington, C., Wolfe, R., 
Bohensky, M.A., & Stoelwinder, J.U. (2015). The Extra Resource 
Burden of In-hospital Falls: a Cost of Falls Study. The Medical 
Journal of Australia, 203(9), 367. https://doi.org/10.5694/mja15.00296.
    \576\ Dykes, P.C., Curtin-Bowen, M., Lipsitz, S., Franz, C., 
Adelman, J., Adkison, L., Bogaisky, M., Carroll, D., Carter, E., 
Herlihy, L., Lindros, M.E., Ryan, V., Scanlan, M., Walsh, M.A., 
Wien, M., & Bates, D.W. (2023). Cost of Inpatient Falls and Cost-
Benefit Analysis of Implementation of an Evidence-Based Fall 
Prevention Program. JAMA Health Forum, 4(1), e225125. https://doi.org/10.1001/jamahealthforum.2022.5125.
    \577\ AHRQ. (2019). Patient Safety Primer: Falls. Retrieved July 
24, 2019, from AHRQ PSNet website: https://psnet.ahrq.gov/primers/primer/40/Falls.
    \578\ Currie, L. (2008). Fall and Injury Prevention. In E. 
Hughes RG (Ed.), Patient Safety and Quality: An Evidence-Based 
Handbook for Nurses (pp. 195-250). Rockville: Agency for Healthcare 
Research and Quality.
    \579\ Montero-Odasso, M., Van der Velde, N., Martin, F.C., et 
al. (2022). World Guidelines for Falls Prevention and Management for 
Older Adults: A Global Initiative. Age and Ageing, 51(9), 1-36.
    \580\ Staggs, V.S., Mion, L.C., & Shorr, R.I. (2015). Consistent 
Differences in Medical Unit Fall Rates: Implications for Research 
and Practice. Journal of the American Geriatrics Society, 63(5), 
983-987. https://doi.org/10.1111/jgs.13387.
    \581\ Registered Nurses' Association of Ontario. (2017). 
Preventing Falls and Reducing Injury from Falls (4th ed.). Toronto, 
ON: Registered Nurses' Association of Ontario.
    \582\ National Institute of Health and Care Excellence. (2013). 
Falls in Older People: Assessing Risk and Prevention.
    \583\ ACS National Surgical Quality Improvement Program (NSQIP)/
American Geriatrics Society (AGS). (2016). Optimal Perioperative 
Management of the Geriatric Patient: Best Practices Guideline from 
ACS NSQIP/AGS. https://www.facs.org/media/y5efmgox/acs-nsqip-geriatric-2016-guidelines.pdf.
---------------------------------------------------------------------------

    Currently there are no electronic clinical quality measures (eCQMs) 
that focus specifically on acute care inpatient falls with major or 
moderate injury in any of the hospital quality reporting or value-based 
purchasing programs. The Patient Safety Indicator (PSI) 90 composite 
measure,\584\ which is currently included in the HAC

[[Page 69535]]

Reduction Program, does include a fall related component, (PSI 08): In 
Hospital Fall-Associated Fracture Rate; however, it is a claims-based 
measure that uses a two-year performance period, it is focused on the 
Medicare fee-for-service (FFS) population, and the numerator is limited 
to fractures and does not include other fall-associated major and 
moderate injuries. In the FY 2022 IPPS/LTCH PPS final rule, we 
highlighted our commitment to developing new digital quality measures 
that assess various aspects of patient safety in the inpatient setting 
(87 FR 49181 through 49190). As discussed later in this section of the 
preamble, the Hospital Harm--Falls with Injury eCQM provides the 
opportunity to assess the rate of falls that result in a wider range of 
injuries, in a much larger patient population, and using more timely 
information from patients' electronic medical records instead of 
administrative claims data.
---------------------------------------------------------------------------

    \584\ PSI 90 Technical Specification can be found here: https://qualitynet.cms.gov/inpatient/measures/psi/resources.
---------------------------------------------------------------------------

(2) Overview of Measure
    The Hospital Harm--Falls with Injury measure is a risk-adjusted 
outcome eCQM. The denominator is inpatient hospitalizations for 
patients aged 18 and older with a length of stay less than or equal to 
120 days that ends during the measurement period. The numerator is 
inpatient hospitalizations where the patient has a fall that results in 
moderate injury (such as lacerations, open wounds, dislocations, 
sprains, and strains) or major injury (such as fractures, closed head 
injuries, internal bleeding). The diagnosis of a fall and of a moderate 
or major injury that was present on admission would be excluded from 
the measure.
    The baseline risk-adjustment model accounts for age and several 
risk factors present on admission (weight loss or malnutrition, 
delirium, dementia, and other neurological disorders).\585\ The risk-
adjustment model has been developed to ensure that hospitals that care 
for sicker and more complex patients are evaluated fairly.\586\ We 
refer readers to the eCQI Resource Center (https://ecqi.healthit.gov/eh-cah) for more details on the measure specifications and risk 
methodology.
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    \585\ Battelle--Partnership for Quality Measurement. Hospital 
Harm--Falls with Injury. Available at: https://p4qm.org/measures/4120e.
    \586\ Ibid.
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(3) Measure Alignment to Strategy
    This measure aligns with several goals under the CMS National 
Quality Strategy in addition to supporting our re-commitment to better 
patient and healthcare worker safety.\587\ The COVID-19 public health 
emergency (PHE) put significant strain on hospitals and health systems 
which negatively impacted patient safety in routine care delivery, 
highlighting the need to address gaps in safety. Adopting the Hospital 
Harm--Falls with Injury measure is one of several initial actions we 
are taking in response to the President's Council of Advisors on 
Science and Technology (PCAST) call to action to renew ``our nation's 
commitment to improving patient safety.'' \588\ By establishing 
additional safety indicators, such as this measure, we are building a 
stronger, more resilient U.S. healthcare system. We refer readers to 
section IX.B.1. for more details on other efforts toward better patient 
and healthcare workers safety practices and the proposed Patient Safety 
Structural measure into the Hospital IQR Program and the PCHQR Program.
---------------------------------------------------------------------------

    \587\ CMS National Quality Strategy. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
    \588\ President's Council of Advisors on Science and Technology. 
(2023). Report to the President: A Transformational Effort on 
Patient Safety. https://www.whitehouse.gov/wp-content/uploads/2023/09/PCAST_Patient-Safety-Report_Sept2023.pdf.
---------------------------------------------------------------------------

    This measure aligns with the ``Safety and Resiliency'' goal of our 
CMS National Quality Strategy to achieve zero preventable harm, the 
``Equity and Engagement'' goal to ensure that all individuals have the 
information needed to make the best choices and complements the HHS 
National Action Alliance to Advance Patient Safety. By providing 
hospitals with the opportunity to assess the rate of falls with injury 
in a much larger patient population (all-payer) compared to current 
measures such as PSI 08 (limited to Medicare FFS), this measure expands 
the available safety indicator data within CMS programs and promotes 
equitable care for all. This measure additionally supports the 
``Outcomes and Alignment'' goals to improve quality and health outcomes 
by providing hospitals a mechanism to track falls with injury event 
rates and improve falls intervention efforts over time, a key patient 
safety metric across the care journey. Third, this measure supports 
CMS' Interoperability goal to improve quality measure efficiency by 
transitioning to digital measures in CMS quality reporting programs. As 
an eCQM, this measure increases the digital measure footprint and can 
also serve as a potential replacement for the claims-based PSI 08 
measure (reported within the PSI 90 composite) in the future.
(4) Pre-rulemaking Process and Measure Endorsement
(a) Recommendation From the PRMR Process
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of the preamble of this final rule for details on 
the PRMR process including the voting procedures used to reach 
consensus on measure recommendations. The PRMR Hospital Committee met 
on January 18-19, 2024, to review measures included by the Secretary on 
a publicly available ``2023 Measures Under Consideration List'' (MUC 
List), including the Hospital Harm--Falls with Injury measure (MUC2023-
048), and to vote on a recommendation regarding use of this 
measure.589 590
---------------------------------------------------------------------------

    \589\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \590\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
---------------------------------------------------------------------------

    The committee reached consensus and recommended including this 
measure in the Hospital IQR Program with conditions. Twelve members of 
the group voted to adopt the measure into the Hospital IQR Program 
without conditions; six members voted to adopt with conditions; one 
committee member voted not to recommend the measure for adoption. Taken 
together, 94.7 percent of the votes were recommended or recommended 
with conditions. The six members who voted to adopt with conditions 
specified the condition as monitoring unintended consequences, such as 
use of patient restraints. We agree that the potential for unintended 
consequences exists and note that we consistently monitor all the 
measures in the Hospital IQR Program for unintended consequences. 
Furthermore, we note that under our previously finalized measure 
removal policy, codified at 42 CFR 412.140(g)(2) and (3) (88 FR 59144), 
if we were to identify unintended consequences related to this measure 
we would consider it for removal. Furthermore, we note that various 
programs have been instituted that reduce hospital falls without 
decreasing mobility (such as the Hospital Elder Life Program) \591\ and 
that

[[Page 69536]]

the benefits of promoting mobility outweigh any increase in fall 
risk.\592\
---------------------------------------------------------------------------

    \591\ Hshieh, T.T., Yue, J., Oh, E., Puelle, M., Dowal, S., 
Travison, T., & Inouye, S. K. (2015). Effectiveness of 
multicomponent nonpharmacological delirium interventions: a meta-
analysis. JAMA internal medicine, 175(4), 512-520. https://doi.org/10.1001/jamainternmed.2014.7779.
    \592\ Montero-Odasso, M., van der Velde, N., Martin, F.C., 
Petrovic, M., Tan, M.P., Ryg, J., Aguilar-Navarro, S., Alexander, 
N.B., Becker, C., Blain, H., Bourke, R., Cameron, I.D., Camicioli, 
R., Clemson, L., Close, J., Delbaere, K., Duan, L., Duque, G., Dyer, 
S.M., . . . Rixt Zijlstra, G.A. (2022). World guidelines for falls 
prevention and management for older adults: a global initiative. Age 
and Ageing, 51(9), 1-36.
---------------------------------------------------------------------------

(b) Measure Endorsement
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this final rule for details on the E&M process 
including the measure evaluation procedures the E&M Committees uses to 
evaluate measures and whether they meet endorsement criteria. The E&M 
Management of Acute Events, Chronic Disease, Surgery, and Behavioral 
Health Committee \593\ convened in the Fall 2023 cycle to review the 
Hospital Harm--Falls with Injury measure (CBE #4120e) submitted to the 
CBE for endorsement. The E&M Management of Acute Events, Chronic 
Disease, Surgery, and Behavioral Health Committee ultimately voted to 
endorse the measure on January 29, 2024.\594\
---------------------------------------------------------------------------

    \593\ Battelle--Partnership for Quality Measurement. Hospital 
Harm--Fall Injury Measure Specifications. Available at: https://p4qm.org/measures/4120e.
    \594\ Battelle--Partnership for Quality Measurement. 2023 
Management of Acute and Chronic Events Meeting Summary. https://p4qm.org/sites/default/files/Management%20of%20Acute%20Events%2C%20Chronic%20Disease%2C%20Surgery%2C%20and%20Behavioral%20Health/material/EM-Acute-Chronic-Events-Fall2023-Endorsement-Meeting-Summary.pdf
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(5) Measure Specifications
    This ratio measure is reported as the number of inpatient 
hospitalizations with falls with moderate or major injury per 1,000 
patient days. The measure is calculated using the following: (Total 
number of encounters with falls with moderate or major injury/total 
number of eligible hospital days) x 1,000. To calculate the numerator 
(that is, the total number of encounters with falls with moderate or 
major injury): (1) identify the initial population (inpatient 
hospitalizations for patients aged 18 and older with a length of stay 
less than or equal to 120 days that ends during the measurement 
period), (2) remove exclusions (patients who had a fall diagnosis 
present at the time the order for inpatient admission occurs), and (3) 
determine if the patient meets numerator criteria (patient has both a 
fall diagnosis and major or moderate injury diagnosis not present on 
admission). Hospital days are measured in 24-hour periods starting from 
the time of arrival at the hospital (including time in the emergency 
department and or observation). The number of hospital days is rounded 
down to whole numbers; any fractional periods are dropped. All data 
elements necessary to calculate the numerator and denominator are 
defined within value sets available in the Value Set Authority Center 
(VSAC).\595\
---------------------------------------------------------------------------

    \595\ To access the value sets for the measure, please visit the 
Value Set Authority Center (VSAC), sponsored by the National Library 
of Medicine, at https://vsac.nlm.nih.gov/.
---------------------------------------------------------------------------

    The measure was tested in 12 hospital test sites with two different 
EHR vendors (Epic and Allscripts) with varying bed size, geographic 
location, and teaching status. Risk-adjusted rates showed substantial 
variation in performance scores across the 12 test hospitals indicating 
ample room for quality improvement.\596\ Test results using one year of 
data indicated strong measure reliability and validity (including 
agreement between data exported from the EHR and data in the patient 
chart).\597\ As PSI 08 uses a two-year performance period, this eCQM 
would allow hospitals to receive more timely information about measure 
performance.
---------------------------------------------------------------------------

    \596\ Battelle--Partnership for Quality Measurement. Hospital 
Harm--Falls with Injury. Available at: https://p4qm.org/measures/4120e.
    \597\ Ibid.
---------------------------------------------------------------------------

    We recognize there may be concern regarding measure duplication 
with PSI 08 (a component of PSI 90 that is currently measured and 
publicly reported in the HAC Reduction Program). However, as described 
earlier, the Hospital Harm--Falls with Injury eCQM assesses the rate of 
falls with a wider range of injuries in a larger population compared to 
PSI 08. We envision the potential future use of patient safety eCQMs 
not only in the Hospital IQR Program, but also pay-for-performance 
programs such as the HAC Reduction Program, including as a potential 
replacement for the claims-based PSI 90 measure. However, until that 
time we are retaining PSI 08 (within the PSI 90 composite) in the HAC 
Reduction Program as well as include the Hospital Harm--Falls with 
Injury eCQM in the Hospital IQR Program.
(6) Data Submission and Reporting
    This eCQM uses data collected through hospitals' EHRs. The measure 
is designed to be calculated by the hospitals' certified electronic 
health record technology (CEHRT) using patient-level data and then 
submitted by hospitals to CMS. As with all quality measures we develop, 
testing was performed to confirm the feasibility of the measure, data 
elements, and validity of the numerator, using clinical adjudicators 
who validated the EHR data compared with medical chart-abstracted data. 
Testing demonstrated that all critical data elements were reliably and 
consistently captured in hospital EHRs, and measure implementation is 
feasible.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36306 through 
36341), we proposed the adoption of the Hospital Harm--Falls with 
Injury eCQM as part of the eCQM measure set beginning with the CY 2026 
reporting period/FY 2028 payment determination. The eCQM measure set is 
the measure set from which hospitals can self-select measures to report 
to meet the eCQM reporting requirement. We refer readers to section 
IX.C.9.c. of this final rule for a discussion of our previously 
finalized eCQM reporting and submission requirements, as well as 
proposed modifications to these requirements. Additionally, we refer 
readers to section IX.F.6.a.(2). of the preamble of this final rule for 
a discussion of a similar measure adoption in the Medicare Promoting 
Interoperability Program.
    We invited public comment on our proposal to adopt the Hospital 
Harm--Falls with Injury eCQM beginning with the CY 2026 reporting 
period/FY 2028 payment determination.
    Comment: Many commenters supported adopting the measure. 
Specifically, commenters stated that the measure represents an 
important measurement area that targets one of the most common hospital 
harms, promotes patient safety, captures a broader population than PSI 
08, and would allow a timelier delivery of information than claims 
data. A commenter stated that the measure can be used to identify gaps 
in care, optimize care delivery, and improve patient outcomes. Another 
commenter stated that the measure would raise awareness of fall rates 
and lower healthcare costs. A commenter supported our consideration of 
malnutrition in the risk adjustment. Another commenter stated that the 
implementation timeline is consistent with the amount of time the 
industry needs to implement the measure.
    Response: We thank the commenters for their support.
    Comment: A commenter supported our proposal to adopt the Hospital 
Harm--Falls with Injury eCQM beginning with the CY 2026 reporting 
period. The commenter stated that malnutrition is a risk factor for 
severe clinical events and suggested that some of its effects, such as 
loss of lean body mass, can contribute to frailty and possible falls.

[[Page 69537]]

    Response: We thank the commenter for their support for including 
the measure's risk-adjustment model.
    Comment: A commenter supported the adoption of the Hospital Harm--
Falls with Injury eCQM but encouraged CMS to consider the workflow and 
education impact of the proposed volume of new measures and to align 
adoption and attestation timelines accordingly. Another commenter had 
concerns with the proposals to adopt new eCQMs and recommended adopting 
only one new eCQM per reporting period due to the burdensome process 
for building, tracking, and implementing new eCQMs.
    Response: We carefully consider the benefit of adopting new 
measures and transitioning to eCQMs with attention to the burden on 
hospitals. The program's progressive shift toward digital measures 
would ultimately decrease the burden for hospitals because eCQMs use 
electronic standards, which help reduce the burden of manual 
abstraction and reporting for measured entities. We additionally note 
that hospitals would initially have the option to self-select whether 
to report this measure, which provides sufficient flexibility for those 
hospitals that may need more time to implement this measure before 
being able to report it.
    Comment: A commenter supported the addition of the Hospital Harm--
Falls with Injury eCQM in the Hospital IQR Program but cautioned CMS 
against moving this measure into pay-for-performance programs such as 
the Hospital VBP Program. The commenter stated that there is a limited 
evidence base for best practices on fall prevention within the 
hospital.
    Response: We note that we proposed adopting the Hospital Harm--
Falls with Injury eCQM in the Hospital IQR and Medicare Promoting 
Interoperability Programs. We have not proposed to adopt this measure 
in a pay-for-performance program. If we decide to use this measure for 
additional CMS programs, such as the Hospital VBP Program, we would do 
so through notice-and-comment rulemaking.
    Comment: A commenter supported adoption of the Hospital Harm--Falls 
with Injury eCQM into the Hospital IQR Program as an eCQM that 
hospitals can select to meet the eCQM reporting requirements but 
encouraged CMS to work with technical experts to improve risk 
standardization under the measure. The commenter stated that fall risk 
varies considerably based on the patient's diagnoses, procedures and 
other aspects of care (for example, medications) and stated that the 
measure could be enhanced using indirect standardization (as the method 
of risk adjustment), whereby the expected value is conditioned on MS-
DRG and potentially other patient- and visit-level factors.
    Response: We note that the measure, as proposed, is risk-adjusted 
for several factors including medications active on admission, 
medications administered during the hospitalization, diagnoses present 
on admission which may increase the risk for a fall with injury, and 
physical traits, such as body mass index. Additional information 
regarding the measure specifications and risk methodology is available 
at the eCQI Resource Center (https://ecqi.healthit.gov/eh-cah). We will 
monitor measure performance and consider any future adjustments to the 
measure, including adjustments to the measure's risk-adjustment 
methodology.
    Comment: A commenter supported the implementation of the Hospital 
Harm--Falls with Injury eCQM, stating that falls are an important 
patient safety issue, that the measure is risk-adjusted so that outcome 
rates can be compared across hospitals, and that pilot testing revealed 
that hospitals were able to map key elements for reporting without 
changes to current workflow. However, the commenter recommended that 
the 120-day length of stay exclusion be removed in alignment with most 
eCQMs where this exclusion has already been removed.
    Response: We thank the commenter for their support. We note that 
several eCQMs such as Venous Thromboembolism Prophylaxis, Safe Use of 
Opioids--Concurrent Prescribing, and Discharged on Antithrombotic 
Therapy eCQMs specify a length of stay less than or equal to 120 days; 
therefore, this measure is in alignment with those eCQMs.
    Comment: A few commenters supported the Hospital Harm--Falls with 
Injury eCQM, as an outcome measure of patient falls while hospitalized, 
which is an important measure area, but did not support the fact that 
the measure excludes patients admitted due to a fall diagnosis from the 
measure calculation. Those commenters were concerned that the measure 
excluded the patients most vulnerable to falls and stated that a 
hospital should be able to document and separate when a fall happened 
prior to admission and while hospitalized. The commenters also stated 
that these falls are preventable. Another commenter stated that a more 
reasonable approach to categorizing these events would be to stratify 
the measure by unit, allowing comparison within ICU, medical surgical, 
or other specific units where patients are of similar risks.
    Response: We thank the commenters for this feedback. As currently 
specified, the Hospital Harm--Falls with Injury eCQM excludes patients 
from the numerator and the denominator who have a fall diagnosis which 
is present on admission. Therefore, a patient who had a fall present on 
admission and then had a subsequent fall during the inpatient 
hospitalization would be excluded from both the numerator and 
denominator. Patients who have a fall present on admission are excluded 
from the denominator population because the measure focuses on falls 
with injury that occurred during hospitalization. This measure 
exclusion is necessary to reduce the measure's false positive rate and 
to prevent hospitals from being penalized by including falls that 
occurred prior to the encounter, when injuries resulting from these 
falls may be diagnosed later in a hospital stay.
    For a patient safety measure that may be used to compare hospital 
performance, it is important to aim for some level of case mix 
uniformity across hospitals and therefore stratifying by unit may not 
be practical, but we will consider whether such stratification is 
appropriate in future measure updates. Although the measure already 
uses risk adjustment, including a highly heterogenous group of patients 
already admitted for a fall may exceed the ability of the risk 
adjustment model to provide a level playing field and complicate the 
use of the measure for comparing hospital performance. However, we 
recognize the importance of assessing fall risk for all hospitalized 
patients, including those patients with a fall present on admission. We 
also refer readers to the discussion of the Domain 3: Frailty Screening 
and Intervention domain of the finalized Age Friendly Hospital measure 
where hospitals will be required to attest to whether they screen 
patients for risks regarding mobility and whether data is collected on 
the rate of falls. We will consider removing the exclusion of patients 
admitted due to a fall diagnosis from the Hospital Harm--Falls with 
Injury eCQM in future updates to the measure.
    Comment: Several commenters raised concerns regarding unintended 
consequences of the measure. A few commenters supported the measure but 
encouraged CMS to monitor results carefully to ensure the measure does 
not result in unintended consequences associated with immobilization, 
such as pressure injuries or patient restraints. A commenter did not 
support the measure due to concerns that the measure could 
inadvertently discourage early patient

[[Page 69538]]

mobilization, which the commenter stated is vital for recovery.
    Response: We agree that the potential for unintended consequences 
exists and note that we consistently monitor all the measures in the 
Hospital IQR Program for unintended consequences. We note that various 
programs have been instituted that reduce hospital falls without 
decreasing mobility (such as the Hospital Elder Life Program).\598\ We 
also note that the Hospital IQR Program adopted a Hospital Harm--
Pressure Injury eCQM in the FY 2024 IPPS/LTCH PPS final rule as one of 
the eCQMs hospitals have the option to self-select for reporting 
beginning with the CY 2025 reporting period/FY 2027 payment 
determination (88 FR 59149), which will also encourage early patient 
mobilization.
---------------------------------------------------------------------------

    \598\ Hshieh, T.T., Yue, J., Oh, E., Puelle, M., Dowal, S., 
Travison, T., & Inouye, S.K. (2015). Effectiveness of multicomponent 
nonpharmacological delirium interventions: a meta-analysis. JAMA 
internal medicine, 175(4), 512-520. https://doi.org/10.1001/jamainternmed.2014.7779.
---------------------------------------------------------------------------

    Comment: A few commenters supported adding the measure to the list 
of available eCQMs that hospitals can choose to self-select to report 
but urged CMS not to require its reporting until questions about 
variations in the capture of data by EHR vendors can be answered.
    Response: As finalized in the FY 2023 IPPS/LTCH PPS final rule (87 
FR 49299 through 49302), hospitals must report on six total eCQMs 
beginning with the CY 2024 reporting period and subsequent years. 
Hospitals must report on the following three eCQMs: (1) Hospital Harm--
Severe Hypoglycemia eCQM; (2) Hospital Harm--Severe Hyperglycemia eCQM; 
and (3) Hospital Harm--Opioid-Related Adverse Events eCQM. Hospitals 
must also report three additional eCQMs that are self-selected from the 
list of remaining eCQMs. We proposed this measure would be included as 
one of the eCQMs hospitals have the option to self-select for reporting 
beginning with the CY 2026 reporting period/FY 2028 payment 
determination. We note that in section IX.C.9.c., we proposed to 
increase progressively the number of eCQMs a hospital must report 
beginning with the CY 2026 reporting period/FY 2028 payment 
determination, however the Hospital Harm--Falls with Injury eCQM would 
remain one of the eCQMs hospitals can self-select to report. Future 
changes to the eCQM reporting requirements, including any additional 
eCQMs for mandatory reporting, would go through notice-and-comment 
rulemaking.
    Comment: A few commenters discussed differences in how falls are 
documented by hospitals and expressed concerns that the documentation 
does not lend itself to eCQMs. Some commenters stated that falls are 
not necessarily captured as discrete data points in the hospital EHR, 
but may be documented in narrative notes, and to capture falls they 
would need a discrete field in the EHR. The commenters stated that 
clinicians may be using structured fields differently to input data and 
documentation may not be captured in a standardized manner. The 
commenter stated this could lead to measure performance being more 
dependent on the sensitivity of the screening technologies and 
approaches used than on underlying performance. Another commenter 
stated that details about patient falls, and resultant injuries are 
often captured more reliably in a hospital's safety event reporting 
database than in a patient's medical record. Further, commenters noted 
that sometimes when a fall happens, it is not immediately known if 
there is an injury, or the extent of the injury and this information 
would need to be manually entered into the record after getting test or 
imaging results. A commenter raised a concern that hospitals with 
better, more complete, data would be punished because their results 
would compare unfavorably against hospitals that failed to accurately 
capture falls with injury.
    A commenter stated that information related to a fall prior to 
arrival could be recorded in the EHR and could be pulled into the 
numerator falsely by key words if the process is not set up correctly 
and staff are not educated to enter the information correctly. Another 
commenter encouraged CMS to assess the feasibility of collecting the 
required data elements from EHRs and determine if the measure is 
reliable and valid across a broader set of EHR vendors and hospitals. 
The commenter stated that assessing measure performance using only two 
vendor systems and 12 hospitals is insufficient.
    Response: Data element feasibility was assessed during testing, 
where all 13 hospital sites that participated in the evaluation of 
feasibility confirmed that the data elements used in the proposed 
measure can be captured within the electronic health record in a 
structured and codified manner either using nationally accepted 
terminology standards or local system codes that could be mapped.\599\ 
While one hospital did not always use its structured fields to capture 
a fall that occurred during hospitalization, the three other sites 
using an EHR from the same vendor did not encounter the same workflow 
challenges. The remaining 12 hospitals proceeded with validity testing 
that evaluated electronic clinical data compared to manually extracted 
data. The results indicate that the positive predictive value for the 
numerator was 98.77 percent, meaning that in 98.77 percent of the cases 
where the patient was identified as experiencing the harm using EHR 
data, the result was confirmed using the manually extracted data.\600\ 
These results generally indicate that most hospitals would have the 
data available to calculate the measure accurately in structured fields 
in their EHR and to provide complete data for measurement. Resources 
such as the QRDA implementation guide that can assist with eCQM 
implementation, including ensuring that data is captured in a 
consistent format, can be found on the eCQI Resource Center.\601\
---------------------------------------------------------------------------

    \599\ Battelle--Partnership for Quality Measurement. (2024). 
Hospital Harm--Falls with Injury. Available at: https://p4qm.org/measures/4120e.
    \600\ Battelle--Partnership for Quality Measurement. (2024). 
Hospital Harm--Falls with Injury. Available at: https://p4qm.org/measures/4120e.
    \601\ QRDA--Quality Reporting Document Architecture, https://ecqi.healthit.gov/qrda?qt-tabs_qrda=about.
---------------------------------------------------------------------------

    Comment: A commenter raised concerns about the measure definitions. 
The commenter acknowledged that the published measure definitions 
include examples of injuries categorized as moderate or major but 
questioned whether the definitions would be applied universally by all 
reporting hospitals. Another commenter stated that standardization of 
national operational definition of a fall, moderate injury, and severe 
injury must occur before adopting the measure into the Hospital IQR 
Program.
    Response: The measure specifications include definitions for the 
terms fall, moderate injury, and major injury. A fall is defined as: A 
sudden, unintentional descent, with or without injury to the patient, 
that results in the patient coming to rest on the floor, on or against 
some other surface (for example, a counter), on another person, or on 
an object (for example, a trash can). A fall with moderate or major 
injury is defined as: A fall and a diagnosis of moderate or major 
injury during the inpatient hospitalization. Examples of moderate 
injuries include lacerations, open wounds, dislocations, sprains, and 
muscle strains. Examples of major injuries include fractures, closed 
head injuries, and internal bleeding. These definitions are available 
on the eCQI Resource Center at: https://

[[Page 69539]]

ecqi.healthit.gov/ecqm/eh/2026/cms1017v1?qt-tabs_measure=measure-
information.
    Comment: Several commenters raised concerns that the Hospital 
Harm--Falls with Injury eCQM overlaps with the PSI 08 component of the 
PSI 90 measure in the HAC Reduction Program. These commenters asked CMS 
to consider the potential burden of overlapping eCQMs and claims-based 
measures that could give differing results and require duplicative 
reporting. A commenter stated that we should consider removing PSI 90 
in the future when replacement eCQMs have been implemented or that we 
could allow hospitals to choose whether to report a claims-based or 
electronic measure. A commenter added that if the Hospital Harm--Falls 
with Injury eCQM is included, CMS should outline a clear timeline for 
elimination of duplicative PSI measures. A commenter recommended CMS 
not finalize the Hospital Harm--Falls with Injury eCQM and instead 
retain PSI 08 within the HAC Reduction Program.
    Response: As we discussed in the FY 2025 IPPS/LTCH PPS proposed 
rule (89 FR 36319) and in this final rule, the Hospital Harm--Falls 
with Injury eCQM would assess the rate of falls with a wider range of 
injuries in a larger population compared to PSI 08 and uses more timely 
information from patients' electronic medical records instead of 
administrative claims data. In addition to these two measurement 
improvements, the development and implementation of the Hospital Harm--
Falls with Injury eCQM aligns with CMS's commitment to moving to 
digital quality measurements as highlighted in the FY 2022 IPPS/LTCH 
PPS final rule (87 FR 49181 through 49190). We envision the potential 
future use of patient safety eCQMs not only in the Hospital IQR 
Program, but also pay-for-performance programs such as the HAC 
Reduction Program, including as a potential replacement for the claims-
based PSI 90 measure. However, until that time, we are retaining PSI 08 
(within the PSI 90 composite) in the HAC Reduction Program while 
hospitals gain experience with the Hospital Harm--Falls with Injury 
eCQM in the Hospital IQR Program.
    Comment: A few commenters stated that the performance scores ranged 
from 0.0 to 0.258 across 12 hospitals and questioned whether this 
measure demonstrates a sufficient performance gap to support its use in 
the Hospital IQR Program. The commenters recommended that CMS continue 
to test this measure across a broad range of hospitals and vendor 
systems to determine the extent to which there is sufficient variation 
in performance scores to warrant the measure's use in the Hospital IQR 
Program.
    Response: The data from 12 hospitals demonstrates wide performance 
variation, suggesting room for improvement. Specifically, the median 
risk-adjusted measure rate was 0.053 falls per 1,000 encounter days, 
ranging from 0 falls to 0.257 falls per 1000 encounter days. The sample 
data show that the average number of encounter days per year per 
hospital is about 100,000. Using that assumption, the mean risk-
adjusted number of falls per year across the 12 hospitals was 
approximately 8, with a range of 0 to 26, underscoring the measure's 
underlying performance gap and variation. In other words, the worst 
performing hospital has a performance rate that is more than three 
times higher than the sample average. Additionally, there may be 
disparities in the rate of in-hospital falls based on certain factors. 
For example, according to a report from the Leapfrog Group, the rate of 
in-hospital falls with hip fracture is significantly higher for 
patients insured by Medicare and Medicaid than for privately insured 
patients.\602\ This analysis also found the rate of in-hospital falls 
with hip fracture is also significantly lower for Non-Hispanic Black 
and Hispanic patients than for White patients.\603\ During the measure 
testing, patient and caregiver representatives agreed that the rate of 
hospital-acquired falls resulting in major or moderate injury is 
important to measure and can help improve care for patients.\604\ 
During an additional TEP meeting, one member additionally stressed that 
the measure has importance from a patient safety standpoint.\605\
---------------------------------------------------------------------------

    \602\ Gangopadhyaya, A., Pugazhendhi, A., Austin, M., Campione, 
A., & Danforth, M. (2023) Racial, ethnic, and payer disparities in 
adverse safety events: Are there differences across Leapfrog 
Hospital Safety Grades? The Leapfrog Group. https://www.leapfroggroup.org/racial-ethnic-and-payer-disparities-adverse-safety-events-are-there-differences-across-leapfrog.
    \603\ Battelle--Partnership for Quality Measurement. (2024). 
Hospital Harm--Falls with Injury. Available at: https://p4qm.org/measures/4120e.
    \604\ Battelle--Partnership for Quality Measurement. (2024). 
Hospital Harm--Falls with Injury. Available at: https://p4qm.org/measures/4120e.
    \605\ Battelle--Partnership for Quality Measurement. (2024). 
Hospital Harm--Falls with Injury. Available at: https://p4qm.org/measures/4120e.
---------------------------------------------------------------------------

    The measure was tested in 12 hospitals, which represented a 
diversity of hospital characteristics, including teaching status, size, 
EHR vendor, and geographic location. In terms of teaching status, three 
hospitals were major teaching hospitals and nine were community 
teaching hospitals. In terms of size, three hospitals had between 100-
199 beds, seven hospitals had between 200-499 beds, and two hospitals 
had >499 beds. In terms of EHR systems, two different EHR vendors were 
used in the hospitals. Finally, in terms of geographic locations, 
hospitals were headquartered in the Southeast, Northeast, and Western 
parts of the United States.
    Comment: A commenter requested that CMS share more details about 
the Hospital Harm--Falls with Injury eCQM, noting that previous eCQM 
implementations have had issues with their logic and code sets. The 
commenter was concerned that the measure's codes may not be robust 
enough to capture falls and recommended that CMS and the measure 
steward incorporate more flexibility for rapid cycle improvements into 
the measure.
    Response: We thank the commenter for their feedback. We refer 
readers to the eCQI Resource Center (https://ecqi.healthit.gov/) as 
well as the PQM's site (https://p4qm.org/measures/4120e) for more 
details on the Hospital Harm--Falls with Injury eCQM specifications, 
including the logic and value sets used in the specifications. We also 
reiterate that this eCQM underwent testing which demonstrated that all 
critical data elements were reliably and consistently captured in 
patient EHRs, and measure implementation is feasible. We also note that 
CMS has a process to receive feedback on issues with measure 
implementation, including a ticketing process, and we will consider how 
we can incorporate more flexibility for faster measure updates.\606\
---------------------------------------------------------------------------

    \606\ eCQI Resource Center, ONC Project Tracking System (Jira), 
https://ecqi.healthit.gov/tool/onc-project-tracking-system-jira.
---------------------------------------------------------------------------

    Comment: A commenter did not support the adoption of the measure 
and suggested that CMS consider a measure that rewards an increase in 
patient mobility as opposed to a measure that captures falls because 
encouraging improved mobility is a better approach than tracking higher 
rates of patient falls.
    Response: We thank the commenter for their suggestion. The measure 
would promote patient safety and encourage hospitals to reduce patient 
falls through promoting patient mobility. We also note that the 
Hospital IQR Program adopted a Hospital Harm--Pressure Injury eCQM in 
the FY 2024 IPPS/LTCH PPS final rule as one of the eCQMs hospitals have 
the option to self-select for reporting beginning with the CY

[[Page 69540]]

2025 reporting period/FY 2027 payment determination (88 FR 59149) which 
will promote increased patient mobility. We will monitor the measure 
and will take into consideration whether a measure focusing 
specifically on increasing patient mobility should be considered in 
future rulemaking.
    Comment: A commenter expressed concerns regarding the expansion of 
eCQMs in hospital and ambulatory quality reporting programs. The 
commenter stated that the introduction of new eCQMs is shortsighted, 
burdensome, and fails to recognize the effort to shift toward digital 
quality measures (dQMs). The commenter stated that new eCQMs should not 
be required as part of quality reporting or pay-for-performance 
programs but that rather, CMS should invest efforts towards the future 
development of dQMs.
    Response: We agree with the commenter in prioritizing investment in 
dQMs for quality measurement in order to improve accuracy, improve the 
timeliness of the information, and to reduce reporting burden. In 
general, CMS considers eCQMs to be a subset of dQMs.\607\ The 
definition of dQMs is: ``Quality measures that use standardized, 
digital data from one or more sources of health information that are 
captured and exchanged via interoperable systems; apply quality measure 
specifications that are standards-based and use code packages; and are 
computable in an integrated environment without additional effort.'' 
\608\ CMS has developed a dQM Strategic Roadmap to outline the 
activities required to transition to digital quality measurement.\609\
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    \607\ CMS, Reference Brief: Digital Quality Measurement & eCQMs, 
https://ecqi.healthit.gov/sites/default/files/Digital%20Quality%20Measurement%20eCQMs%20reference%20brief_508ed.pdf
.
    \608\ CMS, dQMs--Digital Quality Measures, available at https://ecqi.healthit.gov/dqm?qt-tabs_dqm=about-dqms.
    \609\ CMS, dQMs--Digital Quality Measures, https://ecqi.healthit.gov/dqm?qt-tabs_dqm=dqm-strategic-roadmap.
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    After consideration of the public comments we received, we are 
finalizing the measure as proposed beginning with the CY 2026 reporting 
period/FY 2028 payment determination. We refer readers to section 
IX.F.6.a.(2). of the preamble of this final rule for a discussion of 
the adoption of this measure in the Medicare Promoting Interoperability 
Program. We also refer readers to section XXXX of the preamble of this 
final rule where we discuss the use of this measure in the Transforming 
Episode Accountability Model (TEAM).
d. Adoption of Hospital Harm--Postoperative Respiratory Failure eCQM 
Beginning With the CY 2026 Reporting Period/FY 2028 Payment 
Determination
(1) Background
    Postoperative respiratory failure is defined as unplanned 
intubation or prolonged mechanical ventilation (MV) after an 
operation.\610\ It is considered to be the most serious of the 
postoperative respiratory complications because it represents the ``end 
stage'' of several types of pulmonary complications (for example, 
pneumonia, aspiration, pulmonary edema, and acute respiratory distress 
syndrome) and non-pulmonary problems (for example, sepsis, 
oversedation, seizures, stroke, heart failure, pulmonary embolism, and 
fluid overload), and it often results in negative outcomes, including 
prolonged morbidity, longer hospital stays, increased readmissions, 
higher costs, or death.611 612 613 Postoperative respiratory 
failure is potentially preventable with optimal care, such as carefully 
managing intraoperative ventilator use and fluids, reducing surgical 
duration, using regional anesthesia, and preventing wound infection and 
pain.614 615 616 Published data suggest room for 
improvement; a Nationwide Inpatient Sample (NIS) database study of over 
500,000 hospitalizations involving a brain tumor between 2002 and 2010 
found the incidence of postoperative respiratory failure varied by 
hospital characteristics, with higher reported rates of postoperative 
respiratory failure in nonteaching hospitals than teaching hospitals, 
and incidence increased with hospital bed size.\617\
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    \610\ Stocking, J.C., Utter, G.H., Drake, C., Aldrich, J.M., 
Ong, M.K., Amin, A., Marmor, R.A., Godat, L., Cannesson, M., 
Gropper, M.A., & Romano, P.S. (2020). Postoperative Respiratory 
Failure: An Update on the Validity of the Agency for Healthcare 
Research and Quality Patient Safety Indicator 11 in an Era of 
Clinical Documentation Improvement Programs. American Journal of 
Surgery, 220(1), 222-228. https://doi.org/10.1016/j.amjsurg.2019.11.019
    \611\ Sabate S., Mazo V., Canet J. (2014). Predicting 
Postoperative Pulmonary Complications: Implications for Outcomes and 
Costs. Case Reports in Anesthesiology. 27(2), 201-209.
    \612\ Rosen, A.K., Loveland, S., Shin, M., Shwartz, M., 
Hanchate, A., Chen, Q., Kaafarani, H.M., & Borzecki, A. (2013). 
Examining the impact of the AHRQ Patient Safety Indicators (PSIs) on 
the Veterans Health Administration: the case of readmissions. 
Medical Care, 51(1), 37-44.
    \613\ Lawson E.H., Hall B.L., Louie R., et al. (2013). 
Association Between Occurrence of a Postoperative Complication and 
Readmission: Implications for Quality Improvement and Cost Savings. 
Annals of Surgery, 258(1),10-18.
    \614\ Stocking, J.C., Drake, C., Aldrich, J.M., Ong, M.K., Amin, 
A., Marmor, R.A., Godat, L., Cannesson, M., Gropper, M.A., Romano, 
P.S., Sandrock, C., Bime, C., Abraham, I., & Utter, G.H. (2022). 
Outcomes and Risk Factors for Delayed-onset Postoperative 
Respiratory Failure: A Multi-center Case-control Study by the 
University of California Critical Care Research Collaborative 
(UC\3\RC). BMC Anesthesiology, 22(1), 146.
    \615\ Encinosa, W.E., & Hellinger, F.J. (2008). The Impact of 
Medical Errors on Ninety-day Costs and Outcomes: An Examination of 
Surgical Patients. Health Services Research, 43(6), 2067-2085.
    \616\ Zrelak, P.A., Utter, G.H., Sadeghi, B., Cuny, J., Baron, 
R., & Romano, P.S. (2012). Using the Agency for Healthcare Research 
and Quality patient safety indicators for targeting nursing quality 
improvement. Journal of Nursing Care Quality, 27(2), 99-108.
    \617\ Rahman, M., Neal, D., Fargen, K.M., & Hoh, B.L. (2013). 
Establishing Standard Performance Measures for Adult Brain Tumor 
Patients: A Nationwide Inpatient Sample Database Study. Neuro-
oncology, 15(11), 1580-1588.
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    Currently there are no eCQMs that focus specifically on 
postoperative respiratory failure in the inpatient setting in any of 
the hospital quality reporting or value-based purchasing programs. The 
PSI 90 composite measure,\618\ which is currently included in the HAC 
Reduction Program, does include a postoperative respiratory failure 
related component, PSI 11: Postoperative Respiratory Failure Rate; 
however, it is a claims-based measure that uses a two-year performance 
period, it is focused on the Medicare FFS population, and is dependent 
upon ICD-10-CM codes. In the FY 2022 IPPS/LTCH PPS final rule, we 
highlighted our commitment to developing new digital quality measures 
that assess various aspects of patient safety in the inpatient setting 
(87 FR 49181 through 49190). The Hospital Harm--Postoperative 
Respiratory Failure eCQM provides the opportunity to assess the rate of 
postoperative respiratory failure in a much larger patient population 
and use more timely information from patients' electronic medical 
records instead of administrative claims data.
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    \618\ PSI 90 Technical Specification can be found here: https://qualitynet.cms.gov/inpatient/measures/psi/resources.
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(2) Overview of Measure
    The Hospital Harm--Postoperative Respiratory Failure measure is a 
risk-adjusted outcome eCQM. The denominator is elective inpatient 
hospitalizations that end during the measurement period for patients 18 
years old and older without an obstetrical condition and at least one 
surgical procedure was performed within the first three days of the 
encounter. The numerator is elective inpatient hospitalizations for 
patients with postoperative respiratory failure: For more detail on how 
postoperative respiratory failure is determined we refer readers to the 
measure specifications at the eCQI Resource

[[Page 69541]]

Center (https://ecqi.healthit.gov/eh-cah).
    The baseline risk-adjustment model accounts for ten comorbidities 
present on admission (weight loss, deficiency anemias, heart failure, 
diabetes with chronic complications, moderate to severe liver disease, 
peripheral vascular disease, pulmonary circulation disease, valvular 
disease, American Society of Anesthesiologists categories 3 through 5) 
and lab values for oxygen (partial pressure), leukocytes, albumin, 
blood urea nitrogen, bilirubin, and pH of arterial blood.\619\ The 
risk-adjustment ensures that hospitals that care for sicker and more 
complex patients are evaluated fairly.\620\ We refer readers to the 
eCQI Resource Center (https://ecqi.healthit.gov/eh-cah) for more 
details on the measure specifications and risk-adjustment methodology.
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    \619\ Battelle--Partnership for Quality Measurement. Hospital 
Harm--Postoperative Respiratory Failure. Available at: https://p4qm.org/measures/4130e.
    \620\ Ibid.
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(3) Measure Alignment to Strategy
    This measure aligns with several goals under the CMS National 
Quality Strategy in addition to supporting our re-commitment to better 
patient and healthcare worker safety.\621\ The COVID-19 public health 
emergency (PHE) highlighted the need to address gaps in safety by 
putting significant strain on hospitals and health systems which, in 
turn, negatively impacted patient safety. Adopting the Hospital Harm--
Postoperative Respiratory Failure measure is one of several initial 
actions we are taking in response to the President's Council of 
Advisors on Science and Technology (PCAST), call to action to renew 
``our nation's commitment to improving patient safety.'' \622\ By 
establishing additional safety indicators, such as this measure, we are 
building a stronger, more resilient U.S. healthcare system. We refer 
readers to section IX.B.1. for more details on other efforts toward 
better patient and healthcare workers safety practices and the proposed 
Patient Safety Structural measure into the Hospital IQR Program and the 
PCHQR Program.
---------------------------------------------------------------------------

    \621\ CMS National Quality Strategy. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
    \622\ President's Council of Advisors on Science and Technology. 
(2023). Report to the President: A Transformational Effort on 
Patient Safety. https://www.whitehouse.gov/wp-content/uploads/2023/09/PCAST_Patient-Safety-Report_Sept2023.pdf.
---------------------------------------------------------------------------

    In alignment with the CMS National Quality Strategy \623\ this 
measure supports the ``Safety and Resiliency'' goal to achieve zero 
preventable harm, the ``Equity and Engagement'' goal to ensure that all 
individuals have the information needed to make the best choices and 
complements the HHS National Action Alliance to Advance Patient Safety. 
By providing hospitals the opportunity to assess postoperative 
respiratory failure rates in a much larger patient population (all-
payer) compared to current measures such as PSI 11 (limited to Medicare 
FFS), this measure expands the available safety indicator data within 
CMS programs and promotes equitable care for all. Second, this measure 
supports the ``Outcomes and Alignment'' goals to improve quality and 
health outcomes by providing hospitals a mechanism to track their 
postoperative respiratory failure incidents and improve harm reduction 
efforts over time, a key patient safety metric across the care journey. 
Third, this measure supports CMS' Interoperability goal to improve 
quality measure efficiency by transitioning to digital measures in CMS 
quality reporting programs. As an eCQM, this measure increases the 
digital measure footprint and can also serve as a potential replacement 
for the claims-based PSI 11 measure (reported within the PSI-90 
composite) in the future.
---------------------------------------------------------------------------

    \623\ CMS National Quality Strategy. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
---------------------------------------------------------------------------

(4) Pre-rulemaking Process and Measure Endorsement
(a) Recommendation From the PRMR Process
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this final rule for details on the PRMR process 
including the voting used to reach consensus on measure 
recommendations. The PRMR Hospital Committee met on January 18-19, 
2024, to review measures included by the Secretary on a publicly 
available ``2023 Measures Under Consideration List'' (MUC 
List),624 625 including the Hospital Harm--Postoperative 
Respiratory Failure measure (MUC2023-050), and to vote on a 
recommendation for rulemaking for the Hospital IQR Program.
---------------------------------------------------------------------------

    \624\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \625\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
---------------------------------------------------------------------------

    The committee reached consensus and recommended including this 
measure in the Hospital IQR Program with conditions. Twelve members of 
the group voted to adopt the measure into the Hospital IQR Program 
without conditions; five members voted to adopt with conditions; two 
committee members voted not to recommend the measure for adoption. 
Taken together, 89.5 percent of the votes were between recommend and 
recommend with conditions. The five members who voted to adopt with 
conditions specified the condition as monitoring unintended 
consequences, such as avoidance of life-saving procedures with higher 
risk for respiratory failure. We agree that the potential for 
unintended consequences exists and note that we consistently monitor 
all the measures in the Hospital IQR Program for unintended 
consequences. Furthermore, we note that under our previously finalized 
measure removal policy, codified at 42 CFR 412.140(g)(2) and (3) (88 FR 
59144), if we were to identify unintended consequences related to this 
measure, we would consider it for removal. Furthermore, the measure 
logic allows for the use of mechanical ventilation or intubation or 
extubation documentation outside of a procedural area to trigger a 
postoperative respiratory event, thus expanding opportunities for 
electronic capture of information and accommodating varying clinical 
documentation workflows.
(b) Measure Endorsement
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this final rule for details on the E&M process 
including the measure evaluation procedures the E&M Committees uses to 
evaluate measures and whether they meet endorsement criteria. The E&M 
Management of Acute and Chronic Events Committee convened in the Fall 
2023 cycle to review the Hospital Harm--Postoperative Respiratory 
Failure measure (CBE #4130e) submitted to the CBE for endorsement.\626\ 
The E&M Management of Acute and Chronic Events Committee ultimately 
voted to endorse the measure on January 29, 2024.\627\
---------------------------------------------------------------------------

    \626\ Battelle--Partnership for Quality Measurement. Hospital 
Harm--Postoperative Respiratory Failure. Available at: https://p4qm.org/measures/4130e.
    \627\ Battelle--Partnership for Quality Measurement. Fall 2023 
Management of Acute and Chronic Events Meeting Summary. Available 
at: https://p4qm.org/sites/default/files/Management%20of%20Acute%20Events%2C%20Chronic%20Disease%2C%20Surgery%2C%20and%20Behavioral%20Health/material/EM-Acute-Chronic-Events-Fall2023-Endorsement-Meeting-Summary.pdf.

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[[Page 69542]]

(5) Measure Calculation
    Postoperative respiratory failure is evaluated using MV 
documentation, intubation or extubation documentation to determine if 
an unplanned initiation of MV occurred or if MV was continued without 
interruption after a procedure.
    The following calculation is applied to report the overall 
performance rate: [Number of encounters in numerator/(Number of 
encounters in denominator--Number of encounters in denominator 
exclusions)] x 1,000. All data elements necessary to calculate the 
numerator and denominator are defined within value sets available in 
the VSAC.\628\
---------------------------------------------------------------------------

    \628\ To access the value sets for the measure, please visit the 
Value Set Authority Center (VSAC), sponsored by the National Library 
of Medicine, at https://vsac.nlm.nih.gov/.
---------------------------------------------------------------------------

    The measure was tested in 12 hospitals (test sites) with two 
different EHR vendors (Epic and Cerner) with varying bed size, 
geographic location, and teaching status. Risk-adjusted rates showed 
substantial variation in performance scores across the 12 test 
hospitals.\629\ Test results indicated high measure reliability and 
validity (including agreement between data exported from the EHR and 
data in the patient chart).\630\
---------------------------------------------------------------------------

    \629\ Battelle--Partnership for Quality Measurement. Hospital 
Harm--Postoperative Respiratory Failure. Available at: https://p4qm.org/measures/4130e.
    \630\ Ibid.
---------------------------------------------------------------------------

(6) Data Submission and Reporting
    This eCQM uses data collected through hospitals' EHRs. The measure 
is designed to be calculated by the hospitals' CEHRT using patient-
level data and then submitted by hospitals to CMS. As with all quality 
measures we develop, testing was performed to confirm the feasibility 
of the measure, data elements, and validity of the numerator, using 
clinical adjudicators who validated the EHR data compared with medical 
chart-abstracted data. Testing demonstrated that all critical data 
elements were reliably and consistently captured in patient EHRs, and 
measure implementation is feasible.
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36306 through 
36341), we proposed the adoption of the Hospital Harm--Postoperative 
Respiratory Failure eCQM as part of the eCQM measure set beginning with 
the CY 2026 reporting period/FY 2028 payment determination. The eCQM 
measure set is the measure set from which hospitals can self-select 
measures to report to meet the eCQM reporting requirement. We refer 
readers to section IX.C.9.c. of this final rule for a discussion of our 
previously finalized eCQM reporting and submission policies, as well as 
modifications for these requirements. Additionally, we refer readers to 
section IX.F.6.a.(2). of the preamble of this final rule for a 
discussion of a similar measure adoption in the Medicare Promoting 
Interoperability Program.
    We invited public comment on our proposal to adopt the Hospital 
Harm--Postoperative Respiratory Failure eCQM beginning with the CY 2026 
reporting period/FY 2028 payment determination.
    Comment: Many commenters supported our proposal to adopt the 
Hospital Harm--Postoperative Respiratory Failure eCQM. Specifically, 
commenters noted that the measure represents an important measurement 
area, would promote patient safety, provide more timely information 
than claims data, and advance the use of eCQMs. A commenter also noted 
that the timeline was consistent with the amount of time that the 
industry needs to implement the measure.
    Response: We thank the commenters for their support.
    Comment: A commenter supported the adoption of the Hospital Harm--
Postoperative Respiratory Failure eCQM to encourage hospital prevention 
efforts while minimizing hospital reporting burdens and agreed that 
postoperative respiratory failure is ``the most serious of the 
postoperative respiratory complications,'' representing the end-stage 
of certain pulmonary complications (for example, pneumonia) and non-
pulmonary problems (for example, sepsis). The commenter encouraged CMS 
to increase focus on preventing non-ventilator hospital-acquired 
pneumonia, which the commenter stated is a common, costly, and largely 
avoidable problem that is often unrecognized in hospitals.
    Response: We thank the commenter for their support and will take 
their recommendation into consideration for future rulemaking as 
appropriate.
    Comment: A commenter supported the measure but recommended that CMS 
consider expanding the exclusion criteria to include patients who are 
placed on mechanical ventilation for airway protection rather than 
respiratory failure. The commenter stated that examples of this 
population would include patients who experience a seizure or a 
cardiopulmonary event and require resuscitative measures and mechanical 
ventilatory support. Another commenter was also concerned that it may 
be inappropriate to consider any reintubation or mechanical ventilation 
after a procedure to be a postoperative respiratory failure, especially 
if the patient is recovering well or if the event occurs several days 
after the procedure.
    Response: We thank the commenters for their feedback regarding the 
expansion of the denominator exclusion criteria. Regarding the 
appropriateness of considering any reintubation or mechanical 
ventilation after a procedure to be a postoperative respiratory 
failure, we note that high-quality, routine post-operative medical care 
and monitoring, including among patients who are stable or doing well 
several days after surgical procedures, should reduce the incidence of 
postoperative respiratory failure requiring reintubation and/or 
mechanical ventilation.\631\ While we recognize that there will always 
be rare, unavoidable emergencies that require reintubation or 
mechanical ventilation, high quality post-operative nursing and medical 
care can typically catch the preventable problems that could lead to 
these situations. We will consider the recommendation to include 
patients placed on mechanical ventilation for airway protection and 
investigate the possibility of eliciting the nuances of intubation for 
airway protection versus intubation for respiratory failure from EHR 
data and existing codes for future measure updates.
---------------------------------------------------------------------------

    \631\ Ruscic KJ, Grabitz SD, Rudolph MI, Eikermann M. Prevention 
of respiratory complications of the surgical patient: actionable 
plan for continued process improvement. Curr Opin Anaesthesiol. 2017 
Jun;30(3):399-408.
---------------------------------------------------------------------------

    Comment: A commenter supported adoption of the Hospital Harm--
Postoperative Respiratory Failure eCQM in the Hospital IQR Program and 
encouraged the measure developer to consider including non-elective 
hospitalizations with appropriate risk stratifications and denominator 
exclusions to further improve postoperative respiratory failure 
monitoring.
    Response: We thank the commenters for their feedback regarding the 
expansion of the denominator criteria to include non-elective 
hospitalizations. We will consider this expansion for future updates to 
the eCQM. The measure currently focuses on elective hospitalizations as 
postoperative respiratory failure may be more avoidable after elective 
procedures, which tend to be more clinically homogenous. Postoperative 
respiratory failure is generally considered a significant marker for 
complications after elective surgeries.
    Comment: A commenter supported the adoption of the measures but 
encouraged CMS to consider the workflow and education impact of new 
measures and to align adoption and

[[Page 69543]]

attestation timelines accordingly. Another commenter had concerns with 
the proposals to adopt new eCQMs and recommended adopting only one new 
eCQM per reporting period due to the burdensome process for building, 
tracking, and implementing new eCQMs.
    Response: We carefully consider the benefit of adopting new 
measures in relation to any burden on hospitals. The program's shift 
toward digital measures would ultimately decrease the burden for 
hospitals because eCQMs use electronic standards, which help reduce the 
burden of manual abstraction and reporting for measured entities. We 
additionally note that the hospitals would initially have the option to 
self-select whether to report this eCQM to meet the eCQM reporting 
requirement for the Hospital IQR Program, providing flexibility for 
those hospitals that may need more time to implement this measure 
before being able to report it.
    Comment: A few hospitals raised concerns about how hospitals 
capture the data used in the measure and how that data would be mapped 
to an eCQM. A commenter stated that hospital staff may write post-
operative respiratory failure when the condition is due to an 
underlying condition and not related to the surgery. Another commenter 
stated that the relevant terminology is not well understood by 
physicians and is frequently documented incorrectly. Another commenter 
stated that the measure relies on procedure timing and stated that 
timestamps on measure components can complicate measure accuracy. The 
commenter stated that timestamps are metadata about an event and are 
not as easily mapped to eCQM logic as the event itself. A few 
commenters stated that the pre-rulemaking review of this measure raised 
concerns about variations in the capture of data by EHR vendors and 
that, as a result, clinicians may be using structured fields 
differently to input data, and documentation may not be captured in a 
standardized manner. The commenters stated that this could lead to 
measure performance being more dependent on the sensitivity of the 
screening technologies and approaches used than on underlying 
performance. A commenter said that it was important that CMS first 
align the data capture across a variety of vendors to allow ample time 
for hospitals to evaluate their EHR capabilities. A commenter stated 
that hospitals may require additional guidance to capture anesthesia 
data elements, stating that operating room documentation frequently 
uses notes or scanned paper records. That commenter stated that, as a 
result, anesthesia data are not always documented in a structured field 
or system that is interoperable with the certified EHR used for measure 
reporting.
    Response: Feasibility testing was performed at 13 hospitals across 
three different EHR systems, and reliability and validity testing was 
performed at 12 hospitals across two different EHR systems.\632\ This 
testing sample exceeds minimum testing requirements for an eCQM.\633\ 
Feasibility testing results indicated that all the hospital sites 
confirmed that the data elements used in the measure are captured 
within the EHR in a structured and codified manner using nationally 
accepted terminology standards or local system codes that could be 
easily mapped.\634\ Testing results found that while mechanical 
ventilation was captured in structured fields at all sites, 
documentation was not standardized. To account for differences in 
documentation workflows related to mechanical ventilation, the measure 
also accommodates the use of intubation and extubation outside of a 
procedural area to trigger a postoperative respiratory event. 
Additionally, during the 2022 call for public comment on this measure, 
feedback from interested parties noted that required data elements for 
the measure are routinely captured in structured data.
---------------------------------------------------------------------------

    \632\ One of the 13 hospitals did not always use their 
structured fields to capture mechanical ventilation. For this 
reason, the site opted to not proceed with reliability and validity 
phases of testing.
    \633\ For more details, see Partnership for Quality Measurement. 
Endorsement and Maintenance (E&M) Guidebook. (2023). Available at: 
https://p4qm.org/sites/default/files/2023-12/Del-3-6-Endorsement-and-Maintenance-Guidebook-Final_0_0.pdf.
    \634\ Battelle--Partnership for Quality Measurement. (2024). 
Hospital Harm--Postoperative Respiratory Failure. Available at: 
https://p4qm.org/measures/4130e.
---------------------------------------------------------------------------

    Validity testing results evaluated electronic clinical data 
compared to manually extracted data. The results indicate that in 89.6 
percent of the cases where the patient was identified as experiencing 
the harm using EHR data, the result was confirmed using the manually 
extracted data. These results are an acceptable level of validity for 
measure testing and indicate that most hospitals would have the data 
available to calculate the measure in structured fields in their EHR. 
Further, we are proposing to implement the measure beginning with the 
CY 2026 reporting period, which would provide time for hospitals to 
review their workflows and make documentation updates if needed.
    We acknowledge that certain underlying conditions place some 
patients at a higher risk of respiratory failure following a surgical 
procedure. To account for this, the measure excludes inpatient 
hospitalizations for patients with select underlying conditions and 
diagnoses that may increase their risk for postoperative respiratory 
failure. These exclusions, the full list of which can be found in the 
measure specification published on the eCQI Resource Center, were 
informed by clinical input received by the measure's technical expert 
panel and the 2022 public comment period for the measure.
    To account for any ambiguity in defining postoperative respiratory 
failure, the measure's numerator includes explicit conditions that must 
be met for an event to be considered postoperative respiratory failure. 
These conditions were also informed by clinical input received by the 
measure's technical expert panel and the 2022 public comment period for 
the measure. Specifically, to meet the measure's numerator criteria, 
patients must have experienced (1) the initiation of mechanical 
ventilation within 30 days after the first operating room procedure, or 
(2) mechanical ventilation with a duration of more than 48 hours after 
the first operating room procedure. To account for differences in 
documentation workflows related to mechanical ventilation, the measure 
accommodates the use of intubation and extubation outside of a 
procedural area to trigger a postoperative respiratory event.
    Regarding the commenter's concern related to reliance on procedure 
timing, eCQMs are updated during the eCQM annual update cycle to modify 
or improve the measure's logic expressions, value sets, and code 
systems, as necessary. In future updates to the eCQM, we will consider 
whether consolidation of this measure's timing elements into 
definitions, where appropriate, would improve the measure's accuracy by 
simplifying the measure's logic and making the relationships of these 
timing elements more evident. Feasibility testing results for the 
``Procedure, Performed'': ``General and Neuraxial Anesthesia'' data 
element showed 100% scores in data availability, accuracy, standards 
and in workflow. These results suggest that anesthesia data is 
typically documented in a structured field and can be accurately 
captured for the purpose of measure reporting.
    Comment: Several commenters suggested that CMS carefully examine 
the potential for unintended consequences, such as inappropriate use

[[Page 69544]]

of noninvasive positive pressure ventilation in lieu of mechanical 
respiration, excessive use of preventive tracheostomy, or avoidance of 
offering necessary procedures for high-risk patients. A commenter 
stated that CMS should address these issues before adopting this 
measure to ensure that the measure effectively enhances patient safety 
without unintended drawbacks.
    Response: We agree that the potential for unintended consequences 
exists, although none were identified during the measure development 
and testing process. The intent of this measure is not to dictate 
clinical practice. Rather, it is to assist healthcare providers in 
highlighting, tracking, and responding to clinical quality improvement 
opportunities and to focus on prevention of patient harm. CMS expects 
hospitals to continue providing appropriate life-saving interventions 
based on sound clinical judgments. However, we note that we 
consistently monitor all the measures in the Hospital IQR Program for 
unintended consequences. Under our previously finalized measure removal 
policies, codified at 42 CFR 412.140(g)(2) and (3) (88 FR 59144), we 
could consider this measure for removal if we were to identify 
unintended consequences related to implementation of this measure.
    Comment: Several commenters raised concerns that the Hospital 
Harm--Postoperative Respiratory Failure eCQM was duplicative of the PSI 
11 component of the PSI 90 measure. A few commenters stated that CMS 
should consider the potential burden of overlapping measures and 
consider retiring PSI 90 in the future or allowing hospitals a choice 
of reporting method. A few commenters stated that if the Hospital 
Harm--Postoperative Respiratory Failure eCQM is adopted, CMS should 
outline a clear timeline for elimination of duplicative PSI measures. A 
commenter stated that the measure was similar to CMS PSI 11, and that 
they would not want two measures that are too similar but that CMS 
should not adopt the eCQM in order to replace CMS PSI 90, stating that 
CMS should not replace a claims-based measure with an eCQM since that 
shifts the burden to the hospital to build, map, and report the eCQM 
rather than it being based on claims.
    Response: As we discussed in the FY 2025 IPPS/LTCH PPS proposed 
rule (89 FR 36306 through 36341) and in this final rule, while the CMS 
PSI 90 measure in the HAC Reduction Program includes a postoperative 
respiratory failure related component (PSI 11), it is a claims-based 
measure that uses a two-year performance period, it is focused on the 
Medicare FFS population, and is dependent upon ICD-10-CM codes. In the 
FY 2022 IPPS/LTCH PPS final rule, we highlighted our commitment to 
developing new digital quality measures that assess various aspects of 
patient safety in the inpatient setting (87 FR 49181 through 49190). 
The Hospital Harm--Postoperative Respiratory Failure eCQM provides the 
opportunity to assess the rate of postoperative respiratory failure in 
a much larger patient population and use more timely information from 
patients' electronic medical records instead of administrative claims 
data. The eCQM logic also allows for the use of mechanical ventilation, 
intubation, or extubation documentation outside of a procedural area to 
trigger a postoperative respiratory event, thus expanding opportunities 
for the electronic capture of information and accommodating varying 
clinical documentation workflows. In addition to these three 
measurement improvements, the development and implementation of the 
Hospital Harm--Postoperative Respiratory Failure eCQM aligns with CMS's 
commitment to moving to digital quality measures as highlighted in the 
FY 2022 IPPS/LTCH PPS final rule (87 FR 49181 through 49190). We note 
that we did not propose to remove the CMS PSI 90 measure from the HAC 
Reduction Program, while hospitals gain experience with the Hospital 
Harm--Postoperative Respiratory Failure eCQM.
    Comment: A few commenters raised concerns about the testing of the 
measure. A commenter encouraged CMS to assess the feasibility of 
collecting the required data elements from EHRs and determine if the 
measure is reliable and valid across a broader set of EHRs vendors and 
hospitals. The commenter stated that assessment of how the measure 
performs using only three vendor systems and 13 hospitals is 
insufficient to generalize the measure's suitability to a broader 
population of facilities. A few commenters expressed concerns that the 
measure was tested only in teaching hospitals and thought that raised 
questions about the feasibility of implementation for all hospital 
types.
    Response: We thank the commenters for their feedback and note that 
eCQM development must rely on a sample of hospitals. To guide and 
evaluate measure development and testing, CMS has developed the 
Measures Management System (MMS) Hub, and we consult the CBE's E&M 
criteria. The MMS Blueprint and the CBE suggest that the minimum 
requirement for eCQM testing to test for feasibility of collecting the 
required data points and to determine if the measure is reliable and 
valid is to perform testing in at least three testing sites and within 
two EHR systems.635 636 The testing for the Hospital Harm--
Postoperative Respiratory Failure eCQM exceeds these requirements. 
Specifically, feasibility testing was performed at 13 hospitals across 
three different EHR systems, and reliability and validity testing was 
performed at 12 hospitals across two different EHR systems.\637\ These 
hospital sites represent a diversity of hospital characteristics, 
including teaching status, size, electronic health record (EHR) vendor, 
and geographic location. In terms of teaching status, two hospitals 
were non-teaching hospitals, five were major teaching hospitals, and 
six were community teaching hospitals. In terms of size, four hospitals 
had between 100-199 beds, five hospitals had between 200-499 beds, and 
four hospitals had >499 beds. In terms of EHR systems, the hospitals 
used three different EHR vendors, combined these three vendors are used 
in more than two-thirds of acute care hospitals in the United 
States.\638\ Finally, in terms of geographic locations, hospitals were 
headquartered in the Southeast, Northeast, and Western parts of the 
United States.
---------------------------------------------------------------------------

    \635\ Centers for Medicare & Medicaid. Measures Management 
System Hub. Available at: https://mmshub.cms.gov.
    \636\ Partnership for Quality Measurement. Endorsement and 
Maintenance (E&M) Guidebook. (2023). Available at: https://p4qm.org/sites/default/files/2023-12/Del-3-6-Endorsement-and-Maintenance-Guidebook-Final_0_0.pdf.
    \637\ One of the 13 hospitals did not always use their 
structured fields to capture mechanical ventilation. For this 
reason, the site opted to not proceed with reliability and validity 
phases of testing.
    \638\ Becker's Hospital Review. Epic vs. Cerner: EHR Market 
Share. Available at: https://www.beckershospitalreview.com/ehrs/epic-vs-cerner-ehr-market-share.html?oly_enc_id=3703D1456278B3W.
---------------------------------------------------------------------------

    Comment: A commenter asked for a delay in required reporting on the 
Hospital Harm--Postoperative Respiratory Failure eCQM.
    Response: Currently, as finalized in the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49299 through 49302), hospitals must report on six 
total eCQMs beginning with the CY 2024 reporting period and subsequent 
years. Hospitals must report the following three eCQMs: (1) Hospital 
Harm--Severe Hypoglycemia eCQM; (2) Hospital Harm--Severe Hyperglycemia 
eCQM; and (3) Hospital Harm--Opioid-Related Adverse Events eCQM. 
Hospitals must also report three additional eCQMs that are self-
selected from the list of

[[Page 69545]]

remaining eCQMs. We reiterate this measure would be included as one of 
the eCQMs hospitals have the option to self-select for reporting 
beginning with the CY 2026 reporting period/FY 2028 payment 
determination. In section IX.C.9.c., we are finalizing our proposal to 
progressively increase the number of eCQMs a hospital must report 
beginning with the CY 2026 reporting period/FY 2028 payment 
determination, however, the Hospital Harm--Postoperative Respiratory 
Failure would remain a measure that hospitals can self-select to 
report. Future changes to the eCQM reporting requirements, including 
any additional eCQMs for mandatory reporting, would go through notice-
and-comment rulemaking.
    Comment: A commenter stated that the measure specification includes 
imprecise and repetitive data elements and timing expressions that 
would result in unnecessary administrative burden for EHR vendors, 
hospitals, and CMS' data receipt system, including the IntubationTime, 
MVTime, FirstProcedureTime, and GATime definitions. Another commenter 
requested that CMS share more details about the proposed Hospital 
Harm--Postoperative Respiratory Failure eCQM, noting that previous eCQM 
implementations have had issues with their logic and code sets.
    Response: We thank the commenters for their feedback regarding the 
measure's data elements. We refer readers to the eCQI Resource Center 
(https://ecqi.healthit.gov) for more information about the measure's 
logic and code sets and definitions. The guidance section of the 
measure specification notes that post respiratory failure is evaluated 
using mechanical ventilation (MV) documentation or intubation and 
extubation documentation to allow for hospital documentation variances. 
Therefore, if MV documentation is not available, intubation and 
extubation can serve as a proxy for determining if MV occurred and its 
duration. During future measure development cycles, we will review the 
data elements included in this measure for specific sets of data 
(MVTime, AnesthesiaTime, FirstProcedureTime, etc.) and continue to 
identify opportunities to establish functions or definitions that 
generalize a number of the common patterns.
    Additionally, eCQMs are updated during the eCQM annual update cycle 
to modify or improve the measure's logic expressions, value sets, and 
code systems, as necessary. Vendors and implementers have several 
opportunities throughout the year to provide input on potential measure 
changes. At any time during the year, implementers can submit specific 
measure questions through the eCQM Issue Tracker.\639\ Common issues or 
questions received through the eCQM Issue Tracker are taken into 
consideration during the eCQM annual update process. Vendors and 
implementers are also able to preview and provide feedback on specific 
measure changes that are being considered each year during the annual 
update cycle's vendor and implementer review period, via the eCQM Issue 
Tracker. To receive updates about the vendor and implementer review 
period, users may create an account with the eCQI Resource Center.
---------------------------------------------------------------------------

    \639\ https://oncprojectracking.healthit.gov/olp/.
---------------------------------------------------------------------------

    Comment: A commenter expressed concerns regarding the expansion of 
eCQMs in hospital and ambulatory quality reporting programs. The 
commenter stated that the introduction of new eCQMs is shortsighted, 
burdensome, and fails to recognize the impending effort to shift toward 
digital quality measures (dQMs). The commenter stated that new eCQMs 
should not be required as part of quality reporting or pay-for-
performance programs but that rather, CMS should invest efforts towards 
the future development of dQMs.
    Response: We agree with the commenter in prioritizing investment in 
dQMs for quality measurement in order to improve accuracy, improve the 
timeliness of the information, and to reduce reporting burden. We note 
the definition of dQM that we have published as part of strategic 
materials on the eCQI Resource Center states that in general, eCQMs are 
a subset of dQMs. This definition states that dQMs are ``quality 
measures that use standardized, digital data from one or more sources 
of health information that are captured and exchanged via interoperable 
systems; apply quality measure specifications that are standards-based 
and use code packages; and are computable in an integrated environment 
without additional effort.'' This definition of a dQM is available on 
the eCQI Resource Center at: https://ecqi.healthit.gov/dqm?qt-tabs_dqm=about-dqms.
    After consideration of the public comments we received, we are 
finalizing our proposal of the Hospital Harm--Postoperative Respiratory 
Failure eCQM as proposed beginning with the CY 2026 reporting period/FY 
2028 payment determination. We refer readers to section IX.F.6.a.(2). 
of the preamble of this final rule for a discussion of the adoption of 
this measure in the Medicare Promoting Interoperability Program. We 
also refer readers to section XXXX of the preamble of this final rule 
where we discuss the use of this measure in the Transforming Episode 
Accountability Model (TEAM).
e. Adoption of Thirty-day Risk-Standardized Death Rate Among Surgical 
Inpatients With Complications (Failure-to-Rescue) Measure Beginning 
With the FY 2027 Payment Determination
(1) Background
    Failure-to-rescue is defined as the probability of death given a 
postoperative complication.640 641 642 Hospitals can 
implement evidence-supported interventions to improve timely 
identification of clinical deterioration and treatment of potentially 
preventable complications, including improved nurse staffing, 
simulation training, standardized communication tools, electronic 
monitoring and/or warning systems, and rapid response 
systems.643 644 645 646 647 648 Studies also

[[Page 69546]]

show that other processes of care can influence failure-to-rescue 
rates, including a hospital's aggressiveness of care (defined as the 
level of resources or inpatient spending), with hospitals that treat 
patients more aggressively (such as providing more inpatient days or 
ICU days in the last 2 years of life) having lower surgical mortality 
and failure-to-rescue rates than otherwise similar hospitals that treat 
patients less aggressively.649 650 Hospitals and healthcare 
providers benefit from knowing not only their institution's mortality 
rate, but also their institution's ability to rescue patients after an 
adverse occurrence. Using a failure-to-rescue measure is especially 
important if hospital resources needed for preventing complications are 
different from those needed for rescue.
---------------------------------------------------------------------------

    \640\ Silber JH, Williams SV, Krakauer H, Schwartz JS. Hospital 
and patient characteristics associated with death after surgery. A 
study of adverse occurrence and failure to rescue. Med Care. 1992 
Jul;30(7):615-29. doi: 10.1097/00005650-199207000-00004.
    \641\ Needleman J, Buerhaus P, Mattke S, Stewart M, Zelevinsky 
K. Nurse-staffing levels and the quality of care in hospitals. N 
Engl J Med. 2002 May 30;346(22):1715-22. doi: 10.1056/NEJMsa012247.
    \642\ Portuondo JI, Shah SR, Singh H, Massarweh NN. Failure to 
Rescue as a Surgical Quality Indicator: Current Concepts and Future 
Directions for Improving Surgical Outcomes. Anesthesiology. 2019 
Aug;131(2):426-437. doi: 10.1097/ALN.0000000000002602.
    \643\ Silber, J. H., Rosenbaum, P. R., Ross, R. (1995). 
Comparing the Contributions of Groups of Predictors: Which Outcomes 
Vary with Hospital Rather than Patient Characteristics? Journal of 
the American Statistical Association, 90(429), 7-18. https://doi.org/10.2307/2291124.
    \644\ Liao, L. M., Sun, X. Y., Yu, H., & Li, J. W. (2016). The 
Association of Nurse Educational Preparation and Patient Outcomes: 
Systematic Review and Meta-Analysis. Nurse Education Today, 42, 9-
16. https://doi.org/10.1016/j.nedt.2016.03.029.
    \645\ Burke, J. R., Downey, C., & Almoudaris, A. M. (2022). 
Failure to Rescue Deteriorating Patients: A Systematic Review of 
Root Causes and Improvement Strategies. Journal of Patient Safety, 
18(1), e140-e155. https://doi.org/10.1097/PTS.0000000000000720.
    \646\ Hall K.K., Lim A., Gale B. (2020). Failure To Rescue. In: 
Hall, K. K., Shoemaker-Hunt, S., Hoffman, et al. Making Healthcare 
Safer III: A Critical Analysis of Existing and Emerging Patient 
Safety Practices. Agency for Healthcare Research and Quality (US).
    \647\ Hall K.K., Lim A., Gale B. (2020). The Use of Rapid 
Response Teams to Reduce Failure to Rescue Events: A Systematic 
Review. Journal of Patient Safety.16(3S Suppl 1):S3-S7.
    \648\ Johnston, M. J., Arora, S., King, D., Bouras, G., 
Almoudaris, A. M., Davis, R., & Darzi, A. (2015). A Systematic 
Review to Identify the Factors that Affect Failure to Rescue and 
Escalation of Care in Surgery. Surgery, 157(4), 752-763. https://doi.org/10.1016/j.surg.2014.10.017.
    \649\ Kaestner, R., & Silber, J. H. (2010). Evidence on the 
Efficacy of Inpatient Spending on Medicare Patients. The Milbank 
Quarterly, 88(4), 560-594.
    \650\ Silber, J. H., Kaestner, R., Even-Shoshan, O., Wang, Y., & 
Bressler, L. J. (2010). Aggressive Treatment Style and Surgical 
Outcomes. Health Services Research, 45(6 Pt 2), 1872-1892.
---------------------------------------------------------------------------

    This Failure-to-Rescue measure was designed to improve upon the CMS 
Patient Safety Indicator 04 Death Rate Among Surgical Inpatients with 
Serious Treatable Complications (CMS PSI 04) measure in the Hospital 
IQR Program. We refer readers to section IX.C.6.a. for our proposal to 
remove the CMS PSI 04 measure contingent upon the adoption of the 
Failure-to-Rescue measure. Both the Failure-to-Rescue measure and the 
CMS PSI 04 measure focus on hospitals' ability to rescue patients who 
experience clinically significant complications after inpatient 
operations, so that these complications do not result in death. Both 
measures are sensitive to factors such as appropriate nurse staffing 
and nursing skill-mix, which enable hospitals to identify complications 
earlier and intervene effectively to prevent death.
    The Failure-to-Rescue measure directly addresses concerns about the 
CMS PSI 04 measure, including:
     Complications sometimes develop before the index operation 
in CMS PSI 04, even before transferring to the index hospital. For 
example, the operation is part of an effort to ``rescue'' the patient.
     The heterogeneous cohort includes patients with very high-
risk surgery (for example, trauma surgery, burn surgery, organ 
transplants, intracranial hemorrhage) and very low-risk surgery (for 
example, eye, ear, urolithiasis).
     Mean length of stay and prevalence of early discharge to 
post-acute facilities vary across hospitals, causing bias in comparing 
performance.
     CMS PSI 04 may slightly disadvantage teaching hospitals, 
even after risk-adjustment, due to residual confounding from unmeasured 
case-mix differences.
    The Failure-to-Rescue measure has four major differences compared 
to CMS PSI 04:
    1. Captures all deaths of denominator-eligible patients within 30 
days of the first qualifying operating room procedure, regardless of 
site.
    2. Limits the denominator to patients in general surgical, 
vascular, and orthopedic Medicare Severity Diagnosis Related Groups 
(MS-DRGs).
    3. Excludes patients whose relevant complications preceded (rather 
than followed) their first inpatient operating room procedure, while 
broadening the definition of denominator-triggering complications to 
include other complications that may predispose to death (for example, 
pyelonephritis, osteomyelitis, acute myocardial infarction, stroke, 
acute renal failure, heart failure/volume overload).
    4. Measure cohort includes Medicare Advantage patients.
    We proposed to adopt the Failure-to-Rescue measure beginning with 
the performance period of July 1, 2023--June 30, 2025, affecting the FY 
2027 payment determination.
(2) Overview of Measure
    The Failure-to-Rescue measure is a risk-standardized measure of 
death after hospital-acquired complication. The measure denominator 
includes patients 18 years old and older admitted for certain 
procedures in the General Surgery, Orthopedic, or Cardiovascular 
Medicare Severity Diagnosis Related Groups (MS-DRGs) who were enrolled 
in the Medicare program and had a documented complication that was not 
present on admission. The measure numerator includes patients who died 
within 30 days from the date of their first ``operating room'' 
procedure, regardless of site of death.
    We refer readers to CMS' QualityNet website: https://qualitynet.cms.gov/inpatient/iqr/proposedmeasures#tab2 (or other 
successor CMS designated websites) for more details on the measure 
specifications.
(3) Measure Alignment to Strategy
    The Failure-to-Rescue measure aligns with several goals under the 
CMS National Quality Strategy.\651\ In alignment with the goal to 
``Promote Alignment'' and ``Improved Health Outcomes,'' this outcome-
based measure would allow hospitals to track their institution's 
ability to rescue patients after an adverse occurrence and encourage 
hospitals to focus on early identification and rapid treatment of 
complications, thereby improving the overall quality of care and health 
outcomes of patients in the inpatient setting. In alignment with the 
goal to ``Ensure Safe and Resilient Health Care Systems,'' the Failure-
to-Rescue measure includes a larger patient population than the CMS PSI 
04 measure. The Failure-to-Rescue measure includes Medicare Advantage 
data, and the denominator includes a much broader range of hospital-
acquired complications (for example, kidney dysfunction, seizures, 
stroke, heart failure, and wound infection) than the CMS PSI 04 
measure.
---------------------------------------------------------------------------

    \651\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
---------------------------------------------------------------------------

(4) Pre-rulemaking Process and Measure Endorsement
(a) Recommendation From the PRMR Process
    We refer readers to section IX.B.1.c. of the preamble of this final 
rule for details on the PRMR process including the voting procedures 
the PRMR process uses to reach consensus on measure recommendations. 
The PRMR Hospital Committee, comprised of the PRMR Hospital Advisory 
Group and PRMR Hospital Recommendation Group, reviewed measures 
included by the Secretary on a publicly available ``2023 Measures Under 
Consideration List'' (MUC List),652 653 including the 
Failure-to-Rescue measure (MUC2023-049). The PRMR Hospital 
Recommendation Group reviewed the proposed updates to the Failure-to-
Rescue measure (MUC2023-049) during a meeting on January 18-19, 
2024.654 655
---------------------------------------------------------------------------

    \652\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \653\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
    \654\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \655\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
---------------------------------------------------------------------------

    The committee reached consensus and recommended including this 
measure in the Hospital IQR Program with conditions. Twelve members of 
the

[[Page 69547]]

group voted to adopt the measure into the Hospital IQR Program without 
conditions; five members voted to adopt with conditions; two committee 
members voted not to recommend the measure for adoption. Taken 
together, 89.5 percent of the votes were recommend or recommended with 
conditions. The five members of the voting committee who voted to adopt 
with conditions specified the condition as collecting data to evaluate 
possible unintended consequences, such as hospitals encouraging 
patients to sign a DNR order or enter hospice. We agree with the 
potential for unintended consequences and note that we consistently 
monitor all the measures in the Hospital IQR Program for unintended 
consequences. Furthermore, we note that under our previously finalized 
measure removal Factor 6, codified at 42 CFR 412.140(g)(3)(i)(F) and 
(3) (88 FR 59144), collection or reporting of a measure leads to 
negative unintended consequences other than patient harm, if we were to 
identify unintended consequences related to this measure we would 
consider it for removal.
    Feedback was generally positive with some discussion around whether 
the measure was enough of an improvement on CMS PSI 04. The measure 
developer highlighted several areas of improvement compared to CMS PSI 
04, including increased reliability and validity largely due to the 
application of this measure to both Medicare Advantage and fee-for-
service enrollees, as well as the inclusion of deaths after hospital 
discharge but within 30 days of the index operative procedure.\656\
---------------------------------------------------------------------------

    \656\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Pre-Rulemaking Measure Review (PRMR) Meeting Summary: 
Hospital Committee. Available at: https://p4qm.org/sites/default/files/2024-02/PRMR-Hospital-Recommendation-Group-Meeting-Summary-Final.pdf
---------------------------------------------------------------------------

(b) Measure Endorsement
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this final rule for details on the E&M process 
including the measure evaluation procedures the E&M Committees uses to 
evaluate measures and whether they meet endorsement criteria. The E&M 
Management of Acute Events, Chronic Disease, Surgery, and Behavioral 
Health Committee convened in the Fall Cycle 2023 to review the Failure-
to-Rescue measure (CBE #4125) which was submitted to the CBE for 
endorsement. The E&M Management of Acute Events, Chronic Disease, 
Surgery, and Behavioral Health Committee ultimately voted to endorse 
with conditions on January 29th, 2024.\657\ The condition was: perform 
additional reliability testing for endorsement review, namely 
conducting additional simulation analyses of minimum case volume 
adjustments.\658\ We will monitor the data as part of the standard 
measure maintenance.
---------------------------------------------------------------------------

    \657\ Battelle--Partnership for Quality Measurement. (February 
2024). Fall 2023 Management of Acute and Chronic Events Meeting 
Summary. Available at: https://p4qm.org/sites/default/files/Management%20of%20Acute%20Events,%20Chronic%20Disease,%20Surgery,%20and%20Behavioral%20Health/material/EM-Acute-Chronic-Events-Fall2023-Endorsement-Meeting-Summary.pdf.
    \658\ Battelle--Partnership for Quality Measurement. (February 
2024). Fall 2023 Management of Acute and Chronic Events Meeting 
Summary. Available at: https://p4qm.org/sites/default/files/Management%20of%20Acute%20Events,%20Chronic%20Disease,%20Surgery,%20and%20Behavioral%20Health/material/EM-Acute-Chronic-Events-Fall2023-Endorsement-Meeting-Summary.pdf.
---------------------------------------------------------------------------

(5) Measure Calculation
    The measure is calculated using Medicare fee-for-service (FFS) Part 
A inpatient claims data and Medicare Inpatient Encounter data for 
Medicare Advantage enrollees, in combination with validated death data 
from the Medicare Beneficiary Summary File or equivalent resources. CMS 
receives death information from several sources: Medicare claims data 
from the Medicare Common Working File (CWF); online date of death edits 
submitted by family members; and benefit information used to administer 
the Medicare program collected from the Railroad Retirement Board (RRB) 
and the Social Security Administration (SSA). Like the CMS 30-day 
mortality measures, the ``Valid Date of Death Switch'' is used to 
confirm that the exact day of death has been validated.
    This measure was tested using Medicare inpatient hospital discharge 
data from 2,055 IPPS hospitals with at least 25 eligible discharges 
from January 1, 2021, through June 30, 2022. Hospital-level performance 
rates are depicted in Table IX.C-2.\659\ Because lower scores are 
better the lower performance percentiles are better performing 
hospitals than those in the higher percentiles (for example, the 
hospitals in the fifth percentile are the best performing hospitals).
---------------------------------------------------------------------------

    \659\ Battelle--Partnership for Quality Measurement. Thirty-day 
Risk-Standardized Death Rate among Surgical Inpatients with 
Complications (Failure-to-Rescue). Available at: https://p4qm.org/measures/4125.
[GRAPHIC] [TIFF OMITTED] TR28AU24.227

    If hospitals currently in the worst quartile (that is, those at the 
75th percentile) were to improve performance to the performance of 
hospitals in the best quartile (that is, those at the 25th percentile) 
it would represent a 50 percent decrease in the frequency of deaths 
after postoperative complications at those hospitals.\660\
---------------------------------------------------------------------------

    \660\ Ibid.
---------------------------------------------------------------------------

    Test results indicated moderate measure reliability and strong 
validity.\661\
---------------------------------------------------------------------------

    \661\ Ibid.
---------------------------------------------------------------------------

(6) Data Submission and Reporting
    This measure uses readily available administrative claims data 
routinely generated and submitted to CMS for all Medicare 
beneficiaries, which includes Medicare Advantage and Medicare fee-for-
service patients. Hospitals would not

[[Page 69548]]

be required to report any additional data. We have used a similarly 
designed claims-based measure (CMS PSI 04) for over a decade. The 
Failure-to-Rescue measure would be calculated and publicly reported on 
annual basis using a rolling 24 months of prior data for the 
measurement period, consistent with the approach currently used for CMS 
PSI 04 and PSI 90, the Patient Safety and Adverse Events Composite.
    We invited public comment on our proposal to adopt the Thirty-day 
Risk-Standardized Death Rate Among Surgical Inpatients with 
Complications measure beginning with the CY 2025 reporting period/FY 
2027 payment determination.
    Comment: Many commenters supported the proposal to add the Failure-
to-Rescue measure as a replacement for CMS PSI 04 in the Hospital IQR 
Program. Several commenters noted the adoption of this measure would 
incentivize hospitals to provide patients and family members with clear 
mechanisms to voice their concerns and to empower staff (such as less 
senior staff) to do so as well. A few commenters noted that the measure 
can serve as a valuable metric to help hospitals identify areas where 
they can improve their quality of care, enhance patient outcomes, and 
prevent death. Another commenter noted that the adoption of this 
measure would capture additional deaths while employing more precise 
exclusions than CMS PSI 04. A commenter stated that the adoption of the 
measure would help to recognize hospitals that are exemplars in patient 
safety, as well as refine the data collected so that it is meaningfully 
used to prioritize safety improvement for the most vulnerable 
populations. A commenter applauded CMS for applying this measure to 
both Medicare FFS and Medicare Advantage patients. A commenter 
expressed their support for the removal of CMS PSI 04 contingent on the 
adoption of the Failure-to-Rescue measure.
    Response: We thank commenters for their support.
    Comment: A few commenters noted the adoption of the Failure-to-
Rescue measure improves upon CMS PSI 04 because it includes a 
denominator limitation to a more appropriate set of index DRGs for 
inclusion, adds Medicare Advantage patients to the measure population, 
and excludes complications that occur prior to surgery rather than 
focusing on complications that occur post-procedure.
    Response: We thank commenters for their support and agree with 
their feedback. Using the Failure-to-Rescue measure instead of the CMS 
PSI 04 would allow us to assess an expanded population, encourage safe 
practices for the widest range of surgical inpatients, and allow 
hospitals to identify opportunities to improve their quality of care.
    Comment: Many commenters expressed concerns about using patient 
safety measures derived from claims data, because in their view, such 
data would not accurately reflect hospital performance and would 
eliminate the clinical components of care from quality calculations. To 
close this gap, commenters requested that CMS explore alternative data 
sources other than claims data to ensure an accurate and fair hospital 
performance assessment. A commenter also suggested the Failure-to-
Rescue measure become an eCQM.
    Response: We disagree that patient safety measures derived from 
claims data eliminate clinical components of care from quality 
measurement, or that claims-based measures are inaccurate. Studies have 
shown that using claims data is a robust approach to capturing 
variation in mortality outcomes across hospital systems.\662\ 
Additionally, claims data contain all the necessary data elements to 
accurately calculate the Failure-to-Rescue measure. Testing results for 
the Failure-to-Rescue measure were shown to have high face-validity; 
and 90 percent of the TEP members supported the measure's relevance in 
assessing quality of care and agreed that the measure could improve 
quality of care by reducing the frequency of failure to rescue.\663\ 
Furthermore, the measure exhibited adequate signal-to-noise 
reliability, indicating its ability to distinguish between the quality 
of care across facilities. Notably, hospitals with higher nurse 
staffing levels and skill mix tend to exhibit lower mortality rates 
following serious postoperative complications. Conversely, hospitals 
that delay identification or fail to aggressively treat complications 
are associated with higher rates of 30-day readmissions and mortality 
post complications.\664\
---------------------------------------------------------------------------

    \662\ https://doi.org/10.1016/j.jcjq.2017.08.003.
    \663\ https://p4qm.org/measures/4125.
    \664\ Ibid.
---------------------------------------------------------------------------

    We note that during the measure development process we are 
responsible for determining whether to account for variation in factors 
intrinsic to the patient before comparing outcomes and to determine how 
to best apply these factors in the quality measure specifications. 
Additionally, in our view, utilizing claims data where practical helps 
to minimize the reporting burden on hospitals and provides sufficient 
and high-quality data and therefore the Failure-to-Rescue measure is 
appropriate as a claims-based measure rather than an eCQM. However, we 
will consider exploring alternative data sources for other quality 
measurement topics in the future.
    Comment: A few commenters expressed concerns about the risk 
adjustment methodologies for the Failure-to-Rescue measure. A commenter 
strongly opposed the risk adjustment for patients who enter the 
hospital with COVID-19 because the commenter noted that the policy 
excludes a wide range of patients. A commenter stated that it is 
unclear whether the revised risk adjustment methodology for the 
Failure-to-Rescue measure would appropriately account for differences 
between hospitals. A commenter recommended that CMS risk-adjust the 
Failure-to-Rescue measure to account for differences in patient 
populations and case mixes across hospitals. The commenter suggested 
that such risk adjustment factors should include severity of illness, 
comorbidity burden, socioeconomic factors, and care setting 
characteristics. The commenter argued that by incorporating risk 
adjustment methodologies in the Failure-to-Rescue measure, CMS will 
ensure a comprehensive and equitable evaluation of hospitals because 
patient outcomes can be influenced by factors outside the control of 
healthcare providers.
    Response: We thank commenters for their feedback on risk adjustment 
methodologies. However, as we discussed in the proposed rule (89 FR 
36324), measure testing results indicated moderate measure reliability 
and strong validity. Further, we have used a similarly designed claims-
based measure (CMS PSI 04) for over a decade. For additional details on 
the measure's risk adjustment model, please refer to the measure 
details available on the Partnership for Quality Measurement 
website.\665\ The Failure-to-Rescue measure, like all quality measures, 
would undergo a rigorous maintenance review process, in which we would 
evaluate the potential inclusion of additional factors into the 
measure's risk adjustment model. We note that including COVID-19 as a 
risk factor in the risk adjustment model does not exclude patients with 
COVID-19. Rather, by including COVID-19 status in the model, we 
recognize COVID-19 as an important risk factor within the model. This 
approach ensures that hospitals are not penalized for treating

[[Page 69549]]

a higher number of COVID-19 patients, but we agree with the commenter 
that all patients deserve quality care, including patients with COVID-
19. Additionally, we have ensured the Failure-to-Rescue measure 
appropriately accounts for differences between hospitals, as we 
recognize this is an important risk factor within the model.
---------------------------------------------------------------------------

    \665\ https://p4qm.org/measures/4125.
---------------------------------------------------------------------------

    Comment: A few commenters requested CMS consider the workflow and 
education impact of the high volume of measures proposed for FY2025 and 
ensure adoption alignment.
    Response: We thank commenters for their input. We are mindful of 
the reporting burden for participants in the Hospital IQR Program. 
Adopting a measure can result in changes in workflow as well as staff 
training. However, those changes are necessary where quality measures 
ensure that hospitals meet the applicable standard of care. We remind 
commenters that the Failure-to-Rescue measure is a claims-based 
hospital measure, calculated using Medicare Advantage data and Medicare 
FFS claims that are already reported to the Medicare program for 
payment purposes. Adopting this measure would not result in a change in 
hospitals' reporting burden.
    Comment: Several commenters requested that CMS release the full 
measure specifications as soon as possible to ensure that interested 
parties have sufficient clinical documentation of coding. Commenters 
suggested that providing documentation regarding justification for each 
surgical complication used in the Failure-to-Rescue measure along with 
their respective ICD-10 based definitions would be helpful to program 
participants.
    Response: We thank the commenters for their feedback regarding 
measure specifications. As described in the proposed rule, we refer 
readers to CMS' QualityNet website: https://qualitynet.cms.gov/inpatient/iqr/measures (or other successor CMS designated websites) for 
the measure specifications. The measure specifications detail the 
surgical complications included in the Failure-to-Rescue measure along 
with their respective ICD-10 based definitions and their relevant 
exclusions. Any future updates to the technical measure specification 
will be announced through the QualityNet website and listserv 
announcements.
    Comment: A few commenters expressed concern that the abbreviated 
name of the measure, Failure-to-Rescue, may not appropriately describe 
the underlying measure's focus. Commenters suggested that the name of 
the measure is misleading to consumers and may evoke an image of 
disregard for human suffering and elicit feelings of distrust or 
avoidance of any hospital with a non-zero performance rate. A commenter 
suggested that the abbreviated name uses blaming language that implies 
hospitals are directly at fault for patients who may die within the 30 
days of surgical complication. To close this gap, a commenter requested 
that CMS work with patients and communities to determine whether the 
measure's name appropriately meets patients' understanding of the 
measure and suggested CMS rename the measure to something that 
adequately correlates to patients' understanding of the measure. The 
commenter further requested CMS identify how the Failure-to-Rescue 
measure would be used among patients to make determinations about where 
to seek inpatient surgical care.
    Response: We thank commenters for their feedback on the abbreviated 
name of the measure, Failure-to-Rescue, and will take this suggestion 
into consideration during future measure updates. The measure's full 
name is Thirty-Day Risk-Standardized Death Rate Among Surgical 
Inpatients With Complications, and we will consider the most 
appropriate way to display measure performance on this clinical topic 
for purposes of public reporting. Additionally, we acknowledge the 
suggestion to identify how the measure would be used to make 
determinations about where to seek inpatient surgical care. We 
reiterate that this measure assesses the percentage of surgical 
inpatients who experienced a complication and then died within 30-days 
from the date of their first ``operating room'' procedure. Hospitals 
can use the measure to identify opportunities to improve their quality 
of care and patient safety. With strategies that focus on improving 
patient centered care, the measure would ensure that the decisions from 
these hospitals respect patients' needs and preferences to make the 
appropriate determinations for their care.
    Comment: A commenter requested that CMS provide clarity in defining 
the Failure-to-Rescue measure. The commenter suggested the Failure-to-
Rescue measure's definition should provide a comprehensive 
understanding of what constitutes as a ``failure to rescue'' event, 
including specific criteria for identifying such events.
    Response: We thank commenters for their feedback on clarifying the 
definition of a ``failure to rescue'' event. The Failure-to-Rescue 
measure is a risk-standardized measure of death after a hospital-
acquired complication. However, we note that, as we discussed in the 
proposed rule (89 FR 36322), the measure's denominator includes 
patients 18 years old and older admitted for certain procedures in the 
General Surgery, Orthopedic, or Cardiovascular Medicare Severity 
Diagnosis Related Groups (MS-DRGs) who were enrolled in the Medicare 
program and had a documented complication that was not present on 
admission. The measure's numerator includes patients who died within 30 
days from the date of their first ``operating room'' procedure, 
regardless of site of death. We will work with interested parties to 
ensure that the measure's documentation is as clear as possible to 
ensure that hospitals can provide the best possible care to their 
patients. Additional details about the Failure-to-Rescue measure can be 
found on the QualityNet website: https://qualitynet.cms.gov/inpatient/iqr/proposedmeasures#tab2 and the Partnership for Quality Measurement 
website: https://p4qm.org/measures/4125. We consistently monitor all 
the measures in the Hospital IQR Program for unintended consequences, 
and we will monitor performance on this measure to ensure that those 
unintended consequences do not result from its adoption.
    Comment: Several commenters expressed concerns that the proposed 
performance period for the Failure-to-Rescue measure would begin on 
July 1, 2023, more than a year prior to the measure's adoption in the 
Hospital IQR Program. Commenters questioned if it was appropriate for 
CMS to utilize claims data from July 2023 for quality measurement 
purposes. A commenter elaborated and requested that CMS reconsider the 
timeline of the Failure-to-Rescue measure proposal to avoid 
incorporating claims data for years in which the measure had not been 
adopted in the Hospital IQR Program. The commenters further requested 
that CMS delay the measure's adoption for at least one year to allow 
hospitals time to familiarize and educate staff around the Failure-to-
Rescue measure requirements and changes compared to CMS PSI 04 and to 
align with the other Hospital IQR Program proposals this year.
    Response: We thank the commenters for their feedback on the 
proposed measurement period. As we noted in the proposed rule (89 FR 
36324), the measure is calculated and publicly reported on an annual 
basis using a rolling 24 months of prior data for the measurement 
period. This performance period is consistent with the CMS PSI 04 
measure and the CMS PSI 90 composite measure. We acknowledge

[[Page 69550]]

that the Failure-to-Rescue measure's performance period would begin on 
July 1, 2023, as with many other quality measures whose performance 
period occurs in the past and whose calculations are incorporated into 
payment determinations for future years. However, because this measure 
is calculated and publicly reported on an annual basis using a rolling 
24 months of prior data, this policy is necessary to ensure that we 
calculate the measure with sufficient reliability and validity using a 
sufficiently large claims data set. Additionally, by adopting the 
measure with this performance period, we can ensure that we continue 
assessing hospitals on this important clinical subject rather than 
delaying the measure's adoption until the FY 2028 payment 
determination, as would be necessary if we adopted the measure with a 
performance period beginning on July 1, 2024. Since this measure will 
replace CMS PSI 04, it would be appropriate to delay measurement of the 
clinical topic when we have an improved measure available. We remain 
confident that hospitals and hospital staff will be able to familiarize 
themselves with the measure's requirements in comparison to CMS PSI 04, 
particularly because the measure represents an improvement on CMS PSI 
04 rather than a fundamental change to the clinical topic's 
measurement.
    Comment: A commenter requested that CMS provide hospitals with a 
dry run of their Failure-to-Rescue measure results prior to adoption 
and mandatory reporting in the Hospital IQR Program.
    Response: We thank the commenter for their feedback. We intend to 
provide hospitals with information on their performance on the measure 
as part of the Hospital IQR Program's preview period process prior to 
public reporting. As finalized in the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50776), quality data displayed for each quarter on Care Compare 
are made available to providers for a 30-day preview period 
approximately two months in advance of display.
    Comment: A few commenters did not support the measure's adoption, 
citing concerns with its reliability. Commenters stated that testing 
for this measure demonstrated that the reliability was 0.231 using the 
measure's case minimum of 25 patients and that it required roughly 600 
patients to achieve a high level of reliability (0.7 at minimum). 
Commenters further noted that the low reliability results were 
questioned during the recent CBE endorsement review. Commenters 
explained that the committee placed conditions to perform additional 
reliability testing, and to conduct additional simulation on the 
measure's endorsement. The commenters requested CMS conduct the 
recommended additional testing and that the conditions be removed from 
endorsement before the Failure-to-Rescue measure is used in the 
Hospital IQR Program.
    Response: We appreciate commenters' feedback regarding the 
reliability of the Failure-to-Rescue measure. The committee placed 
conditions on the measure's endorsement to perform additional 
reliability testing for endorsement review, namely, to conduct 
additional simulation analyses of minimum case volume adjustments. 
During the E&M committee review, the measure developer responded to 
concerns regarding low reliability by emphasizing that the Failure-to-
Rescue measure is an improvement compared to the CMS PSI 04 measure due 
to increased reliability and validity largely due to the application of 
this measure to both Medicare Advantage and fee-for-service enrollees, 
as well as the inclusion of deaths after hospital discharge but within 
30 days of the index operative procedure.\666\ Additional details 
related to the Failure-to-Rescue measure's reliability results can be 
found on the Partnership for Quality Measurement website.\667\ As 
discussed earlier, we agree with the potential for unintended 
consequences and note that we consistently monitor all the measures in 
the Hospital IQR Program for unintended consequences. Furthermore, we 
note that under our previously finalized measure removal Factor 6, 
codified at 42 CFR 412.140(g)(3)(i)(F) and (3), collection or reporting 
of a measure leads to negative unintended consequences other than 
patient harm, if we were to identify unintended consequences related to 
this measure we would consider it for removal.
---------------------------------------------------------------------------

    \666\ Battelle--Partnership for Quality Measurement. (February 
2024). Fall 2023 Management of Acute and Chronic Events Meeting 
Summary. Available at: https://p4qm.org/sites/default/files/Management%20of%20Acute%20Events,%20Chronic%20Disease,%20Surgery,%20and%20Behavioral%20Health/material/EM-Acute-Chronic-Events-Fall2023-Endorsement-Meeting-Summary.pdf.
    \667\ https://p4qm.org/measures/4125.
---------------------------------------------------------------------------

    Comment: A few commenters expressed concerns with the exclusion of 
various patient populations in the Failure-to-Rescue measure. A 
commenter noted the Failure-to-Rescue measure excludes the most 
vulnerable patients, who it stated are often at the highest risk of 
death. To close this gap, the commenter recommended that CMS add a 
measure to the Hospital IQR Program that gauges hospital mortality 
performance, observing the most vulnerable cases that are at a 
heightened risk of death. The commenter expressed they do not support 
the adoption of the measure unless CMS provides an alternative method 
to account for the most vulnerable patients. A commenter noted concerns 
with the exclusion of patients whose complications preceded a surgical 
event. A commenter also requested that CMS consider expanding the 
Failure-to-Rescue measure to include other populations and procedures, 
such as recipients of inpatient cellular therapy services that 
experience complications. The commenter further suggested that CMS 
consider adding stratifications for interested parties to better 
understand performance by procedure.
    Response: We thank the commenters for their feedback on the 
exclusion of various patient populations. The Hybrid Hospital-Wide All-
Cause Risk-Standardized Mortality (Hybrid HWM) measure in the Hospital 
IQR Program complements the Failure-to-Rescue measure and meets the 
need the commenter suggested for a measure of mortality that can 
account for the most vulnerable cases that are at a heightened risk of 
death. Currently, we do not plan to expand the Failure-to-Rescue 
measure to include other populations or stratify the measure. The 
Failure-to-Rescue measure, like all quality measures, would undergo a 
rigorous maintenance review process, in which the measure steward would 
evaluate the need for changes to the measure.
    Comment: A commenter expressed concerns about the data challenges 
to reliably measure the quality of care for Medicare Advantage 
patients. The commenter elaborated that the Medicare Payment Advisory 
Commission has consistently noted challenges with the completeness and 
accuracy of MA encounter data. To close this gap, the commenter 
recommended CMS consider policies to ensure that Medicare Advantage 
plans would be able to provide complete encounter data for quality 
measurement.
    Response: We thank the commenter for their feedback. However, as we 
stated in the proposed rule (89 FR 36323), the measure developer 
highlighted the measure's increased reliability and validity in 
comparison to CMS PSI 04 largely due to the application of this measure 
to both Medicare Advantage and fee-for-service enrollees as well as the 
inclusion of deaths after hospital discharge but within 30 days of the 
index operative procedure. As required under

[[Page 69551]]

Sec.  422.504(l), Medicare Advantage organizations certify the 
accuracy, completeness, and truthfulness of their encounter data (based 
on best knowledge, information, and belief).\668\ Medicare Advantage 
plans conduct self-assessments regarding the accuracy and completeness 
of their encounter data submissions for each contract they have with 
CMS, and each year Medicare Advantage plans apply the findings from 
their self-assessments to improve the accuracy and completeness of 
their submissions.\669\ There is an established compliance framework, 
including identification of initial metrics for assessing completeness 
and accuracy,\670\ to ensure that the encounter data provided is as 
reliable and as complete as possible for the Failure-to-Rescue measure.
---------------------------------------------------------------------------

    \668\ Centers for Medicare & Medicaid Services. (November 2022). 
Encounter Data Submission and Processing Guide Version 5.0. 
Available at: https://csscoperations.com/internet/csscw3_files.nsf/
F2/2022ED_Submission_Processing_Guide_20221130.pdf/$FILE/
2022ED_Submission_Processing_Guide_20221130.pdf.
    \669\ Centers for Medicare & Medicaid Services. (November 2022). 
Encounter Data Submission and Processing Guide Version 5.0. 
Available at: https://csscoperations.com/internet/csscw3_files.nsf/
F2/2022ED_Submission_Processing_Guide_20221130.pdf/$FILE/
2022ED_Submission_Processing_Guide_20221130.pdf.
    \670\ Centers for Medicare & Medicaid Services. (November 2022). 
Encounter Data Submission and Processing Guide Version 5.0. 
Available at: https://csscoperations.com/internet/csscw3_files.nsf/
F2/2022ED_Submission_Processing_Guide_20221130.pdf/$FILE/
2022ED_Submission_Processing_Guide_20221130.pdf.
---------------------------------------------------------------------------

    Comment: A commenter suggested that CMS maintain transparency and 
actively engage with interested parties throughout the development and 
implementation process of the Failure-to-Rescue measure to ensure the 
success of measures aimed at enhancing high-quality, patient-centered 
care. The commenter further recommended that CMS seek input from a 
diverse range of interested parties, including clinicians, researchers, 
and patient advocacy groups, to ensure the measure aligns with its 
objectives and reflects the need to prioritize all those involved.
    Response: We thank the commenter for their feedback. To ensure 
transparency throughout the measure development process, a Technical 
Evaluation Panel (TEP) provided direction and input from interested 
parties to the measure developer in every phase of the measure 
development process. Measure developers incorporated feedback from TEPs 
upon their review of the measure testing results. We also submitted 
this measure through the PRMR process for input from a multistakeholder 
group of clinicians, patients, and other interested parties. We refer 
readers to section IX.B.1.c. of the preamble of this final rule for 
details on the PRMR process including the voting procedures the PRMR 
process uses to reach consensus on measure recommendations.
    Comment: A commenter expressed concerns with the Failure-to-Rescue 
measure having exclusions regarding documentation errors and missing 
demographic information, which in the commenter's opinion allows too 
much leeway for hospitals to remove such cases from the measure's 
calculation.
    Response: We thank the commenter for their input on excessive 
exclusions. However, we note that because the measure is claims-based, 
hospitals do not have the discretion to withhold cases from its 
calculation so long as they have submitted those claims for payment. We 
will monitor the data that underpins this measure carefully to ensure 
that the measure's exclusions are implemented appropriately.
    Comment: A commenter suggested it would be helpful for CMS to 
provide hospitals with additional guidance and resources for support in 
implementing evidence-based practices that aim to reduce Failure-to-
Rescue rates and improve patient outcomes.
    Response: We thank the commenter for their feedback and the 
recommendation to provide additional guidance and resources to support 
hospitals in implementing evidence-based practices that aim to reduce 
Failure-to-Rescue measure rates and improve patient outcomes. As noted 
in the Partnership for Quality Measurement website (https://p4qm.org/measures/4125), there are evidence-supported interventions that 
hospitals can implement to improve timely identification of clinical 
deterioration and treatment of preventable complications, including 
improved nurse staffing, simulation training, standardized 
communication tools, electronic monitoring or warning systems, and 
rapid response systems.
    Comment: A commenter recommended that CMS exclude Medicare 
Advantage patients from the Failure-to-Rescue measure's calculations 
because, in the commenter's view, this population is subject to quality 
initiatives under specific managed care payer contracts.
    Response: While the commenter is correct that we implement other 
quality initiatives for Medicare Advantage patients, the measure's 
incorporation of Medicare Advantage patients improves its reliability 
and validity and appropriately provides Medicare beneficiaries with 
additional information about the quality of care that they receive from 
hospitals.
    Comment: Several commenters expressed concerns that the Failure-to-
Rescue measure may hold hospitals accountable for factors outside of 
their control. Commenters elaborated on how a person may die within 30 
days of a hospital procedure for various reasons unrelated to the 
hospital's quality of care, including self-harm or trauma, which may 
increase the risk of skewing the data. To address this issue, 
commenters requested CMS to consider adding additional exclusions to 
the Failure-to-Rescue measure to ensure the measure is reflective of 
the hospital's performance. A commenter also noted concerns with deaths 
outside the hospital system may have missing information, ultimately 
creating challenges for hospitals for potential improvement.
    Response: The measure's denominator exclusions control for factors 
affecting patients' clinical care that are beyond the hospital's 
control, such as a patient age of over 90 years, a ``do not resuscitate 
(DNR)'' status present on admission, or a departure against medical 
advice. We refer readers to the Failure-to-Rescue Measure 
Specifications on the QualityNet website at: https://qualitynet.cms.gov/inpatient/iqr/measures for more details and a 
complete list of the denominator exclusions. We note additionally that 
the complications in the Failure-to-Rescue measure are all serious 
adverse health events. We will monitor the measure's effects on the 
provision of clinical care to avoid any unintended consequences of its 
adoption.
    Comment: A commenter urged CMS to ensure that healthcare providers 
have access to sufficient resources and support to enable accurate data 
collection and reporting. To encourage participation and compliance, 
the commenter stated that CMS must minimize any administrative burdens 
and streamline data submission mechanisms wherever possible.
    Response: We are mindful of the administrative burden for 
participants in the Hospital IQR Program. We reiterate the Failure-to-
Rescue measure would be included as one of the claims-based hospital 
measures, calculated using Medicare Advantage data and Medicare FFS 
claims that are already reported to the Medicare program for payment 
purposes. Hospitals would not be required to report any additional 
data, so adoption of this measure would not result in a change in 
burden.
    Comment: A commenter expressed concerns with the unintended 
consequences that may arise based on

[[Page 69552]]

the well-known limitations in measurement science. The commenter 
further elaborated that measures should be assessed regularly for their 
effectiveness, impact, and overall performance, which are all an 
essential part of measurement science. To address this issue, the 
commenter recommended that CMS utilize an unbiased party to conduct 
such assessments, and to track and report any issues that arise in a 
timely manner.
    Response: We agree that the potential for unintended consequences 
exists and note that we consistently monitor and evaluate all the 
measures in the Hospital IQR Program for unintended consequences. With 
respect to the concern regarding the use of unbiased parties to assess 
the measure for potential unintended consequences and enhancements, the 
current CBE (which consists of a variety of experts including 
clinicians, measure experts, and health IT specialists) conducts annual 
reviews to provide recommendations regarding the quality and efficiency 
measures in CMS programs.\671\ Common issues or questions received are 
taken into consideration during the annual update process. 
Additionally, the CBE's Measure Set Review process provides additional 
recommendations for us to consider as we refine our programs.
---------------------------------------------------------------------------

    \671\ For more information on the CBE measure review process we 
refer readers to https://p4qm.org/MSR.
---------------------------------------------------------------------------

    Comment: A commenter did not support the adoption of the Failure-
to-Rescue measure because they stated that the measure lacks insight 
into post discharge care or related complications. The commenter argued 
that CMS PSI 04 and the current 30-day mortality measures provide 
hospitals with opportunities to improve their care and post-discharge 
planning and therefore adoption of the Failure-to-Rescue measure is not 
necessary.
    Response: As we stated in the proposed rule (89 FR 36323), the 
measure aligns with several goals under the CMS National Quality 
Strategy and is outcome-based. We consider the Failure-to-Rescue 
measure as an improvement on CMS PSI 04 and therefore, in connection 
with the proposal to adopt this measure in the Hospital IQR Program, we 
also proposed to remove the CMS PSI 04 measure from the Hospital IQR 
Program. We discuss removal of the CMS PSI 04 measure in detail in the 
next section.
    After consideration of the public comments we received, we are 
finalizing adoption of the Failure-to-Rescue measure as proposed 
beginning with the July 1, 2023-June 30, 2025, reporting period/FY 2027 
payment determination. We also refer readers to section XXXX of the 
preamble of this final rule where we discuss the use of this measure in 
the Transforming Episode Accountability Model (TEAM).
6. Measure Removals for the Hospital IQR Program Measure Set
    We proposed to remove five measures: (1) Death Among Surgical 
Inpatients with Serious Treatable Complications (CMS PSI 04) measure 
beginning with the July 1, 2023-June 30, 2025 reporting period/FY 2027 
payment determination; (2) Hospital-level, Risk-Standardized Payment 
Associated with a 30-Day Episode-of-Care for Acute Myocardial 
Infarction (AMI) measure beginning with the July 1, 2021-June 30, 2024 
reporting period/FY 2026 payment determination; (3) Hospital-level, 
Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for 
Heart Failure (HF) measure beginning with the July 1, 2021-June 30, 
2024 reporting period/FY 2026 payment determination; (4) Hospital-
level, Risk-Standardized Payment Associated with a 30-Day Episode-of-
Care for Pneumonia (PN) measure beginning with the July 1, 2021-June 
30, 2024 reporting period/FY 2026 payment determination; and (5) 
Hospital-level, Risk-Standardized Payment Associated with a 30-Day 
Episode-of-Care for Elective Primary Total Hip Arthroplasty (THA) and/
or Total Knee Arthroplasty (TKA) measure beginning with the April 1, 
2021-March 31, 2024 reporting period/FY 2026 payment determination. We 
provide more details on each of these proposals in the subsequent 
sections.
a. Removal of Death Among Surgical Inpatients With Serious Treatable 
Complications (CMS PSI 04) Measure Beginning With the FY 2027 Payment 
Determination
    We proposed to remove the Death Among Surgical Inpatients with 
Serious Treatable Complications (CMS PSI 04) measure, beginning with 
the FY 2027 payment determination associated with the performance 
period of July 1, 2023-June 30, 2025, based on removal Factor 3,\672\ 
the availability of a more broadly applicable measure (across settings, 
populations), or the availability of a measure that is more proximal in 
time to desired patient outcomes for the particular topic. The CMS PSI 
04 measure was adopted into the Hospital IQR Program in the FY 2009 
IPPS/LTCH PPS final rule (73 FR 48607). The CMS PSI 04 measure records 
in-hospital deaths per 1,000 elective surgical discharges, among 
patients ages 18 through 89 years old or obstetric patients with 
serious treatable complications (shock/cardiac arrest, sepsis, 
pneumonia, deep vein thrombosis/pulmonary embolism, or gastrointestinal 
hemorrhage/acute ulcer).\673\ It is a claims-based measure which uses 
claims and administrative data to calculate the measure without any 
additional data collection from hospitals. The measure was previously 
endorsed (CBE #0351), but given the measurement's limitations, 
endorsement was not maintained by the measure steward, and the measure 
has not been updated since 2017.\674\
---------------------------------------------------------------------------

    \672\ We refer readers to the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41540 through 41544) for a summary of the Hospital IQR 
Program's removal Factors. Removal Factors were codified at 42 CFR 
412.140(g)(2) and (3). (88 FR 59144).
    \673\ Agency for Healthcare Research and Quality. (2023). AHRQ 
Quality IndicatorsTM (AHRQ QITM) ICD-9-CM 
Specification Version 6.0. Available at: https://qualityindicators.ahrq.gov/Downloads/Modules/PSI/V2023/TechSpecs/PSI_04_Death_Rate_among_Surgical_Inpatients_with_Serious_Treatable_Complications.pdf.
    \674\ Partnership for Quality Measurement. (2023). Death Rate 
among Surgical Inpatients with Serious Treatable Complications (PSI 
04). Available at: https://p4qm.org/measures/0351.
---------------------------------------------------------------------------

    In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25579 through 
25580), we proposed to remove this measure under removal Factor 3, 
codified at 42 CFR 412.140(g)(3)(i)(C), noting at that time that the 
Hybrid Hospital-Wide Mortality measure (Hybrid HWM) (CBE #3502) was 
more broadly applicable. Some public commenters, however, expressed 
concerns about replacing CMS PSI 04 with the Hybrid HWM measure since 
the Hybrid HWM measure would report on the mortality rate of the entire 
hospital, instead of specifically measuring the deaths of surgical 
inpatients in an effort to assess postoperative mortality distinct from 
hospital-wide mortality (86 FR 45391). Other commenters elaborated on 
this concern stating that by removing a postoperative-specific 
mortality measure, hospitals may lose the ability to account for what 
resources they need to better care for surgical inpatients since that 
population's needs often differs from the needs of non-surgical IPPS 
hospital patients (86 FR 45390 through 45391).\675\ Some commenters 
suggested modifications to the existing CMS PSI 04 measure such as 
changing its methodology to refine the types of surgical patients and 
complications included in the measure and to expand the measure beyond 
surgical inpatients

[[Page 69553]]

(86 FR 45390 through 45391). Other commenters suggested keeping CMS PSI 
04 unchanged because of the importance of evaluating patient deaths 
when assessing patient safety and suggested adding more patient safety 
measures to the Hospital IQR Program measure set, expressing that there 
were too few patient safety measures in the program (86 FR 45391). 
After consideration of the public comments on our proposal to remove 
CMS PSI 04 in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25579 
through 25580) we decided not to finalize removal of the measure at 
that time.
---------------------------------------------------------------------------

    \675\ Nilsson, U., Gruen, R., & Myles, P.S. (2020). 
Postoperative recovery: The importance of the team. Anesthesia, 
75(S1). https://doi.org/10.1111/anae.14869.
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    Since then, we have developed the Thirty-Day Risk-Standardized 
Death Rate Among Surgical Inpatients with Complications (Failure-to-
Rescue) (CBE #4125) measure, as proposed for adoption in section 
IX.C.5.e. of this final rule beginning with the FY 2027 payment 
determination. The Failure-to-Rescue measure is a more broadly 
applicable measure that would be more appropriate for inclusion in the 
Hospital IQR Program. Recent studies have indicated that the CMS PSI 04 
measure does not consistently recognize preventable in-hospital deaths 
(failure to rescue cases). A 2023 study indicated that CMS PSI 04 is 
being used to an unknown extent outside of postoperative cases, and 
there is often erroneous categorization of patients as having a CMS PSI 
04 complication.\676\ This same study found significant variation in 
the identification of CMS PSI 04 complications at different procedure 
locations (For example: bedside versus operating room procedures).\677\ 
Therefore, both the temporal and causal relationship attributing a CMS 
PSI 04 complication to patient mortality has been found to be poorly 
understood, particularly because CMS PSI 04 relates to a complication 
being deemed treatable.\678\
---------------------------------------------------------------------------

    \676\ Azad, T.D., Rodriguez, E., Raj, D., Xia, Y., Materi, J., 
Rincon-Torroella, J., Gonzalez, L.F., Suarez, J.I., Tamargo, R.J., 
Brem, H., Haut, E.R., & Bettegowda, C. (2023). Patient Safety 
Indicator 04 Does Not Consistently Identify Failure to Rescue in the 
Neurosurgical Population. Neurosurgery, 92(2), 338-343. https://doi.org/10.1227/neu.0000000000002204.
    \677\ Ibid.
    \678\ Ibid.
---------------------------------------------------------------------------

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36322 through 
36324), we proposed to adopt the Failure-to-Rescue measure to replace 
CMS PSI 04 as a more broadly applicable patient safety indicator and 
one which can better address concerns previously raised by interested 
parties. The Failure-to-Rescue measure assesses the percentage of 
surgical inpatients who experienced a complication and then died within 
30-days from the date of their first ``operating room'' procedure. We 
refer readers to section IX.C.5.e. of this final rule for more detail 
on the Failure-to-Rescue measure including the timeline for its initial 
performance, reporting, and payment determination periods.
    While CMS PSI 04 only measures the rate of in-hospital deaths among 
surgical inpatients within a set of serious treatable conditions, the 
Failure-to-Rescue measure assesses the probability of death given a 
postoperative complication and is inclusive of a broader range of 
conditions commonly experienced by surgical inpatients. To best address 
the needs of a broader scope of surgical inpatients and conditions, it 
allows for more context-specific approaches to measure preventable 
deaths due to the highly variable nature of surgical procedures between 
specialties. This highly variable and context-specific nature of 
postoperative cases has been considered a challenge of using CMS PSI 04 
as an effective universal patient safety metric.\679\ There would be 
minimal burden for hospitals associated with replacing CMS PSI 04 with 
the Failure-to-Rescue measure due to the Failure-to Rescue measure's 
data sources, including its use of Medicare Advantage encounter data. 
Thus, the Failure-to-Rescue measure would include a wider range of 
patients and better reflect the true nature of postoperative patient 
safety at institutions. In addition, multiple failure-to-rescue 
measures have been repeatedly validated by their consistent association 
with nurse staffing, nursing skill mix, technological resources, rapid 
response systems, and other activities that improve early 
identification and prompt intervention when complications arise after 
surgery.680 681 682
---------------------------------------------------------------------------

    \679\ Azad, T.D., Rodriguez, E., Raj, D., Xia, Y., Materi, J., 
Rincon-Torroella, J., Gonzalez, L.F., Suarez, J.I., Tamargo, R.J., 
Brem, H., Haut, E.R., & Bettegowda, C. (2023). Patient Safety 
Indicator 04 Does Not Consistently Identify Failure to Rescue in the 
Neurosurgical Population. Neurosurgery, 92(2), 338-343. https://doi.org/10.1227/neu.0000000000002204.
    \680\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \681\ Rosero, E.B., Romito, B.T., & Joshi, G.P. (2021). Failure 
to rescue: A quality indicator for postoperative care. Best Practice 
& Research Clinical Anesthesiology, 35(4), 575-589. https://doi.org/10.1016/j.bpa.2020.09.003.
    \682\ Hall KK, Lim A, Gale B. Failure To Rescue. In: Hall KK, 
Shoemaker-Hunt S, Hoffman L, et al. Making Healthcare Safer III: A 
Critical Analysis of Existing and Emerging Patient Safety Practices 
[internet]. Rockville (MD): Agency for Healthcare Research and 
Quality (US); 2020 Mar. 2. Available at: https://www.ncbi.nlm.nih.gov/books/NBK555513/.
---------------------------------------------------------------------------

    By using the Failure-to-Rescue measure, hospitals can identify 
opportunities to improve their quality of care and patient safety. 
Hospitals and healthcare providers can benefit from knowing not only 
their institution's mortality rate, but also their institution's 
ability to provide each patient with the appropriate and necessary 
standard of care after an adverse occurrence.\683\ Using the Failure-
to-Rescue measure as opposed to the current CMS PSI 04 measure is 
especially important if the hospital resources needed for preventing 
and treating 30-day postoperative complications among surgical 
inpatients are different from those needed for targeted care after an 
adverse event, such as more skilled care personnel or equipment 
specific to postoperative care. From a quality improvement perspective, 
the Failure-to-Rescue measure rate would complement the mortality rate 
to improve our understanding of mortality statistics and identify 
opportunities for improvement.\684\ Therefore, the quality-of-care 
measurement may be improved if both mortality and Failure-to-Rescue 
measure rates are reported instead of relying on the Hybrid HWM measure 
alone. Using the Failure-to-Rescue measure instead of the CMS PSI 04 
measure would allow us to assess an expanded population and encourage 
safe practices for the widest range of surgical inpatients.
---------------------------------------------------------------------------

    \683\ Rodziewicz TL, Houseman B, Hipskind JE. Medical Error 
Reduction and Prevention. [Updated 2023 May 2]. In: StatPearls 
[internet]. Treasure Island (FL): StatPearls Publishing; 2023 Jan-. 
Available at: https://www.ncbi.nlm.nih.gov/books/NBK499956/.
    \684\ Ward, S.T., Dimick, J.B., Zhang, W., Campbell, D.A., & 
Ghaferi, A.A. (2019). Association Between Hospital Staffing Models 
and Failure to Rescue. Annals of surgery, 270(1), 91-94. https://doi.org/10.1097/SLA.0000000000002744.
---------------------------------------------------------------------------

    We proposed to remove the CMS PSI 04 measure from the Hospital IQR 
Program beginning with the FY 2027 payment determination associated 
with the performance period of July 1, 2023-June 30, 2025, contingent 
upon finalizing our proposal to adopt the Failure-to-Rescue measure 
beginning with the FY 2027 payment determination so that there is no 
gap in measuring this important topic area.
    We invited public comment on our proposal to remove the CMS PSI 04 
measure from the Hospital IQR Program beginning with the FY 2027 
payment determination associated with the performance period of July 1, 
2023-June 30, 2025, contingent upon finalizing our proposal to adopt 
the Failure-to-Rescue

[[Page 69554]]

measure beginning with the FY 2027 payment determination.
    Comment: Many commenters broadly supported the removal of the CMS 
PSI 04 measure. Several commenters supported the removal of the CMS PSI 
04 measure contingent upon its replacement with the Failure-to-Rescue 
measure. A few commenters supported the measure removal, regardless of 
its replacement with a new measure. A few commenters supported the 
removal of CMS PSI 04 because they had concerns about the measure's 
validity and reliability. A commenter stated that the Failure-to-Rescue 
measure would be more reliable and valid because it includes Medicare 
Advantage and Medicare fee-for-service participants, as well as deaths 
after hospital discharge but within 30 days of the index operative 
procedure.
    Response: We thank the commenters for their support. We agree with 
this feedback.
    Comment: A few commenters supported removal of the CMS PSI 04 
measure because they stated it is redundant with existing or proposed 
Hospital IQR Program measures.
    Response: We thank commenters for their support. The Failure-to-
Rescue measure would be complementary, rather than redundant, to the 
mortality measures used in the Hospital IQR Program and Hospital VBP 
Program. We refer readers to sections IX.C.8. and V.L.2. for more 
details on the previously adopted mortality measures in the Hospital 
IQR Program and Hospital VBP Program, respectively. Quality of care 
measurement would be improved through reporting both the Failure-to-
Rescue measure and the mortality measures.
    Comment: A commenter voiced support for the removal of CMS PSI 04, 
as well as the four payment-based measures. However, the commenter did 
not support the addition of eight measures for a net increase of three 
quality reporting measures.
    Response: We thank the commenter for their support. While we 
understand that there are times when quality reporting poses challenges 
for hospitals, we view quality-of-care measurement as an essential 
aspect of improving clinical outcomes and encouraging safe practices 
for a wide range of surgical inpatients.
    Comment: A few commenters raised concerns about removing CMS PSI 04 
and replacing it with the Failure-to-Rescue measure. A commenter 
mentioned that the change from in-hospital deaths to 30-day mortality 
increases the risk of skewing the data with mortalities that are 
unrelated to hospital complications. Another commenter stated that an 
alternate measure must account for the most vulnerable patients since 
the proposed replacement measure, the Failure-to-Rescue measure, 
excludes these patients from consideration.
    Response: We thank the commenters for their input. Recent studies 
have indicated that the CMS PSI 04 measure does not consistently 
recognize preventable in-hospital deaths. A 2023 study indicated that 
the CMS PSI 04 measure is used outside of postoperative cases, and 
patients are often erroneously categorized as having a PSI 04 
complication.\685\ We understand the Failure-to-Rescue measure is a 
more broadly applicable patient safety indicator than the CMS PSI 04 
measure in that it assesses the probability of death given a 
postoperative complication. It is not necessarily intended to attribute 
a causal relationship between the complication and death; rather, it 
would allow patients to compare hospitals and determine the nature of 
postoperative patient safety at institutions on a global level. In 
contrast to the CMS PSI 04 measure, the Failure-to-Rescue measure 
excludes patients whose relevant complications preceded (rather than 
followed) their first inpatient operating room procedure. It also 
limits the patients assessed to the general surgical, vascular, and 
orthopedic Medicare Severity Diagnosis Related Groups (MS-DRGs). These 
limitations were implemented in response to specific concerns with CMS 
PSI 04--namely, that the cohort of patients assessed was too 
heterogenous and included those who had undergone very high-risk and 
very low-risk surgeries. In contrast, the exclusion criteria of the 
Failure-to-Rescue measure would allow prospective patients to make a 
truer comparison when evaluating hospitals for postoperative safety. 
The measure's risk-standardization process appropriately controls for 
factors impacting patients' clinical care that are beyond the 
hospital's control. We note that the complications in the Failure-to-
Rescue measure are all serious adverse health events. We will monitor 
the measure's effects on the provision of clinical care to avoid any 
unintended consequences of its adoption.
---------------------------------------------------------------------------

    \685\ Nilsson, U., Gruen, R., & Myles, P.S. (2020). 
Postoperative recovery: The importance of the team. Anesthesia, 
75(S1). https://doi.org/10.1111/anae.14869.
---------------------------------------------------------------------------

    Comment: A commenter only supported the removal of the CMS PSI 04 
measure if there was no gap in publicly reporting performance between 
this measure and the implementation of the Failure-to-Rescue measure. 
The commenter noted that more than 500 people die every day due to 
hospital errors; therefore, it is critical that no day goes by without 
reporting on hospital mortality.
    Response: We appreciate and agree with the commenter's input. We 
would like to clarify that there would be no gap in public reporting 
between the removal of the CMS PSI 04 measure and the implementation of 
the Failure-to-Rescue measure. The CMS PSI 04 measure would be removed 
beginning with the July 1, 2023-June 30, 2025, reporting period/FY 2027 
payment determination, and the Failure-to-Rescue measure would be 
adopted beginning with the July 1, 2023-June 30, 2025, reporting 
period/FY 2027 payment determination. Therefore, no gap in reporting 
would exist.
    After consideration of the public comments received, we are 
finalizing the removal of CMS PSI 04 as proposed beginning with the 
July 1, 2023-June 30, 2025, reporting period/FY 2027 payment 
determination.
b. Removal of Four Clinical Episode-Based Payment Measures Beginning 
With the FY 2026 Payment Determination
    We proposed to remove four clinical episode-based payment measures 
from the Hospital IQR Program beginning with the FY 2026 payment 
determination (89 FR 36326 through 36392):
     Hospital-level, Risk-Standardized Payment Associated with 
a 30-Day Episode of Care for Acute Myocardial Infarction (AMI) (CBE 
#2431) (AMI Payment) (adopted at 78 FR 50802 through 50805). This 
measure assesses hospital risk-standardized payment associated with a 
30-day episode-of-care for acute myocardial infarction for Medicare FFS 
patients aged 65 or older for any hospital participating in the 
Hospital IQR Program;
     Hospital-level, Risk-Standardized Payment Associated with 
a 30-Day Episode of Care for Heart Failure (HF) (CBE #2436) (HF 
Payment) (adopted at 79 FR 50231 through 50235). This measure assesses 
hospital risk-standardized payment associated with a 30-day episode-of-
care for heart failure for Medicare FFS patients aged 65 or older for 
any hospital participating in the Hospital IQR Program;
     Hospital-level, Risk-Standardized Payment Associated with 
a 30-Day Episode of Care for Pneumonia (PN) (CBE #2579) (PN Payment) 
(adopted at 79 FR 50227 through 50231). This measure assesses hospital 
risk-

[[Page 69555]]

standardized payment associated with a 30-day episode-of-care for 
pneumonia for any hospital participating in the Hospital IQR Program 
and includes Medicare FFS patients aged 65 or older; and
     Hospital-level, Risk-Standardized Payment Associated with 
a 30-Day Episode of Care for Elective Primary Total Hip Arthroplasty 
(THA) and/or Total Knee Arthroplasty (TKA) (CBE #3474) (THA/TKA 
Payment) (adopted at 80 FR 49674 through 49680; revised at 87 FR 49267 
through 49269). This measure assesses hospital risk-standardized 
payment (including payments made by CMS, patients, and other insurers) 
associated with a 90-day episode-of-care for elective primary THA/TKA 
for any hospital participating in the Hospital IQR Program and includes 
Medicare FFS patients aged 65 or older.
    The final performance periods for these four payment measures are 
indicated in the following table:
[GRAPHIC] [TIFF OMITTED] TR28AU24.228

    We proposed to remove the AMI Payment, HF Payment, PN Payment, and 
THA/TKA Payment measures under measure removal Factor 3, codified at 42 
CFR 412.140(g)(3)(i)(C), the availability of a more broadly applicable 
measure (across settings, populations, or the availability of a measure 
that is more proximal in time to desired patient outcomes for the 
particular topic)--specifically, the Medicare Spending Per Beneficiary 
Hospital measure (CBE #2158) (MSPB Hospital measure) in the Hospital 
VBP Program (89 FR 36326).\686\ The MSPB Hospital measure has been 
intermittently included in the Hospital IQR Program's measure set, most 
recently to update the measure specifications in the Hospital VBP 
Program. The Hospital VBP Program's statute requires that measures be 
publicly reported for one year in the Hospital IQR Program prior to the 
beginning of the performance period in the Hospital VBP Program 
(section 1886(o)(2)(B)(ii) of the Act and 42 CFR 412.164(b)).\687\ In 
the FY 2023 IPPS/LTCH PPS final rule, we re-adopted the previously 
removed MSPB Hospital measure into the Hospital IQR Program with 
refinements (87 FR 28529 through 28532) to update the measure 
specifications for purposes of the Hospital VBP Program. We 
subsequently removed it again from the Hospital IQR Program and 
concurrently adopted the refined version into the Hospital VBP Program 
(88 FR 59064 through 59067, 59170 through 59171, respectively). We 
refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 49257 
through 49263) for more details on this measure's history in the 
Hospital IQR and Hospital VBP Programs.
---------------------------------------------------------------------------

    \686\ We refer readers to the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41540 through 41544) for a summary of the Hospital IQR 
Program's removal Factors. Removal Factors were codified at 42 CFR 
412.140(g)(3).
    \687\ When substantive updates to measure specifications are 
needed, we have had to readopt the measure and updates into the 
Hospital IQR Program first. The measure was initially adopted into 
the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51618) and then was finalized for removal in the FY 2019 IPPS/
LTCH PPS final rule (83 FR 41559 through 41560) to deduplicate the 
measure sets across programs and reduce burden for hospitals.
---------------------------------------------------------------------------

    The MSPB Hospital measure evaluates hospitals' efficiency and 
resource use relative to the efficiency of the national median 
hospital. The MSPB Hospital measure is a more broadly applicable 
measure because it captures the same data as the four clinical episode-
based payment measures proposed for removal but incorporates a much 
larger set of conditions and procedures. We note that we recently 
adopted refinements to the MSPB Hospital measure to ensure a more 
comprehensive and consistent assessment of hospital performance (87 FR 
49257 through 49263, 88 FR 59064 through 59067). Those refinements 
allow the measure to capture more episodes and adjusted the measure 
calculation.\688\
---------------------------------------------------------------------------

    \688\ These refinements are available in a summary of the 
measure re-evaluation on the CMS QualityNet website, Medicare 
Spending Per Beneficiary (MSPB) Measure Methodology. Available at: 
https://qualitynet.cms.gov/inpatient/measures/hvbp-mspb.
---------------------------------------------------------------------------

    The four clinical episode-based payment measures proposed for 
removal are condition-specific whereas the MSPB Hospital measure is 
not. Although the MSPB Hospital measure does not provide the same level 
of granularity as the four condition-specific measures, the important 
data elements would be captured more broadly under the Hospital VBP 
Program by evaluating and publicly reporting the hospitals' efficiency 
relative to the efficiency of the median national hospital. 
Specifically, the MSPB Hospital measure assesses the cost to Medicare 
for services performed by hospitals and other healthcare providers 
during an episode of care, which includes the three days prior to, 
during, and 30 days following an inpatient's hospital stay.\689\ 
Additionally, providers would continue to receive confidential feedback 
reports containing details on the MSPB Hospital measure.
---------------------------------------------------------------------------

    \689\ Centers for Medicare & Medicaid Services. (2024). Medicare 
Spending Per Beneficiary--National https://data.cms.gov/provider-data/dataset/3n5g-6b7f.
---------------------------------------------------------------------------

    We note that performance on these four clinical episode-based 
payment measures has either remained stable or decreased since FY 2019. 
Based on an internal CMS analysis, the mean performance for the PN 
Payment, HF Payment, and AMI Payment measures

[[Page 69556]]

has decreased, while the mean performance for the THA/TKA Payment 
measure has remained stable. Considering these performance trends, we 
highlight that these four clinical episode-based payment measures have 
not been as beneficial in recent years to the Hospital IQR Program.
    We invited public comment on our proposal to remove these four 
clinical episode-based payment measures from the Hospital IQR Program 
beginning with the FY 2026 payment determination.
    Comment: Several commenters expressed general support for the 
proposal to remove the four clinical episode-based payment measures. 
Many commenters agreed that the existing and proposed new Hospital IQR 
Program measures are more broadly applicable and that retaining these 
four measures would result in program measure redundancies. Several 
commenters expressed support contingent upon replacement measures as 
outlined in the proposed rule. A few commenters supported CMS's 
proposal and noted that removal of the four payment measures aligns 
with the National Quality Strategy and Meaningful Measures Framework, 
enabling hospitals to prioritize patient care and quality improvement 
initiatives more effectively. A few commenters appreciated that 
removing these four measures would reduce the administrative impact of 
quality measure reporting and allow hospitals to meet reporting 
requirements more efficiently. A commenter suggested CMS consider the 
administrative impact of quality measure reporting and remove measures 
that are redundant or no longer needed. A commenter noted that removing 
these measures would allow for other measures to be added in the 
future.
    Response: We thank the commenters for their support. We agree that 
the MSPB Hospital measure is a more broadly applicable measure such 
that removing these four clinical episode-based payment measures would 
enable hospitals to more efficiently report on, and work toward, 
improved quality of care. We note that we continually assess the 
Hospital IQR Program's measure set and appreciate feedback regarding 
removal of measures. We will continue engaging with interested parties 
through education and outreach opportunities for any feedback about 
suggested additional measure removals in the future.
    Comment: A commenter supported CMS's proposal to remove the four 
payment measures and stated that the data produced by these measures 
were difficult to interpret or act upon for quality improvement 
purposes. A commenter specifically supported CMS's proposal to remove 
the AMI Payment and HF Payment measures, expressing concern about 
whether they had been appropriately risk adjusted.
    Response: We thank the commenters for their support and appreciate 
their feedback regarding their perceived utility as well as the lack of 
risk adjustment for these measures.
    Comment: A few commenters did not support removal of the four 
clinical episode-based payment measures and expressed concern about 
adequacy of the MSPB Hospital measure as a replacement. Specifically, 
commenters expressed concern about whether the MSPB Hospital measure 
considers patient risk factors, that it does not include non-Medicare 
costs, and that it lacks granular detail which the four procedure- or 
condition-based payment measures provide.
    Response: We thank the commenters for their feedback, but we 
respectfully disagree. The MSPB Hospital measure is an adequate 
replacement for the four clinical episode-based payment measures 
because it captures the same data as the four clinical episode-based 
payment measures proposed for removal and incorporates a much larger 
set of conditions and procedures. The MSPB Hospital measure's risk 
adjustment methodology also adjusts for several factors, including 
patient age and severity of illness. We note that we recently adopted 
refinements to the MSPB Hospital measure to ensure a more comprehensive 
and consistent assessment of hospital performance (87 FR 49257 through 
49263, 88 FR 59064 through 59067). Those refinements allow the measure 
to capture more episodes and adjust the measure calculation. Although 
the MSPB Hospital measure does not provide the same level of 
granularity as the four condition-specific measures, the important data 
elements would be captured more broadly under the Hospital VBP Program 
by evaluating and publicly reporting the hospitals' efficiency relative 
to the efficiency of the median national hospital. Removing the four 
clinical episode-based payment measures helps ensure that we are moving 
the Hospital IQR Program forward in the least burdensome manner 
possible while continuing to encourage improvement in the quality of 
care provided to patients. We note that hospitals have access to 
patient-level information through confidential hospital-specific 
reports for the MSPB Hospital measure.
    Comment: A few commenters recommended that CMS retain all four 
clinical episode-based payment measures and stated that they provide 
valuable information for consumers assessing where to pursue care. A 
commenter specifically did not support removal of the AMI Payment and 
HF Payment measures, noting that these payment measures, when directly 
linked with clinical quality measures, help interested parties assess 
whether reducing costs leads to improved patient outcomes.
    Response: We thank the commenters for their input. While we agree 
that these measures have provided valuable information in the past, we 
note that performance trends on these four clinical episode-based 
payment measures indicate that they had not been as beneficial in 
recent years to the Hospital IQR Program. In alignment with our ongoing 
effort to implement a more parsimonious measure set while continuing to 
incentivize improvement in the quality of care provided to patients, we 
concluded it is appropriate to remove these four clinical episode-based 
payment measures at this time, resulting in a streamlined set of the 
most meaningful measures.
    Comment: A commenter specifically did not support removal of the PN 
Payment measure, stating that pneumonia often results from a 
preventable airborne infection and the measure should remain in the 
Hospital IQR Program.
    Response: While we appreciate the commenter's concern, the PN 
Payment measure is not currently incentivizing prevention of pneumonia. 
We do agree that pneumonia is an important topic for quality 
measurement and note that the Hospital Readmissions Reduction Program 
includes an unplanned readmission measure for Pneumonia (Hospital 30-
day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following 
Pneumonia Hospitalization (NQF #0506), 76 FR 51666 and 51667) and that 
the Hospital VBP Program includes the Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate Following Pneumonia Hospitalization 
measure.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the four clinical episode-based 
payment measures beginning with the FY 2026 payment determination.
7. Refinements to Current Measures in the Hospital IQR Program Measure 
Set
    We proposed refinements to two measures currently in the Hospital 
IQR Program measure set: (1) Global

[[Page 69557]]

Malnutrition Composite Score (GMCS) eCQM, beginning with the CY 2026 
reporting period/FY 2028 payment determination and for subsequent 
years, and (2) the Hospital Consumer Assessment of Healthcare Providers 
and Systems (HCAHPS) Survey measure beginning with the CY 2025 
reporting period/FY 2027 payment determination. We provide more details 
on modifications to the GMCS eCQM in the subsequent sections and 
details on the modification to HCAHPS Survey measure are in section 
IX.B.2.e. of this final rule.
a. Modification of the Global Malnutrition Composite Score Measure 
Beginning With the CY 2026 Reporting Period/FY 2028 Payment 
Determination
(1) Background
    The previously finalized GMCS eCQM (CBE #3592e) assesses the 
percentage of hospitalizations for adults 65 years old and older prior 
to the start of the measurement period with a length of stay equal to 
or greater than 24 hours who received optimal malnutrition care during 
the current inpatient hospitalizations where care performed was 
appropriate to the patient's level of malnutrition risk and severity. 
We adopted the GMCS eCQM in the FY 2023 IPPS/LTCH PPS final rule 
beginning with the CY 2024 reporting period/FY 2026 payment 
determination (87 FR 49239 through 49246). We refer readers to the FY 
2023 IPPS/LTCH PPS final rule (87 FR 49241 through 49242) for more 
detailed discussion of the CBE review and endorsement of the current 
GMCS eCQM, which received CBE endorsement in July 2021 (CBE 
#3592e).\690\ \691\
---------------------------------------------------------------------------

    \690\ Partnership for Quality Measurement. (2023). Global 
Malnutrition Composite Score. Available at: https://p4qm.org/measures/3592e.
    \691\ Centers for Medicare & Medicaid Services Measures 
Inventory Tool. (2023). Global Malnutrition Composite Score. 
Available at: https://cmit.cms.gov/cmit/#/MeasureView?variantId=5120§ionNumber=1.
---------------------------------------------------------------------------

    While we understand the unique challenges malnutrition creates for 
older adults, we also recognize that hospital and disease-related 
malnutrition is not limited to that population (87 FR 49239). Data from 
the Agency for Healthcare Research and Quality (AHRQ) indicate that 
approximately eight percent of all hospitalized adults have a diagnosis 
of malnutrition,\692\ and additional research finds that malnutrition 
and malnutrition risk can be found in 20 to 50 percent of hospitalized 
adults 18 years old and older.\693\ Failure to diagnose and 
insufficient treatment of malnutrition in hospitals is also associated 
with poor institutional coordination between nurses, physicians, and 
other hospital staff regarding screening, diagnosis, and treatment, 
further emphasizing the need to address malnutrition in all 
hospitalized adults.\694\ Because malnutrition impacts adults of all 
ages, preventive screening and intervention among all hospitalized 
adults 18 years old and older would greatly reduce the risk and improve 
the treatment of malnutrition.\695\ A 2020 study estimated that every 
dollar spent on nutrition interventions in a hospital setting can 
result in up to $99 in savings on subsequent medical care.\696\ 
Screening all patients over age 18 for malnutrition instead of only 
those over age 65 could result in both improved clinical outcomes for 
patients and substantial financial savings for the healthcare system.
---------------------------------------------------------------------------

    \692\ United States Agency for Healthcare Research and Quality. 
(2016). Non-maternal and non-neonatal inpatient stays in the United 
States involving malnutrition 2016. Available at: https://hcup-us.ahrq.gov/reports/ataglance/HCUPMalnutritionHospReport_083018.pdf.
    \693\ Kabashneh, S., Alkassis, S., Shanah, L., & Ali, H. (2020). 
A Complete Guide to Identify and Manage Malnutrition in Hospitalized 
Patients. Cureus, 12(6), e8486. https://doi.org/10.7759/cureus.8486.
    \694\ Anghel, S., Kerr, K.W., Valladares, A.F., Kilgore, K.M., & 
Sulo, S. (2021). Identifying patients with malnutrition and 
improving use of nutrition interventions: A quality study in four US 
hospitals. Nutrition, 91-92, 111360. https://doi.org/10.1016/j.nut.2021.111360.
    \695\ Sauer, A.C., Goates, S., Malone, A., Mogensen, K.M., 
Gewirtz, G., Sulz, I., Moick, S., Laviano, A., & Hiesmayr, M. 
(2019). Prevalence of malnutrition risk and the impact of nutrition 
risk on hospital outcomes: Results from nutrition day in the U.S. 
Journal of Parenteral and Enteral Nutrition, 43(7), 918-926. https://doi.org/10.1002/jpen.1499.
    \696\ Suela Sulo, Leah Gramlich, Jyoti Benjamin, Sharon 
McCauley, Jan Powers, Krishnan Sriram & Kristi Mitchell (2020) 
Nutrition Interventions Deliver Value in Healthcare: Real-World 
Evidence, Nutrition and Dietary Supplements, 12:, 139-146, DOI: 
10.2147/NDS.S262364.
---------------------------------------------------------------------------

    We, therefore, proposed modifications to the GMCS eCQM to expand 
the applicable population from hospitalized adults 65 or older to 
hospitalized adults 18 or older in the FY 2025 IPPS/LTCH PPS proposed 
rule (89 FR 36327 through 36329). The modified GMCS eCQM would broaden 
the measure to assess hospitalized adults 18 years old and older who 
received care appropriate to their level of malnutrition risk and 
malnutrition diagnosis, if properly identified.
(2) Measure Alignment to Strategy
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49239), we noted 
that the adoption of a malnutrition measure may help address several 
priority areas identified in the CMS Framework for Health Equity \697\ 
(87 FR 49240 through 49241) and expanding the current measure's 
population to include all adults over 18 years old would further 
address these priorities. Malnutrition in the U.S., whether caused by 
challenges from disease and functional limitations, food insecurity, 
other factors, or a combination of causes, is more frequently 
experienced by underserved populations and can thus be a contributing 
factor to health inequities.\698\ Adopting the updated measure as 
proposed would lead to a more diverse population being assessed for 
malnutrition, and by identifying instances of malnutrition among 
younger populations, the benefits of proper nutrition could be felt 
over a lifetime. As part of the CMS National Quality Strategy, the 
modified GMCS eCQM would also address the priority area of ``Promote 
Aligned and Improved Health Outcomes.'' \699\ Under the CMS Meaningful 
Measures 2.0 Initiative, which is a key component of the CMS National 
Quality Strategy, the modified GMCS eCQM addresses the quality 
priorities of ``Seamless Care Coordination,'' ``Person-Centered Care,'' 
and ``Equity.'' It would address these priorities by connecting 
providers at different levels of care to ensure the largest possible 
population of adult patients with in-hospital malnutrition are 
identified and treated using a patient-centered approach.
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    \697\ Centers for Medicare & Medicaid Services. (2023). CMS 
Framework for Health Equity. Available at: https://www.cms.gov/priorities/health-equity/minority-health/equity-programs/framework.
    \698\ Blankenship, J., & Blancato, R. B. (2022). Nutrition 
Security at the Intersection of Health Equity and Quality Care. 
Journal of the Academy of Nutrition and Dietetics, 122(10S), S12-
S19. https://doi.org/10.1016/j.jand.2022.06.017.
    \699\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
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(3) Overview of Measure Update
    The modified GMCS eCQM still includes the four component measures 
corresponding to documented best practices as described in the FY 2023 
IPPS/LTCH PPS final rule (87 FR 49241) and in the first column of Table 
IX.C.4. The only change we proposed is to expand the applicable 
population for this measure. The measure specifications for the 
modified GMCS eCQM can be found on the eCQI Resource Center website, 
available at: https://ecqi.healthit.gov/ecqm/eh/2024/cms0986v2.

[[Page 69558]]

(4) Pre-rulemaking Process and Measure Endorsement
(a) Recommendation From the PRMR Process
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this final rule for details on the PRMR process 
including the voting procedures used to reach consensus on measure 
recommendations. The PRMR Hospital Committee met on January 18-19, 
2024, to review measures included by the Secretary on a publicly 
available ``2023 Measures Under Consideration List'' (MUC 
List),700 701 including the modified GMCS eCQM (MUC2023-
114), to vote on a recommendation regarding use of this 
measure.702 703
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    \700\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \701\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
    \702\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \703\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
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    The PRMR Hospital Committee reached consensus and recommended 
including this measure (MUC2023-114) in the Hospital IQR Program with 
conditions. Fourteen members of the group recommended adopting the 
measure into the Hospital IQR Program without conditions; three members 
recommended adoption with conditions; two committee members voted not 
to recommend the measure for adoption. Taken together, 84.2 percent of 
the votes were recommended with conditions.\704\ The three members who 
voted to adopt with conditions specified the condition as screening and 
assessment includes hospital-acquired malnutrition and high-risk 
nutritional practices in hospitals, such as prolonged fasting for 
rescheduled procedures, and to obtain more feedback from patient 
groups. We agree that the potential for unintended consequences exists 
and note that we consistently monitor all the measures in the Hospital 
IQR Program for unintended consequences. Furthermore, we note that 
under our previously finalized measure removal Factor 6, codified at 42 
CFR 412.140(g)(3)(i)(F), collection or public reporting of a measure 
leads to negative unintended consequences other than patient harm, if 
we were to identify unintended consequences related to this measure, we 
would consider it for removal.
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    \704\ Battelle-Partnership for Quality Measurement. (February 
2024). Pre-Rulemaking Measure Review Measures Under Consideration 
2023 RECOMMENDATIONS REPORT. Available at: https://p4qm.org/sites/default/files/2024-02/PRMR-2023-MUC-Recommendations-Report-Final-.pdf.
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(b) Measure Endorsement
    We refer readers to section IX.B.1.c. of the preamble of this final 
rule for details on the E&M process including the measure evaluation 
procedures the E&M Committees, comprised of the E&M Advisory Group and 
E&M Recommendation Group, uses to evaluate measures and whether they 
meet endorsement criteria. The GMCS eCQM was initially endorsed in the 
Fall 2020 cycle by the CBE (CBE #3592e) and is scheduled for 
endorsement review with the proposed modification in 2024.\705\ Section 
1886(b)(3)(B)(viii)(IX)(aa) of the Act requires that measures specified 
by the Secretary for use in the Hospital IQR Program be endorsed by the 
entity with a contract under section 1890(a) of the Act. Section 
1886(b)(3)(B)(viii)(IX)(bb) 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 measures that have been endorsed or adopted 
by a consensus organization identified by the Secretary. After 
reviewing the modified measure, we found no measures, other than the 
proposed GMCS measure, on this topic. We determined this was an 
appropriate medical topic for us to propose the adoption of an 
unendorsed measure because of its general consistency with the current, 
endorsed measure, and the usefulness of the measure would be 
substantially improved by the modification.
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    \705\ Battelle-Partnership for Quality Measurement. Global 
Malnutrition Composite Score eCQM. Available at: https://p4qm.org/measures/3592e
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(5) Measure Calculation
    The modified GMCS eCQM would still use data collected through 
hospitals' EHRs. The measure is designed to be calculated by the 
hospitals' CEHRT using the patient-level data and then submitted by 
hospitals to CMS.
    The modified GMCS eCQM continues to consist of four component 
measures, which are first scored separately.706 707 The 
overall composite score is derived from averaging the individual 
performance scores of the four component measures. The malnutrition 
component measures are all fully specified for use in EHRs. Table 
IX.C.4 describes each of the four measure components with the expanded 
population.
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    \706\ Valladares AF, McCauley SM, Khan M, D'Andrea C, Kilgore K, 
Mitchell K. Development and Evaluation of a Global Malnutrition 
Composite Score. J Acad Nutr Diet. 2022 Feb;122(2):251-258. doi: 
10.1016/j.jand.2021.02.002. Epub 2021 Mar 10. PMID: 33714687.
    \707\ Centers for Medicare & Medicaid Services Measures 
Inventory Tool. (2023). Global Malnutrition Composite Score. 
Available at: https://cmit.cms.gov/cmit/#/MeasureView?variantId=5120§ionNumber=1.

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[[Page 69559]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.229

    The modified GMCS eCQM numerator is comprised of the four component 
measures, that are individually scored for patients 18 years old and 
older who are admitted to an acute inpatient hospital. The measure 
denominator is the composite, or total, of the four component measures 
for patients 18 years old and older who are admitted to an acute 
inpatient hospital. The only exclusion for this measure population 
remains as patients whose length of stay is less than 24 hours, the 
same as previously adopted in the FY 2023 IPPS/LTCH PPS final rule (87 
FR 49244).
    Each measure component is a proportion with a possible performance 
score of 0 to 100 percent (higher percent reflects better performance). 
After each component score is calculated individually, an unweighted 
average of all four scores is computed to determine the final composite 
score for the individual with a total score ranging from 0 to 100 
percent (higher percent reflects better performance).\708\
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    \708\ Centers for Medicare & Medicaid Services Measures 
Inventory Tool. (2023). Global Malnutrition Composite Score. 
Available at: https://cmit.cms.gov/cmit/#/MeasureView?variantId=5120§ionNumber=1.
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(6) Data Submission and Reporting
    We proposed the adoption of the modified GMCS eCQM as part of the 
Hospital IQR Program measure set from which hospitals can self-select 
beginning with the CY 2026 reporting period/FY 2028 payment 
determination. Since this modification uses the same data sources and 
collection methods as the current version of the GMCS eCQM, there is 
not expected to be any major impact to workflows or other aspects of 
data collection. The only anticipated change to data collection 
processes is that the data would be collected from a larger patient 
population. We refer readers to section IX.C.9.c. of this final rule 
for our previously finalized eCQM reporting and submission 
requirements, as well as proposed modifications for these requirements.
    We also refer readers to section IX.F.6.a.(2). of the preamble of 
this final rule for discussion of a similar adoption of this measure in 
the Medicare Promoting Interoperability Program.
    We invited public comment on our proposal to modify the GMCS eCQM 
to expand the applicable population from hospitalized adults 65 years 
old or older to hospitalized adults 18 years old or older beginning 
with the CY 2026 reporting period/FY 2028 payment determination.
    Comment: Many commenters supported the proposal to expand the 
patient population for the GMCS eCQM. Many commenters supported it 
because they stated that malnutrition has a significant impact on 
patient outcomes and that this expansion would lead to valuable data, 
improved patient outcomes for a broader range of patients, and a more 
comprehensive understanding of malnutrition in the adult population.
    Response: We thank the commenters for their support and agree with 
their feedback.
    Comment: A few commenters supported the proposal to expand the 
patient population for the GMCS eCQM and emphasized that this 
modification, in addition to enhancing the quality of care for patients 
with malnutrition, has the potential to advance CMS's goal of reducing 
health disparities.
    Response: We appreciate and agree with the commenters' perspective. 
As we noted in the FY 2025 IPPS/LTCH PPS proposed rule, malnutrition in 
the U.S., whether caused by challenges from disease and functional 
limitations, food insecurity, other factors, or a combination of 
causes, is more frequently experienced by underserved populations and 
can thus be a contributing factor to health disparities (89 FR 36328). 
Expanding the population for the GMCS eCQM would ensure the largest 
possible population of adult patients with in-hospital malnutrition are 
identified and treated.
    Comment: A commenter appreciated that in this proposal, CMS 
acknowledged the valuable work of registered dieticians in addressing 
malnutrition and improving patient care outcomes.
    Response: We thank the commenter for their input. Nutrition 
screening is an important aspect of a patient's health, and it is the 
responsibility of all clinicians to support appropriate nutrition, 
particularly in inpatient settings (87 FR 49244 through 49245).
    Comment: Many commenters supported the proposal and recommended 
that CMS accelerate implementation of the expansion from CY 2026 to CY 
2025 to encourage hospitals to provide high-quality malnutrition care 
to all adults. Many commenters who supported accelerating the 
proposal's implementation noted that the modification to the measure 
would not impose a burden increase on providers.
    Response: We thank the commenters for their feedback; however, in 
determining the proposed implementation timeline for the GMCS eCQM we 
considered how this timeline allows hospitals time to review the 
results of the first full year of reporting on the GMCS eCQM before 
implementation of the modification. This does not preclude 
organizations from engaging in preventive screening and intervention 
for malnutrition in patients 18 years of age and older. We encourage 
commenters to engage in this work, which could result in both improved 
clinical outcomes and substantial financial savings on subsequent 
medical care for hospital systems.\709\
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    \709\ Suela Sulo, Leah Gramlich, Jyoti Benjamin, Sharon 
McCauley, Jan Powers, Krishnan Sriram & Kristi Mitchell (2020) 
Nutrition Interventions Deliver Value in Healthcare: Real-World 
Evidence, Nutrition and Dietary Supplements, 12:, 139-146, DOI: 
10.2147/NDS.S262364.

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[[Page 69560]]

    Comment: A commenter recommended that CMS align the GMCS eCQM logic 
with that of other eCQMs, such that the record is included only if the 
encounter ends during the measurement period. A few commenters 
suggested that CMS should further refine GMCS to better capture changes 
in nutritional status during an inpatient stay because they state that 
malnutrition may arise during a hospitalization. Another commenter 
recommended that the measure steward be more flexible for rapid cycle 
improvements of the measure logic that allow for the measure to 
function as intended.
    Response: We appreciate the input from the commenters. We will 
continue to evaluate the appropriateness of refinements to the GMCS 
eCQM, including possible adjustments to the inclusion criteria. In 
addition, we continually assess the Hospital IQR Program's measure set 
and will take this feedback into consideration.
    Comment: A commenter recommended that CMS perform additional 
feasibility assessments on this measure across a broader set of EHR 
vendors and hospitals and suggested that the proposed refinement be 
reviewed and approved by the CBE.
    Response: We appreciate the commenter's input regarding feasibility 
assessments and CBE endorsement. We emphasize that eCQMs, like all 
other types of quality measures in the Hospital IQR Program, undergo 
rigorous testing during the measure development process for 
feasibility, validity, and reliability. As we discussed in the FY 2023 
IPPS/LTCH PPS final rule (87 FR 49241 through 49242), the measure 
developer conducted additional testing after the measure was initially 
reviewed by the CBE, and the testing results demonstrated that the four 
component measures were usable for identifying key improvement areas in 
malnutrition care. A subsequent test with additional hospitals showed 
that the component measures could be implemented in a cohort of diverse 
hospitals and lead to meaningful improvements in measure performance as 
all four components were significantly associated with improved 
outcomes for 30-day readmissions. Notably, the GMCS eCQM is endorsed by 
the CBE and the modified GMCS eCQM is scheduled for endorsement review 
in the fall of 2024.
    Comment: A commenter did not support the proposed modification to 
the GMCS eCQM because they stated it would create an undue burden on 
the hospital and would not adequately address the root cause of 
malnutrition. The commenter suggested that CMS does not compensate 
hospitals sufficiently to help address root causes of malnutrition. A 
commenter expressed concern that hospitals lack the resources to screen 
and refer the expanded population appropriately.
    Response: We appreciate this feedback, and we remind the commenter 
that reporting on the GMCS eCQM is not required under the current eCQM 
reporting requirements, as hospitals may self-select to report on this 
eCQM. Furthermore, the modification to the GMCS eCQM would use the same 
data sources and collection methods as the current version of the GMCS 
eCQM. Therefore, no major impact on workflows or data collection is 
expected. The only change is that the data would be collected from a 
larger patient population. A 2020 study estimated that every dollar 
spent on nutrition interventions in a hospital setting can result in up 
to $99 in savings on subsequent medical care.\710\ Therefore, we 
believe that the measure can help address the root cause of 
malnutrition. While we understand the commenter's concern about 
hospitals' resources to screen and refer the expanded population, we 
reiterate that the GMCS eCQM is not required to be reported. We 
encourage hospitals to consider reporting this eCQM, as it addresses an 
important clinical topic.
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    \710\ Suela Sulo, Leah Gramlich, Jyoti Benjamin, Sharon 
McCauley, Jan Powers, Krishnan Sriram & Kristi Mitchell (2020) 
Nutrition Interventions Deliver Value in Healthcare: Real-World 
Evidence, Nutrition and Dietary Supplements, 12:, 139-146, DOI: 
10.2147/NDS.S262364.
---------------------------------------------------------------------------

    Comment: A commenter did not support modifying the GMCS eCQM 
because they state it would overlap with the Screening for Social 
Drivers of Health measure and should instead focus on implementation of 
that measure to create interoperable data.
    Response: The GMCS eCQM and the Screening for Social Drivers of 
Health measure, while topically related, are not duplicative. The 
Screening for Social Drivers of Health measure and the GMCS eCQM both 
address nutrition as a driver of health because it is an important 
contributor to a healthy population, but they address different goals 
(87 FR 49245). While the Screening for Social Drivers of Health measure 
incentivizes the screening and identifying of patients for food 
insecurity, the GMCS eCQM focuses on screening for malnutrition risk 
(of which food insecurity may be a contributing factor), but also the 
performance of a nutrition assessment and development of a care plan 
for identified malnourished patients (87 FR 49245). The GMCS eCQM and 
the Screening for Social Drivers of Health measure are complementary to 
one another but are not duplicative as they measure different aspects 
of the quality care processes (87 FR 49245). We thank the commenter for 
their recommendation regarding interoperable data for the Screening for 
Social Drivers of Health measure and will take it into consideration as 
we assess the Hospital IQR Program's measure set.
    After consideration of the public comments received, we are 
finalizing the GMCS eCQM measure modification as proposed beginning 
with the CY 2026 reporting period/FY 2028 payment determination. We 
also refer readers to section IX.F.6.a.(2). of the preamble of this 
final rule for discussion of adoption of this measure in the Medicare 
Promoting Interoperability Program.
8. Summary of Previously Finalized and New Hospital IQR Program 
Measures
a. Summary of Hospital IQR Program Measures for the FY 2026 Payment 
Determination
    This table summarizes the previously finalized Hospital IQR Program 
measure set for the FY 2026 payment determination updated to reflect 
the removals of four claims-based payment measures:

[[Page 69561]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.230

    We refer readers to the CY 2025 OPPS/ASC proposed rule where we are 
proposing to continue voluntary reporting of the core clinical data 
elements (CCDEs) and linking variables for both the Hybrid Hospital-
Wide Readmission (HWR) and Hybrid Hospital-Wide Standardized Mortality 
(HWM) measures, for the performance

[[Page 69562]]

period of July 1, 2023 through June 30, 2024, impacting the FY 2026 
payment determination for the Hospital IQR Program (89 FR 59500 through 
59502).
b. Summary of Hospital IQR Program Measures for the FY 2027 Payment 
Determination
    This table summarizes the previously finalized and newly finalized 
Hospital IQR Program measure set for the FY 2027 payment determination 
including the adoption of two new structural measures, one new claims-
based patient safety measure, and the removal of the CMS PSI 04 
measure:
BILLING CODE 4120-01-P

[[Page 69563]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.231


[[Page 69564]]


BILLING CODE 4120-01-C
c. Summary of Hospital IQR Program Measures for the FY 2028 Payment 
Determination
    This table summarizes the previously finalized and newly finalized 
Hospital IQR Program measure set for the FY 2028 payment determination 
including the adoption of two new Hospital Harm eCQMs, two new NHSN 
measures, modification of the GMCS eCQM, and the modification of the 
HCAHPS Survey measure:
BILLING CODE 4120-01-P

[[Page 69565]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.232


[[Page 69566]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.233

d. Summary of Hospital IQR Program Measures for the FY 2029 Payment 
Determination and for Subsequent Years
    This table summarizes the previously finalized and newly finalized 
Hospital IQR Program measure set for the FY 2029 payment determination 
and for subsequent years:

[[Page 69567]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.234


[[Page 69568]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.235

BILLING CODE 4120-01-C
9. Form, Manner, and Timing of Quality Data Submission
    We proposed changes to our reporting and submission requirements 
for eCQMs. There are no proposed changes to the following requirements, 
and thus have been omitted from the Form, Manner, and Timing of Quality 
Data Submission section: procedural requirements; data submission 
requirements for chart-abstracted measures; data submission and 
reporting requirements for hybrid measures; sampling and case 
thresholds for chart-abstracted measures; HCAHPS Survey administration 
and submission requirements; data submission requirements for 
structural measures; data submission and reporting requirements for CDC 
NHSN measures; and data submission and reporting requirements for 
Patient-Reported Outcome-Based Performance Measures (PRO-PMs). We refer 
readers to the QualityNet website at: https://qualitynet.cms.gov/inpatient/iqr (or other successor CMS designated websites) for more 
details on the Hospital IQR Program data submission and procedural 
requirements.
a. Background
    Section 1886(b)(3)(B)(viii)(I) and (b)(3)(B)(viii)(II) of the Act 
state that the applicable percentage increase for FY 2015 and each 
subsequent year shall be reduced by one-quarter of such applicable 
percentage increase (determined without regard to sections 
1886(b)(3)(B)(ix), (xi), or (xii) of the Act) for any subsection (d) 
hospital that does not submit data required to be submitted on measures 
specified by the Secretary in a form and manner and at a time specified 
by the Secretary. To successfully participate in the Hospital IQR 
Program, hospitals must meet specific procedural, data collection, 
submission, and validation requirements.
b. Maintenance of Technical Specifications for Quality Measures
    Section 412.140(c)(1) of title 42 of the Code of Federal 
Regulations generally requires that a subsection (d) hospital 
participating in the Hospital IQR Program must submit to CMS data on 
measures selected under section 1886(b)(3)(B)(viii) of the Act in a 
form and manner, and at a time, specified by CMS. The data submission 
requirements, specifications manual, measure methodology reports, and 
submission deadlines are posted on the QualityNet website at: https://qualitynet.cms.gov (or other successor CMS designated websites). The 
CMS Annual Update for the Hospital Quality Reporting Programs (Annual 
Update) contains the technical specifications for eCQMs. The Annual 
Update contains updated measure specifications for the year prior to 
the reporting period. For example, for the CY 2024 reporting period/FY 
2026 payment determination, hospitals are collecting and would submit 
eCQM data using the May 2023 Annual Update and any applicable addenda. 
The Annual Update and implementation guidance documents are available 
on the Electronic Clinical Quality Improvement (eCQI) Resource Center 
website at: https://ecqi.healthit.gov/.
    Hospitals must register and submit quality data through the HQR 
System (previously referred to as the QualityNet Secure Portal) (42 CFR 
412.140(a)). The HQR System is safeguarded in accordance with the HIPAA 
Privacy and Security Rules to protect submitted patient information. 
See 45 CFR parts 160 and 164, subparts A, C, and E.
c. Reporting and Submission Requirements for eCQMs
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36336 through 
36339), we proposed a progressive increase in the number of mandatory 
eCQMs a hospital must report beginning with the CY 2026 reporting 
period/FY 2028 payment determination. We did not propose any changes to 
the current eCQM reporting or submission requirements for the CY 2024 
reporting period/FY 2026 payment determination or the CY 2025 reporting 
period/FY 2027 payment determination. We provide additional detail in 
our proposal later in this section of the preamble.
(1) Background
    We began requiring hospitals to report on eCQMs in the CY 2016 
reporting period, with a goal of progressively increasing the number of 
eCQMs

[[Page 69569]]

hospitals are required to report in the Hospital IQR Program while also 
being responsive to hospitals' concerns about timing, readiness, and 
burden associated with the increased number of measures (80 FR 49693 
through 49698, and 81 FR 57150 through 57157). To allow hospitals and 
their vendors time to gain experience with reporting eCQMs we gradually 
increased the number of eCQMs on which hospitals were required to 
report over the course of several years. We required hospitals to 
report on certain specific eCQMs that we prioritized while retaining an 
element of choice by allowing hospitals to self-select some eCQMs. We 
also gradually increased the number of reporting quarters to improve 
measure reliability for public reporting of performance information (84 
FR 42503 through 42505, 85 FR 58932 through 58939, 86 FR 45418, and 87 
FR 49299 through 49302).
    Under previously adopted eCQM reporting policies, hospitals must 
report four calendar quarters of data for each required eCQM: (1) the 
Safe Use of Opioids--Concurrent Prescribing eCQM; (2) the Cesarean 
Birth eCQM; (3) the Severe Obstetric Complications eCQM; and (4) three 
self-selected eCQMs; for a total of six eCQMs for the CY 2024 reporting 
period/FY 2026 payment determination and subsequent years (85 FR 58932 
through 58939, 86 FR 45418, and 87 FR 49298 through 49302). We refer 
readers to the QualityNet website for additional information on 
previous reporting and submission requirements policies for eCQMs at: 
https://qualitynet.cms.gov/inpatient/measures/ecqm (or other successor 
CMS designated websites).
    In the CY 2024 Medicare Physician Fee Schedule (PFS) final rule (88 
FR 79307 through 79312), we finalized the revisions to the definition 
of CEHRT for the Medicare Promoting Interoperability Program at 42 
CFR[thinsp]495.4. Specifically, we finalized the addition of a 
reference to the revised name of ``Base Electronic Health Record (EHR) 
definition,'' proposed in the Health Data, Technology, and 
Interoperability: Certification Program Updates, Algorithm 
Transparency, and Information Sharing (HTI-1) proposed rule (88 FR 
23759, 23905), to ensure, if the HTI-1 proposals were finalized, the 
revised name of ``Base EHR definition'' would be applicable for the 
CEHRT definitions going forward (88 FR 79309 through 79312). We also 
finalized the replacement of our references to the ``2015 Edition 
health IT certification criteria'' with ``ONC health IT certification 
criteria,'' and the addition of the regulatory citation for ONC health 
IT certification criteria in 45 CFR 170.315. We finalized the proposal 
to specify that technology meeting the CEHRT definition must meet ONC's 
health IT certification criteria ``as adopted and updated in 45 CFR 
170.315'' (88 FR 79553). This approach is consistent with the 
definitions and approach subsequently finalized in ONC's HTI-1 final 
rule, which appeared in the Federal Register on January 9, 2024 (89 FR 
1205 through 1210). For additional background and information on this 
update, we refer readers to the discussion in the CY 2024 PFS final 
rule on this topic (88 FR 79307 through 79312).
(2) Progressive Increase of Mandatory eCQM Reporting Beginning With CY 
2026 Reporting Period/FY2028 Payment Determination
    Increasing the number of mandatory eCQMs, specifically to include 
the five previously adopted Hospital Harm eCQMs, would support our re-
commitment to better safety practices for both patients and healthcare 
workers to save lives from preventable harms.\711\ Proposing mandatory 
reporting of these Hospital Harms eCQMs are a part of our initial 
actions in responding and joining the President's Council of Advisors 
on Science and Technology (PCAST) call to action to renew ``our 
nation's commitment to improving patient safety.'' \712\ We refer 
readers to section IX.B.1. for more details on other efforts toward 
better patient and healthcare worker safety practices and the Patient 
Safety Structural measure for the Hospital IQR and PCHQR Programs.
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    \711\ AHRQ. (2023). National Action Alliance To Advance Patient 
and Workforce Safety. Available at: https://www.ahrq.gov/cpi/about/otherwebsites/action-alliance.html.
    \712\ President's Council of Advisors on Science and Technology. 
(2023). Report to the President: A Transformational Effort on 
Patient Safety. Available at: https://www.whitehouse.gov/wp-content/uploads/2023/09/PCAST_Patient-Safety-Report_Sept2023.pdf.
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    We developed our proposal to also align with CMS' National Quality 
Strategy priority area of ``Patient Safety and Resiliency,'' that seeks 
to ``improve performance on key patient safety metrics through the 
applications of CMS levers such as quality measurement, payment, health 
and safety standards, and quality improvement support.'' \713\ It is 
important to more comprehensively collect data on these measures from 
all hospitals participating in the Hospital IQR and Medicare Promoting 
Interoperability Programs instead of limiting data collection to just 
those hospitals that chose to report it. Capturing this important 
quality information is crucial to improve surveillance on safety 
metrics in hospitals and support the CMS National Quality Strategy 
target success goal of reducing preventable harm.\714\ Additionally, 
the proposal was developed in alignment with the ``Interoperability'' 
goal outlined in the National Quality Strategy that eCQMs use standard 
and interoperable data requirements that are less burdensome than other 
types of measures. By increasing the number of required eCQMs, and 
prioritizing the measures focused on preventable hospital harms, we are 
progressing towards our goal of using all digital measures. Thus, we 
proposed to increase the number of mandatory eCQMs over a two-year 
period to ultimately require reporting on five additional eCQMs (89 FR 
36336 through 36339).
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    \713\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy. Available at: https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
    \714\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy. Available at: https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
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(a) Proposed Reporting and Submission Requirements for eCQMs for the CY 
2026 Reporting Period/FY 2028 Payment Determination
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36336 through 
36339), beginning with the CY 2026 reporting period/FY 2028 payment 
determination, we proposed to modify the eCQM reporting and submission 
requirements to require hospitals to report on the following three 
eCQMs in addition to the existing eCQMs: (1) Hospital Harm--Severe 
Hypoglycemia eCQM; (2) Hospital Harm--Severe Hyperglycemia eCQM; and 
(3) Hospital Harm--Opioid-Related Adverse Events eCQM. This proposal 
would require hospitals to report four calendar quarters of data for a 
total of nine eCQMs (six specified eCQMs and three self-selected 
eCQMs).
(b) Proposed Reporting and Submission Requirements for eCQMs for the CY 
2027 Reporting Period/FY 2029 Payment Determination and for Subsequent 
Years
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36336 through 
36339), beginning with the CY 2027 reporting period/FY 2029 payment 
determination, we proposed to modify the eCQM reporting and submission 
requirements to require hospitals to report on the following two eCQMs 
in addition to the eCQMs proposed for the CY 2026 reporting period/FY 
2028

[[Page 69570]]

payment determination: (1) Hospital Harm--Pressure Injury eCQM; and (2) 
Hospital Harm--Acute Kidney Injury eCQM. This proposal would require 
hospitals to report four calendar quarters of data for a total of 
eleven eCQMs (eight specified eCQMs and three self-selected eCQMs).
    We proposed this stepwise approach to increasing the number of 
required eCQMs in response to public comments noting the burden and 
resources necessary to implement new eCQMs (88 FR 59145 through 59149, 
and 88 FR 59149 through 59154), while also balancing the need to 
prioritize more comprehensive reporting on important safety and 
preventable harm metrics. Waiting until the CY 2027 reporting period/FY 
2029 payment determination to require that hospitals report on these 
two Hospital Harm eCQMs would allow hospitals to experience 2 years of 
self-selecting to report on these relatively new eCQMs and build the 
infrastructure necessary to report these measures (88 FR 59145 through 
59149, and 88 FR 59149 through 59154). Therefore, we proposed to 
require these two measures in the CY 2027 reporting period instead of 
the CY 2026 reporting period to provide hospitals with additional time 
to gain experience with these newer measures (89 FR 36336 through 
36339).
(c) Summary of Proposed Changes to the eCQM Reporting and Submission 
Requirements
    We refer readers to section IX.C.8. for the full list of eCQMs by 
payment determination in the Hospital IQR Program. If a hospital does 
not have patients that meet the denominator criteria for any of the 
eCQMs included in this proposal, the hospital would submit a zero-
denominator declaration for the measure that allows a hospital to meet 
the reporting requirements for a particular eCQM. We refer readers to 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50258), the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49705 through 49708), and the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57170) for our previously adopted eCQM file 
format requirements. A QRDA Category I file with patients meeting the 
initial patient population of the applicable measures, a zero-
denominator declaration, and/or a case threshold exemption all count 
toward a successful submission for eCQMs for the Hospital IQR Program 
(82 FR 38387). The following Table IX.C.9 summarizes the proposed 
policies:
[GRAPHIC] [TIFF OMITTED] TR28AU24.236

    We invited public comment on our proposal to increase the number of 
mandatory eCQMs over a two-year period to ultimately require reporting 
on five additional eCQMs beginning with CY 2026 Reporting Period/FY 
2028 Payment Determination. We refer readers to section IX.F.6.b. of 
this final rule, in which we outline similar reporting and submission 
requirements under the Medicare Promoting Interoperability Program.
    Comment: Many commenters supported our proposal to modify eCQM 
reporting requirements. A few commenters supported modifying eCQM 
requirements because it is a reasonable step in moving towards the goal 
to transition all quality measure reporting to digital quality measures 
(dQMs). Another commenter supported the proposed requirements because 
they would support transition to dQMs, which would in turn provide more 
real-time, actionable data, and reduce the burden of chart-abstracted 
measures.
    Many commenters specifically supported making the Hospital Harm--
Severe Hypoglycemia and the Hospital Harm--Severe Hyperglycemia eCQMs 
mandatory, noting that both conditions are serious adverse events that 
can be avoided with proper glycemic management through tracking blood 
glucose levels. A few commenters support modifying eCQM requirements 
specifically because the proposed mandatory eCQMs are patient safety 
outcome eCQMs and mandatory reporting ensures data collected are useful 
to beneficiaries and the public.
    A commenter supported the proposed addition of the Hospital Harm--
Opioid-Related Adverse Events eCQMs for mandatory reporting because 
opioids have dangerous adverse effects in the inpatient hospital 
setting, are among the most frequently implicated medications in 
adverse drug events among hospitalized patients, and most opioid-
related adverse events are preventable with better monitoring and 
response.
    A few commenters strongly supported incorporation of the Hospital 
Harm--

[[Page 69571]]

Pressure Injury eCQM into the expanded mandatory eCQM measure set and 
recommended accelerating the timeline for mandatory reporting to CY 
2026 reporting period/FY 2028 payment determination. Commenters noted 
that accelerating the timeline would enhance prevention efforts and 
improve care for Medicare patients. A few commenters recommended making 
all patient safety outcome eCQMs mandatory.
    Response: We thank commenters for their support. We agree that 
modifications to eCQM reporting requirements to include patient safety 
outcome eCQMs would increase public reporting on quality and safety, 
thus empowering individuals to make decisions about where to go for 
care, which is one of our key actions to drive improvements in safety 
as outlined in the CMS National Quality Strategy.\715\ While we did not 
propose to make all patient safety outcome eCQMs mandatory at this 
time, we will continue to prioritize improving safety and consider 
additional eCQMs that focus on safety in future program years. In 
addition, we encourage hospitals to voluntarily report on as many 
patient safety eCQMs as feasible to support efforts toward improving 
patient safety in the hospital inpatient setting. As we note in section 
IX.C.5.c. and IX.C.5.d. of this final rule, we are adopting two new 
hospital harm eCQMs, Hospital Harm--Falls with Injury eCQM and Hospital 
Harm--Postoperative Respiratory Failure eCQM, beginning with the CY 
2026 reporting period/FY 2028 payment determination to provide 
additional reporting options for patient safety.
---------------------------------------------------------------------------

    \715\ Centers for Medicare & Medicaid Services. (April 2024). 
Quality in Motion: Acting on the CMS National Quality Strategy. 
Available at: https://www.cms.gov/files/document/quality-motion-cms-national-quality-strategy.pdf
---------------------------------------------------------------------------

    Comment: Many commenters did not support this proposal and 
recommended building out the digital quality strategy further and 
ensuring that new requirements align with its future data collection 
approach. A few commenters expressed concerns about modifying eCQM 
reporting requirements and recommended providing greater clarity on the 
vision for digital quality and how eCQM reporting fits within that 
vision. A commenter recommended pausing new requirements to focus on 
efforts towards the future development of dQMs.
    Response: We acknowledge commenters' concerns and requests for 
clarification regarding our digital quality strategy and how modifying 
eCQM reporting aligns with this strategy. We wish to highlight that in 
the FY 2022 IPPS/LTCH PPS final rule, we discussed our goal of moving 
to digital quality measurement for all CMS quality reporting and value-
based purchasing programs (86 FR 45342). In the FY 2023 IPPS/LTCH PPS 
final rule, we further described our goals to transition to dQMs, which 
include: reducing burden of reporting; provision of multi-dimensional 
data in a timely fashion, rapid feedback, and transparent reporting of 
quality measures; leveraging digital measures for advanced analytics to 
define, measure, and predict key quality issues; and employing quality 
measures that support development of a learning health system, which 
uses key data that are also used for care, quality improvement, public 
health, and research (87 FR 49181 through 49188). We also wish to 
highlight that our previously described vision for future dQMs would 
leverage interoperability standards to decrease mapping burden and 
align standards for quality measurement with interoperability standards 
used in other healthcare exchange methods (87 FR 49181 through 49188).
    The definition of dQM that we have published as part of strategic 
materials on the eCQI Resource Center states that in general, eCQMs are 
a subset of dQMs. As defined, dQMs are quality measures that use 
standardized, digital data from one or more sources of health 
information that are captured and exchanged via interoperable systems; 
apply quality measure specifications that are standards-based and use 
code packages; and are computable in an integrated environment without 
additional effort.\716\ As we previously described, increasing eCQM 
reporting requirements are a part of CMS' National Quality Strategy to 
``accelerate and support the transition to a digital and data-driven 
health care system'' by taking action to annually increasing the 
percentage of digital quality measures used in quality programs.\717\ 
Regarding the recommendation to pause new eCQM reporting requirements 
to focus efforts on the future development of dQMs, we wish to note 
that the addition of these eCQMs to our reporting requirements further 
advances CMS' goal of transition toward a fully digital quality 
measurement landscape promoting interoperability that would help 
decrease burden.718 719
---------------------------------------------------------------------------

    \716\ Definition of dQM available on the eCQI Resource Center 
at: https://ecqi.healthit.gov/dqm?qt-tabs_dqm=about-dqms.
    \717\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy. Available at: https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
    \718\ Centers for Medicare & Medicaid Services. (March 2022). 
Digital Quality Measurement Strategic Roadmap. Available at: https://ecqi.healthit.gov/sites/default/files/CMSdQMStrategicRoadmap_032822.pdf.
    \719\ Centers for Medicare & Medicaid Services. (April 2024). 
Quality in Motion: Acting on the CMS National Quality Strategy. 
Available at: https://www.cms.gov/files/document/quality-motion-cms-national-quality-strategy.pdf.
---------------------------------------------------------------------------

    Comment: A commenter did not support this proposal because feedback 
to hospitals about their performances on eCQMs is infrequent and seldom 
helpful as a basis for performance improvement. The commenter 
recommended that CMS provide more frequent and actionable eCQM 
performance feedback.
    Response: We disagree with the commenter that eCQM performance 
feedback is infrequent and not useful for performance improvement. We 
note that eCQMs provide real or near-real-time performance information 
because they are calculated using data in hospitals' EHRs. By using 
eCQMs, hospitals are not reliant on calculations provided by CMS and do 
not need to wait until they receive performance reports from CMS the 
way that they do with claims-based measures. Based on this immediate, 
or near-immediate, feedback embodied in eCQMs, hospitals should receive 
frequent and actionable feedback on their measured performance.
    Comment: A commenter requested clarification regarding whether the 
number of voluntary eCQMs is being reduced.
    Response: We interpret the commenter's question as asking for 
clarification about the number of self-selected eCQMs hospitals would 
have to report as part of the eCQM reporting requirements. In response, 
we did not propose any changes; hospitals would continue to report 
three self-selected eCQMs, as described in the proposal to modify eCQM 
reporting requirements in the FY 2025 IPPS/LTCH PPS proposed rule (89 
FR 36336 through 36339).
    Comment: Several commenters did not support the proposed 
modifications to eCQM reporting, stating that the required reporting of 
the previously adopted Hospital Harm eCQMs is premature, noting the 
proposed mandatory eCQMs are very new to the Hospital IQR Program. 
These commenters recommended maintaining the current requirements until 
important issues with the existing Hospital Harm eCQMs have been 
addressed. Several commenters similarly expressed concern about the 
feasibility of implementing the two Hospital Harm glycemic control 
eCQMs

[[Page 69572]]

and recommended additional testing for these measures. A commenter 
noted that three of the proposed mandatory eCQMs (Hospital Harm--
Opioid-Related Adverse Events, Hospital Harm--Pressure Injury, and 
Hospital Harm--Acute Kidney Injury) are measures that hospitals do not 
yet have in use, noting hospitals have not had an adequate opportunity 
to receive feedback on these measures. A commenter expressed concern 
that a one-year voluntary reporting period for new eCQMs may not be 
sufficient to implement and validate.
    Response: Regarding the recommendation to delay mandatory reporting 
requirements for both the Hospital Harm--Severe Hyperglycemia eCQM and 
Hospital Harm--Severe Hypoglycemia eCQM, we wish to note that hospitals 
will have had three years to self-select to report these eCQMs as we 
adopted these eCQMs beginning with the CY 2023 reporting period/FY 2025 
payment determination (86 FR 45382 through 45390). We have thus 
provided three years for hospitals to report and incorporate feedback, 
and we continue to encourage hospitals to self-select to report on 
these eCQMs as feasible to support efforts toward patient safety in the 
hospital inpatient setting. We acknowledge the Hospital Harm--Opioid-
Related Adverse Events, Hospital Harm--Pressure Injury, and Hospital 
Harm--Acute Kidney Injury eCQMs are relatively newer to the Hospital 
IQR Program eCQM measure set.
    Comment: Many commenters did not support eCQM reporting 
modifications and expressed concern with the burden associated with 
implementing new eCQMs per the proposed timeline. Many commenters, 
stressing the importance of flexibility and incremental change to 
quality reporting, recommended adopting a more phased approach to 
implement the new requirements. Commenters maintained that participants 
in the Hospital IQR Program required additional time to implement 
workflow changes and required updates to keep pace with this impactful 
increase in eCQM reporting. Several commenters recommended additional 
time specifically for staff training, education, and rollout.
    Many commenters expressed concerns about the burden associated with 
meeting these new requirements with limited health IT resources 
available. Many commenters noted that hospitals have experienced a 
significant increase in requirements over a short period of time and 
that they must invest significant time and staff resources, noting this 
places a significant burden on hospitals. Commenters expressed concern 
that the volume of changes being implemented introduces a significant 
administrative burden for small and rural hospitals, including critical 
access hospitals (CAHs). A few commenters described the intensive 
process to meet new eCQM reporting requirements, particularly for small 
teams, noting IT staff in hospitals is often very limited and that EHR 
vendor lead-times to implement changes can often take several years to 
go- live. Commenters noted that EHR vendors need considerable advance 
notice to complete upgrades and programming to meet new eCQM reporting 
requirements and that CMS should incrementally ramp up eCQM reporting 
requirements in order to advance digital quality measurement. A 
commenter recommended allowing more time for hospitals and EHR vendors 
to focus on eCQM optimization as they currently exist before adding new 
eCQMs and further increasing administrative burdens. Another commenter 
emphasized that the hospital workforce is under tremendous strain, 
noting quality and health IT resources are stretched thin, and that 
adding more reporting mandates to hospitals may prove unsustainable. 
Another commenter recommended considering providing direct funding for 
increased efforts by hospitals to implement eCQMs.
    Several commenters had specific recommendations for a further 
phased approach. A commenter recommended that CMS require only one 
additional eCQM in CY 2026 and only one additional eCQM in CY 2027 to 
reduce the burden and resources necessary to comply with the proposal. 
A commenter requested delay of the Hospital Harm--Pressure Injury eCQM 
Requirement and the Hospital Harm--Acute Kidney Injury eCQM for an 
additional year, noting the additional year would provide hospitals 
time to implement these measures and respond to feedback. This 
commenter specifically suggested adopting the Hospital Harm--Opioid-
Related Adverse Events measure next year and Hospital Harm--Pressure 
Injury as well as Hospital Harm--Acute Kidney Injury the following 
year. Another commenter recommended transitioning fewer eCQMs to 
mandatory reporting. A commenter noted that hospitals should be able to 
self-select the majority of their reported eCQMs.
    Response: We acknowledge the concerns of commenters related to the 
burden that the proposed timeline imposes on hospitals to implement a 
set of new eCQMs, particularly on small and rural hospitals, including 
CAHs. We further acknowledge comments regarding needing time to map EHR 
data and that there is often novel data collection involved in 
implementing new eCQMs that can be challenging and burdensome for 
providers. We also recognize that there are many new requirements 
placing burden on hospital IT staff, including working through the 
challenges associated with the implementation of the Hybrid Hospital-
Wide Readmission and Hybrid Hospital-Wide Mortality measures.
    After considering these comments, and in response to commenters' 
feedback recommending additional time for implementing new eCQMs, we 
are finalizing a modification of our proposal on eCQM reporting 
requirements.
    Specifically, we are finalizing a modification of our proposal such 
that for the CY 2026 reporting period/FY 2028 payment determination, 
hospitals would be required to submit data for eight total eCQMs: three 
self-selected, Safe Use of Opioids, Severe Obstetric Complications, 
Cesarean Birth, Hospital Harm--Severe Hypoglycemia, and Hospital Harm--
Severe Hyperglycemia. For the CY 2027 reporting period/FY 2029 payment 
determination, hospitals would be required to submit data for these 
eight eCQMs in addition to the Hospital Harm--Opioid-Related Adverse 
Events eCQM, for a total of nine eCQMs. Lastly, beginning with the CY 
2028 reporting period/FY 2030 payment determination, hospitals would be 
required to submit data for these nine eCQMs in addition to the 
Hospital Harm--Pressure Injury and Hospital Harm--Acute Kidney Injury 
eCQMs, for a total of eleven eCQMs. We refer readers to Table IX.C.XXXX 
for a summary of the newly finalized eCQM reporting and submission 
requirement policies. We reiterate that we are fully committed to our 
National Quality Strategy priority area of ``Patient Safety and 
Resiliency'' and, likewise, taking action to expand the collection and 
use of safety indicator data across programs, including data on key 
areas such as adverse events.\720\ In finalizing eCQM reporting 
requirements with revisions, we sought to balance the need for 
hospitals and their vendors to prepare for reporting the new eCQMs with 
the urgency of measuring at a national scale and addressing important 
patient safety events in hospital inpatient settings in the U.S.
---------------------------------------------------------------------------

    \720\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy. Available at: https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.

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

[[Page 69573]]

    The following Table IX.C.XXXX summarizes the newly finalized 
policies:
[GRAPHIC] [TIFF OMITTED] TR28AU24.237

10. Validation of Hospital IQR Program Data
    We proposed changes to our policies for eCQM validation scoring 
processes beginning with validation of eCQMs affecting the FY 2028 
payment determinations.
a. Background
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539 through 
53553), we finalized the processes and procedures for validation of 
chart-abstracted measures in the Hospital IQR Program for the FY 2015 
payment determination and subsequent years. In the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38398 through 38403), we finalized several 
requirements for the validation of eCQM

[[Page 69574]]

data, including a policy requiring submission of at least 75 percent of 
sampled eCQM medical records in a timely and complete manner for 
validation (81 FR 57181). In the FY 2021 IPPS/LTCH PPS final rule (85 
FR 58950 through 58952), we finalized the existing Hospital IQR Program 
validation scoring processes such that a combined score is calculated 
based on a weighted combination of a hospital's validation performance 
for chart-abstracted measures and eCQMs. Under the aligned validation 
policies, each hospital selected for validation is expected to submit 
medical record data for both chart-abstracted measures and eCQMs (85 FR 
58942 through 58953). Beginning with validation procedures affecting 
the FY 2024 payment determination, we finalized a policy to annually 
identify one pool of up to 200 hospitals selected through random 
selection and one pool of up to 200 hospitals selected using targeting 
criteria to participate in both chart-abstracted measure and eCQM 
validation (85 FR 58942 through 58953).
    We refer readers to 42 CFR 412.140(d) for our codification of 
validation policies and to the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49308 through 49310) for a discussion of the most recent changes to 
chart-abstracted and eCQM data validation requirements for the Hospital 
IQR Program wherein we finalized the requirement that hospitals 
selected for validation must submit timely and complete data for 100 
percent of requested records for eCQM validation. We refer readers to 
the FY 2017 IPPS/LTCH PPS final rule (81 FR 57178 through 57180) for 
details on the Hospital IQR Program data submission requirements for 
chart-abstracted measures.
b. Modification of eCQM Data Validation Beginning With the CY 2025 
Reporting Period/FY 2028 Payment Determination
(1) Modification of eCQM Validation Scoring Beginning With CY 2025 eCQM 
Data Affecting the FY 2028 Payment Determination
    Under the existing eCQM data validation policy, as described in the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 57180 through 57181), the 
accuracy of eCQM data (the extent to which data abstracted for 
validation matches the data submitted in the QRDA I file) has not 
affected a hospital's validation score. Instead, hospitals have been 
scored on the completeness of eCQM medical record data that were 
submitted for the validation process. In the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38401), we noted our intention for the accuracy of 
eCQM data validation to affect validation scores in the future.
    We have assessed agreement rates, or the rates by which hospitals' 
reported eCQM data agree with the data resulting from the review 
process that we conduct as part of validation. The agreement rates for 
validation accuracy, which have been confidentially reported to 
hospitals selected for eCQM validation in recent years, are 
consistently robust overall. For example, around 90 percent (national 
average agreement rate) for current eCQMs that would be validated in FY 
2028 (ranging from a low average of about 84 percent for the 
Anticoagulation Therapy for Atrial Fibrillation/Flutter eCQM to a high 
of average of about 94 percent for the Antithrombotic Therapy by the 
End of Hospital Day Two eCQM), based on FY 2024 validation results. 
With the low end of the average accuracy range being well above a 
passing threshold of 75 percent, it is now appropriate to move forward 
with scoring hospitals' eCQM data based on the accuracy of the data 
submitted for purposes of determining whether a hospital has met the 
validation requirements under the Hospital IQR Program. Therefore, in 
the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36339), we proposed to 
implement eCQM validation scoring based on the accuracy of eCQM data 
beginning with CY 2025 eCQM data affecting the FY 2028 payment 
determination. By the time our eCQM validation scoring methodology 
would go into effect, we would have been validating eCQM data for 
completeness for 8 years, which is ample time for hospitals to have 
prepared for data to be validated based on its accuracy. We also noted 
that because hospitals are already required to submit 100 percent of 
requested eCQM medical records to pass the eCQM validation requirement, 
there is no additional burden to hospitals associated with this policy 
to begin scoring the submitted records.
    In addition, in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
36339 through 36340), we proposed to remove the requirement at Sec.  
412.140(d)(2)(ii) that hospitals submit 100 percent of the requested 
eCQM medical records to pass the eCQM validation requirement and 
proposed that missing eCQM medical records would be treated as 
mismatches, beginning with the validation of CY 2025 eCQM data 
affecting the FY 2028 payment determination. This is the same 
methodology that is applied for missing medical records in chart-
abstracted measure validation to incentivize the timely submission of 
requested medical records. Because mismatches count against the 
agreement rate, by treating missing eCQM medical records as mismatches, 
we can ensure our validation scoring methodology clearly requires that 
hospitals submit all necessary eCQM data for our review without also 
requiring medical records submissions.
    In the proposed rule (89 FR 39339), we proposed that eCQM 
validation scores be determined using the same methodology that is 
currently used to score chart-abstracted measure validation. Hospitals' 
eCQM data would be used to compute an agreement rate and its associated 
confidence interval. The upper bound of the two-tailed 90 percent 
confidence interval would be used as the final eCQM validation score 
for the selected hospital. A minimum score of 75 percent accuracy would 
be required for the hospital to pass the eCQM validation requirement. 
Based on the FY 2024 results, most measures had national agreement 
rates well above the proposed 75 percent threshold, however these FY 
2024 results are based on only two quarters of data and included data 
only from eCQMs that have been in the Hospital IQR Program for several 
years. We anticipate that the average agreement rates may decrease with 
a full year of data and the introduction of newer eCQMs that hospitals 
may have less experience reporting. As such, while we may consider 
raising the minimum passing threshold from 75 percent in future years, 
at this time we have determined that the 75 percent threshold is 
appropriate for initial scoring of eCQMs in Hospital IQR Program 
validation.
    We invited public comment on our proposal to Modify eCQM Validation 
Scoring beginning with CY 2025 eCQM data affecting the FY 2028 payment 
determination. We summarize the public comments that we received, along 
with our responses, in the next subsection.
(2) Modification of the Combined Validation Scoring Process Beginning 
With CY 2025 Data Affecting the FY 2028 Payment Determination
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36339), we 
proposed to remove the existing combined validation score based on a 
weighted combination of a hospital's validation performance for chart-
abstracted measures and eCQMs and replace it with two separate 
validation scores, one for chart-abstracted measures, and one for 
eCQMs. Based on our current policies, the eCQM portion of the combined 
agreement rate is multiplied by zero percent, and the chart-abstracted 
measure agreement rate

[[Page 69575]]

is weighted at 100 percent. A minimum passing score for this combined 
score is set at 75 percent.
    Reporting requirements and procedures for eCQMs are different than 
those for chart-abstracted measures. For instance, hospitals implement 
electronic algorithms to query eCQM data and submit eCQM measure 
results using a custom file layout for quality data reporting to CMS. 
In contrast, validation of chart-abstracted measures is conducted using 
measure specifications written to support manual abstraction processes. 
As such, separate validation scores are consistent with the distinct 
requirements and procedures for the reporting of quality measure data. 
Moreover, CMS intends to retain an emphasis on data accuracy through 
the validation efforts across both measure types (that is, chart-
abstracted measures and eCQMs). It is important to ensure necessary 
analysis and resources are placed on chart-abstracted measures that are 
still currently being validated, especially because of their use within 
the Hospital Value-Based Purchasing (VBP) Program. Therefore, in the 
proposed rule (89 FR 36339 through 36340), we proposed to implement two 
separate scoring processes, one for chart-abstracted measures and one 
for eCQMs, for the FY 2028 payment determination and subsequent years. 
Hospitals would be required to receive passing validation scores for 
both chart-abstracted measure data and eCQM data to pass validation.
    Under our proposal, beginning with the validation of CY 2025 data 
affecting the FY 2028 payment determination, hospitals would receive 
separate validation scores for both chart-abstracted measure data and 
eCQM data, which would be used to determine a hospital's overall annual 
payment update. As established in the FY 2006 IPPS final rule (70 FR 
47420 through 47428), a hospital that fails to meet validation 
requirements may not receive the full annual payment update. Under our 
proposal, if a hospital fails either chart-abstracted validation 
requirements or eCQM validation requirements, it may not receive the 
full annual payment update. To be eligible for a full annual payment 
update, provided all other Hospital IQR Program requirements are met, a 
hospital would have to attain at least a 75 percent validation score 
for chart-abstracted measure validation and at least a 75 percent 
validation score for eCQM data validation.
    Our existing and newly proposed validation scoring changes are 
summarized in Table IX.C.10.
[GRAPHIC] [TIFF OMITTED] TR28AU24.238

    We invited public comment on our eCQM validation proposals.
    Comment: Some commenters supported our eCQM validation proposals in 
alignment with other validation scoring standards, including changing 
the weighting of the eCQM validation score from 0 percent to 50 
percent.
    Response: We thank the commenters for their support.
    Comment: Some commenters appreciated that the proposed eCQM 
validation requirements are meant to align with other validation 
criteria in the Hospital IQR Program. However, commenters had some 
concerns about eCQM validation scoring, noting that hospitals have 
little detail about validation decisions and questioned the value of 
the feedback reports provided to hospitals. Commenters requested that 
CMS publish a resource guide and requested that CMS not penalize 
hospitals for issues outside their control, like measure definition 
issues. Some commenters requested that CMS allow a grace period for new 
validation of new eCQMs since many new eCQMs have been introduced into 
the Hospital IQR Program in recent years.
    Response: We thank the commenters for this feedback. However, our 
experience in validating eCQMs in previous years, coupled with 
consistently high agreement rates, confirms that these measures are 
ready for validation. We have a number of resources related to 
validation located on our QualityNet website at: https://qualitynet.cms.gov/inpatient/data-management/data-validation/resources, 
and will consider publishing additional resources to support hospitals' 
efforts to report eCQM data accurately in the future.
    Comment: Some commenters requested that CMS consider changing the 
timeline for validation of eCQM data. A commenter requested additional 
time for review and validation of measure data to avoid incorrect 
validation decisions. The commenter argued that hospitals and vendors 
often need six or more weeks to complete coding, leaving little time 
for validation prior to data submission deadlines under the current 
practice. The commenter suggested that CMS align the eCQM reporting 
deadline with MIPS' deadline for March 31 instead of the current 
February 28th. Another commenter requested that the increased number of 
eCQMs should be delayed to avoid coinciding with increased validation 
requirements and called for an extended timeline for eCQM data 
submissions. The commenter also suggested analyzing how charts 
submitted for eCQM validation are being assessed to ensure that correct 
validation methods are used.

[[Page 69576]]

    Response: We thank the commenters for this feedback. However, as 
stated earlier, our experience with validating eCQMs in previous years, 
coupled with consistently high agreement rates, confirms that the 
measures are ready for validation, and correspondingly, that hospitals 
are sufficiently prepared to submit their eCQM data and for those data 
to be sufficiently accurate for validation. We do not agree that we 
should delay implementation of additional validation requirements for 
eCQMs because we continue to believe that accurate and complete eCQM 
data are crucial to informing members of the public about the care 
quality that Medicare beneficiaries receive in hospitals. We understand 
that hospitals would need to adjust processes and workflows to account 
for additional eCQM reporting requirements, but delaying validation 
would not impact hospitals' efforts to deliver the highest quality care 
to their patients. We will continue to work with hospitals to ensure 
that they are fully informed about the validation program and that they 
continue to report their eCQM data accurately.
    Comment: Some commenters opposed CMS's eCQM validation proposals, 
arguing that validation imposes a significant administrative burden on 
hospitals and that validating eCQMs for accuracy would increase that 
burden. Commenters noted that targeted reviews during eCQM validation 
would require additional cases per quarter to be submitted during the 
30-day window to retrieve and review records and suggested that CMS 
allow up to 45 days for those processes.
    Response: We thank the commenters for this feedback. However, while 
we understand that validation imposes some reporting burden on 
hospitals, we have determined, based on the power analysis for the 
confidence interval calculation, that a final sample size of eight eCQM 
cases per quarter is essential to achieve sufficient and accurate 
validation results. We do not intend to increase the hospital sample 
size for eCQM validation because we have attempted to ensure that our 
eCQM validation proposals achieve both the objectives of minimizing 
reporting burden on participating hospitals and ensuring that hospitals 
report fully accurate data. We will consider whether to extend the 
timeframe for hospitals' retrieval of records for validation purposes 
in the future. However, we note that we are required by section 
1886(b)(3)(B)(viii)(XI) to establish a process to validate measure data 
submitted by hospitals under the Program, with the process to include 
random audits. Our validation program continues to ensure that the data 
reported by hospitals, and that we report publicly, are as accurate as 
feasible and to the extent that the commenters oppose validation 
requirements in their entirety do not understand that such a position 
would adhere to our statutory direction.
    Comment: Some commenters requested that CMS consider requiring 
validation of fewer measures for selected hospitals and start with a 
required validation score lower than 75 percent. A commenter suggested 
that CMS delay eCQM validation scoring until after some chart-
abstracted measures are removed from the program. Another commenter 
argued that the 75 percent threshold is more appropriate for chart-
abstracted measures with which hospitals have more experience than 
eCQMs.
    Response: We proposed the 75 percent agreement rate for eCQM 
validation scoring in alignment with common standards that we have 
adopted in other validation programs, including chart-abstracted 
measure validation previously adopted in the Hospital IQR Program (81 
FR 57179 through 57180), to ensure sufficient accuracy of the measures. 
Given the high overall agreement rates that we have observed for eCQMs, 
we anticipate that this threshold would uphold the integrity of the 
validation process consistently and that its alignment with other 
validation programs would help hospitals meet validation requirements 
consistently across measure types. We will continue observing 
hospitals' experience with eCQM validation and will consider whether we 
should propose further refinements in future years.
    Comment: Some commenters opposed eCQM validation scoring changes 
for measures that have been adopted for their first or second year of 
reporting, arguing that validation is more reasonable for measures that 
hospitals have reported for at least two years. Commenters suggested 
that CMS consider a phased-in approach to eCQM validation starting in 
CY 2026 or later. Commenters noted that hospitals often receive their 
eCQM data at the very end of the calendar year and thus do not have 
time for their staff to review their performance and work to implement 
improvements.
    Response: We thank commenters for this feedback. However, as we 
stated earlier, our experience in validating eCQMs in previous years, 
coupled with consistently high agreement rates, confirms that these 
measures are ready for validation and that hospitals can successfully 
report eCQM data accurately. We understand that hospitals must adjust 
their processes to account for new eCQMs, but ensuring that hospitals 
report accurately on their eCQMs necessitates the validation policies 
that we have proposed. We will continue to observe hospitals' 
experience with eCQM validation and will consider whether to revisit 
these policies in future years.
    Comment: A commenter opposed CMS's eCQM validation proposals, 
arguing that hospitals have never received any feedback on eCQM 
validation from the agency.
    Response: We would like to clarify that, as we discussed in the FY 
2025 IPPS/LTCH PPS proposed rule (89 FR 36339), we have confidentially 
reported agreement rates for validation accuracy to hospitals selected 
for eCQM validation in recent years. Those agreement rates range 
between about 84 percent to about 94 percent based on FY 2024 
validation results.
    Comment: A commenter was concerned about the time it takes CMS to 
make changes to quality measure specifications and the speed with which 
eCQMs can be adopted thereafter. The commenter noted that, in one case, 
it took CMS five years to make a change to the perinatal care eCQM 
specifications, but the measure became a requirement the following 
year. The commenter argued that this timeframe is too short for 
hospitals to adjust and ensure data integrity, particularly for eCQMs 
where the commenter stated that hospitals and CMS must partner to 
identify and correct issues with measure specifications.
    Response: We thank the commenter for this feedback. We note that 
quality measure specifications changes are the purview of the measure 
steward, which may be CMS in some cases or may be a third party. Minor 
or technical changes to quality measure specifications are not 
significant enough to impair hospitals' delivery of high-quality care 
to their patients while those changes are implemented in EHR systems. 
Based on the high agreement rates we have observed to date, hospitals 
have been successful at implementing the necessary updates to their 
systems and care practices. We agree with the commenter that we must 
partner with hospitals to ensure that issues identified in measure 
specifications are appropriately captured in eCQMs so that hospitals 
report data successfully and accurately to CMS and we will continue to 
engage collaboratively with hospitals to that end.

[[Page 69577]]

    Comment: A commenter expressed concerns about eCQM validation when, 
in the commenter's view, hospitals are at the mercy of measure 
developers and EHR vendors. The commenter argued that, unless code sets 
are fully updated, hospitals are unable to capture patient chart data 
accurately. The commenter requested that CMS provide examples of 
inaccurately reported data to inform hospitals and requested that CMS 
consider a confidential feedback period before penalizing hospitals 
over eCQM data accuracy.
    Response: As stated earlier, minor or technical changes to quality 
measure specifications are not significant enough to alter hospitals' 
ability to provide care in accordance with the applicable clinical 
standard. We understand that hospitals must rely on measure developers 
and EHR vendors for their eCQMs reporting, and we work closely with 
both groups to ensure that the measures that we propose to adopt and 
that we propose to validate are fully ready for hospitals' 
implementation. We will consider whether we should provide additional 
confidential feedback to hospitals in the future, potentially including 
examples of inaccurately reported data, as we continue working to keep 
hospitals fully informed about our validation programs.
    After consideration of the comments that we have received, we are 
finalizing our eCQM validation policies as proposed.
11. Data Accuracy and Completeness Acknowledgement (DACA) Requirements
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53554) for previously adopted details on DACA requirements. We did not 
propose any changes to this policy in this final rule. We refer readers 
to the QualityNet website at: https://qualitynet.cms.gov (or other 
successor CMS designated websites) for more details on DACA 
requirements.
12. Public Display Requirements
    Section 1886(b)(3)(B)(viii)(VII) of the Act requires the Secretary 
to report quality measures of process, structure, outcome, patients' 
perspectives on care, efficiency, and costs of care that relate to 
services furnished in inpatient settings in hospitals on the internet 
website of CMS. Section 1886(b)(3)(B)(viii)(VII) of the Act also 
requires that the Secretary establish procedures for making information 
regarding measures available to the public after ensuring that a 
hospital can review its data before they are made public. Our current 
policy is to report data from the Hospital IQR Program as soon as it is 
feasible on CMS websites such as the Compare tool hosted by HHS, 
currently available at: https://www.medicare.gov/care-compare, or its 
successor website, after a 30-day preview period (78 FR 50776 through 
50778).
    We did not propose any changes to these policies or the public 
reporting of eCQM data or overall hospital star ratings in this final 
rule. We also refer readers to the QualityNet website at: https://qualitynet.cms.gov/inpatient/public-reporting (or other successor CMS 
designated websites) for details on public display requirements.
    We refer readers to the CY 2025 OPPS/ASC proposed rule where we are 
soliciting input on potential future methodological modifications 
regarding the Safety of Care measure group within the Overall Hospital 
Quality Star Rating (89 FR 59509 through 59515).
13. Reconsideration and Appeal Procedures
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51650 through 
51651), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836), and 42 CFR 
412.140(e), we established an approach for reconsideration and appeal 
procedures for the Hospital IQR Program. As part of this 
reconsideration process, hospitals can request reconsideration if CMS 
determines that the hospital did not meet the Hospital IQR Program's 
validation requirements. Under these requirements as established in the 
FY 2011 IPPS/LTCH PPS final rule (75 FR 50225 through 50229), for 
purposes of validation, hospitals are required to resubmit copies of 
all medical records that were originally submitted to the Clinical Data 
Abstraction Center (CDAC) each relevant quarter. With the transition to 
all electronic submission of copies of medical records for Hospital IQR 
Program validation as established in they FY 2021 IPPS/LTCH final rule 
(85 FR 58949 through 58950), both through eCQMs and digitized charts, 
the current reconsideration requirement to resubmit records used for 
validation results is no longer necessary and creates duplicative files 
and work.
    Therefore, we proposed to revise Sec.  412.140(e)(2)(vii)(A) to no 
longer require hospitals to resubmit medical records as part of their 
request for reconsideration of validation, beginning with CY 2023 
discharges affecting the FY 2026 payment determination.
    Under our proposal, hospitals that need to submit a revised medical 
record may still do so, but those hospitals that would otherwise be 
resubmitting copies of the previously submitted records would no longer 
be required to submit them. Removing record submission as a requirement 
for validation reconsideration would reduce hospital administrative 
burden for most hospitals that do not have revised records to submit. 
Making this step optional would also reduce the burden for CMS to 
collect and track medical records that are already available.
    We invited public comment on our proposal to remove the requirement 
for hospitals to resubmit medical records as part of their request for 
reconsideration of validation, beginning with CY 2023 discharges 
affecting the FY 2026 payment determination.
    Comment: A commenter supported our proposal to remove the 
requirement to resubmit records for validation, agreeing with us that 
this change would reduce burden on participating hospitals.
    Response: We thank the commenter for their support.
    After consideration of the comment that we received, we are 
finalizing this policy as proposed beginning with the CY 2023 
discharges affecting the FY 2026 payment determination.
14. Hospital IQR Program Extraordinary Circumstances Exceptions (ECE) 
Policy
    We did not propose any changes to this policy in this final rule. 
We refer readers to Sec.  412.140(c)(2) and the QualityNet website at: 
https://qualitynet.cms.gov (or other successor CMS designated websites) 
for our current requirements for submission of a request for an 
exception.

D. Changes to the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program

1. Background
    The PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program, 
authorized by section 1866(k) of the Act, applies to hospitals 
described in section 1886(d)(1)(B)(v) of the Act (referred to as ``PPS-
Exempt Cancer Hospitals'' or ``PCHs''). In the FY 2025 IPPS/LTCH PPS 
proposed rule (86 FR 36341), we proposed to adopt the Patient Safety 
Structural measure beginning with the CY 2025 reporting period/FY 2027 
program year as described in section IX.B.1. of this final rule. We 
also proposed to modify the Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) Survey measure as described in section 
IX.B.2. of this final rule and proposed to move up the start date for 
publicly displaying hospital performance on the

[[Page 69578]]

Hospital Commitment to Health Equity measure (86 FR 36341).\721\
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    \721\ To provide clarity and to better align with the Hospital 
IQR Program, we have changed the name of the Facility Commitment to 
Health Equity measure in the PCHQR Program to the Hospital 
Commitment to Health Equity measure. This is a non-substantive 
change and does not impact the measure's specifications or reporting 
requirements.
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2. Adoption of the Patient Safety Structural Measure Beginning With the 
CY 2025 Reporting Period/FY 2027 Program Year
    We refer readers to section IX.B.1. of this final rule where we 
finalize with modification the adoption of the Patient Safety 
Structural measure beginning with the CY 2025 reporting period/FY 2027 
program year for the PCHQR Program. We are also finalizing with 
modification the adoption of this measure for the Hospital Inpatient 
Quality Reporting (IQR) Program, as discussed in that section.
3. Modification of the Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) Survey Measure Beginning With the CY 
2025 Reporting Period/FY 2027 Program Year
    We refer readers to section IX.B.2. of this final rule where we 
finalize the modification of the HCAHPS Survey measure (CBE #0166) 
beginning with the CY 2025 reporting period/FY 2027 program year for 
the PCHQR Program. We are also finalizing the adoption of the same 
modifications to this measure for purposes of the Hospital IQR Program 
and the Hospital VBP Program, as discussed in the same section.
4. Summary of Previously Adopted and Newly Finalized PCHQR Program 
Measures for the CY 2025 Reporting Period/FY 2027 Program Year and 
Subsequent Years
    Table IX.D.-01 summarizes the previously adopted and the newly 
finalized measures for the PCHQR Program measure set beginning with the 
CY 2025 reporting period/FY 2027 program year.

[[Page 69579]]

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5. New Start Date for Public Display of the Hospital Commitment to 
Health Equity Measure
    In the FY 2024 IPPS/LTCH PPS final rule, we adopted the Hospital 
Commitment to Health Equity measure for the PCHQR measure set beginning 
with the CY 2024 reporting period/FY 2026 program year (88 FR 59204 
through 59210). We also finalized that we would publicly report PCH 
performance on this measure beginning with CY 2024 data beginning July 
2026 or as soon as feasible thereafter (88 FR 59209; 59228).
    In the FY 2025 IPPS/LTCH PPS proposed rule, we proposed to 
accelerate the timeline for beginning to publicly report PCH 
performance on this measure. Specifically, we proposed to start public 
reporting of PCH performance on this measure using CY 2024 data 
beginning January 2026 or as soon as feasible thereafter. We stated 
that the public could benefit from having access to the information 
sooner because the data provide an opportunity to recognize PCHs that 
have attested to their commitment to health equity at an earlier date. 
We also stated that the modification of the date for public reporting 
would promote efficiencies through alignment of the performance 
periods, data submission periods, and the anticipated public reporting 
release with the Inpatient Psychiatric Facility Quality Reporting 
(IPFQR) Program that adopted the Facility Commitment to Health Equity 
measure (which requires the same attestations as the Hospital 
Commitment to Health Equity measure) beginning with reporting of CY 
2024 data for the FY 2026 payment determination and would provide this 
information for providers participating in the PCHQR Program and the 
IPFQR Program simultaneously. We invited public comment on this 
proposal.
    Comment: A few commenters supported moving up the public reporting 
timeline for the Hospital Commitment to Health Equity measure

[[Page 69580]]

because they believe that patients will benefit from being able to 
access the information sooner, and that the earlier publication 
timeframe will promote greater efficiencies through alignment with 
other CMS quality reporting programs without changing the submission 
timeline for PCH data.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing the start of public reporting of the Hospital Commitment to 
Health Equity measure to January 2026 or as soon as feasible 
thereafter.
6. Summary of Previously Finalized Public Display Policies and Newly 
Finalized Public Display Start Date Change for the PCHQR Program
    Our previously finalized public display policies and newly 
finalized public display start date change for the Hospital Commitment 
to Health Equity measure for the PCHQR Program are described in Table 
IX.D.-02:
BILLING CODE 4120-01-P
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[[Page 69581]]


BILLING CODE 4120-01-C

E. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

1. Background and Statutory Authority
    The Long-Term Care Hospital Quality Reporting Program (LTCH QRP) is 
authorized by section 1886(m)(5) of the Act, and it applies to all 
hospitals certified by Medicare as Long-Term Care Hospitals (LTCHs). 
Section 1886(m)(5)(C) of the Act requires LTCHs to submit to the 
Secretary quality measure data specified under section 1886(m)(5)(D) in 
a form and manner, and at a time, specified by the Secretary. In 
addition, section 1886(m)(5)(F) of the Act requires LTCHs to submit 
data on quality measures under section 1899B(c)(1) of the Act, resource 
use or other measures under section 1899B(d)(1) of the Act, and 
standardized patient assessment data required under section 1899B(b)(1) 
of the Act. LTCHs must submit the data required under section 
1886(m)(5)(F) of the Act in the form and manner, and at the time, 
specified by the Secretary. Under the LTCH QRP, the Secretary must 
reduce by two percentage points the annual update to the LTCH PPS 
standard federal rate for discharges for an LTCH during a fiscal year 
(FY) if the LTCH has not complied with the LTCH QRP requirements 
specified for that FY. Section 1890A of the Act requires that the 
Secretary establish and follow a pre-rulemaking process, in 
coordination with the consensus-based entity (CBE) with a contract 
under section 1890(a) of the Act, to solicit input from certain groups 
regarding the selection of quality and efficiency measures for the LTCH 
QRP. We have codified our program requirements in our regulations at 42 
CFR 412.560.
    We proposed to require LTCHs to report four new items to the LTCH 
Continuity Assessment and Record of Evaluation (CARE) Data Set (LCDS) 
and modify one item on the LCDS as described in section IX.E.4. of the 
preamble of this final rule. Second, we proposed to extend the 
Admission assessment window for the LCDS as described in section 
IX.E.7.c. Third, we sought information on future measure concepts for 
the LTCH QRP, and finally, we sought information on a future LTCH Star 
Rating system.
2. General Considerations Used for the Selection of Quality Measures 
for the LTCH QRP
    For a detailed discussion of the considerations, we historically 
use for the selection of LTCH QRP quality, resource use, and other 
measures, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 
FR 49728).
3. Quality Measures Currently Adopted for the FY 2025 LTCH QRP
    The LTCH QRP currently has 18 adopted measures, which are set out 
in Table IX.E.-01. For a discussion of the factors used to evaluate 
whether a measure should be removed from the LTCH QRP, we refer readers 
to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41624 through 41634) and 
to the regulations at 42 CFR 412.560(b)(3).

[[Page 69582]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.241

    We did not propose to adopt any new measures for the LTCH QRP.
4. Collection of Four New Items as Standardized Patient Assessment Data 
Elements and Modification of One Item Collected as a Standardized 
Patient Assessment Data Element Beginning With the FY 2028 LTCH QRP
    In the proposed rule, we proposed to add four new items \722\ to be 
collected as standardized patient assessment data elements under the 
social determinants of health (SDOH) category under the LTCH QRP: 
Living Situation (one item); Food (two items); and Utilities (one 
item). We also proposed to modify one of the current items collected as 
a standardized patient assessment data element under the SDOH category 
(the Transportation item).\723\
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    \722\ Items may also be referred to as ``data elements.''
    \723\ As noted in section IX.E of the proposed rule and section 
IX.E. of this final rule, hospitals are required to report whether 
they have screened patients for five standardized SDOH categories: 
housing instability, food insecurity, utility difficulties, 
transportation needs, and interpersonal safety.
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a. Definition of Standardized Patient Assessment Data
    Section 1886(m)(5)(F)(ii) of the Act requires LTCHs to submit 
standardized patient assessment data required under section 1899B(b)(1) 
of the Act. Section 1899B(b)(1)(A) of the Act requires post-acute care 
(PAC) providers to submit standardized patient assessment data under 
applicable reporting provisions (which, for LTCHs, is the LTCH QRP) 
with respect to the admission and discharge of an individual (and more 
frequently as the Secretary deems appropriate). Section 1899B(a)(1)(C) 
of the Act requires, in part, the Secretary to modify the PAC 
assessment instruments in order for PAC providers, including LTCHs, to 
submit standardized patient assessment data under the Medicare program. 
LTCHs are currently required to report patient assessment data through 
the LCDS. Section 1899B(b)(1)(B) of the Act describes standardized 
patient assessment data as data required for at least the quality 
measures described in section 1899B(c)(1) of the Act and that is with 
respect to the following categories: (1) functional status, such as 
mobility and self-care at admission to a PAC provider and before 
discharge from a PAC provider; (2) cognitive function, such as ability 
to express ideas and to understand, and mental status, such as 
depression and dementia; (3) special services, treatments, and 
interventions, such as need for ventilator use, dialysis, chemotherapy, 
central line placement, and total parenteral nutrition; (4) medical 
conditions and comorbidities, such as diabetes, congestive heart 
failure, and pressure ulcers; (5) impairments, such as incontinence and 
an impaired ability to hear, see, or swallow; and (6) other categories 
deemed necessary and appropriate by the Secretary.

[[Page 69583]]

b. Social Determinants of Health Collected as Standardized Patient 
Assessment Data Elements
    Section 1899B(b)(1)(B)(vi) of the Act authorizes the Secretary to 
collect standardized patient assessment data elements with respect to 
other categories deemed necessary and appropriate. Accordingly, we 
finalized the creation of the SDOH category of standardized patient 
assessment data elements in the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42577 through 42581), and defined SDOH as the socioeconomic, cultural, 
and environmental circumstances in which individuals live that impact 
their health.\724\ According to the World Health Organization, research 
shows that the SDOH can be more important than health care or lifestyle 
choices in influencing health, accounting for between 30-55% of health 
outcomes.\725\ This is a part of a growing body of research that 
highlights the importance of SDOH on health outcomes. Subsequent to the 
FY 2020 IPPS/LTCH PPS final rule, we expanded our definition of SDOH: 
SDOH are the conditions in the environments where people are born, 
live, learn, work, play, worship, and age that affect a wide range of 
health, functioning, and quality-of-life outcomes and 
risks.726 727 728 This expanded definition aligns our 
definition of SDOH with the definition used by HHS agencies, including 
OASH, the Centers for Disease Control and Prevention (CDC) and the 
White House Office of Science and Technology Policy.729 730 
We currently collect seven items in this SDOH category of standardized 
patient assessment data elements: ethnicity, race, preferred language, 
interpreter services, health literacy, transportation, and social 
isolation (84 FR 42577 through 42581).\731\
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    \724\ Office of the Assistant Secretary for Planning and 
Evaluation (ASPE). Second Report to Congress on Social Risk and 
Medicare's Value-Based Purchasing Programs. June 28, 2020. Available 
at: https://aspe.hhs.gov/reports/second-report-congress-social-risk-medicares-value-based-purchasing-programs.
    \725\ World Health Organization. Social determinants of health. 
Available at: https://www.who.int/health-topics/social-determinants-of-health#tab=tab_1.
    \726\ Using Z Codes: The Social Determinants of Health (SDOH). 
Data Journey to Better Outcomes.
    \727\ Improving the Collection of Social Determinants of Health 
(SDOH) Data with ICD-10-CM Z Codes. https://www.cms.gov/files/document/cms-2023-omh-z-code-resource.pdf.
    \728\ CMS.gov. Measures Management System (MMS). CMS Focus on 
Health Equity. Health Equity Terminology and Quality Measures. 
https://mmshub.cms.gov/about-quality/quality-at-CMS/goals/cms-focus-on-health-equity/health-equity-terminology.
    \729\ Centers for Disease Control and Prevention. Social 
Determinants of Health (SDOH) and PLACES Data.
    \730\ ``U.S. Playbook To Address Social Determinants Of Health'' 
from the White House Office Of Science And Technology Policy 
(November 2023).
    \731\ These SDOH data are also collected for purposes outlined 
in section 2(d)(2)(B) of the Improving Medicare Post-Acute Care 
Transitions Act (IMPACT Act). For a detailed discussion on SDOH data 
collection under section 2(d)(2)(B) of the IMPACT Act, see the FY 
2020 LTCH PPS final rule (84 FR 42577 through 42579).
---------------------------------------------------------------------------

    In accordance with our authority under section 1899B(b)(1)(B)(vi) 
of the Act, we similarly finalized the creation of the SDOH category of 
standardized patient assessment data elements for Skilled Nursing 
Facilities (SNFs) in the FY 2020 SNF PPS final rule (84 FR 38805 
through 38817), for Inpatient Rehabilitation Facilities (IRFs) in the 
FY 2020 IRF PPS final rule (84 FR 39149 through 39161), and for Home 
Health Agencies (HHAs) in the Calendar Year (CY) 2020 HH PPS final rule 
(84 60597 through 60608). We also collect the same seven SDOH items in 
these PAC providers' respective patient/resident assessment instruments 
(84 FR 38817, 39161, and 60610, respectively).
    Access to standardized data relating to SDOH on a national level 
permits us to conduct periodic analyses, and to assess their 
appropriateness as risk adjustors or in future quality measures. Our 
ability to perform these analyses and to make adjustments relies on 
existing data collection of SDOH items from PAC settings. We adopted 
these SDOH items using common standards and definitions across the four 
PAC providers to promote interoperable exchange of longitudinal 
information among these PAC providers, including LTCHs, and other 
providers. We believe this information may facilitate coordinated care, 
improve patient focused care planning, and allow for continuity of the 
discharge planning process from PAC settings.
    We noted in our FY 2020 IPPS/LTCH PPS final rule that each of the 
items was identified in the 2016 National Academies of Sciences, 
Engineering, and Medicine (NASEM) report as impacting care use, cost, 
and outcomes for Medicare beneficiaries (84 FR 39150). At that time, we 
acknowledged that other items may also be useful to understand. The 
SDOH items we proposed to collect as standardized patient assessment 
data elements under the SDOH category in the proposed rule were also 
identified in the 2016 NASEM report \732\ or the 2020 NASEM report 
\733\ as impacting care use, cost, and outcomes for Medicare 
beneficiaries. These items have the potential to affect treatment 
preferences and goals of patients and their caregivers. Identification 
of these SDOH items may also help LTCHs be in a position to offer 
assistance, by connecting patients and their caregivers with these 
associated needs to social support programs, as well as inform our 
understanding of patient complexity.
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    \732\ Social Determinants of Health. Healthy People 2020. 
https://www.healthypeople.gov/2020/topics-objectives/topic/social-determinants-of-health. (February 2019).
    \733\ National Academies of Sciences, Engineering, and Medicine. 
2020. Leading Health Indicators 2030: Advancing Health, Equity, and 
Well-Being. Washington, DC: The National Academies Press. https://doi.org/10.17226/25682.
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    Health-related social needs (HRSNs) are the resulting effects of 
SDOH, which are individual-level, adverse social conditions that 
negatively impact a person's health or health care.\734\ Examples of 
HRSNs include lack of access to food, housing, or transportation, and 
have been associated with poorer health outcomes, greater use of 
emergency departments and hospitals, and higher health care costs. 
Certain HRSNs can lead to unmet social needs that directly influence an 
individual's physical, psychosocial, and functional status.\735\ This 
is particularly true for food security, housing stability, utilities 
security, and access to transportation.\736\
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    \734\ Centers for Medicare & Medicaid Services. ``A Guide to 
Using the Accountable Health Communities Health-Related Social Needs 
Screening Tool: Promising Practices and Key Insights.'' August 2022. 
Available at https://www.cms.gov/priorities/innovation/media/document/ahcm-screeningtool-companion.
    \735\ Hugh Alderwick and Laura M. Gottlieb, ``Meanings and 
Misunderstandings: A Social Determinants of Health Lexicon for 
Health Care Systems: Milbank Quarterly,'' Milbank Memorial Fund, 
November 18, 2019, https://www.milbank.org/quarterly/articles/meanings-and-misunderstandings-a-social-determinants-of-health-lexicon-for-health-care-systems/.
    \736\ Hugh Alderwick and Laura M. Gottlieb, ``Meanings and 
Misunderstandings: A Social Determinants of Health Lexicon for 
Health Care Systems: Milbank Quarterly,'' Milbank Memorial Fund, 
November 18, 2019, https://www.milbank.org/quarterly/articles/meanings-and-misunderstandings-a-social-determinants-of-health-lexicon-for-health-care-systems/.
---------------------------------------------------------------------------

    We proposed to require LTCHs collect and submit four new items in 
the LCDS as standardized patient assessment data elements under the 
SDOH category because these items would collect information not already 
captured by the current SDOH items. Specifically, we believe the 
ongoing identification of SDOH would have three significant benefits. 
First, promoting screening for SDOH could serve as evidence-based

[[Page 69584]]

building blocks for supporting healthcare providers in actualizing 
their commitment to address disparities that disproportionately impact 
underserved communities. Second, screening for SDOH improves health 
equity through identifying potential social needs so the LTCH may 
address those with the patient, their caregivers, and community 
partners during the discharge planning process, if indicated.\737\ 
Third, these SDOH items could support our ongoing LTCH QRP initiatives 
by providing data with which to stratify LTCHs' performance on measures 
or in future quality measures.
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    \737\ American Hospital Association. (2020). Health Equity, 
Diversity & Inclusion Measures for Hospitals and Health System 
Dashboards. December 2020. Accessed: January 18, 2022. Available at: 
https://ifdhe.aha.org/system/files/media/file/2020/12/ifdhe_inclusion_dashboard.pdf.
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    Collection of additional SDOH items would permit us to continue 
developing the statistical tools necessary to maximize the value of 
Medicare data and improve the quality of care for all beneficiaries. 
For example, we recently developed and released the Health Equity 
Confidential Feedback Reports, which provided data to LTCHs on whether 
differences in quality measure outcomes are present for their patients 
by dual-enrollment status and race and ethnicity.\738\ We note that 
advancing health equity by addressing the health disparities that 
underlie the country's health system is one of our strategic pillars 
\739\ and a Biden-Harris Administration priority.\740\
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    \738\ In October 2023, we released two new annual Health Equity 
Confidential Feedback Reports to LTCHs: The Discharge to Community 
(DTC) Health Equity Confidential Feedback Report and the Medicare 
Spending Per Beneficiary (MSPB) Health Equity Confidential Feedback 
Report. The PAC Health Equity Confidential Feedback Reports 
stratified the DTC and MSPB measures by dual-enrollment status and 
race/ethnicity. For more information on the Health Equity 
Confidential Feedback Reports, please refer to the Education and 
Outreach materials available on the LTCH QRP Training web page at 
https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-quality-reporting-training.
    \739\ Brooks-LaSure, C. (2021). My First 100 Days and Where We 
Go from Here: A Strategic Vision for CMS. Centers for Medicare & 
Medicaid. Available at: https://www.cms.gov/blog/my-first-100-days-and-where-we-go-here-strategic-vision-cms.
    \740\ The White House. The Biden-Harris Administration Immediate 
Priorities [website]. https://www.whitehouse.gov/priorities/.
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c. Collect Four New Items as Standardized Patient Assessment Data 
Elements Beginning With the FY 2028 LTCH QRP
    We proposed to require LTCHs to collect four new items as 
standardized patient assessment data elements under the SDOH category 
using the LCDS: one item for Living Situation, as described in section 
IX.E.4.c.(1) of the proposed rule; two items for Food, as described in 
section IX.E.4.c.(2) of the proposed rule; and one item for Utilities, 
as described in section IX.E.4.c.(3) of the proposed rule.
    We selected the proposed SDOH items from the Accountable Health 
Communities (AHC) Health Related Social Needs (HRSN) Screening Tool 
developed for the AHC Model.\741\ The AHC HRSN Screening Tool is a 
universal, comprehensive screening for HRSNs that addresses five core 
domains as follows: (i) housing instability (for example, homelessness, 
poor housing quality), (ii) food insecurity, (iii) transportation 
difficulties, (iv) utility assistance needs, and (v) interpersonal 
safety concerns (for example, intimate-partner violence, elder abuse, 
child maltreatment).\742\
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    \741\ The AHC Model was a five year demonstration project run by 
the Centers for Medicare & Medicaid Innovation between May 1, 2017 
and April 30, 2022. For more information go to https://www.cms.gov/priorities/innovation/innovation-models/ahcm.
    \742\ More information about the AHC HRSN Screening Tool is 
available on the website at https://innovation.cms.gov/Files/worksheets/ahcm-screeningtool.pdf.
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    We believe that requiring LTCHs to report new items that are 
included in the AHC HRSN Screening Tool would further standardize the 
screening of SDOH across quality programs. For example, our proposal 
would align, in part, with the requirements of the Hospital Inpatient 
Quality Reporting (IQR) Program and the Inpatient Psychiatric Facility 
Quality Reporting (IPFQR) Program. As of January 2024, hospitals are 
required to report whether they have screened patients for the 
standardized SDOH categories of housing stability, food security, 
utility difficulties, transportation needs, and interpersonal safety to 
meet the Hospital IQR Program requirements.\743\ Beginning January 
2025, IPFs will also be required to report whether they have screened 
patients for the same set of SDOH categories.\744\ As we continue to 
standardize data collection across PAC settings, we believe using 
common standards and definitions for new items is important to promote 
interoperable exchange of longitudinal information between LTCHs and 
other providers to facilitate coordinated care, continuity in care 
planning, and the discharge planning process.
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    \743\ Centers for Medicare & Medicaid Services, FY2023 IPPS/LTCH 
PPS final rule (87 FR 49191 through 49194).
    \744\ Centers for Medicare & Medicaid Services, FY2024 Inpatient 
Psychiatric Prospective Payment System--Rate Update (88 FR 51107 
through 51121).
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    Below we describe each of the four proposed items in more detail.
(1) Living Situation
    Healthy People 2030 prioritizes economic stability as a key SDOH, 
of which housing stability is a component.745 746 Lack of 
housing stability encompasses several challenges, such as having 
trouble paying rent, overcrowding, moving frequently, or spending the 
bulk of household income on housing.\747\ These experiences may 
negatively affect one's physical health and access to health care. 
Housing instability can also lead to homelessness, which is housing 
deprivation in its most severe form.\748\ On a single night in 2023, 
roughly 653,100 people, or 20 out of every 10,000 people in the United 
States, were experiencing homelessness.\749\ Studies also found that 
people who are homeless have an increased risk of premature death and 
experience chronic disease more often than among the general 
population.\750\
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    \745\ https://health.gov/healthypeople/priority-areas/social-determinants-health.
    \746\ Healthy People 2030 is a long-term, evidence-based effort 
led by the U.S. Department of Health and Human Services (HHS) that 
aims to identify nationwide health improvement priorities and 
improve the health of all Americans.
    \747\ Kushel, M.B., Gupta, R., Gee, L., & Haas, J.S. (2006). 
Housing instability and food insecurity as barriers to health care 
among low-income Americans. Journal of General Internal Medicine, 
21(1), 71-77. doi: 10.1111/j.1525-1497.2005.00278.x.
    \748\ Homelessness is defined as ``lacking a regular nighttime 
residence or having a primary nighttime residence that is a 
temporary shelter or other place not designed for sleeping.'' 
Crowley, S. (2003). The affordable housing crisis: Residential 
mobility of poor families and school mobility of poor children. 
Journal of Negro Education, 72(1), 22-38. doi: 10.2307/3211288.
    \749\ The 2023 Annual Homeless Assessment Report (AHAR) to 
Congress. The U.S. Department of Housing and Urban Development 2023. 
https://www.huduser.gov/portal/sites/default/files/pdf/2023-AHAR-Part-1.pdf.
    \750\ Baggett, T.P., Hwang, S.W., O'Connell, J.J., Porneala, 
B.C., Stringfellow, E.J., Orav, E.J., Singer, D.E., & Rigotti, N.A. 
(2013). Mortality among homeless adults in Boston: Shifts in causes 
of death over a 15-year period. JAMA Internal Medicine, 173(3), 189-
195. doi: 10.1001/jamainternmed.2013.1604. Schanzer, B., Dominguez, 
B., Shrout, P.E., & Caton, C.L. (2007). Homelessness, health status, 
and health care use. American Journal of Public Health, 97(3), 464-
469. doi: 10.2105/AJPH.2005.076190.
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    We believe that LTCHs can use information obtained from the Living 
Situation item during a patient's discharge planning. For example, 
LTCHs could work in partnership with community care hubs and community-
based organizations to establish new care transition workflows, 
including referral pathways, contracting mechanisms, data sharing 
strategies, and implementation training that can track HRSNs to ensure 
unmet needs, such as housing, are successfully

[[Page 69585]]

addressed through closed loop referrals and follow-up.\751\ LTCHs could 
also take action to help alleviate a patient's other related costs of 
living, like food, by referring the patient to community-based 
organizations that would allow the patient's additional resources to be 
allocated towards housing without sacrificing other needs.\752\ 
Finally, LTCHs could use the information obtained from the Living 
Situation item to better coordinate with other healthcare providers, 
facilities, and agencies during transitions of care, so that referrals 
to address a patient's housing stability are not lost during vulnerable 
transition periods.
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    \751\ U.S. Department of Health & Human Services (HHS), Call to 
Action, ``Addressing Health Related Social Needs in Communities 
Across the Nation.'' November 2023. https://aspe.hhs.gov/sites/default/files/documents/3e2f6140d0087435cc6832bf8cf32618/hhs-call-to-action-health-related-social-needs.pdf.
    \752\ Henderson, K.A., Manian, N., Rog, D.J., Robison, E., 
Jorge, E., AlAbdulmunem, M. ``Addressing Homelessness Among Older 
Adults'' (Final Report). Washington, DC: Office of the Assistant 
Secretary for Planning and Evaluation, U.S. Department of Health and 
Human Services. October 26, 2023.
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    Due to the potential negative impacts housing instability can have 
on a patient's health, we proposed to adopt the Living Situation item 
as a new standardized patient assessment data element under the SDOH 
category. This proposed Living Situation item is based on the Living 
Situation item collected in the AHC HRSN Screening 
Tool,753 754 and was adapted from the Protocol for 
Responding to and Assessing Patients' Assets, Risks, and Experiences 
(PRAPARE) tool.\755\ The proposed Living Situation item asks, ``What is 
your living situation today?'' The proposed response options are: (1) I 
have a steady place to live; (2) I have a place to live today, but I am 
worried about losing it in the future; (3) I do not have a steady place 
to live; (7) Patient declines to respond; and (8) Patient unable to 
respond. A draft of the proposed Living Situation item to be adopted as 
a standardized patient assessment data element under the SDOH category 
can be found in the Downloads section of the LCDS and LTCH Manual web 
page at https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-care-data-set-ltch-qrp-manual.
---------------------------------------------------------------------------

    \753\ More information about the AHC HRSN Screening Tool is 
available on the website at https://innovation.cms.gov/Files/worksheets/ahcm-screeningtool.pdf.
    \754\ The AHC HRSN Screening Tool Living Situation item includes 
two questions. In an effort to limit LTCH burden, we only proposed 
the first question.
    \755\ National Association of Community Health Centers and 
Partners, National Association of Community Health Centers, 
Association of Asian Pacific Community Health Organizations, 
Association OPC, Institute for Alternative Futures. ``PRAPARE.'' 
2017. https://prapare.org/the-prapare-screening-tool/.
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(2) Food
    The U.S. Department of Agriculture, Economic Research Service 
defines a lack of food security as a household-level economic and 
social condition of limited or uncertain access to adequate food.\756\ 
Adults who are food insecure may be at an increased risk for a variety 
of negative health outcomes and health disparities. For example, a 
study found that food insecure adults may be at an increased risk for 
obesity.\757\ Another study found that food insecure adults have a 
significantly higher probability of death from any cause or 
cardiovascular disease in long-term follow-up care, in comparison to 
adults that are food secure.\758\
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    \756\ U.S. Department of Agriculture, Economic Research Service. 
(n.d.). Definitions of food security. Retrieved March 10, 2022, from 
https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-u-s/definitions-of-food-security/.
    \757\ Hernandez, D.C., Reesor, L.M., & Murillo, R. (2017). Food 
insecurity and adult overweight/obesity: Gender and race/ethnic 
disparities. Appetite, 117, 373-378.
    \758\ Banerjee, S., Radak, T., Khubchandani, J., & Dunn, P. 
(2021). Food Insecurity and Mortality in American Adults: Results 
From the NHANES-Linked Mortality Study. Health promotion practice, 
22(2), 204-214. https://doi.org/10.1177/1524839920945927.
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    While having enough food is one of many predictors for health 
outcomes, a diet low in nutritious foods is also a factor.\759\ The 
United States Department of Agriculture (USDA) defines nutrition 
security as ``consistent and equitable access to healthy, safe, 
affordable foods essential to optimal health and well-being.'' \760\ 
Nutrition security builds on and complements long standing efforts to 
advance food security.\761\ Studies have shown that older adults 
struggling with food security consume fewer calories and nutrients and 
have lower overall dietary quality than those who are food secure, 
which can put them at nutritional risk.\762\ Older adults are also at a 
higher risk of developing malnutrition, which is considered a state of 
deficit, excess, or imbalance in protein, energy, or other nutrients 
that adversely impacts an individual's own body form, function, and 
clinical outcomes.\763\ About 50% of older adults are affected by 
malnutrition, which is further aggravated by a lack of food security 
and poverty.\764\ These facts highlight why the Biden-Harris 
Administration launched the White House Challenge to End Hunger and 
Build Health Communities.\765\
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    \759\ National Center for Health Statistics. (2022, September 
6). Exercise or Physical Activity. Retrieved from Centers for 
Disease Control and Prevention: https://www.cdc.gov/nchs/fastats/exercise.htm.
    \760\ Food and Nutrition Security. (n.d.). USDA. https://www.usda.gov/nutrition-security.
    \761\ Food and Nutrition Service. (March 2022). USDA. https://www.usda.gov/sites/default/files/documents/usda-actions-nutrition-security.pdf.
    \762\ Ziliak, J.P., & Gundersen, C. (2019). The State of Senior 
Hunger in America 2017: An Annual Report. Prepared for Feeding 
America. Available at: https://www.feedingamerica.org/research/senior-hunger-research/senior.
    \763\ The Malnutrition Quality Collaborative. (2020). National 
Blueprint: Achieving Quality Malnutrition Care for Older Adults, 
2020 Update. Washington, DC: Avalere Health and Defeat Malnutrition 
Today. Available at: https://defeatmalnutrition.today/advocacy/blueprint/.
    \764\ Food Research & Action Center (FRAC). ``Hunger is a Health 
Issue for Older Adults: Food Security, Health, and the Federal 
Nutrition Programs.'' December 2019. https://frac.org/wp-content/uploads/hunger-is-a-health-issue-for-older-adults-1.pdf.
    \765\ The White House Challenge to End Hunger and Build Health 
Communities (Challenge) was a nationwide call-to-action released on 
March 24, 2023 to stakeholders across all of society to make 
commitments to advance President Biden's goal to end hunger and 
reduce diet-related diseases by 2030--all while reducing 
disparities. More information on the White House Challenge to End 
Hunger and Build Health Communities can be found: https://www.whitehouse.gov/briefing-room/statements-releases/2023/03/24/fact-sheet-biden-harris-administration-launches-the-white-house-challenge-to-end-hunger-and-build-healthy-communities-announces-new-public-private-sector-actions-to-continue-momentum-from-hist/.
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    We believe that adopting items to collect and analyze information 
about a patient's food security at home could provide additional 
insight to their health complexity and help facilitate coordination 
with other healthcare providers, facilities, and agencies during 
transitions of care, so that referrals to address a patient's food 
security are not lost during vulnerable transition periods. For 
example, an LTCH's dietitian or other clinically qualified nutrition 
professional could work with the patient and their caregiver to plan 
healthy, affordable food choices prior to discharge.\766\ LTCHs could 
also refer a patient that indicates lack of food security to government 
initiatives such as the Supplemental Nutrition Assistance Program 
(SNAP) and food pharmacies (programs to increase access to healthful 
foods by making them affordable), two initiatives that have been 
associated with lower health care costs and reduced hospitalization and 
emergency department visits.\767\
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    \766\ Schroeder K, Smaldone A. Food Insecurity: A Concept 
Analysis. Nurse Forum. 2015 Oct-Dec;50(4):274-84. doi: 10.1111/
nuf.12118. Epub 2015 Jan 21. PMID: 25612146; PMCID: PMC4510041.
    \767\ Tsega M, Lewis C, McCarthy D, Shah T, Coutts K. Review of 
Evidence for Health-Related Social Needs Interventions. July 2019. 
The Commonwealth Fund. https://www.commwealthfund.org/sites/default/files/2019-07/ROI-EVIDENCE-REVIEW-FINAL-VERSION.pdf.

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[[Page 69586]]

    We proposed to adopt two Food items as new standardized patient 
assessment data elements under the SDOH category. These proposed items 
are based on the Food items collected in the AHC HRSN Screening Tool, 
and were adapted from the USDA 18-item Household Food Security Survey 
(HFSS).\768\ The first proposed Food item states, ``Within the past 12 
months, you worried that your food would run out before you got money 
to buy more.'' \769\ The second proposed Food item states, ``Within the 
past 12 months, the food you bought just didn't last and you didn't 
have money to get more.'' We proposed the same response options for 
both items: (1) Often true; (2) Sometimes true; (3) Never True; (7) 
Patient declines to respond; and (8) Patient unable to respond. A draft 
of the proposed Food items to be adopted as a standardized patient 
assessment data element under the SDOH category can be found in the 
Downloads section of the LCDS and LTCH Manual web page at https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-care-data-set-ltch-qrp-manual.
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    \768\ More information about the HFSS tool can be found at 
https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-u-s/survey-tools/.
    \769\ The AHC HRSN Screening Tool Food item includes two 
questions. In an effort to limit LTCH burden, we only proposed the 
first question.
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(3) Utilities
    A lack of energy (utility) security can be defined as an inability 
to adequately meet basic household energy needs.\770\ According to the 
Department of Energy, one in three households in the U.S. are unable to 
adequately meet basic household energy needs.\771\ The consequences 
associated with a lack of utility security are represented by three 
primary dimensions: economic, physical, and behavioral. Patients with 
low incomes are disproportionately affected by high energy costs, and 
they may be forced to prioritize paying for housing and food over 
utilities.\772\ Some patients may face limited housing options and 
therefore are at increased risk of living in lower-quality physical 
conditions with malfunctioning heating and cooling systems, poor 
lighting, and outdated plumbing and electrical systems.\773\ Patients 
with a lack of utility security may use negative behavioral approaches 
to cope, such as using stoves and space heaters for heat.\774\ In 
addition, data from the Department of Energy's U.S. Energy Information 
Administration confirm that a lack of energy security 
disproportionately affects certain populations, such as low-income and 
African American households.\775\ The effects of a lack of utility 
security include vulnerability to environmental exposures such as 
dampness, mold, and thermal discomfort in the home, which have a direct 
impact on a person's health.776 777 For example, research 
has shown associations between a lack of energy security and 
respiratory conditions as well as mental health-related disparities and 
poor sleep quality in vulnerable populations such as the elderly, 
children, the socioeconomically disadvantaged, and the medically 
vulnerable.\778\
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    \770\ Hern[aacute]ndez D. Understanding `energy insecurity' and 
why it matters to health. Soc Sci Med. 2016 Oct; 167:1-10. doi: 
10.1016/j.socscimed.2016.08.029. Epub 2016 Aug 21. PMID: 27592003; 
PMCID: PMC5114037.
    \771\ US Energy Information Administration. ``One in Three U.S. 
Households Faced Challenges in Paying Energy Bills in 2015.'' 2017 
Oct 13. https://www.eia.gov/consumption/residential/reports/2015/energybills/.
    \772\ Hern[aacute]ndez D. ``Understanding `energy insecurity' 
and why it matters to health.'' Soc Sci Med. 2016; 167:1-10.
    \773\ Hern[aacute]ndez D. Understanding `energy insecurity' and 
why it matters to health. Soc Sci Med. 2016 Oct;167:1-10. doi: 
10.1016/j.socscimed.2016.08.029. Epub 2016 Aug 21. PMID: 27592003; 
PMCID: PMC5114037.
    \774\ Hern[aacute]ndez D. ``What `Merle' Taught Me About Energy 
Insecurity and Health.'' Health Affairs, VOL.37, NO.3: Advancing 
Health Equity Narrative Matters. March 2018. https://doi.org/10.1377/hlthaff.2017.1413.
    \775\ US Energy Information Administration. ``One in Three U.S. 
Households Faced Challenges in Paying Energy Bills in 2015.'' 2017 
Oct 13. https://www.eia.gov/consumption/residential/reports/2015/energybills/.
    \776\ Hern[aacute]ndez D. Understanding `energy insecurity' and 
why it matters to health. Soc Sci Med. 2016 Oct;167:1-10. doi: 
10.1016/j.socscimed.2016.08.029. Epub 2016 Aug 21. PMID: 27592003; 
PMCID: PMC5114037.
    \777\ Institute of Medicine. (2004). Damp Indoor Spaces and 
Health. Washington, DC: National Academies Press. https://www.nap.edu/openbook.php?record_id=11011&page=R2.
    \778\ Siegal et al., ``Energy Insecurity Indicators Associated 
with Increased Odds of Respiratory, Mental Health, And 
Cardiovascular Conditions.'' Health Affairs 43, NO. 2 (2024): 260-
268. https://doi.org/10.1377/hlthaff.2023.01052.
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    We believe adopting an item to collect information about a 
patient's utility security upon admission to an LTCH would facilitate 
the identification of patients who may not have utility security and 
who may benefit from engagement efforts. For example, LTCHs may be able 
to use the information on utility security to help connect identified 
patients in need, such as older adults, to programs that can help pay 
for home energy (heating/cooling) costs, like the Low-Income Home 
Energy Assistance Program (LIHEAP). LTCHs may also be able to partner 
with community care hubs and community-based organizations to assist 
the patient in applying for these and other local utility assistance 
programs, as well as helping them navigate the enrollment process.\779\
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    \779\ National Council on Aging (NCOA). ``How to Make It Easier 
for Older Adults to Get Energy and Utility Assistance.'' Promising 
Practices Clearinghouse for Professionals. Jan 13, 2022. https://www.ncoa.org/article/how-to-make-it-easier-for-older-adults-to-get-energy-and-utility-assistance.
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    We proposed to adopt a new item, Utilities, as a new standardized 
patient assessment data element under the SDOH category. This proposed 
item is based on the Utilities item collected in the AHC HRSN Screening 
Tool and was adapted from the Children's Sentinel Nutrition Assessment 
Program (C-SNAP) survey.\780\ The proposed Utilities item asks, ``In 
the past 12 months, has the electric, gas, oil, or water company 
threatened to shut off services in your home?'' The proposed response 
options are: (1) Yes; (2) No; (3) Already shut off; (7) Patient 
declines to respond; and (8) Patient unable to respond. A draft of the 
proposed Utilities item to be adopted as a standardized patient 
assessment data element under the SDOH category can be found in the 
Downloads section of the LCDS and LTCH Manual web page at https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-care-data-set-ltch-qrp-manual.
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    \780\ This validated survey was developed as a clinical 
indicator of household energy security among pediatric caregivers. 
Cook, J.T., D.A. Frank., P.H. Casey, R. Rose-Jacobs, M.M. Black, M. 
Chilton, S. Ettinger de Cuba, et al. ``A Brief Indicator of 
Household Energy Security: Associations with Food Security, Child 
Health, and Child Development in US Infants and Toddlers.'' 
Pediatrics, vol. 122, no. 4, 2008, pp. e874-e875. https://doi.org/10.1542/peds.2008-0286
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d. Stakeholder Input
    We developed our proposal to add these items after considering 
feedback we received in response to our request for information (RFI) 
on Closing the Health Equity Gap in CMS Hospital Quality Programs in 
the FY 2022 IPPS/LTCH PPS final rule (86 FR 45349 through 45362). This 
RFI sought to update providers on CMS initiatives to make reporting of 
health disparities more comprehensive and actionable for LTCHs, 
providers, and patients. The RFI also invited public comment on future 
potential stratification of quality measures and improving demographic 
data collection. In response to the solicitation of public comment on 
future potential stratification and improving demographic data 
collection, commenters generally supported and recommended that CMS 
collect additional social and demographic data, like gender expression, 
disability status, language including English proficiency,

[[Page 69587]]

housing security, food security, and forms of economic or financial 
insecurity to help provides address health equity in LTCHs. In 
addition, some commenters suggested CMS use standardized data 
collection across agencies when incorporating health equity 
initiatives, while also expressing concern about the burden additional 
data collection efforts would place on providers (86 FR 45358).
    Furthermore, we considered feedback we received when we proposed 
the creation of the SDOH category of standardized patient assessment 
data elements in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19545). 
Many commenters were generally in favor of the concept of collecting 
SDOH items and noted the inclusion of additional SDOH would provide 
greater breadth and depth of data when developing policies to address 
social factors related to health. Many commenters also recommended 
including additional factors, such as food insecurity, housing 
insecurity, and independent living status, to ensure the full spectrum 
of social needs is examined. The FY 2020 IPPS/LTCH PPS final rule (84 
FR 42578 through 42581) includes a summary of the public comments that 
we received and our responses to those comments. We incorporated this 
input into the development of this proposal.
    We solicited comment on the proposal to adopt four new items as 
standardized patient assessment data elements under the SDOH category 
beginning with the FY 2028 LTCH QRP: one Living Situation item; two 
Food items; and one Utilities item.
    We received public comments on these proposals. The following is a 
summary of the comments we received and our responses.
    Comment: Some commenters expressed support for the proposed new 
SDOH assessment items, viewing this proposal as an important step 
towards improving patient outcomes, advancing health equity, advancing 
patient-centered care, improving health outcomes, and early 
identification of important areas that affect downstream health costs, 
health outcomes, and quality of life. One of these commenters also 
emphasized the importance of understanding the patient's environmental 
and personal factors to guide the selection of interventions provided 
through the plan of care.
    Several commenters also noted the importance of the proposed new 
SDOH assessment items in facilitating discharge planning strategies 
that can account for an individual's housing, food, utilities, and 
transportation needs. Three of these commenters noted that the 
information obtained from these proposed new SDOH assessment items will 
help LTCHs identify future needs in collaboration with the patient and 
their caregivers during the discharge planning process. Two of these 
commenters also highlighted how SDOH influence a patient's ability to 
execute post-discharge recommendations and could impact patient 
recovery and readmission rates. These commenters said that by 
addressing these non-medical factors during the LTCH stay, they can 
help connect patients to the resources they may need, resulting in 
successful discharges to the community or improved health outcomes.
    Response: We appreciate the support from commenters. We agree that 
the collection of the proposed SDOH assessment items will support LTCHs 
that want to understand and address health disparities that affect 
their patient population, facilitate coordinated care, foster 
continuity in care planning, and assist with the discharge planning 
process from the LTCH setting.
    Comment: Several commenters appreciated CMS' efforts at 
standardizing collection of patient assessment data elements related to 
SDOH by proposing to adopt the four new assessment items, Living 
Situation, Food, and Utilities, in the LCDS. Three of these commenters 
recognized that the standardized collection of the proposed SDOH 
assessment items will support interoperability and comparability across 
LTCHs and within facilities for different patient populations. A couple 
of these commenters noted that the standardized SDOH assessment items 
are essential to reducing practice variance, which can lead to 
inconsistencies in data collection and reporting. Further, a commenter 
highlighted that a unified approach to SDOH can ensure that those 
critical social and economic factors are accurately captured and 
utilized to inform care decisions, ultimately leading to a more 
effective and equitable healthcare system.
    Response: We thank the commenters for recognizing the importance of 
standardized SDOH assessment items in the LTCH QRP. As we continue to 
standardize data collection across settings, we believe using common 
standards and definitions for new assessment items is important to 
promote interoperable exchange of longitudinal information between 
LTCHs and other providers, including hospitals. We also believe 
collecting this information may facilitate coordinated care, continuity 
in care planning, and the discharge planning process from PAC settings, 
including LTCHs.
    Comment: A commenter suggested that feedback from patients on their 
experiences of SDOH-related screenings should be used to inform updates 
to quality measures, while another commenter suggested that CMS could 
use the SDOH-related screening data in quality programs to stratify 
patient data.
    Response: We thank the commenters for their recommendations and 
agree that the standardized SDOH assessment items will be valuable 
sources of information that would permit us to continue developing the 
statistical tools necessary to maximize the value of Medicare data and 
improve the quality of care for all beneficiaries. We will take the 
commenters' recommendations into consideration for future rulemaking.
    Comment: Two commenters acknowledged there would be an increase in 
burden in collecting these four new assessment items. However, one of 
these commenters said that they still support the proposal because the 
adoption of consistent, standardized questions will reduce the burden 
of implementation and have a positive impact on discharge planning. The 
other commenter noted that the additional burden on their LTCHs will be 
relatively low because they are already collecting most of this 
information through their electronic medical record system.
    Two commenters did not support the proposal to collect the new SDOH 
assessment items and noted significant concerns about the cumulative 
collection burden for critically ill patients, the cost of updating the 
data collection systems, and training staff members. One of these 
commenters noted that asking the proposed SDOH assessment items will 
increase burden on their only discharge planner and reduce the time 
they can spend on actual discharge planning. Another one of these 
commenters noted that their facility already has concerns with the high 
administrative burden of LCDS data collection and its impact on patient 
care, particularly considering ongoing workforce challenges.
    Response: We acknowledge the addition of four new SDOH assessment 
items will increase the burden associated with completing the LCDS, and 
we carefully weighed the burden of collecting new assessment items 
against the benefits of adopting those assessment items for the LCDS. 
We prioritized balancing the reporting burden for LTCHs with our policy 
objective to collect additional SDOH standardized patient assessment 
data elements that will inform care planning and coordination and 
quality

[[Page 69588]]

improvement across care settings. We interpret the commenters who 
acknowledged the increase in burden associated with collecting these 
four new assessment items while still supporting the proposal to 
recognize this important balance. We interpret the comment regarding 
the reduction of burden associated with the adoption of consistent, 
standardized questions to be supportive of the proposal to adopt four 
new SDOH assessment items from the AHC HRSN Screening Tool since 
implementing standardized questions across all LCDS will be easier on 
staff administering the assessment.
    As we noted in section IX.E.4.b., the proposed new SDOH assessment 
items were identified in either the 2016 NASEM report[thinsp]\781\ or 
the 2020 NASEM report \782\ as impacting care use, cost, and outcomes 
for Medicare beneficiaries. In addition, Healthy People 2030 \783\ and 
related work across HHS \784\ underscores that social risk factors and 
unmet social needs contribute to wide health and health care 
disparities and inequities. Stakeholders across the health care 
spectrum have a role to play in addressing SDOH. We believe by 
integrating the proposed new SDOH assessment items into routine 
practice and, when indicated, facilitating referrals to downstream 
interventions informed by patient data, then the risk for negative 
outcomes, such as hospital readmissions, can be reduced. Collection of 
these new SDOH items will provide key information to LTCHs to support 
effective discharge planning. Therefore, we hope that the proposed new 
SDOH assessment items, when collected at admission, can inform the 
discharge planning process for LTCHs, reducing discharge planning 
burden overall, rather than negatively impacting the time LTCHs spend 
on discharge planning.
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    \781\ National Academies of Sciences, Engineering, and Medicine. 
2016. Accounting for Social Risk Factors in Medicare Payment: 
Identifying Social Risk Factors. Washington, DC: The National 
Academies Press. https://doi.org/10.17226/21858.
    \782\ National Academies of Sciences, Engineering, and Medicine. 
2020. Leading Health Indicators 2030: Advancing Health, Equity, and 
Well-Being. Washington, DC: The National Academies Press. https://doi.org/10.17226/25682.
    \783\ Healthy People 2030 Framework. Healthy People 2030. 
https://health.gov/healthypeople/about/healthy-people-2030-framework.
    \784\ Green K, Zook M. When Talking About Social Determinants, 
Precision Matters. HealthAffairs. Published October 29, 2019. 
https://www.healthaffairs.org/do/10.1377/hblog20191025.776011/full/.
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    In response to the commenters with concerns about the cumulative 
collection burden on critically ill patients, we interpret the comments 
to be referring to LTCH patients on admitted on ventilators or other 
critically ill LTCH patients who may be unable to respond to interview 
questions at the time of admission. We note that we did propose these 
new and modified SDOH items to include additional response options for 
patients that decline to respond or are unable to respond (89 FR 36347 
through 36350). We encourage LTCHs to assess all patients and select 
the appropriate response options for the SDOH items on the LCDS.
    In response to the commenters with concerns about the cost of 
updating the data collection systems, CMS continually looks for 
opportunities to minimize the cost to LTCHs associated with collection 
and submission of the LCDS through strategies that simplify collection 
and submission requirements. This includes standardizing instructions, 
providing a help desk, hosting a dedicated web page, communication 
strategies, free data specifications, and free on-demand reports.
    Finally, in response to the commenters with concerns about training 
their staff on collecting the proposed new SDOH assessment items, we 
plan to provide training resources in advance of the initial collection 
of the assessment items to ensure that LTCHs have the tools necessary 
to administer the new SDOH assessment items in a respectful way and 
reduce the burden to LTCHs in creating their own training resources. 
These training resources may include online learning modules, tip 
sheets, questions and answers documents, and recorded webinars and 
videos, and would be available to providers as soon as technically 
feasible, allowing LTCHs several months to ensure their staff take 
advantage of the learning opportunities.
    Comment: Three commenters who did not support the proposal 
suggested that the proposed SDOH assessment items need further testing 
and refinement to ensure they work as intended in the LTCH setting, and 
referred to the CMS second evaluation of the AHC Model from 2018 
through 2021 as evidence of this suggestion.\785\ These commenters 
interpret the Findings at a Glance to conclude that the AHC HRSN 
Screening Tool ``did not appear to increase beneficiaries' connection 
to community services or HRSN resolution.''
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    \785\ https://www.cms.gov/priorities/innovation/data-and-reports/2023/ahc-second-eval-rpt-fg.
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    Response: The HRSN domains in the AHC HRSN Screening Tool were 
chosen based upon literature review and expert consensus utilizing the 
following criteria: (1) availability of high-quality scientific 
evidence linking a given HRSN to adverse health outcomes and increased 
healthcare utilization, including hospitalizations and associated 
costs; (2) ability for a given HRSN to be screened and identified in 
the inpatient setting prior to discharge, addressed by community-based 
services, and potentially improve healthcare outcomes, including 
reduced readmissions; and (3) evidence that a given HRSN is not 
systematically addressed by healthcare providers.\786\ In addition to 
established evidence of their association with health status, risk, and 
outcomes, these domains were selected because they can be assessed 
across the broadest spectrum of individuals in a variety of 
settings.787 788
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    \786\ Billioux, A., Verlander, K., Anthony, S., & Alley, D. 
(2017). Standardized Screening for Health-Related Social Needs in 
Clinical Settings: The Accountable Health Communities Screening 
Tool. NAM Perspectives, 7(5). Available at: https://doi.org/10.31478/201705b. Accessed on June 9, 2024.
    \787\ Billioux, A., Verlander, K., Anthony, S., & Alley, D. 
(2017). Standardized Screening for Health-Related Social Needs in 
Clinical Settings: The Accountable Health Communities Screening 
Tool. NAM Perspectives, 7(5). Available at: https://doi.org/10.31478/201705b. Accessed on June 9, 2024.
    \788\ Centers for Medicare & Medicaid Services. (2021). 
Accountable Health Communities Model. Accountable Health Communities 
Model [verbar] CMS Innovation Center. Available at: https://innovation.cms.gov/innovation-models/ahcm. Accessed on February 20, 
2023.
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    The commenters also referred to the two-page summary of the AHC 
Model 2018-2021 \789\ which describes the results of testing whether 
systematically identifying and connecting beneficiaries to community 
resources for their HRSNs improved health care utilization outcomes and 
reduced costs. To ensure consistency in the screening offered to 
beneficiaries across both an individual community's clinical delivery 
sites and across all the communities in the model, CMS developed a 
standardized HRSN screening tool. This AHC HRSN Screening Tool was used 
to screen Medicare and Medicaid beneficiaries for core HRSNs to 
determine their eligibility for inclusion in the AHC Model. If a 
Medicare or Medicaid beneficiary was eligible for the AHC Model, they 
were randomly assigned to one of two tracks: (1) Assistance; or (2) 
Alignment. The Assistance Track tested whether navigation assistance 
that connects navigation-eligible beneficiaries with community services 
results in increased HRSN resolution, reduced health care expenditures, 
and unnecessary utilization. The Alignment Track tested whether 
navigation

[[Page 69589]]

assistance, combined with engaging key stakeholders in continuous 
quality improvement (CQI) to align community service capacity 
beneficiaries' HRSNs, results in greater increases in HRSN resolution 
and greater reductions in health expenditures and utilization than 
navigation assistance alone. Regardless of assigned track, all 
beneficiaries received HRSN screening, community referrals, and 
navigation to community services.\790\
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    \789\ https://www.cms.gov/priorities/innovation/data-and-reports/2023/ahc-second-eval-rpt-fg.
    \790\ Accountable Health Communities (AHC) Model Evaluation, 
Second Evaluation Report. May 2023. This project was funded by the 
Centers for Medicare & Medicaid Services under contract no. HHSM-
500-2014-000371, Task Order75FCMC18F0002. https://www.cms.gov/priorities/innovation/data-and-reports/2023/ahc-second-eval-rpt.
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    We believe the commenter inadvertently misinterpreted the findings, 
believing these findings were with respect to the effectiveness and 
scientific validity of the AHC HRSN Screening Tool itself. The findings 
section of this two-page summary described six key findings from the 
AHC Model, which examined whether the Assistance Track or the Alignment 
Track resulted in greater increases in HRSN resolution and greater 
reductions in health expenditures and utilization. Particularly, the 
AHC Model reduced emergency department visits among Medicaid and FFS 
Medicare beneficiaries in the Assistance Track, which was suggestive 
that navigation may help patients use the health care system more 
effectively. We acknowledge that navigation alone did not increase 
beneficiaries' connection to community services or HRSN resolution, and 
this was attributed to gaps between community resource availability and 
beneficiary needs. The AHC HRSN Screening Tool use in the AHC Model was 
limited to identifying Medicare and Medicaid beneficiaries with at 
least one core HRSN who could be eligible to participate in the AHC 
Model. Our review of the AHC Model did not identify any issues with the 
validity and scientific reliability of the AHC HRSN Screening Tool.
    Finally, as part of our routine item and measure monitoring work, 
we continually assess the implementation of new assessment items, and 
we will include the four new proposed SDOH assessment items in our 
monitoring work.
    Comment: Three commenters requested we articulate our vision for 
how we plan to use the data collected from the SDOH standardized 
patient assessment data elements in quality and payment programs. These 
commenters noted concern that CMS may use the SDOH assessment data to 
develop an LTCH QRP measure that would hold LTCHs solely accountable to 
address the social drivers of health that require resources and 
engagement across an entire community.
    Response: We proposed the four new SDOH assessment items because 
collection of additional SDOH items would permit us to continue 
developing the statistical tools necessary to maximize the value of 
Medicare data and improve the quality of care for all beneficiaries. 
For example, we recently developed and released the Health Equity 
Confidential Feedback Reports, which provided data to LTCHs on whether 
differences in quality measure outcomes are present for their patients 
by dual-enrollment status and race and ethnicity.\791\ We note that 
advancing health equity by addressing the health disparities that 
underlie the country's health system is one of our strategic pillars 
\792\ and a Biden-Harris Administration priority.\793\ Furthermore, any 
updates to the LTCH QRP measure set or payment system would be 
addressed through future notice-and-comment rulemaking, as necessary.
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    \791\ In October 2023, we released two new annual Health Equity 
Confidential Feedback Reports to LTCHs: The Discharge to Community 
(DTC) Health Equity Confidential Feedback Report and the Medicare 
Spending Per Beneficiary (MSPB) Health Equity Confidential Feedback 
Report. The PAC Health Equity Confidential Feedback Reports 
stratified the DTC and MSPB measures by dual-enrollment status and 
race/ethnicity. For more information on the Health Equity 
Confidential Feedback Reports, please refer to the Education and 
Outreach materials available on the LTCH QRP Training web page at 
https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-quality-reporting-training.
    \792\ Brooks-LaSure, C. (2021). My First 100 Days and Where We 
Go from Here: A Strategic Vision for CMS. Centers for Medicare & 
Medicaid. Available at https://www.cms.gov/blog/my-first-100-days-and-where-we-go-here-strategic-vision-cms.
    \793\ The Biden-Harris Administration's strategic approach to 
addressing health related social needs can be found in The U.S. 
Playbook to Address Social Determinants of Health (SDOH) (2023): 
https://www.whitehouse.gov/wp-content/uploads/2023/11/SDOH-Playbook-3.pdf.
---------------------------------------------------------------------------

    Comment: Five commenters were concerned that the proposed SDOH 
assessment items are not applicable to LTCH patients because many LTCH 
patients are generally unable to respond to questioning due to 
mechanical ventilation or sedation and are more severely ill than the 
average Medicare beneficiary for which the AHC HRSN Screening Tool was 
developed. Two of these commenters do not think LTCHs are the 
appropriate reporting and accountability entity for the SDOH assessment 
items unless the items are used in patient reporting or case-mix 
adjustment of measures or the healthcare entity can redress the 
disadvantage because LTCHs generally see patients at the end of the 
care continuum and have very little control over the SDOH of patients. 
These commenters were also concerned with the stigma patients may feel 
when they are asked about their living situation, and food and 
utilities availability, and the potential risk of violence against 
their staff due to having to ask sensitive and repetitive questions.
    Response: We believe the proposed SDOH assessment items are 
important to collect on all LTCH patients. We acknowledge that many 
patients are admitted to LTCHs on mechanical ventilation. However, 
based on our internal analysis of LTCH data reported from October 1, 
2021 through September 30, 2023 (Quarter 4 of CY 2021 through Quarter 3 
CY 2023), over 70% of patients were not on invasive mechanical 
ventilation support when they were admitted to an LTCH. While we 
acknowledge the medical complexity of LTCH patients, we believe LTCHs 
are accustomed to working with patients with very complex medical 
conditions, including those who are on mechanical ventilation, sedated, 
or severely ill, and we are confident in their ability to collect this 
data in a consistent manner. There are currently several patient 
interview assessment items on the LCDS, and LTCHs are accustomed to 
administering these questions to impaired patients. In addition, the 
new and modified assessment items we proposed include additional 
response options for patients that decline to respond or are unable to 
respond (89 FR 36347 through 36350) We encourage LTCHs to assess all 
patients and select the appropriate response options for the SDOH.
    In response to the commenters that stated LTCHs are not the 
appropriate entity for these SDOH assessment items because LTCHs 
generally see patients at the end of the care continuum and have very 
little control over the SDOH for that reason, we refer the commenters 
to section IX.E.4.b of this final rule. In section IX.E.4.b of this 
final rule, we noted that the assessment items we proposed to collect 
as standardized patient assessment data elements under the SDOH 
category were identified in the 2016 NASEM report \794\ or the 2020 
NASEM report \795\ as impacting care use,

[[Page 69590]]

cost, and outcomes for Medicare beneficiaries. These items have the 
potential to affect treatment preferences and goals of patients and 
their caregivers, and therefore will support LTCHs in implementing an 
effect discharge planning process. The discharge planning process 
requires that the LTCH must identify, at an early stage of 
hospitalization, those patients who are likely to suffer adverse health 
consequences upon discharge in the absence of adequate discharge 
planning and must provide a discharge planning evaluation for those 
patients so identified.
---------------------------------------------------------------------------

    \794\ Social Determinants of Health. Healthy People 2020. 
https://www.healthypeople.gov/2020/topics-objectives/topic/social-determinants-of-health. (February 2019).
    \795\ National Academies of Sciences, Engineering, and Medicine. 
2020. Leading Health Indicators 2030: Advancing Health, Equity, and 
Well-Being. Washington, DC: The National Academies Press. https://doi.org/10.17226/25682.
---------------------------------------------------------------------------

    Finally, we respectfully disagree that the proposed SDOH assessment 
items are inherently stigmatizing. We understand the potentially 
sensitive nature of these questions, and we want patients to feel 
comfortable answering the questions. We plan to provide training 
resources in advance of the initial collection of the assessment items 
to ensure that LTCHs have the tools necessary to administer the new 
SDOH assessment items in a respectful way and reduce the burden to 
LTCHs in creating their own training resources. These training 
resources may include online learning modules, tip sheets, questions 
and answers documents, and recorded webinars and videos, and would be 
available to providers as soon as technically feasible, allowing LTCHs 
several months to ensure their staff take advantage of the learning 
opportunities. Finally, as previously noted, we proposed that these new 
and modified SDOH items include response options for patients that 
decline to respond or are unable to respond (89 FR 36347 through 
36350).
    Comment: Two commenters noted the opportunities to advance 
interoperability through the adoption of the items. One of these 
commenters supported the proposal to adopt four SDOH assessment items 
as standardized patient assessment data elements, but encouraged CMS to 
ensure that the data generated by the LCDS is interoperable with 
existing screening standards, like the Gravity Project, to ensure that 
consumers are not asked multiple times for the same information. The 
other commenter encouraged CMS to consider supporting data portability 
and screening interoperability across acute hospitals, LTCHs, and other 
PAC settings to avoid unnecessary duplication of screenings and 
assessments. This commenter recognized that repeating screenings and 
assessments at appropriate intervals can support the identification of 
emerging or changing needs, but also noted that duplication may lead to 
patient mistrust.
    Response: We appreciate the statements from commenters encouraging 
CMS to support data portability and screening interoperability. As we 
have noted in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28122 and 
28123), to further interoperability in post-acute care settings, CMS 
and the Office of the National Coordinator for Health Information 
Technology (ONC) participate in the Post-Acute Care Interoperability 
Workgroup (PACIO) to facilitate collaboration with interested parties 
to develop Health Level Seven International[supreg] (HL7) Fast 
Healthcare Interoperability Resource[supreg] (FHIR) standards. These 
standards could support the exchange and reuse of patient assessment 
data derived from the post-acute care (PAC) setting assessment tools, 
such as the Minimum Data Set (MDS), Inpatient Rehabilitation Facility--
Patient Assessment Instrument (IRF-PAI), LCDS, Outcome and Assessment 
Information Set (OASIS), and other sources. The CMS Data Element 
Library (DEL) \796\ continues to be updated and serves as a resource 
for PAC assessment data elements, as well as furthers CMS' goal of data 
standardization and interoperability. We acknowledge that there are 
still opportunities to advance these goals, and we will take these 
comments into consideration.
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    \796\ The CMS Data Element Library (DEL) is the centralized 
resource for CMS assessment instrument data elements (e.g., 
questions and responses) and their associated health information 
technology (IT) standards. https://del.cms.gov/DELWeb/pubHome.
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    We find the commenter's statement unclear that repeating screenings 
and assessments may lead to patient mistrust.We interpret the commenter 
to mean that patients may become concerned that the LTCH does not have 
the necessary information to appropriately care for the patient if the 
LTCH asks similar questions as the previous healthcare setting. We 
disagree and believe that patient trust can be strengthened when 
interview questions are introduced appropriately by the LTCH clinical 
staff, including explain the reason for asking the question again. We 
note that LTCH patients may experience changing needs over the course 
of their hospital stay. For example, some patients may have been 
housing secure prior to their condition, but their prior living 
situation may no longer be suitable for their current needs, which may 
include specific requirements such as mobility equipment.
    Comment: Three commenters did not agree with CMS that the proposed 
SDOH assessment items would produce interoperable data within 
Medicare's quality reporting programs because the proposed requirements 
for LTCH are not aligned with the SDOH screening requirements in the 
Hospital IQR Program and IPFQR Program. Specifically, these commenters 
noted that the Screening for SDOH measures in the Hospital IQR and 
IPFQR Programs do not specify when a patient is screened (for example, 
at admission) nor how the screening questions are asked (that is, 
specific wording and responses). Instead, these providers are only 
asked to document that a patient was screened for the following 
domains: housing instability, food insecurity, transportation 
difficulties, utility assistance needs, and interpersonal safety 
concerns. These commenters contrast requirements for reporting the 
Screening for SDOH measures with our proposal to add assessment items 
to the LCDS with standardized questions and responses and would require 
screening at admission.
    Response: We disagree that the proposed collection of four new SDOH 
assessment items and one modified SDOH assessment item for the LTCH QRP 
and the requirements for the Hospital IQR and IPFQR Programs do not 
promote standardization. Although hospitals and IPFs participating in 
these programs can use a self-selected SDOH screening tool, the 
Screening for SDOH and Screen Positive Rate for SDOH measures we have 
adopted for the Hospital IQR and IPFQR Programs address the same SDOH 
domains that we proposed to collect as standardized patient assessment 
data under the LTCH QRP: housing instability, food insecurity, utility 
difficulties, transportation needs. We believe that this partial 
alignment will facilitate longitudinal data collection on the same 
topics across healthcare settings. As we continue to standardize data 
collection, we believe using common standards and definitions for new 
assessment items is important to promote interoperable exchange of 
longitudinal information between LTCHs and other providers to 
facilitate coordinated care, continuity in care planning, and the 
discharge planning process. This is evidenced by our recent proposals 
to add these four SDOH assessment items and one modified SDOH 
assessment item in the SNF QRP (89 FR 23462 through 23468), IRF QRP (89 
FR 22275 through 22280),

[[Page 69591]]

and Home Health QRP (89 FR 55383 through 55388).
(a) Comments on the Living Situation Assessment Item
    Comment: Two commenters specifically supported the proposal to 
adopt the Living Situation assessment item as a standardized patient 
assessment data element in the LCDS. These commenters emphasized that 
having information on living situation is critical for understanding 
social and environmental factors that affect their patient' health 
outcomes. One of these commenters suggested that having information 
related to a patient's living situation would enable LTCHs to better 
understand the social and environmental factors that impact their 
patient's outcomes. They also agree with CMS that it will support LTCHs 
in their efforts to partner with community care hubs and community-
based organizations (CBOs) to tailor transitions of care plans and 
ensure that patients are able to access resources from community 
providers. The other commenter also highlighted how understanding the 
patient's living situation can ensure patients' adaptive equipment 
needs are addressed.
    Response: We thank the commenters and agree that the collection of 
the Living Situation item will support LTCHs in collecting information 
to integrate into their admission and discharge processes in order to 
facilitate partnerships with community care hubs and community-based 
organizations, continuity in care planning, and their discharge 
planning process.
    Comment: A commenter noted that the cognitive function of patients 
might not allow them to accurately recall their living situation prior 
to being in the LTCH. They also noted the possibility that patients 
would be confused with the item which asks the person to identify their 
living situation ``today.'' This commenter suggested that, depending on 
the person's condition or cognitive status, they may not be able to 
recall or determine this, nor might they be able to say whether they 
will be able to return to the living situation they had before their 
illness or injury.
    Response: We thank the commenters for their input. We acknowledge 
the complex medical conditions of most LTCH patients. However, there 
are other patient interview assessment items that LTCHs are already 
collecting, and we believe LTCHs have experience in managing these 
complex scenarios successfully in order to obtain the information 
required. We encourage LTCHs to assess all patients and select the 
appropriate response options for the SDOH, and remind commenters that 
we specifically proposed additional response options for patients that 
are unable to respond or decline to respond to the Living Situation 
item (89 FR 36347).
    Comment: Another commenter recommended that CMS simplify the 
responses for the Living Situation assessment item because they are 
likely to lead to confusion. This commenter suggested that CMS align 
the responses for the Living Situation assessment item with the 
proposed Food assessment item that has a ``Often true,'' ``Sometimes 
true,'' and ``Never true'' response option or the modified 
Transportation assessment item that has a ``Yes'' or ``No'' response. 
They believe this would be simpler for patients to answer and easier on 
the LTCH staff to collect the information.
    Response: We agree that standardized patient assessment data 
elements should be easy to understand and have clear response options. 
However, we believe that including the specific distinction in the 
Living Situation item's response options is needed. Specifically, we 
believe that additional response options to indicate whether a patient 
is worried about their living situation in the future helps reduce 
ambiguity for patients who may only have temporary housing. For 
example, having a ``Yes'' and ``No'' response and eliminating an option 
for ``I have a place to live today, but I am worried about losing it in 
the future'' would not capture those patients that may be at risk of 
losing their place to live due to lost income because of the traumatic 
injury or event precipitating their admission to the LTCH. Identifying 
these patients who are worried about losing their housing in the future 
would help LTCHs facilitate discharge planning and make the appropriate 
community referrals.
(b) Comments on the Food Assessment Items
    Comment: Three commenters supported the collection of the two 
proposed Food assessment items because of the importance of nutrition 
and food access to LTCH patients' health outcomes, and the usefulness 
of this information for treatment and discharge planning. One of these 
commenters commended CMS for acknowledging within the proposed rule how 
older adults grappling with food insecurity experience lower dietary 
quality, placing them at nutritional risk. The commenter acknowledged 
that inadequate access to nutritious food elevates the risk of health 
issues such as malnutrition, diabetes, and cardiovascular diseases, and 
when issues with access to food can be addressed, patients may 
experience better health outcomes and enhanced quality of life. Another 
one of these commenters noted that information from the two proposed 
Food assessment items can give healthcare professionals a greater 
understanding of a patient's complex needs and improve coordination 
with other healthcare providers, such as dieticians, or referring 
patients to SNAP and food pharmacies to increase access to healthy 
foods. Finally, the other commenter noted that the responses to the 
proposed Food assessment items would help providers incorporate 
treatment strategies that may be necessary to address a patient's 
ability to physically access food sources.
    Response: We thank the commenters for their responses and we agree 
that an individual's access to food affects their health outcomes and 
risk for adverse events. Understanding the potential needs of patients 
admitted to LTCH through the collection of the two proposed Food 
assessment items can help LTCHs facilitate resources for LTCH patients, 
if indicated, when discharged.
    Comment: Several commenters expressed concerns that the proposed 
Food assessment items ask patients to rate the frequency of their food 
shortage using a three-point scale, which is inconsistent with other 
questions on the LCDS such as the patient mood, behavioral symptoms, 
and daily preference assessment items, which use a four-point scale to 
determine frequency. This commenter suggested this inconsistency may 
lead to confusion for staff and patients.
    Response: We clarify that the proposed Food assessment items 
include three frequency responses in addition to response options in 
the event the patient declines to respond or is unable to respond: (0) 
Often true; (1) Sometimes true; (2) Never True; (7) Patient to declines 
to respond; and (8) Patient unable to respond. We acknowledge there are 
several patient interview assessment items on the LCDS that use a four-
point scale, but there are also assessment items on the LCDS that do 
not use a four-point scale. For example, the Health Literacy (B1300), 
Social Isolation (D0700), and the Pain Interference with Therapy 
Activities (J0520) assessment items currently use a five-point scale. 
We chose the proposed Food assessment items from the AHC HRSN Screening 
Tool, and they were tested and validated using a three-point response 
scale.
    Since the LCDS currently includes assessment items that use varying

[[Page 69592]]

response scales, we do not believe staff and patients will be confused. 
We will develop coding guidance for these new assessment items and 
develop training resources for LTCH staff in advance of the initial 
collection of the assessment items to ensure LTCHs have the tools 
necessary to administer the new SDOH assessment items. Additionally, we 
plan to develop resources LTCH staff can use to ensure patients 
understand the proposed assessment item questions and response options. 
For example, CMS developed cue cards to assist LTCHs in conducting the 
Brief Interview for Mental Status (BIMS) in Writing, the Patient Mood 
Interview (PHQ-2 to 9), the Pain Assessment Interview, and the 
Interview for Daily and Activity Preference.\797\
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    \797\ These cue cards are currently available on the LTCH QRP 
Training web page at https://www.cms.gov/medicare/quality/inpatient-rehabilitation-facility/LTCH-quality-reporting-training.
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    Comment: A commenter was concerned with the 12-month look back 
period of the proposed Food assessment items, noting that this broad 
look back period may capture needs that occurred in the past that have 
already been resolved. This commenter recommended a three-month look 
back period instead, to capture true concerns that should inform LTCHs' 
care and discharge planning.
    Response: We disagree that the 12-month look back period for the 
proposed Food assessment items is too long and that it will not result 
in reliable responses. We believe a 12-month look back is more 
appropriate than a shorter, three-month look back period, since it is 
common for a person's Food situation to fluctuate over time and 
especially throughout the treatment journey. One study of Medicare 
Advantage beneficiaries found that approximately half of U.S. adults 
report one or more HRSNs over four quarters.\798\ However, at the 
individual level, participants had substantial fluctuations: 47.4 
percent of the participants fluctuated between 0 and 1 or more over the 
four quarters, and 21.7 percent of participants fluctuated between one, 
two, three, or four or more over the four quarters. The researchers 
noted that the dynamic nature of individual-level HRSNs requires 
consideration by healthcare providers screening for HRSNs.
---------------------------------------------------------------------------

    \798\ Haff, N, Choudhry, N.K., Bhatkhande, G., Li, Y., Antol, 
D., Renda, A., Laufffenburger, J. Frequency of Quarterly Self-
reported Health-Related Social Needs Among Older Adults, 2020. JAMA 
Network Open. 2022;5(6):e2219645. Doi:101001/
jamanetworkopen.2022.19645. Accessed June 9, 2024.
---------------------------------------------------------------------------

    To account for potentially changing Food needs over time, we 
believe it is important to use a longer lookback window to 
comprehensively capture any Food needs an LTCH patient may have had, so 
that LTCHs may consider them in their care and discharge planning.
(c) Comments on the Utilities Assessment Item
    Comment: Two commenters who support the proposal to add a new 
Utility assessment item to the LCDS stated that understanding patient's 
access to utilities is crucial for maintaining good health. 
Specifically, a commenter pointed out that understanding patients' 
living situation can ensure appropriate provision of adaptive equipment 
and engagement with community partners. The other commenter highlighted 
that access to utilities like electricity, heating, and water are 
necessary to maintain a safe and healthy living environment. This 
commenter noted that by collecting information about a patient's 
utility security at admission, an LTCH may be able to assist their 
patients in addressing their basic needs by referring them to agencies 
and programs like the Low-Income Home Energy Assistance Program 
(LIHEAP) or organizations like community care hubs that are well-
positioned to support patients in applying for related assistance 
programs.
    Response: We thank the commenters for their support and agree that 
patients' utilities needs can affect LTCH patients' health outcomes, 
and the collection of the proposed Utilities assessment item can equip 
providers with information to inform care plans and discharge planning.
    Comment: A commenter was concerned that the 12-month look back 
period of the proposed Utility assessment item is too broad to result 
in reliable or valid responses. Specifically, patients may have 
difficulty remembering if a relevant event, such as a utility shut off 
threat, occurred within such a long period or the issue may no longer 
be valid for the person at time of discharge. In addition, if the 
patient is experiencing cognitive deficits, they may be unable to 
provide reliable responses to the Utilities assessment item. This 
commenter recommended that CMS consider a shorter look back period for 
the Utilities assessment item and reconsider the inclusion of all 
utilities, including electric, gas, oil, or water, in the assessment 
item to truly capture concerns that need to be part of the coordination 
of an appropriate discharge.
    Response: We disagree that the 12-month look back period for the 
proposed Utility assessment item is too long and that it will not 
result in reliable responses. We believe a 12-month look back is more 
appropriate than a shorter, three-month look back period, because an 
individual's Utilities situation may fluctuate over time and especially 
throughout the treatment journey. One study of Medicare Advantage 
beneficiaries found that approximately half of U.S. adults report one 
or more HRSNs over four quarters.\799\ However, at the individual 
level, participants had substantial fluctuations: 47.4 percent of the 
participants fluctuated between 0 and 1 or more over the four quarters, 
and 21.7 percent of participants fluctuated between one, two, three, or 
four or more over the four quarters. The researchers noted that the 
dynamic nature of individual-level HRSNs requires consideration by 
healthcare providers screening for HRSNs. To account for potentially 
changing Utilities needs over time, we believe it is important to use a 
longer look back period to comprehensively capture any Utilities needs 
an LTCH patient may have had, so that LTCHs may consider them in their 
care and discharge planning.
---------------------------------------------------------------------------

    \799\ Haff, N, Choudhry, N.K., Bhatkhande, G., Li, Y., Antol, 
D., Renda, A., Laufffenburger, J. Frequency of Quarterly Self-
reported Health-Related Social Needs Among Older Adults, 2020. JAMA 
Network Open. 2022;5(6):e2219645. Doi:101001/
jamanetworkopen.2022.19645. Accessed June 9, 2024.
---------------------------------------------------------------------------

    We note that LTCHs are accustomed to working with patients with 
very complex medical conditions, including those with cognitive 
deficits, and we are confident in their ability to collect this data in 
a consistent manner. There are currently several patient interview 
assessment items on the LCDS, and LTCHs are accustomed to administering 
these questions to impaired patients.
    We also believe it is important to capture utility needs across 
electric, gas, oil, and water services, in order to comprehensively 
understand patients' access to necessary utility services, especially 
since patients' needs for utilities may vary depending on their 
equipment needs at discharge. We note that although we proposed to 
require the collection of the Utilities item for the LTCH QRP, nothing 
would preclude LTCHs from choosing to screen their patients for 
additional SDOH they believe are relevant to their patient population 
and the community they serve. For example, if it is useful to 
understand patients' access to a specific type of utility service (for 
example, water or electricity capacity), LTCHs

[[Page 69593]]

may consider follow-up questions to collect granular information.
    After careful consideration of the public comments we received, we 
are finalizing our proposal to adopt four new items as standardized 
patient assessment data elements under the SDOH category beginning with 
the FY 2028 LTCH QRP: one Living Situation item; two Food items; and 
one Utilities item.
e. Modification of the Transportation Item Beginning With the FY 2028 
LTCH QRP
    Beginning October 1, 2022, LTCHs began collecting seven 
standardized patient assessment data elements under the SDOH category 
on the LCDS.\800\ One of these items, A1250. Transportation, collects 
data on whether a lack of transportation has kept a patient from 
getting to and from medical appointments, meetings, work, or from 
getting things they need for daily living. This item was adopted as a 
standardized patient assessment data element under the SDOH category in 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42587). As we discussed in 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42586), we continue to 
believe that access to transportation for ongoing health care and 
medication access needs, particularly for those with chronic diseases, 
is essential to successful chronic disease management and the 
collection of a Transportation item would facilitate the connection to 
programs that can address identified needs.
---------------------------------------------------------------------------

    \800\ The seven SDOH items are ethnicity, race, preferred 
language, interpreter services, health literacy, transportation, and 
social isolation (84 FR 42577 through 42579).
---------------------------------------------------------------------------

    As part of our routine item and measure monitoring work, we 
continually assess the implementation of the new SDOH items. We have 
identified an opportunity to improve the data collection for A1250. 
Transportation by aligning it with the Transportation category 
collected in our other programs.801 802 Specifically, we 
proposed to modify the current Transportation item so that it aligns 
with a Transportation item collected on the AHC HRSN Screening Tool 
available to the IPFQR and Hospital IQR Programs.
---------------------------------------------------------------------------

    \801\ Centers for Medicare & Medicaid Services, FY2024 Inpatient 
Psychiatric Prospective Payment System--Rate Update (88 FR 51107 
through 51121).
    \802\ Centers for Medicare & Medicaid Services, FY2023 IPPS/LTCH 
PPS final rule (87 FR 49202 through 49215).
---------------------------------------------------------------------------

    A1250. Transportation currently collected in the LCDS asks: ``Has 
lack of transportation kept you from medical appointments, meetings, 
work, or from getting things needed for daily living?'' The response 
options are: (A) Yes, it has kept me from medical appointments or from 
getting my medications; (B) Yes, it has kept me from non-medical 
meetings, appointments, work, or from getting things that I need; (C) 
No; (X) Patient unable to respond; and (Y) Patient declines to respond. 
The Transportation item collected in the AHC HRSN Screening Tool asks, 
``In the past 12 months, has lack of reliable transportation kept you 
from medical appointments, meetings, work or from getting things needed 
for daily living?'' The two response options are: (1) Yes; and (2) No. 
Consistent with the AHC HRSN Screening Tool, we proposed to modify the 
A1250. Transportation item currently collected in the LCDS in two ways: 
(1) revise the look back period for when the patient experienced lack 
of reliable transportation; and (2) simplify the response options.
    First, the proposed modification of the Transportation item would 
use a defined 12-month look back period, while the current 
Transportation item uses a look back period of six to 12 months. We 
believe the distinction of a 12-month look back period would reduce 
ambiguity for both patients and clinicians, and therefore improve the 
validity of the data collected. Second, we proposed to simplify the 
response options. Currently, LTCHs separately collect information on 
whether a lack of transportation has kept the patient from medical 
appointments or from getting medications, and whether a lack of 
transportation has kept the patient from non-medical meetings, 
appointments, work, or from getting things they need. Although 
transportation barriers can directly affect a person's ability to 
attend medical appointments and obtain medications, a lack of 
transportation can also affect a person's health in other ways, 
including accessing goods and services, obtaining adequate food and 
clothing, and social activities.\803\ The proposed modified 
Transportation item would collect information on whether a lack of 
reliable transportation has kept the patient from medical appointments, 
meetings, work, or from getting things needed for daily living, rather 
than collecting the information separately. As discussed previously, we 
believe reliable transportation services are fundamental to a person's 
overall health, and as a result, the burden of collecting this 
information separately outweighs its potential benefit.
---------------------------------------------------------------------------

    \803\ Centers for Medicare & Medicaid Services, FY2024 Inpatient 
Psychiatric Prospective Payment System--Rate Update (88 FR 51107 
through 51121).
---------------------------------------------------------------------------

    For the reasons stated, we proposed to modify A1250. Transportation 
based on the Transportation item adopted for use in the AHC HRSN 
Screening Tool and adapted from the PRAPARE tool. The proposed 
Transportation item asks, ``In the past 12 months, has a lack of 
reliable transportation kept you from medical appointments, meetings, 
work or from getting things needed for daily living?'' The proposed 
response options are: (0) Yes; (1) No; (7) Patient declines to respond; 
and (8) Patient unable to respond. A draft of the proposed modified 
Transportation item \804\ to be adopted as a standardized patient 
assessment data element under the SDOH category can be found in the 
Downloads section of the LCDS and LTCH Manual web page at https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-care-data-set-ltch-qrp-manual.
---------------------------------------------------------------------------

    \804\ In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36350), 
we inadvertently stated here that a draft of the proposed Living 
Situation item could be found at the LCDS and LTCH Manual web page. 
We have corrected this typographical error here in this final rule 
to refer to the proposed modified Transportation item.
---------------------------------------------------------------------------

    We solicited comment on the proposal to modify the current 
Transportation item previously adopted as a standardized patient 
assessment data element under the SDOH category beginning with the FY 
2028 LTCH QRP.
    We received public comments on this proposal. The following is a 
summary of the comments we received and our responses.
    Comment: Several commenters supported the proposal to modify the 
Transportation assessment item. Three of these commenters noted various 
reasons for their support for the new 12-month lookback period, 
including that it would help clarify the intent of the question, reduce 
provider burden associated with collecting the information, and 
identify transportation needs that might fluctuate throughout the year. 
Two of these commenters supported the simplified response options, 
noting that it would make it easier for patients to answer the 
question.
    Three commenters also agreed with CMS' proposal to simplify the 
response options and agreed it would reduce data collection burden. One 
of these commenters acknowledged the important relationship between 
transportation and an individual's ability to access food. This 
commenter noted that having transportation to access nutritious food is 
important and can improve patient outcomes related to

[[Page 69594]]

chronic conditions, such as diabetes and hypertension.
    Finally, several commenters supported the modification to the 
Transportation item because it would align better with other CMS 
quality reporting programs which would permit comparability of data 
between providers and settings, and across patients.
    Response: We thank the commenters for their support of the proposed 
modification of the Transportation assessment item. We agree that 
simplifying the response options would help streamline the data 
collection process for both patients and staff collecting the data. We 
also believe specifying a 12-month look back period would reduce 
ambiguity for both patients and staff and improve the validity of the 
data collected.
    Comment: A commenter did not support the proposal to modify the 
Transportation assessment item due to concerns with the 12-month look 
back period and the simplified response options, ``Yes'' and ``No.'' 
The commenter noted that the responses do not collect information about 
the frequency of patients' concerns and the reasons why they do not 
have reliable transportation, which does not allow for nuanced 
understanding of the patient's transportation needs. They also noted 
the lack of consideration for patients with a disability that requires 
special accommodations for transportation. Therefore, this commenter 
recommended that CMS shorten the look back period to three months and 
reconsider the reliability and validity of the proposed modifications.
    Response: We believe a 12-month look back is more appropriate than 
a shorter, three-month look back period, since a person's 
Transportation needs may fluctuate over time and especially throughout 
the treatment journey. As we have previously noted in an earlier 
response, a study of Medicare Advantage beneficiaries found that 
approximately half of U.S. adults report one or more HRSNs over four 
quarters.\805\ However, at the individual level, participants had 
substantial fluctuations: 47.4 percent of the participants fluctuated 
between 0 and 1 or more HRSNs over the four quarters, and 21.7 percent 
of participants fluctuated between one, two, three, or four or more 
HRSNs over the four quarters. The researchers noted that the dynamic 
nature of individual-level HRSNs requires consideration by healthcare 
providers screening for HRSNs. To account for potentially changing 
Transportation needs over time, we believe it is important to use a 
longer lookback window to comprehensively capture any Transportation 
needs an LTCH patient may have had, so that LTCHs may consider them in 
their care and discharge planning.
---------------------------------------------------------------------------

    \805\ Haff, N, Choudhry, N.K., Bhatkhande, G., Li, Y., Antol, 
D., Renda, A., Laufffenburger, J. Frequency of Quarterly Self-
reported Health-Related Social Needs Among Older Adults, 2020. JAMA 
Network Open. 2022;5(6):e2219645. Doi:101001/
jamanetworkopen.2022.19645. Accessed June 9, 2024.
---------------------------------------------------------------------------

    Regarding the comment on the response options and the commenter's 
concern there is not enough information in the responses, we remind 
LTCHs that although the proposal would require the collection of the 
Transportation assessment item at admission, we hope that the interview 
would cultivate future conversations between LTCHs and their patients 
about the patient's specific transportation needs, rather than being 
the only time the LTCH discusses the patient's specific transportation 
needs. Additionally, LTCHs may collect any additional information they 
believe relevant for their patient population and to inform their care 
and discharge planning process.
    Finally, in response to the comment that we reconsider the 
reliability and validity of the proposed modified Transportation item, 
the AHC HRSN Screening Tool was tested across many care delivery sites 
in diverse geographic locations across the United States. More than one 
million Medicare and Medicaid beneficiaries have been screened using 
the AHC HRSN Screening Tool, which was evaluated psychometrically and 
demonstrated evidence of both reliability and validity, including 
inter-rater reliability and concurrent and predictive validity.
    After careful consideration of the public comments we received, we 
are finalizing our proposal to modify the current Transportation item 
previously adopted as a standardized patient assessment data element 
under the SDOH category beginning with the FY 2028 LTCH QRP.
5. LTCH QRP Quality Measure Concepts Under Consideration for Future 
Years: Request for Information (RFI)
    In the proposed rule, we solicited input on the importance, 
relevance, appropriateness, and applicability of each of the concepts 
under consideration listed in Table IX.E.-02 for future years in the 
LTCH QRP. The FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27150 through 
27153) included a request for information (RFI) on a set of principles 
for selecting and prioritizing LTCH QRP measures, identifying 
measurement gaps, and suitable measures for filling these gaps. Within 
this proposed rule, we also sought input on data available to develop 
measures, approaches for data collection, perceived challenges or 
barriers, and approaches for addressing identified challenges. We refer 
readers to the FY 2024 IPPS/LTCH PPS final rule (88 FR 59250 and 59251) 
for a summary of the public comments we received in response to the 
RFI.
    Subsequently, our measure development contractor convened a 
Technical Expert Panel (TEP) on December 15, 2023 to obtain expert 
input on future measure concepts that could fill the measurement gaps 
identified in the FY 2024 RFI.\806\ The TEP also discussed the 
alignment of PAC and Hospice measures with CMS's ``Universal 
Foundation'' of quality measures.\807\
---------------------------------------------------------------------------

    \806\ The Post-Acute Care (PAC) and Hospice Quality Reporting 
Program Cross-Setting TEP summary report will be published in early 
summer or as soon as technically feasible. LTCHs can monitor the 
Partnership for Quality Measurement website at https://mmshub.cms.gov/get-involved/technical-expert-panel/updates for 
updates.
    \807\ Centers for Medicare & Medicaid Services. Aligning Quality 
Measures Across CMS--the Universal Foundation. November 17, 2023. 
https://www.cms.gov/aligning-quality-measures-across-cms-universal-foundation
---------------------------------------------------------------------------

    In consideration of the feedback we received through these 
activities, we solicited input on three measure concepts for the LTCH 
QRP (see Table IX.E.-02). One is a composite of vaccinations,\808\ 
which could represent overall immunization status of patients such as 
the Adult Immunization Status measure\809\ in the Universal Foundation. 
A second concept on which we sought feedback is the concept of 
depression for the LTCH QRP, which may be similar to the Clinical 
Screening for Depression and Follow-up measure \810\ in the Universal 
Foundation. Finally, we sought feedback on the concept of pain 
management.
---------------------------------------------------------------------------

    \808\ A composite measure can summarize multiple measures 
through the use of one value or one piece of information. More 
information can be found at https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/mms/downloads/composite-measures.pdf.
    \809\ CMS Measures Inventory Tool. Adult immunization status 
measure found at https://cmit.cms.gov/cmit/#/FamilyView?familyId=26.
    \810\ CMS Measure Inventory Tool. Clinical Depression Screening 
and Follow-Up measure found at https://cmit.cms.gov/cmit/#/FamilyView?familyId=672.

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

[[Page 69595]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.242

    We received several public comments with feedback on these measure 
concepts. The following is a summary of the comments we received.
1. Vaccination Composite
    Comments: We received many comments on the vaccination composite 
measure, and several commenters supported the concept of a vaccination 
composite measure. One commenter noted that it could improve 
vaccination rates for those vaccines recommended by the Advisory 
Committee on Immunization Practices (ACIP), reduce administrative 
burden through alignment with the Universal Foundation,\811\ and 
potentially improve immunization rates in PAC settings, including 
LTCHs. Another commenter noted how the Adult Immunization Status 
measure is a well-tested and reliable means of assessing routine adult 
vaccinations recommended by the ACIP, and would emphasize the 
importance of vaccination as a core prevention intervention, streamline 
existing adult immunization measures, and provide meaningful data to 
better assess gaps in vaccine coverage.
---------------------------------------------------------------------------

    \811\ Centers for Medicare & Medicaid Services. Aligning Quality 
Measures Across CMS--the Universal Foundation. November 17, 2023. 
https://www.cms.gov/aligning-quality-measures-across-cms-universal-foundation.
---------------------------------------------------------------------------

    Several commenters, however, did not support the idea of adding a 
composite vaccination measure to the LTCH QRP and noted a number of 
reasons why it was not a good fit for the LTCH setting. Most of these 
commenters do not believe the LTCH is the appropriate setting for 
collecting vaccination rates, and other commenters noted that adding 
such a measure potentially could increase LTCHs' administrative burden 
in collecting and reporting the data. Finally, two of these commenters 
questioned how the information provided by patients would be verified.
    Several commenters noted that reporting vaccination rates and 
documenting patients' vaccine status is more appropriate as a measure 
in the primary care setting, and suggested the information could be 
shared with other health care providers. Commenters also suggested that 
a vaccination composite measure would be of fairly low value and not 
indicative of the quality of LTCH patient care. Finally, a few 
commenters noted there are numerous reasons patients may decide to 
decline vaccinations, including cultural preferences and norms, and 
these reasons are largely dependent on factors outside of an LTCH's 
control.
2. Pain Management
    Comments: We received several comments that supported the pain 
management measure concept, favoring the idea of further probes to 
identify a patient's depression status in the LTCH QRP. A commenter 
encouraged aligning a pain management measure with the CDC Clinical 
Practice Guideline for Prescribing Opioids for Pain since LTCH patients 
may appropriately need pain medications. Another commenter underscored 
the importance of understanding the impact of pain on therapy and other 
daily activities in order to improve the quality of services provided. 
A commenter agreed with the importance of measuring pain management, 
but recommended CMS consider appropriate exclusions for patient-
reported measures. This commenter also recommended exploring ways to 
promote pain management for patients who may have challenges 
communicating.
    Several commenters opposed the concept of a pain management measure 
in the LTCH QRP and provided several reasons why they believe it would 
not be an appropriate measure concept for the LTCH QRP. Four of these 
commenters noted that pain is often an unavoidable part of a patient's 
recovery and is not an indicator for whether the patient is improving. 
These commenters also explained that any kind of pain management 
measure would need to consider implications for the use of opioids or 
other pain medications, to avoid unintentionally incentivizing the use 
of pain medication. One of these commenters recommended that a pain 
management measure should not include an expectation of an improvement 
of pain. Another commenter suggested that a pain management measure may 
not be necessary since LTCHs currently collect data on the frequency 
that pain affects a patient's sleep and the frequency of pain 
interference with a patient's ability to participate with therapy 
activities and with day-to-day activities in Section J of the LCDS.
3. Depression
    Comments: We received several comments on the concept of depression 
for a future LTCH QRP measure, and over half of these commenters 
supported the concept and favored the idea of further probes in 
identifying depression measures in the LTCH QRP. One of these 
commenters noted that their organization had recently revised its 
policy priorities to advocate for physical and mental health parity, 
and therefore supported the work to develop a depression measure for 
the LTCH QRP. Two of these commenters noted that depression can 
strongly affect health and quality of life and an LTCH stay can 
specifically impact a patient both mentally and physically. However, 
one of these commenters recommended that, in developing a depression 
measure, CMS carefully consider exclusion criteria and timing of a 
screen for depression since patients are often admitted to an LTCH on a 
ventilator.
    Several commenters, however, opposed the measure concept of 
depression for reasons related to potential redundancy in data 
collection, concern about the lack of resources to treat depression, 
and the administrative burden of collecting the information. Five of 
these commenters noted that LTCHs already screen for depression through 
the Patient Health Questionnaire (PHQ-2 to-9)\812\ on the LCDS and use 
information in the patient's chart to identify mental health conditions 
or other behavioral health issues. Several commenters also noted that, 
since LTCHs already screen for depression, a depression quality measure 
is not necessary. Three commenters also noted that LTCHs do not 
generally have psychiatrists or psychologists on staff or available to

[[Page 69596]]

provide the comprehensive services needed to treat behavioral health 
problems, and one of these commenters expressed concern that adding a 
measure for depression screening would result in consumers expecting 
that they should have these resources available. Finally, one of these 
commenters encouraged CMS to consider all aspects of data collection 
and reporting when prioritizing the appropriateness of the measures 
selected for the LTCH QRP, suggesting that collecting the same data as 
other entities when it is not suited to the LTCH patient population is 
alignment for alignment's sake without benefit to patients or CMS.
---------------------------------------------------------------------------

    \812\ The Patient Health Questionnaire (PHQ-2 to-9) is a 
validated interview for symptoms of depression. It provides a 
standardized severity score and a rating for evidence of a 
depression disorder. Chapter 3, Section D, LCDS Manual.
---------------------------------------------------------------------------

4. Other suggestions for Future Measure Concepts
    Comments: In addition to comments received on the three measure 
concepts of pain, depression, and composite vaccinations, we also 
received several comments recommending other measures for future 
inclusion. A commenter recommended CMS develop and utilize metrics 
associated with ventilator, dialysis, wound, and nutritional issues. 
Two commenters recommended the addition of a Patient Experience of 
Care/Patient Satisfaction measure, highlighting that patient self-
report is the gold standard to assess care quality. Commenters also 
recommended other measure concepts for development and inclusion in the 
LTCH QRP, including: a ``Needs Navigation'' measure for the new 
Principal Illness Navigation codes\813\ in the 2024 Physician Fee 
Schedule (88 FR 78937 through 78950), an Advance Care Planning 
measure,\814\ LTCH-acquired COVID-19 infection morbidity and deaths, a 
patient safety structural measure, palliative care access and 
utilization, and timely and appropriate referral to hospice.
---------------------------------------------------------------------------

    \813\ Principal Illness Navigation (PIN) services describe 
services that auxiliary personnel, including care navigators or peer 
support specialists, may perform incidental to the professional 
services of a physician or other billing practitioner, under general 
supervision. Two codes describe PIN services, and two codes describe 
Principal Illness Navigation-Peer Support (PIN-PS) services, which 
are intended more for patients with high-risk behavioral health 
conditions and have slightly different service elements that better 
describe the scope of practice of peer support specialists. In 
general, where we describe aspects of PIN, it also applies to PIN-PS 
unless otherwise specified. MLN9201074 January 2024. https://www.cms.gov/files/document/mln9201074-health-equity-services-2024-physician-fee-schedule-final-rule.pdf-0
    \814\ The Patient Safety Structural Measure (PSSM) is proposed 
for the Hospital IQR Program and PPS-Exempt Cancer Hospital Quality 
Reporting (PCHQR) Program in the FY 2025 IPPS/LTCH PPS proposed rule 
(89 FR 35937 through 35938). It is an attestation-based measure that 
assesses whether hospitals have a structure and culture that 
prioritizes safety as demonstrated by the following five domains: 
(1) leadership commitment to eliminating preventable harm; (2) 
strategic planning and organizational policy; (3) culture of safety 
and learning health system; (4) accountability and transparency; and 
(5) patient and family engagement.
---------------------------------------------------------------------------

    Response: We thank all commenters for responding to this RFI. We 
will take this feedback into consideration regarding our future measure 
development efforts for the LTCH QRP.
    6. Future LTCH Star Rating System: Request for Information (RFI)
    In the proposed rule, we sought feedback on the development of a 
five-star methodology for LTCHs that can meaningfully distinguish 
between quality of care offered by LTCHs. We refer readers to the RFI 
in the proposed rule (89 FR 36351). Specifically, we invited public 
comment on the following questions:
    1. Are there specific criteria CMS should use to select measures 
for a star rating system?
    2. How should CMS present star ratings information in a way that it 
is most useful to consumers?
    We received several comments in response to this RFI, which are 
summarized below.
1. Specific Criteria To Use In Measure Selection
    Comments: We received a few comments that offered a wide range of 
recommendations on the criteria we should use for selecting measures to 
include in a future LTCH Star Ratings system. Several commenters 
suggested selecting measures that focus on patient and diagnostic 
safety outcomes. Three commenters recommended CMS align selected 
measures with the Universal Foundation measure set and stated they 
believe a consistent approach will make the rating more understandable 
for all interested parties. One of these three commenters specifically 
recommended CMS consider the Universal Foundation PAC Add-On Set,\815\ 
noting that it would allow CMS to compare quality of care more easily 
and consistently to other settings. Several commenters recommended 
utilizing existing measures in the LTCH QRP. However, four commenters 
disagreed, suggesting the measures available in the LTCH QRP were never 
selected to create a holistic picture of LTCH care. They stated the 
measures in the LTCH QRP have been added to the program to achieve 
disparate goals, ranging from agency priorities to statutory 
requirements, such as the Improving Medicare Post-Acute Care 
Transformation Act of 2014 (IMPACT Act).\816\ Therefore, they are 
concerned that an overall rating may reflect performance on measures 
that are irrelevant to the reasons a patient is seeking care. Several 
commenters recommended an LTCH Star Rating system include measures of 
patient experience. However, other commenters were not in favor of 
including measures of patient experience, suggesting the reliability 
would be low since many LTCH patients have undergone traumatic brain 
injuries and may not be able to respond to patient experience questions 
in the same way as in general acute care. A commenter suggested an LTCH 
Star Rating system should align with the CMS Meaningful Measures 
framework focused on person-centered care, equity, safety, 
affordability, efficiency, chronic conditions, wellness and prevention, 
seamless care coordination, and behavioral health.
---------------------------------------------------------------------------

    \815\ The Universal Foundation PAC Add-On Set can be found at: 
https://www.cms.gov/medicare/quality/cms-national-quality-strategy/aligning-quality-measures-across-cms-universal-foundation.
    \816\ Improving Medicare Post-Acute Care Transformation Act of 
2014. Public Law 113-185--OCT. 6, 2014 https://www.govinfo.gov/content/pkg/PLAW-113publ185/pdf/PLAW-113publ185.pdf
---------------------------------------------------------------------------

    Other commenters provided more general recommendations, such as 
selecting measures that matter most to patients and families, and 
utilizing LTCH-specific measures, such as the Ventilator Liberation 
Rate measure. Two commenters emphasized the need to minimize the burden 
of data collection when selecting measures for a star ratings system. 
Other commenters recommended including measures that focus on 
nutrition, function, staff turnover, data reported to NHSN, patient 
reported experiences of discrimination or bias and missed or delayed 
diagnoses, vaccination, cardiovascular disease, and diabetes.
2. Presentation of LTCH Star Ratings Information
    Comments: We received several comments strongly recommending we 
engage with patients, caregivers, providers, and specialty societies to 
inform the development and display of the LTCH Star Rating system. Most 
of these commenters suggested holding a TEP, while one recommended a 
listening session. Additionally, three commenters urged CMS to ensure 
full transparency for consumers, including how scores are converted 
into ratings and reporting periods for each of the reported measures.
    We also received comments about the timeliness of data reported and 
LTCHs' need for additional reports to support their efforts at 
improving patient outcomes. Several commenters

[[Page 69597]]

suggested that the age of the LTCH quality measures currently displayed 
does not represent the current performance of the providers, which 
patients need to make care decisions. Three of these commenters 
specifically suggested that LTCHs should receive patient-level results 
for claims-based measures on a quarterly basis and, without these 
reports they are limited in their ability to implement tailored 
improvements to the care they provide. They also note that CMS 
currently provides this level of information to hospitals.
    Several commenters also raised concerns about the limited number of 
LTCH quality measures and lower patient volumes as compared to other 
settings with a Star Rating System. These commenters were concerned 
about CMS' ability to develop an overall star rating that is reliable 
and valid for consumers. Two of these commenters also highlighted their 
concern that there would be even more instability in an LTCH five-star 
rating system, which would undermine confidence in the rating system.
3. Other Comments Received About an LTCH Star Ratings System
    Comments: Commenters also provided feedback for CMS to consider 
when developing a potential methodology and shared their insights and 
experience with other CMS Star Ratings Systems. Several commenters 
recommended accounting for factors that differentiate LTCHs, such as 
patient characteristics and complexities; whether an LTCH is located 
within another hospital or is freestanding; and the number of patients 
admitted requiring dialysis. These commenters were concerned that a 
future star rating methodology that did not incorporate appropriate 
``risk adjustment'' or weighting methodologies would be ineffective in 
appropriately differentiating between LTCH providers. Although a 
commenter recommended aligning the methodology used in an LTCH Star 
Ratings system with other existing star ratings to help consumers 
navigate the ratings, a number of commenters shared their concerns 
about developing an LTCH Star Rating system given what they described 
as issues with CMS' other star rating systems. Two of these commenters 
suggested CMS apply lessons learned from the development and 
maintenance of the existing star ratings programs and urged CMS to 
allow for a sufficient timeline for development and implementation.
    Response: We thank all the commenters for responding to our RFI on 
this important CMS priority. We will take these recommendations into 
consideration in our future star rating development efforts.
7. Form, Manner, and Timing of Data Submission Under the LTCH QRP
a. Background
    We refer readers to the regulatory text at 42 CFR 412.560(b) for 
information regarding the current policies for reporting specified data 
for the LTCH QRP.
b. Reporting Schedule for the New Items as Standardized Patient 
Assessment Data Elements and the Modified Transportation Item Beginning 
With the FY 2028 LTCH QRP
    As discussed in section IX.E.4. of this final rule, we proposed to 
adopt four new items as standardized patient assessment data elements 
under the SDOH category (one Living Situation item, two Food items, and 
one Utilities item), and to modify the Transportation standardized 
patient assessment data elements previously adopted under the SDOH 
category beginning with the FY 2028 LTCH QRP.
    We proposed that LTCHs would be required to report these new items 
and the modified Transportation item using the LCDS beginning with 
patients admitted on October 1, 2026 for purposes of the FY 2028 LTCH 
QRP. Starting in CY 2027, LTCHs would be required to submit data for 
the entire calendar year for purposes of the FY 2029 LTCH QRP.
    We also proposed that LTCHs who submit the Living Situation, Food, 
and Utilities items proposed for adoption as standardized patient 
assessment data elements under the SDOH category with respect to 
admission only would be deemed to have submitted those items with 
respect to both admission and discharge. We proposed that LTCHs would 
be required to submit these items at admission only (and not at 
discharge), because it is unlikely that the assessment of those items 
at admission will differ from the assessment of the same item at 
discharge. This would align the data collection for these proposed 
items with other SDOH items (that is, Race, Ethnicity, Preferred 
Language, and Interpreter Services) which are only collected at 
admission.\817\ A draft of the proposed items is available in the 
Downloads section of the LCDS and LTCH Manual web page at https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-care-data-set-ltch-qrp-manual.
---------------------------------------------------------------------------

    \817\ FY 2020 IPPS/LTCH PPS final rule (84 FR 42588 through 
42590).
---------------------------------------------------------------------------

    As we noted in Section IX.E.4.e. of this proposed rule, we 
continually assess the implementation of the new SDOH items, including 
A1250. Transportation, as part of our routine item and measure 
monitoring work. We received feedback from stakeholders in response to 
the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19551) noting their 
concern with the burden of collecting the Transportation item at 
admission and discharge. Specifically, commenters stated that a 
patient's access to transportation is unlikely to change between 
admission and discharge. We analyzed the data LTCHs reported from 
October 1, 2022 to June 30, 2023 (Q4 CY 2022 through Q2 CY 2023) and 
found that patient responses did not significantly change from 
admission to discharge.\818\ Specifically, the proportion of patients 
\819\ who responded ``Yes'' to the Transportation item at admission 
versus at discharge differed by only 1.65 percentage points during this 
period. We find these results convincing, and therefore we proposed to 
require LTCHs to collect and submit the proposed modified standardized 
patient assessment data element, Transportation, at admission only.
---------------------------------------------------------------------------

    \818\ Due to data availability of LTCH SDOH standardized patient 
assessment data elements, this is based on three quarters of 
Transportation data.
    \819\ The analysis is limited to patients who responded to the 
Transportation item at both admission and discharge.
---------------------------------------------------------------------------

    We solicited public comment on our proposal to collect data on the 
following items proposed as standardized patient assessment data 
elements under the SDOH category at admission beginning October 1, 2026 
with the FY 2028 LTCH QRP: (1) Living Situation as described in section 
IX.E.4.c.(1) of the proposed rule and this final rule; (2) Food as 
described in section IX.E.4.c.(2) of the proposed rule and this final 
rule; and (3) Utilities as described in section IX.E.4.c.(3) of the 
proposed rule and this final rule. We also invited comment on our 
proposal to submit the proposed modified standardized patient 
assessment data element, Transportation, at admission only beginning 
October 1, 2026 with the FY 2028 LTCH QRP as described in section 
IX.E.4.e. of the proposed rule and this final rule.
    We received a number of comments related to our proposals for the 
collection of the proposed SDOH assessment items. The following is a 
summary of the comments we received and our responses.
    Comment: Two commenters supported the proposed collection of the

[[Page 69598]]

four new SDOH assessment items once, upon admission, noting that it 
would mitigate the administrative burden of data collection and reduce 
redundancy.
    Response: We appreciate the commenters' support of our proposal to 
collect the four new SDOH items at admission only. We are mindful of 
provider burden and appreciate the support from several commenters who 
agreed that collection upon admission would mitigate the administrative 
burden of data collection for this item.
    Comment: A commenter suggested that CMS offer flexibility for LTCHs 
on how to collect the proposed SDOH assessment items, rather than 
requiring LTCHs to use assessment items from the AHC HRSN Screening 
Tool. This commenter stated they believed CMS' focus should be on 
whether the information is collected and less on the specific vendor or 
tool used for collection. Similarly, another commenter encouraged CMS 
to have flexibility in collection and reporting, such as obtaining data 
from existing items in electronic medical record systems and case 
management systems, and allowing caregivers to provide responses to the 
SDOH assessment items. Another commenter noted that these items are 
also collected by referring hospitals, and stated it therefore would be 
duplicative to collect the same information in the LTCH.
    Response: We interpret these commenters to be suggesting that CMS 
should not require LTCHs to use a specific tool to collect the 
information if it is collected elsewhere, such as in previous 
healthcare settings, rather than CMS requiring LTCHs to question 
patients and collect their verbal responses on the LCDS upon the 
patient's admission to the LTCH.
    In response to the comments suggesting CMS should not require LTCHs 
to use a specific tool to collect the information as long as it is 
collected, we disagree and believe it is important to collect 
standardized information. As we continue to standardize data collection 
across settings, we believe using common standards and definitions for 
new assessment items is important to promote interoperable exchange of 
patient information between and within LTCHs and other providers. This 
will facilitate standardized patient data to enhance coordinated care, 
continuity in care planning, and the discharge planning process. 
Section 1899B(b) of the Act already requires LTCHs to collect 
standardized patient assessment data via the LCDS or another assessment 
instrument. The proposed and modified SDOH assessment items will be 
added to a future version of the LCDS, in the same way other 
standardized patient assessment data elements are collected, which will 
contribute to further standardized data collection across LTCHs. This 
is important to supporting our ongoing LTCH QRP initiatives by 
providing standardized data with which to stratify LTCH's performance 
on current measures and or in future quality measures.
    In response to the comments suggesting LTCHs should be able to 
utilize information collected in previous healthcare settings, we are 
intentional in our efforts to increase the patient's voice in the 
assessment process and the LTCH QRP. Obtaining information about the 
Living Situation, Food, Utilities, and Transportation assessment items 
directly from the patient, sometimes called ``hearing the patient's 
voice,'' is more reliable and accurate than obtaining it from a health 
care provider that previously cared for the patient for several 
reasons: the LTCH would not know whether it was collected from the 
patient or from a family member or other source; the LTCH would not 
know how the SDOH domain was defined--for example, whether utilities 
included electricity, gas, oil, or water or only asked about 
electricity; and the LTCH would not be able to determine whether the 
potential problem had been resolved since then. Most importantly, we 
believe that by asking the patient these questions at admission, it may 
prompt further discussion with the patient about their needs and help 
formulate an appropriate discharge care plan. We also clarify that 
LTCHs may use different methods to collect the information from the 
patient, if they are consistent with the requirements for these new and 
modified SDOH items set forth in sections IX.E.4 and IX.E.7.b of this 
final rule.
    Comment: A commenter noted that it would be helpful if SDOH item 
collection requirements were focused on patients that are being 
discharged home from the LTCH, because patients who go from LTCHs to 
IRFs or SNFs could have their SDOH information collected in their next 
setting of care.
    Response: While we understand that some LTCH patients may be 
transferred to IRFs or SNFs, we believe that it is important to collect 
the proposed SDOH items at admission to the LTCH. This information may 
support LTCHs in effective discharge planning. Patients receiving 
services in an LTCH may have a longer length of stay than in other PAC 
settings, and therefore, LTCHs may not know whether a patient will be 
discharged home or transferred to another PAC setting at the time they 
are admitted to the LTCH. It is also possible that a patient's living 
situation, food, utilities, and transportation needs could change over 
the course of their treatment or the patient's discharge plans may 
change due to lost income as a result of the traumatic injury or event 
precipitating their admission to the LTCH. Collecting this information 
at admission equips the LTCH to adjust their discharge plans as needed.
    Comment: A commenter encouraged CMS to ensure this requirement 
includes that these data elements be standardized and documented in 
patients' medical records.
    Response: We thank the commenter for their support and input. We 
proposed these SDOH assessment items as standardized patient assessment 
data elements to ensure they are standardized. The Living Situation, 
Food, and Utilities assessment items will be collected on the LCDS and 
electronically submitted to CMS' data submission system, in the same 
way other standardized patient assessment data elements are collected. 
Additionally, we recommend that an LTCH maintain the original LCDS as 
part of the patient's medical record.
    Comment: Four commenters offered suggestions or recommendations for 
guidance related to collecting the proposed SDOH assessment items. 
Three of these commenters recommended that CMS include coding logic to 
allow skipping the Utilities assessment item if a patient indicated 
that they do not have a steady place to live, since it would be 
inappropriate to ask about utilities if a patient has no place to live. 
One of the commenters asked CMS to work with LTCHs to ensure the data 
are collected in a respectful and person-centered way, and encouraged 
CMS to educate and build trust with beneficiaries on why LTCHs are 
collecting this data. This commenter also encouraged CMS to work with 
the National Committee for Quality Assurance and other organizations to 
develop frameworks, workflows, and guidance to collect this data.
    Response: We acknowledge that the proposed SDOH assessment items 
require the patient to be asked potentially sensitive questions. We 
will provide training materials and guidance for LTCH staff to collect 
the information from LTCH patients on these new and modified SDOH 
items. However, we decline the recommendation to add a skip pattern if 
a patient responds to the Living Situation item that they either have a 
steady place to live today, but are worried about losing it in the 
future (Response 2) or they do not have a steady place to live 
(Response 3). We are

[[Page 69599]]

concerned that patients that provide such responses may live somewhere, 
temporarily, that may or may not have adequate utilities. For example, 
a patient may be living in temporary housing that does or does not have 
adequate utilities, or their situation may be that they have 
electricity but no running water. Therefore, we believe that asking 
both questions of every patient (that is, the Living Situation and 
Utilities items) provides a more complete assessment for LTCHs to use 
in their discharge planning. We also note that we proposed a response 
option for patients that decline to respond for each of the new and 
modified SDOH items (89 FR 36347 through 36350).
    Comment: Several commenters suggested that CMS consider adopting 
additional items from the AHC HRSN Screening Tool in the LTCH QRP, 
especially those addressing disability and financial strain. These 
commenters noted that both factors can affect patient safety outcomes 
or be HRSNs that contribute to bias. Additionally, another commenter 
suggested assessing family caregiver burden and whether referrals 
resulted in actual service delivery, both of which can be a factor in 
both the patient's health and the use of emergency department visits or 
hospitalization.
    Response: We appreciate the comments and suggestions provided by 
the commenters, and we agree that it is important to understand the 
needs of patients with disabilities. While disability is not currently 
assessed through the LCDS, it is comprehensively assessed as part of 
existing protocols around care plans and health goals. However, as we 
continue to evaluate SDOH standardized patient assessment data 
elements, we will consider this feedback. We note that, although we 
proposed to require the collection of these new and modified SDOH items 
for the LTCH QRP, nothing would preclude LTCHs from choosing to screen 
their patients for additional SDOH they believe are relevant to their 
patient population and the community they serve, including screening 
for lack of financial strain and caregiver burden. For example, the AHC 
HRSN Screening Tool includes questions for eight supplemental domains, 
including financial strain.
    After careful consideration of the public comments we received, we 
are finalizing our proposal to collect data on the following items 
adopted as standardized patient assessment data elements under the SDOH 
category at admission only beginning with October 1, 2026 LTCH 
admissions: (1) Living Situation as described in section IX.E.4(c)(1) 
of this final rule; (2) Food as described in section IX.E.4(c)(2) of 
this final rule; and (3) Utilities as described in section IX.E.4(c)(3) 
of this final rule. We are also finalizing our proposal to collect the 
modified standardized patient assessment data element, Transportation, 
at admission only beginning with October 1, 2026 LTCH admissions as 
described in section IX.E.4(e) of this final rule.
c. Modification of the LCDS Admission Assessment Window to Four Days 
Beginning With the FY 2028 LTCH QRP
    Since the FY 2012 IPPS/LTCH PPS final rule, LTCHs have collected 
information for the LTCH QRP utilizing the LCDS.\820\ Since 2012, the 
LTCH QRP has evolved in response to both quality initiatives and 
statutory requirements, and as a result, the LCDS has evolved to 
support data collection for evaluation of health outcomes in the LTCH. 
The LCDS Version 5.0 was implemented on October 1, 2022, and is 
currently in use.\821\
---------------------------------------------------------------------------

    \820\ Office of the Federal Register of the National Archives 
and Records Administration and the U.S. Government Publishing 
Office. Medicare Program; Hospital Inpatient Prospective Payment 
Systems for Acute Care Hospitals and the Long-Term Care Hospital 
Prospective Payment System and FY 2012 Rates; Hospitals' FTE 
Resident Caps for Graduate Medical Education Payment. 2011. https://www.federalregister.gov/d/2011-19719/p-3517.
    \821\ Centers for Medicare & Medicaid Services (CMS). Long-Term 
Care Hospital (LTCH) Continuity Assessment Record and Evaluation 
(CARE) Data Set (LCDS) & LCDS Manual. 2023. https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-care-data-set-ltch-qrp-manual.
---------------------------------------------------------------------------

    As specified in the LCDS Manual, the LCDS Admission assessment has 
a maximum three-day assessment period, beginning with the date of 
admission, in which the patient's assessment must be conducted to 
obtain information for the LCDS Admission assessment items. All LTCHs 
are required to record the Assessment Reference Date (ARD) (A0210) on 
each LCDS, which is defined as the end point of the assessment period 
for the LCDS assessment record. LTCHs can set their own ARD, as long as 
it is no later than the third calendar day (date of admission plus two 
calendar days) of the patient's stay.
    We continually look for opportunities to minimize LTCHs' burden 
associated with collection of the LCDS through strategies that include 
improving communication and conducting outreach with users, as well as 
simplifying collection and submission requirements. In recent years, we 
have received feedback regarding the difficulty of collecting the 
required LCDS data elements within the three-day assessment window when 
medically complex patients are admitted prior to and on weekends. On 
October 17th, 2023, our measure development contractor hosted an LTCH 
Listening Session on the Administrative Burden of the LTCH QRP, and 
invited providers to comment on several LTCH QRP topics, including a 
potential expansion of the assessment period to four days.\822\ During 
the listening session, we received support for revising the Admission 
assessment window, with participants suggesting that extending the 
assessment window would ease the difficulties noted above.
---------------------------------------------------------------------------

    \822\ A summary of the LTCH Listening Session can be found on 
the LTCH QRP Measures Information web page at: https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-quality-reporting-measures-information.
---------------------------------------------------------------------------

    We proposed to extend the Admission assessment period from three 
days to four days, beginning with LTCH admissions on October 1, 2026. 
For example, if a patient was admitted on Friday, October 19, the ARD 
for the LCDS Admission assessment could be no later than Monday, 
October 22. This change to the assessment period would only apply to 
the LCDS Admission assessment and have no impact on burden.
    We solicited public comment on our proposal to extend the LCDS 
Admission assessment window from three to four days beginning with the 
FY 2028 LTCH QRP.
    We received public comments on this proposal. The following is a 
summary of the comments we received and our responses.
    Comment: We received support from all interested parties who 
commented on our proposal for modifying the LTCH Admission assessment 
window from three days to four days. Several commenters noted that 
patient assessments are extremely time consuming, and support the 
extension, especially when medically complex patients are transferred 
to an LTCH during an evening or weekend. Several commenters stated that 
an additional day to conduct a patient assessment will ease the 
administrative burden associated with completing assessments on their 
workforce, particularly for patients admitted on a Friday or Saturday. 
Two of these commenters noted their appreciation that CMS considered 
the comments from interested parties and acted to ease some of the 
administrative burden of completing the LCDS.
    Response: We thank commenters for their support to modify the 
assessment window from three days to four days and for recognizing that 
our proposal is in response to LTCHs' requests to reconsider the 
admission assessment

[[Page 69600]]

window. We are also pleased to hear that many LTCHs will find this 
modification supports their admission process, especially when a 
patient is admitted on a Friday or Saturday. As part of our routine 
item and measure monitoring work, we continually assess the 
implementation of the LCDS to look for opportunities to improve and 
streamline the data collection process.
    Comment: We received several comments requesting that the proposed 
modification to the assessment window be implemented earlier than the 
proposed date of October 1, 2026, and three commenters requested this 
change be implemented on October 1, 2024. Two other commenters 
requested it be implemented as soon as possible, especially since CMS 
has acknowledged that completing the assessment within three days of 
admission is a burdensome requirement, and believes CMS has confirmed 
through its proposal that a four-day assessment window for completing 
the LCDS is feasible for the agency.
    Response: We acknowledge the commenters' requests that we implement 
the modification earlier than October 1, 2026 and understand that 
completing the LCDS within three days of admission imposes some burden 
on LTCHs. However, our proposal to modify the Admission assessment 
window does not decrease the overall burden of collecting the data in 
the LCDS. With this proposed modification, LTCHs would have more time 
to collect the same data in a response to LTCHs' concerns. However, it 
is not feasible for us to implement this change earlier than the 
proposed date of October 1, 2026 for the FY 2028 LTCH QRP. Any 
modification to the LCDS has downstream logistical implications. For 
example, CMS has already finalized and published the LCDS 5.1 item set 
that will be effective October 1, 2024, approximately 12 months early, 
to allow providers adequate time for preparation. The LCDS Manual 
Version 5.1 and LTCH data specifications V4.00.1 were published over 7 
months early on February 1 and February 14, 2024, respectively. 
Additionally, we typically follow a 2-year cycle of updates/
modifications to the item sets. We proposed that this modification be 
effective beginning with patients admitted on October 1, 2026 for FY 
2028 LTCH QRP because it is the earliest feasible date to implement 
this modification.
    After careful consideration of the public comments we received, we 
are finalizing our proposal to modify the LCDS Admission assessment 
from three to four days beginning with the FY 2028 LTCH QRP.
8. Policies Regarding Public Display of Measure Data for the LTCH QRP
    As described in the proposed rule, we did not propose any new 
policies regarding the public display of measure data at this time. For 
a more detailed discussion about our policies regarding public display 
of LTCH QRP measure data and procedures for the opportunity to review 
and correct data and information, we refer readers to the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57231 through 57236).

F. Medicare Promoting Interoperability Program

1. Statutory Authority for the Medicare Promoting Interoperability 
Program for Eligible Hospitals and Critical Access Hospitals (CAHs)
    Sections 1886(b)(3)(B)(ix) and 1814(l)(4) of the Social Security 
Act (as amended by the Health Information Technology for Economic and 
Clinical Health Act, Title XIII of Division A and Title IV of Division 
B of the American Recovery and Reinvestment Act of 2009, Pub. L. 111-5) 
authorize downward payment adjustments under Medicare, beginning with 
fiscal year (FY) 2015 for eligible hospitals and CAHs that do not 
successfully demonstrate meaningful use of certified electronic health 
record technology (CEHRT) for the applicable electronic health record 
(EHR) reporting periods. Section 602 of Title VI, Division O of the 
Consolidated Appropriations Act, 2016 (Pub. L. 114-113) added 
subsection (d) hospitals in Puerto Rico as eligible hospitals under the 
Medicare EHR Incentive Program and extended the participation timeline 
for these hospitals such that downward payment adjustments were 
authorized beginning in FY 2022 for section (d) Puerto Rico hospitals 
that do not successfully demonstrate meaningful use of CEHRT for the 
applicable EHR reporting periods.
2. Changes to the Antimicrobial Use and Resistance (AUR) Surveillance 
Measure Beginning With the EHR Reporting Period in Calendar Year (CY) 
2025
a. Modification of the AUR Surveillance Measure Beginning With the EHR 
Reporting Period in CY 2025
    The Medicare Promoting Interoperability Program encourages 
healthcare data exchange for public health purposes through the Public 
Health and Clinical Data Exchange objective. In the FY 2023 IPPS/LTCH 
PPS final rule, we finalized the requirement for eligible hospitals and 
CAHs to report the AUR Surveillance measure with a modification to 
begin reporting with the EHR reporting period in CY 2024 (87 FR 49337). 
Under the AUR Surveillance measure, eligible hospitals and CAHs are 
required to report two kinds of data to the Centers for Disease Control 
and Prevention (CDC) National Healthcare Safety Network (NHSN): 
Antimicrobial Use (AU) data and Antimicrobial Resistance (AR) data (87 
FR 49335). Separate data elements and technical capabilities are 
required for reporting the AU data and AR data, and we refer readers to 
the CDC NHSN AUR protocols for technical details regarding 
implementation.\823\ Eligible hospitals and CAHs that report a ``yes'' 
response indicate that they have submitted data for both AU and AR, and 
will receive credit for reporting the measure, unless they claim an 
exclusion for which they are eligible. Eligible hospitals and CAHs must 
also use technology certified to the criterion at 45 CFR 170.315(f)(6), 
``Transmission to public health agencies--antimicrobial use and 
resistance reporting'' for data submission (87 FR 49337).
---------------------------------------------------------------------------

    \823\ https://www.cdc.gov/nhsn/psc/aur/.
---------------------------------------------------------------------------

    After finalizing the AUR Surveillance measure, we received feedback 
from some eligible hospitals and CAHs seeking clarity regarding 
reporting requirements and exclusion eligibility for eligible hospitals 
and CAHs. Comments and questions included whether eligible hospitals or 
CAHs with an applicable exclusion preventing their participation in 
reporting either AU data or AR data were required or able to report any 
available data to receive credit under the AUR Surveillance measure. 
Under this policy, if an eligible hospital or CAH meets the exclusion 
criteria with respect to reporting either AU data or AR data, the 
hospital is excluded from the entire AUR Surveillance measure (87 FR 
49337).
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
36352 through 36353), in collaboration with the CDC, we identified the 
need to separate the AUR Surveillance measure into two measures, to 
clarify reporting requirements and to incentivize greater data 
reporting from eligible hospitals and CAHs. In addition, because AU and 
AR reporting rely on different data sources, such as an electronic 
medication administration record (eMAR) or bar-coded medication 
administration (BCMA) for AU, and lab information systems (LISs) for 
AR, we discussed how separating the measure into two measures will more

[[Page 69601]]

appropriately target the availability of exclusions for participants 
who have difficulty with data transmission using a single data source.
    Specifically, we proposed in the FY 2025 IPPS/LTCH PPS proposed 
rule (89 FR 36352 through 36353) to separate the AUR Surveillance 
measure into two measures, beginning with the EHR reporting period in 
CY 2025:
     AU Surveillance measure: The eligible hospital or CAH is 
in active engagement with CDC's NHSN to submit AU data for the selected 
EHR reporting period and receives a report from NHSN indicating its 
successful submission of AU data for the selected EHR reporting period.
     AR Surveillance measure: The eligible hospital or CAH is 
in active engagement with CDC's NHSN to submit AR data for the selected 
EHR reporting period and receives a report from NHSN indicating its 
successful submission of AR data for the selected EHR reporting period.
    Under the AU Surveillance measure, eligible hospitals and CAHs 
would be required to report AU data to CDC's NHSN. Under the AR 
Surveillance measure, eligible hospitals and CAHs would also be 
required to report AR data to CDC's NHSN. Eligible hospitals and CAHs 
would be required to report a ``yes'' response or claim an applicable 
exclusion, separately, to receive credit for reporting on the AU 
Surveillance measure and the AR Surveillance measure. For both 
measures, eligible hospitals and CAHs would be required to use 
technology certified to the Office of the National Coordinator for 
Health Information Technology (ONC) Certification Program for Health 
Information Technology (health IT) certification criterion at 45 CFR 
170.315(f)(6), ``Transmission to public health agencies--antimicrobial 
use and resistance reporting,'' as they are for the AUR Surveillance 
measure. We believe that separating the AUR Surveillance measure into 
two measures would encourage participation from eligible hospitals and 
CAHs that could report data for only the AU Surveillance measure or for 
only the AR Surveillance measure that might previously have been 
excluded because of their inability to report both AU data and AR data 
as required by the AUR Surveillance measure.
    Under the requirements for the AUR Surveillance measure, eligible 
hospitals and CAHs that meet one of the exclusion criteria with respect 
to reporting data of one kind (for example, AR), are excluded from all 
AUR Surveillance measure reporting requirements, even if they could 
report data of the other kind (for example, AU). Offering an exclusion 
based on an eligible hospital's or CAH's inability to report only one 
kind of data results in eligible hospitals and CAHs being unable to 
report on the entire AUR Surveillance measure, even when they could 
report either AU or AR data. This result is contrary to the goals of 
the Public Health and Clinical Data Exchange objective because it 
discourages the sending of partial data as available. Separating the 
single AUR Surveillance measure into two measures better reflects the 
reality that AU data reporting and AR data reporting rely on different 
data sources that require different types of exclusions to reflect the 
separate clinical and data domains of prescribing and microbiological 
testing. Separation of AU data reporting and AR data reporting into two 
measures also supports the Medicare Promoting Interoperability 
Program's administrative requirements with respect to scoring, because 
the scoring approach for the Public Health and Clinical Data Exchange 
objective does not grant partial credit for reporting on individual 
measures. We note that separating the AUR Surveillance measure into two 
measures does not expand on the previously finalized requirements of 
the measure. Separating one measure into two measures allows eligible 
hospitals and CAHs the opportunity to submit data for either AU or AR 
if the eligible hospital or CAH can only submit data for one of the 
two, versus an all or nothing approach.
    We invited public comment on our proposal to separate the AUR 
Surveillance measure into two measures, AU Surveillance and AR 
Surveillance, beginning with the EHR reporting period in CY 2025.
    Comment: Many commenters supported our proposal to split the AUR 
Surveillance measure into two measures for a variety of reasons. 
Several commenters supported the change because they stated it would 
increase the number of eligible hospitals and CAHs that could report on 
one of the measures, or conversely, it could reduce the number of 
facilities that are excluded from reporting on the existing singular 
measure. Several commenters appreciated separating the single measure 
into two measures because it allows eligible hospitals and CAHs to 
submit data for either measure versus an all or nothing approach given 
the different technical requirements and data sources for each measure. 
A few commenters stated the separation would allow more time for health 
organizations and EHR vendors to develop additional technologies 
necessary for reporting on both measures. In addition, a few commenters 
supported separating the AUR Surveillance measure because they stated 
CAHs, smaller hospitals, and hospitals serving socioeconomically 
vulnerable populations often can report AU data but cannot report AR as 
discrete data due to the investments required in EHR and laboratory 
information systems, and the lack of discrete electronic access to 
required data elements for complete AR reporting. One of these 
commenters stated this change could allow hospitals, particularly those 
serving socioeconomically vulnerable populations, to more meaningfully 
participate in reporting AU and AR data to support national public 
health goals. A few commenters supported the separation because it 
aligns with other NHSN reporting requirements or furthers the goals of 
public health and development of robust interoperability programs. A 
commenter agreed that this change is clinically appropriate and allows 
for more comprehensive reporting by eligible hospitals and CAHs. 
Another commenter supported the change because they stated it could 
provide the flexibility necessary for continued data exchange. Another 
commenter agreed with separating the measure as the additional 
reporting burden associated with the proposed change is less than a 
minute per year for each eligible hospital and CAH. A commenter 
supported separating the measure as they stated it supports the 
Medicare Promoting Interoperability Program's administrative 
requirements by providing a clear, achievable path for eligible 
hospitals and CAHs to earn credit for their reporting efforts, even if 
they can only report one type of data. A commenter stated the change 
will support the ability to separately assess compliance and rates of 
exclusions for each component separately.
    Response: We thank the commenters for their support of the proposal 
to split the AUR Surveillance measure into two measures. We agree that 
this approach allows eligible hospitals and CAHs the opportunity to 
report on data that is available to them and offers additional time 
without penalty to address technological updates required for reporting 
data that are not currently available.
    Comment: A commenter thanked CMS for recognizing the challenges 
associated with the consolidated AUR Surveillance measure and expressed 
interest in learning how an exclusion for one component of the 
consolidated measure (that is, either AU or AR) currently affords 
exclusion to both AU and AR reporting.

[[Page 69602]]

    Response: We thank the commenter for their feedback. In order to 
report AU data, an eligible hospital or CAH must have an eMAR or a 
BCMA, and an electronic admission discharge transfer (ADT). To report 
AR data, an eligible hospital or CAH must have an LIS and an ADT. When 
we finalized the AUR Surveillance measure, we established an exclusion 
for eligible hospitals and CAHs that lack an eMAR, BCMA, or ADT. We 
also established an exclusion for eligible hospitals and CAHs that lack 
an LIS or ADT. As a result, and for example, even if an eligible 
hospital or CAH had an LIS and ADT and could report AR data, it could 
receive an exclusion from the entire AUR Surveillance measure if it did 
not have an eMAR or BCMA.
    Comment: Several commenters who supported the proposed change to 
the AUR Surveillance measure provided recommendations for the Medicare 
Promoting Interoperability Program. A few commenters suggested CMS 
consider making the AU and AR Surveillance measures bonus measures to 
reward early adopters and to allow more time for the remaining eligible 
hospitals and CAHs to report. A commenter recommended evaluating the 
need for partial credit if one of the two new measures is 
disproportionately reported. A commenter suggested adding complementary 
measures such as sepsis-associated antibiotic use and nephrotoxic acute 
kidney injury, to better understand antibiotic prescribing patterns in 
healthcare.
    Response: We thank the commenters for their support and feedback 
and may consider some of these recommendations in the future. We 
disagree, however, with the recommendation to establish a bonus for the 
AU Surveillance and AR Surveillance measures because the AUR 
Surveillance measure is currently required for reporting for the EHR 
reporting period in CY 2024. Because the separated measures would be 
treated as new measures with respect to level of active engagement, 
eligible hospitals and CAHs would have an additional year of Pre-
production and Validation (Option 1) before progressing to Validated 
Data Production (Option 2). We believe this offers eligible hospitals 
and CAHs the additional time requested to gain more familiarity with 
the new measures. We continue to work closely with the CDC regarding 
how best to support eligible hospitals and CAHs in AU Surveillance and 
AR Surveillance reporting. For implementation questions regarding 
reporting issues, we recommend contacting CDC's NHSN (cdc.gov">nhsn@cdc.gov), or 
contacting CMS through the ``Help'' page at the CMS QualityNet website 
at https://cmsqualitysupport.servicenowservices.com/qnet_qa.
    Comment: A few commenters recommended adopting the measure change 
beginning with CY 2024 instead of CY 2025 as they stated adopting the 
change in CY 2024 would benefit more eligible hospitals and CAHs.
    Response: We thank commenters for their support and feedback; 
however, we believe that by adopting this change in CY 2025, eligible 
hospitals and CAHs will have had an additional year of experience in 
the Pre-production and Validation stage (Option 1). In the Medicare and 
Medicaid Programs; Electronic Health Record Incentive Program-Stage 3 
and Modifications to Meaningful Use in 2015 Through 2017 final rule (80 
FR 62862 through 62864), beginning with the EHR reporting period in CY 
2016, we defined active engagement under the Public Health and Clinical 
Data Registry Reporting objective as when an eligible hospital or CAH 
is in the process of moving towards sending ``production data'' to a 
public health agency or clinical data registry, or is sending 
production data to a public health agency or clinical data registry. In 
the FY 2023 IPPS/LTCH PPS final rule, we required that eligible 
hospitals and CAHs report their level of active engagement as either 
Option 1: Pre-production and Validation, or Option 2: Validated Data 
Production for each required or optional Public Health and Clinical 
Data Exchange objective measure they report, beginning with the EHR 
reporting period in CY 2023 (87 FR 49338 through 49340). We also 
adopted the requirement that eligible hospitals and CAHs may spend only 
one EHR reporting period at the Option 1: Pre-production and Validation 
level of active engagement per measure, and that they must progress to 
the Option 2: Validated Data Production level for the next EHR 
reporting period for which they report a particular measure, beginning 
with the EHR reporting period in CY 2024 (87 FR 49342).
    Our proposal to treat the AU Surveillance measure and AR 
Surveillance measure as new measures, as finalized in section 
IX.F.2.(c) of this final rule, will provide eligible hospitals and CAHs 
an additional year in Pre-production and Validation (Option 1) before 
progressing to Validated Data Production (Option 2). This means that 
eligible hospitals and CAHs could spend two years in Option 1 before 
moving to Validated Data Production (Option 2), while reporting on the 
same data.
    For example, an eligible hospital or CAH submitting data on the AUR 
Surveillance measure in CY 2024 could be in Option 1. In CY 2025, that 
eligible hospital or CAH could remain in Option 1 when reporting the 
separated AU Surveillance and AR Surveillance measures, and in CY 2026, 
the eligible hospital or CAH would be required to be in Option 2 for 
the AU Surveillance and AR Surveillance measures.
    Comment: A few commenters recommended that CMS continue to work 
with rural and small hospitals to ensure they have the resources and 
technical assistance to fulfill the intent of the measure. A commenter 
requested that CMS provide transparency regarding data submission 
requirements and implementation guidance in the final rule like what 
CMS and CDC provided regarding CY 2024 data submission. A commenter 
described a significant burden in reporting AU and AR data to NHSN. The 
commenter stated their belief that the measure does not meet the intent 
of ``interoperable'' because of the resources involved to extract 
reports and file sets to upload to NHSN, difficulties with NHSN 
reporting software, and the cost to automate the process.
    Response: We will continue to work with small and rural hospitals 
to provide technical assistance and other resources to successfully 
meet Medicare Promoting Interoperability Program requirements, as 
commenters recommended. In collaboration with the CDC, we will strive 
to provide open, transparent communication about how eligible hospitals 
and CAHs can fulfill the AU Surveillance and AR Surveillance measures. 
We disagree that a measure to promote the standards-based transmission 
of AU and AR data does not meet the intent of interoperability. 
Standards-based interoperability does require investment and 
configuration of health IT modules and the work of staff skilled in 
that domain to execute it. Eligible hospitals and CAHs are important 
contributors to public health efforts to address antibiotic use and 
resistance. Therefore, we believe that the public health value of 
antibiotic use and resistance reporting outweighs the burden incurred 
by reporting eligible hospitals and CAHs. Nevertheless, we agree that 
the best model of interoperable public health data exchange is one that 
delivers necessary data in the least burdensome fashion. We will 
continue to work with CDC and ONC to identify opportunities to reduce 
the reporting burden for eligible hospitals and CAHs.
    After consideration of the public comments we received, we are

[[Page 69603]]

finalizing our proposal to separate the AUR Surveillance measure into 
two measures, AU Surveillance and AR Surveillance, beginning with the 
EHR reporting period in CY 2025.
b. Exclusions for the AU Surveillance Measure and the AR Surveillance 
Measure Beginning With the EHR Reporting Period in CY 2025
    We previously finalized in the FY 2023 IPPS/LTCH PPS final rule (87 
FR 49337) the availability of three exclusions for an eligible hospital 
or CAH reporting on the AUR Surveillance measure that: (1) Does not 
have any patients in any patient care location for which data are 
collected by NHSN during the EHR reporting period; (2) Does not have an 
eMAR/BCMA records or an ADT system during the EHR reporting period; or 
(3) Does not have an electronic LIS or electronic ADT system during the 
EHR reporting period.
    We received feedback from eligible hospitals and CAHs requesting 
clarity on whether an AUR Surveillance exclusion applies when they 
possess all necessary health IT systems but lack discrete electronic 
access to data elements necessary for NHSN AUR reporting. For example, 
an eligible hospital or CAH may possess an LIS, but it may refer AR 
testing to an outside reference laboratory that does not provide data 
elements necessary for NHSN AUR reporting results to the referring 
laboratory. As the eligible hospital or CAH has an LIS system and 
therefore could not claim the third exclusion, assuming it could not 
claim another exclusion, the eligible hospital or CAH would be required 
to manually extract the data elements to successfully report the AUR 
Surveillance measure.
    This policy inadvertently caused difficulties for eligible 
hospitals and CAHs, such as the one in the example, because manual 
reporting of NHSN AUR data is both infeasible and against NHSN AUR 
recommendations.\824\ In addition, we require that eligible hospitals 
and CAHs must use technology certified to the criterion at 45 CFR 
170.315(f)(6), ``Transmission to public health agencies--antimicrobial 
use and resistance reporting'' for data submission (87 FR 49337). We 
believe an exclusion that applies to eligible hospitals and CAHs that 
lack discrete electronic access to required data elements, including 
interface or configuration issues beyond their control, will address 
the difficulties for eligible hospitals and CAHs engaging in manual 
data collection to conduct AU or AR reporting. Therefore, in the FY 
2025 IPPS/LTCH PPS proposed rule (89 FR 36353 through 36354), we 
proposed to add a new exclusion to account for scenarios where eligible 
hospitals or CAHs lack a data source containing discrete electronic 
data elements that are required for reporting the AU Surveillance or AR 
Surveillance measures, meaning an eligible hospital or CAH cannot 
query, extract, or download the data elements in a discrete, structured 
manner from the systems to which it has access. Specifically, under 
this new exclusion, an eligible hospital or CAH will be excluded from 
reporting the AU Surveillance measure when it does not have a data 
source containing the minimal discrete data elements that are required 
for reporting the AU Surveillance measure. Similarly, an eligible 
hospital or CAH will be excluded from reporting the AR Surveillance 
measure when it does not have a data source containing the minimal 
discrete data elements that are required for reporting the AR 
Surveillance measure.
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    \824\ https://www.cdc.gov/nhsn/pdfs/pscmanual/11pscaurcurrent.pdf.
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    Specifically, we proposed to modify the existing exclusions under 
the AUR Surveillance measure, to maintain applicability to the AU 
Surveillance and AR Surveillance measures (89 FR 36353 through 36354). 
For example, we would assign exclusion 2 to the AU Surveillance measure 
because it relies on eMAR or BCMA data, and exclusion 3 to the AR 
Surveillance measure because it relies on LIS data. For the AU 
Surveillance measure, we proposed to adopt three eligible exclusions, 
as follows: Any eligible hospital or CAH may be excluded from the AU 
Surveillance measure if the eligible hospital or CAH: (1) Does not have 
any patients in any patient care location for which data are collected 
by NHSN during the EHR reporting period; (2) Does not have an eMAR/BCMA 
electronic records or an electronic ADT system during the EHR reporting 
period; or (3) Does not have a data source containing the minimal 
discrete data elements that are required for reporting. For the AR 
Surveillance measure, we proposed to adopt three eligible exclusions, 
as follows: Any eligible hospital or CAH may be excluded from the AR 
Surveillance measure if the eligible hospital or CAH: (1) Does not have 
any patients in any patient care location for which data are collected 
by NHSN during the EHR reporting period; (2) Does not have an 
electronic LIS or electronic ADT system during the EHR reporting 
period; or (3) Does not have a data source containing the minimal 
discrete data elements that are required for reporting.
    We invited public comment on our proposals to adopt three 
applicable exclusions for the AU Surveillance measure and for the AR 
Surveillance measure, of which the third exclusion for each measure is 
a new exclusion for eligible hospitals and CAHs that lack discrete 
electronic access to data elements that are required for reporting.
    Comment: Many commenters supported adopting the exclusions for the 
AU Surveillance and AR Surveillance measures. A few stated the proposal 
to separate the AUR Surveillance measure into two measures provided 
clarification for the associated exclusions. A few commenters stated 
the exclusion criteria would ensure smaller acute care hospitals that 
lack the infrastructure to report the level of data are not unduly 
penalized. A few commenters supported the change because the AU 
Surveillance and AR Surveillance measures rely on different data 
sources, and there are certain data fields that require a discrete, 
structured format. A few commenters stated including measure-specific 
exclusions could provide the flexibility necessary for continued 
participation and success. A commenter appreciated that eligible 
hospitals or CAHs could qualify for an exclusion for one or both 
measures, without penalty. Another commenter stated that the new 
exclusion for scenarios where eligible hospitals or CAHs lack a data 
source containing discrete electronic data elements that are required 
for reporting would reduce the administrative burden by removing the 
need for eligible hospitals or CAHs to manually extract the data 
elements needed to successfully report on the measures.
    Response: We thank the commenters for their support and feedback. 
We agree that the new exclusions allow eligible hospitals and CAHs to 
avoid penalties in situations where reporting on AU Surveillance 
measure data, AR Surveillance measure data, or both, is infeasible. In 
proposing to separate the AUR Surveillance exclusions, we tailored the 
exclusions to the specific measure.
    After consideration of the public comments we received, we are 
finalizing our proposal to adopt three exclusions each, for the AU 
Surveillance and AR Surveillance measures as follows. For the AU 
Surveillance measure, we are finalizing our proposal to adopt three 
exclusions, as follows, beginning with the EHR reporting period in CY 
2025: Any eligible hospital or CAH may be excluded from the AU 
Surveillance

[[Page 69604]]

measure if the eligible hospital or CAH: (1) Does not have any patients 
in any patient care location for which data are collected by NHSN 
during the EHR reporting period; (2) Does not have an eMAR/BCMA 
electronic records or an electronic ADT system during the EHR reporting 
period; or (3) Does not have a data source containing the minimal 
discrete data elements that are required for reporting. For the AR 
Surveillance measure, we are finalizing our proposal to adopt three 
exclusions, as follows, beginning with the EHR Reporting Period in CY 
2025: Any eligible hospital or CAH may be excluded from the AR 
Surveillance measure if the eligible hospital or CAH: (1) Does not have 
any patients in any patient care location for which data are collected 
by NHSN during the EHR reporting period; (2) Does not have an 
electronic LIS or electronic ADT system during the EHR reporting 
period; or (3) Does not have a data source containing the minimal 
discrete data elements that are required for reporting.
c. Levels of Active Engagement for the AU Surveillance Measure and AR 
Surveillance Measure Beginning With the EHR Reporting Period in CY 2025
    In the FY 2023 IPPS/LTCH PPS final rule, we finalized a policy to 
limit the amount of time an eligible hospital or CAH may spend in the 
Option 1: Pre-production and Validation level of active engagement to 
one EHR reporting period (87 FR 49340 through 49342). As finalized, 
this limitation applies beginning with the EHR reporting period in CY 
2024. In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36354), we 
proposed to consider the AU Surveillance and AR Surveillance measures 
as new measures with respect to level of active engagement beginning 
with the EHR reporting period in CY 2025, independent of the eligible 
hospital's or CAH's prior level of active engagement for the AUR 
Surveillance measure in the EHR reporting period in CY 2024. We 
proposed that, should we finalize the AU Surveillance and AR 
Surveillance measures, for each measure, eligible hospitals and CAHs 
may spend only one EHR reporting period at the Option 1: Pre-production 
and Validation level of active engagement before they must progress to 
the Option 2: Validated Data Production level for the next EHR 
reporting period for which they report the measure. We discussed in our 
proposal that this will offer eligible hospitals and CAHs an additional 
year to gain familiarity with reporting to the NHSN before they are 
required to move to Option 2: Validated Data Production.
    We invited public comment on our proposal to consider the AU 
Surveillance and AR Surveillance measures as new measures with respect 
to level of active engagement beginning with the EHR reporting period 
in CY 2025, independent of the eligible hospital's or CAH's prior level 
of active engagement for the AUR Surveillance measure.
    Comment: Many commenters supported our proposal to treat the AU 
Surveillance and AR Surveillance measures as new measures with respect 
to level of active engagement. Several commenters agreed the proposal 
would allow eligible hospitals and CAHs additional time to gain 
familiarity with reporting to the NHSN. A commenter stated this 
proposal would smooth the transition and allow eligible hospitals and 
CAHs additional time for testing and validation prior to submitting 
production data for the two new measures. Another commenter stated that 
treating the AU Surveillance and AR Surveillance measures as new 
measures with respect to level of active engagement is necessary given 
the difficulties hospitals have experienced with AR data reporting and 
the current inability to claim an exclusion specific to AR data.
    Response: We thank commenters for their support. We agree that 
treating the AU Surveillance and AR Surveillance measures as new 
measures with respect to level of active engagement will be helpful for 
eligible hospitals and CAHs and will allow them additional time to gain 
familiarity with reporting to the NHSN.
    Comment: A commenter supported the proposal to allow eligible 
hospitals and CAHs to spend only one EHR reporting period at the ``Pre-
production and Validation'' level of active engagement but recommended 
that the new measures and their proposed requirements begin in CY 2026 
rather than CY 2025 because of expected workflow changes.
    Response: We thank the commenter for this feedback. We expect that 
internal workflow considerations regarding the new AU Surveillance and 
AR Surveillance measures compared to the prior AUR Surveillance measure 
will be relatively small because the content of the measures is 
unchanged. We believe a delay in the separation of the AUR Surveillance 
measure by an additional year is unnecessary because eligible hospitals 
and CAHs already have experience reporting the AUR Surveillance measure 
beginning with the EHR reporting period in CY 2024. .
    After consideration of the public comments we received, we are 
finalizing our proposal to treat the AU Surveillance and AR 
Surveillance measures as new measures with respect to level of active 
engagement, beginning with the EHR reporting period in CY 2025 and 
subsequent years.
d. Scoring Approach for Reporting Required Measures in the Public 
Health and Clinical Data Exchange Objective Beginning With the EHR 
Reporting Period in CY 2025
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36354 through 
36355), we stated that we do not believe separating the AUR 
Surveillance measure into two measures, AU Surveillance and AR 
Surveillance, should affect scoring or the exclusion redistributions 
for the Public Health and Clinical Data Exchange objective previously 
adopted in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59266). We noted 
that the separation of the AUR Surveillance measure does not expand on 
the previously finalized requirements of the measure. In other words, 
eligible hospitals and CAHs are required to report AU and AR data, 
whether combined under the AUR Surveillance measure, or separated into 
AU Surveillance and AR Surveillance measures.
    Therefore, in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36354 
through 36355), we proposed maintaining a scoring value of 25 points 
for reporting on all required measures in the Public Health and 
Clinical Data Exchange objective, which would increase from five 
measures to six measures, including the four previously finalized 
measures and the two proposed required measures (AU Surveillance and AR 
Surveillance). We also proposed to maintain the exclusion 
redistribution policy we adopted in the FY 2024 IPPS/LTCH PPS final 
rule (88 FR 59267) but modify it to indicate there are six measures as 
opposed to five measures. If an eligible hospital or CAH claims an 
exclusion for each of the six required measures, the 25 points of the 
Public Health and Clinical Data Exchange objective would continue to be 
redistributed to the Provide Patients Electronic Access to their Health 
Information measure.
    We invited public comment on our proposal to maintain the approach 
to scoring and point redistribution for the Public Health and Clinical 
Data Exchange objective.
    Comment: A few commenters supported our proposal to maintain the 
scoring approach for the Public Health and Clinical Data Exchange 
objective with the new AU Surveillance and AR Surveillance measures. 
One of the

[[Page 69605]]

commenters expressed concern that the scoring approach does not account 
for challenges in reporting among resource-constrained hospitals. The 
commenter recommended a weighted scoring system considering each 
measure's complexity.
    Response: We thank the commenters for their feedback and may 
consider a weighted scoring approach that takes each measure's 
complexity into account in the future.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the approach to scoring for the 
Public Health and Clinical Data Exchange objective. We are also 
finalizing our proposal to maintain the existing exclusion 
redistribution policy for the Public Health and Clinical Data Exchange 
objective but modify it to indicate there are six measures rather than 
five measures.
3. Overview of Objectives and Measures for the Medicare Promoting 
Interoperability Program for the EHR Reporting Period in CY 2025
    For ease of reference, Table IX.F.-01 lists the objectives and 
measures for the Medicare Promoting Interoperability Program for the 
EHR reporting period in CY 2025, as revised, to reflect the previously 
finalized and newly finalized measures and objectives in this final 
rule.
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4. Updates to the Definition of CEHRT in the Medicare Promoting 
Interoperability Program Beginning With the EHR Reporting Period in CY 
2024
    In the CY 2024 Medicare Physician Fee Schedule (PFS) final rule (88 
FR 79307 through 79312), we finalized revisions to the definition of 
CEHRT for the Medicare Promoting Interoperability Program at 42 CFR 
495.4. Specifically, we finalized the addition of a reference to the 
revised name of ``Base EHR definition,'' proposed in the Health Data, 
Technology, and Interoperability: Certification Program Updates, 
Algorithm Transparency, and Information Sharing (HTI-1) proposed rule 
(88 FR 23759, 23905), to ensure, if the HTI-1 proposals were finalized, 
the revised name of ``Base EHR definition'' will be applicable for the 
CEHRT definitions going forward (88 FR 79309 through 79312). We also 
finalized the replacement of our references to the ``2015 Edition 
health IT certification criteria'' with ``ONC health IT certification 
criteria,'' and the addition of the regulatory citation for ONC health 
IT certification criteria in 45 CFR 170.315. We finalized the proposal 
to specify that technology meeting the CEHRT definition must meet ONC's 
health IT certification criteria ``as adopted and updated in 45 CFR 
170.315'' (88 FR 79553). This approach is consistent with the 
definitions and approach subsequently finalized in ONC's HTI-1 final 
rule, which appeared in the Federal Register on January 9, 2024 (89 FR 
1205 through 1210). For additional background and information on this 
update, we refer readers to the discussion in the CY 2024 PFS final 
rule on this topic (88 FR 79307 through 79312).
    In consideration of the updates finalized in the CY 2024 PFS final 
rule and the HTI-1 final rule, we refer to ``ONC health IT 
certification criteria'' throughout this final rule where we previously 
would have referred to ``2015 Edition health IT certification 
criteria.'' We believe that these revisions to the definition of CEHRT 
in 42 CFR 495.4 will ensure that updates to the definition of Base EHR 
in 45 CFR 170.102, and updates to applicable ONC health IT 
certification criteria in 45 CFR 170.315, will be incorporated into the 
CEHRT definition without additional regulatory action by CMS. We also 
believe these updates align with the transition from designating health 
IT certification criteria as part of year themed ``editions,'' to the 
``edition-less'' approach finalized in the ONC HTI-1 final rule. For 
ease of reference, Table IX.F.-02. lists the ONC health IT 
certification criteria required to meet the Medicare Promoting 
Interoperability Program objectives and measures.
    We also wish to highlight certain updates to ONC health IT 
certification criteria finalized in the ONC HTI-1 final rule that 
impact certification criteria referenced under the CEHRT definition. 
ONC adopted the certification criterion, ``decision support 
interventions (DSI)'' in 45 CFR 170.315(b)(11) to replace the 
``clinical decision support (CDS)'' certification criterion in 
170.315(a)(9) included in the Base EHR definition (89 FR 1231). The 
finalized DSI criterion ensures that Health IT Modules certified to 45 
CFR 170.315(b)(11) must, among other functions, enable a limited set of 
identified users to select (activate)

[[Page 69614]]

evidence-based and Predictive DSIs (as defined in 45 CFR 170.102) and 
support ``source attributes''--categories of technical performance and 
quality information--for both evidence-based and Predictive DSIs. ONC 
further finalized that a Health IT Module may meet the Base EHR 
definition by either being certified to the existing CDS version of the 
certification criterion in 45 CFR 170.315(a)(9) or being certified to 
the revised DSI criterion in 45 CFR 170.315(b)(11), for the period up 
to, and including, December 31, 2024. On and after January 1, 2025, ONC 
finalized that only the DSI criterion in 45 CFR 170.315(b)(11) will be 
included in the Base EHR definition, and the adoption of the criterion 
in 45 CFR 170.315(a)(9) will expire on January 1, 2025 (89 FR 1281).
    In addition to the DSI criterion, which is required to meet the 
Base EHR definition after January 1, 2025, in the ONC HTI-1 final rule, 
ONC finalized other updates related to health IT certification criteria 
referenced in the CEHRT definition. For these updates, health IT 
developers must update and provide certified Health IT Modules to their 
customers by January 1, 2026, including updates resulting from the 
following finalized policies:
     ONC updated the ``Transmission to public health agencies--
electronic case reporting'' criterion in 45 CFR 170.315(f)(5) 
specifying consensus-based, industry-developed electronic standards and 
implementation guides (IGs) to replace functional, descriptive 
requirements in the existing criterion (89 FR 1226).
     ONC adopted the United States Core Data for 
Interoperability (USCDI) version 3 in 45 CFR 170.213(b) and finalized 
that USCDI version 1 in 45 CFR 170.213(a) will expire on January 1, 
2026. This change impacts ONC health IT certification criteria that 
reference the USCDI, including the ``transitions of care'' 
certification criteria in 45 CFR 170.315(b)(1)(iii)(A)(1)-(2), 
``Clinical information reconciliation and incorporation--
Reconciliation'' (45 CFR 170.315(b)(2)(iii)(D)(1) through (3)); and 
``View, download, and transmit to 3rd party'' (45 CFR 
170.315(e)(1)(i)(A)(1)) (89 FR 1210).
     ONC updated the ``demographics'' certification criterion 
(45 CFR 170.315(a)(5)), including renaming the criterion to ``patient 
demographics and observations'' (89 FR 1295).
     ONC updated the ``standardized API for patient and 
population services'' certification criterion in 45 CFR 170.315(g)(10) 
to include newer versions of certain standards and updated 
functionality to support the criterion (89 FR 1283).
    For complete information about the updates to ONC health IT 
certification criteria finalized in the HTI-1 final rule, we refer 
readers to the text of the final rule (89 FR 1192) as well as resources 
available on ONC's website.\825\
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    \825\ For more information, see: https://www.healthit.gov/topic/laws-regulation-and-policy/health-data-technology-and-interoperability-certification-program.
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    We did not propose and are not finalizing any changes to these 
policies.
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5. Changes to the Scoring Methodology Beginning With the EHR Reporting 
Period in CY 2025
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41636 through 
41645), we adopted a performance-based scoring methodology for eligible 
hospitals and CAHs reporting under the Medicare Promoting 
Interoperability Program beginning with the EHR reporting period in CY 
2019, which included a minimum scoring threshold of a total score of 50 
points or more, that eligible hospitals and CAHs must meet to satisfy 
the requirement to report on the objectives and measures of meaningful 
use under 42 CFR 495.24. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45491 through 45492), we increased the minimum scoring threshold from 
50 points to 60 points beginning with the EHR reporting period in CY 
2022 and adopted corresponding changes to the regulatory text at 42 CFR 
495.24(e)(1)(i)(C) for the EHR reporting period in CY 2022. In the FY 
2023 IPPS/LTCH PPS final rule (87 FR 49410 through 49411), we extended 
the 60-point threshold for the EHR reporting period in CY 2023 and 
subsequent years in the regulatory text at 42 CFR 495.24(f)(1)(i)(B).
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36369 through 
36371), we proposed to increase the minimum scoring threshold from 60 
points to 80 points and proposed corresponding changes to the 
regulation text at 42 CFR 495.24(f)(1)(i) for the EHR reporting period 
in CY 2025 and subsequent years. Our review of the CY 2022 Medicare 
Promoting Interoperability Program's performance results found 98.5 
percent of eligible hospitals and CAHs (that is 97 percent of CAHs and 
99 percent of eligible hospitals) that reported to the Medicare 
Promoting Interoperability Program successfully met the minimum scoring 
threshold of 60 points, and 81.5 percent of eligible hospitals and CAHs 
(that is 78 percent of CAHs and 83 percent of eligible hospitals) that 
reported to the Medicare Promoting Interoperability Program exceeded 
the score of 80 points. Given the widespread success of eligible 
hospitals and CAHs participating in the Medicare Promoting 
Interoperability Program in CY 2022, we stated that adopting a higher 
scoring threshold would incentivize more eligible hospitals and CAHs to 
align their health information systems with evolving industry standards 
and will encourage increased data exchange. We noted that eligible 
hospitals and CAHs will have gained 3 years of experience in the 
Medicare Promoting Interoperability Program (CYs 2022, 2023, and 2024) 
at the 60-point minimum score threshold to improve performance. We 
stated that an increase from 60 points to 80 points would encourage 
higher levels of performance through the advanced use of CEHRT to 
further incentivize eligible hospitals and CAHs to improve 
interoperability and health information exchange. We also proposed to 
make corresponding changes to the regulatory text at 42 CFR 
495.24(f)(1)(i) to reflect the scoring threshold change. Specifically, 
in the proposed rule, we proposed to adopt new regulatory text at 42 
CFR 495.24(f)(1)(i)(C), to state ``In 2025 and subsequent years, earn a 
total score of at least 80 points.'' We proposed that this change would 
take effect for the EHR reporting period in CY 2025 and subsequent 
years.
    We invited public comment on our proposals to increase the minimum 
scoring threshold from 60 points to 80 points for the EHR reporting 
period in CY 2025 and subsequent years, and to make corresponding 
changes to the regulatory text at 42 CFR 495.24(f)(1)(i).
    Comment: A few commenters expressed support for the proposal to 
increase the minimum scoring threshold

[[Page 69617]]

from 60 points to 80 points. These commenters agreed that a higher 
scoring threshold will incentivize more eligible hospitals and CAHs to 
align their health information systems with evolving industry 
standards, including advanced use of CEHRT, improved interoperability 
and health information exchange, and increased data exchange.
    Response: We thank the commenters for their support.
    Comment: Several commenters supported the proposal to increase the 
scoring threshold from 60 points to 80 points and offered additional 
recommendations for CMS's consideration. A commenter suggested that CMS 
conduct further research and release de-identified data on which 
categories of eligible hospitals and CAHs are performing well to better 
understand the success rates of participation in the Medicare Promoting 
Interoperability Program. Another commenter recommended CMS ensure the 
increased scoring threshold is scaled appropriately, considering the 
evolving nature of health IT and varying capabilities of organizations. 
A commenter supported the proposal to raise the scoring threshold to 80 
points but recommended raising it to 100 points because they stated 
that would have the most effect on quality and safety. A few commenters 
supported the increase in the minimum scoring threshold but noted that 
beginning with the EHR reporting period in CY 2025 was too soon. A few 
commenters recommended an incremental increase over two years, from 60 
points to 70 points in CY 2025 and from 70 points to 80 points in CY 
2026. A commenter recommended CMS consider a three-year phased 
approach, remaining at 60 points in year one, increasing to 70 points 
in year two, and finally increasing to 80 points in year three. A few 
commenters supported raising the scoring threshold but recommended 
increasing it to 75 points rather than 80 points because of the 
difficulty smaller hospitals may have with performing on the HIE 
objective.
    Response: We thank the commenters for their support and 
recommendations. We continue to believe that adopting a higher scoring 
threshold will incentivize more eligible hospitals and CAHs to align 
their health information systems with evolving industry standards and 
will encourage increased data exchange. With regard to the comment 
requesting release of de-identified data, we remind readers of our 
previously adopted policy to publicly report total scores for each 
eligible hospital and CAH, beginning with data from the EHR reporting 
period in CY 2023 (87 FR 49347). When these data become publicly 
available, which we anticipate will be in January 2025, researchers, 
consumers, and other interested parties will have access to hospitals' 
scoring information. As we discuss hereafter, we agree with commenters 
who recommended an incremental increase to the minimum scoring 
threshold over two years, from 60 points to 70 points for the EHR 
reporting period in CY 2025 and from 70 points to 80 points for the EHR 
reporting period in CY 2026. In response to the commenter recommending 
that we consider increasing the minimum scoring threshold to 100 
points, we may consider this for future rulemaking.
    Comment: A few commenters did not support the proposal to increase 
the scoring threshold from 60 points to 80 points. A commenter stated 
that according to the CY 2022 Medicare Promoting Interoperability 
Program's performance results CMS cited, over 1000 hospitals would not 
meet the new scoring threshold and would be adversely impacted by this 
change. Another commenter stated the additional reporting burden for CY 
2025 from past finalized rules, proposed rule changes, as well as 
changes to requirements of CEHRT increase the program requirements and 
negate the need to increase the performance threshold. Another 
commenter stated they did not believe changing the scoring threshold 
would produce a more comprehensive score of reliable data as EHR 
developers and vendors are responsible for providing certified 
functionality to obtain such a score.
    Many commenters did not support the proposal to increase the 
scoring threshold from 60 points to 80 points and offered alternative 
recommendations for CMS' consideration. Several commenters recommended 
that CMS consider a delayed implementation of the change in scoring 
over several years. A few commenters were concerned that hospitals and 
EHR developers needed more time to adjust to the reporting 
requirements. A few commenters stated CMS should give hospitals time to 
independently analyze the Medicare Promoting Interoperability Program 
performance data CMS referenced. A commenter noted that in past years, 
CMS has provided fair warning and time for adjustment, and therefore 
this proposal should be delayed avoiding increased failure rates and 
decreased compliance. A commenter stated the most likely path to 
increased points would be HIE or TEFCA participation, which would 
require more time and money. Several commenters opposed raising the 
minimum scoring threshold to 80 points at this time, recommending a 
smaller increase. A few commenters urged CMS to maintain the 60-point 
threshold because they stated the proposed increase is too drastic.
    Response: We thank the commenters for their feedback and concerns. 
We disagree with the commenter who stated that over 1,000 hospitals 
would not meet an 80-point scoring threshold. According to the CY 2022 
Medicare Promoting Interoperability Program's performance results we 
cited in the FY 2025 LTCH/IPPS proposed rule (89 FR 36369 through 
36371), 18.5 percent of hospitals did not meet a scoring threshold of 
at least 80 points. That is 739 hospitals, or 502 eligible hospitals 
and 236 CAHs. We reiterate that these statistics refer to the CY 2022 
performance period and eligible hospitals and CAHs will have gained 3 
additional years (CYs 2022, 2023, and 2024) of experience in the 
Medicare Promoting Interoperability Program with the threshold of 60 
points.
    We also disagree with the commenter who stated the additional 
reporting burden for CY 2025 from past finalized rules, proposed rule 
changes, as well as changes to requirements of CEHRT increase the 
program requirements and negate the need to increase the minimum 
performance threshold. We believe that there has been sufficient time 
since CY 2022 for programmatic stability in the Medicare Promoting 
Interoperability Program's available objectives and measures to warrant 
an increase to the minimum scoring threshold. According to the Medicare 
Promoting Interoperability Program's performance results, the average 
scores for eligible hospitals and CAHs have steadily increased since 
2020; the average final score was 72.5 in 2020 (72.4 for eligible 
hospitals and 73.8 for CAHs), 74.9 in 2021 (74.5 for eligible hospitals 
and 76.6 for CAHs), and 94.6 in 2022 (95.5 for eligible hospitals and 
91.7 for CAHs). An increase to the minimum scoring threshold represents 
our goals of encouraging higher levels of program performance and 
further advancement toward interoperability, promoting greater health 
information exchange, and raising overall patient care quality.
    While participation in TEFCA or HIE bidirectional exchange are 
highly scored, we disagree that choosing one of these options under the 
HIE objective is the most likely path to increasing overall points. We 
note that there have been several finalized changes in the Medicare 
Promoting Interoperability Program that allow increased scoring on

[[Page 69618]]

new measures (for example, the HIE Bi-Directional Exchange, Enabling 
Exchange under TEFCA, AU Surveillance and AR Surveillance measures) as 
well as opportunities to earn bonus points that could allow eligible 
hospitals and CAHs to achieve the 70-point scoring threshold for CY 
2025 and 80-point scoring threshold for CY 2026 that we are finalizing 
as a modification of our proposal. We have balanced this scoring 
threshold increase against the full scope of the Medicare Promoting 
Interoperability Program's changes, which consider the role of bonus 
points in meeting or surpassing the minimum threshold. We believe that 
these efforts offer more than sufficient opportunity for eligible 
hospitals and CAHs to earn more points with an increase to the Medicare 
Promoting Interoperability Program's minimum scoring threshold.
    We also disagree with commenters who stated that an increase to the 
minimum scoring threshold beginning with the EHR reporting period in CY 
2025 would be too drastic. As the 60-point threshold has been in place 
since CY 2022, we maintain that the Program is prepared to adapt and 
evolve toward an increased standard of participation for eligible 
hospitals and CAHs to be considered meaningful EHR users. We remind 
readers that according to CY 2022 Medicare Promoting Interoperability 
Program performance results, 98.5 percent of eligible hospitals and 
CAHs (that is 97 percent of CAHs and 99 percent of eligible hospitals) 
that reported to the Medicare Promoting Interoperability Program 
successfully met the minimum threshold score of 60 points, and 81.5 
percent of eligible hospitals and CAHs (that is 78 percent of CAHs and 
83 percent of eligible hospitals) that reported to the Medicare 
Promoting Interoperability Program exceeded the score of 80 points. 
According to the same data, 92.8 percent of eligible hospitals and CAHs 
(that is 93.8 percent of eligible hospitals and 90.2 percent of CAHs) 
achieved a scoring threshold of 70 points in CY 2022. We reiterate that 
the average scores for eligible hospitals and CAHs have remained above 
70 since 2020 and have shown upward trends year after year. Such 
successful Program results signify the need for raising the minimum 
score. Given the widespread success of eligible hospitals and CAHs 
participating in the Medicare Promoting Interoperability Program in CY 
2022, the expanded opportunities to earn points on new measures as well 
as additional bonus points that have become available since CY 2022, as 
well as the fact that eligible hospitals and CAHs have gained three 
years of experience in the Medicare Promoting Interoperability Program 
at the 60-point minimum score threshold to improve performance (CYs 
2022, 2023, and 2024), we believe that an increase to the minimum 
scoring threshold is more than feasible. Increasing the minimum scoring 
threshold will encourage higher levels of performance through the 
advanced use of CEHRT to further incentivize eligible hospitals and 
CAHs to improve interoperability and health information exchange.
    While increasing the minimum scoring threshold is important for 
incentivizing eligible hospitals and CAHs to improve interoperability 
and health information exchange, after considering public comments, we 
concluded that an incremental approach would provide additional time 
for eligible hospitals, CAHs, and EHR developers to meet updated 
reporting requirements. Specifically, we agree with commenters who 
recommended an incremental increase to the minimum scoring threshold 
over two years, from 60 points to 70 points for the EHR reporting 
period in CY 2025 and from 70 points to 80 points for the EHR reporting 
period beginning in CY 2026. We believe this will give eligible 
hospitals, CAHs, and EHR developers additional time to adjust to an 
eventual 80-point minimum scoring threshold, while continuing to 
incentivize more eligible hospitals and CAHs to align their health 
information systems with evolving industry standards. Increasing the 
minimum scoring threshold to 70 points for the EHR reporting period in 
CY 2025 will also be less likely to disproportionately impact eligible 
hospitals and CAHs that have struggled to achieve a score of 80 points, 
especially smaller and under resourced hospitals. This incremental 
increase will reduce the burden of increased reporting requirements by 
providing a phased approach. Finally, a 10-point increase for the EHR 
reporting period in CY 2025, and a subsequent 10-point increase for the 
EHR reporting period beginning in CY 2026, would align with previous 
gradual increases to the minimum scoring threshold in the Medicare 
Promoting Interoperability Program, such as the previous increase from 
50 points to 60 points in CY 2022 (86 FR 45492).
    After consideration of the public comments we received, we are 
finalizing, with modification, our proposal to increase the minimum 
performance-based scoring threshold from 60 points to 80 points, 
beginning with the EHR reporting period in CY 2025. We are finalizing 
an increase to the minimum performance-based scoring threshold from 60 
points to 70 points for the EHR reporting period in CY 2025, and from 
70 points to 80 points beginning with the EHR reporting period in CY 
2026 and continuing in subsequent years. We maintain our intent to 
heighten the required standards for the Medicare Promoting 
Interoperability Program's performance levels and encourage higher 
levels of performance through the advanced usage of CEHRT in order to 
further incentivize eligible hospitals and CAHs to improve 
interoperability and health information exchange. This gradual increase 
will be more feasible for eligible hospitals and CAHs, while providing 
an opportunity to show continued growth in the Program and reflect the 
success of its participants.
    We are therefore also finalizing, with modification, our proposal 
to adopt regulatory text at 42 CFR 495.24(f)(1)(i)(C), which stated 
``In 2025 and subsequent years, earn a total score of at least 80 
points,''. Instead, we are modifying the regulatory text to align with 
the finalized policy to increase the performance-based scoring 
threshold from 60 points to 70 points for the EHR reporting period in 
CY 2025, and from 70 points to 80 points beginning with the EHR 
reporting period in CY 2026 and continuing in subsequent years. We are 
finalizing changes to the regulatory text at 42 CFR 495.24(f)(1)(i)(B) 
to state ``In 2023 and 2024, earn a total score of at least 60 
points'', and modifying our proposal by adding regulatory text at 42 
CFR 495.24(f)(1)(i)(C) to state ``In 2025, earn a total score of at 
least 70 points.'' and by adding regulatory text at 42 CFR 
495.24(f)(1)(i)(D) to state ``In 2026 and subsequent years, earn a 
total score of at least 80 points.''
    As shown in Table IX.F.-03., the points associated with the 
required measures sum to 100 points and reporting one of the optional 
measures under the Public Health and Clinical Data Exchange objective 
adds an additional 5 bonus points. The scores for each of the measures 
are added together to calculate a total score of up to 100 possible 
points for each eligible hospital or CAH. We refer readers to Table 
IX.F.-03. in this final rule, which summarizes the objectives, 
measures, maximum points available, and whether a measure is required 
or optional for the EHR reporting period in CY 2025 based on our 
previously adopted policies, and the finalized measure changes included 
in this final rule.

[[Page 69619]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.256

    The maximum points available, by measure, in this final rule, as 
shown in Table IX.F.-03, do not include the points that will be 
redistributed in the event an exclusion is claimed for a given measure. 
We did not propose any changes to our policy for point redistribution 
in the event an exclusion is claimed. We did propose and have finalized 
a revision to the redistribution for the Public Health and Clinical 
Data Exchange objective to reflect the six measures under that 
objective (rather than five) after the division of the AUR Surveillance 
measure into AU Surveillance and AR Surveillance measures, as discussed 
in section IX.F.2.a. We refer readers to Table IX.F.-

[[Page 69620]]

04 in this final rule, which shows how points will be redistributed 
among the objectives and measures for the EHR reporting period in CY 
2025, in the event an eligible hospital or CAH claims an exclusion.
[GRAPHIC] [TIFF OMITTED] TR28AU24.257

6. Clinical Quality Measurement for Eligible Hospitals and CAHs 
Participating in the Medicare Promoting Interoperability Program
a. Updates to Clinical Quality Measures and Reporting Requirements in 
Alignment With the Hospital Inpatient Quality Reporting (IQR) Program
(1) Background
    Under sections 1814(l)(3)(A) and 1886(n)(3)(A) of the Social 
Security Act, and the definition of ``meaningful EHR user'' under 42 
CFR 495.4, eligible hospitals and CAHs must report on clinical quality 
measures selected by CMS using CEHRT (also referred to as eCQMs), as 
part of being a meaningful EHR user under the Medicare Promoting 
Interoperability Program.
    Tables IX.F.-05. and IX.F.-06 in this final rule summarize the 
previously finalized eCQMs available for eligible hospitals and CAHs to 
report under the Medicare Promoting Interoperability Program for the CY 
2024 and CY 2025 reporting periods, as finalized in the FY 2024 IPPS/
LTCH PPS final rule (88 FR 59280 through 59281). To maintain alignment 
with the Hospital IQR Program (sections IX.C.5.c and IX.C.5.d of the 
preamble of this final rule), the order of the eCQMs displayed in 
Tables IX.F.-05 and IX.F.-06 mirrors that of the Hospital IQR program. 
In addition, the short names, and the consensus-based entity (CBE) 
numbers of the measures in the tables match the measures on the 
Electronic Clinical Quality Improvement Resource Center website at: 
https://ecqi.healthit.gov/.

[[Page 69621]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.258

[GRAPHIC] [TIFF OMITTED] TR28AU24.259

(2) Adoption of Additional eCQMs
    As we stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38479), 
we intend to continue to align the eCQM reporting requirements and eCQM 
measure set for the Medicare Promoting Interoperability Program with 
similar requirements under the Hospital IQR Program, to the extent 
feasible. Section 1886(n)(3)(B)(i)(I) of the Act sets forth a 
preference for the selection of eCQMs that are also used in the 
Hospital IQR Program or endorsed by the CBE.
    In the FY 2025 LTCH/IPPS PPS proposed rule (89 FR 36373 through 
36373), we proposed to adopt two new eCQMs for the Medicare Promoting 
Interoperability Program and to modify one eCQM, beginning with the CY 
2026 reporting period, in alignment with the Hospital IQR Program. 
Specifically, we proposed to add the following two eCQMs to the 
Medicare Promoting Interoperability Program eCQM measure set from which 
eligible hospitals and CAHs can self-select to report, beginning with 
the CY 2026 reporting period: (1) the Hospital Harm--Falls with Injury 
eCQM (CBE #4120e) and (2) the Hospital Harm--Postoperative Respiratory 
Failure eCQM (CBE #4130e). We also proposed to modify

[[Page 69622]]

the Global Malnutrition Composite Score eCQM (CBE #3592e) beginning 
with the CY 2026 reporting period, by adding patients ages 18 to 64 to 
the current cohort of patients 65 years or older.
    We invited public comment on these proposals for the Medicare 
Promoting Interoperability Program. We also refer readers to sections 
IX.C.5 and IX.C.7 where we discuss comments received on these eCQM 
proposals for both the Medicare Promoting Interoperability and Hospital 
IQR Programs or only the Hospital IQR Program.
    Comment: Several commenters supported CMS's proposals to adopt the 
Hospital Harm--Falls eCQM and the Hospital Harm--Postoperative 
Respiratory Failure eCQM, as well as to modify the Global Malnutrition 
Composite Score eCQM. A few commenters commended CMS's continued 
efforts to align clinical quality measures across its public reporting 
programs. A commenter appreciated the measured scope changes of CMS's 
proposals. Another commenter emphasized the need for quality measures 
to monitor populations with cognitive and age-related conditions.
    Response: We thank the commenters for their support of these 
measures.
    Comment: A commenter recommended that CMS not add more than one new 
eCQM per reporting period, stating it is a burdensome process to build, 
track, and implement new eCQMs to maintain alignment between the 
Hospital IQR Program and the Medicare Promoting Interoperability 
Program.
    Response: We acknowledge the commenter's concerns about the costs 
associated with adding new eCQMs to their hospital's EHR. While the 
initial implementation cost for an eCQM may be higher, we anticipate 
maintenance costs to be much less costly than chart-abstracted quality 
measures. We believe that aligning eCQM reporting requirements between 
the Medicare Promoting Interoperability Program and the Hospital IQR 
Program allows for improved coordination, burden reduction, and 
promotes quality care. Eligible hospitals that participate in both the 
Medicare Promoting Interoperability Program and the Hospital IQR 
Program only need to report eCQM data once for credit in both programs. 
In addition, the Hospital Harm--Falls eCQM, Hospital Harm--
Postoperative Respiratory Failure eCQM, and the Global Malnutrition 
Composite Score eCQM are among the eCQMs in the eCQM measure set for 
which eligible hospitals and CAHs may self-select and choose whether to 
report on.
    Comment: A few commenters did not support the Medicare Promoting 
Interoperability Program's proposal to add two new eCQMs to the measure 
set in alignment with the Hospital IQR Program. A commenter stated that 
allowing hospitals to perform their own data extracts and submit data 
directly to CMS, instead of mandating that eligible hospitals and CAHs 
utilize CEHRT, would provide benefits such as decreased vendor 
reliance, increase agility to adapt to changes, and consume fewer 
resources.
    Response: We thank the commenters for their feedback. By aligning 
the Hospital IQR Program and Medicare Promoting Interoperability 
Program measure sets, eligible hospitals and CAHs must utilize CEHRT 
for the electronic transmission of eCQM data to fulfill reporting 
requirements. Furthermore, we believe that aligning eCQM reporting 
requirements between the Medicare Promoting Interoperability Program 
and the Hospital IQR Program allows for improved coordination, burden 
reduction, and promotes quality care. While we recognize the perceived 
independence, flexibility, and potential cost savings associated with 
allowing eligible hospitals and CAHs to extract and submit their own 
data to CMS, requiring the use of CEHRT for the transmission of this 
data helps to ensure standardization, interoperability, data accuracy, 
and integrity.
    After consideration of the public comments we received, we are 
finalizing our proposal to adopt into the measure set from which 
eligible hospitals and CAHs could self-select to report (1) the 
Hospital Harm--Falls with Injury eCQM (CBE #4120e) eCQM beginning with 
the CY 2026 reporting period, (2) the Hospital Harm--Postoperative 
Respiratory Failure eCQM (CBE #4130e) beginning with the CY 2026 
reporting period, and (3) to modify the Global Malnutrition Composite 
Score eCQM (CBE #3592e) beginning with the CY 2026 reporting period. 
Table IX.F.-07 summarizes the newly adopted and previously adopted 
eCQMs for the Medicare Promoting Interoperability Program for the CY 
206 reporting period and for subsequent years.

[[Page 69623]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.260

b. eCQM Reporting and Submission Requirements for the CY 2026 Reporting 
Period and Subsequent Years
    Consistent with our goal to align the eCQM reporting periods and 
criteria in the Medicare Promoting Interoperability Program with the 
Hospital IQR Program, eligible hospitals and CAHs have been required to 
report four calendar quarters of data for each required eCQM: (1) the 
Safe Use of Opioids--Concurrent Prescribing eCQM; (2) the Severe 
Obstetric Complications eCQM; (3) the Cesarean Birth eCQM; and (4) 
three self-selected eCQMs, for the CY 2024 reporting period and 
subsequent years (87 FR 49365 through 49367).
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36375 through 
36376), we proposed that eligible hospitals and CAHs under the Medicare 
Promoting Interoperability Program would be required to report four 
calendar quarters of data for each of the following: (1) Three self-
selected eCQMs; (2) the Safe Use of Opioids--Concurrent Prescribing 
eCQM; (3) the Severe Obstetric Complications eCQM; (4) the Cesarean 
Birth eCQM; (5) the Hospital Harm--Severe Hypoglycemia eCQM; (6) the 
Hospital Harm--Severe Hyperglycemia eCQM; and (7) the Hospital Harm--
Opioid-Related Adverse Events eCQM, beginning with the CY 2026 
reporting period. This proposal would require eligible hospitals and 
CAHs to report a total of nine eCQMs for the CY 2026 reporting period.
    We also proposed that eligible hospitals and CAHs under the 
Medicare Promoting Interoperability Program would be required to report 
four calendar quarters of data for each of the following: (1) Three 
self-selected eCQMs; (2) the Safe Use of Opioids--Concurrent 
Prescribing eCQM; (3) the Severe Obstetric Complications eCQM; (4) the 
Cesarean Birth eCQM; (5) the Hospital Harm--Severe Hypoglycemia eCQM; 
(6) the Hospital Harm--Severe Hyperglycemia eCQM; (7) the Hospital 
Harm--Opioid-Related Adverse Events eCQM; (8) the Hospital Harm--
Pressure Injury eCQM; and (9) the Hospital Harm--Acute Kidney Injury 
eCQM, for a total of eleven eCQMs, beginning with the CY 2027 reporting 
period and subsequent years.
    We invited public comment on our proposals to increase the number 
of mandatory eCQM measures to a total of nine beginning with the CY 
2026 reporting period, and to increase the number of mandatory eCQM 
measures to a total of eleven beginning with the CY 2027 reporting 
period and subsequent years. We also refer readers

[[Page 69624]]

to sections IX.C.5.c. and IX.C.5.d. where we discuss comments we 
received on these eCQM reporting and submission proposals for both the 
Medicare Promoting Interoperability and Hospital IQR Programs or only 
the Hospital IQR Program.
    Comment: A few commenters supported CMS's proposals to revise the 
eCQM reporting and submission requirements for the CY 2026 reporting 
period and subsequent years.
    Response: We thank the commenters for their support for these 
proposals.
    Comment: Several commenters did not support increasing the number 
of required eCQMs, believing the increase may create additional burden 
to implement, monitor and maintain. A few commenters recommended CMS 
delay increased reporting requirements or take a less aggressive and 
phased approach.
    Response: We acknowledge commenters' concerns regarding the burden 
to implement, monitor and maintain eCQMs. However, while the initial 
implementation cost for an eCQM may be higher, we anticipate 
maintenance costs to be much less and overall less costly than chart-
abstracted quality measures. We acknowledge commenters' recommendations 
to provide more time to comply with an increase in reporting 
requirements and a delayed or phased approach. We are committed to 
supporting eligible hospitals and CAHs through the eCQM implementation 
process by providing sufficient time to update their systems to comply 
with new reporting requirements, while balancing the need of including 
important new patient safety metrics. We also note that we are 
finalizing with modification our proposal to increase the required 
number of eCQMs from eight to eleven eCQMs over two years and we are 
instead finalizing an increase in the number of required eCQMs from 
eight to eleven over three years
    Comment: A few commenters supported CMS's efforts to align eCQM 
reporting requirements for the Hospital IQR Program and the Medicare 
Promoting Interoperability Program, believing alignment partially 
mitigates administrative and cost burdens.
    Response: We thank the commenters for their comments and support. 
We remain committed to implementing quality measures to improve 
healthcare outcomes while reducing the reporting burden by aligning 
reporting requirements across multiple quality reporting programs.
    Comment: A commenter was concerned that eligible hospitals and CAHs 
are not required to report on all of the eCQMs in the measure set and 
suggested that CMS consider this in the future.
    Response: We thank the commenter for their feedback. CMS is 
committed to a balanced approach in implementing quality measures, and 
a considered approach to increasing the number of measures required for 
reporting over time. Our goal is to ensure that the measures we use are 
meaningful, actionable, and not overly burdensome for providers. While 
we understand the desire for comprehensive reporting and faster 
implementation, we also must consider factors such as the readiness of 
providers to report new measures, the feasibility of data collection, 
and the potential impact on patient care. This is particularly 
important for rural and small hospitals with limited resources, which 
is why we proposed a stepwise increase in the number of required eCQMs 
over a two-year period. After considering comments expressing concerns 
about burden and requests for more lead time to increase the number of 
required eCQMs, we are modifying and finalizing our proposal by 
increasing the number of required eCQMs over a three-year period 
instead of a two-year period as further described below.
    Comment: A few commenters suggested that CMS consider 
implementation timeframes when introducing a new measure, taking into 
account voluntary versus mandatory reporting, software development 
requirements, and organizational readiness to operationalize workflows 
and tracking. These commenters recommended CMS wait at least three 
years post-introduction of a new measure before requiring it.
    Response: We agree on the importance of considering implementation 
timeframes and providing sufficient time for hospitals to implement new 
eCQMs into their EHRs, to take into account offering the opportunity 
for hospitals to self-select measures so they can gain experience with 
the measures before they become mandatory, and the potential benefits 
of a phased approach. We disagree with the recommendation to wait at 
least three years post-introduction of a new measure before requiring 
it because hospitals can self-select measures to gain experience with 
the measures before they become mandatory. CMS is committed to 
implementing measures in a manner that supports quality improvement 
while minimizing the burden on providers.
    After consideration of the public comments we received, we are 
finalizing, with modification, our proposal to increase eCQM reporting 
requirements in the Medicare Promoting Interoperability Program for the 
CY 2026 reporting period. Specifically, for the CY 2026 reporting 
period, eligible hospitals and CAHs will be required to report a total 
of eight eCQMs: three self-selected, and the Safe Use of Opioids, 
Severe Obstetric Complications, Cesarean Birth, Hospital Harm--Severe 
Hypoglycemia, and Hospital Harm--Severe Hyperglycemia eCQMs.
    We are also finalizing, with modification, our proposal to increase 
eCQM reporting requirements in the Medicare Promoting Interoperability 
Program for the CY 2027 reporting period. Specifically, for the CY 2027 
reporting period, eligible hospitals and CAHs will be required to 
submit data for the eight eCQMs finalized for the CY 2026 reporting 
period as well as the Hospital Harm--Opioid-Related Adverse Events 
eCQM, for a total of nine eCQMs.
    Lastly, we are finalizing, with modification, our proposal to 
increase eCQM reporting requirements in the Medicare Promoting 
Interoperability Program beginning with the CY 2028 reporting period. 
Specifically, beginning with the CY 2028 reporting period and for 
subsequent years, eligible hospitals and CAHs will be required to 
submit data for the nine eCQMs required for the CY 2027 reporting 
period as well as the Hospital Harm--Pressure Injury and Hospital 
Harm--Acute Kidney Injury eCQMs, for a total of eleven eCQMs.
7. Potential Future Update of the SAFER Guides Measure
a. Background
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45479 through 
45481), we adopted the SAFER Guides measure under the Protect Patient 
Health Information objective beginning with the EHR reporting period in 
CY 2022. Eligible hospitals and CAHs are required to attest to whether 
they have conducted an annual self-assessment using all nine SAFER 
Guides,\826\ at any point during the calendar year in which the EHR 
reporting period occurs, with one ``yes/no'' attestation statement. 
Beginning in CY 2022, the reporting of this measure was required, but 
eligible hospitals and CAHs were not scored, and an attestation of 
``yes'' or ``no'' were both acceptable answers without penalty. For 
additional information, please refer to the discussion of the SAFER 
Guides measure in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45479 
through 45481). In the FY 2024 IPPS/

[[Page 69625]]

LTCH PPS final rule, we finalized a proposal to modify our requirement 
for the SAFER Guides measure beginning with the EHR reporting period in 
CY 2024 and continuing in subsequent years, to require eligible 
hospitals and CAHs to attest ``yes'' to having conducted an annual 
self-assessment using all nine SAFER Guides, at any point during the 
calendar year in which the EHR reporting period occurs to be considered 
a meaningful user (88 FR 59262).
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    \826\ https://www.healthit.gov/topic/safety/safer-guides.
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    We did not propose and are not finalizing any changes to these 
policies.
b. Status of Updates to SAFER Guides
    We received comments on the FY 2024 IPPS/LTCH PPS proposed rule 
recommending that we work with ONC to update the SAFER Guides, citing 
that the SAFER Guides were last updated in 2016 (88 FR 59264). In 
response to these comments, we noted that, while the current SAFER 
Guides reflect relevant and valuable guidelines for safe practices with 
respect to current EHR systems, we would consider exploring updates in 
collaboration with ONC. We reminded readers to visit the CMS resource 
library website at https://www.cms.gov/regulations-guidance/promoting-interoperability/resource-library and the ONC website at https://www.healthit.gov/topic/safety/safer-guides for resources on the content 
and appropriate use of the SAFER Guides (88 FR 59262). We also noted 
that future updates to the SAFER Guides would be provided with 
accompanying educational and promotional materials to notify 
participants, in collaboration with ONC, when available (88 FR 59265). 
In this final rule, we seek to make readers aware that efforts to 
update the SAFER Guides are currently underway. We anticipate that 
updated versions of the SAFER Guides may become available as early as 
CY 2025, and we would consider proposing a change to the SAFER Guides 
measure for the EHR reporting period beginning in CY 2026 to permit use 
of an updated version of the SAFER Guides at that time. We encourage 
eligible hospitals and CAHs to become familiar with the updated 
versions of the SAFER Guides when they become available and consider 
them as they implement appropriate EHR safety practices.
    We did not propose and are not finalizing any changes to these 
policies.
8. Update the Definition of Meaningful EHR User for Healthcare 
Providers That Have Committed Information Blocking
    The Department of Health and Human Services (HHS) rule, 21st 
Century Cures Act: Establishment of Disincentives for Health Care 
Providers That Have Committed Information Blocking final rule 
(hereafter referred to as the Disincentives final rule) (89 FR 54662), 
appeared in the Federal Register on July 1, 2024. The Disincentives 
final rule implements the provision of the 21st Century Cures Act 
specifying that a healthcare provider, determined by the HHS Office of 
Inspector General (OIG) to have committed information blocking, shall 
be referred to the appropriate agency to be subject to appropriate 
disincentives set forth through notice and comment rulemaking. Through 
policies finalized in the Disincentives final rule, an eligible 
hospital or CAH will not be considered a meaningful EHR user in an EHR 
reporting period if the OIG refers, during the calendar year of the EHR 
reporting period, a determination that the eligible hospital or CAH 
committed information blocking as defined at 45 CFR 171.103 (89 FR 
54663). Accordingly, we revised the definition of ``Meaningful EHR 
User'' in 42 CFR 495.4 to state that an eligible hospital or CAH is not 
a meaningful EHR user in a payment adjustment year if the OIG refers a 
determination that the eligible hospital or CAH committed information 
blocking, as defined at 45 CFR 171.103, during the calendar year of the 
EHR reporting period (89 FR 54687 through 54691). The downward payment 
adjustment will apply 2 years after the year the referral was made by 
the OIG, and the EHR reporting period in which the eligible hospital 
was not a meaningful EHR user. For CAHs, the downward payment 
adjustment will apply to the payment adjustment year in which the OIG 
referral was made (89 FR 54691).
    An eligible hospital subject to this disincentive will be subject 
to a three quarters reduction of the annual market basket increase, 
while a CAH subject to this disincentive will have its payment reduced 
to 100 percent of reasonable costs, from the 101 percent of reasonable 
costs it might have otherwise earned, for failing to qualify as a 
meaningful EHR user in an applicable year. Additional regulatory 
provisions have been finalized at 45 CFR 171 Subpart J, related to the 
application of disincentives (89 FR 74953).
    We note the revised definition of Meaningful EHR User in 42 CFR 
495.4 became effective on July 31, 2024, when the Disincentives final 
rule became effective. For additional background and information on 
this update, we refer readers to the discussion in the Disincentives 
final rule (89 FR 54687 through 54691).
    We did not propose and are not finalizing any changes to these 
policies in this final rule.
9. Future Goals of the Medicare Promoting Interoperability Program
a. Future Goals With Respect to Fast Healthcare Interoperability 
Resources[supreg] (FHIR) APIs for Patient Access
    In partnership with ONC, we envision a future where patients have 
timely, secure, and easy access to their health information through the 
health application of their choice. We are working with ONC to enable 
this type of access to health information by requiring the use of APIs 
that utilize the Health Level Seven International[supreg] (HL7) FHIR. 
We work with ONC and other federal partners to improve timely and 
accurate data exchange, partner with industry to enhance digital 
capabilities, advance adoption of FHIR, support enterprise 
transformation efforts that increase our technological capabilities, 
and promote interoperability. In the FY 2021 IPPS/LTCH PPS proposed 
rule (85 FR 32858), we described our future vision for the Medicare 
Promoting Interoperability Program and stated that we will continue to 
consider changes that support a variety of HHS goals, including 
supporting alignment with the 21st Century Cures Act, advancing 
interoperability and the exchange of health information, and promoting 
innovative uses of health IT. We also solicited public comment on 
issues relevant to the Medicare Promoting Interoperability Program that 
related to policies finalized in the 21st Century Cures Act: 
Interoperability, Information Blocking, and the ONC Health IT 
Certification Program final rule, including finalization of a new 
certification criterion for a standards-based API using FHIR, among 
other health IT topics (85 FR 32858).
    ONC finalized the HTI-1 final rule (89 FR 1192), effective March 
11, 2024, to further implement the 21st Century Cures Act, among other 
policy goals. ONC finalized revisions to the ``standardized API for 
patient and population services'' certification criterion at 45 CFR 
170.315(g)(10). It also adopted the HL7 FHIR US Core Implementation 
Guide (IG) Standard for Trial Use version 6.1.0 at 45 CFR 
170.215(b)(1)(ii), which provides the latest consensus-based 
capabilities aligned with the USCDI version 3 \827\ data elements for 
FHIR APIs. The HTI-1 final rule also created the Insights Condition and 
Maintenance of Certification requirements (Insights

[[Page 69626]]

Condition) within the ONC Health IT Certification Program to provide 
transparent reporting on certified health IT (89 FR 1199). This 
Insights Condition requires developers of certified health IT subject 
to the requirements to report on measures that provide information 
about the use of specific certified health IT functionalities by end 
users. One such measure calculates the number of unique individuals who 
access their electronic health information overall and by different 
methods such as through a standardized API for patient and population 
services.
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    \827\ https://www.healthit.gov/isa/united-states-core-data-interoperability-uscdi#uscdi-v3.
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    By adopting these new and updated standards, implementation 
specifications, certification criteria, and conditions of 
certification, provisions in the HTI-1 final rule advance 
interoperability, improve transparency, and support the access, 
exchange, and use of electronic health information. CMS aims to further 
advance the use of FHIR APIs through policies in the Medicare Promoting 
Interoperability Program to advance interoperability, encourage the 
exchange of health information, and promote innovative uses of health 
IT. We also hope to gain insights into the adoption and use of FHIR 
APIs by eligible hospitals and CAHs due to the ONC Health IT 
Certification Program Insights Condition. We believe maintaining our 
focus on promoting interoperability, alignment, and simplification will 
reduce healthcare provider burden while allowing flexibility to pursue 
innovative applications that improve care delivery. For additional 
background and information, we refer readers to the discussion in the 
ONC HTI-1 final rule on this topic (89 FR 1192).
    We did not propose and are not finalizing any changes to these 
policies.
b. Improving Cybersecurity Practices
    The Medicare Promoting Interoperability Program encourages the 
advancement of patient safety by promoting appropriate cybersecurity 
practices through the Security Risk Analysis and the SAFER Guides 
measures. On February 14, 2023, the National Institute of Standards and 
Technology (NIST) published updated guidance for health care entities 
implementing requirements of the Health Insurance Portability and 
Accountability (HIPAA) Security Rule (45 CFR part 160 and subparts A 
and C of part 164; see also, most recently, 75 FR 40868 and 78 FR 
5566). The guidance, NIST SP 800-66r2, provides information and 
resources to HIPAA-covered entities to improve their cybersecurity risk 
practices.\828\ We also wish to alert readers of additional HHS 
resources and activities regarding cybersecurity best practices as 
recently summarized in an HHS strategy document that provides an 
overview of HHS recommendations to help the health care sector address 
cyber threats.\829\ HHS has also recently published a website detailing 
recommended cybersecurity performance goals.\830\ We intend to consider 
how the Medicare Promoting Interoperability Program can promote 
cybersecurity best practices for eligible hospitals and CAHs to inform 
potential future rulemaking proposals.
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    \828\ https://csrc.nist.gov/pubs/sp/800/66/r2/final.
    \829\ https://aspr.hhs.gov/cyber/Documents/Health-Care-Sector-Cybersecurity-Dec2023-508.pdf.
    \830\ https://hphcyber.hhs.gov/performance-goals.html.
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    We did not propose and are not finalizing any changes to these 
policies.
c. Improving Prior Authorization Processes
    We recently released the CMS Interoperability and Prior 
Authorization final rule (CMS-0057-F), which appeared in the Federal 
Register on February 8, 2024 (89 FR 8758). This final rule aims to 
enhance health information exchange and access to health records for 
patients, healthcare providers, and payers, and improve prior 
authorization processes. In the final rule, we finalized the 
``Electronic Prior Authorization'' measure under the HIE objective of 
the Merit-based Incentive Payment System (MIPS) Promoting 
Interoperability performance category and under the HIE objective of 
the Medicare Promoting Interoperability Program, beginning, for the 
Medicare Promoting Interoperability Program, in the EHR reporting 
period in CY 2027 (89 FR 8909 through 8927).
    We did not propose and are not finalizing any changes to these 
policies in this final rule.
10. Request for Information Regarding (RFI) Public Health Reporting and 
Data Exchange
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36377 through 
36381), we sought feedback in response to efforts across HHS to advance 
the public health information infrastructure, aimed to offer 
opportunities to further evolve the Medicare Promoting Interoperability 
Program, in collaboration with the CDC and ONC. We outlined a series of 
goals, followed by questions for commenters to consider and provide 
feedback for consideration in future rulemaking.
    We received many comments on the RFI regarding public health 
reporting and data exchange, and we thank the commenters for responding 
to our request for information. While we are not responding to specific 
comments submitted in response to this RFI, we believe that this input 
is valuable in our efforts to continue to promote public health 
reporting and data exchange. We may consider some of this feedback to 
inform potential future rulemaking proposals.

X. Other Provisions Included in This Final Rule

A. Transforming Episode Accountability Model (TEAM)

    In the May 2, 2024 Federal Register (89 FR 35934), we published the 
proposed rule titled ``Medicare and Medicaid Programs and the 
Children's Health Insurance 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 
2025 Rates; Quality Programs Requirements; and Other Policy Changes'' 
that would implement a new mandatory Medicare payment model under 
section 1115A of the Act--the Transforming Episode Accountability Model 
(TEAM).
    As we stated in the proposed rule, we believe that this model will 
test ways to further our goals of reducing Medicare expenditures while 
preserving or enhancing the quality of care furnished to beneficiaries. 
We are finalizing several of the provisions from the proposed rule but 
not all of them, and we intend to address and finalize some provisions 
of the proposed rule in future rulemaking. We also note that some of 
the public comments were outside of the scope of the proposed rule. 
These out-of-scope public comments are not addressed in this final 
rule. We have summarized the public comments that are within the scope 
of the proposed rule and our responses to those public comments. 
However, we note that in this final rule we are not addressing most 
comments received with respect to the provisions of the proposed rule 
that we are not finalizing at this time. Rather, we will address them 
at a later time, in subsequent rulemaking, as appropriate.
1. General Provisions
a. Introduction
    The CMS Innovation Center has designed and tested numerous 
alternative payment models that each include specific payment, quality, 
and other policies. However, there are some

[[Page 69627]]

general provisions that are very similar across models. The general 
provisions address beneficiary protections, model evaluation and 
monitoring, audits and record retention, rights in data and 
intellectual property, monitoring and compliance, remedial action, 
model termination by CMS, limitations on review, and miscellaneous 
provisions on bankruptcy and other notifications.
    We proposed to implement the general provisions, described later in 
this section and in subpart E of part 512, based on similar 
requirements that have been previously finalized in existing model 
tests. In addition to the general provisions discussed here, TEAM-
specific provisions that are uniquely tailored to this model are 
described elsewhere in this rule (89 FR 36381).
b. Basis and Scope
    In Sec.  512.500 of the proposed rule, we proposed that the general 
provisions would only be applicable to TEAM. We stated that the 
proposed general provisions would not, except as specifically noted in 
proposed part 512, subpart E, affect the applicability of other 
provisions affecting providers and suppliers under Medicare FFS, 
including the applicability of provisions regarding payment, coverage, 
and program integrity (such as those in parts 413, 414, 419, 420, and 
489 of chapter IV of 42 CFR and those in parts 1001 through 1003 of 
chapter V of 42 CFR) (89 FR 36381).
    We invited public comment on the general provisions proposed for 
TEAM.
    Summaries of the public comments received, and our responses are 
set forth in this section of the final rule under the appropriate 
headings.
c. Definitions
    We proposed at Sec.  [thinsp]512.505 of the proposed rule to define 
certain terms. We proposed to define the term ``TEAM participant'' to 
mean an acute care hospital that is identified under the terms of and 
defined in proposed Sec.  [thinsp]512.505. We proposed to define 
``downstream participant'' to mean an individual or entity that has 
entered into a written arrangement with a TEAM participant pursuant to 
which the downstream participant engages in one or more TEAM 
activities. We further proposed that a downstream participant may 
include, but would not be limited to, an individual practitioner, as 
defined for purposes of TEAM. We proposed to define ``TEAM activities'' 
to mean any activities impacting the care of model beneficiaries 
related to the test of TEAM performed under the terms of proposed 512 
subpart E (89 FR 36381).
    We describe additional proposed definitions in context throughout 
this section X.A.1. of the preamble of this final rule.
d. Cooperation with Model Evaluation and Monitoring
    Section 1115A(b)(4) of the Act requires the Secretary to evaluate 
each model tested under the authority of section 1115A of the Act and 
to publicly report the evaluation results in a timely manner. The 
evaluation must include an analysis of the quality of care furnished 
under the model and the changes in program spending that occurred due 
to the model. Models tested by the CMS Innovation Center are rigorously 
evaluated. For example, when evaluating models tested under section 
1115A of the Act, we require the production of information that is 
representative of a wide and diverse group of model participants and 
includes data regarding potential unintended or undesirable effects, 
such as cost-shifting. The Secretary must take the evaluation into 
account if making any determinations regarding the expansion of a model 
under section 1115A(c) of the Act.
    In addition to model evaluations, the CMS Innovation Center 
regularly monitors model participants for compliance with model 
requirements. For the reasons described in section X.A.1. of the 
preamble of this final rule, these compliance monitoring activities are 
an important and necessary part of the model test.
    Therefore, we proposed to codify at Sec.  512.584 that TEAM 
participants and their downstream participants must comply with the 
requirements of 42 CFR 403.1110(b) (regarding the obligation of 
entities participating in the testing of a model under section 1115A of 
the Act to report information necessary to monitor and evaluate the 
model) and must otherwise cooperate with CMS' model evaluation and 
monitoring activities as may be necessary to enable CMS to evaluate 
TEAM in accordance with section 1115A(b)(4) of the Act. Participation 
in the evaluation may include, but is not limited to, responding to 
surveys and participating in focus groups. Additional details on the 
specific research questions that we proposed that the TEAM evaluation 
would consider can be found in section X.A.3.o.(4) of the preamble of 
this final rule. Further, we proposed to conduct monitoring activities 
according to proposed Sec.  512.590(b), described in section X.A.3.i. 
of the preamble of this final rule, including obtaining such data as 
may be required by CMS to evaluate or monitor TEAM, which may include 
protected health information as defined in 45 CFR 160.103 and other 
individually identifiable data. (89 FR 36381)
    We received no comments on the proposals to require cooperation 
with model evaluation and monitoring and are finalizing the proposals 
without modification.
e. Rights in Data and Intellectual Property
    In the proposed rule, we proposed to allow CMS to use any data 
obtained in accordance with proposed Sec.  512.588 to evaluate and 
monitor the proposed TEAM, as required by section 1115A(b)(4) of the 
Act and pursuant to Sec.  512.590, described at section X.A.3.i. of the 
preamble of this final rule. We further proposed that, consistent with 
section 1115A(b)(4)(B) of the Act, that CMS would be allowed to 
disseminate quantitative and qualitative results and successful care 
management techniques, including factors associated with performance, 
to other providers and suppliers and to the public. We proposed that 
the data to be disseminated would include, but would not be limited to, 
patient de-identified results of patient experience of care and quality 
of life surveys, as well as patient de-identified measure results 
calculated based upon claims, medical records, and other data sources 
(89 FR 36381).
    In the proposed rule we stated that in order to protect the 
intellectual property rights of TEAM participants and downstream 
participants, we proposed in Sec.  512.588(c) to require TEAM 
participants and their downstream participants to label data they 
believe is proprietary and should be protected from disclosure under 
the Trade Secrets Act. We noted that this approach is already in use in 
other models currently being tested by the CMS Innovation Center, 
including End Stage Renal Disease Treatment Choices models. Any such 
assertions would be subject to review and confirmation prior to CMS 
acting upon such assertion.
    We further proposed to protect such information from disclosure to 
the full extent permitted under applicable laws, including the Freedom 
of Information Act. Specifically, in proposed Sec.  512.588(b), we 
proposed to not release data that has been confirmed by CMS to be 
proprietary trade secret information and technology of the TEAM 
participant or its downstream participants without the express written 
consent of the TEAM participant or its downstream participants, unless 
such release is required by law (89 FR 36382).
    We received no comments on the proposed rights in data and 
intellectual

[[Page 69628]]

property provisions and are finalizing the proposals without 
modification.
f. Remedial Action
    As stated in the proposed rule, as part of the CMS Innovation 
Center's monitoring and assessment of the impact of models tested under 
the authority of section 1115A of the Act, we have a special interest 
in ensuring that these model tests do not interfere with the program 
integrity interests of the Medicare program. For this reason, we 
monitor for compliance with model terms as well as other Medicare 
program rules. When we become aware of noncompliance with these 
requirements, it is necessary for CMS to have the ability to impose 
certain administrative remedial actions on a noncompliant model 
participant (89 FR 36382).
    In the proposed rule, we stated that the terms of many models 
currently being tested by the CMS Innovation Center permit CMS to 
impose one or more administrative remedial actions to address 
noncompliance by a model participant. We proposed that CMS may impose 
any of the remedial actions set forth in proposed Sec.  512.592 if we 
determine that the TEAM participant or a downstream participant--
     Has failed to comply with any or all of the terms of TEAM;
     Has failed to comply with any applicable Medicare program 
requirement, rule, or regulation;
     Has taken any action that threatens the health or safety 
of a beneficiary or other patient;
     Has submitted false data or made false representations, 
warranties, or certifications in connection with any aspect of TEAM;
     Has undergone a change in control (as defined in proposed 
Sec.  512.505) that presents a program integrity risk;
     Is subject to any sanctions of an accrediting organization 
or a Federal, state, or local government agency;
     Is subject to investigation or action by HHS (including 
the HHS-OIG and CMS) or the Department of Justice due to an allegation 
of fraud, a pattern of improper billing, or significant misconduct, 
including being subject to the filing of a complaint or filing of a 
criminal charge, being subject to an indictment, being named as a 
defendant in a False Claims Act qui tam matter in which the Federal 
Government has intervened, or similar action; or
     Has failed to demonstrate improved performance following 
any remedial action imposed by CMS.
     Has misused or disclosed beneficiary-identifiable data in 
a manner that violates any applicable statutory or regulatory 
requirements or that is otherwise non-compliant with the provisions of 
the TEAM data sharing agreement.
    At proposed Sec.  [thinsp]512.592(b), we proposed to codify that 
CMS may take one or more of the following remedial actions if CMS 
determined that one or more of the grounds for remedial action 
described in proposed Sec.  512.592(a) had taken place--
     Notify the TEAM participant and, if appropriate, require 
the TEAM participant to notify its downstream participants of the 
violation;
     Require the TEAM participant to provide additional 
information to CMS or its designees;
     Subject the TEAM participant to additional monitoring, 
auditing, or both;
     Prohibit the TEAM participant from distributing TEAM 
payments;
     Require the TEAM participant to terminate, immediately or 
by a deadline specified by CMS, its agreement with a downstream 
participant with respect to TEAM;
     Terminate the TEAM participant from the model test;
     Require the TEAM participant to submit a corrective action 
plan in a form and manner and by a date specified by CMS;
     Discontinue the provision of data sharing and reports to 
the TEAM participant;
     Recoup TEAM payments;
     Reduce or eliminate a TEAM payment otherwise owed to the 
TEAM participant, as applicable; or
     Such other action as may be permitted under the terms of 
TEAM.
    In the proposed rule, we noted that because TEAM is a mandatory 
model, we would not expect to use the proposed provision that would 
allow CMS to terminate a TEAM participant's participation in the model, 
except in circumstances in which the TEAM participant has engaged, or 
is engaged in, egregious actions.
    We invited public comment on these proposed provisions regarding 
the proposed grounds for remedial actions, remedial actions generally, 
and whether additional types of remedial action would be appropriate 
(89 FR 36382).
    We received no comments on the proposed remedial actions and are 
finalizing the proposals without modification.
g. CMS Innovation Center Model Termination by CMS
    In the proposed rule, we proposed certain provisions that would 
allow CMS to terminate TEAM under certain circumstances. Section 
1115A(b)(3)(B) of the Act requires the CMS Innovation Center to 
terminate or modify the design and implementation of a model, after 
testing has begun and before completion of the testing, unless the 
Secretary determines, and the Chief Actuary certifies with respect to 
program spending, that the model is expected to: improve the quality of 
care without increasing program spending; reduce program spending 
without reducing the quality of care; or improve the quality of care 
and reduce spending (89 FR 36382).
    We proposed at Sec.  512.596 that CMS could terminate TEAM for 
reasons including, but not limited to, one of the following 
circumstances:
     CMS determines that it no longer has the funds to support 
TEAM.
     CMS terminates TEAM in accordance with section 
1115A(b)(3)(B) of the Act.
    As stated in the proposed rule, section 1115A(d)(2)(E) of the Act 
and proposed Sec.  512.596 provide that termination of TEAM in 
accordance with section 1115A(b)(3)(B) of the Act would not be subject 
to administrative or judicial review.
    To ensure model participants had appropriate notice in the case of 
the termination of TEAM by CMS, we also proposed to codify at Sec.  
512.596 that we would provide TEAM participants with written notice of 
the model termination, which would specify the grounds for termination 
as well as the effective date of the termination.
    We received no comments on the model termination by CMS proposals 
and are finalizing the proposals without modification.
h. Limitations on Review
    In proposed Sec.  512.594, we proposed to codify the preclusion of 
administrative and judicial review under section 1115A(d)(2) of the Act 
(89 FR 36382). Section 1115A(d)(2) of the Act states that there is no 
administrative or judicial review under section 1869 or 1878 of the Act 
or otherwise for any of the following:
     The selection of models for testing or expansion under 
section 1115A of the Act.
     The selection of organizations, sites, or participants to 
test models selected.
     The elements, parameters, scope, and duration of such 
models for testing or dissemination.
     Determinations regarding budget neutrality under section 
1115A(b)(3) of the Act.
     The termination or modification of the design and 
implementation of a model under section 1115A(b)(3)(B) of the Act.

[[Page 69629]]

     Determinations about expansion of the duration and scope 
of a model under section 1115A(c) of the Act, including the 
determination that a model is not expected to meet criteria described 
in paragraph (1) or (2) of such section.
    In the proposed rule, we proposed to interpret the preclusion from 
administrative and judicial review regarding the CMS Innovation 
Center's selection of organizations, sites, or participants to test 
TEAM to preclude from administrative and judicial review our selection 
of a TEAM participant, as well as our decision to terminate a TEAM 
participant, as these determinations are part of our selection of 
participants for TEAM. (89 FR 36383)
    We invited public comment on the proposed codification of these 
statutory preclusions of administrative and judicial review for TEAM, 
as well as our proposed interpretations regarding their scope.
    The following is a summary of the comments we received on the 
limitations on review proposals and our responses:
    Comment: A commenter believed the use of administrative and 
judicial preclusion language is unlawful, beyond the agency's 
authority, and unenforceable.
    Response: We thank the commenter for their feedback. However, we 
disagree that preclusion of administrative and judicial review is 
beyond the agency's authority. We note that the language in section 
1115A(d)(2) of the Act precludes administrative or judicial review for 
a range of policies for Innovation Center models, including selection 
of sites or participants. We also believe that the language in 
1115A(d)(2) clearly indicates that the intent of the statute was to 
ensure that CMS has authority to test models, and precluding 
administrative or judicial review of the specific policies listed above 
is necessary to ensure our ability to implement models. Allowing 
administrative or judicial review could hinder our ability to test 
models, if entities are able to appeal CMS' decisions such as our 
selection of sites or participants and certain aspects of model design 
and implementation.
    Comment: A commenter stated that administrative and judicial review 
may be the only effective option available to assure that a TEAM 
participant's network is adequate. The commenter stated that a 
beneficiary or downstream participant should have the opportunity to 
challenge an exclusion of a downstream participant from participating 
in the model to protect beneficiary choice rights. They are concerned 
that in the case of a geographically established mandatory bundle, 
beneficiary choice or provider protection could be seriously eroded in 
areas where there are a limited number of hospitals, and adversely 
affect Medicare beneficiaries' access to appropriate downstream care 
following an acute care hospital stay.
    Response: We share the commenter's interest in ensuring that 
beneficiaries are not negatively affected by model requirements and 
preserving and protecting beneficiary access but disagree that allowing 
for administrative or judicial review of certain TEAM policies would 
address the potential issues raised by the commenter. TEAM does not 
affect a beneficiary's ability to choose how or where they receive 
care, and we are finalizing several policies in section X.A.3.i. of 
this final rule in order to protect beneficiary choice and access for 
those receiving services from TEAM participants. At Sec.  
512.582(a)(1), we are finalizing that TEAM participants and their 
collaborators and other partners may not restrict beneficiaries' 
freedom to choose to receive care from any provider or supplier. We are 
also finalizing (at Sec.  512.582(a)(3)) a requirement that TEAM 
participants provide, at discharge from the hospital, a list of all 
local post-acute care providers participating in the Medicare program. 
In addition, while TEAM participants may recommend certain providers or 
suppliers, they may not restrict access or limit beneficiary choice to 
those providers or suppliers with whom they have a relationship.
    Finally, we note that the TEAM participants will be acute care 
hospitals, not downstream care partners such as post-acute care 
facilities or other providers. In addition, we note that the model does 
not require a provider network. We believe our policies referenced 
above with regard to beneficiary protections, choice, and access, will 
address the commenter's concern.
    After consideration of the public comments we received on the 
proposed limitations on review, we are finalizing Sec.  512.594 as 
proposed without modification.
i. Miscellaneous Provisions on Bankruptcy and Other Notifications
    We noted in the proposed rule that the proposed TEAM would have a 
defined period of performance, but final payment under the model might 
occur long after the end of the performance period. In some cases, a 
TEAM participant could owe money to CMS. We recognize that the legal 
entity that is the TEAM participant could experience significant 
organizational or financial changes during or after the period of 
performance for TEAM. To protect the integrity of the proposed TEAM and 
Medicare funds, we proposed a number of provisions to ensure that CMS 
is made aware of events that could affect a TEAM participant's ability 
to perform its obligations under TEAM, including the payment of any 
monies owed to CMS (89 FR 36383).
    First, in proposed Sec.  512.595(a), we proposed that a TEAM 
participant must promptly notify CMS and the local U.S. Attorney Office 
if it files a bankruptcy petition, whether voluntary or involuntary. 
Because final payment may not take place until after the TEAM 
participant ceases active participation in TEAM, we further proposed 
that this requirement would apply until final payment has been made by 
either CMS or the TEAM participant under the terms of the model and all 
administrative or judicial review proceedings relating to any payments 
under TEAM have been fully and finally resolved.
    In the proposed rule, we, specifically, proposed that notice of the 
bankruptcy must be sent by certified mail within 5 days after the 
bankruptcy petition has been filed and that the notice must contain a 
copy of the filed bankruptcy petition (including its docket number), 
unless final payment has been made under the terms of TEAM and all 
administrative or judicial review proceedings regarding TEAM payments 
between the TEAM participant and CMS have been fully and finally 
resolved. The notice to CMS must be addressed to the CMS Office of 
Financial Management, Mailstop C3-01-24, 7500 Security Boulevard, 
Baltimore, Maryland 21244 or to such other address as may be specified 
for purposes of receiving such notices on the CMS website.
    In the proposed rule, we stated that by requiring the submission of 
the filed bankruptcy petition, CMS would obtain information necessary 
to protect its interests, including the date on which the bankruptcy 
petition was filed and the identity of the court in which the 
bankruptcy petition was filed. We recognized that such notices may 
already be required by existing law, but CMS often does not receive 
them in a timely fashion, and they may not specifically identify TEAM. 
The failure to receive such notices on a timely basis can prevent CMS 
from asserting a claim in the bankruptcy case. We were particularly 
concerned that a TEAM participant may not furnish notice of bankruptcy 
after it has completed its performance in TEAM, but before final

[[Page 69630]]

payment has been made or administrative or judicial proceedings have 
been resolved. We believe our proposal was necessary to protect the 
financial integrity of the proposed TEAM and the Medicare Trust Funds.
    Second, in proposed Sec.  512.595(b), we proposed that the TEAM 
participant would have to provide written notice to CMS within 30 days 
of any change in the TEAM participant's legal name becoming effective. 
The notice of legal name change would have to be in a form and manner 
specified by CMS and include a copy of the legal document effecting the 
name change, which would have to be authenticated by the appropriate 
state official. The purpose of this final notice requirement is to 
ensure the accuracy of our records regarding the identity of TEAM 
participants and the entities to whom TEAM payments should be made or 
against whom payments should be demanded or recouped. We solicited 
comment on requiring notice to be furnished promptly, that is, within 
30 days after a change in legal name has become effective.
    Third, in proposed Sec.  512.595(c), we proposed that the TEAM 
participant would have to provide written notice to CMS at least 90 
days before the effective date of any change in control. We proposed 
that the written notification must be furnished in a form and manner 
specified by CMS. For purposes of this notice obligation, we proposed 
that a ``change in control'' would mean any of the following: (1) The 
acquisition by any ``person'' (as such term is used in sections 13(d) 
and 14(d) of the Securities Exchange Act of 1934) of beneficial 
ownership (within the meaning of Rule 13d-3 promulgated under the 
Securities Exchange Act of 1934), of beneficial ownership (within the 
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 
1934), directly or indirectly, of voting securities of the TEAM 
participant representing more than 50 percent of the TEAM participant's 
outstanding voting securities or rights to acquire such securities; (2) 
the acquisition of the TEAM participant by any individual or entity; 
(3) the sale, lease, exchange or other transfer (in one transaction or 
a series of transactions) of all or substantially all of the assets of 
the TEAM participant; or (4) the approval and completion of a plan of 
liquidation of the TEAM participant, or an agreement for the sale or 
liquidation of the TEAM participant. The proposed requirement and 
definition of change in control are the same requirements and 
definition used in certain models that are currently being tested under 
section 1115A authority. We believe this final notice requirement is 
necessary to ensure the accuracy of our records regarding the identity 
of model participants and to ensure that we pay and seek payment from 
the correct entity. For this reason, we proposed that if CMS determined 
in accordance with proposed Sec.  512.592(a)(5) that a TEAM 
participant's change in control would present a program integrity risk, 
CMS could take remedial action against the TEAM participant under 
proposed Sec.  512.592(b). In addition, to ensure payment of amounts 
owed to CMS, we proposed that CMS may require immediate reconciliation 
and payment of all monies owed to CMS by a model participant that is 
subject to a change in control.
    We received one timely public comment on the proposed bankruptcy 
and other notifications requirements.
    Comment: A commenter requested CMS change the timelines for the 
bankruptcy and other notifications provision to be consistent with 
other Medicare reporting timelines, as provider burden is lessened when 
timelines are consistent. Specifically, the commenter asked that TEAM 
provision conform to the timelines set forth in the ``Disclosures of 
Ownership and Additional Disclosable Parties Information for Skilled 
Nursing Facilities and Nursing Facilities; Definitions of Private 
Equity Companies and Real Estate Investment Trusts for Medicare 
Providers and Suppliers'' Final Rule published November 17, 2023, which 
implemented portions of the Affordable Care Act, requiring the 
disclosure of certain ownership, managerial, and other information and 
the required timelines associated with each.
    Response: While we agree with the commenter that in general, 
aligning reporting timelines across the various Medicare program 
requirements is desirable, we note that the specific timelines and 
parameters of TEAM (and other Innovation Center models) necessitate 
that we collect many types of information, such as ownership and 
financial information, on a more frequent basis, as applicable, than 
those finalized in the regulation referenced by the commenter (88 FR 
80141). In the ``Disclosures of Ownership and Additional Disclosable 
Parties Information for Skilled Nursing Facilities and Nursing 
Facilities; Definitions of Private Equity Companies and Real Estate 
Investment Trusts for Medicare Providers and Suppliers'' Final Rule, 
CMS finalized certain timelines for reporting of specific information 
for Medicare-enrolled providers and other entities; such reporting 
would occur upon initial enrollment into Medicare or Medicaid, upon 
change of ownership, or during revalidation, which occurs every five 
years. We do not believe this frequency of reporting would be 
sufficient for TEAM. We proposed to require reporting on the timelines 
specified in the proposed rule in order to effectively protect CMS 
against potential program integrity issues that may arise due to 
changes in control during model participation, expeditiously make 
payments (or send demand letters) to TEAM participants, and generally 
ensure we have accurate information on the entities participating in 
our models in order to monitor and enforce model requirements. As noted 
above, our proposed timelines and requirements mirror those utilized by 
other models tested under section 1115A authority. Given this, we are 
finalizing at Sec.  512.595 our proposals to require a TEAM participant 
to (1) promptly notify CMS and the local U.S. Attorney Office if it 
files a bankruptcy petition, whether voluntary or involuntary, within 5 
days of the bankruptcy petition; (2) provide written notice to CMS 
within 30 days of any change in the TEAM participant's legal name 
becoming effective; and (3) provide written notice to CMS at least 90 
days before the effective date of any change in control.
2. Transforming Episode Accountability Model (TEAM)--Introduction
    As discussed in the proposed rule (89 FR 35934), we proposed the 
implementation and testing of the Transforming Episode Accountability 
Model (TEAM), a new mandatory alternative payment model under the 
authority of section 1115A of the Act, beginning on January 1, 2026, 
and ending on December 31, 2030. TEAM would test whether an episode-
based pricing methodology linked with quality measure performance for 
select acute care hospitals reduces Medicare program expenditures while 
preserving or improving the quality of care for Medicare beneficiaries 
who initiate certain episode categories. Specifically, TEAM proposals 
included the testing of five surgical episode categories: Coronary 
Artery Bypass Graft Surgery (CABG), Lower Extremity Joint Replacement 
(LEJR), Major Bowel Procedure, Surgical Hip/Femur Fracture Treatment 
(SHFFT), and Spinal Fusion.
    As stated in the proposed rule, this model falls within a larger 
framework of activities initiated by the CMS Innovation Center during 
the past several years, including the release of the CMS Innovation 
Center strategic

[[Page 69631]]

refresh and the comprehensive specialty strategy.831 832 The 
strategic refresh includes a goal of having 100 percent of Medicare FFS 
beneficiaries and the vast majority of Medicaid beneficiaries in an 
accountable care relationship by 2030. Episode-based payment models, 
such as TEAM, can be a tool to support this goal by increasing provider 
participation in value-based care initiatives with accountability for 
quality and cost outcomes. To further the goals of the strategic 
refresh, the CMS Innovation Center released the comprehensive specialty 
care strategy in 2022, which includes an element to maintain momentum 
established by episode-based payment models and supports development of 
TEAM.\833\ In addition, in July 2023, we published a Request for 
Information (RFI) to gain public input on design elements for a new 
mandatory bundled payment model.\834\ Given TEAM's alignment with many 
strategic facets of the CMS Innovation Center, our proposal to test a 
new episode-based payment model for acute care hospitals is based on: 
(1) lessons learned from testing the Bundled Payments for Care 
Improvement (BPCI) Initiative, the BPCI Advanced Model, and the 
Comprehensive Care for Joint Replacement (CJR) Model; and (2) comments 
received from the Episode-based Payment Model RFI (88 FR 45872) 
published in the Federal Register.
---------------------------------------------------------------------------

    \831\ Innovation Center Strategy Refresh: https://www.cms.gov/priorities/innovation/strategic-direction-whitepaper.
    \832\ The CMS Innovation Center's Strategy to Support Person-
centered, Value-based Specialty Care: https://www.cms.gov/blog/cms-innovation-centers-strategy-support-person-centered-value-based-specialty-care.
    \833\ https://www.cms.gov/blog/cms-innovation-centers-strategy-support-person-centered-value-based-specialty-care.
    \834\ https://www.federalregister.gov/documents/2023/07/18/2023-15169/request-for-information-episode-based-payment-model.
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    As stated in the proposed rule, and finalized in this final rule, 
TEAM participants continue to bill Medicare under the traditional FFS 
system for services furnished to Medicare FFS beneficiaries. However, 
the TEAM participant may also receive a reconciliation payment amount 
from CMS depending on their Composite Quality Score (CQS) and if their 
performance year spending is less than their reconciliation target 
price. As TEAM is a two-sided risk model, meaning the model requires 
TEAM participants to be accountable for performance year spending that 
is above or below their reconciliation target price, TEAM participants 
may also owe CMS a repayment amount depending on their CQS and if their 
performance year spending is more than their reconciliation target 
price.
    As stated in the proposed rule, and finalized in this final rule, 
the model performance period for TEAM will consist of five performance 
years, beginning January 1, 2026, and ending December 31, 2030, with 
final data submission of clinical data elements and quality measures in 
CY 2031 to account for episodes ending in CY 2030, and final 
reconciliation reports and TEAM reconciliation payment amounts and 
repayment amounts in CY 2031. Further information about all the 
proposals in TEAM may be found at (89 FR 35934).
a. Background
    CMS believes an episode-based payment structure may improve 
beneficiary care by aligning incentives in pursuit of improved quality 
and reduced spending. A FFS payment system pays health care providers 
and suppliers for discrete services over a single episode, potentially 
resulting in fragmented care and duplicative use of resources. Paying 
for discrete services may also not provide sufficient financial 
incentive for health care providers and suppliers to invest in quality 
improvement and care coordination that could help avoid adverse 
outcomes. Further, providers and suppliers may be paid under different 
FFS payment systems which may create challenges managing beneficiaries 
in an episode. Therefore, providers and suppliers have less of an 
incentive to collaborate to improve the quality of care and decrease 
the cost and unnecessary utilization of services.
    An episode-based payment methodology creates an incentive for 
participating providers and suppliers to coordinate across care 
settings as the participating entity takes responsibility for the 
quality and cost outcomes across the entire episode. All of the 
projected payments to the physician, hospital, and other health care 
provider and supplier services are combined into a target price. This 
target price represents the expected cost of all items and services 
furnished to a beneficiary during an episode. Health care providers 
included in such initiatives may either realize a financial gain or 
loss, based on how successfully they perform on quality measure 
assessment and manage resources and total costs throughout each 
episode. Payment models that hold entities accountable for spending and 
quality performance metrics for an entire episode can motivate health 
care providers to furnish services more efficiently, to better 
coordinate care, and to improve the quality of care.
    The CMS Innovation Center has tested episode-based payment models 
for over a decade, including the BPCI initiative, the BPCI Advanced 
Model, and the CJR Model. The CJR Model and the BPCI Advanced Models 
are current CMS Innovation Center model tests that are set to end on 
December 31, 2024, and December 31, 2025, respectively. When 
considering the future of episode-based payment models, we reviewed 
results of the CJR Model and the BPCI Advanced Model given promising 
evaluation findings that support these models reducing episode 
payments, before accounting for incentive payments, and maintaining 
quality of care, as described further in section X.A.2.c. of the 
preamble of this final rule. However, both models experienced 
significant model changes, including changes in participation volume, 
in the later years of their model test and assessing the results of 
these models based on their current methodologies requires additional 
evaluation data, which would not be available until after each model 
has concluded. We also note additional challenges that arise from 
voluntary models, including the BPCI Advanced model, where selection 
bias, stemming from self-selection into and out of the model and 
selection of clinical episode categories or clinical episode service 
line groups, can make it more difficult to evaluate and produce 
generalizable results. We believe TEAM will allow the CMS Innovation 
Center to test a new episode-based payment model that builds upon 
lessons learned in previous episode-based payment models by 
incorporating the most promising model features, while also continuing 
care transformation efforts that we have promoted through the CJR or 
BPCI Advanced models.
    As stated in the proposed rule, if TEAM is successful, we hope this 
model would establish the framework for managing episodes as a standard 
practice in Traditional Medicare. TEAM includes features that are 
attentive to operational feasibility for both participants and CMS, 
such as how often reconciliation would be conducted to minimize 
administrative burden, a pricing methodology that would be responsive 
to providers with varying levels of experience and different patient 
populations, and the selection of episodes with sufficient volume that 
would warrant standard care pathways during the acute and post-acute 
care periods of an episode. In the proposed rule, we stated that any 
future policy changes to this proposed model test, such as the addition 
of episode categories, would be implemented

[[Page 69632]]

through future notice and comment rulemaking.
    Increasing quality, patient-centeredness, and cost-effective care 
requires collaboration among hospitals, physicians, and post-acute care 
(PAC) providers. To encourage this collaboration, TEAM proposed to 
further align incentives between hospitals and physicians by specifying 
certain types of financial arrangements that participants may elect to 
pursue to share reconciliation payment amounts received from CMS under 
the model. By doing so, TEAM participants would be able to share 
incentives with downstream providers and suppliers when they achieve 
higher quality and more cost-effective care through collaboration.
b. Evidence Base for Model
    Medicare beneficiaries can experience fragmented and costly care, 
distinguished by frequent diagnostics, imaging, tests and other 
treatment approaches delivered by different providers across different 
sites of care.\835\ A 2022 study examining fragmentation of ambulatory 
care for Medicare FFS beneficiaries found that four in ten 
beneficiaries experience highly fragmented care, with a mean of 13 
ambulatory visits across seven practitioners in one year.\836\ 
Fragmented care is further evident when focusing on the clinical 
management of Medicare beneficiaries for acute procedural care since 
these beneficiaries may be receiving care from different physicians in 
different settings before, during, and after their procedure.\837\ In 
the absence of effective communication between patients, families, 
physicians, hospitals, and other care settings, beneficiaries receiving 
acute procedural care may not receive comprehensive care management and 
coordination. TEAM is based on the premise--supported by evidence from 
the CJR and BPCI Advanced model evaluations--that appropriately aligned 
financial incentives would improve or maintain quality of care for 
beneficiaries who are in an episode, while also achieving reductions in 
episode spending.\838\
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    \835\ Papanicolas, I., Woskie, L., & Jha, A.K. (2018). Health 
care spending in the United States and other High-Income countries. 
JAMA, 319(10), 1024. https://doi.org/10.1001/jama.2018.1150.
    \836\ Timmins, L., Urato, C., Kern, L.M., Ghosh, A., & Rich, 
E.C. (2022). Primary care redesign and care fragmentation among 
Medicare beneficiaries. The American Journal of Managed Care, 28(3), 
e103-e112. https://doi.org/10.37765/ajmc.2022.88843.
    \837\ The Center for Healthcare Research & Transformation. 
(2013). Payment Strategies: A Comparison of Episodic and Population-
based Payment Reform. Retrieved November 14, 2023, from https://www.chrt.org/wp-content/uploads/2013/11/CHRT_Payment-Strategies-A-Comparison-of-Episodic-and-Population-based-Payment-Reform-.pdf.
    \838\ https://www.cms.gov/priorities/innovation/data-and-reports/2022/wp-eval-synthesis-21models.
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    Care fragmentation in acute surgical procedures in the United 
States is well documented, leading to care variation and inefficiencies 
producing unfavorable patient outcomes and increased health 
spending.839 840 841 Given the variation in acute surgical 
care and costs, including post-acute care costs immediately following a 
procedure, significant literature has been devoted to evaluating 
opportunities to improve the quality and efficiency of 
care.842 843 This includes the design and implementation of 
standardized care processes that emphasize high-value care that can 
support episode-based care initiatives. For example one study found 
that, ``Enhanced Recovery After Surgery protocols have resulted in 
shorter length of hospital stay by 30 percent to 50 percent and similar 
reductions in complications, while readmissions and costs are 
reduced''.\844\ Moreover, other findings focus on perioperative care 
delivery and indicate, ``that through elements that emphasize care 
coordination, standardization, and patient-centeredness, perioperative 
surgical home programs can improve patient postoperative recovery 
outcomes and decrease hospital utilization''.\845\
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    \839\ Fry, D.E., Pine, M., Jones, B., & Meimban, R.J. (2011). 
The impact of ineffective and inefficient care on the excess costs 
of elective surgical procedures. Journal of the American College of 
Surgeons, 212(5), 779-786. https://doi.org/10.1016/j.jamcollsurg.2010.12.046.
    \840\ Justiniano, C.F., Xu, Z., Becerra, A.Z., Aquina, C.T., 
Boodry, C.I., Swanger, A.A., Temple, L.K., & Fleming, F.J. (2017). 
Long-term deleterious impact of surgeon care fragmentation after 
colorectal surgery on survival: Continuity of care continues to 
count. Diseases of the Colon & Rectum, 60(11), 1147-1154. https://doi.org/10.1097/dcr.0000000000000919.
    \841\ Tsai, T.C., Orav, E.J., & Jha, A.K. (2015). Care 
fragmentation in the postdischarge period. JAMA Surgery, 150(1), 59. 
https://doi.org/10.1001/jamasurg.2014.2071.
    \842\ Tsai, T.C., Greaves, F., Zheng, J., Orav, E.J., Zinner, 
M.J., & Jha, A.K. (2016). Better patient care at High-Quality 
hospitals may save Medicare money and bolster Episode-Based payment 
models. Health Affairs, 35(9), 1681-1689. https://doi.org/10.1377/hlthaff.2016.0361.
    \843\ Scally, C.P., Thumma, J.R., Birkmeyer, J.D., & Dimick, 
J.B. (2015). Impact of surgical quality improvement on payments in 
Medicare patients. Annals of Surgery, 262(2), 249-252. https://doi.org/10.1097/sla.0000000000001069.
    \844\ Ljungqvist, O., Scott, M.J., & Fearon, K.C.H. (2017). 
Enhanced recovery after surgery. JAMA Surgery, 152(3), 292. https://doi.org/10.1001/jamasurg.2016.4952.
    \845\ Cline, K.M., Clement, V., Rock-Klotz, J., Kash, B.A., 
Steel, C.A., & Miller, T.R. (2020). Improving the cost, quality, and 
safety of perioperative care: A systematic review of the literature 
on implementation of the perioperative surgical home. Journal of 
Clinical Anesthesia, 63, 109760. https://doi.org/10.1016/j.jclinane.2020.109760.
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    CMS, commercial payers, and other stakeholders are continuously 
testing a variety of approaches to constructing episodes of care, 
including through different patient populations, clinical episode 
categories, and pricing methodologies.846 847 848 Though the 
results of alternative payment models focused on episodes of care have 
been mixed, evidence related to models' ability to realize savings and 
improve quality is promising, especially given the 10 years of 
experience yielded from participants and the CMS Innovation Center 
model tests. The BPCI Advanced and CJR models are still being tested, 
and the effects of the models' care redesign changes aimed to achieve 
Medicare savings and maintain or improve quality of care are still 
being evaluated, see section X.A.2.c. of the preamble of this final 
rule, but have generated evidence from multiple evaluation reports to 
support the design of TEAM. Beyond quantitative data, qualitative data 
collected from model participants and data from site visits indicate 
care transformation is happening, and quality of care is improving 
across the spectrum. Qualitative data range from reported improved 
relationships between inpatient providers and post-acute care (PAC) 
providers, to reshaping patient and provider expectations about 
appropriate discharge destinations, to process changes, such as 
standardized care pathways, identification and mitigation of medical 
and social risk factors, monitoring patients in the post-discharge 
period, and connecting patients to primary care providers. As noted in 
section X.A.2.c. of the preamble of this final rule, evaluation results 
from the previous and current episode-based payment models consistently 
indicate that these models can reduce episode payments, before 
considering incentive payments, and

[[Page 69633]]

generally without compromising quality of care.
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    \846\ Agarwal, R., Liao, J.M., Gupta, A., & Navathe, A.S. 
(2020). The Impact of bundled payment on health care spending, 
utilization, and quality: A Systematic review. Health Affairs, 
39(1), 50-57. https://doi.org/10.1377/hlthaff.2019.00784.
    \847\ Steenhuis, S., Struijs, J.N., Koolman, X., Ket, J.C.F., & 
Van Der Hijden, E. (2020). Unraveling the complexity in the design 
and implementation of bundled payments: A scoping review of key 
elements from a payer's perspective. The Milbank Quarterly, 98(1), 
197-222. https://doi.org/10.1111/1468-0009.12438.
    \848\ Sutherland, A., Boudreau, E., Bowe, A., Huang, Q., Liao, 
J.M., Flagg, M., Cousins, D., Antol, D.D., Shrank, W.H., Powers, B., 
& Navathe, A.S. (2023). Association between a bundled payment 
program for lower extremity joint replacement and patient outcomes 
among Medicare Advantage beneficiaries. JAMA Health Forum, 4(6), 
e231495. https://doi.org/10.1001/jamahealthforum.2023.1495.
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c. ACE, BPCI, BPCI Advanced, and CJR Evaluation Results
    The CMS Innovation Center previously tested episode-based payment 
approaches among acute episodes, including the Medicare Acute Care 
Episode (ACE) demonstration and the BPCI Initiative, and currently is 
testing additional approaches under the BPCI Advanced model and the CJR 
model.\849\ The ACE demonstration tested a bundled payment approach for 
cardiac and orthopedic inpatient surgical services and procedures. All 
Medicare Part A and Part B services pertaining to the inpatient stay 
were included in the ACE demonstration episodes of care. Evaluations 
results found that Medicare saved an average of $585 per episode from 
the combined Medicare Part A and B expected payments or a total of $7.3 
million across all episodes (12,501 episodes), all ACE MS-DRGs, and 
four ACE Sites. However, increases in post-acute care spending reduced 
these savings by approximately 45 percent, resulting in per episode 
savings of $319 and total net savings of approximately $4 million. With 
respect to quality of care, findings suggest that the ACE sites 
maintained their quality-of-care levels without any systematic or 
consistent changes in clinical outcomes or in the type of patients they 
admitted in response to the demonstration. Despite the lack of strong 
quantitative evidence for realized improvements in quality, there was 
qualitative evidence that hospitals worked to improve processes and 
outcomes.\850\
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    \849\ Medicare Acute Care Episode Demonstration (https://innovation.cms.gov/innovation-models/ace), BPCI Initiative (https://www.cms.gov/priorities/innovation/innovation-models/bundled-payments), BPCI Advanced Model (https://www.cms.gov/priorities/innovation/innovation-models/bpci-advanced), CJR Model (https://www.cms.gov/priorities/innovation/innovation-models/CJR).
    \850\ Evaluation of the Medicare Acute Care Episode (ACE) 
Demonstration. (2013). Centers for Medicare & Medicaid Services. 
Retrieved December 1, 2023, from https://downloads.cms.gov/files/cmmi/ACE-EvaluationReport-Final-5-2-14.pdf.
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    The BPCI initiative tested whether linking payments for providers 
that furnish Medicare-covered items and services during an episode 
related to an inpatient hospitalization could reduce Medicare 
expenditures while maintaining or improving quality of care.
     Model 1 episodes were limited to the acute inpatient 
hospitalizations for all MS-DRGs.
     Model 2 episodes began with a hospital admission and 
extended for 30, 60, or 90 days after discharge.
     Model 3 episodes began with the initiation of post-acute 
care following a hospital admission and extended for 30, 60, or 90 
days.
     Model 4 episodes began with a hospital admission and 
included readmissions within 30 days after discharge.
    Model 1 was unique, as compared to Models 2-4, in that target 
prices weren't generated but awardees received a predetermined discount 
percentage to their Medicare Inpatient Prospective Payment System 
(IPPS) operating payment rates for episodes at their hospital. Model 1 
had a small volume of participants, however, evaluation results found 
that there were no consistent negative or positive statistically 
significant impacts to Medicare payments or quality of care effects on 
Medicare beneficiaries.\851\ Similarly, Model 4 had a small volume of 
participants, and by the end of the model there was no change in 
allowed payments nor were there any changes in the quality of care as 
measured by claims-based quality measures.\852\
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    \851\ Evaluation and Monitoring of the Bundled Payments for Care 
Improvement Model 1 Initiative. (2016). Centers for Medicare & 
Medicaid Services. Retrieved December 1, 2023, from https://www.cms.gov/priorities/innovation/files/reports/bpci-mdl1yr2annrpt.pdf.
    \852\ CMS Bundled Payments for Care Improvement Initiative 
Models 2-4: Year 7 Evaluation & Monitoring Annual Report. (2021). 
Centers for Medicare & Medicaid Services. Retrieved December 1, 
2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2021/bpci-models2-4-yr7evalrpt.
---------------------------------------------------------------------------

    Evaluation results for BPCI Models 2 and 3 were more robust given 
the greater volume of participants in each model. Similar to Model 1 
and Model 4, quality of care generally remained unchanged in BPCI 
Models 2 and 3. With respect to the financial performance of the 
models, findings demonstrated reductions in FFS payments of $1,193 
million for Model 2 and $232 million for Model 3. However, Medicare 
experienced net losses of $418 million (p < 0.05) for Model 2, or $332 
per episode, and $110 million (p < 0.05) for Model 3, or $714 per 
episode, after accounting for reconciliation payments to participants. 
These net losses to Medicare represented 1.3 percent of what payments 
would have been absent BPCI under Model 2 and 3.1 percent under Model 
3. The largest contributing factor to these losses was the elimination 
of participants' repayment responsibility during the initial part of 
the model for all participants, and then in later years for certain 
participants due to episode attribution errors. If CMS had not 
eliminated repayment responsibility, and assuming model participation 
remained the same, Model 2 would have resulted in no net losses or 
savings, and net losses under Model 3 would have been reduced to $66 
million (p < 0.05), or 1.9 percent of what payments would have been 
absent BPCI.\853\
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    \853\ CMS Bundled Payments for Care Improvement Initiative 
Models 2-4: Year 7 Evaluation & Monitoring Annual Report. (2021). 
Centers for Medicare & Medicaid Services. Retrieved December 1, 
2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2021/bpci-models2-4-yr7evalrpt.
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    We currently are testing the BPCI Advanced model, which is a 
voluntary episode-based model based on the BPCI Initiative's Model 2, 
that tests whether linking payments for an episode will incentivize 
health care providers to invest in innovation and care redesign to 
improve care coordination and reduce expenditures, while maintaining or 
improving the quality of care for Medicare FFS beneficiaries. We are 
still evaluating the effects of the BPCI Advanced model on patient 
experience of care, quality outcomes, and cost of care for Medicare FFS 
beneficiaries. However, evaluation results to date demonstrated 
reductions in episode payments and maintenance of quality of care, but 
the model has thus far been unable to generate Medicare savings. As of 
Model Year 3 (2020), BPCI Advanced participants reduced average episode 
payments by 3.8 percent or $1,028 per episode, and more specifically 
3.1 percent ($796 per episode) for medical episodes and 5.8 percent 
($1,800 per episode) for surgical episodes. Despite the reductions in 
FFS payments, after accounting for reconciliation payments to 
participants, Medicare had a net loss of $114 million in 2020, or 0.8 
percent of what Medicare payments would have been in absence of the 
model. When looking at Medicare savings by episode type, surgical 
episodes resulted in an estimated net savings of $71.3 million, or 2.3 
percent, but those savings were offset by medical episodes which 
resulted in an estimated net loss of $200.5 million, or 1.9 
percent.\854\ The BPCI Advanced model implemented changes, most notably 
in 2021-23, and most recently made further changes to extend the model 
through 2025 and support provider engagement in value-based care.
---------------------------------------------------------------------------

    \854\ CMS Bundled Payments for Care Improvement Advanced Model: 
Fourth Evaluation Report. (2023). Centers for Medicare & Medicaid 
Services. Retrieved December 1, 2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2023/bpci-adv-ar4.

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[[Page 69634]]

    We are also currently testing the CJR model, which is a mandatory 
episode-based payment model in 34 metropolitan statistical areas (MSAs) 
for lower extremity joint replacement episodes that encourages 
hospitals, physicians, and PAC providers to work together to improve 
the quality and coordination of care from the initial hospitalization 
or outpatient procedure through recovery. Evaluation results to date 
have indicated that in the first four performance years, mandatory 
hospitals generated $72 million dollars in savings to Medicare, 
although not statistically significant. But in Performance Year 5, 
reconciliation payments substantially increased generating $95.4M in 
statistically significant Medicare losses, due to adjustments made to 
the model made during the COVID-19 Public Health Emergency (PHE). CMS 
enacted these temporary adjustments, which effectively waived downside 
risk for all CJR episodes, in order to minimize any financial burden 
associated with model participation given the financial challenges and 
uncertainties hospitals faced early in the COVID-19 PHE. These 
adjustments resulted in reconciliation payments being triple what they 
were in previous years, which reversed the savings trajectory and 
resulted in statistically significant losses to Medicare for mandatory 
hospitals. The losses in Performance Year 5 were large enough to offset 
total estimated savings prior to the public health emergency.\855\ Like 
the BPCI Advanced model, the CJR model was revised and extended until 
December 31, 2024.
---------------------------------------------------------------------------

    \855\ CMS Comprehensive Care for Joint Replacement Model: 
Performance Year 5 Evaluation Report. (2023). Centers for Medicare & 
Medicaid Services. Retrieved December 1, 2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2023/cjr-py5-annual-report.
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    As stated in the proposed rule, we believe that providers', 
suppliers', and CMS' experiences with the BPCI Advanced and CJR models 
support the design of TEAM. Stakeholders both directly and indirectly 
involved in testing the BPCI Advanced and CJR models have conveyed that 
they perceive episode-based payments to be an effective mechanism for 
advancing better, more accountable care through care coordination and 
opportunities to improve care efficiency. CMS has also heard similar 
sentiment through other efforts including the CMS Innovation Center's 
Specialty Care Strategy Listening Session and recent Episode-based 
Payment Model Request for Information (RFI) (88 FR 45872).\856\
---------------------------------------------------------------------------

    \856\ CMS Innovation Center's Specialty Care Strategy Listening 
Session (https://www.cms.gov/priorities/innovation/media/document/spec-care-listening-session-slides).
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    Further information of why specific elements of the models and 
initiatives were incorporated into TEAM's designs is discussed later in 
this final rule.
d. CMS Innovation Center Specialty Care Strategy
    In 2021, the CMS Innovation Center announced a strategic refresh 
with a vision of having a health care system that achieves equitable 
outcomes through high quality, affordable, person-centered care.\857\ 
To guide this updated vision, the CMS Innovation Center intends to 
design, implement, and evaluate future models with a focus on five 
strategic objectives: (i) driving accountable care; (ii) advancing 
health equity; (iii) supporting innovation; (iv) addressing 
affordability; and (v) partnering to achieve system transformation. One 
of the goals established by the strategic refresh was having 100 
percent of traditional Medicare beneficiaries and the vast majority of 
Medicaid beneficiaries in accountable care relationships by 2030. This 
means that beneficiaries should experience longitudinal, accountable 
care with providers that are responsible for the quality and total cost 
of their care. Beneficiaries will experience accountable care 
relationships mostly through advanced primary care or accountable care 
organizations (ACOs), and these entities are expected to coordinate 
with or fully integrate specialty care to deliver whole-person care.
---------------------------------------------------------------------------

    \857\ Centers for Medicare & Medicaid Services. (2021). 
Innovation Center Strategy Refresh. https://www.cms.gov/priorities/innovation/strategic-direction-whitepaper.
---------------------------------------------------------------------------

    To support specialty care integration, the CMS Innovation Center 
released a comprehensive specialty strategy to test models and 
innovations supporting access to high-quality, integrated specialty 
care across the patient journey--both longitudinally and for procedural 
or acute services.\858\ Specialty integration cannot be achieved with a 
single approach given a beneficiary's health needs may change 
influencing the types of providers and settings where they receive 
care. Therefore, the specialty care strategy consists of four elements: 
(i) enhancing specialty care performance data transparency; (ii) 
maintaining momentum on acute episode payment models and condition-
based models; (iii) creating financial incentives within primary care 
for specialist engagement; and (iv) creating financial incentives for 
specialists to affiliate with population-based models and move to 
value-based care. As stated in the proposed rule, TEAM falls within the 
second element of the specialty care strategy and utilizes lessons 
learned from our experience with the BPCI Advanced model and the CJR 
model to design TEAM as a new episode-based payment model that would 
focus on accountability for quality and cost, health equity, and 
specialty integration. TEAM is further informed by the Episode-Based 
Payment Model RFI (88 FR 45872) published in July 2023, which gathered 
public comment on potential model design elements.
---------------------------------------------------------------------------

    \858\ The CMS Innovation Center's strategy to support person-
centered, value-based specialty care [verbar] CMS. (2022). https://www.cms.gov/blog/cms-innovation-centers-strategy-support-person-centered-value-based-specialty-care#_ftn1.
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    As stated in the proposed rule, TEAM represents one aspect of the 
specialty care strategy, and does not capture all beneficiaries, 
providers, and care settings to achieve complete person-centered value-
based care on its own. Improving the health care system for Medicare 
beneficiaries requires a comprehensive approach that cannot be 
addressed by a single model or initiative since beneficiary health care 
needs are dynamic across the patient care continuum. This means TEAM 
would center accountability on beneficiary health care needs during 
narrow, focused periods of acute and post-acute care while health care 
needs outside of this scope would be addressed with other elements of 
the specialty care strategy. Therefore, we believe TEAM would 
complement other elements of the specialty care strategy (for example, 
another element of the strategy is to share TEAM-style episode data 
with ACOs) and would promote care transformation that generates 
standard care pathways and new best practices across broad patient 
populations (not just Medicare FFS).
    The following is a summary of comments we received on the overall 
goals and evidence supporting the implementation of TEAM, as well as 
general comments about TEAM, and our responses to these comments:
    Comment: Many commenters supported certain model aspects of TEAM 
while others supported the overarching goals of TEAM and its 
advancement towards greater value-based care. Some commenters were 
excited TEAM was built from previous bundled payment models, with a 
commenter noting successful participation in the CJR model and another 
commenter providing specific examples how episode-based payment models 
support medication reconciliation strategies and create incentives to 
address social needs. A

[[Page 69635]]

commenter noted that TEAM will bring more hospitals into patient-first 
care initiatives. Another commenter applauded CMS efforts to 
financially incentivize performance on safety and quality across the 
continuum of care through payment models such as TEAM.
    Response: We thank these commenters for their support of our 
efforts to move forward with TEAM. We are finalizing the majority of 
TEAM's proposals in this final rule and finalizing others with 
modifications. We are also not finalizing certain proposals and we may 
undergo notice and comment rulemaking to propose new policies in the 
future.
    Comment: Several commenters requested CMS extend the proposed rule 
comment period to review TEAM proposals due to the scope and breadth of 
the model. Of these commenters, a commenter indicated CMS has not 
heeded calls for heightened engagement with providers as the model is 
developed and implemented and provided an example of CMS denying a 
comment period extension for the Episode-Based Payment Model RFI (88 FR 
45872). Another commenter indicated that additional time beyond 60 days 
is necessary to fully evaluate and analyze these proposed policies and 
their full impact across the health care spectrum, especially in light 
of CMS proposing another hospital-based mandatory payment model just 
four weeks after it proposed TEAM.
    Response: We acknowledge the commenters request for a comment 
period extension and considered the request prior to the proposed rule 
(89 FR 35934) comment period end date. However, we received robust 
comment on the proposed rule, so we believe the 60-day comment period 
window provided sufficient time to review TEAM proposals. This time 
period is consistent with comment period windows for other rules where 
a CMS Innovation Center model has been proposed. We had publicly 
signaled during the publication of the Episode-Based Payment Model RFI 
(88 FR 45872), that a model would be implemented via notice and comment 
rulemaking, and that we anticipated the model to be implemented no 
earlier than 2026. Given the desire to start this model in 2026, we 
wanted to propose TEAM in notice and comment rulemaking well in advance 
of model implementation to give ample time for participants to prepare 
for participation. We recognize that stakeholders had to review both 
the Medicare Program; Alternative Payment Model Updates and the 
Increasing Organ Transplant Access (IOTA) Model (89 FR 43518) proposed 
rule, and this proposed rule (89 FR 35934) including TEAM, but feel 
that staggered, rather than simultaneous, publication of these two 
proposed rules provided the public more time to review each model's 
policies.
    We will continue to engage the public and stakeholders throughout 
the implementation of TEAM.
    Comment: Some commenters acknowledged the goal of advancing toward 
more accountable and coordinated care but have overarching concerns for 
the implementation of TEAM. Many commenters indicated that CMS is 
placing too much financial risk on providers and that there is not 
enough opportunity for reward, especially considering the significant 
upfront investments required. Some commenters suggested that TEAM's 
focus was on reducing Medicare spending and not enough emphasis on 
improving patient care. Some commenters suggested TEAM not be finalized 
unless significant changes are implemented.
    Response: We appreciate these commenters concerns, but we disagree 
that TEAM does not have enough emphasis on improving beneficiary care. 
As discussed in section X.A.3.c of the preamble of this final rule, we 
purposefully selected specific quality measures for TEAM to assess 
patient safety, care coordination, and patient outcomes. Further, we 
are finalizing a referral to primary care services policy, in section 
X.A.3.l of the preamble of this final rule, because we believe taking 
steps to link beneficiaries to primary care can lead to positive longer 
term health outcomes. With respect to commenters' concerns about too 
much financial risk, we have addressed these comments throughout the 
applicable sections of this final rule, including in, but not limited 
to, the discussions about participation tracks in section X.A.3.a.(3), 
and the pricing methodology in section X.A.3.d of the preamble of this 
final rule. In response to the commenters who suggested that TEAM not 
be finalized unless significant changes are implemented, we note that 
we are finalizing TEAM; we are finalizing some policies as proposed and 
we are finalizing others with modification. There are also certain 
proposed policies that we are not finalizing, and we will instead go 
through rulemaking in the future to promulgate new policies that could 
be finalized before the model start date.
    Comment: A commenter supported the surgical nature of TEAM and 
looks forward to other APM options for non-surgical conditions and 
suggested MIPS Value Pathways or total cost of care models tailored to 
sepsis and Congestive Heart Failure, as these two conditions account 
for nearly half of all readmissions and take an extensive amount of 
time to cure or cover. Another commenter is supportive of CMS' efforts 
to increase opportunities for specialists to engage in APMs and 
believes episode-based payment models present an opportunity to move 
specialists off the FFS chassis and increase integration and 
coordination with broader delivery system reform efforts.
    Response: We appreciate the support and agree that TEAM helps to 
provide opportunities for providers and suppliers to collaborate to 
improve quality and reduce Medicare spending for beneficiaries 
receiving specialty-specific care. We may consider including non-
surgical (medical) episodes in TEAM in the future. We recognize that 
TEAM is just one aspect of the CMS Innovation Center's specialty care 
strategy that aims to test models and innovations that support access 
to high-quality, integrated specialty care across the patient journey. 
We refer readers to a recently released RFI in the CY 2025 Physician 
Fee Schedule Notice of Proposed Rulemaking to gather public feedback on 
the design of a potential future model to increase the engagement of 
specialists in value-based care that supports the specialty care 
strategy.\859\
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    \859\ https://www.federalregister.gov/public-inspection/2024-14828/medicare-and-medicaid-programs-calendar-year-2025-payment-policies-under-the-physician-fee-schedule.
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    Comment: A couple of commenters requested that CMS separate TEAM 
and future models from the IPPS and other larger payment rules. 
Commenters specifically requested TEAM be finalized in a separate rule 
and future models be standalone rules with their own public notice and 
rulemaking.
    Response: We appreciate commenters providing their request for 
models to be in standalone rules and may consider this request in the 
future. We note that there may be benefits to proposing models in 
larger CMS payment rules versus proposing models in standalone rules. 
For example, because TEAM requires select hospital participation and 
accountability, we assumed that by proposing and finalizing TEAM in 
this larger CMS payment rule that is focused on hospital policies, TEAM 
would capture greater public attention and feedback but also allow for 
efficient review since we expect most hospitals to already be reading 
the proposed and final rule.

[[Page 69636]]

    Comment: A commenter suggested that CMS must provide a final rule 
with comment period or other avenue for public input because CMS has 
not specified which geographic areas will be subject to the model and 
it's critical that the affected hospitals have the opportunity to offer 
geographic and hospital-specific feedback on TEAM prior to the model's 
start date.
    Response: We disagree that a final rule with a comment period, such 
as an interim final rule with comment period (``IFC''), would be 
appropriate for purposes of finalizing TEAM, because the proposed rule 
for TEAM was published May 2, 2024 (89 FR 35934) and it provided an 
opportunity to comment on TEAM's policies. We note that we intend to go 
through rulemaking in the future to address certain policies, which 
would allow another opportunity for the public, including hospitals 
that are required to participate in TEAM, to share feedback.
    We acknowledge that the list of mandatory CBSA's selected for 
participation was not included in the proposed rule but is included in 
section X.A.3.a(4) of the preamble of this final rule. However, we did 
provide the full list of eligible CBSAs, effectively putting all 
hospitals located in one of the eligible CBSA's on notice for potential 
participation, as indicated in section X.A.3.a(4) of the preamble of 
the proposed rule and of this final rule. Given this notice, hospitals 
located within an eligible CBSA could have provided their comments, 
including geographic comments, during the proposed rule comment period. 
Further, we believe TEAM participants have sufficient time to prepare 
for the model start date, which is January 1, 2026. We are publishing 
this final rule, which includes a list of the selected mandatory CBSAs 
in section X.A.3.a.(4) of the preamble of this final rule, 
approximately 17 months prior to the beginning of the model start date.
    Comment: A commenter had questioned how the outcome of other 
proposed changes to the IPPS contained in the Proposed Rule could 
affect stakeholder views on the potential impact of TEAM.
    Response: We recognize the breadth of proposals included in the 
proposed rule (89 FR 35934) required time to review and to assess the 
potential impact of TEAM, especially in light of the uncertainty of 
whether a proposal would be finalized. However, we believe proposing 
TEAM in the larger IPPS payment rule provides the public with the most 
comprehensive set of information to gauge how an episode-based payment 
model could impact them in conjunction with other potential future 
changes to Medicare payment policy.
    Comment: Some commenters suggested we did not provide sufficient 
information for them to assess either the impact of our proposals or 
the potential opportunity for improved performance for their facility. 
Of those commenters, a commenter indicated the scope of TEAM is too 
broad and implementing TEAM would put their hospitals at greater risk 
of increased financial and operational challenges.
    Response: We strived to notify the public of the model's proposed 
policies in the most comprehensive manner, while balancing the burden 
that can be associated with regulatory review. We believe we provided 
sufficient detail in the proposed rule (89 FR 35934) to assess the 
impact of TEAM. Specifically, our proposed rule defined the type of 
participant; identified the types of episode categories and eligible 
beneficiaries, corresponding billing codes, and included items and 
services; established the quality measures and process for assessment; 
detailed the methodology used to construct target prices and determine 
reconciliation payment amounts and repayment amounts; identified health 
equity reporting; described in detail financial arrangements and 
Medicare payment policy waivers; specified data sharing requirements, 
outlined beneficiary monitoring; and numerous other policies to help 
the public, and potential TEAM participants understand and assess the 
policies being proposed. We have also published evaluations from prior 
CMS episode-based payment models that informed the development of this 
model. While we did not provide a proposed list of hospitals that would 
be required to participate in the model, we did provide a list of 
potential CBSAs eligible for selection into TEAM, along with table that 
identified selection strata probabilities.
    We disagree that the scope of TEAM is too broad. TEAM was designed 
from lessons learned from other CMS episode-based payment models that 
captures a similar scope and balances policies tested in either 
voluntary models, mandatory models, or both. For example, TEAM is 
testing far fewer episode categories than the BPCI Advanced model but 
only four more than the CJR model.
    With respect to commenters concerns about participants' financial 
risk in TEAM, we have addressed those comments in sections X.A.3.a.(3) 
and X.A.3.d of the preamble of this final rule.
    Comment: A couple of commenters had concerns about what CMS would 
learn from testing TEAM. A commenter indicated that each of the five 
TEAM episode categories have been previously tested and analyzed with 
nearly identical parameters in either in BPCI or CJR, with the salient 
lesson from evaluations showing the predominant way to achieve Medicare 
savings is to use a discounted spending benchmark (target price) to 
force hospitals to send patients to less intensive and less costly 
post-acute care settings. Another commenter requested CMS indicate what 
insights and lessons will be garnered from TEAM that have not already 
emerged through the BPCI and CJR models, particularly when these five 
clinical episodes have already been tested.
    Response: We appreciate the commenters concerns and clarifying 
questions. We believe the evaluation findings from the BPCI, BPCI 
Advanced, and CJR models support the continued testing of episode-based 
payment models. Evaluation findings demonstrated that participants in 
these episode-based payment models generally maintained quality of care 
and generated savings by reducing post-acute care spending through 
mechanisms such as reducing institutional post-acute care length of 
stay.\860\ While TEAM builds upon lessons learned from episode-based 
payment models by incorporating the most promising model features, we 
disagree that TEAM has nearly identical parameters as previous or 
current episode-based payment models that have been tested in a single 
model. For example, the five episode categories tested in TEAM have 
been tested in the BPCI Advanced model, but BPCI Advanced was not a 
mandatory model and participants self-selected into the model and self-
selected into certain clinical episode categories or clinical episode 
service line groups, making evaluation results much less generalizable. 
Likewise, the CJR model was a mandatory model for hospitals in 34 MSAs, 
but it only tested a single episode category. Model 2 of the BPCI 
initiative tested 30-day post-discharge lengths but very few awardees 
signed up for that post-discharge length because it was associated with 
a higher discount factor. We believe TEAM represents the right 
combination of features tested in other episode-based payment models, 
and that if successful, TEAM could potentially be used to establish the 
framework for managing episodes as a

[[Page 69637]]

standard practice in Traditional Medicare and could meet criteria to be 
expanded, as permitted under section 1115A(c) of the Act. Further, TEAM 
also includes policies and features that have not been tested in other 
episode-based payment models, including the requirement to refer 
beneficiaries to primary care services and the novel Decarbonization 
and Resilience Initiative.
---------------------------------------------------------------------------

    \860\ https://www.cms.gov/priorities/innovation/data-and-reports/2022/wp-eval-synthesis-21models.
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    Comment: A commenter indicated the importance of physical 
therapists in functional care management to promote the connection of 
Medicare beneficiaries to prescribed community programs that support 
evidence-based physical activity. A commenter also indicated that for 
identifying higher risk patient and for whom physical therapist-
facilitated early mobilization and ongoing PT care is necessary, a 
basic frailty screen prior to one of the targeted procedures is 
recommended.
    Response: We agree physical therapists can play a key role in the 
care management of Medicare beneficiaries. Some TEAM beneficiaries may 
require physical therapy services after the anchor hospitalization and 
anchor procedure to improve their physical abilities and functional 
status. To support collaboration with TEAM participants and drive 
improved patient outcomes, TEAM allows providers and suppliers of 
outpatient therapy services, therapists in a private practice, and 
therapy group practices to be TEAM collaborators in the model. We may 
also take into consideration the recommendation of including a frailty 
screen in the future, though we note that in other episode-based 
models, CMS has generally avoided imposing requirements on participants 
before the episode is initiated, and ultimately before they are 
accountable for the cost and quality of the episode. However, TEAM 
participants are encouraged to implement early screening or 
intervention for their patients.
    Comment: Some commenters requested greater transparency and support 
mechanisms, such as guidance on data reporting, care coordination 
strategies, and best practices for managing complex patient 
populations, in order to help hospitals appropriately participate in 
TEAM. Another commenter suggested a learning system or other mechanism 
for CMS to provide technical assistance to model participants and to 
facilitate peer-to-peer sharing of best practices.
    Response: We intend to do as much as we can to provide learning 
resources and support for TEAM participants. In general, most CMS 
Innovation Center models include a learning system that helps to 
disseminate, share, and integrate lessons learned, quality improvement 
concepts, tactics, and resources so that participants can benefit from 
their participation experience in the model. We anticipate TEAM will 
have a learning system that would mimic these same functions, with a 
goal of engaging TEAM participants prior to the model start date to 
help them prepare for model implementation. In addition to the learning 
system, we will continue to make publicly available updated model 
resources, including the model-specific web page, Frequently Asked 
Questions (FAQs), and fact sheet, among other resources. We are always 
looking for and welcome feedback for better ways to educate and assist 
participants and their partners in care redesign and knowledge sharing.
    Comment: Some commenters recommended CMS to continue to proactively 
engage with potentially-impacted people on the front end so their needs 
are heard and incorporated before a model is fully developed, 
specifically incorporating beneficiary and caregiver and provider 
perspectives into model design. A commenter noted that patient and 
caregiver engagement must guide the development, implementation, and 
evaluation of all care models, including TEAM, to ensure that patient 
perspectives and lived experiences are incorporated into every step of 
the process. Another commenter indicated that it is critical that CMS 
directly engage relevant practicing physicians in model development and 
implementation, including defining appropriate participation 
parameters, episode triggers, quality measures, and risk adjustments, 
as well as methods for assessing model success over time.
    Response: We agree engagement with interested parties, including 
beneficiaries, providers, and suppliers, as well as the public at 
large, is an important aspect of model development. During the design 
of TEAM, we believed it was important to seek input in a variety of 
mechanisms in order to capture feedback from a broad scope of 
individuals, groups, and entities. That is why we released a request 
for information in the Federal Register (88 FR 45872), and most 
importantly proposed TEAM in rulemaking to ensure robust opportunity 
for public notice and comment on the model and its design (89 FR 
35934). We believe engagement is essential to the success of the models 
we design and test and will continue to do so throughout TEAM 
implementation. We look forward to continued feedback from all members 
of the public about the model.
    Comment: A few commenters had concerns about the amount of burden 
placed on providers to implement the model. A commenter noted TEAM 
produces complex, burdensome administrative requirements where 
providers must expend a substantial outlay of time, money, and 
attention to comply. Another commenter indicated that certain hospitals 
will experience an increase in costs which will then be passed on to 
private payors or patients and they do not believe CMS should willingly 
contribute to the volume of administrative costs that already exist 
within the healthcare system. Another commenter indicated they would 
need to dedicate staff to TEAM, taking them away from other tasks when 
they are already struggling to maintain sufficient staffing for both 
patient care and back-office functions.
    Response: We thank these commenters for sharing their concerns, but 
we do not believe TEAM will create significant provider burden. TEAM 
will not alter the way TEAM participants bill Medicare. We believe that 
there will be no additional burden for TEAM participants related to 
billing practices, even in cases where CMS waives certain policies for 
purposes of TEAM (for example, the telehealth waivers discussed in 
section X.A.3.h of this final rule). We do recognize the time and 
effort to establish financial arrangements, which may vary based on a 
TEAM participant's experience and capabilities partnering with entities 
and setting up the terms and conditions. of such partnerships. However, 
TEAM participants are not required to engage financial arrangements for 
the model.
    The model evaluation for TEAM will include surveys, site visits, 
and other modalities to obtain of obtaining evaluation data. The burden 
for these evaluation efforts will depend on their length, complexity, 
and frequency, but we note that we will try to minimize the length, 
complexity, and frequency of model evaluation related tasks.
    Lastly, we believe TEAM will not be adding to quality measure 
reporting or health equity reporting burden because we are using 
quality measures that TEAM participants will already be reporting for 
other CMS quality reporting programs and health equity reporting is 
voluntary.
    Comment: A commenter suggested CMS only implement payment models 
that are designed by physicians or designed in close collaboration with 
physicians.
    Response: We appreciate the commenter's viewpoint and agree that 
it's important to include physician input. However, we do not agree 
that

[[Page 69638]]

only models designed by physicians should be tested because it's 
important to capture input from all parties potentially impacted by a 
model, including but not limited to, beneficiaries, caregivers, 
providers, other non-physician clinicians, and the public.
    Comment: A commenter expressed concern that TEAM may result in 
disparities among providers, especially in areas that are economically 
distressed where social determinants of health and socioeconomic 
barriers pose significant challenges to implementation. The commenter 
notes that health systems with more vertically integrated structures, 
including SNFs, will likely have an advantage in adopting this model.
    Response: We thank the commenter for their concerns, however, we do 
not believe TEAM will result in or increase disparities among hospitals 
participating in the model. TEAM includes features that acknowledges 
that certain types of TEAM participants, such as safety net hospitals, 
as defined in section X.A.3.f of the preamble of this final rule, may 
need additional support given their financial constraints and the care 
they provide to underserved populations. One such feature, the 
different participation tracks, as described in section X.A.3.a.(3) in 
the preamble of this final rule, allows safety net hospitals to 
participate in TEAM with reduced financial risk and reward, including 
the opportunity to participate with no downside risk for a limited 
time. We also believe that other model features, such as financial 
arrangements, as discussed in section X.A.3.g of the preamble of this 
final rule, will help TEAM participants to engage other Medicare 
providers and suppliers, such as SNFs, to promote improved quality of 
care and reductions in Medicare spending. Lastly, we note in section 
X.A.3.a.(1) of the preamble of this final rule that TEAM participants 
will have approximately 17 months before the model start date to 
prepare for model participation, allowing them time to plan and 
structure their care redesign processes for successful participation.
    Comment: Some commenters had concerns about TEAM participants 
controlling discharge decisions for post-acute care. A commenter noted 
they believe there is an inherent bias against institutional 
rehabilitation facilities and there are insufficient safeguards for 
TEAM beneficiaries from discharge decisions that are motivated purely 
by the financial parameters of TEAM. Another commenter noted that based 
on their experience with other payment models, they are concerned that 
the TEAM participants (that is, IPPS hospitals) will choose to 
collaborate with only some post-acute care providers and will exclude 
other post-acute care providers from this new model.
    Response: We acknowledge the commenters concerns. TEAM participants 
may not limit access to medically necessary items and services, nor 
limit the TEAM beneficiary's choice of Medicare providers and 
suppliers, including post-acute care providers such as long-term care 
hospitals and inpatient rehabilitation facilities. This means that TEAM 
beneficiaries are not precluded from seeking care from providers or 
suppliers who do not participate in TEAM and a TEAM participant is 
prohibited from limiting beneficiaries to a preferred or recommended 
providers list that is not compliant with restrictions existing under 
current statutes and regulations., as discussed in section X.A.3.i of 
the preamble of this final rule. However, we do expect the model to 
encourage TEAM participants to better coordinate post-acute care, which 
may include referring to certain facilities that better meet the needs 
of the patient and goals of improving patient care while reducing cost. 
We will monitor beneficiary care, as discussed in section X.A.3.i of 
the preamble of this final rule, to ensure beneficiary freedom of 
choice is not compromised. Through monitoring of the model, CMS will 
aim to ensure steering or other efforts to limit beneficiary access or 
move beneficiaries out of the model are not occurring. We also note the 
breadth of monitoring activities, which includes audits, CMS monitoring 
of utilization and outcomes within the model, and the availability of 
Quality Improvement Organization (QIOs) and 1-800-MEDICARE for 
reporting beneficiary concerns, that can help us identify any 
beneficiary access or freedom of choice concerns in TEAM.
    Comment: Several commenters stated that hospitals may not be 
successful in TEAM due to challenges discharging beneficiaries to post-
acute care, citing financial and staffing challenges and the lack of 
vacancies in the post-acute-care settings. A commenter indicated that 
they believed TEAM would lead nursing homes to reduce capacity or close 
outright, including those that are otherwise high performers on quality 
and safety metrics. Another commenter indicated that across the 
country, acute-care hospitals are retaining patients long after they 
can safely be discharged into post-acute care for the simple and 
unfortunate reason that there are no vacancies in the post-acute-care 
settings those patients need when they need them. A commenter stated 
that the success under the model depends largely on reducing post-acute 
care costs, and the post-acute care sector is in the midst of a well-
documented staffing crisis. A commenter requested CMS to allow 
flexibility based on the availability of post-acute resources because 
the availability of home health, skilled nursing, and swing bed 
services can vary widely among communities, regions and states.
    Response: We do not expect the TEAM will result in adverse results 
such as post-acute care closures, decrease in availability of services, 
or disruption of patient care. In contrast, CMS believes that TEAM may 
have the opposite effects. The financial incentives in the model are 
designed to incentivize innovative care delivery methods that focus on 
improving care and reducing Medicare spending. We believe TEAM will 
spur partnerships between TEAM participants and post-acute care 
providers, such as skilled nursing facilities and home health agencies, 
to share financial risk and collaborate on care redesign strategies. We 
recognize that partnerships with post-acute care providers could be a 
crucial driver of episode spending and quality, given that many 
beneficiaries in TEAM may receive post-acute care services after 
discharge from the hospital. We believe the opportunities to find 
savings in post-acute care could be a motivator for these partnerships 
to help address some of the challenges with vacancies and capacities. 
Evaluation evidence from testing other episode-based payment models 
indicates participants tend to find efficiencies in the post-acute care 
space such as reducing the length of stay in institutional post-acute 
care.861 862 Reductions in the length of stay may free up 
institutional post-acute care beds, thereby allowing beneficiaries to 
not remain in the acute care setting unnecessarily. We also believe 
that model incentives could be a catalyst to financially support 
additional staffing needs through the sharing of reconciliation payment 
amounts established by financial arrangements between the TEAM 
participant and post-acute care provider. We emphasize the importance 
of beneficiary quality and access to care in TEAM and we will monitor 
the impact of the model closely, as described in section X.A.3.i of 
this final rule. In the event that adverse

[[Page 69639]]

outcomes such as these arise, CMS may modify or terminate the model 
accordingly.
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    \861\ https://www.cms.gov/priorities/innovation/data-and-reports/2023/cjr-py5-annual-report.
    \862\ https://www.cms.gov/priorities/innovation/data-and-reports/2024/bpci-adv-ar5.
---------------------------------------------------------------------------

    We also acknowledge that post-acute care can vary across different 
communities, regions, and states and will take into consideration 
policies, waivers, or pricing methodology adjustments that may address 
these variances. Any changes resulting from this consideration would be 
proposed in future notice and comment rulemaking.
    Comment: A commenter indicated CMS should review research 
surrounding previous episode-based payment models that when nursing 
home care goes down, home health use goes up. They cite this as a 
positive result, but findings also show that at the end of the 
patient's home health episode that patients needed more help from their 
caregivers than they did before the bundled payment was used which may 
increase patient and provider burden or stress health care resources in 
communities.
    Response: We appreciate the commenter highlighting this research. 
When designing CMS Innovation Center models, including the design of 
TEAM, extensive investigation is performed using data from our 
independent evaluations as well as reviewing external research data. 
Our model evaluations generally assess the impact of the model on the 
beneficiary, including obtaining data directly from beneficiaries 
through beneficiary surveys. We intend for the evaluation of TEAM to 
continue looking into beneficiary impacts, such as beneficiary care 
experience and functional status, and may also capture caregiver 
experience and burden as well. We will also monitor beneficiary quality 
of care, as discussed in section X.A.3.i in the preamble of this final 
rule and may modify or terminate the model if we identify adverse 
outcomes.
    Comment: A commenter suggested TEAM consider including a 
longitudinal feature that extends the episode well before surgery and 
accounts for savings due to avoided procedures which would better 
address the physical, psychological, and economic burden of back pain.
    Response: We appreciate the commenters suggestion and agree that 
beneficiaries can benefit from care management before surgical 
intervention. We believe it's important for episode-based payment 
models to have clear episode time periods and triggers and extending 
the episode to start before the anchor hospitalization or anchor 
procedure can make defining the episode challenging. Further, starting 
the episode before the anchor hospitalization or anchor procedure can 
make it difficult to avoid including unrelated items and is more likely 
to encompass costs that vary widely among beneficiaries, which would 
make the episode more difficult to price appropriately. However, we 
believe TEAM is complementary to existing longitudinal, population-
based models, such as ACO models and initiatives, that can manage 
beneficiaries before and after an episode and potentially reduce 
avoidable procedures that would lead to an episode of care.
    Comment: A commenter observed across other episode-based payment 
programs, improvements and savings take time and investment to realize 
and recommended that CMS grant hospitals a fair opportunity to achieve 
enough savings to garner a reconciliation payment.
    Response: We appreciate the comment observing that improvements and 
savings take time in episode-based payment programs. CMS believes that 
offering multiple participation tracks, as discussed in section 
X.A.3.a.(3) of the preamble of the final rule, with varying levels of 
risk helps to alleviate the time and investment associated with 
participation.
    Comment: A commenter requested clarification on whether hospitals 
participating in TEAM will also still participate in the Medicare 
Promoting Interoperability Program.
    Response: TEAM participants eligible for the Medicare Promoting 
Interoperability Program must comply with all requirements of the 
program to avoid being potentially subject to a downward payment 
adjustment. We did not include any proposals nor are we finalizing any 
policies that would exclude a TEAM participant from participating in 
the Medicare Interoperability Program.
    Comment: A commenter is concerned with the incentives that episode-
based payment models may create when focused on procedures, rather than 
better managing patients' underlying conditions.
    Response: We thank the commenter for their feedback. While TEAM 
will focus on testing five surgical episode categories, we believe 
model incentives and goals will help TEAM participants to manage 
beneficiaries underlying conditions and comorbidities. Specifically, we 
are requiring TEAM participants to refer TEAM beneficiaries to primary 
care services, as described in section X.A.3.l in the preamble of this 
final rule, prior to discharge from the anchor hospitalization or 
anchor procedure. We believe this requirement will promote 
collaboration between the TEAM participant and primary care providers, 
so that the TEAM beneficiary is being managed by a care team that 
includes clinicians who can manage the surgical procedure and 
clinicians who can manage underlying, chronic conditions. It is 
important to note that eligible Medicare beneficiaries may be 
attributed to both TEAM and population-based models, such as ACOs, 
which we hope will promote collaboration between providers who 
generally manage acute, specialty care, such as TEAM participants, and 
providers who generally manage primary care, such as those 
participating in an ACO, to work together to ensure of the TEAM 
beneficiary's needs are met.
    Comment: A commenter voiced their belief that episode-based models 
with complex quality and outcomes requirements are an exercise in 
diminishing return and their experience resulted in operational and 
financial challenges created by the payment and regulatory policies of 
these programs year after year.
    Response: While we purposely tried to minimize complexity when 
designing TEAM, we recognize that some hospitals participating in TEAM 
will be new to episode-based payment models, and other hospitals 
participating may have experience, but that experience does not 
guarantee successful participation or understanding of the pricing or 
quality aspects of the model. Since understanding, operationalizing, 
and gaining experience in an episode-based payment model takes time, we 
are not starting the model until January 1, 2026. We are also 
finalizing a participation track that provides a glide path to full 
financial risk, as indicated in section X.A.3.a.(3) of this preamble of 
the final rule, that allows all TEAM participants to participate in 
TEAM without downside financial risk, and TEAM participants that are 
safety net hospitals, as defined in section X.A.3.f of the preamble of 
this final rule, additional time without downside financial risk. This 
will allow TEAM participants the time and experience to operationalize 
their care redesign interventions without the financial pressures of 
owing a repayment amount to CMS for the first performance year, and 
safety net hospitals up to the third performance year. Also, prior to 
model implementation and during model implementation, CMS will be 
providing TEAM participants with support, by sharing learning resources 
and holding webinars to help TEAM participants understand complex 
topics, such as the target price methodology.

[[Page 69640]]

3. Provisions of Transforming Episode Accountability Model
a. Model Performance Period, TEAM Participants, Participation Tracks, 
and Geographic Area Selection
(1) Model Performance Period
    We proposed a 5-year ``model performance period'', defined as the 
60-month period from January 1, 2026, to December 31, 2030, during 
which TEAM is being tested and the TEAM participants are held 
accountable for Medicare spending and quality of care. We proposed that 
the model would have 5 ``performance years'' (PYs). We proposed to 
define a PY as a 12-month period beginning on January 1 and ending on 
December 31 of each year during the model performance period in which 
TEAM is being tested and TEAM participants are held accountable for 
spending and quality. We proposed to define the start of the model 
performance period as the ``model start date''.
    We proposed a 5-year model performance period to allow for a 
sufficient time period for TEAM Participants to invest in care delivery 
transformation and observe return on investments. We stated that a 
five-year period would also allow for an adequate evaluation period to 
determine model results, given that many of the episode categories we 
proposed to test under TEAM have thus far only been tested among 
voluntary model participants (89 FR 36387).
    We alternatively considered a 3- or 10-year model performance 
period. However, we believe a 3-year period to be too short to allow 
adequate time to invest in transformations and achieve considerable 
model savings to the Medicare trust fund. We also considered a 10-year 
model performance period, similar to several recently announced CMS 
Innovation Center models; however, given this would be a mandatory 
model, we believe 5 years would be sufficient to gather the necessary 
data to evaluate whether the model is successful for the included 
episode categories.
    We also considered beginning TEAM on April 1, 2026, July 1, 2026, 
or October 1, 2026, to allow selected TEAM participants more time to 
prepare for model implementation. However, based on our experience with 
prior and current episode-based payment models, we believe that 
potential participants would have sufficient time to prepare to 
participate in a model that begins January 1, 2026, which is why we 
proposed TEAM at least 18 months before the proposed model start date. 
In addition, given that the current BPCI Advanced model concludes on 
December 31, 2025, beginning TEAM on January 1, 2026, would ensure 
continuity between models for those hospitals in BPCI Advanced that are 
in the mandatory CBSAs selected to participate in TEAM. We also 
recognize the potential misalignment between the performance 
measurement period based on the calendar year and an alternative model 
start date, so if we were to adjust the model start date based on 
public input, we proposed that we would also alter the model 
performance period. For example, if TEAM were to begin April 1, 2026, 
the PY would still be defined as a 12-month period from the start date, 
meaning April 1, 2026, to March 31, 2027. As a result, the model 
performance period end date would also shift to reflect a 60-month 
period from the model start date of the first PY--for example, April 1, 
2026, to March 31, 2031.
    We sought comment on the proposed model performance period of 5 
years and proposed model start date of January 1, 2026, for PY 1, and 
on the alternatively considered start dates (April 1, 2026, July 1, 
2026, and October 1, 2026), and the subsequent adjustment to dates of 
the model performance period if we were to change the model start date.
    The following is a summary of comments we received on the proposed 
model performance period and model start date and our responses to 
these comments:
    Comment: A commenter supported a calendar year start date because 
of the alignment in timing with other Medicare programmatic 
requirements. A commenter also supported a model length of five years, 
indicating that as an appropriate length of time to be able to evaluate 
a model to determine success.
    Response: We thank the commenter for the support and agree that a 
calendar year model start date would align with other Medicare 
requirements or initiatives. We also agree a five-year model test 
should provide sufficient evidence to determine if TEAM is achieving 
its goals of improving quality of care and reducing Medicare 
expenditures.
    Comment: Many commenters requested CMS delay the model start date 
for TEAM. Some commenters indicated that the volume of relationships, 
processes, and contracts that TEAM participants would need to establish 
would be substantial given the large scope of the proposed model. Some 
commenters had concerns about the impact that they thought TEAM may 
have on the care that hospitals provide, and, ultimately, the quality 
of care provided to Medicare beneficiaries. A commenter noted their 
belief that January 2026 was ambitious to start the model and 
recommended that CMS undertake a phased implementation of the model. A 
few commenters urged CMS to delay the model until such time that more 
episode specific quality measures can be established and to engage 
subject matter experts in this effort before making this model 
mandatory. Another commenter indicated that they believed it would be 
difficult for hospitals to participate without subjecting themselves 
and their communities to significant financial risk and recommended 
that CMS delay implementation until these issues can be resolved. A 
commenter recommended delaying the model and including a dedicated 
payment bump for administrative costs that would allow hospitals to 
prepare for additional costs.
    Response: We appreciate comments expressing concerns around the 
timing of this model. We believe that it is important to initiate TEAM 
after the conclusion of the CJR and BPCI Advanced models to continue 
testing the care transformation effects that episode-based payment 
models have on the health care system. Testing TEAM well after the BPCI 
Advanced ends may slow the speed and adoption of broad care 
transformation practices and may lead to a loss of the efficiencies 
that were achieved during the testing of the BPCI Advanced and CJR 
models. We believe it's important for TEAM to have a model start date 
of January 1, 2026, as this start date will provide essential 
information to CMS and others about the potential for a new episode-
based payment model to improve care and lower spending and to continue 
the momentum of testing episodes and associated care transformation.
    We are sensitive to commenters' concerns about the level of 
preparation needed to implement care redesign activities, develop 
relationships and processes, especially for hospitals new to episode-
based payment models. A key reason we began soliciting information for 
the design of TEAM last year through the Episode-Based Payment Model 
Request for Information (88 FR 45872) was to signal our desire to test 
a mandatory episode-based payment model and to put the public on early 
notice that a model might be developed in the near future. We purposely 
proposed TEAM with at least 18 months before the proposed model start 
date to give potential TEAM participants time to consider preparations 
if their CBSA was selected

[[Page 69641]]

as one of the required areas in this model.
    We disagree that TEAM's scope is too large for future TEAM 
participants. We note that TEAM will only include a limited number of 
episode categories, and those episodes include higher volume procedures 
where hospitals may already have established care protocols. We believe 
it is reasonable for TEAM participants to begin to analyze data and 
identify care patterns and opportunities for care redesign for these 
episode categories prior to assuming accountability for quality and 
spending outcomes in order to prepare for model implementation. Prior 
to each performance year, and thus prior to the model start date, we 
intend to offer TEAM participants the opportunity to request baseline 
period data, as indicated in section X.A.3.k of the preamble of this 
final rule. CMS would share such data with TEAM participants in 
accordance with the TEAM data sharing agreement. This data will assist 
TEAM participants to prepare for model implementation by helping to 
evaluate their potential performance, conduct quality assessment and 
improvement activities, conduct population-based activities relating to 
improving health or reducing health care costs, or conduct other health 
care operations.
    We also disagree that TEAM will create significant financial risk 
for TEAM participants, and that the financial risk in the model would 
warrant either delaying the model or providing TEAM participants with 
an additional payment to account for administrative costs. As discussed 
in section X.A.3.a.(3) of the preamble of this final rule, we believe 
that allowing all TEAM participants the opportunity to participate in 
Track 1 for the first performance year will provide additional 
preparation time before being subject to downside financial risk. We 
are also finalizing changes to other TEAM policies in an effort to 
minimize financial risk for TEAM participants, including reducing the 
discount factor, reducing the stop-gain and stop-loss limits for Track 
2, and allowing safety net hospitals the opportunity to remain in Track 
1 for the first three performance years, as discussed in sections 
X.A.3.d.(3)(g), X.A.3.d.(5)(h), and X.A.3.a.(3) of the preamble of this 
final rule. However, it's important to note that TEAM participants who 
feel prepared and want to assume two-sided financial risk, both upside 
and downside risk, from the model start date may do so by participating 
Track 3, as described in section X.A.3.a.(3) of the preamble of this 
final rule.
    Likewise, we do not agree that the models should be implemented 
after episode-specific quality measures are established. We recognize 
the value in having episode-specific quality measures but for purposes 
of TEAM, we chose measures that hospitals are already reporting under 
existing CMS quality reporting programs in an effort to minimize TEAM 
participant burden. Previous episode-based payment models, including 
the BPCI Advanced model, have used some similar hospital level quality 
measures to assess participant quality performance and therefore we 
believe this approach is consistent with other models. We have engaged 
interested parties on quality measure selections, and we took the 
public comments received during the Episode-Based Payment Model Request 
for Information (88 FR 45872) and the proposed rule (89 FR 35934) into 
consideration, and we will continue engagement throughout the 
implementation of TEAM. However, as noted in section X.A.3.c of the 
preamble of this final rule, we are interested in considering episode-
specific quality measures and if we identify appropriate measures, we 
may propose them in future notice and comment rulemaking.
    Lastly, we do not believe the model start date of January 1, 2026, 
will compromise beneficiary access or reduce quality of care. As 
discussed in section X.A.3.c of the preamble of this final rule, we are 
including quality measures for purposes of evaluating participating 
hospitals' performance both individually and in aggregate across the 
model. Also, as discussed in section X.A.3.i of the preamble of this 
final rule, we are finalizing policies and actions to monitor both care 
access and quality. We believe these features will help ensure that 
beneficiary access to high quality care is not compromised under the 
model.
    Comment: Some commenters suggested that CMS provide at least 18 
months from when the list of selected mandatory CBSAs is finalized to 
when the model starts to provide ample implementation time, especially 
for potential participants with a lack of experience in episodic models 
or accountable care. A commenter suggested CMS should accommodate 
participants' annual budgeting cycles by providing at least an 18 
months' lead time. A commenter noted that migrating the volume of 
procedures to mandatory bundles across multiple service lines in such a 
rapid timeframe would be untenable. Another commenter suggested that 
2026 be an optional year because the short implementation timeline 
would impose a great burden on hospitals to set up the appropriate 
infrastructure to support a complex model such as TEAM by the proposed 
2026 model start date.
    Response: We appreciate comments expressing concerns around 
providing sufficient notice between when the final listed of mandatory 
CBSAs are publicly shared and when the model starts. We identified the 
selected mandatory CBSAs for participation in TEAM, as noted in section 
X.A.3.a.(4) of the preamble of this final rule, and keeping a January 
1, 2026, model start date provides approximately 17 months of time to 
prepare. We believe 17 months is sufficient time for participants to 
implement the kinds of changes needed to successfully participate in 
the model.
    Further, we don't believe making 2026 an optional year is necessary 
because we are providing the opportunity for all TEAM participants to 
participate in Track 1, as discussed in section X.A.3.a.(3) of the 
preamble of this final rule, which allows them to participate with no 
downside financial risk for PY 1, effectively increasing the 
preparation time and experience to operationalize their care redesign 
without the financial pressure of downside risk for one year before 
owing a repayment amount. Additionally, for TEAM participants who meet 
our definition of safety net hospital, as defined in section 
X.A.3.f.(2) of the preamble of this final rule, we are extending their 
ability to remain in Track 1 for the first three performance years, 
allowing a longer on-ramp to downside risk.
    We disagree with the commenter that the timeframe to implement TEAM 
is untenable given the volume of procedures spanning multiple service 
lines. The episode categories that will be tested in TEAM are higher 
volume procedures that we anticipate most TEAM participants can 
leverage their existing standard care pathways to find efficiencies. 
Additionally, TEAM does not require a TEAM participant to change how 
they perform these procedures, thus there is no bearing to the 
timeframe before these procedures are mandatorily tested in TEAM.
    As noted previously, we expect that hospitals will spend the first 
performance year of the model analyzing data, identifying care 
pathways, forming clinical and financial relationships with other 
providers and suppliers, and assessing opportunities for savings under 
the model. Therefore, we do not believe that CMS needs to change the 
model start date or make other changes related to the timing of the 
model.

[[Page 69642]]

    Comment: A commenter requested that CMS delay the model start date 
because there are many unknown implications of minimum staffing 
standards for long-term care (LTC) facilities.
    Response: We do not agree that the model should be delayed because 
of the minimum staffing standards for long-term care facilities (89 FR 
40876). Staffing in LTC facilities has remained a persistent concern 
and the minimum staffing standards for LTC facilities final rule 
represents a critical step in addressing adequate staffing and reducing 
the risk of residents receiving unsafe and low-quality care in LTC 
facilities. As such, we believe that the ongoing efforts of LTC 
facilities to comply with the minimum staffing standards may create 
improvements in the quality of care for residents that may support the 
goals of TEAM. We also do not believe that the minimum staffing 
standards for long-term care facilities, in particular, will impede 
TEAM participants' abilities to participate in TEAM successfully.
    After consideration of the public comments we received, we are 
finalizing our proposed definitions for model performance period, 
performance year, and model start date at Sec.  512.505 without 
modifications.
(2) Participants
(a) Background
    We indicated in the proposed rule that TEAM builds upon previous 
CMS Innovation Center episode-based payment models, including the BPCI 
Advanced and CJR models. While these models have similarities, they 
have some notable differences with regard to participant structure and 
the entity who can initiate episodes. The BPCI Advanced model is a 
voluntary model that includes convener and non-convener participants. A 
non-convener participant initiates episodes, is either an acute care 
hospital or physician group practice (PGP) and bears financial risk for 
itself. A convener participant is an entity willing to bear financial 
risk for downstream episode initiators, either acute care hospitals or 
PGPs, and generally provides supportive services such as data analytics 
or clinical care navigators. In contrast, the CJR model is a mandatory 
model in 34 MSAs that does not include convener participants or allow 
PGPs to initiate episodes but does parallel BPCI Advanced by including 
participant hospitals (non-convener) that initiate episodes. While the 
CJR Model does not have a formal convener role, some CJR participant 
hospitals contract with (non-model participant) convener-organizations 
to provide administrative, operational, analytical, and clinical 
services.
    In the proposed rule we stated that we were interested in testing 
and evaluating the impact of a mandatory episode-based payment model in 
selected geographic areas, see section X.A.3.a.(4) of the preamble of 
this final rule, for acute care hospitals that initiate certain episode 
categories, including among those hospitals that have not chosen to 
voluntarily participate in the BPCI Advanced model or those that were 
selected to participate in the CJR model. We stated that testing the 
model among acute care hospitals in select geographic areas would allow 
CMS and participants to gain experience testing and evaluating an 
episode-based payment approach for certain episodes furnished by 
hospitals with a variety of historic utilization patterns; roles within 
their local markets, including with regard to accountable care 
organization participation or affiliation; volume of services provided; 
access to financial, community, or other resources; and population and 
health care provider density. Further, Medicare beneficiaries and 
providers in rural and underserved areas can be underrepresented in 
voluntary models, whereas under a mandatory model we may include these 
entities, with safeguards as appropriate, for participation so that 
beneficiaries have equitable access to care redesign approaches 
intended to improve the quality care, and such providers gain 
experience in value-based care. Lastly, we noted that participation of 
hospitals in selected geographic areas would allow CMS to test episode-
based payments without introducing participant attrition or selection 
bias such as the selection bias inherent in the BPCI Advanced model due 
to self-selected participation in the model and self-selection of 
episode categories (89 FR36388).
(b) TEAM Participant Definition
    We noted in the proposed rule that the CJR model has participant 
hospitals who are acute care hospitals that initiate episodes whereas 
the BPCI Advanced model allows either acute care hospitals or PGPs to 
initiate episodes, who may either be a participant or a downstream 
episode initiator in the model. Since two different types of entities 
are permitted to initiate episodes in BPCI Advanced and they may be co-
located, meaning the PGP may initiate episodes and practices at a 
hospital that also initiates episodes, the BPCI Advanced model includes 
precedence rules. Precedence rules dictate which entity will be 
attributed the episode and will be held accountable for quality and 
cost performance, but they also contribute to operational complexity. 
For example, in BPCI Advanced a single episode could be attributed to 
one of three potential provider or suppliers: the attending PGP, the 
operating PGP, or the hospital. Data feeds can help inform entities of 
episode attribution when multiple provider or suppliers have interacted 
with the beneficiary, but BPCI Advanced participants have expressed 
challenges with identifying their potential episodes due to lack of 
real-time data.
    Given the challenges of having multiple providers or suppliers in a 
single model initiate an episode, we stated in the proposed rule that 
we believed it would benefit TEAM to only allow a single entity to 
initiate episodes and be the participant in TEAM (89 FR 36388). We 
stated in the proposed rule that this is because it would simplify 
episode attribution, meaning it would avoid precedence rules, and make 
it easier for the single entity to identify beneficiaries that may be 
included in the model. Therefore, similar to the CJR model, we proposed 
that acute care hospitals would be the TEAM participant and the only 
entity able to initiate an episode in TEAM. Specifically, we proposed 
defining a TEAM participant as an acute care hospital that initiates 
episodes and is paid under the IPPS with a CMS Certification Number 
(CCN) primary address located in one of the geographic areas selected 
for participation in TEAM, as described in section X.A.3.a.(4) of the 
preamble of this final rule. We are also proposing that the term 
``hospital'' has the same meaning as hospital as defined in section 
1886(d)(1)(B) of the Act. This statutory definition of hospital 
includes only acute care hospitals paid under the IPPS.
    We believe that hospitals are more likely than other providers or 
suppliers to have an adequate volume of episodes to justify an 
investment in episode management. We also believe that hospitals, 
compared to other providers or suppliers, are most likely to have 
access to resources that would allow them to appropriately manage and 
coordinate care throughout these episodes. Further, the hospital staff 
is already involved in discharge planning and placement recommendations 
for Medicare beneficiaries, and more efficient PAC service delivery 
provides substantial opportunities for improving quality and reducing 
costs in TEAM.
    In the proposed rule, we also noted that we believed hospitals 
being TEAM participants aligns with how episodes

[[Page 69643]]

are initiated in TEAM, as described in section X.A.3.b.(5)(c) of the 
preamble of this final rule, since it relies on a beneficiary's 
inpatient admission to a hospital or a beneficiary receiving a 
procedure in a hospital outpatient department. Additionally, we believe 
that utilizing the hospital as the TEAM participant is a 
straightforward approach for this model because the hospital furnishes 
the acute surgical procedure and plans for and manages post-discharge 
(or post-procedure) care. We also want to test a broad model in a 
variety of hospitals, including safety net hospitals specified in 
section X.A.3.f.(2) and rural hospitals specified in section 
X.A.3.f.(3) of the preamble of this final rule, under TEAM to examine 
results from a more generalized payment model. Finally, as described in 
the following sections that present our finalized approach to 
geographic area selection, our geographic area selection approach 
relies upon our definition of hospitals as the TEAM participant and the 
entity that initiates episodes.
    We sought comment on our proposal at Sec.  512.505 to define TEAM 
participants as an acute care hospital that initiates episodes and paid 
under the IPPS with a CMS CCN primary address located in one of the 
geographic areas selected for participation in TEAM. We also sought 
comment on our proposal at Sec.  512.505 to define hospital as defined 
in section 1886(d)(1)(B) of the Act.
(i) TEAM Participant Exclusions and Considerations
    We stated in the proposed rule that all acute care hospitals in 
Maryland would be excluded from being TEAM participants because 
Maryland hospitals are not currently paid under the IPPS and OPPS. 
Therefore, any acute care hospital located in Maryland would not be 
able to satisfy the definition of TEAM participant. Currently, CMS and 
the state of Maryland are testing the Maryland Total Cost of Care 
(TCOC) Model, which sets a per capita limit on Medicare total cost of 
care in Maryland. The TCOC Model holds the state fully at risk for the 
total cost of care for Medicare beneficiaries. Maryland acute care 
hospitals are not paid under the IPPS or OPPS, but rather are paid 
using a global budget methodology that establishes pricing of medical 
services provided by hospitals, primary care doctors, and specialists 
across all payers. Therefore, we proposed that payments to Maryland 
acute care hospitals would be excluded in the pricing calculations as 
described in section X.A.3.d. of the preamble of this final rule. We 
sought comment on this proposal and whether there were potential 
approaches for including Maryland acute care hospitals as TEAM 
participants. In addition, we sought comment on whether Maryland 
hospitals should be TEAM participants in the future (89 FR 36389).
    In the proposed rule we also stated we recognize that the Maryland 
TCOC Model may not be the only CMS model or initiative that may use 
hospital global budgets as part of their alternative payment models. 
The States Advancing All-Payer Health Equity Approaches and Development 
(AHEAD) Model is a state-based voluntary TCOC model that will 
incorporate hospital global budgets. We indicated there are several 
cohorts in which states may participate, and we expect that the AHEAD 
Model implementation period would overlap with the performance years of 
TEAM. Given that CMS envisions that up to eight states would 
participate in the AHEAD Model, unlike the Maryland TCOC Model, we said 
in the proposed rule that we were hesitant to propose excluding 
hospitals that participate in the AHEAD Model from being TEAM 
participants because it could reduce the volume of beneficiaries that 
may benefit from episodic, acute coordinated care. We said that we were 
aware that allowing overlap may introduce model complexities with 
respect to constructing TEAM prices or the AHEAD global budgets and 
statewide total cost of care calculations. However, there may be other 
opportunities, such as sharing of TEAM-style summary episode data (not 
beneficiary-identifiable) with AHEAD hospitals, to support episodes 
without allowing hospitals participating in the AHEAD Model to 
participate in TEAM as TEAM participants. Thus, we stated that we were 
unsure if we should allow AHEAD hospitals located in areas selected for 
TEAM participation to participate in TEAM as TEAM participants. We 
sought comment on whether there may be potential approaches for 
including hospitals participating in the AHEAD Model in TEAM as TEAM 
participants, or other approaches that may not result in participation 
in both models but support the integration of episodes and hospital 
global budgets. We indicated in the proposed rule, that the AHEAD Model 
would be voluntary for participating states and hospitals within those 
states, and as such, we also sought comment on whether hospitals 
located in AHEAD states should be required to participate in TEAM as 
TEAM participants if they either do not participate in in the AHEAD 
Model or if they terminate their participation in the AHEAD Model (or 
CMS terminates them) before the AHEAD Model ends.
    We stated in the proposed rule that since TEAM is built from 
lessons learned from previous episode-based payment models, including 
the BPCI Advanced model, we considered including PGPs in the definition 
of TEAM participant in the future. We recognized that PGPs demonstrated 
some successes in the BPCI Advanced model, most specifically that BPCI 
Advanced PGPs reduced average episode payments by $2,157 for surgical 
episodes in Model Year 3 (2020) and reduced unplanned hospital 
readmissions for surgical episodes in Model Years 1&2 (October 2018-
December 2019).863 864 We indicated in the proposed rule 
that despite these favorable findings, we have concerns about requiring 
PGPs, who are generally smaller entities and care for a lower volume of 
Medicare beneficiaries, to participate in an Advanced APM such as TEAM 
given the more than nominal financial risk standard required of 
Advanced APMs set forth in regulation in the Quality Payment Program 
(42 CFR 414.1415). We noted that while BPCI Advanced is an Advanced 
APM, participation is voluntary, and PGPs have the autonomy to 
determine if they have the infrastructure and resources to take on the 
level of financial risk to participate in the model and determine if 
they have sufficient episode volume to create systematic care redesign 
efficiencies. Further, we are aware from internal reports that most 
eligible clinicians in the BPCI Advanced model do not meet Qualifying 
APM Participant determinations in the model due to not meeting the 
required thresholds for Medicare Part B payments or Medicare 
beneficiaries, suggesting that acute care-based episodes may not 
sufficiently capture the full panel of patients a PGP manages. We 
stated in the proposed rule that we believe there are other meaningful 
opportunities for PGPs to engage in TEAM, specifically through 
financial arrangements with TEAM participants, or through other CMS 
value-based care initiatives, including future PGP-specific 
opportunities under development through the CMS Innovation Center 
specialty care

[[Page 69644]]

strategy. For these reasons, we did not propose PGPs to be included in 
the definition of TEAM participant in TEAM. However, we sought comment 
on whether we should include PGPs in the definition of TEAM participant 
through future rulemaking, or if there are other ways, beyond financial 
arrangements, that we could incorporate PGPs to promote collaboration 
between TEAM participants and other providers who may care for a TEAM 
beneficiary over the course of the episode.
---------------------------------------------------------------------------

    \863\ CMS Bundled Payments for Care Improvement Advanced Model: 
Third Evaluation Report. (2022). Centers for Medicare & Medicaid 
Services. Retrieved November 28, 2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2022/bpci-adv-ar3.
    \864\ CMS Bundled Payments for Care Improvement Advanced Model: 
Year 2 Evaluation Report. (2021). Centers for Medicare & Medicaid 
Services. Retrieved November 28, 2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2021/bpci-yr2-annual-report.
---------------------------------------------------------------------------

    We sought comment on our proposal to exclude hospitals located in 
Maryland from TEAM participation, and how to address hospitals that 
would participate in the AHEAD model. We also sought comment on 
including PGPs in the definition of TEAM participant.
    The following is a summary of comments we received on the proposed 
TEAM participant definition, Maryland hospital exclusion, and AHEAD 
hospital overlap and our responses to these comments:
    Comment: We had a few commenters support the TEAM participant 
definition to only include hospitals. A commenter agreed that the 
definition is relatively unambiguous and is consistent with a larger 
goal of making the ``initiating hospital'' of a surgical episode 
responsible for a defined set of downstream costs and patient outcomes.
    Response: We thank the commenters for their support.
    Comment: A couple of commenters requested that CMS include critical 
access hospitals (CAHs) in the TEAM participant definition. A commenter 
had concerns with the proposed TEAM participant definition, which only 
included IPPS hospitals, and stated that this definition would have 
unintended consequences that will detrimentally impact CAHs. 
Specifically, the commenter thought that TEAM may result in more 
surgeries being referred to urban partner facilities instead of CAHs in 
order to ``meet the target price,'' and more importantly that TEAM 
would result in a patient having to travel a much further distance to 
obtain care.
    Response: We believe it would be challenging to include CAHs in the 
TEAM participant definition since CAHs are not paid under the IPPS or 
OPPS, but rather they are paid for most inpatient and outpatient 
services to patients at 101 percent of reasonable costs.\865\ Given 
these and other differences between CAHs and IPPS hospitals, it would 
be difficult to construct a reasonable target price for CAHs using 
TEAM's current pricing methodology.
---------------------------------------------------------------------------

    \865\ https://www.cms.gov/files/document/mln006400-information-critical-access-hospitals.pdf.
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    With respect to impacting patient care, we will monitor beneficiary 
care, as discussed in section X.A.3.i of the preamble of this final 
rule, to ensure beneficiary freedom of choice is not compromised. 
Medicare beneficiaries are not precluded from seeking care from 
providers or suppliers who do not participate in TEAM and a TEAM 
participant is prohibited from limiting beneficiaries to a preferred or 
recommended providers list. CMS's monitoring efforts will aim to ensure 
steering or other efforts to limit beneficiary access or move 
beneficiaries out of the model are not occurring.
    Comment: Many commenters requested that CMS include physicians or 
PGPs as TEAM participants, so that physicians or PGPs could also 
initiate episodes and assume financial responsibility for episodes. 
Some commenters recognized that PGPs may be unprepared for mandatory 
participation but indicated more must be done to recognize and favor 
the physician's role in the model as the individual responsible for 
clinical care. A commenter noted that allowing hospitals to form 
partnerships or joint ventures with PGPs would facilitate shared 
responsibilities and rewards, promoting a holistic and patient-centered 
care experience. Another commenter noted that by not directly including 
PGPs as participants, CMS places an additional burden on hospitals to 
organize financial and legal arrangements. Another commenter believed 
that excluding PGPs from being a TEAM participant gives more power to 
health care facilities and could further drive consolidation in health 
care providers. A commenter wanted to know what considerations CMS had 
for risk bearing entities other than the hospital, such as hospital-
PGPs or clinically integrated networks because these types of providers 
are amenable to serving as risk-bearing entities and are highly-
focused, team-based, and able to construct an episode-directed quality 
program and track episode costs-regardless of site of care. A commenter 
thought that allowing the clinical team to participate in TEAM as a 
risk bearing entity could better align incentives around the patient 
because the team has responsibility for the care journey, including 
time in the hospital and time to discharge.
    Response: We believe it is most appropriate to identify a single 
type of provider or supplier to bear financial responsibility for 
making repayment to CMS under TEAM as one entity needs to be ultimately 
responsible for ensuring that care for TEAM beneficiaries is 
appropriately furnished and coordinated to avoid fragmented approaches 
that are often less effective and more costly. Hospitals play a central 
role in coordinating episode-related care and ensuring smooth 
transitions for beneficiaries from the hospital inpatient and hospital 
outpatient department. Most hospitals already have some infrastructure 
in place related to patient and family education and health information 
technology to coordinate care across different providers and settings. 
In addition, hospitals are required by the hospital Conditions of 
Participation (CoPs) to have in effect a standard discharge planning 
process (Sec.  482.43 (a)) that includes requirements related to post-
acute care services (PAC) (Sec.  482.43(c)), which includes 
coordinating with PAC providers, a function usually performed by 
hospital discharge planners or case managers. Thus, hospitals can build 
upon already established infrastructure, practices, and procedures to 
achieve efficiencies under this episode-based payment model.
    Many hospitals also have recently heightened their focus on 
aligning their efforts with those of community providers to provide an 
improved continuum of care due to the incentives under other CMS models 
and programs, including ACO initiatives such as the Medicare Shared 
Savings Program, and the Hospital Readmissions Reduction Program 
(HRRP), establishing a base for augmenting these efforts under TEAM. 
Hospitals are also more likely than other providers and suppliers to 
have an adequate number of episode cases to justify an investment in 
episode management for this model, have access to resources that would 
allow them to appropriately manage and coordinate care throughout the 
episode, and hospital staff is already involved in discharge planning 
and placement recommendations for Medicare beneficiaries, and more 
efficient PAC service delivery provides substantial opportunities for 
improving quality and reducing costs under TEAM.
    We considered whether to make physicians or their associated PGPs, 
if applicable, financially responsible for the episode under TEAM (89 
FR 36391). However, standardizing episodes and determining the 
appropriate level of financial risk if physicians or PGPs initiated 
episodes and were responsible for them would be challenging because the 
services of providers and suppliers other than the hospital where the 
hospitalization or hospital outpatient procedure occurs would not 
necessarily be furnished in every episode in TEAM.

[[Page 69645]]

For example, physicians of different specialties play varying roles in 
managing patients during an acute care hospitalization for a surgical 
procedure and during the recovery period, depending on the hospital and 
community practice patterns and the clinical condition of the 
beneficiary and therefore, we do not think that every episode in TEAM 
could account for all specialties and all roles. This variability would 
make requiring a particular physician or PGP to be financially 
responsible for a given episode in TEAM very challenging. If we were to 
assign financial responsibility to the operating physician, it is 
likely that there would be significant variation in the number of 
relevant episodes that could be assigned to an individual person, 
potentially resulting in significant financial risk for a given 
physician Assigning financial responsibility to a PGP may help to 
mitigate individual physician risk, but even at the PGP level there 
still may be significant risk depending on the volume of physicians 
within a PGP and the volume of episodes the PGP may initiate. We 
acknowledge that providers and suppliers with low volumes of cases may 
not find it in their financial interests to make systematic care 
redesigns or engage in an active way with TEAM. We expect that 
physicians typically do not have the case volume to justify an 
investment in the infrastructure needed to adequately provide the care 
coordination services required under TEAM (such as dedicated support 
staff for case management), which leads us to believe that as a result, 
the physician, PGP, and model would have more challenges if physicians 
and PGPs were TEAM participants.
    Although the BPCI Advanced model allows a PGP to have financial 
accountability for clinical episodes, the PGPs electing to participate 
in BPCI Advanced have done so because their business structure supports 
care redesign and other infrastructure necessary to bear financial 
responsibility for episodes and is not necessarily representative of 
the typical group practice. The incentive to invest in the 
infrastructure necessary to accept financial responsibility for the 
entire episode, starting at the anchor hospitalization or anchor 
procedure and ending 30 days after the date of discharge from the 
hospital, would not be present across all PGPs. Thus, we do not believe 
it would be appropriate to designate physicians or PGPs to bear the 
financial responsibility for making repayment amounts to CMS under 
TEAM. Further, with respect to commenters who were interested in CMS 
providing more opportunities for physicians and PGPs to assume risk, we 
note that those comments seemed to focus on voluntary participation in 
models rather than including and mandating physicians or PGPs to be 
TEAM participants.
    We would emphasize that physicians, PGPs, and other providers or 
suppliers are encouraged to collaborate with TEAM participants and take 
advantage of establishing financial arrangements that would align 
financial incentives to improve quality of care and reduce Medicare 
spending through improved beneficiary care transitions and reduced 
fragmentation. While such PGPs would not be accountable directly to 
CMS, their arrangements with TEAM participants could include financial 
risk and accountability to the TEAM participant. We disagree with the 
comment that there would be additional burden on hospitals to organize 
financial and legal arrangements since CMS is not requiring TEAM 
participants to have financial arrangements nor is CMS requiring TEAM 
participants to change other types of arrangements as a result of 
participation in the model. We also disagree that excluding PGPs from 
TEAM could further drive consolidation in the future because while PGPs 
may not be TEAM participants, they are still given the opportunity to 
engage in the model, such as being TEAM collaborators, that allows them 
to be in financial arrangements with TEAM participants to share 
reconciliation payment amounts and repayment amounts.
    We recognize the important role of physicians and non-physician 
practitioners in caring for Medicare beneficiaries and are committed to 
testing models that may be more appropriate for these types of Medicare 
suppliers, or the practices they work with, to assume risk. We are 
actively developing other opportunities for physicians and non-
physician practitioners to be included in value-based care and 
alternative payment models and refer to the recently published RFI 
``Building Upon the Merit-based Incentive Payment System (MIPS) Value 
Pathways (MVPs) Framework to Improve Ambulatory Specialty Care,'' in 
the CY 2025 Physician Fee Schedule Notice of Proposed Rulemaking that 
seeks feedback on the design of a potential model to increase the 
engagement of specialists in value-based care.\866\
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    \866\ https://www.federalregister.gov/public-inspection/2024-14828/medicare-and-medicaid-programs-calendar-year-2025-payment-policies-under-the-physician-fee-schedule.
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    Comment: A commenter requested that physicians and non-physician 
organizations, with requisite qualifications, should be permitted to 
participate in any CMS Innovation Center model as conveners.
    Response: As described in section X.A.3.a.(2) of the preamble of 
this final rule, TEAM participants may enter into administrative or 
risk sharing arrangements related to TEAM with entities that may 
provide similar support as a convener, except to the extent that such 
arrangements are restricted or prohibited by existing law.
    Comment: A commenter recommended that CMS require that hospitals 
include anesthesiologists and their contracted anesthesia services in 
their participation lists.
    Response: CMS will collect from TEAM participants a financial 
arrangements list and a clinician engagement list, as applicable, and 
as finalized in section X.A.3.m of the preamble of this final rule. The 
financial arrangements list will identify eligible clinicians or MIPS 
eligible clinicians that have a financial arrangement, as discussed in 
section X.A.3.g of the preamble of this final rule, with the TEAM 
participant, TEAM collaborator, collaboration agent, and downstream 
collaboration agent. The clinician engagement list will identify 
eligible clinicians or MIPS eligible clinicians that participate in 
TEAM activities and have a contractual relationship with the TEAM 
participant, and who are not listed on the financial arrangements list. 
We do not believe a requirement that certain providers or suppliers be 
included on these lists is necessary to meet the goals of the model. We 
believe it is important for the TEAM participant, and not CMS, to 
dictate who should be included on these lists.
    Comment: A commenter suggested CMS should be sensitive to the 
prevalence and movement of surgeons between hospitals and should 
include PGPs as direct participants in the model to address practice 
patterns shifting.
    Response: We recognize that individual Medicare suppliers that were 
present during the baseline period may be different during the 
performance year. However, the shifting of providers is inevitable and 
will continually occur during the baseline period and performance year 
and that alone does not support the commenter's assertion that PGPs 
should be direct TEAM participants and assume financial accountability 
in the model. We are hopeful that TEAM participants will

[[Page 69646]]

take steps to partner with PGPs during the performance year to engage 
physicians in value-based care.
    Comment: A commenter suggested the development of specific quality 
measures and performance standards that reflect the unique 
contributions of PGPs to ensure the inclusion of PGPs positively 
impacts TEAM.
    Response: We thank the commenter for the feedback. While we are 
finalizing the TEAM participant definition as proposed with slight 
modification to account for hospitals eligible to voluntarily opt into 
TEAM, as discussed in section X.A.3.a.(2)(c) of the preamble of this 
final rule. We may consider including PGPs and/or different quality 
measures in the model in the future.
    Comment: Some commenters suggested that CMS should allow Ambulatory 
Surgical Centers (ASCs) to participate as participants in the model or 
allow ASCs to be a care setting where episodes may initiate. A 
commenter noted potential concerns with TEAM participants shifting 
volume to ASCs to diminish exposure to TEAM or individual providers 
shifting volume to ASCs to avoid downside risk. Another commenter noted 
that there is a huge shift of LEJR out of the hospitals into ASCs, 
leaving only the higher risk patients remaining in the hospital. A 
commenter noted that procedures done in an ASC would not accrue shared 
savings under TEAM and questioned how CMS will track these activities 
for impact on patients or unintended consequences in the model. Another 
commenter indicated that some hospitals could feel incentivized to 
direct high-cost, complex LEJR patients to ASCs to improve their own 
facility's quality scores.
    Response: We appreciate the interest of the commenters in providing 
certain episode categories, such as LEJR, under TEAM to Medicare 
beneficiaries in ASCs as a further opportunity to test strategies to 
provide high quality, efficient care for beneficiaries. We recognize 
that testing episodes that initiate in an ASC setting would require us 
to expand the TEAM participant definition to include ASCs or PGPs. We 
have previously noted our concerns with requiring PGPs to participate 
in TEAM and are also hesitant to expand the definition of TEAM 
participant to include ASCs as TEAM participants without having data to 
support an assertion that they can assume accountability in a two-sided 
risk model. We have not tested or allowed ASCs to be participants or 
awardees in the previous episode-based models that served as examples 
during our development of TEAM. However, we will take commenters 
feedback into consideration should we want to expand the definition of 
TEAM participant in future notice and comment rulemaking.
    We acknowledge that testing episodes in ASCs is an area where the 
CMS Innovation Center can expand its understanding of site neutrality 
in episode-based payment models. We have experience from BPCI Advanced 
and CJR constructing site neutral target prices from IPPS and OPPS data 
but have not constructed target prices using data from the ASC Payment 
System. We are unsure if including episodes that initiate in the ASC 
setting in the model would require a more ASC-specific target price or 
if a more site neutral approach would be appropriate when considering 
episodes initiated in the hospital inpatient, hospital outpatient 
department, and ASC settings. Further, the current quality measures 
that we are finalizing for TEAM, as discussed in section X.A.3.c of the 
preamble of this final rule, are hospital-level measures and may not be 
appropriate for episodes initiated at ASCs and thus would need further 
consideration if TEAM included episodes initiated in ASCs.
    With respect to shifting volume or unintended consequences for not 
including episodes that initiate in ASCs in TEAM, we note that in a 
review of Medicare payments that compared hospitals in the CJR model 
and a comparison group, CMS found that for total hip arthroplasty (THA) 
and total knee arthroplasty (TKA), two procedures captured in the LEJR 
episode, the rates of ASC utilization have slowly been increasing over 
the years, but overall have remained fairly low. While ASC utilization 
may still be relatively low, we disagree that utilization may increase 
because of TEAM participants directing high-cost, complex beneficiaries 
to ASCs in order to avoid inclusion of these beneficiaries in the 
model. Generally, high-cost, medically complex beneficiaries have 
procedures performed in the hospital inpatient setting and we believe 
TEAM participants will work with beneficiaries to make medically 
appropriate decisions. We intend to monitor beneficiary care, as 
discussed in section X.A.3.i of the preamble of this final rule. We 
will monitor for any patterns of inappropriate care, which includes 
monitoring the proportion of patients who are treated in different care 
settings by TEAM participants in comparison to non-TEAM participant 
hospitals. If we see that certain hospitals are treating patients in 
the various care settings at a rate that is different from their peers 
and cannot be explained by aspects of the hospital's patient population 
such as age or area-level socioeconomic factors, then we have multiple 
options for remedial action, as described in section X.A.1.f of the 
preamble of this final rule. This may include requiring the TEAM 
participant to develop a corrective action plan and reducing or 
eliminating a TEAM participant's reconciliation payment amount, as 
described in section X.A.3.d.(5)(j) of the preamble of this final rule. 
We will also continue to share changes in practice patterns and trends 
we identify through evaluation reports and other means.
    Comment: A commenter wanted to know how anesthesia and hospital-
based anesthesia providers fit into TEAM.
    Response: The episode categories tested in TEAM are all surgical 
procedures that may require the use of anesthesia during the anchor 
hospitalization or anchor procedure, or during some other provider 
encounter, such as a hospital readmission. The cost of anesthesia items 
and services are included in the episode and factored into target 
prices. Hospital-based anesthesia providers may furnish services to the 
TEAM beneficiary, be part of the care team, and could potentially be a 
TEAM collaborator, as described in section X.A.3.g.(3) of the preamble 
of this final rule, that has a financial arrangement with a TEAM 
participant that would allow sharing reconciliation payment amounts or 
repayment amounts.
    Comment: Some commenters recommended that CMS not allow overlap 
between TEAM and the AHEAD model. A few commenters suggested allowing 
hospitals participating in AHEAD to opt-out of TEAM, especially since 
hospitals in AHEAD will be voluntarily assuming global budgets for all 
hospital services, including the hospital-based portion of the episodes 
in TEAM. A commenter recommended that CMS exclude the states or the 
CBSAs that are participating in the AHEAD model from TEAM as they will 
have accountability for total cost of care, including hospital global 
budgets, and should have the ability to implement their specific state-
based approach. A commenter noted that such overlap could lead to 
unintended consequences and exacerbate hospitals' financial challenges, 
especially given the unknown impact of each model. A commenter 
acknowledged that the discharge planning processes required under TEAM 
could end up aligning well with a hospital's AHEAD model strategy and 
believed it would be premature to decide now about whether to exempt

[[Page 69647]]

AHEAD hospitals from TEAM participation. A commenter supported sharing 
TEAM-style summary episode data with AHEAD hospitals to encourage the 
integration of episodes of care into hospital global budgets and that 
hospitals in AHEAD states that decline to join AHEAD should be part of 
TEAM. A commenter supported excluding hospitals in Maryland from TEAM.
    Response: We thank the commenters for their feedback. As noted in 
the proposed rule (89 FR 36389) and preamble of this final rule, we 
were uncertain on how to handle overlap between hospitals selected to 
participate in TEAM and those who may also participate in the AHEAD 
model. We acknowledge commenters opinions, but we are not convinced 
that the two models should be mutually exclusive. Specifically, we 
think that different service and payment delivery models could co-exist 
and work synergistically to improve health care cost and quality 
outcomes. We disagree that a hospital being in a total-cost-of care 
(TCOC) model or assuming hospital global budgets is reason enough to be 
excluded or to allow an opt-out policy. Similar to Medicare ACO 
initiatives, where organizations are accountable for total cost of 
care, we believe there are complementary incentives between TEAM and 
the AHEAD model that could result in hospitals achieving maximum 
success in improving beneficiary quality of care, reducing acute care 
costs, and reducing post-acute care costs through participation in both 
initiatives. For example, hospital global budgets focus on controlling 
hospital, or acute care volume and spending while episodes generally 
elicit reductions in post-acute care spending. We believe a hospital 
participating in both a hospital global budget initiative, like the 
AHEAD model, and in an episode-based payment model, like TEAM, could 
benefit from both models' unique cost savings opportunities. Further, 
hospital global budgets can encourage improvements in population 
health, while episodes help providers to focus on making improvements 
for a narrower pool of patients associated with higher cost clinical 
conditions or procedures. We believe combining both approaches could 
help hospitals to achieve the best outcomes in patient care and cost 
reductions broadly and for specific beneficiaries.
    We agree that the overall impact of allowing model overlap is 
unknown, however, we believe there could be an opportunity for us to 
evaluate and learn from the interaction of both models. The BPCI 
Advanced and CJR models, which TEAM is predicated on, did not allow 
overlap with hospital global budget models operating at that time 
(which were more limited in scope). Thus, we do not have insightful 
data on how these types of payment models can coexist. We believe that 
excluding AHEAD participants, except Maryland, from TEAM would prevent 
us from evaluating their combined effects. Further, permitting 
voluntary opt-out from TEAM for AHEAD participants, meaning a hospital 
selected for TEAM participation could opt-out of TEAM if they 
participated in AHEAD, would introduce selection bias and potentially 
yield less generalizable results for TEAM.
    Therefore, we are finalizing the definition of TEAM participant as 
proposed with slight modification to account for hospitals eligible to 
voluntarily opt into TEAM, as discussed in section X.A.3.a.(2)(c) of 
the preamble of this final rule. We are also finalizing allowing 
overlap between hospitals selected to participate in TEAM and those 
that may also participate in the AHEAD Model, except for hospitals in 
Maryland. We are not finalizing a policy that would allow future AHEAD 
participants to voluntarily opt-out of TEAM, nor are we finalizing any 
payment adjustments to account for the same beneficiaries attributed to 
both models, which is consistent with our approach to TEAM and ACO 
overlap, as discussed in section X.A.3.e of the preamble of this final 
rule. We recognize that as of the date of publication of this final 
rule the hospitals that may choose to voluntarily participate in the 
AHEAD model are unknown. However, we believe it's important to be 
transparent about our policy desire to allow overlap--for purposes of 
testing the interaction of both model designs, as well as responsibly 
planning for potential model scalability. We will be considering more 
detailed overlap policies in future notice and comment rulemaking to 
ensure that hospitals considering joining the AHEAD model do not view 
participation in TEAM as a deterrent. We will consider more detailed 
overlap policy with the AHEAD model as plans surrounding the 
participating states and hospitals in those states develop.
    We note that, as proposed, we are finalizing our policy to exclude 
Maryland acute care hospitals from TEAM.
    Comment: A commenter asked CMS to maintain as a guiding principle 
that hospitals do not propose and perform surgical procedures; surgeons 
do.
    Response: We recognize that there are multiple providers and 
suppliers involved in a beneficiary's care during an episode of care in 
TEAM. We acknowledge that the physician and non-physician practitioners 
are the individuals ordering and performing the surgery and providing 
the hands-on care to the beneficiary, while the TEAM participant 
furnishes hospital services and is the financially accountable entity 
facilitating care coordination and responsible for quality and cost 
outcomes.
    Comment: A commenter suggested CMS allow health systems, rather 
than individual hospitals, to participate in TEAM because it would 
support health systems' development of centers of excellence without 
penalizing the sites where the most complex and least elective care is 
provided.
    Response: We appreciate the commenter's suggestion. We believe it 
would be challenging to require health systems to participate in TEAM, 
given the lack of a standard definition for a ``health system.'' We 
anticipate that hospitals in health systems that participate in this 
model would leverage their participation to share learnings and 
standardize their care practices across all the hospitals in the health 
system. We also note the commenter's concern for potential 
disincentives for hospitals that care for medically complex 
beneficiaries, and we would like to highlight that target prices in 
TEAM include beneficiary level risk adjusters that account for patient 
acuity, as discussed in section X.A.3.d.(4) of the preamble of this 
final rule.
    After consideration of the public comments we received, we are 
finalizing our proposed TEAM participant definition at Sec.  512.505 
with slight modification to include hospitals that make a voluntary 
opt-in participation election to participate in TEAM in accordance with 
Sec.  512.510 and are accepted to participate in TEAM by CMS, as 
described in section X.A.3.a.(2)(c) of the preamble of this final rule. 
We are also finalizing as proposed our proposal to exclude Maryland 
hospitals from TEAM. Lastly, we are finalizing a policy to allow TEAM 
participants to also participate in the AHEAD model.
(c) Mandatory Participation
    We proposed to require hospitals located in selected CBSAs, as 
described in section X.A.3.a.(4) of the preamble of this final rule, 
that meet the proposed TEAM participant definition to participate in 
TEAM. Such hospitals would be required to participate in the Model even 
if they have not had previous episode-based payment model or value-
based care experience. Shifting

[[Page 69648]]

hospitals away from the traditional Medicare FFS payment system to 
value-based care may require significant time, effort, and resources to 
build infrastructure and establish care redesign processes.\867\ We 
stated in the proposed rule that we intend to provide sufficient time 
for potential TEAM participants to prepare for model implementation, 
which is why we proposed TEAM at least 18 months before the proposed 
model start date. However, we acknowledged that time alone may not be 
adequate to prepare TEAM participants for model participation, 
especially those with limited or no value-based care experience. We 
sought comment on whether one year would be a sufficient amount of time 
for hospitals required to participate in TEAM to prepare for TEAM 
participation or whether a longer timeframe (for example, 18 months) or 
shorter timeframe (for example, 6 months) would be sufficient time for 
hospitals to prepare to become TEAM participants, effective on the 
model start date (89 FR 36390).
---------------------------------------------------------------------------

    \867\ Erikson, C., Pittman, P., LaFrance, A., & Chapman, S. 
(2017). Alternative payment models lead to strategic care 
coordination workforce investments. Nursing Outlook, 65(6), 737-745. 
https://doi.org/10.1016/j.outlook.2017.04.001.
---------------------------------------------------------------------------

    We alternatively considered making participation in TEAM voluntary. 
However, we noted in the proposed rule that we would be concerned that 
a fully voluntary model would not lead to meaningful evaluation 
findings especially since the CMS Innovation Center has tested 
voluntary episode-based payment models for over a decade (89 FR 36390). 
We note that voluntary models have been impacted by selection bias 
through self-selection in and out of the model and selections of 
episodes or clinical episode service line groups. We recognize that a 
mandatory model test limits the selection of participants to only those 
captured within the selected geographic areas. We also recognize there 
may be participants of previous or current models that wish to continue 
their care redesign efforts, further care transformation, and maintain 
efficiencies to avoid reliance on the volume-based FFS payment system. 
We considered allowing hospitals that have previously participated (or 
are currently participating) in a Medicare episode-based payment model 
to voluntarily opt-in to TEAM to increase the footprint of the model 
and allow those entities to maintain their momentum in value-based 
care. We noted in the proposed rule that we recognize several 
challenges with including a voluntary opt-in for a model such as TEAM. 
We noted in the proposed rule that allowing an opt-in may limit the 
ability of the model to achieve Medicare savings, given that opt-in 
participants may self-select into the model based on their belief that 
they would benefit financially. Second, we also noted in the proposed 
rule that a voluntary opt-in may compromise the rigor of our evaluation 
of TEAM, because it could limit the number of hospitals available for 
our comparison group and our ability to detect generalizable evaluation 
results, due to participant self-selection into the model. Finally, we 
noted in the proposed rule that we have been testing the five episode 
categories that we proposed to include in TEAM, as described in section 
X.A.3.b. of the preamble of this final rule, on a voluntary basis via 
BPCI Advanced and the BPCI Initiative, so we have a significant amount 
of data on the performance of those episode categories in a voluntary 
structure already.
    For these reasons, we did not propose a voluntary opt-in 
participation arm to TEAM. However, for the reasons discussed below, we 
sought comment regarding a voluntary opt-in participation arm for TEAM. 
Specifically, we considered limiting voluntary opt-in participation in 
TEAM to hospitals that currently participate in the BPCI Advanced or 
the CJR model, that are not located in an area mandated for TEAM 
participation, and that continue to participate until completion in the 
model in which they are currently participating.\868\ For those 
hospitals that meet this criteria and that would want to voluntarily 
opt-in to TEAM participation, we stated in the proposed rule that we 
would require those hospitals to participate in all TEAM episode 
categories for the full five-year model performance period and they 
would not be permitted to voluntarily terminate model participation. 
The TEAM voluntary opt-in would be a one-time opportunity to join TEAM 
and those hospitals would need to submit a completed application to CMS 
in a form and manner and by a date specified by CMS, prior to the first 
performance year of TEAM. Further, we stated that, at a minimum, 
hospitals that submit an application would need to undergo and pass 
multiple levels of program integrity and law enforcement screening. 
Hospitals that pass this screening would be offered a participation 
agreement from CMS to participate in TEAM, which would, at a minimum, 
subject them to all the same terms, conditions and requirements of 
those hospitals mandated to participate in TEAM. Lastly, hospitals 
offered a participation agreement to voluntarily opt-in to TEAM would 
be required to submit and execute a participation agreement with CMS in 
a manner and form, and by a date specified by CMS prior to the model 
start date.
---------------------------------------------------------------------------

    \868\ Current BPCI Advanced hospitals would need to participate 
in BPCI Advanced until December 31, 2025 and current CJR participant 
hospitals would need to participate in the CJR model until December 
31, 2024.
---------------------------------------------------------------------------

    We stated in the proposed rule that we believe that offering this 
potential voluntary opt-in consideration would allow those hospitals 
that have made significant investments in care redesign and episode 
management to further their efforts to improve beneficiary quality of 
care and reduce Medicare spending. We recognize the pool of hospitals 
that could potentially apply for voluntary opt-in participation may be 
narrow. However, we believe extending the voluntary opt-in opportunity 
to hospitals not mandared to participate in TEAM that terminated BPCI 
Advanced or CJR model participation or to hospitals not mandated to 
participate in TEAM that did not participate in BPCI Advanced or CJR at 
all would result in the voluntary opt-in policy applying to too many 
hospitals and could jeopardize the model's ability to have a robust 
evaluation. This is because we would want to ensure we have a 
sufficient comparison group of hospitals not participating in TEAM to 
produce generalizable findings. As previously indicated, we did not 
propose a voluntary opt-in participation arm to TEAM; however, we 
considered and sought comment regarding a voluntary opt-in 
participation arm in the proposed TEAM. Lastly, we sought comment on 
our proposal for hospitals located in selected geographic areas that 
meet the proposed TEAM participant definition to participate in TEAM.
    The following is a summary of comments we received on the proposed 
mandatory participation in TEAM and the voluntary opt-in considerations 
and our responses to these comments:
    Comment: A few commenters supported the mandatory participation in 
TEAM. A commenter noted that such comprehensive testing is crucial for 
understanding how these models can save Medicare funds and enhance care 
efficiencies. Another commenter indicated mandatory advanced APMs are 
more likely to generate net savings for Medicare than voluntary 
advanced APMs because mandatory models do not experience the selection 
problems that have undermined voluntary models. A commenter stated that 
requiring hospital participation will

[[Page 69649]]

allow CMS to understand its impact more fully on different patient 
groups, especially underserved populations, ahead of any further model 
expansion.
    Response: We thank the commenters for their support and agree with 
their comments. As explained in the preamble of this final rule, 
mandatory participation eliminates selection bias and participant 
attrition issues, helps to capture a representative sample of different 
types of hospitals, and facilitates a comparable evaluation comparison 
group. We maintain that the mandatory design for TEAM is necessary to 
enable CMS to detect change reliably in a generalizable sample of 
hospitals to support a potential model expansion.
    Comment: Numerous commenters requested that CMS make TEAM a 
voluntary model and allow hospitals to select individual episode 
categories. Many commenters identified the increased financial risk and 
the upfront costs required for implementation of the model. Some 
commenters had concerns with the scope of the model being too large for 
a mandatory model. A commenter urged CMS to revise the mandatory nature 
of the proposal and instead create incentives for interested 
participants that would reward innovation and high-quality patient 
care. Another commenter suggested that the model first be tested among 
those hospitals with the requisite experience, competencies, and strong 
post-acute care referral partners to ensure patients receive high-
quality and appropriate levels of care. A commenter suggested waiving 
mandatory participation of hospitals with recent participation in the 
BPCI Advanced and CJR models because these hospitals have made 
substantial strides in improving efficiencies and optimizing episode 
performance.
    Response: We thank the commenters for their feedback but disagree 
with the suggestion to finalize TEAM as a voluntary model. Testing TEAM 
as a mandatory model will give CMS the ability to test how an episode 
payment model might function among participants that would otherwise 
not participate in such a model and is also responsive to federal 
partners feedback supporting mandatory model tests.869 870 
As such, we expect the results from TEAM will produce data that are 
more broadly representative than what might be achieved under a 
voluntary model. We do not agree with allowing TEAM participants to 
select individual episode categories as that will introduce selection 
bias and make evaluating TEAM more difficult and produce less 
generalizable findings. Requiring TEAM participants to be accountable 
for all episode categories tested helps to broaden care transformation 
efforts, include more beneficiaries in value-based care, and apply 
efficiencies across multiple different service lines. We also disagree 
with excluding hospitals that have previously participated in the BPCI 
Advanced and CJR models because previous participation in these models 
does not guarantee these hospitals were able to find efficiencies, 
improve patient outcomes, and achieve overall success. Further, 
including hospitals from the BPCI Advanced and CJR models will 
incentivize them to continue improved care and efficiencies they 
started under the previous models. We also disagree that TEAM should be 
tested only where hospitals meet certain requirements as this would 
limit evaluation findings and not capture hospitals new to value-based 
care, where we believe it's important that they have the same 
opportunity for participation in a mandatory model to gain experience 
and work towards improving beneficiary quality of care and reducing 
Medicare spending.
---------------------------------------------------------------------------

    \869\ https://www.cbo.gov/system/files/2023-09/59274-CMMI.pdf.
    \870\ https://www.medpac.gov/wp-content/uploads/2022/06/Jun22_MedPAC_Report_to_Congress_v4_SEC.pdf.
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    We believe the relatively narrow scope of the model of testing five 
episode categories and the availability of Track 1, which allows the 
phasing in of full financial risk, along with our plan to engage with 
hospitals through the learning system and provide data to help them 
succeed under this model will aid hospitals in succeeding under TEAM. 
As discussed in section X.A.3.a.(1) of the preamble of this final rule, 
we are finalizing that the model start date is January 1, 2026, which 
provides TEAM participants with approximately 17 months' notice before 
implementation and what we believe is sufficient time to prepare for 
participation by identifying care redesign opportunities, beginning to 
form financial and clinical partnerships with other providers and 
suppliers, and using data to assess opportunities for success under the 
model.
    As previously mentioned, we disagree that TEAM will create 
significant financial risk or necessitate a payment to account for 
administrative costs. We believe that by allowing all TEAM participants 
the opportunity to participate in Track 1 for the first performance 
year, this will provide additional preparation time before being 
subject to downside financial risk. We are also finalizing TEAM 
policies that we believe will minimize financial risk for TEAM 
participants, including reducing the discount factor, reducing the 
stop-gain and stop-loss limits for Track 2, and allowing safety net 
hospitals the opportunity to remain in Track 1 for the first three 
performance years, as discussed in sections X.A.3.d.(3)(g), 
X.A.3.d.(5)(h), and X.A.3.a.(3) of the preamble of this final rule.
    We believe that by holding hospitals accountable for episodes of 
care, TEAM will incentivize care coordination and care redesign 
activities that may reduce readmissions, complications, and unnecessary 
health care spending. We believe TEAM will improve beneficiary care by 
improving care transitions and the overall care experience during the 
anchor hospitalization or anchor procedure and post-discharge period. 
Hospitals stand to benefit from TEAM, in the form of the opportunity to 
earn reconciliation payment amounts if successful under the model.
    Comment: Some commenters have concerns with CMS' authority to test 
TEAM. A commenter believes TEAM is an overreach of CMS's authority that 
contradicts the statutory mandate of section 1115A and raises concerns 
about impermissible delegation of lawmaking authority to the executive 
branch and unjust compensation for services provided to Medicare 
beneficiaries. The commenter also notes that they believe requiring 
Medicare providers to be held financially accountable if spending 
exceeds the model's reconciliation target price means that Medicare 
providers will be required to furnish medically necessary services to 
Medicare beneficiaries without payment. They believe mandatory 
demonstrations with two-sided risk does not justly compensate Medicare 
providers for the use of their services by Medicare beneficiaries and 
is in violation of the Fifth Amendment of the United States 
Constitution and the Medicare statute.
    Another commenter objected to the way the CMS Innovation Center is 
testing TEAM and indicated that new payment and delivery models should 
not impede patient access, undermine physician practices, or discourage 
medical progress through top-down governmental price-setting, and that 
they comply with the statute (section 1115A of the Act) and U.S. 
Constitution. Further, the commenter indicated that CMS is essentially 
proposing TEAM as a Phase II mandatory model before proper testing and 
evaluation has been performed on a limited, voluntary basis under Phase 
I, especially since prior models to date have not been evaluated

[[Page 69650]]

and found to meet the criteria for Phase II expansion. A few commenters 
urged CMS to test TEAM on a voluntary basis first before mandating 
participation.
    Response: CMS' testing of payment and service delivery models, 
including TEAM, complies with section 1115A of the Act and other 
governing laws and regulations, including the U.S. Constitution. We 
believe that we have the legal authority to test TEAM and to require 
the participation of all hospitals, as defined and finalized in section 
X.A.3.a.(2)(b) of the preamble of this final rule, located in the 
mandatory CBSAs selected for participation, as described and finalized 
in section X.A.3.a.(4) of the preamble of this final rule. We believe 
this model test is not an impermissible delegation of lawmaking 
authority that is inconsistent with section 1115A of the Act. First, we 
note that TEAM will not be the first CMS Innovation Center model that 
requires participation under the authority of section 1115A of the Act; 
we refer readers to the Comprehensive Care for Joint Replacement (CJR) 
Payment Model for Acute Care Hospitals Furnishing Lower Extremity Joint 
Replacement Services Final Rule (80 FR 73274), and the Home Health 
Prospective Payment System (HHPPS) Final Rule (80 FR 68624) 
implementing the Home Health Value-Based Purchasing (HHVBP) Model. 
Hospitals in selected Metropolitan Statistical Area (MSAs) were 
required to participate in the CJR Model beginning in April 2016, and 
home health agencies in selected states were required to participate in 
the HHVBP Model beginning in January 2016.
    We believe that both section 1115A of the Act and the Secretary's 
existing authority to operate the Medicare program authorize us to 
finalize mandatory participation in TEAM for selected mandatory CBSAs, 
and we note that Medicare participation remains voluntary regardless of 
TEAM mandatory participation. Section 1115A of the Act authorizes the 
Secretary to test payment and service delivery models intended to 
reduce Medicare costs while preserving quality of care. The statute 
does not require that models be voluntary or be tested first as a 
voluntary model, but rather gives the Secretary broad discretion to 
design and test models that meet certain requirements as to spending 
and quality. Although section 1115A(b) of the Act describes a number of 
payment and service delivery models that the Secretary may choose to 
test, the Secretary is not limited to those models. Rather, as 
specified in section 1115A(b)(1) of the Act, models to be tested under 
section 1115A of the Act must address a defined population for which 
there are either deficits in care leading to poor clinical outcomes or 
potentially avoidable expenditures. Here, TEAM addresses a defined 
population (FFS Medicare beneficiaries who initiate an anchor 
hospitalization or anchor procedure for specific episode categories) 
for which there are potentially avoidable expenditures (arising from 
incentives that may encourage volume of services over the value of 
services). We designed TEAM to require participation for hospitals to 
avoid the selection bias inherent to any model in which providers and 
suppliers may choose whether or not to participate. Such a design will 
ensure sufficient participation of hospitals, including different types 
of hospitals such as safety net hospitals, which is necessary to obtain 
a diverse, representative sample of hospitals that will allow a 
statistically robust test of the model. We believe this is the most 
prudent approach for the following reasons. Under the mandatory TEAM, 
we will test and evaluate a model across a wide range of hospitals, 
representing varying degrees of experience with episode-based payment 
models. We note that TEAM is not a nationwide test and mandatory CBSAs 
are selected through randomization in order to have adequate comparison 
groups to evaluate the model. The information gained from testing the 
mandatory TEAM will allow CMS to comprehensively assess whether TEAM 
would be appropriate for a potential expansion in duration or scope, 
including on a nationwide basis. Thus, we disagree that TEAM is not a 
Phase I model test and believe that TEAM meets the criteria required 
for Phase I model tests.
    Moreover, the Secretary has the authority to establish regulations 
to carry out the administration of Medicare. Specifically, the 
Secretary has authority under sections 1102 and 1871 of the Act to 
implement regulations as necessary to administer Medicare, including 
testing this Medicare payment and service delivery model. We note that 
TEAM is not a permanent feature of the Medicare program; TEAM will test 
different methods for delivering and paying for services covered under 
the Medicare program, which the Secretary has clear legal authority to 
regulate. The proposed rule went into detail about the provisions of 
the proposed TEAM, enabling the public to understand how TEAM was 
designed and could apply to affected hospitals. As permitted by section 
1115A of the Act, we are testing TEAM within specified limited 
geographic areas. The fact that TEAM will require the participation of 
certain hospitals does not mean it is not a Phase I Model test. If the 
TEAM test meets the statutory requirements for expansion, and the 
Secretary determines that expansion is appropriate, we would undertake 
rulemaking to implement the expansion of the scope or duration of TEAM 
to additional geographic areas or for additional time periods, as 
required by section 1115AI of the Act.
    We do not believe TEAM will impede patient access. We rely on 
Medicare providers and suppliers to furnish appropriate care to 
Medicare beneficiaries. TEAM upholds a Medicare beneficiary's freedom 
of choice and access to care, as discussed in section X.A.3.i of the 
preamble of this final rule, and we will monitor for unintended 
consequences of TEAM including but not limited to beneficiary access to 
care. If our monitoring reveals that TEAM reduces patient access, we 
would investigate and consider making changes to the model via future 
rulemaking.
    We also do not believe TEAM will undermine physician practices or 
discourage medical progress by price-setting. TEAM will continue to 
drive greater value-based care participation, whereby providers and 
suppliers can focus on the value of care provided compared to the 
volume of items and services delivered. As an episode-based payment 
model, care coordination plays a significant role in TEAM participants 
achieving improved beneficiary quality of care and reduced Medicare 
spending. Hospitals selected to participate in TEAM will need to 
coordinate and communicate with many providers and suppliers, including 
physician practices, to ensure TEAM beneficiaries receive optimal care 
and outcomes. This provides an opportunity for increased collaboration 
between TEAM participants and providers and suppliers to improve care 
pathways and offer access to model financial incentives, through 
financial arrangements.
    With respect to the constitutional claim raised by one commenter, 
we also disagree that two-sided risk models, such as TEAM, require 
Medicare providers and suppliers to furnish medically necessary 
services to Medicare beneficiaries without payment. TEAM participants 
will continue to bill Medicare FFS and be compensated for the services 
they provide to TEAM beneficiaries throughout the course of the model. 
TEAM participants may be eligible to receive a reconciliation payment 
amount from CMS or may be required

[[Page 69651]]

to pay CMS a repayment amount depending on their quality performance 
and spending compared to the reconciliation target price. This 
incentive structure is consistent with other Medicare programs in which 
if a Medicare provider or supplier does not meet certain performance 
metrics, they may experience positive or negative financial impacts. 
For example, the Hospital Value-Based Purchasing Program rewards acute 
care hospitals, through positive or negative payment adjustments under 
the IPPS, based on their quality of care provided in the inpatient 
hospital setting.\871\ We also remind commenters that participation in 
the Medicare program is voluntary, and that TEAM is a time-limited 
model test.
---------------------------------------------------------------------------

    \871\ https://www.cms.gov/medicare/quality/value-based-programs/hospital-purchasing.
---------------------------------------------------------------------------

    Another commenter urged us to ensure that this program is 
implemented in a manner consistent with the statute and the U.S. 
Constitution, noting that the same commenter had submitted previous 
comments regarding constitutional constraints (but not providing any 
citation to that previous comment). For the reasons described elsewhere 
in this preamble, we disagree with the commenter's vague suggestion 
that this model runs afoul of statutory or constitutional constraints.
    Lastly, we acknowledge that the BPCI Advanced and CJR models are 
still being evaluated, but we believe it would be premature to assume 
these models do not or would not meet the criteria for Phase II 
expansion. Both the BPCI Advanced and CJR models underwent significant 
changes based on interested parties' feedback and from findings that 
suggested the models may incur significant Medicare losses. While we 
have not published CJR model evaluation results that include findings 
from these changes yet, we recently released BPCI Advanced evaluation 
results that encompass the changes to the model which demonstrates 
significant Medicare net savings of approximately $465 million (or 3.4 
percent of what Medicare payments would have been had the model not 
existed), offsetting losses in earlier model years.\872\ As we gain 
further evaluation results from the BPCI Advanced and CJR models, we 
will take these findings into account, in conjunction with the findings 
from TEAM's evaluation, when determining which model or model features 
we may want to consider for Phase II expansion.
---------------------------------------------------------------------------

    \872\ https://www.cms.gov/priorities/innovation/data-and-reports/2024/bpci-adv-ar5.
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    Comment: Some commenters expressed concerns for testing TEAM when 
evidence from CMS Innovation Center models have not been fully 
evaluated, specifically the ongoing evaluations of the BPCI Advanced 
and CJR models, for which both models were used to inform TEAM design. 
While other commenters suggested the existing evidence from CMS 
Innovation Center models does not support testing TEAM because the BPCI 
Advanced and CJR models have not successfully generated Medicare 
savings. A commenter recommends that CMS delay finalizing TEAM until 
the publication of the final CJR and BPCI Advanced evaluations. Another 
commenter indicated that adverse selection in voluntary models has not 
been an issue and the commenter believed that this is not a cause of 
the failures of past CMS Innovation Center demonstrations in generating 
savings and improving outcomes. Another commenter believed findings 
that the physician-led ACO's yielded savings for Medicare and not 
mandatory, hospital-controlled APMs supported the need to test 
voluntary models and not mandatory.\873\
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    \873\ https://www.cbo.gov/publication/59612.
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    Response: We do not agree with commenters that implementation of 
TEAM is premature or that it should not be implemented until results 
for the final BPCI Advanced or CJR model evaluations are available. 
These models have been tested for many years and we believe evidence 
already produced from these models supports the continued testing of 
episode-based payment models. We also anticipate that these future 
model evaluations may offer valuable information to assist CMS in 
potentially refining TEAM policies, while TEAM will offer additional 
insights that are not available under the BPCI Advanced and CJR models; 
in particular, insights with respect to episode-based payment models on 
a distinct set of episode categories for participants that would not 
otherwise participate under a model such as BPCI Advanced. Also, this 
model tests a different target pricing methodology and has shorter 
episode lengths as compared to the BPCI Advanced and CJR models. 
Testing this model will provide additional information for CMS and 
providers on successful payment structures and care redesign 
strategies.
    We acknowledge that the BPCI Advanced and CJR model evaluation are 
still ongoing. At the time the proposed rule was published, publicly 
available evaluation data demonstrated that surgical episodes in the 
BPCI Advanced model consistently resulted in an estimated net savings 
to Medicare for the first three model years: approximately $204 million 
in savings for Model Years 1&2 and $71 million in savings for Model 
Year 3. More recent BPCI Advanced evaluation findings that were 
published after the publication of the proposed rule, demonstrated a 
net Medicare savings of $465 million in Model Year 4 for all episodes, 
not just surgical episodes.\874\ We will continue to take into 
consideration these models future evaluation results, and if warranted, 
may propose policies in future notice and comment rulemaking to support 
our goals of improving beneficiary quality of care and reducing 
Medicare expenditures.
---------------------------------------------------------------------------

    \874\ https://www.cms.gov/priorities/innovation/data-and-reports/2024/bpci-adv-ar5.
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    We disagree with the notion that adverse selection is not an in 
issue in CMS Innovation Center models. For example, the BPCI Advanced 
model is a voluntary model and the first evaluation report found that 
hospitals that have opted to participate in the model were more likely 
to be larger, urban facilities that were part of a health system and 
located in more competitive markets than all eligible hospitals.\875\ 
Findings like this suggest that it may be more difficult to generalize 
evaluation results from a voluntary model and expect the model to have 
similar outcomes for participants that do not have these same 
characteristics.
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    \875\ https://www.cms.gov/priorities/innovation/data-and-reports/2020/bpciadvanced-firstannevalrpt.
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    Lastly, we acknowledge the commenter's statements about the 
contribution of voluntary, physician-led ACOs however, the voluntary 
Shared Savings Program is a different model design than TEAM's episode-
based payment model construction. Further, models tested by the CMS 
Innovation Center generally go through a rigorous evaluation and these 
evaluations may differ in the breadth and scope as compared to 
evaluations done for other CMS programs and initiatives.
    Comment: Many commenters urged CMS to exclude safety net hospitals, 
rural hospitals, Sole Community Hospitals (SCHs) and Medicare-Dependent 
Hospitals (MDHs) from mandatory participation in TEAM. Many commenters 
indicated that these types of providers are unable to absorb the 
additional costs and potential payment reductions that may arise from 
compulsory payment models. Some commenters indicated these hospitals do 
not have the experience or the infrastructure to be successful in risk-
based models. Other commenters

[[Page 69652]]

indicated that these hospitals will be disproportionately burdened and 
penalized under this model if required to participate in TEAM.
    Response: We understand the commenters' concerns but a key reason 
for testing a model with required participation is, in fact, to examine 
and better understand the impact of a model on a broader range of 
hospital types, beneficiaries, and communities that are not usually 
included in a voluntary model. We believe that excluding these 
hospitals from the model test diminishes the generalizability of 
evaluation findings and could limit TEAM's ability to capture 
beneficiaries in the markets where these hospitals are located and thus 
prevent these beneficiaries from receiving the benefits of value-based 
care. This means a mandatory model that includes these types of 
hospitals could increase beneficiary access to improved care 
transitions, coordination and communication across acute and post-acute 
care, and screening/referral for health-related social needs for better 
recovery. Further, a mandatory model helps to continue value-based care 
for beneficiaries and providers since providers are required to 
participate and cannot leave at will. Further, we believe TEAM will 
encourage these hospitals, who may be new to episode-based payment 
models, to adopt and employ innovative approaches to caring for 
beneficiaries in an episode of care.
    However, we recognize commenters' concerns with these hospitals 
having less experience with fewer financial resources, and potentially 
caring for a greater proportion of underserved beneficiaries, that may 
make participating in TEAM more challenging. As such, we address these 
concerns in sections X.A.3.a.(3) and X.A.3.d.(5)(h) of the preamble of 
this final rules, which includes allowing safety net hospitals to 
participate in Track 1 for the first three performance years with no 
downside risk and reducing the stop-gain and stop-loss limits for Track 
2, the participation track that is open to safety net hospitals, rural 
hospitals, Medicare Dependent Hospitals, Sole Community Hospitals, and 
Essential Access Community Hospitals.
    Comment: Many commenters indicated that CMS is not giving enough 
consideration to the potential harm that such a mandatory model could 
have on selected hospitals and the beneficiaries they serve. Some 
commenters stated that TEAM would create significant access and patient 
choice-related issues for beneficiaries following their underlying 
procedure. Other commenters recommended CMS to use its authority to 
implement compulsory pilot programs sparingly, as unintended 
ramifications could harm patients. A commenter indicated that hospital 
administrators with no clinical experience could be empowered by this 
model to alter hospital operations to optimize their facility's short-
term performance metrics at the expense of quality and cost. Another 
commenter was concerned about hospice services included in the costs 
that TEAM participants would be accountable for in the shorter episodes 
which could lead to a risk of hospitals delaying appropriate hospice 
care. Another commenter said that TEAM will create unfortunate 
financial incentives for hospitals to: (1) reduce the number of 
services for higher-need patients below the level they require to 
achieve good outcomes; and (2) to simply avoid performing these 
surgeries on higher-need patients altogether.
    Response: We do not see how participation in TEAM, in and of 
itself, would lead to beneficiary harm and that if beneficiary harm 
were to occur, that CMS would be responsible. First, and most 
importantly, we note that under the model, providers and suppliers are 
still required to provide all medically necessary services to 
beneficiaries, and that this model does not change beneficiary access 
to services, providers, or suppliers. Second, we note that there are 
already payment policies under Medicare FFS systems and payment models, 
such as BPCI Advanced, CJR and ACOs, that include similar incentives to 
promote efficiency, and we have not determined that beneficiaries have 
been harmed by those systems and models. Third, and as previously 
mentioned, we will monitor beneficiary care, as discussed in section 
X.A.3.i of the preamble of this final rule, to ensure beneficiary 
freedom of choice is not compromised. Through monitoring of the model, 
CMS will aim to ensure steering or other efforts to limit beneficiary 
access or move beneficiaries out of the model are not occurring. We 
also note the breadth of monitoring activities, which includes audits, 
CMS monitoring of utilization and outcomes within the model, and the 
availability of Quality Improvement Organization (QIOs) and 1-800-
MEDICARE for reporting beneficiary concerns that can help us identify 
any beneficiary access or freedom of choice concerns in TEAM.
    The model pricing methodology, discussed in section X.A.3.d of the 
preamble of this final rule, also includes features to protect against 
such potential harm, such as responsibility for post-episode spending 
increases that may capture if a TEAM participant is withholding or 
delaying medically necessary care, stop-gain policies that set a 
maximum threshold a hospital can earn a reconciliation payment amount, 
and other policies as detailed in that section. In summary, we note 
that TEAM does not constrain the practice of medicine and we do not 
expect clinical decisions to be made on the basis of TEAM participation 
and we do not expect TEAM to harm Medicare beneficiaries. As noted in 
section X.A.3.c of the preamble of this final rule, CMS will hold TEAM 
participants accountable for quality of care.
    Comment: A commenter noted that if CMS finalizes the requirements 
for mandatory participation in TEAM, they must closely monitor for 
unintended consequences.
    Response: We will conduct ongoing monitoring and evaluation 
analyses to watch for any unintended consequences of the model, as 
finalized in section X.A.3.o of the preamble of this final rule. We 
will also be monitoring beneficiary care for unintended consequences 
and refer to section X.A.3.i of the preamble of this final rule, for 
more discussion about how we will monitor for unintended consequences 
under TEAM.
    Comment: A commenter indicated that when the primary goal of the 
mandatory feature is evaluation, it would seem that hospitals, staff, 
and patients are being asked to be involved in research without 
informed consent--a practice that would never be allowed if the 
organizing entity were not a government body.
    Response: We recognize informed consent is a process used in 
research and in general health care decisions between providers and 
patient about health care procedures or interventions. However, we note 
that while CMS is required to evaluate its models in accordance with 
section 1115A of the Act, the primary goal of mandatory participation 
in TEAM is not evaluation, it is to test an innovative payment and 
service delivery model using an episode-based pricing methodology for 
five surgical episode categories that aims to preserve or enhance the 
quality of care and reduce Medicare costs, in a large, nationally 
representative group of providers. We also refer readers to our earlier 
response about CMS' authority to test TEAM. Further, a Medicare 
beneficiary's freedom of choice is not changed or affected by TEAM, as 
discussed in section X.A.3.i of the preamble of this final rule, and 
beneficiaries have the ability to seek care from hospitals 
participating in the model and hospitals that are not

[[Page 69653]]

participating in the model. Further, the beneficiary notification 
informs TEAM beneficiaries about the model, specifically how it will 
impact their care, their freedom of choice, their ability to report 
concerns, and other requirements as discussed in section X.A.3.i.(2).
    Comment: A commenter indicated that hospitals selected for 
participation in TEAM that find themselves participating in multiple 
initiatives at one time could struggle to keep up with all the various 
quality and financial incentives, which could impact their overall 
operations and actually lead to higher overall administrative and 
regulatory compliance costs.
    Response: We recognize that a hospital could be selected for 
participation in TEAM and be participating in other CMS initiatives at 
the same time. Hospitals are adept to handle rapid changes in the 
health care ecosystem, including policy and practice changes, along 
with multiple payer initiatives. It is not uncommon for CMS to test 
multiple models concurrently rather than sequentially. For example, the 
BPCI Advanced and CJR models are currently being tested and hospitals 
required to participate in CJR may also participate in the BPCI 
Advanced model for all episode categories except LEJR. In addition, CMS 
has a permanent ACO program (the Medicare Shared Savings Program), as 
well as multiple other ACO models in the testing phase, such as the ACO 
Realizing Equity, Access, and Community Health (ACO REACH) Model. We 
believe our decision to test TEAM at this time is consistent with the 
approach taken for other models and programs to test payment models 
that may share similar design features or target similar providers or 
beneficiaries. Such an approach provides CMS with additional 
information on the potential success of various model and program 
aspects and design features.
    We also note that hospitals are already participating in various 
CMS quality reporting programs, and TEAM is not making changes to these 
existing initiatives. Further, a reason for using the quality measures 
selected in TEAM, as discussed in section X.A.3.c of the preamble of 
this final rule, was to minimize TEAM participant burden and use 
measures that hospitals were already reporting to the Hospital 
Inpatient Quality Reporting Program and the Hospital-Acquired Condition 
Reduction Program.
    Comment: Many commenters supported a voluntary opt-in approach for 
TEAM to allow providers the means to continue care redesign efforts. 
Some commenters requested allowing PGPs to voluntarily opt-in to those 
geographic regions not selected for mandatory participation. Some 
commenters suggested expanding voluntary opt-in to previous BPCI 
Advanced and CJR participants, or to all hospitals regardless of 
geography or participation status in other episode-based models. A 
commenter indicated that mandatory participation in TEAM would 
undermine progress made to date by individual providers outside of the 
model and may exclude those who have historically participated in the 
BPCI Advanced and CJR model and done well, leaving them with no option 
once the two models end.
    Response: We thank the commenters for their support of a voluntary 
opt-in opportunity in TEAM. As discussed in the proposed rule (89 FR 
35934), we sought comment on the approach given it introduces self-
selection into the model and could compromise the rigor of the 
evaluation of TEAM. However, since many commenters supported voluntary 
opt-in, demonstrating sufficient interest from the public, and for the 
additional reasons stated below, we have decided to finalize a 
voluntary opt-in policy for hospitals that participate in the BPCI 
Advanced and CJR models.
    We recognize the value of allowing voluntary opt-in because it: (i) 
captures more beneficiaries in value-based care and gives them access 
to the benefits of the model (for example, improved care transitions); 
(ii) increases the volume of providers in APMs; (iii) supports 
continued investment in care transformation; (iv) maintains 
efficiencies and moves more providers away from the volume-based FFS 
payment system; and (v) furthers a CMS Innovation Center specialty care 
strategy goal to maintain momentum on acute episode payment 
models.\876\ We believe these reasons, coupled with the public's 
interest in the approach, support our decision to allow voluntary opt-
in for TEAM. Therefore, we are finalizing the policy to allow a one-
time opportunity for BPCI Advanced and CJR participants to voluntarily 
opt-in to TEAM. This opt-in opportunity is only available to for 
hospitals that currently participate in the BPCI Advanced or the CJR 
model, that are not located in a mandatory CBSA selected for TEAM 
participation and continue to participate in BPCI Advanced or CJR until 
the last day of the last performance period or last performance year of 
the respective model. For the BPCI Advanced model, the last day of the 
last performance period, performance period 14, is December 31, 2025. 
For the CJR model, the last day of the last performance year, 
performance year 8, is December 31, 2024. To overcome selection bias 
concerns for selection of episode categories they will be accountable 
for, we will require these hospitals to participate in all episode 
categories tested in TEAM. We will also require the hospitals that 
voluntarily opt-in to TEAM to remain in the model for the full model 
performance period and they will not be permitted to voluntarily 
terminate model participation, which avoids attrition concerns. To 
mitigate evaluation concerns, we are finalizing our CBSA selection 
strata with modifications to accommodate the voluntary opt-in policy, 
as discussed in section X.A.3.a.(4) of the preamble of this final rule 
and are purposely keeping the pool of hospitals eligible to voluntarily 
opt-in narrow to ensure we can construct a sufficient, comparable 
comparison group.
---------------------------------------------------------------------------

    \876\ https://www.healthaffairs.org/content/forefront/cms-innovation-center-s-strategy-support-person-centered-value-based-specialty-care.
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    We are also finalizing that prior to PY 1, any eligible hospitals, 
meaning hospitals that currently participate in the BPCI Advanced or 
the CJR model, that are not located in a mandatory CBSA selected for 
TEAM participation, and continue to participate in BPCI Advanced or CJR 
until the last day of the last performance period or last performance 
year of the respective model, that wish to pursue voluntarily opt-in to 
TEAM, must submit a written participation election letter to CMS in a 
form and manner specified by CMS during the voluntary election period 
of January 1, 2025-January 31, 2025.\877\ The participation election 
letter will serve as the participation agreement which would bind and 
subject the hospitals to the same terms, conditions, and requirements 
in TEAM's regulations at Sec.  512.500. However, CMS may choose to not 
accept a hospitals participation election letter, for reasons 
including, but not limited to, program integrity concerns or 
ineligibility. In instances where CMS does not accept a hospital's 
participation letter, CMS will notify the hospital within 30 days of 
the determination. For example, we recognize that the participation 
election letter will need to be submitted prior to December 31, 2025, 
the last day of the last performance period in the BPCI Advanced model. 
Hospitals eligible for

[[Page 69654]]

voluntary opt-in based on BPCI Advanced participation that submit a 
participation election letter and then terminate their BPCI Advanced 
participation agreement will not be permitted to participate in 
TEAM.\878\ Further, we are finalizing that the participation election 
letter must contain, at minimum, the following elements:
---------------------------------------------------------------------------

    \877\ For the BPCI Advanced model, the last day of the last 
performance period, performance period 14, is December 31, 2025. For 
the CJR model, the last day of the last performance year, 
performance year 8, is December 31, 2024.
    \878\ Termination from BPCI Advanced includes the BPCI Advanced 
participant voluntarily terminating their BPCI Advanced 
participation agreement or CMS terminating the BPCI Advanced 
participation agreement with the BPCI Advanced participant.
---------------------------------------------------------------------------

 Hospital Name
 Hospital Address
 Hospital CCN
 Hospital contact name, telephone number, and email address
 Model name (TEAM)
 Certification that--
    ++ The hospital will comply with all requirements of TEAM (that is, 
42 CFR part 512.500) and all other laws and regulations that are 
applicable to its participation in TEAM; and
    ++ Any data or information submitted to CMS will be accurate, 
complete and truthful, including, but not limited to, the participation 
election letter and any other data or information that CMS uses for 
purposes of TEAM.
     Signed by the hospital administrator, chief financial 
officer, or chief executive officer with authority to bind the 
hospital.
    Lastly, we recognize that the TEAM participant definition, as 
proposed, did not account for potential hospitals that might 
voluntarily opt into TEAM. Therefore, we are finalizing a slight 
modification to the definition of TEAM participant to include hospitals 
that make a voluntary opt-in participation election in TEAM, in 
accordance with Sec.  512.510 and are accepted to participate in TEAM 
by CMS.
    After consideration of the public comments we received, we are 
finalizing our proposal without modification for the mandatory 
participation of TEAM participants in mandatory CBSAs selected for 
participation. We are also finalizing a policy to allow a one-time 
opportunity to voluntarily opt-in to TEAM for hospitals that currently 
participate in the BPCI Advanced or the CJR model, that are not located 
in a mandatory CBSA selected for TEAM participation and continue to 
participate until the last day of the last performance period or last 
day of the last performance year, of the model in which they are 
currently participating. For the BPCI Advanced model, the last day of 
the last performance period, performance period 14, is December 31, 
2025. For the CJR model, the last day of the last performance year, 
performance year 8, is December 31, 2024. Further, we are finalizing 
that hospitals eligible for voluntary opt-in must submit a written 
participation election letter during the voluntary election period of 
January 1, 2025-January 31, 2025, in the regulations at Sec.  512.510. 
Lastly, we are finalizing our proposed TEAM participant definition at 
Sec.  512.505 with slight modification to include hospitals that make a 
voluntary opt-in participation election to participate in TEAM in 
accordance with Sec.  512.510 and are accepted to participate in TEAM 
by CMS.
(d) Financial Accountability of a TEAM Participant
    We stated in the proposed rule that as we did with the CJR model, 
we continue to believe it is most appropriate to identify a single 
entity to bear financial accountability for making repayment to CMS if 
quality and spending performance metrics are not met under the model 
after CMS performs reconciliation. Consistent with the CJR model, we 
proposed to make TEAM participants financially accountable for the 
episode for the following reasons:
     We believe hospitals would play a central role in 
coordinating episode-related care and ensuring smooth transitions for 
beneficiaries undergoing services related to episodes. A large portion 
of a beneficiary's recovery trajectory from an episode would begin 
during the hospital inpatient stay or procedure performed in the 
hospital outpatient department.
     Most hospitals already have some infrastructure related to 
health information technology, patient and family education, and care 
management and discharge planning. This infrastructure includes post-
acute care coordination infrastructure and resources such as case 
managers, which hospitals can build upon to achieve efficiencies under 
TEAM.
     We proposed that episodes in TEAM begin with an acute care 
hospital stay or hospital outpatient department procedure visit. Some 
episodes may be preceded by an emergency room visit and possible 
transfer from another hospital's emergency room, or followed by PAC. 
However, we do not believe it would be appropriate to hold a PAC 
provider or a hospital other than the TEAM participant where the 
inpatient stay or initial hospital outpatient procedure that initiated 
the episode happened fully financially accountable for an episode under 
this model.
    Episodes in TEAM may be associated with multiple hospitalizations 
through readmissions or transfers. When more than one hospitalization 
occurs during a single episode, we proposed to hold the TEAM 
participant that initiated the episode, as described in section 
X.A.3.b.(5)(c) of the preamble of this final rule, financially 
accountable for the episode, nonetheless. We recognize that, 
particularly where the hospital admission may be preceded by an 
emergency room visit and subsequent transfer to a tertiary or other 
regional hospital facility, patients often wish to return home to their 
local area for post-acute care. Many hospitals have recently heightened 
their focus on aligning their efforts with those of community 
providers, both those in the immediate area as well as more outlying 
areas from which they receive transfers and referrals, to provide an 
improved continuum of care. In many cases, this heightened focus on 
alignment is due to the incentives under other CMS models and programs, 
including ACO initiatives such as the Shared Savings Program or the 
Hospital Readmissions Reduction Program (HRRP). In the proposed rule, 
we noted that by focusing on the TEAM participant as the accountable or 
financially responsible entity, we hope to continue to encourage this 
coordination across providers and sought comment on ways we can best 
encourage these relationships within the scope of TEAM (89 FR 36391).
    We sought comment on our proposal to require TEAM participants to 
be financially accountable for episodes in TEAM.
(i) Financial Accountability Considerations
    In the proposed rule, we recognized for purposes of TEAM that a 
beneficiary in an episode may receive care from multiple providers and 
suppliers, and not just from the TEAM participant where the episode was 
initiated. We considered allowing providers or suppliers, other than 
the TEAM participant, to bear financial accountability for episodes 
given their involvement in a TEAM beneficiary's care. Specifically, we 
considered splitting financial accountability between the TEAM 
participant and other providers and suppliers that provide items and 
services to the TEAM beneficiary. For example, we considered the TEAM 
participant being financially accountable for a majority of the episode 
spending, such as all Medicare Part A spending, and other suppliers, 
such as PGPs, being accountable for a portion of episode spending 
related to Medicare Part B spending. However, we noted in

[[Page 69655]]

the proposed rule that we have concerns about how to accurately 
determine a reasonable sharing methodology that reflects the portion of 
spending either the TEAM participant or the PGP should be financially 
accountable for. Further, we have concerns about requiring PGPs to be 
financially accountable given practices can vary by size and resources. 
As previously noted, the BPCI Advanced model includes PGPs, and the 
physician groups electing to participate in BPCI Advanced have done so 
because their practice structure supports care redesign and other 
infrastructure necessary to bear financial accountability for episodes. 
However, these physician groups are not necessarily representative of 
the typical group practice. The infrastructure necessary to accept 
financial accountability for episodes is not present across all PGPs, 
and thus we do not believe it would be appropriate to designate PGPs to 
bear a portion of the financial accountability for episodes under the 
proposed TEAM. Further, shared financial accountability would require 
more than hospitals being TEAM participants and introduces model 
complexity. We sought comment on approaches to splitting financial 
accountability when multiple providers care for a single beneficiary in 
an episode (89 FR 36391).
    While we proposed that the TEAM participant would be financially 
responsible for the episode, we also believe that effective care 
redesign requires meaningful collaboration among acute care hospitals, 
PAC providers, physicians, and other providers and suppliers within 
communities to achieve the highest value care for Medicare 
beneficiaries. We believe it may be essential for key providers and 
suppliers to be aligned and engaged, financially and otherwise, with 
the TEAM participants, with the potential to share financial 
accountability for an episode with those TEAM participants. We noted in 
the proposed rule that all relationships between and among TEAM 
participants and other providers and suppliers would still need to 
comply with all relevant laws and regulations, including the fraud and 
abuse laws and all Medicare payment and coverage requirements unless 
otherwise specified further in this section and in section X.A.3.g of 
the preamble of this final rule. Depending on a TEAM participant's 
current degree of clinical integration, new and different contractual 
relationships among hospitals and other health care providers may be 
important, although not necessarily required, for TEAM success in a 
community. We acknowledged in the proposed rule that there may need to 
be incentives for other providers and suppliers to partner with TEAM 
participants and develop strategies to improve episode efficiency (89 
FR 36392).
    We acknowledged in the proposed rule the important role that 
conveners play in the BPCI Advanced model with regard to providing 
financial responsibility and infrastructure support to hospital and PGP 
participation in BPCI Advanced. The convener relationship (where 
another entity assumes financial responsibility) may take numerous 
forms, including contractual (such as a separate for-profit company 
that agrees to take on a hospital or PGP's financial risk in the hopes 
of achieving financial gain through better management of the episodes) 
and through ownership (such as when risk is borne at a corporate level 
within a hospital chain). We considered allowing convener entities, 
like those recognized in the BPCI Advanced model, to have formal roles 
in TEAM. At peak BPCI Advanced participation, over 70 percent, or 
1,439, of the hospitals and PGPs in Model Year 3 (2020) participated as 
downstream episode initiators under one of the 92 convener 
participants.\879\ While the majority of BPCI Advanced hospitals and 
PGPs participated under a convener participant, some hospitals and PGPs 
found the participation relationship with a convener challenging. 
Specifically, some hospitals and PGPs felt removed from participation 
decisions since they were not party to the participation agreement 
between CMS and the convener participant. Additionally, we noted in the 
proposed rule that convener participants that are not Medicare 
providers or suppliers may need financial guarantees that can impose 
significant upfront financial investment for participation and be 
administratively burdensome for CMS and the participant. We did not 
propose to require convener entities in this model, and we do not 
intend to identify or require any Medicare-enrolled providers or 
suppliers (or providers and suppliers that are not enrolled in 
Medicare) to be convener entities in TEAM, in light of the experiences 
and resources that would be needed to ``convene'' over one or more TEAM 
participants. As with the CJR model, we do not intend to restrict the 
ability of TEAM participants to enter into administrative or risk 
sharing arrangements related to TEAM with entities that may provide 
similar support as a convener, except to the extent that such 
arrangements are restricted or prohibited by existing law. We did not 
propose to require TEAM participants to partner with convener entities 
and we did not propose to require any entities, providers, or suppliers 
to serve as conveners for purposes of TEAM. We refer readers to section 
X.A.3.g. of the preamble of this final rule for further discussion of 
model design elements that may outline financial arrangements between 
TEAM participants and other providers and suppliers (89 FR 36392).
---------------------------------------------------------------------------

    \879\ CMS Bundled Payments for Care Improvement Advanced Model: 
Year 2 Evaluation Report. (2021). Centers for Medicare & Medicaid 
Services. Retrieved November 28, 2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2021/bpci-yr2-annual-report.
---------------------------------------------------------------------------

    We sought comment on approaches to splitting financial 
accountability when multiple providers or suppliers care for a single 
beneficiary in an episode.
    The following is a summary of comments we received on the proposed 
financial accountability of TEAM participants and other financial 
accountability considerations and our responses to these comments:
    Comment: A commenter supported holding acute care hospitals 
accountable for all items and services during an episode.
    Response: We thank the commenter for the support on the financial 
accountability for hospitals.
    Comment: A commenter recommended that CMS make TEAM a shared 
savings model, where the participant and CMS have shared accountability 
for earning savings.
    Response: We thank the commenter for the suggestion. If CMS were to 
structure TEAM as a shared savings initiative, then it may prevent TEAM 
from overlapping with other shared savings initiatives, including the 
Shared Savings Program, as described in 42 CFR 425.114. CMS proposed, 
and is finalizing, a policy that permits overlap between TEAM and 
shared savings initiatives, as described in section X.A.3.e of the 
preamble of this final rule. We believe that overlaps between TEAM and 
shared savings initiatives are important, and we aim to encourage TEAM 
participants to collaborate with ACOs and ensure TEAM beneficiaries are 
connected back to the longitudinal providers to support continuity of 
care positive long-term health outcomes. We also note that TEAM 
participants may use financial arrangements to set-up their own sharing 
of accountability through sharing reconciliation payment amounts, or 
repayment amounts with TEAM collaborators and other entities,

[[Page 69656]]

as discussed in section X.A.3.g of the preamble of this final rule.
    Comment: Some commenters suggested that CMS require TEAM 
participants to set up financial arrangements with other providers and 
suppliers. A commenter believed that organizations outside of the 
hospital have no incentive or requirement to implement efficiencies 
when the hospital bears all financial responsibility. A commenter 
recommended allowing the clinical team to participate as the risk-
bearing entity to better align incentives around the patient. Another 
commenter recommended that CMS adopt a mechanism to ensure that 
clinically relevant physicians have the option to be integrated into 
leadership and governance roles within this proposed model and to share 
in the savings generated by the model and direct participants to allot 
a meaningful portion of the shared savings payment within the model to 
physicians to account for their leadership and management of care 
redesign activities. Another commenter requested that CMS require 
equitable distribution of shared savings among physicians and clinical 
staff participating in the surgical episodes; establish performance 
parameters at the specialty-level; and embrace clinical integration 
that redistribute incentives in an upside/downside approach.
    Response: We agree that financial arrangements provide an 
opportunity for TEAM participants to share their reconciliation payment 
amount or repayment amount resulting from participation in TEAM with 
certain providers and suppliers participating in TEAM activities. This 
means that providers and suppliers other than the TEAM participant 
could be subject to upside and downside financial risk depending on the 
terms of their financial arrangement. We also support TEAM participants 
including other providers and suppliers in the governance of their 
processes to implement TEAM as a mechanism to collaborate and encourage 
the use of financial arrangements to incentivize high value care. We 
believe that financial arrangements, as described in section X.A.3.g of 
the preamble of this final rule, can strengthen the relationship 
between TEAM participants and other providers and suppliers and 
encourage redesigned care processes for higher quality and more 
efficient service delivery. However, TEAM is not a shared savings 
initiative, and we want to give flexibility to TEAM participants to 
enter into financial arrangements or require providers and suppliers to 
be integrated in governance structures as they desire, consistent with 
law and regulation. We believe including such requirements in TEAM 
would increase burden on the TEAM participants and reduce their 
flexibility. The TEAM participant, not CMS, is best positioned to 
partner with providers and suppliers to determine the terms of the 
arrangements, which may vary by the TEAM participant's specific 
circumstances and capabilities, that ensure alignment to financial 
incentives to improve quality of care, drive equitable outcomes, and 
reduce Medicare spending.
    Comment: A commenter encouraged CMS to meet with clinical 
stakeholders and prospective TEAM participants to discuss appropriate 
sharing methodologies and funds flow strategies suited for modern 
integrated delivery networks and physician-owned surgical practices.
    Response: We thank the commenter for the recommendation and are 
always looking for opportunities to engage with interested parties on 
how to improve collaboration between all Medicare providers and 
suppliers that may care for a beneficiary in an episode of care.
    Comment: A few commenters requested that CMS give other providers 
and suppliers, other than the hospital including post-acute care 
providers, the opportunity to be episode initiators and have financial 
accountability in the model. A couple of commenters suggested that CMS 
require the hospital to include these providers and suppliers in 
gainsharing incentives or require hospitals to pass on a proportional 
portion of the shared savings generated under this model.
    Response: While we acknowledge the critical importance of other 
providers and suppliers, other than the hospital, including providing 
post-acute care, in helping to manage episodes which extend 30 days 
beyond discharge from the anchor hospitalization or anchor procedure, 
we continue to believe the hospital should be the financially 
accountable, episode initiator for TEAM. For hospitals to be successful 
in TEAM, we believe that they will need support from physicians, post-
acute care providers, and other clinical care providers to provide the 
best quality of care in a cost-effective manner. This may involve 
establishing financial arrangements with such providers and suppliers. 
We support other types of providers and suppliers assuming risk where 
they are financially able to do so, and we agree that providers and 
suppliers that have a share in the risk, both positive and negative, 
may be more motivated to participate in value-based care. However, we 
do not believe that in a mandatory model like TEAM, any other provider 
or supplier is consistently as financially positioned to assume risk as 
the hospital. We also do not want to require financial arrangements or 
mandate a specific division of risk between TEAM participants and other 
providers and suppliers given we believe that the hospital is best 
positioned to determine the terms of these types of arrangements and 
not CMS.
    Comment: A few of commenters requested that clinicians receive 
greater decision-making authority with respect to TEAM in light of 
CMS's proposal to hold hospitals financially accountable in the model. 
A commenter stated that given the hospital's financial control of the 
episode, it is imperative that all involved clinicians (including those 
involved post-discharge) have the authority to make the right 
decisions, which will impact patients' next level of care, as well as 
outcomes. Another commenter recommended that CMS consider providing 
hospital systems in the model with flexibility to have more decision-
making capacity regarding referrals and appropriateness of post-acute 
facility utilization. Another commenter requested CMS consider greater 
flexibility and coverage to promote what is the appropriate care at the 
right place at the right time.
    Response: TEAM participants will be financially accountable for 
episodes initiated in their hospital or hospital outpatient department 
and should work with all providers and suppliers, in addition to the 
beneficiary and their caregivers, to determine the proper plan of care 
for each TEAM beneficiary. We do not believe that providers and 
suppliers will compromise their patients' safety or deviate from the 
standard practice of care in an attempt to avoid negative financial 
implications of the model, and TEAM does not affect or change a 
participant's ability or authority to make the ``right'' decisions with 
respect to a beneficiary's care. Moreover, the TEAM beneficiary's role 
in decision making is imperative as well. TEAM beneficiaries will still 
be able to seek care from their choice of Medicare providers and 
suppliers. We will monitor beneficiary access and quality of care, as 
described in section X.A.3.i of the preamble in this final rule, to 
ensure steering or other efforts to limit beneficiary access or move 
beneficiaries out of the model are not occurring.
    After consideration of the public comments we received, we are 
finalizing our proposals to hold the TEAM participant financially

[[Page 69657]]

accountable for episodes in TEAM without modification.
(3) TEAM Participation Tracks
    In the proposed rule we stated that one way to help providers and 
suppliers gain experience in alternative payment models is through 
model participation tracks where the levels of risk and reward are 
reduced while the participants establish and hone their care redesign 
processes. Stakeholders have urged CMS to offer a glide path in its 
models, most recently in the Episode-based Payment Model RFI (88 FR 
45872), to smooth the transition to risk. Such a glide path could 
provide more time for participants to gain experience with two-sided 
financial risk by phasing-in risk rather than requiring full-risk 
participation at the start of the model. Previous and current CMS 
models and programs have implemented this approach, including the 
recently announced Making Care Primary Model, which offers a 
progressive three-track approach that increases participants' 
accountability, and the Medicare Shared Savings Program, which offers 
an incremental glide path for ACOs to transition to higher levels of 
potential risk and reward. We note that these models and programs have 
longer durations than the model duration that we proposed in TEAM, 
which makes it easier to offer a gradual transition to two-sided 
financial risk or higher levels of risk and reward. However, in light 
of our proposal to make TEAM a five-year model test, we believe that 
TEAM participants would still benefit from the opportunity to ease into 
two-sided financial risk participation as they develop efficiencies (89 
FR 36392).
    We proposed that there will be three tracks in TEAM, each with 
differing financial risk and quality performance adjustments. Track 1 
would be available only in PY 1 for all TEAM participants and would 
have only upside financial risk with the quality adjustment applied to 
positive reconciliation amounts. Track 2 would be available in PYs 2 
through 5 to a limited set of TEAM participants, including safety net 
hospitals, and would have two-sided financial risk with the quality 
adjustment applied to reconciliation amounts. Lastly, Track 3 would be 
available in PYs 1 through 5 for all TEAM Participants and would have 
two-sided financial risk with the quality adjustment applied to 
reconciliation amounts (89 FR 36392).
    We proposed a one-year glide path to two-sided risk for TEAM 
participants in an effort to ensure that TEAM participants have time to 
prepare for two-sided financial risk. We proposed to allow all TEAM 
participants to select between one of two tracks for the first 
performance year of TEAM. For PY 1, a TEAM participant may elect to 
participate in either Track 1 or Track 3. For PY 1, Track 1 would have 
upside-only financial risk provided through reconciliation payments, 
subject to a 10 percent stop-gain limit and a Composite Quality Score 
(CQS) adjustment percentage of up to 10 percent, as described in 
sections X.A.3.d.(5)(h) and X.A.3.d.(5)(g) of the preamble of this 
final rule, that would allow TEAM participants to be rewarded for their 
work to improve quality and cost outcomes for their episodes, but not 
be held financially accountable if spending exceeds the reconciliation 
target price. We believe the 10 percent stop-gain limit and a CQS 
adjustment percentage of up to 10 percent for Track 1 are appropriate 
and would allow TEAM participants to be rewarded for spending and 
quality performance while easing into financial risk. We proposed that 
Track 3 would have two-sided financial risk in the form of 
reconciliation payments or repayment amounts, subject to 20 percent 
stop-gain and stop-loss limits and a CQS adjustment percentage of up to 
10 percent, as described in sections X.A.3.d.(5)(h) and X.A.3.d.(5)(g) 
of the preamble of this final rule, that would allow TEAM participants 
to have higher levels of reward and risk based on their quality and 
cost performance for their episodes. We proposed to only allow TEAM 
participants to participate in Track 1 for one performance year, 
specifically PY 1. We proposed a five-year model test, and we do not 
believe that making Track 1 available for more than one performance 
year would motivate TEAM participants to improve quality or spending 
performance since there would be no financial accountability when 
spending reductions are not achieved (89 FR 36392).
    As indicated in the proposed rule, we believe a one-year glide path 
is an appropriate length of time for a five-year model test that aims 
to improve patient quality of care and reduce Medicare spending. We 
considered limiting eligibility for Track 1 during PY 1 to TEAM 
participants that have not previously participated in a Medicare 
episode-based payment model, but given that TEAM would be a mandatory 
model, we believe prior experience does not guarantee successful 
participation, and that it is important for TEAM participants to 
consider their own unique organizational position and characteristics 
when determining their desired track selection for PY 1. We sought 
comment on this proposal and whether there are alternative potential 
approaches for constructing a glide path in TEAM (89 FR 36393).
    We proposed that TEAM participants would be required to notify CMS 
of their track selection prior to the start of PY 1, in a form and 
manner and by a date specified by CMS. TEAM participants who fail to 
timely notify CMS would be automatically assigned to Track 1 for PY 1. 
We sought comment on the proposal to require TEAM participants to 
notify CMS of their track selection and to automatically assign TEAM 
participants to Track 1 if they fail to timely notify CMS of their 
desired track selection.
    We stated in the proposed rule that the proposed glide path 
opportunity was limited to one year. We proposed that TEAM participants 
who elected to participate in Track 1 for PY 1 would automatically be 
assigned to Track 3 for PY 2 and would remain in Track 3 for the 
remainder of the model (PYs 2 through 5). We recognize that offering 
different participation tracks in TEAM presents an opportunity to 
provide flexibilities to TEAM participants that may care for a greater 
proportion of underserved beneficiaries and TEAM participants that lack 
the financial reserves to invest in value-based care, including safety 
net, rural, and other hospital providers. Research has identified APM 
participation challenges for these types of providers, such as a lack 
of capital to finance the upfront costs of transitioning to an APM, 
including purchasing electronic health record technology, and 
challenges acquiring or conducting data analysis necessary for 
participation.\880\ CMS has taken significant steps to address and 
improve health equity in value-based care models and programs, 
including health equity adjustments to the Hospital Value-Based 
Purchasing Program (88 FR 58640) and the Medicare Shared Savings 
Program (87 FR 69404).
---------------------------------------------------------------------------

    \880\ Medicare Information on the Transition to Alternative 
Payment Models by Providers in Rural, Health Professional Shortage, 
or Underserved Areas: Report to Congressional Committees. (2021). 
United States Government Accountability Office. Retrieved December 
1, 2023, from https://www.gao.gov/assets/gao-22-104618.pdf.
---------------------------------------------------------------------------

    We proposed to require different types of hospitals to participate 
in TEAM, and we believe that certain TEAM participants may benefit from 
a participation option that has limited two-sided financial risk so 
that their beneficiaries may receive high quality, coordinated care 
without imposing significant financial pressure. Therefore,

[[Page 69658]]

we proposed that rather than automatically being assigned to Track 3 
beginning in PY 2, certain TEAM participants could elect to participate 
in Track 2 beginning in PY 2 and stay in Track 2 for the remainder of 
the model (PYs 2 through 5). As further described in sections 
X.A.3.d.(5)(h) and X.A.3.d.(5)(g) of the preamble of this final rule, 
we proposed that Track 2 would have two-sided financial risk in the 
form of reconciliation payments and repayment amounts, subject to 10 
percent stop-gain and stop-loss limits, a CQS adjustment percentage of 
up to 10 percent for positive reconciliation amounts, and a CQS 
adjustment percentage of up to 15 percent for negative reconciliation 
amounts. We believe the CQS adjustment percentage of up to 15 percent 
for negative reconciliation amounts, is appropriate for Track 2 because 
it further limits a TEAM participant's financial risk given that a 
higher CQS adjustment percentage for negative reconciliation amounts 
results in a lower repayment amount. In the proposed rule, we stated 
that the proposed payments and payment adjustments would allow TEAM 
participants to receive reconciliation payment amounts or owe repayment 
amounts based on their quality and cost performance for their episodes.
    We proposed that only the following types of TEAM participants 
would be eligible to participate in Track 2 for PYs 2 through 5:
     Hospitals that are safety net hospitals, as further 
described in section X.A.3.f.(2) of the preamble of this final rule. 
For purposes of TEAM, we proposed that a TEAM participant must meet at 
least one of the following criteria in order to be considered a safety 
net hospital:
    ++ Exceeds the 75th percentile of the proportion of Medicare 
beneficiaries considered dually eligible for Medicare and Medicaid 
across all PPS acute care hospitals in the baseline period (as 
described in section X.A.3.d.(3)(a)).
    ++ Exceeds the 75th percentile of the proportion of Medicare 
beneficiaries partially or fully eligible to receive Part D low-income 
subsidies across all PPS acute care hospitals in the baseline period.
     Hospitals that are rural hospitals, as further described 
in section X.A.3.f.(3) of the preamble of this final rule. For purposes 
of TEAM, we proposed that a TEAM participant must meet at least one of 
the following criteria in order to be considered a rural hospital:
    ++ Is located in a rural area as defined under Sec.  412.64.
    ++ Is located in a rural census tract defined under Sec.  
412.103(a)(1).
    ++ Has reclassified as a rural hospital under Sec.  412.103.
    ++ Is a rural referral center (RRC), which has the same meaning 
given this term under Sec.  412.96.
     Hospitals that are Medicare dependent hospitals (MDH) as 
defined under 42 CFR 412.108.
     Hospitals that are sole community hospitals (SCHs) as 
defined under 42 CFR 412.92.
     Hospitals that are essential access community hospitals as 
defined under 42 CFR 412.109.
    As noted in the proposed rule, we believe that allowing TEAM 
participants that meet the safety net hospital or rural hospital 
criteria, as well as those that are Medicare dependent hospitals, sole 
community hospitals, or essential access community hospitals to 
participate in Track 2 during PYs 2 through 5 would provide an 
opportunity for these hospitals to develop capabilities to deliver 
value-based care and would avoid the financial pressures of a two-sided 
financial risk model that could make their participation in TEAM 
untenable.
    We proposed that TEAM participants that meet the Track 2 hospital 
criteria described above would be required to notify CMS on an annual 
basis prior to the start of every performance year, beginning for PY 2, 
of their desire to participate in Track 2. We proposed that TEAM 
participants that meet the Track 2 hospital criteria could switch 
between Track 2 and Track 3 on an annual basis. Such TEAM participants 
would need to notify CMS of their preference, in a form and manner and 
by the date specified by CMS. We proposed that TEAM participants would 
need to meet the hospital criteria for Track 2 participation by the 
date CMS requires notification of their preference. TEAM participants 
who fail to timely notify CMS or do not meet the Track 2 hospital 
criteria would not be approved by CMS to participate in Track 2 and 
would be automatically assigned to Track 3 for the given performance 
year. We recognize that allowing these specific TEAM participants to 
self-select into Track 2 for PYs 2 through 5 could create challenges 
when evaluating the model, such as the generalizability of evaluation 
findings. We also recognize that requiring these specific TEAM 
participants to notify CMS every year will permit them to switch tracks 
if they no longer desire to participate in Track 2 or no longer meet 
the Track 2 hospital criteria. Therefore, we sought comment on whether 
we should prohibit TEAM participants from switching tracks after PY 2 
or if there are other options, we should consider to mitigate 
evaluation challenges (89 FR 36394).
    We considered but did not propose allowing TEAM participants that 
meet the safety net hospital criteria to remain in Track 1 for all 
performance years so that they would not be subject to downside 
financial risk during their participation in the model. Further, we 
considered not allowing these TEAM participants that meet the safety 
net hospital criteria to switch between tracks, meaning that they would 
have to participate in Track 1 for all performance years. However, as 
stated in the proposed rule, we did not want to limit a TEAM 
participant that meets the safety net hospital criteria from making its 
own decision about whether to participate in a track with downside 
financial risk. Further, we believe that having downside risk by PY 2 
for all TEAM participants would help to drive care improvements and 
establish care efficiencies that could lead to better outcomes on cost 
and quality of care. We sought comment on whether we should consider 
allowing TEAM participants who meet the safety net hospital criteria to 
participate in Track 1 for all performance years.
    Table X.A.-01 summarizes the proposed TEAM tracks.

[[Page 69659]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.261

    We sought comment on the proposals for the TEAM Participation 
Tracks at Sec.  512.520. We also sought comment on the proposal to 
allow eligible TEAM participants to choose to participate in Track 2 
and change their track selection from Track 2 to Track 3 annually.
    The following is a summary of comments we received on the proposed 
participation tracks and our responses to these comments:
    Comment: We had several commenters support CMS' effort to include a 
glide path to downside financial risk, through the construction of 
different participation tracks. A commenter noted that allowing all 
participants to join Track 1 for the first performance year creates 
opportunities to invest in quality improvement and infrastructure 
investments. Another commenter appreciated CMS offering flexibility to 
hospitals that care for a higher proportion of underserved individuals, 
such as safety net hospitals, by allowing several tracks for 
participation in the model with varying levels of financial risks and 
rewards.
    Response: We thank commenters for their support of the 
participation tracks in TEAM.
    Comment: Numerous commenters requested that CMS provide a longer 
glide path to downside financial risk for all hospitals. Many 
commenters suggested that all hospitals should have the opportunity to 
remain in Track 1 for at least the first two years of the model. Many 
commenters pointed to other APMs, including the Medicare Shared Savings 
Program, that have longer glide paths before participants take on 
downside financial risk. Some commenters recommended that all hospitals 
be eligible to participate in Track 2 due to the more demanding 
requirements set forth in Track 3. Many commenters believed that the 
level of financial risk for all participants was too significant on 
participants, especially in light of a 3 percent discount factor. Many 
commenters also requested that CMS consider allowing low volume 
hospitals to remain in Track 1 throughout the entirety of the model. 
Some commenters believed that a one-year glide path is insufficient 
since CMS has underestimated the resources that would be required to 
establish the care teams needed to lead and participate in TEAM. A 
commenter indicated that advancing participants who do not meet 
eligibility for Track 2 to Track 3 in the second performance year will 
not allow enough time for hospitals to review PY 1 data and make 
appropriate adjustments. A commenter encouraged CMS to consider 
extending glide path to two performance years, particularly for TEAM 
participants that had no prior experience in the CJR or BPCI models. 
Another commenter stated their belief that an extended upside-only 
period would grant TEAM participants the necessary time to explore 
other and possibly less obvious, or more innovative, cost management 
practices.
    Response: We appreciate the comments requesting that CMS extend 
Track 1 beyond PY 1, and we believe it may be necessary to extend the 
length of Track 1 for TEAM participants that are safety net hospitals, 
as discussed in the subsequent comment response, but we are not 
persuaded that this extension is necessary for TEAM participants that 
are not safety net hospitals. As discussed in section X.A.3.a.(1) of 
the preamble of this final rule, we are finalizing a model start date 
of January 1, 2026. This gives TEAM participants with at least 17 
months to prepare for model implementation and another 12 months after 
that before the TEAM participants that participate in Track 1 during PY 
1 would potentially be financially accountable for repayment amounts to 
Medicare. As indicated in section X.A.3.k of the preamble of this final 
rule, we intend to make TEAM participants' baseline period data 
available, pursuant to a request and a TEAM data sharing agreement, in 
advance of the January 1, 2026, model start date. Access to data before 
the model starts will allow TEAM participants the opportunity to assess 
their historical performance as they consider changes to their care 
practices in advance of the model's start date. In addition, TEAM 
participants may request and receive data from CMS throughout the 
performance year, pursuant to a TEAM data sharing agreement, that will 
help them to gauge their performance in the model and identify areas 
for care improvement that will inform their care redesign practices in 
all performance years of the model. We also disagree with commenters 
that CMS underestimated the resources needed to establish the care 
teams to lead and participate in TEAM. We intentionally chose and 
limited the episode categories tested in TEAM, as described in section 
X.A.3.b of the preamble of this final rule, that were common, higher 
volume procedures. We believe many hospitals already have established 
standard care pathways and care teams with experience managing 
beneficiaries who receive these procedures, so we do not expect TEAM to 
require an overhaul to care practices but to rather encourage TEAM 
participants to introduce refinements to existing process that will 
create the efficiencies to improve quality and reduce spending. 
Therefore, we believe

[[Page 69660]]

the time period from the publication of this final rule until the end 
of PY 1 will provide sufficient time to explore and implement care 
redesign approaches before TEAM participants that participate in Track 
1 during PY 1 are required to assume downside financial risk.
    We acknowledge that other CMS APMs have longer glide paths, such as 
the Making Care Primary Model, but note that these APMs generally have 
longer performance periods. As a five-year model, we believe that a 
one-year glide path is sufficient for most TEAM participants. We do not 
believe a longer glide path is necessary for TEAM participants that 
have not participated in the BPCI Advanced and CJR models, because we 
do not believe their lack of participation in these models is 
indicative of needing a greater amount of time before assuming downside 
financial risk. However, we are finalizing some slight changes to our 
proposal with respect to certain TEAM participants, as discussed in the 
following comment and response, which may affect hospitals that have 
not previously participated in these models.
    Also, as discussed in section X.A.3.d.(3)(g) of the preamble of 
this final rule, we have considered commenter's concerns regarding TEAM 
participant's exposure to significant financial risk, and we are 
finalizing changes to our proposed discount factor policy--we are 
reducing that potential financial risk by lowering the discount factor. 
In addition, as discussed in section X.A.3.d.(3)(h) of the preamble of 
this final rule, we are not finalizing our policy for low volume 
hospitals and will propose an updated policy in future notice and 
comment rulemaking that will address concerns with respect to the level 
of risk these TEAM participants may have. We believe that these changes 
will both facilitate participants' abilities to be successful under 
this model and allow for a more gradual transition to full financial 
responsibility under the model.
    Comment: Numerous commenters indicated that CMS did not provide 
adequate safeguards to protect safety net and rural hospitals due to 
their lack of resources caring for a more complex population with 
greater health-related social needs and requested that CMS allow these 
hospitals to remain in Track 1 for the entirety of the model. Numerous 
commenters cited safety net hospitals operating on negative margins 
with insufficient resources to participate in a model like TEAM, 
creating an even greater risk to access to care for populations that 
have historically suffered inequitable outcomes. Many commenters had 
concerns with CMS' oversampling CBSAs with safety net hospitals 
indicating the added administrative demands and financial risk of TEAM 
may have unintended consequences of placing further strain on systems 
serving a high proportion of patients with significant social need. 
Other commenters requested that CMS allow Sole Community Hospitals and 
Medicare Dependent Hospitals to participate in Track 1 for the entirety 
of the model. A couple of commenters recommended CMS develop meaningful 
readiness metrics that would allow these safety net hospitals to better 
understand their performance and give them adequate time for internal 
process improvement projects before being held accountable for these 
episodes of care.
    Response: We appreciate and are persuaded by comments expressing 
concerns that our proposed policies for certain types of hospitals need 
to be modified. We recognize the importance of including safety net 
hospitals in TEAM, providing them and the beneficiaries they care for, 
access to the benefits of value-based care though improving care 
coordination, avoiding duplicative or unnecessary services, and 
improving the beneficiary care experience during care transitions. 
While CMS has tested episode-based payment models for over a decade, we 
are aware that safety net hospitals have been underrepresented in our 
previous and current episode-based payment models and believe that 
oversampling them in TEAM will allow them to gain experience and help 
them become less dependent on traditional FFS payments. Even though 
many hospitals may have some experience with episode-based payments, 
with Medicare or with beneficiaries covered by commercial insurance, we 
acknowledge that safety net hospitals may have significant financial 
barriers that have limited their exposure to episode-based payments or 
have different care priorities given the beneficiary population they 
care for. Accordingly, we are finalizing our proposed Track 1 policies 
with slight changes. We are lengthening Track 1 for safety net 
hospitals, as defined and finalized in section X.A.3.f of the preamble 
of this final rule, so they will be eligible to remain in Track 1 for 
PYs 1 through 3 of the model, if they so choose. The election and 
notification process remains unchanged, meaning TEAM participants that 
are safety net hospitals that wish to participate in Track 1 for PYs 2 
and 3 must notify CMS of their Track selection prior to each 
performance year in a form and manner, and by a date specified by CMS. 
The TEAM participant may switch between tracks, however, if the TEAM 
participant fails to timely notify CMS of their election to participate 
in Track 1 or Track 2, the TEAM participant will be assigned to Track 3 
for the performance year they were requesting Track1 or Track 2 
participation. We believe that allowing safety net hospitals to have 
the option of an additional two years of participating in Track 1 
beyond PY 1, if they so choose, will provide them with a more 
meaningful opportunity to gain experience in the model and make 
investments into care redesign processes. We note the definitions of 
safety net hospital and other hospital types, such as rural hospital, 
are not mutually exclusive. Therefore, if any TEAM participant meets 
the definition of safety net hospital, then they may participate in 
Track 1 for PYs 1 through 3. We still believe that all TEAM 
participants should assume double-sided risk during the performance 
period of the model, and thus we are not allowing safety net providers 
to remain in Track 1 for the entirety of the model. We will monitor 
safety net hospital performance in the model and, if warranted, will 
propose updated policies in future notice and comment rulemaking.
    We also recognize that TEAM participants in Track 2, which includes 
rural hospitals, as defined and finalized in section X.A.3.f of the 
preamble of this final rule, and other types of hospitals may need 
additional safeguards to limit their financial risk in TEAM. We refer 
readers to section X.A.3.d.(5)(h) of the preamble of this final rule, 
where we discuss modifications to the stop-gain and stop-loss limits 
for TEAM participants in Track 2.
    In addition, as discussed in section X.A.3.d.(3)(h) of the preamble 
of this final rule, we are not finalizing our policy for low volume 
hospitals and will propose an updated policy in future notice and 
comment rulemaking that will address the level of risk these TEAM 
participants may have. We believe that a future low volume hospital 
policy, paired with the changes for Track 1 for safety net hospitals 
and the stop-gain and stop-loss limit changes for Track 2, will help 
facilitate TEAM participants' abilities to be successful under this 
model and allow for a more gradual transition to full financial 
responsibility under the model.
    Lastly, we appreciate the commenters recommendation to develop 
readiness metrics to help hospitals understand their performance in the 
model. We may take this recommendation into

[[Page 69661]]

consideration as we develop learning resources and supports that may 
help TEAM participants achieve success in the model.
    Table X.A.-02 summarizes the final TEAM participation tracks based 
on the modifications made to Track 1 and Track 2.
[GRAPHIC] [TIFF OMITTED] TR28AU24.262

    Comment: A commenter suggested allowing voluntary participation in 
Track 3 to encourage more hospitals to continue investing in value-
based care programs and episodic payment models.
    Response: We thank the commenter for the suggestion but do not 
believe making Track 3 voluntary would yield sufficient evaluation data 
or offer a sustainable policy.
    Comment: A commenter was concerned that the terminology of 
``participation tracks'' may be misleading since Track 1 is available 
only in PY 1.
    Response: We disagree that the term participation track is 
misleading as it represents a unique pathway with different 
participation parameters in TEAM. We believe it would be more confusing 
to not differentiate the time-limited glide path of Track 1, especially 
given the different eligibility requirements and time lengths for each 
track. We note that we are finalizing a longer time period for Track 1, 
specifically allowing TEAM participants who meet the definition of 
safety net hospitals to participate in Track 1 for PYs 1 through 3.
    Comment: A commenter recommended providing advance investment 
payments to participants in rural or underserved areas and not recoup 
these payments and allow them to remain in upside-only track for the 
duration of TEAM.
    Response: We thank the commenter for the suggestion. We may 
consider infrastructure payments for TEAM participants in future notice 
and comment rulemaking. As previously noted, we are modifying financial 
risk thresholds, specifically we are modifying the stop-gain and stop-
loss limits from 10 percent to 5 percent for TEAM participants eligible 
to participate in Track 2, as discussed in section X.A.3.d.(5)(h) of 
the preamble of the final rule. Further, we are also modifying Track 1 
policies for participants who satisfy the safety net hospital 
definition, as defined in section X.A.3.f of the preamble of this final 
rule, which will allow them to remain eligible to participate in Track 
1 for PYs 1 through 3 of the model.
    Comment: A commenter recommended we establish different 
participation tracks for inpatient and outpatient episodes because 
procedures performed in the inpatient setting are becoming more complex 
and costly, with greater use of skilled nursing facility services 
following surgery.
    Response: We thank the commenter for this suggestion, but we do not 
believe creating different participation tracks based on hospital 
setting is needed and may cause unnecessary confusion given the three 
participation tracks proposed. Target prices, as described in section 
X.A.3.d of the preamble of this final rule, will account for episodes 
that are initiated in these different settings and will include 
beneficiary-level risk adjustment to adjust for patient acuity.
    Comment: A commenter noted that hospitals will have meaningful 
downside risk in any of the proposed tracks including Track 1 due to 
operating and reporting expenses that may exceed reconciliation payment 
amounts.
    Response: We indicated in the proposed rule (89 FR 36392) that 
Track 1 would have upside-only financial risk provided through 
reconciliation payments, thus TEAM participants would not be subject to 
downside risk through a repayment amount in Track 1. We acknowledge 
that some TEAM participants may make significant investments into their 
care redesign processes that include financial resources to implement. 
However, we believe TEAM participants may be able to achieve success by 
making refinements to their existing care processes and we aim to 
minimize reporting burden by making health equity plans voluntary in 
the first performance year and using quality measures hospitals are 
already required to report on for other CMS quality reporting programs 
as the required quality measures in TEAM.
    Comment: A commenter indicated there are likely many hospitals that 
would be able to take on downside risk in the first participation year 
but will not be allowed to do so and disagreed with limiting the option 
for downside risk in the TEAM program.
    Response: CMS recognizes the importance of allowing a TEAM

[[Page 69662]]

participant the autonomy and flexibility to decide what participation 
track they would like to participate in for the first performance year 
of the model. As indicated in the proposed rule (89 FR 36392), we 
proposed allowing all TEAM participants to select between one of two 
tracks for the first performance year of TEAM. Therefore, TEAM 
participants who wish to take on downside risk in the first performance 
year may do so, by notifying CMS of their election, in a form and 
manner and by a date specified by CMS. As proposed, TEAM participants 
may choose to participate in either Track 1 or Track 3 during PY 1.
    After consideration of the public comments we received, we are 
finalizing the participation track proposals with slight modifications. 
First, safety net hospitals will be eligible to participate in Track 1 
for PYs 1 through 3 of the model. Accordingly, we are modifying the 
regulatory text definition of Track 1 at Sec.  512.505 to specify that 
TEAM participants who satisfy the definition of safety net hospitals 
may participate in this track for PYs 1 through 3 of the model. We are 
also modifying the regulatory text at Sec.  512.520 to specify TEAM 
participants who satisfy the definition of safety net hospital have the 
ability to request participation in Track 1 for PYs 1 through 3. We are 
modifying the regulatory text at Sec.  512.550 (3)(3)(i) to eliminate 
the reference to PY 1 so that TEAM participants in Track 1 will not owe 
a repayment amount.

(4) Approach To Select TEAM Participants and Statistical Power

    The participant selection methodology that we proposed for TEAM was 
designed to provide adequate statistical power for evaluating and 
detecting changes in cost and quality.
    We proposed that TEAM would be an episode-based payment model 
implemented at the hospital level that captures all items and services 
furnished to a beneficiary over a defined period of time. We proposed 
to test five episode categories in TEAM, as described in section 
X.A.3.b. of the preamble of this final rule, focusing on acute clinical 
procedures initiated in the hospital inpatient and outpatient settings. 
Specifically, we proposed to test episodes that begin with CABG, LEJR, 
major bowel procedure, SHFFT, and spinal fusion. We considered whether 
the model should be limited to hospitals where a high volume of the 
proposed five episode categories are performed, which would result in a 
more narrow test on the effects of an episode-based payment approach, 
or whether to include all hospitals in particular geographic areas, 
which would result in testing the effects of an episode-based payment 
approach more broadly across an accountable care community seeking to 
coordinate care longitudinally across settings. We noted in the 
proposed rule that selecting only those hospitals where a high volume 
of the proposed episode categories is performed may result in fewer 
hospitals being selected as TEAM participants but could still result in 
a sufficient number of episodes to evaluate the success of the model. 
We noted in the proposed rule that there would be more potential for 
behaviors that could impact the model test, such as patient shifting 
and steering between hospitals in a given geographic area (89 FR 
36394).
    We proposed to select geographic areas and require all hospitals, 
as defined in section X.A.3.a.(2).(b). of the preamble of this final 
rule, in those selected areas to participate in TEAM to help minimize 
the risk of TEAM participants shifting higher cost cases to hospitals 
not participating in TEAM. We proposed that, instead of taking a simple 
random sampling where all geographic areas have the same chance for 
selection, we would group these geographic areas according to certain 
characteristics and then randomly select geographic areas from within 
those groups, also known as strata, for model implementation. Such a 
stratified random sampling method based on geographic area would 
provide several benefits. We stated in the proposed rule that we 
expected that this method would allow us to observe the experiences of 
hospitals in geographic areas with various characteristics, such as 
variations in the number of hospitals, average episode spending, number 
of hospitals that serve a higher proportion of historically underserved 
beneficiaries, and differing experience with previous CMS bundled 
payment models. We noted that we could then examine whether these 
characteristics impact the effect of the model on patient outcomes and 
Medicare expenditures within episodes of care. Using a stratified 
random sampling based on geographic area would also substantially 
reduce the extent to which the selected hospitals would differ from 
other hospitals on the characteristics used for stratification, 
compared to a simple random sample. Simple randomization may ensure 
similarity between the selected hospitals and hospitals that are not 
selected, but simple randomization can also lead to differences if 
enough units are drawn in a group-randomized design where the number of 
available groups is relatively small. Finally, we stated in the 
proposed rule that using a stratified random sampling of geographic 
areas would improve the statistical power of the subsequent model 
evaluation and improve our ability to reach conclusions about the 
model's effects on episode spending and the quality of patient care. 
Section 1115A(a)(5) of the Act allows the Secretary to limit the 
testing of a model to certain geographic areas, and we proposed for the 
reasons stated above to use a stratified random sampling method to 
select geographic areas and require all hospitals within those selected 
geographic areas to participate in TEAM.
(a) Overview and Options for Geographic Area Selection
    We considered using a stratified random sampling methodology to 
select the following geographic areas: (1) certain counties based on 
their CBSAs; (2) certain ZIP codes based on their Hospital Referral 
Regions (HRR); or (3) certain states. We address each geographic unit 
in turn.
    We considered selecting certain counties based on their CBSA. CBSA 
includes a core area with a substantial portion of the population in 
adjacent communities having a high degree of economic and social 
integration with that core. A county is designated as part of a CBSA 
when the county is associated with at least one core (urbanized area or 
urban cluster) with a population of at least 10,000, with the adjacent 
counties having a high degree of social and economic integration with 
the core as measured through commuting ties with the other counties 
associated with the core.
    OMB Bulletin 23-01, issued on July 21, 2023, states that there are 
935 CBSAs in the United States and Puerto Rico. The 935 CBSAs include 
393 Metropolitan Statistical Areas (MSAs), which have an urban core 
population of at least 50,000, and 542 Micropolitan Statistical Areas 
(mSAs), which have an urban core population of at least 10,000 but less 
than 50,000. CBSAs may be further combined into a Combined Statistical 
Area (CSA) which consists of two or more adjacent CBSAs (including 
MSAs, mSAs, or both) with substantial employment interchange. Counties 
not classified as a CBSA are typically categorized and examined at a 
state level.
    The choices for a geographical unit based on CBSA include a CBSA, 
an MSA, or a CSA. We proposed to select CBSAs in this model, which we 
will discuss later in this section. We note

[[Page 69663]]

that CJR, a previous mandatory episode-based payment model, utilized 
MSAs as the geographic unit. Under TEAM, we proposed to expand upon the 
CJR model's representation of geographic units by also including 
smaller geographic units, mSAs, in addition to MSAs. We proposed that 
counties and other areas not located in a CBSA would not be included in 
the TEAM selection method.
    We considered, but ultimately decided against, using CSAs instead 
of CBSAs as the geographic unit of selection. Under this scenario, we 
would look at how OMB classifies counties. We would first assess 
whether a county has been identified as belonging to a CSA, a unit 
which consists of adjacent CBSAs. If the county was not in a CSA, we 
would determine if it was in a CBSA that is not part of a larger CSA. 
Counties not located in a CBSA would be excluded from selection.
    We considered a number of factors to decide whether to select 
geographic areas on the basis of CSAs and CBSAs or just on CBSAs alone, 
including an assessment of the anticipated degree to which patients who 
have one of the proposed episode categories would be willing to travel 
for their initial hospitalization, the extent to which surgeons are 
expected to have admitting privileges in multiple hospitals located in 
different CBSAs, and statistical power considerations related to the 
number of independent geographic units available for selection (there 
are only 184 CSAs vs. 935 CBSAs). We also considered the risk for 
patient shifting and steering between CBSAs within a CSA, and we 
believe that the anticipated risk is not severe enough to warrant 
selecting CSAs.
    We next considered selecting hospital referral regions (HRRs). HRRs 
represent regional health care markets for tertiary medical care. HRRs 
are defined by determining where the majority of patients were referred 
for major cardiovascular surgical procedures and for neurosurgery. 
There are 306 HRRs with at least one city where both major 
cardiovascular surgical procedures and neurosurgery are performed. HRRs 
may not sufficiently reflect referral patterns for the five episode 
categories we proposed to test in TEAM, as only one of the five 
proposed episode categories is cardiovascular (coronary artery bypass 
graft surgery), and this episode category has the smallest procedure 
volume. Therefore, as stated in the proposed rule, we believe that 
CBSAs as a geographic unit are preferable over HRRs for this model.
    We also considered selecting states as the geographic areas for 
TEAM. However, we concluded that CBSAs as a geographic unit are 
preferable over states. Choosing states as the geographic unit would 
require us to automatically include hospitals in all rural areas within 
the selected states. Using a unit of selection smaller than a state 
would allow for a more deliberate choice about the extent of inclusion 
of rural or small population areas. Selecting states rather than CBSAs 
would also greatly reduce the number of independent geographic areas 
subject to selection under the model, which would decrease the 
statistical power of the model evaluation. Finally, CBSAs straddle 
state lines where providers and Medicare beneficiaries can easily cross 
these boundaries for health care. Choosing states as the geographic 
unit would potentially divide a hospital market and set up a greater 
potential for patient shifting and steering to different hospitals 
under the model. CMS decided that the CBSA-level analysis was more 
analytically appropriate based on the specifics of this model.
    For the reasons previously discussed, we proposed to require all 
hospitals, as defined in section X.A.3.a.(2)(b). of the preamble of 
this final rule and in proposed Sec.  512.505, within a CBSA that CMS 
selects through the stratified random sampling methodology, described 
in section X.A.3.a.(4)(d). of the preamble of this final rule, to 
participate in TEAM. Although CBSAs are revised periodically, with 
additional counties added to or removed from certain CBSAs, we proposed 
to use the CBSA designations in OMB Bulletin 23-01 issued on July 21, 
2023, as the CBSA designations for purposes of selecting participants 
for this model, regardless of whether such CBSA designations have 
changed since July 21, 2023, or will change at some point during the 
model performance period. We believe that this approach would best 
maintain the consistency of the TEAM participants in the model, which 
is crucial for our ability to evaluate the effects of the model test on 
quality of care and changes in Medicare spending.
(b) Exclusion of Certain CBSAs
    We proposed to exclude from the stratified random sampling of 
geographic areas any CBSAs that are located entirely in the state of 
Maryland, and certain CBSAs that straddle Maryland and another state. 
If a CBSA: (1) includes a portion of Maryland; and (2) more than 50 
percent of the episodes that initiated at hospitals within that CBSA 
between January 1, 2022, and June 30, 2023, for any of the five episode 
categories proposed for testing in TEAM did so at hospitals in 
Maryland, that CBSA will also be excluded from TEAM. We proposed to 
exclude these CBSAs from selection because the state of Maryland is 
currently participating in another Innovation Center Model--the 
Maryland Total Cost Ofo Care Model, as further described in section 
X.A.3.a.(2).(b).(i). of the preamble of this final rule.
    We also proposed to exclude CBSAs in which no episodes were 
initiated at hospitals for any of the five episode categories proposed 
for testing in TEAM between January 1, 2022, and June 30, 2023. We 
stated in the proposed rule that we believed it would be highly 
unlikely for these CBSAs to have data available for evaluation after 
the model starts. After applying these criteria, 803 CBSAs remain 
available for selection in TEAM. We proposed to use a stratified random 
sampling method as described below to select approximately 25 percent 
of eligible CBSAs in TEAM following the process we describe in the next 
two sections. We are providing the proposed list of CBSAs eligible for 
selection in TEAM in Table X.A.-03.\881\
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    \881\ This list was generated using the criteria and methods 
that are being proposed, and is subject to change if different 
criteria and methods end up being finalized.
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BILLING CODE 4120-01-C
(c) Selection Strata
    We proposed to stratify CBSAs into groups based on average 
historical episode spending, the number of hospitals, the number of 
safety net hospitals, and the CBSA's exposure to prior CMS bundled 
payment models.
    Stratification enables certain groups of interest to be represented 
at a higher level, or oversampled, in the model test. One of CMS' 
policy objectives is to extend the reach of value-based care to more 
beneficiaries, including beneficiaries from underserved communities. 
Consistent with that objective, CMS proposed to oversample CBSAs that 
have limited previous exposure to CMS' bundled payment models and CBSAs 
with a higher number of safety net hospitals.
    We considered stratifying eligible CBSAs into mutually exclusive 
groups corresponding to the 16 unique combinations of ``high'' and 
``low'' values for the following four CBSA-level characteristics (based 
on the median values across all CBSAs):
     Average spend for a broad set of episode categories in the 
CBSA. There are significant healthcare cost differences across 
geographic regions. One of the main objectives of TEAM is to reduce 
episode spending, and the proposed pricing methodology for episodes is 
regional. Thus, it will be important for the TEAM design to account for 
the significant variation in average episode spending across geographic 
regions. We proposed to use the episode categories included in the 
predecessor bundled payment model, BPCI Advanced, initiated between 
January 1, 2022, and June 30, 2023, to determine the average spend for 
a broad set of episode categories for each CBSA. The episode categories 
are: Acute myocardial infarction; Cardiac arrhythmia; Congestive heart 
failure; Cardiac defibrillator; Cardiac valve; Coronary artery bypass 
graft; Endovascular cardiac valve replacement; Pacemaker; Percutaneous 
coronary intervention; Cardiac defibrillator; Percutaneous coronary 
intervention; Disorders of liver except malignancy; cirrhosis or 
alcoholic hepatitis; Gastrointestinal hemorrhage; Gastrointestinal 
obstruction; Inflammatory bowel disease; Bariatric surgery; Major bowel 
procedure; Cellulitis; Chronic obstructive pulmonary disease; 
bronchitis, asthma, Renal failure; Sepsis; Simple pneumonia and 
respiratory infections; Urinary tract infection; Seizures; Stroke; 
Double joint replacement of the lower extremity; Fractures of the femur 
and hip or pelvis; Hip & femur procedures except major joint; Lower 
extremity and humerus procedure except hip, foot, femur; Major joint 
replacement of the lower extremity; Major joint replacement of the 
upper extremity; Back & neck except spinal fusion; Spinal fusion.\882\
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    \882\ See the technical resources section of the following web 
page on how these episode categories were constructed: https://www.cms.gov/priorities/innovation/innovation-models/bpci-advanced/participant-resources.
---------------------------------------------------------------------------

     Number of hospitals within the CBSA. We proposed to select 
CBSAs for purposes of model implementation, which include mSA areas in 
addition to MSAs, meaning that TEAM would be highly representative of 
the United States and would include many areas with only a single 
hospital as well as areas with a high number of hospitals. We stated in 
the proposed rule that we expected significant differences in the 
healthcare environment and beneficiary characteristics across CBSAs 
with low and high numbers of hospitals. Consequently, we believe it is 
important to select areas above and below the median to have broad 
representation of CBSAs included in the model.
     CBSA's past exposure to CMS' bundled payment models (BPCI 
Models 2, 3, and 4, CJR, or BPCI Advanced) during the period from 
October 1, 2013, to December 31, 2022. The extent of previous 
participation in bundled payment models in a CBSA may be a factor in 
how successful TEAM participants will be at reducing costs and 
improving quality of care under the model. We stated in the proposed 
rule that this stratification will allow CMS to assess how TEAM's 
impacts vary by past regional exposure to bundled payment models.
     Number of safety net hospitals in the CBSA. Safety net 
providers have historically not participated in voluntary episode-based 
payment models as frequently as other providers. Through TEAM, we see 
an opportunity to improve care for beneficiaries served by safety net 
providers and want to ensure focus on care redesign and improving 
quality of care for beneficiaries in underserved communities, 
consistent with CMS' objectives to improve health equity. Stratifying 
CBSAs by the number of safety net hospitals will allow CMS to gather 
robust data to assess TEAM's effects across a range of provider types.
    We ultimately decided to create an additional stratum from one of 
these 16 strata for a total of 17 strata to select CBSAs into TEAM. 
Below, we identify the stratum we proposed to split into two strata and 
how we would do that; and describe the reasons for this decision.
    We noted in the proposed rule that there are only a handful of 
outlier CBSAs with a very high number of safety net hospitals. 
Inclusion of these outlier CBSAs results in an extremely lopsided or 
asymmetrical distribution when stratifying CBSAs by this 
characteristic. Depending on the circumstances, these handful of CBSAs 
may potentially lead to significant

[[Page 69683]]

differences in the total number of safety net hospitals between the 
mandatory CBSAs that are selected for TEAM and those that are not 
selected. We therefore proposed to move these CBSAs into a new 17th 
stratum. Therefore, the proposed stratification process results in 17 
mutually exclusive strata of CBSAs.
(d) Random Selection of CBSAs From Strata
    We proposed to randomly select CBSAs for TEAM from the 17 
stratified groups using a method that reflects CMS' policy objectives 
described above, including expanding the reach of value-based care. We 
proposed to oversample CBSAs with low past exposure to CMS' bundled 
payment models and CBSAs with a high number of safety net hospitals. 
The selection probability for a given CBSA would differ across strata, 
but all CBSAs within a particular stratum, will have the same chance of 
being selected. The hospitals located in the selected mandatory CBSAs 
will be required to participate. We stated in the proposed rule that 
CMS' proposed method of randomly selecting CBSAs while oversampling 
CBSAs with certain characteristics would result in the following 
selection probabilities:
     33.3 percent of (one out of three) CBSAs will be selected 
in strata with high number of safety net hospitals and low past 
exposure to CMS' bundled payment models. Four strata have this 
selection probability.
     25 percent of (one out of four) CBSAs will be selected in 
strata with either high number of safety net hospitals or low past 
exposure to CMS' bundled payment models (but not both). Eight strata 
have this selection probability.
     20 percent of (one out of five) CBSAs will be selected in 
strata with neither high number of safety net hospitals nor low past 
exposure to CMS' bundled payment models. Four strata have this 
selection probability.
     50 percent of (one out of two) CBSAs will be selected with 
the highest number of safety net hospitals (One strata has this 
selection probability: the 17th stratum).
    The 17 selection strata and their relationship to the dimensions 
discussed above are represented in Table X.A.-04.
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    Through this selection scheme, CMS would select approximately a 
quarter of eligible CBSAs listed in Table X.A.-04 as the mandatory 
CBSAs in which TEAM would be implemented. A hospital's probability of 
being required to participate in TEAM would depend on the stratum their 
CBSA is in and would range from 20 percent to 50 percent.
    We conducted power analyses to identify detectable changes in 
episode spending between a potential group of mandatory CBSAs selected 
for the model and a potential control group of CBSAs using a Type I 
error of 0.05 and Type 2 error of 0.2 (implying a power of 0.8). The 
analysis shows that, if a quarter of eligible CBSAs are selected for 
TEAM, we will be able to detect 1.5 percent changes in episode 
spending, all else being equal. This change in episode spending is 
within the savings range that CMS might expect to achieve given 
estimates for surgical episodes from previous episode-based payment 
models, including BPCI Model 2, CJR, and BPCI Advanced. This is 
critical to ensuring that CMS can assess the model's impact on Medicare 
spending.
    We sought comment on our proposed approach to selecting TEAM 
participants at Sec.  512.515.
    The following is a summary of comments we received on the proposed 
approach to selecting TEAM participants and our responses to these 
comments:
    Comment: Numerous commenters noted concerns regarding to 
oversampling safety-net hospitals. Commenters noted that this would put 
undue burden on these providers who work in hospitals that care for a 
high proportion of vulnerable patients. A commenter stated that over-
sampling of safety net hospitals will financially harm hospitals who 
can least afford to take on risk. Another commenter stated that these 
already-stretched-thin providers may not have the capacity to succeed 
in this model as proposed. Safety net hospitals may have diminished 
readiness to bear risk and have fewer resources than non-safety-net 
hospitals. A couple commenters noted the same factors that increase the 
cost to deliver care to safety net populations also reduce the 
likelihood of success in episodic payment models and that these 
hospitals have not demonstrated significant spending reductions in 
previous models. A

[[Page 69684]]

commenter suggested eliminating the 17th outlier stratum.
    Response: While we recognize the commenters' concerns with 
requiring participation from safety net hospitals, as defined in 
section X.A.3.f of the preamble of this final rule, by including all 
types of hospitals within TEAM CMS will have a better, more accurate 
picture of the effects of the model for consideration of any potential 
expansion on a national scale. The stratification approach will allow 
CMS to assess TEAM across healthcare delivery settings, from high-
resource environments to those with limited capabilities. One of CMS' 
policy objectives is to extend the reach of value-based care to more 
beneficiaries, including beneficiaries from underserved communities. 
Determining the impact across diverse markets, hospitals and patient 
populations is critical for ensuring the design of the payment model is 
fair and equitable across all types of hospitals. To balance the need 
for a broad test of TEAM and the concerns about the negative financial 
impacts on safety-net hospitals, TEAM will provide additional 
flexibilities to these hospitals as discussed in section X.A.3.a.(3) of 
the preamble of this final rule.
    Comment: A few commenters expressed concerns with the selection 
approach using CBSAs as the unit of selection. One commenter was 
worried that this could inadvertently harm academic medical centers 
because these tertiary care centers often serve patients from outside 
their CBSA, and patients from outside their region are typically more 
complex. The commenter suggested that that the difference in where 
patients reside between academic/referral center/tertiary care centers 
and community hospitals should be taken into consideration in the 
model, including benchmarking.
    Response: We appreciate the views and expressed concerns of the 
commenters on our proposal for required participation in the TEAM based 
on CBSA selection. By using CBSAs as the unit of selection, CMS is 
ensuring that the model represents a wide range of markets. 
Additionally, we believe that by requiring the participation of a large 
number of hospitals with diverse characteristics, TEAM will result in a 
robust data set for evaluation of this payment approach and will 
stimulate the rapid development of new evidence-based knowledge. 
Regarding the comment about differences in patient complexity, the risk 
adjustment methodology discussed in X.A.3.d.(4) of the final rule 
explains how patient-level factors are taken into account.
    Comment: A couple of commenters outlined concerns for hospitals 
located in rural areas. These commenters suggested that CMS exclude 
rural areas and providers located in rural areas from the model or 
allow these hospitals to voluntarily opt-in because these commenters 
said that these hospitals may have difficulty in achieving the model 
aims due to low volume of procedures and a low supply of associated 
providers. Commenters stated particularly in particular that geographic 
areas with primary care shortages might encounter difficulties in 
referring post-surgical patients to appropriate primary care follow-up 
within the 30-day episode. Commenters said that hospitals that handle 
very low volumes of the selected episodes do not have the experience or 
volume to adjust behaviors as envisioned by the proposed model.
    Response: We appreciate TEAM and acknowledge commenters' concerns 
related to the ability of small and rural providers to effectively 
participate and succeed in the model. The inclusion of hospitals 
possessing a variety of characteristics is critical to allow CMS to 
evaluate the impact of the model on a wide range of hospitals in 
diverse markets. Including hospitals with various volumes of services; 
different levels of access to financial, community, or other resources; 
and various levels of population and health provider density, will 
provide a broad test of the model and generate evidence for 
consideration of any potential expansion on a national scale.
    We acknowledge that providers with low volumes of cases may not 
find it in their financial interests to make systematic care redesigns 
or engage in an active way with TEAM. We expect that low volume 
providers may decide that their resources are better targeted to other 
efforts because they do not find the financial incentive present in the 
TEAM sufficiently strong to cause them to shift their practice 
patterns. We acknowledge that low volume hospitals may achieve less 
savings because they did not or could not make the necessary changes to 
the treatment of their qualifying beneficiary population. We believe 
this choice is similar in nature to that made as hospitals decide their 
overall business strategies and where to focus their efforts.
    Comment: A couple of commenters discussed how prior experience with 
participation in value-based care could hinder a hospital's ability to 
be successful in TEAM. Specifically, in CBSAs that include hospitals 
with a long history of hospital participation in value-based care 
models, hospitals will have already found efficiencies and they may 
face undue difficulty finding more efficiencies thus leading to 
diminishing returns under TEAM. A commenter expressed fears that 
including these areas will penalize early adopters.
    Response: We acknowledge the concerns of the commenters, but we 
disagree that requiring hospitals located in mandatory CBSAs with a 
long history of participation in value-based care to participate in 
TEAM would penalize early adopters. It would be highly unlikely that 
these historically low-cost hospitals would find regional target prices 
unachievable. Rather, if all hospitals in a region did not change their 
behavior, hospitals that are historically low-cost relative to other 
hospitals in their region and conditional on their episode risk 
adjusters, would generally be rewarded under the model. We expect that 
hospitals can build upon already established infrastructure, practices, 
and procedures to achieve efficiencies under this episode payment 
model.
    Comment: One commenter stated that the selection approach may 
inadvertently exclude hospitals with particularly high volumes of the 
surgical procedures proposed for the model and suggested an opportunity 
for hospitals with high volumes of the surgical procedures to opt-in.
    Response: While we acknowledge that some high-volume hospitals not 
located in a selected mandatory CBSAs may desire to participate in 
TEAM, maintaining the mandatory, randomized design will allow for a 
more accurate test of the effects of the model to inform potential 
expansion on a national scale. CMS designed TEAM based on prior 
experience with several types of large voluntary episode payment 
models. TEAM is intended to be a broader test of episode payment models 
by including hospitals who may not otherwise volunteer for such a 
model. The participant selection methodology for TEAM was designed to 
provide adequate statistical power for evaluating and detecting changes 
in cost and quality and allows us to observe the experiences of 
hospitals in geographic areas with a broad range of characteristics. 
The selection approach ensures that important characteristics are 
balanced across TEAM participants and the control group, (i.e., 
eligible hospitals not selected for TEAM). Section X.A.3.a.(2)(c) of 
the preamble of this final rule discusses the narrow opportunity for 
select hospitals to opt-in to TEAM if they are not located in a 
mandatory CBSA. This option has been

[[Page 69685]]

limited to a select group of hospitals currently participating in 
episode-based payment models to continue care transformation efforts.
    Comment: A commenter stated that the proposed sampling methodology 
will create unnecessary payment complexity and hinder CMS' ability to 
accurately isolate and evaluate the impacts of the proposed model. They 
expressed concern that several markets with a high probability of being 
sampled based on the established methodology also have the highest 
level of participation in ACOs. The commenter's concern was two-fold 
(1) they thought this could create an unnecessarily complex payment 
environment in sampled areas across the country; and (2) they thought 
it would be particularly difficult for CMS to parse out whether savings 
are generated by TEAM or other models.
    Response: We note that the simultaneous testing of multiple value-
based care initiatives is an appropriate strategy in many situations, 
depending on the care targeted under each model. Section X.A.3.e of the 
preamble of this final rule lays out our policies for accounting for 
overlap between models and contains discussion of the potential 
synergies and improved care coordination we expect will ensue through 
allowing for hospitals and beneficiaries to be engaged in more than one 
initiative simultaneously. We see no compelling reason why hospitals 
participating in ACO initiatives and other efforts cannot be TEAM 
participants.
    Comment: A few commenters had concerns with the model requiring 
participation for all IPPS hospitals within the mandatory CBSA. A 
commenter asserted that many hospitals are neither of an adequate size 
nor in a financial position to support the investments necessary to 
transition to mandatory bundled payment models. Commenters suggested a 
variety of alternative options; make TEAM fully voluntary, begin with a 
period of voluntary participation, allow hospitals the opportunity to 
opt-in or out based on internal assessment of readiness. A commenter 
stated that voluntary participation grants entities who have the 
existing capabilities and resources a window to put in place practices 
that reduce the risk of unsuccessful financial and quality outcomes. 
Another commenter suggested adding in a selection variable that would 
capture CBSA readiness.
    Response: We appreciate the concerns of the commenters. The CMS 
Innovation Center has multiple years of experience with several types 
of large voluntary episode payment models where we have successfully 
collaborated with participants on implementation of episode-based 
payment models in a variety of settings for multiple clinical 
conditions. Because we believe that it is important to provide an 
option for hospitals currently participating in episode-based payment 
models to continue care transformation efforts, Section X.A.3.a.(2)(c) 
of the preamble discusses an opportunity for select hospitals to opt-in 
to TEAM if they are not located in a mandatory CBSA. The mandatory, 
randomized design allows us to observe the experiences of hospitals in 
geographic areas with various characteristics, such as variation in the 
number of hospitals, average episode spending, number of hospitals that 
serve a higher proportion of historically underserved beneficiaries, 
and differing experience with previous CMS episode-based payment 
models. The TEAM evaluation could then examine whether these 
characteristics impact the effect of the model on patient outcomes and 
Medicare expenditures within episodes of care.
    We acknowledge that hospitals will have varying levels of readiness 
to implement the care redesign activities to be successful in TEAM. As 
discussed in section X.A.3.a.(3) of the preamble of this final rule, we 
believe the phasing in of full financial risk by offering participation 
tracks with differing levels of risk and reward, and our planned 
efforts to engage with hospitals to help them succeed under this model 
through the provision of beneficiary-identifiable claims data, pursuant 
to a request and TEAM data sharing agreement, as discussed in section 
X.A.3.k of the preamble of this final rule, will aid hospitals to 
succeed under TEAM.
    Comment: A couple commenters shared their concerns regarding of the 
size of the model and suggested that CMS reduce the percentage of 
mandatory CBSAs selected from 25 percent to 10-15 percent.
    Response: The size of the model was determined based on the ability 
to have the statistical power to detect significant impacts on payment. 
We conducted power analyses under TEAM as proposed, and under the TEAM 
participant definition, discussed in Section X.A.3.a.(2)(b) of the 
preamble of this final rule, to identify detectable changes in episode 
spending between a potential group of mandatory CBSAs selected for the 
model and a potential control group of CBSAs using a Type I error of 
0.05 and Type 2 error of 0.2 (implying a power of 0.8). The analysis 
showed that selecting a quarter of eligible CBSAs for TEAM will enable 
the detection of 1.5 percent changes in episode spending, all else 
being equal.
    Comment: A commenter suggested TEAM should emphasize the low-risk 
Track options and choose CBSAs newer to value-based initiatives, then 
study factors that affect intra-CBSA coordination, such as equity, 
rurality, and interoperability.
    Response: We appreciate comments expressing that it is important to 
include CBSAs newer to value-based initiates and to evaluate a broad 
range of factors that may affect the models' impacts. One of CMS' 
policy objectives is to extend the reach of value-based care to more 
beneficiaries.
    Comment: Many commenters urged significant transparency from CMS by 
providing the list of selected mandatory CBSAs. They stated that 
without any information on those mandatory CBSAs selected for 
participation in TEAM, the public's ability to understand and 
ultimately articulate potential impacts is compromised. The commenters 
thought that this transparency is critical not only for fairness and 
trust but also for enabling systematic evaluation and feedback, which 
are essential for continuous improvement in public health policy.
    Response: We appreciate comments expressing concerns around 
transparency, fairness, and systematic evaluation. We agree 
transparency is critical and have provided the list of selected 
mandatory CBSAs in Table X.A.-07 of the preamble of this final rule to 
provide sufficient notice between when the final listed of selected 
mandatory CBSAs is published and when the model starts.
    After consideration of the public comments we received, we are 
finalizing our proposal for the approach to selecting mandatory CBSAs 
and TEAM Participants with modifications.
    As finalized in section X.A.3.a.(2)(c) of the preamble of this 
final rule, we are finalizing a voluntary opt-in option for BPCI 
Advanced and CJR model participants that participate in those models 
until the last day of the last performance period or last performance 
year of their respective model.\883\ However, we recognize that 
allowing voluntary opt-in may cause self-selection effects and limit 
the rigor of randomization, and we are unsure of extent of those 
effects at this time.
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    \883\ For the BPCI Advanced model, the last day of the last 
performance period, performance period 14, is December 31, 2025. For 
the CJR model, the last day of the last performance year, 
performance year 8, is December 31, 2024.
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    To mitigate such adverse effects of self-selection on evaluation 
rigor, we are finalizing a slightly modified selection

[[Page 69686]]

approach to isolate potential bias introduced by the potential BPCI 
Advanced and CJR participants that voluntarily opt to participate in 
TEAM. In the first 16 strata, we will move the CBSAs that contain at 
least one hospital participating in BPCI Advanced or CJR model as of 
January 1, 2024, and CBSAs that are located in a state that is 
participating in AHEAD states except Maryland, finalized in this 
preamble section X.A.3.a.(2), to a new stratum--stratum 18. As a 
result, CMS is finalizing a stratification policy that moves 93 CBSAs 
from strata 1-16 to the 18th stratum. We are finalizing stratum 17 as 
proposed, without any changes, as this stratum already includes five 
CBSAs, in addition to the 93 CBSAs described above, that contain a 
hospital participating in BPCI Advanced or CJR as of January 1, 2024. 
Other than the creation of the 18th stratum, we are generally 
finalizing the proposed eligibility criteria for CBSAs in TEAM as 
proposed. Thus, there are still 803 CBSAs in the country which include 
2,718 IPPS hospitals eligible for selection.
    As shown in Table X.A.-06, we are finalizing a policy to assign 
CBSAs to one of 18 strata. As proposed, CMS is assigning CBSAs to one 
of 16 strata on the basis of high or low values (based on median 
values) of four CBSA characteristics: past exposure to CMS' bundled 
payment models (BPCI Models 2, 3, and 4, CJR, or BPCI Advanced) in the 
CBSA, the number of safety net hospitals, the number of hospitals, and 
the average cost of care for surgical and medical episodes in the BPCI 
Advanced model. As proposed, CMS is assigning six CBSAs with 
exceptionally large numbers of hospitals and safety net hospitals to 
stratum 17. Designating a stratum for these unique CBSAs helps 
selecting control CBSAs that are comparable to TEAM CBSAs, which is 
critical for unbiased evaluation results. Finally, CMS is moving the 93 
CBSAs in strata 1-16 CBSAs that contain at least one hospital that meet 
the criteria related to BPCI Advanced, CJR model participation, or 
AHEAD participation, as finalized in section X.A.3.a.(2) of the 
preamble of this final rule, to the newly created stratum 18.
    Among strata 1-16, strata with high past exposure to BPCI Advanced 
and low counts of safety net hospitals were assigned to TEAM with a 
probability of 20 percent. Strata with low past exposure to CMS' 
bundled payment models and high counts of safety net hospitals were 
assigned to TEAM with a probability of 33 percent. CBSAs with either 
low past exposure to CMS' bundled payment models or high counts of 
safety net hospitals (but not both) were assigned to TEAM with a 
probability of 25 percent. CBSAs in stratum 17 were assigned to TEAM 
with a probability of 50 percent. Finally, CBSAs in stratum 18 were 
assigned to TEAM with a probability of 20 percent, the lowest 
probability of selection from strata 1-16. This ensures that despite 
the addition of stratum 18, no hospital would have a higher probability 
of selection than they would have had CMS selected mandatory CBSAs 
exactly as described in the proposed rule. See Table X.A.-05 for list 
of CBSAs and their final assigned strata.
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    CMS randomized the CBSAs as described in this rule and selected 188 
CBSAs for TEAM (23.4 percent of 803 CBSAs). CMS has conducted an 
analysis and found that CBSAs that were randomly selected into TEAM are 
comparable to those that were not selected for TEAM (that is, the 
control group), which is essential for a rigorous evaluation of TEAM. 
See Table X.A.-06 for finalized selection strata and selection 
probabilities. See Table X.A.-07 for list of mandatory CBSAs selected 
for TEAM.

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BILLING CODE 4120-01-C
b. Episodes
(1) Background
    In the proposed rule, we stated that a key model design feature for 
episode-based payment models is the definition of the episodes included 
in the model. We stated that the episode definition has two significant 
dimensions--(1) a clinical dimension that describes which clinical 
conditions and associated services are included in the episode; and (2) 
a time dimension that describes the beginning and end of the episode, 
its length, and when the episode may be cancelled prior to the end of 
the episode (89 FR 36412).
(2) Overview of Episodes
    In the proposed rule, we stated that in selecting episodes to test 
in TEAM, we considered a variety of factors, including the number and 
type of episodes best suited to meet the goals of the model (89 FR 
36413). We chose to limit the selection of episode categories for TEAM 
to those that were included in BPCI Advanced through a robust selection 
process similar to that used for the CJR model (80 FR 73277). These 
episode categories represent high-expenditure, high-volume care 
delivered to Medicare beneficiaries and are evaluable in an episode-
based payment model. BPCI Advanced clinical episodes include both 
surgical episodes, which are triggered by a surgical procedure, and 
medical episodes that are primarily non-surgical in nature.
    In the proposed rule, we stated that while we continue to strive 
for our models to reduce Medicare expenditures and improve quality of 
care, we also want to ensure that there is a potential for 
participating hospitals to succeed. We want the conditions captured by 
episode categories in TEAM to be clinically similar enough that 
participants could drive care improvements by streamlining care 
pathways and transitions between clinical settings. In general, 
elective surgical procedures are associated with greater clinical 
homogeneity than unplanned hospitalizations or medical conditions. In 
addition, when episodes are clinically similar, episode spending is 
more predictable. Unsurprisingly, medical episodes are associated with 
greater spending variability. Medical episodes may also be more 
difficult to manage for hospitals without previous experience 
implementing value-based care and care redesign activities.
    In the proposed rule, we noted that evaluations of CJR and BPCI 
Advanced suggest that surgical episode categories do not capture 
underserved populations to the same degree as medical episodes and that 
medical episodes may offer relatively greater opportunity to address 
health equity. Specifically, medical episodes generally have a higher 
proportion of dual-eligible beneficiaries when compared to surgical 
episodes. TEAM will test novel ways to improve representation of 
underserved populations in surgical episodes through targeted 
flexibilities for safety net hospitals (discussed in section 
X.A.3.a.(3) of this final rule) and more broadly defined beneficiary-
level social risk adjustment (described in section X.A.3.f. of this 
final rule).
    In the proposed rule, we stated that we also selected episodes for 
this proposed model with a greater proportion of spending in the post-
acute period relative to the anchor hospitalization or procedure, as 
such episodes may reflect a greater opportunity to improve care 
transitions for beneficiaries and reduce unnecessary hospitalizations 
and emergency care.
    Finally, we acknowledged that testing all 34 BPCI Advanced episodes 
in a novel mandatory model could overwhelm participants.
    For the reasons discussed previously in the proposed rule, we 
proposed testing five surgical episodes in the model--Coronary Artery 
Bypass Graft Surgery (CABG), Lower Extremity Joint Replacement (LEJR), 
Surgical Hip and Femur Fracture Treatment (SHFFT), Spinal Fusion, and 
Major Bowel Procedure. We stated in the proposed rule that based on our 
experience with the BPCI Advanced and CJR models and the stakeholder 
feedback received in response to the July 2023 Episode-Based Payment 
Model Request for Information (88 FR 45872), we believe that beginning 
the model with these five episode categories is the most reasonable 
course for TEAM. Specifically, we proposed to test surgical episodes 
because they are time-limited with well-defined triggers, have 
clinically similar patient populations with common care pathways, and 
have sufficient spending or quality variability, particularly in the 
post-acute period, to offer participants the opportunity for 
improvement (89 FR 36413).
    We stated in the proposed rule that the proposed episodes have been 
previously tested in BPCI Advanced voluntarily, allowing CMS to assess 
engagement and gather data. The proposed episodes represent the highest 
volume and highest cost surgical episodes performed in the inpatient 
setting. Although CABG and SHFFT episodes were finalized in the 
Advancing Care Coordination through Episode Payment Models (Cardiac and 
Orthopedic Bundled Payment Models) Final Rule (CMS-5519-F) on December 
20, 2016, that mandatory test was not implemented. The proposed TEAM is 
the next logical step for applying lessons learned from BPCI Advanced 
in a mandatory model. TEAM would enable CMS to capture a more diverse 
population of providers, and potentially beneficiaries.
    Regarding our proposed episodes, we direct readers to certain 
changes that were included in the correction notice for the proposed 
rule (CMS-1808-CN) published May 31, 2024, which addressed inadvertent 
errors in this Proposed Episodes section of the proposed rule.
    First, we added language to reflect the proposed changes to the 
spinal fusion Medicare Severity Diagnosis Related Groups (MS-DRGs) 
outlined in the proposed rule (89 FR 35971). We stated that TEAM would 
conform to the new spinal fusion MS-DRGs, if finalized, for the 
purposes of identifying and defining spinal fusion episodes that would 
be included in the model. The spinal fusion MS-DRG changes that would 
directly impact the TEAM Spinal Fusion episode category are also 
discussed in Section X.A.3.b.(4)(d) and X.A.3.b.(5)(c) of this final 
rule.

[[Page 69711]]

    Second, in the correction notice, we clarified that the Medicare 
FFS claims data referenced in the discussion of BPCI Advanced episodes 
in the proposed rule was limited to BPCI Advanced episodes, not all 
Medicare FFS claims (89 FR 36413). While we did not explicitly restate 
that we were discussing historical BPCI Advanced episodes, we expected 
this would address any confusion between the estimated volumes in this 
section of the final rule and those included in section X.A.3.b.(4) for 
TEAM episodes. Specifically, the estimated BPCI Advanced episode 
volumes are based on final episode counts, which reflect BPCI Advanced 
episode-level exclusions and overlap policies. That is, episodes that 
were excluded at any point during the 0-90 days following discharge 
from an anchor hospitalization or anchor procedure would not have been 
counted as a BPCI Advanced episode and would lower episode counts.
    Finally, we updated out of date hyperlinks to the ICD-10-CM/PCS MS-
DRG Definitions Manual in the episode category footnotes throughout the 
Overview of Proposed Episodes section of the proposed rule (89 FR 
36413). They have been updated again since the release of the 
correction notice to account for the release of Version 42 of the ICD-
10 MS-DRG Definitions Manual that will be published with this final 
rule.
    In the proposed rule, we stated that the proposed Lower Extremity 
Joint Replacement (LEJR) episode category would include hip, knee, and 
ankle replacements performed in either the hospital inpatient or 
outpatient setting. This episode category was selected because, using 
2021 BPCI Advanced episode data, it was the highest volume, highest 
cost BPCI Advanced surgical episode category. There were 204,160 
episodes with a total cost of $5.01 billion, with more than 40 percent 
of spending occurring in the post-acute period.
    In the proposed rule, we stated that the proposed SHFFT episode 
category, referred to as Hip and Femur Procedures except Major Joint in 
BPCI Advanced, would include beneficiaries who receive a hip fixation 
procedure in the presence of a hip fracture. It would not include 
fractures treated with a joint replacement. This episode was selected 
because it was the second highest volume, and second-highest cost BPCI 
Advanced surgical episode performed in the inpatient setting, using 
2021 BPCI Advanced episode data. There were 69,076 episodes with a 
total cost of $3.22 billion, with more than 63 percent of spending 
occurring in the post-acute period.
    In the proposed rule, we stated that the proposed CABG episode 
category would include beneficiaries undergoing coronary 
revascularization by CABG surgery.\884\ This episode was selected to 
maintain the engagement of cardiac surgeons who have participated in 
prior episode-based models. Among cardiac procedures it was the second 
highest cost and second highest volume BPCI Advanced surgical episode 
performed in the inpatient setting using 2021 BPCI Advanced episode 
data. There were 26,259 episodes with a total cost of $1.39 billion; 
approximately 22 percent of spending occurred in the post-acute period. 
In the proposed rule we stated we also considered percutaneous coronary 
intervention (PCI) for TEAM because it was the highest volume and 
highest cost surgical cardiac episode. However, we did not propose a 
PCI episode because PCI has been described as a low-value service by 
the Medicare Payment Advisory Commission when performed for stable 
coronary artery disease,\885\ and the majority of PCIs are performed in 
the outpatient setting and are not associated with an acute event.
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    \884\ FY 2025 ICD-10 MS-DRG Definitions Manual Version 42. 
Available at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software.
    \885\ MedPAC March 2021 Report to the Congress. https://www.medpac.gov/.
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    In the proposed rule, we stated that the proposed Spinal Fusion 
episode category would include beneficiaries who undergo certain spinal 
fusion procedures in either a hospital inpatient or outpatient setting. 
This episode was selected because it was the third-highest cost BPCI 
Advanced surgical episode performed in the inpatient setting using 2021 
BPCI Advanced episode data. There were 62,345 episodes with a total 
cost of $3.2 billion; more than 27 percent of spending occurred in the 
post-acute period.
    In the proposed rule, we stated that the proposed Major Bowel 
Procedure episode category would include beneficiaries who undergo a 
major small or large bowel surgery.\886\ This episode was selected 
because it was the fifth-highest volume and fourth-highest cost BPCI 
Advanced surgical episode performed in the inpatient setting using 2021 
BPCI Advanced episode data. There were 54,848 episodes with a total 
cost of $1.95 billion; 37 percent of spending occurred in the post-
acute period (89 FR 36414).
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    \886\ FY 2025 ICD-10 MS-DRG Definitions Manual Version 42. 
Available at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software.
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    In the proposed rule, we stated that each of the episodes provides 
different opportunities for TEAM to improve the coordination and 
quality of care, as well as efficiency of care during the episode, 
based on varying current patterns of utilization and Medicare spending. 
While these episode categories have been tested previously, we believe 
TEAM will provide additional information that can be used for potential 
expansion through its greater focus on care transitions back to primary 
care, health equity, and refined payment methodology, as described in 
section X.A.3.d. of the preamble of this final rule.
    In the proposed rule, we stated that the mandatory nature of TEAM 
would address selection bias, where high performing hospitals have 
elected to voluntarily participate in a model but then withdrew from 
the model in the face of financial losses or uncertainty of receiving 
financial rewards. In BPCI Advanced, participants were able to select 
clinical episode categories and, later, service lines, which further 
ensured selection bias.
    In the proposed rule, we stated we performed an analysis of BPCI 
Advanced episode claims data, beginning in CY 2021, to estimate the 
average annual number of historical episodes that extended 30 days 
post-hospital discharge, and, therefore, would have been included in 
TEAM. Based on that analysis, after applying all BPCI Advanced episode-
level exclusion and overlap policies, we anticipate the number of BPCI 
Advanced episodes that TEAM would capture to be approximately 28,088 
for CABG; 75,254 for SHFFT; 59,983 for Major Bowel Procedure; 215,957 
for LEJR; and 65,968 for Spinal Fusion. The average episode cost for 
these historical episodes was approximately $48,905 for CABG, $35,501 
for SHFFT, $29,184 for Major Bowel Procedure, $21,063 for LEJR, and 
$46,326 for Spinal Fusion.
    As previously stated in the proposed rule, we proposed five episode 
categories for TEAM to ease TEAM participants into episode 
accountability. We stated in the proposed rule that we intend to add 
additional episode categories in future performance years of the model, 
offering a gradual transition to greater episode accountability, and 
ultimately to capture a larger proportion of FFS spending in value-
based care. We also solicited input on which medical episodes we should 
consider for future years of the model. Finally, we stated that any 
additional episodes would be

[[Page 69712]]

added to TEAM pursuant to notice and comment rulemaking (89 FR 36413).
    We sought comment on the five proposed episode categories, 
described at Sec.  512.525(d). We also solicited input on additional 
episode categories, including medical episode categories, we should 
consider for the model.
    The following is a summary of the public comments received on the 
proposed episode categories, potential additional episode categories, 
and our responses to those comments. Here, we have included comments 
related to the number and type of proposed episodes. We have separately 
summarized and responded to comments regarding the five specific 
proposed episode categories below in Section X.A.3.b.(4) of this final 
rule, which covers Episode Category Definitions.
    Comment: Several commenters supported the decision to include five 
episodes in TEAM. One commenter thanked CMS for selecting a smaller 
panel of clinical episodes while representing multiple service lines to 
maximize clinical value and physician engagement. Many commenters 
supported including acute, surgical episodes, finding them appropriate 
for episode-based models, in part, because procedures are 
straightforward clinical triggers with defined and well-established 
care practices and protocols. A commenter believed participants will 
have an easier time drawing clinical pathways, monitoring cost, finding 
efficiency, and scoring performance for surgical episodes. Another 
commenter stated that the selected episodes are good choices given the 
overall goals of the demonstration.
    Response: We thank commenters for supporting the inclusion of five 
surgical clinical episode categories in TEAM.
    Comment: Many commenters thought five episodes was too many for a 
mandatory model because many health care systems and facilities will be 
new to the concept of bundled payments. Some commenters suggested CMS 
commence the demonstration with fewer covered conditions and gradually 
add episodes in future model years, to allow for the education and 
process changes that will be necessary for each clinical episode 
category. Several commenters stated that, given the limited resources 
available, five episodes will overwhelm many hospitals, create 
unnecessary burden, and be too disruptive.
    Response: We do not believe that five episodes is too many for a 
mandatory model as we see TEAM as a model designed using lessons 
learned and experiences gained in prior models, including CJR. We see 
TEAM has a logical step forward in expanding our testing of mandatory 
episodes of care.
    However, we acknowledge that there will likely be TEAM participants 
with limited experience with the concept of bundled payments or 
managing five clinical episodes at one time. For this reason, we 
proposed a glide path to two-sided risk for TEAM participants to ensure 
that TEAM participants have time to prepare for two-sided financial 
risk. This is intended to support a TEAM participant's transition into 
the model and to allow participants time for education and process 
changes necessary for each category. Please refer to section X.A.2.d of 
this rule for additional details on TEAM participant risk tracks.
    Comment: Many commenters believed participants should have the 
option to voluntarily select individual clinical episodes, for which 
there are opportunities to improve patient outcomes for the specific 
populations served by each hospital, as opposed to requiring 
participants to take on risk for large, clinically diverse bundles of 
episodes. A commenter suggested that CMS adopt episodes that are more 
closely related, which would enable hospitals to engage common medical 
specialties and care teams. Several commenters stated that because the 
episodes selected are dissimilar, they will require different 
workflows, processes, and specialist engagement, which would equate to 
not one mandated program but at least five individual programs. A 
couple of commenters stated that voluntary selection would also allow 
hospitals with limited resources, such as safety net hospitals, to 
participate without over-extending staff or expending resources on 
episodes for which it has marginal volume.
    Response: We appreciate that commenters would like to voluntarily 
select clinical episodes in TEAM. However, we believe that testing all 
the proposed episode categories in TEAM will enable CMS to test how 
participants perform in clinical areas that they would otherwise not 
select. Allowing participants to voluntarily choose episode categories 
would introduce selection bias, make evaluating TEAM more difficult, 
and produce less generalizable findings. We expect that TEAM will 
produce data that are more broadly representative of spending, quality, 
and outcomes than what might be collected under a voluntary model.
    Comment: Some commenters suggested that CMS share additional 
information with respect to the criteria, clinical or administrative, 
that CMS used so stakeholders may better understand how CMS chose the 
clinical episodes. A commenter recommended that CMS develop a process 
for adding any new clinical episodes to TEAM, detailing exactly what 
criteria are utilized in considering new episodes and including a 
standardized and lengthy notice and comment period. Another recommended 
CMS work with stakeholders, including clinicians, to model and design 
future episodes.
    Response: We appreciate these comments and the desire from 
commenters to have a better understanding of the criteria used and 
analyses undertaken to identify and select clinical episodes. We 
respect that stakeholders want to understand the details used to 
determine additional clinical episodes to add to TEAM in future years, 
especially based on the mandatory nature of the model. For a discussion 
on the criteria and analyses used to select the episode categories for 
TEAM, we direct readers to section X.A.3.b.(2) of this final rule and 
page 89 FR 36413 of the proposed rule. With respect to developing a 
process for adding episode categories and working with stakeholders, we 
stated above in section X.A.3.b.(2) of this final rule and, previously 
in the proposed rule (89 FR 36413), that any additional episode 
categories would be added pursuant to notice and comment rulemaking. We 
encourage the public, including clinicians, to submit comments in 
response to any future TEAM rulemaking. CMS will take into 
consideration any feedback received should additional clinical episode 
categories be considered for TEAM in future years. Additional episode 
categories would be proposed through future notice and comment 
rulemaking.
    Comment: A few commenters raised the need for the model to be 
inclusive of services and supports that address conditions, such as 
obesity and osteoporosis, which may precipitate or exacerbate clinical 
episodes in TEAM. A commenter stated that a broad team of health 
professionals is essential for coordination purposes and to deliver 
complete and comprehensive care. Another commenter highlighted the need 
for comprehensive healthcare as a means to improve long-term costs and 
overall health outcomes. Another commenter believed TEAM would penalize 
facilities for the added cost of performing even a cursory inquiry into 
the underlying causes of bone fragility.
    Response: We appreciate these comments and acknowledge the 
importance of including services for conditions that may precipitate or 
exacerbate clinical episodes in TEAM.

[[Page 69713]]

Because of this, we proposed to only exclude from episodes certain Part 
A and B items and services that are clinically unrelated to the anchor 
hospitalization or anchor procedure, thus ensuring the episode captures 
all relevant items and services rendered (89 FR 36416).
    Although we recognize that some underlying conditions may require 
services that would not be captured in the TEAM episode because they 
occur outside of the episode window, we encourage TEAM participants to 
ensure they are accurately documenting underlying conditions upon 
admission for anchor hospitalization or anchor procedure. This 
information could prove vital in determining the best course of care 
for the patient during their anchor stay or anchor procedure and after 
discharge.
    Comment: Many commenters provided feedback with respect to the 
potential inclusion of additional surgical and medical episodes CMS 
might consider for later years of the model. A commenter stated that 
CMS should focus on episodes that already have a proven track record in 
voluntary models. Another commenter stated CMS should select episodes 
that are high volume and have variability in costs, so participants 
have meaningful opportunities to participate and achieve success under 
the model. Many commenters supported additional acute episodes. Many 
commenters urged CMS not to add new episodes during the model 
performance period so as not to introduce additional burden onto 
hospitals. A few commenters stated that, once a model begins, it can be 
challenging to change workflows and processes if the requirements 
suddenly change or expand, particularly when health systems are already 
struggling to meet growing Inpatient Quality Reporting (IQR) 
requirements. A commenter felt that if CMS ultimately ends up adding 
additional services during the model, the episodes should be optional 
for participants.
    Response: We appreciate these comments on considerations for future 
clinical episodes CMS may consider for later years of the model. Many 
factors would play into the potential introduction of new and 
additional episodes in TEAM and all episodes would be vetted internally 
within CMS with analysis to ensure there is sufficient episode volume 
and opportunity to make the episode worth incorporating. CMS may 
consider bringing in additional expertise to help guide analysis and 
decision-making regarding potential new episodes, as well. 
Additionally, any new episodes would be introduced to TEAM through 
notice and comment rulemaking so the public would be able to share 
their opinions and thoughts during the comment period.
    Comment: Many commenters urged CMS to consider stratifying emergent 
and other non-elective episodes because of the substantial cost 
difference in those procedures that are done on a scheduled basis, 
compared to those that are done on an emergent basis. A commenter 
believed only elective surgeries should be included in the model. A 
commenter noted that elective episodes provide patients and caregivers 
ample time to prepare for post-hospitalization care, whereas emergent 
cases do not. Several commenters believe that stratifying by elective 
status creates targets that are more equitable across hospital types. A 
commenter stated that hospitals with trauma centers will be 
disadvantaged whereas community hospitals will be advantaged by a 
target price that blends in the higher cost of emergent episodes that 
they do not perform and recommended that CMS resolve this design 
vulnerability by segmenting all episode types by the presence of a 
trauma diagnosis code, fracture diagnosis code, or an inpatient charge 
with an ER related revenue code.
    Response: We acknowledge that emergent procedures can be relatively 
more expensive and complex than elective procedures. In light of the 
comments received, we are modifying the proposed risk adjustment model 
to include additional clinically relevant risk adjusters. We refer the 
readers to section X.A.3.d.(4) of this final rule for the comprehensive 
list of risk adjustment variables, including individual HCCs, that will 
be included in TEAM.
    We appreciate the commenters' suggestions on the target price 
methodology for episodes initiated on an emergent basis. We believe 
that grouping emergent and elective procedures together, rather than 
stratifying them by an indicator or a separate target price, reduces 
the incentive for increasing coding intensity. We believe that the 
expansion of the proposed risk adjustment model, which will include 
additional clinical risk adjusters, should be sufficient in accounting 
for pricing differences and clinical complexities among emergent 
procedures. Risk adjustment will likely result in higher target prices 
for emergent procedures, so that a hospital with a trauma center would 
have a higher target price at reconciliation for emergent episodes as 
compared to a community hospital that only performed elective 
procedures. Thus, we are not finalizing any policy specific to 
stratifying emergent procedures. However, in light of comments 
received, we may consider additional adjustments for emergent 
procedures in future rulemaking.
    Comment: Some commenters support including both inpatient and 
outpatient episodes in TEAM. A few of commenters suggested that CMS 
create separate episode categories and target prices for inpatient and 
outpatient episodes within the same clinical episode category because 
the clinical characteristics of such patients can vary significantly in 
terms of complexity, care pathways, and recommended post-discharge 
treatment. A couple of commenters recommended that CMS set target 
prices for the inpatient cases without major comorbidity or 
complication separately from the targets for the outpatient cases. A 
couple of commenters stated that patients who need to remain in the 
facility overnight are clinically not able to have the procedure on a 
purely outpatient basis. A few commenters stated that the national 
trend towards outpatient surgery has not necessarily left high-waste 
procedures to the inpatient setting, only high-risk.
    Response: We thank the commenters who expressed support for 
including both inpatient and outpatient episodes in TEAM. We also 
acknowledge some commenters' concerns regarding the inclusion of 
outpatient procedures and inpatient hospitalizations in the same 
episode category. We continue to believe the combined inpatient and 
outpatient pricing methodology discussed in section X.A.3.d.(2) of this 
final rule is more appropriate since it reduces any risks for 
beneficiaries to be inappropriately shifted from the inpatient to the 
outpatient setting. We agree that patient case-mix can vary between the 
inpatient and outpatient procedures. We also recognize a blended 
pricing structure could create pressure for clinicians to recommend the 
lower cost outpatient setting to minimize total episode costs. However, 
we believe that our risk adjustment methodology will incentivize 
clinicians to continue performing LEJR and Spinal Fusion procedures in 
the appropriate clinical setting based on their assessment of each 
patients' complexity, particularly since performing these procedures on 
sicker patients in the outpatient setting could increase the risk of 
post-acute complications and lead to higher overall episode spending. 
We understand the commenters' concerns related to the proposed risk 
adjustment methodology, and as

[[Page 69714]]

discussed in section X.A.3.d.(4) of this rule, we are finalizing the 
risk adjustment methodology to include additional beneficiary-level 
covariates as well as some provider-level characteristics from what was 
proposed (89 FR 36433). CMS believes these modifications will further 
address differences in patient characteristics as well as variation in 
spending between outpatient and inpatient cases with MCCs.
    While we acknowledge commenters' concerns with respect to excluding 
or stratifying certain episodes within the selected categories as 
either emergent or non-emergent and inpatient or outpatient, we don't 
believe excluding any of these episodes outright would serve Medicare 
beneficiaries or be in line with the goals of the model. We do believe 
the commenters' concerns will be addressed by the final risk adjustment 
methodology, which differs from the proposed risk adjustment 
methodology (89 FR 36433). We direct readers to section X.A.3.d.(4) of 
this final rule for a discussion on the risk adjustment methodology we 
are finalizing for TEAM. We have also indicated that we may consider 
additional updates to the risk adjustment methodology and any further 
updates would be made pursuant to future notice and comment rulemaking.
    We thank commenters for their feedback on potential episode 
categories and the introduction of medical episodes in future years of 
the model. We will take commenters feedback into consideration should 
we expand the number of TEAM episodes in future years. Any additional 
episodes would be added to TEAM pursuant to notice and comment 
rulemaking.
(3) Clinical Dimensions of Episodes
    In the proposed rule, we stated we believe that a straightforward 
approach for hospitals and other providers to identify Medicare 
beneficiaries in this payment model is important for the care redesign 
that is required for model success. Some of the inpatient procedures 
that group to the included MS-DRGs are also performed in the outpatient 
setting. To identify outpatient episodes for TEAM, we proposed to use 
methods similar to BPCI Advanced and CJR. Specifically, we proposed to 
match a hospital's institutional claim for TEAM procedure codes billed 
through the Outpatient Prospective Payment System (OPPS) (89 FR 36414).
    Therefore, we stated in the proposed rule that as in the BPCI 
Advanced and CJR models, hospitals participating in the proposed TEAM 
would be able to identify beneficiaries in included episodes through 
their MS-DRG during the anchor hospitalization or, for hospital 
outpatient procedures, by their Healthcare Common Procedure Coding 
System (HCPCS) codes, allowing active coordination of beneficiary care 
during and after the procedure.
    In the proposed rule, we stated that the MS-DRG for inpatient 
procedures would determine the ultimate MS-DRG assignment for the 
hospitalization, unless additional surgeries higher in the MS-DRG 
hierarchy also are reported.\887\ This approach offers operational 
simplicity for providers and CMS and is consistent with the approach 
taken by the BPCI Advanced and CJR models to identify beneficiaries 
whose care is included in those episodes.
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    \887\ FY 2025 ICD-10 MS-DRG Definitions Manual Version 42. 
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    We sought comment on our proposal to identify episodes for 
inclusion in TEAM by MS-DRGs and HCPCS codes.
    Comment: A commenter appreciated CMS incorporating previous 
feedback and experience with past episode-based models and recognizing 
that surgical MS-DRGs are easiest to predict and identify for purposes 
of managing patients.
    Response: We thank the commenter for their support of the proposed 
use of MS-DRGs to identify episodes for TEAM.
    We are finalizing the proposal to identify episodes with MS-DRGs 
and HCPCS codes for inclusion in TEAM without modification.
(4) Episode Category Definitions
    In the proposed rule, we stated that episode definitions have two 
significant dimensions--(1) a clinical dimension that describes which 
clinical conditions and associated services are included in the episode 
category; and (2) a time dimension that describes the beginning and end 
of the episode, its length, and when the episode may be cancelled prior 
to the end of the episode (89 FR 36414).
    For the purposes of TEAM, we proposed to define episodes as 
including all Medicare Part A and Part B items and services described 
at proposed Sec.  512.525(e), with some exceptions described at 
proposed Sec.  512.525(f), beginning with an admission to an acute care 
hospital stay (hereinafter ``the anchor hospitalization'') or an 
outpatient procedure at a hospital outpatient department (HOPD) 
(hereinafter ``anchor procedure''), and ending 30 days following 
hospital discharge or anchor procedure (89 FR 36414).
    As previously discussed in section X.A.3.b.(2) of the preamble of 
this final rule, the proposed episode categories were previously tested 
in BPCI Advanced and were voluntarily selected by BPCI Advanced 
participants. They represent the highest volume and highest cost 
surgical episode categories performed in the inpatient setting. 
However, we believe, based on current patterns of utilization and 
Medicare spending, there are still efficiencies to be gained by 
streamlining care pathways and transitions between clinical settings.
    We stated in the proposed rule that we selected these episode 
categories because elective surgical procedures are more clinically 
similar and have greater spending predictability. In addition, these 
episode categories have a significant proportion of spending in the 
post-acute period, reflecting greater opportunity to improve care 
transitions for beneficiaries and reduce unnecessary hospitalizations 
and emergency care.
    In section X.A.3.b.(2) of this final rule, we highlighted 
clarifying language that was issued in the correction notice for the 
proposed rule (CMS-1808-CN) pertaining to the data used in the BPCI 
Advanced episode analyses and why those estimates are different than 
those presented below. The volume estimates for the proposed TEAM 
episode categories described in the proposed rule (89 FR 36414) were 
higher than the BPCI Advanced episodes because (1) they reflect the 
proposed shorter, 30-day episodes which would be expected to have fewer 
exclusions and (2) the proposed episodes for TEAM were defined more 
broadly, including additional episode types (for example, outpatient 
spinal fusion, emergent CABG). Inclusion, exclusion, and overlap 
policies are discussed in sections X.A.3.b.(5) and X.A.3.e. of this 
final rule.
(a) Lower Extremity Joint Replacement Episode Category
    As mentioned in proposed rule, we identified the LEJR episode 
category for inclusion in this model. We noted in the proposed rule 
that the proposed LEJR episode category would include hip, knee, and 
ankle replacements, but exclude arthroplasty of the small joints in the 
foot, and both inpatient and outpatient procedures reimbursed through 
the IPPS under select MS-DRG and HOPD procedures billed under

[[Page 69715]]

select HCPCS codes through the OPPS (89 FR 36414).\888\
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    \888\ FY 2025 ICD-10 MS-DRG Definitions Manual Version 42. 
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    While we recognized in the proposed rule that LEJR has been tested 
in other episode-based payment models. Given the promising findings for 
this episode category in those model tests, we believe there is value 
in continuing to test this episode category under an alternate payment 
methodology, particularly given the high volume of such procedures 
among the Medicare population. In addition, as mentioned in the 
proposed rule, TEAM would potentially capture underserved populations 
who were disproportionately underrepresented in CJR. We proposed to 
define the LEJR episode category as a hip, knee, or ankle replacement 
that is paid through the IPPS under MS-DRG 469, 470, 521, or 522 or 
through the OPPS under HCPCS code 27447, 27130, or 27702. We stated 
that this approach offers operational simplicity for providers and CMS 
and is consistent with the approach taken by previous models to 
identify beneficiaries whose care is included in the LEJR episode 
category (89 FR 36415).
    We noted in the proposed rule that Medicare-covered outpatient 
total ankle arthroplasty (TAA) was excluded from both the BPCI Advanced 
and CJR models. However, since its removal from the Inpatient-Only List 
in 2021, the majority of TAA procedures have shifted to the outpatient 
setting. For example, in 2022, there were approximately 2,600 
outpatient TAAs and only 600 TAAs performed in the inpatient setting. 
For this reason, and to be consistent with other episodes in the LEJR 
episode category, we proposed that both inpatient and outpatient TAAs 
would trigger an episode in TEAM (89 FR 36415).
    Based on an analysis of 2021 historical LEJR episodes and an 
estimated number of additional outpatient TAAs, the annual number of 
potentially eligible beneficiary discharges for this mandatory model 
nationally would be approximately 226,000.
    We sought public comment on our proposed definition of LEJR 
episodes for TEAM at Sec.  512.525(d)(1). We also sought comment on the 
proposed MS-DRG and HCPCS codes and our proposal to include outpatient 
TAA in the LEJR episode category.
    The following is a summary of the comments we received on the LEJR 
episode category and our responses:
    Comment: A couple of commenters strongly support including LEJR as 
one of the five surgical episode categories. Another commenter asked 
that CMS add revision total joint replacement procedures (MS-DRGs 466, 
467 & 468) to the LEJR episode, as these procedures are performed 
exclusively on an inpatient basis and the improvements CMS seeks to 
encourage would also apply to them. Another commenter supported 
continuing to exclude revision procedures. A few commenters suggested 
including the not insignificant volume of LEJR procedures that are 
performed in ASC settings and believe excluding them is a missed 
opportunity for this model.
    Response: We thank the commenters for their support for including 
the LEJR episode category in the model.
    We also acknowledge the commenter's suggestion to include revision 
total joint replacements in TEAM. While we agree that our goal with 
TEAM is to improve care for all beneficiaries receiving joint 
replacements, CMS elected not to include surgical procedures for TEAM 
that had not previously been tested in the voluntary the BPCI Advanced 
or mandatory CJR models.
    We acknowledge that ASCs are popular settings for lower risk LEJR 
procedures and appreciate that commenters support testing ASC episodes 
in TEAM. However, as noted in section X.A.3.a.(2)(b)(i) of this final 
rule, we have not previously tested ASC episodes in the voluntary 
models that TEAM is built upon. Additionally, quality measures for ASC 
procedures would require additional consideration, as those being 
finalized for TEAM are hospital-level measures and may not be 
appropriate for episodes initiated at ASCs. Should we decide to expand 
the definition of TEAM episodes pursuant to future notice and comment 
rulemaking, we will take this feedback into consideration.
    Comment: Several commenters recommended that CMS not include the 
LEJR episode category in TEAM. A couple of commenters stated that broad 
participation by hospitals in BPCI, BPCI-A, and CJR has removed much of 
the variation for this procedure, and it will be difficult for 
participants to find additional efficiencies in LEJR. Commenters also 
believe target prices have likely converged to the cost to provide an 
efficient LEJR episode, particularly for inpatient LEJRs, which have 
become higher risk with the movement of lower-acuity procedures to the 
outpatient and ASC settings. A commenter specifically recommended that 
CMS exclude TAA procedures from TEAM, as these medically-complex, high-
cost, low-frequency cases could cause hospitals to face potential 
economic penalties.
    Response: We appreciate that many hospitals have introduced greater 
efficiency to care pathways for LEJR procedures. We acknowledge the 
concern for some clinical episode categories like LEJR, which has been 
tested in both the CJR and BPCI Advanced models with a high 
participation rate. However, we disagree that the participating 
providers have a disadvantage in TEAM. CMS analyzed the post-discharge 
and post-acute care spending among providers participating and not 
participating in CJR and BPCI Advanced models and observed that both 
groups had similar spending trends, suggesting that there were 
additional opportunities for savings for LEJR in the post-discharge 
period for all providers. For TEAM, we proposed regional target prices 
where the participant hospitals' performance will be measured relative 
to their peers and not based on improvement relative to their own 
historical performance (89 FR 36428). This will mitigate concerns 
associated with the individual ratcheting effect.
    We also believe there is value in continuing to test this episode 
category under an alternate payment methodology, particularly given the 
high volume of such procedures among the Medicare population. In 
addition, as previously mentioned, TEAM would potentially capture 
underserved populations who were disproportionately underrepresented in 
CJR.
    We thank the commenter for their input on TAA procedures. We 
disagree that TAA procedures are high cost and penalize providers. 
First, we want to note that the blended inpatient and outpatient LEJR 
pricing approach being finalized in section X.A.3.d.(3) of this final 
rule, and additional risk adjusters based on patient characteristics 
being finalized in section X.A.3.d.(4), will allow providers to conduct 
TAA procedures in the outpatient or inpatient setting based on their 
assessment of each patient's complexity without creating any 
disincentives. Second, based on our preliminary analyses, TAA 
procedures for any clinical setting have lower average anchor and post-
discharge costs than all procedures under MS-DRG 469, which will be 
assigned preliminary benchmark prices. However, we agree that they can 
be rare and medically complex

[[Page 69716]]

procedures, so we are finalizing an additional risk adjuster for ankle 
procedures or reattachments in the LEJR episode category to account for 
any other differences associated with TAA procedures.
    CMS also investigated what the equivalent to a 3 percent discount 
in a 90-day episode would be in a 30-day episode, assuming that anchor 
costs were not modifiable. As a result of this investigation, and 
considering savings opportunities, CMS is finalizing a reduced TEAM 
discount factor of 2 percent for the LEJR episode category, as compared 
to the discount factor specified in the proposed rule. We direct 
commenters to section X.A.3.d.(3)(g) for further discussion on the 
discount factor.
    After consideration of the public comments we received, we are 
finalizing our proposal to include the LEJR episode category in TEAM 
without modification.
(b) Surgical Hip & Femur Fracture Treatment (Excluding Lower Extremity 
Joint Replacement) Episode Category
    In the proposed rule, we proposed to define the SHFFT episode as a 
hip fixation procedure, with or without fracture reduction, but 
excluding joint replacement, that is paid through the IPPS under MS-DRG 
480-482. We proposed that the SHFFT episode would include beneficiaries 
treated surgically for hip and femur fractures, other than hip 
arthroplasty and would include open and closed surgical hip fixation, 
with or without reduction of the fracture (89 FR 36415).
    We stated in the proposed rule that the SHFFT episode was selected 
because it was the second highest volume, and second-highest cost BPCI 
Advanced surgical episode performed in the inpatient setting, based on 
an analysis of 2021 episode data. There were 69,076 episodes with a 
total cost of $3.22 billion. In addition, we stated that more than 63 
percent of spending occurred in the post-acute period, signifying 
potential opportunity for care improvement. Using that same data for 
historical SHFFT episodes, the annual number of potentially eligible 
beneficiary discharges for this episode category nationally would be 
approximately 85,000 (89 FR 36415).
    Together, the LEJR and SHFFT episode categories cover all surgical 
treatment options for Medicare beneficiaries with hip fracture (that 
is, hip arthroplasty and fixation). Although a small number of SHFFT 
procedures are furnished in the outpatient hospital setting, TEAM would 
only include inpatient procedures, which conforms with hip and femur 
procedure except major joint episodes under BPCI Advanced.
    Thus, we proposed to include episodes for beneficiaries admitted 
and discharged from an anchor hospitalization paid under a SHFFT MS-DRG 
(480-482) under the IPPS in TEAM.
    We sought comment on our proposed definition of SHFFT and our 
proposal to include the SHFFT episode category at Sec.  512.525(d)(2).
    The following is a summary of the comments we received on the SHFFT 
episode category and our responses:
    Comment: A commenter supported the choice of SHFFT as an episode. 
Another commenter recommended removing the SHFFT episode category, as 
these procedures are less likely to be scheduled in advance, removing 
the opportunity for the hospital to intervene prior to hospitalization. 
Another commenter expressed concerns about including hip fracture cases 
in a mandatory model given the variability in costs and outcomes, 
especially for non-elective, trauma-related cases. Another commenter 
stated that the large number of procedure codes in these MS-DRGs, 
represent disparate treatments (for example, repositioning procedure 
versus insertion procedure) and anatomical locations (for example, 
upper femur versus lower femur) with different costs, lengths of stay, 
and readmission rates that are not accounted for in the bundle. Another 
commenter suggested excluding the episode because those sustaining hip 
fractures are often elderly, osteoporotic patients with complex co-
morbidities.
    Response: We thank the commenters for their input on the 
appropriateness of including the SHFFT episode category in TEAM. We are 
aware of concerns regarding cost and clinical variability associated 
with hip fractures and non-elective procedures in general. However, 
based on our experience with hip fracture bundles in the BPCI Advanced 
model, we continue to believe there are additional efficiencies and 
care improvement to be achieved for patients undergoing these 
procedures. We also point out that the BPCI Advanced Hip and Femur 
Procedures Except Major Joint episode category was the third highest 
volume episode category, behind major joint replacement and outpatient 
percutaneous coronary intervention episodes and was voluntarily 
selected by participants of the BPCI Advanced model, who tended to 
choose episodes under which they expected to succeed. We also refer 
commenters to section X.A.3.d.(4) for a discussion on updates to the 
risk adjustment methodology and a more robust set of risk adjusters 
that CMS is finalizing to capture episode spending accurately. Finally, 
we direct commenters to section X.A.3.d.(3)(g) for a discussion on the 
discount factor that CMS is finalizing for the SHFFT episode category. 
CMS is finalizing a 2 percent discount factor for the SHFFT episode 
category, which is a reduction from the discount factor proposed in the 
proposed rule (89 FR 36431).
    After consideration of the public comments we received, we are 
finalizing our proposal to include the SHFFT episode category in TEAM. 
However, we may consider additional analysis on how to best address 
emergent and trauma-related episodes to ensure we do not unduly 
disadvantage participant hospitals selected for the model. If analysis 
results warrant a new or updated policy, we would address it pursuant 
to future notice and comment rulemaking.
(c) Coronary Artery Bypass Graft Surgery Episode Category
    In the proposed rule, we stated that the proposed CABG episode 
category would include beneficiaries undergoing coronary 
revascularization by CABG.\889\ This episode category was selected in 
order to maintain the engagement of cardiac surgeons who have 
participated in prior episode-based models. Among cardiac procedures, 
it was the second highest cost and second highest volume BPCI Advanced 
surgical episode performed in the inpatient setting using 2021 data. 
There were 26,259 episodes with a total cost of $1.39 billion (89 FR 
36415).
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    We stated in the proposed rule that we also considered the 
percutaneous coronary intervention (PCI) episode category for TEAM 
because it was the highest volume and highest cost surgical cardiac 
episode. However, we did not select this episode because PCI has been 
described as a low-value service by the Medicare Payment Advisory 
Commission when performed for stable coronary artery disease,\890\ and 
the majority of PCIs are not associated with an acute care 
hospitalization.
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    \890\ MedPAC March 2021 Report to the Congress. https://www.medpac.gov/.
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    In the proposed rule, we proposed to define the CABG episode 
category as any coronary revascularization procedure that is paid 
through the IPPS under MS-DRG 231-236, including both elective CABG and 
CABG

[[Page 69717]]

procedures performed during initial acute myocardial infarction 
treatment (AMI). Based on an analysis of 2021 historical CABG episodes, 
the annual number of potentially eligible beneficiary discharges for 
CABG episodes in TEAM would be approximately 30,000.
    We sought comment on our proposed definition of the CABG episode 
category and our proposal to include emergent CABG in episodes at Sec.  
512.525(d)(3).
    The following is a summary of the comments we received on the CABG 
episode category and our responses:
    Comment: A couple of commenters supported the inclusion of the CABG 
episode category in TEAM. One stated that the CABG procedure has a more 
consistent care pathway compared to other cardiovascular conditions, 
such as atrial fibrillation or congestive heart failure, and has also 
been included in several commercial and state value-based projects. We 
also received several comments in support of CMS' decision to not 
include the PCI episode category. A commenter stated a PCI episode 
category would be more difficult to implement based on its variation in 
care including acute and non-acute settings, as well as the number of 
performed outside of the hospital settings. Another commenter believed 
including such episodes introduces additional specialists to the 
episode, complicating attribution, decision-making, and follow up.
    Response: We thank commenters for their support of the inclusion of 
CABG in TEAM and the decision to not include PCI.
    Comment: Several commenters strongly encouraged CMS to reconsider 
the mandatory inclusion of CABG in TEAM and allow for voluntary 
selection. A commenter said few hospitals perform enough of these 
procedures to be able to dedicate additional resources to them. Another 
cautioned the high underlying procedure costs will make it difficult 
for hospitals to meet target prices and provide less opportunity for 
hospitals to optimize costs and increase value. Another commenter 
recommended CMS exclude CABG episodes with acute myocardial infarction 
to ensure that the remaining episodes are homogenous and more readily 
analyzed.
    Response: We thank the commenters for sharing their concerns about 
including CABG as a mandatory episode category in TEAM. However, we 
believe that testing all of the proposed episode categories in TEAM 
will more effectively test how participants perform in clinical areas 
that they would otherwise not select voluntarily. Allowing participants 
to voluntarily choose episode categories would introduce selection bias 
and make evaluating TEAM more difficult and produce less generalizable 
findings. We expect that TEAM will produce data that are more broadly 
representative of spending, quality, and outcomes than what might be 
collected under a voluntary model.
    We disagree that the frequency of CABG procedures and the high 
costs associated with the anchor period warrant voluntary selection. 
While the volume of CABG episodes is lower than the other four proposed 
episode categories, a sufficiently high proportion of hospitals perform 
CABG procedures. Based on our analyses, 30 to 40 percent of acute care 
hospitals eligible for TEAM across all regions had a CABG episode using 
2023 Quarter 1 and Quarter 2 data. Additionally, as discussed in 
section X.A.3.d.(3)(h) of the preamble of this final rule, CMS may 
consider protections in reconciliation for low volume hospitals 
pursuant to future notice and comment rulemaking.
    We disagree that CABG provides less opportunity for savings. As 
stated in the proposed rule, CABG was the second highest cost and 
second highest volume BPCI Advanced surgical episode performed in the 
inpatient setting using 2021 BPCI Advanced data (89 FR 36413). CMS 
continues to believe that the high-expenditure services involved in 
CABG procedures make it an ideal episode category to support the goals 
of the model and maintain engagement of cardiac surgeons who have 
participated in prior episode-based models. We also direct commenters 
to section X.A.3.d.(3)(g) for a discussion on our decision to finalize 
a 1.5 percent discount factor for the CABG episode category in TEAM, 
which is a significant reduction from the discount factor that was 
proposed.
    We recognize that the proportion of anchor costs are relatively 
higher than the post discharge costs in CABG episodes; however, 
hospitals on average have higher observed than expected spending that 
accounts for patient acuity and regional trends. Additionally, a 
patient's surgical course can be affected by perioperative management 
including surgical technique, anesthesia requirement, extubation times, 
ambulation, management of bleeding, and prevention of infection. This 
suggests that there are opportunities for savings in the CABG episode 
category.
    We disagree that hospitals will have difficulty meeting target 
prices in the CABG episode category. Target prices are based on 
historical data and expected to capture the underlying mix of anchor 
and post-acute care services. Regional level target prices will also 
account for any variation in costs due to patient acuity or regional 
trends, which are not under the provider's control.
    After consideration of the public comments received, we are 
finalizing our proposal to include the CABG episode category in the 
model without modification.
(d) Spinal Fusion Episode Category
    We proposed to include in TEAM the Spinal Fusion episode category 
for beneficiaries undergoing inpatient and outpatient spinal fusion. 
The spinal fusion episode category was selected because it was the 
third-highest cost BPCI Advanced surgical episode performed in the 
inpatient setting using 2021 data. There were 62,345 episodes with a 
total cost of $3.2 billion. Based on the high number of episodes and 
its voluntary selection by participants in BPCI Advanced, we believe 
there are additional opportunities to improve care for beneficiaries 
undergoing these procedures (89 FR 36415).
    We proposed to define the Spinal Fusion episode category as any 
cervical, thoracic, or lumbar spinal fusion procedure paid through the 
IPPS under MS-DRG 453-455, 459-460, or 471-473, or through the OPPS 
under HCPCS codes 22551, 22554, 22612, 22630, or 22633.
    In the correction notice for the proposed rule (CMS-1808-CN) 
published May 31, 2024, we noted that the proposed changes to several 
of the spinal fusion MS-DRGs discussed at 89 FR 35971 would, if 
finalized, directly affect the proposed definition for the Spinal 
Fusion episode category for TEAM. We also directed the reader to the 
draft version of the ICD-10 MS-DRG Definitions Manual, Version 42 on 
the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software 
to view the changes that were proposed to the spinal fusion MS-DRGs for 
FY 2025. We stated that, if finalized for FY 2025 as proposed (89 FR 
35971), rather than including MS-DRGs 453, 454, and 455 in the 
definition for the TEAM Spinal Fusion episode category, we would 
include the eight proposed MS-DRGs: MS-DRG 426 (Multiple Level Combined 
Anterior and Posterior Spinal Fusion Except Cervical with MCC), MS-DRG 
427 (Multiple Level Combined Anterior and Posterior Spinal Fusion 
Except Cervical with CC), MS-DRG 428 (Multiple Level Combined Anterior 
and Posterior Spinal Fusion Except Cervical without CC/MCC), MS-DRG 402 
(Single

[[Page 69718]]

Level Combined Anterior and Posterior Spinal Fusion Except Cervical), 
MS-DRG 429 (Combined Anterior and Posterior Cervical Spinal Fusion with 
MCC), MS-DRG 430 (Combined Anterior and Posterior Cervical Spinal 
Fusion without MCC), MS-DRG 447 (Multiple Level Spinal Fusion Except 
Cervical with MCC) and MS-DRG 448 (Multiple Level Spinal Fusion Except 
Cervical without MCC). In addition, we stated in the proposed rule 
that, if finalized as proposed at 89 FR 35984, we would use the revised 
titles for existing MS-DRGs 459 and 460, ``Single Level Spinal Fusion 
Except Cervical with MCC and without MCC'', respectively, for the TEAM 
Spinal Fusion episode definition.
    In the proposed rule, we stated that based on an analysis of 2021 
BPCI Advanced episodes and an estimated number of additional outpatient 
episodes, the annual number of potentially eligible TEAM Spinal Fusion 
episodes would be approximately 94,000.
    We sought comment on our definition and inclusion of the Spinal 
Fusion episode category at Sec.  512.525(d)(4).
    The following is a summary of the comments we received on the 
Spinal Fusion episode category and our responses:
    Comment: A couple of commenters supported inclusion of the Spinal 
Fusion episode category in TEAM.
    Response: We thank the commenters for their support of our proposal 
to include the Spinal Fusion episode category in TEAM.
    Comment: Several commenters recommended CMS first test a more 
limited bundle, focusing on single-level lumbar fusion, as it typically 
the most common lumbar fusion, to ensure homogeneity of diagnosis, 
treatment, and patient experiences before expanding to a broader 
episode category. A commenter noted that including cervical fusion (CPT 
code 22551) is unnecessary, since CMS initiated a relatively 
unprecedented prior authorization control over this code in 2021. A 
commenter recommended both cervical fusion codes (22551 and 22554) be 
removed from this list in order to focus on the primarily inpatient 
lumbar fusion procedures. The commenter believed that this would 
provide consistency in expectations for surgeons and focus on the more 
resource-intensive inpatient cases.
    Response: We thank commenters for the suggestion to only include 
single-level lumbar fusions and to remove cervical fusion codes from 
the list of included procedures. We believe that limiting the spinal 
fusion episode category to single-level lumbar fusions would create 
unintended consequences by incentivizing multi-level procedures. 
Including all levels of fusions in the episode category will remove 
potentially distorted financial incentives to ensure that participants 
base decisions solely on patient need. We acknowledge that both 
cervical fusion procedures mentioned by the commenters (HCPCS codes 
22551 and 22554) require prior authorization to be performed by a 
provider. However, CMS believes that prior authorization is applicable 
to triggering procedures but not the post-acute care services provided 
after the procedure. Including them in TEAM will allow for improvement 
in quality of care in the post discharge period while reducing overall 
Medicare spending.
    CMS acknowledges that post-acute care for cervical and lumbar 
fusion patients may differ, and the pricing methodology takes this into 
account. As discussed in section X.A.3.d.(3), we are finalizing our 
proposal to calculate TEAM target prices by episode types and regions, 
reflecting the potentially different historical episode spending for 
both cervical and lumbar procedures. Risk adjustment will also be done 
at the MS-DRG-level to account for the effect of each risk adjuster on 
episode spending. We direct readers to section X.A.3.d.(4) of this 
final rule for a discussion of our finalized risk adjustment policy.
    Comment: Many commenters strongly recommended that the Spinal 
Fusion episode category be excluded from TEAM. Several commenters 
stated that, particularly in light of the proposed discount factor (89 
FR 36431), the target prices for these procedures are more likely to be 
eroded by the underlying procedure costs and therefore limit the 
patients' ability to receive medically necessary post-discharge items 
and services. Some commenters believe CMS must first conduct a thorough 
and complete evaluation of the current BPCI Advanced model and, until 
CMS can provide publicly available data ensuring that spinal fusion 
episodes did not have a negative impact on patient quality, outcomes, 
and experience of care, these episodes should not be included in a 
mandatory model.
    Response: We thank commenters for these suggestions and acknowledge 
concerns that episodes with higher procedure costs may reduce the 
magnitude of savings that can be achieved. To better understand the 
effect of non-modifiable anchor costs on the ability to meet target 
prices, CMS investigated what the equivalent to a 3 percent discount in 
a 90-day episode would be for a 30-day episode. As a result of this 
investigation, and potential savings opportunities, CMS is finalizing a 
2 percent discount factor for the Spinal Fusion episode category in 
TEAM. This is a reduction from what was originally proposed for TEAM 
(89 FR 36431). We direct commenters to section X.A.3.d.(3)(g) of this 
final rule for further discussion on the discount factor.
    We also direct commenters to the most recent BPCI Advanced 
evaluation for information on the patient quality, outcomes, and 
experience of care impacts of spinal fusion episodes, available at: 
https://www.cms.gov/priorities/innovation/data-and-reports/2024/bpci-adv-ar5.
    Comment: Some commenters expressed concern with respect to the 
proposed restructuring of spinal fusion DRGs discussed in the proposed 
rule (89 FR 35984) and in Section II.C.6.b of this final rule. A 
commenter stated MS-DRG changes often lead to volatility and potential 
future refinements. For this reason, they stated that selecting spinal 
fusion for inclusion in the TEAM demonstration creates added complexity 
that could lead to difficulty for hospitals trying to manage care under 
the proposed model. A commenter stated that the current MS-DRGs don't 
directly map to the proposed new spinal fusion MS-DRGs. Some commenters 
urged CMS to exclude the Spinal Fusion episode category or at least 
delay implementation until the agency is able to monitor the impact of 
the proposed MS-DRGs, if finalized, and has three years of data based 
on the new groupings. The commenters believed this would allow for the 
proposed MS-DRGs to be fully reflected in both performance year and 
baseline assessments so TEAM participants may better understand the 
applicable target prices and needed efforts to manage 30 days of post-
discharge care. A couple of commenters suggested CMS also include the 
newly proposed MS-DRG 402 in the spinal fusion definition if the spinal 
fusion MS-DRGs are finalized.
    Response: As discussed in section II.C.6.b. in the preamble of this 
final rule, CMS is finalizing the proposed restructuring of the spinal 
fusion MS-DRGs for FY 2025, with modifications, effective October 1, 
2024. We appreciate that there are concerns regarding the restructuring 
of the spinal fusion MS-DRGs, as these MS-DRGs were also proposed for 
inclusion in TEAM (89 FR 36415). However, because the final spinal 
fusion MS-DRGs affect all spinal fusion MS-DRG payments, TEAM must 
conform to the changes. We believe that

[[Page 69719]]

the redistribution of the spinal fusion procedures to ten new MS-DRGs 
will decrease some of the concerns reflected in comments we received 
about the spinal fusion MS-DRGs currently in use not being granular 
enough and including too great a spectrum of procedures. We believe 
that the final spinal fusion MS-DRGs, which separate single and multi-
level fusions, respond, in part, to commenters who believe these 
procedures should be considered differently and will reduce the 
variance of procedures within each of the finalized MS-DRGs. We also 
believe the final spinal fusion MS-DRGs will enable us to better 
analyze the appropriateness of including both single and multi-level 
fusions in TEAM.
    We disagree that the currently used MS-DRGs don't directly map to 
the final FY 2025 MS-DRGs. Although the final MS-DRGs separate single- 
and multi-level spinal fusions into different MS-DRGs, as a group, they 
will capture the same pool of episodes that were previously assigned to 
the deleted and restructured MS-DRGs.
    We intend to conduct a thorough review and analysis of how the 
composition of episodes under the current spinal fusion MS-DRGs may 
change with the implementation of the final MS-DRGs for FY 2025. We 
intend to propose and finalize the pricing methodology for the TEAM 
Spinal Fusion episode category pursuant to FY2026 IPPS rulemaking. CMS 
also plans to develop, through rulemaking, a method to address in any 
future year of the model the potential addition or removal of 
procedures to or from MS-DRGs that are included in the definitions of 
TEAM episode categories.
    Comment: Several commenters fear that the migration of a group of 
spine surgeons from a participant hospital could significantly affect 
their case-mix and episode costs.
    Response: We thank the commenters for raising their concerns about 
the migration of spine surgeons from a participant hospital. 
Participants in TEAM will be selected based on a stratified random 
sampling procedure done at the CBSA level. Given the relatively large 
geographic area that CBSAs cover, CMS does not believe that groups of 
surgeons are likely to relocate across CBSAs to avoid participation in 
TEAM. Furthermore, TEAM incentivizes hospitals and surgeons to work 
together to provide the highest quality, most efficient care, and 
hospitals are incentivized to retain their best surgeons. While we 
agree with the commenters that the loss or gain of a large number of 
surgeons could alter a hospital's case mix and resultant costs, it will 
likely not affect the participant negatively. The risk adjustment 
methodology finalized in section X.A.3.d.(3) accounts for patient case-
mix nationally using data from the baseline period. For a given 
participant, the risk adjustment multipliers from the baseline are 
going to be applied to their performance year episodes, which means 
that final target prices will take the realized patient case-mix into 
account.
    Comment: Several commenters stated that spinal fusion MS-DRGs are 
not sufficient to delineate the extreme variance in spinal procedures 
and that a single target price at the MS-DRG level is inadequate for 
more complex fusion cases. Some commenters believe the spinal fusion 
episode category runs the risk of penalizing trauma and other high 
acuity centers. A commenter asked CMS to consider that there are 
separate MS-DRGs for hip fractures, while spinal fusion MS-DRGs do not 
distinguish between the presence or absence of a fracture. Several 
commenters requested that CMS stratify episodes for a variety of 
factors, such as non-elective, complexity (for example, 
spondylolisthesis, scoliosis, kyphosis), trauma, cancer or spinal 
tumors, spinal infections, and admission through the emergency 
department. The commenters believe that hospitals that treat these 
conditions would be at a significant disadvantage within the proposed 
pricing methodology. A commenter stated that trauma centers caring for 
spinal fractures will have the same episode target price as community 
hospitals caring for degenerative spines; despite having the same MS-
DRG, the post-hospital clinical experience is vastly different. A 
commenter stated that the 30-day readmission rate for emergent spine 
fusions at their hospital is typically in the range of 15 to 25 
percent, compared to five percent for elective spine fusions. A 
commenter recommended segmenting the spine fusion episode types by the 
presence of a relevant trauma or fracture ICD-10 diagnosis code in the 
claims data of the anchor hospital. A commenter suggested that CMS 
exclude revision spine surgery and episodes in which a patient 
undergoes both anterior and posterior approach in the same admission.
    Response: We thank the commenters for sharing their concerns 
regarding the clinical variation captured in the spinal fusion MS-DRGs 
and the need for TEAM to adequately account for risk factors that may 
affect episode spending and quality. We acknowledge the commenters' 
concerns that more complex spinal fusions, such as those which include 
cancer, would be more expensive. We agree with the commenters that a 
more robust risk adjustment methodology is necessary for TEAM. We refer 
readers to section X.A.3.d.(4), which details the final risk adjustment 
model that differs from what was proposed (89 FR 36433). The final risk 
adjustment policy includes the addition of several beneficiary-level 
risk adjusters that will adjust the target prices to reflect the 
complexity of patients demonstrated in the 90-day lookback period. The 
finalized risk adjustment methodology also incorporates HCC variables, 
such as an HCC indicator for metastatic cancer and acute leukemia 
(HCC8), in addition to the HCC count variable, in order to create more 
accurate episode spending predictions than what was proposed, in that 
they are based on the clinical complexity of the patient case mix and 
additional resource use. The finalized risk adjustment methodology also 
includes a prior post-acute care variable, which was not included in 
the proposed methodology, to account for patients who have visited a 
post-acute care facility during the lookback period for LEJR, CABG, and 
Spinal Fusion. These facilities include long-term care hospitals 
(LTCH), skilled nursing facilities (SNF), home health (HH), and 
inpatient rehabilitation facility (IRF). We believe these final 
policies will address the disadvantages noted by the commenters.
    We acknowledge the commenter's suggestion to exclude revision spine 
surgery. However, CMS is concerned with the ability to identify 
revision procedures in the coding, since the coding does not specify 
revisions and the prior surgery may have occurred years before and is 
not captured in Medicare FFS data. Additionally, we acknowledge that 
patients which undergo anterior and posterior approach in the same 
admission may be more expensive. We will monitor spinal fusion episodes 
and consider whether additional adjustments are necessary in future 
rulemaking.
    After reviewing the public comments, we are finalizing the proposed 
Spinal Fusion episode category with modification. To conform to the 
final spinal fusion MS-DRGs discussed in section II.6.b, the Spinal 
Fusion episode category is defined as any cervical, thoracic, or lumbar 
spinal fusion procedure paid through the IPPS under the following MS-
DRGs or through the OPPS under the following HCPCS codes:
     402 (Single Level Combined Anterior and Posterior Spinal 
Fusion Except Cervical).

[[Page 69720]]

     426 (Multiple Level Combined Anterior and Posterior Spinal 
Fusion Except Cervical with MCC or Custom-Made Anatomically Designed 
Interbody Fusion Device).
     427 (Multiple Level Combined Anterior and Posterior Spinal 
Fusion Except Cervical with CC).
     428 (Multiple Level Combined Anterior and Posterior Spinal 
Fusion Except Cervical without CC/MCC).
     429 (Combined Anterior and Posterior Cervical Spinal 
Fusion with MCC).
     430 (Combined Anterior and Posterior Cervical Spinal 
Fusion without MCC).
     447 (Multiple Level Spinal Fusion Except Cervical with MCC 
or Custom-Made Anatomically Designed Interbody Fusion Device).
     448 (Multiple Level Spinal Fusion Except Cervical without 
MCC).
     450 (Single Level Spinal Fusion Except Cervical with MCC 
or Custom-Made Anatomically Designed Interbody Fusion Device).
     451 Single Level Spinal Fusion Except Cervical without MCC
     471 (Cervical Spinal Fusion with MCC).
     472 (Cervical Spinal Fusion with CC).
     473 (Cervical Spinal Fusion without CC/MCC).
     22551 (Anterior Cervical Spinal Fusion with Decompression 
Below C2).
     22554 (Anterior Cervical Spinal Fusion without 
Decompression).
     22612 (Posterior or Posterolateral Lumbar Spinal Fusion).
     22630 (Posterior Lumbar Interbody Lumbar Spinal Fusion).
     22633 (Combined Posterior or Posterolateral Lumbar and 
Posterior Lumbar Interbody Spinal Fusion).
(e) Major Bowel Procedure Episode Category
    In the proposed rule, we proposed to include in TEAM the Major 
Bowel Procedure episode category for beneficiaries undergoing inpatient 
major small bowel and large bowel procedures. This episode category was 
selected because it was the fifth-highest volume and fourth-highest 
cost BPCI Advanced surgical episode performed in the inpatient setting 
using 2021 data. There were 54,848 episodes with a total cost of $1.95 
billion. We believe there are still opportunities to streamline care 
pathways and improve care transitions for beneficiaries receiving this 
care (89 FR 36415).
    We proposed to define the Major Bowel Procedure episode category as 
any small or large bowel procedure paid through the IPPS under MS-DRG 
329-331. Based on an analysis of 2021 data for historical Major Bowel 
Procedure episodes, the annual number of potentially eligible 
beneficiary discharges for episodes in TEAM would be approximately 
64,000.
    We sought comment on our proposed definition and inclusion of the 
Major Bowel Procedure episode at Sec.  512.525(d)(5).
    The following is a summary of the comments we received on the Major 
Bowel Procedure episode category and our responses:
    Comment: A commenter was in support of including the Major Bowel 
Procedure episode category, but encouraged CMS to ensure that target 
prices and peer adjustment factors reflect the fact that 
gastrointestinal disorders in the elderly often coincide with major 
chronic conditions, such as renal failure and congestive heart failure. 
Several commenters recommended CMS remove the Major Bowel Procedure 
episode category, as the category is too broad and includes procedures 
that are less likely to be scheduled in advance, giving hospitals 
limited opportunity to optimize costs and increase value. A couple of 
commenters suggested that CMS exclude small bowel procedures from the 
Major Bowel Procedure episode category because of the complexity of the 
service line. They further recommended that, if CMS did include small 
bowel procedures, CMS should create separate small and large bowel 
procedure episode categories because they have distinctly different 
diagnoses, surgical treatment, clinical outcomes, and attendant risks.
    Response: We thank the commenter for the support of the Major Bowel 
Procedure episode category in TEAM and disagree with commenters that it 
should be removed from TEAM. We also thank the commenters for their 
suggestions to exclude small bowel procedures from the Major Bowel 
Procedure episode category; however, CMS believes this can 
significantly affect the episode volume and reach of TEAM for this 
episode category. We also acknowledge recommendations to stratify small 
and large bowel procedures and for the additional suggestions regarding 
the risk adjustment methodology for these episodes.
    CMS believes that calculating TEAM target prices at the MS-DRG 
level accounts for complexity through the presence of diagnosis codes 
on the Major Complication or Comorbidity (MCC) or CC list. 
Additionally, as explained in section X.A.3.d.(4) of this final rule, 
we are finalizing a list of 19 risk adjusters for Major Bowel 
Procedure, including HCC 21 (Protein-Calorie Malnutrition) and HCC 33 
(Intestinal Obstruction/Perforation), which will further address 
differences in episode spending due to high complexity conditions and 
negate the need for stratification. This list of risk adjusters is an 
update from what was proposed (89 FR 36433). We also direct commenters 
to section X.A.3.d.(3)(g) for a discussion on our finalized TEAM 
discount factor of 1.5 percent for the Major Bowel Procedure episode 
categories., which is a significant reduction from what was proposed 
(89 FR 36431).
    Comment: A couple of commenters suggested including only elective 
procedures in the episode, as this would better align with clinical 
care, determining the value of an episode, assigning quality metrics, 
informing patients, providing information to referring PCPs, and aiding 
health plans seeking to contract for episodic-specific services. A 
couple of commenters also strongly recommended that CMS episode exclude 
urgent/emergent procedures. A commenter stated that there is major 
variation in cost per episode in elective versus emergent cases for 
both small and large bowel services; in their analysis, urgent/emergent 
episodes cost roughly $15,000-$20,000 more than elective episodes.
    Response: We acknowledge the commenters' input on elective and 
emergent procedures in the Major Bowel Procedure episode category. In 
BPCI Advanced, 54 percent of Major Bowel Procedure episodes were 
performed electively, with the remainder performed emergently. CMS is 
concerned that only including elective procedures and excluding urgent/
emergent procedures may drop episode volume substantially and 
negatively impact the reach of the model. However, we acknowledge that 
these emergent procedures may be more expensive than elective 
procedures. We believe we can account for the pricing differences 
between emergent and elective procedures by including additional HCC 
risk adjusters in the final list of risk adjusters for this episode 
category. We refer the readers to section X.A.3.d.(4) of this final 
rule for the comprehensive list of risk adjustment variables, including 
individual HCCs, that are being finalized for TEAM. Additionally, we 
may consider whether additional adjustments for emergent procedures are 
needed for the Major Bowel Procedure episode category in future years 
of the model. Any changes will be made pursuant to notice and comment 
rulemaking.

[[Page 69721]]

    Comment: A commenter requested that CMS delay the inclusion of the 
Major Bowel Procedure episode category in TEAM, given CMS' proposed 
shift in procedures from MS-DRGs 347, 348, and 349 to MS-DRGs 329, 330, 
and 331 (89 FR 35968). The commenter urged CMS to reconcile the 
different composition of these MS-DRGs for purposes of setting TEAM 
episode prices, and to delay inclusion if unable to do so timely.
    Response: We acknowledge the commenters' concerns with the proposed 
reassignment of eight procedure codes that describe excision of 
intestinal body parts from MS-DRGs 347, 348 and 349 to MS-DRGs 329, 330 
and 331 for the TEAM Major Bowel Procedure episode category (89 FR 
35968). We direct readers to section II.C.5. for a full discussion of 
the reassignments. CMS recognizes that the proposed baseline period for 
initial TEAM performance years will not account for the patient case-
mix and post-discharge resource utilization represented by these 
procedure codes, impacting the preliminary target prices. In future 
rulemaking, CMS may consider analyzing and implementing a methodology 
similar to the BPCI-Advanced methodology to remap the baseline MS-DRGs 
to performance year MS-DRGs and allow for episodes to be triggered 
based on the remapped MS-DRGs. This would account for any differences 
in patient case-mix, post-discharge resource utilization, and other 
spending patterns between the baseline and performance year.
    After consideration of the public comments we received, we are 
finalizing the Major Bowel Procedure episode category as proposed, 
without modification.
    The following Table X.A.-08 summarizes the five final episode 
categories and corresponding billing codes that CMS is finalizing for 
purposes of identifying episodes in TEAM.
[GRAPHIC] [TIFF OMITTED] TR28AU24.307

(5) Items and Services Included in Episodes
    Like previous episode-based payment models, TEAM would incentivize 
comprehensive, coordinated, patient-centered care through inclusive 
episodes. We proposed to include in the episode all items and services 
paid under Medicare Part A and Part B during the performance period, 
unless such items and services fell under one of the proposed 
exclusions, described in the preamble of the proposed rule (89 FR 
36416).
    We proposed to include all Part A services furnished during the 
proposed 30-day post-discharge period of the episode, other than 
certain excluded hospital readmissions, as post-hospital discharge Part 
A services are typically intended to be comprehensive in nature. In 
particular, we believe that claims for services with diagnosis codes 
that are directly related to the proposed episode categories or the 
quality and safety of care furnished during the episode, based on 
clinical judgment (for example, surgical wound infection) and taking 
into consideration coding guidelines, should be included in an episode. 
Thus, we proposed that items and services for episodes would include 
the following items and services paid under Medicare Part A and Part B, 
subject to the proposed exclusions in the preamble of the proposed rule 
(89 FR 36416) and section X.A.3.b.(5)(a) of this final rule:
     Physicians' services.
     Inpatient hospital services, including services paid 
through IPPS operating and capital payments.
     Inpatient psychiatric facility (IPF) services.
     Long-Term Care Hospital (LTCH) services.
     Inpatient Rehabilitation Facility (IRF) services.
     Skilled Nursing Facility (SNF) services.
     Home Health Agency (HHA) services.
     Hospital outpatient services.
     Outpatient therapy services.
     Clinical laboratory services.
     Durable medical equipment (DME).
     Part B drugs and biologicals except for those excluded 
under Sec.  512.525 (f) as proposed.
     Hospice services.
     Part B professional claims dated in the 3 days prior to an 
anchor hospitalization if a claim for the surgical procedure for the 
same episode category is not detected as part of the hospitalization 
because the procedure was performed by the TEAM participant on an 
outpatient basis, but the patient was subsequently admitted as an 
inpatient.
    We sought comment on the proposed items and services we proposed to 
include in TEAM episodes in Sec.  512.525(e).
    The following is a summary of comments we received on the items and 
services we proposed to include in TEAM episodes and our responses:
    Comment: A commenter believed the model addresses the 
undervaluation of spinal implants by including all costs attributable 
to the case, including the physician services, rather than just the 
hospital costs related to the procedure. They also stated that this 
will lead to better clinical choices for the patient and help 
participants to succeed under the model.
    Response: We thank the commenter for their support. We are 
finalizing the items and services included in TEAM episodes as proposed 
without modification.
(a) Items and Services Excluded From Episodes
    In the proposed rule, we proposed to exclude from episodes certain 
Part A and B items and services that are

[[Page 69722]]

clinically unrelated to the anchor hospitalization or anchor procedure. 
The proposed exclusions would be applicable to episodes included during 
the baseline period, the three-year historical period used to construct 
target prices, as described in section X.A.3.d.(3) of the preamble of 
this final rule, and episodes initiated during a performance year (89 
FR 36416).
    As explained in the proposed rule, the proposed exclusions are 
similar to those excluded from BPCI Advanced, as discussed in detail 
later in this section.\891\ We have used similar exclusions in CMS 
Innovation Center models, with minor adjustments since BPCI, and intend 
to continue to apply them to TEAM. The exclusions list was developed 
through a collaborative effort between CMS and external stakeholders 
and has been vetted broadly in the health care community. We proposed 
to use the BPCI Advanced exclusions list in TEAM based on several years 
of experience with these exclusions and their suitability for episodes. 
As stated in the proposed rule, the rationale for these exclusions 
described below is consistent with the rationale for exclusions in the 
CJR model (80 FR 73304) and in BPCI Advanced.
---------------------------------------------------------------------------

    \891\ A complete list of excluded items, services, and 
readmission MS-DRGs can be found in the ``BPCI Advanced Exclusions 
List--MY7 (XLS)'' available under Participant Resources at the CMS 
BPCI Advanced website.
---------------------------------------------------------------------------

    In the proposed rule, we proposed to exclude from episodes all Part 
A and B items and services, for both the baseline period and 
performance years, for hospital admissions and readmissions for 
specific categories of diagnoses, such as oncology, trauma medical 
admissions, organ transplant, and ventricular shunts determined by MS-
DRGs, as well as all the following excluded Major Diagnostic Categories 
(MDC): \892\
---------------------------------------------------------------------------

    \892\ MDCs are formed by dividing all possible principal 
diagnoses (from ICD-10-CM) into 25 mutually exclusive diagnosis 
areas. The diagnoses in each MDC correspond to a single organ system 
or etiology and in general are associated with a particular medical 
specialty.
---------------------------------------------------------------------------

     MDC 02 (Diseases and Disorders of the Eye).
     MDC 14 (Pregnancy, Childbirth, and Puerperium).
     MDC 15 (Newborns and other neonates with conditions 
originating in perinatal period).
     MDC 25 (Human immunodeficiency virus infections).
    In the proposed rule, we proposed to exclude from episodes IPPS new 
technology add-on payments for drugs, technologies, and services 
identified by value code 77 on IPPS hospital claims for episodes in the 
baseline period and performance years.\893\ New technology add-on 
payments are made separately and in addition to the MS-DRG payment 
under the IPPS for specific new drugs, technologies, and services that 
substantially improve the diagnosis or treatment of Medicare 
beneficiaries and would be inadequately paid under the MS-DRG system. 
We believe it would not be appropriate for TEAM to potentially diminish 
beneficiaries' access to new technologies or to burden hospitals who 
choose to use these new drugs, technologies, or services with concern 
about these payments counting toward TEAM participants' actual episode 
spending. Additionally, new drugs, technologies, or services approved 
for the add-on payments vary unpredictably over time in their 
application to specific clinical conditions. Exclusion of new 
technology add-on payments for drugs, technologies, or services 
approved for add-on payments from episodes in TEAM is similar to 
episode exclusions in the CJR model (80 FR 73303 and 73304 and 73315) 
(89 FR 36417).
---------------------------------------------------------------------------

    \893\ This exclusion is applied during the payment 
standardization process.
---------------------------------------------------------------------------

    In the proposed rule, we also proposed to exclude from episodes 
OPPS transitional pass-through payments for medical devices as 
identified through OPPS status indicator H for episodes in the baseline 
period and performance years. Through the established OPPS review 
process, we have determined that these technologies have a substantial 
cost but also lead to substantial clinical improvement for Medicare 
beneficiaries. This proposal is also consistent with the BPCI Advanced 
and CJR model final exclusions policies (80 FR 73308 and 73315).
    In the proposed rule, we proposed to exclude from episodes drugs or 
biologicals that are paid outside of the MS-DRG, specifically 
hemophilia clotting factors (Sec.  412.115), identified through HCPCS 
code, diagnosis code, and revenue center on IPPS claims for episodes in 
the baseline period and performance years. Hemophilia clotting factors, 
in contrast to other drugs and biologicals that are administered during 
an inpatient hospitalization and paid through the MS-DRG, are paid 
separately by Medicare in recognition that clotting factors are costly 
and essential to appropriate care for certain beneficiaries. Because we 
do not believe that there are any spending efficiencies to be gained by 
including hemophilia clotting factors, we proposed to exclude these 
high-cost drugs from episodes initiated during the baseline period and 
performance year.
    In the proposed rule, we proposed to exclude from episodes certain 
Part B payments for high-cost drugs and biologicals, low-volume 
drugs,\894\ and blood clotting factors for hemophilia patients billed 
on outpatient, carrier, and DME claims for episodes in the baseline 
period and initiated in the performance years. These high-cost items 
are essential to appropriate care of certain beneficiaries, and we do 
not believe including them in the episode would improve any spending or 
quality of care efficiencies. We stated in the proposed rule that this 
proposed list would include:
---------------------------------------------------------------------------

    \894\ To determine if a drug HCPCS code meets the cost or volume 
thresholds for exclusion, the episodes are pooled across all episode 
categories.
---------------------------------------------------------------------------

     For episodes included during the baseline period:
    ++ Drug/biological HCPCS codes that are billed in fewer than 31 
episodes in total across all episodes in TEAM during the baseline 
period.
    ++ Drug/biological HCPCS codes that are billed in at least 31 
episodes in the baseline period, and have a mean allowed cost of 
greater than $25,000 per episode in the baseline period; and
    ++ HCPCS codes corresponding to clotting factors for hemophilia 
patients, identified in the quarterly average sales price file \895\ 
for certain Medicare Part B drugs and biologicals as HCPCS codes with 
clotting factor = 1, HCPCS codes for new hemophilia clotting factors 
not in the baseline period, and other HCPCS codes identified as 
hemophilia.
---------------------------------------------------------------------------

    \895\ https://www.cms.gov/medicare/payment/all-fee-service-providers/medicare-part-b-drug-average-sales-price/asp-pricing-files.
---------------------------------------------------------------------------

     For episodes initiated during a performance year, in 
addition to those listed in the previous bullet, Part B payments for 
high-cost drugs and biologicals, low-volume drugs, and blood clotting 
factors for hemophilia billed on outpatient, carrier, and DME claims, 
including, but not limited to:
    ++ Drug/biological HCPCS codes that were not included in the 
baseline period and appear in 10 or fewer episodes in the performance 
year.
    ++ Drug/biological HCPCS codes that were not included in the 
baseline period, appear in more than 10 episodes in the performance 
year, have a mean cost of greater than $25,000 per episode in the 
performance year; and
    ++ Drug/biological HCPCS codes that were not included in the 
baseline period, appear in more than 10 episodes in the performance 
year, have a mean cost of $25,000 or less per episode in the 
performance year, and correspond to a drug/biological that appears in 
the baseline period list but was assigned a

[[Page 69723]]

new HCPCS code between the baseline period and performance year.
    ++ HCPCS codes for new hemophilia clotting factors not in the 
baseline period.
    We stated in the proposed rule that the complete list of excluded 
MS-DRGs for readmissions and excluded HCPCS codes for Part B services 
furnished during TEAM episodes after TEAM beneficiary discharge from an 
anchor hospitalization would be posted on the CMS TEAM website at 
https://innovation.cms.gov/initiatives/TEAM (89 FR 36417). We stated in 
the proposed rule that the list would apply to all performance years of 
the model until and unless the list is updated. We proposed that 
revisions to the TEAM exclusions list would be initiated through 
rulemaking to allow for public input. Potential updates to the list 
could include additions to or deletions from the list, reflect changes 
to ICD-10-CM coding and the MS-DRGs under the IPPS, or address any 
other issues that are brought to our attention throughout the course of 
the TEAM performance period.
    We sought comment on the proposed excluded services, the TEAM 
exclusions list, and the process for updating the TEAM exclusions list 
in Sec.  512.525(f), Sec.  512.525(g), and Sec.  512.525(h).
    The following is a summary of the public comments received on the 
proposed excluded services, the TEAM exclusions list, and the process 
for updating the list and our responses:
    Comment: Several commenters supported the proposal to exclude 
specific MS-DRGs and high-cost hemophilia drugs, Part B drugs that cost 
more than $25,000, and products that appear in less than 31 episodes in 
total.
    Response: We appreciate the support received from commenters on our 
proposed exclusions and are pleased commenters identified these 
exclusions as the appropriate exclusions to ensure TEAM episodes are 
comprised of Part A and B items and services that are clinically 
related to the anchor hospitalization or anchor procedure.
    Comment: Several commenters commended CMS for excluding new 
technology add-on and transitional pass-through payments from the 
model. Several commenters agree that innovation should be rewarded and 
certainly not disincentivized. Another commenter acknowledged the role 
that technology can play to advance clinical goals of TEAM and 
recommends that CMS ensure TEAM will protect patient access to 
appropriate and innovative medical devices.
    Response: We agree that access to new medical technologies and 
services should not be withheld from TEAM beneficiaries. We recognize 
the importance of high value technologies and services that will 
improve healthcare quality and the lives of Medicare beneficiaries. As 
discussed in the proposed rule, we proposed to exclude from TEAM new 
technology add-on payments for drugs, technologies, and services 
identified by value code 77 on IPPS hospital claims for episodes in the 
baseline period and performance years (89 FR 36417). This would mean 
new technology add-on payments for drugs, technologies, and services 
would not be included in episode spending or factored into target 
prices. We believe this exclusion removes any disincentive that a TEAM 
participant may have to recommend such items and services and may help 
contribute to the adoption of such items and services.
    Also, beneficiary access to medically necessary services and their 
quality of care are critically important in TEAM. As discussed in 
section X.A.3.c. of the preamble of this final rule, we are finalizing 
quality measures for the purpose of evaluating hospitals' performance 
both individually and in aggregate across the model. Also, as discussed 
in section X.A.3.i. of the preamble of this final rule, we are 
finalizing policies and actions to monitor both care access and 
quality. We believe these features will help ensure that beneficiary 
access to high quality care is not compromised under the model.
    Comment: Several commenters emphasized the importance of utilizing 
a sufficiently comprehensive list of admissions, readmissions, and 
services, defined by MS-DRG and HCPCS codes, that would generally be 
considered unrelated to the trigger episodes and thus excluded. Several 
commenters further stated that inadequately defining the exclusions 
within an episode-based model creates frustration and financial 
burdens. Another commenter stated the exclusions will be especially 
important in the presence of a 30-day episode. A commenter encouraged 
CMS to closely review hospital stakeholders' comments on the adequacy 
of exclusion criteria but acknowledged that TEAM hold participants 
accountable for the longer-term trajectory of patients' recovery. A few 
commenters claimed that incorporating a stronger outlier methodology 
may better exclude the high costs accrued from urgent, emergent, and 
trauma patients, as well as those patients with unrelated comorbidity 
complications and high-cost medications, without the need for a 
specified list of exclusions.
    Response: We believe the proposed exclusions list is sufficient to 
avoid frustration and financial burdens for TEAM participants and that 
the exclusions list comprehensively captures items and services 
unrelated to a TEAM episode, even with a 30-day episode. We have 
several years of experience with these exclusions and their suitability 
for episodes. As explained in the proposed rule, the exclusions list 
was developed with significant input from external stakeholders and has 
been vetted broadly in the health care community (89 FR 36416).
    We also believe that the TEAM participant should only be held 
accountable for the items and services associated to their attributed 
TEAM episodes. As such, we disagree with the commenter's recommendation 
for TEAM participants to be held accountable for care beyond the course 
of the episode.
    Regarding the TEAM outlier methodology, we believe our high-cost 
outlier cap methodology, as currently designed, does capture unusually 
high costs from a variety of scenarios, including urgent, emergent and 
trauma cases, as well as unrelated comorbidity complications that 
generate catastrophic expenditures during a TEAM episode.
    As written, the TEAM exclusions list is designed to capture certain 
high-cost drugs. CMS recognizes that some drugs, such as hemophiliac 
blood clotting drugs, incur significant costs which are out of the 
participant's control. We believe these exclusions adequately support a 
TEAM participant from being financially impacted by high-cost drugs in 
their TEAM performance.
    Comment: Many commenters recommended that CMS revisit the 
development of its exclusions list for episodes to ensure participants 
are only held accountable for care that is truly relevant and 
clinically appropriate to the episode of care. A commenter stated the 
current exclusions list is limited in scope and often holds model 
participants accountable for items and services unrelated to the 
initial episode of care. A couple of commenters suggested that CMS 
exclude discharges where patients leave against medical advice or are 
discharged to hospice. A couple of commenters recommended excluding 
episodes if a patient is admitted from a congregate care setting (that 
is, a nursing home), as there is no opportunity to discharge them to an 
alternate site of care, which is where most savings opportunity will be 
found in 30-day episodes. A few commenters requested that DME be 
excluded from episodes due to these services extending

[[Page 69724]]

beyond the 30-days and the ongoing challenge of fraud and abuse around 
catheters. A commenter also requested that physical therapy be excluded 
because it also extends past the 30-days.
    Response: We acknowledge the importance of holding TEAM 
participants accountable for services and care related to the 
beneficiary's TEAM episode. Our proposed exclusions consider many 
categories of high-cost spending, such as hemophilia blood clotting 
drugs and certain readmissions, that would be considered unrelated to 
the beneficiary's episode. We recognize that there are some unique 
scenarios, such as a patient who leaves against medical advice; 
however, those situations are not common and thus do not make up enough 
of a potential risk for participants to warrant exclusion from a TEAM 
episode.
    We also recognize that there will be patients who trigger a TEAM 
episode that will be admitted and discharged back to a form of 
congregate care, such as a nursing home. Allowing these services to be 
included in a TEAM episode aligns with how episode expenditures were 
calculated in prior models, such as BPCI and BPCI Advanced. From CMS's 
prior experience in these models, we found model participants were 
still able to identify and realize savings opportunities through 
identifying inefficiencies elsewhere in the patient's episode. 
Therefore, CMS will not be excluding services for beneficiaries when 
they are admitted and/or discharge back to a congregate care setting.
    Finally, we recognize that the Medicare fee-for-service structure 
sometimes makes claim payment for services spanning a time period that 
could extend beyond the 30-day episode length. In these situations, CMS 
will prorate these payments so that only the portion attributable to 
care during the fixed duration of the episode is attributed to the 
episode spending. This ensures the TEAM participant is only responsible 
for the services and associated expenditures for the TEAM episode and 
not for services beyond the 30-day episode. Please refer to section 
X.A.3.(b)(5) for more details.
    Comment: Several commenters recommended that CMS exclude treatments 
that are unrelated to the episode such as treatment for substance use 
disorder or inpatient psychiatric facility services; dialysis, 
chemotherapy, or other long-term maintenance therapy; patients with a 
cancer diagnosis, in addition to cancer readmissions; unrelated trauma; 
auto-immune disorders; previously existing wounds or pressure ulcers 
requiring ongoing care; and critical care transport (that is, fixed 
wing helicopter ambulance). A commenter requested that CMS exclude any 
post-acute care following an excluded readmission, as holding a 
participant accountable for all patient pathways is unreasonable given 
how little is known about the causal relationship between the hospital 
readmission and subsequent post-acute care services.
    Response: We recognize that every TEAM episode could incur costs 
from a variety of items or services rendered, including some the 
commenters mention above such as cancer treatment, substance use 
disorder, or post-acute care following an excluded readmission. 
Although we understand commenters desire to exclude certain services 
unrelated to a TEAM episode, TEAM was designed to incentivize 
comprehensive, coordinated, patient-centered care through inclusive 
episodes. We have provided a thoughtful list of exclusions that 
adequately capture a variety of high-cost scenarios and we do not 
believe the TEAM exclusions list should be expanded to include 
additional items or services. Furthermore, TEAM is designed to 
encourage participants to make primary care referrals and engage with a 
patient's aligned total cost of care or shared savings model or 
program, if applicable. We encourage TEAM participants to work together 
to engage and collaborate with the patient's primary care provider or 
aligned total cost of care or shared savings model or program to help 
support effective management and care coordination of a patient.
    Comment: Several commenters urged CMS to ensure that the model does 
not impede access to drugs that are vitally important but not 
associated with the surgical episodes included in the model, as the 
medication exclusions in BPCI Advanced were not adequate. A commenter 
suggested that CMS exclude any drugs that have a mean cost of more than 
$25,000 per episode, including drugs for oncology and other conditions. 
The commenter stated exclusion is necessary due to the high cost of 
these drugs, combined with the large annual price increases that many 
high-cost drugs experience. Some commenters recommended that CMS 
exclude a variety of high-cost drugs, including biologicals, and 
biosimilars; rare disease drugs; drugs qualifying for pass-through 
status, including orphan drugs; drugs and biological agents used to 
treat cancer; and chronic disease medications, such as bone mineral 
density modifying agents and diabetic medications including GLP-1s.
    Response: CMS does not believe the proposed lists of exclusions 
will impede a TEAM participant's access to vital drugs for their 
beneficiaries. It is our expectation that TEAM participants will make 
decisions with optimal patient care in mind and not make decisions 
based on which drugs may or may not be included in the patient's TEAM 
episode. We also expect to evaluate the exclusions list and make 
adjustments, when necessary, through rulemaking to allow for public 
comment. Based on our experience with the BPCI Advanced model, these 
exclusions cover a variety of high-cost and rare drugs/biologicals 
including those used to treat cancer, chronic conditions, etc., and 
ensure that providers are not discouraged from using drugs that are 
vitally important to the care of the beneficiary due to fear of 
financial penalties. Using standard criteria each performance year will 
allow for the model to maintain consistency in the way low-volume and 
high-cost drugs are identified year-to-year as providers adopt the use 
of new drugs/biologicals and previously rare drugs/biologicals get 
adopted more broadly in later years of TEAM.
    Comment: A commenter recommended CMS establish a separate payment 
for non-opioid pain medications furnished in the inpatient setting to 
ensure that the shift to the episode-based payment model does not 
disincentivize clinically appropriate use of novel, non-opioid pain 
treatments in favor of lower cost generic opioids. The commenter also 
indicated CMS should exclude any separate payment for non-opioid pain 
management from the model's episode expenditures to avoid inadvertently 
discouraging use of these products.
    Response: We thank the commenter for their recommendation and will 
take this into consideration. We acknowledge the benefits of non-opioid 
pain treatments, which may be associated with less side effects while 
still providing effective pain management. As an episode-based payment 
model, TEAM strives to abide to total-cost-of-care principles and 
include most Medicare Parts A and B items and services into an episode, 
including drugs. Therefore, we try to limit the items and services 
excluded from an episode, so that the episode captures most Medicare 
spending. If we determine a separate payment should be established and 
excluded from episode costs for non-opioid drugs, we would do so 
through future notice and comment rulemaking.

[[Page 69725]]

    Comment: Several commenters recommended that CMS engage with 
stakeholders regarding making updates to the exclusions list, including 
clinical expert review of potential product exclusions, to ensure TEAM 
does not disincentivize recommended and necessary care or cause a delay 
to such services. Several commenters stated that, under TEAM, hospitals 
will have a tight window in which they are able to control costs and 
find efficiencies.
    Response: We appreciate these comments and the desire to engage 
with stakeholders to ensure exclusions from TEAM have been vetted by a 
variety of different experts. As we proposed, the TEAM exclusions list, 
uses similar exclusions to other CMS Innovation Center Models, with 
minor adjustments. The exclusions list was developed through a 
collaborative effort between CMS and external stakeholders and has been 
vetted broadly in the health care community. We proposed to use the 
BPCI Advanced exclusions list in TEAM based on several years of 
experience with these exclusions and their suitability for episodes. As 
such, we feel confident that our proposed exclusions list has been 
viewed and discussed by experts who had the opportunity to create a 
comprehensive, thorough list of exclusions. Additionally, as we 
mentioned previously, we will consider future modifications to the TEAM 
exclusions list, as needed, and will use rulemaking to allow for public 
input.
    Comment: Several commenters suggested timeframes for updating the 
list of excluded items and services. Several commenters stated that the 
initial period of care and the services provided during anchor stay 
will be a significant percentage of expenses accrued for a 30-day 
episode, when compared to other CMS Innovation Center models. For these 
reasons, they suggested that CMS develop and revisit its cost exclusion 
criteria at least annually, as is done in BPCI Advanced. A couple of 
commenters encouraged CMS to consider a semiannual or quarterly update 
to the list of proposed excluded MS-DRGs for readmissions and proposed 
excluded HCPCS codes for Part B services for the first performance 
year.
    Response: We appreciate that these commenters want to ensure 
exclusions from TEAM are as current as possible and evaluated on a 
regular basis. However, CMS considers quarterly or semiannual updates 
to be too frequent. Increasing frequency of review to multiple times a 
year would require an immense increase in resources and CMS does not 
believe there would be enough gained by frequent reviews, especially in 
light of CMS Medicare payment rules' schedules which generally only 
receive updates once annually. We do recognize there may be situations 
in the future that require changes to the TEAM exclusions list. Should 
we determine that future modifications to the TEAM exclusions list are 
needed, we would use notice and comment rulemaking to allow for public 
comment and review.
    After consideration of the public comments we received, we are 
finalizing our proposed TEAM exclusions list without any modifications. 
The exclusions list will be posted on the CMS TEAM website at https://innovation.cms.gov/initiatives/TEAM prior to the start of the model.
(b) Beneficiary Inclusion Criteria
    In the proposed rule, wee proposed to begin an episode with an 
anchor hospitalization or anchor procedure because of the challenges 
related to clinical variability leading up to the episodes and 
identifying unrelated services, given the multiple chronic conditions 
experienced by many TEAM beneficiaries (89 FR 36417). We proposed that 
all services that are included in the IPPS (for example, 3-day payment 
window payment policies) would be included in the episodes. We further 
proposed that the population of Medicare beneficiaries whose care would 
be included in TEAM would be those beneficiaries who meet all of the 
following criteria at the time of admission to the anchor 
hospitalization or anchor procedure:
     Enrolled in Medicare Part A and Part B.
     Not eligible for Medicare on the basis of end-stage renal 
disease.
     Not enrolled in any managed care plan (for example, 
Medicare Advantage, Health Care Prepayment Plans, cost-based health 
maintenance organizations).
     Not covered under a United Mine Workers of America health 
plan, which provides health care benefits for retired mine workers.
     Have Medicare as their primary payer.
    We sought comment on the proposed beneficiary inclusion criteria 
included in Sec.  512.535.
    We did not receive any comments on the beneficiary inclusion 
criteria and are finalizing the proposals without modification.
(c) Initiating Episodes
    In the proposed rule, we proposed that, if the beneficiary meets 
the beneficiary inclusion criteria, an episode would begin when a 
beneficiary is admitted for an anchor hospitalization or anchor 
procedure for one of the following MS-DRGs, or by the presence of one 
of the following HCPCS codes on an outpatient claim (specifically, a 
hospital's institutional claim for an included outpatient procedure 
billed through the OPPS)(89 FR 36418):
    LEJR MS-DRGs and HCPCS codes--
     469 (Major Hip and Knee Joint Replacement or Reattachment 
of Lower Extremity with MCC or Total Ankle Replacement).\896\
---------------------------------------------------------------------------

    \896\ MCC: major complications or comorbidities.
---------------------------------------------------------------------------

     470 (Major Hip and Knee Joint Replacement or Reattachment 
of Lower Extremity without MCC).
     521 (Hip Replacement with Principal Diagnosis of Hip 
Fracture with MCC).
     522 (Hip Replacement with Principal Diagnosis of Hip 
Fracture without MCC).
     27447 (Total Knee Arthroplasty).
     27130 (Total Hip Arthroplasty).
     27702 (Total Ankle Arthroplasty).
    SHFFT MS-DRGs--
     480 (Hip and Femur Procedures Except Major Joint with 
MCC).
     481 (Hip and Femur Procedures Except Major Joint with 
CC).\897\
---------------------------------------------------------------------------

    \897\ CC: complication or comorbidity.
---------------------------------------------------------------------------

     482 (Hip and Femur Procedures Except Major Joint without 
CC/MCC).
    CABG MS-DRGs--
     231 (Coronary Bypass with PTCA with MCC).
     232 (Coronary Bypass with PTCA without MCC).
     233 (Coronary Bypass with Cardiac Catheterization or Open 
Ablation with MCC).
     234 (Coronary Bypass with Cardiac Catheterization or Open 
Ablation without MCC).
     235 (Coronary Bypass without Cardiac Catheterization with 
MCC).
     236 (Coronary bypass without Cardiac Catheterization 
without MCC).
    Spinal Fusion MS-DRGs and HCPCS codes--
     453 (Combined Anterior and Posterior Spinal Fusion with 
MCC).
     454 (Combined Anterior and Posterior Spinal Fusion with 
CC).
     455 (Combined Anterior and Posterior Spinal Fusion without 
CC/MCC).
     459 (Spinal Fusion Except Cervical with MCC).
     460 (Spinal Fusion Except Cervical without MCC).
     471 (Cervical Spinal Fusion with MCC).
     472 (Cervical Spinal Fusion with CC).
     473 (Cervical Spinal Fusion without CC/MCC).

[[Page 69726]]

     22551 (Anterior Cervical Spinal Fusion with Decompression 
Below C2).
     22554 (Anterior Cervical Spinal Fusion without 
Decompression).
     22612 (Posterior or Posterolateral Lumbar Spinal Fusion).
     22630 (Posterior Lumbar Interbody Lumbar Spinal Fusion).
     22633 (Combined Posterior or Posterolateral Lumbar and 
Posterior Lumbar Interbody Spinal Fusion).
    In a correction notice (CMS-1808-CN), we noted that the proposed 
rule included proposed changes to several of the spinal fusion MS-DRGs 
that were also included in the proposed definition for the TEAM Spinal 
Fusion clinical episode category (89 FR 35971). We stated that if the 
proposed changes to the spinal fusion MS-DRGs were finalized for FY 
2025, we would use the eight new MS-DRGs: MS-DRG 426 (Multiple Level 
Combined Anterior and Posterior Spinal Fusion Except Cervical with 
MCC), MS-DRG 427 (Multiple Level Combined Anterior and Posterior Spinal 
Fusion Except Cervical with CC), MS-DRG 428 (Multiple Level Combined 
Anterior and Posterior Spinal Fusion Except Cervical without CC/MCC), 
MS-DRG 402 (Single Level Combined Anterior and Posterior Spinal Fusion 
Except Cervical), MS-DRG 429 (Combined Anterior and Posterior Cervical 
Spinal Fusion with MCC), MS-DRG 430 (Combined Anterior and Posterior 
Cervical Spinal Fusion without MCC), MS-DRG 447 (Multiple Level Spinal 
Fusion Except Cervical with MCC) and MS-DRG 448 (Multiple Level Spinal 
Fusion Except Cervical without MCC). In addition, we stated that, if 
finalized as proposed at 89 FR 35971, we would use the revised titles 
for the existing MS-DRGs 459 and 460, ``Single Level Spinal Fusion 
Except Cervical with MCC and without MCC'', respectively.
    Major Small and Large Bowel Procedure MS-DRGs--
     329 (Major Small and Large Bowel Procedures with MCC).
     330 (Major Small and Large Bowel Procedures with CC).
     331 (Major Small and Large Bowel Procedures without CC/
MCC).
    In the proposed rule, we proposed that the episode start date would 
be the day of the anchor procedure for outpatient procedures or the 
date of admission on the IPPS claim associated with the anchor 
hospitalization that triggered the episode (89 FR 36418). However, as 
stated in the proposed rule, if an anchor hospitalization is initiated 
on the same day as or in the 3 days following an outpatient procedure 
that could initiate an anchor procedure for the same episode category, 
we proposed to begin the episode on the date of the outpatient 
procedure rather than the date of the inpatient admission. That is, the 
outpatient procedure would not initiate an anchor procedure. For 
example, if a beneficiary undergoes an outpatient TKA and is sent home 
but is admitted the next day through the emergency department, the 
episode would be respecified as an anchor hospitalization rather than 
an anchor procedure with readmission. We proposed this in the proposed 
rule to ensure we would be able to accurately capture outpatient 
procedures that may result in admission after a period of observation 
or shortly after discharge. Moreover, we believe that an inpatient 
episode should take precedence over an outpatient procedure performed 
on the same day, given the likelihood of higher spend associated with 
the inpatient episode and potential for higher clinical acuity.
    In the proposed rule, we stated that, although we were not 
proposing a transfer policy for TEAM, we recognized there could 
potentially be episodes in TEAM that are initiated as a result of a 
beneficiary being transferred from one hospital to another, where at 
least one or both hospitals are TEAM participants and where at least 
one of the hospital admissions is for an MS-DRG that would initiate an 
anchor hospitalization in TEAM (89 FR 36418). In the BPCI Advanced 
model, this is viewed as one continuous hospitalization, whereas in the 
CJR model and in the proposed TEAM, it is viewed as two separate 
hospitalizations that may result in an episode initiating depending on 
the hospital participation in the model and the MS-DRGs involved in the 
hospital admissions. Specifically, we stated in the proposed rule if 
the initial inpatient admission is at a TEAM participant for a proposed 
MS-DRG in TEAM, then it would initiate an anchor hospitalization and 
the resulting transfer to the second hospital would not initiate a new 
anchor hospitalization, rather it would be included in the episode 
initiated from the first hospitalization. However, if the initial 
inpatient admission is for an MS-DRG not proposed in TEAM, then an 
anchor hospitalization is not initiated and the resulting transfer to 
the second hospital could initiate an episode depending on the second 
hospital's participation status and the MS-DRG for the inpatient 
admission.
    In the proposed rule, we stated that we considered mimicking the 
BPCI Advanced model and proposing a transfer policy where a TEAM 
beneficiary that is transferred from one hospital to another would be 
considered one continuous hospitalization. Specifically, we considered 
defining an acute-to-acute hospital transfer as consecutive inpatient 
stays for a TEAM beneficiary if the admission date of the latter 
inpatient hospital stay is the same as the discharge date of the 
initial hospital inpatient stay for different acute care hospitals. In 
the proposed rule, we stated this would mean that acute-to-acute 
hospital transfers are treated as one continuous hospitalization and 
would be assigned the admission date and the hospital from the first 
leg of the transfer and the MS-DRG and discharge date from the last leg 
of the transfer. For example, hospital A is a TEAM participant and 
hospital B is not a TEAM participant. A beneficiary is admitted to 
hospital A on January 1st for an MS-DRG 637 (which is not a TEAM 
episode) and discharged on January 5th with a transfer to hospital B on 
the same day. The beneficiary is admitted to hospital B for MS-DRG 470 
(LEJR) and is discharged on January 10th. In this example, the episode 
is attributed to hospital A and is considered an LEJR episode with an 
anchor hospitalization start date of January 1st and an anchor 
hospitalization end date of January 10th. All of the spending between 
both hospitalizations would be captured in the episode. On the other 
hand, if hospital A was not a TEAM participant and hospital B was a 
TEAM participant, then neither hospital would be attributed the episode 
since hospital A is not a participant and the transfer policy prevents 
the episode from being attributed to hospital B. We recognized this 
policy would help keep the initial hospital accountable and may 
mitigate perverse incentives to transfer a beneficiary; however, it 
increases complexity for determining when an episode is initiated, and 
which hospital is accountable for the episode. We also noted that the 
BPCI Advanced model included additional requirements in their transfer 
policy, where if one of the hospitals was a critical access hospital or 
a PPS-exempt cancer hospital or if one of the inpatient admissions was 
for a MS-DRG on the exclusions list, the episode was cancelled (89 FR 
36419).
    We sought comment on our proposal for initiating TEAM episodes 
based on MS-DRGs or HCPCS codes included in Sec.  512.510 and whether 
we should consider a transfer policy similar to BPCI Advanced for TEAM.
    The following is a summary of the comments received and our 
responses:
    Comment: Several commenters recommended that CMS explore modifying 
the point at which an episode is triggered and broaden episodes to 
include pre-operative care or office

[[Page 69727]]

visits related to the procedure, as some episodes of care are planned 
and start prior to a hospital admission or outpatient procedure.
    Response: We appreciate the interest expressed by the commenters in 
starting comprehensive care coordination prior to the hospital 
admission, and we recognize that the beneficiary's care which 
ultimately leads to the procedure that begins a TEAM episode often 
begins long before the surgical procedure. However, beginning the 
episode too far in advance of the procedure that initiates the episode 
would make it difficult to avoid bundling unrelated items, and starting 
the episode prior to the hospital admission (or outpatient procedure) 
is more likely to encompass spending that varies widely among 
beneficiaries, which would make the episode more difficult to price 
appropriately. In addition, identifying a specific set of related 
presurgical services to include in the episode, would be of little 
value in the model because many of the services that are typically 
necessary or the standard of care prior to a surgical procedure are 
often included in the IPPS payment (for inpatient episodes) under the 
three-day payment window payment policies and are therefore already 
included in the TEAM episodes. We believe that using the date of 
admission, or date of the outpatient procedure for outpatient episodes, 
as the start of the TEAM episode is appropriate as hospitals are 
unlikely to shift related services earlier than when is clinically 
indicated.
    Comment: A commenter stated that it is critical that CMS directly 
engage relevant practicing physicians in defining episode triggers.
    Response: We agree that engaging with providers and other 
stakeholders is necessary for developing new models and prioritized 
public outreach throughout model development, including releasing an 
RFI in July 2023 to gather input and inform the model well before the 
NPRM was drafted (88 FR 45872). Throughout the development of this 
model prior to the drafting of the NPRM, CMS also met with multiple 
physician associations and additional stakeholders to ensure ample 
opportunity for the public to contribute to the development of TEAM. We 
appreciate the time and effort these public groups engaged in to ensure 
the model team was in receipt of their invaluable input and insight.
    We are finalizing our proposal to initiate TEAM episodes with the 
MS-DRGs and HCPCS codes included in Sec.  512.510. We note that the 
proposed restructuring of the spinal fusion MS-DRGs is final, with 
modifications, effective October 1, 2024, for FY 2025. We direct 
readers to section II.C.6.b. of the preamble of this final rule for a 
full discussion of the changes. Therefore, if a beneficiary meets the 
beneficiary inclusion criteria, an episode in the Spinal Fusion episode 
category would begin when a beneficiary is admitted for an anchor 
hospitalization or anchor procedure for one of the following MS-DRGs, 
or by the presence of one of the following HCPCS codes on an outpatient 
claim (specifically, a hospital's institutional claim for an included 
outpatient procedure billed through the OPPS):
     402 (Single Level Combined Anterior and Posterior Spinal 
Fusion Except Cervical).
     426 (Multiple Level Combined Anterior and Posterior Spinal 
Fusion Except Cervical with MCC or Custom-Made Anatomically Designed 
Interbody Fusion Device).
     427 (Multiple Level Combined Anterior and Posterior Spinal 
Fusion Except Cervical with CC).
     428 (Multiple Level Combined Anterior and Posterior Spinal 
Fusion Except Cervical without CC/MCC).
     429 (Combined Anterior and Posterior Cervical Spinal 
Fusion with MCC).
     430 (Combined Anterior and Posterior Cervical Spinal 
Fusion without MCC).
     447 (Multiple Level Spinal Fusion Except Cervical with MCC 
or Custom-Made Anatomically Designed Interbody Fusion Device).
     448 (Multiple Level Spinal Fusion Except Cervical without 
MCC).
     450 (Single Level Spinal Fusion Except Cervical with MCC 
or Custom-Made Anatomically Designed Interbody Fusion Device).
     451 Single Level Spinal Fusion Except Cervical without MCC
     471 (Cervical Spinal Fusion with MCC).
     472 (Cervical Spinal Fusion with CC).
     473 (Cervical Spinal Fusion without CC/MCC).
     22551 (Anterior Cervical Spinal Fusion with Decompression 
Below C2).
     22554 (Anterior Cervical Spinal Fusion without 
Decompression).
     22612 (Posterior or Posterolateral Lumbar Spinal Fusion).
     22630 (Posterior Lumbar Interbody Lumbar Spinal Fusion).
     22633 (Combined Posterior or Posterolateral Lumbar and 
Posterior Lumbar Interbody Spinal Fusion).
    We are not finalizing a transfer policy at this time but thank the 
commenters for their input regarding a potential transfer policy for 
TEAM. We will take the comments into consideration should we propose a 
transfer policy through future notice and comment rulemaking.
(d) Episode Length
    In the proposed rule, we stated that the proposed episodes would 
cover time periods marked by significant PAC needs, potential 
complications of surgery, and short-term, intense management of chronic 
conditions that may be destabilized by surgery. We believe that 
hospitals have substantial ability to influence the quality and 
efficiency of care that TEAM beneficiaries receive over the weeks and 
months following a procedure. In the proposed rule, we also stated that 
for this reason, both CJR and BPCI Advanced utilize a 90-day post-
discharge episode duration (89 FR 36419).
    However, we stated in the proposed rule that an episode duration 
longer than 30 days poses greater risk for the hospital because of 
variability due to medical events outside the intended scope of the 
model. Our analysis of BPCI Advanced episodes found that the need for 
care for chronic conditions and other non-anchor MS-DRG-related 
conditions become much more prevalent during the 31 to 90 days 
following hospital discharge. Longer episodes also increase the 
potential for ACO overlap (where a beneficiary aligned or assigned to 
an ACO has an episode included in TEAM), are associated with a greater 
number of episode-level exclusions in the post-discharge period, and 
are more likely to include potential readmissions for an unrelated 
condition. We also stated that shorter episode lengths are used in 
other models that employ total cost-of-care approaches. In the Medicare 
Spending Per Beneficiary (MSPB) measure of the Hospital Value-Based 
Program (HVBP), episodes include Part A and Part B payments for 
services furnished three days prior to a patient's inpatient stay and 
extend for 30 days after discharge.
    In the proposed rule, we stated that reducing episode duration to 
30 days could both sustain the spending reductions demonstrated in BPCI 
Advanced and CJR and mitigate some of the current challenges 
experienced between ACOs, hospitals, and other providers. A 30-day 
episode would position the specialist as the principal provider near 
the anchor event with a hand-off back to the primary care provider for 
longitudinal care management and we believe that ACOs are better 
equipped to address the population health needs of Medicare 
beneficiaries.

[[Page 69728]]

    Additionally, we stated that the majority of episode spending 
occurs in the first 30 days following discharge or the anchor 
procedure. Based on an internal analysis of BPCI Advanced episodes 
between 2020 and 2022, seventy-five percent of episode spending 
occurred in the first 30 days of the episode and 90 percent occurred in 
the first 60 days. We stated that we expect TEAM to continue to provide 
hospitals with opportunities to improve care and incentivize 
coordinated, quality care among acute care hospitals, HOPDs, 
physicians, and PAC providers throughout care transitions, given that 
the majority of episode spending during 90-day episodes occurred in the 
first 30 days.
    Based on the rationale noted, we proposed that episodes end 30 days 
after discharge from the anchor hospitalization or anchor procedure and 
that day 1 of the 30-day post-acute portion of the episode is the date 
of the anchor procedure or the date of discharge from an anchor 
hospitalization. To the extent that a Medicare payment for services 
included in an episode spans a period of care that extends beyond the 
episode duration, we proposed that these payments would be prorated so 
that only the portion attributable to care during the fixed duration of 
the episode is attributed to the episode spending. The proposal for a 
30-day post-discharge episode length is included in Sec.  
512.537(a)(1).
    We sought comment on our proposal to implement a 30-day post-
discharge episode length. We also sought comment on alternative episode 
durations, such as a 60-day or 90-day post-discharge episode length.
    The following is a summary of the public comments received on our 
proposal to implement a 30-day post-discharge episode length and our 
responses.
    Comment: Many commenters support a 30-day post-discharge episode 
length for TEAM because they believe it is within the scope of what 
hospitals can influence, meets the objectives of improving efficiency 
and reducing variation in cost and outcomes, and captures the majority 
of post-procedure spend. Several commenters believed that a 30-day 
episode provides sufficient time for the beneficiary to complete the 
acute phase of the episode and return to their primary care provider or 
medical home. Many commenters stated that a shorter episode will help 
mitigate the risk of chronic or unrelated conditions impacting 
readmissions, which is more likely to occur with longer episodes. 
Several commenters agreed that reducing episode duration will mitigate 
some of the challenges with integrating longitudinal and episodic care 
between ACOs, hospitals, and other providers and will be an incentive 
for hospitals to communicate and collaborate with local ACOs, who may 
welcome the chance to partner with the hospital and manage their 
patients when discharged to post-acute settings. Another commenter 
agreed with CMS that a 30-day episode could sustain the spending 
reductions demonstrated in BPCI Advanced and CJR. Another commenter 
wrote that it is reasonable and necessary for hospitals to do 
everything they can while a patient is in their facility to ensure the 
best possible long-term outcomes. One commenter stated that a 30-day 
length is consistent with other CMS programs.
    Response: We thank the commenters for their support of our proposed 
30-day post-discharge episode length. We agree that a 30-day post-
discharge episode length provides sufficient time for post-procedure 
management and care redesign, while limiting the risk of including care 
for other, unrelated conditions in the episode. We also agree that a 
30-day post-discharge episode length promotes our goal of ensuring that 
episode-based models and ACO initiatives coexist and allow for 
sufficient financial opportunities and incentives to improve care both 
during episodes and afterwards.
    Comment: A number of commenters believed that a 30-day episode 
would limit financial opportunity and participants' ability to improve 
both the quality and efficiency of care furnished during the episode, 
as a higher proportion of episode costs would be incurred during the 
hospital stay or procedure. They further noted that this would be most 
problematic for episodes with the highest-cost index admissions 
relative to their post-discharge spending, such as CABG and Spinal 
Fusion. Several commenters stated that given hospitals are paid a MS-
DRG payment, any internal cost savings realized during the index 
admission would not be reflected in their performance and even greater 
savings would be required during the post-discharge period. Several 
commenters stated that, although the greatest opportunity is through 
fewer post-surgical complications and longer-term PAC management, a 30-
day episode would deprive participants of vital cost reducing 
opportunities, as a single post-acute stay may consume the entire 
episode window. Another commenter expressed concern that the short 
timeframe will negatively impact patient discharges to the most 
appropriate PAC setting, in particular to IRFs, which tend to be higher 
in cost than other PAC providers, whereas a longer episode would reduce 
the financial pressure to discharge to the lowest cost setting.
    Response: We thank commenters for raising their concerns with the 
30-day episode window limiting financial opportunity and participants' 
ability to improve care. In response to the comments, we analyzed the 
share of anchor and post-discharge spending of total episode spending 
in 30-day and 90-day episodes using Medicare FFS claims from 2021. CMS 
acknowledges that the anchor procedure makes up a larger proportion of 
the total spending in shorter episodes. Mean anchor spending as a 
percentage of total episode spending is 37 percent for SHFFT and 78 
percent for CABG in 90-day episodes, and is 49 percent and 85 percent, 
respectively, in 30-day episodes. Furthermore, CMS acknowledges the 
commenters' observation that cost savings during the anchor procedure 
will not result in lower reimbursement rates for MS-DRGs and HCPCS 
codes. There are other costs grouped to the anchor period of episodes. 
However, based on the payment structure and prior evaluation studies 
for BPCI Advanced and CJR, CMS expects that participants have savings 
opportunities in the post-discharge period. There are large differences 
among hospitals with respect to post-discharge spending as a proportion 
of total spending, in the range of 10-13 percentage points between the 
25th and the 75th percentile of the distribution for each episode type. 
These relatively large differences between hospitals indicate that 
there are still financial opportunities and a potential for care 
improvement.
    CMS also investigated what the equivalent to a 3 percent discount 
in a 90-day episode would be in a 30-day episode, assuming that anchor 
costs were not modifiable. As a result of this investigation, and 
considering savings opportunities, CMS is finalizing lower discount 
factors for TEAM episodes than what was proposed (89 FR 36433). 
Specifically, we are finalizing a 2 percent discount factor for the 
LEJR, SHFFT, and Spinal Fusion episode categories and a 1.5 percent 
discount factor for the CABG and Major Bowel Procedure episode 
categories. We direct commenters to section X.A.3.d.(3)(g) for further 
discussion on the discount factor.
    CMS also acknowledges the commenter's concern with the trade-off 
between discharging patients to the most appropriate or cheapest post-
acute care settings. CMS plans to monitor

[[Page 69729]]

costs of episodes with IRF utilization. If we determine additional risk 
adjusters are necessary to improve pricing accuracy, they would be 
added pursuant to notice and comment rulemaking.
    Comment: Several commenters stated that, due to data lag in claims-
based models, a shorter episode does not provide enough time for 
participants to identify that their beneficiaries are included in a 
bundled payment model. They stated that the episode would end before 
participants receive data on post-acute care because hospitals 
typically do not receive claims data within a 30-day window.
    Response: Because the clinical episodes included in TEAM will be 
procedure-based, we believe that TEAM participants should generally be 
able to identify beneficiaries that will be included in TEAM episodes 
when the beneficiaries are admitted to the hospital. In fact, this is 
referenced in section X.A.3.i.(2) where we finalize provisions 
requiring TEAM participants to notify beneficiaries about their 
inclusion in a TEAM episode. In addition, we know from prior and 
current model tests that one of the main mechanisms in which hospitals 
engage in care redesign in an episode-based payment model has to do 
with planning for care post-discharge and the selection of and planning 
for post-acute care (whether in a facility or at home). This care 
redesign and planning occurs prior to the hospital receiving any 
relevant data on post-acute care for the episodes in question; 
generally, the participant does not receive data from the episode until 
it has concluded, even in models with a longer episode duration. We 
also note that, as discussed in section X.A.3.k. of this final rule, 
CMS will be providing comprehensive episode and claims data to TEAM 
participants that request such data on a monthly basis. TEAM 
participants will be able to use this data to identify historical 
spending patterns (using the baseline data) and patterns of care during 
their performance in the model more generally. We know from operating 
other bundled payment models that model participants can, and often do, 
use this data to inform strategies for care redesign, regardless of 
exact episode duration.
    Comment: Several commenters believed that a 30-day episode is not 
sufficient for capturing clinical outcomes and assessing quality. A 
commenter pointed out that quality measures already used in CMS 
programs demonstrate, with clinical evidence, that a longer window is 
necessary. Another commenter pointed to the 90-day CABG mortality 
measure as evidence for the appropriateness of a longer episode. 
Several commenters stated it is impossible to meaningfully analyze the 
quality of a spine fusion operation so soon after surgery, particularly 
if the aim of measuring quality is to determine if the operation 
achieved the surgeon's or patient's stated goals for undergoing the 
operation; the ultimate outcome of a spinal surgery such as fusion may 
not be measurable for one to two years in terms of the adequacy of the 
fusion and the impact it may have on the adjacent levels of the spine. 
A commenter claimed that a 30-day episode length is insufficient to 
capture the relevant costs needed to bring patients back to functional 
independence. Another commenter noted that recovery time for the 
procedures included in the model can vary widely and a 30-day episode 
duration will make it difficult for providers to address social risk 
factors and effectively identify high-risk patients. Several commenters 
stated that providing quality care for conditions that are directly 
linked to TEAM episodes, such as osteoporosis and the development of 
opioid use disorder resulting from a discharge prescription, would 
likely occur well beyond the acute episode and could not be determined 
within a 30-day episode. Several commenters stated that the narrowing 
of episodic scope weights the focus of TEAM almost entirely on the cost 
of surgical procedures and acute surgical complications and removes 
patient outcomes, as they will not be known for months after the 
episode. Another commenter stated that that the 30-day episode length 
is too short to account for the true timeline of when patients are seen 
for post-acute care visits from the treating surgical team. Another 
said it would be difficult to capture meaningful information on the 
success of a knee replacement in a 30-day episode, as it is the 
avoidance of complication, reoperations, and long-term functional 
outcomes that will truly show success.
    Response: In designing TEAM, we have attempted to create financial 
and quality accountability, across the range of potential outcomes and 
clinical scenarios that occur during and after the procedures included 
in the model, while ensuring that we do not hold providers accountable 
for financial and quality outcomes that are not directly related to the 
anchor procedure that initiated an episode.
    We agree that in many cases, the patient's outcome and recovery 
from surgery (or return to functional independence) may not be fully 
realized during the timeframe of the episode. However, our analysis of 
TEAM episode types in the BPCI Advanced model found that the plurality 
of IRF, SNF, and LTCH stays start and end within the first 30-days of 
the post-discharge period. So, we believe 30 days is sufficient to 
capture the most relevant post-acute care visits directed by the 
surgical team. As proposed, providers would be held accountable for the 
cost of revisions or reoperations of the same procedure if it occurs 
within 30 days of the initial procedure through the inclusion of Part A 
and B related costs in the initial episode or through the triggering of 
a second episode if it occurs after 30 days.
    We have attempted to balance our desire to encourage care redesign 
of the acute episode and time period immediately after the 
hospitalization, during which we know the majority of spending 
historically occurs, and the most intensive post-acute care and follow-
up post-procedure occurs, and our desire to simultaneously encourage 
longer-term, longitudinal management of beneficiaries through other 
initiatives, such as ACOs. For this reason, we are finalizing several 
policies with respect to other care management and care redesign 
efforts that may occur outside of the scope of TEAM episodes. We refer 
readers to sections X.A.3.l. and X.A.3.e.(3) of this final rule, where 
we discuss our final policies to require TEAM participants to refer 
beneficiaries to a primary care provider at the conclusion of a TEAM 
episode (or at hospital discharge, as applicable), and to allow for 
beneficiaries aligned to an ACO to initiate TEAM episodes. We believe 
this addresses the concerns of the commenters who stressed the 
importance of longer-term patient management and care beyond the scope 
and duration of the TEAM clinical episodes.
    With respect to the timeframe for the quality measures included in 
TEAM, we believe that it is reasonable to include quality measures in 
TEAM that have timeframes that differ from the exact time period for 
financial accountability under the model (that is, 30 days post-
discharge). We are committed to aligning our selected measures with 
those already in use in other required quality reporting programs where 
possible, and, as such, have limited measure options from which to 
choose. In addition, while the TEAM episode timeframe may not fully 
align with a particular quality measure, we believe the underlying goal 
of the financial and quality accountability under the model is the 
same: to improve the quality of care provided to beneficiaries and

[[Page 69730]]

choose the most efficient care that is reasonable and safe for the 
patient.
    We disagree that a 30-day episode duration makes it difficult for 
providers to address social risk factors and effectively identify high-
risk patients, and encourage TEAM participants to screen beneficiaries 
for health-related social needs, or HRSNs, as discussed in section 
X.A.3.f.(5)(c).
    Finally, with respect to patient outcomes, we note that we are 
finalizing at X.A.3.c.(3)(c) the inclusion of a patient-reported 
outcomes measure for the LEJR episode and have indicated our interest 
in the potential inclusion of additional PROMs for other TEAM clinical 
episodes in the future. We agree with the commenters who emphasized the 
importance of measuring longer-term functional status and patient 
outcomes for beneficiaries included in TEAM episodes; we believe the 
best avenue in which to do that is through quality accountability over 
a longer time period, not an extension of the 30-day post-discharge 
period.
    Comment: We received many comments in support of longer episode 
lengths. A commenter expressed concern that CMS' proposal of a 30-day 
episode represents a significant departure from previous alternative 
payment models, as both the BPCI Advanced and CJR models utilize 90-day 
episodes. Another commenter in support of 90-day episodes believed CMS 
should keep the 90-day episode structure that has proven effective in 
the CJR and BPCI Advanced models, which would enable robust evaluation 
and continuity with prior models. Other commenters supported a 90-day 
episode for spinal fusion and CABG because of the higher proportion of 
spend for the index procedure.
    Response: We thank the commenters for their feedback and 
suggestions. While commenters have pointed out the success we have had 
with other episode-based payment models with 90-day episodes, such as 
CJR and BPCI Advanced, we know from those models that the majority of 
episode spending occurs in the earlier part of the episode, that is, 
the hospitalization and first 30 days, not in the ensuing 30 or 60 days 
(for 60 or 90-day episodes, respectively). In addition, we have stated 
in section X.A.3.e.(3) of this final rule our desire to complement and 
encourage the coexistence of episode-based payment models like TEAM 
alongside more longitudinal, population-based initiatives, such as 
ACOs. We believe that the best way to do that, without encroaching on 
the accountable care entity's interest in managing the care for 
beneficiaries with chronic conditions or care needs that continue 
beyond the length of the TEAM episode, is to limit TEAM episode 
financial accountability to a 30-day post-discharge timeframe. By doing 
so, we can simultaneously encourage TEAM participants to actively 
manage and plan for post-acute care, prevent readmissions, and 
otherwise manage follow-up care immediately post-hospitalization, while 
also allowing for the accountable care entity to ``own'' the financial 
accountability for aligned beneficiaries after the acute episode and 
immediate post-discharge period ends.
    Comment: We received many comments in support of variable episode 
lengths for each clinical episode category. Many commenters encouraged 
the establishment of episode lengths specific to each clinical episode, 
so the duration is more reflective of actual opportunities for savings 
for participants, the clinical needs of patients, and distinct patterns 
of post-operative care. A couple of commenters recommended tailoring 
the episode duration to the specific set of MS-DRGs covered in the 
model; specifically, thirty days for LEJR but something longer for 
SHFFT, to reflect when the hospital and its surgical team are primarily 
responsible for the patient's care management. Another commenter noted 
that total cost of care extends well beyond the episode and that costs 
in the two years after joint replacement surgery are twice that of the 
surgical procedure.
    Response: We believe a singular episode length for all TEAM 
episodes will reduce confusion among TEAM participants with regard to 
recognizing the beginning and end of an episode, analyzing claims data 
provided to them under the terms of the model, and implementing care 
redesign strategies focusing on discharge planning, post-acute care 
planning, and follow-up care, including referral to primary care 
providers as applicable.
    While we appreciate the commenters' arguments in favor of variable 
episode lengths, we refer readers to our discussion in section 
X.A.3.e.(3) about our desire to implement TEAM in a way that 
complements other CMS initiatives focusing on longer-term population-
based care, like ACOs.
    We recognize that the episodes we are including in TEAM are 
clinically distinct, as are the beneficiaries that will be included in 
such episodes. We considered variable lengths for the clinical episodes 
but ultimately did not propose such a policy because we wanted to limit 
confusion for providers, and recognized that even within a single 
clinical episode, there will be meaningful differences between 
beneficiaries with regard to functional status, post-surgical 
complications, and other clinical considerations. We believe that a 30-
day post-discharge episode length strikes the balance of financial 
accountability for the majority of spending during and immediately 
after the procedures included in the model, while not extending the 
episode so long as to encroach upon potential activities by other 
entities providing care for beneficiaries included in TEAM, such as 
ACOs or primary care providers.
    Comment: Many commenters objected to a shorter episode combined 
with the proposed 3 percent discount factor, and the commenters 
believed that together they would create the most aggressive financial 
target that CMS has ever adopted in either a mandatory or voluntary 
episode-based model. A commenter asserted that the bands between 
benchmark spending and quality and the savings and loss thresholds will 
fall too narrowly to provide adequate opportunity for success by model 
participants. Many commenters requested that CMS either adopt a 90-day 
episode or reduce the discount.
    Response: We refer commenters to section X.A.3.d.(3)(g) of this 
final rule, where we discuss the final discount factors for the 
episodes included in TEAM.
    After consideration of the comments, we are finalizing our policy 
for a 30-day post-discharge episode length at Sec.  512.537 without 
modification.
(e) Canceling Episodes
    In the proposed rule, we proposed that, similar to the CJR model, 
once an episode begins, the episode would continue until the end of the 
episode, unless the episode is canceled because the beneficiary ceases 
to meet any of the general beneficiary inclusion criteria described in 
section X.A.3.b.(5)(b) of the preamble of this final rule (89 FR 
36419).
    In the proposed rule, we stated that we believe it would be 
appropriate to cancel the episode when a beneficiary's status changes 
during the episode, such that they no longer meet the criteria for 
inclusion, because the episode target price reflects full payment for 
the episode, yet we would not have full Medicare episode payment data 
for the beneficiary to reconcile against the target price.
    In the proposed rule, we proposed to cancel the episode if a 
beneficiary dies during the anchor hospitalization or anchor procedure, 
rather than at any point during the post-discharge period

[[Page 69731]]

of the episode, as is done in BPCI Advanced. As discussed in the CJR 
Final Rule, we believe there would be limited incentive for efficiency 
that could be expected when death occurs during the anchor 
hospitalization itself (80 FR 73318).
    As discussed in the Episode Payment Model proposed rule, we 
consider mortality to be a harmful beneficiary outcome that should be 
targeted for improvement through care redesign for these clinical 
conditions. We do not believe that it would be appropriate to exclude 
beneficiaries from episodes who die any time during the episode (81 FR 
50841).
    Instead, in the proposed rule, we proposed to maintain beneficiary 
episodes in TEAM unless death occurs during the anchor hospitalization 
or anchor procedure. We proposed that when a beneficiary dies following 
discharge from the anchor hospitalization or anchor procedure, but 
within the 30-day post-hospital discharge episode period, we would 
calculate actual episode spending and reconcile it against the target 
price. We believe this would encourage TEAM participants to actively 
manage beneficiaries to reduce their risk of death, especially as death 
would often be preceded by expensive care for emergencies and 
complications. Therefore, we proposed to cancel episodes for death only 
during the anchor hospitalization or anchor procedure.
    In the proposed rule, we stated that, if a beneficiary is admitted 
to the hospital on the same day as or within 3 days of an outpatient 
procedure that could have initiated an anchor procedure for the same 
episode category, the procedure would not initiate an anchor procedure. 
Rather, the admission would initiate an anchor hospitalization with a 
start date corresponding to the outpatient procedure. We proposed this 
policy because we believe that an inpatient episode should take 
precedence over an outpatient procedure performed on the same day, 
given the likelihood of higher spend associated with the inpatient 
episode and potential for higher clinical acuity.
    Finally, we proposed that episodes subject to extreme and 
uncontrollable circumstances (EUC) would be canceled, meaning that the 
services associated with the episode would continue to be paid through 
Medicare FFS, but the episode would not be reconciled against a target 
price. We proposed to base the TEAM EUC definition on the definition 
finalized in the CJR 2018 Final Rule (83 FR 26604), which was designed 
to address the extreme and uncontrollable costs associated with natural 
disasters such as hurricanes, flooding, and wildfires. Specifically, we 
proposed that the EUC policy would apply to TEAM participants located 
in a county where both: (1) a major disaster has been declared under 
the Stafford Act; and (2) section 1135 waivers have been issued. In the 
proposed rule, we stated that we believe that it is appropriate for our 
EUC policy to apply only in the narrow circumstance of a major 
disaster, which is catastrophic in nature and tends to have significant 
impacts on infrastructure, rather than the broader grounds for which an 
emergency could be declared. In regard to determining the start date of 
episodes to which the EUC would apply, we stated our belief that 
episodes initiated during an emergency period or in the 30 days before 
the start date of an emergency period (as defined in section 1135(g) of 
the Act) should reasonably capture those beneficiaries whose high 
episode costs could be attributed to extreme and uncontrollable 
circumstances (89 FR 36420).
    In summary, we proposed that the following circumstances would 
cancel an episode:
     The beneficiary no longer meets the criteria for 
inclusion.
     The beneficiary dies during the anchor hospitalization or 
anchor procedure.
     The participating hospital is subject to the EUC policy.
    In the proposed rule, we proposed that when an episode is canceled, 
the services furnished to beneficiaries prior to and following the 
episode cancelation would continue to be paid by Medicare as usual but 
there would be no episode spending calculation that would be reconciled 
against the TEAM target price (see section X.A.3.d.(5)(f) of the 
preamble of this final rule). As discussed in section X.A.3.h. of the 
preamble of this final rule, waivers of program rules applicable to 
beneficiaries in episodes would apply to the care of beneficiaries who 
are in episodes at the time the waiver is used to bill for a service 
that is furnished, even if the episode is later canceled.
    We sought comment on our proposals to cancel episodes once they 
have begun but prior to the end of the 30-day post-discharge period 
included in Sec.  512.537(b).
    The following is a summary of the public comments received on our 
proposals to cancel episodes and our responses:
    Comment: We received a comment regarding the need to ensure planned 
staged procedures are not counted as a readmission for those patients 
whose clinical case calls for this type of surgery. The commenter 
stated that surgeons may stage surgeries as part of the care plan, when 
appropriate and in the best interest of patient safety. That is, they 
would perform one surgery on one date and follow up with a second 
surgery at a future date. The commenter stated that if the first 
surgery initiates an episode and the second surgery is counted as a 
readmission, the target prices would not accurately reflect the episode 
and would penalize the participant hospital for caring for the patient 
in the safest manner possible.
    Response: We appreciate the comment related to staged procedures 
and the need to account for planned subsequent admission for TEAM 
episodes from the same clinical episode category during the 30-day 
discharge period. We did not propose to cancel one of the episodes when 
two episodes overlap one another, such as in planned staged procedures 
(89 FR 36419). Both CJR (42 CFR 510.210(b)) and BPCI Advanced have 
policies for such an occurrence, where the first episode is canceled, 
and a new episode begins. However, both CJR and BPCI Advanced have a 
90-day episode length.
    We recognize that there may be instances where a beneficiary has a 
subsequent admission for a TEAM episode from the same clinical episode 
category during the 30-day discharge period, such as a knee replacement 
on the contralateral knee. However, assuming the need for beneficiaries 
to be medically optimized before undertaking a second procedure, our 
belief is that such occurrences will be infrequent within TEAM's 
shorter 30-day episode. We will further analyze the frequency and 
circumstances of such occurrences (for example, how often one episode 
of the same clinical category supersedes another, and the circumstance 
in which this occurs) to determine if this policy needs to be changed 
in future rule making.
    Comment: We received a couple of comments asking CMS to exclude 
from TEAM any episode during which a patient expires during the 30-day 
post-discharge period. Commenters stated that this would be appropriate 
to account for patients that expire post-surgery because of conditions 
that are unrelated to the surgery itself. These commenters also 
believed that CMS should align its episode cancelation policy with the 
policy under the CJR model, which cancels an episode if a death occurs 
at any time during the episode, rather than just during the anchor 
admission or procedure. A

[[Page 69732]]

commenter also stated that this cancelation policy is particularly 
important, as the model looks to include more safety net providers and 
address health inequity and may include patients with more complex 
conditions unrelated to the surgery.
    Response: We appreciate comments pertaining to the policy of how to 
handle episodes in the event of a beneficiary death. We disagree that 
an episode should be canceled and excluded from TEAM reconciliation, if 
a patient dies at any point during the 30-day post discharge period. We 
consider mortality to be a harmful beneficiary outcome that should be 
targeted for improvement and encourage TEAM participants to actively 
manage beneficiaries to reduce their risk of death, especially as death 
would often be preceded by expensive care for emergencies and 
complications. We believe beneficiaries with heightened needs and 
acuity would benefit greatly from the care coordination and improved 
care transitions incentivized under the model.
    As discussed in the Episode Payment Model proposed rule (81 FR 
50841), death within the 30 days following hospital discharge would not 
be rare for certain clinical conditions in TEAM, such as CABG and 
SHFFT, and could appropriately be targeted for improvement through care 
redesign. We note that in the case of a 90-day episode, such as in CJR, 
death occurring later in the episode is less likely to be attributed to 
the anchor procedure or hospitalization procedure than a death 
occurring within 30 days. For this reason, we do not believe aligning 
the TEAM policy with CJR is necessary.
    Therefore, we believe that the proposed policy of only canceling 
those episodes when a beneficiary dies during the anchor procedure, and 
not canceling those episodes where a beneficiary dies during the 30-day 
post discharge period, best aligns with the model's greater priorities 
and incentives, and encourages providers to offer high quality and 
coordinated care to beneficiaries, including those beneficiaries who 
may have multiple complex conditions with a high risk of mortality.
    Comment: A commenter supported the cancelation of episodes subject 
to extreme and uncontrollable circumstances (EUC), as it helps health 
care organizations during climate-related disasters, which are out of 
their control.
    Response: We thank the commenter for their support.
    After consideration of the public comments we received, we are 
finalizing without modification our proposals to cancel certain TEAM 
episodes once they have begun but prior to the end of the 30-day post-
discharge period.
c. Quality Measures and Reporting
(1) Background
    As discussed in the CJR model final rule (80 FR 73358), Medicare 
payment policy has moved away from FFS payments unlinked to quality of 
care. Through the Medicare Modernization Act and the Affordable Care 
Act, we have implemented specific IPPS programs like the Hospital 
Inpatient Quality Reporting (IQR) Program (section 1886(b)(3)(B)(viii) 
of the Act), the Hospital Value-Based Purchasing (VBP) Program 
(subsection (o) of section 1886), the Hospital-Acquired Condition (HAC) 
Reduction Program (subsection (q) of section 1886), and the Hospital 
Readmissions Reduction Program (subsection (p) of section 1886), where 
payment reflects the quality of care delivered to Medicare 
beneficiaries. The CJR model similarly incorporates pay-for-
performance, offering TEAM participants the potential for financial 
reward based on quality performance or, in some cases, quality 
improvement. Through the use of quality measures, CMS is also able to 
pursue objectives beyond resource alignment, such as the development of 
new quality measures and performance indicators.\898\ Additionally, CMS 
may incorporate new quality measures, re-evaluate, or improve existing 
quality measures, or adjust a quality measure set to take effect at the 
start of each Model Year, or at other times specified by CMS.
---------------------------------------------------------------------------

    \898\ Damberg CL et al., Research Report: Measuring Success in 
Health Care Value-Based Purchasing Programs, Summary and 
Recommendations. RAND (2014). Available from https://www.rand.org/content/dam/rand/pubs/research_reports/RR300/RR306z1/RAND_RR306z1.pdf. https://www.rand.org/content/dam/rand/pubs/research_reports/RR300/RR306z1/RAND_RR306z1.pdf.
---------------------------------------------------------------------------

    We believe that episode payment models such as the proposed TEAM 
should include pay-for performance methodologies that incentivize 
improvements in patient outcomes while simultaneously lowering health 
care spending. We also believe that improved quality of care, 
specifically achieved through coordination and communication among 
providers, patients, and their caregivers, can favorably influence 
patient outcomes. We proposed that TEAM would incorporate quality 
measures that focus on care coordination, patient safety, and patient 
reported outcomes (PROs) which we believe represents areas of quality 
that are particularly important to patients undergoing acute 
procedures. Finally, wherever possible, we would align TEAM quality 
measures with those used in ongoing models and programs to minimize 
participant burden. Our goal is to focus on improving beneficiary 
quality of care and capture meaningful quality data for use in the TEAM 
pay-for-performance methodologies.
    We are starting with a parsimonious set of quality measures that 
are being tied to payment and plan to incorporate more PRO-PMs in the 
future of the model. We recognize that there are some gaps in the 
proposed measures with respect to post-acute care settings and limited 
measures for episode-specific PROs. We considered including generic PRO 
data to support the collection and reporting of PROs, similar to the 
CJR model requiring voluntary submission of the Veterans RAND 12 Item 
Health Survey (VR-12) or Patient-Reported Outcomes Measurement 
Information System (PROMIS) Global-10 generic PRO survey. However, we 
recognize PRO collection and reporting may increase participant and 
patient burden and we do not want to impose this on TEAM participants 
for generic PRO data since it may be less clinically meaningful to the 
episodes that would be tested in TEAM. We will continue to assess the 
evolving inventory of measures and refine measures based on public 
comments, changes to payment methodologies, recommendations from TEAM 
participants and their collaborators, and new CMS episode measure 
development activities.
    In the proposed rule, we stated that the proposed TEAM's quality 
measures would be scored according to the methodology described in 
section X.A.3.d.(5)(e) of the preamble of this final rule to calculate 
the CQS. The CQS would be combined with the TEAM participants' 
reconciliation amount, as specified in section X.A.3.d.(5)(g) of the 
preamble of this final rule, during the reconciliation process to tie 
quality performance to payment.
    While we believe the proposed measure set would provide CMS with 
sufficient measures to monitor quality, and to calculate scoring on 
quality performance, we may adjust the measure set in future 
performance years by adding new measures or removing measures, if we 
determine those adjustments to be appropriate at the time. We note that 
a selection of these measures may be used for evaluation purposes as 
well. Prior to adding or removing measures for monitoring quality and 
calculating scores for quality performance, we would use notice and 
comment rulemaking.

[[Page 69733]]

    The following is a summary of the public comments received on the 
proposed TEAM quality measures and its impact on other various quality 
requirements and our responses to these comments:
    Comment: Some commenters are in support of the proposed quality 
measures in TEAM. Commenters mention they greatly appreciate that CMS 
is utilizing three proposed quality measures which are currently 
collected and evaluated as part of the Hospital Inpatient Quality 
Reporting Program, in part because of the limited increase in 
administrative burden. Commenters note it is important to not increase 
the administrative burden on hospitals, clinicians, and staffs when 
possible. A few commenters showed strong support of PROMs being 
incorporated in TEAM. However, commenters warn CMS might need to 
provide some additional technical assistance on a case-by-case basis 
for PRO reporting. Additionally, a commenter suggested that TEAM 
incorporate the Patient Activation Measure (PAM) to help identify 
readmission risks, supporting discharge planning, surgical episodes of 
care, transitions of care, and improving outcomes while reducing costs. 
Lastly, a commenter agreed that enhancing patient safety should be a 
top priority in TEAM. This commenter suggested that TEAM adopt the 
Patient Safety Structural measure (MUC2023-188) that was proposed in 
the 2023 MUC list within the IQR.
    Response: We would like to thank each commenter for their support 
of the proposed quality measures in TEAM. CMS placed a strong emphasis 
on wanting to propose measures we believe do not increase the 
administrative burden on hospitals, clinicians, and staff. CMS will 
work to ensure all hospitals within TEAM are fully prepared prior to 
the model's launch date. Lastly, we'd like to thank the commenters who 
suggested the Patient Activation Measure and the Patient Safety 
Structural Measure (MUC2023-188). We believe the CMS Patient Safety and 
Adverse Events Composite (CMS PSI 90) is more appropriate for the 
episodes we've proposed in TEAM because it includes a broad array of 
safety events, many of which are relevant to patients in the episodes, 
with the added benefit of being familiar to hospitals and not 
introducing additional administrative burden. We will take this 
commenter's support into account for the inclusion of these two 
measures and corresponding attestation requirements in future 
rulemaking.
    Comment: A few commenters mentioned their appreciation of CMS using 
measures that would be reported following existing Hospital Inpatient 
Quality Reporting (IQR) program processes to reduce reporting burdens. 
However, commenters mention concerns over the proposed measures being 
used in other pay-for-performance programs, which could result in 
duplicative penalties for TEAM participants. A commenter cautions CMS 
from adopting the three measures into TEAM until hospitals have had 
time to report the measures for several years under the Hospital IQR 
Program. Lastly, a few commenters mention concerns since the proposed 
measures within TEAM will be in their first year of reporting.
    Response: We would like to thank the commenters for their 
appreciation of the proposed quality measures in TEAM aligning with the 
Hospital IQR program. CMS is aware of the concerns and reporting 
challenges that commenters have shared. However, we want to clarify 
that Hospital IQR is a pay-for-reporting program not pay-for-
performance. Where possible, we aimed to align with existing quality 
improvement efforts and selected measures that were not already 
included in performance-based payment programs, with the exception of 
PSI 90 which will only be included in TEAM's first Performance Year. 
CMS recognizes the importance of all-cause readmissions and patient 
safety in hospitals and the increased emphasis on these broadly 
applicable, valid, and consensus-entity endorsed measures through 
inclusion in the Hospital IQR program and TEAM may further incentivize 
focus on these important areas of care, while placing minimal burden on 
TEAM participants. We will continue to assess the evolving inventory of 
measures and refine measures based on public comments, changes to 
payment methodologies, recommendations from TEAM participants and their 
collaborators, and new CMS episode measure development activities.
    Comment: Some commenters voiced their concerns about the 
administrative burden to report on certain measures and for CMS to 
consider the resource allocation and administrative burden that 
providers, especially hospitals, would have to take on under the TEAM. 
TEAM participants, as well as the individual health care professions 
involved in the model, will have to increase their efficiency of care 
and accuracy of discharge recommendations while collaborating as a team 
to ensure that the patient received the right services in the right 
order at the right time. A commenter mentions that TEAM will require 
that significant hospital procedural modifications are put into 
practice for all providers who are involved. Another commenter 
suggested that CMS to refrain from implementing any mandatory 
documentation, record keeping, or reporting burden that exceeds a 
minimal level. If CMS would choose to implement such requirements, we 
would encourage CMS to align closely any required reporting with 
administrative work already being done. A commenter suggested that CMS 
ensure that there is an easy way for TEAM participants to port all of 
their ENERGY STARTM data to CMS Innovation Center, rather 
than having to do it independently. This will drastically lessen the 
administrative burden of the program. This commenter strongly 
recommended using as much of the data tracking in portfolio manager as 
we can, and NOT require any additional reporting to CMS Innovation 
Center. Lastly, a commenter suggested that CMS should create 
educational resources that help providers make the case to patients for 
why these data are being requested, and for what purposes they will be 
used. The process of improving patient-reported data requires a 
foundation of trust. We encourage CMS to consider its role in 
addressing this need.
    Response: We are appreciative of commenters sharing their concerns 
around various reporting burden challenges. TEAM proposed the said 
quality measures within TEAM to align with measures being used in other 
models and pay-for-performance programs to minimize participant burden. 
Our goal is to focus on improving beneficiary quality of care and 
capture meaningful quality data for use in the TEAM pay-for-performance 
methodologies. Additionally, the proposed quality measures in TEAM will 
already be mandatorily reported within the Hospital IQR and Hospital-
Acquired Condition Reduction Programs. CMS believes participants will 
have familiarity with reporting on these measures prior to the start of 
TEAM. Also, we recognize that hospitals will be newly adapting to the 
Hospital IQR Program requirement for the THA/TKA PRO-PM but that 
infrastructure and process development should make the incorporation of 
future PRO-PMs less burdensome. CMS is aware of the educational 
resources request and will take into account commenters feedback and 
ensure that participants in TEAM will be well informed prior to the 
beginning of the model.
    Comment: A few commenters shared their concerns over the reporting

[[Page 69734]]

barriers and administrative burden for hospitals required to 
participate in TEAM. A commenter asked CMS to ensure that the value of 
certain policies is on the initiation of timely care, and that these 
policies are adequately enforced to maximize these outcomes. For 
instance, the proliferation of Medicare Advantage (MA) plans has been 
widely considered in annual MA rulemaking, specifically concerning the 
impact of internal coverage criteria that MA plans use to deny care in 
post-acute settings. Commenters stated that other activities may 
already be ongoing in some or most hospitals, but a formal demo-like 
TEAM with strong financial incentive features, will require more of 
this activity than is typically taking place leading to additional 
administrative burden. Lastly, a commenter stated that TEAM as proposed 
would add significant risk and burden to some of the most distressed 
hospitals at time when they--and especially non-profit community 
hospitals who are mostly serving Medicare and Medicaid beneficiaries--
have no capacity to take on new risks and burden. CMS Innovation Center 
must make this model, if mandatory, easier to implement, less risky to 
manage, and more aligned with other work than voluntary models.
    Response: We appreciate commenters voicing their concerns over the 
proposed TEAM quality measures. These quality measures that were 
proposed in TEAM align with measures being used in other models and 
pay-for-performance programs to minimize participant burden. Our goal 
is to focus on improving beneficiary quality of care and capture 
meaningful quality data for use in the TEAM pay-for-performance 
methodologies. CMS is aware of the educational resources request and 
will take into account commenters feedback and ensure that participants 
in TEAM will be well informed and ready to implement the various TEAM 
requirements prior to the model's start date.
    Comment: Many commenters suggested that TEAM mimic BPCI Advanced 
which used an administrative (claims-based) measure set and allowed for 
hospitals to utilize instead an alternative measure set, which 
frequently made use of registry data, for quality measures. Commenters 
specifically mention that registry-based metrics are especially useful 
for engaging specialists and aligning value-based care programs across 
payers and provide more episode-specific data than the proposed 
measures. A few commenters suggested episode specific measures such as, 
Patient-Centered Surgical Risk Assessment and Communication (QPP #358) 
and the CABG Composite Score (CBE #0696) for specific TEAM episodes 
categories. Additionally, a commenter mentioned that CMS should include 
the Advanced Care Plan measure in TEAM to better support person 
centered care.
    Response: We acknowledge there is rich clinical quality data 
available in clinical data registries, which have an important place in 
the history of quality measure development. Our aim was to use quality 
measures that all hospitals would have access and experience with hence 
why we recommended Hospital IQR measures for the majority of the 
performance years in TEAM. Introducing new reporting functions and 
requirements in a mandatory model would create for additional burden 
especially on hospitals who are not a member of these specialty 
societies and those who are not reporting on these alternative quality 
measures. CMS will take into consideration the suggested episode 
specific measures for TEAM and will propose any new measures in 
rulemaking.
    Comment: A commenter voiced their concerns with the proposed 
measures within TEAM not aligning with other pay for performance 
programs. Measures most often included in the core set are primary care 
centric and may not be appropriate for episodic or specialty care 
models. As a result, a commenter cautions CMS in its evaluation of 
measures for inclusion under an episodic model to ensure whatever 
measures are selected are appropriate and relevant to the model.
    Response: We appreciate commenters voicing their concerns with the 
proposed measures in TEAM. CMS recognizes the difficulties associated 
with patient reported outcome and hospital wide measures and the 
underlying data collection tools used in a clinical domain; however, we 
decline the requests to remove the proposed measures from TEAM because 
hospitals will have familiarity reporting on the measures and we 
believe that providing Team participants with measures that are already 
incorporated within the Hospital IQR and HAC Reduction Program will 
lead to less burden. Additionally, the measures align with CMS quality 
goals and support. We will consider incorporating episode-specific 
measures where applicable in future rulemaking.
    Comment: A commenter recommended that evaluations should include 
quality measures that reflect patients' health and functioning period 
beyond the 30-day post discharge period. For many individuals, the 
recovery period extends well beyond 30 days. We recommend aligning the 
quality measurement period with the Part A deductible period of 60 days 
post discharge.
    Response: We appreciate commenters recommendation to include 
measures that reflect a patients' health beyond the 30-day post 
discharge period. CMS will take these recommendations into 
consideration for future rulemaking.
    Comment: A commenter mentioned that we should study whether 
surgical-related prehabilitation services and care should be included 
in future TEAM policy. The commenter said that many studies have 
demonstrated, and hospital perioperative services know, the value 
anesthesiologists provide in preoperative assessment clinics and that 
their actions are key to setting patient expectations, reducing patient 
length of stay, and encouraging patients to take better ownership of 
their health. Additionally, this commenter mentions that they recognize 
many hospitals are unable to provide such preoperative services, but 
perhaps collecting information on such services would acknowledge the 
importance of those services in reducing costs, improving care, and 
allocating resources based upon patient needs.
    Response: We appreciate this commenter's input regarding pre-
hospitalization. We will take this commenter's suggestion in future 
consideration. Any addition of future measures that focus on surgical-
related prehabilitation services would be done through future 
rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposals for the proposed measures that are being used 
within the Hospital IQR and HAC Reduction programs without modification 
in our regulation at Sec.  512.547.
(2) Selection of Quality Measures
    As proposed, TEAM is designed to provide financial incentives for 
improving coordination of care for beneficiaries. We expect care 
redesign activities to reduce post-surgical complications and hospital 
readmissions and enhance patient experience and outcome. Furthermore, 
we acknowledge that achieving savings while continuing to ensure high-
quality care for Medicare FFS beneficiaries will require close 
collaboration among hospitals, physicians, PAC providers, and other 
providers. In order to encourage greater care collaboration among the 
providers of TEAM beneficiaries, we proposed three measures as 
described in section

[[Page 69735]]

X.A.3.c.(3) of the preamble of this final rule. These measures would be 
used to determine hospital quality of care and eligibility for a TEAM 
reconciliation payment.
    The measures we proposed are--
     For all TEAM episodes: Hybrid Hospital-Wide All-Cause 
Readmission Measure with Claims and Electronic Health Record Data (CMIT 
ID #356).
     For all TEAM episodes: CMS Patient Safety and Adverse 
Events Composite (CMS PSI 90) (CMIT ID #135); and
     For LEJR episodes: Hospital-Level Total Hip and/or Total 
Knee Arthroplasty (THA/TKA) Patient-Reported Outcome-Based Performance 
Measure (PRO-PM) (CMIT ID #1618).
    Beginning in PY 1 and continuing for the duration of the model, we 
proposed to adjust reconciliation amounts by the TEAM participants' CQS 
based on their performance of quality measures previously listed.
    We initially proposed these three quality measures due to their: 
(1) Alignment with the goals of TEAM; (2) hospitals' familiarity with 
the measures due to their use in other CMS hospital quality programs, 
including the Hospital IQR and HAC Reduction Programs; and (3) 
alignment to CMS priorities, including the CMS National Quality 
Strategy which has goals that support safety, outcomes, and engagement. 
We believe the three quality measures we proposed to link to payment 
reflect these goals and accurately measure hospitals' level of 
achievement on such goals.
    We note that shared-decision making (SDM) is an important aspect of 
care around elective procedures, including elective procedures captured 
in episodes such as the LEJR episode and Spinal Fusion episode. Use of 
SDM prior to episode initiation can serve as an important tool to 
ensure appropriate care. SDM allows the clinician and patient to have 
informed discussion about treatment options, balancing the risks and 
expected outcomes with a patient's preferences and values, and can help 
contribute to ensuring appropriate use of procedures and minimization 
of low value care. CMS has taken steps to incorporate SDM in care 
pathways, such as requiring SDM interaction prior to ICD implantation 
for certain patients for national coverage determinations.\899\ 
However, implementing SDM in episode-based payment models such as TEAM 
poses challenges with respect to the timing of the patient/provider 
interaction and when an episode is initiated. While there are upstream 
opportunities for SDM in the case of elective surgical episodes, 
unplanned or non-elective episodes may be less conducive to SDM. 
Although we did not propose a measure initially, we sought feedback on 
the opportunity for TEAM to capture quality data related to SDM between 
patients and providers, and avoidance of low value care and procedures. 
We invited public comment on whether such a measure concept or any 
existing measures would be appropriate for TEAM.
---------------------------------------------------------------------------

    \899\ https://www.cms.gov/medicare-coverage-database/view/ncacal-decision-memo.aspx?proposed=N&NCAId=288.
---------------------------------------------------------------------------

    Lastly, we also recognize that there are certain measures on the 
2023 Measures Under Consideration (MUC) List 900 901 that 
may be more clinically meaningful and specific to the episodes in TEAM. 
These measures are as follows:
---------------------------------------------------------------------------

    \900\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsxhttps://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \901\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
---------------------------------------------------------------------------

     Hospital Harm--Falls with Injury (MUC2023-048).
     Thirty-day Risk-Standardized Death Rate among Surgical 
Inpatients with Complications (Failure-to-Rescue) (MUC2023-049).
     Hospital Harm--Postoperative Respiratory Failure (MUC2023-
050).
    These three outcome measures focus on improving quality and health 
outcomes across a beneficiary's care journey and allow for hospitals to 
better align and coordinate care across various programs and care 
settings. TEAM sought further comment on these three MUC measures, and 
potentially replacing the CMS PSI 90 measure beginning in 2027, TEAM's 
second performance year. This timeline will allow TEAM participants to 
have one year to gain experience with reporting the measures in the 
Hospital IQR program before their performance is tied to payment 
beginning in TEAM's second performance year. Further details on these 
MUC measures can be found in section X.A.3.c.(3)(d) of the preamble of 
this final rule. The following is a summary of the public comments 
received on the proposed TEAM quality measures and its impact on other 
various quality requirements and our responses to these comments:
    Comment: A commenter recommended that TEAM incorporate the 
Preventive Care and Screening: Body Mass Index (BMI) Screening and 
Follow-Up Plan Measure and quality measures for dementia care to 
support alignment between TEAM and the GUIDE model. This commenter 
encourages CMS to also consider the absence of obesity care specific 
quality metrics in data sets such as HEDIS. Accelerating the 
development, testing, and emplacement of quality metrics focused on 
diagnosis, care plan development and implementation, and outcomes, as 
examples, would support improved use of evidence-based care. Lastly, 
this commenter believes that any CMS Innovation Center demonstration 
activity in dementia care should focus on testing ways to improve and 
support overall care delivery quality, appropriate and timely diagnosis 
and treatment initiation, follow-up care coordination, and health 
equity.
    Response: We appreciate commenters suggestion to incorporate 
dementia and obesity related quality measures in TEAM. However, CMS 
declines to incorporate these measures due to the potential for 
increasing reporting burden on hospitals who may not be reporting on 
these said measures. CMS will continue to move forward with our 
proposed measures in TEAM and will add or remove any new quality 
measures in TEAM in a future year's rulemaking, where appropriate.
    Comment: A couple of commenters were in full support of the TEAM 
proposed quality measures. Commenters are appreciative of the proposed 
quality measure set and its alignment with quality reporting programs 
that TEAM participants will already be supporting. Although a commenter 
believes that adjustments can be made to align the associated 
measurement timeframes more appropriately for post-operative episodes 
with industry standards, as it relates to complications and 
mortalities.
    Response: We appreciate commenters feedback and support of the TEAM 
proposed quality measures. As of now, we plan to make no adjustments to 
the proposed quality measure specifications since they align with what 
is proposed and used in the Hospital IQR and HAC Reduction programs. 
CMS will continue to move forward with the proposed measures as is. Any 
future updates or changes will be incorporated into a future year's 
rulemaking process.
    Comment: A couple of commenters suggested that TEAM incorporate the 
hospital consumer assessment of healthcare providers and systems 
(HCAHPS) survey data, or the Patient-Reported Outcomes Measurement 
Information System (PROMIS) Global-10 survey (PROMIS-10) in the quality

[[Page 69736]]

accountability framework for TEAM participants. Commenters believe that 
the HCAHPS and PROMIS survey may be a valuable addition to include 
well-established patient reported data and metrics.
    Response: We appreciate commenters suggestion to include the HCAHPS 
and PROMIS survey data in TEAM and will consider the suggestion for 
future rulemaking, where appropriate.
    Comment: Many commenters expressed concern that the proposed 
measures do not directly measure performance under the model and stated 
that for measures to be meaningful, those selected must be focused on 
what the model is trying to accomplish and limited to the model's 
patient population. This will ensure commenters have meaningful 
opportunities to improve quality and are held accountable under the 
model for care that is relevant to their care improvement efforts. The 
proposed measures utilize hospital-wide metrics that collect data on 
the entire hospital, rather than being specific to the patient 
population participating in TEAM. Another commenter mentioned the 
challenge that proposed measures are a measure of inpatient 
performance, whereas the model includes both inpatient and outpatient 
episodes. For procedures that can be furnished in either the inpatient 
or outpatient setting, typically the patients who continue to receive 
care in the inpatient setting tend to be higher risk and with higher 
prevalence's of complications, which can negatively impact performance 
on measures. A similar challenge has occurred in the CJR model. A 
couple of commenters recommended that CMS adopt a more diverse and 
meaningful set of quality measures for use under this model. In 
selecting more focused measures, it is also critical that CMS better 
align the manner it evaluates quality and cost under TEAM, which has 
been a challenge for CMS on other value-based programs. Lastly, a 
commenter suggested that CMS align TEAM quality measures with MIPS 
Value Pathways.
    Response: We would like to thank all commenters that closely 
reviewed and shared their suggestions for with the TEAM proposed 
quality measures. While we recognize that the Hybrid HWR measure and 
CMS PSI 90 are not specific to surgical episodes, we believe they are 
critical measures for assessing hospital quality and performance. The 
Hybrid HWR measure is well suited for an episode accountability model 
because it reports a single Comment performance score derived from the 
volume-weighted results of five different models. The measure also 
indicates the hospital-level standardized risk ratios (SRR) for each of 
these five specialty cohorts. The Hybrid HWR measure helps to capture 
an overall view of hospital-level performance while encompassing all 
the TEAM participants, has the potential to incentivize improved 
transitions in care, and can serve as an indicator of poor quality of 
care within a hospital overall. The CMS PSI 90 measure summarizes 
patient safety across multiple indicators, monitors performance over 
time, and facilitates comparative reporting and quality improvement at 
the hospital level. The CMS PSI 90 composite measure intends to reflect 
the safety climate of a hospital by providing a marker of patient 
safety during the delivery of care. The CMS Innovation Center is using 
this measure for TEAM because it may inform how patients select care 
options, providers allocate resources, and payers evaluate performance. 
Additionally, CMS PSI 90 is a subset of the AHRQ Patient Safety 
Indicators and is a more relevant measure for the Medicare population 
because it utilizes ICD-10 data. CMS will consider incorporating 
episode-specific measures and aligning with other quality-based payment 
programs where applicable in future rulemaking.
    Comment: A commenter suggested that as CMS considers additional 
quality measures to include in TEAM, CMS should provide all PAC 
providers with patient-level feedback data for claims-based measures. 
The lack of patient-level data for claims-based measures and relative 
infrequency of claims-based measure reports hampers Inpatient 
Rehabilitation Facilities' (IRF) ability to adjust or fully optimize 
any potential modifications to patient care practices and procedures in 
order to improve quality measure performance, which is the express 
purpose of the IRF Quality Reporting Program (QRP). Transparency of 
data and information in Medicare has become a critically important 
ingredient within the multiple dashboards, frameworks, and portals that 
have been designed to enable consumers and patients to evaluate quality 
of care and make better informed decisions about where to receive their 
care. This transparency should include furnishing IRFs with patient-
specific data and information for IRF QRP claims-based quality 
measures, as it would enable IRFs to take steps toward improving and 
refining our processes and quality of care initiatives.
    Response: We appreciate commenters suggestion to provide additional 
patient-level feedback data for the proposed claims-based measures and 
will take this feedback into consideration in future rulemaking where 
appropriate.
    Comment: Many commenters suggested that TEAM include more episode 
specific measures or align with programmatic measures that focus on 
team-based care of patients including patient goals, drive quality 
improvement cycles with clinical data, help guide patients seeking safe 
and good care, and reduce measurement burden since they are tied to 
optimal care delivery and improvement. The concept behind the 
programmatic measure is based on several decades of history 
implementing programs that demonstrably improve patient care provided 
by both the clinical team and the facility. Specifically, commenters 
suggested TEAM include the Advanced Care Plan measure for all episodes 
proposed in TEAM. Additionally, a few commenters suggested using 
existing Medicare risk-standardized quality measures tracking TJA 
readmissions and complications as specific measures for the LEJR 
episode category. Also, a commenter suggested CMS consider use of 
existing or new CAHPS surveys to enhance the proposed quality measures 
and provide a standardized method to assess patient experience. Lastly, 
a commenter suggested CMS collaborate with surgical providers AND post-
acute providers to identify appropriate post-surgical functional 
outcomes measures, particularly those related to mobility, selfcare, 
and cognition that are aligned with PAC measures.
    Response: We acknowledge commenters suggestions for CMS to consider 
more episode specific and programmatic measures within TEAM and CMS 
will consider these suggestions for future notice and comment 
rulemaking, where appropriate.
    Comment: A couple of commenters shared that they are interested in 
future shared decision-making measures to be incorporated into TEAM in 
a future year. The inclusion of culturally congruent shared decision 
making as a quality measure in TEAM would promote health equity by 
incentivizing providers to ensure all patients and their caregivers, 
including patients of color and patients with limited English 
proficiency, receive comprehensive information and support in their 
health care decisions. Shared decision-making measures will help both 
policymakers and providers better define and monitor what ``value'' is 
to patients and families. Specifically, a commenter suggested that TEAM 
consider the SDM-Q-9, CollaboRATE and SDM Process 4 survey measures for 
the TEAM LEJR episode. Additionally, another commenter

[[Page 69737]]

acknowledges that measures around shared decision-making prior to a 
surgical episode are not being included now due to challenges with 
``respect to the timing of patient/provider interaction and when an 
episode is initiated.
    Response: We appreciate commenters suggestion of the inclusion of 
shared decision-making measures into TEAM. CMS will take these 
considerations into account and any future incorporation of shared 
decision-making within TEAM will be shared through future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposals for the proposed quality measures that are 
being used within the Hospital IQR and HAC Reduction programs without 
modification in our regulation at Sec.  512.547. TEAM will consider SDM 
and share further updates in a future notice and comment rulemaking.
(3) Quality Measures
(a) Hybrid Hospital-Wide All-Cause Readmission Measure With Claims and 
Electronic Health Record Data (CMIT ID #356)
    Hospital readmission, for any reason, is disruptive to patients and 
caregivers, costly to the healthcare system, and puts patients at 
additional risk of hospital-acquired infections and complications. 
Readmissions are also a major source of patient and family stress and 
may contribute substantially to loss of functional ability, 
particularly in older patients. Some readmissions are unavoidable and 
result from inevitable progression of disease or worsening of chronic 
conditions. However, readmissions may also result from poor quality of 
care or inadequate transitional care. Transitional care includes 
effective discharge planning, transfer of information at the time of 
discharge, patient assessment and education, and coordination of care 
and monitoring in the post-discharge period. Numerous studies have 
found an association between quality of inpatient or transitional care 
and early (typically 30-day) readmission rates for a wide range of 
conditions.\902\ In 2013, CMS contracted with Yale New Haven Services 
Corporation, Center for Outcomes Research and Evaluation (CORE) to 
demonstrate whether clinical data derived from electronic health 
records (EHRs) could be used to reengineer and enhance the Hospital-
Wide All-Cause Unplanned Readmission (HWR) measure.\903\ Under the 
contract with CMS, Yale CORE identified a set of core clinical data 
elements (CCDE) that are feasibly extracted from hospital EHRs and are 
related to patients' clinical status at the start of an inpatient 
encounter.
---------------------------------------------------------------------------

    \902\ Frankl SE, Breeling JL, Goldman L. Preventability of 
emergent hospital readmission. American Journal of Medicine. Jun 
1991;90(6):667-674.
    \903\ https://qualitynet.cms.gov/inpatient/measures/hybrid/methodology.
---------------------------------------------------------------------------

    In the proposed rule, we proposed including the Hybrid Hospital-
Wide Readmission (HWR) Measure with Claims and Electronic Health Record 
Data (CMIT ID #356) measure in TEAM, for all episode categories. 
Previously, within the CJR rule, CMS proposed using the Hospital-Level 
30-day, All-Cause Risk-Standardized Readmission Rate (RSRR) Following 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) (NQF #1551) measure because we believed that this 
measure aligned with CMS priorities to improve the rate of LEJR 
complications and readmissions, while improving the overall patient 
experience. As a result of stakeholder feedback voicing concerns over 
the requirements already set in place by the Hospital Readmissions 
Reduction Program for this measure, the Hospital-level 30-day, all-
cause RSRR following elective primary THA and/or TKA (NQF #1551) was 
not included in the CJR Model. Our rationale for including the Hybrid 
HWR measure within TEAM is because the increased use of EHRs by 
hospitals creates an opportunity to incorporate clinical data into 
outcome measures without the laborious process of extracting them from 
paper medical records. Although claims-based risk adjustment has been 
shown to be comparable to risk adjustment using clinical data when 
observing hospital-level performance, clinical providers continue to 
express preference for using patient-level clinical 
data.904 905 Additionally, we believe this version of HWR 
provides an opportunity to align the measure with clinical decision 
support systems that many providers utilize to alert care teams about 
patients at increased risk of poor outcomes, such as readmission, in 
real time during the inpatient stay. Further, utilizing the same 
variables to calculate hospital performance that are used to support 
clinical decision, we believe, would be clinically sensible and cost 
effective, as it may reduce the burden of EHR data mapping and 
extraction required for quality reporting.
---------------------------------------------------------------------------

    \904\ Keenan PS, Normand SL, Lin Z, Drye EE, Bhat KR, Ross JS, 
et al. An administrative claims measure suitable for profiling 
hospital performance on the basis of 30-day all-cause readmission 
rates among patients with heart failure. Circ Cardiovasc Qual 
Outcomes. 2008 Sep;1(1):29-37. PubMed PMID: 20031785. Epub 2008/09/
01. eng.
    \905\ Krumholz HM, Lin Z, Drye EE, Desai MM, Han LF, Rapp MT, et 
al. An administrative claims measure suitable for profiling hospital 
performance based on 30-day all-cause readmission rates among 
patients with acute myocardial infarction. Circ Cardiovasc Qual 
Outcomes. 2011 Mar;4(2):243-52. PubMed PMID: 21406673. PMCID: 
PMC3350811. Epub 2011/03/17. eng.
---------------------------------------------------------------------------

    In addition, clinical data captured in electronic health records 
are recorded by clinicians who are interacting with the patient and who 
value the accuracy of the data to guide the care they provide. 
Therefore, many clinical data elements that are captured in real-time 
to support patient care are less susceptible to gaming, coding drift, 
and variations in billing practices compared with administrative data 
used for billing purposes. These reporting processes allow for more 
stable measurements over time. Finally, the measures that are included 
within HRRP do not capture some of the episodes that we proposed for 
TEAM. The Hybrid HWR measure is one of the only existing readmission 
measures that captures readmission data for patients following 
procedures such as spine surgery. By using the Hybrid HWR measure, we 
are inclusive of the specified episodes and encourage broader efforts 
to reduce unnecessary returns to the hospital at participating 
hospitals within TEAM.
    For TEAM, we proposed to use the measure specifications detailed 
here: https://ecqi.healthit.gov/sites/default/files/ecqm/measures/CMS529v4.html and https://qualitynet.cms.gov/inpatient/measures/hybrid/methodology. If we were to remove the measure, we would use notice and 
comment rulemaking. This measure would be a pay-for-performance measure 
beginning in PY 1 and scored in accordance with our proposed 
methodology in section X.A.3.d.(5)(e) of the preamble of this final 
rule.
    We sought public comment on our proposal to include the Hybrid 
Hospital-Wide All-Cause Readmission Measure with Claims and Electronic 
Health Record Data measure in TEAM at Sec.  512.547(a)(1).
    The following is a summary of the public comments received on the 
proposed Hybrid Hospital-Wide Readmission (HWR) measure and our 
responses to these comments.
    Comment: Several commenters raised concern that the Hybrid 
Hospital-Wide Readmission (HWR) measure provides little meaningful 
insight into the quality of care for TEAM specific episodes. Many 
commenters stated that the Hybrid HWR measure cannot assess quality or 
improvement for patients treated under TEAM and providers should not be 
held accountable for

[[Page 69738]]

hospital-wide measures, especially if TEAM episodes make-up a small 
proportion of the hospital's total population.
    Response: We would like to thank all commenters for their close 
review and comments regarding with the Hybrid HWR measure. While we 
recognize that the Hybrid HWR measure is not specific to surgical 
episodes, we believe this is a critical measure for assessing hospital 
quality and performance. This measure is well suited for an episode 
accountability model because it reports a single Comment performance 
score derived from the volume-weighted results of five different 
models. These models are specialty cohorts based on groups of discharge 
condition categories or procedure categories: surgery/gynecology; 
general medicine; cardiorespiratory; cardiovascular; and neurology. The 
measure also indicates the hospital-level standardized risk ratios 
(SRR) for each of these five specialty cohorts. The Hybrid HWR measure 
helps to capture an overall view of hospital-level performance while 
encompassing all the TEAM participants, has the potential to 
incentivize improved transitions in care, and can serve as an indicator 
of poor quality of care within a hospital overall. Overall, CMS 
acknowledges participants preference for episode specific measures. We 
will consider incorporating episode-specific measures where applicable 
in future rulemaking.
    Comment: Some commenters noted that the novelty of hybrid reporting 
for the Hybrid HWR measure has created challenges for hospitals. For 
example, hospitals have been unable to extract the required data from 
their EHRs for the first year of voluntary reporting in IQR or reported 
issues with the measure specifications.
    Response: We appreciate commenters for voicing their concerns and 
experience with reporting the HWR measure. CMS is aware of the 
obstacles hospitals faced reporting this measure in IQR through the 
hybrid methodology and are working with the developer to address issues 
commenters have noted. CMS is aware of the EHR reporting requirement 
concerns and commenters feeling that they won't be ready in time to 
report this measure for TEAM. We anticipate that hospitals will be 
better prepared to report the Hybrid HWR measure by the first 
performance year, but TEAM participants will still have the option to 
report the claims-based version of the measure throughout the model if 
they prefer.
    Comment: Some commenters voiced their support for the Hybrid HWR 
measure. Commenters noted that they appreciate CMS aligning with other 
CMS Hospital Quality Reporting programs, agreed that the inclusion of 
clinical data likely improves risk adjustment, and agreed that the 
measure aligns well with the use of clinical decision support systems.
    Response: We thank commenters for expressing support for inclusion 
of the Hybrid HWR measure.
    Comment: A commenter asked CMS if TEAM considered any outcome 
measures that are associated with positive long term health outcomes.
    Response: We appreciate this commenters question. CMS considered a 
number of measures before deciding on its proposed quality measures for 
TEAM. CMS will has taken commenter feedback into account and any 
updates or additions to the proposed quality measures in TEAM would be 
in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposals for the proposed Hybrid HWR measures that is 
being used in the Hospital IQR program without modification in our 
regulation at Sec.  512.547.
(b) CMS Patient Safety and Adverse Events Composite (CMS PSI 90) (CMIT 
ID #135)
    The Agency for Healthcare Research and Quality (AHRQ) developed 
patient safety indicators for health providers to identify potential in 
hospital patient safety problems for targeted institution-level quality 
improvement efforts. These Patient Safety Indicators (PSIs) are 
comprised of 26 measures (including 18 provider-level indicators) that 
highlight safety-related adverse events occurring in hospitals 
following operations, procedures, and childbirth. AHRQ developed the 
PSIs after a comprehensive literature review, analysis of available ICD 
codes, review by clinical panels, implementation of risk adjustment, 
and empirical analyses. The CMS Patient Safety and Adverse Events 
Composite (CMS PSI 90) is used in the HAC Reduction Program to support 
CMS public reporting and pay-for-performance. The CMS PSI 90 measure is 
calibrated using the Medicare fee-for-service population and based on 
the AHRQ Patient Safety Indicators. The CMS PSI 90 measure summarizes 
patient safety across multiple indicators, monitors performance over 
time, and facilitates comparative reporting and quality improvement at 
the hospital level. The CMS PSI 90 composite measure intends to reflect 
the safety climate of a hospital by providing a marker of patient 
safety during the delivery of care. However, we are aware of the common 
stakeholder concerns surrounding the CMS PSI 90 measure, including the 
following: \906\
---------------------------------------------------------------------------

    \906\ Adverse Effects of the Medicare PSI 90 Hospital Penalty 
System on Revenue-Neutral Hospital-Acquired Conditions (Jun 2020).
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     PSI 90 may be associated with adverse prioritization for 
preventing some conditions over others. Not all conditions are equal 
with respect to prevention guidelines.
    ++ Sepsis prevention may include use of prophylactic antibiotics.
    ++ Fall prevention requires assessment of fall risk and 
appropriately applied remediation methods.
     Pressure injury prevention consists of a time-consuming, 
complex series of unrelated tasks for nurses, consisting of daily skin 
checks and risk assessments, repositioning every 3 to 4 hours, and 
managing moisture and incontinence among other tasks.
     Simple clinical decision points can expose patients to 
many risks reflected in PSI 90; however, PSI 90 weighting system may 
influence risk because HACs are weighted in PSI 90 based on volume and 
harm.
     The PSI 90 composite score could create incentives to 
prioritize low hanging fruit (for example, procedures and treatments 
that are directly remunerated) over pressure injury prevention.
    We proposed including the CMS PSI 90 measure in TEAM, for all 
episode categories, because it includes a broad array of safety events, 
many of which are relevant to patients in the episodes, are familiar to 
hospitals and have no additional burden. CMS would use the CMS PSI 90 
software to produce the CMS PSI 90 results. Since CMS is currently 
using the CMS PSI 90 measure in certain quality programs, including the 
Hospital-Acquired Condition Reduction Program, we do not anticipate 
additional administrative burden for TEAM participants.
    For TEAM, we proposed to use the measure specifications detailed 
here: https://qualitynet.cms.gov/inpatient/measures/psi/resources. If 
we were to remove the measure, we would use notice and comment 
rulemaking. This measure would be a pay-for-performance measure 
beginning in PY 1 and scored in accordance with our proposed 
methodology in section X.A.3.d.(5)(e) of the preamble of this final 
rule.
    We sought public comment on our proposal to include the CMS PSI 90 
measure in TEAM at proposed Sec.  512.547(a)(2) and sought comment on 
other hospital level safety measures

[[Page 69739]]

appropriate for these episodes that are not already tied to payment in 
CMS programs. We also invited public comment on the ones that were on 
the 2023 MUC list and the possible approach to transition from CMS PSI 
90 to the three measures beginning in TEAM's second performance year.
    The following is a summary of the public comments received on the 
proposed CMS PSI 90 measure and our responses to these comments.
    Comment: Many commenters did not agree with the inclusion of the 
CMS PSI 90 measure in TEAM and highlight several reasons. For example, 
a few commenters mention that PSI 90 is a weighted average of all 
patient safety indicators (PSIs), despite the varying PSIs do not pose 
equal risk to a patient. Essentially, the measure is driven by the 
frequency of different events without accounting for relative severity 
of harm. Additionally, many commenters state this measure is not 
episode specific and too broad of a measure to be meaningful enough for 
the surgical episodes that are being proposed in TEAM. A commenter 
mentioned while PSI data may assist hospitals in identifying specific 
cases to investigate for quality improvement purposes, it is not well 
suited to meaningfully assessing hospital performance on safety issues 
in comparison to other hospitals. A commenter raised some concerns 
about the disproportionate impact PSI 90 may have on safety net 
hospitals. The inclusion of the PSI 90 measure could disadvantage these 
hospitals, further exacerbating the challenging financial situation of 
these vital facilities. Commenters shared concerns with this measure 
being scored on performance in multiple payment programs. The CMS PSI-
90 measure currently included in the Hospital-Acquired Condition 
Reduction Program. Therefore, hospitals are already held financially 
accountable for their performance on this measure. A commenter does not 
believe that providers should be held financially accountable for 
performance on the same measure based on two different methodologies in 
two separate programs. Doing so risks creating conflicting signals 
based on performance for the same measure. Many commenters did not 
agree with the proposed CMS PSI 90 measure and CMS should consider 
incorporating other CMS patient safety outcome measures in TEAM.
    Response: We are aware of commenters concern over the CMS PSI 90 
measure; however, the CMS PSI 90 measure includes a broad array of 
safety events, many of which are relevant to patients in the episodes, 
are familiar to hospitals and have no additional burden on hospitals. 
Additionally, TEAM incorporating the CMS PSI 90 measure for only PY 1 
and then replacing this measure with our proposed list of 2023 Measures 
Under Consideration measures along with considering other safety 
measures that were provided by commenters. CMS will use future 
rulemaking to incorporate any newly proposed safety measures within 
TEAM.
    Comment: A couple of commenters suggested that CMS revisit the 
Alternate Quality Measure set that was used in BPCI Advanced and 
consider applying those measures for applicable TEAM episodes in lieu 
of the PSI 90 measure. The proposed measures in TEAM utilize mainly 
hospital wide metrics. Some commenters believe participants will find 
it difficult to draw direct correlates between the PSI 90 and surgical 
care redesign. A commenter states that the Alternate Quality Measures 
are trackable in the EHR, clinically relevant, and process oriented.
    Response: We appreciate commenters suggestions on incorporating 
measures from the Alternate Quality Measure set that was used in BPCI 
Advanced in lieu of CMS PSI 90. However, CMS has proposed the CMS PSI 
90 measure in TEAM because we believe this measure summarizes patient 
safety across multiple indicators, monitors performance over time, and 
facilitates comparative reporting and quality improvement at the 
hospital level. The CMS PSI 90 composite measure intends to reflect the 
safety climate of a hospital by providing a marker of patient safety 
during the delivery of care. Additionally, CMS wanted to propose 
measures that are not administratively burdensome. CMS PSI 90 has been 
mandatorily reported within HAC Reduction Program for years and 
hospitals will be familiar with reporting this measure before the start 
of TEAM.
    Comment: A few commenters are in support of the inclusion of the 
PSI 90 measure with TEAM. A commenter states that the selection of the 
PSI 90 and all-cause readmission measures aligns heavily with quality 
improvement efforts already underway in hospitals and reduces the need 
for duplicate measures. Another commenter states that PSI 90 is 
fundamental to patient safety measurement because it addresses patient 
safety across a broad range of events and indicators, monitors 
performance over time, facilitates comparative reporting and quality 
improvement, and is already embedded in other quality reporting and 
pay-for-performance programs, for example, the HAC (Hospital Acquired 
Condition) Reduction Program.
    Response: We appreciate commenters support of the PSI 90 measure 
being collected in TEAM for PY 1.
    After consideration of the public comments we received, we are 
finalizing our proposals for the proposed CMS PSI 90 measure that is 
being used within the HAC Reduction program without modification in our 
regulation at Sec.  512.547.
(c) Hospital-Level Total Hip and/or Total Knee Arthroplasty (THA/TKA) 
Patient-Reported Outcome-Based Performance Measure (PRO-PM) (CMIT ID 
#1618)
    As part of the CMS Innovation Center's Strategy Refresh, TEAM is 
working to align with the Center's Patient-Reported Outcome Measure 
Strategy. This strategy supports the CMS Innovation Center's Advancing 
Quality Initiative, which aims to support a more person-centered 
quality strategy in accountable care and specialty care models and 
demonstrations. The Patient-Reported Outcome Measure Strategy aims to 
increase the use of patient-reported measures in CMS Innovation Center 
models and demonstrations. PROs are reported by the patient and capture 
a person's perception of their own health through surveys and 
questionnaires. Broadly, patient-reported data includes PROs and ePROs, 
which is the electronic capture of this data; patient-reported outcome 
measures (PROMs), which reflect how the PRO data is reported (for 
example, a survey instrument); and patient-reported outcome-based 
performance measures (PRO-PMs), which are reliable and valid quality 
measures of aggregated PRO data reported through a PROM and potentially 
used for performance assessment.
    The CJR model includes voluntary reporting of PRO data. In order to 
meet the requirements for successful submission of PRO data, hospitals 
must submit the Veterans RAND 12 Item Health Survey (VR-12) or Patient-
Reported Outcomes Measurement Information System (PROMIS) Global-10 
generic PRO survey; and the (HOOS Jr.)/(KOOS Jr.) or HOOS/KOOS 
subscales PRO survey for patients undergoing eligible elective primary 
THA/TKA procedures. CMS was able to use the CJR THA/TKA PRO data 
collection to develop the THA/TKA PRO-PM as a part of the Hospital IQR 
Program, included in the FY 2023 IPPS/LTCH PPS Final rule (87 FR 
48780).
    Elective THA/TKAs are most commonly performed for degenerative 
joint disease, or osteoarthritis, which is the most common joint 
disorder in the US, affecting more than 32.5 million, or

[[Page 69740]]

1 in every 7, US adults.907 908 This condition is one of the 
leading causes of disability among non-institutionalized adults; 
roughly 80 percent of patients with osteoarthritis have some limitation 
in mobility.909 910 Osteoarthritis also significantly 
burdens the health care system--in 2017, it was the second most 
expensive treated condition across all payers in US hospitals, and in 
2018, it accounted for approximately 1,128,000 
hospitalizations.911 912 913 THAs and TKAs offer significant 
improvement in quality of life by decreasing pain and improving 
function in a majority of patients, without conferring a high risk of 
complications or death.914 915 Over 1 million hip and knee 
replacements are performed annually in the US, 60 percent of which are 
paid for by Medicare. This number is expected to double by 2030 with an 
estimated annual cost of $50 billion to Medicare.\916\
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    \907\ Zhang, Y. and J.M. Jordan, Epidemiology of osteoarthritis. 
Clin Geriatr Med, 2010. 26(3): p. 355-69.
    \908\ Centers for Disease Control and Prevention. Osteoarthritis 
(OA). 2020; Available from: https://www.cdc.gov/arthritis/basics/osteoarthritis.htm.
    \909\ Guccione, A.A., et al., The effects of specific medical 
conditions on the functional limitations of elders in the Framingham 
Study. Am J Public Health, 1994. 84(3): p. 351-8.
    \910\ Michaud, C.M., et al., The burden of disease and injury in 
the United States 1996. Popul Health Metr, 2006. 4: p. 11.
    \911\ Levit, K., et al. HCUP Facts and Figures, 2006: Statistics 
on Hospital-based Care in the United States. 2008; Available from: 
https://www.hcupus.ahrq.gov/reports/factsandfigures/facts_figures_2006.jsp.
    \912\ Healthcare Cost and Utilization Project. HCUP Fast Stats--
Most Common Diagnoses for Inpatient Stays 2021; Available from: 
https://www.hcupus.ahrq.gov/faststats/NationalDiagnosesServlet?year1=2018&characteristic1=0&included1=1&year2=2017&characteristic2=0&included2=1&expansionInfoState=hide&dataTablesState=hide&definitionsState=hide&exportState=hide.
    \913\ Liang, L., B. Moore, and A. Soni, National Inpatient 
Hospital Costs: The Most Expensive Conditions by Payer, 2017. HCUP 
Statistical Brief #261. 2020.
    \914\ Lopez, C.D., et al., Hospital and Surgeon Medicare 
Reimbursement Trends for Total Joint Arthroplasty. Arthroplast 
Today, 2020. 6(3): p. 437-444.
    \915\ Rissanen, P., et al., Health and quality of life before 
and after hip or knee arthroplasty. The Journal of Arthroplasty, 
1995. 10(2): p. 169-175.
    \916\ Lopez, C.D., et al., Hospital and Surgeon Medicare 
Reimbursement Trends for Total Joint Arthroplasty. Arthroplast 
Today, 2020. 6(3): p. 437-444.
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    In order to encourage greater use of patient-reported outcome data, 
we proposed to require submission of THA/TKA PRO-PM. However, we 
recognize that this PRO-PM is only applicable to the LEJR episode 
category and sought comment on other PROs or PROMs that would be 
applicable to other episode categories tested and could be incorporated 
in future performance years of TEAM. Please note, that the addition of 
the use of generic PROs may be applicable across numerous episodes 
versus PROs that are more episode specific to given procedures. Also, 
we recognize that hospitals will be newly adapting to the Hospital IQR 
Program requirement for the THA/TKA PRO-PM, but that infrastructure and 
process development should make the incorporation of future PRO-PMs 
less burdensome.
    For TEAM, we proposed to use the measure specifications detailed 
here: https://qualitynet.cms.gov/files/631b6163642a6000163edbf0?filename=THA_TKA-PRO-PM_MeasMthdlgy.pdf, 
https://www.cms.gov/files/document/draft-technical-report.pdf. If we 
were to remove the measure, we would use notice and comment rulemaking. 
This measure would be a pay-for-performance measure beginning in PY 1 
and scored in accordance with our proposed methodology in section 
X.A.3.d.(5)(e) Of the preamble of this final rule.
    We sought public comment on our proposal to include the Hospital-
Level, Risk-Standardized Patient-Reported Outcomes Following Elective 
Primary THA/TKA measure in TEAM at Sec.  512.547(a)(3).
    The following is a summary of the public comments received on the 
proposed THA/TKA PRO-PM and our responses to these comments.
    Comment: Several commenters stated their support for inclusion of 
the THA/TKA PRO-PM in the LEJR episode of TEAM. A commenter noted that 
PRO measures (PROMs) are critical in determining whether additional 
follow-up is warranted and another acknowledged that PROMs can be the 
impetus for initiating conversations between patients and providers and 
improving shared decision making.
    Response: We thank commenters for their support of the THA/TKA PRO-
PM in the LEJR episode. Requiring the submission of the PRO-PM aligns 
with the CMS Innovation Center's Advancing Quality Initiative that aims 
to drive person-centered care by elevating the voice of the patients. 
We will consider adding other episode-specific PROMs in future 
rulemaking where appropriate.
    Comment: A few commenters proposed that CMS include other LEJR 
related measures in place of the THA/TKA PRO-PM. A commenter noted that 
the hospital-level 30-day risk-standardized readmissions quality 
measure following total hip and knee replacement (NQF #1551) and the 
hospital-level risk-standardized complication rate following primary 
total hip arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF 
#1550) measure would be more suitable to track short-term care quality 
following total joint arthroplasty. Another commenter suggested using 
the complications measure that has been in the IQR program for several 
years: COMP-HIP-KNEE Hospital-Level Risk-Standardized Complication Rate 
Following Primary Elective Total Hip Arthroplasty and/or Total Knee 
Arthroplasty.
    Response: We appreciate commenters that suggested alternative 
measures for the LEJR episode in place of the THA/TKA PRO-PM. However, 
none of the quality measures suggested are PROMs or PRO-PMs. Patient 
reported outcomes can be extremely insightful for medical procedures 
and the THA/TKA PRO-PM is intended to quantify pain and functional 
improvements with validated PROMs to improve the lives of orthopedic 
patients.
    Comment: Several commenters voiced their concern with required 
reporting of the THA/TKA PRO-PM, noting challenges related to data 
collection, administrative burden, and unfamiliarity with the measure. 
For example, a commenter raised that providers may not yet have the 
necessary experience submitting the THA/TKA PRO-PM to warrant its 
inclusion in a pay-for-performance program. Other commenters 
highlighted difficulties in collecting and reporting due to the degree 
of data collection burden and potential survey fatigue, especially 
since the measure involves fielding several pre-op and post-op surveys. 
A couple of commenters requested that the measure should only be 
included for voluntarily reporting.
    Response: We thank commenters for expressing their concerns and 
challenges with reporting the THA/TKA PRO-PM. CMS recognizes the 
difficulties associated with patient reported outcome measures and the 
underlying data collection tools used in a clinical domain; however, we 
decline the requests to remove the THA/TKA PRO-PM from the model and 
requests to make the measure voluntary to report. THAs and TKAs are 
most commonly performed for degenerative joint disease, or 
osteoarthritis, and offer significant improvement in quality of life by 
decreasing pain and improving function in a majority of patients, 
without conferring a high risk of complications or death. Additionally, 
PRO-PMs hold providers accountable for the quality of care provided to 
its patients and support the CMS Innovation Center's goal of advancing 
person-centered measurement. Similar to the Hybrid HWR measure, we

[[Page 69741]]

anticipate that hospitals will be better prepared to report this 
measure by the start of TEAM's first performance year.
    Comment: A commenter is in support of TEAM's decision to 
incorporate future PROMs in later performance years of the model. 
Similar in nature to CJR voluntary submission of RAND 12 (VR-12) or 
PROMIS Global-10 surveys, a commenter urges CMS to push EHR vendors to 
support automated collection of these standard measure sets. The manual 
burden to operationalize collection of these measures within a bundled 
payment model can be extremely resource-intensive for hospitals that 
likely already have resource constraints when considering other 
requirements of TEAM.
    Response: We appreciate commenters support for the decision to 
include general PROMs within TEAM in future performance years. CMS will 
consider EHR reporting challenges when selecting PROMs to account for 
future performance. CMS will update and add new measures to TEAM 
through future notice and comment rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposals for the proposed THA/TKA PRO-PM that is being 
used within the Hospital IQR program without modification in our 
regulation at Sec.  512.547.
(d) Measures Under Consideration for Future Rulemaking
    We recognize there are other measures that may be more clinically 
relevant to the proposed TEAM clinical episode categories but are not 
yet being used in the Hospital IQR Program. Therefore, we sought 
comment on requiring submission of the Thirty-day Risk-Standardized 
Death Rate among Surgical Inpatients with Complications (Failure-to-
Rescue) (MUC2023-049) measure for use in all of our episode categories. 
This measure assesses the percentage of surgical inpatients who 
experienced a complication and then died within 30-days from the date 
of their first ``operating room'' procedure. Failure-to-rescue (FTR) is 
defined as the probability of death given a postoperative complication.
    We believe inclusion of the potential FTR measure in TEAM would 
allow hospitals to identify opportunities to improve their quality of 
care. Hospitals and health care providers benefit from knowing not only 
their institution's mortality rate, but also their institution's 
ability to rescue patients after an adverse occurrence. Using a 
failure-to-rescue measure is especially important if hospital resources 
needed for preventing complications are different from those needed for 
rescue. From a research and policy perspective, knowing the failure-to-
rescue rate in addition to the mortality rate would improve our 
understanding of mortality statistics. Since the death rate appears to 
be composed of two distinct rates, quality of care measurement may be 
improved if both mortality and FTR rates are reported instead of 
relying on the adjusted mortality rate alone. Failure to rescue 
measures have been repeatedly validated by their consistent association 
with nurse staffing, nursing skill mix, technological resources, rapid 
response systems, and other activities that improve early 
identification and prompt intervention when complications arise after 
surgery.
    We also sought comment on requiring submission of two hospital harm 
measures for potential use in TEAM; the Hospital Harm--Falls with 
Injury (MUC2023-048) and the Hospital Harm--Postoperative Respiratory 
Failure (MUC2023-050).
    We believe including the Hospital Harm--Falls with Injury (MUC2023-
048) would address the importance of patient safety in the acute care 
setting. We recognize that inpatient falls are among the most common 
incidents reported in hospitals and can increase length of stay and 
patient costs. Due to the potential for serious harm associated with 
patient falls, ``patient death or serious injury associated with a fall 
while being cared for in a health care setting'' is considered a 
Serious Reportable Event by the National Quality Forum (NQF).
    Falls (including unplanned or unintended descents to the floor) can 
result in patient injury ranging from minor abrasion or bruising to 
death as a result of injuries sustained from a fall. While major 
injuries (for example, fractures, closed head injuries, internal 
bleeding) (Mintz, 2022) have the biggest impact on patient outcomes, 
2008-2021 data findings from the 2022 Network of Patient Safety 
Databases (NPSD) demonstrated that 18.8 percent of falls resulted in an 
injury, and of these falls where there was an injury, 41.8 percent 
resulted in moderate injuries such as skin tear, avulsion, hematoma, 
significant bruising, dislocations and lacerations requiring suturing. 
Moderate injury is, as defined by NDNQI, that resulted in suturing, 
application of steric-strips or skin glue, splinting, or muscle/joint 
strain (Press Ganey, 2020). NPSD findings of residual harm also 
demonstrated that mild to moderate level of harm represent 24.2. 
percent, 0.4 percent--severe harm, and 0.1 percent--death (levels of 
harm definitions developed by WHO, 2009).
    By focusing on falls with major and moderate injuries, the goal of 
this hospital harm eCQM is to raise awareness of fall rates and, 
ultimately, to improve patient safety by preventing falls with injury 
in all hospital patients. The purpose of measuring the rate of falls 
with major and moderate injury events is to improve hospitals' 
practices for monitoring patients at high risk for falls with injury 
and, in so doing, to reduce the frequency of patient falls with 
injury.917 918 919 920
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    \917\ Mintz, J., Duprey, M.S., Zullo, A.R., Lee, Y., Kiel, D.P., 
Daiello, L.A., Rodriguez, K.E., Venkatesh, A.K., & Berry, S.D. 
(2022). Identification of Fall-Related Injuries in Nursing Home 
Residents Using Administrative Claims Data. The journals of 
gerontology. Series A, Biological sciences and medical sciences, 
77(7), 1421-1429. https://doi.org/10.1093/gerona/glab274.
    \918\ Network of Patient Safety Databases Chartbook, 2022. 
Rockville, MD: Agency for Healthcare Research and Quality; September 
2022. AHRQ Pub. No. 22-0051.
    \919\ National Quality Forum. Serious Reportable Events. https://www.qualityforum.org/topics/sres/serious_reportable_events.aspx. 
Accessed July 24, 2019.
    \920\ WHO. (2009). Conceptual Framework for the International 
Classification for Patient Safety, Version 1.1. https://apps.who.int/iris/bitstream/handle/10665/70882/WHO_IER_PSP_2010.2_eng.pdf.
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    Additionally, we considered including the Hospital Harm--
Postoperative Respiratory Failure (MUC2023-050). This eCQM assesses the 
proportion of elective inpatient hospitalizations for patients aged 18 
years and older without an obstetrical condition who have a procedure 
resulting in postoperative respiratory failure (PRF). PRF is defined as 
unplanned endotracheal reintubation, prolonged inability to wean from 
mechanical ventilation, or inadequate oxygenation and/or ventilation, 
and is the most common serious postoperative pulmonary complication, 
with an incidence of up to 7.5 percent (the incidence of any 
postoperative pulmonary complication ranges from 10-40 percent).\921\ 
This measure addresses the prevalence of PRF and the incidence variance 
between hospitals. PRF is a serious complication that can increase the 
risk of morbidity and mortality, with in-hospital mortality resulting 
from PRF estimated at 25 percent to 40 percent.\922\ Surgical

[[Page 69742]]

procedures complicated by PRF have 3.74 times higher adjusted odds of 
death than those not complicated by respiratory failure, 1.47 times 
higher odds of 90-day readmission, and 1.86 times higher odds of an 
outpatient visit with one of 44 postoperative conditions (for example, 
bacterial infection, fluid and electrolyte disorder, abdominal hernia) 
within 90 days of hospital discharge.\923\ PRF is additionally 
associated with prolonged mechanical ventilation and the need for 
rehabilitation or skilled nursing facility placement upon 
discharge.\924\
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    \921\ Arozullah AM, Daley J, Henderson WG, Khuri SF. (2000). 
Multifactorial risk index for predicting postoperative respiratory 
failure in men after major noncardiac surgery. The National Veterans 
Administration Surgical Quality Improvement Program. Annals of 
surgery. 232(2):242-253.
    \922\ Arozullah AM, Daley J, Henderson WG, Khuri SF. (2000). 
Multifactorial risk index for predicting postoperative respiratory 
failure in men after major noncardiac surgery. The National Veterans 
Administration Surgical Quality Improvement Program. Annals of 
surgery. 232(2):242-253.
    \923\ Miller MR, Elixhauser A, Zhan C, Meyer GS. (2001). Patient 
Safety Indicators: using administrative data to identify potential 
patient safety concerns. Health services research. 36(6 Pt 2):110-
132.
    \924\ Thompson SL, Lisco SJ. Postoperative Respiratory Failure. 
Int Anesthesiol Clin. 2018;56(1):147-164.
---------------------------------------------------------------------------

    The incidence of PRF varies by hospital, with higher reported rates 
of PRF in nonteaching hospitals than teaching hospitals (Rahman, et 
al., 2013). Additionally, one study found that the odds of developing 
PRF increased by 6 percent for each level increase in hospital size 
from small to large.\925\ This finding suggests that there remains room 
for improvement in hospitals reporting higher rates of PRF.
---------------------------------------------------------------------------

    \925\ Rahman M, Neal D, Fargen KM, Hoh BL. Establishing standard 
performance measures for adult brain tumor patients: a Nationwide 
Inpatient Sample database study. Neuro Oncol. 2013;15(11):1580-1588.
---------------------------------------------------------------------------

    The most widely used current measures of PRF are based on either 
claims data (CMS Patient Safety Indicator PSI 11) or proprietary 
registry data (National Surgical Quality Improvement Program (NSQIP) of 
the American College of Surgeons). The proposed eCQM is closely modeled 
after the NSQIP measure of PRF, which has been widely adopted across 
American hospitals, and is intended to complement and eventually 
supplant CMS PSI 11. As mentioned of section X.A.3.c.(3)(b) of the 
preamble of this final rule, these three MUC measures would potentially 
take the place of the CMS PSI 90 measure beginning in TEAM's second 
performance year. These three MUC measures will be available for 
optional reporting in the Hospital IQR Program beginning in 2026.
    The following is a summary of the public comments received on the 
proposed MUC Measures and our responses to these comments on these 
measures that will be incorporated into TEAM in performance year 2:
    Comment: Some commenters have shared concerns that hospitals are 
newly reporting on these proposed MUC measures and suggested they not 
be included in TEAM until hospitals have had ample time to familiarize 
themselves with the reporting requirements. A couple of commenters 
mention the new Hospital IQR measures that CMS is proposing as 
alternatives to Hospital IQR are untested, meaning there may be 
reporting challenges and benchmark data is not available to support 
quality improvement efforts. CMS acknowledges this uncertainty by 
proposing the new IQR measures be voluntary. A commenter suggested that 
for the measures referenced as being under consideration they would 
encourage CMS to allow the measures to be more widely adopted without 
financial recourse, highlighting previous implementation issues for 
eCQMs, before being implemented in TEAM, and suggest fuller 
implementation for troubleshooting. Lastly, a commenter mentions the 
proposed measures measure inpatient performance, whereas the model 
includes both inpatient and outpatient episodes. For procedures that 
can be furnished in either the inpatient or outpatient setting, 
typically the patients who continue to receive care in the inpatient 
setting tend to be higher risk and with higher prevalences of 
complications, which can negatively impact performance on measures.
    Response: We would like to thank commenters for sharing their 
concerns with the newly proposed MUC measures that are being proposed 
for TEAM's second performance year. CMS is aware the measures are new 
to the Hospital IQR program. CMS is planning to align with the proposed 
reporting period of the Hospital IQR program that is referenced in 
section IX.C of the proposed rule. Details on the specific reporting 
periods for these MUC measures can be found within the proposed rule 
(89 FR 35938). CMS will continue to develop and make measure 
adjustments to better align with feedback that has been shared through 
various testing periods. CMS acknowledges concerns that these measures 
focused on inpatient performance for episodes that include both 
inpatient and outpatient procedures and may consider other quality 
measure options in future years. Any additional measures incorporated 
into TEAM will be shared in future rulemaking.
    Comment: A commenter suggested that under the current proposal, two 
of the outcomes' measures only measure negative events--all-cause 
hospital readmissions and a composite adverse events measure, while 
three other negative events measures are being considered for future 
years. Only one positive outcomes measure related to a persons' 
functional abilities and the effectiveness of functional recover 
interventions (the THA/TKA PRO-PM) is proposed--and only for one of the 
proposed post-surgical bundles. This commenter believes the measures 
are unbalanced as the incentive program is focusing most heavily on 
cost savings and the prevention of medical complications with little or 
no focus on the primary purpose of the post-acute provider care--to 
help assure the beneficiary can live safely in their home environment 
with the optimal function.
    Response: We acknowledge this commenter sharing their concerns with 
the proposed outcome measures. However, we believe our proposed 
measures focus on care coordination, patient safety, and patient 
reported outcomes which we believe represents areas of quality that are 
particularly important to patients undergoing acute procedures. CMS 
wishes to highlight the important protections `negative' measures allow 
for monitoring for decrements in care. CMS is finalizing the proposed 
quality measures for PY 1 in TEAM. CMS acknowledges the importance of 
the goals of surgical episodes to restore function however disagrees 
that a focus on reducing readmissions and adverse events is imbalanced, 
given our central mission to ensure high-quality, person-centered and 
safe care. Wherever possible, we would align TEAM quality measures with 
those used in ongoing models and programs to minimize participant 
burden. CMS will incorporate any changes or updates to our quality 
measures in a future notice and comment rulemaking where applicable.
    Comment: A few commenters showed strong support for the Hospital 
Harm--Falls with Injury (CMIT ID #1518) measure being included in TEAM. 
Although some of these commenters mention some concern with how these 
data will be captured. Commenters agree monitoring to prevent falls is 
important for hospitals to measure but notes challenges to capturing 
this accurately with an eCQM. Lastly, a commenter mentions they are 
concerned with the measure since it lacks specificity and may lead to 
unequal assignment. This commenter stated that PSI 08--In Hospital Fall 
with Hip Fracture Rate is clear on which patients qualify, CMIT ID 
#1518 lacks specificity as to what constitutes a ``moderate or major'' 
injury without a clear and distinct definition of everything that is 
included within this broad category.
    Response: We would like to thank the commenters for sharing their 
support

[[Page 69743]]

and concerns regarding the Hospital Harm--Falls with Injury (CMIT ID 
#1518) measure being included in TEAM starting in its second 
performance year. By focusing on falls with major and moderate 
injuries, the goal of this hospital harm eCQM is to raise awareness of 
fall rates and, ultimately, to improve patient safety by preventing 
falls with injury in all hospital patients. The purpose of measuring 
the rate of falls with major and moderate injury events is to improve 
hospitals' practices for monitoring patients at high risk for falls 
with injury and, in so doing, to reduce the frequency of patient falls 
with injury. Should there be further specificity established in the 
definition of minor or major injury, CMS may update this measure in 
future years, and CMS will incorporate any changes or updates to our 
quality measures in a future notice and comment rulemaking where 
applicable.
    Comment: Multiple commenters are in full support of the inclusion 
of the Hospital Harm--Postoperative Respiratory Failure (CMIT ID #1788) 
measure being included in TEAM.
    Response: We would like to thank commenters for their support of 
this proposed MUC Measure being incorporated in TEAM within the model's 
second performance year.
    Comment: Some commenters showed strong support for the Thirty-day 
Risk-Standardized Death Rate among Surgical Inpatients with 
Complications (Failure-to-Rescue) (CMIT ID #134) being included within 
TEAM. A commenter stated that hospital data on death could lead to 
significant learning about death and improved prevention of death if 
both mortality and failure to rescue data were captured and analyzed.
    Response: We would like to thank commenters for their support of 
the proposed Thirty-day Risk-Standardized Death Rate among Surgical 
Inpatients with Complications (Failure-to-Rescue) (CMIT ID #134) 
measure being incorporated in TEAM within the model's second 
performance year.
    Comment: A few commenters had some concerns with the proposed 
Thirty-day Risk-Standardized Death Rate among Surgical Inpatients with 
Complications (Failure-to-Rescue) (CMIT ID #134) measure being included 
within TEAM. Specifically, a commenter mentioned that the measure fails 
to account for circumstances outside of the control of the hospital 
reporting the measure. Additionally, a commenter noted that this 
measure should contain a 90-day post episode window to account for 
complications that occur in the CABG, THA/TKA and spinal fusion 
episodes.
    Response: We appreciate commenters voicing their concerns about the 
Thirty-day Risk-Standardized Death Rate among Surgical Inpatients with 
Complications (Failure-to-Rescue) (CMIT ID #134) measure. We believe 
inclusion of the potential Failure-To-Rescue measure in TEAM would 
allow hospitals to identify opportunities to improve their quality of 
care. From a research and policy perspective, knowing the failure-to-
rescue rate in addition to the mortality rate would improve our 
understanding of mortality statistics. CMS believes that the proposed 
30-day window is appropriate to assesses the percentage of surgical 
inpatients who experienced a complication and then died. CMS will 
continue to monitor the specifications of this measure and incorporate 
any changes to this measure in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing the proposed Hospital Harm and Failure-to-Rescue measures to 
be used within the Hospital IQR program without modification in our 
regulation at Sec.  512.547. These measures will be incorporated into 
TEAM during its second performance year.
(4) Form, Manner, and Timing of Quality Measures Reporting
    We believe it is important to be transparent and to outline the 
form, manner, and timing of quality measure data submission so that 
accurate measure results are provided to hospitals, and that timely and 
accurate calculation of measure results are consistently produced to 
determine reconciliation payment amounts and repayment amounts. We 
proposed that data submission for the Hybrid Hospital-Wide Readmission 
Measure with Claims and Electronic Health Record Data (CMIT ID #356), 
CMS Patient Safety and Adverse Events Composite (CMS PSI 90) (CMIT ID 
#135), Hospital-Level, and Risk-Standardized Patient-Reported Outcomes 
Following Elective Primary Total Hip and/or Total Knee Arthroplasty 
(THA/TKA) (CMIT ID #1618) be accomplished through existing Hospital IQR 
Program processes. Since these measures are or will soon be reported to 
the Hospital IQR and HAC Reduction Programs, hospitals would not need 
to submit additional data for TEAM.
    For the Measures Under Consideration (MUC) measures, Thirty-day 
Risk-Standardized Death Rate among Surgical Inpatients with 
Complications (Failure-to-Rescue) (CMIT ID #134), Hospital Harm--
Postoperative Respiratory Failure (CMIT ID #1788) and Hospital Harm--
Falls with Injury (CMIT ID #1518) measures, we would propose that data 
submission for these measures align with the Hospital IQR Program if 
they are finalized for that program as proposed. Similar to the 
proposed required measures noted previously, hospitals would not need 
to submit any additional data on these proposed measures if they are 
finalized and implemented for the Hospital IQR Program. We invited 
public comment on the proposal to collect quality measure data through 
the existing mechanisms of the Hospital IQR and HAC Reduction Program.
    The following is a summary of the public comments received on the 
proposed performance periods and our responses to these comments.
    Comment: A commenter mentioned concern over the proposed 
performance periods for the TEAM quality measures being significantly 
lagged. CMS should delay incorporating quality measures until the 
performance period for those measures is actionable (that is, begins 
after the model start date). Commenters recognize that any adjustments 
could be lagged by several years due to the data validation process, 
but this is certainly more appropriate than holding hospitals 
accountable for measure performance in a period before the model 
starts. Furthermore, commenters cannot evaluate hospital-level 
performance on these measures to meaningfully comment on because data 
is not yet publicly available for two of the three measures. Therefore, 
it is premature to propose these measures for inclusion in TEAM.
    Response: We appreciate commenters for voicing their concerns over 
the proposed performance periods for the TEAM quality measures. 
However, to align with the model timeline, CMS will move forward with 
the proposed performance periods. We understand the concern that the 
first performance period is prior to the model start date, but 
hospitals will already have mandatorily reported data on these measures 
within the Hospital IQR and HAC Reduction Programs. Any adjustments to 
the TEAM proposed measures will be shared in a future notice and within 
comment rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposals for the proposed measures performance periods 
that align with those that are being used within the Hospital IQR and 
HAC Reduction programs without

[[Page 69744]]

modification in our regulation at Sec.  512.547.
(5) Display of Quality Measures and Availability of Information for 
Public
    We believe that the display of measure results is an important way 
to educate the public on hospital performance and increase the 
transparency of the model. We proposed to display quality measure 
results on the publicly available CMS website in a form and manner 
consistent with other publicly reported measures. CMS would share each 
TEAM participants' quality metrics with the hospital prior to display 
on the CMS website. The timeframe for when TEAM participants would 
receive data on our proposed measures align with the Care Compare 
schedule that can be found here: https://data.cms.gov/provider-data/topics/hospitals/measures-and-current-data-collection-periods. The 
Hybrid HWR and CMS PSI 90 measure results are posted annually in July. 
The THA/TKA PRO-PM is still in the voluntary reporting stage and the 
public reporting schedule for this measure will be reported on an 
annual basis. All measures under the statutory hospital quality 
programs have a 30-day preview period prior to results being posted on 
the Care Compare web page. TEAM participant measure scores will be 
delivered to TEAM participants confidentially. We proposed to publicly 
report PY 1 measure scores in 2027 and we would continue to publicly 
report scores every performance year with a one-year lag. TEAM has 
proposed 2027 as the first performance year for when scores will be 
publicly available due to the amount of lag time it takes for a few of 
our measures to fully process. For example, the Hybrid HWR measure 
which uses claims data and core clinical data elements from the EHR has 
about a year between from when the data is submitted and when that data 
is publicly posted. The applicable time periods for the measures during 
TEAM are summarized in the Table X.A.-09.
[GRAPHIC] [TIFF OMITTED] TR28AU24.308

    The proposed time periods for the Hybrid Hospital-Wide Readmission 
Measure with Claims and Electronic Health Record Data (CMIT ID #356), 
CMS Patient Safety and Adverse Events Composite (CMS PSI 90) (CMIT ID 
#135) and Hospital-Level, Risk-Standardized Patient-Reported Outcomes 
Following Elective Primary Total Hip and/or Total Knee Arthroplasty 
(THA/TKA) (CMIT ID #1618) are consistent with the Hospital IQR Program 
performance periods for the Hybrid HWR measure and THA/TKA PRO-PM and 
consistent with the HAC Reduction Program performance period for the 
CMS PSI 90 measure. We believe the public is familiar with the proposed 
measures, which have mostly been publicly reported in past releases of 
Care Compare as part of the Hospital IQR and HAC Reduction Programs. We 
are aware that the Hospital-Level, Risk-Standardized Patient-Reported 
Outcomes Following Elective Primary Total Hip and/or Total Knee 
Arthroplasty (THA/TKA) PRO-PM is new to the Hospital IQR Program, 
although it has been used in the CJR model for several years and sought 
comment on the use of this measure for TEAM. To minimize confusion and 
facilitate access to the data on the measures included in TEAM, we 
proposed to post the data on each TEAM participant's performance on 
each of the three proposed quality measures in a downloadable format in 
a section of the website specific to TEAM, similar to what is done for 
the Hospital Readmissions Reduction Program and the HAC Reduction 
Program. We invited public comments on these proposals to post data for 
the required measures on the TEAM specific website.
    The following is a summary of the public comments received on the 
proposed display of public quality measurement data and our responses 
to these comments.
    Comment: A couple of commenters were in support of the public 
display of TEAM quality measure data.
    Response: We appreciate commenters support and will provide quality 
measure data publicly as appropriate.
    Comment: A couple of commenters are against the proposal to 
publicly report quality measure data within TEAM. Specifically, a 
commenter mentions that they are not supportive of publicly reporting 
TEAM quality scores because not all hospitals in a market/region will 
have TEAM scores which may unfairly advantage/disadvantage 
participating hospitals when patients seek services in a region and not 
all hospitals have reporting data. Having only some hospitals in a 
region participate creates inequality in patients' ability to evaluate 
the competing hospitals because there is this additional data provided 
only for some of the hospitals. Although commenters favor publicly 
reporting of data when all hospitals have an equal opportunity to have 
their data risk stratified and presented in the same manner. 
Additionally, a commenter mentioned concern that publicly reporting 
PRO-PMs for hospitals and surgeons may disadvantage those physicians 
and hospitals who accept higher risk and socially disadvantaged 
patients. The difficulty of obtaining PRO-PM metrics in underserved and 
socially disadvantaged populations is

[[Page 69745]]

further exacerbated by a greater incidence of medical and social risk 
factors for readmissions, ER visits and adverse outcomes in certain 
vulnerable populations and geographic regions.
    Response: We thank commenters for raising their concerns with 
publicly reporting TEAM quality scores and we recognize the challenges 
associated with collecting PRO-PM data. However, we believe that the 
public display of measure results is an important vehicle for 
communicating hospital performance to the public and increasing 
transparency of TEAM. Publicly reported data helps patients make 
informed decisions about where to seek care that is not just based on 
cost. We will move forward with the proposal to publicly display TEAM 
measure results which is consistent with other CMS Innovation Center 
models and CMS quality reporting programs.
    After consideration of the public comments we received, we are 
finalizing our proposals for the proposed public display of quality 
measurement data that aligns with how other pay-for-reporting programs 
display their quality measurement data.
d. Pricing and Payment Methodology
(1) Background
    In the proposed rule, we stated that in determining the best 
methodology for setting target prices for episodes, we drew from 
lessons learned from multiple iterations of both the CJR and BPCI 
Advanced target price methodologies. As we developed the methodologies 
for CJR and BPCI Advanced and refined them over time in response to 
observed changes in nationwide spending trends and payment system 
changes (such as the removal of total knee arthroplasty (TKA) and total 
hip arthroplasty (THA) from the inpatient only (IPO) list, and the 
reclassification of certain MS-DRGs), each new iteration drew from 
lessons learned in the previous iteration. For purposes of TEAM, we 
aimed to find the balance between simplicity and predictive accuracy. 
CMS wants to adopt a payment methodology that will be as transparent 
and understandable as possible for participants of varying levels of 
statistical background and knowledge. On the other hand, the more 
elements we consider and more sophisticated statistical modeling we 
use, the better able we are to accurately predict performance period 
spending. Accurate performance period spending predictions increase the 
likelihood of achieving our model goals of setting target prices that 
provide a reasonable opportunity to achieve savings for Medicare but 
are not too onerous for participants.
(i) Previous Episode-Based Payment Methodologies
(A) CJR
    When designing the CJR payment methodology, one goal was to be as 
simple and straightforward as possible, given that it was a mandatory 
model covering only one episode category. The initial CJR payment 
methodology included a 3-year baseline period that rolled forward every 
2 years. Target prices used a blend of participant-specific and 
regional spending, which shifted towards 100 percent regional spending 
for PYs 4-5. Downside risk was waived for the first performance year of 
the model to allow participants time to enact practice changes that 
would help them succeed in the model. Beginning in PY 2, participants 
were subject to both upside and downside risk, within stop-loss and 
stop-gain limits that increased to a maximum of 20 percent by PY 3 for 
most hospitals. The stop-loss and stop-gain limits were designed to 
ensure that participants would neither be subject to an unmanageable 
level of risk, nor be incentivized to stint on care to achieve savings. 
The initial CJR payment methodology is described in detail in the final 
rule titled ``Medicare Program; Comprehensive Care for Joint 
Replacement Payment Model for Acute Care Hospitals Furnishing Lower 
Extremity Joint Replacement Service'' that appeared in the November 24, 
2015, Federal Register (80 FR 73274) (referred to in this proposed rule 
as the ``2015 CJR Final Rule''), starting at 80 FR 73324.
    The initial CJR payment methodology was modified in the final rule 
titled ``Medicare Program: Comprehensive Care for Joint Replacement 
Model Three-Year Extension and Changes to Episode Definition and 
Pricing; Medicare and Medicaid Programs; Policies and Regulatory 
Revisions in Response to the COVID-19 Public Health Emergency'' that 
appeared in the May 3, 2021 Federal Register (86 FR 23496) (referred to 
in this proposed rule as the ``2021 CJR 3-Year Extension Final Rule''). 
The CJR model's 3-year extension and modification were due to a number 
of factors, as described in detail starting at 86 FR 23508. A principal 
reason for the modifications to the payment methodology was the fact 
that the initial CJR target price methodology did not account for 
changing downward trends in spending on lower extremity joint 
replacement (LEJR) episodes, both among CJR participant hospitals and 
non-participant hospitals. The resulting reconciliation payments under 
the initial methodology rewarded participants for spending reductions 
that likely would have happened regardless of the model, which led to 
concerns that target prices could be too high for Medicare to achieve 
savings in the model over time.
    The changes to the model increased the complexity in some ways (for 
example, the addition of risk adjustment multipliers) while simplifying 
it in other ways (for example, the removal of update factors) in order 
to calculate target prices that would more accurately reflect 
performance period spending. A retrospective Market Trend Factor was 
applied to target prices at reconciliation to capture changes in 
spending patterns that occurred nationally during the performance 
period. This market trend factor, in combination with the change from a 
3-year baseline to a 1-year baseline, negated the need for setting-
specific update factors that we had used previously to set purely 
prospective target prices. At the same time, our added risk adjustment 
increased target prices for episodes with more complex patients, to 
better reflect the higher costs associated with those patients. The 
changes to the CJR payment methodology are described in detail in the 
2021 CJR 3-Year Extension Final Rule starting at 86 FR 23508.
(B) BPCI Advanced
    By contrast, the BPCI Advanced methodology is more complex. The 
target price calculation method was designed to support participation 
from a broad range of providers by accounting for variation in episode 
payments and factors that contribute to differences that are beyond 
providers' control. In Model Years 1-3, BPCI Advanced target prices 
were constructed using a 4-year rolling baseline period and were based 
on hospital historical payments, patient risk adjustment, a prospective 
peer group trend factor, and 3 percent CMS discount. Physician group 
practice (PGP) target prices adjusted hospital target prices for PGP-
specific patient case mix and differences between PGP and hospital 
historical payments. Risk adjustment is performed using a two-stage 
model, with Stage 1 consisting of a compound log-normal model with 
episode cost as the dependent variable, and Stage 2 consisting of an 
Ordinary Least Squares regression with case mix adjusted spending as 
the dependent variable.
    The use of a prospective trend in Model Years 1-3 resulted in 
prices not accurately predicting spending that

[[Page 69746]]

arose from unanticipated, systematic factors. For example, changes in 
coding guidelines can lead to cost changes. In fiscal year 2017, there 
were changes to the guidelines for coding the congestive heart failure 
(CHF) and simple pneumonia episodes, two of the highest-volume episodes 
in the BPCI Advanced model. The change resulted in an increase in the 
share of patients classified as having more serious CHF and simple 
pneumonia diagnoses in the performance period than in the baseline 
period. Because target prices are based on the seriousness of a 
patient's diagnosis, target prices increased leading to larger 
reconciliation payments to participants and losses to Medicare.
    The losses to Medicare spurred changes to the BPCI Advanced pricing 
methodology. Similar to CJR, the prospective trend factor used in Model 
Years 1-3 was replaced in Model Year 4 with a retrospective trend 
factor adjustment at reconciliation, although this retrospective trend 
adjustment was subject to guardrails. Specifically, the trend at 
reconciliation could not exceed 10 percent of the 
prospective trend for Model Years 4 and 5, and in response to 
participant feedback, the trend adjustment was limited to 5 
percent beginning in Model Year 6. The CMS discount was also reduced in 
Model Year 6 from 3 percent to 2 percent for medical episodes. Pricing 
methodology changes since Model Year 4 were intended to improve pricing 
accuracy and reflect actual spending trends during the performance 
period. Future evaluation reports will assess the effectiveness of 
these changes. Additional information on the BPCI Advanced pricing 
methodology may be found on the BPCI Advanced participant resources 
page.\926\
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    \926\ https://www.cms.gov/priorities/innovation/innovation-models/bpci-advanced/participant-resources
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    In TEAM, our goal is a target price methodology that blends the 
most successful elements of each of these model iterations, striking a 
balance of predictability and accuracy.
(2) Overview of TEAM Pricing and Payment Methodology
    While we describe each element of the pricing and payment 
methodology in detail in the following sections, here we present an 
overview of the proposed TEAM pricing and payment methodology. At 
proposed Sec.  512.540, we proposed to use 3 years of baseline data, 
trended forward to the performance year, to calculate target prices at 
the level of MS-DRG/HCPCS episode type and region. In the proposed 
rule, we proposed to group episodes from the baseline period by 
applicable MS-DRG for episode types that include only inpatient 
hospitalizations, and by applicable MS-DRG or HCPCS code for episode 
types that include both inpatient hospitalizations and outpatient 
procedures. For episode types that include both inpatient 
hospitalizations (identified by MS-DRGs) and outpatient procedures 
(identified by HCPCS codes), HCPCS codes are combined for purposes of 
target pricing with the applicable MS-DRG representing an inpatient 
hospitalization without Major Complications and Comorbidities, as we 
expected those beneficiaries to have similar clinical characteristics 
and costs. After capping high-cost outlier episodes at the 99th 
percentile for each of the 24 proposed MS-DRG/HCPCS episode types and 9 
regions (which we proposed at proposed Sec.  512.505 to define as the 9 
U.S. census divisions, as defined by the U.S. Census Bureau), we stated 
in the proposed rule we would use average standardized spending for 
each MS-DRG/HCPCS episode type in each region as the benchmark price 
for that MS-DRG/HCPCS episode type for that specific region, resulting 
in 216 MS-DRG/HCPCS episode type/region-level benchmark prices. In the 
proposed rule, we proposed to apply a prospective trend factor and a 
discount factor to benchmark prices (as well as a prospective 
normalization factor, described later in this section) to calculate 
preliminary target prices. The prospective trend factor would represent 
expected changes in overall spending patterns between the most recent 
calendar year of the baseline period and the performance year, based on 
observed changes in overall spending patterns between the earliest 
calendar year of the baseline period and the most recent year of the 
baseline period. The discount factor would represent Medicare's portion 
of potential savings from the episode.
    At proposed Sec.  512.545, we proposed to risk adjust episode-level 
target prices at reconciliation by the following beneficiary-level 
variables: age group, Hierarchical Condition Category (HCC) count (a 
measure of clinical complexity), and social risk (the components of 
which are described in more detail in sections X.A.3.d.(4) and X.A.3.f 
of the preamble of this final rule). In the proposed rule, we proposed 
to calculate risk adjustment multipliers prospectively at the MS-DRG/
HCPCS episode type level based on baseline data and hold those 
multipliers fixed for the performance year. To ensure that risk 
adjustment does not inflate target prices overall, we further proposed 
to calculate a prospective normalization factor based on the data used 
to calculate the risk adjustment multipliers. We proposed to apply the 
prospective normalization factor, in addition to the prospective trend 
factor and discount factor described previously, to the benchmark price 
to calculate the preliminary target price for each MS-DRG/HCPCS episode 
type and region. We proposed that the prospective normalization factor 
would be subject to a limited adjustment at reconciliation based on 
TEAM participants' observed performance period case mix, such that the 
final normalization factor would not exceed 5 percent of 
the prospective normalization factor.
    We sought comments on the general design of TEAM pricing and 
payment methodology.
    In response to comments, we are finalizing many elements of the 
proposed pricing and payment methodology from the proposed rule, as we 
describe below. However, in certain cases we are finalizing policies 
that have been modified in order to be responsive to commenters' 
concerns. Specifically, in Sec.  512.540(c) we are finalizing a 1.5 
percent discount for Coronary Artery Bypass Graft Surgery (CABG) and 
Major Bowel Procedure episodes, and a 2 percent discount for Lower 
Extremity Joint Replacement (LEJR), (Surgical Hip/Femur Fracture 
Treatment (SHFFT), and Spinal Fusion episodes.
    In Sec.  512.545(f), we are finalizing the application of a 3 
percent capped retrospective trend factor at reconciliation. In Sec.  
512.545(a), we are finalizing a policy to include additional 
beneficiary and hospital level risk factors in our risk adjustment 
model. Although we are finalizing at Sec.  512.545(a)(1) our proposal 
to use a lookback period to determine which HCC flags the beneficiary 
is assigned, we are not yet finalizing the length of the lookback 
period due to concerns raised by commenters. Similarly, after 
consideration of the public comments we received, we will not be 
finalizing a policy on low volume hospitals. Accordingly, we are 
modifying regulatory text in sections Sec.  512.545 (a)(1) to remove 
references to a 90-day lookback period, and Sec.  512.550 (e)(3) to 
remove references to a low volume threshold. We intend to propose and 
finalize a specific length for the lookback period and an alternative 
low volume hospital policy through notice and comment rulemaking within 
the

[[Page 69747]]

next year, so that participants will be aware of the final policies 
prior to the start of the model.
    The following is a summary of comments we received regarding the 
general design of TEAM pricing and payment methodology and our 
responses to these comments:
    Comment: A few commenters expressed concern that the target price 
methodology is opaque and, when combined with the final target price 
data lag, will make it onerous for TEAM participants to succeed in the 
model.
    Response: We thank the commenters for their concern regarding the 
uncertainty of our target price methodology. In order to clearly 
describe the target price methodology to stakeholders, we have detailed 
each component used in target price construction throughout the 
proposed rule (beginning at 89 FR 36426) and this final rule preamble. 
Alongside those details, we also provided comparisons to the BPCI 
Advanced and CJR models to help readers further understand differences 
or similarities given these models and methodologies have been around 
longer and are more familiar to the public. We are also taking multiple 
steps to assist participants with understanding both the TEAM pricing 
methodology, and how they can use the data we will provide to help them 
succeed in the model. We will be sharing preliminary target prices and 
baseline data, pursuant to a request and TEAM data sharing agreement, 
as discussed in section X.A.3.k of the preamble of this final rule, 
which will allow TEAM participants to understand their preliminary 
target price in advance of the performance year as well as increase 
transparency on historical performance. We acknowledge that monthly 
data will have a lag, but we believe that by choosing surgical episode 
categories, it minimizes the difficulty in determining whether a 
beneficiary is included in the model. Lastly, TEAM participants will 
have approximately 17 months to prepare before the model start date, as 
discussed in section X.A.3.a. of the preamble of this final rule. 
During this time, we anticipate engaging with TEAM participants and 
providing learning resources and opportunities to help them further 
understand TEAM policies, including the construction of target prices. 
We believe that each of these steps will help to minimize any 
unnecessary burden of TEAM participation and optimize participants' 
opportunities for success in the model.
    Comment: A couple of commenters were concerned that risk-adjustment 
was inadequate to ensure accurate target prices. Some procedures, such 
as hip fractures, are performed as an emergency. Others may be 
technically elective, but complex.
    Response: We thank the commenters for their concern regarding 
target price accuracy. We have made some modifications to our risk 
adjustment methodology based on commenters feedback, as discussed in 
section X.A.3.d.(4) of the preamble of this final rule. We will 
continue to analyze our risk-adjustment model and will consider changes 
for future notice and comment rulemaking.
    Comment: A commenter expressed concern that bundled payments work 
best for relatively healthy patients and safety net hospitals may be 
penalized by TEAM without adequate risk adjustment. They stated their 
belief that improving target price accuracy for TEAM should be a goal 
of CMS.
    Response: We thank the commenter for their concern regarding safety 
net hospital participation in TEAM and accurate target prices. We agree 
that accurate target prices are important for participant success in 
TEAM, and we will risk adjust for dual eligibility, age, HCC count, and 
more, as discussed in section X.A.3.d.(4) of the preamble of this final 
rule. Furthermore, TEAM will include a social risk adjustment factor 
that should account for hospitals that provide care for underserved 
beneficiaries such as safety net hospitals. We disagree TEAM will 
penalize safety net hospitals as we have purposely included provisions 
to minimize financial risk. Specifically, safety net hospitals, as 
defined in section X.A.3.f.(2) of the preamble of this final rule, have 
the option to participate in Track 1 for the first three performance 
years with no downside risk, as discussed in section X.A.3.a.(3) of the 
preamble of this final rule. However, we will monitor TEAM participant 
performance, including safety net hospitals and we will consider 
further changes in future notice and comment rulemaking.
    Comment: A commenter expressed concern that cost reductions in TEAM 
must come from post-discharge spending relative to the benchmark in a 
30-day period.
    Response: We thank the commenter for their concern regarding cost 
reductions via post-discharge spending. We acknowledge that much of the 
cost reductions achieved in past models such as the CJR and BPCI 
Advanced models were achieved via reductions in post-acute care while 
avoiding a reduction of quality of care. We believe TEAM can achieve a 
similar result with a 30-day episode window rather than a 90-day 
episode window.
    Comment: A commenter is concerned that site neutral target prices 
for TEAM episodes could incentivize patients to go to lower acuity 
settings regardless of appropriate care.
    Response: We thank the commenter for their concern regarding 
quality of care and site neutral payments. We disagree that site 
neutral payments will lead to a decrease in quality of care. TEAM 
episodes will be risk-adjusted and reconciliation payments made in the 
aggregate. Furthermore, a CQS adjustment will adjust a TEAM 
participant's reconciliation amount based on patient quality scores. 
This will incentivize practices to focus on cost reductions and care 
redesign that will both reduce costs and maintain or improve quality of 
care.
    Comment: A commenter stated that CMS should monitor target prices 
to ensure participants are adequately compensated.
    Response: We thank the commenter for their concern regarding target 
prices that ensure that participants are adequately compensated. TEAM's 
target prices will be risk-adjusted for many factors such as regional 
pricing over three baseline years, dual eligibility, age, HCC counts, a 
social risk adjustment, and a discount factor. We will monitor target 
prices and participant performance throughout TEAM.
    Comment: A couple commenters recommended that CMS make 
considerations for the utilization of critical access hospital (CAH) 
swing beds. A commenter noted that CAH swing beds are sometimes the 
only option with access, sometimes they are clinically the best option 
based on the beneficiary's hometown or primary care provider (PCP), and 
under freedom of choice, they are often preferred by beneficiaries. 
Commenters cited that CAH swing bed daily allowed claims can be ten-
folder greater than traditional skilled nursing facility (SNF) daily 
allowed claims. They stated their belief that if CAH swing bed claims 
are not adjusted for in some way, either in Target Prices or 
Reconciliation calculations, participants would not be able to meet 
Target Prices.
    Response: We thank the commenters for sharing their concerns 
regarding CAH swing bed claims. In response to the comments, we 
analyzed how frequently CAH swing bed claims are included in 30-day 
episode spending and what proportion of spending in the post-discharge 
period CAH swing bed claims make up. The 30-day episodes were 
constructed using Medicare FFS

[[Page 69748]]

claims from 2022 and the first two quarters of 2023.
    Our analysis showed that CAH swing bed stays are a low frequency 
event in 30-day episodes. In 4 of the 5 episode categories proposed for 
TEAM, among episodes with at least one SNF claim (traditional or CAH 
swing bed), approximately 4 percent had at least one CAH swing bed 
claim. In the episode category CABG, approximately 7 percent of 
episodes had a CAH swing bed claim. Since CAHs swing beds are exempt 
from the SNF PPS, they are reimbursed at a higher rate. However, these 
claims will not make up a large proportion of post-discharge spending, 
or episode spending as a whole in TEAM episodes. Our analysis showed 
that in 4 of the 5 episode categories, post-discharge spending in the 
SNF setting among episodes with at least one CAH swing bed claim only 
accounted for 11 percent to 12 percent of total post-discharge SNF 
spending among all episodes. In CABG episodes, the proportion was 19 
percent of total post-discharge SNF spending.
    We are concerned that applying adjustments for CAH swing bed claims 
will create unintended consequences for utilization of these CAH swing 
bed services. We believe that the high reimbursement rates for these 
CAH swing bed claims could encourage providers to seek out 
relationships with and to increase utilization of traditional SNFs in 
order to obtain savings for the model. Although it is always good for 
hospitals to have relationships with both traditional SNFs and CAHs, 
model participants that have historically utilized CAH swing beds will 
be in a position to earn significant savings by establishing 
relationships with traditional SNFs and discharging patients they would 
otherwise move to CAH swing beds to traditional SNFs. Finally, we note 
that CAH swing bed allowable charges will be payment standardized as 
will other Part A and Part B allowable charges in TEAM. CMS has been 
working closely with the Federal Office of Rural Health Policy to 
adjust the payment standardization formula for CAH swing beds to 
reflect resource use that is comparable to that of SNFs. CMS plans to 
implement this adjusted payment standardization formula for CAH swing 
beds in the future.
(3) Target Prices
(a) Baseline Period for Benchmarking
    At proposed Sec.  512.540(b)(2) we proposed to use 3 years of 
baseline episode spending to calculate benchmark prices, which we would 
further adjust as described in section X.A.3.d.(3)(i) of the preamble 
of this final rule to create preliminary target prices. In the proposed 
rule, we proposed to roll this 3-year baseline period forward every 
year. Specifically, we proposed in the proposed rule that--
     To determine baseline episode spending for performance 
year (PY) 1, CMS would use baseline episode spending for episodes that 
started between January 1, 2022, and December 31, 2024;
     To determine baseline episode spending for PY 2, CMS would 
use baseline episode spending for episodes that started between January 
1, 2023, and December 31, 2025;
     To determine baseline episode spending for PY 3, CMS would 
use baseline episode spending for episodes that started between January 
1, 2024, and December 31, 2026;
     To determine baseline episode spending for PY 4, CMS would 
use baseline episode spending for episodes that started between January 
1, 2025, and December 31, 2027;
     To determine baseline episode spending for PY 5, CMS would 
use baseline episode spending for episodes that started between January 
1, 2026, and December 31, 2028.
    The use of 3 years of baseline episode spending is consistent with 
our initial CJR methodology, as described in the 2015 CJR Final Rule at 
80 FR 73340. In that case, the 3-year baseline period moved forward 
every 2 years. However, in combination with the lack of a retrospective 
trend factor, the use of a 3-year baseline period that only moved 
forward every 2 years meant that our methodology was not able to 
capture the degree to which spending on lower extremity joint 
replacement (LEJR) episodes was decreasing nationwide, both among CJR 
and non-CJR hospitals. As a result, we believed our target prices 
partially reflected spending decreases that were not due specifically 
to participation in CJR.
    Subsequently, in the 2021 CJR 3-Year Extension Final Rule, we 
finalized a policy to use a 1-year baseline period that would move 
forward every year (with the exception of skipping data from 2020 due 
to COVID-19 irregularities) (86 FR 23514). In combination with a 
retrospective market trend factor, using 1 year of baseline episode 
spending updated every year meant that our target prices would not be 
inflated as they had been under the initial CJR methodology. BPCI 
Advanced employs a strategy that blends elements of both CJR 
approaches, with a longer baseline period (4 years) similar to the 
initial CJR methodology, but shifting forward every year, as we do in 
the CJR extension.
    Participants in episode-based payment models have expressed 
concerns about a concept known as the ratchet effect when choosing the 
baseline period from which to calculate target prices. That is, 
participants do not want to be penalized for achieving lower spending 
by having lower target prices in subsequent years. The use of fewer 
years of the most recent baseline episode spending, as well as more 
frequent rebasing, will generally decrease target prices more quickly 
year over year if overall episode spending is decreasing, as opposed to 
a longer, fixed baseline. However, we need to balance this concern 
against the likelihood of having inaccurate target prices if we use 
older baseline episode spending or rebase less frequently.
    In the proposed rule, one way that we proposed to mitigate the 
ratchet effect is to use a 3-year baseline period and rebase annually. 
We believed this approach would achieve a balance between having target 
prices based on sufficiently up-to-date spending patterns but not 
requiring participants to compete against only the most recent spending 
patterns.
    In the proposed rule, we proposed to adjust baseline episode 
spending to trend all episode spending to the most recent year of the 
baseline period. The adjustment would reflect the impact of inflation 
and any changes in episode spending due to evolving patterns of care, 
Medicare payment policies, payment system updates, and other factors 
during the baseline period. In the proposed rule, we proposed to define 
a baseline year as any of the three calendar years (CYs) during a given 
baseline period. For example, baseline year 1 for PY 1 will be CY 2022, 
baseline year 2 will be CY 2023, and baseline year 3 will be CY 2024. 
In the proposed rule, we proposed to calculate the adjustment factors 
for baseline years 1 and 2 by dividing average episode spending for 
baseline year 3 episodes by average episode spending for episodes from 
baseline years 1 and 2, respectively. We would then apply the 
applicable adjustment factors to the episode spending of each episode 
in baseline years 1 and 2. This adjustment would bring all baseline 
episode spending forward to the most recent baseline year, so that 
baseline year 1 and 2 spending would be expressed in baseline year 3 
dollars. This method would be consistent with how we calculated the 
baseline trend factor for CJR in the performance years that used the 3-
year baseline period, as described

[[Page 69749]]

in the 2015 CJR Final Rule (80 FR 73342). In the proposed rule, we 
proposed to calculate these baseline trend factor adjustments at the 
MS-DRG/HCPCS episode type and region level.
    In recognition of the fact that baseline episode spending from more 
recent years are likely to be a better predictor of performance year 
spending, we proposed in the proposed rule to weight recent baseline 
episode spending more heavily than episode spending from earlier 
baseline years. Specifically, we stated in the proposed rule we would 
weight episode spending from baseline year 1 at 17 percent, baseline 
year 2 at 33 percent, and baseline year 3 at 50 percent. This method of 
weighting would mean that the most recent episode spending patterns, 
expected to be the most accurate predictor of performance year 
spending, would contribute most strongly to the benchmark price at 50 
percent. The remaining 50 percent would be divided into thirds, with 
baseline year 2 contributing approximately \2/3\, while baseline year 
1, which is likely to be the least accurate predictor of performance 
year spending, would contribute \1/3\.
    We sought comment on our proposal at proposed Sec.  512.540(b)(2-3) 
to use 3 years of baseline episode spending, rolled forward for each 
performance year, with more recent baseline years weighted more 
heavily, to calculate TEAM target prices.
    The following is a summary of public comments received in response 
to the proposals to construct the baseline period for benchmarking:
    Comment: Many commenters were concerned that a three-year, rolling 
baseline will make it hard for hospitals to continue making efficiency 
improvements in later years of the model. Most of these commenters 
specifically drew attention to the ratchet effect, which means that 
lower spending in the first few years of the model will be incorporated 
to target prices resulting in lower target prices in later years of the 
model. A couple commenters also expressed appreciation for CMS's steps 
to address the ratcheting effect. A few commenters raised the issue 
that some episode types, like lower extremity joint replacement, have 
been tested in bundled payment models for several years, making 
spending in these episode types already low, which would result in low 
target prices. A few commenters were concerned with the differential 
weights applied to each of the baseline years making the ratchet effect 
more severe, while a commenter supported the differential weighing.
    Another commenter was concerned that the benchmarking methodology 
will be too aggressive for providers who are rural and small, and/or 
have little experience with value-based care, and it will be 
challenging for them to meet their targets. Another commenter asked CMS 
to pay careful attention to regions where most participants are 
efficient at the start of the model as they will require a higher prior 
savings adjustment to effectively combat ratcheting while rewarding 
improvements in care coordination. A third commenter pointed out that 
the regions are broad and in the proposed rule there are no proposed 
adjustments for pricing in regions that have higher reimbursed 
facilities in the mix.
    Some commenters proposed alternative approaches to calculating 
target prices other than using and updating historical data. A 
commenter supported the use of a three-year baseline but recommended 
against annual rebasing. Another commenter suggested to set a one-time 
baseline score that is in place for the entirety of the model. A 
commenter suggested to conduct a study to understand the optimal 
utilization of services and use that information to set target prices. 
A few other commenters suggested to incorporate administratively set 
benchmarks to mitigate the ratchet effect. Another commenter suggested 
using a retrospective peer group level trend factor adjustment similar 
to the BPCI Advanced model with an asymmetrical cap so that target 
prices are not lowered too much due to improvements in care delivery at 
the time of the performance period reconciliation. A commenter 
suggested to exclude a TEAM participant's own beneficiaries from 
regional benchmark calculations referring to similar requests made in 
the Medicare Shared Savings Program.
    Response: We thank commenters for sharing their support for our 
attempt to address the ratchet effect as well as concerns regarding the 
ratcheting effect and hospitals' sustained opportunities for savings 
for the duration of the model. Target prices in TEAM were proposed to 
be based on regional average spending making TEAM an achievement-based 
model. In this framework, participant hospitals will not compete 
against their historical selves but rather strive to outperform their 
regional peers. Individual improvements will not affect future target 
prices in a substantive way as the future benchmark is being calculated 
based on the performance of several hospitals, including those that are 
not mandated to participate in TEAM. High-performing hospitals will 
likely continue to receive rewards and avoid being penalized on cost 
performance given that they can expect to continue having lower 
spending than their peers.
    We acknowledge that some hospitals (small, rural, those serving 
socially disadvantaged beneficiaries, etc.) may find it harder to meet 
target prices and compete against other hospitals in their region. We 
expect the finalized risk adjustment methodology, which will adjust 
target prices to account for additional beneficiary-level and provider-
level characteristics, as discussed in section X.A.3.d.(4) of the 
preamble of this final rule, to mitigate some of these concerns. 
Additionally, we acknowledge the challenges faced by safety-net 
hospitals, as defined in section X.A.3.f of the preamble of this final 
rule, and will provide flexibilities, as discussed in section X.A.3.a.3 
of the preamble of this final rule, to avoid downside risks and allow 
them safety net hospitals to remain in Track 1 for the first three 
performance years and eligible to participate in Track 2 in Performance 
Years 4 and 5 with a lower stop-loss/stop-gain threshold than other 
hospitals.
    Weighting the baseline years equally or differentially results in 
the same unadjusted regional target prices in the currently proposed 
framework, thus it does not mitigate or exacerbate the ratchet effect. 
Prior to calculating the weighted average, baseline episode spending 
for the first two years of the baseline is trended to the third and 
most recent year of the baseline period using a ratio of average 
episode spending in the third baseline year to average episode spending 
in the specified baseline year, so all components of the weighted 
average are going to be equal to average spending in the third baseline 
year. Weighting only plays a meaningful role in the proposed risk 
adjustment methodology.
    We appreciate commenters' suggestions on using alternative 
approaches to setting target prices. We disagree that a static baseline 
or a one-time baseline score are appropriate for TEAM. We are 
finalizing the inclusion of a capped 3 percent retrospective trend 
factor adjustment applied to reconciliation target prices, as discussed 
in section X.A.3.d.(3)(f) of the preamble of this final rule. Because 
of the capping, using a static baseline will lead to more inaccurate 
trends in subsequent model years, and hence will adversely affect the 
accuracy of the benchmarks in later years if the baseline remains 
static. Further, with a static baseline, the risk adjustment 
coefficients would get less accurate with each passing year.

[[Page 69750]]

    We also disagree with excluding a TEAM participant's own 
beneficiaries from regional benchmark calculations. This would result 
in a more complicated target pricing methodology, since each provider 
in the same region would receive a slightly different unadjusted target 
price. Additionally, the proposed target price methodology in TEAM 
relies on average episode spending and average trends across all 
hospitals in a particular region so the fraction of the episodes 
belonging to an individual participant and hence their individual 
influence on the unadjusted regional target price should be low.
    Commenters suggested we use administratively set benchmarks. We 
disagree that administratively set benchmarks are appropriate for TEAM. 
Administratively set benchmarks appear to be more appropriate for 
population-based models, like ACOs. Administrative trends used for ACOs 
are based on a mix of services that are different from the mix of 
services received after TEAM procedures. Clinical episode-specific 
trends can capture changes, like Medicare payment update rates or 
behavioral changes, more appropriately than administrative trends. 
However, we will continue to consider alternative approaches to 
trending episode spending, and if we believe adjustments to our 
trending approach are necessary, then we will propose such adjustments 
in future notice and comment rulemaking.
    Comment: A commenter asked why CMS used a benchmarking weight of 50 
percent on the most recent year, 33 percent on baseline year 2, and 17 
percent on baseline year 1 rather than the standard typically used by 
ACOs of 60 percent for baseline year 3, 30 percent for baseline year 2, 
and 10 percent for baseline year 1.
    Response: We thank the commenter for their concern regarding 
baseline year weights. We were concerned that creating a benchmark with 
only one baseline year could risk a ratchet effect to the detriment of 
TEAM participants and thus proposed using a three-year baseline period 
as the basis for benchmarking in TEAM. In recognition of the fact that 
baseline episode spending from more recent years are likely to be a 
better predictor of performance year spending, we proposed to weight 
recent baseline episode spending more heavily than episode spending 
from earlier baseline years. Weighting the baseline years equally or 
differentially results in the same unadjusted regional target prices in 
the currently proposed framework, thus it does not mitigate or 
exacerbate the ratcheting effect. Prior to calculating the weighted 
average, baseline episode spending for the first two years of the 
baseline is trended to the third and most recent year of the baseline 
period using a ratio of average episode spending in the third baseline 
year to average episode spending in the specified baseline year, so all 
components of the weighted average are going to be equal to average 
spending in the third baseline year.
    However, weighting too heavily in a given year could have 
unintended consequences if a certain year is an outlier, for example 
during a pandemic. Because the purpose of using multiple baseline years 
is to smooth out potential volatility, we prefer to use a baseline that 
does not too heavily weight any given year. Because TEAM is an episode-
based model rather than a population-based model, accounting for 
volatility from episode-level variation, and time periods that could be 
correlated with episodes, is a high priority. Based on previous 
experience in the Oncology Care Model, we proposed using the 17 percent 
weight for baseline year 1, 33 percent weight for baseline year 2, and 
50 percent weight for baseline year 3. For any factors not accounted 
for by this benchmarking model, as discussed in section X.A.3.d.(3)(f) 
of the preamble of this final rule, our proposed trend factor should 
help to account for any unforeseen or unanticipated changes.
    Comment: A commenter recommended that the episode spending should 
be the actual fee-for-service (FFS) claims submitted for TEAM episodes, 
not the TEAM episode target prices.
    Response: We thank the commenter for their input. All items and 
services paid under Medicare Part A and Part B FFS will be included in 
the Clinical Episode, unless those items and services meet certain 
exclusion criteria. We refer readers to section X.A.3.b.(5)(a) of the 
preamble of this final rule for the TEAM exclusions list. Medicare 
spending for non-excluded items and services will be used to calculate 
episode spending. Episode spending will be capped at the 99th 
percentile for each DRG and region, as discussed in section 
X.A.3.d.(3)(e) of the preamble of this final rule.
    Additionally, preliminary benchmark prices will be calculated as 
the average episode spending (after capping) for the DRG, and region 
trended to baseline year 3 dollar values. The preliminary benchmark 
price will be adjusted to include adjustments for patient risk score 
from the performance year, final capped normalization factor, and the 
discount factor. Episode spending will be compared to the final target 
price to assess the cost performance of TEAM participants.
    Comment: A couple commenters expressed concerns that the proposed 
rule and correction notice did not address the pricing methodology for 
spinal fusion MS-DRGs given the deletion of MS-DRGs 453-455 and the 
addition of eight new MS-DRGs. The new MS-DRGs may not appear in the 
baseline data and may have significantly different payment rates from 
the deleted and existing MS-DRGs, thus impacting the Target Price 
calculations.
    Response: We acknowledge the concerns brought up by the commenters 
regarding the pricing for spinal fusion MS-DRGs. We are finalizing the 
testing of the spinal fusion episode category, with the updated MS-
DRGs, as discussed in section X.A.3.b. of the preamble of this final 
rule. However, we intend to conduct a thorough review of how the 
composition of episodes under the current spinal fusion MS-DRGs may 
change with the introduction of the new MS-DRGs and deletion of three 
MS-DRGs. We intend to propose a policy in future rulemaking for how to 
construct target prices when there are MS-DRG or HCPCS modification or 
other payment system changes that may arise over the course of the 
model. This policy proposal would address how target prices for spinal 
fusion MS-DRGs in TEAM would be constructed given the new MS-DRGs did 
not exist in the baseline period.
    After consideration of the comments received, we are finalizing at 
Sec.  512.540(b)(2-3) the proposal to use 3 years of baseline episode 
spending, rolled forward for each performance year, with more recent 
baseline years weighted more heavily, to calculate target prices in 
TEAM.
(b) Regional Target Prices
    In the proposed rule, we proposed to provide to TEAM participants 
target prices for each proposed MS-DRG/HCPCS episode type and region 
based on 100 percent regional data for all TEAM participants prior to 
each PY. That approach would be consistent with PYs 4-8 of CJR. While 
CJR target prices used a blend of \2/3\ hospital-specific data and \1/
3\ regional data for PYs 1-2, and \1/3\ hospital-specific data and \2/
3\ regional data for PY 3, we stated our reasons in the 2015 CJR Final 
Rule for moving towards fully regional target pricing as participants 
gained more experience in the model (80 FR73347). Target prices based 
on hospital-specific data would require a TEAM participant to compete 
against its own previous performance, such that improvement over 
previous

[[Page 69751]]

performance would result in a reconciliation payment. Conversely, 
target prices based on regional data would require a TEAM participant 
to compete against its peers in that region, such that only a specific 
level of achievement, as opposed to improvement alone, would result in 
a reconciliation payment. For TEAM participants that are historically 
inefficient compared to their peers, hospital-specific target prices 
would be higher than regional target prices because hospital-specific 
baseline episode spending would be greater than average baseline 
episode spending for the region. For TEAM participants that are 
historically efficient compared to their peers, hospital-specific 
target prices would be lower than regional target prices because 
hospital-specific baseline episode spending would be lower than average 
baseline episode spending for the region. We noted in the 2015 CJR 
Final Rule that if we used 100 percent hospital-specific pricing in 
CJR, historically efficient hospitals could have fewer opportunities 
for achieving additional efficiencies under the model and would not be 
rewarded for maintaining high quality and efficiency, whereas less 
efficient hospitals would be rewarded for improvement even if they did 
not reach the same level of high quality and efficiency as the more 
historically efficient hospitals.
    However, as described in section X.A.3.f of the preamble of this 
final rule, health equity has been a priority in the proposed design of 
TEAM. We are concerned by literature stating that safety net hospitals 
in CJR were disproportionately likely to owe a repayment once we moved 
to 100 percent regional pricing.927 928 We note that these 
findings reflect the original CJR payment methodology, which did not 
include risk adjustment at the beneficiary level. For PYs 6-8, the 
modified CJR payment methodology incorporates beneficiary level risk 
adjustment, including an adjustment for dual income eligibility. 
Additionally, although we provided lower stop-loss limits for rural and 
low volume hospitals, we did not identify or provide protective stop-
loss limits for safety net hospitals.
---------------------------------------------------------------------------

    \927\ Carey, K., & Lin, M-Y. (2022). Safety-net hospital 
performance under Comprehensive Care for Joint Replacement. Health 
Services Research, 2022(1-6). https://doi:10.1111/1475-6773.14042.
    \928\ Shashikumar, S.A., Ryan, A.M., & Joynt Maddox, K.E. 
(2022). Equity implications of hospital penalties during 4 years of 
the Comprehensive Care for Joint Replacement Model, 2016 to 1019. 
JAMA Health Forum, 3(12). https://doi.org/10.1001/jamahealthforum.2022.4455.
---------------------------------------------------------------------------

    Therefore, in addition to lower stop-loss limits for Track 1 and 
Track 2 TEAM participants as compared to Track 3 TEAM participants, and 
the incorporation of additional measures of social need in our 
beneficiary-level risk adjustment, we considered in the proposed rule 
an alternative target price proposal to provide Track 1 and Track 2 
TEAM participants with 100 percent hospital-specific, rather than 
regional, target prices. However, given our proposal in the proposed 
rule to calculate target prices at the MS-DRG/HCPCS episode type level, 
we are concerned that many Track 1 or Track 2 TEAM participants would 
not meet the low volume threshold of baseline episodes to calculate 
reliable target prices for many of the MS-DRG/HCPCS episode types 
included in TEAM. Additionally, there may be some hospitals that serve 
a high proportion of underserved populations yet have already achieved 
high levels of quality and efficiency, such that a 100 percent 
hospital-specific target price would be disadvantageous.
    In the proposed rule, we also considered blending hospital-specific 
pricing with regional pricing as we did in the first 3 years of CJR. 
For instance, we considered using a blend of 50 percent hospital-
specific data and 50 percent regional data to calculate target prices 
for Track 1 and Track 2 participants. We further considered using a 
different blend for Track 1 and Track 2 participants vs. Track 3 
participants. For example, we considered using a blend of \2/3\ 
hospital-specific data and \1/3\ regional data for Track 1 and Track 2 
participants, and a blend of \1/3\ hospital-specific data and \2/3\ 
regional data for Track 3 hospitals. However, blending hospital-
specific pricing with regional pricing could be subject to the same 
concerns regarding low volume or disadvantaging efficient hospitals as 
100 percent hospital-specific pricing, though to a lesser degree.
    We also considered, but did not propose and are not finalizing, 
calculating target prices at the region/episode category level as 
compared to our proposed region/MS-DRG/HCPCS level. Calculating target 
prices at the region/episode category would help to mitigate some 
concerns with certain MS-DRG/HCPCS episode types having a low volume of 
episodes in a given region. However, to ensure target prices are 
sufficiently risk-adjusted to capture spending differences between the 
different MS-DRG/HCPCS within a given episode category, we considered 
including MS-DRG/HCPCS risk adjusters in TEAM's risk adjustment 
methodology if we calculated target prices at the region/episode 
category level. We sought comment on calculating target prices at the 
region/episode category level.
    We sought comment on our proposal at proposed Sec.  512.540(b)(1) 
to provide regional target prices to all TEAM participants for each PY 
during the model performance period. We also sought comment on other 
potential ways to set target prices for Track 1 or Track 2 TEAM 
participants, including adjustments to regional target prices for Track 
1 or Track 2 TEAM participants, that would decrease the likelihood of 
safety net hospitals being disproportionately penalized by regional 
target prices.
    The following is a summary of the public comments received on the 
proposed methodology to construct regional target prices and our 
responses to these comments:
    Comment: A couple of commenters requested additional information 
about the TEAM pricing methodology. Specifically, a commenter required 
more details on regional target pricing beyond the use of average 
episode cost in the nine regions.
    Response: We proposed to calculate TEAM target prices using 3 years 
of baseline data, as discussed in section X.A.3.d.(3)(a) of the 
preamble of this final rule, trended forward to the performance year, 
at the level of MS-DRG/HCPCS episode type and region, with updates to 
be made using the performance year data, as discussed in section 
X.A.3.d.(3)(f) of the preamble of this final rule. The regions are 
defined as the 9 U.S. census divisions. Hospitals in the five U.S. 
territories (American Samoa, Guam, the Northern Mariana Islands, Puerto 
Rico, and the U.S. Virgin Islands) will be grouped alongside Census 
Division 9 (that is, the Pacific region).
    Episode spending will be capped at the 99th percentile, as 
discussed in section X.A.3.d.(3)(e) of the preamble of this final rule, 
for each of the 29 MS-DRG/HCPCS episode types and 9 regions, and the 
benchmark price will be calculated as the average capped and 
standardized spending in baseline year 3 dollars for each MS-DRG/HCPCS 
episode type in each region, resulting in 261 benchmark prices. 
Benchmark prices will be calculated using all hospitals in a region, 
regardless of TEAM participation status, except the hospitals specified 
in Sec.  512.540(b)(1)(ii). CMS will apply a prospective trend factor 
and a discount factor, as discussed in section X.A.3.d.(3)(g) of the 
preamble of this final rule, to benchmark prices, as well as a

[[Page 69752]]

prospective normalization factor, as discussed in section X.A.3.d.(4) 
of the preamble of this final rule, to calculate preliminary target 
prices. Each TEAM participant within a region will receive the same 
preliminary target price for an MS-DRG/HCPCS episode type. During 
reconciliation, these preliminary target prices will be updated by 
updating the trend (subject to caps) and normalization factor (subject 
to caps) and by factoring in each participant's realized risk 
adjustment multipliers.
    Risk adjustment multipliers (that is, coefficients) will be 
calculated and made available to TEAM participants prior to the start 
of the performance year, so participants would be able to use them to 
estimate their episode-level target prices. We proposed to use age 
group, Hierarchical Condition Category (HCC) count, and beneficiary 
social risk as risk adjusters, and, as referenced in section 
X.A.3.d.(4) of the preamble of this final rule, are adding an expanded 
set of risk adjusters including specific HCC indicators for each 
episode type and provider-level covariates like safety-net status of 
the participant. The risk adjustment multipliers will be calculated at 
the MS-DRG/HCPCS level on baseline episodes, using a weighted linear 
regression where episodes are weighted differentially based on whether 
they belong to year 1, 2, or 3 of the baseline periods. Episodes from 
baseline year 1 will be weighted at 17 percent, baseline year 2 at 33 
percent, and baseline year 3 at 50 percent. The risk adjustment 
multipliers will be held fixed and applied to performance year episodes 
at reconciliation based on the realized case mix of the TEAM 
Participant in the performance year.
    After risk adjusting for the performance year case-mix, CMS will 
normalize the target prices to ensure that the average of the total 
risk-adjusted preliminary target price does not exceed the average of 
the total non-risk adjusted preliminary target price. The final 
normalization factor will be calculated as the national mean of the 
benchmark price for each MS-DRG/HCPCS episode type divided by the 
national mean of the risk-adjusted benchmark price for the same MS-DRG/
HCPCS episode type. However, it will be capped should this ratio exceed 
5 percent of the prospective normalization factor. The 
final target prices will include a retrospective trend (instead of the 
prospective trend), as discussed in section X.A.3.d.(3)(f) of the 
preamble of this final rule, which will be capped at being within 3 
percent of the prospective trend. The retrospective trend will be 
calculated as the average capped performance year episode spending at 
the MS-DRG/HCPCS episode type and region level divided by the capped 
mean baseline episode spending in baseline year 3 dollars at the MS-
DRG/HCPCS episode type and region level. In summary, the final target 
price will be calculated as the product of the capped mean baseline 
episode spending in baseline year 3 dollars, the capped retrospective 
trend, the risk adjustment multiplier using the performance year case-
mix, and the capped final normalization factor.
    Comment: We received many comments regarding pricing episodes based 
on region. A couple commenters explicitly supported regional target 
prices, and a commenter proposed an alternative regional pricing 
methodology based more closely on BPCI Advanced. Other commenters 
expressed concerns about the proposed model and some of these proposed 
modifications to the model methodology. The most commonly expressed 
concern about regional target prices was that they may not be 
achievable for particular types of hospitals including safety net 
hospitals, rural hospitals, ``underserved'' hospitals, historically 
high-cost hospitals, and historically low-cost hospitals. A few 
commenters also expressed concerns that hospitals in regions with high 
CJR or BPCI Advanced penetration or a lot of historically efficient 
providers would be at a disadvantage, or that hospitals inexperienced 
with episode-based models would be at a disadvantage, one of which was 
particularly concerned about hospitals inexperienced with episode-based 
models in regions with high historical penetration of episode-based 
models. A few commenters expressed the concern that census divisions 
are not sufficiently granular regions. To address their concerns that 
the regional pricing approach disadvantages particular kinds of 
hospitals, a few commenters suggested benchmarking hospitals against 
their own history rather than a regional average, either just for 
safety net hospitals, or for all hospitals. One of these commenters 
suggested this as a solution to the social risk adjuster being 
allegedly inadequate. A commenter also suggested benchmarking hospitals 
against a blend of regional and hospital-specific history. Another 
commenter suggested adjusting target prices for safety net status or 
rural status.
    Response: We thank all the commenters for sharing their support as 
well as concerns. We agree with the comments in support of regional 
target pricing and are finalizing this type of pricing approach for 
TEAM, but we have taken into account concerns about particular hospital 
types. In particular, we will be including additional risk adjusters 
for patient and hospital characteristics, including hospital safety net 
status, as discussed in this section and in section X.A.3.d.(4) of the 
preamble of the final rule.
    Regarding the comment proposing an alternative method of regional 
pricing based more closely on the BPCI Advanced model, we will be 
maintaining the regional target price approach that more closely 
follows the CJR model, as outlined in the proposed rule. The regional 
pricing approach allows CMS to implement a payment methodology that is 
as transparent and understandable as possible for participants of 
varying levels of statistical background and knowledge.
    Regarding the concerns about the achievability of regional target 
prices for safety net, rural, and ``underserved'' hospitals, to improve 
the fit of the risk adjustment model while remaining conscious of the 
risk of overfitting (that is, the risk that including too many 
covariates in the model can make it worse at predicting spending in the 
performance year), we used a combination of clinical input and Lasso 
analyses to develop a more extensive list of risk adjusters (refer to 
section X.A.3.d.(4) for additional details on the analyses) based on 
risk adjusters used in the BPCI Advanced model. We tested a number of 
hospital characteristics including a provider's status as a major 
teaching hospital, rural hospital, rural referral center, safety net 
hospital; and its bed size (coded as small, medium, large, or extra-
large). Based on our findings, we will be adding a few provider-level 
risk adjusters to the model including flags for safety net status, and 
bed size. None of the other provider characteristics tested were 
selected by the Lasso analysis for any of the episode types. Based on 
further testing with historical data, we expect this will result in 
higher target prices for safety net hospitals than they would otherwise 
receive.
    Regarding the concern that historically high-cost hospitals would 
find regional target prices unachievable, we believe that hospitals 
that are historically high-cost after conditioning out the effect of 
patient characteristics and important hospital characteristics (such as 
safety net) are those that should have the greatest opportunities for 
savings.
    Regarding the concern that historically low-cost hospitals would 
find regional target prices unachievable, this is highly unlikely. 
Rather, if all hospitals in a region did not change

[[Page 69753]]

their behavior, hospitals that are historically low-cost relative to 
other hospitals in their region and conditional on their episode risk 
adjusters, would generally be rewarded under the model.
    We recognize that some hospitals with past experience in episode-
based models may be better positioned to participate in an episode-
based model than hospitals without past experience in episode-based 
models, since they may already have the infrastructure in place to 
transform care. We also acknowledge that past performance in an 
episode-based payment model does not guarantee successful participation 
in new models. However, with TEAM not slated to take effect until 2026, 
and with all participants having the option to participate in a no-
downside-risk track in PY 1 (and safety net hospitals having the option 
to participate in a no-downside-risk track in PYs 1-3), as discussed in 
section X.A.3.a.(3) of the preamble of this final rule, CMS expects 
hospitals should be able to get the infrastructure in place prior to 
bearing any downside risk due to TEAM. Further, TEAM participants will 
be able to leverage learning resources developed for TEAM and those 
based on lessons learned in the BPCI Advanced and CJR models.
    We, however, disagree that hospitals with past experience in 
episode-based payment models presently have a cost advantage or that 
hospitals in regions with high BPCI Advanced or CJR penetration have a 
disadvantage in TEAM. In designing TEAM, we examined distributions of 
spending for the proposed TEAM episodes ``triggered'' between January 
2019 to June 2023 stratified by past participation in episode-based 
models (CJR participation in 2022 or 2023 for LEJR, or BPCI Advanced 
participation in 2022 or 2023 for all TEAM episode types). We found 
that episode spending distributions were similar for participants in 
episode-based models and for non-participants. For Coronary Artery 
Bypass Graft Surgery (CABG), Surgical Hip/Femur Fracture Treatment 
(SHFFT), Spinal Fusion, and Major Bowel Procedure, we think this result 
may be driven by participants with higher BPCI Advanced target prices 
being more likely to remain in the model in the later years of BPCI 
Advanced. For LEJR, the explanation is less clear.
    In regions with a large proportion of historically efficient 
providers, it is true that the baseline average of episode spending 
would tend to be lower (conditional on patient mix) than in regions 
with a large proportion of historically inefficient providers. In 
advance, it is problematic to distinguish between regions that have 
large proportions of historically efficient (or inefficient) providers 
and regions that have structural factors resulting in lower (or higher) 
resource utilization beyond what is captured in the risk adjustment. 
However, the trends in regions with a large proportion of historically 
efficient providers would be expected to be more positive or less 
negative than in regions with a large proportion of historically 
inefficient providers as the model progresses, which would mitigate the 
difference in target prices over time. The use of retrospective trends 
(albeit subject to a cap), as discussed in section X.A.3.d.(3)(f) of 
the preamble of this final rule, helps ensure that trends in regions 
where efficiency is improving over time do not overshoot what is 
feasible. Over the life of TEAM, we will continue to assess whether 
there remain opportunities for savings for each clinical episode type 
and if warranted, will propose adjustments in future notice and comment 
rulemaking.
    Regarding the comments that census division is not a sufficiently 
granular unit at which to set target prices, we would like to clarify 
that the target prices will be based on geographically standardized 
allowed amounts. This geographic standardization removes any geographic 
adjustments like wage index adjustments and other hospital-specific 
adjustments and ensures that hospitals are compared based on resource 
utilization rather than price levels in their local area. Furthermore, 
setting target prices at more granular levels will result in less 
stable prices, particularly for smaller MS-DRGs and regions.
    CMS did consider using an improvement framework (that is, 
benchmarking hospitals against their own history) and a blended 
framework (that is, benchmarking hospitals against a blend of their own 
history and their region's history) for certain types of hospitals as 
suggested by some commenters. We do acknowledge that factors that 
differ systematically between hospitals within a region which may not 
be captured in the risk adjustment would be accounted for in a 
hospital-specific target price but are not accounted for in a regional 
target price. However, hospital-specific and blended target prices 
disadvantage historically efficient hospitals and create pricing 
instability for low volume hospitals. Further, CMS expects that risk 
adjusting for safety net status and the additional flexibilities 
provided to safety net hospitals will address the concerns about the 
achievability of regional target prices for these hospitals.
    After consideration of the public comments we received, we are 
finalizing at Sec.  512.540(b) our proposal to provide regional target 
prices to all TEAM participants for each performance year during the 
model performance period where region is defined by the U.S. Census 
Divisions.
(c) Services That Extend Beyond an Episode
    As we proposed in the proposed rule a fixed 30-day post discharge 
episode length as discussed in section X.A.3.b.(5)(d) of the preamble 
of this final rule, we recognize that there may be some instances where 
a service included in the episode begins during the episode but 
concludes after the end of the episode and for which Medicare makes a 
single payment under an existing payment system. An example would be a 
beneficiary in an episode who is admitted to a skilled nursing facility 
(SNF) for 15 days, beginning on Day 26 post-discharge from the TEAM 
anchor hospitalization or anchor procedure. The first 5 days of the SNF 
admission would fall within the episode, while the subsequent 10 days 
would fall outside of the episode.
    We proposed in the proposed rule that, to the extent that a 
Medicare payment for included episode services spans a period of care 
that extends beyond the episode, these payments would be prorated so 
that only the portion attributable to care during the episode is 
attributed to the episode payment when calculating actual Medicare 
payment for the episode. For non-Inpatient Prospective Payment System 
(IPPS) inpatient hospital services (for example, CAH) and inpatient 
post-acute care (PAC) such as a SNF, inpatient rehabilitation facility 
(IRF), long-term care hospital (LTCH), and inpatient psychiatric 
facility (IPF) services; we proposed to prorate payments based on the 
percentage of actual length of stay (in days) that falls within the 
episode window. For home health agency (HHA) services that extend 
beyond the episode, we proposed that the payment proration be based on 
the percentage of days, starting with the first billable service date 
(``start of care date'') and through and including the last billable 
service date, that fall within the episode. The proposed policy would 
ensure that TEAM participants are not held responsible for the cost of 
services that did not overlap with the episode period.
    For IPPS services that extend beyond the episode (for example, 
readmissions included in the episode definition), we proposed in the 
proposed rule to separately prorate the IPPS claim

[[Page 69754]]

amount from episode target price and actual episode payment 
calculations, called the normal MS-DRG payment amount for purposes of 
this final rule. The normal MS-DRG payment amount would be pro-rated 
based on the geometric mean length of stay, comparable to the 
calculation under the IPPS PAC transfer policy at Sec.  
[thinsp]412.4(f) and as published on an annual basis in Table 5 of the 
IPPS/LTCH PPS final rules. Consistent with the IPPS PAC transfer 
policy, the first day for a subset of MS-DRGs (indicated in Table 5 of 
the IPPS/LTCH PPS final rules) would be doubly weighted to count as 2 
days to account for likely higher hospital costs incurred at the 
beginning of an admission. If the actual length of stay that occurred 
during the episode is equal to or greater than the MS-DRG geometric 
mean, the normal MS-DRG payment would be fully allocated to the 
episode. If the actual length of stay that occurred during the episode 
is less than the geometric mean, the normal MS-DRG payment amount would 
be allocated to the episode based on the number of inpatient days that 
fall within the episode. If the full amount is not allocated to the 
episode, any remainder amount would be allocated to the 30-day post-
episode payment calculation discussed in section X.A.3(d)(5) of the 
preamble of this final rule. The proposed approach for prorating the 
normal MS-DRG payment amount was consistent with the IPPS transfer per 
diem methodology.
    This methodology would be consistent with CJR and is described as 
applied to CJR in the 2015 CJR Final Rule (80 FR 73333). We sought 
comment on our proposed methodology at proposed Sec.  512.555 for 
prorating services that extend beyond the episode.
    We received no comments on this proposal and therefore are 
finalizing this provision without modification at Sec.  512.555.
(d) Episodes That Begin in One Performance Year and End in the 
Subsequent Performance Year
    Given that we proposed episodes with a 30-day post discharge 
period, we recognize that some episodes will begin during one 
performance year and end during the following performance year. In the 
proposed rule, we proposed that all episodes would receive the target 
price associated with the date of discharge from the anchor 
hospitalization or the anchor procedure, as applicable, regardless of 
the episode end date, which determines the performance year in which 
the episode would be reconciled. We note that the assignment of target 
prices based on the date of discharge from the anchor hospitalization, 
or the anchor procedure is different from CJR, where the target price 
was assigned based on the episode start date rather than the discharge 
date, but it is consistent with BPCI Advanced. As noted in section 
X.A.3.d.(5)(a) of the preamble of this final rule, annual 
reconciliation is based on episodes that end during a PY, so if an 
episode extends past the end of a PY, that episode would factor into 
the next PY's reconciliation, when the episode ends, which is 
consistent with both CJR and BPCI Advanced. Accordingly, if an episode 
were to end after the final performance year of the model, we proposed 
that it would not be reconciled. We sought comment on our proposal at 
proposed Sec.  512.540(a)(3) for applying target prices to an episode 
that begins in one performance year and ends in the subsequent 
performance year.
    The following is a summary of comments we received regarding our 
proposal for on how to address an episode that begins in one 
performance year and ends in the subsequent performance year and our 
responses to these comments:
    Comment: A commenter supported the proposal to treat episodes that 
begin in one performance year and end in the subsequent performance 
year similar to CJR and BPCI Advanced models, but requested 
clarification on which target year will be affected by the performance.
    Response: We thank the commenters for expressing their support for 
the assignment of episodes that overlap with two performance years. We 
note that, in the TEAM methodology in the proposed rule, performance 
years are not separated into two sub-periods based on calendar and 
fiscal year, as was done in the BPCI Advanced model. The preliminary 
target price applied to the episode is based on the performance year 
that the episode is assigned to, in accordance with Sec.  512.540(a)(3) 
of the proposed rule.
    For example, if an episode has an anchor end date in December 2026 
but an episode end date in January 2027, the episode is assigned to PY 
1 and will have the PY 1 target price applied to it. However, if the 
episode starts in 2026 but both the anchor and episode end dates are in 
2027, the episode is assigned to Performance Year 2 and will have the 
Performance Year 2 target price applied to it. Both episodes would be 
reconciled at the same time, along with the other PY 1 and 2 episodes 
with episode end dates in 2027.
    After consideration of the public comments we received, we are 
finalizing at Sec.  512.540(a)(3) the proposed methodology to assign 
episodes to performance years and target prices.
(e) High-Cost Outlier Cap
    Given the broad episode definition and 30-day proposed post-
discharge period in the proposed rule, we want to ensure that hospitals 
have some protection from the downside risk associated with especially 
high payment episodes, where the clinical scenarios for these cases 
each year may differ significantly and unpredictably. As we stated in 
the 2015 CJR Final Rule (80 FR 73335), we do not believe that the 
opportunity for a hospital's systematic care redesign of particular 
surgical episodes has the significant potential to impact the clinical 
course of these extremely disparate high payment cases. In the 2015 CJR 
Final Rule (80 FR 73335) we finalized a policy to limit the hospital's 
responsibility for high episode payment cases by utilizing a high price 
payment ceiling at two standard deviations above the mean episode 
payment amount in calculating the target price and in comparing actual 
episode payments during the performance year to the target prices. This 
policy was designed to prevent participant hospitals from being held 
responsible for catastrophic episode spending amounts that they could 
not reasonably have been expected to prevent. The policy, and the 
reasoning behind it, is described in detail at (80 FR 73335).
    However, as we described in 86 FR 23518, based on data from the 
first few years of the CJR model, we observed that the original 2 
standard deviation methodology was insufficient to identify and cap 
high episode spending, as more episodes than expected exceeded the 
spending cap. We describe in detail our reasoning for finalizing a 
change to the high episode spending cap in the 2021 CJR 3-Year 
Extension Final Rule (86 FR 23518). We finalized a change to the 
calculation of the high episode spending cap to derive the amount by 
setting the high episode spending cap at the 99th percentile of 
historical costs for each MS-DRG for each region. The resulting 
methodology was similar to the BPCI Advanced methodology for capping 
high-cost episode spending at the 99th percentile for each MS-DRG.
    We proposed a similar high-cost outlier policy for TEAM in the 
proposed rule, to cap both baseline episode spending and performance 
year episode spending at the 99th percentile of spending at the MS-DRG/
HCPCS episode type and region level, referred to as the high-cost 
outlier cap. We stated

[[Page 69755]]

in the proposed rule we would determine the 99th percentile of spending 
at the MS-DRG/HCPCS episode type and region level during the applicable 
time period, and then set spending amounts that exceed the high-cost 
outlier cap to the amount of the high-cost outlier cap. For instance, 
if the high-cost outlier cap was set at $30,000, an episode that had 
actual episode spending of $45,000 would have its spending amount, for 
purposes of the model, reduced by $15,000 when the cap was applied and 
therefore, the spending for that episode would be held at $30,000. In 
the proposed rule, we proposed to use capped episode spending when 
calculating benchmark prices in order to ensure that high-cost outlier 
episodes do not artificially inflate the benchmark. When calculating 
performance year episode spending at reconciliation, we stated in the 
proposed rule we would use capped episode spending so that a TEAM 
participant would not be held responsible for catastrophic episode 
spending amounts that they could not reasonably have been expected to 
prevent. We sought comment on our proposal at proposed Sec.  
512.540(b)(4) for calculating and applying the high-cost outlier cap.
    The following is a summary of public comments we received regarding 
our proposal for calculating and applying the high-cost outlier cap:
    Comment: A few commenters raised concerns that setting the high-
cost outlier cap at the 99th percentile of the episode spending 
distribution is too high. A couple of commenters suggested setting it 
at the 95th percentile and a commenter suggested setting it at the 90th 
percentile to reduce variability with outlier cases. A couple 
commenters were especially concerned about the volatility in episode 
spending of low volume providers. A commenter noted that this may 
inadvertently punish providers who take the risk of treating more 
vulnerable and complex patients and may particularly be of concern for 
rural and/or small providers with limited experience in value-based 
care.
    Response: We thank commenters for sharing their concerns regarding 
the high-cost outlier cap. We expect that the proposed method of 
capping at the 99th percentile of the spending distribution will result 
in high episode spending caps that accurately represent the cost of 
infrequent and potentially nonpreventable complications within each MS-
DRG and region, which the participant could not have reasonably 
controlled and for which we do not want to penalize the participant. By 
setting the cap at this level, we are holding hospitals accountable for 
patients, including complex cases, whose care hospitals can be expected 
to have reasonable control over. In response to the comments, we 
analyzed the increase in episode spending between each percentile from 
the 95th to the 99th in 30-day episodes using Medicare FFS claims from 
2021. These increases were between 5 percent to 10 percent for the 
majority of MS-DRG and region combinations between the 95th and the 
98th percentiles, but above 10 percent for the majority of MS-DRG and 
region combinations between the 98th and 99th percentiles. Setting the 
cap below the 99th percentile could lead to a too low high-cost outlier 
cap, which is contrary to the intention of only capping extreme 
outliers beyond providers' control and allowing reduction in spending 
for other high-cost episodes.
    Additionally, exclusions for low volume or high-cost drugs are 
going to be applied in both the baseline and performance year, to 
further prevent hospitals from being penalized for incurring high costs 
by using necessary, but rare or very expensive treatment options. This 
approach is consistent with how we applied the high-cost outlier cap in 
the 2021 CJR 3-Year Extension Final Rule (86 FR 23518), and is similar 
to the BPCI Advanced methodology for capping high-cost episode spending 
at the 99th percentile for each MS-DRG.
    Lastly, we acknowledge commenters concerns about low volume 
providers. Given concerns and our desire to protect low volume 
hospitals from greater financial risks, we are not finalizing our low 
volume hospital policy, as discussed in section X.A.3.d.(3)(h) of the 
preamble of this final rule. We intend to propose a new policy in 
future notice and comment rulemaking prior to TEAM being implemented.
    After consideration of the public comments we received, we are 
finalizing at Sec.  512.540(b)(4) the proposal for calculating and 
applying the high-cost outlier cap.
(f) Trending Prices
    Target prices are derived from a prediction based on previous 
Medicare spending patterns, but it is not possible to perfectly predict 
how Medicare spending patterns may change over the course of the 
performance year. In the original BPCI model, prospective target prices 
were not provided to participants, so the trend factor was calculated 
retrospectively based on the observed spending during the performance 
period. Quarterly reconciliations in BPCI meant that participants could 
gain a sense of how their target prices tended to change over time and 
get relatively frequent feedback on their performance in the model. 
However, BPCI participants did not like the uncertainty of not knowing 
their target prices in advance.
    In the initial CJR methodology and Model Years 1-3 of BPCI 
Advanced, CMS provided fully prospective target prices to participants. 
Participants appreciated the certainty of prospective target prices, 
where we predict in advance how spending patterns might shift and hold 
those target prices firm even if we underpredicted or overpredicted 
spending. This methodology included applying update factors to account 
for setting-specific payment system updates, allowing us to estimate 
how a given set of services performed during the baseline would be 
priced had those same services been subject to the fee schedules in 
effect during the performance period.
    In CJR, we originally overpredicted performance period spending, 
not accounting for the overall decline in spending on LEJR episodes 
nationwide that occurred outside of the model during its first few 
performance years. In BPCI Advanced, we similarly overpredicted 
performance period spending for certain episodes because our 
methodology was unable to account for medical coding changes that 
occurred between the baseline and performance period, or during the 
performance period itself. For instance, in FY 2016, changes to medical 
coding guidance were made for Inpatient Congestive Heart Failure, such 
that certain patients who during the baseline would have been coded as 
the less expensive MS-DRG 292, were instead coded as the more expensive 
MS-DRG 291, despite having the same clinical characteristics. This 
meant that many beneficiaries who received a target price associated 
with the more expensive MS-DRG 291, actually had the lower performance 
period costs previously associated with the less expensive MS-DRG 292. 
The use of a fully prospective trend factor was unable to capture these 
changes in both practice patterns and coding guidelines.
    Subsequently, we modified both models' methodologies to include a 
retrospective trend adjustment. Starting in Model Year 4, we continued 
to provide BPCI Advanced participants with a prospective target price 
using an estimated trend factor, but we adjusted the target price at 
reconciliation based on the retrospective calculation of the trend 
factor using performance period data. Initially, this policy included

[[Page 69756]]

guardrails around the magnitude of the retrospective trend factor 
adjustment of 10 percent. In response to participant 
feedback, we lowered the maximum level of the retrospective trend 
factor adjustment to 5 percent starting in Model Year 6.
    In the CJR extension, the retrospective trend is known as the 
market trend factor adjustment. It is fully retrospective and 
calculated at reconciliation, meaning that the unadjusted target price 
we post on the CJR website prior to the performance year does not 
include a prospective trend factor. In response to participant 
requests, we provided estimates of the market trend factor on the CJR 
website based on the most recently available data to help participants 
estimate their potential target prices. The market trend factor is 
calculated separately for each MS-DRG/region combination. For the PY 6 
reconciliation (corresponding to episodes that ended between October 1, 
2021, and December 31, 2022), the highest market trend factor was 1.294 
for MS-DRG 469 episodes in the West South Central region, while the 
lowest market trend factor was 0.972 for MS-DRG 521 episodes in the New 
England region.
    For TEAM, we proposed in the proposed rule to provide preliminary 
target prices that incorporate a prospective trend factor to TEAM 
participants. We stated at proposed Sec.  512.540(b)(7) to calculate 
this prospective trend factor as the percent difference between the 
average regional MS-DRG/HCPCS episode type expenditures computed using 
the most recent year of the applicable baseline period, and the 
comparison average regional MS-DRG/HCPCS episode type expenditures 
during the first year of the baseline. By comparing baseline year 3 to 
baseline year 1, the prospective trend would capture changes across a 
two-year period, which we believed would be appropriate given that we 
would be projecting spending patterns in the performance year, which 
would be two years after baseline year 3. The trend factor calculation 
as proposed in the proposed rule would be similar to how the market 
trend factor is currently calculated in the CJR extension, but instead 
of retrospectively comparing average regional MS-DRG/HCPCS episode type 
spending during the performance year to spending during the baseline 
year, the calculation would be performed prospectively, so that 
performance year expenditures would not be considered. A fully 
prospective trend factor would give participants more certainty about 
what their reconciliation target prices would be, although 
reconciliation target prices as proposed in the proposed rule would 
incorporate both beneficiary-level risk adjustment and an adjustment to 
the prospective normalization factor, as applicable (as described in 
section X.A.3.d.(4) of the preamble of this final rule).
    Given our proposal in the proposed rule to use a prospective trend 
factor to predict future spending for the purposes of pricing 
stability, we considered but did not propose to include update factors 
that take into account Medicare payment systems updates for each fiscal 
year (FY) or CY and could improve pricing accuracy. Specifically, we 
considered a methodology similar to BPCI Advanced and Performance Years 
1-5 of CJR, where preliminary target prices are updated to reflect the 
most current FY and CY payment system rates using setting-specific 
update factors for payment system, including the IPPS, the Outpatient 
Prospective Payment System (OPPS), the Physician Fee Schedule (PFS), 
the Home Health Prospective Payment System (HH PPS), the Medicare 
Economic Index (MEI), the IRF Prospective Payment System (PPS), and the 
SNF PPS. However, updating target prices using setting-specific update 
factors would result in TEAM participants receiving more than one 
target price for a MS-DRG/HCPCS episode type in a performance year 
which can increase complexity. Further, while including update factors 
would generally increase target prices, it also decreases pricing 
stability since the preliminary target price would change due to the 
application of update factors. We sought comment on whether we should 
include setting-specific update factors in preliminary target prices to 
improve pricing accuracy, or if there are other ways, we should 
consider updating target prices that would reflect Medicare payment 
system updates.
    We considered, but did not propose, an alternative proposal to 
adjust the preliminary target price at reconciliation based on the 
observed trend during the performance year. We considered proposing to 
limit the magnitude of this retrospective trend adjustment by applying 
guardrails, similar to what we currently do in BPCI Advanced. 
Specifically, if the trend factor calculated at reconciliation based on 
performance year expenditures differed from the prospective trend 
factor by up to 5 percent, we considered, but did not 
propose, to adjust the preliminary target price at reconciliation by 
applying the final trend factor to the baseline target price. We 
considered, but did not propose, only adjusting the preliminary target 
price by 5 percent if the final trend factor differed from 
the prospective trend factor by more than 5 percent. In 
other words, that the maximum upward trend adjustment we would make to 
the preliminary target price at reconciliation would be 5 percent, and 
the maximum downward trend adjustment we would make to the preliminary 
target price at reconciliation would be -5 percent. We also considered 
lower percentages for the guardrails, including 3 percent and 1 
percent, given the BPCI Advanced model's experience initially having a 
higher percentage maximum adjustment and then reducing the percentage 
in later years of the model. We considered these alternative proposals 
because we believed that these guardrails would help us achieve a 
balance of providing predictability to participants and mitigating the 
risk that target prices would be disproportionately impacted by 
performance year shifts in spending patterns that could not have been 
foreseen.
    We also requested comment on alternative ways to calculate the 
trend factor to both increase accuracy of prospective target prices and 
to mitigate the ratchet effect. We recognized that spending on some 
episodes, such as Lower Extremity Joint Replacement, has been 
decreasing over time and may reach a point where further decreases in 
spending could compromise quality and patient safety. While in the 
early years of CJR, our target prices failed to account for decreasing 
trends in spending for LEJR nationwide and thus were overinflated, that 
downward trend has since stabilized, suggesting that there may no 
longer be as much of an opportunity for participant savings as there 
was in the early years of CJR. In the case of an episode where spending 
has been decreasing but has since stabilized, trending the target price 
forward based on previous years' trends could result in target prices 
that are too low. In such a scenario, a retrospective trend adjustment 
might actually result in a higher target price than a fully prospective 
trend. We sought comment on ways to construct a trend factor that can 
result in a reasonable target price regardless of whether spending has 
been increasing, decreasing, or stabilizing.
    For example, in the CY 2023 Physician Fee Schedule final rule, CMS 
finalized a policy to include a prospectively-determined component, the 
Accountable Care Prospective Trend (ACPT), in the factor used to update 
the benchmark to the performance year for accountable care organization 
(ACO) agreement periods starting on or after January 1, 2024 (see 87 FR 
69881 to 69898) to help address the ratchet effect

[[Page 69757]]

by insulating a portion of the update factor from the impact that ACO 
savings can have on retrospective national and regional spending 
trends. This type of trend is referred to as an administrative trend 
because it is not directly linked to ongoing observed FFS spending. 
However, we recognized that there may be some concerns using 
administrative trends for episode-based payment models, as opposed to 
population-based payment models like ACOs, because administrative 
trends may not capture episode-specific trends, which could lead to 
higher or lower preliminary target prices when compared to actual 
performance year spending. We requested comment on this type of 
trending approach, or other potential ways to increase the accuracy of 
prospective target prices and mitigate the ratchet effect when we 
update TEAM target prices.
    We sought comment on our proposal at proposed Sec.  512.540(b)(7) 
for calculating and applying a prospective trend factor.
    The following is a summary of the comments received on the trending 
approach for TEAM, and how to include payment system updates and our 
responses to these comments:
    Comment: A couple commenters requested that TEAM include Medicare 
payment system updates in the target prices. A commenter specifically 
expressed concerns that not applying update factors to update prices 
from the baseline year payment rates to the most current payment rates 
can lead to inaccurate target prices, specifically when there are major 
Medicare rate updates not reflected in the historical data.
    Response: We acknowledge the concerns related with not applying 
payment system updates to the target prices. CMS will conduct 
additional analyses to understand the impact of update factors on the 
target price methodology and intends to include policy proposals in 
future notice and comment rulemaking, prior to the implementation of 
TEAM.
    Comment: A couple of commenters suggested testing administrative 
trends in TEAM while another commenter supported the use of regional 
benchmark prices but urged to exercise caution while using Accountable 
Care Prospective Trend or ACPT (that is, administrative trends) because 
it could impact regions where the spending growth is faster than the 
national inflation.
    A few commenters recommended using retrospective trends for TEAM 
similar to the peer group trend (PGT) Factor adjustment used in BPCI 
Advanced. One of the commenters suggested that applying a PGT Factor 
Adjustment would solve the ratcheting effect which specifically impacts 
the episodes for major joint replacement of the lower extremity. 
Another commenter suggested that applying retrospective trends would be 
critical for a mandatory model to ensure greater accuracy of the target 
prices and to reduce the financial stress on the participants.
    Additionally, commenters made some suggestions on the capping for 
retrospective trends. A commenter suggested using an asymmetrical (-2/
+5 percent) cap on the target prices so that the target prices do not 
get lowered substantially in the performance year due to improvements 
in care. Another commenter suggested that upper and lower bounds of 5 
percent are too high and would subject the data to wide variations 
exacerbating the difficulty to trend the data and impede predictions.
    Response: We thank the commenters for their suggestions about 
testing administrative trends for TEAM. CMS continues to believe that 
administrative trends may be more applicable for population-based 
models like ACOs especially because ACOs are likely to have a high 
market penetration at the regional level and thus, the regional trends 
can negatively impact their benchmark prices through strong historical 
performance. Clinical episode-specific trends are more appropriate for 
an episode-based model like TEAM which can capture changes including 
Medicare payment rate updates or behavioral changes specific to the 
episode categories. We agree with the comment that administrative 
trends can have a negative impact on the target prices leading to 
higher or lower preliminary target prices for some clinical episode 
categories which can put both CMS and providers at risk for high 
losses.
    We acknowledge the comments on using PGT Factor Adjustment to solve 
the ratcheting effect and capping for target prices in the performance 
year. For TEAM, we proposed, and are finalizing, regional target prices 
where the participant hospitals' performance will be measured relative 
to their peers and not based on improvement relative to their own 
historical performance. This will mitigate concerns associated with the 
individual ratcheting effect. We acknowledge the concern for some 
clinical episode categories like LEJR which has been tested in both the 
CJR and BPCI Advanced models with a high participation rate. However, 
we disagree that the participating providers have a disadvantage in 
TEAM. CMS analyzed the post-discharge and post-acute care spending 
among providers participating and not participating in CJR and BPCI 
Advanced models and observed that both groups had similar spending 
trends, suggesting that there were opportunities for savings for LEJR 
in the post-discharge period for all providers.
    We also acknowledge the suggestion that implementing retrospective 
trends (that is, adjusting the preliminary target price at 
reconciliation based on the observed trend during the performance 
year), will lead to target prices that more accurately reflect spending 
patterns during the performance period. We agree that retrospective 
trends will account for significant changes in the spending patterns in 
the performance year that are not accounted for in the baseline and 
make the target prices more comparable to the performance year 
spending. As discussed in the proposed rule, a retrospective trend 
adjustment might actually result in a higher target price than a fully 
prospective trend if episode spending shows a decrease in the baseline 
but has since stabilized, since trending the target price forward based 
on previous years' trends could result in target prices that are too 
low. An internal analysis simulating reconciliation as proposed in TEAM 
demonstrated that more TEAM participants would owe CMS a repayment 
amount than would earn a reconciliation payment amount due to 
prospective trends resulting in lower target prices than would have 
been calculated with a retrospective trend. The analysis also simulated 
different types of trend construction, including fully prospective, as 
stated in the proposed rule for TEAM, fully retrospective, and then 
capped at varying percentages, including 1 percent, 3 percent, and 5 
percent. Results were least favorable for TEAM participants with a 
prospective trend and most favorable for TEAM participants with a 
retrospective trend, with the capped trends falling in between. We note 
that this simulation did not include behavioral effects, nor does it 
represent the same baseline period or performance years of TEAM. 
However, it does highlight the increased risk the TEAM participant may 
be exposed to when relying on a fully prospective trend that cannot 
capture unanticipated spending changes or may not be able to predict 
spending that is tapering off.
    Given these findings, and commenters' concerns regarding too much 
financial risk in TEAM, we are finalizing our trend proposal with 
slight modifications to include a 3 percent

[[Page 69758]]

capped retrospective trend factor adjustment applied during 
reconciliation to construct reconciliation target prices. While the 
prospective trend calculates average regional episode spending that 
occurred during the baseline period, the retrospective trend factor 
calculates realized average regional episode spending that occurred 
during the performance year. Thus, the retrospective trend factor 
adjustment will be calculated by taking the average regional capped 
performance year episode spending for each MS-DRG/HCPCS episode type 
divided by the average regional capped baseline period episode spending 
for each MS-DRG/HCPCS episode type. The retrospective trend factor 
adjustment will be capped at 3 percent, meaning that the maximum 
difference between the prospective trend and retrospective trend is 3 
percent. We believe including a 3 percent capped retrospective trend 
adjustment will protect TEAM participants and CMS from excessive risk, 
while balancing predictability and stability for TEAM participants. 
Table X.A.-10 is an example of how the capped retrospective trend 
factor adjustment would be applied.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU24.309

BILLING CODE 4120-01-C
    We note that caps on the performance year target prices protect 
both CMS and TEAM participants from significant changes in the spending 
patterns between the baseline year and performance year. We agree that 
lowering the cap would increase the predictability of target prices and 
drive improvements. However, applying an asymmetrical retrospective 
trend factor adjustment in the performance year would put the TEAM 
participants or CMS at a high risk for loss. Thus, we think applying a 
symmetrical capping for the retrospective trend factor adjustment in 
the performance year at 3 percent provides both protection 
and predictability to TEAM participants.
    After consideration of the public comments we received, we are 
slightly modifying our trending approach at Sec.  512.545(f) to apply a 
retrospective trend factor adjustment to the reconciliation target 
prices. The retrospective trend factor adjustment will be calculated by 
taking the average regional capped performance year episode spending 
for each MS-DRG/HCPCS episode type divided by the average regional 
capped baseline period episode spending for each MS-DRG/HCPCS episode 
type. The retrospective trend factor adjustment will be capped at 3 
percent, meaning that the maximum difference between the prospective 
trend and retrospective trend is 3 percent.
(g) Discount Factor
    In addition to the prospective trend factor, at proposed Sec.  
512.540(c) we proposed to apply a discount factor to the benchmark 
price when calculating preliminary target prices. Specifically, we 
proposed in the proposed rule to apply a 3 percent discount factor to 
the benchmark price to serve as Medicare's portion of reduced 
expenditures from the episode. This discount would be similar to the 3 
percent discount factor applied to target prices in the CJR model and 
to surgical episode target prices in BPCI Advanced.
    However, we recognize that there may be different levels of 
opportunity for savings within different episode types. For instance, 
in BPCI Advanced, in recognition of the fact that participants were 
generally able to achieve greater savings in surgical, as opposed to 
medical, episodes, we incorporated a 3 percent discount into surgical 
episode target prices and a 2 percent discount into medical episode 
target prices. Given differential opportunities for

[[Page 69759]]

savings across the different types of proposed episode categories, as 
well as our intention to incorporate additional episodes in future 
years of TEAM, we considered but did not propose varying the Medicare 
discount based on episode category. Specifically, we considered but did 
not propose lower discount factors including 2 percent, 1 percent, 0.5 
percent, or no discount factor. We also considered but did not propose 
linking the discount to variability in episode spending during the 
baseline, such that an episode with minimal variability in baseline 
spending might have a lower discount percentage, given that lower 
variability in baseline spending might indicate fewer opportunities for 
savings in that episode, as opposed to episodes with greater spending 
variability. We also considered but did not propose lower discount 
factors, including 2 percent, 1 percent, 0.5 percent, or no discount 
factor, for specific types of TEAM participants. For example, we 
considered no discount factor for safety net hospitals given the 
proportion of underserved beneficiaries they care for and many of these 
safety net hospitals may be new to episode-based payment participation. 
Although we did not propose these alternatives in the proposed rule, we 
sought comment on whether we should include any of these alternatives 
in TEAM and also sought comment on different ways to adjust the 
Medicare discount based on differential savings opportunities for 
different episode types.
    We sought comment on our proposal at proposed Sec.  512.540(c) to 
apply a 3 percent discount factor to preliminary episode target prices 
for episodes.
    The following is a summary of the public comments received on this 
proposal and our responses to those comments:
    Comment: Numerous commenters expressed concern with the 3 percent 
discount rate for TEAM episodes and requested the discount rate be 
lower or eliminated. Many commenters recommended using different 
discount factors by episode category. Some commenters suggested 
applying discount factors only to post-acute care spending. Many 
commenters cited reasons for concern that were related to the shortened 
episode window of 30 days compared to the 90-day episode windows in the 
other episode-based payment models, differences between hospitals 
within certain regions such as high performers or hospitals with 
previous experience in value based care such as CJR or BPCI Advanced, 
larger portions of the episode being related to the surgical procedure 
rather than post-acute care, threats to quality of care, and that the 
discount rate would harm hospital operating margins and ability to 
invest in infrastructure.
    Response: We thank commenters for sharing their concern regarding 
the 3 percent discount rate. We acknowledge that the shorter episode 
length compared to previous and current models that have used a 3 
percent discount factor coupled with a 90-day post-discharge episode 
length (post-discharge period), means there is less spending captured 
in a 30-day post-discharge period, resulting in less potential for 
savings opportunities. However, target prices will also be calculated 
based on the shorter 30-post-discharge period and should taper target 
prices relative to 90-day post-discharge period.
    We disagree with commenters that previous models have eliminated 
potential reductions in spending for TEAM participants. Participants in 
CJR and BPCI Advanced have continued to achieve reductions in spending 
without overall reductions in quality over the years. As noted in 
section X.A.3.d.(3)(b), we also do not agree that hospitals with past 
experience in episode-based payment models presently have a cost 
advantage or that hospitals in regions with high BPCI Advanced or CJR 
penetration have a disadvantage in TEAM. In designing TEAM, we examined 
distributions of spending for the proposed TEAM episodes ``triggered'' 
between January 2019 to June 2023 stratified by past participation in 
episode-based models (CJR participation in 2022 or 2023 for LEJR, or 
BPCI Advanced participation in 2022 or 2023 for all TEAM episode 
types). We found that episode spending distributions were similar for 
participants in episode-based models and for non-participants. For 
CABG, SHFFT, Spinal Fusion, and Major Bowel Procedure, we think this 
result may be driven by participants with higher BPCI Advanced target 
prices being more likely to remain in the model in the later years of 
BPCI Advanced. For LEJR, the explanation is less clear. Furthermore, 
TEAM will oversample mandatory core-based statistical areas (CBSAs) 
with safety net hospitals and low past exposure to bundled payment 
models, capturing more hospitals that may not have been influenced to 
spending reduction shifts in their markets, which may present greater 
opportunity to find efficiencies and savings. Therefore, we believe 
that TEAM participants will have potential for reductions to episode 
spending without reductions in quality of care.
    We disagree that high performing, or more efficient, hospitals in 
certain regions will have less room to achieve further reductions in 
spending to meet their target price after the discount rate is factored 
in. This is because target prices are set regionally, high performing 
hospitals may be well-positioned to meet their target prices for 
episodes since less efficient hospitals in a region will tend to drag 
regional prices higher.
    We disagree that the discount factor, if set at a reasonable 
percentage, will disincentivize quality of care or investment in the 
infrastructure needed to succeed in TEAM. The discount factor is 
intended to reflect Medicare's potential savings from TEAM, and once 
applied to benchmark prices to create a target price, may help to 
motivate providers to closely manage beneficiaries to improve their 
quality care and care transitions to avoid readmissions and unnecessary 
spending. However, we recognize that a discount factor that is set too 
high, may create an unreasonable target price, and limit the TEAM 
participant's ability to earn a reconciliation payment amount, even if 
they were able to reduce episode spending and provide high-quality 
care. Further, we acknowledge that a shorter episode length, that 
encompasses the anchor hospitalization or anchor procedure plus the 30-
day post-discharge period results in larger portions of the episode 
spending being captured by the anchor hospitalization or anchor 
procedure and less episode spending captured during the 30-day post-
discharge period. Current models like the CJR and BPCI Advanced model, 
have demonstrated that most participants were able to achieve savings 
primarily through reductions in post-acute care spending. Therefore, we 
recognize that a 3 percent discount may be too high for TEAM 
participants for the shorter episode lengths used in TEAM.
    Given commenters concerns, we are persuaded that the discount 
factor in TEAM should be reduced and further took into consideration 
commenters' recommendations applying different discount factors for 
each episode category, as compared to a blanket discount factor where 
all the episode categories receive the same discount factor. We 
disagree with applying a discount factor only to post-acute care 
spending because there may be some episodes where there isn't any post-
acute care spending. Additionally, we want to spur TEAM participants to 
find savings opportunities in other areas, such as reducing 
readmissions, and applying a discount factor to just one

[[Page 69760]]

type of cost in the post-discharge period may not incentivize TEAM 
participants to identify improvements or efficiencies elsewhere. We do 
see value in setting different discount factors based on the episode 
category and their proportion of anchor hospitalization or anchor 
procedure spending, relative to their 30-day post-discharge period 
spending, given BPCI Advanced and CJR evaluation results demonstrating 
most participants achieve savings in post-acute care spending 
reductions.
    We acknowledge certain episode categories may have a higher 
proportion of anchor hospitalization spending compared to other episode 
categories and that in itself may create challenges for TEAM 
participants to reduce spending. Our review of the proportion of anchor 
hospitalization and anchor procedure spending relative to the 30-day 
post-discharge spending identified the CABG and Major Bowel Procedure 
episodes categories had higher anchor hospitalization spending compared 
to LEJR, SHFFT, and Spinal Fusion episode categories. Given these 
differences, we believe a 1.5 percent discount factor for CABG and 
Major Bowel Procedure and a 2 percent discount factor for LEJR, SHFFT, 
and Spinal Fusion, are appropriate discount factors. We are finalizing 
a lower discount factor for CABG and Major Bowel Procedure because we 
recognize that there may be fewer opportunities for savings on these 
episodes as compared to LEJR, SHFFT, and Spinal Fusion. We believe 
these modified discount factors are more in-line with a 30-day post-
discharge period and will allow TEAM participants to reduce spending 
and have opportunities to receive a reconciliation payment amount from 
CMS. Therefore, we will be finalizing these updated discount factors.
    We note that we are cautious to assume that higher post-discharge 
spending necessarily means larger opportunities to reduce spending and 
achieve savings. For example, it may be clinically appropriate to have 
higher post-discharge period spending for a given episode category, 
because beneficiaries in that episode category require more 
institutional post-acute care spending and reducing that could 
compromise quality of care. We will monitor for unintended consequences 
and if warranted, will adjust policies in future notice and comment 
rulemaking.
    Comment: Some commenters believe that the discount rate should be 
reduced or eliminated for safety net hospitals, rural hospitals, or 
hospitals with little to no experience in value-based care.
    Response: We thank commenters for sharing their concern regarding 
safety net hospital and rural hospital participation in TEAM. We 
disagree that safety net hospitals and rural hospitals, as defined in 
section X.A.3.f of the preamble of this final rule, should have a 
different discount rate than other TEAM participants. However, safety 
net hospitals will be insulated from downside risk by being allowed to 
stay in Track 1, if they elect to do so, for the first three years of 
the model, as discussed in section X.A.3.a.(3) of the preamble of this 
final rule. Rural hospitals, and safety net hospitals, may elect to 
participate in Track 2, that has a stop loss/gain limit of 5 percent to limit potential losses in revenue. Furthermore, TEAM 
participants in Track 2 will be subject to Composite Quality Score 
(CQS) adjustment up to 10 percent for positive reconciliation amounts 
and up to 15 percent for negative reconciliation amounts. This will 
also help to insulate rural hospitals and safety net hospitals from 
greater financial risk, while incentivizing cost reductions and 
improvements in quality of care.
    Comment: A few commenters expressed concern that rebasing the 
target prices annually will lead to a ratcheting effect and make the 
discount factor infeasible even with a baseline period of the previous 
three years. A commenter said that heavier weighting on the most recent 
year will exacerbate this effect.
    Response: We disagree with commenters that rebasing the target 
prices annually will make the discount factor unachievable and that the 
three-year baseline period for target prices is inadequate. In the 2021 
CJR 3-Year Extension Final Rule, we finalized a policy to use a 1-year 
baseline period that would move forward every year (with the exception 
of skipping data from 2020 due to COVID-19 irregularities) (86 FR 
23514). In combination with a retrospective market trend factor, using 
1 year of baseline episode spending updated every year meant that the 
target prices would not be inflated as they had been under the initial 
CJR methodology. Moving the baseline period forward every year in TEAM 
like in the CJR extension while using multiple years in the baseline 
period like in the original CJR methodology will allow for both a 
baseline that is not subject to undue volatility and matches any 
changes to spending that may have happened for reasons other than TEAM.
    Comment: A few commenters suggested that either the 30-day episode 
window be extended to 90 days, or the 3 percent discount factor be 
reduced, stating that the 30-day episode window means a greater 
proportion of the episodes are from the surgical procedure and there 
are fewer opportunities for cost reductions.
    Response: We thank the commenters for their suggestions regarding 
the 30-day post-discharge episode length and the 3 percent discount 
factor. While we disagree that the 30-day post-discharge episode length 
should be extended to 90 days, as discussed in section X.A.3.b.(5)(d) 
of the preamble of this final rule, we agree that the shorter episode 
length creates fewer opportunities for spending reductions as a 
proportion of the episode spend in TEAM. As noted earlier, we are 
finalizing a modification to the discount factor that will reduce the 
percentage to 1.5 percent for CABG and Major Bowel Procedure episode 
categories and 2 percent for LEJR, SHFFT, and Spinal Fusion episode 
categories. We believe this updated discount factor paired with the 
shorter episode length will balance commenters concerns about savings 
opportunities and driving spending reductions.
    Comment: A couple of commenters expressed concern that hospitals 
may be prohibited from employing physicians directly and thus do not 
control all aspects of spending related to TEAM episodes. This makes 
the ability of participants to reduce spending in an amount that is 
more than the discount factor, and thus achieving savings, onerous.
    Response: We disagree that hospitals will be unable to achieve 
savings if they do not employ their own physicians. While some 
physicians may not be employed by a TEAM participant as proposed, CMS 
outlines physicians as proposed TEAM collaborators in section 
X.A.3.g.(3) of the preamble of the proposed rule, which includes 
skilled nursing facilities, home health agencies, long-term care 
hospitals, inpatient rehabilitation facilities, physicians, 
nonphysician practitioners, therapists in a private practice, 
comprehensive outpatient rehabilitation facilities, provider or 
suppliers of outpatient therapy services, physician group practices, 
hospitals, critical access hospitals, non-physician provider group 
practices, therapy group practices, and Medicare ACOs.
    Comment: A couple of commenters recommended phasing in the discount 
factor. A commenter suggested a 1 percent discount, or a 2 percent 
discount for the first two years of the model followed by 1 percent, 
thereafter, would better reflect the risk and potential financial 
jeopardy TEAM

[[Page 69761]]

could create from the annual rolling baseline.
    Response: We thank commenters for sharing their concern regarding 
the 3 percent discount rate. We agree with the commenters' suggestion 
to reduce the discount rate and are finalizing the policy to reduce the 
CMS discount to 1.5 percent for CABG and Major Bowel Procedure episode 
categories and 2 percent for LEJR, SHFFT and Spinal Fusion episode 
categories. However, we disagree with the concept that the discount 
rate should be phased in or reduced further after the first two years 
of TEAM. We do not believe phasing in the discount factor is 
appropriate given the opportunity for all TEAM participants to 
participate in Track 1 with no downside risk in the first performance 
year, as discussed in section X.A.3.a.(3) of the preamble of this final 
rule. We also believe that the annual rolling baseline will not be a 
significant risk to TEAM participants. Additionally, we will continue 
to monitor and analyze TEAM Participant performance and target prices 
with respect to an appropriate discount rate and if warranted, would 
propose any policy changes in future notice and comment rulemaking.
    Comment: A commenter described how the 3 percent discount factor 
may be harder to continually reach after inefficiencies are removed.
    Response: We thank the commenter for their suggestion. We agree 
that a 3 percent discount factor, or any discount factor percentage, 
may not be a policy that should remain in perpetuity if inefficiencies 
are removed. However, we believe there are opportunities to reduce 
spending and eliminate inefficiencies given the variation in spending 
we have observed across the different episode categories when looking 
at a national set of hospital spending.
    Comment: A commenter expressed concern that the discount factor is 
onerous for hospitals facing thin margins after changes in the labor 
market and absorption of new Medicaid obligations and that ideally TEAM 
will encourage a positive sum relationship between CMS and hospitals.
    Response: We thank the commenter for sharing their concern 
regarding the 3 percent discount rate. We disagree with the commenter 
that TEAM is onerous for hospitals that have large obligations to 
Medicaid patients. While the model does not include Medicaid patients, 
we believe the care redesign processes that TEAM participants may 
implement can be applied to other populations of patients, encouraging 
greater care transformation and opportunities to improve patient care 
and reducing spending, within and outside of the model. We agree with 
the commenter's suggestion to reduce the discount rate and are making 
modifications to reduce the discount rate to be 1.5 percent for CABG 
and Major Bowel Procedure episode categories and 2 percent discount 
factor for LEJR, SHFFT, and Spinal Fusion episode categories to grant 
hospitals more flexibility to meet their target prices for TEAM.
    Comment: A couple of commenters had concerns that the 3 percent 
discount factor can impact post-acute care discharge destinations. A 
commenter is concerned that the 30-day episode window and 3 percent 
discount rate will disincentivize discharge to IRF even when it is the 
optimal post-acute care setting for a patient. Another commenter cited 
concerns regarding patient freedom to select a post-acute care provider 
of their choice.
    Response: We thank the commenter for sharing their concern 
regarding patient care and the discount rate. TEAM participants may not 
limit access to medically necessary items and services, nor limit the 
TEAM beneficiary's choice of Medicare providers and suppliers, 
including post-acute care providers such as long-term care hospitals 
and inpatient rehabilitation facilities. This means that TEAM 
beneficiaries are not precluded from seeking care from providers or 
suppliers who do not participate in TEAM and a TEAM participant is 
prohibited from limiting beneficiaries to a preferred or recommended 
providers list that is not compliant with restrictions existing under 
current statutes and regulations. We will monitor beneficiary care, as 
discussed in section X.A.3.i of the preamble of this final rule, to 
ensure beneficiary freedom of choice is not compromised. Monitoring 
CMS's efforts will aim to ensure steering or other efforts to limit 
beneficiary access or move beneficiaries out of the model are not 
occurring. We also note the breadth of monitoring activities, which 
includes audits, CMS monitoring of utilization and outcomes within the 
model, and the availability of Quality Improvement Organization (QIOs) 
and 1-800-MEDICARE for reporting beneficiary concerns, that can help us 
identify any beneficiary access or freedom of choice concerns in TEAM.
    We also note that target prices are set in the aggregate by episode 
category, so individual patients can still be cared for as best meets 
their needs. Furthermore, target prices will be risk-adjusted, as 
discussed in section X.A.3.d.(4), to account for beneficiary-level risk 
adjusters that help to mitigate costs that are out of the control of 
the provider. Finally, TEAM participants' reconciliation amounts will 
be adjusted by their CQS to drive quality of care improvements. 
Therefore, we disagree that TEAM will disincentivize high quality care.
    Comment: A commenter stated that the discount rate is difficult to 
achieve for hospitals with a history of managing population health 
spending through participating in CMS ACOs due to diminishing returns.
    Response: We disagree that hospitals with previous experience in 
CMS ACOs will be unable to meet the target price after the discount 
factor due to past reductions in episode spending. Target prices are 
set regionally; therefore, TEAM participants with previous experience 
in bundled payment models and value-based care may be better situated 
to achieve reduce spending if they were successful in other value-based 
care initiatives.
    Comment: A commenter suggested that discount factors should be set 
by provider spending variation. Providers with low variation could be 
given a low discount factor, while providers with more variation could 
be given a slightly higher discount factor.
    Response: We thank the commenter for their suggestion of different 
discount factors by variation in spending. We disagree with varying 
discount factors according to episode variation. We believe that 
regionally set target prices, normalization and trend factor 
adjustments, risk-adjustment, and social risk-adjustment will more 
directly address for differences in spending variation.
    After consideration of the public comments we received, we are 
finalizing the discount factor provision with slight modification at 
Sec.  512.540(c) by incorporating a discount factor of 1.5 percent for 
CABG and Major Bowel episode categories and a discount factor of 2 
percent for LEJR, SHFFT, and Spinal Fusion episode categories.
(h) Special Considerations for Low Volume Hospitals
    In both CJR and BPCI Advanced, we recognized that hospitals that 
perform a number of episodes below a certain volume threshold would 
have insufficient volume to receive a target price based on their own 
baseline data. In the 2015 CJR Final Rule (80 FR 73285), we 
acknowledged that such hospitals might not find it in their financial 
interests to make systemic care redesigns or engage in an active way 
with the CJR model. At 80 FR 73292, we acknowledged commenter concerns 
about low volume providers, including

[[Page 69762]]

but not limited to, observations that low volume providers could be 
less proficient in taking care of LEJR patients in an efficient and 
cost-effective manner, more financially vulnerable with fewer resources 
to respond to the financial incentives of the model, and 
disproportionately impacted by high-cost outlier cases. Despite these 
potential challenges, we stated that the inclusion of low volume 
hospitals in CJR was consistent with the goal of evaluating the impact 
of bundled payment and care redesign across a broad spectrum of 
hospitals with varying levels of infrastructure, care redesign 
experience, market position, and other considerations and circumstances 
(80 FR 73292).
    In CJR, we set the low volume threshold as fewer than 20 CJR 
episodes across the 3-year baseline years of 2012-2014. Low volume 
hospitals received target prices based on 100 percent regional data, 
rather than a blended target price that incorporated their participant-
specific data, because a target price based on limited data is less 
likely to be accurate and reliable. These hospitals were also subject 
to the lower stop-loss limits that we offered to rural hospitals, in 
recognition of the fact that they might be less prepared to take on 
downside risk than hospitals with higher episode volume. In the CJR 
2017 Final Rule that reduced the number of mandatory metropolitan 
statistical areas (MSAs), low volume hospitals were among the types of 
hospitals that were required to opt in if they wanted to remain in the 
model (82 FR 57072). In the 2020 Final Rule, we removed the remaining 
low volume hospitals from the CJR extension when we limited the CJR 
participant hospital definition to those hospitals that had been 
mandatory participants throughout the model (86 FR 23497).
    In BPCI Advanced, our low volume threshold policy was to not 
provide a target price for a given clinical episode category if 
performed at a hospital that did not meet the 41 clinical episode 
minimum volume threshold during the 4-year baseline period. This meant 
that no BPCI Advanced episodes would be triggered for that particular 
clinical episode category during the applicable performance period at 
that hospital. However, participants could continue to trigger other 
clinical episode categories for which they had enrolled and for which 
there was sufficient baseline volume. Additionally, clinical episodes 
that occurred at the hospital during the performance period, though not 
triggering a BPCI Advanced episode, would count toward the low volume 
threshold when that year became part of the baseline. Therefore, as the 
baseline shifted forward each year, bringing a more recent year into 
the baseline and dropping the oldest year, a hospital could potentially 
meet the volume threshold and receive a target price for the clinical 
episode category for a subsequent performance period.
    In TEAM, we stated in the proposed rule that there will be a low 
volume threshold for purposes of reconciliation. This low volume 
threshold would apply to total episodes across all episode categories 
in the baseline period for a given PY. If a TEAM Participant did not 
meet the proposed low volume threshold of at least 31 total episodes in 
the baseline period for PY 1, CMS would still reconcile their episodes, 
but the TEAM participant would be subject to the Track 1 stop-loss and 
stop-gain limits for PY 1. If a TEAM Participant did not meet the 
proposed low volume threshold of at least 31 total episodes in the 
applicable baseline periods for PYs 2-5, the TEAM Participant would be 
subject to the Track 2 stop-loss and stop-gain limits for PYs 2-5, as 
described in section X.A.3.d.(5)(h) of the preamble of this final rule.
    We considered, but did not propose, including alternative 
approaches to a minimum episode volume threshold in TEAM, including an 
approach similar to BPCI Advanced, where if a TEAM participant did not 
meet the 31 episode minimum volume threshold for a given episode 
category in the 3-year baseline period, the TEAM participant would not 
be held accountable for that episode category for the performance year 
that aligned with the 3-year baseline period. We also considered 
different minimum volume thresholds in the baseline period, including 
51, 21, and 11. However, we are concerned that imposing a minimum 
volume threshold that removes TEAM participant accountability may 
restrict the number of hospitals eligible to participate in TEAM and 
limit beneficiary access to the benefits of value-based, coordinated 
care. We also considered, but did not propose, implementing minimum 
episode volume thresholds during the performance year. Specifically, we 
considered, but did not propose, not holding TEAM participants 
accountable for a given episode category if they initiated less than 11 
or 6 episodes in a given episode category or less than 31 or 21 total 
episodes across episode categories in a performance year. However, we 
are concerned that including minimum episode volume thresholds during 
the performance year may introduce program integrity issues where TEAM 
participants steer TEAM beneficiaries to other providers to be below 
the threshold and not be accountable for episodes in TEAM. We sought 
comment on whether TEAM should consider implementing the alternatives 
to the minimum volume thresholds for either the 3-year baseline period 
or the performance year.
    We sought comment on our proposal at proposed Sec.  512.550(e)(3) 
for setting and applying the low volume threshold at reconciliation.
    The following is a summary of the public comments received on the 
low volume hospital proposal and our responses to those comments:
    Comment: Many commenters stated that practices that do not meet the 
low volume threshold should not be included in model reconciliation for 
the episode categories that do not meet the low volume threshold. Many 
commenters expressed concern that the low volume threshold placing TEAM 
participants in Track 2 is insufficient to protect low volume 
providers.
    Response: We thank commenters for their concern regarding the 
inclusion of low volume TEAM participants in Track 2 model 
participation. We will not be finalizing this low volume threshold and 
will propose alternatives in future notice and comment rulemaking prior 
to the model start date.
    Comment: Many commenters stated that the low volume threshold was 
set too low and noted that the threshold for BPCI Advanced and CJR were 
41 episodes per episode category for BPCI Advanced and typically an 
average of 10 episodes per baseline year. TEAM, by contrast, is set at 
10 episodes per year for all episode types. Practices could meet the 
requirement by having most episodes in one episode type and a few in 
others. As a result, providers could be subject to episode variation. 
Many commenters stated that using a low volume threshold per episode 
category would avoid this issue. Some other commenters stated the BPCI 
Advanced threshold of 41 episodes by episode category, 50 episodes by 
episode category, or 100 episodes total should be used.
    Response: We thank commenters for their concern regarding the low 
volume threshold. We understand that this low volume threshold could 
create difficulties for TEAM participants. We will not be finalizing 
this low volume threshold and will propose alternatives in future 
notice and comment rulemaking prior to the model start date.
    Comment: Some commenters stated that TEAM participants should be 
placed in Track 1 of the model, or have downside risk waived, if they 
are classified as a low volume hospital.

[[Page 69763]]

    Response: We thank the commenters for their concern regarding 
downside risk in TEAM for low volume hospitals. We will not be 
finalizing this low volume threshold and will propose alternatives in 
future notice and comment rulemaking prior to the model start date.
    Comment: A couple of commenters stated that low volume and rural 
hospitals are poor candidates for bundled payment models such as TEAM. 
Low volume and rural hospitals have difficulties recruiting, training, 
and maintaining the staff and clinicians required for TEAM goals. 
Additionally, these hospitals have less experience in these types of 
models, and lack the robust networks required by them.
    Response: We thank these commenters for their concern regarding the 
feasibility of including low volume and rural hospitals in TEAM. We 
disagree that rural hospitals are unable to meet the requirements of 
TEAM and believe rural hospitals can succeed in implementation. To 
ameliorate some issues, TEAM will allow rural hospitals, as defined in 
section X.A.3.f of the preamble of this final rule, the ability to 
participate in Track 1 for the first performance year with no downside 
risk and Track 2 for performance years 2 through 5 with a 5 percent 
stop-gain and stop-loss limit. Also, as indicated in section 
X.A.3.a.(1) of the preamble of this final rule, we are providing TEAM 
participants with approximately 17 months to prepare before the model 
start date. We believe this time period will allow TEAM participants, 
including rural hospitals, the opportunity to develop care redesign 
interventions and review baseline period data, pursuant to a request 
and a TEAM data sharing agreement, as discussed in section X.A.3.k of 
the preamble of this final rule. However, we agree our proposed low 
volume hospital policy may not be sufficient to protect low volume 
hospitals, including rural hospitals from unnecessary financial risk. 
Therefore, we will not be finalizing this low volume threshold and will 
propose alternatives in future notice and comment rulemaking prior to 
the model start date.
    Comment: A couple of commenters stated that the proposed low volume 
threshold could result in outlier episodes skewing the results without 
statistical significance. A low volume threshold should account for 
natural variation.
    Response: We thank the commenters for their concern regarding 
outliers and variation in low volume hospitals. We will not be 
finalizing this low volume threshold and will propose alternatives in 
future notice and comment rulemaking prior to the model start date.
    Comment: A commenter stated that CMS should seek more feedback on 
TEAM burdens on low volume hospitals before future implementation and 
finalizing a rule.
    Response: We thank the commenter for their concern regarding TEAM 
burdens on low volume hospitals. We will not be finalizing this low 
volume threshold and will propose alternatives in future notice and 
comment rulemaking prior to the model start date.
    After consideration of the public comments we received, we will not 
be finalizing a policy on low volume hospitals. Accordingly, we are 
modifying regulatory text in section Sec.  512.550 (e)(3) to remove 
references to a low volume threshold.
(i) Preliminary Target Prices
    We stated in the proposed rule that CMS would provide preliminary 
target prices to TEAM participants prior to the start of each 
performance year. For instance, since the earliest episodes for a given 
performance year would end on January 1, and most of these episodes 
would have been initiated by an anchor hospitalization or anchor 
procedure that occurred near the end of November or the beginning of 
December of the previous calendar year, we proposed in the proposed 
rule to provide preliminary target prices to the TEAM participant by 
the end of November prior to each performance year. We stated in the 
proposed rule that preliminary target prices would be based on regional 
episode spending during the baseline period. TEAM participants would 
receive the preliminary target prices for each MS-DRG/HCPCS episode 
type that corresponded to their region. In the proposed rule, we 
proposed that these preliminary target prices would incorporate a 
prospective trend factor (as described in section X.A.3.d.(3)(f) of the 
preamble of this final rule) and a discount factor (as described in 
section X.A.3.d.(3)(g) of the preamble of this final rule), as well as 
a prospective normalization factor (as described in section X.A.3.d.(4) 
of the preamble of this final rule) that would be subject to limited 
adjustment at reconciliation (as described in section X.A.3.d.(5)(h) of 
the preamble of this final rule).
(4) Risk Adjustment and Normalization
    In the original CJR methodology, we first proposed that risk 
adjustment be limited to providing separate target prices for episodes 
initiated by MS-DRG 469 versus MS-DRG 470, because MS-DRGs under the 
Inpatient Prospective Payment System (IPPS) are designed to account for 
some of the clinical and resource variations that exist and that impact 
hospitals' costs of providing care (80 FR 73338). In response to 
comments requesting further risk adjustment, in the 2015 CJR Final Rule 
we finalized a policy to risk adjust target prices based on the 
presence of hip fractures in order to capture a significant amount of 
patient-driven episode expenditure variation (80 FR 73339). As a 
result, we provided four separate target prices to participant 
hospitals based on MS-DRG 469 versus MS-DRG 470, and presence versus 
absence of a primary hip fracture. The impact of hip fractures on 
inpatient costs associated with a hip replacement was subsequently 
acknowledged by CMS' decision to create two new MS-DRGs (521 and 522) 
for hip replacements in the presence of a primary hip fracture (85 FR 
58432). We incorporated these new MS-DRGs into the CJR model episode 
definition as of October 1, 2020, via the November 2020 Interim Final 
Rule with Comment (IFC) (85 FR 71170).
    In the 2021 CJR 3-Year extension Final Rule, we acknowledged the 
need for further risk adjustment to account for beneficiary-level 
factors that tend to impact spending in a way that is beyond the 
control of the provider. We introduced age bracket (less than 65 years, 
65 to 74 years, 75 to 84 years, and 85 years or more), CJR Hierarchical 
Condition Category (HCC) count (zero, one, two, three, and four or 
more), and dual eligibility (receiving both full Medicare and Medicaid 
benefits) as beneficiary-level risk adjustment factors that would be 
applied to each episode at reconciliation. The definition of these risk 
adjustment variables, and our reasoning for incorporating them into the 
risk adjustment methodology, is described in detail at 86 FR 23523.
    The coefficients for the risk adjustment variables in the CJR 
extension were calculated prospectively, prior to the beginning of each 
performance year, using a linear regression model. As we stated at 86 
FR 23524, this regression model approach would allow us to estimate the 
impact of each risk adjustment variable on the episode cost of an 
average beneficiary, based on typical spending patterns for a 
nationwide sample of beneficiaries with a given number of CMS-HCC 
conditions, within a given age bracket, and with dual eligibility or 
non-dual eligibility status. We used an exponential model to account 
for the fact that CJR episode costs are not normally distributed. A 
detailed description of the regression model begins at 86 FR 23524.

[[Page 69764]]

    At reconciliation, after applying the high-cost episode cap to 
remove outliers, the risk adjustment coefficients for the three risk 
adjustment variables were applied to the episode-level target price 
based on the applicable episode region and MS-DRG. However, since age, 
CJR HCC count, and dual eligibility status are inherently included in 
the regional target price, since regions with beneficiaries who are 
older, more medically complex, and socioeconomically disadvantaged tend 
to have higher average episode costs, we applied a normalization factor 
to remove the overall impact of adjusting for age, CJR HCC count, and 
dual eligibility on the national average target price, as described at 
86 FR 23527.
    By contrast, BPCI Advanced has used a more complex risk adjustment 
model that includes many more risk adjustment coefficients, including 
both patient and provider characteristics. Categories of patient 
characteristics include (but are not limited to): HCCs (individual 
flags, interactions, and counts), recent resource use, and 
demographics. Provider characteristics, which are used to group 
hospitals into peer groups, include bed size, rural vs. urban, safety 
net vs. non-safety net, and whether or not the participant is a major 
teaching hospital. (We note that the term ``provider characteristics'' 
and the related term ``provider-level risk adjusters'' in BPCI Advanced 
referred to characteristics of the hospital where the patient was 
hospitalized or received the procedure, regardless of whether the BPCI 
Advanced participant was a PGP or a hospital. For increased clarity, 
since hospitals will be the participants, we will use the terms 
``hospital characteristics'' and ``hospital-level risk adjusters'' for 
these same risk adjusters in TEAM.). The first stage of the BPCI 
Advanced risk adjustment methodology uses a compound log-normal model 
in order to account for the substantial right skew of the distribution 
of episode costs. This means that it combines two log-normal 
distributions in order to capture costs associated with both low-cost 
episodes (which are the majority of episodes) and very high-cost 
episodes (which are fewer in number but exert a strong influence on 
spending averages). However, participants have found the risk 
adjustment model difficult to interpret, particularly since is it is 
not widely used in other research or healthcare models.
    In an effort to simplify the risk adjustment methodology for TEAM 
and allow participants to more easily calculate an episode level 
estimated target price, we proposed in the proposed rule to base our 
methodology on the CJR extension methodology, with a few key 
differences. Rather than calculate one national set of risk adjusters 
across all MS-DRGs for a given episode category, we stated in the 
proposed rule we would calculate risk adjustment coefficients at the 
MS-DRG/HCPCS episode type level. We considered, but did not propose, 
calculating risk adjustment at the MS-DRG/HCPCS episode type/region 
level. However, we believed that, when further subdivided into regions, 
the low volume of episodes for certain MS-DRG/HCPCS episode types would 
be insufficient to create accurate and reliable risk adjustment 
multipliers.
    In the proposed rule, we proposed to use the same age bracket risk 
adjustment variable (less than 65 years, 65 to less than 75 years, 75 
to less than 85 years, and 85 years or more) that we use in the CJR 
extension, based on the participant's age on the first day of the 
episode, as determined through Medicare enrollment data. We also 
proposed in the proposed rule to use an HCC count risk adjustment 
variable, but we to calculate it differently than the CJR HCC count 
risk adjustment variable. For this risk adjustment variable, which we 
would call the TEAM HCC count, we stated in the proposed rule we would 
conduct a 90-day lookback for each beneficiary, beginning with the day 
prior to the anchor hospitalization or anchor procedure. We would use 
the beneficiary's Medicare FFS claims from that 90-day lookback period 
to determine which HCC flags the beneficiary is assigned and create a 
count of those HCC flags. This methodology would be consistent with 
BPCI Advanced and would represent a more uniform way of measuring 
clinical complexity across beneficiaries, as opposed to using the 
annual HCC file that is used in CJR. It would also reduce the incentive 
for increased coding intensity at the time of the initiating procedure.
    In the proposed rule, we proposed to use an expanded risk 
adjustment variable that accounts for multiple potential markers of 
beneficiary social risk. Although it would function as a single, binary 
(yes = 1 or no = 0) variable in our risk adjustment model, the variable 
would represent the union of three different potential markers of 
beneficiary social risk. The first would be full Medicare/Medicaid dual 
eligibility status, which is currently used in both CJR and BPCI 
Advanced. Additionally, we would incorporate two additional elements to 
the beneficiary social risk adjustment variable. We stated in the 
proposed rule that beneficiaries would also be assigned the value of 
yes = 1 for the social risk adjustment variable if they either fall 
into a state or national Area Deprivation Index (ADI) percentile beyond 
a certain threshold, or if they qualify for the Medicare Part D Low 
Income Subsidy. The beneficiary would be assigned a value of yes = 1 on 
this single, binary social risk variable if one or more of these three 
indicators of social risk applied to the beneficiary. In the proposed 
rule, we proposed to use a threshold of the 80th percentile for the 
national ADI and the 8th decile for the state ADI. Across other CMS 
Innovation Center models, as well as peer reviewed publications, and we 
did not find a consensus on a specific threshold that is universally 
used. For example, the Making Care Primary Model uses 75th percentile 
for the national ADI and in existing literature, some papers use a 
continuous measure, and some use a 75 percent, an 80 percent, or 85 
percent cut-off.929 930 931 932 933 Therefore, we feel that 
an 80 percent threshold is comparable to other risk adjustment 
methodologies. We sought comment on whether there are different 
thresholds for national and state ADI that we should consider. Lastly, 
we proposed in the proposed rule to enforce sign restrictions to avoid 
negative coefficients for beneficiary social risk adjustment. In other 
words, the adjustment to the preliminary or reconciliation target 
prices would only happen if the coefficient on the beneficiary social 
risk adjustment variable is positive. We believed enforcing sign 
restrictions would more accurately reflect episode spending for 
underserved beneficiaries who may

[[Page 69765]]

experience access and underutilization issues. The beneficiary social 
risk variable proposed in the proposed rule and our reasons for 
choosing each component are described in detail in section X.A.3.f of 
the preamble of this final rule.
---------------------------------------------------------------------------

    \929\ Kind, A., Jencks, S., Brock, J. E., Yu, M., Bartels, C. 
M., Ehlenbach, W. J., Greenberg, C., & Smith, M. (2014). 
Neighborhood socioeconomic disadvantage and 30-Day 
rehospitalization. Annals of Internal Medicine, 161(11), 765. 
https://doi.org/10.7326/m13-2946.
    \930\ D[iacute]az, A., Lindau, S. T., Obeng[hyphen]Gyasi, S., 
Dimick, J. B., Scott, J. W., & Ibrahim, A. M. (2023). Association of 
hospital quality and neighborhood deprivation with mortality after 
inpatient surgery among Medicare beneficiaries. JAMA Network Open, 
6(1), e2253620. https://doi.org/10.1001/jamanetworkopen.2022.53620.
    \931\ Bose, S., Dun, C., Zhang, G. Q., Walsh, C., Makary, M. A., 
& Hicks, C. W. (2022). Medicare beneficiaries in disadvantaged 
neighborhoods increased telemedicine use during the COVID-19 
pandemic. Health Affairs, 41(5), 635-642. https://doi.org/10.1377/hlthaff.2021.01706.
    \932\ Tung, E. L., Peek, M. E., Rivas, M., Yang, J. P., & 
Volerman, A. (2021). Association of neighborhood disadvantage with 
racial disparities in COVID-19 positivity in Chicago. Health 
Affairs, 40(11), 1784-1791. https://doi.org/10.1377/hlthaff.2021.00695.
    \933\ Durfey, S. N. M., Kind, A., Gutman, R., Monteiro, K., 
Buckingham, W. R., DuGoff, E. H., & Trivedi, A. N. (2018). Impact of 
risk adjustment for socioeconomic status on Medicare Advantage Plan 
quality Rankings. Health Affairs, 37(7), 1065-1072. https://doi.org/10.1377/hlthaff.2017.1509.
---------------------------------------------------------------------------

    While we proposed a limited set of risk adjusters that is closer in 
number to the CJR methodology for simplicity in the proposed rule, we 
considered, but did not propose, using the same set of risk adjusters 
in the BPCI Advanced model because we recognize that there may be 
particular episode categories or MS-DRGs that would benefit from 
additional clinical risk adjusters. For instance, in BPCI Advanced, 
just over half (53 percent) of coronary artery bypass graft (CABG) 
procedures have been performed electively, with the remainder performed 
emergently. Some clinicians have stated their belief that CABG episodes 
should be priced differently based on whether they are performed 
electively (that is, scheduled in advance) or emergently, even when 
they are assigned to the same MS-DRG. They stated their belief that 
non-emergent procedures are generally performed on relatively healthier 
beneficiaries, and providers may have greater control over outcomes. 
Conversely, they stated that episodes following an emergency room visit 
on the same day or the day before an episode tend to involve sicker 
patients, leading to greater clinical variability and less predictable 
episode spending. We therefore requested comment on whether TEAM should 
use the BPCI Advanced episode-specific risk adjuster or if there are 
other potential episode-specific or MS-DRG-specific clinical risk 
adjusters, and how those clinical risk adjusters should be defined 
based on information available on the IPPS claim associated with the 
episode trigger.
    We also considered, but did not propose, including peer group or 
hospital-specific risk adjusters in TEAM. Similar to the BPCI Advanced 
model, peer group adjusters would be based off of hospital 
characteristics, including hospital size (for example, number of 
hospital beds), safety net hospital status, location (for example, 
core-based statistical area (CBSA) urban and rural indicators and 
census division), and if the hospital was a major teaching hospital 
determined by looking at the intern to bed ratio in the provider 
specific files.\934\ We recognized including this level of risk 
adjustment may improve pricing accuracy for hospitals, but it 
introduces an additional layer of complexity to the risk adjustment 
model that could be challenging for TEAM participants understand when 
factoring in the existing risk adjustment variable and other pricing 
components. Since TEAM is a mandatory model, and it may capture more 
hospitals that have not previously participated in an episode-based 
payment model, we wanted to create a pricing methodology that all TEAM 
participants, regardless of experience or resource, can understand. We 
sought comment on whether target prices in TEAM should include risk 
adjustment variables based on hospital characteristics.
---------------------------------------------------------------------------

    \934\ https://www.cms.gov/medicare/payment/prospective-payment-systems/provider-specific-data-public-use-text-format.
---------------------------------------------------------------------------

    Another key difference between our proposal and the current CJR 
risk adjustment methodology is that we proposed in the proposed rule to 
provide a prospective normalization factor with preliminary target 
prices. We stated in the proposed rule that the prospective 
normalization factor would be subject to a limited adjustment at 
reconciliation based on the observed case mix, up to 5 
percent. This would allow participants to better estimate their target 
prices, as it would incorporate the normalization factor prospectively, 
rather than only introducing the normalization factor at 
reconciliation. We believed that this approach strikes a balance 
between predictability and protecting TEAM participants and CMS from 
significant shifts in patient case mix between the final baseline year 
and the performance year.
    A goal of TEAM's risk adjustment approach is to balance simplicity 
with accuracy to ensure our pricing methodology reflects episode 
spending those accounts for provider spending trends by region and MS-
DRG as well as accounting for beneficiary acuity. The risk adjustment 
approach in our proposed rule relies on capturing data from Medicare 
claims or other sources of information that do not include patient 
functional assessment data. Evidence suggests that risk adjustment 
models may be improved when taking into account patient functional 
status.\935\ We recognized there are existing data sets that capture 
patient functional status information. Specifically, the Improving 
Medicare Post-Acute Care Transformation Act of 2014 (the IMPACT Act) 
requires the reporting of standardized patient assessment data with 
regard to quality measures and standardized patient assessment data 
elements. The standardized patient assessment elements include 
functional status and are collected and reported by Long-Term Care 
Hospitals (LTCHs), Skilled Nursing Facilities (SNFs), Home Health 
Agencies (HHAs) and Inpatient Rehabilitation Facilities (IRFs). Since 
an episode encompasses post-acute care spend, the standardized patient 
assessment data could be incorporated into TEAM's risk adjustment 
methodology. However, we recognized inclusion of such data may increase 
the risk adjustment methodology complexity and make it challenging for 
TEAM participants to understand how it affects their preliminary or 
reconciliation target price. Therefore, we sought comment on the 
utility of including standardized patient assessment data in TEAM's 
risk adjustment methodology or whether there is other functional status 
data we should consider and whether standardized patient assessment 
data or other functional status data should be included in TEAM's risk 
adjustment methodology in future performance years.
---------------------------------------------------------------------------

    \935\ Benefits and Challenges of Payment Adjustments Based on 
Beneficiaries' Ability to Perform Daily Tasks (GAO-18-588). (2018). 
United States Government Accountability Office. https://www.gao.gov/assets/gao-18-588.pdf.
---------------------------------------------------------------------------

    To summarize, for TEAM we proposed in the proposed rule a risk 
adjustment methodology based on the CJR extension methodology, but with 
key differences that we believed would maximize target price 
predictability and transparency. As in CJR, this methodology would use 
baseline data to calculate risk adjustment multipliers and hold them 
constant at reconciliation. Participants would be provided with these 
risk adjustment multipliers prior to the start of the Performance Year 
and would be able to use them to estimate their episode-level target 
prices. Unlike in CJR, these risk adjustment multipliers would be 
calculated at the MS-DRG level, resulting in a separate set of risk 
adjustment multipliers for each MS-DRG episode type. We also proposed 
in the proposed rule to incorporate a prospective normalization factor 
into preliminary target prices, which would be subject to a limited 
adjustment at reconciliation. We sought comment on our proposals at 
proposed Sec.  512.545(a-d) for risk adjusting episodes.
    The following is a summary of the comments we received related to 
the proposed risk adjustment and normalization and our responses to 
these comments:
    Comment: A commenter suggested to use regional risk adjustment for 
each of the episode types. For regions and episode types where the 
episode volume

[[Page 69766]]

is not sufficient, the commenter suggested to use a national 
coefficient.
    Response: We thank the commenter for their suggestion. As we 
pointed out in the proposed rule (89 FR 35934) and the preamble of this 
final rule, we are concerned that for most risk adjusters, we would not 
have sufficient episode volume to create accurate and reliable risk 
adjustment multipliers at the MS-DRG/HCPCS episode type/region level. 
Keeping the risk adjustment methodology as simple and consistent as 
possible is a primary focus in TEAM and using regional coefficients for 
some MS-DRG/HCPCS episode types/regions but a national coefficient for 
other MS-DRG/HCPCS episode types/regions goes against this goal.
    Comment: A commenter suggested including elective episodes only, 
citing concerns that providers who have a higher proportion of urgent, 
emergent, and trauma admissions will be disadvantaged under the current 
proposal.
    Response: We thank the commenter for their input on including 
elective episodes only. As stated in the proposed rule (89 FR 35934) 
and preamble of this final rule, 53 percent of CABG procedures in BPCI 
Advanced were elective procedures, with the remainder performed 
emergently. We are concerned that removing nearly half of CABG episodes 
would drop the episode volume substantially and therefore negatively 
impact the reach of the model. Exclusions are typically reserved for 
services or procedures that are expensive, but also rare.
    Comment: A couple commenters recommended that CMS make 
considerations for the utilization of critical access hospital (CAH) 
swing beds. Commenters cited that CAH swing bed daily allowed claims 
can be ten-folder greater than traditional SNF daily allowed claims. If 
CAH swing bed claims are not adjusted for in some way, either in target 
prices or reconciliation calculations, target prices cannot be met.
    Response: We thank the commenters for sharing their concerns 
regarding CAH swing bed claims. In response to the comments, we 
analyzed how frequently CAH swing bed claims are included in the 30-day 
post-discharge episode spending and what proportion of spending in the 
post-discharge period CAH swing bed claims make up. The episodes were 
constructed using Medicare FFS claims from 2022 and the first two 
quarters of 2023.
    Our analysis showed that CAH swing bed stays are a low frequency 
event in episodes with 30-day post-discharge lengths. In 4 of the 5 
episode categories proposed for TEAM, among episodes with at least one 
SNF claim (traditional or CAH swing bed), approximately 4 percent had 
at least one CAH swing bed claim. In the episode category CABG, 
approximately 7 percent of episodes had a CAH swing bed claim. Since 
CAHs swing beds are exempt from the SNF Prospective Payment System 
(PPS), they are reimbursed at a higher rate. However, these claims will 
not make up a large proportion of post-discharge spending, or episode 
spending as a whole in TEAM episodes. Our analysis showed that in 4 of 
the 5 episode categories, post-discharge spending in the SNF setting 
among episodes with at least one CAH swing bed claim only accounted for 
11 percent to 12 percent of total post-discharge SNF spending among all 
episodes. In CABG episodes, the proportion was 19 percent of total 
post-discharge SNF spending.
    We are concerned that applying adjustments for CAH swing bed claims 
will create unintended consequences for utilization of these CAH swing 
bed services. We believe that the high reimbursement rates for these 
CAH swing bed claims could encourage providers to seek out 
relationships with and to increase utilization of traditional SNFs. 
TEAM participants that have historically utilized CAH swing beds will 
be in a position to earn significant savings by establishing 
relationships with traditional SNFs and discharging patients they would 
otherwise move to CAH swing beds to traditional SNFs.
    Comment: A few commenters expressed their support for the risk 
adjustment of target prices and appreciated the goal of maintaining 
simplicity of the methodology. A few commenters also supported the 
calculation of the risk adjustment coefficients at the MS-DRG/HCPCS 
episode type level. However, many commenters expressed support for the 
expansion of the TEAM risk adjustment methodology to better account for 
the clinical complexity of patients and resource use across hospitals. 
Commenters noted that HCC variables, in addition to the HCC count 
variable, should be included in order to accurately capture a 
hospital's patient complexity. Commenters expressed concern that a lack 
of proper risk adjustment would penalize hospitals which treat the 
sickest, most complex patients. A few commenters noted that additional 
risk adjusters are necessary to account for patients who previously 
lived in nursing homes since these beneficiaries may return to nursing 
homes and increase post-episode spending. Additional commenters asked 
CMS to consider including variables for the severity of illness and 
risk of mortality. A few commenters also asked CMS to include risk 
adjusters based on patient assessment data, such as the patient's 
functional status, since this can affect the type and amount of post-
acute care that the patient receives. A couple commenters expressed 
concern that the risk adjustment methodology only incorporates HCC 
count variables, which assumes that the impact on costs for all HCCs 
are the same. A commenter noted that this would create an incentive for 
providers to favor the treatment of patients who have multiple mild 
chronic conditions and avoid patients with one or two conditions severe 
enough to increase the risk of poor surgical outcomes. A commenter also 
requested CMS to include disability as a risk adjustment variable. A 
commenter suggested that CMS should include demographic factors, 
clinical factors, and procedure-specific factors into the risk 
adjustment methodology to allow for appropriate clinical decisions for 
care teams and patients. A commenter expressed support for age 
variables to be included in the risk adjustment methodology. A 
commenter asked CMS to include a risk adjustment variable to capture 
the complexity of patients treated at academic medical centers. Some 
commenters requested the risk adjustment model to include additional 
risk adjusters for all HCCs and other beneficiary-level variables 
similar to the BPCI Advanced model.
    Response: Given the numerous concerns from stakeholders regarding 
the proposed TEAM risk adjustment methodology, we recognized an updated 
methodology may be necessary to strengthen the risk adjustment model. 
As indicated in the proposed rule (89 FR 35934) and discussed in the 
preamble of this final rule, we considered using the BPCI Advanced 
model's risk adjusters, but we opted to not propose them and 
constructed TEAM's risk adjustment methodology similar to the CJR model 
to avoid adding complexity. We recognize that there may be a better 
balance in including more risk adjusters to increase target pricing 
accuracy while still limiting complexity. In order to expand the number 
of variables included in the risk adjustment model, we conducted a 
Lasso regression analysis using episodes built with Medicare FFS claims 
from CY 2019--2021 and received additional input from a Technical 
Expert Panel (TEP) of clinicians. The Lasso regression identified risk 
adjusters that minimize the residual sum of squares between the 
observed spending values and predicted spending values. The Lasso 
regression

[[Page 69767]]

included an exhaustive list of beneficiary-level and hospital-level 
risk variables from the BPCI Advanced model, including HCC variables, 
interactions between multiple conditions or comorbidities, and hospital 
characteristics among others. The TEP conducted literature reviews, 
reviewed the results of the Lasso regression, and leveraged their own 
expertise to recommend a number of additional beneficiary-level risk 
variables per episode category. Based on the Lasso analysis and 
clinician input, we curated a list of additional variables for testing 
inclusive of the risk adjustment variables from the proposed rule. This 
updated list of risk adjustment variables, which contains no more than 
25 risk adjustment variables per episode category, intends to maintain 
our goal of a simplified risk adjustment methodology, while including a 
more robust set of risk adjustment variables in order to capture 
spending accurately.
    We compared the fit of the proposed TEAM regression model first 
including only the risk adjustment variables from the proposed rule 
(hereby referred to as Model 1) and then including the curated list of 
risk adjustment variables (hereby referred to as Model 2).
    The accuracy of the predicted spending, relative to observed 
spending, of Model 2 was tested against Model 1. The analysis showed 
that Model 2 was more accurate in predicting spending compared to the 
observed spending at both the episode-level and hospital-level. In 
addition, goodness-of-fit statistics were produced to test model fit. 
The R-squared, adjusted R-squared, and coefficient of variation 
statistics showed that Model 2 has better model fit compared to Model 
1.
    Based on the Lasso regression, clinician input, spending analysis, 
and model fit analysis, and the commenters concerns about needing a 
more robust risk adjustment methodology, we are finalizing an updated 
list of risk adjustment variables to include in the TEAM risk 
adjustment methodology as follows:
    For CABG episodes, the following 17 risk adjustment variables are 
now included: age bracket variable, HCC count variable, prior post-
acute care use variable, beneficiary social risk variable, hospital bed 
size variable (which is based on four categories: 250 beds or fewer, 
251--500 beds, 501--850 beds, and 850 beds or more), safety net 
hospital status variable, and the following 11 HCCs:

 HCC 18: Diabetes with Chronic Complications
 HCC 46: Severe Hematological Disorders
 HCC 58: Major Depressive, Bipolar, and Paranoid Disorders
 HCC 84: Cardio-Respiratory Failure and Shock
 HCC 85: Congestive Heart Failure
 HCC 86: Acute Myocardial Infarction
 HCC 96: Specified Heart Arrhythmias
 HCC 103: Hemiplegia/Hemiparesis
 HCC 111: Chronic Obstructive Pulmonary Disease
 HCC 112: Fibrosis of Lung and Other Chronic Lung Disorders
 HCC 134: Dialysis Status
    For Surgical Hip/Femur Fracture Treatment (SHFFT) episodes, the 
following 21 risk adjustment variables are now included: age bracket 
variable, HCC count variable, beneficiary social risk variable, 
hospital bed size variable, safety net hospital status variable, and 
the following 16 HCCs:

 HCC 18: Diabetes with Chronic Complications
 HCC 22: Morbid Obesity
 HCC 82: Respirator Dependence/Tracheostomy Status
 HCC 83: Respiratory Arrest
 HCC 84: Cardio-Respiratory Failure and Shock
 HCC 85: Congestive Heart Failure
 HCC 86: Acute Myocardial Infarction
 HCC 96: Specified Heart Arrhythmias
 HCC 103: Hemiplegia/Hemiparesis
 HCC 111: Chronic Obstructive Pulmonary Disease
 HCC 112: Fibrosis of Lung and Other Chronic Lung Disorders
 HCC 134: Dialysis Status
 HCC 157: Pressure Ulcer of Skin with Necrosis Through to 
Muscle, Tendon, or Bone
 HCC 158: Pressure Ulcer of Skin with Full Thickness Skin Loss
 HCC 161: Chronic Ulcer of Skin, Except Pressure
 HCC 170: Hip Fracture/Dislocation

    For Major Bowel Procedure episodes, the following 18 risk 
adjustment variables are now included: age bracket variable, HCC count 
variable, beneficiary social risk variable, long-term institutional 
care use variable, hospital bed size variable, safety net hospital 
status variable, and the following 12 HCCs:

 HCC 11: Colorectal, Bladder, and Other Cancers
 HCC 18: Diabetes with Chronic Complications
 HCC 21: Protein-Calorie Malnutrition
 HCC 33: Intestinal Obstruction/Perforation
 HCC 82: Respirator Dependence/Tracheostomy Status
 HCC 85: Congestive Heart Failure
 HCC 86: Acute Myocardial Infarction
 HCC 103: Hemiplegia/Hemiparesis
 HCC 111: Chronic Obstructive Pulmonary Disease
 HCC 112: Fibrosis of Lung and Other Chronic Lung Disorders
 HCC 134: Dialysis Status
 HCC 188: Artificial Openings for Feeding or Elimination

    For LEJR episodes, the following 21 risk adjustment variables are 
now included: age bracket variable, HCC count variable, procedure-
related variable (ankle procedure or reattachment, partial hip 
procedure, partial knee arthroplasty, total hip arthroplasty or hip 
resurfacing procedure, and total knee arthroplasty), variable for 
disability as the original reason for Medicare enrollment, dementia 
without complications variable, beneficiary social risk variable, prior 
post-acute care use variable, hospital bed size variable, safety net 
hospital status variable, and the following 12 HCCs:

 HCC 8: Metastatic Cancer and Acute Leukemia
 HCC 18: Diabetes with Chronic Complications
 HCC 22: Morbid Obesity
 HCC 58: Major Depressive, Bipolar, and Paranoid Disorders
 HCC 78: Parkinson's and Huntington's Diseases
 HCC 85: Congestive Heart Failure
 HCC 86: Acute Myocardial Infarction
 HCC 103: Hemiplegia/Hemiparesis
 HCC 111: Chronic Obstructive Pulmonary Disease
 HCC 112: Fibrosis of Lung and Other Chronic Lung Disorders
 HCC 134: Dialysis Status
 HCC 170: Hip Fracture/Dislocation

    For Spinal fusion episodes, the following 18 risk adjustment 
variables are now included in the updated TEAM risk adjustment 
methodology: age bracket variable, HCC count variable, prior post-acute 
care use variable, beneficiary social risk variable, hospital bed size 
variable, safety net hospital status variable, and the following 12 
HCCs:

 HCC 8: Metastatic Cancer and Acute Leukemia
 HCC 18: Diabetes with Chronic Complications
 HCC 22: Morbid Obesity
 HCC 40: Rheumatoid Arthritis and Inflammatory Connective 
Tissue Disease
 HCC 58: Major Depressive, Bipolar, and Paranoid Disorders
 HCC 85: Congestive Heart Failure
 HCC 86: Acute Myocardial Infarction
 HCC 96: Specified Heart Arrhythmias
 HCC 103: Hemiplegia/Hemiparesis
 HCC 111: Chronic Obstructive Pulmonary Disease

[[Page 69768]]

 HCC 112: Fibrosis of Lung and Other Chronic Lung Disorders
 HCC 134: Dialysis Status

    We thank the commenters for sharing their support and concerns 
regarding the TEAM risk adjustment methodology. We agree with the 
commenters that a more robust risk adjustment methodology is necessary 
for TEAM. We refer readers to the description above, which lists the 
additional beneficiary-level variables per episode category that will 
be included in the TEAM risk adjustment methodology to accurately 
capture the complexity of the patient case mix. Coefficient estimates 
for the risk adjustment variables will only be included in the 
regression if they are present in at least 21 episodes during the 3-
year baseline period. This threshold will ensure that coefficient 
estimates are produced based on a reasonable sample size of episodes.
    The updated risk adjustment methodology incorporates HCC variables, 
in addition to the HCC count variable, in order to create more accurate 
episode spending predictions that are based on the clinical complexity 
of the patient case mix and additional resource use. The updated risk 
adjustment methodology also includes a prior post-acute care variable 
to account for patients who have visited a post-acute care facility 
during the lookback period for Lower Extremity Joint Replacement 
(LEJR), CABG, and Spinal Fusion. These facilities include LTCH, SNF, 
HH, and IRF.
    We acknowledge the comments regarding additional variables to 
account for severity of illness and risk of mortality. We also 
acknowledge the comments to include variables based on patient 
assessment data, including the functional status and disability of 
patients, into the risk adjustment methodology. The updated risk 
adjustment methodology incorporates disability as the original reason 
for Medicare enrollment for LEJR episodes. CMS will consider additional 
analyses to assess the appropriateness of the remaining variables and 
their impact on episode costs.
    We thank the commenter for suggesting CMS incorporate variables for 
demographic factors, clinical factors, and procedure-specific factors. 
The updated risk adjustment methodology includes age brackets as a 
demographic variable. CMS is not considering any other demographic 
factors. The risk adjustment for LEJR episodes now includes five 
procedure-related variables to better account for spending specific to 
each type of procedure.
    We acknowledge the comment regarding additional risk adjustment 
variables for patient treated at academic medical centers. As part of 
the Lasso regression analysis, CMS found that patients treated at major 
teaching hospitals did not have a statistically significant difference 
in episode spending for any of the episode categories.
    We also acknowledge the comments requesting CMS consider an even 
larger risk adjustment model, similar to BPCI Advanced. While our 
updated risk adjustment model is predicated from the BPCI Advanced 
model and selects the variables that demonstrated the most promising 
findings, we still want to maintain the goal of a simplified risk 
adjustment methodology which still captures differences in episode 
spending based on patient complexity and resource use. The updated risk 
adjustment methodology achieves this goal without incorporating the 
full risk adjustment variables used in BPCI Advanced.
    However, we will continue to review additional beneficiary-level 
risk adjustment variables based on commenters suggestions to better 
assess their impact on episode spending and if warranted, will propose 
additional risk adjustment variables in future notice and comment 
rulemaking.
    Comment: Some commenters suggested that CMS include hospital-level 
characteristics in the TEAM risk adjustment methodology. Specifically, 
commenters asked CMS to consider safety net status, rural/urban 
location, size, and teaching status. A commenter noted that any 
additional risk adjusters should not result in lower target prices for 
rural or safety net hospitals. Particularly, safety-net hospitals may 
have higher episode payments than non-safety-net hospitals for certain 
conditions and may find difficulty reaching regional spending targets. 
A couple commenters noted that the hospital-level risk adjustment 
methodology should be more sophisticated, similar to the CJR and BPCI 
Advanced models.
    Response: We agree that additional hospital-level variables are 
necessary for the TEAM risk adjustment model in order to accurately 
capture differences among hospitals. The updated hospital-level TEAM 
risk adjustment model will include variables for bed size and safety-
net status for all episode categories. The hospital-level variables 
were identified from ones used in the BPCI Advanced model and were 
selected based on the Lasso regression analysis. The variable for bed 
size is based on four categories: 250 beds or fewer, 251--500 beds, 
501--850 beds, and 850 beds or more. We believe that these 
modifications to the TEAM risk adjustment methodology will sufficiently 
capture the additional patient complexity and resource use across the 
various types of hospitals in TEAM. In addition, safety net hospitals, 
as defined in section X.A.3.f of the preamble of this final rule, will 
also have the option to remain in Track 1 for performance years 1 
through 3, as discussed in section X.A.3.a.(3) of the preamble of this 
final rule, which is limited to only upside financial risk and includes 
a 10 percent stop-gain limit.
    We acknowledge the comments regarding the inclusion of hospital-
level risk adjustment variables for rural/urban status as well as 
teaching hospital status, as they were used in the BPCI Advanced model. 
As part of the Lasso regression analysis, which identified risk 
adjustment variables that minimize the residual sum of squares between 
the observed spending values and predicted spending values, we found 
that the variables for patients treated at rural hospitals and teaching 
hospitals were not selected by the Lasso model for any of the episode 
categories. Therefore, risk adjustment variables for rural status and 
teaching hospital status will not be included. However, rural 
hospitals, as defined in section X.A.3.f of the preamble of this final 
rule, will have additional flexibilities in TEAM, such as opting to 
participate in Track 2 of the model which has lower levels of risk and 
reward with a 5 percent stop-loss/stop-gain limit. We acknowledge the 
comments asking for a risk adjustment model which is more similar to 
CJR and BPCI Advanced models. The updated risk adjustment methodology 
we are finalizing, as described earlier, is a balance between the two 
models with the inclusion of the additional risk adjusters, while 
maintaining the goal of a simple risk adjustment model.
    Comment: Some commenters urged CMS to ensure that the risk 
adjustment model accounts for the differences in episode costs between 
emergent and elective procedures. A couple commenters noted that 
considering whether an operation is scheduled/elective vs. non-
scheduled/urgent can dramatically alter the expected cost. A couple 
commenters cited that there is a meaningful clinical difference that 
drives patient complexity and the need for more intensive care 
patterns. A couple commenters noted there is a high degree of 
variability and clinical complexity of cases, even within MS-DRGs, for 
emergent versus elective cases.
    Response: We acknowledge that emergent procedures can be relatively 
more expensive than elective

[[Page 69769]]

procedures, given that emergent patients are likely to be more 
clinically complex. In light of the comments, we will expand our 
proposed risk adjustment model by adding more clinically relevant risk 
adjustment variables. We believe this can account for the pricing 
differences between emergent and elective procedures, such as by adding 
HCCs for Cardio-Respiratory Failure and Shock, Congestive Heart 
Failure, Acute Myocardial Infarction, and Specified Heart Arrhythmias 
for the episode category CABG. We refer the readers our discussion 
earlier for the comprehensive list of additional risk adjustment 
variables, including individual HCCs, that will be included and 
finalized in TEAM. We appreciate the commenter's suggestion on 
extending the lookback period or including HCCs on the claims incurred 
during the anchoring hospital encounter. However, as stated in the 
proposed rule, we believe that using Medicare FFS claims from the 
lookback period, as opposed to the anchoring claim, is beneficial since 
it will reduce the incentive for increased coding intensity at the time 
of the initiating procedure.
    Comment: Some commenters requested CMS create a separate target 
price for episodes initiated on an emergent basis. A commenter believed 
CMS's approach to calculate target prices does not adequately reflect 
many of the variables that go into the care of patients on a case-by-
case basis. Another commenter encouraged CMS to refine the target price 
methodology to avoid performance disadvantage for centers where the 
most urgent, emergent care is provided. A commenter suggested 
segmenting episode types by the presence of a trauma diagnosis code, 
fracture diagnosis code, or an inpatient charge with an ER related 
revenue code.
    Response: We appreciate the commenters' suggestions on the target 
price methodology for episodes initiated on an emergent basis. We 
believe that grouping emergent and elective procedures together, rather 
than stratifying them by an indicator or a separate target price, 
reduces the incentive for increasing coding intensity. We believe that 
the expansion of the proposed risk adjustment model, which will include 
additional clinical risk adjustment variables, should be sufficient in 
accounting for pricing differences and clinical complexities among 
emergent procedures. Thus, we are not finalizing any policy specific to 
stratifying emergent procedures. However, in light of comments 
received, we will consider additional adjustments for emergent 
procedures in future notice and comment rulemaking.
    Comment: A commenter took issue with capturing HCCs documented 
within 90-days prior to the anchor hospitalization or procedure, citing 
this may not accurately capture the clinical complexity of patients, 
especially if a procedure is non-elective. The commenter cited that 
utilizing HCC count and not each HCC's unique weight will dilute the 
accuracy of risk adjustment, and suggested CMS utilize the standard 
Medicare HCC risk adjustment model. Another commenter expressed support 
for patient level clinical risk adjustment for pre-existing conditions, 
but requested the annual HCC file is used, similar to what the CJR 
model uses.
    Response: We thank the commenters for their input on the risk 
adjustment model and suggestions to use the CMS-HCC risk adjustment 
model and annual HCC file. We acknowledge the commenter's concern on 
only capturing HCCs documented within 90-days prior to the anchor 
hospitalization or procedure.
    We disagree that the standard Medicare HCC risk adjustment model 
should be utilized. The HCC model is not designed to predict costs 
within TEAM episodes, and thus may not accurately predict TEAM episode 
spending. The CMS-HCC risk adjustment model's intended use is to pay 
for Medicare Advantage (MA) plans appropriately. On the other hand, the 
TEAM risk adjustment model is tailored for specific episode categories 
in TEAM. For example, there will be adjusters for specific procedure 
groups in LEJR for total knee arthroplasty, partial knee arthroplasty, 
total hip arthroplasty/hip resurfacing procedure, partial hip 
procedure, and ankle procedures/reattachments). The CMS-HCC risk 
adjustment model is used to predict total Medicare expenditures in an 
upcoming year, which may not be appropriate for use when predicting 
expenditures in shorter time periods, such as 30-day episodes in TEAM. 
It is more accurate to develop specific lookback periods based on an 
episode's start date, as opposed to using the CMS-HCC risk adjustment 
model calculations, which are applicable to a calendar year.
    However, we do agree that utilizing only HCC count may dilute the 
accuracy of risk adjustment. We believe we can improve upon the 
proposed approach by expanding the risk adjustment model to include 
curated HCCs for each episode category. The expanded risk adjustment 
model should account for cost differences between elective and non-
elective procedures. We refer the readers to our earlier discussion in 
this section for the comprehensive list of risk adjustment variables, 
including individual HCCs per episode category, that will be included 
and finalized in TEAM.
    We acknowledge the commenter's suggestion to use the annual HCC 
file, similar to CJR. As stated in the proposed rule, we proposed to 
use the beneficiary's Medicare FFS claims from the lookback period to 
determine which HCC flags the beneficiary is assigned. Using a lookback 
period represents a more uniform way of measuring clinical complexity 
across beneficiaries, as opposed to using the claims from the 
initiating procedure like the annual HCC file does. Using the lookback 
period reduces the incentive for increased coding intensity at the time 
of the initiating procedure. However, similar to CJR, we proposed to 
use baseline data to calculate risk adjustment multipliers and hold 
them constant at reconciliation. TEAM participants will be provided 
these risk adjustment multipliers prior to the start of the performance 
year and would be able to use them to estimate their episode-level 
target prices, similar to the annual HCC file provided to CJR 
participants.
    Comment: Many commenters were concerned that the 90-day lookback 
period to determine the inclusion of beneficiary-level variables in 
risk adjustment was too short of a time period to accurately capture 
comorbidities and complications that are clinically relevant to the 
episode. A commenter noted that a majority of HCCs are documented 
during primary care provider visits. Given that Medicare beneficiaries 
are recommended to visit their primary care provider once a year, a 90-
day lookback period may not capture HCCs which are clinically relevant 
to the episode if the primary care provider visit did not occur within 
the 90-day lookback period. Commenters suggested CMS to consider 
extending the lookback period to 180 days, 1 year, or 36 months. 
Commenters also suggested that the HCC variables captured from the 
anchor hospitalization should be included in the risk adjustment.
    Response: We thank the commenters for sharing their concerns 
regarding the 90-day HCC lookback period. We did not consider a longer 
lookback period and therefore cannot finalize a longer period. However, 
we will review the data to determine whether a 90-day, 180-day, or 1-
year HCC lookback period will accurately capture comorbidities and 
complications that are clinically relevant to the episode. We will not 
consider a 36-month lookback period as

[[Page 69770]]

HCCs flagged as far back as 36 months from the start of an episode are 
unlikely to be clinically relevant and will additionally increase the 
level of administrative burden. In addition, we will not be including 
any risk adjustment variables that are captured during the anchor 
hospitalization because of the likelihood for increased coding 
intensity. We believe that variables captured prior to the anchor 
hospitalization provide the best predictive information regarding 
episode costs. The TEAM beneficiary-level risk adjustment methodology 
will continue to only include variables that are flagged prior to the 
anchor hospitalization or anchor procedure.
    Comment: A commenter suggested that the complexity of referral 
patients living outside of a hospital's CBSA may not be accurately 
accounted for by HCC codes. They cited concerns related to factors 
outside of their control, including these patients seeking care from 
primary care providers outside of their health care system. They are 
concerned that the current benchmarking model is not accurately 
accounting for the increased complexity of these patients.
    Response: We thank the commenter for sharing their concerns 
regarding the HCC codes of patients from outside a TEAM participant's 
CBSA area. We will consider analyzing whether patients residing outside 
of a TEAM participant's CBSA are more costly to treat for a given 
hospital and if it is appropriate to add new risk adjustment variables 
to improve pricing accuracy in such scenarios. If such is the case, 
then we would propose updates in future notice and comment rulemaking.
    Comment: CMS received a comment that expressed concerns about 
coding intensity increasing over time and recommended limiting the 
settings in which HCCs are collected for the risk adjusters to hospital 
inpatient stays, hospital outpatient visits, and visits with 
clinicians. The commenter also urged that CMS remove codes generated 
from health risk assessments (including annual wellness visits) from 
the TEAM HCC count to ensure that diagnosis codes contribute to the 
risk score only if they are related to actual health care services 
received. This comment also touched on the possibility of increased 
coding intensity among model participants relative to an external 
population.
    Response: We thank the commenter for sharing their thoughts. We 
agree that ``coding creep'' can be a concern in a model where payments 
are risk adjusted. Similarly, increased coding intensity among model 
participants relative to non-participants can be a concern. The 
performance year update to the normalization factor will reverse any 
coding creep that occurs nationally between the baseline and the 
performance year, though we have applied a 5 percent cap to the 
normalization update to provide model participants with more stability 
in their pricing estimates. Using a lookback period, rather than 
including diagnoses from the episode initiating admission/procedure 
will minimize the opportunities for participants to change coding 
intensity among their patients, relative to non-participants. We also 
note that when capturing HCCs during the lookback period, using the 
most updated version of HCC model may increase accuracy in terms of 
predicting resource needs and we will strive to incorporate the most 
recent version that can be used for our baseline period and performance 
years. We also want to clarify the language on page 36434 of the 
proposed rule regarding the settings from which the HCCs will be 
constructed, we intend to use only inpatient, outpatient, and carrier 
claims, as is currently done in the BPCI Advanced model. This is 
similar to the settings the commenter suggested with the exception that 
we do not intend to limit the carrier claims used to exclude non-
clinician claims and claims from health risk assessments. We are 
concerned that removing diagnosis codes from non-clinicians and health 
risk assessments could result in important diagnoses being missed.
    Comment: Many commenters expressed concern that outpatient 
procedures are included in the same episode categories as inpatient 
hospitalizations when setting target prices and recommended adjusting 
for inpatient and outpatient originating episodes in the risk 
adjustment models. The commenters pointed out that these cases can vary 
significantly in terms of complexity, resources required, care 
pathways, and recommended post-discharge treatment. Specifically, the 
commenter noted that safety-net hospitals that serve populations with 
health-related social needs will more likely have procedures performed 
on an inpatient basis and may be disadvantaged by the blended pricing 
structure. Commenters also noted CMS's proposal could result in 
financial incentives to shift care from the inpatient to the outpatient 
setting.
    Response: We acknowledge the commenters concerns regarding the 
inclusion of outpatient procedures and inpatient hospitalizations in 
the same episode category. We continue to believe blended pricing 
methodology is more appropriate since it reduces any risks for 
beneficiaries to be inappropriately shifted from the inpatient to the 
outpatient setting. We agree that patient case-mix can vary between the 
inpatient and outpatient procedures and also recognize a blended 
pricing structure could create pressure for clinicians to recommend the 
lower cost outpatient setting to minimize total episode costs. However, 
we believe that our risk adjustment methodology will incentivize 
clinicians to continue performing LEJR and Spinal Fusion procedures in 
the appropriate clinical setting based on their assessment of each 
patients' complexity, particularly since performing these procedures on 
sicker patients in the outpatient setting could increase the risk of 
post-acute complications and lead to higher overall episode spending. 
We understand the concerns related with proposed risk adjustment 
methodology and as mentioned in earlier in this section of the final 
rule, we are finalizing the risk adjustment methodology to include 
additional beneficiary-level variables as well as some hospital-level 
variables. We believe these modifications will further address 
differences in patient characteristics as well as variation in spending 
between outpatient and inpatient cases with MCCs.
    Comment: A few commenters suggested that CMS adjust for cases of 
fracture and non-fracture in the risk adjustment model due to the high 
degree of variability in the clinical complexity and recommended post-
discharge treatment between these cases.
    Response: We thank the commenters for their suggestions but 
disagree that a fracture flag is necessary in the LEJR and SHFFT 
episode types. LEJR comprises of MS-DRGs, 469, 470, 521, and 522 in the 
inpatient setting. MS-DRGs 521 and 522 specifically account for hip 
replacement with a principal diagnosis of hip fracture. Prior analyses 
in the BPCI Advanced model have shown that knee joint replacements with 
fractures account for a very small proportion of episodes within MS-
DRGs 469 and 470. Ankle replacements, which make up a very small volume 
of LEJR episodes, are mostly performed in the outpatient setting. 
Similarly, the proposed SHFFT episode category, which contains MS-DRGs 
480, 481, and 482, will primarily include beneficiaries who receive a 
hip fixation procedure in the presence of a hip fracture, other than 
hip arthroplasty. Since the MS-DRGs in the episode categories 
inherently account for fractures, and the risk-adjustment regression is 
run at the MS-DRG level, we do not think additional

[[Page 69771]]

fracture risk adjusters are necessary in TEAM.
    Comment: A commenter requested the following risk adjusters to be 
included for inpatient coronary artery bypass graft episodes: ejection 
fraction less than 30 percent, malnutrition, obesity, lung disease, 
chronic kidney disease, and congestive heart failure. The commenter 
also suggested CMS to include risk adjusters for intraoperative 
findings and exclude redo procedures.
    Response: We thank the commenter for the additional suggestions 
regarding the risk adjustment methodology for inpatient coronary artery 
bypass graft episodes. As explained before, HCC 85 (congestive heart 
failure) and HCC 112 (fibrosis of lung and other chronic lung 
disorders) are now included as risk adjusters for inpatient coronary 
artery bypass graft episodes, in addition to nine other HCC flags. 
Although malnutrition, obesity, and chronic kidney disease have 
implications on clinical outcomes, CMS has concerns about the over-
reporting for these conditions and do not plan to include these HCC 
flags in the risk adjustment methodology for inpatient coronary artery 
bypass graft episodes.
    While an ejection fraction less than 30 percent certainly has an 
effect on clinical outcomes, there is no method to identify this 
scenario using claims data. We welcome suggestions for possible 
surrogate risk adjusters for an ejection fraction less than 30 percent 
which can be captured in claims data in future rulemaking.
    The TEAM risk adjustment methodology is limited to beneficiary- and 
provider-level variables during the lookback period. Risk adjusters for 
intraoperative findings may be subject to variations among providers 
based on clinical expertise, and increased coding intensity if 
included.
    Inpatient coronary artery bypass graft redo procedures have 
decreased over time and make up a small percentage of all inpatient 
coronary artery bypass graft episodes.\936\ Redo procedures are also 
likely to indicate the quality of care provided during the initial 
procedure, which providers should be held accountable for as long as 
the redo procedure is conducted during the 30-day post-discharge period 
of the initial procedure.
---------------------------------------------------------------------------

    \936\ Bakaeen, F. G., Akras, Z., & Svensson, L. G. (2018). Redo 
coronary artery bypass grafting. Indian journal of thoracic and 
cardiovascular surgery, 34(Suppl 3), 272-278. https://doi.org/10.1007/s12055-018-0651-1.
---------------------------------------------------------------------------

    Comment: A few commenters recommended that CMS make considerations 
for the utilization of IRF. A commenter noted that the costs for 
patients who typically received inpatient rehabilitation can be higher 
due to intensive therapy and care. Commenters cited concerns that TEAM 
target price would not account for the complexity of such patients and 
would impede the use of IRF care even when it is the best option for 
them. Commenters urged for updates to the risk adjustment to ensure 
that patient complexity is appropriately accounted for as well as 
retroactive adjustments to the target prices when IRF care is utilized 
such that providers do not incur negative financial impact when 
beneficiaries must use IRF.
    Response: We thank the commenters for sharing their concerns 
regarding IRF utilization. We will consider assessing whether patients 
receiving IRF care have higher episode costs and if it is appropriate 
to add new risk adjusters to improve pricing accuracy for such cases. 
If such is the case, then we would make proposals in future notice and 
comment rulemaking. We also refer readers to our discussion earlier in 
this section which details the changes to the risk adjustment model 
including the addition of several beneficiary-level risk adjustment 
variables that will adjust the target prices to reflect the complexity 
of patients demonstrated in the lookback period.
    Comment: A commenter expressed concerns regarding the proposed risk 
adjustment model that fails to account for differences in Medicare 
Advantage penetration in participating communities. Specifically, the 
commenter noted such communities can have very few beneficiaries 
enrolled in traditional Medicare leading to few episodes in TEAM, 
making it difficult to make investments for delivering care. Another 
concern they have noted is that healthier beneficiaries are more likely 
to be enrolled in Medicare Advantage Plan. Thus, less healthy 
beneficiaries enrolled in a traditional Medicare plan who are more 
likely to experience complications in the post discharge period would 
be left in TEAM and not adjusting for it in the model can incur 
penalties for such providers.
    Response: We acknowledge the concerns shared regarding the 
differences in the beneficiary enrollment and characteristics between 
the Medicare Advantage and traditional Medicare plans in certain 
geographical areas and appreciate the recommendations made. We 
understand the concern that having fewer episodes in TEAM may not make 
a sufficient enough incentive for hospitals to make the investments 
needed to deliver care in different ways and hospitals may not find it 
in their financial interest to make systemic care redesigns or engage 
in the model in an active way. As noted in section X.A.3.d.(3)(h) of 
this rule, we are not finalizing the proposed low volume threshold 
policy and intend to propose a new policy in future notice and comment 
rulemaking. We also agree that healthier beneficiaries are more likely 
to enroll in Medicare Advantage plans than the traditional Medicare 
plan. We believe the changes we are finalizing for the risk adjustment, 
as discussed earlier in this section of the final rule--to add specific 
beneficiary level risk adjustment variables that are relevant to the 
episode types--will incentivize hospitals to perform these procedures 
on sicker patients, decrease the risk of post-acute complications, and 
lead to higher savings. Moreover, we also believe our regional target 
prices and additional hospital-level variables in the risk adjustment 
will help account for high/low FFS beneficiaries' penetration in 
specific regions.
    Comment: A couple of commenters requested that CMS share all 
variables used in risk adjustment and target price creation to allow 
for participants to conduct their own assessments, predictions, and 
validations.
    Response: We thank the commenters for their recommendation to share 
risk adjustment variables with TEAM participants. We recognize the 
importance of transparency and predictability in target pricing. We 
note that as discussed earlier in this section of the final rule, we 
stated in the proposed rule that participants would be provided with 
the risk adjustment multipliers prior to the start of the performance 
year and would be able to use them to estimate their episode-level 
target prices.
    Comment: Some commenters expressed that the risk adjustment model 
should account for additional patient-level social risk indicators such 
as housing instability, food insecurity, financial needs, 
transportation problems, education, language, interpersonal safety, and 
homelessness. They also shared that the social risk adjustment model 
should go beyond a binary yes/no variable as the safety net status, 
specifically dual-eligibility status, of beneficiaries may not always 
be identified prior to the episode occurring.
    A commenter also noted that the risk adjustment mechanism relies on 
prior episodic payment models that did not fully adjust for the 
additional costs of caring for safety net populations. Additionally, a 
commenter remarked that that dual eligibility is an imperfect proxy of 
social need and vulnerability and requested CMS to investigate

[[Page 69772]]

potential new indicators for assessing individual-level health-related 
social needs (HRSN) correlated with negative health outcomes. Another 
commenter noted that hospitals in their state are concerned about 
potential disparities among providers, specifically those that 
primarily serve economically distressed counties where social 
determinants of health and socioeconomic barriers pose significant 
challenges to implementation.
    A couple commenters did express support for the addition of 
adjustment for social risk by including dual eligibility status, LIS 
status, and state and national ADI as this would accurately capture the 
social risk faced by patients and the associated resource use for these 
patient populations.
    Response: We thank the commenters who have expressed support for 
the social risk adjustment as well as those that have expressed 
concerns regarding it.
    In the proposed rule, we noted that the social risk adjustment 
variable was chosen so that it can account for multiple potential 
markers of beneficiary social risk. Using Medicare/Medicaid dual 
eligibility status, LIS status, and living in areas in the top 
percentiles of either the national or state level ADI allows CMS to 
utilize existing indicators of social risk together and capture safety-
net populations through multiple means. If dual-eligibility status has 
not been identified prior to the episode occurring, the ADI marker may 
still be able to identify the beneficiary at a higher social risk. 
Additionally, we proposed in the proposed rule to enforce sign 
restrictions to avoid negative coefficients for the beneficiary social 
risk adjuster, that is, the adjustment to the preliminary or 
reconciliation target prices would only happen if the coefficient on 
the beneficiary social risk adjustment variable is positive. We would 
not be able to enforce the sign restrictions if additional variables 
for social risk were separately added to the model.
    As discussed earlier in this section of the final rule, we are also 
finalizing the addition of safety-net status of the hospital as a risk-
adjustment variable to all episode types to address concerns about 
providers that primarily care for beneficiaries with dual-eligibility 
or LIS status. We believe the inclusion of the hospital's safety-net 
status will strengthen the risk adjustment model and appropriately set 
target prices for providers that serve economically distressed 
counties. While CMS is not including all of the risk adjustment 
variables tested in BPCI Advanced to maintain the simplicity required 
for hospitals without experience in value-based care to participate in 
TEAM, the updated risk adjustment model does take more patient-level 
and hospital level factors into account.
    We acknowledge that dual eligibility may not be a perfect proxy of 
social need and vulnerability. As CMS mandates the collection of 
health-related social needs (HRSN) data from Medicare provider and 
suppliers more widely and strengthens the availability of HRSN data, we 
will consider if there is sufficient and high-quality data available in 
future baseline years for TEAM to utilize such alternative indicators 
for risk adjustment.
    Comment: A couple of commenters expressed concerns that the 
application of the normalization factor to the target prices negates 
the application of risk adjustment to the model. In particular, a 
commenter expressed concern that the application of the normalization 
factor can be problematic for providers with low acuity patient mix 
compared to the nation and can disincentivize care improvement. Another 
commenter noted that CMS should consider removing the normalization 
factor entirely or consider applying a full prospective normalization 
factor in the subsequent year. A few commenters suggested limiting to 
only prospective normalization factor and not renormalizing during 
reconciliation. Similarly, another commenter expressed concern that 
risk adjustment process outlined in the proposed rule is not sufficient 
and the proposed renormalization policy will likely cancel out the risk 
adjustment. The commenter further noted that CMS should propose caps 
for normalization factor that would not offset the risk adjustment. 
Another commenter suggested CMS incorporate the normalization 
retrospectively. One other commenter suggested that CMS should 
considering capping the normalization factor for a given region.
    Response: We appreciate the comments on the calculation of the 
normalization factor. We recognize the concerns expressed by commenters 
regarding the application of the normalization factor. However, we 
continue to believe that the application of normalization factor should 
not cancel or nullify the beneficiary level risk adjustment. At a high 
level, the purpose of the normalization factor is to prevent the double 
counting of the patient case-mix that would happen because of the 
application of the risk adjustment to regional benchmark prices. To 
elaborate further, the benchmark prices, which are calculated as 
average observed costs (after capping at the 99th percentile) for each 
region and MS-DRG combination, have the beneficiary level risk 
adjusters inherently included in the benchmark prices, as such DRG-
regions with more complex patients like older beneficiaries or those 
with high HCC counts, will tend to have higher benchmark prices. If 
these high benchmark prices are further multiplied with the risk score 
multipliers without the application of the normalization factor, the 
effect of patient severity will be double counted leading to inaccurate 
target prices. We understand the concern related with capping the 
retrospective normalization factor. However, we believe the application 
of the normalization factor with limited adjustment at reconciliation 
will protect both CMS and TEAM participants from significant shifts in 
patient case-mix nationally between the final baseline year and 
performance year.
    We appreciate the suggestions for capping the normalization factor 
at the regional level. However, since the normalization factor is 
calculated at the MS-DRG level, it is statistically more appropriate to 
cap it at the same level. We will continue to assess our target price 
methodology, including the application of the normalization factor, and 
may propose modifications if we believe they are necessary. We agree 
that the risk adjustment process outlined in the proposed rule (89 FR 
35934) of using HCC counts, age bracket and social risk as risk 
adjustment variables are not sufficient. As we discussed earlier in 
this of the final rule, we are finalizing changes to risk adjustment 
process with additional beneficiary-level and hospital-level risk 
variables.
    Comment: A few commenters suggested that the normalization factor 
should be capped so that the normalization factor does not have a 
greater impact than the risk adjustment itself and target prices remain 
stable and predictable.
    Response: We refer readers to section X.A.3.d.(5)(h) of the 
preamble of the final rule where we proposed that a cap will be applied 
to the final normalization factor at Reconciliation, such that the 
final normalization factor would not exceed 5 percent of 
the prospective normalization factor.
    Comment: A commenter stated that CMS should broaden its scope to 
consider non-medical factors of care in risk adjustment, such as 
hospitals expanding insurance coverage or providing financial 
assistance programs for vulnerable patient populations.
    Response: We thank the commenter for their concern regarding non-
medical

[[Page 69773]]

factors of care and barriers to care in the risk adjustment process. 
TEAM risk adjusts for several factors such as dual eligibility, age, 
HCC counts, and a social risk adjustment that includes patient 
population eligibility for Low-Income Subsidies in Medicare. We believe 
this social risk adjustment will adequately account for non-medical 
factors of risk-adjustment. We acknowledge that some hospitals (small, 
rural, those serving underserved beneficiaries, etc.) may find it 
harder to meet target prices and compete against other hospitals in 
their region. We expect the finalized risk adjustment methodology, 
which will adjust target prices to account for additional beneficiary-
level and hospital-level variables, as discussed earlier in this 
section of the final rule, to mitigate some of these concerns. 
Additionally, we acknowledge the challenges faced by safety-net 
hospitals and will provide flexibilities to avoid downside risk and 
allow them to remain in Track 1 for performance years 1 through 3 and 
eligible to participate in Track 2 in performance years 4 through 5 
with a lower stop-loss/stop-gain limit, as discussed in section 
X.A.3.a.(3) of the preamble of this final rule. Lastly, we will take 
into consideration the recommendations with regard to expanding 
coverage or providing financial assistance programs to underserved 
beneficiaries.
    After consideration of the comments received, we are finalizing at 
Sec.  512.545(a) our proposal to calculate risk adjustment coefficients 
at the MS-DRG/HCPCS episode type level. We are finalizing with 
modifications our proposed risk adjustment methodology to include two 
hospital level variables, hospital bed size and safety net hospital, to 
all episode categories at Sec.  512.545(a). We are also finalizing with 
modification our proposed risk adjustment methodology to include 
additional beneficiary level variables at Sec.  512.545(a)(6) that are 
episode category specific. Specifically, in addition to the five risk 
adjustment variables applicable to all episode categories, we are 
finalizing the addition of 12 beneficiary level risk adjustment 
variables for the CABG episode category, 16 beneficiary level risk 
adjustment variables for the LEJR episode category, 13 beneficiary 
level risk adjustment variables for the Major Bowel Procedure episode 
category, 16 beneficiary level risk adjustment variables for the SHFFT 
episode category, 13 beneficiary level risk adjustment variables for 
the Spinal Fusion episode category at Sec.  512.545(a)(1). We are also 
finalizing with modification at Sec.  512.545(d) that at the time of 
reconciliation, the preliminary target prices are risk adjusted using 
all the beneficiary level and provider level variables. We also are 
finalizing at Sec.  512.540(b)(6) the proposal to calculate the 
normalization factor as the MS-DRG mean benchmark price for episodes 
during the baseline period divided by MS-DRG mean risk adjusted 
benchmark price for episodes during the baseline period and include 
this value prospectively when determining preliminary target prices. We 
are also finalizing at Sec.  512.545(e)(1)(ii) the proposal that the 
prospective normalization factor would be subject to a limited 
adjustment at reconciliation based on the observed case mix, up to 
5 percent. We are finalizing at Sec.  512.545(a)(1) our 
proposal to use a lookback period to determine which HCC flags the 
beneficiary is assigned. However, we are not yet finalizing the length 
of the lookback period due to concerns raised by commenters. We intend 
to propose and finalize a specific length for the lookback period 
through notice and comment rulemaking within the next year, so that 
participants will know the lookback period prior to the start of the 
model.
(5) Process for Reconciliation
    This section outlines our proposals on how we intend to reconcile 
performance year spending for a TEAM participant's beneficiaries in 
episodes against the reconciliation target price in order to determine 
if CMS owes the TEAM participant a reconciliation payment, or if the 
TEAM participant owes CMS a repayment (for all Track 3 participants and 
beginning in performance year 2 for Track 2 hospitals). In the proposed 
rule, we proposed to adjust the reconciliation amount for quality based 
on the TEAM participant's Composite Quality Score (CQS), which would be 
constructed from their quality measure performance, to calculate the 
quality-adjusted reconciliation amount. Stop-loss/stop-gain limits 
would be applied to the quality-adjusted reconciliation amount to 
determine the TEAM participant's Net Payment Reconciliation Amount 
(NPRA). Finally, we would adjust the NPRA for post-episode spending, 
when applicable, to determine the reconciliation payment or repayment 
amount.
    We refer readers to section X.A.3.b.(5) of the preamble of this 
final rule for our definition of related services for our episodes, to 
section X.A.3.a.(1) of the preamble of this final rule for our 
definition of performance years, and to section X.A.3.d.(3) of the 
preamble of this final rule for our approach to establish preliminary 
target prices.
(a) Annual Reconciliation
    At proposed Sec.  512.550 we stated in the proposed rule to conduct 
an annual reconciliation calculation that would compare performance 
year spending on episodes that ended during that PY with reconciliation 
target prices for those episodes to calculate a reconciliation amount 
for each TEAM participant. We would reconcile, on an annual basis, all 
episodes attributed to a TEAM participant that end in a given calendar 
year during the model performance period. This would be consistent with 
CJR and numerous other CMS value-based payment programs. We believed 
that one annual reconciliation accommodates the need for regular 
performance feedback while minimizing the administrative burden of more 
frequent reconciliations. Therefore, we proposed in the proposed rule 
to align the TEAM reconciliation approach with reconciliation in CJR, 
and to reconcile episodes based on performance years. We sought comment 
on this proposal to conduct one reconciliation for each performance 
year. We invited public comment regarding the proposal to conduct one 
reconciliation for each performance year. We received no comments on 
the proposal; therefore, we are finalizing these provisions without 
modification at Sec.  512.550.
(b) Timing
    In the proposed rule, we proposed to conduct the annual 
reconciliation of each TEAM participant's actual episode payments 
against the target price(s) 6 months after the end of the performance 
year. This policy would be consistent with the 6 months of claims 
runout we allow for the CJR reconciliation for PYs 6-8. We believed 
that 6 months is sufficient time for claims runout given that an 
internal review of Medicare claims data found that 98.71 percent of 
inpatient (IP) claims had been received, and 89.96 percent were 
considered final, by 6 months after the date of service.\937\ For 
hospital outpatient department (HOPD) claims, those rates were 98.10 
percent and 95.78 percent, respectively. Similar rates were found for 
all other types of claims, including Carrier, skilled nursing facility 
(SNF), home health (HH), and durable medical equipment (DME), 
indicating that we would have a nearly complete picture of performance 
year spending by 6 months

[[Page 69774]]

after the end of the performance year. For TEAM, we proposed in the 
proposed rule to capture claims submitted by July 1st following the end 
of the performance year and carry out the NPRA calculation as described 
previously to make a reconciliation payment or hold TEAM participants 
responsible for repayment, as applicable, in quarters 3 or 4 of that 
calendar year. We sought comment on our proposal at proposed Sec.  
512.550(b) to perform reconciliation 6 months after the end of the 
performance year.
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    \937\ Medicare Claims Maturity: CCW White Paper accessed at 
https://www2.ccwdata.org/web/guest/white-papers?p_l_back_url=%2Fweb%2Fguest%2Fsearch%3Fq%3Dmedicare%2Bclaims%2Bmaturity. on Jan, 26, 2024 https://www2.ccwdata.org/web/guest/white-papers?p_l_back_url=%2Fweb%2Fguest%2Fsearch%3Fq%3Dmedicare%2Bclaims%2Bmaturity.
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    The following is a summary of the public comments received on the 
timing of reconciliation proposal and our responses to those comments:
    Comment: A few commenters supported CMS's proposal to offer a 
single reconciliation with at least six months of claims runout and 
encouraged CMS to release the reconciliation data on a consistent 
basis. A commenter also asked if CMS could consider other ways to 
shorten the data lag by providing provisional reconciliation results to 
some accountable care organization (ACO) participants.
    Response: We thank the commenters for their support and plan to 
release beneficiary-identifiable claims data on a monthly basis, 
pursuant to a request and TEAM data sharing agreement, as described in 
section X.A.3.k of the preamble of this final rule. We would be unable 
to provide provisional reconciliation results since the claims data 
would not be available in time to produce those results, however, we 
will consider ways of providing more updated performance and trend data 
throughout the performance year to help TEAM participants gauge their 
performance in the model before reconciliation.
    After consideration of the comments received, we are finalizing at 
Sec.  512.550(b) the proposal to perform reconciliation 6 months after 
the end of the performance year.
(c) TEAM Participants That Experience a Reorganization Event
    We recognize that there may be TEAM participants that experience a 
reorganization event during a given performance year. At proposed Sec.  
512.505, we proposed in the proposed rule to define a reorganization 
event as a merger, consolidation, spin off or other restructuring that 
results in a new hospital entity under a given CMS Certification Number 
(CCN). As a result of such an event, the TEAM participant may begin 
billing under a different CCN, or an additional entity could be 
incorporated into the TEAM participant's existing CCN, resulting in a 
new hospital entity. For instance, TEAM participant A may merge with, 
or be purchased by, TEAM participant B and begin billing under TEAM 
participant B's CCN. In this case, we stated in the proposed rule we 
would perform separate reconciliation calculations for TEAM participant 
A and TEAM participant B for those episodes where the anchor 
hospitalization admission or the anchor procedure occurred before the 
effective date of the merger or purchase. In the proposed rule, we 
proposed to reconcile episodes where the anchor hospitalization 
admission or the anchor procedure occurred on or after the effective 
date of the merger or purchase under the new or surviving CCN that 
applies to the blended entity. We proposed this policy in recognition 
that the blended entity may have different spending patterns, or a 
different overall patient case mix, than the two separate entities 
prior to the merger. In a different instance, if a TEAM participant 
merges into or is purchased by a non-TEAM participant and begins 
billing under the CCN on the non-TEAM participant, we stated in the 
proposed rule we would reconcile episodes for the TEAM participant 
where the anchor hospitalization admission or the anchor procedure 
occurred before the effective date of the merger or purchase. This 
policy would allow for the TEAM participant to earn a reconciliation 
payment or owe a repayment for the episodes that occurred during the 
portion of the performance year that they were in the model. However, 
once the TEAM participant begins to bill under the non-TEAM 
participant's CCN, the blended entity would not be considered a TEAM 
participant, and we would not reconcile episodes where the anchor 
hospitalization admission or the anchor procedure occurred on or after 
the effective date of the merger or purchase under the new or surviving 
CCN that applies to the blended entity. We sought comment on our 
proposal at proposed Sec.  512.550(b)(2) for conducting reconciliations 
for TEAM participants that experience a reorganization event during a 
given performance year.
    We invited public comment regarding the proposal to conduct 
reconciliations for TEAM participants that experience a reorganization 
event during a given performance year. We received no comments on the 
proposal; therefore, we are finalizing these provisions without 
modification at Sec.  512.550(b)(2).
(d) Updating Preliminary Target Prices To Create Reconciliation Target 
Prices
    As discussed in section X.A.3.d.(4) of the preamble of this final 
rule, we proposed in the proposed rule to apply beneficiary-level risk 
adjustment and a limited adjustment to the prospective normalization 
factor, as applicable, to increase the accuracy of our reconciliation 
calculations. At the time of reconciliation, we would apply these 
adjustments, if applicable, to the preliminary target prices we 
calculated and communicated to TEAM participants prior to the 
applicable performance year, as described in section X.A.3.d.(3)(i) of 
the preamble of this final rule. We noted that in some cases, the final 
target price applied to an episode in a given performance year at 
reconciliation would not change. In addition, in some cases the 
reconciliation target price would increase from the preliminary target 
price provided prior to the performance year, potentially benefitting 
TEAM participants. For instance, if the prospective normalization 
factor were calculated as 0.85, but the beneficiary case mix during the 
performance year differed from the case mix during the final year of 
the baseline such that the final normalization factor was calculated as 
0.89, the reconciliation target price would incorporate the final 
normalization factor and therefore be higher than the preliminary 
target price.
(e) Composite Quality Score
(i) Overview
    Incorporating quality performance into the model payment structure 
is an essential component of TEAM, just as it is for the CJR model (80 
FR 73370) and BPCI Advanced. Section X.A.3.c of the preamble of this 
final rule discusses the specific measures for which we proposed that 
TEAM participants would be held accountable. In addition to Quality 
Payment Program requirements to tie quality performance to payment for 
Advanced APMs, we believe it is important for TEAM to link the 
opportunity to earn a reconciliation payment with performance on 
quality measures to place greater emphasis on beneficiary quality of 
care and patient-centered care.
    As discussed in section X.A.3.d.(5)(g) of the preamble of this 
final rule, which outlines the proposed process for incorporating 
quality into the reconciliation calculation, for each TEAM participant, 
we proposed in the proposed rule to calculate the difference between 
the TEAM participant's performance year spending and their 
reconciliation target price at

[[Page 69775]]

reconciliation, identified as the reconciliation amount. In the 
proposed rule, we proposed that the reconciliation amount would then be 
adjusted based on the TEAM participant's quality performance. We 
proposed to use the quality measures discussed in section X.A.3.c of 
the preamble of this final rule to calculate a CQS in a similar manner 
to what we have implemented for many CMS models and initiatives, 
including CJR and BPCI Advanced. The CQS methodology would allow 
performance on each required TEAM quality measure to be meaningfully 
valued in the TEAM pay-for-performance methodology, incentivizing and 
rewarding cost savings in relation to the quality of episode care 
provided by the TEAM participant.
    For TEAM, the actual level of quality performance achieved would be 
the most important factor in calculating the CQS to reward those TEAM 
participants furnishing high quality care to TEAM beneficiaries. Like 
the CJR model, TEAM would include a wide range of participants with 
varying levels of experience with value-based care and different 
current levels of quality performance. Other CMS programs also capture 
a wide range of participants and include quality performance 
methodologies that may directly affect the participant's financial 
performance. We noted that the Shared Savings Program utilizes similar 
features as the proposed TEAM CQS methodology, such as benchmarking 
quality performance, calculating scores for each measure and 
constructing an overall score (see 42 CFR 425.502). Additionally, the 
Hospital VBP Program and the HAC Reduction Program also utilize similar 
scoring methodologies, which apply weights to various measures and 
assign overall scores to hospitals (42 CFR 412.165 and 42 CFR 412.172). 
Despite the small number of quality measures proposed in the proposed 
rule for TEAM, the measures represent both clinical outcomes and 
patient experience, and each would carry substantial value in the TEAM 
CQS.
    Although performance on each measure would be valued in the TEAM 
CQS methodology as proposed in the proposed rule, it is the TEAM 
participant's overall quality performance that would be considered in 
the pay-for-performance approach, rather than performance on each 
quality measure individually determining the financial opportunity 
under TEAM. The TEAM CQS methodology would also provide a framework for 
incorporating additional measures of meaningful outcomes for episodes 
in the future. The TEAM CQS methodology would provide the potential for 
financial reward for TEAM participants that reach an overall acceptable 
quality performance, thus incentivizing their continued efforts to 
improve the quality and efficiency of episodes. We sought comment on 
our proposal to use a CQS in the pay-for-performance methodologies of 
TEAM.
(ii) Determining Composite Quality Score
    The CQS is one component of the reconciliation process and we 
proposed that it would be calculated based on the TEAM participant's 
performance on the quality measures proposed for the model. One of the 
primary purposes of the CQS is to create a comparative assessment for 
performance across episode categories and TEAM participants. Since not 
all quality measures apply to all episode categories, quality measures 
that apply to more episode categories will be volume-weighted more 
heavily in the CQS.
    As indicated in section X.A.3.c.(3) of the preamble of this final 
rule, the TEAM quality measures proposed in the proposed rule would be 
collected from the CMS Hospital Inpatient Quality Reporting (IQR) 
Program and the Hospital-Acquired Condition (HAC) Reduction Program. 
The TEAM quality measures collected from the Hospital IQR Program and 
HAC Reduction Program would have raw quality measure scores, however, 
these raw quality measure scores may be in different measurement units 
making it difficult to make comparisons. Therefore, raw quality measure 
scores must be manipulated in order to produce a CQS. We proposed, 
similar to the BPCI Advanced model, for each performance year for each 
quality measure to convert the raw quality measure scores into scaled 
quality measure scores by comparing the raw quality measure scores to 
the distribution of raw quality measure score percentiles among the 
national cohort of hospitals, which would consist of TEAM participants 
and hospitals not participating in TEAM, in the CQS baseline period, so 
that each measure has a scaled quality measure score between 0 and 100 
for each episode category. For example, if a TEAM participant's raw 
quality measure score of 71 percent in performance year (PY) 1 is 
equivalent to the 60th percentile during the CQS baseline period, their 
scaled quality measure score for that measure would be 60 in the 
performance year. We recognized there may be instances where the raw 
quality score may fall between percentiles or may be higher or lower 
than the raw quality scores in the CQS baseline period. Therefore, we 
proposed that if the raw quality measure score could belong to either 
of two percentiles in the CQS baseline period, then we would assign the 
higher percentile. Further we proposed to assign a scaled score of 100 
if the TEAM participant has a raw quality measure score greater than 
the maximum of the raw quality measure scores in the CQS baseline 
period and assign a scaled quality measure score of zero if the TEAM 
participant has a raw quality score less than the minimum of the raw 
scores in the CQS baseline period. Lastly, we proposed not to assign a 
scaled quality measure score if the TEAM participant had no raw quality 
measure score.
    In the proposed rule, we proposed the CQS baseline period to be CY 
2025 for the duration of TEAM. We believed using CY 2025 as the CQS 
baseline period was similar to other CMS Innovation Center models, 
including the BPCI Advanced model, where the baseline period was 
established before the incentives of the model were in place in order 
to assess quality improvement. We considered, but did not propose, 
using a contemporaneous CQS baseline period, where the CQS baseline 
period would be the same as the performance year for each performance 
year, but we believed that may increase CQS calculation complexity and 
may create challenges for TEAM participants to implement meaningful 
quality improvement efforts. Lastly, we also considered, but did not 
propose, a rolling CQS baseline period, where the CQS baseline period 
would move forward by one year each performance year, but similarly to 
a contemporaneous CQS baseline period, we believed the simplicity of 
having a fixed CQS baseline period would be easier for TEAM 
participants to understand the CQS calculation methodology. However, as 
indicated in section X.A.3.b.(1) of the preamble of this final rule, we 
recognized the potential for additional episodes added to TEAM in 
future performance years, which may result in different quality 
measures being used in the CQS calculation. If new episodes categories 
or quality measures are introduced to TEAM, we would reassess the CQS 
baseline period and implement any changes in future notice and comment 
rulemaking.
    Prior to calculating the CQS, we stated in the proposed rule that 
we would volume weight the quality measures based on the volume of 
episodes for a TEAM participant.

[[Page 69776]]

Specifically, a normalized weight would be calculated by dividing the 
TEAM participant's volume of episodes for a given quality measure by 
the total volume of all the TEAM participant's episodes. This 
calculation would be applied to all quality measures for the TEAM 
participant (see Table X.A.-11). We believed it was important to volume 
weight the quality measures so that more weight is given to the quality 
measures that apply to more episode categories.
[GRAPHIC] [TIFF OMITTED] TR28AU24.310

    We would then take the quality measures' normalized weights and 
combine them with the scaled quality measure scores to determine the 
weighted scaled score. Specifically, we proposed in the proposed rule 
to calculate a weighted average by multiplying each quality measure's 
scaled quality measure score by its normalized weight to create 
weighted scaled scores for a TEAM participant. The weighted scaled 
scores would then be added together to construct the CQS for the TEAM 
participant (see Table X.A.-12).
[GRAPHIC] [TIFF OMITTED] TR28AU24.311

    As stated in the proposed rule, although the required set of 
quality measures proposed for TEAM are ones currently being reported 
through the Hospital IQR Program and HAC Reduction Program, we 
recognize that CMS may, in future regulations, remove current measures 
or require different measures for hospitals to report in the Hospital 
IQR Program and HAC Reduction Program. Therefore, CMS may propose 
changes to the TEAM measures and the methodology for constructing the 
composite quality score through future notice and comment rulemaking. 
We sought comment on our proposed methodology to calculate the TEAM 
composite quality score.
    The following is a summary of the public comments received on the 
proposed CQS methodology and our responses to these comments.
    Comment: A couple of commenters requested that CMS must provide 
monthly reporting in a form in which the participant can see the 
composite components and replicate the quality score due to the 
mandatory nature of the model. Specifically, a commenter requested CMS 
report each part of the CQS as part of an improved monthly reporting 
package.
    Response: We thank commenters for sharing their suggestions on data 
sharing processes. We will take this suggestion into consideration as 
the model develops and will share more information on how data will be 
distributed in the future.
    Comment: Some commenters expressed concern over the proposed CQS 
methodology. Specifically, commenters mentioned that CMS should 
reconsider setting a score of 100 to achieve full quality credit in 
reconciliation, ensuring the CQS payment adjustment work the same for 
hospitals receiving a positive or negative reconciliation payment. In 
other words, regardless of the costs of care, a higher quality score 
should be financially advantageous to hospitals. If hospitals would 
otherwise receive a positive payment adjustment, their adjustment 
should be increased by the amount of their quality score. A commenter 
suggested to balance quality and cost as part of value-based care, 
quality measures should be given an equal weighting to success as cost 
savings.
    Response: We appreciate the concerns from commenters about the 
proposed CQS methodology and the need to achieve a perfect score to 
receive their full reconciliation payment amount. However, we believe 
the CQS methodology spurs TEAM participants to improve quality 
performance given the disincentive to perform poorly on quality. To 
that end, TEAM's CQS methodology also tries to protect TEAM 
participants from increased financial risk based on their CQS. Meaning, 
if a TEAM participant has a negative reconciliation amount, performing 
better on quality would reduce their repayment amount. For example, a 
TEAM participant that performs well in quality (e.g., a CQS of 100) 
would have a lower repayment amount, as compared to a TEAM participant 
that did poorly on quality (e.g., score of 0) and would owe their full 
repayment amount. We

[[Page 69777]]

also note that TEAM's CQS methodology is similar to prior successful 
examples of episode-based payment models such as BPCI Advanced. 
Additionally, our methodology has similar features to how the Hospital 
VBP Program and the HAC Reduction Program apply their scoring methods, 
which applies weights to various measures and assigns an overall score 
to a hospital. However, we would like to clarify the calculation of 
specific quality measures that are considered inverse measures, where a 
lower raw quality measure score is considered favorable.
    Lastly, CMS will take commenters' considerations into account and 
any updates to our CQS methodology will be proposed in future notice 
and comment rulemaking.
    Comment: A few commenters expressed concern over the weighting of 
the CQS methodology due to the hospital wide measures holding more 
weight than the proposed total hip arthroplasty (THA)/total knee 
arthroplasty (TKA) Patient-Reported Outcome-Based Performance Measure 
(PRO-PM) given that this measure is specific to just the lower 
extremity joint replacement (LEJR) episode. Commenters mentioned that 
hospitals that do not have significant LEJR volume will in effect be 
held accountable to only the two hospital-wide measures. Commenters 
suggested that the weighting for the THA/TKA PRO-PM be increased.
    Response: We would like to thank commenters for their suggestions. 
However, we decline to make any changes to the proposed CQS 
methodology. We believe that it is important to volume weight the 
quality measures so that more weight is given to the quality measures 
that apply to more episode categories. Specifically, we proposed to 
calculate a weighted average by multiplying each quality measure's 
scaled quality measure score by its normalized weight to create 
weighted scaled scores for a TEAM participant. Those weighted scaled 
scores would then be added together to construct the CQS for the TEAM 
participant.
    Comment: A commenter mentioned being in full support of CMS' 
decision to use the quality adjustment methodology used in BPCI 
Advanced.
    Response: We appreciate this commenter's support.
    Comment: A couple of commenters mention being appreciative of CMS' 
proposal to calculate the quality scores based on measures that are 
already reported for other purposes. A commenter believes this is a 
great pathway to reduce burden related to quality reporting. However, 
commenters highlight some of the measures are in their first year of 
reporting and including a measure in a mandatory bundle with little 
data on how it will perform. Additionally, a commenter requested 
additional clarification on how other independent variables are being 
considered in terms of impacting the CQS baseline period or the 
performance relative to the baseline.
    Response: We appreciate the concern and feedback from commenters 
regarding the CQS baseline period and the potential for unfamiliar 
measures being incorporated into the TEAM CQS in a later performance 
year. We will continue with the proposed CQS baseline period to be CY 
2025 for the Hybrid Hospital-Wide All-Cause Readmission Measure with 
Claims and Electronic Health Record Data (CMIT ID #356) measure, CMS 
Patient Safety and Adverse Events Composite (CMS PSI 90) (CMIT ID #135) 
measure, and the Hospital-Level Total Hip and/or Total Knee 
Arthroplasty (THA/TKA) Patient-Reported Outcome-Based Performance 
Measure (PRO-PM) (CMIT ID #1618) measure, as described in section 
X.A.3.c of the preamble of this final rule. We believe using a fixed 
CQS baseline period of CY 2025 is similar to other CMS Innovation 
Center models, including the BPCI Advanced model, where the baseline 
period was established before the incentives of the model were in place 
to assess the impact of the model.
    We will assess TEAM participant performance on these measures and 
if warranted, will make policy updates in future notice and comment 
rulemaking.
    Comment: Some commenters suggested that CMS adjust quality 
assessments to allow for high quality scores to reduce the discount 
factor and make other adjustments to reflect more meaningful quality 
evaluations in the model. A few commenters requested TEAM's CQS be 
designed like the CJR model where an excellent quality score reduces 
the discount factor down to zero. A commenter recommended including a 
quality improvement aspect into the CQS like the CJR model.
    Response: We appreciate this commenter sharing their suggestion. 
However, CMS will continue to move forward with the proposed CQS 
methodology that was shared in this year's rule. As previously 
indicated, we do not think that reducing the discount factor based on 
quality performance is a sustainable, long-term policy. We recognize 
that eventually episode spending will level off and we cannot assume 
spending reductions will occur in perpetuity. Therefore, it may be 
reasonable to assume that a discount factor may not be needed when this 
scenario occurs, and CMS would want to incentivize TEAM participants to 
maintain spending rather reduce spending, especially to avoid 
compromising quality of care. We note that we do not believe TEAM 
participants, or Medicare Inpatient Prospective Payment System (IPPS) 
hospitals at large, have met that threshold yet, but given it may 
occur, we do not believe reducing the discount factor based on quality 
performance would be a policy to continue testing in TEAM. We also 
acknowledge the request for adjusting the CQS based on a TEAM 
participant's quality improvement on one or more of their quality 
measures. We will consider adding including quality improvement points 
to the CQS and we will continue to assess potential changes that may 
encourage greater quality of care improvement in TEAM. Any adjustments 
or updates to our proposed methodology will be shared in a future 
notice or comment rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposals for the proposed composite quality score 
methodology with slight modification to the CQS baseline period. We 
acknowledge that by finalizing the Hospital Harm--Falls with Injury 
(CMIT ID #1518) measure, the Hospital Harm--Postoperative Respiratory 
Failure (CMIT ID #1788) measure, and the Thirty-day Risk-Standardized 
Death Rate among Surgical Inpatients with Complications (Failure-to-
Rescue) (CMIT ID #134) measure for inclusion in TEAM starting in PY 2, 
a CQS baseline period of CY 2025 would be inappropriate given hospitals 
are not required to report on these measures for the Hospital IQR 
Program until 2026. A CQS baseline period of CY 2026 would be more 
appropriate for these measures. Therefore, we are finalizing our 
proposal with slight modification at Sec.  512.547 to use a CQS 
baseline period of CY 2025 for the Hybrid Hospital-Wide All-Cause 
Readmission Measure with Claims and Electronic Health Record Data (CMIT 
ID #356) measure, CMS Patient Safety and Adverse Events Composite (CMS 
PSI 90) (CMIT ID #135) measure, and the Hospital-Level Total Hip and/or 
Total Knee Arthroplasty (THA/TKA) Patient-Reported Outcome-Based 
Performance Measure (PRO-PM) (CMIT ID #1618) and a CQS baseline period 
of CY 2026 for the Hospital Harm--Falls with Injury (CMIT ID #1518) 
measure, the Hospital Harm--

[[Page 69778]]

Postoperative Respiratory Failure (CMIT ID #1788) measure, and the 
Thirty-day Risk-Standardized Death Rate among Surgical Inpatients with 
Complications (Failure-to-Rescue) (CMIT ID #134) measure.
    We are also modifying our scaled score methodology proposal for 
inverse quality measures, specifically the Hybrid Hospital-Wide All-
Cause Readmission Measure with Claims and Electronic Health Record Data 
(CMIT ID #356) measure, the CMS Patient Safety and Adverse Events 
Composite (CMS PSI 90) (CMIT ID #135) measure, the Hospital Harm--Falls 
with Injury (CMIT ID #1518) measure, the Hospital Harm--Postoperative 
Respiratory Failure (CMIT ID #1788) measure, and the Thirty-day Risk-
Standardized Death Rate among Surgical Inpatients with Complications 
(Failure-to-Rescue) (CMIT ID #134). We recognize our proposal in the 
proposed rule to assign a scaled score of 100 if the TEAM participant 
has a raw quality measure score greater than the maximum of the raw 
quality measure scores in the CQS baseline period and assign a scaled 
quality measure score of zero if the TEAM participant has a raw quality 
score less than the minimum of the raw scores in the CQS baseline 
period, would inadvertently penalize quality measure scoring for 
inverse quality measures. Therefore, we are modifying our proposal at 
Sec.  512.547(b)(i)(C) slightly so that for the Hybrid Hospital-Wide 
All-Cause Readmission Measure with Claims and Electronic Health Record 
Data (CMIT ID #356) measure, the CMS Patient Safety and Adverse Events 
Composite (CMS PSI 90) (CMIT ID #135) measure, the Hospital Harm--Falls 
with Injury (CMIT ID #1518) measure, the Hospital Harm--Postoperative 
Respiratory Failure (CMIT ID #1788) measure, and the Thirty-day Risk-
Standardized Death Rate among Surgical Inpatients with Complications 
(Failure-to-Rescue) (CMIT ID #134) measure, we will assign a scaled 
score of 0 if the TEAM participant has a raw quality measure score 
greater than the maximum of the raw quality measure scores in the CQS 
baseline period and assign a scaled quality measure score of 100 if the 
TEAM participant has a raw quality score less than the minimum of the 
raw scores in the CQS baseline period. This slight modification 
acknowledges the difference between quality measures where a higher raw 
quality measure score is favorable and quality measures where a lower 
raw quality measure score is favorable.
(f) Calculating the Reconciliation Payment Amount or Repayment Amount
    After the completion of a performance year, we proposed in the 
proposed rule to retrospectively calculate a TEAM participant's actual 
episode performance based on the episode definition. We noted that 
episode spending would be subject to proration for services that extend 
beyond the episode (as described in section X.A.3.d.(3)(c) of the 
preamble of this final rule). In the proposed rule, we proposed to cap 
performance year spending at the high-cost outlier cap as described in 
section X.A.3.d.(3)(e) of the preamble of this final rule, and to apply 
the high-cost outlier cap to episodes in the performance year similarly 
to how we proposed to apply it to baseline episodes, using the 99th 
percentile for each MS-DRG/HCPCS episode type and region as the 
maximum. Any performance year episode spending amount above the high-
cost outlier cap would be set to the amount of the high-cost outlier 
cap. We then proposed in the proposed rule to compare each TEAM 
participant's performance year spending to its reconciliation target 
prices. Specifically, we stated in the proposed rule we would define 
the reconciliation amount as the dollar amount representing the 
difference between the reconciliation target price and performance year 
spending, prior to adjustments for quality, stop-gain/stop-loss limits, 
and post-episode spending. We noted that, as discussed in section 
X.A.3.d.(3) of the preamble of this final rule, a TEAM participant 
would have multiple target prices for episodes ending in a given 
performance year, based on the MS-DRG/HCPCS episode type and the 
performance year when the episode was initiated. In the proposed rule, 
we proposed to determine the applicable reconciliation target price for 
each episode using the aforementioned criteria and calculate the 
difference between each TEAM participant's performance year spending 
and its aggregated reconciliation target price for all episodes in the 
performance year, resulting in the reconciliation amount. Specifically, 
we stated in the proposed rule we would define the reconciliation 
amount as the dollar amount representing the difference between the 
reconciliation target price and performance year spending, prior to 
adjustments for quality, stop-gain/stop-loss limits, and post-episode 
spending. Next, we would adjust the reconciliation amount for quality 
performance as discussed in section X.A.3.d.(5)(e) of the preamble of 
this final rule to determine the quality-adjusted reconciliation 
amount. Then we would apply the stop-loss and stop-gain limits to the 
quality-adjusted reconciliation amount, as discussed in section 
X.A.3.d.(5)(f) of the preamble of this final rule, creating the NPRA. 
Finally, we proposed in the proposed rule to combine the NPRA with the 
results of the post-episode payment calculation (as discussed in 
section X.A.3.d.(5)(g) of the preamble of this final rule), to create 
the reconciliation payment amount or repayment amount. We sought 
comment on our proposal at proposed Sec.  512.550(c-g) for calculating 
the reconciliation payment amount or repayment amount.
    We did not propose to include any TEAM reconciliation payments or 
repayments to Medicare under this model for a given performance year in 
the reconciliation amount for a subsequent performance year. We wanted 
to incentivize providers to provide high quality and efficient care in 
all years of the model. If reconciliation payments for a performance 
year are counted as performance year spending in a subsequent 
performance year, a hospital would experience higher performance year 
spending in the subsequent performance year as a consequence of 
providing high quality and efficient care in the prior performance 
year, negating some of the incentive to perform well in the prior year. 
Therefore, we proposed in the proposed rule to not have the 
reconciliation amount for a given performance year be impacted by TEAM 
Medicare repayments or reconciliation payments made in a prior 
performance year. We sought comment on our proposal not to include TEAM 
reconciliation payments or repayments in performance year spending.
    Comment: A commenter recommended that TEAM participants should not 
be eligible for reconciliation payments for an episode category if the 
quality of care on episode-specific measures decreases during the 
performance period compared to the hospital's performance during the 
baseline period. At the same time, CMS should reward quality 
improvement independent of cost performance.
    Response: We thank the commenter for their recommendation and refer 
them to sections X.A.3.d.(5)(h) and X.A.3.d.(5)(g) of the preamble of 
the proposed rule, that would allow TEAM participants to be rewarded 
for their work to improve quality and cost outcomes for their episodes, 
but not be held financially accountable if spending exceeds the 
reconciliation target price. We believe the 10 percent stop-gain

[[Page 69779]]

limit and a CQS adjustment percentage of up to 10 percent for Track 1 
are appropriate and would allow TEAM participants to be rewarded for 
spending and quality performance while easing into financial risk. 
Further Track 3 would have two-sided financial risk in the form of 
reconciliation payments or repayment amounts, subject to 20 percent 
stop-gain and stop-loss limits and a CQS adjustment percentage of up to 
10 percent, as described in sections X.A.3.d.(5)(h) and X.A.3.d.(5)(g) 
of the preamble of this final rule, that would allow TEAM participants 
to have higher levels of reward and risk based on their quality and 
cost performance for their episodes. We are finalizing our policy to 
allow all TEAM participants to participate in Track 1 for the first 
performance year, and safety net hospitals, as defined in section 
X.A.3.f of the preamble of this final rule, to be eligible to 
participate in Track 1 for the first three performance years with no 
downside risk, as discussed in section X.A.3.a.(3) of the preamble of 
this final rule. With TEAM having a five-year model performance period 
we do not believe that making Track 1 available for more than one 
performance year would motivate TEAM participants to improve quality or 
spending performance since there would be no financial accountability 
when spending reductions are not achieved. Furthermore, we believe 
TEAMs pay-for-performance methodology does not need a CQS threshold 
since poor quality performance in TEAM would negatively affect any 
positive or negative reconciliation amount. After consideration of the 
public comments we received, we are finalizing our proposals without 
modification at regulation Sec.  512.550(c-g) for calculating the 
reconciliation payment amount or repayment amount.
(g) Incorporating the Composite Quality Score Into the Reconciliation 
Amount
    As indicated in section X.A.3.c of the preamble of this final rule, 
the TEAM quality measure assessment is a pay-for-performance 
methodology aimed to incentivize and reward cost savings in relation to 
the quality of episode care provided by the TEAM participant. Similar 
to the BPCI Advanced model, we proposed in the proposed rule that a 
TEAM participant's quality performance would be linked to payment by 
translating the CQS into a CQS adjustment percentage and applying the 
CQS adjustment percentage to any positive or negative reconciliation 
amount. Specifically, for Track 1 TEAM participants we stated in the 
proposed rule that the CQS adjustment percentage would adjust a 
positive reconciliation amount up to 10 percent, and because Track 1 
does not have downside risk, there would be no CQS adjustment 
percentage for negative reconciliation amounts. In the event a TEAM 
participant in Track 1 would have earned a negative reconciliation 
amount, their CQS would still be reported in their reconciliation 
report so that they may use this information to improve their quality 
measure performance in the next performance year. For Track 2 we stated 
in the proposed rule that the CQS adjustment percentage would adjust a 
positive reconciliation amount up to 10 percent and a negative 
reconciliation amount up to 15 percent. In other words, the CQS 
adjustment percent would not adjust the positive reconciliation amount 
down by more than 10 percent, nor would it adjust the negative 
reconciliation amount up (meaning more towards a positive amount) by 
more than 15 percent. For Track 3 TEAM participants, we stated in the 
proposed rule that the CQS adjustment percentage would adjust a 
positive reconciliation amount up to 10 percent and a negative 
reconciliation amount up to 10 percent. We would determine the CQS 
adjustment percentage using the following proposed formulas in Table 
X.A.-13.
[GRAPHIC] [TIFF OMITTED] TR28AU24.312

    In the proposed rule, we stated the CQS adjustment percentage would 
be multiplied with the TEAM participant's positive or negative 
reconciliation amount to produce the CQS adjustment amount. The CQS 
adjustment amount would then be subtracted from the positive or 
negative reconciliation amount to create the quality-adjusted 
reconciliation amount. We proposed in the proposed rule to define the 
quality-adjusted reconciliation amount as the dollar amount 
representing the difference between the reconciliation target price and 
performance year spending, after adjustments for quality, but prior to 
application of stop-gain/stop-loss limits and the post-episode spending 
adjustment, as described in sections X.A.3.d.(5)(h). and 
X.A.3.d.(5)(i). of the preamble of this final rule. Since we indicated 
in the proposed rule that Track 2 participation is limited to TEAM 
participants who may care for a higher proportion of underserved TEAM 
beneficiaries, we believed an asymmetric application of the CQS 
adjustment percentage for Track 2 TEAM participants may help to 
mitigate some the negative financial burden that may be associated with 
caring for underserved beneficiaries who tend to be higher cost and 
have worse health outcomes. Table X.A.-14 illustrates TEAM's 
methodology in the proposed rule of incorporating CQS into payment 
using the different CQS adjustment percentage scenarios using rounded 
values.

[[Page 69780]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.313

    We considered, but did not propose, an asymmetric application of 
the CQS adjustment percentage for TEAM participants in Track 3. We 
believed the symmetric application in the proposed rule was appropriate 
to balance the amount of financial risk associated with quality 
performance since Track 3 was meant to have higher risks and rewards. 
Further, we also considered different CQS adjustment percentages for 
TEAM participants in all tracks including 20 percent, 25 percent, 33 
percent and 50 percent but felt that these percentages may be too high 
given TEAM participants will have varying levels of experience with 
value-based care and a pay-for-performance methodology. We also 
considered lower CQS adjustment percentages for TEAM participants in 
all tracks including 1 percent, 3 percent, and 5 percent, but we 
believe these percentages would be too low and minimize the importance 
of quality improvement and thus would not incentivize TEAM participants 
to strive for quality of care improvements.
    We also considered other approaches to tying TEAM quality measure 
performance to payment, including how the CJR Model applied their CQS 
methodology to adjust the discount factor. However, we believe the 
TEAM's proposed approach creates a greater incentive to improve quality 
measure performance because a TEAM participant must achieve of a CQS of 
100 to receive the maximum quality-adjusted reconciliation amount. 
While this may be perceived as setting a high standard, it is 
consistent with the approach we have taken in BPCI Advanced and 
emphasizes the importance of beneficiary quality of care. We also note 
that TEAM's CQS methodology also tries to protect TEAM participants 
from increased financial risk based on their CQS. Meaning, if a TEAM 
participant has a negative reconciliation amount, performing better on 
quality would reduce their repayment amount. For example, a TEAM 
participant that performs well in quality (e.g., a CQS of 100) would 
have a lower repayment amount, as compared to a TEAM participant that 
did poorly on quality (e.g., score of 0) and would owe their full 
repayment amount.
    Lastly, we considered applying a CQS threshold to be eligible to 
receive a reconciliation payment in TEAM. A similar approach was used 
in the CJR model where a participant hospital had to achieve a minimum 
CQS to receive a reconciliation payment, however, a level of quality 
performance that was below acceptable would not affect participant 
hospitals' repayment responsibility. We believed TEAM's pay-for-
performance methodology as outlined in the proposed rule does not need 
a CQS threshold since poor quality performance in TEAM would negatively 
affect any positive or negative reconciliation amount.
    We sought comment on TEAM's proposed methodology at proposed Sec.  
512.550(d) to calculate and apply the CQS. We also sought comment on 
our proposed definition of quality-adjusted reconciliation amount at 
Sec.  512.505.
    We invited public comment regarding the proposal to calculate and 
apply the CQS and the definition of quality-adjusted reconciliation 
amount. We received no comments on the proposals on how to calculate 
and apply the CQS and are finalizing as proposed without modification 
at Sec.  512.550(d). We are also finalizing our proposal at Sec.  
512.505 the definition of quality-adjusted reconciliation amount.
(h) Limitations on NPRA
    In the proposed rule, we stated that in CJR and BPCI Advanced, we 
included both stop-loss and stop-gain limits on the total amount that a 
participant could owe to CMS as a repayment or receive from CMS as a 
reconciliation payment. For CJR, this policy and its justification is 
described in the 2015 CJR Final Rule at 80 FR 73398. For both CJR and 
BPCI Advanced, these limits were applied as a percentage of a 
participant's total aggregate target price at reconciliation. Stop-loss 
and stop-gain limits gradually increased over the first few years of 
the CJR model, reaching a maximum of 20 percent for most hospitals for 
performance years 4-8, while the BPCI Advanced model has maintained 20 
percent limits every model year for all participants.
    As with CJR, we proposed in the proposed rule to phase in risk in 
TEAM. We stated in the proposed rule that Track 1 TEAM participants 
would not be subject to downside risk in PY 1. We also stated in the 
proposed rule that a stop-gain limit of 10 percent would be used for 
Track 1 TEAM participants in PY 1, and that TEAM participants in Track 
2 would be subject to downside and upside risk with a symmetric stop-
gain and stop-loss limits of 10 percent for PY 2-5. We indicated in the 
proposed rule that we believe a 10 percent stop-gain and stop-loss 
limit of 10 percent is appropriate for Track 2 participants who can 
gain value-based care experience but have less financial risk. However, 
since Track 3 would be designed for TEAM participants with prior 
experience in value-based care or those who are prepared to accept 
greater financial risk in the first year of TEAM, we stated in the 
proposed rule that TEAM participants that opt into Track 3 of the model 
would be subject to both upside and downside risk, with symmetric stop-
gain and stop-loss limits of 20 percent for all performance years. The 
greater level of downside risk in Track 3 would therefore be balanced 
by higher stop-gain limits for Track 3 compared to Track 1 or Track 2, 
which we indicated in the proposed rule we would continue for all 
performance years.
    We considered, but we did not propose, higher and lower stop-gain 
and stop-loss limits for Track 3, including 25 percent, 15 percent, and 
10 percent but we believed maintaining consistency with 20 percent 
stop-gain and stop-loss limits of previous episode-based payment models 
provides an appropriate balance of financial risk and reward to promote 
spending reductions with reasonable risk thresholds. We also 
considered, but did not propose, lower stop-gain and stop-loss limits 
for Track 2, including 5 percent, 3 percent and 1 percent limits, or 
asymmetric limits,

[[Page 69781]]

such as 10 percent stop-gain and 5 percent stop-loss limits or 5 
percent stop-gain and 3 percent or 1 percent stop-loss. We also 
considered, but did not propose, lower and asymmetric limits for 
certain TEAM participants. For example, we considered a 10 percent or 5 
percent stop-gain paired with a 3 percent or 1 percent stop-loss for 
TEAM participants who meet the criteria of a safety net hospital. Since 
TEAM offers a one-year glide path where all TEAM participants could 
elect to participate in Track 1 with no downside risk for PY 1, we do 
not believe lower or asymmetric limits would be necessary for Track 2. 
By PY 2 when Track 2 is available for certain TEAM participants, they 
should have sufficient infrastructure in place to assume two-sided risk 
while having less financial risk compared to Track 3. We sought comment 
on these alternative proposals for stop-gain and stop-loss limits and 
whether there are other mechanisms we should consider to help limit a 
TEAM participant's financial risk in the model.
    We also indicated in the proposed rule we would apply stop-loss and 
stop-gain limits after application of the CQS which would result in the 
NPRA. We would define NPRA as the dollar amount representing the 
difference between the reconciliation target price and performance year 
spending, after adjustments for quality and stop-gain/stop-loss limits, 
but prior to the post-episode spending adjustment, which is described 
in section X.A.3.d.(5)(g) of the preamble of this final rule. We 
believed applying the stop-loss and stop-gain limits after the CQS was 
appropriate because it limits the financial risk associated with 
episode spending and quality performance, which is similar to how the 
BPCI Advanced model and CJR model apply stop-loss and stop-gain limits.
    We sought comment on our proposal at proposed Sec.  512.550(c)(vi) 
for differential stop-gain and stop-loss limits for TEAM participants 
by Track and Performance Year. We also sought comment on our NPRA 
definition at proposed Sec.  512.505.
    The following is a summary of public comments received on our 
proposal for the application of stop-loss and stop-gain limits and our 
responses to these comments:
    Comment: Numerous commenters requested lower financial risk for 
rural hospitals. Many commenters noted the strain on rural hospitals 
who are not as risk tolerant, especially when these hospitals have 
lower volumes and less financial resources compared to larger, urban 
hospitals. Some commenters recommend reducing the CMS discount or 
adjusting the stop-gain and stop-loss risk corridors in Track 2 to 
provide a higher incentive for rural hospitals and safety net hospitals 
to participate; specifically reducing the stop-loss limits from 10 
percent to 5 percent. A commenter recommended CMS to reconsider Track 
2's proposed risk arrangement by implementing parallel upside and 
downside risk of 10 percent for that track.
    Response: We thank commenters for their recommendations surrounding 
financial risk for rural hospitals. We recognize rural hospitals, as 
defined and finalized in section X.A.3.f of the preamble of this final 
rule, and other types of hospitals, including Sole Community Hospitals 
as defined under 42 CFR 412.92, Medicare Dependent Hospitals as defined 
under 42 CFR 412.108, and essential access community hospitals as 
defined under 42 CFR 412.109, often serve as the only access of care 
for beneficiaries living in rural areas, may have fewer resources to 
contain costs under this model, and may have more limited options on 
providers to coordinate care with. Similar to safety net hospitals, 
these hospitals have been underrepresented in previous episode-based 
models and can also experience financial challenges, in part due to 
their lower patient volumes, that can make it difficult to sustain 
their resources. While rural hospitals are not being oversampled in 
TEAM, the use of core-based statistical areas (CBSAs) may capture a 
greater number of rural providers compared to using metropolitan 
statistical areas (MSAs) like the CJR model, thus potentially 
increasing their presence in TEAM. CMS has considered the unique needs 
of rural hospitals and tested the Pennsylvania Rural Hospital Model to 
engage rural providers in value-based care. However, the Pennsylvania 
Rural Hospital Model is not an episode-based payment model, is limited 
in scope, and is not permitted to overlap with certain episode-based 
payment models like the BPCI Advanced model. Therefore, we acknowledge 
that rural hospitals and the other hospitals eligible for Track 2, as 
described in section X.A.3.a.(3) of the preamble of this final rule, 
may need reduced financial risk to provide a more equitable 
participation opportunity in the model. We are finalizing our Track 2 
stop-loss and stop-gain limits with slight modification by reducing the 
limits, from 10 percent to 5 percent for all performance years of Track 
2. We believe this reduction will help protect from significant 
financial losses and is an appropriate threshold for these hospitals' 
exposure to downside financial risk.
    In addition, as discussed in section X.A.3.d.(3)(h) of the preamble 
of this final rule, we are not finalizing our policy for low volume 
hospitals and will propose an updated policy in future notice and 
comment rulemaking that will address the level of risk these TEAM 
participants may have. We believe that a future low volume hospital 
policy, paired with the stop-gain and stop-loss limit reductions for 
Track 2, will help facilitate TEAM participants' abilities to be 
successful under this model.
    Lastly, we thank the commenter for the recommendation to apply 
symmetrical stop-gain and stop-loss limits and highlight that in the 
proposed rule (89 FR 35934), we proposed that Track 2 have parallel or 
symmetrical stop-gain and stop-loss limits. Further, the changes we are 
finalizing to the stop-gain and stop-loss limits for Track 2 are 
symmetrical, such that both limits are set at 5 percent.
    Comment: A commenter suggested that the application of the stop-
loss/stop-gain threshold should be at the individual beneficiary or 
Clinical Episode level instead of the hospital level for the relevant 
Reconciliation period. The commenter cited concerns about low volume 
hospitals randomly experiencing anomalous expensive Clinical Episodes 
and how the financial impact of a single outlier episode will be larger 
for a low volume provider than a higher volume provider.
    Response: We thank the commenter for sharing their concerns; 
however, we disagree that the stop-loss/stop-gain threshold should be 
at the individual beneficiary or Clinical Episode level. The intention 
of the stop-loss/stop-gain thresholds are to protect both TEAM 
participants and CMS from losses. In order to ensure that TEAM 
participants have some protection from the downside risk associated 
with clinical outliers that incur high payment episodes, we will cap 
episode spending at the 99th percentile for each DRG and region 
combination in both the baseline and performance year, as discussed in 
section X.A.3.d.(3)(e) of the preamble of this final rule. We believe 
that applying the stop-loss/stop-gain threshold at the individual level 
would also blunt the incentives providers have to reduce the frequency 
of bad outcomes. As indicated in section X.A.3.d.(3)(h) of the preamble 
of this final rule, we intend to provide additional flexibility and 
protection to low volume hospitals and will propose a new policy in 
future notice and comment rulemaking prior to the model start date.

[[Page 69782]]

    After consideration of the public comments we received, we are 
finalizing our proposal with some slight modification for differential 
stop-gain and stop-loss limits for TEAM participants by Track and 
Performance Year at regulation Sec.  512.550(e)(1-3). Specifically, we 
are modifying our proposal for Track 2 to have 5 percent stop-gain at 
Sec.  512.550(e)(2) and 5 percent stop-loss limits and Sec.  
512.550(e)(3). We are also finalizing our proposal to define NPRA at 
regulation Sec.  512.505.
(i) Participant Responsibility for Increased Post-Episode Payments
    While the episodes as stated in the proposed rule would extend 30 
days post-discharge from the anchor hospitalization or post-procedure 
(for outpatient episodes), some hospitals may have an incentive to 
withhold or delay medically necessary care until after an episode ends 
to reduce their actual episode payments. We did not believe this would 
be likely, but in order to identify and address such inappropriate 
shifting of care, we stated in the proposed rule we would calculate the 
total Medicare Parts A and B expenditures in the 30-day period 
following completion of each episode for all services covered under 
Medicare Parts A and B for each performance year, regardless of whether 
the services are included in the episode definition proposed in the 
proposed rule (section X.A.3.b.(5) of the preamble of this final rule). 
Because we based the episode definition on exclusions, identified by 
MS-DRGs for readmissions and ICD-10-CM diagnosis codes for Part B 
services as discussed in section X.A.3.b.(5)(a) of the preamble of this 
final rule, and Medicare beneficiaries may typically receive a wide 
variety of related (and unrelated) services during episodes, there is 
some potential for hospitals to inappropriately withhold or delay a 
variety of types of services until the episode concludes regardless of 
whether the service is included in the episode definition, especially 
for Part B services where diagnosis coding on claims may be less 
reliable. This inappropriate shifting could include both those services 
that are related to the episode (for which the hospital would bear 
financial responsibility as they would be included in the actual 
episode spending calculation) and those that are unrelated (which would 
not be included in the actual episode spending calculation), because a 
hospital engaged in shifting of medically necessary services outside 
the episode for potential financial benefit may be unlikely to clearly 
distinguish whether the services were related to the episode or not.
    This calculation would include prorated payments for services that 
extend beyond the episode as discussed in section X.A.3.d.(3)(c) of 
this final rule. Specifically, at proposed Sec.  512.550(f) we stated 
in the proposed rule we would identify whether the average 30-day post-
episode spending for a TEAM participant in any given performance year 
is greater than three standard deviations above the regional average 
30-day post-episode spending, based on the 30-day post-episode spending 
for episodes attributed to all TEAM regional hospitals in the same 
region as the TEAM participant. We stated in the proposed rule that 
beginning with PY 1 for Track 3 TEAM participants, and PY 2 for Track 2 
TEAM participants, if the TEAM participant's average post-episode 
spending exceeds this threshold, the amount above the threshold would 
be subtracted from the reconciliation amount or added to the repayment 
amount for that performance year. The amount above the threshold would 
not be subject to the stop-loss limits proposed elsewhere in the 
proposed rule. We sought comment on this proposal at proposed Sec.  
512.550(f) to make TEAM participants responsible for making repayments 
to Medicare based on high spending in the 30 days after the end of the 
episode and for our proposed methodology to calculate the threshold for 
high post-episode spend.
    The following is a summary of public comments received regarding 
the proposal to make TEAM participants responsible for making 
repayments to Medicare based on high post-episode spending and the 
proposed methodology to calculate the threshold for high post-episode 
spending, and our responses to these comments:
    Comment: A commenter supported the use of post-episode spending 
calculations and NPRA adjustments to ensure care is not being 
postponed. Some commenters suggested that CMS should compare the post-
episode spending for TEAM participants to their peers, citing concerns 
that region alone will not sufficiently capture differences in the 
hospital type and the patient populations (such as trauma and 
oncology). One of the commenters recommended using the same peer group 
characteristics as the BPCI Advanced model.
    We thank the commenters for sharing their support and concerns with 
the proposed post-episode spending methodology; however, we continue to 
believe that participant post-episode spending should be compared to 
region-level distributions.
    Since peer groups would include fewer hospitals than regions, the 
standard deviation of the distribution of post-episode spending could 
be larger. This would reduce CMS's ability to identify and address 
inappropriate withholding or delaying of medically necessary care for 
potential financial benefit. Furthermore, it is more straightforward to 
keep the level of comparison consistent with the in-episode spending 
calculations, which are at the region-level.
    We acknowledge the commenters' specific concern for trauma and 
oncology patients. However, CMS believes that it is imperative to 
compare post-episode spending across hospitals regardless of the types 
of services provided, as a hospital engaged in shifting of medically 
necessary services outside the episode for potential financial benefit 
may be unlikely to clearly distinguish whether the services were 
related to the episode or not. We will continue to assess our target 
price methodology, including the construction of the post-episode 
spending calculation, and if we believe a modification is necessary, we 
will propose such modification in future notice and comment rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal at Sec.  512.550(f) to compare post-episode 
spending for TEAM participants to the region-level distribution.
(j) Reconciliation Payments and Repayments
    For the PY 1 reconciliation process for Track 1 TEAM participants, 
we indicated in the proposed rule we would combine a TEAM participant's 
NPRA and post-episode spending amount, as described previously in this 
section, and if positive, the TEAM participant would receive the amount 
as a one-time lump sum reconciliation payment from Medicare. If 
negative, the TEAM participant would not be responsible for repayment 
to Medicare, consistent with our proposal for a 1-year glide path to 
phase in greater financial responsibility in the model. For TEAM 
participants in Track 3 for PY 1, and Track 2 or Track 3 for PYs 2-5, 
if the amount is positive, the TEAM participant would receive the 
amount as a one-time lump sum reconciliation payment from Medicare. If 
the amount is negative, Medicare would hold the TEAM participant 
responsible for a one-time lump sum repayment. CMS would collect the 
one-time lump sum repayment in a manner that is

[[Page 69783]]

consistent with all relevant federal debt collection laws and 
regulations.
    We want participants to succeed in TEAM by providing high quality 
care to TEAM beneficiaries and reducing episode spending, but we 
understand there may be instances when a TEAM participant does not meet 
performance metrics and owes a repayment amount. We acknowledge paying 
back Medicare in a lump sum for a repayment amount may introduce 
financial hardship for some TEAM participants, especially those who may 
be new to value-based care with downside risk or those who have fewer 
financial resources. In some CMS Innovation Center models, certain 
participants are required to have financial guarantees, which act as a 
reinsurance policy for CMS if the participant is unable to pay back 
debts owed as a result of their performance in the model. For example, 
the BPCI Advanced model requires certain participants to have secondary 
repayment sources, generally in the form of a letter of credit or 
escrow agreement, that can be drawn upon if the participant is unable 
or fails to pay their repayment amount. Yet, financial guarantees 
require upfront capital and must be replenished in a timely manner for 
potential use in future debts. Further, financial guarantees generally 
need to be established before the model starts, thus before the TEAM 
participant would be eligible to use any TEAM payment amounts to fund 
the financial guarantee.
    We do not believe financial guarantees would be appropriate for 
TEAM given the aforementioned concerns but recognize that providing 
some process to prolong recovery of a repayment amount may be needed to 
mitigate potential financial hardships. Existing Medicare policy allows 
the recovery of Medicare debt, defined as recoupment in 42 CFR 405.370, 
and non-Medicare debt, defined as offset in 42 CFR 405.370, by reducing 
present or future Medicare payments and applying the amount withheld to 
the indebtedness. To leverage the existing Medicare policy to recover 
debts in TEAM, we considered whether the reduction of present or future 
Medicare payments should be a dollar amount reduction, for example a 
$100 reduction of all Medicare payments, or a percentage reduction 
applied to all Medicare payments, for example a 2 percent reduction to 
Medicare payments. A dollar amount reduction may be simpler to 
calculate while translating a debt to a percentage reduction may be 
more complex to calculate. We also considered whether the reduction of 
present or future Medicare payments should only be associated with a 
TEAM participant's Medicare Part A payments for the corresponding 
episode categories tested in TEAM or for all of a TEAM participant's 
Medicare Part A payments. Limiting the Medicare payment reduction to 
only corresponding episode categories tested in TEAM may draw out the 
length of time for debt recovery, but it may ease TEAM participant 
bookkeeping when accounting for TEAM financial performance. Conversely, 
reduction of Medicare payments for all of a TEAM participant's Medicare 
Part A payments may reduce the length of time for debt recovery, but it 
may be more challenging to identify and track TEAM participant 
financial performance.
    We did not propose to require financial guarantees or change 
existing Medicare recoupment or offsetting policies, but we sought 
comment on whether we should consider these options further or if there 
are other ways to reduce financial hardship for TEAM participants that 
owe a repayment amount. We also sought comment on whether we should 
consider a Medicare payment policy waiver to reduce financial hardship, 
what the waiver would waive, and if the waiver is necessary to avoid 
undue burden on TEAM participants.
    We invited public comment on whether we should consider these 
options further or if there are other ways to reduce financial hardship 
for TEAM participants that owe a repayment amount. We also sought 
comment on whether we should consider a Medicare payment policy waiver 
to reduce financial hardship, what the waiver would waive, and if the 
waiver is necessary to avoid undue burden on TEAM participants.
    We also considered an alternative approach to making reconciliation 
payments and collecting repayments from TEAM participants. Under this 
alternative approach, in lieu of making a lump sum payment to TEAM 
participants, or collecting a repayment amount from TEAM participants, 
we would instead make a percentage adjustment to future fee-for-service 
(FFS) claims for TEAM participants. The magnitude of the adjustments 
would be intended to approximate the same dollar amount that would be 
paid or recouped via a reconciliation process; adjustments would be 
made in the form of a multiplier on claims for the anchor procedures 
for the episodes included in TEAM. For example, we would make 
adjustments to IPPS claims containing the MS-DRGs included in the 
model, and the amounts of the adjustments for each TEAM participant 
over the course of a year would, in aggregate, be intended to 
approximately equal the dollar amount that would have otherwise been 
paid via a reconciliation payment (or recouped via a repayment amount). 
The alternative approach would look similar to the operational payment 
mechanisms used in other Medicare programs and initiatives such as the 
Hospital Value-Based Purchasing Program, the SNF Value-Based Purchasing 
Program, the Expanded Home Health Value-Based Purchasing Model, and the 
Hospital Readmissions Reduction Program. We considered a value-based 
purchasing payment approach because we believe it has the potential to 
be less operationally cumbersome than making separate reconciliation 
payments if TEAM is expanded nationally in the future. We also believed 
that a value-based purchasing payment approach that adjusts future FFS 
claims up or down would provide financial stability for TEAM 
participants, because they would receive notice of their adjustment 
amounts ahead of the year in which those adjustments would apply, and 
TEAM participants that would otherwise owe a repayment amount could 
effectively pay that debt over time automatically via claims 
adjustments, versus writing a check to CMS.
    A value-based purchasing approach for TEAM would not be without 
challenges, however. First, preliminary modeling indicates that payment 
adjustment percentages for the proposed episodes may need to be 
relatively large in order to approximate the same dollar amount that 
would otherwise be paid out via a reconciliation payment or paid to CMS 
via a repayment amount. Although the adjustment percentages would be 
limited to a subset of FFS claims for a given TEAM participant, we 
believe we must be cautious that particularly for some providers, a 
negative adjustment to FFS claims could represent a financial hardship. 
Second, we considered whether claims adjustments should be made to only 
IPPS claims (for the MS-DRGs that trigger an anchor procedure/
hospitalization for an episode), or also to Outpatient Prospective 
Payment System (OPPS) claims, given that we proposed to include 
episodes that initiate in the outpatient setting in TEAM for certain 
episode categories. Making adjustments to both IPPS and OPPS claims 
would add complexity, particularly since the IPPS payment updates are 
made on a fiscal year schedule, while the OPPS updates payments on a 
calendar year cycle. We

[[Page 69784]]

sought comment on whether, for TEAM or other future initiatives that 
may consider a similar value-based purchasing approach, we should make 
adjustments to IPPS claims only or also OPPS claims that trigger model 
episodes.
    We sought comment on our proposal making reconciliation payments 
to, and collecting repayment amounts from, TEAM participants as a one-
time, lump sum payment, as well as the alternative considered to 
implement a value-based purchasing approach where we make payment 
adjustments to future FFS claims in lieu of lump sum payments or 
repayments.
    The following is a summary of the public comments received on this 
proposal and our responses to those comments:
    Comment: A commenter suggested that the CMS Innovation Center could 
determine the likely reimbursement from the IRS, provide that money to 
the TEAM participant, and get reimbursed by the IRS at project 
completion. The commenter also suggested that we provide some way to 
link TEAM participants with other funding sources to overcome this same 
problem of time-delay of the reimbursements or provide some kind of 
loan program, available ONLY to TEAM participants.
    Response: We thank the commenter for sharing their support and 
concerns regarding payment options for TEAM participants. This would 
require infrastructure and policy changes across multiple agencies that 
are outside of the scope of TEAM, but we will continue to consider 
improvements to how we collect repayment amounts from TEAM 
participants.
    Comment: A commenter recommended CMS allow participants to pay 
money back after the reconciliation process rather than having CMS 
recoup future payments and encouraged CMS to finalize an annual 
reconciliation process. Also, the commenter recommended that CMS 
provide participants regular monthly reporting.
    Response: We thank the commenter for their encouragement and 
recommendations. TEAM participants will have the opportunity to pay 
repayment amounts before they are recouped from future Medicare 
payments. TEAM participants will receive cumulative beneficiary-
identifiable claims files on a monthly basis, pursuant to a request and 
TEAM data sharing agreement, for care coordination purposes and to help 
estimate their performance.
    Comment: A commenter recommended that CMS should make 
reconciliation payments in its value-based models by adjusting future 
fee-for-service claims in lieu of lump sum reconciliation because it 
would eliminate the challenges with obtaining the demand letters. The 
commenter also recommended that CMS electronically deliver demand 
letters instead of mailing them as an alternative approach.
    Response: We thank the commenter for their concern regarding their 
challenges associated with demand letters that are sent via regular 
mail. We disagree that the usage of the mail service is onerous for our 
participants but may consider their recommendations for future 
rulemaking.
    After consideration of the comments received, we are finalizing 
without modification at Sec.  512.550(g)(2-3) the proposed provisions 
for lump sum reconciliation payments and repayment amounts.
(6) Appeals Process
(a) First Level Appeal Process
    At proposed Sec.  512.560, we stated in the proposed rule the 
following first level appeal process for TEAM participants to contest 
matters related to payment or reconciliation, of which the following is 
a non-exhaustive list: The calculation of the TEAM participant's 
reconciliation amount or repayment amount as reflected on a TEAM 
reconciliation report; the calculation of net payment reconciliation 
amount (NPRA); and the calculation of the Composite Quality Score 
(CQS). We stated in the proposed rule that TEAM participants would 
review their TEAM reconciliation report and be required to provide a 
notice of calculation error that must be submitted in a form and manner 
specified by CMS. Unless the participant provides such notice, we 
indicated in the proposed rule that the reconciliation report would be 
deemed final within 30 calendar days after it is issued, and CMS would 
proceed with payment or repayment. In the proposed rule, we proposed 
that if CMS receives a timely notice of an error in the calculation, 
CMS will respond in writing within 30 calendar days to either confirm 
or refute the calculation error, although CMS would reserve the right 
to an extension upon written notice to the TEAM participant. If a TEAM 
participant does not submit timely notice of calculation error in 
accordance with the timelines and processes specified by CMS, the TEAM 
participant would be precluded from later contesting any element of the 
TEAM reconciliation report for that performance year.
    At proposed Sec.  512.560(b) we proposed in the proposed rule an 
exception to the appeals process. If a TEAM participant contests a 
matter that does not involve an issue contained in, or a calculation 
that contributes to, a TEAM reconciliation report, a notice of 
calculation error is not required. A notice of calculation error form 
would not be an appropriate format for addressing issues other than 
calculation errors, given that it is tailored specifically to 
calculation errors. In these instances, we stated in the proposed rule 
that if CMS does not receive a request for reconsideration from the 
TEAM participant within 10 calendar days of the notice of the initial 
reconciliation, the initial determination is deemed final and CMS 
proceeds with the action indicated in the initial determination. We 
note that this proposed exception does not apply to the limitations on 
review in Sec.  512.594.
    We sought comment on our proposal for the first level appeals 
process.
    We received no comments on these proposals and therefore are 
finalizing this provision without modification at Sec.  512.560.
(b) Reconsideration Review Process
    At proposed Sec.  512.561, we proposed in the proposed rule a 
reconsideration process that is based on processes implemented under 
current models being tested by the CMS Innovation Center. The process 
would enable TEAM participants to contest determinations made by CMS. 
We proposed at Sec.  512.594 to waive section 1869 of the Act, which 
governs determinations and appeals in Medicare and instead we proposed 
to codify a reconsideration process for TEAM participants to utilize. 
We proposed at Sec.  512.561(a) that only TEAM participants may utilize 
the dispute resolution process. We believe establishing a 
reconsideration process is necessary to give TEAM participants a means 
to dispute certain determinations made by CMS.
    This proposed reconsideration review process would be utilized in 
the case that a determination has been made and the TEAM participant 
disagrees with that determination. Part 512 subpart E would include 
specific details about when a determination is final and may be 
disputed through the reconsideration review processes.
    At proposed Sec.  512.561(b), we stated in the proposed rule that 
TEAM participants may request reconsideration of a determination made 
by CMS, only if such reconsideration is not precluded by section 
1115A(d)(2) of the Act or this subpart. At proposed

[[Page 69785]]

Sec.  512.561(b)(1)(i) we stated in the proposed rule that a request 
for review of those final determinations made by CMS that are not 
precluded from administrative or judicial review would be submitted to 
a CMS reconsideration official. The CMS reconsideration official would 
be authorized to receive such requests and would not have been involved 
in the initial determination or, if applicable, the notice of 
calculation error process. At proposed Sec.  512.561(b)(1)(ii) we 
stated in the proposed rule that the reconsideration review request 
would be required to include a copy of CMS's initial determination, 
contain a detailed written explanation of the basis for the dispute, 
and at proposed Sec.  512.561(b)(1)(iii) we stated in the proposed rule 
that the request would have to be made within 30 days of the date of 
CMS's initial determination via email addressed to an address specified 
by CMS. At proposed Sec.  512.561(b)(2), we indicated in the proposed 
rule that requests that do not meet the requirements of paragraphs 
(b)(1) are denied.
    We indicated in the proposed rule that the reconsideration official 
would send a written acknowledgement to CMS and to the TEAM participant 
requesting reconsideration within 10 business days of receiving the 
reconsideration request. The acknowledgement would set forth the review 
procedures and a schedule that permits each party an opportunity to 
submit documentation in support of their position for consideration by 
the reconsideration official.
    At proposed Sec.  512.561(b)(1)(i)(B) we proposed, that, to access 
the reconsideration process for a determination concerning a TEAM 
payment, the TEAM participant would be required to satisfy the notice 
of calculation error requirements specified in section X.A.3.d.(6)(a) 
of the preamble of this final rule before submitting a reconsideration 
request under this process. In the event that the model participant 
fails to timely submit an error notice with respect to a TEAM payment, 
we stated in the proposed rule that the reconsideration review process 
would not be available to the TEAM participant with regard to that 
payment.
    At proposed Sec.  512.561(c), we stated in the proposed rule we 
would codify standards for the reconsideration. First, during the 
course of the reconsideration, both CMS and the party requesting the 
reconsideration must continue to fulfill all responsibilities and 
obligations during the course of any dispute arising under TEAM. 
Second, the reconsideration would consist of a review of documentation 
timely submitted to the reconsideration official and in accordance with 
the standards specified by the reconsideration official in the 
acknowledgement at proposed Sec.  512.561(b)(3). Finally, we stated in 
the proposed rule that the burden of proof would be on the TEAM 
participant to prove to the reconsideration official, by a standard of 
clear and convincing evidence, that the determination made by CMS was 
inconsistent with the terms of TEAM.
    At proposed Sec.  512.561(d) we stated in the proposed rule that 
the reconsideration determination would be an on-the-record review. By 
this, we meant a review that would be conducted by a CMS 
reconsideration official who is a designee of CMS who is authorized to 
receive such requests under proposed Sec.  512.561(b)(1)(i), of the 
position papers and supporting documentation that are timely submitted 
and meet the standards of submission under proposed Sec.  512.561(b)(1) 
as well as any documents and data timely submitted to CMS by the TEAM 
participant in the required format before CMS made the initial 
determination. Under the proposed Sec.  512.561(d)(2), the 
reconsideration official would issue to CMS and the TEAM participant a 
written reconsideration determination. Absent unusual circumstances in 
which the reconsideration official would reserve the right to an 
extension upon written notice to the TEAM participant, the 
reconsideration determination would be issued within 60 days of CMS's 
receipt of the timely filed position papers and supporting 
documentation. Under proposed Sec.  512.561(d)(3), the determination 
made by the CMS reconsideration official would be final and binding 30 
days after its issuance, unless the TEAM participant or CMS were to 
timely request review of the reconsideration determination by the CMS 
Administrator in accordance with proposed Sec.  512.5610(e)(1) and (2).
    We received no comments on these proposals and therefore are 
finalizing this provision without modification at Sec.  512.561.
(c) CMS Administrator Review Process
    We stated in the proposed rule we would codify at proposed Sec.  
512.561(e) a process for the CMS Administrator to review 
reconsideration determinations made under proposed Sec.  512.561(d). We 
indicated in the proposed rule that either the TEAM participant or CMS 
may request that the CMS Administrator review the reconsideration 
determination made by the reconsideration official. Under proposed 
Sec.  512.561(e)(1), we stated in the proposed rule that the request to 
the CMS Administrator would have to be made via email, within 30 days 
of the reconsideration determination, to an email address specified by 
CMS. The request would have to include a copy of the reconsideration 
determination, as well as a detailed written explanation of why the 
model participant or CMS disagrees with the reconsideration 
determination. Under proposed Sec.  512.561(e)(4), we stated in the 
proposed rule that promptly after receiving the request for review, the 
CMS Administrator would send the parties an acknowledgement of receipt 
that outlines whether the request for review was granted or denied and, 
should the request for review be granted, the review procedures and a 
schedule that would permit both CMS and the TEAM participant an 
opportunity to submit a brief in support of their positions for 
consideration by the CMS Administrator. Should the request for review 
be denied, under proposed Sec.  512.561(e)(5), we indicated in the 
proposed rule that the reconsideration determination would be final and 
binding as of the date of denial of the request for review by the CMS 
Administrator. Under proposed Sec.  512.561(e)(6), we indicated in the 
proposed rule that should the request for review by the CMS 
Administrator be granted, the record for review would consist solely of 
timely submitted briefs and evidence contained in the record before the 
reconsideration official and evidence as set forth in the documents and 
data described in proposed Sec.  512.561(d)(1)(ii); the proposed rule 
indicated that the CMS Administrator would not consider evidence other 
than information set forth in the documents and data described in 
proposed Sec.  512.561(d)(1)(ii). As stated in the proposed rule, the 
CMS Administrator would review the record and issue to CMS and the TEAM 
participant a written determination that would be final and binding as 
of the date the written determination was sent.
    We solicited comments on the proposed reconsideration review 
process included in TEAM. The following is a summary of the public 
comments received on this proposal and our responses to those comments:
    Comment: A commenter expressed support for the proposed processes 
and timelines for submission of calculation error notices (``CEN'') and 
reconsideration requests. Additionally, the commenter recommended we 
use an impartial third party in evaluating issues related to model 
implementation.

[[Page 69786]]

    Response: We appreciate the commenter's support and recommendation. 
TEAM will use multiple levels of review to ensure a fair evaluation of 
all appeals submitted, including an Administrative Review by the CMS 
Office of the Administrator if the TEAM participant submits a timely 
request.
    Comment: A commenter expressed support for the proposed process for 
requesting CMS Administrator Review.
    Response: We thank the commenter for their support.
    After consideration of the comments received, we are finalizing at 
Sec.  512.561 the proposed reconsideration review processes for TEAM.
e. Model Overlap
(1) Background
    In the proposed rule we stated that when determining the best 
strategy for addressing model overlap, we recognize we need to consider 
how to promote meaningful collaboration between providers and TEAM 
participants. In prior models, overlap policies were intended to be 
simple by avoiding duplicative incentive payments or giving precedence 
to a single accountable entity. However, what resulted were confusing 
methodologies or misaligned incentives which were difficult to 
navigate. Participants from prior models have also cited confusion with 
identifying to which model(s) a beneficiary may be aligned or 
attributed.
    In earlier episode-based payment models, such as CJR (in certain 
circumstances) and BPCI, CMS addressed overlap by implementing a 
complex calculation and recouping a portion of the pricing discount for 
providers also participating in certain ACO initiatives. The recoupment 
was intended to prevent duplicate incentive payments for the same 
beneficiary's care; however, some participants perceived the resulting 
recoupment as a financial loss, discouraging providers from 
participating in both initiatives.
(2) Previous Episode-Based Model Overlap Policies
    To avoid complexity, the CJR and BPCI Advanced models exclude 
beneficiaries aligned or assigned to certain ACOs, and these 
beneficiaries will not trigger a clinical episode.\938\ While this 
exclusionary approach creates a clean demarcation of who is accountable 
for a beneficiary's care, it also limits the number of providers in 
accountable care relationships and becomes less tenable as we work 
towards the goal of increased accountability. Additionally, 
participants may be informed of beneficiary ACO alignment or assignment 
after the potential episode has been initiated and the expending of 
resources on unattributed beneficiaries. This concern highlights the 
opportunity to incentivize coordinated care, expand care redesign 
efforts to more patients, and strengthen APM participation.
---------------------------------------------------------------------------

    \938\ Currently, the BPCI Advanced model does not allow overlap 
with the ACO Realizing Equity, Access, and Community Health (ACO 
REACH) model, the Vermont Medicare ACO Initiative, and the 
Comprehensive Kidney Care Contracting (CKCC) Options of the Kidney 
Care Choices (KCC) Model. The CJR model does not allow overlap with 
the ENHANCED Track of the Medicare Shared Savings Program.
---------------------------------------------------------------------------

    Even passive avoidance of duplicated payments has its drawbacks 
such as lack of incentive to coordinate care. For example, the CJR and 
BPCI Advanced models allow overlap with the Medicare Shared Savings 
Program without a financial recoupment.939 940 However, this 
policy does not encourage behavior change to ensure a smooth transition 
back to population-based providers.
---------------------------------------------------------------------------

    \939\ The Medicare Shared Savings Program benchmark updates 
include retrospective county-level trends that implicitly reflect 
BPCI Advanced and CJR spending changes; such methodology helps 
mitigate potential overlap of federal outlays.
    \940\ The CJR model only allows overlap with the BASIC track of 
the Medicare Shared Savings Program.
---------------------------------------------------------------------------

(3) Beneficiary Overlap
    In the proposed rule, we acknowledge that there may be 
circumstances where a Medicare beneficiary in an episode may also be 
assigned to an ACO, advanced primary care model, or other model or 
initiative being implemented through the CMS Innovation Center or 
otherwise through CMS. For the purposes of this final rule, ``total 
cost of care'' models or programs refer to models or programs in which 
episodes or performance periods include participant financial 
responsibility for all Part A and Part B spending, as well as some Part 
D spending in select cases. We use the term ``shared savings'' in the 
proposed rule to refer to models or programs in which the payment 
structure includes a calculation of savings (that is, the difference 
between FFS amounts and program or model benchmark) and CMS and the 
model or program participant each retain a particular percentage of 
that savings. We noted that there exists the possibility for overlap 
between episode-based payment model and shared savings models or 
programs such as Shared Savings Program, specialty care models such as 
the Enhancing Oncology Model (EOM), advanced primary care models such 
as Making Care Primary (MCP), state-based models such as the All-Payer 
Health Equity Approaches and Development model (AHEAD), or other CMS 
Innovation Center payment models that incorporate per-beneficiary-per-
month (PBPM) fees or other payment structures.
    We state in the proposed rule that in addition to the Shared 
Savings Program, there are other ACO and CMS Innovation Center models 
that make or will make, once implemented, providers accountable for 
total cost of care over a period of time (for example, 6 to 12 months). 
Some of these are shared savings models (or programs, in the case of 
the Shared Savings Program), while others are not shared savings but 
hold participating providers accountable for the total cost of care 
during a defined episode. Each of these payment models or programs 
holds providers accountable for the total cost of care over the course 
of an extended period or episode by applying various payment 
methodologies. We stated in the proposed rule that we believe it is 
important to simultaneously allow beneficiaries to participate in 
broader population-based and other total cost of care models, as well 
as episode payment models that target a specific episode with a shorter 
duration, such as TEAM. Allowing beneficiaries to receive care under 
both types of models may maximize the potential benefits to the 
Medicare Trust Funds and participating providers and suppliers, as well 
as beneficiaries. Research suggests that shared beneficiaries in 
episode-based payment models and ACOs can lead to lower post-acute care 
spending and reduced readmissions.\941\ Beneficiaries stand to benefit 
from care redesign that may lead to improved quality for episodes even 
while also receiving care under these broader models, while entities 
that participate in other models and programs that assess total cost of 
care stand to benefit, at least in part, from the cost savings that 
accrue under TEAM. For example, a beneficiary receiving a procedure 
under TEAM may benefit from a hospital's care coordination efforts 
regarding care during the inpatient hospital stay. The same beneficiary 
may be attributed to a primary care physician affiliated with an ACO 
who is actively engaged in coordinating care for all the beneficiary's 
clinical conditions throughout the entire performance year,

[[Page 69787]]

beyond the 30-day post-discharge period of the episode.
---------------------------------------------------------------------------

    \941\ Navathe, A.S., Liao, J.M., Wang, E., Isidro, U., Zhu, J., 
Cousins, D., & Werner, R.M. (2021). Association of patient outcomes 
with bundled payments among hospitalized patients attributed to 
accountable care organizations. JAMA Health Forum, 2(8), e212131. 
https://doi.org/10.1001/jamahealthforum.2021.2131.
---------------------------------------------------------------------------

    We proposed that a beneficiary could be in an episode in TEAM, as 
described in the Episodes section: X.A.3.b. of this final rule, by 
undergoing a procedure at a TEAM participant, and be attributed to a 
provider participating in a total cost of care or shared savings model 
or program. For example, a beneficiary may be attributed to a provider 
participating in the Shared Savings Program for an entire performance 
year, as well as have initiated an episode in TEAM during the ACO's 
performance year. Each model or program incorporates a reconciliation 
process, where total included spending during the performance period or 
episode are calculated, as well as any potential savings achieved by 
the model or program. We proposed to allow any savings generated on an 
episode in TEAM and any contribution to savings in the total cost of 
care model be retained by each respective participant. This would mean 
the episode spending in TEAM would be accounted for the in the total 
cost of care model's total expenditures, but TEAM's reconciliation 
payment amount or repayment amount would not be included in the total 
cost of care model's total expenditures. Likewise, the total cost of 
care model's savings payments or losses would not be included in the 
episode spending in TEAM.
    In the proposed rule we noted that by allowing a beneficiary 
aligned to a total cost of care model participant to also be attributed 
to an episode in TEAM, we would be eliminating complexities experienced 
in prior models where it was difficult for participants to know when a 
beneficiary would trigger an episode and when the episode would be 
excluded. We stated that in prior models such as BPCI, we implemented a 
recoupment process after reconciliation to account for any duplicative 
savings generated on overlapping beneficiaries. This process involved 
disbursing reconciliation payments to BPCI participants and then 
submitting a recoupment demand for any savings generated on overlap. 
Overwhelming feedback from participants indicated that this recoupment 
process was perceived negatively and postured participants in BPCI and 
the total cost of care model into an adversarial relationship. Allowing 
overlap between beneficiaries aligned to a total cost of care model who 
also initiate an episode in TEAM and by allowing both participants to 
retain savings will have a positive impact on beneficiaries by 
fostering a cooperative relationship between accountable care and TEAM 
participants where all parties have interest in providing coordinated, 
longitudinal care.
    We indicated in the proposed rule that overlap does mean that 
episode expenditures will be included in ACO expenditures and thus, 
have a potential impact on ACO performance. Whether or not this 
benefits an ACO's shared savings involves a variety of contributing 
factors that span beyond merely the results of episodes in TEAM. For 
example, an ACO's size and volume of aligned beneficiaries or the 
dynamics of certain markets in which an ACO operates could impact an 
ACO's expenditure calculations and shared savings. We stated in the 
proposed rule that CMS cannot isolate each variable that could 
influence an ACO's expenditures and shared savings, nor can CMS propose 
a singular policy that will ensure all ACOs benefit from interaction, 
or lack thereof, with TEAM. But because TEAM will be mandatory in 
specific markets, the model will be generally expected to similarly 
impact a Shared Savings Program ACO's episode spending and 
corresponding regional episode spending that contributes most of its 
retrospective benchmark update. This interaction is anticipated to 
largely mitigate potential overlapping incentive payments for the 
largest ACO program in traditional Medicare. We stated in the proposed 
rule that we believe allowing overlap and the retention of savings by 
ACOs and TEAM participants will encourage providers to collaboratively 
deliver coordinated care and yield improved outcomes to beneficiaries. 
This aligns with broader agency goals to foster increased beneficiary 
alignment to value-based care and allows us to learn from experience 
and avoid creating challenges managing shared beneficiaries between 
ACOs and episodes of care participants. In addition, there are other 
potential benefits to allowing overlap between a beneficiary aligned to 
a total cost of care model and initiate an episode in TEAM, such as 
strengthening the volume of episodes a TEAM participant is responsible 
for. We know from prior experience that low episode volume creates 
challenges for participants to generate meaningful savings and manage 
outlier cases with unusually high episode expenditures.
    We also acknowledge in the proposed rule that certain ACOs may 
prefer for their aligned beneficiary population to not be included in 
TEAM. Since ACOs are accountable for total cost of care, they may 
prefer to manage their beneficiaries and have full control over all 
expenditures and beneficiary care instead of sharing that 
responsibility with a TEAM participant. Alternatively, we sought 
comment on prohibiting aligned beneficiaries from full-risk population-
based care relationships (for example, Shared Savings Program Enhanced 
Track) from being in an episode in TEAM. We sought comment specifically 
on non-condition specific care relationships (that is, this would 
exclude condition-specific models such as the Enhancing Oncology Model 
(EOM)).
    Additionally, we sought comment on the use of supplemental data 
(for example, shadow bundles \942\ data) as providing a total cost of 
care or shared savings model participant with the ability to utilize 
episodes to improve care coordination and reduce cost.
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    \942\ Shadow bundles are claims data for services, supplies, and 
their associated payments grouped into discrete procedural- and/or 
condition-specific episodes of care. Episodes are constructed based 
on a consistent set of rules for ACO-attributed beneficiaries who 
meet the criteria to trigger an episode. Target prices are 
incorporated to measure performance and provide opportunity for 
sharing savings with providers.
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    The following is a summary of comments we received related to the 
proposed model overlap policy and our responses to those comments:
    Comment: Overall, we received considerable support for our proposed 
policy to allow model overlap between beneficiaries aligned to a total 
cost of care model or shared savings model who also initiate an episode 
in TEAM. These comments included support for allowing both participants 
to retain savings.
    Response: We appreciate the many comments of support received for 
this aspect of the model. In particular, we appreciate that commenters 
agree with our desire to simplify the attribution process, maintain 
higher TEAM participant volume, and incentivize engagement between 
total cost of care or shared savings model participants and TEAM 
participants to foster more integrated, patient-centered approach to 
care.
    We believe by allowing model overlap, this encourages provides 
participating in TEAM and shared savings or total cost of care models 
or programs to engage collaboratively and strengthen care coordination 
for aligned beneficiaries. We also believe that by allowing TEAM 
participants and shared savings or total cost of care model or program 
participants to retain savings generated in their respective models, we 
are eliminating the risk of these participants forming an adversarial 
relationship.
    Comment: We received some responses from commenters who

[[Page 69788]]

opposed our proposed policy to allow model overlap between TEAM 
participants and total cost of care participants. Commenters mentioned 
that allowing model overlap could create confusion or duplication of 
effort, and place substantial administrative burdens on hospitals and 
the clinicians and staff. Other commenters mentioned that allowing 
overlap between TEAM and existing advanced alternative payment models, 
such as total cost of care models or shared savings models, is contrary 
to the philosophy of a total cost of care model and may disrupt ongoing 
initiatives, particularly if not all providers within an umbrella ACO 
must participate.
    Response: We recognize that participants in total cost of care or 
shared savings models will have their own ongoing initiatives and 
strategies; however, we do not see TEAM as disrupting these efforts. By 
allowing TEAM episodes to overlap with a total cost of care or shared 
savings model, we are eliminating confusion over who is attributed, and 
therefore responsible, for the episode and encouraging coordination 
between TEAM participant and total cost of care or shared savings model 
participant by creating a shared goal of caring for the aligned 
beneficiary.
    Comment: We sought comment on prohibiting aligned beneficiaries 
from full-risk population-based care relationships (for example, Shared 
Savings Program Enhanced Track or ACO REACH) from being in an episode 
in TEAM and we received responses from some commenters supporting this 
concept citing that these total cost of care or shared savings 
participants are already bearing full risk for any TEAM episodes 
initiated for their aligned population. Several commenters mention that 
requiring these participants to participate could avoid unnecessary 
complexity, duplication of efforts and confusion regarding how CMS will 
recognize these Medicare beneficiaries under these different types of 
accountable care models. A commenter suggested that allowing an opt-out 
would create an additional incentive for participation in two-sided 
risk total cost of care models and recognize that these entities are 
already accountable for cost and health outcomes for their population.
    Response: We appreciate that these commenters want to acknowledge 
that full-risk model or program participants have taken on the greatest 
amount of risk for their aligned populations. CMS's goal is to create 
the ability for TEAM participants to engage and collaborate with other 
model or program participants through TEAM overlap policy, not to be a 
drain on resources or to elicit confusion. In fact, CMS learned from 
prior model experience that by excluding certain models or programs and 
by setting rules in which savings was not retained by both participants 
caused significant confusion and frustration. Specifically, when 
considering full risk models or programs, we expect these participants 
likely have experience in population-based care and are invested in the 
concept of value-based care. As such, we expect these participants to 
be able to manage their populations of aligned beneficiaries will 
coordinating effectively with TEAM participants on any overlap using 
their resources, when needed, to ensure smooth care coordination for 
their aligned beneficiaries.
    Comment: A commenter suggested to allow total cost of care 
participants the ability to opt-out of mandatory participation for 
total cost of care participants who are actively managing episodes 
through another mechanism, such as a shadow bundle or different kind of 
focused care intervention.
    Response: We acknowledge that total cost of care or shared savings 
model participants will have other initiatives they operate to support 
focused care intervention. However, for CMS to monitor total cost of 
care or shared savings participants to ensure they are actively 
utilizing another mechanism, such as a shadow bundle, CMS would have to 
create and operate an audit and election process which would be a 
significant drain on CMS resources to establish. Additionally, creating 
an audit or election process would be an administrative challenge for 
TEAM participants who moved in and out of model participation based on 
their varying interventions and strategies.
    Comment: We received some comments that asked for clarity regarding 
how TEAM episodes would impact a total cost of care model's 
expenditures. Specifically, commenters asked if the TEAM target price 
or FFS expenditures would be used in total cost of care model 
expenditures used to calculate model shared savings and benchmarks. A 
commenter stated that using FFS expenditures instead of the TEAM target 
price would avoid being a source of friction across programs, allowing 
ACOs to clearly understand and track their performance throughout the 
performance period.
    Response: CMS can confirm that FFS expenditures, not the TEAM 
target price, will be used in other model savings calculations. These 
expenditures represent the actual claims billed for services furnished 
to the aligned beneficiary.
    Comment: Regarding our request on supplemental data to provide a 
total cost of care or shared savings model participant with the ability 
to utilize episodes to improve care coordination and reduce cost, a 
couple of commenters made requests for additional data elements. 
Additionally, commenters also requested that existing data initiatives 
provided by CMS, such as Shadow Bundles data, were not discontinued. A 
commenter requested that CMS include a data flag representing ACO 
assignment within the raw claims files that would be provided to a TEAM 
participant. Another commenter requested that CMS continue to provide 
shadow bundles data on all clinical episode categories currently 
offered (which includes the 34 BPCI Advanced clinical episode 
categories).
    Response: CMS appreciates these comments and the desire to use data 
provided to TEAM participants to identify model overlap and use it to 
benefit engagement with shared savings or total cost of care model 
participants.
    As CMS develops the structure of the raw claims files that will be 
provided on a regular basis to TEAM participants, we will explore the 
ability to add model overlap assignment information when feasible. This 
aligns with how model overlap is represented in raw claims files in 
prior and existing models such as CJR and BPCI Advanced.
    Regarding shadow bundles data, CMS is currently committed to 
sharing this data on a regular basis. We are also exploring options for 
how to continue to make this data or similar available once the BPCI 
Advanced model ends.
    After consideration of the public comments we received, we are 
finalizing our proposals for model overlap to allow overlap between 
shared savings or total cost of care model or program participants with 
TEAM episodes. This includes allowing both TEAM participant and total 
cost of care model or program participant to retain savings generated 
from their perspective performance in their model or program without 
recoupment.

[[Page 69789]]

(a) Considerations for Notification Process for Shared Savings or Total 
Cost of Care Model
    In the proposed rule we stated that prior model experience has 
shown that it can be challenging for model participants to understand 
in real time whether a beneficiary's episode will be excluded, and we 
know that prior recoupment policies created friction between episode 
model participants and total cost of care model participants. We 
recognized the importance of coordination between a TEAM participant 
and total cost of care participant to ensure the beneficiary has 
continuous care moving beyond the structure of an episode. In order to 
accommodate a smooth transition for the aligned beneficiary, we 
considered, but did not propose there be a notification process 
required of the TEAM participant to ensure they are alerting the total 
cost of care participant of their aligned beneficiary's episode during 
the anchor hospitalization or anchor procedure. This notification 
process would allow the total cost of care participant the time to 
deploy their resources (for example, care coordination staff) and be 
prepared as the patient discharges from their anchor hospitalization or 
anchor procedure. However, we recognized that identifying beneficiaries 
aligned to a total cost of care participant may be challenging because 
it would require timely access to beneficiary alignment list for total 
cost of care participants and would increase burden to implement a 
notification process. We sought comment on ways to implement a 
notification process for shared savings or total cost of care 
participants that would be used to alert a shared savings or total cost 
of care participant that one of their aligned beneficiaries has 
initiated an episode in TEAM.
    In the proposed rule we stated that total cost of care models (that 
is, ACOs) use their market's Health Information Exchange (HIE) to 
provide admission, discharge, and transfer (ADT) alerts. Others use 
less automated processes including fax or telephone to provide the 
alert. We recognized there is variation in the capabilities and 
sophistication of HIEs nationally and we recognized there is an 
increased administrative burden on participants when providing a 
telephonic or fax alert. Additionally, we recognized that there is 
variation in the timeframe in which these alerts can be issued based on 
the mechanism in which they are provided. We sought comment on what 
timeframe should be required to issue a notification and what 
process(es) should be used to provide a notification without causing 
undue burden on the TEAM participant, including both the processes 
cited previously or other processes not mentioned. We also sought 
comment on how broader use of ADT data exchange between TEAM 
participants and ACOs could improve care coordination, including any 
perceived barriers to better ADT exchange, and opportunities to improve 
ADT exchange, and how CMS could address these barriers and 
opportunities.
    The following is a summary of comments and our responses to those 
comments received related to the notification process for shared 
savings or total cost of care model for which we sought comment.
    Comment: A couple of commenters requested that TEAM participants be 
required to embed ACO beneficiary rosters into their electronic health 
records system to allow for better identification of aligned 
beneficiaries by the TEAM participant and to facilitate smoother 
communication between ACO and TEAM participant. One of these commenters 
recommended making this a requirement by the second year of TEAM, thus 
allowing time for the TEAM participant to fully integrate the ACO 
rosters into their electronic system after model launch.
    Response: Although we acknowledge there would be benefits to a TEAM 
participant by having quick and immediate access to ACO alignment 
information in their EHR, making this a requirement could put undue 
financial and administrative burden on participants. In the final rule, 
we are not requiring TEAM participants to make any modifications or 
enhancements to their EHR; however, we encourage participants to 
consider how they can use their resources, including the data provided 
through TEAM participation, to enhance their ability to identify 
aligned beneficiaries.
    Comment: We received a few comments supporting the concept of a 
beneficiary notification, but commenters asked that CMS hold the 
responsibility of contacting and notifying total cost of care or shared 
savings model participants rather than put the responsibility on the 
TEAM participant. A commenter mentioned that a required notification 
process is an administratively burdensome requirement that takes 
hospitals already limited resources away from more important patient 
care matters. A couple of other commenters mentioned that CMS has the 
greatest access to timely data and is already receives notifications 
from hospitals as part of eligibility checks and thus is best 
positioned to identify and provide the beneficiary notification.
    Response: We appreciate receiving support for this policy and 
acknowledge the commenter's desire for CMS to own the responsibility of 
providing beneficiary notifications to total cost of care or shared 
savings model participants would alleviate administrative burden on 
TEAM participants. However, a key reason for requiring a beneficiary 
notification is to force connection and communication between TEAM 
participant and total cost of care or shared savings model. This forced 
connection means that information on the beneficiary is shared and both 
participants have an opportunity to collaborate on the beneficiary's 
immediate and long-term care. To have CMS stand as the intermediary and 
provide the notification takes away this required interaction, which 
could diminish the effectiveness of providing the notification and 
allowing for collaboration and coordination of the patient's care. As 
such, CMS will not take on the responsibility of providing the 
beneficiary notification to a total cost of care or shared savings 
model participant.
    Comment: A commenter expressed concern over the time requirement of 
the notification and encouraged CMS to select a healthy time frame that 
ACOs and TEAM participants can comply with.
    Response: The purpose in providing a beneficiary notification to a 
total cost of care or shared savings model participant is to ensure 
strong care coordination to ensure the best care for the beneficiary 
and allow the total cost of care or shared savings model participant 
the ability to deploy their own resources or be involved in the 
patient's care following discharge from the anchor hospitalization or 
anchor procedure. In order to effectively accomplish this, notification 
should occur by the time the patient discharges from their anchor 
hospitalization or anchor procedure to provide the patient with the 
warm hand off for ongoing care coordination.
    Comment: A commenter who opposed the proposed requirement of 
beneficiary notification between a TEAM participant and total cost of 
care or shared savings model participant encouraging CMS to consider 
the extreme administrative burden it would place on participants.
    Response: We acknowledge that providing a beneficiary notification 
to a total cost of care or shared savings participant adds a level of 
additional administrative effort on behalf of the

[[Page 69790]]

TEAM participant, especially if the notification cannot be delivered 
electronically and requires a telephonic or fax notification. However, 
CMS believe the effort is outweighed by the benefit of alerting a total 
cost of care or shared savings model participant to which a beneficiary 
is aligned. The TEAM participant may benefit from leveraging their 
resources and support in ensuring the best outcomes for the patient.
    Comment: We received some comments supporting the idea of a 
notification from a TEAM participant to a beneficiary's aligned total 
cost of care or shared savings model or program. Commenters mention 
that notifications such as ADT are relied upon to trigger a chain of 
action including timely post-discharge follow-up to reduce readmissions 
and decrease the number of patients going back to the emergency 
department unnecessarily.
    Response: We appreciate the support received from commenters and 
agree that a beneficiary notification can serve to not only create 
opportunity for engagement between TEAM participant and shared savings 
or total cost of care participant, but also to create a smoother 
transition from episode back into longitudinal care and improve patient 
outcomes, such as avoiding unnecessary readmissions or emergency 
department visits.
    Comment: We received a comment urging CMS to mandate that hospitals 
cannot participate in TEAM unless they provide admission, discharge, 
and transfer (ADT) notifications to community-based primary care 
physicians. This commenter states that the current lack of ADT 
notifications from hospitals is not a technological issue, but rather a 
behavioral issue that CMS could influence. They also state that ADT 
notifications are an essential part of ensuring appropriate transitions 
of care and are critical in helping ensure patients are able to have a 
longitudinal primary care relationship with their care team after an 
acute care episode, we urge CMS to mandate that hospitals cannot 
participate in TEAM unless they provide ADT notifications.
    Response: We appreciate that this commenter considers the use of 
ADT notifications an essential part of care coordination and we agree 
that a beneficiary notification is an important step supporting and 
preparing for the patient's long-term care prior to leaving their 
anchor hospitalization or anchor procedure. We recognize there are many 
factors that influence the ability to transmit an ADT, including 
sophisticated HIE, market dynamics, hospital-specific resources, and 
technological capabilities, etc. However, the technology used to 
support a beneficiary notification is merely mean to assist in the 
action of providing the notification and should not deter a hospital 
from successfully making a notification to a beneficiary's aligned 
total cost of care or shared savings model or program.
    Comment: A commenter in support of a beneficiary notification 
requested that CMS increase access to ADT alerting. This commenter 
specially mentioned that third-party vendors often offer notification 
services at a very high cost to ACOs and that although HIEs may be a 
more beneficial data source, they are not ever present or functional 
everywhere.
    Response: CMS recognizes that there are many factors that impact 
how a hospital delivers a beneficiary notification to a total cost of 
care or shared savings model or program--whether the notification be 
electronic, by fax, telephonic, etc. We also acknowledge that there are 
costs associated by engaging a third-party vendor to support 
notification. CMS believes communication should be going on in value-
based care and not be dependent on having a certain kind of technology. 
We view technology as merely an assist to support a beneficiary 
notification and do not consider technology or third-party vendors as a 
requirement to deliver a beneficiary notification to a total cost of 
care or shared savings model or program.
    However, because we as an agency understand the need to improve the 
alerting process as it stands now, CMS has an outstanding Request for 
Information (RFI) where we are seeking feedback on the ADT process. We 
hope to use information gathered to identify where we can improve the 
alert process making it less burdensome and more useful for 
participants across models and programs.
    We thank commenters for their input on beneficiary notifications 
and will address these comments, along with further proposals, in 
future notice and rulemaking.
(b) Accounting for Beneficiary Overlap With New CMS Models and Programs
    We acknowledge there may be new models or programs that could have 
overlap with TEAM. This could occur because a beneficiary may trigger 
an episode in TEAM while being aligned to a new CMS model or program or 
because a TEAM participant also participates in another CMS model or 
program. We would plan to assess each new model to determine if the 
structure of payment and savings calculation are subject to the current 
proposed overlap policy or if there would be a need to bring forward 
any additional overlap requirements to account for the new model.
f. Health Equity
(1) Background
    In the proposed rule we stated that consistent with President 
Biden's Executive Order 13985 on ``Advancing Racial Equity and Support 
for Underserved Communities Through the Federal Government,'' and 
Executive Order 14091 on ``Further Advancing Racial Equity and Support 
for Underserved Communities Through the Federal Government,'' CMS has 
made advancing health equity the first pillar in its Strategic 
Plan.943 944 We define health equity as the attainment of 
the highest level of health for all people, where everyone has a fair 
and just opportunity to attain their optimal health regardless of race, 
ethnicity, disability, sexual orientation, gender identity, 
socioeconomic status, geography, preferred language, and other factors 
that affect access to care and health outcomes. We work to advance 
health equity by designing, implementing, and operationalizing policies 
and programs that support health for all the people served by our 
programs, eliminating avoidable differences in health outcomes 
experienced by people who are disadvantaged or underserved, and 
providing the care and support that our beneficiaries need to 
thrive.\945\
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    \943\ https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
    \944\ 88 FR 10825 (February 22, 2023) (https://www.federalregister.gov/documents/2023/02/22/2023-03779/further-advancing-racial-equity-and-support-for-underserved-communities-through-the-federal).
    \945\ https://www.cms.gov/sites/default/files/2022-04/Health%20Equity%20Pillar%20Fact%20Sheet_1.pdf.
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    Disparities in access to surgical care by race/ethnicity, insurance 
status, income, and geography are well-documented, including 
disparities in the progression to surgery once surgical indication is 
determined and disparities in receipt of optimal surgical care.\946\ 
Research has also highlighted disparities in readmissions rates 
following surgical intervention, indicating opportunities to tailor

[[Page 69791]]

readmission-focused interventions to specific sites of care, such as 
safety net hospitals, to improve surgical outcomes.947 948 
For Medicare beneficiaries, higher health-related social need is also 
associated with a higher risk of complications, length of stay, 30-day 
readmission, and mortality following surgery.\949\ Accordingly, there 
are opportunities to improve disparities in surgical outcomes by 
transforming infrastructure and care delivery processes, particularly 
for hospitals that serve higher proportions of historically underserved 
populations.
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    \946\ de Jager E, Levine AA, Udyavar NR, et al. Disparities in 
Surgical Access: A Systematic Literature Review, Conceptual Model, 
and Evidence Map. J Am Coll Surg. 2019;228(3):276-298. doi:10.1016/
j.jamcollsurg.2018.12.028 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6391739/https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6391739/.
    \947\ Tsai TC, Orav EJ, Joynt KE. Disparities in surgical 30-day 
readmission rates for Medicare beneficiaries by race and site of 
care. Ann Surg. 2014;259(6):1086-1090. doi:10.1097/
SLA.0000000000000326. https://pubmed.ncbi.nlm.nih.gov/24441810/ 
https://pubmed.ncbi.nlm.nih.gov/24441810/.
    \948\ Paredes AZ, Hyer JM, Diaz A, Tsilimigras DI, Pawlik TM. 
Examining healthcare inequities relative to United States safety net 
hospitals. Am J Surg. 2020;220(3):525-531. doi:10.1016/
j.amjsurg.2020.01.044 https://pubmed.ncbi.nlm.nih.gov/32014296/.
    \949\ Paro A, Hyer JM, Diaz A, Tsilimigras DI, Pawlik TM. 
Profiles in social vulnerability: The association of social 
determinants of health with postoperative surgical outcomes. 
Surgery. 2021;170(6):1777-1784. doi:10.1016/j.surg.2021.06.001 
https://pubmed.ncbi.nlm.nih.gov/34183179/https://pubmed.ncbi.nlm.nih.gov/34183179/.
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    In this section, we discussed proposals for identifying safety net 
hospitals and rural hospitals within TEAM, and the associated 
flexibilities for TEAM participants meeting these definitions. We 
sought comment on the proposed safety net hospital and rural hospital 
definitions for TEAM, proposed model flexibilities for participants 
meeting each of these definitions, and the alternatives discussed.
(2) Identification of Safety Net Hospitals
(a) Background
    In the proposed rule, we stated that a the goals of CMS's health 
equity pillar is to evaluate policies to determine how we can support 
safety net providers, partner with providers in underserved 
communities, and ensure care is accessible to those who need it.\950\ 
There are also opportunities to engage more safety net providers in CMS 
Innovation Center models to increase the diversity of Medicare 
beneficiaries reached by models.\951\ Although various approaches exist 
to identify ``safety net providers,'' this term is commonly used to 
refer to health care providers that furnish a substantial share of 
services to uninsured and low-income patients.\952\ As such, safety net 
providers, including acute care hospitals, play a crucial role in the 
advancement of health equity by making essential services available to 
the uninsured, underinsured, and other populations that face barriers 
to accessing healthcare, including people from racial and ethnic 
minority groups, the LGBTQ+ community, rural communities, and members 
of other historically disadvantaged groups. Whether located in urban 
centers or geographically isolated rural areas, safety net hospitals 
are often the sole providers in their communities of specialized 
services such as burn and trauma units, neonatal care and inpatient 
psychiatric facilities.\953\ They also frequently partner with local 
health departments and other institutions to sponsor programs that 
address homelessness, food insecurity and other social determinants of 
health, and offer culturally and linguistically appropriate care to 
their patients.
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    \950\ https://www.cms.gov/sites/default/files/2022-04/Health%20Equity%20Pillar%20Fact%20Sheet_1.pdf.
    \951\ https://www.healthaffairs.org/content/forefront/advancing-health-equity-through-cms-innovation-center-first-year-progress-and-s-come.
    \952\ https://www.ncbi.nlm.nih.gov/books/NBK224519/.
    \953\ https://www.ncbi.nlm.nih.gov/books/NBK224521/.
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    Because they serve many low-income and uninsured patients, safety 
net hospitals may experience greater financial challenges compared to 
other hospitals. Among the factors that negatively impact safety net 
hospital finances, MedPAC has pointed specifically to the greater share 
of patients insured by public programs, which MedPAC stated typically 
pay lower rates for the same services than commercial payers; the 
increased costs associated with treating low-income patients, whose 
conditions may be complicated by social determinants of health, such as 
homelessness and food insecurity, and the provision of higher levels of 
uncompensated care.\954\
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    \954\ https://www.medpac.gov/wp-content/uploads/2022/06/Jun22_MedPAC_Report_to_Congress_v2_SEC.pdf.
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    In its June 2022 Report to Congress, MedPAC expressed concern over 
the financial position of safety net hospitals.\955\ The Commission 
noted that the limited resources of many safety net hospitals may make 
it difficult for them to compete with other hospitals for labor and 
technology, and observed that ``[t]his disadvantage, in turn, could 
lead to difficulty maintaining quality of care and even to hospital 
closure.'' \956\ Other research shows that the closure of a safety net 
hospital can have ripple effects within the community, making it more 
difficult for disadvantaged patients to access care and shifting 
uncompensated care costs onto neighboring facilities.957 958
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    \955\ The June 2022 Report sets forth a conceptual framework for 
identifying safety-net hospitals and a rationale for better-targeted 
Medicare funding for such hospitals through a new Medicare Safety-
Net Index (MSNI), as discussed in more detail later in this request 
for information. In its March 2023 Report to Congress, MedPAC 
discusses its recommendation to Congress to redistribute 
disproportionate share hospital and uncompensated care payments 
through the MSNI: https://www.medpac.gov/wp-content/uploads/2023/03/Mar23_MedPAC_Report_To_Congress_SEC.pdf.
    \956\ https://www.medpac.gov/wp-content/uploads/2022/06/Jun22_MedPAC_Report_to_Congress_v2_SEC.pdf.
    \957\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3272769/.
    \958\ https://www.healthaffairs.org/do/10.1377/forefront.20180503.138516/full/.
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    Given the critical importance of safety net hospitals to the 
communities they serve, we considered different safety net hospital 
definitions to identify the best way to represent providers serving 
historically underserved populations in TEAM and/or provide 
flexibilities to those deemed as safety net providers. In the following 
section, we discuss multiple methodological options for identifying 
safety net providers in TEAM.
(b) Methodological Considerations
(i) CMS Innovation Center Strategy Refresh Safety Net Definition
    In the proposed rule, we stated that CMS Innovation Center's 
Strategy Refresh developed a definition of safety net providers to 
monitor the percent of safety net facilities participating in CMS 
Innovation Center models. The CMS Innovation Center's Strategy Refresh 
defined safety net hospitals as short-term hospitals and critical 
access hospitals (CAHs) that serve above a baseline threshold of 
beneficiaries with dual eligibility or Part D Low-Income Subsidy (LIS), 
as a proxy for low-income status.\959\ Under the CMS Innovation 
Center's Strategy Refresh definition, hospitals are identified as 
safety net when their patient mix of beneficiaries with dual 
eligibility or Part D LIS exceeds the 75th percentile threshold for all 
congruent facilities who bill Medicare.
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    \959\ https://www.cms.gov/priorities/innovation/data-and-reports/2022/cmmi-strategy-refresh-imp-tech-report.
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    To calculate the hospital-level proportions of beneficiaries with 
dual eligibility and Part D LIS, a one-year or multiple-year 
retrospective baseline (for example, weighted three-year average) for 
each measure could be calculated for each TEAM participant. We would 
then determine the 75th percentile threshold for each measure 
separately based on the distribution of the two proportions 
(beneficiaries with dual eligibility or Part D LIS) for all PPS 
hospitals who bill

[[Page 69792]]

Medicare. TEAM participants with proportions that meet or exceed the 
determined threshold for either dual eligibility or Part D LIS will be 
considered as a safety net hospital for the purposes of TEAM.
    We considered that we could make safety net determinations based on 
the CMS Innovation Center's Strategy Refresh's definition using the 
described approach as of the model start date and hold the 
determinations constant for TEAM's duration. Alternatively, we 
considered calculating the hospital-level proportions of beneficiaries 
with dual eligibility and Part D LIS and the corresponding 75th 
percentile threshold for each measure annually, using a single year or 
rolling multiple-year weighted average of data from all PPS hospitals 
who bill Medicare. We could make redeterminations of safety net 
qualification under TEAM annually. This annual approach could mean that 
TEAM participants' safety net hospital qualifications could vary over 
the model's duration.
(ii) Medicare Safety Net Index (MSNI)
    Another approach to identify safety net hospitals we considered was 
to use MedPAC's Safety Net Index (SNI), which is calculated as the sum 
of--(1) the share of the hospital's Medicare volume associated with 
low-income beneficiaries; (2) the share of its revenue spent on 
uncompensated care; and (3) an indicator of how dependent the hospital 
is on Medicare. MSNI is calculated at the hospital level using data 
from CMS cost reports for each hospital.\960\
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    \960\ MedPAC. ``March 2023 Report to Congress: Medicare Payment 
Policy, Chapter 3''. https://www.medpac.gov/document/chapter-3-hospital-inpatient-and-outpatient-services-march-2023-report/https://www.medpac.gov/document/chapter-3-hospital-inpatient-and-outpatient-services-march-2023-report/.
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    For the share of the hospital's Medicare volume associated with 
low-income beneficiaries, MedPAC's definition of low-income 
beneficiaries includes all those who are dually eligible for full or 
partial Medicaid benefits, and those who do not qualify for Medicaid 
benefits in their states but who receive the Part D LIS because they 
have limited assets and an income below 150 percent of the Federal 
poverty level. Collectively, MedPAC refers to this population as ``LIS 
beneficiaries'' because those who receive full or partial Medicaid 
benefits are automatically eligible to receive the LIS. MedPAC states 
that its intent in defining low-income beneficiaries in this manner is 
to reduce the effect of variation in states' Medicaid policies on the 
share of beneficiaries whom MedPAC considers low-income, but to allow 
for appropriate variation across states based on the share of 
beneficiaries who are at or near the Federal poverty level. To 
calculate the LIS ratio for a hospital for a given fiscal year, we 
considered using the number of inpatient discharges of Medicare 
beneficiaries who are also LIS beneficiaries, using the most recent 
MedPAR claims for the discharge information, divided by the total 
number of inpatient discharges of Medicare beneficiaries.
    For the share of a hospital's revenue spent on uncompensated care, 
we considered using the ratio of uncompensated care costs to total 
operating hospital revenue from the most recent available audited cost 
report data.\961\ For further discussion on how this ratio could be 
calculated using audited cost report, please refer to 88 FR 26658.
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    \961\ The most recent available cost report data for this 
purpose generally lags 4 years behind the rulemaking year (for 
example, FY 2020 cost report data are available for this FY 2024 
proposed rule.)
---------------------------------------------------------------------------

    For the indicator of how dependent a hospital is on Medicare, 
MedPAC's recommendation is to use one-half of the Medicare share of 
total inpatient days. In calculating the Medicare share of total 
inpatient days for a hospital, we considered using the most recent 
available audited cost report data. For further information on how the 
numerator and denominator could be determined to calculate the 
indicator of how dependent a hospital is on Medicare from audited cost 
report data, please refer to 88 FR 26658.
    Using the sum of the three indicators as described, we considered 
that each TEAM participant could be assigned an SNI score, where a 
higher value means that a participant has either a high Medicare share 
of services, a high share of its Medicare patients with low incomes, 
and/or a high share of its revenue spent on uncompensated care.
    To apply the Medicare Safety Net Index (MSNI) to identify safety 
net hospital participants in TEAM, we considered calculating the MSNI 
for TEAM participants using a one-year or multiple-year baseline period 
(for example, a three-year average). We considered setting a threshold 
to identify safety net providers with TEAM based on the distribution of 
scores for all PPS hospitals that bill Medicare (for example, providers 
with scores in the 75th percentile of SNI scores could be considered 
safety net providers). We considered making safety net determinations 
based on the described approach as of the model start date and hold the 
determinations constant for TEAM's duration. Alternatively, we 
considered calculating the SNI and corresponding threshold annually 
using a one-year or multiple-year moving average and make 
redeterminations of safety net designations annually. This annual 
approach could mean that TEAM participant safety net qualifications for 
TEAM could vary over the model's duration.
(iii) Area Deprivation Index
    In the proposed rule, we stated that an approach to identifying 
safety net hospitals could be to use area-level indices. This approach 
could potentially better target policies to address the social 
determinants of health as well as address the lack of community 
resources that may increase risk of poor health outcomes and risk of 
disease in the population. In a recent environmental scan, the Office 
of the Assistant Secretary for Planning and Evaluation (ASPE) suggested 
that an area-level index could be used to prioritize communities for 
funding and other assistance to improve social determinants of health 
(SDOH)--such as affordable housing, availability of food stores, and 
transportation infrastructure. Although ASPE concluded that none of the 
existing area-level indices identified in the environmental scan were 
ideal, they concluded that the area deprivation index (ADI) was one of 
the best available choices when selecting an index for addressing 
health-related social needs or social determinants of health.\962\
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    \962\ Report: ``Landscape of Area-Level Deprivation Measures and 
Other Approaches to Account for Social Risk and Social Determinants 
of Health in Health Care Payments.'' Accessed at https://aspe.hhs.gov/reports/area-level-measures-account-sdoh on September 
27, 2022.
---------------------------------------------------------------------------

    The ADI was developed through research supported by the National 
Institutes of Health (NIH) with the goal of quantifying and comparing 
social disadvantage across geographic neighborhoods. It is a composite 
measure derived through a combination of 17 input variables--including 
measures of income, education, employment, and housing quality--from 
the American Community Survey (ACS) 5-year estimate datasets.\963\ Each 
neighborhood is assigned an ADI value from 1 to 100 (corresponding to 
percentile), where a higher value means that a neighborhood is more 
deprived. The ADI measure is intended to capture local socioeconomic 
factors correlated with medical disparities and

[[Page 69793]]

underservice. Several peer reviewed research studies demonstrate that 
neighborhood-level factors for those residing in disadvantaged 
neighborhoods also have a relationship to worse health outcomes for 
these residents.964 965 966
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    \963\ https://www.neighborhoodatlas.medicine.wisc.edu/.
    \964\ Kind AJ, et al., ``Neighborhood socioeconomic disadvantage 
and 30-day rehospitalization: a retrospective cohort study.'' Annals 
of Internal Medicine. No. 161(11), pp 765-74, doi: 10.7326/M13-2946 
(December 2, 2014), available at https://www.acpjournals.org/doi/epdf/10.7326/M13-2946.
    \965\ Jencks SF, et al., ``Safety-Net Hospitals, Neighborhood 
Disadvantage, and Readmissions Under Maryland's All-Payer Program.'' 
Annals of Internal Medicine. No. 171, pp 91-98, doi:10.7326/M16-2671 
(July 16, 2019), available at https://www.acpjournals.org/doi/epdf/10.7326/M16-2671.
    \966\ Khlopas A, et al., ``Neighborhood Socioeconomic 
Disadvantages Associated With Prolonged Lengths of Stay, Nonhome 
Discharges, and 90-Day Readmissions After Total Knee Arthroplasty.'' 
The Journal of Arthroplasty. No. 37(6), pp S37-S43, doi: 10.1016/
j.arth.2022.01.032 (June 2022), available at https://www.sciencedirect.com/science/article/pii/S0883540322000493.
---------------------------------------------------------------------------

    Medicare already uses ADI to assess underserved beneficiary 
populations in the Shared Savings Program, and ADI is also used in CMS 
Innovation Center models. In the CY 2023 PFS final rule, CMS adopted a 
policy to provide eligible Accountable Care Organizations (ACOs) with 
an option to receive advanced investment payments (87 FR 69778). 
Advance investment payments are intended to encourage low-revenue ACOs 
that are inexperienced with risk to participate in the Shared Savings 
Program and to provide additional resources to such ACOs in order to 
support care improvement for underserved beneficiaries (87 FR 69845 
through 69849). The risk-factors based (using ADI) scores assigned to 
the beneficiaries assigned to the ACO form the basis for determining 
the quarterly advanced investment payment to the ACO. For additional 
detail, please see the quarterly payment amount calculation methodology 
at 42 CFR 425.630(f)(2).
    To use ADI to identify safety net hospitals for TEAM, we considered 
assigning episodes an ADI value based on the beneficiary's address 
found in the Common Medicare Environment (CME) file. Episodes meeting 
an established national ADI percentile threshold (for example, ADI >80) 
could be classified as high-ADI episodes, and a distribution of the 
proportion of high-ADI episodes could be constructed. We considered 
that those TEAM participants that fell above an established threshold 
of high-ADI episodes (for example, 75th percentile) could be classified 
as safety net hospitals. For PY 1, the proportion of high-ADI episodes 
and its corresponding distribution could be determined based on a 
single-year or multiple-year retrospective baseline (for example, 
three-year average). Those TEAM participants that met or exceeded the 
determined threshold would be designated as safety net. We could hold 
these designations constant for TEAM's duration or recalculate the 
proportion of high-ADI episodes annually (using a one-year or multiple-
year moving average) and make safety net redeterminations based on an 
updated threshold on an annual basis. This annual approach could mean 
that TEAM participants' safety net qualifications for TEAM could vary 
over the model's duration.
(c) Methodology for Identifying Safety Net Hospitals
    We considered the previously mentioned methods for identifying 
safety net hospitals and we proposed to use the CMS Innovation Center's 
Strategy Refresh definition for identifying safety net hospitals within 
TEAM. Use of the CMS Innovation Center's Strategy Refresh's safety net 
definition allows for a consistent and streamlined approach to how the 
CMS Innovation Center plans to monitor safety net participation with 
CMS Innovation Center models. Further, the definition uses two 
recognized measures of social risk to identify hospitals serving a 
higher proportion of beneficiaries that may face barriers to receiving 
or accessing care.
    Beneficiaries with dual eligibility are considered a vulnerable 
group for several reasons including the nature of dual eligibility 
requirements, a higher proclivity for experiencing chronic conditions, 
and an increased likelihood of mental health 
diagnosis.967 968 In its 2016 ``Report to Congress Social 
Risk Factors and Performance Under Medicare's Value-Based Purchasing 
Programs,'' the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) found that dual eligibility status was the strongest 
predictor of poor outcomes of quality measures among multiple social 
risk factors examined.\969\ TEAM's proposed approach to identify safety 
net hospitals is also similar to other approaches used in CMS 
Innovation Center models. For example, BPCI Advanced identifies safety 
net hospitals by tabulating the proportion of episodes with fully or 
partially dual eligible beneficiaries; if a hospital exceeded a 60 
percent threshold of episodes based on the previous model year, then 
they would be considered a safety net hospital.\970\
---------------------------------------------------------------------------

    \967\ https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/Downloads/MMCO_Factsheet.pdf.
    \968\ https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/Downloads/NationalProfile_2012.pdf.
    \969\ https://aspe.hhs.gov/reports/report-congress-social-risk-factors-performance-under-medicares-value-based-purchasing-programs.
    \970\ https://www.cms.gov/files/document/bpcia-model-trg-price-specs-my7.pdf.
---------------------------------------------------------------------------

    While dual eligibility status does not fully capture all aspects of 
social risk, the incorporation of the proportion of patients with Part 
D LIS as a proxy for income into TEAM's proposed safety net definition 
broadens the range of possible beneficiary social risk factors used to 
make safety net hospital designations under the model. In its 2017 
report on ``Accounting for Social Risk Factors in Medicare Payment,'' 
the National Academies found that accounting for dual eligibility alone 
may not be sufficient to capture all social risk factors, and the 
incorporation of multiple measures may help to better characterize 
overall social risk.\971\ We sought comment on our proposal to identify 
safety net hospitals using the CMS Innovation Center's Strategy 
Refresh's definition in TEAM at Sec.  512.505.
---------------------------------------------------------------------------

    \971\ National Academies of Sciences, Engineering, and Medicine. 
2017. Accounting for social risk factors in Medicare payment. 
Washington, DC: The National Academies Press. doi: 10.17226/23635.
---------------------------------------------------------------------------

    The following is a summary of the public comments received on the 
proposed definition of safety net hospitals in TEAM and our responses 
to these comments:
    Comment: A commenter recommended CMS should use its authority to 
create a federal designation of essential health systems to target 
funding and other support across CMS programs, rather than creating a 
safety net hospital definition limited to TEAM.
    Response: The proposed definition of safety net hospital, as 
defined and finalized in this section of the preamble of the final 
rule, is specific to the purposes of TEAM. Creating a standard federal 
designation for essential health system is not within the scope of this 
rule.
    Comment: A commenter supported the use of the Hospital Value Based 
Purchasing Program's health equity adjustment (HEA) methodology to 
acknowledge socioeconomic inequities that differentially affect 
hospitals, especially safety net hospitals, by assigning additional 
points to hospitals that treat a greater proportion of patients who are 
dually eligible for Medicare and Medicaid and recommend TEAM to 
consider a similar approach.

[[Page 69794]]

    Response: We thank the commenter for their suggestion and agree 
that the approach aims to rewards hospitals that serve higher 
proportions of dual-eligible patients for providing excellent care. 
TEAM recognizes safety net hospitals may need additional policies to 
protect them from significant financial risk given they typically have 
less resources and care for a higher proportion of underserved 
beneficiaries. TEAM includes provisions that allow safety net hospitals 
to participate in value-based care, with lower risks and rewards. In 
particular, TEAM will allow safety net hospitals to participate in 
Track 1 for the first three performance years of the model, as 
discussed in section X.A.3.a.(3) of the preamble of this final rule, 
which removes their exposure to downside risk. TEAM also recognizes 
differences in quality measure performance for safety net hospitals, 
and other hospitals that may elect to participate in Track 2, by 
adjusting their CQS adjustment percentage for negative reconciliation 
amounts by 15 percent, which further limits their financial risk, as 
discussed in section X.A.3.d.(5)(g) of the preamble of this final rule. 
We will take into consideration a health equity adjustment approach, 
and if warranted, would propose in future notice and comment 
rulemaking.
    Comment: A few commenters supported the proposed definition of 
safety net hospitals using the CMS Innovation Center's Strategy 
Refresh's definition. A commenter supported the use of the CMS 
Innovation Center's definition because CMS conducted extensive 
stakeholder roundtables on the safety net definition, which led the CMS 
Innovation Center to use the Medicare Part D LIS indicator and dual-
eligibility ratio. A few commenters noted their appreciation for TEAM's 
safety net definition because it recognizes the challenges of providing 
care to low-income Medicare beneficiaries. Several commenters noted 
that TEAM's proposed definition for safety net hospital would not fully 
capture the full range of hospitals within the safety net as it does 
not reflect data from all payers or the degree of patients without 
health insurance served by a hospital. A commenter suggested that a 
broader definition of safety net that more closely aligns with 
community need would be more appropriate to identify hospitals that 
care for the most vulnerable populations. A commenter suggested that 
the proposed TEAM definition would prioritize smaller hospitals and 
would miss several large essential hospitals that have long played a 
safety net role in their communities. A commenter noted that dual 
eligibility and qualification for the Part D LIS subsidy may be highly 
correlated, which may affect a hospital's qualification as a safety net 
participant under TEAM.
    Response: We thank the commenters for sharing their support and 
concerns regarding TEAM's proposed safety net definition. We recognize 
that there are multiple approaches to identifying a safety net hospital 
for TEAM. The CMS Innovation Center definition reflects one measure of 
a hospital's patient mix through use of the percentage of beneficiaries 
that are dually eligible, and a proxy measure for the degree of low-
income beneficiaries that are furnished services at a given facility. 
As discussed in this section of the preamble of the final rule, these 
measures have been shown to be associated with lower access to care and 
worse health outcomes. The use of the CMS Innovation Center safety net 
definition within TEAM would align with the broader use of the safety 
net definition in monitoring safety net participation across CMS 
Innovation Center models.
    We acknowledge that measurement of community need could provide 
insights into the characteristics of a service area of a given 
hospital; however, the lack of readily available standardized data on 
community need across all possible TEAM participants beyond area-based 
indices could pose a challenge to incorporating the concept of 
community need into TEAM's safety net hospital definition.
    To clarify a commenter's concern about the possible high degree of 
correlation between the two measures used in the proposed safety net 
definition under TEAM, the proposed safety net definition would allow a 
TEAM participant to qualify as a safety net hospital under TEAM should 
it exceed the 75th percentile of either measure based on the 
distribution of these measures from all hospitals billing Medicare.
    Comment: A few commenters recommended against use of a safety net 
definition for TEAM that uses area-level indices, such as the ADI, due 
to shortcomings in measure design. A commenter advised against ADI as 
it does not capture patient-level social risk factors and only measures 
social risk factor data at the geographic level, specifically the 
characteristics of the hospital's geographic location. A commenter 
noted that an area-based index using a hospital's geographic location 
may not be a good proxy for determining whether a TEAM hospital should 
be considered a safety net hospital because patients may be transient. 
A commenter stated that while neighborhood factors are important 
determinants of health outcomes and spending, the lack of 
standardization in calculating the ADI score has made the measure 
overly dependent on median housing value and may disadvantage certain 
neighborhoods in large urban areas.
    Response: We thank commenters for raising concerns of using ADI as 
a possible way to define a safety net hospital under TEAM. We recognize 
that ADI as an area-based index has several valid uses for identifying 
a geographic measure of neighborhood disadvantage at the census block 
group level. We are aware of potential concerns that have been raised 
how the lack of standardization of ADI variables may make the ADI 
primarily a function of a subset of variables included in calculation 
of the ADI.\972\ Due to the concerns raised by commenters, we are not 
finalizing the use of ADI in determining safety net status for TEAM 
participants at this time as we feel use of the CMS Innovation Center's 
safety net provider definition is most appropriate for reasons 
discussed throughout this section. However, in response to commenters, 
we will assess the use of standardization in calculating ADI for target 
price risk adjustment purposes and may propose updates to our risk 
adjustment methodology in future rulemaking.
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    \972\ Petterson S. Deciphering the Neighborhood Atlas Area 
Deprivation Index: the consequences of not standardizing. Health Aff 
Sch. 2023;1(5):qxad063. Published 2023 Nov 3. doi:10.1093/haschl/
qxad063.
---------------------------------------------------------------------------

    Comment: A couple commenters recommended against use of the MSNI as 
it favors hospitals with high Medicare volume and does not incorporate 
Medicaid volume into its formula. A commenter noted that MSNI favors 
hospitals with higher Medicare volume because of the weight the 
Medicare share of inpatient days has in the MSNI formula. A commenter 
noted that use of the MSNI could discourage hospitals from expanding 
access to care as hospitals that serve more Medicaid beneficiaries and 
patients without health insurance will have a lower share of Medicare 
inpatient days even if they continue to serve the same number of 
Medicare beneficiaries. A commenter also noted that neither the MSNI 
nor the ADI would accurately reflect the broad patient mix of safety 
net hospitals if used in TEAM's safety net definition.
    Response: We thank commenters for raising concerns about the 
potential use of MSNI in determining safety net status under TEAM. Due 
to the concerns

[[Page 69795]]

raised by commenters, we are not finalizing the use of MSNI in 
determining safety net status for TEAM participants at this time as we 
feel use of the CMS Innovation Center's safety net provider definition 
is most appropriate for reasons discussed throughout this section.
    Comment: Many commenters found that the proposed TEAM definition 
does not account for the degree to which a hospital serves Medicaid 
beneficiaries and patients without health insurance. Several commenters 
suggested that the safety net definition under TEAM should account for 
the degree to which a hospital serves Medicaid beneficiaries. A 
commenter stated that the proposed TEAM safety net definition would 
adequately account for care provided to low-income Medicare 
beneficiaries but that low Medicare beneficiary volumes should not be a 
barrier to qualify as a safety net under TEAM for hospitals that 
otherwise serve large low-income populations. A few commenters noted 
that the proposed definition does not account for the financial 
difficulties of hospitals that treat a high number of Medicaid-eligible 
patients but may not have a relatively high volume of Medicare and 
Medicaid dually eligible patients. A commenter noted that a hospital's 
overall payer mix would be more useful in identifying facility-level 
characteristics that would influence the hospital's ability to fund 
infrastructure and investments for value-based care arrangements.
    Response: We thank commenters for their recommendations on 
potentially incorporating measures of the degree to which a TEAM 
participant serves Medicaid beneficiaries or patients without health 
insurance in determining safety net status. We acknowledge that this 
type of data could provide a more comprehensive view of the payer mix 
of a given hospital. However, as we do not have access to this type of 
standardized data for all possible TEAM participants, it would be 
challenging to incorporate both measures as part of TEAM's safety net 
definition at this time. The CMS Innovation Center safety net 
definition reflects one measure of a hospital's patient mix through use 
of the percentage of beneficiaries that are dually eligible, and a 
proxy measure for the degree of low-income beneficiaries that are 
furnished services at a given facility.
    Comment: Some commenters recommended that TEAM's safety net 
definition should consider the degree of uncompensated care provided by 
a hospital. These commenters suggested several existing measures 
related to uncompensated care that could be used in TEAM's safety net 
definition. A few commenters recommended that the disproportionate 
patient percentage (DPP), which captures a hospital's proportion of 
Medicaid and low-income Medicare patients, would be an appropriate 
measure of uncompensated care as it has long been used in Medicare's 
Disproportionate Share Hospital (DSH) program. A couple commenters 
suggested use of the Medicare uncompensated care payment factor (UCPF), 
which is a measure of a hospital's share of uncompensated care costs 
relative to all hospitals' uncompensated costs, as it can be used to 
identify the costs of care delivered to uninsured individuals. A few 
commenters recommended use of the deemed DSH hospital designation as it 
could identify hospitals that are statutorily required to receive 
Medicaid DSH payments because they serve a high share of Medicaid and 
low-income patients. A commenter expressed that the TEAM safety net 
definition could continue to use the Medicare-Medicaid dual eligibility 
and Part D LIS criteria but should add uncompensated care as a 
percentage of a hospital's total costs as a third eligibility 
criterion.
    Response: We thank commenters for their suggestions on the range of 
measures related to DSH and uncompensated care payments that could be 
used in TEAM's safety net definition. In its June 2022 Report, MedPAC 
raised concerns about whether these payments appropriately target 
safety net hospitals.\973\ We do not feel that it would be appropriate 
to use measures related to DSH or uncompensated care payments in TEAM's 
safety net definition as we feel that the CMS Innovation Center 
Strategy safety net definition use of dual eligibility and Part D LIS 
eligibility criteria is most appropriate in identifying TEAM 
participants as safety net participants. As discussed in this section, 
these two criteria have been shown to be associated with lower access 
to care and worse health outcomes.
---------------------------------------------------------------------------

    \973\ https://www.medpac.gov/wp-content/uploads/2022/06/Jun22_MedPAC_Report_to_Congress_v2_SEC.pdf.
---------------------------------------------------------------------------

    Comment: A commenter recommended that participation in the 340B 
Program be considered a criterion for designating TEAM participants as 
safety net hospitals.
    Response: Section 340B of the Public Health Service Act (340B) 
allows participating hospitals and other providers to purchase certain 
covered outpatient drugs or biologicals from manufacturers at 
discounted prices. We feel that using the HRSA-administrated 340B Drug 
Pricing Program participation alone would be insufficient to identify 
safety net hospitals under TEAM. Only certain types of hospitals are 
eligible to be covered entities in the 340B Drug Pricing Program.\974\ 
Therefore, using 340B Drug Pricing Program eligibility for determining 
safety net hospital status under TEAM could restrict the types of 
eligible TEAM participants that could be considered safety net for the 
purposes of TEAM. The 340B Program also focuses on the purchasing of 
certain covered outpatient drugs or biologicals, which is not fully 
aligned with the inpatient focus of TEAM episodes at this time. Use of 
the CMS Innovation Center safety net definition would allow all TEAM 
participants to be considered for safety net hospital eligibility for 
the purposes of TEAM.
---------------------------------------------------------------------------

    \974\ Section 340B(a)(4) of the Public Health Service Act 
considers the following types of hospitals as covered entities that 
can participate in the 340B Drug Pricing Program: children's 
hospitals, critical access hospitals, disproportionate, share 
hospitals, free standing cancer hospitals, rural referral centers, 
and sole community hospitals. For further information, refer to 
https://www.hrsa.gov/opa/eligibility-and-registration.
---------------------------------------------------------------------------

    Comment: A few commenters requested that safety net determinations 
for TEAM be done at the beginning of the model and be held constant for 
the duration of the model. A couple commenters highlighted that 
participants require time for financial planning within the context of 
a model that creates financial uncertainty for participating providers, 
highlighting that a shift between tracks for eligible safety net TEAM 
participants could undermine the participant's success in the model.
    Response: We thank the commenters for their perspectives on when 
safety net determinations should be made and whether they should be 
held for the duration of the model. We acknowledge the potential 
challenges that changing safety net determinations in each model year 
could create in a TEAM participant's ability to adequately plan for the 
model and that having a consistent designation for model's performance 
period may be beneficial. However, we do not believe holding the safety 
net determination for the duration of the model would create a 
sustainable, long-term policy, especially if TEAM could meet criteria 
to be expanded, as permitted under section 1115A(c) of the Act. 
Further, holding safety net determinations constant limits a TEAM 
participant's access to participating in different participation tracks 
in TEAM. As discussed in section X.A.3.a.(3) of

[[Page 69796]]

the preamble of this final rule and finalized at Sec.  512.520(b)(3) 
and (4), TEAM participants must satisfy the definition of safety net 
hospital at the time of participation track request for participation 
in Track 1 or Track 2.
    After consideration of public comments, we received, we are 
finalizing as proposed our proposed definition of safety net hospital 
under TEAM at Sec.  512.505.
(3) Identification of Rural Hospitals
(a) Background
    Americans who live in rural areas of the nation make up about 20 
percent of the United States (U.S.) population, and they often 
experience shorter life expectancy, higher all-cause mortality, higher 
rates of poverty, fewer local doctors, and greater distances to travel 
to see health care providers, compared to their urban and suburban 
counterparts.\975\ The health care inequities that many rural Americans 
face raise serious concerns that the trend for poor health care access 
and worse outcomes overall in rural areas will continue unless the 
potential causes of such health care inequities are addressed. Barriers 
such as workforce shortages can impact health care access in rural 
communities and can lead to unmet health needs, delays in receiving 
appropriate care, inability to get preventive services, financial 
burdens, and preventable hospitalizations.\976\
---------------------------------------------------------------------------

    \975\ Rural Health Research Gateway. (2018). Rural Communities: 
Age, Income, and Health Status. https://www.ruralhealthresearch.org/assets/2200-8536/rural-communities-age-income-health-status-recap.pdf.
    \976\ Healthy People 2020 (n.d.) Access to Health Services. 
https://www.healthypeople.gov/2020/topics-objectives/topic/Access-to-Health-Services.
---------------------------------------------------------------------------

    Hospitals in rural areas often face other unique challenges. Rural 
hospitals may be the only source of healthcare services for 
beneficiaries living in rural areas, and beneficiaries have limited 
alternatives. Rural hospitals may also be in areas with fewer providers 
including fewer physicians and PAC facilities, rural hospitals may have 
more limited options in coordinating care and reducing spending while 
maintain quality of care under a value-based care arrangement. We 
believe that urban hospitals may not have similar concerns as they are 
often in areas with many other providers and have greater opportunity 
to develop efficiencies.
(b) Definition of Rural Hospital
    We did not propose to include any geographically rural areas for 
TEAM based on the proposed CBSAs as defined in 89 FR 36394 through 
36412. However, some hospitals in the proposed CBSAs for TEAM may be 
considered rural for other reasons, such as being reclassified as rural 
under the Medicare wage index regulations or being designated a rural 
referral center (RRC).
    For the purposes of TEAM, we proposed a rural hospital to mean an 
IPPS hospital that is located in a rural area as defined under Sec.  
412.64 of this chapter; is located in a rural census tract defined 
under Sec.  412.103(a)(1) of this chapter; has reclassified as a rural 
hospital under Sec.  412.103 of this chapter, or is designated a rural 
referral center (RRC) under Sec.  412.96 of this chapter. This 
definition would be an expanded version of the rural hospital 
definition used by the CJR model as defined in 42 CFR 510.
    For PY 1, we proposed that rural designations under TEAM would be 
based on the TEAM participant's rural classification as of the model 
start date. We recognized that rural designations and rural 
reclassification requests in accordance with Sec.  412.103 may occur 
over on a rolling basis over the course of the model and can take 
several months to be reviewed and approved by CMS. We proposed that 
TEAM participants that receive an approved rural designation under the 
criteria defined in the preceding paragraph or an approved rural 
reclassification in accordance with Sec.  412.103 must notify CMS at 
least 60 calendar days prior to the start of a model's performance year 
for CMS to consider classifying the TEAM participant as rural under the 
model for the following performance year. We proposed that model rural 
designations will occur only once at the beginning of each model 
performance year regardless of when a TEAM participant's rural 
classification may change within a given performance year.
    We proposed that if a TEAM participant's classification is no 
longer rural pursuant to Sec.  412.103 or any other criteria previously 
qualifying them as rural as defined earlier in this section, the TEAM 
participant must notify CMS in a manner chosen by CMS within 60 
calendar days of receipt of this designation change. We proposed that 
TEAM participants would continue to receive the flexibilities for rural 
hospitals as described in 89 FR 36392 through 36394 through the 
remainder of the performance year in which the redesignation occurs, 
but the TEAM participant would no longer qualify for rural hospital 
flexibilities at the start of the next performance year.
    We sought comment on our proposal to identify rural hospitals in 
this section. We did not propose to include a measure of hospital 
rurality within our risk adjustment model as described in 89 FR 36433 
through 36435 but sought comments on whether inclusion of this risk 
adjustor would be warranted.
    The following is a summary of public comments received on the 
proposed definition of a rural hospital under TEAM and our responses to 
these comments:
    Comment: MedPAC noted that the proposed definition would encompass 
a large share of hospitals and recommended that rural hospitals should 
be defined as those located in geographically rural areas and not those 
that have been reclassified as rural or RRCs. MedPAC commented that 
nearly one-third of hospitals have gone through rural reclassifications 
and that TEAM should avoid a rural definition that could fuel 
reclassifications and should instead focus on a geographically based 
rural definition.
    Response: We thank MedPAC for noting the large share of hospitals 
that would be included in the definition. Our proposed inclusion of 
hospitals that were reclassified as a rural hospital under Sec.  
412.103 of this chapter or is designated a rural referral center (RRC) 
under Sec.  412.96 of this chapter in TEAM's rural definition was to 
consider a broader set of hospitals that are considered rural and to 
align with the rural definition used under the CJR model (42 CFR 510). 
Consistent use of a rural definition across CMS Innovation Center 
models and CMS programs can potentially provide continuity in a 
participant's rural classification across models and programs. However, 
in the context of a mandatory model, we understand that a narrower and 
rural definition based strictly on geographic area could prevent 
creating an incentive for a hospital to seek rural reclassification 
given the flexibilities offered to rural hospitals under TEAM.
    Comment: A commenter recommended that CMS not reclassify hospitals 
as rural during the middle of TEAM's performance period as changes in 
rural classifications were viewed as a challenge in the BPCI Advanced 
model.
    Response: We thank the commenters for their concern regarding the 
potential challenges of changing rural classifications over the model 
performance period. We acknowledge that determining a participant's 
rural status under TEAM at the beginning of the model performance 
period and maintaining it throughout the model performance period may 
provide a hospital with an understanding of their model track for the 
duration of the model, giving them the ability to plan accordingly. 
However, we do not

[[Page 69797]]

believe holding the rural hospital classification for the duration of 
the model would create a sustainable, long-term policy, especially if 
TEAM could meet criteria to be expanded, as permitted under section 
1115A(c) of the Act. Further, holding rural hospital classifications 
constant may limit a TEAM participant's access to participating in 
different participation tracks in TEAM, specifically Track 2. As 
discussed in section X.A.3.a.(3) of the preamble of this final rule and 
finalized at Sec.  512.520(b)(3) and (4), TEAM participants must 
satisfy the definition of rural hospital at the time of participation 
track request for participation in Track 2.
    Comment: A commenter suggested that some hospitals may be just 
outside an applicable rural zone and that CMS should considering a 
policy that would allow these hospitals to request a change in their 
designation.
    Response: We understand that a hospital may wish to request a 
change in their rural designation under TEAM. Any definition chosen 
will have participants on the margin of the definition. The rural 
definition under TEAM must be applied consistently across all TEAM 
participants and allowing for such change requests could increase 
operational complexity of the model and would not allow for a 
consistent and standard definition of rurality to be applied across all 
TEAM participants.
    After consideration of public comments, we received, we are 
finalizing our proposed definition of rural hospital under TEAM with 
slight modification to remove hospitals that have reclassified as a 
rural hospital under Sec.  412.103 and hospitals that are a rural 
referral center (RRC) as given this term under Sec.  412.96. For the 
purposes of TEAM, a rural hospital means an IPPS hospital that is 
located in a rural area as defined under Sec.  412.64 of this chapter 
or is located in a rural census tract defined under Sec.  412.103(a)(1) 
of this chapter as defined at Sec.  512.505.
(4) Beneficiary Social Risk Adjustment
    In recent years there has been a push for Medicare and other payers 
to include beneficiary social risk adjustment into financial 
methodologies that determine health care payments.\977\ It is believed 
that the inclusion of beneficiary social risk adjustment may provide 
more resources to providers who care for underserved beneficiaries to 
offset the additional costs often attributed to SDOH. In other words, 
patients with limited resources or access to care may require more 
spending from providers to achieve equitable outcomes. Beneficiary 
social risk adjustment has been limited in previous episode-based 
payment models. The BPCI Advanced and CJR models included beneficiary 
social risk adjustment for beneficiary dual eligibility status, yet 
that single adjuster alone may not be sufficient in capturing spending 
differences for beneficiary social risk. Findings from the CJR model's 
5th Annual Report found that, during the baseline period, historically 
underserved populations generally had higher episode payments, used 
more institutional post-acute care, had higher rates of emergency 
department use and readmissions, and received elective LEJRs at a lower 
rate than their reference populations.\978\
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    \977\ Adjusting Medicare payments for social risk to better 
support social needs. (2021). [Dataset]. In Forefront Group. https://doi.org/10.1377/forefront.20210526.933567.
    \978\ CMS Comprehensive Care for Joint Replacement Model: 
Performance Year 5 Evaluation Report. (2023). Centers for Medicare & 
Medicaid Services. Retrieved December 1, 2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2023/cjr-py5-annual-report.
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    There is significant literature and research surrounding the 
inclusion of social risk adjustment in health care payments, especially 
given the varying social risk adjustment indicators 
available.979 980 981 In a recent environmental scan, ASPE 
indicated that area-level deprivation indices tend to have the broadest 
coverage across the entire range of social risk factors. According to 
ASPE's report, area-level deprivation indices are, by definition, 
measured for geographic areas, which presents challenges in including 
them in payment models because a provider's patients are unlikely to be 
representative of the population of the geographic area in which the 
provider is located.\982\
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    \979\ Powers, B., Figueroa, J.F., Canterberry, M., Gondi, S., 
Franklin, S.M., Shrank, W.H., & Maddox, K.E.J. (2023). Association 
between Community-Level Social Risk and spending among Medicare 
beneficiaries. JAMA Health Forum, 4(3), e230266. https://doi.org/10.1001/jamahealthforum.2023.0266.
    \980\ Irvin, J., Kondrich, A., Ko, M., Rajpurkar, P., Haghgoo, 
B., Landon, B.E., Phillips, R.L., Petterson, S., Ng, A.Y., & Basu, 
S. (2020). Incorporating machine learning and social determinants of 
health indicators into prospective risk adjustment for health plan 
payments. BMC Public Health, 20(1). https://doi.org/10.1186/s12889-020-08735-0.
    \981\ Addressing social risk factors in Value-Based Payment: 
Adjusting payment not performance to optimize outcomes and fairness. 
(2021). [Dataset]. In Forefront Group. https://doi.org/10.1377/forefront.20210414.379479.
    \982\ Landscape of Area-Level Deprivation Measures and Other 
Approaches to Account for Social Risk and Social Determinants of 
Health in Health Care Payments. (2022). Office of the Assistant 
Secretary for Planning and Evaluation. Retrieved December 1, 2023, 
from https://aspe.hhs.gov/sites/default/files/documents/ce8cdc5da7d1b92314eab263a06efd03/Area-Level-SDOH-Indices-Report.pdf.
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    Several CMS Innovation Center initiatives incorporate (or may 
incorporate) beneficiary social risk adjustment into their financial 
calculations or determining payment amounts, including the ACO REACH 
model, the Enhancing Oncology Model (EOM), the Making Care Primary 
(MCP) model, and the Guiding an Improved Dementia Experience (GUIDE) 
model. To avoid relying on a single indicator that may not be 
representative of the beneficiaries a provider cares for, these models 
incorporate multiple social risk indicators. Specifically, these models 
take into account one or more of the following indicators in their risk 
adjustment models: state and national ADI, Medicare Part D Low-Income 
Subsidy (LIS), and dually eligible beneficiaries enrolled in both 
Medicare and Medicaid. Factoring in multiple indices may avoid 
challenges when an underserved beneficiary lives in higher cost-of-care 
area or beneficiaries that have difficulty accessing care. For example, 
incorporating both state and national ADI allows the for the risk 
adjustment model to capture national and local socioeconomic factors 
correlated with medical disparities and underservice, while including 
the LIS measure will capture socioeconomic challenges that could affect 
a beneficiary's ability to access care. For these reasons, and to align 
with other CMS Innovation Center models, we proposed to incorporate and 
equally weight three social risk indicators in TEAM's target price 
methodology, see 89 FR 36433 through 36435, specifically state and 
national ADI indicators, the Medicare Part D LIS indicator, and dual-
eligibility status for Medicare and Medicaid. We believe that including 
these social risk indicators would ensure TEAM participants that serve 
disproportionately high numbers of underserved beneficiaries are not 
inadvertently penalized when setting TEAM target prices.
    We sought comment on the proposed beneficiary social risk adjusters 
for TEAM and whether there were beneficiary social risk indicators we 
should consider in TEAM's target price methodology.
    The following is a summary of public comments received on the 
beneficiary social risk adjustment indicators under TEAM and our 
responses to these comments. For further comments and responses related 
to the risk adjustment methodology, please see section

[[Page 69798]]

X.A.3.d.(4) of the preamble of this final rule.
    Comment: A few commenters supported the inclusion of social risk 
adjustment in the model's target pricing methodology. A commenter noted 
that inclusion of these adjustments can ensure that facilities that 
disproportionately serve underserved populations, such as communities 
of color and rural communities, are not penalized under the model given 
their higher investment needs due to higher levels of social risk. A 
commenter stated that failing to adjust for social risk variables could 
unfairly penalize hospitals and clinicians for serving more complex and 
underserved populations, and that adjusting for these factors could 
ensure a more accurate and fair assessment of quality. A commenter 
noted that the current proposal to use dual eligibility, Part D LIS 
status, or living in an area with a high ADI would not appropriately 
demonstrate a patient's social risk. A commenter recommended that TEAM 
take a cautious approach to social risk adjustment to ensure 
beneficiary needs are not excessively adjusted and potentially masked.
    Response: We thank commenters for their support about the inclusion 
of social risk adjustors into TEAM's target price methodology and 
commenters for raising potential concerns about inclusions of such 
variables. In the proposed rule, we noted that the social risk 
adjustment variable was chosen so that it can account for multiple 
potential markers of beneficiary social risk. Using Medicare/Medicaid 
dual eligibility status, LIS status, and living in areas in the top 
percentiles of either the national or state level ADI allows CMS to 
utilize existing indicators of social risk together and capture safety-
net populations through multiple means. If dual-eligibility status has 
not been identified prior to the episode occurring, the ADI marker may 
still be able to identify the beneficiary at a higher social risk. 
Additionally, we proposed to enforce sign restrictions to avoid 
negative coefficients for the beneficiary social risk adjuster, meaning 
that the adjustment to the preliminary or reconciliation target prices 
would only happen if the coefficient on the beneficiary social risk 
adjustment variable is positive. We would not be able to enforce the 
sign restrictions if additional variables for social risk were 
separately added to the model.
    As indicated above in section X.A.3.d.(4) of this final rule, CMS 
is also finalizing the addition of safety net status of the hospital as 
a risk-adjuster to all episode types to address concerns about 
providers that primarily care for beneficiaries with dual-eligibility 
or LIS status. We believe the inclusion of the provider's safety net 
status will strengthen the risk adjustment model and appropriately set 
target prices for providers that serve economically distressed 
counties. While CMS is not including all the risk adjusters tested in 
BPCI Advanced to maintain the simplicity required for hospitals without 
experience in value-based care to participate in TEAM, the updated risk 
adjustment model does take more patient-level and hospital level 
factors into account.
    Comment: A couple commenters suggested that rural status should be 
considered as a risk adjustor to support rural providers in taking on 
risk and to acknowledge the disparities that exist in rural settings.
    Response: We acknowledge the comments regarding the inclusion of 
provider-level risk adjusters for rural/urban status. As part of the 
Lasso regression analysis to identify risk adjustors as described in 
section X.A.3.d.(4) of the preamble of this final rule, CMS found that 
the variables for patients treated at rural hospitals were not selected 
by the Lasso model for any of the episode categories. Therefore, risk 
adjusters for rural status will not be included. However, rural 
hospitals will have additional flexibilities in TEAM, such as opting 
for Track 2 of the model which has a lower level of risk sharing (5 
percent stop-loss/stop-gain).
    Comment: Each of the following sociodemographic variables were 
proposed by a commenter: age, disability status, educational level, 
preferred language, and socioeconomic status. A couple commenters 
recommended including patient-level health-related social need (HRNS) 
variables for risk adjustment such as housing instability, experiencing 
homelessness, food insecurity, financial needs, transportation 
problems, and interpersonal safety. A couple commenters suggested that 
Z codes related to social determinants of health (SDOH) and HRSNs could 
be used for risk adjustment purposes.
    Response: We thank commenters for their suggestions on additional 
measures that could be considered to risk adjust for a beneficiary's 
levels of social risk, including the potential use of Z codes to 
identify SDOH-related variables.
    As described in section X.A.3.d.(4) in the preamble of this final 
rule, the updated risk adjustment methodology for TEAM includes age 
brackets as a demographic variable for all TEAM episodes. We also note 
that the updated risk adjustment methodology will incorporate a measure 
of disability as the original reasons for Medicare enrollment for the 
LEJR episode as it was found to be statistically significant in the 
Lasso regression analysis. We recognize that there are additional 
measures of disability status that could be considered in exploration 
of future risk adjustment methodologies under TEAM should standardized 
and sufficient data be available across TEAM participants. Based on the 
results of the Lasso regression analysis to identify risk adjustors for 
TEAM episodes, we are not considering any other demographic factors--
such as educational level, preferred language, and socioeconomic 
status--at this time but could consider them in future analyses that 
may lead to proposed adjustments in TEAM's risk adjustment methodology 
prior to the start of TEAM's performance period.
    We appreciate commenters recommendations on additional variables 
related to HRSNs that could be considered in the risk adjustment 
methodology. Given variability in the use of Z codes to capture HRSN 
data, we would be concerned about the availability of standardized data 
across TEAM beneficiaries to meaningfully incorporate such measures 
into TEAM's risk adjustment methodology. The proposed beneficiary-level 
social risk variable included in TEAM's risk adjustment variable 
incorporates measures that have been shown to be correlated with a 
beneficiary's level of social risk as described in section X.A.3.d.(4) 
in the preamble of this final rule. In the absence of consistently 
available HRSN data at the beneficiary-level, we consider that the 
beneficiary-level social risk variable captures the degree of 
beneficiary's social risk and avoids potential overcontrolling of 
social risk variables within the risk adjustment models. We could 
consider further exploration of the recommended HRSN-related risk 
adjustors should TEAM adjust its risk adjustment methodology through 
notice and comment rulemaking.
    Comment: A commenter recommended to continue using the BPCI 
Advanced and CJR risk adjustment methodology but to include LIS status 
and ADI to more accurately capture the social risk experienced by a 
beneficiary in TEAM's risk adjustment methodology.
    Response: We appreciate the commenter's suggestion on expanding 
upon existing risk adjustment methodologies to incorporate measures of 
social risk. The updated risk adjustment methodology as described in 
section X.A.3.d.(4) in the preamble of

[[Page 69799]]

this final rule more closely resembles the CJR and BPCI Advanced models 
with the additional risk adjusters that were selected based on 
statistical analyses and maintains the goal of a simple risk adjustment 
model for TEAM.
    Comment: A commenter cautioned CMS in using the ADI as a measure of 
social risk as research has demonstrated that ADI is weakly correlated 
with self-reported social needs and with health care costs and may mask 
inequities in communities where there are high levels of wealth 
disparities. Another commenter recommended that CMS develop guardrails 
so that hospitals that receive higher reimbursement because of ADI 
factors should be required to make their services more accessible to 
Medicaid and dually eligible enrollees. A commenter suggested that 
beneficiary-level social risk factors should be used to better capture 
beneficiary-level disadvantage since beneficiaries living in high ADI 
area could have considerable social risk. A commenter suggested that 
use of ADI in risk adjustment could cause harm to providers in high-
cost living areas by boosting the risk scores of healthy beneficiaries 
in low-cost living areas. A commenter supported the use of ADI as it 
creates a multi-dimensional picture of the social drivers of health 
within a community but may mask differences within a census block. A 
couple of commenters recommended CMS to consider using patient-level 
data in combination with similar indices to the ADI, like the Centers 
for Disease Control and Prevention's (CDC) Social Vulnerability Index 
(SVI), which includes data on race, ethnicity, and disability.
    Response: We thank commenters for raising potential concerns around 
the use of ADI as one variable to determine the beneficiary social risk 
variable in risk adjustment. One benefit of ADI as a measure of social 
risk is that it measures several factors of socioeconomic position 
across the domains of education, income, home values, employment, and 
household information. The geographic level of an area-based index or 
indicator will inherently be a limitation in the use of any area-based 
measure, including potentially masking differences below the geographic 
unit of analysis. We believe ADI's use of census blocks groups provides 
an appropriate unit of geography by which to assess social risk for the 
purposes of risk adjustment under TEAM. We acknowledge that more 
granular beneficiary-level data on HRSNs could theoretically provide a 
more accurate assessment of an individual beneficiary's level of social 
risk compared to an area-based index; however, because HRSN data may be 
inconsistently available at the beneficiary level, we do not think that 
such adjustors would be appropriate to use for risk adjustment under 
TEAM at this time. We are aware of potential concerns that have been 
raised how the lack of standardization of ADI variables may make the 
ADI primarily a function of a subset of variables included in 
calculation of the ADI.\983\ While we think that the use of ADI is 
appropriate as one way to capture a beneficiary's level of social, we 
will continue to explore whether standardization of the ADI variables 
would be appropriate for the purposes of TEAM's risk adjustment 
approach and would propose any such changes in future rulemaking.
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    \983\ Petterson S., Deciphering the Neighborhood Atlas Area 
Deprivation Index: the consequences of not standardizing. Health Aff 
Sch. 2023;1(5):qxad063. Published 2023 Nov 3. doi:10.1093/haschl/
qxad063.
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    As described in section X.A.3.d.(4) in the preamble of this final 
rule, we also note that the construction of the beneficiary social risk 
variable in TEAM's risk adjustment methodology represents the union of 
three different potential markers of beneficiary social risk: national-
level ADI, state-level ADI, and dual eligibility status. While we 
acknowledge concerns that the ADI could mask differences in levels of 
deprivation lower than the census block, we believe that the use of 
national- and state-level ADIs would help mitigate potential concerns 
on the validity of the measure of social risk as it incorporates 
relative measures of deprivation at national scale and within a given 
state. Similarly, as dual eligibility status has been shown to be 
associated with a beneficiary's level of social risk, we feel that 
allowing three ways in which a beneficiary's level of social risk could 
be accounted for in risk adjustment is appropriate.
    We disagree with the recommendation that TEAM participants that 
receive higher payment because of ADI factors alone should be 
encouraged to expand access to certain patient populations. The use of 
ADI in risk adjustment is done for target pricing, and performance 
against the risk-adjusted target price and quality measure benchmarks 
across all episodes in accordance with the participation track of the 
TEAM participant collectively determine the NPRA. Therefore, the 
influence of ADI performance alone on payment would not be an 
appropriate determination of whether a participant should be encouraged 
to expand access to services to Medicaid or dually eligible 
beneficiaries, nor would such an incentive structure be within the 
direct scope of TEAM.
    We appreciate the suggestion for CMS to consider use of the SVI as 
a potential way to identify beneficiary-level social risk for the 
purposes of team. The SVI provides a ranking of social vulnerability, 
or the resilience of communities when confronted by external stresses 
on human health and incorporates 15 variables across 4 themes: 
socioeconomic status, household composition and disability, racial/
ethnic minority status, and language.\984\ The SVI is not as granular 
as ADI as ADI uses census block groups and SVI uses census tracts. SVI 
uses the American Community Survey (ACS) 5-year estimates, and the SVI 
accordingly inherits the limitations and timing of this source data. 
For these reasons, we did not propose SVI as potential risk adjustor 
because we did not feel it would have been appropriate to use SVI in 
place of the ADI for the purposes of risk adjustment under TEAM.
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    \984\ https://www.atsdr.cdc.gov/placeandhealth/svi/at-a-glance_svi.html.
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    Comment: A commenter supported the use of dual eligibility status 
as a risk adjustor as research has shown that dual eligibility status 
is correlated with other measures of social drivers of health; however, 
the commenter also suggested that Medicaid eligibility may be a more 
comprehensive reflection of underserved populations for some hospitals 
given the variation in Medicaid eligibility across states.
    Response: We thank the commenters for their support of using dual 
eligibility as a possible proxy for social risk under TEAM's risk 
adjustment methodology and for the suggestion to consider Medicaid 
eligibility. Given TEAM is a Medicare-based model, we feel that dual 
eligibility is an appropriate proxy for social risk that reflects both 
Medicare and Medicaid eligibility.
    Comment: A commenter noted that CMS should continue to advance 
standardization of SDOH data in the context of social risk adjustment 
to explore ways to modify target prices to better account for 
historical underutilization.
    Response: We appreciate the commenter's suggestion that 
standardization of SDOH data could help more easily incorporate 
measures of social risk into target price risk methodologies under 
team. As described in section X.A.3.d.(4) in the preamble of this final 
rule, we have identified statistically meaningful risk adjustors, 
including measures related to

[[Page 69800]]

social risk, that can be reliably measured across TEAM participants and 
episodes to ensure that data is available to the extent possible for 
risk adjustment.
    We refer readers to section X.A.3.d.(4) in the preamble of this 
final rule for the comprehensive list of risk adjustment variables, 
including those related to social risk, that will be included in TEAM's 
pricing methodology.
(5) Health Equity Plans and Reporting
(a) Health Equity Plans
    We believe it is important for TEAM participants to identify and 
monitor where disparities exist in their TEAM beneficiary population, 
and to use the data that they collect to implement evidence-based 
strategies aimed at addressing the identified health disparities and 
advancing health equity. To further align with other CMS Innovation 
Center models and promote health equity, we proposed that TEAM 
participants can voluntarily submit to CMS, in a form and manner and by 
the date(s) specified by CMS, a health equity plan for the first 
performance year. This proposal to make submission of a health equity 
plan voluntary in PY 1 recognized that constructing a health equity 
plan may require significant time and effort by the TEAM participant. 
Beginning in PY 2, we proposed that TEAM participants would be required 
to submit a health equity plan in a form and manner and by the date(s) 
specified by CMS. Beginning in PY 2 for those TEAM participants that 
voluntarily submitted a health equity plan in PY 1 and beginning in PY 
3 for those TEAM participants that first reported a health equity plan 
in PY 2, we proposed that the TEAM participant would submit updates to 
their previously submitted health equity plans in a form and manner and 
by date(s) specified by CMS.
    We proposed that the health equity plans submitted in all 
performance years would include the following elements:
     Identifies health disparities. We proposed to define 
``health disparities'' as preventable differences in the burden of 
disease, injury, violence, or opportunities to achieve optimal health, 
health quality, or health outcomes that are experienced by one or more 
``underserved communities'' \985\ within the TEAM participant's 
population of TEAM beneficiaries that the participant will aim to 
reduce. We proposed to define ``underserved communities'' as 
populations sharing a particular characteristic, as well as geographic 
communities, that have been systematically denied a full opportunity to 
participate in aspects of economic, social, and civic life.\986\ We 
proposed that the data sources used to inform the identification of 
health disparities should also be noted in the plan.
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    \985\ https://www.cms.gov/priorities/innovation/key-concepts/
health-
equity#:~:text=(Source3ACMS),underservedpopulations(AdaptedfromCDC).
    \986\ https://www.federalregister.gov/d/2021-01753/p-6.
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     Identifies health equity goals and describes how the TEAM 
participant will use the health equity goals to monitor and evaluate 
progress in reducing the identified health disparities. We proposed to 
define ``health equity goals'' as targeted outcomes relative to the 
health equity plan performance measures for the first PYs and all 
subsequent PYs.
     Describes the health equity plan intervention strategy. We 
proposed to define ``health equity plan intervention strategy'' as the 
initiative(s) the TEAM participant will create and implement to reduce 
the identified health disparities.
     Identifies health equity plan performance measure(s), the 
data sources used to construct the health equity plan performance 
measures, and an approach to monitor and evaluate the health equity 
plan performance measures. We proposed to define ``health equity plan 
performance measure(s)'' as one or more quantitative metrics that the 
TEAM participant will use to measure changes in health disparities 
arising from the health equity plan interventions.
    We solicited comment on the proposed voluntary health equity plan 
submission in PY 1 and mandatory health equity plan submission in PY 2 
and all following performance years as proposed in Sec.  512.563. We 
also solicited comment on whether TEAM participants should be required 
to submit a health equity plan in PY 2 and for all subsequent 
performance years if a TEAM participant submits a health equity plan to 
CMS for another CMS Innovation Center model in the same performance 
year, or if the TEAM participant should be required to submit a health 
equity plan that is specific to TEAM and the TEAM participant's 
population of TEAM beneficiaries. We also solicited comment on the 
proposed elements of the health equity plan.
    The following is a summary of comments we received on health equity 
plans under TEAM and our responses:
    Comment: Some commenters expressed their support for TEAM's 
inclusion of a health equity plan. A commenter found the definition of 
health disparities to be broadly defined and requested that CMS narrow 
the scope of the health equity plan to focus on racial/ethnic, 
socioeconomic, or similar demographic disparities in key process or 
outcomes measures central to surgical care. A couple commenters 
requested that CMS allow hospitals to choose their own area of focus, 
population and/or process or outcome indicators in their action plan 
that are related to just one procedure. A commenter recommended that 
TEAM participants should be required or incentivized to reduce 
disparities in readmission rates, patient safety indicators, or PROMs. 
Another commenter raised a concern that requirements to close health 
equity gaps are well-intentioned, but CMS should consider protections 
and incentives to specifically encourage inclusion of vulnerable 
populations as incentives to close health equity gaps could 
inadvertently cause participants to adversely select beneficiaries.
    Response: We thank commenters for their support of the proposed 
health equity plans under TEAM and for raising some concerns about the 
proposed components of the plan. The intent of the health equity plan 
under TEAM is to allow the TEAM participant flexibility to identify 
health equity goals and interventions that are most appropriate for 
their context and then work to improve identified health disparities. 
We agree that TEAM participants should be able to choose their own area 
of focus within the health equity plan as long as the participant's 
health equity plan meets all stated requirements. While we recognize 
that focusing on improving disparities in readmission rates, patient 
safety indicators, or PROMs may be appropriate for many TEAM 
participants, we believe that allowing for more contextually specific 
health equity goals is most appropriate for TEAM participants and will 
allow for alignment with other relevant health equity work in which the 
TEAM participant may be engaged. We acknowledge the concern that 
incentivizing improvements in health equity gaps could potentially lead 
to adverse selection in that a hospital could theoretically choose to 
furnish services to healthier patients to improve measures related to 
the TEAM's participant chosen health equity goals. However, given that 
payments under TEAM are not tied to performance on the health equity 
plan, we do not feel there is a significant likelihood that this 
adverse selection would occur solely as a result of a health equity 
plan under TEAM.

[[Page 69801]]

    Comment: A couple commenters suggested that the health equity plan 
should be voluntary for the entirety of TEAM's performance period, 
while another commenter recommended that health equity plans should be 
mandatory for all performance years as CMS has already piloted these 
plans on a voluntary basis in other initiatives. A commenter had 
concerns that requiring the plan from the start may lead to a less 
thorough plan and recommended that the health equity plan should start 
in PY 2, or at a minimum delay the plan to PY 2 for participants in 
Tracks 1 and 2, to allow providers new to value-based care the 
opportunity to build infrastructure for addressing disparities in the 
hospital's service area.
    Response: We thank reviewers for their comments on the timing of 
when health equity plans should be implemented and mandatory under 
TEAM. We acknowledge that developing and implementing a health equity 
plan under TEAM may require additional time for a TEAM participant to 
identify and quantify health disparities appropriate for TEAM's health 
equity plan and then develop a plan to address them. Accordingly, we 
believe that voluntary reporting for all model performance years would 
be appropriate to give sufficient time for TEAM participants interested 
in developing a TEAM-specific health equity plan, including those that 
are newer to value-based care, to develop a comprehensive TEAM health 
equity plan that meets all stated components.
    Comment: A few commenters expressed concern over the increased 
burden of creating and implementing a standalone health equity plan for 
TEAM. A couple commenters recommended that CMS streamline requirements 
with other health equity plan requirements in other CMS quality 
reporting programs. A couple commenters raised concerns that the 
requirement of a TEAM health equity plan is significantly different 
from the Hospital Commitment to Health Equity (HCHE) requirement under 
the Hospital Inpatient Quality Reporting Program beginning in CY 2023, 
which requires a hospital to attest to five domains that demonstrate a 
hospital's commitment to health equity, as it will increase 
administrative burden and could shift the focus to meeting regulatory 
requirements at the expense of meaningful action to improve health 
disparities. A commenter expressed concern that CMS is requiring a 
standalone health equity plan for TEAM whereas the Joint Commission 
(TJC) requires hospitals to submit a health equity plan. A few 
commenters suggested CMS should allow overlap of health equity plans if 
a TEAM participant is also participating in a CMS Innovation Center 
model that requires a health equity plan to decrease burden. A 
commenter noted that health equity plans should be tailored to a 
specific model to align with the identified needs of the model's 
beneficiaries and that equity plans from other CMS Innovation Center 
models should not be used for the purposes of TEAM.
    Response: We thank commenters for raising concerns around the 
potential duplication and differences in requirements across different 
health equity plan and reporting requirements under CMS programs. We 
disagree that having a health equity plan under TEAM would shift focus 
away from meaningful action to improve observed TEAM-related 
disparities as the plan would serve as an accountability mechanism for 
TEAM participants to identify disparities, work to improve them, and 
monitor progress against their stated health equity goals. We recognize 
that a TEAM participant may already report on health equity work under 
CMS' Hospital Inpatient Quality Reporting Program, such as through the 
required HCHE measure (87 FR 49191 through 49201), and other CMS 
Innovation Center models. However, we feel that TEAM's proposed health 
equity plan requirements are more appropriate to establishing and 
advancing specific health equity goals related to TEAM's proposed 
clinical focus areas than what is required under the HCHE measure in 
the Hospital Inpatient Quality Reporting Program. We agree with the 
commenter that health equity plans should be tailored to specific 
models to align with the identified needs of the model's target 
beneficiaries. We believe that voluntary reporting of health equity 
plans for all performance years would allow TEAM participants 
interested in developing and implementing a health equity plan the 
flexibility to appropriately focus their goals and interventions to 
areas of clinical focus most relevant to TEAM.
    Comment: A commenter suggested that CMS should add an element to 
TEAM's health equity plan in future years on community engagement to 
better understand how TEAM participants are seeking input on model 
implementation and investing in structures and opportunities to partner 
with patients, caregivers, and communities with the greatest health 
inequities.
    Response: We thank the commenter for highlighting that community 
engagement is an important aspect of advancing health equity goals. 
Given that TEAM's proposed health equity plan requirements allow TEAM 
participants that voluntarily submit a health equity plan to tailor 
health equity interventions to the specific needs of their identified 
beneficiaries, TEAM participants would be able to focus on community 
engagement strategies that support the improvement of health equity 
goals should the TEAM participant find it an appropriate intervention 
strategy for their context.
    Comment: A commenter expressed concern that CAHs or safety net 
hospitals may have limited data available to sufficiently identify 
inequities and track performance. A commenter recommend that CMS 
consider providing technical assistance to safety net and rural 
providers, who may not have sufficient data analytics capacity to 
determine disparities experienced by the hospital's patient population.
    Response: We thank the commenters for raising these concerns as we 
are aware of the different contexts in which rural and safety net 
hospitals operate. As part of the implementation of TEAM, we will 
consider if there are opportunities to provide technical assistance on 
data analytics for health equity for safety net and rural hospitals in 
TEAM.
    Comment: A commenter recommended that CMS issue additional guidance 
on how accountability and enforcement of these plans will address 
health disparities. A commenter expressed concern that CMS has not 
defined clear guidelines and criteria for assessment of the health 
equity plans.
    Response: We thank the commenters for raising concerns about how 
TEAM participants would be assessed and held accountable on health 
equity plans for TEAM. As part of the implementation of TEAM, CMS will 
provide further sub-regulatory guidance on how CMS will review and 
provide feedback on TEAM participants' health equity plans for those 
participants that voluntarily submit a health equity plan.
    After consideration of the public comments we received, we are 
finalizing our proposal of voluntary health equity plan submission for 
all following performance years in a form and manner and by date(s) 
specified by CMS as defined in Sec.  512.563(a). A health equity plan 
voluntarily submitted by a TEAM participant must include all proposed 
elements and must be specific to TEAM and the TEAM participant's 
population of TEAM beneficiaries as defined in Sec.  512.563(a).

[[Page 69802]]

(b) Demographic Data Collection and Reporting
    We recognize disparities exist for beneficiaries in the health care 
system, including those receiving episodic care. Health care 
disparities highlight the importance of data collection and analysis 
that includes race, ethnicity, language, disability, sexual 
orientation, gender identity, and sex characteristics or other 
demographics by health care facilities. Such data are necessary for 
integration of health equity in quality programs, because the data 
permits stratification by patient subpopulation.987 988 
Stratified data can produce meaningful measures that can be used to 
expose health disparities, develop focused interventions to reduce 
them, and monitor performance to ensure interventions to improve care 
do not have unintended consequences for certain patients.\989\ 
Furthermore, quality programs are carried out with well-known and 
widely used standardized procedures including but not limited to root 
cause analysis, plan-do-study-act (PDSA) cycles, health care failure 
mode effects analysis, and fishbone diagrams. These approaches are 
common in the health care industry to uncover the causes of problems, 
show the potential causes of a specific event, test a change that is 
being implemented, prevent failure by correcting a process proactively, 
and identify possible causes of a problem and soft ideas into useful 
categories, respectively.990 991 992 993 Adding a health 
equity prompt to these standardized procedures integrates a health 
equity lens within the quality structure and cues considerations of the 
patient subpopulations who receive care and services from a 
hospital.\994\
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    \987\ IOM (Institute of Medicine). 2009. Race, Ethnicity, and 
Language Data: Standardization for Health Care Quality Improvement 
(p.287). The National Academies Press https://www.ahrq.gov/sites/default/files/publications/files/iomracereport.pdf, https://www.ahrq.gov/sites/default/files/publications/files/iomracereport.pdf.
    \988\ Sivashanker, K., & Gandhi, T.K., (2020). Advancing Safety 
and Equity Together. New England Journal of Medicine, 382(4), 301-
303. https://doi.org/10.1056/nejmp1911700, https://doi.org/10.1056/nejmp1911700.
    \989\ Weinick, R.M., & Hasnain-Wynia, R. (2011). Quality 
Improvement Efforts Under Health Reform: How To Ensure That They 
Help Reduce Disparities--Not Increase Them. Health Affairs, 30(10), 
1837-1843. https://doi.org/10.1377/hlthaff.2011.0617, https://doi.org/10.1377/hlthaff.2011.0617.
    \990\ American Society for Quality. (2019). What is root cause 
analysis (RCA)? Asq.org. https://asq.org/quality-resources/root-cause-analysis.
    \991\ Agency for Healthcare Research and Quality. (2020). Plan-
Do-Study-Act (PDSA) directions and examples. www.ahrq.gov. https://www.ahrq.gov/health-literacy/improve/precautions/tool2b.html.
    \992\ Failure Modes and Effects Analysis (FMEA) Tool  
IHI--Institute for Healthcare Improvement. (2017). www.ihi.org. 
https://www.ihi.org/resources/Pages/Tools/FailureModesandEffectsAnalysisTool.aspx.
    \993\ Kane, R. (2014). How to Use the Fishbone Tool for Root 
Cause Analysis. https://www.cms.gov/medicare/provider-enrollment-and-certification/qapi/downloads/fishbonerevised.pdf.
    \994\ Sivashanker, K., & Gandhi, T.K. (2020). Advancing Safety 
and Equity Together. New England Journal of Medicine, 382(4), 301-
303. https://doi.org/10.1056/nejmp1911700.
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    To align with other CMS efforts, we proposed that TEAM participants 
could voluntarily report to CMS demographic data of TEAM beneficiaries 
pursuant to 42 CFR 403.1110(b) in PY 1. Beginning in PY 2 and all 
subsequent performance years, we proposed that TEAM participants would 
be required to report demographic data of TEAM beneficiaries to CMS in 
a form and manner and by a date specified by CMS. We proposed that 
demographic data would also be required to conform to USCDI version 2 
data standards, at a minimum. Collection of this data could provide 
synergies with goals articulated in the health equity plans of TEAM 
participants. Further, this demographic data reporting would allow CMS 
to gain more nuanced understanding of the expanded demographics of TEAM 
beneficiaries--including data on race, ethnicity, language, disability, 
sexual orientation, gender identity, sex characteristics, and other 
demographics--to monitor and evaluate the model.
    We proposed that the TEAM participant would be required make a 
reasonable effort to collect demographic data from all TEAM 
beneficiaries beginning in PY 2; however, we recognized that this may 
require additional administrative effort to collect this data or 
identify TEAM beneficiaries that may elect to not provide this data. We 
recognized that CEHRT may help to reduce administrative burden once EHR 
platforms have been programmed to capture and exchange the types of 
demographic data elements of interest. We also recognized that this 
demographic data may already be reported to CMS for other CMS 
initiatives.
    We sought comment on the proposed voluntary reporting of 
demographic data of TEAM beneficiaries in PY 1 and the proposed 
mandatory reporting of demographic data of TEAM beneficiaries beginning 
in PY 2 and all following performance years. We wished to minimize the 
reporting burden on TEAM participants to ensure sufficient time and 
effort is spent adjusting to the requirements of a mandatory model, and 
we sought comments on how reporting of this demographic data could 
minimize burden and if it could be collected from existing data 
sources.
    The following is a summary of the public comments received on the 
proposed demographic data reporting requirements under TEAM and our 
responses:
    Comment: Some commenters supported the proposal to collect and 
report demographic data under TEAM as it would provide a comprehensive 
understanding of health disparities, enabling targeted actions to 
promote health equity. A commenter supported the voluntary reporting in 
PY 1 followed by mandatory reporting in all other TEAM performance 
years.
    Response: We thank commenters for their overall support of the 
proposed demographic data collection and reporting for TEAM 
beneficiaries as well as support for voluntary demographic data 
reporting in PY 1 followed by mandatory reporting beginning in PY 2 and 
for all following performance years. After a consideration of the full 
range of comments summarized in this section of the preamble of the 
final rule, we feel that allowing voluntary collection and reporting of 
demographic data for TEAM beneficiaries for all performance year would 
be most appropriate.
    Comment: A few commenters supported use of USCDI standards for the 
demographic data reporting requirement under TEAM. A commenter 
recommended that CMS align coding and documentation requirements for 
the demographic data reporting under TEAM with national standards, like 
the USCDI version 3. A commenter appreciated CMS' interest in 
collecting more robust demographic data but was concerned that 
variation in data collection processes may result in data that does not 
confirm to USCDI version 2 standards, recommending that hospitals 
should have more flexibility in data collection standards. A commenter 
recommended that claims or QRDA 1 submissions would provide sufficient 
demographic information to meet the data reporting requirement and 
cautioned against requiring a separate data submission. A couple 
commenters recognized that demographic data reporting under TEAM would 
help to advance health equity goals but cautioned about requiring data 
collection when federal standards for collecting data are undergoing 
significant changes, and that attention should first be on data 
structuring instead of reporting.
    Response: We thank commenters for suggestions related to how the 
proposed demographic data reporting requirements under TEAM could align

[[Page 69803]]

with existing data standards. We believe that it is important that 
demographic data reported under TEAM follow adopted standards to allow 
for aggregation and comparability across the model. USCDI standards 
provide an appropriate national standard given their adoption by ONC. 
As raised by commenters, we acknowledge that TEAM participants may have 
different data collection and reporting capabilities that align with 
existing USCDI standards. We disagree with commenters concerns that 
demographic data collection and reporting should not occur due to 
changing national standards. ONC has adopted USCDI version 3 (45 
CFR[thinsp]170.213(b)) which will become the baseline USCDI standard 
adopted in 45 CFR[thinsp]170.213 on January 1, 2026, upon the 
expiration of USCDI v1. While we proposed that TEAM participants that 
report TEAM beneficiary demographic data would need to use USCDI 
version 2 at a minimum, we feel that a minimum of USCDI version 3 for 
the purposes of TEAM would be appropriate given that the USCDI version 
3 would be the minimum standard adopted in 45 CFR 170.213 at the 
beginning of TEAM's performance period. We feel that it would be 
important to standardize the demographic data elements to the minimum 
of USCDI version 3 to ensure that we will have standardized data that 
can be aggregated from those TEAM participants that voluntarily report 
the data to better understand the demographics of TEAM beneficiaries to 
help advance the model's health equity goals. The current CMS 
Innovation Center Enhancing Oncology Model (EOM) has required use of 
USCDI version 3 standards in their collection and reporting of 
beneficiary sociodemographic data.\995\
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    \995\ https://www.cms.gov/priorities/innovation/innovation-models/enhancing-oncology-model#part.
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    We do not agree that QRDA-1 or claims-reported demographic data 
would align with the intended goals of advancing health equity under 
TEAM. Given that QRDA-1 is a framework for reporting patient-level data 
about quality measures, we feel that using this framework would not 
fully capture the required demographic data elements for all TEAM 
beneficiaries. Similarly, demographic data reported through standard 
Medicare claims forms does not provide the range of demographic 
information we hope to obtain on TEAM beneficiaries to help advance the 
health equity goals of TEAM and the Innovation Center.
    Comment: A couple commenters also recommended that CMS should use 
existing tools for data collection, including HL7 and FHIR standards, 
or work with EHR vendors so this data could be requested via 
Application Programming Interfaces (API) from EHRs. A commenter 
recommended that the reporting of demographic data should be voluntary 
until it can be reported in an automatic fashion.
    Response: We appreciate the comments recommended the use of tools, 
like HL7 and FHIR standards, to help facilitate the reporting of 
demographic data of TEAM beneficiaries. We recognize that ONC adopted 
the HL7 FHIR US Core Implementation Guide (IG) Standard for Trial Use 
version 6.1.0 at 45 CFR 170.215(b)(1)(ii), which provides the latest 
consensus-based capabilities aligned with the USCDI version 3 data 
elements for FHIR APIs. However, TEAM participants may have varying 
abilities to access and use these tools to automate voluntary reporting 
of demographic data required under TEAM. CMS may explore automated 
solutions in the future that are leveraging certified technology used 
by providers to reduce the burden of the demographic data reporting 
required under TEAM. While we are finalizing the voluntary reporting of 
TEAM beneficiary demographic data, we disagree in principle that 
reporting should be voluntary until automation is feasible as waiting 
for automation could limit the period in which TEAM participants may 
voluntarily report the demographic data of TEAM beneficiaries.
    Comment: A few commenters also cautioned that CMS should address 
patient privacy and data protection to ensure the protection of 
demographic data, including educating both providers and patients on 
how this data collection affects care and existing requirements of 
Health Insurance Portability and Accountability Act (HIPAA).
    Response: We appreciate commenters' concerns about patient privacy 
and data protection as it relates to the proposed requirements for 
demographic data reporting under TEAM. We acknowledge that TEAM 
beneficiaries may not wish to disclose some or all of the demographic 
data elements reportable under TEAM with their TEAM participant or CMS. 
For those TEAM participants that choose to voluntarily report 
demographic data, we would expect that TEAM participants would attempt 
to ask every TEAM beneficiary for these demographic data elements, but 
TEAM participants would not be penalized should a TEAM beneficiary 
choose not to disclose some or all the requested information. For those 
TEAM participants that choose to voluntarily report demographic data, 
TEAM demographic data reporting requirements would not affect any 
existing obligations under privacy and security laws for patient 
information. We also appreciate the recommendation on how CMS could 
provide support to TEAM participants on demographic data collection 
efforts. We may consider developing resources on these topics as part 
of TEAM's implementation.
    Comment: A couple commenters requested clarification on whether the 
demographic data would be reported at the beneficiary-level or in 
aggregate.
    Response: For those TEAM participants that choose to voluntarily 
repot the demographic data, we clarify that demographic data would need 
to be reported at the TEAM beneficiary-level for all TEAM beneficiaries 
that are willing to share some or all of the requested information.
    Comment: A couple commenters requested CMS to clarify the required 
demographics and demographic groups. A commenter requested 
clarification on the definitions of disability and sex characteristics, 
recommending that CMS align definitions with existing requirements.
    Response: As discussed in the proposed rule at 89 FR 36451, we 
would expect TEAM participants that voluntarily report TEAM beneficiary 
demographic data to consider reporting the following data elements: 
race, ethnicity, sex, gender identity, sexual orientation, preferred 
language, and disability status. We will provide further sub-regulatory 
guidance on the specifics of demographic data reporting and definitions 
for reportable data elements. We expect that definitions for race, 
ethnicity, sex, gender identity, sexual orientation, preferred 
language, disability status, and other possible data elements would 
align with the definitions under USCDI version 3, as USCDI version 3 
will be the minimum USCDI standard adopted in 45 CFR 170.213 at the 
beginning of TEAM's performance period.
    We clarify that sex characteristics as referenced in the proposed 
rule refers to sex as defined under USCDI version 3.\996\
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    \996\ https://www.healthit.gov/isp/taxonomy/term/731/uscdi-v3.

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[[Page 69804]]

    There are multiple ways that disability status can be captured 
under USCDI. TEAM could use six well-tested questions endorsed by the 
Office of the Assistant Secretary for Planning and Evaluation and the 
CDC, among others, to support meeting the Affordable Care Act 
requirements under Section 4302 to collect standardized demographic 
data.\997\ These questions align with the data elements defined under 
USCDI version 3 disability status assessment, which should be measured 
through assessment of a patient's physical, cognitive, intellectual, or 
psychiatric disabilities (for example, vision, hearing, memory, 
activities of daily living).\998\ The disability status data element as 
defined under USCDI version 3 includes assessments related to hearing 
status; vision status; difficulty with concentration, memory, or 
decision-making due to a physical, mental or emotional condition; 
difficulty walking or climbing stairs; difficulty dressing or bathing, 
and difficulty doing errands alone due to a physical, mental, or 
emotional condition.
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    \997\ Office of the Assistant Secretary for Planning and 
Evaluation (ASPE). (2011). HHS Implementation Guidance on Data 
Collection Standards for Race, Ethnicity, Sex, Primary Language, and 
Disability Status. Retrieved from: https://aspe.hhs.gov/reports/hhs-implementation-guidance-data-collection-standards-race-ethnicity-sexprimary-language-disability-0.
    \998\ https://www.healthit.gov/isp/taxonomy/term/3276/uscdi-v3.
---------------------------------------------------------------------------

    Comment: A commenter recommended that CMS not apply penalties for 
errors or incompleteness in data.
    Response: We acknowledge that TEAM beneficiaries may not wish to 
disclose some, all, or none of the demographic data elements reportable 
under TEAM with their TEAM participant or CMS. For those TEAM 
participants that voluntarily collect and report demographic data, we 
would expect that TEAM participants ask every TEAM beneficiary for 
these demographic data elements, but TEAM participants would not 
receive a penalty should a beneficiary choose not to disclose some or 
all the requested information.
    Comment: A commenter suggested that CMS should pay separately for 
data collection. A commenter suggested that CMS stratify all measures 
by patient-level factors, such as demographics, and that CMS consider 
adopting upside-only incentives to close measure gaps. A commenter 
recommended that CMS provide upfront payments to support data 
collection infrastructure.
    Response: We thank commenters for their suggestions on how 
financial incentives could potentially improve the reporting of 
demographic data and improve the closing of health disparities in 
measures. We did seek comments on possible infrastructure payments for 
qualifying safety net TEAM participants that could support data 
infrastructure (see 89 FR 36452 through 36453) but are not finalizing 
any infrastructure payments in this final rule. Further, we did not 
propose to require the stratification of quality measure data by the 
demographic characteristics of TEAM beneficiaries, and we are therefore 
not able to consider upside-only incentives based on TEAM participants' 
performance on stratified quality measures.
    After a review of public comments, we are finalizing our proposal 
for voluntary demographic data collection and reporting for all 
following performance years in a form and manner and by date(s) 
specified by CMS as described in Sec.  512.563(c). We are finalizing 
that all demographic data collected for TEAM beneficiaries is to be 
reported at the beneficiary level as described in Sec.  512.563(c). We 
will provide further sub-regulatory guidance on the demographic data 
elements and their definitions that can be voluntarily collected from 
TEAM beneficiaries and reported by TEAM participants.
(c) Health-Related Social Needs Data Reporting
    The CMS Innovation Center is charged with testing innovations that 
improve quality and reduce the cost of health care. There is strong 
evidence that non-clinical drivers of health are the largest 
contributor to health outcomes and are associated with increased health 
care utilization and costs.999 1000 These individual-level, 
adverse social conditions that negatively impact a person's health or 
healthcare are referred to as ``health-related social needs'' or HRSNs. 
CMS aims to expand the collection, reporting, and analysis of 
standardized HRSNs data in its efforts to drive quality improvement, 
reduce health disparities, and better understand and address the unmet 
social needs of patients. Standardizing HRSN screening and referral as 
a practice can inform larger, community-wide efforts to ensure the 
availability of and access to community services that are responsive to 
the needs of Medicare beneficiaries. While screening for HRSN is an 
important step to identify the unmet HRSNs of patients, it is also 
critical for providers to build referral relationships with community-
based organizations and other social service organizations that can 
more directly support patients identified to have unmet HRSNs. 
Relationships with community-based organizations should include 
collaboration to identify available funding sources to support service 
provision to address unmet HRSNs, as needed.
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    \999\ Booske, B.C., Athens, J.K., Kindig, D.A., Park, H., & 
Remington, P.L. (2010). County Health Rankings (Working Paper). 
https://www.countyhealthrankings.org/sites/default/files/differentPerspectivesForAssigningWeightsToDeterminantsOfHealth.pdf.
    \1000\ ROI Calculator for Partnerships to Address the Social 
Determinants of Health Review of Evidence for Health-Related Social 
Needs Interventions. (2019). https://www.commonwealthfund.org/sites/default/files/2019-07/COMBINED-ROI-EVIDENCE-REVIEW-7-1-19.pdf.
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    While more common nationally, HRSN screening is not uniform across 
geography or health care setting. A literature review of national 
surveys measuring prevalence of HRSN screening found that 56-77 percent 
of health care payers and/or delivery organizations screened for 
HRSNs.\1001\ The review also found that almost half of state Medicaid 
agencies have established managed care contracting requirements for 
HRSN screening in Medicaid.\1002\ Despite screening proliferation and 
generally positive views toward screening among both patients and 
health care providers, implementation of screening and referral 
policies for beneficiaries of CMS programs with similar health--and 
even demographic--profiles may be inconsistent, potentially 
exacerbating disparities in the comprehensiveness and quality of care.
---------------------------------------------------------------------------

    \1001\ De Marchis EH, Brown E, Aceves B, et al. State of the 
Science of Screening in Healthcare Settings. Social Interventions 
Research & Evaluation Network, 2022. https://sirenetwork.ucsf.edu/tools-resources/resources/state-science-social-screening-healthcare-settings. https://sirenetwork.ucsf.edu/tools-resources/resources/state-science-social-screening-healthcare-settings.
    \1002\ De Marchis EH, Brown E, Aceves B, et al. State of the 
Science of Screening in Healthcare Settings. Social Interventions 
Research & Evaluation Network, 2022. https://sirenetwork.ucsf.edu/tools-resources/resources/state-science-social-screening-healthcare-settings. https://sirenetwork.ucsf.edu/tools-resources/resources/state-science-social-screening-healthcare-settings.
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    To help facilitate alignment of HRSN screening within inpatient 
settings, beginning in 2024, the Hospital Inpatient Quality Reporting 
(IQR) Program began mandatory reporting of a Screening for Social 
Drivers of Health (SDOH-1) measure (CMIT ID #1664), the proportion of 
admitted adults screened for five HRSNs, and a Screen Positive Rate for 
Social Drivers of Health (SDOH-2) measure (CMIT ID #1662), the 
percentage of screened admitted adults that screened positive

[[Page 69805]]

for one or more HRSNs. The measures reflect screening for five HRSNs: 
housing instability, food insecurity, transportation needs, utility 
difficulties, and interpersonal safety. The CMS Innovation Center 
Strategy Refresh also established a goal to require all new models to 
collect and report demographic and social determinants of health (SDOH) 
data in support of broader system transformation that support goals of 
advancing health equity.
    We proposed that beginning in PY 1, TEAM participants would be 
required to screen attributed TEAM beneficiaries for at least four HRSN 
domains--such as but not limited to food insecurity, housing 
instability, transportation needs, and utilities difficulty--because we 
believe these areas are most pertinent for the TEAM beneficiary 
population. We also considered requiring TEAM participants to screen on 
a standardized set of HRSN domains.
    We also proposed that TEAM participants would need to report 
aggregated HRSN screening data and screened-positive data for each HRSN 
domain for TEAM beneficiaries that received screening to CMS in a form 
and manner and by date(s) specified by CMS beginning in PY 1 and for 
all following performance years. As part of this reporting to CMS, we 
also proposed that TEAM participants would report on policies and 
procedures for referring beneficiaries to community-based 
organizations, social service agencies, or similar organizations that 
may support patients in accessing services to address unmet social 
needs.
    We recognize TEAM participants may already report some of this HRSN 
screening data through other CMS initiatives and requiring reporting of 
aggregated HRSN screening data in TEAM may be redundant. For example, 
the Hospital IQR Program will begin mandatory reporting beginning with 
the CY 2024 reporting period/FY 2026 payment determination of two 
evidence-based measures related to HRSN screening: the Screening for 
Social Drivers of Health measure and the Screen Positive Rate for 
Social Drivers of Health measure (87 FR 49201 through 49220). We 
therefore sought comment on reporting processes that would streamline 
reporting of aggregated HRSN screening data for attributed TEAM 
beneficiaries, including potential use of the Hospital IQR Program 
measures related to HRSN screening.
    We also sought comment on how the reporting of aggregated HRSN 
screening data could incorporate data on referrals of beneficiaries 
screening positive for HRSNs to community-based organizations and other 
organizations helping to address beneficiaries' HRSNs.
    The following is a summary of comments we received related to HRSN 
screening and data reporting requirements under TEAM and our responses:
    Comment: Several commenters supported the HRSN screening 
requirement under TEAM as it could help advance health equity goals. 
However, many commenters recommended that we should align HRSN 
screening and data reporting requirements under TEAM with the existing 
HRSN requirements currently required under the Hospital IQR Program as 
this would reduce burden. A commenter specifically noted that differing 
standards with misaligned requirements could create an undue burden and 
confusion within the large body of work already underway at both the 
hospital and community levels to align and work toward existing HRSN 
goals. Another commenter stated that health equity data should be 
collected at the hospital level like how we proposed to evaluate the 
PSI 90 measure at the hospital level under TEAM (se 89 FR 36421). A 
commenter suggested that CMS should minimize provider burden on the 
collection of HRSN data by aligning with national data standards and 
only requiring reporting of aggregated HRSN screening and screened 
positive data. A commenter suggested that TEAM participants should be 
able to report HRSN screening data submitted through other CMS 
Innovation Center models to fulfill the TEAM requirements. A commenter 
recommended not requiring HRSN data collection under TEAM as some 
patients do not respond to these questions when screened.
    Response: We thank commenters for their support of the proposed 
HRSN screening data reporting requirements under TEAM and for raising 
their suggestions on ways in which the collection and reporting of HRSN 
screening data could minimize burden on TEAM participants. We agree 
that standardization of the HRSN data requirements under TEAM with 
existing CMS programs that require HRSN screening and are applicable to 
TEAM participants could help to reduce burden under TEAM and minimize 
confusion with existing efforts at hospital and community levels to 
gain alignment around HRSN-related goals and interventions. We do not 
agree that TEAM should not consider requiring the collection of HRSN 
screening due to some patients choosing not to report this data when 
screened. As discussed in this section in the preamble of this final 
rule, HRSN screening is an important step to identify non-clinical 
drivers of a beneficiary's health and working to improve unmet social 
needs can support improvements in a beneficiary's overall health. We 
acknowledge that TEAM beneficiaries would have the right to refuse 
responding to questions related to HRSNs asked by TEAM participants 
without penalty to the TEAM participant.
    We agree with the many commenters suggested that TEAM should align 
with the existing SDOH-1 and SDOH-2 measure reporting requirements 
under the Hospital IQR Program to minimize burden of reporting HRSN at 
the aggregated TEAM participant level. Specification of these two 
measures enable a consistent HRSN screening and screened-positive 
definition for five HRSN domains, as well as data that is aggregated 
and comparable at the hospital level. Given that we would permit 
voluntary reporting of aggregated HRSN screening data at the hospital 
level for TEAM participants using the Hospital IQR Program SDOH-1 and 
SDOH-2 measures, we do not feel that it would be necessary to allow 
participants to report HRSN data from other CMS Innovation Center 
models. Standardizing to the SDOH-1 and SDOH-2 measures in the Hospital 
IQR Program would ensure consistent reporting across all TEAM 
participants that voluntarily report this data.
    While we agree that use of Hospital IQR Program would provide us 
with an understanding of HRSN screening and screened-positive data 
aggregated at the TEAM participant level, we also think that it would 
be important to gain more granular data on HRSN screening and screened-
positive data for TEAM beneficiaries specifically. As TEAM participants 
would already collect and report the aggregated hospital-level data 
through the SDOH-1 and SDOH-2 measures in the Hospital IQR Program, we 
would want to consider ways in which TEAM participants could abstract 
data on HRSN screening and screened-positive data for TEAM 
beneficiaries to gain more granular information that could help advance 
TEAM's health equity goals. The proposal for beneficiary-level HRSN 
screening and screened-positive data for TEAM beneficiaries for a 
future performance year could undergo future notice and comment 
rulemaking.
    Comment: A few commenters suggested that TEAM should require the 
collection of the same five HRSNs (housing instability, food 
insecurity, transportation needs, utility difficulties, and 
interpersonal safety) as required in

[[Page 69806]]

the Hospital IQR Program to reduce burden. A couple commenters 
suggested that hospitals should select domains they wish to screen to 
tailor screening questions base on community needs. A commenter 
suggested including a measure of economic insecurity. A commenter 
suggested that CMS should identify a short list of the most essential 
HRSNs to standardize across models.
    Response: We thank commenters for their perspectives on which HRSN 
domains should be screened and reported under TEAM. We agree that 
alignment with the HRSNs domains under the Hospital IQR Program SDOH-1 
and SDOH-2 measures would be appropriate and would reduce 
administrative burden by aligning with existing requirements of other 
programs in which TEAM participants participate. As these measures have 
gone through notice and comment rulemaking, we feel that they would 
reflect an essential set of HRSNs for which TEAM participants should 
screen. Use of these measures also aligns with CMS Innovation Center 
priorities in incorporating HRSN screening into all new models. We 
acknowledge that HRSN can be context-specific and that hospitals may 
perceive benefits to screening for additional HRSNs beyond the five 
included in the SDOH-1 and SDOH-2 measures. However, we feel that it is 
important to obtain standardized HRSN data from all TEAM participants 
that voluntarily report this data.
    Comment: A commenter recommended mandatory HRSN data reporting 
based on voluntary reporting of HRSN data from patients beginning in 
Model Year 2.
    Response: We thank the commenter for their recommendation on the 
mandatory nature of reporting beginning in PY 1 of TEAM. While we 
recognize that TEAM participants will be prepared to report data 
through the Hospital IQR Program in PY 1 because the SDOH-1 and SDOH-2 
measures are required to be reported by all IPPS hospitals as of CY 
2024, we feel that voluntary reporting of this aggregated data to TEAM 
would be appropriate.
    Comment: A commenter expressed concern about the clinical settings 
in which TEAM participants would be required to conduct screening given 
that some episodes may be initiated in settings like an ambulatory 
surgical center, and asked if HRSN screening should be conducted for 
all patients in the event they could trigger a TEAM episode at some 
point. A commenter noted that providers are at varying stages of HRSN 
data collection efforts and that the required reporting manner under 
TEAM could be incompatible with current hospital-level systems and 
processes.
    Response: We thank commenters for raising concerns about the 
clinical settings in which TEAM participants would be excepted to 
screen for HRSNs. We expect that TEAM participants would align their 
screening procedures in applicable clinical settings, so they meet 
requirements under the SDOH-1 and SDOH-2 measure specifications (87 FR 
49201 through 49220) under the Hospital IQR Program. As the SDOH-1 and 
SDOH-2 measures are required to reported by all IPPS hospitals as of 
CY24, we feel that TEAM participants would have sufficient capabilities 
to collect and voluntarily report the required HRSN screening and 
screened-positive data beginning in PY 1 of TEAM's performance period.
    Comment: A couple commenters suggested that CMS should provide TEAM 
participants with educational resources that help clinicians explain to 
patients why HRSN data are being requested and how they will be used to 
help foster a foundation of trust between patient and providers. A 
commenter suggested that CMS should publish technical information to 
facilitate TEAM participants to configure their data systems and EMRs. 
Another commenter suggested that CMS provide resources to providers to 
help clinicians identify interventions as patients screen positive for 
different HRSNs.
    Response: We appreciate the commenters suggestions on technical and 
educational resources that could support TEAM participants in HRSN 
screening and data reporting. We encourage TEAM participants to review 
resources available for reporting the SDOH-1 and SDOH-2 measures under 
the Hospital IQR Program given our alignment with those measure for the 
purposes of HSRN data reporting under TEAM. We will also consider the 
feasibility of developing other technical resources on the topics 
raised by commenters during TEAM's implementation.
    Comment: A few commenters suggested that CMS should pay separately 
for HSRN screening and data collection, such as providing a monthly fee 
to deliver enhanced wraparound services or upside-only incentives to 
close observed gaps in social needs data.
    Response: We thank commenters for their recommendations on 
potential of upside-only incentives for HRSN screening and closing HRSN 
gaps under TEAM. CMS could consider these recommendations in future 
notice and comment rulemaking for TEAM.
    Comment: A commenter expressed concern over CMS setting specific 
thresholds for HRSN screening and referral rates since there is 
variability in staff capacity and resources to conduct HRSN screenings.
    Response: We thank the commenter for raising this concern around 
screening thresholds. We currently do not envision that TEAM 
participants will be assessed against a specific threshold for HRSN 
screening, and HRSN screening will not be factored into TEAM payment 
adjustments.
    Comment: A commenter supported the proposal for TEAM participants 
to report on policies and procedures for referring patients screening 
positive for HRSN to community-based organizations as it is essential 
to build referral relationships with community-based organizations and 
other social service organizations that have the history, expertise, 
and relationships to directly support patients identified to have unmet 
HRSNs. A commenter noted that TEAM should consider how primary care 
clinicians can facilitate access to culturally responsive care and 
support responding to HRSNs. A commenter noted their support for the 
HRSN data collection and reporting requirements but noted that many 
clinicians and staff experience data collection fatigue and anxiety 
when they lack resources to assist patients that screen positive for 
HRSNs. A couple commenters expressed concern that the proposed referral 
requirements may be excessively burdensome for TEAM participants to 
meet as participants may not have relationships with referral 
organizations or that organizations for referrals may not exist in some 
communities.
    Response: We thank commenters for expressing support and raising 
concerns about the proposed requirements for TEAM participants to 
report on policies and procedures they have in place for referring 
beneficiaries screening positive for select HRSNs to community-based 
organizations. While we recognize that the availability of referral 
organizations may vary across TEAM participants, we think that allowing 
TEAM participants to voluntarily report either existing policies or a 
plan for developing policies and procedures for referring HRSN 
screened-positive patients, can help develop more specific strategies, 
relationships with external organizations, or approaches to be 
responsive to identified HRSNs of Medicare beneficiaries served by TEAM 
participants. TEAM participants would not be penalized based on the 
content of their HRSN referral policy and procedures voluntary 
reporting, but we

[[Page 69807]]

feel that reporting in this area is an important accountability 
mechanism to help TEAM participants think beyond HRSN screening and 
identify the range of provider or organizational relationships, 
including those with primary care providers, that could help improve 
identified HRSNs of Medicare beneficiaries served by TEAM participants.
    After a review of public comments, we are finalizing our proposal 
that all TEAM participants can voluntarily report HRSN screening and 
screened-positive using the SDOH-1 and SDOH-2 measures under the 
Hospital IQR Program beginning in PY 1 for all other performance years 
as described in Sec.  512.563(b). We are also finalizing our proposal 
that TEAM participants that voluntarily report the HRSN data can 
voluntarily report on referral policies and procedures for screened-
positive beneficiaries in a form and manner and by date(s) specified by 
CMS beginning in PY 1 and for all other performance years as described 
in Sec.  512.563(b).
(6) Other Considerations
    In addition to the preceding health equity proposals, we sought 
comment on possibly providing upfront infrastructure payments to 
qualified safety net hospital participants to further support safety 
net hospitals in the transformation of care delivery. Subject to 
certain limitations, these funds could be available to cover approved 
expenses aimed at supporting beneficiaries with unmet health and social 
needs. Payment could support Health Information Technology (health IT)/
Electronic Health Records (EHR) enhancements, to the extent they 
involve population health analytics, support care coordination with 
other providers within and across care settings, and support referrals 
to address HRSNs (such as closed loop community-based organization 
referrals). Participants might also use the infrastructure payment to 
fund the upfront expenses involved in recruiting dedicated staff (for 
example, care managers). Participants could distribute or use 
infrastructure payments received under this model in accordance with 
existing law or the terms of applicable waivers. Such funds would 
ensure the infrastructure of safety net hospitals could support the 
transformational goals of the model and would not come out of the 
Medicare Parts A and B Trust Funds.
    We believe that transformation of acute care delivery in 
underserved areas is fundamental to addressing persistent disparities 
and engaging safety net hospitals may broaden the landscape of 
clinicians focusing on value-based care. We would need to consider the 
amount of the infrastructure payment, which may include a standard 
fixed funding component and a variable component that depends on the 
size of the population served by the safety net hospital participant. 
We would also need to define a specific set of parameters and formula 
to calculate the infrastructure payment for each qualifying TEAM 
participant and sought feedback on the set of parameters we could 
consider using.
    We sought feedback from hospitals and health IT vendors for 
estimates on the potential upfront start-up costs of health IT 
investments for safety net hospitals, such as new health information 
exchange capabilities, solutions to provide patients with access to 
their health data (for instance, patient portals), capabilities to 
capture patient-reported outcomes, event notification systems, and 
community referral capacity. Should we decide to provide such payments, 
we also expect the infrastructure improvement would require financial 
investment on the part of the participant, clinicians, and other payer 
partners, including those on the commercial side.
    The goal of the infrastructure payment would be to assist safety 
net hospital participants, many of whom have less access to capital, 
participate in and be successful in this model. CMS recognizes that 
start-up and ongoing annual operating costs could vary greatly between 
participants for various reasons, including those related to the 
experience, size, and funding available to the participant.
    Past CMS Innovation Center models have proven the utility of 
infrastructure payments in certain circumstances, which may or may not 
apply to TEAM. These models include the ACO Investment Model (AIM), a 
CMS Innovation Center model that tested the effects of making advanced 
payments to certain ACOs participating in the Shared Savings Program to 
assist them in transforming care by funding infrastructure investments 
or staffing. AIM ACOs overwhelmingly used these funds to invest in 
health IT systems and care management staff and to cover administrative 
and program compliance costs. At the start of the model, many AIM ACOs 
lacked the capacity and knowledge to implement population health 
initiatives, to manage claims-based analytics, and to coordinate 
practice management. The demonstrated Medicare savings by AIM ACOs 
suggest that financial accountability with upfront investments can 
succeed in allowing under-resourced clinicians serving underserved 
areas to deliver care more efficiently and afford them more flexibility 
in how they meet beneficiaries' needs without increasing Medicare 
spending.
    To receive an infrastructure payment, we could consider the 
following requirements and sought comment on any changes: (1) require 
TEAM participants to be a safety net hospital, as defined by section 
X.A.3.f.(2)(c) of the preamble of this final rule. The TEAM participant 
would also submit a detailed plan that describes their intended use of 
the funds and how those funds would support the goals of the model and 
improve the care of underserved beneficiaries.
---------------------------------------------------------------------------

    \1003\ For more information ONC Health IT Certification 
Criteria, see https://www.healthit.gov/topic/certification-ehrs/certification-criteria.https://www.healthit.gov/topic/certification-ehrs/certification-criteria. For standards and implementation 
specifications adopted under PHSA section 3004, see 45 CFR part 170, 
subpart B.
---------------------------------------------------------------------------

    With respect to use of funds for technology investments that 
involve implementing, acquiring, or upgrading health IT, the hospital 
would also be required to ensure such technology is certified under the 
ONC Health IT Certification Program or utilizes nationally recognized, 
consensus-based standards adopted under section 3004 of the PHSA,\1003\ 
where such criteria or standards are available for the health IT-
related activity. Use of these standards and certification criteria 
ensure that technology investments would support interoperability 
across systems. Should we make an infrastructure payment to a safety 
net hospital, we would need to monitor the spending of infrastructure 
payments to prevent funds from being misdirected and ensure they are 
used for activities that constitute a permitted use of the funds (for 
example, health IT/EHR enhancements to the extent those involve 
population health analytics and support for referrals to address HRSNs, 
in addition to costs associated with recruiting and hiring dedicated 
staff). In addition to the initial plan of anticipated spending, should 
a safety net hospital participant receive upfront funds, they could 
also be required to submit annual reports (in a standardized format 
specified by CMS) that includes an itemization of how infrastructure 
payments were actually spent during the performance year, including 
expenditure categories, the dollar amounts spent on the various 
categories, any changes to the spend plan, and such other information 
as may be specified by CMS. This itemization could include expenditures 
not identified or anticipated in the submitted spend plan and any 
amounts remaining unspent.

[[Page 69808]]

Any infrastructure payments that are spent for unauthorized purposes or 
are unspent at the end of a specified timeframe, that is, 3 years, must 
be repaid to CMS.
    Should safety net hospital participants receive such payments, they 
would be required to retain adequate records to ensure that we have the 
information necessary to conduct appropriate monitoring and oversight 
of the use of infrastructure payments (for example, invoices, receipts, 
and other supporting documentation of disbursements). CMS would need to 
conduct audits on a percentage of funding recipients annually to 
monitor and assess a safety net hospital participant's use of 
infrastructure funds and participant compliance related to such 
payments. To encourage speedy resolution of noncompliance and provide 
an added safeguard against abuse, if CMS determines that a participant 
has spent infrastructure funds on an identified prohibited use, has 
unspent funds at the end of the designated eligible spending period, 
otherwise fails to comply with infrastructure requirements, and/or 
meets any of the grounds for termination, CMS may require repayment 
equal to the amount of any infrastructure funds spent on a prohibited 
use.
    As mandatory model, one consideration in potentially implementing 
an infrastructure payment for qualifying safety net hospital TEAM 
participants is the long-term scalability of the model. With the goal 
of longer-term expansion of TEAM, inclusion of a one-time 
infrastructure payment for qualifying safety net hospitals as part of 
model design could present challenges to the financial sustainability 
of the model. Accordingly, the potential objectives and benefits of the 
infrastructure payment would need to be considered against the 
feasibility of implementing this model feature should the model be 
expanded.
    We sought comment on the considerations surrounding provision of 
infrastructure payments and their utility in the acute care setting, 
including how to identify participants most likely to benefit. We also 
sought comment on how best to ensure the integrity of such payments in 
supporting the goal of addressing known health disparities among the 
episode categories we proposed to test via TEAM. We also sought comment 
on the proposed methodology and/or parameters that could be used in a 
formula to determine the infrastructure payment amounts for qualifying 
TEAM participants.
    Comment: Commenters provided many recommendations related to 
possible infrastructure payments under TEAM.
    Response: We greatly appreciate the wide range of suggestions on 
which TEAM participants would benefit the most from infrastructure 
payments, the scope and intended use of the payment, ensuring integrity 
and accountability for the payments, and how payments could be 
determined. We will continue to consider how infrastructure payments 
under TEAM could help support participants to strengthen health equity 
data reporting and improve identified health disparities related to 
TEAM.
    We are expeditiously conducting an in-depth review of the comments 
we received. This review will help to inform and guide our future 
rulemaking and other actions in this area.
g. Financial Arrangements
(1) Background
    We believe it is necessary to provide TEAM participants with 
flexibilities that could support their performance in TEAM and allow 
for greater support for the needs of beneficiaries. These flexibilities 
are outlined in this section and include the ability to engage in 
financial arrangements to share a TEAM participant's reconciliation 
payment amounts and repayment amounts. Such flexibilities would allow 
TEAM participants to share all or some of the TEAM participant's 
reconciliation payment amount or repayment amount. Finally, we believe 
that TEAM participants caring for beneficiaries may want to offer 
beneficiary incentives to encourage adherence to recommended treatment 
and beneficiary engagement in recovery. These financial and beneficiary 
incentives may help a TEAM participant reach their quality and 
efficiency goals for the model. They may also benefit beneficiaries and 
the Medicare Trust Fund if the TEAM participant improves the quality 
and efficiency of care that results in reductions in hospital 
readmissions, complications, days in acute care, and mortality, while 
beneficiary recovery continues uninterrupted or accelerates.
(2) Overview of TEAM Financial Arrangements
    We believe that TEAM participants may wish to enter into financial 
arrangements with certain providers and suppliers participating in TEAM 
activities to share their reconciliation payment amount or repayment 
amount resulting from participation in TEAM. Allowing these types of 
financial arrangements would allow the alignment of financial 
incentives of those providers and suppliers participating in TEAM 
activities to improve quality of care, drive equitable outcomes, and 
reduce Medicare spending through improved beneficiary care transitions 
and reduced fragmentation following select episodes of care. We expect 
that TEAM participants would identify key providers and suppliers 
caring for beneficiaries in the surrounding communities, and then could 
establish partnerships with these individuals and entities to promote 
accountability for the quality, cost, and overall care for 
beneficiaries, including managing and coordinating care; encouraging 
investment in infrastructure, enabling technologies, and redesigning 
care processes for high quality and efficient service delivery; and 
carrying out other obligations or duties under TEAM. These providers 
and suppliers may invest substantial time and other resources in these 
activities, yet they would not be the direct recipients of any 
reconciliation payment amounts or repayment amounts as they are not the 
risk bearing entity and do not directly participate in TEAM. Therefore, 
we believe it is possible that a TEAM participant that may receive a 
reconciliation payment amount or repayment amount may want to enter 
into financial arrangements with other providers or suppliers to share 
this reconciliation payment amount or repayment amount with the TEAM 
participant. It is a requirement that all financial relationships 
established between TEAM participants and providers or suppliers for 
purposes of TEAM comply with all applicable laws and regulations, 
including the applicable fraud and abuse laws and all applicable 
payment and coverage requirements in the finalized policy.
    As discussed in section X.A.3.g.(9) of the preamble of this final 
rule, CMS has made the determination that the Anti-Kickback Statute 
(AKS) Safe Harbor for CMS-sponsored model arrangements (42 CFR 
1001.952(ii)) is available to protect certain remuneration finalized in 
this section when arrangements with eligible providers and suppliers 
are in compliance with the requirements established in the final rule 
and the conditions of the safe harbor for CMS-sponsored model 
arrangements established at 42 CFR 1001.952(ii).
    We recognize that there are numerous arrangements that TEAM 
participants may wish to enter other than the financial arrangements 
described in the proposed regulations for which safe harbor protection 
may be extended that could be beneficial to TEAM

[[Page 69809]]

participants. For example, TEAM participants may choose to engage with 
organizations that are neither providers nor suppliers to assist with 
matters such as data analysis; local provider and supplier engagement; 
care redesign planning and implementation; beneficiary outreach; 
beneficiary care coordination and management; monitoring TEAM 
participants' compliance with the model's terms and conditions; or 
other model-related activities. Such organizations may play important 
roles in a TEAM participant's plans to implement the model based on the 
experience these organizations may bring, such as prior experience with 
episode-based payment models, care coordination expertise, familiarity 
with a particular locale, or knowledge of bundled data. We require all 
relationships established between TEAM participants and these 
organizations for purposes of the model would be those permitted only 
under existing law and regulation, including any relationships that 
would include the TEAM participant's sharing of the reconciliation 
payment amount or repayment amount, and must comply with all applicable 
laws and regulations. We require these relationships to be solely based 
on the level of engagement of the organization's resources to directly 
support the TEAM participants' model implementation.
(3) TEAM Collaborators
    As proposed, TEAM is a two-sided financial risk model, and the TEAM 
participant would bear sole financial risk for any repayment amount to 
CMS in the absence of financial arrangements. However, given the 
incentive to reduce episode spending to earn a reconciliation payment 
amount, as described in section X.A.3.d.(5)(j) of the preamble of this 
final rule, a TEAM participant may want to engage in financial 
arrangements with providers and suppliers or participants in Medicare 
ACO initiatives who are making contributions to the TEAM participant's 
performance in the model. Such arrangements would allow the TEAM 
participant to share reconciliation payment amounts or repayment 
amounts with individuals and entities that have a role in the TEAM 
participant's performance in the model. We proposed at (89 FR 36454) to 
use the term ``TEAM collaborator'' to refer to these individuals and 
entities.
    Because TEAM participants would be accountable for spending and 
quality during the anchor hospitalization or anchor procedure and the 
30-day post discharge period, as described in section X.A.3.b.(5) of 
the preamble of this final rule, providers and suppliers other than the 
TEAM participant may furnish services to the beneficiary during the 
model performance period. As such, for purposes of the Federal Anti-
Kickback Statute Safe Harbor for CMS-sponsored model arrangements (42 
CFR 1001.952(ii)), we proposed at Sec.  512.505 that the following 
types of providers and suppliers that are Medicare-enrolled and 
eligible to participate in Medicare or entities that are participating 
in a Medicare ACO initiative may be TEAM collaborators:
     Skilled Nursing Facility (SNF).
     Home Health Agency (HHA).
     Long-Term Care Hospital (LTCH).
     Inpatient Rehabilitation Facility (IRF).
     Physician.
     Nonphysician practitioner.
     Therapist in a private practice.
     Comprehensive Outpatient Rehabilitation Facility (CORF).
     Provider or supplier of outpatient therapy services.
     Physician Group Practice (PGP).
     Hospital.
     Critical Access Hospital (CAH).
     Non-physician provider group practice (NPPGP).
     Therapy group practice (TGP).
     Medicare ACO.
    We sought comment on the proposed definition of TEAM collaborators 
and any additional Medicare-enrolled providers or suppliers, such as 
Rural Emergency hospitals, Rural Health Clinics, and Federally 
Qualified Health Centers, that should be included in this definition.
    The following is a summary of the public comments received on this 
proposal and our response to those comments.
    Comment: Several commenters encouraged expanding the types of 
entities allowed as Team collaborators to include drug or device 
manufacturers to facilitate value-based contracts, which they stated 
are essential for addressing rising healthcare costs.
    Commenters also recommended offering APM participants flexibility 
in post-acute care (PAC) payments, allowing them to negotiate rates and 
create partnerships with PAC providers. They stated this flexibility 
should extend to home health services, enabling providers to negotiate 
different rates for home care that better address patient needs.
    In addition to flexibility for PAC payment arrangements, commenters 
also called for greater latitude for participants to create new payment 
and downstream risk arrangements with medical and community-based 
providers.
    Response: Thank you for your valuable recommendations. We 
appreciate your insights on expanding the types of entities allowed as 
Team collaborators and offering flexibility in post-acute care 
payments. Your suggestions on allowing greater latitude for new payment 
and downstream risk arrangements are noted. We will take them into 
consideration in future rulemaking.
    Comment: Many commenters had input and feedback on the proposed 
list of providers and suppliers eligible to be a TEAM collaborator.
    A commenter noted that while Medicare hospice services are included 
in the TEAM episode of care, hospice providers are not listed as 
eligible TEAM collaborators. They request clarification on whether this 
exclusion is intentional and, if so, the reasons behind it. They 
acknowledge that post-discharge use of hospice services in the 30-day 
episode is rare but urge CMS to consider including hospice providers as 
eligible collaborators.
    Additional recommendations included Registered Dietitian 
Nutritionists (RDNs) and Rural Emergency Hospitals (REHs) as TEAM 
collaborators. Finally, there is a strong encouragement for CMS to 
consider the role of medical technology and device manufacturers as 
collaborators, potentially offering incentives for innovative 
technologies that improve outcomes and generate savings.
    Other commenters stated that, while LTCHs are listed as eligible to 
be TEAM collaborators, they have concerns that TEAM participants might 
limit collaboration with certain post-acute care providers, such as 
LTCHs, which could restrict patient freedom of choice in selecting 
their post-acute care provider. To address this, these commenters 
suggested that CMS require or incentivize hospitals to collaborate with 
all interested LTCHs and other post-acute care providers to ensure 
patient access and choice.
    Response: Thank you for your comments regarding the inclusion of 
various providers and entities as TEAM collaborators in the proposed 
model. We appreciate your detailed feedback and suggestions.
    While Medicare hospice services are included in the TEAM episode of 
care, hospice providers were not initially listed as eligible TEAM 
collaborators. We acknowledge your request for clarification on this 
exclusion. Given the rarity of post-discharge hospice use within the 
30-day episode, this exclusion was based on the minimal impact these 
providers might have on the overall performance of TEAM.

[[Page 69810]]

However, we recognize the importance of providing comprehensive care 
options and will consider your suggestion to include hospice providers 
as eligible TEAM collaborators to enhance patient access and choice in 
future iterations of rulemaking.
    In addition, we appreciate the recommendations to include 
Registered Dietitian Nutritionists (RDNs) and Rural Emergency Hospitals 
(REHs) as TEAM collaborators. Both RDNs and REHs can play significant 
roles in improving patient outcomes and managing care transitions. We 
appreciate the commenters' suggestion to consider the role of medical 
technology and device manufacturers as collaborators. Innovative 
technologies have the potential to improve outcomes and generate 
savings. While these entities are not traditional care providers, their 
inclusion as collaborators could incentivize the adoption of advanced 
technologies that support the clinical aims of TEAM. We will explore 
the feasibility of including medical technology and device 
manufacturers as TEAM collaborators, potentially offering incentives 
for innovative technologies that enhance care quality and efficiency, 
in future rulemaking.
    We understand the commenters' concerns regarding potential 
limitations on collaboration with certain post-acute care providers, 
such as Long-Term Care Hospitals (LTCHs). TEAM aims to ensure patient 
freedom of choice in selecting their post-acute care provider. We will 
consider strategies to require or incentivize hospitals to collaborate 
with all interested LTCHs and other post-acute care providers, ensuring 
that patient access and choice are maintained and enhanced in future 
rulemaking.
    The feedback is invaluable as we refine TEAM to ensure it meets its 
goals of improving care quality, enhancing patient access, and reducing 
costs. We will carefully consider these recommendations in future 
rulemaking.
    Comment: Another commenter emphasized the importance of managing 
total cost of care and coordinating care across the patient's care 
team, stating that the proposed model primarily addresses unit price 
without focusing on utilization, lacking clear incentives for 
physicians and others directly involved in patient care. This commenter 
also suggested that TEAM participation should include anesthesiologists 
and non-hospital entities in financial arrangements.
    Response: We recognize the importance of managing total cost of 
care and ensuring comprehensive care coordination across the patient's 
care team. The commenters' insights on addressing both unit price and 
utilization are valuable, and we will consider these factors to enhance 
the model's incentives for physicians and other care providers involved 
in patient care. We also appreciate the detailed feedback regarding the 
inclusion of anesthesiologists and non-hospital entities in TEAM 
financial arrangements. We will take it into consideration in future 
rulemaking.
    Comment: Another commenter stated appreciation for the opportunity 
to provide input on the definition of TEAM collaborators and noted the 
inclusion of nonphysician practitioners as potential collaborators. 
They requested CMS clarify and define which providers are considered 
nonphysician practitioners for this model, referencing page 43617 of 
the Federal Register for the Medicare Program's Alternative Payment 
Model Updates and the Increasing Organ Transplant Access (IOTA) Model 
Proposed Rule. Specifically, they asked for clarification on whether 
RDNs (Registered Dietitian Nutritionists) would be considered TEAM 
collaborators.
    Response: We thank the commenter for highlighting the need for 
clarity regarding nonphysician practitioners in TEAM and appreciate the 
reference to page 43617 of the Federal Register for the Medicare 
Program's Alternative Payment Model Updates and the Increasing Organ 
Transplant Access (IOTA) Model Proposed Rule.
    Similar to what was proposed under IOTA, at proposed Sec.  512.505, 
we proposed that for purposes of TEAM that a nonphysician practitioner 
means one of the following: A physician assistant who satisfies the 
qualifications set forth at Sec.  410.74(a)(2)(i) and (ii) of this 
chapter; A nurse practitioner who satisfies the qualifications set 
forth at Sec.  410.75(b) of this chapter; A clinical nurse specialist 
who satisfies the qualifications set forth at Sec.  410.76(b) of this 
chapter; A certified registered nurse anesthetist (as defined at Sec.  
410.69(b) of this chapter); A clinical social worker (as defined at 
Sec.  410.73(a) of this chapter); A registered dietician or nutrition 
professional (as defined at Sec.  410.134 of this chapter).
    The commenters' feedback is invaluable as we work to refine these 
definitions and ensure comprehensive inclusion in future rulemaking 
cycles.
    Comment: A commenter expressed concerns, stating the model's 
definition of a TEAM collaborator is narrow, and urged CMS to 
reconsider the current TEAM proposal design and seek more feedback 
before implementation.
    Response: We acknowledge the concerns about the TEAM collaborator 
definition. This input is crucial in shaping a well-balanced and 
successful model and we will take it into consideration in future 
rulemaking.
    After consideration of the public comments received, we are 
finalizing the proposal for the model definition of TEAM collaborators 
as proposed at Sec.  512.505.
(4) Sharing Arrangements
(a) General
    Similar to the CJR Model (42 CFR 510.500), we proposed at (89 FR 
36454) that certain financial arrangements between a TEAM participant 
and a TEAM collaborator be termed ``sharing arrangements.'' For 
purposes of the Federal Anti-Kickback Statute Safe Harbor for CMS-
sponsored model arrangements (42 CFR 1001.952(ii)), we proposed that a 
sharing arrangement would be to share reconciliation payment amounts or 
repayment amounts. Where a payment from a TEAM participant to a TEAM 
collaborator is made pursuant to a sharing arrangement, we proposed to 
define that payment as a ``gainsharing payment,'' which is discussed in 
section X.A.3.g.(4)(c) of the preamble of this final rule. Where a 
payment from a TEAM collaborator to a TEAM participant is made pursuant 
to a sharing arrangement, we proposed to define that payment as an 
``alignment payment,'' which is discussed in section X.A.3.g.(4)(c) of 
the preamble of this final rule. As proposed, a TEAM participant must 
not make a gainsharing payment or receive an alignment payment except 
in accordance with a sharing arrangement. As discussed in section 
X.A.3.g.(4)(b) of the preamble of this final rule, we proposed that a 
sharing arrangement must comply with all other applicable laws and 
regulations, including the applicable fraud and abuse laws and all 
applicable payment and coverage requirements. We proposed that the TEAM 
participant and TEAM collaborator must document this agreement in 
writing, and, per monitoring and compliance guidelines (Sec.  512.590), 
we proposed that it must be made available to CMS upon request.
    We proposed that the TEAM participant must develop, maintain, and 
use a set of written policies for selecting individuals and entities to 
be TEAM collaborators. To safeguard against potentially fraudulent or 
abusive practices, we proposed that the selection criteria determined 
by the TEAM participant must include the quality of care delivered by 
the potential

[[Page 69811]]

TEAM collaborator. Moreover, we proposed that the selection criteria 
could not be based directly or indirectly on the volume or value of 
referrals or business otherwise generated by, between or among the TEAM 
participant, any TEAM collaborator, any collaboration agent, or any 
individual affiliated with a TEAM participant, TEAM collaborator, or 
collaboration agent. We proposed that, in addition to including quality 
of care in their selection criteria, TEAM participants must also 
consider selection of TEAM collaborators based on criteria that include 
the anticipated contribution to the performance of the TEAM participant 
in the model by the potential TEAM collaborator to ensure that the 
selection of TEAM collaborators takes into consideration the likelihood 
of their future performance.
    Finally, we proposed that if a TEAM participant enters a sharing 
arrangement, its compliance program must include oversight of sharing 
arrangements and compliance with the applicable requirements of the 
model. We believe that requiring oversight of sharing arrangements to 
be included in the compliance program provides a program integrity 
safeguard.
    We sought comment about all provisions described in the preceding 
discussion, including whether additional or different safeguards would 
be needed to ensure program integrity, protect against abuse, and 
ensure that the goals of the model are met.
    We received no comments on these proposals and therefore are 
finalizing these proposals as proposed in our regulation at Sec.  
[thinsp]512.505.
(b) Requirements
    At (89 FR 36455), we proposed several requirements for sharing 
arrangements to help ensure that their sole purpose is to create 
financial alignment between TEAM participants and TEAM collaborators 
toward the goals of the model while maintaining adequate program 
integrity safeguards. We proposed that the sharing arrangement must be 
in writing, signed by the parties, and entered into before care is 
furnished to TEAM beneficiaries under the sharing arrangement. In 
addition, we proposed that participation in a sharing arrangement must 
be voluntary and without penalty for nonparticipation. It is important 
that providers and suppliers rendering items and services to 
beneficiaries during the model performance period have the freedom to 
provide medically necessary items and services to beneficiaries without 
any requirement that they participate in a sharing arrangement to 
safeguard beneficiary freedom of choice, access to care, and quality of 
care. We proposed that a sharing arrangement must set out the mutually 
agreeable terms for the financial arrangement between the parties to 
guide and reward model care redesign for future performance toward 
model goals, rather than reflect the results of model performance years 
that have already occurred and where the financial outcome of the 
sharing arrangement terms would be known before signing.
    We proposed that the sharing arrangement must require the TEAM 
collaborator and its employees, contractors, and subcontractors to 
comply with certain requirements that are important for program 
integrity under the arrangement. We note that, as proposed, the terms 
contractors and subcontractors include collaboration agents as defined 
later in this section. We proposed that a sharing arrangement must 
require all of the individuals and entities party to the arrangement to 
comply with the applicable provisions of this final rule, including 
proposed requirements regarding beneficiary notifications, at proposed 
Sec.  512.582(b), access to records and record retention, at proposed 
Sec.  512.586, and participation in any evaluation, monitoring, 
compliance, and enforcement activities performed by CMS or its 
designees, at proposed Sec.  512.590 because these individuals and 
entities all would play a role in model care redesign and they would be 
part of financial arrangements under the model as proposed. We proposed 
that the sharing arrangement must also require all individuals and 
entities party to the arrangement who are providers or suppliers to 
comply with the applicable Medicare provider enrollment requirement at 
Sec.  424.500, including having a valid and active TIN or NPI, during 
the term of the sharing arrangement. This proposed requirement helps 
ensure that these individuals and entities have the required enrollment 
relationship with CMS under the Medicare program, although we note that 
they are not responsible for complying with requirements that do not 
apply to them. Finally, the sharing arrangement as proposed must 
require individuals and entities to comply with all other applicable 
laws and regulations.
    We proposed that the sharing arrangement must not pose a risk to 
beneficiary access, beneficiary freedom of choice, or quality of care 
so that financial relationships between TEAM participants and TEAM 
collaborators do not negatively impact beneficiary protections under 
the model. The sharing arrangement as proposed must require the TEAM 
collaborator to have a compliance program that includes oversight of 
the sharing arrangement and compliance with the requirements of the 
model, just as we proposed requiring TEAM participants to have a 
compliance program that covers oversight of the sharing arrangement for 
this purpose as a program integrity safeguard. We sought comment on the 
anticipated effect of the proposed compliance program requirement for 
TEAM collaborators, particularly with regard to individual physicians 
and nonphysician practitioners, small PGPs, NPPGPs, and TGPs and 
whether alternative compliance program requirements for all or a subset 
of TEAM collaborators should be adopted to mitigate any effect of the 
proposal that could make participation as a TEAM collaborator 
infeasible for any provider, supplier, or other entity on the proposed 
list of types of TEAM collaborators.
    It is necessary that TEAM participants have adequate oversight over 
sharing arrangements to ensure that all arrangements meet the 
applicable requirements and to help provide program integrity 
safeguards. Therefore, we proposed that the board or other governing 
body of the TEAM participant have responsibility for overseeing the 
TEAM participant's participation in the model, its arrangements with 
TEAM collaborators, its payment of gainsharing payments, its receipt of 
alignment payments, and its use of beneficiary incentives in the model. 
Additionally, we proposed that the TEAM participant and TEAM 
collaborator must document this agreement in writing and, as part of 
the model's monitoring and compliance activities as proposed in (Sec.  
512.590), we proposed that this agreement must be made available to CMS 
upon request.
    For purposes of sharing arrangements under the model, we proposed 
at Sec.  512.505 to define TEAM activities to be activities related to 
promoting accountability for the quality, cost, and overall care for 
TEAM beneficiaries and performance in the model, including managing and 
coordinating care; encouraging investment in infrastructure and 
redesigned care processes for high quality and efficient service 
delivery; or carrying out any other obligation or duty under the model. 
In addition to the quality of care provided during episodes, we believe 
the activities that would fall under this proposed definition encompass 
the totality of activities upon which it would be appropriate for 
sharing arrangements under the model to be based in order to value the 
contributions of providers, suppliers, and other entities toward 
meeting the performance

[[Page 69812]]

goals of the model. We sought comment on the proposed definition of 
TEAM activities as an inclusive and comprehensive framework for 
capturing direct care and care redesign that contribute to performance 
toward model goals.
    We proposed that the written agreement memorializing a sharing 
arrangement must specify the following parameters of the arrangement:
     The purpose and scope of the sharing arrangement.
     The identities and obligations of the parties, including 
specified TEAM activities and other services to be performed by the 
parties under the sharing arrangement.
     The date of the sharing arrangement.
     Management and staffing information, including type of 
personnel or contractors that will be primarily responsible for 
carrying out TEAM activities.
     The financial or economic terms for payment, including the 
following:
    ++ Eligibility criteria for a gainsharing payment.
    ++ Eligibility criteria for an alignment payment.
    ++ Frequency of gainsharing or alignment payment.
    ++ Methodology and accounting formula for determining the amount of 
a gainsharing payment that is solely based on quality of care and the 
provision of TEAM activities.
    ++ Methodology and accounting formula for determining the amount of 
an alignment payment.
    Finally, we proposed to require that the terms of the sharing 
arrangement must not induce the TEAM participant, TEAM collaborator, or 
any employees, contractors, or subcontractors of the TEAM participant 
or TEAM collaborator to reduce or limit medically necessary services to 
any beneficiary or restrict the ability of a TEAM collaborator to make 
decisions in the best interests of its patients, including the 
selection of devices, supplies, and treatments. These requirements as 
proposed are to ensure that the quality of care for beneficiaries is 
not negatively affected by sharing arrangements under the model.
    The proposals for the requirements for sharing arrangements under 
the model are included in proposed Sec.  512.565. We sought comment on 
all of the requirements set out in the preceding discussion, including 
whether additional or different safeguards would be needed to ensure 
program integrity, protect against abuse, and ensure that the goals of 
the model are met.
    We solicited comments on the above proposed policy. The following 
is a summary of the public comments received on this proposal and our 
response to those comments.
    Comment: A few commenters highlighted the importance of requiring 
hospitals to pass on savings generated by the model to physicians 
leading patient care, ensuring fair financial distribution and better 
alignment with incentives. emphasized that savings should result from 
improved efficiencies, not just cost-cutting measures that could 
compromise patient care, and stated concerns about financial 
arrangements rewarding providers for using cheaper, but potentially 
inappropriate, products.
    Commenters also suggested that clinically relevant specialties be 
integrated into TEAM leadership and governance to ensure appropriate 
care and savings based on genuine improvements. Additionally, 
commenters called for physicians to have adequate resources and 
flexibility to deliver quality outcomes without being at risk for 
uncontrollable costs or outcomes.
    Commenters noted that hospitals will need to invest in preparing 
sharing agreements with TEAM collaborators, on top of other model 
requirements such as developing health equity plans. The commenters 
stated that success under TEAM should offset the costs of participation 
not covered by the model.
    Finally, commenters recommended for mandatory shared savings 
agreements between acute care hospitals and surgeons, as previous 
models like CJR have seen limited voluntary participation in such 
agreements, despite their potential to enhance savings and care 
quality.
    Response: We appreciate the commenters' thoughtful comments 
regarding the financial arrangements and sharing agreements within 
TEAM. We appreciate the emphasis on the importance of fair financial 
distribution and alignment of incentives to ensure high-quality patient 
care.
    TEAM's proposed financial arrangements, similar to the CJR Model, 
are designed to promote accountability and encourage providers and 
suppliers to collaborate on improving care quality while reducing 
costs. These proposed arrangements, termed ``sharing arrangements,'' 
allow for the sharing of reconciliation payment amounts and repayment 
amounts, fostering financial alignment between TEAM participants and 
TEAM collaborators.
    Under the proposed sharing arrangements, TEAM participants can 
enter into financial agreements with TEAM collaborators to share 
savings (gainsharing payments) or losses (alignment payments) resulting 
from their performance in the model. These arrangements must comply 
with all applicable laws and regulations, including fraud and abuse 
laws, and must be documented in writing. As proposed, this 
documentation must be made available to CMS upon request as part of our 
monitoring and compliance activities.
    We proposed that the TEAM participant must develop, maintain, and 
use a set of written policies for selecting individuals and entities to 
be TEAM collaborators. To safeguard against potentially fraudulent or 
abusive practices as proposed, the selection criteria for TEAM 
collaborators must include the quality of care delivered and the 
anticipated contribution to the TEAM participant's performance in the 
model. Additionally, as proposed, the selection criteria cannot be 
based on the volume or value of referrals or business generated between 
the parties. We proposed that sharing arrangements must be voluntary 
and without penalty for nonparticipation, in order to allow providers 
and suppliers the freedom to provide medically necessary items and 
services to beneficiaries without any requirement that they participate 
in a sharing arrangement and therefore, to safeguard beneficiary 
freedom of choice, access to care, and quality of care. Additionally, 
as proposed, sharing arrangements must not induce the reduction or 
limitation of medically necessary services. As proposed, the terms of 
these arrangements must also ensure that TEAM collaborators have the 
ability to make decisions in the best interests of their patients. We 
recognize the need for adequate oversight of sharing arrangements to 
ensure compliance with the model's requirements. Therefore, TEAM 
participants must have a compliance program that includes oversight of 
sharing arrangements.
    We appreciate the suggestion to integrate clinically relevant 
specialties into TEAM leadership and governance. Ensuring that 
clinicians have adequate resources and flexibility to deliver quality 
outcomes is crucial. The model is designed to incentivize genuine 
improvements in care efficiency and quality, rather than cost-cutting 
measures.
    We acknowledge the recommendation for mandatory shared savings 
agreements between acute care hospitals and surgeons. TEAM aims to 
foster voluntary collaboration rather than mandatory agreements; 
however, we will consider this feedback in future comment and 
rulemaking.

[[Page 69813]]

    We understand that hospitals may need to invest in preparing 
sharing agreements and developing health equity plans. We anticipate 
that the efficiencies and improvements achieved under TEAM will offset 
these participation costs.
    Comment: Commenters requested flexibility in requirements for TEAM 
sharing arrangements and urged CMS to allow tailoring of compliance 
expectations based on the specific circumstances of each arrangement. 
Commenters stated that this flexibility is crucial to encourage 
participation from a diverse range of collaborators, including small 
physician group practices and non-physician providers, without imposing 
undue compliance burdens.
    Response: We appreciate the commenters' comments on adding 
flexibility to the proposed requirements for TEAM sharing arrangements.
    The proposed requirements for TEAM sharing arrangements are 
designed to protect beneficiary access, beneficiary freedom of choice, 
and quality of care so that financial relationships between TEAM 
participants and TEAM collaborators do not negatively impact 
beneficiary protections under the model. Additionally, TEAM sharing 
arrangement requirements safeguard against potentially fraudulent or 
abusive practices. Therefore, we believe these requirements to be 
necessary, and we finalize them as proposed.
    We thank the commenters for their engagement and commitment to 
enhancing TEAM. We will continue to evaluate the TEAM sharing 
arrangement requirements, in order to ensure they offer the protections 
as intended, and whether modifications are necessary in future comment 
and rulemaking.
    After consideration of the public comments received, we are 
finalizing our proposals for the model sharing arrangements 
requirements as proposed at Sec.  512.565.
(c) Gainsharing Payment and Alignment Payment Conditions and 
Limitations
    We proposed at (89 FR 36456) several conditions and limitations for 
gainsharing payments and alignment payments as program integrity 
protections for the payments to and from TEAM collaborators. We 
proposed to require that gainsharing payments be derived solely from a 
TEAM participant's reconciliation payment amounts, internal costs 
savings, or both; that they be distributed on an annual basis, not more 
than once per CY; that they not be a loan, advance payment, or payment 
for referrals or other business; and that they be clearly identified as 
a gainsharing payment at the time they are paid.
    We believe that gainsharing payment eligibility for TEAM 
collaborators should be conditioned on two requirements--(1) quality of 
care criteria; and (2) the provision of TEAM activities. With respect 
to the first requirement, we proposed that to be eligible to receive a 
gainsharing payment, the TEAM collaborator must meet quality of care 
criteria during the performance year for which the TEAM participant 
earned a reconciliation payment amount that comprises the gainsharing 
payment. We proposed that this quality of care criteria be included in 
the sharing arrangement and be mutually agreed upon by the TEAM 
participant and TEAM collaborator. With regard to the second 
requirement, we proposed that, to be eligible to receive a gainsharing 
payment, or to be required to make an alignment payment, a TEAM 
collaborator other than a PGP, NPPGP, or TGP must have directly 
furnished a billable item or service to a TEAM beneficiary during the 
same performance year for which the TEAM participant earned a 
reconciliation payment amount or repayment amount. For purposes of this 
proposed requirement, we consider a hospital, CAH or post-acute care 
provider to have ``directly furnished'' a billable service if one of 
these entities billed for an item or service for a TEAM beneficiary in 
the performance year for which the TEAM participant earned a 
reconciliation payment amount or repayment amount. The phrase 
``episode,'' as proposed, refers to all Part A and B items and services 
described in section X.A.3.b.(5) (excluding the items and services 
described in section X.A.3.b.(5)(a)) of the preamble of this final rule 
that are furnished to a beneficiary described in section X.A.3.b.(5)(b) 
of the preamble of this final rule, during the time period that begins 
with the beneficiary's admission to an anchor hospitalization or the 
date of the anchor procedure, as applicable, and ends on the 30th day 
of either the date of discharge from the anchor hospitalization or the 
date of service for the anchor procedure. These proposed requirements 
ensure that there is a required relationship between eligibility for a 
gainsharing payment and the direct care for TEAM beneficiaries during 
an episode for these TEAM collaborators. We believe the provision of 
direct care is essential to the implementation of effective care 
redesign, and the proposed requirement provides a safeguard against 
payments to TEAM collaborators other than a PGP, NPPGP, or TGP that are 
unrelated to direct care for TEAM beneficiaries during the model's 
performance year.
    We proposed to establish similar requirements for PGPs, NPPGPs and 
TGPs; however, these proposed requirements take into account that these 
entities do not themselves directly furnish billable services. We 
proposed that to be eligible to receive a gainsharing payment or 
required to make an alignment payment for a given performance year, a 
PGP, NPPGP or TGP must have billed for an item or service that was 
rendered by one or more members of the PGP, NPPGP or TGP to a TEAM 
beneficiary during the episode that is attributed to the same 
performance year for which the TEAM participant earned a reconciliation 
payment amount or repayment amount. Like the proposal for TEAM 
collaborators that are not PGPs, these proposals also require a link 
between the TEAM collaborator that is the PGP, NPPGP or TGP and the 
provision of items and services to beneficiaries during the episode by 
PGP, NPPGP or TGP members.
    Moreover, we further proposed that, because PGPs, NPPGPs and TGPs 
do not directly furnish items and services to beneficiaries, in order 
to be eligible to receive a gainsharing payment or be required to make 
an alignment payment, for a given performance year the PGP, NPPGP or 
TGP must have contributed to TEAM activities and been clinically 
involved in the care of beneficiaries during an episode that is 
attributed to the same performance year for which the TEAM participant 
earned a reconciliation payment amount or repayment amount that 
comprises the gainsharing payment.
    We proposed that the amount of any gainsharing payments must be 
determined in accordance with a methodology that is solely based on 
quality of care and the provision of TEAM activities. We considered 
whether this methodology could substantially, rather than solely, be 
based on quality of care and the provision of TEAM activities, but 
ultimately determined that basing the methodology solely on these two 
elements creates a model safeguard where gainsharing aligns directly 
with the model goal of quality of care and with TEAM activities. We 
proposed that the gainsharing methodology may take into account the 
amount of such TEAM activities provided by a TEAM collaborator relative 
to other TEAM collaborators. We emphasize that, as proposed, financial 
arrangements may not be conditioned directly or indirectly on the 
volume or value of referrals or business otherwise generated by,

[[Page 69814]]

between or among TEAM participants, any TEAM collaborator, any 
collaboration agent, or any individual or entity affiliated with a TEAM 
participant, TEAM collaborator, or collaboration agent so that the sole 
purpose of the arrangement is to align the financial incentives of the 
TEAM participant and TEAM collaborators toward the model. However, we 
believe that accounting for the relative amount of TEAM activities by 
TEAM collaborators in the determination of gainsharing payments does 
not undermine this objective. Rather, the requirement as proposed 
allowed flexibility in the determination of gainsharing payments where 
the amount of a TEAM collaborator's provision of TEAM activities 
(including direct care) to beneficiaries during a performance year may 
contribute to the TEAM participant's reconciliation payment amount that 
may be available for making a gainsharing payment.
    Greater contributions of TEAM activities by one TEAM collaborator 
versus another TEAM collaborator that result in greater differences in 
the funds available for gainsharing payments may be appropriately 
valued in the methodology used to make gainsharing payments to those 
TEAM collaborators in order to reflect these differences in TEAM 
activities among TEAM collaborators.
    However, we do not believe it would be appropriate to allow the 
selection of TEAM collaborators or the opportunity to make or receive a 
gainsharing payment or an alignment payment to take into account the 
amount of TEAM activities provided by a potential or actual TEAM 
collaborator relative to other potential or actual TEAM collaborators 
because these financial relationships are not to be based directly or 
indirectly on the volume or value of referrals or business otherwise 
generated by, between or among the TEAM participant, any TEAM 
collaborator, any collaboration agent, or any individual or entity 
affiliated with a TEAM participant, TEAM collaborator, or collaboration 
agent. Specifically, with respect to the selection of TEAM 
collaborators or the opportunity to make or receive a gainsharing 
payment or an alignment payment, we do not believe that the amount of 
model activities provided by a potential or actual TEAM collaborator 
relative to other potential or actual TEAM collaborators could be taken 
into consideration by the TEAM participant without a significant risk 
that the financial arrangement in those instances could be based 
directly or indirectly on the volume or value of referrals or business 
generated by, between or among the parties. Similarly, if the 
methodology for determining alignment payments was allowed to take into 
account the amount of TEAM activities provided by a TEAM collaborator 
relative to other TEAM collaborators, there would be a significant risk 
that the financial arrangement could directly account for the volume or 
value of referrals or business generated by, between or among the 
parties and, therefore, we proposed that the methodology for 
determining alignment payments may not directly take into account the 
volume or value of referrals or business generated by, between or among 
the parties.
    We sought comment on this proposal, where any gainsharing payments 
must be determined in accordance with a methodology that is based on 
quality of care and the provision of TEAM activities. We also sought 
comment on whether the methodology must be based solely on these two 
elements, or if, alternately, the methodology must be based 
substantially on these two elements. We sought comment on this proposal 
for gainsharing payments, where the methodology could take into account 
the amount of TEAM activities provided by a TEAM collaborator relative 
to other TEAM collaborators. We were particularly interested in 
comments about whether this standard would provide sufficient 
additional flexibility in the gainsharing payment methodology to allow 
the financial reward of TEAM collaborators commensurate with their 
level of effort that achieves model goals. In addition, we were 
interested in comment on whether additional safeguards or a different 
standard is needed to allow for greater flexibility to provide certain 
performance-based payments consistent with the goals of program 
integrity, protecting against abuse and ensuring the goals of the model 
are met.
    We proposed that for each performance year, the aggregate amount of 
all gainsharing payments that are derived from a reconciliation payment 
amount by the TEAM participant must not exceed the amount of the 
reconciliation payment amount. In accordance with the prior discussion, 
no entity or individual, whether a party to a sharing arrangement or 
not, may condition the opportunity to make or receive gainsharing 
payments or to make or receive alignment payments on the volume or 
value of referrals or business otherwise generated by, between or among 
the TEAM participant, any TEAM collaborator, any collaboration agent, 
or any individual or entity affiliated with a TEAM participant, TEAM 
collaborator, or collaboration agent. We proposed that a TEAM 
participant must not make a gainsharing payment to a TEAM collaborator 
that is subject to any action for noncompliance by CMS or any other 
federal or state entity or subject to noncompliance with any other 
federal or state laws or regulations, or for the provision of 
substandard care to beneficiaries or other integrity problems. Finally, 
we proposed that the sharing arrangement must require the TEAM 
participant to recover any gainsharing payment that contained funds 
derived from a CMS overpayment on a reconciliation payment amount or 
was based on the submission of false or fraudulent data. These 
requirements provide program integrity safeguards for gainsharing under 
sharing arrangements.
    With respect to alignment payments, we proposed that alignment 
payments from a TEAM collaborator to a TEAM participant may be made at 
any interval that is agreed upon by both parties. We proposed that 
alignment payments must not be issued, distributed, or paid prior to 
the calculation by CMS of the repayment amount, and cannot be assessed 
in the absence of a repayment amount. We also proposed that TEAM 
participants must not receive any amounts under a sharing arrangement 
from a TEAM collaborator that are not alignment payments.
    We also proposed certain limitations on alignment payments that are 
consistent with the CJR model. In the proposed policy, for a 
performance year, the aggregate amount of all alignment payments 
received by the TEAM participant from all of the TEAM participant's 
TEAM collaborators must not exceed 50 percent of the repayment amount. 
Given that the TEAM participant would be responsible for developing and 
coordinating care redesign strategies in response to its TEAM 
participation, we believe it is important that the TEAM participant 
retain a significant portion of its responsibility for repayment 
amounts. In addition, in the proposed policy, the aggregate amount of 
all alignment payments from a TEAM collaborator to the TEAM participant 
for a TEAM collaborator other than an ACO may not be greater than 25 
percent of the TEAM participant's repayment amount. The aggregate 
amount of all alignment payments from a TEAM collaborator to the TEAM 
participant for a TEAM collaborator that is an ACO may not be greater 
than 50 percent of the TEAM participant's repayment amount, in the 
proposed policy.

[[Page 69815]]

    We sought comment on our proposed aggregate and individual TEAM 
collaborator limitations on alignment payments.
    We proposed that all gainsharing payments and any alignment 
payments must be administered by the TEAM participant in accordance 
with GAAP and Government Auditing Standards (The Yellow Book). 
Additionally, we proposed that all gainsharing payments and alignment 
payments must be made by check, electronic funds transfer, or another 
traceable cash transaction. We made this proposal to mitigate the 
administrative burden that the electronic fund transfer (EFT) 
requirement would place on the financial arrangements between certain 
TEAM participants and TEAM collaborators, especially individual 
physicians and nonphysician practitioners and small PGPs, NPPGPs or 
TGPs which could discourage participation of those suppliers as TEAM 
collaborators. We sought comment on the effect of this proposal.
    The proposals for the conditions and restrictions on gainsharing 
payments, alignment payments, and internal cost savings under the model 
were included in proposed Sec.  512.56. We sought comment about all of 
the conditions and restrictions set out in the preceding discussion, 
including whether additional or different safeguards would be needed to 
ensure program integrity, protect against abuse, and ensure that the 
goals of TEAM are met.
    The following is a summary of the public comments received on these 
proposals and our response to those comments.
    Comment: A few commenters emphasized that financial incentives 
could enhance patient care, throughput, and patient experiences. 
Commenters made recommendations including equitably distributing shared 
savings among physicians and clinical staff involved in surgical 
episodes, establishing performance parameters at the specialty level, 
and embracing clinical integration with an upside/downside approach to 
redistributing incentives.
    Response: We thank the commenters for the valuable recommendations. 
We appreciate these insights and agree that financial incentives can 
impact patient care, throughput and care transitions, and patient 
experiences, and believe that as proposed, TEAM financial incentives 
will enhance these crucial elements.
    We proposed two requirements for gainsharing payment eligibility 
for TEAM collaborators. The first proposed requirement is quality of 
care criteria, wherein to be eligible to receive a gainsharing payment, 
the TEAM collaborator must meet quality of care criteria, as included 
in the sharing arrangement and mutually agreed upon by the TEAM 
participant and TEAM collaborator, during the performance year where 
the TEAM participant earned a reconciliation payment amount that 
comprises the gainsharing payment. The second proposed requirement is 
that to be eligible to receive a gainsharing payment or make an 
alignment payment, a TEAM collaborator must have directly furnished a 
billable item or service to a TEAM beneficiary (or, in the case of a 
PGP, NPPGP or TGP, must have billed for an item or service that was 
rendered by one or more members of the PGP, NPPGP or TGP) during the 
same performance year where the TEAM participant earned a 
reconciliation payment amount or repayment amount. These proposed 
requirements entail that the amount of any gainsharing payments must be 
determined in accordance with a methodology that is solely based on 
quality of care and the provision of TEAM activities. By ensuring there 
is a relationship between eligibility for a gainsharing payment and 
criteria for quality of care and the direct care for TEAM beneficiaries 
during an episode, we believe that crucial elements such as patient 
care, throughput and care transitions, and patient experiences for TEAM 
beneficiaries will be enhanced.
    We also appreciate the commenters' suggestions related to the 
equitable distribution of shared savings, establishment of performance 
parameters at the specialty level, and ability to embrace clinical 
integration with an upside/downside approach. We believe that the 
proposed requirements that the amount of gainsharing payments be 
determined solely based on quality of care and provision of TEAM 
activities will create an equitable and fair approach to distributing 
gainsharing payments and establishing performance parameters through 
quality of care criteria. Additionally, we feel the proposed 
requirement that to be eligible for both gainsharing and alignment 
payments, the TEAM collaborator must have furnished a billable item or 
service allows the opportunity for appropriate and objective 
gainsharing payment and alignment payments for TEAM collaborators.
    We are finalizing this proposal as proposed and without 
modification. We appreciate these comments and will continue to explore 
opportunities to further enhance the financial incentive requirements 
through future comment and rulemaking.
    Comment: A commenter recommended that CMS allow PGPs to participate 
in TEAM through gainsharing agreements with the participating ACHs. The 
commenter suggested that this would allow for PGPs to contribute their 
knowledge and patient management skills, to better integrate the care 
that beneficiaries receive.
    Response: We thank the commenter for the suggestion that PGPs 
should be able to participate in TEAM through gainsharing agreements 
with the participating ACHs. We acknowledged in the proposed rule that 
because TEAM participants would be accountable for quality during the 
anchor hospitalization or anchor procedure and the 30-day post 
discharge period, providers and suppliers other than the TEAM 
participant may furnish services to the Medicare beneficiary during the 
model performance period. As such, we proposed to allow TEAM 
participants to engage in financial arrangements with TEAM 
collaborators. PGPs are one such Medicare-enrolled provider type 
meeting the definition of a TEAM collaborator and, therefore, can 
engage in gainsharing with a TEAM participant. CMS believes that the 
TEAM collaborator term as proposed is broad enough to capture all 
provider/supplier types that may furnish services to the Medicare 
beneficiary during the model performance period, including PGPs.
    Comment: A few commenters supported CMS' proposal to allow 
gainsharing in TEAM but expressed concern regarding the proposed 50 
percent cap on shared losses. The commenters recommended that CMS 
remove the 50 percent cap on shared losses in order to reduce 
administrative burden for providers, strengthen integration between 
ACOs and specialists, and maintain consistency with prior bundled 
payment models like CJR and BPCI Advanced.
    Response: We thank the commenters for their suggestions regarding 
the proposed 50 percent cap on shared losses. CMS believes, however, 
that given that the TEAM participant would be responsible for 
developing and coordinating care redesign strategies in response to its 
TEAM participation, it is important that the TEAM participant retain a 
significant portion of its responsibility for repayment amounts. With 
that said, we believe that the 50 percent cap on shared losses supports 
CMS' goal. However, we will consider this recommendation in future 
comment and rulemaking.
    Comment: A commenter expressed concern that the proposed TEAM 
gainsharing policy does not tie

[[Page 69816]]

gainsharing agreements to volume, and it would make it more difficult 
for TEAM participants to link the size of the gainsharing payment to 
the partnering organizations' level of involvement in TEAM.
    Response: We thank the commenter for their concern regarding the 
proposed gainsharing policy. As proposed, the TEAM gainsharing 
methodology may take into account the amount of such TEAM activities 
provided by a TEAM collaborator relative to other TEAM collaborators, 
however it should not be based fully on volume of referrals. CMS 
believes this proposed requirement allows flexibility in the 
determination of gainsharing payments to TEAM collaborators, who have 
differing contributions to TEAM activities. We understand that this may 
result in greater differences in the funds available for gainsharing 
payments, and believe, as proposed, allows for gainsharing payments to 
be made appropriately, without tying them directly or indirectly to 
volume or value of referrals. We are finalizing the policy on 
gainsharing arrangements as proposed. However, we will continue to 
review this policy and will take your comments into consideration in 
future comment and rulemaking cycles.
    Comment: A commenter proposed that CMS determine the financial 
arrangements between the initiating hospital, surgeon, primary care 
physician and other post-acute providers, and that CMS require the 
participating ACH to pass the shared savings generated in TEAM to the 
physicians.
    Response: We thank the commenter for their recommendation regarding 
the distribution of TEAM reconciliation payment and repayment amounts. 
As proposed, CMS has a direct relationship with the TEAM participant 
and does not have a relationship with the other providers and suppliers 
that may be furnishing services to beneficiaries during a TEAM 
performance period. As such, under this proposal, CMS believes that the 
TEAM participant, as the risk bearing entity should determine the 
methodology used to identify key providers and suppliers providing care 
to an aligned beneficiary and establish financial arrangements as an 
incentive. In addition, CMS believes that the commenters recommendation 
that CMS identify a TEAM participant's financial arrangements creates a 
high level of operational burden. This policy, as proposed, provides 
TEAM participants the ability to identify financial arrangements in a 
manner that is most beneficial to the TEAM participants and the 
downstream providers and suppliers, rather than CMS determining those 
arrangements on behalf of the participant and downstream providers and 
suppliers. CMS believes that the gainsharing policy that is proposed 
aligns with the gainsharing policies of previous CMS Innovation Center 
bundled payment models, where the participant receives the payment or 
repayment amount, and can choose the methodology, within the 
requirements of the model, to distribute the payment and repayment 
amounts with other providers and suppliers, who are not the risk 
bearing entity. We are finalizing this policy as proposed. We will take 
this comment into consideration in future rulemaking cycles.
    Comment: A commenter suggested that CMS should require hospitals 
participating in TEAM to gainshare incentives with downstream 
participants in order to provide required incentives to providers, who 
might otherwise not receive incentives depending on the financial 
arrangements of the TEAM participant.
    Response: We thank the commenter for the suggestion and concern 
regarding proper incentives for TEAM collaborators. CMS does not 
believe that TEAM participants should be required to gainshare with 
TEAM collaborators, because TEAM collaborators are not the risk bearing 
entity. We believe that the goal of the TEAM gainsharing policy should 
be to offer TEAM participants the opportunity and enough flexibility to 
identify key providers and suppliers caring for aligned beneficiaries, 
and then establish partnerships with these individuals and entities to 
promote accountability for the quality, cost, and overall care for 
beneficiaries, including managing and coordinating care; encouraging 
investment in infrastructure, enabling technologies, and redesigning 
care processes for high quality and efficient service delivery; and 
carrying out other obligations or duties under TEAM. We are finalizing 
this policy as proposed. We will take this recommendation into 
consideration in future rulemaking cycles.
    Comment: A commenter expressed concerns with CMS' proposal on 
gainsharing requirements. Specifically, the commenter suggested that 
CMS should permit gainsharing payments to be based substantially, 
rather than solely, on quality of care and the provisions of TEAM 
activities. The commenter believes that this would provide the 
appropriate flexibility for TEAM participants to construct their 
gainsharing agreements.
    Response: We thank the commenter for their concern and suggestion 
to the proposed policy. CMS believes that there must be a model 
safeguard in place to ensure that gainsharing aligns directly with the 
TEAM goals of quality of care, and engagement in TEAM activities. We 
believe that in order for this model safeguard to be in place, 
gainsharing payments must be based solely on the quality of care and 
the provisions of TEAM activities. We are finalizing the policy as 
proposed and will take this commenters suggestion into account in 
future rulemaking.
    Comment: A commenter expressed concerns over CMS' proposed policy 
of limiting gainsharing payments to TEAM collaborators so that the 
aggregate payment amount cannot exceed that year's reconciliation 
payment amount, where the Composite Quality Score is incorporated into 
the reconciliation payment amount. The commenter suggests that 
hospitals participating in TEAM need the flexibility to construct their 
gainsharing programs in their own ways. As such, the commenter stated 
that TEAM participants should limit aggregate gainsharing payments to 
the pre-quality adjusted reconciliation amount.
    Response: We thank the commenter for their concern and their 
suggestion to allow TEAM participants to gainshare payments to TEAM 
collaborators, where the Composite Quality Score is not incorporated 
into the reconciliation payment amount. In the proposed policy, the 
reconciliation payment made to the TEAM participant would include the 
Composite Quality Score adjustment, and this payment amount would be 
the one that the TEAM participant could share with a TEAM collaborator. 
As such, CMS believes that the proposed policy that the aggregate 
gainsharing payments to TEAM collaborators cannot exceed that year's 
reconciliation payment amount (from CMS), where the composite quality 
score is incorporated into the reconciliation payment amount, is 
acceptable because this reconciliation amount paid to the TEAM 
participant would already include the Composite Quality Score 
adjustment.
    Comment: A commenter recommended that the CMS Innovation Center 
must allow participants to develop and execute separate gainsharing 
arrangements with physicians (or physician practices) that are tied to 
the individual episodes for which the hospital is assuming performance-
based risk, by performing reconciliation separately for each episode, 
not at the enterprise level.
    Response: We thank the commenter for their recommendation. We 
considered whether the gainsharing methodology could substantially, 
rather

[[Page 69817]]

than solely, be based on quality of care and the provision of TEAM 
activities, but ultimately determined that basing the methodology 
solely on these two elements creates a model safeguard where 
gainsharing aligns directly with the model goal of quality of care and 
with TEAM activities. The gainsharing methodology as proposed may take 
into account the amount of such TEAM activities provided by a TEAM 
collaborator relative to other TEAM collaborators. While we emphasize 
that financial arrangements may not be conditioned directly or 
indirectly on the volume or value of referrals or business otherwise 
generated by, between or among TEAM participants, any TEAM 
collaborator, any collaboration agent, or any individual or entity 
affiliated with a TEAM participant, TEAM collaborator, or collaboration 
agent so that their sole purpose is to align the financial incentives 
of the TEAM participant and TEAM collaborators toward the model, we 
believe that accounting for the relative amount of TEAM activities by 
TEAM collaborators in the determination of gainsharing payments does 
not undermine this objective. Rather, the proposed requirement allows 
flexibility in the determination of gainsharing payments where the 
amount of a TEAM collaborator's provision of TEAM activities (including 
direct care) to beneficiaries during a performance year may contribute 
to the TEAM participant's reconciliation payment amount that may be 
available for making a gainsharing payment. Greater contributions of 
TEAM activities by one TEAM collaborator versus another TEAM 
collaborator that result in greater differences in the funds available 
for gainsharing payments may be appropriately valued in the methodology 
used to make gainsharing payments to those TEAM collaborators in order 
to reflect these differences in TEAM activities among TEAM 
collaborators.
    However, we do not believe it would be appropriate to allow the 
selection of TEAM collaborators or the opportunity to make or receive a 
gainsharing payment or an alignment payment to take into account the 
amount of TEAM activities provided by a potential or actual TEAM 
collaborator relative to other potential or actual TEAM collaborators 
because these financial relationships are not to be based directly or 
indirectly on the volume or value of referrals or business otherwise 
generated by, between or among the TEAM participant, any TEAM 
collaborator, any collaboration agent, or any individual or entity 
affiliated with a TEAM participant, TEAM collaborator, or collaboration 
agent. Specifically, with respect to the selection of TEAM 
collaborators or the opportunity to make or receive a gainsharing 
payment or an alignment payment, we do not believe that the amount of 
model activities provided by a potential or actual TEAM collaborator 
relative to other potential or actual TEAM collaborators could be taken 
into consideration by the TEAM participant without a significant risk 
that the financial arrangement in those instances could be based 
directly or indirectly on the volume or value of referrals or business 
generated by, between or among the parties. Similarly, if the 
methodology for determining alignment payments was allowed to take into 
account the amount of TEAM activities provided by a TEAM collaborator 
relative to other TEAM collaborators, there would be a significant risk 
that the financial arrangement could directly account for the volume or 
value of referrals or business generated by, between or among the 
parties. Therefore, we proposed that the methodology for determining 
alignment payments may not directly take into account the volume or 
value of referrals or business generated by, between or among the 
parties. After consideration of the public comments we received, we are 
finalizing our proposals as proposed for the model gainsharing payment 
and alignment payment conditions and limitations without modification 
in our regulation at Sec.  512.56.
(d) Documentation Requirements
    To ensure the integrity of the sharing arrangements, we proposed at 
(89 FR 36458) that TEAM participants must meet a variety of 
documentation requirements for these arrangements. Specifically, we 
proposed that the TEAM participant must--
     Document the sharing arrangement contemporaneously with 
the establishment of the arrangement;
     Maintain accurate current and historical lists of all TEAM 
collaborators, including TEAM collaborator names and addresses; update 
such lists on at least a quarterly basis; and publicly report the 
current and historical lists of TEAM collaborators on a web page on the 
TEAM participant's website; and
     Maintain and require each TEAM collaborator to maintain 
contemporaneous documentation with respect to the payment or receipt of 
any gainsharing payment or alignment payment that includes at a minimum 
the--
    ++ Nature of the payment (gainsharing payment or alignment 
payment);
    ++ Identity of the parties making and receiving the payment;
    ++ Date of the payment;
    ++ Amount of the payment;
    ++ Date and amount of any recoupment of all or a portion of a TEAM 
collaborator's gainsharing payment; and
    ++ Explanation for each recoupment, such as whether the TEAM 
collaborator received a gainsharing payment that contained funds 
derived from a CMS overpayment of a reconciliation payment amount or 
was based on the submission of false or fraudulent data.
    In addition, we proposed that the TEAM participant must keep 
records for all of the following:
     Its process for determining and verifying its potential 
and current TEAM collaborators' eligibility to participate in Medicare 
if the TEAM collaborator is a Medicare-enrolled provider or supplier.
     A description of current health information technology, 
including systems to track reconciliation payment amounts and repayment 
amounts.
     Its plan to track gainsharing payments and alignment 
payments.
    Finally, we proposed that the TEAM participant must retain and 
provide access to and must require each TEAM collaborator to retain and 
provide access to, the required documentation as discussed in section 
X.A.3.j. of the preamble of this final rule and 42 CFR 1001.952(ii).
    The proposals for the requirements for documentation of sharing 
arrangements under the model are included in Sec.  512.565. We sought 
comment about all of the requirements set out in the preceding 
discussion, including whether additional or different safeguards would 
be needed to ensure program integrity, protect against abuse, and 
ensure that the goals of the model are met.
    We solicited public comment on our proposal regarding the 
requirements for documentation of sharing arrangements. We received no 
comments on these proposals and therefore are finalizing these 
proposals as proposed in our regulation at Sec.  512.565.
(5) Distribution Arrangements
(a) General
    Similar to the CJR model, we proposed at (89 FR 36458) that certain 
financial arrangements between TEAM collaborators and other individuals 
or entities called ``collaboration agents'' be termed ``distribution 
arrangements.'' A

[[Page 69818]]

collaboration agent is an individual or entity that is not a TEAM 
collaborator and that is a PGP, NPPGP, or TGP member that has entered 
into a distribution arrangement with the same PGP, NPPGP, or TGP in 
which he or she is an owner or employee. For purposes of the Federal 
Anti-Kickback Statute Safe Harbor for CMS-sponsored model arrangements 
(42 CFR 1001.952(ii)), we proposed that a distribution arrangement is a 
financial arrangement between a TEAM collaborator that is a PGP, NPPGP 
or TGP and a collaboration agent for the sole purpose of sharing a 
gainsharing payment received by the PGP, NPPGP or TGP. Where a payment 
from a TEAM collaborator to a collaboration agent is made pursuant to a 
TEAM distribution arrangement, we proposed to define that payment as a 
``distribution payment.'' As proposed, a collaboration agent may only 
make a distribution payment in accordance with a distribution 
arrangement which complies with the provisions of this proposed model 
and all other applicable laws and regulations, including the fraud and 
abuse laws.
    Like our proposal for gainsharing payments, we proposed that the 
amount of any distribution arrangements must be determined in 
accordance with a methodology that is solely based on quality of care 
and the provision of TEAM activities. We considered whether this 
methodology could substantially, rather than solely, be based on 
quality of care and the provision of TEAM activities, but ultimately 
determined that basing the methodology solely on these two elements 
creates a model safeguard where gainsharing aligns directly with the 
model goal of quality of care and with TEAM activities.
    The proposals for the general provisions for distribution 
arrangements under the model are included in proposed Sec.  512.568. We 
sought comment about all of the provisions set out in the preceding 
discussion, including whether additional or different safeguards would 
be needed to ensure program integrity, protect against abuse, and 
ensure that the goals of the model are met.
    We solicited public comment on our proposal regarding the 
requirements for general distribution arrangements. We received no 
comments on these proposals and therefore are finalizing these 
proposals as proposed in our regulation at Sec.  512.568.
(b) Requirements
    We proposed at (89 FR 36458) several specific requirements for 
distribution arrangements as a program integrity safeguard to help 
ensure that their sole purpose is to create financial alignment between 
TEAM collaborators and collaboration agents and performance toward TEAM 
goals. These proposed requirements largely parallel those proposed in 
section X.A.3.g.(4) of the preamble of this final rule for sharing 
arrangements and gainsharing payments based on similar reasoning for 
these two types of arrangements and payments. We proposed that all 
distribution arrangements must be in writing and signed by the parties, 
contain the effective date of the agreement, and be entered into before 
care is furnished to TEAM beneficiaries under the distribution 
arrangement. Furthermore, we proposed that participation must be 
voluntary and without penalty for nonparticipation, and the 
distribution arrangement must require the collaboration agent to comply 
with all applicable laws and regulations.
    We sought comment on this proposal, where any distribution payments 
must be determined in accordance with a methodology that is based on 
quality of care and the provision of TEAM activities. We also sought 
comment on whether the methodology must be based solely on these two 
elements, or if the methodology must be based substantially on these 
two elements. Additionally, and also like our proposal for gainsharing 
payments, we proposed that the opportunity to make or receive a 
distribution payment must not be conditioned directly or indirectly on 
the volume or value of referrals or business otherwise generated by, 
between or among the TEAM participant, any TEAM collaborator, any 
collaboration agent, or any individual or entity affiliated with a TEAM 
participant, TEAM collaborator, or collaboration agent. We proposed 
more flexible standards for the determination of the amount of 
distribution payments from PGPs, NPPGPs and TGPs allowing TEAM 
collaborators and collaboration agents to create tailored distribution 
payments that supports the individual structure of their arrangement.
    We note that for distribution payments made by a PGP to PGP 
members, by NPPGPs to NPPGP members, or TGPs to TGP members, the 
proposed requirement that the amount of any distribution payments must 
be determined in accordance with a methodology that is solely based on 
quality of care and the provision of TEAM activities may be more 
limiting in how a PGP, NPPGP or TGP pays its members than is allowed 
under existing law. However, we believe quality of care is an important 
facet of episode-based payment models and making this a requirement for 
distribution payment supports greater emphasis on quality of care 
improvement in TEAM. Further this is consistent with the BPCI Advanced 
model that required their Net Payment Reconciliation Amount (NPRA) 
Shared Payments and Partner Distribution Payments to achieve quality 
performance targets to receive these payments.
    We sought comment on this proposal and specifically whether there 
are additional safeguards or a different standard is needed to allow 
for greater flexibility in calculating the amount of distribution 
payments that would avoid program integrity risks and whether 
additional or different safeguards are reasonable, necessary, or 
appropriate for the amount of distribution payments from a PGP to its 
members, a NPPGP to its members or a TGP to its members.
    Similar to our proposed requirements for sharing arrangements for 
those TEAM collaborators that furnish or bill for items and services, 
we proposed that a collaboration agent is eligible to receive a 
distribution payment only if the collaboration agent furnished or 
billed for an item or service rendered to a beneficiary during an 
episode that occurred during the same performance year for which the 
TEAM participant accrued the internal cost savings or earned a 
reconciliation payment amount that comprises the gainsharing payment 
being distributed. We note that, as proposed, all individuals and 
entities that fall within our proposed definition of collaboration 
agent may either directly furnish or bill for items and services 
rendered to beneficiaries. This proposal ensures that, there is the 
same required relationship between direct care for beneficiaries during 
a performance year and distribution payment eligibility that we require 
for gainsharing payment eligibility. We believe this requirement as 
proposed provides a safeguard against payments to collaboration agents 
that are unrelated to direct care for beneficiaries during the 
performance year.
    We further proposed that with respect to the distribution of any 
gainsharing payment received by an ACO, PGP, NPPGP or TGP, the total 
amount of all distribution payments in a performance year must not 
exceed the amount of the gainsharing payment received by the TEAM 
collaborator from the TEAM participant for that performance year. Like 
gainsharing and alignment payments, we proposed that all distribution 
payments must be made by check, electronic funds transfer, or another 
traceable cash transaction. Under the proposal, the collaboration agent 
must retain the ability to make

[[Page 69819]]

decisions in the best interests of the beneficiary, including the 
selection of devices, supplies, and treatments. Finally, under the 
proposal, the distribution arrangement must not induce the 
collaboration agent to reduce or limit medically necessary items and 
services to any Medicare beneficiary or reward the provision of items 
and services that are medically unnecessary.
    We proposed that the TEAM collaborator must maintain 
contemporaneous documentation regarding distribution arrangements in 
accordance with proposed Sec.  512.586, including--
     The relevant written agreements;
     The date and amount of any distribution payment(s);
     The identity of each collaboration agent that received a 
distribution payment; and
     A description of the methodology and accounting formula 
for determining the amount of any distribution payment.
    We proposed that the TEAM collaborator may not enter into a 
distribution arrangement with any individual or entity that has a 
sharing arrangement with the same TEAM participant. This proposal 
ensures that the proposed separate limitations on the total amount of 
gainsharing payment and distribution payment to PGPs, NPPGPs, TGPs, 
physicians, and nonphysician practitioners that are solely based on 
quality of care and the provision of TEAM activities are not exceeded 
in absolute dollars by a PGP, NPPGP, TGP, physician, or nonphysician 
practitioner's participation in both a sharing arrangement and 
distribution arrangement for the care of the same TEAM beneficiaries 
during the performance year. Allowing both types of arrangements for 
the same individual or entity for care of the same beneficiary during 
the performance year could also allow for duplicate counting of the 
individual or entity's same contribution toward model goals and 
provision of TEAM activities in the methodologies for both gainsharing 
and distribution payments, leading to financial gain for the individual 
or entity that is disproportionate to the contribution toward model 
goals and provision of TEAM activities by that individual or entity. 
However, we recognize there could be instances where an individual or 
entity could have distribution arrangements with multiple TEAM 
collaborators. For example, a physician may practice with and have 
reassigned their Medicare billing rights to multiple PGPs, and those 
PGPs may each be TEAM collaborators. We sought comment on allowing an 
individual or entity to have distribution arrangements with multiple 
TEAM collaborators and whether there are additional program integrity 
safeguards that should be established in those scenarios. Finally, we 
proposed that the TEAM collaborator must retain and provide access to 
and must require collaboration agents to retain and provide access to, 
the required documentation in accordance with Sec.  512.586.
    The proposals for requirements for distribution arrangements under 
the model were included in proposed Sec.  512.568. We sought comment 
about all of the proposed requirements set out in the preceding 
discussion, including whether additional or different safeguards would 
be needed to ensure program integrity, protect against abuse, and 
ensure that the goals of the model are met. In addition, we sought 
comment on how the regulation of the financial arrangements under this 
proposal may interact with how these or similar financial arrangements 
are regulated under the Medicare Shared Savings Program.
    We solicited public comment on our proposal regarding the 
requirements for distribution arrangements. We received no comments on 
these proposals and are finalizing these proposals as proposed in our 
regulation at Sec.  512.568.
(6) Downstream Distribution Arrangements
(a) General
    We proposed at (89 FR 36460) that TEAM allow for certain financial 
arrangements within an ACO between a PGP and its members. Specifically, 
we proposed that certain financial arrangements between a collaboration 
agent that is both a PGP, NPPGP, or TGP and an ACO participant and 
other individuals termed ``downstream collaboration agents'' be termed 
a ``downstream distribution arrangement.'' A downstream distribution 
arrangement, as proposed, is a financial arrangement between a 
collaboration agent that is both a PGP, NPPGP, or TGP and an ACO 
participant and a downstream collaboration agent for the sole purpose 
of sharing a distribution payment received by the PGP, NPPGP, or TGP. A 
downstream collaboration agent, as proposed, is an individual who is 
not a TEAM collaborator or a collaboration agent and who is a PGP 
member, a NPPGP member, or a TGP member that has entered into a 
downstream distribution arrangement with the same PGP, NPPGP, or TGP in 
which he or she is an owner or employee, and where the PGP, NPPGP, or 
TGP is a collaboration agent. Where a payment from a collaboration 
agent to a downstream collaboration agent is made pursuant to a 
downstream distribution arrangement, we proposed to define that payment 
as a ``downstream distribution payment.'' As proposed, a collaboration 
agent may only make a downstream distribution payment in accordance 
with a downstream distribution arrangement which complies with the 
requirements of this section and all other applicable laws and 
regulations, including the fraud and abuse laws.
    We sought comment about all of the provisions set out in the 
preceding discussion, including whether additional or different 
safeguards would be needed to ensure program integrity, protect against 
abuse, and ensure that the goals of TEAM are met.
    We solicited public comment on our proposal regarding the 
downstream distribution arrangements. We received no comments on these 
proposals and are finalizing these proposals as proposed in our 
regulation at Sec.  512.570.
(b) Requirements
    We proposed at (89 FR 36460) several specific requirements for 
downstream distribution arrangements as a program integrity safeguard 
to help ensure that their sole purpose is to create financial alignment 
between collaboration agents that are PGPs, NPPGPs, or TGPs which are 
also ACO participants and downstream collaboration agents toward the 
goals of the TEAM to improve the quality and efficiency of episodes. 
These requirements as proposed largely parallel those proposed for 
sharing and distribution arrangements at proposed Sec.  512.565 and 
Sec.  512.568 and gainsharing and distribution payments at proposed 
Sec.  512.565 and Sec.  512.568 based on similar reasoning for these 
types of arrangements and payments. We proposed that all downstream 
distribution arrangements must be in writing and signed by the parties, 
contain the effective date of the agreement, and entered into before 
care is furnished to TEAM beneficiaries under the downstream 
distribution arrangement. Furthermore, we proposed that participation 
must be voluntary and without penalty for nonparticipation, and the 
downstream distribution arrangement must require the downstream 
collaboration agent to comply with all applicable laws and regulations.
    Like our proposals for gainsharing and distribution payments, we 
proposed that the opportunity to make or receive a downstream 
distribution payment must not be conditioned directly or indirectly on 
the volume or value of

[[Page 69820]]

referrals or business otherwise generated by, between or among the TEAM 
participant, any TEAM collaborator, any collaboration agent, any 
downstream collaboration agent, or any individual or entity affiliated 
with a TEAM participant, TEAM collaborator, collaboration agent, or 
downstream collaboration agent. We proposed the amount of any 
downstream distribution payments from an NPPGP to an NPPGP member or 
from a TGP to a TGP member must be determined in accordance with a 
methodology that is solely based on quality of care and the provision 
of TEAM activities and that may take into account the amount of such 
TEAM activities provided by a downstream collaboration agent relative 
to other downstream collaboration agents. We believe that the amount of 
a downstream collaboration agent's provision of TEAM activities 
(including direct care) to TEAM beneficiaries during episodes may 
contribute to the TEAM participant's internal cost savings and 
reconciliation payment amount that may be available for making a 
gainsharing payment to the TEAM collaborator that is then shared 
through a distribution payment to the collaboration agent with which 
the downstream collaboration agent has a downstream distribution 
arrangement. Greater contributions of TEAM activities by one downstream 
collaboration agent versus another downstream collaboration agent that 
result in different contributions to the distribution payment made to 
the collaboration agent with which the downstream collaboration agents 
both have a downstream distribution arrangement may be appropriately 
valued in the methodology used to make downstream distribution payments 
to those downstream collaboration agents.
    Similar to our proposed requirements for distribution arrangements 
for those TEAM collaborators that are PGPs, we proposed that a 
downstream collaboration agent is eligible to receive a downstream 
distribution payment only if the PGP billed for an item or service 
furnished by the downstream collaboration agent to a TEAM beneficiary 
during an episode that was attributed to the same performance year for 
which the TEAM participant accrued the internal cost savings or earned 
the reconciliation payment amount that comprise the gainsharing payment 
from which the ACO made the distribution payment to the PGP that is an 
ACO participant. This proposal ensures that there is the same required 
relationship between direct care for TEAM beneficiaries during episodes 
and downstream distribution payment eligibility that we require for 
gainsharing and distribution payment eligibility. We believe this 
proposed requirement provides a safeguard against payments to 
downstream collaboration agents that are unrelated to direct care for 
TEAM beneficiaries during episodes.
    We further proposed that the total amount of all downstream 
distribution payments made to downstream collaboration agents must not 
exceed the amount of the distribution payment received by the 
collaboration agent (that is, the PGP, NPPGP, or TGP that is an ACO 
participant) from the ACO that is a TEAM collaborator. Like 
gainsharing, alignment, and distribution payments, we proposed that all 
downstream distribution payments must be made by check, electronic 
funds transfer, or another traceable cash transaction. As proposed, the 
downstream collaboration agent must retain the ability to make 
decisions in the best interests of the patient, including the selection 
of devices, supplies, and treatments. The distribution arrangement must 
not induce a downstream collaboration agent to reduce or limit 
medically necessary items and services to any Medicare beneficiary or 
reward the provision of items and services that are medically 
unnecessary.
    We proposed that the PGP, NPPGP, or TGP must maintain 
contemporaneous documentation regarding downstream distribution 
arrangements in accordance with proposed Sec.  512.586, including all 
of the following:
     The relevant written agreements.
     The date and amount of any downstream distribution 
payment(s).
     The identity of each downstream collaboration agent that 
received a downstream distribution payment.
     A description of the methodology and accounting formula 
for determining the amount of any downstream distribution payment.
    We proposed that the PGP, NPPGP, or TGP may not enter into a 
downstream distribution arrangement with any PGP, NPPGP, or TGP member 
who has a sharing arrangement with a TEAM participant or distribution 
arrangement with the ACO the PGP, NPPGP, or TGP is a participant in. 
This proposal ensures that the proposed separate limitations on the 
total amount of gainsharing payment, distribution payment, and 
downstream distribution payment to PGP, NPPGP, or TGP members that are 
solely based on quality of care and the provision of TEAM activities 
are not exceeded in absolute dollars by a PGP, NPPGP, or TGP member's 
participation in more than one type of arrangement for the care of the 
same TEAM beneficiaries during episodes. Allowing more than one 
arrangement for the same PGP, NPPGP, or TGP member for the care of the 
same TEAM beneficiaries during episodes could also allow for duplicate 
counting of the PGP, NPPGP, or TGP member's effort in TEAM activities 
in the methodologies for the different payments. Finally, we proposed 
that the PGP, NPPGP, or TGP must retain and provide access to, and must 
require downstream collaboration agents to retain and provide access 
to, the required documentation in accordance with Sec.  512.586.
    We sought comment about all of the requirements, including whether 
additional or different safeguards would be needed to ensure program 
integrity, protect against abuse, and ensure that the goals of TEAM are 
met.
    The following is a summary of the public comments received on this 
proposal and our response to those comments.
    Comment: Commenters expressed concerns about TEAM's penalties based 
on Medicare spending, noting that hospitals may incur costs from 
unaffiliated providers. They expressed concerns that hospitals might 
consolidate services to control costs, potentially leading to higher 
prices. They suggested upfront infrastructure investments for safety 
net providers and financial support for preparation and ongoing costs. 
Additionally, they urged CMS to cover upfront costs for medication 
supplies to avoid barriers to participation and reduce health 
inequities.
    Response: We appreciate the detailed feedback on TEAM. CMS 
recognizes the complexity and potential financial implications for 
hospitals, particularly concerning relationships with unaffiliated 
providers and the risk of increased consolidation. To address these 
concerns, CMS will explore options to provide upfront infrastructure 
investments, especially for safety net providers, and consider 
mechanisms to support both initial and ongoing operational costs. 
Furthermore, we acknowledge the importance of covering upfront costs 
for medication supplies to ensure equitable participation. These 
insights are invaluable in refining TEAM to balance cost control with 
high-quality care and accessibility. We will take this comment into 
consideration in future rulemaking.
    Comment: A commenter expressed concerns that downstream 
participants are only subject to penalties without being eligible for 
savings, incentive

[[Page 69821]]

payments or involvement in identifying appropriate post-acute discharge 
placements. They believe that downstream participants could be unfairly 
penalized for issues they are not involved in. The commenter suggests 
that hospitals should be required to share incentives with downstream 
participants and include them in TEAM strategy and pre-discharge 
placement decisions to address this imbalance.
    Response: We appreciate the comments raised regarding the 
participation of downstream participants in the incentive and penalty 
structures in TEAM. We have carefully considered the suggestion to 
mandate that hospitals share incentives with downstream participants 
and involve them in pre-discharge placement decisions. However, we 
believe our current approach effectively addresses these issues while 
maintaining the integrity and goals of TEAM.
    Our proposal includes several specific requirements for downstream 
distribution arrangements designed to ensure financial alignment and 
safeguard against potential abuses. Key elements of our proposed 
approach include:
    1. Written and Signed Agreements: All downstream distribution 
arrangements must be documented in writing, signed by all parties, and 
established before care is furnished to TEAM beneficiaries. This 
ensures transparency and accountability.
    2. Voluntary Participation: Participation in these arrangements is 
entirely voluntary, and there are no penalties for non-participation. 
This respects the autonomy of downstream participants while promoting 
collaboration.
    3. Quality-Based Payments: The methodology for downstream 
distribution payments is based solely on the quality of care and the 
provision of TEAM activities, not on the volume or value of referrals. 
This focus on quality ensures that patient care remains the primary 
consideration.
    4. Documentation and Compliance: We require rigorous documentation 
of all agreements, payments, and methodologies to ensure compliance 
with all applicable laws and regulations. This includes maintaining 
records of the relevant agreements, payment details, and the formulas 
used to determine payment amounts.
    5. Safeguards Against Abuse: The arrangements include safeguards to 
prevent the reduction of medically necessary services or the provision 
of unnecessary services. Payments are made through traceable 
transactions, ensuring financial transparency.
    6. Contribution-Based Payments: The amount of downstream 
distribution payments is tied to the downstream collaboration agent's 
contributions to TEAM activities, which may vary based on their 
involvement in direct care for TEAM beneficiaries. This ensures that 
payments reflect actual contributions to patient care and program 
goals.
    7. Consistent Performance Year Attribution: To receive downstream 
distribution payments, the PGP must have billed for services furnished 
by the downstream collaboration agent during an episode attributed to 
the same performance year. This aligns payments with the specific 
period of care delivery, ensuring relevance and accuracy.
    By adhering to these structured requirements, we aim to foster a 
collaborative environment that rewards quality care and ensures the 
appropriate distribution of incentives. Our proposed approach balances 
the need for financial alignment with the imperative to protect program 
integrity and avoid potential abuses. While we recognize the importance 
of involving downstream participants in incentive structures, our 
proposed safeguards and requirements provide a robust framework that 
supports the goals of TEAM without compromising on these critical 
principles.
    After consideration of the public comments received, we are 
finalizing these proposals as proposed in our regulation at Sec.  
512.570.
(7) TEAM Beneficiary Incentives
    We believe it is necessary and appropriate to provide additional 
flexibilities to TEAM participants for purposes of testing the model, 
to give TEAM participants additional access to the tools necessary to 
improve beneficiaries' quality of care, drive equitable outcomes, and 
reduce Medicare spending through improved beneficiary care transitions 
and reduced fragmentation during episodes of care. As proposed at (89 
FR 36461), TEAM participants may choose to provide in-kind patient 
engagement incentives to beneficiaries in an episode, which may include 
but not be limited to items of technology, subject to the following 
conditions consistent with 42 CFR 510.515.
    As discussed in section X.A.3.g.(9) of the preamble of this final 
rule, we stated that if the proposed beneficiary incentives are 
finalized, we would expect to make a determination that the Anti-
Kickback Statute Safe Harbor for CMS-sponsored model patient incentives 
(42 CFR 1001.952(ii)) would be made available. This Safe Harbor will 
protect the beneficiary incentives proposed in this section when the 
incentives are offered in compliance with the requirements established 
in the final rule and the conditions for use of the Anti-Kickback 
Statute Safe Harbor set out at 42 CFR 1001.952(ii).
    As stated previously, TEAM participants may choose to provide in-
kind engagement incentives, which may include but not be limited to 
items of technology, to TEAM beneficiaries in an episode, subject to 
the following proposed conditions. We proposed at (89 FR 36461) that 
the incentive must be provided directly by the TEAM participant or by 
an agent of the TEAM participant under their direction and control to 
the TEAM beneficiary during an episode. Additionally, we proposed that 
the item or service provided must be reasonably connected to the TEAM 
beneficiary's medical care and be a preventive care item or service or 
an item of service that advances a clinical goal, as described in 
section X.A.3.g.(7)(b) of the preamble of this final rule, by engaging 
the TEAM beneficiary in better managing their own health. We sought 
comment on the proposed conditions for TEAM beneficiary incentives, as 
outlined in 512.575. Specifically, we sought comment on whether these 
proposed conditions are reasonable, and whether additional conditions 
are appropriate to further engage TEAM beneficiaries in their own 
healthcare management while preventing fraud or abuse.
    The following is a summary of the public comments received on this 
proposal and our response to those comments.
    Comment: Many commenters supported the proposed beneficiary 
incentives aimed at encouraging adherence to recommended treatments and 
improving patient engagement in recovery. The commenters highlighted 
the benefits of such incentives in managing health, preventing disease 
development, and addressing health-related social needs, such as 
transportation to medical appointments. These incentives are seen as 
particularly beneficial for historically underserved populations by 
directly supporting chronic care management and promoting equitable 
outcomes.
    Additionally, commenters suggested that beneficiary incentives in 
the model should align with its clinical aims. Commenters suggested 
that CMS consider adding flexibilities for TEAM participants to provide 
limited financial assistance, such as cost-sharing for non-opioid 
prescriptions, to further promote adherence to drug regimens, reduce

[[Page 69822]]

opioid misuse, adhere to care plans and reduce complications. 
Commenters also recommend that TEAM participants seek direct input from 
beneficiaries on needed items or services to advance shared clinical 
goals.
    Response: We appreciate the feedback and support regarding the 
proposed beneficiary incentives. We appreciate the recognition of these 
incentives' potential to enhance adherence to recommended treatments, 
manage health conditions, and address health-related social needs, 
particularly for historically underserved populations.
    We value the suggestion to add flexibilities for TEAM participants 
to provide limited financial assistance, such as cost-sharing for non-
opioid prescriptions. This aligns with our goal of promoting adherence 
to drug regimens and care plans while reducing the risk of opioid 
misuse and potential complications. We will consider this 
recommendation and its alignment with the clinical aims of TEAM.
    Additionally, we acknowledge the importance of seeking direct input 
from beneficiaries on needed items or services that would advance 
shared clinical goals. We will explore mechanisms to incorporate 
beneficiary feedback to ensure that the incentives provided meet their 
specific needs and enhance their engagement in care.
    The commenters' insights are valuable as we refine TEAM to achieve 
better health outcomes and equitable care for all beneficiaries. We are 
finalizing this proposal without modification; however, we will take 
these recommendations into consideration in future rulemaking.
    Comment: A commenter supported the proposed beneficiary incentives 
designed to encourage adherence to recommended treatments and promote 
beneficiary engagement in recovery.
    Response: We appreciate the commenter's support of the proposed 
beneficiary incentives aimed at encouraging adherence to recommended 
treatments and promoting beneficiary engagement in recovery. We 
appreciate the commenter's feedback and will continue to develop 
strategies that enhance patient participation and improve health 
outcomes.
    After consideration of the public comments received, we are 
finalizing our proposals for the TEAM beneficiary incentives as 
proposed in our regulation at Sec.  512.575. Therefore, as discussed in 
section X.A.3.g.(9) of the preamble of this final rule and since these 
proposed beneficiary incentives are finalized, we are making the 
determination that the Anti-Kickback Statute Safe Harbor for CMS-
sponsored model patient incentives (42 CFR 1001.952(ii)) is available. 
This Safe Harbor will protect the beneficiary incentives finalized in 
this section when the incentives are offered in compliance with the 
requirements established in the final rule and the conditions for use 
of the Anti-Kickback Statute Safe Harbor set out at 42 CFR 
1001.952(ii).
(a) Technology Provided to a TEAM Beneficiary
    In some cases, items or services involving technology may be useful 
as beneficiary engagement incentives that can advance a clinical goal 
of TEAM by engaging a beneficiary in managing their health during the 
30 days following discharge from the anchor hospitalization or anchor 
procedure. However, we believe specific enhanced safeguards are 
necessary for these items and services to prevent abuse, and our 
proposals are consistent with the CJR model policies (80 FR 73437). 
Specifically, we proposed at (89 FR 36461) that items or services 
involving technology provided to a beneficiary may not exceed $1,000 in 
retail value for any TEAM beneficiary in any episode (per episode), and 
that items or services involving technology provided to a TEAM 
beneficiary must be the minimum necessary to advance a clinical goal as 
discussed in this section for a TEAM beneficiary in an episode. We 
proposed additional enhanced requirements for items of technology 
exceeding $75 in retail value as an additional safeguard against misuse 
of these items as beneficiary engagement incentives. Specifically, we 
proposed that these items of technology that exceed $75 in retail value 
remain the property of the TEAM participant and be retrieved from the 
TEAM beneficiary at the end of the episode. As proposed, the TEAM 
participant must document all retrieval attempts, including the 
ultimate date of retrieval. We understand that TEAM participants may 
not always be able to retrieve these items after the episode ends, such 
as when a TEAM beneficiary dies or moves to another geographic area. 
Therefore, in cases when the item of technology is not able to be 
retrieved, we proposed that the TEAM participant must determine why the 
item was not retrievable and if it was determined that the item was 
used inappropriately (if it were sold, for example) preventing future 
beneficiary incentives for that TEAM beneficiary. Following this 
proposed process, the documentation of diligent, good faith attempts to 
retrieve items of technology will be deemed to meet the retrieval 
requirement.
    Our proposals for enhanced requirements for technology provided to 
TEAM beneficiaries as beneficiary engagement incentives under TEAM are 
included in proposed Sec.  512.575. We sought comment on our proposed 
requirements for beneficiary engagement incentives that involve 
technology. Additionally, we sought comment on the types of technology 
that may be useful to advance the goals of the model. We welcomed 
comment on additional or alternative program integrity safeguards for 
this type of beneficiary engagement incentive, including whether the 
financial thresholds proposed in this section are reasonable, 
necessary, and appropriate.
    The following is a summary of the public comments received on this 
proposal and our response to those comments.
    Comment: A commenter stated their belief that TEAM incentives for 
innovative and effective medical technology can significantly benefit 
patients with comorbidities or risk factors. These incentives would 
enable hospitals to enhance monitoring and management throughout 
surgical episodes, leading to more efficient care.
    Response: We appreciate the commenter's insight regarding the 
impact of TEAM incentives for innovative medical technology, especially 
for patients with comorbidities or other risk factors. CMS acknowledges 
that such incentives can play a crucial role in improving monitoring 
and management throughout surgical episodes. We are committed to 
integrating these considerations into future models to support 
hospitals in providing efficient, high-quality care. This feedback 
helps us ensure that our programs effectively address the needs of 
diverse patient populations and enhance overall care outcomes.
    After consideration of the public comments we received, we are 
finalizing our proposals for technology provided to a TEAM beneficiary 
as proposed in our regulation at Sec.  512.575.
(b) Clinical Goals of TEAM
    As discussed in section X.A.3.b. of the preamble of this final 
rule, the proposed episodes are broadly defined to include most Part A 
and Part B items and services furnished during episodes of care that 
extend 30 days following discharge from the anchor hospitalization or 
anchor procedure that begins the episode. Therefore, we believe that 
in-kind beneficiary engagement incentives may appropriately be provided 
for managing acute conditions arising from episodes, as well as chronic 
conditions if the

[[Page 69823]]

condition is likely to have been affected by care during the episode or 
when substantial services are likely to be provided for the chronic 
condition during the episode. We proposed at (89 FR 36462) to allow 
TEAM participants to offer in-kind beneficiary engagement incentives, 
where such incentives must be closely related to the provision of high-
quality care and advance a clinical goal for a TEAM beneficiary and 
should not serve as inducements for TEAM beneficiaries to seek care 
from the TEAM participants or other specific suppliers and providers. 
We proposed that beneficiary incentives must advance one of the 
following clinical goals of TEAM:
     Beneficiary adherence to drug regimens.
     Beneficiary adherence to a care plan.
     Reduction of readmissions and complications resulting from 
treatment during the episode.
     Management of chronic diseases and conditions that may be 
affected by treatment for the TEAM clinical condition.
    Our proposals for beneficiary engagement incentives are included in 
Sec.  512.575. We sought comment on our proposed clinical goals of 
TEAM, as well as whether the advancement of additional or different 
clinical goals through beneficiary engagement incentives may better 
advance the overarching goals of TEAM while maintaining appropriate 
program integrity safeguards.
    We received no comments on these proposals and are finalizing these 
proposals as proposed without modification in our regulation at Sec.  
512.575.
(c) Documentation of Beneficiary Engagement Incentives
    As a program safeguard against misuse of beneficiary engagement 
incentives under TEAM, we proposed that TEAM participants must maintain 
documentation of items and services furnished as beneficiary engagement 
incentives that exceed $25 in retail value including items of 
technology. In addition, we proposed at (89 FR 36462) to require that 
the documentation established contemporaneously with the provision of 
the items and services must include at least the following:
     The date the incentive is provided.
     The incentive and estimated value of the item or service.
     The identity of the beneficiary to whom the item or 
service was provided.
    We further proposed that the documentation regarding items of 
technology exceeding $75 in retail that are required to be retrieved 
from the beneficiary at the end of an episode must also include 
contemporaneous documentation of any attempt to retrieve technology. In 
instances where the item of technology is not able to be retrieved, we 
proposed that the TEAM participant must determine why it is not 
retrievable, and if the item were misappropriated (if it were sold, for 
example), then further steps must be taken to ensure that TEAM 
beneficiary does not receive further TEAM beneficiary incentives. 
Following this proposed process, documented, diligent, good faith 
attempts to retrieve items of technology will be deemed to meet the 
retrieval requirement.
    Finally, we proposed that the TEAM participant must retain and 
provide access to the required documentation in accordance with Sec.  
512.586.
    We sought comment on our proposed documentation requirements, 
including whether additional or different documentation requirements 
may provide better program integrity safeguards.
    The following is a summary of the public comments received on this 
proposal and our response to those comments.
    Comment: Several commenters express concerns that the enhanced 
documentation requirements for items of technology exceeding $75 in 
retail value will be burdensome for TEAM participants. They highlight 
that the requirement for TEAM participants to determine why an item was 
not retrievable may be impractical or impossible to meet. Commenters 
suggest CMS finalize the regulation without this requirement and 
consider raising the cost threshold above $75 for enhanced 
requirements. Additionally, some commenters are concerned that these 
documentation requirements could disincentivize the provision of 
beneficiary incentives and place an undue burden on both providers and 
patients. They recommend increasing the minimum retail value price 
threshold for items requiring documentation and retrieval to reduce 
administrative overhead and the burden on patients and caregivers.
    Response: We thank the commenter for their feedback regarding the 
enhanced documentation requirements for beneficiary incentives, 
particularly for items of technology exceeding $75 in retail value. We 
understand the concerns about the potential burdens these requirements 
may place on TEAM participants, providers, and patients.
    We have carefully considered the suggestion to finalize Sec.  
512.575 without the requirement to determine why an item was not 
retrievable and to raise the cost threshold above $75 for enhanced 
requirements. We also have considered the recommendation to increase 
the minimum retail value price threshold for items requiring 
documentation and retrieval to reduce administrative overhead.
    However, these requirements are in alignment with other CMS 
policies, such as those found in CJR, on cost thresholds for 
beneficiary incentives. We understand it is important to reduce burden 
and remove barriers to using such incentives. Our goal is to ensure 
that beneficiary incentives effectively support patient care and 
engagement without imposing unnecessary burdens on providers or 
patients. We are finalizing this policy as proposed. However, we 
appreciate these insights and will take them into account in future 
rulemaking cycles, as we continue to refine TEAM's documentation 
requirements to strike the right balance between program integrity and 
practical implementation.
    Comment: A commenter recommended that CMS add a non-scored PI 
measure to record participation in the data collection process of the 
Insights Measure reporting. This would incentivize hospitals and 
providers to contribute, helping ONC gain statistically useful and 
meaningful data. It is the commenter's opinion that including a Yes/No 
measure for provider participation in the Insights Measures program 
would likely encourage behavior that helps HHS achieve its goals.
    Response: We thank the commenter for this valuable recommendation. 
We appreciate these insights on adding a non-scored PI measure to 
record participation in the data collection process of the Insights 
Measure reporting. The suggestion to include a Yes/No measure for 
provider participation to incentivize cooperation and help achieve HHS 
goals is noted. We will take it into consideration in future 
rulemaking.
    Comment: A commenter suggested that beyond the proposed 
documentation requirements, CMS should establish data collection 
mandates to test the effectiveness of incentives on healthcare outcomes 
like hospital readmissions and patient experience, specifically 
beneficiary adherence to care plans. They recommended that this data be 
analyzed by demographic groups to design more effective incentive 
programs, especially for underserved populations.
    Response: We appreciate the commenter's suggestion to enhance data

[[Page 69824]]

collection to assess the effectiveness of TEAM incentives on healthcare 
outcomes and patient experience. We agree that such data, especially 
when analyzed by demographic groups, is crucial for informing and 
refining beneficiary incentive programs. CMS is committed to exploring 
ways to incorporate these recommendations to better serve all 
populations, particularly those that are underserved. We are finalizing 
this proposal as proposed. However, in future rulemaking cycles and as 
we continue to refine the model, we will consider the inclusion of 
additional data collection requirements to measure the impact of 
incentives on hospital readmissions, adherence to care plans, and other 
health outcomes. This feedback is valuable in helping us improve the 
design and implementation of TEAM to achieve equitable and high-quality 
care for all beneficiaries. We will take this comment into 
consideration in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposals for the documentation of beneficiary 
engagement incentives as proposed in our regulation at Sec.  512.575.
(8) Enforcement Authority
    OIG authority is not limited or restricted by the provisions of the 
model, including the authority to audit, evaluate, investigate, or 
inspect the TEAM participant, TEAM collaborators, collaboration agents, 
downstream collaboration agents, or any other person or entity or their 
records, data, or information, without limitations. Additionally, as 
proposed, no model provisions limit or restrict the authority of any 
other Government Agency to do the same.
    The proposals for enforcement authority under the model are 
included in Sec.  512.150(e). We sought comment about all of the 
requirements set out in the preceding discussion, including whether 
additional or different safeguards would be needed to ensure program 
integrity, protect against abuse, and ensure that the goals of the 
model are met.
    We received no comments on these proposals. These proposals are 
finalized at Sec.  512.150(e).
(9) Fraud and Abuse Waiver and OIG Safe Harbor Authority
    Under section 1115A(d)(1) of the Act, the Secretary may waive such 
requirements of Titles XI and XVIII and of sections 1902(a)(1), 
1902(a)(13), 1903(m)(2)(A)(iii) of the Act, and certain provisions of 
section 1934 of the Act as may be necessary solely for purposes of 
carrying out section 1115A of the Act with respect to testing models 
described in section 1115A(b) of the Act.
    For this model and consistent with the authority under section 
1115A(d)(1) of the Act, the Secretary may consider issuing waivers of 
certain fraud and abuse provisions in sections 1128A, 1128B, and 1877 
of the Act. No fraud or abuse waivers are being issued in this 
document; fraud and abuse waivers, if any, would be set forth in 
separately issued documentation. Any such waiver would apply solely to 
TEAM and could differ in scope or design from waivers granted for other 
programs or models. Thus, not withstanding any provision of this final 
rule, TEAM participants, TEAM collaborators, collaboration agents, and 
downstream collaboration agents must comply with all applicable laws 
and regulations, except as explicitly provided in any such separately 
documented waiver issued pursuant to section 1115A(d)(1) of the Act 
specifically for TEAM.
    At proposed Sec.  512.576, we proposed to make the Federal Anti-
Kickback Statute Safe Harbor for CMS-sponsored model arrangements 
available to protect remuneration furnished in TEAM in the form of the 
sharing arrangement's gainsharing payments and alignment payments, the 
distribution arrangement's distribution payments, and the downstream 
distribution arrangement's distribution payments provided that all of 
the financial arrangements associated with such payment meet all safe 
harbor requirements set forth in 42 CFR 1001.952(ii), proposed Sec.  
512.565, proposed Sec.  512.568, and proposed Sec.  512.570. We 
considered, but did not propose, adopting an alternative approach in 
which the availability of the safe harbor for a specific type of 
financial arrangement would only be conditioned on compliance with the 
specific requirements for that type of financial arrangement and the 
compliance of the other financial arrangements associated with such 
payment would not implicate the availability of the safe harbor. For 
example, we considered, but did not propose, an alternative proposal 
making the availability of the safe harbor for the sharing 
arrangement's gainsharing payments only conditioned on compliance with 
the requirements associated with that type of financial arrangement and 
not also conditioned on the compliance of a downstream financial 
arrangement associated with such payment.
    In the proposed rule at (89 FR 36463), we considered not allowing 
use of the safe harbor provisions. However, we decided that use of the 
safe harbor will encourage the goals of the model. We believe that a 
successful model requires integration and coordination among TEAM 
participants and other health care providers and suppliers. We believe 
the use of the safe harbor will encourage and improve beneficiary 
experience of care and coordination of care among providers and 
suppliers. We also believe this safe harbor offers flexibility for 
innovation and customization. The safe harbor allows for emerging 
arrangements that reflect up-to-date understandings in medicine, 
science, and technology.
    We sought comment on this proposal, including that the Anti-
Kickback Statue Safe Harbor for CMS-sponsored model arrangements (42 
CFR 1001.952(ii)(1)) and CMS-sponsored model patient incentives (42 CFR 
1001.952(ii)(2)) be available to TEAM participants and TEAM 
collaborators, collaboration agents, and downstream collaboration 
agents. After reviewing the public comments, we are finalizing that, in 
addition to or in lieu of a waiver of certain fraud and abuse 
provisions in sections 1128A and 1128B of the Act, the Anti-Kickback 
Statute (AKS) Safe Harbor for CMS-sponsored model arrangements and CMS-
sponsored model patient incentives (42 CFR 1001.952(ii) (1) and 42 CFR 
1001.952(ii)(2)) is available to protect remuneration exchanged 
pursuant to certain financial arrangements and patient incentives that 
may be permitted under the final rule. Specifically, in this final 
rule, we have determined that the CMS-sponsored models safe harbor is 
available to protect the following financial arrangements and 
incentives: the TEAM sharing arrangement's gainsharing payments and 
alignment payments, the distribution arrangement's distribution 
payments with TEAM collaborators and collaboration agents, the 
downstream distribution arrangements and downstream distribution 
payments with collaboration agents and downstream collaboration agents, 
and TEAM beneficiary incentives. We summarize and respond to public 
comments received on this proposal below.
    The following is a summary of the public comments received on this 
proposal and our response to those comments.
    Comment: Many commenters urge CMS to ensure that TEAM's policies 
align with the physician self-referral law and Anti-Kickback Statute 
(AKS) Safe Harbor related to arrangements that facilitate value-based 
health care delivery and payment finalized in 2020. There is a call for 
greater clarity and

[[Page 69825]]

education on the types of arrangements and flexibilities allowed under 
these exceptions and safe harbor, as providers are uncertain about 
compliance, risking penalties or exclusion from federal programs.
    Commenters emphasized the need for CMS and the Office of Inspector 
General (OIG) to provide fraud and abuse waivers and clear guidance to 
support TEAM participants and collaborators. Commenters noted the 
complexity of applying the fraud and abuse legal framework to new 
models like TEAM and recommended maximum security for participants to 
minimize compliance risks. A commenter stated that modernizing legal 
barriers, such as the Anti-Kickback Statute and physician self-referral 
law, is necessary to permit value-based contracts for drugs and devices 
structured as product/service guarantees or risk-sharing arrangements.
    Response: We thank the commenter for this feedback regarding the 
alignment of TEAM's policies with the physician self-referral law 
exceptions and Anti-Kickback Statute (AKS) Safe Harbor related to the 
arrangements that facilitate value-based health care delivery and 
payment, as well as the concerns about compliance and the preparation 
required for TEAM. No fraud and abuse waivers are being issued for TEAM 
and we believe we have provided clarity in this final rule for 
participants to meet the requirements of an applicable exception under 
the physician self-referral law and an applicable AKS safe harbor. We 
appreciate these comments and suggestions for ensuring clear guidance 
and support for TEAM participants and collaborators.
    After consideration of the public comments we received, we are 
finalizing our proposals as proposed in our regulation at Sec.  521.576 
for TEAM participants, TEAM collaborators, collaboration agents, and 
downstream collaboration agents to comply with all applicable laws and 
regulations, except as explicitly provided in any such separately 
documented waiver issued pursuant to section 1115A(d)(1) of the Act 
specifically for TEAM without modification. We again note that no fraud 
and abuse waivers are being finalized in this rule.
h. Waivers of Medicare Program Requirements
(1) Overview
    We believe it may be necessary and appropriate to provide 
flexibilities to hospitals participating in TEAM, as well as other 
providers and suppliers that furnish services to beneficiaries in 
episodes. The purpose of such flexibilities would be to increase 
episode quality, decrease episode spending or internal costs, or both 
of providers and suppliers, resulting in better, more coordinated care 
for beneficiaries and improved financial efficiencies for Medicare, 
providers, and beneficiaries. These possible additional flexibilities 
could include use of our waiver authority under section 1115A of the 
Act, which provides authority for the Secretary to waive such 
requirements of title XVIII of the Act as may be necessary solely for 
purposes of carrying out section 1115A of the Act with respect to 
testing models described in section 1115A(b) of the Act. This provision 
affords broad authority for the Secretary to waive statutory Medicare 
program requirements as necessary to carry out the provisions of 
section 1115A of the Act.
    As we have stated elsewhere in section X.A.2.c. of the preamble of 
this final rule, our previous and current efforts in testing episode 
payment models have led us to believe that models where entities bear 
financial responsibility for total Medicare spending for episodes of 
care hold the potential to incentivize the most substantial 
improvements in episode quality and efficiency. As discussed in section 
X.A.3.a.(3) of the preamble of this final rule, we proposed that TEAM 
participants participating in Track 1 of this model be eligible for 
reconciliation payment amounts based on spending and quality 
performance in PY 1. TEAM participants in Track 2 would be eligible for 
repayment amounts and reconciliation payment amounts starting in PY 2, 
while TEAM participants in Track 3 are eligible for repayment amounts 
and reconciliation payment amounts starting in PY 1. We believe that 
where TEAM participants bear financial accountability for excess 
episode spending beyond the reconciliation target price while high 
quality care is valued, they will have an increased incentive to 
coordinate care furnished by the hospital and other providers and 
suppliers throughout the episode to improve the quality and efficiency 
of care. With these incentives present, there may be a reduced 
likelihood of over-utilization of services that could otherwise result 
from waivers of Medicare program rules. Given these circumstances, 
waivers of certain program rules for providers and suppliers furnishing 
services to TEAM beneficiaries may be appropriate to offer more 
flexibility than under existing Medicare rules for such providers and 
suppliers, so that they may provide appropriate, efficient care for 
beneficiaries. An example of such a program rule that could be waived 
to potentially allow more efficient inpatient episodes would be the 3-
day inpatient hospital stay requirement prior to a covered skilled 
nursing facility (SNF) stay for beneficiaries who could appropriately 
be discharged to a SNF after less than a 3-day inpatient hospital stay. 
This type of waiver was implemented in a range of previous and existing 
CMS initiatives, including various episode-based payment models and 
accountable care initiatives.
    We welcomed comments on possible waivers under section 1115A of the 
Act of certain Medicare program rules beyond those specifically 
discussed in the proposed rule that might be necessary to test this 
model. We will consider the comments that were received during the 
public comment period and may make future proposals regarding program 
rule waivers during the course of the model test if we determine that 
the additional flexibilities afforded by these waivers would be 
appropriate and beneficial to the model test. We were especially 
interested in comments explaining how such waivers could provide 
providers and suppliers with additional flexibilities that are not 
permitted under existing Medicare rules to increase quality of care and 
reduce unnecessary episode spending, but that could be appropriately 
used in the context of TEAM where TEAM participants bear full 
responsibility for total episode spending.
    The following is a summary of the public comments we received on 
additional waivers of Medicare program rules beyond those specifically 
discussed in the proposed rule and our responses to those comments:
    Comment: Many commenters suggested that we consider additional 
Medicare policy waivers beyond those which we proposed or considered 
for TEAM.
    A few commenters suggested that we waive patient cost-sharing for 
certain services provided to TEAM beneficiaries. A couple of commenters 
cited the precedent for waiving patient-cost sharing in ACO REACH, 
indicating that this provision could improve access for patients with 
health-related social needs (HRSNs). A commenter suggested that we 
waive co-pays for telehealth visits.
    A couple commenters recommended that we consider coverage of 
transportation costs for medical care.
    A commenter suggested that we waive the requirement for physician 
certification of an outpatient physical

[[Page 69826]]

therapy plan of care for TEAM beneficiaries. The commenter indicated 
that this requirement imposes an administrative burden on physical 
therapists and physicians and represents a barrier to initiating care. 
The commenter suggested that CMS accept the presence of an order or 
referral on file and the delivery of a physical therapy plan of care to 
the treating physician as satisfying the requirement for physician 
review of the plan of care, removing the requirement for a physician 
signature.
    A commenter recommended that we include a waiver which would 
authorize nurse practitioners to order cardiac rehabilitation, noting 
the precedent for such a waiver in the ACO Realizing Equity, Access, 
and Community Health (REACH) and the planned States Advancing All-Payer 
Equity Approaches and Development (AHEAD) Models. The commenter cited 
CABG as a qualifying condition for cardiac rehabilitation and suggested 
that permitting nurse practitioners to order cardiac rehabilitation for 
TEAM beneficiaries would contribute to care coordination efforts under 
TEAM and improve access to cardiac rehabilitation.
    A commenter recommended that TEAM episodes which do not qualify 
toward the compliance threshold for the IRF ``60 Percent Rule''--that 
is, episodes that do not fall under the 13 conditions listed in Sec.  
412.29(b)(2) which must encompass at least 60 percent of an IRF's total 
inpatient population in order for the IRF to be classified for Medicare 
IRF payment--be excluded from an IRF's ``60 Percent Rule'' calculations 
altogether. The commenter indicated that the incentive for TEAM 
participants to reduce costs would eliminate the need for the ``60 
Percent Rule'' to limit utilization and suggested that not waiving this 
rule for TEAM beneficiaries could limit the provision of IRF services 
as deemed appropriate by the TEAM participant.
    A commenter recommended that we consider waiving the initiation of 
care regulations for home health, specifically requesting that therapy 
staff be permitted to initiate home health services in situations where 
both therapy and nursing are required under the home health plan of 
care. The commenter suggested that waiving this requirement under TEAM 
could promote access to care and care coordination.
    A commenter requested that we include waivers in TEAM that match 
the waivers offered under the Medicare Advantage (MA) Value-Based 
Insurance Design (VBID) Model.
    A commenter requested that we offer a waiver allowing TEAM 
participants the flexibility to negotiate alternative payment rates and 
structures with PAC providers.
    A commenter requested that we consider flexible options for 
organizations to provide insurance coverage for home health services 
including increased custodial home health aides, home care, home 
nursing, and home therapy.
    A commenter suggested that CMS cover up to two weeks of respite 
care for patients whose condition necessitates medication and pain 
management but does not allow for intensive therapies.
    A commenter suggested that we consider increased coverage of daily 
wound care in situations where receiving such care would allow patients 
to return home rather than staying in a hospital or institutional PAC 
setting.
    A commenter encouraged us to consider potential episode-specific 
waivers for TEAM. The commenter suggested that waivers should be 
focused on enabling participants to provide stable transitions of care 
and timely post-discharge follow-up.
    Response: We thank the commenters for their suggestions for 
additional waivers and appreciate the information provided on the 
potential benefits of these waivers for TEAM participants and 
beneficiaries. As discussed in the proposed rule, we will consider the 
comments we received during the public comment period and our early 
model implementation experience, including experience in specific 
episodes, and may propose additional waivers for TEAM in future 
rulemaking.
    Comment: A few commenters requested that CMS offer a waiver of 
beneficiary inducements to allow TEAM participants to conduct pre-
surgical home visits. These commenters suggested that allowing such 
home visits before surgery would permit participants to proactively 
assess a patient's home environment and potentially make structural 
modifications, thereby improving the patient's chances of successful 
recovery at home. A couple of the commenters suggested that a 
beneficiary inducements waiver could reduce reliance on inpatient or 
SNF settings that present high costs and infection risk. A commenter 
offered the inclusion of a beneficiary inducement waiver in the Guiding 
an Improved Dementia Experience (GUIDE) Model as an example.
    Response: We thank the commenters for their recommendation to 
include a beneficiary inducement waiver for pre-surgical home visits. 
We recognize the potential benefit to beneficiaries of environmental 
assessment and modification prior to surgery. However, we feel that 
this potential benefit must be balanced against the protection of 
beneficiary freedom of choice through the restriction of beneficiary 
inducements as defined in section 1128A(i)(6) of the Act. At this time 
and considering the clinical episodes proposed under TEAM and the 
precedents set in BPCI Advanced and CJR, we do not believe that the 
potential benefits of waiving beneficiary inducement rules outweigh the 
potential harms. We will monitor patient outcomes and PAC utilization 
throughout the model test and may consider additional waivers in future 
rulemaking.
    Comment: Some commenters sought greater standardization of waivers 
and their requirements across models. A few commenters recommended that 
CMS establish a core standard set of waivers across all Medicare APMs. 
These commenters suggested that standardizing waiver offerings across 
models could ease administrative and compliance burdens and thereby 
motivate greater waiver utilization. A commenter recommended that CMS 
use the same guidelines for the SNF 3-day rule waiver under TEAM as are 
used in the corresponding waiver under MSSP, suggesting that consistent 
guidelines would benefit participants.
    Response: We thank the commenters for their suggestions to 
establish a standard set of waivers across CMS APMs and to standardize 
waiver usage requirements across models. We recognize the 
administrative burden of billing for Medicare program waivers and the 
benefit of consistency for providers participating in multiple payment 
models either concurrently or successively. The proposed TEAM waivers 
of the SNF 3-day rule and the geographic site requirements and 
originating site requirements were included in the proposed rule with 
this consistency in mind. TEAM is designed to build upon progress made 
and lessons learned from BPCI Advanced and CJR in value-based care for 
Medicare beneficiaries undergoing surgery. We recognize that many TEAM 
participants will have experience coordinating and delivering care--
including telehealth and SNF services--under these models. Thus, we 
proposed provisions for the applicable waivers in TEAM that we expect 
will be familiar to providers with experience in BPCI Advanced and/or 
CJR. Still, in recognition of the expected range of value-based care 
and APM experience

[[Page 69827]]

among TEAM participants and consistent with learning system offerings 
in BPCI Advanced and CJR, we plan to provide informational support to 
TEAM participants, including support geared toward new or less 
experienced participants, regarding model provisions such as Medicare 
policy waivers.
    We also note that internal efforts at CMS are underway to identify, 
analyze, and compare Medicare payment policy waiver utilization across 
models. In line with the intention of offering such flexibilities to 
APM participants under section 1115A of the Act, we share the goal of 
facilitating providers' use of the proposed waivers to deliver 
efficient and high-quality care to beneficiaries. As stated in the 
proposed rule at 89 FR 36463, we will consider public comments on the 
proposed waivers and may make future proposals regarding program rule 
waivers during the course of the model test.
    Comment: A few commenters requested that CMS further expand the 
waivers offered to TEAM participants in general.
    Response: We thank the commenters for their suggestions. We plan to 
monitor utilization, spending, quality, and outcome trends throughout 
the model test and may consider additional waivers in future 
rulemaking.
    Comment: A commenter suggested that we consider providing coverage 
for counseling services for patients and their families.
    Response: We thank the commenter for the suggestion to cover 
counseling services for patients and their families. We direct the 
commenter's attention to the scope of included services under TEAM as 
defined in Sec.  512.525(e) to include all Medicare Part A and B items 
and services except as excluded under Sec.  512.525(f). Thus, Medicare 
Part B services included and covered in TEAM episodes would include 
certain counseling and mental health services, including family 
counseling if the main purpose is to help with the beneficiary's 
treatment.
    We address the Medicare programmatic waivers we proposed in the 
proposed rule in the following sections. We decline at this time to 
waive any additional Medicare programmatic requirements. We will review 
the information provided by the commenters and our early model 
experience and may consider waiving additional requirements during the 
course of the model test.
    Specific program rules for which we proposed waivers under TEAM to 
support provider and supplier efforts to increase quality and decrease 
episode spending and for which we invited comments are included in the 
sections that follow. We proposed that these waivers of program rules 
would apply to the care of beneficiaries who are in episodes at the 
time when the waiver is used to bill for a service that is furnished to 
the beneficiary, even if the episode is later cancelled as described in 
section X.A.3.b.(5)(e) of the preamble of this final rule. Finally, we 
proposed that if a service is found to have been billed and paid by 
Medicare under circumstances only allowed by a program rule waiver for 
a beneficiary not in TEAM at the time the service was furnished, CMS 
would recover payment for that service from the provider or supplier 
who was paid, and require that provider and supplier to repay the 
beneficiary for any coinsurance previously collected.
(2) Post-Discharge Home Visits and Homebound Requirement
    We expect that the broadly defined episodes with a duration of 30 
days following an anchor hospitalization or anchor procedure discharge, 
as discussed in section X.A.3.b. of the preamble of this final rule, 
would result in TEAM participants redesigning care by increasing care 
coordination and management of beneficiaries following discharge from 
an anchor hospitalization or anchor procedure. This result would 
require TEAM participants to pay close attention to any underlying 
medical conditions that could be affected by the anchor hospitalization 
or anchor procedure and improving coordination of care across care 
settings and providers. Beneficiaries may have mobility limitations 
during certain episodes following discharge to their home or place of 
residence that may interfere with their ability to travel easily to 
physicians' offices or other health care settings. Increasing 
beneficiary adherence to and engagement with recommended treatment and 
follow-up care following discharge from the hospital or PAC setting 
would be important to high quality episode care. Evidence exists to 
support the use of home visits among Medicare beneficiaries in 
improving clinical outcomes and reducing readmissions following 
hospital discharge.1004 1005 In addition, we believe the 
financial incentives in TEAM would encourage hospitals to closely 
examine the most appropriate PAC settings for beneficiaries, taking 
into consideration beneficiary choice and location of beneficiary home 
or place of residence, so that the clinically appropriate setting of 
the lowest acuity is recommended following discharge from the anchor 
hospitalization or anchor procedure. We expect that all these 
considerations would lead to greater interest on the part of hospitals 
and other providers and suppliers caring for TEAM beneficiaries in 
furnishing services to beneficiaries in their home or place of 
residence. Such services could include visits by licensed clinicians 
other than physicians and nonphysician practitioners.
---------------------------------------------------------------------------

    \1004\ Nabagiez, J.P., Shariff, M.A., Khan, M.A., Molloy, W.J., 
& McGinn, J.T. (2013). Physician assistant home visit program to 
reduce hospital readmissions. The Journal of Thoracic and 
Cardiovascular Surgery, 145(1), 225-233. https://doi.org/10.1016/j.jtcvs.2012.09.047.
    \1005\ Hall, M.L., Esposito, G., Pekmezaris, R., Lesser, M., 
Moravick, D., Jahn, L., Blenderman, R., Akerman, M., Nouryan, C., & 
Hartman, A.R. (2014). Cardiac surgery nurse practitioner home visits 
prevent coronary artery bypass graft readmissions. The Annals of 
Thoracic Surgery, 97(5), 1488-1495. https://doi.org/10.1016/j.athoracsur.2013.12.049.
---------------------------------------------------------------------------

    In order for Medicare to pay for home health services, a 
beneficiary must be determined to be ``home-bound'' Specifically, 
sections 1835(a) and 1814(a) of the Act require that a physician 
certify (and recertify) that in the case of home health services under 
the Medicare home health benefit, such services are or were required 
because the individual is or was ``confined to the home'' and needs or 
needed skilled nursing care on an intermittent basis, or physical or 
speech therapy or has or had a continuing need for occupational 
therapy. A beneficiary is considered to be confined to the home if the 
beneficiary has a condition, due to an illness or injury, that 
restricts his or her ability to leave home except with the assistance 
of another individual or the aid of a supportive device (that is, 
crutches, a cane, a wheelchair or a walker) or if the beneficiary has a 
condition such that leaving his or her home is medically 
contraindicated. While a beneficiary does not have to be bedridden to 
be considered confined to the home, the condition of the beneficiary 
must be such that there exists a normal inability to leave home and 
leaving the home requires a considerable and taxing effort by the 
beneficiary. Absent this condition, it would be expected that the 
beneficiary could typically get the same services in an outpatient or 
other setting. Thus, the homebound requirement provides a way to help 
differentiate between patients that require medical care at home versus 
patients who could more appropriately receive care in a less costly 
outpatient setting. Additional information regarding the homebound 
requirement is available in the Medicare Benefit Manual (Pub 100-02); 
Chapter 7, ``Home

[[Page 69828]]

Health Services,'' Section 30.1.1, ``Patient Confined to the Home.''
    We considered whether a waiver of the homebound requirement would 
be appropriate under TEAM. Waiving the homebound requirement would 
allow additional beneficiaries to receive home health care services in 
their home or place of residence. As previously discussed, physician 
certification that a beneficiary meets the homebound requirement is a 
prerequisite for Medicare coverage of home health services, and waiving 
the homebound requirement could result in lower episode spending in 
some instances. For example, if a beneficiary is allowed to have home 
health care visits, even if the beneficiary is not considered 
homebound, the beneficiary may avoid a hospital readmission. All other 
requirements for the Medicare home health benefit would remain 
unchanged. Thus, under such a waiver, only beneficiaries who otherwise 
meet all program requirements to receive home health services would be 
eligible for coverage of home health services without being homebound.
    However, we did not propose to waive the homebound requirement 
under TEAM for several reasons. Based on the typical clinical course of 
beneficiaries after certain surgical procedures, we believe that many 
beneficiaries would meet the homebound requirement for home health 
services immediately following discharge from the anchor 
hospitalization or following discharge to their home or place of 
residence from a SNF that furnished PAC services immediately following 
the hospital discharge, so they could receive medically necessary home 
health services under existing program rules. Home health agencies 
(HHAs) are paid a national, standardized 30-day period payment rate if 
a period of care meets a certain threshold of home health visits. 30-
day periods of care that do not meet the visit threshold are paid a 
per-visit payment rate for the discipline providing care. For those 
TEAM beneficiaries who could benefit from home visits by a licensed 
clinician for purposes of assessment and monitoring of their clinical 
condition, care coordination, and improving adherence with treatment 
but who are not homebound, we do not believe that paying for these 
visits as home health services under Medicare is necessary or 
appropriate, especially given that Medicare payments for home health 
services are set based on the clinical care furnished to beneficiaries 
who are truly homebound. Finally, in other CMS episode payment models, 
such as BPCI Advanced and CJR, we have not waived the homebound 
requirement for home health services.
    In the BPCI Advanced and CJR models, we have provided a waiver of 
the ``incident to'' rule to allow a physician or nonphysician 
practitioner participating in care redesign under a participating 
provider to bill for services furnished to a beneficiary who does not 
qualify for Medicare coverage of home health services as set forth 
under Sec.  409.42 where the services are furnished in the 
beneficiary's home during the episode after the beneficiary's discharge 
from an acute care hospital. The ``incident to'' rule is set forth in 
Sec.  410.26(b)(5), which requires services and supplies furnished 
incident to the service of a physician or other practitioner must be 
provided under the direct supervision (as defined at Sec.  
410.32(b)(3)(ii)) of a physician or other practitioner.
    In the BPCI Advanced and CJR models, the waiver is available only 
for services that are furnished by licensed clinical staff under the 
general supervision (as defined at Sec.  410.32(b)(3)(i)) of a 
physician (or other practitioner), or other qualified health care 
professional, and who are allowed by law, regulation, and facility 
policy to perform or assist in the performance of a specific 
professional service, but do not individually report that professional 
service. While the services may be furnished by licensed clinical 
staff, they must be billed by the physician (or other practitioner) or 
participant to which the supervising physician has reassigned their 
billing rights in accordance with CMS instructions using a Healthcare 
Common Procedures Coding System (HCPCS) G-code created by CMS 
specifically for the BPCI Advanced or CJR model. In the case of the 
incident to waiver under BPCI Advanced, the waiver allows physician and 
nonphysician practitioners to furnish the services up to 13 home visits 
during each 90-day clinical episode. In the case of the incident to 
waiver under CJR, the waiver allows physician and nonphysician 
practitioners to furnish the services up to 9 home visits during each 
90-day clinical episode. All other Medicare coverage and payment 
criteria must be met for both BPCI Advanced and CJR models.
    We considered waiving the ``incident to'' rule set forth in Sec.  
410.26(b)(5) for TEAM, similar to the BPCI Advanced and CJR models, 
however, we reviewed this specific waiver utilization and found that 
there was very low uptake in these models. While waiving the ``incident 
to'' rule set forth in Sec.  410.26(b)(5) could be beneficial in 
furnishing services to beneficiaries in their home or place of 
residence, we believe there has been a greater shift towards 
telemedicine as a modality for post-discharge follow-up, especially 
after the COVID-19 public health emergency which drove greater adoption 
and standard practice of telehealth services. Evidence suggests that 
telemedicine post-discharge visits were effective, safe, and did not 
negatively affect health care utilization as compared to in-person 
visits.1006 1007 For these reasons, we did not propose to 
waive the ``incident to'' rule set forth in Sec.  410.26(b)(5) for 
TEAM, but we sought comment if we should waive the ``incident to'' rule 
set forth in Sec.  410.26(b)(5), if we should consider modifications or 
alternatives to this waiver, and how we could make this waiver 
beneficial to TEAM participants and beneficiaries.
---------------------------------------------------------------------------

    \1006\ Harkey, K., Kaiser, N., Zhao, J., Gutnik, B., Kelz, R.R., 
Matthews, B.D., & Reinke, C.E. (2023). Utilization of telemedicine 
to provide post-discharge care: A comparison of pre-pandemic vs. 
pandemic care. The American Journal of Surgery, 226(2), 163-169. 
https://doi.org/10.1016/j.amjsurg.2023.03.007.
    \1007\ Grauer, A., Cornelius, T., Abdalla, M., Moise, N., 
Kronish, I.M., & Ye, S. (2023). Impact of early telemedicine follow-
up on 30-Day hospital readmissions. PLOS ONE, 18(5), e0282081. 
https://doi.org/10.1371/journal.pone.0282081.
---------------------------------------------------------------------------

    The following is a summary of the public comments we received on 
the homebound requirement, the ``incident to'' rule, and other 
provisions related to the home health waivers that we considered, and 
our responses to those comments:
    Comment: Some commenters requested that we waive the Medicare 
requirement that beneficiaries must be homebound in order for Medicare 
to cover home health services. Some of the commenters cited the 
experiences of ACOs which have been permitted to provide home health 
services covered by Medicare to beneficiaries who do not meet the 
homebound requirements, suggesting that these home visits can benefit 
patients beyond those that are homebound.
    Response: We thank the commenters for their requests. We 
acknowledge the potential benefits of home health services for some 
patients who are not homebound. However, we believe that it is 
necessary to consider these potential benefits in light of clinical 
expectations and existing payment structures as described in the 
proposed rule at 89 FR 36464. First, we expect that the typical 
clinical course of beneficiaries after certain surgical procedures will 
result in many TEAM beneficiaries meeting the homebound requirement 
immediately following hospital discharge. Second,

[[Page 69829]]

we recognize that home health agencies (HHAs) are paid for their 
services based on standardized rates--either per 30-day period or per 
visit depending on volume--which are calculated based on care provided 
to patients who are homebound. Thus, we do not feel it is necessary or 
appropriate for Medicare to pay for home health services for TEAM 
beneficiaries who are not homebound. We will monitor utilization and 
payment trends throughout the model test and may consider additional 
home health waivers in future rulemaking.
    Comment: Many commenters requested that we provide a post-discharge 
home visit waiver that would waive the direct supervision requirement 
for ``incident to'' services as defined in Sec.  410.26(b)(5), thereby 
permitting the provision of home health services to TEAM beneficiaries 
by a wider range of health care professionals. Many commenters 
specifically requested that we provide these flexibilities through a 
Post-Discharge Home Visits waiver as offered in BPCI Advanced. Some 
commenters cited the Care Management Home Visit waiver offered in the 
Next Generation ACO Model. A commenter further requested that any 
potential home health waivers include coverage of home health services 
delivered electronically or in a community setting outside of a 
patient's home. A commenter cited a shift from institutional to home-
based PAC services as a motivating factor in increasing home health 
care access.
    Response: We thank the commenters for their recommendations and 
acknowledge the additional care management flexibility afforded to 
providers through a waiver of the direct supervision requirement for 
``incident to'' services. However, we are not convinced that there is a 
need for such a waiver in TEAM. As discussed in the preamble of the 
proposed rule at 89 FR 36465, a review of ``incident to'' waiver 
utilization in BPCI Advanced and CJR--the most direct precedents for 
TEAM--indicated very low uptake of this waiver in these models. 
Further, while we acknowledge a shift from institutional to home-based 
PAC, we also recognize a shift toward telemedicine and away from home 
health for post-discharge follow-up and acknowledge evidence that 
telemedicine post-discharge visits were effective, safe, and did not 
negatively affect health care utilization compared to in-person visits, 
as cited in the preamble of the proposed rule at 89 FR 36465. We thus 
maintain that there is not sufficient evidence to suggest the necessity 
of a post-discharge home visit or ``incident to'' waiver in TEAM. 
However, we will monitor post-discharge care utilization and outcomes 
throughout the model test and may consider such a waiver in future 
rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to maintain the existing 
Medicare requirements for home health services, including the 
requirement that the beneficiary be homebound, when home health 
services are furnished to TEAM beneficiaries.
(3) Telehealth
    As discussed in the previous section, we expect that the proposed 
TEAM design features would lead to greater interest on the part of 
hospitals and other providers and suppliers caring for TEAM 
beneficiaries in furnishing services to beneficiaries in their home or 
place of residence, including physicians' professional services. TEAM 
would create new incentives for comprehensive episode care management 
for beneficiaries, including early identification and intervention 
regarding changes in health status following discharge from the anchor 
hospitalization or anchor procedures. Given that we are not waiving the 
``incident to'' rule set forth in Sec.  410.26(b)(5) for TEAM, we 
understand that TEAM participants may still want to engage physicians 
in furnishing timely visits to homebound or non-homebound TEAM 
beneficiaries in their homes or places of residence to address 
concerning symptoms or observations raised by beneficiaries themselves, 
clinicians furnishing home health services, or licensed clinicians 
furnishing post-discharge home visits, while physicians committed to 
TEAM care redesign may not be able to revise their practice patterns to 
meet this home visit need for TEAM beneficiaries.
    Under section 1834(m) of the Act, Medicare pays for telehealth 
services furnished by a physician or practitioner under certain 
conditions even though the physician or practitioner is not in the same 
location as the beneficiary. The telehealth services must be furnished 
to a beneficiary located in one of the eight types of originating sites 
specified in section 1834(m)(4)(C)(ii) of the Act and the site must 
satisfy at least one of the requirements of section 1834(m)(4)(C)(i)(I) 
through (III) of the Act. Generally, for Medicare payment to be made 
for telehealth services under the Medicare Physician Fee Schedule 
several conditions must be met, as set forth under Sec.  410.78(b). 
Specifically, the service must be on the Medicare list of telehealth 
services and meet all of the following other requirements for payment:
     The service must be furnished via an interactive 
telecommunications system.
     The service must be furnished to an eligible telehealth 
individual.
     The individual receiving the services must be in an 
eligible originating site.
    When all of these conditions are met, Medicare pays a facility fee 
to the originating site and provides separate payment to the distant 
site practitioner for the service. Section 1834(m)(4)(F)(i) of the Act 
defines Medicare telehealth services to include professional 
consultations, office visits, office psychiatry services, and any 
additional service specified by the Secretary, when furnished via a 
telecommunications system. For the list of approved Medicare telehealth 
services, see the CMS website at https://www.cms.gov/medicare/coverage/telehealth/list-services. Under section 1834(m)(4)(F)(ii) of the Act, 
CMS has an annual process to consider additions to and deletions from 
the list of telehealth services. We do not include any services as 
telehealth services when Medicare does not otherwise make a separate 
payment for them.
    Some literature suggests the benefits of telehealth technologies 
that enable health care providers to deliver care to patients in 
locations remote from providers are being increasingly used to 
complement face-to-face patient-provider encounters to increase access 
to care, especially in rural or underserved areas.\1008\ In these 
cases, the use of remote access technologies may improve the 
accessibility and timeliness of needed care, increase communication 
between providers and patients, enhance care coordination, and improve 
the efficiency of care. We note that certain professional services that 
are commonly furnished remotely using telecommunications technology are 
paid under the same conditions as in-person physicians' services, and 
thus do not require a waiver to be considered as telehealth services. 
Such services that do not require the patient to be present in person 
with the practitioner when they are furnished are covered and paid in 
the same way as services delivered without the use of 
telecommunications technology when the practitioner is in person at the 
medical facility furnishing care to the patient.
---------------------------------------------------------------------------

    \1008\ Gajarawala, S.N., & Pelkowski, J.N. (2021). Telehealth 
benefits and barriers. The Journal for Nurse Practitioners, 17(2), 
218-221. https://doi.org/10.1016/j.nurpra.2020.09.013.
---------------------------------------------------------------------------

    In other CMS episode-based payment models, such as the BPCI 
Advanced and

[[Page 69830]]

CJR models, participants were permitted to use telehealth waivers that 
applied to two provisions:
     CMS waived the geographic site requirements under 
1834(m)(4)(C)(i)(I) through (III) of the Act which allowed telehealth 
services to be furnished to eligible telehealth individuals when they 
are located at one of the eight originating sites at the time the 
service is furnished via a telecommunications system but without regard 
to the site meeting one of the geographic site requirements.
     CMS waived the originating site requirements under section 
1834(m)(4)(C)(ii)(I) through (VIII) of the Act which allowed the 
eligible telehealth individual to not be in an originating site when 
the otherwise eligible individual is receiving telehealth services in 
their home or place of residence.
    These telehealth waivers allowed providers and suppliers furnishing 
services to model beneficiaries to utilize telemedicine for 
beneficiaries that are not classified as rural and allowed the greatest 
degree of efficiency and communication between providers and suppliers 
and beneficiaries by allowing beneficiaries to receive telehealth 
services at their home or place of residence. We believe similar 
telehealth waivers would be essential to maximize the opportunity to 
improve the quality of care and efficiency for episodes of care in 
TEAM.
    Specifically, like the telehealth waivers in the BPCI Advanced and 
CJR models, we proposed to waive the geographic site requirements of 
section 1834(m)(4)(C)(i)(I) through (III) of the Act that limit 
telehealth payment to services furnished within specific types of 
geographic areas or in an entity participating in a federal 
telemedicine demonstration project approved as of December 31, 2000. 
Waiver of this requirement would allow beneficiaries located in any 
region to receive services related to the episode to be furnished via 
telehealth, as long as all other Medicare requirements for telehealth 
services are met. Any service on the list of Medicare approved 
telehealth services and reported on a claim that is not excluded from 
the proposed episode definition (see section X.A.3.b. of the preamble 
of this final rule) could be furnished to a TEAM beneficiary, 
regardless of the beneficiary's geographic location. Under TEAM, this 
waiver would support care coordination and increasing timely access to 
high quality care for all TEAM beneficiaries, regardless of geography. 
Additionally, we proposed for TEAM waiving the originating site 
requirements of section 1834(m)(4)(C)(ii)(I)-(VIII) of the Act that 
specify the particular sites at which the eligible telehealth 
individual must be located at the time the service is furnished via a 
telecommunications system. Specifically, we proposed to waive the 
requirement only when telehealth services are being furnished in the 
TEAM beneficiary's home or place of residence during the episode. Any 
service on the list of Medicare approved telehealth services that is 
not excluded from the proposed episode definition (see section 
X.A.3.b.(5)(a) of the preamble of this final rule) could be furnished 
to a TEAM beneficiary in their home or place of residence, unless the 
service's HCPCS code descriptor precludes delivering the service in the 
home or place of residence. For example, subsequent hospital care 
services could not be furnished to beneficiaries in their home since 
those beneficiaries would not be inpatients of the hospital.
    The existing set of codes used to report evaluation and management 
(E/M) visits are extensively categorized and defined by the setting of 
the service, and the codes describe the services furnished when both 
the patient and the practitioner are located in that setting. Section 
1834(m) of the Act provides for particular conditions under which 
Medicare can make payment for office visits when a patient is located 
in a health care setting (the originating sites authorized by statute) 
and the eligible practitioner is located elsewhere. However, we do not 
believe that the kinds of E/M services furnished to patients outside of 
health care settings via real-time, interactive communication 
technology are accurately described by any existing E/M codes. This 
would include circumstances when the patient is located in his or her 
home and the location of the practitioner is unspecified. In order to 
create a mechanism to report E/M services accurately, the BPCI Advanced 
and CJR models created specific sets of HCPCS G-codes to describe the 
E/M services furnished to the model beneficiaries in their homes via 
telehealth. Similarly for TEAM, we proposed to create a specific set of 
nine HCPCS G-codes to describe the E/M services furnished to TEAM 
beneficiaries in their homes via telehealth. If the proposed TEAM is 
finalized, we would specify the precise G-code created for TEAM and 
share them to TEAM participants prior to the first performance year.
    Among the existing E/M visit services, we envision these services 
would be most similar to those described by the office and other 
outpatient E/M codes. Therefore, we proposed to structure the new codes 
similarly to the office/outpatient E/M codes but adjusted to reflect 
the location as the beneficiary's residence and the virtual presence of 
the practitioner. Specifically, we proposed to create a parallel 
structure and set of descriptors currently used to report office or 
other outpatient E/M services, see Table X.A.-15, for CPT codes 99201 
through 99205 for new patient visits and CPT codes 99212 through 99215 
for established patient visits. For example, the proposed G- code for a 
level 3 E/M visit for an established patient would be a telehealth 
visit for the evaluation and management of an established patient in 
the patient's home, which requires at least 2 of the following 3 key 
components:
     An expanded problem focused history;
     An expanded problem focused examination;
     Medical decision making of low complexity.
    Counseling and coordination of care with other physicians, other 
qualified health care professionals or agencies are provided consistent 
with the nature of the problem(s) and the patient's or family's needs 
or both. Usually, the presenting problem(s) are of low to moderate 
severity. Typically, 15 minutes are spent with the patient or family or 
both via real-time, audio and video intercommunications technology.

[[Page 69831]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.314

    We note that we did not propose a G-code to parallel the level 1 
office/outpatient visit for an established patient, since that service 
does not require the presence of the physician or other qualified 
health professional.
    We proposed to develop payment rates for these new telehealth G-
codes for E/M services in the patient's home that are similar to the 
payment rates for the office/outpatient E/M services, since the codes 
will describe the work involved in furnishing similar services. 
Therefore, we proposed to include the resource costs typically incurred 
when services are furnished via telehealth. In terms of the relative 
resource costs involved in furnishing these services, we believe that 
the efficiencies of virtual presentation generally limit resource costs 
other than those related to the professional time, intensity, and 
malpractice risk to marginal levels. Therefore, we proposed to adopt 
work and malpractice (MP) RVUs associated with the corresponding level 
of office/outpatient codes as the typical service because the 
practitioner's time and intensity and malpractice liabilities when 
conducting a visit via telehealth are comparable to the office visit. 
We would include final RVUs under the CY 2026 Medicare Physician Fee 
Schedule for PY 1. Additionally, we proposed to update these values 
each performance year to correspond to final values established under 
the Medicare Physician Fee Schedule.
    We considered whether each level of visit typically would warrant 
support by auxiliary licensed clinical staff within the context of 
TEAM. The cost of such staff and any associated supplies, for example, 
would be incorporated in the practice expense (PE) RVUs under the PFS. 
For the lower-level visits, levels 1 through 3 for new and 2 and 3 for 
established visits, we did not believe that the visit would necessarily 
require auxiliary medical staff to be available in the patient's home. 
We anticipated these lower-level visits would be the most commonly 
furnished and would serve as a mechanism for the patient to consult 
quickly with a practitioner for concerns that can be easily described 
and explained by the patient. We did not propose to include PE RVUs for 
these services, since we do not believe that virtual visits envisioned 
for this model typically incur the kinds of costs included in the PE 
RVUs under the Medicare Physician Fee Schedule. For higher level 
visits, we typically would anticipate some amount of support from 
auxiliary clinical staff. For example, wound examination and minor 
wound debridement would be considered included in an E/M visit and 
would require licensed clinical staff to be present in the 
beneficiary's home during the telehealth visit in order for the 
complete service to be furnished. We believed it would be rare for a 
practitioner to conduct as complex and detailed a service as a level 4 
or 5 E/M home visit via telehealth for TEAM beneficiaries in episodes 
without licensed clinical staff support in the home.
    We have considered support by auxiliary clinical staff to be 
typical for level 4 or 5 E/M visits furnished to TEAM beneficiaries in 
the home via telehealth, however, we did not propose to incorporate 
these costs through PE RVUs. Given the anticipated complexity of these 
visits, we would expect to observe level 4 and 5 E/M visits to be 
reported on the same claim with the same date of service as a home 
visit or during a period of authorized home health care. If neither of 
these occurs, we proposed to require the physician to document in the 
medical record that auxiliary licensed clinical staff were available on 
site in the patient's home during the visit and if they were not, to 
document the reason that such a high-level visit would not require such 
personnel.
    We noted that because the services described by the proposed G-
codes, by definition, are furnished remotely using telecommunications 
technology, they therefore are paid under the same conditions as in-
person physicians' services, and they do not require a waiver to the 
requirements of section 1834(m) of the Act. We also noted that because 
these home telehealth services are E/M services, all other coverage and 
payment rules regarding E/M services would continue to apply.
    Under TEAM, this proposal to waive the originating site 
requirements and create new home visit telehealth HCPCS codes would 
support the greatest efficiency and timely communication between 
providers and beneficiaries by allowing beneficiaries to receive 
telehealth services at their places of residence.
    With respect to home health services paid under the home health 
prospective payment system (HH PPS), we emphasized that telehealth 
visits under this model cannot substitute for in-person home health 
visits per section 1895(e)(1)(A) of the Act. Furthermore, telehealth 
services by social workers cannot be furnished for TEAM beneficiaries 
who are in a home health episode because medical social services are 
included as home health services per section 1861(m) of the Act and 
paid for under the Medicare HH PPS. However, telehealth services 
permitted under section 1834 of the Act and furnished by physicians or 
other practitioners, specifically physician assistants, nurse 
practitioners, clinical nurse specialists, certified nurse midwives, 
nurse anesthetists, psychologists, and dieticians, can be furnished for 
TEAM beneficiaries who are in a home health episode. Finally, sections 
1835(a) and 1814(a) of the Act require that the patient has a face-to-
face encounter with the certifying physician or an allowed nonphysician 
practitioner (NPP) working in collaboration with or under the 
supervision of the certifying physician before the certifying physician 
certifies that the patient is eligible for home health services. Under

[[Page 69832]]

Sec.  424.22(a)(1)(v), the face-to-face encounter can be performed up 
to 90 days prior to the start of home health care or within 30 days 
after the start of home health care. Section 424.22(a)(1)(v)(A) also 
allows a physician, with privileges, who cared for the patient in an 
acute or PAC setting (from which the patient was directly admitted to 
home health) or an allowed NPP working in collaboration with or under 
the supervision of the acute or PAC physician to conduct the face-to-
face encounter.
    Although sections 1835(a) and 1814(a) of the Act allow the face-to-
face encounter to be performed via telehealth, we did not propose that 
the waiver of the telehealth geographic site requirement for telehealth 
services and the originating site requirement for telehealth services 
furnished in the TEAM beneficiary's home or place of residence would 
apply to the face-to- face encounter required as part of the home 
health certification when that encounter is furnished via telehealth. 
In other words, when a face-to-face encounter furnished via telehealth 
is used to meet the requirement for home health certification, the 
usual Medicare telehealth rules apply with respect to geography and 
eligibility of the originating site. We expect that this policy would 
not limit TEAM beneficiaries' access to medically necessary home health 
services because beneficiaries receiving home health services during an 
episode will have had a face-to-face encounter with either the 
physician or an allowed NPP during their anchor hospitalization or a 
physician or allowed NPP during a post-acute facility stay prior to 
discharge directly to home health services.
    Under the proposed waiver of the geographic site requirement and 
originating site requirement, all telehealth services would be required 
to be furnished in accordance with all Medicare coverage and payment 
criteria, and no additional payment would be made to cover set-up 
costs, technology purchases, training and education, or other related 
costs. The facility fee paid by Medicare to an originating site for a 
telehealth service would be waived if there is no facility as an 
originating site (that is, the service was originated in the 
beneficiary's home). Finally, providers and suppliers furnishing a 
telehealth service to a TEAM beneficiary in his or her home or place of 
residence during the episode would not be permitted to bill for 
telehealth services that were not fully furnished when an inability to 
provide the intended telehealth service is due to technical issues with 
telecommunications equipment required for that service. Beneficiaries 
would be able to receive services furnished pursuant to the telehealth 
waivers only during the episode.
    We plan to monitor patterns of utilization of telehealth services 
under TEAM to monitor for overutilization or reductions in medically 
necessary care, and significant reductions in face-to-face visits with 
physicians and NPPs. We plan to specifically monitor the distribution 
of new telehealth home visits that we are proposing, as we anticipate 
greater use of lower-level visits. Given our concern that auxiliary 
licensed clinical staff be present for level 4 and 5 visits, we will 
monitor our proposed requirement that these visits be billed on the 
same claim with the same date of service as a home nursing visit, 
during a period authorized home health care, or that the physician 
document the presence of auxiliary licensed clinical staff in the home 
or an explanation as to the specific circumstances precluding the need 
for auxiliary staff for the specific visit. We sought comments on the 
proposed waivers with respect to telehealth services, and the proposed 
creation of the home visit telehealth codes.
    The following is a summary of the public comments we received on 
the proposed telehealth waivers and creation of home visit telehealth 
codes and our responses to those comments:
    Comment: Many commenters expressed support for the proposed 
telehealth waivers. Some of these commenters indicated that these 
waivers would facilitate care coordination, improve access to services, 
and promote equity. A couple commenters lauded the consistency of these 
waivers with those offered under BPCI Advanced. A few commenters 
expressed specific support for the proposed waiver of the originating 
site requirements. A commenter expressed specific support for the 
proposed waiver of the geographic site requirements.
    Response: We thank the commenters for their support and concur that 
the proposed waivers can improve care access and equity, facilitate 
care coordination, and provide continuity for providers with experience 
utilizing waivers in BPCI Advanced.
    Comment: A commenter requested that CMS make the proposed 
telehealth waivers available for all TEAM procedures, as in CJR and 
BPCI Advanced.
    Response: We thank the commenter for this recommendation. We would 
like to note that the usage of the proposed telehealth waivers under 
TEAM, pursuant to the requirements outlined in Sec.  512.580, is not 
restricted to certain TEAM clinical episodes.
    Comment: A commenter suggested that we add a waiver permitting the 
delivery of physical therapist services via telehealth, noting the 
importance of initiating physical therapy soon after surgery. The 
commenter suggested that such a waiver could benefit individuals facing 
delays in care by allowing for the timely initiation of physical 
therapy following discharge.
    Response: We thank the commenter for their suggestion and 
acknowledge the importance of physical therapy for many beneficiaries 
following a surgical procedure. We will take this recommendation into 
consideration and may propose such a waiver in future rulemaking if we 
believe it would improve beneficiary care and further the goals of the 
model.
    Comment: A couple commenters provided input on the proposed 
creation of the home visit telehealth codes.
    A commenter expressed support for the proposal to create new 
telehealth G-codes and HCPCS codes and corresponding payment rates for 
home health, indicating that telehealth can increase access to post-
surgical care, particularly for patients facing barriers to access. 
This commenter further suggested that we permanently extend the new 
payment rates for these telehealth services beyond TEAM.
    A commenter opposed the proposal to create new telehealth codes and 
lower payment rates for home health services in TEAM. This commenter 
indicated that the existing telehealth visit codes developed by the 
Current Procedural Terminology (CPT[supreg]) Editorial Panel should be 
available for use by all physicians.
    Response: We thank the commenters for their responses regarding the 
proposed creation of TEAM-specific telehealth G-codes. As stated in the 
proposed rule at 89 FR 36466, we recognize that the existing set of 
codes for evaluation and management (E/M) visits are categorized and 
defined by the setting of service and describe services provided when 
both the patient and the practitioner are located in that setting. As a 
result, and with consideration of the comments received, we continue to 
believe that the kinds of E/M services furnished to patients outside of 
health care settings via real-time, interactive communication 
technology are not accurately described by any existing E/M codes. 
Further, we note that the creation of model-specific telehealth G-codes 
for BPCI Advanced and CJR provide precedent for the establishment of 
such codes for TEAM.

[[Page 69833]]

    Comment: A couple commenters suggested that we apply the proposed 
telehealth waivers to all Medicare Fee-for-Service (FFS) beneficiaries 
with billing codes that could trigger a TEAM episode at participating 
hospitals. One of the commenters indicated that waivers are often 
underutilized due to concerns that a patient may not qualify as a model 
beneficiary.
    Response: We thank the commenters for their suggestion and 
recognize the potential challenges that TEAM participants may face in 
identifying beneficiaries who will trigger a TEAM episode. We believe 
that certain provisions already included in the proposed rule will 
mitigate these concerns for participants. Regarding the telehealth 
waivers, we note that covered telehealth services would be provided 
after discharge from the anchor stay or completion of the anchor 
procedure, and correspondingly expect that providers would have a 
working knowledge of their patients' TEAM beneficiary status as part of 
their care coordination. As a result, and in further acknowledgement of 
the administrative challenge that would be imposed on CMS to track TEAM 
beneficiary status in real time, we do not believe it is necessary or 
appropriate to automatically apply the telehealth waivers to all FFS 
beneficiaries that could trigger a TEAM episode at a participating 
hospital.
    After consideration of the comments received, we are finalizing at 
Sec.  512.580(a) the waivers pertaining to telehealth services as 
proposed. We are also finalizing at Sec.  512.580(a)(3)(ii) the 
creation of telehealth home visit HCPCS codes as proposed.
(4) SNF 3-Day Rule
    Pursuant to section 1861(i) of the Act, a beneficiary must have a 
prior inpatient hospital stays of no fewer than 3 consecutive days to 
be eligible for Medicare coverage of inpatient SNF care. We refer to 
this as the SNF 3-day rule. We noted that the SNF 3-day rule has been 
waived for Medicare SNF coverage under other episode payment models, 
including the BPCI Advanced the CJR models. Model participants that 
elect to use the waiver can discharge model beneficiaries in fewer than 
3 days from an anchor hospital stay or anchor procedure (in the case of 
the CJR model) to a SNF, where services are covered under Medicare Part 
A if all other coverage requirements for such services are satisfied.
    Episode-based payment models like BPCI Advanced and CJR have the 
potential to mitigate the existing incentives under the Medicare 
program to overuse SNF benefits for beneficiaries, as well as to 
furnish many fragmented services that do not reflect significant 
coordinated attention to and management of complications following 
hospital discharge. These model participants considering the early 
discharge of a beneficiary pursuant to the waiver must evaluate whether 
early discharge to a SNF is clinically appropriate and SNF services are 
medically necessary. Next, they must balance that determination and the 
potential benefits to the hospital in the form of internal cost savings 
due to greater financial efficiency with the understanding that a 
subsequent hospital readmission, attributable to premature discharge or 
low quality SNF care, could substantially increase episode spending 
while also resulting in poorer quality of care for the beneficiary. 
Furthermore, early hospital discharge for a beneficiary who would 
otherwise not require a SNF stay (that is, the beneficiary has no 
identified skilled nursing or rehabilitation need that cannot be 
provided on an outpatient basis) following a hospital stay of typical 
length does not improve episode efficiency.
    Because of the potential benefits we see for TEAM participants, 
their provider partners, and beneficiaries, we proposed to waive the 
SNF 3-day rule for coverage of a SNF stay following the anchor 
hospitalization or anchor procedure under TEAM. We proposed to use our 
authority under section 1115A of the Act with respect to certain SNFs 
that furnish Medicare Part A post-hospital extended care services to 
beneficiaries included in an episode in TEAM. We believe this waiver is 
necessary to the model test so that TEAM participants can redesign care 
throughout the episode continuum of care extending to 30 days post-
discharge from the anchor hospital stay or anchor procedure to maximize 
quality and hospital financial efficiency, as well as reduce episode 
spending under Medicare. All other Medicare rules for coverage and 
payment of Part A-covered SNF services would continue to apply to TEAM 
beneficiaries in all performance years of the model. Further, to ensure 
protection to TEAM beneficiary safety and optimize health outcomes, we 
proposed to require that TEAM participants may only discharge a TEAM 
beneficiary under this proposed waiver of the SNF 3-day rule to a SNF 
rated an overall of three stars or better by CMS based on information 
publicly available at the time of hospital discharge from an anchor 
hospital stay or anchor procedure. Problem areas due to early hospital 
discharge may not be discovered through model monitoring and evaluation 
activities until well after the episode has concluded, and the 
potential for later negative findings alone may not afford sufficient 
beneficiary protections. CMS created a Five-Star Quality Rating System 
for SNFs to allow SNFs to be compared more easily and to help identify 
areas of concerning SNF performance. The Nursing Home Compare website 
gives each SNF an overall rating of between 1 and 5 stars.\1009\ Those 
SNFs with 5 stars are considered to have much above average quality, 
and SNFs with 1 star are considered to have quality much below average. 
Published SNF ratings include distinct ratings of health inspection, 
staffing, and quality measures, with ratings for each of the three 
sources combined to calculate an overall rating. These areas of 
assessment are all relevant to the quality of SNF care following 
discharge from the anchor hospitalization or anchor procedure 
initiating an episode, especially if that discharge occurs after fewer 
than 3 days in the hospital. Because of the potential greater risks 
following early inpatient hospital discharge, we believe it is 
appropriate that all TEAM beneficiaries discharged from the TEAM 
participant to a SNF in fewer than 3 days be admitted to a SNF that has 
demonstrated that it can provide quality care to patients with 
significant unresolved post-surgical symptoms and problems. We believe 
such a SNF would need to provide care of at least average overall 
quality, which would be represented by an overall SNF 3-star or better 
rating.
---------------------------------------------------------------------------

    \1009\ https://www.medicare.gov/care-compare/?redirect=true&providerType=NursingHome.
---------------------------------------------------------------------------

    Thus, the TEAM participant must discharge the beneficiary to a SNF 
that is qualified under the SNF 3-day rule waiver. We proposed that to 
be qualified under the SNF 3-day rule waiver a SNF must be included in 
the most recent calendar year quarter Five-Star Quality Rating System 
listing for SNFs on the Nursing Home Compare website for the date of 
the beneficiary's admission to the SNF. The qualified SNF must be rated 
an overall 3 stars or better for at least 7 of the 12 months based on a 
review of the most recent rolling 12 months of overall star ratings. We 
proposed to post on the CMS website the list of qualified SNFs in 
advance of the calendar quarter.
    We recognized that there may be instances where a TEAM participant 
would like to use the SNF 3-day rule waiver, but the TEAM beneficiary 
receives inpatient PAC through swing

[[Page 69834]]

bed arrangements in a hospital or Critical Access Hospital (CAH), as 
designated in Sec.  485.606 of this chapter, which is not subject to 
the Five-Star Quality Rating System. For example, a TEAM beneficiary 
located in a rural area may wish to receive PAC care closer to their 
home but there are no qualified SNFs in their area. Allowing TEAM 
participants to use the SNF 3-day rule waiver for hospitals and CAHs 
operating under swing bed agreements may support beneficiary freedom of 
choice and provide greater flexibility to TEAM participants for their 
care coordination efforts. This approach is consistent with the Shared 
Savings Program, which offers a similar SNF 3-day rule waiver and 
allows their ACOs to partner with hospitals and CAHs to with swing bed 
arrangements to utilize the waiver. Therefore, we sought comment on 
whether we should allow TEAM participants to use hospitals and CAHs 
operating under swing bed agreements for the SNF 3-day rule waiver and 
what beneficiary protections we should include since the Five-Star 
Quality Rating System would not apply.
    The following is a summary of the public comments we received on 
the possibility of including swing bed arrangements under the SNF 3-day 
rule waiver and our responses to these comments:
    Comment: A commenter recommended that we allow TEAM participants to 
use the SNF 3-day rule waiver for Critical Access Hospitals (CAHs) 
providing post-acute care (PAC) under swing bed arrangements. The 
commenter indicated that including swing beds under the SNF 3-day rule 
waiver would increase access to PAC services for beneficiaries in rural 
areas or areas with health care shortages.
    Response: We thank the commenter for the recommendation. We would 
like to clarify that the option of including swing beds under the SNF 
3-day rule waiver for TEAM participants was considered but not proposed 
in the proposed rule. While we agree that including swing bed 
arrangements under the SNF 3-day rule waiver could promote freedom of 
choice and PAC access for beneficiaries in areas with limited SNF 
options, we remain concerned about the lack of a standard and 
comprehensive quality assessment metric for hospitals and CAHs 
operating under swing bed arrangements, which are not subject to the 
Five-Star Quality Rating System. As stated in the preamble of the 
proposed rule at 89 FR 36468-9, we recognize that greater risks may be 
present for patients following early inpatient hospital discharge. The 
proposed SNF quality rating requirement for use of the SNF 3-day rule 
waiver offers an additional level of protection to beneficiaries 
following an early discharge by ensuring that all TEAM beneficiaries 
discharged to a SNF after a hospital stay of fewer than 3 days are 
admitted to a SNF that has demonstrated that it can provide quality 
care to patients with significant unresolved post-surgical symptoms and 
problems. At this time, we do not feel that an appropriate 
corresponding metric is in place for swing bed arrangements. However, 
we will continue to monitor SNF utilization throughout the model and 
may seek additional comment and consider alterations to the SNF 3-day 
rule waiver requirements in future rulemaking.
    After consideration of the comments received, and as discussed 
further below, we are finalizing at Sec.  512.580(b) the waiver of the 
SNF 3-day rule as proposed, including the provisions for determining 
qualified SNFs as proposed at Sec.  512.580(b)(3), and without 
inclusion of swing bed arrangements.
    We plan to monitor patterns of SNF utilization under the TEAM, 
particularly with respect to hospital discharge in fewer than 3 days to 
a SNF, to ensure that beneficiaries are not being discharged 
prematurely to SNFs and that they are able to exercise their freedom of 
choice without patient steering. We sought comment on our proposal to 
waive the SNF 3-day stay rule for stays in SNFs rated overall as 3 
stars or better following discharge from the anchor hospitalization or 
anchor procedures for episodes in TEAM.
    The following is a summary of the public comments we received on 
the proposal to waive the SNF 3-day rule for stays in SNFs rated 
overall as 3 stars or better and our responses to these comments:
    Comment: Many commenters expressed support for the proposed SNF 3-
day rule waiver. Some of these commenters indicated that this waiver 
would facilitate care coordination, improve access to services, and 
promote equity. A couple commenters lauded the consistency of this 
waiver with that offered under BPCI Advanced.
    Response: We thank the commenters for their support and concur that 
the proposed waiver can improve care access and equity, facilitate care 
coordination, and provide continuity for providers with experience 
utilizing the SNF 3-day rule waiver in BPCI Advanced.
    Comment: A couple commenters suggested that we apply the proposed 
SNF 3-day rule waiver to all Medicare Fee-for-Service (FFS) 
beneficiaries with billing codes that could trigger a TEAM episode at 
participating hospitals. A commenter indicated that waivers are often 
underutilized due to concerns that a patient may not qualify as a model 
beneficiary.
    Response: We thank the commenters for their suggestion and 
recognize the potential challenges that TEAM participants may face in 
identifying beneficiaries who will trigger a TEAM episode. We believe 
that certain provisions already included in the proposed rule will 
mitigate these concerns for participants. Regarding the SNF 3-day rule 
waiver, we note in Sec.  512.580(b)(1)-(2) that CMS determines 
eligibility for the SNF 3-day rule waiver based on TEAM beneficiary 
status on the date of discharge from the anchor hospitalization or the 
date of service of the anchor procedure, as applicable. As a result, 
and in further acknowledgement of the administrative challenge that 
would be imposed on CMS to track TEAM beneficiary status in real time, 
we do not believe it is necessary or appropriate to automatically apply 
the SNF 3-day rule waiver to all FFS beneficiaries that could trigger a 
TEAM episode at a participating hospital.
    Comment: A commenter expressed support for the proposal to restrict 
usage of the SNF 3-day rule waiver to stays in SNFs that meet the 
three-star quality rating requirement.
    Response: We thank the commenter for their support.
    Comment: A commenter requested that CMS make the proposed SNF 3-day 
rule waiver available for all TEAM procedures, as in CJR and BPCI 
Advanced.
    Response: We thank the commenter for this recommendation. We would 
like to note that the usage of the SNF 3-day rule waiver under TEAM, 
pursuant to the requirements outlined in Sec.  512.580, is not 
restricted to certain TEAM clinical episodes.
    After consideration of the comments received, we are finalizing at 
Sec.  512.580(b) the waiver of the SNF 3-day rule as proposed.
(a) Additional Beneficiary Protections Under the SNF 3-Day Rule Waiver
    We believed that it will be necessary to propose beneficiary 
protections against financial liability in addition to the beneficiary 
protections discussed elsewhere in this proposed rule. Specifically, we 
believed it is important to discern whether a waiver applies to SNF 
services furnished to a particular beneficiary to ensure compliance 
with the conditions of the waiver and improve our ability to monitor 
waivers for misuse.

[[Page 69835]]

    In considering additional beneficiary protections that may be 
necessary to ensure proper use of SNF 3-day rule waiver under the TEAM, 
we noted that there are existing, well-established payment and coverage 
policies for SNF services based on sections 1861(i), 1862(a)(1), and 
1879 of the Act that include protections for beneficiaries from 
liability for certain non-covered SNF charges. These existing payment 
and coverage policies for SNF services continue to apply under TEAM, 
including SNF services furnished pursuant to the SNF 3-day rule waiver. 
(For example, see section 70 in the Medicare Claims Processing Manual, 
Chapter 30--Financial Liability Protections on the CMS website at 
https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c30.pdf; and Medicare Coverage of Skilled Nursing 
Facility Care https://www.medicare.gov/coverage/skilled-nursing-facility-snf-care; Medicare Benefit Policy Manual, Chapter 8--Coverage 
of Extended Care (SNF) Services Under Hospital Insurance at https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/bp102c08pdf.pdf). In general, CMS requires that the SNF inform a 
beneficiary in writing about services and fees before the beneficiary 
is discharged to the SNF (Sec.  483.10(b)(6)); the beneficiary cannot 
be charged by the SNF for items or services that were not requested 
(Sec.  483.10(c)(8)(iii)(A)); a beneficiary cannot be required to 
request extra services as a condition of continued stay (Sec.  
483.10(c)(8)(iii)(B)); and the SNF must inform a beneficiary that 
requests an item or service for which a charge will be made that there 
will be a charge for the item or service and what the charge will be 
(Sec.  483.10(c)(8)(iii)(C)). (See also section 6 of Medicare Coverage 
of Skilled Nursing Facility Care at https://www.cms.gov/regulations-
and-guidance/guidance/manuals/downloads/bp102c06.pdf.)
    As we discussed in the CJR final rule (80 FR 73454 through 73460), 
commenters expressed concern regarding the lag between a CJR 
beneficiary's Medicare coverage or eligibility status change and a TEAM 
participant's awareness of that change. There may be cases in which a 
SNF 3-day rule waiver is used by a TEAM participant because the TEAM 
participant believes that the beneficiary meets the inclusion criteria, 
based on the information available to the hospital and SNF at the time 
of the beneficiary's admission to the SNF, but in fact the 
beneficiary's Medicare coverage has changed and the hospital was 
unaware of it based on available information. We recognize that despite 
good faith efforts by TEAM participants and SNFs to determine a 
beneficiary's Medicare status for the model, it may occur that a 
beneficiary is not eligible to be included in the TEAM at the time the 
SNF 3-day rule waiver is used. In these cases, we will cover services 
furnished under the waiver when the information available to the 
provider at the time the services under the waiver were furnished 
indicated that the beneficiary was included in the model.
    Based on our experience with the SNF 3-day rule waiver, including 
the CJR model, we believed there are situations where it would be 
appropriate to require additional beneficiary financial protections 
under the SNF 3-day rule waiver for the TEAM. Specifically, we were 
concerned about potential beneficiary financial liability for non-
covered Part A SNF services that might be directly related to use of 
the SNF 3-day rule waiver under the TEAM. We were concerned that there 
could be scenarios where a beneficiary could be charged for non-covered 
SNF services that were a result of a TEAM participant's inappropriate 
use of the SNF 3-day rule waiver. Specifically, we were concerned that 
a beneficiary could be charged for non-covered SNF services if a TEAM 
participant discharges a beneficiary to a SNF that does not meet the 
quality requirement (3 stars or higher in 7 of the last 12 months), and 
payment for SNF services is denied for lack of a qualifying inpatient 
hospital stay. We recognized that requiring a discharge planning notice 
would help mitigate concerns about beneficiaries' potential financial 
liability for non-covered services. Nevertheless, we were concerned 
that in this scenario, once the claim is rejected, the beneficiary may 
not be protected from financial liability under existing Medicare rules 
because the waiver would not be available, and the beneficiary would 
not have had a qualifying inpatient hospital stay. Thus, the TEAM 
beneficiary could be charged by the SNF for non-covered SNF services 
that were a result of an inappropriate attempt to use the waiver. In 
this scenario, Medicare would deny payment of the SNF claim, and the 
beneficiary could potentially be charged by the SNF for these non-
covered SNF services, potentially subjecting such beneficiaries to 
significant financial liability. In this circumstance, we assume the 
TEAM participant's intent was to rely upon the SNF 3-day rule waiver, 
but the waiver requirements were not met. We believe that in this 
scenario, the rejection of the claim could easily have been avoided if 
the hospital had confirmed that the requirements for use of the SNF 3-
day rule waiver were satisfied or if the beneficiary had been provided 
the discharge planning notice and elected to go to a SNF that met the 
quality requirement.
    The CJR model (82 FR 180) addressed beneficiary liability financial 
concerns for non-covered SNF services related to the waiver by 
generally placing the risk on the participant hospital and we believe 
it is appropriate to propose a similar policy for TEAM. CJR participant 
hospitals are generally held financially responsible for misusing the 
waiver in situations where waiver requirements are not met, because 
participant hospitals are required to be aware of the SNF 3-day rule 
waiver requirements. Participant hospitals are the entities financially 
responsible for episode spending under the model and will make the 
decision as to whether it is appropriate to discharge a beneficiary 
without a 3-day stay. In addition, the requirements for use of the SNF 
waiver are clearly laid out in the CJR final rule (80 FR 73273). CMS 
posts on the public website a list of qualifying SNFs (those with a 3-
star or higher rating for 7 of the last 12 months). CJR participant 
hospitals are required to consult the published list of SNFs prior to 
utilizing the SNF 3-day rule waiver.
    For participant hospitals that provide a beneficiary with the 
discharge planning notice, the hospital would not have financial 
liability for non-covered SNF services that result from inapplicability 
of the waiver. In other words, when the participant hospital has 
discharged a beneficiary to a SNF that does not qualify under the 
conditions of the waiver, and has not provided the required discharge 
planning notice so that the beneficiary is aware that he or she is 
accepting financial liability for non-covered SNF services as a result 
of not having a qualifying inpatient stay, the ultimate responsibility 
and financial liability for the non-covered SNF stay rests with the 
participant hospital. For this reason, we proposed to align with the 
CJR model policy and require TEAM participants to keep a record of 
discharge planning notice distribution to TEAM beneficiaries. We will 
monitor TEAM participants' use of discharge planning notices to assess 
the potential for their misuse.
    To protect TEAM beneficiaries from being charged for non-covered 
SNF charges in instances when the waiver was used inappropriately, and 
similar to

[[Page 69836]]

the CJR model (82 FR 180), we proposed to add certain beneficiary 
protection requirements that would apply for SNF services that would 
otherwise have been covered except for lack of a qualifying hospital 
stay. Specifically, we proposed that if a TEAM participant discharges a 
beneficiary without a qualifying 3-day inpatient stay to a SNF that is 
not on the published list of SNFs that meet the TEAM SNF 3-day rule 
waiver quality requirements as of the date of admission to the SNF, the 
TEAM participant will be financially liable for the SNF stay if no 
discharge planning notice is provided to the beneficiary, alerting them 
of potential financial liability. If the TEAM participant provides a 
discharge planning notice, then the TEAM participant will not be 
financially liable for the cost of the SNF stay and the normal Medicare 
FFS rules for coverage of SNF services will apply. In cases where the 
TEAM participant provides a discharge planning notice and the 
beneficiary chooses to obtain care from a non-qualified SNF without a 
qualifying inpatient stay, the beneficiary assumes financial liability 
for services furnished (except those that are covered by Medicare Part 
B during a non-covered inpatient SNF stay).
    In the event a TEAM beneficiary is discharged to a SNF without a 
qualifying 3-day inpatient stay, but the SNF is not on the qualified 
list as of the date of admission to the SNF, and the TEAM participant 
has failed to provide a discharge planning notice, we proposed that CMS 
apply the following rules:
     CMS shall make no payment to the SNF for such services.
     The SNF shall not charge the beneficiary for the expenses 
incurred for such services; and the SNF shall return to the beneficiary 
any monies collected for such services.
     The hospital shall be responsible for the cost of the 
uncovered SNF stay.
    We sought comment on these proposals. Specifically, we sought 
comment on whether it is reasonable to--(1) cover services furnished 
under the SNF waiver based on TEAM participant knowledge of beneficiary 
eligibility for the TEAM as determined by Medicare coverage status at 
the time the services under the waiver were furnished; and (2) to hold 
the TEAM participant financially responsible for rejected SNF claims if 
a TEAM beneficiary is discharged to a SNF without a qualifying 3-day 
inpatient stay, but the SNF is not on the qualified list as of the date 
of admission to the SNF, and the TEAM participant has failed to provide 
a discharge planning notice. Finally, we sought comment on any other 
related issues that we should consider in connection with these 
proposals to protect beneficiaries from significant financial liability 
for non-covered SNF services related to the waiver of the SNF 3-day 
rule under the proposed TEAM. We may address those issues through 
future notice and comment rulemaking.
    The following is a summary of the public comments we received on 
beneficiary protection considerations in connection with the proposed 
waiver of the SNF 3-day rule and our responses to these comments:
    Comment: A commenter expressed support for the proposal to waive 
responsibility for denied claims relying on the SNF 3-day rule waiver 
in instances where the participant would have no way of knowing that a 
patient would not ultimately be assigned as a TEAM beneficiary. The 
commenter indicated that this provision would encourage use of the 
waiver by ensuring coverage of SNF stays even if a patient is later 
excluded from the model.
    Response: We thank the commenter for their support and concur that 
the provision to determine SNF 3-day rule waiver coverage based on TEAM 
beneficiary status at the time of discharge, as described in Sec.  
512.580(b), provides protection from unforeseen beneficiary 
ineligibility.
    Comment: A commenter inquired whether it would be permissible to 
provide patients with a list of SNFs only including those with a 
quality rating of at least 3 stars, citing the 3-star requirement for 
coverage under the SNF 3-day rule waiver.
    Response: We thank the commenter for their inquiry and suggestion. 
We appreciate the need to simultaneously maintain freedom of choice and 
protection for beneficiaries discharged to a SNF. We note that the TEAM 
waiver of the SNF 3-day rule represents an extension of existing PAC 
options covered by Medicare for TEAM beneficiaries deemed medically 
appropriate for discharge to a SNF after an inpatient hospital stay of 
less than 3 days. Medicare will continue to cover SNF stays for TEAM 
beneficiaries discharged to a SNF after an inpatient hospital stay of 3 
days or more under existing Medicare rules, which do not include a star 
rating requirement.
    As stated in the proposed rule, we recognize that the waiver of the 
SNF 3-day rule has the potential to introduce additional risk to 
beneficiaries through early hospital discharge. While model monitoring 
and evaluation activities may detect negative outcomes resulting from 
this risk, such results are likely to be known only after the end of 
the episode. The CMS Five-Star Quality Rating System for SNFs provides 
an additional means of beneficiary protection through the comparison 
and identification of SNFs based on quality of care. As stated in the 
proposed rule at 89 FR 36469, we believe it is appropriate that all 
TEAM beneficiaries discharged from the TEAM participant to a SNF in 
fewer than 3 days be admitted to a SNF that has demonstrated that it 
can provide quality care to patients with significant unresolved post-
surgical symptoms and problems. As stated in Sec.  
512.582(b).(2).(iv).(E), as part of discharge planning and referral, 
TEAM participants must provide a complete list of HHAs, SNFs, IRFs, or 
LTCHs that are participating in the Medicare program, and that serve 
the geographic area (as defined by the HHA) in which the patient 
resides, or in the case of a SNF, IRF, or LTCH, in the geographic area 
requested by the patient. We provide in Sec.  512.582(a)(3)(iii) that 
TEAM participants may recommend preferred providers and suppliers, 
consistent with applicable statutes and regulations. We believe that 
this provision would permit TEAM participants to recommend SNF 
providers that meet the 3-star waiver use requirement, of which we 
propose to provide a list on a quarterly basis. We also note that 
participants are required to provide a discharge planning notice which 
would notify beneficiaries who are being discharged to SNF after less 
than 3 days in the hospital that they would not receive Medicare 
coverage for their stay at a SNF that does not meet the 3-star 
requirement for waiver usage. We expect that this would disincentivize 
beneficiaries in this situation from choosing non-covered SNFs. We 
believe that the combination of permitting participants to recommend 
preferred SNFs and notifying beneficiaries that stays at SNFs that do 
not meet the 3-star waiver use requirement would not be covered by 
Medicare provides sufficient means to meet the beneficiary protection 
goal of the 3-star provision while maintaining freedom of choice.
    Comment: A commenter recommended additional provisions in response 
to the concern that beneficiaries could be charged for SNF services 
that do not meet the requirements for coverage under the SNF 3-day rule 
waiver. The commenter recommended that we institute a SNF affiliate 
agreement and that we include a beneficiary notice that TEAM 
participants would not be responsible for SNF stays that do not meet 
the

[[Page 69837]]

quality rating requirement for use of the SNF 3-day rule waiver.
    Response: We thank the commenter for their suggestions and concur 
that it is necessary to provide beneficiary protections surrounding 
coverage for SNF services under the SNF 3-day rule waiver. Regarding 
beneficiary notice, we note that a TEAM participant would be required 
in Sec.  512.580(b)(3) to provide a discharge planning notice which, 
per Sec.  512.580(b)(3)(ii), must include notification that the 
beneficiary would be responsible for payment for services rendered 
during a SNF stay that would not be covered by Medicare Part B due to 
not meeting the SNF 3-day rule waiver requirements outlined in Sec.  
512.580. Regarding agreements between TEAM participants and SNFs, we 
note that TEAM participants would be able to enter into financial 
arrangements with TEAM collaborators pursuant to the requirements 
defined in Sec.  512.565. In light of these provisions and the expected 
administrative burden associated with a separate SNF affiliate 
agreement, we do not believe it is necessary to institute such an 
agreement at this time. We will continue to monitor SNF utilization 
during the model test and may consider alterations to the SNF 3-day 
rule waiver provisions in future rulemaking.
    After consideration of the comments received, we are finalizing at 
Sec.  512.580(b) all provisions regarding the SNF 3-day rule waiver as 
proposed, including the financial liability provisions as proposed at 
Sec.  512.580(b)(5).
i. Monitoring and Beneficiary Protection
(1) Overview
    We proposed TEAM as we believe it is an opportunity to improve the 
quality of care and that the policies of the model support making care 
more easily accessible to consumers when and where they need it, 
increasing consumer engagement and thereby informing consumer choices. 
For example, under this model we proposed certain waivers which would 
offer TEAM participants additional flexibilities with respect to 
furnishing telehealth services and care in SNFs, as discussed in 
section X.A.3.h. of the preamble of this final rule. We believe that 
this model will improve beneficiary access and outcomes. Conversely, we 
do note that these same opportunities could be used to try to steer 
beneficiaries into lower cost services without an appropriate emphasis 
on maintaining or increasing quality. We direct readers to section 
X.A.3.d.(5) of the preamble of this final rule for discussion of the 
methodology for calculating the reconciliation payment amount or 
repayment amount under this model. We believe that existing Medicare 
provisions can be effective in protecting beneficiary freedom of choice 
and access to appropriate care under TEAM. However, because TEAM is 
designed to promote care delivery efficiencies for episodes, providers 
may seek greater control over the continuum of care and, in some cases, 
could attempt to direct beneficiaries into care pathways that save 
money at the expense of beneficiary choice or even beneficiary 
outcomes. As such, we acknowledge that some additional safeguards may 
be necessary under TEAM for program integrity purposes as providers are 
simultaneously seeking opportunities to decrease costs and utilization. 
We believe that it is important to consider any possibility of adverse 
consequences to patients and to ensure that sufficient controls are in 
place to protect Medicare beneficiaries in episodes under TEAM.
(2) Beneficiary Choice and Notification
    Because we have proposed that hospitals in selected geographic 
areas would be required to participate in the model, individual 
beneficiaries would not be able to opt out of TEAM when they receive 
care from a TEAM participant in the model. We do not believe that it is 
consistent with other Medicare programs to allow patients to opt out of 
a payment system that is unique to a particular geographic area. For 
example, the state of Maryland has a unique payment system under 
Medicare, but that payment system does not create an alternative care 
delivery system, and we do not expect it in any way to impact 
beneficiary decisions. Moreover, we do not believe that an ability to 
opt out of a payment system is a critical factor in upholding 
beneficiary choice if other safeguards are in place given that this 
model does not increase beneficiary cost-sharing. However, a 
beneficiary is not precluded from seeking care from providers or 
suppliers who do not participate in TEAM. We do believe that full 
notification and disclosure of the payment model and its possible 
implications is critical for beneficiary understanding and protection. 
It is important to create safeguards for beneficiaries to ensure that 
care recommendations are based on clinical needs and not inappropriate 
cost savings. It is also important for beneficiaries to know that they 
can raise any concerns with their clinicians, with 1-800-Medicare, or 
with their local Quality Improvement Organizations (QIOs).
    In the proposed rule we stated that TEAM would not limit a 
beneficiary's ability to choose among Medicare providers or limit 
Medicare's coverage of items and services available to the beneficiary. 
Beneficiaries may continue to choose any Medicare participating 
provider, or any provider who has opted out of Medicare, with the same 
costs, copayments and responsibilities as they have with other Medicare 
services. The model would allow TEAM participants to enter into TEAM 
sharing arrangements, as discussed in section X.A.3.g.(4) of the 
preamble of this final rule, with certain providers and these preferred 
providers may be recommended to beneficiaries as long as those 
recommendations are made within the constraints of current law. 
However, TEAM participants may not limit beneficiaries to a preferred 
or recommended providers list that is not compliant with restrictions 
existing under current statutes and regulations.
    Moreover, we indicated in the proposed rule that TEAM participants 
may not charge any TEAM collaborator, as discussed in section 
X.A.3.g.(3) of the preamble of this final rule, a fee to be included on 
any list of preferred providers or suppliers, nor may the hospital 
accept such payments, which would be considered to be outside the realm 
of risk-sharing agreements. Thus, TEAM does not create any restriction 
of beneficiary freedom to choose providers, including surgeons, 
hospitals, post-acute care or any other providers or suppliers. 
Moreover, as TEAM participants redesign care pathways, it may be 
difficult for providers to sort individuals based on health care 
insurance and to treat them differently. We anticipate that care 
pathway redesign occurring in response to the model will increase 
coordination of care, improve the quality of care, and decrease costs 
for all patients, not just for Medicare beneficiaries. We anticipate 
this broader care delivery impact to all patients may further promote 
consistent treatment of all beneficiaries.
    In the proposed rule we stated we believe that beneficiary 
notification and engagement is essential because there will be a change 
in the way participating hospitals are paid. We believe that 
appropriate beneficiary notification should explain the model, advise 
patients of both their clinical needs and their care delivery choices, 
and should clearly specify any providers, suppliers, and ACOs holding a 
sharing arrangement with the TEAM participant should be identified to 
the beneficiary as a ``financial partner of the hospital for the 
purposes of

[[Page 69838]]

participation in TEAM.'' These policies seek to enhance beneficiaries' 
understanding of their care, improve their ability to share in the 
decision-making, and ensure that they have the opportunity to consider 
competing benefits even as they are presented with cost-saving 
recommendations. We believe that appropriate beneficiary notification 
should do all of the following:
     Explain the model and how it will or will not impact the 
beneficiary's care.
     Inform patients that they retain freedom of choice to 
choose providers and services.
     Explain how patients can access care records and claims 
data through an available patient portal and through sharing access to 
caregivers to their Blue Button[supreg] electronic health information.
     Explain that TEAM participants may receive beneficiary-
identifiable claims data.
     Advise patients that all standard Medicare beneficiary 
protections remain in place, including the ability to report concerns 
of substandard care to QIOs and 1-800-MEDICARE.
     Provide a list of the providers, suppliers, and ACOs with 
whom the TEAM participant has a sharing arrangement. We recognize an 
exhaustive list of providers, suppliers, and ACOs may lengthen the 
beneficiary notification unnecessarily, therefore this requirement may 
be fulfilled by the TEAM participant including in the beneficiary 
notification a web address where beneficiaries may access the list.
    After carefully considering the appropriate timing and 
circumstances for the necessary beneficiary notification, we proposed 
at (89 FR 36472) that TEAM participants must require all ACOs, 
providers, and suppliers who execute a Sharing Arrangement with a TEAM 
participant to share beneficiary notification materials, to be 
developed or approved by CMS, that detail this proposed payment model 
with the beneficiary prior to discharge from the anchor hospitalization 
or prior to discharge from the anchor procedure for a Medicare FFS 
patient who would be included under the model. TEAM participants must 
require this notification as a condition of any Sharing Arrangement. 
Where a TEAM participant does not have Sharing Arrangements with 
providers or suppliers that furnish services to beneficiaries during an 
episode, or where the anchor hospitalization or anchor procedure for a 
Medicare FFS patient who would be included under the model was ordered 
by a physician who does not have a Sharing Arrangement, the beneficiary 
notification materials must be provided to the beneficiary by the TEAM 
participant. We indicated in the proposed rule that the purpose of this 
policy is to ensure that all TEAM beneficiaries receive the beneficiary 
notification materials, and that they receive such materials as early 
as possible but no later than discharge from the hospital or hospital 
outpatient department. We believe that this proposal targets 
beneficiaries for whom information is relevant and increases the 
likelihood that patients will become engaged and seek to understand the 
model and its potential impact on their care.
    In addition, we proposed at Sec.  512.582(b)(2) that TEAM 
participants must require every TEAM collaborator to provide written 
notice, to be developed by CMS, to applicable TEAM beneficiaries of the 
existence of its sharing arrangement with the TEAM participant and the 
basic quality and payment incentives under the model. We proposed that 
the notice must be provided no later than the time at which the 
beneficiary first receives an item or service from the TEAM 
collaborator during an episode. We recognize that due to the patient's 
condition, it may not be feasible to provide notification at such time, 
in which case the notification must be provided to the beneficiary or 
his or her representative as soon as is reasonably practicable. We note 
that beneficiaries are accustomed to receiving similar notices of 
rights and obligations from healthcare providers prior to the start of 
inpatient care. However, we also considered that this information might 
be best provided by hospitals at the point of admission for all 
beneficiaries, as hospitals provide other information concerning 
patient rights and responsibilities at that time. We invited comment on 
ways in which the timing and source of beneficiary notification could 
best serve the needs of beneficiaries without creating unnecessary 
administrative work for providers and suppliers. We believe that this 
notification is an important safeguard to help ensure that 
beneficiaries in the model receive all medically necessary services, 
but it is also an important clinical opportunity to better engage 
beneficiaries in defining their goals and preferences as they share in 
the planning of their own care.
    The following is a summary of comments we received on the proposed 
beneficiary notification and beneficiary protections (89 FR 36471) in 
the proposed model:
    Comment: We received a number of comments supporting our proposals 
to require notification of beneficiaries about their inclusion in a 
TEAM episode, and the sharing arrangements between TEAM participants 
and their collaborators, including our proposed timing for 
notification. Additionally, a commenter supported the idea that 
patients should be fully informed about TEAM and should be able to be 
active participants in their treatment decisions.
    Response: We thank the commenters for their support and note that 
CMS will continue to strive for transparency in care delivery within 
TEAM.
    Comment: Several commenters expressed concern with our proposed 
beneficiary notification policies. Some commenters stated CMS should 
take responsibility for the distribution of this letter. Other 
commenters felt the burden of this letter would be too high and should 
not be required. Commenters also made suggestions such as including the 
notification letter in other CMS materials such as the Medicare & You 
handbook, Welcome to Medicare packet or the Medicare Beneficiary 
Manual. Commentors also expressed that timing of the beneficiary 
notification letter is important and should be distributed at the time 
services are provided and as early as possible.
    Response: We acknowledge the need to streamline the beneficiary 
notification process to mitigate administrative burdens for 
participating hospitals. Additionally, we understand the importance of 
providing information to beneficiaries about their care in clear, plain 
language. We are committed to ensuring that notifications are concise 
and easily understandable, as well as detail the model's goals, 
structure, and potential impacts on care delivery and access. With 
regard to inclusion of the beneficiary notification information in 
other Medicare publications, we believe this would create confusion for 
beneficiaries, since not all beneficiaries who access or read those 
documents will be included in TEAM episodes. We also think it would not 
accomplish our goal of ensuring that TEAM participants directly provide 
notice to beneficiaries about their participation (and beneficiaries' 
inclusion) in the model. Finally, we also note that the proposed 
beneficiary notification letter would allow providers the ability to 
translate the notification letter into needed languages for their 
hospital population.
    Comment: A commenter stated concern with the timing for beneficiary 
notifications, noting that current requirements that notifications be 
made prior to discharge from the anchor hospitalization, or prior to 
discharge from the anchor procedure, may inform

[[Page 69839]]

beneficiaries too late for post-discharge planning. The commenter 
recommended notifications be made at the first encounter regardless of 
episode initiation.
    Response: We appreciate the feedback regarding the timing of 
beneficiary notifications. Though the notification isn't required until 
discharge, we do expect discharge care to be coordinated prior to that 
time. CMS will review the suggestion to require notifications at the 
first encounter to better inform beneficiaries ahead of surgical 
decisions and we will take it into consideration in future rulemaking.
    Comment: Several commenters provided general input on the proposed 
beneficiary protections under the model. A commenter recommended 
considering a longer lookback period than 90 days, such as 180 days or 
one year, in order to allow for an extended period to monitor changes 
in utilization and access to care. Additionally, a commenter suggested 
strengthening the model's emphasis on delivering high-quality care, and 
through monitoring, ensuring that cost-savings do not come at the 
expense of care delivery. Commenters urged CMS to design TEAM to reward 
primary care physicians for supporting optimal, long-term health 
outcomes. Furthermore, several commenters suggested that care under 
TEAM be person-centered, incorporating the beneficiary perspective, 
including recommendations such as patient-reported quality measures 
related to shared decision-making, developing a patient ombudsman role 
or contracting with patient navigators, and ensuring that community and 
beneficiary perspectives are included in the participant selection and 
evaluation processes.
    Response: We thank the commenters for their suggestions and 
dedication to ensuring beneficiary protections for TEAM are in place. 
We will take this information under consideration when monitoring TEAM 
participants for potential compliance and access issues. We also refer 
readers to sections X.A.3.l and X.A.3.c of this final rule, where we 
finalize proposals to encourage TEAM participants to connect 
beneficiaries to primary care and include a patient-reported outcome 
measure for one of the episode categories in TEAM.
    After consideration of the public comments we received, we are 
finalizing as proposed our proposals for beneficiary freedom of choice 
at Sec.  512.582(a), TEAM participant beneficiary notification at Sec.  
512.582(b)(1) and TEAM collaborator notice at Sec.  512.582(b)(2).
(3) Monitoring for Access to Care
    In the proposed rule we stated that since TEAM participants would 
receive a reconciliation payment when they are able to meet certain 
cost and quality performance thresholds, they could have an incentive 
to avoid complex, high-cost cases by referring them to nearby 
facilities or specialty referral centers. We intend to monitor the 
claims data from TEAM participants--for example, to compare a 
hospital's case mix relative to a pre-model historical baseline--to 
determine whether complex patients are potentially being systematically 
excluded. We indicated in the proposed rule that we will publish these 
data as part of the model evaluation to promote transparency and an 
understanding of the model's effects. We also proposed to continue to 
review and audit hospitals if we have reason to believe that they are 
compromising beneficiary access to care. For example, we may audit a 
hospital or conduct additional claims analyses where initial claims 
analysis indicates an unusual pattern of referral to regional hospitals 
located outside of the model catchment area or a clinically unexplained 
increase or decrease in surgical rates for procedures included in TEAM. 
We sought comment at (89 FR 36472) on our proposals to monitor TEAM 
participants.
    The following is a summary of comments we received on the proposed 
monitoring for access to care:
    Comment: A commenter supported the proposal to monitor 
inappropriate care patterns in TEAM.
    Response: We thank the commenter for their support of our proposed 
monitoring and compliance of the model.
    Comment: Several commenters referenced situations where monitoring 
will be especially important for TEAM. Some commenters are concerned 
that patients treated by TEAM participants should have access to the 
full range of treatment options necessary for their medical conditions, 
which are critical to the health and well-being of Medicare 
beneficiaries. Specifically, these commenters were concerned that TEAM 
participants might limit patient choice during the 30-day post-
discharge period, potentially diverting patients away from essential 
post-acute services, and disregarding existing patient-physician 
relationships or avoiding specialist referrals that may be necessary. 
Additionally, commenters were concerned that participants might favor 
lower-cost, lower-utility devices over higher-cost technologies that 
are more appropriate for certain conditions, thereby compromising the 
quality of care for patients with more intensive or costly needs. A 
commenter also emphasized timeliness with regard to monitoring, to 
ensure CMS is able to quickly address any adverse effects discovered 
through monitoring activities.
    Response: We appreciate the commenters' concerns and are committed 
to monitoring for, and promptly addressing, any potential negative 
impacts identified through ongoing monitoring. As proposed, we will 
compare hospitals' case mixes to historical baselines to detect 
potential exclusion of complex patients and publish these findings for 
transparency. We will also review and audit hospitals to uncover any 
signs of compromised beneficiary access, such as unusual referral 
patterns or unexplained changes in surgical rates.
    After consideration of the public comments we received, we are 
finalizing as proposed our proposals for monitoring for access to care 
at Sec.  512.584.
(4) Monitoring for Quality of Care
    In the proposed rule we noted that in any payment system that 
promotes efficiencies of care delivery, there may be opportunities to 
direct patients away from more expensive services at the expense of 
outcomes and quality. We believe that professionalism, the quality 
measures in the model, and clinical standards can be effective in 
preventing beneficiaries from being denied medically necessary care in 
the inpatient setting, outpatient setting, and in post-acute care 
settings during the 30 days post-discharge. Accordingly, we believe 
that the potential for the denial of medically necessary care within 
TEAM will not be greater than that which currently exists under IPPS. 
However, we also believe that we have the authority and responsibility 
to audit the medical records and claims of participating hospitals and 
their TEAM collaborators in order to ensure that beneficiaries receive 
medically necessary services. Similarly, at Sec.  512.590, we proposed 
to monitor arrangements between TEAM participants and their TEAM 
collaborators to ensure that such arrangements do not result in the 
denial of medically necessary care, or other program or patient abuse. 
We invited public comment on these proposals and on whether there are 
elements of TEAM that would require additional beneficiary protection 
for the appropriate delivery of inpatient care, and if so, what types 
of monitoring or safeguards would be most appropriate.

[[Page 69840]]

    We stated in the proposed rule that we believe that these 
safeguards are all enhanced by beneficiary knowledge and engagement. 
Therefore, we proposed at Sec.  512.582(a)(3) to require that TEAM 
participants must, as part of discharge planning, account for potential 
financial bias by providing TEAM beneficiaries with a complete list of 
all available post-acute care options in the Medicare program, 
including HHAs, SNFs, IRFs, or LTCHs, in the service area consistent 
with medical need, including beneficiary cost-sharing and quality 
information (where available and when applicable). This list should 
also indicate whether the TEAM participant has a sharing arrangement 
with the post-acute care provider. We expect that the treating surgeons 
or other treating practitioners, as applicable, will continue to 
identify and discuss all medically appropriate options with the 
beneficiary, and that hospitals will discuss the various facilities and 
providers who are available to meet the clinically identified needs. 
These proposed requirements for TEAM participants would supplement the 
existing discharge planning requirements under the hospital Conditions 
of Participation. We also specifically note that neither the Conditions 
of Participation nor this proposed transparency requirement preclude 
hospitals from recommending preferred providers within the constraints 
created by current law, as coordination of care and optimization of 
care are important factors for successful participation in this model. 
We invited comment on this proposal, including additional opportunities 
to ensure high quality care.
    We received no comments on these proposals and are finalizing as 
proposed our proposals on monitoring for quality of care at Sec.  
512.582 and Sec.  512.590.
(5) Monitoring for Delayed Care
    We stated in the proposed rule that we believe TEAM would 
incentivize TEAM participants to create efficiencies in the delivery of 
care within a 30-day episode following an acute clinical event. 
Theoretically, TEAM also could create incentives for TEAM participants 
or their TEAM collaborators to delay services until after such 30-day 
window has closed. Consistent with the CJR model, we believe that 
existing Medicare safeguards are sufficient to protect beneficiaries in 
TEAM.
    We indicated in the proposed rule that our experience with other 
episode-based payment models, such as the BPCI Advanced model, has 
shown that providers focus first on appropriate care and then on 
efficiencies only as obtainable in the setting of appropriate care. We 
believe that a 30-day post-discharge episode is sufficient to minimize 
the risk that TEAM participants and their TEAM collaborators would 
compromise services furnished in relation to a beneficiary's care. 
While we recognize that ongoing care for underlying conditions may be 
required after the 30-day episode, we believe that TEAM participants 
and other providers and suppliers would be unlikely to postpone key 
services beyond a 30-day period because the consequences of delaying 
care beyond such episode duration would be contrary to usual standards 
of care.
    However, we also note in the proposed rule that additional 
monitoring would occur as a function of the proposed TEAM. As with the 
CJR model, we proposed as part of the reconciliation process (see 
section X.A.3.d.(5)(i) of the preamble of this final rule) that TEAM 
participants would be financially accountable for certain post-episode 
payments occurring in the 30 days after conclusion of the episode. We 
believe that including such a payment adjustment would create an 
additional deterrent to delaying care beyond the episode duration. In 
addition, we believe the data collection and calculations used to 
determine such adjustment would provide a mechanism to check whether 
providers are inappropriately delaying care. Finally, we noted in the 
proposed rule that the proposed quality measures create additional 
safeguards as such measures are used to monitor and influence clinical 
care at the institutional level.
    We invited public comment on our proposed requirements for 
notification of beneficiaries and our proposed methods for monitoring 
participants' actions and ensuring compliance as well as on other 
methods to ensure that beneficiaries receive high quality, clinically 
appropriate care.
    We received no comments on these proposals and are finalizing as 
proposed the proposals on monitoring for delayed care at Sec.  512.582 
and Sec.  512.590.
j. Access to Records and Record Retention
    In the proposed rule we stated that by virtue of their 
participation in an CMS Innovation Center model, TEAM participants and 
TEAM collaborators may receive model-specific payments, access to 
payment rule waivers, or some other model-specific flexibility (89 FR 
36473). Therefore, we believe that CMS's ability to audit, inspect, 
investigate, and evaluate records and other materials related to 
participation in CMS Innovation Center models is necessary and 
appropriate. There is a need for CMS to be able to audit, inspect, 
investigate, and evaluate records and materials related to 
participation in CMS Innovation Center models to allow us to ensure 
that TEAM participants are not denying or limiting the coverage or 
provision of benefits for beneficiaries as part of their participation 
in the CMS Innovation Center model. We proposed at Sec.  512.505 to 
define ``model-specific payment'' to mean a payment made by CMS only to 
TEAM participants, under the terms of the CMS Innovation Center model 
that is not applicable to any other providers or suppliers; the term 
``model-specific payment'' would include, unless otherwise specified, 
the reconciliation payment, described in section X.A.3.d.(5)(j) of the 
preamble of this final rule.
    We noted in the proposed rule that there are audit and record 
retention requirements under the Medicare Shared Savings Program (42 
CFR 425.314) and in current models being tested under section 1115A 
(such as under 42 CFR 510.110 for the CMS Innovation Center's 
Comprehensive Care for Joint Replacement Model) (89 FR 36473). Building 
off those existing requirements, we proposed in Sec.  
[thinsp]512.135(a), that the Federal Government, including, but not 
limited to, CMS, HHS, and the Comptroller General, or their designees, 
would have a right to audit, inspect, investigate, and evaluate any 
documents and other evidence regarding implementation of a CMS 
Innovation Center model. Additionally, in order to align with the 
policy of current models being tested by the CMS Innovation Center, we 
proposed that the TEAM participant and its TEAM collaborators must 
maintain and give the Federal Government, including, but not limited 
to, CMS, HHS, and the Comptroller General, or their designees, access 
to all documents (including books, contracts, and records) and other 
evidence sufficient to enable the audit, evaluation, inspection, or 
investigation of the CMS Innovation Center model, including, without 
limitation, documents and other evidence regarding all of the 
following:
     Compliance by the TEAM participant and its TEAM 
collaborators with the terms of the CMS Innovation Center model, 
including proposed new subpart A of proposed part 512.
     The accuracy of model-specific payments made under the CMS 
Innovation Center model.
     The TEAM participant's payment of amounts owed to CMS, or 
payment

[[Page 69841]]

adjustments, under the CMS Innovation Center model.
     Quality measure information and the quality of services 
performed under the terms of the CMS Innovation Center model, including 
proposed new subpart A of proposed part 512.
     Utilization of items and services furnished under the CMS 
Innovation Center model.
     The ability of the TEAM participant to bear the risk of 
potential losses and to repay any losses through claims adjustments to 
CMS, as applicable.
     Patient safety under TEAM.
     Any other program integrity issues.
    We proposed that TEAM participants must maintain the documents and 
other evidence for a period of 6 years from the last payment 
determination for the TEAM participant under the CMS Innovation Center 
model or from the date of completion of any audit, evaluation, 
inspection, or investigation, whichever is later, unless--
     CMS determines there is a special need to retain a 
particular record or group of records for a longer period and notifies 
the TEAM participant at least 30 days before the normal disposition 
date; or
     There has been a termination, dispute, or allegation of 
fraud or similar fault against the TEAM participant in which case the 
records must be maintained for an additional 6 years from the date of 
any resulting final resolution of the termination, dispute, or 
allegation of fraud or similar fault.
    We stated in the proposed rule that if CMS notifies the TEAM 
participant of a special need to retain a record or group of records at 
least 30 days before the normal disposition date, we proposed that the 
records must be maintained for such period of time determined by CMS 
(89 FR 36473). We also proposed that, if CMS notifies the TEAM 
participant of a special need to retain records or there has been a 
termination, dispute, or allegation of fraud or similar fault against 
the TEAM participant or its TEAM collaborators, the TEAM participant 
must notify its TEAM collaborators of the need to retain records for 
the additional period specified by CMS. This provision will ensure that 
that the government has access to the records. To avoid any confusion 
or disputes regarding the timelines outlined in this section of this 
final rule, we proposed to define the term ``days'' to mean calendar 
days.
    We stated in the proposed rule that historically, the CMS 
Innovation Center has required participants in section 1115A models to 
retain records for at least 10 years, which is consistent with the 
outer limit of the statute of limitations for the Federal False Claims 
Act and is consistent with the Shared Savings Program's policy outlined 
at 42 CFR 425.314(b)(2) (89 FR 36474). For this reason, we solicited 
public comments on whether we should require hospital participants and 
TEAM collaborators to maintain records for less than 10 years.
    We invited public comment on these proposed provisions described at 
Sec.  512.586 regarding audits and record retention.
    The following is a summary of comments we received on these 
proposed provisions regarding audits and record retention.
    Comment: A commenter expressed support for the proposed 
requirements regarding Access and Record Retention for TEAM 
Participants and TEAM collaborators.
    Response: CMS thanks the commentor for their support of the 
proposed requirement.
    After consideration of the public comments we received, we are 
finalizing these proposed provisions described at Sec.  512.586 
regarding audits and record retention. Additionally, we recognize the 
overlap between model-specific payment and TEAM payment definitions, 
and therefore to minimize confusion, we are finalizing only the 
definition of TEAM payment at Sec.  512.505 and not model-specific 
payment.
k. Data Sharing
(1) Overview
    As discussed in the proposed rule at 89 FR 36384 and 89 FR 36419, 
we aim to incentivize TEAM participants to engage in care redesign 
efforts to improve quality of care and reduce Medicare FFS spending for 
beneficiaries included in the model during the anchor hospitalization 
or anchor procedure and the 30 days post-discharge from the hospital or 
hospital outpatient department. These care redesign efforts would 
require TEAM participants to work with and coordinate care with other 
health care providers and suppliers to improve the quality and 
efficiency of care for Medicare beneficiaries.
    We have experience with a range of efforts designed to improve care 
coordination for Medicare beneficiaries, including the BPCI Advanced 
and CJR models, both of which make certain Medicare data available to 
participants to better enable them to achieve their goals. For example, 
both the BPCI Advanced and CJR participants may request to receive 
beneficiary-identifiable claims data and financial performance data 
from the baseline period and throughout their tenure in the model to 
help them better understand the FFS beneficiaries that are receiving 
services from their providers and help them improve quality of care and 
conduct care coordination and other care redesign activities to improve 
patient outcomes or reduce health care for beneficiaries that could 
have initiated an episode in the model.
    Based on our experience with these efforts, as discussed later in 
this section, we proposed to make certain beneficiary-identifiable 
claims data and regional aggregate data available to participants in 
TEAM regarding Medicare FFS beneficiaries who may initiate an episode 
and be attributed to them in the model. However, we also stated that we 
expect that TEAM participants are able to, or will work toward, 
independently identifying and producing their own data, through 
electronic health records, health information exchanges, or other means 
that they believe are necessary to best evaluate the health needs of 
their patients, improve health outcomes, and produce efficiencies in 
the provision and use of services.
(2) Beneficiary-Identifiable Claims Data
(a) Legal Authority To Share Beneficiary-Identifiable Data
    We believe that TEAM participants may need access to certain 
Medicare beneficiary-identifiable data for the purposes of evaluating 
their performance, conducting quality assessment and improvement 
activities, conducting population-based activities relating to 
improving health or reducing health care costs, or conducting other 
health care operations listed in the first or second paragraph of the 
definition of ``health care operations'' under the HIPAA Privacy Rule, 
45 CFR 164.501. We recognize that there are issues and sensitivities 
surrounding the disclosure of beneficiary-identifiable health 
information, and that several laws place constraints on sharing 
individually identifiable health information. For example, section 1106 
of the Act generally bars the disclosure of information collected under 
the Act without consent unless a law (statute or regulation) permits 
the disclosure. Here, the HIPAA Privacy Rule would allow for the 
proposed disclosure of individually identifiable health information by 
CMS. In the proposed rule, we proposed to make TEAM participants 
accountable for quality and cost outcomes for TEAM beneficiaries during 
an anchor hospitalization or

[[Page 69842]]

anchor procedure and during the 30-day post-discharge period. We stated 
in the proposed rule that we believe that it is necessary for the 
purposes of this model to offer TEAM participants the ability to 
request summary or raw beneficiary-identifiable claims data for a 3-
year baseline period as well as on a monthly basis during the 
performance year to help TEAM participants engage in care coordination 
and quality improvement activities for TEAM beneficiaries in an 
episode. For the 3-year baseline period, TEAM participants would only 
receive beneficiary-identifiable claims data for beneficiaries that 
initiated an episode in their hospital or hospital outpatient 
department in the 3-year baseline period, and the beneficiary-
identifiable claims data shared with the TEAM participant would be 
limited to the items and services included in the episode. In other 
words, the TEAM participant would not receive beneficiary-identifiable 
claims data for beneficiaries that were admitted to their hospital or 
hospital outpatient department and did not initiate an episode in the 
baseline period. Nor would the TEAM participant receive beneficiary-
identifiable claims data, for beneficiaries who did initiate an episode 
in their hospital or hospital outpatient department during the baseline 
period, for items and services that are not included in an episode, 
such as a primary care visit 5 days before the episode or a hospital 
readmission 1 day after the episode ends. We proposed to apply a 
similar approach for the beneficiary-identifiable claims data sharing 
during the performance year. We stated that we believe that these data 
would constitute the minimum information necessary to enable the TEAM 
participant to understand spending patterns during the episode, 
appropriately coordinate care, and target care strategies toward 
individual beneficiaries furnished care by the TEAM participant and 
other providers and suppliers.
    Under the HIPAA Privacy Rule, covered entities (defined as health 
care plans, providers that conduct covered transactions, including 
hospitals, and health care clearinghouses) are barred from using or 
disclosing individually identifiable health information that is 
``protected health information'' or PHI in a manner that is not 
explicitly permitted or required under the HIPAA Privacy Rule, without 
the individual's authorization. The Medicare FFS program, a ``health 
plan'' function of the Department, is subject to the HIPAA Privacy Rule 
limitations on the disclosure of PHI. Hospitals, which would be TEAM 
participants, and other Medicare providers and suppliers are also 
covered entities, provided they are health care providers as defined by 
45 CFR 160.103 and they conduct (or someone on their behalf conducts) 
one or more HIPAA standard transactions electronically, such as for 
claims transactions. We noted that since TEAM participants are 
hospitals who are covered entities and are the only entities able to 
request the beneficiary-identifiable data and with whom CMS would share 
the beneficiary-identifiable data, we believe that the proposed 
disclosure of the beneficiary claims data for an anchor hospitalization 
or an anchor procedure plus 30-day post-discharge for episodes included 
under TEAM would be permitted by the HIPAA Privacy Rule under the 
provisions that permit disclosures of PHI for ``health care 
operations'' purposes. Under those provisions, a covered entity is 
permitted to disclose PHI to another covered entity for the recipient's 
health care operations purposes if both covered entities have or had a 
relationship with the subject of the PHI to be disclosed, the PHI 
pertains to that relationship, and the recipient will use the PHI for a 
``health care operations'' function that falls within the first two 
paragraphs of the definition of ``health care operations'' in the HIPAA 
Privacy Rule (45 CFR 164.506(c)(4)).
    The first paragraph of the definition of health care operations 
includes ``conducting quality assessment and improvement activities, 
including outcomes evaluation and development of clinical guidelines,'' 
and ``population-based activities relating to improving health or 
reducing health costs, protocol development, case management and care 
coordination'' (45 CFR 164.501).
    Under our proposal, TEAM participants would be using the data on 
their patients to evaluate the performance of the TEAM participant and 
other providers and suppliers that furnished services to the patient, 
conduct quality assessment and improvement activities, and conduct 
population-based activities relating to improved health for their 
patients. When done by or on behalf of a covered entity, these are 
covered functions and activities that would qualify as ``health care 
operations'' under the first and second paragraphs of the definition of 
health care operations at 45 CFR 164.501. Hence, as previously 
discussed, we believe that this provision is extensive enough to cover 
the uses we would expect a TEAM participant to make of the beneficiary-
identifiable data and would be permissible under the HIPAA Privacy 
Rule. Moreover, we noted that our proposed disclosures would be made 
only to HIPAA covered entities, specifically hospitals that are TEAM 
participants that have (or had) a relationship with the subject of the 
information, the information we would disclose would pertain to such 
relationship, and those disclosures would be for purposes listed in the 
first two paragraphs of the definition of ``health care operations.''
    When using or disclosing PHI, or when requesting this information 
from another covered entity, covered entities must make ``reasonable 
efforts to limit'' the information that is used, disclosed, or 
requested to a ``minimum necessary'' to accomplish the intended purpose 
of the use, disclosure, or request (45 CFR 164.502(b)). We stated in 
the proposed rule that we believe that the provision of the proposed 
data elements, as described in section X.A.3.k.(2)(c) of the preamble 
of this final rule, would constitute the minimum data necessary to 
accomplish the TEAM's model goals of the TEAM participant.
    The Privacy Act of 1974 also places limits on agency data 
disclosures. The Privacy Act applies when the federal government 
maintains a system of records by which information about individuals is 
retrieved by use of the individual's personal identifiers (names, 
Social Security numbers, or any other codes or identifiers that are 
assigned to the individual). The Privacy Act prohibits disclosure of 
information from a system of records to any third party without the 
prior written consent of the individual to whom the records apply (5 
U.S.C. 552a(b)).
    ``Routine uses'' are an exception to this general principle. A 
routine use is a disclosure outside of the agency that is compatible 
with the purpose for which the data was collected. Routine uses are 
established by means of a publication in the Federal Register about the 
applicable system of records describing to whom the disclosure will be 
made and the purpose for the disclosure. For the proposed TEAM, the 
system of records would be covered in Master Demonstration, Evaluation, 
and Research Studies (DERS) for the Office of Research, Development and 
Information (ORDI) system of record (72 FR 19705). We stated that we 
believe that the proposed data disclosures are consistent with the 
purpose for which the data discussed in the proposed rule was collected 
and may be disclosed in accordance with the routine uses applicable to 
those records.
    We noted that, as is the case with the CJR model, in the proposed 
rule, we

[[Page 69843]]

proposed to disclose beneficiary-identifiable data to only the 
hospitals that are bearing risk for episodes and not with their 
collaborators. As stated in the final CJR rule (80 FR 73515), we 
believe that the hospitals that are specifically held financially 
responsible for an episode should make the determination as to which 
data are needed to manage care and care processes with their 
collaborators as well as which data they might want to re-disclose, if 
any, to their collaborators provided they are in compliance with the 
HIPAA Privacy Rule.
    We stated that we believe our data sharing proposals are permitted 
by and are consistent with the authorities and protections available 
under the aforementioned statutes and regulations. We sought comments 
on our proposals regarding the authority to share beneficiary-
identifiable data with TEAM participants.
    We received no public comments on our proposals regarding the legal 
authority for CMS to share beneficiary-identifiable data with TEAM 
participants. Thus, we are finalizing at Sec.  512.562(b)(1) the 
proposal to share beneficiary-identifiable data with TEAM participants 
as permitted under the referenced statutes and regulations.
(b) Summary and Raw Beneficiary-Identifiable Claims Data Reports
    Based on our experience with BPCI Advanced and CJR participants, we 
recognize that TEAM participants could vary with respect to the kinds 
of beneficiary-identifiable claims information that would best meet 
their needs. For example, while many TEAM participants might have the 
ability to analyze raw claims data, other TEAM participants could find 
it more useful to have a summary of these data. Given this, we proposed 
to make beneficiary-identifiable claims data for episodes in TEAM 
available through two formats, summary and raw, both for the baseline 
period and on an ongoing monthly basis during their participation in 
the model as we do for BPCI Advanced and CJR. As we explained in the 
proposed rule, summary beneficiary-identifiable claims data summarizes 
the claims data by combining and categorizing claims data to provide a 
broad view of the TEAM participant's health care expenditures and 
utilization. For example, a TEAM participant may use summary 
beneficiary-identifiable data to identify total episode spending for a 
given episode category across all of a TEAM participant's episodes in a 
given performance year. Raw beneficiary-identifiable claims data is 
unrefined and has not been grouped or combined and includes the 
specific claims fields, as described in the minimum necessary data 
discussion in section X.A.3.k.(2).(c). of the preamble of this final 
rule, at the episode level. For example, a TEAM participant may use raw 
beneficiary-identifiable data to look at a particular episode to 
identify the diagnosis code(s) that were associated with a hospital 
readmission for a TEAM beneficiary.
    First, for TEAM participants who wish to receive summary Medicare 
Parts A and B claims data, we proposed to offer TEAM participants, that 
enter into a TEAM data sharing agreement with CMS, as specified in 
section X.A.3.k.(6). of the preamble of this final rule, the option to 
submit a formal data request for summary beneficiary-identifiable 
claims data that have been aggregated to provide summary-level spending 
and utilization data on TEAM beneficiaries who would be in an episode 
during the baseline period and performance years, in accordance with 
applicable privacy and security laws and established privacy and 
security protections. We explained that such summary beneficiary-
identifiable claims data would provide tools to monitor, understand, 
and manage utilization and expenditure patterns as well as to develop, 
target, and implement quality improvement programs and initiatives. For 
example, if the data provided by CMS to a particular TEAM participant 
reflects that, relative to their peers, a certain provider is 
associated with significantly higher rates of inpatient readmissions 
than the rates experienced by other beneficiaries with similar care 
needs, that may be evidence that the TEAM participant could consider, 
among other things, the appropriateness of that provider, whether other 
alternatives might be more appropriate, and whether there exist certain 
care interventions that could be incorporated post-discharge to lower 
readmission rates.
    Second, for TEAM participants who wish to receive raw Medicare 
Parts A and B claims data, we proposed to offer TEAM participants, that 
enter into a TEAM data sharing agreement with CMS, the opportunity to 
submit a formal data request for raw beneficiary-identifiable claims 
data for TEAM beneficiaries who would be in an episode during the 
baseline period and performance years, in accordance with applicable 
privacy and security laws and established privacy and security 
protections. We explained that these raw beneficiary-identifiable 
claims data would be much more detailed compared to the summary 
beneficiary-identifiable claims data and include all beneficiary-
identifiable claims for all episodes in TEAM. In addition, they would 
include episode summaries, indicators for excluded episodes, diagnosis 
and procedure codes, and enrollment and dual eligibility information 
for beneficiaries that initiate episodes in TEAM. Through analysis, 
these raw beneficiary-identifiable claims data would provide TEAM 
participants with information to improve their ability to coordinate 
and target care strategies as well as to monitor, understand, and 
manage utilization and expenditure patterns. Such data would also aid 
them in developing, targeting, and implementing quality improvement 
programs and initiatives.
    We explained that the summary and raw beneficiary-identifiable data 
would allow TEAM participants to assess summary and raw data on their 
relevant TEAM beneficiary population, giving them the flexibility to 
utilize the data based on their analytic capacity. Therefore, for both 
the baseline period and at a minimum on a monthly basis during an TEAM 
participant's performance year, we proposed to provide TEAM 
participants with an opportunity to request summary beneficiary-
identifiable claims data and raw beneficiary-identifiable claims data 
that would meet HIPAA minimum necessary requirements in 45 CFR 
164.502(b) and 164.514(d) and include Medicare Parts A and B 
beneficiary-identifiable claims data for TEAM beneficiaries in an 
episode during the 3-year baseline period and performance year. This 
means the summary and raw beneficiary-identifiable claims data would 
encompass the total expenditures and claims for the proposed episodes, 
including the anchor hospitalization or anchor procedure, and all non-
excluded items and services in an episode covered under Medicare Parts 
A and B within the 30 days after discharge, including hospital care, 
post- acute care, and physician services for the TEAM participant's 
beneficiaries.
    We proposed that if a TEAM participant wishes to receive 
beneficiary-identifiable claims data, they must submit a formal request 
for data on at least an annual basis in a manner form and by a date 
specified by CMS, indicating if they want summary beneficiary-
identifiable data, raw beneficiary-identifiable data, or both, and sign 
a TEAM data sharing agreement. To comply with applicable laws and 
safeguards, we proposed the TEAM participant must attest that--
     The TEAM participant is requesting claims data of TEAM 
beneficiaries who would be in an episode during the

[[Page 69844]]

baseline period or performance year as a HIPAA-covered entity;
     The TEAM participant's request reflects the minimum data 
necessary for the TEAM participant to conduct health care operations 
work that falls within the first or second paragraph of the definition 
of health care operations at 45 CFR 164.501;
     The TEAM participant's use of claims data will be limited 
to developing processes and engaging in appropriate activities related 
to coordinating care and improving the quality and efficiency of care 
and conducting population-based activities relating to improving health 
or reducing health care costs that are applied uniformly to all TEAM 
beneficiaries, in an episode during the baseline period or performance 
year, and that these data will not be used to reduce, limit or restrict 
care for specific Medicare beneficiaries.
    We proposed that the summary and raw beneficiary-identifiable data 
would be packaged and sent to a data portal (to which the TEAM 
participants must request and be granted access) in a ``flat'' or 
binary format for the TEAM participant to retrieve. We also noted that, 
for both the summary and raw beneficiary-identifiable claims data, we 
would exclude information that is subject to the regulations governing 
the confidentiality of substance use disorder patient records (42 CFR 
part 2) from the data shared with a TEAM participant. We stated that we 
believe our proposal to make data available to TEAM participants, 
through the most appropriate means, may be useful to TEAM participants 
to determine appropriate ways to increase the coordination of care, 
improve quality, enhance efficiencies in the delivery system, and 
otherwise achieve the goals of the proposed model. TEAM beneficiaries 
would be informed of TEAM and the potential sharing of Medicare 
beneficiary-identifiable claims data through the beneficiary 
notification, as discussed in section X.A.3.i.(2) of the preamble of 
this final rule. Further, CMS would make beneficiary-identifiable 
claims data available to a TEAM participant for beneficiaries who may 
be included in episodes, in accordance with applicable privacy and 
security laws and only in response to the TEAM participant's request 
for such data, through the use of an executed TEAM data sharing 
agreement with CMS.
    We requested comments on this proposal to share beneficiary-
identifiable claims data with TEAM participants at Sec.  512.562(b).
    The following is a summary of the public comments we received on 
the proposal to share beneficiary-identifiable data with TEAM 
participants and our responses to those comments:
    Comment: A couple of commenters expressed support for the proposal 
to share certain beneficiary-level data with TEAM participants. The 
commenters indicated that these data would enable participants to 
identify their patient populations, plan and improve care, and gauge 
the quality of post-acute care providers.
    Response: We thank the commenters for their support for the 
proposal to share certain beneficiary-level data under this model, and 
concur with the stated benefits for TEAM participants in receiving such 
data.
    Comment: Several commenters emphasized the burden for TEAM 
participants in processing and analyzing data provided by CMS. These 
commenters noted that hospitals may need to dedicate staff or hire 
outside consultants to translate performance data into usable insights, 
and one of the commenters expressed specific concerns about the burden 
of this analytical work for safety net and rural hospitals. A commenter 
requested that CMS work to provide participant hospitals with the type 
of analyzed data that hospitals would otherwise pay outside analysts to 
generate, and another commenter suggested that CMS develop one-page 
data reports tailored to various types of hospital staff.
    Response: We thank the commenters for expressing their concerns 
about the burden placed on hospitals to analyze performance data and 
generate usable insights. We also appreciate the commenters' 
suggestions for the provision of data reports that are usable without 
the aid of external analysts and that are tailored to different 
hospital staff. We note that the proposed availability of both summary 
and raw beneficiary-level and aggregate data for the baseline and 
performance periods is intended to provide data that is useful for TEAM 
participants with a range of analytic capacities. We also note that 
TEAM participants may weigh their own analytic capacities when 
determining whether to request beneficiary-identifiable data from CMS. 
We also note that, as stated in the preamble of the proposed rule at 89 
FR 36474 and in alignment with the goals of the model, we expect that 
TEAM participants are able to, or will work toward being able to, 
independently identify and produce their own data through electronic 
health records, health information exchanges, or other means as they 
deem necessary to evaluate patients, improve outcomes, and produce 
efficiencies. Still, we recognize that challenges may persist for TEAM 
participants in analyzing and improving patterns of care. Thus, we 
intend to provide additional supports to participants as we deem 
appropriate and feasible. For example, as with other models like BPCI 
Advanced and CJR, we plan to implement a learning system through which 
CMS can provide support to participants and participants can 
voluntarily share insights with each other. Additionally, similar to 
efforts undertaken to improve data transparency and utility during the 
course of BPCI Advanced, we will welcome input from TEAM participants 
and other interested parties on additional data sharing that could 
benefit participants and may consider such input in future rulemaking.
    After consideration of the comments received, we are finalizing at 
Sec.  512.562(b) the proposal to share certain beneficiary-identifiable 
claims data with TEAM participants.
(c) Minimum Necessary Data
    We proposed TEAM participants must limit their beneficiary-
identifiable data requests, for TEAM beneficiaries who are in an 
episode during the baseline period or performance year, to the minimum 
necessary to accomplish a permitted use of the data. We proposed the 
minimum necessary Parts A and B data elements may include but are not 
limited to the following data elements:
     Medicare beneficiary identifier (ID).
     Procedure code.
     Gender.
     Diagnosis code.
     Claim ID.
     The from and through dates of service.
     The provider or supplier ID.
     The claim payment type.
     Date of birth and death, if applicable.
     Tax identification number.
     National provider identifier.
    We sought comment on the minimum necessary beneficiary-identifiable 
information for TEAM participants to request for purposes of conducting 
permissible health care operations purposes under this model at Sec.  
512.562(c).
    The following is a summary of the public comments we received on 
the minimum necessary beneficiary-identifiable data for TEAM 
participants to request for health care operations purposes and our 
responses to those comments:
    Comment: A couple of commenters further recommended that the

[[Page 69845]]

beneficiary-level data include all claim types.
    Response: We thank the commenters for their requests. We note that 
the proposed beneficiary-identifiable data sharing would encompass the 
total expenditures and claims for the proposed episodes in order to 
best support participants in health care operations, including 
performance monitoring, care coordination, quality improvement, and 
population-based activities. This would include all non-excluded items 
and services in an episode covered under Medicare Parts A and B, 
including hospital care, post-acute care settings, and physician 
services--in other words, all claim types that are included in TEAM 
episodes. We note that including any claim types in the beneficiary-
identifiable data sharing that are not among the claim types included 
in TEAM episodes would be irrelevant to TEAM and thus fall beyond the 
minimum necessary data sharing.
    We are finalizing at Sec.  512.562(c) the proposal to make 
beneficiary-identifiable data available to TEAM participants, to 
include raw and summary Medicare Parts A and B beneficiary-identifiable 
claims data for TEAM beneficiaries in an episode during the 3-year 
baseline period and performance year.
(3) Regional Aggregate Data
    As discussed in section X.A.3.d.(3) of the preamble of this final 
rule, we proposed to incorporate regional pricing data when 
establishing target prices for TEAM participants, similar to the CJR 
model's target prices that are constructed at the regional level. As 
indicated in the CJR final rule (80 FR 73510), we finalized our 
proposal to share regional pricing data with CJR participants because 
it was a factor affecting target prices. Given some of the similar 
features between the CJR model and TEAM proposed in the proposed rule, 
particularly our proposal to incorporate regional pricing data when 
establishing target prices under the model, we proposed to provide 
regional aggregate expenditure data available for all Parts A and B 
claims associated with episodes in TEAM for the U.S. Census Division in 
which the TEAM participant is located, as we similarly provide to 
hospitals participating in the CJR model. Specifically, we proposed to 
provide TEAM participants with regional aggregate data on the total 
expenditures during an anchor hospitalization or anchor procedure and 
the 30-day post-discharge period for all Medicare FFS beneficiaries who 
would have initiated an episode under our proposed episode definitions 
at 89 FR 36416 during the baseline period and performance years. This 
data would be provided at the regional level; that is, we proposed to 
share regional aggregate data with a TEAM participant for episodes 
initiated in the U.S. Census Division where the TEAM participant is 
located. These regional aggregate data would be in a format similar to 
the proposed summary beneficiary-identifiable claims data and would 
provide summary information on the average episode spending for 
episodes in TEAM in the U.S. Census Division in which the TEAM 
participant is located. However, the regional aggregate data would not 
be beneficiary-identifiable and would be de-identified in accordance 
with HIPAA Privacy Rule, 45 CFR 164.514(b). Further, the regional 
aggregate data would also comply with CMS data sharing requirements, 
including the CMS cell suppression policy which stipulates that no cell 
(for example, admissions, discharges, patients, services, etc.) 
containing a value of 1 to 10 can be reported directly. Given the 
regional aggregate data is de-identified, we proposed TEAM participants 
would not have to submit a request to receive this data and the data 
would not be subject to the terms and conditions of the TEAM data 
sharing agreement.
    We sought comments on our proposal at Sec.  512.562(d) to provide 
these data to TEAM participants.
    We received no public comments on the proposal to provide regional 
aggregate data to TEAM participants and thus are finalizing at Sec.  
512.562(d) the provision of regional aggregate data to TEAM 
participants as proposed, noting that only minor grammatical changes 
were made to the regulatory text.
(4) Timing and Period of Baseline Period Data
    We recognize that providing the ability for TEAM participants to 
request the summary and raw beneficiary-identifiable claims baseline 
data and receive regional aggregate baseline data would be important 
for TEAM participants to be able to detect unnecessary episode 
spending, coordinate care, and identify areas for practice 
transformation, and that early provision of this data, specifically 
before the model start date, as defined in Sec.  512.505, could 
facilitate their efforts to do so. Also, as discussed in section 
X.A.3.d.(3)(a) of the preamble of this final rule, target prices would 
be calculated using a TEAM participant's historical episode spending 
during their baseline period. Further, we believe that TEAM 
participants would view the episode payment model effort as one 
involving continuous improvement. As a result, changes initially 
contemplated by a TEAM participant could be subsequently revised based 
on updated information and experiences.
    Therefore, as with the BPCI Advanced model, we proposed to make 3-
years of baseline period data available to TEAM participants, who enter 
into a TEAM data sharing agreement with CMS, for beneficiaries who 
would have been included in an episode had the model been implemented 
during the baseline period, and intend to make these data available 
upon request prior to the start of each performance year and in 
accordance with applicable privacy and security laws and established 
privacy and security protections. We would provide the 3 years of 
baseline period data for the summary and raw beneficiary-identifiable 
data and for the regional aggregate data. We believe that 3 years of 
baseline period data is sufficient to support a TEAM participant's 
ability to detect unnecessary episode spending, coordinate care, and 
identify areas for practice transformation. We believe that if a TEAM 
participant has access to baseline period data for the 3-year period 
for each performance year used to set target prices, then it would be 
better able to assess its practice patterns, identify cost drivers, and 
ultimately redesign its care practices to improve efficiency and 
quality. We considered proposing to make available 4 years of baseline 
period data, or offering 1 year of baseline period data, but we believe 
offering 4 years of baseline period data would not be necessary since 
target prices in TEAM are constructed from a 3-year baseline period and 
1 year of data may not sufficiently help TEAM participants identify 
areas to improve beneficiary health and care coordination or reducing 
health costs.
    Therefore, we proposed that the 3-year period utilized for the 
baseline period match the baseline data used to create TEAM 
participants target prices every performance year, and roll forward one 
year every performance year, as discussed in section X.A.3.d.(3)(a) of 
the preamble of this final rule. Specifically, we proposed that the 
baseline period data for the summary and raw beneficiary-identifiable 
data reports and regional aggregate data report would be shared 
annually at least 1 month prior to the start of a performance year and 
available for episodes for each of the following performance years:

 Performance Year 1: Episodes that began January 1, 2022, 
through December 31, 2024

[[Page 69846]]

 Performance Year 2: Episodes that began January 1, 2023, 
through December 31, 2025
 Performance Year 3: Episodes that began January 1, 2024, 
through December 31, 2026
 Performance Year 4: Episodes that began January 1, 2025, 
through December 31, 2027
 Performance Year 5: Episodes that began January 1, 2026, 
through December 31, 2028

    We requested comments on these proposals at proposed Sec.  
512.562(b)(6)(i) and Sec.  512.562(d)(1)(i) to share beneficiary-
identifiable data and regional aggregate data for a 3-year baseline 
period at least 1 month prior to the start of a performance year. We 
note that the proposed periods of data sharing stated in the proposed 
rule at 89 FR 36477 for Performance Years 4 and 5 were erroneously 
listed as being only two years long, ending at the end of 2026 and 
2027, respectively. The data sharing periods have been corrected in 
this final rule to reflect the 3-year baseline period consistently 
across performance years--namely, episodes beginning January 1, 2025, 
through December 31, 2027, for Performance Year 4, and episodes 
beginning January 1, 2026, through December 31, 2028, for Performance 
Year 5.
    The following is a summary of the public comments we received on 
the proposal to share beneficiary-identifiable data and regional 
aggregate data for a 3-year baseline period with TEAM participants at 
least 1 month prior to the start of a performance year and our 
responses to these comments:
    Comment: A couple commenters requested earlier data sharing from 
CMS prior to the start of the model performance period. A couple 
commenters requested that CMS provide TEAM participants with a full set 
of claims and quality data one year prior to model launch, indicating 
that this is needed for participants to conduct the care redesign 
necessary for successful performance in the model. Another commenter 
requested that CMS provide baseline claims data and target prices at 
least one year prior to the performance period.
    Response: We thank the commenters for these requests. As stated in 
the proposed rule, we recognize that sharing baseline claims data with 
TEAM participants prior to the model start date could facilitate their 
efforts to detect unnecessary spending, coordinate care, and identify 
areas for practice transformation. The proposed commitment by CMS to 
provide baseline data at least one month prior to the start of the 
corresponding performance period is in recognition of the utility of 
these data for participants. However, we are not convinced that the 
provision of claims data to participants one year prior to model launch 
is necessary for participants' success in the model, nor that 
participants' success in the model will be determined by care redesign 
activities undertaken entirely prior to model launch. Instead, as 
stated in the proposed rule, we view TEAM participation as a process of 
continuous improvement and expect that participants will use baseline 
and performance period data to inform care redesign activities 
throughout their tenure in the model. In accordance with this 
expectation, we proposed to provide multiple sources of usable data to 
participants at regular intervals, including monthly beneficiary-
identifiable claims data and yearly quality measure score data. For 
both claims and quality data, the proposed timing and cadence of data 
sharing was carefully considered and determined based on the utility of 
the data, availability of results, and administrative burden under this 
model specifically.
    We also note that, as stated in the proposed rule (89 FR 36425), 
the proposed timing for CMS to share quality measure performance data 
with TEAM participants aligns with the established CMS Care Compare 
schedule found here: https://data.cms.gov/provider-data/topics/hospitals/measures-and-currentdata-collection-periods. Regarding target 
price data, we note that the timing of preliminary target price 
calculations is dependent on the availability of episode spending data 
for the baseline period. For example, as stated in the proposed rule 
(89 FR 36427), CMS would use baseline episode spending for episodes 
that started between January 1, 2022, and December 31, 2024, to 
determine baseline episode spending for Performance Year 1 (PY 1), 
which is proposed to begin on January 1, 2026. Since episodes starting 
on December 31, 2024, would be included in the PY 1 baseline spending 
calculations that form a primary component of PY 1 preliminary target 
prices, the timing of PY 1 target price calculations would need to 
allow the time not only for such episodes to end but also for claims 
run-out to capture any additional spending and for baseline spending 
and target price calculations to be performed. Thus, we conclude that 
it is not feasible for CMS to provide target price data, or indeed 
baseline spending data, a full year prior to the applicable performance 
period.
    Comment: A commenter reflected on the use of beneficiary-
identifiable claims data from the 3-year baseline period, suggesting 
that these baseline period data should be considered in aggregate and 
not used for individual patient care decisions.
    Response: We thank the commenter for sharing this view and concur 
that there are limitations to the use of baseline data for clinical 
decision making. We proposed to make available to TEAM participants 
multiple forms of baseline and performance period data such that 
participants may gain insights into multiple aspects of their care 
delivery and model performance. As stated in the proposed rule (89 FR 
36474), we also expect that participants will work toward developing 
and improving their own data identification and analysis capabilities 
as part of their care improvement efforts.
    After consideration of the comments received, we are finalizing at 
Sec.  512.562(b)(6)(i) and Sec.  512.562(d)(1)(i) the proposal to share 
beneficiary-identifiable data and regional aggregate data for a 3-year 
baseline period at least 1 month prior to the start of a performance 
year.
(5) Timing and Period of Performance Year Data
    As discussed in the proposed rule, the availability of periodically 
updated raw and summary beneficiary-identifiable claims data and 
regional aggregate data would assist TEAM participants to identify 
areas where they might wish to change their care practice patterns, as 
well as monitor the effects of any such changes. With respect to these 
purposes, we considered what would be the most appropriate period for 
making updated raw and summary beneficiary-identifiable claims data and 
regional aggregate data available to TEAM participants, while complying 
with the HIPAA Privacy Rule's ``minimum necessary'' provisions, 
described in 45 CFR 164.502(b) and 164.514(d). We noted that we believe 
that monthly data updates would align with a 30-day post-discharge 
episode window given the episode's duration and the need to share data 
in a timely manner and identify areas for care improvement. 
Accordingly, we proposed to make updated raw and summary beneficiary-
identifiable claims data and regional aggregate data available for a 
given performance year to TEAM participants upon receipt of a request 
for such information and execution of a TEAM data sharing agreement 
with CMS, that meets CMS's requirements to ensure the

[[Page 69847]]

applicable HIPAA conditions for disclosure have been met, as frequently 
as on a monthly basis during the performance year and continue sharing 
the claims data for up to 6 months beyond the end of that performance 
year to capture claims run out. We stated that we believe 6 months of 
claims run out is sufficient given that an internal review of Medicare 
claims data found that the majority of Medicare claims had been 
received, and were considered final, by 6 months after the date of 
service and is also consistent with how we proposed claims run out for 
the reconciliation process, as described in section X.A.3.d.(5). of the 
preamble of this final rule.\1010\
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    \1010\ Medicare Claims Maturity: CCW White Paper accessed at 
https://www2.ccwdata.org/web/guest/white-papers?p_l_back_url=%2Fweb%2Fguest%2Fsearch%3Fq%3Dmedicare%2Bclaims%2Bmaturity on Jan, 26, 2024.
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    To accomplish this for the first performance year of the TEAM 
(2026), we proposed to provide, upon request and execution of a TEAM 
data sharing agreement with CMS, and in accordance with the HIPAA 
Privacy Rule, beneficiary-identifiable claims data and aggregate 
regional data from January 1, 2026, to December 30, 2026 on as 
frequently as a running monthly basis, as claims are available. We 
would continue sharing beneficiary-identifiable claims data and 
regional aggregate data for episodes in PY 1 for an additional 6 
months, so until June 30, 2027, to capture claims run out for items and 
services billed during this time period. These datasets would represent 
all potential episodes that were initiated in 2026 and capture a 
sufficient amount of time, up to 6 months, for relevant claims to have 
been processed. We would limit the content of this data set to the 
minimum data necessary for the TEAM participant to conduct quality 
assessment and improvement activities and effectively coordinate care 
of its patient population. This data sharing process would continue 
each performance year of TEAM. We considered proposing to extend this 
period to capture more than 30 days of data or updating on a quarterly 
frequency. However, as discussed in the proposed rule, we do not 
believe this would benefit the TEAM participant since it may create 
challenges to timely identify potential TEAM beneficiaries for care 
coordination efforts. We sought comment on whether we should consider 
extending the period to capture more than 30 days of data or updating 
the data on a frequency other than monthly.
    We sought comments on this proposal at proposed Sec.  
512.562(b)(6)(ii) and Sec.  512.562(d)(1)(ii) to make beneficiary-
identifiable data and regional aggregate data available on a monthly 
basis and for up to 6 months after a performance year.
    The following is a summary of the public comments we received on 
the proposal to make beneficiary-identifiable data and regional 
aggregate data available to TEAM participants on a monthly basis and 
for up to 6 months after a performance year and our responses to these 
comments:
    Comment: A couple of commenters expressed concern about the 
potential for data lags limiting the ability of participants to make 
real-time improvements. The commenters requested that CMS work to 
provide timely data as soon as feasible.
    Response: We thank the commenters for sharing their concerns about 
data lags. We recognize that delays in data sharing can limit the 
utility of these data for participants in assessing and improving care. 
In recognition of the benefits of timely data for continuous 
improvement, we proposed to share raw and summary beneficiary-
identifiable claims data as frequently as on a monthly basis during the 
performance year and for up to 6 months beyond the end of the 
performance year to capture claims run-out. As stated in the preamble 
of the proposed rule (89 FR 36478), we believe that the proposed timing 
of performance period data sharing aligns appropriately with the 
proposed 30-day episode length and the need for timely data.
    Comment: A commenter requested that CMS include updated preliminary 
target prices as part of the monthly data sharing, or alternatively 
provide more detailed information on target price model coefficients to 
allow participants to proactively calculate target prices.
    Response: We thank the commenter for their suggestions for 
additional data sharing surrounding target prices. We note that, as 
described in section X.A.3.d.(3).(b) of this final rule, TEAM 
preliminary target prices will be constructed at a regional level and 
shared with participants prior to the performance year, then will be 
updated with realized trends and participant-specific risk adjustments 
during reconciliation. As we note in the responses to comments in 
section X.A.3.d.(3).(b) of this final rule, coefficients will be 
calculated and made available to participants prior to the start of the 
performance year, so participants would be able to use them to estimate 
their episode-level target prices.
    After consideration of the comments, we are finalizing at Sec.  
512.562(b)(6)(ii) and Sec.  512.562(d)(1)(ii) the proposal to make 
beneficiary-identifiable data and regional aggregate data available on 
a monthly basis and for up to 6 months after a performance year.
(6) TEAM Data Sharing Agreement
    We proposed that if a TEAM participant wishes to retrieve the 
beneficiary-identifiable data, the TEAM participant would be required 
to first complete, sign, and submit--and thereby agree to the terms 
of--a data sharing agreement with CMS, which we would call the TEAM 
data sharing agreement. We proposed to define the TEAM data sharing 
agreement as an agreement between the TEAM participant and CMS that 
includes the terms and conditions for any beneficiary-identifiable data 
being shared with the TEAM participant under Sec.  512.562. Further, we 
proposed to require TEAM participants to comply with all applicable 
laws and the terms of the TEAM data sharing agreement as a condition of 
retrieving the beneficiary-identifiable data. We also proposed that the 
TEAM data sharing agreement would include certain protections and 
limitations on the TEAM participant's use and further disclosure of the 
beneficiary-identifiable data and would be provided in a form and 
manner specified by CMS. Additionally, we proposed that a TEAM 
participant that wishes to retrieve the beneficiary-identifiable data 
would be required to complete, sign, and submit a signed TEAM data 
sharing agreement at least annually. We stated that we believe that it 
is important for the TEAM participant to complete and submit a signed 
TEAM data sharing agreement at least annually so that CMS has up-to-
date information that the TEAM participant wishes to retrieve the 
beneficiary-identifiable data and information on the designated data 
custodian(s). As described in greater detail later in this section, we 
proposed that a designated data custodian would be the individual(s) 
that a TEAM participant would identify as responsible for ensuring 
compliance with all privacy and security requirements and for notifying 
CMS of any incidents relating to unauthorized disclosures of 
beneficiary-identifiable data.
    CMS believes it is important for the TEAM participant to first 
complete and submit a signed TEAM data sharing agreement before it 
retrieves any beneficiary-identifiable data to help protect the privacy 
and security of any beneficiary-identifiable data shared by CMS with 
the TEAM participant. There

[[Page 69848]]

are important sensitivities surrounding the sharing of this type of 
individually identifiable health information, and CMS must ensure to 
the best of its ability that any beneficiary-identifiable data that it 
shares with TEAM participants would be further protected in an 
appropriate fashion.
    We considered an alternative proposal under which TEAM participants 
would not need to complete and submit a signed TEAM data sharing 
agreement, but we concluded that, if we proceeded with this option, we 
would not have adequate assurances that the TEAM participants would 
appropriately protect the privacy and security of the beneficiary-
identifiable data that we proposed to share with them. We also 
considered an alternative proposal under which the TEAM participant 
would need to complete and submit a signed TEAM data sharing agreement 
only once for the duration of the TEAM. However, we concluded that this 
similarly would not give CMS adequate assurances that the TEAM 
participant would protect the privacy and security of the beneficiary-
identifiable data from CMS. We concluded that it is critical that we 
have up-to-date information and designated data custodians, and that 
requiring the TEAM participant to submit a TEAM data sharing agreement 
at least annually would represent the best means of achieving this 
goal.
    We solicited public comment on our proposal to define TEAM data 
sharing agreement at Sec.  512.505. We also sought comment on our 
proposal to require, in Sec.  512.562(e)(2), that the TEAM participant 
agree to comply with all applicable laws and the terms of the TEAM data 
sharing agreement as a condition of retrieving the beneficiary-
identifiable data, and on our proposal in Sec.  512.562(e)(1) that the 
TEAM participant would need to submit the signed TEAM data sharing 
agreement at least annually if the TEAM participant wishes to retrieve 
the beneficiary-identifiable data.
    The following is a summary of the public comments we received on 
the proposals to define the TEAM data sharing agreement, to require 
compliance with the terms of the TEAM data sharing agreement as a 
condition of retrieving the beneficiary-identifiable data, and to 
require submission of the TEAM data sharing agreement at least 
annually, and our responses to these comments:
    Comment: A commenter expressed support and appreciation for the 
proposed protections surrounding the sharing of beneficiary-
identifiable data with TEAM participants. The commenter reiterated that 
any data sharing should be conducted in a manner that protects patient 
privacy and allows all points of care to maximize lessons learned and 
implement quality improvement activities.
    Response: We thank the commenter for their support and agree that 
appropriate protections must be ensured in the sharing of beneficiary-
identifiable data. As described in the proposed rule (89 FR 36478), we 
proposed that a TEAM participant requesting to receive such data from 
CMS would be required to submit a TEAM data sharing agreement at least 
annually and comply with the terms of said agreement. As proposed, the 
data sharing agreement would include certain protections and 
limitations on the TEAM participant's use and further disclosure of the 
beneficiary-identifiable data in compliance with the requirements 
imposed on covered entities by the HIPAA regulations. The TEAM 
participant would be required to designate a data custodian who would 
be responsible for ensuring compliance with all privacy and security 
requirements and for notifying CMS of any unauthorized disclosures of 
beneficiary-identifiable data. As detailed in the proposed rule (89 FR 
36479), the data sharing agreement would also:
     Require the TEAM participant to comply with additional 
privacy, security, breach notification, and data retention 
requirements,
     Impose the same terms and conditions for any downstream 
recipient of the beneficiary-identifiable data that is a business 
associate of the TEAM participant or performs a similar function for 
the TEAM participant, and
     Revoke the eligibility of a TEAM participant to receive 
beneficiary-identifiable data in the event of any misuse or disclosure 
of such data in violation of any applicable statutory or regulatory 
requirements.
    Comment: A commenter indicated that the need to request data on a 
monthly basis would impose an unnecessary burden on participants and 
requested that CMS automatically provide data on a monthly basis.
    Response: We thank the commenter for their input and concur that 
requiring participants to request claims data on a monthly basis would 
constitute an unnecessary burden on participants. We wish to clarify 
that we do not intend to require participants to submit a request for 
claims data each month. As stated in the preamble of the proposed rule 
(89 FR 36478), TEAM participants would be required to complete, sign, 
and submit a TEAM data sharing agreement at least annually to receive 
beneficiary-identifiable claims data on as frequently as a monthly 
basis as described in the preamble of the proposed rule (89 FR 36478). 
We believe this cadence appropriately balances participant burden with 
the need for CMS to maintain up-to-date information on participants and 
their data custodians.
    After consideration of the comments received, we are finalizing at 
Sec.  512.505 the definition of TEAM data sharing agreement as an 
agreement entered into between the TEAM participant and CMS that 
includes the terms and conditions for any beneficiary-identifiable data 
shared with the TEAM participant under Sec.  512.562, which includes a 
minor change for clarity (adding ``entered into'') from the language 
proposed. In addition, we are finalizing at Sec.  512.562(e)(1) the 
proposal that the TEAM participant would need to submit the signed TEAM 
data sharing agreement at least annually if the TEAM participant wishes 
to retrieve the beneficiary-identifiable data.
    We are also finalizing at Sec.  512.562(e)(2) the proposed 
requirement that the TEAM participant agree to comply with all 
applicable laws and the terms of the TEAM data sharing agreement as a 
condition of retrieving the beneficiary-identifiable data.
(a) Content of TEAM Data Sharing Agreement
    We proposed that, under the TEAM data sharing agreement, TEAM 
participants would agree to certain terms, namely: (1) To comply with 
the requirements for use and disclosure of this beneficiary-
identifiable data that are imposed on covered entities by the HIPAA 
regulations and the requirements of TEAM; (2) to comply with additional 
privacy, security, and breach notification requirements to be specified 
by CMS in the TEAM data sharing agreement; (3) to contractually bind 
each downstream recipient of the beneficiary-identifiable data that is 
a business associate of the TEAM participant to the same terms and 
conditions to which the TEAM participant is itself bound in its data 
sharing agreement with CMS as a condition of the downstream recipient's 
receipt of the beneficiary-identifiable data retrieved by the TEAM 
participant under TEAM; and (4) that if the TEAM participant misuses or 
discloses the beneficiary-identifiable data in a manner that violates 
any applicable statutory or regulatory requirements or that is 
otherwise non-compliant with the provisions of the TEAM data sharing 
agreement, the TEAM participant would no longer be eligible to retrieve 
the

[[Page 69849]]

beneficiary-identifiable data and may be subject to additional 
sanctions and penalties available under the law. As discussed in the 
proposed rule, CMS believes that these terms for sharing beneficiary-
identifiable data with TEAM participants are appropriate and important, 
as CMS must ensure to the best of its ability that any beneficiary 
identifiable data that it shares with TEAM participants would be 
further protected by the TEAM participant, and any business associates 
of the TEAM participant, in an appropriate fashion. We stated that we 
believe that these proposals would allow CMS to accomplish that.
    We sought public comment on the additional privacy, security, 
breach notification, and other requirements that we would include in 
the TEAM data sharing agreement. CMS has these types of agreements in 
place as part of the governing documents of other models tested under 
section 1115A of the Act and in the Medicare Shared Savings Program. In 
these agreements, CMS typically requires the identification of data 
custodian(s) and imposes certain requirements related to 
administrative, physical, and technical safeguards relating to data 
storage and transmission; limitations on further use and disclosure of 
the data; procedures for responding to data incidents and breaches; and 
data destruction and retention. We noted that these provisions would be 
imposed in addition to any restrictions required by law, such as those 
provided in the HIPAA privacy, security and breach notification 
regulations. These provisions would not prohibit the TEAM participant 
from making any disclosure of the data otherwise required by law.
    We also sought public comment on what disclosures of the 
beneficiary-identifiable data might be appropriate to permit or 
prohibit under the TEAM data sharing agreement. For example, we 
considered prohibiting, in the TEAM data sharing agreement, any further 
disclosure, not otherwise required by law, of the beneficiary-
identifiable data to anyone who is not a HIPAA covered entity or 
business associate, as defined in 45 CFR 160.103, or to an individual 
practitioner in a treatment relationship with the TEAM beneficiary, or 
that practitioner's business associates. Such a prohibition would be 
similar to that imposed by CMS in other models tested under section 
1115A of the Act in which CMS shares beneficiary identifiable data with 
model participants.
    We considered these possibilities because there exist important 
legal and policy limitations on the sharing of the beneficiary-
identifiable data and CMS must carefully consider the ways in which and 
reasons for which we would provide access to this data for purposes of 
the TEAM. CMS believes that some TEAM participants may require the 
assistance of business associates, such as contractors, to perform data 
analytics or other functions using this beneficiary-identifiable data 
to support the TEAM participant's review of their care management and 
coordination, quality improvement activities, or clinical treatment of 
TEAM beneficiaries. CMS also believes that this beneficiary-
identifiable data may be helpful for any HIPAA covered entities who are 
in a treatment relationship with the TEAM beneficiary.
    We sought public comment on how a TEAM participant might need to, 
and want to, disclose the beneficiary-identifiable data to other 
individuals and entities to accomplish the goals of the TEAM, in 
accordance with applicable law.
    The following is a summary of the public comments we received on 
potential needs for TEAM participants to disclose beneficiary-
identifiable data to other individuals or entities to accomplish the 
goals of TEAM, and our responses to these comments:
    Comment: A couple of commenters requested that we include 
provisions for data sharing among additional health care providers 
involved in providing care to TEAM beneficiaries. A commenter requested 
that CMS guarantee data sharing among physicians, other clinicians, and 
relevant non-clinical staff. This commenter indicated that hospital-
level data are important for quality, safety, and cost improvement 
among anesthesiologists. Another commenter requested that CMS provide 
an option for TEAM participants to share claims data with 
collaborators, noting that such data sharing could especially benefit 
safety net providers and providers new to value-based care.
    Response: We thank the commenters for their requests regarding 
further data sharing beyond the TEAM participant. We agree that 
multiple health care providers working within and beyond the TEAM 
participant organization may play a critical role in providing care for 
TEAM beneficiaries. We further recognize the benefit of sharing 
beneficiary-identifiable data with such providers as well as the 
provisions of the HIPAA Privacy Rule which permit disclosures of PHI 
between covered entities for certain ``health care operations'' 
purposes (45 CFR 164.506(c)(4)).
    As noted in the proposed rule, in alignment with the CJR model, we 
proposed to enter into a data sharing agreement with, and disclose 
beneficiary-identifiable data to, only the hospitals that are bearing 
risk for episodes, and that CMS would not enter into a data sharing 
agreement with the business associates of TEAM participants. We 
reiterate that, as stated in the final CJR rule (80 FR 73515), we 
believe that the hospitals that are specifically held financially 
responsible for an episode should make the determination as to which 
data are needed to manage care and care processes with their 
collaborators as well as which data they might want to re-disclose, if 
any, to their collaborators provided they are in compliance with the 
HIPAA Privacy Rule. We proposed that under the TEAM data sharing 
agreement, the TEAM participant receiving beneficiary-identifiable data 
would agree to contractually bind each downstream recipient of the 
beneficiary-identifiable data that is a business associate of the TEAM 
participant to the same terms and conditions to which the TEAM 
participant is itself bound in its TEAM data sharing agreement with CMS 
as a condition of the business associate's receipt of the beneficiary-
identifiable data retrieved by the TEAM participant under TEAM.
    After considering the comments received, we are finalizing as 
proposed the content of the TEAM data sharing agreement as described at 
Sec.  512.562(e), including the contractual obligations for downstream 
recipients of the beneficiary-identifiable data as proposed at Sec.  
512.562(e)(1)(iii). Specifically, we are finalizing the proposed 
requirements at Sec.  512.562(e)(1)(i) through (iv) that the TEAM data 
sharing agreement would:
     Require the TEAM participant to comply with the 
requirements for use and disclosure of this beneficiary-identifiable 
data that are imposed on covered entities by the HIPAA regulations and 
the requirements of the TEAM;
     Require the TEAM participant to comply with additional 
privacy, security, breach notification, and data retention requirements 
specified by CMS--with one modification, removing ``in the TEAM data 
sharing agreement'' from the description of these requirements, to 
avoid redundancy;
     Contractually bind and impose the same terms and 
conditions for any downstream recipient of the beneficiary-identifiable 
data that is a business associate of the TEAM participant; and
     Revoke the eligibility of a TEAM participant to receive 
beneficiary-

[[Page 69850]]

identifiable data in the event of any misuse or disclosure of such data 
in violation of any applicable statutory or regulatory requirements or 
non-compliance with the provisions of the TEAM data sharing agreement.
    We are finalizing one modification to use the defined term for 
``TEAM data sharing agreement'' in the revocation provision under Sec.  
512.562(e)(1)(iv).
    Under our proposal, the TEAM data sharing agreement would include 
other provisions, including requirements regarding data security, 
retention, destruction, and breach notification. For example, we are 
considering including, in the TEAM data sharing agreement, a 
requirement that the TEAM participant designate one or more data 
custodians who would be responsible for ensuring compliance with the 
privacy, security and breach notification requirements for the data set 
forth in the TEAM data sharing agreement; various security requirements 
like those found in other models tested under section 1115A of the Act, 
but no less restrictive than those provided in the relevant Privacy Act 
system of records notices; how and when beneficiary-identifiable data 
could be retained by the TEAM participant or its downstream 
participants of the beneficiary identifiable data; procedures for 
notifying CMS of any breach or other incident relating to the 
unauthorized disclosure of beneficiary-identifiable data; and 
provisions relating to destruction of the data. These are only examples 
and are not the only terms CMS would potentially include in the TEAM 
data sharing agreement.
    We solicited public comment on this proposal that CMS, by adding 
Sec.  512.562(e)(1)(ii), would impose certain requirements in the TEAM 
data sharing agreement related to privacy, security, data retention, 
breach notification, and data destruction.
    Finally, CMS proposed, at Sec.  512.562(e)(1)(iv), that the TEAM 
data sharing agreement would include a term providing that if the TEAM 
participant misuses or discloses the beneficiary-identifiable data in a 
manner that violates any applicable statutory or regulatory 
requirements or that is otherwise non-compliant with the provisions of 
the TEAM data sharing agreement, the TEAM participant would no longer 
be eligible to retrieve beneficiary-identifiable data under proposed 
Sec.  512.562(b) and may be subject to additional sanctions and 
penalties available under law. We also proposed that if CMS determines 
that one or more grounds for remedial action specified in Sec.  
512.592(a) has taken place, CMS may discontinue the provision of data 
sharing and reports to the model participant. We proposed that CMS may 
take remedial action if the model participant misuses or discloses the 
beneficiary-identifiable data in a manner that violates any applicable 
statutory or regulatory requirements or that is otherwise non-compliant 
with the provisions of the TEAM data sharing agreement.
    We solicited public comment on this proposal, to prohibit the TEAM 
participant from obtaining beneficiary-identifiable data pertaining to 
the TEAM if the TEAM participant fails to comply with applicable laws 
and regulations, the terms of the TEAM, or the TEAM data sharing 
agreement.
    We received no public comments regarding the proposed additional 
content of the TEAM data sharing agreement, namely the proposed 
addition of privacy, security, breach notification, and data retention 
requirements and the proposal to prohibit the TEAM participant from 
obtaining beneficiary-identifiable data pertaining to the TEAM if the 
TEAM participant fails to comply with applicable laws and regulations, 
the terms of the TEAM, or the TEAM data sharing agreement. Thus, we are 
finalizing at Sec.  512.562(e)(1)(ii) the inclusion of additional 
requirements, as proposed, and at Sec.  512.562(e)(1)(iv) the 
prohibition of a TEAM participant from receiving beneficiary-
identifiable data in the event of non-compliance, as proposed.
l. Referral to Primary Care Services
    We noted in this proposed rule, the CMS Innovation Center has 
placed accountable care at the center of our comprehensive strategy, 
with a goal of 100 percent of Medicare FFS beneficiaries (and most 
Medicaid beneficiaries as well) being in an accountable care 
relationship by 2030. Achieving the goal of increasing the number of 
beneficiaries in accountable care relationships and testing models and 
innovations supporting access to high-quality, integrated specialty 
care across the patient journey--both longitudinally and for procedural 
or acute services--will greatly depend on numerous factors, including 
the models and initiatives available for providers in value-based 
payment, but also our ability to create incentives for providers and 
suppliers to coordinate care across different aspects of care. With 
TEAM, we have an opportunity to further integrate care during the 
transition from an acute event- an episode- back to longitudinal care 
relationships, such as primary care.
    We stated in the proposed rule that acute care hospitals commonly 
refer patients back to primary care providers in the community upon 
discharge from the hospital, given the connection between ongoing care 
follow-up and reduced readmissions, among other benefits. While the 
hospital Conditions of Participation for discharge planning at Sec.  
482.43(a) outline requirements for referring patients to post-acute 
providers as well as community-based providers and suppliers, there is 
no specific requirement for referral back to a supplier, as defined in 
in section 1861(d) of the Act and codified at Sec.  400.202, of primary 
care services, as defined in section 1842(i)(4) of the Act, at hospital 
discharge for all patients. Under TEAM, we proposed that TEAM 
participants be required to include in hospital discharge planning a 
referral to a supplier of primary care services for a TEAM beneficiary, 
on or prior to discharge from an anchor hospitalization or anchor 
procedure. We also proposed that the TEAM participant must comply with 
beneficiary freedom of choice requirements, as described in the 
Beneficiary Choice and Notification section: X.A.3.i.(2) of this final 
rule and codified at Sec.  512.582(a), and not limit a TEAM 
beneficiary's ability to choose among Medicare providers or suppliers. 
If a TEAM participant fails to comply with requiring a referral to a 
supplier of primary care services during hospital discharge planning, 
then we proposed the TEAM participant would be subject to remedial 
action, as described in the Remedial Action section: X.A.1.f. of this 
final rule.
    Referring TEAM beneficiaries to a supplier of primary care services 
would require the TEAM participant to confirm the TEAM beneficiary's 
primary care provider status during the anchor hospitalization or 
anchor procedure and make the referral to primary care services by the 
point of the hospital discharge. By requiring a referral to primary 
care services, TEAM would be used to connect TEAM beneficiaries with 
ongoing care beyond the course of the episode. Further, TEAM 
participants would be required to ensure TEAM beneficiaries preference 
of suppliers are considered to ensure proper beneficiary protections.
    In the proposed rule we stated that we recognize that TEAM is 
comprised of procedural episodes, which may mean TEAM beneficiaries 
have a greater need to stay connected to their surgeon or specialist 
involved in their episode, rather than make a connection to primary 
care for ongoing care. Additionally, we also recognize requiring a 
referral to primary care services for all TEAM beneficiaries may

[[Page 69851]]

increase TEAM participant burden. However, we believe many hospitals 
already have this perform this process as a standard of care for 
discharge planning, therefore the burden on TEAM participants should be 
minimal.
    We sought comment on our proposal at Sec.  515.564 to require TEAM 
participants during hospital discharge planning to make a referral to a 
supplier of primary care services for a TEAM beneficiary on or prior to 
discharge from the anchor hospitalization or anchor procedure. We also 
sought comment on whether there are other mechanisms or ways to connect 
the TEAM beneficiary back to a supplier of primary care services that 
would support a patient's continuum of care.
    The following is a summary of comments we received related to the 
proposed referral to primary care services policy and our responses to 
those comments:
    Comment: We received some comments of support for our proposed 
policy to require TEAM participants to make a referral to a supplier of 
primary care services by the point of discharge from anchor 
hospitalization or anchor procedure. Several commenters acknowledged 
the importance of ensuring a handoff to primary care services as a 
critical component in good care coordination and improved patient 
outcomes.
    Response: We appreciate the support received and the 
acknowledgement from commenters that a referral to primary care is an 
important aspect of ensuring strong care coordination and striving to 
improve patient outcomes. We agree with these commenters that requiring 
a referral to primary care services upon discharge will serve to give 
the patient the best opportunity for collaborative care.
    Comment: We received some comments from commenters who express 
concern that physician access issues could make adherence to this 
policy difficult for some TEAM participants. These commenters mention 
that access could be a barrier in ensuring a referral occurred by the 
point of discharge from the anchor hospitalization or anchor procedure, 
stating that lack of available primary care resources could limited a 
TEAM participant's ability to adequately meet this requirement and 
asking that CMS consider an appropriate amount of time for a referral 
to occur.
    A commenter recommended the use of other types of providers, such 
as telehealth or nurse-led programs, to better support broad access for 
a primary care referral by the point of discharge from the anchor 
procedure or anchor hospitalization.
    Another commenter expressed concern over requiring a referral back 
to primary care specifically for spinal fusion episodes. They mentioned 
that there is a shortage of primary care physicians and a growing 
number of primary care physicians who are no longer accepting Medicare 
patients due to the downward trend of Medicare payments. Because of 
these reasons, the commenter stated that this requirement could unduly 
impact access for patients in this model (either pre- or post-surgery).
    Additionally, a couple of other commenters recommended that TEAM 
participants located in Health Professional Shortage Areas (HPSA) be 
given exemption, opt-out option, or episode extension from this policy 
as they may experience the greatest shortage of primary care providers 
in their communities.
    Response: We acknowledge that access to primary care services 
varies based on many factors, including geographic location, market 
dynamics--among others. Furthermore, we acknowledge that there are 
areas with shortages of healthcare providers and varying volumes of 
providers accepting Medicare patients. However, we also acknowledge 
that ensuring a beneficiary is connected to a supplier of primary care 
services serves as a critical component to ensuring the patient has 
continued care coordination upon discharge from their anchor 
hospitalization or anchor procedure across all areas, even those with 
areas with shortages of providers. We also do not anticipate that any 
one clinical episode category, such as spinal fusion, included in TEAM 
would experience greater issues with access.
    Additionally, we recognize that a referral to primary care services 
is a common component to hospital discharge planning procedure and, as 
such, expects that many TEAM participants, regardless of access issues 
or HSPA status, will already have this policy integrated into their 
standardized discharge planning procedures.
    Comment: A commenter suggested that rural hospitals generally--and 
Sole Community Hospitals (SCH) and Medicare Dependent Hospitals (MDH) 
in particular--also often do not have robust care networks that are 
needed to succeed as TEAM participants. This commenter mentions that to 
be effective in the model, hospitals would also likely need to form 
networks with post-acute care providers, among others. They state that 
many communities served by SCHs and MDHs are experiencing a shortage of 
primary care clinicians, which may make it difficult for participating 
hospitals to comply with the primary care referral requirement for 
reasons outside their control. Further, they state some rural 
communities simply do not have post-acute care providers. Those that do 
have limited options, and those post-acute providers may decline to 
collaborate with the hospitals in the ways that would be needed to 
succeed under TEAM.
    Response: As mentioned in comment responses above, we recognize 
that access to primary care will vary depending on many factors. We 
also recognize that rural hospitals, including SCHs and MDHs, serve 
special patient populations and after often located in areas that have 
the potential to present unique challenges. However, these factors do 
not discount that these beneficiaries still need to be connected with a 
primary care provider to support ongoing care coordination beyond the 
scope of their TEAM episode.
    Additionally, CMS disagrees that this policy will require providers 
to form networks--with primary care, post-acute care, or other types of 
healthcare providers--in order to be successful and adhere to this 
policy.
    Comment: Some commenters expressed concern over the risk of 
disrupting a patient's existing primary care relationship through this 
policy. These commenters state the importance of ensuring patients with 
an existing primary care relationship be ``tucked back into'' their 
provider and not be referred to a different supplier of primary care 
services. A few commenters submitted comments requesting that TEAM 
participants be required to make referral decisions for primary care 
based on the patient's PCP status determined upon admission, thus 
ensuring TEAM participants would have the most up to date information 
on a patient's existing primary care relationship before making a 
referral and limit the risk the patient is referred away from their 
existing primary care provider. Additionally, a commenter encouraged 
CMS to create safeguards that can be used to monitor that a warm hand-
off occurs back to the patient's existing primary care provider using 
CPT (Current Procedural Terminology) II codes, like the CPT II code 
used in Advanced Care Planning (ACP).
    Response: We agree with these commenters on the importance of 
maintaining a patient's relationship with their existing primary care 
provider. Disrupting this relationship does not serve the patient's 
best interests and could cause delays or gaps

[[Page 69852]]

in providing the best care due to lack of historical knowledge and 
relationship between provider and patient.
    CMS also agrees that TEAM participants would benefit from 
identifying the patient's primary care provider upon admission to their 
anchor hospitalization or anchor procedure and we expect that many TEAM 
participants already have this step built into their standardized 
admission practices.
    Although we recognize the value in monitoring this policy through a 
mechanism such as HCPCS code present in claims data, CMS does not agree 
that these kinds of safeguards should be implemented. Specifically for 
the request to use HCPCS coding to identify advance care planning 
conversations, we do not believe that requiring an advance care 
planning conversation to occur during a specific window of the 
beneficiary's episode to be the most effective. CMS's expectation is 
that many beneficiaries are having these conversations with their 
providers at various times, including prior to an episode initiating. 
Additionally, this kind of claims-based monitoring would be requiring 
increased resources and burden to both TEAM participant and CMS. As 
mentioned above, we proposed the TEAM participant would be subject to 
remedial action, as described in the Remedial Action section: X.A.1.f. 
of this final rule, which we believe is a sufficient guardrail to 
encourage adherence to this policy by TEAM participants.
    Comment: A few commenters mention concern that the policy to 
require a referral to a supplier of primary care services could cause 
higher referrals to in-network or hospital-system affiliated providers, 
leading to an imbalance of referrals to hospital affiliated over 
community practices or reduced patient volume to independent practices 
or practices not included in any preferred network.
    Response: As mentioned above, we recognize the important of 
ensuring a patient's existing primary care relationship not be 
disrupted due to this policy. Additionally, TEAM participants must 
ensure they comply with beneficiary freedom of choice requirements. CMS 
urges TEAM participants to make referral decisions based on timely 
connection to a primary care provider and not base referrals on their 
own profit or benefit from retaining a beneficiary within any specific 
network.
    Comment: We received a few comments where commenters opposed the 
requirement to refer to only a primary care supplier and asked CMS to 
consider making the referral policy more flexible around which 
physician is engaged. These commenters state that not all patients 
would benefit from a primary care visit upon discharge from their TEAM 
episode, but rather may benefit from simply seeing their surgeon post-
discharge.
    Response: As TEAM is designed include multiple procedurally based 
clinical episode categories, we acknowledge that many beneficiaries 
that trigger a TEAM episode will likely engage in subsequent 
appointments with their specialist for follow-up and post-surgical 
care. We encourage these visits to take place and recognize the 
importance of the continued care from the patient's specialist after a 
procedure. However, this does not negate the importance of also 
ensuring the patient is engaged with a primary care provide to support 
their long-term care after the immediate care surrounding the patient's 
procedure has concluded. By requiring a referral to primary care, this 
creates opportunity for the patient's specialist and primary care 
providers to engage and support the patient with more collaborative 
care.
    Comment: We received a comment that mentioned that TEAM covers the 
major surgeries that fall within the 90-day global period and asked for 
clarification on how a primary care provider would be compensated for 
the follow-up care provided to the patient during the 90-day global 
period.
    Response: All providers furnishing services during a TEAM episode 
will be reimbursed per the applicable CMS fee schedule; CMS will not be 
issuing a global payment or any capitated payments as part of TEAM. We 
encourage this commenter and any other stakeholders with questions on 
how providers will be compensated to review sections on episode 
construction and reconciliation in the Items and Services Included in 
Episodes section: X.A.3(b)(5) and the Process for Reconciliation 
section: X.A.3(d)(5) of this final rule.
    Comment: A commenter in support of this policy specifically asked 
CMS to consider how to use the referral process to ensure that primary 
care suppliers involved in care transitions are taking steps to prevent 
opioid misuse. This commenter states this could be done through 
requiring TEAM participants to counsel patients prior to discharge 
about their pain management options to ensure they are adequately 
informed about the benefits and risks of each potential treatment plan, 
document in the medical record a rationale for prescribing opioids, if 
applicable, together with a plan for (to the extent clinically 
appropriate) transitioning the beneficiary to a non-opioid alternative 
over the course of the patient's treatment journey, and, for 
beneficiaries prescribed opioids at discharge, establishing a care plan 
that involves joint monitoring by the TEAM participant and primary care 
supplier to monitor for any signs of opioid misuse or opioid use 
disorder.
    Response: We appreciate this commenter's acknowledgement of the 
risk of opioid overuse and recommendation that suppliers of primary 
care are monitoring their patient's use of opioids and identify 
potential overuse. CMS agrees that primary care suppliers should be 
identifying potential overuse for their patients. However, at this 
time, CMS does not plan to incorporate any formal policy surrounding 
opioid management or misuse avoidance. We do expect that primary care 
providers are actively engaged in conversations with their 
beneficiaries about all medications prescribed and documenting 
medications used to ensure they are able to identify potential misuse 
and avoid misuse.
    Comment: A commenter asked CMS to consider how to leverage digital 
tools, such as a digital platform presented in a dashboard interface, 
to aid referrals between specialists and primary care physicians. The 
commenter states that this kind of interface could display information 
about an existing relationship with a primary care provider or offer 
options for discharge referrals based on the patient's coverage and 
specific need, aiding in better care coordination.
    Response: CMS agrees with this commenter that the ability to 
leverage digital tools like a dashboard interface can strongly support 
collaboration, data-sharing, and communication between providers, such 
as specialists and primary care providers. However, creating and 
maintaining these kinds of digital tools would cause a significant 
drain on time and resources for CMS and potentially, TEAM participants. 
CMS encourages participants to consider how they can leverage digital 
tools to aid their success in TEAM; however, CMS will not be 
incorporating the support for any digital tool into TEAM at this time.
    Comment: We received a comment from a commenter who recommended 
that primary care referrals only be made for a beneficiary without an 
existing primary care relationship. For a beneficiary with an existing 
primary care relationship, that the TEAM participant shares medical 
record documentation with the primary care

[[Page 69853]]

supplier to streamline care coordination.
    Response: As mentioned in earlier comments, connection to a primary 
care provider upon discharge from a patient's anchor hospitalization or 
anchor procedure is critical to ensuring care coordination. CMS agrees 
that sharing of medical record documentation should be included in this 
process so primary care providers have the most up-to-date information 
so as to make this most informed decisions for their patient. However, 
CMS does not believe that the sharing of medical record documentation 
eliminates the need for patients to be referred for a visit to see 
their primary care providers. This connection between primary care and 
patient ensures all patients, even thoughts with existing primary care 
relationships, are involving the primary care providers in the ongoing 
care the patient needs.
    Comment: Some commenters submitted comments asking to clarify how 
this policy would be monitored by CMS. A commenter mentioned there 
could be an increased risk for patients with high social determinants 
of health concerns and it would be helpful to know if these factors 
would be included in evaluation or monitoring of the policy.
    Response: As mentioned above, if a TEAM participant fails to comply 
with requiring a referral to a supplier of primary care services during 
hospital discharge planning, the TEAM participant would be subject to 
remedial action, as described in the Remedial Action section: X.A.1.f. 
of this final rule. CMS does not plan to evaluate or monitor 
participants adherence to this policy for any specific populations of 
patients, such as those with social determinant of health concerns.
    Comment: We received a few comments opposing the policy to require 
a referral to primary care services as it could add administrative 
burden on the TEAM participant. Commenters stated that requiring 
primary care referral at discharge does not further incentivize 
hospitals to coordinate care and states there are enough incentives in 
place now to coordinate care without additional documentation burden to 
the participant.
    Response: CMS disagrees with these commenters and strongly believes 
that referring a patient to primary care upon discharge from anchor 
hospitalization or anchor procedure supports better care coordination 
and ongoing care for the patient beyond the care surrounding their 
procedure. For TEAM participants who do not currently refer to primary 
care at discharge, we understand this will be an additional 
administrative component to build in their discharge planning 
procedures. However, we also believe that most TEAM participants 
already have a referral to primary care built into their discharge 
planning, which would not add additional administrative burden for 
those hospitals.
    After consideration of the public comments we received, we are 
finalizing our proposal as proposed that TEAM participants be required 
to include in hospital discharge planning a referral to a supplier of 
primary care services for a TEAM beneficiary, on or prior to discharge 
from an anchor hospitalization or anchor procedure at Sec.  512.564. We 
also finalize our proposal that the TEAM participant must comply with 
beneficiary freedom of choice requirements, as described in Beneficiary 
and Notification section: X.A.3.i.(2) of this final rule and codified 
at Sec.  512.582(a), and not limit a TEAM beneficiary's ability to 
choose among Medicare providers or suppliers.
m. Alternative Payment Model Options
(1) Background
    We stated in the proposed rule (89 FR 36480) that in the Quality 
Payment Program (42 CFR 414.1415), an APM must meet three criteria to 
be considered an Advanced APM:
     Beginning with the CY 2025 Qualifying APM Participant (QP) 
performance period, an Advanced APM must require all eligible 
clinicians in each participating APM Entity, or for APMs in which 
hospitals are the participants, each hospital, to use Certified 
Electronic Health Record Technology (CEHRT).
     An Advanced APM must include quality measure performance 
as a factor when determining payment to participants for covered 
professional services under the terms of the APM.
     Meet the financial risk standard under 42 CFR 
414.1415(c)(1) or (2) and the nominal amount standard under 42 CFR 
414.1415(c)(3) or (4).
    We sought to align the design of TEAM with the Advanced APM 
criteria in the Quality Payment Program and enable CMS to have the 
necessary information on eligible clinicians to make the requisite QP 
determinations. Eligible clinicians, as defined in 42 CFR 414.1305, 
that are captured on a CMS-maintained list for the APM entity, as 
defined in 42 CFR 414.1305, may be eligible to receive benefits for 
participating in an Advanced APM, including burden reduction and 
financial incentives. We proposed that the TEAM participant would be 
considered the APM entity, but that the TEAM participant's eligible 
clinicians may be assessed for QP determinations depending on which 
track the TEAM participant is in and whether the CEHRT criteria are met 
(89 FR 36480). However, we also sought to ensure the design of TEAM 
meets the Merit-based Incentive Payment System (MIPS) APM criteria and 
that CMS has the necessary information on MIPS eligible clinicians, as 
defined in 42 CFR 414.1305, so that they may be eligible for certain 
scoring benefits under MIPS. We proposed to adopt two different APM 
options for TEAM--an AAPM option in which TEAM participants would 
attest to meeting the CEHRT standards and in which the TEAM 
participant's eligible clinicians may be assessed for QP determinations 
(to the extent TEAM is determined to be an Advanced APM for Track 2 and 
Track 3), and a non-AAPM option in which TEAM participants would not 
meet CEHRT or financial risk standards and in which the TEAM 
participant's MIPS eligible clinicians may be assessed for reporting 
and scoring through the APM Performance Pathway (APP) (to the extent 
the TEAM is determined to be a MIPS APM for all tracks).
(2) TEAM APM Options
    In the proposed rule we stated an Advanced APM must require 
participants to use CEHRT (42 CFR 414.1415(a)), make payment based on 
quality measures (42 CFR 414.1415(b)) and meet financial risk standards 
(42 CFR 414.1415(c)) (89 FR 36481). We proposed to have two APM options 
in TEAM: a non-Advanced APM (non-AAPM) option and an Advanced APM 
(AAPM) option (89 FR 36481). The non-AAPM option would be for TEAM 
participants that do not meet the CEHRT or financial risk standards. 
These TEAM participants may still be considered APM entities in a MIPS 
APM. The AAPM option would be for TEAM participants in Tracks 2 and 3 
that meet the CEHRT and financial risk standards. These TEAM 
participants would be considered APM entities in an Advanced APM., TEAM 
participants in Track 1 would automatically be assigned into the non-
AAPM option since Track 1 would have no downside financial risk. The 
financial risk that we proposed in Tracks 2 and 3 would meet the 
generally applicable nominal amount standard, as defined in 42 CFR 
414.1415(c)(3), but there may be TEAM participants in Tracks 2 and 3 
who do not meet the CEHRT standard. TEAM participants in Tracks 2 or 3 
that do not meet and attest to the CEHRT use

[[Page 69854]]

requirement would fall into the non-AAPM option of TEAM, but these TEAM 
participants may still be considered APM entities in a MIPS APM. TEAM 
participants that participate in Tracks 2 or 3 and meet and attest to 
the CEHRT use requirement would be in the AAPM option of TEAM.
    We proposed to require TEAM participants who wish to participate in 
the AAPM option to attest to meeting the CEHRT use requirement that 
meets the CEHRT definition in our regulations at section 414.1305 on an 
annual basis prior to the start of each performance year in a form and 
manner and by a date specified by CMS (89 FR 36481). We proposed that 
the TEAM participant would be required to retain and provide CMS access 
to the attestation upon request. We further proposed that meeting and 
attesting to the CEHRT use criteria would be voluntary, and that CMS 
would assign TEAM participants who choose not to do so to the non-AAPM 
option. Lastly, we proposed to require TEAM participants who wish to 
participate in the AAPM option to provide their CMS Electronic Health 
Record (EHR) Certification IDs on an annual basis prior to the end of 
each performance year in a form and manner and by a date specified by 
CMS.
    We stated in the proposed rule that we believe that a TEAM 
participant's decision to meet and attest to the CEHRT use criteria 
would not create significant additional administrative burden for the 
TEAM participant (89 FR 36481). Moreover, the choice of whether to meet 
and attest to the CEHRT use criteria would not otherwise affect the 
TEAM participant's requirements or opportunities under the model. 
However, a TEAM participant's decision to attest to CEHRT use may 
affect the ability of its clinicians to qualify as a QP. In other 
words, if a TEAM participant chose not to attest to CEHRT use, its 
clinicians would not be assessed for QPs status.
    We sought comment on our proposals for the TEAM Advanced APM 
options and the associated requirements at Sec.  512.522. We also 
sought comment on our proposed definitions for the AAPM option and non-
AAPM option at Sec.  512.505.
    The following is a summary of comments we received on our proposals 
for the TEAM Advanced APM options, as well as comments on our proposed 
definitions for the AAPM option and non-AAPM option.
    Comment: A commenter supports CMS' proposals related to Advanced 
APM options and QP status under TEAM and suggests that CMS can reduce 
burden by not requiring TEAM participants to report on the MIPS 
Promoting Interoperability requirement. The commenter is concerned that 
CMS will require APM Participants to report on the MIPS Promoting 
Interoperability requirement in 2025, which could present a non-
financial disincentive to APM Participation.
    Response: We thank the commenter for their support of CMS' proposed 
Advanced APM options under TEAM, and for their recommendation regarding 
the reduction of burden for APM Participants. The recommendation made 
by the commenter is related to policies set by the Quality Payment 
Program (QPP) and are beyond the scope of the proposed TEAM. CMS will 
consider this recommendation for future use; however, we are unable to 
adopt this recommendation regarding QPP policies under this proposed 
rule.
    Summary: A commenter seeks clarification on TEAM requirements 
regarding the use of Certified Electronic Health Record Technology 
(CEHRT) for TEAM Participants and Collaborators.
    Response: We thank the commenter for their interest in the TEAM 
CEHRT requirements. The use of CEHRT is not required for TEAM 
Participants or TEAM collaborators, however, CMS proposes two APM 
options in TEAM: an Advanced APM (AAPM) option and a non-Advanced APM 
(non-AAPM) option. The AAPM option would be for TEAM Participants in 
Track 2 and 3 that meet the financial risk standards and attest to 
meeting the CEHRT requirements. In the non-AAPM option, that do not 
meet the financial risk standards and/or do not attest to meeting the 
CEHRT requirements.
    Comment: A commenter recommended that CMS should reduce QP 
determination thresholds around Medicare Part B payments and Medicare 
Beneficiaries for TEAM Participants and Collaborators to ensure that 
they are provided relief from reporting under MIPS if they do not meet 
QP thresholds.
    Response: We thank the commenter for their recommendation regarding 
the QP determination thresholds, and the potential burden faced by TEAM 
Participants and Collaborators who do not meet the QP thresholds. The 
recommendation made by the commenter is related to policies set under 
the Quality Payment Program (QPP) and are beyond the scope of the 
proposed TEAM. CMS will consider this recommendation for future use; 
however, we are unable to adopt this recommendation regarding QPP 
policies under this proposed rule.
    After consideration of the public comments we received, we are 
finalizing the TEAM Advanced APM options and the associated 
requirements at Sec.  512.522, as well as the proposed definitions for 
the AAPM option and non-AAPM option at Sec.  512.505.
(3) Financial Arrangements List and Clinician Engagement List
    We proposed that each TEAM participant would be required to submit 
information about the eligible clinicians or MIPS eligible clinicians 
who enter into financial arrangements with the TEAM participant for 
purposes of supporting the TEAM participants' cost or quality goals as 
discussed in section X.A.3.g. of the preamble of this final rule (89 FR 
36481). This information would enable CMS to make determinations as to 
eligible clinicians who could be considered QPs based on the services 
furnished under TEAM (to the extent the model is determined to be an 
AAPM) and would be necessary for APP reporting and scoring for MIPS 
eligible clinicians (to the extent the model is determined to be a MIPS 
APM), We proposed that for purposes of TEAM, the eligible clinicians or 
MIPS eligible clinicians could be: (1) TEAM collaborators, as described 
in section X.A.3.g.(3). of the preamble of this final rule, engaged in 
sharing arrangements with a TEAM participant; (2) PGP, NPPGP, or TGP 
members who are collaboration agents engaged in distribution 
arrangements with a PGP, NPPGP, or TGP that is a TEAM collaborator, as 
described in section X.A.3.g.(5). of the preamble of this final rule; 
or (3) PGP, NPPGP, or TGP members who are downstream collaboration 
agents engaged in downstream distribution arrangements with a PGP, 
NPPGP, or TGP that is also an ACO participant in an ACO that is a TEAM 
collaborator, as described in section X.A.3.g.(6). of the preamble of 
this final rule. The list of physicians and nonphysician practitioners 
in these three groups that we proposed to require TEAM participants to 
submit to CMS would satisfy the criteria to be considered an Affiliated 
Practitioner List, as defined in Sec.  414.1305. We proposed to use the 
list submitted by TEAM participants to make determinations regarding 
which physicians and nonphysician practitioners should receive QP 
determinations or be reported for the APP based on the services they 
furnish under TEAM (89 FR 36481).
    We proposed for the reasons detailed above that each TEAM 
participant with eligible clinicians or MIPS eligible clinicians must 
submit to CMS a financial arrangements list in a form and manner and by 
the date specified by

[[Page 69855]]

CMS on a quarterly basis during each performance year, or attest that 
there are no individuals to report on the financial arrangements list 
(89 FR 36481). We stated in the proposed rule that we believe 
submission of the financial arrangements list on a quarterly basis 
would align with the Quality Payment Program's QP determination dates, 
as described in Sec.  414.1425. We proposed to define the financial 
arrangements list as the list of eligible clinicians or MIPS eligible 
clinicians that have a financial arrangement with the TEAM participant, 
TEAM collaborator, collaboration agent, or downstream collaboration 
agent. We proposed that the TEAM participant would be required to 
retain and provide CMS access to the financial arrangements list upon 
request. The proposed list must include the following information:
     For each TEAM collaborator who is a physician, 
nonphysician practitioner, or therapist during the performance year--
    ++ The name, tax identification number (TIN), and national provider 
identifier (NPI) of the TEAM collaborator; and
    ++ The start date and, if applicable, end date, for the sharing 
arrangement between the TEAM participant and the TEAM collaborator.
     For each collaboration agent who is a physician, 
nonphysician practitioner, or therapist during the performance year--
    ++ The name, TIN, and NPI of the collaboration agent and the name 
and TIN of the TEAM collaborator with which the collaboration agent has 
entered into a distribution arrangement; and
    ++ The start date and, if applicable, end date, for the 
distribution arrangement between the TEAM collaborator and the 
collaboration agent.
     For each downstream collaboration agent who is a physician 
or nonphysician practitioner, or therapist during the performance 
year--
    ++ The name, TIN, and NPI of the downstream collaboration agent and 
the name and TIN of the collaboration agent; and
    ++ The start date and, if applicable, end date, for the downstream 
distribution arrangement between the collaboration agent and the 
downstream collaboration agent.
     If there are no individuals that meet the reporting 
criteria above for TEAM collaborators, collaboration agents, or 
downstream collaboration agents, then the TEAM participant must attest 
on a quarterly basis in a form and manner and by a date specified by 
CMS that there are no individuals to report on the financial 
arrangements list.
    We indicated in the proposed rule that while the submission of the 
financial arrangements list may create some additional administrative 
burdens for certain TEAM participants, we expect that TEAM Participants 
could modify their contractual relationships with their TEAM 
collaborators and, correspondingly, require those TEAM collaborators to 
include similar requirements in their contracts with collaboration 
agents and in the contracts of collaboration agents with downstream 
collaboration agents (89 FR 36482).
    In the proposed rule we recognize there may be physicians and 
nonphysician practitioners who would not be listed on the financial 
arrangements list because they have not entered into a financial 
arrangement as a TEAM collaborator, collaboration agent, or downstream 
collaboration agent, but who may nevertheless participate in TEAM 
activities, as defined at Sec.  512.505, and may be eligible for QP 
determinations or eligible for APP reporting because they are 
affiliated with and support the APM Entity. We proposed that, in order 
to capture these physicians and nonphysician practitioners who are not 
listed on the TEAM participant's financial arrangements list for QP 
determinations or APP reporting, TEAM participants must also submit to 
CMS a clinician engagement list in a form and manner and by a date 
specified by CMS on a quarterly basis every performance year. We 
proposed to use the clinician engagement list for assessing QP 
determinations and for APP reporting. The submission of the clinician 
engagement lists may create some additional administrative burdens for 
TEAM participants, but we expect the effort to be worthwhile since some 
of these QP determinations may result in eligible clinicians receiving 
burden reduction benefits and financial incentives, and some MIPS 
eligible clinicians may receive MIPS APM scoring benefits (89 FR 
36482).
    We proposed to define the clinician engagement list as the list of 
eligible clinicians or MIPS eligible clinicians that participate in 
TEAM activities and have a contractual relationship with the TEAM 
participant, and who are not listed on the financial arrangements list 
(89 FR 36482). We proposed that the TEAM participant must submit the 
list to CMS on a quarterly basis during each performance year in a form 
and manner and by a date specified by CMS or attest that there are no 
individuals to report on the clinician engagement list. We believe 
submission of the clinician engagement list on a quarterly basis would 
align with the Quality Payment Program's QP determination dates, as 
described in Sec.  414.1425. We proposed that the TEAM participant 
would be required to retain and provide CMS access to the clinician 
engagement list upon request. We proposed that the clinician engagement 
list must include the following information:
     For each physician, nonphysician practitioner, or 
therapist who is not listed on the TEAM participant's financial 
arrangements list during the performance year but who does have a 
contractual relationship with the TEAM participant and participates in 
TEAM activities during the performance year--
    ++ The name, TIN, and NPI of the physician, nonphysician 
practitioner, or therapist; and
    ++ The start date and, if applicable, end date, for the contractual 
relationship between the physician, nonphysician practitioner, or 
therapist and the TEAM participant.
     We proposed that if there are no individuals that meet the 
requirements to be reported on the clinician engagement list, then the 
TEAM participant must attest on a quarterly basis in a form and manner 
and by a date specified by CMS that there are no individuals to report 
on the clinician engagement list (89 FR 36482).
    We sought comments on the proposal to require TEAM participants to 
submit a financial arrangements list and clinician engagement list on a 
quarterly basis or attest that there are no individuals to report. We 
were especially interested in comments about approaches to information 
submission, including the content of the lists, and periodicity and 
method of submission to CMS that would minimize the reporting burden on 
TEAM participants while providing CMS with sufficient information about 
eligible clinicians to facilitate QP determinations and APP reporting 
to the extent that TEAM is considered to be an Advanced APM for Track 2 
and Track 3 and a MIPS APM for all tracks, respectively. The following 
is a summary of the comments we received regarding the requirement for 
TEAM participants to submit a financial arrangements list and clinician 
engagement list to provide CMS with sufficient information about 
eligible clinicians to facilitate QP determinations and APP Reporting.
    Comment: A commenter expressed support and approval of CMS' 
proposal to use the clinician engagement list for assessing QP 
determinations and for APP reporting.

[[Page 69856]]

    Response: We thank the commenter for their support and approval of 
the TEAM proposal regarding the use of the clinician engagement list.
    After consideration of the public comments we received, we are 
finalizing the requirement that TEAM participants submit a quarterly 
financial arrangements list and clinician engagement list, as 
applicable, in our regulation at Sec.  512.522.
n. Interoperability
    In the proposed rule we stated that improved interoperability of 
software systems and tools used to manage patients supports the goals 
of value-based care, enabling care coordination and data-driven 
decision making to improve outcomes and lower healthcare expenditures. 
Hospitals use electronic health record (EHR) systems to document 
patient medical history, which may include clinical data relevant to 
that person's care, including demographics, clinical notes, 
medications, vital signs, past medical and surgical history, 
immunizations, laboratory data and radiology reports. The EHR also has 
the ability to support other care-related and administrative activities 
directly or indirectly through various interfaces, including clinical 
decision support, quality improvement, and population-health outcomes 
reporting. While EHRs also include capabilities to coordinate care by 
sharing data in a structured system with other health care providers, 
health information exchanges (HIEs) and health information networks 
(HINs), as defined in 45 CFR 171.102, have played an increasingly 
important role in assisting hospitals to connect with other health care 
providers and ensure that information supporting care coordination is 
consistently shared.\1011\ A hospital may be connected to an HIE or HIN 
that focuses on exchange within a defined geographic area, or 
nationally across systems and regions. Evidence suggests that 
participation with an entity facilitating cross-system exchange may 
improve patient outcomes, including decreased hospital readmission 
rates, as well as decreased utilization, such as repeat laboratory or 
radiology studies.1012 1013
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    \1011\ https://www.healthit.gov/topic/health-it-and-health-information-exchange-basics/health-information-exchange.
    \1012\ Chen, M., Guo, S., & Tan, X. (2019). Does health 
information exchange improve patient outcomes? Empirical evidence 
from Florida hospitals. Health Affairs, 38(2), 197-204. https://doi.org/10.1377/hlthaff.2018.05447.
    \1013\ Menachemi, N., Rahurkar, S., Harle, C.A., & Vest, J.R. 
(2018). The benefits of health information exchange: an updated 
systematic review. Journal of the American Medical Informatics 
Association, 25(9), 1259-1265. https://doi.org/10.1093/jamia/ocy035.
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    In the proposed rule, we stated that despite the growth of HIEs and 
HINs, important gaps remain for an infrastructure that supports the 
seamless exchange of clinical data across disparate healthcare 
organizations and software vendors. Barriers to interoperability create 
silos that limit care coordination between hospitals and other health 
care providers, especially during care transitions such as a patient 
being discharged from a hospital to a post-acute care facility. 
Existing HHS and CMS initiatives aim to support health care 
organizations engaging in interoperable exchange of health information. 
The Office of the National Coordinator for Health Information 
Technology (ONC) launched The Trusted Exchange Framework and Common 
Agreement (TEFCA), which establishes a universal governance, policy, 
and technical floor for nationwide interoperability; simplifies 
connectivity for organizations to securely exchange information to 
improve patient care, enhance the welfare of populations, and generate 
health care value; and enables individuals to gather their healthcare 
information.\1014\
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    \1014\ https://www.healthit.gov/topic/interoperability/policy/trusted-exchange-framework-and-common-agreement-tefca.
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    CMS acknowledged the importance of TEFCA in the FY 2023 Inpatient 
Prospective Payment System (IPPS) final rule (87 FR 48780) by adding 
the Enabling Exchange under TEFCA (87 FR 49329) as a new measure under 
the Health Information Exchange Objective for the Medicare Promoting 
Interoperability Program. Participants in the Medicare Promoting 
Interoperability Program may also earn credit for the Health 
Information Exchange Objective by reporting on the previously finalized 
Health Information Exchange (HIE) Bidirectional Exchange measure (86 FR 
45465).
    In the CY 2023 Physician Fee Schedule final rule (87 FR 70067 
through 70071), CMS also added a new optional measure, Enabling 
Exchange Under TEFCA, to the Health Information Exchange objective for 
the Merit-based Incentive Payment System (MIPS) Promoting 
Interoperability performance category beginning with the CY 2023 
performance period/2025 MIPS payment year. Currently, for the CY 2024 
performance period/2026 MIPS payment year, MIPS eligible clinicians may 
fulfill the Health Information Exchange objective via three avenues by 
reporting: (1) the two Support Electronic Referral Loops measures; (2) 
the Health Information Exchange Bidirectional Exchange measure; or (3) 
the Enabling Exchange under TEFCA measure (88 FR 79357 through 79362).
    In the proposed rule (89 FR 36482) we stated that we would like to 
support TEAM participants' interoperability efforts that could lead to 
best practices across U.S. health care landscape. However, we 
recognized that given the existing federal interoperability 
initiatives, we do not want to create duplicate efforts or create 
unnecessary burden on TEAM participants. We sought comment on how CMS 
can promote interoperability in the proposed TEAM, in particular, to 
what extent TEAM participants are planning on participating in TEFCA in 
the next 1-2 years, as well as other means by which interoperability 
may support care coordination for an episode. Any further proposals 
related to interoperability included in TEAM would be done in future 
notice and comment rulemaking.
    We thank commenters for their input and will address these 
comments, along with further proposals, in future notice and comment 
rulemaking.
o. Evaluation Approach
(1) Background
    TEAM is intended to enable CMS to better understand the effects of 
bundled payments models on a broader range of Medicare providers and 
capture a greater number of episodes of care than what is currently 
available under the CJR model and BPCI Advanced. Obtaining information 
that is representative of a wide and diverse group of providers and 
episodes of care will best inform us on how such a payment model might 
function were it to be more fully integrated within the Medicare 
program. All CMS Innovation Center models, which would include TEAM, 
are rigorously evaluated on their ability to improve quality and reduce 
costs. In addition, we routinely monitor CMS Innovation Center models 
for potential unintended consequences of the model that run counter to 
the stated objective of lowering costs without adversely affecting 
quality of care. Outlined later in this section are the design and 
evaluation methods, the data collection methods, key evaluation 
research questions, and the evaluation period and anticipated reports 
for TEAM.
(2) Design and Evaluation Methods
    In the proposed rule we stated that our evaluation methodology for 
TEAM would be consistent with the CMS Innovation Center evaluation

[[Page 69857]]

approaches we have taken in other projects such as the BPCI initiative, 
BPCI Advanced and the CJR model, and o vcxther CMS Innovation Center 
models. Specifically, the evaluation design and methodology for the 
proposed TEAM would allow for a comparison of historic patterns of care 
among TEAM participants to any changes made in these patterns in 
response to the TEAM. In addition, the overall design would include a 
comparison of TEAM participants with hospitals not participating in 
TEAM to help us discern simultaneous and competing provider and market 
level forces that could influence our findings.
    We indicated in the proposed rule that the evaluation methodology 
for this model builds upon the fact that we proposed CBSAs to be 
selected for participation in the model based on a stratified random 
assignment. In this approach, researchers evaluate the effects of the 
model on outcomes of interest by directly comparing CBSAs that are 
randomly selected to participate in the model to a comparison group of 
CBSs that were not randomly selected for the model (but could have 
been). Randomized evaluation designs of this kind are widely considered 
the ``gold standard'' for social science and medical research because 
they ensure that the systematic differences are reduced between units 
that do and do not experience an intervention, which ensures that (on 
average) differences in outcomes between participating and non-
participating units reflect the effect of the intervention.
    In the proposed rule we stated that we plan to use a range of 
analytic methods, including regression and other multivariate methods 
appropriate to the analysis of stratified randomized experiments to 
examine each of our measures of interest. Measures of interest could 
include, for example, quality of and access to care, utilization 
patterns, expenditures, and beneficiary experience. With these 
methodologies, we would be able to examine the experience of the TEAM 
participants over time relative to those in the comparison group 
controlling for as many of the relevant confounding factors as is 
possible. The evaluation would also include rigorous qualitative 
analyses to capture the evolving nature of care delivery 
transformation.
    In the proposed rule we stated that in our design, we plan to 
evaluate the impact of the TEAM at the geographic unit level, the 
hospital level, and at the patient level. We also considered various 
statistical methods to address factors that could confound or bias our 
results. For example, we would use statistical techniques to account 
for clustering, that is how groups of patients may have commonalities 
in outcomes by receiving care in the same hospitals or in the same 
markets. Accounting for clustering ensures that we do not overstate our 
effective sample size by failing to recognize how performance of 
hospitals in each market may not be fully independent of one another. 
Alternatively, accounting for clustering may improve statistical 
precision or allow us to examine better how patterns of performance 
vary across hospitals. Thus, in our analysis, if a large hospital 
consistently has poor performance, clustering would allow us to still 
be able to detect improved performance in the other, smaller hospitals 
in a market rather than placing too much weight on the results of one 
hospital.
    In the proposed rule we stated that we plan to use various 
statistical techniques to examine the effects of the TEAM while also 
taking into account the effects of other ongoing interventions such as 
Medicare Shared Savings Program. For example, we considered additional 
regression techniques to help identify and evaluate the incremental 
effects of adding the TEAM in areas where patients and market areas are 
already subject to other models as well as potential interactions among 
these efforts.
(3) Data Collection Methods
    We considered multiple sources of data to evaluate the effects of 
TEAM. In the proposed rule we stated that we expect to base much of our 
analysis on secondary data sources such as the Medicare FFS claims. 
Beneficiary level claims data would be analyzed to estimate 
expenditures in total and by type of provider and service, as well as 
whether or not there was an inpatient hospital readmission. In 
conjunction with the secondary data sources mentioned previously, we 
considered collecting primary data through a CMS-administered survey, 
guided interviews and focus groups with beneficiaries who were cared 
for and resulting in a TEAM episode during the performance year. The 
survey would be administered to beneficiaries who were cared for as 
patients within a TEAM episode or similar beneficiaries selected as 
part of a control group. The primary focus of a survey would be to 
obtain information on the beneficiary's experience in TEAM episodes 
relative to usual care as represented in the control group. The 
administration of this beneficiary survey would be coordinated with 
administration of the HCAHPS (Hospital Consumer Assessment of 
Healthcare Providers and Systems) survey to not conflict with or 
compromise the HCAHPS efforts. Likewise, we considered a survey 
administered by CMS with providers including, but not limited to, TEAM 
participants, physicians, and PAC providers participating in the TEAM. 
These surveys would provide insight on providers' experience under the 
model and further information on the care redesign strategies 
undertaken by health care providers.
    In addition, we considered CMS evaluation contractor administered 
site visits and focus groups with selected TEAM participants, 
physicians and PAC providers. In the proposed rule we stated that we 
believe that these qualitative methods would provide contextual 
information that would help us understand better the dynamics and 
interactions occurring among the providers in TEAM. For example, these 
data could help us understand hospitals' intervention plans as well as 
how they were implemented and what they achieved. In contrast to 
relying on quantitative methods alone, qualitative approaches would 
enable us to capture variations in implementation as well as identify 
factors that are associated with successful interventions and 
distinguish the effects of multiple interventions that may be occurring 
within participating providers, such as simultaneous ACO and bundled 
payment participation.
    We considered primary data collection efforts with providers and 
beneficiaries within the control group. The systematic data collection 
from a control group would allow us to observe and separate changes in 
standard care from the TEAM impact. Additionally, primary data 
collection with beneficiaries who received care from hospitals and 
providers in the control group would provide critical information about 
the impact of the model on patient-reported health status, experience 
of care, and overall satisfaction.
(4) Key Evaluation Research Questions
    Our evaluation would assess the impact of the TEAM on the aims of 
improved care quality and efficiency as well as reduced health care 
costs. This would include assessments of patient experience of care, 
utilization, outcomes, Medicare expenditures, provider costs, and 
beneficiary access. Our key evaluation questions would include, but are 
not limited to, the following:
     Payment. Is there a reduction in Medicare expenditures in 
absolute terms? By subcategories? Do the TEAM participants reduce or 
eliminate

[[Page 69858]]

variations in expenditures that are not attributable to differences in 
health status? If so, how have they accomplished these changes? Did 
TEAM result in net savings to the Medicare program, after accounting 
for the financial incentives distributed under the model?
     Utilization. Are there changes in Medicare utilization 
patterns, overall and for specific types of services? How do these 
patterns compare to historic patterns, regional variations, and 
national patterns of care? How are these patterns of changing 
utilization associated with Medicare payments, patient experience and 
outcomes, and general clinical judgment of appropriate care?
     Referral Patterns and Market Impact. How has provider 
behavior in the selected mandatory CBSAs changed under the model? Is 
there evidence of broader changes to the market? Are provider 
relationships changing over the course of the model? Is the model 
facilitating continuity of care by connecting beneficiaries with new or 
existing primary care providers?
     Outcomes/Quality. Is there either a negative or positive 
impact on quality of care and/or better patient experiences of care? 
Did the incidence of relevant clinical outcomes such as complications 
remain constant or decrease? Were there changes in beneficiary outcomes 
under the model compared to appropriate comparison groups?
     Equity. Were there notable impacts of TEAM for subgroups 
based on beneficiary characteristics such as race/ethnicity, dual 
status, rurality, and other measures of socio-economic disadvantage? 
How did TEAM participants address health disparities in care? Did the 
financial performance differ for hospitals furnishing a substantial 
share of services to uninsured and low-income patients?
     Transformation. Is there evidence that the participants' 
changes in care delivery, that were made in the response to the model, 
will be sustained? Did TEAM enable positive spillover effects to other 
episodes of care, or other providers across the local market of the 
health system?
     Unintended Consequences. Did TEAM result in any unintended 
consequences, including adverse selection of patients, access problems, 
cost shifting beyond the agreed upon episode, evidence of stinting on 
appropriate care, anti-competitive effects on local health care 
markets, evidence of inappropriate referrals practices? If so, how, to 
what extent, and for which beneficiaries or providers?
     Potential for Extrapolation of Results. What was the 
typical patient case mix in the participating practices and how did 
this compare to regional and national patient populations? What were 
the characteristics of participating practices and to what extent were 
they representative of practices treating Medicare FFS beneficiaries? 
Was the model more successful in certain types of markets? To what 
extent would the results be able to be extrapolated to similar markets 
and/or nationally?
     Explanations for Variations in Impact. What factors are 
associated with the pattern of results (previously)? Specifically, are 
they related to:
     Characteristics of the model including variations by year 
and factors such as presence of downside risk or track assignment?
    The TEAM participant's specific features and structure, including 
such factors as the number of relevant cases, provider mix, and health 
system affiliation?
     The TEAM participant's organizational culture and 
readiness
     The TEAM participant's care redesign interventions and 
their ability to carry out their proposed intervention?
     Characteristics and nature of interaction with partner 
providers including PAC provider community?
     Characteristics of market and CBSA such as resources, care 
infrastructure and supply of physicians and associated providers?
     Characteristics associated with the patient populations 
served?
(5) Evaluation Period and Anticipated Reports
    As discussed in section X.A.3.a.(1) of the preamble of this final 
rule, TEAM would have a 5-year model performance period. The evaluation 
period would encompass this entire 5-year model performance period, a 
year baseline period and up to 2 years after. We plan to evaluate the 
TEAM on an annual basis. However, we recognize, that interim results 
are subject to changing policies as discussed in the preamble of this 
final rule, and issues such as sample size and random fluctuations in 
practice patterns. Hence, while CMS intends to conduct periodic 
summaries to offer useful insight during the model test, a final 
analysis after the end of the 5-year model performance period will be 
important for ultimately synthesizing and validating results.
    We sought comments on our design, evaluation, data collection 
methods, and research questions.
    The following is a summary of comments we received on the proposed 
evaluation approach for TEAM and our responses to these comments:
    Comment: Commenters detailed evaluation topics and subgroups in 
which they were particularly interested. A couple commenters expressed 
support for evaluating the impact on equity, especially for 
historically disadvantaged groups. A commenter stressed the importance 
of assessing differential impacts for all key questions by 
sociodemographic factors. A couple of commenters noted model overlap 
and the ability to distinguish impacts from co-occurring model 
participation as a critical area to quantify. A commenter highlighted 
patients with fracture as a key population to assess separately as they 
are typically more elderly and medically complex.
    Response: We thank the commenters for their list of topics and 
subgroups of interest. These topics and subgroups are in alignment with 
our stated areas of interest and will be considered in the development 
and implementation of the evaluation plan.
    Comment: A couple of commenters emphasized the importance of the 
patients' experience and supported the inclusion of beneficiaries and 
caregivers in data collection to better access patient and family 
caregivers and/or support persons' experience with this model.
    Response: We agree with the commenters' points of emphasis. The 
inclusion of the patient and caregiver perspective is an important 
aspect of the evaluation of the impact of the model. The survey of 
patients is a key component of the evaluation to address the very 
important issues of patient functional performance, pain reduction, 
experience, and access.
    Comment: A couple of commenters expressed concerns about the 
anticipated burden associated with the evaluation. A commenter express 
concern about the costs associated with duplicative and overlapping 
evaluation efforts. The commenter suggested a concerted effort to limit 
site visits, data requests, and other reporting requirements to the 
minimum necessary to understand the impact of the program.
    Response: We acknowledge the commenters' concern related to the 
burden associated with the evaluation and will minimize it to the 
extent possible while still ensuring a thorough assessment of the model 
and its impacts. We intend to use the site visit approach for data 
collection judiciously while being mindful of the impact on providers. 
Furthermore, while we expect TEAM participants and TEAM collaborators 
to abide by the terms of

[[Page 69859]]

the model and to cooperate with the evaluation as discussed in section 
X.A.1.d of the preamble to this final rule, we point out that this 
final rule does not contain any provisions that the TEAM participants 
must incorporate the requirement that their TEAM collaborators host 
site visits in their agreements.
    After consideration of the public comments received, we are 
finalizing the proposed approach to the evaluation without 
modification.
p. Decarbonization and Resilience Initiative
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 35934), we 
proposed a voluntary Decarbonization and Resilience Initiative within 
TEAM to assist hospitals in addressing the threats to the nation's 
health and its health care system presented by climate change and the 
effects of hospital carbon emissions on health outcomes, health care 
costs and quality of care. The voluntary initiative would have two 
elements: technical assistance for all interested TEAM participants and 
a proposed voluntary reporting option to capture information related to 
Scope 1 and Scope 2 emissions as defined by the Greenhouse Gas Protocol 
(GHGP) framework,\1015\ with the potential to add Scope 3 in future 
years.
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    \1015\ Janet Ranganathan, Laurent Corbier, Pankaj Bhatia, Simon 
Schultz, Peter Gage, & Kjeli Oren. The Greenhouse Gas Protocol: A 
Corporate Accounting and Reporting Standard (Revised Edition). World 
Business Council for Sustainable Development and World Resources 
Institute. 2004. https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf.
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    The threats presented by climate change to the health of 
beneficiaries and to health care operations are growing. These include 
acute climate-related events (for example, wildfires, high-powered 
storms, flooding) that can harm exposed populations and disrupt service 
delivery, exacerbations of chronic illness (for example, extreme heat 
impacts on cardiovascular and pulmonary health), and increases in 
water-borne and insect-borne illness.\1016\ These risks often fall 
disproportionately on traditionally underserved populations, 
heightening existing health disparities.\1017\ In view of these 
challenges, health care organizations must increase their resilience, 
and understand and address their patients' climate-related health 
risks.
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    \1016\ Allison R. Crimmins & Alexa K. Jay (eds.). U.S. Global 
Change Research Program. Fifth National Climate Assessment. U.S. 
Global Change Research Program. 2023. https://nca2023.globalchange.gov/https://nca2023.globalchange.gov/.
    \1017\ EPA's Office of Atmospheric Programs. Climate Change and 
Social Vulnerability in the United States: A Focus on Six Impacts. 
U.S. Environmental Protection Agency. U.S. Environmental Protection 
Agency. EPA 430-R-21-003. September 2021. https://www.epa.gov/system/files/documents/2021-09/climate-vulnerability_september-2021_508.pdf https://www.epa.gov/system/files/documents/2021-09/climate-vulnerability_september-2021_508.pdf.
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    Health systems have reduced their own significant emissions and 
ground-level air pollution, often through the introduction of energy 
efficiency solutions, renewable energy initiatives, and focused 
efficiency measures in clinical care delivery in areas including 
surgery (described throughout section X.A.3.p. of the preamble of this 
final rule). We believe these types of cumulative reductions have the 
potential to make significant contributions to nationwide emission 
reductions and produce savings. At an individual facility level, these 
reductions have the potential to save the facility money and enhance 
their operational resilience (as many sustainable energy solutions can 
create more energy independence for facilities), meaning 
decarbonization has bearing on quality of care and cost. More efficient 
utilization of resources in the surgical setting, specifically, can 
also reduce cost and improve sustainability; for example, although 
operating rooms represent a relatively small proportion of hospitals' 
physical footprint, they typically consume 3-6 times more energy per 
square foot as the hospital as a whole,\1018\ account for 40-60 percent 
of the hospital's supply costs, and produce 30 percent of the 
hospital's waste.\1019\
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    \1018\ Andrea J. MacNeill, Robert Lillywhite, & Carl J. Brown. 
The Impact of Surgery on Global Climate: A Carbon Footprinting Study 
Of Operating Theatres in Three Health Systems. Lancet Planetary 
Health, vol. 1, no. 9, pp. E381-E388. December 2017. https://www.thelancet.com/journals/lanplh/article/PIIS2542-5196(17)30162-6/
fulltexthttps://www.thelancet.com/journals/lanplh/article/PIIS2542-5196(17)30162-6/fulltext.
    \1019\ Maya A. Babu, Angela K. Dalenberg, Glen Goodsell, Amanda 
B. Holloway, Marcia M. Belau, & Michael J. Link. Greening the 
Operating Room: Results of a Scalable Initiative to Reduce Waste and 
Recover Supply Costs. Neurosurgery, vol. 85, no. 3, pp. 432-437. 
September 1, 2019. https://pubmed.ncbi.nlm.nih.gov/30060055/. 
https://pubmed.ncbi.nlm.nih.gov/30060055/.
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    Because hospital activities (such as surgical procedures) impact 
emissions and the work of hospitals requires uninterrupted service 
delivery, we believe TEAM presents an opportunity for CMS to learn more 
about key strategies for decarbonization (for example, clinical 
decarbonization approaches, approaches to reducing low-value services 
and physical waste) and improving resiliency in the health care system. 
It is hoped that this initiative would help bring savings to the health 
system and the Medicare Program, consistent with TEAM's goals.
(1) Background
(a) Climate Impact on Health
    Climate change driven by greenhouse gas (GHG) emissions threatens 
patients' health. The health care industry's contribution to those 
emissions is well-documented and accounts for between 4.4 and 4.6 
percent of worldwide GHG emissions.\1020\ In the U.S. in 2018, GHG 
emissions from the health care sector accounted for 8.5 percent of 
total U.S. GHG emissions.\1021\ According to the National Climate 
Assessment, the US Government's official report on climate change 
impacts, children, older adults, and low-income communities are 
disproportionately affected by climate change and pollution, meaning 
the Medicare, Medicaid, and CHIP programs bear much of the medical 
expenses and caregiving services related to emissions.\1022\ Medicare 
beneficiaries face several health conditions related to GHG emissions, 
including, but not limited to, heart disease, stroke, cancer, and 
respiratory diseases.'' \1023\ More discussion on the impact of climate 
to Medicare, Medicaid, and CHIP beneficiaries is presented in section 
X.A.3.p.(1).(c).(v). of the preamble of this final rule. The estimated 
disease burden from U.S. health care pollution is the same order of 
magnitude as years

[[Page 69860]]

of life lost as a result of deaths from preventable medical 
errors.\1024\
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    \1020\ Matthew J. Eckelman, Kaixin Huang, Robert Lagasse, Emily 
Senay, Robert Dubrow, & Jodi D. Sherman. Health Care Pollution and 
Public Health Damage in The United States: An Update. Health 
Affairs, vol. 39, no. 12, pp. 2071-2079. December 2020. https://www.healthaffairs.org/doi/10.1377/hlthaff.2020.01247https://www.healthaffairs.org/doi/10.1377/hlthaff.2020.01247.
    \1021\ Matthew J. Eckelman, Kaixin Huang, Robert Lagasse, Emily 
Senay, Robert Dubrow, & Jodi D. Sherman. Health Care Pollution and 
Public Health Damage in The United States: An Update. Health 
Affairs, vol. 39, no. 12, pp. 2071-2079. December 2020. https://www.healthaffairs.org/doi/10.1377/hlthaff.2020.01247https://www.healthaffairs.org/doi/10.1377/hlthaff.2020.01247.
    \1022\ USGCRP, 2018: Impacts, Risks, and Adaptation in the 
United States: Fourth National Climate Assessment, Volume II 
[Reidmiller, D.R., C.W. Avery, D.R. Easterling, K.E. Kunkel, K.L.M. 
Lewis, T.K. Maycock, and B.C. Stewart (eds.)]. U.S. Global Change 
Research Program, Washington, DC, USA, 1515 pp. doi: 10.7930/
NCA4.2018.
    \1023\ Joel D. Kaufman, Sara D. Adar, R. Graham Barr, et al. 
Association Between Air Pollution and Coronary Artery Calcification 
Within Six Metropolitan Areas in the USA (The Multi-Ethnic Study of 
Atherosclerosis and Air Pollution): A Longitudinal Cohort Study. 
Lancet, vol. 388, no. 10045, pp. 696-704. August 13, 2017. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5019949/https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5019949/.
    \1024\ Joel D. Kaufman, Sara D. Adar, R. Graham Barr, et al. 
Association Between Air Pollution and Coronary Artery Calcification 
Within Six Metropolitan Areas in the USA (The Multi-Ethnic Study of 
Atherosclerosis and Air Pollution): A Longitudinal Cohort Study. 
Lancet, vol. 388, no. 10045, pp. 696-704. August 13, 2017. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5019949/https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5019949/.
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    In keeping with an increased focus on climate resilience and 
sustainability across HHS, the Biden Administration in 2021 called for 
the creation of a new Office of Climate Change and Health Equity 
(OCCHE) within HHS via executive order (E.O. 14008), and for the first 
time HHS set an aim for addressing climate-related threats to health in 
its 2022-2026 strategic plan, requiring all Operating Divisions to 
contribute. In 2022, the Biden Administration launched the Health 
Sector Climate Pledge, a voluntary commitment to climate resilience and 
emissions reduction that invites health sector organizations to align 
with administration goals, cutting GHG emissions by 50 percent by 2030 
and achieving net zero emissions by 2050. A group of 133 organizations 
representing 900 hospitals have signed the Pledge as of November 16, 
2023.\1025\ To support health sector efforts with climate resilience 
and emissions reduction, OCCHE developed a resource hub,\1026\ 
featuring tools from across HHS such as a compendium of federal 
resources for the healthcare sector, information on how to leverage the 
IRA, an educational webinar series, and the Agency for Healthcare 
Research and Quality (AHRQ)'s Decarbonization Primer \1027\ (referred 
to hereafter as the AHRQ primer). OCCHE also convenes federal health 
systems (for example, Indian Health Service, Veteran's Health 
Administration) to collaborate on meeting the administration's goals 
for emissions reduction, which can inform this initiative.
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    \1025\ HHS Office of Climate Change & Health Equity. Health 
Sector Commitments to Emissions Reduction and Resilience. HHS Office 
of the Assistant Secretary for Health--Health Sector Pledge. January 
3, 2024. https://www.hhs.gov/climate-change-health-equity-environmental-justice/climate-change-health-equity/actions/health-sector-pledge/https://www.hhs.gov/climate-change-health-equity-environmental-justice/climate-change-health-equity/actions/health-sector-pledge/.
    \1026\ HHS Office of Climate Change & Health Equity. Compendium 
of Federal Resources for Health Sector Emissions Reduction and 
Resilience. HHS Office of the Assistant Secretary for Health--Health 
Sector Pledge. December 7, 2023. https://www.hhs.gov/climate-change-health-equity-environmental-justice/climate-change-health-equity/actions/health-care-sector-pledge/federal-resources/https://www.hhs.gov/climate-change-health-equity-environmental-justice/climate-change-health-equity/actions/health-care-sector-pledge/federal-resources/.
    \1027\ Bhargavi Sampath, Matthew Jensen, Jennifer Lenoci-
Edwards, Kevin Little, Hardeep Singh, & Jodi D. Sherman. Reducing 
Health care Carbon Emissions: A Primer on Measures and Actions for 
Health Care Organizations to Mitigate Climate Change. U.S. Agency 
for Healthcare Research & Quality. AHRQ pub. No. 22-M011. September 
2023. Reducing Healthcare Carbon Emissions: A Primer on Measures and 
Actions to Mitigate Climate Change (ahrq.gov)Reducing Healthcare 
Carbon Emissions: A Primer on Measures and Actions to Mitigate 
Climate Change (ahrq.gov).
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(b) Greenhouse Gas Protocol and Health
    CMS has twice sought and received feedback on approaches to 
decarbonization and resilience through requests for information in 
proposed rules. The feedback to these requests was summarized in the 
final rules. The first request for information was published in the 
Patient Protection and Affordable Care Act; HHS Notice of Benefit and 
Payment Parameters for 2023 proposed rule (87 FR 693 through 694) and a 
summary presented in the final rule (87 FR 27354). The second was in 
the in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28478 through 
28479) and the summary was presented in the final rule (87 FR 49167). 
Overall, respondents showed a notable interest in reducing health 
sector emissions and increasing transparent GHG emissions reporting. 
CMS continues to update policies to promote energy efficiency and 
reduce GHG emissions. For example, in 2023, CMS issued the Categorical 
Waiver Health Care Microgrid System. CMS requires specified providers 
to have ``emergency power for an essential electrical system (EES) to 
be supplied by a generator or battery system.'' \1028\ The waiver 
permits normal and emergency power to be supplied by sources other than 
a generator or battery system, including a health care microgrid 
systems that use sustainable sources of energy such as solar power.
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    \1028\ CMS Quality, Safety, & Oversight Group (QSOG) Director 
and CMS Survey & Operations Group (SOG) Director. Categorical 
Waiver--Health Care Microgrid Systems (HCMSs). CMS Center for 
Clinical Standards and Quality reference no. QSO-23-11-LSC. March 
31, 2023. https://www.cms.gov/medicare/provider-enrollment-and-certification/surveycertificationgeninfo/policy-and-memos-states/categorical-waiver-health-care-microgrid-systems-hcmsshttps://www.cms.gov/medicare/provider-enrollment-and-certification/surveycertificationgeninfo/policy-and-memos-states/categorical-waiver-health-care-microgrid-systems-hcmss.
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    When discussing GHG for this initiative, we refer to the Greenhouse 
Gas Protocol (GHGP) framework, which is a globally recognized standard 
for quantifying and reporting on emissions. The framework defines 3 
scope levels.\1029\ We have included examples that relate to health 
care.1030 1031
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    \1029\ Janet Ranganathan, Laurent Corbier, Pankaj Bhatia, Simon 
Schultz, Peter Gage, & Kjeli Oren. The Greenhouse Gas Protocol: A 
Corporate Accounting and Reporting Standard (Revised Edition). World 
Business Council for Sustainable Development and World Resources 
Institute. 2004. https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdfhttps://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf.
    \1030\ Nick Watts (ed.). Delivering a `Net Zero' National Health 
Service. NHS England & NHS Improvement publication no. PAR133. July 
2022. B1728-delivering-a-net-zero-nhs-july-2022.pdf 
(england.nhs.uk)B1728-delivering-a-net-zero-nhs-july-2022.pdf 
(england.nhs.uk).
    \1031\ Matthew J. Eckelman, Kaixin Huang, Robert Lagasse, Emily 
Senay, Robert Dubrow, & Jodi D. Sherman. Health Care Pollution and 
Public Health Damage in The United States: An Update. Health 
Affairs, vol. 39, no. 12, pp. 2071-2079. December 2020. https://www.healthaffairs.org/doi/10.1377/hlthaff.2020.01247https://www.healthaffairs.org/doi/10.1377/hlthaff.2020.01247.
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    Scope 1: Direct emissions. Direct GHG emissions occur from sources 
that are owned or controlled by an organization or company. For health 
care, Scope 1 captures health care operations such as direct facilities 
emissions, anesthetic gases, and GHG emissions from leased or owned 
vehicles.
    Scope 2: Indirect emissions from purchased energy. GHG emissions 
from the generation of purchased electricity consumed by the 
organization or company. For health care facilities, Scope 2 includes 
purchased or acquired electricity, and steam, heat, or cooling consumed 
by the reporting organization or company.
    Scope 3: Other indirect GHG emissions. Scope 3 allows for the 
treatment of all other indirect emissions. Scope 3 incorporates 
upstream and downstream emissions in the supply chain. For health care, 
Scope 3 may include purchased pharmaceuticals and chemicals, medical 
devices and supplies, food, water, waste, employee and patient 
transportation, and additional emissions outside of Scopes 1 and 2. In 
Scope 3, all purchased and sold goods have an estimated emissions 
factor for their production, transportation, and life cycle. For 
example, in a health care setting, Scope 3 emissions may include 
prescribed medicine such as metered dose inhalers (MDI). Scope 3 
uniquely incorporates intangible emissions through the organization's 
reported investments.
    In a 2018 analysis, Scope 1 accounted for 7 percent of the U.S. 
National Health Care GHG emissions, Scope 2 accounted for 11 percent, 
and Scope 3 accounted for the remaining 82 percent.\1032\ We

[[Page 69861]]

believe that Scopes 1 and 2 emissions reduction measures represent 
areas where there are significant opportunities to increase hospital 
operating efficiency and reduce operating costs. Therefore, we proposed 
in section X.A.3.p.(4). of the FY 2025 IPPS/LTCH PPS proposed rule, (89 
FR 35934), that TEAM participants could voluntarily respond to 
organizational questions and Scopes 1 and 2 metrics, as participants in 
TEAM would have direct oversight of these items. While we did not 
propose Scope 3 metrics in this rule, we recognize Scope 3 accounts for 
the largest portion of GHG emissions. Therefore, we sought comment in 
section X.A.3.p.(4).(a).(vii). of the FY 2025 IPPS/LTCH PPS proposed 
rule, (89 FR 35934) on how we might be able to standardize and collect 
this information in the future.
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    \1032\ Matthew J. Eckelman, Kaixin Huang, Robert Lagasse, Emily 
Senay, Robert Dubrow, & Jodi D. Sherman. Health Care Pollution and 
Public Health Damage in The United States: An Update. Health 
Affairs, vol. 39, no. 12, pp. 2071-2079. December 2020. https://www.healthaffairs.org/doi/10.1377/hlthaff.2020.01247https://www.healthaffairs.org/doi/10.1377/hlthaff.2020.01247.
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(c) Rationale for Establishing the Decarbonization and Resilience 
Initiative
(i) GHG Emissions are Relevant to Monitoring and Evaluating Quality 
Outcomes
    The CMS Innovation Center is granted discretion to collect data 
necessary for the purposes of evaluating and monitoring its models 
under section 1115A(b)(4)(B) of the Act. Overwhelming evidence points 
to GHG emission's deleterious effect on patient health and the 
disproportionate impact borne by Medicare, Medicaid, and CHIP 
beneficiaries. See section X.A.3.p.(1).(c).(v). of the preamble of this 
final rule, for GHG Emissions Impact on Medicare, Medicaid, and CHIP 
populations.
    Given the established impact GHG emissions have on Medicare, 
Medicaid, and CHIP beneficiary health, in the FY 2025 IPPS/LTCH PPS 
proposed rule, (89 FR 35934), CMS proposed to collect data on GHG 
emissions, through voluntary reporting, as part of our monitoring and 
evaluation of the model, just as CMS monitors for other quality 
indicators that may impact beneficiary health.
(ii) Measuring GHG Emissions is a Key First Step to Reducing GHG 
Emissions Which Could Improve Quality Outcomes for Beneficiaries
    Measuring GHG emissions is an important first step toward reducing 
GHG emissions, and such reductions could lead to outcome quality 
improvements among beneficiaries. By organizing a GHG emissions 
reporting system, CMS is supporting TEAM participants in establishing a 
baseline understanding of their GHG emissions, how much and how 
efficiently energy is used in their facilities, and the emissions 
generated by their facilities or activities. Establishing this baseline 
understanding is a necessary first step to lowering emissions. The 
proposed decarbonization initiative could directly lead to lower 
emissions through: (1) sharing benchmarkable data back to TEAM 
participants, which will support identification of opportunities to 
improve energy efficiency; (2) supporting their GHG emissions reporting 
activities, which will support TEAM participants in better 
understanding their current state energy consumption, GHG emissions, 
and opportunities to improve energy efficiency; and (3) providing 
technical assistance related to reporting, identifying, and accessing 
resources for and undertaking activities to reduce GHG emissions.
    Given the association of emissions with chronic diseases, including 
respiratory and cardiovascular disease, the decarbonization and 
resilience initiative could improve health outcomes for the Medicare, 
Medicaid, and CHIP beneficiaries disproportionately affected by GHG 
emissions. In particular, the Environmental Protection Agency (EPA) 
released a report on the health impacts of GHG emissions, pollution, 
and climate change and health and pointed towards key health outcomes 
that are impacted--new asthma diagnoses in children age 0-17 due to 
particulate air pollution, premature deaths in adults ages 65 and older 
due to particulate air pollution, and deaths due to extreme 
temperatures.\1033\ We would expect reductions in GHG emissions to 
improve these health outcomes for its patient populations.
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    \1033\ EPA's Office of Atmospheric Programs. Climate Change and 
Social Vulnerability in the United States: A Focus on Six Impacts. 
U.S. Environmental Protection Agency. U.S. Environmental Protection 
Agency. EPA 430-R-21-003. September 2021. https://www.epa.gov/system/files/documents/2021-09/climate-vulnerability_september-2021_508.pdfhttps://www.epa.gov/system/files/documents/2021-09/climate-vulnerability_september-2021_508.pdf.
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(iii) Measuring GHG Emissions Could Improve Hospitals' Resilience and 
Beneficiaries' Continuity of Care, Both of Which Impact Quality 
Outcomes
    In addition to these general health quality impacts, there are also 
resilience and continuity of care impacts associated with energy 
efficiency and a transition to sustainable energy sources for 
hospitals, which also impact quality outcomes. One study that examined 
158 hospital evacuations between 2000 and 2017 found that nearly three-
quarters were for climate-sensitive events such as wildfires or 
hurricanes.\1034\ In addition to causing hospital evacuations, climate 
change can disrupt health care system operations by causing facility 
damage and closures, power outages, displacement of health care 
professionals, and disruptions in transportation. These climate impacts 
affect access to and quality of care.
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    \1034\ Sharon E. Mace & Aishwarya Sharma. Hospital Evacuations 
Due to Disasters in the United States in the Twenty-First Century. 
American Journal of Disaster Medicine, vol. 15, no. 1, pp. 7-22. 
January 2020, Hospital evacuations due to disasters in the United 
States in the twenty-first century--PubMed (nih.gov).
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    By sharing back benchmarkable data with TEAM participants (as 
described in section X.A.3.p.(6).(a)., Individualized Feedback Reports 
to TEAM Participants, of the preamble of this final rule), providing 
technical assistance related to GHG emissions reporting, and providing 
technical assistance to improve energy efficiency and energy 
resilience, the Decarbonization and Resilience Initiative could 
directly support TEAM participants in building greater energy 
resilience to disasters and ensuring greater continuity of care. We 
expect the Decarbonization and Resilience Initiative to increase the 
energy efficiency of participating TEAM participants and the degree to 
which they have sustainable, more localized sources of energy that are 
resilient to disasters and other climate change related hazards.\1035\ 
We expect this to lead to fewer hospital closures during disasters and 
therefore improve continuity of care and other health quality outcomes 
for effected beneficiaries. Greenwich Hospital offers an example of 
this. In 2008, the hospital invested in building a low-carbon, energy 
efficient energy infrastructure with the intention of it being able to 
withstand the impact of an extreme weather event. The investment proved 
to be valuable because when Hurricane Sandy hit the New Jersey coast in 
2012, the hospital was still able to carry on with normal healthcare 
operations.
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    \1035\ NOAA Climate Program Office. Hospital Plans Ahead for 
Power, Serves the Community Through Hurricane Sandy. U.S. National 
Oceanic & Atmospheric Administration Climate Resilience Toolkit. 
February 15, 2018. https://toolkit.climate.gov/case-studies/hospital-plans-ahead-power-serves-community-through-hurricane-sandyhttps://toolkit.climate.gov/case-studies/hospital-plans-ahead-power-serves-community-through-hurricane-sandy.

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[[Page 69862]]

(iv) GHG Emissions are Relevant to Reducing Program Expenditures
    Reductions in operating costs and spending due to energy efficiency 
and more efficient provision of care (in the case of anesthetic gases) 
directly contribute to savings for CMS. GHG emissions reporting is a 
necessary first step for hospitals to begin to understand their 
emissions, how energy efficient their facilities and processes are, and 
to identify opportunities to increase efficiencies and lower operating 
costs and spending tied to GHG emissions and to overutilization of 
anesthetic gas. In turn, increased energy efficiency and reduced energy 
expenditures may reduce Medicare Program costs. Technical assistance 
provided under the initiative would also further help hospitals 
identify, resource, and implement energy efficiency improvements.
    Medicare pays Critical Access Hospitals based on each hospital's 
reported costs outside of IPPS. Therefore, reductions in operating 
costs and some capital costs could lead to cost savings for the 
Medicare program. Medicare pays for capital and operating costs as part 
of IPPS payments, and efficiencies achieved through decarbonization 
could lead to savings to the Medicare program. In addition, reporting 
questions and metrics related to energy use could improve understanding 
of those costs and inform potential future policy development to secure 
further savings.
    Medicare covers anesthesia services through both Part A and Part B. 
Research has shown that low-flow anesthesia techniques (<=1 L/min) are 
associated with lower costs, reduced emissions, and do not impact 
quality of care or health outcomes.\1036\ The Patient Safety and 
Support of Positive Experiences with Anesthesia MIPS Value Pathway 
already includes an efficiency measure focused on encouraging the use 
of low flow inhalation general anesthesia during the maintenance phase 
of the anesthetic for patients aged 18 years or older who undergo an 
elective procedure lasting 30 minutes or longer (ABG44). Such 
improvements to the provision of care and anesthesia could 
simultaneously lower emissions and reduce costs/produce savings.
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    \1036\ Alicia Edmonds, Hilary Stambaugh, Scot Pettey, & Kenn B. 
Daratha. Evidence-Based Project: Cost Savings and Reduction in 
Environmental Release With Low-Flow Anesthesia. AANA J, vol. 89, no. 
1, pp. 27-33. February 2021. Evidence-Based Project: Cost Savings 
and Reduction in Environmental Release With Low-Flow Anesthesia--
PubMed (nih.gov)Evidence-Based Project: Cost Savings and Reduction 
in Environmental Release With Low-Flow Anesthesia--PubMed (nih.gov).
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(v) GHG Emissions Impact on Medicare, Medicaid, and CHIP Populations
    Medicare and Medicaid beneficiary health and program expenditures 
are directly impacted by GHG emissions. Older adults, or those 65 years 
old and older, experience poorer health outcomes because of rising 
temperatures, air pollution, and disaster events. Depending on global 
trajectories of global warming, particulate matter concentrations are 
estimated to result in approximately 2,000 to 6,000 premature U.S. 
deaths for those over 65 years old on an annual basis. Air pollution 
has other negative health consequences, including the exacerbation of 
chronic obstructive pulmonary disease and increased occurrence of heart 
attacks, especially for those living with diabetes or obesity.\1037\ 
Other studies have documented the impact of weather- related events 
such as high temperatures, flood, storms, or hurricanes that may 
disproportionately affect older adults.1038 1039 1040 1041
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    \1037\ Lulin Wang, Junqing Xie, Yonghua Hu, & Yaohua Tian. Air 
Pollution and Risk of Chronic Obstructed Pulmonary Disease: The 
Modifying Effect of Genetic Susceptibility and Lifestyle. Lancet 
eBioMedicine, vol. 79, pp. 103994. May 2022. Air pollution and risk 
of chronic obstructed pulmonary disease: The modifying effect of 
genetic susceptibility and lifestyle--PMC (nih.gov)Air pollution and 
risk of chronic obstructed pulmonary disease: The modifying effect 
of genetic susceptibility and lifestyle--PMC (nih.gov).
    \1038\ Marina Romanello, Alice McGushin, Claudia Di Napoli, et 
al. The 2021 Report of the Lancet Countdown on Health and Climate 
Change: Code Red for a Healthy Future. Lancet, vol. 398, no. 10311, 
pp. 1619-1662. October 20, 2021. The 2021 report of the Lancet 
Countdown on health and climate change: code red for a healthy 
future--The LancetThe 2021 report of the Lancet Countdown on health 
and climate change: code red for a healthy future--The Lancet.
    \1039\ Janet L. Gamble & John Balbus. Chapter. 9: Populations of 
Concern. In: U.S. Global Change Research Program. The Impacts of 
Climate Change on Human Health in the United States: A Scientific 
Assessment. 2016. The Impacts of Climate Change on Human Health in 
the United States: A Scientific Assessment (globalchange.gov)The 
Impacts of Climate Change on Human Health in the United States: A 
Scientific Assessment (globalchange.gov).
    \1040\ Diarmid Campbell-Lendrum & Nicola Wheeler. COP24 Special 
Report: Health & Climate Change. World Health Organization Special 
Report. 2018. 9789241514972-eng.pdf (who.int)9789241514972-eng.pdf 
(who.int).
    \1041\ Laura P. Sands, Quyen Do, Pang Du, Yunnan Xu, & Rachel 
Pruchno. Long Term Impact of Hurricane Sandy on Hospital Admissions 
of Older Adults. Social Science & Medicine, vol. 293, pp. 114659. 
January 1, 2023. Long term impact of Hurricane Sandy on hospital 
admissions of older adults--PMC (nih.gov)Long term impact of 
Hurricane Sandy on hospital admissions of older adults--PMC 
(nih.gov).
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    Medicaid beneficiaries are typically lower-income populations, 
pregnant people, and children, all of whom experience many direct and 
indirect health challenges because of climate drivers and events, 
including greater exposure to air pollution, mortality and injury from 
extreme temperatures, and food insecurity.\1042\
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    \1042\ Wim Thiery, Stefan Lange, Joeri Rogel, et al. 
Intergenerational Inequities in Exposure to Climate Extremes. 
Science, vol. 374, no. 6564, pp. 158-160. September 26, 2021. 
Intergenerational inequities in exposure to climate extremes--PubMed 
(nih.gov).
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    Medicare and Medicaid beneficiaries are among the groups most 
vulnerable to the health effects of climate change and GHG emissions 
and bear the highest share of climate-sensitive health costs including 
those from GHG emissions which may account for billions in health-
related costs to both programs.1043 1044 The Office of 
Management and Budget's (OMB) 2022 Assessment of the Federal 
Government's Financial Risks to Climate Change estimates that ``Federal 
climate-related healthcare spending in a few key areas could increase 
by between $824 million and $22 billion (2020$) by the end of the 
century.'' \1045\
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    \1043\ Vijay S. Limaye, Wendy Max, Juanita Constible, & Kim 
Knowlton. Estimating the Health-Related Costs of 10 Climate-
Sensitive U.S. Events During 2012. GeoHealth, vol. 3, no. 9, pp. 
245-265. September 17, 2019. Estimating the Health[hyphen]Related 
Costs of 10 Climate-Sensitive U.S. Events During 2012--PMC 
(nih.gov)Estimating the Health-Related Costs of 10 Climate-Sensitive 
U.S. Events During 2012--PMC (nih.gov).
    \1044\ Ibid.
    \1045\ U.S. Office of Management & Budget. Climate Risk 
Exposure: An Assessment of the Federal Government's Financial Risks 
to Climate Change. OMB White Paper. April 2022. https://www.whitehouse.gov/wp-content/uploads/2022/04/OMB_Climate_Risk_Exposure_2022.pdfhttps://www.whitehouse.gov/wp-content/uploads/2022/04/OMB_Climate_Risk_Exposure_2022.pdf.
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(2) Defining the Decarbonization and Resilience Initiative
    We proposed at Sec.  512.505 that a Decarbonization and Resilience 
Initiative is an initiative for TEAM participants that includes 
technical assistance on decarbonization and a voluntary reporting 
program where TEAM participants may annually report questions and 
metrics related to emissions to CMS based on information that we 
describe in section X.A.3.p.(4). of the preamble of this final rule.
    In section X.A.3.p.(4). of the FY 2025 IPPS/LTCH PPS proposed rule, 
(89 FR 35934), we proposed that CMS would make available to TEAM 
participants technical assistance related to decarbonization, emissions 
reduction, and energy efficiency as described of the preamble of this 
final rule. The voluntary reporting component of the initiative 
described in section X.A.3.p.(4). of the preamble of this final rule 
would allow TEAM participants to

[[Page 69863]]

elect to report metrics including emissions data and assessment 
questions on four potential categories: organizational questions, 
building energy metrics, anesthetic gas metrics, and transportation 
metrics to CMS. As used in this initiative, the terms ``metrics'' and 
``measures'' refer to data to be collected and reported by TEAM 
participants. We proposed the building energy metrics would be reported 
to CMS using the ENERGY STAR Portfolio Manager and all other metrics 
would be reported to CMS in a manner and form specified by CMS. TEAM 
participants that elect to report all the metrics after a performance 
year would receive individualized feedback reports and public 
recognition from CMS.
    We summarize and respond to public comments received on the 
proposal to establish this initiative below.
    Comment: Many commenters, including many providers, expressed 
strong support for the initiative. Commenters highlighted how the 
initiative will lessen the impact of climate change on health. 
Commenters also noted that the initiative would improve patient 
outcomes, provide cost savings, and help scale sustainable practices. A 
few commenters stated that the initiative provides helpful resources 
and incentives to reduce GHG emissions while minimizing the burden of 
participation. A commenter expressed their belief that this initiative 
will help signatories to the HHS Health Sector Climate Pledge 
strengthen their efforts.
    Response: We thank commenters for their support. We agree that the 
initiative would have the potential to improve patient outcomes, may 
provide cost savings, and would help scale sustainable practices. The 
purpose of the initiative is to assist TEAM participants with 
addressing the threats to the nation's health and its health care 
system presented by climate change and addressing the effects of 
hospital carbon emissions on health outcomes, health care costs and 
quality of care. We believe the two elements of the initiative, 
technical assistance and voluntary reporting, will help achieve this 
purpose while minimizing burden on facilities.
    Comment: Several commenters supported including this initiative in 
TEAM and recommended additional actions. A few commenters expressed 
their belief that the initiative is a starting point or first step for 
future decarbonization efforts, but that more action is necessary to 
reduce emissions in the health care system. A few commenters requested 
incentives or penalties be added, stating that these are critical to 
emission reduction at a systems level. A commenter recommended 
additional financial incentives to encourage hospital participation. 
Another commenter recommended tying emission reductions to Medicare 
payments.
    Response: We thank commenters for their recommendations and support 
of this initiative. We will take commentators' recommendations into 
account as we continue to build the initiative. We believe that the 
initiative is an important step in addressing hospital carbon emission 
reduction. We refer readers to section X.A.3.p.(6).(d). of this final 
rule for a summary of comments we received regarding financial 
incentives.
    Comment: A few commenters recommended that the initiative should be 
accelerated, beginning earlier than 2026. A commenter specifically 
called out the need to accelerate the transition from voluntary to 
mandatory carbon reporting. Another commenter requested the initiative 
to be put in place by January 1, 2025.
    Response: We appreciate commenters recommendations. We note that we 
did not propose a transition from voluntary to mandatory reporting, and 
any changes would be proposed in future notice and comment rulemaking. 
In regard to timing, as the initiative is part of monitoring efforts 
for TEAM, this initiative will begin with TEAM's start date on January 
1, 2026 (89 FR 35934, at 35935) as stated in section X.A.3.a.(1). of 
this final rule. CMS will issue sub-regulatory guidance and technical 
assistance for the voluntary reporting ahead of TEAM's start date as 
feasible.
    Comment: Several commenters noted their support for the initiative 
and expressed their opinion that it should be opened to all hospitals, 
not just TEAM participants. A few commenters noted that all hospitals 
need to participate due to the scale of the GHG emissions problem. 
Other commenters noted that the initiative, particularly technical 
assistance, would be of interest to a broader community and should be 
available for all hospitals and not restricted to TEAM. A commenter 
noted that this initiative and other CMS environmental sustainability 
initiatives should include hospital outpatient departments, ambulatory 
surgical centers, and office-based locations.
    Response: We appreciate the commenters' support for this initiative 
and their feedback regarding this voluntary reporting initiative. Given 
these comments and other considerations such as the ability to scale 
reporting across health systems with TEAM participants, we will allow a 
TEAM participant hospital to voluntarily report its own metrics and 
respond to questions to CMS and additionally report on metrics and 
respond to questions to CMS on behalf of the TEAM participant's 
hospital corporate affiliates. While CMS will provide an individualized 
feedback report to the TEAM participant, CMS will not provide 
individualized feedback reports to a TEAM participant's hospital 
corporate affiliates. If a TEAM participant elects to report on all 
metrics and responds to questions to CMS, the participant is eligible 
to receive the badging provided by CMS as described in section 
X.A.3.p.(6).(b). If a TEAM participant voluntarily opts to report data 
regarding a corporate affiliate or affiliates, the badging, as 
described in section X.A.3.p.(6).(b) may include the corporate 
affiliate. This approach to reporting will allow acute care hospitals 
selected for TEAM to report on their own emissions as well as report on 
emissions across one or more of their hospital corporate affiliates 
within their larger health system, if they wish to do so, rather than 
needing to limit it to their acute care hospital alone. We agree with 
commenters that this voluntary reporting and feedback could be helpful 
to a TEAM participant if that additional voluntary expansion is 
warranted because the TEAM participant is just one part of a larger 
health system or other corporate affiliation structure. CMS emphasizes 
that this expanded reporting option is fully voluntary and at the 
discretion of the TEAM participant. In addition, in light of these 
strong supportive comments and given the alignment to CMS goals, CMS 
may consider expanding this voluntary reporting to additional 
providers, health care facilities and suppliers in future years.
    Comment: Several commenters supported the initiative particularly 
because it is voluntary and optional. Commenters expressed concern that 
the potential cost, time, and resources to collect this data may be a 
barrier for some providers. A few commenters noted that this initiative 
will help hospitals reduce carbon emissions and improve emissions data 
reporting. A commenter noted that this initiative should be responsive 
to individual hospital needs because of the difference between 
hospitals.
    Response: We thank the commenters for their support and understand 
their concerns that the time, cost, and resources needed to participate 
in this initiative may be prohibitive for some. As we gain experience 
with the technical assistance and voluntary reporting aspects of the 
initiative, we

[[Page 69864]]

plan to share information and learnings to address these concerns. We 
appreciate commenters' belief that the initiative will help hospitals 
to reduce carbon emissions and improve data reporting about emissions, 
and we understand the commenter's concern that it should be responsive 
to individual hospital's needs. Again, as we gain experience through 
our technical assistance and voluntary reporting of data, we will 
additional ways to identify ways to address these needs.
    Comment: A few commenters expressed support specifically for 
including this initiative within TEAM. These commenters noted the 
importance of climate change and noted that the initiative will benefit 
the health care sector by helping to improve efficiency and increase 
cost savings through climate action. Some commenters expressed their 
belief that the reporting and accompanying technical assistance will 
lay the groundwork and precedent for other programs.
    Response: We appreciate the commenters' support for including this 
initiative in TEAM and their belief that this initiative may benefit 
the health sector by improving efficiency, increasing cost savings, and 
laying the groundwork for other programs.
    After reviewing the public comments, for the reasons set forth in 
this rule, we are modifying Sec.  512.598(a) to not only allow TEAM 
participants to voluntarily report on metrics and respond to questions 
to CMS for their acute care hospital but additionally allow TEAM 
participants to report on metrics and respond to questions that 
includes the TEAM participant's hospital corporate affiliates. With 
this modification, we are finalizing the proposal defining this 
initiative.
(3) Technical Assistance
    For the technical assistance portion of the Decarbonization and 
Resilience Initiative we proposed that CMS would provide three types of 
support to interested TEAM participants:
     Developing approaches to enhance organizational 
sustainability and resilience;
     Transitioning to care delivery methods that result in 
lower GHG emissions and are clinically equivalent to or better than 
previous care delivery methods (for example, switching from Desflurane 
to alternative inhaled anesthetics); and
     Identifying and using tools to measure emissions and 
associated measurement activities.
    We summarize and respond to public comments received on the 
proposal to provide technical assistance to TEAM participants in this 
initiative below.
    Comment: Several commenters stated that they support our providing 
technical assistance to TEAM participants. These commenters expressed 
the need for guidance with the initiative, transitioning care delivery 
to lower carbon emissions, and understanding the metrics in this area.
    Response: We thank the commenters for their support and for 
identifying areas where our technical assistance may help guide TEAM 
participants.
    Comment: A few commenters noted that geography and hospital 
characteristics need to be considered in technical assistance 
materials. A commenter believed that establishing technical assistance 
cohorts by region or selected core-based statistical area would help to 
develop regional approaches to address climate change. A commenter 
expressed concern about whether CMS is knowledgeable enough about the 
various emissions reduction opportunities that may exist for hospitals 
based on regional variations and individual hospital characteristics.
    Response: We appreciate the comments asking us to take into 
consideration regional and geographic variations of hospitals as well 
as the unique characteristics of hospitals when developing our 
technical assistance for this initiative. As we develop the technical 
assistance aspect of this initiative, we will take these suggestions 
regarding geographic, regional, and hospital characteristics into 
consideration.
    Comment: Several commenters believe that CMS should consider 
partnering with existing learning communities and leverage existing 
resources from groups such as OCCHE, NAM Climate Collaborative, and the 
American Climate Corps. A few commenters suggested that CMS should form 
technical assistance panels or advisory committees to promote learning 
between TEAM participants and experts. A commenter recommended that CMS 
align with TJC certification or help with compliance requirements for 
the TJC program.
    Response: We thank the commenters for noting the importance of 
partnering with organizations that have been working with hospitals to 
successfully reduce their carbon emissions.
    Comment: Several commenters requested that CMS go beyond technical 
assistance and provide funding for TEAM participants to assess their 
facility's emissions, set goals, reduce emissions, and successfully 
implement voluntary reporting.
    Response: We thank the commenters for identifying these 
suggestions.
    Comment: A few commenters noted that CMS need to better define what 
will be included in technical assistance and how that assistance will 
be distributed to physicians and clinicians within their facilities. 
They noted that there are numerous sustainability actions that a 
hospital can take but help would be needed to tailor activities to 
their particular situation. A few commenters noted that customized or 
targeted technical assistance is preferred and that CMS should consider 
providing such technical assistance by establishing technical 
assistance cohorts, possibly by hospital type or by focusing on some 
aspect of GHG emission measurements including the basics of GHG 
measurements.
    Response: We thank the commenters for their comments that point out 
the types of technical assistance needed and how TEAM participants may 
have different needs depending on their facility's situation and we 
will take those considerations into account as we develop our technical 
assistance plan.
    After reviewing the public comments, for the reasons set forth in 
this rule, we are finalizing the proposal to provide voluntary 
technical assistance in this initiative.
    In the first support type, developing organizational approaches, 
CMS would offer interested TEAM participants guidance on best practices 
and methods for identifying opportunities to reduce GHG emissions while 
promoting sustainability and resilience. Particular attention will be 
placed on building efficiency and sustainable transportation. We would 
also help to identify potential non-Medicare financing strategies for 
this work, noting that TEAM participants have access to tax credits and 
grant programs that can support decarbonization and climate resilience 
investments through the Inflation Reduction Act,\1046\ as well as other 
federal funding opportunities.\1047\

[[Page 69865]]

OCCHE is leading a Catalytic Program to support safety-net health 
providers in taking advantage of these unprecedented opportunities; 
TEAM participants would be encouraged to take advantage of the recorded 
content and other materials from that program.\1048\
---------------------------------------------------------------------------

    \1046\ HHS Office of Climate Change & Health Equity. (OCCHE) 
Quickfinder for Leveraging the Inflation Reduction Act for the 
Health Sector. HHS Office of the Assistant Secretary for Health. 
February 27, 2024. The Office of Climate Change and Health Equity 
(OCCHE) Quickfinder for Leveraging the Inflation Reduction Act for 
the Health Sector [verbar] HHS.gov The Office of Climate Change and 
Health Equity (OCCHE) Quickfinder for Leveraging the Inflation 
Reduction Act for the Health Sector [verbar] HHS.gov.
    \1047\ HHS Office of Climate Change & Health Equity. Compendium 
of Federal Resources for Health Sector Emissions Reduction and 
Resilience. HHS Office of the Assistant Secretary for Health. 
December 7, 2023. Compendium of Federal Resources for Health Sector 
Emissions Climate Change Technical Assistance for Territories 
Reduction and Resilience [verbar] HHS.govCompendium of Federal 
Resources for Health Sector Emissions Climate Change Technical 
Assistance for Territories Reduction and Resilience [verbar] 
HHS.gov.
    \1048\ HHS Office of Climate Change & Health Equity. Catalytic 
Program on Utilizing the IRA. HHS Office of the Assistant Secretary 
for Health Resource Hub. March 1, 2024. https://www.hhs.gov/climate-change-health-equity-environmental-justice/climate-change-health-equity/health-sector-resource-hub/new-catalytic-program-utilizing-ira/. https://www.hhs.gov/climate-change-health-equity-environmental-justice/climate-change-health-equity/health-sector-resource-hub/new-catalytic-program-utilizing-ira/
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    We summarize and respond to public comments received on the 
proposal to provide the first type of technical assistance support 
below.
    Comment: Several commenters stressed that technical assistance in 
the absence of providing some form of direct, upfront funding may have 
little impact on reducing GHG emissions. A few commenters urged CMS to 
consider providing funding in the form of loans or grants. A commenter 
believed that upfront funding as compared to IRA tax credits that are 
received as reimbursement at a later point in time would be beneficial 
to TEAM participants. A commenter believed that IRA support for 
technical assistance regarding low carbon on site generation for the 
essential electrical system can be obtained only if the project 
succeeds but not if it fails.
    Response: We thank these commenters for their suggestions regarding 
additional financial support options regarding this voluntary 
initiative.
    Comment: A few commenters stated that some health systems need 
direct, hands-on technical assistance that will support their 
sustainability efforts such as tracking emissions, developing emissions 
reduction goals, navigating Treasury regulations for implementing the 
IRA, and linking TEAM participants to relevant funding sources. They 
noted that webinars and websites provide information that often is too 
general to be helpful.
    Response: We thank the commenters who believe that direct, hands-on 
technical assistance would be most helpful to their health systems. 
TEAM participants will receive guidance on how to access the ENERGY 
STAR Portfolio Manager platform to report their facility's emissions 
and additional technical assistance for the other reporting areas. We 
will take these comments into consideration as we review which 
technical assistance strategies to implement.
    Comment: A commenter believes that technical assistance that 
specifically addresses Scope 1 emissions and its potential overlap with 
other categories is needed.
    Response: We thank the commenter for this suggestion. After 
reviewing the public comments, for the reasons set forth in this rule, 
we are finalizing the proposal to provide the first type of technical 
assistance support in this initiative.
    With respect to the second type of support transitioning to lower-
carbon clinical alternatives, we would offer guidance on strategies for 
reducing emissions associated with inhaled anesthetic gases in pursuit 
of improvements on the measures described later in this section 
(drawing in part on ongoing work by federal health systems in this 
area). Other types of care delivery transitions could benefit patients 
by reducing demand for hospital services through education, addressing 
health inequities, improving telehealth options, and improving upstream 
care management.
    We summarize and respond to public comments received on the 
proposal to provide the second type of technical assistance support 
below.
    Comment: A few commenters recommended that CMS encourage TEAM 
participants to transition to clinical practices, therapies, and 
technologies that emit less carbon. They urged CMS to find a way to 
build embodied carbon into the metrics of clinical quality. A commenter 
provided an example in which a clinician has two choices of treatment 
with similar outcomes on all scales with the exception of embodied 
carbon. The commenter believed that the lower carbon intervention 
should be preferred. A commenter noted that the clinical and 
therapeutic benefits of specific gases such as desflurane and 
sevoflurane must be weighed against the benefits of reduced emissions 
when treating patients who are older or who present with certain 
conditions and asked us to respect the clinician's assessment in 
determining the safest anesthetic agents for the patient.
    Response: We thank these commenters for providing us with these 
helpful insights and recommendations. We will take these insights and 
recommendations into consideration as we work to develop our technical 
assistance strategies to support TEAM participants' efforts to 
transition to lower carbon clinical alternatives as well as the use of 
anesthetic gases in section X.A.3.p.(4).(a).(v). of this initiative.
    After reviewing the public comments, for the reasons set forth in 
this rule, we are finalizing the proposal to provide the second type of 
technical assistance support in this initiative.
    For the third type of support, developing emissions measurement 
strategies, we would identify relevant measures, existing tools (for 
example, the ENERGY STAR Portfolio Manager platform described in 
section X.A.3.p.(4). of the preamble of this final rule) and new tools 
as needed. We would also offer guidance on strategies for using 
emissions data to identify opportunities to save energy and reduce 
emissions (for example, ENERGY STAR Treasure Hunt to identify potential 
areas to reduce energy usage).\1049\
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    \1049\ Energy Star Treasure Hunts, https://www.energystar.gov/industrial_plants/treasure_hunt. https://www.energystar.gov/industrial_plants/treasure_hunt.
---------------------------------------------------------------------------

    We summarize and respond to public comments received on the 
proposal to provide the third type of technical assistance support 
below.
    Comment: A commenter urged CMS to provide interactive technical 
assistance in accounting methods, which include data sources and 
normalization methods, and believed that this interactive technical 
assistance should be provided directly from an expert oversight body at 
CMS or TJC, or both. The commenter urged CMS to not rely on third-party 
vendors to provide these accounting methods as third-party vendors may 
not have the expertise or may have conflicts of interest.
    Response: We thank the commenter for their comment and will take 
these suggestions into consideration when developing technical 
assistance regarding emissions measurement strategies.
    After reviewing the public comments, for the reasons set forth in 
this rule, we are finalizing the proposal to provide the third type of 
technical assistance support in this initiative.
    As proposed in the FY 2025 IPPS/LTCH PPS proposed rule, (89 FR 
35934), this technical assistance would be provided to interested TEAM 
participants.
    After reviewing the public comments, for the reasons set forth in 
this rule, we are finalizing the proposal to provide technical 
assistance to TEAM participants who voluntarily participate in the 
Decarbonization and Resilience Initiative, including their corporate 
affiliates, as feasible.

[[Page 69866]]

(4) Voluntary Reporting
    For the voluntary reporting portion of the TEAM Decarbonization and 
Resiliency Initiative, we proposed at Sec.  512.598(a) that TEAM 
participants may elect to report metrics and questions related to 
emissions to CMS on an annual basis following each performance year. 
TEAM participants that elect to report on all the initiative metrics 
and questions to CMS, in the form and manner required by CMS, would be 
eligible for benefits such as receiving individualized feedback reports 
and public recognition as well as potentially achieving operational 
savings (please note these savings would be incidental and not a result 
of model-related payments). In section X.A.3.p.(4). of the preamble of 
this final rule, we proposed the metrics and questions that would be 
included in the voluntary reporting initiative. In section X.A.3.p.(5). 
of the preamble of this final rule, we proposed how and when TEAM 
participants would report the metrics and respond to questions to CMS. 
Finally, in section X.A.3.p.(6). of the preamble of this final rule, we 
outline our proposals for benefits for TEAM participants that elect to 
engage in the voluntary reporting portion of the Decarbonization and 
Resiliency Initiative as well as document some potential indirect 
benefits, such as operational savings.
    We summarize and respond to public comments received on the 
proposal for voluntary reporting by TEAM participants that elect to 
report below.
    Comment: Many commenters supported voluntary reporting. Commenters 
expressed their belief that reporting is an important first step to 
taking action on climate change. Commenters noted the need to pilot the 
reporting prior to making it mandatory. Commenters also noted some 
voluntary reporting is needed because some TEAM participants have 
limited resources and limited capacity to participate; they expressed 
concern about the potential burden of collecting emissions data. These 
commenters further requested that CMS streamline reporting to minimize 
this burden. Commenters also noted that voluntary reporting will help 
guide TEAM participants to carbon emission reporting, which may help to 
reduce emissions, lead to better health outcomes, and set a precedent 
for other health care institutions.
    Response: We appreciate the commenters' support. We intend to 
streamline the voluntary reporting as much as possible to minimize 
burden and increase participation. We also believe that technical 
assistance may provide TEAM participants with the support they may need 
to participate. We also believe that voluntary reporting is the first 
step to measure emission reductions and could lead to better health 
outcomes. In response to commenters' position that voluntary reporting 
may set a precedent for other health care entities, we agree and may 
consider other ways to integrate elements of the initiative in future 
models.
    Comment: Several commenters stated their belief that this 
initiative should be mandatory rather than voluntary. Commenters argued 
the importance and urgency of curbing GHG emissions and the need to 
include as many health care facilities as possible. A commenter noted 
that they understood that the voluntary nature of this initiative is to 
encourage engagement, at least initially, but urged CMS to move toward 
some form of mandated participation in less than two years. Another 
commenter mentioned that starting in 2026 is too slow. A commenter 
recommended mandatory participation so that CMS could eventually modify 
the Composite Quality Score based on performance on this initiative.
    Response: We appreciate the commenters' urgency on curbing GHG 
emissions; however, we believe that voluntary reporting, with technical 
assistance, is an important first step to understanding and curbing 
health care emissions. In regard to timing, as the initiative is part 
of monitoring efforts for TEAM, we cannot start this initiative until 
TEAM begins on January 1, 2026 (89 FR 35934, at 35935) as stated in 
section X.A.3.a.(1). of the final rule. Similarly, we cannot at this 
time indicate if or and when we may propose to make this initiative to 
be mandatory.
    Comment: A few commenters supported additional financial incentives 
to encourage TEAM participants to take part in the initiative. Some 
commenters noted this would be needed if the initiative ever became 
mandatory. A commenter noted the need for funding for TEAM participants 
to talk to patients about health and climate.
    Response: We are not proposing to include financial incentives for 
the voluntary initiative. We refer readers to section X.A.3.p.(6).(d). 
of this final rule for more information on comments we received on 
integrating financial incentives in the future. We also agree that 
providers talking to patients about health and climate may be helpful 
and will consider whether that would be appropriate for technical 
assistance.
    Comment: Several commenters believed that reporting on metrics was 
not sufficient. A few commenters believed the focus needs to move to 
setting goals and meeting outcomes rather than just reporting to meet 
national emission reduction goals. A commenter stated their belief that 
TEAM participants should also share raw data and measure performance 
with their sustainability teams, anesthesiologists, and other 
stakeholders first. Another commenter noted the need for health care 
clinicians, particularly those located in health centers in areas with 
high environmental injustice, to be able to talk to patients about the 
connection between climate and health. A commenter requested that CMS 
explore the feasibility of emission reduction benchmarks so that TEAM 
participants have a common target.
    Response: We believe that this initiative's voluntary reporting, 
along with technical assistance, is a critical first step for TEAM 
participants to understand their GHG emissions to achieve the desired 
outcomes. Data is needed to understand current GHG emissions and to 
establish the desired outcomes of reduced GHG emissions. We believe 
this phased approach within this initiative will enable us to better 
understand opportunities for improvement, the impact on health, and 
potentially establish future benchmarks. We do encourage TEAM 
participants to work with and share data with their sustainability 
committees and clinicians in order to make progress on climate 
objectives, but we are not requiring that as part of this model. 
Similarly, we believe there may be value in health centers talking to 
their patients about the connection between climate and health but want 
to limit the first iteration of this initiative to selected metrics and 
assessment questions. We may consider whether examples of data sharing 
and discussion with patients would be appropriate for technical 
assistance.
    Comment: A few commenters recommended that the metrics in this 
initiative be measured with verifiable data. Some commenters 
additionally asked that TEAM participants publicly disclose their GHG 
emissions measurements. A commenter recommended that CMS develop a 
process to ensure accuracy, either through auditing or third-party 
verification of data reports, especially if performance will become 
tied to bonus payments. Another commenter recommended CMS create a 
template for health care organizations to report their

[[Page 69867]]

results so the reports are consistent across organizations.
    Response: We agree it is important to verify the data that is 
reported through this initiative. As discussed in more detail in 
sections X.A.3.p.(4).(a).(iv). through X.A.3.p.(4).(a).(vi). of this 
final rule, we are anchoring our data collection on tools like ENERGY 
STAR Portfolio Manager and on verified documented records such as 
purchase records and administrative billing. We did not propose that 
TEAM participants must publicly disclose their GHG emission 
measurements, as we believe that could deter participation. We do 
intend to assess the metric data for validity, but because we are 
trying to minimize burden, we therefore did not propose to conduct 
audits or third-party validations. We may revisit whether audits or 
other validations are needed in the future. Finally, we do intend to 
create reporting templates for the information not reported through 
ENERGY STAR Portfolio Manager and will issue this through sub-
regulatory guidance.
    Comment: A few commenters expressed additional benefits from 
collecting GHG data. Some commenters expressed their belief that this 
initiative can establish benchmarks and help identify areas where 
emissions levels are undermining progress on health outcomes. 
Commenters also noted that data can help identify trends and provide 
opportunities for new analysis and strategies for positive changes. A 
few commenters noted that this initiative may create efficiency through 
standards that help reduce waste and facilitate more robust GHG 
emission assessments.
    Response: We thank the commenters for their support. We agree there 
are many potential benefits from collecting GHG emissions. We 
anticipate developing benchmarks for the participant feedback reports. 
We will also assess if there are trends that are particularly relevant 
for TEAM participants. Finally, as discussed in section X.A.3.p.(6). of 
this final rule, we do agree there may be some operational benefits to 
TEAM participants from operational efficiencies and waste reduction.
    Comment: A commenter recommended making the reporting option of 
this initiative available to the entire country and not limited to TEAM 
participants.
    Response: We appreciate the commenter's request, but the voluntary 
reporting of the initiative is part of the monitoring of TEAM and not a 
separate model that has separate participants. In the future, we may 
explore adding similar initiatives to monitoring of other models.
    Comment: A few commenters did not support disclosing carbon 
information, citing their belief that there is no clear evidence that 
public disclosure will result in the healthcare industry decarbonizing. 
A commenter noted that CMS does not reimburse differently regardless of 
a provider's carbon footprint. Another commenter believed that 
disclosure may prove regressive or counterproductive and may conflate 
improvements with reporting with actual GHG emissions reductions with 
improvements, and that published reports may be satisfying to 
investors. A commenter suggested that requiring a reduction or 
elimination of industry GHG emissions by regulation is far more 
effective, more durable and more than just this initiative.
    Response: We recognize that reporting on GHG emissions and other 
assessment questions is not the same as reducing GHG emissions, but we 
think it is an important first step. As discussed in section 
X.A.3.p.(6).(d)., we included an RFI on potential ways we might 
integrate the initiative into future TEAM financial incentives. We 
emphasize that reporting in the initiative is voluntary and that we are 
not requesting or requiring TEAM participants to publicly disclose 
their information, and as discussed in section X.A.3.p.(6).(b). of this 
final rule, we intend to be clear on what the participation badge 
includes. As for the commenter who suggested we regulate the reduction 
or elimination of GHG emissions in the health care industry, we believe 
that would be beyond the scope of TEAM.
    After consideration of public comments, we are finalizing the 
voluntary reporting proposal at Sec.  512.598(a) and note that if TEAM 
participants elect to report metrics and questions related to emissions 
to CMS on an annual basis, they must report the information to CMS no 
later than 120 days in the year following each performance year, or a 
later date specified by CMS.
(a) Decarbonization and Resilience Initiative Metrics
(i) Background on Scope and Metrics Sources
    As discussed in section X.A.3.p.(1). of the preamble of this final 
rule, the GHGP establishes a framework for measuring Scope 1 and Scope 
2 emissions. In identifying priority Scope 1 and Scope 2 categories and 
metrics for emissions reporting for TEAM participants, we considered 
guidance and research from several sources. In 2022, AHRQ convened an 
expert panel to develop a primer for identifying, prioritizing, 
monitoring, and reducing health care carbon emissions. In developing 
our proposals, we referred to this AHRQ primer to identify potential 
measures for Scopes 1 and 2. We also looked at guideline sources, such 
as: the new Sustainable Healthcare Certification requirements by TJC, 
for their elements on leadership, measurement, and performance 
improvement; and guidance from the National Academy of Medicine (NAM) 
for steps and key actions to reduce GHG emission within health care 
systems.
    The AHRQ primer identified three categories that fit into Scopes 1 
and 2: building energy, anesthetic gases, and transportation. NAM 
published key actions that facilities could take to address greenhouse 
gas emissions.\1050\ These actions are broken into two steps. Step I 
focuses on actions to start a decarbonization journey and includes 
activities like assembling an executive sustainability team, performing 
a GHG inventory, and establishing specific decarbonization goals. Step 
II actions, which focus on specific interventions, include activities 
for reducing emissions from building energy, anesthetic gas, and 
transportation. TJC launched a Sustainable Healthcare Certification 
program that includes required standards for organizational performance 
and leadership, such as a sustainability plan, as well as requirements 
for collection of detailed emissions information for at least 3 
different sources out of six--energy use (fuel combustion), purchased 
electricity (purchased grid electricity, district steam, chilled and 
hot water), anesthetic gas use (including volatile agents and nitrous 
oxide), pressurized metered-dose inhaler use), fleet vehicle carbon-
based fuel use (from organization-owned vehicles), and waste disposal.
---------------------------------------------------------------------------

    \1050\ Kathy Gerwig, Hardeep Singh, Jodi Sherman, Walt Vernon, & 
Beth Schenk. Action Collaborative on Decarbonizing the Health 
Sector. Key Actions to Reduce Greenhouse Gas Emissions by U.S. 
Hospitals and Health Systems. National Academy of Medicine Climate 
Collaborative. 2022. https://nam.edu/programs/climate-change-and-human-health/action-collaborative-on-decarbonizing-the-u-s-health-sector/key-actions-to-reduce-greenhouse-gas-emissions-by-u-s-hospitals-and-health-systems/https://nam.edu/programs/climate-change-and-human-health/action-collaborative-on-decarbonizing-the-u-s-health-sector/key-actions-to-reduce-greenhouse-gas-emissions-by-u-s-hospitals-and-health-systems/.
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(ii) Scope and Sources for Metrics
    At this time, we proposed to limit metrics that TEAM participants 
may voluntarily report for the Decarbonization and Resilience 
Initiative to Scope 1 (direct emissions

[[Page 69868]]

related to health care operations) and Scope 2 (emissions related to 
purchased electricity consumption). We believe that TEAM participants 
have more ability to track and report these metrics at this time and 
could use information from these metrics to assess ways to reduce their 
carbon emissions and improve their operating efficiency. TEAM 
participants would be encouraged to look at emissions across all three 
Scopes, but for this initial program, the proposed metrics would 
include Scopes 1 and 2. We sought comment on our proposal to limit the 
focus of Decarbonization and Resilience Initiative to Scopes 1 and 2 
for the initial years of TEAM.
    Based on programs and publications discussed in section 
X.A.3.p.(4).(a).(i). of the preamble of this final rule, we proposed 
four areas for reporting: (1) Organizational Questions; (2) Building 
Energy Metrics; (3) Anesthetic Gas Metrics; and (4) Transportation 
Metrics. We proposed at Sec.  512.598(a) the metrics for the voluntary 
program. TEAM participants, if they so choose, would report on these 
four categories. In proposing these voluntary questions and areas for 
voluntary metric reporting, CMS is prioritizing alignment with existing 
initiatives such as those described in section X.A.3.p.(4).(a).(i). of 
the preamble of this final rule.
    We summarize and respond to public comments received on the 
proposal regarding the background on scope and metrics sources below.
    Comment: Several commenters supported using the GHGP and limiting 
the focus to Scopes 1 and 2 for the initial years of TEAM. A commenter 
noted the proposal had the right balance between administrative burden 
and highest potential for impact and has clear definitions. The 
commenter further noted that limiting to Scopes 1 and 2 would increase 
uptake of this initiative. A commenter recommended requiring all health 
facilities to measure and achieve reductions fully across Scopes 1 and 
2 including energy use (Scope 1-Stationary Combustion, Mobile Fleet 
Combustion), purchased electricity (Scope 2 purchased grid electricity 
and district steam, chilled and hot water), fleet (based on fuel use) 
(Scope 1- Mobile Fuel Combustion), and waste anesthetic gas use (Scope 
1-Fugitive Emissions). The commenter expressed the belief that these 
categories reflect those activities that many health facilities already 
track (for example, energy consumption) and/or are easy to quantify 
(for example., waste anesthetic gases from surgical procedures) and 
there are reasonable interventions for reducing these emissions in 
Scopes 1 and 2, and often, those interventions bring cost savings for 
health facilities.
    Response: We thank the commenters for their support. We agree that 
starting with Scope 1 and 2 would have impact and be feasible for most 
TEAM participants to report.
    Comment: Many commenters believed this initiative proposal did not 
go far enough because it did not include Scope 3 emissions which 
contribute significantly to the total emissions. These commenters 
recommended certain Scope 3 metrics they believed were attainable for 
TEAM participants to collect, including normalizing patient encounters 
when it came to reusables vs single use devices, collecting waste 
volumes, patient and employee travel by mileage, and food waste. A few 
commenters believed that Scope 3 data collection should also be 
mandatory.
    Response: We understand Scope 3 accounts for a large portion of 
total healthcare emissions; however, we believe we should start with 
Scope 1 and Scope 2 for the initial years because we believe it is more 
feasible to collect and we want to encourage participation. We may add 
Scope 3 in the future. For additional comments related to Scope 3 
metrics, please refer to section X.A.3.p.(4).(a).(vii)(A). of this 
final rule.
    Comment: A commenter noted specifics related to the metrics under 
Scope 1 and Scope 2. A commenter suggested that CMS should not attempt 
to do all of Scope 1 and 2 emissions, and that there is some confusion 
in the industry around those boundaries. The commenter specifically 
noted that Scope 1 refers only to the Kyoto protocol gases, and not to 
all GHGs. Thus, some gases (such as desflurane) are not exactly Scope 
1, even though they are directly emitted by the organization, and there 
are other sources of Scope 1 emissions (for example, refrigerants) that 
are not captured by ENERGY STAR. The commenter thus noted that the 
proposed measures are measuring some Scope 1 emissions and some other 
direct emissions. The commenter did support the measures that were 
proposed.
    Response: We thank the commenter for the clarification. The gases 
listed in the GHGP include carbon dioxide (CO2), methane (CH4), nitrous 
oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), 
sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3).\1051\ 
However, additional healthcare related documents related to emissions, 
including both the AHRQ Primer and the NAM, consider both desflurane 
and similar gases in their discussion. Therefore, we intend to measure 
these gases in this initiative. Also, we do not intend to capture all 
of Scope 1 and Scope 2, we are just collecting quantitative information 
on building energy, anesthetic gases, and transportation metrics (as 
discussed in section X.A.3.p.(4).(a).(vii).(a). of this final rule). We 
intend to update metrics as ENERGY STAR metrics evolve and are updated. 
We proposed at Sec.  512.598(a)(2)(i) that these proposed building 
energy metrics would be based on the ENERGY STAR Portfolio Manager 
guidelines for the time of submission.
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    \1051\ https://ghgprotocol.org/corporate-standard.
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    Comment: A commenter agreed with the need for normalization factors 
for comparing facilities. The commenter recommended CMS consider 
emission normalization factors related to patient outcomes, such as 
anesthetic hours (for volatile and nitrous oxide emissions), bed-days 
for inpatient care facility emissions, and potentially adjusted 
patient-days for total emissions.
    Response: We thank the commenter for their suggestions. We agree on 
the importance of normalization factors and discuss that in the 
anesthetic gas metric and transportation metric portion of this final 
rule.
    Comment: A commenter recommended that CMS align this initiative 
with other voluntary and mandatory initiatives, such as the Joint 
Commission Sustainable Healthcare Certification and the Department of 
Health and Human Services Health Sector Climate Pledge, mandatory state 
laws (for example, California) to avoid duplicative efforts.
    Response: Our intention is to align with existing programs where 
possible when it comes to data collection and general questions. For 
the initiative, we considered questions from the Department of Health 
and Human Services Health Sector Climate Pledge and the Joint 
Commission Sustainable Healthcare Certification.
    Comment: A commenter recommended CMS consider opportunities to 
improve reporting accuracy before focusing on opportunities to increase 
the number of TEAM participants voluntarily reporting information to 
CMS on Scope 1 and 2 metrics. The commenter noted they have seen 
significant variation in how this information is interpreted.
    Response: We agree that reporting accuracy is important for the 
initiative. We are finalizing quantitative metrics which can be derived 
from purchase records, administrative billing, or other quantifiable 
data. We do intend to check submissions for data integrity and 
completeness.

[[Page 69869]]

    Comment: A few commenters asked for clarity on the scope of the 
data collected. A commenter recommended reporting Scope 1 and 2 metrics 
at the facility level, ideally using a health care organization's HCO 
ID number (for example, ``HCO ID #1'' with two hospital facilities 
within the same campus constitutes the boundary). This would make the 
reporting consistent with TJC's approach in their Sustainable 
Healthcare Certification (SHC) program as well as with ENERGY STAR 
Portfolio Manager. Another commenter recommended that CMS broaden its 
approach to measures to include hospital outpatient departments, 
ambulatory surgical centers, and office-based locations. The commenter 
noted that an increasing number of procedures are conducted in 
nonoperating room anesthetizing locations as well as outpatient 
settings.
    Response: For TEAM participants that elect to report, we would 
require the quantitative building energy, anesthesia, and 
transportation metrics at the inpatient facility level (using the 
identifier selected for TEAM) in a manner that is consistent with 
ENERGY STAR Portfolio Manager. We will provide an option, however, for 
TEAM participants to additionally submit information for their hospital 
corporate affiliates. We also intend to publish technical guidance 
which will provide more details on how the information may be 
submitted.
    Comment: A few commenters recommended that ENERGY STAR Portfolio 
Manager should be the only benchmarking and reporting tool, data 
repository, calculator tool, feedback, and support center for all 
proposed metrics in this initiative. A commenter stated that 
centralization at ENERGY STAR will make it easier to integrate Scope 3 
reporting more quickly and to identify with best practices. Another 
commenter stated their belief that ENERGY STAR Portfolio Manager will 
avert greenwashing of data.
    Response: We appreciate the commenter feedback. However, ENERGY 
STAR Portfolio Manager does not currently collect information on 
anesthetic gas and transportation. We may revisit using ENERGY STAR 
Portfolio Manager in the future if CMS would like to collect, and TEAM 
participants would like to submit, a larger scope of information.
    After reviewing public comments, for the reasons set forth in this 
rule, we are finalizing the proposal to base our metrics on Scope 1 and 
Scope 2 of the GHGP with the acknowledgement that some of the 
anesthetic gases we are discussing are technically not part of the GHGP 
but are important when reviewing emissions from anesthesia.
(iii) Organizational Questions
    For the Decarbonization and Resilience Initiative, we proposed at 
Sec.  512.598(a)(1) a set of organizational questions about the TEAM 
participants' sustainability team and sustainability activities. These 
questions are generally based on NAM's key action Step I shortlist. We 
proposed the organizational questions would include the following:
     Does your facility have a sustainability team? If so, does 
your facility's sustainability team include broad representation, 
seeking input across operational and clinical lines, and engaging 
staff, executive leaders, clinicians, board members, and patients?
     Does your facility perform a GHG inventory? If so, which 
of the following are included in your facility's GHG inventory:
    ++ Scope 1 emissions.
    ++ Scope 2 emissions.
    ++ Scope 3 emissions (business travel, employee commuting, waste)?
     Has your facility implemented a decarbonization goal that 
compares performance to a baseline year?
     What are your facility's decarbonization goals (for 
example, 10 percent GHG reduction annually across all operations, 
aiming to achieve 50 percent reduction by 2030)? What is the baseline 
year used to measure your facility's decarbonization success?
     Has your facility implemented a decarbonization plan?
     What is your facility's implementation plan? What 
milestones and deliverables to track progress are you documenting?
     Has your facility designated resources for decarbonization 
and resilience initiatives?
     Does your facility track operation room (OR) specific 
energy use or waste? If so, what, if any, OR energy efficiency or waste 
reduction initiatives have you implemented?
    We anticipate these questions would be relatively straightforward 
to report on and provide a helpful baseline to inform technical 
assistance. We sought feedback on the potential burden of adding 
overall organizational questions to the Decarbonization and Resilience 
Initiative.
    We summarize and respond to public comments received on the 
proposal to provide a set of organizational questions at Sec.  
512.598(a)(1) of the final rule later in this section.
    Comment: A few commenters recommended adding additional questions 
to the organizational question section that address the TEAM 
participants' sustainability team and activities, including questions 
about the healthcare system's current pledges, commitments, and 
certifications, specific questions about how GHG emissions are 
calculated and reported, large medical equipment energy use, 
decarbonization challenges, linkages between compensation and achieving 
decarbonization goals, and adding open ended questions. A commenter 
noted that identifying current activities of the TEAM participants 
sustainability team members takes time and helps hospitals understand 
expectation for local implementation efforts.
    Response: We thank commenters for their recommendations. CMS is 
committed to helping organizations accurately assess their current 
level of decarbonization efforts. We will finalize organizational 
questions but may revise the set of questions based on this feedback.
    Comment: A few commenters recommended requiring a climate 
resilience plan from TEAM participants to align with the HHS Health 
Sector Climate Pledge and to ensure continued ability to provide health 
care services during and after extreme weather events.
    Response: We thank commenters for their recommendations and may 
take this suggestion under consideration.
    Comment: A few commenters supported asking organizational questions 
from TEAM participants and confirmed that these questions would not be 
burdensome.
    Response: We thank commenters for their support and their feedback 
on the level of burden for these questions.
    Comment: A commenter recommended that TEAM participants complete 
these organizational questions on an annual basis since they are 
general in nature.
    Response: We thank the commenter for the recommendation and confirm 
that the organizational questions are submitted on an annual basis, as 
referenced in section X.A.3.p.(4).(a).(iii).
    Comment: A commenter recommended identifying questions that contain 
a set of smaller attainable goals to receive buy-in across the hospital 
facility.
    Response: We thank the commenter for their recommendation and 
believe the organizational questions are an appropriate start on a 
decarbonization journey as they focus on identification and assembly of 
a team, conducting an inventory of GHG emissions, and developing 
specific decarbonization goals and plans.

[[Page 69870]]

    After reviewing the public comments, for the reasons set forth in 
this rule, we are finalizing with modifications at Sec.  512.598(a)(1) 
the set of organizational questions about the TEAM participants' 
sustainability team and sustainability activities to allow us to 
collect and analyze the responses in a more structured way and to allow 
us to make comparisons across TEAM participants.
(iv) Building Energy Metrics
    For building energy usage, we proposed metrics that would assess 
both the raw GHG emissions (location-based and market-based methods of 
calculation) from energy use (direct and indirect), source information, 
and information to normalize these metrics. Specifically, we proposed 
at Sec.  512.598(a)(2) a set of building energy metrics related to 
measuring and reporting GHG emissions related to energy use at TEAM 
participant facilities. We proposed at Sec.  512.598(a)(2)(i) that 
these proposed building energy metrics would be based on the ENERGY 
STAR Portfolio Manager guidelines for the time of submission and that 
TEAM participants choosing to report these metrics must submit using 
ENERGY STAR Portfolio Manager according to the reporting and timing 
requirements proposed in section X.A.3.p.(5). of the preamble of this 
final rule. We proposed to adopt the ENERGY STAR Portfolio Manager 
guidelines at the time of submission to ensure that the metrics 
collected are consistent with current standards.
    For the Decarbonization and Resilience initiative, we proposed at 
Sec.  512.598(a)(2)(ii) the following metrics: ENERGY STAR Score for 
Hospitals, as well as the supporting data that goes into that 
calculation, and energy costs and basic energy consumption metrics such 
as total, direct, and indirect GHG emissions and emissions intensity as 
specified in the ENERGY STAR Portfolio Manager.\1052\ As of the 
publication of the FY 2025 IPPS proposed rule, the most recent ENERGY 
STAR Score for Hospitals methodology was published in February 2021 
\1053\ and requires information such as energy use intensity, 
electricity, natural gas, and other source emissions usage and several 
normalizing factors such as building size, number of full-time 
equivalent workers, number of staffed beds, number of magnetic 
resonance imaging (MRI) machines, and zip code (to pull weather and 
climate related data such as the number of heating and cooling 
days).\1054\ We proposed that this supporting data would be reported to 
CMS, as well. Having both the aggregate score and the underlying 
details would provide CMS additional detail to monitor the impact of 
emissions. As described in section X.A.3.p.(5). of the preamble of this 
final rule, TEAM participants who elect to report data would submit 
after the performance year. Should the ENERGY STAR Score for Hospitals 
method change, we would default to the methods that ENERGY STAR is 
using at the time of submission so that the data reported to CMS would 
be consistent with ENERGY STAR Score for Hospitals.
---------------------------------------------------------------------------

    \1052\ EPA Office of Air Programs. ENERGY STAR Portfolio Manager 
Glossary. U.S. Environmental Protection Agency & U.S. Department of 
Energy. Undated. https://portfoliomanager.energystar.gov/pm/glossaryhttps://portfoliomanager.energystar.gov/pm/glossary.
    \1053\ EPA Office of Air Programs. ENERGY STAR Score for 
Hospitals (General Medical and Surgical). U.S. Environmental 
Protection Agency & U.S. Department of Energy. February 19, 2021. 
https://www.energystar.gov/buildings/tools-and-resources/energy-star-score-hospitals-general-medical-and-surgicalhttps://www.energystar.gov/buildings/tools-and-resources/energy-star-score-hospitals-general-medical-and-surgical.
    \1054\ EPA Office of Air Programs. Technical Reference: ENERGY 
STAR Score for Hospitals in the United States. U.S. Environmental 
Protection Agency & U.S. Department of Energy. February 2021. 
https://www.energystar.gov/sites/default/files/tools/Hospital_TechnicalReference_Feb2021_508.pdfhttps://www.energystar.gov/sites/default/files/tools/Hospital_TechnicalReference_Feb2021_508.pdf.
---------------------------------------------------------------------------

    ENERGY STAR Portfolio Manager also allows users to track GHG 
emissions and energy costs, which captures total energy cost and can 
inform tracking of potential savings.
    There are several reasons we proposed that TEAM participants use 
the ENERGY STAR Portfolio Manager for submitting building energy 
metrics. First, ENERGY STAR Portfolio Manager is a free, on-line 
benchmarking tool used by over 3,000 hospitals as of January 2024 
(approximately half of the number of U.S. hospitals \1055\) to 
benchmark energy, water, and waste. Approximately forty-seven state and 
local governments \1056\ require its use to track and report energy 
usage and emissions on an annual basis. We believe that by using data 
and information collected in the ENERGY STAR Portfolio Manager tool, we 
would minimize the reporting burden for TEAM participants and maximize 
the benchmarking value of reporting, which should make comparisons and 
measuring progress easier. We also believe the information collected in 
the ENERGY STAR Score for Hospitals are similar to recommended measures 
in the AHRQ primer.
---------------------------------------------------------------------------

    \1055\ AHA Health Forum. Fast Facts on Hospitals. American 
Hospital Association. 2024. https://www.aha.org/statistics/fast-facts-us-hospitalshttps://www.aha.org/statistics/fast-facts-us-hospitals.
    \1056\ EPA Office of Air Programs. State/Local Compliance 
Ordinances. U.S. Environmental Protection Agency & U.S. Department 
of Energy. February 20, 2024. State/local compliance ordinances 
(site.com)State/local compliance ordinances (site.com).
---------------------------------------------------------------------------

    Finally, we also considered an alternative where we instead allowed 
private vendors with a relationship to the facility to submit 
equivalent information, aligned to the GHG Protocol, instead of ENERGY 
STAR Portfolio Manager. Ideally, we would like TEAM participants to 
have options to collect and capture their emissions data, but we also 
want to ensure that any benchmarks are consistent across TEAM 
participants.
    We sought feedback on our proposed metrics reported through ENERGY 
STAR Portfolio Manager and on the alternative of allowing private 
vendors to submit equivalent information.
    We summarize and respond to public comments received on the 
proposal to use building energy metrics related to measuring and 
reporting GHG emissions regarding energy use at TEAM participant 
facilities at Sec.  512.598(a)(2) of the final rule below.
    Comment: Several commenters supported the use of ENERGY STAR 
Portfolio Manager for the building energy metrics because it is the 
standard reporting structure health systems use to measure and track 
energy consumption and GHG emissions, was developed by the 
Environmental Protection Agency, limits reporting burden for providers, 
and is already used by the Department of Health and Human Services.
    Response: We thank commenters for their support. We agree that the 
use of ENERGY STAR for the building energy metrics will limit reporting 
burden on providers.
    Comment: A few commenters recommended that CMS use data tracking in 
ENERGY STAR Portfolio Manager and not require additional reporting of 
the building energy metrics to minimize reporting burden. A commenter 
recommended that CMS ensure easy integration of ENERGY STAR data for 
TEAM participants that participate in this initiative in order to 
minimize reporting burden.
    Response: We thank commenters for their recommendations regarding 
the use of ENERGY STAR Portfolio Manager for our building energy 
metrics. The building energy metrics we finalize will be collected 
through ENERGY STAR Portfolio Manager and TEAM participants will be 
able to submit their information through that platform.
    Comment: A commenter provided an alternative tool to ENERGY STAR 
Portfolio Manager. The commenter

[[Page 69871]]

noted that Health Care Without Harm and Practice Greenhealth's Health 
Care Emissions Impact Calculator is a publicly available tool that 
allows facilities to track their GHG emissions across Scope 1 and 2.
    Response: We thank commenters for their suggested alternative. At 
this time, based on public feedback, we are finalizing our proposal to 
report building energy metrics through ENERGY STAR Portfolio Manager.
    Comment: A few commenters did not support the alternative of 
allowing private vendors to submit equivalent information to ENERGY 
STAR Portfolio Manager. In not supporting this alternative, commenters 
stated their belief that a single reporting structure is critical to 
the success of a program; that the ENERGY STAR Portfolio Manager is the 
standard tool used to benchmark energy, water, and waste; and by only 
having one reporting structure, it will reduce reporting burden; and 
that allowing private vendors to submit data may create adverse future 
effects.
    Response: We thank commenters for sharing their concerns on the 
alternative of allowing private vendors to submit equivalent 
information to ENERGY STAR Portfolio Manager. We agree the ENERGY STAR 
Portfolio Manager is the standard, but we wanted to recognize that some 
TEAM participants may use third party vendors for emissions reporting. 
However, based on public feedback, at this time, we are not finalizing 
the alternative of allowing private vendors to submit equivalent 
information to ENERGY STAR Portfolio Manager.
    After reviewing the public comments, for the reasons set forth in 
this rule, we are finalizing our proposed building energy metrics 
reported through ENERGY STAR Portfolio Manager. We are not finalizing 
our alternative proposal of allowing private vendors to submit 
equivalent information.
(v) Anesthetic Gas Metrics
    We believe anesthetic gas metrics are important to collect for the 
TEAM Decarbonization and Resilience Initiative because the TEAM's 
proposed initial performance focus is on surgical procedures which 
regularly utilize anesthetic gas, as discussed previously. We proposed 
at Sec.  512.598(a)(3) a set of metrics related to measuring and 
managing emissions from anesthetic gas. These metrics include total GHG 
emissions from inhaled anesthetic gases (based on purchase records) 
along with the associated normalization factors, and additional 
assessment questions.
    We evaluated methods to consistently capture anesthesia metrics. 
ENERGY STAR Portfolio Manager currently does not collect information or 
calculate benchmarks on anesthetic gases. Anesthetic gases may be 
collected through an optional field through ENERGY STAR Portfolio 
Manager, but we acknowledge that this is not a standardized field. We 
intend to update metrics as ENERGY STAR metrics evolve and are updated, 
as we proposed at Sec.  512.598(a)(2)(i) that these proposed building 
energy metrics would be based on the ENERGY STAR Portfolio Manager 
guidelines for the time of submission. There are other calculators, 
such as Practice Greenhealth's[supreg] Health Care Emissions Impact 
Calculator that collect and calculate data related to anesthetic 
metrics,\1057\ but we were concerned that using multiple tools to 
report metrics (considering we are already proposing to use ENERGY STAR 
Portfolio Manager for the building energy metrics) would increase 
reporting complexity and reporting burden. The AHRQ primer recommended 
total GHG emissions from inhaled anesthetics and mean gas flow rates, 
but we were concerned on the feasibility of capturing mean gas flow 
rates. Based on all these factors, we are therefore proposing at Sec.  
512.598(a)(3)(i) to include a metric for total GHG emissions from 
inhaled anesthetics using purchase records. The metric would include 
information such as volume of the bottle, the number of bottles, and/or 
the number of pounds, depending on the anesthetic gas.\1058\ We believe 
purchase records provide a proxy for actual utilization and that 
purchase records may be easier for TEAM participants to report compared 
to actual usage which generally would have to be extracted from 
electronic health records. Also, we proposed at Sec.  512.598(b)(3)(ii) 
normalization factors which we proposed to be anesthetic hours so we 
could more accurately compare the carbon impact across different 
facilities. We believe these metrics would provide information on 
anesthetic gases which would be most relevant to the episodes and 
provide a means for which to create anesthetic gas metric benchmarks.
---------------------------------------------------------------------------

    \1057\ Practice Greenhealth. Health Care Emissions Impact 
Calculator. 2023. https://practicegreenhealth.org/tools-and-resources/health-care-emissions-impact-calculator. https://practicegreenhealth.org/tools-and-resources/health-care-emissions-impact-calculator.
    \1058\ We recognize that certain gases and compounds are most 
easily measured by volume and others in weight as they are not 
purchased by bottle (for example, Nitrous Oxide).
---------------------------------------------------------------------------

    At Sec.  512.598(a)(3)(iii), we also proposed to include assessment 
questions broadly based on the key actions recommended by NAM Step II 
for reducing emissions from anesthetic gases that TEAM participants may 
choose to answer. Assessment questions include the following:
     Has your facility set an emissions reduction goal related 
to anesthetic gases? If so, what is that goal?
     Does your facility track and benchmark anesthetic gas 
emissions at the procedure and provider level?
     Has your facility removed the use of desflurane or removed 
vaporizers when using desflurane?
     Has your facility decommissioned piped nitrous oxide and 
substituted e-cylinders? If not, are these activities in process?
    We believe answering these assessment questions would provide 
facilities with ideas and actions that could in turn reduce impact on 
emissions and would supplement the other anesthesia gases data.
    We sought comment on our proposed anesthesia gas metrics which 
would include the total GHG emissions from inhaled anesthetics and 
anesthetic hours and assessment questions for anesthetic gases. We 
particularly sought feedback on the feasibility of reporting data based 
on purchase records or whether we should require actual records. We 
also sought comment on the feasibility of capturing anesthetic hours or 
if we should consider a different normalization factor such as number 
of operating rooms. We also sought feedback on whether we should 
consider other calculators, metrics and inputs to determine GHG 
emissions from anesthetic gases, or quality measures such as ABG44: Low 
Flow Inhalational General Anesthesia.
    Finally, while we believe it is important to capture the data on 
total GHG emissions from inhaled anesthetics, anesthetic hours, and the 
assessment questions for anesthetic gases, we also considered whether 
we provide the TEAM participants an option of reporting either the 
total GHG emissions from inhaled anesthetics (with anesthetic hours) or 
reporting the assessment questions for the voluntary reporting program. 
We believe this flexibility for TEAM participants could reduce 
reporting burden and enhance participation, but we are concerned this 
alternative may not provide comparable data across the TEAM 
participants who voluntarily submit data. We sought feedback on this 
alternative for TEAM participants who choose to submit to report either 
anesthetic gases and anesthetic hours or to report the assessment 
questions.
    We summarize and respond to public comments received on the 
proposal to

[[Page 69872]]

use a set of metrics related to measuring and managing emissions from 
anesthetic gas at Sec.  512.598(a)(3) below.
    Comment: Several commenters supported collecting information on 
anesthetic gases using purchase records noting that purchase records 
have less administrative burden than actual records and it would 
provide needed data to build benchmarks.
    Response: We thank commenters for their support. We agree that 
purchase records seem to be the most efficient way to collect 
anesthetic gas metrics and are finalizing that proposal. We do intend 
to evaluate potential benchmarks for the participant feedback reports.
    Comment: A commenter recommended CMS pilot test collection metrics 
before implementing on a large scale to ensure that data elements can 
be captured uniformly.
    Response: We agree on the importance of uniform data capture. We 
believe that rolling this initiative out in a voluntary manner will 
provide an opportunity to assess the comparability of the data 
captured.
    Comment: A few commenters supported additional metrics for 
consideration. A commenter supports ABG44: Low Flow Inhalational 
General Anesthesia for the anesthesia Merit-based Incentive Payment 
Systems (MIPS) Value Pathway (MVP)--especially since many anesthesia 
groups do not have access to their hospital records or electronic 
health records. ABG44 is used to encourage anesthesia groups to track 
their gas flows. Another commenter recommended an outcome metric and 
performance metrics. The outcome metric is total anesthesia-related GHG 
emissions, normalized anesthesia-related GHG emissions (kgCO2e/hour). 
The performance metrics are (1) agent selection--percent of clinical 
use for each anesthetic agent (sevoflurane, isoflurane, desflurane) 
which could be assessed across an entire practice, or per individual 
clinician and (2) efficiency of use--fresh gas flow assessment (mean 
vs. median fresh gas flow (FGF) per group practice or individual 
clinician.
    Response: We thank the commenters for their feedback. For the first 
years of this voluntary initiative, we are not finalizing additional 
metrics for collection. We note that ABG44: Low Flow Inhalational 
General Anesthesia is still reportable for clinicians via the MIPS. We 
do believe we could assess the percent of agent selection with the 
information we are collecting from TEAM participants, but we are not 
asking for this information at the clinician level. We will review 
areas where our reporting tool may already calculate normalized 
anesthesia-related GHG emissions. Finally, we are not proposing to 
capture fresh gas flow assessment because that information is not 
always available through purchase records or administrative claims 
data, although we may consider adding a question related to fresh gas 
flow to the assessment questions.
    Comment: A few commenters strongly encouraged CMS to separate the 
assessment of volatile anesthetics (the ``fluranes'': desflurane, 
sevoflurane, isoflurane) from nitrous oxide, noting the gases are 
clinically different, operationally different, and with different 
emission mitigation solutions. Commenters noted that anesthesia hours 
may be an appropriate normalizer for emissions are generated through 
clinical activity (measured in time). For nitrous oxide, much of the 
emissions come from central line systems. A few commenters recommended 
using operating rooms as a normalizing factor for nitrous oxide. A 
commenter requested CMS collect both the purchased information and 
utilization information for nitrous oxide noting that comparing these 
two numbers will accelerate the mitigation of fugitive nitrous oxide 
emissions by transitioning from central medical gas line distribution 
to decentralized distribution via localized E-tanks. A commenter noted 
that for areas where nitrous oxide is used outside of anesthesia care 
the normalizing factors would need to be numbers of patients receiving 
nitrous oxide analgesia because detailed quantitative data is not 
regularly captured in an EHR.
    Response: We appreciate the feedback. We intend to look at nitrous 
oxide separately from the volatile anesthetics and as discussed below, 
we will be adding operating rooms onto our quantitative metrics to 
assess it as a potential normalizing factor for nitrous oxide. In 
section X.A.3.p.(4).(a).(vi). we are finalizing our proposal to capture 
patient encounters, so we will already have that data as a potential 
normalizing factor. We have heard other commenters that capturing 
actual utilization from an EHR may be cumbersome for some TEAM 
participants, so we are not requiring actual utilization for nitrous 
oxide at this point, but we could revisit that requirement in the 
future.
    Comment: A few commenters supported the use of anesthetic hours to 
normalize the anesthetic metrics. Commenters noted while this 
information may not be exactly precise, it can be pulled from billing 
data and does not require a complicated extract from an electronic 
health record. A few commenters noted that anesthetic hours are 
appropriate for volatile gases and not for nitrous oxide. A commenter 
said anesthetic hours was better than operation rooms because many 
services occur outside of the operating room.
    Response: We thank commenters for their support. We are finalizing 
anesthetic hours as one potential normalizing factor. As discussed 
elsewhere in this section, we are also considering other potential 
normalizing factors.
    Comment: A few commenters did not support using anesthetic hours or 
suggested alternatives to anesthetic hours for normalizing anesthetic 
gases. A commenter noted logistical issues with using anesthetic hours 
such as the anesthesia start times varying based on the circumstances 
and that anesthetic hours would have to be converted from 15-minute 
increments into hours which could add to administrative burden. Another 
commenter recommended using procedures or patient encounters or asking 
each organization to select the normalization factor. The commenter 
noted TEAM participants could select operating rooms, anesthetic hours 
or procedures. By allowing organizations to select their normalization 
factor, CMS would get a sense for which ones would be most attractive. 
A commenter said the recommended normalization from the anesthesia 
community is ``MAC-hour equivalents'' compared with an ideal 
(sevoflurane) reference point. The commenter noted this is feasible for 
any organization that uses EHRs, and automated flow meters and this 
metric can account for the complex nuances that otherwise make 
normalizing anesthetics complicated.
    Response: We understand there may be limitations using anesthetic 
hours as a normalizing factor, however, we believe this number can be 
relatively easily captured from administrative claims data and thus may 
be more feasible than information collected from an EHR. We are 
concerned that procedures may not be appropriate because the timing of 
procedures vary greatly and therefore, we are not requesting that 
information. As discussed in an earlier response, we will add operating 
rooms as a required element to evaluate it as a potential normalizing 
factor, especially for nitrous oxide. Finally, we are allowing, but not 
requiring, reporting of ``MAC-hour equivalents.'' A minimum alveolar 
concentration (MAC) hour equivalent allows comparison of the amount of 
administered anesthetic gas to an equivalent mass of carbon dioxide 
that would be emitted for driving an automobile a certain number of 
miles, for example. We are concerned that not all participants are able 
to retrieve this

[[Page 69873]]

information easily from their EHR, but we understand the potential 
benefits of using MAC-hour equivalents as a normalizing factor, 
therefore, we will have an optional field for reporting this 
information.
    Comment: A few commenters did not support reporting the assessment 
questions in lieu of reporting actual emissions from inhaled 
anesthetics. Commenters noted that CMS needed to start to collect this 
data in order to develop benchmarks and make comparisons. Commenters 
also noted this should be feasible as billing data and purchasing data 
should be universally available.
    Response: We agree with commenters on the importance of capturing 
quantitative measures so TEAM participants can have benchmarks in 
comparison data. We also appreciate that data pulled from billing data 
and purchase records should be feasible. We do intend to finalize 
collection of anesthetic metrics with some modifications to the 
normalization factors.
    Comment: A commenter supported the collection of responses to local 
structural questions as described in ``Anesthetic Gas Metrics,'' but 
asked for additional time before endorsing specific measures. The 
commenter noted that only a handful of anesthesia departments and their 
hospitals are collecting data. The commenter suggested that CMS develop 
a technical advisory panel to develop such measures or measure concepts 
and noted that they are planning to develop a suite of anesthesia-
related environmental sustainability measures in the near future, with 
an eye toward gathering granular data from electronic health records, 
anesthesia machines, and other equipment. They requested CMS convene 
multistakeholder panels to develop other environmental sustainability 
measures and concepts that promote data exchange.
    Response: In the future, CMS may consider establishing a technical 
advisory panel that is comprised of stakeholders which could provide 
feedback on measures, reporting and technical assistance.
    Comment: A commenter recommended that the Decarbonization and 
Resilience Initiative include all areas within the hospital that use 
anesthetic gases, including nitrous oxide, and encourage responsibility 
from all service lines. The commenter noted an increase in the use of 
desflurane and isoflurane in non-operating room anesthetizing locations 
and that nitrous oxide is used services within the hospital such as 
obstetric, urological, and dental patients not provided by 
anesthesiologists. The commenter further stated their belief that 
hospitals provide anesthesia groups and departments with increased 
authority over administration of nitrous oxide and recommended that CMS 
be explicit in this proposal that all physicians and clinical staff 
have a responsibility to reduce their use of certain anesthetic agents.
    Response: We intend to collect information for each facility but 
will allow health systems optionally to report for additional locations 
outside the inpatient facility. We do agree that facilities and 
clinicians should collectively work together to reduce their anesthetic 
emissions, but we do not believe we should inform TEAM participants who 
elect to participate in the Decarbonization and Resilience Initiative 
how they need to implement their efforts.
    Comment: A few commenters had specific feedback on our proposed 
assessment question ``Has your facility removed the use of desflurane 
or removed vaporizers when using desflurane?'' Some commenters 
recommended modifying the question to assess the ``mitigation of 
desflurane emissions'' to allow for the clinically appropriate and 
medically necessary use of desflurane while encouraging mitigation of 
desflurane emissions, noting this wording more closely matches the 
language of the NAM Step II recommendation. Another commenter believed 
that the phrasing should be modified to ``remove or eliminate 
desflurane from formulary.'' Another commenter believed that changing 
the phrasing to ``restrict access to desflurane vaporizers'' would be 
more actionable.
    Response: We thank the commenters for their feedback. We agree that 
desflurane at times may be clinically appropriate and medically 
necessary and intend to adjust the assessment questions to reflect that 
distinction.
    Comment: A commenter had suggested edits to the other anesthetic 
assessment questions. The commenter recommended adding the question 
``Implement a low FGF practice notification in EMR.'' and replace ``Has 
your facility decommissioned piped nitrous oxide and substituted e-
cylinders? If not, are these activities in process?'' with two 
questions: ``Deactivate central nitrous oxide supply systems'' and 
``Transition to portable nitrous oxide E-cylinder supply.'' The 
commenter noted the language and terms on this topic are important and 
carry specific meanings with facilities professionals and it is 
important for health and sustainability professionals to speak their 
language to gain their trust and partnership.
    Response: We thank the commenters for their feedback. We will 
consider making these modifications to the assessment questions.
    Comment: A commenter recommended the American Society of 
Anesthesiologists for reliable calculators, tools, and academic papers 
with up-to-date conversion factors.
    Response: We thank the commenter for this suggestion. We will 
continue to evaluate tools as we assess the quantitative anesthetic 
data.
    After reviewing the public comments, for the reasons set forth in 
this rule, we are finalizing at Sec.  512.598(a)(3)(i) to include a 
metric for total GHG emissions from inhaled anesthetics using purchase 
records. We are finalizing with modification at Sec.  512.598(a)(3)(ii) 
normalization factors that may include information on anesthetic hours, 
operating rooms, or MAC-hour equivalents. Finally, we are finalizing at 
Sec.  512.598(b)(3)(iii) assessment questions based on key actions 
recommended for reducing emissions for anesthetic gases although we may 
modify those questions in the future.
(vi) Transportation Metrics
    The third category of information relevant to health care 
facilities is the GHG emissions related to leased or owned vehicles. We 
proposed at Sec.  512.598(a)(4) a set of metrics that focus on 
greenhouse gases related to leased or owned vehicles. We proposed Sec.  
512.598(a)(4)(i) through (a)(4)(iii) metrics that include gallons for 
owned and leased vehicles consistent with GHGP Scope 1 requirements, 
patient encounter volume as a normalization factor, and assessment 
questions. For transportation emissions related to patient 
transportation and supply chain, please see the RFI on Scope 3 
emissions which sought comment on the feasibility of reporting Scope 3 
emissions such as those from Scope 3 transportation emissions (for 
example, patient transportation).
    Including information on gallons for owned and leased vehicles 
aligns with the AHRQ primer core measure for transportation, and we 
anticipate that TEAM participants can capture this information. We also 
proposed that if TEAM participants choose to partake in the 
Decarbonization and Resilience Initiative Voluntary Reporting, we would 
require TEAM participants to capture patient encounter volume as a 
normalization factor and are considering a range of other factors 
consistent with

[[Page 69874]]

GHG protocols such as full-time equivalents (FTEs).
    We also proposed a series of assessment questions that align with 
the NAM recommended key actions to reduce transportation emissions. 
Assessment questions include the following:
     Has your facility set an emissions reduction goal related 
to transportation? If so, what is that goal?
     Has your facility executed plans to reduce fleet emissions 
(either from reducing miles or replacing with electric vehicles [EVs])?
     Has your facility identified measures to optimize product 
delivery?
     Has your facility provided (or in the process of 
providing) EV charging infrastructure?
    We sought feedback on the proposed transportation metrics. 
Additionally, we sought feedback to the extent hospitals are tracking 
this information and the operational feasibility to track and report 
this information or if other alternative metrics may be more feasible 
(for example, mileage). Finally, while we believe it is important to 
capture both the data on the gallons of gas as well as the assessment 
questions, we also considered whether we provide the TEAM participants 
an option of reporting either the gallons data or reporting the 
assessment questions for the voluntary reporting program. We believe 
this flexibility for TEAM participants could reduce reporting burden 
and enhance participation, but we are concerned this alternative may 
not provide comparable data across the TEAM participants who 
voluntarily submit data. We sought feedback on this alternative for 
TEAM participants who choose to submit to report either gallons and 
patient encounter or to report the assessment questions.
    We invited public comment on our proposal at Sec.  512.598(a)(4) to 
use a set of metrics that focus on greenhouse gases related to leased 
or owned vehicles.
    Comment: A commenter recommended that CMS expand the assessment 
questions outside of yes or no parameters. This commenter also 
recommended that we remove the criteria in the question ``Has your 
facility executed plans to reduce fleet emissions (either from reducing 
miles or replacing with electric vehicles [EVs])?'' which would reduce 
the question to ``Has your facility executed plans to reduce fleet 
emissions?'' The commenter believes that removing the criteria, 
additional emission reduction plans can be included. This commenter 
also believes that CMS should adopt questions relating to whether the 
facility has a policy or plan regarding reducing fleet emissions, the 
quantity of EV charging stations, and the distribution between owned 
and leased vehicles by the facility. Another commenter recommended that 
CMS eliminate the assessment question: ``Has your facility identified 
measures to optimize product delivery?'' because it is not related to 
Scope 1 emissions.
    Response: We thank the commenters for their suggestions and may 
consider these suggestions for alterations to the assessment questions. 
CMS is considering modifications to the assessment questions to allow 
for more detailed structured responses and will publish the full and 
complete assessment questions in sub-regulatory guidance and/or 
technical reporting guidelines.
    Comment: A commenter noted that CMS' ``gallons for owned and leased 
vehicles'' should include gas and diesel as these are the primary fuel 
types used. The commenter noted that additional fuel types include gas-
electric hybrid, E-85, electricity, biodiesel, CNG, Hydrogen fuel cell, 
and could be collected as well.
    Response: We thank commenter for their response. We note that 
``gallons for owned and leased vehicles'' include gas and diesel fuel 
types but that other fuel types will be addressed in sub-regulatory 
guidance.
    Comment: A commenter recommended allowing the reporting entity to 
select their normalization factor from a bounded set. The commenter did 
not support using patient encounter volume as a normalization factor. 
Another commenter noted that they collect a variety of patient volume 
data, total FTEs, and refined FTEs regarding telework for their 
normalization factors. The commenter recommended that should CMS 
collect only total outpatient visits and total FTEs, CMS should 
consider adjusting emission calculations per median telehealth and 
telework percent to totals.
    Response: We thank commenters for their recommendations. We believe 
that patient encounter volume could be a normalization factor that 
helps to benchmark and compare performance both within and between 
institutions.1059 1060 106 1062 We are collecting other 
normalization factors to compare TEAM participants to each other and 
are considering a range of other factors consistent with GHG protocols 
such as FTEs (which is already collected through ENERGY STAR Portfolio 
Manager. We may also consider the number of FTEs in the future when 
reviewing potential metrics regarding staff transportation if scope 3 
is pursued.
---------------------------------------------------------------------------

    \1059\ Bhargavi Sampath, Matthew Jensen, Jennifer Lenoci-
Edwards, Kevin Little, Hardeep Singh, & Jodi D. Sherman. Reducing 
Health care Carbon Emissions: A Primer on Measures and Actions for 
Health Care Organizations to Mitigate Climate Change. U.S. Agency 
for Healthcare Research & Quality. AHRQ pub. No. 22-M011. September 
2023. Available at: https://www.ahrq.gov/sites/default/files/wysiwyg/healthsystemsresearch/decarbonization/decarbonization.pdf
    \1060\ Tennison I. Roschnik S. Ashby B et al. (2021). Health 
care's response to climate change: a carbon footprint assessment of 
the NHS in England. Lancet Planet Health. 5(2):e84-e92. www.doi.org/10.1016/S2542-5196(20)30271-0.
    \1061\ Singh H. Eckelman M. Berwick DM & Sherman JD. (2022). 
Mandatory Reporting of Emissions to Achieve Net-Zero Health Care. N 
Engl J Med 387(26): 2469-27476. www.doi.org/10.1056/NEJMsb2210022.
    \1062\ Bhargavi Sampath, Matthew Jensen, Jennifer Lenoci-
Edwards, Kevin Little, Hardeep Singh, & Jodi D. Sherman. Reducing 
Health care Carbon Emissions: A Primer on Measures and Actions for 
Health Care Organizations to Mitigate Climate Change. U.S. Agency 
for Healthcare Research & Quality. AHRQ pub. No. 22-M011. September 
2023. Reducing Healthcare Carbon Emissions: A Primer on Measures and 
Actions to Mitigate Climate Change (ahrq.gov)Reducing Healthcare 
Carbon Emissions: A Primer on Measures and Actions to Mitigate 
Climate Change (ahrq.gov).
---------------------------------------------------------------------------

    Comment: A commenter provided feedback on our alternative proposal 
for TEAM participants who choose to submit to report either gallons and 
patient encounter or to report the assessment questions. The commenter 
recommended limiting reporting to the gallons data because it is 
congruent with TJC program and would align organizations around the 
same set of metrics.
    Response: We thank the commenter for their suggestions on our 
alternative proposal for TEAM participants who choose to submit to 
report either gallons and patient encounter or to report the assessment 
questions. The assessment questions for facilities allow facilities to 
report whether they are taking key actions to reduce transportation 
emissions and provide a deeper understanding of a hospitals' commitment 
to reducing emissions. We believe that both the assessment questions 
and gallons reported are important in providing a whole-scope view on 
transportation at facilities.
    After reviewing the public comments, for the reasons set forth in 
this rule, we are finalizing the proposal at Sec.  512.598(a)(4) to use 
a set of metrics that focus on greenhouse gases related to leased or 
owned vehicles.
(vii) Request for Information on Scope 3 Metrics and MDIs
    Both Scope 3 and MDI emissions account for a large percentage of 
medical carbon emissions and CMS is

[[Page 69875]]

interested in potential ways in which to provide technical assistance 
to TEAM participants to assess available metrics to help reduce the 
enormity of this impact.
(a) Scope 3 Metrics
    We believe Scope 3 emissions are relevant to a Decarbonization and 
Resilience Initiative connected to TEAM because Scope 3 emissions 
account for 82 percent of all U.S. health care emissions. Scope 3 
includes all emissions upstream and downstream in the supply chain and 
other indirect emissions. We sought additional information regarding 
potential future voluntary reporting of Scope 3 emissions.
     What metrics or data collection elements would be 
appropriate for TEAM participants to accurately report Scope 3 
emissions?
     Is there an industry standard tool that can be utilized 
for Scope 3 reporting?
     Which Scope 3 categories are most feasible and appropriate 
for hospitals participating in TEAM to report at this time?
     How can CMS and hospitals engage other parts of supply 
chain that contribute to Scope 3 emissions or incentivize their 
reduction of Scope 3 GHGs?
     Would hospital burden of Scope 3 reporting differ from 
Scope 1 and 2 reporting?
    We summarize the feedback to our request for information as 
follows:
    Comment: We received many comments related to Scope 3 reporting. 
Many commenters recommended certain Scope 3 metrics they believed were 
attainable for TEAM participants to collect, including normalizing 
patient encounters when it came to reusables vs single use devices, 
collecting waste volumes, patient and employee travel by mileage, and 
food waste. A few commenters recommended CMS to include Scope 3 metrics 
in the initiative, including making Scope 3 reporting mandatory and 
focusing on a limited but impactful set of metrics. A commenter 
suggested that Scope 3 is not burdensome to collect, and that there are 
a number of tools available for hospitals to use. This commenter 
recommended CMS to build its own tool in collaboration with EPA. A 
commenter recommended CMS provide leniency on Scope 3 metrics due to 
the complexity of these emissions in large hospital systems. A 
commenter recommended longer term technical assistance and for TEAM 
participants to use external regional vendors rather than CMS due to 
their familiarity with local supply information. A commenter gave an 
example of a health system who had undertaken and published a partial 
Scope 3 inventory for CMS to reference.
    Response: We thank the commenters for their input, acknowledge 
their recommendations, and will take the feedback into consideration in 
future rulemaking. We also refer readers to section 
X.A.3.p.(4).(a).(ii). for additional comments and feedback on why we 
excluded Scope 3 from the first year of the initiative.
    Comment: A commenter recommended CMS include metrics that encourage 
clinicians to choose treatments that have less carbon emissions.
    Response: We agree with the commenter, and we believe that starting 
with Scope 1 and Scope 2 will help start the process. We will look into 
incorporating Scope 3 in future.
    We thank commenters for their support and will consider this 
feedback for future iterations of the initiative.
(b) MDIs
    Also, under Scope 3, we sought additional information regarding 
MDIs. We believe that further understanding of the MDI prescription and 
usage rates could assist in finding pathways of reduction and 
substitution to a less harmful environmental option. However, we 
understand that most MDI prescriptions and the management of related 
conditions occur in the outpatient setting and may not be directly 
relevant to TEAM participants. Hospital reductions in MDI prescriptions 
can still result in significant reductions of GHG emissions. For 
example, Providence Oregon hospitals identified clinically equivalent 
MDI formulations of albuterol with 3-fold differences in 
emissions.\1063\ By prioritizing the lower emissions intensity 
inhalers, these emissions are projected to drop by 42 percent, or 298 
tons of CO2e (the equivalent of 64 gasoline powered passenger vehicles 
driven) per year. We sought information on the feasibility of capturing 
information on MDI outpatient prescriptions as a percentage of all 
inhaler prescriptions relevant to TEAM participants.
---------------------------------------------------------------------------

    \1063\ Bhargavi Sampath, Matthew Jensen, Jennifer Lenoci-
Edwards, Kevin Little, Hardeep Singh, & Jodi D. Sherman. Reducing 
Health care Carbon Emissions: A Primer on Measures and Actions for 
Health Care Organizations to Mitigate Climate Change. U.S. Agency 
for Healthcare Research & Quality. AHRQ pub. No. 22-M011. September 
2023. Reducing Healthcare Carbon Emissions: A Primer on Measures and 
Actions to Mitigate Climate Change (ahrq.gov). Reducing Healthcare 
Carbon Emissions: A Primer on Measures and Actions to Mitigate 
Climate Change (ahrq.gov).
---------------------------------------------------------------------------

    What role do acute care hospitals, hospital-based pharmacies, or 
other providers in the inpatient setting play in prescribing MDIs and 
guiding patients toward environmentally preferable selections, such as 
dry powder inhaler,\1064\ when clinically safe to do so?
---------------------------------------------------------------------------

    \1064\ Kimberly Wintemute & Fiona Miller. Dry Powder Inhalers 
Are Environmentally Preferable to Metered-Dose Inhalers. CMAJ, vol. 
192, no. 29, pp. E846. July 20, 2020. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7828988/https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7828988/.
---------------------------------------------------------------------------

    We believe it would be important to record data such as the volume 
of each MDI cannister (micrograms) and number of MDI cannisters 
prescribed on an annual basis and this would be helpful to capture. We 
sought feedback on the feasibility of capturing information for the 
following questions:
     What is the utilization rate of MDIs and dry powder 
inhalers, for inpatients?
     What is the prescription rate of MDIs and dry powder 
inhalers?
     Is there a way to replace the MDI propellant from a 
hydrofluorocarbon to hydrofluoroalkane?
    We summarize the feedback to our request for information as 
follows:
    Comment: Many commenters provided feedback on MDIs. Commenters 
recommended ways of collecting MDIs, including number of prescriptions 
collected from EHRs, percentage of total possible MDI doses utilized, 
stratification by drug class, collecting formulation weights by grams 
rather than micrograms, requiring formularies to include environmental 
costs in their prioritization framework, frequency they are prescribing 
different albuterol formulations, including the dry powder form, and 
recommending devices that provide more actuations and less emissions. A 
commenter suggested that MDI emissions are complicated to assess and 
mitigate, requiring formulation-specific quantification within each 
drug class and action from multiple stakeholders. A commenter 
recommending using Medicare claims data to collect data rather than 
during the hospitalization when the patient is switched from an MDI to 
a Dry Powdered Inhaler (DPI). A commenter recommended using nebulized 
medications to reduce inpatient MDI use. A commenter supports 
collecting MDIs but believes that it does not seem to fit into the TEAM 
initiative since it focuses primarily on inpatients undergoing surgical 
procedures.
    In response to the question of whether the MDI propellant from a

[[Page 69876]]

hydrofluorocarbon can be replaced to hydrofluoroalkane, a commenter 
noted that both are in the same class of chemical, and it is up to the 
preference of the pharmaceutical company. This commenter noted that not 
all hydrofluoroalkanes are potent GHGs and that the pharmaceutical 
industry is working on bringing new low or no global warming potential 
propellants to the market that are also hydrofluoroalkanes. This same 
commenter also expressed concern that the development of new 
propellants would move this drug-device combination from generic back 
to patent protection, potential driving prices up for patients and 
payers, similar to what happened in the 2000s during the 
chlorofluorocarbon to hydrofluorocarbon propellant transition.
    Response: We thank the commenters for their input and acknowledge 
their recommendations. We may take the feedback into consideration in 
future rulemaking.
    Comment: A few commenters pointed out the difference between Scope 
1 MDIs, which is directly released onsite, versus Scope 3 MDIs, which 
is used outside of the health system.
    Response: We thank the commenters for their input, pointing to 
differences between Scope 1 MDIs and Scope 3 MDIs. While some MDI usage 
may be classified as Scope 1, we believe it would be important to 
review MDI usage in total and not try to separate between Scope 1 and 
Scope 3 for the initial years of the initiative.
    We thank the commenters for their input and will take the feedback 
into consideration in future rulemaking.
(5) Report Timing
    For the Decarbonization and Resilience Initiative, we proposed at 
Sec.  512.598(b) that, if TEAM participants so choose, they would 
report information annually to CMS after each performance period. The 
form and manner would be specified by CMS for each performance period 
including using ENERGY STAR Portfolio Manager for building energy 
metrics proposed in section X.A.3.p.(4).(a).(iv). of the preamble of 
this final rule. We anticipate reporting for the other metrics and 
assessment questions would be a survey and questionnaire in a form and 
manner specified by CMS. We also proposed at Sec.  512.598(b) that the 
Decarbonization and Resilience Initiative information would need to be 
reported to CMS by no later than 120 days in the year following the 
performance period, or a later date as determined by CMS. We believe it 
is important to have flexibility to delay the reporting in case of an 
emergency or technical issue.
    We also considered requiring reporting by June 1 after the 
performance period to align with the majority of the local 
decarbonization programs that report to ENERGY STAR.\1065\ We sought 
comment on the proposed report timing and alternatives.
---------------------------------------------------------------------------

    \1065\ EPA Office of Air Programs. State/Local Compliance 
Ordinances. U.S. Environmental Protection Agency & U.S. Department 
of Energy. February 20, 2024. State/local compliance ordinances 
(site.com).
---------------------------------------------------------------------------

    We summarize and respond to public comments received on the 
proposal at Sec.  512.598(b) to require TEAM participants to report 
information below.
    Comment: A few commenters supported annual reporting by TEAM 
participants to CMS after each performance period. On commenter 
recommended one year of technical assistance prior to requiring 
reporting to support education on the initiative requirements and how 
to structure their programs prior to initial reporting.
    Response: We thank the commenters for their support. We will take 
into consideration the option of providing technical assistance prior 
to the launch of the Decarbonization and Resilience Initiative and will 
utilize TEAM participants feedback to inform future technical 
assistance.
    Comment: A commenter encouraged CMS to shorten the reporting 
timeline, stating the health sector is behind other sectors.
    Response: We thank the commenter for their feedback and may 
consider it in future rulemaking. Because the Decarbonization and 
Resilience Initiative is part of TEAM, TEAM participants who elect to 
voluntarily participate in the initiative will not need to begin 
reporting until TEAM starts. However, CMS may provide technical 
assistance to help TEAM participants to prepare for the initiative 
ahead of the start of this initiative as part of TEAM.
    Comment: A commenter supported the reporting deadline of June 1st 
after the previous year's performance period.
    Response: We thank the commenter for their support of the proposed 
reporting deadline.
    After consideration of public comments received, we are finalizing 
our proposal at Sec.  512.598(b) as proposed.
    After reviewing the public comments, for the reasons set forth in 
this rule, we are finalizing the proposal to require TEAM participants 
to report information.
(6) Benefits for TEAM Participants Who Elect To Report in the 
Decarbonization and Resiliency Initiative
    We proposed at Sec.  512.598(c) that TEAM participants who elect to 
report all the metrics identified in section X.A.3.p.(4). of the 
preamble of this final rule in the manner described in section 
X.A.3.p.(5). of the preamble of this final rule would receive 
individualized feedback reports and be eligible to receive public 
recognition for their commitment to decarbonization. In addition to 
these proposed benefits, we believe TEAM participants may receive 
additional indirect benefits from engaging in the voluntary reporting 
portion of the Decarbonization and Resiliency Initiative.
    We invited public comment on this proposal to offer benefits to 
TEAM participants who engage in voluntary reporting.
    Comment: A few commenters supported proposed benefits to TEAM 
participants who elect to report in the decarbonization and resiliency 
initiative and recommended CMS reward TEAM participants by implementing 
a bonus to CQS or help offset the costs incurred by health care 
organizations with upfront funding or incentives for reporting.
    Response: We thank comments for their support regarding the 
benefits to TEAM participants who elect to report in the 
decarbonization and resiliency initiative. At this time, we do not 
intend to modify the CQS, but we did seek feedback on how to 
incorporate financial incentives in the future and have a summary of 
comments in section X.A.3.p.(6).(d).
    After reviewing the public comments, for the reasons set forth in 
this rule, we are finalizing the proposal to offer benefits to TEAM 
participants who engage in voluntary reporting.
(a) Individualized Feedback Reports to TEAM Participants
    We proposed at Sec.  512.598(c)(1) to provide individualized 
feedback reports to TEAM participants who voluntarily report to CMS the 
four emissions-related metrics in the Decarbonization and Resilience 
Initiative. We anticipate these reports would summarize facilities' 
emissions metrics and would include benchmarks, as feasible, for 
normalized metrics to compare facilities, in aggregate, to other TEAM 
participants in the Decarbonization and Resilience Initiative. While 
ENERGY STAR has many robust benchmarks related to building energy 
efficiency, we believe that TEAM participants would be able to learn 
additional information from peers about emissions from

[[Page 69877]]

anesthetic gases and transportation emissions. See section 
X.A.3.p.(4).(a). of the preamble of this final rule for discussion of 
the proposed metrics and calculator tools to be used as part of the 
Decarbonization and Resilience Initiative. CMS does not intend to make 
these individualized feedback reports available to the public or other 
TEAM participants and intends them for the purpose of learning and 
improvement.
    We invited public comment on this proposal to provide 
individualized feedback reports to TEAM participants.
    Comment: Several commenters supported providing individualized 
feedback reports to TEAM participants who voluntarily report to CMS the 
four emissions-related metrics, noting the value of benchmark data to 
TEAM participants to help evaluate emissions and energy efficiencies, 
and with public recognition.
    Response: We thank commenters for their support.
    Comment: A few commenters recommended public disclosure of the 
general benchmarking data and verification at the facility level. A 
commenter requested CMS clarify with TEAM participants that reports can 
be shared with the public if a TEAM participant wants the data made 
public. A commenter recommended CMS provide individual feedback reports 
using relevant regional and hospital-type benchmarks.
    Response: We appreciate the commenters' suggestion regarding public 
disclosure and verification of benchmarking data at the facility level. 
We will monitor data submitted by a TEAM participant for compliance 
with the requirements of this final rule and will ensure that the data 
is sufficiently complete. We will use processes similar to those used 
in other models in monitoring the data submitted by TEAM participants. 
At this time, due to limited resources, we will not be able to conduct 
audits of the data submitted. Finally, we want to caution that TEAM 
participant that receives data or information in an individualized 
feedback report from CMS as a participant in this initiative of TEAM 
must request in writing and receive written approval by CMS prior to 
publication or public disclosure of data or information contained in 
the individualized feedback report.
    After reviewing the public comments, for the reasons set forth in 
this rule, we are finalizing the proposal to provide individualized 
feedback reports to TEAM participants.
(b) Establishment of a Publicly Reported Hospital Recognition of 
Decarbonization Commitment
    We proposed at Sec.  512.598(c)(2) to establish a publicly reported 
hospital recognition badge for the commitment of the TEAM participant 
or of the TEAM participant's hospital corporate affiliate to 
decarbonization; CMS would post a hospital recognition badge on a CMS 
website. We would provide annual recognition to TEAM participants for 
reporting all the metrics detailed in section X.A.3.p.(4).(a). of the 
preamble of this final rule. The recognition badge would be reevaluated 
each year based on the reporting of performance year metrics to CMS. We 
believe adding this recognition to a consumer-facing CMS website would 
allow patients and families to choose hospitals that have participated 
in efforts to measure health care carbon emissions.
    To encourage meaningful reductions in emissions, we sought comments 
on potentially expanding to a tiered recognition in future years. We 
believe a tiered approach could better acknowledge TEAM participants 
that have elected to voluntarily report their emissions data, actively 
engage in decarbonization activities that would result in reduced 
Scopes 1, 2, and 3 emissions, and meet absolute or relative standards 
of reported energy efficiency and lowered emissions. We sought comment 
on tiering such badging so as to recognize TEAM Participants that meet 
certain absolute or relative standards based on emissions reporting 
measures or other standards such as the Department of Energy's National 
Definition for a Zero Emission Building and may consider making select 
reported information public.\1066\ Any modifications to the public 
recognition benefit would be addressed through future rulemaking.
---------------------------------------------------------------------------

    \1066\ Kent Peterson, Paul Torcellini, & Roger Grant. A Common 
Definition for Zero Energy Buildings. National Institute of Building 
Sciences. September 2015. DOE/EE-1247. https://www.energy.gov/sites/default/files/2015/09/f26/bto_common_definition_zero_energy_buildings_093015.pdf https://www.energy.gov/sites/default/files/2015/09/f26/bto_common_definition_zero_energy_buildings_093015.pdf.
---------------------------------------------------------------------------

    We invited public comment on the proposed publicly reported 
hospital recognition of decarbonization commitment.
    Comment: Several commenters supported a publicly reported hospital 
recognition badge for a TEAM participant's commitment to 
decarbonization. A few commenters recommended transparent and 
verifiable qualifications for a TEAM participant to receive a badge. A 
commenter recommended expanding the public recognition with a tiered 
approach to encourage continuous improvement in GHG reduction 
performance. A commenter recommended a sustainability badge on Care 
Compare to recruit and retain care staff and attract patients. A 
commenter recommended CMS recognition of TJC Sustainable Healthcare 
Certification to align sustainability programs.
    Response: We thank the commenters for their support for a publicly 
reported hospital recognition badge for reporting all metrics detailed 
in section X.A.3.p.(4).(a). of the preamble of this final rule. As 
noted in section X.A.3.p.(3), we are allowing a TEAM participant to 
voluntarily report on metrics and respond to questions to CMS on behalf 
of the TEAM participant's hospital corporate affiliates. To support 
recognition of that additional voluntary reporting, a TEAM participant 
may receive a badge for the commitment of the TEAM participant or for 
the commitment of the TEAM participant's hospital corporate affiliates. 
We want to be clear that the publicly reported hospital recognition 
badge is for reporting and not for performance. We will monitor data 
submitted by a TEAM participant for compliance with the requirements of 
this final rule and will ensure that the data is sufficiently complete. 
At this time, due to limited resources, we will not be able to conduct 
audits of the data submitted. We will not be establishing a tiered 
approach as we want to gain experience with the data submitted by TEAM 
participants before further consideration of a tiered approach.
    Comment: A commenter did not support a recognition badge for non-
disclosed data and recommends verified data disclosure to ensure total 
transparency. Another commenter did not support a star-ranking system 
for environmental sustainability until future studies define what 
patients care about most and what the rankings mean in terms of patient 
safety and quality of care.
    Response: We appreciate the commenters' concerns regarding 
recognition badges and the data used. We will monitor data submitted by 
a TEAM participant for compliance with the requirements of this final 
rule and will ensure that the data is sufficiently complete. At this 
time, we are not proposing public disclosure of data submitted by TEAM 
participants as doing so may act as a barrier to voluntary 
participation. Due to limited resources, we will not be able to conduct 
audits of the data submitted.

[[Page 69878]]

    After reviewing the public comments, for the reasons set forth in 
this rule, we are finalizing the proposed publicly reported hospital 
recognition of decarbonization commitment.
(c) Indirect Benefits
    We believe that in addition to the direct benefits of participating 
in the Decarbonization and Resilience Initiative there are several 
indirect benefits associated with the Initiative's efforts to assist 
interested TEAM participants in undertaking decarbonization and 
resilience activities. Decarbonization can help improve the financial 
well-being of health care facilities by reducing operational costs. 
Estimates indicate that up to 30 percent of the energy used in 
hospitals and other commercial buildings is consumed unnecessarily and 
investing in decarbonization has been shown to decrease operational 
costs through supply chain optimization and reduced energy consumption 
and expenditures.\1067\
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    \1067\ Hardeep Singh, Walt Vernon, Terri Scannell, & Kathy 
Gerwig. (2023). Crossing the Decarbonization Chasm: A Call to Action 
for Hospital and Health System Leaders to Reduce Their Greenhouse 
Gas Emissions. National Academy of Medicine Discussion Paper. 
November 29, 2023. https://nam.edu/crossing-the-decarbonization-chasm-a-call-to-action-for-hospital-and-health-system-leaders-to-reduce-their-greenhouse-gas-emissions/https://nam.edu/crossing-the-decarbonization-chasm-a-call-to-action-for-hospital-and-health-system-leaders-to-reduce-their-greenhouse-gas-emissions/.
---------------------------------------------------------------------------

    Beyond the potential cost reduction benefit of decarbonization, 
investing in decarbonization may help to improve patient care and 
outcomes. For example, facilities that opt to reduce GHG emissions by 
switching to renewable energy sources increase their resilience and 
thus can bypass power outages in the electric grid during climate 
emergencies. Furthermore, by reducing GHG emissions, healthcare 
facilities are contributing to preventing or ameliorating adverse 
health outcomes that are linked to air pollution and climate change-
related hazards like hurricanes (for example, respiratory illnesses, 
injury).\1068\ Health systems could benefit patients by reduced demand 
for hospital services through encouraging health education, addressing 
health inequities perpetuated by social determinants of health, 
improving telehealth options, and improving upstream care management. A 
well-developed sustainability strategy could allow health systems to 
become more resilient to the consequences of extreme weather events, 
which exacerbate patients' chronic cardiac, respiratory, and other 
conditions.\1069\
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    \1068\ Vijay S. Limaye, Wendy Max, Juanita Constible, & 
Knowlton. Estimating the Health[hyphen]Related Costs of 10 
Climate[hyphen]Sensitive U.S. Events During 2012. GeoHealth, vol. 3, 
no. 9, pp. 245-265. September 17, 2019. Estimating the 
Health[hyphen]Related Costs of 10 Climate[hyphen]Sensitive U.S. 
Events During 2012--PMC (nih.gov). Estimating the 
Health[hyphen]Related Costs of 10 Climate[hyphen]Sensitive U.S. 
Events During 2012--PMC (nih.gov).
    \1069\ The Joint Commission. Sustainable Healthcare 
Certification. 2024. Sustainable Healthcare Certification [verbar] 
The Joint Commission. Sustainable Healthcare Certification [verbar] 
The Joint Commission.
---------------------------------------------------------------------------

    We summarize and respond to public comments received regarding the 
indirect benefits for TEAM participants who elect to report on the 
metrics.
    Comment: A few commenters agreed with the indirect benefits of 
participating in the Decarbonization and Resilience Initiative, 
including cost savings overall and specifically in anesthesia 
departments, and reductions in air pollution and improvements in air 
quality that impact healthcare savings and public health benefits.
    Response: We thank commenters for their feedback.
    Comment: A commenter suggested decarbonization may not reduce costs 
and may increase operational costs and cited possible ongoing 
depreciation expenses as an example.
    Response: We thank the commenter for their input. We believe that 
decarbonization may provide opportunities to decrease operational 
costs. Reports have shown that the operational costs of electric 
vehicles are lower than that of a vehicle with an internal combustion 
engine.1070 1071 Some efforts may not result in immediate 
cost savings but will be beneficial to the interests of hospitals and 
health systems.1072 1073 It is important to note, that an 
exclusive focus on direct cost savings and immediate return on 
investment does not capture long-term costs associated with impacts of 
climate change (for example, infrastructure/physical damages, greater 
healthcare costs, etc.) and reputational costs.\1074\
---------------------------------------------------------------------------

    \1070\ Sivak M and Schoettle B. (2018) Relative Costs of Driving 
Electric and Gasoline Vehicles in the Individual U.S. States. 
Transportation Research Board. Available at: https://trid.trb.org/view/1508116.
    \1071\ Baldwin R, Richie S, Vanderwerp D. (2022). EV vs. Gas: 
Which Cars Are Cheaper to Own? Car and Driver. Available at: https://www.caranddriver.com/shopping-advice/a32494027/ev-vs-gas-cheaper-to-own/.
    \1072\ Dzau VJ, Levine R, Barrett G, & Witty A. (2021). 
Decarbonizing the U.S. Health Sector--A Call to Action. N Engl J Med 
385;23, 2117-2119. www.doi.org/10.1056/NEJMp2115675 www.doi.org/10.1056/NEJMp2115675.
    \1073\ Singh H, Vernon W, Scannell T, & Gerwig K. (2023). 
Crossing the Decarbonization Chasm: A Call to Action for Hospital 
and Health System Leaders to Reduce Their Greenhouse Gas Emissions. 
NAM Perspectives. Discussion Paper, National Academy of Medicine, 
Washington, DC. https://doi.org/10.31478/202311g.
    \1074\ Ibid.
---------------------------------------------------------------------------

    After reviewing the public comments, for the reasons set forth in 
this rule, we are finalizing the proposal regarding the indirect 
benefits for TEAM participants who elect to report on the metrics.
(d) Request for Information on Potential Future Incentives for 
Participation in the Voluntary Decarbonization and Resilience 
Initiative
    At this time, we proposed not to include any bonuses, payments, or 
payment adjustments to TEAM participants for voluntary reporting in the 
Decarbonization and Resilience Initiative. We may add such a policy to 
the Decarbonization and Resilience Initiative in future years, subject 
to additional rulemaking. We sought feedback on the ways we could 
structure potential payments, bonuses, or payment adjustments. To offer 
some examples:
     A potential bonus added to the Composite Quality Score 
(CQS), which is discussed in section X.A.3.d.(5).(e). of the preamble 
of the proposed rule, for TEAM participants who report the information 
for the Decarbonization and Resilience Initiative. This would reward 
TEAM participants for collecting and reporting data, but not 
necessarily for better performance.
     We could elect to modify the CQS score by providing a 
bonus for those who perform well on the Decarbonization and Resilience 
Initiative. We welcomed thoughts on which metrics we should identify 
for measuring performance and how a bonus could be structured.
    We invited public comment on the future bonuses, payments, or 
adjustments for participation in the Decarbonization and Resilience 
Initiative.
    Comment: Many commenters recommended financial incentives to TEAM 
participants for voluntary reporting in the decarbonization and 
resilience initiative, including Medicare payment adjustments or bonus 
points; and linking reimbursement rates to emissions reductions or 
green medical supplies and pharmaceuticals. A few commenters 
recommended separate, targeted payments or upfront financial 
incentives, such as to hospitals serving low-income communities and 
focused on Scope 1 emissions; to small, independent, and rural 
hospitals; to hospital sustainability teams co-led by clinical and 
administrative leaders; and to hospitals to work with third parties.

[[Page 69879]]

    A few commenters supported adding a potential bonus to the 
Composite Quality Score (CQS) for TEAM participants who report for the 
decarbonization and resilience initiative. A few commenters recommended 
revisions to the CQS score, to include establishing a climate 
resilience plan, and establishing an overall emissions reduction goal 
within the CQS.
    A few commenters recommended additional administrative processes 
for the initiative including flexibility and a longer timeframe to 
address the uniqueness of healthcare operations as compared to other 
industries; audit or third-party verification of data reports to ensure 
accurate eligibility for bonus payments.
    Response: We thank commenters for their input and acknowledge their 
recommendations and concerns. We may take commenters' feedback into 
consideration in future rulemaking related to financial incentives for 
voluntary reporting in the initiative.
    Comment: A few commenters recommended non-financial incentives to 
TEAM participants for voluntary reporting in the decarbonization and 
resilience initiative including linking reporting to measurements of 
energy consumption, water usage, waste/disposal volume, and emission 
reduction; or the use of cloth gowns and scrubs, and reusable surgical 
equipment and tools.
    Response: We thank the commenters for their suggestions and may 
consider other non-financial incentives for TEAM participants in future 
years.
    Comment: A commenter did not support financial incentives to TEAM 
participants for voluntary reporting as bonuses or modifications 
related to GHG emissions would weaken the quality scoring system.
    Response: We acknowledge the commenter's concern. At this point we 
are not finalizing financial incentives for the initiative. We will 
consider implications of a financial incentive on TEAM if we elect to 
do financial incentives in the future.
    We appreciate the comments we received in response to the RFI and 
will consider them if we propose adding such a financial incentive 
policy to the initiative in future years, subject to additional 
rulemaking.
    We note that we received comments and suggestions that were outside 
the scope of the proposed rule, which are not addressed in this final 
rule.
q. Termination of TEAM
    In the proposed rule we stated that the general provisions relating 
to termination of the model by CMS in 42 CFR 512.596 would apply to 
TEAM. Consistent with these provisions, in the event we terminate TEAM, 
we would provide written notice to TEAM participants specifying the 
grounds for termination and the effective date of such termination or 
ending. As provided by section 1115A(d)(2) of the Act and Sec.  
512.594, termination of the model under section 1115A(b)(3)(B) of the 
Act would not be subject to administrative or judicial review.
    We received no comments on this proposal, and we are finalizing our 
proposal as proposed at Sec.  512.596.

B. Provider Reimbursement Review Board (PRRB) (Sec.  405.1845)

    Section 1878 of the Act (42 U.S.C. 1395oo) established by the 
Social Security Amendments of 1972, describes the role and function of 
the Provider Reimbursement Review Board (PRRB), a five-member 
administrative tribunal that adjudicates disputes over Medicare 
reimbursement for certain providers of services in the Medicare 
program. The statute requires the HHS Secretary to appoint individuals 
to the PRRB for a 3-year term of office; the law also established a 
shorter length of office for the first appointments for the newly 
created PRRB to permit staggered terms of office. To qualify for 
appointment to the PRRB, all members must be knowledgeable in the field 
of payment of providers of services; two members must be representative 
of a Medicare provider of services; and at least one member must be a 
certified public accountant. In 1974, the Social Security 
Administration (SSA), which administered the Medicare program prior to 
its transfer to the Health Care Financing Administration in the 
Department of Health and Human Services, promulgated the implementing 
regulations for the PRRB. The regulations governing the operation and 
administration of the PRRB reside at 42 CFR part 405 subpart R, with 
the provision governing the composition of the PRRB at 42 CFR 405.1845. 
In addition to codifying the statutory requirements governing the 
composition of the PRRB, the regulations established that no Board 
Member is permitted to serve more than two consecutive 3-year terms of 
office and that the Secretary has the authority to terminate a Board 
Member's term of office for good cause.
    When the PRRB was established more than 50 years ago, payment to 
providers participating in the Medicare program was on a cost 
reimbursement basis. Beginning October 1, 1983, Medicare transitioned 
to a prospective payment system for inpatient hospitals. These changes 
in reimbursement have led to changes in the types of cases adjudicated 
by the Board, the complexity of the matters that come before the Board, 
and often, the amount of time required to bring matters to resolution. 
While the limit on the number of consecutive terms served by a Board 
Member was established in the 1974 implementing regulations, CMS no 
longer believes that the current limitation on the number of 
consecutive terms a Board Member may serve makes good sense.
    In the proposed rule, we sought public comment on our proposal to 
amend paragraphs (a) and (b) of 42 CFR 405.1845, effective January 1, 
2025.
     First, we sought to modify the requirement that Board 
Members shall be knowledgeable in the area of cost reimbursement, so 
that it instead requires them to be knowledgeable in the field of 
payment of providers under Medicare Part A.
     Second, we proposed to permit a Board Member to serve no 
more than three consecutive terms, instead of two consecutive terms 
allowed under current regulations.
     Third, we proposed to permit a Board Member who is 
designated as Chairperson in their second or third consecutive term to 
serve a fourth consecutive term to continue leading the Board as 
Chairperson.
    The proposed change to paragraph (a) is intended to align the 
regulatory language with the statute, which, at section 1878(h) of the 
Act states, ``All of the members of the Board shall be persons 
knowledgeable in the field of payment of providers of services . . .'' 
As explained earlier in this preamble, Medicare payment to providers 
was on cost reimbursement basis when this provision became law; 
however, this change would clarify that a Board Member must have 
knowledge of Medicare Part A payment (which broadly covers the category 
of cases adjudicated by the PRRB, as opposed to the narrower 
subcategory of cost reimbursement matters). The proposed changes to 
paragraph (b) are intended to reduce the amount of turnover that occurs 
on the PRRB, enabling CMS to recruit and retain highly qualified 
individuals as they gain experience in adjudicating cases. We believe 
that these changes have the potential to expand the pool of applicants 
seeking to serve on the Board and who, because of the current two-term 
limitation, may not be willing to entertain a job change for what would 
be at most a 6-year period of service. Under current regulations, if a 
Board Member is serving in their first or second consecutive term and 
later

[[Page 69880]]

designated as Chairperson, the total length of service on the PRRB 
remains 6 years, or two consecutive terms. In other words, a Board 
Member who is designated as Chairperson in year 4 or 5 of their second 
consecutive term is only permitted to serve 1 to 2 more years as 
Chairperson. Under the policy described in the proposed rule, the PRRB 
would continue to benefit from having an experienced Board Member serve 
for a total of 12 years, if they were designated as Chairperson in 
their second or third consecutive term.
    We recognized in the proposed rule that the limit of two 
consecutive terms under current regulations creates more openings on 
the PRRB, which offers opportunities for newly appointed individuals to 
apply their unique skill sets, experience, and perspective to the work. 
However, we noted that there is an opportunity cost associated with the 
current level of turnover. Recruitment of Board Members occurs with 
regularity, generally every 1 to 3 years, and considerable time and 
effort have been expended by CMS and HHS in recruiting and vetting 
candidates as well as training newly appointed Board Members. Over 
time, it has been increasingly challenging to attract a large pool of 
qualified candidates who have relevant skills and experience in matters 
that come before the PRRB.
    Even after a candidate is identified, they must be formally 
appointed to the PRRB by the Secretary. Upon accepting the appointment, 
a Board Member must devote significant time to learning the duties of 
the job. As a result, in our experience, a newer Board Member takes 
more time to complete tasks relative to their colleagues who have more 
experience in the role. While Board Members may have a strong legal, 
accounting, health care, or other professional background, this 
position often is the first time they are serving as an adjudicator. 
Conversely, when a Board Member departs, there is a loss of 
institutional knowledge and expertise that adversely impacts efficiency 
and productivity. Turnover also impacts the relationships among and 
between the Board Members, and it takes time for the newly constituted 
Board to learn how to work together. This proposal would decrease the 
frequency of turnover and permit lengthier periods of service for Board 
Members, which we believe would have the potential to increase the 
PRRB's efficiency and productivity.
    The volume of cases filed with the PRRB has remained relatively 
steady over the past several decades with the average number of appeals 
filed and closed annually hovering around 2,000. The PRRB's docket has 
experienced years in which fewer appeals were filed in large part due 
to holds on issuing Notices of Program Reimbursement from which many 
providers file their appeals. A year or years with a lower appeals 
volume was then followed in subsequent years by spikes of new appeals 
once the holds were lifted. The PRRB's total docket has ranged from 
about 5,000 appeals to about 10,000 appeals over the last 30 years, 
with an average ending annual inventory of 8,700 cases. The PRRB's 
fiscal year 2023 docket ended with 8,698 open appeals.
    Additionally, the nature of the PRRB's cases has evolved over time. 
For example, in the past decade, the PRRB has seen an increase in 
broad-based legal challenges to regulatory interpretations and fewer 
appeals of reimbursable expenses specific to individual providers, 
which were common in the early years of the PRRB's operation. For 
example, early on, disputes over a provider's allowable costs in its 
cost report involving such expenses as owners' compensation, 
malpractice insurance, and marketing expenses were the norm, and 
generally these issues are simpler matters to adjudicate. With the 
evolution of Part A reimbursement to a prospective payment system, 
appeals to the PRRB frequently involve nuanced issues that implicate 
highly specialized and complex areas of law. Cases that have been 
adjudicated by the PRRB often reach the federal courts, and on 
occasion, are decided by the U.S. Supreme Court.\1075\ Permitting Board 
Members to serve more than two consecutive terms would allow them 
greater opportunity to follow the landscape of issues under judicial 
review, as it is not unusual for it to take years for cases to wind 
their way through the courts. Over their length of service, a Board 
Member develops an understanding of how certain issues are decided in 
the courts and applies that knowledge to the issues presented to the 
PRRB. The longer length of service would allow Board Members to obtain 
a deeper understanding of, and knowledge about, pertinent issues and 
caselaw.
---------------------------------------------------------------------------

    \1075\ See e.g.,: Becerra v. Empire Health Found., for Valley 
Hosp. Med. Ctr., 142 S. Ct. 2354 (2022); Sebelius v. Auburn Reg'l 
Med. Ctr., 568 U.S. 145 (2013); Your Home Visiting Nurse Servs., 
Inc. v. Shalala, 525 U.S. 449 (1999); and Bethesda Hosp. Ass'n v. 
Bowen, 485 U.S. 399 (1988).
---------------------------------------------------------------------------

    In the proposed rule, we explained that we considered a policy of 
permitting a Board Member to serve four consecutive 3-year terms, which 
would have permitted an individual to serve as long as 12 years (with 
the potential of serving another 3 years, or 15 years total, if the 
Board Member would later be designated as Chairperson), as opposed to 9 
years. Making a Board Member eligible to serve as many as four 
consecutive 3-year terms could have an advantage over three consecutive 
terms, as there will be less Member turnover and a greater ability to 
retain highly qualified Board Members. We sought public comment on this 
alternative option of four consecutive terms rather than three.
    As explained in the proposed rule, we also considered permitting a 
Board Member who ascends to the position of Chairperson to serve an 
additional two or three consecutive terms, instead of the proposed one 
additional consecutive term. Such a policy would have permitted an 
individual to serve 15 or 18 years (three 3-year terms as a Board 
Member and another two or three 3-year terms as Chairperson). Allowing 
a Board Member who is later designated as Chairperson to serve two or 
three additional consecutive terms would have likely made all Board 
vacancies more attractive (given the prospect of career progression and 
a longer tenure) and provide a longer period for a Board Member to gain 
experience prior to assuming the role of Chairperson, as they developed 
the knowledge, skills, and abilities in serve in a leadership capacity 
on the Board. We solicited comment on these alternative options for the 
extended tenure of the Chairperson and whether our proposal or one of 
the alternative proposals best struck a balance between an appropriate 
level of turnover and CMS's desire to recruit and retain qualified 
Board Members.
    Comment: Several commenters supporting our CMS's proposal to 
require Board Members to possess knowledge of Medicare Part A 
reimbursement, with the commenters noting that knowledge of payment to 
providers alone is insufficient. The commenters stated that it is 
critical that Board Members have specific knowledge and expertise in 
Medicare Part A reimbursement given the complex and unique types of 
Medicare cost report appeals that the PRRB adjudicates. These 
commenters also observed that this proposed amendment more 
appropriately reflects the statutory requirement of requiring Board 
Members to be knowledgeable in the field of ``payment of providers of 
services.''
    Response: We agree. As expressed earlier in this preamble, we seek 
to clarify that a Board Member must have knowledge of Medicare Part A 
payment, which covers the diversity of cases

[[Page 69881]]

adjudicated by the PRRB, as opposed to cost reimbursement matters 
alone.
    Comment: We received a comment expressing opposition to the 
proposed policy of allowing the term of Board Members be extended under 
certain circumstances up to 18 years. The commenter stated that the 
current system is working well and expressed concern about members with 
9- to 18-year terms becoming entrenched. Other commenters expressed 
opposition to the proposed change and urged CMS instead to explore 
other options, such as higher pay which would serve as an incentive to 
attract highly qualified applicants to Board positions. Other 
commenters cautioned that the relaxation of term limits would deprive 
the Board of the regular infusion of fresh experience and perspectives 
that new Board Members bring.
    Response: As explained earlier this preamble, turnover on the Board 
occurs with regularity, which has disruptive impacts on the Board's 
productivity and efficiency. Like anyone new to a position, it takes 
time to maximize a Board Member's contributions to the PRRB, which 
under regulations in effect prior to the effective date of this 
provision (January 1, 2025), would leave only one more 3-year term to 
apply the institutional knowledge and expertise they have acquired. 
Furthermore, a Board Member's departure at the end of their tenure 
creates a loss of such institutional knowledge and expertise; upon 
filling that vacancy, this cycle starts over again. However, we also 
recognize the commenters' concerns about permitting a Board Member to 
serve as long as 12 to 18 years and the risks of having such a long 
tenure. As such, we will not be finalizing the proposals to have Board 
Members serve more than three consecutive 3-year terms at this time.
    Comment: Commenters questioned the effective date of January 1, 
2025, as to when these PRRB composition-related changes were proposed 
to take effect. These commenters noted that by making them effective 
within months of issuance of the final rule, it creates an appearance 
that CMS seeks to reward current Board Members who might be sympathetic 
to the agency's position, which in turn undermines the legitimacy of 
the Board.
    Response: We disagree with the commenters' characterization of the 
proposed effective date. As explained earlier in this preamble, it is 
time and resource intensive to recruit, screen, and appoint candidates 
to the PRRB, which occurs on a regular cadence. Furthermore, there is 
an upfront investment of time and effort on the part of the newly 
appointed Board Member to learn their role and responsibilities and 
grow into the position. This set of changes to the regulations 
preserves the Secretary's existing long-standing authority to decide 
whether to reappoint a Board Member to a consecutive term or terminate 
a Board Member's term of office for good cause.
    After consideration of the public comments received, we are 
finalizing our proposal to require Board Members to be knowledgeable in 
the field of payment of providers under Medicare Part A. Additionally, 
we are finalizing our proposal to permit a Board Member to serve no 
more than three 3-year consecutive terms. At this time, we are not 
finalizing any policy that modifies the number of consecutive terms 
served by the Chairperson. These regulatory changes become effective 
January 1, 2025.

C. Maternity Care Request for Information (RFI)

1. Overview
    As described in the White House Blueprint for Addressing the 
Maternal Health Crisis and in the CMS Maternity Care Action Plan, we 
are committed to reducing maternal health disparities and improving 
maternal health outcomes during pregnancy, childbirth, and the 
postpartum period.1076 1077 In alignment with our commitment 
to addressing the maternal health crisis, this RFI sought to gather 
information on differences between hospital resources required to 
provide inpatient pregnancy and childbirth services to Medicare 
patients as compared to non-Medicare patients. To the extent that the 
resources required differ between patient populations, we also 
requested information on the extent to which non-Medicare payers, or 
other commercial insurers, may be using the IPPS as a basis for 
determining their payment rates for inpatient pregnancy and childbirth 
services and the effect, if any, that the use of the IPPS as a basis 
for determining payment by those payers may have on maternal health 
outcomes.
---------------------------------------------------------------------------

    \1076\ White House. White House Blueprint for Addressing the 
Maternal Health Crisis. 2022. Accessed January 2, 2024. https://www.whitehouse.gov/wp-content/uploads/2022/06/Maternal-Health-Blueprint.pdf.
    \1077\ CMS. CMS Cross Cutting Initiative: Maternity Care Action 
Plan. 2022. Accessed January 2, 2023. https://www.cms.gov/files/document/cms-maternity-care-action-plan.pdf.
---------------------------------------------------------------------------

2. Use of Medicare Data for the Calculation of the IPPS MS-DRG Relative 
Weights
    As explained in section II.A. of the preamble of this final rule, 
section 1886(d)(4) of the Act requires the Secretary to establish a 
classification of inpatient hospital discharges by diagnosis-related 
groups and a methodology for classifying specific hospital discharges 
within these groups. We refer to these groups of diagnoses as the IPPS 
Medicare Severity Diagnosis Related Groups (MS-DRGs). For each MS-DRG, 
the Secretary is required to assign an appropriate weighting factor 
which reflects the relative hospital resources used with respect to 
discharges classified within that group compared to discharges 
classified within other groups. The Secretary is also required to 
adjust the MS-DRG classifications and weighting factors at least 
annually to reflect changes in treatment patterns, technology, and 
other factors which may change the relative use of hospital resources.
    As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58652), 
our goal is always to use the best available data overall for 
ratesetting, including the calculation of the IPPS MS-DRG relative 
weights. We primarily utilize Medicare claims data and Medicare cost 
report data for IPPS ratesetting for inpatient hospital services. The 
claims data we utilize is specific to the Medicare beneficiaries 
population, which includes people 65 and older or people with 
disabilities, End-Stage Renal Disease, or amyotrophic lateral sclerosis 
(ALS) that qualifies them for Medicare earlier than the age of 
65.\1078\ Although most Medicare beneficiaries are 65 and older, in 
2021 around 13% of the total share of Medicare beneficiaries were under 
the age of 65.\1079\ Therefore, people of reproductive age may have 
Medicare as their primary health insurance. Notably, a study from the 
National Institutes of Health found that pregnant women with 
disabilities have higher risks for maternal mortality and severe 
complications during birth and pregnancy compared to other pregnant 
women.\1080\ Thus, considering we utilize data that is specific to the 
Medicare beneficiary population in our ratesetting for inpatient 
hospital services we caution against using the IPPS rates and DRGs 
without first taking

[[Page 69882]]

into account the characteristics of the Medicare beneficiary 
population.
---------------------------------------------------------------------------

    \1078\ Who's eligible for Medicare? U.S. Department of Health 
and Human Services. Accessed January 2, 2024. https://www.hhs.gov/answers/medicare-and-medicaid/who-is-eligible-for-medicare/.
    \1079\ Medicare Beneficiaries at a Glance 2023 Edition. Centers 
for Medicare and Medicaid Services. https://data.cms.gov/infographic/medicare-beneficiaries-at-a-glance.
    \1080\ Gleason JL, Grewal J, Chen Z, Cernich AN, Grantz KL. Risk 
of Adverse Maternal Outcomes in Pregnant Women With Disabilities. 
JAMA Netw Open. 2021;4(12):e2138414. Published 2021 Dec 1. 
doi:10.1001/jamanetworkopen.2021.38414.
---------------------------------------------------------------------------

3. Request for Information
    This RFI generally sought to gather information on differences 
between the resources required to provide inpatient obstetrical 
services to Medicare patients, on which the IPPS MS-DRGs relative 
weights for those services are based, as compared to non-Medicare 
patients. To the extent that the resources required differ, we also 
sought information regarding the extent to which non-Medicare payers, 
such as state Medicaid programs, may be using the IPPS MS-DRG relative 
weights to determine payment for inpatient obstetrical services and the 
effect, if any, that use may have on maternal health outcomes. We asked 
some specific questions to help facilitate feedback on this issue and 
more broadly on maternal heath, including the questions that follow.
     What policy options could help drive improvements in 
maternal health outcomes?
     How can CMS support hospitals in improving maternal health 
outcomes?
     What payment models have impacted maternal health 
outcomes, and how?
     What payment models have been effective in improving 
maternal health outcomes, especially in rural areas?
     What factors influence the number of vaginal deliveries 
and cesarean deliveries?
     What types of modifications or assumptions, if any, are 
being made by payers when they are using the IPPS MS-DRG relative 
weights to account for the fact they are based on the Medicare 
beneficiary population?
     Does the use of the IPPS MS-DRG relative weights as the 
basis for setting rates for other payers, including state Medicaid 
programs, impact efforts to reduce low-risk cesarean deliveries?
     To what extent are Medicare claims and cost report data 
reflective of the differences in relative costs between vaginal births 
and cesarean section births for non-Medicare patients?
     Are there other data beyond claims and cost reports that 
Medicare should consider incorporating in development of relative 
weights for vaginal births and cesarean section births?
     What impact, if any, does the relatively lower numbers of 
births in Medicare have on the variability of the relative weights?
     What effect, if any, does potential variability in the 
relative weights on an annual basis have on maternal health outcomes?
    We also noted our longstanding principle, reiterated each year in 
the IPPS rulemaking, that facilities should not consider differences in 
relative weights when making treatment decisions.
    Comment: Generally, commenters expressed appreciation for CMS' and 
the Administration's interest and commitment to maternal health and 
improving maternal health outcomes. Commenters provided a wide range of 
feedback to the questions in the Maternity Care RFI, which is 
summarized in the following paragraphs.
    Some commenters stated that payment rates to providers and health 
care professionals for pre/postnatal care, delivery, and related 
maternity care services were inadequate regardless of the payer. Some 
commenters said that there were structural issues with how payers pay 
for maternity care services and suggested payers restructure payments. 
Some commenters provided examples of payment restructuring that would 
include standby capacity payments, delivery fees, and federal add-on 
payments for labor and delivery.
    Many commenters mentioned the importance of Disproportionate Share 
Hospital payments, Uncompensated Care Payments, and adequate payments 
from Medicare for all hospital services as keys to indirectly 
supporting hospitals that provide maternity care services.
    Some commenters, including a national hospital association, stated 
that Medicare payment rates are generally not perceived to be a driver 
of practice patterns in maternity care.
    Some commenters indicated that Medicare rates do impact other 
payers' payment rates in general, as well as specifically for maternity 
care services. For example, some comments discussed how Medicare 
payment rates are often used as a benchmark by state Medicaid programs 
for setting rates. With regard to commercial payers, various commenters 
pointed out that payment rates are set via contractual negotiations 
with providers, among other factors.
    Various commenters indicated that Medicaid plays an important role 
in the delivery of maternity care services, and therefore encouraged 
CMS to work with state Medicaid agencies.
    Most commenters acknowledged that resources to treat Medicare 
beneficiaries may differ from the resources required to treat a non-
Medicare population. However, some commenters stated that they did not 
believe that the current MS-DRG structure and weights adequately 
reflect the resource consumption of maternity care services. 
Additionally, some of those commenters suggested that CMS use 
supplemental data to adjust the MS-DRGs and weights.
    Other suggestions to support improvements in maternal health 
outcomes included use of value-based care arrangements, standardizing 
quality reporting across payers, establishing support programs for care 
for mental health and substance use disorder, and for addressing 
housing and food security challenges.
    Response: We appreciate the many thoughtful comments we received 
from hospitals, hospital associations, health systems, beneficiary 
groups, and others. We will consider the comments received for future 
actions in our ongoing efforts to reduce maternal health disparities 
and improve maternal health outcomes during pregnancy, childbirth, and 
the postpartum period of maternal health.

D. Changes to the Payment Error Rate Measurement (PERM)

    The Payment Integrity Information Act of 2019 requires federal 
agencies to annually review programs susceptible to significant 
improper payments, estimate the amount of improper payments, report 
those estimates to Congress, and submit a report on actions the agency 
is taking to reduce the improper payments.
    Medicaid and the Children's Health Insurance Program (CHIP) were 
identified as programs at risk for significant improper payments by the 
Office of Management and Budget (OMB). We measure Medicaid and CHIP 
improper payments through the Payment Error Rate Measurement (PERM) 
program. Under PERM, reviews are conducted in three component areas 
(FFS, managed care, and eligibility) for both the Medicaid program and 
CHIP. The results of these reviews are used to produce national program 
improper payment rates, as well as state-specific program improper 
payment rates. The PERM program uses a 17-state, 3-year rotation cycle 
for measuring improper payments, so every state is measured once every 
3 years.
    Section 202 of Division N of the Further Consolidated 
Appropriations Act, 2020 (FCAA, 2020) (Pub. L. 116-94) amended Medicaid 
program integrity requirements in Puerto Rico. Puerto Rico was required 
to publish a plan, developed by Puerto Rico in coordination with CMS, 
and approved by the CMS Administrator, not later than 18 months after 
the FCAA's enactment, for how Puerto Rico would develop measures to 
comply with the PERM requirements of 42 CFR part 431, subpart Q. Puerto 
Rico published this

[[Page 69883]]

plan on June 20, 2021,\1081\ and it was approved by the CMS 
Administrator on June 22, 2021. In the proposed rule, we proposed to 
remove the exclusion of Puerto Rico from the PERM program found at 42 
CFR 431.954(b)(3). In compliance with section 202 of Division N of the 
FCAA, 2020, Puerto Rico has developed measures to comply with the PERM 
requirements of 42 CFR part 431, subpart Q. Including Puerto Rico in 
the PERM program will increase transparency in its Medicaid and CHIP 
operations and will improve program integrity efforts that protect 
taxpayer dollars from improper payments.
---------------------------------------------------------------------------

    \1081\ https://www.medicaid.pr.gov/pdf/Congress/PRDOH_Congressional%20Report%202%20PERM%20Compliance%20Plan_FINAL[2][
1].pdf.
---------------------------------------------------------------------------

    We proposed that Puerto Rico would be incorporated into the PERM 
program starting in RY27 (Cycle 3), which covers the payment period 
between July 1, 2025 through June 30, 2026.
    We received no comments on this proposal and therefore are 
finalizing this provision with minor technical correction based on 
further review of current statute reference. Three references to the 
Improper Payments Information Act (IPIA) of 2002 (Pub. L. 107-300) will 
be updated to the Payment Integrity Information Act (PIIA) of 2019 
(Pub. L. 116-117). Otherwise, the provision will be finalized without 
modification.

E. CoP Requirements for Hospitals and CAHs To Report Acute Respiratory 
Illnesses

1. Background
    Under sections 1866 and 1902 of the Act, providers of services 
seeking to participate in the Medicare or Medicaid program, or both, 
must enter into an agreement with the Secretary or the state Medicaid 
agency, as appropriate. Hospitals (all hospitals to which the 
requirements of 42 CFR part 482 apply, including short-term acute care 
hospitals, LTC hospitals, rehabilitation hospitals, psychiatric 
hospitals, cancer hospitals, and children's hospitals) and CAHs seeking 
to be Medicare and Medicaid providers of services under 42 CFR part 
485, subpart F, must be certified as meeting Federal participation 
requirements. Our conditions of participation (CoPs), conditions for 
coverage (CfCs), and requirements set out the patient health and safety 
protections established by the Secretary for various types of providers 
and suppliers. The specific statutory authority for hospital CoPs is 
set forth in section 1861(e) of the Act; section 1820(e) of the Act 
provides similar authority for CAHs. The hospital provision at section 
1861(e)(9) of the Act authorizes the Secretary to issue any regulations 
he or she deems necessary to protect the health and safety of patients 
receiving services in those facilities; the CAH provision at section 
1820(e)(3) of the Act authorizes the Secretary to issue such other 
criteria as he or she may require. The CoPs are codified at 42 CFR part 
482 for hospitals, and at 42 CFR part 485, subpart F, for CAHs.
    Our CoPs at Sec.  482.42 for hospitals and Sec.  485.640 for CAHs 
require that hospitals and CAHs, respectively, have active facility-
wide programs for the surveillance, prevention, and control of 
healthcare-associated infections (HAIs) and other infectious diseases 
and for the optimization of antibiotic use through stewardship. 
Additionally, the programs must demonstrate adherence to nationally 
recognized infection prevention and control guidelines, as well as to 
best practices for improving antibiotic use where applicable, and for 
reducing the development and transmission of HAIs and antibiotic-
resistant organisms. Infection prevention and control problems and 
antibiotic use issues identified in the required hospital and CAH 
programs must also be addressed in coordination with facility-wide 
quality assessment and performance improvement (QAPI) programs.
    Infection prevention and control is a primary goal and 
responsibility of hospitals and CAHs in their normal day-to-day 
operations, and these programs have been at the center of initiatives 
taking place in hospitals and CAHs since the beginning of the Public 
Health Emergency (PHE) for COVID-19. Our regulations for hospitals and 
CAHs at Sec. Sec.  482.42(a)(3) and 485.640(a)(3), respectively, 
require infection prevention and control program policies to address 
any infection control issues identified by public health authorities.
    On March 4, 2020, we issued guidance stating that hospitals should 
inform infection prevention and control services, local and state 
public health authorities, and other health care facility staff as 
appropriate about the presence of a person under investigation for 
COVID-19 (QSO-20-13-Hospitals). CMS followed this guidance with an 
interim final rule with comment period (IFC), ``Medicare and Medicaid 
Programs, Clinical Laboratory Improvement Amendments (CLIA), and 
Patient Protection and Affordable Care Act; Additional Policy and 
Regulatory Revisions in Response to the COVID-19 Public Health 
Emergency,'' published on September 2, 2020 (85 FR 54820), that 
required hospitals and CAHs to report important data critical to 
support the fight against COVID-19. The IFC provisions specifically 
required that hospitals and CAHs report specified information about 
COVID-19 in a format and frequency specified by the Secretary. Examples 
of data elements that could be required to be reported included things 
such as the number of staffed beds in a hospital and the number of 
those that are occupied, information about its supplies, and a count of 
patients currently hospitalized who have laboratory-confirmed COVID-19. 
These elements proved essential for developing and directing 
implementation of infection prevention and control guidance, as well as 
resource allocations and technical assistance during the PHE.
    On August 10, 2022, we finalized revisions to the COVID-19 and 
Seasonal Influenza reporting standards for hospitals and CAHs (at 
Sec. Sec.  482.42(e) and (f); and 485.640(d) and (e), respectively) in 
the FY 2023 IPPS final rule ``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 2023 Rates'' (87 FR 48780, 49409), to require that, beginning at 
the conclusion of the COVID-19 PHE declaration and continuing until 
April 30, 2024, hospitals and CAHs must electronically report 
information about COVID-19 and seasonal influenza virus, influenza-like 
illness, and severe acute respiratory infection in a standardized 
format specified by the Secretary. In establishing these requirements, 
we stressed that such reporting continued to be necessary for CMS to 
monitor whether individual hospitals and CAHs were appropriately 
tracking, planning for, responding to, and mitigating the spread and 
impact of COVID-19 and influenza on patients, the staff who care for 
them, and the general public (87 FR 49377). We also noted that the 
approach finalized in that rule would provide a path towards ending the 
overall reporting of COVID-19-related data between the end of the 
current PHE and April 2024, when those requirements would sunset (87 FR 
49379).
2. Hospital Respiratory Illness Data Are and Will Continue To Be 
Critical for Patient Health and Safety
    The COVID-19 pandemic highlighted the importance of taking a broad 
view of patient safety--one that recognizes patient safety is 
determined not just by what is happening at the bedside, but also what 
is happening in the broader hospital, and in hospitals across the 
region, state, and country. At the same time, it also demonstrated the 
patient

[[Page 69884]]

benefits of strong integration between public health and health care 
systems, particularly when data are available to direct collaborative 
actions that protect patient and public health and safety. Data from 
health care providers remain the key driver to identify and respond to 
public health threats, yet health care and public health data systems 
have long persisted on separate, often poorly compatible tracks.
    Hospital and CAH-reported data on COVID-19, influenza, and RSV 
infections among patients, as well as hospital bed capacity and 
occupancy rates, continue to play a critical role in infection 
prevention and control efforts at every level of the health system. The 
value of these data extend beyond the COVID-19 PHE. For example, source 
control remains an important intervention during periods of higher 
respiratory virus transmission.\1082\ Data on hospital admissions 
reported under the current CoPs continue to inform national, state, and 
county recommendations for community and health care mitigation 
measures.\1083\ Notably, the CDC recommends that health care facilities 
consider levels of respiratory virus transmission in the whole 
community when making decisions about source control. Comprehensive and 
consistent surveillance across hospitals creates a shared resource that 
all health care facilities in a community could use to inform infection 
control policies. Hospital and CAH requirements to report this data 
ended in April 2024. Not maintaining this reporting would result in an 
absence of vital information on local, regional, and national 
transmission and impact of respiratory illness and overall healthcare 
system capacity, with significant implications for both patient care 
and public health mitigation.
---------------------------------------------------------------------------

    \1082\ https://www.cdc.gov/infectioncontrol/guidelines/core-practices/?CDC_AA_refVal=https%3A%2F%2Fwww.cdc.govhicpacrecommendationscore-practices.html.
    \1083\ Infection Control: Severe acute respiratory syndrome 
coronavirus 2 (SARS-CoV-2) [verbar] CDC; 2023.12.14--IDPH Recommends 
Healthcare Facilities Adopt Mitigation Measures as Respiratory 
Viruses Increase (illinois.gov) 2024-doh-masking-advisory.pdf 
(ny.gov); Health Alert Network (HAN)--00503 [verbar] Urgent Need to 
Increase Immunization Coverage for Influenza, COVID-19, and RSV and 
Use of Authorized/Approved Therapeutics in the Setting of Increased 
Respiratory Disease Activity During the 2023-2024 Winter Season 
(cdc.gov).
---------------------------------------------------------------------------

    In the proposed rule, we provided a detailed discussion regarding 
the data produced by the hospital and CAH respiratory virus reporting 
requirements and how the insight provided by the data collected 
positively impacted patient health and safety by guiding actions to 
reduce the prevalence of respiratory illnesses through enhanced 
planning, technical assistance, resource allocation, and coordination. 
We encourage readers to refer to the proposed rule for this detailed 
discussion (89 FR 36504-36505).\1084\
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    \1084\ FY2025 IPPS Proposed Rule. https://www.govinfo.gov/content/pkg/FR-2024-05-02/pdf/2024-07567.pdf.
---------------------------------------------------------------------------

3. Provisions of the Proposed Regulations and Analysis and Response to 
Public Comments
    In response to the proposed rule, we received 1,377 total comments 
(709 unique) from patients, providers, medical professionals, national 
and state hospital associations, and pharmaceutical and biotech 
companies. In light of continued utility of respiratory illness data, 
the proposed policy aimed to continue national monitoring of COVID-19, 
influenza, and RSV cases to guide infection control interventions and 
hospital operations that directly relate to patient safety; monitor 
emerging and evolving respiratory illnesses; guide and motivate 
community-level disease control interventions; and enhance preparedness 
and resiliency to improve health system responses to future threats, 
including pandemics that pose catastrophic risks to patient safety and 
the health care system.
    In this final rule, we provide a summary of the proposed 
provisions, a summary of the public comments received, and our 
responses to them, and an explanation for changes in the policies we 
are finalizing.
    Comment: We received overwhelming support from patients and 
community members on our proposal to extend requirements for 
respiratory illness reporting in the hospital and CAH CoPs. Many 
commenters expressed that such data, when reported publicly, helps to 
inform both public and personal healthcare decisions. We received some 
anecdotes on personal experiences with long-COVID as well as stories of 
loved ones who died due to COVID. Although the PHE is over, commenters 
remind us that the threat to individuals remains, and many stated that 
accessible data is the number one factor in determining personal risk, 
especially for those who are immunocompromised. Many commenters 
mentioned how they rely on published public health data to inform their 
personal health decisions. For that reason, many recommend publishing 
the collected data to an easily accessible location, such as 
HealthData.gov. Likewise, a few state hospital organizations and 
epidemiology industry groups voiced support for the proposal, noting 
that data collection is vital for the informed preparation and 
coordination of hospital operations before, during, and after surges of 
respiratory illnesses.
    Response: We thank commenters for their overwhelming support of the 
hospital data reporting and for sharing their personal stories 
regarding the impact of COVID. The compelling narratives shared by 
commenters demonstrate importance of data reporting to inform both 
public health and personal safety. We support the publication of data 
in a publicly accessible manner. Previously, the COVID-19 and influenza 
hospitalization data were displayed in multiple ways on the CDC 
website. CDC will use similar approaches to communicate these data in 
the future, including continuing to provide data visualizations on our 
website and posting updated weekly data aggregated by state on 
data.CDC.gov. Consistent data on COVID-19, influenza, and RSV 
hospitalizations will facilitate clear and comprehensive communication 
to health care organizations and to the public about major viral 
respiratory disease trends and burden. In addition to disseminating 
tabular data and descriptive statistics calculated from the data, 
respiratory virus hospital admission data has underpinned publicly 
available advanced analytics including short-term forecasts, longer-
term scenario projections, and analyses that quantify the epidemic 
trajectory in near real-time. The data will continue to be used in 
these types of analyses, which help the public interpret the data and 
understand what is happening in their state.
    Comment: A few hospital associations expressed concern about the 
appropriateness of data reporting as a CoP requirement. These comments 
emphasized that establishing CoPs may threaten access to Medicare 
participation, facility financial viability, access to care, and 
operational efficiency, and hinder true infection prevention efforts. 
They also noted that data reporting may not accurately reflect 
community prevalence. While these groups noted the value of data 
reporting, many reflected on the existing willingness of hospitals to 
participate in voluntary data sharing. A few commenters suggested 
alternative mechanisms to foster data collection rather than through 
the CoPs, such as supporting infrastructure for voluntary disclosure 
that could lead to long-term automated, efficient data sharing.
    Response: We appreciate the feedback from these commenters; 
however, we

[[Page 69885]]

disagree that the CoPs are an inappropriate means to assure essential 
data collection that protects the health and safety of patients. In our 
experience during the COVID-PHE, when similar data reporting 
requirements were first established, the data produced by hospital 
respiratory virus reporting requirements informed coordination of 
hospital operations and were especially important to anticipate and 
prepare for surge conditions. Collaborative, data driven approaches 
could help to manage patient transfers and alleviate strained 
hospitals, ultimately improving patient care by assuring that hospital 
resources are not overly strained to the point of patient harm. During 
the COVID PHE, state and local agencies, health care coalitions, and 
health systems used hospital capacity data to coordinate patient 
placement and reduce emergency department (ED) boarding and 
overcrowding, all of which improve the patient experience of care. 
Insight into hospital and CAH capacity helps ensure capabilities are 
available to meet patient needs with quality care through enhanced 
planning, technical assistance, resource allocation, and coordination.
    Since the April 30, 2024, sunset of the COVID-19 data reporting 
requirement, data reporting has been voluntary for facilities. Since 
May 1, 2024, without the CoP requirement, reporting has dropped from 
near complete reporting by all US hospitals each week to only around 35 
percent of hospitals reporting, representing nearly a 65 percentage 
point reduction. There is also significant variability by state, so 
that several states have zero reporting, leaving gaps in the visibility 
of the healthcare system and the burden of respiratory illness. The 
majority of hospitals that are continuing to report data to the 
National Healthcare Safety Network (NHSN) are doing so on a daily 
basis, and we appreciate their dedication and recognition of the 
importance of this reporting. Due to the dramatic decrease of data 
reporting during the voluntary period, we conclude that voluntary 
reporting is insufficient to capture this data on a consistently 
widespread and accurate basis. Information sharing across the health 
care ecosystem helps the health care community to prepare for, and 
effectively respond to, respiratory illness surges in ways that 
maintain the safety and availability of critical care services.
    We recognize that neither the number of incident respiratory virus 
hospital admissions nor the number of prevalent respiratory virus 
hospitalizations are direct measures of community prevalence (that is, 
the proportion of people in a community who are infectious). Indeed, no 
respiratory virus surveillance system routinely used in the United 
States directly measures infection prevalence in the community. It is 
therefore necessary to use proxy measures. Rates of respiratory virus 
hospital admissions are strongly affected by transmission in the 
community and therefore these data serve as a valuable correlate of 
community transmission dynamics.
    Overall, we note that the information reported would be shared with 
both CMS and CDC, retained, and publicly reported to support protecting 
the health and safety of patients as well as facility personnel and the 
general public. These requirements would support our efforts to 
proactively and transparently inform interested parties and ensure that 
the most complete information on viruses is available.
    Comment: Some commenters suggest delaying the compliance date to 
ensure that hospitals would be prepared to comply. A commenter stated 
that an October 2024 start date for reporting influenza and RSV data is 
too soon since this data has not been previously required. The 
commenter explained that facilities would need time to operationalize 
this requirement.
    Response: We understand the implementation timeline concerns 
expressed by commenters. However, due to the unpredictable nature of 
viruses, it is vital that this information be collected and recorded in 
a timely manner. We are working to avoid significant gaps in data and 
expect hospitals to be prepared to report, as the finalized policy is a 
reduction from the already familiar required reporting that ended in 
April 2024. Retaining the data reporting requirements is an important 
element of maintaining effective surveillance of novel viruses. In 
addition, there are still significant risks of morbidity and mortality 
for immunocompromised patients. Timely and actionable surveillance 
enables CMS to continue to respond to facilities in need of additional 
technical support and oversight to assure patient health and safety. As 
such, we are finalizing our proposal to extend a streamlined data set 
of required ongoing reporting and additional reporting in the event of 
a future PHE for an acute infectious illness, effective November 1, 
2024. We note that there is a 90-day delay between the date of 
publication of this final rule and the effective date of these 
requirements, allowing hospitals sufficient time to prepare for 
implementing the streamlined data reporting requirements.
a. Proposal To Establish Ongoing Reporting for COVID-19, Influenza, and 
RSV
    We proposed to revise the hospital and CAH infection prevention and 
control and antibiotic stewardship programs CoPs to extend a modified 
form of the current COVID-19 and influenza reporting requirements that 
would include data for RSV and reduce the frequency of reporting for 
hospitals and CAHs. Specifically, we proposed to replace the COVID-19 
and Seasonal Influenza reporting standards for hospitals and CAHs at 
Sec.  482.42(e) and (f) and Sec.  485.640(d) and (e), respectively, 
with a new standard addressing respiratory illnesses to require that, 
beginning on October 1, 2024, hospitals and CAHs electronically report 
information about COVID-19, influenza, and RSV in a standardized format 
and frequency specified by the Secretary. To the extent determined by 
the Secretary, we proposed that the data elements for which reporting 
would be required at this time include--
     Confirmed infections of respiratory illnesses, including 
COVID-19, influenza, and RSV, among hospitalized patients;
     Hospital bed census and capacity (both overall and by 
hospital setting and population group [adult or pediatric]); and
     Limited patient demographic information, including age.
    Therefore, outside of a declared PHE for an acute infectious 
illness, we proposed that hospitals and CAHs would have to report these 
data on a weekly basis (either in the form of weekly totals or 
snapshots of key indicators) through the NHSN or other CDC-owned or 
CDC-supported system as determined by the Secretary.
    We noted that the proposed policy was scaled back and tailored from 
the post-COVID-19 PHE requirements that expired April 30, 2024, and 
that we intend to continue the collection of the minimally necessary 
data to maintain a level of situational awareness that would benefit 
patients and hospitals across the country while reducing reporting 
burden on hospitals and CAHs.
    We welcomed public comments on our proposals and on ways that 
reporting burden could be minimized while still providing adequate and 
actionable data. We also requested feedback on any challenges of 
collecting and reporting these data; ways that CMS could reduce 
reporting burden for facilities; alternative reporting mechanisms or 
quality reporting programs through which CMS could

[[Page 69886]]

instead effectively and sustainably incentivize reporting and the value 
of these data in protecting the health and safety of individuals 
receiving treatment and working in hospitals and CAHs.
    In the proposed rule, we also discussed the impact of the COVID-19 
pandemic on communities across the United States, and the 
disproportionate impact on socially vulnerable populations. We noted 
that from the beginning, reports indicated that people of color and 
people from economically disadvantaged communities were at an increased 
risk of becoming sick from COVID-19, being hospitalized due to COVID-
19, and dying from COVID-19, compared to members of predominantly white 
and/or affluent communities.\1085\ Unfortunately, the data necessary to 
detect and respond to these disparities were not consistently available 
from core data sources, including hospitalization data reported by 
hospitals and CAHs under existing requirements Sec. Sec.  482.42(e) and 
(f); and 485.640(d) and (e), respectively.
---------------------------------------------------------------------------

    \1085\ https://oig.hhs.gov/oei/reports/OEI-05-20-00540.asp; 
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9533809/
#:~:text=In%20this%20study%20cohort%2C%2062,%2C%20and%205%25%20were%2
0Hispanic.
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    We emphasized our commitment to protecting patients from all 
communities and preventing inequities caused or exacerbated by 
respiratory viruses like COVID-19, influenza, and RSV and how timely, 
complete data on racial and ethnic differences in hospitalizations are 
critical to meeting such a commitment in policy solutions. For that 
reason, we sought public comment on expanding the scope of demographic 
information collection to further support improvements in clinical 
outcomes while also protecting privacy and the safety of demographic 
groups.
    Specifically, we invited comment as to whether race/ethnicity 
demographic information should be explicitly included as part of 
requirements for ongoing reporting beginning on the effective date of 
the final rule. We indicated our particular interest in comments that 
address the ways these additional data elements could be used to better 
protect patient and community health and safety both during and outside 
of a declared PHE and how to protect patient privacy within demographic 
groups, while being sure not to also stigmatize demographic groups.
    Comment: Commenters requested further clarification and more 
detailed regulations to ensure that hospital and CAH data collections 
contribute to higher quality health care and do so at a lower cost to 
providers. Commenters requested clarity regarding the data elements 
required for reporting, including the respiratory pathogens, limited 
demographic information, hospital census and capacity data, as well as 
how CMS intends to use the data to ensure hospitals have enough 
resources for compliance. A commenter recommended revising the ongoing 
data collection requirements by collecting both adult and pediatric 
data, collecting the census of staffed beds, and reporting the level of 
care and equipment available. Some commenters recommended expanding 
reporting to all communicable diseases that might improve public health 
information available to the public and those working to ensure public 
health, while others limited their suggestions to expanding reporting 
to address H5N1 as well as ``hospital acquired infections.'' Some 
commenters also questioned the need for reporting hospital bed capacity 
data outside of a PHE. For instance, a commenter mentioned that 
hospital bed census and capacity is reported yearly in the annual NHSN 
survey. The commenter mentioned hospital bed capacity likely does not 
change drastically week to week, therefore this data element is 
excessive. Some commenters suggested that other surveillance indicators 
such as wastewater surveillance data or data from public health lab 
testing could be used instead. A commenter stated that respiratory 
virus hospitalizations ``severely lag'' community transmission.
    Response: The proposed reporting requirements were written in a 
manner that would allow for maximum flexibility by covering a broad 
array of services and entities. In developing the proposed 
requirements, we considered the data elements that proved most 
actionable and informative over the course of the COVID-19 PHE with 
evidence of protecting health and safety, as well as more recent 
lessons that have emerged during the 2023-2024 respiratory virus 
response. We also considered ways to balance the burden of reporting on 
hospitals and CAHs with the need to maintain a level of situational 
awareness that benefits the patients and communities served by 
hospitals, as well benefitting hospitals directly. We believe that 
reporting all communicable disease and hospital acquired infections 
would be overly burdensome for providers. Likewise, reporting related 
to H5N1 on a routine basis would also be unduly burdensome at this 
time.
    Respiratory virus surveillance is inherently multi-faceted, and 
other sources of data may be important adjuncts. However, they have 
their own significant limitations. For example, wastewater surveillance 
does not cover all jurisdictions. One of the key advantages of the 
proposed hospital-based surveillance is that it would provide data that 
are nationally comprehensive and can could be resolved at the sub-state 
level (for example, by health service area). A published CDC analysis 
found that COVID-19--associated hospital admissions lagged reported 
case incidence by one day and test positivity and ED visits by four 
days. When considered over the scale of epidemic waves that last for 
weeks or months, an indicator that lags by less than a week can be a 
valuable source of actionable information to inform infection control 
decisions within hospitals.\1086\ In addition, per the bed capacity 
data elements, CDC is funding ($24.9 million from the Epidemiology and 
Laboratory Capacity Program) over 19 States to automate bed capacity 
reporting to NHSN via a State repository.\1087\ The long-term goal of 
this project is to develop a fully automated approach that standardizes 
data elements.
---------------------------------------------------------------------------

    \1086\ https://www.cdc.gov/mmwr/volumes/72/wr/mm7219e2.htm
    \1087\ https://www.cdc.gov/nhsn/pdfs/training/D1_Connectivity-Initiative_-Hospital-Bed-Capacity-Project_508c.pdf
---------------------------------------------------------------------------

    Comment: Commenters asked for clarity on how hospitals should 
collect, format, and submit the requested data. Many commenters urged 
CMS to establish a modern automated, standardized reporting and 
collection system for providers and to partner with CDC, Administration 
for Strategic Preparedness and Response (ASPR), and the Office of the 
National Coordinator for Health IT (ONC). Such a platform would provide 
a single place where all the proposed data elements could be captured. 
Commenters mentioned Trusted Exchange Framework and Common Agreement 
(TEFCA), CDC's National Syndromic Surveillance Program (NSSP), and 
NHSN, and standards which could facilitate transfer with such a 
platform including Fast Healthcare Interoperability Resources (FHIR), 
United States Core Data for Interoperability (USCDI), USCDI Plus 
(USCDI+). In addition, commenters mentioned that CMS should establish a 
certification criterion for public health technologies used by Public 
Health Agencies (PHA).
    Response: We appreciate the support of our goal of transitioning 
to, and using, more modern, flexible approaches and networks that 
support data exchange between and across

[[Page 69887]]

public health and healthcare institutions to modernize the public 
health information infrastructure. We agree that easily adoptable 
universal standards are necessary for accurate data reporting and would 
reduce burden. We appreciate commenters support of TEFCA, FHIR, and 
USCDI/USCDI+. We agree that establishment of certification criteria for 
public health technologies used by PHAs would improve bi-directional 
exchange and help improve the quality, timeliness, and completeness of 
public health reporting. We refer readers to the Health Data, 
Technology, and Interoperability: Patient Engagement, Information 
Sharing, and Public Health Interoperability (HTI-2) Proposed Rule, in 
which ONC has proposed to establish certification criteria for health 
IT used by public health.\1088\
---------------------------------------------------------------------------

    \1088\ The HTI-2 proposed rule is available on ONC's website at 
https://www.healthit.gov/sites/default/files/page/2024-07/ONC_HTI-2_Proposed_Rule.pdf.
---------------------------------------------------------------------------

    Through its data modernization efforts, CDC is working to 
strengthen public health digital infrastructure. These efforts include 
investments in core data sources and systems that provide actionable 
data for facilities, health systems, and response agencies. NHSN is 
actively engaged in developing approaches to data collection that can 
be automated and thus reduce the manual burden of reporting by 
healthcare facilities. NHSN is piloting automated versions of the 
respiratory virus data collection that, if successful, could be used 
during the 2025-2026 respiratory season.\1089\ CDC has several pilot 
sites enrolling through the NHSN with the NHSNCoLab, a collaborative 
partnership that allows facilities to send automated data flows to NHSN 
via FHIR and other digital approaches.\1090\ These pilot sites are 
ready to test out this automated activity that is designed to reduce 
burden. NSSP is also actively working to expand existing data flows 
collecting emergency department visits to include inpatient 
hospitalizations and direct admissions, capitalizing on the automated 
nature of admit, discharge, and transfer (ADT) messaging to improve 
public health understanding of hospitalizations. To further reduce 
burden, CMS will work with the CDC to ensure hospitals can continue to 
use existing, established systems to report data in the interim. The 
CDC will continue increasing the automation capabilities of the 
surveillance systems like NHSN and NSSP and their abilities to connect 
with other data submission techniques, vendors, and systems. The CDC, 
CMS, and ASPR are also working with ONC, jurisdictions, health 
information technology (health IT) vendors, hospitals and CAHs, and 
other public and private partners to establish national standards and 
interoperability requirements that reduce burden and promote 
standardization. We aim to build an infrastructure to create more 
automated, efficient, timely, and less burdensome processes for data 
reporting.
---------------------------------------------------------------------------

    \1089\ https://www.cdc.gov/nhsn/pdfs/training/D1_Introducing-NHSNs-New-Digital-Quality-Measures_508c.pdf.
    \1090\ https://www.cdc.gov/nhsn/nhsncolab/.
---------------------------------------------------------------------------

    Comment: A significant number of commenters indicated that the 
reporting requirements were too burdensome, time consuming, and 
duplicative. Some commenters noted that the burden on hospitals and 
health systems may outweigh the benefits of mandatory reporting. 
Commenters were concerned that this type of reporting was resource 
intensive and would require hospitals to implement reporting processes 
and systems. These groups mentioned the increased paperwork burden that 
would be placed on staff to comply with reporting requirements noting 
that increased staff would be necessary to comply with all the steps of 
data collection, verification, and submission, while hospitals are 
currently facing staffing challenges.
    Some commenters specifically highlighted the potential burden on 
rural facilities, citing the need for significant onboarding, capacity-
building, technical assistance, and the lack of existing public health 
relationships. Commenters note that rural facilities may not have 
sufficient informatics support of their own and might not likely be 
able to find enough funding or workforce to support such reporting. 
Many commenters suggested financial support would be necessary to 
alleviate some burden.
    In addition, some commenters mentioned that infection data may be 
already reported through other mandatory mechanisms, including manual 
case reporting, electronic case reporting (eCR), and NSSP. A commenter 
expressed concern that the same data reporting requirements were being 
required from multiple HHS agencies. Commenters suggested that CMS 
would have to allocate resources to hospitals to build capacity to 
report COVID cases should the CoP be finalized.
    Response: We acknowledge the potential burden of our proposed 
reporting requirements, especially for rural and small facilities. We 
understand that some commenters felt these data were duplicative of 
other reporting measures or that the CoPs were an inappropriate method 
to implement data reporting requirements, and this could place 
unnecessary burdens on hospitals. Federal reporting requirements are 
used by State and local authorities to inform their operations and 
response for their particular populations. Due to the variation in 
mandates across States and localities, we will continue to require 
surveillance efforts at the Federal level and maintain the reporting 
requirements in more or less the form in use up through April 30, 2024.
    CMS, CDC, and ASPR will work with hospitals, health systems, and 
State, territorial, local and Tribal agencies (STLTs) to streamline 
this Federal, State, and local reporting burden, utilizing the least 
burdensome technical exchange mechanism for reporting. CDC and ASPR, 
together with ONC, would also take steps to encourage State, local, 
jurisdictional partners to utilize HHS-adopted health IT standards such 
as USCDI that are already supported by existing systems for data 
exchange, which would further reduce burden on health care systems. We 
will also explore where guidance could leverage data sets being 
developed under the USCDI+ initiative, which focuses on develop and 
advancing use of standardized data elements for exchange for additional 
use cases that build on the USCDI.
    Comment: Many commenters suggested ways to revise the proposed 
regulations in general. Commenters suggested that CMS ask each State, 
territory, or regional jurisdiction--but not individual hospitals--to 
voluntarily submit a retrospective file that covers the gap period 
between May 1 and September 30, 2024, when possible, to gain a better 
understanding of the viruses and have a complete data set. Many 
commenters also suggested adding COVID to the list of measures utilized 
by the Hospital Acquired Condition (HAC) Reduction Program and defining 
the measure ``hospital-onset COVID'' as infection within five days 
after admissions, opposed to the current fourteen days, because current 
variants only take two to three days from exposure to develop symptoms 
and the average hospital stay is 5.4 days. Other commenters provided 
recommendations for measures to improve hospital infection prevention, 
including mandatory staff masking, use of air purifiers, and use of UVC 
lights. Another comment suggested that all healthcare providers that 
see patients in primary care and medical practices settings should be 
required to report all

[[Page 69888]]

infectious diseases within one week of a patient visit.
    Response: We appreciate the suggestion to ask for voluntary 
retrospective data from each State, territory, or regional 
jurisdiction, however we note that many individual facilities have 
already been voluntarily submitting many of these data elements. We 
appreciate the suggestion to add COVID to the HAC Reduction program, 
defining hospital-onset COVID and specific infection control measures, 
however the suggestions are outside the scope of the CoPs. We 
appreciate the suggestion to require medical practices to report all 
infectious diseases, however this is also outside the scope of this 
rule.
    Comment: A commenter expressed concerns that this requirement would 
be extremely burdensome for laboratories and strongly recommended 
delaying any reporting requirements for respiratory diseases during a 
non-PHE time until a clear process that leveraged existing EHR systems 
was in place to minimize the burden on laboratories and eliminate the 
need for laboratories to duplicate reporting to multiple agencies.
    Response: We appreciate the commenter's feedback regarding the 
downstream impact on laboratories associated with requirements for 
hospital and CAHs to report data on respiratory illnesses. However, the 
CoPs set forth in this rule apply to hospitals and CAHs and do not 
apply to laboratories. While there are hospital (Sec.  483.27) and CAH 
(Sec.  485.635(b)(2)) CoPs that require hospitals and CAHs to have 
adequate laboratory services to meet the needs of their patients in 
accordance with the Clinical Laboratory Improvement Amendments (CLIA) 
program (42 CFR part 493), the requirements finalized in this rule are 
specific to reporting activities and do not address agreements that 
hospitals and CAHs must have with laboratories (either directly or 
through contracts) to address laboratory services and testing. Thus, 
this comment is outside the scope of this rule.
    Comment: We received many comments advocating for ongoing data 
submissions to be more frequent than once a week, including daily. 
Those that fully support the proposed rule agree with continued ongoing 
weekly reporting. However, we also received many comments that 
suggested that facilities provide a snapshot of data from one day per 
week, which would reduce administrative burden compared to daily data 
for all days reported once per week and/or cumulative weekly totals. 
Many comments discussed the tradeoff between data granularity and 
burden on hospitals to comply.
    Response: We appreciate the feedback that we received and the 
numerous suggestions of ways to revise reporting frequency. To clarify, 
weekly reporting would encapsulate daily data, but the facility would 
submit it once a week. While commenters had mixed response to weekly 
data reporting, the majority were in support of this frequency. 
Sustained data collection and reporting outside of emergencies would 
help ensure that hospitals and CAHs maintain a functional reporting 
capacity that could be mobilized quickly when a new threat emerges to 
inform and direct response efforts (for example, resource allocations 
or patient load balancing within and across facilities) that protect 
patients and their communities. It would also provide the baseline data 
necessary to forecast, detect, quantify and, ultimately, direct 
responses to signals of strain.
    Some commenters also indicated that weekly reporting should be 
limited to a one-day-a-week snapshot, rather than aggregate totals, as 
means of further reducing reporting burden. We agree that following 
this approach makes sense in cases where the resulting data are still 
sufficiently useful to justify reporting. Taking into consideration the 
need to limit overall reporting burden and the specific uses of data 
elements, we identified as many data elements as possible for which a 
``one-day-a-week'' snapshot would be acceptable. These included bed 
census and capacity data, as well as total confirmed existing 
infections of respiratory illnesses, including COVID-19, influenza, and 
RSV, among hospitalized patients.
    However, a one-day-a-week snapshot for newly admitted patients with 
confirmed infections of respiratory illnesses, including COVID-19, 
influenza, and RSV, would significantly degrade the utility of reported 
data for patient and public health and safety applications. 
Accordingly, we are finalizing our proposal to require reporting of a 
limited set of respiratory disease and hospital capacity data on a 
weekly basis. We are further clarifying that new admissions of patients 
with confirmed respiratory illnesses, including COVID-19, influenza, 
and RSV by age group, would be reported as weekly totals. However, the 
other data elements, such as staffed bed capacity and occupancy, 
prevalence of hospitalizations and ICU patients by respiratory 
illnesses, required under this provision would be reported as one-day-
a-week snapshots. We believe our approach of totals where most 
important/impactful, and snapshots where feasible, strikes an 
appropriate balance between value/burden, particularly since the 
overall impact of shifting to weekly totals and snapshots reporting 
already represents a significant reduction in burden relative to the 
proposed rule, which involved reporting daily totals on a weekly basis. 
These variables and reporting methodology will be part of the revised 
CDC information collection National Healthcare Safety Network (NHSN) 
Surveillance in Healthcare Facilities (OMB 0920-1317) or, as designated 
by the Secretary, other CDC systems and corresponding approved 
information collection packages. Changes may be made over time based on 
patient and population health needs and technology advances, but for FY 
2025, the information collection will include:
[GRAPHIC] [TIFF OMITTED] TR28AU24.315

    Comment: Many commenters submitted suggestions related to the 
solicitation of public comments on the collection of demographic 
information. Most commenters agree that there are benefits to 
collecting race and ethnicity data to better address disparities in 
public health response. However, commenters note that some patients may 
be less willing to share additional demographic information, such as 
their socioeconomic or disability status, therefore there is a tradeoff 
between honoring patient choices and having a complete data set. A 
commenter noted

[[Page 69889]]

that demographic factors such as socioeconomic or disability status are 
too burdensome and very subjective. Commenters also expressed concern 
about the consistency of the data set. Since there are not uniform 
requirements across States in terms of what questions are asked and how 
they are asked, the response options available, and how and when data 
is collected, comments stressed the importance of creating definitions 
and categories so that there is a standard classification for the 
entire nation. Some commenters had suggestions on appropriate timelines 
for future demographic reporting. For example, commenters suggested 
waiting to collect demographic data until finalization of the Office of 
Management and Budget Revised Statistical Policy Directive No. 15 (SPD-
15), updated March 28, 2024, which would govern how federal agencies 
collect and use race and ethnicity data in their programs.
    Some commenters weighed the pros and cons of aggregate versus 
patient-level data. For instance, age should be collected only in 
categories rather than each patient's exact age. A commenter noted the 
importance of protecting patient confidentiality in hospitals where 
there might be small numbers of a particular race or ethnicity. Lastly, 
some commenters highlighted how reporting on these additional data 
elements would increase burden. Specifically, many noted that all 
electronic health records are not prepared to collect and exchange data 
on disability and health related social needs in a standardized manner. 
While some larger facilities may already collect these data, smaller 
facilities that manually report data would have a large burden.
    Response: We thank commenters for the information and perspectives 
that they provided on expanding the collection and submission of 
demographic data. While we are not expanding the collection of 
demographic data at this time due to the need to further refine this 
concept and the need to begin data collection by November 1, 2024, we 
acknowledge that not collecting this data would represent a gap in 
epidemiological information. We believe that demographic data plays an 
important role in informing healthcare decisions that ultimately impact 
the health and safety of patients. We intend to continue exploring ways 
to facilitate the collection of additional demographic data and close 
this gap in the future.
    Final Rule Action: We are finalizing our proposal to require 
ongoing respiratory illness reporting in a modified form as proposed. 
Hospitals and CAHs, in a standardized format and frequency specified by 
the Secretary, must electronically report data related to COVID-19, 
influenza, and RSV including confirmed infections of respiratory 
illnesses among hospitalized patients, hospital bed census and capacity 
(both overall and by hospital setting and population group [adult or 
pediatric]), and limited patient demographic information, including 
age. Beginning November 1, 2024, hospitals and CAHs must electronically 
report this information to CDC's NHSN or other CDC-owned or CDC-
supported system, as determined by the Secretary.
b. Proposal To Collect Additional Elements During a PHE
    We proposed in the NPRM that during a declared federal, state, or 
local PHE for an acute infectious illness, or if an event was 
significantly likely to become a PHE for an acute infectious illness, 
the Secretary could require hospitals to report data up to a daily 
frequency without going through notice and comment rulemaking. 
Specifically, we proposed that the Secretary could require the 
reporting of additional or modified data elements relevant to an acute 
infectious illness PHE including but not limited to: confirmed 
infections of the infectious disease, facility structure and 
infrastructure operational status; hospital/ED diversion status; 
staffing and staffing shortages; supply inventory shortages (for 
example, equipment, blood products, gases); medical countermeasures and 
therapeutics; and additional, demographic factors.
    We invited comments on whether, during a PHE, there should be any 
limits to the data the Secretary could require without notice and 
comment rulemaking, such as limits on the duration of additional 
reporting or the scope of the jurisdiction of reporting (that is, state 
or local PHEs). We also sought comments on whether and how the 
Secretary should still seek stakeholder feedback on additional elements 
during a PHE without notice and comment rulemaking and how HHS should 
notify hospitals of new required acute infectious illness data. We also 
invited comments on the evidence HHS should provide to demonstrate: (1) 
that an event is ``significantly likely to become a PHE''; or (2) that 
the increased scope of required data would be used to protect patient 
and community health and safety. Finally, we invited comment on whether 
hospitals should be compensated for collecting and reporting these data 
if the burden reached a certain threshold of cost or time.
    Comment: We received mixed responses regarding our proposal for 
reporting respiratory illness data during a PHE. Some stakeholders 
noted that the value of reporting respiratory illness data during a PHE 
outweighed the administrative burden and suggested that there should be 
incentives for hospitals to provide even more data during a PHE. 
However, commenters also noted that increased reporting during a PHE 
would significantly burden hospitals during the most vulnerable and 
resource-constrained period. Some mentioned that data collection during 
PHE was especially burdensome without any payoff for hospital 
facilities since staff would have to spend substantial time trying to 
oversee data collection while juggling patients and implementing 
infection control protocols.
    In particular, hospital associations shared significant concern 
regarding the proposed flexibility provided to the Secretary to request 
increased reporting if there was a ``likely threat'' of a PHE, 
especially with the lack of notice and comment rulemaking to define 
what might rise to the level of a ``significantly likely threat''. 
Commenters questioned CMS's authority, noting there is no legal 
standard or precedent to support such a requirement and requested CMS 
provide additional justification. Many commenters urged CMS to withdraw 
the proposal to adopt increased reporting for events that are 
``significantly likely'' to become PHEs.
    Commenters encouraged CMS to work with stakeholders to determine 
the necessary level of required reporting during a PHE and emphasized 
that public health organizations should play a role in the decision-
making. Lastly, commenters emphasized that, on occasions when PHE 
reporting was required, the Secretary should be required to provide 
clear and detailed notification, such as the use of an automated 
system, noting that regional emergency coordinators could be an 
appropriate resource to disseminate information.
    Response: We understand the need for clarity when PHE-related 
reporting is required; we acknowledge the efforts that would be 
required of providers and the strain that the COVID-19 PHE placed on 
the health care system. The experiences with the COVID-19 PHE and the 
new ``normal'' that we currently face with circulating respiratory 
illnesses that include COVID-19 is why we believe it is imperative to 
retain respiratory illness data reporting and ensure that facilities 
are informed and

[[Page 69890]]

prepared in the event of another PHE. Routinely collected data from 
hospitals power forecasts that inform decision making during an 
emergency response.
    In the face of future illness emergencies, we anticipate 
stakeholders--including health care systems--will continue to need data 
on how respiratory illnesses are affecting and burdening the health 
care system. Better understanding anticipated impacts empower hospitals 
and CAHs, health systems, and jurisdictions to take steps that protect 
patient safety and health care system capacity in the face of surges in 
respiratory virus cases, including low-probability, high-impact events 
such as pandemics that pose catastrophic risks to patient safety and 
the health care system. These include facility-initiated actions, such 
as delaying elective procedures or activating contracts for additional 
surge staffing support, as well as jurisdiction or federal-level 
actions to mobilize supplies, staffing, or other forms of support. 
Collaborations during the COVID-19 pandemic demonstrated the value of 
bringing together analysts, public health officials, and health care 
practitioners and leaders to use advanced analytics to guide emergency 
response, and data from hospitals were central to some of these 
efforts. The federal government has made significant investments to 
consolidate these gains and develop response-ready analytic tools that 
work at scale to meet the needs of the health care and public health 
systems. As part of CDC's recent reorganization, the Inform and 
Disseminate Division within the Office of Public Health Data, 
Surveillance, and Technology uses human-centered design to develop 
systems and products that effectively communicate public health data. 
CDC's Center for Forecasting and Outbreak Analytics uses hospital data 
to generate, evaluate, and continually refine analytic products such as 
real-time estimates of transmission rates, short-term forecasts, and 
scenario models that evaluate the impact of vaccines and other 
interventions. The Center also provides financial and technical support 
to state and local public health agencies, the healthcare sector, and 
academic collaborators to develop analytic tools that support decision 
making to combat infectious disease threats.
    We acknowledge concerns about potential elasticity of proposed data 
categories, particularly those outlined for enhanced reporting during a 
PHE. In the event of a PHE, HHS will provide proper notification to 
hospitals and CAHs to activate increased PHE reporting and indicate the 
frequency and required additional elements that are necessary for 
reporting based on the specific circumstances at the time. We expect to 
use a communication mechanism, such a Quality Safety and Oversight 
Memo, that is readily available to the public, nationally accessible, 
and familiar to stakeholders, to ensure clarity and access to necessary 
information. Through the identified mechanism, the Secretary will 
provide clear, standardized definitions for any data to be reported, as 
well as instructions and the effective data for the PHE specific 
reporting. We also reiterate that the data elements proposed for PHE 
reporting will represent our best effort in identifying those 
categories that will be required for additional reporting. We note that 
these data elements, supply inventory shortages; staffing shortages; 
relevant medical countermeasures and therapeutic inventories, usage, or 
both; and facility structure and operating status, including hospital/
ED diversion status, have all previously been reported on by hospitals 
and we expect that hospitals will be aware and prepared in the event 
they are required to again report this information during a PHE.
    We recognize the concerns raised regarding the proposal to also 
require increased PHE reporting if a ``likely threat'' of a PHE exists. 
We also anticipate that the ongoing reporting requirements established 
in this rule will be sufficient to assure patient health and safety in 
times when the threat of a PHE is significantly likely. Therefore, in 
response to the concerns raised we are withdrawing the proposal that 
the Secretary may require increased reporting if the threat of a PHE is 
significantly likely. The Secretary may require increased reporting in 
the event of a future PHE declaration for a respiratory illness. We 
believe the benefits of data collection are necessary to protect 
patient safety and inform public health decisions and public policy and 
expect hospitals to consider the need to ramp up reporting during a 
future PHE. We encourage hospitals to utilize their required emergency 
preparedness plans and policies and procedures to promote readiness and 
actions that could reduce burden during a resource intense time (that 
is, during a PHE).
    Final rule Action: We are finalizing as proposed our proposal to 
require additional reporting during a declared federal, state, or local 
PHE for an acute infectious illness. We have withdrawn our proposal to 
require additional reporting if the Secretary determines that an event 
is ``significantly likely'' to become a PHE for an infectious disease. 
During a declared federal, state, or local PHE for an acute infectious 
illness the Secretary may require reporting of data elements relevant 
to confirmed infections of the acute infectious illness, facility 
structure and infrastructure operational status, hospital/ED diversion 
status, staffing and staffing shortages, supply inventory shortages 
(for example, equipment, blood products, gases), medical 
countermeasures and therapeutics, and additional demographic factors.
c. Request for Information on Health Care Reporting to the National 
Syndromic Surveillance Program
    In the proposed rule, we included a RFI on health care reporting to 
the CDC's National Syndromic Surveillance Program (NSSP), which is a 
collaboration among CDC, other federal agencies, local and state health 
departments, and academic and private sector partners who have formed a 
Community of Practice to collect, analyze, and share electronic patient 
encounter data received from emergency departments, urgent and 
ambulatory care centers, inpatient health care settings, and 
laboratories.
    We emphasized that Syndromic surveillance is not a part of any 
condition of participation under this program, however the continued 
growth of national syndromic surveillance would benefit hospitals, 
health care, and public health. The goal of the RFI was to gather 
feedback to better understand what else could be done to ensure that 
this effort could continue to make progress and that this critical data 
source is available at all levels of public health to support health 
care preparedness, public health readiness, and responsiveness to 
existing and emerging health threats. We sought input on the following:
     How could CMS further advance hospital and CAH 
participation in CDC's NSSP?
     Should CMS require hospitals and CAHs to report data to 
CDC's NSSP, whether as a condition of participation or as a 
modification to current requirements under the Promoting 
Interoperability Program?
     Should CMS explore other incentive or existing quality and 
reporting programs to collect this information?
     What would be the potential burden for facilities in 
creating these connections in state and local public health 
jurisdictions that have not yet established syndromic programs and/or 
where state and local public health are not presently exchanging data 
with CDC's NSSP? Are there unique

[[Page 69891]]

challenges in rural areas that CMS should take into consideration?
     Data reported as part of syndromic surveillance 
requirements could serve as an alternative source for the COVID-19, 
influenza, and RSV hospitalization reporting requirements proposed in 
this rule--and even support eventual evolution towards an all-hazards 
approach for monitoring inpatient hospitalizations for conditions of 
public health significance. Should CMS consider a future requirement or 
otherwise incentivize facilities to expand ADT-based reporting 
currently provided for emergency department visits to include data 
collected from inpatient settings as defined in the HHS COVID-19 
reporting guidance,\1091\ or a subset of these? If the latter, should a 
subset of inpatient locations be subject to such a requirement? What 
would be the potential value and burden trade-offs to facilities? And 
should any requirement specify that reporting also be to CDC's NSSP (in 
addition to more general reporting to state/local syndromic 
surveillance systems? (noting that often the reporting to CDC's NSSP 
happens through a given state/local system and that applicable law may 
apply).
---------------------------------------------------------------------------

    \1091\ https://www.hhs.gov/sites/default/files/covid-19-faqs-hospitals-hospital-laboratory-acute-care-facility-data-reporting.pdf.
---------------------------------------------------------------------------

     How could CMS leverage its authorities and programs to 
improve the quality of data reported to CDC's NSSP, especially for key 
elements that are sometimes incomplete, including discharge diagnoses, 
discharge disposition, and patient class? \1092\
---------------------------------------------------------------------------

    \1092\ https://www.cdc.gov/nssp/technical-pubs-and-standards.html#Dictionaries.
---------------------------------------------------------------------------

     In addition to its value for public health, how could 
CDC's NSSP serve as a tool to directly improve clinical practice, 
patient safety, and overall situational awareness? What types of 
questions would you like the system to help answer?
    Comment: We received varied responses to this comment solicitation. 
A commenter reminded us that NSSP is already a measure under the Public 
Health and Clinical Data Exchange objectives in the Promoting 
Interoperability Program, therefore introducing an unnecessary 
duplication in reporting by requiring hospitals to submit the same data 
to NSSP that is already being reported to State. Another commenter 
suggested that the CDC's NSSP could serve as, ``a valuable tool to 
directly improve clinical practice, patient safety, and overall 
situational awareness by leveraging aggregated data for early warning 
signals without necessitating extensive line-level data sharing.'' To 
further advance hospital and CAH participation in the NSSP a commenter 
recommended clearly defining reporting requirements specific to 
applicable care settings, such as emergency or inpatient settings. To 
address the potential burden for facilities in creating connections in 
state and local public health jurisdictions that have not yet 
established syndromic programs or where data exchange with CDC's NSSP 
is not currently happening, a commenter suggested (1) using 
standardized formats and vocabulary to accelerate adoption and simplify 
implementation and configuration efforts for both IT developers and 
healthcare providers (2) using a single submission point to submit a 
report, which could then be distributed to the appropriate 
jurisdictions in either identified or de-identified formats to improve 
efficiencies; and (3) Leveraging TEFCA to work under a single common 
agreement and trust framework.
    Response: We appreciate the comments that we received on this 
subject and will use them to further inform our understanding of 
advancing hospital and CAH participation in the NSSP. We appreciate 
that hospital and CAH attestation to participate in syndromic 
surveillance reporting is a required measure under the Promoting 
Interoperability Program's Public Health and Clinical Data Exchange 
Objective. However, as noted in the proposed rule, inclusion in that 
program, while a valuable incentive, has not been sufficient to close 
the current participation gap. As also noted in the proposed rule, CMS 
is not proposing a new CoP specific to ED reporting at this time. 
However, we disagree that any such measure, if introduced, would result 
is significant duplicative reporting, as states could submit data on 
hospitals' behalf to CDC as many already do voluntary. CDC is in the 
early stages of a project, through NSSP, to expand existing data flows 
collecting ED visits from admit, discharge and transfer (ADT) messaging 
to include inpatient hospitalizations and direct admits. This effort 
will capitalize on the fully automated nature of this data exchange to 
improve CDC and STLT understanding of hospitalizations across all 
hazards while minimizing the additional burden of collection required 
for these data. Key principles of this effort include (1) improving 
upon processes initiated early in the COVID-19 pandemic by facilitating 
improvements in automation; (2) promoting efficiency by re-using, where 
possible, existing infrastructure and processes such as ADT messaging 
systems within healthcare, NSSP, and jurisdictional ED data pipelines; 
(3) and building upon fully automated processes that are maintained for 
coordinating patient care, such that once configured, minimal 
additional resources are needed for long term sustainment of the data 
exchange with public health.

XI. MedPAC Recommendations and Publicly Available Files

A. MedPAC Recommendations

    Under section 1886(e)(4)(B) of the Act, the Secretary must consider 
MedPAC's recommendations regarding hospital inpatient payments. Under 
section 1886(e)(5) of the Act, the Secretary must publish in the annual 
proposed and final IPPS rules the Secretary's recommendations regarding 
MedPAC's recommendations. We have reviewed MedPAC's March 2024 ``Report 
to the Congress: Medicare Payment Policy'' and have given the 
recommendations in the report consideration in conjunction with the 
policies set forth in this final rule. MedPAC recommendations for the 
IPPS for FY 2025 are addressed in Appendix B to this final rule.
    For further information relating specifically to the MedPAC reports 
or to obtain a copy of the reports, contact MedPAC at (202) 653-7226, 
or visit MedPAC's website at https://www.medpac.gov.

B. Publicly Available Files

    IPPS-related data are available on the internet for public use. The 
data can be found on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index. We listed the 
data files available in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
36509 through 36510).
    Commenters interested in discussing any data files used in 
construction of this final rule should contact Michael Treitel at (410) 
786-4552.

XII. Collection of Information Requirements

A. Statutory Requirement for Solicitation of Comments

    Under the Paperwork Reduction Act (PRA) of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB,

[[Page 69892]]

section 3506(c)(2)(A) of the PRA of 1995 requires that we solicit 
comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In the proposed rule, we solicited public comment on each of these 
issues for the following sections of this document that contain 
information collection requirements (ICRs). The following ICRs are 
listed in the order of appearance within the preamble (see sections II. 
through X. of the preamble of this final rule).

B. Collection of Information Requirements

1. ICRs Regarding the Implementation of Section 4122 of the 
Consolidated Appropriations Act, 2023--Distribution of Additional 
Residency Positions
    As discussed in section V.F.2. of the preamble of this final rule, 
teaching hospitals would be able to submit electronic applications to 
CMS for resident slot increase requests under section 4122 of the 
Consolidated Appropriations Act (CAA), 2023. The burden associated with 
these requests will be captured under OMB control number 0938-1417 
(expiration date March 31, 2025), currently approved for CMS to receive 
electronic applications for Medicare-funded GME Residency Positions 
submitted in accordance with Section 126 of the CAA, 2021. For that 
information collection, we estimated each eligible hospital (1,325 
hospitals) would require 8 hours per eligible hospital annually to 
gather appropriate documentation, prepare and submit an application for 
a total burden of 10,600 hours (8 hours x 1,325 hospitals). The most 
recent data from the BLS reflects a mean salary for legal secretaries 
and administrative assistants of $26.05.\1093\ With the fringe benefits 
included the salary is $52.10 ($26.05 x 2). The total cost related to 
this information collection is approximately $416.80 per eligible 
hospital per year ($52.10 x 8.0 hours per hospital). The total 
estimated burden is $552,260 ($52.10 x 10,600 hours). As a result of 
the final policies, for FY 2026, if an eligible hospital submits an 
electronic application to CMS for section 126 of the CAA, 2021 or for 
section 4122 of the CAA, 2023, the total annual burden remains the 
same. However, if an eligible hospital submits an electronic 
application to CMS for both section 126 of the CAA, 2021, and section 
4122 of the CAA, 2023, we estimated that the new total annual burden to 
be 16 hours per eligible hospital. We estimated the adjustment in the 
number of hours from 8 hours to 16 hours, results in 21,200 hours (16 
hours x 1,325 hospitals) at a cost of $1,104,520 ($52.10 x 21,200 
hours) for FY 2026 only. We will submit the revised information 
collection request to OMB for approval under OMB control number 0938-
1417 (expiration date March 31, 2025).
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    \1093\ U.S. Bureau of Labor Statistics. Occupational Outlook 
Handbook, Legal Secretaries and Administrative Assistants. Accessed 
on February 6, 2024. Available at: https://www.bls.gov/oes/current/oes436012.htm.
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    We received no comments on this proposal and therefore are 
finalizing this provision without modification.
2. ICRs for Payment Adjustments for Establishing and Maintaining Access 
to Essential Medicines
    In section V.J. of the preamble of this final rule, we finalized, 
for cost reporting periods beginning on or after October 1, 2024, a 
separate payment under IPPS to small, independent hospitals for 
establishing and maintaining access to buffer stocks of essential 
medicines to foster a more reliable, resilient supply of these 
medicines for these hospitals. The payment adjustments will be based on 
the reasonable cost incurred by the hospital for establishing and 
maintaining access to a 6-month buffer stock of one or more essential 
medicines during the cost reporting period. In order to calculate the 
essential medicines payment adjustment for each eligible cost reporting 
period, we will create a new supplemental cost reporting form that will 
collect the additional information from hospitals.
    Specifically, the new cost reporting worksheet will collect the 
costs of a hospital that voluntarily requests separate payment under 
this policy for the costs associated with establishing and maintaining 
access to its buffer stock of one or more essential medicines. This new 
information will include the costs associated with contractual 
arrangements to establish and maintain access to buffer stock(s) of 
essential medicine(s) as well as the costs associated with directly 
establishing and maintaining buffer stock(s) of essential medicine(s) 
such as (but not limited to) utilities like cold chain storage and 
heating, ventilation, and air conditioning, warehouse space, 
refrigeration, management of stock including stock rotation, managing 
expiration dates, and managing recalls, administrative costs related to 
contracting and record-keeping, and dedicated staff for maintaining the 
buffer stock(s). This information will be used, along with other 
information already collected on the Hospitals and Health Care Complex 
Cost Report (Form CMS-2552-10) approved under OMB control number 0938-
0050, to calculate the IPPS payment adjustment amount. This new cost 
report worksheet may be submitted by a provider of service as part of 
the annual filing of the cost report and the provider should make 
available to its contractor and CMS, documentation to substantiate the 
data included on this Medicare cost report worksheet. The documentation 
requirements are based on the recordkeeping requirements at current 
Sec.  413.20, which require providers of services to maintain 
sufficient financial records and statistical data for proper 
determination of costs payable under Medicare.
    The burden associated with filling out this new essential medicine 
cost report worksheet would be the time and effort necessary for the 
provider to locate and obtain the relevant supporting documentation to 
report the costs of a hospital to establish and maintain access to its 
buffer stock for the cost reporting period. We estimated the number of 
respondents to be approximately 500. This number is comprised of 
Medicare certified section 1886(d) hospitals that are small, 
independent hospitals that would be eligible for the payment 
adjustment. We estimated the average burden hours per facility to be 
1.0 hour. This breaks down to approximately 0.4 hours per provider for 
recordkeeping, which includes a 0.10-hour burden associated with 
monitoring the quarterly communication from CMS regarding updates to 
the list of essential medicines that are considered to be in shortage 
for purposes of this policy, beginning when the hospital elects to 
establish a buffer stock of an essential medicine and when the hospital 
is not able to maintain a previously established 6 month buffer stock 
of an essential medicine. We estimated 0.6 hours per provider for 
obtaining and analyzing the data and reporting. We recognize this 
average varies depending on the provider size and complexity. In 
addition to general comment on this burden estimate, we specifically 
sought feedback on the burden estimate that is associated with 
monitoring the FDA shortage list as described. We stated that CMS would 
conduct provider education regarding

[[Page 69893]]

additions and deletions to the publicly available FDA Drug Shortages 
Database to assist hospitals with the finalized policy.
    We estimated the associated labor costs as follows. As explained 
earlier, the estimate of 0.4 hour is required for recordkeeping 
including time for bookkeeping activities. Based on the most recent 
data published by Bureau of Labor Statistics (BLS) in its 2022 
Occupation Employment and Wage Statistics Program, the mean hourly wage 
for Bookkeeping, Accounting, and Auditing Clerks (Category 43-3031) is 
$22.81. We added 100 percent of the mean hourly wage to account for 
fringe and overhead benefits, which calculates to $45.62 ($22.81 + 
$22.81) and multiplied it by 0.4 hour, to determine the annual 
recordkeeping costs per hospital to be $18.25 ($45.62 per hour 
multiplied by 0.4 hour). The estimated 0.6 hours for reporting include 
time for accounting and audit professionals' activities. The mean 
hourly wage for Accountants and Auditors (Category 13-2011) is $41.70. 
We added 100 percent of the mean hourly wage to account for fringe and 
overhead benefits, which calculates to $83.40 ($41.70 plus $41.70) and 
multiplied it by 0.6 hour, to determine the annual reporting costs per 
hospital to be $50.04 ($83.40 per hour multiplied by 0.6 hour). We 
calculated the total average annual cost per hospital of $68.29 by 
adding the recordkeeping costs (which includes monitoring the quarterly 
communication from CMS regarding updates to the list of essential 
medicines) of $18.25 plus the reporting costs of $50.04. We estimated 
the total annual cost to be $34,145 ($68.29 cost per hospital 
multiplied by 500 hospitals). We sought comment on our estimates and 
cost of recordkeeping and oversight.
    We did not receive any comments specific to our ICR for payment 
adjustments for establishing and maintaining access to essential 
medicines. We did, however, receive comments on the general 
administrative burden that eligible hospitals who voluntarily 
participate in this finalized policy are anticipated to experience. 
These comments are summarized in the V.J. pages of the preamble of this 
final rule.
3. ICRs Relating to the Hospital Readmissions Reduction Program
    We are not finalizing any changes to the Hospital Readmissions 
Reduction Program for FY 2025. All six of the current Hospital 
Readmissions Reduction Program's measures are claims-based measures. We 
believe that continuing to use these claims-based measures will not 
create or reduce any information collection burden for hospitals 
because they will continue to be collected using Medicare FFS claims 
that hospitals are already submitting to the Medicare program for 
payment purposes.
4. ICRs for the Hospital Value-Based Purchasing (VBP) Program
    In section IX.B.2. of the preamble of this final rule, we discuss 
our updates to the Hospital VBP Program. Specifically, we are adopting 
an updated version of the Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) Survey measure beginning with the FY 
2030 program year to align with the adoption of the updated measure in 
the Hospital IQR Program beginning with the CY 2025 reporting period/FY 
2027 payment determination. The updated HCAHPS Survey measure in the 
Hospital VBP Program adds three new survey dimensions, removes one 
existing survey dimension, and modifies one existing survey dimension. 
We are also modifying scoring of the HCAHPS Survey measure in the 
Hospital VBP Program for the FY 2027 to FY 2029 program years to only 
score on the six unchanged dimensions of the survey while the updates 
to the survey are adopted and publicly reported on in the Hospital IQR 
Program. In addition, we are modifying scoring on the HCAHPS Survey 
measure beginning with the FY 2030 program year to account for the 
updated measure.
    Data collections for the Hospital VBP Program are associated with 
the Hospital IQR Program under OMB control number 0938-1022 (expiration 
date January 31, 2026), the National Healthcare Safety Network under 
OMB control number 0920-0666 (expiration date December 31, 2026), and 
the HCAHPS Survey under OMB control number 0938-0981 (expiration date 
January 31, 2025). The Hospital VBP Program will use data that are also 
used to calculate quality measures in these programs and Medicare FFS 
claims data that hospitals are already submitting to CMS for payment 
purposes, therefore, the program does not estimate any additional 
change in burden associated with these finalized updates outside of the 
burden that is associated with collecting that data under the Hospital 
IQR Program. There is also no estimated change in burden related to the 
finalized scoring methodology modification because the policy does not 
require hospitals to submit any additional information specific to the 
Hospital VBP Program but instead will change how hospitals are scored 
based on the information already being submitted under the Hospital IQR 
Program.
    We discuss the burden associated with the adoption of the updated 
HCAHPS Survey measure under the Hospital IQR Program in section 
XII.B.6. of the preamble of this final rule. We note that respondents 
will only complete the HCAHPS Survey once for use in both programs, so 
there is no additional information collection burden for the Hospital 
VBP Program.
    We summarized comments on the information collection burden 
estimates associated with the adoption of the updates to the HCAHPS 
Survey measure in section IX.B.2. of this final rule.
5. ICRs Relating to the Hospital-Acquired Condition (HAC) Reduction 
Program
    OMB has currently approved 28,800 hours of burden and approximately 
$1.2 million under OMB control number 0938-1352 (expiration date 
November 30, 2025), accounting for information collection burden 
experienced by the 400 subsection (d) hospitals selected for validation 
each year in the HAC Reduction Program.
    As discussed in section V.M. of the preamble of this final rule 
above, we are not adding or removing any measures from the HAC 
Reduction Program.
6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program
a. Background
    Data collections for the Hospital IQR Program are associated with 
OMB control number 0938-1022. OMB has currently approved 2,286,977 
hours of burden at a cost of approximately $80.3 million under OMB 
control number 0938-1022 (expiration date January 31, 2026), accounting 
for information collection burden experienced by approximately 3,150 
IPPS hospitals and 1,350 non-IPPS hospitals for the FY 2026 payment 
determination. In this final rule, we describe the burden changes 
regarding collection of information, under OMB control number 0938-
1022, for IPPS hospitals.
    For more detailed information on what requirements we are changing 
for the Hospital IQR Program, we refer readers to sections IX.B.1., 
IX.B.2., and IX.C. of the preamble of this final rule. We are adopting 
seven new measures: (1) Age-Friendly Hospital measure beginning with 
the CY 2025 reporting period/FY 2027 payment determination; (2) Patient 
Safety Structural measure beginning with the CY 2025 reporting period/
FY 2027 payment determination, with modifications; (3) Catheter-

[[Page 69894]]

Associated Urinary Tract Infection (CAUTI) Standardized Infection Ratio 
Stratified for Oncology Locations measure beginning with the CY 2026 
reporting period/FY 2028 payment determination; (4) Central Line-
Associated Bloodstream Infection (CLABSI) Standardized Infection Ratio 
Stratified for Oncology Locations measure beginning with the CY 2026 
reporting period/FY 2028 payment determination; (5) Hospital Harm--
Falls with Injury electronic clinical quality measure (eCQM) beginning 
with the CY 2026 reporting period/FY 2028 payment determination; (6) 
Hospital Harm--Postoperative Respiratory Failure eCQM beginning with 
the CY 2026 reporting period/FY 2028 payment determination; and (7) 
Thirty-day Risk-Standardized Death Rate among Surgical Inpatients with 
Complications (Failure-to-Rescue) measure beginning with the July 1, 
2023--June 30, 2025 reporting period/FY 2027 payment determination. We 
are refining two measures: (1) the Global Malnutrition Composite Score 
eCQM, beginning with the CY 2026 reporting period/FY 2028 payment 
determination; and (2) the Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) Survey measure beginning with the CY 
2025 reporting period/FY 2027 payment determination. We are also 
removing five measures: (1) Death Rate Among Surgical Inpatients with 
Serious Treatable Complications (CMS PSI-04) measure beginning with the 
July 1, 2023--June 30, 2025 reporting period/FY 2027 payment 
determination; (2) Hospital-level, Risk-Standardized Payment Associated 
with a 30-Day Episode-of-Care for Acute Myocardial Infarction (AMI) 
measure beginning with the July 1, 2021--June 30, 2024 reporting 
period/FY 2026 payment determination; (3) Hospital-level, Risk-
Standardized Payment Associated with a 30-Day Episode-of-Care for Heart 
Failure (HF) measure beginning with the July 1, 2021--June 30, 2024 
reporting period/FY 2026 payment determination; (4) Hospital-level, 
Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for 
Pneumonia (PN) measure beginning with the July 1, 2021--June 30, 2024 
reporting period/FY 2026 payment determination; and (5) Hospital-level, 
Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) measure beginning with the April 1, 2021--March 31, 
2024 reporting period/FY 2026 payment determination. We are finalizing 
a modified version of our proposal to increase the total number of 
eCQMs that must be reported each year. We are increasing the total 
number of eCQMs reported from six to eight for the CY 2026 reporting 
period/FY 2028 payment determination, from eight to nine for the CY 
2027 reporting period/FY 2029 payment determination, and then from nine 
to eleven beginning with the CY 2028 reporting period/FY 2030 payment 
determination. Lastly, we are updating data validation policies, 
including updating the scoring methodology for eCQM validation, 
removing the requirement that hospitals must submit 100 percent of eCQM 
records to pass validation beginning with CY 2025 eCQM data affecting 
the FY 2028 payment determination, and no longer requiring hospitals to 
resubmit medical records as part of their request for reconsideration 
of validation beginning with CY 2025 discharges affecting the FY 2028 
payment determination.
    In the FY 2024 IPPS/LTCH 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 Hospital IQR Program (88 FR 59312). Using the most recent May 
2022 National Occupational Employment and Wage Estimates data from the 
BLS reflects a mean hourly wage of $24.56 per hour for all medical 
records specialists (SOC 29-2072), however, we are using the mean 
hourly wage for medical records specialists for the industry, ``general 
medical and surgical hospitals,'' which is $26.06.\1094\ We believe the 
industry of ``general medical and surgical hospitals'' is more specific 
to our settings for use in our calculations than other industries that 
fall under medical records specialists, such as ``office of 
physicians'' or ``nursing care facilities.'' We calculated the cost of 
overhead, 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 overhead 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 hospitals using a wage plus 
benefits estimate of $52.12 per hour throughout the discussion in this 
section of this final rule for the Hospital IQR Program.
---------------------------------------------------------------------------

    \1094\ U.S. Bureau of Labor Statistics. Occupational Outlook 
Handbook, Medical Records Specialists. Accessed January 3, 2024. 
Available at: https://www.bls.gov/oes/current/oes292072.htm.
---------------------------------------------------------------------------

    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59312), our burden 
estimates were based on an assumption of approximately 3,150 IPPS 
hospitals. For this final rule, based on data from the FY 2024 Hospital 
IQR Program payment determination, we are updating our assumption and 
estimate that approximately 3,050 IPPS hospitals will report data to 
the Hospital IQR Program for the CY 2025 reporting period and 
subsequent years, unless otherwise noted.
b. Information Collection Burden Estimate for the Adoption of the Age 
Friendly Hospital Measure Beginning With the CY 2025 Reporting Period/
FY 2027 Payment Determination
    In section IX.C.5.a. of the preamble of this final rule, we discuss 
adoption of the Age Friendly Hospital measure beginning with the CY 
2025 reporting period/FY 2027 payment determination. Hospitals will 
submit responses on an annual basis during the submission period 
through CMS' Hospital Quality Reporting (HQR) System. Specifically, for 
the Age Friendly Hospital measure, hospitals will be required to attest 
``yes'' or ``no'' in response to questions across five domains annually 
for a given reporting period. Similar to the Hospital Commitment to 
Health Equity measure currently approved under OMB control number 0938-
1022, which also requires a ``yes'' or ``no'' attestation to questions 
across five domains, we estimate the information collection burden 
associated with this measure to be, on average across all 3,050 IPPS 
hospitals, no more than 10 minutes per hospital per year (87 FR 49385). 
Using the estimate of 10 minutes (or 0.167 hour) per hospital per year, 
we estimate that adoption of this measure will result in a total annual 
burden increase of 509 hours across all participating IPPS hospitals 
(0.167 hour x 3,050 IPPS hospitals) at a cost of $26,529 (509 hours x 
$52.12).
    We received no comments on our burden estimates.
c. Information Collection Burden Estimate for Adoption of the Patient 
Safety Structural Measure Beginning With the CY 2025 Reporting Period/
FY 2027 Payment Determination
    In section IX.B.1. of the preamble of this final rule, we are 
finalizing with modification the Patient Safety Structural measure 
beginning with the CY 2025 reporting period/FY 2027 payment 
determination. Hospitals will submit responses on an annual basis

[[Page 69895]]

during the submission period through the Centers for Disease Control 
and Prevention's (CDC) National Healthcare Safety Network (NHSN), which 
is a secure, internet-based surveillance system maintained and managed 
by the CDC that is provided free of charge to providers. To report to 
the NHSN, hospitals must first agree to the NHSN Agreement to 
Participate and Consent form, which specifies how NHSN data will be 
used, including fulfilling CMS's quality measurement reporting 
requirements for NHSN data.\1095\ Specifically, hospitals will be 
required to provide responses and attest ``yes'' or ``no'' in response 
to a total of five domains for a given reporting period.
---------------------------------------------------------------------------

    \1095\ CDC. (2023). FAQs About NHSN Agreement to Participate and 
Consent. Available at: https://www.cdc.gov/nhsn/about-nhsn/faq-agreement-to-participate.html.
---------------------------------------------------------------------------

    We note that burden estimates under OMB control number 0920-0666 
(expiration date December 31, 2026) are calculated based on the CDC's 
Organization Identification Numbers (OrgIDs). The CDC's OrgID reflects 
physical locations, meaning that multiple OrgIDs may appear under a 
single IPPS-related CMS Certification Number, which results in a higher 
number of potential respondents for burden calculations. Accounting for 
relevant physical locations, we estimate that 3,900 OrgID locations 
will submit data to the NHSN for this measure. Similar to the Hospital 
Commitment to Health Equity measure currently approved under OMB 
control number 0938-1022, which also requires a ``yes'' or ``no'' 
response to each of five domains, we estimate the information 
collection burden associated with this measure to be, on average across 
all 3,900 OrgID locations, no more than 10 minutes per hospital per 
year. We are modifying the attestation statement in Domain 4 Statement 
B of the measure to remove the portion of the attestation related to 
voluntary reporting to the NPSD and focus instead on the beneficial 
activities possible through engagement with a PSO. Because this does 
not affect the number of responses each hospital must provide, we are 
not making a change to our burden assumptions. Using the estimate of 10 
minutes (or 0.167 hour) per OrgID location per year, and the updated 
wage estimate as described previously, we estimate that the adoption of 
this measure will result in a total annual burden increase of 650 hours 
across all participating OrgID locations (0.167 hour x 3,900 OrgID 
locations) at a cost of $33,878 (650 hours x $52.12).,
    We received no comments on our burden estimates.
    We discuss the burden associated with the adoption of the Patient 
Safety Structural measure for the PCHQR Program in section XII.B.7.a. 
of this final rule. We will work with the CDC to submit the revised 
information collection estimates for NHSN data collection to OMB for 
approval under OMB control number 0920-0666. Therefore, we do not 
anticipate any changes in burden associated with OMB control number 
0938-1022.
d. Information Collection Burden Estimate for Adoption of Two 
Healthcare-Associated Infection (HAI) Measures Beginning With the CY 
2026 Reporting Period/FY 2028 Payment Determination
    In section IX.C.5.b. of the preamble of this final rule, we discuss 
the adoption of two HAI measures beginning with the CY 2026 reporting 
period/FY 2028 payment determination: (1) the CAUTI Standardized 
Infection Ratio Stratified for Oncology Locations measure, and (2) the 
CLABSI Standardized Infection Ratio Stratified for Oncology Locations 
measure. We will collect data for both measures via the CDC's NHSN. 
Hospitals will provide data for both measures from their EHRs and 
report on a quarterly basis. The burden associated with submission of 
data via the NHSN continues to be accounted for under OMB control 
number 0920-0666. Therefore, we do not anticipate any changes in burden 
associated with OMB control number 0938-1022.
    We received no comments on our assumptions regarding burden.
e. Information Collection Burden for Adoption of Two eCQMs and 
Modification of One eCQM Beginning With the CY 2026 Reporting Period/FY 
2028 Payment Determination
    In sections IX.C.5.c. and IX.C.5.d of the preamble of this final 
rule, we are adopting two new eCQMs beginning with the CY 2026 
reporting period/FY 2028 payment determination: (1) the Hospital Harm--
Falls With Injury eCQM, and the (2) Hospital Harm--Postoperative 
Respiratory Failure eCQM, to add to the set of eCQMs from which 
hospitals may self-select to meet their eCQM reporting requirements. In 
section IX.C.7.a. of the preamble of this final rule, we discuss the 
modification of the Global Malnutrition Composite Score eCQM to add 
patients ages 18 to 64 to the current cohort of patients 65 years or 
older beginning with the CY 2026 reporting period/FY 2028 payment 
determination.
    Under OMB control number 0938-1022, the currently approved burden 
estimate for reporting six eCQMs is 4 hours per IPPS hospital (0.167 
hours/eCQM x 4 quarters x 6 eCQMs) for all six required eCQM measures. 
The addition of these two new Hospital Harm eCQMs and modification of 
the Global Malnutrition Composite Score eCQM will not affect the 
information collection burden associated with submitting eCQM data 
under the currently established Hospital IQR Program, which is that 
hospitals are not required to report more than a total of six eCQMs (87 
FR 49299 through 49302). However, in the immediately following section 
of this Collection of Information section, we discuss the burden 
associated with increasing the total number of eCQMs that will be 
required to be reported.
    We received no comments on our assumptions regarding burden.
f. Information Collection Burden for the Modification of the eCQM 
Reporting Requirements Beginning With the CY 2026 Reporting Period/FY 
2028 Payment Determination
    In section IX.C.9.c. of the preamble of this final rule, we are 
finalizing with modification the eCQM reporting requirements whereby we 
will increase the total number of eCQMs to be reported from six to 
eight eCQMs for the CY 2026 reporting period/FY 2028 payment 
determination, from eight to nine eCQMs for the CY 2027 reporting 
period/FY 2029 payment determination, and then from nine to eleven 
eCQMs beginning with the CY 2028 reporting period/FY 2030 payment 
determination.
    We previously finalized in the FY 2023 IPPS/LTCH PPS final rule 
that, for the CY 2024 reporting period/FY 2026 payment determination 
and subsequent years, hospitals are required to submit data for six 
eCQMs each year which must include the Safe Use of Opioids-Concurrent 
Prescribing, Cesarean Birth, and Severe Obstetric Complications eCQMs 
in addition to three self-selected eCQMs (87 FR 49387). In this final 
rule, we are finalizing our proposal with modification, such that for 
the CY 2026 reporting period/FY 2028 payment determination, hospitals 
will be required to submit data for eight total eCQMs: three self-
selected eCQMs, and the Safe Use of Opioids, Severe Obstetric 
Complications, Cesarean Birth, Hospital Harm--Severe Hypoglycemia, and 
Hospital Harm--Severe Hyperglycemia eCQMs. We are also finalizing the 
proposal with modification, such that for the CY 2027 reporting period/
FY 2029 payment determination, hospitals will be

[[Page 69896]]

required to submit data for these eight eCQMs in addition to the 
Hospital Harm--Opioid-Related Adverse Events eCQM. Lastly, we are also 
finalizing this proposal with modification, such that beginning with 
the CY 2028 reporting period/FY 2030 payment determination, hospitals 
will be required to submit data for these nine eCQMs in addition to the 
Hospital Harm--Pressure Injury and Hospital Harm--Acute Kidney Injury 
eCQMs.
    We continue to estimate the information collection burden 
associated with the eCQM reporting requirements to be 10 minutes per 
measure per quarter. For the increase in reporting from six to eight 
eCQMs for the CY 2026 reporting period/FY 2028 payment determination, 
we estimate a total of 20 minutes, or 0.33 hours (10 minutes x 2 
eCQMs), per hospital per quarter. We estimate a total burden increase 
of 4,067 hours (0.33 hour x 3,050 IPPS hospitals x 4 quarters) at a 
cost of $211,972 (4,067 hours x $52.12). For the additional increase in 
reporting from eight to nine eCQMs beginning with the CY 2027 reporting 
period/FY 2029 payment determination, we estimate a total of 30 
minutes, or 0.5 hours (10 minutes x 3 eCQMs), per hospital per quarter, 
accounting for both the increase of two eCQMs for the CY 2026 reporting 
period/FY 2028 payment determination and the increase of one eCQM for 
the CY 2027 reporting period/FY 2029 payment determination. We estimate 
a total burden increase of 6,100 hours annually (0.5 hour x 3,050 IPPS 
hospitals x 4 quarters) at a cost of $317,932 (6,100 hours x $52.12) 
compared to the currently approved burden estimate. Lastly, for the 
additional increase in reporting from nine to eleven eCQMs beginning 
with the CY 2028 reporting period/FY 2030 payment determination, we 
estimate a total of 50 minutes, or 0.83 hours (10 minutes x 5 eCQMs), 
per hospital per quarter, accounting for both the increase of two eCQMs 
for the CY 2026 reporting period/FY 2028 payment determination, the 
increase of one eCQM for the CY 2027 reporting period/FY 2029 payment 
determination, and the increase of two eCQMs for the CY 2028 reporting 
period/FY 2030 payment determination. We estimate a total burden 
increase of 10,126 hours annually (0.83 hour x 3,050 IPPS hospitals x 4 
quarters) at a cost of $527,767 (10,126 hours x $52.12) compared to the 
currently approved burden estimate.
    We received no comments on our burden estimates.
g. Information Collection Burden for the Adoption of the Thirty-Day 
Risk-Standardized Death Rate Among Surgical Inpatients With 
Complications (Failure-to-Rescue) Measure Beginning With the July 1, 
2023-June 30, 2025 Reporting Period/FY 2027 Payment Determination
    In section IX.C.5.e. of the preamble of this final rule, we are 
adopting the Thirty-day Risk-standardized Death Rate among Surgical 
Inpatients with Complications (Failure-to-Rescue) measure beginning 
with the July 1, 2023-June 30, 2025 reporting period/FY 2027 payment 
determination. Because this measure is calculated using Medicare 
Advantage data and Medicare FFS claims that are already reported to the 
Medicare program for payment purposes, adopting this measure will not 
result in a change in burden associated with OMB control number 0938-
1022.
    We received no comments on our assumptions regarding burden.
h. Information Collection Burden for the Removal of Five Claims-Based 
Measures
    In section IX.C.6.b. of the preamble of this final rule, we are 
removing four claims-based payment measures beginning with the FY 2026 
payment determination: (1) Hospital-level, Risk-Standardized Payment 
Associated with a 30-Day Episode-of-Care for AMI measure; (2) Hospital-
level, Risk-Standardized Payment Associated with a 30-Day Episode-of-
Care for HF measure; (3) Hospital-level, Risk-Standardized Payment 
Associated with a 30-Day Episode-of-Care for Pneumonia measure; and (4) 
Hospital-level, Risk-Standardized Payment Associated with a 30-Day 
Episode-of-Care for Elective Primary THA and/or TKA measure. In section 
IX.C.6.a., we are also removing the Death Rate Among Surgical 
Inpatients with Serious Treatable Complications (CMS PSI-04) claims-
based measure beginning with the FY 2027 payment determination.
    Because these measures are calculated using Medicare FFS claims 
that are already reported to the Medicare program for payment purposes, 
removing these measures will not result in a change in burden 
associated with OMB control number 0938-1022.
    We received no comments on our assumptions regarding burden.
i. Information Collection Burden for the Modification of the HCAHPS 
Survey Measure Beginning With the CY 2025 Reporting Period/FY 2027 
Payment Determination
    In section IX.B.2.e. of the preamble of this final rule, we are 
modifying the HCAHPS Survey measure beginning with the CY 2025 
reporting period/FY 2027 payment determination. Specifically, the 
updated measure includes adding three new sub-measures, removing one 
existing sub-measure, and revising one existing sub-measure. The new 
sub-measures will include: ``Care Coordination,'' ``Restfulness of 
Hospital Environment,'' and ``Information about Symptoms.''
    Under OMB control number 0938-0981 (expiration date January 31, 
2025), we estimate the time to complete the HCAHPS Survey is 
approximately 7.25 minutes per respondent and approximately 2,309,985 
respondents will complete and submit the HCAHPS Survey as part of the 
Hospital IQR Program. As stated in section IX.B.2.b. of this final 
rule, we estimate the combination of survey sub-measure removals and 
additions will result in an additional 0.75 minute (0.0125 hour) per 
respondent to complete the updated version of the HCAHPS Survey. 
Therefore, we estimate the updated time to complete the HCAHPS Survey 
will be 8 minutes per respondent (0.133 hour).
    We believe that the cost for patients undertaking administrative 
and other tasks on their own time is a post-tax wage of $24.04/hr. 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.\1096\ To derive the costs for patients, a measurement 
of the usual weekly earnings of wage and salary workers from BLS's 
Labor Force Statistics program, Current Population Survey (CPS) of 
$1,118 was divided by 40 hours to calculate an hourly pre-tax wage rate 
of $27.95/hr.\1097\ 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,\1098\ resulting in 
the post-tax hourly wage rate of $24.04/hr. Unlike our state and 
private sector wage adjustments, we are not adjusting patients' wages 
for fringe benefits and other indirect costs since the individuals' 
activities, if any, will occur outside the scope of their employment. 
We therefore estimate a burden increase of 28,875 hours (2,309,985 
respondents

[[Page 69897]]

x 0.0125 hour) at a cost of $694,155 (28,875 hours x $24.04).
---------------------------------------------------------------------------

    \1096\ https://aspe.hhs.gov/reports/valuing-time-us-department-health-human-services-regulatory-impact-analyses-conceptual-framework.
    \1097\ https://www.bls.gov/news.release/pdf/wkyeng.pdf. Accessed 
January 1, 2024.
    \1098\ https://www.census.gov/library/stories/2023/09/median-household-income.html. Accessed January 2, 2024.
---------------------------------------------------------------------------

    We will submit the revised information collection estimates to OMB 
for approval under OMB control number 0938-0981.
    We summarized comments on the information collection burden 
associated with the adoption of the updates to the HCAHPS Survey 
measure in section IX.B.2. of this final rule.
j. Information Collection Burden for Changes to Data Validation 
Policies
    In section IX.C.10. of the preamble of this final rule, we are 
updating the scoring methodology for eCQM validation, replacing the 
existing combined validation score for eCQMs and chart-abstracted 
measures with two separate validation scores for chart-abstracted 
measures and eCQMs, beginning with the FY 2028 payment determination, 
and removing the requirement that hospitals must submit 100 percent of 
eCQM records to pass validation beginning with CY 2025 eCQM data 
affecting the FY 2028 payment determination. We are also finalizing in 
section IX.C.13 of this final rule to no longer require hospitals to 
resubmit medical records as part of their request for reconsideration 
of validation, beginning with CY 2025 discharges affecting the FY 2028 
payment determination.
    Changes to the scoring methodology and validation score will not 
affect burden as neither the amount of data nor frequency of data 
submission is impacted. The removal of the requirement that hospitals 
must submit 100 percent of eCQM records to pass validation will not 
affect burden, as the implementation of eCQM validation scoring will 
still require hospitals to submit the same number of requested medical 
records to validate the accuracy of eCQM data (the extent to which data 
abstracted from the submitted medical record matches the data submitted 
in the QRDA I file). Lastly, as finalized in the FY 2011 IPPS/LTCH PPS 
final rule regarding information collection burden associated with the 
Hospital IQR Program's request for reconsideration process, information 
collection requirements imposed subsequent to an administrative action 
are not subject to the Paperwork Reduction Act (PRA) under 5 CFR 
1320.4(a)(2), therefore to no longer require hospitals to resubmit 
medical records as part of their request for reconsideration of 
validation will not affect burden (75 FR 50411).
    We received no comments on our assumptions regarding burden.
k. Summary of Information Collection Burden Estimates for the Hospital 
IQR Program
    In summary, under OMB control number 0938-1022, we estimate that 
the policies in this final rule will result in a total increase of 
10,635 hours at a cost of $554,296 annually for 3,050 IPPS hospitals 
from the CY 2025 reporting period/FY 2027 payment determination through 
the CY 2028 reporting period/FY 2030 payment determination. Under OMB 
control number 0920-0666, we estimate that the policies in this final 
rule will result in a total increase of 650 hours at a cost of $33,878 
annually for 3,900 hospitals beginning with the CY 2025 reporting 
period/FY 2027 payment determination. Under OMB control number 0938-
0981, we estimate that the policies in this final rule will result in a 
total increase of 28,875 hours at a cost of $694,155 annually for 
patients responding to the HCAHPS Survey beginning with the CY 2025 
reporting period/FY 2027 payment determination. The total increase in 
burden associated with the finalized information collections under OMB 
control numbers 0938-1022, 0920-0666, and 0938-0981 is approximately 
40,160 hours (10,635 + 650 + 28,875) at a cost of $1,282,329 ($554,296 
+ $33,878 + $694,155). We will submit the revised information 
collection estimates to OMB for approval under OMB control numbers 
0938-1022, 0920-0666, and 0938-0981.
    With respect to any costs/burdens unrelated to data submission, we 
refer readers to the Regulatory Impact Analysis (section I.K. of 
Appendix A of this final rule).
    Comment: A commenter stated that in general, the burden estimates 
for the program do not accurately reflect the total reporting process, 
with specific mention of information reporting to state and local 
health departments.
    Response: We thank the commenter for its feedback on the burden 
associated with reporting quality measures. We understand that some 
hospitals may experience burden greater than our estimates, however, 
our estimates appropriately reflect the average across all IPPS and 
non-IPPS hospitals. CMS continues to make efforts to balance the burden 
of quality measure reporting with the value provided to both 
participating hospitals and the public by the measures included in the 
Hospital IQR Program measure set. We also note that the burden 
estimates in this final rule only reflect the time required to collect 
and submit required data to federal agencies under the Hospital IQR 
Program and not to state and local health departments due to any 
requirements external to the Hospital IQR Program.
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7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program
    OMB has currently approved 109 hours of burden at a cost of $2,452 
under OMB control number 0938-1175 (expiration date January 31, 2027), 
accounting for the annual information collection requirements for 11 
PCHs for the PCHQR Program. In this final rule, we are adopting the 
Patient Safety Structural measure with modification to one domain 
beginning with the CY 2025 reporting period/FY 2027 program year. This 
new measure will affect the information collection burden. In addition, 
we are modifying the HCAHPS Survey beginning with the CY 2025 reporting 
period/FY 2027 program year, which is currently approved under OMB 
control number 0938-0981 (expiration date January 31, 2025). We are 
also moving up the start date for public display of the Hospital 
Commitment to Health Equity (HCHE) measure. This policy will not affect 
the information collection burden associated with the PCHQR Program.
    In the FY 2024 IPPS/LTCH 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 PCHQR Program (88 FR 59317). 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.\1099\ We believe the industry of ``general medical 
and surgical hospitals'' is more specific to our settings for use in 
our calculations than other industries that fall under medical records 
specialists, such as ``office of physicians'' or ``nursing care 
facilities.'' We calculated the cost of overhead, including fringe 
benefits, at 100 percent of the mean hourly wage, consistent with 
previous years. This is necessarily a rough adjustment, both because 
fringe benefits and overhead 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 hospitals using a wage plus benefits estimate of $52.12 per 
hour throughout the discussion in this section of this rule for the 
PCHQR Program.
---------------------------------------------------------------------------

    \1099\ U.S. Bureau of Labor Statistics. Occupational Outlook 
Handbook, Medical Records Specialists. Accessed on January 2, 2024. 
Available at: https://www.bls.gov/oes/current/oes292072.htm.
---------------------------------------------------------------------------

a. Information Collection Burden Estimate for the Adoption of the 
Patient Safety Structural Measure Beginning With the CY 2025 Reporting 
Period/FY 2027 Program Year
    In section IX.B.1. of the preamble of this final rule, we are 
adopting with modification the Patient Safety Structural measure 
beginning with the CY 2025 reporting period/FY 2027 program year. PCHs 
will submit responses on an annual basis during the submission period 
through the Center for Disease Control and Prevention's (CDC) National 
Healthcare Safety Network (NHSN). Specifically, PCHs will be required 
to provide responses and attest ``yes'' or ``no'' in response to a 
total of five domains for a given reporting period. Similar to the 
Hospital Commitment to Health Equity measure currently approved under 
OMB control number 0938-1022 (expiration date

[[Page 69900]]

January 31, 2026), which also requires a ``yes'' or ``no'' response to 
each of five domains, we estimate the information collection burden 
associated with this measure to be, on average across all 11 PCHs, no 
more than 10 minutes per PCH per year. We are modifying the attestation 
statement in Domain 4 Statement B of the measure to remove the portion 
of the attestation related to voluntary reporting to the NPSD and focus 
instead on the beneficial activities possible through engagement with a 
PSO. Because this does not affect the number of responses each hospital 
must provide, we are not making a change to our burden assumptions. 
Using the estimate of 10 minutes (or 0.167 hours) per PCH per year, and 
the updated wage estimate as described previously, we estimate that the 
adoption of this measure will result in a total annual burden increase 
of 2 hours across all participating PCHs (0.167 hours x 11 PCHs) at a 
cost of $104 (2 hours x $52.12).
    We discussed the burden associated with the adoption of the Patient 
Safety Structural measure for the Hospital IQR Program in section 
XII.B.6.c. of this final rule. We will work with CDC to submit the 
revised information collection estimates for NHSN data collection to 
OMB for approval under OMB control number 0920-0666.
    We received no comments on this proposal and therefore are 
finalizing our burden estimates without modification.
b. Information Collection Burden for the Modification of the HCAHPS 
Survey Beginning With the CY 2025 Reporting Period/FY 2027 Program Year
    In section IX.B.2.e of the preamble of this final rule, we are 
modifying the HCAHPS Survey measure beginning with the CY 2025 
reporting period/FY 2027 program year. Specifically, we are refining 
the current HCAHPS Survey by adding three new sub-measures, removing 
one existing sub-measure, and revising one existing sub-measure. The 
new sub-measures will include: ``Care Coordination,'' ``Restfulness of 
Hospital Environment,'' and ``Information about Symptoms.''
    Under OMB control number 0938-0981 (expiration date January 31, 
2025), we estimated the time to complete the HCAHPS Survey is 
approximately 7.25 minutes per respondent and approximately 13,105 
respondents will complete and submit the HCAHPS Survey as part of the 
PCHQR Program. As stated in section IX.B.2.b of this final rule, we 
estimated the combination of sub-measure removals and additions will 
result in an additional 0.75 minutes (0.0125 hours) per respondent to 
complete the HCAHPS Survey. Therefore, we estimated the updated time to 
complete the HCAHPS Survey will be 8 minutes per respondent (0.133 
hours).
    We believe that the cost for beneficiaries undertaking 
administrative and other tasks on their own time is a post-tax wage of 
$24.04/hr. 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.\1100\ To derive the costs for 
beneficiaries, a measurement of the usual weekly earnings of wage and 
salary workers of $1,118 was divided by 40 hours to calculate an hourly 
pre-tax wage rate of $27.95/hr.\1101\ 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,\1102\ 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, will occur outside the 
scope of their employment. We therefore estimate a burden increase of 
164 hours (13,105 respondents x 0.0125 hours) at a cost of $3,943 (164 
hours x $24.04).
---------------------------------------------------------------------------

    \1100\ https://aspe.hhs.gov/reports/valuing-time-us-department-health-human-services-regulatory-impact-analyses-conceptual-framework.
    \1101\ https://www.bls.gov/news.release/pdf/wkyeng.pdf. Accessed 
January 1, 2024.
    \1102\ https://www.census.gov/library/stories/2023/09/median-household-income.html. Accessed January 2, 2024.
---------------------------------------------------------------------------

    We will submit the revised information collection request to OMB 
for approval under OMB control number 0938-0981.
    We summarized comments on the proposed information collection 
burden associated with the adoption of the updates to the HCAHPS Survey 
measure in Section IX.B.2. of this final rule. We are finalizing our 
burden estimates without modification.
c. Information Collection Burden Estimate for the Policy To Move Up the 
Start Date of Public Display of the Hospital Commitment to Health 
Equity Measure
    In section IX.D.5. of the preamble of this final rule, we are 
moving up the start date of PCH performance on the Hospital Commitment 
to Health Equity measure. Because we are not requiring PCHs to collect 
or submit any additional data, we do not estimate any change in 
information collection burden associated with this policy.
    We received no comments on this proposal and are therefore 
finalizing our assumptions regarding burden without modification.
d. Summary of Information Collection Burden Estimates for the PCHQR 
Program
    In summary, under OMB control number 0920-0666 (expiration date 
December 31, 2026), we estimate that the policies being finalized will 
result in a total increase of 2 hours at a cost of $104 annually for 11 
PCHs beginning with the CY 2025 reporting period/FY 2027 program year. 
Under OMB control number 0938-0981 (expiration date January 31, 2025), 
we estimated that the policies being finalized will result in a total 
increase of 164 hours at a cost of $3,943 annually for 11 PCHs 
beginning with the CY 2025 reporting period/FY 2027 program year. The 
total increase in burden associated with this information collection 
will be approximately 166 hours at a cost of $4,047. We will submit the 
revised information collection request to OMB for approval under OMB 
control numbers 0920-0666 and 0938-0981.
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BILLING CODE 4120-01-C
8. ICRs for the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP)
    An LTCH that does not meet the requirements of the LTCH QRP for a 
fiscal year will receive a 2-percentage point reduction to its 
otherwise applicable annual update for that fiscal year.
    We believe that the burden associated with the LTCH QRP is the time 
and effort associated with complying with the requirements of the LTCH 
QRP. In sections IX.E.4.c. and IX.E.4.e. of the preamble of this final 
rule, we proposed to add four items to the LCDS and modify one item on 
the LCDS. The LCDS V5.1 has been approved under OMB control number 
0938-1163 (Expiration date: 08/31/2025). The following is a discussion 
of this information collection.
    In section IX.E.4.c. of this final rule, we proposed to adopt four 
new items as standardized patient assessment data elements under the 
SDOH category beginning with the FY 2028 LTCH QRP. The proposed items, 
Living Situation (one item), Food (two items), and Utilities (one 
item), will be collected at admission using the LCDS. These four new 
items will be added to the LCDS and will result in an increase of 0.02 
hours (1.2 minutes/60) of clinical staff time at admission. In 
addition, as described in section IX.E.4.e. of this final rule, we also 
proposed to modify the current Transportation item on the LCDS, which 
is currently collected at admission and discharge. We proposed that the 
modified Transportation item will only be collected at admission 
beginning with the FY 2028 LTCH QRP as described in section . and 
IX.E.7.b. of this final rule. The burden associated with collecting 
this item at admission and discharge was accounted for in the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42606) when the item was originally 
adopted. Additionally, LTCHs will no longer have to collect one item at 
discharge to meet LTCH QRP reporting requirements, which will result in 
a decrease of 0.005 hours (0.3 minutes/60) of clinical staff time at 
discharge. Using data collected for FY 2023, we estimate 130,050 total 
admissions and 96,890 planned discharges from 330 LTCHs annually. This 
equates to an increase of 2,117 hours for all LTCHs [(130,050 x 0.02 
hour) minus (96,890 x 0.005 hour)] and 6.41 hours per LTCH.
    We believe that the additional SDOH items will be completed equally 
by RNs and LPN/LVNs. Individual LTCHs determine the staffing resources 
necessary. We averaged BLS' National Occupational Employment and Wage 
Estimates (see Table XII.B-08) for these labor types and established a 
composite cost estimate using our adjusted wage estimates. The 
composite estimate of $65.31/hr was calculated by weighting each hourly 
wage equally [($78.10 + $52.52)/2]. We estimate the total cost would be 
increased by $418.88 per LTCH annually, or $138,231.88 for all LTCHs 
annually ([(130,050 admission assessments x 0.02 hour = 2,601 hours) x 
$65.31/hr] minus [(96,890 planned discharge assessments x 0.005 hour = 
484.45 hours) x $65.31/hr] = $138,231.88); ($138,231.88/330 LTCHs = 
$418.88/LTCH).

[[Page 69902]]

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    As described in Table XII.B-09, under OMB control number 0938-1163, 
we estimate that the policies finalized in this final rule for the LTCH 
QRP would result in an overall increase of 2,117 hours annually for 330 
LTCHs. The total cost increase related to this information collection 
is estimated at approximately $138,231.88. The increase in burden would 
be accounted for in a revised information collection request under OMB 
control number (0938-1163).
[GRAPHIC] [TIFF OMITTED] TR28AU24.325

    In section IX.E.7.c. of this final rule, we finalized the proposal 
to extend the LCDS Admission assessment window from three days to four 
days beginning with the FY 2028 LTCH QRP. However, this change will 
have no impact on burden since it is an administrative change and does 
not impact the number of items collected.
    We invited public comments on these potential information 
collection requirements. We responded to these comments in section 
IX.E.4 and IX.E.7 of this final rule. After considering the public 
comments received, and for the reasons outlined in these sections of 
the final rule and our comment responses, we are finalizing the 
revisions as proposed.
9. ICRs for the Medicare Promoting Interoperability Program
a. Background
    In section IX.F. of the preamble of this final rule, we discussed 
several finalized policies for the Medicare Promoting Interoperability 
Program. As discussed in the most recent Paperwork Reduction Act (PRA) 
approval under OMB control number 0938-1278 (expiration date April 30, 
2027), OMB has approved 29,625 hours of burden at a cost of 
approximately $1.3 million, accounting for information collection 
burden experienced by approximately 3,150 eligible hospitals and 1,350 
CAHs for the EHR reporting period in CY 2024. In this final rule, we 
describe the burden changes regarding collection of information under 
OMB control numbers 0938-1278 and 0938-1022 for eligible hospitals and 
CAHs. The collection of information burden analysis is focused on all 
eligible hospitals and CAHs that could participate in the Medicare 
Promoting Interoperability Program and report the objectives and 
measures and electronic clinical quality measures (eCQMs), under the 
Medicare Promoting Interoperability Program for the EHR reporting 
periods in CY 2025 through CY 2028.
    We are adopting two new eCQMs beginning with the CY 2026 reporting 
period: (1) the Hospital Harm--Falls with Injury eCQM, and (2) the 
Hospital Harm--Postoperative Respiratory Failure eCQM. In addition, we 
are separating the previously finalized Antimicrobial Use and 
Resistance (AUR) Surveillance measure into two separate measures, 
beginning with the EHR reporting period in CY 2025: (1) the 
Antimicrobial Use (AU) Surveillance measure, and (2) the Antimicrobial 
Resistance (AR) Surveillance measure. We are also modifying the Global 
Malnutrition Composite Score eCQM, beginning with the CY 2026 reporting 
period. In addition, we are increasing the total number of eCQMs that 
must be reported each year by eligible hospitals and CAHs from six to 
eight eCQMs for the CY 2026 reporting period, from eight to nine eCQMs 
for the CY 2027 reporting

[[Page 69903]]

period, and then from nine to eleven eCQMs beginning with the CY 2028 
reporting period. Lastly, we are increasing the minimum scoring 
threshold from 60 points to 70 points for the EHR reporting period in 
CY 2025 and then from 70 points to 80 points beginning with the EHR 
reporting period in CY 2026; this will not affect the information 
collection burden associated with the Medicare Promoting 
Interoperability Program.
    In the FY 2024 IPPS/LTCH PPS final rule, we utilized the median 
hourly wage rate for Medical Records Specialists, in accordance with 
the BLS, to calculate our burden estimates for the Medicare Promoting 
Interoperability Program (88 FR 59325). While the most recent data, the 
May 2022 National Occupational Employment and Wage Estimates from the 
BLS, reflects a mean hourly wage of $24.56 per hour for all medical 
records specialists (SOC 29-2072); we use the mean hourly wage for 
medical records specialists for the industry, ``general medical and 
surgical hospitals,'' which is $26.06.\1103\ We believe the industry of 
``general medical and surgical hospitals'' is more specific to our 
settings for use in our calculations than other industries that fall 
under medical records specialists, such as ``office of physicians'' or 
``nursing care facilities.'' We calculated the cost of overhead, 
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 overhead 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 eligible hospitals and CAHs using a wage plus 
benefits estimate of $52.12 per hour throughout the discussion in this 
section of this rule for the Medicare Promoting Interoperability 
Program.
---------------------------------------------------------------------------

    \1103\ U.S. Bureau of Labor Statistics. Occupational Outlook 
Handbook, Medical Records Specialists. Accessed on January 3, 2024. 
Available at: https://www.bls.gov/oes/current/oes292072.htm.
---------------------------------------------------------------------------

    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59325), our burden 
estimates were based on an assumption of 4,500 eligible hospitals and 
CAHs. In the FY 2024 IPPS/LTCH PPS final rule, the Medicare Promoting 
Interoperability Program and Hospital IQR Program used the same 
estimate for the number of eligible hospitals and IPPS hospitals for 
both programs (88 FR 59325). In section XII.B.6.a. of the preamble of 
this final rule, we provide our updated estimate of 3,050 IPPS 
hospitals for the Hospital IQR Program for the CY 2025 reporting 
period. Upon further analysis, we believe it is no longer appropriate 
to use the same estimate for both programs as the approximately 100 
eligible hospitals located in Maryland and Puerto Rico which were 
previously excluded from our estimate of IPPS hospitals and included in 
our estimate of non-IPPS hospitals should be included as eligible 
hospitals for the Medicare Promoting Interoperability Program. 
Therefore, based on data from the EHR reporting period in CY 2022, we 
estimated approximately 3,150 eligible hospitals and 1,400 CAHs will 
report data to the Medicare Promoting Interoperability Program for the 
EHR reporting period in CY 2025, for a total number of 4,550 
respondents.
b. Information Collection Burden for the Adoption of the Two eCQMs and 
Modification of One eCQM Beginning With the CY 2026 Reporting Period
    In section IX.F.6.a. of the preamble of this final rule, we are 
adopting two new eCQMs beginning with the CY 2026 reporting period: (1) 
the Hospital Harm--Falls With Injury eCQM and (2) the Hospital Harm--
Postoperative Respiratory Failure eCQM, to add to the set of eCQMs from 
which hospitals may self-select to meet their eCQM reporting 
requirements. In section IX.F.6.a. of the preamble of this final rule, 
we are modifying the Global Malnutrition Composite Score eCQM to add 
patients ages 18 to 64 to the current cohort of patients 65 years or 
older beginning with the CY 2026 reporting period.
    Under OMB control number 0938-1022 (expiration date January 31, 
2026), the currently approved burden estimate for reporting of six 
eCQMs is four hours per CAH and the 100 eligible hospitals not included 
as IPPS hospitals for the Hospital IQR Program (0.167 hours/eCQM x 4 
quarters x 6 eCQMs) for all six required eCQMs. The addition of these 
two new Hospital Harm eCQMs and modification of the Global Malnutrition 
Composite Score eCQM will not affect the information collection burden 
associated with submitting eCQM data under the Medicare Promoting 
Interoperability Program. As finalized in the FY 2023 IPPS/LTCH PPS 
final rule, current policy requires CAHs to select six eCQMs from the 
eCQM measure set on which to report (87 FR 49365 through 49367). In 
other words, although these new eCQMs are being added to the eCQM 
measure set, CAHs are not required to report more than a total of six 
eCQMs for the CY 2025 reporting period. We refer readers to section 
XII.B.7.f. of this final rule for discussion of the burden estimates 
associated with this policy impacting eligible hospitals (referred to 
as IPPS hospitals under the Hospital IQR Program).
    In section XII.B.9.c. of this final rule (Collection of Information 
section), we account for the burden associated with increasing the 
total number of eCQMs reported from six to eight eCQMs for the CY 2026 
reporting period, from eight to nine eCQMs for the CY 2027 reporting 
period, and then from nine to eleven eCQMs beginning with the CY 2028 
reporting period. We refer readers to section XII.B.7.f. of this final 
rule for discussion of the burden estimates associated with these 
policies impacting eligible hospitals (referred to as IPPS hospitals 
under the Hospital IQR Program).
    We received no comments on the proposals and are therefore 
finalizing our assumptions regarding burden without modification.
c. Information Collection Burden for the Modification of the eCQM 
Reporting Requirements Beginning With the CY 2026 Reporting Period
    In section IX.F.6.b. of the preamble of this final rule, we are 
finalizing with modification our eCQM reporting requirements by 
increasing the total number of eCQMs to be reported from six to eight 
eCQMs for the CY 2026 reporting period, from eight to nine eCQMs for 
the CY 2027 reporting period, and from nine to eleven eCQMs beginning 
with the CY 2028 reporting period.
    We previously finalized in the FY 2023 IPPS/LTCH PPS final rule 
that, for the CY 2024 reporting period, CAHs are required to annually 
submit data for six eCQMs each year, which must consist of the Safe Use 
of Opioids-Concurrent Prescribing, Cesarean Birth, and Severe Obstetric 
Complications eCQMs in addition to three self-selected eCQMs (87 FR 
49394 through 49395). We are finalizing with modification that, for the 
CY 2026 reporting period, CAHs will be required to submit data for 
eight total eCQMs: three self-selected eCQMs, and the Safe Use of 
Opioids, Severe Obstetric Complications, Cesarean Birth Rate, Hospital 
Harm--Severe Hypoglycemia, and Hospital Harm--Severe Hyperglycemia 
eCQMs. We are also finalizing with modification that, for the CY 2027 
reporting period, CAHs will be required to submit data for these eight 
eCQMs as well as the Hospital Harm--Opioid-Related Adverse Events eCQM, 
for nine total eCQMs. Lastly, we are finalizing with modification that,

[[Page 69904]]

beginning with the CY 2028 reporting period, CAHs will be required to 
submit data for these nine eCQMs as well as the Hospital Harm--Pressure 
Injury and Hospital Harm--Acute Kidney Injury eCQMs for eleven total 
eCQMs.
    To calculate the information collection burden associated, we 
estimate a total of 1,500 respondents, which includes the 100 eligible 
hospitals not included as IPPS hospitals for the Hospital IQR Program 
as well as the 1,400 CAHs required to report eCQM data for the Medicare 
Promoting Interoperability Program. We continue to estimate the 
information collection burden associated with the eCQM reporting and 
submission requirements to be 10 minutes per measure per quarter. For 
the increase in submission from six to eight eCQMs for the CY 2026 
reporting period, we estimate a total of 20 minutes, or 0.33 hours (10 
minutes x 2 eCQMs), per CAH per quarter. We estimate a total burden 
increase of 2,000 hours (0.33 hour x 1,400 CAHs and 100 eligible 
hospitals x 4 quarters) at a cost of $104,240 (2,000 hours x $52.12). 
For the additional increase in submission from eight to nine eCQMs 
beginning with the CY 2027 reporting period, we estimate a total of 30 
minutes, or 0.5 hours (10 minutes x 3 eCQMs), per CAH per quarter. We 
estimate a total burden increase of 3,000 hours annually (0.5 hours x 
1,500 CAHs x 4 quarters) at a cost of $156,360 (3,000 hours x $52.12). 
For the additional increase in submission from nine to eleven eCQMs 
beginning with the CY 2027 reporting period, we estimate a total of 50 
minutes, or 0.83 hours (10 minutes x 5 eCQMs), per CAH per quarter. We 
estimate a total burden increase of 5,000 hours annually (0.83 hours x 
1,500 CAHs x 4 quarters) at a cost of $260,600 (5,000 hours x $52.12). 
We refer readers to section XII.B.7.f. of this final rule for 
discussion of the burden estimates associated with this policy 
impacting eligible hospitals (referred to as IPPS hospitals under the 
Hospital IQR Program).
    With respect to any costs/burdens related to eligible hospitals 
(referred to as IPPS hospitals under the Hospital IQR Program), we 
refer readers to section XII.B.7.f. of this final rule.
    We received no comments on our burden estimates.
d. Information Collection Burden for the Separation of the AUR 
Surveillance Measure Into Two Measures Beginning With the EHR Reporting 
Period in CY 2025
    In section IX.F.2. of the preamble of this final rule, we are 
finalizing the modification of the AUR Surveillance measure by 
separating the single measure into two measures: (1) AU Surveillance, 
and (2) AR Surveillance, beginning with the EHR reporting period in CY 
2025. In the CY 2023 IPPS/LTCH PPS final rule, we finalized a burden 
estimate of 0.5 minutes per eligible hospital and CAH to attest the AUR 
Surveillance measure (87 FR 49394). In association with this policy, we 
estimate an annual increase in burden for each eligible hospital and 
CAH to attest to both measures of 0.5 minutes (.0083 hours). Therefore, 
we estimate a total increase in burden of 38 hours across all eligible 
hospitals and CAHs (.0083 hours x 4,550 eligible hospitals and CAHs) 
annually at a cost of $1,981 (38 hours x $52.12).
    We received no comments on our burden estimates.
e. Information Collection Burden for the Increase to the Minimum 
Scoring Threshold Beginning With the EHR Reporting Period in CY 2025
    In section IX.F.5. of the preamble of this final rule, we are 
finalizing an increase to the minimum scoring threshold from 60 points 
to 70 points for the EHR reporting period in CY 2025 and an increase to 
the minimum scoring threshold from 70 points to 80 points beginning 
with the EHR reporting period in CY 2026. Because we are not requiring 
eligible hospitals or CAHs to collect or submit any additional data, we 
do not estimate any change in information collection burden associated 
with the policy.
    We received no comments on our assumptions regarding burden.
f. Summary of Estimates Used to Calculate the Collection of Information 
Burden
    In summary, under OMB control number 0938-1278, we estimate that 
the policies in this final rule will result in an increase in burden of 
38 hours at a cost of $1,981 across 4,550 hospitals. In addition, under 
OMB control number 0938-1022, we estimate that the policies in this 
final rule will result in an increase in burden of 5,000 hours at a 
cost of $260,600 across 4,550 hospitals. The total increase in burden 
associated with the finalized information collections under OMB control 
numbers 0938-1278 and 0938-1022 is approximately 5,038 hours (38 + 
5,000) at a cost of $262,581 ($1,981 + $260,600). Based on these 
policies, the annual burden per eligible hospital and CAH will increase 
to 6 hours and 36 minutes (6.6 hours) as well as an additional 7.33 
hours annually for CAHs and the 100 eligible hospitals that do not 
participate in the Hospital IQR Program to report eCQMs. We will submit 
the revised information collection estimates to OMB for approval under 
OMB control numbers 0938-1022 and 0938-1278. With respect to costs/
burdens related to eligible hospitals (referred to as IPPS hospitals 
under the Hospital IQR Program), we refer readers to section XII.B.7.f. 
of this final rule.
    With respect to any costs/burdens unrelated to data submission, we 
refer readers to the Regulatory Impact Analysis (section I.N. of 
Appendix A of this final rule).
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BILLING CODE 4120-01-C
10. ICRs for the Transforming Episode Accountability Model
    In section X.A. of the preamble of this final rule, we discuss 
testing the Transforming Episode Accountability Model (TEAM) under the 
authority of the CMS Innovation Center. Section 1115A of the Act 
authorizes the CMS Innovation Center to test innovative payment and 
service delivery models that preserve or enhance the quality of care 
furnished to Medicare, Medicaid, and Children's Health Insurance 
Program beneficiaries while reducing program expenditures. As stated in 
section 1115A(d)(3) of the Act, Chapter 35 of title 44, United States 
Code, shall not apply to the testing and evaluation of models under 
section 1115A of the Act. As a result, the information collection 
requirements contained in this final rule for TEAM need not be reviewed 
by the Office of Management and Budget.
    We received no comments on the information collection requirements 
and therefore are finalizing this provision without modification.
11. ICRs for Payment Error Rate Measurement (PERM)
a. ICRs Regarding Sec.  431.970 Information Submission and Systems 
Access Requirements
    Section 431.970 defines state and provider submission 
responsibilities, including state submission of Medicaid and CHIP FFS 
claims and managed care payments on a quarterly basis; and provider 
submission of medical records. These claims and payments are rigorously 
reviewed by the Federal statistical contractor. Additionally, states 
are required to collect and submit (with an estimate of 4 submissions) 
state policies, including an initial submission

[[Page 69906]]

and quarterly updates. The ongoing burden associated with the 
requirements under Sec.  431.970 is the time and effort it will take 
each of the up to 36 state programs (17-18 Medicaid and 17-18 CHIP 
agencies for 17-18 states equates to maximum 36 total respondents each 
PERM year) to submit its claims universe, collect and submit state 
policies, and the time and effort it will take providers to furnish 
medical record documentation. We estimate that it will take 1,350 hours 
annually per state program to develop and submit its claims universe 
and state policies. The total estimated hours are broken down between 
the FFS, managed care, and eligibility components and is estimated at 
900 hours for universe development and submission, and 450 hours for 
policy collection and submission. Per component it is estimated at 
1,150 FFS hours, 100 managed care hours, and 100 eligibility hours for 
a total of 48,600 annual hours (1,350 hours x 36 respondents). The 
total estimated annual cost per respondent is $86,832 (1,350 hours x 
$64.32), and the total estimated annual cost across all respondents is 
$3,125,952 ($86,832 x 36 respondents). The preceding requirements and 
burden estimates will be submitted to OMB as reinstatements with 
changes of the information collection requests previously approved 
under control numbers 0938-0974, 0938-0994, and 0938-1012. Inclusion of 
Puerto Rico has added an additional burden of 2,700 hours and $173,664 
for Information Submission and Systems Access Requirements.
    We received no comments on this proposal and therefore are 
finalizing this provision with minor technical correction based on 
further review of current statute reference. Three references to the 
Improper Payments Information Act (IPIA) of 2002 (Pub. L. 107-300) will 
be updated to the Payment Integrity Information Act (PIIA) of 2019 
(Pub. L. 116-117). Otherwise, the provision will be finalized without 
modification.
b. ICRs Regarding Sec.  431.992 Corrective Action Plan
    Section 431.992 requires states to submit corrective action plans 
to address all improper payments and deficiencies found through the 
PERM review as defined at Sec.  431.960(f)(1) and evaluate corrective 
actions from the previous PERM cycle as defined at Sec.  431.992(b)(4). 
The ongoing burden associated with the requirements under Sec.  431.992 
is the time and effort it would take each of the up to 36 state 
programs (17-18 Medicaid and 17-18 CHIP agencies for 17-18 states 
equates to maximum 36 total respondents per PERM cycle) to submit its 
corrective action plan. We estimate that it will take 750 hours (250 
hours for FFS, 250 hours for managed care and an additional 250 hours 
for eligibility), per PERM cycle per state program to submit its 
corrective action plan for a total estimated annual burden of 27,000 
hours (750 hours x 36 respondents). We estimate the total cost per 
respondent to be $48,240 (750 hours x $64.32). The total estimated cost 
for all respondents is $1,736,640 ($48,240 x 36 respondents). The 
preceding requirements and burden estimates will be submitted to OMB as 
part of reinstatement of the information collection requests previously 
approved under control numbers 0938-0974, 0938-0994, and 0938-1012. 
total burden would amount to: 36 annual respondents, 36 annual 
responses, and 750 hours per corrective action plan Inclusion of Puerto 
Rico has added an additional burden of 1,500 hours and $96,480 for 
Corrective Action Plan requirements.
    We received no comments on this proposal and therefore are 
finalizing this provision with minor technical correction based on 
further review of current statute reference. Three references to the 
Improper Payments Information Act (IPIA) of 2002 (Pub. L. 107-300) will 
be updated to the Payment Integrity Information Act (PIIA) of 2019 
(Pub. L. 116-117). Otherwise, the provision will be finalized without 
modification.
c. ICRs Regarding Sec.  431.998 Difference Resolution and Appeal 
Process
    Section 431.998 allows states to dispute federal contractor 
findings. The ongoing burden associated with the requirements under 
Sec.  431.998 is the time and effort it would take each of the up to 36 
state programs (17-18 Medicaid and 17-18 CHIP agencies for 17-18 states 
equates to maximum 36 total respondents per PERM cycle) to review PERM 
findings and inform the Federal contractor(s) of any additional 
information and/or dispute requests. We estimated that it will take 
1,625 hours (500 hours for FFS, 475 hours for managed care and an 
additional 650 hours for eligibility) per PERM cycle per state program 
to review PERM findings and inform federal contractor(s) of any 
additional information or dispute requests for FFS, managed care, and 
eligibility components for a total estimated annual burden of 58,500 
hours (1,625 hours x 36 respondents). We estimate the total cost per 
respondent to be $104,520 (1,625 hours x $64.32). The total estimated 
cost for all respondents is $3,762,720 ($104,520 x 36 respondents). The 
preceding requirements and burden estimates will be submitted to OMB as 
reinstatements of the information collection requests previously 
approved under control numbers 0938-0974, 0938-0994, and 0938-1012. 
Total burden would amount to: 36 annual respondents, 36 annual 
responses, and 1,625 hours per PERM cycle.
    Inclusion of Puerto Rico has added an additional burden of 3,250 
hours and $209,040 for Difference Resolution and Appeal Process 
requirements.
    We received no comments on this proposal and therefore are 
finalizing this provision with minor technical correction based on 
further review of current statute reference. Three references to the 
Improper Payments Information Act (IPIA) of 2002 (Pub. L. 107-300) will 
be updated to the Payment Integrity Information Act (PIIA) of 2019 
(Pub. L. 116-117). Otherwise, the provision will be finalized without 
modification.
12. ICRs for the CoP Requirements for Hospitals and CAHs To Report 
Acute Respiratory Illnesses
a. Ongoing Reporting
    The hospital must electronically report information on acute 
respiratory illnesses, including influenza, SARS-CoV-2/COVID-19, and 
RSV, in a standardized format and frequency specified by the Secretary. 
To the extent as required by the Secretary, this report must include 
the following data elements:
     Confirmed infections for a limited set of respiratory 
illnesses, including but not limited to influenza, SARS-CoV-2/COVID-19, 
and RSV, among newly admitted and hospitalized patients.
     Total bed census and capacity, including for critical 
hospital units and age groups.
     Limited patient demographic information, including but not 
limited to age.
    For purposes of burden estimates, we do not differentiate among 
hospitals and CAHs as they all would collect data. For the estimated 
costs contained in the analysis that follows, we used data from the BLS 
to determine the mean hourly wage for the staff member responsible for 
reporting the required information for a hospital (or a CAH).\1104\ 
Based on our experience with hospitals and CAHs and the previous COVID-
19 and related reporting requirements, we believe that

[[Page 69907]]

this would primarily be the responsibility of a registered nurse and we 
have used this position in this analysis at an average hourly salary of 
$39.05. For the total hourly cost, we doubled the mean hourly wage for 
a 100 percent increase to cover overhead and fringe benefits, according 
to standard HHS estimating procedures. If the total cost after doubling 
resulted in 0.50 or more, the cost was rounded up to the next dollar. 
If it was 0.49 or below, the total cost was rounded down to the next 
dollar. Therefore, we estimated the total hourly cost for a registered 
nurse to perform these duties would be $78.
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    We expect that facilities will need to review their existing 
policies and procedures to ensure they comply with the permanent 
reporting requirements finalized in this rule. We assume that a RN with 
responsibility for these activities will review and update the policies 
and procedures. In addition, prior to the actual submission of the 
data, we expect that compliance with ongoing reporting will require 
continuous efforts to collect and organize the information necessary to 
report the data through the NHSN or other CDC-owned or CDC supported 
system as determined by the Secretary. Based on the assumption of 
weekly reporting frequency, we estimate that total annual burden hours 
for all participating hospitals and CAHs to conduct these activities 
and comply with these requirements would be 248,976 hours based on 
weekly reporting of the required information by approximately 6,384 
hospitals and CAHs x 52 weeks per year and at an average weekly 
response time of 0.75 hours for a registered nurse with an average 
hourly salary of $78. Therefore, the estimate for total annual costs 
for all hospitals and CAHs to comply with the required reporting 
provisions weekly would be $19,420,128 (248,976 hours x 6,384 
facilities) or approximately $3,042 per facility annually ($19,420,128/
6,384 facilities).
    We will update the PRA packages for the hospital and CAH CoPs to 
include these preliminary estimates for these reporting activities (OMB 
control numbers 0938-0328 for hospitals and 0938-1043 for CAHs). We 
note that any additional ICR burden related to the specific instruments 
used for reporting and the time necessary to submit/report the data is 
the National Healthcare Safety Network (NHSN) Surveillance in 
Healthcare Facilities (OMB control number 0920-1317) package.
    Furthermore, we note that this estimate likely overestimates the 
costs associated with reporting because it assumes that all hospitals 
and CAHs will report manually. Efforts are underway to automate 
hospital and CAH reporting that have the potential to significantly 
decrease reporting burden and improve reliability. Our preliminary 
estimates for these reporting activities (OMB control numbers 0938-0328 
for hospitals and 0938-1043 for CAHs) can be found in the tables that 
follow.
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b. PHE Reporting
    In the event that the Secretary has declared a Public Health 
Emergency (PHE) for an acute infectious illness, the hospital must also 
electronically report the following data elements in a standardized 
format and frequency specified by the Secretary:
     Supply inventory shortages.
     Staffing shortages.
     Relevant medical countermeasures and therapeutic 
inventories, usage, or both.
     Facility structure and operating status, including 
hospital/ED diversion status.
    Similar to the activities necessary to comply with ongoing 
reporting, hospitals and CAHs will need to ensure they have policies 
and procedures in place to activate PHE specific reporting and will 
require staff to gather the information necessary to support reporting 
at a frequency determined by the Secretary (OMB Control Nos. 0938-0328 
and 0938-1043). Likewise, the specific information collection for the 
data reporting is the NHSN Surveillance in Healthcare Facilities (OMB 
Control Number 0920-1317). For purposes of burden estimates, we do not 
differentiate among hospitals and CAHs as they all would complete the 
same data collection. For the estimated costs

[[Page 69908]]

contained in the analysis that follows, we used data from the U.S. 
Bureau of Labor Statistics (BLS) to determine the mean hourly wage for 
the staff member responsible for reporting the required information for 
a hospital (or a CAH).\1105\ Based on our experience with hospitals and 
CAHs and the previous COVID-19 and related reporting requirements, we 
believe that this will primarily be the responsibility of a registered 
nurse and we have used this position in this analysis at an average 
hourly salary of $39.05. For the total hourly cost, we doubled the mean 
hourly wage for a 100 percent increase to cover overhead and fringe 
benefits, according to standard HHS estimating procedures. If the total 
cost after doubling resulted in 0.50 or more, the cost was rounded up 
to the next dollar. If it was 0.49 or below, the total cost was rounded 
down to the next dollar. Therefore, we estimated the total hourly cost 
for a registered nurse to perform these duties will be $78.
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    We acknowledge that the data elements and reporting frequency could 
increase or decrease due to the what the Secretary deems necessary for 
the given PHE; the changes would impact this burden estimate. For 
instance, data reporting requirements may be active for less than or 
more than a year. During the COVID-19 PHE, facilities reported daily. 
However, we cannot predict how often the Secretary would require data 
reporting for any future PHE. Therefore, we include two burden 
estimates to encapsule a range in frequency of reporting. The lower 
range is based on twice a week reporting. The higher range is based on 
daily reporting.
    Based on the assumption of twice weekly reporting frequency, we 
estimate that total annual burden hours for all participating hospitals 
and CAHs to comply with these requirements will be 995,904 hours based 
on twice weekly reporting of the required information by approximately 
6,384 hospitals and CAHs x 104 days a year and at an average twice 
weekly response time of 1.5 hours for a registered nurse with an 
average hourly salary of $78. Therefore, the estimate for total annual 
costs for all hospitals and CAHs to comply with the required reporting 
provisions weekly will be $77,680,512 (995,904 hours x $78) or 
approximately $12,168 ($77,680,512/6,384 facilities) per facility 
annually.
    Based on the assumption of daily reporting frequency, we estimate 
that total annual burden hours for all participating hospitals and CAHs 
to comply with these requirements will be 3,495,240 hours based on 
daily reporting of the required information by approximately 6,384 
hospitals and CAHs x 365 days a year and at an average daily response 
time of 1.5 hours for a registered nurse with an average hourly salary 
of $78. Therefore, the estimate for total annual costs for all 
hospitals and CAHs to comply with the required reporting provisions 
weekly will be $272,628,720 (3,495,240 hours x $78) or approximately 
$42,705 ($272,628,720/6,384 facilities) per facility annually.
    Furthermore, we note that this estimate likely overestimates the 
costs associated with reporting because it assumes that all hospitals 
and CAHs will report manually. Efforts are underway to automate 
hospital and CAH reporting that have the potential to significantly 
decrease reporting burden and improve reliability. Our preliminary 
estimates for these reporting activities (OMB control numbers 0938-0328 
for hospitals and 0938-1043 for CAHs) can be found in the tables that 
follow.
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[[Page 69909]]


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BILLING CODE 4120-01-C
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on July 26, 2024.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Diseases, Health facilities, 
Health professions, Medical devices, Medicare Reporting and 
recordkeeping requirements, Rural areas, X-rays.

42 CFR Part 412

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

42 CFR Part 413

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

42 CFR Part 431

    Grant programs-health, Health facilities, Medicaid, Privacy, 
Reporting and recordkeeping requirements.

42 CFR Part 482

    Grant programs-health, Hospitals, Medicaid, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 485

    Grant programs-health, Health facilities, Medicaid, Medicare, 
Reporting and recordkeeping requirements.

42 CFR Part 495

    Administrative practice and procedure, Health facilities, Health 
maintenance organizations (HMO), Health professions, Health records, 
Medicaid, Medicare, Penalties, Privacy, and Reporting and recordkeeping 
requirements.

42 CFR Part 512

    Administrative practice and procedure, Health care, Health 
facilities, Health insurance, Intergovernmental relations, Medicare, 
Penalties, Reporting and recordkeeping requirements.
    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as follows:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority citation for part 405 continues to read as follows:

    Authority: 42 U.S.C. 263a, 405(a), 1302, 1320b-12, 1395x, 
1395y(a), 1395ff, 1395hh, 1395kk, 1395rr, and 1395ww(k).

0
2. Effective January 1, 2025, amend Sec.  405.1845 by revising 
paragraphs (a) and (b) and the paragraph (c) paragraph heading to read 
as follows:


Sec.  405.1845  Composition of Board; hearings, decisions, and remands.

    (a) Composition of the Board. The Board consists of five members 
appointed by the Secretary.
    (1) All members must be knowledgeable in the field of payment of 
providers under Medicare Part A.
    (2) At least one member must be a certified public accountant.
    (3) At least two Board members must be representative of providers 
of services.
    (b) Terms of office. The term of office for Board members must be 3 
years, except that initial appointments may be for such shorter terms 
as the Secretary may designate to permit staggered terms of office.
    (1) No member may serve more than three consecutive terms of 
office.
    (2) The Secretary has the authority to terminate a Board member's 
term of office for good cause.
    (c) Role of the Chairperson. * * *
* * * * *

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

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

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

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


Sec.  412.1  Scope of part.

    (a) * * *
    (1) * * *
    (iv) Additional payments are made for outlier cases, bad debts, 
indirect medical education costs, for serving a disproportionate share 
of low-income patients, for the additional resource costs of domestic 
National Institute for Occupational Safety and Health approved surgical 
N95 respirators, and for the additional resource costs for small, 
independent hospitals to establish and maintain access to buffer stocks 
of essential medicines.
* * * * *

0
5. Section 412.2 is amended by adding paragraph (f)(11) to read as 
follows:


Sec.  412.2  Basis of payment.

* * * * *
    (f) * * *
    (11) A payment adjustment for small, independent hospitals for the 
additional resource costs of establishing and maintaining access to 
buffer stocks of

[[Page 69910]]

essential medicines as specified in Sec.  412.113.
* * * * *

0
6. Section 412.23 is amended by revising paragraphs (e)(3)(i) and 
(iii), removing and reserving paragraph (e)(3)(iv) and revising and 
republishing paragraph (e)(4) to read as follows:


Sec.  412.23  Excluded hospitals: Classifications.

* * * * *
    (e) * * *
    (3) * * *
    (i) Subject to the provisions of paragraphs (e)(3)(ii) through 
(vii) of this section and paragraphs (e)(4)(iv) and (v) of this section 
as applicable, the average Medicare inpatient length of stay specified 
under paragraph (e)(2)(i) of this section is calculated by dividing the 
total number of covered and noncovered days of stay of Medicare 
inpatients (less leave or pass days) by the number of total Medicare 
discharges for the hospital's most recent complete cost reporting 
period. Subject to the provisions of paragraphs (e)(3)(ii) through 
(vii) of this section, the average inpatient length of stay specified 
under paragraph (e)(2)(ii) of this section is calculated by dividing 
the total number of days for all patients, including both Medicare and 
non-Medicare inpatients (less leave or pass days) by the number of 
total discharges for the hospital's most recent complete cost reporting 
period.
* * * * *
    (iii) If a change in a hospital's average length of stay specified 
under paragraph (e)(2)(i) or (e)(2)(ii) of this section would result in 
the hospital not maintaining an average Medicare inpatient length of 
stay of greater than 25 days, the calculation is made by the same 
method for the period of at least 5 consecutive months of the 
immediately preceding 6-month period.
    (iv) [Reserved]
* * * * *
    (4) For the purpose of calculating the average length of stay for 
hospitals seeking to become long-term care hospitals, with the 
exception of paragraphs (e)(3)(iii) and (v) of this section, the 
provisions of paragraph (e)(3) of this section apply.
    (i) Definition. For the purpose of payment under the long-term care 
hospital prospective payment system under subpart O of this part, a new 
long-term care hospital is a provider of inpatient hospital services 
that meets the qualifying criteria in paragraphs (e)(1) and (e)(2) of 
this section; meets the applicable requirements of paragraphs 
(e)(4)(ii) through (v) of this section; and, under present or previous 
ownership (or both), its first cost reporting period as a LTCH begins 
on or after October 1, 2002.
    (ii) Satellite facilities and remote locations of hospitals seeking 
to become new long-term care hospitals. Except as specified in 
paragraph (e)(4)(iii) of this section, a satellite facility (as defined 
in Sec.  412.22(h)) or a remote location of a hospital (as defined in 
Sec.  413.65(a)(2) of this chapter) that voluntarily reorganizes as a 
separate Medicare participating hospital, with or without a concurrent 
change in ownership, and that seeks to qualify as a new long-term care 
hospital for Medicare payment purposes must demonstrate through 
documentation that it meets the average length of stay requirement as 
specified under paragraphs (e)(2)(i) or (e)(2)(ii) of this section 
based on discharges that occur on or after the effective date of its 
participation under Medicare as a separate hospital.
    (iii) Provider-based facility or organization identified as a 
satellite facility and remote location of a hospital prior to July 1, 
2003. Satellite facilities and remote locations of hospitals that 
became subject to the provider-based status rules under Sec.  413.65 as 
of July 1, 2003, that become separately participating hospitals, and 
that seek to qualify as long-term care hospitals for Medicare payment 
purposes may submit to the fiscal intermediary discharge data gathered 
during the period of at least 5 consecutive months of the immediate 6 
months preceding the facility's separation from the main hospital for 
calculation of the average length of stay specified under paragraph 
(e)(2)(i) or paragraph (e)(2)(ii) of this section.
    (iv) Qualifying period for hospitals seeking to become long-term 
care hospitals. A hospital may be classified as a long-term care 
hospital after a 6-month qualifying period, provided that the average 
length of stay during the period of at least 5 consecutive months of 
that 6-month qualifying period, calculated under paragraph (e)(2) of 
this section, is greater than 25 days. The 6-month qualifying period 
for a hospital is the 6 months immediately preceding the date of long-
term care hospital classification.
    (v) Special rule for hospitals seeking to become long-term care 
hospitals that experience a change in ownership. If a hospital seeks 
exclusion from the inpatient prospective payment system as a long-term 
care hospital and a change of ownership (as described in Sec.  489.18 
of this chapter) occurs within the period of at least 5 consecutive 
months of the 6-month period preceding its petition for long-term care 
hospital status, the hospital may be excluded from the inpatient 
prospective payment system as a long-term care hospital for the next 
cost reporting period if, for the period of at least 5 consecutive 
months of the 6 months immediately preceding the start of the cost 
reporting period for which the hospital is seeking exclusion from the 
inpatient prospective payment system as a long-term care hospital 
(including time before the change of ownership), the hospital has met 
the required average length of stay, has continuously operated as a 
hospital, and has continuously participated as a hospital in Medicare.
* * * * *

0
7. Section 412.88 is amended by adding paragraphs (a)(2)(ii)(C) and 
(b)(2)(iv) to read as follows:


Sec.  412.88  Additional payment for new medical service or technology.

* * * * *
    (a) * * *
    (2) * * *
    (ii) * * *
    (C) For a medical product that is a gene therapy that is indicated 
and used specifically for the treatment of sickle cell disease and 
approved for new technology add-on payments in the FY 2025 IPPS/LTCH 
PPS final rule, for discharges occurring on or after October 1, 2024, 
if the costs of the discharge (determined by applying the operating 
cost-to-charge ratios as described in Sec.  412.84(h)) exceed the full 
DRG payment, an additional amount equal to the lesser of--
    (1) 75 percent of the costs of the new medical service or 
technology; or
    (2) 75 percent of the amount by which the costs of the case exceed 
the standard DRG payment.
* * * * *
    (b) * * *
    (2) * * *
    (iv) For discharges occurring on or after October 1, 2024, for a 
medical product that is a gene therapy that is indicated and used 
specifically for the treatment of sickle cell disease and approved for 
new technology add-on payments in the FY 2025 IPPS/LTCH PPS final rule, 
75 percent of the estimated costs of the new medical service or 
technology.

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


Sec.  412.90  General rules.

* * * * *
    (j) Medicare-dependent, small rural hospitals. For cost reporting 
periods beginning on or after April 1, 1990, and before October 1, 
1994, and for

[[Page 69911]]

discharges occurring on or after October 1, 1997 and before January 1, 
2025, CMS adjusts the prospective payment rates for inpatient operating 
costs determined under subparts D and E of this part if a hospital is 
classified as a Medicare-dependent, small rural hospital.
* * * * *

0
9. Section 412.96 is amended by revising paragraph (c)(2)(ii) to read 
as follows:


Sec.  412.96  Special treatment: Referral centers.

* * * * *
    (c) * * *
    (2) * * *
    (ii) For cost reporting periods beginning on or after January 1, 
1986, an osteopathic hospital, recognized by the American Osteopathic 
Healthcare Association (or any successor organization), that is located 
in a rural area must have at least 3,000 discharges during its cost 
reporting period that began during the same fiscal year as the cost 
reporting periods used to compute the regional median discharges under 
paragraph (i) of this section to meet the number of discharges 
criterion. A hospital applying for rural referral center status under 
the number of discharges criterion in this paragraph must demonstrate 
its status as an osteopathic hospital.
* * * * *

0
10. Section 412.101 is amended by revising paragraphs (b)(2)(i) and 
(iii), (c)(1), and (c)(3) introductory text to read as follows:


Sec.  412.101  Special treatment: Inpatient hospital payment adjustment 
for low-volume hospitals.

* * * * *
    (b) * * *
    (2) * * *
    (i) For FY 2005 through FY 2010, the portion of FY 2025 beginning 
on January 1, 2025 and subsequent fiscal years, a hospital must have 
fewer than 200 total discharges, which includes Medicare and non-
Medicare discharges, during the fiscal year, based on the hospital's 
most recently submitted cost report, and be located more than 25 road 
miles (as defined in paragraph (a) of this section) from the nearest 
``subsection (d)'' (section 1886(d) of the Act) hospital.
* * * * *
    (iii) For FY 2019 through FY 2024 and the portion of FY 2025 
beginning on October 1, 2024, and ending on December 31, 2024, a 
hospital must have fewer than 3,800 total discharges, which includes 
Medicare and non-Medicare discharges, during the fiscal year, based on 
the hospital's most recently submitted cost report, and be located more 
than 15 road miles (as defined in paragraph (a) of this section) from 
the nearest ``subsection (d)'' (section 1886(d) of the Act) hospital.
* * * * *
    (c) * * *
    (1) For FY 2005 through FY 2010, the portion of FY 2025 beginning 
on January 1, 2025, and subsequent fiscal years, the adjustment is an 
additional 25 percent for each Medicare discharge.
* * * * *
    (3) For FY 2019 through FY 2024 and the portion of FY 2025 
beginning on October 1, 2024, and ending on December 31, 2024, the 
adjustment is as follows:
* * * * *

0
11. Section 412.103 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  412.103  Special treatment: Hospitals located in urban areas and 
that apply for reclassification as rural.

    (a) * * *
    (1) The hospital is located in a rural census tract of a 
Metropolitan Statistical Area (MSA) as determined under the most recent 
version of the Goldsmith Modification, using the Rural-Urban Commuting 
Area codes and additional criteria, as determined by the Federal Office 
of Rural Health Policy (FORHP) of the Health Resources and Services 
Administration (HRSA), which is available at the web link provided in 
the most recent Federal Register notice issued by HRSA defining rural 
areas.
* * * * *

0
12. Section 412.104 is amended by revising paragraphs (b)(2) through 
(4) to read as follows:


Sec.  412.104  Special treatment: Hospitals with high percentage of 
ESRD discharges.

* * * * *
    (b) * * *
    (2)(i) Effective for cost reporting periods beginning before 
October 1, 2024, the estimated weekly cost of dialysis is the average 
number of dialysis sessions furnished per week during the 12-month 
period that ended June 30, 1983, multiplied by the average cost of 
dialysis for the same period.
    (ii) Effective for cost reporting periods beginning on or after 
October 1, 2024, the estimated weekly cost of dialysis is calculated as 
3 dialysis sessions per week multiplied by the applicable ESRD 
prospective payment system (PPS) base rate (as defined in 42 CFR 
413.171) that corresponds with the fiscal year in which the cost 
reporting period begins.
    (3) The average cost of dialysis used for purposes of determining 
the estimated weekly cost of dialysis for cost reporting periods 
beginning before October 1, 2024, includes only those costs determined 
to be directly related to the renal dialysis services. (These costs 
include salary, employee health and welfare, drugs, supplies, and 
laboratory services.)
    (4) Effective for cost reporting periods beginning before October 
1, 2024, the average cost of dialysis is reviewed and adjusted, if 
appropriate, at the time the composite rate reimbursement for 
outpatient dialysis is reviewed.
* * * * *

0
13. Section 412.105 is amended by adding paragraph (f)(1)(iv)(C)(4) to 
read as follows:


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

* * * * *
    (f) * * *
    (1) * * *
    (iv) * * *
    (C) * * *
    (4) Effective for portions of cost reporting periods beginning on 
or after July 1, 2026, a hospital may qualify to receive an increase in 
its otherwise applicable FTE resident cap if the criteria specified in 
Sec.  413.79(q) of this subchapter are met.
* * * * *

0
14. Section 412.106 is amended by revising paragraph (i)(1) to read as 
follows:


Sec.  412.106  Special treatment: Hospitals that serve a 
disproportionate share of low-income patients.

* * * * *
    (i) * * *
    (1) Interim payments are made during the payment year to each 
hospital that is estimated to be eligible for payments under this 
section at the time of the annual final rule for the hospital inpatient 
prospective payment system, subject to the final determination of 
eligibility at the time of cost report settlement for each hospital. 
For FY 2025, interim uncompensated care payments are calculated based 
on an average of the most recent 2 years of available historical 
discharge data. For FY 2026 and subsequent years, interim uncompensated 
care payments are calculated based on an average of the most recent 3 
years of available historical discharge data.
* * * * *

0
15. Section 412.108 is amended by revising paragraphs (a)(1) 
introductory text and (c)(2)(iii) introductory text to read as follows:

[[Page 69912]]

Sec.  412.108  Special treatment: Medicare-dependent, small rural 
hospitals.

    (a) * * *
    (1) General considerations. For cost reporting periods beginning on 
or after April 1, 1990, and ending before October 1, 1994, or for 
discharges occurring on or after October 1, 1997, and before January 1, 
2025, a hospital is classified as a Medicare-dependent, small rural 
hospital if it meets all of the following conditions:
* * * * *
    (c) * * *
    (2) * * *
    (iii) For discharges occurring during cost reporting periods (or 
portions thereof) beginning on or after October 1, 2006, and before 
January 1, 2025, 75 percent of the amount that the Federal rate 
determined under paragraph (c)(1) of this section is exceeded by the 
highest of the following:
* * * * *

0
16. Section 412.113 is amended by adding paragraph (g) to read as 
follows:


Sec.  412.113  Other payments.

* * * * *
    (g) Additional resource costs of establishing and maintaining 
access to buffer stocks of essential medicines. (1) Essential medicines 
are the 86 medicines prioritized in the report Essential Medicines 
Supply Chain and Manufacturing Resilience Assessment developed by the 
U.S. Department of Health and Human Services Office of the Assistant 
Secretary for Preparedness and Response and published in May of 2022, 
and any subsequent revisions to that list of medicines. A buffer stock 
of essential medicines for a hospital is a supply, for no less than a 
6-month period of one or more essential medicines.
    (2) The additional resource costs of establishing and maintaining 
access to a buffer stock of essential medicines for a hospital are the 
additional resource costs incurred by the hospital to directly hold a 
buffer stock of essential medicines for its patients or arrange 
contractually for such a buffer stock to be held by another entity for 
use by the hospital for its patients. The additional resource costs of 
establishing and maintaining access to a buffer stock of essential 
medicines does not include the resource costs of the essential 
medicines themselves.
    (3) For cost reporting periods beginning on or after October 1, 
2024, a payment adjustment to a small, independent hospital for the 
additional resource costs of establishing and maintaining access to 
buffer stocks of essential medicines is made as described in paragraph 
(g)(4) of this section. For purposes of this section, a small, 
independent hospital is a hospital with 100 or fewer beds as defined in 
Sec.  412.105(b) during the cost reporting period that is not part of a 
chain organization, defined as a group of two or more health care 
facilities which are owned, leased, or through any other device, 
controlled by one organization.
    (4) The payment adjustment is based on the estimated reasonable 
cost incurred by the hospital for establishing and maintaining access 
to buffer stocks of essential medicines during the cost reporting 
period.

0
17. Section 412.140 is amended by revising paragraphs (d)(2)(ii) and 
(e)(2)(vii) introductory text to read as follows:


Sec.  412.140  Participation, data submission, and validation 
requirements under the Hospital Inpatient Quality Reporting (IQR) 
Program.

* * * * *
    (d) * * *
    (2) * * *
    (ii)(A) Prior to the FY 2028 payment determination, a hospital 
meets the eCQM validation requirement with respect to a fiscal year if 
it submits 100 percent of sampled eCQM measure medical records in a 
timely and complete manner, as determined by CMS.
    (B) For the FY 2028 payment determination and later years, a 
hospital meets the eCQM validation requirement with respect to a fiscal 
year if it achieves a 75-percent score, as determined by CMS.
* * * * *
    (e) * * *
    (2) * * *
    (vii) If the hospital has requested reconsideration on the basis 
that CMS concluded it did not meet the validation requirement set forth 
in paragraph (d) of this section, the reconsideration request must 
contain a detailed explanation identifying which data the hospital 
believes was improperly validated by CMS and why the hospital believes 
that such data are correct.
* * * * *


Sec.  412.230  [Amended]

0
18. In Sec.  412.230 amend paragraph (a)(5)(i) by removing the phrase 
``in the rural area of the state'' and adding in its place the phrase 
``either in its geographic area or in the rural area of the State''.

0
19. Amend Sec.  412.273 by revising paragraphs (c)(1)(ii) and (c)(2) to 
read as follows:


Sec.  412.273  Withdrawing an application, terminating an approved 3-
year reclassification, or canceling a previous withdrawal or 
termination.

* * * * *
    (c) * * *
    (1) * * *
    (ii) After the MGCRB issues a decision, provided that the request 
for withdrawal is received by the MCGRB within 45 days of the date of 
filing for public inspection of the proposed rule at the website of the 
Office of the Federal Register, or within 7 calendar days of receiving 
a decision of the Administrator's in accordance with Sec.  412.278, 
whichever is later concerning changes to the inpatient hospital 
prospective payment system and proposed payment rates for the fiscal 
year for which the application has been filed.
    (2) A request for termination must be received by the MGCRB within 
45 days of the date of filing for public inspection of the proposed 
rule at the website of the Office of the Federal Register, or within 7 
calendar days of receiving a decision of the Administrator's in 
accordance with Sec.  412.278, whichever is later concerning changes to 
the inpatient hospital prospective payment system and proposed payment 
rates for the fiscal year for which the termination is to apply.
* * * * *

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

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

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


Sec.  413.75  [Amended]

0
21. Section 413.75 is amended in paragraph (b), in the introductory 
text of the definition of ``Emergency Medicare GME Affiliated Group'' 
by removing the reference ``Sec.  413.79(f)(6)'' and adding in its 
place the reference ``Sec.  413.79(f)(7)''.


Sec.  413.78  [Amended]

0
22. Section 413.78 is amended by--
0
a. In paragraph (e)(3)(iii), removing the reference ``Sec.  
413.79(f)(6)'' and adding in its place the reference ``Sec.  
413.79(f)(7)''; and
0
b. In paragraph (f)(3)(iii) introductory text, removing the reference

[[Page 69913]]

``Sec.  413.79(f)(6)'' and adding in its place the reference ``Sec.  
413.79(f)(7)''.

0
23. Section 413.79 is amended by--
0
a. Revising paragraphs (d)(6), (f)(8) and (k)(2)(i); and
0
b. Adding paragraph (q).
    The revisions and addition read as follows:


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

* * * * *
    (d) * * *
    (6) Subject to the provisions of paragraph (h) of this section, FTE 
residents who are displaced by the closure of either another hospital 
or another hospital's program are added to the FTE count after applying 
the averaging rules in this paragraph (d), for the receiving hospital 
for the duration of the time that the displaced residents are training 
at the receiving hospital.
* * * * *
    (f) * * *
    (8) FTE resident cap slots added under section 126 of Public Law 
116-260 and section 4122 of Public Law 117-328 may be used in a 
Medicare GME affiliation agreement beginning in the fifth year after 
the effective date of those FTE resident cap slots.
* * * * *
    (k) * * *
    (2) * * *
    (i)(A) For rural track programs started before October 1, 2012, for 
the first 3 years of the rural track's existence, the rural track FTE 
limitation for each urban hospital will be the actual number of FTE 
residents, subject to the rolling average specified in paragraph (d)(7) 
of this section, training in the rural track at the urban hospital and 
the rural nonprovider site(s).
    (B) For rural track programs started on or after October 1, 2012, 
and before October 1, 2022, prior to the start of the urban hospital's 
cost reporting period that coincides with or follows the start of the 
sixth program year of the rural track's existence, the rural track FTE 
limitation for each urban hospital will be the actual number of FTE 
residents, subject to the rolling average specified in paragraph (d)(7) 
of this section, training in the rural track at the urban hospital and 
the rural nonprovider site(s).
    (C) For cost reporting periods beginning on or after October 1, 
2022, before the start of the urban or rural hospital's cost reporting 
period that coincides with or follows the start of the sixth program 
year of the Rural Track Program's existence, the rural track FTE 
limitation for each hospital will be the actual number of FTE residents 
training in the Rural Track Program at the urban or rural hospital and 
subject to the requirements under Sec.  413.78(g), at the rural 
nonprovider site(s).
* * * * *
    (q) Determination of an increase in the otherwise applicable 
resident cap under section 4122 of the Consolidated Appropriations Act 
(Pub. L. 117-328). For portions of cost reporting periods beginning on 
or after July 1, 2026, a hospital may receive an increase in its 
otherwise applicable FTE resident cap (as determined by CMS) if the 
hospital meets the requirements and qualifying criteria under section 
1886(h)(10) of the Act and if the hospital submits an application to 
CMS within the timeframe specified by CMS.

PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION

0
24. The authority citation for part 431 continues to read as follows:

    Authority: 42 U.S.C. 1302.


Sec.  431.954  [Amended]

0
25. Section 431.954 is amended by:
0
a. In paragraph (a)(2), removing the phrase ``Improper Payments 
Information Act of 2002 (Pub. L. 107-300)'' and adding in its place the 
phrase ``Payment Integrity Information Act (PIIA) of 2019 (Pub. L. 116-
117)''.
0
b. In paragraph (b)(3) by removing the words ``Puerto Rico''.


Sec.  431.960  [Amended]

0
26. Section 431.960 is amended in paragraph (a) by removing the phrase 
``Improper Payments Information Act of 2002'' and adding in its place 
the word ``PIIA''.


Sec.  431.998  [Amended]

0
27. Section 431.998 is amended in paragraph (f) by removing the word 
``IPIA'' and adding in its place the word ``PIIA''.

PART 482--CONDITIONS OF PARTICIPATION FOR HOSPITALS

0
28. The authority citation for part 482 continues to read as follows:

    Authority:  42 U.S.C. 1302, 1395hh, and 1395rr, unless otherwise 
noted.


0
29. Effective November 1, 2024, amend Sec.  482.42 by revising 
paragraph (e) and removing paragraph (f) to read as follows:


Sec.  482.42  Condition of participation: Infection prevention and 
control and antibiotic stewardship programs.

* * * * *
    (e) Respiratory illness reporting--(1) Ongoing reporting. The 
hospital must electronically report information on acute respiratory 
illnesses, including influenza, SARS-CoV-2/COVID-19, and RSV.
    (i) The report must be in a standardized format and frequency 
specified by the Secretary.
    (ii) To the extent as required by the Secretary, this report must 
include all of the following data elements:
    (A) Confirmed infections for a limited set of respiratory 
illnesses, including but not limited to influenza, SARS-CoV-2/COVID-19, 
and RSV, among newly admitted and hospitalized patients.
    (B) Total bed census and capacity, including for critical hospital 
units and age groups.
    (C) Limited patient demographic information, including but not 
limited to age.
    (2) Public health emergency (PHE) reporting. In the event that the 
Secretary has declared a national, State, or local PHE for an acute 
infectious illness, the hospital must also electronically report the 
following data elements in a standardized format and frequency 
specified by the Secretary:
    (i) Supply inventory shortages.
    (ii) Staffing shortages.
    (iii) Relevant medical countermeasures and therapeutic inventories, 
usage, or both.
    (iv) Facility structure and operating status, including hospital/ED 
diversion status.

PART 485--CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS

0
30. The authority citation for part 482 continues to read as follows:

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


0
31. Effective November 1, 2024, amend Sec.  485.640 by revising 
paragraph (d) and removing paragraph (e) to read as follows:


Sec.  485.640  Condition of participation: Infection prevention and 
control and antibiotic stewardship programs.

* * * * *
    (d) Respiratory illness reporting--(1) Ongoing reporting. The CAH 
must electronically report information on acute respiratory illnesses, 
including influenza, SARS-CoV-2/COVID-19, and RSV.
    (i) The report must be in a standardized format and frequency 
specified by the Secretary.
    (ii) To the extent as required by the Secretary, the report must 
include the following data elements:

[[Page 69914]]

    (A) Confirmed infections for a limited set of respiratory 
illnesses, including but not limited to influenza, SARS-CoV-2/COVID-19, 
and RSV, among newly admitted and hospitalized patients.
    (B) Total bed census and capacity, including for critical hospital 
units and age groups.
    (C) Limited patient demographic information, including but not 
limited to age.
    (2) Public health emergency (PHE) reporting. In the event that the 
Secretary has declared a national, State, or local PHE for an acute 
infectious illness, the CAH must also electronically report the 
following data elements in a standardized format and frequency 
specified by the Secretary:
    (i) Supply inventory shortages.
    (ii) Staffing shortages.
    (iii) Relevant medical countermeasures and therapeutic inventories, 
usage, or both.
    (iv) Facility structure and operating status, including CAH/ED 
diversion status.
* * * * *

PART 495--STANDARDS FOR THE ELECTRONIC HEALTH RECORD TECHNOLOGY 
INCENTIVE PROGRAM

0
32. The authority citation for part 495 continues to read as follows:

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


0
33. Section 495.24 is amended by--
0
a. In paragraph (f)(1)(i)(B) removing the phrase ``In 2023 and 
subsequent years'' and adding in its place the phrase ``In 2023 and 
2024,''; and
0
b. Adding paragraphs (f)(1)(i)(C) and (D).
    The addition reads as follows:


Sec.  495.24  Stage 3 meaningful use objectives and measures for EPs, 
eligible hospitals and CAHs for 2019 and subsequent years.

* * * * *
    (f) * * *
    (1) * * *
    (i) * * *
    (C) In 2025 and subsequent years, earn a total score of at least 70 
points.
    (D) In 2026 and subsequent years, earn a total score of at least 80 
points.
* * * * *

PART 512--STANDARD PROVISIONS FOR INNOVATION CENTER MODELS AND 
SPECIFIC PROVISIONS FOR CERTAIN MODELS

0
34. The authority citation for part 512 continues to read as follows:

    Authority:  42 U.S.C. 1302, 1315a, and 1395hh.


0
35. Revise the heading for part 512 to read as set forth above.

0
36. Add subparts D and E to read as follows:

Subpart D [Reserved]

Subpart E--Transforming Episode Accountability Model (TEAM)

Sec.

General

512.500 Basis and scope of subpart.
512.505 Definitions.

TEAM Participation

512.510 Voluntary opt-in participation.
512.515 Geographic areas.
512.520 Participation tracks.
512.522 APM options.

Scope of Episodes Being Tested

512.525 Episodes.
512.535 Beneficiary inclusion criteria.
512.537 Determination of the episode.

Pricing Methodology

512.540 Determination of preliminary target prices.
512.545 Determination of reconciliation target prices.

Quality Measures and Composite Quality Score

512.547 Quality measures, composite quality score, and display of 
quality measures.

Reconciliation and Review Process

512.550 Reconciliation process and determination of the 
reconciliation payment or repayment amount.
512.552 Treatment of incentive programs or add-on payments under 
existing Medicare payment systems.
512.555 Proration of payments for services that extend beyond an 
episode.
512.560 Appeals process.
512.561 Reconsideration review processes.

Data Sharing and Other Requirements

512.562 Data sharing with TEAM participants.
512.563 Health equity reporting.
512.564 Referral to primary care services.

Financial Arrangements and Beneficiary Incentives

512.565 Sharing arrangements.
512.568 Distribution arrangements.
512.570 Downstream distribution arrangements.
512.575 TEAM beneficiary incentives.
512.576 Application of the CMS-sponsored model arrangements and 
patient incentives safe harbor.

Medicare Program Waivers

512.580 TEAM Medicare Program waivers.

General Provisions

512.582 Beneficiary protections.
512.584 Cooperation in model evaluation and monitoring.
512.586 Audits and record retention.
512.588 Rights in data and intellectual property.
512.590 Monitoring and compliance.
512.592 Remedial action.
512.594 Limitations on review.
512.595 Bankruptcy and other notifications.
512.596 Termination of TEAM or TEAM participant from model by CMS.
512.598 Decarbonization and resilience initiative.

General


Sec.  512.500  Basis and scope of subpart.

    (a) Basis. This subpart implements the test of the Transforming 
Episode Accountability Model (TEAM) under section 1115A(b) of the Act. 
Except as specifically noted in this part, the regulations under this 
subpart do not affect the applicability of other provisions affecting 
providers and suppliers under Medicare FFS, including the applicability 
of provisions regarding payment, coverage, and program integrity.
    (b) Scope. This subpart sets forth the following:
    (1) Participation in TEAM.
    (2) Scope of episodes being tested.
    (3) Pricing methodology.
    (4) Quality measures and quality reporting requirements.
    (5) Reconciliation and review processes.
    (6) Data sharing and other requirements
    (7) Financial arrangements and beneficiary incentives.
    (8) Medicare program waivers
    (9) Beneficiary protections.
    (10) Cooperation in model evaluation and monitoring.
    (11) Audits and record retention.
    (12) Rights in data and intellectual property.
    (13) Monitoring and compliance.
    (14) Remedial action.
    (15) Limitations on review.
    (16) Miscellaneous provisions on bankruptcy and other 
notifications.
    (17) Model termination by CMS.
    (18) Decarbonization and resilience initiative.


Sec.  512.505  Definitions.

    For the purposes of this part, the following definitions are 
applicable unless otherwise stated:
    AAPM stands for Advanced Alternative Payment Model.
    AAPM option means the advanced alternative payment model option of 
TEAM for Track 2 and Track 3 TEAM participants that provide their CMS 
EHR Certification ID and attest to their use of CEHRT in accordance 
with Sec.  512.522.
    ACO means an accountable care organization, as defined at Sec.  
425.20 of this chapter.
    ACO participant has the meaning set forth in Sec.  425.20 of this 
chapter.
    ACO provider/supplier has the meaning set forth in Sec.  425.20 of 
this chapter.

[[Page 69915]]

    Acute care hospital means a provider subject to the prospective 
payment system specified in Sec.  412.1(a)(1) of this chapter.
    Age bracket risk adjustment factor means the coefficient of risk 
associated with a patient's age bracket, calculated as described in 
Sec.  512.545(a)(1).
    Aggregated reconciliation target price refers to the sum of the 
reconciliation target prices for all episodes attributed to a given 
TEAM participant for a given performance year.
    Alignment payment means a payment from a TEAM collaborator to a 
TEAM participant under a sharing arrangement, for the sole purpose of 
sharing the TEAM participant's responsibility for making repayments to 
Medicare.
    AMI stands for acute myocardial infarction
    Anchor hospitalization means the initial hospital stay upon 
admission for an episode category included in TEAM, as described in 
Sec.  512.525(c), for which the institutional claim is billed through 
the inpatient prospective payment system (IPPS).
    Anchor procedure means a procedure related to an episode category, 
as described in Sec.  512.525(c), included in TEAM that is permitted 
and paid for by Medicare when performed in a hospital outpatient 
department (HOPD) and billed through the Hospital Outpatient 
Prospective Payment System (OPPS).
    ADI stands for Area Deprivation Index.
    APM stands for Alternative Payment Model.
    APM Entity means an entity as defined in Sec.  414.1305 of this 
chapter.
    Baseline episode spending refers to total episode spending by all 
providers and suppliers associated with a given MS-DRG/HCPCS episode 
type for all hospitals in a given region during the baseline period.
    Baseline period means the 3-year historical period used to 
construct the preliminary target price and reconciliation target price 
for a given performance year.
    Baseline year means any one of the 3 years included in the baseline 
period.
    Benchmark price means average standardized episode spending by all 
providers and suppliers associated with a given MS-DRG/HCPCS episode 
type for all hospitals in a given region during the applicable baseline 
period.
    Beneficiary means an individual who is enrolled in Medicare FFS.
    Beneficiary who is dually eligible means a beneficiary enrolled in 
both Medicare and full Medicaid benefits.
    BPCI stands for Bundled Payments for Care Improvement, which was an 
episode_based payment initiative with four models tested by the CMS 
Innovation Center from April 2013 to September 2018.
    BPCI Advanced stands for the Bundled Payments for Care Improvement 
Advanced Model, which is an episode-based payment model tested by the 
CMS Innovation Center from October 2018 to December 2025.
    CABG (Coronary Artery Bypass Graft Surgery) means any coronary 
revascularization procedure paid through the IPPS under MS-DRGs 231-
236, including both elective CABG and CABG procedures performed during 
initial acute myocardial infarction (AMI) treatment.
    CCN stands for CMS certification number.
    CEHRT means certified electronic health record technology that 
meets the requirements set forth in Sec.  414.1305 of this chapter.
    Change in control means any of the following:
    (1) The acquisition by any ``person'' (as this term is used in 
sections 13(d) and 14(d) of the Securities Exchange Act of 1934) of 
beneficial ownership (within the meaning of Rule 13d-3 promulgated 
under the Securities Exchange Act of 1934), directly or indirectly, of 
voting securities of the TEAM participant representing more than 50 
percent of the TEAM participant's outstanding voting securities or 
rights to acquire such securities.
    (2) The acquisition of the TEAM participant by any individual or 
entity.
    (3) The sale, lease, exchange, or other transfer (in one 
transaction or a series of transactions) of all or substantially all of 
the assets of the TEAM participant.
    (4) The approval and completion of a plan of liquidation of the 
TEAM participant, or an agreement for the sale or liquidation of the 
TEAM participant.
    CJR stands for the Comprehensive Care for Joint Replacement Model, 
which is an episode-based payment model tested by the CMS Innovation 
Center from April 2016 to December 2024.
    Clinician engagement list means the list of eligible clinicians or 
MIPS eligible clinicians that participate in TEAM activities and have a 
contractual relationship with the TEAM participant, and who are not 
listed on the financial arrangements list, as described in Sec.  
512.522(c).
    CMS Electronic Health Record (EHR) Certification ID means the 
identification number that represents the combination of Certified 
Health Information Technology that is owned and used by providers and 
hospitals to provide care to their patients and is generated by the 
Certified Health Information Technology Product List.
    Collaboration agent means an individual or entity that is not a 
TEAM collaborator and that is either of the following:
    (1) A member of a PGP, NPPGP, or TGP that has entered into a 
distribution arrangement with the same PGP, NPPGP, or TGP in which he 
or she is an owner or employee, and where the PGP, NPPGP, or TGP is a 
TEAM collaborator.
    (2) An ACO participant or ACO provider/supplier that has entered 
into a distribution arrangement with the same ACO in which it is 
participating, and where the ACO is a TEAM collaborator.
    Composite quality score (CQS) means a score computed for each TEAM 
participant to summarize the TEAM participant's level of quality 
performance and improvement on specified quality measures as described 
in Sec.  512.547.
    Core-based statistical area (CBSA) means a statistical geographic 
entity defined by the Office of Management and Budget (OMB) consisting 
of the county or counties associated with at least one core (urbanized 
area or urban cluster) of at least 10,000 population, plus adjacent 
counties having a high degree of social and economic integration with 
the core as measured through commuting ties with the counties 
containing the core.
    CORF stands for comprehensive outpatient rehabilitation facility.
    Covered services means the scope of health care benefits described 
in sections 1812 and 1832 of the Act for which payment is available 
under Part A or Part B of Title XVIII of the Act.
    Critical access hospital (CAH) means a hospital designated under 
subpart F of part 485 of this chapter.
    CQS adjustment amount means the amount subtracted from the positive 
or negative reconciliation amount to generate the reconciliation 
payment or repayment amount.
    CQS adjustment percentage means the percentage CMS applies to the 
positive or negative reconciliation amount based on the TEAM 
participant's CQS performance.
    CQS baseline period means the time period used to benchmark quality 
measure performance.
    Days means calendar days.
    Decarbonization and Resilience Initiative means an initiative for 
TEAM participants that includes technical assistance on decarbonization 
and a voluntary reporting program where TEAM participants may annually 
report

[[Page 69916]]

metrics and questions related to emissions in accordance with Sec.  
512.598.
    Descriptive TEAM materials and activities means general audience 
materials such as brochures, advertisements, outreach events, letters 
to beneficiaries, web pages, mailings, social media, or other materials 
or activities distributed or conducted by or on behalf of the TEAM 
participant or its downstream participants when used to educate, 
notify, or contact beneficiaries regarding TEAM. All of the following 
communications are not descriptive TEAM materials and activities:
    (1) Communications that do not directly or indirectly reference 
TEAM (for example, information about care coordination generally).
    (2) Information on specific medical conditions.
    (3) Referrals for health care items and services, except as 
required by Sec.  512.564.
    (4) Any other materials that are excepted from the definition of 
``marketing'' as that term is defined at 45 CFR 164.501.
    Discount factor means a set percentage included in the preliminary 
target price and reconciliation target price intended to reflect 
Medicare's potential savings from TEAM.
    Distribution arrangement means a financial arrangement between a 
TEAM collaborator that is an ACO, PGP, NPPGP, or TGP and a 
collaboration agent for the sole purpose of distributing some or all of 
a gainsharing payment received by the ACO, PGP, NPPGP, or TGP.
    Distribution payment means a payment from a TEAM collaborator that 
is an ACO, PGP, NPPGP, or TGP to a collaboration agent, under a 
distribution arrangement, composed only of gainsharing payments.
    DME stands for durable medical equipment.
    Downstream collaboration agent means an individual who is not a 
TEAM collaborator or a collaboration agent and who is a member of a 
PGP, NPPGP, or TGP that has entered into a downstream distribution 
arrangement with the same PGP, NPPGP, or TGP in which he or she is an 
owner or employee, and where the PGP, NPPGP, or TGP is a collaboration 
agent.
    Downstream distribution arrangement means a financial arrangement 
between a collaboration agent that is both a PGP, NPPGP, or TGP and an 
ACO participant and a downstream collaboration agent for the sole 
purpose of sharing a distribution payment received by the PGP, NPPGP, 
or TGP.
    Downstream participant means an individual or entity that has 
entered into a written arrangement with a TEAM participant, TEAM 
collaborator, collaboration agent, or downstream collaboration agent 
under which the downstream participant engages in one or more TEAM 
activities.
    EHR stands for electronic health record.
    Eligible clinician means a clinician as defined in Sec.  414.1305 
of this chapter.
    Episode category means one of the five episodes tested in TEAM as 
described at Sec.  512.525(d).
    Episode means all Medicare Part A and B items and services 
described in Sec.  512.525(e) (and excluding the items and services 
described in Sec.  512.525(f)) that are furnished to a beneficiary 
described in Sec.  512.535 during the time period that begins on the 
date of the beneficiary's admission to an anchor hospitalization or the 
date of the anchor procedure, as described at Sec.  512.525(c), and 
ends on the 30th day following the date of discharge from the anchor 
hospitalization or anchor procedure, with the date of discharge or date 
of the anchor procedure itself being counted as the first day in the 
30-day post-discharge period, as described at Sec.  512.537. If an 
anchor hospitalization is initiated on the same day as or in the 3 days 
following an outpatient procedure that could initiate an anchor 
procedure for the same episode category, the outpatient procedure 
initiates an anchor hospitalization and the anchor hospitalization 
start date is that of the outpatient procedure.
    Essential access community hospital means a hospital as defined 
under Sec.  412.109 of this chapter.
    Final normalization factor refers to the national mean of the 
benchmark price for each MS-DRG/HCPCS episode type divided by the 
national mean of the risk-adjusted benchmark price for the same MS-DRG/
HCPCS episode type.
    Financial arrangements list means the list of eligible clinicians 
or MIPS eligible clinicians that have a financial arrangement with the 
TEAM participant, TEAM collaborator, collaboration agent, and 
downstream collaboration agent, as described in Sec.  512.522(b).
    Gainsharing payment means a payment from a TEAM participant to a 
TEAM collaborator, under a sharing arrangement, composed of only 
reconciliation payments, internal cost savings, or both.
    HCPCS stands for Healthcare Common Procedure Coding System, which 
is used to bill for items and services.
    Health disparities mean preventable differences in the burden of 
disease, injury, violence, or opportunities to achieve optimal health, 
health quality, or health outcomes that are experienced by one or more 
underserved communities within the TEAM participant's population of 
TEAM beneficiaries that the TEAM participant will aim to reduce.
    Health equity goal means a targeted outcome relative to health 
equity plan performance measures.
    Health equity plan means a document that identifies health equity 
goals, intervention strategies, and performance measures to improve 
health disparities identified within the TEAM participant's population 
of TEAM beneficiaries that the TEAM participant will aim to reduce as 
described in Sec.  512.563.
    Health equity plan intervention strategy means the initiative the 
TEAM participant creates and implements to reduce the identified health 
disparities as part of the health equity plan.
    Health equity plan performance measure means a quantitative metric 
that the TEAM participant uses to measure changes in health disparities 
arising from the health equity plan intervention strategies.
    Health-related social need means an unmet, adverse social condition 
that can contribute to poor health outcomes and is a result of 
underlying social determinants of health, which refer to the conditions 
in the environments where people are born, live, learn, work, play, 
worship, and age that affect a wide range of health, functioning, and 
quality-of-life outcomes and risks.
    HHA means a Medicare-enrolled home health agency.
    High-cost outlier cap refers to the 99th percentile of regional 
spending for a given MS-DRG/HCPCS episode type in a given region, which 
is the amount at which episode spending would be capped for purposes of 
determining baseline and performance year episode spending.
    Hospital means a hospital as defined in section 1886(d)(1)(B) of 
the Act.
    Hospital discharge planning means the standards set forth in Sec.  
482.43 of this chapter.
    ICD-CM stands for International Classification of Diseases, 
Clinical Modification.
    Internal cost savings means the measurable, actual, and verifiable 
cost savings realized by the TEAM participant resulting from care 
redesign undertaken by the TEAM participant in connection with 
providing items and services to TEAM beneficiaries within an episode. 
Internal cost savings does not include savings realized by any 
individual or entity that is not the TEAM participant.

[[Page 69917]]

    IPF stands for inpatient psychiatric facility.
    IPPS stands for Inpatient Prospective Payment System, which is the 
payment system for subsection (d) hospitals as defined in section 
1886(d)(1)(B) of the Act.
    IRF stands for inpatient rehabilitation facility.
    LIS stands for Medicare Part D Low-Income Subsidy.
    Lower-Extremity Joint Replacement (LEJR) means any hip, knee, or 
ankle replacement that is paid under MS-DRG 469, 470, 521, or 522 
through the IPPS or HCPCS code 27447, 27130, or 27702 through the OPPS.
    LTCH stands for long-term care hospital.
    Major Bowel Procedure means any small or large bowel procedure paid 
through the IPPS under MS-DRG 329-331.
    Mandatory CBSA means a core-based statistical area selected by CMS 
in accordance with Sec.  512.515 where all eligible hospitals are 
required to participate in TEAM.
    MDC stands for Major Diagnostic Category.
    Medically necessary means reasonable and necessary for the 
diagnosis or treatment of an illness or injury, or to improve the 
functioning of a malformed body member.
    Medicare Severity Diagnosis-Related Group (MS-DRG) means, for the 
purposes of this model, the classification of inpatient hospital 
discharges updated in accordance with Sec.  412.10 of this chapter.
    Medicare-dependent, small rural hospital (MDH) means a specific 
type of hospital that meets the classification criteria specified under 
Sec.  412.108 of this chapter.
    Member of the NPPGP or NPPGP member means a nonphysician 
practitioner or therapist who is an owner or employee of an NPPGP and 
who has reassigned to the NPPGP his or her right to receive Medicare 
payment.
    Member of the PGP or PGP member means a physician, nonphysician 
practitioner, or therapist who is an owner or employee of the PGP and 
who has reassigned to the PGP his or her right to receive Medicare 
payment.
    Member of the TGP or TGP member means a therapist who is an owner 
or employee of a TGP and who has reassigned to the TGP his or her right 
to receive Medicare payment.
    MIPS stands for Merit-based Incentive Payment System.
    MIPS eligible clinician means a clinician as defined in Sec.  
414.1305 of this chapter.
    Model performance period means the 60-month period from January 1, 
2026, to December 31, 2030, during which TEAM is being tested and the 
TEAM participant is held accountable for spending and quality.
    Model start date means January 1, 2026, the start of the model 
performance period.
    MS-DRG/HCPCS episode type refers to the subset of episodes within 
an episode category that are associated with a given MS-DRG/HCPCS, as 
set forth at Sec.  512.540(a)(1).
    Non-AAPM option means the option of TEAM for TEAM participants in 
Track 1 or for TEAM participants in Track 2 or Track 3 that do not 
attest to use of CEHRT as described in Sec.  512.522.
    Nonphysician practitioner means one of the following:
    (1) A physician assistant who satisfies the qualifications set 
forth at Sec.  410.74(a)(2)(i) and (ii) of this chapter.
    (2) A nurse practitioner who satisfies the qualifications set forth 
at Sec.  410.75(b) of this chapter.
    (3) A clinical nurse specialist who satisfies the qualifications 
set forth at Sec.  410.76(b) of this chapter.
    (4) A certified registered nurse anesthetist (as defined at Sec.  
410.69(b) of this chapter).
    (5) A clinical social worker (as defined at Sec.  410.73(a) of this 
chapter).
    (6) A registered dietician or nutrition professional (as defined at 
Sec.  410.134 of this chapter).
    NPI stands for National Provider Identifier.
    NPPGP stands for Non-Physician Provider Group Practice, which means 
an entity that is enrolled in Medicare as a group practice, includes at 
least one owner or employee who is a nonphysician practitioner, does 
not include a physician owner or employee, and has a valid and active 
TIN.
    NPRA stands for Net Payment Reconciliation Amount, which means the 
dollar amount representing the difference between the reconciliation 
target price and performance year spending, after adjustments for 
quality and stop-gain/stop-loss limits, but prior to the post-episode 
spending adjustment.
    OIG stands for the Department of Health and Human Services Office 
of the Inspector General.
    OP means an outpatient procedure for which the institutional claim 
is billed by the hospital through the OPPS.
    OPPS stands for the Outpatient Prospective Payment System.
    PAC stands for post-acute care.
    PBPM stands for per-beneficiary-per-month.
    Performance year means a 12-month period beginning on January 1 and 
ending on December 31 of each year during the model performance period.
    Performance year spending means the sum of standardized Medicare 
claims payments during the performance year for the items and services 
that are included in the episode in accordance with Sec.  512.525(e), 
excluding the items and services described in Sec.  512.525(f).
    PGP stands for physician group practice.
    Physician has the meaning set forth in section 1861(r) of the Act.
    Post-episode spending amount means the sum of all Medicare Parts A 
and B payments for items and services furnished to a beneficiary within 
30 days after the end of an episode and includes the prorated portion 
of services that began during the episode and extended into the 30-day 
post-episode period.
    Preliminary target price refers to the target price provided to the 
TEAM participant prior to the start of the performance year, which is 
subject to adjustment at reconciliation, as set forth at Sec.  512.540.
    Primary care services has the meaning set forth in section 
1842(i)(4) of the Act.
    Prospective normalization factor refers to the multiplier 
incorporated into the preliminary target price to ensure that the 
average of the total risk-adjusted preliminary target price does not 
exceed the average of the total non-risk adjusted preliminary target 
price, calculated as set forth in Sec.  512.540(b)(6).
    Prospective trend factor refers to the multiplier incorporated into 
the preliminary target price to estimate changes in spending patterns 
between the baseline period and the performance year, calculated as set 
forth in Sec.  512.540(b)(7).
    Provider means a ``provider of services'' as defined under section 
1861(u) of the Act and codified in the definition of ``provider'' at 
Sec.  400.202 of this chapter.
    Provider of outpatient therapy services means an entity that is 
enrolled in Medicare as a provider of therapy services and furnishes 
one or more of the following:
    (1) Outpatient physical therapy services as defined in Sec.  410.60 
of this chapter.
    (2) Outpatient occupational therapy services as defined in Sec.  
410.59 of this chapter.
    (3) Outpatient speech-language pathology services as defined in 
Sec.  410.62 of this chapter.
    QP stands for Qualifying APM Participant as defined in Sec.  
414.1305 of this chapter.
    Quality-adjusted reconciliation amount refers to the dollar amount 
representing the difference between the reconciliation target price and

[[Page 69918]]

performance year spending, after adjustments for quality, but prior to 
application of stop-gain/stop-loss limits and the post-episode spending 
adjustment.
    Raw quality measure score means the quality measure value as 
obtained from the Hospital Inpatient Quality Reporting Program and the 
Hospital-Acquired Condition Reduction Program.
    Reconciliation amount means the dollar amount representing the 
difference between the reconciliation target price and performance year 
spending, prior to adjustments for quality, stop-gain/stop-loss limits, 
and post-episode spending.
    Reconciliation payment amount means the amount that CMS may owe to 
a TEAM participant after reconciliation as determined in accordance 
with Sec.  512.550(g).
    Reconciliation target price means the target price applied to an 
episode at reconciliation, as determined in accordance with Sec.  
512.545.
    Region means one of the nine U.S. census divisions, as defined by 
the U.S. Census Bureau.
    Reorganization event refers to a merger, consolidation, spin off or 
other restructuring that results in a new hospital entity under a given 
CCN.
    Repayment amount means the amount that the TEAM participant may owe 
to Medicare after reconciliation as determined in accordance with Sec.  
512.550(g).
    Retrospective trend factor refers to the multiplier incorporated 
into the reconciliation target price to estimate realized changes in 
spending patterns during the performance year, calculated as set forth 
in Sec.  512.545(f).
    Rural hospital means an IPPS hospital that meets one of the 
following criteria:
    (1) Is located in a rural area as defined under Sec.  412.64 of 
this chapter.
    (2) Is located in a rural census tract defined under Sec.  
412.103(a)(1) of this chapter.
    Safety Net hospital means an IPPS hospital that meets at least one 
of the following criteria:
    (1) Exceeds the 75th percentile of the proportion of Medicare 
beneficiaries considered dually eligible for Medicare and Medicaid 
across all PPS acute care hospitals in the baseline period.
    (2) Exceeds the 75th percentile of the proportion of Medicare 
beneficiaries partially or fully eligible to receive Part D low-income 
subsidies across all PPS acute care hospitals in the baseline period.
    Scaled quality measure score means the score equal to the 
percentile to which the TEAM participant's raw quality measure score 
would have belonged in the CQS baseline period.
    Sharing arrangement means a financial arrangement between a TEAM 
participant and a TEAM collaborator for the sole purpose of making 
gainsharing payments or alignment payments under TEAM.
    SNF stands for skilled nursing facility.
    Sole community hospital (SCH) means a hospital that meets the 
classification criteria specified in Sec.  412.92 of this chapter.
    Spinal Fusion means any cervical, thoracic, or lumbar spinal fusion 
procedure paid through the IPPS under MS-DRG 402, 426, 427, 428, 429, 
430, 447, 448, 450, 451, 471, 472, or 473, or through the OPPS under 
HCPCS codes 22551, 22554, 22612, 22630, or 22633.
    Supplier means a supplier as defined in section 1861(d) of the Act 
and codified at Sec.  400.202 of this chapter.
    Surgical Hip and Femur Fracture Treatment (SHFFT) means a hip 
fixation procedure, with or without fracture reduction, but excluding 
joint replacement, that is paid through the IPPS under MS-DRGs 480-482.
    TAA stands for total ankle arthroplasty.
    TEAM activities mean any activity related to promoting 
accountability for the quality, cost, and overall care for TEAM 
beneficiaries and performance in the model, including managing and 
coordinating care; encouraging investment in infrastructure and 
redesigned care processes for high quality and efficient service 
delivery; or carrying out any other obligation or duty under the model.
    TEAM beneficiary means a beneficiary who meets the beneficiary 
inclusion criteria in Sec.  512.535 and who is in an episode.
    TEAM collaborator means an ACO or one of the following Medicare-
enrolled individuals or entities that enters into a sharing 
arrangement:
    (1) SNF.
    (2) HHA.
    (3) LTCH.
    (4) IRF.
    (5) Physician.
    (6) Nonphysician practitioner.
    (7) Therapist in private practice.
    (8) CORF.
    (9) Provider of outpatient therapy services.
    (10) PGP.
    (11) Hospital.
    (12) CAH.
    (13) NPPGP.
    (14) Therapy Group Practice (TGP).
    TEAM data sharing agreement means an agreement entered into between 
the TEAM participant and CMS that includes the terms and conditions for 
any beneficiary-identifiable data shared with the TEAM participant 
under Sec.  512.562.
    TEAM HCC count refers to the TEAM Hierarchical Condition Category 
count, which is a categorical risk adjustment variable designed to 
reflect a beneficiary's overall health status during a lookback period 
by grouping similar diagnoses into one related category and counting 
the total number of diagnostic categories that apply to the 
beneficiary.
    TEAM participant means an acute care hospital that either--
    (1) Initiates episodes and is paid under the IPPS with a CCN 
primary address located in one of the mandatory CBSAs selected for 
participation in TEAM in accordance with Sec.  512.515; or
    (2) Makes a voluntary opt-in participation election to participate 
in TEAM in accordance with Sec.  512.510 and is accepted to participate 
in TEAM by CMS.
    TEAM payment means a payment made by CMS only to TEAM participants, 
or a payment adjustment made only to payments made to TEAM 
participants, under the terms of TEAM that is not applicable to any 
other providers or suppliers.
    TEAM reconciliation report means the report prepared after each 
reconciliation that CMS provides to the TEAM participant notifying the 
TEAM participant of the outcome of the reconciliation.
    TGP or therapy group practice means an entity that is enrolled in 
Medicare as a therapy group in private practice, includes at least one 
owner or employee who is a therapist in private practice, does not 
include an owner or employee who is a physician or nonphysician 
practitioner, and has a valid and active TIN.
    THA means total hip arthroplasty.
    Therapist means one of the following individuals as defined at 
Sec.  484.4 of this chapter:
    (1) Physical therapist.
    (2) Occupational therapist.
    (3) Speech-language pathologist.
    Therapist in private practice means a therapist that--
    (1) Complies with the special provisions for physical therapists in 
private practice in Sec.  410.60(c) of this chapter;
    (2) Complies with the special provisions for occupational 
therapists in private practice in Sec.  410.59(c) of this chapter; or
    (3) Complies with the special provisions for speech-language 
pathologists in private practice in Sec.  410.62(c) of this chapter.

[[Page 69919]]

    TIN stands for taxpayer identification number.
    TKA stands for total knee arthroplasty.
    Track 1 means a participation track in TEAM in which any TEAM 
participant may participate for the first performance year and only 
TEAM participants who are a safety net hospital, as defined in Sec.  
512.505, may participate for performance years 1 through 3 of the 
model. TEAM participants in Track 1 are subject to all of the 
following:
    (1) CQS adjustment percentage described in Sec.  512.550(d)(1)(i).
    (2) Limitations on gain described in Sec.  512.550(e)(2).
    (3) The calculation of the reconciliation payment described in 
Sec.  512.550(g).
    Track 2 means a participation track in TEAM in which certain TEAM 
participants, as described in Sec.  512.520(b)(4), may request to 
participate in for performance years 2 through 5. TEAM participants in 
Track 2 are subject to all of the following:
    (1) CQS adjustment percentage described in Sec.  512.550(d)(1)(ii).
    (2) Limitations on gain and loss described in Sec.  512.550(e)(2) 
and Sec.  512.550(e)(3).
    (3) The calculation of the reconciliation payment or repayment 
amount described in Sec.  512.550(g).
    Track 3 means a participation track in TEAM in which a TEAM 
participant may participate in for performance years 1 through 5. TEAM 
participants in Track 3 are subject to all of the following:
    (1) CQS adjustment percentage described in Sec.  
512.550(d)(1)(iii).
    (2) Limitations on loss and gain described in Sec.  512.550(e)(1) 
and in Sec.  512.550(e)(2).
    (3) The calculation of the reconciliation payment or repayment 
amount described in Sec.  512.550(g).
    Underserved community means a population sharing a particular 
characteristic, including geography, that has been systematically 
denied a full opportunity to participate in aspects of economic, 
social, and civic life.
    U.S. Territories means American Samoa, the Federated States of 
Micronesia, Guam, the Marshall Islands, and the Commonwealth of the 
Northern Mariana Islands, Palau, Puerto Rico, U.S. Minor Outlying 
Islands, and the U.S. Virgin Islands.
    Weighted scaled score means the scaled quality measure score 
multiplied by its normalized weight.

TEAM Participation


Sec.  512.510  Voluntary opt-in participation.

    (a) General. Hospitals that wish to voluntarily opt-in to TEAM for 
the full duration of the model performance period must submit a written 
participation election letter as described in paragraph (d) of this 
section during the voluntary participation election period specified in 
paragraph (c) of this section.
    (b) Eligibility. A hospital must not be located in a mandatory CBSA 
selected for TEAM participation, in accordance with Sec.  512.515, and 
must satisfy one of the following criteria to be eligible for voluntary 
opt-in participation election--
    (1) Be a participant hospital in the CJR model that participates in 
CJR until the last day of the last performance year, December 31, 2024; 
or
    (2) Be a hospital participating in the BPCI Advanced model, either 
as a participant or downstream episode initiator, that participates in 
BPCI Advanced until the last day of the last performance period, 
December 31, 2025.
    (c) Voluntary participation election period. The voluntary 
participation election period begins on January 1, 2025 and ends on 
January 31, 2025.
    (d) Voluntary participation election letter. The voluntary 
participation election letter serves as the model participation 
agreement. CMS may accept the voluntary participation election letter 
if the letter meets all of the following criteria:
    (1) Includes all of the following:
    (i) Hospital name.
    (ii) Hospital address.
    (iii) Hospital CCN.
    (iv) Hospital contact name, telephone number, and email address.
    (v) Model name (TEAM).
    (2) Includes a certification that the hospital will--
    (i) Comply with all applicable requirements of this part and all 
other laws and regulations applicable to its participation in TEAM; and
    (ii) Submit data or information to CMS that is accurate, complete 
and truthful, including, but not limited to, the participation election 
letter and any other data or information that CMS uses for purposes of 
TEAM.
    (3) Is signed by the hospital administrator, chief financial 
officer, or chief executive officer with authority to bind the 
hospital.
    (4) Is submitted in the form and manner specified by CMS.
    (e) CMS rejection of participation letter. CMS may reject a 
participation election letter for reasons including, but not limited 
to, program integrity concerns or ineligibility, and notifies the 
hospital of the rejection within 30 days of the determination.


Sec.  512.515  Geographic areas.

    (a) General. CMS uses stratified random sampling to select the 
mandatory CBSAs included in TEAM.
    (b) Exclusions. CMS excludes from the selection of geographic areas 
CBSAs that meet any of the following criteria:
    (1) Are located entirely in the State of Maryland.
    (2) Are located partially in Maryland, and in which more than 50 
percent of the five episode categories tested in TEAM were initiated at 
a Maryland hospital between January 1, 2022 and June 30, 2023.
    (3) Did not have at least one episode for at least one of the five 
episode categories tested in TEAM between January 1, 2022 and June 30, 
2023.
    (c) Stratification. (1) Based on the median for each of the 
following four metrics, CMS designates the CBSAs that are not excluded 
in accordance with paragraph (b) of this section as ``high'' and 
``low'':
    (i) Average episode spend for a broad set of episode categories 
tested in the BPCI Advanced Model, as described in Sec.  512.505, 
between January 1, 2022 and June 30, 2023.
    (ii) Number of acute care hospitals paid under the IPPS between 
January 1, 2022 and June 30, 2023.
    (iii) Past exposure to CMS' bundled payment models, which are 
Bundled Payments for Care Improvement (BPCI) Models 2, 3, and 4, as 
described in Sec.  512.505, Comprehensive Care for Joint Replacement 
(CJR) as described in Sec.  512.505, or BPCI Advanced between October 
1, 2013 and December 31, 2022.
    (iv) Number of Safety Net hospitals in 2022 that have initiated at 
least one episode between January 1, 2022 and June 30, 2023 for at 
least one of the five episode categories tested in TEAM.
    (2)(i) CMS stratifies the CBSAs into mutually exclusive groups 
corresponding to the 16 unique combinations of these ``high'' and 
``low'' designations.
    (ii) CMS assigns selection probabilities ranging from 20 percent to 
33.3 percent to each of the 16 strata, with a higher selection 
probability for strata containing CBSAs with a high number of safety 
net hospitals or low past exposure to bundles and a lower selection 
probability for all other strata.
    (3)(i) CMS recategorizes outlier CBSAs in these 16 strata with a 
very high number of safety net hospitals into a 17th stratum.
    (ii) CMS assigns a selection probability of 50 percent to the 17th 
stratum.

[[Page 69920]]

    (4)(i) CMS recategorizes CBSAs still remaining in the first 16 
strata with at least one hospital participating in BPCI Advanced or CJR 
as of January 1, 2024 or those located in the states of Vermont, 
Connecticut, or Hawaii into an 18th stratum.
    (ii) CMS assigns a selection probability of 20 percent to the 18th 
stratum.
    (d) Random selection into TEAM. CMS randomly selects mandatory 
CBSAs into TEAM from each of the 18 strata according to selection 
probabilities described in paragraph (c) of this section.


Sec.  512.520  Participation tracks.

    (a) For performance year 1: (1) Any TEAM participant may choose to 
participate in Track 1 or Track 3.
    (2) The TEAM participant must notify CMS of its track choice, prior 
to performance year 1, in a form and manner and by a date specified by 
CMS.
    (3) CMS assigns the TEAM participant to Track 1 for performance 
year 1 if a TEAM participant does not choose a track in the form and 
manner and by the date specified by CMS.
    (b) For performance years 2 through 5: (1) CMS assigns a TEAM 
participant to participate in Track 3 unless the TEAM participant 
requests to participate in Track 1 or Track 2 and receives approval 
from CMS to participate in Track 1 or Track 2, with the exception that 
a TEAM participant cannot request participation in Track 1 for 
performance years 4 and 5.
    (2) The TEAM participant must notify CMS of its Track 1 or Track 2 
request prior to performance year 2, and prior to every performance 
year thereafter, as applicable, in a form and manner and by a date 
specified by CMS.
    (3) CMS does not approve a TEAM participant's request to 
participate in Track 1 submitted in accordance with paragraph (b)(2) of 
this section unless the TEAM participant is a safety net hospital, as 
defined in Sec.  512.505, at the time of the request.
    (4) CMS does not approve a TEAM participant's request to 
participate in Track 2 submitted in accordance with paragraph (b)(2) of 
this section unless the TEAM participant is one of the following 
hospital types at the time of the request:
    (i) Medicare-dependent hospital (as defined in Sec.  512.505).
    (ii) Rural hospital (as defined in Sec.  512.505).
    (iii) Safety Net hospital (as defined in Sec.  512.505).
    (iv) Sole community hospital (as defined in Sec.  512.505).
    (v) Essential access community hospital (as defined in Sec.  
512.505).
    (5) A TEAM participant who does not notify CMS of its Track 1 or 
Track 2 request prior to a given performance year in the form and 
manner and by the date specified by CMS or who is not a safety net 
hospital, as defined as defined in Sec.  512.505, or one of the 
hospital types specified in paragraph (b)(4) of this section at the 
time of the request is assigned to Track 3 for the applicable 
performance year.


Sec.  512.522  APM options.

    (a) TEAM APM options. For performance years 1 through 5, a TEAM 
participant may choose either of the following options based on their 
CEHRT use and track participation:
    (1) AAPM option. A TEAM participant participating in Track 2 or 
Track 3 may select the AAPM option by attesting in a form and manner 
and by a date specified by CMS to their use of CEHRT, as defined in 
Sec.  414.1305 of this chapter, on an annual basis prior to the start 
of each performance year.
    (i) A TEAM participant that selects the AAPM option as provided for 
in paragraph (a)(1) must provide their CMS electronic health record 
certification ID in a form and manner and by a date specified by CMS on 
annual basis prior to the end of each performance year.
    (ii) A TEAM participant that selects the AAPM option as provided 
for in paragraph (a)(1) must retain documentation of their attestation 
to CEHRT use and provide access to the documentation in accordance with 
Sec.  512.586.
    (2) Non-AAPM option. CMS assigns the TEAM participant to the non-
AAPM option if the TEAM participant is in Track 1 or if the TEAM 
participant is in Track 2 or Track 3 and does not attest in a form and 
manner and by a date specified by CMS to their use of CEHRT as defined 
in Sec.  414.1305 of this chapter.
    (b) Financial arrangements list. A TEAM participant with TEAM 
collaborators, collaboration agents, or downstream collaboration agents 
during a performance year must submit to CMS a financial arrangements 
list in a form and manner and by a date specified by CMS on a quarterly 
basis for each performance year. The financial arrangements list must 
include the following:
    (1) TEAM collaborators. For each physician, nonphysician 
practitioner, or therapist who is a TEAM collaborator during the 
performance year:
    (i) The name, TIN, and NPI of the TEAM collaborator.
    (ii) The start date and, if applicable, end date, for the sharing 
arrangement between the TEAM participant and the TEAM collaborator.
    (2) Collaboration agents. For each physician, nonphysician 
practitioner, or therapist who is a collaboration agent during the 
performance year:
    (i) The name, TIN, and NPI of the collaboration agent and the name 
and TIN of the TEAM collaborator with which the collaboration agent has 
entered into a distribution arrangement.
    (ii) The start date and, if applicable, end date, for the 
distribution arrangement between the TEAM collaborator and the 
collaboration agent.
    (3) Downstream collaboration agents. For each physician, 
nonphysician practitioner, or therapist who is a downstream 
collaboration agent during the performance year:
    (i) The name, TIN, and NPI of the downstream collaboration agent 
and the name and TIN of the collaboration agent with which the 
downstream collaboration agent has entered into a downstream 
distribution arrangement.
    (ii) The start date and, if applicable, end date, for the 
downstream distribution arrangement between the collaboration agent and 
the downstream collaboration agent.
    (c) Clinician engagement list. A TEAM participant must submit to 
CMS a clinician engagement list in a form and manner and by a date 
specified by CMS on a quarterly basis during each performance year. The 
clinician engagement list must include the following:
    (1) For each physician, nonphysician practitioner, or therapist who 
is not on a TEAM participant's financial arrangements list during the 
performance year but who does have a contractual relationship with the 
TEAM participant and participates in TEAM activities during the 
performance year:
    (i) The name, TIN, and NPI of the physician, nonphysician 
practitioner, or therapist.
    (ii) The start date and, if applicable, the end date for the 
contractual relationship between the physician, nonphysician 
practitioner, or therapist and the TEAM participant.
    (d) Attestation to no individuals. A TEAM participant with no 
individuals that meet the criteria specified in paragraphs (b)(1) 
through (3) of this section for the financial arrangements list or 
paragraph (c) of this section for the clinician engagement list must 
attest in a form and manner and by a date specified by CMS that there 
are no financial arrangements or clinician engagements to report.
    (e) Documentation requirements. A TEAM participant that submits a 
financial arrangements list specified in paragraph (b) of this section 
or a clinician engagement list specified in

[[Page 69921]]

paragraph (c) of this section must retain and provide access to the 
documentation in accordance with Sec.  512.586.

Scope of Episodes Being Tested


Sec.  512.525  Episodes.

    (a) Time periods. All episodes must begin on or after January 1, 
2026 and end on or before December 31, 2030.
    (b) Episode attribution. All items and services included in the 
episode are attributed to the TEAM participant at which the anchor 
hospitalization or anchor procedure, as applicable, occurs.
    (c) Episode initiation. An episode is initiated by--
    (1) A beneficiary's admission to a TEAM participant for an anchor 
hospitalization that is paid under a MS-DRG specified in paragraph (d) 
of this section; or
    (2) A beneficiary's receipt of an anchor procedure billed under a 
HCPCS code specified in paragraph (d) of this section. If an anchor 
hospitalization is initiated on the same day as or in the 3 days 
following an outpatient procedure that could initiate an anchor 
procedure for the same episode category, the episode start date is that 
of the outpatient procedure rather than the admission date, and an 
anchor procedure is not initiated.
    (d) Episode categories. The MS-DRGs and HCPCS codes included in the 
episodes are as follows:
    (1) Lower Extremity Joint Replacement (LEJR): (i) IPPS discharge 
under MS-DRG 469, 470, 521, or 522; or
    (ii) OPPS claim for HCPCS codes 27447, 27130, or 27702.
    (2) Surgical Hip/Femur Fracture Treatment (SHFFT). IPPS discharge 
under MS-DRG 480 to 482.
    (3) Coronary Artery Bypass Graft Surgery (CABG). IPPS discharge 
under MS-DRG 231 to 236.
    (4) Spinal Fusion: (i) IPPS discharge under MS-DRG 402, 426, 427, 
428, 429, 430, 447, 448, 450, 451, 471, 472, 473; or
    (ii) OPPS claim for HCPCS codes 22551, 22554, 22612, 22630, or 
22633.
    (5) Major Bowel Procedure. IPPS discharge under MS-DRG 329 to 331.
    (e) Included services. All Medicare Part A and B items and services 
are included in the episode, except as specified in paragraph (f) of 
this section. These services include, but are not limited to, the 
following:
    (1) Physicians' services.
    (2) Inpatient hospital services (including hospital readmissions).
    (3) IPF services.
    (4) LTCH services.
    (5) IRF services.
    (6) SNF services.
    (7) HHA services.
    (8) Hospital outpatient services.
    (9) Outpatient therapy services.
    (10) Clinical laboratory services.
    (11) DME.
    (12) Part B drugs and biologicals, except for those excluded under 
paragraph (f) of this section.
    (13) Hospice services.
    (14) Part B professional claims dated in the 3 days prior to an 
anchor hospitalization if a claim for the surgical procedure for the 
same episode category is not detected as part of the hospitalization 
because the procedure was performed by the TEAM participant on an 
outpatient basis, but the patient was subsequently admitted as an 
inpatient.
    (f) Excluded services. The following items, services, and payments 
are excluded from the episode:
    (1) Select items and services considered unrelated to the anchor 
hospitalization or the anchor procedure for episodes in the baseline 
period and performance year, including, but not limited to, the 
following:
    (i) Inpatient hospital admissions for MS-DRGs that group to the 
following categories of diagnoses:
    (A) Oncology.
    (B) Trauma medical.
    (C) Organ transplant.
    (D) Ventricular shunt.
    (ii) Inpatient hospital admissions that fall into the following 
Major Diagnostic Categories (MDCs):
    (A) MDC 02 (Diseases and Disorders of the Eye).
    (B) MDC 14 (Pregnancy, Childbirth, and Puerperium).
    (C) MDC 15 (Newborns).
    (D) MDC 25 (Human Immunodeficiency Virus).
    (2) New technology add-on payments, as defined in part 412, subpart 
F of this chapter for episodes in the baseline period and performance 
year.
    (3) Transitional pass-through payments for medical devices as 
defined in Sec.  419.66 of this chapter for episodes initiated in the 
baseline period and performance year.
    (4) Hemophilia clotting factors provided in accordance with Sec.  
412.115 of this chapter for episodes in the baseline period and 
performance year.
    (5) Part B payments for low-volume drugs, high-cost drugs and 
biologicals, and blood clotting factors for hemophilia for episodes in 
the baseline period and performance year, billed on outpatient, 
carrier, and DME claims, defined as--
    (i) Drug/biological HCPCS codes that are billed in fewer than 31 
episodes in total across all episodes in TEAM during the baseline 
period;
    (ii) Drug/biological HCPCS codes that are billed in at least 31 
episodes in the baseline period and have a mean cost of greater than 
$25,000 per episode in the baseline period; and
    (iii) HCPCS codes corresponding to clotting factors for hemophilia 
patients, identified in the quarterly average sales price file for 
certain Medicare Part B drugs and biologicals as HCPCS codes with 
clotting factor equal to 1, HCPCS codes for new hemophilia clotting 
factors not included in the baseline period, and other HCPCS codes 
identified as hemophilia.
    (6) Part B payments for low-volume drugs, high-cost drugs and 
biologicals, and blood clotting factors for hemophilia for episodes 
initiated in the performance year, billed on outpatient, carrier, and 
DME claims, defined as--
    (i) Drug/biological HCPCS codes that were not captured in the 
baseline period and appear in 10 or fewer episodes in the performance 
year;
    (ii) Drug/biological HCPCS codes that were not included in the 
baseline period, appear in more than 10 episodes in the performance 
year, and have a mean cost of greater than $25,000 per episode in the 
performance year; and
    (iii) Drug/biological HCPCS codes that were not included in the 
baseline period, appear in more than 10 episodes in the performance 
year, have a mean cost of $25,000 or less per episode in the 
performance year, and correspond to a drug/biological that appears in 
the baseline period but was assigned a new HCPCS code between the 
baseline period and the performance year.
    (iv) HCPCS codes for new hemophilia clotting factors not included 
in the baseline period.
    (g) TEAM exclusions List. The list of excluded MS-DRGs, MDCs, and 
HCPCS codes is posted on the CMS website.
    (h) Updating the TEAM exclusions list. The list of excluded 
services is updated through rulemaking to reflect all of the following:
    (1) Changes to the MS-DRGs under the IPPS.
    (2) Coding changes.
    (3) Other issues brought to CMS' attention.


Sec.  512.535  Beneficiary inclusion criteria.

    (a) Episodes tested in TEAM include only those in which care is 
furnished to beneficiaries who meet all of the following criteria upon 
admission for an anchor procedure or anchor hospitalization:
    (1) Are enrolled in Medicare Parts A and B.
    (2) Are not eligible for Medicare on the basis of having end stage 
renal disease, as described in Sec.  406.13 of this chapter.

[[Page 69922]]

    (3) Are not enrolled in any managed care plan (for example, 
Medicare Advantage, health care prepayment plans, or cost-based health 
maintenance organizations).
    (4) Are not covered under a United Mine Workers of America health 
care plan.
    (5) Have Medicare as their primary payer.
    (b) The episode is canceled in accordance with Sec.  512.537(b) if 
at any time during the episode a beneficiary no longer meets all 
criteria in this section.


Sec.  512.537  Determination of the episode.

    (a) Episode conclusion. (1) An episode ends on the 30th day 
following the date of the anchor procedure or the date of discharge 
from the anchor hospitalization, as applicable, with the date of the 
anchor procedure or the date of discharge from the anchor 
hospitalization being counted as the first day in the 30-day post-
discharge period.
    (b) Cancellation of an episode. The episode is canceled and is not 
included in the reconciliation calculation as specified in Sec.  
512.545 if any of the following occur:
    (1) The beneficiary ceases to meet any criterion listed in Sec.  
512.535.
    (2) The beneficiary dies during the anchor hospitalization or the 
outpatient stay for the anchor procedure.
    (3) The episode qualifies for cancellation due to extreme and 
uncontrollable circumstances. An extreme and uncontrollable 
circumstance occurs if both of the following criteria are met:
    (i) The TEAM participant has a CCN primary address that--
    (A) Is located in an emergency area, as those terms are defined in 
section 1135(g) of the Act, for which the Secretary has issued a waiver 
under section 1135 of the Act; and
    (B) Is located in a county, parish, or tribal government designated 
in a major disaster declaration or emergency disaster declaration under 
the Stafford Act.
    (ii) The date of admission to the anchor hospitalization or the 
date of the anchor procedure is during an emergency period (as defined 
in section 1135(g) of the Act) or in the 30 days before the date that 
the emergency period (as defined in section 1135(g) of the Act) begins.

Pricing Methodology


Sec.  512.540  Determination of preliminary target prices.

    (a) Preliminary target price application. CMS establishes 
preliminary target prices for TEAM participants for each performance 
year of the model as follows:
    (1) MS-DRG/HCPCS episode type. CMS uses the MS-DRGs and, as 
applicable, HCPCS codes specified in Sec.  512.525(d) when calculating 
the preliminary target prices for each MS-DRG/HCPCS episode type.
    (i) CMS determines a separate preliminary target price for each of 
the 24 MS-DRGs specified in Sec.  512.525(d).
    (ii) Preliminary target prices for a subset of the MS-DRGs 
specified in Sec.  512.525(d) include certain HCPCS codes as follows:
    (A) HCPCS 27130 and 27447 are included in MS-DRG 470.
    (B) HCPCS 27702 is included in MS-DRG 469.
    (C) HCPCS 22551 and 22554 are included in MS-DRG 473.
    (D) HCPCS 22612 and 22630 are included in MS-DRG 451.
    (E) HCPCS 22633 is included in MS-DRG 402.
    (2) Applicable time period for preliminary target prices. CMS 
calculates preliminary target prices for each MS-DRG/HCPCS episode type 
and region for each performance year and applies the preliminary target 
price to each episode based on the episode's date of discharge from the 
anchor hospitalization or the episode's date of the anchor procedure, 
as applicable.
    (3) Episodes that begin in one performance year and end in the 
subsequent performance year. CMS applies the preliminary target price 
to the episode based on the date of discharge from the anchor 
hospitalization or the date of the anchor procedure, as applicable, but 
reconciles the episode based on the end date of the episode.
    (b) Preliminary target price calculation. (1) CMS calculates 
preliminary target prices based on average baseline episode spending 
for the region where the TEAM participant is located.
    (i) The region used for calculating the preliminary target price 
corresponds to the U.S. Census Division associated with the primary 
address of the CCN of the TEAM participant, and the regional episode 
spending amount is based on all hospitals in the region, except as 
specified in Sec.  512.540(b)(1)(ii).
    (ii) In cases where a TEAM participant is located in a mandatory 
CBSA selected for participation in TEAM which spans more than one 
region, the TEAM participant and all other hospitals in the mandatory 
CBSA are grouped into the region where the most populous city in the 
mandatory CBSA is located for pricing and payment calculations.
    (2) CMS uses the following baseline periods to determine baseline 
episode spending:
    (i) Performance Year 1: Episodes beginning on January 1, 2022 
through December 31, 2024.
    (ii) Performance Year 2: Episodes beginning on January 1, 2023 
through December 31, 2025.
    (iii) Performance Year 3: Episodes beginning on January 1, 2024 
through December 31, 2026.
    (iv) Performance Year 4: Episodes beginning on January 1, 2025 
through December 31, 2027.
    (v) Performance Year 5: Episodes beginning on January 1, 2026 
through December 31, 2028.
    (3) CMS calculates the benchmark price as the weighted average of 
baseline episode spending, applying the following weights:
    (i) Baseline episode spending from baseline year 1 is weighted at 
17 percent.
    (ii) Baseline episode spending from baseline year 2 is weighted at 
33 percent.
    (iii) Baseline episode spending from baseline year 3 is weighted at 
50 percent.
    (4) Exception for high episode spending. CMS applies a high-cost 
outlier cap to baseline episode spending at the 99th percentile of 
regional spending for each of the MS-DRG/HCPCS episode types specified 
in Sec.  512.540(a)(1)(ii).
    (5) Exclusion of incentive programs and add-on payments under 
existing Medicare payment systems. Certain Medicare incentive programs 
and add-on payments are excluded from baseline episode spending by 
using, with certain modifications, the CMS Price (Payment) 
Standardization Detailed Methodology used for the Medicare spending per 
beneficiary measure in the Hospital Value-Based Purchasing Program.
    (6) Prospective normalization factor. Based on the episodes in the 
most recent calendar year of the baseline period, CMS calculates a 
prospective normalization factor, which is a multiplier that ensures 
that the average risk adjusted target price does not exceed the average 
unadjusted target price, by doing the following:
    (i) CMS applies risk adjustment multipliers, as specified in Sec.  
512.545(a)(1) through (3), to the most recent baseline year episodes to 
calculate the estimated risk-adjusted target price for all performance 
year episodes.
    (ii) CMS divides the mean of the preliminary target price for each 
episode across all hospitals and regions by the mean of the estimated 
risk-adjusted

[[Page 69923]]

target price calculated in Sec.  512.540(b)(6)(i) for the same episode 
types across all hospitals and regions.
    (7) Prospective trend factor. CMS calculates the following:
    (i) The average regional episode spending for each MS-DRG/HCPCS 
episode type using the most recent calendar year of the applicable 
baseline period.
    (ii) The difference between the average regional spending for each 
MS-DRG/HCPCS episode type during the most recent calendar year of the 
baseline period and the average regional spending for each MS-DRG/HCPCS 
episode type during the first years of the baseline period to determine 
the prospective trend factor.
    (8) Communication of preliminary target prices. CMS communicates 
the preliminary target prices for each MS-DRG/HCPCS episode type for 
each region to the TEAM participant before the performance year in 
which they apply.
    (c) Discount factor. CMS incorporates an episode category specific 
discount factor of 1.5 percent for CABG and Major Bowel episodes and 2 
percent for LEJR, SHFFT, and Spinal Fusion episodes to the TEAM 
participant's preliminary episode target prices intended to reflect 
Medicare's potential savings from TEAM.


Sec.  512.545  Determination of reconciliation target prices.

    CMS calculates the reconciliation target price as follows:
    (a) CMS risk adjusts the preliminary episode target prices computed 
under Sec.  512.540 at the beneficiary level using a TEAM Hierarchical 
Condition Category (HCC) count risk adjustment factor, an age bracket 
risk adjustment factor, a social need risk adjustment factor, and at 
the hospital level using a hospital bed size risk adjustment factor and 
a safety net hospital risk adjustment factor, and at the episode 
category-specific beneficiary level using factors specified in 
paragraph (a)(6)(i) through (v) of this section.
    (1) The TEAM HCC count risk adjustment factor uses five variables, 
representing beneficiaries with zero, one, two, three, or four or more 
CMS-HCC conditions based on a lookback period that ends on the day 
prior to the anchor hospitalization or anchor procedure.
    (2) The age bracket risk adjustment factor uses four variables, 
representing beneficiaries in the following age groups as of the first 
day of the episode:
    (i) Less than 65 years.
    (ii) 65 to less than 75 years.
    (iii) 75 years to less than 85 years.
    (iv) 85 years or more.
    (3) The social need risk adjustment factor uses two variables, 
representing beneficiaries that, as of the first day of the episode--
    (i) Meet one or more of the following measures of social need:
    (A) State ADI above the 8th decile.
    (B) National ADI above the 80th percentile.
    (C) Eligibility for the low-income subsidy.
    (D) Eligibility for full Medicaid benefits.
    (ii) Do not meet any of the three measures of social need in Sec.  
512.545(a)(1)(iii)(A).
    (4) The hospital bed size risk adjustment factor uses four 
variables based on the TEAM participant's characteristics:
    (i) 250 beds or fewer.
    (ii) 251-500 beds.
    (iii) 501-850 beds.
    (iv) 850 beds or more.
    (5) The safety net hospital risk adjustment factor is based on the 
TEAM participant meeting the definition of safety net hospital, as 
defined in Sec.  512.505.
    (6) Episode category-specific beneficiary level risk adjustment 
factors represent the presence or absence in beneficiaries, as of the 
first day of the episode, of each of the following conditions:
    (i) CABG episode category.
    (A) Prior post-acute care use.
    (B) HCC 18: Diabetes with Chronic Complications.
    (C) HCC 46: Severe Hematological Disorders.
    (D) HCC 58: Major Depressive, Bipolar, and Paranoid Disorders.
    (E) HCC 84: Cardio-Respiratory Failure and Shock.
    (F) HCC 85: Congestive Heart Failure.
    (G) HCC 86: Acute Myocardial Infarction.
    (H) HCC 96: Specified Heart Arrhythmias.
    (I) HCC 103: Hemiplegia/Hemiparesis.
    (J) HCC 111: Chronic Obstructive Pulmonary Disease.
    (K) HCC 112: Fibrosis of Lung and Other Chronic Lung Disorders.
    (L) HCC 134: Dialysis Status.
    (ii) LEJR episode category.
    (A) Ankle procedure or reattachment, partial hip procedure, partial 
knee arthroplasty, total hip arthroplasty or hip resurfacing procedure, 
and total knee arthroplasty.
    (B) Disability as the original reason for Medicare enrollment.
    (C) Dementia without complications.
    (D) Prior post-acute care use.
    (E) HCC 8: Metastatic Cancer and Acute Leukemia.
    (F) HCC 18: Diabetes with Chronic Complications.
    (G) HCC 22: Morbid Obesity.
    (H) HCC 58: Major Depressive, Bipolar, and Paranoid Disorders.
    (I) HCC 78: Parkinson's and Huntington's Diseases.
    (J) HCC 85: Congestive Heart Failure.
    (K) HCC 86: Acute Myocardial Infarction.
    (L) HCC 103: Hemiplegia/Hemiparesis.
    (M) HCC 111: Chronic Obstructive Pulmonary Disease.
    (N) HCC 112: Fibrosis of Lung and Other Chronic Lung Disorders.
    (O) HCC 134: Dialysis Status.
    (P) HCC 170: Hip Fracture/Dislocation.
    (iii) Major Bowel Procedure episode category.
    (A) Long-term institutional care use.
    (B) HCC 11: Colorectal, Bladder, and Other Cancers.
    (C) HCC 18: Diabetes with Chronic Complications.
    (D) HCC 21: Protein-Calorie Malnutrition.
    (E) HCC 33: Intestinal Obstruction/Perforation.
    (F) HCC 82: Respirator Dependence/Tracheostomy Status.
    (G) HCC 85: Congestive Heart Failure.
    (H) HCC 86: Acute Myocardial Infarction.
    (I) HCC 103: Hemiplegia/Hemiparesis.
    (J) HCC 111: Chronic Obstructive Pulmonary Disease.
    (K) HCC 112: Fibrosis of Lung and Other Chronic Lung Disorders.
    (L) HCC 134: Dialysis Status.
    (M) HCC 188: Artificial Openings for Feeding or Elimination.
    (iv) SHFFT episode category.
    (A) HCC 18: Diabetes with Chronic Complications.
    (B) HCC 22: Morbid Obesity.
    (C) HCC 82: Respirator Dependence/Tracheostomy Status.
    (D) HCC 83: Respiratory Arrest.
    (E) HCC 84: Cardio-Respiratory Failure and Shock.
    (F) HCC 85: Congestive Heart Failure.
    (G) HCC 86: Acute Myocardial Infarction.
    (H) HCC 96: Specified Heart Arrhythmias.
    (I) HCC 103: Hemiplegia/Hemiparesis.
    (J) HCC 111: Chronic Obstructive Pulmonary Disease.
    (K) HCC 112: Fibrosis of Lung and Other Chronic Lung Disorders.
    (L) HCC 134: Dialysis Status.
    (M) HCC 157: Pressure Ulcer of Skin with Necrosis Through to 
Muscle, Tendon, or Bone.
    (N) HCC 158: Pressure Ulcer of Skin with Full Thickness Skin Loss.
    (O) HCC 161: Chronic Ulcer of Skin, Except Pressure.

[[Page 69924]]

    (P) HCC 170: Hip Fracture/Dislocation.
    (v) Spinal Fusion episode category.
    (A) Prior post-acute care use.
    (B) HCC 8: Metastatic Cancer and Acute Leukemia.
    (C) HCC 18: Diabetes with Chronic Complications.
    (D) HCC 22: Morbid Obesity.
    (E) HCC 40: Rheumatoid Arthritis and Inflammatory Connective Tissue 
Disease.
    (F) HCC 58: Major Depressive, Bipolar, and Paranoid Disorders.
    (G) HCC 85: Congestive Heart Failure.
    (H) HCC 86: Acute Myocardial Infarction.
    (I) HCC 96: Specified Heart Arrhythmias.
    (J) HCC 103: Hemiplegia/Hemiparesis.
    (K) HCC 111: Chronic Obstructive Pulmonary Disease.
    (L) HCC 112: Fibrosis of Lung and Other Chronic Lung Disorders.
    (M) HCC 134: Dialysis Status.
    (b) All risk adjustment factors are computed prior to the start of 
the performance year via a linear regression analysis. The regression 
analysis is computed using 3 years of claims data as follows:
    (1) For performance year 1, CMS uses claims data with dates of 
service dated January 1, 2022 to December 31, 2024.
    (2) For performance year 2, CMS uses claims data with dates of 
service dated January 1, 2023 to December 31, 2025.
    (3) For performance year 3, CMS uses claims data with dates of 
service dated January 1, 2024 to December 31, 2026.
    (4) For performance year 4, CMS uses claims data with dates of 
service dated January 1, 2025 to December 31, 2027.
    (5) For performance year 5, CMS uses claims data with dates of 
service dated January 1, 2026 to December 30, 2028.
    (c) The annual linear regression analysis produces exponentiated 
coefficients to determine the anticipated marginal effect of each risk 
adjustment factor on episode costs. CMS transforms, or exponentiates, 
these coefficients, and the resulting coefficients are the beneficiary 
and hospital-level risk adjustment factors, specified in paragraphs 
(a)(1) through (6) of this section, that would be used during 
reconciliation for the subsequent performance year.
    (d) At the time of reconciliation, the preliminary target prices 
computed under Sec.  512.540 are risk adjusted by applying the 
applicable beneficiary level and hospital-level risk adjustment factors 
specific to the beneficiary in the episode, as set forth in paragraphs 
(a)(1) through (6) of this section.
    (e) The risk-adjusted preliminary target prices are normalized at 
reconciliation to ensure that the average of the total risk-adjusted 
preliminary target price does not exceed the average of the total non-
risk adjusted preliminary target price.
    (1) The final normalization factor at reconciliation--
    (i) Is the national mean of the benchmark price for each MS-DRG/
HCPCS episode type divided by the national mean of the risk-adjusted 
benchmark price for the same MS-DRG/HCPCS episode type.
    (ii) As applied, cannot exceed 5 percent of the 
prospective normalization factor (as specified in Sec.  512.540(b)(6)).
    (2) CMS applies the final normalization factor to the previously 
calculated, beneficiary and provider level, risk-adjusted target prices 
specific to each region and MS-DRG/HCPCS episode type.
    (f) Retrospective trend factor. CMS calculates the average regional 
capped performance year episode spending for each MS-DRG/HCPCS episode 
type divided by the average regional capped baseline period episode 
spending for each MS-DRG/HCPCS episode type.
    (1) The retrospective trend factor is capped so that the maximum 
difference cannot exceed 3 percent of the prospective trend 
factor (as specified in Sec.  512.540(b)(7)).
    (2) CMS applies the capped retrospective trend factor to the 
previously calculated normalized, risk adjusted target prices specific 
to each region and MS-DRG/HCPCS episode type, as specified in paragraph 
(e)(2) of this section, to calculate the reconciliation target prices, 
which are compared to performance year spending at reconciliation, as 
specified in Sec.  512.550(c).

Quality Measures and Composite Quality Score


Sec.  512.547  Quality measures, composite quality score, and display 
of quality measures.

    (a) Quality measures. CMS calculates the quality measures used to 
evaluate the TEAM participant's performance using Medicare claims data 
or patient-reported outcomes data that TEAM participants report under 
the Hospital Inpatient Quality Reporting Program and the Hospital-
Acquired Condition Reduction Program. The following quality measures 
and CQS baseline periods are used for public reporting and for 
determining the TEAM participant's CQS as described in paragraph (b) of 
this section:
    (1) For performance year 1:
    (i) For all episode categories: Hybrid Hospital-Wide All-Cause 
Readmission Measure with Claims and Electronic Health Record Data (CMIT 
ID #356) with a CY 2025 CQS baseline period;
    (ii) For all episode categories: CMS Patient Safety and Adverse 
Events Composite (CMS PSI 90) (CMIT ID #135) with a CY 2025 CQS 
baseline period; and
    (iii) For LEJR episodes: Hospital-Level Total Hip and/or Total Knee 
Arthroplasty (THA/TKA) Patient-Reported Outcome-Based Performance 
Measure (PRO-PM) (CMIT ID #1618) with a CY 2025 CQS baseline period.
    (2) For performance years 2 through 5:
    (i) For all episode categories: Hybrid Hospital-Wide All-Cause 
Readmission Measure with Claims and Electronic Health Record Data (CMIT 
ID #356) with a CY 2025 CQS baseline period;
    (ii) For all episode categories: Hospital Harm--Falls with Injury 
(CMIT ID #1518) with a CY 2026 CQS baseline period;
    (iii) For all episode categories: Hospital Harm--Postoperative 
Respiratory Failure (CMIT ID #1788) with a CY 2026 CQS baseline period;
    (iv) For all episode categories: Thirty-day Risk-Standardized Death 
Rate among Surgical Inpatients with Complications (Failure-to-Rescue) 
(CMIT ID #134) with a CY 2026 CQS baseline period; and
    (v) For LEJR episodes: Hospital-Level Total Hip and/or Total Knee 
Arthroplasty (THA/TKA) Patient-Reported Outcome-Based Performance 
Measure (PRO-PM) (CMIT ID #1618) with a CY 2025 CQS baseline period.
    (b) Calculation of the composite quality score (CQS). (1) CMS 
converts the TEAM participant's raw quality measure score for the 
performance year into a scaled quality measure score by comparing the 
raw quality measure score to the distribution of raw quality measure 
score percentiles among a national cohort of hospitals, consisting of 
TEAM participants and hospitals not participating in TEAM, in the CQS 
baseline period.
    (i) CMS assigns a scaled quality measure score equal to the 
percentile to which the TEAM Participant's raw quality measure score 
would have belonged in the CQS baseline period.
    (A) CMS assigns the higher scaled quality measure score if the TEAM 
participant's raw quality measure score straddles two percentiles in 
the CQS baseline period.
    (B) For the Hospital-Level Total Hip and/or Total Knee Arthroplasty 
(THA/TKA) Patient-Reported Outcome-Based Performance Measure (PRO-PM) 
(CMIT ID #1618):
    (1) CMS assigns a scaled quality measure score of 100 if the TEAM 
participant's raw quality measure score

[[Page 69925]]

is greater than the maximum of the raw quality measure scores in the 
CQS baseline period.
    (2) CMS assigns a scaled quality measure score of 0 if the raw 
quality measure score is less than the minimum of the raw quality 
measure scores in the baseline period.
    (C) For the Hybrid Hospital-Wide All-Cause Readmission Measure with 
Claims and Electronic Health Record Data (CMIT ID #356) measure, the 
CMS Patient Safety and Adverse Events Composite (CMS PSI 90) (CMIT ID 
#135) measure, the Hospital Harm--Falls with Injury (CMIT ID #1518) 
measure, the Hospital Harm--Postoperative Respiratory Failure (CMIT ID 
#1788) measure, and the Thirty-day Risk-Standardized Death Rate among 
Surgical Inpatients with Complications (Failure-to-Rescue) (CMIT ID 
#134) measure:
    (1) CMS assigns a scaled quality measure score of 0 if the TEAM 
participant has a raw quality measure score greater than the maximum of 
the raw quality measure scores in the CQS baseline period.
    (2) CMS assigns a scaled quality measure score of 100 if the TEAM 
participant has a raw quality score less than the minimum of the raw 
scores in the CQS baseline period.
    (D) CMS does not assign a scaled quality measure score if the TEAM 
participant has no raw quality measure score.
    (2) CMS calculates a normalized weight for each quality measure by 
dividing the TEAM participant's volume of attributed episodes for a 
given quality measure by the total volume of all the TEAM participant's 
attributed episodes.
    (3) CMS calculates a weighted scaled score for each quality measure 
by multiplying each quality measure's scaled quality measure score, 
computed under paragraph (b)(2) of this section, by its normalized 
weight, computed under paragraph (b)(3) of this section.
    (4) CMS sums each quality measure's weighted scaled score, computed 
under paragraph (b)(4) of this section, to construct the CQS.
    (c) Display of quality measures. CMS does all of the following:
    (1) Displays quality measure results on the publicly available CMS 
website that is specific to TEAM, in a form and manner consistent with 
other publicly reported measures.
    (2) Shares quality measures with the TEAM participant prior to 
display on the CMS website.
    (3) Uses the following time periods to share quality measure 
performance:
    (i) Quality measure performance in performance year 1 is reported 
in 2027.
    (ii) Quality measure performance in performance year 2 is reported 
in 2028.
    (iii) Quality measure performance in performance year 3 is reported 
in 2029.
    (iv) Quality measure performance in performance year 4 is reported 
in 2030.
    (v) Quality measure performance in performance year 5 is reported 
in 2031.

Reconciliation and Review Process


Sec.  512.550  Reconciliation process and determination of the 
reconciliation payment or repayment amount.

    (a) General. Providers and suppliers furnishing items and services 
included in the episode bill for such items and services in accordance 
with existing Medicare rules.
    (b) Reconciliation process. Six months after the end of each 
performance year, CMS does the following:
    (1) Performs a reconciliation calculation to establish a 
reconciliation payment or repayment amount for each TEAM participant.
    (2) For TEAM participants that experience a reorganization event in 
which one or more hospitals reorganize under the CCN of a TEAM 
participant, performs--
    (i) Separate reconciliation calculations for each predecessor TEAM 
participant for episodes where the anchor hospitalization admission or 
the anchor procedure occurred before the effective date of the 
reorganization event; and
    (ii) Reconciliation calculations for each new or surviving TEAM 
participant for episodes where the anchor hospitalization admission or 
anchor procedure occurred on or after the effective date of the 
reorganization event.
    (c) Calculation of the reconciliation amount. CMS compares the 
reconciliation target prices described in Sec.  512.545 and the TEAM 
participant's performance year spending to establish a reconciliation 
amount for the TEAM participant for each performance year as follows:
    (1) CMS determines the performance year spending for each episode 
included in the performance year (other than episodes that have been 
canceled in accordance with Sec.  512.537(b)) using claims data that is 
available 6 months after the end of the performance year.
    (2) CMS calculates and applies the high-cost outlier cap for 
performance year episode spending by applying the calculation described 
in Sec.  512.540(b)(4) to performance year episode spending.
    (3) CMS applies the adjustments specified in Sec.  512.545 to the 
preliminary target prices computed in accordance with Sec.  512.540 to 
calculate the reconciliation target prices.
    (4) CMS aggregates the reconciliation target prices computed in 
accordance with paragraph (c)(3) of this section for all episodes 
included in the performance year (other than episodes that have been 
canceled in accordance with Sec.  512.537(b)).
    (5) CMS subtracts the performance year spending amount determined 
under paragraph (c)(1-2) of this section from the aggregated 
reconciliation target price amount determined under paragraph (c)(4) of 
this section to determine the reconciliation amount.
    (d) Calculation of the quality-adjusted reconciliation amount. CMS 
adjusts the reconciliation amount based on the Composite Quality Score 
as follows:
    (1) CMS calculates a CQS adjustment percentage based on a TEAM 
participant's CQS, computed in accordance with Sec.  512.547(b).
    (i) CMS applies a CQS adjustment percentage up to 10 percent for 
positive reconciliation amounts for TEAM participants in Track 1.
    (ii) CMS applies a CQS adjustment percentage up to 10 percent for 
positive reconciliation amounts and up to 15 percent for negative 
reconciliation amounts for TEAM participants in Track 2.
    (iii) CMS applies a CQS adjustment percentage up to 10 percent for 
positive reconciliation amounts and up to 10 percent for negative 
reconciliation amounts for TEAM participants in Track 3.
    (2) CMS multiplies the CQS adjustment percentage, computed under 
paragraph (d)(1) of this section, by the TEAM participant's positive or 
negative reconciliation amount calculated in paragraph (c) of this 
section to construct the CQS adjustment amount.
    (3) CMS subtracts the CQS adjustment amount, computed from 
paragraph (d)(2) of this section, from the positive or negative 
reconciliation amount calculated in paragraph (c) of this section to 
construct the quality-adjusted reconciliation amount.
    (e) Calculation of the net payment reconciliation amount (NPRA). 
CMS applies stop-loss and stop gain limits to the quality-adjusted 
reconciliation amount computed in paragraph (d) of this section to 
calculate the NPRA as follows:
    (1) Limitation on loss. For TEAM participants in Track 3, except as 
provided in paragraph (e)(3) of this section, the repayment amount for 
a performance year cannot exceed 20 percent of the aggregated 
reconciliation target price amount calculated in paragraph (c)(3) of 
this section for the performance year. The post-episode spending 
calculation amount in

[[Page 69926]]

paragraph (f) of this section is not subject to the limitation on loss.
    (2) Limitation on gain. (i) For TEAM participants in Track 1, the 
reconciliation payment amount for a performance year cannot exceed 10 
percent of the aggregated reconciliation target price amount calculated 
in accordance with paragraph (c)(3) of this section for the performance 
year.
    (ii) For TEAM participants in Tracks 2, the reconciliation payment 
amount for a performance year cannot exceed 5 percent of the aggregated 
reconciliation target price amount calculated in accordance with 
paragraph (c)(3) of this section for the performance year.
    (iii) For TEAM participants in Track 3, the reconciliation payment 
amount for a performance year cannot exceed 20 percent of the 
aggregated reconciliation target price amount calculated in accordance 
with paragraph (c)(3) of this section for the performance year.
    (iv) The post-episode spending amount calculated in accordance with 
paragraph (f) of this section is not subject to the limitation on gain.
    (3) Limitation on loss for certain providers. For performance years 
2-5, the repayment amount for a TEAM participant in Track 2 defined at 
Sec.  512.505, must not exceed 5 percent of the aggregated 
reconciliation target price amount calculated in accordance with 
paragraph (c)(3) of this section.
    (f) Post-episode spending calculation. CMS calculates the post-
episode spending amount as follows: If the average post-episode 
spending amount for a TEAM participant in the performance year being 
reconciled is greater than 3 standard deviations above the regional 
average post-episode spending amount for the performance year, then the 
post-episode spending amount that exceeds 3 standard deviations above 
the regional average post-episode spending amount for the performance 
year is subtracted from the NPRA for that performance year.
    (g) Calculation of the reconciliation payment or repayment amount. 
(1) CMS applies the results of the post-episode spending calculation 
set forth in paragraph (f) of this section to the NPRA as follows:
    (i) For TEAM participants whose post-episode spending amount does 
not exceed the limit calculated in paragraph (f) of this section, the 
reconciliation payment or repayment amount is equal to the NPRA.
    (ii) If the TEAM participant's post-episode spending exceeds the 
limit calculated in paragraph (f) of this section, CMS subtracts the 
amount of post-episode spending exceeding the limit from the NPRA to 
calculate the reconciliation payment or repayment amount.
    (2) If the amount calculated in paragraph (g)(1) of this section is 
positive, the TEAM participant is owed a reconciliation payment in that 
amount, to be paid by CMS in one lump sum payment.
    (3) If the amount calculated in paragraph (g)(1) of this section is 
negative, CMS determines the repayment amount as follows:
    (i) For TEAM participants in Track 1, the TEAM participant does not 
owe a repayment amount.
    (ii) For TEAM participants in Track 2 or Track 3 for Performance 
Years 1-5, as applicable, the Team participant owes that amount as a 
repayment to CMS.
    (h) TEAM reconciliation report. CMS issues each TEAM participant a 
TEAM reconciliation report for the performance year. Each TEAM 
reconciliation report contains the following:
    (1) The total performance year spending for the TEAM participant.
    (2) The TEAM participant's reconciliation target prices.
    (3) The TEAM participant's reconciliation amount.
    (4) The TEAM participant's composite quality score calculated in 
accordance with Sec.  512.547(b).
    (5) The TEAM participant's quality-adjusted reconciliation amount.
    (6) The stop-loss and stop-gain limits that apply to the TEAM 
participant.
    (7) The TEAM participant's NPRA.
    (8) The TEAM participant's post-episode spending amount, if 
applicable.
    (9) The amount of any reconciliation payment owed to the TEAM 
participant or repayment owed by the TEAM participant to CMS for the 
performance year, if applicable.


Sec.  512.552  Treatment of incentive programs or add-on payments under 
existing Medicare payment systems.

    The TEAM does not replace any existing Medicare incentive programs 
or add-on payments. The TEAM payments are independent of, and do not 
affect, any incentive programs or add-on payments under existing 
Medicare payment systems.


Sec.  512.555  Proration of payments for services that extend beyond an 
episode.

    (a) General. CMS prorates services included in the episode that 
extend beyond the episode so that only those portions of the services 
that were furnished during the episode are included in the calculation 
of the actual episode payments.
    (b) Proration of services. CMS prorates payments for services that 
extend beyond the episode for the purposes of calculating both baseline 
episode spending and performance year spending using the following 
methodology:
    (1) Non-IPPS inpatient services. Non-IPPS inpatient services that 
extend beyond the end of the episode are prorated according to the 
percentage of the actual length of stay (in days) that falls within the 
episode.
    (2) Home health agency services. Home health agency services paid 
under the Medicare prospective payment system in accordance with part 
484, subpart E of this chapter that extend beyond the episode are 
prorated according to the percentage of days, starting with the first 
billable service date and through and including the last billable 
service date, that occur during the episode.
    (3) IPPS services. IPPS services that extend beyond the end of the 
episode are prorated according to the MS-DRG geometric mean length of 
stay, using the following methodology:
    (i) The first day of the IPPS stay is counted as 2 days.
    (ii) If the actual length of stay that occurred during the episode 
is equal to or greater than the MS-DRG geometric mean, the full MS-DRG 
payment is allocated to the episode.
    (iii) If the actual length of stay that occurred during the episode 
is less than the MS-DRG geometric mean length of stay, the MS-DRG 
payment amount is allocated to the episode based on the number of 
inpatient days that fall within the episode.
    (4) If the full amount of the payment is not allocated to the 
episode, any remainder amount is allocated to the post-episode spending 
calculation (defined in Sec.  512.550(f)).


Sec.  512.560  Appeals process.

    (a) Notice of calculation error (first level of appeal). Subject to 
the limitations on review in Sec.  512.594, if a TEAM participant 
wishes to dispute calculations involving a matter related to payment, 
reconciliation amounts, repayment amounts, the use of quality measure 
results in determining the composite quality score, or the application 
of the composite quality score during reconciliation, the TEAM 
participant is required to provide written notice of the calculation 
error, in a form and manner and by a date specified by CMS.
    (1) Unless the TEAM participant provides such written notice, CMS 
deems the TEAM reconciliation report to be final 30 calendar days after 
it is issued and proceeds with the payment or repayment processes as 
applicable.

[[Page 69927]]

    (2) If CMS receives a notice of a calculation error within 30 
calendar days of the issuance of the TEAM reconciliation report, CMS 
responds in writing within 30 calendar days to either confirm that 
there was an error in the calculation or verify that the calculation is 
correct. CMS reserves the right to extend the time for its response 
upon written notice to the TEAM participant.
    (3) Only TEAM participants may use the calculation error process 
described in this part.
    (b) Exception to the appeals process. If the TEAM participant 
contests a matter that does not involve an issue contained in, or a 
calculation that contributes to, a TEAM reconciliation report, a notice 
of calculation error is not required. In these instances, if CMS does 
not receive a request for reconsideration from the TEAM participant 
within 10 calendar days of the notice of the initial reconciliation, 
the initial determination is deemed final and CMS proceeds with the 
action indicated in the initial determination. This does not apply to 
the limitations on review in Sec.  512.594.


Sec.  512.561  Reconsideration review processes.

    (a) Applicability of this section. This section is applicable only 
where section 1869 of the Act has been waived or is not applicable for 
TEAM participants. This section is only applicable to TEAM 
participants.
    (b) Right to reconsideration. The TEAM participant may request 
reconsideration of a determination made by CMS only if such 
reconsideration is not precluded by section 1115A(d)(2) of the Act or 
this subpart.
    (1) A request for reconsideration by the TEAM participant must 
satisfy the following criteria:
    (i) The request must be submitted to a designee of CMS 
(``Reconsideration Official'') who--
    (A) Is authorized to receive such requests; and
    (B) Did not participate in the determination that is the subject of 
the reconsideration request or, if applicable, the notice of 
calculation error process.
    (ii) The request must include a copy of the initial determination 
issued by CMS and contain a detailed, written explanation of the basis 
for the dispute, including supporting documentation.
    (iii) The request must be made within 30 days of the date of the 
initial determination for which reconsideration is being requested via 
email to an address as specified by CMS.
    (2) Requests that do not meet the requirements of paragraph (b)(1) 
of this section are denied.
    (3) Within 10 business days of receiving a request for 
reconsideration, the Reconsideration Official sends the parties a 
written acknowledgement of receipt of the reconsideration request. This 
acknowledgement sets forth the following:
    (i) The review procedures.
    (ii) A schedule that permits each party to submit position papers 
and supporting documentation in support of the party's position for 
consideration by the reconsideration official.
    (4) The TEAM participant must satisfy the notice of calculation 
error requirements specified in this part before submitting a 
reconsideration request under paragraph (b) of this section.
    (c) Standards for reconsideration. (1) The parties must continue to 
fulfill all responsibilities and obligations under TEAM during the 
course of any dispute arising under this part.
    (2) The reconsideration consists of a review of documentation that 
is submitted timely and in accordance with the standards specified by 
the reconsideration official.
    (3) The burden of proof is on the TEAM participant to demonstrate 
to the reconsideration official with clear and convincing evidence that 
the determination is inconsistent with the terms of this subpart.
    (d) Reconsideration determination. (1) The reconsideration 
determination is based solely upon--
    (i) Position papers and supporting documentation that are timely 
submitted to the reconsideration official per the schedule defined in 
paragraph (b)(3)(ii) and meet the standards for submission under 
paragraph (b)(1) of this section; and
    (ii) Documents and data that were timely submitted to CMS in the 
required format before CMS made the determination that is the subject 
of the reconsideration request.
    (2) The reconsideration official issues the reconsideration 
determination to CMS and to the TEAM participant in writing.
    (3) Absent unusual circumstances, in which case the reconsideration 
official reserves the right to an extension upon written notice to the 
TEAM participant, the reconsideration determination is issued within 60 
days of receipt of timely filed position papers and supporting 
documentation per the schedule defined in paragraph (b)(3)(ii) of this 
section.
    (4) The reconsideration determination is final and binding 30 days 
after its issuance, unless the TEAM participant or CMS timely requests 
review of the reconsideration determination in accordance with 
paragraphs (e)(1) and (2) of this section.
    (e) CMS Administrator review. The TEAM participant or CMS may 
request that the CMS Administrator review the reconsideration 
determination.
    (1) The request must be made via email within 30 days of the date 
of the reconsideration determination to the address specified by CMS.
    (2) The request must include a copy of the reconsideration 
determination and a detailed written explanation of why the TEAM 
participant or CMS disagrees with the reconsideration determination.
    (3) The CMS Administrator promptly sends the parties a written 
acknowledgement of receipt of the request for review.
    (4) The CMS Administrator sends the parties notice of the 
following:
    (i) Whether the request for review is granted or denied.
    (ii) If the request for review is granted, the review procedures 
and a schedule that permits each party to submit a brief in support of 
the party's position for consideration by the CMS Administrator.
    (5) If the request for review is denied, the reconsideration 
determination is final and binding as of the date the request for 
review is denied.
    (6) If the request for review is granted--
    (i) The record for review consists solely of--
    (A) Timely submitted briefs and the evidence contained in the 
record of the proceedings before the reconsideration official; and
    (B) Evidence as set forth in the documents and data described in 
paragraph (d)(1)(ii) of this section;
    (ii) The CMS Administrator reviews the record and issues to CMS and 
to the TEAM participant a written determination; and
    (iii) The written determination of the CMS Administrator is final 
and binding as of the date the written determination is sent.

Data Sharing and Other Requirements


Sec.  512.562  Data sharing with TEAM participants.

    (a) General. CMS shares certain beneficiary-identifiable data as 
described in paragraphs (b), (c), and (e) of this section and certain 
regional aggregate data as described in paragraph (d) of this section 
with TEAM participants regarding TEAM beneficiaries and performance 
under the model.

[[Page 69928]]

    (b) Beneficiary-identifiable claims data. CMS shares beneficiary-
identifiable claims data with TEAM participants as follows:
    (1) CMS makes available certain beneficiary-identifiable claims 
data described in paragraph (b)(5) of this section for TEAM 
participants to request for purposes of conducting health care 
operations work that falls within the first or second paragraph of the 
definition of health care operations at 45 CFR 164.501 regarding their 
TEAM beneficiaries.
    (2) A TEAM participant that wishes to receive beneficiary-
identifiable claims data for its TEAM beneficiaries must do all of the 
following:
    (i) Submit a formal request for the data on at least an annual 
basis in a manner and form and by a date specified by CMS, indicating 
their selection of summary beneficiary-identifiable data, raw 
beneficiary-identifiable data, or both, and attest that--
    (A) The TEAM participant is requesting claims data of TEAM 
beneficiaries who would be in an episode during the baseline period or 
performance year, as a HIPAA covered entity.
    (B) The TEAM participant's request reflects the minimum data 
necessary, as set forth in paragraph (c) of this section, for the TEAM 
participant to conduct health care operations work that falls within 
the first or second paragraph of the definition of health care 
operations at 45 CFR 164.501.
    (C) The TEAM participant's use of claims data is limited to 
developing processes and engaging in appropriate activities related to 
coordinating care, improving the quality and efficiency of care, and 
conducting population-based activities relating to improving health or 
reducing health care costs that are applied uniformly to all TEAM 
beneficiaries, in an episode during the baseline period or performance 
year, and that these data are not to be used to reduce, limit or 
restrict care for specific Medicare beneficiaries.
    (ii) Sign and submit a TEAM data sharing agreement, as defined in 
Sec.  512.505, with CMS as set forth in paragraph (e) of this section.
    (3) CMS shares this beneficiary-identifiable claims data with a 
TEAM participant in accordance with applicable privacy and security 
laws and established privacy and security protections.
    (4) CMS omits from the beneficiary-identifiable claims data any 
information that is subject to the regulations in 42 CFR part 2 
governing the confidentiality of substance use disorder patient 
records.
    (5) The beneficiary-identifiable claims data includes, when 
available, the following:
    (i) Unrefined (raw) Medicare Parts A and B beneficiary-identifiable 
claims data for TEAM beneficiaries in an episode during the 3-year 
baseline period and performance year.
    (ii) Summarized (summary) Medicare Parts A and B beneficiary-
identifiable claims data for TEAM beneficiaries in an episode during 
the 3-year baseline period and performance year.
    (6) CMS makes available the beneficiary-identifiable claims data 
for retrieval by TEAM participants at the following frequency:
    (i) Annually, at least 1 month prior to every performance year for 
baseline period data, based on the baseline periods described in Sec.  
512.540(b)(2).
    (ii) Monthly during the performance year and for up to 6 months 
after the performance year for performance year data.
    (c) Minimum necessary data. The TEAM participant must limit its 
request for beneficiary-identifiable data under paragraph (b) of this 
section to the minimum necessary Parts A and B data elements which may 
include, but are not limited to the following:
    (1) Medicare beneficiary identifier (ID).
    (2) Procedure code.
    (3) Gender.
    (4) Diagnosis code.
    (5) Claim ID.
    (6) The from and through dates of service.
    (7) The provider or supplier ID.
    (8) The claim payment type.
    (9) Date of birth and death, if applicable.
    (10) Tax identification number.
    (11) National provider identifier.
    (d) Regional aggregate data. (1) CMS shares regional aggregate data 
for the 3-year baseline period and performance years with TEAM 
participants as follows:
    (i) Shares 3-year baseline period regional aggregate data annually 
at least 1 month before the performance year, based on the baseline 
periods described in Sec.  512.540(b)(2).
    (ii) Shares performance year regional aggregate data on a monthly 
basis during the performance year and for up to 6 months after the 
performance year.
    (2) Regional aggregate data--
    (i) Is aggregated based on all Parts A and B claims associated with 
episodes in TEAM for the U.S. Census Division in which the TEAM 
participant is located;
    (ii) Summarizes average episode spending for episodes in TEAM in 
the U.S. Census Division in which the TEAM participant is located; and
    (iii) Is de-identified in accordance with 45 CFR 164.514(b).
    (e) TEAM data sharing agreement. (1) A TEAM participant who wishes 
to retrieve the beneficiary-identifiable data specified in paragraph 
(b) of this section, must complete and submit, on at least an annual 
basis, a signed TEAM data sharing agreement, as defined in Sec.  
512.505, to be provided in a form and manner and by a date specified by 
CMS, under which the TEAM participant agrees:
    (i) To comply with the requirements for use and disclosure of this 
beneficiary-identifiable data that are imposed on covered entities by 
the HIPAA regulations and the requirements of the TEAM set forth in 
this part.
    (ii) To comply with additional privacy, security, breach 
notification, and data retention requirements specified by CMS.
    (iii) To contractually bind each downstream recipient of the 
beneficiary-identifiable data that is a business associate of the TEAM 
participant to the same terms and conditions to which the TEAM 
participant is itself bound in its TEAM data sharing agreement with CMS 
as a condition of the business associate's receipt of the beneficiary-
identifiable data retrieved by the TEAM participant under TEAM.
    (iv) That if the TEAM participant misuses or discloses the 
beneficiary-identifiable data in a manner that violates any applicable 
statutory or regulatory requirements or that is otherwise non-compliant 
with the provisions of the TEAM data sharing agreement, CMS may deem 
the TEAM participant ineligible to retrieve beneficiary-identifiable 
data under paragraph (b) of this section for any amount of time, and 
the TEAM participant may be subject to additional sanctions and 
penalties available under the law.
    (2) A TEAM participant must comply with all applicable laws and the 
terms of the TEAM data sharing agreement in order to retrieve the 
beneficiary-identifiable data.


Sec.  512.563  Health equity reporting.

    (a) Health equity plans. (1) The TEAM participant may voluntarily 
submit a health equity plan to CMS for each performance year that 
includes the elements specified in paragraph (a)(2) of this section, in 
a form and manner and by the date specified by CMS.
    (2) Health equity plans must include the following elements:

[[Page 69929]]

    (i) Identifies health disparities in the TEAM participant's 
population of TEAM beneficiaries.
    (ii) Identifies health equity goals and describes how the TEAM 
participant uses the health equity goals to monitor and evaluate 
progress in reducing the identified health disparities.
    (iii) Describes the health equity plan intervention strategy.
    (iv) Identifies health equity plan performance measure(s), the data 
sources used to construct the performance measures, and an approach to 
monitor and evaluate the measures.
    (b) Health-related social needs screening and reporting. (1) For 
all performance years, the TEAM participant may voluntarily submit 
aggregated health-related social needs screening and screened-positive 
data in a form and manner and by the dates specified by CMS. The 
health-related social needs screening and reporting must include the 
elements specified in paragraph (a)(2) of this section.
    (2) CMS uses the following measures from the Hospital Inpatient 
Quality Reporting Program for the TEAM participants who opt to 
voluntarily submit aggregated health-related social needs screening and 
screened-positive data.
    (i) Screening for Social Drivers of Health (SDOH-1; CMIT ID #1664).
    (ii) Screen Positive Rate for Social Drivers of Health (SDOH-2; 
CMIT ID #1662).
    (3) For all performance years, TEAM participants that voluntarily 
submit data health-related social needs screening and screened-positive 
data as specified in paragraphs (b)(1) and (2) of this section may 
voluntarily submit information on referral policies and procedures for 
beneficiaries that screen positive for health-related social needs in a 
form and manner and by dates specified by CMS.
    (c) Demographic data collection and reporting. For all performance 
years, the TEAM participant may voluntarily collect and submit to CMS, 
in a form and manner and by the dates specified by CMS, demographic 
data of TEAM beneficiaries that are willing to share demographic data 
elements with the TEAM participant and CMS.


Sec.  512.564  Referral to primary care services.

    (a) A TEAM participant must include in hospital discharge planning 
a referral to a supplier of primary care services for a TEAM 
beneficiary, on or prior to discharge from an anchor hospitalization or 
anchor procedure.
    (b) In making the referral described in paragraph (a) of this 
section, the TEAM participant must comply with beneficiary freedom of 
choice, as described in Sec.  512.582(a).
    (c) A TEAM participant that does not comply with paragraph (a) of 
this section, may be subject to remedial action as described in Sec.  
512.592.

Financial Arrangements and Beneficiary Incentives


Sec.  512.565  Sharing arrangements.

    (a) General. (1) A TEAM participant may enter into a sharing 
arrangement with a TEAM collaborator to make a gainsharing payment, or 
to receive an alignment payment, or both. A TEAM participant must not 
make a gainsharing payment to a TEAM collaborator or receive an 
alignment payment from a TEAM collaborator except in accordance with a 
sharing arrangement.
    (2) A sharing arrangement must comply with the provisions of this 
section and all other applicable laws and regulations, including the 
applicable fraud and abuse laws and all applicable payment and coverage 
requirements.
    (3) TEAM participants must develop, maintain, and use a set of 
written policies for selecting individuals and entities to be TEAM 
collaborators.
    (i) These policies must contain criteria related to, and inclusive 
of, the quality of care delivered by the potential TEAM collaborator 
and the provision of TEAM activities.
    (ii) The selection criteria cannot be based directly or indirectly 
on the volume or value of past or anticipated referrals or business 
otherwise generated by, between or among the TEAM participant, any TEAM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with a TEAM participant, 
TEAM collaborator, collaboration agent, or downstream collaboration 
agent.
    (iii) A selection criterion that considers whether a potential TEAM 
collaborator has performed a reasonable minimum number of services that 
would qualify as TEAM activities, as determined by the TEAM 
participant, will be deemed not to violate the volume or value standard 
if the purpose of the criterion is to ensure the quality of care 
furnished to TEAM beneficiaries.
    (4) If a TEAM participant enters into a sharing arrangement, its 
compliance program must include oversight of sharing arrangements and 
compliance with the applicable requirements of TEAM.
    (b) Requirements. (1) A sharing arrangement must be in writing and 
signed by the parties, and entered into before care is furnished to 
TEAM beneficiaries under the sharing arrangement.
    (2) Participation in a sharing arrangement must be voluntary and 
without penalty for nonparticipation.
    (3) The sharing arrangement must require the TEAM collaborator and 
its employees, contractors (including collaboration agents), and 
subcontractors (including downstream collaboration agents) to comply 
with all of the following:
    (i) The applicable provisions of this part (including requirements 
regarding beneficiary notifications, access to records, record 
retention, and participation in any evaluation, monitoring, compliance, 
and enforcement activities performed by CMS or its designees).
    (ii) All applicable Medicare provider enrollment requirements at 
Sec.  424.500 of this chapter, including having a valid and active TIN 
or NPI, during the term of the sharing arrangement.
    (iii) All other applicable laws and regulations.
    (4) The sharing arrangement must require the TEAM collaborator to 
have or be covered by a compliance program that includes oversight of 
the sharing arrangement and compliance with the requirements of TEAM 
that apply to its role as a TEAM collaborator, including any 
distribution arrangements.
    (5) The sharing arrangement must not pose a risk to beneficiary 
access, beneficiary freedom of choice, or quality of care.
    (6) The board or other governing body of the TEAM participant must 
have responsibility for overseeing the TEAM participant's participation 
in TEAM, its arrangements with TEAM collaborators, its payment of 
gainsharing payments, its receipt of alignment payments, and its use of 
beneficiary incentives in TEAM.
    (7) The specifics of the agreement must be documented in writing 
and must be made available to CMS upon request (as outlined in Sec.  
512.590).
    (8) The sharing arrangement must specify the following:
    (i) The purpose and scope of the sharing arrangement.
    (ii) The obligations of the parties, including specified TEAM 
activities and other services to be performed by the parties under the 
sharing arrangement.
    (iii) The date range for which the sharing arrangement is 
effective.
    (iv) The financial or economic terms for payment, including the 
following:
    (A) Eligibility criteria for a gainsharing payment.
    (B) Eligibility criteria for an alignment payment.
    (C) Frequency of gainsharing or alignment payments.

[[Page 69930]]

    (D) Methodology and accounting formula for determining the amount 
of a gainsharing payment or alignment payment.
    (9) The sharing arrangement must not--
    (i) Induce the TEAM participant, TEAM collaborator, or any 
employees, contractors, or subcontractors of the TEAM participant or 
TEAM collaborator to reduce or limit medically necessary services to 
any Medicare beneficiary; or
    (ii) Restrict the ability of a TEAM collaborator to make decisions 
in the best interests of its patients, including the selection of 
devices, supplies, and treatments.
    (c) Gainsharing payment, alignment payment, and internal cost 
savings conditions and restrictions. (1) Gainsharing payments, if any, 
must--
    (i) Be derived solely from reconciliation payment amounts, or 
internal cost savings, or both;
    (ii) Be distributed on an annual basis (not more than once per 
calendar year);
    (iii) Not be a loan, advance payment, or payment for referrals or 
other business; and
    (iv) Be clearly identified as a gainsharing payment at the time it 
is paid.
    (2)(i) To be eligible to receive a gainsharing payment, a TEAM 
collaborator must meet quality of care criteria for the performance 
year for which the TEAM participant accrued the internal cost savings 
or earned the reconciliation payment that comprises the gainsharing 
payment. The quality-of-care criteria must be established by the TEAM 
participant and directly relate to the episode.
    (ii) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a TEAM collaborator other than 
ACO, PGP, NPPGP, or TGP must have directly furnished a billable item or 
service to a TEAM beneficiary during an episode that was attributed to 
the same performance year for which the TEAM participant accrued the 
internal cost savings or earned the reconciliation payment amount or 
repayment amount that comprises the gainsharing payment or the 
alignment payment.
    (iii) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a TEAM collaborator that is a 
PGP, NPPGP, or TGP must meet the following criteria:
    (A) The PGP, NPPGP, or TGP must have billed for an item or service 
that was rendered by one or more PGP member, NPPGP member, or TGP 
member respectively to a TEAM beneficiary during an episode that was 
attributed to the same performance year for which the TEAM participant 
accrued the internal cost savings or earned the reconciliation payment 
amount or repayment amount that comprises the gainsharing payment or 
the alignment payment.
    (B) The PGP, NPPGP, or TGP must have contributed to TEAM activities 
and been clinically involved in the care of TEAM beneficiaries during 
the same performance year for which the TEAM participant accrued the 
internal cost savings or earned the reconciliation payment amount or 
repayment amount that comprises the gainsharing payment or the 
alignment payment. A non-exhaustive list of examples where, a PGP, 
NPPGP, or TGP might have been clinically involved in the care of TEAM 
beneficiaries includes--
    (1) Providing care coordination services to TEAM beneficiaries 
during or after inpatient admission;
    (2) Engaging with a TEAM participant in care redesign strategies, 
and performing a role in implementing such strategies, that are 
designed to improve the quality of care for episodes and reduce episode 
spending; or
    (3) In coordination with other providers and suppliers (such as PGP 
members, NPPGP members, or TGP members; the TEAM participant; and post-
acute care providers), implementing strategies designed to address and 
manage the comorbidities of TEAM beneficiaries.
    (iv) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a TEAM collaborator that is an 
ACO must meet the following criteria:
    (A) The ACO must have had an ACO provider/supplier that directly 
furnished, or an ACO participant that billed for, an item or service 
that was rendered to a TEAM beneficiary during an episode that was 
attributed to the same performance year for which the TEAM participant 
accrued the internal cost savings or earned the reconciliation payment 
amount or repayment amount that comprises the gainsharing payment or 
the alignment payment; and
    (B) The ACO must have contributed to TEAM activities and been 
clinically involved in the care of TEAM beneficiaries during the 
performance year for which the TEAM participant accrued the internal 
cost savings or earned the reconciliation payment amount or repayment 
amount that comprises the gainsharing payment or the alignment payment. 
A non-exhaustive list of ways in which an ACO might have been 
clinically involved in the care of TEAM beneficiaries could include--
    (1) Providing care coordination services to TEAM beneficiaries 
during and/or after inpatient admission;
    (2) Engaging with a TEAM participant in care redesign strategies 
and performing a role in implementing such strategies that are designed 
to improve the quality of care and reduce spending for episodes; or
    (3) In coordination with providers and suppliers (such as ACO 
participants, ACO providers/suppliers, the TEAM participant, and post-
acute care providers), implementing strategies designed to address and 
manage the comorbidities of TEAM beneficiaries.
    (3) The methodology for accruing, calculating and verifying 
internal cost savings will be determined by the TEAM participant. The 
methodology--
    (i) Must be transparent, measurable, and verifiable in accordance 
with generally accepted accounting principles (GAAP) and Government 
Auditing Standards (The Yellow Book).
    (ii) Used to calculate internal cost savings must reflect the 
actual, internal cost savings achieved by the TEAM participant through 
the documented implementation of TEAM activities identified by the TEAM 
participant and must exclude--
    (A) Any savings realized by any individual or entity that is not 
the TEAM participant; and
    (B) ``Paper'' savings from accounting conventions or past 
investment in fixed costs.
    (4) The amount of any gainsharing payments must be determined in 
accordance with a methodology that is based solely on quality of care 
and the provision of TEAM activities. The methodology may take into 
account the amount of TEAM activities provided by a TEAM collaborator 
relative to other TEAM collaborators.
    (5) For a performance year, the aggregate amount of all gainsharing 
payments that are derived from reconciliation payment amounts must not 
exceed the amount of that year's reconciliation payment amount.
    (6) No entity or individual, whether a party to a sharing 
arrangement or not, may condition the opportunity to make or receive 
gainsharing payments or to make or receive alignment payments directly 
or indirectly on the volume or value of past or anticipated referrals 
or business otherwise generated by, between or among the TEAM 
participant, any TEAM collaborator, any collaboration agent, any 
downstream collaboration agent, or any individual or entity affiliated 
with a TEAM participant, TEAM collaborator, collaboration agent, or 
downstream collaboration agent.

[[Page 69931]]

    (7) A TEAM participant must not make a gainsharing payment to a 
TEAM collaborator if CMS has notified the TEAM participant that such 
TEAM collaborator is subject to any action by CMS, HHS or any other 
governmental entity, or its designees, for noncompliance with this part 
or the fraud and abuse laws, for the provision of substandard care to 
TEAM beneficiaries or other integrity problems, or for any other 
program integrity problems or noncompliance with any other laws or 
regulations.
    (8) The sharing arrangement must require the TEAM participant to 
recoup any gainsharing payment that contained funds derived from a CMS 
overpayment on a reconciliation payment amount or was based on the 
submission of false or fraudulent data.
    (9) Alignment payments from a TEAM collaborator to a TEAM 
participant may be made at any interval that is agreed upon by both 
parties, and must not be--
    (i) Issued, distributed, or paid prior to the calculation by CMS of 
a repayment amount; payment;
    (ii) Loans, advance payments, or payments for referrals or other 
business; or
    (iii) Assessed by a TEAM participant in the absence of a repayment 
amount.
    (10) The TEAM participant must not receive any amounts under a 
sharing arrangement from a TEAM collaborator that are not alignment 
payments.
    (11) For a performance year, the aggregate amount of all alignment 
payments received by the TEAM participant must not exceed 50 percent of 
the TEAM participant's repayment amount.
    (12) The aggregate amount of all alignment payments from a TEAM 
collaborator to the TEAM participant may not be greater than--
    (i) With respect to a TEAM collaborator other than an ACO, 25 
percent of the TEAM participant's repayment amount.
    (ii) With respect to a TEAM collaborator that is an ACO, 50 percent 
of the TEAM participant's repayment amount.
    (13) The amount of any alignment payments must be determined in 
accordance with a methodology that does not directly account for the 
volume or value of past or anticipated referrals or business otherwise 
generated by, between or among the TEAM participant, any TEAM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with a TEAM participant, 
TEAM collaborator, collaboration agent, or downstream collaboration 
agent.
    (14) All gainsharing payments and any alignment payments must be 
administered by the TEAM participant in accordance with generally 
accepted accounting principles (GAAP) and Government Auditing Standards 
(The Yellow Book).
    (15) All gainsharing payments and alignment payments must be made 
by check, electronic funds transfer, or another traceable cash 
transaction.
    (d) Documentation requirements. (1) TEAM participants must--
    (i) Document the sharing arrangement contemporaneously with the 
establishment of the arrangement;
    (ii) Publicly post (and update on at least a quarterly basis) on a 
web page on the TEAM participant's website--
    (A) Accurate lists of all current TEAM collaborators, including the 
TEAM collaborators' names and addresses as well as accurate historical 
lists of all TEAM collaborators.
    (B) Written policies for selecting individuals and entities to be 
TEAM collaborators as required by Sec.  512.565(a)(3).
    (iii) Maintain, and require each TEAM collaborator to maintain, 
contemporaneous documentation with respect to the payment or receipt of 
any gainsharing payment or alignment payment that includes, at a 
minimum--
    (A) Nature of the payment (gainsharing payment or alignment 
payment);
    (B) Identity of the parties making and receiving the payment;
    (C) Date of the payment;
    (D) Amount of the payment; and
    (E) Date and amount of any recoupment of all or a portion of a TEAM 
collaborator's gainsharing payment.
    (F) Explanation for each recoupment, such as whether the TEAM 
collaborator received a gainsharing payment that contained funds 
derived from a CMS overpayment of a reconciliation payment or was based 
on the submission of false or fraudulent data.
    (2) The TEAM participant must keep records of all of the following:
    (i) Its process for determining and verifying its potential and 
current TEAM collaborators' eligibility to participate in Medicare.
    (ii) Its plan to track internal cost savings.
    (iii) Information on the accounting systems used to track internal 
cost savings.
    (iv) A description of current health information technology, 
including systems to track reconciliation payment amounts, repayment 
amounts, and internal cost savings.
    (v) Its plan to track gainsharing payments and alignment payments.
    (3) The TEAM participant must retain and provide access to and must 
require each TEAM collaborator to retain and provide access to, the 
required documentation in accordance with Sec.  512.586.


Sec.  512.568  Distribution arrangements.

    (a) General. (1) An ACO, PGP, NPPGP, or TGP that is a TEAM 
collaborator and has entered into a sharing arrangement with a TEAM 
participant may distribute all or a portion of any gainsharing payment 
it receives from the TEAM participant only in accordance with a 
distribution arrangement.
    (2) All distribution arrangements must comply with the provisions 
of this section and all other applicable laws and regulations, 
including the fraud and abuse laws.
    (b) Requirements. (1) All distribution arrangements must be in 
writing and signed by the parties, contain the effective date of the 
agreement, and be entered into before care is furnished to TEAM 
beneficiaries under the distribution arrangement.
    (2) Participation in a distribution arrangement must be voluntary 
and without penalty for nonparticipation.
    (3) The distribution arrangement must require the collaboration 
agent to comply with all applicable laws and regulations.
    (4) The opportunity to make or receive a distribution payment must 
not be conditioned directly or indirectly on the volume or value of 
past or anticipated referrals or business otherwise generated by, 
between or among the TEAM participant, any TEAM collaborator, any 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with a TEAM participant, TEAM 
collaborator, collaboration agent, or downstream collaboration agent.
    (5) The amount of any distribution payments from an ACO, from an 
NPPGP to an NPPGP member, or from a TGP to a TGP member, must be 
determined in accordance with a methodology that is solely based on 
quality of care and the provision of TEAM activities and that may take 
into account the amount of such TEAM activities provided by a 
collaboration agent relative to other collaboration agents.
    (6) The amount of any distribution payments from a PGP must be 
determined in accordance with a methodology that is solely based on 
quality of care and the provision of TEAM activities and that may take 
into account the amount of such TEAM activities provided by a 
collaboration agent relative to other collaboration agents.

[[Page 69932]]

    (7) A collaboration agent is eligible to receive a distribution 
payment only if the collaboration agent furnished or billed for an item 
or service rendered to a TEAM beneficiary during an episode that was 
attributed to the same performance year for which the TEAM participant 
accrued the internal cost savings or earned the reconciliation payment 
amount that comprises the gainsharing payment being distributed.
    (8) With respect to the distribution of any gainsharing payment 
received by an ACO, PGP, NPPGP, or TGP, the total amount of all 
distribution payments for a performance year must not exceed the amount 
of the gainsharing payment received by the TEAM collaborator from the 
TEAM participant for the same performance year.
    (9) All distribution payments must be made by check, electronic 
funds transfer, or another traceable cash transaction.
    (10) The collaboration agent must retain the ability to make 
decisions in the best interests of the patient, including the selection 
of devices, supplies, and treatments.
    (11) The distribution arrangement must not--
    (i) Induce the collaboration agent to reduce or limit medically 
necessary items and services to any Medicare beneficiary; or
    (ii) Reward the provision of items and services that are medically 
unnecessary.
    (12) The TEAM collaborator must maintain contemporaneous 
documentation regarding distribution arrangements in accordance with 
Sec.  512.586, including all of the following:
    (i) The relevant written agreements.
    (ii) The date and amount of any distribution payment(s).
    (iii) The identity of each collaboration agent that received a 
distribution payment.
    (iv) A description of the methodology and accounting formula for 
determining the amount of any distribution payment.
    (13) The TEAM collaborator may not enter into a distribution 
arrangement with any individual or entity that has a sharing 
arrangement with the same TEAM participant.
    (14) The TEAM collaborator must retain and provide access to and 
must require collaboration agents to retain and provide access to, the 
required documentation in accordance with Sec.  512.586.


Sec.  512.570  Downstream distribution arrangements.

    (a) General. (1) An ACO participant that is a PGP, NPPGP, or TGP 
and that has entered into a distribution arrangement with a TEAM 
collaborator that is an ACO, may distribute all or a portion of any 
distribution payment it receives from the TEAM collaborator only in 
accordance with a downstream distribution arrangement.
    (2) All downstream distribution arrangements must comply with the 
provisions of this section and all applicable laws and regulations, 
including the fraud and abuse laws.
    (b) Requirements. (1) All downstream distribution arrangements must 
be in writing and signed by the parties, contain the effective date of 
the agreement, and be entered into before care is furnished to TEAM 
beneficiaries under the downstream distribution arrangement.
    (2) Participation in a downstream distribution arrangement must be 
voluntary and without penalty for nonparticipation.
    (3) The downstream distribution arrangement must require the 
downstream collaboration agent to comply with all applicable laws and 
regulations.
    (4) The opportunity to make or receive a downstream distribution 
payment must not be conditioned directly or indirectly on the volume or 
value of past or anticipated referrals or business otherwise generated 
by, between or among the TEAM participant, any TEAM collaborator, any 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with a TEAM participant, TEAM 
collaborator, collaboration agent, or downstream collaboration agent.
    (5) The amount of any downstream distribution payments from an 
NPPGP to an NPPGP member or from a TGP to a TGP member must be 
determined in accordance with a methodology that is solely based on 
quality of care and the provision of TEAM activities and that may take 
into account the amount of such TEAM activities provided by a 
downstream collaboration agent relative to other downstream 
collaboration agents.
    (6) The amount of any downstream distribution payments from a PGP 
must be determined in accordance with a methodology that is solely 
based on quality of care and the provision of TEAM activities and that 
may take into account the amount of such TEAM activities provided by a 
downstream collaboration agent relative to other downstream 
collaboration agents.
    (7) A downstream collaboration agent is eligible to receive a 
downstream distribution payment only if the downstream collaboration 
agent furnished an item or service to a TEAM beneficiary during an 
episode that is attributed to the same performance year for which the 
TEAM participant accrued the internal cost savings or earned the 
reconciliation payment amount that comprises the gainsharing payment 
from which the ACO made the distribution payment to the PGP, NPPGP, or 
TGP that is an ACO participant.
    (8) The total amount of all downstream distribution payments made 
to downstream collaboration agents must not exceed the amount of the 
distribution payment received by the PGP, NPPGP, or TGP from the ACO.
    (9) All downstream distribution payments must be made by check, 
electronic funds transfer, or another traceable cash transaction.
    (10) The downstream collaboration agent must retain his or her 
ability to make decisions in the best interests of the beneficiary, 
including the selection of devices, supplies, and treatments.
    (11) The downstream distribution arrangement must not--
    (i) Induce the downstream collaboration agent to reduce or limit 
medically necessary services to any Medicare beneficiary; or
    (ii) Reward the provision of items and services that are medically 
unnecessary.
    (12) The PGP, NPPGP, or TGP must maintain contemporaneous 
documentation regarding downstream distribution arrangements in 
accordance with Sec.  512.586, including the following:
    (i) The relevant written agreements.
    (ii) The date and amount of any downstream distribution payment.
    (iii) The identity of each downstream collaboration agent that 
received a downstream distribution payment.
    (iv) A description of the methodology and accounting formula for 
determining the amount of any downstream distribution payment.
    (13) The PGP, NPPGP, or TGP may not enter into a downstream 
distribution arrangement with any PGP member, NPPGP member, or TGP 
member who has--
    (i) A sharing arrangement with a TEAM participant.
    (ii) A distribution arrangement with the ACO that the PGP, NPPGP, 
or TGP is a participant in.
    (14) The PGP, NPPGP, or TGP must retain and provide access to, and 
must require downstream collaboration agents to retain and provide 
access to, the required documentation in accordance with Sec.  512.586.


Sec.  512.575  TEAM beneficiary incentives.

    (a) General. TEAM participants may choose to provide in-kind 
patient engagement incentives including but not limited to items of 
technology to

[[Page 69933]]

TEAM beneficiaries in an episode, subject to the following conditions:
    (1) The incentive must be provided directly by the TEAM participant 
or by an agent of the TEAM participant under the TEAM participant's 
direction and control to the TEAM beneficiary during an episode.
    (2) The item or service provided must be reasonably connected to 
medical care provided to a TEAM beneficiary during an episode.
    (3) The item or service must be a preventive care item or service 
or an item or service that advances a clinical goal, as listed in 
paragraph (c) of this section, for a TEAM beneficiary in an episode by 
engaging the TEAM beneficiary in better managing his or her own health.
    (4) The item or service must not be tied to the receipt of items or 
services outside the episode.
    (5) The item or service must not be tied to the receipt of items or 
services from a particular provider or supplier.
    (6) The availability of the items or services must not be 
advertised or promoted, except that a TEAM beneficiary may be made 
aware of the availability of the items or services at the time the TEAM 
beneficiary could reasonably benefit from them.
    (7) The cost of the items or services must not be shifted to any 
Federal health care program, as defined at section 1128B(f) of the Act.
    (b) Technology provided to a TEAM beneficiary. TEAM beneficiary 
engagement incentives involving technology are subject to the following 
additional conditions:
    (1) Items or services involving technology provided to a TEAM 
beneficiary may not exceed $1,000 in retail value for any one TEAM 
beneficiary during any one episode.
    (2) Items or services involving technology provided to a TEAM 
beneficiary must be the minimum necessary to advance a clinical goal, 
as listed in paragraph (c) of this section, for a beneficiary in an 
episode.
    (3) Items of technology exceeding $75 in retail value must--
    (i) Remain the property of the TEAM participant; and
    (ii) Be retrieved from the TEAM beneficiary at the end of the 
episode, with documentation of the ultimate date of retrieval. The TEAM 
participant must document all retrieval attempts. In cases when the 
item of technology is not able to be retrieved, the TEAM participant 
must determine why the item was not retrievable. If it was determined 
that the item was misappropriated (if it were sold, for example), the 
TEAM participant must take steps to prevent future beneficiary 
incentives for that TEAM beneficiary. Following this process, 
documented, diligent, good faith attempts to retrieve items of 
technology will be deemed to meet the retrieval requirement.
    (c) Clinical goals of TEAM. The following are the clinical goals of 
TEAM, which may be advanced through TEAM beneficiary incentives:
    (1) Beneficiary adherence to drug regimens.
    (2) Beneficiary adherence to a care plan.
    (3) Reduction of readmissions and complications following an 
episode.
    (4) Management of chronic diseases and conditions that may be 
affected by the TEAM procedure.
    (d) Documentation of TEAM beneficiary incentives. (1) TEAM 
participants must maintain documentation of items and services 
furnished as beneficiary incentives that exceed $25 in retail value.
    (2) The documentation must be established contemporaneously with 
the provision of the items and services with a record established and 
maintained to include at least the following:
    (i) The date the incentive is provided.
    (ii) The identity of the TEAM beneficiary to whom the item or 
service was provided.
    (3) The documentation regarding items of technology exceeding $75 
in retail value must also include contemporaneous documentation of any 
attempt to retrieve technology at the end of an episode, or why the 
items were not retrievable, as described in paragraph (b)(3) of this 
section.
    (4) The TEAM participant must retain and provide access to the 
required documentation in accordance with Sec.  512.586.


Sec.  512.576  Application of the CMS-sponsored model arrangements and 
patient incentives safe harbor.

    (a) Application of the CMS-sponsored model arrangements safe 
harbor. CMS has determined that the Federal Anti-Kickback Statute Safe 
Harbor for CMS-sponsored model arrangements (42 CFR 1001.952(ii)(1)) is 
available to protect remuneration furnished in TEAM in the form of the 
sharing arrangement's gainsharing payments and alignment payments, the 
distribution arrangement's distribution payments, and the downstream 
distribution arrangement's distribution payments that meet all safe 
harbor requirements set forth in 42 CFR 1001.952(ii), and Sec. Sec.  
512.565, 512.568, 512.570.
    (b) Application of the CMS-sponsored model patient incentives safe 
harbor. CMS has determined that the Federal Anti-Kickback Statute Safe 
Harbor for CMS-sponsored model patient incentives (42 CFR 
1001.952(ii)(2)) is available to protect TEAM beneficiary incentives 
that meet all safe harbor requirements set forth in 42 CFR 1001.952(ii) 
and Sec.  512.575.

Medicare Program Waivers


Sec.  512.580  TEAM Medicare Program Waivers

    (a) Waiver of certain telehealth requirements--(1) Waiver of the 
geographic site requirements. Except for the geographic site 
requirements for a face-to-face encounter for home health 
certification, CMS waives the geographic site requirements of section 
1834(m)(4)(C)(i)(I) through (III) of the Act for episodes being tested 
in TEAM solely for services that--
    (i) May be furnished via telehealth under existing Medicare program 
requirements; and
    (ii) Are included in the episode in accordance with Sec.  
512.525(e).
    (2) Waiver of the originating site requirements. Except for the 
originating site requirements for a face-to-face encounter for home 
health certification, CMS waives the originating site requirements 
under section 1834(m)(4)I(ii)(I) through (VIII) of the Act for episodes 
to permit a telehealth visit to originate in the beneficiary's home or 
place of residence solely for services that--
    (i) May be furnished via telehealth under existing Medicare program 
requirements; and
    (ii) Are included in the episode in accordance with Sec.  
512.525(e).
    (3) Waiver of selected payment provisions. (i) CMS waives the 
payment requirements under section 1834(m)(2)(A) of the Act so that the 
facility fee normally paid by Medicare to an originating site for a 
telehealth service is not paid if the service is originated in the 
beneficiary's home or place of residence.
    (ii) CMS waives the payment requirements under section 
1834(m)(2)(B) of the Act to allow the distant site payment for 
telehealth home visit HCPCS codes unique to TEAM.
    (4) Other requirements. All other requirements for Medicare 
coverage and payment of telehealth services continue to apply, 
including the list of specific services approved to be furnished by 
telehealth.
    (b) Waiver of the SNF 3-day rule--(1) Episodes initiated by an 
anchor hospitalization. CMS waives the SNF 3-day rule for coverage of a 
SNF stay within 30 days of the date of discharge from the anchor 
hospitalization for a

[[Page 69934]]

beneficiary who is a TEAM beneficiary on the date of discharge from the 
anchor hospitalization if the SNF is identified on the applicable 
calendar quarter list of qualified SNFs at the time of the TEAM 
beneficiary's admission to the SNF.
    (2) Episodes initiated by an anchor procedure. CMS waives the SNF 
3-day rule for coverage of a SNF stay within 30 days of the date of 
service of the anchor procedure for a beneficiary who is a TEAM 
beneficiary on the date of service of the anchor procedure if the SNF 
is identified on the applicable calendar quarter list of qualified SNFs 
at the time of the TEAM beneficiary's admission to the SNF.
    (3) Determination of qualified SNFs. CMS determines the qualified 
SNFs for each calendar quarter based on a review of the most recent 
rolling 12 months of overall star ratings on the Five-Star Quality 
Rating System for SNFs on the Nursing Home Compare website. Qualified 
SNFs are rated an overall of 3 stars or better for at least 7 of the 12 
months.
    (4) Posting of qualified SNFs. CMS posts to the CMS website the 
list of qualified SNFs in advance of the calendar quarter.
    (5) Financial liability for non-covered SNF services. If CMS 
determines that the waiver requirements specified in paragraph (b) of 
this section were not met, the following apply:
    (i) CMS makes no payment to a SNF for SNF services if the SNF 
admits a TEAM beneficiary who has not had a qualifying anchor 
hospitalization or anchor procedure.
    (ii) In the event that CMS makes no payment for SNF services 
furnished by a SNF as a result of paragraph (b)(5)(i) of this section, 
the beneficiary protections specified in paragraph (b)(5)(iii) of this 
section apply, unless the TEAM participant has provided the beneficiary 
with a discharge planning notice in accordance with Sec.  
512.582(b)(3).
    (iii) If the TEAM participant does not provide the beneficiary with 
a discharge planning notice in accordance with Sec.  512.582(b)(3)--
    (A) The SNF must not charge the beneficiary for the expenses 
incurred for such services;
    (B) The SNF must return to the beneficiary any monies collected for 
such services; and
    (C) The TEAM participant is financially liable for the expenses 
incurred for such services.
    (6) Coverage of SNF services and discharge planning notification. 
If the TEAM participant provided a discharge planning notice to the 
beneficiary in accordance with Sec.  512.582(b)(3), then normal SNF 
coverage requirements apply, and the beneficiary may be financially 
liable for non-covered SNF services.
    (c) Other requirements. All other Medicare rules for coverage and 
payment of Part A-covered services continue to apply except as 
otherwise waived in this part.

General Provisions


Sec.  512.582  Beneficiary protections.

    (a) Beneficiary freedom of choice. (1) A TEAM participant, TEAM 
collaborators, collaboration agents, downstream collaboration agent and 
downstream participants must not restrict Medicare beneficiaries' 
ability to choose to receive care from any provider or supplier.
    (2) The TEAM participant and its downstream participants must not 
commit any act or omission, nor adopt any policy that inhibits 
beneficiaries from exercising their freedom to choose to receive care 
from any provider or supplier or from any health care provider who has 
opted out of Medicare. The TEAM participant and its downstream 
participants may communicate to TEAM beneficiaries the benefits of 
receiving care with the TEAM participant, if otherwise consistent with 
the requirements of this part and applicable law.
    (3) As part of discharge planning and referral, TEAM participants 
must provide a complete list of HHAs, SNFs, IRFs, or LTCHs that are 
participating in the Medicare program, and that serve the geographic 
area (as defined by the HHA) in which the patient resides, or in the 
case of a SNF, IRF, or LTCH, in the geographic area requested by the 
patient.
    (i) This list must be presented to TEAM beneficiaries for whom home 
health care, SNF, IRF, or LTCH services are medically necessary.
    (ii) TEAM participants must specify on the list those post-acute 
care providers on the list with whom they have a sharing arrangement.
    (iii) TEAM participants may recommend preferred providers and 
suppliers, consistent with applicable statutes and regulations.
    (iv) TEAM participants may not limit beneficiary choice to any list 
of providers or suppliers in any manner other than as permitted under 
applicable statutes and regulations.
    (v) TEAM participants must take into account patient and family 
preferences for choice of provider and supplier when they are 
expressed.
    (4) TEAM participants may not charge any TEAM collaborator a fee to 
be included on any list of preferred providers or suppliers, nor may 
the TEAM participant accept such payments.
    (b) Required beneficiary notification--(1) TEAM participant 
beneficiary notification--(i) Notification to beneficiaries. Each TEAM 
participant must provide written notification to any TEAM beneficiary 
that meets the criteria in Sec.  512.535 of his or her inclusion in the 
TEAM model.
    (ii) Timing of notification. Prior to discharge from the anchor 
hospitalization, or prior to discharge from the anchor procedure, as 
applicable, the TEAM participant must provide the TEAM beneficiary with 
a beneficiary notification as described in paragraph (b)(1)(iv) of this 
section.
    (iii) List of beneficiaries who have received a notification. The 
TEAM participant must be able to generate a list of all beneficiaries 
who have received such notification, including the date on which the 
notification was provided to the beneficiary, to CMS or its designee 
upon request.
    (iv) Content of notification. The beneficiary notification must 
contain all of the following:
    (A) A detailed explanation of TEAM and how it might be expected to 
affect the beneficiary's care.
    (B) Notification that the beneficiary retains freedom of choice to 
choose providers and services.
    (C) Explanation of how patients can access care records and claims 
data through an available patient portal, if applicable, and how they 
can share access to their Blue Button[supreg] electronic health 
information with caregivers.
    (D) Explanation of the type of beneficiary-identifiable claims data 
the TEAM participant may receive.
    (E) A statement that all existing Medicare beneficiary protections 
continue to be available to the TEAM beneficiary. These include the 
ability to report concerns of substandard care to Quality Improvement 
Organizations or the 1-800-MEDICARE helpline.
    (F) A list of the providers, suppliers, and ACOs with whom the TEAM 
participant has a sharing arrangement. This requirement may be 
fulfilled by the TEAM participant including in the detailed 
notification a Web address where beneficiaries may access the list.
    (2) TEAM collaborator notice. A TEAM participant must require every 
TEAM collaborator to provide written notice to applicable TEAM 
beneficiaries of TEAM, including information on the quality and payment 
incentives under TEAM, and the existence of its sharing arrangement 
with the TEAM participant.

[[Page 69935]]

    (i) With the exception of ACOs, PGPs, NPPGPs, and TGPs, a TEAM 
participant must require every TEAM collaborator that furnishes an item 
or service to a TEAM beneficiary during an episode to provide written 
notice to the beneficiary of TEAM, including basic information on the 
quality and payment incentives under TEAM, and the existence of the 
TEAM collaborator's sharing arrangement.
    (A) The notice must be provided no later than the time at which the 
beneficiary first receives an item or service from the TEAM 
collaborator during an episode. In circumstances where, due to the 
patient's condition, it is not feasible to provide notification at such 
time, the notification must be provided to the beneficiary or his or 
her representative as soon as is reasonably practicable.
    (B) The TEAM collaborator must be able to provide a list of all 
beneficiaries who received such a notice, including the date on which 
the notice was provided to the beneficiary, to CMS upon request.
    (ii) A TEAM participant must require every PGP, NPPGP, or TGP that 
is a TEAM collaborator where a member of the PGP, member of the NPPGP, 
or member of the TGP furnishes an item or service to a TEAM beneficiary 
during an episode to provide written notice to the beneficiary of TEAM, 
including basic information on the quality and payment incentives under 
TEAM, and the existence of the entity's sharing arrangement.
    (A)(1) The notice must be provided no later than the time at which 
the beneficiary first receives an item or service from any member of 
the PGP, member of the NPPGP, or member of the TGP, and the required 
PGP, NPPGP, or TGP notice may be provided by that member respectively.
    (2) In circumstances where, due to the patient's condition, it is 
not feasible to provide notice at such times, the notice must be 
provided to the beneficiary or his or her representative as soon as is 
reasonably practicable.
    (B) The PGP, NPPGP, or TGP must be able to provide a list of all 
beneficiaries who received such a notice, including the date on which 
the notice was provided to the beneficiary, to CMS upon request.
    (iii) A TEAM participant must require every ACO that is a TEAM 
collaborator where an ACO participant or ACO provider/supplier 
furnishes an item or service to a TEAM beneficiary during an episode to 
provide written notice to the beneficiary of TEAM, including basic 
information on the quality and payment incentives under TEAM, and the 
existence of the entity's sharing arrangement.
    (A)(1) The notice must be provided no later than the time at which 
the beneficiary first receives an item or service from any ACO 
participant or ACO provider/supplier and the required ACO notice may be 
provided by that ACO participant or ACO provider/supplier respectively.
    (2) In circumstances where, due to the patient's condition, it is 
not feasible to provide notice at such times, the notice must be 
provided to the beneficiary or his or her representative as soon as is 
reasonably practicable.
    (B) The ACO must be able to provide a list of all beneficiaries who 
received such a notice, including the date on which the notice was 
provided to the beneficiary, to CMS upon request.
    (3) Discharge planning notice. A TEAM participant must provide the 
beneficiary with a written notice of any potential financial liability 
associated with non-covered services recommended or presented as an 
option as part of discharge planning, no later than the time that the 
beneficiary discusses a particular post-acute care option or at the 
time the beneficiary is discharged from an anchor procedure or anchor 
hospitalization, whichever occurs earlier.
    (i) If the TEAM participant knows or should have known that the 
beneficiary is considering or has decided to receive a non-covered 
post-acute care service or other non-covered associated service or 
supply, the TEAM participant must notify the beneficiary in writing 
that the service would not be covered by Medicare.
    (ii) If the TEAM participant is discharging a beneficiary to a SNF 
after an inpatient hospital stay, and the beneficiary is being 
transferred to or is considering a SNF that would not qualify under the 
SNF 3-day waiver in Sec.  512.580, the TEAM participant must notify the 
beneficiary in accordance with paragraph (b)(3)(i) of this section that 
the beneficiary will be responsible for payment for the services 
furnished by the SNF during that stay, except those services that would 
be covered by Medicare Part B during a non-covered inpatient SNF stay.
    (4) Access to records and retention. Lists of beneficiaries that 
receive notifications or notices must be retained, and access provided 
to CMS, or its designees, in accordance with Sec.  512.586.
    (c) Availability of services. (1) The TEAM participant and its 
downstream participants must continue to make medically necessary 
covered services available to beneficiaries to the extent required by 
applicable law. TEAM beneficiaries and their assignees retain their 
rights to appeal claims in accordance with part 405, subpart I of this 
chapter.
    (2) The TEAM participant and its downstream participants must not 
take any action to select or avoid treating certain Medicare 
beneficiaries based on their income levels or based on factors that 
would render the beneficiary an ``at-risk beneficiary'' as defined at 
Sec.  425.20 of this chapter.
    (3) The TEAM participant and its downstream participants must not 
take any action to selectively target or engage beneficiaries who are 
relatively healthy or otherwise expected to improve the TEAM 
participant's or downstream participant's financial or quality 
performance.
    (d) Descriptive TEAM materials and activities. (1) The TEAM 
participant and its downstream participants must not use or distribute 
descriptive TEAM materials and activities that are materially 
inaccurate or misleading.
    (2) The TEAM participant and its downstream participants must 
include the following statement on all descriptive TEAM materials and 
activities: ``The statements contained in this document are solely 
those of the authors and do not necessarily reflect the views or 
policies of the Centers for Medicare & Medicaid Services (CMS). The 
authors assume responsibility for the accuracy and completeness of the 
information contained in this document.''
    (3) The TEAM participant and its downstream participants must 
retain copies of all written and electronic descriptive TEAM materials 
and activities and appropriate records for all other descriptive TEAM 
materials and activities in a manner consistent with Sec.  512.135(c).
    (4) CMS reserves the right to review, or have a designee review, 
descriptive TEAM materials and activities to determine whether or not 
the content is materially inaccurate or misleading. This review takes 
place at a time and in a manner specified by CMS once the descriptive 
TEAM materials and activities are in use by the TEAM participant.


Sec.  512.584  Cooperation in model evaluation and monitoring.

    The TEAM participant and its TEAM collaborators must comply with 
the requirements of Sec.  403.1110(b) of this chapter and must 
otherwise cooperate with CMS' TEAM evaluation and monitoring activities 
as may be necessary to enable CMS to evaluate TEAM in accordance with 
section

[[Page 69936]]

1115A(b)(4) of the Act and to conduct monitoring activities under Sec.  
512.590, including producing such data as may be required by CMS to 
evaluate or monitor TEAM, which may include protected health 
information as defined in 45 CFR 160.103 and other individually-
identifiable data.


Sec.  512.586  Audits and record retention.

    (a) Right to audit. The Federal government, including CMS, HHS, and 
the Comptroller General, or their designees, has the right to audit, 
inspect, investigate, and evaluate any documents and other evidence 
regarding implementation of TEAM.
    (b) Access to records. The TEAM participant and its TEAM 
collaborators must maintain and give the Federal government, including 
CMS, HHS, and the Comptroller General, or their designees, access to 
all such documents and other evidence sufficient to enable the audit, 
evaluation, inspection, or investigation of the implementation of TEAM, 
including without limitation, documents and other evidence regarding 
all of the following:
    (1) The TEAM participant's and its downstream participants' 
compliance with the terms of TEAM.
    (2) The accuracy of TEAM reconciliation payment amounts and 
repayment amounts.
    (3) The TEAM participant's payment of amounts owed to CMS under 
TEAM.
    (4) Quality measure information and the quality of services 
performed under the terms of TEAM.
    (5) Utilization of items and services furnished under TEAM.
    (6) The ability of the TEAM participant to bear the risk of 
potential losses and to repay any losses to CMS, as applicable.
    (7) Patient safety.
    (8) Other program integrity issues.
    (c) Record retention. (1) The TEAM participant and its downstream 
participants must maintain the documents and other evidence described 
in paragraph (b) of this section and other evidence for a period of 6 
years from the last payment determination for the TEAM participant 
under TEAM or from the date of completion of any audit, evaluation, 
inspection, or investigation, whichever is later, unless--
    (i) CMS determines there is a special need to retain a particular 
record or group of records for a longer period and notifies the TEAM 
participant at least 30 days before the normal disposition date; or
    (ii) There has been a termination, dispute, or allegation of fraud 
or similar fault against the TEAM participant or its downstream 
participants, in which case the records must be maintained for an 
additional 6 years from the date of any resulting final resolution of 
the termination, dispute, or allegation of fraud or similar fault.
    (2) If CMS notifies the TEAM participant of the special need to 
retain records in accordance with paragraph (c)(1)(i) of this section 
or there has been a termination, dispute, or allegation of fraud or 
similar fault against the TEAM participant or its downstream 
participants described in paragraph (c)(1)(ii) of this section, the 
TEAM participant must notify its downstream participants of this need 
to retain records for the additional period specified by CMS.


Sec.  512.588  Rights in data and intellectual property.

    (a) CMS may--
    (1) Use any data obtained under Sec. Sec.  512.584, 512.586, or 
512.590 to evaluate and monitor TEAM; and
    (2) Disseminate quantitative and qualitative results and successful 
care management techniques, including factors associated with 
performance, to other providers and suppliers and to the public. Data 
disseminated may include patient--
    (i) De-identified results of patient experience of care and quality 
of life surveys, and patient; and
    (ii) De-identified measure results calculated based upon claims, 
medical records, and other data sources.
    (b) Notwithstanding any other provision of this part, for all data 
that CMS confirms to be proprietary trade secret information and 
technology of the TEAM participant or its downstream participants, CMS 
or its designee(s) will not release this data without the express 
written consent of the TEAM participant or its downstream participant, 
unless such release is required by law.
    (c) If the TEAM participant or its downstream participant wishes to 
protect any proprietary or confidential information that it submits to 
CMS or its designee, the TEAM participant or its downstream participant 
must label or otherwise identify the information as proprietary or 
confidential. Such assertions are subject to review and confirmation by 
CMS prior to CMS' acting upon such assertions.


Sec.  512.590  Monitoring and compliance.

    (a) Compliance with laws. The TEAM participant and each of its 
downstream participants must comply with all applicable laws and 
regulations.
    (b) CMS monitoring and compliance activities. (1) CMS staff, or its 
approved designee, may conduct monitoring activities to ensure 
compliance by the TEAM participant and each of its downstream 
participants with the terms of TEAM under this subpart to--
    (i) Understand TEAM participants' use of TEAM payments; and
    (ii) Promote the safety of beneficiaries and the integrity of TEAM.
    (2) Monitoring activities may include, without limitation, all of 
the following:
    (i) Documentation requests sent to the TEAM participant and its 
downstream participants, including surveys and questionnaires.
    (ii) Audits of claims data, quality measures, medical records, and 
other data from the TEAM participant and its downstream participants.
    (iii) Interviews with members of the staff and leadership of the 
TEAM participant and its downstream participants.
    (iv) Interviews with beneficiaries and their caregivers.
    (v) Site visits to the TEAM participant and its downstream 
participants, performed in a manner consistent with paragraph (c) of 
this section.
    (vi) Monitoring quality outcomes and clinical data, if applicable.
    (vii) Tracking patient complaints and appeals.
    (3) In conducting monitoring and oversight activities, CMS or its 
designees may use any relevant data or information including without 
limitation all Medicare claims submitted for items or services 
furnished to TEAM beneficiaries.
    (c) Site visits. (1) In a manner consistent with Sec.  512.584, the 
TEAM participant and its downstream participants must cooperate in 
periodic site visits performed by CMS or its designees in order to 
facilitate the evaluation of TEAM and the monitoring of the TEAM 
participant's compliance with the terms of TEAM.
    (2) CMS or its designee provides, to the extent practicable, the 
TEAM participant or downstream participant with no less than 15 days 
advance notice of any site visit. CMS--
    (i) Attempts, to the extent practicable, to accommodate a request 
for particular dates in scheduling site visits; and
    (ii) Does not accept a date request from a TEAM participant or 
downstream participant that is more than 60 days after the date of the 
CMS initial site visit notice.
    (3) The TEAM participant and its downstream participants must 
ensure that personnel with the appropriate responsibilities and 
knowledge associated with the purpose of the site visit are available 
during all site visits.
    (4) CMS may perform unannounced site visits at the office of the 
TEAM

[[Page 69937]]

participant and any of its downstream participants at any time to 
investigate concerns about the health or safety of beneficiaries or 
other patients or other program integrity issues.
    (5) Nothing in this part shall be construed to limit or otherwise 
prevent CMS from performing site visits permitted or required by 
applicable law.
    (d) Reopening of payment determinations. (1) CMS may reopen a TEAM 
payment determination on its own motion or at the request of a TEAM 
participant, within 4 years from the date of the determination, for 
good cause (as defined at Sec.  405.986 of this chapter).
    (2) CMS may reopen a TEAM payment determination at any time if 
there exists reliable evidence (as defined in Sec.  405.902 of this 
chapter) that the determination was procured by fraud or similar fault 
(as defined in Sec.  405.902 of this chapter).
    (3) CMS's decision regarding whether to reopen a TEAM payment 
determination is binding and not subject to appeal.
    (e) OIG authority. Nothing contained in the terms of TEAM limits or 
restricts the authority of the HHS Office of Inspector General or any 
other Federal government authority, including its authority to audit, 
evaluate, investigate, or inspect the TEAM participant or its 
downstream participants for violations of any Federal statutes, rules, 
or regulations.


Sec.  512.592  Remedial action.

    (a) Grounds for remedial action. CMS may take one or more remedial 
actions described in paragraph (b) of this section if CMS determines 
that the TEAM participant or a downstream participant:
    (1) Has failed to comply with any of the terms of TEAM, included in 
this subpart.
    (2) Has failed to comply with any applicable Medicare program 
requirement, rule, or regulation.
    (3) Has taken any action that threatens the health or safety of a 
beneficiary or other patient.
    (4) Has submitted false data or made false representations, 
warranties, or certifications in connection with any aspect of TEAM.
    (5) Has undergone a change in control that presents a program 
integrity risk.
    (6) Is subject to any sanctions of an accrediting organization or a 
Federal, State, or local government agency.
    (7) Is subject to investigation or action by HHS (including the HHS 
Office of Inspector General and CMS) or the Department of Justice due 
to an allegation of fraud or significant misconduct, including any of 
the following:
    (i) Being subject to the filing of a complaint or filing of a 
criminal charge.
    (ii) Being subject to an indictment.
    (iii) Being named as a defendant in a False Claims Act qui tam 
matter in which the Federal government has intervened, or similar 
action.
    (8) Has failed to demonstrate improved performance following any 
remedial action imposed under this section.
    (9) Has misused or disclosed beneficiary-identifiable data in a 
manner that violates any applicable statutory or regulatory 
requirements or that is otherwise non-compliant with the provisions of 
the TEAM data sharing agreement.
    (b) Remedial actions. If CMS determines that one or more grounds 
for remedial action described in paragraph (a) of this section has 
taken place, CMS may take one or more of the following remedial 
actions:
    (1) Notify the TEAM participant and, if appropriate, require the 
TEAM participant to notify its downstream participants of the 
violation.
    (2) Require the TEAM participant to provide additional information 
to CMS or its designees.
    (3) Subject the TEAM participant to additional monitoring, 
auditing, or both.
    (4) Prohibit the TEAM participant from distributing TEAM payments, 
as applicable.
    (5) Require the TEAM participant to terminate, immediately or by a 
deadline specified by CMS, its agreement with a downstream participant 
with respect to TEAM.
    (6) Require the TEAM participant to submit a corrective action plan 
in a form and manner and by a date specified by CMS.
    (7) Discontinue the provision of data sharing and reports to the 
TEAM participant.
    (8) Recoup TEAM payments.
    (9) Reduce or eliminate a TEAM payment otherwise owed to the TEAM 
participant.
    (10) Such other action as may be permitted under the terms of this 
part.


Sec.  512.594  Limitations on review.

    There is no administrative or judicial review under sections 1869 
or 1878 of the Act or otherwise for all of the following:
    (a) The selection of models for testing or expansion under section 
1115A of the Act.
    (b) The selection of organizations, sites, or participants to test 
TEAM, including a decision by CMS to remove a TEAM participant or to 
require a TEAM participant to remove a downstream participant from 
TEAM.
    (c) The elements, parameters, scope, and duration of testing or 
dissemination, including without limitation the following:
    (1) The selection of quality performance standards for TEAM by CMS.
    (2) The methodology used by CMS to assess the quality of care 
furnished by the TEAM participant.
    (3) The methodology used by CMS to attribute TEAM beneficiaries to 
the TEAM participant, if applicable.
    (d) Determinations regarding budget neutrality under section 
1115A(b)(3) of the Act.
    (e) The termination or modification of the design and 
implementation of TEAM under section 1115A(b)(3)(B) of the Act.
    (f) Determinations about expansion of the duration and scope of 
TEAM under section 1115A(c) of the Act, including the determination 
that TEAM is not expected to meet criteria described in paragraph (a) 
or (b) of this section.


Sec.  512.595  Bankruptcy and other notifications.

    (a) Notice of bankruptcy. If the TEAM participant has filed a 
bankruptcy petition, whether voluntary or involuntary, the TEAM 
participant must provide written notice of the bankruptcy to CMS and to 
the U.S. Attorney's Office in the district where the bankruptcy was 
filed, unless final payment has been made by either CMS or the TEAM 
participant under the terms of TEAM and all administrative or judicial 
review proceedings relating to any TEAM payments have been fully and 
finally resolved.
    (1) The notice of bankruptcy must be sent by certified mail no 
later than 5 days after the petition has been filed and must contain a 
copy of the filed bankruptcy petition (including its docket number).
    (2) The notice to CMS must be addressed to the CMS Office of 
Financial Management at 7500 Security Boulevard, Mailstop C3-01-24, 
Baltimore, MD 21244 or such other address as may be specified on the 
CMS website for purposes of receiving such notices.
    (b) Notice of legal name change. A TEAM participant must furnish 
written notice to CMS within 30 days of any change in its legal name 
becomes effective. The notice of legal name change must meet all of the 
following:
    (1) Be in a form and manner specified by CMS.
    (2) Include a copy of the legal document effecting the name change, 
which must be authenticated by the appropriate State official.

[[Page 69938]]

    (c) Notice of change in control. (1) A TEAM participant must 
furnish written notice to CMS in a form and manner specified by CMS at 
least 90 days before any change in control becomes effective.
    (2) If CMS determines, in accordance with Sec.  512.592(a)(5), that 
a TEAM participant's change in control would present a program 
integrity risk, CMS may--
    (i) Take remedial action against the TEAM participant under Sec.  
512.160(b).
    (ii) Require immediate reconciliation and payment of all monies 
owed to CMS by a TEAM participant that is subject to a change in 
control.


Sec.  512.596  Termination of TEAM or TEAM participant from model by 
CMS.

    (a) Termination of TEAM. (1) CMS may terminate TEAM for reasons 
including, but not limited to, the following:
    (i) CMS determines that it no longer has the funds to support TEAM.
    (ii) CMS terminates TEAM in accordance with section 1115A(b)(3)(B) 
of the Act.
    (2) If CMS terminates TEAM, CMS provides written notice to the TEAM 
participant specifying the grounds for termination and the effective 
date of such termination.
    (b) Notice of a TEAM participant's termination from TEAM. If a TEAM 
participant receives notification that it has been terminated from TEAM 
and wishes to dispute the termination, it must provide a written notice 
to CMS requesting review of the termination within 10 calendar days of 
the notice.
    (1) CMS has 30 days to respond to the TEAM participant's request 
for review.
    (2) If the TEAM participant fails to notify CMS, the termination is 
deemed final.


Sec.  512.598  Decarbonization and Resilience Initiative.

    (a) Voluntary reporting. A TEAM participant may elect to respond to 
questions and report metrics related to the TEAM participant's, or the 
TEAM participant's corporate affiliate's, emissions to CMS on an annual 
basis following each performance period. Voluntary reporting includes 
the following metrics:
    (1) Organizational questions, which are a set of questions about 
the TEAM participants' sustainability team and sustainability 
activities.
    (2) Building energy metrics, which are a set of metrics related to 
measuring and reporting GHG emissions related to energy use at TEAM 
participant facilities.
    (i) Building energy metrics are based on the ENERGY STAR[supreg] 
Portfolio Manager[supreg] guidelines for the time of submission. TEAM 
participants reporting these metrics must submit using ENERGY STAR 
Portfolio Manager in the manner described in paragraph (b) of this 
section.
    (ii) Metrics to be collected include all of the following:
    (A) ENERGY STAR[supreg] Score for Hospitals as defined in the 
ENERGY STAR[supreg] Portfolio Manager[supreg] as well as supporting 
data which may include energy use intensity, electricity, natural gas, 
and other source emissions and normalizing factors such as building 
size, number of full-time equivalent workers, number of staffed beds, 
number of magnetic resonance imaging machines, zip codes, and heating 
and cooling days, as specified in the ENERGY STAR[supreg] Portfolio 
Manager[supreg].
    (B) Energy cost, to capture total energy costs, as specified in the 
ENERGY STAR[supreg] Portfolio Manager[supreg].
    (C) Total, direct, and indirect GHG emissions and emissions 
intensity as specified in the ENERGY STAR[supreg] Portfolio 
Manager[supreg].
    (3) Anesthetic gas metrics, which are a set of metrics related to 
measuring and managing emissions from anesthetic gas which include all 
of the following:
    (i) Total greenhouse gas emissions from inhaled anesthetics based 
on purchase records.
    (ii) Normalization factors that may include information on 
anesthetic hours, operating rooms, or MAC-hour equivalents.
    (iii) Assessment questions based on key actions recommended for 
reducing emissions for anesthetic gases.
    (4) Transportation metrics, which are a set metrics that focus on 
greenhouse gases related to leased or owned vehicles and may include 
any of the following:
    (i) Gallons for owned and leased vehicles.
    (ii) Normalization factors that may include patient encounter 
volume and the number of full-time equivalent (FTE) employees.
    (iii) Assessment questions on key actions to reduce transportation 
emissions.
    (b) Manner and timing of reporting. (1) If the TEAM participant 
elects to report the metrics in paragraph (b) of this section to CMS, 
such information must be reported to CMS in a form and manner specified 
by CMS for each performance year, including the use of ENERGY 
STAR[supreg] Portfolio Manager[supreg] for the building energy metrics 
at paragraph (a)(2) of this section and a survey and questionnaire for 
questions and metrics at paragraphs (a)(1), (3), and (4) of this 
section.
    (2) If the TEAM participant chooses to participate, the TEAM 
participant must report the information to CMS--
    (i) No later than 120 days in the year following the performance 
year; or
    (ii) A later date as specified by CMS.
    (c) Individualized feedback reports; recognition. If a TEAM 
participant elects to report all the metrics specified in paragraph (a) 
of this section to CMS, in the manner specified in paragraph (b) of 
this section, CMS annually provides the TEAM participant with the 
following:
    (1) Individualized feedback reports, which may summarize 
facilities' emissions metrics and may include benchmarks, as feasible, 
for normalized metrics to compare facilities, in aggregate, to other 
TEAM participants in the Decarbonization and Resilience Initiative. A 
TEAM participant that receives individualized feedback reports from CMS 
must request approval from CMS in writing and receive written approval 
from CMS prior to publication or public disclosure of data or 
information contained in the individualized feedback reports.
    (2) Publicly reported hospital recognition for the TEAM 
participant's commitment to decarbonization through a hospital 
recognition badge publicly reported on a CMS website, which may include 
recognition of the TEAM participant's corporate affiliates when such 
data has been submitted as specified in paragraph (a) of this section.

Xavier Becerra,
Secretary, Department of Health and Human Services.

The following Will Not Publish in the Code of Federal Regulations 
Addendum--Schedule of Standardized Amounts, Update Factors, Rate-of-
Increase Percentages Effective With Cost Reporting Periods Beginning on 
or After October 1, 2024, and Payment Rates for LTCHs Effective for 
Discharges Occurring on or After October 1, 2024

I. Summary and Background

    In this Addendum, we are setting forth a description of the methods 
and data we used to determine the prospective payment rates for 
Medicare hospital inpatient operating costs and Medicare hospital 
inpatient capital-related costs for FY 2025 for acute care hospitals. 
We also are setting forth the rate-of-increase percentage for updating 
the target amounts for certain hospitals excluded from the IPPS for FY 
2025. We note that, because certain hospitals excluded from the IPPS 
are paid on a reasonable cost basis subject to a rate-of-increase 
ceiling (and not by the IPPS),

[[Page 69939]]

these hospitals are not affected by the figures for the standardized 
amounts, offsets, and budget neutrality factors. Therefore, in this 
final rule, we are setting forth the rate-of-increase percentage for 
updating the target amounts for certain hospitals excluded from the 
IPPS that would be effective for cost reporting periods beginning on or 
after October 1, 2024. In addition, we are setting forth a description 
of the methods and data we used to determine the LTCH PPS standard 
Federal payment rate that would be applicable to Medicare LTCHs for FY 
2025.
    In general, except for SCHs and MDHs, for FY 2025, each hospital's 
payment per discharge under the IPPS is based on 100 percent of the 
Federal national rate, also known as the national adjusted standardized 
amount. This amount reflects the national average hospital cost per 
case from a base year, updated for inflation.
    SCHs are paid based on whichever of the following rates yields the 
greatest aggregate payment:
     The Federal national rate (including, as discussed in 
section IV.E. of the preamble of this final rule, uncompensated care 
payments under section 1886(r)(2) of the Act).
     The updated hospital-specific rate based on FY 1982 costs 
per discharge.
     The updated hospital-specific rate based on FY 1987 costs 
per discharge.
     The updated hospital-specific rate based on FY 1996 costs 
per discharge.
     The updated hospital-specific rate based on FY 2006 costs 
per discharge.
    Under section 1886(d)(5)(G) of the Act, MDHs historically were paid 
based on the Federal national rate or, if higher, the Federal national 
rate plus 50 percent of the difference between the Federal national 
rate and the updated hospital-specific rate based on FY 1982 or FY 1987 
costs per discharge, whichever was higher. However, section 5003(a)(1) 
of Public Law 109-171 extended and modified the MDH special payment 
provision that was previously set to expire on October 1, 2006, to 
include discharges occurring on or after October 1, 2006, but before 
October 1, 2011. Under section 5003(b) of Public Law 109-171, if the 
change results in an increase to an MDH's target amount, we must rebase 
an MDH's hospital specific rates based on its FY 2002 cost report. 
Section 5003(c) of Public Law 109-171 further required that MDHs be 
paid based on the Federal national rate or, if higher, the Federal 
national rate plus 75 percent of the difference between the Federal 
national rate and the updated hospital specific rate. Further, based on 
the provisions of section 5003(d) of Public Law 109-171, MDHs are no 
longer subject to the 12-percent cap on their DSH payment adjustment 
factor. Section 4102 of the Consolidated Appropriations Act, 2023 (Pub. 
L. 117-328), enacted on December 29, 2022, extended the MDH program 
through FY 2024 (that is, for discharges occurring on or before 
September 30, 2024). Subsequently, section 307 of the Consolidated 
Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-42), enacted on March 
9, 2024, further extended the MDH program for FY 2025 discharges 
occurring before January 1, 2025. Prior to enactment of the CAA, 2024, 
the MDH program was only to be in effect through the end of FY 2024. 
Under current law, the MDH program will expire for discharges on or 
after January 1, 2025. We refer readers to section V.F. of the preamble 
of this final rule for further discussion of the MDH program.
    As discussed in section V.B.2. of the preamble of this final rule, 
section 1886(n)(6)(B) of the Act was amended to specify that the 
adjustments to the applicable percentage increase under section 
1886(b)(3)(B)(ix) of the Act apply to subsection (d) Puerto Rico 
hospitals that are not meaningful EHR users, effective beginning FY 
2022. In general, Puerto Rico hospitals are paid 100 percent of the 
national standardized amount and are subject to the same national 
standardized amount as subsection (d) hospitals that receive the full 
update. Accordingly, our discussion later in this section does not 
include references to the Puerto Rico standardized amount or the Puerto 
Rico-specific wage index.
    As discussed in section II. of this Addendum, we are making changes 
in the determination of the prospective payment rates for Medicare 
inpatient operating costs for acute care hospitals for FY 2025. In 
section III. of this Addendum, we discuss our policy changes for 
determining the prospective payment rates for Medicare inpatient 
capital-related costs for FY 2025. In section IV. of this Addendum, we 
are setting forth the rate-of-increase percentage for determining the 
rate-of-increase limits for certain hospitals excluded from the IPPS 
for FY 2025. In section V. of this Addendum, we discuss policy changes 
for determining the LTCH PPS standard Federal rate for LTCHs paid under 
the LTCH PPS for FY 2025. The tables to which we refer in the preamble 
of this final rule are listed in section VI. of this Addendum and are 
available via the internet on the CMS website.

II. Changes to Prospective Payment Rates for Hospital Inpatient 
Operating Costs for Acute Care Hospitals for FY 2025

    The basic methodology for determining prospective payment rates for 
hospital inpatient operating costs for acute care hospitals for FY 2005 
and subsequent fiscal years is set forth under Sec.  412.64. The basic 
methodology for determining the prospective payment rates for hospital 
inpatient operating costs for hospitals located in Puerto Rico for FY 
2005 and subsequent fiscal years is set forth under Sec. Sec.  412.211 
and 412.212. In this section, we discuss the factors we are using for 
determining the prospective payment rates for FY 2025.
    In summary, the standardized amounts set forth in Tables 1A, 1B, 
and 1C that are listed and published in section VI. of this Addendum 
(and available via the internet on the CMS website) reflect--
     Equalization of the standardized amounts for urban and 
other areas at the level computed for large urban hospitals during FY 
2004 and onward, as provided for under section 1886(d)(3)(A)(iv)(II) of 
the Act.
     The labor-related share that is applied to the 
standardized amounts to give the hospital the highest payment, as 
provided for under sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the 
Act. For FY 2025, depending on whether a hospital submits quality data 
under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital 
that submits quality data) and is a meaningful EHR user under section 
1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that 
is a meaningful EHR user), there are four possible applicable 
percentage increases that can be applied to the national standardized 
amount.
    We refer readers to section V.B. of the preamble of this final rule 
for a complete discussion on the FY 2025 inpatient hospital update. The 
table that follows shows these four scenarios:

[[Page 69940]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.334

    We note that section 1886(b)(3)(B)(viii) of the Act, which 
specifies the adjustment to the applicable percentage increase for 
``subsection (d)'' hospitals that do not submit quality data under the 
rules established by the Secretary, is not applicable to hospitals 
located in Puerto Rico. In addition, section 602 of Public Law 114-113 
amended section 1886(n)(6)(B) of the Act to specify that Puerto Rico 
hospitals are eligible for incentive payments for the meaningful use of 
certified EHR technology, effective beginning FY 2016, and also to 
apply the adjustments to the applicable percentage increase under 
section 1886(b)(3)(B)(ix) of the Act to subsection (d) Puerto Rico 
hospitals that are not meaningful EHR users, effective beginning FY 
2022. Accordingly, the applicable percentage increase for subsection 
(d) Puerto Rico hospitals that are not meaningful EHR users for FY 2025 
and subsequent fiscal years is adjusted by the adjustment for failure 
to be a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act. 
The regulations at 42 CFR 412.64(d)(3)(ii) reflect the current law for 
the update for subsection (d) Puerto Rico hospitals for FY 2022 and 
subsequent fiscal years.
     An adjustment to the standardized amount to ensure budget 
neutrality for DRG recalibration and reclassification, as provided for 
under section 1886(d)(4)(C)(iii) of the Act.
     An adjustment to the standardized amount to ensure budget 
neutrality for the permanent 10 percent cap on the reduction in a MS-
DRG's relative weight in a given fiscal year, as discussed in section 
II.D.2.c. of the preamble of this final rule, consistent with our 
current methodology for implementing DRG recalibration and 
reclassification budget neutrality under section 1886(d)(4)(C)(iii) of 
the Act.
     An adjustment to ensure the wage index and labor-related 
share changes (depending on the fiscal year) are budget neutral, as 
provided for under section 1886(d)(3)(E)(i) of the Act (as discussed in 
the FY 2006 IPPS final rule (70 FR 47395) and the FY 2010 IPPS final 
rule (74 FR 44005)). We note that section 1886(d)(3)(E)(i) of the Act 
requires that when we compute such budget neutrality, we assume that 
the provisions of section 1886(d)(3)(E)(ii) of the Act (requiring a 62-
percent labor-related share in certain circumstances) had not been 
enacted.
     An adjustment to ensure the effects of geographic 
reclassification are budget neutral, as provided for under section 
1886(d)(8)(D) of the Act, by removing the FY 2024 budget neutrality 
factor and applying a revised factor.
     An adjustment to the standardized amount to implement in a 
budget neutral manner the increase in the wage index values for 
hospitals with a wage index value below the 25th percentile wage index 
value across all hospitals (as described in section III.G.5 of the 
preamble of this final rule).
     An adjustment to the standardized amount to implement in a 
budget neutral manner the wage index cap policy (as described in 
section III.G.6. of the preamble of this final rule).
     An adjustment to ensure the effects of the Rural Community 
Hospital Demonstration program required under section 410A of Public 
Law 108-173 (as amended by sections 3123 and 10313 of Public Law 111-
148, which extended the demonstration program for an additional 5 years 
and section 15003 of Public Law 114-255), are budget neutral as 
required under section 410A(c)(2) of Public Law 108-173.
     An adjustment to remove the FY 2024 outlier offset and 
apply an offset for FY 2025, as provided for in section 1886(d)(3)(B) 
of the Act.
    For FY 2025, consistent with current law, we are applying the rural 
floor budget neutrality adjustment to hospital wage indexes. Also, 
consistent with section 3141 of the Affordable Care Act, instead of 
applying a State-level rural floor budget neutrality adjustment to the 
wage index, we are applying a uniform, national budget neutrality 
adjustment to the FY 2025 wage index for the rural floor.
    For FY 2025, as we proposed, we are continuing to not remove the 
Stem Cell Acquisition Budget Neutrality Factor from the prior year's 
standardized amount and to not apply a new factor. If we removed the 
prior year's adjustment, we would not satisfy budget neutrality. We 
believe this approach ensures the effects of the reasonable cost-based 
payment for allogeneic hematopoietic stem cell acquisition costs under 
section 108 of the Further Consolidated Appropriations Act, 2020 (Pub. 
L. 116-94) are budget neutral as required under section 108 of Public 
Law 116-94. For a discussion of Stem Cell Acquisition Budget Neutrality 
Factor, we refer the reader to the FY 2021 IPPS/LTCH PPS final rule (85 
FR 59032 and 59033).

A. Calculation of the Adjusted Standardized Amount

1. Standardization of Base-Year Costs or Target Amounts
    In general, the national standardized amount is based on per 
discharge averages of adjusted hospital costs from a base period 
(section 1886(d)(2)(A) of the Act), updated and otherwise adjusted in 
accordance with the provisions of section 1886(d) of the Act. The 
September 1, 1983 interim final rule (48 FR 39763) contained a detailed 
explanation of how base-year cost data

[[Page 69941]]

(from cost reporting periods ending during FY 1981) were established 
for urban and rural hospitals in the initial development of 
standardized amounts for the IPPS.
    Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us to 
update base-year per discharge costs for FY 1984 and then standardize 
the cost data in order to remove the effects of certain sources of cost 
variations among hospitals. These effects include case-mix, differences 
in area wage levels, cost-of-living adjustments for Alaska and Hawaii, 
IME costs, and costs to hospitals serving a disproportionate share of 
low-income patients.
    For FY 2025, as we proposed, we are continuing to use the national 
labor-related and nonlabor-related shares (which are based on the 2018-
based hospital IPPS market basket) that were used in FY 2024. 
Specifically, under section 1886(d)(3)(E) of the Act, the Secretary 
estimates, from time to time, the proportion of payments that are 
labor-related and adjusts the proportion (as estimated by the Secretary 
from time to time) of hospitals' costs which are attributable to wages 
and wage-related costs of the DRG prospective payment rates. We refer 
to the proportion of hospitals' costs that are attributable to wages 
and wage-related costs as the ``labor-related share.'' For FY 2025, as 
discussed in section III.I. of the preamble of this final rule, as we 
proposed, we are using a labor-related share of 67.6 percent for the 
national standardized amounts for all IPPS hospitals (including 
hospitals in Puerto Rico) that have a wage index value that is greater 
than 1.0000. Consistent with section 1886(d)(3)(E) of the Act, as we 
proposed, we are applying the wage index to a labor-related share of 62 
percent of the national standardized amount for all IPPS hospitals 
(including hospitals in Puerto Rico) whose wage index values are less 
than or equal to 1.0000.
    The standardized amounts for operating costs appear in Tables 1A, 
1B, and 1C that are listed and published in section VI. of the Addendum 
to this final rule and are available via the internet on the CMS 
website.
2. Computing the National Average Standardized Amount
    Section 1886(d)(3)(A)(iv)(II) of the Act requires that, beginning 
with FY 2004 and thereafter, an equal standardized amount be computed 
for all hospitals at the level computed for large urban hospitals 
during FY 2003, updated by the applicable percentage increase. 
Accordingly, as proposed, we are calculating the FY 2025 national 
average standardized amount irrespective of whether a hospital is 
located in an urban or rural location.
3. Updating the National Average Standardized Amount
    Section 1886(b)(3)(B) of the Act specifies the applicable 
percentage increase used to update the standardized amount for payment 
for inpatient hospital operating costs. We note that, in compliance 
with section 404 of the MMA, we are using the 2018-based IPPS operating 
and capital market baskets for FY 2025. As discussed in section V.B. of 
the preamble of this final rule, in accordance with section 
1886(b)(3)(B) of the Act, as amended by section 3401(a) of the 
Affordable Care Act, we are reducing the FY 2025 applicable percentage 
increase (which for this final rule is based on IGI's second quarter 
2024 forecast of the 2018-based IPPS market basket) by the productivity 
adjustment, as discussed elsewhere in this final rule.
    Based on IGI's second quarter 2024 forecast of the hospital market 
basket percentage increase (as discussed in Appendix B of this final 
rule), the forecast of the hospital market basket percentage increase 
for FY 2025 for this final rule is 3.4 percent and the forecast of the 
productivity adjustment for FY 2025 for this final rule is 0.5 percent. 
As discussed earlier, for FY 2025, depending on whether a hospital 
submits quality data under the rules established in accordance with 
section 1886(b)(3)(B)(viii) of the Act and is a meaningful EHR user 
under section 1886(b)(3)(B)(ix) of the Act, there are four possible 
applicable percentage increases that can be applied to the standardized 
amount. We refer readers to section V.B. of the preamble of this final 
rule for a complete discussion on the FY 2025 inpatient hospital update 
to the standardized amount. We also refer readers to the previous table 
for the four possible applicable percentage increases that would be 
applied to update the national standardized amount. The standardized 
amounts shown in Tables 1A through 1C that are published in section VI. 
of this Addendum and that are available via the internet on the CMS 
website reflect these differential amounts.
    Although the update factors for FY 2025 are set by law, we are 
required by section 1886(e)(4) of the Act to recommend, taking into 
account MedPAC's recommendations, appropriate update factors for FY 
2025 for both IPPS hospitals and hospitals and hospital units excluded 
from the IPPS. Section 1886(e)(5)(A) of the Act requires that we 
publish our recommendations in the Federal Register for public comment. 
Our recommendation on the FY 2025 update factors is set forth in 
appendix B of this final rule.
4. Methodology for Calculation of the Average Standardized Amount
    The methodology we used to calculate the FY 2025 standardized 
amount is as follows:
     To ensure we are only including hospitals paid under the 
IPPS in the calculation of the standardized amount, we applied the 
following inclusion and exclusion criteria: include hospitals whose 
last four digits fall between 0001 and 0879 (section 2779A1 of Chapter 
2 of the State Operations Manual on the CMS website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/som107c02.pdf); exclude CAHs at the time of this final rule; exclude 
hospitals in Maryland (because these hospitals are paid under an all 
payer model under section 1115A of the Act); and remove PPS excluded- 
cancer hospitals that have a ``V'' in the fifth position of their 
provider number or a ``E'' or ``F'' in the sixth position.
    Section 125 of Division CC (section 125) of the CAA 2021 
established a new rural Medicare provider type: Rural Emergency 
Hospitals (REHs). (We refer the reader to the CMS website at https://www.cms.gov/medicare/health-safety-standards/guidance-for-laws-regulations/hospitals/rural-emergency-hospitals for additional 
information on REHs.) In doing so, section 125 amended section 1861(e) 
of the Act, which provides the definition of a hospital and states that 
the term ``hospital'' does not include, unless the context otherwise 
requires, a critical access hospital (as defined in subsection (mm)(1)) 
or a rural emergency hospital (as defined in subsection (kkk)(2)). 
Section 125 also added section 1861(kkk) to the Act, which sets forth 
the requirements for REHs. Per section 1861(kkk)(2) of the Act, one of 
the requirements for an REH is that it does not provide any acute care 
inpatient services (other than post-hospital extended care services 
furnished in a distinct part unit licensed as a skilled nursing 
facility (SNF)). Therefore, we believe hospitals that have subsequently 
converted to REH status should be removed from the calculation of the 
standardized amount, because they are a separately certified Medicare 
provider type and are not comparable to other short-term, acute care 
hospitals as they do not provide inpatient hospital services. For FY 
2025, we proposed to exclude REHs from the calculation of the 
standardized amount, including

[[Page 69942]]

hospitals that subsequently became REHs after the period from which the 
data were taken. We did not receive any comments with regard to this 
proposal, and we are finalizing as proposed to exclude hospitals that 
have subsequently converted to REH from the calculation of the 
standardized amount, including hospitals that subsequently became REHs 
after the period from which the data were taken.
     As in the past, we are adjusting the FY 2025 standardized 
amount to remove the effects of the FY 2024 geographic 
reclassifications and outlier payments before applying the FY 2025 
updates. We then applied budget neutrality offsets for outliers and 
geographic reclassifications to the standardized amount based on FY 
2025 payment policies.
     We do not remove the prior year's budget neutrality 
adjustments for reclassification and recalibration of the DRG relative 
weights and for updated wage data because, in accordance with sections 
1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, estimated aggregate 
payments after updates in the DRG relative weights and wage index 
should equal estimated aggregate payments prior to the changes. If we 
removed the prior year's adjustment, we would not satisfy these 
conditions.
    Budget neutrality is determined by comparing aggregate IPPS 
payments before and after making changes that are required to be budget 
neutral (for example, changes to MS-DRG classifications, recalibration 
of the MS-DRG relative weights, updates to the wage index, and 
different geographic reclassifications). We include outlier payments in 
the simulations because they may be affected by changes in these 
parameters.
     Consistent with our methodology established in the FY 2011 
IPPS/LTCH PPS final rule (75 FR 50422 through 50433), because IME 
Medicare Advantage payments are made to IPPS hospitals under section 
1886(d) of the Act, we believe these payments must be part of these 
budget neutrality calculations. However, we note that it is not 
necessary to include Medicare Advantage IME payments in the outlier 
threshold calculation or the outlier offset to the standardized amount 
because the statute requires that outlier payments be not less than 5 
percent nor more than 6 percent of total ``operating DRG payments,'' 
which does not include IME and DSH payments. We refer readers to the FY 
2011 IPPS/LTCH PPS final rule for a complete discussion on our 
methodology of identifying and adding the total Medicare Advantage IME 
payment amount to the budget neutrality adjustments.
     Consistent with the methodology in the FY 2012 IPPS/LTCH 
PPS final rule, in order to ensure that we capture only fee-for-service 
claims, we are only including claims with a ``Claim Type'' of 60 (which 
is a field on the MedPAR file that indicates a claim is an FFS claim).
     Consistent with our methodology established in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57277), in order to further ensure that 
we capture only FFS claims, we are excluding claims with a ``GHOPAID'' 
indicator of 1 (which is a field on the MedPAR file that indicates a 
claim is not an FFS claim and is paid by a Group Health Organization).
     Consistent with our methodology established in the FY 2011 
IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we examine the 
MedPAR file and remove pharmacy charges for anti-hemophilic blood 
factor (which are paid separately under the IPPS) with an indicator of 
``3'' for blood clotting with a revenue code of ``0636'' from the 
covered charge field for the budget neutrality adjustments. We are 
removing organ acquisition charges, except for cases that group to MS-
DRG 018, from the covered charge field for the budget neutrality 
adjustments because organ acquisition is a pass-through payment not 
paid under the IPPS. Revenue centers 081X-089X are typically excluded 
from ratesetting, however, we are not removing revenue center 891 
charges from MS-DRG 018 claims during ratesetting because those revenue 
891 charges were included in the relative weight calculation for MS-DRG 
018, which is consistent with the policy finalized in the FY 2021 final 
rule (85 FR 58600). We note that a new MedPAR variable for revenue code 
891 charges was introduced in April 2020.
     For FY 2025, we are continuing to remove allogeneic 
hematopoietic stem cell acquisition charges from the covered charge 
field for budget neutrality adjustments. As discussed in the FY 2021 
IPPS/LTCH PPS final rule, payment for allogeneic hematopoietic stem 
cell acquisition costs is made on a reasonable cost basis for cost 
reporting periods beginning on or after October 1, 2020 (85 FR 58835 
through 58842).
     The participation of hospitals under the BPCI (Bundled 
Payments for Care Improvement) Advanced model started on October 1, 
2018. The BPCI Advanced model, tested under the authority of section 
3021 of the Affordable Care Act (codified at section 1115A of the Act), 
is comprised of a single payment and risk track, which bundles payments 
for multiple services beneficiaries receive during a Clinical Episode. 
Acute care hospitals may participate in the BPCI Advanced model in one 
of two capacities: as a model Participant or as a downstream Episode 
Initiator. Regardless of the capacity in which they participate in the 
BPCI Advanced model, participating acute care hospitals would continue 
to receive IPPS payments under section 1886(d) of the Act. Acute care 
hospitals that are participants also assume financial and quality 
performance accountability for Clinical Episodes in the form of a 
reconciliation payment. For additional information on the BPCI Advanced 
model, we refer readers to the BPCI Advanced web page on the CMS Center 
for Medicare and Medicaid Innovation's website at: https://innovation.cms.gov/initiatives/bpci-advanced/.
    For FY 2025, consistent with how we treated hospitals that 
participated in the BPCI Advanced Model in the FY 2021 IPPS/LTCH PPS 
final rule (85 FR 59029 and 59030), as we proposed, we are including 
all applicable data from subsection (d) hospitals participating in the 
BPCI Advanced model in our IPPS payment modeling and ratesetting 
calculations. We believe it is appropriate to include all applicable 
data from the subsection (d) hospitals participating in the BPCI 
Advanced model in our IPPS payment modeling and ratesetting 
calculations because these hospitals are still receiving IPPS payments 
under section 1886(d) of the Act. For the same reasons, as we proposed, 
we included all applicable data from subsection (d) hospitals 
participating in the Comprehensive Care for Joint Replacement (CJR) 
Model in our IPPS payment modeling and ratesetting calculations.
     Consistent with our methodology established in the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53687 through 53688), we believe that 
it is appropriate to include adjustments for the Hospital Readmissions 
Reduction Program and the Hospital VBP Program (established under the 
Affordable Care Act) within our budget neutrality calculations.
    Both the hospital readmissions payment adjustment (reduction) and 
the hospital VBP payment adjustment (redistribution) are applied on a 
claim-by-claim basis by adjusting, as applicable, the base-operating 
DRG payment amount for individual subsection (d) hospitals, which 
affects the overall sum of aggregate payments on each side of the 
comparison within the budget neutrality calculations.
    In order to properly determine aggregate payments on each side of 
the comparison, consistent with the

[[Page 69943]]

approach we have taken in prior years, for FY 2025, we are applying a 
proxy based on the prior fiscal year hospital readmissions payment 
adjustment and a proxy based on the prior fiscal year hospital VBP 
payment adjustment on each side of the comparison, consistent with the 
methodology that we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 
FR 53687 through 53688). Under this policy for FY 2025, we used the 
final FY 2024 readmissions adjustment factors from Table 15 of the FY 
2024 IPPS/LTCH PPS final rule and the final FY 2024 hospital VBP 
adjustment factors from Table 16B of the FY 2024 IPPS/LTCH PPS final 
rule. These proxy factors are applied on both sides of our comparison 
of aggregate payments when determining all budget neutrality factors 
described in section II.A.4. of this Addendum. We refer the reader to 
section V.K. of the preamble of this final rule for a complete 
discussion on the Hospital Readmissions Reduction Program and section 
V.L. of the preamble of this final rule for a complete discussion on 
the Hospital VBP Program.
     The Affordable Care Act also established section 1886(r) 
of the Act, which modifies the methodology for computing the Medicare 
DSH payment adjustment beginning in FY 2014. Beginning in FY 2014, IPPS 
hospitals receiving Medicare DSH payment adjustments receive an 
empirically justified Medicare DSH payment equal to 25 percent of the 
amount that would previously have been received under the statutory 
formula set forth under section 1886(d)(5)(F) of the Act governing the 
Medicare DSH payment adjustment. In accordance with section 1886(r)(2) 
of the Act, the remaining amount, equal to an estimate of 75 percent of 
what otherwise would have been paid as Medicare DSH payments, reduced 
to reflect changes in the percentage of individuals who are uninsured 
and any additional statutory adjustment, is available to make 
additional payments to Medicare DSH hospitals based on their share of 
the total amount of uncompensated care reported by Medicare DSH 
hospitals for a given time period. In order to properly determine 
aggregate payments on each side of the comparison for budget 
neutrality, prior to FY 2014, we included estimated Medicare DSH 
payments on both sides of our comparison of aggregate payments when 
determining all budget neutrality factors described in section II.A.4. 
of this Addendum.
    To do this for FY 2025 (as we did for the last 11 fiscal years), as 
we proposed, we are including estimated empirically justified Medicare 
DSH payments that would be paid in accordance with section 1886(r)(1) 
of the Act and estimates of the additional uncompensated care payments 
made to hospitals receiving Medicare DSH payment adjustments as 
described by section 1886(r)(2) of the Act. That is, we considered 
estimated empirically justified Medicare DSH payments at 25 percent of 
what would otherwise have been paid, and also the estimated additional 
uncompensated care payments for hospitals receiving Medicare DSH 
payment adjustments on both sides of our comparison of aggregate 
payments when determining all budget neutrality factors described in 
section II.A.4. of this Addendum.
    We also are including the estimated supplemental payments for 
eligible IHS/Tribal hospitals and Puerto Rico hospitals on both sides 
of our comparison of aggregate payments when determining all budget 
neutrality factors described in section II.A.4. of this Addendum.
     When calculating total payments for budget neutrality, to 
determine total payments for SCHs, we model total hospital-specific 
rate payments and total Federal rate payments and then include 
whichever one of the total payments is greater. As discussed in section 
IV.G. of the preamble to this final rule and later in this section, we 
proposed to continue to use the FY 2014 finalized methodology under 
which we take into consideration uncompensated care payments in the 
comparison of payments under the Federal rate and the hospital-specific 
rate for SCHs. Therefore, we are including estimated uncompensated care 
payments in this comparison.
    As discussed elsewhere in this final rule, section 307 of the 
Consolidated Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-42), 
enacted on March 9, 2024, extended the MDH program for FY 2025 
discharges occurring before January 1, 2025. Prior to enactment of the 
CAA, 2024, the MDH program was only to be in effect through the end of 
FY 2024. Therefore, under current law, the MDH program will expire for 
discharges on or after January 1, 2025. As a result, MDHs that 
currently receive the higher of payments made based on the Federal rate 
or the payments made based on the Federal rate plus 75 percent of the 
difference between payments based on the Federal rate and the hospital-
specific rate will be paid based on the Federal rate starting January 
1, 2025. In the proposed rule we stated that because of the timing of 
this legislation, the total payments for budget neutrality in the 
proposed rule did not reflect the extension of the MDH program for the 
first quarter of FY 2025. We further stated in the proposed rule that 
this extension will be reflected in the total payments for budget 
neutrality for the final rule. For this final rule, approximately 117 
hospitals would receive payments under the MDH program for the first 
quarter of FY 2025. Upon further review and consideration, given the 
limited magnitude, for this final rule we did not include this 
extension in the total payments for budget neutrality. Accordingly, for 
this final rule, the budget neutrality factor calculations do not 
reflect the extension of the MDH program for the first quarter of FY 
2025.
     As proposed, we included an adjustment to the standardized 
amount for those hospitals that are not meaningful EHR users in our 
modeling of aggregate payments for budget neutrality for FY 2025. 
Similar to FY 2024, we are including this adjustment based on data on 
the prior year's performance. Payments for hospitals would be estimated 
based on the applicable standardized amount in Tables 1A and 1B for 
discharges occurring in FY 2025.
     In our determination of all budget neutrality factors 
described in section II.A.4. of this Addendum, we used transfer-
adjusted discharges.
    We note, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49414 
through 49415), we finalized a change to the ordering of the budget 
neutrality factors in the calculation so that the RCH Demonstration 
budget neutrality factor is applied after all wage index and other 
budget neutrality factors. We refer the reader to the FY 2023 IPPS/LTCH 
PPS final rule for further discussion.
    We note that the wage index value is calculated and assigned to a 
hospital based on the hospital's labor market area. Under section 
1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate hospital 
labor market areas based on the Core-Based Statistical Areas (CBSAs) 
established by the Office of Management and Budget (OMB). The current 
statistical areas used in FY 2024 are based on the OMB delineations 
that were adopted beginning with FY 2015 (based on the revised 
delineations issued in OMB Bulletin No. 13-01) to calculate the area 
wage indexes, with updates as reflected in OMB Bulletin Nos. 15-01, 17-
01, and 18-04. For purposes of determining all of the FY 2024 budget 
neutrality factors, we determined aggregate payments on each side of 
the comparison for our budget neutrality calculations using wage 
indexes based on the current CBSAs.
    On July 21, 2023, OMB released Bulletin No. 23-01. A copy of OMB

[[Page 69944]]

Bulletin No. 23-01 may be obtained at https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf. According to OMB, the 
delineations reflect the 2020 Standards for Delineating Core Based 
Statistical Areas (``the 2020 Standards''), which appeared in the 
Federal Register on July 16, 2021 (86 FR 37770 through 37778), and the 
application of those standards to Census Bureau population and journey-
to-work data (for example, 2020 Decennial Census, American Community 
Survey, and Census Population Estimates Program data). In order to 
implement these revised standards for the IPPS, it was necessary to 
identify the new OMB labor market area delineation for each county and 
hospital in the country. As stated in section III.B. of the preamble of 
this final rule, we believe that using the revised delineations based 
on OMB Bulletin No. 23-01 will increase the integrity of the IPPS wage 
index system by more accurately representing current geographic 
variations in wage levels. As discussed in section III. of the preamble 
of this final rule, we are finalizing to adopt the new OMB labor market 
area delineations as described in the July 21, 2023 OMB Bulletin No. 
23-01, effective for the FY 2025 IPPS wage index.
    Consistent with our policy to adopt the new OMB delineations, in 
order to properly determine aggregate payments on each side of the 
comparison for our budget neutrality calculations, we are using wage 
indexes based on the new OMB delineations in the determination of all 
of the budget neutrality factors discussed later in this section. We 
also note that, consistent with past practice as finalized in the FY 
2005 IPPS final rule (69 FR 49034), we are not adopting the new OMB 
delineations themselves in a budget neutral manner. We continue to 
believe that the revision to the labor market areas in and of itself 
does not constitute an ``adjustment or update'' to the adjustment for 
area wage differences, as provided under section 1886(d)(3)(E) of the 
Act.
a. Reclassification and Recalibration of MS-DRG Relative Weights Before 
Cap
    Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning in 
FY 1991, the annual DRG reclassification and recalibration of the 
relative weights must be made in a manner that ensures that aggregate 
payments to hospitals are not affected. As discussed in section II.D. 
of the preamble of this final rule, we normalized the recalibrated MS-
DRG relative weights by an adjustment factor so that the average case 
relative weight after recalibration is equal to the average case 
relative weight prior to recalibration. However, equating the average 
case relative weight after recalibration to the average case relative 
weight before recalibration does not necessarily achieve budget 
neutrality with respect to aggregate payments to hospitals because 
payments to hospitals are affected by factors other than average case 
relative weight. Therefore, as we have done in past years, we are 
making a budget neutrality adjustment to ensure that the requirement of 
section 1886(d)(4)(C)(iii) of the Act is met.
    For this FY 2025 final rule, as we proposed, to comply with the 
requirement that MS-DRG reclassification and recalibration of the 
relative weights be budget neutral for the standardized amount and the 
hospital-specific rates, we used FY 2023 discharge data to simulate 
payments and compared the following:
     Aggregate payments using the new OMB labor market area 
delineations for FY 2025, the FY 2024 labor-related share percentages, 
the FY 2024 relative weights, and the FY 2024 pre-reclassified wage 
data, and applied the proxy hospital readmissions payment adjustments 
and proxy hospital VBP payment adjustments (as described previously); 
and
     Aggregate payments using the new OMB labor market area 
delineations for FY 2025, the FY 2024 labor-related share percentages, 
the FY 2025 relative weights before applying the 10 percent cap, and 
the FY 2024 pre-reclassified wage data, and applied the same proxy 
hospital readmissions payment adjustments and proxy hospital VBP 
payment adjustments applied previously.
    Because this payment simulation uses the FY 2025 relative weights 
(before applying the 10 percent cap), consistent with our policy in 
section V.I. of the preamble to this final rule, we applied the 
adjustor for certain cases that group to MS-DRG 018 in our simulation 
of these payments. We note that because the simulations of payments for 
all of the budget neutrality factors discussed in this section also use 
the FY 2025 relative weights, we are applying the adjustor for certain 
MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell and other 
immunotherapies) cases in all simulations of payments for the budget 
neutrality factors discussed later in this section. We refer the reader 
to section V.I. of the preamble of this final rule for a complete 
discussion on the adjustor for certain cases that group to MS-DRG 018 
and to section II.D.2.b. of the preamble of this final rule, for a 
complete discussion of the adjustment to the FY 2025 relative weights 
to account for certain cases that group to MS-DRG 018.
    Based on this comparison, we computed a budget neutrality 
adjustment factor and applied this factor to the standardized amount. 
As discussed in section IV. of this Addendum, we are applying the MS-
DRG reclassification and recalibration budget neutrality factor to the 
hospital-specific rates that are effective for cost reporting periods 
beginning on or after October 1, 2024. Please see the table later in 
this section setting forth each of the FY 2025 budget neutrality 
factors.
b. Budget Neutrality Adjustment for Reclassification and Recalibration 
of MS-DRG Relative Weights With Cap
    As discussed in section II.D.2.c of the preamble of this final 
rule, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48897 through 
48900), we finalized a permanent 10-percent cap on the reduction in an 
MS-DRG's relative weight in a given fiscal year, beginning in FY 2023. 
As also discussed in section II.D.2.c of the preamble of this final 
rule, and consistent with our current methodology for implementing 
budget neutrality for MS-DRG reclassification and recalibration of the 
relative weights under section 1886(d)(4)(C)(iii) of the Act, we apply 
a budget neutrality adjustment to the standardized amount for all 
hospitals so that this 10-percent cap on relative weight reductions 
does not increase estimated aggregate Medicare payments beyond the 
payments that would be made had we never applied this cap. We refer the 
reader to the FY 2023 IPPS/LTCH PPS final rule for further discussion.
    To calculate this budget neutrality adjustment factor for FY 2025, 
we used FY 2023 discharge data to simulate payments and compared the 
following:
     Aggregate payments using the new OMB labor market area 
delineations for FY 2025, the FY 2024 labor-related share percentages, 
the FY 2025 relative weights before applying the 10-percent cap, and 
the FY 2024 pre-reclassified wage data, and applied the proxy FY 2025 
hospital readmissions payment adjustments and the proxy FY 2025 
hospital VBP payment adjustments; and
     Aggregate payments using the new OMB labor market area 
delineations for FY 2025, the FY 2024 labor-related share percentages, 
the FY 2025 relative weights after applying the 10-percent cap, and the 
FY 2024 pre-reclassified wage data, and applied the same proxy FY 2025 
hospital readmissions payment adjustments and proxy FY 2025 hospital 
VBP payment adjustments applied previously.

[[Page 69945]]

    Because this payment simulation uses the FY 2025 relative weights, 
consistent with our proposal in section V.I. of the preamble to this 
final rule and our historical policy, and as discussed in the preceding 
section, we applied the adjustor for certain cases that group to MS-DRG 
018 in our simulation of these payments.
    In addition, we applied the MS-DRG reclassification and 
recalibration budget neutrality adjustment factor before the cap 
(derived in the first step) to the payment rates that were used to 
simulate payments for this comparison of aggregate payments from FY 
2024 to FY 2025. Based on this comparison, we computed a budget 
neutrality adjustment factor and applied this factor to the 
standardized amount. As discussed in section IV. of this Addendum, as 
we proposed, we are applying this budget neutrality factor to the 
hospital-specific rates that are effective for cost reporting periods 
beginning on or after October 1, 2024. Please see the table later in 
this section setting forth each of the FY 2025 budget neutrality 
factors.
c. Updated Wage Index--Budget Neutrality Adjustment
    Section 1886(d)(3)(E)(i) of the Act requires us to update the 
hospital wage index on an annual basis beginning October 1, 1993. This 
provision also requires us to make any updates or adjustments to the 
wage index in a manner that ensures that aggregate payments to 
hospitals are not affected by the change in the wage index. Section 
1886(d)(3)(E)(i) of the Act requires that we implement the wage index 
adjustment in a budget neutral manner. However, section 
1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62 percent 
for hospitals with a wage index less than or equal to 1.0000, and 
section 1886(d)(3)(E)(i) of the Act provides that the Secretary shall 
calculate the budget neutrality adjustment for the adjustments or 
updates made under that provision as if section 1886(d)(3)(E)(ii) of 
the Act had not been enacted. In other words, this section of the 
statute requires that we implement the updates to the wage index in a 
budget neutral manner, but that our budget neutrality adjustment should 
not take into account the requirement that we set the labor-related 
share for hospitals with wage indexes less than or equal to 1.0000 at 
the more advantageous level of 62 percent. Therefore, for purposes of 
this budget neutrality adjustment, section 1886(d)(3)(E)(i) of the Act 
prohibits us from taking into account the fact that hospitals with a 
wage index less than or equal to 1.0000 are paid using a labor-related 
share of 62 percent. Consistent with current policy, for FY 2025, as we 
proposed, we are adjusting 100 percent of the wage index factor for 
occupational mix. We describe the occupational mix adjustment in 
section III.E. of the preamble of this final rule.
    To compute a budget neutrality adjustment factor for wage index and 
labor-related share percentage changes, we used FY 2023 discharge data 
to simulate payments and compared the following:
     Aggregate payments using the new OMB labor market area 
delineations for FY 2025, the FY 2025 relative weights and the FY 2023 
pre-reclassified wage indexes, applied the FY 2024 labor-related share 
of 67.6 percent to all hospitals (regardless of whether the hospital's 
wage index was above or below 1.0000), and applied the proxy FY 2025 
hospital readmissions payment adjustment and the proxy FY 2025 hospital 
VBP payment adjustment.
     Aggregate payments using the new OMB labor market area 
delineations for FY 2025, the FY 2025 relative weights and the proposed 
FY 2025 pre-reclassified wage indexes, applied the labor-related share 
for FY 2025 of 67.6 percent to all hospitals (regardless of whether the 
hospital's wage index was above or below 1.0000), and applied the same 
proxy FY 2025 hospital readmissions payment adjustments and proxy FY 
2025 hospital VBP payment adjustments applied previously.
    In addition, we applied the MS-DRG reclassification and 
recalibration budget neutrality adjustment factor before the proposed 
cap (derived in the first step) and the 10 percent cap on relative 
weight reductions adjustment factor (derived from the second step) to 
the payment rates that were used to simulate payments for this 
comparison of aggregate payments from FY 2024 to FY 2025. Based on this 
comparison, we computed a budget neutrality adjustment factor and 
applied this factor to the standardized amount for changes to the wage 
index. Please see the table later in this section for a summary of the 
FY 2025 budget neutrality factors.
d. Reclassified Hospitals--Budget Neutrality Adjustment
    Section 1886(d)(8)(B) of the Act provides that certain rural 
hospitals are deemed urban. In addition, section 1886(d)(10) of the Act 
provides for the reclassification of hospitals based on determinations 
by the MGCRB. Under section 1886(d)(10) of the Act, a hospital may be 
reclassified for purposes of the wage index.
    Under section 1886(d)(8)(D) of the Act, the Secretary is required 
to adjust the standardized amount to ensure that aggregate payments 
under the IPPS after implementation of the provisions of sections 
1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the 
aggregate prospective payments that would have been made absent these 
provisions. Additionally, as discussed, changes in the wage index are 
generally budget neutralized. We note, in the FY 2024 IPPS/LTCH final 
rule (88 FR 58971 through 58977), we finalized a policy beginning with 
FY 2024 to include hospitals with Sec.  412.103 reclassification along 
with geographically rural hospitals in all rural wage index 
calculations, and only exclude ``dual reclass'' hospitals (hospitals 
with simultaneous Sec.  412.103 and MGCRB reclassifications) in 
accordance with the hold harmless provision at section 
1886(d)(8)(C)(ii) of the Act. Consistent with the previous policy, 
beginning with FY 2024, we include the data of all Sec.  412.103 
hospitals (including those that have an MGCRB reclassification) in the 
calculation of ``the wage index for rural areas in the State in which 
the county is located'' as referred to in section 1886(d)(8)(C)(iii) of 
the Act.
    We refer the reader to the FY 2015 IPPS final rule (79 FR 50371 and 
50372) for a discussion regarding the requirement of section 
1886(d)(8)(C)(iii) of the Act. We further note that the wage index 
adjustments provided for under section 1886(d)(13) of the Act are not 
budget neutral. Section 1886(d)(13)(H) of the Act provides that any 
increase in a wage index under section 1886(d)(13) of the Act shall not 
be taken into account in applying any budget neutrality adjustment with 
respect to such index under section 1886(d)(8)(D) of the Act. To 
calculate the budget neutrality adjustment factor for FY 2025, we used 
FY 2022 discharge data to simulate payments and compared the following:
     Aggregate payments using the new OMB labor market area 
delineations for FY 2025, the FY 2025 labor-related share percentage, 
the FY 2025 relative weights, and the FY 2025 wage data prior to any 
reclassifications, and applied the proxy FY 2025 hospital readmissions 
payment adjustments and the proxy FY 2025 hospital VBP payment 
adjustments.
     Aggregate payments using the new OMB labor market area 
delineations for FY 2025, the FY 2025 labor-related share percentage, 
the FY 2025 relative weights, and the FY 2025 wage data after such 
reclassifications, and applied the same proxy FY 2025 hospital 
readmissions payment adjustments and

[[Page 69946]]

the proxy FY 2025 hospital VBP payment adjustments applied previously.
    We note that the reclassifications applied under the second 
simulation and comparison are those listed in Table 2 associated with 
this final rule, which is available via the internet on the CMS 
website. This table reflects reclassification crosswalks for FY 2025 
and applies the policies explained in section III. of the preamble of 
this final rule. Based on this comparison, we computed a budget 
neutrality adjustment factor and applied this factor to the 
standardized amount to ensure that the effects of these provisions are 
budget neutral, consistent with the statute. Please see the table later 
in this section for a summary of the FY 2025 budget neutrality factors.
    The FY 2025 budget neutrality adjustment factor was applied to the 
standardized amount after removing the effects of the FY 2024 budget 
neutrality adjustment factor. We note that the FY 2025 budget 
neutrality adjustment reflects FY 2025 wage index reclassifications 
approved by the MGCRB or the Administrator at the time of development 
of this final rule.
    Comment: A commenter requested that CMS confirm that if an urban 
hospital has reclassified as rural under Sec.  412.103, the ``before'' 
wage index value for the hospital in this simulation would be equal to 
the rural wage index for its state. The commenter further asked for 
confirmation if was this CMS's policy prior to FY 2024, or did it 
originate in FY 2024 when CMS decided to regard Sec.  412.103 hospitals 
as rural for purposes of the rural wage index.
    Response: The ``before'' wage index value uses a hospitals area 
wage data before any reclassifications or state rural wage index is 
applied. This is also referred to as the pre reclassified wage index. 
Therefore, if an urban hospital has reclassified as rural under section 
Sec.  412.103, the ``before'' wage index value would be based on the 
hospitals urban area wage index prior to any reclassification or 
application of the state rural wage index. We also confirm that this 
has been the policy prior to FY 2024.
    Comment: A commenter requested that CMS confirm that section 
1886(d)(8)(C)(ii) has no effect on aggregate expenditures or the 
Reclassification Budget Neutrality Adjustment (RBNA). The commenter 
also referenced the FY 2024 IPPS/LTCH PPS final rule (88 FR 58976) with 
regard to the calculation of the rural wage index and requested that 
CMS confirm that when a state's rural wage index is determined under 
Calculations 2 or 3, the increase in aggregate expenditures is measured 
by reference to what the rural wage index for the state would have been 
under Calculation 1. Finally, the commenter also requested that CMS 
confirm that section 1886(d)(8)(C)(iii) has no effect on aggregate 
expenditures or the RBNA for geographically rural or Sec.  412.103 
hospitals that have a LUGAR or MGCRB reclassification.
    Response: It appears that the commenter believes that calculation 1 
should be used for the pre reclassified wage index. As previously 
mentioned, the ``before'' wage index value uses a hospitals area wage 
data before any reclassifications or state rural wage index is applied 
(the pre reclassified wage index). The ``after'' wage index for a rural 
area would be based on the greater of the three rural wage index 
calculations as discussed in the FY 2024 IPPS/LTCH final rule. 
Accordingly, there could be an impact on the budget neutrality factor 
due to sections 1886(d)(8)(C)(ii) and (iii) of the Act, and the 
``before'' wage index uses the pre reclassified wage index and not 
Calculation 1.
    Under Sec.  412.64(e)(4), we make an adjustment to the wage index 
to ensure that aggregate payments after implementation of the rural 
floor under section 4410 of the BBA (Pub. L. 105-33) are equal to the 
aggregate prospective payments that would have been made in the absence 
of this provision. Consistent with section 3141 of the Affordable Care 
Act and as discussed in section III.G. of the preamble of this final 
rule and codified at Sec.  412.64(e)(4)(ii), the budget neutrality 
adjustment for the rural floor is a national adjustment to the wage 
index.
    For FY 2025 there is one hospital in Puerto Rico with wage data. 
Therefore, for this final rule, we do not need to apply the calculation 
discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50369 through 
50370). In a future fiscal year, if there were no hospitals with wage 
data in rural Puerto Rico, we would then calculate a national rural 
Puerto Rico wage index based on the policy adopted in the FY 2008 IPPS 
final rule with comment period (72 FR 47323). That is, we would use the 
unweighted average of the wage indexes from all CBSAs (urban areas) 
that are contiguous to (share a border with) the rural counties to 
compute the rural floor (72 FR 47323; 76 FR 51594).
    We note, in the FY 2024 IPPS/LTCH final rule (88 FR 58971-77), we 
finalized a policy beginning with FY 2024 to include hospitals with 
Sec.  412.103 reclassification along with geographically rural 
hospitals in all rural wage index calculations and are only excluding 
``dual reclass'' hospitals (hospitals with simultaneous Sec.  412.103 
and MGCRB reclassifications) in accordance with the hold harmless 
provision at section 1886(d)(8)(C)(ii) of the Act. Consistent with the 
previous policy, beginning with FY 2024, we include the data of all 
Sec.  412.103 hospitals (including those that have an MGCRB 
reclassification) in the calculation of the rural floor.
    To calculate the national rural floor budget neutrality adjustment 
factor, we used FY 2023 discharge data to simulate payments, the new 
OMB labor market area delineations adopted for FY 2025, and the post-
reclassified national wage indexes and compared the following:
     National simulated payments without the rural floor.
     National simulated payments with the rural floor.
    Based on this comparison, we determined a national rural floor 
budget neutrality adjustment factor. The national adjustment was 
applied to the national wage indexes to produce rural floor budget 
neutral wage indexes. Please see the table later in this section for a 
summary of the FY 2025 budget neutrality factors.
    As further discussed in section III.G.2. of this final rule, we 
note that section 9831 of the American Rescue Plan Act of 2021 (Pub. L. 
117-2), enacted on March 11, 2021 amended section 1886(d)(3)(E)(i) of 
the Act (42 U.S.C. 1395ww(d)(3)(E)(i)) and added section 
1886(d)(3)(E)(iv) of the Act to establish a minimum area wage index (or 
imputed floor) for hospitals in all-urban States for discharges 
occurring on or after October 1, 2022. Unlike the imputed floor that 
was in effect from FY 2005 through FY 2018, section 
1886(d)(3)(E)(iv)(III) of the Act provides that the imputed floor wage 
index shall not be applied in a budget neutral manner. Specifically, 
section 9831(b) of Public Law 117-2 amends section 1886(d)(3)(E)(i) of 
the Act to exclude the imputed floor from the budget neutrality 
requirement under section 1886(d)(3)(E)(i) of the Act. In the past, we 
budget neutralized the estimated increase in payments each year 
resulting from the imputed floor that was in effect from FY 2005 
through FY 2018. For FY 2022 and subsequent years, in applying the 
imputed floor required under section 1886(d)(3)(E)(iv) of the Act, we 
are applying the imputed floor after the application of the rural floor 
and would apply no reductions to the standardized amount or to the wage 
index to fund the increase in payments to hospitals in all-urban States 
resulting from the application of the imputed floor. We

[[Page 69947]]

refer the reader to section III.G.2. of the preamble of this final rule 
for a complete discussion regarding the imputed floor.
    Comment: A commenter requested that CMS fully describe the 
interplay between the Reclassification Budget Neutrality Factor and the 
Rural Floor Budget Neutrality Factor and make available the 
calculations of both budget neutrality adjustments. The commenter 
stated that it is unclear how the Reclassification Budget Neutrality 
Factor is applied or potentially replaced with the Rural Floor Budget 
Neutrality Factor for a provider who receives both adjustments.
    Response: With regard to the commenter requesting a description of 
the interplay between the Reclassification Budget Neutrality Factor and 
the Rural Floor Budget Neutrality Factor and a calculation of both 
adjustments, we refer the commenter to sections II.A.4.d. and II.A.4.e. 
of the Addendum of this final rule for a complete discussion of the 
budget neutrality impacts of reclassified hospitals and the rural 
floor. We also refer the commenter to the table in the Addendum 
summarizing the FY 2025 budget neutrality factors. Regarding the 
interplay of both adjustments and the impact on a hospital that 
receives both, we remind the commenter that the reclassification budget 
neutrality adjustment is applied to the standardized amount while the 
rural floor budget neutrality factor is applied to the wage index.
f. Continuation of the Low Wage Index Hospital Policy--Budget 
Neutrality Adjustment
    As discussed in section III.G.5. of the preamble of this final 
rule, we are continuing for FY 2025 the wage index policy finalized in 
the FY 2020 IPPS/LTCH PPS final rule to address wage index disparities 
by increasing the wage index values for hospitals with a wage index 
value below the 25th percentile wage index value across all hospitals 
(the low wage index hospital policy). As discussed in section III.G.3. 
of this final rule, consistent with our current methodology for 
implementing wage index budget neutrality under section 1886(d)(3)(E) 
of the Act, we are making a budget neutrality adjustment to the 
national standardized amount for all hospitals so that the increase in 
the wage index for hospitals with a wage index below the 25th 
percentile wage index, is implemented in a budget neutral manner.
    We note that the FY 2020 low wage index hospital policy and the 
related budget neutrality adjustment are the subject of pending 
litigation in multiple courts. On July 23, 2024, the Court of Appeals 
for the D.C. Circuit held that the Secretary lacked authority under 
1886(d)(3)(E) or 1886(d)(5)(I)(i) of the Act to adopt the low wage 
index hospital policy for FY 2020, and that the policy and related 
budget neutrality adjustment must be vacated. Bridgeport Hosp. v. 
Becerra, Nos. 22-5249, 22-5269, 2024 WL 3504407, at *7-*8 & n.6 (D.C. 
Cir. July 23, 2024). As of the date of this Rule's publication, the 
time to seek further review of the D.C. Circuit's decision in 
Bridgeport Hospital has not expired. See Fed. R. App. P. 40(a)(1). The 
government is evaluating the decision and considering options for next 
steps.
    To calculate this budget neutrality adjustment factor for FY 2025, 
we used FY 2023 discharge data to simulate payments and compared the 
following:
     Aggregate payments using the new OMB labor market area 
delineations for FY 2025, the FY 2025 labor-related share percentage, 
the FY 2025 relative weights, and the FY 2025 wage index for each 
hospital before adjusting the wage indexes under the low wage index 
hospital policy, and applied the proxy FY 2025 hospital readmissions 
payment adjustments and the proxy FY 2025 hospital VBP payment 
adjustments; and
     Aggregate payments using the new OMB labor market area 
delineations for FY 2025, the FY 2025 labor-related share percentage, 
the FY 2025 relative weights, and the FY 2025 wage index for each 
hospital after adjusting the wage indexes under the low wage index 
hospital policy, and applied the same proxy FY 2025 hospital 
readmissions payment adjustments and the proxy FY 2025 hospital VBP 
payment adjustments applied previously.
    This final FY 2025 budget neutrality adjustment factor was applied 
to the standardized amount.
g. Permanent Cap Policy for Wage Index--Budget Neutrality Adjustment
    As noted previously, in section III.G.6. of the preamble to this 
final rule, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 
through 49021) we finalized a policy to apply a 5-percent cap on any 
decrease to a hospital's wage index from its wage index in the prior 
FY, regardless of the circumstances causing the decline. That is, a 
hospital's wage index would not be less than 95 percent of its final 
wage index for the prior FY. We also finalized the application of this 
permanent cap policy in a budget neutral manner through an adjustment 
to the standardized amount to ensure that estimated aggregate payments 
under our wage index cap policy for hospitals that will have a decrease 
in their wage indexes for the upcoming fiscal year of more than 5 
percent will equal what estimated aggregate payments would have been 
without the permanent cap policy.
    To calculate a wage index cap budget neutrality adjustment factor 
for FY 2025, we used FY 2023 discharge data to simulate payments and 
compared the following:
     Aggregate payments without the 5-percent cap using the FY 
2025 labor-related share percentages, the new OMB labor market area 
delineations for FY 2025, the FY 2025 relative weights, the FY 2025 
wage index for each hospital after adjusting the wage indexes under the 
low wage index hospital policy, and applied the proxy FY 2025 hospital 
readmissions payment adjustments and the proxy FY 2025 hospital VBP 
payment adjustments.
     Aggregate payments with the 5-percent cap using the FY 
2025 labor-related share percentages, the new OMB labor market area 
delineations for FY 2025, the FY 2025 relative weights, the FY 2025 
wage index for each hospital after adjusting the wage indexes under the 
low wage index hospital policy, and applied the same proxy FY 2025 
hospital readmissions payment adjustments and the proxy FY 2025 
hospital VBP payment adjustments applied previously.
    We note, Table 2 associated with this final rule contains the wage 
index by provider before and after applying the low wage index hospital 
policy and the cap.
h. Rural Community Hospital Demonstration Program Adjustment
    In section V.N. of the preamble of this final rule, we discuss the 
Rural Community Hospital (RCH) Demonstration program, which was 
originally authorized for a 5-year period by section 410A of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA) (Pub. L. 108-173), and extended for another 5-year period by 
sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-148). 
Subsequently, section 15003 of the 21st Century Cures Act (Pub. L. 114-
255), enacted December 13, 2016, amended section 410A of Public Law 
108-173 to require a 10-year extension period (in place of the 5-year 
extension required by the Affordable Care Act, as further discussed 
later in this section). Finally, Division CC, section 128(a) of the 
Consolidated Appropriations Act of 2021 (Pub. L. 116-260) again amended 
section 410A to require a 15-year extension period in place of the 10-
year period. We make an adjustment to the

[[Page 69948]]

standardized amount to ensure the effects of the RCH Demonstration 
program are budget neutral as required under section 410A(c)(2) of 
Public Law 108-173. We refer readers to section V.N. of the preamble of 
this final rule for complete details regarding the Rural Community 
Hospital Demonstration.
    With regard to budget neutrality, as mentioned earlier, we make an 
adjustment to the standardized amount to ensure the effects of the 
Rural Community Hospital Demonstration are budget neutral, as required 
under section 410A(c)(2) of Public Law 108-173. For FY 2025, based on 
the latest data for this final rule, the total amount that we are 
applying to make an adjustment to the standardized amounts to ensure 
the effects of the Rural Community Hospital Demonstration program are 
budget neutral is $19,414,819. Accordingly, using the most recent data 
available to account for the estimated costs of the demonstration 
program, for FY 2025, we computed a factor for the Rural Community 
Hospital Demonstration budget neutrality adjustment that would be 
applied to the standardized amount. Please see the table later in this 
section for a summary of the Proposed FY 2025 budget neutrality 
factors. We refer readers to section V.N. of the preamble of this final 
rule on complete details regarding the calculation of the amount we are 
applying to make an adjustment to the standardized amounts.
    The following table is a summary of the FY 2025 budget neutrality 
factors, as discussed in the previous sections.
[GRAPHIC] [TIFF OMITTED] TR28AU24.335

i. Outlier Payments
    Section 1886(d)(5)(A) of the Act provides for payments in addition 
to the basic prospective payments for ``outlier'' cases involving 
extraordinarily high costs. To qualify for outlier payments, a case 
must have costs greater than the sum of the prospective payment rate 
for the MS-DRG, any IME and DSH payments, uncompensated care payments, 
supplemental payment for eligible IHS/Tribal hospitals and Puerto Rico 
hospitals, any new technology add-on payments, and the ``outlier 
threshold'' or ``fixed-loss'' amount (a dollar amount by which the 
costs of a case must exceed payments in order to qualify for an outlier 
payment). We refer to the sum of the prospective payment rate for the 
MS-DRG, any IME and DSH payments, uncompensated care payments, 
supplemental payment for eligible IHS/Tribal hospitals and Puerto Rico 
hospitals, any new technology add-on payments, and the outlier 
threshold as the outlier ``fixed-loss cost threshold.'' To determine 
whether the costs of a case exceed the fixed-loss cost threshold, a 
hospital's CCR is applied to the total covered charges for the case to 
convert the charges to estimated costs. Payments for eligible cases are 
then made based on a marginal cost factor, which is a percentage of the 
estimated costs above the fixed-loss cost threshold. The marginal cost 
factor for FY 2025 is 80 percent, or 90 percent for burn MS-DRGs 927, 
928, 929, 933, 934 and 935. We have used a marginal cost factor of 90 
percent since FY 1989 (54 FR 36479 through 36480) for designated burn 
DRGs as well as a marginal cost factor of 80 percent for all other DRGs 
since FY 1995 (59 FR 45367).
    In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier 
payments for any year are projected to be not less than 5 percent nor 
more than 6 percent of total operating DRG payments (which does not 
include IME and DSH payments) plus outlier payments. When setting the 
outlier threshold, we compute the projected percentage by dividing the 
total projected operating outlier payments by the total projected 
operating DRG payments plus projected operating outlier payments. As 
discussed in the next section, for FY 2025, we are incorporating an 
estimate of the impact of outlier reconciliation when setting the 
outlier threshold. We do not include any other payments such as IME and 
DSH within the outlier target amount. Therefore, it is not necessary to 
include Medicare Advantage IME payments in the outlier threshold 
calculation. Section 1886(d)(3)(B) of the Act requires the Secretary to 
reduce the average standardized amount by a factor to account for the 
estimated total of outlier payments as a proportion of total DRG 
payments. More information on outlier payments may be found on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/outlier.html.
(1) Methodology To Incorporate an Estimate of the Impact of Outlier 
Reconciliation in the FY 2025 Outlier Fixed-Loss Cost Threshold
    The regulations in 42 CFR 412.84(i)(4) state that any outlier 
reconciliation at cost report settlement will be based on operating and 
capital cost-to-charge ratios (CCRs) calculated based on a ratio of 
costs to charges computed from the relevant cost report and charge data 
determined at the time the cost report coinciding with the discharge is 
settled. Instructions for outlier reconciliation are in section 
20.1.2.5 of chapter 3 of the Claims Processing Manual (on line at 
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf). The original instructions issued in July 2003 
\1106\ instruct MACs to identify for CMS any instances where: (1) a

[[Page 69949]]

hospital's actual operating CCR for the cost reporting period 
fluctuates plus or minus 10 percentage points or more compared to the 
interim operating CCR used to calculate outlier payments when a bill is 
processed; and (2) the total operating and capital outlier payments for 
the hospital exceeded $500,000 for that cost reporting period. Cost 
reports that meet these criteria will have the hospital's outlier 
payments reconciled at the time of cost report final settlement if 
approved by the CMS Central Office. For the remainder of this 
discussion, we refer to these criteria as the original criteria for 
outlier reconciliation (or the original criteria).
---------------------------------------------------------------------------

    \1106\ Change Request 2785 (Transmittal A-03-058; July 3, 2003) 
found at https://www.cms.gov/regulations-and-guidance/guidance/transmittals/downloads/a03058.pdf.
---------------------------------------------------------------------------

    On March 28, 2024, we issued Change Request (CR) 13566, which is 
available at https://www.cms.gov/medicare/regulations-guidance/transmittals/2024-transmittals/r12558cp. CR 13566 provides additional 
instructions to MACs that expand the criteria for identifying cost 
reports MACs are to refer to CMS for approval of outlier 
reconciliation. We anticipate that MACs will identify more cost reports 
to refer to CMS for outlier reconciliation approval. A report issued by 
the Office of the Inspector General (OIG) recommended that CMS require 
reconciliation of all hospital outlier payments during a cost-reporting 
period in its November 2019 report titled ``Hospitals Received Millions 
in Excessive Outlier Payments Because CMS Limits the Reconciliation 
Process'' (A-05-16-00060).\1107\ CMS concurs with the OIG's 
recommendation and is exploring the administrative feasibility of 
reconciling the outlier payments for all hospitals.
---------------------------------------------------------------------------

    \1107\ This report is available on the OIG website at: https://oig.hhs.gov/oas/reports/region5/51600060.pdf.
---------------------------------------------------------------------------

    Consistent with the OIG recommendation, CMS modified the original 
criteria for identifying cost reports to refer to CMS for outlier 
reconciliation approval in instructions to MACs in CR 13566. 
Specifically, CR 13566 states that for cost reports beginning on or 
after October 1, 2024, MACs shall identify for CMS any instances where: 
(1) the actual operating CCR is found to be plus or minus 20 percent or 
more from the operating CCR used during that time period to make 
outlier payments, and (2) the total operating and capital outlier 
payments for the hospital exceeded $500,000 for that cost reporting 
period. For the remainder of this discussion, we refer to these 
criteria as the new criteria for outlier reconciliation (or the new 
criteria). In the proposed rule we stated that we believe the new 
criteria balance current administrative feasibility with the goal of 
expanding the scope of cost reports identified for outlier 
reconciliation approval and conducting outlier reconciliation more 
frequently to increase the accuracy of outlier payments. These new 
criteria for identifying hospital cost reports that MACs should 
identify for outlier reconciliation approval are in addition to the 
original criteria for reconciliation described previously. That is, 
under the new criteria, MACs identify hospitals for outlier 
reconciliation that would not have met the original criteria. For 
example, in an instance where a hospital was paid with an operating CCR 
of 0.09 and its actual operating CCR was 0.07, then the hospital would 
not have met the 10-percentage point criterion under the original 
criteria (the hospital's operating CCR would have to be a negative 
number, which is not possible). Under the new criteria, a hospital that 
had a change in their actual operating CCR that was greater than 20 
percent from the CCR used for payment during the cost reporting period 
would be referred to CMS. Using the same example, while the operating 
CCR changed by a difference of -0.02 percentage point (0.07-0.09), the 
percentage change operating CCR is -22.2 percent ((0.07/0.09)-1), which 
meets the new 20 percent criterion. In addition, CR 13566 instructs 
that for cost reporting periods that begin on or after October 1, 2024, 
a hospital in its first cost reporting period will be referred for 
reconciliation of outlier payments at the time of cost report final 
settlement. As such, new hospitals will be referred for outlier 
reconciliation regardless of the change to the operating CCR and no 
matter the amount of outlier payments during the cost reporting period.
    If we determine that a hospital's outlier payments should be 
reconciled, we reconcile both operating and capital outlier payments. 
We refer readers to section 20.1.2.5 of Chapter 3 of the Medicare 
Claims Processing Manual for complete instructions regarding outlier 
reconciliation, including the update to the outlier reconciliation 
criteria provided in CR 13566.
    Comment: Commenters were concerned that CMS has added new criteria 
for determining which hospitals will have their outlier payments 
reconciled in CR 13566. The commenters stated CMS has not explained the 
grounds for the new criteria or its retention of the old criteria, and 
the new criteria were adopted without notice and comment rulemaking. 
The commenters stated their belief that new reconciliation criteria 
constitute a substantive change to CMS' payment policy that cannot be 
adopted without notice and comment rulemaking. The commenters urged CMS 
to withdraw the CR.
    MedPAC supported changes in CR 13566 and agreed with CMS that 
expanding the criteria for identifying hospitals for outlier 
reconciliation approval and increasing the frequency reconciliation 
would increase the accuracy of outlier payments while maintaining 
relatively low administrative burden. MedPAC also encouraged CMS to 
continue to monitor outlier payments and administrative burden to 
inform if additional changes to referral criteria are warranted in 
future years.
    Response: CMS established the outlier reconciliation regulation 
under Sec.  412.84(i)(4) effective for discharges on or after August 8, 
2003 which makes all hospital outlier payments subject to 
reconciliation. CMS has not modified the outlier regulation. The 
instructions CMS has issued via CR 13566 have set forth an enforcement 
policy that determines when MACs will identify additional hospitals for 
reconciliation referral. They do not change the legal standards that 
govern the hospitals.
    We appreciate MedPAC's supporting comment. As we explained in the 
proposed rule, we believe the new criteria balance current 
administrative feasibility with the goal of expanding the scope of cost 
reports identified for outlier reconciliation approval to increase the 
accuracy of outlier payments. These new criteria for identifying 
hospital cost reports that MACs should be referred for outlier 
reconciliation approval are in addition to the original criteria for 
reconciliation described previously.
    The regulations at Sec.  412.84(m) further state that at the time 
of any outlier reconciliation under Sec.  412.84(i)(4), outlier 
payments may be adjusted to account for the time value of any 
underpayments or overpayments. Section 20.1.2.6 of Chapter 3 of the 
Medicare Claims Processing Manual contains instructions on how to 
assess the time value of money for reconciled outlier amounts.
    If the operating CCR of a hospital approved for outlier 
reconciliation is lower at cost report settlement compared to the 
operating CCR used for payment, the hospital would owe CMS money. 
Conversely, if the operating CCR increases at cost report settlement 
compared to the operating CCR used for payment, CMS would owe the 
hospital money.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42623 through 
42635), we

[[Page 69950]]

finalized a methodology to incorporate outlier reconciliation in the FY 
2020 outlier fixed loss cost threshold. As discussed in the FY 2020 
IPPS/LTCH PPS proposed rule (84 FR 19592), we stated that rather than 
trying to predict which claims and/or hospitals may be subject to 
outlier reconciliation, we believe a methodology that incorporates an 
estimate of outlier reconciliation dollars based on actual outlier 
reconciliation amounts reported in historical cost reports would be a 
more feasible approach and provide a better estimate and predictor of 
outlier reconciliation for the upcoming fiscal year. We also stated 
that we believe the methodology addresses stakeholders' concerns about 
the impact of outlier reconciliation on the modeling of the outlier 
threshold. For a detailed discussion of additional background regarding 
the incorporation of outlier reconciliation into the outlier fixed loss 
cost threshold, we refer the reader to the FY 2020 IPPS/LTCH PPS final 
rule. Consistent with the instructions to MACs that added new criteria 
that identify additional cost reports for reconciliation referral 
beginning with FY 2025 cost reports, we proposed changes to our 
methodology to reflect the estimated reconciled outlier payments of the 
additional hospital cost reports identified under the new criteria. 
Specifically, we proposed to make modifications to the steps of our 
methodology in section II.A.4.i.1.a. of this Addendum to reflect the 
estimated reconciled outlier payments under the new criteria in the 
projection of outlier reconciliations for the FY 2025 outlier fixed 
loss cost threshold.
(a) Incorporating a Projection of Outlier Reconciliations for the FY 
2025 Outlier Threshold Calculation
    Based on the methodology finalized in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42623 through 42625), for FY 2025, we proposed to 
continue to incorporate outlier reconciliation in the FY 2025 outlier 
fixed loss cost threshold, with modifications to reflect the expansion 
of outlier reconciliations under the new criteria in CR 13566 
(described previously).
    As discussed in the FY 2020 IPPS/LTCH PPS final rule, for FY 2020, 
we used the historical outlier reconciliation amounts from the FY 2014 
cost reports (cost reports with a begin date on or after October 1, 
2013, and on or before September 30, 2014), which we believed would 
provide the most recent and complete available data to project the 
estimate of outlier reconciliation. We refer the reader to the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42623 through 42625) for a discussion 
on the use of the FY 2014 cost report data for purposes of projecting 
outlier reconciliations for the FY 2020 outlier threshold calculation. 
For FY 2024, we applied the same methodology finalized in FY 2020, 
using the historical outlier reconciliation amounts from the FY 2018 
cost reports (cost reports with a begin date on or after October 1, 
2017, and on or before September 30, 2018).
    Similar to the FY 2024 methodology, we proposed to determine a 
projection of outlier reconciliations for the FY 2025 outlier threshold 
calculation by advancing the historical data used by 1 year. 
Specifically, we proposed to use FY 2019 cost reports (cost reports 
with a begin date on or after October 1, 2018, and on or before 
September 30, 2019). For FY 2025, we proposed to use the methodology 
from FY 2020 to incorporate a projection of operating outlier 
reconciliations for the FY 2025 outlier threshold calculation, modified 
to reflect additional cost reports that would be identified for 
reconciliation under the new criteria in CR 13566. Because the new 
criteria are not effective until FY 2025 cost reports, to estimate 
outlier reconciliation dollars under the new criteria, we proposed to 
apply the new criteria to FY 2019 cost reports as if they had been in 
place at the time of final cost report settlement (as described in more 
detail later in this section).
    As described previously, under the expanded outlier reconciliation 
criteria in CR 13566, for cost reporting periods beginning on or after 
October 1, 2024, new hospitals will have their outlier payments 
referred for outlier reconciliation by the MAC to CMS in their first 
cost reporting period regardless of the change to the operating CCR or 
the amount of outlier payments during the cost reporting period. For 
purposes of the methodology for incorporating a projection of operating 
outlier reconciliations for the FY 2025 outlier threshold calculation 
to reflect additional cost reports that would be identified for 
reconciliation under the criteria added by CR 13566, we did not propose 
to include the first cost reporting periods of new hospitals because 
the lack of predictability of new hospitals' data may impact the 
reliability of our projection. We noted in the proposed rule that we 
expect the proposed modifications to our methodology for incorporating 
a projection of operating outlier reconciliations into the outlier 
threshold calculation would be necessary for 6 years, at which point 
the additional FY 2025 cost reports with outlier payments reconciled 
under the new criteria will be reflected in the HCRIS data available to 
be used to set the threshold.
    For FY 2019 hospital cost reports that were reconciled using the 
original criteria for referral for outlier reconciliation, in the FY 
2025 proposed rule, we used the December 2023 HCRIS extract of the cost 
report data to calculate the proposed percentage adjustment for outlier 
reconciliation. For the FY 2025 final rule, we proposed to use the 
latest quarterly HCRIS extract that is publicly available at the time 
of the development of that rule which, for FY 2025, would be the March 
2024 extract. As discussed in the FY 2024 IPPS/LTCH final rule (88 FR 
59346), we stated that we generally expect historical cost reports for 
the applicable fiscal year to be available by March, and we have worked 
with our MACs so that historical cost reports for the applicable fiscal 
year can be made available with the March HCRIS update for the final 
rule.
    To account for the additional hospital cost reports that would be 
reconciled as a result of the new criteria, we proposed to use data 
from the Provider Specific File (PSF) and the cost report to identify 
the FY 2019 cost reports that would have met the new criteria if those 
criteria had been in effect. This is because the FY 2019 cost reports 
in HCRIS would not have been identified as meeting the new criteria for 
outlier reconciliation since those new criteria are not being used 
until cost reports beginning with FY 2025. As such, these FY 2019 cost 
reports do not have an amount reported for operating or capital outlier 
reconciliation dollars. Therefore, we proposed to modify our 
methodology to estimate the outlier reconciliation dollars based on the 
operating and capital outlier amounts reported on the FY 2019 cost 
reports and supplemental data collected from the MACs, as described 
further in this section.
    The following proposed steps are similar to those finalized in the 
FY 2020 final rule, with updated data for FY 2025 and additional steps 
to reflect the cost reports that would be identified with new criteria 
under the updated instructions:
    Step 1.--Identify hospital cost reports that meet the original 
criteria or the new criteria.
    Step 1a.--Identify hospitals that report on their cost report the 
operating outlier reconciliation dollars on Worksheet E, Part A, Line 
2.01. We note, these were hospitals that were identified by the MACs 
that met the original criteria for outlier reconciliation and were 
approved by CMS for outlier reconciliation. We use the Federal FY

[[Page 69951]]

2019 cost reports for hospitals paid under the IPPS from the most 
recent publicly available quarterly HCRIS extract available at the time 
of development of the proposed and final rules and exclude sole 
community hospitals (SCHs) that were paid under their hospital-specific 
rate (that is, if Worksheet E, Part A, Line 48 is greater than Line 
47). We note that when there are multiple columns available for the 
lines of the cost report described in the following steps and the 
provider was paid under the IPPS for that period(s) of the cost report, 
then we believe it is appropriate to use multiple columns to fully 
represent the relevant IPPS payment amounts, consistent with our 
methodology for the FY 2020 final rule.
    Step 1b.--For hospitals that were not included in Step 1a, to 
identify hospitals that would be referred for outlier reconciliation 
under the new criteria, we proposed to use data from the latest PSF and 
cost report data from the most recent publicly available quarterly 
HCRIS extract. We identified hospitals with cost reports where the 
actual operating CCR for the cost reporting period fluctuates plus or 
minus 20 percent or more compared to the interim operating CCR used to 
calculate outlier payments when a bill is processed. To do this, we 
compared the operating CCR calculated from the FY 2019 cost report in 
the most recent publicly available quarterly HCRIS extract (the 
December 2023 HCRIS for the proposed rule) to the weighted operating 
CCR used for claim payment during the FY 2019 cost reporting period 
from the latest quarterly PSF update (December 2023 for the proposed 
rule). We then determined whether the hospital had total operating and 
capital outlier payments greater than $500,000 during the FY 2019 cost 
reporting period based on the most recent publicly available quarterly 
HCRIS (the December 2023 HCRIS for the proposed rule). If the hospital 
met both of these criteria, we included the operating outlier payments 
from the MAC using CCRs from the FY 2019 cost report (as described in 
Step 2b-2). For the final rule, to identify hospitals that would be 
referred for reconciliation, we proposed to use the most recent HCRIS 
and PSF data available, which would be the March 2024 update. We note 
that for this purpose we assumed that all hospitals that would be 
referred for outlier reconciliation under the new criteria would have 
their outlier payments reconciled.
    Step 2.--Determine the aggregate amount of operating outlier 
reconciliation dollars (under both the original criteria and the new 
criteria).
    Step 2a.--Calculate the aggregate amount of historical total of 
operating outlier reconciliation dollars (Worksheet E, Part A, Line 
2.01) using the Federal FY 2019 cost reports from Step 1a.
    Step 2b.--For the hospitals that would have met the new criteria as 
identified in Step 1b, to determine the aggregate amount of operating 
outlier reconciliation dollars, we proposed to use the following 
process:
    We collected supplemental estimated outlier payment data from the 
MACs for claims with discharges occurring during the hospital's FY 2019 
cost reporting period to estimate the change in the hospital's outlier 
payments. Specifically, for each hospital identified in Step 1b, the 
MACs used the actual operating CCR calculated from the FY 2019 cost 
report and the utility in the claims system along with that CCR to 
determine total outlier payments for claims with discharges occurring 
during the hospital's FY 2019 cost report (this is the same process 
MACs would have used if the cost report had been identified for 
reconciliation had the new criteria been in place for FY 2019 cost 
reports). For those same claims with discharges occurring during the 
hospital's 2019 cost report, the MAC provided to CMS the outlier 
payment as reported on the claim (which was based on the hospital's CCR 
in the PSF at the time of claim payment).
    Using this supplemental estimated outlier payment data, we computed 
a ratio of the outlier payments based on the actual operating CCR for 
the FY 2019 cost reporting period and the CCR used at the time of claim 
payment. This ratio is then applied to the operating outlier payment 
reported on the FY 2019 cost report to impute an operating outlier 
payment for the FY 2019 cost report. In the proposed rule we stated 
that we believe it is appropriate to impute the operating outlier 
payment for the cost report using the supplemental data from the MACs 
described previously rather than use the actual amount reported on the 
cost report because the claims data in the claims processing system may 
slightly differ from the cost report data in the HCRIS due to timing. 
This approach would also allow CMS to use more recent data (from the 
most recent publicly available quarterly HCRIS extract, which was from 
December 2023 for the proposed rule) to estimate outlier reconciliation 
dollars as compared to estimating outlier reconciliation dollars using 
the supplemental outlier payment data from the MACs, which was 
submitted by the MACs to CMS beginning in November 2022 (as described 
in this section). This is also the same data used to determine the 
aggregate amount of operating outlier reconciliation dollars for 
hospitals from the FY 2019 cost report data using the December 2023 
HCRIS extract in Step 2a.
    As presented in the table that follows, to calculate the imputed 
operating outlier payment for the FY 2019 cost report, we multiplied 
the operating outlier payment reported on the FY 2019 cost report by 
the following ratio (determined from the supplemental data collected 
from the MACs described previously): Operating Outlier Payments from 
MAC using the CCR from FY 2019 Cost Report divided by Operating Outlier 
Payments from MAC Based on Claim Payment. The general formula is the 
following: Operating Outlier Payments Reported on the Cost Report* 
(Operating Outlier Payments from MAC Using CCRs from FY 2019 Cost 
Report/Operating Outlier Payments from MAC Based on Claim Payment).
    To calculate the Estimated Operating Outlier Reconciliation 
Dollars, we then subtracted the Imputed Operating Outlier Amount for 
the FY 2019 Cost Report (Step 2b-5) from the Operating Outlier Payment 
Reported on the FY 2019 Cost Report (Step 2b-1).
    The following is an example to illustrate our proposed calculation 
to determine the estimated amount of operating outlier reconciliation 
dollars for the hospitals that would have met the new criteria:

[[Page 69952]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.336

    We noted the following, with regard to the data used in the 
calculation:
     Due to system limitations the MACs needed 13 months to 
process all providers' claims through the claims utility (for Steps 2b-
2 and 2b-3). The MACs used the operating and capital CCR from the FY 
2019 cost reports based on the September 2022 HCRIS extract and began 
processing the supplemental data for FY 2019 outlier payments in 
November 2022. We proposed to move this forward each year, using the 
September HCRIS for future fiscal years for the CCRs (for example, for 
FY 2026, MACs would use CCRs from the FY 2020 cost reports based on the 
September 2023 HCRIS).
     For FY 2025, for the ``Operating Outlier Payment Reported 
on the FY 2019 Cost Report'' (Step 2b-1) we used operating outlier 
payments reported on Worksheet E, Part A, Lines 2.02, 2.03, and 2.04 
from the FY 2019 cost report using the most recent publicly available 
quarterly HCRIS extract for the proposed rule (that is, the December 
2023 HCRIS extract). We proposed to move this forward each year and use 
the most recent publicly available quarterly HCRIS extract (for 
example, for FY 2026, we would use operating outlier payments reported 
on Worksheet E, Part A, Lines 2.02, 2.03, and 2.04 from the FY 2020 
cost reports using the most recent publicly available quarterly HCRIS 
extract).
     For the hospitals identified in Step 1b, for the proposed 
rule we posted a public use file that included the operating CCR 
calculated from the FY 2019 cost report in the most recent publicly 
available quarterly HCRIS extract (the December 2023 HCRIS for the 
proposed rule), the weighted operating CCR used for claim payment 
during the FY 2019 cost reporting period from the latest quarterly PSF 
update (December 2023 for the proposed rule), supplemental data from 
the MACs and operating outlier payment reported on the FY 2019 cost 
report.
    Step 3.--Calculate the aggregate amount of total Federal operating 
payments across all applicable hospitals using the Federal FY 2019 cost 
reports. The total Federal operating payments consist of the Federal 
payments (Worksheet E, Part A, Line 1.01 and Line 1.02, plus Line 1.03 
and Line 1.04), outlier payments (Worksheet E, Part A, Lines 2.02, 
2.03, and 2.04), and the outlier reconciliation amounts from Steps 2a 
and 2b. We noted that a negative amount on Worksheet E, Part A, Line 
2.01 from Step 2a for outlier reconciliation indicates an amount that 
was owed by the hospital, and a positive amount indicates this amount 
was paid to the hospital. Similarly, a negative amount from Step 2b for 
outlier reconciliation indicates an amount that would have been owed by 
the hospital, and a positive amount indicates an amount that would have 
been paid to the hospital.
    Step 4.--Divide the aggregate amount from Step 2 (that is, the sum 
of the amounts from Steps 2a and 2b) by the amount from Step 3 and 
multiply the resulting amount by 100 to produce the percentage of total 
operating outlier reconciliation dollars to total Federal operating 
payments for FY 2019. For FY 2025, the proposed ratio was a negative 
0.03979 percent ((-$34,513,755/$86,740,955,496) x 100), which, when 
rounded to the second digit, is -0.04 percent. We stated that this 
percentage amount would be used to adjust the outlier target for FY 
2025 as described in Step 5.
    Step 5.--Because the outlier reconciliation dollars are only 
available on the cost reports, and not in the Medicare claims data in 
the MedPAR file used to model the outlier threshold, we proposed to 
target 5.1 percent minus the percentage determined in Step 4 in 
determining the outlier threshold. Using the FY 2019 cost reports, 
because the aggregate outlier reconciliation dollars from Step 2 are 
negative, we are targeted an amount higher than 5.1 percent for outlier 
payments for FY 2025 under our proposed methodology. Therefore, for FY 
2025, we proposed to incorporate a projection of outlier reconciliation 
dollars by targeting an outlier threshold at 5.14 percent [5.1 percent-
(-0.04 percent)].
    In the proposed rule we stated that when the percentage of 
operating outlier reconciliation dollars to total Federal operating 
payments rounds to a negative value (that is, when the aggregate amount 
of outlier reconciliation as a percent of total operating payments 
rounds to a negative percent), the effect is a decrease to the outlier 
threshold compared to an outlier threshold that is calculated without 
including this estimate of operating outlier reconciliation dollars.
    As explained in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 
19593), we would continue to use a 5.1 percent target (or an outlier 
offset factor of 0.949) in calculating the outlier offset to the 
standardized amount. Therefore, the proposed operating outlier offset 
to the standardized amount was 0.949 (1-0.051). In section 
II.A.4.i.(2). of this Addendum, we provided the FY 2025 outlier 
threshold as calculated for the proposed rule both with and without 
including this proposed percentage estimate of operating outlier 
reconciliation.
    We invited public comment on our proposed methodology for 
projecting an estimate of outlier reconciliation and incorporating that 
estimate into the modeling for the fixed-loss cost outlier threshold 
for FY 2025.
    We did not receive any comments with regard to the steps described 
previously and we are finalizing as proposed without modification the 
methodology to project an estimate of outlier reconciliation and 
incorporating that estimate into the modeling for the fixed-loss cost 
outlier threshold for FY 2025. As we proposed and where stated in the 
previous steps, we are finalizing to use the most recent HCRIS and PSF 
data available for this final rule, which is the March 2024 update. 
Also, for the hospitals identified in Step 1b, similar to the proposed 
rule, for this final rule, we have posted a public use file that 
includes the operating CCR calculated from the FY 2019 cost report in 
the most recent publicly available quarterly HCRIS extract (the March 
2023 HCRIS for this final rule), the weighted operating CCR used for 
claim payment during the FY 2019 cost reporting period from the latest 
quarterly PSF update (March 2023 for this final rule), supplemental 
data from the MACs and operating outlier payment reported on the FY 
2019 cost report.

[[Page 69953]]

    With regard to step 4, the final ratio is a negative 0.041994 
percent ((-$36,439,127/$86,772,005,692) x 100), which, when rounded to 
the second digit, is -0.04 percent. This percentage amount is used to 
adjust the outlier target for FY 2025 as described in Step 5. Based on 
step 5, for FY 2025, we are incorporating a projection of outlier 
reconciliation dollars by targeting an outlier threshold at 5.14 
percent [5.1 percent-(-0.04 percent)]. In section II.A.4.i.(2). of this 
Addendum, we provide the FY 2025 outlier threshold as calculated for 
this final rule both with and without including this percentage 
estimate of operating outlier reconciliation.
(b) Reduction to the FY 2025 Capital Standard Federal Rate by an 
Adjustment Factor To Account for the Projected Proportion of Capital 
IPPS Payments Paid as Outliers
    We establish an outlier threshold that is applicable to both 
hospital inpatient operating costs and hospital inpatient capital 
related costs (58 FR 46348). Similar to the calculation of the 
adjustment to the standardized amount to account for the projected 
proportion of operating payments paid as outlier payments, as discussed 
in greater detail in section III.A.2. of this Addendum, we proposed to 
reduce the FY 2025 capital standard Federal rate by an adjustment 
factor to account for the projected proportion of capital IPPS payments 
paid as outliers. The regulations in 42 CFR 412.84(i)(4) state that any 
outlier reconciliation at cost report settlement would be based on 
operating and capital CCRs calculated based on a ratio of costs to 
charges computed from the relevant cost report and charge data 
determined at the time the cost report coinciding with the discharge is 
settled. As such, any reconciliation also applies to capital outlier 
payments.
    For FY 2025, we proposed to continue to use the methodology from FY 
2020 to adjust the FY 2025 capital standard Federal rate by an 
adjustment factor to account for the projected proportion of capital 
IPPS payments paid as outliers, with modifications to reflect the 
expansion of outlier reconciliations under the new criteria in CR 13566 
(described previously).
    For purposes of the methodology for incorporating a projection of 
capital outlier reconciliations for the FY 2025 outlier adjustment to 
the capital standard Federal rate to reflect additional cost reports 
that would be identified for reconciliation under the criteria added by 
CR 13566, as we discussed in section II.A.4.i.1.a. of the Addendum of 
this final rule regarding the projection of the operating outlier 
reconciliation, we did not propose to include the first cost reporting 
periods of new hospitals because the lack of predictability of new 
hospitals' data may impact the reliability of our projection. As noted, 
we expect the proposed modifications to our methodology for 
incorporating a projection of capital outlier reconciliations into the 
outlier adjustment to the capital standard federal rate would be 
necessary for 6 years, at which point the additional FY 2025 cost 
reports with outlier payments reconciled under the new criteria will be 
reflected in the HCRIS data available to be used to determine this 
adjustment.
    For FY 2019 hospital cost reports that were reconciled using the 
original criteria for referral for outlier reconciliation, for the FY 
2025 proposed rule, we used the December 2023 HCRIS extract of the cost 
report data to calculate the proposed percentage adjustment for outlier 
reconciliation. For the FY 2025 final rule, we proposed to use the 
latest quarterly HCRIS extract that is publicly available at the time 
of the development of that rule which, for FY 2025, would be the March 
2024 extract. As discussed in the FY 2024 IPPS/LTCH final rule (88 FR 
59347), we generally expect historical cost reports for the applicable 
fiscal year to be available by March, and we have worked with our MACs 
so that historical cost reports for the applicable fiscal year can be 
made available with the March HCRIS update for the final rule.
    To account for the additional hospital cost reports that would be 
reconciled as a result of the new criteria, we proposed to use data 
from the PSF and the cost report to identify the FY 2019 cost reports 
that would have met the new criteria if those criteria had been in 
effect. This is because the FY 2019 cost reports in HCRIS would not 
have been identified as meeting the new criteria for outlier 
reconciliation since those new criteria are not being used until cost 
reports beginning with FY 2025. As such, these FY 2019 cost reports do 
not have an amount reported for operating or capital outlier 
reconciliation dollars. Therefore, we proposed to modify our 
methodology to estimate the outlier reconciliation dollars based on the 
operating and capital outlier amounts reported on the FY 2019 cost 
reports and supplemental data collected from the MACs as described 
further in this section.
    Similar to FY 2020, as part of our proposal for FY 2025 to 
incorporate into the outlier model the total outlier reconciliation 
dollars from the most recent and most complete fiscal year cost report 
data, we also proposed to adjust our estimate of FY 2025 capital 
outlier payments to incorporate a projection of capital outlier 
reconciliation payments when determining the adjustment factor to be 
applied to the capital standard Federal rate to account for the 
projected proportion of capital IPPS payments paid as outliers (that 
is, the capital outlier payment adjustment factor). To do so, we 
proposed to use the following methodology, which generally parallels 
the proposed methodology to incorporate a projection of operating 
outlier reconciliation payments for the FY 2025 outlier threshold 
calculation, including updated data for FY 2025 and additional steps to 
reflect the cost reports that would be identified with new criteria 
under the updated instructions.
    Step 1.--Identify hospital cost reports that meet the original 
criteria or the new criteria.
    Step 1a.--Identify hospitals that report on their cost report the 
capital outlier reconciliation dollars on Worksheet E, Part A, Line 93, 
Column 1. We note, these were hospitals that were identified by the 
MACs that met the original criteria for outlier reconciliation and were 
approved by CMS for outlier reconciliation. We used the Federal FY 2019 
cost reports for hospitals paid under the IPPS from the most recent 
publicly available quarterly HCRIS extract available at the time of 
development of the proposed and final rules and exclude SCHs that were 
paid under their hospital-specific rate (that is, if Worksheet E, Part 
A, Line 48 is greater than Line 47). We note that when there are 
multiple columns available for the lines of the cost report described 
in the following steps and the provider was paid under the IPPS for 
that period(s) of the cost report, then we believe it is appropriate to 
use multiple columns to fully represent the relevant IPPS payment 
amounts, consistent with our methodology for the FY 2020 final rule.
    Step 1b.--For hospitals that were not included in Step 1a, to 
identify hospitals that would be referred for outlier reconciliation 
under the new criteria, we used the same hospitals that were identified 
in Step 1b of the operating methodology. We note, as discussed 
previously, the new criteria from CR 13566 is based on the change to 
the operating CCR (not the capital CCR) where the actual operating CCR 
for the cost reporting period fluctuates plus or minus 20 percent or 
more compared to the interim operating CCR used to calculate outlier 
payments when a bill

[[Page 69954]]

is processed and the hospital had total operating and capital outlier 
payments greater than $500,000 during the cost reporting period.
    Step 2.--Determine the aggregate amount of capital outlier 
reconciliation dollars (under both the original criteria and the new 
criteria).
    Step 2a.--Calculate the aggregate amount of the historical total of 
capital outlier reconciliation dollars (Worksheet E, Part A, Line 93, 
Column 1) using the Federal FY 2019 cost reports from Step 1.
    Step 2b.--For the hospitals that would have met the new criteria as 
identified in Step 1b, to determine the aggregate amount of capital 
outlier reconciliation dollars, we proposed to use the following 
process (we note this process is the same as Step 2b of the operating 
methodology):
    We collected supplemental estimated outlier payment data from the 
MACs for claims with discharges occurring during the hospital's FY 2019 
cost reporting period to estimate the change in the hospital's outlier 
payments. Specifically, for each hospital identified in Step 1b, the 
MACs used the actual capital CCR calculated from the FY 2019 cost 
report and the utility in the claims system along with that CCR to 
determine total outlier payments for claims with discharges occurring 
during the hospital's FY 2019 cost report (this is the same process 
MACs would have used if the cost report had been identified for 
reconciliation had the new criteria been in place for FY 2019 cost 
reports). For those same claims with discharges occurring during the 
hospital's 2019 cost report, the MAC provided to CMS the outlier 
payment as reported on the claim (which was based on the hospital's CCR 
in the PSF at the time of claim payment).
    Using this supplemental estimated outlier payment data, we computed 
a ratio of the outlier payments based on the actual capital CCR for the 
FY 2019 cost reporting period and the capital CCR used at the time of 
claim payment. This ratio is then applied to the capital outlier 
payment reported on the FY 2019 cost report to impute a capital outlier 
payment for the FY 2019 cost report. We stated that we believe it is 
appropriate to impute the capital outlier payment for the cost report 
using the supplemental data from the MACs described previously rather 
than use the actual amount reported on the cost report because the 
claims data in the claims processing system may slightly differ from 
the cost report data in the HCRIS due to timing. This approach would 
also allow CMS to use more recent data (from the most recent publicly 
available quarterly HCRIS extract, which was December 2023 for the 
proposed rule) to estimate outlier reconciliation dollars as compared 
to estimating outlier reconciliation dollars using the supplemental 
data from the MACs which was submitted by the MACs to CMS beginning in 
November 2022 (as described in this section). This is also the same 
data used to determine the aggregate amount of capital outlier 
reconciliation dollars for hospitals from the FY 2019 cost report data 
using the December 2023 HCRIS extract in Step 2a.
    As presented in the table that follows, to calculate the imputed 
capital outlier payment for the FY 2019 cost report, we multiplied the 
capital outlier payment reported on the FY 2019 cost report by the 
following ratio (determined from the supplemental data collected from 
the MACs described previously): Capital Outlier Payments from MAC using 
the CCR from FY 2019 Cost Report divided by Capital Outlier Payments 
from MAC Based on Claim Payment. The general formula is the following: 
Capital Outlier Payments Reported on the Cost Report * (Capital Outlier 
Payments from MAC Using CCRs from FY 2019 Cost Report/Capital Outlier 
Payments from MAC Based on Claim Payment).
    To calculate the Estimated Capital Outlier Reconciliation Dollars, 
we then subtracted the Imputed Capital Outlier Amount for the FY 2019 
Cost Report (Step 2b-5) from the Capital Outlier Payment Reported on 
the FY 2019 Cost Report (Step 2b-1).
    The following is an example to illustrate our proposed calculation 
to determine the estimated amount of capital outlier reconciliation 
dollars for the hospitals that would have met the new criteria:
[GRAPHIC] [TIFF OMITTED] TR28AU24.336

    We noted the following in the proposed rule, with regard to the 
data used in the calculation:
     Due to system limitations the MACs needed 13 months to 
process all providers' claims through the claims utility (for Steps 2b-
2 and 2b-3). The MACs used the operating and capital CCR from the FY 
2019 cost reports based on the September 2022 HCRIS extract and began 
processing the supplemental data for FY 2019 outlier payments in 
November 2022. We proposed to move this forward each year, using the 
September HCRIS for future fiscal years for the CCRs (for example, for 
FY 2026, MACs would use CCRs from the 2020 cost reports based on the 
September 2023 HCRIS).
     For FY 2025, for the ``Capital Outlier Payment Reported on 
the FY 2019 Cost Report'' (Step 2b-1) we used capital outlier payments 
reported on Worksheet L, Part I, Line 2 and Line 2.01 from the FY 2019 
cost report using the most recent publicly available quarterly HCRIS 
extract for the proposed rule (that is, the December 2023 HCRIS 
extract). We proposed to move this forward each year and use the most 
recent publicly available quarterly HCRIS extract (for example, for FY 
2026, we would use operating capital payments reported on Worksheet L, 
Part I, Line 2 and Line 2.01 from the FY 2020 cost reports using the 
most recent publicly available quarterly HCRIS extract).
     For the hospitals identified in Step 1b, we posted a 
public use file that includes the operating CCR calculated from the FY 
2019 cost report in the most recent publicly available quarterly HCRIS 
extract (the December 2023 HCRIS for the proposed rule), the weighted 
operating CCR used for claim payment during the FY 2019 cost reporting 
period from the latest quarterly PSF update (December 2023 for the 
proposed rule), supplemental data from the MACs and capital outlier

[[Page 69955]]

payments reported on the FY 2019 cost report.
    Step 3.--Calculate the aggregate amount of total capital Federal 
payments across all applicable hospitals using the Federal FY 2019 cost 
reports. The total capital Federal payments consist of the capital DRG 
payments, including capital outlier payments, capital indirect medical 
education (IME) and capital disproportionate share hospital (DSH) 
payments (Worksheet E, Part A, Line 50, Column 1) and the capital 
outlier reconciliation amounts from Steps 2a and 2b. We note that a 
negative amount on Worksheet E, Part A, Line 93 from Step 2a for 
capital outlier reconciliation indicates an amount that was owed by the 
hospital, and a positive amount indicates this amount was paid to the 
hospital. Similarly, a negative amount from Step 2b for capital outlier 
reconciliation indicates an amount that would have been owed by the 
hospital, and a positive amount indicates an amount that would have 
been paid to the hospital.
    Step 4.--Divide the aggregate amount from Step 2 (that is, the sum 
of the amounts from Steps 2a and 2b) by the amount from Step 3 and 
multiply the resulting amount by 100 to produce the percentage of total 
capital outlier reconciliation dollars to total capital Federal 
payments for FY 2019. This percentage amount would be used to adjust 
the estimate of capital outlier payments for FY 2025 as described in 
Step 5.
    Step 5.--Because the outlier reconciliation dollars are only 
available on the cost reports, and not in the specific Medicare claims 
data in the MedPAR file used to estimate outlier payments, we proposed 
that the estimate of capital outlier payments for FY 2025 would be 
determined by adding the percentage in Step 5 to the estimated 
percentage of capital outlier payments otherwise determined using the 
shared outlier threshold that is applicable to both hospital inpatient 
operating costs and hospital inpatient capital-related costs. (We noted 
that this percentage is added for capital outlier payments but 
subtracted in the analogous step for operating outlier payments. We 
have a unified outlier payment methodology that uses a shared threshold 
to identify outlier cases for both operating and capital payments. The 
difference stems from the fact that operating outlier payments are 
determined by first setting a ``target'' percentage of operating 
outlier payments relative to aggregate operating payments which 
produces the outlier threshold. Once the shared threshold is set, it is 
used to estimate the percentage of capital outlier payments to total 
capital payments based on that threshold. Because the threshold is 
already set based on the operating target, rather than adjusting the 
threshold (or operating target), we adjust the percentage of capital 
outlier to total capital payments to account for the estimated effect 
of capital outlier reconciliation payments. This percentage is adjusted 
by adding the capital outlier reconciliation percentage from Step 5 to 
the estimate of the percentage of capital outlier payments to total 
capital payments based on the shared threshold.) We noted, when the 
aggregate capital outlier reconciliation dollars from Steps 2a and 2b 
are negative, the estimate of capital outlier payments for FY 2025 
under our proposed methodology would be lower than the percentage of 
capital outlier payments otherwise determined using the shared outlier 
threshold.
    For the FY 2025 proposed rule, the estimated percentage of FY 2025 
capital outlier payments otherwise determined using the shared outlier 
threshold was 4.26 percent (estimated capital outlier payments of 
$290,612,698 divided by (estimated capital outlier payments of 
$290,612,698 plus the estimated total capital Federal payment of 
$6,532,600,813)). The proposed ratio in Step 5 was a negative -0.026446 
percent ((-$2,056,344/$7,775,606,401) x 100), which, when rounded to 
the second digit, is -0.03 percent. Therefore, for the FY 2025 proposed 
rule, taking into account projected capital outlier reconciliation 
under our proposed methodology decreased the estimated percentage of FY 
2025 aggregate capital outlier payments by 0.03 percent.
    As discussed in section III.A.2. of this Addendum, we proposed to 
incorporate the capital outlier reconciliation dollars from Step 5 when 
applying the outlier adjustment factor in determining the capital 
Federal rate based on the estimated percentage of capital outlier 
payments to total capital Federal rate payments for FY 2025.
    We invited public comment on our proposed methodology for 
projecting an estimate of capital outlier reconciliation and 
incorporating that estimate into the modeling of the estimate of FY 
2025 capital outlier payments for purposes of determining the capital 
outlier adjustment factor.
    We did not receive any comments with regard to the steps described 
previously and we are finalizing as proposed without modification the 
methodology for projecting an estimate of capital outlier 
reconciliation and incorporating that estimate into the modeling of the 
estimate of FY 2025 capital outlier payments for purposes of 
determining the capital outlier adjustment factor. As we proposed and 
where stated in the previous steps, for this final rule, we used the 
most recent HCRIS and PSF data available for this final rule, which is 
the March 2024 update. Also, for the hospitals identified in Step 1b, 
similar to the proposed rule, for this final rule, we have posted a 
public use file that includes the operating CCR calculated from the FY 
2019 cost report in the most recent publicly available quarterly HCRIS 
extract (the March 2024 HCRIS for this final rule), the weighted 
operating CCR used for claim payment during the FY 2019 cost reporting 
period from the latest quarterly PSF update (March 2024 for this final 
rule), supplemental data from the MACs and operating outlier payment 
reported on the FY 2019 cost report.
    With regard to step 5, for this FY 2025 final rule, the estimated 
percentage of FY 2025 capital outlier payments otherwise determined 
using the shared outlier threshold is 4.26 percent (estimated capital 
outlier payments of $292,195,135 divided by (estimated capital outlier 
payments of $292,195,135 plus the estimated total capital Federal 
payment of $6,564,012,091)). The ratio in Step 5 is a negative -0. 
028042 percent ((-$2,181,440/$7,779,306,800) x 100), which, when 
rounded to the second digit, is -0.03 percent. Therefore, for this FY 
2025 final rule, taking into account projected capital outlier 
reconciliation under our methodology will decrease the estimated 
percentage of FY 2025 aggregate capital outlier payments by 0.03 
percent.
    As discussed in section III.A.2. of this Addendum, we are 
incorporating the capital outlier reconciliation dollars from Step 5 
when applying the outlier adjustment factor in determining the capital 
Federal rate based on the estimated percentage of capital outlier 
payments to total capital Federal rate payments for FY 2025.
(2) FY 2025 Outlier Fixed-Loss Cost Threshold
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50977 through 
50983), in response to public comments on the FY 2013 IPPS/LTCH PPS 
proposed rule, we made changes to our methodology for projecting the 
outlier fixed-loss cost threshold for FY 2014. We refer readers to the 
FY 2014 IPPS/LTCH PPS final rule for a detailed discussion of the 
changes.

[[Page 69956]]

    As we have done in the past, to calculate the proposed FY 2025 
outlier threshold, we simulated payments by applying FY 2025 payment 
rates and policies using cases from the FY 2023 MedPAR file. As noted 
in section II.C. of this Addendum, we specify the formula used for 
actual claim payment which is also used by CMS to project the outlier 
threshold for the upcoming fiscal year. The difference is the source of 
some of the variables in the formula. For example, operating and 
capital CCRs for actual claim payment are from the Provider-Specific 
File (PSF) while CMS uses an adjusted CCR (as described later in this 
section) to project the threshold for the upcoming fiscal year. In 
addition, charges for a claim payment are from the bill while charges 
to project the threshold are from the MedPAR data with an inflation 
factor applied to the charges (as described earlier).
    To determine the FY 2025 outlier threshold, we inflated the charges 
on the MedPAR claims by 2 years, from FY 2023 to FY 2025. Consistent 
with the FY 2020 IPPS/LTCH PPS final rule (84 FR 42626 and 42627), we 
proposed to use the following methodology to calculate the charge 
inflation factor for FY 2025:
     Include hospitals whose last four digits fall between 0001 
and 0899 (section 2779A1 of Chapter 2 of the State Operations Manual on 
the CMS website at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/som107c02.pdf); include CAHs and REHs that 
were IPPS hospitals for the time period of the MedPAR data being used 
to calculate the charge inflation factor; include hospitals in 
Maryland; and remove PPS-excluded cancer hospitals that have a ``V'' in 
the fifth position of their provider number or a ``E'' or ``F'' in the 
sixth position.
     Include providers that are in both periods of charge data 
that are used to calculate the 1-year average annual rate of-change in 
charges per case. We note this is consistent with the methodology used 
since FY 2014.
     We excluded Medicare Advantage IME claims for the reasons 
described in section I.A.4. of this Addendum. We refer readers to the 
FY 2011 IPPS/LTCH PPS final rule for a complete discussion on our 
methodology of identifying and adding the total Medicare Advantage IME 
payment amount to the budget neutrality adjustments.
     In order to ensure that we capture only FFS claims, we 
included claims with a ``Claim Type'' of 60 (which is a field on the 
MedPAR file that indicates a claim is an FFS claim).
     In order to further ensure that we capture only FFS 
claims, we excluded claims with a ``GHOPAID'' indicator of 1 (which is 
a field on the MedPAR file that indicates a claim is not an FFS claim 
and is paid by a Group Health Organization).
     We examined the MedPAR file and removed pharmacy charges 
for anti-hemophilic blood factor (which are paid separately under the 
IPPS) with an indicator of ``3'' for blood clotting with a revenue code 
of ``0636'' from the covered charge field. We also removed organ 
acquisition charges from the covered charge field because organ 
acquisition is a pass-through payment not paid under the IPPS. As noted 
previously, we are removing allogeneic hematopoietic stem cell 
acquisition charges from the covered charge field for budget neutrality 
adjustments. As discussed in the FY 2021 IPPS/LTCH PPS final rule, 
payment for allogeneic hematopoietic stem cell acquisition costs is 
made on a reasonable cost basis for cost reporting periods beginning on 
or after October 1, 2020 (85 FR 58835 through 58842).
     Because this payment simulation uses the FY 2025 relative 
weights, consistent with our policy discussed in section IV.I. of the 
preamble to this final rule, we applied the adjustor for certain cases 
that group to MS-DRG 018 in our simulation of these payments.
    Our general methodology to inflate the charges computes the 1-year 
average annual rate-of-change in charges per case which is then applied 
twice to inflate the charges on the MedPAR claims by 2 years since we 
typically use claims data for the fiscal year that is 2 years prior to 
the upcoming fiscal year.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42627), we modified 
our charge inflation methodology. We stated that we believe balancing 
our preference to use the latest available data from the MedPAR files 
and stakeholders' concerns about being able to use publicly available 
MedPAR files to review the charge inflation factor can be achieved by 
modifying our methodology to use the publicly available Federal fiscal 
year period (that is, for FY 2020, we used the charge data from Federal 
fiscal years 2017 and 2018), rather than the most recent data available 
to CMS which, under our prior methodology, was based on calendar year 
data. We refer the reader to the FY 2020 IPPS/LTCH PPS final rule for a 
complete discussion regarding this change.
    For the same reasons discussed in that rulemaking, for FY 2025, we 
proposed to use the same methodology as FY 2020 to determine the charge 
inflation factor. That is, for FY 2025, we proposed to use the MedPAR 
files for the two most recent available Federal fiscal year time 
periods to calculate the charge inflation factor, as we did for FY 
2020. Specifically, for the proposed rule we used the December 2022 
MedPAR file of FY 2022 (October 1, 2021 to September 30, 2022) charge 
data (released for the FY 2024 IPPS/LTCH PPS proposed rule) and the 
December 2023 MedPAR file of FY 2023 (October 1, 2022 to September 30, 
2023) charge data (released for the FY 2025 IPPS/LTCH PPS proposed 
rule) to compute the proposed charge inflation factor. We proposed that 
for the FY 2025 final rule, we would use more recently updated data, 
that is the MedPAR files from March 2023 for the FY 2022 time period 
and March 2024 for the FY 2023 time period.
    For FY 2025, under this proposed methodology, to compute the 1-year 
average annual rate-of-change in charges per case, we compared the 
average covered charge per case of $82,570.13 ($574,544,024,043/
6,958,255) from October 1, 2021 through September 30, 2022, to the 
average covered charge per case of $85,990.03 ($593,444,028,889/
6,901,312) from October 1, 2022 through September 30, 2023. This rate-
of-change was 4.142 percent (1.04142) or 8.4555 percent (1.084555) over 
2 years. The billed charges are obtained from the claims from the 
MedPAR file and inflated by the inflation factor specified previously.
    As we have done in the past, in this FY 2025 IPPS/LTCH PPS proposed 
rule, we proposed to establish the FY 2025 outlier threshold using 
hospital CCRs from the December 2023 update to the Provider-Specific 
File (PSF), the most recent available data at the time of the 
development of the proposed rule. We proposed to apply the following 
edits to providers' CCRs in the PSF. We believe these edits are 
appropriate to accurately model the outlier threshold. We first search 
for Indian Health Service providers and those providers assigned the 
statewide average CCR from the current fiscal year. We then replace 
these CCRs with the statewide average CCR for the upcoming fiscal year. 
We also assign the statewide average CCR (for the upcoming fiscal year) 
to those providers that have no value in the CCR field in the PSF or 
whose CCRs exceed the ceilings described later in this section (3.0 
standard deviations from the mean of the log distribution of CCRs for 
all hospitals). We do not apply the adjustment factors described later 
in this section to hospitals assigned the statewide average CCR. For FY 
2025, we proposed to continue to apply an adjustment factor to the CCRs 
to account for cost and charge inflation (as explained later in this 
section). We also proposed that, if more recent data

[[Page 69957]]

become available, we would use that data to calculate the final FY 2025 
outlier threshold.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we adopted a 
new methodology to adjust the CCRs. Specifically, we finalized a policy 
to compare the national average case-weighted operating and capital CCR 
from the most recent update of the PSF to the national average case-
weighted operating and capital CCR from the same period of the prior 
year.
    Therefore, as we have done in the past, we proposed to adjust the 
CCRs from the December 2023 update of the PSF by comparing the 
percentage change in the national average case weighted operating CCR 
and capital CCR from the December 2022 update of the PSF to the 
national average case weighted operating CCR and capital CCR from the 
December 2023 update of the PSF. We note that, in the proposed rule, we 
used total transfer-adjusted cases from FY 2023 to determine the 
national average case weighted CCRs for both sides of the comparison. 
As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we 
believe that it is appropriate to use the same case count on both sides 
of the comparison because this will produce the true percentage change 
in the average case-weighted operating and capital CCR from one year to 
the next without any effect from a change in case count on different 
sides of the comparison.
    Using the proposed methodology, for the proposed rule, we 
calculated a December 2022 operating national average case-weighted CCR 
of 0.246416 and a December 2023 operating national average case-
weighted CCR of 0.254624.We then calculated the percentage change 
between the two national operating case-weighted CCRs by subtracting 
the December 2022 operating national average case-weighted CCR from the 
December 2023 operating national average case-weighted CCR and then 
dividing the result by the December 2022 national operating average 
case-weighted CCR. This resulted in a proposed one-year national 
operating CCR adjustment factor of 1.03331.
    We used this same proposed methodology to adjust the capital CCRs. 
Specifically, we calculated a December 2022 capital national average 
case-weighted CCR of 0.018005 and a December 2023 capital national 
average case-weighted CCR of 0.017765. We then calculated the 
percentage change between the two national capital case-weighted CCRs 
by subtracting the December 2022 capital national average case-weighted 
CCR from the December 2023 capital national average case-weighted CCR 
and then dividing the result by the December 2022 capital national 
average case-weighted CCR. This resulted in a proposed one-year 
national capital CCR adjustment factor of 0.98667.
    For purposes of estimating the proposed outlier threshold for FY 
2025, we used a wage index that reflects the policies discussed in the 
proposed rule. This includes the following:
     Application of the proposed rural and imputed floor 
adjustment.
     The proposed frontier State floor adjustments in 
accordance with section 10324(a) of the Affordable Care Act.
     The proposed out-migration adjustment as added by section 
505 of Public Law 108-173.
     Incorporating the proposed FY 2025 low wage index hospital 
policy (described in section III.G.5 of the preamble of this final 
rule) for hospitals with a wage index value below the 25th percentile, 
where the increase in the wage index value for these hospitals would be 
equal to half the difference between the otherwise applicable final 
wage index value for a year for that hospital and the 25th percentile 
wage index value for that year across all hospitals.
     Incorporating our policy (described in section III.6. of 
the preamble of this final rule) to apply a 5-percent cap on any 
decrease to a hospital's wage index from its wage index in the prior 
FY, regardless of the circumstances causing the decline.
    As stated earlier, if we did not take the aforementioned into 
account, our estimate of total FY 2025 payments would be too low, and, 
as a result, our outlier threshold would be too high, such that 
estimated outlier payments would be less than our projected 5.1 percent 
of total payments (which includes outlier reconciliation).
    As described in sections V.K. and V.L., respectively, of the 
preamble of this final rule, sections 1886(q) and 1886(o) of the Act 
establish the Hospital Readmissions Reduction Program and the Hospital 
VBP Program, respectively. We do not believe that it is appropriate to 
include the proposed hospital VBP payment adjustments and the hospital 
readmissions payment adjustments in the proposed outlier threshold 
calculation or the proposed outlier offset to the standardized amount. 
Specifically, consistent with our definition of the base operating DRG 
payment amount for the Hospital Readmissions Reduction Program under 
Sec.  412.152 and the Hospital VBP Program under Sec.  412.160, outlier 
payments under section 1886(d)(5)(A) of the Act are not affected by 
these payment adjustments. Therefore, outlier payments would continue 
to be calculated based on the unadjusted base DRG payment amount (as 
opposed to using the base-operating DRG payment amount adjusted by the 
hospital readmissions payment adjustment and the hospital VBP payment 
adjustment). Consequently, we proposed to exclude the estimated 
hospital VBP payment adjustments and the estimated hospital 
readmissions payment adjustments from the calculation of the proposed 
outlier fixed-loss cost threshold.
    We note that, to the extent section 1886(r) of the Act modifies the 
DSH payment methodology under section 1886(d)(5)(F) of the Act, the 
uncompensated care payment under section 1886(r)(2) of the Act, like 
the empirically justified Medicare DSH payment under section 1886(r)(1) 
of the Act, may be considered an amount payable under section 
1886(d)(5)(F) of the Act such that it would be reasonable to include 
the payment in the outlier determination under section 1886(d)(5)(A) of 
the Act. As we have done since the implementation of uncompensated care 
payments in FY 2014, for FY 2025, we proposed to allocate an estimated 
per-discharge uncompensated care payment amount to all cases for the 
hospitals eligible to receive the uncompensated care payment amount in 
the calculation of the outlier fixed-loss cost threshold methodology. 
We continue to believe that allocating an eligible hospital's estimated 
uncompensated care payment to all cases equally in the calculation of 
the outlier fixed-loss cost threshold would best approximate the amount 
we would pay in uncompensated care payments during the year because, 
when we make claim payments to a hospital eligible for such payments, 
we would be making estimated per-discharge uncompensated care payments 
to all cases equally.
    Furthermore, we continue to believe that using the estimated per-
claim uncompensated care payment amount to determine outlier estimates 
provides predictability as to the amount of uncompensated care payments 
included in the calculation of outlier payments. Therefore, consistent 
with the methodology used since FY 2014 to calculate the outlier fixed-
loss cost threshold, for FY 2025, we proposed to include estimated FY 
2025 uncompensated care payments in the computation of the proposed 
outlier fixed-loss cost threshold. Specifically, we proposed to use the 
estimated per-discharge uncompensated care payments to hospitals 
eligible for the

[[Page 69958]]

uncompensated care payment for all cases in the calculation of the 
proposed outlier fixed-loss cost threshold methodology.
    In addition, consistent with the methodology finalized in the FY 
2023 final rule, we proposed to include the estimated supplemental 
payments for eligible IHS/Tribal hospitals and Puerto Rico hospitals in 
the computation of the FY 2025 proposed outlier fixed-loss cost 
threshold. Specifically, we proposed to use the estimated per-discharge 
supplemental payments to hospitals eligible for the supplemental 
payment for all cases in the calculation of the proposed outlier fixed-
loss cost threshold methodology.
    Using this methodology, we used the formula described in section 
I.C.1. of this Addendum to simulate and calculate the Federal payment 
rate and outlier payments for all claims. In addition, as described in 
the earlier section to this Addendum, we proposed to incorporate an 
estimate of FY 2025 outlier reconciliation in the methodology for 
determining the outlier threshold. As noted previously, for the FY 2025 
proposed rule, the ratio of outlier reconciliation dollars to total 
Federal Payments (Step 4) is a negative 0.039789 percent, which, when 
rounded to the second digit, is -0.04 percent. Therefore, for FY 2025, 
we proposed to incorporate a projection of outlier reconciliation 
dollars by targeting an outlier threshold at 5.14 percent [5.1 percent 
- (-.04 percent)]. Under this proposed approach, we determined a 
proposed threshold of $49,237 and calculated total outlier payments of 
$4,330,371,122 and total operating Federal payments of $79,917,085,666. 
We then divided total outlier payments by total operating Federal 
payments plus total outlier payments and determined that this threshold 
matched with the 5.14 percent target, which reflected our proposal to 
incorporate an estimate of outlier reconciliation in the determination 
of the outlier threshold (as discussed in more detail in the previous 
section of this Addendum). We noted that, if calculated without 
applying our proposed methodology for incorporating an estimate of 
outlier reconciliation in the determination of the outlier threshold, 
the proposed threshold would be $49,601. We proposed an outlier fixed-
loss cost threshold for FY 2025 equal to the prospective payment rate 
for the MS-DRG, plus any IME, empirically justified Medicare DSH 
payments, estimated uncompensated care payment, estimated supplemental 
payment for eligible IHS/Tribal hospitals and Puerto Rico hospitals, 
and any add-on payments for new technology, plus $49,237.
    Comment: A commenter requested that CMS apply trims when 
calculating charge inflation as it does under the LTCH PPS to ``remove 
all claims from providers whose growth in average charges was a 
statistical outlier''.
    Response: We responded to a similar comment in the FY 2024 IPPS/
LTCH final rule (88 FR 59351). As we explained in that final rule, 
there are many more providers and claims under the IPPS compared to the 
LTCH PPS. When we analyzed the LTCH PPS claims data, a single LTCH 
provider had substantial increases in its charges with average charges 
per case of approximately $10 million which significantly influenced 
the charge inflation factor. Since there are fewer hospitals and claims 
under the LTCH PPS, the potential for a single provider to influence 
the charge inflation factor is much more significant. We are not aware 
of a similar situation with a hospital having such high average charges 
under the IPPS. Therefore, we believe it is not necessary to apply the 
same trim to hospitals included in the IPPS charge inflation factor. We 
refer the reader to the FY 2024 IPPS/LTCH final rule for our complete 
response.
    Comment: Commenters were concerned about the proposed increase in 
the high-cost outlier threshold, a 15 percent increase from the FY 2024 
threshold, which they stated would significantly decrease the number of 
cases that qualify for an outlier payment. The commenters stated that 
the proposed increase in the threshold compared to FY 2024 is 
substantial and comes after a decade of increases which amount to a 126 
percent increase from FY 2013 through FY 2025.
    Commenters stated that they believe much of the increase in FY 2025 
is being driven by the fact that CMS has estimated and proposed to use 
a one-year national operating CCR adjustment factor of 1.03331. These 
commenters stated that the CCR adjustment factor is much higher than it 
has been in the past and is largely driven by CCRs that are reflecting 
the high-cost inflation, namely labor costs, that have been experienced 
by hospitals during 2022 and 2023.
    A commenter stated that CMS' proposed operating CCR adjustment 
factor for FY 2025 is anomalous and would be the first use of a 
projected increase in the CCRs since FY 2013. The commenter asserted 
that the anomalous first-time year-over-year increase in CCRs, used for 
the proposed FY 2025 adjustment factor, is driven by CCRs skewed by 
costs--largely labor costs--incurred during the peak inflationary 
period of the COVID-19 PHE in 2022 and early 2023. The commenter 
explained that CMS' projection of a one-year 1.033 change in CCRs 
suggest that average costs per case increased by over 7 percent, given 
that CMS estimated average charge inflation of about 4.4 percent from 
FY 2022 to FY 2023. The commenter stated that CMS' current data and 
projections reflect a Q4 2022 peak in the four-quarter moving average 
percent change to the market basket index level followed by a slowing 
in cost inflation.
    The commenter further stated that a comparison of the March 2023 
and March 2024 updates of the PSF (in lieu of the December 2022 and 
December 2023 updates of the PSF used in the proposed rule) shows that 
CCRs are again declining such that a CCR adjustment factor greater than 
1.0 is unreasonable. Despite this decline, the commenter expressed 
concern that a CCR adjustment factor calculated from this data will 
continue to be skewed by data from an anomalous period of rapid 
inflation. The commenter asserted that a preliminary review of HCRIS 
data indicates that CCRs are in fact declining in ways that are not yet 
reflected in the PSF. Therefore, the commenter urged CMS to not only 
use more recent data from the PSF when finalizing a CCR adjustment 
factor, but also to address the skewing impact of older CCR data 
(namely that from 2022 and earlier) in the PSF so as to develop a CCR 
adjustment factor that reasonably projects CCRs for FY 2025.
    In addition, the commenter stated that in the past, CMS has 
deviated from its general methodology for calculating the CCR 
adjustment factor when appropriate to ensure that the CCR adjustment 
factor provides a reasonable approximation of anticipated CCR trends. 
The commenter cited the FY 2023 IPPS/LTCH final rule (87 FR 48780, 
48797) where CMS did not use its usual methodology because it would 
have produced an ``abnormally high'' CCR adjustment factor of 
approximately 1.03 and instead applied a CCR adjustment factor from the 
last 1-year period prior to the COVID-19 PHE. The commenter concluded 
that it is likewise unreasonable to assume that CCRs will continue to 
increase at the abnormally high rates seen during a period of rapid and 
significant cost increases and urged CMS to modify its method for FY 
2025 to develop a CCR adjustment factor that is consistent with 
historical pre-PHE period CCR changes and that reflects the most recent 
CCR data, which demonstrate a consistent trend of decreasing CCRs.

[[Page 69959]]

    Other commenters recommended that CMS examine its methodology more 
closely and consider making additional, temporary changes to help 
mitigate the substantial increases that are occurring in the outlier 
threshold. The commenters suggested that CMS could instead apply the FY 
2024 CCR adjustment factor in calculating the FY 2025 outlier 
threshold, which they stated would mitigate the anomalous increase. 
Another commenter suggested that CMS should keep the outlier threshold 
flat due to the increase in the threshold finalized in the FY 2024 
IPPS/LTCH PPS final rule. The commenter stated that since MS-DRGs were 
introduced back in 2007, the fixed cost outlier threshold has increased 
at a steady, gradual pace. A commenter suggested that CMS review 
methodological changes to improve base MS-DRG payment rates that would 
facilitate a decrease in the number of cases for which outlier payments 
are made on a routine basis. Another commenter stated that CMS be more 
consistent in determining the outlier threshold so there are not 
significant variations year over year. The commenter suggested that one 
alternative would be to consider establishing a new outlier baseline 
and then increasing the outlier threshold each year by the approved 
market basket percentage or CMS could implement a three-year rolling 
average for calculating the outlier threshold as a stabilizing factor. 
A commenter encouraged CMS to limit the final FY 2025 and future year 
over year increases in the outlier threshold to ensure more accurate 
and appropriate reimbursement rates across high cost cases.
    Response: We appreciate the commenters' feedback. While the 
proposed CCR adjustment factor was based on a comparison of average 
CCRs from the December 2022 and December 2023 updates of the PSF, 
consistent with our usual practice we are using more recent CCR data 
for the final rule. Specifically, for this final rule, as discussed in 
greater detail below, based on the latest data available, we calculated 
a national operating CCR adjustment factor of 1.015123, which is 
slightly over 1.0 and less than half the increase of the proposed 
factor of 1.03331 in the proposed rule.
    We agree that prior to recent years the CCRs have decreased year-
over-year, and as such the CCR adjustment factors were slightly less 
than 1.0 compared to the slightly over 1.0 value calculated for this 
final rule. In FY 2023 we did not use the factor based on the most 
recent data available at that time, stating that we believed the 
abnormally high CCR adjustment factor as compared to historical levels 
was partially due to the high number of COVID-19 cases with higher 
charges that were treated in IPPS hospitals in FY 2021. As noted by the 
commenters, there are other factors aside from COVID-19 cases, such as 
higher labor costs and inflation, that may be contributing to the 
change in average CCRs above 1.0. We acknowledge there can be variation 
in the annual changes in CCRs and charges, as noted by the commenter's 
examples. At this time, it is challenging to precisely predict the 
relative relationship between hospitals' costs and charging practices 
for the upcoming FY. It is reasonable to assume balancing older 
historical data (i.e., pre COVID-19 PHE) used to determine the CCR 
adjustment factor) with more recent data (i.e., during and post COVID-
19 PHE) to calculate the CCR adjustment factor that the resulting CCR 
adjustment factor may be slightly over 1.0 or slightly under 1.0. In 
other words, and as explained earlier, the current conditions such as 
higher labor costs and inflation were not as prevalent with the 
historical older data as the CCR adjustment factor was consistently 
under 1.0, so it is unclear at this time whether change in average CCRs 
would return to being under 1.0 or remain above 1.0. Given that the use 
of the most recent data available, after updating it for this final 
rule, results in a CCR adjustment factor that is within that reasonable 
range and that it is challenging to precisely predict the relative 
relationship between hospitals' costs and charging practices for the 
upcoming FY, we do not believe it is necessary to deviate from our 
usual practice of using the most recent data available to determine the 
CCR adjustment factor for FY 2025. We believe a national operating CCR 
adjustment factor of 1.015123, which is slightly over 1.0, used in 
conjunction with the charge inflation factor discussed below results in 
a reasonable prediction of average costs in FY 2025 for purposes of the 
outlier threshold calculation.
    With regard to the other suggestions from the commenters, as noted 
previously, section 1886(d)(5)(A)(iv) of the Act states that outlier 
payments may not be less than 5 percent nor more than 6 percent of the 
total payments projected or estimated to be made based on DRG 
prospective payment rates for discharges in that year. We believe that 
the commenters' suggestion to maintain the FY 2024 outlier fixed-loss 
cost threshold for FY 2025 or using a rolling average or limiting the 
increase in the outlier threshold would be inconsistent with the 
statute as such a threshold would not result in a projection outlier 
payments that are not less than 5 percent nor more than 6 percent of 
projected total payments for FY 2025.
    With regard to the commenter that suggested CMS review 
methodological changes to improve base MS-DRG payment rates that would 
facilitate a decrease in the number of cases for which outlier payments 
are made on a routine basis, the commenter did not provide any specific 
suggestions and we welcome suggestions from the commenter that we can 
consider for future rulemaking.
    Comment: A commenter requested that CMS consider whether it is 
appropriate to include extreme cases when calculating the threshold. 
This commenter explained that high charge cases have a significant 
impact on the threshold. The commenter stated that it examined the data 
to understand the factors that drove an increase of over 80 percent 
between FY 2017 and FY 2024, and to propose to increase the threshold 
almost an additional 15 percent for FY 2025, and stated that it 
observed that the inclusion of extreme cases in the calculation of the 
threshold, the rate of which are increasing over time, significantly 
impacts CMS' determination of the fixed-loss threshold. If this trend 
continues (that is, if the number (and proportion) of extreme cases 
continues to increase each year), the commenter stated that the impact 
of this population of cases on the threshold will likewise increase. 
Thus, the commenter recommended that CMS carefully consider what is 
causing this trend, whether the inclusion of these cases in the 
calculation of the threshold is appropriate, or whether a separate 
outlier mechanism should apply to these cases that more closely hews 
outlier payments to marginal costs.
    Response: We responded to a similar comment in prior rulemaking, 
most recently in the FY 2024 IPPS/LTCH final rule (88 FR 59352). 
Specifically, in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38526) and 
other prior rulemaking, we explained the methodology used to calculate 
the outlier threshold includes all claims to account for all different 
types of cases, including high charge cases, to ensure that CMS meets 
the 5.1 percent target. As the commenter pointed out, the volume of 
these cases continues to rise, making their impact on the threshold 
significant. We believe excluding these cases would artificially lower 
the threshold. We believe it is important to include all cases in the 
calculation of the threshold no matter how high or low

[[Page 69960]]

the charges. Including these cases with high charges lends more 
accuracy to the threshold, as these cases have an impact on the 
threshold and continue to rise in volume. Therefore, we believe the 
inclusion of the high-cost outlier cases in the calculation of the 
outlier threshold is appropriate.
    Also, as we explained in the FY 2024 IPPS/LTCH final rule (88 FR 
59352). in response to commenter's recommendation that CMS consider 
whether a separate outlier mechanism should apply to these cases that 
more closely hews outlier payments to marginal costs, we believe the 
current calculation of outlier payment meets these goals. If a case has 
high charges that once reduced to cost significantly exceed the payment 
plus the threshold, then the case will receive a larger outlier payment 
reflective of the higher costs. Therefore, we believe the current 
payment system provides such a mechanism.
    Comment: A commenter noted the final fixed-loss threshold 
established by CMS has consistently been lower than the threshold set 
forth in the proposed rule, and the variance between the proposed and 
final thresholds has generally exceeded 4 percent. The commenter 
emphasized that this demonstrates that CMS must ordinarily use the most 
recent data to appropriately calculate the outlier threshold.
    Response: We responded to similar comments in the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50378 through 50379) and refer readers to that 
rule for our response. We reiterate that CMS' historical policy is to 
use the best available data when setting the payment rates and factors 
in both the proposed and final rules. Sometimes there are variables 
that change between the proposed and final rule as result of the 
availability of more recent data, such as the charge inflation factor 
and the CCR adjustment factors that can cause fluctuations in the 
threshold amount. Other factors such as changes to the wage indexes and 
market basket increase can also cause the outlier fixed loss cost 
threshold to fluctuate between the proposed rule and the final rule 
each year. We use the latest data that is available at the time of the 
development of the proposed and final rules, such as the most recent 
update of MedPAR claims data and CCRs from the most recent update of 
the PSF.
    After consideration of the public comments we received and for the 
reasons discussed, we are finalizing to use the same methodology we 
proposed, without modifications, to calculate the final outlier 
threshold for FY 2025.
    For the FY 2025 final outlier threshold, we used the March 2023 
MedPAR file of FY 2022 (October 1, 2021 through September 30, 2022) 
charge data (released in conjunction with the FY 2024 IPPS/LTCH PPS 
final rule) and the March 2024 MedPAR file of FY 2023 (October 1, 2022 
through September 30, 2023) charge data (released in conjunction with 
this FY 2025 IPPS/LTCH PPS final rule) to determine the charge 
inflation factor. To compute the 1-year average annual rate-of-change 
in charges per case, we compared the average covered charge per case of 
$ 82,677.79 ($577,981,065,082/6,990,766 cases) from October 1, 2021 
through September 31, 2022, to the average covered charge per case of $ 
86,082.41 ($596,812,542,644/6,933,037 cases) from October 1, 2021 
through September 31, 2023. This rate-of-change was 4.1 percent 
(1.04118) or 8.4 percent (1.08406) over 2 years. The billed charges are 
obtained from the claims from the MedPAR file and inflated by the 
inflation factor specified previously.
    As we have done in the past, we are establishing the FY 2025 
outlier threshold using hospital CCRs from the March 2024 update to the 
Provider-Specific File (PSF)--the most recent available data at the 
time of the development of the final rule. We applied the following 
edits to providers' CCRs in the PSF. We believe these edits are 
appropriate to accurately model the outlier threshold. We first search 
for Indian Health Service providers and those providers assigned the 
statewide average CCR from the current fiscal year. We then replaced 
these CCRs with the statewide average CCR for the upcoming fiscal year. 
We also assigned the statewide average CCR (for the upcoming fiscal 
year) to those providers that have no value in the CCR field in the PSF 
or whose CCRs exceed the ceilings described later in this section (3.0 
standard deviations from the mean of the log distribution of CCRs for 
all hospitals). We did not apply the adjustment factors described later 
in this section to hospitals assigned the statewide average CCR. For FY 
2025, we also are continuing to apply an adjustment factor to the CCRs 
to account for cost and charge inflation (as explained later in this 
section).
    For this final rule, as we have done since FY 2014 (with the 
exception of FYs 2022 and 2023, as discussed in the FY 2022 and FY 2023 
IPPS/LTCH PPS proposed and final rules), we are adjusting the CCRs from 
the March 2024 update of the PSF by comparing the percentage change in 
the national average case-weighted operating CCR and capital CCR from 
the March 2023 update of the PSF to the national average case-weighted 
operating CCR and capital CCR from the March 2024 update of the PSF. We 
note that we used total transfer-adjusted cases from FY 2023 to 
determine the national average case weighted CCRs for both sides of the 
comparison. As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50979), we believe that it is appropriate to use the same case count on 
both sides of the comparison because this will produce the true 
percentage change in the average case-weighted operating and capital 
CCR from one year to the next without any effect from a change in case 
count on different sides of the comparison.
    Using the methodology noted earlier, for this final rule, we 
calculated a March 2023 operating national average case-weighted CCR of 
0.24849 and a March 2024 operating national average case-weighted CCR 
of 0.252248. We then calculated the percentage change between the two 
national operating case-weighted CCRs by subtracting the March 2023 
operating national average case weighted CCR from the March 2024 
operating national average case-weighted CCR and then dividing the 
result by the March 2023 national operating average case-weighted CCR. 
This resulted in a national operating CCR adjustment factor of 
1.015123.
    We used the same methodology earlier to adjust the capital CCRs. 
Specifically, for this final rule, we calculated a March 2023 capital 
national average case-weighted CCR of 0.017716 and a March 2024 capital 
national average case-weighted CCR of 0.017666. We then calculated the 
percentage change between the two national capital case weighted CCRs 
by subtracting the March 2023 capital national average case-weighted 
CCR from the March 2024 capital national average case-weighted CCR and 
then dividing the result by the March 2023 capital national average 
case-weighted CCR. This resulted in a national capital CCR adjustment 
factor of 0.997178.
    As discussed previously, for purposes of estimating the final 
outlier threshold for FY 2025, we used a wage index that reflects the 
policies discussed in this final rule. This includes the following:
     Application of the rural and imputed floor adjustment.
     The frontier State floor adjustments in accordance with 
section 10324(a) of the Affordable Care Act.
     The out-migration adjustment as added by section 505 of 
Public Law 108-173.
     Incorporating the FY 2025 low wage index hospital policy 
(described in

[[Page 69961]]

section III.G.5 of the preamble of this final rule) for hospitals with 
a wage index value below the 25th percentile, where the increase in the 
wage index value for these hospitals would be equal to half the 
difference between the otherwise applicable final wage index value for 
a year for that hospital and the 25th percentile wage index value for 
that year across all hospitals.
     Incorporating our policy (described in section III.6. of 
the preamble of this final rule) to apply a 5-percent cap on any 
decrease to a hospital's wage index from its wage index in the prior 
FY, regardless of the circumstances causing the decline.
    As stated previously, if we did not take the above into account, 
into our estimate of total FY 2025 payments would be too low, and, as a 
result, our outlier threshold would be too high, such that estimated 
outlier payments would be less than our projected 5.14 percent of total 
payments (which reflects the estimate of outlier reconciliation 
calculated for this final rule).
     We excluded the hospital VBP payment adjustments and the 
hospital readmissions payment adjustments from the calculation of the 
outlier fixed-loss cost threshold.
     We used the estimated per-discharge uncompensated care 
payments to hospitals eligible for the uncompensated care payment for 
all cases in the calculation of the outlier fixed-loss cost threshold 
methodology.
     Based on the policy finalized, as previously described, we 
used the estimated per-discharge supplemental payments to hospitals 
eligible for the supplemental payment for all cases in the calculation 
of the proposed outlier fixed-loss cost threshold methodology.
    Using this methodology, we used the formula described in section 
I.C.1. of this Addendum to simulate and calculate the Federal payment 
rate and outlier payments for all claims. In addition, as described in 
the earlier section to this Addendum, we are finalizing to incorporate 
an estimate of FY 2025 outlier reconciliation in the methodology for 
determining the outlier threshold. As noted previously, for this final 
rule, the ratio of outlier reconciliation dollars to total Federal 
Payments (Step 4) is a negative 4.1994 percent, which, when rounded to 
the second digit, is -0.04 percent. Therefore, for FY 2025, we 
incorporated a projection of outlier reconciliation dollars by 
targeting an outlier threshold at 5.14 percent [5.1 percent-(-.04 
percent)]. Under this approach, we determined a threshold of $ 46,152 
and calculated total outlier payments of $ 4,349,520,041and total 
operating Federal payments of $ 80,269,760,637. We then divided total 
outlier payments by total operating Federal payments plus total outlier 
payments and determined that this threshold matched with the 5.14 
percent target, which incorporated an estimate of outlier 
reconciliation in the determination of the outlier threshold (as 
discussed in more detail in the previous section of this Addendum). We 
note that, if calculated without applying our methodology for 
incorporating an estimate of outlier reconciliation in the 
determination of the outlier threshold, the threshold would be $46,502. 
We are finalizing an outlier fixed-loss cost threshold for FY 2025 
equal to the prospective payment rate for the MS-DRG, plus any IME, 
empirically justified Medicare DSH payments, estimated uncompensated 
care payment, estimated supplemental payment for eligible IHS/Tribal 
hospitals and Puerto Rico hospitals, and any add on payments for new 
technology, plus $46,152.
(3) Other Changes Concerning Outliers
    As stated in the FY 1994 IPPS final rule (58 FR 46348), we 
establish an outlier threshold that is applicable to both hospital 
inpatient operating costs and hospital inpatient capital-related costs. 
When we modeled the combined operating and capital outlier payments, we 
found that using a common threshold resulted in a higher percentage of 
outlier payments for capital-related costs than for operating costs. We 
project that the threshold for FY 2025 (which reflects our methodology 
to incorporate an estimate of operating outlier reconciliation) would 
result in outlier payments that would equal 5.1 percent of operating 
DRG payments and we estimate that capital outlier payments would equal 
4.23 percent of capital payments based on the Federal rate (which 
reflects our methodology discussed previously to incorporate an 
estimate of capital outlier reconciliation).
    In accordance with section 1886(d)(3)(B) of the Act and as 
discussed previously, we reduce the FY 2025 standardized amount by 5.1 
percent to account for the projected proportion of payments paid as 
outliers.
    The outlier adjustment factors that would be applied to the 
operating standardized amount and capital Federal rate based on the FY 
2025 outlier threshold are as follows:
[GRAPHIC] [TIFF OMITTED] TR28AU24.338

    We are applying the outlier adjustment factors to the FY 2025 
payment rates after removing the effects of the FY 2024 outlier 
adjustment factors on the standardized amount.
    To determine whether a case qualifies for outlier payments, we 
currently apply hospital-specific CCRs to the total covered charges for 
the case. Estimated operating and capital costs for the case are 
calculated separately by applying separate operating and capital CCRs. 
These costs are then combined and compared with the outlier fixed-loss 
cost threshold.
    Under our current policy at Sec.  412.84, we calculate operating 
and capital CCR ceilings and assign a statewide average CCR for 
hospitals whose CCRs exceed 3.0 standard deviations from the mean of 
the log distribution of CCRs for all hospitals. Based on this 
calculation, for hospitals for which the MAC computes operating CCRs 
greater than 1.283 or capital CCRs greater than 0.132 or hospitals for 
which the MAC is unable to calculate a CCR (as described under Sec.  
412.84(i)(3) of our regulations), statewide average CCRs are used to 
determine whether a hospital qualifies for outlier payments. Table 8A 
listed in section VI. of this Addendum (and available via the internet 
on the CMS website) contains the statewide average operating CCRs for 
urban hospitals and for rural hospitals for which the MAC is unable to 
compute a hospital-specific CCR within the range previously specified. 
These statewide average ratios would be effective for discharges 
occurring on or after October 1, 2024

[[Page 69962]]

and would replace the statewide average ratios from the prior fiscal 
year. Table 8B listed in section VI. of this Addendum (and available 
via the internet on the CMS website) contains the comparable statewide 
average capital CCRs. As previously stated, the CCRs in Tables 8A and 
8B would be used during FY 2025 when hospital-specific CCRs based on 
the latest settled cost report either are not available or are outside 
the range noted previously. Table 8C listed in section VI. of this 
Addendum (and available via the internet on the CMS website) contains 
the statewide average total CCRs used under the LTCH PPS as discussed 
in section V. of this Addendum.
    We finally note that section 20.1.2 of chapter three of the 
Medicare Claims Processing Manual (on the internet at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf) covers an array of topics, including CCRs, 
reconciliation, and the time value of money. Per the regulations at 42 
CFR 412.84(i)(1), a hospital may request that its MAC use a different 
(higher or lower) cost-to-charge ratio based on substantial evidence 
presented by the hospital. We encourage hospitals that are assigned the 
statewide average operating and/or capital CCRs to work with their MAC 
on a possible alternative operating and/or capital CCR as explained in 
the manual. Use of an alternative CCR developed by the hospital in 
conjunction with the MAC can avoid possible overpayments or 
underpayments at cost report settlement, thereby ensuring better 
accuracy when making outlier payments and negating the need for outlier 
reconciliation. We also note that a hospital may request an alternative 
operating or capital CCR at any time as long as the guidelines of the 
manual are followed. In addition, the manual outlines the outlier 
reconciliation process for hospitals and Medicare contractors. We refer 
hospitals to the manual instructions for complete details on outlier 
reconciliation.
(4) FY 2023 Outlier Payments
    Our current estimate, using available FY 2023 claims data, is that 
actual outlier payments for FY 2023 were approximately 5.27 percent of 
actual total MS-DRG payments. Therefore, the data indicate that, for FY 
2023, the percentage of actual outlier payments relative to actual 
total payments is higher than we projected for FY 2023. Consistent with 
the policy and statutory interpretation we have maintained since the 
inception of the IPPS, we do not make retroactive adjustments to 
outlier payments to ensure that total outlier payments for FY 2023 are 
equal to 5.1 percent of total MS-DRG payments. As explained in the FY 
2003 Outlier final rule (68 FR 34502), if we were to make retroactive 
adjustments to all outlier payments to ensure total payments are 5.1 
percent of MS-DRG payments (by retroactively adjusting outlier 
payments), we would be removing the important aspect of the prospective 
nature of the IPPS. Because such an across-the-board adjustment would 
either lead to more or less outlier payments for all hospitals, 
hospitals would no longer be able to reliably approximate their payment 
for a patient while the patient is still hospitalized. We believe it 
would be neither necessary nor appropriate to make such an aggregate 
retroactive adjustment. Furthermore, we believe it is consistent with 
the statutory language at section 1886(d)(5)(A)(iv) of the Act not to 
make retroactive adjustments to outlier payments. This section states 
that outlier payments be equal to or greater than 5 percent and less 
than or equal to 6 percent of projected or estimated (not actual) MS-
DRG payments. We believe that an important goal of a PPS is 
predictability. Therefore, we believe that the fixed-loss outlier 
threshold should be projected based on the best available historical 
data and should not be adjusted retroactively. A retroactive change to 
the fixed-loss outlier threshold would affect all hospitals subject to 
the IPPS, thereby undercutting the predictability of the system as a 
whole.
    We note that, because the MedPAR claims data for the entire FY 2024 
period would not be available until after September 30, 2024, we are 
unable to provide an estimate of actual outlier payments for FY 2024 
based on FY 2024 claims data in this final rule. We will provide an 
estimate of actual FY 2024 outlier payments in the FY 2026 IPPS/LTCH 
PPS proposed rule.
5. FY 2025 Standardized Amount
    The adjusted standardized amount is divided into labor-related and 
nonlabor-related portions. Tables 1A and 1B listed and published in 
section VI. of this Addendum (and available via the internet on the CMS 
website) contain the national standardized amounts that we are applying 
to all hospitals, except hospitals located in Puerto Rico, for FY 2025. 
The standardized amount for hospitals in Puerto Rico is shown in Table 
1C listed and published in section VI. of this Addendum (and available 
via the internet on the CMS website). The amounts shown in Tables 1A 
and 1B differ only in that the labor-related share applied to the 
standardized amounts in Table 1A is 67.6 percent, and the labor-related 
share applied to the standardized amounts in Table 1B is 62 percent. In 
accordance with sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the 
Act, we are applying a labor-related share of 62 percent, unless 
application of that percentage would result in lower payments to a 
hospital than would otherwise be made. In effect, the statutory 
provision means that we would apply a labor-related share of 62 percent 
for all hospitals whose wage indexes are less than or equal to 1.0000.
    In addition, Tables 1A and 1B include the standardized amounts 
reflecting the applicable percentage increases for FY 2025.
    The labor-related and nonlabor-related portions of the national 
average standardized amounts for Puerto Rico hospitals for FY 2025 are 
set forth in Table 1C listed and published in section VI. of this 
Addendum (and available via the internet on the CMS website). 
Similarly, section 1886(d)(9)(C)(iv) of the Act, as amended by section 
403(b) of Public Law 108-173, provides that the labor-related share for 
hospitals located in Puerto Rico be 62 percent, unless the application 
of that percentage would result in lower payments to the hospital.
    The following table illustrates the changes from the FY 2024 
national standardized amounts to the FY 2025 national standardized 
amounts. The second through fifth columns display the changes from the 
FY 2024 standardized amounts for each applicable FY 2025 standardized 
amount. The first row of the table shows the updated (through FY 2024) 
average standardized amount after restoring the FY 2024 offsets for 
outlier payments, geographic reclassification, rural demonstration, 
lowest quartile, and wage index cap policy budget neutrality. The MS-
DRG reclassification and recalibration wage index, and stem cell 
acquisition budget neutrality factors are cumulative (that is, we have 
not restored the offsets). Accordingly, those FY 2024 adjustment 
factors have not been removed from the base rate in the following 
table. Additionally, for FY 2025 we have applied the budget neutrality 
factors for the lowest quartile hospital policy, described previously.

[[Page 69963]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.339

B. Adjustments for Area Wage Levels and Cost-of-Living

    Tables 1A through 1C, as published in section VI. of this Addendum 
(and available via the internet on the CMS website), contain the labor-
related and nonlabor-related shares that we are using to calculate the 
prospective payment rates for hospitals located in the 50 States, the 
District of Columbia, and Puerto Rico for FY 2025. This section 
addresses two types of adjustments to the standardized amounts that are 
made in determining the prospective payment rates as described in this 
Addendum.
1. Adjustment for Area Wage Levels
    Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require 
that we make an adjustment to the labor-related portion of the national 
prospective payment rate to account for area differences in hospital 
wage levels. This adjustment is made by multiplying the labor-related 
portion of the adjusted standardized amounts by the appropriate wage 
index for the area in which the hospital is located. For FY 2025, as 
discussed in section IV.B.3. of the preamble of this final rule, we are 
applying a labor-related share of 67.6 percent for the national 
standardized amounts for all IPPS hospitals (including hospitals in 
Puerto Rico) that have a wage index value that is greater than 1.0000. 
Consistent with section 1886(d)(3)(E) of the Act, we are applying the 
wage index to a labor-related share of 62 percent of the national 
standardized amount for all IPPS hospitals (including hospitals in 
Puerto Rico) whose wage index values are less than or equal to 1.0000. 
In section III. of the preamble of this final rule, we discuss the data 
and methodology for the FY 2025 wage index.

[[Page 69964]]

2. Adjustment for Cost-of-Living in Alaska and Hawaii
    Section 1886(d)(5)(H) of the Act provides discretionary authority 
to the Secretary to make adjustments as the Secretary deems appropriate 
to take into account the unique circumstances of hospitals located in 
Alaska and Hawaii. Higher labor-related costs for these two States are 
taken into account in the adjustment for area wages described 
previously. To account for higher non-labor-related costs for these two 
States, we multiply the nonlabor-related portion of the standardized 
amount for hospitals in Alaska and Hawaii by an adjustment factor.
    In the FY 2013 IPPS/LTCH PPS final rule, we established a 
methodology to update the COLA factors for Alaska and Hawaii that were 
published by the U.S. Office of Personnel Management (OPM) every 4 
years (coinciding with the update to the labor-related share of the 
IPPS market basket), beginning in FY 2014. We refer readers to the FY 
2013 IPPS/LTCH PPS proposed and final rules for additional background 
and a detailed description of this methodology (77 FR 28145 through 
28146 and 77 FR 53700 through 53701, respectively). For FY 2022, in the 
FY 2022 IPPS/LTCH PPS final rule (86 FR 45546 through 45547), we 
updated the COLA factors published by OPM for 2009 (as these are the 
last COLA factors OPM published prior to transitioning from COLAs to 
locality pay) using the methodology that we finalized in the FY 2013 
IPPS/LTCH PPS final rule. Based on the policy finalized in the FY 2013 
IPPS/LTCH PPS final rule, we are continuing to use the same COLA 
factors in FY 2025 that were used in FY 2024 to adjust the nonlabor-
related portion of the standardized amount for hospitals located in 
Alaska and Hawaii. The following table lists the COLA factors for FY 
2025.
[GRAPHIC] [TIFF OMITTED] TR28AU24.340

    Lastly, as we finalized in the FY 2013 IPPS/LTCH PPS final rule (77 
FR 53700 and 53701), we intend to update the COLA factors at the same 
time as the update to the labor-related share of the IPPS market 
basket.

C. Calculation of the Prospective Payment Rates

1. General Formula for Calculation of the Prospective Payment Rates for 
FY 2025
    In general, the operating prospective payment rate for all 
hospitals (including hospitals in Puerto Rico) paid under the IPPS, 
except SCHs and MDHs, for FY 2025 equals the Federal rate (which 
includes uncompensated care payments). As previously discussed, section 
4102 of the Consolidated Appropriations Act, 2023 (Pub. L. 117-328), 
enacted on December 29, 2022, extended the MDH program through FY 2024 
(that is, for discharges occurring on or before September 30, 2024). 
Subsequently, section 307 of the Consolidated Appropriations Act, 2024 
(CAA, 2024) (Pub. L. 118-42), enacted on March 9, 2024, further 
extended the MDH program for discharges occurring before January 1, 
2025. Prior to enactment of the CAA, 2024, the MDH program was only to 
be in effect through the end of FY 2024. Under current law, the MDH 
program will expire for discharges on or after January 1, 2025.
    SCHs are paid based on whichever of the following rates yields the 
greatest aggregate payment:
     The Federal national rate (which, as discussed in section 
IVE. of the preamble of this final rule, includes uncompensated care 
payments).
     The updated hospital-specific rate based on FY 1982 costs 
per discharge.
     The updated hospital-specific rate based on FY 1987 costs 
per discharge.
     The updated hospital-specific rate based on FY 1996 costs 
per discharge.
     The updated hospital-specific rate based on FY 2006 costs 
per discharge to determine the rate that yields the greatest aggregate 
payment.
    The prospective payment rate for SCHs for FY 2025 equals the higher 
of the applicable Federal rate, or the hospital-specific rate as 
described later in this section. The prospective payment rate for MDHs 
for FY 2025 discharges occurring before January 1, 2025 equals the 
higher of the Federal rate, or the Federal rate plus 75 percent of the 
difference between the Federal rate and the hospital-specific rate as 
described in this section. For MDHs, the updated hospital-specific rate 
is based on FY 1982, FY 1987, or FY 2002 costs per discharge, whichever 
yields the greatest aggregate payment.
2. Operating and Capital Federal Payment Rate and Outlier Payment 
Calculation

    Note:  The formula specified in this section is used for actual 
claim payment and is also used by CMS to project the outlier 
threshold for the upcoming fiscal year. The difference is the source 
of some of the variables in the formula. For example, operating and 
capital CCRs for actual claim payment are from the PSF while CMS 
uses an adjusted CCR (as described previously) to project the 
threshold for the upcoming fiscal year. In addition,

[[Page 69965]]

charges for a claim payment are from the bill while charges to 
project the threshold are from the MedPAR data with an inflation 
factor applied to the charges (as described earlier).

    Step 1--Determine the MS-DRG and MS-DRG relative weight (from Table 
5) for each claim primarily based on the ICD-10-CM diagnosis and ICD-
10-PCS procedure codes on the claim.
    Step 2--Select the applicable average standardized amount depending 
on whether the hospital submitted qualifying quality data and is a 
meaningful EHR user, as described previously.
    Step 3--Compute the operating and capital Federal payment rate:

--Federal Payment Rate for Operating Costs = MS-DRG Relative Weight x 
[(Labor-Related Applicable Standardized Amount x Applicable CBSA Wage 
Index) + (Nonlabor-Related Applicable Standardized Amount x Cost-of-
Living Adjustment)] x (1 + IME + (DSH * 0.25))
--Federal Payment for Capital Costs = MS-DRG Relative Weight x Federal 
Capital Rate x Geographic Adjustment Fact x (l + IME + DSH)

    Step 4--Determine operating and capital costs:

--Operating Costs = (Billed Charges x Operating CCR)
--Capital Costs = (Billed Charges x Capital CCR)

    Step 5--Compute operating and capital outlier threshold (CMS 
applies a geographic adjustment to the operating and capital outlier 
threshold to account for local cost variation):

--Operating CCR to Total CCR = (Operating CCR)/(Operating CCR + Capital 
CCR)
--Operating Outlier Threshold = [Fixed Loss Threshold x ((Labor-Related 
Portion x CBSA Wage Index) + Nonlabor-Related portion)] x Operating CCR 
to Total CCR + Federal Payment with IME, DSH + Uncompensated Care 
Payment + supplemental payment for eligible IHS/Tribal hospitals and 
Puerto Rico hospitals + New Technology Add-On Payment Amount
--Capital CCR to Total CCR = (Capital CCR)/(Operating CCR + Capital 
CCR)
--Capital Outlier Threshold = (Fixed Loss Threshold x Geographic 
Adjustment Factor x Capital CCR to Total CCR) + Federal Payment with 
IME and DSH

    Step 6--Compute operating and capital outlier payments:

--Marginal Cost Factor = 0.80 or 0.90 (depending on the MS-DRG)
--Operating Outlier Payment = (Operating Costs--Operating Outlier 
Threshold) x Marginal Cost Factor
--Capital Outlier Payment = (Capital Costs--Capital Outlier Threshold) 
x Marginal Cost Factor
    The payment rate may then be further adjusted for hospitals that 
qualify for a low-volume payment adjustment under section 1886(d)(12) 
of the Act and 42 CFR 412.101(b). The base-operating DRG payment amount 
may be further adjusted by the hospital readmissions payment adjustment 
and the hospital VBP payment adjustment as described under sections 
1886(q) and 1886(o) of the Act, respectively. Payments also may be 
reduced by the 1-percent adjustment under the HAC Reduction Program as 
described in section 1886(p) of the Act. We also make new technology 
add-on payments in accordance with section 1886(d)(5)(K) and (L) of the 
Act. Finally, we add the uncompensated care payment and supplemental 
payment for eligible IHS/Tribal hospitals and Puerto Rico hospitals to 
the total claim payment amount. As noted in the previous formula, we 
take uncompensated care payments, supplemental payments for eligible 
IHS/Tribal hospitals and Puerto Rico hospitals, and new technology add-
on payments into consideration when calculating outlier payments.
3. Hospital-Specific Rate (Applicable Only to SCHs and MDHs)
a. Calculation of Hospital-Specific Rate
    Section 1886(b)(3)(C) of the Act provides that SCHs are paid based 
on whichever of the following rates yields the greatest aggregate 
payment: the Federal rate; the updated hospital-specific rate based on 
FY 1982 costs per discharge; the updated hospital-specific rate based 
on FY 1987 costs per discharge; the updated hospital-specific rate 
based on FY 1996 costs per discharge; or the updated hospital-specific 
rate based on FY 2006 costs per discharge to determine the rate that 
yields the greatest aggregate payment. As discussed previously, 
currently MDHs are paid based on the Federal national rate or, if 
higher, the Federal national rate plus 75 percent of the difference 
between the Federal national rate and the greater of the updated 
hospital-specific rates based on either FY 1982, FY 1987, or FY 2002 
costs per discharge. As noted, under current law, the MDH program is 
effective for FY 2025 discharges on or before December 31, 2024.
    For a more detailed discussion of the calculation of the hospital-
specific rates, we refer readers to the FY 1984 IPPS interim final rule 
(48 FR 39772); the April 20, 1990 final rule with comment period (55 FR 
15150); the FY 1991 IPPS final rule (55 FR 35994); and the FY 2001 IPPS 
final rule (65 FR 47082).
b. Updating the FY 1982, FY 1987, FY 1996, FY 2002 and FY 2006 
Hospital-Specific Rate for FY 2025
    Section 1886(b)(3)(B)(iv) of the Act provides that the applicable 
percentage increase applicable to the hospital-specific rates for SCHs 
and MDHs equals the applicable percentage increase set forth in section 
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all 
other hospitals subject to the IPPS). Because the Act sets the update 
factor for SCHs and MDHs equal to the update factor for all other IPPS 
hospitals, the update to the hospital-specific rates for SCHs and MDHs 
is subject to the amendments to section 1886(b)(3)(B) of the Act made 
by sections 3401(a) and 10319(a) of the Affordable Care Act. 
Accordingly, the applicable percentage increases to the hospital-
specific rates applicable to SCHs and MDHs are the following:

[[Page 69966]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.341

    For a complete discussion of the applicable percentage increase 
applied to the hospital-specific rates for SCHs and MDHs, we refer 
readers to section V.F. of the preamble of this final rule.
    In addition, because SCHs and MDHs use the same MS-DRGs as other 
hospitals when they are paid based in whole or in part on the hospital-
specific rate, the hospital-specific rate is adjusted by a budget 
neutrality factor to ensure that changes to the MS-DRG classifications 
and the recalibration of the MS-DRG relative weights are made in a 
manner so that aggregate IPPS payments are unaffected. Therefore, the 
hospital specific-rate for an SCH or MDH is adjusted by the MS-DRG 
reclassification and recalibration budget neutrality factor, as 
discussed in section III. of this Addendum and listed in the table in 
section II. of this Addendum. In addition, as discussed in section 
II.E.2.d. of the preamble this final rule and previously, we are 
applying a permanent 10-percent cap on the reduction in a MS-DRG's 
relative weight in a given fiscal year, as finalized in the FY 2023 
IPPS/LTCH PPS final rule. Because SCHs and MDHs use the same MS-DRGs as 
other hospitals when they are paid based in whole or in part on the 
hospital-specific rate, consistent with the policy adopted in the FY 
2023 IPPS/LTCH PPS final rule (87 FR 48897 through 48900 and 49432 
through 49433), the hospital specific-rate for an SCH or MDH would be 
adjusted by the MS-DRG 10-percent cap budget neutrality factor. The 
resulting rate is used in determining the payment rate that an SCH or 
MDH would receive for its discharges beginning on or after October 1, 
2024.

III. Changes to Payment Rates for Acute Care Hospital Inpatient 
Capital-Related Costs for FY 2025

    The PPS for acute care hospital inpatient capital-related costs was 
implemented for cost reporting periods beginning on or after October 1, 
1991. The basic methodology for determining Federal capital prospective 
rates is set forth in the regulations at 42 CFR 412.308 through 
412.352. In this section of this Addendum, we discuss the factors that 
we used to determine the capital Federal rate for FY 2025, which would 
be effective for discharges occurring on or after October 1, 2024.
    All hospitals (except ``new'' hospitals under Sec.  412.304(c)(2)) 
are paid based on the capital Federal rate. We annually update the 
capital standard Federal rate, as provided in Sec.  412.308(c)(1), to 
account for capital input price increases and other factors. The 
regulations at Sec.  412.308(c)(2) also provide that the capital 
Federal rate be adjusted annually by a factor equal to the estimated 
proportion of outlier payments under the capital Federal rate to total 
capital payments under the capital Federal rate. In addition, Sec.  
412.308(c)(3) requires that the capital Federal rate be reduced by an 
adjustment factor equal to the estimated proportion of payments for 
exceptions under Sec.  412.348. (We note that, as discussed in the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53705), there is generally no 
longer a need for an exceptions payment adjustment factor.) However, in 
limited circumstances, an additional payment exception for 
extraordinary circumstances is provided for under Sec.  412.348(f) for 
qualifying hospitals. Therefore, in accordance with Sec.  
412.308(c)(3), an exceptions payment adjustment factor may need to be 
applied if such payments are made. Section 412.308(c)(4)(ii) requires 
that the capital standard Federal rate be adjusted so that the effects 
of the annual DRG reclassification and the recalibration of DRG weights 
and changes in the geographic adjustment factor (GAF) are budget 
neutral.
    Section 412.374 provides for payments to hospitals located in 
Puerto Rico under the IPPS for acute care hospital inpatient capital-
related costs, which currently specifies capital IPPS payments to 
hospitals located in Puerto Rico are based on 100 percent of the 
Federal rate.

A. Determination of the Federal Hospital Inpatient Capital-Related 
Prospective Payment Rate Update for FY 2025

    In the discussion that follows, we explain the factors that we used 
to determine the capital Federal rate for FY 2025. In particular, we 
explain why the FY 2025 capital Federal rate will increase 
approximately 1.33 percent, compared to the FY 2024 capital Federal 
rate. As discussed in the impact analysis in Appendix A to this final 
rule, we estimate that capital payments per discharge will increase 
approximately 2.8 percent during that same period. Because capital 
payments constitute approximately 10 percent of hospital payments, a 1-
percent change in the capital Federal rate yields only approximately a 
0.1 percent change in actual payments to hospitals.
1. Projected Capital Standard Federal Rate Update
    Under Sec.  412.308(c)(1), the capital standard Federal rate is 
updated on the basis of an analytical framework that takes into account 
changes in a capital input price index (CIPI) and several other policy 
adjustment factors. Specifically, we adjust the projected CIPI rate of 
change, as appropriate, each year for case-mix index-related changes, 
for intensity, and for errors in previous CIPI forecasts. The update 
factor for FY 2025 under that framework is 3.1 percent based on a 
projected 2.6 percent increase in the 2018-based CIPI, a 0.0 percentage 
point adjustment for intensity, a 0.0 percentage point adjustment for 
case-mix, a 0.0 percentage point adjustment for the DRG 
reclassification and recalibration, and a forecast error correction of 
0.5 percentage point. As discussed in section III.C. of this Addendum, 
we continue to believe that the CIPI is the most appropriate input 
price index for capital costs to measure capital price

[[Page 69967]]

changes in a given year. We also explain the basis for the FY 2025 CIPI 
projection in that same section of this Addendum. In this final rule, 
we describe the policy adjustments that we applied in the update 
framework for FY 2025.
    The case-mix index is the measure of the average DRG weight for 
cases paid under the IPPS. Because the DRG weight determines the 
prospective payment for each case, any percentage increase in the case-
mix index corresponds to an equal percentage increase in hospital 
payments.
    The case-mix index can change for any of several reasons--
     The average resource use of Medicare patient changes 
(``real'' case-mix change);
     Changes in hospital documentation and coding of patient 
records result in higher-weighted DRG assignments (``coding effects''); 
or
     The annual DRG reclassification and recalibration changes 
may not be budget neutral (``reclassification effect'').
    We define real case-mix change as actual changes in the mix (and 
resource requirements) of Medicare patients, as opposed to changes in 
documentation and coding behavior that result in assignment of cases to 
higher-weighted DRGs, but do not reflect higher resource requirements. 
The capital update framework includes the same case-mix index 
adjustment used in the former operating IPPS update framework (as 
discussed in the May 18, 2004 IPPS proposed rule for FY 2005 (69 FR 
28816)). (We no longer use an update framework to make a recommendation 
for updating the operating IPPS standardized amounts, as discussed in 
section II. of appendix B to the FY 2006 IPPS final rule (70 FR 
47707).)
    For FY 2025, we are projecting a 0.5 percent total increase in the 
case-mix index. We estimated that the real case-mix increase would 
equal 0.5 percent for FY 2025. The net adjustment for change in case-
mix is the difference between the projected real increases in case mix 
and the projected total increase in case mix. Therefore, as proposed, 
the net adjustment for case-mix change in FY 2025 is 0.0 percentage 
point.
    The capital update framework also contains an adjustment for the 
effects of DRG reclassification and recalibration. This adjustment is 
intended to remove the effect on total payments of prior year's changes 
to the DRG classifications and relative weights, to retain budget 
neutrality for all case-mix index-related changes other than those due 
to patient severity of illness. Due to the lag time in the availability 
of data, there is a 2-year lag in data used to determine the adjustment 
for the effects of DRG reclassification and recalibration. For example, 
for this final rule, we have the FY 2023 MedPAR claims data available 
to evaluate the effects of the FY 2023 DRG reclassification and 
recalibration as part of our update for FY 2025. We assume for purposes 
of this adjustment, that the estimate of FY 2023 DRG reclassification 
and recalibration would result in no change in the case-mix when 
compared with the case mix index that would have resulted if we had not 
made the reclassification and recalibration changes to the DRGs. 
Therefore, as proposed, we are making a 0.0 percentage point adjustment 
for reclassification and recalibration in the update framework for FY 
2025.
    The capital update framework also contains an adjustment for 
forecast error. The input price index forecast is based on historical 
trends and relationships ascertainable at the time the update factor is 
established for the upcoming year. In any given year, there may be 
unanticipated price fluctuations that may result in differences between 
the actual increase in prices and the forecast used in calculating the 
update factors. In setting a prospective payment rate under the 
framework, we make an adjustment for forecast error only if our 
estimate of the change in the capital input price index for any year is 
greater than 0.25 percentage point in absolute terms. There is a 2-year 
lag between the forecast and the availability of data to develop a 
measurement of the forecast error. Historically, when a forecast error 
of the CIPI is greater than 0.25 percentage point in absolute terms, it 
is reflected in the update recommended under this framework. A forecast 
error of 0.5 percentage point was calculated for the FY 2023 update, 
for which there are historical data. That is, current historical data 
indicate that the forecasted FY 2023 CIPI increase (2.5 percent) used 
in calculating the FY 2023 update factor is 0.5 percentage point lower 
than actual realized price increases (3.0 percent). As this exceeds the 
0.25 percentage point threshold, we are making an adjustment of 0.5 
percentage point for the FY 2023 forecast error in the update for FY 
2025.
    Under the capital IPPS update framework, we also make an adjustment 
for changes in intensity. Historically, we calculate this adjustment 
using the same methodology and data that were used in the past under 
the framework for operating IPPS. The intensity factor for the 
operating update framework reflects how hospital services are utilized 
to produce the final product, that is, the discharge. This component 
accounts for changes in the use of quality-enhancing services, for 
changes within DRG severity, and for expected modification of practice 
patterns to remove noncost-effective services. Our intensity measure is 
based on a 5-year average.
    We calculate case-mix constant intensity as the change in total 
cost per discharge, adjusted for price level changes (the CPI for 
hospital and related services) and changes in real case-mix. Without 
reliable estimates of the proportions of the overall annual intensity 
changes that are due, respectively, to ineffective practice patterns 
and the combination of quality-enhancing new technologies and 
complexity within the DRG system, we assume that one-half of the annual 
change is due to each of these factors. Thus, the capital update 
framework provides an add-on to the input price index rate of increase 
of one-half of the estimated annual increase in intensity, to allow for 
increases within DRG severity and the adoption of quality-enhancing 
technology.
    In this final rule, as proposed, we are continuing to use a 
Medicare-specific intensity measure that is based on a 5-year adjusted 
average of cost per discharge for FY 2025 (we refer readers to the FY 
2011 IPPS/LTCH PPS final rule (75 FR 0436) for a full description of 
our Medicare-specific intensity measure). Specifically, for FY 2025, we 
are using an intensity measure that is based on an average of cost-per-
discharge data from the 5-year period beginning with FY 2018 and 
extending through FY 2022. Based on these data, we estimated that case-
mix constant intensity declined during FYs 2018 through 2022. In the 
past, when we found intensity to be declining, we believed a zero 
(rather than a negative) intensity adjustment was appropriate. 
Consistent with this approach, because we estimated that intensity 
declined during that 5-year period, we believe it is appropriate to 
continue to apply a zero-intensity adjustment for FY 2025. Therefore, 
as proposed, we are making a 0.0 percentage point adjustment for 
intensity in the update for FY 2025.
    Earlier, we described the basis of the components we used to 
develop the 3.1 percent capital update factor under the capital update 
framework for FY 2025, as shown in the following table.

[[Page 69968]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.342

2. Outlier Payment Adjustment Factor
    Section 412.312(c) establishes a unified outlier payment 
methodology for inpatient operating and inpatient capital-related 
costs. A shared threshold is used to identify outlier cases for both 
inpatient operating and inpatient capital-related payments. Section 
412.308(c)(2) provides that the standard Federal rate for inpatient 
capital-related costs be reduced by an adjustment factor equal to the 
estimated proportion of capital-related outlier payments to total 
inpatient capital-related PPS payments. The outlier threshold is set so 
that operating outlier payments are projected to be 5.1 percent of 
total operating IPPS DRG payments. For FY 2025, as proposed, we 
incorporated the impact of estimated operating outlier reconciliation 
payment amounts into the outlier threshold model. (For more details on 
our incorporation of the estimated operating outlier reconciliation 
payment amounts into the outlier threshold model, including 
modifications to our methodology to reflect the estimate of operating 
outlier reconciliation payment amounts under the new criteria which 
expands the scope of cost reports identified for outlier reconciliation 
approval in FY 2025, see section II.A.4.i. of this Addendum to this 
final rule.)
    For FY 2024, we estimated that outlier payments for capital-related 
PPS payments will equal 4.02 percent of inpatient capital-related 
payments based on the capital Federal rate. Based on the threshold 
discussed in section II.A. of this Addendum, we estimate that prior to 
taking into account projected capital outlier reconciliation payments, 
outlier payments for capital-related costs will equal 4.26 percent of 
inpatient capital-related payments based on the capital Federal rate in 
FY 2025. Using the methodology outlined in section II.A.4.i. of this 
Addendum, we estimate that taking into account projected capital 
outlier reconciliation payments will decrease the estimated percentage 
of FY 2025 capital outlier payments by 0.03 percent. Therefore, 
accounting for estimated capital outlier reconciliation, the estimated 
outlier payments for capital-related PPS payments will equal 4.23 
percent (4.26 percent-0.03 percent) of inpatient capital-related 
payments based on the capital Federal rate in FY 2025. Accordingly, we 
applied an outlier adjustment factor of 0.9577 in determining the 
capital Federal rate for FY 2025. Thus, we estimate that the percentage 
of capital outlier payments to total capital Federal rate payments for 
FY 2025 will be higher than the percentage we estimated for FY 2024. 
(For more details on our methodology for incorporating the impact of 
estimated capital outlier reconciliation payment amounts into the 
calculation of the capital outlier adjustment factor for FY 2025, 
including modifications made to our methodology to reflect the estimate 
of capital outlier reconciliation payment amounts under the new 
criteria which expands the scope of cost reports identified for outlier 
reconciliation approval in FY 2025, see section II.A.4.i. of this 
Addendum to this final rule.)
    The outlier reduction factors are not built permanently into the 
capital rates; that is, they are not applied cumulatively in 
determining the capital Federal rate. The FY 2025 outlier adjustment of 
0.9577 is a -0.22 percent change from the FY 2024 outlier adjustment of 
0.9598. Therefore, the net change in the outlier adjustment to the 
capital Federal rate for FY 2024 is 0.9978 (0.9577/0.9598) so that the 
outlier adjustment will decrease the FY 2025 capital Federal rate by 
approximately -0.22 percent compared to the FY 2024 outlier adjustment.
3. Budget Neutrality Adjustment Factor for Changes in DRG 
Classifications and Weights and the GAF
    Section 412.308(c)(4)(ii) requires that the capital Federal rate be 
adjusted so that aggregate payments for the fiscal year based on the 
capital Federal rate, after any changes resulting from the annual DRG 
reclassification and recalibration and changes in the GAF, are 
projected to equal aggregate payments that would have been made on the 
basis of the capital Federal rate without such changes.
    As discussed in section III.G.5. of the preamble of this final 
rule, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42325 through 
42339), we finalized a policy to help reduce wage index disparities 
between high and low wage index hospitals by increasing the wage index 
values for hospitals with a wage index value below the 25th percentile 
wage index. We stated that this policy would be effective for at least 
4 years, beginning in FY 2020. This policy was applied in FYs 2020 
through 2024, and we are finalizing our proposal to continue to apply 
this policy for at least 3 more years, beginning in FY 2025. We note 
that the FY 2020 low wage index hospital policy and the related budget 
neutrality adjustment are the subject of pending litigation in multiple 
courts. On July 23, 2024, the Court of Appeals for the D.C. Circuit 
held that the Secretary lacked authority under 1886(d)(3)(E) or 
1886(d)(5)(I)(i) of the Act to adopt the low wage index hospital policy 
for FY 2020, and that the policy and related budget neutrality 
adjustment must be vacated. Bridgeport Hosp. v. Becerra, Nos. 22-5249, 
22-5269, 2024 WL 3504407, at *7-*8 & n.6 (D.C. Cir. July 23, 2024). As 
of the date of this Rule's publication, the time to seek further review 
of the D.C. Circuit's decision in Bridgeport Hospital has not expired. 
See Fed. R. App. P. 40(a)(1). The government is evaluating the

[[Page 69969]]

decision and considering options for next steps.
    In addition, beginning in FY 2023, we finalized a permanent 5-
percent cap on any decrease to a hospital's wage index from its wage 
index in the prior FY regardless of the circumstances causing the 
decline. That is, under this policy, a hospital's wage index value 
would not be less than 95 percent of its prior year value (87 FR 49018 
through 49021).
    We have established a 2-step methodology for computing the budget 
neutrality factor for changes in the GAFs in light of the effect of 
those wage index changes on the GAFs. In the first step, we first 
calculate a factor to ensure budget neutrality for changes to the GAFs 
due to the update to the wage data, wage index reclassifications and 
redesignations, and application of the rural floor policy, consistent 
with our historical GAF budget neutrality factor methodology. In the 
second step, we calculate a factor to ensure budget neutrality for 
changes to the GAFs due to our policy to increase the wage index for 
hospitals with a wage index value below the 25th percentile wage index, 
which will continue in FY 2025, and our policy to place a 5-percent cap 
on any decrease in a hospital's wage index from the hospital's final 
wage index in the prior fiscal year. In this section, we refer to the 
policy that we applied in FYs 2020 through FY 2024 and continue to 
apply in FY 2025, of increasing the wage index for hospitals with a 
wage index value below the 25th percentile wage index, as the lowest 
quartile hospital wage index adjustment (also known as low wage index 
hospital policy). We refer to our policy to place a 5-percent cap on 
any decrease in a hospital's wage index from the hospital's final wage 
index in the prior fiscal year as the 5-percent cap on wage index 
decreases policy.
    The budget neutrality factors applied for changes to the GAFs due 
to the update to the wage data, wage index reclassifications and 
redesignations, and application of the rural floor policy are built 
permanently into the capital Federal rate; that is, they are applied 
cumulatively in determining the capital Federal rate. However, the 
budget neutrality factor for the lowest quartile hospital wage index 
adjustment and the 5-percent cap on wage index decreases policy is not 
permanently built into the capital Federal rate. This is because the 
GAFs with the lowest quartile hospital wage index adjustment and the 5-
percent cap on wage index decreases policy applied from the previous 
year are not used in the budget neutrality factor calculations for the 
current year. Accordingly, and consistent with this approach, prior to 
calculating the GAF budget neutrality factors for FY 2025, we removed 
from the capital Federal rate the budget neutrality factor applied in 
FY 2024 for the lowest quartile hospital wage index adjustment and the 
5-percent cap on wage index decreases policy. Specifically, we divided 
the capital Federal rate by the FY 2024 budget neutrality factor of 
0.9964 (88 FR 59362). We refer the reader to the FY 2022 IPPS/LTCH PPS 
final rule (86 FR 45552) for additional discussion on our policy of 
removing the prior year budget neutrality factor for the lowest 
quartile hospital wage index adjustment and the 5-percent cap on wage 
index decreases from the capital Federal rate.
    In light of the changes to the wage index and other wage index 
policies for FY 2025 discussed previously, which directly affect the 
GAF, we continue to compute a budget neutrality adjustment for changes 
in the GAFs in two steps. We discuss our 2-step calculation of the GAF 
budget neutrality factors for FY 2025 as follows.
    To determine the GAF budget neutrality factors for FY 2025, we 
first compared estimated aggregate capital Federal rate payments based 
on the FY 2024 MS-DRG classifications and relative weights and the FY 
2024 GAFs to estimated aggregate capital Federal rate payments based on 
the FY 2024 MS-DRG classifications and relative weights and the FY 2025 
GAFs without incorporating the lowest quartile hospital wage index 
adjustment and the 5-percent cap on wage index decreases policy. To 
achieve budget neutrality for these changes in the GAFs, we calculated 
an incremental GAF budget neutrality adjustment factor of 0.9887 for FY 
2025. Next, we compared estimated aggregate capital Federal rate 
payments based on the FY 2025 GAFs with and without the lowest quartile 
hospital wage index adjustment and the 5-percent cap on wage index 
decreases policy. For this calculation, estimated aggregate capital 
Federal rate payments were calculated using the FY 2025 MS-DRG 
classifications and relative weights (after application of the 10-
percent cap discussed later in this section) and the FY 2025 GAFs (both 
with and without the lowest quartile hospital wage index adjustment and 
the 5-percent cap on wage index decreases policy). (We note, for this 
calculation the GAFs included the imputed floor, out-migration, and 
Frontier state adjustments.) To achieve budget neutrality for the 
effects of the lowest quartile hospital wage index adjustment and the 
5-percent cap on wage index decreases policy on the FY 2025 GAFs, we 
calculated an incremental GAF budget neutrality adjustment factor of 
0.9958. As discussed earlier in this section, the budget neutrality 
factor for the lowest quartile hospital wage index adjustment factor 
and the 5-percent cap on wage index decreases policy is not permanently 
built into the capital Federal rate. Consistent with this, we present 
the budget neutrality factor for the lowest quartile hospital wage 
index adjustment and the 5-percent cap on wage index decreases policy 
calculated under the second step of this 2-step methodology separately 
from the other budget neutrality factors in the discussion that 
follows, and this factor is not included in the calculation of the 
combined GAF/DRG adjustment factor described later in this section.
    In the FY 2023 IPPS/LTCH PPS final rule, we finalized a permanent 
10-percent cap on the reduction in an MS-DRG's relative weight in a 
given fiscal year, beginning in FY 2023. Consistent with our historical 
methodology for adjusting the capital standard Federal rate to ensure 
that the effects of the annual DRG reclassification and the 
recalibration of DRG weights are budget neutral under Sec.  
412.308(c)(4)(ii), we finalized to apply an additional budget 
neutrality factor to the capital standard Federal rate so that the 10-
percent cap on decreases in an MS-DRG's relative weight is implemented 
in a budget neutral manner (87 FR 49436). Specifically, we augmented 
our historical methodology for computing the budget neutrality factor 
for the annual DRG reclassification and recalibration by computing a 
budget neutrality adjustment for the annual DRG reclassification and 
recalibration in two steps. We first calculate a budget neutrality 
factor to account for the annual DRG reclassification and recalibration 
prior to the application of the 10-percent cap on MS-DRG relative 
weight decreases. Then we calculate an additional budget neutrality 
factor to account for the application of the 10-percent cap on MS-DRG 
relative weight decreases.
    To determine the DRG budget neutrality factors for FY 2025, we 
first compared estimated aggregate capital Federal rate payments based 
on the FY 2024 MS-DRG classifications and relative weights to estimated 
aggregate capital Federal rate payments based on the FY 2025 MS-DRG 
classifications and relative weights prior to the application of the 
10-percent cap. For these calculations, estimated aggregate capital 
Federal rate payments were calculated using the FY 2025 GAFs without 
the lowest quartile hospital wage index adjustment and the 5-percent 
cap on wage index decreases

[[Page 69970]]

policy. The incremental adjustment factor for DRG classifications and 
changes in relative weights prior to the application of the 10-percent 
cap is 0.9970. Next, we compared estimated aggregate capital Federal 
rate payments based on the FY 2025 MS-DRG classifications and relative 
weights prior to the application of the 10-percent cap to estimated 
aggregate capital Federal rate payments based on the FY 2025 MS-DRG 
classifications and relative weights after the application of the 10-
percent cap. For these calculations, estimated aggregate capital 
Federal rate payments were also calculated using the FY 2025 GAFs 
without the lowest quartile hospital wage index adjustment and the 5-
percent cap on wage index decreases policy. The incremental adjustment 
factor for the application of the 10-percent cap on relative weight 
decreases is 0.9999. Therefore, to achieve budget neutrality for the FY 
2025 MS-DRG reclassification and recalibration (including the 10-
percent cap), based on the calculations described previously, we are 
applying an incremental budget neutrality adjustment factor of 0.9969 
(0.9970 x 0.9999) for FY 2025 to the capital Federal rate. We note that 
all the values are calculated with unrounded numbers.
    The incremental adjustment factor for the FY 2025 MS-DRG 
reclassification and recalibration (0.9969) and for changes in the FY 
2025 GAFs due to the update to the wage data, wage index 
reclassifications and redesignations, and application of the rural 
floor policy (0.9887) is 0.9856 (0.9969 x 0.9887). This incremental 
adjustment factor is built permanently into the capital Federal rates. 
To achieve budget neutrality for the effects of the continuation of the 
lowest quartile hospital wage index adjustment and the 5-percent cap on 
wage index decreases policy on the FY 2025 GAFs, as described 
previously, we calculated a budget neutrality adjustment factor of 
0.9958 for FY 2025. We refer to this budget neutrality factor for the 
remainder of this section as the lowest quartile/cap adjustment factor.
    We applied the budget neutrality adjustment factors described 
previously to the capital Federal rate. This follows the requirement 
under Sec.  412.308(c)(4)(ii) that estimated aggregate payments each 
year be no more or less than they would have been in the absence of the 
annual DRG reclassification and recalibration and changes in the GAFs.
    The methodology used to determine the recalibration and geographic 
adjustment factor (GAF/DRG) budget neutrality adjustment is similar to 
the methodology used in establishing budget neutrality adjustments 
under the IPPS for operating costs. One difference is that, under the 
operating IPPS, the budget neutrality adjustments for the effect of 
updates to the wage data, wage index reclassifications and 
redesignations, and application of the rural floor policy are 
determined separately. Under the capital IPPS, there is a single budget 
neutrality adjustment factor for changes in the GAF that result from 
updates to the wage data, wage index reclassifications and 
redesignations, and application of the rural floor policy. In addition, 
there is no adjustment for the effects that geographic 
reclassification, the lowest quartile hospital wage index adjustment, 
or the 5-percent cap on wage index decreases policy described 
previously have on the other payment parameters, such as the payments 
for DSH or IME.
    The incremental GAF/DRG adjustment factor of 0.9856 accounts for 
the MS-DRG reclassifications and recalibration (including application 
of the 10-percent cap on relative weight decreases) and for changes in 
the GAFs that result from updates to the wage data, the effects on the 
GAFs of FY 2025 geographic reclassification decisions made by the MGCRB 
compared to FY 2024 decisions, and the application of the rural floor 
policy. The lowest quartile/cap adjustment factor of 0.9958 accounts 
for changes in the GAFs that result from our continuation of the policy 
to increase the wage index values for hospitals with a wage index value 
below the 25th percentile wage index and the 5-percent cap on wage 
index decreases policy. However, these factors do not account for 
changes in payments due to changes in the DSH and IME adjustment 
factors.
4. Capital Federal Rate for FY 2025
    For FY 2024, we established a capital Federal rate of $503.83 (88 
FR 59363). We are establishing an update of 3.1 percent in determining 
the FY 2025 capital Federal rate for all hospitals. As a result of this 
update and the budget neutrality factors discussed earlier, we are 
establishing a national capital Federal rate of $510.51 for FY 2025. 
The national capital Federal rate for FY 2025 was calculated as 
follows:
     The FY 2025 update factor is 1.031; that is, the update is 
3.1 percent.
     The FY 2025 GAF/DRG budget neutrality adjustment factor 
that is applied to the capital Federal rate for changes in the MS-DRG 
classifications and relative weights (including application of the 10-
percent cap on relative weight decreases) and changes in the GAFs that 
result from updates to the wage data, wage index reclassifications and 
redesignations, and application of the rural floor policy is 0.9856.
     The FY 2025 lowest quartile/cap budget neutrality 
adjustment factor that is applied to the capital Federal rate for 
changes in the GAFs that result from our policy to increase the wage 
index values for hospitals with a wage index value below the 25th 
percentile wage index and the 5-percent cap on wage index decreases 
policy is 0.9958.
     The FY 2025 outlier adjustment factor is 0.9577.
    We are providing the following chart that shows how each of the 
factors and adjustments for FY 2025 affects the computation of the FY 
2025 national capital Federal rate in comparison to the FY 2024 
national capital Federal rate. The FY 2025 update factor has the effect 
of increasing the capital Federal rate by 3.1 percent compared to the 
FY 2024 capital Federal rate. The GAF/DRG budget neutrality adjustment 
factor has the effect of decreasing the capital Federal rate by 1.44 
percent. The FY 2025 lowest quartile/cap budget neutrality adjustment 
factor has the effect of decreasing the capital Federal rate by 0.07 
percent compared to the FY 2024 capital Federal rate. The FY 2025 
outlier adjustment factor has the effect of decreasing the capital 
Federal rate by 0.22 percent compared to the FY 2024 capital Federal 
rate. The combined effect of all the changes would increase the 
national capital Federal rate by approximately 1.33 percent, compared 
to the FY 2024 national capital Federal rate.

[[Page 69971]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.343

B. Calculation of the Inpatient Capital-Related Prospective Payments 
for FY 2025

    For purposes of calculating payments for each discharge during FY 
2025, the capital Federal rate is adjusted as follows: (Standard 
Federal Rate) x (DRG weight) x (GAF) x (COLA for hospitals located in 
Alaska and Hawaii) x (1 + DSH Adjustment Factor + IME Adjustment 
Factor, if applicable). The result is the adjusted capital Federal 
rate.
    Hospitals also may receive outlier payments for those cases that 
qualify under the threshold established for each fiscal year. Section 
412.312(c) provides for a shared threshold to identify outlier cases 
for both inpatient operating and inpatient capital-related payments. 
The outlier threshold for FY 2025 is in section II.A. of this Addendum. 
For FY 2025, a case will qualify as a cost outlier if the cost for the 
case is greater than the prospective payment rates for the MS-DRG plus 
IME and DSH payments (including the empirically justified Medicare DSH 
payment and the estimated uncompensated care payment), estimated 
supplemental payment for eligible IHS/Tribal hospitals and Puerto Rico 
hospitals, and any add-on payments for new technology, plus the fixed-
loss amount of $46,152.
    Currently, as provided under Sec.  412.304(c)(2), we pay a new 
hospital 85 percent of its reasonable costs during the first 2 years of 
operation, unless it elects to receive payment based on 100 percent of 
the capital Federal rate. Effective with the third year of operation, 
we pay the hospital based on 100 percent of the capital Federal rate 
(that is, the same methodology used to pay all other hospitals subject 
to the capital PPS).

C. Capital Input Price Index

1. Background
    Like the operating input price index, the capital input price index 
(CIPI) is a fixed-weight price index that measures the price changes 
associated with capital costs during a given year. The CIPI differs 
from the operating input price index in one important aspect--the CIPI 
reflects the vintage nature of capital, which is the acquisition and 
use of capital over time. Capital expenses in any given year are 
determined by the stock of capital in that year (that is, capital that 
remains on hand from all current and prior capital acquisitions). An 
index measuring capital price changes needs to reflect this vintage 
nature of capital. Therefore, the CIPI was developed to capture the 
vintage nature of capital by using a weighted-average of past capital 
purchase prices up to and including the current year.
    For this final rule, we are using the IPPS operating and capital 
market baskets that reflect a 2018 base year. For a complete discussion 
of the 2018-based market baskets, we refer readers to section IV. of 
the preamble of the FY 2022 IPPS/LTCH PPS final rule (86 FR 45194 
through 45213).
2. Forecast of the CIPI for FY 2025
    Based on IHS Global Inc.'s second quarter 2024 forecast, for this 
final rule, we are forecasting the 2018-based CIPI to increase 2.6 
percent in FY 2025. This reflects a projected 3.1 percent increase in 
vintage-weighted depreciation prices (building and fixed equipment, and 
movable equipment), and a projected 4.2 percent increase in other 
capital expense prices in FY 2025, partially offset by a projected 1.5 
percent decline in vintage-weighted interest expense prices in FY 2025. 
The weighted average of these three factors produces the forecasted 2.6 
percent increase for the 2018-based CIPI in FY 2025. As proposed, we 
are using the more recent data available for this final rule to 
determine the FY 2025 increase in the 2018-based CIPI for this final 
rule.

IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase 
Percentages for FY 2025

    Payments for services furnished in children's hospitals, 11 cancer 
hospitals, and hospitals located outside the 50 States, the District of 
Columbia and Puerto Rico (that is, short-term acute care hospitals 
located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, 
and American Samoa) that are excluded from the IPPS are paid on the 
basis of reasonable costs based on the hospital's own historical cost 
experience, subject to a rate-of-increase ceiling. A per discharge 
limit (the target amount, as defined in Sec.  413.40(a) of the 
regulations) is set for each hospital, based on the hospital's own cost 
experience in its base year, and updated annually by a rate-of-increase 
percentage specified in Sec.  413.40(c)(3). In addition, as specified 
in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38536), effective for 
cost reporting periods beginning during FY 2018, the annual update to 
the target amount for extended neoplastic disease care hospitals 
(hospitals described in Sec.  412.22(i) of the regulations) also is the 
rate-of-increase percentage specified in Sec.  413.40(c)(3). (We note 
that, in accordance with Sec.  403.752(a), religious nonmedical health 
care institutions (RNHCIs) are also subject to the rate-of-

[[Page 69972]]

increase limits established under Sec.  413.40 of the regulations.)
    For the FY 2025 IPPS/LTCH PPS proposed rule, based on IGI's 2023 
fourth quarter forecast, we estimated that the 2018-based IPPS 
operating market basket percentage increase for FY 2025 would be 3.0 
percent (that is, the estimate of the market basket rate-of-increase). 
Based on this estimate, the FY 2025 rate-of-increase percentage that we 
proposed to apply to the FY 2024 target amounts to calculate the FY 
2025 target amounts for children's hospitals, the 11 cancer hospitals, 
RNCHIs, and short-term acute care hospitals located in the U.S. Virgin 
Islands, Guam, the Northern Mariana Islands, and American Samoa was 3.0 
percent, in accordance with the applicable regulations at 42 CFR 
413.40. However, we proposed that if more recent data became available 
for the FY 2025 IPPS/LTCH PPS final rule, we would use such data, if 
appropriate, to calculate the final IPPS operating market basket update 
for FY 2025. Based on more recent data available (IGI's second quarter 
2024 forecast), we estimate that the 2018-based IPPS operating market 
basket percentage increase for FY 2025 is 3.4 percent (that is, the 
estimate of the market basket rate-of-increase). Based on this 
estimate, the FY 2025 rate-of-increase percentage that we will apply to 
the FY 2024 target amounts to calculate the FY 2025 target amounts for 
children's hospitals, the 11 cancer hospitals, RNCHIs, and short-term 
acute care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa is 3.4 percent, in 
accordance with the applicable regulations at 42 CFR 413.40.
    IRFs and rehabilitation distinct part units, IPFs and psychiatric 
units, and LTCHs are excluded from the IPPS and paid under their 
respective PPSs. The IRF PPS, the IPF PPS, and the LTCH PPS are updated 
annually. We refer readers to section VIII. of the preamble and section 
V. of the Addendum of this final rule for the changes to the Federal 
payment rates for LTCHs under the LTCH PPS for FY 2025. The annual 
updates for the IRF PPS and the IPF PPS are issued by the agency in 
separate Federal Register documents.
    We received no comments on this proposal and therefore are 
finalizing this provision without modification. Incorporating more 
recent data available for this final rule, as we proposed, we are 
adopting a 3.4 percent update for FY 2025.

V. Changes to the Payment Rates for the LTCH PPS for FY 2025

A. LTCH PPS Standard Federal Payment Rate for FY 2025

1. Overview
    In section VIII. of the preamble of this final rule, we discuss our 
annual updates to the payment rates, factors, and specific policies 
under the LTCH PPS for FY 2025.
    Under Sec.  412.523(c)(3) of the regulations, for FY 2012 and 
subsequent years, we updated the standard Federal payment rate by the 
most recent estimate of the LTCH PPS market basket at that time, 
including additional statutory adjustments required by sections 
1886(m)(3) (citing sections 1886(b)(3)(B)(xi)(II) and 1886(m)(4) of the 
Act as set forth in the regulations at Sec.  412.523(c)(3)(viii) 
through (xvii)). (For a summary of the payment rate development prior 
to FY 2012, we refer readers to the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38310 through 38312) and references therein.)
    Section 1886(m)(3)(A) of the Act specifies that, for rate year 2012 
and each subsequent rate year, any annual update to the standard 
Federal payment rate shall be reduced by the productivity adjustment 
described in section 1886(b)(3)(B)(xi)(II) of the Act as discussed in 
section VIII.C.2. of the preamble of this final rule. This section of 
the Act further provides that the application of section 1886(m)(3)(B) 
of the Act may result in the annual update being less than zero for a 
rate year, and may result in payment rates for a rate year being less 
than such payment rates for the preceding rate year. (As noted in 
section VIII.C.2. of the preamble of this final rule, the annual update 
to the LTCH PPS occurs on October 1 and we have adopted the term 
``fiscal year'' (FY) rather than ``rate year'' (RY) under the LTCH PPS 
beginning October 1, 2010. Therefore, for purposes of clarity, when 
discussing the annual update for the LTCH PPS, including the provisions 
of the Affordable Care Act, we use the term ``fiscal year'' rather than 
``rate year'' for 2011 and subsequent years.)
    For LTCHs that fail to submit the required quality reporting data 
in accordance with the LTCH QRP, the annual update is reduced by 2.0 
percentage points as required by section 1886(m)(5) of the Act.
2. Development of the FY 2025 LTCH PPS Standard Federal Payment Rate
    Consistent with our historical practice and Sec.  
412.523(c)(3)(xvii), for FY 2025, as we proposed, we are applying the 
annual update to the LTCH PPS standard Federal payment rate from the 
previous year. Furthermore, in determining the LTCH PPS standard 
Federal payment rate for FY 2025, we also are making certain regulatory 
adjustments, consistent with past practices. Specifically, in 
determining the FY 2025 LTCH PPS standard Federal payment rate, as we 
proposed, we are applying a budget neutrality adjustment factor for the 
changes related to the area wage level adjustment (that is, changes to 
the wage data and labor-related share) as discussed in section V.B.6. 
of this Addendum.
    In this final rule, we are establishing an annual update to the 
LTCH PPS standard Federal payment rate of 3.0 percent (that is, the 
most recent estimate of the 2022-based LTCH market basket increase of 
3.5 percent less the productivity adjustment of 0.5 percentage point). 
Therefore, in accordance with Sec.  412.523(c)(3)(xvii), we are 
applying an update factor of 1.030 to the FY 2024 LTCH PPS standard 
Federal payment rate of $48,116.62 to determine the FY 2025 LTCH PPS 
standard Federal payment rate. Also, in accordance with Sec.  
412.523(c)(3)(xvii) and (c)(4), we are required to reduce the annual 
update to the LTCH PPS standard Federal payment rate by 2.0 percentage 
points for LTCHs that fail to submit the required quality reporting 
data for FY 2025 as required under the LTCH QRP. Therefore, for LTCHs 
that fail to submit quality reporting data under the LTCH QRP, we are 
establishing an annual update to the LTCH PPS standard Federal payment 
rate of 1.0 percent (or an update factor of 1.010). This update 
reflects the annual market basket update of 3.5 percent reduced by the 
0.5 percentage point productivity adjustment, as required by section 
1886(m)(3)(A)(i) of the Act, minus 2.0 percentage points for LTCHs 
failing to submit quality data under the LTCH QRP, as required by 
section 1886(m)(5) of the Act. Consistent with Sec.  412.523(d)(4), we 
are applying an area wage level budget neutrality factor to the FY 2025 
LTCH PPS standard Federal payment rate of 0.9964315, based on the best 
available data at this time, to ensure that any changes to the area 
wage level adjustment (that is, the annual update of the wage index 
(including the update to the CBSA labor market areas and the 
application of the 5-percent cap on wage index decreases, discussed 
later in this section), and labor-related share) will not result in any 
change (increase or decrease) in estimated aggregate LTCH PPS standard 
Federal payment rate payments. Accordingly, we are

[[Page 69973]]

establishing an LTCH PPS standard Federal payment rate of $49,383.26 
(calculated as $48,116.62 x 1.030 x 0.9964315) for FY 2025. For LTCHs 
that fail to submit quality reporting data for FY 2025, in accordance 
with the requirements of the LTCH QRP under section 1866(m)(5) of the 
Act, we are establishing an LTCH PPS standard Federal payment rate of 
$48,424.36 (calculated as $48,116.62 x 1.010 x 0.9964315) for FY 2025.

B. Adjustment for Area Wage Levels Under the LTCH PPS for FY 2025

1. Background
    Under the authority of section 123 of the BBRA, as amended by 
section 307(b) of the BIPA, we established an adjustment to the LTCH 
PPS standard Federal payment rate to account for differences in LTCH 
area wage levels under Sec.  412.525(c). The labor-related share of the 
LTCH PPS standard Federal payment rate is adjusted to account for 
geographic differences in area wage levels by applying the applicable 
LTCH PPS wage index. The applicable LTCH PPS wage index is computed 
using wage data from inpatient acute care hospitals without regard to 
reclassification under section 1886(d)(8) or section 1886(d)(10) of the 
Act.
    The FY 2025 LTCH PPS standard Federal payment rate wage index 
values that will be applicable for LTCH PPS standard Federal payment 
rate discharges occurring on or after October 1, 2024, through 
September 30, 2025, are presented in Table 12A (for urban areas) and 
Table 12B (for rural areas), which are listed in section VI. of this 
Addendum and available via the internet on the CMS website.
2. Geographic Classifications (Labor Market Areas) Under the LTCH PPS
    In adjusting for the differences in area wage levels under the LTCH 
PPS, the labor-related portion of an LTCH's Federal prospective payment 
is adjusted by using an appropriate area wage index based on the 
geographic classification (labor market area) in which the LTCH is 
located. Specifically, the application of the LTCH PPS area wage level 
adjustment under existing Sec.  412.525(c) is made based on the 
location of the LTCH--either in an ``urban area,'' or a ``rural area,'' 
as defined in Sec.  412.503. Under Sec.  412.503, an ``urban area'' is 
defined as a Metropolitan Statistical Area (MSA) (which includes a 
Metropolitan division, where applicable), as defined by the Executive 
OMB, and a ``rural area'' is defined as any area outside of an urban 
area (75 FR 37246).
    The geographic classifications (labor market area definitions) 
currently used under the LTCH PPS, effective for discharges occurring 
on or after October 1, 2014, are based on the Core Based Statistical 
Areas (CBSAs) established by OMB, which are based on the 2010 decennial 
census data. In general, the current statistical areas (which were 
implemented beginning with FY 2015) are based on revised OMB 
delineations issued on February 28, 2013, in OMB Bulletin No. 13-01. 
(We note we have adopted minor revisions and updates in the years 
between the decennial censuses.) We adopted these labor market area 
delineations because they were at that time based on the best available 
data that reflect the local economies and area wage levels of the 
hospitals that are currently located in these geographic areas. We also 
believed that these OMB delineations would ensure that the LTCH PPS 
area wage level adjustment most appropriately accounted for and 
reflected the relative hospital wage levels in the geographic area of 
the hospital as compared to the national average hospital wage level. 
We noted that this policy was consistent with the IPPS policy adopted 
in FY 2015 under Sec.  412.64(b)(1)(ii)(D) (79 FR 49951 through 49963). 
(For additional information on the CBSA-based labor market area 
(geographic classification) delineations currently used under the LTCH 
PPS and the history of the labor market area definitions used under the 
LTCH PPS, we refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50180 through 50185).)
    In general, it is our historical practice to update the CBSA-based 
labor market area delineations annually based on the most recent 
updates issued by 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. OMB 
Bulletin No. 17-01, issued August 15, 2017, established the 
delineations for the Nation's statistical areas, and the corresponding 
changes to the CBSA-based labor market areas were adopted in the FY 
2019 IPPS/LTCH PPS final rule (83 FR 41731). A copy of this bulletin 
may be obtained on the website at: https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/bulletins/2017/b-17-01.pdf.
    On April 10, 2018, OMB issued OMB Bulletin No. 18-03, which 
superseded OMB Bulletin No. 17-01 (August 15, 2017). On September 14, 
2018, OMB issued OMB Bulletin No. 18-04, which superseded OMB Bulletin 
No. 18-03 (April 10, 2018). Historically OMB bulletins issued between 
decennial censuses have only contained minor modifications to CBSA 
delineations based on changes in population counts. However, OMB's 2010 
Standards for Delineating Metropolitan and Micropolitan Standards 
created a larger mid-decade redelineation that takes into account 
commuting data from the American Commuting Survey. As a result, OMB 
Bulletin No. 18-04 (September 14, 2018) included more modifications to 
the CBSAs than are typical for OMB bulletins issued between decennial 
censuses. We adopted the updates set forth in OMB Bulletin No. 18-04 in 
the FY 2021 IPPS/LTCH PPS final rule (85 FR 59050 through 59051). A 
copy of OMB Bulletin No. 18-04 (September 14, 2018) may be obtained at 
https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf.
    On March 6, 2020, OMB issued Bulletin No. 20-01, which provided 
updates to and superseded OMB Bulletin No. 18-04, which was issued on 
September 14, 2018. The attachments to OMB Bulletin No. 20-01 provided 
detailed information on the update to statistical areas since September 
14, 2018. (For a copy of this bulletin, we refer readers to the 
following website: https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf.) In OMB Bulletin No. 20-01, OMB announced one 
new Micropolitan Statistical Area and one new component of an existing 
Combined Statistical Area. After reviewing OMB Bulletin No. 20-01, we 
determined that the changes in OMB Bulletin 20-01 encompassed 
delineation changes that would not affect the CBSA-based labor market 
area delineations used under the LTCH PPS. Therefore, we adopted the 
updates set forth in OMB Bulletin No. 20-01 in the FY 2022 IPPS/LTCH 
PPS final rule (86 FR 45556 through 45557) consistent with our general 
policy of adopting OMB delineation updates; however, the LTCH PPS area 
wage level adjustment was not altered as a result of adopting the 
updates because the CBSA-based labor market area delineations were the 
same as the CBSA-based labor market area delineations adopted in the FY 
2021 IPPS/LTCH PPS final rule based on OMB Bulletin No. 18-04 (85 FR 
59050 through 59051). Thus, most recently in the FY 2024 IPPS/LTCH PPS 
final rule (88 FR 59366), we continued to use the CBSA-based labor 
market area delineations as established in OMB Bulletin 18-04 and OMB 
Bulletin 20-01.
    In the July 16, 2021 Federal Register (86 FR 37777), OMB finalized 
a

[[Page 69974]]

schedule for future updates based on results of the decennial Census 
updates to commuting patterns from the American Community Survey. In 
accordance with that schedule, on July 21, 2023, OMB released Bulletin 
No. 23-01, which superseded OMB Bulletin No. 20-01. A copy of OMB 
Bulletin No. 23-01 may be obtained at https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf. According to OMB, the 
delineations reflect the 2020 Standards for Delineating Core Based 
Statistical Areas (``the 2020 Standards''), which appeared in the 
Federal Register on July 16, 2021 (86 FR 37770 through 37778), and the 
application of those standards to Census Bureau population and journey-
to-work data (that is, 2020 Decennial Census, American Community 
Survey, and Census Population Estimates Program data). In the FY 2025 
IPPS/LTCH PPS proposed rule (89 FR 36584 through 36586), we proposed to 
adopt the revised delineations announced in OMB Bulletin No. 23-01 
effective for FY 2025 under the LTCH PPS. We did not receive any public 
comments on this proposal. Therefore, in this final rule, under the 
authority of section 123 of the BBRA, as amended by section 307(b) of 
the BIPA, we are adopting the revised delineations announced in OMB 
Bulletin No. 23-01 effective for FY 2025 under the LTCH PPS, as we 
proposed, without modification. We believe that adopting the CBSA-based 
labor market area delineations established in OMB Bulletin 23-01 will 
ensure that the LTCH PPS area wage level adjustment most appropriately 
accounts for and reflects the relative hospital wage levels in the 
geographic area of the hospital as compared to the national average 
hospital wage level based on the best available data that reflect the 
local economies and area wage levels of the hospitals that are 
currently located in these geographic areas (81 FR 57298). Our adoption 
of the revised delineations announced in OMB Bulletin No. 23-01 is 
consistent with the changes under the IPPS for FY 2025 as discussed in 
section III.B. of the preamble of this final rule. A summary of these 
changes is presented in the discussion that follows in this section. 
For complete details on the changes, we refer readers to section III.B. 
of the preamble of this final rule.
a. Urban Counties That Will Become Rural Under the Revised OMB 
Delineations
    CBSAs are made up of one or more constituent counties. Analysis of 
the revised labor market area delineations (based upon OMB Bulletin No. 
23-01) that we are adopting, beginning in FY 2025, shows that a total 
of 53 counties (and county equivalents) that were located in an urban 
CBSA pursuant to OMB Bulletin No. 20-01 will be located in a rural area 
under the revised OMB delineations. The chart in section III.B.4. of 
the preamble of this final rule lists the 53 urban counties that will 
be rural under these revised OMB delineations.
b. Rural Counties That Will Become Urban Under the Revised OMB 
Delineations
    Analysis of the revised labor market area delineations (based upon 
OMB Bulletin No. 23-01) that we are adopting, beginning in FY 2025, 
shows that a total of 54 counties (and county equivalents) that were 
located in a rural area pursuant to OMB Bulletin No. 20-01 will be 
located in an urban CBSA under the revised OMB delineations. The chart 
in section III.B.5. of the preamble of this final rule lists the 54 
rural counties that will be urban under these revised OMB delineations.
c. Urban Counties That Will Move to a Different Urban CBSA Under the 
Revised OMB Delineations
    In addition to rural counties becoming urban and urban counties 
becoming rural, some urban counties will shift from one urban CBSA to 
another urban CBSA under our adoption of the revised delineations 
announced in OMB Bulletin No. 23-01. In other cases, the adoption of 
the revised delineations announced in OMB Bulletin No. 23-01 will 
involve a change only in CBSA name and/or number, while the CBSA 
continues to encompass the same constituent counties. For example, CBSA 
23844 (Gary, IN) will experience both a change to its number and its 
name and become CBSA 29414 (Lake County-Porter County-Jasper County, 
IN), while all of its four constituent counties will remain the same. 
In other cases, only the name of the CBSA will be modified, and none of 
the currently assigned counties will be reassigned to a different urban 
CBSA. The chart in section III.B.6. of the preamble of this final rule 
lists the CBSAs where only the name and/or CBSA number changed.
    There are also counties that will shift between existing and new 
CBSAs, changing the constituent makeup of the CBSAs, under our adoption 
of the revisions to the OMB delineations based on OMB Bulletin No. 23-
01. For example, some CBSAs will be split into multiple new CBSAs, or a 
CBSA will lose one or more counties to other urban CBSAs. The chart in 
section III.B.6 of the preamble of this final rule lists the urban 
counties that will move from one urban CBSA to a new or modified CBSA 
under our adoption of these revisions to the OMB delineations.
d. Change to County-Equivalents in the State of Connecticut
    For FY 2025, we are continuing to use the Federal Information 
Processing Standard (FIPS) county codes, maintained by the U.S. Census 
Bureau, for purposes of cross walking counties to CBSAs. In a June 6, 
2022 Federal Register notice (87 FR 34235 through 34240), the Census 
Bureau announced that it was implementing the State of Connecticut's 
request to replace the 8 counties in the State with 9 new ``Planning 
Regions.'' Planning regions now serve as county-equivalents within the 
CBSA system. OMB Bulletin No. 23-01 is the first set of revised 
delineations that referenced the new county-equivalents for 
Connecticut. For the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36585), 
we evaluated the change in hospital assignments for Connecticut LTCHs 
and proposed to adopt the planning regions as county equivalents for 
wage index purposes. As all forthcoming county-based delineation data 
will utilize these new county-equivalent definitions for the 
Connecticut, we believe it is necessary to adopt this migration from 
counties to planning region county-equivalents in order to maintain 
consistency with OMB Bulletin No. 23-01 and future OMB updates. We did 
not receive any public comments on this proposal. Therefore, in this 
final rule, we are adopting our proposal to adopt the planning regions 
as county equivalents for wage index purposes, without modification. 
Our adoption of the planning regions as county equivalents for wage 
index purposes is consistent with the changes under the IPPS for FY 
2025 as discussed in section III.B.3. of the preamble of this final 
rule. We are providing the following crosswalk for each LTCH in 
Connecticut with the current (FY 2024) and new (FY 2025) FIPS county 
and county-equivalent codes and CBSA assignments.

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[GRAPHIC] [TIFF OMITTED] TR28AU24.344

    As previously discussed, we are adopting the revisions announced in 
OMB Bulletin No. 23-01 to the CBSA-based labor market area delineations 
under the LTCH PPS, effective October 1, 2024. Accordingly, the FY 2025 
LTCH PPS wage index values in Tables 12A and 12B listed in section VI. 
of the Addendum to this final rule (which are available via the 
internet on the CMS website) reflect the revisions to the CBSA-based 
labor market area delineations previously described. We also are 
including in a supplemental data file an updated county-to-CBSA 
crosswalk that reflects the revisions to the CBSA-based labor market 
area delineations. This supplemental data file for public use will be 
posted on the CMS website for this final rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
3. Labor-Related Share for the LTCH PPS Standard Federal Payment Rate
    Under the payment adjustment for the differences in area wage 
levels under Sec.  412.525(c), the labor-related share of an LTCH's 
standard Federal payment rate is adjusted by the applicable wage index 
for the labor market area in which the LTCH is located. The LTCH PPS 
labor-related share currently represents the sum of the labor-related 
portion of operating costs and a labor-related portion of capital costs 
using the applicable LTCH market basket. Additional background 
information on the historical development of the labor-related share 
under the LTCH PPS can be found in the RY 2007 LTCH PPS final rule (71 
FR 27810 through 27817 and 27829 through 27830) and the FY 2012 IPPS/
LTCH PPS final rule (76 FR 51766 through 51769 and 51808).
    For FY 2013, we rebased and revised the market basket used under 
the LTCH PPS by adopting a 2009-based LTCH market basket. In addition, 
for FY 2013 through FY 2016, we determined the labor-related share 
annually as the sum of the relative importance of each labor-related 
cost category of the 2009-based LTCH market basket for the respective 
fiscal year based on the best available data. (For more details, we 
refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53477 
through 53479).) For FY 2017, we rebased and revised the 2009-based 
LTCH market basket to reflect a 2013 base year. In addition, for FY 
2017 through FY 2020, we determined the labor-related share annually as 
the sum of the relative importance of each labor-related cost category 
of the 2013-based LTCH market basket for the respective fiscal year 
based on the best available data. (For more details, we refer readers 
to the FY 2017 IPPS/LTCH PPS final rule (81 FR 57085 through 57096).) 
Then, effective for FY 2021, we rebased and revised the 2013-based LTCH 
market basket to reflect a 2017 base year and determined the labor-
related share annually as the sum of the relative importance of each 
labor-related cost category in the 2017-based LTCH market basket using 
the most recent available data. (For more details, we refer readers to 
the FY 2021 IPPS/LTCH PPS final rule (85 FR 58909 through 58926).)
    As discussed in section VIII.D of the preamble to this final rule, 
effective for FY 2025, as we proposed, we are rebasing and revising the 
2017-based LTCH market basket to reflect a 2022 base year. In addition, 
as discussed in section VIII.D. of the preamble of this final rule, as 
we proposed, we are establishing that the LTCH PPS labor-related share 
for FY 2025 is the sum of the FY 2025 relative importance of each 
labor-related cost category in the 2022-based LTCH market basket using 
the most recent available data. For more information on comments 
related to our proposed labor-related share based on the labor-related 
cost categories in the 2022-based LTCH market basket as well as our 
responses to those comments, we refer readers to section VIII.D of the 
preamble of this final rule. Also, as we proposed, consistent with our 
historical practice, we are using the most recent data available to 
determine the final FY 2025 labor-related share in this final rule.
    Table EEEE9 in section VIII.D. of the preamble of this final rule 
shows the FY 2025 labor-related share using the 2022-based LTCH market 
basket and the FY 2024 labor-related share using the 2017-based LTCH 
market basket. The labor-related share for FY 2025 is the sum of the 
labor-related portion of operating costs from the 2022-based LTCH 
market basket (that is, the sum of the FY 2025 relative importance 
shares 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 relative importance of Capital-
Related cost weight from the 2022-based LTCH market basket. The 
relative importance reflects the different rates of price change for 
these cost categories between the base year (2022) and FY 2025. Based 
on IHS Global Inc.'s second quarter 2024 forecast of the 2022-based 
LTCH market basket, the sum of the FY 2025 relative importance for 
Wages and Salaries; Employee Benefits; Professional Fees: Labor-
Related; Administrative and Facilities Support Services; Installation, 
Maintenance, and Repair Services; and All Other: Labor-Related Services 
is 68.9 percent. The portion of capital-related costs that is 
influenced by the local labor market is estimated to be 46 percent 
(that is, the same percentage applied to the 2009-based, 2013-based, 
and 2017-based LTCH market basket capital-related costs relative 
importance). Since the FY 2025 relative importance for capital-related 
costs is 8.4 percent based on IHS Global Inc.'s second quarter 2024 
forecast of the 2022-based LTCH market basket, we took 46 percent of 
8.4 percent to determine the labor-related share of capital-related 
costs for FY 2025 of 3.9 percent. Therefore, we are finalizing a total 
labor-related share for FY 2025 of 72.8 percent (the sum of 68.9 
percent for the labor-related share of operating costs and 3.9 percent 
for the labor-related share of capital-related costs). The total 
difference between the FY 2025 labor-related share using the 2022 based 
LTCH market basket (72.8 percent) and the FY 2024 labor-related share 
using the 2017 based LTCH market basket (68.5 percent) is 4.3 
percentage points. As discussed in greater detail in section VIII.D. of 
the preamble of this final rule, this difference is primarily 
attributable to the revision to the base year cost weights for those 
categories included in the labor-related share.
4. Wage Index for FY 2025 for the LTCH PPS Standard Federal Payment 
Rate
    Historically, we have established LTCH PPS area wage index values 
calculated from acute care IPPS hospital wage data without taking into 
account geographic reclassification under sections 1886(d)(8) and 
1886(d)(10) of the Act (67 FR 56019). The area wage level adjustment 
established under the

[[Page 69976]]

LTCH PPS is based on an LTCH's actual location without regard to the 
``urban'' or ``rural'' designation of any related or affiliated 
provider. As with the IPPS wage index, wage data for multicampus 
hospitals with campuses located in different labor market areas (CBSAs) 
are apportioned to each CBSA where the campus (or campuses) are 
located. We also employ a policy for determining area wage index values 
for areas where there are no IPPS wage data.
    Consistent with our historical methodology, to determine the 
applicable area wage index values for the FY 2025 LTCH PPS standard 
Federal payment rate, under the broad authority of section 123 of the 
BBRA, as amended by section 307(b) of the BIPA, as we proposed, we are 
continuing to employ our historical practice of using the same data we 
used to compute the FY 2025 acute care hospital inpatient wage index, 
as discussed in section III. of the preamble of this final rule (that 
is, wage data collected from cost reports submitted by IPPS hospitals 
for cost reporting periods beginning during FY 2021) because these data 
are the most recent complete data available.
    In addition, as we proposed, we computed the FY 2025 LTCH PPS 
standard Federal payment rate area wage index values consistent with 
the ``urban'' and ``rural'' geographic classifications (that is, the 
labor market area delineations as previously discussed in section V.B. 
of this Addendum) and our historical policy of not taking into account 
IPPS geographic reclassifications under sections 1886(d)(8) and 
1886(d)(10) of the Act in determining payments under the LTCH PPS. As 
we proposed, we also continued to apportion the wage data for 
multicampus hospitals with campuses located in different labor market 
areas to each CBSA where the campus or campuses are located, consistent 
with the IPPS policy. Lastly, consistent with our existing methodology 
for determining the LTCH PPS wage index values, for FY 2025, as we 
proposed, we continued to use our existing policy for determining area 
wage index values for areas where there are no IPPS wage data. Under 
our existing methodology, the LTCH PPS wage index value for urban CBSAs 
with no IPPS wage data is determined by using an average of all of the 
urban areas within the State, and the LTCH PPS wage index value for 
rural areas with no IPPS wage data is determined by using the 
unweighted average of the wage indices from all of the CBSAs that are 
contiguous to the rural counties of the State.
    Based on the FY 2021 IPPS wage data that we used to determine the 
FY 2025 LTCH PPS area wage index values in this final rule, there are 
no IPPS wage data for the urban area of Hinesville, GA (CBSA 25980). 
Consistent with our existing methodology, we calculated the FY 2025 
wage index value for CBSA 25980 as the average of the wage index values 
for all of the other urban areas within the State of Georgia (that is, 
CBSAs 10500, 12020, 12054, 12260, 15260, 16860, 17980, 19140, 23580, 
31420, 31924, 40660, 42340, 46660, and 47580), as shown in Table 12A, 
which is listed in section VI. of this Addendum.
    Based on the FY 2021 IPPS wage data that we used to determine the 
FY 2025 LTCH PPS area wage index values in this final rule, there are 
no IPPS wage data for rural North Dakota (CBSA 35). Consistent with our 
existing methodology, we calculated the FY 2025 wage index value for 
CBSA 35 as the average of the wage index values for all CBSAs that are 
contiguous to the rural counties of the State (that is, CBSAs 13900, 
22020, 24220, and 33500), as shown in Table 12B, which is listed in 
section VI. of this Addendum. We note that, as IPPS wage data are 
dynamic, it is possible that the number of urban and rural areas 
without IPPS wage data will vary in the future.
    Comment: A commenter stated that CMS should account for geographic 
reclassification of IPPS hospitals when determining the LTCH PPS wage 
index. The commenter believes that not accounting for geographic 
reclassification when determining the LTCH PPS wage index disadvantages 
LTCHs when competing with IPPS hospitals for clinical staff.
    Response: We did not propose to account for geographic 
reclassification of IPPS hospitals when determining the LTCH PPS wage 
index as suggested by the commenter and do not believe such a policy is 
necessary at this time, but we will take this comment into 
consideration to potentially inform future rulemaking.
    Comment: A commenter stated that there are discrepancies between 
the IPPS and LTCH PPS wage indexes for the same CBSAs. This commenter 
requested that CMS provide additional information on these differences 
and provide the data and information necessary to replicate the LTCH 
PPS wage index calculations. The commenter did not provide examples of 
specific CBSAs that were of particular concern to them.
    Response: We thank the commenter for the feedback. As we described 
previously, the LTCH PPS wage index values are calculated from acute 
care IPPS hospital wage data without taking into account geographic 
reclassification. There are also several other adjustments made in 
determining the IPPS wage index that are not applicable to the LTCH PPS 
wage index, such as the occupational mix adjustment. For these reasons, 
differences between the LTCH PPS wage index and the IPPS wage index are 
to be expected. We refer the reader to section III.C. of the preamble 
of this final rule for details on the methodology for computing the 
IPPS wage index. We note that the wage and hours data from the acute 
care IPPS hospital used in calculating the LTCH PPS wage index values 
are available in the Public Use Files released with each proposed and 
final rule each fiscal year. The Public Use Files for this final rule 
will be posted on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
5. Permanent Cap on Wage Index Decreases
a. Permanent Cap on LTCH PPS Wage Index Decreases
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49440 through 
49442), we finalized a policy that applies a permanent 5-percent cap on 
any decrease to an LTCH's wage index from its wage index in the prior 
year. Consistent with the requirement at Sec.  412.525(c)(2) that 
changes to area wage level adjustments are made in a budget neutral 
manner, we include the application of this policy in the determination 
of the area wage level budget neutrality factor that is applied to the 
standard Federal payment rate, as is discussed later in section V.B.6. 
of this Addendum.
    Under this policy, an LTCH's wage index will not be less than 95 
percent of its wage index for the prior fiscal year. An LTCH's wage 
index cap adjustment is determined based on the wage index value 
applicable to the LTCH on the last day of the prior Federal fiscal 
year. However, for newly opened LTCHs that become operational on or 
after the first day of the fiscal year, these LTCHs will not be subject 
to the LTCH PPS wage index cap since they were not paid under the LTCH 
PPS in the prior year. For example, newly opened LTCHs that become 
operational during FY 2025 would not be eligible for the LTCH PPS wage 
index cap in FY 2025. These LTCHs would receive the calculated wage 
index for the area in which they are geographically located, even if 
other LTCHs in the same geographic area are receiving a wage

[[Page 69977]]

index cap. The cap on wage index decreases policy is reflected at Sec.  
412.525(c)(1).
    For each LTCH we identify in our rulemaking data, we are including 
in a supplemental data file the wage index values from both fiscal 
years used in determining its capped wage index. This includes the 
LTCH's final prior year wage index value, the LTCH's uncapped current 
year wage index value, and the LTCH's capped current year wage index 
value. Due to the lag in rulemaking data, a new LTCH may not be listed 
in this supplemental file for a few years. For this reason, a newly 
opened LTCH could contact their MAC to ensure that its wage index value 
is not less than 95 percent of the value paid to it for the prior 
Federal fiscal year. This supplemental data file for public use will be 
posted on the CMS website for this final rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    Comment: A commenter expressed their appreciation of the permanent 
cap on LTCH PPS wage index decreases policy.
    Response: We thank the commenter for their support of this policy.
b. Permanent Cap on IPPS Comparable Wage Index Decreases
    Determining LTCH PPS payments for short-stay-outlier cases 
(reflected in Sec.  412.529) and site neutral payment rate cases 
(reflected in Sec.  412.522(c)) requires calculating an ``IPPS 
comparable amount.'' For information on this ``IPPS comparable amount'' 
calculation, we refer the reader to the FY 2016 IPPS/LTCH PPS final 
rule (80 FR 49608 through 49610). Determining LTCH PPS payments for 
LTCHs that do not meet the applicable discharge payment percentage 
(reflected in Sec.  412.522(d)) requires calculating an ``IPPS 
equivalent amount.'' For information on this ``IPPS equivalent amount'' 
calculation, we refer the reader to the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42439 through 42445).
    Calculating both the ``IPPS comparable amount'' and the ``IPPS 
equivalent amount'' requires adjusting the IPPS operating and capital 
standardized amounts by the applicable IPPS wage index for 
nonreclassified IPPS hospitals. That is, the standardized amounts are 
adjusted by the IPPS wage index for nonreclassified IPPS hospitals 
located in the same geographic area as the LTCH. In the FY 2023 IPPS/
LTCH PPS final rule (87 FR 49442 through 49443), we finalized a policy 
that applies a permanent 5-percent cap on decreases in an LTCH's 
applicable IPPS comparable wage index from its applicable IPPS 
comparable wage index in the prior year. Historically, we have not 
budget neutralized changes to LTCH PPS payments that result from the 
annual update of the IPPS wage index for nonreclassified IPPS 
hospitals. Consistent with this approach, the cap on decreases in an 
LTCH's applicable IPPS comparable wage index is not applied in a budget 
neutral manner.
    Under this policy, an LTCH's applicable IPPS comparable wage index 
will not be less than 95 percent of its applicable IPPS comparable wage 
index for the prior fiscal year. An LTCH's applicable IPPS comparable 
wage index cap adjustment is determined based on the wage index value 
applicable to the LTCH on the last day of the prior Federal fiscal 
year. However, for newly opened LTCHs that become operational on or 
after the first day of the fiscal year, these LTCHs will not be subject 
to the applicable IPPS comparable wage index cap since they were not 
paid under the LTCH PPS in the prior year. For example, newly opened 
LTCHs that become operational during FY 2025 would not be eligible for 
the applicable IPPS comparable wage index cap in FY 2025. This means 
that these LTCHs would receive the calculated applicable IPPS 
comparable wage index for the area in which they are geographically 
located, even if other LTCHs in the same geographic area are receiving 
a wage cap. The cap on IPPS comparable wage index decreases policy is 
reflected at Sec.  412.529(d)(4)(ii)(B) and (d)(4)(iii)(B).
    Similar to the information we are making available for the cap on 
the LTCH PPS wage index values (described previously), for each LTCH we 
identify in our rulemaking data, we are including in a supplemental 
data file the wage index values from both fiscal years used in 
determining its capped applicable IPPS comparable wage index. Due to 
the lag in rulemaking data, a new LTCH may not be listed in this 
supplemental file for a few years. For this reason, a newly opened LTCH 
could contact its MAC to ensure that its applicable IPPS comparable 
wage index value is not less than 95 percent of the value paid to them 
for the prior Federal fiscal year. This supplemental data file for 
public use will be posted on the CMS website for this final rule at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
6. Budget Neutrality Adjustments for Changes to the LTCH PPS Standard 
Federal Payment Rate Area Wage Level Adjustment
    Historically, the LTCH PPS wage index and labor-related share are 
updated annually based on the latest available data. Under Sec.  
412.525(c)(2), any changes to the area wage index values or labor-
related share are to be made in a budget neutral manner such that 
estimated aggregate LTCH PPS payments are unaffected; that is, will be 
neither greater than nor less than estimated aggregate LTCH PPS 
payments without such changes to the area wage level adjustment. Under 
this policy, we determine an area wage level adjustment budget 
neutrality factor that is applied to the standard Federal payment rate 
to ensure that any changes to the area wage level adjustments are 
budget neutral such that any changes to the area wage index values or 
labor-related share would not result in any change (increase or 
decrease) in estimated aggregate LTCH PPS payments. Accordingly, under 
Sec.  412.523(d)(4), we have applied an area wage level adjustment 
budget neutrality factor in determining the standard Federal payment 
rate, and we also established a methodology for calculating an area 
wage level adjustment budget neutrality factor. (For additional 
information on the establishment of our budget neutrality policy for 
changes to the area wage level adjustment, we refer readers to the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51771 through 51773 and 51809).)
    For FY 2025, in accordance with Sec.  412.523(d)(4), we are 
applying an area wage level budget neutrality factor to adjust the LTCH 
PPS standard Federal payment rate to account for the estimated effect 
of the adjustments or updates to the area wage level adjustment under 
Sec.  412.525(c)(1) on estimated aggregate LTCH PPS payments, 
consistent with the methodology we established in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51773). As discussed in section V.B.6. of this 
Addendum, consistent with, Sec.  412.525(c)(2), we include the 
application of the 5-percent cap on wage index decreases in the 
determination of the area wage level budget neutrality factor. 
Specifically, as we proposed, we determined an area wage level 
adjustment budget neutrality factor that is applied to the LTCH PPS 
standard Federal payment rate under Sec.  412.523(d)(4) for FY 2025 
using the following methodology:
    Step 1--Simulate estimated aggregate LTCH PPS standard Federal 
payment

[[Page 69978]]

rate payments using the FY 2024 wage index values and the FY 2024 
labor-related share of 68.5 percent. We note that the FY 2024 wage 
index values are based on the existing CBSA labor market areas used in 
the FY 2024 IPPS/LTCH PPS final rule.
    Step 2--Simulate estimated aggregate LTCH PPS standard Federal 
payment rate payments using the FY 2025 wage index values (including 
the update to the CBSA labor market areas and the application of the 5 
percent cap on wage index decreases) and the FY 2025 labor-related 
share of 72.8 percent. (As noted previously, the changes to the wage 
index values based on updated hospital wage data are discussed in 
section V.B.4. of this Addendum and the labor-related share is 
discussed in section V.B.3. of this Addendum.)
    Step 3--Calculate the ratio of these estimated total LTCH PPS 
standard Federal payment rate payments by dividing the estimated total 
LTCH PPS standard Federal payment rate payments using the FY 2024 area 
wage level adjustments (calculated in Step 1) by the estimated total 
LTCH PPS standard Federal payment rate payments using the FY 2025 
updates to the area wage level adjustment (calculated in Step 2) to 
determine the budget neutrality factor for updates to the area wage 
level adjustment for FY 2025 LTCH PPS standard Federal payment rate 
payments.
    Step 4--Apply the FY 2025 updates to the area wage level adjustment 
budget neutrality factor from Step 3 to determine the FY 2025 LTCH PPS 
standard Federal payment rate after the application of the FY 2025 
annual update.
    As we proposed, we used the most recent data available, including 
claims from the FY 2023 MedPAR file, in calculating the FY 2025 LTCH 
PPS standard Federal payment rate area wage level adjustment budget 
neutrality factor. We note that, because the area wage level adjustment 
under Sec.  412.525(c) is an adjustment to the LTCH PPS standard 
Federal payment rate, consistent with historical practice, we only used 
data from claims that qualified for payment at the LTCH PPS standard 
Federal payment rate under the dual rate LTCH PPS to calculate the FY 
2025 LTCH PPS standard Federal payment rate area wage level adjustment 
budget neutrality factor.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49448), we discussed 
the abnormal charging practices of an LTCH (CCN 312024) in FY 2021 that 
led to the LTCH receiving an excessive amount of high-cost outlier 
payments. In that rule, we stated our understanding that, based on 
information we received from the provider, these abnormal charging 
practices would not persist into FY 2023. Therefore, we did not include 
their cases in our model for determining the FY 2023 outlier fixed-loss 
amount. In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59376), we 
stated that the FY 2022 MedPAR claims also reflect the abnormal 
charging practices of this LTCH. Therefore, we removed claims from CCN 
312024 when determining the fixed-loss amount for LTCH PPS standard 
Federal payment rate cases for FY 2024 and all other FY 2024 
ratesetting calculations, including the MS-LTC-DRG relative weights and 
the calculation of the area wage level adjustment budget neutrality 
factor. Given recent actions by the Department of Justice regarding CCN 
312024 (see https://www.justice.gov/opa/pr/new-jersey-hospital-and-investors-pay-united-states-306-million-alleged-false-claims-related), 
as we proposed, we again removed claims from CCN 312024 when 
determining the area wage level adjustment budget neutrality factor for 
FY 2025 and all other FY 2025 ratesetting calculations, including the 
MS-LTC-DRG relative weights and the fixed-loss amount for LTCH PPS 
standard Federal payment rate cases.
    For this final rule, using the steps in the methodology previously 
described, we determined a FY 2025 LTCH PPS standard Federal payment 
rate area wage level adjustment budget neutrality factor of 0.9964315. 
Accordingly, in section V.A. of this Addendum, we applied the area wage 
level adjustment budget neutrality factor of 0.9964315 to determine the 
FY 2025 LTCH PPS standard Federal payment rate, in accordance with 
Sec.  412.523(d)(4).

C. Cost-of-Living Adjustment (COLA) for LTCHs Located in Alaska and 
Hawaii

    Under Sec.  412.525(b), a cost-of-living adjustment (COLA) is 
provided for LTCHs located in Alaska and Hawaii to account for the 
higher costs incurred in those States. Specifically, we apply a COLA to 
payments to LTCHs located in Alaska and Hawaii by multiplying the 
nonlabor-related portion of the standard Federal payment rate by the 
applicable COLA factors established annually by CMS. Higher labor-
related costs for LTCHs located in Alaska and Hawaii are taken into 
account in the adjustment for area wage levels previously described. 
The methodology used to determine the COLA factors for Alaska and 
Hawaii is based on a comparison of the growth in the Consumer Price 
Indexes (CPIs) for Anchorage, Alaska, and Honolulu, Hawaii, relative to 
the growth in the CPI for the average U.S. city as published by the 
Bureau of Labor Statistics (BLS). It also includes a 25-percent cap on 
the CPI-updated COLA factors. Under our current policy, we have updated 
the COLA factors using the methodology as previously described every 4 
years (at the same time as the update to the labor-related share of the 
IPPS market basket) and we last updated the COLA factors for Alaska and 
Hawaii published by OPM for 2009 in FY 2022 (86 FR 45559 through 
45560).
    We continue to believe that determining updated COLA factors using 
this methodology would appropriately adjust the nonlabor-related 
portion of the LTCH PPS standard Federal payment rate for LTCHs located 
in Alaska and Hawaii. Therefore, in this final rule, for FY 2025, under 
the broad authority conferred upon the Secretary by section 123 of the 
BBRA, as amended by section 307(b) of the BIPA, to determine 
appropriate payment adjustments under the LTCH PPS, as we proposed, we 
are continuing to use the COLA factors based on the 2009 OPM COLA 
factors updated through 2020 by the comparison of the growth in the 
CPIs for Anchorage, Alaska, and Honolulu, Hawaii, relative to the 
growth in the CPI for the average U.S. city as established in the FY 
2022 IPPS/LTCH PPS final rule. (For additional details on our current 
methodology for updating the COLA factors for Alaska and Hawaii and for 
a discussion on the FY 2022 COLA factors, we refer readers to the FY 
2022 IPPS/LTCH PPS final rule (86 FR 45559 through 45560).)

[[Page 69979]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.345

D. Adjustment for LTCH PPS High Cost Outlier (HCO) Cases

1. HCO Background
    From the beginning of the LTCH PPS, we have included an adjustment 
to account for cases in which there are extraordinarily high costs 
relative to the costs of most discharges. Under this policy, additional 
payments are made based on the degree to which the estimated cost of a 
case (which is calculated by multiplying the Medicare allowable covered 
charge by the hospital's overall hospital CCR) exceeds a fixed-loss 
amount. This policy results in greater payment accuracy under the LTCH 
PPS and the Medicare program, and the LTCH sharing the financial risk 
for the treatment of extraordinarily high-cost cases.
    We retained the basic tenets of our HCO policy in FY 2016 when we 
implemented the dual rate LTCH PPS payment structure under section 1206 
of Public Law 113-67. LTCH discharges that meet the criteria for 
exclusion from the site neutral payment rate (that is, LTCH PPS 
standard Federal payment rate cases) are paid at the LTCH PPS standard 
Federal payment rate, which includes, as applicable, HCO payments under 
Sec.  412.523(e). LTCH discharges that do not meet the criteria for 
exclusion are paid at the site neutral payment rate, which includes, as 
applicable, HCO payments under Sec.  412.522(c)(2)(i). In the FY 2016 
IPPS/LTCH PPS final rule, we established separate fixed-loss amounts 
and targets for the two different LTCH PPS payment rates. Under this 
bifurcated policy, the historic 8-percent HCO target was retained for 
LTCH PPS standard Federal payment rate cases, with the fixed-loss 
amount calculated using only data from LTCH cases that would have been 
paid at the LTCH PPS standard Federal payment rate if that rate had 
been in effect at the time of those discharges. For site neutral 
payment rate cases, we adopted the operating IPPS HCO target (currently 
5.1 percent) and set the fixed-loss amount for site neutral payment 
rate cases at the value of the IPPS fixed-loss amount. Under the HCO 
policy for both payment rates, an LTCH receives 80 percent of the 
difference between the estimated cost of the case and the applicable 
HCO threshold, which is the sum of the LTCH PPS payment for the case 
and the applicable fixed-loss amount for such case.
    To maintain budget neutrality, consistent with the budget 
neutrality requirement at Sec.  412.523(d)(1) for HCO payments to LTCH 
PPS standard Federal rate payment cases, we also adopted a budget 
neutrality requirement for HCO payments to site neutral payment rate 
cases by applying a budget neutrality factor to the LTCH PPS payment 
for those site neutral payment rate cases. (For additional details on 
the HCO policy adopted for site neutral payment rate cases under the 
dual rate LTCH PPS payment structure, including the budget neutrality 
adjustment for HCO payments to site neutral payment rate cases, we 
refer readers to Sec.  412.522(c)(2)(i) of the regulations and to the 
FY 2016 IPPS/LTCH PPS final rule (80 FR 49617 through 49623).)
2. Determining LTCH CCRs Under the LTCH PPS
a. Background
    As noted previously, CCRs are used to determine payments for HCO 
adjustments for both payment rates under the LTCH PPS and are also used 
to determine payments for site neutral payment rate cases. As noted 
earlier, in determining HCO and the site neutral payment rate payments 
(regardless of whether the case is also an HCO), we generally calculate 
the estimated cost of the case by multiplying the LTCH's overall CCR by 
the Medicare allowable charges for the case. An overall CCR is used 
because the LTCH PPS uses a single prospective payment per discharge 
that covers both inpatient operating and capital-related costs. The 
LTCH's overall CCR is generally computed based on the sum of LTCH 
operating and capital costs (as described in section 150.24, Chapter 3, 
of the Medicare Claims Processing Manual (Pub. 100-4)) as compared to 
total Medicare charges (that is, the sum of its operating and capital 
inpatient routine and ancillary charges), with those values determined 
from either the most recently settled cost report or the most recent 
tentatively settled cost report, whichever is from the latest cost 
reporting period. However, in certain instances, we use an alternative 
CCR, such as the statewide average CCR, a CCR that is specified by CMS, 
or one that is requested by the hospital. (We refer readers to Sec.  
412.525(a)(4)(iv) of the regulations for further details regarding CCRs 
and HCO adjustments for either LTCH PPS payment rate and Sec.  
412.522(c)(1)(ii) for the site neutral payment rate.)
    The LTCH's calculated CCR is then compared to the LTCH total CCR 
ceiling. Under our established policy, an LTCH with a calculated CCR in 
excess of the applicable maximum CCR threshold (that is, the LTCH total 
CCR ceiling, which is calculated as 3 standard deviations from the 
national geometric average CCR) is generally assigned the applicable 
statewide CCR.

[[Page 69980]]

This policy is premised on a belief that calculated CCRs in excess of 
the LTCH total CCR ceiling are most likely due to faulty data reporting 
or entry, and CCRs based on erroneous data should not be used to 
identify and make payments for outlier cases.
b. LTCH Total CCR Ceiling
    Consistent with our historical practice, as we proposed, we used 
the best available data to determine the LTCH total CCR ceiling for FY 
2025 in this final rule. Specifically, in this final rule, we used our 
established methodology for determining the LTCH total CCR ceiling 
based on IPPS total CCR data from the March 2024 update of the Provider 
Specific File (PSF), which is the most recent data available. 
Accordingly, we are establishing an LTCH total CCR ceiling of 1.368 
under the LTCH PPS for FY 2025 in accordance with Sec.  
412.525(a)(4)(iv)(C)(2) for HCO cases under either payment rate and 
Sec.  412.522(c)(1)(ii) for the site neutral payment rate. (For 
additional information on our methodology for determining the LTCH 
total CCR ceiling, we refer readers to the FY 2007 IPPS final rule (71 
FR 48117 through 48119).)
    We did not receive any public comments on our proposals and are 
finalizing our proposals as described previously.
c. LTCH Statewide Average CCRs
    Our general methodology for determining the statewide average CCRs 
used under the LTCH PPS is similar to our established methodology for 
determining the LTCH total CCR ceiling because it is based on ``total'' 
IPPS CCR data. (For additional information on our methodology for 
determining statewide average CCRs under the LTCH PPS, we refer readers 
to the FY 2007 IPPS final rule (71 FR 48119 through 48120).) Under the 
LTCH PPS HCO policy at Sec.  412.525(a)(4)(iv)(C), the SSO policy at 
Sec.  412.529(f)(4)(iii), and the site neutral payment rate at Sec.  
412.522(c)(1)(ii), the MAC may use a statewide average CCR, which is 
established annually by CMS, if it is unable to determine an accurate 
CCR for an LTCH in one of the following circumstances: (1) New LTCHs 
that have not yet submitted their first Medicare cost report (a new 
LTCH is defined as an entity that has not accepted assignment of an 
existing hospital's provider agreement in accordance with Sec.  
489.18); (2) LTCHs whose calculated CCR is in excess of the LTCH total 
CCR ceiling; and (3) other LTCHs for whom data with which to calculate 
a CCR are not available (for example, missing or faulty data). (Other 
sources of data that the MAC may consider in determining an LTCH's CCR 
include data from a different cost reporting period for the LTCH, data 
from the cost reporting period preceding the period in which the 
hospital began to be paid as an LTCH (that is, the period of at least 6 
months that it was paid as a short-term, acute care hospital), or data 
from other comparable LTCHs, such as LTCHs in the same chain or in the 
same region.)
    Consistent with our historical practice of using the best available 
data, in this final rule, as we proposed, we are using our established 
methodology for determining the LTCH PPS statewide average CCRs, based 
on the most recent complete IPPS ``total CCR'' data from the March 2024 
update of the PSF. As we proposed, we are establishing LTCH PPS 
statewide average total CCRs for urban and rural hospitals that will be 
effective for discharges occurring on or after October 1, 2024, through 
September 30, 2025, in Table 8C listed in section VI. of this Addendum 
(and available via the internet on the CMS website).
    Under the LTCH PPS labor market areas for FY 2025, all areas in the 
District of Columbia, New Jersey, and Rhode Island are classified as 
urban. Therefore, there are no rural statewide average total CCRs 
listed for those jurisdictions in Table 8C. This policy is consistent 
with the policy that we established when we revised our methodology for 
determining the applicable LTCH statewide average CCRs in the FY 2007 
IPPS final rule (71 FR 48119 through 48121) and is the same as the 
policy applied under the IPPS. In addition, consistent with our 
existing methodology, in determining the urban and rural statewide 
average total CCRs for Maryland LTCHs paid under the LTCH PPS, as we 
proposed, we are continuing to use, as a proxy, the national average 
total CCR for urban IPPS hospitals and the national average total CCR 
for rural IPPS hospitals, respectively. We are using this proxy because 
we believe that the CCR data in the PSF for Maryland hospitals may not 
be entirely accurate (as discussed in greater detail in the FY 2007 
IPPS final rule (71 FR 48120)).
    Furthermore, although Connecticut, Massachusetts, and North Dakota 
have areas that are designated as rural under the LTCH PPS labor market 
areas for FY 2025, in our calculation of the LTCH statewide average 
CCRs, there were no trimmed CCR data available from IPPS hospitals 
located in these rural areas as of March 2024. We refer the reader to 
section II.A.4.i.(2). of this Addendum for details on the trims applied 
to the IPPS CCR data from the March 2024 update of the PSF, which are 
the same data used to calculate the LTCH statewide average total CCRs. 
Therefore, consistent with our existing methodology, we used the 
national average total CCR for rural IPPS hospitals for rural 
Connecticut, Massachusetts, and North Dakota in Table 8C. We note that 
there were no LTCHs located in these rural areas as of March 2024.
    We did not receive any public comments on our proposals. We are 
finalizing our proposals as described previously.
d. Reconciliation of HCO Payments
    Under the HCO policy at Sec.  412.525(a)(4)(iv)(D), the payments 
for HCO cases are subject to reconciliation (regardless of whether 
payment is based on the LTCH standard Federal payment rate or the site 
neutral payment rate). Specifically, any such payments are reconciled 
at settlement based on the CCR that was calculated based on the cost 
report coinciding with the discharge. For additional information on the 
reconciliation policy, we refer readers to sections 150.26 through 
150.28 of the Medicare Claims Processing Manual (Pub. 100-4), as added 
by Change Request 7192 (Transmittal 2111; December 3, 2010) and the RY 
2009 LTCH PPS final rule (73 FR 26820 through 26821), and most recently 
modified by Change Request 13566 (Transmittal 12558; March 28, 2024) 
with an update to the outlier reconciliation criteria.
    Comment: Commenters were concerned that CMS has added new criteria 
for determining which LTCHs will have their outlier payments reconciled 
in CR 13566. The commenters stated their belief that new reconciliation 
criteria constitute a substantive change to CMS' payment policy that 
cannot be adopted without notice and comment rulemaking. The commenters 
urged CMS to withdraw the CR.
    Response: CMS established the outlier reconciliation regulation 
under Sec.  412.525(a)(4)(iv)(D) effective for discharges on or after 
October 1, 2006, which makes all LTCH outlier payments subject to 
reconciliation. CMS has not modified the outlier regulation. The 
instructions CMS has issued via CR 13566 have set forth an enforcement 
policy that determines when MACs will identify additional LTCHs for 
reconciliation referral. They do not change the legal standards that 
govern the LTCHs.

[[Page 69981]]

3. High-Cost Outlier Payments for LTCH PPS Standard Federal Payment 
Rate Cases
a. High-Cost Outlier Payments for LTCH PPS Standard Federal Payment 
Rate Cases
    Under the regulations at Sec.  412.525(a)(2)(ii) and as required by 
section 1886(m)(7) of the Act, the fixed-loss amount for HCO payments 
is set each year so that the estimated aggregate HCO payments for LTCH 
PPS standard Federal payment rate cases are 99.6875 percent of 8 
percent (that is, 7.975 percent) of estimated aggregate LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases. (For more 
details on the requirements for high-cost outlier payments in FY 2018 
and subsequent years under section 1886(m)(7) of the Act and additional 
information regarding high-cost outlier payments prior to FY 2018, we 
refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38542 
through 38544).)
b. Fixed-Loss Amount for LTCH PPS Standard Federal Payment Rate Cases 
for FY 2025
    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36590 through 
36592), we presented our proposed methodology for determining the 
outlier fixed-loss amount for LTCH PPS standard Federal payment rate 
cases and proposed an outlier fixed-loss amount of $90,921. In the 
proposed rule, we acknowledged that the proposed increase to the fixed-
loss amount from the FY 2024 fixed-loss amount ($59,873) was 
substantial. We also acknowledged that the FY 2024 fixed-loss amount 
was substantially higher than the FY 2023 fixed-loss amount ($38,518). 
Recognizing that such substantial increases to the fixed-loss amount in 
consecutive years could impact LTCH operations, in the proposed rule, 
we considered an alternative approach for determining the proposed 
fixed-loss threshold for FY 2025. As discussed in full in section 
I.O.4. of Appendix A of the proposed rule (89 FR 36664), the 
alternative approach we considered would have established the FY 2025 
fixed-loss amount as an average of the FY 2024 fixed-loss amount and 
our modelled FY 2025 fixed-loss amount. Under this approach, the 
proposed fixed-loss amount would have been $75,397 (($59,873 + 
$90,921)/2). In the proposed rule, we solicited comments on our 
proposed fixed-loss amount for FY 2025 as well as on the alternative 
approach that we considered for determining the fixed-loss amount for 
FY 2025. In this section, we first summarize and respond to the 
comments received in response to those solicitations. Later in this 
section, we present the detailed application of our finalized 
methodology after consideration of the comments received.
    Comment: Several commenters objected to the charge inflation factor 
we proposed to apply under our proposed methodology for determining the 
FY 2025 fixed-loss amount. Many commenters urged CMS to return to the 
methodology employed prior to FY 2022 in which the charge inflation 
factor was set equal to the market basket update. These commenters 
stated that returning to this methodology would provide greater 
stability and predictability to the outlier fixed-loss amount. A 
commenter asserted that the proposed charge inflation methodology has 
led to inaccurate fixed-loss amounts in previous years and therefore 
CMS should return to our previous methodology. This commenter stated 
that CMS significantly overpaid outliers in FY 2023 relative to our 
statutory 7.975 percent target and would have significantly underpaid 
outliers in FY 2024 but for the modifications CMS made to the 
methodology in the FY 2024 final rule, in which CMS applied a charge 
inflation factor and CCR adjustment factor based on data prior to the 
COVID-19 PHE rather than based on the most recently available data. 
Another commenter stated that CMS should return to its previous 
methodology because of the uncertain impacts of inflation on charges 
and lagged availability of changes in CCRs. A commenter requested that 
CMS calculate the charge inflation factor based on data from prior to 
the COVID-19 PHE. Another commenter stated that CMS should modify the 
statistical outlier trim used in our methodology for determining the 
charge inflation factor by removing claims for providers with a 
calculated charge growth factor that exceeds 1 standard deviation from 
the mean provider charge growth factor. A commenter requested that when 
determining the two-year charge inflation factor, CMS double the one-
year charge inflation factor rather than squaring the one-year charge 
inflation factor. The same commenter stated that the CCR adjustment 
factor is a double adjustment of the charge inflation factor and 
requested that CMS remove the CCR adjustment factor from the 
calculation of the outlier fixed-loss amount.
    Response: We appreciate the feedback and suggestions that 
commenters provided on the proposed charge inflation factor. We 
appreciate the importance of more stability and predictability in the 
annual fixed-loss amount. We agree that it is reasonable to evaluate 
the effectiveness and accuracy of our fixed-loss amount methodology by 
determining how close actual outlier payments were to our statutory 
target of 7.975 percent of total payments for LTCH PPS standard Federal 
payment rate cases. We also acknowledge that in recent years and in FY 
2025, the calculated fixed-loss amount would have been lower if we had 
estimated charge inflation based on the market basket update. However, 
we do not agree with commenters that the fixed-loss amounts calculated 
under the previous market basket methodology would have yielded outlier 
payments closer to the statutory target in either FY 2022 or FY 2023. 
We estimate that high cost outlier payments significantly exceeded the 
statutory 7.975 percent target in both FY 2022 and FY 2023. Using the 
previous market basket methodology for FY 2022 and FY 2023 would have 
resulted in lower estimates of costs per discharge and lower fixed-loss 
amounts. These lowered fixed-loss amounts would have resulted in high 
cost outlier payments exceeding the statutory target by even more than 
we estimate actually occurred. While commenters also implied that this 
market basket approach would have yielded a more accurate fixed-loss 
amount in FY 2024, we note that commenters are referring to our 
projection of FY 2024 outlier payments included in the proposed rule. 
The FY 2024 payment projections in both the proposed rule and this 
final rule are not based on actual FY 2024 claims but rather based on a 
payment model that uses FY 2023 claims. We refer the reader to section 
J.3.C. of the Appendix to this final rule for a full description of our 
methodology for modelling FY 2024 payments using FY 2023 claims. We 
believe it is more appropriate to evaluate the effectiveness and 
accuracy of our fixed-loss amount methodology based on an analysis of 
actual FY 2024 payments rather than a projection of FY 2024 payments. 
For these reasons we continue to believe using a charge inflation 
factor based on actual growth rates in charges from historical claims 
data rather than one based on quarterly market basket update values 
leads to better accuracy in calculating the fixed-loss amount that 
would result in actual outlier payments meeting the statutory target.
    We also disagree with the other modifications commenters suggested 
we make to the charge inflation factor. We believe using the most 
recent data available is appropriate for projecting charge inflation 
for FY 2025. In FYs 2022 through 2024, we used a charge

[[Page 69982]]

inflation factor based on data prior to the COVID-19 PHE. However, 
after analyzing actual LTCH PPS claims from FY 2022 and FY 2023, we 
believe actual outlier payments during these years would have been 
closer to the statutory target if we had used the most recent available 
data to determine the charge inflation factor when establishing the 
fixed-loss amounts for these fiscal years. We note that the commenter 
that requested CMS remove claims for providers with a calculated charge 
growth factor that exceeds 1 standard deviation from the mean provider 
charge growth factor did not provide any justification for making this 
methodology change. We continue to believe that removing providers from 
the charge inflation factor calculation with a calculated charge growth 
factor that exceeds 3 standard deviations from the mean provider charge 
growth factor is effective at removing actual aberrations in the data 
that would distort the measure of average charge growth. We also note 
that using 3 standard deviations from the mean as a threshold for 
removing aberrations in ratesetting data is a standard method that CMS 
uses in other IPPS and LTCH PPS ratesetting calculations, such as the 
calculation of the relative weights. We also disagree with the comment 
that the CCR adjustment factor is duplicative of the charge inflation 
factor or that it should be applied in an additive rather than a 
multiplicative manner. The charge inflation factor accounts for the 
historical growth in charges for LTCHs while the CCR adjustment factor 
accounts for historical changes in the relationship between costs and 
charges for LTCHs. We believe both factors are necessary for estimating 
costs of LTCH cases in FY 2025 from historical LTCH data. To account 
for annual growth in LTCHs' charges, we also continue to believe that 
squaring the one-year charge inflation factor is the appropriate 
calculation for projecting year-over-year charge inflation for a two-
year period That is, to increase the charges from the FY 2023 MedPAR 
claims to projected FY 2025 charge levels, it is necessary to multiply 
the FY 2023 charges by the one-year charge inflation factor two times 
(FY 2023 charges x 1-year charge inflation factor x 1-year charge 
inflation factor). To simplify this equation, the FY 2023 charges can 
instead be multiplied by the 1-year charge inflation factor squared (FY 
2023 charges x (1-year charge inflation factor [supcaret]2)) and 
achieve the same resulting estimate of projected FY 2025 charges.
    Comment: Some commenters asserted that the data CMS proposed to use 
were significantly impacted by the COVID-19 pandemic. These commenters 
stated that the claims and cost report data CMS proposed to use reflect 
patient acuity and cost trends that are unlikely to be repeated in FY 
2025. Examples provided by commenters included differences in patient 
acuity during the COVID-19 pandemic, levels of COVID-19 
hospitalizations, and changes in vaccination and immunity rates. These 
commenters also believe that CMS should adjust our ratesetting 
methodologies for FY 2025, including our methodology for determining 
the fixed-loss amount, to account for these pandemic-era impacts. We 
note that commenters did not provide recommendations for specific 
technical adjustments CMS could make to the ratesetting data to account 
for the impact of COVID-19.
    Similar to last year, some commenters urged CMS to exclude dialysis 
patients from the FY 2023 claims data when determining the outlier 
fixed-loss amount. Commenters again stated that since the start of the 
COVID-19 pandemic, the cost of providing in-hospital dialysis to LTCH 
patients has increased significantly. These commenters stated that many 
LTCHs continue to face significant increases in the rates charged by 
third-party dialysis vendors or have begun providing dialysis services 
``in-house'' at higher costs. Some commenters stated that they expect 
this trend to continue as the staffing and wage pressures faced by 
third-party vendors continue. Commenters also stated that LTCHs 
continue to face challenges discharging dialysis patients due to 
limited space in outpatient dialysis clinics, which has led to longer 
lengths of stay and costs for these cases. Commenters believe that 
dialysis cases are skewing the fixed-loss amount calculation and 
believe removing dialysis cases would allow for a more accurate 
forecast of what costs and charges will look like when these issues 
subside.
    A few commenters encouraged CMS to use more recent data to 
determine the fixed-loss amount in the final rule. Some commenters 
requested that CMS incorporate claims data from FY 2024 into the 
calculation of the fixed-loss amount for FY 2025. Another commenter 
stated that CMS should use data from more recent cost reports in the 
calculation. This commenter stated that their analysis has found that 
using data from cost reports with a July 31st cutoff historically has 
resulted in a more accurate fixed-loss amount.
    Response: We thank the commenters for their suggestions to modify 
the data used in calculating the fixed-loss threshold to account for 
COVID-19 impacts. In the FY 2023 claims data used for this final rule, 
we found that approximately 4.0 percent of LTCH standard payment rate 
claims had a COVID-19 diagnosis code. We do not have reason to assume 
that the percentage of claims with a COVID-19 diagnosis code in FY 2025 
will be meaningfully different than FY 2023. Furthermore, using the 
March 2024 update of the FY 2023 MedPAR file, we estimate that actual 
high-cost outlier payments as a percentage of total LTCH PPS standard 
Federal payment rate payments in FY 2023 would only decrease by 0.1 
percentage point if we were to remove all claims with a COVID-19 
diagnosis. Therefore, while we do not believe a modification is 
necessary, we also believe that making such modification would not have 
had a significant influence on the fixed-loss amount for FY 2025. For 
these reasons, we are not adopting commenters' suggestion to use 
different data from the data we proposed to use in calculating the 
fixed-loss threshold to account for the impact of the COVID-19 
pandemic.
    We thank the commenters for the suggestion to exclude dialysis 
claims when calculating the fixed-loss threshold. Although commenters 
described why dialysis cases were costly in FY 2023, similar to our 
response to such comments last year (88 FR 59374-59375), we still do 
not find that commenters provided sufficient evidence to support why 
costs for these types of patients would differ significantly from FY 
2023 to FY 2025, such that it would be appropriate to exclude them from 
our calculations. Some commenters explicitly stated in their comments 
that they expect LTCHs will continue to incur higher costs of providing 
dialysis services to patients. For these reasons, we are not adopting 
commenters' suggestion to exclude dialysis claims when calculating the 
fixed-loss threshold for FY 2025.
    We thank the commenters for the suggestion to use more recent data 
for calculating the fixed-loss threshold in this final rule. As 
discussed later in this section, we are using more recent data than we 
used in the proposed rule. Specifically, we are using the March 2024 
update of the FY 2023 MedPAR file and the March 2024 update of the 
Provider Specific File (PSF) to calculate the fixed-loss threshold in 
this final rule. At the time of developing this final rule, the March 
2024 update of the FY 2023 MedPAR file was the most recent full year of 
publicly available claims data. Similarly, at the time of developing 
this final rule, the March 2024 update of the PSF was the most

[[Page 69983]]

recent publicly available version of the PSF. With regards to the 
comment requesting we use the most recently available cost report data, 
we note that the PSF generally contains CCR data from an LTCH's most 
recently settled or tentatively settled cost report, whichever is from 
the latest cost reporting period.
    We continue to believe it is most appropriate to use one full year 
of publicly available claims data in our ratesetting calculations. The 
use of one full year of publicly available claims data is consistent 
with our historical practice and is not susceptible to the seasonality 
issues affiliated with using partial year data. Therefore, we are not 
adopting commenters' suggestion to incorporate claims from the first 
part of FY 2024 in our calculation of the fixed-loss threshold for FY 
2025.
    Comment: Several commenters believe that CMS needs to update its 
high-cost outlier policy to better account for the effects of the dual 
rate LTCH PPS payment structure on outlier payments. Several commenters 
stated that the under the dual rate payment structure, the majority of 
LTCH standard Federal payment rate cases have become concentrated to 
only a few MS-LTC-DRGs. The commenters stated that there is great 
variation in patient severity and costs among the cases grouped to 
these MS-LTC-DRGs which they believe leads to many of them qualifying 
for outlier payments, and that this pattern is contributing to the 
proposed increase in the fixed-loss amount. Commenters highlighted 
standard Federal payment rate cases grouped to base MS-LTC-DRGs 189 and 
207 in particular. These two base MS-DRGs, which accounted for over 40 
percent of standard Federal payment rate cases in FY 2023, are not 
subdivided based on the presence or absence of a complication or 
comorbidity (CC) or a major complication or comorbidity (MCC). 
Commenters requested that CMS refine certain MS-LTC-DRGs, such as by 
creating subgroups within these base MS-DRGs based on the presence or 
absence of CCs and MCCs, which they believe would increase LTCH PPS 
payment accuracy thereby reducing the outlier payments made to cases 
grouped to such MS-LTC-DRGs.
    Response: We appreciate commenters' suggestions on possible 
refinements to certain MS-LTC-DRGs, in particular the concerns 
regarding the absence of CC or MCC subgroups within certain high-volume 
MS-LTC-DRGs, and commenters' thoughts on the impact this may have on 
LTCH PPS outlier payments. We note that we did not propose to make any 
adjustments or create CC or MCC subgroups within the MS-LTC-DRGs as 
requested by commenters. We also recognize that such adjustments would 
have differential impacts on individual LTCHs based on each LTCH's case 
mix. As such, we would like to have the opportunity to explore and 
analyze such adjustments more before making this type of change. 
Therefore, we are not adopting any of the changes to the MS-LTC-DRGs 
suggested by commenters in this final rule. However, we may consider 
these comments for future rulemaking.
    Comment: Commenters expressed concern with the impact of the LTCH 
PPS dual rate payment system on the claims data CMS uses for 
calculating the fixed-loss amount. Commenters asserted that because CMS 
only uses cases that would have been paid the standard Federal rate, 
the claims dataset used in the calculation is smaller and on average 
has a higher acuity than the claims datasets CMS used prior to the 
start of the dual rate payment structure. The commenters believe this 
change has led to fluctuations in the fixed-loss amount. A commenter 
stated that CMS should reconsider whether the statutory outlier payment 
target of 7.975 percent is still an appropriate target for LTCH PPS 
standard Federal rate cases under the dual rate payment system.
    Response: We thank the commenters for this feedback. We note that 
commenters did not provide specific recommendations on how CMS could 
address the decreasing number of cases available for LTCH PPS 
ratesetting. We agree with commenters and believe it is reasonable to 
expect that, given the statutory patient criteria for payment at the 
LTCH PPS standard Federal rate, the average acuity of the LTCH claims 
data used for determining the FY 2025 outlier fixed-loss amount is 
higher than the average acuity of the claims data used prior to the 
start of the dual rate payment structure. However, section 1886(m)(7) 
of the Act directs the Secretary to establish a fixed-loss amount for 
LTCH PPS standard Federal payment rate cases that would result in total 
estimated outlier payments being equal to 7.975 percent of projected 
total LTCH PPS payments for LTCH PPS standard Federal payment rate 
cases.
    Comment: In general, commenters expressed concern with the proposed 
increase to the outlier fixed-loss amount and believe it would have 
negative financial impacts on LTCHs. A commenter stated that most LTCHs 
would not be able to absorb the level of financial losses that they 
believe would result from the proposed fixed-loss amount. Another 
commenter stated that the proposed increase to the outlier fixed-loss 
amount conflicts with CMS's principle for stability and predictability 
in reimbursement rates. Commenters stated that the proposed outlier 
fixed-loss amount would reduce access to LTCHs, such as restricting the 
number of patients they admit with pressure injuries. Many commenters 
stated that decreased access to LTCH services would lead to significant 
increases in their length of stays and costs in the intensive care 
units of IPPS hospitals. Several commenters stated that the proposed 
outlier fixed-loss amount would lead to LTCH closures. Many commenters 
expressed that even the outlier fixed-loss amount determined using the 
alternative approach we considered would require LTCHs to experience 
significant financial losses. A commenter stated that the alternative 
approach we considered for determining the outlier fixed-loss amount 
would only delay the implementation of a steep financial cliff for 
LTCHs. Commenters provided a variety of recommendations for CMS to 
consider when determining the fixed-loss amount in this final rule.
    We received several comments requesting that we adopt a modified 
version of the alternative approach we considered in the proposed rule 
for determining the FY 2025 fixed-loss amount. Many of these commenters 
requested that instead of phasing in the increase in the fixed-loss 
amount over two-years, we phase in the increase over a longer period, 
such as a four-year period. Commenters believe this modified approach 
would create a more stable transition.
    A commenter requested that CMS set the FY 2025 fixed-loss amount 
equal to the FY 2023 fixed-loss amount. Other commenters similarly 
requested that CMS set the FY 2025 fixed-loss amount equal to the FY 
2024 fixed-loss amount. Several commenters requested that CMS adopt a 
non-budget neutral cap on annual increases to the fixed-loss amount. 
Commenters stated that this cap would be similar to the cap policies 
CMS already applies to the LTCH PPS wage index and MS-LTC-DRG relative 
weights. Some commenters suggested that such a cap be temporary while 
others suggested it become a permanent part of the methodology. Such a 
limit on annual increases to the fixed-loss amount suggested by 
commenters included a cap of no more than 5 percent, of no more than 10 
percent, and set equal to the annual market basket percent increase. In 
general, commenters believe a cap on annual increases would provide 
stability and predictability to the LTCH PPS.

[[Page 69984]]

    Response: We thank the commenters for the feedback, including the 
variety of suggestions on alternative methods for determining the FY 
2025 fixed-loss amount. In the proposed rule we acknowledged that the 
proposed increase to the fixed-loss amount was substantial and sought 
comments on our proposed fixed-loss amount as well as an alternative 
approach we considered. Specifically, in the FY 2025 IPPS/LTCH PPS 
proposed rule, we proposed a fixed-loss amount for FY 2025 of $90,921 
that would result in estimated outlier payments projected to be equal 
to 7.975 percent of estimated FY 2025 payments for such cases. In that 
same proposed rule, we also discussed an alternative approach we 
considered which would have established the FY 2025 fixed-loss amount 
as an average of the FY 2024 fixed amount and our modelled FY 2025 
fixed-loss amount. Under this approach, the proposed fixed-loss amount 
would have been $75,397. This fixed-loss amount would have resulted in 
estimated outlier payments projected to exceed the 7.975 percent 
statutory target, and we would have used the broad authority conferred 
upon the Secretary under section 307(b)(1) of the BIPA to make this 
``adjustment'' to ``outliers'' under the LTCH PPS.
    As discussed in greater detail later in this section, with the use 
of more recent data available for this final rule, our proposed 
methodology for determining the fixed-loss amount results in a fixed-
loss amount of $77,048, which is significantly lower than the fixed-
loss amount of $90,921 that we proposed. Given this significant 
reduction, at this time we do not believe it is necessary or 
appropriate to use our adjustments authority to adjust outlier payments 
by using an alternative methodology to set the fixed-loss amount that 
would not result in total estimated outlier payments being projected to 
be equal to the statutory target of 7.975 percent in section 1886(m)(7) 
of the Act. As discussed in the proposed rule (88 FR 36592), we 
currently estimate that high-cost outlier payments in both FYs 2023 and 
2024 will account for a percentage of total LTCH PPS standard Federal 
payment rate payments that is much higher than the budget neutral 
statutory target of 7.975 percent. For example, as discussed in 
Appendix A to this final rule, based on the most recent available data, 
we currently model that high-cost outlier payments in FY 2024 will 
account for 8.8 percent of total LTCH PPS standard Federal payment rate 
payments. At this time, we believe that using our proposed historical 
methodology which results in a fixed-loss amount of $77,048 for FY 2025 
strikes an appropriate balance between accurately estimating high cost 
outlier payments and considering the financial effect on LTCHs caused 
by increases in the fixed-loss amount . We understand commenters' 
concerns regarding payment stability and access to care under the LTCH 
PPS, and will continue to consider those issues for future rulemaking.
    After consideration of comments received, we are finalizing our 
proposed methodology for determining the fixed-loss amount for LTCH PPS 
standard Federal payment rate cases for FY 2025 without modification. 
In this section of this Addendum, we present the detailed application 
of our finalized methodology.
    When we implemented the LTCH PPS, we established a fixed-loss 
amount so that total estimated outlier payments are projected to equal 
8 percent of total estimated payments (that is, the target percentage) 
under the LTCH PPS (67 FR 56022 through 56026). When we implemented the 
dual rate LTCH PPS payment structure beginning in FY 2016, we 
established that, in general, the historical LTCH PPS HCO policy would 
continue to apply to LTCH PPS standard Federal payment rate cases. That 
is, the fixed-loss amount for LTCH PPS standard Federal payment rate 
cases would be determined using the LTCH PPS HCO policy adopted when 
the LTCH PPS was first implemented, but we limited the data used under 
that policy to LTCH cases that would have been LTCH PPS standard 
Federal payment rate cases if the statutory changes had been in effect 
at the time of those discharges.
    To determine the applicable fixed-loss amount for LTCH PPS standard 
Federal payment rate cases, we estimate outlier payments and total LTCH 
PPS payments for each LTCH PPS standard Federal payment rate case (or 
for each case that would have been an LTCH PPS standard Federal payment 
rate case if the statutory changes had been in effect at the time of 
the discharge) using claims data from the MedPAR files. In accordance 
with Sec.  412.525(a)(2)(ii), the applicable fixed-loss amount for LTCH 
PPS standard Federal payment rate cases results in estimated total 
outlier payments being projected to be equal to 7.975 percent of 
projected total LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49448), we discussed 
the abnormal charging practices of an LTCH (CCN 312024) in FY 2021 that 
led to the LTCH receiving an excessive amount of high-cost outlier 
payments. In that rule, we stated our belief, based on information we 
received from the provider, that these abnormal charging practices 
would not persist into FY 2023. Therefore, we did not include their 
cases in our model for determining the FY 2023 outlier fixed-loss 
amount. In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59376), we 
stated that the FY 2022 MedPAR claims also reflect the abnormal 
charging practices of this LTCH. Therefore, we removed claims from CCN 
312024 when determining the fixed-loss amount for LTCH PPS standard 
Federal payment rate cases for FY 2024 and all other FY 2024 
ratesetting calculations, including the MS-LTC-DRG relative weights and 
the calculation of the area wage level adjustment budget neutrality 
factor. Given recent actions by the Department of Justice regarding CCN 
312024 (see https://www.justice.gov/opa/pr/new-jersey-hospital-and-investors-pay-united-states-306-million-alleged-false-claims-related), 
as we proposed, we again removed claims from CCN 312024 when 
determining the fixed-loss amount for LTCH PPS standard Federal payment 
rate cases for FY 2025 and all other FY 2025 ratesetting calculations, 
including the MS-LTC-DRG relative weights and the calculation of the 
area wage level adjustment budget neutrality factor.
(1) Charge Inflation Factor for Use in Determining the Fixed-Loss 
Amount for LTCH PPS Standard Federal Payment Rate Cases for FY 2025
    Under the LTCH PPS, the cost of each claim is estimated by 
multiplying the charges on the claim by the provider's CCR. Due to the 
lag time in the availability of claims data, when estimating costs for 
the upcoming payment year we typically inflate the charges from the 
claims data by a uniform factor.
    For greater accuracy in calculating the fixed-loss amount, in the 
FY 2022 IPPS/LTCH PPS final rule (86 FR 45562 through 45566), we 
finalized a technical change to our methodology for determining the 
charge inflation factor. Similar to the method used under the IPPS 
hospital payment methodology (as discussed in section II.A.4.i.(2). of 
this Addendum), our methodology determines the LTCH charge inflation 
factor based on the historical growth in charges for LTCH PPS standard 
Federal payment rate cases, calculated using historical MedPAR claims 
data. In this section of this Addendum, we describe our charge 
inflation factor methodology.
    Step 1--Identify LTCH PPS Standard Federal Payment Rate Cases
    The first step in our methodology is to identify LTCH PPS standard 
Federal

[[Page 69985]]

payment rate cases from the MedPAR claim files for the two most 
recently available Federal fiscal year time periods. For both fiscal 
years, consistent with our historical methodology for determining 
payment rates for the LTCH PPS, we remove any claims submitted by LTCHs 
that were all-inclusive rate providers as well as any Medicare 
Advantage claims. For both fiscal years, we also remove claims from 
providers that only had claims in one of the fiscal years.
    Step 2--Remove Statistical Outliers
    The next step in our methodology is to remove all claims from 
providers whose growth in average charges was a statistical outlier. We 
remove these statistical outliers prior to calculating the charge 
inflation factor because we believe they may represent aberrations in 
the data that would distort the measure of average charge growth. To 
perform this statistical trim, we first calculate each provider's 
average charge in both fiscal years. Then, we calculate a charge growth 
factor for each provider by dividing its average charge in the most 
recent fiscal year by its average charge in the prior fiscal year. Then 
we remove all claims for providers whose calculated charge growth 
factor was outside 3 standard deviations from the mean provider charge 
growth factor.
    Step 3--Calculate the Charge Inflation Factor.
    The final step in our methodology is to use the remaining claims to 
calculate a national charge inflation factor. We first calculate the 
average charge for those remaining claims in both fiscal years. Then we 
calculate the national charge inflation factor by dividing the average 
charge in the more recent fiscal year by the average charge in the 
prior fiscal year.
    Following the methodology described previously, as we proposed, we 
computed a charge inflation factor based on the most recently available 
data. Specifically, we used the March 2024 update of the FY 2023 MedPAR 
file and the March 2023 update of the FY 2022 MedPAR as the basis of 
the LTCH PPS standard Federal payment rate cases for the two most 
recently available Federal fiscal year time periods, as described 
previously in our methodology. Therefore, we trimmed the March 2024 
update of the FY 2023 MedPAR file and the March 2023 update of the FY 
2022 MedPAR file as described in steps 1 and 2 of our methodology. To 
compute the 1-year average annual rate-of-change in charges per case, 
we compared the average covered charge per case of $281,402 
($11,630,925,449/41,332 cases) from FY 2022 to the average covered 
charge per case of $301,946 ($12,740,324,507/42,194 cases) from FY 
2023. This rate-of-change was 7.3005 percent, which results in a 1-year 
charge inflation factor of 1.073005, and a 2-year charge inflation 
factor of 1.15134 (calculated by squaring the 1-year factor). We 
inflated the billed charges obtained from the FY 2023 MedPAR file by 
this 2-year charge inflation factor of 1.15134 when determining the 
fixed-loss amount for LTCH PPS standard Federal payment rate cases for 
FY 2025.
(2) CCRs for Use in Determining the Fixed-Loss Amount for LTCH PPS 
Standard Federal Payment Rate Cases for FY 2025
    For greater accuracy in calculating the fixed-loss amount, in the 
FY 2022 IPPS/LTCH PPS final rule (86 FR 45562 through 45566), we 
finalized a technical change to our methodology for determining the 
CCRs used to calculate the fixed-loss amount. Similar to the 
methodology used for IPPS hospitals (as discussed in section 
II.A.4.i.(2). of this Addendum), our methodology adjusts CCRs obtained 
from the best available PSF data by an adjustment factor that is 
calculated based on historical changes in the average case-weighted CCR 
for LTCHs. We believe these adjusted CCRs more accurately reflect CCR 
levels in the upcoming payment year because they account for historical 
changes in the relationship between costs and charges for LTCHs. In 
this section of this Addendum, we describe our CCR adjustment factor 
methodology.
    Step 1--Assign Providers Their Historical CCRs
    The first step in our methodology is to identify providers with 
LTCH PPS standard Federal payment rate cases in the most recent MedPAR 
claims file (excluding all-inclusive rate providers and providers with 
only Medicare Advantage claims). For each of these providers, we then 
identify the CCR from the most recently available PSF. For each of 
these providers we also identify the CCR from the PSF that was made 
available one year prior to the most recently available PSF.
    Step 2--Trim Providers with Insufficient CCR Data
    The next step in our methodology is to remove from the CCR 
adjustment factor calculation any providers for which we cannot 
accurately measure changes to their CCR using the PSF data. We first 
remove any provider whose CCR was missing in the most recent PSF or 
prior year PSF. We next remove any provider assigned the statewide 
average CCR for their State in either the most recent PSF or prior year 
PSF. We lastly remove any provider whose CCR was not updated between 
the most recent PSF and prior year PSF (determined by comparing the 
effective date of the records).
    Step 3--Remove Statistical Outliers
    The next step in our methodology is to remove providers whose 
change in their CCR is a statistical outlier. To perform this 
statistical trim, for those providers remaining after application of 
Step 2, we calculate a provider-level CCR growth factor by dividing the 
provider's CCR from the most recent PSF by its CCR in the prior year's 
PSF. We then remove any provider whose CCR growth factor was outside 3 
standard deviations from the mean provider CCR growth factor. These 
statistical outliers are removed prior to calculating the CCR 
adjustment factor because we believe that they may represent 
aberrations in the data that would distort the measure of average 
annual CCR change.
    Step 4--Calculate a CCR Adjustment Factor
    The final step in our methodology is to calculate, across all 
remaining providers after application of Step 3, an average case-
weighted CCR from both the most recent PSF and prior year PSF. The 
provider case counts that we use to calculate the case-weighted average 
are determined from claims for LTCH standard Federal rate cases from 
the most recent MedPAR claims file. We note when determining these case 
counts, consistent with our historical methodology for determining the 
MS-LTC-DRG relative weights, we do not count short stay outlier claims 
as full cases but instead as a fraction of a case based on the ratio of 
covered days to the geometric mean length of stay for the MS-LTC-DRG 
grouped to the case. We calculate the national CCR adjustment factor by 
dividing the case-weighted CCR from the most recent PSF by the case-
weighted CCR from the prior year PSF.
    Following the methodology described previously, as we proposed, we 
computed a CCR adjustment factor based on the most recently available 
data. Specifically, we used the March 2024 PSF as the most recently 
available PSF and the March 2023 PSF as the PSF that was made available 
one year prior to the most recently available PSF, as described in our 
methodology. In addition, we used claims from the March 2024 update of 
the FY 2023 MedPAR file in our calculation of average case-weighted 
CCRs described in Step 4 of our methodology. Specifically, following 
the methodology described previously and, for providers with LTCH PPS 
standard Federal payment rate cases in the March 2024 update of the FY 
2023 MedPAR file, we

[[Page 69986]]

identified their CCRs from both the March 2023 PSF and March 2024 PSF. 
After performing the trims outlined in our methodology, we used the 
LTCH PPS standard Federal payment rate case counts from the FY 2023 
MedPAR file (classified using finalized Version 42 of the GROUPER) to 
calculate case-weighted average CCRs. Based on this data, we calculated 
a March 2023 national average case-weighted CCR of 0.236968 and a March 
2024 national average case-weighted CCR of 0.234910. We then calculated 
the proposed national CCR adjustment factor by dividing the March 2024 
national average case-weighted CCR by the March 2023 national average 
case-weighted CCR. This results in a proposed 1-year national CCR 
adjustment factor of 0.991315. When calculating the fixed-loss amount 
for FY 2025, we assigned the statewide average CCR for the upcoming 
fiscal year to all providers who were assigned the statewide average in 
the March 2024 PSF or whose CCR was missing in the March 2024 PSF. For 
all other providers, we multiplied their CCR from the March 2024 PSF by 
the 1-year national CCR adjustment factor of 0.991315. We note that the 
March 2024 PSF national average case-weighted CCR was 1.4 percent lower 
than the December 2023 PSF national average case-weighted CCR. We also 
note that the 1-year national adjustment CCR adjustment factor 
calculated in this final rule is 3.1 percent lower than the 1-year 
national adjustment CCR factor that we proposed. The incorporation of 
more recent cost-to-charge ratio data into our payment model was the 
primary driver of the reduction in the fixed-loss amount calculated in 
this final rule compared to the fixed-loss amount calculated in the 
proposed rule.
(3) Proposed Fixed-Loss Amount for LTCH PPS Standard Federal Payment 
Rate Cases for FY 2025
    In this final rule, for FY 2025, using the best available data and 
the steps described previously, we calculated a fixed-loss amount that 
would maintain estimated HCO payments at the projected 7.975 percent of 
total estimated LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases as required by section 1886(m)(7) of the Act and in 
accordance with Sec.  412.525(a)(2)(ii) (based on the payment rates and 
policies for these cases presented in this final rule). Consistent with 
our historical practice, we use the best available LTCH claims data and 
CCR data, when determining the fixed-loss amount for LTCH PPS standard 
Federal payment rate cases for FY 2025 in the final rule. Therefore, 
based on LTCH claims data from the March 2024 update of the FY 2023 
MedPAR file adjusted for charge inflation and adjusted CCRs from the 
March 2024 update of the PSF, under the broad authority of section 
123(a)(1) of the BBRA and section 307(b)(1) of the BIPA, we are 
establishing a fixed-loss amount for LTCH PPS standard Federal payment 
rate cases for FY 2025 of $77,048 that will result in estimated outlier 
payments projected to be equal to 7.975 percent of estimated FY 2025 
payments for such cases. As such, we will make an additional HCO 
payment for the cost of an LTCH PPS standard Federal payment rate case 
that exceeds the HCO threshold amount that is equal to 80 percent of 
the difference between the estimated cost of the case and the outlier 
threshold (the sum of the adjusted LTCH PPS standard Federal payment 
rate payment and the fixed-loss amount for LTCH PPS standard Federal 
payment rate cases of $77,048).
4. High-Cost Outlier Payments for Site Neutral Payment Rate Cases
    When we implemented the application of the site neutral payment 
rate in FY 2016, in examining the appropriate fixed-loss amount for 
site neutral payment rate cases issue, we considered how LTCH 
discharges based on historical claims data would have been classified 
under the dual rate LTCH PPS payment structure and the CMS' Office of 
the Actuary projections regarding how LTCHs will likely respond to our 
implementation of policies resulting from the statutory payment 
changes. We again relied on these considerations and actuarial 
projections in FY 2017 and FY 2018 because the historical claims data 
available in each of these years were not all subject to the LTCH PPS 
dual rate payment system. Similarly, for FYs 2019 through 2024, we 
continued to rely on these considerations and actuarial projections 
because, due to the transitional blended payment policy for site 
neutral payment rate cases and the provisions of section 3711(b)(2) of 
the CARES Act, the historical claims data available in each of these 
years were not subject to the full effect of the site neutral payment 
rate.
    For FYs 2016 through 2024, our actuaries projected that the 
proportion of cases that would qualify as LTCH PPS standard Federal 
payment rate cases versus site neutral payment rate cases under the 
statutory provisions would remain consistent with what is reflected in 
the historical LTCH PPS claims data. Although our actuaries did not 
project an immediate change in the proportions found in the historical 
data, they did project cost and resource changes to account for the 
lower payment rates. Our actuaries also projected that the costs and 
resource use for cases paid at the site neutral payment rate would 
likely be lower, on average, than the costs and resource use for cases 
paid at the LTCH PPS standard Federal payment rate and would likely 
mirror the costs and resource use for IPPS cases assigned to the same 
MS-DRG, regardless of whether the proportion of site neutral payment 
rate cases in the future remains similar to what is found based on the 
historical data. As discussed in the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49619), this actuarial assumption is based on our expectation 
that site neutral payment rate cases would generally be paid based on 
an IPPS comparable per diem amount under the statutory LTCH PPS payment 
changes that began in FY 2016, which, in the majority of cases, is much 
lower than the payment that would have been paid if these statutory 
changes were not enacted. In light of these projections and 
expectations, we discussed that we believed that the use of a single 
fixed-loss amount and HCO target for all LTCH PPS cases would be 
problematic. In addition, we discussed that we did not believe that it 
would be appropriate for comparable LTCH PPS site neutral payment rate 
cases to receive dramatically different HCO payments from those cases 
that would be paid under the IPPS (80 FR 49617 through 49619 and 81 FR 
57305 through 57307). For those reasons, we stated that we believed 
that the most appropriate fixed-loss amount for site neutral payment 
rate cases for FYs 2016 through 2024 would be equal to the IPPS fixed-
loss amount for that particular fiscal year. Therefore, we established 
the fixed-loss amount for site neutral payment rate cases as the 
corresponding IPPS fixed-loss amounts for FYs 2016 through 2024. In 
particular, in FY 2024, we established the fixed-loss amount for site 
neutral payment rate cases as the FY 2024 IPPS fixed-loss amount of 
$42,750 (88 FR 59378).
    For this final rule, we used FY 2023 data in the FY 2025 LTCH PPS 
ratesetting. We note that section 3711(b)(2) of the CARES Act provided 
a waiver of the application of the site neutral payment rate for LTCH 
cases admitted during the COVID-19 PHE period. The COVID-19 PHE expired 
on May 11, 2023. Therefore, all LTCH PPS cases in FY 2023 with 
admission dates on or before the PHE expiration date were paid the LTCH 
PPS standard Federal rate regardless of whether the

[[Page 69987]]

discharge met the statutory patient criteria. Because not all FY 2023 
claims in the data used for this final rule were subject to the site 
neutral payment rate, we continue to rely on the same considerations 
and actuarial projections used in FYs 2016 through 2024 when developing 
a fixed-loss amount for site neutral payment rate cases for FY 2025. 
Our actuaries continue to project that the costs and resource use for 
FY 2025 cases paid at the site neutral payment rate would likely be 
lower, on average, than the costs and resource use for cases paid at 
the LTCH PPS standard Federal payment rate and will likely mirror the 
costs and resource use for IPPS cases assigned to the same MS-DRG, 
regardless of whether the proportion of site neutral payment rate cases 
in the future remains similar to what was found based on the historical 
data. (Based on the FY 2023 LTCH claims data used in the development of 
this final rule, if the provisions of the CARES Act had not been in 
effect, approximately 71 percent of LTCH cases would have been paid the 
LTCH PPS standard Federal payment rate and approximately 29 percent of 
LTCH cases would have been paid the site neutral payment rate for 
discharges occurring in FY 2023.)
    For these reasons, we continue to believe that the most appropriate 
fixed-loss amount for site neutral payment rate cases for FY 2025 is 
the IPPS fixed-loss amount for FY 2025. Therefore, for FY 2025, as we 
proposed, we are establishing that the applicable HCO threshold for 
site neutral payment rate cases is the sum of the site neutral payment 
rate for the case and the IPPS fixed-loss amount. That is, we are 
establishing a fixed-loss amount for site neutral payment rate cases of 
$46,152, which is the same FY 2025 IPPS fixed-loss amount discussed in 
section II.A.4.i.(2). of this Addendum. Accordingly, under this policy, 
for FY 2025, we will calculate an HCO payment for site neutral payment 
rate cases with costs that exceed the HCO threshold amount that is 
equal to 80 percent of the difference between the estimated cost of the 
case and the outlier threshold (the sum of the site neutral payment 
rate payment and the fixed-loss amount for site neutral payment rate 
cases of $46,152).
    In establishing an HCO policy for site neutral payment rate cases, 
we established a budget neutrality adjustment under Sec.  
412.522(c)(2)(i). We established this requirement because we believed, 
and continue to believe, that the HCO policy for site neutral payment 
rate cases should be budget neutral, just as the HCO policy for LTCH 
PPS standard Federal payment rate cases is budget neutral, meaning that 
estimated site neutral payment rate HCO payments should not result in 
any change in estimated aggregate LTCH PPS payments.
    To ensure that estimated HCO payments payable to site neutral 
payment rate cases in FY 2025 would not result in any increase in 
estimated aggregate FY 2025 LTCH PPS payments, under the budget 
neutrality requirement at Sec.  412.522(c)(2)(i), it is necessary to 
reduce site neutral payment rate payments by 5.1 percent to account for 
the estimated additional HCO payments payable to those cases in FY 
2025. Consistent with our historical practice, as we proposed, we are 
continuing this policy.
    As discussed earlier, consistent with the IPPS HCO payment 
threshold, we estimate the fixed-loss threshold would result in FY 2025 
HCO payments for site neutral payment rate cases to equal 5.1 percent 
of the site neutral payment rate payments that are based on the IPPS 
comparable per diem amount. As such, to ensure estimated HCO payments 
payable for site neutral payment rate cases in FY 2025 would not result 
in any increase in estimated aggregate FY 2025 LTCH PPS payments, under 
the budget neutrality requirement at Sec.  412.522(c)(2)(i), it is 
necessary to reduce the site neutral payment rate amount paid under 
Sec.  412.522(c)(1)(i) by 5.1 percent to account for the estimated 
additional HCO payments payable for site neutral payment rate cases in 
FY 2025. To achieve this, for FY 2025, as we proposed, we are applying 
a budget neutrality factor of 0.949 (that is, the decimal equivalent of 
a 5.1 percent reduction, determined as 1.0-5.1/100 = 0.949) to the site 
neutral payment rate for those site neutral payment rate cases paid 
under Sec.  412.522(c)(1)(i). We note that, consistent with our current 
policy, this HCO budget neutrality adjustment will not be applied to 
the HCO portion of the site neutral payment rate amount (81 FR 57309).
    Comment: A few commenters stated that they were concerned with the 
proposed increase to the fixed-loss amount for site-neutral rate cases.
    Response: We acknowledge the commenters' concern. We note that the 
commenters did not elaborate on the basis for their concerns with the 
proposed fixed-loss amount for site-neutral rate cases. The commenters 
also did not suggest any modifications for CMS to make in establishing 
the fixed-loss amount for site-neutral rate cases in this final rule. 
Therefore, after consideration of comments received, we are finalizing 
our proposals as described previously, without modification.

E. Update to the IPPS Comparable Amount To Reflect the Statutory 
Changes to the IPPS DSH Payment Adjustment Methodology

    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50766), we 
established a policy to reflect the changes to the Medicare IPPS DSH 
payment adjustment methodology made by section 3133 of the Affordable 
Care Act in the calculation of the ``IPPS comparable amount'' under the 
SSO policy at Sec.  412.529 and the ``IPPS equivalent amount'' under 
the site neutral payment rate at Sec.  412.522. Historically, the 
determination of both the ``IPPS comparable amount'' and the ``IPPS 
equivalent amount'' includes an amount for inpatient operating costs 
``for the costs of serving a disproportionate share of low-income 
patients.'' Under the statutory changes to the Medicare DSH payment 
adjustment methodology that began in FY 2014, in general, eligible IPPS 
hospitals receive an empirically justified Medicare DSH payment equal 
to 25 percent of the amount they otherwise would have received under 
the statutory formula for Medicare DSH payments prior to the amendments 
made by the Affordable Care Act. The remaining amount, equal to an 
estimate of 75 percent of the amount that otherwise would have been 
paid as Medicare DSH payments, reduced to reflect changes in the 
percentage of individuals under the age of 65 who are uninsured, is 
made available to make additional payments to each hospital that 
qualifies for Medicare DSH payments and that has uncompensated care. 
The additional uncompensated care payments are based on the hospital's 
amount of uncompensated care for a given time period relative to the 
total amount of uncompensated care for that same time period reported 
by all hospitals that receive Medicare DSH payments.
    To reflect the Medicare DSH payment adjustment methodology 
statutory changes in section 3133 of the Affordable Care Act in the 
calculation of the ``IPPS comparable amount'' and the ``IPPS equivalent 
amount'' under the LTCH PPS, we stated in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50766) that we will include a reduced Medicare DSH 
payment amount that reflects the projected percentage of the payment 
amount calculated based on the statutory Medicare DSH payment formula 
prior to the amendments made by the Affordable Care Act that will be 
paid to eligible IPPS hospitals as

[[Page 69988]]

empirically justified Medicare DSH payments and uncompensated care 
payments in that year (that is, a percentage of the operating Medicare 
DSH payment amount that has historically been reflected in the LTCH PPS 
payments that are based on IPPS rates). We also stated, in the FY 2014 
IPPS/LTC PPS final rule (78 FR 50766), that the projected percentage 
will be updated annually, consistent with the annual determination of 
the amount of uncompensated care payments that will be made to eligible 
IPPS hospitals. We believe that this approach results in appropriate 
payments under the LTCH PPS and is consistent with our intention that 
the ``IPPS comparable amount'' and the ``IPPS equivalent amount'' under 
the LTCH PPS closely resemble what an IPPS payment would have been for 
the same episode of care, while recognizing that some features of the 
IPPS cannot be translated directly into the LTCH PPS (79 FR 50766 
through 50767).
    As discussed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 
36593 through 36594), for FY 2025, based on the most recent data 
available at that time, we proposed to establish that the calculation 
of the ``IPPS comparable amount'' under Sec.  412.529 would include an 
applicable operating Medicare DSH payment amount that is equal to 71.61 
percent of the operating Medicare DSH payment amount that would have 
been paid based on the statutory Medicare DSH payment formula absent 
the amendments made by the Affordable Care Act. Furthermore, consistent 
with our historical practice, we proposed that, if more recent data 
became available, we would use that data to determine the applicable 
operating Medicare DSH payment amount used to calculate the ``IPPS 
comparable amount'' in the final rule.
    We did not receive any public comments in response to our proposal, 
and as such are finalizing this proposal. However, as we proposed, we 
are determining the applicable operating Medicare DSH payment amount 
used to calculate the ``IPPS comparable amount'' in this final rule 
using more recent data.
    For FY 2025, as discussed in greater detail in section IV.E.2.b. of 
the preamble of this final rule, based on the most recent data 
available, our estimate of 75 percent of the amount that would 
otherwise have been paid as Medicare DSH payments (under the 
methodology outlined in section 1886(r)(2) of the Act) is adjusted to 
54.29 percent of that amount to reflect the change in the percentage of 
individuals who are uninsured. The resulting amount is then used to 
determine the amount available to make uncompensated care payments to 
eligible IPPS hospitals in FY 2025. In other words, the amount of the 
Medicare DSH payments that would have been made prior to the amendments 
made by the Affordable Care Act is adjusted to 40.72 percent (the 
product of 75 percent and 54.29 percent) and the resulting amount is 
used to calculate the uncompensated care payments to eligible 
hospitals. As a result, for FY 2025, we project that the reduction in 
the amount of Medicare DSH payments pursuant to section 1886(r)(1) of 
the Act, along with the payments for uncompensated care under section 
1886(r)(2) of the Act, will result in overall Medicare DSH payments of 
65.72 percent of the amount of Medicare DSH payments that would 
otherwise have been made in the absence of the amendments made by the 
Affordable Care Act (that is, 25 percent + 40.72 percent = 65.72 
percent).
    Therefore, for FY 2025, consistent with our proposal, we are 
establishing that the calculation of the ``IPPS comparable amount'' 
under Sec.  412.529 will include an applicable operating Medicare DSH 
payment amount that is equal to 65.72 percent of the operating Medicare 
DSH payment amount that would have been paid based on the statutory 
Medicare DSH payment formula absent the amendments made by the 
Affordable Care Act.

F. Computing the Adjusted LTCH PPS Federal Prospective Payments for FY 
2025

    Under the dual rate LTCH PPS payment structure, only LTCH PPS cases 
that meet the statutory criteria to be excluded from the site neutral 
payment rate are paid based on the LTCH PPS standard Federal payment 
rate. Under Sec.  412.525(c), the LTCH PPS standard Federal payment 
rate is adjusted to account for differences in area wages; we make this 
adjustment by multiplying the labor-related share of the LTCH PPS 
standard Federal payment rate for a case by the applicable LTCH PPS 
wage index (the final FY 2025 values are shown in Tables 12A through 
12B listed in section VI. of this Addendum and are available via the 
internet on the CMS website). The LTCH PPS standard Federal payment 
rate is also adjusted to account for the higher costs of LTCHs located 
in Alaska and Hawaii by the applicable COLA factors (the final FY 2025 
factors are shown in the chart in section V.C. of this Addendum) in 
accordance with Sec.  412.525(b). In this final rule, we are 
establishing an LTCH PPS standard Federal payment rate for FY 2025 of 
$49,383.26, as discussed in section V.A. of this Addendum. We 
illustrate the methodology to adjust the LTCH PPS standard Federal 
payment rate for FY 2025, applying our finalized LTCH PPS amounts for 
the standard Federal payment rate, MS-LTC-DRG relative weights, and 
wage index in the following example:
    Example:
    During FY 2025, a Medicare discharge that meets the criteria to be 
excluded from the site neutral payment rate, that is, an LTCH PPS 
standard Federal payment rate case, is from an LTCH that is located in 
CBSA 16984, which has a FY 2025 LTCH PPS wage index value of 1.0207 (as 
shown in Table 12A listed in section VI. of this Addendum). The 
Medicare patient case is classified into MS-LTC-DRG 189 (Pulmonary 
Edema & Respiratory Failure), which has a relative weight for FY 2025 
of 0.9787 (as shown in Table 11 listed in section VI. of this 
Addendum). The LTCH submitted quality reporting data for FY 2025 in 
accordance with the LTCH QRP under section 1886(m)(5) of the Act.
    To calculate the LTCH's total adjusted Federal prospective payment 
for this Medicare patient case in FY 2025, we computed the wage-
adjusted Federal prospective payment amount by multiplying the 
unadjusted FY 2025 LTCH PPS standard Federal payment rate ($49,383.26) 
by the labor-related share (72.8 percent) and the wage index value 
(1.0207). This wage-adjusted amount was then added to the nonlabor-
related portion of the unadjusted LTCH PPS standard Federal payment 
rate (27.2 percent; adjusted for cost of living, if applicable) to 
determine the adjusted LTCH PPS standard Federal payment rate, which is 
then multiplied by the MS-LTC-DRG relative weight (0.9787) to calculate 
the total adjusted LTCH PPS standard Federal prospective payment for FY 
2025 ($49,059.74). The table illustrates the components of the 
calculations in this example.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Unadjusted LTCH PPS Standard Federal Prospective              $49,383.26
 Payment Rate........................................
Labor-Related Share..................................            x 0.728
Labor-Related Portion of the LTCH PPS Standard              = $35,951.01
 Federal Payment Rate................................
Wage Index (CBSA 16984)..............................           x 1.0207
Wage-Adjusted Labor Share of the LTCH PPS Standard          = $36,695.20
 Federal Payment Rate................................

[[Page 69989]]

 
Nonlabor-Related Portion of the LTCH PPS Standard           + $13,432.25
 Federal Payment Rate ($49,383.26 x 0.272)...........
Adjusted LTCH PPS Standard Federal Payment Amount....       = $50,127.45
MS-LTC-DRG 189 Relative Weight.......................           x 0.9787
                                                      ------------------
    Total Adjusted LTCH PPS Standard Federal                = $49,059.74
     Prospective Payment.............................
------------------------------------------------------------------------

VI. Tables Referenced in This Final Rule Generally Available Through 
the Internet on the CMS Website

    This section lists the tables referred to throughout the preamble 
of this final rule and in the Addendum. In the past, a majority of 
these tables were published in the Federal Register as part of the 
annual proposed and final rules. However, similar to FYs 2012 through 
2024, for the FY 2025 rulemaking cycle, the IPPS and LTCH PPS tables 
will not be published in the Federal Register in the annual IPPS/LTCH 
PPS proposed and final rules and will be on the CMS website. 
Specifically, all IPPS tables listed in the final rule, with the 
exception of IPPS Tables 1A, 1B, 1C, and 1D, and LTCH PPS Table 1E, 
will generally be available on the CMS website. IPPS Tables 1A, 1B, 1C, 
and 1D, and LTCH PPS Table 1E are displayed at the end of this section 
and will continue to be published in the Federal Register as part of 
the annual proposed and final rules.
    Tables 7A and 7B historically contained the Medicare prospective 
payment system selected percentile lengths of stay for the MS-DRGs for 
the prior year and upcoming fiscal year. We note, in the FY 2023 IPPS/
LTCH PPS final rule (87 FR 49452), we finalized beginning with FY 2023, 
to provide the percentile length of stay information previously 
included in Tables 7A and 7B in the supplemental AOR/BOR data file. The 
AOR/BOR files can be found on the FY 2025 IPPS final rule home page on 
the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    After hospitals have been given an opportunity to review and 
correct their calculations for FY 2025, we will post Table 15 (which 
will be available via the CMS website) to display the final FY 2025 
readmissions payment adjustment factors that will be applicable to 
discharges occurring on or after October 1, 2024. We expect Table 15 
will be posted on the CMS website in the Fall 2024.
    Readers who experience any problems accessing any of the tables 
that are posted on the CMS websites identified in this final rule 
should contact Michael Treitel at (410) 786-4552.
    The following IPPS tables for this final rule are generally 
available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link 
on the left side of the screen titled ``FY 2025 IPPS Final Rule Home 
Page'' or ``Acute Inpatient--Files--for Download.''

Table 2.--Final Case-Mix Index and Wage Index Table by CCN--FY 2025 
Final Rule
Table 3.--Final Wage Index Table by CBSA--FY 2025 Final Rule
Table 4A.--Final List of Counties Eligible for the Out-Migration 
Adjustment Under Section 1886(d)(13) of the Act--FY 2025 Final Rule
Table 4B.--Final Counties Redesignated Under Section 1886(d)(8)(B) of 
the Act (LUGAR Counties)--FY 2025 Final Rule
Table 5.--Final List of Medicare Severity Diagnosis-Related Groups (MS-
DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean 
Length of Stay--FY 2025 Final Rule
Table 6A.--New Diagnosis Codes--FY 2025
Table 6B.--New Procedure Codes--FY 2025
Table 6C.--Invalid Diagnosis Codes--FY 2025
Table 6D.--Invalid Procedure Codes--FY 2025
Table 6E.--Revised Diagnosis Code Titles--FY 2025
Table 6F.--Revised Procedure Code Titles--FY 2025
Table 6G.1.--Secondary Diagnosis Order Additions to the CC Exclusions 
List--FY 2025
Table 6G.2.--Principal Diagnosis Order Additions to the CC Exclusions 
List--FY 2025
Table 6H.1.--Secondary Diagnosis Order Deletions to the CC Exclusions 
List--FY 2025
Table 6H.2.--Principal Diagnosis Order Deletions to the CC Exclusions 
List--FY 2025
Table 6I.--Complete MCC List--FY 2025
Table 6I.1.--Additions to the MCC List--FY 2025
Table 6J.--Complete CC List--FY 2025
Table 6J.1.--Additions to the CC List--FY 2025
Table 6J.2.--Deletions to the CC List--FY 2025
Table 6K.--Complete CC Exclusions List--FY 2025
Table 6P.--ICD-10-CM and ICD-10-PCS Codes for Final MS-DRG Changes and 
Analysis With Application of the NonCC Subgroup Criteria--FY 2025 
(Table 6P contains multiple tables, 6P.1a. through 6P.4d that include 
the ICD-10-CM and ICD-10-PCS code lists relating to specific final MS-
DRG changes or other analyses). These tables are referred to throughout 
section II.C. of the preamble of this final rule.
Table 8A.--Final FY 2025 Statewide Average Operating Cost-to-Charge 
Ratios (CCRs) for Acute Care Hospitals (Urban and Rural)
Table 8B.--Final FY 2025 Statewide Average Capital Cost-to-Charge 
Ratios (CCRs) for Acute Care Hospitals
Table 16A.--Updated Proxy Hospital Value-Based Purchasing (VBP) Program 
Adjustment Factors for FY 2025
Table 18.--Final FY 2025 Medicare DSH Uncompensated Care Payment Factor 
3

    The following LTCH PPS tables for this FY 2025 final rule are 
available through the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/ under the list item for Regulation 
Number CMS-1808-F:

Table 8C.--Final FY 2025 Statewide Average Total Cost-to-Charge Ratios 
(CCRs) for LTCHs (Urban and Rural)
Table 11.--Final MS-LTC-DRGs, Relative Weights, Geometric Average 
Length of Stay, and Short-Stay Outlier (SSO) Threshold for LTCH PPS 
Discharges Occurring From October 1, 2024, Through September 30, 2025
Table 12A.--Final LTCH PPS Wage Index for Urban Areas for Discharges 
Occurring From October 1, 2024, Through September 30, 2025
Table 12B.--Final LTCH PPS Wage Index for Rural Areas for Discharges 
Occurring From October 1, 2024, Through September 30, 2025
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Appendix A: Economic Analyses

I. Regulatory Impact Analysis

A. Statement of Need

    This final rule is necessary to make payment and policy changes 
under the IPPS for Medicare acute care hospital inpatient services 
for operating and capital-related costs as well as for certain 
hospitals and hospital units excluded from the IPPS. This final rule 
also is necessary to make payment and policy changes for Medicare 
hospitals under the LTCH PPS. Also, as we note later in this 
Appendix, the primary objective of the IPPS and the LTCH PPS is to 
create incentives for hospitals to operate efficiently and minimize 
unnecessary costs, while at the same time ensuring that payments are 
sufficient to adequately compensate hospitals for their legitimate 
costs in delivering necessary care to Medicare beneficiaries. In 
addition, we share national goals of preserving the Medicare 
Hospital Insurance Trust Fund.
    We believe that the changes in this final rule, such as the 
updates to the IPPS and LTCH PPS rates, and the final policies and 
discussions relating to applications for new technology add-on 
payments, are needed to further each of these goals while 
maintaining the financial viability of the hospital industry and 
ensuring access to high quality health care for Medicare 
beneficiaries.
    We expect that these changes would ensure that the outcomes of 
the prospective payment systems are reasonable and provide equitable 
payments, while avoiding or minimizing unintended adverse 
consequences.

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)

a. Update to the IPPS Payment Rates

    In accordance with section 1886(b)(3)(B) of the Act and as 
described in section V.B. of the preamble to this final rule, we are 
updating the national standardized amount for inpatient hospital 
operating costs by the applicable percentage increase of 2.9 percent 
(that is, a 3.4 percent market basket update with a reduction of 0.5 
percentage point for the productivity adjustment). We are also 
applying the applicable percentage increase (including the market 
basket update and the productivity adjustment) to the hospital-
specific rates.
    Subsection (d) hospitals that do not submit quality information 
under rules established by the Secretary and that are meaningful EHR 
users under section 1886(b)(3)(B)(ix) of the Act would receive an 
applicable percentage increase of 2.05 percent which reflects a one-
quarter percent reduction of the market basket update for failure to 
submit quality data. Hospitals that are identified as not meaningful 
EHR users and do submit quality information under section 
1886(b)(3)(B)(viii) of the Act would receive an applicable 
percentage increase of 0.35 percent which reflects a three-quarter 
percent reduction of the market basket update for being identified 
as not a meaningful EHR user.
    Hospitals that are identified as not meaningful EHR users under 
section 1886(b)(3)(B)(ix) of the Act and also do not submit quality 
data under section 1886(b)(3)(B)(viii) of the Act would receive an 
applicable percentage increase of -0.5 percent, which reflects a 
one-quarter percent reduction of the market basket update for 
failure to submit quality data and a three-quarter percent reduction 
of the market basket update for being identified as not a meaningful 
EHR user.

b. Changes for the Add-On Payments for New Services and Technologies

    Consistent with sections 1886(d)(5)(K) and (L) of the Act, we 
review applications for new technology add-on payments based on the 
eligibility criteria at 42 CFR 412.87. As set forth in 42 CFR 
412.87(f)(1), we consider whether a technology meets the criteria 
for the new technology add-on payment and announce the results as 
part of the annual updates and changes to the IPPS. New technology 
add-on payments are not budget neutral.
    As discussed in section II.E.8. of the preamble of this final 
rule, we are finalizing our proposal that, beginning with new 
technology add-on payments for FY 2026, in assessing whether to 
continue the new technology add-on payments for those technologies 
that are first approved for new technology add-on payments in FY 
2025 or a subsequent year, we will extend new technology add-on 
payments for an additional fiscal year when the 3-year anniversary 
date of the product's entry onto the U.S. market occurs on or after 
October 1 of the upcoming fiscal year. For technologies that were 
first approved for new technology add-on payments prior to FY 2025, 
including for technologies we determine to be substantially similar 
to those technologies, we will continue to use the midpoint of the 
upcoming fiscal year (April 1) when determining whether a technology 
would still be considered ``new'' for purposes of new technology 
add-on payments. Similarly, we are also finalizing that beginning 
with applications for new technology add-on payments for FY 2026, we 
will use the start of the fiscal year (October 1) instead of April 1 
to determine whether to approve new technology add-on payment for 
that fiscal year. We note that this change will be effective 
beginning with new technology add-on payments for FY 2026, and there 
would be no impact of this change in FY 2025. For purposes of 
estimating the impact of our finalized changes to the calculation of 
the inpatient new technology add-on payment--under the assumption 
that all of the FY 2025 new technology add-on payment applications 
that have been FDA-approved or -cleared or have a documented delay 
in market availability between October 1, 2023, and March 30, 2024 
(as discussed in section II.E.5. and section II.E.6. of the preamble 
of this final rule), and that are first approved for new technology 
add-on payments in FY 2025, would continue to meet the specified 
criteria for new technology add-on payments for FY 2026 and FY 
2027--this policy would increase IPPS spending by approximately $459 
million in FY 2027. Because it is difficult to predict the actual 
new technology add-on payment for each case, the estimated impact in 
this final rule is based on the applicants' estimated cost and 
volume projections at the time they submitted their application (or 
based on updated figures provided during the public comment period) 
and as if every claim that would qualify for a new technology add-on 
payment would receive the maximum add-on payment.
    As discussed in section II.E.9. of the preamble of this final 
rule, we are finalizing our proposal that beginning with new 
technology add-on payment applications for FY 2026, we will no 
longer consider a hold status to be an inactive status for the 
purposes of eligibility for the new technology add-on payment under 
our existing policy for technologies that are not already FDA market 
authorized for the indication that is the subject of the new 
technology add-on payment application. Under existing policy, 
applicants must have a complete and active FDA market authorization 
request at the time of new technology add-on payment application 
submission and must provide documentation of FDA acceptance (for a 
510k application or De Novo Classification request) or filing (for a 
PMA, NDA, or BLA) to CMS at the time of application submission, 
consistent with the type of FDA marketing authorization application 
the applicant has submitted to FDA. We note that the cost impact of 
this proposal is not estimable. We expect that some applicants who 
were ineligible in FY 2025 may apply for new technology add-on 
payments for FY 2026.
    As discussed in section II.E.10. of the preamble of this final 
rule, we are finalizing our proposal that, subject to our review of 
the new technology add-on payment eligibility criteria, for a gene 
therapy approved for new technology add-on payments in the FY 2025 
IPPS/LTCH PPS final rule that is indicated and used specifically for 
the treatment of sickle cell disease (SCD), effective with 
discharges on or after October 1, 2024 and concluding at the end of 
the 2- to 3-year newness period for such therapy, if the costs of a 
discharge (determined by applying CCRs as described in Sec.  
412.84(h)) involving the use of such therapy for the treatment of 
SCD exceed the full DRG payment (including payments for IME and DSH, 
but excluding outlier payments), Medicare will make an add-on 
payment equal to the lesser of: (1) 75 percent of the costs of the 
new medical service or technology; or (2) 75 percent of the amount 
by which the costs of the case exceed the standard DRG payment. We 
estimate that for the two gene therapy technologies that are 
approved for new technology add-on payments in this final rule that 
are indicated for and used in the treatment of SCD (as discussed in 
section II.E.5. of the preamble of this final rule), these changes 
to the calculation of the inpatient new technology add-on payment 
will increase IPPS spending by approximately $38 million in FY 2025. 
Because it is difficult to predict the actual new technology add-on 
payment for each case, the estimated impact in this final rule is 
based on the applicants' estimated cost and volume projections at 
the time they submitted their application and as if every claim that 
would qualify for a new technology add-on payment would receive the 
maximum add-on payment.

[[Page 69992]]

c. Continuation of the Low Wage Index Hospital Policy

    To help mitigate wage index disparities between high wage and 
low wage hospitals, in the FY 2020 IPPS/LTCH PPS rule (84 FR 42326 
through 42332), we adopted a policy to increase the wage index 
values for certain hospitals with low wage index values (the low 
wage index hospital policy). This policy was adopted in a budget 
neutral manner through an adjustment applied to the standardized 
amounts for all hospitals. We indicated our intention that this 
policy would be effective for at least 4 years, beginning in FY 
2020, to allow employee compensation increases implemented by these 
hospitals sufficient time to be reflected in the wage index 
calculation. We also stated we intended to revisit the issue of the 
duration of this policy in future rulemaking as we gained experience 
under the policy. As discussed in section III.G.5. of the preamble 
of this final rule, while we are using the FY 2021 cost report data 
for the FY 2025 wage index, we are unable to comprehensively 
evaluate the effect, if any, the low wage index hospital policy had 
on hospitals' wage increases during the years the COVID-19 PHE was 
in effect. We believe it is necessary to wait until we have useable 
data from fiscal years after the PHE before reaching any conclusions 
about the efficacy of the policy. Therefore, for FY 2025, we are 
finalizing that the low wage index hospital policy and the related 
budget neutrality adjustment would be effective for at least 3 more 
years, beginning in FY 2025.

d. Implementation of Section 4122 of the Consolidated Appropriations 
Act, 2023 (CAA, 2023)

    As discussed in section V.G.2. of the preamble of this final 
rule, we are finalizing our proposal to implement section 4122 of 
the Consolidated Appropriations Act (CAA) of 2023. Section 4122(a) 
of the CAA, 2023, amended section 1886(h) of the Act by adding a new 
section 1886(h)(10) of the Act requiring the distribution of 
additional residency positions (also referred to as slots) to 
hospitals. Section 4122 of the CAA of 2023 makes available 200 
residency positions, to be distributed beginning in FY 2026, with 
priority given to hospitals in 4 statutorily specified categories. 
At least 100 of the 200 residency positions made available under 
section 4122 of the CAA of 2023 shall be distributed for psychiatry 
or psychiatry subspecialty residency training programs. We expect 
these changes will make appropriate Medicare GME payments to 
hospitals for Medicare's share of the direct costs to operate the 
hospital's approved medical residency program, and for IPPS 
hospitals the indirect costs associated with residency programs that 
may result in higher patient care costs, consistent with the law. We 
expect that these changes will ensure that the outcomes of these 
Medicare payment policies are reasonable and provide equitable 
payments, while avoiding or minimizing unintended adverse 
consequences.

e. Additional Payment for Uncompensated Care to Medicare 
Disproportionate Share Hospitals (DSHs) and Supplemental Payment

    In this final rule, as required by section 1886(r)(2) of the 
Act, we are updating our estimates of the 3 factors used to 
determine uncompensated care payments for FY 2025. Beginning with FY 
2023, we adopted a multiyear averaging methodology to determine 
Factor 3 of the uncompensated care payment methodology, which would 
help to mitigate against large fluctuations in uncompensated care 
payments from year to year. Under this methodology, for FY 2025 and 
subsequent fiscal years, we would determine Factor 3 for all 
eligible hospitals using a 3-year average of the data on 
uncompensated care costs from Worksheet S-10 for the 3 most recent 
fiscal years for which audited data are available. Specifically, we 
would use a 3-year average of audited data on uncompensated care 
costs from Worksheet S-10 from the FY 2019, FY 2020, and FY 2021 
cost reports to calculate Factor 3 for FY 2025 for all eligible 
hospitals.
    Beginning with FY 2023 (87 FR 49047 through 49051), we also 
established a supplemental payment for IHS and Tribal hospitals and 
hospitals located in Puerto Rico. In section IV.D. of the preamble 
of this final rule, we summarize the ongoing methodology for 
supplemental payments.

f. Rural Community Hospital Demonstration Program

    The Rural Community Hospital Demonstration (RCHD) was authorized 
originally for a 5-year period by section 410A of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) 
(Pub. L. 108-173), and it was extended for another 5-year period by 
section 3123 and 10313 of the Affordable Care Act (Pub. L. 111-148). 
Section 15003 of the 21st Century Cures Act (Cures Act) (Pub. L. 
114-255) extended the demonstration for an additional 5-year period, 
and section 128 of the Consolidated Appropriations Act of 2021 (Pub. 
L. 116-159) included an additional 5-year re-authorization. CMS has 
conducted the demonstration since 2004, which allows enhanced, cost-
based payment for Medicare inpatient services for up to 30 small 
rural hospitals.
    The authorizing legislation imposes a strict budget neutrality 
requirement. In this final rule, we summarize the status of the 
demonstration program, and the ongoing methodologies for 
implementation and budget neutrality.

2. Frontier Community Health Integration Project (FCHIP) Demonstration

    The Frontier Community Health Integration Project (FCHIP) 
demonstration was authorized under section 123 of the Medicare 
Improvements for Patients and Providers Act of 2008 (Pub. L. 110-
275), as amended by section 3126 of the Affordable Care Act of 2010 
(Pub. L. 114-158), and most recently re-authorized and extended by 
the Consolidated Appropriations Act of 2021 (Pub. L. 116-260). The 
legislation authorized a demonstration project to allow eligible 
entities to develop and test new models for the delivery of health 
care in order to improve access to and better integrate the delivery 
of acute care, extended care and other health care services to 
Medicare beneficiaries in certain rural areas. The FCHIP 
demonstration initial period was conducted in 10 critical access 
hospitals (CAHs) from August 1, 2016, to July 31, 2019, and the 
demonstration ``extension period'' began on January 1, 2022, to run 
through June 30, 2027.
    The authorizing legislation requires the FCHIP demonstration to 
be budget neutral. In this final rule, we proposed to continue with 
the budget neutrality approach used in the demonstration initial 
period for the demonstration extension period--to offset payments 
across CAHs nationally--should the demonstration incur costs to 
Medicare.

3. Update to the LTCH PPS Payment Rates

    As discussed in section VIII.D. of the preamble of this final 
rule, we are rebasing and revising the 2017-based LTCH market basket 
to reflect a 2022 base year. The update to the LTCH PPS standard 
Federal payment rate for FY 2025 is discussed in section VIII.C.2. 
of the preamble of this final rule. For FY 2025, we are updating the 
LTCH PPS standard Federal payment rate by 3.0 percent (that is, a 
3.5 percent market basket update with a reduction of 0.5 percentage 
point for the productivity adjustment, as required by section 
1886(m)(3)(A)(i) of the Act). LTCHs that failed to submit quality 
data, as required by 1886(m)(5)(A)(i) of the Act would receive an 
update of 1.0 percent for FY 2025, which reflects a 2.0 percentage 
point reduction for failure to submit quality data.

4. Hospital Quality Programs

    Section 1886(b)(3)(B)(viii) of the Act requires subsection (d) 
hospitals to report data in accordance with the requirements of the 
Hospital IQR 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. 
Sections 1886(b)(3)(B)(ix), 1886(n), and 1814(l) of the Act require 
eligible hospitals and CAHs to demonstrate they are meaningful users 
of certified EHR technology for purposes of electronic exchange of 
health information to improve the quality of health care and links 
the submission of information demonstrating meaningful use to the 
annual applicable percentage increase for eligible hospitals and the 
applicable percent for CAHs. Section 1886(m)(5) of the Act requires 
each LTCH to submit quality measure data in accordance with the 
requirements of the LTCH QRP for purposes of measuring and making 
publicly available information on health care quality, and in order 
to avoid a 2-percentage point reduction. Section 1886(o) of the Act 
requires the Secretary to establish a value-based purchasing program 
under which value-based incentive payments are made in a fiscal year 
to hospitals that meet the performance standards established on an 
announced set of quality and efficiency measures for the fiscal 
year. The purposes of the Hospital VBP Program include measuring the 
quality of hospital inpatient care, linking hospital measure 
performance to payment, and making publicly available information on 
hospital quality of care. Section 1886(p) of the Act requires a 
reduction in payment

[[Page 69993]]

for subsection (d) hospitals that rank in the worst-performing 25 
percent with respect to measures of hospital-acquired conditions 
under the HAC Reduction Program for the purpose of measuring HACs, 
linking measure performance to payment, and making publicly 
available information on health care quality. Section 1886(q) of the 
Act requires a reduction in payment for subsection (d) hospitals for 
excess readmissions based on measures for applicable conditions 
under the Hospital Readmissions Reduction Program for the purpose of 
measuring readmissions, linking measure performance to payment, and 
making publicly available information on health care quality. 
Section 1866(k) of the Act applies to hospitals described in section 
1886(d)(1)(B)(v) of the Act (referred to as ``PPS-exempt cancer 
hospitals'' or ``PCHs'') and requires PCHs to report data in 
accordance with the requirements of the PCHQR Program for purposes 
of measuring and making publicly available information on the 
quality of care furnished by PCHs. However, there is no reduction in 
payment to a PCH that does not report data.

5. Other Provisions

a. Transforming Episode Accountability Model (TEAM)

    In section X.A. of the preamble of this final rule, we are 
testing a new alternative payment model called the Transforming 
Episode Accountability Model (TEAM). Section 1115A of the Act 
authorizes the testing of innovative payment and service delivery 
models that preserve or enhance the quality of care furnished to 
Medicare, Medicaid, and CHIP beneficiaries while reducing program 
expenditures. The underlying issue addressed by the model is that 
under FFS, Medicare makes separate payments to providers and 
suppliers for items and services furnished to a beneficiary over the 
course of an episode. Because providers and suppliers are paid for 
each individual item or service delivered, this may lead to care 
that is fragmented, unnecessary or duplicative, while making it 
challenging to invest in quality improvement or care coordination 
that would maximize patient benefit. We anticipate the model may 
reduce costs while maintaining or improving quality of care by 
bundling payment for items and services for a given episode and 
holding TEAM participants accountable for spending and quality 
performance, as well as by providing incentives to promote high 
quality and efficient care.
    This final rule will create and test an episode-based payment 
model under the authority at section 1115A of the Act in which 
selected acute care hospitals, located within the mandatory Core 
Based Statistical Areas (CBSAs) that CMS selected for model 
implementation, will be required to participate. CMS will allow a 
one-time opportunity for hospitals that participate until the last 
day of the last performance period in the BPCI Advanced model or the 
last day of the last performance year of the CJR model, that are not 
located in a mandatory CBSA selected for TEAM participation to 
voluntarily opt into TEAM.\1108\ The model builds on and 
incorporates certain model features from other CMS Innovation Center 
episode-based payment models such as the BPCI Advanced Model and the 
CJR Model. Testing this new model allows us to learn more about the 
patterns of potentially inefficient utilization of health care 
services, as well as how to improve the beneficiary care experience 
during care transitions and incentivize quality improvements for 
common surgical episodes. This information may inform future 
Medicare payment policy and potentially establish the framework for 
managing clinical episodes as a standard practice in Traditional 
Medicare.
---------------------------------------------------------------------------

    \1108\ For the BPCI Advanced model, the last day of the last 
performance period is December 31, 2025. For the CJR model, the last 
day of the last performance year is December 31, 2024.
---------------------------------------------------------------------------

    Under the model, acute care hospitals will be accountable for 
five episode categories: coronary artery bypass graft, lower 
extremity joint replacement, major bowel procedure, surgical hip/
femur fracture treatment excluding lower extremity joint 
replacement, and spinal fusion. We believe the model may benefit 
Medicare beneficiaries through improving the coordination of items 
and services paid for through Medicare FFS payments, encouraging 
provider investment in health care infrastructure and redesigned 
care processes, and incentivizing higher value care across the 
inpatient and post-acute care settings for the episode. The model 
will also provide an opportunity to evaluate the nature and extent 
of reductions in the cost of treatment by providing financial 
incentives for providers to coordinate their efforts to meet patient 
needs and prevent future costs. The model may benefit beneficiaries 
by holding hospitals accountable for the quality and cost of care 
for 30 day episodes after a beneficiary is discharged from the 
inpatient stay or hospital outpatient procedure, which could 
encourage investment in infrastructure and redesigned care processes 
the promote high quality and efficient service delivery that focuses 
on patient-centered care.
    We received no comments on the statement of need and therefore 
are finalizing this provision without modification.

b. Provider Reimbursement Review Board (PRRB)

    Section 1878 of the Act (42 U.S.C. 1395oo) established by the 
Social Security Amendments of 1972, requires the Secretary to 
appoint individuals to the PRRB for a 3-year term of office. In 
regulations promulgated after the enactment of this provision, 42 
CFR 405.1845 stipulated that no member shall serve more than two 
consecutive 3-year terms of office. In section X.B. of the preamble 
of this final rule, we finalize our proposal to increase from two to 
three the number of consecutive terms that a PRRB Member is eligible 
to serve. We believe that extending the length of service of Board 
Members could have an increased effect on the PRRB's productivity 
and efficiency as well as increase the number of individuals who 
seek a position on the PRRB.

c. Payment Error Rate Measurement (PERM)

    Section 202 of the Further Consolidated Appropriations Act of 
2020 (CAA; Pub. L. 116-94) amended Medicaid program integrity 
requirements in Puerto Rico. Puerto Rico was required to publish a 
plan, developed by Puerto Rico in coordination with CMS, and 
approved by the CMS Administrator, not later than 18 months after 
the CAA's enactment, for how Puerto Rico would develop measures to 
comply with the PERM requirements of 42 CFR part 431, subpart Q. 
Puerto Rico published this plan on June 20, 2021, that was approved 
by the CMS Administrator on June 22, 2021.
    In section X.E. of the preamble of this final rule, we discuss 
the proposal to remove the exclusion of Puerto Rico from the PERM 
program found at 42 CFR 431.954(b)(3). In compliance with section 
202 of the CAA, Puerto Rico has developed measures to comply with 
the PERM requirements of 42 CFR part 431, subpart Q. Therefore, we 
proposed that the PERM program become applicable to Puerto Rico. We 
are finalizing our proposal and believe that including Puerto Rico 
in the PERM program will increase visibility into its Medicaid and 
CHIP operations and improve its program integrity efforts, that 
protect taxpayer dollars from improper payments.

d. Hospital CoP Reporting Requirements

    Under sections 1861(e)(9) and 1820(e)(3) of the Act, hospitals 
and CAHs, respectively, under the Medicare and Medicaid programs 
must meet standards for the health and safety of patients receiving 
services in those facilities. Rules issued under that statutory 
authority require such facilities to engage in the surveillance, 
prevention, and control of health care-associated acute respiratory 
illnesses. In 2020, we published detailed reporting standards 
related specifically to COVID-19 for hospitals and CAHs. Those 
standards sunset on April 30, 2024. In section X.F. of the preamble 
of this final rule, we will establish streamlined standards that 
apply to a range of acute respiratory illnesses, not just to COVID-
19, and will contribute to the ability to combat potential future 
threats from either existing or potential future sources of such 
infections.

B. Overall Impact

    We have examined the impacts of this final 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 Act, section 202 of the Unfunded Mandates Reform Act 
of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), and the Congressional Review Act (CRA) 
(5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). 
Executive Order 14094 amends section 3(f) of Executive Order 12866 
to define a

[[Page 69994]]

``significant regulatory action'' as any regulatory action that is 
likely to result in a rule that may: (1) have an annual effect on 
the economy of $200 million or more in any 1 year, or adversely 
affect in a material way 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 entitlement 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 
this Executive Order.
    A regulatory impact analysis (RIA) must be prepared for a 
regulatory action that is significant under section 3(f)(1). Based 
on our estimates, OMB'S Office of Information and Regulatory Affairs 
(OIRA) has determined this rulemaking is significant under section 
3(f)(1) of E.O. 12866. Accordingly, we have prepared a regulatory 
impact analysis that to the best of our ability presents the costs 
and benefits of the rulemaking. Pursuant to Subtitle E of the Small 
Business Regulatory Enforcement Fairness Act of 1996 (also known as 
the Congressional Review Act), OIRA has also determined that this 
rule meets the criteria set forth in 5 U.S.C. OMB has reviewed these 
regulations, and the Departments have provided the following 
assessment of their impact.
    We estimate that the changes for FY 2025 acute care hospital 
operating and capital payments would redistribute amounts in excess 
of $200 million to acute care hospitals. The applicable percentage 
increase to the IPPS rates required by the statute, in conjunction 
with other payment changes in this final rule, would result in an 
estimated $2.9 billion increase in FY 2025 payments, primarily 
driven by the changes in FY 2025 operating payments, including 
uncompensated care payments, FY 2025 capital payments, the 
expiration of the temporary changes in the low-volume hospital 
program and the expiration of the MDH program. These changes are 
relative to payments made in FY 2024. The impact analysis of the 
capital payments can be found in section I.I. of the Appendix in 
this final rule. In addition, as described in section I.J. of this 
Appendix, LTCHs are expected to experience an increase in payments 
by approximately $58 million in FY 2025 relative to FY 2024.
    Our operating payment impact estimate includes the 2.9 percent 
hospital update to the standardized amount (reflecting the 3.4 
percent market basket update reduced by the 0.5 percentage point 
productivity adjustment). The estimates of IPPS operating payments 
to acute care hospitals do not reflect any changes in hospital 
admissions or real case-mix intensity, which would also affect 
overall payment changes.
    The analysis in this Appendix, in conjunction with the remainder 
of this document, demonstrates that this final rule is consistent 
with the regulatory philosophy and principles identified in 
Executive Orders 12866 and 13563, the RFA, and section 1102(b) of 
the Act. This final rule would affect payments to a substantial 
number of small rural hospitals, as well as other classes of 
hospitals, and the effects on some hospitals may be significant. 
Finally, in accordance with the provisions of Executive Order 12866, 
the Office of Management and Budget has reviewed this final rule.

C. Objectives of the IPPS and the LTCH PPS

    The primary objective of the IPPS and the LTCH PPS is to create 
incentives for hospitals to operate efficiently and minimize 
unnecessary costs, while at the same time ensuring that payments are 
sufficient to adequately compensate hospitals for their costs in 
delivering necessary care to Medicare beneficiaries. In addition, we 
share national goals of preserving the Medicare Hospital Insurance 
Trust Fund.
    We believe that the changes in this final rule would further 
each of these goals while maintaining the financial viability of the 
hospital industry and ensuring access to high quality health care 
for Medicare beneficiaries. We expect that these changes would 
ensure that the outcomes of the prospective payment systems are 
reasonable and equitable, while avoiding or minimizing unintended 
adverse consequences.
    Because this final rule contains a range of policies, we refer 
readers to the section of the final rule where each policy is 
discussed. These sections include the rationale for our decisions, 
including the need for the policy.

D. Limitations of Our Analysis

    The following quantitative analysis presents the projected 
effects of our policy changes, as well as statutory changes 
effective for FY 2025, on various hospital groups. We estimate the 
effects of individual policy changes by estimating payments per 
case, while holding all other payment policies constant. We use the 
best data available, but, generally unless specifically indicated, 
we do not attempt to make adjustments for future changes in such 
variables as admissions, lengths of stay, case mix, changes to the 
Medicare population, or incentives. In addition, we discuss 
limitations of our analysis for specific policies in the discussion 
of those policies as needed.

E. Hospitals Included in and Excluded From the IPPS

    The prospective payment systems for hospital inpatient operating 
and capital related- costs of acute care hospitals encompass most 
general short-term, acute care hospitals that participate in the 
Medicare program. There were 25 Indian Health Service hospitals in 
our database, which we excluded from the analysis due to the special 
characteristics of the prospective payment methodology for these 
hospitals. Among other short term, acute care hospitals, hospitals 
in Maryland are paid in accordance with the Maryland Total Cost of 
Care Model, and hospitals located outside the 50 States, the 
District of Columbia, and Puerto Rico (that is, 6 short-term acute 
care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa) receive payment for 
inpatient hospital services they furnish on the basis of reasonable 
costs, subject to a rate-of-increase ceiling.
    As of March 2024, there were 3,082 IPPS acute care hospitals 
included in our analysis. This represents approximately 53 percent 
of all Medicare-participating hospitals. The majority of this impact 
analysis focuses on this set of hospitals. There also are 
approximately 1,381 CAHs. These small, limited service hospitals are 
paid on the basis of reasonable costs, rather than under the IPPS. 
IPPS-excluded hospitals and units, which are paid under separate 
payment systems, include IPFs, IRFs, LTCHs, RNHCIs, children's 
hospitals, cancer hospitals, extended neoplastic disease care 
hospital, and short-term acute care hospitals located in the Virgin 
Islands, Guam, the Northern Mariana Islands, and American Samoa. 
Changes in the prospective payment systems for IPFs and IRFs are 
made through separate rulemaking. Payment impacts of changes to the 
prospective payment systems for these IPPS-excluded hospitals and 
units are not included in this final rule. The impact of the update 
and policy changes to the LTCH PPS for FY 2025 is discussed in 
section I.J. of this Appendix.

F. Quantitative Effects of the Policy Changes Under the IPPS for 
Operating Costs

1. Basis and Methodology of Estimates

    In this final rule, we are announcing policy changes and payment 
rate updates for the IPPS for FY 2025 for operating costs of acute 
care hospitals. The FY 2025 updates to the capital payments to acute 
care hospitals are discussed in section I.I. of the Appendix in this 
final rule.
    Based on the overall percentage change in payments per case 
estimated using our payment simulation model, we estimate that total 
FY 2025 operating payments would increase by 2.8 percent, compared 
to FY 2024. The impacts do not reflect changes in the number of 
hospital admissions or real case-mix intensity, which would also 
affect overall payment changes.
    We have prepared separate impact analyses of the changes to each 
system. This section deals with the changes to the operating 
inpatient prospective payment system for acute care hospitals. Our 
payment simulation model relies on the best available claims data to 
enable us to estimate the impacts on payments per case of certain 
changes in this final rule. However, there are other changes for 
which we do not have data available that would allow us to estimate 
the payment impacts using this model. For those changes, we have 
attempted to predict the payment impacts based upon our experience 
and other more limited data.
    The data used in developing the quantitative analyses of changes 
in payments per case presented in this section are taken from the FY 
2023 MedPAR file and the most current Provider-Specific File (PSF) 
that is used for payment purposes. Although the analyses of the 
changes to the operating PPS do not incorporate cost data, data from 
the best available hospital cost reports were used to categorize 
hospitals. Our analysis has several qualifications. First, in this 
analysis, we do not adjust for future changes in such

[[Page 69995]]

variables as admissions, lengths of stay, or underlying growth in 
real case-mix. Second, due to the interdependent nature of the IPPS 
payment components, it is very difficult to precisely quantify the 
impact associated with each change. Third, we use various data 
sources to categorize hospitals in the tables. In some cases, 
particularly the number of beds, there is a fair degree of variation 
in the data from the different sources. We have attempted to 
construct these variables with the best available source overall. 
However, for individual hospitals, some miscategorizations are 
possible.
    Using cases from the FY 2023 MedPAR file, we simulate payments 
under the operating IPPS given various combinations of payment 
parameters. As described previously, Indian Health Service hospitals 
and hospitals in Maryland were excluded from the simulations. The 
impact of payments under the capital IPPS, and the impact of 
payments for costs other than inpatient operating costs, are not 
analyzed in this section. Estimated payment impacts of the capital 
IPPS for FY 2025 are discussed in section I.I. of this Appendix. We 
note, as discussed in section III. of the preamble of this final 
rule, we are finalizing our proposal to adopt the new OMB labor 
market area delineations as described in the July 21, 2023 OMB 
Bulletin No. 23-01, effective for the FY 2025 IPPS wage index. We 
also note, as discussed in section II.A.4. of the Addendum of this 
final rule, we used wage indexes based on the new OMB delineations 
in determining aggregate payments on each side of the comparison for 
the changes discussed below, except where otherwise noted (for 
example, the FY 2024 baseline simulation model). This is consistent 
with our discussion in section II.A.4. of the Appendix of this final 
rule, to use wage indexes based on the new OMB delineations in the 
determination of all of the budget neutrality factors in order to 
properly determine aggregate payments on each side of the comparison 
for our budget neutrality calculations. We further note that as 
discussed in that same section, consistent with past practice as 
finalized in the FY 2005 IPPS final rule (69 FR 49034), we are not 
adopting the new OMB delineations themselves in a budget neutral 
manner. We continue to believe that the revision to the labor market 
areas in and of itself does not constitute an ``adjustment or 
update'' to the adjustment for area wage differences, as provided 
under section 1886(d)(3)(E) of the Act.
    We discuss the following changes:
     The effects of the application of the applicable 
percentage increase of 2.9 percent (that is, a 3.4 percent market 
basket update with a reduction of 0.5 percentage point for the 
productivity adjustment), and the applicable percentage increase 
(including the market basket update and the productivity adjustment) 
to the hospital-specific rates.
     The effects of the changes to the relative weights and 
MS-DRG GROUPER.
     The effects of the changes in hospitals' wage index 
values reflecting updated wage data from hospitals' cost reporting 
periods beginning during FY 2021, compared to the FY 2020 wage data, 
to calculate the FY 2025 wage index.
     The effects of the geographic reclassifications by the 
MGCRB (as of publication of this final rule) that would be effective 
for FY 2025.
     The effects of the rural floor with the application of 
the national budget neutrality factor to the wage index.
     The effects of the imputed floor wage index adjustment. 
This provision is not budget neutral.
     The effects of the frontier State wage index adjustment 
under the statutory provision that requires hospitals located in 
States that qualify as frontier States to not have a wage index less 
than 1.0. This provision is not budget neutral.
     The effects of the implementation of section 
1886(d)(13) of the Act, which provides for an increase in a 
hospital's wage index if a threshold percentage of residents of the 
county where the hospital is located commute to work at hospitals in 
counties with higher wage indexes for FY 2025. This provision is not 
budget neutral.
     The effects of the expiration of the special payment 
status for MDHs beginning January 1, 2025 under current law. As 
discussed elsewhere in this final rule, section 307 of the 
Consolidated Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-42), 
enacted on March 9, 2024, extended the MDH program for FY 2025 
discharges occurring before January 1, 2025. Prior to enactment of 
the CAA, 2024, the MDH program was only to be in effect through the 
end of FY 2024. Therefore, under current law, the MDH program will 
expire for discharges on or after January 1, 2025. As a result, MDHs 
that currently receive the higher of payments made based on the 
Federal rate or the payments made based on the Federal rate plus 75 
percent of the difference between payments based on the Federal rate 
and the hospital-specific rate will be paid based on the Federal 
rate starting January 1, 2025.
     The total estimated change in payments based on the FY 
2025 policies relative to payments based on FY 2024 policies.
    In accordance with section 1886(b)(3)(B)(i) of the Act, each 
year we update the national standardized amount for inpatient 
hospital operating costs by a factor called the ``applicable 
percentage increase.'' For FY 2025, depending on whether a hospital 
submits quality data under the rules established in accordance with 
section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a 
hospital that submits quality data) and is a meaningful EHR user 
under section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as 
a hospital that is a meaningful EHR user), there are four possible 
applicable percentage increases that can be applied to the national 
standardized amount.
    We refer readers to section V.B. of the preamble of this final 
rule for a complete discussion on the FY 2025 inpatient hospital 
update. The table that follows shows these four scenarios:
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR28AU24.351

BILLING CODE 4120-01-C
    To illustrate the impact of the FY 2025 changes, our analysis 
begins with a FY 2024 baseline simulation model using: the FY 2024 
applicable percentage increase of 2.6 percent; the FY 2024 MS-DRG 
GROUPER (Version 41); the FY 2024 CBSA designations for hospitals 
based on the OMB definitions from the 2010 Census; the FY 2024 wage 
index; and no MGCRB reclassifications. Outlier payments are set at 
5.1 percent of total operating MS-DRG and outlier payments for 
modeling purposes.
    We note the following at the time this impact analysis was 
prepared:
     90 hospitals are estimated to not receive the full 
market basket rate-of-increase for FY 2025 because they failed the 
quality data submission process or did not choose to participate, 
but are meaningful EHR users. For purposes of the simulations shown 
later in this section, we modeled the payment changes for FY 2025 
using a reduced update for these hospitals.
     82 hospitals are estimated to not receive the full 
market basket rate-of-increase for FY 2025 because they are 
identified as not meaningful EHR users that do submit quality 
information under section 1886(b)(3)(B)(viii) of the Act. For 
purposes of the simulations shown in this section, we modeled the 
payment changes for FY 2025 using a reduced update for these 
hospitals.
     27 hospitals are estimated to not receive the full 
market basket rate-of-increase for FY 2025 because they are 
identified as not meaningful EHR users that do not submit quality 
data under section 1886(b)(3)(B)(viii) of the Act.
    Each policy change, statutory or otherwise, is then added 
incrementally to this baseline, finally arriving at an FY 2025 model 
incorporating all of the changes. This simulation allows us to 
isolate the effects of each change.
    Our comparison illustrates the percent change in payments per 
case from FY 2024 to FY 2025. Two factors not discussed separately 
have significant impacts here. The first factor is the update to the 
standardized amount (see the table earlier in this section that 
shows the four applicable percentage increases that can be applied 
to the national standardized amount for FY 2025). We note, section 
1886(b)(3)(B)(iv) of the Act provides that the applicable percentage 
increase applicable to the hospital-specific rates for SCHs and MDHs 
equals the applicable percentage increase set forth in section 
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for 
all other hospitals subject to the IPPS). Because the Act sets the 
update factor for SCHs and MDHs equal to the update factor for all 
other IPPS hospitals, the update to the hospital-specific rates for 
SCHs and MDHs is subject to the amendments to section 1886(b)(3)(B) 
of the Act made by sections 3401(a) and 10319(a) of the Affordable 
Care Act. Accordingly, the applicable percentage increases to the 
hospital-specific rates applicable to SCHs and MDHs for FY 2025 are 
the same as the four applicable percentage increases in the table 
earlier in this section.
    A second significant factor that affects the changes in 
hospitals' payments per case from FY 2024 to FY 2025 is the change 
in hospitals' geographic reclassification status from one year to 
the next. That is, payments may be reduced for hospitals 
reclassified in FY 2024 that are no longer reclassified in FY 2025. 
Conversely, payments may increase for hospitals not reclassified in 
FY 2024 that are reclassified in FY 2025.

2. Analysis of Table I

    Table I displays the results of our analysis of the changes for 
FY 2025. The table categorizes hospitals by various geographic and 
special payment consideration groups to illustrate the varying 
impacts on different types of hospitals. The top row of the table 
shows the overall impact on the 3,082 acute care hospitals included 
in the analysis.
    The next two rows of Table I contain hospitals categorized 
according to their geographic location: urban and rural. There are 
2,392 hospitals located in urban areas and 690 hospitals in rural 
areas included in our analysis. The next two groupings are by bed-
size categories, shown separately for urban and rural hospitals. The 
last groupings by geographic location are by census divisions, also 
shown separately for urban and rural hospitals.
    The second part of Table I shows hospital groups based on 
hospitals' FY 2025 payment classifications, including any 
reclassifications under section 1886(d)(10) of the Act. For example, 
the rows labeled urban and rural show that the numbers of hospitals 
paid based on these categorizations after consideration of 
geographic reclassifications (including reclassifications under 
sections 1886(d)(8)(B) and 1886(d)(8)(E) of the Act) are 1,714, and 
1,368, respectively.
    The next three groupings examine the impacts of the changes on 
hospitals grouped by whether or not they have GME residency

[[Page 69997]]

programs (teaching hospitals that receive an IME adjustment) or 
receive Medicare DSH payments, or some combination of these two 
adjustments. There are 1,832 nonteaching hospitals in our analysis, 
958 teaching hospitals with fewer than 100 residents, and 292 
teaching hospitals with 100 or more residents.
    In the DSH categories, hospitals are grouped according to their 
DSH payment status, and whether they are considered urban or rural 
for DSH purposes. The next category groups together hospitals 
considered urban or rural, in terms of whether they receive the IME 
adjustment, the DSH adjustment, both, or neither.
    The next six rows examine the impacts of the changes on rural 
hospitals by special payment groups (SCHs and RRCs) and 
reclassification status from urban to rural in accordance with 
section 1886(d)(8)(E) of the Act. Of the hospitals that are not 
reclassified from urban to rural, there are 155 RRCs, 244 SCHs, and 
119 hospitals that are both SCHs and RRCs. Of the hospitals that are 
reclassified from urban to rural, there are 579 RRCs, 34 SCHs, and 
46 hospitals that are both SCHs and RRCs.
    The next series of groupings are based on the type of ownership 
and the hospital's Medicare and Medicaid utilization expressed as a 
percent of total inpatient days. These data were taken from the most 
recent available Medicare cost reports.
    The next grouping concerns the geographic reclassification 
status of hospitals. The first subgrouping is based on whether a 
hospital is reclassified or not. The second and third subgroupings 
are based on whether urban and rural hospitals were reclassified by 
the MGCRB for FY 2025 or not, respectively. The fourth subgrouping 
displays hospitals that reclassified from urban to rural in 
accordance with section 1886(d)(8)(E) of the Act. The fifth 
subgrouping displays hospitals deemed urban in accordance with 
section 1886(d)(8)(B) of the Act.
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a. Effects of the Hospital Update (Column 1)

    As discussed in section V.B. of the preamble of this final rule, 
this column includes the hospital update, including the 3.4 percent 
market basket rate-of-increase reduced by the 0.5 percentage point 
for the productivity adjustment. As a result, we are making a 2.9 
percent update to the national standardized amount. This column also 
includes the update to the hospital-specific rates which includes 
the 3.4 percent market basket rate-of-increase reduced by 0.5 
percentage point for the productivity adjustment. As a result, we 
are making a 2.9 percent update to the hospital-specific rates.
    Overall, hospitals would experience a 2.9 percent increase in 
payments primarily due to the combined effects of the hospital 
update to the national standardized amount and the hospital update 
to the hospital-specific rate.

b. Effects of the Changes to the MS-DRG Reclassifications and Relative 
Cost-Based Weights With Recalibration Budget Neutrality (Column 2)

    Column 2 shows the effects of the changes to the MS-DRGs and 
relative weights with the application of the recalibration budget 
neutrality factor to the standardized amounts. Section 
1886(d)(4)(C)(i) of the Act requires us annually to make appropriate 
classification changes to reflect changes in treatment patterns, 
technology, and any other factors that may change the relative use 
of hospital resources. Consistent with section 1886(d)(4)(C)(iii) of 
the Act, we calculated a recalibration budget neutrality factor to 
account for the changes in MS-DRGs and relative weights to ensure 
that the overall payment impact is budget neutral. We also applied 
the permanent 10-percent cap on the reduction in a MS-DRG's relative 
weight in a given year and an associated recalibration cap budget 
neutrality factor to account for the 10-percent cap on relative 
weight reductions to ensure that the overall payment impact is 
budget neutral.
    As discussed in section II.D. of the preamble of this final 
rule, for FY 2025, we calculated the MS-DRG relative weights using 
the FY 2023 MedPAR data grouped to the Version 42 (FY 2025) MS-DRGs. 
The reclassification changes to the GROUPER are described in more 
detail in section II.C. of the preamble of this final rule.
    The ``All Hospitals'' line in Column 2 indicates that changes 
due to the MS-DRGs and relative weights would result in a 0.0 
percent change in payments with the application of the recalibration 
budget neutrality factor of 0.99719 and the recalibration cap budget 
neutrality factor of 0.999874 to the standardized amount.

c. Effects of the Wage Index Changes (Column 3)

    Column 3 shows the impact of the updated wage data, with the 
application of the wage budget neutrality factor. The wage index is 
calculated and assigned to hospitals on the basis of the labor 
market area in which the hospital is located. Under section 
1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate 
hospital labor market areas based on the Core Based Statistical 
Areas (CBSAs) established by OMB. The current statistical standards 
(based on OMB standards) used in FY 2025 are discussed in section 
III.A.2. of the preamble of this final rule. Specifically, we are 
implementing the new OMB delineations as described in the July 21, 
2023 OMB Bulletin No. 23-01, effective beginning with the FY 2025 
IPPS wage index.
    Section 1886(d)(3)(E) of the Act requires that, beginning 
October 1, 1993, we annually update the wage data used to calculate 
the wage index. In accordance with this requirement, the wage index 
for acute care hospitals for FY 2025 is based on data submitted for 
hospital cost reporting periods, beginning on or after October 1, 
2020 and before October 1, 2021. The estimated impact of the updated 
wage data on hospital payments is isolated in Column 3 by holding 
the other payment parameters constant in this simulation. That is, 
Column 3 shows the percentage change in payments when going from a 
model using the FY 2024 wage index, the labor-related share of 67.6 
percent, and having a 100-percent occupational mix adjustment 
applied, to a model using the FY 2025 pre-reclassification wage 
index with the labor-related share of 67.6 percent, also having a 
100-percent occupational mix adjustment applied, while holding other 
payment parameters, such as use of the Version 42 MS-DRG GROUPER 
constant. As noted earlier and as discussed in section II.A.4. of 
the Addendum of this final rule, we used wage indexes based on the 
new OMB delineations in determining aggregate payments on each side 
of the comparison/model. The FY 2025 occupational mix adjustment is 
based on the CY 2022 occupational mix survey.
    In addition, the column shows the impact of the application of 
the wage budget neutrality to the national standardized amount. In 
FY 2010, we began calculating separate wage budget neutrality and 
recalibration budget neutrality factors, in accordance with section 
1886(d)(3)(E) of the Act, which specifies that budget neutrality to 
account for wage index changes or updates made under that 
subparagraph must be made without regard to the 62 percent labor-
related share guaranteed under section 1886(d)(3)(E)(ii) of the Act. 
Therefore, for FY 2025, we are calculating the wage budget 
neutrality factor to ensure that payments under the updated wage 
data and the labor-related share of 67.6 percent are budget neutral, 
without regard to the lower labor-related share of 62 percent 
applied to hospitals with a wage index less than or equal to 1.0. In 
other words, the wage budget neutrality factor is calculated under 
the assumption that all hospitals receive the higher labor-related 
share of the standardized amount. The FY 2025 wage budget neutrality 
factor is 1.000114 and the overall payment change is 0 percent.
    Column 3 shows the impacts of updating the wage data. Overall, 
the new wage data and the labor-related share, combined with the 
wage budget neutrality adjustment, would lead to no change for all 
hospitals, as shown in Column 3.
    In looking at the wage data itself, the national average hourly 
wage would increase 9.20 percent compared to FY 2024. Therefore, the 
only manner in which to

[[Page 70001]]

maintain or exceed the previous year's wage index was to match or 
exceed the 9.20 percent increase in the national average hourly 
wage.
    The following chart compares the shifts in wage index values for 
hospitals due to changes in the average hourly wage data for FY 2025 
relative to FY 2024. These figures reflect changes in the ``pre-
reclassified, occupational mix-adjusted wage index,'' that is, the 
wage index before the application of geographic reclassification, 
the rural floor, the out-migration adjustment, and other wage index 
exceptions and adjustments. We note that the ``post-reclassified 
wage index'' or ``payment wage index,'' which is the wage index that 
includes all such exceptions and adjustments (as reflected in Tables 
2 and 3 associated with this final rule) is used to adjust the 
labor-related share of a hospital's standardized amount, either 67.6 
percent or 62 percent, depending upon whether a hospital's wage 
index is greater than 1.0 or less than or equal to 1.0. Therefore, 
the pre-reclassified wage index figures in the following chart may 
illustrate a somewhat larger or smaller change than would occur in a 
hospital's payment wage index and total payment.
    The following chart shows the projected impact of changes in the 
area wage index values for urban and rural hospitals based on the 
wage data used for this final rule.
[GRAPHIC] [TIFF OMITTED] TR28AU24.355

d. Effects of MGCRB Reclassifications (Column 4)

    Our impact analysis to this point has assumed acute care 
hospitals are paid on the basis of their actual geographic location 
(with the exception of ongoing policies that provide that certain 
hospitals receive payments on bases other than where they are 
geographically located, such as hospitals with a Sec.  412.103 
reclassification or ``LUGAR'' status). The changes in Column 4 
reflect the per case payment impact of moving from this baseline to 
a simulation incorporating the MGCRB decisions for FY 2025.
    By spring of each year, the MGCRB makes reclassification 
determinations that would be effective for the next fiscal year, 
which begins on October 1. The MGCRB may approve a hospital's 
reclassification request for the purpose of using another area's 
wage index value. Hospitals may appeal denials by the MGCRB of 
reclassification requests to the CMS Administrator. Further, 
hospitals have 45 days from the date the IPPS final rule is issued 
in the Federal Register to decide whether to withdraw or terminate 
an approved geographic reclassification for the following year.
    The overall effect of geographic reclassification is required by 
section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, 
for purposes of this impact analysis, we are applying an adjustment 
of 0.962791 to ensure that the effects of the reclassifications 
under sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are 
budget neutral (section II.A. of the Addendum to this final rule).
    Geographic reclassification generally benefits hospitals in 
rural areas. We estimate that the geographic reclassification would 
increase payments to rural hospitals by an average of 2.4 percent. 
By region, most rural hospital categories would experience increases 
in payments due to MGCRB reclassifications.
    Table 2 listed in section VI. of the Addendum to this final rule 
and available via the internet on the CMS website reflects the 
reclassifications for FY 2025.

e. Effects of the Rural Floor, Including Application of National Budget 
Neutrality (Column 5)

    As discussed in section III.G.1. of the preamble of this final 
rule, section 4410 of Public Law 105-33 established the rural floor 
by requiring that the wage index for a hospital in any urban area 
cannot be less than the wage index applicable to hospitals located 
in rural areas in the same state. We apply a uniform budget 
neutrality adjustment to the wage index. Column 5 shows the effects 
of the rural floor.
    The Affordable Care Act requires that we apply one rural floor 
budget neutrality factor to the wage index nationally. We have 
calculated a FY 2025 rural floor budget neutrality factor to be 
applied to the wage index of 0.977499, which would reduce wage 
indexes by 2.3 percent compared to the rural floor provision not 
being in effect.
    Column 5 shows the projected impact of the rural floor with the 
national rural floor budget neutrality factor applied to the wage 
index. The column compares the post-reclassification FY 2025 wage 
index of providers before the rural floor adjustment to the post-
reclassification FY 2025 wage index of providers with the rural 
floor adjustment.
    We estimate that 771 hospitals would receive the rural floor in 
FY 2025. All IPPS hospitals in our model would have their wage 
indexes reduced by the rural floor budget neutrality adjustment of 
0.977499. We project that, in aggregate, rural hospitals would 
experience a 0.7 percent decrease in payments as a result of the 
application of the rural floor budget neutrality adjustment because 
the rural hospitals do not benefit from the rural floor, but have 
their wage indexes downwardly adjusted to ensure that the 
application of the rural floor is budget neutral overall. We project 
that, in the aggregate, hospitals located in urban areas would 
experience a 0.1 percent increase in payments, because increases in 
payments to hospitals benefitting from the rural floor offset 
decreases in payments to non-rural floor urban hospitals whose wage 
index is downwardly adjusted by the rural floor budget neutrality 
factor. Urban hospitals in the Pacific region would experience a 2.3 
percent increase in payments primarily due to the application of the 
rural floor in California.

f. Effects of the Application of the Imputed Floor, Frontier State Wage 
Index and Out-Migration Adjustment (Column 6)

    This column shows the combined effects of the application of the 
following: (1) the imputed floor under section 1886(d)(3)(E)(iv)(I) 
and (II) of the Act, which provides that for discharges occurring on 
or after October 1, 2021, the area wage index applicable to any 
hospital in an all-urban State may not be less than the minimum area 
wage index for the fiscal year for hospitals in that State 
established using the methodology described in Sec.  
412.64(h)(4)(vi) as in effect for FY 2018; (2) section 10324(a) of 
the Affordable Care Act, which requires that we establish a minimum 
post-reclassified wage index of 1.00 for all hospitals located in 
``frontier States;'' and (3) the effects of section 1886(d)(13) of 
the Act, which provides for an increase in the wage index for 
hospitals located in certain counties that have a relatively high 
percentage of hospital employees who reside in the county, but work 
in a different area with a higher wage index.
    These three wage index provisions are not budget neutral and 
would increase payments overall by 0.3 percent compared to the 
provisions not being in effect.
    Section 1886(d)(3)(E)(iv)(III) of the Act provides that the 
imputed floor wage index for all-urban States shall not be applied 
in a budget neutral manner. Therefore, the imputed floor adjustment 
is estimated to increase IPPS operating payments by approximately 
$203 million. There are an estimated 76 providers in Washington DC, 
New Jersey, Puerto Rico, and Rhode Island

[[Page 70002]]

that would receive the imputed floor wage index.
    The term ``frontier States'' is defined in the statute as States 
in which at least 50 percent of counties have a population density 
less than 6 persons per square mile. Based on these criteria, 5 
States (Montana, Nevada, North Dakota, South Dakota, and Wyoming) 
are considered frontier States, and an estimated 41 hospitals 
located in Montana, North Dakota, South Dakota, and Wyoming would 
receive a frontier wage index of 1.0000. We note, the rural floor 
for Nevada exceeds the frontier state wage index of 1.000, and 
therefore no hospitals in Nevada receive the frontier state wage 
index. Overall, this provision is not budget neutral and is 
estimated to increase IPPS operating payments by approximately $55 
million.
    In addition, section 1886(d)(13) of the Act provides for an 
increase in the wage index for hospitals located in certain counties 
that have a relatively high percentage of hospital employees who 
reside in the county but work in a different area with a higher wage 
index. Hospitals located in counties that qualify for the payment 
adjustment would receive an increase in the wage index that is equal 
to a weighted average of the difference between the wage index of 
the resident county, post-reclassification and the higher wage index 
work area(s), weighted by the overall percentage of workers who are 
employed in an area with a higher wage index. There are an estimated 
203 providers that would receive the out-migration wage adjustment 
in FY 2025. This out-migration wage adjustment is not budget 
neutral, and we estimate the impact of these providers receiving the 
out-migration increase would be approximately $65 million.

g. Effects of the Expiration of MDH Special Payment Status (Column 7)

    Column 7 shows our estimate of the changes in payments due to 
the expiration of MDH status, a nonbudget neutral payment provision. 
Section 102 of the Continuing Appropriations and Ukraine 
Supplemental Appropriations Act, 2023 (Pub. L. 117-180), extended 
the MDH program (which, under previous law, was to be in effect for 
discharges before October 1, 2022 only) through December 16, 2022. 
Section 102 of the Further Continuing Appropriations and Extensions 
Act, 2023 (Pub. L. 117-229) extended the MDH program through 
December 23, 2022. Section 4102 of the Consolidated Appropriations 
Act, 2023 (Pub. L. 117-328), extended the MDH program through FY 
2024 (that is for discharges occurring before October 1, 2024). As 
previously noted, section 307 of the CAA, 2024 (Pub. L. 118-42), 
enacted on March 9, 2024, further extended the MDH program for FY 
2025 discharges occurring before January 1, 2025. Prior to enactment 
of the CAA, 2024, the MDH program was only to be in effect through 
the end of FY 2024. Therefore, under current law, the MDH program 
will expire for discharges on or after January 1, 2025. Hospitals 
that qualify to be MDHs receive the higher of payments made based on 
the Federal rate or the payments made based on the Federal rate 
amount plus 75 percent of the difference between payments based on 
the Federal rate and payments based on the hospital-specific rate (a 
hospital-specific cost-based rate). Because this provision is not 
budget neutral, the expiration of this payment provision is 
estimated to result in a 0.1 percent decrease in payments overall. 
There are currently 173 MDHs, of which we estimate 117 would be paid 
under the blended payment of the Federal rate and hospital-specific 
rate if the MDH program were not set to expire. Because those 117 
MDHs will no longer receive the blended payment and will be paid 
only under the Federal rate for FY 2025 discharges beginning on or 
after January 1, 2025, it is estimated that those hospitals would 
experience an overall decrease in payments of approximately $152 
million. The $152 million overall decrease reflects the 3-month 
extension of the MDH program through December 31, 2024 under section 
307 of the CAA, 2024.

h. Effects of All FY 2025 Changes (Column 8)

    Column 8 shows our estimate of the changes in payments per 
discharge from FY 2024 and FY 2025, resulting from all changes 
reflected in this final rule for FY 2025. It includes combined 
effects of the year-to-year change of the factors described in 
previous columns in the table.
    The average increase in payments under the IPPS for all 
hospitals is approximately 2.8 percent for FY 2025 relative to FY 
2024 and for this row is primarily driven by the changes reflected 
in Column 1. Column 8 includes the annual hospital update of 2.9 
percent to the national standardized amount. This annual hospital 
update includes the 3.4 percent market basket rate-of-increase 
reduced by the 0.5 percentage point productivity adjustment. 
Hospitals paid under the hospital-specific rate would receive a 2.9 
percent hospital update. As described in Column 1, the annual 
hospital update for hospitals paid under the national standardized 
amount, combined with the annual hospital update for hospitals paid 
under the hospital-specific rates, combined with the other 
adjustments described previously and shown in Table I, would result 
in a 2.48 percent increase in payments in FY 2025 relative to FY 
2024.
    This column also reflects the estimated effect of outlier 
payments returning to their targeted levels in FY 2025 as compared 
to the estimated outlier payments for FY 2024 produced from our 
payment simulation model. As discussed in section II.A.4.i. of the 
Addendum to this final rule, the statute requires that outlier 
payments for any year are projected to be not less than 5 percent 
nor more than 6 percent of total operating DRG payments plus outlier 
payments, and also requires that the average standardized amount be 
reduced by a factor to account for the estimated proportion of total 
DRG payments made to outlier cases. We continue to use a 5.1 percent 
target (or an outlier offset factor of 0.949) in calculating the 
outlier offset to the standardized amount, just as we did for FY 
2024. Therefore, our estimate of payments per discharge for FY 2025 
from our payment simulation model reflects this 5.1 percent outlier 
payment target. Our payment simulation model shows that estimated 
outlier payments for FY 2024 were less than that target by 
approximately 0.05 percent. Therefore, our estimate of the changes 
in payments per discharge from FY 2024 to FY 2025 in Column 8 
reflects the estimated 0.05 percent change in outlier payments 
produced by our payment simulation model when returning to the 5.1 
percent outlier target for FY 2025. There are also interactive 
effects among the various factors comprising the payment system that 
we are not able to isolate, which may contribute to our estimate of 
the changes in payments per discharge from FY 2024 and FY 2025 in 
Column 8.
    Overall payments to hospitals paid under the IPPS due to the 
applicable percentage increase and changes to policies related to 
MS-DRGs, geographic adjustments, and outliers are estimated to 
increase by 2.8 percent for FY 2025. Hospitals in urban areas would 
experience a 2.8 percent increase in payments per discharge in FY 
2025 compared to FY 2024. Hospital payments per discharge in rural 
areas are estimated to increase by 2.6 percent in FY 2025.

3. Impact Analysis of Table II

    Table II presents the projected impact of the changes for FY 
2025 for urban and rural hospitals and for the different categories 
of hospitals shown in Table I. It compares the estimated average 
payments per discharge for FY 2024 with the estimated average 
payments per discharge for FY 2025, as calculated under our models. 
Therefore, this table presents, in terms of the average dollar 
amounts paid per discharge, the combined effects of the changes 
presented in Table I. The estimated percentage changes shown in the 
last column of Table II equal the estimated percentage changes in 
average payments per discharge from Column 8 of Table I.
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4. Impact Analysis of Table III: Provider Deciles by Beneficiary 
Characteristics

    Advancing health equity is the first pillar of CMS's 2022 
Strategic Framework.\1109\ To gain insight into how the IPPS 
policies could affect health equity, we have added Table III, 
Provider Deciles by Beneficiary Characteristics, for informational 
purposes. Table III details providers in terms of the beneficiaries 
they serve, and shows differences in estimated average payments per 
case and changes in estimated average payments per case relative to 
other providers.
---------------------------------------------------------------------------

    \1109\ Available at: https://www.cms.gov/files/document/2022-cms-strategic-framework.pdf.
---------------------------------------------------------------------------

    As noted in section I.C. of this Appendix, this final rule 
contains a range of policies, and there is a section of the final 
rule where each policy is discussed. Each section includes the 
rationale for our decisions, including the need for the final 
policy. The information contained in Table III is provided solely to 
demonstrate the quantitative effects of our policies across a number 
of health equity dimensions and does not form the basis or rationale 
for the policies.
    Patient populations that have been disadvantaged or underserved 
by the healthcare system may include patients with the following 
characteristics, among others: members of racial and ethnic 
minorities; members of federally recognized Tribes, people with 
disabilities; members of the lesbian, gay, bisexual, transgender, 
and queer (LGBTQ+) community; individuals with limited English 
proficiency, members of rural communities, and persons otherwise 
adversely affected by persistent poverty or inequality. The CMS 
Framework for Health Equity was developed with particular attention 
to disparities in chronic and infectious diseases; as an example of 
a chronic disease associated with significant disparities, we 
therefore also detail providers in terms of the percentage of their 
claims for beneficiaries receiving ESRD Medicare coverage.
    Because we do not have data for all characteristics that may 
identify disadvantaged or underserved patient populations, we use 
several proxies to capture these characteristics, based on claims 
data from the FY 2023 MedPAR file and Medicare enrollment data from 
Medicare's Enrollment Database (EDB), including: race/ethnicity, 
dual eligibility for Medicaid and Medicare, Medicare low income 
subsidy (LIS) enrollment, a joint indicator for dual or LIS 
enrollment, presence of an ICD-10-CM Z code indicating a ``social 
determinant of health'' (SDOH), presence of a behavioral health 
diagnosis code, receiving ESRD Medicare coverage, qualifying for 
Medicare due to disability, living in a rural area, and living in an 
area with an area deprivation index (ADI) greater than or equal to 
85. We refer to each of these proxies as characteristics in Table 
III and the discussion that follows.

a. Race

    The first health equity-relevant grouping presented in Table III 
is race/ethnicity. To assign the race/ethnicity variables used in 
Table III, we utilized the Medicare Bayesian Improved Surname 
Geocoding (MBISG) data in conjunction with the MedPAR data. The 
method used to develop the MBISG data involves estimating a set of 
six racial and ethnic probabilities (White, Black, Hispanic, 
American Indian or Alaskan Native, Asian or Pacific Islander, and 
multiracial) from the surname and address of beneficiaries by using 
previous self-reported data from a national survey of Medicare 
beneficiaries, post-stratified to CMS enrollment files. The MBISG 
method is used by the CMS Office of Minority Health in its reports 
analyzing Medicare Advantage plan performance on Healthcare 
Effectiveness Data and Information Set (HEDIS) measures, and is 
being considered by CMS for use in other CMS programs. To estimate 
the percentage of discharges for each specified racial/ethnic 
category for each hospital, the sum of the probabilities for that 
category for that hospital was divided by the hospital's total 
number of discharges.

[[Page 70005]]

b. Income

    The two main proxies for income available in the Medicare claims 
and enrollment data are dual eligibility for Medicare and Medicaid 
and Medicare LIS status. Dual-enrollment status is a powerful 
predictor of poor outcomes on some quality and resource use measures 
even after accounting for additional social and functional risk 
factors.\1110\ Medicare LIS enrollment refers to a beneficiary's 
enrollment in the low-income subsidy program for the Part D 
prescription drug benefit. This program covers all or part of the 
Part D premium for qualifying Medicare beneficiaries and gives them 
access to reduced copays for Part D drugs. (We note that beginning 
on January 1, 2024, eligibility for the full low-income subsidy was 
expanded to include individuals currently eligible for the partial 
low-income subsidy.) Because Medicaid eligibility rules and benefits 
vary by state/territory, Medicare LIS enrollment identifies 
beneficiaries who are likely to have low income but may not be 
eligible for Medicaid. Not all beneficiaries who qualify for the 
duals or LIS programs actually enroll. Due to differences in the 
dual eligibility and LIS qualification criteria and less than 
complete participation in these programs, sometimes beneficiaries 
were flagged as dual but not LIS or vice versa. Hence this analysis 
also used a ``dual or LIS'' flag as a third proxy for low income. 
The dual and LIS flags were constructed based on enrollment/
eligibility status in the EDB during the month of the hospital 
discharge.
---------------------------------------------------------------------------

    \1110\ https://aspe.hhs.gov/sites/default/files/migrated_legacy_files//195046/Social-Risk-in-Medicare%E2%80%99s-VBP-2nd-Report-Executive-Summary.pdf.
---------------------------------------------------------------------------

c. Social Determinants of Health (SDOH)

    Social determinants of health (SDOH) are the conditions in the 
environments where people are born, live, learn, work, play, 
worship, and age that affect a wide range of health, functioning, 
and quality-of-life outcomes and risks.\1111\ These circumstances or 
determinants influence an individual's health status and can 
contribute to wide health disparities and inequities. ICD-10-CM 
contains Z-codes that describe a range of issues related--but not 
limited--to education and literacy, employment, housing, ability to 
obtain adequate amounts of food or safe drinking water, and 
occupational exposure to toxic agents, dust, or radiation. The 
presence of ICD-10-CM Z-codes in the range Z55-Z65 identifies 
beneficiaries with these SDOH characteristics. The SDOH flag used 
for this analysis was turned on if one of these Z-codes was recorded 
on the claim for the hospital stay itself (that is, the 
beneficiary's prior claims were not examined for additional Z-
codes). Since these codes are not required for Medicare FFS patients 
and did not impact payment under the IPPS in FY 2023, we believe 
they may be underreported in the claims data from the FY 2023 MedPAR 
file used for this analysis and not reflect the actual rates of 
SDOH. In 2019, 0.11 percent of all Medicare FFS claims were Z code 
claims and 1.59 percent of continuously enrolled Medicare FFS 
beneficiaries had claims with Z codes.\1112\ However, we expect the 
reporting of Z codes on claims may increase over time, because of 
newer quality measures in the Hospital Inpatient Quality Reporting 
(IQR) Program that capture screening and identification of patient-
level, health-related social needs (MUC21-134 and MUC21-136) (87 FR 
49201 through 49220). In the FY 2024 IPPS/LTCH PPS final rule (88 FR 
58755 through 58759), we also finalized a change to the severity 
designation of the following three ICD-10-CM diagnosis codes from 
non-CC to CC: Z59.00 (Homelessness, unspecified), Z59.01 (Sheltered 
homelessness) and Z59.02 (Unsheltered homelessness). We also refer 
the reader to section II.C.12.c.1. of the preamble of this final 
rule, where we discuss our final policy to change the severity level 
designation of the following seven ICD-10-CM diagnosis codes from 
non-CC to CC for FY 2025: Z59.10 (Inadequate housing, unspecified), 
Z59.11 (Inadequate housing environmental temperature), Z59.12 
(Inadequate housing utilities), Z59.19 (Other inadequate housing), 
Z59.811 (Housing instability, housed, with risk of homelessness), 
Z59.812 (Housing instability, housed, homelessness in past 12 
months), and Z59.819 (Housing instability, housed unspecified).
---------------------------------------------------------------------------

    \1111\ Available at: https://health.gov/healthypeople/priority-areas/social-determinants-health.
    \1112\ See ``Utilization of Z Codes for Social Determinants of 
Health among Medicare Fee-for-Service Beneficiaries, 2019,'' 
available at https://www.cms.gov/files/document/z-codes-data-highlight.pdf.
---------------------------------------------------------------------------

d. Behavioral Health

    Beneficiaries with behavioral health diagnoses often face co-
occurring physical illnesses, but often experience difficulty 
accessing care.\1113\ The combination of physical and behavioral 
health conditions can exacerbate both conditions and result in 
poorer outcomes than one condition alone.\1114\ Additionally, the 
intersection of behavioral health and health inequities is a core 
aspect of CMS' Behavioral Health Strategy.\1115\ We used the 
presence of one or more ICD-10-CM codes in the range of F01-F99 to 
identify beneficiaries with a behavioral health diagnosis.
---------------------------------------------------------------------------

    \1113\ Viron M, Zioto K, Schweitzer J, Levine G. Behavioral 
Health Homes: an opportunity to address healthcare inequities in 
people with serious mental illness. Asian J Psychiatr. 2014 Aug; 
10:10-6. doi: 10.1016/j.ajp.2014.03.009.
    \1114\ Cully, J.A., Breland, J.Y., Robertson, S. et al. 
Behavioral health coaching for rural veterans with diabetes and 
depression: a patient randomized effectiveness implementation trial. 
BMC Health Serv Res 14, 191 (2014). https://doi.org/10.1186/1472-6963-14-191.
    \1115\ https://www.cms.gov/cms-behavioral-health-strategy.
---------------------------------------------------------------------------

e. Disability

    Beneficiaries with disabilities are categorized as being 
disabled because of a medically determinable physical or mental 
impairment(s) that has lasted or is expected to last for a 
continuous period of at least 12 months or is expected to result in 
death.\1116\ Beneficiaries with disabilities often have complex 
healthcare needs and difficulty accessing care. Beneficiaries with 
disabilities were classified as such persons for the purposes of 
this analysis if their original reason for qualifying for Medicare 
was disability; this information was obtained from Medicare's EDB. 
We note that this is likely an underestimation of disability because 
it does not account for beneficiaries who became disabled after 
becoming entitled to Medicare. This metric also does not capture all 
individuals who would be considered to have a disability under 29 
U.S.C. 705(9)(B).
---------------------------------------------------------------------------

    \1116\ https://www.ssa.gov/disability/professionals/bluebook/general-info.htm.
---------------------------------------------------------------------------

f. ESRD

    Beneficiaries with ESRD have high healthcare needs and high 
medical spending, and often experience comorbid conditions and poor 
mental health. Beneficiaries with ESRD also experience significant 
disparities, such as a limited life expectancy.\1117\ Beneficiaries 
were classified as ESRD for the purposes of this analysis if they 
were receiving Medicare ESRD coverage during the month of the 
discharge; this information was obtained from Medicare's EDB.
---------------------------------------------------------------------------

    \1117\ Smart NA, Titus TT. Outcomes of early versus late 
nephrology referral in chronic kidney disease: a systematic review. 
Am J Med. 2011 Nov;124(11):1073-80.e2. doi: 10.1016/
j.amjmed.2011.04.026. PMID: 22017785.
---------------------------------------------------------------------------

g. Geography

    Beneficiaries in some geographic areas--particularly rural areas 
or areas with concentrated poverty--often have difficulty accessing 
care.1118 1119 For this impact analysis, beneficiaries 
were classified on two dimensions: from a rural area and from an 
area with an area deprivation index (ADI) greater than or equal to 
85.
---------------------------------------------------------------------------

    \1118\ National Healthcare Quality and Disparities Report 
chartbook on rural health care. Rockville, MD: Agency for Healthcare 
Research and Quality; October 2017. AHRQ Pub. No. 17(18)-0001-2-EF 
available at https://www.ahrq.gov/sites/default/files/wysiwyg/research/findings/nhqrdr/chartbooks/qdr-ruralhealthchartbook-update.pdf.
    \1119\ Muluk, S, Sabik, L, Chen, Q, Jacobs, B, Sun, Z, Drake, C. 
Disparities in geographic access to medical oncologists. Health Serv 
Res. 2022; 57(5): 1035-1044. doi:10.1111/1475-6773.13991.
    \1120\ https://www.neighborhoodatlas.medicine.wisc.edu/.
---------------------------------------------------------------------------

    Rural status is defined for purposes of this analysis using the 
primary Rural-Urban Commuting Area (RUCA) codes 4-10 (including 
micropolitan, small town, and rural areas) corresponding to each 
beneficiary's zip code. RUCA codes are defined at the census tract 
level based on measures of population density, urbanization, and 
daily commuting. The ADI is obtained from a publicly available 
dataset designed to capture socioeconomic disadvantage at the 
neighborhood level.\1120\It utilizes data on income, education, 
employment, housing quality, and 13 other factors from the American 
Community Survey and combines them into a single raw score, which is 
then used to rank neighborhoods (defined at various levels), with 
higher scores reflecting greater deprivation. The version of the ADI 
used for this analysis is at the Census Block Group level and the 
ADI corresponds to the Census

[[Page 70006]]

Block Group's percentile nationally. Living in an area with an ADI 
score of 85 or above, a validated measure of neighborhood 
disadvantage, is shown to be a predictor of 30-day readmission 
rates, lower rates of cancer survival, poor end of life care for 
patients with heart failure, and longer lengths of stay and fewer 
home discharges post-knee surgery even after accounting for 
individual social and economic risk 
factors.1121 1122 1123 1124 1125 The MedPAR discharge 
data was linked to the RUCA using beneficiaries' five-digit zip code 
and to the ADI data using beneficiaries' 9-digit zip codes, both of 
which were derived from Common Medicare Enrollment (CME) files. 
Beneficiaries with no recorded zip code were treated as being from 
an urban area and as having an ADI less than 85.
---------------------------------------------------------------------------

    \1121\ 7 U.S. Department of Health & Human Services, ``Executive 
Summary: Report to Congress: Social Risk Factors and Performance in 
Medicare's Value-Based Purchasing Program,'' Office of the Assistant 
Secretary for Planning and Evaluation, March 2020. Available at 
https://aspe.hhs.gov/sites/default/files/migrated_legacy_files//195046/Social-Risk-inMedicare%E2%80%99s-VBP-2nd-Report-Executive-Summary.pdf.
    \1122\ Kind AJ, et al., ``Neighborhood socioeconomic 
disadvantage and 30-day rehospitalization: a retrospective cohort 
study.'' Annals of Internal Medicine. No. 161(11), pp 765-74, doi: 
10.7326/M13-2946 (December 2, 2014), available at https://www.acpjournals.org/doi/epdf/10.7326/M13-2946.
    \1123\ Jencks SF, et al., ``Safety-Net Hospitals, Neighborhood 
Disadvantage, and Readmissions Under Maryland's All-Payer Program.'' 
Annals of Internal Medicine. No. 171, pp 91-98, doi:10.7326/M16-2671 
(July 16, 2019), available at https://www.acpjournals.org/doi/epdf/10.7326/M16-2671.
    \1124\ Cheng E, et al., ``Neighborhood and Individual 
Socioeconomic Disadvantage and Survival Among Patients With 
Nonmetastatic Common Cancers.'' JAMA Network Open Oncology. No. 
4(12), pp 1-17, doi: 10.1001/jamanetworkopen.2021.39593 (December 
17, 2021), available at https://onlinelibrary.wiley.com/doi/epdf/10.1111/jrh.12597.
    \1125\ Khlopas A, et al., ``Neighborhood Socioeconomic 
Disadvantages Associated With Prolonged Lengths of Stay, Nonhome 
Discharges, and 90-Day Readmissions After Total Knee Arthroplasty.'' 
The Journal of Arthroplasty. No. 37(6), pp S37-S43, doi: 10.1016/
j.arth.2022.01.032 (June 2022), available at https://www.sciencedirect.com/science/article/pii/S0883540322000493.
---------------------------------------------------------------------------

    For each of these characteristics, the hospitals were classified 
into groups as follows. First, all discharges at IPPS hospitals 
(excluding Maryland and IHS hospitals) in the FY 2023 MedPAR file 
were flagged for the presence of the characteristic, with the 
exception of race/ethnicity, for which probabilities were assigned 
instead of binary flags, as described further in this section. 
Second, the percentage of discharges at each hospital for the 
characteristic was calculated. Finally, the hospitals were divided 
into four groups based on the percentage of discharges for each 
characteristic: decile group 1 contains the 10% of hospitals with 
the lowest rate of discharges for that characteristic; decile group 
2 to 5 contains the hospitals with less than or equal to the median 
rate of discharges for that characteristic, excluding those in 
decile group 1; decile group 6 to 9 contains the hospitals with 
greater than the median rate of discharges for that characteristic, 
excluding those in decile group 10; and decile group 10 contains the 
10% of hospitals with the highest rate of discharges for that 
characteristic. These decile groups provide an overview of the ways 
in which the average estimated payments per discharge vary between 
the providers with the lowest and highest percentages of discharges 
for each characteristic, as well as those above and below the 
median.
    We note that a supplementary provider-level dataset containing 
the percentage of discharges at each hospital for each of the 
characteristics in Table III is available on our website.
     Column 1 of Table III specifies the beneficiary 
characteristic.
     Column 2 specifies the decile group.
     Column 3 specifies the percentiles covered by the 
decile group.
     Column 4 specifies the percentage range of discharges 
for each decile group specified in the first column.
     Columns 5 and 6 present the average estimated payments 
per discharge for FY 2024 and average estimated payments per 
discharge for FY 2025, respectively.
     Column 7 shows the percentage difference between these 
averages.
    The average payment per discharge, as well as the percentage 
difference between the average payment per discharge in FY 2024 and 
FY 2025, can be compared across decile groups. For example, 
providers with the lowest decile of discharges for Dual (All) or LIS 
Enrolled beneficiaries have an average FY 2024 payment per discharge 
of $13,660.95, while providers with the highest decile of discharges 
for Dual (All) or LIS Enrolled beneficiaries have an average FY 2024 
payment per discharge of $21,150.86. This pattern is also seen in 
the average FY 2025 payment per discharge.
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1. Effects of the Policy Changes Relating to New Medical Service and 
Technology Add-On Payments

a. FY 2025 Status of Technologies Approved for FY 2024 New Technology 
Add-On Payments

    As discussed in section II.E.4. of the preamble of this final 
rule, we are continuing to make new technology add-on payments in FY 
2025 for the 24 technologies that would still be considered ``new'' 
for purposes of new technology add-on payments for FY 2025. Under 
Sec.  412.88(a)(2), the new technology add-on payment for each case 
would be limited to the lesser of: (1) 65 percent of the costs of 
the new technology (or 75 percent of the costs for technologies 
designated as Qualified Infectious Disease Products (QIDPs) or 
approved under the Limited Population Pathway for Antibacterial and 
Antifungal Drugs (LPAD) pathway); or (2) 65 percent of the amount by 
which the costs of the case exceed the standard MS-DRG payment for 
the case (or 75 percent of the amount for technologies designated as 
QIDPs or approved under the LPAD pathway). Because it is difficult 
to predict the actual new technology add-on payment for each case, 
the estimated total payments in this final rule are based on the 
applicant's estimated cost and volume projections at the time they 
submitted their application (or based on updated figures provided 
during the public comment period) and the increase in new technology 
add-on payments for FY 2025 as if every claim that would qualify for 
a new technology add-on payment would receive the maximum add-on 
payment.
    In the following table, we present estimated payment for the 24 
technologies for which we are continuing to make new technology add-
on payments in FY 2025:
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BILLING CODE 4120-01-C

b. FY 2025 Applications for New Technology Add-On Payments

    In sections II.E.5. and 6. of the preamble to this final rule 
are 21 discussions of technologies for which we received 
applications for add-on payments for new medical services and 
technologies for FY 2025 (including Casgevy\TM\ (exagamglogene 
autotemcel) for which the applicant submitted a single application 
for two separate indications, each of which is discussed separately; 
and ELREXFIOTM (elranatamab-bcmm) and TALVEYTM 
(talquetamab-tgvs), which are substantially

[[Page 70010]]

similar to each other and evaluated as one application for new 
technology add-on payments under the IPPS). We note that of the 39 
applications (23 alternative and 16 traditional) we received, 8 
applications were not eligible for consideration for new technology 
add-on payment (7 alternative and 1 traditional), and 10 applicants 
withdrew their application (5 alternative and 5 traditional) prior 
to the issuance of this final rule (including the withdrawal of the 
application for DefenCath[supreg] (taurolidine/heparin), which 
received conditional approval for new technology add-on payments for 
FY 2024, subsequently was eligible to receive new technology add-on 
payments beginning with discharges on or after January 1, 2024, and 
for which we proposed and are finalizing to continue making new 
technology add-on payments for FY 2025). In the 21 discussions of 
technologies in the preamble of this final rule, there are a total 
of 15 new approvals for 14 technologies (3 traditional and 11 
alternative) for new technology add-on payments for FY 2025. As 
explained in the preamble to this final rule, add-on payments for 
new medical services and technologies under section 1886(d)(5)(K) of 
the Act are not required to be budget neutral.
    As discussed in section II.E.6. of the preamble of this final 
rule, under the alternative pathway for new technology add-on 
payments, new technologies that are medical products with a QIDP 
designation, approved through the FDA LPAD pathway, or are 
designated under the Breakthrough Device program will be considered 
not substantially similar to an existing technology for purposes of 
the new technology add-on payment under the IPPS, and will not need 
to demonstrate that the technology represents a substantial clinical 
improvement. These technologies must still be within the 2- to 3-
year newness period, as discussed in section II.E.1.a.(1). of the 
preamble this final rule, and must also still meet the cost 
criterion.
    As fully discussed in section II.E.6. of the preamble of this 
final rule, we are approving 12 new technology add-on payments for 
11 technologies that applied under the alternative pathway for new 
technology add-on payments for FY 2025 (including ZEVTERA\TM\ 
(ceftobiprole medocaril) for which the applicant submitted a single 
application for multiple indications, and for which we are approving 
two separate new technology add-on payments). The approvals include 
10 technologies that received a Breakthrough Device designation from 
FDA and 1 that was designated as a QIDP by FDA. We did not receive 
any LPAD applications for add-on payments for new technologies for 
FY 2025.
    Based on information from the applicants at the time of this 
final rule, we estimate that total payments for the technologies 
approved under the alternative pathway will be approximately $171.5 
million for FY 2025. Total estimated FY 2025 payments for new 
technologies that are designated as a QIDP are approximately $5.6 
million, and the total estimated FY 2025 payments for new 
technologies that are part of the Breakthrough Device program are 
approximately $165.9 million.
    In the following table, we present detailed estimates for the 11 
technologies for which we are approving 12 new technology add-on 
payments under the alternative pathway in FY 2025:
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[GRAPHIC] [TIFF OMITTED] TR28AU24.361

    As fully discussed in section II.E.6. of the preamble of this 
final rule, we are approving new technology add-on payments for 3 
technologies that applied under the traditional pathway for new 
technology add-on payments for FY 2025. We are also providing new 
technology add-on payments for 2 technologies that were evaluated as 
one application due to substantial similarity, and which are also 
considered substantially similar to a technology that was approved 
for new technology add-on payments for FY 2024 and is still 
considered ``new'' for purposes of new technology add-on payments 
for FY 2025. Based on information from the applicants at the time of 
rulemaking, we estimate that total payments for the technologies for 
which we are making new technology add-on payments is approximately 
$335.6 million for FY 2025.

[[Page 70011]]

    In the following table, we present detailed estimates for the 6 
technologies for which we are providing 5 new technology add-on 
payments under the traditional pathway in FY 2025:
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c. Total Estimated Costs for New Technology Add-On Payments in FY 2025

    In the following table, we present summary estimates for all 
technologies approved for new technology add-on payments for FY 
2025:
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BILLING CODE 4120-01-C

2. Medicare DSH Uncompensated Care Payments and Supplemental Payment 
for Indian Health Service Hospitals and Tribal Hospitals and Hospitals 
Located in Puerto Rico

    As discussed in section IV.E. of the preamble of this final 
rule, under section 3133 of the Affordable Care Act, hospitals that 
are eligible to receive Medicare DSH payments will receive 25 
percent of the amount they previously would have received under the 
statutory formula for Medicare DSH payments under section 
1886(d)(5)(F) of the Act. The remainder, equal to an estimate of 75 
percent of what formerly would have been paid as Medicare DSH 
payments (Factor 1), reduced to reflect changes in the percentage of 
uninsured individuals (Factor 2), is available to make additional 
payments to each hospital that qualifies for Medicare DSH payments 
and that has reported uncompensated care. Each hospital that is 
eligible for Medicare DSH payments will receive an additional 
payment based on its estimated share of the total amount of 
uncompensated care for all hospitals eligible for Medicare DSH 
payments. The uncompensated care payment methodology has 
redistributive effects based on the proportion of a hospital's 
amount of uncompensated care relative to the aggregate amount of 
uncompensated care of all hospitals eligible for Medicare DSH 
payments (Factor 3). The change to Medicare DSH payments under 
section 3133 of the Affordable Care Act is not budget neutral.
    In this final rule, we are establishing the amount to be 
distributed as uncompensated care payments (UCP) to DSH-eligible 
hospitals for FY 2025, which is $5,705,743,275.00. This figure 
represents 75 percent of the amount that otherwise would have been 
paid for Medicare DSH payment adjustments adjusted by a Factor 2 of 
54.29 percent. For FY 2024, the amount available to be distributed 
for uncompensated care was $5,938,006,756.87 or 75 percent of the 
amount that otherwise would have been paid for Medicare DSH payment 
adjustments adjusted by a Factor 2 of 59.29 percent. In addition, 
eligible IHS/Tribal hospitals and hospitals located in Puerto Rico 
are estimated to receive approximately $79,884,597 million in 
supplemental payments in FY 2025, as determined based on the 
difference between each hospital's FY 2022 UCP (decreased by 20.67 
percent, which is the projected change between the FY 2025 total 
uncompensated care payment amount and the total uncompensated care 
payment amount for FY 2022) and its FY 2025 UCP as calculated using 
the methodology for FY 2025. If this difference is less than or 
equal to zero, the hospital will not receive a supplemental payment. 
For this final rule, the total UCP and supplemental payments equal 
approximately $5.786 billion. For FY 2025, we are using 3 years of 
data on

[[Page 70012]]

uncompensated care costs from Worksheet S-10 of the FYs 2019, 2020, 
and 2021 cost reports to calculate Factor 3 for all DSH-eligible 
hospitals, including IHS/Tribal hospitals and Puerto Rico hospitals. 
For a complete discussion regarding the methodology for calculating 
Factor 3 for FY 2025, we refer readers to section IV.E. of the 
preamble of this final rule. For a discussion regarding the 
methodology for calculating the supplemental payments, we refer 
readers to section IV.D. of the preamble of this final rule.
    To estimate the impact of the combined effect of the changes in 
Factors 1 and 2, as well as the changes to the data used in 
determining Factor 3, on the calculation of Medicare UCP along with 
changes to supplemental payments for IHS/Tribal hospitals and 
hospitals located in Puerto Rico, we compared total UCP and 
supplemental payments estimated in the FY 2024 IPPS/LTCH PPS final 
rule correction notice (88 FR 68484) to the combined total of the 
proposed UCP and the supplemental payments estimated in this FY 2025 
IPPS/LTCH PPS final rule. For FY 2025, we calculated 75 percent of 
the estimated amount that would be paid as Medicare DSH payments 
absent section 3133 of the Affordable Care Act, adjusted by a Factor 
2 of 59.29 percent and multiplied by a Factor 3 calculated using the 
methodology described in the FY 2024 IPPS/LTCH PPS final rule. For 
FY 2025, we calculated 75 percent of the estimated amount that would 
be paid as Medicare DSH payments during FY 2025 absent section 3133 
of the Affordable Care Act, adjusted by a Factor 2 of 54.29 percent 
and multiplied by a Factor 3 calculated using the methodology 
described previously. For this final rule, the supplemental payments 
for IHS/Tribal hospitals and Puerto Rico hospitals are calculated as 
the difference between the hospital's adjusted base year amount (as 
determined based on the hospital's FY 2022 uncompensated care 
payment) and the hospital's FY 2025 uncompensated care payment.
    Our analysis included 2,399 hospitals that are projected to be 
DSH-eligible in FY 2025. Our analysis did not include hospitals that 
had terminated their participation in the Medicare program as of 
February 2, 2024, Maryland hospitals, new hospitals, and SCHs that 
are expected to be paid based on their hospital-specific rates. The 
23 hospitals that are anticipated to be participating in the Rural 
Community Hospital Demonstration Program were also excluded from 
this analysis, as participating hospitals are not eligible to 
receive empirically justified Medicare DSH payments and 
uncompensated care payments. In addition, the data from merged or 
acquired hospitals were combined under the surviving hospital's CMS 
certification number (CCN), and the non-surviving CCN was excluded 
from the analysis. The estimated impact of the changes in Factors 1, 
2, and 3 on UCP and supplemental payments for eligible IHS/Tribal 
hospitals and Puerto Rico hospitals across all hospitals projected 
to be DSH-eligible in FY 2025, by hospital characteristic, is 
presented in the following table:
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BILLING CODE 4120-01-C
    The changes in projected FY 2025 UCP and supplemental payments 
compared to the total of UCP and supplemental payments in FY 2024 
are driven by changes in Factor 1 and Factor 2. Factor 1 has 
increased from the FY 2024 final rule's Factor 1 of $10.015 billion 
to this final rule's Factor 1 of $10.457 billion. Factor 2 has 
decreased from the FY 2024 final rule's Factor 2 of 59.29 percent to 
this final rule's Factor 2 of 54.29 percent. In addition, we note 
that there is a slight increase in the number of projected DSH-
eligible hospitals to 2,399 at the time of the development of this 
final rule compared to the 2,384 DSH-eligible hospitals in the FY 
2024 IPPS/LTCH PPS final rule (88 FR 58640). Based on the changes, 
the impact analysis found that, across all projected DSH-eligible 
hospitals, FY 2025 UCP and supplemental payments are estimated at 
approximately $5.786 billion, or a decrease of approximately 3.91 
percent from FY 2024 UCP and supplemental payments (approximately 
$6.021 billion). While the changes result in a net decrease in the 
total amount available to be distributed in UCP and supplemental 
payments, the projected payment amounts vary by hospital type. This 
redistribution of payments is caused by changes in Factor 3 and the 
amount of the supplemental payment for DSH-eligible IHS/Tribal 
hospitals and Puerto Rico hospitals. As seen in the previous table, 
a percent change of less than negative 3.91 percent indicates that 
hospitals within the specified category are projected to experience 
a larger decrease in payments, on average, compared to the universe 
of projected FY 2025 DSH-eligible hospitals. Conversely, a 
percentage change greater than negative 3.91 percent indicates that 
a hospital type is projected to have a smaller decrease compared to 
the overall average. The variation in the distribution of overall 
payments by hospital characteristic is largely dependent on a given 
hospital's uncompensated care costs as reported on the Worksheet S-
10 and used in the Factor 3 computation and whether the hospital is 
eligible to receive the supplemental payment.
    Rural hospitals, in general, are projected to experience a 
smaller decrease in UCP compared to the decrease their urban 
counterparts are projected to experience. Overall, rural hospitals 
are projected to receive a 1.16 percent decrease in payments, while 
urban hospitals are projected to receive a 4.07 percent decrease in 
payments, which is slightly larger than the overall hospital 
average.
    By bed size, rural hospitals with 0 to 99 beds are projected to 
receive a smaller than average decrease of 2.97 percent in payments, 
while those with 100 to 249 beds are projected to receive an 
increase of 1.14. Additionally, rural hospitals with 250+ beds are 
projected to receive a 0.59 percent increase in payments. Among 
urban hospitals, the smallest urban hospitals, those with 0 to 99 
beds, are projected to receive a 3.43 percent increase in payments. 
In contrast, larger urban hospitals with 100-249 beds and urban 
hospitals with 250+ beds are projected to receive decreases in 
payments that are larger than the overall hospital average, by 4.81 
and 4.26 percent, respectively.
    By region, rural hospitals are projected to receive a varied 
range of payment changes. Rural hospitals in the New England, West 
North Central, and Middle Atlantic regions are projected to receive 
larger than average decreases in payments. Rural hospitals in all 
other regions are projected to receive either increases in payments 
or smaller than average decreases in payments. Urban hospitals in 
the West South Central, Mountain, and Pacific regions are projected 
to receive either increases in payments or smaller than average 
decreases in payments, while urban hospitals in all other regions 
are projected to receive larger than average decreases in payments.
    By payment classification, hospitals in urban payment areas 
overall are expected to receive a 3.71 percent decrease in UCP and 
supplemental payments. Hospitals in large urban payment areas are 
projected to receive a smaller than average decrease in payments of 
2.36 percent. In contrast, hospitals in other urban payment areas 
and hospitals in rural

[[Page 70015]]

payment areas are projected to receive larger than average decreases 
in payments of 5.69 and 4.13 percent, respectively.
    Nonteaching hospitals and teaching hospitals with 100+ residents 
are projected to receive smaller than average payment decreases of 
3.27 percent and 3.47 percent, respectively. Teaching hospitals with 
fewer than 100 residents are projected to receive larger than 
average payment decreases of 4.87 percent. Voluntary hospitals are 
projected to receive larger than average decreases of 4.61 percent, 
while government-owned hospitals and proprietary hospitals are 
expected to receive smaller than average payment increases of 2.63 
percent and 3.59 percent, respectively. Hospitals with less than 25 
percent Medicare utilization are projected to receive smaller than 
average decreases of 3.22 percent. Hospitals with Medicare 
utilization between 25-50 percent, 50-65 percent, and greater than 
65 percent are projected to receive larger than average decreases of 
5.58 percent, 8.28 percent, and 7.06 percent, respectively. 
Hospitals with 50-65 percent Medicaid utilization are projected to 
receive a smaller than average decrease in payments of 1.93 percent, 
while those with greater than 65 percent Medicaid utilization are 
projected to receive a 5.79 percent increase in payments. Meanwhile, 
hospitals with less than 25 percent Medicaid utilization and those 
with Medicaid utilization between 25-50 percent are projected to 
receive larger than average decreases of 4.44 percent and 4.31 
percent, respectively.
    The impact table reflects the modeled FY 2025 UCP and 
supplemental payments for IHS/Tribal and Puerto Rico hospitals. We 
note that the supplemental payments to IHS/Tribal hospitals and 
Puerto Rico hospitals are estimated to be approximately $79.9 
million in FY 2025.

3. Effects of the Changes to Low-Volume Hospital Payment Adjustment 
Policy

    In section V.D. of the preamble of this final rule, we discuss 
the legislative extension of the temporary changes to the low-volume 
hospital payment policy originally provided for by the Affordable 
Care Act and extended by subsequent legislation. Specifically, 
section 306 of the CAA, 2024 further extended the modified 
definition of low-volume hospital and the methodology for 
calculating the payment adjustment for low-volume hospitals under 
section 1886(d)(12) through December 31, 2024. Beginning January 1, 
2025, the low-volume hospital qualifying criteria and payment 
adjustment will revert to the statutory requirements that were in 
effect prior to FY 2011, and the preexisting low-volume hospital 
payment adjustment methodology and qualifying criteria, as 
implemented in FY 2005, will resume. Effective for FY 2025, 
discharges occurring on or after January 1, 2025 and subsequent 
years, in order to qualify as a low-volume hospital, a subsection 
(d) hospital must be more than 25 road miles from another subsection 
(d) hospital and have less than 200 discharges (that is, less than 
200 discharges total, including both Medicare and non-Medicare 
discharges) during the fiscal year. We recognize the importance of 
this extension with respect to the goal of advancing health equity 
by addressing the health disparities that underlie the health 
system, which is one of CMS' strategic pillars and a Biden-Harris 
Administration priority, as described in section I.A.2. of the 
preamble of this final rule. The provisions of section 306 of the 
CAA, 2024 are projected to increase payments to IPPS hospitals by 
approximately $89 million in FY 2025 relative to what the payments 
would have been in the absence of section 306.
    Based upon the best available data at this time, we estimate the 
expiration of the temporary changes to the low-volume hospital 
payment policy for FY 2025 discharges occurring on or after January 
1, 2025 will decrease aggregate low-volume hospital payments by $267 
million in FY 2025 as compared to FY 2024. These payment estimates 
were determined based on the estimated payments for the 
approximately 600 providers that are expected to no longer qualify 
under the criteria that will apply beginning on January 1, 2025. 
These impacts were calculated using the same methodology used in 
developing the quantitative analyses of changes in payments per case 
discussed previously in section I.G. of this Appendix A of this 
final rule.

4. Effects of the Distribution of Additional Residency Positions Under 
the Provisions of Section 4122 of Subtitle C of the Consolidated 
Appropriations Act, 2023 (CAA, 2023)

    In section V.F.2. of this final rule, we are finalizing our 
proposal to implement section 4122 of the CAA, 2023, which requires 
that the Secretary initiate an application round to distribute 200 
residency positions (also referred to as slots) with at least 100 of 
the positions being distributed for psychiatry or psychiatry 
subspecialty residency programs. The residency positions distributed 
under section 4122 are effective July 1, 2026.
    Under our final policy, we'll first distribute slots by 
prorating the available 200 positions among all qualifying hospitals 
that apply for such slots, such that each qualifying applicant 
hospital will receive up to 1.00 FTE - that is, 1.00 FTE or a 
fraction of 1.00 FTE. According to our final policy, a qualifying 
hospital is a Category One, Category Two, Category Three, or 
Category Four hospital, or one that meets the definitions of more 
than one of these categories, as defined at section 
1886(h)(10)(F)(iii) of the Act.\1126\ We also finalized that if any 
residency slots remain after distributing up to 1.00 FTE to each 
such qualifying hospital, we will prioritize the distribution of the 
remaining slots based on the HPSA score associated with the program 
for which each qualifying hospital is applying using the methodology 
we finalized for purposes of implementing section 126 of the CAA, 
2021 (86 FR 73434 through 73440). Using this HPSA prioritization 
method, a qualifying hospital's total award under section 4122 of 
the CAA, 2023, will be limited to 10.00 additional FTEs consistent 
with section 1886(h)(10)(C)(i) of the Act. We believe including such 
a prioritization will further support the training of residents in 
underserved and rural areas thereby helping to address physician 
shortages and the larger issue of health inequities in these areas.
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    \1126\ Category One consists of hospitals that are located in a 
rural area (as defined in section 1886(d)(2)(D) of the Act) or have 
been reclassified being located in a rural area (pursuant to section 
1886(d)(8)(E) of the Act). Category Two consists of hospitals in 
which the reference resident level of the hospital (as specified in 
section 1886(h)(10)(F)(iv) of the Act) is greater than the otherwise 
applicable resident limit. Category Three consists of hospitals 
located in States with new medical schools that received `Candidate 
School' status from the Liaison Committee on Medical Education 
(LCME) or that received `Pre-Accreditation' status from the American 
Osteopathic Association (AOA) Commission on Osteopathic College 
Accreditation (the COCA) on or after January 1, 2000, and that have 
achieved or continue to progress toward `Full Accreditation' status 
(as such term is defined by the LCME) or toward `Accreditation' 
status (as such term is defined by the COCA); or additional 
locations and branch campuses established on or after January 1, 
2000, by medical schools with `Full Accreditation' status (as such 
term is defined by LCME) or `Accreditation' status (as such term is 
defined by the COCA). Category Four consists of hospitals that serve 
areas designated as HPSAs under section 332(a)(1)(A) of the Public 
Health Service Act (PHSA), as determined by the Secretary.
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    The CMS Office of the Actuary (OACT) estimates an increase of 
$10 million in Medicare payments to teaching hospitals for FY 2026, 
and an increase in Medicare payments to teaching hospitals of $280 
million for FYs 2026 through 2030 (over 5 years). In total, for FYs 
2026 through 2036, Medicare payments to teaching hospitals are 
estimated to increase by $740 million.
    In addition, we are finalizing a modification to our methodology 
for distributing slots under section 126 of the CAA, 2021. Section 
1886(h)(9)(B)(ii) of the Act requires the Secretary to distribute at 
least 10 percent of the aggregate number of total residency 
positions available to the same four categories of hospitals. 
Section 126 of the CAA, 2021, makes available 1,000 residency 
positions and therefore, at least 100 residency positions must be 
distributed to hospitals qualifying in each of the four categories. 
In the final rule implementing section 126 of the CAA, 2021, we 
stated we would track progress in meeting all statutory requirements 
and evaluate the need to modify the distribution methodology in 
future rulemaking (86 FR 73441). To date, we have the completed the 
distribution of residency slots under rounds 1 and 2 of the section 
126 distributions and have determined that only 12.76 DGME slots and 
18.06 IME slots were distributed to hospitals qualifying under 
Category Four. Under our final policy, in rounds 4 and 5 we will 
prioritize the distribution of slots to hospitals that qualify under 
Category Four, regardless of HPSA score, to ensure that at least 100 
residency slots are distributed to these hospitals. The remaining 
slots awarded under rounds 4 and 5 will be distributed using the 
existing methodology based on HPSA score (86 FR 73434 through 
73440). That is, the remaining slots will be distributed to 
hospitals qualifying under Category One, Category Two, or Category

[[Page 70016]]

Three, or hospitals that meet the definition of more than one of 
these categories, based on the HPSA score associated with the 
program for which each hospital is applying. We believe there is a 
minimal impact on Medicare payments associated with this change in 
methodology as the number of total slots distributed will remain the 
same.

5. Effects of Changes to Additional Payment for Hospitals With a High 
Percentage of ESRD Beneficiary Discharges

    As discussed in section V.I. of the preamble of this final rule, 
we are finalizing our proposal to update our payment methodology for 
determining the ESRD add-on payment for hospitals with a high 
percentage of ESRD beneficiary discharges. Currently under Sec.  
412.104(b), the ESRD add-on is based on the average length of stay 
(in days) for ESRD beneficiaries in the hospital, expressed as a 
ratio to 1 week (7 days), multiplied by the estimated weekly cost of 
dialysis, then multiplied by the number of ESRD beneficiary 
discharges (Worksheet E Part A Column 1 line 41.01). After 
consideration of public comments, we are finalizing our proposal 
that, effective for cost reporting periods beginning on or after 
October 1, 2024, the estimated weekly cost of dialysis will be 
calculated as the ESRD PPS base rate (as defined in 42 CFR 413.171) 
multiplied by three. As proposed, under this policy, the CY 2025 
ESRD PPS base rate will be used for all cost reports beginning 
during Federal FY 2025 (that is, for cost reporting periods starting 
on or after October 1, 2024, through September 30, 2025).
    Our impact analysis includes 91 hospitals that were eligible for 
the ESRD add-on payment based on the historical composite rate in 
the FY 2017 cost report data, which is a historical year that has a 
high percentage of final settled cost report data regarding ESRD 
add-on payments. As we did in the proposed rule (89 FR 36620), we 
estimated the impact of the payment methodology by comparing total 
ESRD add-on payments from the December 2023 update of the FY 2017 
cost report data to the estimated FY 2025 ESRD add-on payments 
using, for illustrative purposes, the CY 2024 ESRD PPS base rate 
published in the CY 2024 ESRD PPS final rule (88 FR 76345), which is 
$271.02. (As previously noted, the CY 2025 ESRD PPS base rate will 
be used for all cost reports beginning during Federal FY 2025 (that 
is, for cost reporting periods starting on or after October 1, 2024, 
through September 30, 2025).) The total ESRD add-on payments based 
on the FY 2017 cost report data are approximately $22 million. The 
total estimated FY 2025 ESRD add-on payments, as estimated using the 
CY 2024 ESRD PPS base rate, will be approximately $31.4 million. 
Therefore, we estimated the ESRD add-on payments will increase by 
approximately $10 million.

6. Estimated Effects of the IPPS Payment Adjustment for Establishing 
and Maintaining Access to Essential Medicines

    As discussed in section V.K.1. of the preamble of this final 
rule, we are finalizing IPPS payment adjustments for the Medicare 
inpatient share of additional resource costs that small, independent 
hospitals incur in establishing and maintaining access to a 6-month 
buffer stock of one or more essential medicine(s), effective for 
cost reporting periods beginning on or after October 1, 2024.
    We are finalizing this payment adjustment under the IPPS for the 
additional Medicare inpatient share of resource costs of 
establishing and maintaining access to a buffer stock of essential 
medicines under section 1886(d)(5)(I) of the Act.
    The data currently available to calculate a spending estimate 
for FY 2025 under the IPPS is limited. However, we believe the 
methodology described in this section to calculate this spending 
estimate under the IPPS for FY 2025 is reasonable based on the 
information available.
    To estimate total spending associated with this finalized policy 
under the IPPS, we used the following information for all eligible 
hospitals with completed 12-month or greater cost reporting periods 
concluding in CY 2021 (the most recent cost reporting period for 
which data was available):
     Estimated spend per eligible hospital on its applicable 
essential medicines, expressed as a percentage of the total Drugs 
Charged to Patients cost center, as found on Worksheet B, Part 1, 
line 73, column 26 on Form CMS-2552-2010. For purposes of this 
estimate, we believe it is reasonable to assume that the cost of a 
given hospital's essential medicines will be 1 percent of its total 
Drugs Charged to Patients costs.
     Multiplicative factor of 50 percent to estimate the 
total cost of the essential medicines that are in the 6-month buffer 
stock.
     Assumed cost of carrying essential medicines, expressed 
as a percentage of the total cost of the essential medicines that 
are in the buffer stock. Based on commenter feedback on the CY 2024 
OPPS/ASC proposed rule,\1127\ we believe it is reasonable to assume 
for purposes of this spending estimate a cost of carrying essential 
medicines of 20 percent of the cost of the essential medicines 
themselves. This assumption of a 20 percent cost of carrying would 
apply to any size of buffer stock of essential medicine.
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    \1127\ https://www.regulations.gov/comment/CMS-2023-0120-3326.
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     The provider-specific inpatient Medicare share 
percentage, expressed as the percentage of inpatient Medicare costs 
to total hospital costs.
    To calculate the estimated aggregate IPPS payments under this 
finalized policy, we multiplied together the four factors listed for 
each eligible hospital and summed across all eligible hospitals. 
Based on the latest hospital cost report data available, we 
identified approximately 500 IPPS hospitals that would potentially 
be eligible for this finalized payment. Eligible IPPS hospitals are 
those providers that: (1) had 100 or fewer beds as defined in Sec.  
412.105(b); and (2) answered ``N'' to line 140, column 1 and did not 
fill out any part of lines 141 through 143 on Worksheet S2 Part I on 
Form CMS-2552-10. We estimate that the aggregate FY 2025 IPPS 
payments under this finalized policy, given the assumptions detailed 
previously, would be approximately $0.3 million, and the mean IPPS 
payment per eligible hospital would be approximately $620 over the 
course of a year. This policy would not be budget neutral under the 
IPPS.
    We also estimated the total costs for eligible hospitals to 
establish and maintain buffer stocks of essential medicines in order 
to inform the public what portion of the total costs would be 
separately paid under the finalized policy. To calculate this, we 
multiplied together the first three factors listed previously for 
each eligible hospital, but not the fourth factor (i.e. we did not 
multiply by the provider specific inpatient Medicare share 
percentage) and summed across all eligible hospitals. We estimate 
that the total annual costs for eligible hospitals to establish and 
maintain buffer stocks of essential medicines would be approximately 
$2.8 million, and the mean cost per eligible hospital would be 
approximately $5,610. The IPPS payments under this finalized policy 
represent approximately 11 percent of that amount, or $0.3 million.
    As discussed earlier, our estimate was calculated at the 
hospital level and then summed. However, for illustrative purposes 
the calculation can be described alternatively as starting with the 
aggregated total Drugs Charged to Patients across eligible hospitals 
of approximately $2.8 billion, assuming the annual cost of essential 
medicines to be 1 percent of that amount or $28 million (=$2.8 
billion * .01), calculating the cost of 6 months of essential 
medicines as half that amount or $14 million (=$28 million * .50), 
assuming that the cost of carrying essential medicines is 20 percent 
of that amount or $2.8 million (=$14 million * .20), and then 
calculating the Medicare inpatient share of that amount at 11 
percent or $0.3 million (= $2.8 million * .11).
    We sought comment on these assumptions and estimates.
    Comment: Although many commenters raised concerns that the 
estimated average payment is inadequate to cover the costs of buffer 
stock acquisition, storage, maintenance, and other related costs, we 
did not receive comments regarding our assumptions and estimates for 
purposes of estimating the effects of the IPPS payment adjustment 
for establishing and maintaining access to essential medicines.
    Response: We thank the commenters for their feedback regarding 
the payments. We agree with commenters that the IPPS payment 
adjustment under this policy does not equal to the total reasonable 
costs to establish and maintain a buffer stock of essential 
medicines. This is by definition as the policy is limited to the 
Medicare inpatient share of that amount. We also note that the 
average IPPS payment does not reflect the range of potential 
payments under this policy as these payments will be hospital 
specific depending on each hospital's reasonable costs of 
maintaining and establishing its buffer stocks and its Medicare 
inpatient share of those costs. In response to comments and to 
illustrate this point, we have calculated selected percentiles of 
estimated total reasonable costs and the estimated IPPS payments 
under this policy in Table K-CDD-1.

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    After consideration of the comments received, we continue to 
believe the methodology described in this section to calculate this 
spending estimate under the IPPS for FY 2025 is reasonable based on 
the information currently available.

7. Effects Under the Hospital Readmissions Reduction Program for FY 
2025

    In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36238), we did 
not propose to add, modify, or remove any measures or policies for 
the FY 2025 Hospital Readmissions Reduction Program; the policies 
finalized in FY 2023 IPPS/LTCH PPS final rule (87 FR 49081 through 
49094) continue to apply. This program requires a reduction to a 
hospital's base operating diagnosis-related group (DRG) payments to 
account for excess readmissions of selected applicable conditions 
and procedures. Table I.G.7.-01 and the analysis in this final rule 
illustrate the estimated financial impact of the Hospital 
Readmissions Reduction Program payment adjustment methodology by 
hospital characteristic. Hospitals are sorted into quintiles based 
on the proportion of dual-eligible stays among Medicare fee-for-
service (FFS) and managed care stays between July 1, 2020 and June 
30, 2023 (that is, the FY 2025 Hospital Readmissions Reduction 
Program's applicable period, which is the most recently available 
data at the time of publication of this final rule). Hospitals' 
excess readmission ratios (ERRs) are assessed relative to their peer 
group median and a neutrality modifier is applied in the payment 
adjustment factor calculation to maintain budget neutrality. In this 
FY 2025 IPPS/LTCH PPS final rule, we are providing an updated 
estimate of the financial impact using the proportion of dually-
eligible beneficiaries, ERRs, and aggregate payments for each 
condition/procedure and all discharges for applicable hospitals from 
the FY 2025 Hospital Readmissions Reduction Program applicable 
period (that is, July 1, 2020, through June 30, 2023).
    The results in Table I.G.7.-01 include 2,828 non-Maryland 
hospitals estimated as eligible to receive a penalty during the 
performance period. Hospitals are eligible to receive a penalty if 
they have 25 or more eligible discharges for at least one measure 
between July 1, 2020, and June 30, 2023. The second column in Table 
I.G.7.-01 indicates the total number of non-Maryland hospitals with 
available data for each characteristic that have an estimated 
payment adjustment factor less than 1 (that is, penalized 
hospitals).
    The third column in Table I.G.7.-01 indicates the estimated 
percentage of penalized hospitals among those eligible to receive a 
penalty by hospital characteristic. For example, 78.34 percent of 
eligible hospitals characterized as non-teaching hospitals are 
expected to be penalized. Among teaching hospitals, 88.57 percent of 
eligible hospitals with fewer than 100 residents and 90.14 percent 
of eligible hospitals with 100 or more residents are expected to be 
penalized. The fourth column in Table I.G.7.-01 estimates the 
financial impact on hospitals by hospital characteristic. Table 
I.G.7.-01 also shows the share of penalties as a percentage of all 
base operating DRG payments for hospitals with each characteristic. 
This is calculated as the sum of penalties for all hospitals with 
that characteristic over the sum of all base operating DRG payments 
for those hospitals between October 1, 2022, through September 30, 
2023 (FY 2023). For example, the penalty as a share of payments for 
non-teaching hospitals is 0.45 percent. This means that total 
penalties for all non-teaching hospitals are 0.45 percent of total 
payments for non-teaching hospitals. Measuring the financial impact 
on hospitals as a percentage of total base operating DRG payments 
accounts for differences in the amount of base operating DRG 
payments for hospitals with the characteristic when comparing the 
financial impact of the program on different groups of hospitals.
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8. Effects of Changes Under the FY 2025 Hospital Value-Based Purchasing 
(VBP) Program

    The Secretary makes value-based incentive payments to hospitals 
under the Hospital Value-Based Purchasing Program based on their 
performance on measures during the performance period with respect 
to a fiscal year. These incentive payments will be funded for FY 
2025 through a reduction to the FY 2025 base operating DRG payment 
amount for hospital discharges for such fiscal year, as required by 
section 1886(o)(7)(B) of the Act. The applicable percentage for FY 
2025 and subsequent years is two percent. The total amount available 
for value-based incentive payments must be equal to the total amount 
of reduced payments for all hospitals for the fiscal year, as 
estimated by the Secretary. In section V.L.1.b. of the preamble of 
this final rule, we estimate the available pool of funds for value-
based incentive payments in the FY 2025 program year, which, in 
accordance with section 1886(o)(7)(C)(v) of the Act, will be 2.00 
percent of base operating DRG payments, or a total of approximately 
$1.67 billion. This estimated available pool for FY 2025 is based on 
the historical pool of hospitals that were eligible to participate 
in the FY 2024 program year and the payment information from the 
March 2024 update to the FY 2023 MedPAR file.
    The estimated impacts of the FY 2025 program year by hospital 
characteristic, found in Table I.8.-01., are based on historical 
TPSs. We used the FY 2024 program year's TPSs to calculate the proxy 
adjustment factors used for this impact analysis. These are the most 
recently available scores that hospitals were given an opportunity 
to review and correct. The proxy adjustment factors use estimated 
annual base operating DRG payment amounts derived from the March 
2024 update to the FY 2023 MedPAR file. The proxy adjustment factors 
can be found in Table 16A associated with this final rule (available 
via the internet on the CMS website).
    The impact analysis shows that, for the FY 2025 program year, 
the number of hospitals with a positive percent change in base 
operating DRG (49.7 percent) is lower than the number of hospitals 
with a negative percent change (50.3 percent). Approximately half of 
all hospitals experience a percent change in base operating DRG 
between -2.1 percent and 0.0 percent. On average, urban and rural 
hospitals in the West North Central and Pacific regions have the 
highest positive percent change in base operating DRG. Urban 
hospitals in the Middle Atlantic, East South Central, and West South 
Central regions experience a negative average percent change in base 
operating DRG. All other regions (both urban and rural) experience a 
positive average % change in base operating DRG. With respect to 
hospitals' Medicare utilization as a percent of inpatient days 
(MCR), as the MCR percent increases, the average percent change in 
base operating DRG increases. As DSH percent increases, the average 
percent change in base operating DRG generally decreases. On 
average, non-teaching hospitals have a higher percent change in base 
operating DRG compared to teaching hospitals.
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9. Effects Under the HAC Reduction Program for FY 2025

    We are presenting the estimated impact of the FY 2025 Hospital-
Acquired Condition (HAC) Reduction Program on hospitals by hospital 
characteristic based on previously adopted policies for the program. 
In the FY 2025 IPPS/LTCH PPS proposed rule, we did not propose to 
add or remove any measures from the HAC Reduction Program, nor did 
we propose any changes to reporting or submission requirements which 
would have any significant economic impact for the FY 2025 program 
year or future years. The table in this section presents the 
estimated proportion of hospitals in the worst-performing quartile 
of Total HAC Scores by hospital characteristic. Hospitals' CMS 
Patient Safety and Adverse Events Composite (CMS PSI 90) measure 
results are based on Medicare fee-for-service (FFS) discharges from 
July 1, 2021 through June 30, 2023 and version 14.0 of the PSI 
software. Hospitals' measure results for Centers for Disease Control 
and Prevention (CDC) Central Line-Associated Bloodstream Infection 
(CLABSI), Catheter-Associated Urinary Tract Infection (CAUTI), Colon 
and Abdominal Hysterectomy Surgical Site Infection (SSI), 
Methicillin-resistant Staphylococcus aureus (MRSA) bacteremia, and 
Clostridium difficile Infection (CDI) are derived from standardized 
infection ratios (SIRs) calculated with hospital surveillance data 
reported to the CDC's National Healthcare Safety Network (NHSN) for 
infections occurring between January 1, 2022 and December 31, 2023. 
Hospital characteristics are based on the FY 2025 IPPS Proposed Rule 
Impact File.
    This table includes 2,933 non-Maryland hospitals with an 
estimated FY 2025 Total HAC Score based on the most recently 
available data at the time of publication of this final rule. 
Maryland hospitals and hospitals without a Total HAC Score are 
excluded from the table. Actual results for FY 2025 will be 
determined in the fall of 2024 after a 30-day review and corrections 
period for hospitals to review their program results. The first 
column presents a breakdown of each characteristic, and the second 
column indicates the number of hospitals for the respective 
characteristic.
    The third column in the table indicates the estimated number of 
hospitals for each characteristic that would be in the worst-
performing quartile of Total HAC Scores. For example, with regard to 
teaching status, 426 hospitals out of 1,700 hospitals characterized 
as non-teaching hospitals would be subject to a payment reduction. 
Among teaching hospitals, 196 out of 935 hospitals with fewer than 
100 residents and 102 out of 285 hospitals with 100 or more 
residents would be subject to a payment reduction.
    The fourth column in the table indicates the estimated 
proportion of hospitals for each characteristic that would be in the 
worst-performing quartile of Total HAC Scores and thus receive a 
payment reduction under the FY 2025 HAC Reduction Program. For 
example, 25.1 percent of the 1,700 hospitals characterized as non-
teaching hospitals, 21.0 percent of the 935 teaching hospitals with 
fewer than 100 residents, and 35.8 percent of the 285 teaching 
hospitals with 100 or more

[[Page 70023]]

residents would be subject to a payment reduction.
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10. Effects of Implementation of the Rural Community Hospital 
Demonstration Program in FY 2024

    In section II.A.4.h. of the Addendum of this final rule for FY 
2025, we discussed our budget neutrality methodology for section 
410A of Public Law 108-173, as amended by sections 3123 and 10313 of 
Pub. L 111-148, by section 15003 of Public Law 114-255, and most 
recently, by section 128 of Public Law 116-260, which requires the 
Secretary to conduct a demonstration that would modify payments for 
inpatient services for up to 30 rural hospitals.
    Section 128 of Public Law 116-260 requires the Secretary to 
conduct the Rural Community Hospital Demonstration for a 15-year 
extension period (that is, for an additional 5 years beyond the 
previous extension period). In addition, the statute provides for 
continued participation for all hospitals participating in the 
demonstration program as of December 30, 2019.
    Section 410A(c)(2) of Public Law 108-173 requires that in 
conducting the demonstration program under this section, the 
Secretary shall ensure that the aggregate payments made by the 
Secretary do not exceed the amount which the Secretary would have 
paid if the demonstration program under this section was not 
implemented (budget neutrality). We propose to adopt the general 
methodology used in previous years, whereby we estimated the 
additional payments made by the program for each of the 
participating hospitals as a result of the demonstration, and then 
adjusted the national IPPS rates by an amount sufficient to account 
for the added costs of this demonstration. In other words, we have 
applied budget neutrality across the payment system as a whole 
rather than across the participants of this demonstration. The 
language of the statutory budget neutrality requirement permits the 
agency to implement the budget neutrality provision in this manner. 
The statutory language requires that aggregate payments made by the 
Secretary do not exceed the amount which the Secretary would have 
paid if the demonstration was not implemented, but does not identify 
the range across which aggregate payments must be held equal.
    For this final rule, the resulting amount applicable to FY 2025 
for 22 participating hospitals is $49,914,526, which we are 
incorporating into the budget neutrality offset adjustment for FY 
2025. This estimated amount is based on the specific assumptions 
regarding the data sources used, that is, recently available ``as 
submitted'' cost reports and historical and currently finalized 
update factors for cost and payment.
    In previous years, we have incorporated a second component into 
the budget neutrality offset amounts identified in the final IPPS 
rules. As finalized cost reports became available, we determined the 
amount by which the actual costs of the demonstration for an 
earlier, given year differed from the estimated costs for the 
demonstration set forth in the final IPPS rule for the corresponding 
fiscal year, and we incorporated that amount into the budget 
neutrality offset amount for the upcoming fiscal year. We have 
calculated this difference for FYs 2005 through 2018 between the 
actual costs of the demonstration as determined from finalized cost 
reports once available, and estimated costs of the demonstration as 
identified in the applicable IPPS final rules for these years.
    With the extension of the demonstration for another 5-year 
period, as authorized by section 128 of Public Law 116-260, we will 
continue this general procedure. Thus, we are including in the 
budget neutrality offset amount in the FY 2025 final rule the amount 
by which the actual costs of the demonstration, as determined from 
finalized cost reports and revisions by the MACs for

[[Page 70025]]

the 27 hospitals that completed cost reporting periods beginning in 
FY 2019, differed from the estimated costs identified in the FY 2019 
final rule. Accordingly, the actual costs of the demonstration for 
FY 2019 fell short of the estimated amount in the FY 2019 by 
$30,499,707. This amount is subtracted from the estimated amount for 
FY 2025, resulting in $19,414,819, which represents the budget 
neutrality offset amount to be applied to the national IPPS rates 
for FY 2025.
    Comment: The parent company for two of the participating 
hospitals expressed support for the continuation of the of the Rural 
Community Hospital Demonstration program, while noting that it does 
not offer long-term financial stability needed to maintain health 
care access in rural areas. The commenter requests that the 
demonstration be made a permanent program, and, in addition, that 
CMS institute an application process to ensure the demonstration 
meets program capacity. Furthermore, the commenter requests several 
technical adjustments to the administration of the demonstration 
that may enhance stability in the payment to the participating 
hospitals.
    Response: We appreciate the comments. We have conducted the 
demonstration program in accordance with Congressional mandates. 
Title XVIII does not extend authority to make the demonstration a 
permanent program. With regard to any further actions, we intend to 
work with the commenter and other rural stakeholders to examine the 
issues involved.

11. Effects of Continued Implementation of the Frontier Community 
Health Integration Project (FCHIP) Demonstration

    As described in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
59119 through 59122), CMS waived certain Medicare rules for CAHs 
participating in the demonstration extension period to allow for 
alternative reasonable cost-based payment methods in the three 
distinct intervention service areas: telehealth services, ambulance 
services, and skilled nursing facility/nursing facility services. 
These waivers were implemented with the goal of increasing access to 
care with no net increase in costs. As we explained in the FY 2024 
IPPS/LTCH PPS final rule (88 FR 59119 through 59122), section 129 of 
Public Law 116-159, stipulates that only the 10 CAHs that 
participated in the initial period of the FCHIP Demonstration are 
eligible to participate during the extension period. Among the 
eligible CAHs, five elected to participate in the extension period. 
The selected CAHs are located in two states--Montana and North 
Dakota--and are implementing the three intervention services.
    As explained in the FY 2024 IPPS/LTCH PPS final rule, we based 
our selection of CAHs for participation in the demonstration with 
the goal of maintaining the budget neutrality of the demonstration 
on its own terms meaning that the demonstration would produce 
savings from reduced transfers and admissions to other health care 
providers, offsetting any increase in Medicare payments as a result 
of the demonstration. However, because of the small size of the 
demonstration and uncertainty associated with the projected Medicare 
utilization and costs, the policy we finalized for the demonstration 
extension period of performance in the FY 2024 IPPS/LTCH PPS final 
rule provides a contingency plan to ensure that the budget 
neutrality requirement in section 123 of Public Law 110-275 is met.
    In the FY 2024 IPPS/LTCH PPS final rule, we adopted the same 
budget neutrality policy contingency plan used during the 
demonstration initial period to ensure that the budget neutrality 
requirement in section 123 of Public Law 110 275 is met during the 
demonstration extension period. If analysis of claims data for 
Medicare beneficiaries receiving services at each of the 
participating CAHs, as well as from other data sources, including 
cost reports for the participating CAHs, shows that increases in 
Medicare payments under the demonstration during the 5-year 
extension period is not sufficiently offset by reductions elsewhere, 
we will recoup the additional expenditures attributable to the 
demonstration through a reduction in payments to all CAHs 
nationwide.
    As explained in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
59119 through 59122), because of the small scale of the 
demonstration, we indicated that we did not believe it would be 
feasible to implement budget neutrality for the demonstration 
extension period by reducing payments to only the participating 
CAHs. Therefore, in the event that this demonstration extension 
period is found to result in aggregate payments in excess of the 
amount that would have been paid if this demonstration extension 
period were not implemented, CMS policy is to comply with the budget 
neutrality requirement finalized in the FY 2024 IPPS/LTCH PPS final 
rule, by reducing payments to all CAHs, not just those participating 
in the demonstration extension period.
    In the FY 2024 IPPS/LTCH PPS final rule, we stated that we 
believe it is appropriate to make any payment reductions across all 
CAHs because the FCHIP Demonstration was specifically designed to 
test innovations that affect delivery of services by the CAH 
provider category. As we explained in the FY 2024 IPPS/LTCH PPS 
final rule, we believe that the language of the statutory budget 
neutrality requirement at section 123(g)(1)(B) of Public Law 110-275 
permits the agency to implement the budget neutrality provision in 
this manner. The statutory language merely refers to ensuring that 
aggregate payments made by the Secretary do not exceed the amount 
which the Secretary estimates would have been paid if the 
demonstration project was not implemented and does not identify the 
range across which aggregate payments must be held equal.
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 
45328), CMS concluded that the initial period of the FCHIP 
Demonstration had satisfied the budget neutrality requirement 
described in section 123(g)(1)(B) of Pub L. 110-275. Therefore, CMS 
did not apply a budget neutrality payment offset policy for the 
initial period of the demonstration. As explained in the FY 2022 
IPPS/LTCH PPS final rule, we finalized a policy to address the 
demonstration budget neutrality methodology and analytical approach 
for the initial period of the demonstration. In the FY 2024 IPPS/
LTCH PPS final rule, we finalized a policy to adopt the same budget 
neutrality methodology and analytical approach used during the 
demonstration initial period to be used for the demonstration 
extension period. As stated in the FY 2024 IPPS/LTCH PPS final rule 
(88 FR 59119 through 59122), our policy for implementing the 5-year 
extension period for section 129 of Public Law 116-260 follows same 
budget neutrality methodology and analytical approach as the 
demonstration initial period methodology. While we expect to use the 
same methodology that was used to assess the budget neutrality of 
the FCHIP Demonstration during initial period of the demonstration 
to assess the financial impact of the demonstration during this 
extension period, upon receiving data for the extension period, we 
may update and/or modify the FCHIP budget neutrality methodology and 
analytical approach to ensure that the full impact of the 
demonstration is appropriately captured. Therefore, we did not 
propose to apply a budget neutrality payment offset to payments to 
CAHs in FY 2025. This policy will have no impact for any national 
payment system for FY 2025. We received no comments on this 
provision and therefore are finalizing this provision without 
modification.

12. Effects of Proposed Implementation of the Transforming Episode 
Accountability Model (TEAM)

    In section X.A. of the preamble of this final rule, we are 
finalizing the test of a new mandatory episode-based payment model 
titled the Transforming Episode Accountability Model (TEAM) under 
the authority of the CMS Center for Medicare and Medicaid Innovation 
(CMS Innovation Center). Section 1115A of the Act authorizes the CMS 
Innovation Center to test innovative payment and service delivery 
models that preserve or enhance the quality of care furnished to 
Medicare, Medicaid, and Children's Health Insurance Program 
beneficiaries while reducing program expenditures. The intent of 
TEAM is to improve beneficiary care through financial accountability 
for episode categories that begin with one of the following 
procedures: coronary artery bypass graft, lower extremity joint 
replacement, major bowel procedure, surgical hip/femur fracture 
treatment, and spinal fusion. TEAM will test whether financial 
accountability for these episode categories reduces Medicare 
expenditures while preserving or enhancing the quality of care for 
Medicare beneficiaries. We anticipate that TEAM may benefit Medicare 
beneficiaries through improving the coordination of items and 
services paid for through Medicare fee-for-service (FFS) payments, 
encouraging provider investment in health care infrastructure and 
redesigned care processes, and incentivizing higher value care 
across the inpatient and post-acute care settings for the episode.
    TEAM will require acute care hospitals located within selected 
mandatory CBSAs to participate in the model. CMS will allow a one-
time opportunity for hospitals that participate until the last day 
of the last

[[Page 70026]]

performance period in the BPCI Advanced model or the last day of the 
last performance year of the CJR model, that are not located in a 
mandatory CBSA selected for TEAM participation to voluntarily opt 
into TEAM.\1128\ This episode-based payment model will begin on 
January 1, 2026, and end on December 31, 2030. Payment approaches 
that hold providers accountable for episode cost and performance can 
potentially create incentives for the implementation and 
coordination of care redesign between participants and other 
providers and suppliers such as physicians and post-acute care 
providers. TEAM could enable hospitals to consider the most 
appropriate strategies for care redesign, including (1) increasing 
post-hospitalization follow-up and medical management for patients; 
(2) coordinating care across the inpatient and post-acute care 
spectrum; (3) conducting appropriate discharge planning; (4) 
improving adherence to treatment or drug regimens; (5) reducing 
readmissions and complications during the post-discharge period; (6) 
managing chronic diseases and conditions that may be related to the 
proposed episodes; (7) choosing the most appropriate post-acute care 
setting; and (8) coordinating between providers and suppliers such 
as hospitals, physicians, and post-acute care providers.
---------------------------------------------------------------------------

    \1128\ For the BPCI Advanced model, the last day of the last 
performance period is December 31, 2025. For the CJR model, the last 
day of the last performance year is December 31, 2024.
---------------------------------------------------------------------------

    Under this model, TEAM participants will continue to bill 
Medicare under the traditional FFS system for items and services 
furnished to Medicare FFS beneficiaries. The TEAM participant may 
receive a reconciliation payment from CMS if Medicare FFS 
expenditures for a performance year are less than the reconciliation 
target price, subject to a quality adjustment. TEAM will not have 
downside risk for Track 1 and TEAM participants will only be 
accountable for performance year spending below their reconciliation 
target price, subject to a quality adjustment, that will result in a 
reconciliation payment amount. For Track 2 and Track 3, TEAM will be 
a two-sided risk model that requires TEAM participants to be 
accountable for performance year spending above or below their 
reconciliation target price, subject to a quality adjustment, that 
will result in a reconciliation payment amount or a repayment 
amount.

a. Effects on the Medicare Program

    TEAM is a mandatory episode-based payment model which will have 
a direct effect on the Medicare program because TEAM participants 
will be incentivized to reduce Medicare spending. Additionally, TEAM 
participants may receive a reconciliation payment amount from CMS or 
have to pay CMS a repayment amount based on their spending and 
quality performance. Table I.G.12-01 shows the projected financial 
impacts of TEAM over the course of the five-year model test. The 
first performance year (2026) of TEAM is expected to cost the 
Medicare program $38 million because we assume most TEAM 
participants will elect participation in Track 1, which is not 
subject to downside risk. In performance year 2 (2027), TEAM 
participants in Track 1 will have no downside risk while TEAM 
participants in Track 2 and Track 3 will be subject to both upside 
and downside risk, and we estimate TEAM participants on net (that 
is, repayment amounts less reconciliation payments) will pay $37 
million to CMS, and that TEAM will save the Medicare program $96 
million. To protect TEAM participants from significant financial 
risk, we have finalized a 5 percent stop-loss and stop-gain limit 
for TEAM participants in Track 2 and a 20 percent stop-loss and 
stop-gain limit for TEAM participants in Track 3. These limits will 
cap the total amount of repayments paid by TEAM participants to CMS 
or cap the total amount of reconciliation payment amounts paid by 
CMS to TEAM participants. In performance year 3 (2028), we estimate 
TEAM participants on net will pay $68 million to CMS, and that TEAM 
will save the Medicare program $129 million. We estimate that TEAM 
participants on net will pay CMS $93 million in performance year 4 
and $77 million in performance year 5, and that TEAM will save the 
Medicare program $154 million and $140 million for these performance 
years, respectively. We estimate that, CMS will pay TEAM 
participants $442 million and TEAM participants will pay CMS $622 
million, and that TEAM will save the Medicare program approximately 
$481 million over the 5 performance years (2026 through 2030).
[GRAPHIC] [TIFF OMITTED] TR28AU24.374

(1) Assumptions

    We assumed TEAM episode volume is estimated to grow at the same 
rate as projected Medicare FFS enrollment as indicated in the 2023 
Medicare Trustees Report.\1129\ Further, an internal sample set of 
hospitals was used to estimate financial impacts and simulate TEAM 
participation. The amount of national episode spending captured by 
the sample set of hospitals was 29 percent in 2023.
---------------------------------------------------------------------------

    \1129\ https://www.cms.gov/oact/tr/2023.
---------------------------------------------------------------------------

    We note that TEAM participants are estimated to reduce episode 
spending by 1 percent as a result of participating in TEAM. The 
fifth annual evaluation report of the Comprehensive Care for Joint 
Replacement (CJR) model indicated that CJR resulted in roughly a 4 
percent reduction in lower extremity joint replacement (LEJR) 
spending (not including reconciliation payments) for participants 
over the course of the model.\1130\ Since participation in CJR is 
mandatory in 34 metropolitan statistical areas, and LEJR episodes 
make up a significant portion of the episodes included in TEAM, the 
CJR evaluation results appear to be a reasonable proxy for what to 
expect in TEAM. However, the episode length in CJR is 90 days, 
whereas in TEAM the proposed length is 30 days. Internal analysis 
indicated that the 30-day episode is approximately 75 percent as 
costly as a 90-day episode for LEJR procedures. In addition, post-
acute care spending has been declining in recent years for episodes 
that we are proposing to include in TEAM, which could limit the 
potential for TEAM participants to achieve significant improvements 
in efficiency. Thus, we believe that the intervention effect of TEAM 
on episode spending will be a reduction of 0 to 3 percent (see Table 
I.G.12-02 for a sensitivity analysis for how the financial impact is 
affected by changes in this assumption).
---------------------------------------------------------------------------

    \1130\ https://www.cms.gov/priorities/innovation/data-and-reports/2023/cjr-py5-annual-report.
---------------------------------------------------------------------------

    We also note that starting from actual episode spending that 
occurred in the first half 2023, average baseline spending per 
episode is estimated to increase by 1.5

[[Page 70027]]

percent every year. The national average per episode spending growth 
for all TEAM episode types in years 2018, 2019, 2022, and 2023 was 
approximately 1.3 percent. Annual growth rates for each episode type 
were weighted by spending, and historical experience during 2020 and 
2021 were excluded due to possible impacts from the peak of the 
COVID-19 pandemic. Since some of the historical experience in these 
years includes Medicare policy changes for LEJR episodes that 
resulted in surgeries occurring in more efficient care settings, 
translating to spending decreases that may not be duplicated in 
future years, the assumed annual trend is slightly greater than the 
observed average trend from the historical experience.
    Additionally, our estimates do not include the impact of TEAM 
beneficiary overlap with total cost of care models, such as when a 
TEAM beneficiary is also assigned to a Medicare Shared Savings 
Program ACO. However, given the precision in the Shared Savings 
Program projections, we do not anticipate a practical difference in 
the ACO's shared savings estimates. Nor do we anticipate TEAM 
beneficiary overlap with total cost of care models having a 
meaningful effect to TEAM's projected financial impacts, described 
in Table I.G.12-01.
    TEAM will allow hospitals in the CJR and BPCI Advanced models 
that have remained in their respective models until the conclusion 
of those initiatives the option to voluntarily participate in TEAM. 
Impacts from these potential participants have not been included in 
our estimates due to the high degree of uncertainty regarding the 
level of interest that these potential participants will have in 
TEAM. We would expect that the majority of voluntary opt-in TEAM 
participants would come from the CJR model due to the large amount 
of attrition that has occurred in the BPCI Advanced model. We also 
expect that hospitals who would choose to opt into TEAM would 
include CJR participant hospitals that have consistently received 
positive reconciliation payments in recent years. Given the 
magnitude of reconciliation payments for CJR participant hospitals 
in recent years, we assume that the maximum potential costs of the 
voluntary opt-in policy will not jeopardize the overall direction of 
the net savings estimate.
    Because the financial impact is based on projections of 
spending, the estimates implicitly assume that there will be no 
significant difference between the projected episode spending used 
to calculate the prospective target prices and actual episode 
spending. This assumption has a large degree of uncertainty, and the 
actual TEAM financial impacts will be sensitive to this difference. 
However, some the of the financial risk of the projection error is 
mitigated by the retrospective trend factor. Target prices will 
still be susceptible to some error risk if the projection error 
exceeds the retrospective trend factor cap. The direction, magnitude 
and timing of projection inaccuracies would all affect the overall 
financial impact estimate.

(2) Sensitivity Analysis

    We also performed a sensitivity analysis to assess various 
intervention effects on TEAM. Overall financial impacts are 
sensitive to the intervention effect TEAM would have on TEAM 
participants' episode spending. Table I.G.12-02 includes financial 
impacts at various intervention effect assumptions (note that 
negative values indicate savings):
[GRAPHIC] [TIFF OMITTED] TR28AU24.375

    The sensitivity is due to the lack of the requirement that 
participants participate in downside risk during performance year 1 
and the effect that reductions in episode spending during 
performance years would have on target prices for future performance 
years.
    The following is a summary of comments we received on the 
effects to Medicare and our responses to these comments:
    Comment: A commenter indicated that the impact analysis in the 
proposed rule estimated that TEAM will generate $705 million in net 
savings for the Medicare program and on net $403 million is 
projected to result from hospitals paying CMS because actual episode 
spending exceeded the target price but CMS did not estimate how much 
it will pay hospitals that generated a reconciliation payment 
amount.
    Response: We thank the commenter for their question. For this 
final rule we have updated the Table I.G.12.-01, to reflect updated 
estimates as a result of final policy modifications. This updated 
table now separates reconciliation payment amounts and repayment 
amounts on discrete rows, rather than netting them on a single row, 
to allow the public to view the payments to TEAM participants 
(reconciliation payment amounts) and payments to CMS (repayment 
amounts) over the course of the five-year model performance period. 
The updated estimates indicate that we anticipate CMS will pay TEAM 
participants $442 million and TEAM participants will pay CMS $622 
million as a result of participation in the model.
    Comment: A couple of commenters had concerns that the proposed 
rule's impact analysis did not consider what it will cost hospitals 
to participate in TEAM. A commenter indicated that based on the 
volume projections for each episode and assuming 25% of the targeted 
CBSAs are required to participate, it is estimated that hospital 
costs to participate will range between $530 million and $744 
million, which is between 75% to 106% of CMS' net projected savings 
and represent an unfunded mandate by the agency. Further, the costs 
to participate will either be cross-subsidized by the private 
sector, require hospitals to redeploy funding and resources from 
other outcome improvement efforts that are targeted to communities' 
needs, and/or result in further loss of access to services for 
Medicare beneficiaries and the broader community. Another commenter 
requested CMS estimate the potential costs of participation, and 
then draw on potentially relevant experience in the similar BPCI 
Advanced or CJR models to put forward a good faith estimate of what 
fraction of participating hospitals can expect to gain or lose money 
through participation.
    Response: We appreciate the commenters' concerns or the 
potential economic impact on TEAM participants. We disagree with the 
commenter's estimate for how much TEAM will cost to implement and 
that it represents and unfunded mandate. We believe TEAM 
participants will not incur significant costs to implement TEAM 
because the administrative, monitoring, and compliance requirements 
for TEAM will not substantially diverge from existing requirements 
for Medicare providers. TEAM will not be adding to quality measure 
reporting or health equity reporting burden because we are using 
quality measures that TEAM participants will already be reporting 
for other CMS quality reporting programs and health equity reporting 
is voluntary. Nor does TEAM require TEAM participants to alter the 
way items and serviced are billed to Medicare, invest in technology 
or analytics, or increase human capital. A TEAM participant may wish 
to not change their behaviors or care practices, or devote resources 
to implementing the model, and they will still have financial 
protections that would prevent hospital costs equating to the 
commenter's estimates. Specifically, TEAM includes provisions such 
as the high-cost outlier cap that limits high-cost episode payments, 
and the stop-loss limit that restricts how much a TEAM participant 
may be required to pay CMS, as discussed in sections X.A.3.f.(3)(e)

[[Page 70028]]

and X.A.3.f.(5)(h) of the preamble of this final rule. Further, all 
TEAM participants are eligible to participate in Track 1 for the 
first performance year, as discussed in section X.A.3.a.(3) of the 
preamble of this final rule, with no downside financial risk or up 
to two additional years of no downside risk for TEAM participants 
that are safety net hospitals, as defined in section X.A.3.f.(2) of 
the preamble of this final rule.
    We also do not agree that TEAM will be cross-subsidized by the 
private sector, but in contrast we anticipate that private or 
commercial patients and payers may benefit from the care redesign 
inventions implemented by the TEAM participant. We believe many 
hospitals already have established standard care pathways and care 
teams that have experience managing beneficiaries who receive these 
procedures, so we do not expect TEAM to require a significant 
overhaul to care practices or significantly increase operating 
costs, but to rather encourage TEAM participants to introduce 
refinements to existing process that will create the efficiencies to 
improve quality and reduce spending. These efficiencies may result 
in spillover effects to other patients in the hospital that yield 
broader quality and spending improvements beyond TEAM, generating a 
positive financial impact for the TEAM participant and potentially 
other payers.
    We also disagree that TEAM will result in Medicare beneficiaries 
losing access to services. TEAM participants may not limit access to 
medically necessary items and services, nor limit the TEAM 
beneficiary's choice of Medicare providers and suppliers. We will 
monitor beneficiary care, as discussed in section X.A.3.i of the 
preamble of this final rule, to ensure beneficiary access to care 
and freedom of choice is not compromised.
    Lastly, we acknowledge the commenter's recommendation on drawing 
from experience in the BPCI Advanced and CJR models to estimate the 
fiscal impact to a hospital. However, we do not believe that this is 
something that can be accurately modeled given the high amount of 
uncertainty regarding individual hospital resources, capabilities, 
and care redesign interventions that might potentially be spurred by 
TEAM.

b. Effects on the Medicare Beneficiaries

    We believe that episode-based payment models may have the 
potential to benefit beneficiaries because the intent of the models 
is to test whether providers are able to improve the coordination 
and transition of care, invest in infrastructure and redesigned care 
processes for high quality and efficient service delivery and 
incentivize higher value care across the inpatient and post-acute 
care spectrum. We believe that episode-based payment models have a 
patient-centered focus such that they incentivize improved 
healthcare delivery and communication based on the needs of the 
beneficiary, thus potentially benefitting beneficiaries. We 
anticipate the model will not affect beneficiary cost sharing for 
items and services that beneficiaries receive from TEAM participants 
or premiums paid by beneficiaries. If there is a shift in the 
utilization of items and services within each episode, then 
beneficiary cost sharing could be higher or lower than would 
otherwise be experienced.
    We are including a patient reported outcome measure, specific to 
LEJR episode categories, in the TEAM quality measures that will be 
tied to payment with the belief that doing so would encourage TEAM 
participants to focus on and deliver improved quality of care for 
Medicare beneficiaries. Additionally, TEAM participants must perform 
well on quality measure performance to achieve their maximum 
reconciliation payment. The accountability of TEAM participants for 
both quality and the cost of care that is furnished to TEAM 
beneficiaries within an episode provides TEAM participants with new 
incentives to improve the health and well-being of the Medicare 
beneficiaries they treat.
    Additionally, the model does not affect the beneficiary's 
freedom of choice to obtain health services from any individual or 
organization qualified to participate in the Medicare program as 
guaranteed under section 1802 of the Act. Eligible beneficiaries who 
receive one of the five proposed surgical episode categories from a 
TEAM participant will not have the option to opt their episodes out 
of the model. TEAM participants may not prevent or restrict 
beneficiaries to any list of preferred or recommended providers.
    Many controls exist under Medicare to ensure beneficiary access 
and quality, and we will use our existing authority, if necessary, 
to audit TEAM participants if claims analysis indicates an 
inappropriate change in delivered services. Given that TEAM 
participants may receive a reconciliation payment, subject to a 
quality adjustment, when they are able to reduce spending below the 
reconciliation target price, they could have an incentive to avoid 
complex, high-cost cases by referring them to nearby facilities or 
specialty referral centers. We intend to monitor the claims data 
from TEAM participants--for example, to compare a hospital's case 
mix relative to a pre-model historical baseline to determine whether 
complex patients are being systematically excluded. Furthermore, we 
are requiring TEAM participants to supply beneficiaries with written 
information regarding the hospital's participation in TEAM as well 
as their rights under Medicare, including their right to use their 
provider of choice.
    We will implement safeguards to ensure that Medicare 
beneficiaries do not experience a delay in services. Specifically, 
to avoid perverse incentives to withhold or delay medically 
necessary care until after an episode ends, TEAM participants will 
remain responsible for episode spending in the 30-day period 
following completion of each episode for all services covered under 
Medicare Parts A and B, regardless of whether the services are 
included in the episode definition.
    Importantly, approaches to savings will include taking steps 
that facilitate patient recovery, shorten recovery duration, and 
minimize post-operative problems that might lead to readmissions. 
Thus, the model itself rewards better patient care.
    Lastly, we note that TEAM will not change Medicare FFS payments, 
beneficiary copayments, deductibles, or coinsurance. Beneficiaries 
may benefit if TEAM participants are able to systematically improve 
the quality of care while reducing costs. We welcomed but did not 
receive public comments on our estimates of the impact of TEAM on 
Medicare beneficiaries.

c. Aggregate Effects on the Market

    There may be spillover effects in the non-Medicare market, or 
even in the Medicare market in other areas as a result of this 
model. Testing changes in Medicare payment policy may have 
implications for non-Medicare payers. As an example, non-Medicare 
patients may benefit if participating hospitals introduce system-
wide changes that improve the coordination and quality of health 
care. Other payers may also be developing payment models and may 
align their payment structures with CMS or may be waiting to utilize 
results from CMS' evaluations of payment models. Because it is 
unclear whether and how this evidence applies to a test of these new 
payment models, our analyses assume that spillover effects on non-
Medicare payers will not occur, although this assumption is subject 
to considerable uncertainty. We welcomed comments on this assumption 
and evidence on how this rulemaking, would impact non-Medicare 
payers and patients but did not receive any comments.

13. Effects of Changes the Provider Reimbursement Review Board (PRRB) 
Membership

    In section X.B. of the preamble of this final rule, we finalized 
proposed changes to 42 CFR 405.1845 to permit individuals to serve 
one additional consecutive term as PRRB Members, relative to the 
current regulations, which allow two consecutive 3-year terms (6 
consecutive years). Based on historical experience, PRRB Members 
generally serve 6 consecutive years as permitted by the current 
regulations; under the final rule, a PRRB Member would be eligible 
to serve for 9 years. We anticipate achieving productivity gains and 
greater efficiencies from retaining experienced Board Members over a 
longer period, particularly since Board Members spend a portion of 
their initial term acclimating to the adjudicatory responsibilities 
and deepening their expertise in the wide scope of specialized 
matters that come before the Board. Accordingly, under the policy we 
are adopting in the final rule, we anticipate that a Board Member 
would be in a better position to efficiently address increasingly 
complex and technical issues and a higher volume of cases as they 
gain additional seniority. Furthermore, the possibility of having a 
9-year tenure on the PRRB might make the position more attractive to 
prospective applicants, thereby increasing the size and quality of 
the candidate pool. We believe for example that otherwise qualified 
individuals might refrain from applying, knowing that the position 
is limited to no more than 6 years. Therefore, this policy will 
result in a no cost impact relative to the requirements of Executive 
Orders 12866, 13563, and 14094. There may be negligible government 
savings attributable to reducing human resource-related costs such 
as recruitment and hiring activity. We

[[Page 70029]]

received no comments on this aspect of our proposal and are 
finalizing this provision without modification.

14. Effects of the Removal of the Puerto Rico Exclusion From Payment 
Error Rate Measurement (PERM) Review

    In section X.D. of the preamble of this final rule, we discuss 
in detail the changes to the administration of the existing PERM 
program. The Further Consolidated Appropriations Act of 2020 (Pub. 
L. 116-94) required Puerto Rico to publish a plan, developed in 
coordination with CMS, and approved by the CMS Administrator, not 
later than 18 months after the FCAA's enactment, for how Puerto Rico 
would develop measures to comply with the PERM requirements of 42 
CFR part 431, subpart Q. Currently, Puerto Rico is excluded from 
PERM via regulation at 42 CFR 431.954(b)(3). Puerto Rico will be 
incorporated into the PERM program starting in reporting year 2027 
(Cycle 3), which covers the payment period between July 1, 2025 
through June 30, 2026.
    In the proposed rule, we noted that including Puerto Rico in the 
PERM program will increase transparency into its Medicaid and CHIP 
operations and should improve program integrity efforts that protect 
taxpayer dollars from improper payments. A state \1131\ in the PERM 
program will be reviewed only once every 3 years and it is not 
likely that a provider would be selected more than once per program 
cycle to provide supporting documentation, minimizing the annual 
burden on both the state and its providers. Therefore, we estimate 
the cost to Puerto Rico for participating in the PERM program will 
be approximately $3.5 million annually. More detail about the cost 
and burden hours associated with response to requests for 
information (approximately 6,000 hours annually) can be found in the 
program PRA package (CMS--10166, CMS--10178, CMS--10184). Therefore, 
we did not anticipate this to be a significant administrative cost.
---------------------------------------------------------------------------

    \1131\ For PERM, a ``state'' represents an entity receiving 
Medicaid and CHIP funding that is measured for improper payments, 
which includes the 50 states, the District of Columbia, and now 
Puerto Rico.
---------------------------------------------------------------------------

    We did not prepare an analysis for this policy under the 
Regulatory Flexibility Act (RFA) because we determined that the 
policy will not have a significant impact on a substantial number of 
small entities.
    We did not prepare an analysis for section 1102(b) of the Act 
because we determined that this policy will not have a significant 
impact on the operations of a substantial number of small rural 
hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditure in any one year of 
$100 million in 1995 dollars, updated annually for inflation. That 
threshold level is currently approximately $183 million. This policy 
will not result in an impact of $183 million or more on State, local 
or tribal governments, in the aggregate, or on the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on 
State and local governments, preempts State law, or otherwise has 
Federalism implications. Because this policy does not impose 
substantial costs on State or local governments, the requirements of 
Executive Order 13132 are not applicable.
    We received no comments on this proposal and therefore are 
finalizing this provision with minor technical correction based on 
further review of current statute reference. Three references to the 
Improper Payments Information Act (IPIA) of 2002 (Pub. L. 107-300) 
will be updated to the Payment Integrity Information Act (PIIA) of 
2019 (Pub. L. 116-117). Otherwise, the provision will be finalized 
without modification.

15. Effects of Hospital and CAH Reporting of Acute Respiratory 
Illnesses

    In section X.F. of the preamble of this final rule, we discuss 
our finalized requirements related to the reporting of acute 
respiratory illnesses that will have potentially major public health 
benefits. Routine reporting of these illnesses absent any new 
emergency makes it possible to use the data to determine which 
hospitals faced unusually high or low reported levels of such 
illnesses. Such comparisons will allow individual hospitals, 
individual cities or states, or the federal government, to analyze 
outlier hospitals (either high or low rates of acute respiratory 
infections) to determine if there were any local factors that might 
suggest some form of intervention will be beneficial to redress 
problems or to export successes among the universe of hospitals and 
CAHs. For example, if hospitals in a particular geographic area were 
finding an unusually high rate of these illnesses among admitted 
patients from a particular geographic area, investigation of 
potential causes might lead to improvements in that area's 
immunization outreach efforts. It will not take many such 
interventions to have potentially substantial life-saving effects. 
In the hopefully unlikely case where an outbreak of acute 
respiratory illness was so substantial as to require the declaration 
of a public health emergency, the life-saving benefits could be 
high. For example, an ``early warning'' signal could speed the 
development of a vaccine, effective use of particular medicines for 
treatments, or other interventions to prevent or ameliorate adverse 
outcomes ranging from a single instance of illness to a national 
epidemic.
    We received no public comments on our estimates.

H. Effects on Hospitals and Hospital Units Excluded From the IPPS

    As of July 2024, there were 92 children's hospitals, 11 cancer 
hospitals, 6 short term acute care hospitals located in the Virgin 
Islands, Guam, the Northern Mariana Islands, and American Samoa, 1 
extended neoplastic disease care hospital, and 11 RNHCIs being paid 
on a reasonable cost basis subject to the rate-of-increase ceiling 
under Sec.  413.40. (In accordance with Sec.  403.752(a) of the 
regulation, RNHCIs are paid under Sec.  413.40.) Among the remaining 
providers, the rehabilitation hospitals and units, and the LTCHs, 
are paid the Federal prospective per discharge rate under the IRF 
PPS and the LTCH PPS, respectively, and the psychiatric hospitals 
and units are paid the Federal per diem amount under the IPF PPS. As 
stated previously, IRFs and IPFs are not affected by the rate 
updates discussed in this final rule. The impacts of the changes on 
LTCHs are discussed in section I.J. of this appendix.
    For the children's hospitals, cancer hospitals, short-term acute 
care hospitals located in the Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa, the extended neoplastic disease 
care hospital, and RNHCIs, the update of the rate-of-increase limit 
(or target amount) is the estimated FY 2025 percentage increase in 
the 2018-based IPPS operating market basket, consistent with section 
1886(b)(3)(B)(ii) of the Act, and Sec. Sec.  403.752(a) and 413.40 
of the regulations. Consistent with current law, based on IGI's 
second quarter 2024 forecast of the 2018-based IPPS market basket 
increase, we are estimating the FY 2025 update to be 3.4 percent 
(that is, the estimate of the market basket rate-of-increase), as 
discussed in section V.A. of the preamble of this final rule. We 
proposed that if more recent data became available for the final 
rule, we would use such data, if appropriate, to calculate the final 
IPPS operating market basket update for FY 2025. The Affordable Care 
Act requires a productivity adjustment (0.5 percentage point 
reduction for FY 2025), resulting in a 2.9 percent applicable 
percentage increase for IPPS hospitals that submit quality data and 
are meaningful EHR users, as discussed in section V.B. of the 
preamble of this final rule. Children's hospitals, cancer hospitals, 
short term acute care hospitals located in the Virgin Islands, Guam, 
the Northern Mariana Islands, and American Samoa, the extended 
neoplastic disease care hospital, and RNHCIs that continue to be 
paid based on reasonable costs subject to rate-of-increase limits 
under Sec.  413.40 of the regulations are not subject to the 
reductions in the applicable percentage increase required under the 
Affordable Care Act. Therefore, for those hospitals paid under Sec.  
413.40 of the regulations, the update is the percentage increase in 
the 2018-based IPPS operating market basket for FY 2025, currently 
estimated at 3.4 percent.
    The impact of the update in the rate-of-increase limit on those 
excluded hospitals depends on the cumulative cost increases 
experienced by each excluded hospital since its applicable base 
period. For excluded hospitals that have maintained their cost 
increases at a level below the rate-of-increase limits since their 
base period, the major effect is on the level of incentive payments 
these excluded hospitals receive. Conversely, for excluded hospitals 
with cost increases above the cumulative update in their rate-of-
increase limits, the major effect is the amount of excess costs that 
would not be paid.
    We note that, under Sec.  413.40(d)(3), an excluded hospital 
that continues to be paid under the TEFRA system and whose costs 
exceed 110 percent of its rate-of-increase limit receives its rate-
of-increase limit plus the lesser of: (1) 50 percent of its 
reasonable costs in excess of 110 percent of the limit; or (2) 10 
percent of its limit. In addition, under the various provisions set 
forth in Sec.  413.40,

[[Page 70030]]

hospitals can obtain payment adjustments for justifiable increases 
in operating costs that exceed the limit.

I. Effects of Changes in the Capital IPPS

1. General Considerations

    For the impact analysis presented in this section of this final 
rule, we used data from the March 2024 update of the FY 2023 MedPAR 
file and the March 2024 update of the Provider-Specific File (PSF) 
that was used for payment purposes. Although the analyses of the 
changes to the capital prospective payment system do not incorporate 
cost data, we used the March 2024 update of the most recently 
available hospital cost report data to categorize hospitals. Our 
analysis has several qualifications and uses the best data 
available, as described later in this section of this final rule.
    Due to the interdependent nature of the IPPS, it is very 
difficult to precisely quantify the impact associated with each 
change. In addition, we draw upon various sources for the data used 
to categorize hospitals in the tables. In some cases (for instance, 
the number of beds), there is a fair degree of variation in the data 
from different sources. We have attempted to construct these 
variables with the best available sources overall. However, it is 
possible that some individual hospitals are placed in the wrong 
category.
    Using cases from the March 2024 update of the FY 2023 MedPAR 
file, we simulated payments under the capital IPPS for FY 2024 and 
the payments for FY 2025 for a comparison of total payments per 
case. Short-term, acute care hospitals not paid under the general 
IPPS (for example, hospitals in Maryland) are excluded from the 
simulations.
    The methodology for determining a capital IPPS payment is set 
forth at Sec.  412.312. The basic methodology for calculating the 
capital IPPS payments in FY 2025 is as follows:
    (Standard Federal rate) x (DRG weight) x (GAF) x (COLA for 
hospitals located in Alaska and Hawaii) x (1 + DSH adjustment factor 
+ IME adjustment factor, if applicable).
    In addition to the other adjustments, hospitals may receive 
outlier payments for those cases that qualify under the threshold 
established for each fiscal year. We modeled payments for each 
hospital by multiplying the capital Federal rate by the geographic 
adjustment factor (GAF) and the hospital's case-mix. Then we added 
estimated payments for indirect medical education, disproportionate 
share, and outliers, if applicable. For purposes of this impact 
analysis, the model includes the following assumptions:
     The capital Federal rate was updated, beginning in FY 
1996, by an analytical framework that considers changes in the 
prices associated with capital-related costs and adjustments to 
account for forecast error, changes in the case-mix index, allowable 
changes in intensity, and other factors. As discussed in section 
III.A.1. of the Addendum to this final rule, the update to the 
capital Federal rate is 3.1 percent for FY 2025.
     In addition to the FY 2025 update factor, the FY 2025 
capital Federal rate was calculated based on a GAF/DRG budget 
neutrality adjustment factor of 0.9856, a budget neutrality factor 
for the lowest quartile hospital wage index adjustment and the 5-
percent cap on wage index decreases policy of 0.9958, and an outlier 
adjustment factor of 0.9577.

2. Results

    We used the payment simulation model previously described in 
section I.I. of Appendix A of this final rule to estimate the 
potential impact of the changes for FY 2025 on total capital 
payments per case, using a universe of 3,082 hospitals. As 
previously described, the individual hospital payment parameters are 
taken from the best available data, including the March2024 update 
of the FY 2023 MedPAR file, the March 2024 update to the PSF, and 
the most recent available cost report data from the March 2024 
update of HCRIS. In Table III, we present a comparison of estimated 
total payments per case for FY 2024 and estimated total payments per 
case for FY 2025 based on the FY 2025 payment policies. Column 2 
shows estimates of payments per case under our model for FY 2024. 
Column 3 shows estimates of payments per case under our model for FY 
2025. Column 4 shows the total percentage change in payments from FY 
2024 to FY 2025. The change represented in Column 4 includes the 3.1 
percent update to the capital Federal rate and other changes in the 
adjustments to the capital Federal rate. The comparisons are 
provided by: (1) geographic location; (2) region; and (3) payment 
classification.
    The simulation results show that, on average, capital payments 
per case in FY 2025 are expected to increase 2.8 percent compared to 
capital payments per case in FY 2024. This expected increase is 
primarily due to the 3.1 percent update to the capital Federal rate 
being partially offset by an expected decrease in capital outlier 
payments. In general, regional variations in estimated capital 
payments per case in FY 2025 as compared to capital payments per 
case in FY 2024 are primarily due to the changes in GAFs, and are 
generally consistent with the projected changes in payments due to 
the changes in the wage index (and policies affecting the wage 
index), as shown in Table I in section I.F. of this appendix.
    The net impact of these changes is an estimated 2.8 percent 
increase in capital payments per case from FY 2024 to FY 2025 for 
all hospitals (as shown in Table III). The geographic comparison 
shows that, on average, hospitals in both urban and rural 
classifications would experience an increase in capital IPPS 
payments per case in FY 2025 as compared to FY 2024. Capital IPPS 
payments per case would increase by an estimated 2.7 percent for 
hospitals in urban areas while payments to hospitals in rural areas 
would increase by 3.8 percent from FY 2024 to FY 2025. The primary 
factor contributing to the difference in the projected increase in 
capital IPPS payments per case for rural hospitals as compared to 
urban hospitals is the estimated increase in capital payments to 
rural hospitals due to the effect of changes in the GAFs.
    The comparisons by region show that the change in capital 
payments per case from FY 2024 to FY 2025 for urban areas range from 
a 0.1 percent decrease for the Pacific urban region to a 5.0 percent 
increase for the East South Central and East North Central urban 
regions. Meanwhile, the change in capital payments per case from FY 
2024 to FY 2025 for rural areas range from a 0.3 percent decrease 
for the Pacific rural region to a 6.0 percent increase for the East 
North Central rural region. Capital IPPS payments per case for 
hospitals located in Puerto Rico are projected to increase by an 
estimated 2.2 percent. These regional differences are primarily due 
to the changes in the GAFs.
    The comparison by hospital type of ownership (Voluntary, 
Proprietary, and Government) shows that proprietary hospitals are 
expected to experience an increase in capital payments per case from 
FY 2024 to FY 2025 of 3.2 percent and government hospitals are 
expected to experience an increase per case from FY2024 to FY 2025 
of 2.3 percent. Meanwhile, voluntary hospitals are expected to 
experience an increase in capital payments per case from FY 2024 to 
FY 2025 of 2.8 percent.
    Section 1886(d)(10) of the Act established the MGCRB. Hospitals 
may apply for reclassification for purposes of the wage index for FY 
2025. Reclassification for wage index purposes also affects the GAFs 
because that factor is constructed from the hospital wage index. To 
present the effects of the hospitals being reclassified as of the 
publication of this final rule for FY 2025, we show the average 
capital payments per case for reclassified hospitals for FY 2025. 
Urban reclassified hospitals are expected to experience an increase 
in capital payments of 3.0 percent; urban nonreclassified hospitals 
are expected to experience an increase in capital payments of 2.3 
percent. Rural reclassified hospitals are expected to experience an 
increase in capital payments of 4.1 percent; rural nonreclassified 
hospitals are expected to experience an increase in capital payments 
of 3.3 percent. The higher expected increase in payments for rural 
reclassified hospitals compared to rural nonreclassified hospitals 
is primarily due to the changes in the GAFs.
BILLING CODE 4120-01-P

[[Page 70031]]

[GRAPHIC] [TIFF OMITTED] TR28AU24.376


[[Page 70032]]


[GRAPHIC] [TIFF OMITTED] TR28AU24.377

BILLING CODE 4120-01-C

J. Effects of Payment Rate Changes and Policy Changes Under the 
LTCH PPS

1. Introduction and General Considerations

    In section VIII. of the preamble of this final rule and section 
V. of the Addendum to this final rule, we set forth the annual 
update to the payment rates for the LTCH PPS for FY 2025. In the 
preamble of this final rule, we specify the statutory authority for 
the provisions that are presented, identify the policies for FY 
2025, and present rationales for our provisions as well as 
alternatives that were considered. In this section, we discuss the 
impact of the changes to the payment rate, factors, and other 
payment rate policies related to the LTCH PPS that are presented in 
the preamble of this final rule in terms of their estimated fiscal 
impact on the Medicare budget and on LTCHs.
    There are 331 LTCHs included in this impact analysis. We note 
that, although there are currently approximately 339 LTCHs, for 
purposes of this impact analysis, we excluded the data of all-
inclusive rate providers consistent with the development of the FY 
2025 MS-LTC-DRG relative weights (discussed in section VIII.B.3. of 
the preamble of this final rule). We have also excluded data for CCN 
312024 from this impact analysis due to their abnormal charging 
practices. We note this is consistent with our removal of this LTCH 
from the calculation of the FY 2025 MS-LTC-DRG relative weights, the 
area wage level adjustment budget neutrality factor, and the fixed-
loss amount for LTCH PPS standard Federal payment rate cases 
(discussed in section VIII.B.3. of the preamble of this final rule). 
Moreover, another LTCH, only had one claim in the claims data used 
for this final rule. Because the number of covered days of care that 
are chargeable to Medicare utilization for the stay was reported as 
0 on this claim, we excluded this claim and LTCH from our impact 
analysis. Lastly, in the claims data used for this final rule, one 
of the 331 LTCHs included in our impact analysis only had claims for 
site neutral payment rate cases and, therefore, does not affect our 
impact analysis for LTCH PPS standard Federal payment rate cases 
presented in Table IV (that is, the impact analysis presented in 
Table IV is based on the data for 330 LTCHs).
    In the impact analysis, we used the payment rate, factors, and 
policies presented in this final rule, the 3.0 percent annual update 
to the LTCH PPS standard Federal payment rate, the update to the MS-
LTC-DRG classifications and relative weights, the update to the wage 
index values (including the update to the CBSA labor market areas) 
and labor-related share, and the best available claims and CCR data 
to estimate the change in payments for FY 2025.
    Under the dual rate LTCH PPS payment structure, payment for LTCH 
discharges that meet the criteria for exclusion from the site 
neutral payment rate (that is, LTCH PPS standard Federal payment 
rate cases) is based on the LTCH PPS standard Federal payment rate. 
Consistent with the statute, the site neutral payment rate is the 
lower of the IPPS comparable per diem amount as determined under 
Sec.  412.529(d)(4), including any applicable outlier payments as 
specified in Sec.  412.525(a), reduced by 4.6 percent for FYs 2018 
through 2026; or 100 percent of the estimated cost of the case as 
determined under Sec.  412.529(d)(2). In addition, there are two 
separate high cost outlier targets--one for LTCH PPS standard 
Federal payment rate cases and one for site neutral payment rate 
cases.
    Based on the best available data for the 331 LTCHs in our 
database that were considered in the analyses used for this final 
rule, we estimate that overall LTCH PPS payments in FY 2025 will 
increase by approximately 2.2 percent (or approximately $58 million) 
based on the rates and factors presented in section VIII. of the 
preamble and section V. of the Addendum to this final rule.
    Based on the FY 2023 LTCH cases that were used for the analysis 
in this final rule, approximately 29 percent of those cases were 
classified as site neutral payment rate cases (that is, 29 percent 
of LTCH cases would not meet the statutory patient-level criteria 
for exclusion from the site neutral payment rate). We note that 
section 3711(b)(2) of the CARES Act provided a waiver of the 
application of the site neutral payment rate for LTCH cases admitted 
during the COVID-19 PHE period. The COVID-19 PHE expired on May 11, 
2023. Therefore, all LTCH PPS cases in FY

[[Page 70033]]

2023 with admission dates on or before the PHE expiration date were 
paid the LTCH PPS standard Federal rate regardless of whether the 
discharge met the statutory patient criteria. Because not all FY 
2023 cases were subject to the site neutral payment rate, for 
purposes of this impact analysis, we continue to rely on the same 
considerations and actuarial projections used in FYs 2016 through 
2024. Our Office of the Actuary currently estimates that the percent 
of LTCH PPS cases that will be classified as site neutral payment 
rate cases in FY 2025 will not change significantly from the most 
recent historical data. To estimate FY 2025 LTCH PPS payments for 
site neutral payment rate cases, we calculated the IPPS comparable 
per diem amounts using the FY 2025 IPPS rates and factors along with 
other changes that will apply to the site neutral payment rate cases 
in FY 2025. We estimate that aggregate LTCH PPS payments for these 
site neutral payment rate cases will increase by approximately 4.2 
percent (or approximately $13 million). This projected increase in 
payments to LTCH PPS site neutral payment rate cases is primarily 
due to the finalized updates to the IPPS rates and factors reflected 
in our estimate of the IPPS comparable per diem amount, as well as 
an increase in estimated costs for these cases determined using the 
charge and CCR adjustment factors described in section V.D.3.b. of 
the Addendum to this final rule. We note that we estimate payments 
to site neutral payment rate cases in FY 2025 will represent 
approximately 12 percent of estimated aggregate FY 2025 LTCH PPS 
payments.
    Based on the FY 2023 LTCH cases that were used for the analysis 
in this final rule, approximately 71 percent of LTCH cases will meet 
the patient-level criteria for exclusion from the site neutral 
payment rate in FY 2025, and will be paid based on the LTCH PPS 
standard Federal payment rate. We estimate that total LTCH PPS 
payments for these LTCH PPS standard Federal payment rate cases in 
FY 2025 will increase approximately 2.0 percent (or approximately 
$45 million). This estimated increase in LTCH PPS payments for LTCH 
PPS standard Federal payment rate cases in FY 2025 is primarily due 
to the 3.0 percent annual update to the LTCH PPS standard Federal 
payment rate being partially offset by a projected 0.8 percentage 
point decrease in high cost outlier payments as a percentage of 
total LTCH PPS standard Federal payment rate payments, which is 
discussed later in this section.
    Based on the 331 LTCHs that were represented in the FY 2023 LTCH 
cases that were used for the analyses in this final rule presented 
in this appendix, we estimate that aggregate FY 2024 LTCH PPS 
payments will be approximately $2.581 billion, as compared to 
estimated aggregate FY 2025 LTCH PPS payments of approximately 
$2.638 billion, resulting in an estimated overall increase in LTCH 
PPS payments of approximately $58 million. We note that the 
estimated $58 million increase in LTCH PPS payments in FY 2025 does 
not reflect changes in LTCH admissions or case-mix intensity, which 
will also affect the overall payment effects of the policies in this 
final rule.
    The LTCH PPS standard Federal payment rate for FY 2024 is 
$48,116.62. For FY 2025, we are establishing an LTCH PPS standard 
Federal payment rate of $49,383.26 which reflects the 3.0 percent 
annual update to the LTCH PPS standard Federal payment rate and the 
budget neutrality factor for updates to the area wage level 
adjustment of 0.9964315 (discussed in section V.B.6. of the Addendum 
to this final rule). For LTCHs that fail to submit data for the LTCH 
QRP, in accordance with section 1886(m)(5)(C) of the Act, we are 
establishing an LTCH PPS standard Federal payment rate of 
$48,424.36. This LTCH PPS standard Federal payment rate reflects the 
updates and factors previously described, as well as the required 
2.0 percentage point reduction to the annual update for failure to 
submit data under the LTCH QRP.
    Table IV shows the estimated impact for LTCH PPS standard 
Federal payment rate cases. The estimated change attributable solely 
to the annual update of 3.0 percent to the LTCH PPS standard Federal 
payment rate is projected to result in an increase of 2.9 percent in 
payments per discharge for LTCH PPS standard Federal payment rate 
cases from FY 2024 to FY 2025, on average, for all LTCHs (Column 6). 
The estimated increase of 2.9 percent shown in Column 6 of Table IV 
also includes estimated payments for short-stay outlier (SSO) cases, 
a portion of which are not affected by the annual update to the LTCH 
PPS standard Federal payment rate, as well as the reduction that is 
applied to the annual update for LTCHs that do not submit the 
required LTCH QRP data. For most hospital categories, the projected 
increase in payments based on the LTCH PPS standard Federal payment 
rate to LTCH PPS standard Federal payment rate cases also rounds to 
approximately 2.9 percent.
    For FY 2025, we are updating the wage index values based on the 
most recent available data (data from cost reporting periods 
beginning during FY 2021 which is the same data used for the FY 2025 
IPPS wage index) and the revised CBSA labor market areas 
delineations that we are adopting (as discussed in section V.B.2. of 
the Addendum to this final rule). In addition, we are establishing a 
labor-related share of 72.8 percent for FY 2025, based on the most 
recent available data (IGI's second quarter 2024 forecast) of the 
relative importance of the labor-related share of operating and 
capital costs of the 2022-based LTCH market basket. We are also 
applying an area wage level budget neutrality factor of 0.9964315 to 
ensure that the changes to the area wage level adjustment will not 
result in any change in estimated aggregate LTCH PPS payments to 
LTCH PPS standard Federal payment rate cases.
    For LTCH PPS standard Federal payment rate cases, we currently 
estimate high-cost outlier payments as a percentage of total LTCH 
PPS standard Federal payment rate payments will decrease from FY 
2024 to FY 2025. Based on the FY 2023 LTCH cases that were used for 
the analyses in this final rule, we estimate that the FY 2024 high-
cost outlier threshold of $59,873 (as established in the FY 2024 
IPPS/LTCH PPS final rule) will result in estimated high cost outlier 
payments for LTCH PPS standard Federal payment rate cases in FY 2024 
that are projected to exceed the 7.975 percent target. Specifically, 
we currently estimate that high-cost outlier payments for LTCH PPS 
standard Federal payment rate cases will be approximately 8.8 
percent of the estimated total LTCH PPS standard Federal payment 
rate payments in FY 2024. Combined with our estimate that FY 2025 
high-cost outlier payments for LTCH PPS standard Federal payment 
rate cases will be 7.975 percent of estimated total LTCH PPS 
standard Federal payment rate payments in FY 2025, this will result 
in an estimated decrease in high cost outlier payments as a 
percentage of total LTCH PPS standard Federal payment rate payments 
of approximately 0.8 percentage point between FY 2024 and FY 2025. 
We note that, in calculating these estimated high cost outlier 
payments, we inflated charges reported on the FY 2023 claims by the 
charge inflation factor described in section V.D.3.b. of the 
Addendum to this final rule. We also note that, in calculating these 
estimated high-cost outlier payments, we estimated the cost of each 
case by multiplying the inflated charges by the adjusted CCRs that 
we determined using our finalized methodology described in section 
V.D.3.b. of the Addendum to this final rule.
    Table IV shows the estimated impact of the payment rate and 
policy changes on LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases for FY 2025 by comparing estimated FY 2024 LTCH 
PPS payments to estimated FY 2025 LTCH PPS payments. (As noted 
earlier, our analysis does not reflect changes in LTCH admissions or 
case-mix intensity.) We note that these impacts do not include LTCH 
PPS site neutral payment rate cases as discussed in section I.J.3. 
of this appendix.
    Comment: We received comments expressing concerns about the 
adequacy of the 1.2 percent increase in payments to LTCH PPS 
standard Federal payment rate cases that we projected in the 
proposed rule. These comments primarily focused on the impact that 
the proposed annual update to the LTCH PPS standard Federal payment 
rate and the proposed fixed-loss amount for high-cost outlier cases 
would have on payments to LTCH PPS standard Federal payment rate 
cases in FY 2025.
    Response: We appreciate commenters' concerns about the proposed 
1.2 percent increase in payment to LTCH PPS standard Federal payment 
rate cases. As explained in the proposed rule (89 FR 36635), that 
estimated increase of approximately 1.2 percent was primarily due to 
the proposed 2.8 percent annual update to the LTCH PPS standard 
Federal payment rate being partially offset by a projected 1.3 
percent decrease in high-cost outlier payments as a percentage of 
total LTCH PPS standard Federal payment rate payment. We received 
several comments on the proposed annual update to the LTCH PPS 
standard Federal payment rate which we have summarized and responded 
to in sections VIII.C. and VIII.D. of the preamble to this final 
rule. We also received several comments on the proposed fixed-loss 
amount for high-cost outlier cases which we have summarized and 
responded to in section V.D.3. of the Addendum to this final rule.

[[Page 70034]]

    Based on the finalized payment rates and factors in this final 
rule, we now project a 2.0 percent increase in payments to LTCH PPS 
standard Federal payment rate cases for FY 2025 (as compared to our 
projection of 1.2 percent in the proposed rule). This increase in 
our projected percentage change in payments is partially being 
driven by the upward revision in this final rule to the annual 
update for FY 2025 in the proposed rule. The final annual update 
factor of 3.0 percent is 0.2 percentage point higher than the 
proposed annual update factor. As discussed in section VIII.C.2. of 
the preamble to this final rule, we believe this LTCH market basket 
increase appropriately reflects the input price growth that LTCHs 
will incur providing medical services in FY 2025. The increase in 
our projected percentage change in payments is also partially being 
driven by a downward revision in this final rule to our estimate of 
FY 2024 high cost outlier payments to LTCH PPS standard Federal 
payment rate cases. In this final rule, after incorporating into our 
payment model more recent data, as discussed in section V.D.3. of 
the Addendum to this final rule, we now estimate that high cost 
outlier payments for LTCH PPS standard Federal payment rate cases 
will be approximately 8.8 percent of the estimated total LTCH PPS 
standard Federal payment rate payments in FY 2024 (as compared to 
our estimate of 9.3 percent in the proposed rule). The reduction in 
our estimate of the FY 2024 outlier payment percentage has the 
effect of increasing our projected percent change in payments from 
FY 2024 to FY 2025.
    As we discuss in detail throughout this final rule, based on the 
best available data, we believe that the provisions of this final 
rule relating to the LTCH PPS, which are projected to result in an 
overall increase in estimated aggregate LTCH PPS payments (for both 
LTCH PPS standard Federal payment rate cases and site neutral 
payment rate cases), and the resulting LTCH PPS payment amounts will 
result in appropriate Medicare payments that are consistent with the 
statute.

2. Impact on Rural Hospitals

    For purposes of section 1102(b) of the Act, we define a small 
rural hospital as a hospital that is located outside of an urban 
area and has fewer than 100 beds. As shown in Table IV, we are 
projecting a 2.8 percent increase in estimated payments for LTCH PPS 
standard Federal payment rate cases for LTCHs located in a rural 
area. This increase is primarily due to the combination of the 3.0 
percent annual update to the LTCH PPS standard Federal payment rate 
for FY 2025, the changes to the area wage level adjustment, and 
estimated changes in outlier payments. This estimated impact is 
based on the FY 2023 data for the 19 rural LTCHs (out of 330 LTCHs) 
that were used for the impact analyses shown in Table IV.

3. Anticipated Effects of the LTCH PPS Payment Rate Changes and Policy 
Changes

a. Budgetary Impact

    Section 123(a)(1) of the BBRA requires that the PPS developed 
for LTCHs ``maintain budget neutrality.'' We believe that the 
statute's mandate for budget neutrality applies only to the first 
year of the implementation of the LTCH PPS (that is, FY 2003). 
Therefore, in calculating the FY 2003 standard Federal payment rate 
under Sec.  412.523(d)(2), we set total estimated payments for FY 
2003 under the LTCH PPS so that estimated aggregate payments under 
the LTCH PPS were estimated to equal the amount that would have been 
paid if the LTCH PPS had not been implemented.
    Section 1886(m)(6)(A) of the Act establishes a dual rate LTCH 
PPS payment structure with two distinct payment rates for LTCH 
discharges beginning in FY 2016. Under this statutory change, LTCH 
discharges that meet the patient-level criteria for exclusion from 
the site neutral payment rate (that is, LTCH PPS standard Federal 
payment rate cases) are paid based on the LTCH PPS standard Federal 
payment rate. LTCH discharges paid at the site neutral payment rate 
are generally paid the lower of the IPPS comparable per diem amount, 
reduced by 4.6 percent for FYs 2018 through 2026, including any 
applicable high cost outlier (HCO) payments, or 100 percent of the 
estimated cost of the case, reduced by 4.6 percent.
    As discussed in section I.J.1. of this appendix, we project an 
increase in aggregate LTCH PPS payments in FY 2025 of approximately 
$58 million. This estimated increase in payments reflects the 
projected increase in payments to LTCH PPS standard Federal payment 
rate cases of approximately $45 million and the projected increase 
in payments to site neutral payment rate cases of approximately $13 
million under the dual rate LTCH PPS payment rate structure required 
by the statute beginning in FY 2016.
    As discussed in section V.D. of the Addendum to this final rule, 
our actuaries project cost and resource changes for site neutral 
payment rate cases due to the site neutral payment rates required 
under the statute. Specifically, our actuaries project that the 
costs and resource use for cases paid at the site neutral payment 
rate will likely be lower, on average, than the costs and resource 
use for cases paid at the LTCH PPS standard Federal payment rate, 
and will likely mirror the costs and resource use for IPPS cases 
assigned to the same MS-DRG. While we are able to incorporate this 
projection at an aggregate level into our payment modeling, because 
the historical claims data that we are using in this final rule to 
project estimated FY 2025 LTCH PPS payments (that is, FY 2023 LTCH 
claims data) do not reflect this actuarial projection, we are unable 
to model the impact of the change in LTCH PPS payments for site 
neutral payment rate cases at the same level of detail with which we 
are able to model the impacts of the changes to LTCH PPS payments 
for LTCH PPS standard Federal payment rate cases. Therefore, Table 
IV only reflects changes in LTCH PPS payments for LTCH PPS standard 
Federal payment rate cases and, unless otherwise noted, the 
remaining discussion in section I.J.3. of this appendix refers only 
to the impact on LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases. In the following section, we present our 
provider impact analysis for the changes that affect LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases.

b. Impact on Providers

    The basic methodology for determining a per discharge payment 
for LTCH PPS standard Federal payment rate cases is currently set 
forth under Sec. Sec.  412.515 through 412.533 and 412.535. In 
addition to adjusting the LTCH PPS standard Federal payment rate by 
the MS-LTC-DRG relative weight, we make adjustments to account for 
area wage levels and SSOs. LTCHs located in Alaska and Hawaii also 
have their payments adjusted by a COLA. Under our application of the 
dual rate LTCH PPS payment structure, the LTCH PPS standard Federal 
payment rate is generally only used to determine payments for LTCH 
PPS standard Federal payment rate cases (that is, those LTCH PPS 
cases that meet the statutory criteria to be excluded from the site 
neutral payment rate). LTCH discharges that do not meet the patient-
level criteria for exclusion are paid the site neutral payment rate, 
which we are calculating as the lower of the IPPS comparable per 
diem amount as determined under Sec.  412.529(d)(4), reduced by 4.6 
percent for FYs 2018 through 2026, including any applicable outlier 
payments, or 100 percent of the estimated cost of the case as 
determined under existing Sec.  412.529(d)(2). In addition, when 
certain thresholds are met, LTCHs also receive HCO payments for both 
LTCH PPS standard Federal payment rate cases and site neutral 
payment rate cases that are paid at the IPPS comparable per diem 
amount.
    To understand the impact of the changes to the LTCH PPS payments 
for LTCH PPS standard Federal payment rate cases presented in this 
final rule on different categories of LTCHs for FY 2025, it is 
necessary to estimate payments per discharge for FY 2024 using the 
rates, factors, and the policies established in the FY 2024 IPPS/
LTCH PPS final rule and estimate payments per discharge for FY 2025 
using the rates, factors, and the policies in this final rule (as 
discussed in section VIII. of the preamble of this final rule and 
section V. of the Addendum to this final rule). As discussed 
elsewhere in this final rule, these estimates are based on the best 
available LTCH claims data and other factors, such as the 
application of inflation factors to estimate costs for HCO cases in 
each year. The resulting analyses can then be used to compare how 
our policies applicable to LTCH PPS standard Federal payment rate 
cases affect different groups of LTCHs.
    For the following analysis, we group hospitals based on 
characteristics provided in the OSCAR data, cost report data in 
HCRIS, and PSF data. Hospital groups included the following:
     Location: large urban/other urban/rural.
     Participation date.
     Ownership control.
     Census region.
     Bed size.

c. Calculation of LTCH PPS Payments for LTCH PPS Standard Federal 
Payment Rate Cases

    For purposes of this impact analysis, to estimate the per 
discharge payment effects of our policies on payments for LTCH PPS

[[Page 70035]]

standard Federal payment rate cases, we simulated FY 2024 and FY 
2025 payments on a case-by-case basis using historical LTCH claims 
from the FY 2023 MedPAR files that met or would have met the 
criteria to be paid at the LTCH PPS standard Federal payment rate if 
the statutory patient-level criteria had been in effect at the time 
of discharge for all cases in the FY 2023 MedPAR files. For modeling 
FY 2024 LTCH PPS payments, we used the FY 2024 standard Federal 
payment rate of $48,116.62 (or $47,185.03 for LTCHs that failed to 
submit quality data as required under the requirements of the LTCH 
QRP). Similarly, for modeling payments based on the FY 2025 LTCH PPS 
standard Federal payment rate, we used the FY 2025 standard Federal 
payment rate of $49,383.26 (or $48,424.36 for LTCHs that failed to 
submit quality data as required under the requirements of the LTCH 
QRP). In each case, we applied the applicable adjustments for area 
wage levels and the COLA for LTCHs located in Alaska and Hawaii. 
Specifically, for modeling FY 2024 LTCH PPS payments, we used the 
current FY 2024 labor-related share (68.5 percent), the wage index 
values established in the Tables 12A and 12B listed in the Addendum 
to the FY 2024 IPPS/LTCH PPS final rule (which are available via the 
internet on the CMS website), the FY 2024 HCO fixed-loss amount for 
LTCH PPS standard Federal payment rate cases of $59,873 (as 
reflected in the FY 2024 IPPS/LTCH PPS final rule), and the FY 2024 
COLA factors (shown in the table in section V.C. of the Addendum to 
that final rule) to adjust the FY 2024 nonlabor-related share (31.5 
percent) for LTCHs located in Alaska and Hawaii. Similarly, for 
modeling FY 2025 LTCH PPS payments, we used the FY 2025 LTCH PPS 
labor-related share (72.8 percent), the FY 2025 wage index values 
from Tables 12A and 12B listed in section VI. of the Addendum to 
this final rule (which are available via the internet on the CMS 
website), the FY 2025 HCO fixed-loss amount for LTCH PPS standard 
Federal payment rate cases of $77,048 (as discussed in section 
V.D.3. of the Addendum to this final rule), and the FY 2025 COLA 
factors (shown in the table in section V.C. of the Addendum to this 
final rule) to adjust the FY 2025 nonlabor-related share (27.2 
percent) for LTCHs located in Alaska and Hawaii. We note that in 
modeling payments for HCO cases for LTCH PPS standard Federal 
payment rate cases, we inflated charges reported on the FY 2023 
claims by the charge inflation factors in section V.D.3.b. of the 
Addendum to this final rule. We also note that in modeling payments 
for HCO cases for LTCH PPS standard Federal payment rate cases, we 
estimated the cost of each case by multiplying the inflated charges 
by the adjusted CCRs that we determined using our finalized 
methodology described in section V.D.3.b. of the Addendum to this 
final rule.
    The impacts that follow reflect the estimated ``losses'' or 
``gains'' among the various classifications of LTCHs from FY 2024 to 
FY 2025 based on the payment rates and policy changes applicable to 
LTCH PPS standard Federal payment rate cases presented in this final 
rule. Table IV illustrates the estimated aggregate impact of the 
change in LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases among various classifications of LTCHs. (As discussed 
previously, these impacts do not include LTCH PPS site neutral 
payment rate cases.)
     The first column, LTCH Classification, identifies the 
type of LTCH.
     The second column lists the number of LTCHs of each 
classification type.
     The third column identifies the number of LTCH cases 
expected to meet the LTCH PPS standard Federal payment rate 
criteria.
     The fourth column shows the estimated FY 2024 payment 
per discharge for LTCH cases expected to meet the LTCH PPS standard 
Federal payment rate criteria (as described previously).
     The fifth column shows the estimated FY 2025 payment 
per discharge for LTCH cases expected to meet the LTCH PPS standard 
Federal payment rate criteria (as described previously).
     The sixth column shows the percentage change in 
estimated payments per discharge for LTCH cases expected to meet the 
LTCH PPS standard Federal payment rate criteria from FY 2024 to FY 
2025 due to the annual update to the standard Federal rate (as 
discussed in section V.A.2. of the Addendum to this final rule).
     The seventh column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2024 to FY 2025 due to the changes to the 
area wage level adjustment (that is, the updated hospital wage data, 
labor market areas, and labor-related share) and the application of 
the corresponding budget neutrality factor (as discussed in section 
V.B.6. of the Addendum to this final rule).
     The eighth column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2024 (Column 4) to FY 2025 (Column 5) due 
to all changes.
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d. Results

    Based on the FY 2023 LTCH cases (from 330 LTCHs) that were used 
for the analyses in this final rule, we have prepared the following 
summary of the impact (as shown in Table IV) of the LTCH PPS payment 
rate and policy changes for LTCH PPS standard Federal payment rate 
cases presented in this final rule. The impact analysis in Table IV 
shows that estimated payments per discharge for LTCH PPS standard 
Federal payment rate cases are projected to increase 2.0 percent, on 
average, for all LTCHs from FY 2024 to FY 2025 as a result of the 
payment rate and policy changes applicable to LTCH PPS standard 
Federal payment rate cases presented in this final rule. This 
estimated 2.0 percent increase in LTCH PPS payments per discharge 
was determined by comparing estimated FY 2025 LTCH PPS payments 
(using the finalized payment rates and factors discussed in this 
final rule) to estimated FY 2024 LTCH PPS payments for LTCH 
discharges which will be LTCH PPS standard Federal payment rate 
cases if the dual rate LTCH PPS payment structure was or had been in 
effect at the time of the discharge (as described in section I.J.3. 
of this appendix).
    As stated previously, we are finalizing an annual update to the 
LTCH PPS standard Federal payment rate for FY 2025 of 3.0 percent. 
For LTCHs that fail to submit quality data under the requirements of 
the LTCH QRP, as required by section 1886(m)(5)(C) of the Act, a 2.0 
percentage point reduction is applied to the annual update to the 
LTCH PPS standard Federal payment rate. Consistent with Sec.  
412.523(d)(4), we also are applying a budget neutrality factor for 
changes to the area wage level adjustment of 0.9964315 (discussed in 
section V.B.6. of the Addendum to this final rule), based on the 
best available data at this time, to ensure that any changes to the 
area wage level adjustment will not result in any change (increase 
or decrease) in estimated aggregate LTCH PPS standard Federal 
payment rate payments. As we also explained earlier in this section 
of the final rule, for most categories of LTCHs (as shown in Table 
IV, Column 6), the estimated payment increase due to the 3.0 percent 
annual update to the LTCH PPS standard Federal payment rate is 
projected to result in approximately a 2.9 percent increase in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases for all LTCHs from FY 2024 to FY 2025. We note 
our estimate of the changes in payments due to the update to the 
LTCH PPS standard Federal payment rate also includes estimated 
payments for short-stay outlier (SSO) cases, a portion of which are 
not affected by the annual update to the LTCH PPS standard Federal 
payment rate, as well as the reduction that is applied to the annual 
update for LTCHs that do not submit data under the requirements of 
the LTCH QRP.

(1) Location

    Based on the most recent available data, the vast majority of 
LTCHs are located in urban areas. Only approximately 6 percent of 
the LTCHs are identified as being located in a rural area, and 
approximately 4 percent of all LTCH PPS standard Federal payment 
rate cases are expected to be treated in these rural hospitals. The 
impact analysis presented in Table IV shows that the overall average 
percent increase in estimated payments per discharge for LTCH PPS 
standard Federal payment rate cases from FY 2024 to FY 2025 for all 
hospitals is 2.0 percent. Urban LTCHs are projected to experience an 
increase of 1.9 percent. Meanwhile, rural LTCHs are projected to 
experience an increase of 2.8 percent.

(2) Participation Date

    LTCHs are grouped by participation date into four categories: 
(1) before October 1983; (2) between October 1983 and September 
1993; (3) between October 1993 and September 2002; and (4) October 
2002 and after. Based on the best available data, the categories of 
LTCHs with the largest expected percentage of LTCH PPS standard 
Federal payment rate cases (approximately 41 percent and 45 percent, 
respectively) are in LTCHs that began participating in the Medicare 
program between October 1993 and September 2002 and after October 
2002. These LTCHs are expected to experience an increase in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2024 to FY 2025 of 2.2 percent and 1.9 
percent, respectively. LTCHs that began participating in the 
Medicare program between October 1983 and September 1993 are 
projected to experience an increase in estimated payments per 
discharge for LTCH PPS standard Federal payment rate cases from FY 
2024 to FY 2025 of 2.0 percent, as shown in Table IV. Approximately 
3 percent of LTCHs began participating in the Medicare program 
before October 1983, and these LTCHs are projected to experience a 
decrease in estimated payments per discharge for LTCH PPS standard 
Federal payment rate cases from FY 2024 to FY 2025 of 0.3 percent, 
partially due to the changes to the area wage level adjustment.

(3) Ownership Control

    LTCHs are grouped into three categories based on ownership 
control type: voluntary, proprietary, and government. Based on the 
best available data, approximately 16 percent of LTCHs are 
identified as voluntary (Table IV). The majority (approximately 81 
percent) of LTCHs are identified as proprietary, while government 
owned and operated LTCHs represent approximately 3 percent of LTCHs. 
Based on ownership type, proprietary LTCHs are expected to 
experience an increase in payments to LTCH PPS standard Federal 
payment rate cases of 2.1 percent. Voluntary LTCHs are expected to 
experience an increase in payments to LTCH PPS standard Federal 
payment rate cases from FY 2024 to FY 2025 of 1.3 percent. 
Government owned and operated LTCHs are expected to experience an 
increase in payments to LTCH PPS standard Federal payment rate cases 
from FY 2024 to FY 2025 of 1.2 percent.

(4) Census Region

    The comparisons by region show that the changes in estimated 
payments per discharge for LTCH PPS standard Federal payment rate 
cases from FY 2024 to FY 2025 are projected to range from an 
increase of 0.4 percent in the New England region to increases of 
2.7 percent in both the East South Central region and the Mountain 
region. These regional variations are primarily due to the changes 
to the area wage adjustment and estimated changes in outlier 
payments.

[[Page 70038]]

(5) Bed Size

    LTCHs are grouped into six categories based on bed size: 0-24 
beds; 25-49 beds; 50-74 beds; 75-124 beds; 125-199 beds; and greater 
than 200 beds. We project that LTCHs with 125-199 beds will 
experience an increase in payments for LTCH PPS standard Federal 
payment rate cases of 1.0 percent. LTCHs with 25-49 beds are 
projected to experience the largest increase in payments, 2.5 
percent. The remaining bed size categories are projected to 
experience an increase in payments in the range of 1.4 to 1.9 
percent.

4. Effect on the Medicare Program

    As stated previously, we project that the provisions of this 
final rule will result in an increase in estimated aggregate LTCH 
PPS payments to LTCH PPS standard Federal payment rate cases in FY 
2025 relative to FY 2024 of approximately $45 million (or 
approximately 2.0 percent) for the 331 LTCHs in our database. 
Although, as stated previously, the hospital-level impacts do not 
include LTCH PPS site neutral payment rate cases, we estimate that 
the provisions of this final rule will result in an increase in 
estimated aggregate LTCH PPS payments to site neutral payment rate 
cases in FY 2025 relative to FY 2024 of approximately $13 million 
(or approximately 4.2 percent) for the 331 LTCHs in our database. 
(As noted previously, we estimate payments to site neutral payment 
rate cases in FY 2025 will represent approximately 12 percent of 
total estimated FY 2025 LTCH PPS payments.) Therefore, we project 
that the provisions of this final rule will result in an increase in 
estimated aggregate LTCH PPS payments for all LTCH cases in FY 2025 
relative to FY 2024 of approximately $58 million (or approximately 
2.2 percent) for the 331 LTCHs in our database.

5. Effect on Medicare Beneficiaries

    Under the LTCH PPS, hospitals receive payment based on the 
average resources consumed by patients for each diagnosis. We do not 
expect any changes in the quality of care or access to services for 
Medicare beneficiaries as a result of this final rule, but we 
continue to expect that paying prospectively for LTCH services will 
enhance the efficiency of the Medicare program. As discussed 
previously, we do not expect the continued implementation of the 
site neutral payment system to have a negative impact on access to 
or quality of care, as demonstrated in areas where there is little 
or no LTCH presence, general short-term acute care hospitals are 
effectively providing treatment for the same types of patients that 
are treated in LTCHs.

K. Effects of Requirements for the Hospital Inpatient Quality 
Reporting (IQR) Program

    In sections IX.B.1., IX.B.2., and IX.C. of the preamble of this 
final rule, we discuss the finalized requirements for hospitals 
reporting quality data under the Hospital IQR Program to receive the 
full annual percentage increase for the FY 2027 payment 
determination and subsequent years.
    In the preamble of this final rule, we are adopting seven new 
measures: (1) Age-Friendly Hospital measure beginning with the CY 
2025 reporting period/FY 2027 payment determination; (2) Patient 
Safety Structural measure beginning with the CY 2025 reporting 
period/FY 2027 payment determination, with modifications; (3) 
Catheter-Associated Urinary Tract Infection (CAUTI) Standardized 
Infection Ratio Stratified for Oncology Locations measure beginning 
with the CY 2026 reporting period/FY 2028 payment determination; (4) 
Central Line-Associated Bloodstream Infection (CLABSI) Standardized 
Infection Ratio Stratified for Oncology Locations measure beginning 
with the CY 2026 reporting period/FY 2028 payment determination; (5) 
Hospital Harm--Falls with Injury electronic clinical quality measure 
(eCQM) beginning with the CY 2026 reporting period/FY 2028 payment 
determination; (6) Hospital Harm--Postoperative Respiratory Failure 
eCQM beginning with the CY 2026 reporting period/FY 2028 payment 
determination; and (7) Thirty-day Risk-Standardized Death Rate among 
Surgical Inpatients with Complications (Failure-to-Rescue) measure 
beginning with the July 1, 2023-June 30, 2025 reporting period/FY 
2027 payment determination. We are modifying two measures: (1) the 
Global Malnutrition Composite Score eCQM, beginning with the CY 2026 
reporting period/FY 2028 payment determination; and (2) the Hospital 
Consumer Assessment of Healthcare Providers and Systems (HCAHPS) 
Survey measure beginning with the CY 2025 reporting period/FY 2027 
payment determination. We are also removing five measures: (1) Death 
Rate Among Surgical Inpatients with Serious Treatable Complications 
(CMS PSI-04) measure beginning with the July 1, 2023-June 30, 2025 
reporting period/FY 2027 payment determination; (2) Hospital-level, 
Risk-Standardized Payment Associated with a 30-Day Episode-of-Care 
for Acute Myocardial Infarction (AMI) measure beginning with the 
July 1, 2021-June 30, 2024 reporting period/FY 2026 payment 
determination; (3) Hospital-level, Risk-Standardized Payment 
Associated with a 30-Day Episode-of-Care for Heart Failure (HF) 
measure beginning with the July 1, 2021-June 30, 2024 reporting 
period/FY 2026 payment determination; (4) Hospital-level, Risk-
Standardized Payment Associated with a 30-Day Episode-of-Care for 
Pneumonia (PN) measure beginning with the July 1, 2021-June 30, 2024 
reporting period/FY 2026 payment determination; and (5) Hospital-
level, Risk-Standardized Payment Associated with a 30-Day Episode-
of-Care for Elective Primary Total Hip Arthroplasty (THA) and/or 
Total Knee Arthroplasty (TKA) measure beginning with the April 1, 
2021-March 31, 2024 reporting period/FY 2026 payment determination. 
We are finalizing a modified version of our proposal to increase the 
total number of eCQMs that must be reported each year. We are 
increasing the total number of eCQMs reported from six to eight for 
the CY 2026 reporting period/FY 2028 payment determination, from 
eight to nine for the CY 2027 reporting period/FY 2029 payment 
determination, and then from nine to eleven beginning with the CY 
2028 reporting period/FY 2030 payment determination. Lastly, we are 
updating data validation policies, including updating the scoring 
methodology for eCQM validation, removing the requirement that 
hospitals must submit 100 percent of eCQM records to pass validation 
beginning with CY 2025 eCQM data affecting the FY 2028 payment 
determination, and no longer requiring hospitals to resubmit medical 
records as part of their request for reconsideration of validation 
beginning with CY 2025 discharges affecting the FY 2028 payment 
determination.
    As shown in the summary tables in section XII.B.6.k. of the 
preamble of this final rule, we estimate a total information 
collection burden increase of 40,160 hours at a cost of $1,282,329 
annually associated with the finalized policies across a 3-year 
period from the CY 2025 reporting period/FY 2027 payment 
determination through the CY 2028 reporting period/FY 2030 payment 
determination, compared to our currently approved information 
collection burden estimates.
    In sections IX.C.5.a. and IX.B.1 of the preamble of this final 
rule, we are adopting the Age Friendly Hospital and Patient Safety 
Structural measures. In order for hospitals to receive a point for 
each of the domains in the measures, affirmative attestations are 
required for each of the statements within a domain. As noted in the 
FY 2023 IPPS/LTCH PPS final rule when we finalized the Hospital 
Commitment to Health Equity measure, hospitals that are unable to 
attest affirmatively for a statement and desire to improve their 
measure performance by earning additional points under the measure, 
will likely have additional costs associated with activities such as 
updating hospital policies, protocols, or processes; engaging senior 
leadership; conducting required analyses, surveys, and screenings; 
performing data analysis and collection; and training staff (87 FR 
49492). The extent of these costs will vary from hospital to 
hospital depending on what policies the hospital already has in 
place, what activities the hospital is already performing, hospital 
size, and the individual choices each hospital makes to meet the 
criteria necessary to attest affirmatively. There may also be some 
non-recurring costs associated with changes in workflow and 
information systems to collect patient screening data if a hospital 
is not already doing so, however, the extent of these costs is 
difficult to quantify as different hospitals may utilize different 
modes of data collection (for example paper-based, electronically 
patient-directed, clinician-facilitated, etc.).
    For the Age Friendly Hospital measure, there may be additional 
impacts incurred by patients admitted to hospitals that do not 
currently conduct patient screenings but decide to do so. Hospitals 
will be able to conduct these screenings via multiple methods, 
however, we believe most hospitals will likely collect data through 
a screening tool incorporated into their electronic health record 
(EHR) or other patient intake process. For the Frailty Screening and 
Intervention domain, we assume patients will be screened using a 
combination of validated tools such as the Katz Index of 
Independence in Activities of Daily Living, the Lawton and Brody 
Instrumental Activities of Daily-Living

[[Page 70039]]

Scale, the Mini-Cog screening for early dementia, and the Patient 
Health Questionnaire-2 depression 
module.1132 1133 1134 1135 1136 For the Social 
Vulnerability domain, we assume patients will be screened using a 
tool such as the Emergency Department Senior Abuse Identification 
(ED Senior AID) tool,\1137\ which is currently undergoing 
validation. We estimate each patient will require no more than 20 
minutes (0.33 hours) to complete the screenings for both domains.
---------------------------------------------------------------------------

    \1132\ Park, C., et al. (2022). ``Association Between 
Implementation of a Geriatric Trauma Clinical Pathway and Changes in 
Rates of Delirium in Older Adults With Traumatic Injury.'' JAMA Surg 
157(8): 676-683.
    \1133\ https://mini-cog.com/
#:~:text=The%20Mini%2DCog%C2%A9%20is,cognitive%20impairment%20in%20ol
der%20patients.
    \1134\ https://www.physio-pedia.com/
Katz_ADL#:~:text=The%20Katz%20ADL%2C%20is%20an,to%20perform%20and%20r
equires%20training.
    \1135\ https://cde.nida.nih.gov/sites/nida_cde/files/PatientHealthQuestionnaire-2_v1.0_2014Jul2.pdf.
    \1136\ https://geriatrictoolkit.missouri.edu/funct/Lawton_IADL.pdf.
    \1137\ Platts-Mills TF, Dayaa JA, Reeve BB, et al. Development 
of the Emergency Department Senior Abuse Identification (ED Senior 
AID) tool. J Elder Abuse Negl. Aug-Oct 2018;30(4):247-270. 
doi:10.1080/08946566.2018.1460285.
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    We believe that the cost for beneficiaries undertaking 
administrative and other tasks on their own time is a post-tax wage 
of $24.04/hr. 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.\1138\ To derive 
the costs for beneficiaries, a measurement of the usual weekly 
earnings of wage and salary workers of $1,118 was divided by 40 
hours to calculate an hourly pre-tax wage rate of $27.95/hr.\1139\ 
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,\1140\ 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, will occur outside the scope of their employment.
---------------------------------------------------------------------------

    \1138\ https://aspe.hhs.gov/reports/valuing-time-us-department-health-human-services-regulatory-impact-analyses-conceptual-framework.
    \1139\ https://www.bls.gov/news.release/pdf/wkyeng.pdf. Accessed 
January 2, 2024.
    \1140\ https://www.census.gov/library/stories/2023/09/median-household-income.html. Accessed January 2, 2024.
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    Based on information collected by the Agency for Healthcare 
Research and Quality for CY 2010 through CY 2019,\1141\ we estimate 
approximately 7,600,000 patients may be screened annually across all 
participating IPPS hospitals (12,850,233 average annual admissions 
of patients aged 65 and over x (3,050 IPPS hospitals / 5,157 total 
U.S. community hospitals \1142\)) or an average of 2,492 patients 
per IPPS hospital. For the CY 2025 reporting period and subsequent 
years, for each IPPS hospital that elects to perform these 
screenings, we estimate it will require patients an average of 831 
hours (2,492 respondents x 0.33 hours) at a cost of $19,969 (831 
hours x $24.04) to complete the screenings.
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    \1141\ https://datatools.ahrq.gov/hcupnet/. Accessed January 3, 
2024.
    \1142\ https://www.aha.org/statistics/fast-facts-us-hospitals. 
Accessed January 3, 2024.
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    In sections IX.C.5.c. and IX.C.5.d. of the preamble of this 
final rule, we are adopting two new eCQMs. As noted in the FY 2022 
IPPS/LTCH PPS final rule regarding adoption of eCQMs, while there is 
no change in information collection burden related to the finalized 
policies with regard to reporting of measure data, we believe that 
costs associated with adopting two new eCQMs are multifaceted and 
include not only the burden associated with reporting, but also the 
costs associated with implementing and maintaining all of the eCQMs 
available for use in the Hospital IQR Program in hospitals' EHR 
systems (86 FR 45607). We do not believe the remaining policies will 
result in any additional economic impact beyond the additional 
collection of information burden discussed in section XII.B.6 of 
this final rule.
    Historically, 100 hospitals, on average, that participate in the 
Hospital IQR Program do not receive the full annual percentage 
increase in any fiscal year due to the failure to meet all 
requirements of the Hospital IQR Program. We anticipate that the 
number of hospitals not receiving the full annual percentage 
increase will be approximately the same as in past years based on 
review of previous performance.
    We received no comments on our assumptions regarding effects of 
requirements discussed in this final rule.

L. Effects of New Requirements for the PPS-Exempt Cancer Hospital 
Quality Reporting (PCHQR) Program

    In section IX.D. of the preamble of this final rule, we discuss 
finalized requirements for PPS-exempt cancer hospitals (PCHs) 
reporting quality data under the PCH Quality Reporting (PCHQR) 
Program. The PCHQR Program is authorized under section 1866(k) of 
the Act. There is no financial impact to PCH Medicare reimbursement 
if a PCH does not submit data.
    In the preamble of this final rule, we are: (1) adopting the 
Patient Safety Structural measure beginning with the CY 2025 
reporting period/FY 2027 program year with modification to one 
domain; (2) modifying the HCAHPS Survey beginning with the CY 2025 
reporting period/FY 2027 program year; and (3) moving up the start 
date for public display of PCH performance on the Hospital 
Commitment to Health Equity measure.
    As shown in the summary table in section XII.B.7.d. of this 
final rule, we estimate a total information collection burden 
increase for 11 PCHs of 166 hours at a cost of $4,047 annually 
associated with our finalized policies and updated burden estimates 
beginning with the CY 2025 reporting period/FY 2027 program year 
compared with our currently approved information collection burden 
estimates. We refer readers to section XII.B.7. of this final rule 
(Collection of Information) for a detailed discussion of the 
calculations estimating the changes to the information collection 
burden for submitting data to the PCHQR Program.
    In section IX.B.1. of the preamble of this final rule, we are 
adopting the Patient Safety Structural measure. We finalized that in 
order for a PCH to receive a point for a domain in the measure, the 
PCH will be required to affirmatively attest to each of the 
statements within that domain. We estimate that if a PCH is unable 
to attest affirmatively to all of the statements in a domain and, in 
a future program year, desires to earn a point for that domain, the 
PCH will likely incur costs associated with activities needed to be 
able to affirmatively attest, which can include updating policies, 
protocols, or processes; engaging senior leadership; conducting 
required analyses; or training staff (87 FR 49492). The extent of 
these costs will vary from PCH to PCH depending on what policies the 
PCH already has in place, what activities the PCH is already 
performing, facility size, and the individual choices each PCH makes 
in order to meet the criteria necessary to attest affirmatively.
    We do not believe the remaining policies to modify the HCAHPS 
Survey beginning with the CY 2025 reporting period/FY 2027 program 
year and to move up the start date for public display of PCH 
performance on the Hospital Commitment to Health Equity measure will 
result in any additional economic impact beyond the additional 
collection of information burden discussed in section XII.B.7. of 
this final rule.
    We received no comments and are therefore finalizing our 
assumptions regarding effects of requirements discussed in this 
final rule without modification.

M. Effects of Requirements for the Long-Term Care Hospital Quality 
Reporting Program (LTCH QRP)

    In section IX.E. of this final rule, we are finalizing four new 
items as standardized patient assessment data elements under the 
SDOH category and to modify the current Transportation item on the 
LCDS beginning with the FY 2028 LTCH QRP. We are finalizing that 
LTCHs will collect the four new items at admission using the LCDS 
for: Living Situation (one item), Food (two items), and Utilities 
(one item). We are finalizing modifications for the Transportation 
item, which is currently collected via the LCDS at admission and 
discharge. We are finalizing that the modified Transportation item 
will only be collected at admission beginning with the FY 2028 LTCH 
QRP. We also are finalizing our proposal to extend the admission 
assessment window for the LCDS from three to four days beginning 
with the FY 2028 LTCH QRP. Finally, we sought and received 
information on two topics: future measure concepts for the LTCH QRP 
and a future LTCH Star Rating system.
    The effect of these finalized proposals for the LTCH QRP will be 
an overall increase in burden for LTCHs participating in the LTCH 
QRP. As shown in summary table XII.B-09 in section XII.B.8. of this 
final rule, we estimate a total information collection burden 
increase for 330 eligible LTCHs of 2,116.55 hours for a cost 
increase of $138,231.88 annually associated with our proposed 
policies and updated burden

[[Page 70040]]

estimates for the FY 2028 LTCH QRP program year compared to our 
currently approved information collection burden estimates. We refer 
readers to section XII.B.8. of this final rule, where we have 
provided an estimate of the burden and cost to LTCHs, and note that 
it will be included in a revised information collection request 
under OMB control number 0938-1163.

N. Effects of Requirements Regarding the Medicare Promoting 
Interoperability Program

    In section IX.F. of the preamble of this final rule, we discuss 
finalized requirements for eligible hospitals and critical access 
hospitals (CAHs) to report objectives and measures and electronic 
clinical quality measures (eCQMs) under the Medicare Promoting 
Interoperability Program.
    In this final rule, we are: (1) adopting the Hospital Harm--
Falls with Injury eCQM beginning with the CY 2026 reporting period; 
(2) adopting the Hospital Harm--Postoperative Respiratory Failure 
eCQM beginning with the CY 2026 reporting period; (3) modifying the 
Antimicrobial Use and Resistance (AUR) Surveillance measure by 
splitting it into an Antimicrobial Use Surveillance measure and an 
Antimicrobial Resistance Surveillance measure beginning with the 
electronic health record (EHR) reporting period in CY 2025; (4) 
modifying the Global Malnutrition Composite Score eCQM, beginning 
with the CY 2026 reporting period; (5) increasing the total number 
of eCQMs that must be reported from six to eight eCQMs for the CY 
2026 reporting period, from eight to nine eCQMs for the CY 2027 
reporting period, and then from nine to eleven eCQMs beginning with 
the CY 2028 reporting period; and (6) increasing the minimum scoring 
threshold from 60 points to 70 points for the EHR reporting period 
in CY 2025 and then from 70 points to 80 points beginning with the 
EHR reporting period in CY 2026.
    As shown in the summary table in section XII.B.9. of this final 
rule, we estimate a total information collection burden increase of 
5,038 hours at a cost of $262,581 annually associated with our 
finalized policies and updated burden estimates over the four-year 
period from the EHR reporting period in CY 2025 through the EHR 
reporting period in CY 2028 compared to our currently approved 
information collection burden estimates. We refer readers to section 
XII.B.9.f. of this final rule (Collection of Information) for a 
detailed discussion of the calculations estimating the changes to 
the information collection burden for submitting data to the 
Medicare Promoting Interoperability Program.
    In section IX.F.6.a. of the preamble of this final rule, we are 
adopting two new eCQMs and modifying one eCQM. Similar to our 
previous discussion in the FY 2022 IPPS/LTCH PPS final rule 
regarding adoption of eCQM measures for the Hospital IQR Program (86 
FR 45607), costs associated with adopting new or modified eCQMs can 
be multifaceted and variable, and include not only the burden 
associated with reporting data to CMS, but also the costs associated 
with implementing and maintaining all of the eCQMs available for use 
in the Medicare Promoting Interoperability Program in eligible 
hospitals' and CAHs' EHR systems.
    In section IX.F.5. of the preamble of this final rule, we are 
finalizing increases to the performance-based scoring threshold for 
eligible hospitals and CAHs reporting under the Medicare Promoting 
Interoperability Program from 60 points to 70 points for the EHR 
reporting period in CY 2025 and from 70 points to 80 points 
beginning with the EHR reporting period in CY 2026. Our review of 
the CY 2022 Medicare Promoting Interoperability Program's 
performance results indicates 98.5 percent of eligible hospitals and 
CAHs currently successfully meet the threshold of 60 points and 92.8 
percent of eligible hospitals and CAHs currently meet the threshold 
of 70 points, while 81.5 percent of eligible hospitals and CAHs 
currently exceed a score of 80 points. Therefore, the 11.3 percent 
and 17 percent of eligible hospitals and CAHs that meet the current 
threshold of 60 points but not the finalized threshold of 70 points 
for the EHR reporting period in CY 2025 and 80 points beginning with 
the EHR reporting period in CY 2026, respectively, will be required 
to better align their health information systems with evolving 
industry standards, increase data exchange, or both, to raise their 
performance score or be subject to a potential downward payment 
adjustment. We do not believe the remaining policies will result in 
any additional economic impact beyond the additional collection of 
information burden discussed in section XII.B.9. of this final rule.
    We received no comments on our assumptions regarding these 
effects.

O. Alternatives Considered

    This final rule contains a range of policies. It also provides 
descriptions of the statutory provisions that are addressed, 
identifies the finalized policies, and presents rationales for our 
decisions and, where relevant, alternatives that were considered.

1. Alternatives Considered for the Distribution of Additional Residency 
Positions Under the Provisions of Section 4122 of Subtitle C of the 
Consolidated Appropriations Act, 2023 (CAA, 2023)

    Section 4122(a) of the CAA, 2023 amended section 1886(h) of the 
Act by adding a new section 1886(h)(10) of the Act requiring the 
distribution of an additional 200 residency positions (also referred 
to as slots) to qualifying hospitals. Section 1886(h)(10)(B)(iii) of 
the Act further requires that each qualifying hospital that submits 
a timely application receive at least 1 (or a fraction of 1) of the 
slots made available under section 1886(h)(10) of the Act before any 
qualifying hospital receives more than 1 residency position.
    As discussed in section V.F.2. of this final rule, after 
consideration of public comments, we are finalizing our proposal, 
with minor modifications, to implement section 4122 of the CAA, 
2023. In section V.F.2. of the proposed rule, we discussed our 
proposal to first distribute slots by prorating the available 200 
positions among all qualifying hospitals such that each qualifying 
hospital receives up to 1.00 FTE--that is, 1.00 FTE or a fraction of 
1.00 FTE. We proposed that a qualifying hospital is a Category One, 
Category Two, Category Three, or Category Four hospital, or one that 
meets the definitions of more than one of these categories, as 
defined at section 1886(h)(10)(F)(iii) of the Act.\1143\ We proposed 
that if any residency slots remain after distributing up to 1.00 FTE 
to each qualifying hospital, we will prioritize the distribution of 
the remaining slots based on the HPSA score associated with the 
program for which each qualifying hospital is applying using the 
methodology we finalized for purposes of implementing section 126 of 
the CAA, 2021 (86 FR 73434 through 73440). Using this HPSA 
prioritization method, we proposed to limit a qualifying hospital's 
total award under section 4122 of the CAA, 2023, to 10.00 additional 
FTEs, consistent with section 1886(h)(10)(C)(i) of the Act.
---------------------------------------------------------------------------

    \1143\ Category One consists of hospitals that are located in a 
rural area (as defined in section 1886(d)(2)(D) of the Act) or have 
been reclassified being located in a rural area (pursuant to section 
1886(d)(8)(E) of the Act). Category Two consists of hospitals in 
which the reference resident level of the hospital (as specified in 
section 1886(h)(10)(F)(iv) of the Act) is greater than the otherwise 
applicable resident limit. Category Three consists of hospitals 
located in States with new medical schools that received `Candidate 
School' status from the Liaison Committee on Medical Education 
(LCME) or that received `Pre-Accreditation' status from the American 
Osteopathic Association (AOA) Commission on Osteopathic College 
Accreditation (the COCA) on or after January 1, 2000, and that have 
achieved or continue to progress toward `Full Accreditation' status 
(as such term is defined by the LCME) or toward `Accreditation' 
status (as such term is defined by the COCA); or additional 
locations and branch campuses established on or after January 1, 
2000, by medical schools with `Full Accreditation' status (as such 
term is defined by LCME) or `Accreditation' status (as such term is 
defined by the COCA). Category Four consists of hospitals that serve 
areas designated as HPSAs under section 332(a)(1)(A) of the Public 
Health Service Act (PHSA), as determined by the Secretary.
---------------------------------------------------------------------------

    We considered alternative approaches for distribution of 
additional residency positions under the provisions of section 4122 
of the CAA. An alternative we considered placed greater emphasis on 
the distribution of additional residency positions to hospitals that 
are training residents in geographic and population HPSAs. Under 
this approach, the statutory requirement that each qualifying 
hospital receive 1 slot or a fraction of 1 slot would be met by 
awarding each qualifying hospital 0.01 FTE. The remaining residency 
slots would be prioritized for distribution based on the HPSA score 
associated with the program for which each hospital is applying 
using the HPSA prioritization methodology we finalized for purposes 
of implementing section 126 of the CAA, 2021 (86 FR 73434 through 
73440). After consideration of the public comments, as discussed in 
section V.F.2. of the preamble of this final rule, we did not adopt 
this alternative.

2. Alternative Considered for the Separate IPPS Payment for 
Establishing and Maintaining Access to Essential Medicines

    As discussed in section V.J. of the preamble of this final rule, 
we are establishing a separate payment under the IPPS to small, 
independent hospitals of 100 beds or fewer that are not part of a 
chain organization for the additional resource costs involved in 
voluntarily establishing and

[[Page 70041]]

maintaining access to 6-month buffer stocks of essential medicines. 
Although at the current time we do not believe it would be 
appropriate to expand the pool of hospitals eligible for this 
initial implementation of the policy due primarily to the existing 
purchasing power of larger hospitals and chain hospitals and 
concerns regarding inducing or exacerbating shortages, as we and 
stakeholders gain experience with the policy it may become 
appropriate to consider expansion of eligibility in future 
rulemaking, potentially in conjunction with domestic manufacturing 
requirements as may be feasible based on increases in the domestic 
manufacturing capacity of essential medicines.

3. Alternatives Considered to the LTCH QRP Reporting Requirements

    We are finalizing our proposal to add four new assessment items 
to the LCDS and modify one assessment item on the LCDS in sections 
IX.E.4. and IX.E.7.b. of this final rule. We believe adopting these 
four new assessment items as standardized patient assessment data 
elements and modifying the current Transportation item will advance 
the CMS National Quality Strategy Goals of equity and engagement. We 
considered the alternative of delaying the collection of these four 
new assessment items and modifying the current Transportation item. 
However, given the fact they will encourage meaningful collaboration 
between healthcare providers, caregivers, and community-based 
organizations to address HRSNs prior to discharge from the LTCH, we 
believe further delay is unwarranted.
    We are also finalizing our proposal to extend the LCDS Admission 
assessment window in section IX.E.7.c. of this final rule. We 
considered the option of maintaining the current 3-day assessment 
period versus extending it to 4 days. However, this policy is 
responsive to LTCHs' feedback that we received regarding the 
difficulty of collecting the required LCDS data elements within the 
3-day assessment window when medically complex patients are admitted 
prior to and on weekends. Additionally, extending the assessment 
period will have no impact on the calculation of LTCH QRP measures, 
and will only require minimal revisions to the LCDS guidance 
manuals.

4. Alternatives Considered for the Transforming Episode Accountability 
Model

    In section X.A. of the preamble of this final rule, we are 
finalizing the test of a new mandatory episode-based payment model 
called the Transforming Episode Accountability Model (TEAM). TEAM is 
designed to improve beneficiary care through financial 
accountability for episodes categories that begin with one of the 
following procedures: coronary artery bypass graft, lower extremity 
joint replacement, major bowel procedure, surgical hip/femur 
fracture treatment, and spinal fusion. TEAM will test whether 
financial accountability for these episode categories reduces 
Medicare expenditures while preserving or enhancing the quality of 
care for Medicare beneficiaries. We anticipate that TEAM will 
benefit Medicare beneficiaries through improving the coordination of 
items and services paid for through Medicare FFS payments, 
encouraging provider investment in health care infrastructure and 
redesigned care processes, and incentivizing higher value care 
across the inpatient and post-acute care settings for the episode.
    Throughout this final rule, we have identified our policies and 
alternatives that we have considered and provided information as to 
the effects of these alternatives and the rationale for each of the 
policies. For example, we considered allowing physician group 
practices (PGPs) to be TEAM participants, however, we are concerned 
that PGPs are generally smaller entities and care for a lower volume 
of Medicare beneficiaries which could make it challenging to take on 
the level of financial risk to participate in the model. In the 
proposed rule we solicited comments on our proposals, on the 
alternatives we have identified, and on other alternatives that we 
should consider. We note that our estimates are limited to acute 
care hospitals that are selected to participate in this model and do 
not include the acute care hospitals that voluntarily opt-in to TEAM 
due to the high degree of uncertainty regarding the level of 
interest that these potential participants will have in TEAM. This 
model will not directly affect hospitals that are not participating 
in the model. However, the model may encourage innovations in health 
care delivery in other areas or in care reimbursed through other 
payers. For example, a TEAM participant may choose to extend their 
arrangements to arrangements outside of the model for all surgical 
procedures they provide, as permitted by all applicable laws, not 
just those reimbursed by Medicare and tested in TEAM. We welcomed 
comments on our proposals and the alternatives we have identified in 
the preamble of this final rule. In each section of the final rule 
that we received comments, we have addressed them accordingly.

P. Overall Conclusion

1. Acute Care Hospitals

    Acute care hospitals are estimated to experience an increase of 
approximately $2.9 billion in FY 2025, including operating, capital, 
and the combined effects of (1) the changes to add-on payments for 
certain ESRD discharges, (2) the payment adjustment for establishing 
and maintaining access to a buffer stock of essential medicines, (3) 
new technology add-on payment changes, and (4) the statutory 
expiration of the MDH program and the temporary changes to the low-
volume hospital payment adjustment on January 1, 2025. The estimated 
change in operating payments is approximately $2.7 billion 
(discussed in sections I.F. of this Appendix). The estimated change 
in capital payments is approximately $0.209 billion (discussed in 
section I.I. of this Appendix). The estimated change in the combined 
effects of (1) the changes to add-on payments for certain ESRD 
discharges; (2) the payment adjustment for establishing and 
maintaining access to a buffer stock of essential medicines; (3) new 
technology add-on payment changes; and (4) the statutory expiration 
of the temporary changes to the low-volume hospital payment 
adjustment on January 1, 2025 is approximately $0.021 billion as 
discussed in sections I.F and I.G. of this Appendix. Totals may 
differ from the sum of the components due to rounding.
    Table I. of section I.F. of this Appendix also demonstrates the 
estimated redistributional impacts of the IPPS budget neutrality 
requirements for the MS-DRG and wage index changes, and for the wage 
index reclassifications under the MGCRB.
    We estimate that hospitals will experience a 2.8 percent 
increase in capital payments per case, as shown in Table III. of 
section I.I. of this Appendix. We project that there will be a $209 
million increase in capital payments in FY 2025 compared to FY 2024.
    The discussions presented in the previous pages, in combination 
with the remainder of this final rule, constitute a regulatory 
impact analysis.

2. LTCHs

    Overall, LTCHs are projected to experience an increase in 
estimated payments in FY 2025. In the impact analysis, we are using 
the rates, factors, and policies presented in this final rule based 
on the best available claims and CCR data to estimate the change in 
payments under the LTCH PPS for FY 2025. Accordingly, based on the 
best available data for the 331 LTCHs included in our analysis, we 
estimate that overall FY 2025 LTCH PPS payments would increase 
approximately $58 million relative to FY 2024, primarily due to the 
annual update to the LTCH PPS standard Federal rate partially offset 
by an estimated decrease in high-cost outlier payments.

Q. Regulatory Review Cost Estimation

    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret a rule, we should 
estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of 
entities that would review the final rule, we assumed that the total 
number of timely pieces of correspondence on this year's proposed 
rule would be the number of reviewers of the final rule. We 
acknowledge that this assumption may understate or overstate the 
costs of reviewing the rule. It is possible that not all commenters 
reviewed this year's rule in detail, and it is also possible that 
some reviewers chose not to comment on the proposed rule. For these 
reasons, we believe that the number of past commenters would be a 
fair estimate of the number of reviewers of the final rule.
    We recognize that different types of entities are in many cases 
affected by mutually exclusive sections of the rule. Thus, for the 
purposes of our estimate we assume that each reviewer read 
approximately 50 percent of the proposed rule. Finally, in our 
estimates, we have used the 6,180 number of timely pieces of 
correspondence on the FY 2025 IPPS/LTCH PPS proposed rule as our 
estimate for the number of reviewers of the final rule. We continue 
to acknowledge the uncertainty involved with using this number, but 
we believe it is a fair estimate due to the variety of entities 
affected and the likelihood that some of them choose to rely (in 
full or in part) on press releases, newsletters, fact sheets, or 
other sources rather than the

[[Page 70042]]

comprehensive review of preamble and regulatory text.
    Using the wage information from the BLS for medical and health 
service managers (Code 11-9111), we estimate that the cost of 
reviewing the final rule is $129.28 per hour, including overhead and 
fringe benefits (https://www.bls.gov/oes/current/oes_nat.htm). 
Assuming an average reading speed, we estimate that it would take 
approximately 32.94 hours for the staff to review half of this final 
rule. For each IPPS hospital or LTCH that reviews this final rule, 
the estimated cost is $4,258.48 (32.94 hours x $129.28). Therefore, 
we estimate that the total cost of reviewing this final rule is 
$26,317,406 ($4,258.48 x 6,180 reviewers).

II. Accounting Statements and Tables

A. Acute Care Hospitals

    As required by OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf), in Table V. of this Appendix, we have 
prepared an accounting statement showing the classification of the 
expenditures associated with the provisions of this final rule as 
they relate to acute care hospitals. This table provides our best 
estimate of the change in Medicare payments to providers as a result 
of the changes to the IPPS presented in this final rule. All 
expenditures are classified as transfers to Medicare providers.
    As shown in Table V. of this Appendix, the net costs to the 
Federal Government associated with the policies in this final rule 
are estimated at $2.9 billion.
[GRAPHIC] [TIFF OMITTED] TR28AU24.380

B. LTCHs

    As discussed in section I.J. of this Appendix, the impact 
analysis of the payment rates and factors presented in this final 
rule under the LTCH PPS is projected to result in an increase in 
estimated aggregate LTCH PPS payments in FY 2025 relative to FY 2024 
of approximately $58 million based on the data for 331 LTCHs in our 
database that are subject to payment under the LTCH PPS. Therefore, 
as required by OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf), in Table VI. of this Appendix, we have 
prepared an accounting statement showing the classification of the 
expenditures associated with the provisions of this final rule as 
they relate LTCHs. Table VI. of this Appendix provides our best 
estimate of the estimated change in Medicare payments under the LTCH 
PPS as a result of the payment rates and factors and other 
provisions presented in this final rule based on the data for the 
331 LTCHs in our database. All expenditures are classified as 
transfers to Medicare providers (that is, LTCHs).
    As shown in Table VI. of this Appendix, the net cost to the 
Federal Government associated with the policies for LTCHs in this 
final rule are estimated at $58 million.
[GRAPHIC] [TIFF OMITTED] TR28AU24.381

III. Regulatory Flexibility Act (RFA) Analysis

    The RFA requires agencies to analyze options for regulatory 
relief of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
government jurisdictions. We estimate that most hospitals and most 
other providers and suppliers are small entities as that term is 
used in the RFA. The great majority of hospitals and most other 
health care providers and suppliers are small entities, either by 
being nonprofit organizations or by meeting the SBA definition of a 
small business (having revenues of less than $8.0 million to $41.5 
million in any 1 year). (For details on the latest standards for 
health care providers, we refer readers to page 38 of the Table of 
Small Business Size Standards for NAIC 622 found on the SBA website 
at https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.)
    For purposes of the RFA, all hospitals and other providers and 
suppliers are considered to be small entities. Because all hospitals 
are considered to be small entities for purposes of the RFA, the 
hospital impacts described in this final rule are impacts on small 
entities. Individuals and States are not included in the definition 
of a small entity. MACs are not considered to be small entities 
because they do not meet the SBA definition of a small business.
    HHS's practice in interpreting the RFA is to consider effects 
``economically significant'' if greater than 5 percent of providers 
reach a threshold of 3 to 5 percent or more of total revenue or 
total costs. We believe that the provisions of this final rule 
relating to IPPS hospitals would have an economically significant 
impact on small entities as explained in this Appendix. Therefore, 
the Secretary has certified that this final rule would have a 
significant economic impact on a substantial number of small 
entities. For example, the majority of the 3,082 IPPS hospitals 
included in the impact analysis shown in ``Table I.--Impact Analysis 
of Changes to the IPPS for Operating Costs for FY 2025,'' on average 
are expected to see increases in the range of 2.8 percent, primarily 
due to the hospital rate update, as discussed in section I.F. of 
this Appendix. On average, the rate update for these hospitals is 
estimated to be 2.9 percent.
    The 330 LTCH PPS hospitals included in the impact analysis shown 
in ``Table IV: Impact of Payment Rate and Policy Changes to LTCH PPS 
Payments for LTCH PPS Standard Federal Payment Rate Cases for FY 
2025 (Estimated FY 2024 Payments Compared to Estimated FY 2025 
Payments)'' on average are expected to see an increase of 
approximately 2.0 percent, primarily due to the annual standard 
Federal rate update for FY 2025 (3.0 percent) being partially offset 
by a projected 0.8 percentage point decrease in high cost outlier 
payments as a percentage of total LTCH PPS standard Federal payment 
rate payments, as discussed in section I.J. of this Appendix.
    This final rule contains a range of final policies. It provides 
descriptions of the statutory provisions that are addressed, 
identifies the finalized policies, and presents rationales for our 
decisions and, where

[[Page 70043]]

relevant, alternatives that were considered. The analyses discussed 
in this Appendix and throughout the preamble of this final rule 
constitutes our regulatory flexibility analysis. We solicited public 
comments on our estimates and analysis of the impact of our 
proposals on small entities.

IV. Impact on Small Rural Hospitals

    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis for any proposed or final rule that may have a 
significant impact on the operations of a substantial number of 
small rural hospitals. This analysis must conform to the provisions 
of section 603 of the RFA. With the exception of hospitals located 
in certain New England counties, for purposes of section 1102(b) of 
the Act, we define a small rural hospital as a hospital that is 
located outside of an urban area and has fewer than 100 beds. 
Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 
98-21) designated hospitals in certain New England counties as 
belonging to the adjacent urban area. Thus, for purposes of the IPPS 
and the LTCH PPS, we continue to classify these hospitals as urban 
hospitals.
    As shown in Table I. in section I.F. of this Appendix, rural 
IPPS hospitals with 0-49 beds (341 hospitals) are expected to 
experience an increase in payments from FY 2024 to FY 2025 of 1.6 
percent and rural IPPS hospitals with 50-99 beds (182 hospitals) are 
expected to experience an increase in payments from FY 2024 to FY 
2025 of 1.4 percent. These changes are primarily driven by the 
hospital rate update offset by the statutory expiration of the MDH 
program. We refer readers to Table I. in section I.F. of this 
Appendix for additional information on the quantitative effects of 
the policy changes under the IPPS for operating costs.
    All rural LTCHs (19 hospitals) shown in Table IV. in section 
I.J. of this Appendix have less than 100 beds. These hospitals are 
expected to experience an increase in payments from FY 2024 to FY 
2025 of 2.8 percent. This increase is primarily due to the 
combination of the 3.0 percent annual update to the LTCH PPS 
standard Federal payment rate for FY 2025, the changes to the area 
wage level adjustment, and estimated changes in outlier payments, as 
discussed in section I.J. of this Appendix.

V. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4) also requires that agencies assess anticipated costs and 
benefits before issuing any rule whose mandates require spending in 
any 1 year of $100 million in 1995 dollars, updated annually for 
inflation. In 2024, that threshold level is approximately $183 
million. This final rule would not mandate any requirements that 
meet the threshold for State, local, or tribal governments, nor 
would it affect private sector costs.

VI. Executive Order 13132

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on 
state and local governments, preempts state law, or otherwise has 
federalism implications. This final rule would not have a 
substantial direct effect on state or local governments, preempt 
states, or otherwise have a federalism implication.

VII. Executive Order 13175

    Executive Order 13175 directs agencies to consult with Tribal 
officials prior to the formal promulgation of regulations having 
tribal implications. Section 1880(a) of the Act states that a 
hospital of the Indian Health Service, whether operated by such 
Service or by an Indian tribe or tribal organization, is eligible 
for Medicare payments so long as it meets all of the conditions and 
requirements for such payments which are applicable generally to 
hospitals. Consistent with section 1880(a) of the Act, this final 
rule contains general provisions also applicable to hospitals and 
facilities operated by the Indian Health Service or Tribes or Tribal 
organizations under the Indian Self-Determination and Education 
Assistance Act. We continue to engage in consultations with Tribal 
officials on IPPS issues of interest. We use input received from 
these consultations, as well as the comments on the proposed rule, 
to inform our rulemaking.

VIII. Executive Order 12866

    In accordance with the provisions of Executive Order 12866, the 
Office of Management and Budget reviewed this final rule.

Appendix B: Recommendation of Update Factors for Operating Cost Rates 
of Payment for Inpatient Hospital Services

I. Background

    Section 1886(e)(4)(A) of the Act requires that the Secretary, 
taking into consideration the recommendations of MedPAC, recommend 
update factors for inpatient hospital services for each fiscal year 
that take into account the amounts necessary for the efficient and 
effective delivery of medically appropriate and necessary care of 
high quality. Under section 1886(e)(5) of the Act, we are required 
to publish update factors recommended by the Secretary in the 
proposed and final IPPS rules. Accordingly, this Appendix provides 
the recommendations for the update factors for the IPPS national 
standardized amount, the hospital-specific rate for SCHs and MDHs, 
and the rate-of-increase limits for certain hospitals excluded from 
the IPPS, as well as LTCHs. In prior years, we made a recommendation 
in the IPPS proposed rule and final rule for the update factors for 
the payment rates for IRFs and IPFs. However, for FY 2025, 
consistent with our approach for FY 2024, we are including the 
Secretary's recommendation for the update factors for IRFs and IPFs 
in separate Federal Register documents at the time that we announce 
the annual updates for IRFs and IPFs. We also discuss our response 
to MedPAC's recommended update factors for inpatient hospital 
services.

II. Inpatient Hospital Update for FY 2025

A. FY 2025 Inpatient Hospital Update

    As discussed in section V.B. of the preamble to this final rule, 
for FY 2025, consistent with section 1886(b)(3)(B) of the Act, as 
amended by sections 3401(a) and 10319(a) of the Affordable Care Act, 
we are setting the applicable percentage increase by applying the 
following adjustments in the following sequence. Specifically, the 
applicable percentage increase under the IPPS is equal to the rate-
of-increase in the hospital market basket for IPPS hospitals in all 
areas, subject to a reduction of one-quarter of the applicable 
percentage increase (prior to the application of other statutory 
adjustments; also referred to as the market basket update or rate-
of-increase (with no adjustments)) for hospitals that fail to submit 
quality information under rules established by the Secretary in 
accordance with section 1886(b)(3)(B)(viii) of the Act and a 
reduction of three-quarters of the applicable percentage increase 
(prior to the application of other statutory adjustments; also 
referred to as the market basket update or rate-of-increase (with no 
adjustments)) for hospitals not considered to be meaningful 
electronic health record (EHR) users in accordance with section 
1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment 
based on changes in economy-wide productivity (the productivity 
adjustment). Section 1886(b)(3)(B)(xi) of the Act, as added by 
section 3401(a) of the Affordable Care Act, states that application 
of the productivity adjustment may result in the applicable 
percentage increase being less than zero.
    We note that, in compliance with section 404 of the MMA, in the 
FY 2022 IPPS/LTCH PPS final rule (86 FR 45194 through 45204), we 
replaced the 2014-based IPPS operating and capital market baskets 
with the rebased and revised 2018-based IPPS operating and capital 
market baskets beginning in FY 2022.
    In the FY 2025 IPPS/LTCH PPS proposed rule, in accordance with 
section 1886(b)(3)(B) of the Act, we proposed to base the proposed 
FY 2025 market basket update used to determine the applicable 
percentage increase for the IPPS on IGI's fourth quarter 2023 
forecast of the 2018-based IPPS market basket rate-of-increase with 
historical data through third quarter 2023, which was estimated to 
be 3.0 percent. In accordance with section 1886(b)(3)(B) of the Act, 
as amended by section 3401(a) of the Affordable Care Act, in section 
IV.B. of the preamble of the FY 2025 IPPS/LTCH PPS proposed rule, 
based on IGI's fourth quarter 2023 forecast, we proposed a 
productivity adjustment of 0.4 percentage point for FY 2025. We also 
proposed that if more recent data subsequently became available, we 
would use such data, if appropriate, to determine the FY 2025 market 
basket update and productivity adjustment for the FY 2025 IPPS/LTCH 
PPS final rule.
    In the FY 2025 IPPS/LTCH PPS proposed rule, based on IGI's 
fourth quarter 2023 forecast of the 2018-based IPPS market basket 
update and the productivity adjustment, depending on whether a 
hospital submits quality data under the rules established in 
accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter 
referred to as a hospital that submits quality data) and is a 
meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act 
(hereafter referred to as a hospital that is a meaningful EHR

[[Page 70044]]

user), we presented four possible applicable percentage increases 
that could be applied to the standardized amount.
    In accordance with section 1886(b)(3)(B) of the Act, as amended 
by section 3401(a) of the Affordable Care Act, we are establishing 
the applicable percentages increase for the FY 2025 updates based on 
IGI's second quarter 2024 forecast of the 2018-based IPPS market 
basket of 3.4 percent and the productivity adjustment of 0.5 
percentage point, as discussed in section V.A of the preamble of 
this final rule, depending on whether a hospital submits quality 
data under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act and is a meaningful EHR user under 
section 1886(b)(3)(B)(ix) of the Act, as shown in the table that 
follows.
[GRAPHIC] [TIFF OMITTED] TR28AU24.382

B. FY 2025 SCH and MDH Update

    Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2025 
applicable percentage increase in the hospital-specific rate for 
SCHs and MDHs equals the applicable percentage increase set forth in 
section 1886(b)(3)(B)(i) of the Act (that is, the same update factor 
as for all other hospitals subject to the IPPS).
    Section 307 of the Consolidated Appropriations Act, 2024 (CAA, 
2024) (Pub. L. 118-42), enacted on March 9, 2024, extended the MDH 
program for FY 2025 discharges occurring before January 1, 2025. 
Prior to enactment of the CAA, 2024, the MDH program was only to be 
in effect through the end of FY 2024. Therefore, under current law, 
the MDH program will expire for discharges on or after January 1, 
2025. We refer readers to section V.E. of the preamble of this final 
rule for further discussion of the MDH program.
    As previously stated, the update to the hospital specific rate 
for SCHs and MDHs is subject to section 1886(b)(3)(B)(i) of the Act, 
as amended by sections 3401(a) and 10319(a) of the Affordable Care 
Act. Accordingly, depending on whether a hospital submits quality 
data and is a meaningful EHR user, we are establishing the same four 
possible applicable percentage increases in the previous table for 
the hospital-specific rate applicable to SCHs and MDHs.

C. FY 2025 Puerto Rico Hospital Update

    Because Puerto Rico hospitals are no longer paid with a Puerto 
Rico-specific standardized amount under the amendments to section 
1886(d)(9)(E) of the Act, there is no longer a need for us to make 
an update to the Puerto Rico standardized amount. Hospitals in 
Puerto Rico are now paid 100 percent of the national standardized 
amount and, therefore, are subject to the same update to the 
national standardized amount discussed under section V.B.1. of the 
preamble of this final rule.
    In addition, as discussed in section V.B.2. of the preamble of 
this final rule, section 602 of Public Law 114-113 amended section 
1886(n)(6)(B) of the Act to specify that subsection (d) Puerto Rico 
hospitals are eligible for incentive payments for the meaningful use 
of certified EHR technology, effective beginning FY 2016. In 
addition, section 1886(n)(6)(B) of the Act was amended to specify 
that the adjustments to the applicable percentage increase under 
section 1886(b)(3)(B)(ix) of the Act apply to subsection (d) Puerto 
Rico hospitals that are not meaningful EHR users, effective 
beginning FY 2022.
    Section 1886(b)(3)(B)(ix) of the Act in conjunction with section 
602(d) of Public Law 114-113 requires that for FY 2024 and 
subsequent fiscal years, any subsection (d) Puerto Rico hospital 
that is not a meaningful EHR user as defined in section 1886(n)(3) 
of the Act and not subject to an exception under section 
1886(b)(3)(B)(ix) of the Act will have a reduction of three-quarters 
of the applicable percentage increase (prior to the application of 
other statutory adjustments).
    Based on IGI's fourth quarter 2023 forecast of the 2018-based 
IPPS market basket update with historical data through third quarter 
2023, in the FY 2025 IPPS/LTCH PPS proposed rule, in accordance with 
section 1886(b)(3)(B) of the Act, as previously discussed, for 
Puerto Rico hospitals, we proposed a market basket update of 3.0 
percent and a productivity adjustment of 0.4 percentage point. 
Therefore, for FY 2025, depending on whether a Puerto Rico hospital 
is a meaningful EHR user, we stated that there are two possible 
applicable percentage increases that can be applied to the 
standardized amount. Based on these data, we proposed the following 
applicable percentage increases to the standardized amount for FY 
2025 for Puerto Rico hospitals:
     For a Puerto Rico hospital that is a meaningful EHR 
user, we proposed an applicable percentage increase to the operating 
standardized amount of 2.6 percent (that is, the FY 2025 estimate of 
the proposed market basket rate-of-increase of 3.0 percent less an 
adjustment of 0.4 percentage point for the proposed productivity 
adjustment).
     For a Puerto Rico hospital that is not a meaningful EHR 
user, we proposed an applicable percentage increase to the operating 
standardized amount of 0.35 percent (that is, the FY 2025 estimate 
of the proposed market basket rate-of-increase of 3.0 percent, less 
an adjustment of 2.25 percentage point (the proposed market basket 
rate-of-increase of 3.0 percent x 0.75 for failure to be a 
meaningful EHR user), and less an adjustment of 0.4 percentage point 
for the proposed productivity adjustment).
    As noted previously, we proposed that if more recent data 
subsequently became available, we would use such data, if 
appropriate, to determine the FY 2025 market basket update and the 
productivity adjustment for the FY 2025 IPPS/LTCH PPS final rule.
    As discussed in section V.A.1. of the preamble of this final 
rule, based on more recent data available for this FY 2025 IPPS/LTCH 
PPS final rule, we estimate that the FY 2025 market basket update 
used to determine the applicable percentage increase for the IPPS is 
3.4 percent less a productivity adjustment of 0.5 percentage point. 
Therefore, in accordance with section 1886(b)(3)(B) of the Act, for 
this final rule, for Puerto Rico hospitals the more recent update of 
the market basket update is 3.4 percent less a productivity 
adjustment of 0.5 percentage point. For FY 2025, depending on 
whether a Puerto Rico hospital is a meaningful EHR user, there are 
two possible applicable percentage increases that can be applied to 
the standardized amount. Based on these data, we determined the 
following applicable percentage increases to the standardized amount 
for FY 2025 for Puerto Rico hospitals:
     For a Puerto Rico hospital that is a meaningful EHR 
user, an applicable

[[Page 70045]]

percentage increase to the FY 2025 operating standardized amount of 
2.9 percent (that is, the FY 2025 estimate of the market basket 
rate-of-increase of 3.4 percent less 0.5 percentage point for the 
productivity adjustment).
     For a Puerto Rico hospital that is not a meaningful EHR 
user, an applicable percentage increase to the operating 
standardized amount of 0.35 percent (that is, the FY 2025 estimate 
of the market basket rate-of-increase of 3.4 percent, less an 
adjustment of 2.55 percentage point (the market basket rate-of-
increase of 3.4 percent x 0.75 for failure to be a meaningful EHR 
user), and less 0.5 percentage point for the productivity 
adjustment).

D. Update for Hospitals Excluded From the IPPS for FY 2025

    Section 1886(b)(3)(B)(ii) of the Act is used for purposes of 
determining the percentage increase in the rate-of-increase limits 
for children's hospitals, cancer hospitals, and hospitals located 
outside the 50 States, the District of Columbia, and Puerto Rico 
(that is, short-term acute care hospitals located in the U.S. Virgin 
Islands, Guam, the Northern Mariana Islands, and America Samoa). 
Section 1886(b)(3)(B)(ii) of the Act sets the rate-of-increase 
limits equal to the market basket percentage increase. In accordance 
with Sec.  403.752(a) of the regulations, religious nonmedical 
health care institutions (RNHCIs) are paid under the provisions of 
Sec.  413.40, which also use section 1886(b)(3)(B)(ii) of the Act to 
update the percentage increase in the rate-of-increase limits.
    Currently, children's hospitals, PPS-excluded cancer hospitals, 
RNHCIs, and short-term acute care hospitals located in the U.S. 
Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa are among the remaining types of hospitals still paid under 
the reasonable cost methodology, subject to the rate-of-increase 
limits. In addition, in accordance with Sec.  412.526(c)(3) of the 
regulations, extended neoplastic disease care hospitals (described 
in Sec.  412.22(i) of the regulations) also are subject to the rate-
of-increase limits. As discussed in section VI. of the preamble of 
this final rule, we proposed to use the percentage increase in the 
2018-based IPPS operating market basket to update the target amounts 
for children's hospitals, PPS-excluded cancer hospitals, RNHCIs, 
short-term acute care hospitals located in the U.S. Virgin Islands, 
Guam, the Northern Mariana Islands, and American Samoa, and extended 
neoplastic disease care hospitals for FY 2025 and subsequent fiscal 
years. Accordingly, for FY 2025, the rate-of-increase percentage to 
be applied to the target amount for these children's hospitals, 
cancer hospitals, RNHCIs, extended neoplastic disease care 
hospitals, and short-term acute care hospitals located in the U.S. 
Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa is the FY 2025 percentage increase in the 2018-based IPPS 
operating market basket. For this final rule, the current estimate 
of the IPPS operating market basket percentage increase for FY 2025 
is 3.4 percent.

E. Update for LTCHs for FY 2025

    Section 123 of Public Law 106-113, as amended by section 307(b) 
of Public Law 106-554 (and codified at section 1886(m)(1) of the 
Act), provides the statutory authority for updating payment rates 
under the LTCH PPS.
    As discussed in section V.A. of the Addendum to this final rule, 
we are updating the LTCH PPS standard Federal payment rate for FY 
2025 by 3.0 percent, consistent with section 1886(m)(3) of the Act 
which provides that any annual update be reduced by the productivity 
adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act 
(that is, the productivity adjustment). Furthermore, in accordance 
with the LTCH QR Program under section 1886(m)(5) of the Act, we are 
reducing the annual update to the LTCH PPS standard Federal rate by 
2.0 percentage points for failure of a LTCH to submit the required 
quality data. Accordingly, we are establishing an update factor of 
1.030 in determining the LTCH PPS standard Federal rate for FY 2025. 
For LTCHs that fail to submit quality data for FY 2025, we are 
establishing an annual update to the LTCH PPS standard Federal rate 
of 1.0 percent (that is, the annual update for FY 2025 of 3.0 
percent less 2.0 percentage points for failure to submit the 
required quality data in accordance with section 1886(m)(5)(C) of 
the Act and our rules) by applying a update factor of 1.010 in 
determining the LTCH PPS standard Federal rate for FY 2025. (We note 
that, as discussed in section VII.D. of the preamble of this final 
rule, the update to the LTCH PPS standard Federal payment rate of 
3.0 percent for FY 2025 does not reflect any budget neutrality 
factors.)

III. Secretary's Recommendations

    MedPAC is recommending inpatient hospital rates be updated by 
the amount specified in current law plus 1.5 percent. MedPAC's 
rationale for this update recommendation is described in more detail 
in this section. As previously stated, section 1886(e)(4)(A) of the 
Act requires that the Secretary, taking into consideration the 
recommendations of MedPAC, recommend update factors for inpatient 
hospital services for each fiscal year that take into account the 
amounts necessary for the efficient and effective delivery of 
medically appropriate and necessary care of high quality. Consistent 
with current law, depending on whether a hospital submits quality 
data and is a meaningful EHR user, we are recommending the four 
applicable percentage increases to the standardized amount listed in 
the table under section II. of this Appendix B. We are recommending 
that the same applicable percentage increases apply to SCHs and 
MDHs.
    In addition to making a recommendation for IPPS hospitals, in 
accordance with section 1886(e)(4)(A) of the Act, we are 
recommending update factors for certain other types of hospitals 
excluded from the IPPS. Consistent with our policies for these 
facilities, we are recommending an update to the target amounts for 
children's hospitals, cancer hospitals, RNHCIs, short-term acute 
care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa and extended neoplastic 
disease care hospitals of 3.4 percent.
    For FY 2025, consistent with policy set forth in section VII. of 
the preamble of this final rule, for LTCHs that submit quality data, 
we are recommending an update of 3.0 percent to the LTCH PPS 
standard Federal rate. For LTCHs that fail to submit quality data 
for FY 2025, we are recommending an annual update to the LTCH PPS 
standard Federal rate of 1.0 percent.

IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating 
Payments in Traditional Medicare

    In its March 2024 Report to Congress, MedPAC assessed the 
adequacy of current payments and costs, and the relationship between 
payments and an appropriate cost base. MedPAC recommended an update 
to the hospital inpatient rates by the amount specified in current 
law plus 1.5 percent. MedPAC anticipates that their recommendation 
to update the IPPS payment rate by the amount specified under 
current law plus 1.5 percent in 2025 would generally be adequate to 
maintain beneficiaries' access to hospital inpatient and outpatient 
care and keep IPPS payment rates close to, if somewhat below, the 
cost of delivering high-quality care efficiently.
    MedPAC stated that their recommended update to IPPS and OPPS 
payment rates of current law plus 1.5 percent may not be sufficient 
to ensure the financial viability of some Medicare safety-net 
hospitals with a poor payer mix. MedPAC recommends redistributing 
the current Medicare safety-net payments (disproportionate share 
hospital and uncompensated care payments) using the MedPAC-developed 
Medicare Safety-Net Index (MSNI) for hospitals. In addition, MedPAC 
recommends adding $4 billion to this MSNI pool of funds to help 
maintain the financial viability of Medicare safety-net hospitals 
and recommended to Congress transitional approaches for a MSNI 
policy.
    We refer readers to the March 2024 MedPAC report, which is 
available for download at www.medpac.gov, for a complete discussion 
on these recommendations.
    In light of these recommendations, and in particular those 
concerning safety net hospitals, we look forward to working with 
Congress on these matters. In the FY 2024 IPPS/LTCH PPS proposed 
rule, we sought comments on the challenges faced by safety-net 
hospitals and potential approaches to help safety-net hospitals meet 
those challenges. These comments will inform and guide our future 
rulemaking and other actions in this area.
    We are establishing an applicable percentage increase for FY 
2025 of 2.9 percent as described in section 1886(b)(3)(B) of the 
Act, provided the hospital submits quality data and is a meaningful 
EHR user consistent with these statutory requirements. We note that, 
because the operating and capital payments in the IPPS remain 
separate, we are continuing to use separate updates for operating 
and capital payments in the IPPS. The update to the capital rate is 
discussed in section III. of the Addendum to this final rule.

[[Page 70046]]

    We note that section 1886(d)(5)(F) of the Act provides for 
additional Medicare payment adjustments, called Medicare 
disproportionate share hospital (DSH) payments, for subsection (d) 
hospitals that serve a significantly disproportionate number of low-
income patients. Section 1886(r) of the Act provides that, for FY 
2014 and each subsequent fiscal year, the Secretary shall pay each 
such subsection (d) hospital that is eligible for Medicare DSH 
payments an empirically justified DSH payment equal to 25 percent of 
the Medicare DSH adjustment they would have received under section 
1886(d)(5)(F) of the Act if subsection (r) did not apply. The 
remaining amount, equal to an estimate of 75 percent of what 
otherwise would have been paid as Medicare DSH payments if 
subsection (r) of the Act did not apply, reduced to reflect changes 
in the percentage of individuals who are uninsured, is available to 
make additional payments to each hospital that qualifies for 
Medicare DSH payments and has uncompensated care. These additional 
payments are called uncompensated care payments. We refer readers to 
section IV. of preamble of this final rule for a further discussion 
of Medicare DSH and uncompensated care payments.

[FR Doc. 2024-17021 Filed 8-1-24; 4:15 pm]
BILLING CODE 4120-01-P