80 FR 75107 - Medicare Program; Inpatient Prospective Payment Systems; 0.2 Percent Reduction

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

Federal Register Volume 80, Issue 230 (December 1, 2015)

In accordance with the Court's October 6, 2015 order in Shands Jacksonville Medical Center, Inc., et al. v. Burwell, No. 14-263 (D.D.C.) and consolidated cases that challenge the 0.2 percent reduction in inpatient prospective payment systems (IPPS) rates to account for the estimated $220 million in additional FY 2014 expenditures resulting from the 2-midnight policy, this notice discusses the basis for the 0.2 percent reduction and its underlying assumptions and invites comments on the same in order to facilitate our further consideration of the FY 2014 reduction. We will consider and respond to the comments received in response to this notice, and to comments already received on this issue in a final notice to be published by March 18, 2016.

[Federal Register Volume 80, Number 230 (Tuesday, December 1, 2015)]
[Notices]
[Pages 75107-75117]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-30486]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1658-NC]
RIN 0938-ZB23


Medicare Program; Inpatient Prospective Payment Systems; 0.2 
Percent Reduction

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

ACTION: Notice with comment period.

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SUMMARY: In accordance with the Court's October 6, 2015 order in Shands 
Jacksonville Medical Center, Inc., et al. v. Burwell, No. 14-263 
(D.D.C.) and consolidated cases that challenge the 0.2 percent 
reduction in inpatient prospective payment systems (IPPS) rates to 
account for the estimated $220 million in additional FY 2014 
expenditures resulting from the 2-midnight policy, this notice 
discusses the basis for the 0.2 percent reduction and its underlying 
assumptions and invites comments on the same in order to facilitate our 
further consideration of the FY 2014 reduction. We will consider and 
respond to the comments received in response to this notice, and to 
comments already received on this issue in a final notice to be 
published by March 18, 2016.

DATES: Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
e.s.t. on February 2, 2016.

ADDRESSES: In commenting, refer to file code CMS-1658-NC. Because of 
staff and resource limitations, we cannot accept comments by facsimile 
(FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
notice to http://www.regulations.gov. Follow the ``Submit a comment'' 
instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1658-NC, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1658-NC, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Ing-Jye Cheng, (410) 786-2260 or Don 
Thompson, 410-786-6504.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following Web site as soon as possible after they have

[[Page 75108]]

been received: http://www.regulations.gov. Follow the search 
instructions on that Web site to view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. e.s.t. To schedule an appointment to view public 
comments, phone 1-800-743-3951.

I. Background

    In the final rule titled ``Medicare Program; Hospital Inpatient 
Prospective Payment Systems for the Acute Care Hospitals and the Long-
Term Care Hospital Prospective Payment System and Final Fiscal Year 
2014 Rates; Quality Reporting Requirements for Specific Providers; 
Hospital Conditions of Participation; Payment Policies Related to 
Patient Status'' (hereinafter referred to as the FY 2014 IPPS/LTCH PPS 
final rule), we adopted the 2-midnight policy effective October 1, 2013 
(78 FR 50906 through 50954). Under the 2-midnight policy, an inpatient 
admission is generally appropriate for Medicare Part A payment if the 
physician (or other qualified practitioner) admits the patient as an 
inpatient based upon the expectation that the patient will need 
hospital care that crosses at least 2 midnights. In assessing the 
expected duration of necessary care, the physician (or other 
practitioner) may take into account outpatient hospital care received 
prior to inpatient admission. If the patient is expected to need less 
than 2 midnights of care in the hospital, the services furnished should 
generally be billed as outpatient services. Our actuaries estimated 
that the 2-midnight policy would increase expenditures by approximately 
$220 million in FY 2014 due to an expected net increase in inpatient 
encounters. We used our authority under section 1886(d)(5)(I)(i) of the 
Act to make a reduction of 0.2 percent to the standardized amount, the 
Puerto Rico standardized amount, and the hospital-specific payment 
rate, and we used our authority under section 1886(g) of the Act to 
make a reduction of 0.2 percent to the national capital Federal rate 
and the Puerto Rico-specific capital rate, in order to offset this 
estimated $220 million in additional IPPS expenditures in FY 2014. (In 
addition to an operating IPPS payment for each discharge, hospitals 
also receive a capital IPPS payment for each discharge so a net 
increase in the number of inpatient encounters also results in 
increased expenditures under the capital IPPS.)

II. Supplemental Notice Requesting Comments on the FY 2014 IPPS Rule

A. Overview

    As noted in section I. of this notice with comment period, we 
estimated based on an actuarial model that the 2-midnight policy would 
increase IPPS expenditures by approximately $220 million in FY 2014 due 
to an expected net increase in inpatient encounters, as described in 
greater detail in an August 19, 2013 memorandum. (See Appendix A of 
this notice.)
    Section II.B. of this notice with comment period provides 
additional details on the calculation of this estimate (that is, what 
we did) and section II.C. of this notice with comment period discusses 
the actuaries' assumptions, including why those assumptions were 
reasonable. We collectively refer to the calculations and assumptions 
as the actuarial ``model'' for estimating the financial impact of the 
policy change. Section II.D. of this notice with comment period 
discusses the status of an analysis currently being conducted by our 
actuaries of the claims experience since the implementation of the 2-
midnight policy. We seek comment on all aspects of the model used by 
our actuaries, including but not limited to those for which we 
specifically request comment. We seek comment on, and will consider 
comments on, all aspects of the 0.2 percent reduction.

B. Calculation of the Impact of the 2-Midnight Policy

    The task of modeling the impact of the 2-midnight policy on 
hospital payments begins with a recognition that some cases that were 
previously outpatient cases will become inpatient cases and vice versa. 
Therefore, our actuaries were required to develop a model that 
determined the net effect of the number of cases that would move in 
each direction.
    In estimating the number of outpatient cases that would shift to 
the inpatient setting, we analyzed calendar year (CY) 2011 claims that 
included spending for observation care or a major procedure. For the 
purposes of the -0.2 percent estimate, CMS physicians defined 
observation care as Outpatient Prospective Payment System (OPPS) claims 
containing Healthcare Common Procedure Coding System (HCPCS) code 
``G0378'', Hospital observation service, per hour, or HCPCS code 
``G0379'' Direct admission of patient for hospital observation care. We 
used the difference between the first date of service for the HCPCS 
code (generally the first date that the service represented by that 
code was provided to the patient) and the ``claim through'' date 
(generally the last date any service on the claim was provided to the 
patient) to determine the length of the observation care. In this 
manner, we identified approximately 350,000 observation care stays of 2 
midnights or more using the CY 2011 claims.
    A list of the Ambulatory Payment Classifications (APCs) containing 
the major procedures used in the determination of the -0.2 percent 
estimate can be found in Appendix B of this notice with comment period. 
As with observation care, the difference between the first date of 
service for the HCPCS code and the claim through date was used to 
determine the length of the major procedure. We identified 
approximately 50,000 claims containing major procedures with stays 
lasting 2 midnights or more using the CY 2011 claims.
    Combining the observation care and the major procedures resulted in 
approximately 400,000 claims for services of 2 midnights or more from 
the CY 2011 claims data.
    For additional details on the identification of the outpatient 
claims, see Appendix C of this notice with comment period.
    In estimating the number of inpatient stays that would shift to the 
outpatient setting, FY 2011 inpatient claims containing a surgical 
Medicare Severity Diagnosis Related Group (MS-DRG) were analyzed. The 
number of these stays that spanned less than 2 midnights, based on the 
length of stay, was approximately 360,000. FY 2009 and FY 2010 data 
were also analyzed and the results were consistent with the FY 2011 
results.
    For additional details on the identification of the inpatient 
claims, see Appendix D of this notice with comment period.
    Our actuaries also assumed that payment under the OPPS would be 30 
percent of the payment under the IPPS for encounters shifting between 
the two systems, and that the beneficiary is responsible for 20 percent 
of the Part B cost.
    The number of short stay discharges (for this purpose, same day 
discharges and discharges crossing one or two midnights) represented 
about 28 percent of total discharges in FY 2011, and approximately 17 
percent of total spending for the total discharges. The assumed net 
increase of 40,000

[[Page 75109]]

inpatient discharges (= 400,000 OPPS to IPPS--360,000 IPPS to OPPS) 
represented an increase of 1.2 percent in the number of short stay 
discharges. Taking 1.2 percent of 17 percent of total spending results 
in the estimate at the time of the FY 2014 IPPS/LTCH PPS rulemaking 
that the 2-midnight policy would result in an additional $290 million 
in inpatient expenditures, as shown for FY 2014 in the table ``Impact 
on Medicare Expenditures'' found in the memorandum in Appendix A of 
this notice. The estimates for the additional inpatient expenditures 
for FYs 2015 through 2018 can also be found in the table (for example, 
$320 million for FY 2015).
    For the outpatient expenditure estimate, taking 30 percent (based 
on the assumption that payment under the OPPS would be 30 percent of 
the payment under the IPPS) of 80 percent (to account for the assumed 
20 percent beneficiary responsibility) of the $290 million inpatient 
estimate results in approximately $70 million less outpatient 
expenditures. The estimates for the reduction in outpatient 
expenditures for FYs 2015 through 2018 can also be found in the table 
(For example, $80 million for FY 2015.)
    The estimated $290 million increase in inpatient expenditures less 
the estimated $70 million decrease in outpatient expenditures yields 
the estimated net impact by our actuaries at the time of the FY 2014 
IPPS/LTCH PPS rulemaking of an additional $220 million in expenditures 
in FY 2014 as a result of the 2-midnight policy. The estimated 
additional expenditures for FYs 2015 through 2018 can be similarly 
calculated.
    Using the information contained in this section and the appendices 
to this notice, interested members of the public should be able to 
calculate the estimate by our actuaries of an additional $220 million 
in expenditures in FY 2014 as a result of the 2-midnight policy. (For 
interested members of the public who wish to perform this calculation, 
we highlight the discussion in Appendix D regarding the number of 
inpatient cases identified in the MedPAR data and the Integrated Data 
Repository.)

C. Discussion of the Assumptions Made in the Calculation of the Impact 
of the 2-Midnight Policy

    As our actuaries stated in the August 2013 memorandum, the 
estimates depend critically on the assumed utilization changes in the 
inpatient and outpatient hospital settings. We discuss the assumptions 
underlying the estimates further in this section.
1. Estimated Outpatient Cases That Would Shift to the Inpatient Setting
    As indicated previously, in estimating the number of outpatient 
cases that would shift to the inpatient setting, CY 2011 claims that 
included spending for observation care or a major procedure were 
analyzed. This was done in order to remove claims with diagnostic 
services or minor procedures that would be less likely to trigger an 
encounter in which there was a continuous stay. (See the discussion in 
Appendix C of this notice with comment period.)
    For the purpose of the -0.2 percent estimate, observation care was 
defined as OPPS claims containing HCPCS ``G0378,'' Hospital observation 
service, per hour, or ``G0379'' Direct admission of patient for 
hospital observation care. At the time the -0.2 percent estimate was 
being developed, we were also examining establishing comprehensive APCs 
under the OPPS (for a summary of the results of this examination see 
the CY 2014 OPPS proposed rule (78 FR 43540)). One of the claims 
analyses that we developed for this purpose included service counts of 
G0378 and G0379 and significant procedures. Since this analysis 
included the universe of services of interest for the 2-midnight policy 
at that time, it was well-suited for use in the development of the -0.2 
percent estimate as well. For a discussion of the data specifications 
for this claims analysis, and how it was subset for the 2-midnight 
analysis, see Appendix C of this notice with comment period.
    However, in retrospect, using HCPCS G0378 and G0379 may have been 
an overly conservative definition of observation services, because not 
every use of observation services would be captured by the G-codes. As 
indicated in the Medicare Claims Processing Manual,\1\ hospitals are 
required to report observation charges under the revenue center code 
``0760'', Treatment or observation room--general classification, or 
``0762'' Treatment or observation room--observation room regardless of 
whether or not the G-codes are billed.
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    \1\ See section 290.2.1 in Chapter 4 of the Medicare Claims 
Processing Manual available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c04.pdf)
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    We also note that the Office of the Inspector General (OIG) used 
this revenue center code definition of observation services in its 
report ``Hospitals' Use of Observation Stays and Short Inpatient Stays 
\2\ (OEI-02-12-00040).
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    \2\ Available at http://oig.hhs.gov/oei/reports/oei-02-12-00040.pdf.
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    If we had defined observation services using revenue center codes 
0760 and 0762 instead of HCPCS codes G0378 and G0379, we would have 
identified approximately 400,000 claims for observation services 
spanning 2 midnights or more (instead of 350,000) and we would have 
estimated approximately 450,000 cases shifting from the outpatient to 
the inpatient setting (400,000 claims for observation stays spanning 
more than 2 midnights and approximately 50,000 claims for major 
procedures) instead of the 400,000 cases used in the estimate. We seek 
comment on whether it would be more appropriate to define observation 
services using revenue center codes 0760 and 0762 rather than HCPCS 
codes G0378 and G0379.
    Another consequence of the use of the claims analyses that we 
developed for the purpose of the comprehensive APCs involves the 
approach used to determine whether observation stays spanned 2 
midnights or more. In general, in the claims analysis for comprehensive 
APC development, we examined the difference between the date of service 
for the primary HCPCS code on the claim and the claim through date. For 
the observation services in this analysis, we used the difference 
between first date of service for the observation service and the claim 
through date to determine the length of the observation case. However, 
in retrospect, as with the definition of observation services, this may 
have been an overly conservative approach to determining the length of 
the observation case. Under the 2-midnight policy, for purposes of 
determining whether the 2 midnight benchmark was met and, therefore, 
whether inpatient admission was generally appropriate, the expected 
duration of care includes the time the beneficiary spent receiving 
outpatient services within the hospital. This includes services such as 
observation services, treatments in the emergency department, and 
procedures provided in the operating room or other treatment area. It 
is not just the time spent receiving observation services. As such, it 
may have been more appropriate to have used the ``claim from'' date (in 
general the date that the beneficiary entered the hospital), rather 
than the first date that observation services were provided in order to 
determine when claims containing observation services spanned 2 
midnights or more. If we had used such an approach when developing the 
original estimate, instead of approximately 350,000 claims with 
observation services spanning 2

[[Page 75110]]

midnights or more, the estimate would have been approximately 430,000 
claims under the HCPCS code G0378/G0370 definition of observation 
services and approximately 520,000 under the revenue center code 0760/
0762 definition of observation services. When combined with our 
estimate of major procedures, we would have estimated as many as 
570,000 cases shifting from the outpatient to the inpatient setting 
under this approach instead of the 400,000 cases used in the estimate. 
We seek comment on whether it would be more appropriate to have used 
the claim from date rather than the first date that observation 
services were provided in order to determine when claims containing 
observation services spanned 2 midnights or more.
2. Estimated Inpatient Cases That Would Shift to the Outpatient Setting
    We believed some proportion of the inpatient cases under 2 
midnights in the historical data would remain inpatient because we 
believed that behavioral changes by hospitals and admitting 
practitioners would mitigate some of the impact of cases shifting 
between the inpatient hospital setting and the outpatient hospital 
setting. The question was how to reasonably estimate what that 
proportion would be for purposes of modelling the impact of the 2-
midnight policy. We believe that a model distinguishing between medical 
and surgical cases is a reasonable approach to use in determining what 
proportion of inpatient cases would remain in the inpatient setting and 
what proportion would shift to the outpatient setting.
    Specifically, in estimating the number of inpatient stays that 
would shift to the outpatient setting, FY 2011 inpatient claims 
containing a surgical MS-DRG were analyzed. Our actuaries assumed that 
those spanning less than 2 midnights (other than those stays that were 
cut short by a death or transfer) would shift from the inpatient 
setting to the outpatient setting. Stays that were cut short by a death 
or transfer were excluded because under the 2-midnight policy those 
cases would generally be considered to be appropriately treated on an 
inpatient basis. (For a discussion of the data specifications for the 
inpatient claims analysis, see Appendix D of this notice.)
    Claims containing medical MS-DRGs were excluded because, as stated 
in the August 2013 memorandum, ``it was assumed that these cases would 
be unaffected by the policy change.'' Our actuaries excluded medical 
MS-DRGs when developing the -0.2 percent estimate because they believed 
that due to behavioral changes by hospitals and admitting practitioners 
most inpatient medical encounters spanning less than 2 midnights before 
the current 2-midnight policy was implemented might be reasonably 
expected to extend past 2 midnights after its implementation and would 
thus still be considered inpatient. They believed that the clinical 
assessments and protocols used by physicians to develop an expected 
length of stay for medical cases were, in general, more variable and 
less defined than those used to develop an expected length of stay for 
surgical cases.
    Evidence of this medical/surgical dichotomy is seen in proprietary 
utilization review tools such as the Milliman Care Guidelines, which 
are guidelines based originally on actuarial data, and InterQual, which 
are clinically oriented guidelines. Both tools reflect the same types 
of distinctions between medical and surgical cases that we assumed 
based on CMS medical staff's clinical judgment. Although all 
guidelines, and all surgeons, advise patients that individual patients 
vary in their post-operative courses, there are predictable post-
operative courses that are based on such factors as whether or not the 
abdominal cavity or the pleural cavity are entered, the expected time 
for recovery from anesthesia, the expected time to resume urinary 
function, the expected time to resume bowel function, the expected time 
to regain mobility, and the typical period for common post-operative 
interventions. These are by no means absolute but are fairly well-
defined, as evidenced by the surgeon's ability to generally inform the 
patient, within a day or so, how long the patient probably can expect 
to remain in the hospital if treatment goes well. Part of this 
decreased variance is due to the fact that the reason for admission, a 
specific surgical procedure, is well-defined.
    Conversely, for medical admissions a single diagnosis typically 
covers a much broader spectrum of possibilities. Pneumonia may have 
different etiologies, with vastly different expected lengths of stay. A 
stroke may be minor, allowing a brief diagnostic workup to be followed 
by outpatient rehabilitation, or catastrophic, triggering a prolonged 
stay before stabilization and discharge. Chronic obstructive pulmonary 
disease (COPD) and congestive heart failure (CHF) may respond rapidly 
to medication adjustments or may result in Intense Care Unit (ICU) 
stays. Unlike the surgical procedure, the medical diagnosis does not 
imply a reasonably consistent set of activities. In fact, typical 
medical protocols are highly branched, with the initial portion of 
hospital care typically focused on diagnostics that serve to 
differentiate patient subsets that define treatments and simultaneously 
suggest different hospital courses. The increased variability in the 
medical protocols is influenced by the fact that, for planned surgical 
admissions, more of the branching takes place in the process of 
selecting a specific surgical intervention before the patient is 
admitted, while for medical admissions more of the branching takes 
place after admission.
    For these reasons, the clinical judgment of CMS's medical staff 
supports our actuaries' estimate of the impact of the 2-midnight policy 
on program payments to hospitals.
3. Estimated IPPS/OPPS Cost Difference for Cases That Shift Between the 
IPPS and OPPS
    Our actuaries assumed that the OPPS cost for services that shift 
between the OPPS and IPPS was 30 percent of the IPPS cost, and the 
beneficiary is responsible for 20 percent of the OPPS cost. The 30 
percent is an assumption about the difference on average. While payment 
under the OPPS is on average less than payment under the IPPS for these 
cases, the key question is how much less on average? For any given 
case, the payment differential will vary. We note that when the OIG 
examined the payment differential between short inpatient stays and 
observation stays in their 2013 report ``Hospitals' Use of Observation 
Stays and Short Inpatient Stays for Medicare Beneficiaries'' (OEI-02-
12-00040), it found that on average Medicare paid nearly three times 
more for a short inpatient stay than an observation stay (p. 12). This 
is consistent with the 30 percent estimate used in the development of 
the -0.2 percent estimate. We seek comment on whether it is appropriate 
to utilize a 30 percent estimate.

D. Claims Experience Since the Implementation of the 2-Midnight Policy

    Our actuaries are currently conducting an analysis of claims 
experience for FY 2014 and FY 2015 in light of available data, 
including the MedPAR data. Because that analysis is not yet complete, 
we are not proposing in this notice with comment period to reconsider 
the 0.2 percent reduction in the FY 2014 IPPS/LTCH PPS final rule based 
on the results of the claims analysis. However, we are seeking comment 
on whether we should await the completion of the actuaries' analysis of 
FY 2014 and FY 2015 data before resolution of this proceeding.

[[Page 75111]]

    We note that any potential model revisions do not necessarily mean 
that the net result of the initial modelling, namely the ultimate -0.2 
percent adjustment, was incorrect. As we have indicated since the -0.2 
percent estimate was developed, the assumptions used for purposes of 
reasonably estimating overall impacts cannot be construed as absolute 
statements about every individual encounter. Under the original 2-
midnight policy, our actuaries did not expect that every single 
surgical MS-DRG encounter spanning less than 2 midnights would shift to 
the outpatient setting, that every single medical MS-DRG encounter 
would remain in the inpatient setting, and that every single outpatient 
observation stay or major surgical encounter spanning more than 2 
midnights would shift to the inpatient setting. However, for purposes 
of developing the -0.2 percent adjustment estimate under the original 
policy, a model where cases involving a surgical MS-DRG spanning less 
than 2 midnights in the historical data shifted to the outpatient 
setting, cases involving a medical MS-DRG spanning less than 2 
midnights in the historical data remained in the inpatient setting, and 
outpatient observation stays and major surgical encounters spanning 
more than 2 midnights in the historical data shifted to the inpatient 
setting yielded a reasonable estimate of the net effect of the 2-
midnight policy when it was adopted. To the extent the actual 
experience might vary for each of the individual assumptions, our 
actuaries estimated that the total net effect of that variation would 
not significantly impact the estimate.
    There were also factors that could not be anticipated at the time 
of the initial modelling that may influence the actual experience, such 
as the prohibition on Recovery Auditor post-payment reviews that became 
effective October 1, 2013. This prohibition might have affected 
hospital behavior in unexpected ways.
    Our actuaries will continue to review the claims experience for FY 
2014 and subsequent years under the 2-midnight policy to evaluate the 
assumptions underlying the original estimate. As we indicated in the CY 
2016 OPPS/ASC final rule, we will take the reviews into account during 
future rulemaking, including potential future rulemaking on the issue 
of whether or not the policy change that we adopted for the medical 
review of inpatient hospital admissions under Medicare Part A described 
in the CY 2016 OPPS final rule will have a differential impact on 
expenditures compared to the original policy. Although our analysis of 
the historical data since the implementation of the 2-midnight policy 
is not yet complete, and we do not propose to reconsider the reduction 
in light of that analysis at this time, we are including this 
discussion in this notice because we received many comments on the CY 
2016 OPPS proposed rule asserting that the claims data since the 
adoption of the original 2-midnight policy is inconsistent with our 
original -0.2 percent estimate. We continue to invite comment on this 
issue. As indicated in the CY 2016 OPPS final rule, we intend to 
respond to all public comments regarding the validity of the original -
0.2 percent adjustment that we received in response to the CY 2016 OPPS 
proposed rule as part of these Shands remand proceedings and publish a 
final notice by March 18, 2016.
    We elected to promulgate the -0.2 percent adjustment for the 
reasons described in the FY 2014 IPPS/LTCH PPS proposed and final rules 
and elaborated upon in this notice with comment period. We request 
comment on all aspects of that decision, including but not limited to 
the information, assumptions, and analyses supporting the adjustment.

III. Collection of Information Requirements

    This document does not impose information collection requirements, 
that is, reporting, recordkeeping or third-party disclosure 
requirements. Consequently, there is no need for review by the Office 
of Management and Budget under the authority of the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.).

IV. Response to Comments

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

    Dated: November 20, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: November 24, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.

[[Page 75112]]

Appendix A

BILLING CODE 4120-01-C
[GRAPHIC] [TIFF OMITTED] TN01DE15.062


[[Page 75113]]


[GRAPHIC] [TIFF OMITTED] TN01DE15.063


[[Page 75114]]


[GRAPHIC] [TIFF OMITTED] TN01DE15.064

BILLING CODE 4120-01-P

[[Page 75115]]

Appendix B

List of APCs Containing Major Procedures For Purposes of the 2 Midnight 
Estimate

APC--APC Description
0005--Level II Needle Biopsy/Aspiration Except Bone Marrow
0007--Level II Incision & Drainage
0008--Level III Incision and Drainage
0012--Level I Debridement & Destruction
0017--Level V Debridement & Destruction
0019--Level I Excision/Biopsy
0020--Level II Excision/Biopsy
0021--Level III Excision/Biopsy
0022--Level IV Excision/Biopsy
0028--Level I Breast Surgery
0029--Level II Breast Surgery
0030--Level III Breast Surgery
0037--Level IV Needle Biopsy/Aspiration Except Bone Marrow
0041-- Arthroscopy
0042--Level II Arthroscopy
0045--Bone/Joint Manipulation Under Anesthesia
0047--Arthroplasty without Prosthesis
0048--Level I Arthroplasty or Implantation with Prosthesis
0049--Level I Musculoskeletal Procedures Except Hand and Foot
0050--Level II Musculoskeletal Procedures Except Hand and Foot
0051--Level III Musculoskeletal Procedures Except Hand and Foot
0052--Level IV Musculoskeletal Procedures Except Hand and Foot
0053--Level I Hand Musculoskeletal Procedures
0054--Level II Hand Musculoskeletal Procedures
0055--Level I Foot Musculoskeletal Procedures
0056--Level II Foot Musculoskeletal Procedures
0057--Bunion Procedures
0062--Level I Treatment Fracture/Dislocation
0063--Level II Treatment Fracture/Dislocation
0064--Level III Treatment Fracture/Dislocation
0069--Thoracoscopy
0074--Level IV Endoscopy Upper Airway
0075--Level V Endoscopy Upper Airway
0076--Level I Endoscopy Lower Airway
0080--Diagnostic Cardiac Catheterization
0082--Coronary or Non-Coronary Atherectomy
0083--Coronary Angioplasty, Valvuloplasty, and Level I Endovascular 
Revascularization
0085--Level II Electrophysiologic Procedures
0086--Level III Electrophysiologic Procedures
0088--Thrombectomy
0089--Insertion/Replacement of Permanent Pacemaker and Electrodes
0090--Level I Insertion/Replacement of Permanent Pacemaker
0091--Level II Vascular Ligation
0092--Level I Vascular Ligation
0093--Vascular Reconstruction/Fistula Repair without Device
0103--Miscellaneous Vascular Procedures
0104--Transcatheter Placement of Intracoronary Stents
0105--Repair/Revision/Removal of Pacemakers, AICDs, or Vascular Devices
0106--Insertion/Replacement of Pacemaker Leads and/or Electrodes
0107--Insertion of Cardioverter-Defibrillator Pulse Generator
0108--Insertion/Replacement/Repair of Cardioverter-Defibrillator System
0113--Excision Lymphatic System
0114--Thyroid/Lymphadenectomy Procedures
0115--Cannula/Access Device Procedures
0121--Level I Tube or Catheter Changes or Repositioning
0130--Level I Laparoscopy
0131--Level II Laparoscopy
0132--Level III Laparoscopy
0135--Level III Skin Repair
0136--Level IV Skin Repair
0137--Level V Skin Repair
0148--Level I Anal/Rectal Procedures
0149--Level III Anal/Rectal Procedures
0150--Level IV Anal/Rectal Procedures
0152--Level I Percutaneous Abdominal and Biliary Procedures
0153--Peritoneal and Abdominal Procedures
0154--Hernia/Hydrocele Procedures
0160--Level I Cystourethroscopy and other Genitourinary Procedures
0161--Level II Cystourethroscopy and other Genitourinary Procedures
0162--Level III Cystourethroscopy and other Genitourinary Procedures
0163--Level IV Cystourethroscopy and other Genitourinary Procedures
0166--Level I Urethral Procedures
0168--Level II Urethral Procedures
0169--Lithotripsy
0174--Level IV Laparoscopy
0181--Level II Male Genital Procedures
0183--Level I Male Genital Procedures
0184--Prostate Biopsy
0190--Level I Hysteroscopy
0192--Level IV Female Reproductive Proc
0193--Level V Female Reproductive Proc
0195--Level VI Female Reproductive Procedures
0202--Level VII Female Reproductive Procedures
0208--Laminotomies and Laminectomies
0220--Level I Nerve Procedures
0221--Level II Nerve Procedures
0224--Implantation of Catheter/Reservoir/Shunt
0227--Implantation of Drug Infusion Device
0229--Level II Endovascular Revascularization of the Lower Extremity
0233--Level III Anterior Segment Eye Procedures
0234--Level IV Anterior Segment Eye Procedures
0237--Level II Posterior Segment Eye Procedures
0238--Level I Repair and Plastic Eye Procedures
0239--Level II Repair and Plastic Eye Procedures
0240--Level III Repair and Plastic Eye Procedures
0241--Level IV Repair and Plastic Eye Procedures
0242--Level V Repair and Plastic Eye Procedures
0243--Strabismus/Muscle Procedures
0244--Corneal and Amniotic Membrane Transplant
0246--Cataract Procedures with IOL Insert
0249--Cataract Procedures without IOL Insert
0252--Level III ENT Procedures
0253--Level IV ENT Procedures
0254--Level V ENT Procedures
0255--Level II Anterior Segment Eye Procedures
0256--Level VI ENT Procedures
0259--Level VII ENT Procedures
0293--Level VI Anterior Segment Eye Procedures
0319--Level III Endovascular Revascularization of the Lower Extremity
0384--GI Procedures with Stents
0387--Level II Hysteroscopy
0415--Level II Endoscopy Lower Airway
0419--Level II Upper GI Procedures
0422--Level III Upper GI Procedures
0423--Level II Percutaneous Abdominal and Biliary Procedures
0425--Level II Arthroplasty or Implantation with Prosthesis
0427--Level II Tube or Catheter Changes or Repositioning
0428--Level III Sigmoidoscopy and Anoscopy
0429--Level V Cystourethroscopy and other Genitourinary Procedures
0434--Cardiac Defect Repair
0648--Level IV Breast Surgery
0651--Complex Interstitial Radiation Source Application
0653--Vascular Reconstruction/Fistula Repair with Device
0654--Level II Insertion/Replacement of Permanent Pacemaker
0655--Insertion/Replacement/Conversion of a Permanent Dual Chamber 
Pacemaker or Pacing

[[Page 75116]]

0656--Transcatheter Placement of Intracoronary Drug-Eluting Stents
0672--Level III Posterior Segment Eye Procedures
0673--Level V Anterior Segment Eye Procedures
0674--Prostate Cryoablation
0687--Revision/Removal of Neurostimulator Electrodes
0688--Revision/Removal of Neurostimulator Pulse Generator Receiver

Appendix C

Discussion of the Outpatient Data

    This Appendix provides additional detail on how we identified 
outpatient claims for observation services or a major procedure 
spanning 2 midnights or more for purposes of estimating the shift in 
outpatient cases.
    The comprehensive APC analysis that also formed the basis for 
the 2 midnight analysis was performed using 2011 OPPS claims of bill 
type 13x extracted from the Standard Analytic File processed through 
December 31, 2011 with service line charges converted to costs per 
the usual OPPS cost modeling logic. (A description of the cost 
modeling logic can be found in the claims accounting document for 
each year of OPPS rulemaking and is available on our Web site at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.) Similar conclusions regarding the -0.2 percent 
estimate can be drawn by analyzing the OPPS Limited Data Set rather 
than the Standard Analytic File. The CMS Web site at https://www.cms.gov/research-statistics-data-and-systems/files-for-order/limiteddatasets/HospitalOPPS.html provides information about 
ordering the OPPS Limited Data Set containing the outpatient 
hospital data. In order to facilitate a claims analysis using the 
claim from date and the claim through date a new field has been 
added to the OPPS Limited Data Set.
    Hospital OP claims do not readily distinguish between claims 
based on services provided while the beneficiary physically stayed 
at the hospital and claims where the beneficiary received recurring 
services on successive days while leaving the hospital between 
services. Since only continuous stays apply for this analysis, 
certain assumptions had to be made to indirectly estimate the body 
of claims for continuous stays. Claims were trimmed to only those 
whose full span of coverage (the difference of claim-through-date 
and claim-from-date) was less than 7 days. Claims with longer than a 
7 day span were excluded as unlikely to represent continuous 
overnight stays. Claims were then subset to those containing 
observation services or a significant procedure, as observation 
services are reported differently in those two subgroups. To further 
remove recurring services during this subsetting, claims that did 
not fall into one of the following were removed from the analysis:
     Claims containing G0378 (``Hospital observation per 
hr'') and a medical visit procedure code (status indicator of 
``V'');
     Claims containing G0379 (``Direct refer hospital 
observ''), considered to be ``medical claims;''
     Claims containing a significant OPPS procedure code 
(status indicator of ``S'' or ``T'') that received Medicare payment, 
considered to be ``surgical claims.''
    Next, the highest cost coded services on non-observation claims 
(those without G0379 or without G0378 and a medical visit procedure) 
were identified. Non-observation claims where the highest cost 
procedure was not a C-code (Temporary Hospital Outpatient PPS), a J-
code (non-orally administered medication and chemotherapy drugs), a 
significant OPPS procedure code (status indicator of ``S'' or 
``T''), or a medical visit procedure code (status indicator of 
``V'') were removed from the analysis. This removed non-observation 
claims where the highest cost service was not typical for a claim 
associated with a major procedure.
    Following these steps, a principal procedure representing the 
primary service driving the claim's overall utilization was 
identified for each remaining claim. For observation claims 
containing both G0379 and G0378 with a medical visit procedure, the 
principal procedure was identified as G0379 or G0378 depending on 
which code reports a higher line-item cost. Otherwise, observation 
claims were assigned a principal procedure of G0379 and G0378 
depending on whether G0379 or G0378 with a medical visit procedure 
were respectively reported.
    For non-observation claims, the principal procedure was 
identified as the claim's significant OPPS procedure code (status 
indicator of ``S'' or ``T'') with the highest line-item cost. Non-
observation claims where the earliest service date of the principal 
procedure occurred more than 5 days before or on the same date as 
the claim-through-date were removed from the analysis, as these were 
assumed to represent recurring services. Additionally, non-
observation claims were trimmed to those where the principal 
procedure occurs on only a single service date, thus removing any 
claim that contains major recurring services and ensuring that the 
stay is initiated with a single instance of the major procedure.
    To remove aberrant claims, each claim's non-observation total 
claim cost was then calculated by summing the line-item costs for 
all coded services and all OPPS packaged revenue centers on the 
claim. Each claim's span of coverage was also calculated as the 
number of days between the provision of the principal service and 
the claim's through-date. The geometric mean cost was calculated for 
each observation or non-observation principal procedure using the 
claims' total cost, and those claims with unreasonable costs (That 
is, claim costs above 100 times or below 1 percent of the principal 
procedure geometric mean cost) were trimmed from the analysis.
    For purposes of the 2 midnight analysis, we then further subset 
the data to APCs having a status indicator of ``T'' in order remove 
services which were not relevant for the 2 midnight analysis that 
is, to remove those services that were more likely to represent 
diagnostic services or minor procedures interjected into a series of 
recurring services, and were less likely to trigger a ``surgical'' 
episode in which a continuous stay followed the procedure. For 
similar reasons, our medical officers also removed some of the 
remaining APCs based on clinical judgment that those services were 
unlikely to be indicative of a continuous protracted hospital stay. 
The full list of OPPS status indicators and their definitions is 
published in the OPPS/ASC proposed and final rules each year, 
available on our Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html. The final list of major procedure APCs 
used in the development of the -0.2 percent estimate can be found in 
Appendix B.
    As described in section II.D of this notice, we have also been 
performing an analysis of the claims experience since the 
implementation of the 2-midnight policy. This analysis has used 
claims data from the OPPS Limited Data Set. We have also been 
examining similar data from our Integrated Data Repository (see 
https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/IDR/ for a description of the IDR). For the purpose 
of this analysis, we have used the following claim selection 
criteria: the third position of the provider number group was equal 
to ``0'' (short-term hospital) and the first 2 positions of the 
provider number were not equal to ``21'' (excludes Maryland 
hospitals.)
    We seek comment on the appropriate outpatient data source to use 
for the -0.2 percent estimate and any data trims and claims 
selection criteria that we should apply to the data.

Appendix D

Discussion of the Inpatient Data

    This Appendix provides additional detail on how we identified 
inpatient stays spanning less than 2 midnights for surgical MS-DRGs 
for purposes of estimating the shift in inpatient cases.
    The inpatient data used in the original -0.2 estimate was based 
on data from the CMS Integrated Data Repository (IDR) (see https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/IDR/ for a description of the IDR). The CMS Web site at 
http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ provides information about ordering the 
``MedPAR Limited Data Set (LDS)-Hospital (National)'' containing the 
publicly available inpatient hospital data. At the time the original 
-0.2 percent estimate was developed, we believed similar conclusions 
regarding the -0.2 percent estimate could be drawn using either the 
IDR or the publicly available inpatient data files. However, we did 
not verify this at the time.
    When we now compare the number of inpatient stays less than 2 
midnights for surgical MS-DRGs (excluding deaths and transfers) from 
the FY 2011 IDR data available to us at the time of the original -
0.2 estimate (claims processed through June of 2013) to the number 
from the FY 2011 MedPAR data (claims processed through March of 
2013), we get

[[Page 75117]]

approximately 360,000 stays from the IDR data and approximately 
380,000 stays from the MedPAR data. Further complicating a current 
analysis relative to the analysis performed at that time, when we 
examine the FY 2011 IDR data available to us now (claims processed 
through October 2015) compared to when the original -0.2 percent 
estimate was developed (claims processed through June 2013), we get 
approximately 340,000 stays instead of the originally estimated 
360,000 stays, which we suspect is at least partly driven by 
subsequent claim denials for these cases that have occurred since 
the data was examined for the original -0.2 percent estimate. 
Because the historical MedPAR data for a given fiscal year is not 
generally refreshed after it is created, unlike the IDR which is 
refreshed, there is no analogous number to the 340,000 for the FY 
2011 MedPAR.
    In determining the 380,000 number from the FY 2011 MedPAR, the 
following inpatient claim selection criteria and data trims were 
applied to the data. We selected FY 2011 MedPAR claims based on a FY 
2011 date of discharge where the National Claims History (NCH) claim 
type code was equal to ``60'' (inpatient hospital), the third 
position of the provider number group was equal to ``0'' (short-term 
hospital), the first 2 positions of the provider number were not 
equal to ``21'' (excludes Maryland hospitals), the destination 
discharge code was not equal to ``30'' (excludes still a patient), 
the special unit code was blank (excludes, for example, PPS exempt 
units), the GHO paid code was not equal to ``1'' (a group health 
organization has not paid the provider), the total charge amount was 
greater than 0, and the IME amount was not equal to the DRG price 
amount (indicating it was not a managed care claim).
    As described in section II.D of this notice, we have also been 
performing an analysis of the claims experience since the 
implementation of the 2-midnight policy. This analysis has used data 
from the publicly available MedPAR file and the IDR.
    We seek comment on the appropriate inpatient data source to use 
for the -0.2 percent estimate and any data trims and claims 
selection criteria that we should apply to the data.

[FR Doc. 2015-30486 Filed 11-30-15; 8:45 am]
BILLING CODE 4120-01-P