82 FR 37990 - 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 2018 Rates; Quality Reporting Requirements for Specific Providers; Medicare and Medicaid Electronic Health Record (EHR) Incentive Program Requirements for Eligible Hospitals, Critical Access Hospitals, and Eligible Professionals; Provider-Based Status of Indian Health Service and Tribal Facilities and Organizations; Costs Reporting and Provider Requirements; Agreement Termination Notices
DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services
Federal Register Volume 82, Issue 155 (August 14, 2017)
Page Range
37990-38589
FR Document
2017-16434
We are revising the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals to implement changes arising from our continuing experience with these systems for FY 2018. Some of these changes implement certain statutory provisions contained in the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013, the Improving Medicare Post-Acute Care Transformation Act of 2014, the Medicare Access and CHIP Reauthorization Act of 2015, the 21st Century Cures Act, and other legislation. We also are making changes relating to the provider-based status of Indian Health Service (IHS) and Tribal facilities and organizations and to the low-volume hospital payment adjustment for hospitals operated by the IHS or a Tribe. In addition, we are providing the market basket update that will apply to the rate- of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits for FY 2018. We are updating 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) for FY 2018. In addition, we are establishing new requirements or revising existing requirements for quality reporting by specific Medicare providers (acute care hospitals, PPS-exempt cancer hospitals, LTCHs, and inpatient psychiatric facilities). We also are establishing new requirements or revising existing requirements for eligible professionals (EPs), eligible hospitals, and critical access hospitals (CAHs) participating in the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs. We are updating policies relating to the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition (HAC) Reduction Program. We also are making changes relating to transparency of accrediting organization survey reports and plans of correction of providers and suppliers; electronic signature and electronic submission of the Certification and Settlement Summary page of the Medicare cost reports; and clarification of provider disposal of assets.
Federal Register, Volume 82 Issue 155 (Monday, August 14, 2017)
[Federal Register Volume 82, Number 155 (Monday, August 14, 2017)]
[Rules and Regulations]
[Pages 37990-38589]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2017-16434]
[[Page 37989]]
Vol. 82
Monday,
No. 155
August 14, 2017
Part II
Book 2 of 2 Books
Pages 37989-38590
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 405, 412, 413, et al.
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 2018 Rates; Quality
Reporting Requirements for Specific Providers; Medicare and Medicaid
Electronic Health Record (EHR) Incentive Program Requirements for
Eligible Hospitals, Critical Access Hospitals, and Eligible
Professionals; Provider-Based Status of Indian Health Service and
Tribal Facilities and Organizations; Costs Reporting and Provider
Requirements; Agreement Termination Notices; Final Rule
Federal Register / Vol. 82 , No. 155 / Monday, August 14, 2017 /
Rules and Regulations
[[Page 37990]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 405, 412, 413, 414, 416, 486, 488, 489, and 495
[CMS-1677-F]
RIN 0938-AS98
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 2018 Rates; Quality
Reporting Requirements for Specific Providers; Medicare and Medicaid
Electronic Health Record (EHR) Incentive Program Requirements for
Eligible Hospitals, Critical Access Hospitals, and Eligible
Professionals; Provider-Based Status of Indian Health Service and
Tribal Facilities and Organizations; Costs Reporting and Provider
Requirements; Agreement Termination Notices
AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: We are revising the Medicare hospital inpatient prospective
payment systems (IPPS) for operating and capital-related costs of acute
care hospitals to implement changes arising from our continuing
experience with these systems for FY 2018. Some of these changes
implement certain statutory provisions contained in the Pathway for
Sustainable Growth Rate (SGR) Reform Act of 2013, the Improving
Medicare Post-Acute Care Transformation Act of 2014, the Medicare
Access and CHIP Reauthorization Act of 2015, the 21st Century Cures
Act, and other legislation. We also are making changes relating to the
provider-based status of Indian Health Service (IHS) and Tribal
facilities and organizations and to the low-volume hospital payment
adjustment for hospitals operated by the IHS or a Tribe. In addition,
we are providing the market basket update that will apply to the rate-
of-increase limits for certain hospitals excluded from the IPPS that
are paid on a reasonable cost basis subject to these limits for FY
2018. We are updating 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) for FY
2018.
In addition, we are establishing new requirements or revising
existing requirements for quality reporting by specific Medicare
providers (acute care hospitals, PPS-exempt cancer hospitals, LTCHs,
and inpatient psychiatric facilities). We also are establishing new
requirements or revising existing requirements for eligible
professionals (EPs), eligible hospitals, and critical access hospitals
(CAHs) participating in the Medicare and Medicaid Electronic Health
Record (EHR) Incentive Programs. We are updating policies relating to
the Hospital Value-Based Purchasing (VBP) Program, the Hospital
Readmissions Reduction Program, and the Hospital-Acquired Condition
(HAC) Reduction Program.
We also are making changes relating to transparency of accrediting
organization survey reports and plans of correction of providers and
suppliers; electronic signature and electronic submission of the
Certification and Settlement Summary page of the Medicare cost reports;
and clarification of provider disposal of assets.
DATES: This final rule is effective on October 1, 2017.
FOR FURTHER INFORMATION CONTACT:
Donald Thompson, (410) 786-4487, and Michele Hudson, (410) 786-
4487, Operating Prospective Payment, MS-DRGs, Wage Index, New Medical
Service and Technology Add-On Payments, Hospital Geographic
Reclassifications, Graduate Medical Education, Capital Prospective
Payment, Excluded Hospitals, Sole Community Hospitals, Medicare
Disproportionate Share Hospital (DSH) Payment Adjustment, Medicare-
Dependent Small Rural Hospital (MDH) Program, and Low-Volume Hospital
Payment Adjustment Issues.
Michele Hudson, (410) 786-4487, Mark Luxton, (410) 786-4530, and
Emily Lipkin, (410) 786-3633, Long-Term Care Hospital Prospective
Payment System and MS-LTC-DRG Relative Weights Issues.
Mollie Knight, (410) 786-7948, and Bridget Dickensheets, (410) 786-
8670, Rebasing and Revising the Hospital Market Basket Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Program Issues.
Jeris Smith, (410) 786-0110, Frontier Community Health Integration
Project Demonstration Issues.
Lein Han, (617) 879-0129, Hospital Readmissions Reduction Program--
Readmission Measures for Hospitals Issues.
James Poyer, (410) 786-2261, Hospital Readmissions Reduction
Program--Administration Issues.
Elizabeth Bainger, (410) 786-0529, Hospital-Acquired Condition
Reduction Program Issues.
Joseph Clift, (410) 786-4165, Hospital-Acquired Condition Reduction
Program--Measures Issues.
Grace Im, (410) 786-0700, and James Poyer, (410) 786-2261, Hospital
Inpatient Quality Reporting and Hospital Value-Based Purchasing--
Program Administration, Validation, and Reconsideration Issues.
Reena Duseja, (410) 786-1999, and Cindy Tourison, (410) 786-1093,
Hospital Inpatient Quality Reporting--Measures Issues Except Hospital
Consumer Assessment of Healthcare Providers and Systems Issues; and
Readmission Measures for Hospitals Issues.
Kim Spaulding Bush, (410) 786-3232, Hospital Value-Based Purchasing
Efficiency Measures Issues.
Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality
Reporting--Hospital Consumer Assessment of Healthcare Providers and
Systems Measures Issues.
James Poyer, (410) 786-2261, PPS-Exempt Cancer Hospital Quality
Reporting Issues.
Mary Pratt, (410) 786-6867, Long-Term Care Hospital Quality Data
Reporting Issues.
Jeffrey Buck, (410) 786-0407, and Cindy, Tourison (410) 786-1093,
Inpatient Psychiatric Facilities Quality Data Reporting Issues.
Lisa Marie Gomez, (410) 786-1175, EHR Incentive Program Clinical
Quality Measure Related Issues.
Kathleen Johnson, (410) 786-3295, and Steven Johnson (410) 786-
3332, EHR Incentive Program Nonclinical Quality Measure Related Issues.
Caecilia Blondiaux, (410), 786-2190, and Ariadne Saklas, (410) 786-
3322, Changes in Notice of Termination of Medicare Providers and
Suppliers Issues.
Monda Shaver, (410) 786-3410, and Patricia Chmielewski, (410) 786-
6899, Accrediting Organizations Survey Reporting Transparency Issues.
Kellie Shannon, (410) 786-0416, Medicare Cost Reporting and
Valuation of Assets Issues.
SUPPLEMENTARY INFORMATION:
Electronic Access
This Federal Register document is available from the Federal
Register online database through Federal Digital System (FDsys), a
service of the U.S. Government Printing Office. This database can be
accessed via the Internet at: http://www.thefederalregister.org/fdsys.
[[Page 37991]]
Tables Available Only Through the Internet on the CMS Web Site
In the past, a majority of the tables referred to throughout this
preamble and in the Addendum to the proposed rule and the final rule
were published in the Federal Register as part of the annual proposed
and final rules. However, beginning in FY 2012, some of the IPPS tables
and LTCH PPS tables are no longer published in the Federal Register.
Instead, these tables generally will be available only through the
Internet. The IPPS tables for this final rule are available through the
Internet on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on
the link on the left side of the screen titled, ``FY 2018 IPPS Final
Rule Home Page'' or ``Acute Inpatient--Files for Download''. The LTCH
PPS tables for this FY 2018 final rule are available through the
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the
list item for Regulation Number CMS-1677-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 final rule.
Readers who experience any problems accessing any of the tables
that are posted on the CMS Web sites identified above should contact
Michael Treitel at (410) 786-4552.
Acronyms
3M 3M Health Information System
AAMC Association of American Medical Colleges
ACGME Accreditation Council for Graduate Medical Education
ACoS American College of Surgeons
AHA American Hospital Association
AHIC American Health Information Community
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
AJCC American Joint Committee on Cancer
ALOS Average length of stay
ALTHA Acute Long-Term Hospital Association
AMA American Medical Association
AMGA American Medical Group Association
AMI Acute myocardial infarction
AO Accrediting Organizations
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis Related Group System
APRN Advanced practice registered nurse
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASCA Administrative Simplification Compliance Act of 2002, Public
Law 107-105
ASITN American Society of Interventional and Therapeutic
Neuroradiology
ASPE Assistant Secretary for Planning and Evaluation (DHHS)
ATRA American Taxpayer Relief Act of 2012, Public Law 112-240
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Public
Law 106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Benefits Improvement and Protection Act of 2000,
Public Law 106-554
BLS Bureau of Labor Statistics
CABG Coronary artery bypass graft [surgery]
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation
[Instrument]
CART CMS Abstraction & Reporting Tool
CAUTI Catheter-associated urinary tract infection
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CDC Centers for Disease Control and Prevention
CEHRT Certified electronic health record technology
CERT Comprehensive error rate testing
CDI Clostridium difficile [C. difficile] infection
CFR Code of Federal Regulations
CLABSI Central line-associated bloodstream infection
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law
99-272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
COPD Chronic obstructive pulmonary disease
CPI Consumer price index
CQL Clinical quality language
CQM Clinical quality measure
CY Calendar year
DACA Data Accuracy and Completeness Acknowledgement
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
EBRT External beam radiotherapy
ECE Extraordinary circumstances exemption
ECI Employment cost index
eCQM Electronic clinical quality measure
EDB [Medicare] Enrollment Database
EHR Electronic health record
EMR Electronic medical record
EMTALA Emergency Medical Treatment and Labor Act of 1986, Public Law
99-272
EP Eligible professional
FAH Federation of American Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FPL Federal poverty line
FQHC Federally qualified health center
FR Federal Register
FTE Full-time equivalent
FY Fiscal year
GAF Geographic Adjustment Factor
GME Graduate medical education
HAC Hospital-acquired condition
HAI Healthcare-associated infection
HCAHPS Hospital Consumer Assessment of Healthcare Providers and
Systems
HCFA Health Care Financing Administration
HCO High-cost outlier
HCP Healthcare personnel
HCRIS Hospital Cost Report Information System
HF Heart failure
HHA Home health agency
HHS Department of Health and Human Services
HICAN Health Insurance Claims Account Number
HIPAA Health Insurance Portability and Accountability Act of 1996,
Public Law 104-191
HIPC Health Information Policy Council
HIS Health information system
HIT Health information technology
HMO Health maintenance organization
HPMP Hospital Payment Monitoring Program
HSA Health savings account
HSCRC [Maryland] Health Services Cost Review Commission
HSRV Hospital-specific relative value
HSRVcc Hospital-specific relative value cost center
HQA Hospital Quality Alliance
HQI Hospital Quality Initiative
HwH Hospital-within-hospital
HWR Hospital-wide readmission
ICD-9-CM International Classification of Diseases, Ninth Revision,
Clinical Modification
ICD-10-CM International Classification of Diseases, Tenth Revision,
Clinical Modification
ICD-10-PCS International Classification of Diseases, Tenth Revision,
Procedure Coding System
ICR Information collection requirement
ICU Intensive care unit
IGI IHS Global, Inc.
IHS Indian Health Service
IME Indirect medical education
IMPACT Act Improving Medicare Post-Acute Care Transformation Act of
2014, Public Law 113-185
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPFQR Inpatient Psychiatric Facility Quality Reporting [Program]
IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
IQR [Hospital] Inpatient Quality Reporting
LAMCs Large area metropolitan counties
LDS Limited Data Set
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
[[Page 37992]]
LTCH Long-term care hospital
LTCH QRP Long-Term Care Hospital Quality Reporting Program
MA Medicare Advantage
MAC Medicare Administrative Contractor
MACRA Medicare Access and CHIP Reauthorization Act of 2015, Public
Law 114-10
MAP Measure Application Partnership
MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
MDC Major diagnostic category
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare Provider Analysis and Review File
MEI Medicare Economic Index
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act, Division B of
the Tax Relief and Health Care Act of 2006, Public Law 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008,
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Public Law 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public
Law 110-173
MOON Medicare Outpatient Observation Notice
MRHFP Medicare Rural Hospital Flexibility Program
MRSA Methicillin-resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
MU Meaningful Use [EHR Incentive Program]
MUC Measure under consideration
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NHSN National Healthcare Safety Network
NOP Notice of Participation
NOTICE Act Notice of Observation Treatment and Implication for Care
Eligibility Act, Public Law 114-42
NQF National Quality Forum
NQS National Quality Strategy
NTIS National Technical Information Service
NTTAA National Technology Transfer and Advancement Act of 1991,
Public Law 104-113
NUBC National Uniform Billing Code
NVHRI National Voluntary Hospital Reporting Initiative
OACT [CMS'] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1986, Public Law 99-509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB [Executive] Office of Management and Budget
ONC Office of the National Coordinator for Health Information
Technology
OPM [U.S.] Office of Personnel Management
OQR [Hospital] Outpatient Quality Reporting
O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PAC Post-acute care
PAMA Protecting Access to Medicare Act of 2014, Public Law 113-93
PCH PPS-exempt cancer hospital
PCHQR PPS-exempt cancer hospital quality reporting
PMSAs Primary metropolitan statistical areas
POA Present on admission
PPI Producer price index
PPR Potentially Preventable Readmissions
PPS Prospective payment system
PRA Paperwork Reduction Act
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PRTFs Psychiatric residential treatment facilities
PSF Provider-Specific File
PSI Patient safety indicator
PS&R Provider Statistical and Reimbursement [System]
PQRS Physician Quality Reporting System
PUF Public use file
QDM Quality data model
QIES ASAP Quality Improvement Evaluation System Assessment
Submission and Processing
QIG Quality Improvement Group [CMS]
QIO Quality Improvement Organization
QM Quality measure
QPP Quality Payment Program
QRDA Quality Reporting Document Architecture
RFA Regulatory Flexibility Act, Public Law 96-354
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RIM Reference information model
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RSMR Risk-standard mortality rate
RSP Risk-standardized payment
RSSR Risk-standard readmission rate
RTI Research Triangle Institute, International
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SCHIP State Child Health Insurance Program
SCIP Surgical Care Improvement Project
SFY State fiscal year
SGR Sustainable Growth Rate
SIC Standard Industrial Classification
SIR Standardized infection ratio
SNF Skilled nursing facility
SNF QRP Skilled Nursing Facility Quality Reporting Program
SNF VBP Skilled Nursing Facility Value-Based Purchasing
SOCs Standard occupational classifications
SOM State Operations Manual
SRR Standardized risk ratio
SSI Surgical site infection
SSI Supplemental Security Income
SSO Short-stay outlier
SUD Substance use disorder
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law
97-248
TEP Technical expert panel
THA/TKA Total hip arthroplasty/total knee arthroplasty
TMA TMA [Transitional Medical Assistance], Abstinence Education, and
QI [Qualifying Individuals] Programs Extension Act of 2007, Public
Law 110-90
TPS Total Performance Score
UHDDS Uniform hospital discharge data set
UR Utilization review
VBP [Hospital] Value Based Purchasing [Program]
VTE Venous thromboembolism
Table of Contents
I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
2. Summary of the Major Provisions
3. Summary of Costs and Benefits
B. Summary
1. Acute Care Hospital Inpatient Prospective Payment System
(IPPS)
2. Hospitals and Hospital Units Excluded from the IPPS
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
4. Critical Access Hospitals (CAHs)
5. Payments for Graduate Medical Education (GME)
C. Summary of Provisions of Recent Legislation Implemented in
This Final Rule
1. The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-
240), the Medicare Access and CHIP Reauthorization Act of 2015
(MACRA) (Pub. L. 114-10), and the 21st Century Cures Act (Pub. L.
114-255)
2. Pathway for SGR Reform Act of 2013 (Pub. L. 113-67)
3. Improving Medicare Post-Acute Care Transformation Act of 2014
(IMPACT Act) (Pub. L. 113-185)
4. The Medicare Access and CHIP Reauthorization Act of 2015
(MACRA) (Pub. L. 114-10)
5. The 21st Century Cures Act (Pub. L. 114-255)
D. Issuance of Notice of Proposed Rulemaking
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights
A. Background
B. MS-DRG Reclassifications
C. Adoption of the MS-DRGs in FY 2008
D. FY 2018 MS-DRG Documentation and Coding Adjustment
[[Page 37993]]
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
2. Recoupment or Repayment Adjustment Authorized by Section 631
of the American Taxpayer Relief Act of 2012 (ATRA)
3. Adjustment for FY 2018 Required Under Section 414 of Public
Law 114-10 (MACRA) and Section 15005 of Public Law 114-255
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
2. Discussion of Policy for FY 2018
F. Changes to Specific MS-DRG Classifications
1. Discussion of Changes to Coding System and Basis for FY 2018
MS-DRG Updates
a. Conversion of MS-DRGs to the International Classification of
Diseases, 10th Revision (ICD-10)
b. Basis for FY 2018 MS-DRG Updates
2. MDC 1 (Diseases and Disorders of the Nervous System)
a. Functional Quadriplegia
b. Responsive Neurostimulator (RNS(copyright)) System
c. Precerebral Occlusion or Transient Ischemic Attack With
Thrombolytic
3. MDC 2 (Diseases and Disorders of the Eye: Swallowing Eye
Drops (Tetrahydrozoline))
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Percutaneous Cardiovascular Procedures and Insertion of a
Radioactive Element
b. Modification of the Titles for MS-DRG 246 (Percutaneous
Cardiovascular Procedures With Drug-Eluting Stent With MCC or 4+
Vessels or Stents) and MS-DRG 248 (Percutaneous Cardiovascular
Procedures With Non-Drug-Eluting Stent With MCC or 4+ Vessels or
Stents)
c. Transcatheter Aortic Valve Replacement (TAVR) and Left Atrial
Appendage Closure (LAAC)
d. Percutaneous Mitral Valve Replacement Procedures
e. Percutaneous Tricuspid Valve Repair
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System
and Connective Tissue)
a. Total Ankle Replacement (TAR) Procedures
b. Revision of Total Ankle Replacement (TAR) Procedures
c. Magnetic Controlled Growth Rods (MAGEC[supreg] System)
d. Combined Anterior/Posterior Spinal Fusion
6. MDC 14 (Pregnancy, Childbirth and the Puerperium)
a. Vaginal Delivery and Complicating Diagnoses
b. MS-DRG 998 (Principal Diagnosis Invalid as Discharge
Diagnosis)
c. MS-DRG 782 (Other Antepartum Diagnoses Without Medical
Complications)
d. Shock During or Following Labor and Delivery
7. MDC 15 (Newborns and Other Neonates with Conditions
Originating in Perinatal Period): Observation and Evaluation of
Newborn
8. MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs):
Complication Codes
9. MDC 23 (Factors Influencing Health Status and Other Contacts
With Health Services): Updates to MS-DRGs 945 and 946
(Rehabilitation With CC/MCC and Without CC/MCC, Respectively)
10. Changes to the Medicare Code Editor (MCE)
a. Age Conflict Edit
b. Sex Conflict Edit
c. Non-Covered Procedure Edit
d. Unacceptable Principal Diagnosis Edit
e. Future Enhancement
11. Changes to Surgical Hierarchies
12. Changes to the MS-DRG Diagnosis Codes for FY 2018
a. Background of the CC List and the CC Exclusions List
b. Additions and Deletions to the Diagnosis Code Severity Levels
for FY 2018
c. Principal Diagnosis Is Its Own CC or MCC
d. CC Exclusions List for FY 2018
13. Comprehensive Review of CC List for FY 2019
14. Review of Procedure Codes in MS DRGs 981 Through 983; 984
Through 986; and 987 Through 989
a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-
DRGs 987 Through 989 Into MDCs
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
15. Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
16. Replaced Devices Offered Without Cost or With a Credit
a. Background
b. Changes for FY 2018
17. Other Policy Changes: Other Operating Room (O.R.) and Non-
O.R. Issues
a. O.R. Procedures to Non-O.R. Procedures
b. Revision of Neurostimulator Generator
c. External Repair of Hymen
d. Non-O.R. Procedures in MDC 17 (Myeloproliferative Diseases
and Disorders Poorly Differentiated Neoplasms)
G. Recalibration of the FY 2018 MS-DRG Relative Weights
1. Data Sources for Developing the Relative Weights
2. Methodology for Calculation of the Relative Weights
3. Development of National Average CCRs
H. Add-On Payments for New Services and Technologies for FY 2018
1. Background
2. Public Input Before Publication of a Notice of Proposed
Rulemaking on Add-On Payments
3. ICD-10-PCS Section ``X'' Codes for Certain New Medical
Services and Technologies
4. Revision of Reference to an ICD-9-CM Code in Sec.
412.87(b)(2) of the Regulations
5. FY 2018 Status of Technologies Approved for FY 2017 Add-On
Payments
a. CardioMEMSTM HF (Heart Failure) Monitoring System
b. Defitelio[supreg] (Defibrotide)
c. GORE[supreg] EXCLUDER[supreg] Iliac Branch Endoprosthesis
(IBE)
d. Idarucizumab
e. Lutonix[supreg] Drug Coated Balloon PTA Catheter and
In.PACTTM AdmiralTM Paclitaxel Coated
Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter
f. MAGEC[supreg] Spinal Bracing and Distraction System
(MAGEC[supreg] Spine)
g. VistogardTM (Uridine Triacetate)
h. Blinatumomab (BLINCYTOTM Trade Brand)
6. FY 2018 Applications for New Technology Add-On Payments
a. Bezlotoxumab (ZINPLAVATM)
b. EDWARDS INTUITY EliteTM Valve System (INTUITY) and
Liva Nova Perceval Valve (Perceval)
c. Ustekinumab (Stelara[supreg])
III. Changes to the Hospital Wage Index for Acute Care Hospitals
A. Background
1. Legislative Authority
2. Core-Based Statistical Areas (CBSAs) for the FY 2018 Hospital
Wage Index
3. Codes for Constituent Counties in CBSAs
B. Worksheet S-3 Wage Data for the FY 2018 Wage Index
1. Included Categories of Costs
2. Excluded Categories of Costs
3. Use of Wage Index Data by Suppliers and Providers Other Than
Acute Care Hospitals Under the IPPS
C. Verification of Worksheet S-3 Wage Data
D. Method for Computing the FY 2018 Unadjusted Wage Index
1. Methodology for FY 2018
2. Clarification of Other Wage Related Costs in the Wage Index
E. Occupational Mix Adjustment to the FY 2018 Wage Index
1. Use of 2013 Occupational Mix Survey for the FY 2018 Wage
Index
2. Use of the 2016 Medicare Wage Index Occupational Mix Survey
for the FY 2019 Wage Index
3. Calculation of the Occupational Mix Adjustment for FY 2018
F. Analysis and Implementation of the Occupational Mix
Adjustment and the FY 2018 Occupational Mix Adjusted Wage Index
G. Application of the Rural, Imputed, and Frontier Floors
1. Rural Floor
2. Expiration of the Imputed Floor Policy
3. State Frontier Floor for FY 2018
H. FY 2018 Wage Index Tables
I. Revisions to the Wage Index Based on Hospital Redesignations
and Reclassifications
1. General Policies and Effects of Reclassification and
Redesignation
2. MGCRB Reclassification and Redesignation Issues for FY 2018
a. FY 2018 Reclassification Requirements and Approvals
b. Extension of PRA Information Collection Requirement Approval
for MGCRB Applications
c. Deadline for Submittal of Documentation of Sole Community
Hospital (SCH) and Rural Referral Center (RRC) Classification Status
to the MGCRB
[[Page 37994]]
d. Clarification of Special Rules for SCHs and RRCs
Reclassifying to Geographic Home Area
3. Redesignations Under Section 1886(d)(8)(B) of the Act
4. Changes to the 45-Day Notification Rules
J. Out-Migration Adjustment Based on Commuting Patterns of
Hospital Employees
K. Reclassification From Urban to Rural Under Section
1886(d)(8)(E) of the Act Implemented at 42 CFR 412.103
L. Clarification of Application Deadline for Rural Referral
Center (RRC) Classification
M. Process for Requests for Wage Index Data Corrections
1. Process for Hospitals to Accept Wage Index Data Corrections
2. Process for Wage Index Data Corrections by CMS After the
January Public Use File (PUF)
N. Labor Market Share for the FY 2018 Wage Index
IV. Rebasing and Revising of the Hospital Market Baskets for Acute
Care Hospitals
A. Background
B. Rebasing and Revising the IPPS Market Basket
1. Development of Cost Categories and Weights
a. Use of Medicare Cost Report Data
b. Final Major Cost Category Computation
c. Derivation of the Detailed Cost Weights
2. Selection of Price Proxies
3. Labor-Related Share
C. Market Basket for Certain Hospitals Presently Excluded From
the IPPS
D. Rebasing and Revising the Capital Input Price Index (CIPI)
V. Other Decisions and Changes to the IPPS for Operating Costs
A. Changes to MS-DRGs Subject to Postacute Care Transfer and MS-
DRG Special Payment Policies
B. Changes in the Inpatient Hospital Updates for FY 2018 (Sec.
412.64(d))
1. FY 2018 Inpatient Hospital Update
2. FY 2018 Puerto Rico Hospital Update
C. Change to Volume Decrease Adjustment for Sole Community
Hospitals (SCHs) and Medicare-Dependent, Small Rural Hospitals
(MDHs) (Sec. 412.92)
1. Background
2. Changes to the Volume Decrease Adjustment Calculation
Methodology for SCHs
D. Rural Referral Centers (RRCs): Annual Updates to Case-Mix
Index (CMI) and Discharge Criteria (Sec. 412.96)
1. Case-Mix Index (CMI)
2. Discharges
E. Payment Adjustment for Low-Volume Hospitals (Sec. 412.101)
1. Expiration of Temporary Changes to Low-Volume Hospital
Payment Policy
2. Background
3. Payment Adjustment for FY 2018 and Subsequent Fiscal Years
4. Parallel Low-Volume Hospital Payment Adjustment Regarding
Hospitals Operated by the Indian Health Service (IHS) or a Tribe
F. Indirect Medical Education (IME) Payment Adjustment (Sec.
412.105)
G. Payment Adjustment for Medicare Disproportionate Share
Hospitals (DSHs) for FY 2018 (Sec. 412.106)
1. General Discussion
2. Eligibility for Empirically Justified Medicare DSH Payments
and Uncompensated Care Payments
3. Empirically Justified Medicare DSH Payments
4. Uncompensated Care Payments
a. Calculation of Factor 1 for FY 2018
b. Calculation of Factor 2 for FY 2018
(1) Background
(2) Methodology for Calculation of Factor 2 for FY 2018
c. Calculation of Factor 3 for FY 2018
(1) Background
(2) Data Source for FY 2018
(3) Time Period for Calculating Factor 3 for FY 2018, Including
Methodology for Incorporating Worksheet S-10 Data
(4) Methodological Considerations for Calculating Factor 3
(5) Methodological Considerations for Incorporating Worksheet S-
10 Data
H. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.
412.108)
1. Background for the MDH Program
a. Expiration of the MDH Program
I. Hospital Readmissions Reduction Program: Updates and Changes
(Sec. Sec. 412.150 Through 412.154)
1. Statutory Basis for the Hospital Readmissions Reduction
Program
2. Regulatory Background
3. Maintenance of Technical Specifications for Quality Measures
4. Policies for the Hospital Readmissions Reduction Program
5. Applicable Period for FY 2018
6. Calculation of Aggregate Payments for Excess Readmissions for
FY 2018
7. Background and Current Payment Adjustment Methodology
a. Background
b. Current Payment Adjustment Methodology
8. Provisions for the Payment Adjustment Methodology for FY
2019: Methodology for Calculating the Proportion of Dual-Eligible
Patients
a. Background
b. Data Sources Used To Determine Dual Eligibility
c. Data Period Used To Define Dual Eligibility
9. Provisions for the Payment Adjustment Methodology for FY
2019: Methodology for Assigning Hospitals to Peer Groups
10. Provisions for the Payment Adjustment Methodology for FY
2019: Payment Adjustment Formula Calculation Methodology
a. Background
b. Proposals
c. Analysis
11. Accounting for Social Risk Factors in the Hospital
Readmissions Reduction Program
12. Extraordinary Circumstances Exceptions (ECE) Policy
13. Timeline for Public Reporting of Excess Readmission Ratios
on Hospital Compare for the FY 2018 Payment Determination
J. Hospital Value-Based Purchasing (VBP) Program: Policy Changes
1. Background
a. Statutory Background and Overview of Past Program Years
b. FY 2018 Program Year Payment Details
2. Accounting for Social Risk Factors in the Hospital VBP
Program
3. Retention and Removal of Quality Measures for the FY 2019
Program Year
a. Retention of Previously Adopted Hospital VBP Program Measures
b. Removal of the PSI 90 Measure
c. Summary of Previously Adopted Measures and Measure for
Removal for the FY 2019 and FY 2020 Program Years
4. New Measures for the FY 2022 Program Year, FY 2023 Program
Year, and Subsequent Years
a. New Measure for the FY 2022 Program Year and Subsequent
Years: Hospital-Level, Risk-Standardized Payment Associated with a
30-Day Episode-of-Care for Pneumonia (PN Payment)
b. New Measure for the FY 2023 Program Year and Subsequent
Years: Patient Safety and Adverse Events (Composite) (NQF #0531)
5. Previously Adopted and Baseline and Performance Periods
a. Background
b. Person and Community Engagement Domain
c. Efficiency and Cost Reduction Domain
d. Safety Domain
e. Clinical Care Domain
f. Summary of Previously Adopted and Newly Finalized Baseline
and Performance Periods for the FY 2019 Through FY 2023 Program
Years
6. Performance Standards for the Hospital VBP Program
a. Background
b. Previously Adopted and Newly Finalized Performance Standards
for the FY 2020 Program Year
c. Previously Adopted Performance Standards for Certain Measures
for the FY 2021 Program Year
d. Previously Adopted and Newly Finalized Performance Standards
for Certain Measures for the FY 2022 Program Year
e. Performance Standards for Certain Measures for the FY 2023
Program Year
7. Scoring Methodology and Data Requirements for the FY 2019
Program Year and Subsequent Years
a. Domain Weighting for the FY 2020 Program Year and Subsequent
Years for Hospitals That Receive a Score on All Domains
b. Domain Weighting for the FY 2019 Program Year and Subsequent
Years for Hospitals Receiving Scores on Fewer than Four Domains
c. Minimum Numbers of Cases for Hospital VBP Program Measures
for the FY 2019 Program Year and Subsequent Years
d. Weighting Measures Within the Efficiency and Cost Reduction
Domain
K. Changes to the Hospital-Acquired Condition (HAC) Reduction
Program
1. Background
2. Implementation of the HAC Reduction Program for FY 2018
3. Data Collection Time Periods for the FY 2020 HAC Reduction
Program
[[Page 37995]]
4. Request for Comments on Additional Measures for Potential
Future Adoption
5. Accounting for Social Risk Factors in the HAC Reduction
Program
6. Request for Comments on Inclusion on Disability and Medical
Complexity for CDC NHSN Measures
7. Extraordinary Circumstances Exceptions (ECE) Policy for the
HAC Reduction Program
8. Maintenance of Technical Specifications for Quality Measures
L. Rural Community Hospital Demonstration Program
1. Introduction
2. Background
3. Provisions of the 21st Century Cures Act (Pub. L. 114-255)
and Finalized Policies for Implementation
a. Statutory Provisions
b. Terms of Continuation for Previously Participating Hospitals
c. Solicitation for Additional Participants
4. Budget Neutrality
a. Statutory Budget Neutrality Requirement
b. Methodology Used in Previous Final Rules
c. Budget Neutrality Methodology for Extension Period Authorized
by the 21st Century Cures Act (Pub. L. 114-255)
d. Finalized Budget Neutrality Approach
e. Reconciling Actual and Estimated Costs of the Demonstration
for Previous Years (2011, 2012, and 2013)
M. Adjustment to IPPS Rates Resulting From the 2-Midnight Policy
for FY 2018
N. Provider-Based Status of Indian Health Service and Tribal
Facilities and Organizations
VI. Changes to the IPPS for Capital-Related Costs
A. Overview
B. Additional Provisions
1. Exception Payments
2. New Hospitals
3. Payments for Hospitals Located in Puerto Rico
C. Annual Update for FY 2018
VII. Changes for Hospitals Excluded From the IPPS
A. Rate-of-Increase in Payments to Excluded Hospitals for FY
2018
B. Revisions to Hospital-Within-Hospital Regulations
C. Report of Adjustment (Exceptions) Payments
D. Critical Access Hospitals (CAHs)
1. Background
2. Frontier Community Health Integration Project (FCHIP)
Demonstration
3. Physician Certification Requirement for Payment of Inpatient
CAH Services Under Medicare Part A
a. Background
b. Notice Regarding Changes to Instructions for the Review of
the CAH 96-Hour Certification Requirement
VIII. Changes to the Long-Term Care Hospital Prospective Payment
System (LTCH PPS) for FY 2018
A. Background of the LTCH PPS
1. Legislative and Regulatory Authority
2. Criteria for Classification as an LTCH
a. Classification as an LTCH
b. Hospitals Excluded From the LTCH PPS
3. Limitation on Charges to Beneficiaries
4. Administrative Simplification Compliance Act (ASCA) and
Health Insurance Portability and Accountability Act (HIPAA)
Compliance
B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-
LTC-DRG) Classifications and Relative Weights for FY 2018
1. Background
2. Patient Classifications Into MS-LTC-DRGs
a. Background
b. Changes to the MS-LTC-DRGs for FY 2018
3. Development of the FY 2018 MS-LTC-DRG Relative Weights
a. General Overview of the Development of the MS-LTC-DRG
Relative Weights
b. Development of the MS-LTC-DRG Relative Weights for FY 2018
c. Data
d. Hospital-Specific Relative Value (HSRV) Methodology
e. Treatment of Severity Levels in Developing the MS-LTC-DRG
Relative Weights
f. Low-Volume MS-LTC-DRGs
g. Steps for Determining the FY 2018 MS-LTC-DRG Relative Weights
C. Changes to the LTCH PPS Payment Rates and Other Changes to
the LTCH PPS for FY 2018
1. Overview of Development of the LTCH PPS Standard Federal
Payment Rates
2. FY 2018 LTCH PPS Standard Federal Payment Rate Annual Market
Basket Update
a. Overview
b. Annual Update to the LTCH PPS Standard Federal Payment Rate
for FY 2018
c. Adjustment to the LTCH PPS Standard Federal Payment Rate
under the Long-Term Care Hospital Quality Reporting Program (LTCH
QRP)
d. Annual Update under the LTCH PPS for FY 2018
D. Changes to the Short-Stay Outlier Adjustment Policy (Sec.
412.529)
E. Temporary Exception to the Site Neutral Payment Rate for
Certain Spinal Cord Specialty Hospitals
F. Temporary Exception to the Site Neutral Payment Rate for
Certain Discharges With Severe Wounds From Certain LTCHs
G. Moratorium and Regulatory Delay of the Full Implementation of
the ``25-Percent'' Threshold Policy'' Adjustment (Sec. 412.538)
H. Revision to Moratorium on Increasing Beds in Existing LTCH or
LTCH Satellite Locations Under the 21st Century Cures Act (Pub. L.
114-255) (Sec. 412.23)
I. Changes to the Average Length of Stay Criterion Under the
21st Century Cures Act (Pub. L. 114-255)
J. Change in Medicare Classification for Certain Hospitals
(Sec. 412.23)
IX. Quality Data Reporting Requirements for Specific Providers and
Suppliers
A. Hospital Inpatient Quality Reporting (IQR) Program
1. Background
a. History of the Hospital IQR Program
b. Maintenance of Technical Specifications for Quality Measures
c. Public Display of Quality Measures
d. Accounting for Social Risk Factors in the Hospital IQR
Program
2. Retention of Previously Adopted Hospital IQR Program Measures
for Subsequent Payment Determinations
3. Removal and Suspension of Previously Adopted Hospital IQR
Program Measures
4. Previously Adopted Hospital IQR Program Measures for the FY
2019 Payment Determination and Subsequent Years
5. Considerations in Expanding and Updating of Quality Measures
6. Refinements to Existing Measures in the Hospital IQR Program
for the FY 2020 Payment Determination and Subsequent Years
a. Refining Hospital Consumer Assessment of Healthcare Providers
and Systems (HCAHPS) Survey (NQF #0166) for the FY 2020 Payment
Determination and Subsequent Years
b. Refinement of the Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) following Acute Ischemic Stroke
Hospitalization Measure for the FY 2023 Payment Determination and
Subsequent Years
c. Summary of Previously Adopted Hospital IQR Program Measures
for the FY 2020 Payment Determination and Subsequent Years
7. Voluntary Hybrid Hospital-Wide Readmission Measure With
Claims and Electronic Health Record Data (NQF #2879)
a. Background
b. Voluntary Reporting of Electronic Health Record Data for the
Hybrid HWR Measure (NQF #2879)
c. Data Sources
d. Outcome
e. Cohort
f. Inclusion and Exclusion Criteria
g. Risk-Adjustment
h. Calculating the Risk-Standardized Readmission Rate (RSRR)
i. Data Submission and Reporting Requirements
j. Confidential Hospital-Specific Reports
8. Changes to Policies on Reporting of eCQMs
a. Background
b. Modifications to the eCQM Reporting Requirements for the
Hospital IQR Program for the CY 2017 Reporting Period/FY 2019
Payment Determination
c. Modifications to the eCQM Reporting Requirements for the
Hospital IQR Program for the CY 2018 Reporting Period/FY 2020
Payment Determination
9. Possible New Quality Measures and Measure Topics for Future
Years
a. Potential Inclusion of the Quality of Informed Consent
Documents for Hospital-Performed, Elective Procedures Measure
b. Potential Inclusion of Four End-of-Life (EOL) Measures for
Cancer Patients
c. Potential Inclusion of Two Nurse Staffing Measures
d. Potential Inclusion of Additional Electronic Clinical Quality
Measures (eCQMs) in the Hospital IQR and Medicare and Medicaid EHR
Incentive Programs
[[Page 37996]]
10. Form, Manner, and Timing of Quality Data Submission
a. Background
b. Procedural Requirements for the FY 2020 Payment Determination
and Subsequent Years
c. Data Submission Requirements for Chart-Abstracted Measures
d. Changes to the Reporting and Submission Requirements for
eCQMs
e. Submission Form and Method for the Voluntary Hybrid Hospital-
Wide Readmission Measure with Claims and Electronic Health Record
Data (NQF #2879)
f. Sampling and Case Thresholds for the FY 2020 Payment
Determination and Subsequent Years
g. HCAHPS Administration and Submission Requirements for the FY
2020 Payment Determination and Subsequent Years
h. Data Submission Requirements for Structural Measures for the
FY 2020 Payment Determination and Subsequent Years
i. Data Submission and Reporting Requirements for HAI Measures
Reported via NHSN
11. Modifications to the Validation of Hospital IQR Program Data
a. Background
b. Changes to the Existing Processes for Validation of Hospital
IQR Program eCQM Data for the FY 2020 Payment Determination and
Subsequent Years
c. Modifications to the Educational Review Process for Chart-
Abstracted Measures Validation
12. Data Accuracy and Completeness Acknowledgement (DACA)
Requirements for the FY 2020 Payment Determination and Subsequent
Years
13. Public Display Requirements for the FY 2020 Payment
Determination and Subsequent Years
a. Background
b. Potential Options for Confidential and Public Reporting of
Hospital IQR Measures Stratified by Patient Dual-Eligibility Status
14. Reconsideration and Appeal Procedures for the FY 2020
Payment Determination and Subsequent Years
15. Change to the Hospital IQR Program Extraordinary
Circumstances Exceptions (ECE) Policy
a. Background
b. Alignment of the Hospital IQR Program ECE Policy With Other
CMS Quality Programs
B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
1. Background
2. Criteria for Removal and Retention of PCHQR Program Measures
3. Retention and Removal of Previously Finalized Quality
Measures for PCHs Beginning With the FY 2020 Program Year
a. Background
b. Removal of Measures from the PCHQR Program Beginning With the
FY 2020 Program Year
4. New Quality Measures Beginning With the FY 2020 Program Year
a. Considerations in the Selection of Quality Measures
b. New Quality Measures Beginning With the FY 2020 Program Year
c. Summary of Previously Finalized and Newly Finalized PCHQR
Program Measures for the FY 2020 Program Year and Subsequent Years
5. Accounting for Social Risk Factors in the PCHQR Program
6. Possible New Quality Measure Topics for Future Years
a. Background
b. Localized Prostate Cancer: Vitality; Localized Prostate
Cancer: Urinary Incontinence; Localized Prostate Cancer: Urinary
Frequency, Obstruction, and/or Irritation; Localized Prostate
Cancer: Sexual Function; and Localized Prostate Cancer: Bowel
Function
c. 30-Day Unplanned Readmission for Cancer Patients
7. Maintenance of Technical Specifications for Quality Measures
8. Public Display Requirements
a. Background
b. Deferment of Public Display of Two Measures
9. Form, Manner, and Timing of Data Submission
a. Background
b. Reporting Requirements for New Measures
10. Extraordinary Circumstances Exceptions (ECE) Policy Under
the PCHQR Program
a. Background
b. Modifications to the ECE Policy
C. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
1. Background and Statutory Authority
2. General Considerations Used for Selection of Quality Measures
for the LTCH QRP
a. Background
b. Accounting for Social Risk Factors in the LTCH QRP
3. Collection of Standardized Patient Assessment Data Under the
LTCH QRP
a. Definition of Standardized Patient Assessment Data
b. General Considerations Used for the Selection of Standardized
Patient Assessment Data
4. Policy for Retaining LTCH QRP Measures and Policy To Apply
That Retention Policy to Standardized Patient Assessment Data
5. Policy for Adopting Changes to LTCH QRP Measures and Policy
To Apply That Policy for Adopting Changes to Standardized Patient
Assessment Data
6. Quality Measures Currently Adopted for the LTCH QRP
7. LTCH QRP Quality Measures Beginning With the FY 2020 LTCH QRP
a. Finalized Proposal To Replace the Current Pressure Ulcer
Quality Measure, Percent of Residents or Patients With Pressure
Ulcers That Are New or Worsened (Short Stay) (NQF #0678), With a
Modified Pressure Ulcer Measure, Changes in Skin Integrity Post-
Acute Care: Pressure Ulcer/Injury
b. Mechanical Ventilation Process Quality Measure: Compliance
With Spontaneous Breathing Trial (SBT) by Day 2 of the LTCH Stay
c. Mechanical Ventilation Outcome Quality Measure: Ventilator
Liberation Rate
8. Removal of the All-Cause Unplanned Readmission Measure for 30
Days Post-Discharge From LTCHS From the LTCH QRP
9. LTCH QRP Quality Measures Under Consideration for Future
Years
a. LTCH QRP Quality Measures Under Consideration for Future
Years
b. IMPACT Act Measure--Possible Future Update to Measure
Specifications
c. IMPACT Act Implementation Update
10. Standardized Patient Assessment Data Reporting for the LTCH
QRP
a. Standardized Patient Assessment Data Reporting for the FY
2019 LTCH QRP
b. Standardized Patient Assessment Data Reporting Beginning With
the FY 2020 LTCH QRP
11. Form, Manner, and Timing of Data Submission Under the LTCH
QRP
a. Start Date for Standardized Patient Assessment Data Reporting
by New LTCHs
b. Mechanism for Reporting Standardized Patient Assessment Data
Beginning With the FY 2019 LTCH QRP
c. Schedule for Reporting Standardized Patient Assessment Data
Beginning With the FY 2019 LTCH QRP
d. Schedule for Reporting the Newly Finalized Quality Measures
Beginning With the FY 2020 LTCH QRP
e. Removal of Interrupted Stay Items From the LTCH CARE Data Set
12. Changes to Previously Codified Participation Requirements
Under the LTCH QRP
13. Changes to Previously Codified Data Submission Requirements
Under the LTCH QRP
14. Changes to Previously Codified Exception and Extension
Requirements Under the LTCH QRP
15. Changes to Previously Codified Reconsiderations Requirements
Under the LTCH QRP
16. Application of the LTCH QRP Data Completion Thresholds to
the Submission of Standardized Patient Assessment Data Beginning
With the FY 2019 LTCH QRP
17. Policies Regarding Public Display of Measure Data for the
LTCH QRP
18. Mechanism for Providing Feedback Reports to LTCHs
D. Inpatient Psychiatric Facility Quality Reporting (IPFQR)
Program
1. Background
a. Statutory Authority
b. Covered Entities
c. Considerations in Selecting Quality Measures
2. Factors for Removal or Retention of IPFQR Program Measures
a. Background
b. Considerations in Removing or Retaining Measures
3. Proposal for New Quality Measure for the FY 2020 Payment
Determination and Subsequent Years--Medication Continuation
following Inpatient Psychiatric Discharge
[[Page 37997]]
a. Background
b. Appropriateness for the IPFQR Program
c. Measure Calculation
d. Data Sources
e. Public Comment
4. Summary of Previously Finalized Measures for the FY 2020
Payment Determinations and Subsequent Years
5. Possible IPFQR Program Measures and Topics for Future
Consideration
6. Public Display and Review Requirements
7. Form, Manner, and Timing of Quality Data Submission for the
FY 2019 Payment Determination and Subsequent Years
a. Procedural Requirements for FY 2019 Payment Determination and
Subsequent Years
b. Data Submission Requirements for the FY 2019 Payment
Determination and Subsequent Years
c. Reporting Requirements for the FY 2019 Payment Determination
and Subsequent Years
d. Population and Sampling
e. Data Accuracy and Completeness Acknowledgement (DACA)
Requirements
8. Reconsideration and Appeals Procedures
9. Extraordinary Circumstances Exceptions (ECE) for the IPFQR
Program
a. Background
b. ECE Policy Modifications
E. Clinical Quality Measurement for Eligible Hospitals and
Critical Access Hospitals (CAHs) Participating in the EHR Incentive
Programs
1. Background
2. Modifications to the CQM Reporting Requirements for the
Medicare and Medicaid EHR Incentive Programs for CY 2017
a. Background
b. Changes to Policies Regarding Electronic Reporting of CQMs
for CY 2017
3. CQM Reporting for the Medicare and Medicaid EHR Incentive
Programs in 2018
a. Background
b. CQM Reporting Period for the Medicare and Medicaid EHR
Incentive Programs in CY 2018
c. CQM Reporting Form and Method for the Medicare EHR Incentive
Program in 2018
F. Clinical Quality Measurement for Eligible Professionals (EPs)
Participating in the Medicaid EHR Incentive Program in 2017
1. Modifications to the CQM Reporting Period for EPs in 2017
2. Modifications to CQM Reporting Requirements for Medicaid EPs
Under the Medicaid EHR Incentive Program
G. Changes to the Medicare and Medicaid EHR Incentive Programs
1. Revisions to the EHR Reporting Period in 2018
2. Significant Hardship Exception for Decertified Certified EHR
Technology (CEHRT) for EPs, Eligible Hospitals, and CAHs Seeking To
Avoid the Medicare Payment Adjustment
3. Ambulatory Surgical Center (ASC)-Based Eligible Professionals
(EPs)
4. Certification Requirements for 2018
X. Revisions of Medicare Cost Reporting and Provider Requirements
A. Electronic Signature and Submission of the Certification and
Settlement Summary Page of the Medicare Cost Report
1. Background
2. Changes Relating to Electronic Signature on the Certification
and Settlement Summary Page of the Medicare Cost Report
3. Changes Relating to Electronic Submission of the
Certification and Settlement Summary Page of the Medicare Cost
Report
4. Clarifications Relating to the Items Required to be Submitted
by Providers with the Medicare Cost Report
a. Settlement Summary and Certification Statement
b. Removal of the Transition Period Language
5. Revisions to 42 CFR 413.24(f)(4)(iv)
B. Clarification of Limitations on the Valuation of Depreciable
Assets Disposed of on or after December 1, 1997
XI. Changes Relating to Survey and Certification Requirements
A. Revisions to the Application and Re-Application Procedures
for National Accrediting Organizations (AOs), Provider and Supplier
Conditions, and Posting of Survey Reports and Acceptable Plans of
Corrections (PoCs)
B. Changes to Termination Public Notice Requirements for Certain
Providers and Suppliers
1. Background
2. Basis for Changes
3. Changes to Regulations
XII. MedPAC Recommendations
XIII. Other Required Information
A. Publicly Available Data
B. Collection of Information Requirements
1. Statutory Requirement for Solicitation of Comments
2. ICRs for Temporary Exception to the LTCH PPS Site Neutral
Payment Rate for Certain Spinal Cord Specialty Hospitals
3. ICRs for the Hospital Inpatient Quality Reporting (IQR)
Program
4. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR)
Program
5. ICRs for Hospital Value-Based Purchasing (VBP) Program
6. ICRs for the Long-Term Care Hospital Quality Reporting
Program (LTCH QRP)
7. ICRs for the Inpatient Psychiatric Facility Quality Reporting
(IPFQR) Program
8. ICRs for the Electronic Health Record (EHR) Incentive
Programs and Meaningful Use
9. ICRs Relating to Electronic Signature and Electronic
Submission of the Certification and Settlement Summary Page of
Medicare Cost Reports
10. ICRs Relating to Changes in Public Notices of Terminations
Regulation Text
Addendum--Schedule of Standardized Amounts, Update Factors, and
Rate-of-Increase Percentages Effective with Cost Reporting Periods
Beginning on or after October 1, 2017 and Payment Rates for LTCHs
Effective with Discharges Occurring on or after October 1, 2017
I. Summary and Background
II. Changes to the Prospective Payment Rates for Hospital Inpatient
Operating Costs for Acute Care Hospitals for FY 2018
A. Calculation of the Adjusted Standardized Amount
B. Adjustments for Area Wage Levels and Cost-of-Living
C. Calculation of the Prospective Payment Rates
III. Changes to Payment Rates for Acute Care Hospital Inpatient
Capital-Related Costs for FY 2018
A. Determination of Federal Hospital Inpatient Capital-Related
Prospective Payment Rate Update
B. Calculation of the Inpatient Capital-Related Prospective
Payments for FY 2018
C. Capital Input Price Index
IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2018
V. Updates to the Payment Rates for the LTCH PPS for FY 2018
A. LTCH PPS Standard Federal Payment Rate for FY 2018
B. Adjustment for Area Wage Levels Under the LTCH PPS for FY
2018
1. Background
2. Geographic Classifications (Labor Market Areas) for the LTCH
PPS Standard Federal Payment Rate
3. Labor-Related Share for the LTCH PPS Standard Federal Payment
Rate
4. Wage Index for FY 2018 for the LTCH PPS Standard Federal
Payment Rate
5. Budget Neutrality Adjustment for Changes to the LTCH PPS
Standard Federal Payment Rate Area Wage Level Adjustment
C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located
in Alaska and Hawaii
D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases
E. Update to the IPPS Comparable/Equivalent Amounts to Reflect
the Statutory Changes to the IPPS DSH Payment Adjustment Methodology
F. Computing the Adjusted LTCH PPS Federal Prospective Payments
for FY 2018
VI. Tables Referenced in this Final Rule and Available through the
Internet on the CMS Web site
Appendix A--Economic Analyses
I. Regulatory Impact Analysis
A. Introduction
B. Need
C. Objectives of the IPPS
D. Limitations of Our Analysis
E. Hospitals Included in and Excluded From the IPPS
F. Effects on Hospitals and Hospital Units Excluded From the
IPPS
G. Quantitative Effects of the Policy Changes Under the IPPS for
Operating Costs
1. Basis and Methodology of Estimates
2. Analysis of Table I
3. Impact Analysis of Table II
H. Effects of Other Policy Changes
[[Page 37998]]
1. Effects of Policy Relating to New Medical Service and
Technology Add-On Payments
2. Effects of Changes to MS-DRGs Subject to the Postacute Care
Transfer Policy and the MS-DRG Special Payment Policy
3. Effects of the Changes to the Volume Decrease Adjustment for
Sole Community Hospitals (SCHs)
4. Effects of Changes to Low-Volume Hospital Payment Adjustment
Policy
5. Effects of the Changes to Medicare DSH and Uncompensated Care
Payments for FY 2018
6. Effects of Reduction Under the Hospital Readmissions
Reduction Program
7. Effects of Changes Under the FY 2018 Hospital Value-Based
Purchasing (VBP) Program
8. Effects of Changes to the HAC Reduction Program for FY 2018
9. Effects of Implementation of the Additional 5-Year Expansion
of the Rural Community Hospital Demonstration Program
10. Effects of the Changes Relating to Provider-Based Status of
Indian Health Service and Tribal Facilities and Organizations
11. Effects of the Changes Relating to Hospital-Within-Hospital
Policy
12. Effects of Continued Implementation of the Frontier
Community Health Integration Project (FCHIP) Demonstration
I. Effects of Changes in the Capital IPPS
1. General Considerations
2. Results
J. Effects of Payment Rate Changes and Policy Changes Under the
LTCH PPS
1. Introduction and General Considerations
2. Impact on Rural Hospitals
3. Anticipated Effects of LTCH PPS Payment Rate Changes and
Policy Changes
4. Effect on the Medicare Program
5. Effect on Medicare Beneficiaries
K. Effects of Requirements for Hospital Inpatient Quality
Reporting (IQR) Program
L. Effects of Requirements for the PPS-Exempt Cancer Hospital
Quality Reporting (PCHQR) Program
M. Effects of Requirements for the Long-Term Care Hospital
Quality Reporting Program (LTCH QRP)
N. Effects of Updates to the Inpatient Psychiatric Facility
Quality Reporting (IPFQR) Program
O. Effects of Requirements Regarding the Electronic Health
Record (EHR) Incentive Programs and Meaningful Use
P. Effects of Electronic Signature and Electronic Submission of
the Certification and Settlement Summary Page of Medicare Cost
Reports
Q. Effects of Changes Relating to Survey and Certification
Requirements
R. Effects of Clarification of Limitations on the Valuation of
Depreciable Assets Disposed of on or after December 1, 1997
S. Alternatives Considered
T. Reducing Regulation and Controlling Regulatory Costs
U. Overall Conclusion
1. Acute Care Hospitals
2. LTCHs
V. Regulatory Review Costs
II. Accounting Statements and Tables
A. Acute Care Hospitals
B. LTCHs
III. Regulatory Flexibility Act (RFA) Analysis
IV. Impact on Small Rural Hospitals
V. Unfunded Mandate Reform Act (UMRA) Analysis
VI. Executive Order 13175
VII. Executive Order 12866
Appendix B: Recommendation of Update Factors for Operating Cost
Rates of Payment for Inpatient Hospital Services
I. Background
II. Inpatient Hospital Update for FY 2018
A. FY 2018 Inpatient Hospital Update
B. Update for SCHs for FY 2018
C. FY 2018 Puerto Rico Hospital Update
D. Update for Hospitals Excluded from the IPPS
E. Update for LTCHs for FY 2018
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and
Updating Payments in Traditional Medicare
I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
This final rule makes payment and policy changes under the Medicare
inpatient prospective payment systems (IPPS) for operating and capital-
related costs of acute care hospitals as well as for certain hospitals
and hospital units excluded from the IPPS. We also are making changes
relating to the provider-based status of Indian Health Service (IHS)
and Tribal facilities and organizations and to the IPPS low-volume
hospital payment adjustment for hospitals operated by the IHS or a
Tribe. 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). It
also makes policy changes to programs associated with Medicare IPPS
hospitals, IPPS-excluded hospitals, and LTCHs.
We are establishing new requirements or revising requirements for
quality reporting by specific providers (acute care hospitals, PPS-
exempt hospitals, LTCHs, and inpatient psychiatric facilities) that are
participating in Medicare. We also are establishing new requirements or
revising existing requirements for eligible professionals (EPs),
eligible hospitals, and CAHs participating in the Medicare and Medicaid
EHR Incentive Programs. We are updating policies relating to the
Hospital Value-Based Purchasing (VBP) Program, the Hospital
Readmissions Reduction Program, and the Hospital-Acquired Condition
(HAC) Reduction Program. We also are making changes related to the
transparency of accrediting organization survey reports and plans of
correction; to allow electronic signature and electronic submission of
the Certification and Settlement Summary page of the Medicare cost
reports; and to clarify provider reimbursement regulations relative to
the sale or scrapping of depreciable assets on or after December 1,
1997.
Under various statutory authorities, we are making changes to the
Medicare IPPS, to the LTCH PPS, and to other related payment
methodologies and programs for FY 2018 and subsequent fiscal years.
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 (previously
referred to as ``long-term care neoplastic disease hospitals'' and
renamed in this final rule), 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 BBRA (Pub. L. 106-113) and
section 307(b)(1) of the BIPA (Pub. L. 106-554) (as codified under
section 1886(m)(1) of the 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.
Sections 1814(l), 1820, and 1834(g) of the Act, which
specify that payments are made to critical access hospitals (CAHs)
(that is, rural hospitals or facilities that meet certain statutory
requirements) for inpatient and outpatient services and that these
payments are generally based on 101 percent of reasonable cost.
[[Page 37999]]
Section 1866(k) of the Act, as added by section 3005 of
the Affordable Care Act, which establishes 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(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.
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(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 meeting performance standards established for a performance
period for such fiscal year.
Section 1886(p) of the Act, as added by section 3008 of
the Affordable Care 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 added by section 3025 of
the Affordable Care Act and amended by section 10309 of the Affordable
Care Act and 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'' under
section 1886(d) of the Act will be reduced to account for certain
excess readmissions. Section 15002 of the 21st Century Cures Act
requires the Secretary to compare cohorts of hospitals to each other 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 a new 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
section 1886(d)(5)(F) of the Act for DSH (``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; (2) 1
minus the percent change in the percent of individuals who are
uninsured (minus 0.2 percentage point for FY 2018 through FY 2019); and
(3) a hospital's uncompensated care amount relative to the
uncompensated care amount of all DSH hospitals expressed as a
percentage.
Section 1886(m)(6) of the Act, as added by section 1206(c)
of the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013
(Pub. L. 113-67), which provided for the establishment of site neutral
payment rate criteria under the LTCH PPS with implementation beginning
in FY 2016.
Section 1886(m)(6) of the Act, as amended by section 15009
of the 21st Century Cures Act (Pub. L. 114-255), which provides for a
temporary exception to the application of the site neutral payment rate
under the LTCH PPS for certain spinal cord specialty hospitals for
discharges in cost reporting periods beginning during FYs 2018 and
2019.
Section 1886(m)(6) of the Act, as amended by section 15010
of the 21st Century Cures Act (Pub. L. 114-255), which provides for a
temporary exception to the application of the site neutral payment rate
under the LTCH PPS for certain LTCHs with certain discharges with
severe wounds occurring in cost reporting periods beginning during FY
2018.
Section 1886(m)(5)(D)(iv) of the Act, as added by section
1206(c) of the Pathway for Sustainable Growth Rate (SGR) Reform Act of
2013 (Pub. L. 113-67), which provides for the establishment of a
functional status quality measure under the LTCH QRP for change in
mobility among inpatients requiring ventilator support.
Section 1899B of the Act, as added by section 2(a) of the
Improving Medicare Post-Acute Care Transformation Act of 2014 (the
IMPACT Act, Pub. L. 113-185), which provides for the establishment of
data reporting for certain post-acute care providers, including LTCHs.
2. Summary of the Major Provisions
a. MS-DRG Documentation and Coding Adjustment
Section 631 of the American Taxpayer Relief Act of 2012 (ATRA, Pub.
L. 112-240) amended section 7(b)(1)(B) of Public Law 110-90 to require
the Secretary to make a recoupment adjustment to the standardized
amount of Medicare payments to acute care hospitals to account for
changes in MS-DRG documentation and coding that do not reflect real
changes in case-mix, totaling $11 billion over a 4-year period of FYs
2014, 2015, 2016, and 2017. The FY 2014 through FY 2017 adjustments
represented the amount of the increase in aggregate payments as a
result of not completing the prospective adjustment authorized under
section 7(b)(1)(A) of Public Law 110-90 until FY 2013. Prior to the
ATRA, this amount could not have been recovered under Public Law 110-
90. Section 414 of the Medicare Access and CHIP Reauthorization Act of
2015 (MACRA) (Pub. L. 114-10) replaced the single positive adjustment
we intended to make in FY 2018 with a 0.5 percent positive adjustment
to the standardized amount of Medicare payments to acute care hospitals
for FYs 2018 through 2023. The FY 2018 adjustment was subsequently
adjusted to 0.4588 percent by section 15005 of the 21st Century Cures
Act.
For FY 2018, we are making the 0.4588 percent positive adjustment
to the standardized amount as required by section 414 of Public Law
114-10, as amended by section 15005 of the 21st Century Cures Act.
b. Adjustment to IPPS Rates Resulting From 2-Midnight Policy
In FY 2017, we made a permanent adjustment to the standardized
amount, the hospital-specific payment rates, and the national capital
Federal rate to prospectively remove the 0.2 percent reduction to the
rates put in place in FY 2014 to offset the estimated increase in IPPS
expenditures as a result of the 2-midnight policy. In addition, we made
a temporary one-time prospective increase to the FY 2017 standardized
amount, the hospital-specific payment rates, and the national capital
Federal rate of 0.6 percent by including a temporary one-time factor of
1.006 in the calculation of the standardized amount, the hospital-
specific payment rates, and the national capital Federal rate to
address the effects of the 0.2 percent reduction to the rate for the 2-
midnight policy in effect for FYs 2014, 2015, and 2016.
For FY 2018, we are including a factor of (1/1.006) in the
calculation of the FY
[[Page 38000]]
2018 standardized amount, the hospital-specific payment rates, and the
national capital Federal rate to remove the temporary one-time factor
of 1.006, as established in the FY 2017 IPPS/LTCH PPS final rule.
c. Reduction of Hospital Payments for Excess Readmissions
We are making changes to policies for the Hospital Readmissions
Reduction Program, which is established under section 1886(q) of the
Act, as added by section 3025 of the Affordable Care Act, as amended by
section 10309 of the Affordable Care Act. The Hospital Readmissions
Reduction Program requires a reduction to a hospital's base operating
DRG payment to account for excess readmissions of selected applicable
conditions. For FY 2018 and subsequent years, the reduction is based on
a hospital's risk-adjusted readmission rate during a 3-year period for
acute myocardial infarction (AMI), heart failure (HF), pneumonia,
chronic obstructive pulmonary disease (COPD), total hip arthroplasty/
total knee arthroplasty (THA/TKA), and coronary artery bypass graft
(CABG). In this final rule, we are establishing the following policies:
(1) Specify applicable time period for FY 2018; (2) specifying the
calculation of aggregate payments for excess readmissions for FY 2018;
(3) making changes to the payment adjustment factor in accordance with
the 21st Century Cures Act for FY 2019; and (4) updating the
Extraordinary Circumstances Exceptions policy.
d. 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. In
this final rule, we are removing one previously adopted measure, the
PSI 90: Patient Safety for Selected Indicators measure, from the
Hospital VBP Program beginning with the FY 2019 program year. We also
are adopting one new measure, Hospital-Level, Risk-Standardized Payment
Associated with a 30-Day Episode of Care for Pneumonia, beginning with
the FY 2022 program year, and adopting a modified version of a
previously adopted measure, Patient Safety and Adverse Events Composite
(NQF #0531), beginning with the FY 2023 program year. In addition, we
are making two modifications to our domain scoring policies beginning
with the FY 2019 program year, and further establishing a new weighting
methodology for the measures within the Efficiency and Cost Reduction
domain. We also are addressing public comment submitted in response to
our comment solicitation on whether and how to account for social risk
factors in the Hospital VBP Program.
e. Hospital-Acquired Condition (HAC) Reduction Program
Section 1886(p) of the Act, as added under section 3008(a) of the
Affordable Care Act, establishes an incentive to hospitals to reduce
the incidence of hospital-acquired conditions by requiring the
Secretary to make an adjustment to payments to applicable hospitals
effective for discharges beginning on October 1, 2014. This 1-percent
payment reduction applies to a hospital whose ranking is in the top
quartile (25 percent) of all applicable hospitals, relative to the
national average, of conditions acquired during the applicable period
and on all of the hospital's discharges for the specified fiscal year.
In this final rule, we are establishing the following policies: (1)
Specifying the data collection time periods for the FY 2020 HAC
Reduction Program; and (2) updating the Extraordinary Circumstances
Exception policy for the HAC Reduction Program. In this final rule, we
also are responding to comments received regarding: (1) Additional
measures and potential future adoption; (2) accounting for social risk
factors; and (3) the inclusion of disability and medical complexity for
the CDC NHSN measures.
f. DSH Payment Adjustment and Additional Payment for Uncompensated Care
Section 3133 of the Affordable Care Act modified the Medicare
disproportionate share hospital (DSH) payment methodology beginning in
FY 2014. Under section 1886(r) of the Act, which was added by section
3133 of the Affordable Care Act, starting in FY 2014, 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
otherwise would have been paid as Medicare DSH payments, is paid as
additional payments after the amount is reduced for changes in the
percentage of individuals that are uninsured. Each Medicare DSH 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.
In this final rule, we are updating our estimates of the three
factors used to determine uncompensated care payments for FY 2018. The
statute permits the use of a data source other than the CBO estimates
to determine the percent change in the rate of uninsurance as part of
the calculation of Factor 2 beginning in FY 2018. We are using
uninsured estimates produced by CMS' Office of the Actuary (OACT) as
part of the development of the National Health Expenditure Accounts
(NHEA) in the calculation of Factor 2. We also are beginning to
incorporate data from Worksheet S-10 in the calculation of hospitals'
share of uncompensated care by combining data on uncompensated care
costs from the Worksheet S-10 for FY 2014 with proxy data regarding a
hospital's share of low-income insured days for FYs 2012 and 2013 to
determine Factor 3 for FY 2018. We will continue to use data from three
cost reporting periods to calculate Factor 3, which will gradually
incorporate uncompensated care data from Worksheet S-10 into the
calculation of Factor 3. As part of this policy, we are including a
definition of uncompensated care costs consisting of the sum of charity
care and bad debt and a trim methodology to address aberrant cost-to-
charge ratios (CCRs) as well as potentially aberrant uncompensated care
costs that exceed a threshold of 50 percent of total operating costs.
We also are providing that, for Puerto Rico hospitals, Indian Health
Service and Tribal hospitals, and all-inclusive rate providers, we will
substitute data regarding low-income insured days for FY 2013 for the
Worksheet S-10 data from FY 2014 cost reports.
We are continuing the policies that were finalized in FY 2015 to
address several specific issues concerning the process and data to be
employed in determining hospitals' share of uncompensated care in the
case of hospital mergers. We also are continuing the policies finalized
in FY 2017 concerning the methodology for calculating each hospital's
relative share of uncompensated care, such as combining data from
multiple cost reports beginning in the same fiscal year and averaging
the sum of three individual Factor 3s by the number of cost reporting
periods with data. In addition, we are annualizing hospital cost
reports that do not span 12 months. We also are applying a scaling
factor to each hospital's uncompensated care amount so that total
uncompensated care payments will be consistent with the estimated
amount available to make
[[Page 38001]]
uncompensated care payments for FY 2018.
g. Changes to the LTCH PPS
In this final rule, we set forth changes to the LTCH PPS Federal
payment rates, factors, and other payment rate policies under the LTCH
PPS for FY 2018; changes to the payment methodology under the short-
stay outlier (SSO) policy; implementation of several provisions of the
21st Century Cures Act; and the adoption of a 1-year regulatory delay
on the full implementation of the 25-percent threshold policy for
discharges occurring in FY 2018 (that is, for the fiscal year after
expiration of the current statutory moratoria under the 21st Century
Cures Act, which is set to expire September 30, 2017).
h. 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 that would otherwise apply to the standardized
amount applicable to discharges occurring in that fiscal year. In past
years, we have established measures on which hospitals must report data
and the process for submittal and validation of the data.
In this final rule, we are finalizing several changes. First, we
are refining two previously adopted measures. Specifically, we are
finalizing an update to the Hospital Consumer Assessment of Healthcare
Providers and Systems (HCAHPS) survey measure by replacing the three
existing questions about Pain Management with three new questions that
address Communication About Pain During the Hospital Stay, beginning
with the FY 2020 payment determination with modification that public
reporting would be delayed. In addition, we are finalizing an update to
the stroke mortality measure to include the use of NIH Stroke Scale
claims data for risk adjustment, beginning with the FY 2023 payment
determination. We also are adopting the Hospital-Wide All-Cause
Unplanned Readmission Hybrid Measure as a voluntary measure for the CY
2018 reporting period.
In addition, we are finalizing a modified, reduced policy for eCQM
reporting as compared to our proposals. For both the CY 2017 reporting
period/FY 2019 payment determination and CY 2018 reporting period/FY
2020 payment determination, we are finalizing that hospitals will be
required to select and submit four of the available eCQMs included in
the Hospital IQR Program measure set and provide one self-selected,
calendar year quarter of data. We are also modifying our eCQM
certification requirements such that for the CY 2018 reporting period
hospitals will be able to use: (1) The 2014 Edition of CERHT, (2) the
2015 Edition of CEHRT, or (3) a combination of both the 2014 and 2015
Editions of CEHRT. In addition, we are finalizing the following
policies: (1) For the CY 2017 reporting period/FY 2019 payment
determination and the CY 2018 reporting period/FY 2020 payment
determination, a hospital using EHR technology certified to the 2014 or
2015 Edition, but for which such EHR technology is not certified to all
15 available eCQMs available to report, will be required to have its
EHR technology certified to all 15 eCQMs that are available to report
in the Hospital IQR Program; (2) for the CY 2017 reporting period/FY
2019 payment determination, hospitals will be required to use the most
recent version of the eCQM electronic specifications (namely, the
Spring 2016 version of the eCQM specifications and any applicable
addenda); (3) for the CY 2018 reporting period/FY 2020 payment
determination, hospitals will be required to use the most recent
version of the eCQM electronic specifications (namely, the Spring 2017
version of the eCQM specifications and any applicable addenda); and (5)
hospitals' EHR technology certified to all 15 eCQMs would not need to
be recertified each time it is updated to a more recent version of the
eCQMs. These policies are being made in alignment with the CQM
electronic reporting policies for the Medicare and Medicaid EHR
Incentive Programs, and will decrease the required number of eCQMs and
quarters of reporting as compared with the previously finalized
requirements in the FY 2017 IPPS/LTCH PPS final rule.
Furthermore, we are finalizing our policies for the eCQM data
validation process, whereby we will select eight cases per quarter (the
number of quarters required will vary by specific FY payment
determination) to complete eCQM validation for the FY 2020 payment
determination and subsequent years. In addition, for the FY 2020
payment determination and subsequent years, we are establishing
policies related to the exclusion criteria for hospital and case
selection, and the data submission requirements for participating
hospitals. For the FY 2021 payment determination and subsequent years,
we are finalizing our proposal to extend our previously finalized
medical record submission policy for eCQM validation requiring
submission of at least 75 percent of sampled eCQM measure medical
records in a timely and complete manner. Also, we are: (1) Formalizing
our educational review process for chart-abstracted measures for the FY
2020 payment determination and subsequent years, and (2) finalizing
that we will use this process to correct quarterly scores for any of
the first 3 quarters of validation in order to compute the final
confidence interval.
Moreover, we are establishing policies related to our Hospital IQR
Program Extraordinary Circumstances Extension or Exemptions policy,
including a change to the name of the policy to Extraordinary
Circumstances Exceptions (ECE) policy and updates to 42 CFR
412.140(c)(2) to reflect our ECE policy. Finally, we responded to our
solicitation of public comment on accounting for social risk factors in
the Hospital IQR Program, the confidential and potential future public
reporting of clinical quality measure data stratified by patients'
dual-eligible status, and the following clinical quality measures that
we are considering for future inclusion in the Hospital IQR Program:
(1) Quality of Informed Consent Documents for Hospital-Performed,
Elective Procedures measure; (2) four End-of-Life process and outcome
measures for cancer patients; (3) two nurse staffing measures; and (4)
11 newly specified electronic clinical quality measures (eCQMs).
i. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
Section 1886(m)(5) of the Act requires LTCHs to report certain
quality data to CMS in order to receive their full annual update under
the LTCH PPS. In this final rule, we are adopting one new outcome
measure related to pressure ulcers and two new measures (one process
and one outcome) related to ventilator weaning. We also are defining
the certain standardized patient assessment data that LTCHs must report
to comply with section 1886(m)(5)(F)(ii) of the Act, as well as the
requirements for the reporting of these data. Finally, we will publicly
report data on four assessment-based measures and three claims-based
measures.
j. Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program
For the Inpatient Psychiatric Facility Quality Reporting (IPFQR)
Program, we are making several policy changes. First, beginning with
the FY 2019 payment determination (that is, for extraordinary
circumstances occurring during CY 2018), we are updating the IPFQR
Program's extraordinary circumstances
[[Page 38002]]
exceptions (ECE) policy by: (1) Allowing designated personnel to
provide their contact information and sign the ECE request in lieu of
the requesting IPF's Chief Executive Officer (CEO); (2) allowing up to
90 days after the extraordinary circumstance to submit the request; and
(3) stating that we will strive to respond to ECE requests within 90
days of receiving them. Second, we are changing the annual data
submission period from a specific date range to a 45-day period that
begins at least 30 days following the end of the collection period.
Third, we are aligning our deadlines for submission of a Notice of
Participation (NOP) or program withdrawal with this data submission
timeframe. Finally, we are establishing factors by which we will
evaluate measures for removal from or retention under the IPFQR
Program. These factors align with those in use in other quality
reporting programs.
We are not finalizing our proposal to adopt the Medication
Continuation following Inpatient Psychiatric Discharge measure for FY
2020 payment determination and subsequent years.
3. Summary of Costs and Benefits
Adjustment for MS-DRG Documentation and Coding Changes.
Section 414 of the MACRA replaced the single positive adjustment we
intended to make in FY 2018 once the recoupment required by section 631
of the ATRA was complete with a 0.5 percent positive adjustment to the
standardized amount of Medicare payments to acute care hospitals for
FYs 2018 through 2023. The FY 2018 adjustment was subsequently adjusted
to 0.4588 percent by section 15005 of the 21st Century Cures Act (Pub.
L. 114-255). For FY 2018, we are making the 0.4588 percent positive
adjustment to the standardized amount as required by these provisions.
Adjustment to IPPS Payment Rates as a Result of the 2-
Midnight Policy. The removal of the adjustment to IPPS rates resulting
from the 2-midnight policy will decrease IPPS payment rates by (1/
1.006) for FY 2018. The (1/1.006) is a one-time factor that will be
applied to the standardized amount, the hospital-specific rates, and
the national capital Federal rate for FY 2018 only.
Medicare DSH Payment Adjustment and Additional Payment for
Uncompensated Care. Under section 1886(r) of the Act (as added by
section 3133 of the Affordable Care Act), DSH payments to hospitals
under section 1886(d)(5)(F) of the Act are reduced and an additional
payment for uncompensated care is made to eligible hospitals beginning
in FY 2014. Hospitals that receive Medicare DSH payments 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 remainder, equal to an estimate of 75 percent of what
otherwise would have been paid as Medicare DSH payments, is the basis
for determining the additional payments for uncompensated care after
the amount is reduced for changes in the percentage of individuals that
are uninsured and additional statutory adjustments. Each hospital that
receives Medicare DSH payments will receive an additional payment for
uncompensated care based on its share of the total uncompensated care
amount reported by Medicare DSHs. The reduction to Medicare DSH
payments is not budget neutral.
For FY 2018, we are providing that the 75 percent of what otherwise
would have been paid for Medicare DSH will be adjusted to approximately
58.01 percent of the amount to reflect changes in the percentage of
individuals that are uninsured and additional statutory adjustments. In
other words, approximately 43.51 percent (the product of 75 percent and
58.01 percent) of our estimate of Medicare DSH payments, prior to the
application of section 3133 of the Affordable Care Act, will be
available to make additional payments to hospitals for their relative
share of the total amount of uncompensated care.
We project that estimated Medicare DSH payments, and additional
payments for uncompensated care made for FY 2018, will increase
payments overall by approximately 0.6 percent as compared to the
estimate of overall payments, including Medicare DSH payments and
uncompensated care payments that will be distributed in FY 2017. The
additional payments have redistributive effects based on a hospital's
uncompensated care amount relative to the uncompensated care amount for
all hospitals that are estimated to receive Medicare DSH payments, and
the calculated payment amount is not directly tied to a hospital's
number of discharges.
Changes to the Hospital Readmissions Reduction Program.
For FY 2018 and subsequent years, the reduction is based on a
hospital's risk-adjusted readmission rate during a 3-year period for
acute myocardial infarction (AMI), heart failure (HF), pneumonia,
chronic obstructive pulmonary disease (COPD), total hip arthroplasty/
total knee arthroplasty (THA/TKA), and coronary artery bypass graft
(CABG). Overall, in this final rule, we estimate that 2,591 hospitals
will have their base operating DRG payments reduced by their determined
proxy FY 2018 hospital-specific readmission adjustment. As a result, we
estimate that the Hospital Readmissions Reduction Program will save
approximately $564 million in FY 2018, an increase of approximately $27
million over the estimated FY 2017 savings.
Value-Based Incentive Payments Under the Hospital VBP
Program. We estimate that there will be no net financial impact to the
Hospital VBP Program for the FY 2018 program year in the aggregate
because, by law, the amount available for value-based incentive
payments under the program in a given year must be equal to the total
amount of base operating MS-DRG payment amount reductions for that
year, as estimated by the Secretary. The estimated amount of base
operating MS-DRG payment amount reductions for the FY 2018 program year
and, therefore, the estimated amount available for value-based
incentive payments for FY 2018 discharges is approximately $1.9
billion.
Changes to the HAC Reduction Program. A hospital's Total
HAC score and its ranking in comparison to other hospitals in any given
year depends on several different factors. Any significant impact due
to the HAC Reduction Program changes for FY 2018, including which
hospitals will receive the adjustment, will depend on actual
experience.
Update to the LTCH PPS Payment Rates and Other Payment
Factors. Based on the best available data for the 415 LTCHs in our
database, we estimate that the changes to the payment rates and factors
that we are presenting in the preamble and Addendum of this final rule,
which reflects the rolling end to the transition of the statutory
application of the site neutral payment rate required by section
1886(m)(6)(A) of the Act, the update to the LTCH PPS standard Federal
payment rate for FY 2018, and estimated changes to the site neutral
payment rate and high-cost outlier (HCO) payments will result in an
estimated decrease in payments from FY 2017 of approximately $195
million.
Changes to the 25-Percent Threshold Policy. In this final
rule, we estimate our adoption of a 1-year regulatory delay of the full
implementation of the 25-percent threshold policy for discharges
occurring in FY 2018 will increase payments to LTCHs in FY 2018 by $70
million.
Changes to the Hospital Inpatient Quality Reporting (IQR)
Program. Across 3,300 IPPS hospitals, we
[[Page 38003]]
estimate that our finalized requirements for the Hospital IQR Program
will result in the following changes to costs and benefits in this
program compared to previously finalized requirements: (1) A cost
reduction of $613,864 for the FY 2019 payment determination due to the
updates to the eCQM reporting requirements; (2) a total net cost
reduction of $866,277 for the FY 2020 payment determination due to the
updates to the eCQM reporting requirements, the updates to the eCQM
validation procedures, and the voluntary reporting of the new Hybrid
Hospital-Wide Readmission measure; and (3) a total cost reduction of
$255,104 for the FY 2021 payment determination due to the updates to
the eCQM validation procedures.
Changes Related to the LTCH QRP. In this final rule, we
are adopting one outcome measure related to pressure ulcers and two new
measures (one process and one outcome) related to ventilator weaning.
We also are specifying the use of certain standardized patient
assessment data as required under section 1899B(b)(1)(B) of the Act and
policies regarding public display of measure data. Overall, the cost
associated with the changes to the LTCH QRP is estimated at a reduction
of $893.14 per LTCH annually or $380,480 for all LTCHs.
Changes to the IPFQR Program. In this final rule, we are
not adopting the one claims-based measure we proposed. However, we are
updating our ECE process; changing the specification of the data
submission period; aligning the timeframe for submission of the NOP or
program withdrawal with the data submission period; and establishing
factors to evaluate measures for retention or removal. We do not
believe that these policies will have any impact on the IPFQR program
burden.
B. Summary
1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the Social Security Act (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 a new additional
Medicare payment that considers the amount of uncompensated care
beginning on October 1, 2013.
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. 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.
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.
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 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.
Under current law, the Medicare-dependent, small rural hospital
(MDH) program is effective through FY 2017. Through and including FY
2006, an MDH received the higher of the Federal rate or the Federal
rate plus 50 percent of the amount by which the Federal rate was
exceeded by the higher of its FY 1982 or FY 1987 hospital-specific
rate. For discharges occurring on or after October 1, 2007, but before
October 1, 2017, 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, 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).
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
[[Page 38004]]
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 (referred to as ``long-term care
neoplastic disease hospitals'' in the proposed rule and renamed for
this final rule, which were formerly LTCHs classified under section
1886(d)(1)(B)(iv)(II) of the Act and redesignated by section 15008 of
Pub. L 114-255) 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. 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.
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). During the 5-year (optional) transition period,
a LTCH's payment under the PPS was based on an increasing proportion of
the LTCH Federal rate with a corresponding decreasing proportion based
on reasonable cost principles. Effective for cost reporting periods
beginning on or after October 1, 2006, all LTCHs are paid 100 percent
of the Federal rate. 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, based on a rolling effective
date that is linked to the date on which a given LTCH's Federal FY 2016
cost reporting period begins, LTCHs are 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 (73
FR 26797 through 26798).
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.
C. Summary of Provisions of Recent Legislation Implemented in This
Final Rule
1. The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240),
the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub.
L. 114-10), and the 21st Century Cures Act (Pub. L. 114-255)
Section 631 of the American Taxpayer Relief Act of 2012 (ATRA)
(Pub. L. 112-240) amended section 7(b)(1)(B) of Public Law 110-90 to
require CMS to make a recoupment adjustment to the standardized amounts
under section 1886(d) of the Act based upon the Secretary's estimates
for discharges occurring from FYs 2014 through FY 2017 to fully offset
$11 billion. Once the recoupment required under section 631 of the ATRA
was completed, CMS had anticipated making a single positive adjustment
in FY 2018 to offset the reductions required to recoup the $11 billion
under section 631 of the ATRA. However, section 414 of the MACRA
replaced the single positive adjustment CMS intended to make in FY 2018
with a 0.5 percent positive adjustment for each of FYs 2018 through
2023. Section 15005 of the 21st Century Cures Act (Pub. L. 114-255,
enacted December 13, 2016) further amended Public Law 110-90 to reduce
the adjustment for FY 2018 from 0.5 percent point to 0.4588 percentage
point.
2. Pathway for SGR Reform Act of 2013 (Pub. L. 113-67)
The Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) introduced
new payment rules in the LTCH PPS. Under section 1206 of this law,
discharges in cost reporting periods beginning on or after October 1,
2015 under the LTCH PPS will receive payment under a site neutral rate
unless the discharge meets certain patient-specific criteria. In this
final rule, we are continuing to update certain policies that
implemented provisions under section 1206 of the Pathway for SGR Reform
Act.
3. Improving Medicare Post-Acute Care Transformation Act of 2014
(IMPACT Act) (Pub. L. 113-185)
The Improving Medicare Post-Acute Care Transformation Act of 2014
(IMPACT Act (Pub. L. 113-185), enacted on October 6, 2014, made a
number of changes that affect the Long-Term Care
[[Page 38005]]
Quality Reporting Program (LTCH QRP). In this final rule, we are
continuing to implement portions of section 1899B of the Act, as added
by section 2(a) of the IMPACT Act, which, in part, requires LTCHs,
among other postacute care providers, to report standardized patient
assessment data, data on quality measures, and data on resource use and
other measures.
4. The Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L.
114-10)
Section 411(g) of the Medicare Access and CHIP Reauthorization Act
of 2015 (MACRA, Pub. L. 114-10) sets the annual update under the LTCH
PPS to 1.0 percent for FY 2018. In this final rule, consistent with
this requirement, we are updating the LTCH standard Federal payment
rate by 1.0 percent for FY 2018.
The MACRA also extended the MDH program and temporary changes to
the payment adjustment for low-volume hospitals through FY 2017. In
this final rule, we discuss the expiration of the MDH program and the
expiration of the temporary changes to the low-volume hospital payment
adjustment under current law.
5. The 21st Century Cures Act (Pub. L. 114-255)
The 21st Century Cures Act (Pub. L. 114-255), enacted on December
13, 2016, contains a number of provisions affecting payments under the
LTCH PPS, the Hospital Readmissions Reduction Program and the Medicare
EHR Incentive Program, which we are implementing in this final rule:
Section 4002(b)(1)(A) amended section 1848(a)(7)(B) of the
Act to provide that the Secretary shall exempt an eligible professional
from the application of the payment adjustment under section
1848(a)(7)(A) of the Act with respect to a year, subject to annual
renewal, if the Secretary determines that compliance with the
requirement for being a meaningful EHR user is not possible because the
certified EHR technology used by such eligible professional has been
decertified under the Office of the National Coordinator for Health
Information Technology's (ONC) Health IT Certification Program.
Section 4002(b)(2) amended section 1886(b)(3)(B)(ix)(II)
of the Act to provide that the Secretary shall exempt a hospital from
the application of the payment adjustment under section
1886(b)(3)(B)(ix)(I) with respect to a fiscal year, subject to annual
renewal, if the Secretary determines that compliance with the
requirement for being a meaningful EHR user is not possible because the
certified EHR technology used by the hospital is decertified under
ONC's Health IT Certification Program.
Section 15002, which amended section 1886(q)(3) of the Act
by adding subparagraphs (D) and (E), which requires the Secretary to
develop a methodology for the calculating the excess readmissions
adjustment factor for the Hospital Readmissions Reduction Program based
on cohorts defined by the percentage of dual eligible patients (that
is, patients who are eligible for both Medicare and full-benefit
Medicaid coverage) cared for by a hospital. In this final rule, we are
implementing changes to the payment adjustment factor to assess
penalties based on a hospital's performance relative to other hospitals
treating a similar proportion of dual-eligible patients.
Section 15004(a), which further amended section 114(d)(7)
of the MMSEA (as amended) by striking ``The moratorium under paragraph
(1)(A)'' and inserting ``[a]ny moratorium under paragraph (1)'' and
specified that such amendment shall take effect as if included in the
enactment of section 112 of the PAMA. We are implementing the
exceptions to the current statutory moratorium, which is in effect
through September 30, 2017, on increasing beds in an existing LTCH or
an existing LTCH satellite as provided by Section 15004(a).
Section 15004(b), which modifies high cost outlier
payments to LTCH standard Federal rate cases beginning in FY 2018.
Section 15006, which further amended section 114(c)(1)(A)
of the MMSEA (as amended) by extending the moratorium on the full
implementation of the 25-percent threshold policy through June 30,
2016, and for discharges occurring on or after October 1, 2016 and
before October 1, 2017. In this final rule, we are implementing the
moratorium on the full implementation of the 25-percent threshold
policy for discharges occurring on or after October 1, 2016, through
September 30, 2017, as provided by section 15006.
Section 15007, which amended section 1206(a)(3) of the
Pathway for SGR Reform Act by extending the exclusion for of Medicare
Advantage plans' and site neutral payment rate discharges from the
calculation of the average length-of-stay to all LTCHs, for discharges
occurring in cost reporting periods beginning on or after October 1,
2015.
Section 15008, which provided for a change in Medicare
classification for ``subclause (II)'' LTCHs by redesignating such
hospitals from section 1886(d)(1)(B)(iv)(II) to section
1886(d)(1)(B)(vi) of the Act. In this final rule, we are implementing
the reclassification of hospitals which had previously been classified
as ``subclause (II)'' LTCHs as their own category of IPPS-excluded
hospitals as provided by the provisions of section 15008.
Section 15009 of Public Law 114-255, which added new
subparagraph (F) to section 1886(m)(6) of the Act, providing for a
temporary exception to the site neutral payment rate for certain spinal
cord specialty hospitals for all discharges occurring during such
LTCH's cost reporting periods that begin during FYs 2018 and 2019.
Section 15010, which added a new subparagraph (G) to
section 1886(m)(6) of the Act, to create a temporary exception to the
site neutral payment rate for certain severe wound discharges from
certain LTCHs during such LTCH's cost reporting period beginning during
FY 2018.
Section 16003 amended section 1848(a)(7)(D) of the Act to
provide that no payment adjustment may be made under section
1848(a)(7)(A) of the Act for 2017 and 2018 in the case of an eligible
professional who furnishes substantially all of his or her covered
professional services in an ambulatory surgical center (ASC). Section
1848(a)(7)(D)(iii) of the Act provides that determinations of whether
an eligible professional is ASC-based may be made based on the site of
service as defined by the Secretary or an attestation, but shall be
made without regard to any employment or billing arrangement between
the eligible professional and any other supplier or provider of
services. Section 1848(a)(7)(D)(iv) of the Act provides that the ASC-
based exception shall no longer apply as of the first year that begins
more than 3 years after the date on which the Secretary determines,
through notice-and-comment rulemaking, that certified EHR technology
applicable to the ASC setting is available.
D. Issuance of a Notice of Proposed Rulemaking
In the proposed rule that appeared in the Federal Register on April
28, 2017 (82 FR 19796), we set forth proposed payment and policy
changes to the Medicare IPPS for FY 2018 operating costs and for
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
[[Page 38006]]
associated with payment rate policies under the LTCH PPS for FY 2018.
Below is a summary of the major 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--
Proposed changes to MS-DRG classifications based on our
yearly review for FY 2018.
Proposed adjustment to the standardized amounts under
section 1886(d) of the Act for FY 2018 in accordance with the
amendments made to section 7(b)(1)(B) of Public Law 110-90 by section
414 of the MACRA and section 15005 of the 21st Century Cures Act.
Proposed recalibration of the MS-DRG relative weights.
A discussion of the FY 2018 status of new technologies
approved for add-on payments for FY 2017 and a presentation of our
evaluation and analysis of the FY 2018 applicants for add-on payments
for high-cost new medical services and technologies (including public
input, as directed by Pub. L. 108-173, obtained in a town hall
meeting).
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
In section III. of the preamble to the proposed rule, we proposed
to make 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:
The proposed FY 2018 wage index update using wage data
from cost reporting periods beginning in FY 2014.
Clarification of other wage-related costs in the wage
index.
Calculation of the proposed occupational mix adjustment
for FY 2018 based on the 2013 Occupational Mix Survey.
Analysis and implementation of the proposed FY 2018
occupational mix adjustment to the wage index for acute care hospitals.
Proposed application of the rural floor and the frontier
State floor and the proposed expiration of the imputed floor.
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.
Proposal to require documentation of SCH and RRC
classification status approvals to be submitted to the MGCRB by the
first business day after January 1.
Clarification of special rules for SCHs and RRCs
reclassifying to geographic home areas.
Proposed changes to the 45-day notification rule.
The proposed adjustment to the wage index for acute care
hospitals for FY 2018 based on commuting patterns of hospital employees
who reside in a county and work in a different area with a higher wage
index.
Determination of the labor-related share for the proposed
FY 2018 wage index.
3. Proposed Rebasing and Revising of Hospital Market Basket
In section IV. of the proposed rule, we proposed to revise and
rebase the hospital market baskets for acute care hospitals and update
the labor-related share.
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 changes to MS-DRGs subject to the postacute care
transfer policy.
Proposed changes to the inpatient hospital update for FY
2018.
Proposed changes to the volume decrease adjustment for
SCHs.
Proposed updated national and regional case-mix values and
discharges for purposes of determining RRC status.
Expiration of the temporary changes to the payment
adjustment for low-volume hospitals at the end of FY 2017.
Proposed parallel low-volume hospital payment adjustment
concerning hospitals operated by the Indian Health Service (IHS) or a
Tribe.
The statutorily required IME adjustment factor for FY
2018.
Proposed changes to the methodologies for determining
Medicare DSH payments and the additional payments for uncompensated
care.
Discussion of expiration of the MDH program at the end of
FY 2017 and our policy 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.
Proposed changes to the rules for payment adjustments
under the Hospital Readmissions Reduction Program based on hospital
readmission measures and the process for hospital review and correction
of those rates for FY 2018.
Proposed changes to the requirements and provision of
value-based incentive payments under the Hospital Value-Based
Purchasing Program.
Proposed requirements for payment adjustments to hospitals
under the HAC Reduction Program for FY 2018.
Discussion of and proposals relating to the additional 5-
year extension of the Rural Community Hospital Demonstration Program.
Proposals related to the provider-based status of IHS and
Tribal facilities and organizations that would remove the regulatory
date limitation that restricted the grandfathering provision to IHS or
Tribal facilities and organizations furnishing services on or before
April 7, 2000. We also proposed to make a technical change to make the
regulation text more consistent with our current rules that require
these facilities to comply with all applicable Medicare conditions of
participation that apply to the main provider.
5. Proposed FY 2018 Policy Governing the IPPS for Capital-Related Costs
In section VI. of the preamble to the proposed rule, we discussed
the proposed payment policy requirements for capital-related costs and
capital payments to hospitals for FY 2018.
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--
Proposed changes to payments to certain excluded hospitals
for FY 2018.
Proposed policy changes relating to payments to hospitals-
within-hospitals.
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 set
forth--
Proposed changes to the LTCH PPS Federal payment rates,
factors, and other payment rate policies under the LTCH PPS for FY
2018.
Proposed changes to the short-stay outlier (SSO) policy.
Proposed 1-year regulatory delay of the full
implementation of the 25-percent threshold policy for discharges
occurring in FY 2018.
Proposed changes to implement the temporary exception to
the site neutral payment rate for certain spinal cord specialty
hospitals and for certain discharges with severe wounds from certain
LTCHs, as provided under sections 15009 and 15010 of Public Law 114-
255, respectively.
[[Page 38007]]
Proposed change to the average length of stay criterion to
implement section 15007 of Public Law 114-255.
Proposed change in Medicare classification for certain
hospitals to implement section 15008 of Public Law 114-255.
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--
Proposed requirements for the Hospital Inpatient Quality
Reporting (IQR) Program.
Proposed changes to the requirements for the quality
reporting program for PPS-exempt cancer hospitals (PCHQR Program).
Proposed changes to the requirements under the LTCH
Quality Reporting Program (LTCH QRP).
Proposed changes to the requirements under the Inpatient
Psychiatric Facility Quality Reporting (IPFQR) Program.
Proposed changes to requirements pertaining to the
clinical quality measurement of eligible hospitals and CAHs as well as
EPs participating in the Medicare and Medicaid Electronic Health Record
(EHR) Incentive Programs.
9. Proposed Changes Relating to Medicare Cost Reporting and Provider
Requirements
In section X. of the preamble of the proposed rule, we presented
our proposals to revise the regulations to allow providers to use an
electronic signature to sign the Certification and Settlement Summary
page of the Medicare cost report and submit this page electronically,
and clarify the rules relating to the sale or scrapping of depreciable
assets disposed of on or after December 1, 1997.
10. Proposed Changes Relating to Survey and Certification Requirements
In section XI. of the preamble of the proposed rule, we present our
proposals for allowing transparency in accrediting organization survey
reports and plans of correction and for changing the requirement for
providers to publish self-termination notices in newspapers.
11. Determining Prospective Payment Operating and Capital Rates and
Rate-of-Increase Limits for Acute Care Hospitals
In section V. of the Addendum to the proposed rule, we set forth
proposed changes to the amounts and factors for determining the
proposed FY 2018 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, we
addressed the update factors for determining the rate-of-increase
limits for cost reporting periods beginning in FY 2018 for certain
hospitals excluded from the IPPS.
12. Determining Prospective Payment Rates for LTCHs
In the Addendum to the proposed rule, we set forth proposed changes
to the amounts and factors for determining the proposed FY 2018 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 2018. We proposed to establish
the adjustments for wage levels, the 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 that the proposed changes would have on affected acute care
hospitals, CAHs, LTCHs, PCHs, and IPFs.
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 2018 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).
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 2017 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 2017
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's Web site at: http://www.medpac.gov.
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. MS-DRG Reclassifications
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/RY 2010 LTCH PPS final rule (74 FR
43764 through 43766) and the FYs 2011 through 2017 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; and 81 FR 56787 through
56872, respectively).
C. Adoption of the MS-DRGs in FY 2008
For information on the adoption of the MS-DRGs in FY 2008, we refer
readers to the FY 2008 IPPS final rule
[[Page 38008]]
with comment period (72 FR 47140 through 47189).
D. FY 2018 MS-DRG Documentation and Coding Adjustment
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
In the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189), we adopted the MS-DRG patient classification system for
the IPPS, effective October 1, 2007, to better recognize severity of
illness in Medicare payment rates for acute care hospitals. The
adoption of the MS-DRG system resulted in the expansion of the number
of DRGs from 538 in FY 2007 to 745 in FY 2008. By increasing the number
of MS-DRGs and more fully taking into account patient severity of
illness in Medicare payment rates for acute care hospitals, MS-DRGs
encourage hospitals to improve their documentation and coding of
patient diagnoses.
In the FY 2008 IPPS final rule with comment period (72 FR 47175
through 47186), we indicated that the adoption of the MS-DRGs had the
potential to lead to increases in aggregate payments without a
corresponding increase in actual patient severity of illness due to the
incentives for additional documentation and coding. In that final rule
with comment period, we exercised our authority under section
1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget
neutrality by adjusting the national standardized amount, to eliminate
the estimated effect of changes in coding or classification that do not
reflect real changes in case-mix. Our actuaries estimated that
maintaining budget neutrality required an adjustment of -4.8 percentage
points to the national standardized amount. We provided for phasing in
this -4.8 percentage point adjustment over 3 years. Specifically, we
established prospective documentation and coding adjustments of -1.2
percentage points for FY 2008, -1.8 percentage points for FY 2009, and
-1.8 percentage points for FY 2010.
On September 29, 2007, Congress enacted the TMA [Transitional
Medical Assistance], Abstinence Education, and QI [Qualifying
Individuals] Programs Extension Act of 2007 (Public Law 110-90).
Section 7(a) of Public Law 110-90 reduced the documentation and coding
adjustment made as a result of the MS-DRG system that we adopted in the
FY 2008 IPPS final rule with comment period to -0.6 percentage point
for FY 2008 and -0.9 percentage point for FY 2009.
As discussed in prior year rulemaking, and most recently in the FY
2017 IPPS/LTCH PPS final rule (81 FR 56780 through 56782), we
implemented a series of adjustments required under sections 7(b)(1)(A)
and 7(b)(1)(B) of Public Law 110-90, based on a retrospective review of
FY 2008 and FY 2009 claims data. We completed these adjustments in FY
2013, but indicated in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53274 through 53275) that delaying full implementation of the
adjustment required under section 7(b)(1)(A) of Public Law 110-90 until
FY 2013 resulted in payments in FY 2010 through FY 2012 being
overstated, and that these overpayments could not be recovered.
2. Recoupment or Repayment Adjustment Authorized by Section 631 of the
American Taxpayer Relief Act of 2012 (ATRA)
Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law
110-90 to require the Secretary to make a recoupment adjustment or
adjustments totaling $11 billion by FY 2017. This adjustment
represented the amount of the increase in aggregate payments as a
result of not completing the prospective adjustment authorized under
section 7(b)(1)(A) of Public Law 110-90 until FY 2013. As discussed
earlier, this delay in implementation resulted in overstated payment
rates in FYs 2010, 2011, and 2012. The resulting overpayments could not
have been recovered under Public Law 110-90.
Similar to the adjustments authorized under section 7(b)(1)(B) of
Public Law 110-90, the adjustment required under section 631 of the
ATRA was a one-time recoupment of a prior overpayment, not a permanent
reduction to payment rates. Therefore, we anticipated that any
adjustment made to reduce payment rates in one year would eventually be
offset by a positive adjustment in 2018, once the necessary amount of
overpayment was recovered. However, section 414 of the Medicare Access
and CHIP Reauthorization Act (MACRA) of 2015, Public Law 114-10,
enacted on April 16, 2015, replaced the single positive adjustment we
intended to make in FY 2018 with a 0.5 percentage point positive
adjustment for each of FYs 2018 through 2023. We stated in the FY 2016
IPPS/LTCH PPS final rule (80 FR 49345) that we would address this MACRA
provision in future rulemaking. However, section 15005 of the 21st
Century Cures Act (Pub. L. 114-255), enacted on December 13, 2016,
reduced the adjustment for FY 2018 from 0.5 percentage points to 0.4588
percentage points. We are addressing these provisions of MACRA and the
21st Century Cures Act in section II.D.3. of the preamble of this final
rule.
As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515
through 50517), our actuaries estimated that a -9.3 percentage point
adjustment to the standardized amount would be necessary if CMS were to
fully recover the $11 billion recoupment required by section 631 of the
ATRA in FY 2014. It is often our practice to phase in payment rate
adjustments over more than one year, in order to moderate the effect on
payment rates in any one year. Therefore, consistent with the policies
that we have adopted in many similar cases, and after consideration of
the public comments we received, in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50515 through 50517), we implemented a -0.8 percentage
point recoupment adjustment to the standardized amount in FY 2014. We
estimated that if adjustments of approximately -0.8 percentage point
were implemented in FYs 2014, 2015, 2016, and 2017, using standard
inflation factors, the entire $11 billion would be accounted for by the
end of the statutory 4-year timeline. As estimates of any future
adjustments are subject to variations in total savings, we did not
provide for specific adjustments for FYs 2015, 2016, or 2017 at that
time.
Consistent with the approach discussed in the FY 2014 rulemaking
for recouping the $11 billion required by section 631 of the ATRA, in
the FY 2015 IPPS/LTCH PPS final rule (79 FR 49874) and the FY 2016
IPPS/LTCH PPS final rule (80 FR 49345), we implemented additional -0.8
percentage point recoupment adjustments to the standardized amount in
FY 2015 and FY 2016, respectively. We estimated that these adjustments,
combined with leaving the prior -0.8 percentage point adjustments in
place, would recover up to $2 billion in FY 2015 and another $3 billion
in FY 2016. When combined with the approximately $1 billion adjustment
made in FY 2014, we estimated that approximately $5 to $6 billion would
be left to recover under section 631 of the ATRA by the end of FY 2016.
As indicated in the FY 2017 IPPS/LTCH PPS proposed rule (81 FR
24966), due to lower than previously estimated inpatient spending, we
determined that an adjustment of -0.8 percentage point in FY 2017 would
not recoup the $11 billion under section 631 of the ATRA. For the FY
2017 IPPS/LTCH PPS final rule (81 FR 56785), based on the Midsession
Review of the President's FY 2017 Budget, our actuaries estimated
[[Page 38009]]
that, to the nearest tenth of a percentage point, the FY 2017
documentation and coding adjustment factor that will recoup as closely
as possible $11 billion from FY 2014 through FY 2017 without exceeding
this amount is -1.5 percentage points. Based on those updated estimates
by the Office of the Actuary using the Midsession Review of the
President's FY 2017 Budget, we made a -1.5 percentage point adjustment
for FY 2017 as the final adjustment required under section 631 of the
ATRA. The estimates by our actuaries related to this finalized
adjustment were included in a memorandum that we made publicly
available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-OACT.html.
3. Adjustment for FY 2018 Required Under Section 414 of Public Law 114-
10 (MACRA) and Section 15005 of Public Law 114-255
As stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785),
once the recoupment required under section 631 of the ATRA was
complete, we had anticipated making a single positive adjustment in FY
2018 to offset the reductions required to recoup the $11 billion under
section 631 of the ATRA. However, section 414 of the MACRA (which was
enacted on April 16, 2015) replaced the single positive adjustment we
intended to make in FY 2018 with a 0.5 percentage point positive
adjustment for each of FYs 2018 through 2023. In the FY 2017
rulemaking, we indicated that we would address the adjustments for FY
2018 and later fiscal years in future rulemaking. As noted previously,
section 15005 of the 21st Century Cures Act (Pub. L. 114-255), which
was enacted on December 13, 2016, amended section 7(b)(1)(B) of the
TMA, as amended by section 631 of the ATRA and section 414 of the
MACRA, to reduce the adjustment for FY 2018 from a 0.5 percentage point
to a 0.4588 percentage point. We believe the directive under section
15005 of Public Law 114-255 is clear. Therefore, in the FY 2018 IPPS/
LTCH PPS proposed rule (82 FR 19816) for FY 2018, we proposed to
implement the required +0.4588 percentage point adjustment to the
standardized amount. This is a permanent adjustment to payment rates.
While we did not propose future adjustments required under section 414
of the MACRA and section 15005 of Public Law 114-255 at that time, we
stated in the proposed rule that we expect to propose positive 0.5
percentage point adjustments to the standardized amounts for FYs 2019
through 2023.
Comment: Several commenters reiterated their disagreement with the
-1.5 percentage point adjustment that CMS made for FY 2017 under
section 631 of the ATRA, which exceeded the estimated adjustment of
approximately -0.8 percentage point described in the FY 2014 IPPS/LTCH
PPS rulemaking. Commenters contended that, as a result, hospitals would
be left with a larger permanent cut than Congress intended following
the enactment of MACRA. They asserted that CMS' proposal to apply a
0.4588 percent positive adjustment for FY 2018 misinterprets the
relevant statutory authority, and urged CMS to align with their view of
Congress' intent by restoring an additional +0.7 percentage point
adjustment to the standardized amount in FY 2018; that is, the
difference between the -1.5 percentage point adjustment made in FY 2017
and the initial estimate of -0.8 percentage point discussed in the FY
2014 IPPS/LTCH PPS rulemaking. Commenters also urged CMS to use its
discretion under section 1886(d)(5)(I) of the Act to increase the FY
2018 adjustment by 0.7 percentage point. Other commenters requested
that, despite current law, CMS ensure that adjustments totaling the
full 3.9 percentage points withheld under section 631 of the ATRA be
returned.
Response: As discussed in the FY 2017 IPPS/LTCH PPS final rule (81
FR 56783 through 56785), CMS completed the $11 billion recoupment
required under section 631 of the ATRA. We continue to disagree that
section 414 of the MACRA was intended to augment or limit our separate
obligation under the ATRA to fully offset $11 billion by FY 2017, as we
discussed in response to comments in the FY 2017 IPPS/LTCH PPS final
rule (81 FR 56784). Moreover, as we discussed in the FY 2018 IPPS/LTCH
PPS proposed rule, we believe the directive regarding the applicable
adjustment for FY 2018 is clear. While we had anticipated making a
positive adjustment in FY 2018 to offset the reductions required to
recoup the $11 billion under section 631 of the ATRA, section 414 of
the MACRA requires that we not make the single positive adjustment we
intended to make in FY 2018 but instead make a 0.5 percentage point
positive adjustment for each of FYs 2018 through 2023. As noted by the
commenters, and discussed in the FY 2017 IPPS/LTCH PPS final rule, by
phasing in a total positive adjustment of only 3.0 percentage points,
section 414 of the MACRA would not fully restore even the 3.2
percentage point adjustment originally estimated by CMS in the FY 2014
IPPS/LTCH PPS final rule (78 FR 50515). Finally, Public Law 114-255,
which further reduced the positive adjustment required for FY 2018 from
0.5 percentage point to 0.4588 percentage point, was enacted on
December 13, 2016, after CMS proposed and finalized the -1.5 percentage
point adjustment as the final adjustment required under section 631 of
the ATRA in the FY 2017 rulemaking.
After consideration of the public comments we received, we are
finalizing the +0.4588 percentage point adjustment to the standardized
amount for FY 2018, as required under section 15005 of Public Law 114-
255.
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
Beginning in FY 2007, we implemented relative weights for DRGs
based on cost report data instead of charge information. We refer
readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed
discussion of our final policy for calculating the cost-based DRG
relative weights and to the FY 2008 IPPS final rule with comment period
(72 FR 47199) for information on how we blended relative weights based
on the CMS DRGs and MS-DRGs. We also refer readers to the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56785 through 56787) for a detailed
discussion of the history of changes to the number of cost centers used
in calculating the DRG relative weights. Since FY 2014, we calculate
the IPPS MS-DRG relative weights using 19 CCRs, which now include
distinct CCRs for implantable devices, MRIs, CT scans, and cardiac
catheterization.
2. Discussion of Policy for FY 2018
Consistent with our established policy, we calculated the final MS-
DRG relative weights for FY 2018 using two data sources: The MedPAR
file as the claims data source and the HCRIS as the cost report data
source. We adjusted the charges from the claims to costs by applying
the 19 national average CCRs developed from the cost reports. The
description of the calculation of the 19 CCRs and the MS-DRG relative
weights for FY 2018 is included in section II.G. of the preamble to
this FY 2018 IPPS/LTCH PPS final rule. As we did with the FY 2018 IPPS/
LTCH PPS proposed rule, we are providing the version of the HCRIS from
which we calculated these 19 CCRs on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link on the
[[Page 38010]]
left side of the screen titled, ``FY 2018 IPPS Final Rule Home Page''
or ``Acute Inpatient Files for Download.''
Comment: One commenter recommended that CMS work with stakeholders
to update cost reporting instructions and improve the accuracy and
validity of the national average CCRs. The commenter expressed concern
that the differences between hospitals' use of nonstandard cost center
codes and CMS' procedures for mapping and rolling up nonstandard codes
to the standard cost centers will continue to result in invalid CCRs
and inaccurate payments. The commenter stressed the need for
flexibility in cost reporting, to accommodate any new or unique
services that certain hospitals may provide, which may not be easily
captured through the cost reporting software. Finally, the commenter
again recommended, as it had done in response to prior IPPS rules, that
CMS pay particular attention to data used for CT scan and MRI cost
centers; the commenter believed that the hospital payment rates
established by CMS from the CT scan and MRI CCRs simply do not
correlate with resources used for these capital-intensive services.
Response: We received a similar public comment last year and
responded to it in the FY 2017 IPPS/LTCH PPS final rule. We refer
readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56787) for our
response to these issues. We note that we will continue to explore ways
in which we can improve the accuracy of the cost report data and
calculated CCRs used in the cost estimation process.
Comment: One commenter requested that CMS use a single diagnostic
radiology CCR to set weights, rather than using the separate CT and MRI
cost centers. The commenter requested that if CMS maintains the
separate CT and MRI cost centers, CMS should not include cost reports
from hospitals that use the ``square foot'' allocation methodology. The
commenter provided an analysis to support its assertion that the CCRs
for CT and MRI are incorrect and are inappropriately reducing payments
under the IPPS. The commenter indicated that the charge-compression
hypothesis has been shown to be false with the use of the separate CT
and MRI cost centers. The commenter discussed problems with cost
allocation to the CT and MRI cost centers. The commenter referenced
discussions in prior IPPS/LTCH PPS rules about this issue. The
commenter acknowledged that CMS did not include a specific proposal in
the FY 2018 proposed rule regarding this issue.
Response: As the commenter noted, we did not make any proposals for
FY 2018 relating to the number of cost centers used to calculate the
relative weights. As noted previously and discussed in detail in prior
rulemaking, we have calculated the IPPS MS-DRG relative weights using
19 CCRs, including distinct CCRs for MRIs and CT scans, since FY 2014.
We refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785)
for a detailed discussion of the basis for establishing these 19 CCRs.
We further note that in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50518 through 50523), we presented data analyses using distinct CCRs
for implantable devices, MRIs, CT scans, and cardiac catheterization.
As we noted, we will continue to explore ways in which we can improve
the accuracy of the cost report data and calculated CCRs used in the
cost estimation process.
F. Changes to Specific MS-DRG Classifications
1. Discussion of Changes to Coding System and Basis for FY 2018 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 Official ICD-10-CM and ICD-10-PCS 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 2018 MS-DRG Updates
CMS has previously encouraged input from our stakeholders
concerning the annual IPPS updates when that input is made available to
us by December 7 of the year prior to the next annual proposed rule
update. For example, to be considered for any updates or changes in FY
2018, comments and suggestions should have been submitted by December
7, 2016. The comments that were submitted in a timely manner for FY
2018 are discussed in this section of the preamble of this final rule.
As CMS works with the public to examine the ICD-10 claims data used for
updates to the ICD-10 MS-DRGs, we would like to examine areas where the
MS-DRGs can be improved. This will require additional time for us to
review requests from the public to make specific updates, analyze
claims data, and consider any proposed updates. As discussed in the
proposed rule, given the need for more time to carefully evaluate
requests and propose updates, we are changing the deadline to request
updates to MS-DRGs to November 1 of each year. This will provide an
additional 5 weeks for the data analysis and review process. Interested
parties should submit any comments and suggestions for FY 2019 by
November 1, 2017, via the CMS MS-DRG Classification Change Requests
Mailbox located at: [email protected].
Following are the changes that we proposed to the MS-DRGs for FY
2018 in the FY 2018 IPPS/LTCH PPS proposed rule. 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. In
other cases, we proposed to maintain the existing MS-DRG classification
based on our analysis of claims data. For the FY 2018 proposed rule,
our MS-DRG analysis was based on ICD-10 claims data from the December
2016 update of the FY 2016 MedPAR file, which contains hospital bills
received through September 30, 2016, for discharges occurring through
September 30, 2016. In our discussion of the proposed MS-DRG
reclassification changes, we referred to our analysis of claims data
from the ``December 2016 update of the FY 2016 MedPAR file''.
In this FY 2018 IPPS/LTCH PPS final rule, we summarize the public
comments we received on our proposals, present our responses, and state
our final policies. For this FY 2018 final rule, we performed limited
additional MS-DRG analysis of claims data. Therefore, all of the data
analysis is based on claims data from the December 2016 update of the
FY 2016 MedPAR file, which contains hospital bills received through
September 30, 2016, for discharges occurring through September 30,
2016, except where specifically noted that it is based on the
[[Page 38011]]
March 2017 update of the FY 2016 MedPAR file, which contains hospital
bills received through March 31, 2017, for discharges occurring through
September 30, 2016.
As explained in previous rulemaking (76 FR 51487), in deciding
whether to propose to make further modification 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 the judgment
of our clinical advisors 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 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 our examination of the claims data, we apply the following
criteria established in FY 2008 (72 FR 47169) to determine if the
creation of a new complication or comorbidity (CC) or major
complication or comorbidity (MCC) subgroup within a base MS-DRG is
warranted:
A reduction in variance of costs of at least 3 percent.
At least 5 percent of the patients in the MS-DRG fall
within the CC or MCC subgroup.
At least 500 cases are in the CC or MCC subgroup.
There is at least a 20-percent difference in average costs
between subgroups.
There is a $2,000 difference in average costs between
subgroups.
In order to warrant creation of a CC or MCC subgroup within a base
MS-DRG, the subgroup must meet all five of the criteria.
Comment: Several commenters expressed concern regarding the use of
ICD-10 claims data for proposed updates to the FY 2018 ICD-10 MS-DRGs
Version 35 and in recalibrating the proposed FY 2018 MS-DRG relative
weights. Commenters reported that the proposed relative weights for
certain MS-DRGs had large reductions when compared to the current FY
2017 ICD-10 MS-DRG Version 34 relative weights. Specifically,
commenters noted that MS-DRG 215 (Other Heart Assist System Implant)
appeared to have the largest decrease by approximately 35% although it
was not the subject of a new proposal in the FY 2018 IPPS/LTCH PPS
proposed rule. According to the commenters, the proposed reductions for
certain relative weights are a direct result of the transition from
ICD-9 to ICD-10 coded claims data that was utilized in setting the
proposed FY 2018 MS-DRG relative weights. The commenters stated that,
if finalized as proposed, these reductions could limit access to the
necessary services for Medicare beneficiaries and urged CMS to consider
phasing in these significant fluctuations that they asserted cause
instability of the weights and hinder providers in their ability to
project anticipated payment rates. Many commenters also recommended
that CMS limit the percentage by which an MS-DRG's relative weight can
be reduced.
Commenters also believed that the fluctuations in the proposed
relative weights do not appear to be consistent with the deliberate
approach CMS has taken to ensure a smooth transition from ICD-9 to ICD-
10. The commenters noted that, in the past, CMS has appropriately
recognized and made efforts to maintain stability within the IPPS
during the transition, such as providing several versions of the ICD-10
MS-DRG Grouper for review, contracting for studies to evaluate the
impact of converting the MS-DRGs to ICD-10 and assembling various
public meetings. The commenters also noted that CMS has observed
broader principles in prior rulemaking with regard to payment stability
such as during the transition from charge-based weights to cost-based
weights in FY 2007 and the conversion of the CMS DRGs to MS-DRGs in FY
2008. Consistent with those past policy refinements and the steps taken
to mitigate fluctuations potentially affecting IPPS payment, commenters
requested that CMS once again exercise its authority to do so. We refer
readers to section II.G. of the preamble of this FY 2018 IPPS/LTCH PPS
final rule for further discussion regarding recalibration of the FY
2018 MS-DRG relative weights, including our response to comments
requesting a transition period for substantial reductions in relative
weights in order to facilitate payment stability.
As stated above, commenters noted that MS-DRG 215 (Other Heart
Assist System Implant) appeared to have the largest decrease by
approximately 35% although it was not the subject of a new proposal in
the FY 2018 IPPS/LTCH PPS proposed rule. We received multiple comments
stating that the American Hospital Association published Coding Clinic
advice that changed coding guidance for external heart assist devices
and that this will result in higher-cost patients with more ICU days
and increased lengths of stay that are assigned to MS-DRG 215 in FY
2018. The commenters noted there will be a substantial difference in
coding for this patient population that is not reflected in the current
cost data used to set the FY 2018 payment rates and a commenter urged
CMS to revise the structure of MS-DRG 215 as an alternative option to
address the decrease in the FY 2018 proposed relative weight for this
MS-DRG. According to the commenter, restructuring this MS-DRG would
more accurately reflect the resources required for cases that will be
assigned to this MS-DRG in FY 2018 and is consistent with the agency's
continuing efforts to ensure accurate replication between the ICD-9 and
ICD-10 based MS-DRGs.
The commenter noted that currently, patients who receive heart
assist devices may be assigned to the Pre-MDC MS-DRGs 001 and 002
(Heart Transplant or Implant of Heart Assist System) or MS-DRG 215
(Other Heart Assist System Implant). The commenter asserted that the
transition from using ICD-9 codes to ICD-10 codes as the basis for MS-
DRG assignment has been impacted by the significant increase in the
number of codes relevant to the assignment of a MS-DRG because ICD-10
is more granular. This commenter recommended that CMS revise the
assignments for the ICD-10 procedure codes grouping to MS-DRG 215 to
accurately replicate the logic used to assign ICD-9 procedure codes to
MS-DRG 215.
An example of how the MS-DRG assignment has been impacted by the
transition to ICD-10 was provided by the commenter who noted that under
the ICD-9 based MS-DRGs, procedure code 37.62 (Insertion of temporary
non-implantable extracorporeal circulatory assist device) was reported
for both the insertion and removal of an external heart assist device
and was assigned to MS-DRG 215. However, under ICD-10, two codes are
required, one for the insertion and one for the removal of the device
where the logic for the combination of those two codes results in
assignment to Pre-MDC MS-DRGs 001 and 002 (Heart transplant or Implant
of Heart Assist System).
[[Page 38012]]
Another example offered by the commenter included ICD-9 procedure code
37.63 (Repair of heart assist system) where, under ICD-10, these cases
could be reported with a code describing revision of an external heart
assist device or these cases could be reported with a combination of
codes, one for the removal and one for the revision of an external
heart assist device. The commenter suggested that the combinations of
insertion and removal codes and the combinations of removal and
revision codes be reassigned from the Pre-MDC MS-DRGs 001 and 002 to
MS-DRG 215 to accurately replicate the logic that was used in the ICD-9
based MS-DRGs.
The commenter performed its own analysis of MS-DRG 215 using the FY
2016 MedPAR data and noted that its findings indicated there was a
decrease in the volume of procedures involving a repair or revision of
a heart assist system device and an increase in the number of insertion
or implantation of heart assist system devices when compared to the FY
2015 MedPAR data. The commenter's findings also indicated that there
was a decrease in the average total standardized charges, as well as a
decrease in the severity of illness of the patients grouping to this
MS-DRG in FY 2016 compared to FY 2015. For example, the commenter noted
that its analysis showed approximately 95 percent of insertion or
implant of heart assist system cases also reported a secondary
diagnosis of an MCC in FY 2015; however, this number dropped to 84
percent in FY 2016. Additionally, the commenter reported that
approximately 73 percent of the revision of heart assist system cases
also reported a secondary diagnosis of an MCC in FY 2015; however, this
number dropped to 67 percent in FY 2016. The commenter stated that the
clinical and usage changes for these devices do not account for this
dramatic 1-year reversal.
Response: We agree with the commenter that under the ICD-9 based
MS-DRGs, procedure code 37.62 (Insertion of temporary non-implantable
extracorporeal circulatory assist device) was reported for both the
insertion and removal of an external heart assist device and was
assigned to MS-DRG 215. We also agree with the commenter that, under
ICD-10, two codes are currently required to describe this same
procedure, one for the insertion and one for the removal of the device
where the logic for the combination of those two codes results in
assignment to Pre-MDC MS-DRGs 001 and 002 (Heart transplant or Implant
of Heart Assist System). Lastly, we agree with the example offered by
the commenter that included ICD-9 procedure code 37.63 (Repair of heart
assist system) where under ICD-10, these cases could be reported with a
code describing revision of a heart assist device or these cases could
be reported with a combination of codes, one for the removal and one
for the revision of a heart assist device.
We also are aware that the American Hospital Association published
Coding Clinic advice that clarified coding and reporting for certain
external heart assist devices due to the technology being approved for
new indications. We point out that coding advice is issued
independently from payment policy. That is, in our annual IPPS
rulemaking, in considering updates to the MS-DRGs, it is typically not
our process to analyze changes in published coding advice. We generally
do not make proposals for MS-DRG reclassification changes in the
absence of data and clinical input from our clinical advisors.
In response to the commenters' request to ensure accurate
replication between the ICD-9 and ICD-10 based MS-DRGs for external
heart assist devices in conjunction with the public comments requesting
that we maintain stability in the MS-DRG relative payment weights, we
note that, for FY 2018 and beyond, we are no longer replicating the
ICD-9 MS-DRGs. As stated in the FY 2018 IPPS/LTCH PPS proposed rule and
this final rule, we are using ICD-10 coded claims data for the first
time to propose changes to the ICD-10 MS-DRG classifications and to
compute the relative weights. Therefore, our proposals and final
policies for FY 2018 are based only on the ICD-10 claims data from the
FY 2016 MedPAR file. However, similar to our efforts in identifying
areas where improvements could be made to better account for severity
of illness and resource utilization during the transition from the CMS
DRGs to the MS-DRGs, we are making concerted efforts to continue
refining the ICD-10 MS-DRGs after transitioning from the ICD-9 MS-DRGs.
We appreciate the commenters' acknowledgement of our efforts to
maintain stability within the IPPS during the transition period to ICD-
10 as noted above. We also acknowledge and appreciate the analysis that
was conducted by the commenter for MS-DRG 215. We believe it is
important to be able to fully evaluate the effects and the impact of
restructuring any MS-DRGs for which all heart assist system procedures
are currently assigned under ICD-10. As part of this evaluation, we
believe it would be advantageous to consider additional ICD-10 coded
claims data as well as changes in a hospital's case-mix (for example,
patient characteristics) to determine if the patients undergoing a
heart assist system procedure or a combination of heart assist system
procedures demonstrate a greater severity of illness and/or increased
treatment difficulty as a result of the surgical approach that is used
(for example, open, percutaneous, percutaneous endoscopic, among
others). Finally, consultation with our clinical advisors is also
important to properly analyze the appropriateness of any modifications
to the MS-DRGs where a heart assist device is currently assigned.
Therefore, in response to the public comments received, we are
planning to review for FY 2019 the current ICD-10 logic for Pre-MDC MS-
DRGs 001 and 002 (Heart Transplant or Implant of Heart Assist System
with and without MCC, respectively), MS-DRG 215 (Other Heart Assist
System Implant) and MS-DRGs 268 and 269 (Aortic and Heart Assist
Procedures Except Pulsation Balloon with and without MCC, respectively)
where procedures involving the heart assist devices are currently
assigned. We refer the reader to the ICD-10 MS-DRG Definitions Manual
version 34, which is available via the Internet on the CMS Web site at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for
complete documentation of the GROUPER logic for Pre-MDC MS-DRGs 001 and
002, MS-DRG 215, and MS-DRGs 268 and 269. We also encourage the public
to submit any comments on restructuring the MS-DRGs for heart assist
system procedures to the CMS MS-DRG Classification Change Request
Mailbox located at: [email protected] by November
1, 2017.
As previously stated, we are making concerted efforts to continue
refining the ICD-10 MS-DRGs after transitioning from the ICD-9 MS-DRGs.
We believe that it is important to include the Pre-MDC MS-DRGs and the
other MS-DRGs comprised of heart assist system procedures as part of
our comprehensive review of each MDC and the corresponding MS-DRGs
assigned to them. After consideration of the public comments we
received, we are maintaining the current structure of MS-DRG 215 for FY
2018, under the ICD-10 MS-DRGs Version 35.
We are making the FY 2018 ICD-10 MS-DRG GROUPER and Medicare Code
Editor (MCE) Software Version 35 available to the public on our CMS Web
[[Page 38013]]
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html through the FY 2018 IPPS Final Rule Home
Page.
2. MDC 1 (Diseases and Disorders of the Nervous System)
a. Functional Quadriplegia
We received a request to reassign cases identified by diagnosis
code R53.2 (Functional quadriplegia) from MS-DRGs 052 and 053 (Spinal
Disorders and Injuries with and without CC/MCC, respectively). The
requestor stated that because functional quadriplegia does not involve
any spinal injury or pathology, cases identified by the diagnosis code
should not be assigned to MS-DRGs 052 and 053. However, the requestor
did not suggest an alternative MS-DRG assignment.
Section I.C.18.f. of the FY 2017 ICD-10-CM Official Coding
Guidelines addresses the coding for the diagnosis of functional
quadriplegia. Section I.C.18.f. states that functional quadriplegia
(described by diagnosis code R53.2) is the lack of ability to use one's
limbs or to ambulate due to extreme debility. The condition is not
associated with neurologic deficit or injury, and diagnosis code R53.2
should not be used to identify cases of neurologic quadriplegia. In
addition, the Guidelines state that the diagnosis code should only be
assigned if functional quadriplegia is specifically documented by a
physician in the medical record, and the diagnosis of functional
quadriplegia is not associated with a neurologic deficit or injury. A
physician may document the diagnosis of functional quadriplegia as
occurring with a variety of conditions.
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19817 through 19818), we examined claims data from the December 2016
update of the FY 2016 MedPAR file on cases reporting diagnosis code
R53.2 in MS-DRGs 052 and 053. Our findings are shown in the table
below.
Cases Reporting Functional Quadriplegia in MS-DRGs 052 and 053
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 052--All cases........................................... 865 5.4 $10,247
MS-DRG 052--Cases reporting diagnosis code R53.2................ 63 4.9 6,420
MS-DRG 053--All cases........................................... 239 3.3 6,326
MS-DRG 053-- Cases reporting diagnosis code R53.2............... 16 3.3 2,318
----------------------------------------------------------------------------------------------------------------
As shown in the table above, for MS-DRG 052, there were a total of
865 cases with an average length of stay of 5.4 days and average costs
of $10,247. Of the 865 cases in MS-DRG 052, there were 63 cases that
reported a principal diagnosis of functional quadriplegia, with an
average length of stay of 4.9 days and average costs of $6,420. For MS-
DRG 053, there were a total of 239 cases, with an average length of
stay of 3.3 days and average costs of $6,326. Of the 239 cases in MS-
DRG 053, there were 16 cases that reported a principal diagnosis of
functional quadriplegia, with an average length of stay of 3.3 days and
average costs of $2,318.
To address the request to reassign cases reporting a diagnosis of
functional quadriplegia to a different MS-DRG, we reviewed the data for
a total of 79 cases (63 cases in MS-DRG 052 and 16 cases in MS-DRG 053)
that reported a principal diagnosis of functional quadriplegia in MS-
DRGs 052 and 053. As shown in the table above, our data analysis
demonstrates that the average costs for these 79 cases are lower than
the average costs of all cases in MS-DRGs 052 and 053 ($6,420 compared
to $10,247 for all cases in MS-DRG 052, and $2,318 compared to $6,326
for all cases in MS-DRG 053), and the average lengths of stay are
shorter for cases reporting a diagnosis of functional quadriplegia in
MS-DRG 052 (4.9 days compared to 5.4 days for all cases in MS-DRG 052),
but equal for cases in MS-DRG 053 (3.3 days for cases reporting a
diagnosis of functional quadriplegia and for all cases).
As we discussed in the proposed rule, our clinical advisors
reviewed this issue and agreed that a diagnosis of functional
quadriplegia does not involve a spinal disorder or injury, and may be
associated with, or the result of, a variety of underlying conditions.
Our clinical advisors also agreed that it is not clinically appropriate
to include cases reporting a diagnosis of functional quadriplegia
within MS-DRGs 052 and 053 because these cases do not involve a spinal
disorder or injury. Therefore, given the fact that functional
quadriplegia can be the result of a variety of other conditions, we
reviewed the MS-DRGs in order to identify a more appropriate placement
for cases reporting this diagnosis. Our clinical advisors recommended
assigning cases representing a diagnosis of functional quadriplegia
from MS-DRGs 052 and 053 to MS-DRGs 091, 092, and 093 (Other Disorders
of Nervous System with MCC, with CC, and without CC/MCC, respectively).
Within each MDC, there are MS-DRGs that describe a variety of other
conditions that do not have the clinical characteristics of the more
specific MS-DRGs. In this case, MS-DRGs 091, 092, and 093 describe a
variety of other disorders of the nervous system that are not
clinically similar in characteristics to the disorders described by MS-
DRGs 052 and 053. We stated in the proposed rule that our clinical
advisors believe that MS-DRGs 091, 092, and 093 are more appropriate
MS-DRG assignments for cases representing a diagnosis of functional
quadriplegia.
We examined claims data from the December 2016 update of the FY
2016 MedPAR file on cases in MS-DRGs 091, 092, and 093. Our findings
are shown in the table below.
Cases in MS-DRGs 091, 092, and 093
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 091--All cases........................................... 12,607 5.6 $10,815
MS-DRG 092--All cases........................................... 19,392 3.9 6,706
[[Page 38014]]
MS-DRG 093--All cases........................................... 8,120 2.7 5,253
----------------------------------------------------------------------------------------------------------------
As shown in the table above, for MS-DRG 091, there were a total of
12,607 cases, with an average length of stay of 5.6 days and average
costs of $10,815. For MS-DRG 092, there were a total of 19,392 cases,
with an average length of stay of 3.9 days and average costs of $6,706.
For MS-DRG 093, there were a total of 8,120 cases, with an average
length of stay of 2.7 days and average costs of $5,253. As stated
earlier, of the 865 total cases in MS-DRG 052, there were 63 cases that
reported a principal diagnosis of functional quadriplegia, with an
average length of stay of 4.9 days and average costs of $6,420. Of the
239 total cases in MS-DRG 053, there were 16 cases that reported a
principal diagnosis of functional quadriplegia, with an average length
of stay of 3.3 days and average costs of $2,318. The average lengths of
stay for cases reporting a diagnosis of functional quadriplegia in MS-
DRGs 052 and 053 are similar to the average lengths of stay for cases
found in MS-DRGs 091, 092 and 093 (4.9 days and 3.3 days for cases in
MS-DRGs 052 and 053, respectively, compared to 5.6 days, 3.9 days, and
2.7 days, respectively, for cases in MS-DRGs 091, 092, and 093). The
average costs for cases reporting a diagnosis of functional
quadriplegia in MS-DRGs 052 and 053 are $6,420 and $2,318,
respectively, compared to $10,815, $6,706, and $5,253 for all cases in
MS-DRGs 091, 092, and 093. The average costs for cases reporting a
diagnosis of functional quadriplegia in MS-DRG 053 are lower than the
average costs for all cases in MS-DRG 093 without a CC or MCC ($2,318
compared to $5,253, respectively). The average costs for cases
reporting a diagnosis of functional quadriplegia in MS-DRG 052 are
$6,420, which is lower than the average costs of $10,815 for all cases
in MS-DRG 091, but close to the average costs of $6,706 for all cases
in MS-DRG 092. We stated in the proposed rule that while we acknowledge
that the average costs for cases reporting a diagnosis of functional
quadriplegia are lower than those cases within MS-DRGs 091, 092, and
093, as stated earlier, the average costs of cases reporting a
diagnosis of functional quadriplegia also are lower than the average
costs of all cases in MS-DRGs 052 and 053 where these cases are
currently assigned.
Our clinical advisors reviewed the clinical issues as well as the
claims data for MS-DRGs 052, 053, 091, 092, and 093. As a result of
this review, they recommended that cases reporting a diagnosis of
functional quadriplegia be reassigned from MS-DRGs 052 and 053 to MS-
DRGs 091, 092, and 093 because the current MS-DRG assignment is not
clinically appropriate. We stated in the proposed rule that our
clinical advisors stated that reassigning these cases to MS-DRGs 091,
092, and 093 is more appropriate because this set of MS-DRGs includes a
variety of nervous system disorders that are not appropriately
classified to more specific MS-DRGs within MDC 1. Therefore, in the FY
2018 IPPS/LTCH PPS proposed rule (82 FR 19817 through 19818), we
proposed to reassign cases identified by diagnosis code R53.2 from MS-
DRGs 052 and 053 to MS-DRGs 091, 092, and 093 for FY 2018.
We invited public comments on our proposal.
Comment: Several commenters supported CMS' statement that diagnosis
code R53.2 does not belong in MS-DRGs 052 and 053 because this
condition does not involve a spinal disorder or injury. The commenters
supported reassigning the code from MS-DRGs 052 and 053. However, one
commenter suggested that instead of assigning diagnosis code R53.2 to
MS DRGs 091, 092, and 093 (Other Disorders of Nervous System with MCC,
with CC, and without CC/MCC, respectively) for FY 2018, CMS instead
reassign it to MS-DRGs 947 and 948 (Signs and Symptoms with MCC and
without MCC, respectively). The commenter stated that the ICD-10-CM
code for functional quadriplegia, R53.2, is located in Chapter 18,
Symptoms, Signs and Abnormal Findings because it can be the result of a
variety of underlying conditions. Therefore, the commenter believed it
was not appropriate to classify this diagnosis as a nervous system
disorder. The commenter pointed out that other codes in ICD-10-CM
category R53 are assigned to MS-DRGs 947 and 948. Therefore, the
commenter believed that it was appropriate to reassign code R53.2 from
MS-DRGs 052 and 053 to MS-DRGs 947 and 948.
Response: We agree with the commenter that diagnosis code R53.2 is
located in Chapter 18, Symptoms, Signs and Abnormal Findings because it
can be the result of a variety of underlying conditions. We also agree
that this code cannot be labeled as a nervous system disorder.
Therefore, we agree that there is merit in reassigning diagnosis code
R53.2 where other codes in category R53 are assigned in MS-DRGs 947 and
948. We examined claims data from the December 2016 update of the FY
2016 MedPAR file on cases in MS-DRGs 947 and 948. Our findings are
shown in the table below.
Cases in MS-DRGs 947 and 948
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 947-All cases............................................ 10,799 4.7 $8,225
MS-DRG 948-All cases............................................ 36,123 3.3 5,494
----------------------------------------------------------------------------------------------------------------
As stated earlier, of the 865 total cases in MS-DRG 052, there were
63 cases that reported a principal diagnosis of functional
quadriplegia, with an average length of stay of 4.9 days and average
costs of $6,420. This compares to all cases in MS-DRG 947 which had an
average length of stay of 4.7 days and average costs of $8,225.
Therefore, the average length of stay for functional quadriprlegia
cases in MS-DRG 052 was 0.2 days longer and the average costs
[[Page 38015]]
were $1,805 lower than all cases in MS-DRG 947. Of the 239 total cases
in MS-DRG 053, there were 16 cases that reported a principal diagnosis
of functional quadriplegia, with an average length of stay of 3.3 days
and average costs of $2,318. This compares to all cases in MS-DRG 948
which had an average length of stay of 3.3 days and average costs of
$5,494. Therefore, the average length of stay for functional
quadriprlegia cases in MS-DRG 053 is the same as all cases in MS-DRG
948 and the average costs are $3,176 lower than all cases in MS-DRG
948. The average costs of functional quadriplegia cases are lower than
all cases in MS-DRGs 091, 092, and 093 as well as in MS-DRGs 947 and
948. The average length of stay of functional quadriplegia cases are
similar to those in MS-DRGs 947 and 948. We agree with the commenter
that the more appropriate MS-DRG assignment would be MS-DRGs 947 and
948 because these MS-DRGs capture similar symptom codes.
Our clinical advisors reviewed this clinical issue along with the
claims data for MS-DRGs 947 and 948. Our clinical advisors agree that
because diagnosis code R53.2 is a symptom code that could be the result
of a variety of underlying conditions, it would not be appropriate to
assign it to nervous system MS-DRGs such as MS DRGs 091, 092, and 093
as we proposed. Our clinical advisors agreed with the commenter that
this symptom code should be assigned to MS-DRGs 947 and 948 where other
symptom codes are assigned.
After consideration of the public comments that we received and the
advice of our clinical advisors, we are finalizing the assignment of
code R53.2 (Functional quadriplegia) to MS-DRGs 947 and 948 (Signs and
Symptoms with MCC and without MCC, respectively).
b. Responsive Neurostimulator (RNS(copyright)) System
We received a request to modify the MS-DRG assignment for cases
involving the use of the RNS(copyright) neurostimulator, a
cranially implanted neurostimulator that is a treatment option for
persons diagnosed with medically intractable epilepsy. Cases involving
the use of the RNS(copyright) neurostimulator are assigned
to MS-DRG 023 (Craniotomy with Major Device Implant or Acute Complex
Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or
Chemo Implant) and MS-DRG 024 (Craniotomy with Major Device Implant or
Acute Complex Central Nervous System (CNS) Principal Diagnosis (PDX)
without MCC).
Cases involving the use of the RNS(copyright)
neurostimulator generator and leads are captured within the
descriptions of four ICD-10-PCS codes. ICD-10-PCS code 0NH00NZ
(Insertion of neurostimulator generator into skull, open approach)
captures the use of the neurostimulator generator, and the other three
ICD-10-PCS codes, 00H00MZ (Insertion of neurostimulator lead into
brain, open approach), 00H03MZ (Insertion of neurostimulator lead into
brain, percutaneous approach), and 00H04MZ (Insertion of
neurostimulator lead into brain, percutaneous endoscopic approach)
describe the insertions of the leads, depending on the approach used.
The combination of an ICD-10-PCS code capturing the use of the
generator and another ICD-10-PCS code describing the specific approach
used to insert the leads would capture the performance of the entire
procedure.
The requestor stated that the RNS(copyright)
neurostimulator received FDA pre-market approval on November 14, 2013.
The RNS(copyright) neurostimulator includes a cranially
implanted programmable neurostimulator connected to one or two depth
and/or subdural cortical strip leads that are surgically placed in or
on the brain at the seizure focus. The neurostimulator and leads are
typically implanted during a single acute inpatient hospital procedure
at a Comprehensive Epilepsy Center (CEC). The implanted neurostimulator
continuously monitors brain electrical activity and is programmed by a
physician to detect abnormal patterns of electrical activity that the
physician believes may lead to seizures (epileptiform activity). In
response to the detection of epileptiform activity, the device delivers
brief, mild electrical pulses (responsive stimulation) to one or two
epileptic foci. Detection and stimulation parameters are adjusted
noninvasively by the physician to optimize control of epileptic
seizures for each patient.
As the neurostimulator monitors brain activity, electrocorticograms
(ECoGs) recorded immediately before and after certain events are stored
for later review by the physician. The physician reviews the stored
recordings to see the detections and the effects of stimulation. The
physician can reprogram the neurostimulator at an in-person office
appointment to change detection and stimulation settings based on this
information, as well as review the patient's seizures.
The RNS(copyright) neurostimulator was approved for new
technology add-on payments for FY 2015 and FY 2016, and new technology
add-on payments were discontinued for FY 2017. The new technology add-
on payment application was discussed in the FY 2015 IPPS/LTCH PPS
proposed and final rules (79 FR 28051 through 28054 and 79 FR 49946
through 49950, respectively), the FY 2016 IPPS/LTCH PPS proposed and
final rules (80 FR 24427 through 24448 and 80 FR 49442 through 49443,
respectively), and the FY 2017 IPPS/LTCH PPS proposed and final rules
(81 FR 25036 through 25037 and 81 FR 56882 through 56884,
respectively).
The requestor suggested the following three options for MS-DRG
assignment updates for cases involving the RNS(copyright)
neurostimulator:
Create new MS-DRGs for cases involving the use of the
RNS(copyright) neurostimulator. The requestor suggested MS-
DRG XXX (Cranially Implanted Neurostimulators with MCC) and MS-DRG XXX
(Cranially Implanted Neurostimulators without MCC) as possible MS-DRG
titles. The requestor acknowledged that the number of cases assigned to
this MS-DRG would be low, but anticipated that the number of cases
would increase in the future.
Reassign cases involving the use of the
RNS(copyright) neurostimulator to MS-DRGs 020 and 021
(Intracranial Vascular Procedures with Principal Diagnosis of
Hemorrhage with MCC, with CC, respectively) and update the MS-DRG logic
and titles. The requestor asked CMS to reassign all cases involving the
use of the RNS(copyright) neurostimulator that currently map
to MS-DRG 023 (Craniotomy with Major Device Implant/Acute Complex CNS
Principal Diagnosis with MCC or Chemo Implant) to MS-DRG 20, and change
the title of MS-DRG 20 to ``Intracranial Vascular Procedures with
Principal Diagnosis of Hemorrhage or Cranially Implanted
Neurostimulator with MCC.'' In addition, the requestor asked CMS to
reassign all cases involving the use of the RNS(copyright)
neurostimulator that currently map to MS-DRG 024 (Craniotomy with Major
Device Implant/Acute Complex CNS Principal Diagnosis without MCC) to
MS-DRG 021, and change the title of MS-DRG 021 to ``Intracranial
Vascular Procedures with Principal Diagnosis of Hemorrhage with CC or
Cranially Implanted Neurostimulator without MCC''. The requestor
believed that the majority of cases involving the use of the
RNS(copyright) neurostimulator that map to MS-DRG 024 do not
include a secondary diagnosis that is classified as a CC, and the
average cost of cases involving the use of the
RNS(copyright) neurostimulator without a CC is significantly
higher than the average cost of all cases in MS-DRG 022 (Intracranial
Vascular Procedures with Principal Diagnosis of Hemorrhage
[[Page 38016]]
without CC/MCC). Therefore, the requestor stated that it would not be
adequate to assign cases involving the use of the
RNS(copyright) neurostimulator without a CC to MS-DRG 022.
Reassign cases involving the use of the
RNS(copyright) neurostimulator to other higher paying MS-
DRGs that would provide adequate payment.
The requestor stated that it had analyzed data from two sources,
which demonstrated that the average cost of cases involving the use of
the RNS(copyright) neurostimulator was higher than the
average cost of all cases in MS-DRGs 023 and 024 (the current MS-DRGs
for cases involving the use of the RNS(copyright)
neurostimulator). The requestor indicated that the data used for its
analysis was obtained from hospitals performing the procedure, as well
as from the FY 2015 MedPAR file.
The requestor also asked that CMS examine the cases representing
cranially implanted neurostimulators and leads that were inserted for
the treatment of epilepsy. The requestor pointed out that
neurostimulators also are used in the treatment of movement disorders
such as Parkinson's disease, essential tremor, or dystonia. The
requestor asked that CMS identify those cases with a principal
diagnosis of epilepsy, and identified the following ICD-10-CM codes
that it believed were representative of potential epilepsy cases.
------------------------------------------------------------------------
ICD-10-CM code ICD-10-CM code title
------------------------------------------------------------------------
G40.001................... Localization-related (focal) (partial)
idiopathic epilepsy and epileptic syndromes
with seizures of localized onset, not
intractable, with status epilepticus.
G40.009................... Localization-related (focal) (partial)
idiopathic epilepsy and epileptic syndromes
with seizures of localized onset, not
intractable, without status epilepticus.
G40.011................... Localization-related (focal) (partial)
idiopathic epilepsy and epileptic syndromes
with seizures of localized onset,
intractable, with status epilepticus.
G40.019................... Localization-related (focal) (partial)
idiopathic epilepsy and epileptic syndromes
with seizures of localized onset,
intractable, without status epilepticus.
G40.101................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with simple partial seizures, not
intractable, with status epilepticus.
G40.119................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with simple partial seizures,
intractable, without status epilepticus.
G40.201................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with complex partial seizures,
not intractable, with status epilepticus.
G40.209................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with complex partial seizures,
not intractable, without status
epilepticus.
G40.211................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with complex partial seizures,
intractable, with status epilepticus.
G40.219................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with complex partial seizures,
intractable, without status epilepticus.
G40.301................... Generalized idiopathic epilepsy and
epileptic syndromes, not intractable, with
status epilepticus.
G40.309................... Generalized idiopathic epilepsy and
epileptic syndromes, not intractable,
without status epilepticus.
G40.311................... Generalized idiopathic epilepsy and
epileptic syndromes, intractable, with
status epilepticus.
G40.319................... Generalized idiopathic epilepsy and
epileptic syndromes, intractable, without
status epilepticus.
G40.401................... Other generalized epilepsy and epileptic
syndromes, not intractable, with status
epilepticus.
G40.409................... Other generalized epilepsy and epileptic
syndromes, not intractable, without status
epilepticus.
G40.411................... Other generalized epilepsy and epileptic
syndromes, intractable, with status
epilepticus.
G40.419................... Other generalized epilepsy and epileptic
syndromes, intractable, without status
epilepticus.
G40.501................... Epileptic seizures related to external
causes, not intractable, with status
epilepticus.
G40.509................... Epileptic seizures related to external
causes, not intractable, without status
epilepticus.
G40.801................... Other epilepsy, not intractable, with status
epilepticus.
G40.802................... Other epilepsy, not intractable, without
status epilepticus.
G40.803................... Other epilepsy, intractable, with status
epilepticus.
G40.804................... Other epilepsy, intractable, without status
epilepticus.
G40.811................... Lennox-Gastaut syndrome, not intractable,
with status epilepticus.
G40.812................... Lennox-Gastaut syndrome, not intractable,
without status epilepticus.
G40.813................... Lennox-Gastaut syndrome, intractable, with
status epilepticus.
G40.814................... Lennox-Gastaut syndrome, intractable,
without status epilepticus.
G40.821................... Epileptic spasms, not intractable, with
status epilepticus.
G40.822................... Epileptic spasms, not intractable, without
status epilepticus.
G40.823................... Epileptic spasms, intractable, with status
epilepticus.
G40.824................... Epileptic spasms, intractable, without
status epilepticus.
G40.89.................... Other seizures.
G40.901................... Epilepsy, unspecified, not intractable, with
status epilepticus.
G40.909................... Epilepsy, unspecified, not intractable,
without status epilepticus.
G40.911................... Epilepsy, unspecified, intractable, with
status epilepticus.
G40.919................... Epilepsy, unspecified, intractable, without
status epilepticus.
------------------------------------------------------------------------
MS-DRGs 023 and 024 contain a number of cases representing
neurostimulator generator and lead code combinations that are captured
under a list referred to as ``Major Device Implant.'' The
neurostimulator generators on this list are inserted into the skull, as
well as into the subcutaneous areas of the chest, back, or abdomen. The
leads are all inserted into the brain. The RNS(copyright)
neurostimulator generators are inserted into the skull and the leads
are inserted into the brain. The following three ICD-10-PCS code
combinations capture the use of the
[[Page 38017]]
RNS(copyright) neurostimulator and leads that would
determine an assignment of a case to MS-DRGs 023 and 024, as shown in
the ``Major Device Implant'' list:
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H00MZ (Insertion of
neurostimulator lead into brain, open approach);
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H03MZ (Insertion of
neurostimulator lead into brain, percutaneous approach); and
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H04MZ (Insertion of
neurostimulator lead into brain, percutaneous endoscopic approach).
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19818 through 19822), we examined claims data from the December 2016
update of the FY 2016 MedPAR file for all cases representing the use of
a neurostimulator in MS-DRGs 023 and 024 listed under the ``Major
Device Implant'' list. As requested, we also examined the cases
represented by the three neurostimulator code combinations, which
capture the use of the RNS(copyright) neurostimulator that
are a subset of the cases listed on the ``Major Device Implant'' list
using the code combinations listed above, and that had a principal
diagnosis of epilepsy from the list supplied by the requestor. The
following tables show our findings for those cases in MS-DRGs 023 and
024 as well as findings for cases in MS-DRGs 020 and 021.
MS-DRGs 023 and 024
[Neurostimulator Cases]
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 023--All cases........................................... 6,723 10.9 $39,014
MS-DRG 023--Cases with neurostimulators (Major Device Implant 21 6.7 48,821
list cases)....................................................
MS-DRG 023--Cases with neurostimulator generators inserted into 7 8.0 63,365
skull (includes cases involving the use of the RNS(copyright)
neurostimulator) and cases with a principal diagnosis of
epilepsy.......................................................
MS-DRG 024--All cases........................................... 2,275 5.5 27,574
MS-DRG 024--Cases with neurostimulators (Major Device Implant 394 2.1 31,669
list cases)....................................................
MS-DRG 024--Cases with neurostimulator generators inserted into 54 4.3 51,041
skull (includes cases involving the use of the RNS(copyright)
neurostimulator) and cases with a principal diagnosis of
epilepsy.......................................................
----------------------------------------------------------------------------------------------------------------
Cases in MS-DRGs 020 and 021
----------------------------------------------------------------------------------------------------------------
Number of Average
MS-DRG cases length of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 020-All cases............................................ 1,372 16.7 $72,926
MS-DRG 021-All cases............................................ 336 13.5 54,385
----------------------------------------------------------------------------------------------------------------
As shown by the table above, for MS-DRG 023, we identified a total
of 6,723 cases, with an average length of stay of 10.9 days and average
costs of $39,014. Of the 6,723 cases in MS-DRG 023, there were 21 cases
representing the implantation of any type of neurostimulator generator
with an average length of stay of 6.7 days, and average costs of
$48,821. Of the 21 neurostimulator generator cases, there were 7 cases
with the neurostimulator generators inserted into skull (including
cases involving the use of the RNS(copyright)
neurostimulator) and a principal diagnosis of epilepsy with an average
length of stay of 8.0 days and average costs of $63,365. For MS-DRG
024, we identified a total of 2,275 cases, with an average length of
stay of 5.5 days and average costs of $27,574. Of the 2,275 cases in
MS-DRG 024, there were 394 cases representing the implantation of any
type of neurostimulator generator with an average length of stay of 2.1
days and average costs of $31,669. Of the 394 neurostimulator generator
cases, there were 54 cases with the neurostimulator generators inserted
into skull (including cases involving the use of the
RNS(copyright) neurostimulator) and a principal diagnosis of
epilepsy with an average length of stay of 4.3 days and average costs
of $51,041.
There were only 61 cases involving the use of the
RNS(copyright) neurostimulator with a principal diagnosis of
epilepsy in MS-DRGs 023 and 024 (7 and 54, respectively). As we stated
in the proposed rule, our clinical advisors reviewed this issue, and
agreed that this number of cases is too small on which to base a
rationale for creating a new MS-DRG. Basing a new MS-DRG on such a
small number of cases (61) could lead to distortion in the relative
payment weights for the MS-DRG because several expensive cases could
impact the overall relative payment weight. Having larger clinical
cohesive groups within an MS-DRG provides greater stability for annual
updates to the relative payment weights.
We also examined the possibility of reassigning cases involving the
use of the RNS(copyright) neurostimulator to MS-DRGs 020 and
021. As the table above shows, for MS-DRG 020, there were a total of
1,372 cases with an average length of stay of 16.7 days and average
costs of $72,926. For MS-DRG 021, there were a total of 336 cases with
an average length of stay of 13.5 days and average costs of $54,385.
The cases in MS-DRG 023 with neurostimulator generators inserted into
skull (including cases involving the use of the
RNS(copyright) neurostimulator) and a principal diagnosis of
epilepsy have average costs that are $9,561 lower than that for all
cases in MS-DRG 020 ($63,365 compared to $72,926), and the average
length of stay is 8.7 days shorter (8.0 days compared to 16.7 days). We
stated in the proposed rule that we do not believe these data support
reassigning the cases in MS-DRG 023 with neurostimulator generators
inserted into the skull (including cases involving the use of the
RNS(copyright) neurostimulator) and a principal
[[Page 38018]]
diagnosis of epilepsy to MS-DRG 020. While the cases in MS-DRG 024 with
neurostimulator generators inserted into the skull (including cases
involving the use of the RNS(copyright) neurostimulator) and
a principal diagnosis of epilepsy have average costs that are similar
to the average costs of cases in MS-DRG 021 ($51,041 compared to
$54,385), they have an average length of stay that is 9.2 days shorter
(4.3 days compared to 13.5 days). Our clinical advisors reviewed the
clinical issues and the claims data and, as we discussed in the
proposed rule, did not support reassigning the cases with
neurostimulator generators inserted into skull (including cases
involving the use of the RNS(copyright) neurostimulator) and
a principal diagnosis of epilepsy from MS-DRGs 023 and 024 to MS-DRGs
020 and 021. Our clinical advisors pointed out that the cases in MS-
DRGs 020 and 021 have a principal diagnosis of a hemorrhage. The
RNS(copyright) neurostimulator generators are not used to
treat patients with diagnosis of a hemorrhage. Therefore, our clinical
advisors stated that it was inappropriate to reassign cases
representing a principal diagnosis of epilepsy to an MS-DRG that
contains cases that represent the treatment of intracranial hemorrhage.
They also stated that the differences in average length of stay and
average costs support this recommendation.
We then explored alternative MS-DRG assignments, as was requested.
We noted that the 7 cases with the neurostimulator generators inserted
into the skull (including cases involving the use of the
RNS(copyright) neurostimulator) and a principal diagnosis of
epilepsy had an average length of stay of 8.0 days and average costs of
$63,365, as compared to the 6,723 cases in MS-DRG 023 that had an
average length of stay of 10.9 days and average costs of $39,014. While
these neurostimulator cases had average costs that were $24,351 higher
than the average costs of all cases in MS-DRG 023, there were only a
total of 7 cases. There may have been other factors contributing to the
higher costs. We noted that the 54 cases with the neurostimulator
generators inserted into skull (including cases involving the use of
the RNS(copyright) neurostimulator) and a principal
diagnosis of epilepsy in MS-DRG 024 had average costs of $51,041 and an
average length of stay of 4.3 days, compared to average costs of
$27,574 and average length of stay of 5.5 days for all cases in MS-DRG
024. By reassigning all cases with the neurostimulator generators
inserted into the skull (including cases involving the use of the
RNS(copyright) neurostimulator) and a principal diagnosis of
epilepsy to MS DRG 023, even if there is not a MCC present, the cases
would receive higher payment. The average costs of MS-DRG 023 were
$39,014, compared to the average costs of $51,041 for the cases with
the neurostimulator generators inserted into skull (including cases
involving the use of the RNS(copyright) neurostimulator) and
a principal diagnosis of epilepsy in MS-DRG 024. Our clinical advisors
reviewed the clinical issues and the claims data, and supported the
recommendation to reassign the cases with the neurostimulator
generators inserted into skull (including cases involving the use of
the RNS(copyright) neurostimulator) and a principal
diagnosis of epilepsy to MS-DRG 023, even if there is not a MCC
reported. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19818 through 19822), we proposed to reassign all cases with a
principal diagnosis of epilepsy from the epilepsy diagnosis list
provided earlier, and one of the following ICD-10-PCS code combinations
capturing cases with the neurostimulator generators inserted into the
skull (including cases involving the use of the
RNS(copyright) neurostimulator), to MS-DRG 023, even if
there is no MCC reported:
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H00MZ (Insertion of
neurostimulator lead into brain, open approach);
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H03MZ (Insertion of
neurostimulator lead into brain, percutaneous approach); and
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H04MZ (Insertion of
neurostimulator lead into brain, percutaneous endoscopic approach).
We also proposed to change the title of MS-DRG 023 from
``Craniotomy with Major Device Implant or Acute Complex Central Nervous
System (CNS) Principal Diagnosis (PDX) with MCC or Chemo Implant'' to
``Craniotomy with Major Device Implant or Acute Complex Central Nervous
System (CNS) Principal Diagnosis (PDX) with MCC or Chemotherapy Implant
or Epilepsy with Neurostimulator'' to reflect the proposed
modifications to MS-DRG assignments.
We invited public comments on our proposals.
Comment: Commenters supported CMS' proposal to reassign cases with
insertion of a neurostimulator generator and a principal diagnosis of
epilepsy to MS-DRG 023. The commenters also agreed with the proposed
change in the title of MS-DRG 023. The commenters stated that the
updates were necessary for Comprehensive Epilepsy Centers to be able to
offer the RNS(copyright) neurostimulator. One commenter who
supported this MS-DRG update recommended that codes in subcategories
G40.A and G40.B be included in the list of epilepsy diagnosis codes
classified to MS-DRG 023 because these subcategory codes are also
epilepsy codes.
Response: We appreciate the commenters' support for our
recommendations. We identified the following list of epilepsy codes
that are included under categories G40.A and G40.B.
G40.A01 Absence epileptic syndrome, not intractable, with
status epilepticus
G40.A09 Absence epileptic syndrome, not intractable, without
status epilepticus
G40.A11 Absence epileptic syndrome, intractable, with status
epilepticus
G40.A19 Absence epileptic syndrome, intractable, without
status epilepticus
G40.B01 Juvenile myoclonic epilepsy, not intractable, with
status epilepticus
G40.B09 Juvenile myoclonic epilepsy, not intractable, without
status epilepticus
G40.B11 Juvenile myoclonic epilepsy, intractable, with status
epilepticus
G40.B19 Juvenile myoclonic epilepsy, intractable, without
status epilepticus
We agree that the codes listed above are also epilepsy codes and
should be added to the list of epilepsy codes assigned to MS-DRG 023
because they also capture a type of epilepsy. Our clinical advisors
reviewed this issue and agree with adding the additional epilepsy
codes.
For FY 2018, the complete list of epilepsy codes assigned to MS-DRG
023 under our finalized policy is as follows:
------------------------------------------------------------------------
ICD-10-CM code ICD-10-CM code title
------------------------------------------------------------------------
G40.001................... Localization-related (focal) (partial)
idiopathic epilepsy and epileptic syndromes
with seizures of localized onset, not
intractable, with status epilepticus.
[[Page 38019]]
G40.009................... Localization-related (focal) (partial)
idiopathic epilepsy and epileptic syndromes
with seizures of localized onset, not
intractable, without status epilepticus.
G40.011................... Localization-related (focal) (partial)
idiopathic epilepsy and epileptic syndromes
with seizures of localized onset,
intractable, with status epilepticus.
G40.019................... Localization-related (focal) (partial)
idiopathic epilepsy and epileptic syndromes
with seizures of localized onset,
intractable, without status epilepticus.
G40.101................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with simple partial seizures, not
intractable, with status epilepticus.
G40.119................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with simple partial seizures,
intractable, without status epilepticus.
G40.201................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with complex partial seizures,
not intractable, with status epilepticus.
G40.209................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with complex partial seizures,
not intractable, without status
epilepticus.
G40.211................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with complex partial seizures,
intractable, with status epilepticus.
G40.219................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with complex partial seizures,
intractable, without status epilepticus.
G40.301................... Generalized idiopathic epilepsy and
epileptic syndromes, not intractable, with
status epilepticus.
G40.309................... Generalized idiopathic epilepsy and
epileptic syndromes, not intractable,
without status epilepticus.
G40.311................... Generalized idiopathic epilepsy and
epileptic syndromes, intractable, with
status epilepticus.
G40.319................... Generalized idiopathic epilepsy and
epileptic syndromes, intractable, without
status epilepticus.
G40.A01................... Absence epileptic syndrome, not intractable,
with status epilepticus.
G40.A09................... Absence epileptic syndrome, not intractable,
without status epilepticus.
G40.A11................... Absence epileptic syndrome, intractable,
with status epilepticus.
G40.A19................... Absence epileptic syndrome, intractable,
without status epilepticus.
G40.B01................... Juvenile myoclonic epilepsy, not
intractable, with status epilepticus.
G40.B09................... Juvenile myoclonic epilepsy, not
intractable, without status epilepticus.
G40.B11................... Juvenile myoclonic epilepsy, intractable,
with status epilepticus.
G40.B19................... Juvenile myoclonic epilepsy, intractable,
without status epilepticus.
G40.401................... Other generalized epilepsy and epileptic
syndromes, not intractable, with status
epilepticus.
G40.409................... Other generalized epilepsy and epileptic
syndromes, not intractable, without status
epilepticus.
G40.411................... Other generalized epilepsy and epileptic
syndromes, intractable, with status
epilepticus.
G40.419................... Other generalized epilepsy and epileptic
syndromes, intractable, without status
epilepticus.
G40.501................... Epileptic seizures related to external
causes, not intractable, with status
epilepticus.
G40.509................... Epileptic seizures related to external
causes, not intractable, without status
epilepticus.
G40.801................... Other epilepsy, not intractable, with status
epilepticus.
G40.802................... Other epilepsy, not intractable, without
status epilepticus.
G40.803................... Other epilepsy, intractable, with status
epilepticus.
G40.804................... Other epilepsy, intractable, without status
epilepticus.
G40.811................... Lennox-Gastaut syndrome, not intractable,
with status epilepticus.
G40.812................... Lennox-Gastaut syndrome, not intractable,
without status epilepticus.
G40.813................... Lennox-Gastaut syndrome, intractable, with
status epilepticus.
G40.814................... Lennox-Gastaut syndrome, intractable,
without status epilepticus.
G40.821................... Epileptic spasms, not intractable, with
status epilepticus.
G40.822................... Epileptic spasms, not intractable, without
status epilepticus.
G40.823................... Epileptic spasms, intractable, with status
epilepticus.
G40.824................... Epileptic spasms, intractable, without
status epilepticus.
G40.89.................... Other seizures.
G40.901................... Epilepsy, unspecified, not intractable, with
status epilepticus.
G40.909................... Epilepsy, unspecified, not intractable,
without status epilepticus.
G40.911................... Epilepsy, unspecified, intractable, with
status epilepticus.
G40.919................... Epilepsy, unspecified, intractable, without
status epilepticus.
------------------------------------------------------------------------
After consideration of the public comments that we received, we are
finalizing our proposal to reassign all cases with a principal
diagnosis of epilepsy from the epilepsy diagnosis list provided above,
and one of the following ICD-10-PCS code combinations capturing cases
with the neurostimulator generators inserted into the skull (including
cases involving the use of the RNS(copyright)
neurostimulator), to MS-DRG 023, even if there is no MCC reported:
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H00MZ (Insertion of
neurostimulator lead into brain, open approach);
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H03MZ (Insertion of
neurostimulator lead into brain, percutaneous approach); and
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H04MZ (Insertion of
neurostimulator lead into brain, percutaneous endoscopic approach).
We also finalizing our proposed change to the title of MS-DRG 023
from ``Craniotomy with Major Device Implant or Acute Complex Central
Nervous System (CNS) Principal Diagnosis (PDX) with MCC or Chemo
Implant'' to ``Craniotomy with Major Device Implant or Acute Complex
Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or
Chemotherapy Implant or Epilepsy with Neurostimulator'' to reflect the
modifications to MS-DRG assignments.
c. Precerebral Occlusion or Transient Ischemic Attack with Thrombolytic
We received a request to add the ICD-10-CM diagnosis codes
currently
[[Page 38020]]
assigned to MS-DRGs 067 and 068 (Nonspecific CVA and Precerebral
Occlusion without Infarction with MCC and without MCC, respectively)
and the ICD-10-CM diagnosis codes currently assigned to MS-DRG 069
(Transient Ischemia) to the GROUPER logic for MS-DRGs 061, 062, and 063
(Acute Ischemic Stroke with Use of Thrombolytic Agent with MCC, with
CC, and without CC/MCC, respectively) when those conditions are
sequenced as the principal diagnosis and reported with an ICD-10-PCS
procedure code describing use of a thrombolytic agent (for example,
tPA).
The ICD-10-CM diagnosis codes displayed in the table below identify
the conditions that are assigned to MS-DRGs 067 and 068 when reported
as a principal diagnosis.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
I65.01.................... Occlusion and stenosis of right vertebral
artery.
I65.02.................... Occlusion and stenosis of left vertebral
artery.
I65.03.................... Occlusion and stenosis of bilateral
vertebral arteries.
I65.09.................... Occlusion and stenosis of unspecified
vertebral artery.
I65.1..................... Occlusion and stenosis of basilar artery.
I65.21.................... Occlusion and stenosis of right carotid
artery.
I65.22.................... Occlusion and stenosis of left carotid
artery.
I65.23.................... Occlusion and stenosis of bilateral carotid
arteries.
I65.29.................... Occlusion and stenosis of unspecified
carotid artery.
I65.8..................... Occlusion and stenosis of other precerebral
arteries.
I65.9..................... Occlusion and stenosis of unspecified
precerebral artery.
I66.01.................... Occlusion and stenosis of right middle
cerebral artery.
I66.02.................... Occlusion and stenosis of left middle
cerebral artery.
I66.03.................... Occlusion and stenosis of bilateral middle
cerebral arteries.
I66.09.................... Occlusion and stenosis of unspecified middle
cerebral artery.
I66.11.................... Occlusion and stenosis of right anterior
cerebral artery.
I66.12.................... Occlusion and stenosis of left anterior
cerebral artery.
I66.13.................... Occlusion and stenosis of bilateral anterior
cerebral arteries.
I66.19.................... Occlusion and stenosis of unspecified
anterior cerebral artery.
I66.21.................... Occlusion and stenosis of right posterior
cerebral artery.
I66.22.................... Occlusion and stenosis of left posterior
cerebral artery.
I66.23.................... Occlusion and stenosis of bilateral
posterior cerebral arteries.
I66.29.................... Occlusion and stenosis of unspecified
posterior cerebral artery.
I66.3..................... Occlusion and stenosis of cerebellar
arteries.
I66.8..................... Occlusion and stenosis of other cerebral
arteries.
I66.9..................... Occlusion and stenosis of unspecified
cerebral artery.
------------------------------------------------------------------------
The ICD-10-CM diagnosis codes displayed in the table below identify
the conditions that are assigned to MS-DRG 069 when reported as a
principal diagnosis.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
G45.0..................... Vertebro-basilar artery syndrome.
G45.1..................... Carotid artery syndrome (hemispheric).
G45.2..................... Multiple and bilateral precerebral artery
syndromes.
G45.8..................... Other transient cerebral ischemic attacks
and related syndromes.
G45.9..................... Transient cerebral ischemic attack,
unspecified.
G46.0..................... Middle cerebral artery syndrome.
G46.1..................... Anterior cerebral artery syndrome.
G46.2..................... Posterior cerebral artery syndrome.
I67.81.................... Acute cerebrovascular insufficiency.
I67.82.................... Cerebral ischemia.
I67.841................... Reversible cerebrovascular vasoconstriction
syndrome.
I67.848................... Other cerebrovascular vasospasm and
vasoconstriction.
I67.89.................... Other cerebrovascular disease.
------------------------------------------------------------------------
The ICD-10-PCS procedure codes displayed in the table below
describe use of a thrombolytic agent. These procedure codes are
designated as non-O.R. procedure codes affecting the MS-DRG assignment
for MS-DRGs 061, 062, and 063.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
3E03017................... Introduction of other thrombolytic into
peripheral vein, open approach.
3E03317................... Introduction of other thrombolytic into
peripheral vein, percutaneous approach.
3E04017................... Introduction of other thrombolytic into
central vein, open approach.
3E04317................... Introduction of other thrombolytic into
central vein, percutaneous approach.
3E05017................... Introduction of other thrombolytic into
peripheral artery, open approach.
3E05317................... Introduction of other thrombolytic into
peripheral artery, percutaneous approach.
3E06017................... Introduction of other thrombolytic into
central artery, open approach.
3E06317................... Introduction of other thrombolytic into
central artery, percutaneous approach.
[[Page 38021]]
3E08017................... Introduction of other thrombolytic into
heart, open approach.
3E08317................... Introduction of other thrombolytic into
heart, percutaneous approach.
------------------------------------------------------------------------
At the onset of stroke symptoms, tPA must be given within 3 hours
(or up to 4.5 hours for certain eligible patients) in an attempt to
dissolve a clot and improve blood flow to the specific area affected in
the brain. If, upon receiving the tPA, the stroke symptoms completely
resolve within 24 hours and imaging studies (if performed) are
negative, the patient has suffered what is clinically defined as a
transient ischemic attack, not a stroke. According to the requestor,
the current MS-DRG assignments do not account for this subset of
patients who were successfully treated with tPA to prevent a stroke.
In addition, the requestor expressed concerns regarding
documentation and quality of the data. For example, the requestor noted
that the terms ``stroke-in-evolution'' and ``aborted stroke'' may be
documented as a ``workaround'' for a patient exhibiting symptoms of a
stroke who receives tPA and, regardless of the outcome, would result in
assignment to MS-DRG 061, 062, or 063. Therefore, in cases where the
patient's stroke symptoms completely resolved upon receiving tPA and
the patient clinically suffered a precerebral occlusion or transient
ischemia, this documentation practice is incorrectly labeling these
patients as having had a stroke and ultimately leading to inaccurate
data.
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19822 through 19824), we analyzed claims data from the December 2016
update of the FY 2016 MedPAR file for MS-DRGs 061, 062, and 063. Our
findings are shown in the tables below.
MS-DRGs for Acute Ischemic Stroke With Use of Thrombolytic Agent
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 061-All cases............................................ 4,528 6.4 $20,270
MS-DRG 062-All cases............................................ 8,600 4.2 14,124
MS-DRG 063-All cases............................................ 1,859 3.0 11,898
----------------------------------------------------------------------------------------------------------------
Our analysis also consisted of claims data for MS-DRGs 067 and 068
when reported with a procedure code describing the use of tPA. As shown
in the table below, the total number of cases reported in MS-DRG 067
was 811, with an average length of stay of 4.8 days and average costs
of $10,248. There were 9 cases in MS-DRG 067 with a precerebral
occlusion receiving tPA, with an average length of stay of 5.2 days and
average costs of $20,156. The total number of cases reported in MS-DRG
068 was 3,809, with an average length of stay of 2.8 days and average
costs of $6,555. There were 33 cases in MS-DRG 068 with a precerebral
occlusion receiving tPA, with an average length of stay of 4.3 days and
average costs of $13,814.
MS-DRGs for Precerebral Occlusion With Use of Thrombolytic Agent
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 067--All cases........................................... 811 4.8 $10,248
MS-DRG 067--Cases with tPA...................................... 9 5.2 20,156
MS-DRG 068--All cases........................................... 3,809 2.8 6,555
MS-DRG 068--Cases with tPA...................................... 33 4.3 13,814
----------------------------------------------------------------------------------------------------------------
As we stated in the proposed rule, we recognize that while the
volume of cases for patients with a diagnosis of precerebral occlusion
receiving tPA in MS-DRGs 067 and 068 is relatively low, the average
length of stay is longer, and the average costs for this subset of
patients is approximately twice the amount of the average costs in
comparison to all cases in MS-DRGs 067 and 068.
We then analyzed claims data for cases in MS-DRG 069 when reported
with a procedure code describing the use of tPA. As shown in the table
below, the total number of cases reported in MS-DRG 069 was 50,633,
with an average length of stay of 2.5 days and average costs of $5,518.
There were 554 cases of transient ischemia receiving tPA, with an
average length of stay of 3.2 days and average costs of $12,481.
MS-DRG for Transient Ischemia With Use of Thrombolytic Agent
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 069--All cases........................................... 50,633 2.5 $5,518
MS-DRG 069--Cases with tPA...................................... 554 3.2 12,481
----------------------------------------------------------------------------------------------------------------
Similar to the findings for MS-DRGs 067 and 068, the number of
cases for transient ischemia receiving tPA in MS-DRG 069 was relatively
low in comparison to all the cases in the MS-DRG, with a longer average
length of
[[Page 38022]]
stay and approximately twice the amount of average costs in comparison
to all cases in MS-DRG 069.
We stated in the proposed rule that the results of analysis of the
data and the advice of our clinical advisors support adding the ICD-10-
CM diagnosis codes in MS-DRGs 067, 068, and 069 to the list of
principal diagnoses in MS-DRGs 061, 062, and 063 to better account for
this subset of patients who were successfully treated with tPA to
prevent a stroke, to identify the increasing use of thrombolytics at
the onset of symptoms of a stroke, to further encourage appropriate
physician documentation for a precerebral occlusion or transient
ischemic attack when patients are treated with tPA, and to reflect more
appropriate payment for the resources involved in evaluating and
treating these patients. We stated that we believe this approach will
improve accuracy of the data and assist in addressing the concern that
facilities may be reporting incorrect diagnoses for this subset of
patients.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19824), for FY 2018, we proposed to add the ICD-10-CM diagnosis codes
listed earlier in this section that are currently assigned to MS-DRGs
067 and 068 and the ICD-10-CM diagnosis codes currently assigned to MS-
DRG 069 to the GROUPER logic for MS-DRGs 061, 062, and 063 when those
conditions are sequenced as the principal diagnosis and reported with
an ICD-10-PCS procedure code describing use of a thrombolytic agent
(for example, tPA). We invited public comments on our proposal.
We also proposed to retitle MS-DRGs 061, 062, and 063 as ``Ischemic
Stroke, Precerebral Occlusion or Transient Ischemia with Thrombolytic
Agent with MCC, with CC and without CC/MCC'', respectively, and to
retitle MS-DRG 069 as ``Transient Ischemia without Thrombolytic''.
We invited public comments on our proposals.
Comment: Several commenters supported the proposal to modify the
GROUPER logic for MS-DRGs 061, 062, and 063 to better account for the
subset of patients who are treated successfully with tPA at the onset
of stroke symptoms. The commenters agreed that this change will
encourage appropriate physician documentation for a precerebral
occlusion or transient ischemic attack when patients are treated with
tPA and that it will more accurately reflect proper payment for stroke
care. Commenters also agreed with retitling MS-DRGs 061, 062, 063 and
069. One commenter who supported the proposals also suggested that CMS
consider developing new MS-DRGs in the future to specifically
distinguish acute ischemic strokes from precerebral occlusions and
transient ischemia, with and without thrombolytics, with and without
MCC/CC, respectively.
Response: We appreciate the commenters' support. As additional ICD-
10 claims data become available, we will continue to welcome input from
the public and consider further modifications to the ICD-10 MS-DRGs if
warranted.
After consideration of the public comments that we received, we are
finalizing our proposal to add the ICD-10-CM diagnosis codes listed
earlier in this section that are currently assigned to MS-DRGs 067 and
068 and the ICD-10-CM diagnosis codes currently assigned to MS-DRG 069
to the GROUPER logic for MS-DRGs 061, 062, and 063 when those
conditions are sequenced as the principal diagnosis and reported with
an ICD-10-PCS procedure code describing use of a thrombolytic agent
(for example, tPA). We also are finalizing our proposal to retitle MS-
DRGs 061, 062, and 063 as ``Ischemic Stroke, Precerebral Occlusion or
Transient Ischemia with Thrombolytic Agent with MCC, with CC and
without CC/MCC'', respectively, and to retitle MS-DRG 069 as
``Transient Ischemia without Thrombolytic'' effective October 1, 2017
for the ICD-10 MS-DRGs Version 35.
3. MDC 2 (Diseases and Disorders of the Eye: Swallowing Eye Drops
(Tetrahydrozoline)
We received a request to reassign the following ICD-10-CM diagnosis
codes that capture swallowing eye drops from MS-DRGs 124 and 125 (Other
Disorders of the Eye with and without MCC, respectively) to MS-DRGs 917
and 918 (Poisoning and Toxic Effects of Drugs with and without MCC,
respectively). The requestor described a case where a patient was
treated following swallowing eye drops, specifically Tetrahydrozoline,
which the provider considers to be a poisoning, not a disorder of the
eye.
T49.5X1A (Poisoning by ophthalmological drugs and
preparations, accidental (unintentional), initial encounter);
T49.5X2A (Poisoning by ophthalmological drugs and
preparations, intentional self-harm, initial encounter);
T49.5X3A (Poisoning by ophthalmological drugs and
preparations, assault, initial encounter); and
T49.5X4A (Poisoning by ophthalmological drugs and
preparations, undetermined, initial encounter).
As stated in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19824
through 19825), we agree with the requestor that the four diagnosis
codes describe a poisoning, not a disorder of the eye. We examined
claims data for cases in MS-DRGs 124 and 125 from the December 2016
update of the FY 2016 MedPAR file. Our findings are shown in the table
below.
MS-DRG 124 and 125 Cases
----------------------------------------------------------------------------------------------------------------
Number of Average
MS-DRG cases length of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 124--All cases........................................... 874 4.8 $8,826
MS-DRG 124--Cases reporting poisoning by ophthalmological drugs 1 2.0 3,007
and preparations code..........................................
MS-DRG 125--All cases........................................... 3,205 3.3 5,565
MS-DRG 125--Cases reporting poisoning by ophthalmological drugs 1 2.0 1,446
and preparations code..........................................
----------------------------------------------------------------------------------------------------------------
As shown in the table above, there were only 2 cases of poisoning
by ophthalmological drugs and preparations--1 case in MS-DRG 124 with
an average length of stay of 2 days and average costs of $3,007 and 1
case in MS-DRG 125 with an average length of stay of 2 days and average
costs of $1,446. The case of poisoning by ophthalmological drugs and
preparations in MS-DRG 124 had a shorter average length of stay than
the average length of stay for all cases in MS-DRG 124 (2.0 days
compared to 4.8 days) and lower average costs than the average costs
for all cases in MS-DRG 124 ($3,007 compared to $8,826). The case of
poisoning by ophthalmological
[[Page 38023]]
drugs and preparations in MS-DRG 125 also had a shorter average length
of stay than the average length of stay for all cases in MS-DRG 125
(2.0 days compared to 3.3 days) and lower average costs than the
average costs for all cases in MS-DRG 125 ($1,446 compared to $5,565).
We also examined claims data on cases reported in MS-DRGs 917 and
918 from the December 2016 update of the FY 2016 MedPAR file. Our
findings are shown in the table below.
MS-DRGs 917 and 918 Cases
----------------------------------------------------------------------------------------------------------------
Number of Average
MS-DRG cases length of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 917-- All cases.......................................... 32,381 4.8 $9,882
MS-DRG 918--All cases........................................... 24,061 3.0 5,326
----------------------------------------------------------------------------------------------------------------
As shown in the table above, the 2 cases of poisoning by
ophthalmological drugs and preparations also had shorter average
lengths of stay than the average length of stay for all cases in MS-
DRGs 917 and 918 (2.0 days compared to 4.8 days in MS-DRG 917 and 2.0
days compared to 3.0 days in MS-DRG 918). The average costs also were
lower for the 2 cases of poisoning by ophthalmological drugs and
preparations than the average costs for all cases in MS-DRGs 917 and
918 ($3,007 compared to $9,882 for all cases in MS-DRG 917 and $1,446
compared to $5,326 for all cases in MS-DRG 918). Therefore, cases with
this type of poisoning had lower average lengths of stay and lower
average costs than all other cases assigned to MS-DRGs 124 and 125 and
cases in MS-DRGs 917 and 918 where poisonings are assigned.
Because the codes clearly capture a poisoning and not an eye
disorder, we stated in the proposed rule that we believe that these
codes are more appropriately assigned to MS-DRGs 917 and 918 where
other poisonings are assigned. Our clinical advisors also reviewed this
issue and agreed that the codes should be moved from MS-DRGs 124 and
125 to MS-DRGs 917 and 918 because they clearly capture a poisoning and
not a disorder of the eye. Because MS-DRGs 917 and 918 contain cases
with multiple types of poisonings, it is expected that some types of
poisoning cases will have longer lengths of stay and greater average
costs than other types of poisoning cases. Therefore, in the FY 2018
IPPS/LTCH PPS proposed rule (82 FR 19824 through 19825), we proposed to
reassign the following ICD-10-CM diagnosis codes from MS-DRGs 124 and
125 to MS-DRGs 917 and 918 for FY 2018: T49.5X1A; T49.5X2A; T49.5X3A;
and T49.5X4A.
We invited public comments on our proposal.
Comment: Several commenters supported CMS' proposal to reassign
four poisoning codes from MS-DRGs 124 and 125 to MS-DRGs 917 and 918.
The commenters stated that the proposal was reasonable considering the
information provided.
Response: We appreciate the commenters' support for our proposal.
After consideration of the public comments that we received, we are
finalizing our proposal to reassign the following ICD-10-CM diagnosis
codes from MS-DRGs 124 and 125 to MS-DRGs 917 and 918 for FY 2018:
T49.5X1A; T49.5X2A; T49.5X3A; and T49.5X4A.
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Percutaneous Cardiovascular Procedures and Insertion of a
Radioactive Element
Currently, under ICD-10-PCS, the logic for MS-DRG 246 (Percutaneous
Cardiovascular Procedures with Drug-Eluting Stent with MCC or 4+
Vessels or Stents), MS-DRG 247 (Percutaneous Cardiovascular Procedures
with Drug-Eluting Stent without MCC), MS-DRG 248 (Percutaneous
Cardiovascular Procedures with Non-Drug-Eluting Stent with MCC or 4+
Vessels or Stents), and MS-DRG 249 (Percutaneous Cardiovascular
Procedures with Non-Drug-Eluting Stent without MCC) includes six
procedure codes that describe the insertion of a radioactive element.
When any of these six procedure codes are reported without the
reporting of a percutaneous cardiovascular procedure code, they are
assigned to MS-DRG 264 (Other Circulatory System O.R. Procedures). The
six specific procedure codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0WHC01Z................... Insertion of radioactive element into
mediastinum, open approach.
0WHC31Z................... Insertion of radioactive element into
mediastinum, percutaneous approach.
0WHC41Z................... Insertion of radioactive element into
mediastinum, percutaneous endoscopic
approach.
0WHD01Z................... Insertion of radioactive element into
pericardial cavity, open approach.
0WHD31Z................... Insertion of radioactive element into
pericardial cavity, percutaneous approach.
0WHD41Z................... Insertion of radioactive element into
pericardial cavity, percutaneous endoscopic
approach.
------------------------------------------------------------------------
Unlike procedures involving the insertion of stents, none of the
procedures described by the procedure codes listed above are performed
in conjunction with a percutaneous cardiovascular procedure, and two of
the six procedures described by these procedure codes (ICD-10-PCS codes
0WHC01Z and 0WHD01Z) are not performed using a percutaneous approach,
but rather describe an open approach to performing the specific
procedure. We stated in the proposed rule that our clinical advisors
agreed that these procedures should not be used to classify cases
within MS-DRGs 246 through 249 because they are not performed in
conjunction with a percutaneous cardiovascular procedure. Furthermore,
the indications for the insertion of a radioactive element typically
involve a diagnosis of cancer, whereas the indications for the
insertion of a coronary artery stent typically involve a diagnosis of
coronary artery disease.
We conducted an analysis for the six procedures described by these
procedure codes by reviewing the claims data for MS-DRGs 246 through
249 from the December 2016 update of the FY 2016 MedPAR file. We did
not find any cases where any one of the six
[[Page 38024]]
procedure codes listed above was reported. As noted earlier, when any
of these six procedure codes are reported without the reporting of a
percutaneous cardiovascular procedure code, the case is assigned to MS-
DRG 264. Therefore, as we discussed in the proposed rule, our clinical
advisors also agreed that it would be more appropriate to remove these
six procedure codes from MS-DRGs 246 through 249, but maintain their
current assignment in MS-DRG 264. Based on our analysis and the advice
from our clinical advisors, in the FY 2018 IPPS/LTCH PPS proposed rule
(82 FR 19825 through 19826), for FY 2018, we proposed to remove ICD-10-
PCS procedure codes 0WHC01Z, 0WHC31Z, 0WHC41Z, 0WHD01Z, 0WHD31Z, and
0WHD41Z from MS-DRGs 246 through 249, but maintain their current
assignment in MS-DRG 264.
We invited public comments on our proposal to remove the six
procedure codes listed above from MS-DRGs 246 through 249. We also
invited public comments on our proposal to maintain their current
assignment in MS-DRG 264.
Comment: Commenters supported the proposal to remove the six
procedure codes describing insertion of radioactive element into the
mediastinum and insertion of radioactive element into the pericardial
cavity from MS-DRGs 246 through 249 and to maintain their assignment in
MS-DRG 264.
Response: We appreciate the commenters' support.
Comment: One commenter noted that CMS did not discuss how we
identified the listed procedure codes or why CMS believes these
procedure codes were assigned to MS-DRGs 246 through 249 erroneously.
However, the commenter also agreed with the proposal to remove the six
procedure codes describing insertion of radioactive element into the
mediastinum and insertion of radioactive element into the pericardial
cavity from MS-DRGs 246 through 249 and to maintain their assignment in
MS-DRG 264. The commenter acknowledged that eliminating erroneous
assignments that may have occurred as a result of the transition to
ICD-10 is important and requires ongoing efforts.
Response: We appreciate the commenter's support. In response to the
comment regarding how these procedure codes were identified, as
discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19825), we
recognized the fact that two of the six procedure codes describing
insertion of radioactive element (0WHC01Z and 0WHD01Z) are not
performed using a percutaneous approach, but rather described an open
approach to performing the specific procedure and their assignment was
to a group of ``percutaneous'' cardiovascular procedure MS-DRGs.
Because the comparable translation of these procedure codes under ICD-
9-CM, procedure code 92.27 (Implantation or insertion of radioactive
element) did not specify an approach, all comparable ICD-10-PCS
translations of the ICD-9-CM code were automatically replicated to the
same ICD-10 MS-DRGs during the transition. We agree with the commenter
that eliminating erroneous assignments that may have occurred as a
result of the transition to ICD-10 is important and requires ongoing
efforts.
After consideration of the public comments that we received, we are
finalizing our proposal to remove ICD-10-PCS procedure codes 0WHC01Z,
0WHC31Z, 0WHC41Z, 0WHD01Z, 0WHD31Z, and 0WHD41Z from MS-DRGs 246
through 249, and maintain their current assignment in MS-DRG 264
effective October 1, 2017 for ICD-10 MS-DRGs Version 35.
b. Proposed Modification of the Titles for MS-DRG 246 (Percutaneous
Cardiovascular Procedures With Drug-Eluting Stent With MCC or 4+
Vessels or Stents) and MS-DRG 248 (Percutaneous Cardiovascular
Procedures With Non-Drug-Eluting Stent With MCC or 4+ Vessels or
Stents)
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19826), we
proposed to revise the titles for MS-DRGs 246 (Percutaneous
Cardiovascular Procedures with Drug-Eluting Stent with MCC or 4+
Vessels or Stents) and MS-DRG 248 (Percutaneous Cardiovascular
Procedures with Non-Drug-Eluting Stent with MCC or 4+ Vessels or
Stents) to better reflect the ICD-10-PCS terminology of ``arteries''
versus ``vessels'' as used in the procedure code titles within the
classification. Specifically, we proposed to revise the title of MS-DRG
246 to ``Percutaneous Cardiovascular Procedures with Drug-Eluting Stent
with MCC or 4+ Arteries or Stents''. We proposed to revise the title of
MS-DRG 248 to ``Percutaneous Cardiovascular Procedures with Non-Drug-
Eluting Stent with MCC or 4+ Arteries or Stents''. We invited public
comments on our proposals.
Comment: Commenters agreed with the proposal to update the titles
for MS-DRG 246 and MS-DRG 248 to better reflect the ICD-10-PCS
terminology of ``arteries'' versus ``vessels'' as used in the procedure
code titles within the classification. One commenter noted that this
change adds specificity and makes sense anatomically because
percutaneous coronary intervention procedures are performed in
arteries, which are a type of vessel.
Response: We appreciate the commenters' support.
After consideration of the public comments that we received, we are
finalizing our proposal to revise the titles for MS-DRGs 246 and MS-DRG
248. We are finalizing the title of MS-DRG 246 to ``Percutaneous
Cardiovascular Procedures with Drug-Eluting Stent with MCC or 4+
Arteries or Stents'' and the title of MS-DRG 248 to ``Percutaneous
Cardiovascular Procedures with Non-Drug-Eluting Stent with MCC or 4+
Arteries or Stents'' effective October 1, 2017 for ICD-10 MS-DRGs
Version 35.
c. Transcatheter Aortic Valve Replacement (TAVR) and Left Atrial
Appendage Closure (LAAC)
We received a request to create new MS-DRGs for cases involving
transcatheter aortic valve replacement (TAVR) and left atrial appendage
closure (LAAC) procedures when performed in combination in the same
operative episode. The requestor stated that there are both clinical
and financial advantages for the patient when performing concomitant
procedures. For example, the requestor indicated that the clinical
advantages for the patient may include single exposure to anesthesia
and a reduction in overall procedure time, while the financial
advantages may include lower cost-sharing. The requestor further
believed that a single hospitalization for these concomitant procedures
could be cost-effective for various providers and payers.
TAVR is indicated and approved as a treatment option for patients
diagnosed with symptomatic aortic stenosis who are not surgical
candidates for traditional open surgical techniques. Cases involving
TAVR procedures are assigned to MS-DRGs 266 and 267 (Endovascular
Cardiac Valve Replacement with MCC and without MCC, respectively), and
are identified by the following ICD-10-PCS procedure codes shown in the
table below.
[[Page 38025]]
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
02RF37Z................... Replacement of aortic valve with autologous
tissue substitute, percutaneous approach.
02RF38Z................... Replacement of aortic valve with zooplastic
tissue, percutaneous approach.
02RF3JZ................... Replacement of aortic valve with synthetic
substitute, percutaneous approach.
02RF3KZ................... Replacement of aortic valve with
nonautologous tissue substitute,
percutaneous approach.
02RF37H................... Replacement of aortic valve with autologous
tissue substitute, transapical,
percutaneous approach.
02RF38H................... Replacement of aortic valve with zooplastic
tissue, transapical, percutaneous approach.
02RF3JH................... Replacement of aortic valve with synthetic
substitute, transapical, percutaneous
approach.
02RF3KH................... Replacement of aortic valve with
nonautologous tissue substitute,
transapical, percutaneous approach.
------------------------------------------------------------------------
LAAC is indicated and approved as a treatment option for patients
diagnosed with atrial fibrillation. Cases involving LAAC procedures are
assigned to MS-DRGs 273 and 274 (Percutaneous Intracardiac Procedures
with MCC and without MCC, respectively), and are identified by ICD-10-
PCS procedure code 02L73DK (Occlusion of left atrial appendage with
intraluminal device, percutaneous approach).
The requestor suggested that the structure of the possible new MS-
DRGs for TAVR procedures performed in combination with LAAC procedures
could be modeled similar to the structure of MS-DRGs 266 and 267. While
contemplating creation of the new MS-DRGs, the requestor asked CMS to
also consider subdividing the possible new MS-DRGs into two severity
levels and title them as follows:
Suggested MS-DRG 26x (Endovascular Cardiac Valve
Replacement with LAAC with MCC); and
Suggested MS-DRG 26x (Endovascular Cardiac Valve
Replacement with LAAC without MCC).
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19826 through 19827), we analyzed claims data from the December 2016
update of the FY 2016 MedPAR file for MS-DRGs 266 and 267 and
identified the cases reporting TAVR procedures with and without an LAAC
procedure. As shown in the table below, the data findings show that the
total number of cases reported in MS-DRG 266 was 9,949, with an average
length of stay of 7.2 days and average costs of $56,762. There were
9,872 cases involving a TAVR procedure, with an average length of stay
of 7.2 days and average costs of $56,628. There was only one case
identified in MS-DRG 266 where both a TAVR and an LAAC procedure were
reported. This case had an average length of stay of 21.0 days and
average costs of $60,226. For MS-DRG 267, the total number of cases
found was 13,290, with an average length of stay of 3.5 days and
average costs of $45,297. There were 13,245 cases involving a TAVR
procedure, with an average length of stay of 3.5 days and average costs
of $45,302. There were no cases identified in MS-DRG 267 where both a
TAVR and an LAAC procedure were reported.
MS-DRGs for TAVR Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average
MS-DRG cases length of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 266--All cases........................................... 9,949 7.2 $56,762
MS-DRG 266--Cases with TAVR..................................... 9,872 7.2 56,628
MS-DRG 266--Cases TAVR and LAAC................................. 1 21.0 60,226
MS-DRG 267--All cases........................................... 13,290 3.5 45,297
MS-DRG 267--Cases with TAVR..................................... 13,245 3.5 45,302
MS-DRG 267--Cases TAVR and LAAC................................. 0 0 0
----------------------------------------------------------------------------------------------------------------
We then analyzed claims data in MS-DRGs 273 and 274 for cases
reporting an LAAC procedure. As shown in the table below, the data
findings show that the total number of cases reported in MS-DRG 273 was
6,541, with an average length of stay of 7.7 days and average costs of
$26,042. There were 179 cases involving an LAAC procedure, with an
average length of stay of 3.6 days and average costs of $30,131. For
MS-DRG 274, the total number of cases found was 14,441, with an average
length of stay of 3.0 days and average costs of $20,267. There were
2,428 cases involving an LAAC procedure, with an average length of stay
of 1.2 days and average costs of $26,213.
MS-DRGs for LAAC Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average
MS-DRG cases length of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 273--All cases........................................... 6,541 7.7 $26,042
MS-DRG 273--Cases with LAAC..................................... 179 3.6 30,131
MS-DRG 274--All cases........................................... 14,441 3.0 20,267
MS-DRG 274--Cases with LAAC..................................... 2,428 1.2 26,213
----------------------------------------------------------------------------------------------------------------
We stated in the proposed rule that the analysis of claims data for
MS-DRGs 266, 267, 273, and 274 and input from our clinical advisors do
not support creating new MS-DRGs for TAVR and LAAC procedures when
performed in combination in the same operative episode. We found only
one case in MS-DRG 266 where both a TAVR and an LAAC procedure were
reported and the claims data for cases reporting an LAAC procedure in
MS-DRGs 273 and 274 support their current assignment. Our clinical
advisors agreed the current MS-DRG assignments are appropriate for each
respective procedure.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19827), we
[[Page 38026]]
did not propose to create new MS-DRGs for cases involving TAVR and LAAC
procedures when performed in combination in the same operative episode.
We invited public comments on our proposal to maintain the current MS-
DRG structure for TAVR procedures in MS-DRGs 266 and 267, as well as
the current MS-DRG structure for LAAC procedures in MS-DRGs 273 and
274.
Comment: Commenters supported the proposal to maintain the current
MS-DRG structure for TAVR and LAAC procedures when performed in
combination in the same operative episode.
Response: We appreciate the commenters' support.
After consideration of the public comments that we received, we are
finalizing our proposal to maintain the current MS-DRG structure for
TAVR procedures in MS-DRGs 266 and 267, as well as the current MS-DRG
structure for LAAC procedures in MS-DRGs 273 and 274 effective October
1, 2017 for ICD-10 MS-DRGs Version 35.
d. Percutaneous Mitral Valve Replacement Procedures
We received a request to reassign four ICD-10-PCS procedure codes
that describe percutaneous mitral valve replacement procedures from MS-
DRGs 216 through 221 (Cardiac Valve and Other Major Cardiothoracic
Procedures with and without Cardiac Catheterization with MCC, with CC
and without CC/MCC, respectively) to MS-DRGs 266 and 267 (Endovascular
Cardiac Valve Replacement with MCC and without MCC, respectively). The
requestor indicated that there are inconsistencies in the current
GROUPER logic for endovascular cardiac valve replacement procedures.
Specifically, the requestor stated that the procedure codes that
describe both the percutaneous approach and the transapical,
percutaneous approach for the aortic and pulmonary valves are included
in MS-DRGs 266 and 267. However, for the mitral valve, the GROUPER
logic only includes the procedure codes that describe the transapical,
percutaneous approach.
The requestor also stated that when MS-DRGs 266 and 267 were
created, the intent was to include percutaneous replacement procedures
for all cardiac valves. Therefore, the requestor recommended that CMS
reassign the four ICD-10-PCS procedure codes shown in the table below
that describe mitral valve replacement procedures, performed with the
percutaneous approach from MS-DRGs 216 through 221 to MS-DRGs 266 and
267 to more appropriately group these procedures within the MS-DRG
structure.
------------------------------------------------------------------------
ICD-10-PCS procedure code Code description
------------------------------------------------------------------------
02RG37Z................... Replacement of mitral valve with autologous
tissue substitute, percutaneous approach.
02RG38Z................... Replacement of mitral valve with zooplastic
tissue, percutaneous approach.
02RG3JZ................... Replacement of mitral valve with synthetic
substitute, percutaneous approach.
02RG3KZ................... Replacement of mitral valve with
nonautologous tissue substitute,
percutaneous approach.
------------------------------------------------------------------------
We stated in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19827
through 19828) that we agree with the requestor regarding the intent of
the creation of MS-DRGs 266 and 267. As discussed in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 49890 through 49893), MS-DRGs 266 and 267
were created to uniquely classify the subset of high-risk cases
representing patients who undergo a cardiac valve replacement procedure
performed by a percutaneous (endovascular) approach. As such, we agree
that all cardiac valve replacement procedures should be grouped within
the same MS-DRG. In FY 2015, under the ICD-9-CM classification, there
was not a specific procedure code for a percutaneous mitral valve
replacement procedure. Therefore, when we converted from the ICD-9
based MS-DRGs to the ICD-10 MS-DRGs, there was not a code available
from which to replicate. We refer the reader to the FY 2015 IPPS/LTCH
PPS final rule (79 FR 49890 through 49893) for a detailed discussion on
the initial request to create new MS-DRGs for endovascular cardiac
valve replacement procedures, as well as the FY 2016 IPPS/LTCH PPS
final rule (80 FR 49354 through 49358) and the FY 2017 IPPS/LTCH PPS
final rule (81 FR 56787 through 56790) for a detailed discussion of the
conversion to ICD-10 MS-DRGs, including our analysis of claims data and
the need to accurately replicate the ICD-9-CM based MS-DRGs.
The requestor also noted that a proposal was discussed at the
September 13-14, 2016 ICD-10 Coordination and Maintenance Committee
meeting involving the creation of procedure codes that describe
percutaneous tricuspid valve replacement procedures and, if finalized,
these new procedure codes would also be assigned to MS-DRGs 266 and
267.
As shown in the table below and in Table 6B.-New Procedure Codes,
which is associated with the proposed rule and this final rule and
available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html,
there are eight new procedure codes that describe tricuspid valve
replacement procedures performed with percutaneous and transapical
types of percutaneous approaches that will be effective October 1,
2017.
------------------------------------------------------------------------
ICD-10-PCS procedure code Code description
------------------------------------------------------------------------
02RJ37H................... Replacement of tricuspid valve with
autologous tissue substitute, transapical,
percutaneous Approach.
02RJ37Z................... Replacement of tricuspid valve with
autologous tissue substitute, percutaneous
approach.
02RJ38H................... Replacement of tricuspid valve with
zooplastic tissue, transapical,
percutaneous approach.
02RJ38Z................... Replacement of tricuspid valve with
zooplastic tissue, percutaneous approach.
02RJ3JH................... Replacement of tricuspid valve with
synthetic substitute, transapical,
percutaneous approach.
02RJ3JZ................... Replacement of tricuspid valve with
synthetic substitute, percutaneous
approach.
02RJ3KH................... Replacement of tricuspid valve with
nonautologous tissue substitute,
transapical, percutaneous approach.
02RJ3KZ................... Replacement of tricuspid valve with
nonautologous tissue substitute,
percutaneous approach.
------------------------------------------------------------------------
[[Page 38027]]
We stated in the proposed rule that we agree with the requestor and
believe that, in addition to the four procedure codes that describe the
percutaneous mitral valve replacement procedures listed earlier in this
section, the eight codes that describe percutaneous and transapical
types of percutaneous tricuspid valve replacement procedures also
should be grouped with the other endovascular cardiac valve replacement
procedures. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82
FR 19827 through 19828), we proposed to reassign the four percutaneous
mitral valve replacement procedures described by the procedure codes
listed in the table above from MS-DRGs 216 through 221 to MS-DRGs 266
and 267. In addition, we proposed to assign the eight new procedure
codes (also listed in a separate table above) that describe
percutaneous and transapical, percutaneous tricuspid valve replacement
procedures to MS-DRGs 266 and 267.
We invited public comments on our proposals.
Comment: Many commenters supported the proposal to reassign the
four percutaneous mitral valve replacement procedures from MS-DRGs 216
through 221 to MS-DRGs 266 and 267 and to assign the eight new
procedure codes that describe percutaneous and transapical,
percutaneous tricuspid valve replacement procedures to MS-DRGs 266 and
267. Commenters noted that these updates will appropriately reflect the
clinical characteristics and resource use for this group of
endovascular cardiac valve replacement procedures.
Response: We appreciate the commenters' support.
After consideration of the public comments that we received, we are
finalizing our proposal to reassign the four percutaneous mitral valve
replacement procedures described by the procedure codes listed in the
table above from MS-DRGs 216 through 221 to MS-DRGs 266 and 267 and
assign the eight new procedure codes (also listed in a separate table
above) that describe percutaneous and transapical, percutaneous
tricuspid valve replacement procedures to MS-DRGs 266 and 267 effective
October 1, 2017 for ICD-10 MS-DRGs Version 35.
e. Percutaneous Tricuspid Valve Repair
We received a request to reassign cases reporting ICD-10-PCS
procedure code 02UJ3JZ (Supplement tricuspid valve with synthetic
substitute, percutaneous approach) from MS-DRGs 216 through 221
(Cardiac Valve and Other Major Cardiothoracic Procedures with and
without Cardiac Catheterization with MCC, with CC and without CC/MCC,
respectively) to MS-DRGs 228 and 229 (Other Cardiothoracic Procedures
with MCC and without MCC, respectively). According to the requestor,
reassigning cases involving these procedures would more appropriately
align the cohesiveness with other clinically similar procedures, such
as percutaneous mitral valve repair (for example, procedures involving
the Mitraclip) described by procedure code 02UG3JZ (Supplement mitral
valve with synthetic substitute, percutaneous approach), which are
assigned to MS-DRGs 228 and 229.
The requestor noted that the FORMA Tricuspid Transcatheter Repair
System (herein after referred to as the FORMA system) is currently in
clinical trials in the United States, Europe, and Canada, but has not
received FDA approval/clearance marketing authorization. However, the
FORMA system is presently available through a compassionate use
program. The FORMA system technology is indicated for use in the
treatment of patients diagnosed with tricuspid regurgitation and
occupies the regurgitant area of the affected valve, providing a
surface for native leaflet coaptation. The requestor stated that the
technology offers a viable alternative treatment using traditional
tricuspid valve surgery. According to the requestor, the technology
consists of a rail and a spacer, and the procedure to insert the device
involves fluoroscopic imaging guidance.
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19828 through 19829), we analyzed claims data from the December 2016
update of the FY 2016 MedPAR file for MS-DRGs 216 through 221 for cases
reporting procedure code 02UJ3JZ (Supplement tricuspid valve with
synthetic substitute, percutaneous approach). Our findings are shown in
the following table.
MS-DRGs for Cardiac Valve and Other Major Cardiothoracic Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average
MS-DRG cases length of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 216--All cases........................................... 9,139 14.4 $68,304
MS-DRG 216--Cases with percutaneous tricuspid valve repair...... 1 5.0 14,954
MS-DRG 217--All cases........................................... 3,536 8.9 45,857
MS-DRG 217--Cases with percutaneous tricuspid valve repair...... 1 3.0 16,234
MS-DRG 218--All cases........................................... 498 5.9 41,274
MS-DRG 218--Cases with percutaneous tricuspid valve repair...... 0 0 0
MS-DRG 219--All cases........................................... 16,011 11.1 54,519
MS-DRG 219--Cases with percutaneous tricuspid valve repair...... 6 9.0 58,075
MS-DRG 220--All cases........................................... 18,476 6.8 37,506
MS-DRG 220--Cases with percutaneous tricuspid valve repair...... 1 5.0 90,155
MS-DRG 221--All cases........................................... 3,547 5.0 33,606
MS-DRG 221--Cases with percutaneous tricuspid valve repair...... 0 0 0
----------------------------------------------------------------------------------------------------------------
We also analyzed claims data for MS-DRGs 228 and 229. Our findings
are shown in the following table below.
MS-DRGs for Other Cardiothoracic Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average
MS-DRG cases length of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 228--All cases........................................... 3,466 9.8 $47,435
[[Page 38028]]
MS-DRG 229--All cases........................................... 4,553 4.9 33,347
----------------------------------------------------------------------------------------------------------------
The claims data show that there were very few cases reported for
performing a percutaneous tricuspid valve repair procedure in MS-DRGs
216 through 221. Of the 6 cases found in MS-DRG 219, with average costs
of $58,075, the average cost of these cases aligned with the average
cost of all cases in the MS-DRG assignment ($54,519). We stated in the
proposed rule that the data analysis and our clinical advisors do not
support reassigning cases reporting procedure code 02UJ3JZ to MS-DRGs
228 and 229. The current MS-DRG assignment for percutaneous tricuspid
valve repair procedures to MS-DRGs 216 through 221 is clinically
coherent with the other percutaneous procedures performed on the heart
valves that are currently assigned to these MS-DRGs. Percutaneous
repair of the aortic, pulmonary and tricuspid valves utilizing various
tissue substitutes (autologous, nonautologous, zooplastic, and
synthetic) are assigned to MS-DRGs 216 through 221. The exception is
the percutaneous mitral valve repair, which, as the requestor pointed
out, is assigned to MS-DRGs 228 and 229 as discussed in the FY 2017
IPPS/LTCH PPS final rule (81 FR 56809 through 56813). Our clinical
advisors also agreed that the limited number of cases reported in MS-
DRGs 216 through 221 does not warrant reassignment.
As a result of our review and the input from our clinical advisors,
in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19829), we did not
propose to reassign cases reporting procedure code 02UJ3JZ from MS-DRGs
216 through 221 to MS-DRGs 228 and 229.
We invited public comments on our proposal to maintain the current
MS-DRG assignment for cases reporting procedure code 02UJ3JZ.
Comment: Commenters supported the proposal to maintain the current
MS-DRG assignment for ICD-10-PCS procedure code 02UJ3JZ in MS-DRGs 216
through 221. One commenter also noted that, while CMS' analysis
demonstrated the current assignment is appropriate, CMS should consider
revisiting this procedure in the future in the event it becomes more
common and warrants further consideration for reassignment. The
commenter believed that there could be value in creating MS-DRGs for
endovascular cardiac repair similar to those MS-DRGs for endovascular
cardiac valve replacement.
Response: We appreciate the commenters' support. As additional ICD-
10 claims data become available, we will continue to welcome input from
the public and consider further modifications to the ICD-10 MS-DRGs if
warranted.
Comment: One commenter did not agree with the proposal to maintain
the current MS-DRG assignment for ICD-10-PCS procedure code 02UJ3JZ in
MS-DRGs 216 through 221. The commenter stated that transcatheter
tricuspid valve repair procedures are clinically coherent with other
percutaneous transcatheter cardiac valve repair procedures. This
commenter asserted that the devices utilized in these procedures are
currently under clinical investigation and the utilization of these
technologies is expected to increase through clinical trials.
Therefore, the commenter suggested that these procedures should be
assigned to MS-DRGs 228 and 229.
Response: As we noted in the FY 2018 IPPS/LTCH PPS proposed rule
(82 FR 19829), the results of our analysis of the current MS-DRG
assignment for percutaneous tricuspid valve repair procedures to MS-
DRGs 216 through 221 and the advice of our clinical advisors
demonstrate that this procedure is clinically coherent with the other
percutaneous procedures performed on the heart valves that are
currently assigned to these MS-DRGs because percutaneous repair of the
aortic, pulmonary, and tricuspid valves utilizing various tissue
substitutes (autologous, nonautologous, zooplastic, and snythetic) are
assigned to MS-DRGs 216 through 221. We will continue to consider
further modifications to the ICD-10 MS-DRGs as additional ICD-10 claims
data become available that support suggested changes.
After consideration of the public comments that we received, we are
finalizing our proposal to maintain the current MS-DRG assignment for
cases reporting procedure code 02UJ3JZ (Supplement tricuspid valve with
synthetic substitute, percutaneous approach) to MS-DRGs 216 through 221
for FY 2018.
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue)
a. Total Ankle Replacement (TAR) Procedures
For FY 2018, we again received two requests for the reassignment of
total ankle replacement (TAR) procedures to a different MS-DRG. TAR
procedures are currently assigned to MS-DRGs 469 and 470 (Major Joint
Replacement or Reattachment of Lower Extremity with and without MCC,
respectively). This topic was discussed previously in the FY 2015 IPPS/
LTCH PPS proposed and final rules (79 FR 28013 through 28015 and 79 FR
49896 through 49899, respectively) and in the FY 2017 IPPS/LTCH PPS
proposed and final rules (81 FR 24989 through 24990 and 81 FR 56814
through 56816, respectively). For FY 2015 and FY 2017, we did not
change the MS-DRG assignment for TAR procedures. The requestors
indicated that TAR procedures are currently assigned to MS-DRGs 469 and
470, to which total hip replacement and total knee replacement
procedures also are assigned. The requestors stated that there are
significant clinical and cost differences among these procedures, which
results in underpayment for TAR procedures. The requestors asked CMS to
examine claims data for the following six ICD-10-PCS codes within MS-
DRGs 469 and 470:
0SRF0J9 (Replacement of right ankle joint with synthetic
substitute, cemented, open approach);
0SRF0JA (Replacement of right ankle joint with synthetic
substitute, uncemented, open approach);
0SRF0JZ (Replacement of right ankle joint with synthetic
substitute, open approach);
0SRG0J9 (Replacement of left ankle joint with synthetic
substitute, cemented, open approach);
0SRG0JA (Replacement of left ankle joint with synthetic
substitute, uncemented, open approach); and
0SRG0JZ (Replacement of left ankle joint with synthetic
substitute, open approach).
The requestors recommended that, if the claims data show a
disparity in costs between TAR procedures and total hip and knee
replacement procedures, the TAR procedures be reassigned to a more
appropriate MS-DRG.
[[Page 38029]]
The requestors also stated that total ankle replacement is a
complicated surgery that involves the replacement of the damaged parts
of the three bones that comprise the ankle joint, as compared to the
two bones in hip and knee replacement procedures. Furthermore, as the
smallest weight-bearing large joint in the body, the requestors stated
that TAR procedures demand a complexity of implant device design,
engineering, and manufacture to exacting functional specifications that
is vastly different from that of total hip and knee replacement
devices. One of the requestors stated that the ankle region typically
has poorer circulation and thinner soft tissue coverage than the hip
and knee, leading to a higher risk of wound complications and infection
that may be more challenging and expensive to treat. In addition, this
requestor stated that the unique anatomical characteristics and
function of the ankle joint require a specialized surgical skill set,
operative technique, and level of operating room resource utilization
that is vastly dissimilar from that of total hip and knee replacement
procedures.
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19829 through 19830), we examined claims data from the December 2016
update of the FY 2016 MedPAR file on reported cases of TAR procedures
in MS-DRGs 469 and 470. Our findings are shown in the table below.
Total Ankle Replacements Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average
MS-DRG cases length of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 469--All cases........................................... 25,778 6.7 $22,139
MS-DRG 469--Cases reporting TAR procedure codes................. 31 4.6 23,828
MS-DRG 470--All cases........................................... 461,553 2.7 14,751
MS-DRG 470--Cases reporting TAR procedure codes................. 2,114 1.9 20,862
----------------------------------------------------------------------------------------------------------------
As shown in the table above, for MS-DRG 469, there were a total of
25,778 cases, with an average length of stay of 6.7 days and average
costs of $22,139. Of the 25,778 cases in MS-DRG 469, there were 31
cases reporting a TAR procedure, with an average length of stay of 4.6
days and average costs of $23,828. For MS-DRG 470, there were a total
of 461,553 cases, with an average length of stay of 2.7 days and
average costs of $14,751. Of the 461,553 cases in MS-DRG 470, there
were 2,114 cases reporting a TAR procedure, with an average length of
stay of 1.9 days and average costs of $20,862. As mentioned earlier,
there were only 31 TAR procedure cases in MS-DRG 469, and these cases
had average costs of $1,689 higher than the average costs of all cases
within MS-DRG 469. The relatively small number of cases may have been
impacted by other factors. Several expensive cases could impact the
average costs for a very small number of patients. We also note that
the average length of stay for the TAR procedure cases was 4.6 days, as
compared to 6.7 days for all cases within MS-DRG 469. The 2,114 TAR
procedure cases in MS-DRG 470 had average costs that were $6,111 higher
than the average costs of all cases in MS-DRG 470 ($20,862 compared to
$14,751 for all cases). We stated in the proposed rule that the data
support reassigning all of the TAR procedures to MS-DRG 469, even when
there is no MCC reported. While the average costs of the TAR procedures
in MS-DRG 470 are lower than the average costs for all cases in MS-DRG
469 ($20,862 compared to $22,139), the average costs are much closer to
the average costs of TAR procedure cases in MS-DRG 470.
We stated in the proposed rule that our clinical advisors reviewed
this clinical issue and the claims data, and agreed that it is
clinically appropriate to reassign all of the TAR procedure cases from
MS-DRG 470 to MS-DRG 469, even when there is no MCC reported. The
claims data support the fact that these cases require more resources
than other cases assigned to MS-DRG 470. Therefore, in the FY 2018
IPPS/LTCH PPS proposed rule (82 FR 19829 through 19830), we proposed to
reassign the following TAR procedure codes from MS-DRG 470 to MS-DRG
469, even if there is no MCC reported: 0SRF0J9; 0SRF0JA; 0SRF0JZ;
0SRG0J9; 0SRG0JA; and 0SRG0JZ for FY 2018.
We proposed to change the titles of MS-DRGs 469 and 470 to the
following to reflect these proposed MS-DRG reassignments:
Proposed retitle of MS-DRG 469: ``Major Hip and Knee Joint
Replacement or Reattachment of Lower Extremity with MCC or Total Ankle
Replacement''; and
Proposed retitle of MS-DRG 470: ``Major Hip and Knee Joint
Replacement or Reattachment of Lower Extremity without MCC.''
We invited public comments on our proposals.
Comment: Several commenters supported CMS' recommendation to
reassign the following TAR procedure codes from MS DRG 470 to MS DRG
469, even if there is no MCC reported: 0SRF0J9; 0SRF0JA; 0SRF0JZ;
0SRG0J9; 0SRG0JA; and 0SRG0JZ for FY 2018. The commenters also
supported the change in MS-DRG titles for MS-DRG 469 and 470 to reflect
this MS-DRG update. One commenter stated that claims data supported
this recommendation because, as CMS pointed out, the average costs of
TAR cases in MS-DRG 470 are much closer to the average costs of all
cases in MS-DRG 469 ($20,862 versus $22,139). The commenter also agreed
with the CMS clinical advisors that it was clinically appropriate to
reassign all TAR procedure cases from MS-DRG 470 to MS-DRG 469, even
when there is no MCC reported. The commenter stated that the update
will remedy a historical cost-to-payment disparity, and thus enable
hospitals to continue offering Primary TAR surgery to Medicare
beneficiaries as an economically sustainable, and clinically viable,
alternative to ankle fusion when medically appropriate. The commenter
commended CMS for its consideration of how to address this MS-DRG
issue.
Response: We appreciate the commenters' support.
After consideration of the public comments that we received, we are
reassigning the following TAR procedure codes from MS DRG 470 to MS DRG
469, even if there is no MCC reported: 0SRF0J9; 0SRF0JA; 0SRF0JZ;
0SRG0J9; 0SRG0JA; and 0SRG0JZ for FY 2018. We are changing the titles
of MS-DRGs 469 and 470 to the following to reflect these MS-DRG
reassignments:
MS-DRG 469: ``Major Hip and Knee Joint Replacement or
Reattachment of Lower Extremity with MCC or Total Ankle Replacement'';
and
MS-DRG 470: ``Major Hip and Knee Joint Replacement or
Reattachment of Lower Extremity without MCC.''
[[Page 38030]]
b. Revision of Total Ankle Replacement (TAR) Procedures
We received two requests to modify the MS-DRG assignment for
revision of total ankle replacement (TAR) procedures, which the
requestors indicated are assigned to MS-DRGs 515, 516, and 517 (Other
Musculoskeletal System and Connective Tissue O.R. Procedures with MCC,
with CC, and without CC/MCC, respectively). This topic was discussed in
the FY 2015 IPPS/LTCH PPS proposed and final rules (79 FR 28013 through
28015 and 79 FR 49896 through 49899, respectively) and in the FY 2017
IPPS/LTCH PPS proposed and final rules (81 FR 24992 through 24993 and
81 FR 56819 through 56820, respectively). For FY 2015 and FY 2017, we
did not change the MS-DRG assignment for revision of TAR procedures.
The requestors asked that CMS examine the following eight ICD-10-
PCS codes which they indicated identify revision of TAR procedures and
which are assigned to MS-DRGs 515, 516, and 517. As we discuss later in
this section in response to public comments, while the requestors
requested that we analyze these eight procedure codes for revisions of
TAR procedures in the proposed rule, these procedures are in fact
represented by a combination of other codes that capture the root
operation removal and replacement of joint devices.
0SWF0JZ (Revision of synthetic substitute in right ankle
joint, open approach);
0SWF3JZ (Revision of synthetic substitute in right ankle
joint, percutaneous approach);
0SWF4JZ (Revision of synthetic substitute in right ankle
joint, percutaneous endoscopic approach);
0SWFXJZ (Revision of synthetic substitute in right ankle
joint, external approach);
0SWG0JZ (Revision of synthetic substitute in left ankle
joint, open approach);
0SWG3JZ (Revision of synthetic substitute in left ankle
joint, percutaneous approach);
0SWG4JZ (Revision of synthetic substitute in left ankle
joint, percutaneous endoscopic approach); and
0SWGXJZ (Revision of synthetic substitute in left ankle
joint, external approach).
One requestor stated that these ICD-10-PCS codes more specifically
identify the revision of TAR procedures than the prior ICD-9-CM codes.
Specifically, ICD-9-CM code 81.59 (Revision of joint replacement of
lower extremity, not elsewhere classified) was an unspecified code,
which included toe and foot joint revision procedures in addition to
revision of TAR procedures. The requestor stated that claims data
reporting these ICD-10-PCS codes would allow CMS to better identify
revisions of TAR procedures, and determine if the procedures are
assigned to the appropriate MS-DRGs.
One requestor suggested the following three options for MS-DRG
assignments:
Assign the ICD-10-PCS ankle revision procedure codes to
MS-DRGs 466, 467, and 468 (Revision of Hip or Knee Replacement with
MCC, with CC, and without CC/MCC, respectively), and rename MS-DRGs
466, 467, and 468 as ``Revision of Hip, Knee or Ankle with MCC, with
CC, and without CC/MCC,'' respectively);
Assign the ICD-10-PCS ankle revision procedure codes to
MS-DRG 469 (Major Joint Replacement or Reattachment of Lower Extremity
with MCC) to more appropriately recognize higher hospital procedure
costs associated with revision of TAR procedures; or
Establish a new MS-DRG for the assignment of revision of
TAR procedures.
The other requestor asked that CMS consider reassigning revision of
TAR procedures to MS-DRGs that better address the cost-to-payment
differential, such as MS-DRGs 466, 467, and 468.
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19830 through 19831), we examined claims data from the December 2016
update of the FY 2016 MedPAR file on cases reporting the eight revision
codes listed above as well as cases assigned to MS-DRGs 466, 467, 468,
and MS-DRG 469. Our findings are shown in the tables below.
Revisions of Joint Replacements Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average
MS-DRG cases length of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 515--All cases........................................... 5,038 8.0 $20,562
MS-DRG 515--Cases reporting revision of total ankle replacement 0 0 0
procedure codes................................................
MS-DRG 516--All cases........................................... 13,276 4.8 13,524
MS-DRG 516--Cases reporting revision of total ankle replacement 2 2.5 11,400
procedure codes................................................
MS-DRG 517--All cases........................................... 13,330 2.8 10,003
MS-DRG 517--Cases reporting revision of total ankle replacement 4 1.5 7,423
procedure codes................................................
----------------------------------------------------------------------------------------------------------------
Cases in MS-DRGs 466, 467, 468, and 469
----------------------------------------------------------------------------------------------------------------
Number of Average
MS-DRG cases length of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 466--All cases........................................... 3,886 8.4 $33,720
MS-DRG 467--All cases........................................... 19,145 4.2 24,609
MS-DRG 468--All cases........................................... 16,529 2.7 20,208
MS-DRG 469--All cases........................................... 25,778 6.7 22,139
----------------------------------------------------------------------------------------------------------------
As shown in the tables above, there were only 6 cases identified
with the eight revision codes suggested by the requestor with no cases
in MS-DRG 515, two cases in MS-DRG 516, and four cases in MS-DRG 517.
We stated in the proposed rule that the limited number of six cases
does not justify the creation of a new MS-DRG for the assignment of
revision of TAR procedures. Our data analysis demonstrates that the
average length of stay for these revision procedures was lower than
that for all cases in MS-DRG 516 (2.5 days compared to 4.8 days), and
the average costs were lower ($11,400 compared to $13,524). The average
length of stay for these revision
[[Page 38031]]
procedures also was lower than that for all cases in MS-DRG 517 (1.5
days compared to 2.8 days), and the average costs were lower ($7,423
compared to $10,003). We stated that the data do not support
reassigning the cases from MS-DRGs 515, 516, and 517.
Furthermore, we stated that the average length of stay and average
costs of cases in MS-DRGs 466, 467, 468, and 469 are significantly
higher than those for these revision procedures in MS-DRG 516 and 517.
We stated that the average length of stay for all cases in MS-DRGs 466,
467, 468, and 469 is 8.4, 4.2, 2.7, and 6.7 days, respectively,
compared to the average length of stay of 2.5 and 1.5 days for cases
representing these revision procedures in MS-DRGs 516 and 517,
respectively. The average costs for all cases in MS-DRGs 466, 467, 468,
and 469 are $33,720, $24,609, $20,208, and $22,139, respectively,
compared to the average costs of $11,400 and $7,423 for cases
representing these revision procedures in MS-DRGs 516 and 517,
respectively. Therefore, we stated that in the proposed rule that the
data do not support reassigning the cases to MS-DRGs 466, 467, 468, or
469.
We stated in the proposed rule that our clinical advisors reviewed
the clinical issue and the claims data and agreed that the eight
revision codes are appropriately assigned to MS-DRGs 515, 516, and 517,
along with other procedures that describe revisions of joint
replacements of the lower extremities, including the foot and toe. Our
clinical advisors did not support reassigning these cases to MS-DRGs
466, 467, 468, or 469, or creating a new MS-DRG. Therefore, based on
the findings of our analysis of claims data and the advice of our
clinical advisors, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19830 through 19831), we proposed to maintain the current MS-DRG
assignment for these revision procedures within MS-DRGs 515, 516, and
517 for FY 2018.
Comment: Commenters supported CMS' proposal to maintain the current
MS-DRG assignments for procedures within MS-DRGs 515, 516, and 517 for
FY 2018.
Several commenters questioned the reliability of the revision of
TAR data presented in the proposed rule. The commenters questioned the
codes used in the analysis and stated that revision of TAR procedures
are not captured with the Revision of synthetic substitute codes
identified in the proposed rule. The commenters stated that the
procedures are captured by reporting a combination of codes that
capture the removal of a prior device and the replacement of the device
with a new device. The commenters stated that the correct root
operations for these codes would be Removal and Replacement instead of
Revision as stated in the proposed rule. The commenters provided the
following codes which reported in combination would identify revision
of TAR procedures. The commenters stated that revisions of TAR
procedures are performed with an open approach.
Removals
0SPG0JZ (Removal of Synthetic Substitute from Left Ankle
Joint, Open Approach); and
0SPF0JZ (Removal of Synthetic Substitute from Right Ankle
Joint, Open Approach)
Replacements
0SRF0J9 (Replacement of right ankle joint with synthetic
substitute, cemented, open approach);
0SRF0JA (Replacement of right ankle joint with synthetic
substitute, uncemented, open approach);
0SRF0JZ (Replacement of right ankle joint with synthetic
substitute, open approach);
0SRG0J9 (Replacement of left ankle joint with synthetic
substitute, cemented, open approach);
0SRG0JA (Replacement of left ankle joint with synthetic
substitute, uncemented, open approach); and
0SRG0JZ (Replacement of left ankle joint with synthetic
substitute, open approach).
The commenters requested that CMS encourage the correct coding of
revision of TAR cases through additional educational materials. The
commenters requested that CMS review hospital claims data for revision
of TAR procedures using the list of Removal and Replacement code
combinations provided to identify revision of TAR cases. The commenter
stated that an increasing number of claims for revision of TAR
procedures will become identifiable in the future as patients and
implants naturally age into a need for revision surgery.
Response: We appreciate the commenters' support for our proposal to
maintain the current MS-DRG assignment for procedures within MS-DRGs
515, 516, and 517 for FY 2018.
We conducted an analysis of the correct coding of revision of TARs
and agree with the commenters that these cases are not captured with
ICD-10-PCS codes with the root operation Revision as stated in the
proposed rule. The commenters are correct that the revision of TAR
cases are correctly coded using a combination of codes with the root
operation Removal and Replacement as the commenters suggested. Updates
were made to the ICD-10-PCS index on October 1, 2015 to reinforce this
direction. The index entry is shown below:
Revision
Correcting a portion of existing device
see Revision of device in Removal of device without replacement
see Removal of device from Replacement of existing device
see Removal of device from
see Root operation to place new device, e.g., Insertion,
Replacement, Supplement
We agree that this index entry clearly indicates that the correct
root operations for revision of TARs would be Removal and Replacement.
The codes with the root operation Revision (included in the Revision of
synthetic substitute codes used in our original analysis) would not be
used to capture revision of TAR procedures. Cases reporting the
combination codes are assigned to MS-DRGs 469 and 470 (Major Joint
Replacement or Reattachment of Lower Extremity with and without MCC,
respectively).
As requested by the commenters, we identified revision of TAR cases
using the correct ICD-10-PCS codes that are captured with the root
operation of Removal and Replacement. We examined our claims data for
cases within MDC 8 that reported one of the Removal codes with one of
the Replacement codes for ankle joint devices. These codes accurately
capture revision of TAR cases. The following table shows our findings.
Revision of Total Ankle Replacement Procedures Using Code Combinations
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 469--All cases........................................... 25,778 6.7 $22,139
MS-DRG 469--Cases reporting revision of TAR code combinations... 0 .............. ..............
[[Page 38032]]
MS-DRG 470--All cases........................................... 461,553 2.7 14,751
MS-DRG 470--Cases reporting revision of TAR code combinations... 59 1.7 19,594
----------------------------------------------------------------------------------------------------------------
Using the updated correct ICD-10-PCS codes, we found that there
were 59 revision of TAR procedures in MS-DRG 470 with average costs of
$19,594 and average length of stay of 1.7 days compared to average
costs of $14,751 and average length of stay of 2.7 days for all cases
in MS-DRG 470. There were no revision of TAR procedures in MS-DRG 469.
As discussed in section II.5.a. of the preamble of this final rule on
Total Ankle Replacements, we are finalizing updates to reassign all of
the TAR procedure codes to MS-DRG 469, even if there is no MCC present,
for FY 2018. This update will also impact revision of TAR cases because
the same total ankle replacement codes are also used to identify
revision of TAR procedures. Therefore, the MS-DRG 469 and 470 updates
result in all revision of TAR procedures being assigned to MS-DRG 469
even if there is no MCC reported in FY 2018.
Revisions of TARs were assigned to MS-DRGs 515, 516, and 517 under
the ICD-9-CM MS-DRGs. However, an error in replication for the ICD-10
MS-DRGs resulted in the revision of TAR procedure cases being assigned
to MS-DRGs 469 and 470. This replication error was not noticed until
the commenters on the FY 2018 IPPS/LTCH PPS proposed rule pointed out
that accurate coding of revision of TARs would result in cases not
being assigned to MS-DRGs 515, 516, and 517. Since the implementation
of ICD-10 MS-DRGs, revision of TAR procedure cases have not been
assigned to MS-DRGs 515, 516, and 517. Therefore, we do not need to
modify MS-DRG logic to reassign revision of TAR procedures from MS-DRGs
515, 516, and 517 because correctly coded cases are not assigned there,
but instead to MS-DRGs 469 and 470. As noted earlier, under our
finalized policy for FY 2018, all revision of TAR procedures will be
assigned to MS-DRG 469, even if there is no MCC reported.
We agree with the commenters that it is important to encourage the
accurate and consistent use of ICD-10-PCS to capture procedures such as
revision of TAR. Therefore, we have asked the American Hospital
Association to provide additional information on how to capture
revision of TARs in a future issue of Coding Clinic for ICD-10. We
encourage any providers that have revision of TAR cases on which they
need ICD-10 coding assistance to submit this information and their
questions to the American Hospital Association's Central Office on ICD-
10 at https://www.codingclinicadvisor.com/. We share information
included in Coding Clinic for ICD-10 with our contractors.
After consideration of the public comments that we received, we are
not finalizing any changes to MS-DRGs 515, 516, and 517 for FY 2018
because, as noted, the revision of TAR procedures are not assigned to
these MS-DRGs. Under our finalized policy regarding TAR procedures, as
discussed in section II.5.a. of the preamble of this final rule, all
TAR procedure cases, as well as revision of TAR procedure cases, will
be assigned to MS-DRG 469 for FY 2018, even if there is no MCC present.
c. Magnetic Controlled Growth Rods (MAGEC[supreg] System)
We received a request to add six ICD-10-PCS procedure codes that
describe the use of magnetically controlled growth rods for the
treatment of early onset scoliosis (MAGEC[supreg] System) to MS-DRGs
456, 457, and 458 (Spinal Fusion Except Cervical with Spinal Curvature
or Malignancy or Infection or Extensive Fusions with MCC, with CC or
without CC/MCC, respectively). The MAGEC[supreg] System was discussed
in the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25040 through 25042)
and final rule (81 FR 56888 through 56891) as a new technology add-on
payment application. The application was approved for FY 2017 new
technology add-on payments, effective with discharges occurring on and
after October 1, 2016. The request for new procedure codes to identify
the MAGEC[supreg] System technology was discussed at the March 9-10,
2016 ICD-10 Coordination and Maintenance Committee meeting. Six new
procedure codes were approved, effective October 1, 2016, and were
displayed in Table 6B.--New Procedure Codes associated with the FY 2017
IPPS/LTCH PPS final rule (which is available via the Internet on the
CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page.html). These
six procedure codes are currently assigned to MS-DRGs 518, 519, and 520
(Back and Neck Procedure Except Spinal Fusion with MCC or Disc Device/
Neurostimulator, with CC, or without CC/MCC, respectively) and are
shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
XNS0032................... Reposition of lumbar vertebra using
magnetically controlled growth rod(s), open
approach, new technology group 2.
XNS0432................... Reposition of lumbar vertebra using
magnetically controlled growth rod(s),
percutaneous endoscopic approach, new
technology group 2.
XNS3032................... Reposition of cervical vertebra using
magnetically controlled growth rod(s), open
approach, new technology group 2.
XNS3432................... Reposition of cervical vertebra using
magnetically controlled growth rod(s),
percutaneous endoscopic approach, new
technology group 2.
XNS4032................... Reposition of thoracic vertebra using
magnetically controlled growth rod(s), open
approach, new technology group 2.
XNS4432................... Reposition of thoracic vertebra using
magnetically controlled growth rod(s),
percutaneous endoscopic approach, new
technology group 2.
------------------------------------------------------------------------
[[Page 38033]]
According to the requestor, adding these six procedure codes will
allow these cases to group to MS-DRGs that more accurately reflect the
diagnosis of early onset scoliosis for which the MAGEC[supreg] System
is indicated. In addition, the requestor stated that because this
technology is utilized on a small subset of patients with approximately
2,500 cases per year, adding these procedure codes to MS-DRGs 456, 457,
and 458 would have little impact.
We stated in the proposed rule that because these six procedure
codes shown in the table above were effective as of October 1, 2016,
there are no MedPAR claims data available to analyze. More importantly,
we noted that cases are assigned to MS-DRGs 456, 457, and 458 when an
actual spinal fusion procedure is performed. We stated that our
clinical advisors agree that use of the MAGEC[supreg] System's
magnetically controlled growth rods technology alone does not
constitute a spinal fusion. Therefore, because there were no claims
data available at the time of development of the proposed rule and
based on the advice of our clinical advisors, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19832), we did not propose to add the six
procedure codes to MS-DRGs 456, 457, or 458. We stated that if a spinal
fusion procedure is performed along with the procedure to insert the
MAGEC[supreg] System's magnetically controlled growth rods, it would be
appropriate to report that a spinal fusion was performed and the case
would be assigned to one of the spinal fusion MS-DRGs.
We invited public comments on our proposal to maintain the current
GROUPER logic for cases assigned to MS-DRGs 456, 457, and 458 and not
add the six procedure codes describing the use of the MAGEC[supreg]
System magnetically controlled growth rods. We also invited public
comments on our proposal to maintain the assignment of the six
procedure codes in MS-DRGs 518, 519, and 520.
Comment: Commenters agreed with CMS' proposal to maintain the
assignment of the six procedure codes in MS-DRGs 518, 519, and 520 and
to not reassign the six procedure codes describing the use of the
MAGEC[supreg] System magnetically controlled growth rods to the spinal
fusion MS-DRGs 456, 457 and 458.
Response: We appreciate the commenters' support. We also take this
time to point out that the three ICD-10-PCS procedure codes describing
reposition of the vertebra using magnetically controlled growth rods
with a percutaneous endoscopic approach listed below have been deleted
as displayed in Table 6D.--Invalid Procedure Codes associated with this
FY 2018 IPPS/LTCH PPS final rule (which is available via the Internet
on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) effective October 1, 2017
in the ICD-10 MS-DRGs Version 35.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
XNS0432................... Reposition of lumbar vertebra using
magnetically controlled growth rod(s),
percutaneous endoscopic approach, new
technology group 2.
XNS3432................... Reposition of cervical vertebra using
magnetically controlled growth rod(s),
percutaneous endoscopic approach, new
technology group 2.
XNS4432................... Reposition of thoracic vertebra using
magnetically controlled growth rod(s),
percutaneous endoscopic approach, new
technology group 2.
------------------------------------------------------------------------
The three ICD-10-PCS procedure codes listed in the table above were
discussed in a proposal at the March 7-8, 2017 ICD-10 Coordination and
Maintenance Committee meeting. Decisions for proposals presented at
that meeting were not finalized at the time of publication of the FY
2018 IPPS/LTCH PPS proposed rule. Additional information relating to
the discussion of these codes can be located via the Internet on the
CMS Web site at: https://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html.
Also included in that discussion was a proposal to add a new approach
value to the procedures describing Reposition of the vertebra. As
displayed in Table 6B.--New Procedure Codes associated with this FY
2018 IPPS/LTCH PPS final rule (which is available via the Internet on
the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html), the following three ICD-
10-PCS codes have been created effective October 1, 2017 in the ICD-10
MS-DRGs Version 35 and are assigned to MS-DRGs 518, 519 and 520.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
XNS0332................... Reposition of lumbar vertebra using
magnetically controlled growth rod(s),
percutaneous approach, new technology group
2.
XNS3332................... Reposition of cervical vertebra using
magnetically controlled growth rod(s),
percutaneous approach, new technology group
2.
XNS4332................... Reposition of thoracic vertebra using
magnetically controlled growth rod(s),
percutaneous approach, new technology group
2.
------------------------------------------------------------------------
After consideration of the public comments that we received, we are
finalizing our proposal to maintain the current GROUPER logic for cases
assigned to MS-DRGs 456, 457, and 458. We also are finalizing our
proposal to maintain the assignment of the three existing ICD-10-PCS
procedure codes (describing an open approach) and finalizing assignment
of the three new ICD-10-PCS codes (describing a percutaneous approach)
for the use of magnetically controlled growth rods in the treatment of
early onset scoliosis to MS-DRGs 518, 519, and 520 for FY 2018.
d. Combined Anterior/Posterior Spinal Fusion
It was brought to our attention that 7 of the 10 new ICD-10-PCS
procedure codes describing fusion using a nanotextured surface
interbody fusion device were not added to the appropriate GROUPER logic
list for MS-
[[Page 38034]]
DRGs 453, 454, and 455 (Combined Anterior/Posterior Spinal Fusion with
MCC, with CC and without CC/MCC, respectively), effective October 1,
2016. The logic for MS-DRGs 453, 454, and 455 is comprised of two
lists: An anterior spinal fusion list and a posterior spinal fusion
list. Assignment to one of the combined spinal fusion MS-DRGs requires
that a code from each list be reported.
The seven new ICD-10-PCS procedure codes currently included in the
posterior spinal fusion list for MS-DRGs 453, 454, and 455 are shown in
the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
XRG6092................... Fusion of thoracic vertebral joint using
nanotextured surface interbody fusion
device, open approach, new technology group
2.
XRG7092................... Fusion of 2 to 7 thoracic vertebral joints
using nanotextured surface interbody fusion
device, open approach, new technology group
2.
XRG8092................... Fusion of 8 or more thoracic vertebral
joints using nanotextured surface interbody
fusion device, open approach, new
technology group 2.
XRGA092................... Fusion of thoracolumbar vertebral joint
using nanotextured surface interbody fusion
device, open approach, new technology group
2.
XRGB092................... Fusion of lumbar vertebral joint using
nanotextured surface interbody fusion
device, open approach, new technology group
2.
XRGC092................... Fusion of 2 or more lumbar vertebral joints
using nanotextured surface interbody fusion
device, open approach, new technology group
2.
XRGD092................... Fusion of lumbosacral joint using
nanotextured surface interbody fusion
device, open approach, new technology group
2.
------------------------------------------------------------------------
We note that the remaining three new procedure codes are accurately
reflected in the anterior spinal fusion list; that is, ICD-10-PCS code
XRG1092 (Fusion of cervical vertebral joint using nanotextured surface
interbody fusion device, open approach, new technology group 2); ICD-
10-PCS code XRG2092 (Fusion of 2 or more cervical vertebral joints
using nanotextured surface interbody fusion device, open approach, new
technology group 2); and ICD-10-PCS code XRG4092 (Fusion of
cervicothoracic vertebral joint using nanotextured surface interbody
fusion device, open approach, new technology group 2).
The seven procedure codes currently included in the posterior
spinal fusion list describe an anterior spinal fusion by use of the
interbody fusion device. In an interbody fusion, the anterior column of
the spine is being fused. We stated in the proposed rule that the
results of our review of these procedure codes discussed below and the
advice of our clinical advisors support moving the seven procedure
codes from the posterior spinal fusion list to the anterior spinal
fusion list in the GROUPER logic for MS-DRGs 453, 454, and 455. We
stated that this will improve clinical accuracy and allow appropriate
assignment to these MS-DRGs when both an anterior and posterior spinal
fusion is performed.
During our review of the spinal fusion codes using a nanotextured
surface interbody fusion device in MS-DRGs 453, 454, and 455, we
identified 149 additional procedure codes that should be moved from the
posterior spinal fusion list to the anterior spinal fusion list. These
codes describe spinal fusion of the anterior column with a posterior
approach. As mentioned earlier, the logic for MS-DRGs 453, 454, and 455
is dependent upon a code from the anterior spinal fusion list and a
code from the posterior spinal fusion list. Spinal fusion codes
involving the anterior column should be included on the anterior spinal
fusion list only. In the FY 2018 IPPS/LTCH PPS proposed rule, we
proposed to move the 149 ICD-10-PCS procedure codes listed in Table
6P.3a. associated with the proposed rule (which is available via the
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from the
posterior spinal fusion list to the anterior spinal fusion list in MS-
DRGs 453, 454, and 455.
In addition, we also identified 33 ICD-10-PCS procedure codes in
the posterior spinal fusion list in MS-DRGs 453, 454, and 455 that
describe an interbody fusion device in the posterior column and,
therefore, are not considered clinically valid spinal fusion
procedures. These procedure codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0RG00A1................... Fusion of occipital-cervical joint with
interbody fusion device, posterior
approach, posterior column, open approach.
0RG03A1................... Fusion of occipital-cervical joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
0RG04A1................... Fusion of occipital-cervical joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0RG10A1................... Fusion of cervical vertebral joint with
interbody fusion device, posterior
approach, posterior column, open approach.
0RG13A1................... Fusion of cervical vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
0RG14A1................... Fusion of cervical vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0RG20A1................... Fusion of 2 or more cervical vertebral
joints with interbody fusion device,
posterior approach, posterior column, open
approach.
0RG23A1................... Fusion of 2 or more cervical vertebral
joints with interbody fusion device,
posterior approach, posterior column,
percutaneous approach.
0RG24A1................... Fusion of 2 or more cervical vertebral
joints with interbody fusion device,
posterior approach, posterior column,
percutaneous endoscopic approach.
0RG40A1................... Fusion of cervicothoracic vertebral joint
with interbody fusion device, posterior
approach, posterior column, open approach.
0RG43A1................... Fusion of cervicothoracic vertebral joint
with interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
[[Page 38035]]
0RG44A1................... Fusion of cervicothoracic vertebral joint
with interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0RG60A1................... Fusion of thoracic vertebral joint with
interbody fusion device, posterior
approach, posterior column, open approach.
0RG63A1................... Fusion of thoracic vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
0RG64A1................... Fusion of thoracic vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0RG70A1................... Fusion of 2 to 7 thoracic vertebral joints
with interbody fusion device, posterior
approach, posterior column, open approach.
0RG73A1................... Fusion of 2 to 7 thoracic vertebral joints
with interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
0RG74A1................... Fusion of 2 to 7 thoracic vertebral joints
with interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0RG80A1................... Fusion of 8 or more thoracic vertebral
joints with interbody fusion device,
posterior approach, posterior column, open
approach.
0RG83A1................... Fusion of 8 or more thoracic vertebral
joints with interbody fusion device,
posterior approach, posterior column,
percutaneous approach.
0RG84A1................... Fusion of 8 or more thoracic vertebral
joints with interbody fusion device,
posterior approach, posterior column,
percutaneous endoscopic approach.
0RGA0A1................... Fusion of thoracolumbar vertebral joint with
interbody fusion device, posterior
approach, posterior column, open approach.
0RGA3A1................... Fusion of thoracolumbar vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
0RGA4A1................... Fusion of thoracolumbar vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0SG00A1................... Fusion of lumbar vertebral joint with
interbody fusion device, posterior
approach, posterior column, open approach.
0SG03A1................... Fusion of lumbar vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
0SG04A1................... Fusion of lumbar vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0SG10A1................... Fusion of 2 or more lumbar vertebral joints
with interbody fusion device, posterior
approach, posterior column, open approach.
0SG13A1................... Fusion of 2 or more lumbar vertebral joints
with interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
0SG14A1................... Fusion of 2 or more lumbar vertebral joints
with interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0SG30A1................... Fusion of lumbosacral joint with interbody
fusion device, posterior approach,
posterior column, open approach.
0SG33A1................... Fusion of lumbosacral joint with interbody
fusion device, posterior approach,
posterior column, percutaneous approach.
0SG34A1................... Fusion of lumbosacral joint with interbody
fusion device, posterior approach,
posterior column, percutaneous endoscopic
approach.
------------------------------------------------------------------------
In the proposed rule, we proposed to delete these 33 procedure
codes from MS-DRGs 453, 454, and 455 for FY 2018. We also noted that
some of the above listed codes also may be included in the logic for
MS-DRGs 456, 457, and 458 (Spinal Fusion Except Cervical with Spinal
Curvature or Malignancy or Infection or Extensive Fusions with MCC,
with CC or without CC/MCC, respectively), MS-DRGs 459 and 460 (Spinal
Fusion Except Cervical with MCC and without MCC, respectively), and MS-
DRGs 471, 472, and 473 (Cervical Spinal Fusion with MCC, with CC and
without CC/MCC, respectively). Therefore, we proposed to delete the 33
procedure codes from the logic for those spinal fusion MS-DRGs as well.
In addition, we proposed to delete the 33 procedure codes from the ICD-
10-PCS classification as shown in Table 6D.--Invalid Procedure Codes
associated with the proposed rule (which is available via the Internet
on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
In summary, we invited public comments on our proposal to move the
seven procedure codes describing spinal fusion using a nanotextured
surface interbody fusion device from the posterior spinal fusion list
to the anterior spinal fusion list in the GROUPER logic for MS-DRGs
453, 454, and 455. We also invited public comments on our proposal to
move the 149 procedure codes describing spinal fusion of the anterior
column with a posterior approach from the posterior spinal fusion list
to the anterior spinal fusion list in the GROUPER logic for MS-DRGs
453, 454, and 455. In addition, we invited public comments on our
proposal to delete the 33 procedure codes describing spinal fusion of
the posterior column with an interbody fusion device from MS-DRGs 453,
454, 455, 456, 457, 458, 459, 460, 471, 472, and 473, as well as from
the ICD-10-PCS classification.
Comment: Many commenters supported CMS' proposals related to the
combined anterior/posterior spinal fusion MS-DRGs, including (1)
support to move the seven procedure codes describing spinal fusion
using a nanotextured surface interbody fusion device from the posterior
spinal fusion list to the anterior spinal fusion list in the GROUPER
logic for MS-DRGs 453, 454, and 455; (2) support to move the 149
procedure codes describing spinal fusion of the anterior column with a
posterior approach from the posterior spinal fusion list to the
anterior spinal fusion list in the GROUPER logic for MS-DRGs 453, 454,
and 455; and (3) to delete the 33 procedure codes describing spinal
fusion of the posterior column with an interbody fusion device from MS-
DRGs 453, 454, 455, 456, 457, 458, 459, 460, 471, 472, and 473, as well
as from the ICD-10-PCS classification.
Response: We appreciate the commenters' support.
Comment: One commenter expressed concern with the proposal to move
the 149 ICD-10-PCS procedure codes describing spinal fusion of the
anterior column with a posterior approach that are currently on the
posterior spinal fusion list to the anterior spinal fusion list and
indicated that the proposed decrease in payment weights for this set of
MS-DRGs would affect providers' ability to continue treating patients
necessitating these procedures. The commenter noted that results from
an
[[Page 38036]]
independent analysis it had conducted demonstrated that reassignment of
these procedure codes and the resulting combinations for anterior/
posterior spinal fusion are less costly in comparison to other
procedure combinations assigned to MS-DRGs 453, 454 and 455. This
commenter acknowledged that ICD-10 coded claims data enable CMS to make
important clinical refinements to the ICD-10 MS-DRGs. However, the
commenter stated, the resource homogeneity of the MS-DRGs may be
adversely affected. The commenter also stated that it understood that
the greater specificity of ICD-10 codes will naturally lead to changes
in the MS-DRG weights and assignments and that these changes should
generally lead to improved payment accuracy within the IPPS. However,
the commenter pointed out that not all weight fluctuations occurring
during the early stages of the ICD-10 transition necessarily reflect
improvements in coding and payment. The commenter stated that providers
should not be subject to such disruptive fluctuations in their payments
in a single year. The commenter recommended applying a cap to the
decline in the MS-DRG payment weights relative to the FY 2017 payment
weights until the fluctuations in the number of cases and the case
weights can be determined and Medicare's utilization reflects hospital
adaptation to ICD-10 coding. The commenter stated that applying a cap
would allow CMS to move forward with the proposal to move the 149 ICD-
10-PCS spinal fusion procedure codes from the posterior spinal fusion
list to the anterior spinal fusion list.
Response: We acknowledge the commenter's concerns and appreciate
the analysis that was conducted. In response to the recommendation that
we implement a cap to the decline in the MS-DRG payment weights
relative to the FY 2017 payment weights, we refer readers to section
II.G. of the preamble of this FY 2018 IPPS/LTCH PPS final rule for
further discussion regarding recalibration of the FY 2018 MS-DRG
relative weights, including our response to comments requesting a
transition period for substantial reductions in relative weights in
order to facilitate payment stability.
We also believe it is important to be able to fully evaluate the
MS-DRGs for which all spinal fusion procedures are currently assigned
under ICD-10 with additional claims data. Therefore, in response to the
public comments received, we are planning to review the ICD-10 logic
for the MS-DRGs where procedures involving spinal fusion are currently
assigned for FY 2019.
After consideration of the public comments we received, we are
finalizing our proposal to: (1) Move the seven procedure codes
describing spinal fusion using a nanotextured surface interbody fusion
device from the posterior spinal fusion list to the anterior spinal
fusion list in the GROUPER logic for MS-DRGs 453, 454, and 455; (2)
move the 149 procedure codes describing spinal fusion of the anterior
column with a posterior approach from the posterior spinal fusion list
to the anterior spinal fusion list in the GROUPER logic for MS-DRGs
453, 454, and 455; and (3) delete the 33 procedure codes describing
spinal fusion of the posterior column with an interbody fusion device
from MS-DRGs 453, 454, 455, 456, 457, 458, 459, 460, 471, 472, and 473,
as well as from the ICD-10-PCS classification for FY 2018.
6. MDC 14 (Pregnancy, Childbirth and the Puerperium)
a. Vaginal Delivery and Complicating Diagnoses
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56854), we noted
that the code list as displayed in the ICD-10 MS-DRG Version 33
Definitions Manual for MS-DRG 774 (Vaginal Delivery with Complicating
Diagnoses) required further analysis to clarify what constitutes a
vaginal delivery to satisfy the ICD-10 MS-DRG logic. We stated our
plans to conduct further analysis of the diagnosis code lists in MS-DRG
774 for FY 2018. We stated in the proposed rule that we believe that
the Version 34 Definitions Manual and GROUPER logic for MS-DRG 774
continues to require additional analysis to determine how best to
classify a vaginal delivery. For example, under MS-DRG 774, the
Definitions Manual currently states that three conditions must be met,
the first of which is a vaginal delivery. To satisfy this first
condition, codes that describe conditions or circumstances from among
three lists of codes must be reported. The first list is comprised of
ICD-10-CM diagnosis codes that may be reported as a principal diagnosis
or a secondary diagnosis. These diagnosis codes describe conditions in
which it is assumed that a vaginal delivery has occurred. The second
list of codes is a list of ICD-10-PCS procedure codes that also
describe circumstances in which it is assumed that a vaginal delivery
occurred. The third list of codes identifies diagnoses describing the
outcome of the delivery. Therefore, if any code from one of those three
lists is reported, the first condition (vaginal delivery) is considered
to be met for assignment to MS-DRG 774.
As discussed in the proposed rule, our continued concern with the
first list of ICD-10-CM diagnosis codes as currently displayed in the
Definitions Manual under the first condition is that not all of the
conditions necessarily reflect that a vaginal delivery occurred.
Several of the diagnosis codes listed could also reflect that a
cesarean delivery occurred. For example, ICD-10-CM diagnosis code
O10.02 (Pre-existing essential hypertension complicating childbirth)
does not specify that a vaginal delivery took place; yet it is included
in the list of conditions that may be reported as a principal diagnosis
or a secondary diagnosis in the GROUPER logic for a vaginal delivery.
The reporting of this code also could be appropriate for a delivery
that occurred by cesarean section.
As noted earlier, the second list of codes for the first condition
are comprised of ICD-10-PCS procedure codes. As we stated in the
proposed rule, while we agree that the current list of procedure codes
in MS-DRG 774 may appropriately describe that a vaginal delivery
occurred, we also believe this list could be improved and warrants
closer review.
The third list of codes for the first condition in MS-DRG 774
includes conditions describing the outcome of the delivery that would
be reported as secondary diagnoses. Similar to concerns with the first
list of codes, we believe the conditions do not necessarily reflect
that a vaginal delivery occurred because they also can be reported on
claims where a cesarean delivery occurred.
For the second condition in MS-DRG 774 to be met, diagnosis codes
that are identified as a complicating diagnosis from among two lists
may be reported. The first list is comprised of ICD-10-CM diagnosis
codes that may be reported as a principal or secondary diagnosis. The
second list is comprised of ICD-10-CM diagnosis codes that may be
reported as a secondary diagnosis. Currently, there is only one code
listed under the secondary diagnosis list. We have concerns with these
lists and what is classified as a complicating diagnosis when reviewing
the code lists for this and other MS-DRGs that use that logic in MDC
14.
For the third condition in MS-DRG 774 to be met, a limited set of
O.R. procedures, including both extensive and nonextensive procedures,
are listed. We have concerns with this third condition as being needed
to satisfy the logic for a vaginal delivery MS-DRG.
[[Page 38037]]
In summary, the MS-DRG logic involving a vaginal delivery under MDC
14 is technically complex as a result of the requirements that must be
met to satisfy assignment to the affected MS-DRGs. As discussed in the
FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19834), upon review and
discussion, our clinical advisors recommended, and we agreed, that we
should solicit public comments on further refinement to the following
four MS-DRGs related to vaginal delivery: MS-DRG 767 (Vaginal Delivery
with Sterilization and/or D&C); MS-DRG 768 (Vaginal Delivery with O.R.
Procedure Except Sterilization and/or D&C); MS-DRG 774 (Vaginal
Delivery with Complicating Diagnosis); and MS-DRG 775 (Vaginal Delivery
without Complicating Diagnosis).
In addition, our clinical advisors agreed that we should solicit
public comments on further refinement to the conditions defined as a
complicating diagnosis in MS-DRG 774 and MS-DRG 781 (Other Antepartum
Diagnoses with Medical Complications).
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19834), we solicited public comments on which diagnosis or procedure
codes, or both, should be considered in the logic to identify a vaginal
delivery and which diagnosis codes should be considered in the logic to
identify a complicating diagnosis. As MS-DRGs 767, 768, 774, 775, and
781 incorporate one or both aspects (vaginal delivery or complicating
diagnosis), we stated that public comments that we receive from this
solicitation will be helpful in determining what proposed revisions to
the current logic should be made. We indicated that we will review
public comments received in response to this solicitation as we
continue to evaluate these areas under MDC 14 and, if warranted, we
would propose refinements for FY 2019. We requested that all comments
be directed to the CMS MS-DRG Classification Change Request Mailbox
located at: [email protected] by November 1, 2017.
Comment: Commenters agreed that the MS-DRG logic for a vaginal
delivery under MDC 14 is technically complex. One commenter stated its
intention to provide separate comments related to the solicitation in
accordance with the November 1, 2017 deadline.
Response: We thank the commenters for their acknowledgment of the
complexity with the GROUPER logic for vaginal deliveries under MDC 14
and for their support and consideration of these issues as we continue
to consider possible refinement to the logic. We will review the
comments received in response to the solicitation as we continue to
evaluate this area and, if warranted, we will propose refinements for
the FY 2019 rulemaking.
b. MS-DRG 998 (Principal Diagnosis Invalid as Discharge Diagnosis)
The logic for MS-DRG 998 (Principal Diagnosis Invalid as Discharge
Diagnosis) currently includes a list of diagnoses that are considered
inappropriate for reporting as a principal diagnosis on an inpatient
hospital claim. In other words, these conditions would reasonably be
expected not to necessitate an inpatient admission. Examples of these
diagnosis codes include what are referred to as the ``Supervision of
pregnancy'' codes, as well as pregnancy, maternal care and fetal
related codes with an ``unspecified trimester''. We refer the reader to
the ICD-10 Version 34 Definitions Manual which is available via the
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for the
complete list of diagnosis codes in MS-DRG 998 under MDC 14.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56840 through
56841), there was discussion regarding the supervision of ``high-risk''
pregnancy codes, including elderly primigravida and multigravida
specifically, with regard to removing them from the Unacceptable
principal diagnosis edit code list in the Medicare Code Editor (MCE).
After consultation with the staff at the CDC's NCHS, we learned that
the FY 2017 ICD-10-CM Official Guidelines for Coding and Reporting were
updated to explain appropriate coding for this set of codes. As a
result, the codes describing supervision of high-risk pregnancy (and
other supervision of pregnancy codes) remained on the Unacceptable
principal diagnosis edit code list in the MCE. Therefore, the MCE code
edit is consistent with the logic of MS-DRG 998 (Principal Diagnosis
Invalid as Discharge Diagnosis) for these supervision of pregnancy
codes.
However, as a result of our review and consultation with our
clinical advisors regarding the ``unspecified trimester'' codes in MS-
DRG 998, as discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19835), we determined that there are more appropriate MS-DRG
assignments for this set of codes. Although it may seem unlikely that a
patient would be admitted and ultimately discharged or transferred
without the caregiver or medical personnel having any further knowledge
of the exact trimester, it is conceivable that a situation may present
itself. For example, the pregnant patient may be from out of town or
unable to communicate effectively. The fact that the specific trimester
is not known or documented does not preclude the resources required to
care for the patient with the particular diagnosis.
Therefore, as shown in Table 6P.3b. associated with the proposed
rule (which is available via the Internet on the CMS Web site at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html), we proposed to remove the 314 ICD-10-CM
diagnosis codes identified with ``unspecified trimester'' from MS-DRG
998 and reassign them to the MS-DRGs in which their counterparts (first
trimester, second trimester, or third trimester) are currently assigned
as specified in Column C. We stated that this would enable more
appropriate MS-DRG assignments and payment for these cases. We invited
public comments on our proposal.
Comment: Commenters agreed with the proposal to remove the 314 ICD-
10-CM diagnosis codes identified with ``unspecified trimester'' from
MS-DRG 998 and reassign them to the MS-DRGs in which their counterparts
(first trimester, second trimester, or third trimester) are currently
assigned. However, one commenter disagreed with the proposal and noted
that lack of documentation that specifies the trimester on an inpatient
record is representative of poor documentation and should not be
acceptable for valid MS-DRG assignment. This commenter believed that
the trimester could reasonably be determined or estimated, despite the
patient's circumstances, such as being from out of town or unable to
communicate effectively.
Response: We appreciate the commenters' support. In response to the
commenter who did not support our proposal, we acknowledge that any
diagnosis involving the term ``unspecified'' in a code title can appear
to be the result of poor documentation. However, there are several
instances across the ICD-10 MS-DRG GROUPER logic where an
``unspecified'' principal diagnosis leads to a valid MS-DRG assignment
as a result of the resources and/or complexities involved regarding the
condition itself. The ``unspecified trimester'' diagnoses involved in
the proposal included significant clinical conditions such as
eclampsia, preexisting hypertensive heart disease, and cerebral venous
thrombosis, to
[[Page 38038]]
name a few. The fact that the trimester is not specified does not
preclude the significance of these conditions nor the resources
involved in caring for the patients with these conditions. Therefore,
while we encourage providers to continue to focus efforts on improving
their respective facilities medical record documentation practices, we
also believe that the MS-DRG assignment should appropriately reflect
the resources involved in evaluating and caring for these patients.
After consideration of the public comments we received, we are
finalizing our proposal to remove the 314 ICD-10-CM diagnosis codes
identified with ``unspecified trimester'' from MS-DRG 998 as shown in
Table 6P.3b. associated with this final rule (which is available via
the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html and
reassign them to the MS-DRGs in which their counterparts (first
trimester, second trimester, or third trimester) are currently assigned
as specified in Column C, in the ICD-10 MS-DRGs Version 35, effective
October 1, 2017.
c. MS-DRG 782 (Other Antepartum Diagnoses Without Medical
Complications)
The following three ICD-10-CM diagnosis codes are currently on the
principal diagnosis list for the MS-DRG 782 (Other Antepartum Diagnoses
without Medical Complications) logic.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
O09.41.................... Supervision of pregnancy with grand
multiparity, first trimester.
O09.42.................... Supervision of pregnancy with grand
multiparity, second trimester.
O09.43.................... Supervision of pregnancy with grand
multiparity, third trimester.
------------------------------------------------------------------------
It was brought to our attention that these codes also are included
in the MCE Unacceptable principal diagnosis code edit list. As
discussed in section II.F.6.b. of the preamble of the FY 2018 IPPS/LTCH
PPS proposed rule, the supervision of pregnancy codes are accurately
reflected in the MCE code edit list for Unacceptable principal
diagnosis. Therefore, we stated that it is not appropriate to include
the three above listed codes in MS-DRG 782.
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19835), we
proposed to remove the three codes describing supervision of pregnancy
from MS-DRG 782 and reassign them to MS-DRG 998 (Principal Diagnosis
Invalid as Discharge Diagnosis) to reflect a more appropriate MS-DRG
assignment. We invited public comments on our proposal.
Comment: Commenters supported the proposal to remove the three
codes (ICD-10-CM diagnosis codes O09.41, O09.42 and O09.43) describing
supervision of pregnancy and reassign them to a more appropriate MS-DRG
assignment.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to remove ICD-10-CM diagnosis codes O09.41,
O09.42 and O09.43, which describe supervision of pregnancy, from MS-DRG
782 and reassign them to MS-DRG 998 (Principal Diagnosis Invalid as
Discharge Diagnosis) in the ICD-10 MS-DRGs Version 35, effective
October 1, 2017.
d. Shock During or Following Labor and Delivery
We received a request to review ICD-10-CM diagnosis code O75.1
(Shock during or following labor and delivery), which is currently
assigned to MS-DRG 774 (Vaginal Delivery with Complicating Diagnosis),
MS-DRG 767 (Vaginal Delivery with Sterilization and/or D&C), and MS-DRG
768 (Vaginal Delivery with O.R. Procedure Except Sterilization and/or
D&C).
The requestor provided an example of a patient that delivered at
Hospital A and was transferred to Hospital B for specialized care
related to the diagnosis of shock. The claim for Hospital B resulted in
assignment to a delivery MS-DRG, despite the fact that a delivery did
not occur during that hospitalization. The requestor noted that, by not
reporting the diagnosis code for shock, the claim grouped to a
postpartum MS-DRG and recommended that we evaluate the issue further.
Our analysis initially involved reviewing the GROUPER logic for MS-
DRGs 774, 767 and 768. As discussed in section II.F.14.a. of the
preamble of the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19835
through 19836) and this final rule, the GROUPER logic for
classification and assignment to MS-DRG 774 requires that three
conditions must be met, the first of which is a vaginal delivery.
Similar GROUPER logic applies for assignment to MS-DRGs 767 and 768,
except that only two conditions must be met, with the first condition
being a vaginal delivery. For each of these three MS-DRGs, to satisfy
the first condition, one code that describes a condition or
circumstance from among the three separate lists of codes must be
reported. The first list is comprised of ICD-10-CM diagnosis codes that
may be reported as a principal or secondary diagnosis. These diagnosis
codes describe conditions in which it is assumed that a vaginal
delivery has occurred. Among this first list is ICD-10-CM diagnosis
code O75.1, which is included in the GROUPER logic for MS-DRGs 774, 767
and 768 (under the first condition-vaginal delivery). We refer readers
to the ICD-10 MS-DRG Version 34 Definitions Manual located via the
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for
documentation of the GROUPER logic associated with these MS-DRGs.
In addition, in MS-DRG 774, to satisfy the second condition,
diagnosis codes that are identified as a complicating diagnosis from
among two lists may be reported. The first list is comprised of ICD-10-
CM diagnosis codes that may be reported as a principal or secondary
diagnosis. The second list is comprised of ICD-10-CM diagnosis codes
that may be reported as a secondary diagnosis. Currently, there is only
one code listed under the secondary diagnosis list.
Next, our analysis involved reviewing the GROUPER logic for
assignment to post-partum MS-DRG 769 (Postpartum and Post Abortion
Diagnoses with Major Procedure) and MS-DRG 776 (Postpartum and Post
Abortion Diagnoses without O.R. Procedure). The GROUPER logic for these
postpartum
[[Page 38039]]
MS-DRGs requires that a principal diagnosis be reported from a list of
several conditions, such as those following pregnancy, those
complicating the puerperium, conditions that occurred during or
following delivery and conditions associated with lactation disorders.
For assignment to MS-DRG 769, the GROUPER logic also requires that a
major procedure be reported in addition to a principal diagnosis from
the list of conditions.
We stated in the proposed rule that as a result of our analysis, we
agree with the requestor that ICD-10-CM diagnosis code O75.1 should be
added to the GROUPER logic for assignment to the postpartum MS-DRGs.
This diagnosis code is consistent with other diagnosis codes structured
within the GROUPER logic for assignment to MS-DRGs 769 and 776, and
clearly represents a post-partum diagnosis with the terminology
``during or following labor and delivery'' in the title. We stated that
we believe that adding this diagnosis code to the postpartum MS-DRGs
will enable more appropriate MS-DRG assignment for cases where a
delivery did not occur.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19835
through 19836), we proposed the following:
Removing ICD-10-CM diagnosis code O75.1 from the list of
principal or secondary diagnosis under the first condition-vaginal
delivery GROUPER logic in MS-DRGs 774, 767, and 768;
Moving ICD-10-CM diagnosis code O75.1 from the list of
principal or secondary diagnosis under the second condition-
complicating diagnosis for MS-DRG 774 to the secondary diagnosis list
only; and
Adding ICD-10-CM diagnosis code O75.1 to the principal
diagnosis list GROUPER logic in MS-DRGs 769 and 776.
We invited public comments on our proposals.
Comment: Many commenters supported all of CMS' proposals involving
diagnosis code O75.1 and MS-DRGs 767, 768, 769, 774, and 776.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing the following in the ICD-10 MS-DRGs Version 35, effective
October 1, 2017:
Removing ICD-10-CM diagnosis code O75.1 from the list of
principal or secondary diagnosis under the first condition-vaginal
delivery GROUPER logic in MS-DRGs 774, 767, and 768;
Moving ICD-10-CM diagnosis code O75.1 from the list of
principal or secondary diagnosis under the second condition-
complicating diagnosis for MS-DRG 774 to the secondary diagnosis list
only; and
Adding ICD-10-CM diagnosis code O75.1 to the principal
diagnosis list GROUPER logic in MS-DRGs 769 and 776.
7. MDC 15 (Newborns and Other Neonates With Conditions Originating in
Perinatal Period): Observation and Evaluation of Newborn
We received a request to add the ICD-10-CM diagnosis codes
describing observation and evaluation of newborns for suspected
conditions that are ruled out to MS-DRG 795 (Normal Newborn). The 14
diagnosis codes describing observation and evaluation of newborn for
suspected conditions ruled out are displayed in the table below.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
Z05.0..................... Observation and evaluation of newborn for
suspected cardiac condition ruled out.
Z05.1..................... Observation and evaluation of newborn for
suspected infectious condition ruled out.
Z05.2..................... Observation and evaluation of newborn for
suspected neurological condition ruled out.
Z05.3..................... Observation and evaluation of newborn for
suspected respiratory condition ruled out.
Z05.41.................... Observation and evaluation of newborn for
suspected genetic condition ruled out.
Z05.42.................... Observation and evaluation of newborn for
suspected metabolic condition ruled out.
Z05.43.................... Observation and evaluation of newborn for
suspected immunologic condition ruled out.
Z05.5..................... Observation and evaluation of newborn for
suspected gastrointestinal condition ruled
out.
Z05.6..................... Observation and evaluation of newborn for
suspected genitourinary condition ruled
out.
Z05.71.................... Observation and evaluation of newborn for
suspected skin and subcutaneous tissue
condition ruled out.
Z05.72.................... Observation and evaluation of newborn for
suspected musculoskeletal condition ruled
out.
Z05.73.................... Observation and evaluation of newborn for
suspected connective tissue condition ruled
out.
Z05.8..................... Observation and evaluation of newborn for
other specified suspected condition ruled
out.
Z05.9..................... Observation and evaluation of newborn for
unspecified suspected condition ruled out.
------------------------------------------------------------------------
The requestor expressed concern that currently when one of these
ruled out. codes is added to a newborn encounter with a principal
diagnosis described by ICD-10-CM code Z38.00 (Single liveborn infant,
delivered vaginally), the case is assigned to MS-DRG 794 (Neonate with
Other Significant Problems). The requestor stated that this assignment
appears to be in error and that the assignment should instead be to MS-
DRG 795 (Normal Newborn).
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19836), we reviewed Section I.C.16.b. of the 2017 ICD-10-CM Official
Guidelines for Coding and Reporting which includes the following
instructions for the diagnosis codes listed in the table above:
Assign a code from category Z05 (Observation and
evaluation of newborns and infants for suspected conditions ruled out.)
to identify those instances when a healthy newborn is evaluated for a
suspected condition that is determined after study not to be present.
Do not use a code from category Z05 when the patient has identified
signs or symptoms of a suspected problem; in such cases code the sign
or symptom.
A code from category Z05 may also be assigned as a
principal or first-listed code for readmissions or encounters when the
code from category Z38 code no longer applies. Codes from category Z05
are for use only for healthy newborns and infants for which no
condition after study is found to be present.
A code from category Z05 is to be used as a secondary code
after the code from category Z38, Liveborn infants according to place
of birth and type of delivery.
We stated in the proposed rule that after review of the guidelines
and discussion with our clinical advisors, we agree with the requestor
that the assignment of these codes to MS-DRG
[[Page 38040]]
794 is not accurate because the assignment incorrectly labels the
newborns as having a significant problem when the condition does not
truly exist. We stated that we and our clinical advisors also agree
that the above list of diagnosis codes should be added to MS-DRG 795.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19836), we
proposed to add the 14 diagnosis codes describing observation and
evaluation of newborns for suspected conditions that are ruled out
listed in the table above to the GROUPER logic for MS-DRG 795. We
invited public comments on our proposals.
Comment: Commenters supported the proposal to add the 14 diagnosis
codes describing observation and evaluation of newborn for suspected
conditions ruled out to the MS-DRG logic for normal newborn.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add the 14 diagnosis codes describing
observation and evaluation of newborns for suspected conditions that
are ruled out listed in the table above to the GROUPER logic for MS-DRG
795 (Normal newborn) in the ICD-10 MS-DRGs Version 35, effective
October 1, 2017.
8. MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs):
Complication Codes
We received a request to examine the ICD-10-CM diagnosis codes in
the T85.8-series of codes that describe other specified complications
of internal prosthetic devices, implants and grafts, not elsewhere
classified and their respective MS-DRG assignments. According to the
requestor, the 7th character values in this series of codes impact the
MS-DRG assignment under MDC 21 (Injuries, Poisonings and Toxic Effects
of Drugs) and MDC 23 (Factors Influencing Health Status & Other
Contacts with Health Services) that have resulted in inconsistencies
(that is, shifts) between the MS-DRG assignments under Version 33 and
Version 34 of the ICD-10 MS-DRGs.
Under ICD-10-CM, diagnosis codes in the range of S00 through T88
require a 7th character value of ``A-'' initial encounter, ``D-
''subsequent encounter, or ``S-''sequela to identify if the patient is
undergoing active treatment for a condition. For complication codes,
active treatment refers to treatment for the condition described by the
code, even though it may be related to an earlier precipitating
problem.
The requestor suggested that the following list of diagnosis codes
with the 7th character ``A'' (initial encounter) may have been
inadvertently assigned to the GROUPER logic in the list of diagnoses
(Assignment of Diagnosis Codes) under MDC 23 because when one of these
diagnosis codes was reported with an O.R. procedure, the requestor
found claims grouping to MS-DRG 939, 940, or 941 (O.R. Procedures with
Diagnoses of Other Contact with Health Services with MCC, with CC and
without CC/MCC, respectively) that had previously grouped to MDC 21
under Version 33 of the ICD-10 MS-DRGs. The requestor also suggested
these codes may have been inadvertently assigned to the GROUPER logic
list of principal diagnoses for MS-DRGs 949 and 950 (Aftercare with CC/
MCC and without CC/MCC, respectively) under MDC 23 because it found
claims that grouped to these MS-DRGs (949 and 950) when one of the
following diagnosis codes was reported as a principal diagnosis that
had previously grouped to MDC 21 under Version 33 of the ICD-10 MS-
DRGs.
------------------------------------------------------------------------
ICD-10-CM diagnosis code Code description
------------------------------------------------------------------------
T85.818A.................. Embolism due to other internal prosthetic
devices, implants and grafts, initial
encounter.
T85.828A.................. Fibrosis due to other internal prosthetic
devices, implants and grafts, initial
encounter.
T85.838A.................. Hemorrhage due to other internal prosthetic
devices, implants and grafts, initial
encounter.
T85.848A.................. Pain due to other internal prosthetic
devices, implants and grafts, initial
encounter.
T85.858A.................. Stenosis due to other internal prosthetic
devices, implants and grafts, initial
encounter.
T85.868A.................. Thrombosis due to other internal prosthetic
devices, implants and grafts, initial
encounter.
T85.898A.................. Other specified complication of other
internal prosthetic devices, implants and
grafts, initial encounter.
------------------------------------------------------------------------
The requestor believed that the above list of diagnosis codes with
the 7th character ``A'' (initial encounter) would be more appropriately
assigned under MDC 21 to MS-DRGs 919, 920, and 921 (Complications of
Treatment with MCC, with CC and without CC/MCC, respectively),
according to its review of the 2017 Official Coding Guidelines for use
of the 7th character and assignment of other diagnoses of associated
complications of care. The requestor also noted that these codes were
new, effective October 1, 2016 (FY 2017), and the predecessor codes
grouped to MS-DRGs 919, 920, and 921 in MDC 21 under Version 33 of the
ICD-10 MS-DRGs in FY 2016.
In addition, the requestor suggested that the following list of
diagnosis codes with the 7th character ``D'' (subsequent encounter) may
have been inadvertently assigned to the GROUPER logic list of principal
diagnoses for MS-DRG 919, 920, or 921 in MDC 21. The requestor noted
that these codes were new, effective October 1, 2016 (FY 2017), and the
predecessor codes grouped to MS-DRGs 949 and 950 (Aftercare with CC/MCC
and without CC/MCC, respectively) in MDC 23 under Version 33 of the
ICD-10 MS-DRGs in FY 2016.
------------------------------------------------------------------------
ICD-10-CM diagnosis code Code description
------------------------------------------------------------------------
T85.810D.................. Embolism due to nervous system prosthetic
devices, implants and grafts, subsequent
encounter.
T85.820D.................. Fibrosis due to nervous system prosthetic
devices, implants and grafts, subsequent
encounter.
T85.830D.................. Hemorrhage due to nervous system prosthetic
devices, implants and grafts, subsequent
encounter.
T85.840D.................. Pain due to nervous system prosthetic
devices, implants and grafts, subsequent
encounter.
T85.850D.................. Stenosis due to nervous system prosthetic
devices, implants and grafts, subsequent
encounter.
T85.860D.................. Thrombosis due to nervous system prosthetic
devices, implants and grafts, subsequent
encounter.
T85.890D.................. Other specified complication of nervous
system prosthetic devices, implants and
grafts, subsequent encounter.
------------------------------------------------------------------------
[[Page 38041]]
The requestor also suggested that the following list of additional
diagnosis codes with the 7th character ``D'' (subsequent encounter) may
have been inadvertently assigned to the GROUPER logic list of principal
diagnoses for MS-DRGs 922 and 923 (Other Injury, Poisoning and Toxic
Effect with MCC and without MCC, respectively) also under MDC 21. The
requestor noted these codes were also new, effective October 1, 2016
(FY 2017) and that the predecessor codes grouped to MS-DRGs 949 and 950
in MDC 23 under Version 33 of the ICD-10 MS-DRGs in FY 2016.
------------------------------------------------------------------------
ICD-10-CM diagnosis code Code description
------------------------------------------------------------------------
T85.818D.................. Embolism due to other internal prosthetic
devices, implants and grafts, subsequent
encounter.
T85.828D.................. Fibrosis due to other internal prosthetic
devices, implants and grafts, subsequent
encounter.
T85.838D.................. Hemorrhage due to other internal prosthetic
devices, implants and grafts, subsequent
encounter.
T85.848D.................. Pain due to other internal prosthetic
devices, implants and grafts, subsequent
encounter.
T85.858D.................. Stenosis due to other internal prosthetic
devices, implants and grafts, subsequent
encounter.
T85.868D.................. Thrombosis due to other internal prosthetic
devices, implants and grafts, subsequent
encounter.
T85.898D.................. Other specified complication of other
internal prosthetic devices, implants and
grafts, subsequent encounter.
------------------------------------------------------------------------
The requestor believed that the lists of diagnosis codes above with
7th character ``D'' (subsequent encounter) would be more appropriately
assigned to MS-DRGs 949 and 950 under MDC 23, according to its review
of the 2017 Official Coding Guidelines for use of the 7th character and
assignment of other diagnoses of associated complications of care.
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19837 through 19839), we ran test cases to determine if we could
duplicate the requestor's findings with regard to the shifts in MS-DRG
assignment between Version 33 and Version 34 of the ICD-10 MS-DRGs.
Results of our review were consistent with the requestor's findings. We
found that the T85.8- series of diagnosis codes with the 7th character
of ``A'' (initial encounter) and 7th character of ``D'' (subsequent
encounter) were inadvertently assigned to the incorrect MDC for Version
34 of the ICD-10 MS-DRGs, which led to inconsistencies (MS-DRG shifts)
when compared to Version 33 of the ICD-10 MS-DRGs. Our analysis also
included review of all of the diagnosis codes in the T85.8- series and
their current MDC and MS-DRG assignments, as well as review of the 2017
Official Coding Guidelines for use of the 7th character and assignment
of other diagnoses of associated complications of care. Based on the
results of our review, we agreed with the requestor's findings.
In addition, we identified the following list of diagnosis codes
with the 7th character ``S'' (sequela) that appear to have been
inadvertently assigned to MS-DRGs 949 and 950 in MDC 23 rather than MDC
21 in MS-DRGs 922 and 923 (Other Injury, Poisoning and Toxic Effect
with MCC and without MCC, respectively).
------------------------------------------------------------------------
ICD-10-CM diagnosis code Code description
------------------------------------------------------------------------
T85.810S.................. Embolism due to nervous system prosthetic
devices, implants and grafts, sequela.
T85.820S.................. Fibrosis due to nervous system prosthetic
devices, implants and grafts, sequela.
T85.830S.................. Hemorrhage due to nervous system prosthetic
devices, implants and grafts, sequela.
T85.840S.................. Pain due to nervous system prosthetic
devices, implants and grafts, sequela.
T85.850S.................. Stenosis due to nervous system prosthetic
devices, implants and grafts, sequela.
T85.860S.................. Thrombosis due to nervous system prosthetic
devices, implants and grafts, sequela.
T85.890S.................. Other specified complication of nervous
system prosthetic devices, implants and
grafts, sequela.
------------------------------------------------------------------------
In the FY 2018 IPPS/LTCH PPS proposed rule, we invited public
comment on our proposals to (1) reassign the ICD-10-CM diagnosis codes
with the 7th character ``A'' (initial encounter) from MS-DRGs 949 and
950 in MDC 23 to MS-DRGs 919, 920 and 921 in MDC 21; (2) reassign the
ICD-10-CM diagnosis codes with the 7th character ``D'' (subsequent
encounter) from MS-DRGs 919, 920, 921, 922, and 923 in MDC 21 to MS-
DRGs 949 and 950 in MDC 23; and (3) reassign the ICD-10-CM diagnosis
codes with the 7th character ``S'' (sequela) from MS-DRGs 949 and 950
in MDC 23 to MS-DRGs 922 and 923 in MDC 21 for FY 2018. The table below
displays the current Version 34 MDC and MS-DRG assignments and the
proposed Version 35 MDC and MS-DRG assignments on which we sought
public comment for the respective ICD-10-CM diagnosis codes.
----------------------------------------------------------------------------------------------------------------
Current V34 Current V34 MS- Proposed V35 Proposed V35
ICD-10-CM code Code description MDC DRG MDC MS-DRG
----------------------------------------------------------------------------------------------------------------
T85.810D................... Embolism due to 21 919, 920, 921 23 949, 950
nervous system
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.810S................... Embolism due to 23 949, 950 21 922, 923
nervous system
prosthetic
devices, implants
and grafts,
sequela.
T85.818A................... Embolism due to 23 949, 950 21 919, 920, 921
other internal
prosthetic
devices, implants
and grafts,
initial encounter.
T85.818D................... Embolism due to 21 922, 923 23 949, 950
other internal
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.820D................... Fibrosis due to 21 919, 920, 921 23 949, 950
nervous system
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.820S................... Fibrosis due to 23 949, 950 21 922, 923
nervous system
prosthetic
devices, implants
and grafts,
sequela.
[[Page 38042]]
T85.828A................... Fibrosis due to 23 949, 950 21 919, 920, 921
other internal
prosthetic
devices, implants
and grafts,
initial encounter.
T85.828D................... Fibrosis due to 21 922, 923 23 949, 950
other internal
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.830D................... Hemorrhage due to 21 919, 920, 921 23 949, 950
nervous system
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.830S................... Hemorrhage due to 23 949, 950 21 922, 923
nervous system
prosthetic
devices, implants
and grafts,
sequela.
T85.838A................... Hemorrhage due to 23 949, 950 21 919, 920, 921
other internal
prosthetic
devices, implants
and grafts,
initial encounter.
T85.838D................... Hemorrhage due to 21 922, 923 23 949, 950
other internal
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.840D................... Pain due to nervous 21 919, 920, 921 23 949, 950
system prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.840S................... Pain due to nervous 23 949, 950 21 922, 923
system prosthetic
devices, implants
and grafts,
sequela.
T85.848A................... Pain due to other 23 949, 950 21 919, 920, 921
internal
prosthetic
devices, implants
and grafts,
initial encounter.
T85.848D................... Pain due to other 21 922, 923 23 949, 950
internal
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.850D................... Stenosis due to 21 919, 920, 921 23 949, 950
nervous system
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.850S................... Stenosis due to 23 949, 950 21 922, 923
nervous system
prosthetic
devices, implants
and grafts,
sequela.
T85.858A................... Stenosis due to 23 949, 950 21 919, 920, 921
other internal
prosthetic
devices, implants
and grafts,
initial encounter.
T85.858D................... Stenosis due to 21 922, 923 23 949, 950
other internal
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.860D................... Thrombosis due to 21 919, 920, 921 23 949, 950
nervous system
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.860S................... Thrombosis due to 23 949, 950 21 922, 923
nervous system
prosthetic
devices, implants
and grafts,
sequela.
T85.868A................... Thrombosis due to 23 949, 950 21 919, 920, 921
other internal
prosthetic
devices, implants
and grafts,
initial encounter.
T85.868D................... Thrombosis due to 21 922, 923 23 949, 950
other internal
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.890D................... Other specified 21 919, 920, 921 23 949, 950
complication of
nervous system
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.890S................... Other specified 23 949, 950 21 922, 923
complication of
nervous system
prosthetic
devices, implants
and grafts,
sequela.
T85.898A................... Other specified 23 949, 950 21 919, 920, 921
complication of
other internal
prosthetic
devices, implants
and grafts,
initial encounter.
T85.898D................... Other specified 21 922, 923 23 949, 950
complication of
other internal
prosthetic
devices, implants
and grafts,
subsequent
encounter.
----------------------------------------------------------------------------------------------------------------
Comment: Commenters supported the proposals to (1) reassign the
ICD-10-CM diagnosis codes with the 7th character ``A'' (initial
encounter) from MS-DRGs 949 and 950 in MDC 23 to MS-DRGs 919, 920 and
921 in MDC 21; (2) reassign the ICD-10-CM diagnosis codes with the 7th
character ``D'' (subsequent encounter) from MS-DRGs 919, 920, 921, 922,
and 923 in MDC 21 to MS-DRGs 949 and 950 in MDC 23; and (3) reassign
the ICD-10-CM diagnosis codes with the 7th character ``S'' (sequela)
from MS-DRGs 949 and 950 in MDC 23 to MS-DRGs 922 and 923 in MDC 21 for
FY 2018. However, one commenter did not support the reassignment of
ICD-10-CM diagnosis codes with the 7th character ``S'' (sequela) from
MS-DRGs 949 and 950 in MDC 23 to MS-DRGs 922 and 923 in MDC 21. This
commenter agreed that the codes with the 7th character ``S'' should not
be assigned to MS-DRGs 949 and 950. However, the commenter disagreed
with the proposed reassignment to MS-DRGs 922 and 923 and referenced
language from the FY 2017 ICD-10-CM Official Guidelines for Coding and
Reporting under Section I.B.10. Sequela (Late Effects) which states:
``A sequela is the residual effect (condition produced) after the acute
phase of an illness or injury has terminated. The condition or nature
of the sequela is sequenced first. The sequela code is sequenced
second.'' According to the commenter, sequela cases are appropriately
classified to the MS-DRGs corresponding to the reported residual
condition rather than MS-DRGs 922 and 923 or MS-DRGs 949 and 950.
Response: We appreciate the support of the commenters on our
proposals. In response to the commenter who did not agree with the
reassignment of ICD-10-CM diagnosis codes with the 7th character ``S''
(sequela) from MS-DRGs 949 and 950 in MDC 23 to MS-DRGs 922 and 923 in
MDC 21, we note that the proposal for the ICD-10-CM diagnosis codes
with the 7th character ``S'' (sequela) is consistent with the
assignments under Version 33 of the ICD-10 MS-DRGs from which their
respective predecessor codes were derived. For example, under Version
33 of the ICD-10 MS-DRGs, ICD-10-CM diagnosis code T85.81XS (Embolism
due to internal prosthetic devices, implants and grafts, not elsewhere
[[Page 38043]]
classified, sequela) was assigned to MDC 21 under MS-DRGs 922 and 923.
Similar to the inadvertent errors in MDC and MS-DRG assignments that
occurred with the ICD-10-CM diagnosis codes involving 7th characters
``A'' (initial encounter) and ``D'' (subsequent encounter) from Version
33 to Version 34 of the ICD-10 MS-DRGs, the ICD-10-CM diagnosis codes
involving 7th character ``S'' were also inadvertently assigned to the
incorrect MDC and MS-DRGs under Version 34 of the ICD-10 MS-DRGs.
Therefore, the proposal is consistent for all the 7th characters. In
addition, while the commenter disagreed with our proposed MDC and MS-
DRG assignments, the commenter did not offer suggestions on alternative
assignments.
After consideration of the public comments we received, we are
finalizing our proposals as set forth in the FY 2018 IPPS/LTCH PPS
proposed rule for the complication codes discussed above in the ICD-10
MS-DRGs Version 35, effective October 1, 2017.
9. MDC 23 (Factors Influencing Health Status and Other Contacts With
Health Services): Updates to MS-DRGs 945 and 946 (Rehabilitation With
CC/MCC and Without CC/MCC, Respectively)
In FY 2016, we received requests to modify the MS-DRG assignment
for MS-DRGs 945 and 946 (Rehabilitation with CC/MCC and without CC/MCC,
respectively). This issue was addressed in the FY 2017 IPPS/LTCH PPS
proposed and final rules (81 FR 24998 through 25000 and 81 FR 56826
through 56831). For FY 2017, we did not change the MS-DRG assignments
for MS-DRGs 945 and 946.
We did not receive a request to address this issue as part of the
FY 2018 IPPS/LTCH PPS proposed rule or suggestions on how to update the
MS-DRGs 945 and 946 logic. However, we did refer the FY 2016 requests
for a new ICD-10-CM diagnosis code to the Centers for Disease Control
and Prevention (CDC) for consideration at a future meeting of the ICD-
10 Coordination and Maintenance Committee. CDC has the lead on updating
and maintaining ICD-10-CM codes. CDC did not address the issue at the
September 13-14, 2016 ICD-10 Coordination and Maintenance Committee
meeting. When the topic was not addressed at the September 13-14, 2016
ICD-10 Coordination and Maintenance Committee meeting, we asked CDC to
address the code request at the March 7-8, 2017 meeting of the ICD-10
Coordination and Maintenance Committee. The topic was on the agenda for
the March 7-8, 2017 ICD-10 Coordination and Maintenance Committee
meeting. The deadline for providing comments on proposals considered at
this meeting was April 7, 2017. Any new codes approved after this
meeting which will be implemented on October 1, 2017 were posted on the
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/index.html
and on the CDC Web site at: http://www.cdc.gov/nchs/icd/icd10.html in
June 2017. New codes also are included in Table 6A associated with this
FY 2018 IPPS/LTCH PPS final rule (which is available via the Internet
on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
As addressed in the FY 2017 IPPS/LTCH PPS final rule, the ICD-9-CM
MS-DRGs used ICD-9-CM codes reported as the principal diagnosis that
clearly identified an encounter for rehabilitation services, such as
diagnosis codes V57.89 (Care involving other specified rehabilitation
procedure) and V57.9 (Care involving unspecified rehabilitation
procedure), and these codes were not included in ICD-10-CM. Given this
lack of ICD-10-CM codes to indicate that the reason for the encounter
was for rehabilitation, the ICD-10 MS-DRG logic could not reflect the
logic of the ICD-9-CM MS-DRGs. Commenters on the final rule recommended
that CDC create new diagnosis codes for these concepts in ICD-10-CM so
that the MS-DRG logic could be updated to more closely reflect that of
the ICD-9-CM MS-DRGs.
As we stated in the proposed rule, if new ICD-10-CM codes are
created for encounter for rehabilitation services, we would address any
updates to MS-DRGs 945 and 946 utilizing these new codes in future
rulemaking. In the meantime, we welcome other specific recommendations
on how to update MS-DRGs 945 and 946. We are sharing the following data
on these MS-DRGs from the MedPAR file.
----------------------------------------------------------------------------------------------------------------
Number of Average length
FY 2015 MS-DRGs with ICD-9-CM codes cases of stay Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 945...................................................... 3,991 10.3 $8,242
MS-DRG 946...................................................... 1,184 8.0 7,322
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Number of Average length
FY 2016 MS-DRGs with ICD-10-CM codes cases of stay Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 945...................................................... 671 10.8 $7,814
MS-DRG 946...................................................... 157 7.3 7,672
----------------------------------------------------------------------------------------------------------------
As shown by the tables above, there was a decrease of 3,320 MS-DRG
945 cases (from 3,991 to 671) from FY 2015, when claims were submitted
with ICD-9-CM codes, to FY 2016 when ICD-10 codes were submitted. There
was a decrease of 1,027 MS-DRG 946 cases (from 1,184 to 157) from FY
2015 to FY 2016. The average length of stay increased 0.5 days (from
10.3 to 10.8 days) for MS-DRG 945 and decreased 0.7 days (from 8.0 to
7.3 days) for MS-DRG 946. The average costs decreased by $428 (from
$8,242 to $7,814) for MS-DRG 945 cases and increased by $350 (from
$7,322 to $7,672) for MS-DRG 946 cases. The number of cases was
significantly lower in FY 2016 compared to FY 2015. However, the
difference in average length of stay and average costs did not show
large changes.
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule, we also
examined possible MS-DRGs where these cases may have been assigned in
FY 2016 based on increases in the number of claims. Because there is
not a diagnosis code that could be reported as a principal diagnosis,
which would indicate if the admissions were for rehabilitation
services, we are unable to determine if these were cases admitted for
rehabilitation that moved from MS-DRGs 945 and 946 because of the lack
of a code for encounter for rehabilitation, or if there was simply a
change in the number of cases. The following tables show our findings
for MS-DRG 056 (Degenerative Nervous System Disorders with MCC); MS-DRG
057 (Degenerative Nervous System
[[Page 38044]]
Disorders without MCC); MS-DRG 079 (Hypertensive Encephalopathy without
CC/MCC); MS DRG 083 (Traumatic Stupor & Coma, Coma >1 Hour with CC);
MS-DRG 084 (Traumatic Stupor & Coma, Coma >1 Hour without CC/MCC); MS-
DRG 092 (Other Disorders of Nervous System with MCC); and MS-DRG 093
(Other Disorders of Nervous System without CC/MCC).
----------------------------------------------------------------------------------------------------------------
Number of Average length
FY 2015 MS-DRGs with ICD-9-CM codes cases of stay Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 056...................................................... 9,548 7.3 $12,606
MS-DRG 057...................................................... 25,652 5.1 7,918
MS-DRG 079...................................................... 618 2.7 5,212
MS-DRG 083...................................................... 2,516 4.3 9,446
MS-DRG 084...................................................... 1,955 2.8 6,824
MS-DRG 092...................................................... 12,643 5.7 11,158
MS-DRG 093...................................................... 7,928 2.8 5,182
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Number of Average length
FY 2016 MS-DRGs with ICD-10-CM codes cases of stay Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 056...................................................... 10,817 7.6 $12,930
MS-DRG 057...................................................... 28,336 5.3 7,902
MS-DRG 079...................................................... 1,233 2.7 5,579
MS-DRG 083...................................................... 4,058 6.2 9,134
MS-DRG 084...................................................... 3,016 2.7 6,508
MS-DRG 092...................................................... 19,392 3.9 6,706
MS-DRG 093...................................................... 8,120 2.7 5,253
----------------------------------------------------------------------------------------------------------------
As shown by the tables above, some of the MS-DRGs that show the
largest increase in number of cases do not show significant changes in
the average length of stay or average costs. For instance, MS-DRG 079
cases doubled from FY 2015 to FY 2016 (from 618 to 1,233). However, the
average length of stay did not change from 2.7 days and the average
costs increased only $367 (from $5,212 to $5,579). MS-DRG 083 cases
increased by 1,542 (from 2,516 to 4,058) with a 1.9 day increase in the
average length of stay (from 4.3 to 6.2 days); however, the average
costs decreased only $312 (from $9,446 to $9,134). There were large
changes for MS-DRG 092 with cases increasing by 6,749 (from 12,643 to
19,392), the average length of stay decreasing by 1.8 days (from 5.7 to
3.9) and the average costs decreasing by $4,452 (from $11,158 to
$6,706). Once again, it is not possible to determine if any changes are
a result of the impact of not having a code for the encounter for
rehabilitation services to report as a principal diagnosis, or if other
factors such as changes in types of patient admissions were involved.
Given the lack of a diagnosis code to capture the principal
diagnosis of encounter for rehabilitation, we stated in the FY 2018
proposed rule that we were unable to update MS-DRG 945 or MS-DRG 946 to
better identify those cases in which patients are admitted for
rehabilitation services. If the CDC creates a new code, we will
consider proposing updates to MS-DRGs 945 and 946 in the future.
We invited public comments on our proposal not to update MS-DRGs
945 and 946 for FY 2018.
Comment: Several commenters acknowledged that CMS' analysis
indicates that there was a decrease in the number of cases reported in
MS-DRG 945 and 946 from FY 2015 to FY 2016 and there was an increase in
average length of stay for MS-DRG 945 and a decrease in average length
of stay for MS-DRG 946 from FY 2015 to FY 2016. The commenters stated
that, without an ICD-10-CM diagnosis code to capture encounters for
rehabilitation therapy, it was not possible to identify any specific
shifts in these cases. The commenters stated that they had written to
CDC to support the creation of a new diagnosis code to capture these
admissions after the topic was presented at the March 7-8, 2017 ICD-10
Coordination and Maintenance Committee meeting. The commenters stated
that if CDC creates a new ICD-10-CM code for encounters for
rehabilitation therapy, it recommended that CMS propose adding the new
code as part of the MS-DRG logic for MS-DRGs 945 and 946 as part of the
FY 2019 IPPS/LTCH PPS proposed rule. The commenters stated that if CDC
decides not to create a new ICD-10-CM code for encounters for
rehabilitation therapy, CMS should consider assembling a technical
advisory panel made up of stakeholders, such as rehabilitation
providers and other representation, to conduct an evaluation of this
issue and recommend options to improve the MS-DRG logic and changes
that could be proposed as part of future rulemaking.
Response: We agree with the commenters that without a specific ICD-
10-CM code for encounters for rehabilitation therapy, it is not
possible to identify any specific shifts in these cases. If the CDC
creates a new code effective October 1, 2018, we will evaluate
potential updates to the MS-DRGs utilizing this new code as part of the
FY 2019 IPPS/LTCH PPS proposed rule. If the CDC decides not to create a
new code, we welcome recommendations from the public on how the MS-DRG
logic could be updated to better capture patients within MS-DRGs 945
and 946.
After consideration of the public comments that we received, we are
finalizing our proposal not to update MS-DRGs 945 and 946 for FY 2018.
10. Changes to the Medicare Code Editor (MCE)
The Medicare Code Editor (MCE) is a software program that detects
and reports errors in the coding of Medicare claims data. Patient
diagnoses, procedure(s), and demographic information are entered into
the Medicare claims processing systems and are subjected to a series of
automated screens. The MCE screens are designed to identify cases that
require further review before classification into an MS-DRG.
As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56831
through 56844), we made available the FY 2017 ICD-10 MCE Version 34
manual file and an ICD-9-CM MCE
[[Page 38045]]
Version 34.0A manual file (for analysis purposes only). The links to
these MCE manual files, along with the links to purchase the mainframe
and computer software for the MCE Version 34 (and ICD-10 MS-DRGs) are
posted on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html through the FY
2017 IPPS Final Rule Home Page.
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19840 through
19846), we addressed the MCE requests we received by the December 7,
2016 deadline. We also discussed the proposals we made based on our
internal review and analysis. In addition, as a result of new and
modified code updates approved after the annual spring ICD-10
Coordination and Maintenance Committee meeting, we routinely make
changes to the MCE. 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 the changes we have made to the MCE as a
result of the new and modified codes approved after the annual spring
ICD-10 Coordination and Maintenance Committee meeting. These changes
are approved too late in the rulemaking schedule for inclusion in the
proposed rule. Furthermore, although 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. However, we make available the finalized Definitions of
Medicare Code Edits (MCE) file. Therefore, we have made available the
FY 2018 ICD-10 MCE Version 35 manual file. The link to this MCE manual
file, along with the link to the mainframe and computer software for
the MCE Version 35 (and ICD-10 MS-DRGs) are posted on the CMS Web site
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html through the FY 2018 IPPS Final Rule Home
Page.
a. Age Conflict Edit
In the MCE, the Age Conflict edit exists to detect inconsistencies
between a patient's age and any diagnosis on the patient's record; for
example, a 5-year-old patient with benign prostatic hypertrophy or a
78-year-old patient coded with a delivery. In these cases, the
diagnosis is clinically and virtually impossible for a patient of the
stated age. Therefore, either the diagnosis or the age is presumed to
be incorrect. Currently, in the MCE, the following four age diagnosis
categories appear under the Age Conflict edit and are listed in the
manual and written in the software program:
Perinatal/Newborn--Age of 0 years only; a subset of
diagnoses which will only occur during the perinatal or newborn period
of age 0 (for example, tetanus neonatorum, health examination for
newborn under 8 days old).
Pediatric--Age is 0 to 17 years inclusive (for example,
Reye's syndrome, routine child health examination).
Maternity--Age range is 12 to 55 years inclusive (for
example, diabetes in pregnancy, antepartum pulmonary complication).
Adult--Age range is 15 to 124 years inclusive (for
example, senile delirium, mature cataract).
We received a request to provide clarification regarding the
overlapping age ranges (0 to 17 years and 15 to 124 years) in the
Pediatric and Adult categories under the Age Conflict edit. The
requestor questioned which diagnosis code would be most appropriate to
identify when a general or routine health examination is performed on
patients who are within the age range of 15 to 17 years. The specific
ICD-10-CM diagnosis codes that the requestor inquired about related to
a child or to an adult encounter for a health examination are displayed
in the table below.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
Z00.00.................... Encounter for general adult medical
examination without abnormal findings.
Z00.01.................... Encounter for general adult medical
examination with abnormal findings.
Z00.121................... Encounter for routine child health
examination with abnormal findings.
Z00.129................... Encounter for routine child health
examination without abnormal findings.
------------------------------------------------------------------------
The age ranges defined within the Age Conflict edits were
established with the implementation of the IPPS. The adult age range
includes the minimum age of 15 years for those patients who are
declared emancipated minors. We note that, historically, we have not
provided coding advice in rulemaking with respect to policy. 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 the requestor and other interested parties submit any
questions pertaining to correct coding practices for this specific
issue to the AHA.
Comment: Some commenters believe that CMS is responsible for
addressing questions relating to the pediatric and adult age ranges in
the Age Conflict edit. Other commenters stated that, while the Coding
Clinic for ICD-10-CM and ICD-10-PCS addresses proper coding, it cannot
address issues related to payer-specific edits or definitions.
Response: We believe there is some confusion with regard to the
issue presented in the FY 2018 IPPS/LTCH PPS proposed rule pertaining
to the Age Conflict edit. We specifically responded to a request that
sought clarification regarding the overlapping age ranges (0 to 17
years and 15 to 124 years) in the Pediatric and Adult categories under
the Age Conflict edit. We responded that the age ranges defined within
the Age Conflict edits were established with the implementation of the
IPPS and noted that the adult age range includes the minimum age of 15
years for those patients who are declared emancipated minors.
Therefore, we fully responded to the request that we clarify the Age
ranges in the MCE. However, in addition to the request regarding the
overlapping age ranges in the Age Conflict edit, the requester
specifically asked for coding advice. As noted earlier, ``The requester
questioned which diagnosis code would be most appropriate to identify
when a general or routine health examination is performed on patients
who are within the age range of 15 to 17 years.'' We provided the
specific ICD-10-CM diagnosis codes that the requestor inquired about
related to a child or to an adult encounter for a health examination as
displayed in the table above. The statement recommending that the
requester and other interested parties submit questions pertaining to
correct coding practices for this specific issue to the AHA was with
regard to reporting the most appropriate diagnosis code based on the
clarification provided regarding the Age Conflict edit. As stated in
the FY 2018 IPPS/LTCH PPS proposed rule, we have not provided coding
advice in rulemaking with respect to policy. Accordingly, any
[[Page 38046]]
questions regarding which diagnosis code would be most appropriate to
report when a general or routine health examination is performed on
patients who are within the age range of 15 to 17 years would be best
addressed by the Coding Clinic.
(1) Perinatal/Newborn Diagnosis Category
Under the ICD-10 MCE, the Perinatal/Newborn Diagnosis category
under the Age Conflict edit considers the age of 0 years only; a subset
of diagnoses which will only occur during the perinatal or newborn
period of age 0 to be inclusive. This includes conditions that have
their origin in the fetal or perinatal period (before birth through the
first 28 days after birth) even if morbidity occurs later. For that
reason, the diagnosis codes on this Age Conflict edit list would be
expected to apply to conditions or disorders specific to that age group
only.
In the ICD-10-CM classification, there are two diagnosis codes that
describe conditions as occurring during infancy and the neonatal period
that are currently not on the Perinatal/Newborn Diagnosis category edit
code list. We consulted with staff at the Centers for Disease Control's
(CDC's) National Center for Health Statistics (NCHS) because NCHS has
the lead responsibility for the ICD-10-CM diagnosis codes. The NCHS'
staff confirmed that, although diagnosis codes D80.7 (Transient
hypogammaglobulinemia of infancy) and diagnosis code E71.511 (Neonatal
adrenoleukodystrophy) do occur during infancy and the neonatal period,
both conditions can last beyond the 28-day timeframe which is used to
define the perinatal/newborn period. These diagnosis codes are not
intended to be restricted for assignment to newborn patients.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19841), we
proposed to not add these two diagnosis codes to the Perinatal/Newborn
Diagnosis category under the Age Conflict edit. We invited public
comments on our proposal.
Comment: Commenters agreed that ICD-10-CM diagnosis codes D80.7 and
E71.511 should not be added to the Perinatal/Newborn Diagnosis category
under the Age Conflict edit.
Response: We appreciate the commenters' support.
After consideration of the public comments that we received, we are
finalizing our proposal to not add diagnosis code D80.7 (Transient
hypogammaglobulinemia of infancy) and diagnosis code E71.511 (Neonatal
adrenoleukodystrophy) to the Perinatal/Newborn Diagnosis category under
the Age Conflict edit.
(2) Pediatric Diagnosis Category
Under the ICD-10 MCE, the Pediatric diagnosis category under the
Age Conflict edit considers the age range of 0 to 17 years inclusive.
For that reason, the diagnosis codes on this Age Conflict edit list
would be expected to apply to conditions or disorders specific to that
age group only.
The ICD-10-CM diagnosis code list for the Pediatric diagnosis
category under the Age Conflict edit currently includes a diagnosis
code pertaining to dandruff that is not intended to apply to pediatric
patients only. We consulted with staff at the Centers for Disease
Control's (CDC's) National Center for Health Statistics (NCHS) because
NCHS has the lead responsibility for the ICD-10-CM diagnosis codes. The
NCHS' staff confirmed that, although diagnosis code L21.0 (Seborrhea
capitis) has an inclusion term of ``Cradle cap,'' the description of
the diagnosis code is not intended to be restricted for assignment of
pediatric patients. Therefore, in the FY 2018 IPPS/LTCH PPS proposed
rule (82 FR 19841), we proposed to remove diagnosis code L21.0 from the
list of diagnosis codes for the Pediatric diagnosis category under the
Age Conflict edit. We invited public comments on our proposal.
Comment: Commenters agreed that diagnosis code L21.0 should be
removed from the list of diagnosis codes for the Pediatric diagnosis
category under the Age Conflict edit.
Response: We appreciate the commenters support.
After consideration of the public comments that we received, we are
finalizing our proposal to remove diagnosis code L21.0 (Seborrhea
capitis) from the Pediatric diagnosis category under the Age Conflict
edit in the ICD-10 MCE Version 35, effective October 1, 2017.
(3) Maternity Diagnoses
Under the ICD-10 MCE, the Maternity diagnosis category under the
Age Conflict edit considers the age range of 12 to 55 years inclusive.
For that reason, the ICD-10-CM diagnosis codes on this Age Conflict
edit list would be expected to apply to conditions or disorders
specific to that age group only.
As discussed in section II.F.12. of the preamble of the proposed
rule and this final rule, Table 6A.--New Diagnosis Codes lists the new
ICD-10-CM diagnosis codes that have been approved to date, which will
become effective with discharges occurring on and after October 1,
2017. Included on this list are a number of diagnosis codes associated
with pregnancy and maternal care that we believe are appropriate to add
to the list of diagnosis codes for the Maternity diagnoses category
under the Age Conflict edit. We refer readers to Table 6P.1a.
associated with the FY 2018 IPPS/LTCH PPS proposed rule (which is
available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html)
for a review of the ICD-10-CM diagnosis codes that we proposed to add
to the Age Conflict edit list. We invited public comments on our
proposal.
Comment: Commenters supported the proposal to add the list of
diagnosis codes displayed in Table 6P.1a. associated with the FY 2018
IPPS/LTCH PPS proposed rule to the Maternity diagnoses category under
the Age Conflict edit. Commenters recommended that this same list of
diagnosis codes also be added to the Diagnoses for Females Only edit.
Response: We appreciate the commenters' support. We agree that the
diagnosis codes proposed to be added to the Maternity diagnoses
category under the Age Conflict edit are also appropriate to be added
to the Diagnoses for Females Only edit code list under the Sex Conflict
edit with other diagnosis codes associated with pregnancy and maternal
care.
After consideration of the public comments that we received, we are
finalizing our proposal to add the list of diagnosis codes displayed in
Table 6P.1a. associated with the FY 2018 IPPS/LTCH PPS proposed rule
and this final rule (which is available via the Internet on the CMS Web
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the Maternity diagnoses category under
the Age Conflict edit and we are adding this same list of diagnosis
codes to the Diagnoses for Females Only code list under the Sex
Conflict edit, effective October 1, 2017.
b. Sex Conflict Edit
In the MCE, the Sex Conflict edit detects inconsistencies between a
patient's sex and any diagnosis or procedure on the patient's record;
for example, a male patient with cervical cancer (diagnosis) or a
female patient with a prostatectomy (procedure). In both instances, the
indicated diagnosis or the procedure conflicts with the stated sex of
the patient. Therefore, the patient's diagnosis, procedure, or sex is
presumed to be incorrect.
[[Page 38047]]
(1) Diagnoses for Males Only Edit
We received a request to review the following ICD-10-CM diagnosis
codes pertaining to conditions associated with males for possible
inclusion on the list of diagnosis codes for the Diagnoses for Males
Only edit.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
B37.42.................... Candidal balanitis.
N35.011................... Post-traumatic bulbous urethral stricture.
N35.012................... Post-traumatic membranous urethral
stricture.
N35.013................... Post-traumatic anterior urethral stricture.
N35.112................... Postinfective bulbous urethral stricture,
not elsewhere classified.
N35.113................... Postinfective membranous urethral stricture,
not elsewhere classified.
N35.114................... Postinfective anterior urethral stricture,
not elsewhere classified.
N99.115................... Postprocedural fossa navicularis urethral
stricture.
------------------------------------------------------------------------
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19842), we agreed with the requestor that diagnosis code B37.42
describes a condition that is applicable only to males. Balanitis is
the inflammation of the glans (rounded head) of the penis. We also
agreed that the diagnosis codes listed above that align under
subcategory N35.01 (Post-traumatic urethral stricture, male) and
subcategory N35.11 (Postinfection urethral stricture, not elsewhere
classified, male) are appropriate to add to the list of diagnosis codes
for the Diagnoses for Males Only edit because these diagnosis codes
include specific terminology that is applicable only to males. Further,
we agreed that diagnosis code N99.115 is appropriate to add to the list
of diagnosis codes for the Diagnoses for Males Only edit because
subcategory N99.11 (Postprocedural urethral stricture, male) includes
specific terminology that is applicable to males only as well.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule, we proposed to
add the ICD-10-CM diagnosis codes listed in the table above to the list
of diagnosis codes for the Diagnoses for Males Only edit.
We also proposed to remove ICD-10-CM diagnosis code Q64.0
(Epispadias) from the list of diagnosis codes for the Diagnoses for
Males Only edit because this rare, congenital condition involving the
opening of the urethra can occur in both males and females.
In addition, as discussed in section II.F.12. of the preamble of
the proposed rule, Table 6A.--New Diagnosis Codes associated with the
proposed rule listed the new ICD-10-CM diagnosis codes that had been
approved to date, which will become effective with discharges occurring
on and after October 1, 2017. Included on this list are a number of
diagnosis codes associated with male body parts that we believe are
appropriate to add to the list of diagnosis codes for the Diagnoses for
Males Only category under the Sex Conflict edit. We refer readers to
Table 6P.1b. associated with the proposed rule (which is available via
the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for a
review of the ICD-10-CM diagnosis codes that we proposed to add to the
list of diagnosis codes for the Diagnoses for Males Only category.
We invited public comments on our proposals.
Comment: Commenters supported the proposal to add the diagnosis
codes listed in the table in the proposed rule describing conditions
applicable to males to the Diagnoses for Males Only edit. Commenters
also supported the addition of new diagnosis codes associated with male
body parts as displayed in Table 6P.1b. associated with the proposed
rule to the Diagnoses for Males Only edit. In addition, commenters
supported the proposal to remove diagnosis code Q64.0 (Epispadias) from
the list of diagnosis codes for the Diagnoses for Males Only edit
because this condition can occur in both males and females.
Response: We appreciate the commenters' support.
After consideration of the public comments that we received, we are
finalizing our proposals to add the eight diagnosis codes displayed in
the table above and the new diagnosis codes associated with male body
parts as displayed in Table 6P.1b. associated with the proposed rule
and this final rule (which is available via the Internet on the CMS Web
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the Diagnoses for Males Only edit,
effective October 1, 2017. We are also finalizing our proposal to
remove diagnosis code Q64.0 (Epispadias) from the list of diagnosis
codes for the Diagnoses for Males Only edit, effective October 1, 2017.
(2) Diagnoses for Females Only
We received a request to review the following ICD-10-CM diagnosis
codes for possible removal from the list of diagnosis codes for the
Diagnoses for Females Only edit.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
F52.6..................... Dyspareunia not due to a substance or known
physiological condition.
J84.81.................... Lymphangioleiomyomatosis.
R97.1..................... Elevated cancer antigen 125 [CA 125].
------------------------------------------------------------------------
The requestor noted that, in the ICD-10-CM classification, the term
``Dyspareunia'' (painful sexual intercourse) has specified codes for
males and females located in the Alphabetic Index to Diseases for
Reporting Physiological Dyspareunia. However, the indexing for
diagnosis code F52.6 (Dyspareunia not due to a substance or known
physiological condition) specifies that it is not due to a
physiological condition and the entry is not gender specific. According
to the requestor, while the condition is most often associated with
female sexual dysfunction, there is a subset of males who also suffer
from this condition.
[[Page 38048]]
In addition, the requestor stated that diagnosis code J84.81
(Lymphangioleiomyomatosis) describes a rare form of lung disease
believed to occur more often in patients with tuberous sclerosis
complex (TSC), a disorder due to genetic mutation. Although the
condition is described as being exclusive to women, unique cases for
men with TSC have also been reported.
Lastly, the requestor indicated that diagnosis code R97.1 (Elevated
cancer antigen 125 [CA 125]) describes the tumor marker that commonly
identifies ovarian cancer cells in women. However, the requestor stated
that high levels have also been demonstrated in men (and women) with
lung cancer as well.
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19842 through 19843), we reviewed ICD-10-CM diagnosis codes F52.6,
J84.81, and R97.1, and we agree with the requestor that Dyspareunia,
not due to a physiological condition, can also occur in males. We also
agree that the condition of Lymphangioleiomyomatosis and Elevated CA
125 levels can be found in males. Therefore, we proposed to remove
these three diagnosis codes from the list of diagnosis codes for the
Diagnoses for Females Only edit. We invited public comments on our
proposals.
In addition, we proposed to add new diagnosis code Z40.03
(Encounter for prophylactic removal of fallopian tube(s)) to the list
of diagnosis codes for the Diagnoses for Females Only edit. Currently,
diagnosis code Z40.02 (Encounter for prophylactic removal of ovary) is
on the edit's code list; therefore, inclusion of new diagnosis code
Z40.03 would be consistent. We referred readers to Table 6A.--New
Diagnosis Codes associated with the FY 2018 IPPS/LTCH PPS proposed rule
(which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for the list of new ICD-10-CM diagnosis
codes that had been finalized to date. We invited public comments on
our proposal.
Comment: Commenters supported the proposal to remove diagnosis
codes F52.6, J84.81, and R97.1 from the list of diagnosis codes for the
Diagnoses for Females Only edit. Commenters also supported the proposal
to add new diagnosis code Z40.03 to the list of diagnosis codes for the
Diagnoses for Females Only edit.
Response: We appreciate the commenters' support.
After consideration of the public comments that we received, we are
finalizing our proposal to remove diagnosis codes F52.6 (Dyspareunia
not due to a substance or known physiological condition), J84.81
(Lymphangioleiomyomatosis) and diagnosis code R97.1 (Elevated cancer
antigen 125 [CA 125]) from the Diagnoses for Females Only edit,
effective October 1, 2017. We are also finalizing our proposal to add
new diagnosis code Z40.03 (Encounter for prophylactic removal of
fallopian tube(s)) to the list of diagnosis codes for the Diagnoses for
Females Only edit, effective Octber 1, 2017.
c. Non-Covered Procedure Edit: Gender Reassignment Surgery
In the MCE, the Non-Covered Procedure edit identifies procedures
for which Medicare does not provide payment. Payment is not provided
due to specific criteria that are established in the National Coverage
Determination (NCD) process. We refer readers to the Web site at:
https://www.cms.gov/Medicare/Coverage/DeterminationProcess/howtorequestanNCD.html for additional information on this process. In
addition, there are procedures that would normally not be paid by
Medicare but, due to the presence of certain diagnoses, are paid.
We issued instructions on June 27, 2014, as a one-time
notification, Pub. 100-03, Transmittal 169, Change Request 8825,
effective May 30, 2014, announcing to MACs the invalidation of National
Coverage Determination (NCD) 140.3 for Transsexual Surgery. As a
result, MACs determined coverage on a case-by-case basis. The
transmittal is available via the Internet on the CMS Web site at:
https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R169NCD.html?DLPage=1&DLEntries=10&DLFilter=Transsexual&DLSort=1&DLSortDir=ascending.
It was brought to our attention that the ICD-10-PCS procedure codes
shown in the table below are currently included on the list of
procedure codes for the Non-Covered Procedure edit. As a result, when
one of these procedure codes is reported on a claim, the edit for Non-
Covered Procedure is triggered and claims are not able to process
correctly.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0W4M070................... Creation of vagina in male perineum with
autologous tissue substitute, open
approach.
0W4M0J0................... Creation of vagina in male perineum with
synthetic substitute, open approach.
0W4M0K0................... Creation of vagina in male perineum with
nonautologous tissue substitute, open
approach.
0W4M0Z0................... Creation of vagina in male perineum, open
approach.
0W4N071................... Creation of penis in female perineum with
autologous tissue substitute, open
approach.
0W4N0J1................... Creation of penis in female perineum with
synthetic substitute, open approach.
0W4N0K1................... Creation of penis in female perineum with
nonautologous tissue substitute, open
approach.
0W4N0Z1................... Creation of penis in female perineum, open
approach.
------------------------------------------------------------------------
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19843), we proposed to remove the ICD-10-PCS procedure codes included
in the table above from the list of procedure codes for the Non-Covered
Procedure edit to help resolve claims processing issues associated with
the reporting of these procedure codes. We invited public comments on
our proposal.
Comment: Commenters agreed with the proposal to remove the ICD-10-
PCS procedure codes included in the table in the proposed rule from the
list of procedure codes under the Non-Covered Procedure edit. One
commenter who supported the proposal also requested that CMS review
current policies related to breast implant procedures for transgender
females. This commenter noted that estrogen therapy by itself does not
provide adequate growth tissue. Another commenter stated that these
gender reassignment procedures should remain noncovered as they are a
form of plastic surgery and, in principle, are not unlike elective
abortion procedures.
Response: We appreciate the commenters' support. In response to the
commenter who requested that we review current policies related to
breast implant procedures for transgender females, we recommend that
the commenter contact its local MAC for additional information because
there is
[[Page 38049]]
no national coverage determination (NCD) for this service. With regard
to the commenter who stated that the procedure codes describing gender
reassignment surgery listed in the table in the proposed rule should
remain noncovered, we note that, as mentioned earlier in this section,
NCD 140.3 for Transsexual Surgery was invalidated effective May 30,
2014, and therefore, the MACs determine coverage on a case-by-case
basis.
After consideration of the public comments we received, we are
finalizing our proposal to remove the ICD-10-PCS procedure codes
included in the table above from the list of procedure codes for the
Non-Covered Procedure edit to help resolve claims processing issues
associated with the reporting of these procedure codes.
d. Unacceptable Principal Diagnosis Edit
In the MCE, there are select codes that describe a circumstance
that influences an individual's health status, but does not actually
describe a current illness or injury. There also are codes that are not
specific manifestations but may be due to an underlying cause. These
codes are considered unacceptable as a principal diagnosis. In limited
situations, there are a few codes on the MCE Unacceptable Principal
Diagnosis edit code list that are considered ``acceptable'' when a
specified secondary diagnosis is also coded and reported on the claim.
(1) Bacterial and Viral Infectious Agents (B95 Through B97)
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19843), we examined ICD-10-CM diagnosis codes in Chapter 1 (Certain
Infectious and Parasitic Diseases) of the Classification Manual that
fall within the range of three code categories for ``Bacterial and
Viral Infectious Agents'' (B95 through B97). The instructional note
provided at this section states that these categories are provided for
use as supplementary or additional codes to identify the infectious
agent(s) in diseases classified elsewhere. We identified 45 ICD-10-CM
diagnosis codes within the range of these code categories for
``Bacterial and Viral Infectious Agents'' (B95 through B97) that, as a
result of the instructional note, are not appropriate to report as a
principal diagnosis. In the FY 2018 IPPS/LTCH PPS proposed rule, we
proposed to add the 45 ICD-10-CM diagnosis codes shown in Table 6P.1c.
associated with the proposed rule (which is available via the Internet
on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for
the Unacceptable Principal Diagnosis edit. We invited public comments
on our proposal.
Comment: Commenters supported the proposal to add the 45 ICD-10-CM
diagnosis codes shown in Table 6P.1c. associated with the proposed rule
to the list of codes for the Unacceptable Principal Diagnosis edit.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add the 45 ICD-10-CM diagnosis codes shown
in Table 6P.1c. associated with the proposed rule and this final rule
(which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for the Unacceptable
Principal Diagnosis edit, effective October 1, 2017.
(2) Mental Disorders Due to Known Physiological Conditions (F01 Through
F09)
We examined ICD-10-CM diagnosis codes in Chapter 5 (Mental and
Behavioral Disorders) of the Classification Manual that fall within the
range of nine code categories for ``Mental Disorders Due to Known
Physiological Conditions'' (F01 through F09). The instructional note
provided at this section states that this block comprises a range of
mental disorders grouped together on the basis of their having in
common a demonstrable etiology in cerebral disease, brain injury, or
other insult leading to cerebral dysfunction. The dysfunction may be
primary, as in diseases, injuries, and insults that affect the brain
directly and selectively; or secondary, as in systemic diseases and
disorders that attack the brain only as one of the multiple organs or
systems of the body that are involved.
We identified 21 ICD-10-CM diagnosis codes that fall within the
range of these code categories for ``Mental Disorders Due to Known
Physiological Conditions'' (F01 through F09). Of these nine code
categories, seven have a ``Code first the underlying physiological
condition'' note. For example, at code category F01--Vascular dementia,
the note reads, ``Code first the underlying physiological condition or
sequelae of cerebrovascular disease.'' We stated in the proposed rule
that there are a total of 19 diagnosis codes that fall under these 7
code categories with a ``Code first'' note and, therefore, are not
appropriate to report as a principal diagnosis. Therefore, in the FY
2018 IPPS/LTCH PPS proposed rule (82 FR 19843 through 19844), we
proposed to add the 19 ICD-10-CM diagnosis codes shown in Table 6P.1d.
associated with the proposed rule (which is available via the Internet
on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for
the Unacceptable Principal Diagnosis edit. We invited public comments
on our proposal.
Comment: Some commenters disagreed with the proposal to add the 19
ICD-10-CM diagnosis codes shown in Table 6P.1d. associated with the
proposed rule to the list of codes for the Unacceptable Principal
Diagnosis edit. The commenters suggested that CMS consult with the NCHS
to determine if any of the codes may appropriately be sequenced as a
principal diagnosis in certain circumstances. One commenter noted it
had been informed through communications with the NCHS and AHA that,
within the ICD-10-CM classification, there are instances where some
``Code first'' notes are intended to be interpreted as ``Code first, if
applicable'' or ``Code first, if known,'' although those terms are not
explicitly stated in the instructional note. The commenter acknowledged
that while some of the diagnosis codes that were proposed to be added
to the Unacceptable Principal Diagnosis edit appear straightforward,
such as diagnosis code F04 (Amnestic disorder due to known
physiological condition), other diagnosis codes are not as clear, such
as diagnosis code F01.5 (Vascular dementia) or diagnosis code F07.81
(Postconcussional syndrome).
Response: We appreciate the commenters' review and input regarding
the proposal. We consulted with the staff at NCHS and they acknowledged
that this group of codes was modified from the original World Health
Organization (WHO) version of ICD-10. They indicated that while some
code titles do include the language ``due to known physiological
condition,'' they are evaluating these ``Code first'' instructional
notes further as they perform their annual review of the coding
guidelines and consider updates for FY 2018.
After consideration of the public comments that we received and for
the reasons described, we are not finalizing our proposal to add the 19
ICD-10-CM diagnosis codes shown in Table 6P.1d. associated with the
proposed rule to the list of codes for the Unacceptable Principal
Diagnosis edit.
[[Page 38050]]
(3) Other Obstetric Conditions, Not Elsewhere Classified (O94 Through
O9A)
We examined ICD-10-CM diagnosis codes in Chapter 15 (Pregnancy,
Childbirth and the Puerperium) of the Classification Manual that fall
within the range of four code categories for ``Other Obstetric
Conditions, Not Elsewhere Classified'' (O94 through O9A). The
instructional note provided at this section under category O94 states
that ``this category is to be used to indicate conditions in O00
through O77, O85 through O94 and O98 through O9A as the cause of late
effects. The sequelae include conditions specified as such, or as late
effects, which may occur at any time after the puerperium. Code first
condition resulting from (sequela) of complication of pregnancy,
childbirth, and the puerperium.''
We stated in the proposed rule that we identified one ICD-10-CM
diagnosis code within the range of these code categories for ``Other
Obstetric Conditions, Not Elsewhere Classified'' (O94 through O9A)
that, as a result of the instructional note, is not appropriate to
report as a principal diagnosis because that code identifies the cause
of the late effect. This ICD-10-CM diagnosis code is O94 (Sequelae of
complication of pregnancy, childbirth, and the puerperium). In the FY
2018 IPPS/LTCH PPS proposed rule (82 FR 19844), we proposed to add ICD-
10-CM diagnosis code O94 to the list of codes for the Unacceptable
Principal Diagnosis edit. We invited public comments on our proposal.
Comment: Commenters agreed with the proposal to add diagnosis code
O94 to the list of codes for the Unacceptable Principal Diagnosis edit.
Response: We appreciate the commenters' support.
After consideration of the public comments that we received, we are
finalizing our proposal to add diagnosis code O94 (Sequelae of
complication of pregnancy, childbirth, and the puerperium) to the list
of codes for the Unacceptable Principal Diagnosis edit, effective
October 1, 2017.
(4) Symptoms and Signs Involving Cognition, Perception, Emotional State
and Behavior (R40 Through R46)
We examined ICD-10-CM diagnosis codes in Chapter 18 (Symptoms,
Signs and Abnormal Findings) of the Classification Manual that fall
within the range of code categories for ``Symptoms and Signs Involving
Cognition, Perception, Emotional State and Behavior'' (R40 through
R46), specifically under code category R40--Somnolence, stupor and
coma. At subcategory R40.2--Coma, there is an instructional note, which
states ``Code first any associated: Fracture of skull (S02.-);
Intracranial injury (S06.-).'' We stated in the proposed rule that we
identified 96 ICD-10-CM diagnosis codes under this subcategory that, as
a result of the instructional note, are not appropriate to report as a
principal diagnosis. In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19844), we proposed to add the 96 ICD-10-CM diagnosis codes shown in
Table 6P.1e. associated with the proposed rule (which is available via
the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the
list of codes for the Unacceptable Principal Diagnosis edit. We invited
public comments on our proposal.
Comment: Commenters agreed with the proposed addition of 95 of the
96 diagnosis codes included in Table 6P.1e. associated with the
proposed rule. The commenters specifically disagreed with the proposal
to include diagnosis code R40.20 (Unspecified coma) to the Unacceptable
Principal Diagnosis edit because the term ``any'' in the instructional
note ``Code first any associated: Fracture of skull (S02.-);
Intracranial injury (S06.-)'' indicates that if there is not a
documented skull fracture or intracranial injury, then diagnosis code
R40.20 could appropriately be reported as a Principal Diagnosis.
Response: We appreciate the commenters' support to add 95 of the 96
diagnosis codes included in our proposal as shown in Table 6P.1e.
associated with the proposed rule. We agree with the commenters that
there could be circumstances in which diagnosis code R40.20 would
appropriately be reported as the principal diagnosis in the absence of
a documented fracture of skull or intracranial injury.
After consideration of the public comments we received, we are
finalizing the addition of 95 of the 96 diagnosis codes shown in Table
6P.1e. associated with the proposed rule (which is available via the
Internet on the CMS Web site) to the list of codes for the Unacceptable
Principal Diagnosis edit. For the reasons stated, we are not finalizing
the proposal to add diagnosis code R40.20 (Unspecified coma) to the
Unacceptable Principal Diagnosis edit. Table 6P.1e. associated with
this final rule (which is available via the Internet on the CMS Web
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) sets forth the 95 diagnosis codes that we
are adding to the list of codes for the Unacceptable Principal
Diagnosis edit, consistent with our finalized policy.
(5) General Symptoms and Signs (R50 Through R69)
We examined ICD-10-CM diagnosis codes in Chapter 18 (Symptoms,
Signs and Abnormal Findings) of the Classification Manual that fall
within the range of code categories for ``General Symptoms and Signs''
(R50 through R69), specifically, at code category R65--Symptoms and
signs associated with systemic inflammation and infection. There is an
instructional note at subcategory R65.1--Systemic inflammatory response
syndrome (SIRS) of non-infectious origin, which states ``Code first
underlying condition, such as: Heatstroke (T67.0); Injury and trauma
(S00-T88).'' There is also an instructional note at subcategory R65.2--
Severe sepsis, which states ``Code first underlying infection, such
as:'' and provides a list of examples.
We identified four ICD-10-CM diagnosis codes in these subcategories
that, as a result of the instructional notes described above, are not
appropriate to report as a principal diagnosis. These four ICD-10-CM
codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
R65.10.................... Systemic inflammatory response syndrome
(SIRS) of non-infectious origin without
acute organ dysfunction.
R65.11.................... Systemic inflammatory response syndrome
(SIRS) of non-infectious origin with acute
organ dysfunction.
R65.20.................... Severe sepsis without septic shock.
R65.21.................... Severe sepsis with septic shock.
------------------------------------------------------------------------
[[Page 38051]]
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19844), we
proposed to add the four ICD-10-CM diagnosis codes shown in the table
above to the list of codes for the Unacceptable Principal Diagnosis
edit. We invited public comments on our proposal.
Comment: Commenters agreed with the proposal to add the four
diagnosis codes listed in the table in the proposed rule to the
Unacceptable Principal Diagnosis edit. However, another commenter
disagreed with adding diagnosis code R65.10 (Systemic inflammatory
response syndrome (SIRS) of non-infectious origin without acute organ
dysfunction) and diagnosis code R65.11 (Systemic inflammatory response
syndrome (SIRS) of non-infectious origin with acute organ dysfunction)
to the edit. According to the commenter, if the underlying condition is
not known, it would be appropriate to report either one of the two
codes (R65.10 and R65.11) as the principal diagnosis.
Response: We appreciate the commenters' support. We disagree with
the commenter who asserted that if the underlying condition is not
known, it would be appropriate to report either diagnosis code R65.10
or R65.11 as a principal diagnosis. The current FY 2017 ICD-10-CM
Official Guidelines for Coding and Reporting at Section 1.C.18.g.
states, ``The systemic inflammatory response syndrome (SIRS) can
develop as a result of certain non-infectious disease processes, such
as trauma, malignant neoplasm, or pancreatitis. When SIRS is documented
with a noninfectious condition, and no subsequent infection is
documented, the code for the underlying condition, such as an injury,
should be assigned, followed by code R65.10, Systemic inflammatory
response syndrome (SIRS) of non-infectious origin without acute organ
dysfunction, or code R65.11, Systemic inflammatory response syndrome
(SIRS) of non-infectious origin with acute organ dysfunction.''
Therefore, the underlying condition (for example, trauma, neoplasm,
pancreatitis, amongothers) responsible for causing the systemic
inflammatory response syndrome (SIRS) should be readily available in
the medical record documentation due to its clinical significance for
the care and treatment of the patient.
After consideration of the public comments that we received, we are
finalizing our proposal to add the four diagnosis codes shown in the
table above from code category R65 (Symptoms and signs associated with
systemic inflammation and infection) to the Unacceptable Principal
Diagnosis edit code list, effective October 1, 2017.
(6) Poisoning by, Adverse Effects of, and Underdosing of Drugs,
Medicaments and Biological Substances (T36 Through T50)
We examined ICD-10-CM diagnosis codes in Chapter 19 (Injury and
Poisoning) of the Classification Manual that fall within the range of
code categories for ``Poisoning by, Adverse Effects of and Underdosing
of Drugs, Medicaments and Biological Substances'' (T36 through T50).
The instructional note provided at this section states ``Code first,
for adverse effects, the nature of the adverse effect, such as:'' and
provides a list of examples. In addition, the FY 2017 ICD-10-CM
Official Guidelines for Coding and Reporting at Section I.C.19.e.5.c.,
state that ``Codes for underdosing should never be assigned as
principal or first-listed codes.''
We identified 996 ICD-10-CM diagnosis codes that, as a result of
the instructional note for adverse effects and the guideline for
reporting diagnosis codes for underdosing, are not appropriate to
report as a principal diagnosis. In the FY 2018 IPPS/LTCH PPS proposed
rule (82 FR 19844 through 19845), we proposed to add the 996 ICD-10-CM
diagnosis codes shown in Table 6P.1f. associated with the proposed rule
(which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for the Unacceptable
Principal Diagnosis edit. We invited public comments on our proposal.
Comment: Commenters supported the proposal to add the 996 ICD-10-CM
diagnosis codes shown in Table 6P.1f. associated with the proposed rule
describing adverse effects and underdosing to the Unacceptable
Principal Diagnosis edit.
Response: We appreciate the commenters' support.
After consideration of the public comments that we received, we are
finalizing our proposal to add the 996 ICD-10-CM diagnosis codes shown
in Table 6P.1f. associated with the proposed rule and this final rule
(which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for the Unacceptable
Principal Diagnosis edit code list, effective October 1, 2017.
(7) Complications of Surgical and Medical Care, Not Elsewhere
Classified (T80 Through T88)
We examined ICD-10-CM diagnosis codes in Chapter 19 (Injury and
Poisoning) of the Classification Manual that fall within the range of
code categories for ``Complications of Surgical and Medical Care, Not
Elsewhere Classified'' (T80 through T88), specifically, at code
category T81--Complications of procedures, not elsewhere classified.
There is an instructional note at subcategory T81.12x--Postprocedural
septic shock, which states, ``Code first underlying infection.''
We identified two ICD-10-CM diagnosis codes in this subcategory
that, as a result of the instructional note, are not appropriate to
report as a principal diagnosis. These two ICD-10-CM codes are shown in
the table below.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
T81.12XD.................. Postprocedural septic shock, subsequent
encounter.
T81.12XS.................. Postprocedural septic shock, sequela.
------------------------------------------------------------------------
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19845), we
proposed to add the two ICD-10-CM diagnosis codes shown in the table
above to the list of codes for the Unacceptable Principal Diagnosis
edit. We invited public comments on our proposal.
Comment: Commenters supported the proposal to add the two diagnosis
codes shown in the table in the proposed rule to the Unacceptable
Principal Diagnosis edit.
Response: We appreciate the commenters' support.
After consideration of the public comments that we received, we are
finalizing our proposal to add the two diagnosis codes describing
postprocedural septic shock listed in the
[[Page 38052]]
proposed rule and above in this final rule to the list of codes for the
Unacceptable Principal Diagnosis edit, effective October 1, 2017.
(8) Persons Encountering Health Services for Examinations (Z00 Through
Z13)
We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors
Influencing Health Status) of the Classification Manual that fall
within the range of code categories for ``Persons Encountering Health
Services for Examinations'' (Z00 through Z13), specifically, at code
category Z00--Encounter for general examination without complaint,
suspected or reported diagnosis. The FY 2017 ICD-10-CM Official
Guidelines for Coding and Reporting at Section I.C.21.c.16., state that
the following ICD-10-CM Z-codes/categories may only be reported as the
principal/first-listed diagnosis, except when there are multiple
encounters on the same day and the medical records for the encounters
are combined:
Z00 (Encounter for general examination without complaint,
suspected or reported diagnosis); except Z00.6 (Encounter for
examination for normal comparison and control in clinical research
program).
Therefore, we stated in the proposed rule that diagnosis code Z00.6
should not be reported as a principal/first-listed diagnosis. In the FY
2018 IPPS/LTCH PPS proposed rule (82 FR 19845), we proposed to add ICD-
10-CM diagnosis code Z00.6 to the list of codes for the Unacceptable
Principal Diagnosis edit. We invited public comments on our proposal.
Comment: Commenters did not support the proposal to add diagnosis
code Z00.6 to the list of codes for the Unacceptable Principal
Diagnosis edit. The commenters stated that, although this diagnosis
code is listed as an exception in the FY 2017 ICD-10-CM Official
Guidelines for Coding and Reporting, the code is not prohibited from
ever being reported as a principal diagnosis, rather, it is not
required to be reported as a principal diagnosis. According to the
commenters, there are circumstances when a control subject in a
clinical research program may be admitted to the hospital and diagnosis
code Z00.6 would be appropriate to report as the principal diagnosis.
One commenter also noted that while Medicare may not be the responsible
payer in these circumstances, other payers use the MCE edits, and these
edits are frequently programmed in their billing software. Therefore,
the commenter believed that including diagnosis code Z00.6 on the edit
could cause unintended coding and reporting issues.
Response: We appreciate the commenters' feedback on our proposal.
We agree that there could be circumstances where it would be
appropriate to report diagnosis code Z00.6 as the principal diagnosis.
We have noted previously (72 FR 47152) that we encourage other payers
to develop refinements to Medicare's DRG system, which includes the
Medicare code edits, consistent with their population's needs. However,
we also recognize that tother payers use the MCE edits in their
systems.
After consideration of the public comments we received and for the
reasons described, we are not finalizing our proposal to add diagnosis
code Z00.6 (Encounter for examination for normal comparison and control
in clinical research program) to the list of codes for the Unacceptable
Principal Diagnosis edit.
To address a separate issue, in the FY 2018 IPPS/LTCH PPS proposed
rule (82 FR 19845), we proposed to remove the diagnosis codes under
category Z05 (Encounter for observation and examination of newborn for
suspected diseases and conditions ruled out) from the list of codes for
the Unacceptable Principal Diagnosis edit. The FY 2017 ICD-10-CM
Official Guidelines for Coding and Reporting at Section I.C.16.b. state
the following:
Assign a code from category Z05, Observation and
evaluation of newborns and infants for suspected conditions ruled out,
to identify those instances when a healthy newborn is evaluated for a
suspected condition that is determined after study not to be present.
Do not use a code from category Z05 when the patient has identified
signs or symptoms of a suspected problem; in such cases code the sign
or symptom.
A code from category Z05 may also be assigned as a
principal or first-listed code for readmissions or encounters when the
code from category Z38 no longer applies. Codes from category Z05 are
for use only for healthy newborns and infants for which no condition
after study is found to be present.
A code from category Z05 is to be used as a secondary code
after the code from category Z38, Liveborn infants according to place
of birth and type of delivery.
Therefore, the ICD-10-CM diagnosis codes under category Z05 are
allowed to be reported as a principal diagnosis. We proposed to remove
the 14 ICD-10-CM diagnosis codes shown in the table below from the list
of codes for the Unacceptable Principal Diagnosis edit.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
Z05.0..................... Observation and evaluation of newborn for
suspected cardiac condition ruled out.
Z05.1..................... Observation and evaluation of newborn for
suspected infectious condition ruled out.
Z05.2..................... Observation and evaluation of newborn for
suspected neurological condition ruled out.
Z05.3..................... Observation and evaluation of newborn for
suspected respiratory condition ruled out.
Z05.41.................... Observation and evaluation of newborn for
suspected genetic condition ruled out.
Z05.42.................... Observation and evaluation of newborn for
suspected metabolic condition ruled out.
Z05.43.................... Observation and evaluation of newborn for
suspected immunologic condition ruled out.
Z05.5..................... Observation and evaluation of newborn for
suspected gastrointestinal condition ruled
out.
Z05.6..................... Observation and evaluation of newborn for
suspected genitourinary condition ruled
out.
Z05.71.................... Observation and evaluation of newborn for
suspected skin and subcutaneous tissue
condition ruled out.
Z05.72.................... Observation and evaluation of newborn for
suspected musculoskeletal condition ruled
out.
Z05.73.................... Observation and evaluation of newborn for
suspected connective tissue condition ruled
out.
Z05.8..................... Observation and evaluation of newborn for
other specified suspected condition ruled
out.
Z05.9..................... Observation and evaluation of newborn for
unspecified suspected condition ruled out.
------------------------------------------------------------------------
We invited public comments on our proposal.
Comment: Commenters agreed with the proposal to remove the 14 ICD-
10-CM diagnosis codes describing observation and evaluation of newborn
for various suspected conditions that have been ruled out as shown in
the
[[Page 38053]]
table in the proposed rule from the list of codes for the Unacceptable
Principal Diagnosis edit.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to remove the 14 ICD-10-CM diagnosis codes as
shown in the table above from the list of codes for the Unacceptable
Principal Diagnosis edit, effective October 1, 2017.
(9) Encounters for Other Specific Health Care (Z40 Through Z53)
We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors
Influencing Health Status) of the Classification Manual that fall
within the range of code categories for ``Encounters for Other Specific
Health Care'' (Z40 through Z53), specifically, at code category Z52--
Donors of organs and tissues. The FY 2017 ICD-10-CM Official Guidelines
for Coding and Reporting at Section I.C.21.c.16. state that the
following Z-codes/categories may only be reported as the principal/
first-listed diagnosis, except when there are multiple encounters on
the same day and the medical records for the encounters are combined:
Z52 (Donors of organs and tissues); except Z52.9 (Donor of
unspecified organ or tissue).
Therefore, we stated in the proposed rule that ICD-10-CM diagnosis
code Z52.9 should not be reported as a principal/first-listed
diagnosis. In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19846), we
proposed to add ICD-10-CM diagnosis code Z52.9 to the list of codes for
the Unacceptable Principal Diagnosis edit. We invited public comments
on our proposal.
Comment: Commenters supported the proposal to add diagnosis code
Z52.9 to the list of codes for the Unacceptable Principal Diagnosis
edit. Commenters stated that this code is on the list of ``non-specific
Z codes'' in the FY 2017 ICD-10-CM Official Guidelines for Coding and
Reporting, indicating that this code is so nonspecific that there is
little justification for its use in the hospital inpatient setting.
However, another commenter disagreed with adding diagnosis code Z52.9
to the list of codes for the Unacceptable Principal Diagnosis edit.
Similar to the circumstances with diagnosis code Z00.6 (Encounter for
examination for normal comparison and control in clinical research
program) discussed earlier in this section, this commenter stated that
the FY 2017 ICD-10-CM Official Guidelines for Coding and Reporting does
not prohibit diagnosis code Z52.9 from ever being reported as a
principal diagnosis; rather, it is not required to be reported as a
principal diagnosis.
Response: We thank the commenters for their support and feedback.
Upon further review, we agree that, consistent with the FY 2017 ICD-10-
CM Official Guidelines for Coding and Reporting, the interpretation of
the exception for diagnosis code Z52.9 is that it does not prohibit the
code from ever being reported as a principal diagnosis; rather, the
exception is indicating that the code is not required to be reported as
a principal diagnosis.
After consideration of the public comments we received and for the
reasons described, we are not finalizing our proposal to add ICD-10-CM
diagnosis code Z52.9 to the list of codes for the Unacceptable
Principal Diagnosis edit.
(10) Persons Encountering Health Services in Other Circumstances (Z69
Through Z76)
We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors
Influencing Health Status) of the Classification Manual that fall
within the range of code categories for ``Persons Encountering Health
Services in Other Circumstances'' (Z69 through Z76), specifically, at
subcategory Z71.8--Other specified counseling. Consistent with ICD-10-
CM diagnosis codes Z71.81 (Spiritual or religious counseling) and
Z71.89 (Other specified counseling), in the FY 2018 IPPS/LTCH PPS
proposed rule (82 FR 19846), we proposed to add new diagnosis code
Z71.82 (Exercise counseling) to the list of codes for the Unacceptable
Principal Diagnosis edit. We referred readers to Table 6A.--New
Diagnosis Codes associated with the proposed rule (which is available
via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for the
list of new ICD-10-CM diagnosis codes that had been finalized to date.
We invited public comments on our proposal.
Comment: Commenters supported the proposal to add new diagnosis
code Z71.82 (Exercise counseling) to the list of codes for the
Unacceptable Principal Diagnosis edit.
Response: We appreciate the commenters' support.
After consideration of the public comments that we received, we are
finalizing our proposal to add new ICD-10-CM diagnosis code Z71.82
(Exercise counseling) to the list of codes for the Unacceptable
Principal Diagnosis edit, effective October 1, 2017.
(11) Persons With Potential Health Hazards Related to Family and
Personal History and Certain Conditions Influencing Health Status (Z77
Through Z99)
We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors
Influencing Health Status) of the Classification Manual that fall
within the range of code categories for ``Persons with Potential Health
Hazards Related to Family and Personal History and Certain Conditions
Influencing Health Status'' (Z77 through Z99), specifically, at code
category Z91.8--Other specified personal risk factors, not elsewhere
classified. Consistent with ICD-10-CM diagnosis codes Z91.81 (History
of falling), Z91.82 (Personal history of military deployment), and
Z91.89 (Other specified personal risk factors, not elsewhere
classified), in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19846),
we proposed to add new ICD-10-CM diagnosis codes Z91.841 (Risk for
dental caries, low), Z91.842 (Risk for dental caries, moderate),
Z91.843 (Risk for dental caries, high), and Z91.849 (Unspecified risk
for dental caries) to the list of codes for the Unacceptable Principal
Diagnosis edit. We referred readers to Table 6A.--New Diagnosis Codes
associated with the proposed rule (which is available via the Internet
on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for the list of new ICD-
10-CM diagnosis codes that had been finalized to date. We invited
public comments on our proposal.
Comment: Commenters supported the proposal to add new diagnosis
codes in subcategory Z91.84, Risk for dental caries, to the list of
codes for the Unacceptable Principal Diagnosis edit.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add new ICD-10-CM diagnosis codes Z91.841
(Risk for dental caries, low), Z91.842 (Risk for dental caries,
moderate), Z91.843 (Risk for dental caries, high), and Z91.849
(Unspecified risk for dental caries) to the list of codes for the
Unacceptable Principal Diagnosis edit, effective October 1, 2017.
e. Future Enhancement
Similar to our discussion in the FY 2017 IPPS/LTCH PPS final rule
(81 FR 56843 through 56844), with the implementation of ICD-10, it is
clear that there are several new concepts in the classification.
Looking ahead to the needs and uses of coded data as the data
[[Page 38054]]
continue to evolve from the reporting, collection, processing,
coverage, payment and analysis aspects, we believe the need to ensure
the accuracy of the coded data becomes increasingly significant.
The purpose of the MCE is to ensure that errors and inconsistencies
in the coded data are recognized during Medicare claims processing. As
we continue to evaluate the purpose and function of the MCE with
respect to ICD-10, we encourage public input for future discussion. As
we discussed in the FY 2017 IPPS/LTCH PPS final rule, we recognize a
need to further examine the current list of edits and the definitions
of those edits. We continue to encourage public comments on whether
there are additional concerns with the current edits, including
specific edits or language that should be removed or revised, edits
that should be combined, or new edits that should be added to assist in
detecting errors or inaccuracies in the coded data. Comments should be
directed to the MS-DRG Classification Change Mailbox located at
[email protected] by November 1, 2017 for FY 2019.
11. Changes to 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.
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19846), because the relative resource intensity of surgical classes can
shift as a function of MS-DRG reclassification and recalibrations, for
FY 2018, we reviewed the surgical hierarchy of each MDC, as we have for
previous reclassifications and recalibrations, to determine if the
ordering of classes coincides with the intensity of resource
utilization.
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. 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 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.
We received a request to examine a case involving the principal
procedure for excision of pituitary gland (ICD-10-PCS code 0GB00ZZ
(Excision of pituitary gland, open approach)) with a secondary
procedure for harvesting of a fat graft (ICD-10-PCS code 0JB80ZZ
(Excision of abdomen subcutaneous tissue and fascia, open approach)) to
treat a condition of pituitary adenoma (ICD-10-CM diagnosis code D35.2
(Benign neoplasm of pituitary gland)) and the resulting sella turcica
defect. The requestor noted that when the procedure code for harvesting
of the fat graft is reported on the claim, the case currently groups to
MS-DRGs 622, 623, and 624 (Skin Grafts and Wound Debridement for
Endocrine, Nutritional, and Metabolic Disorders with MCC, with CC and
without CC/MCC, respectively). However, when the procedure code for
harvesting of the fat graft is not reported on the claim, the case
groups to MS-DRGs 614 and 615 (Adrenal and Pituitary Procedures with
CC/MCC and without CC/MCC, respectively), which appears to be a more
appropriate assignment. The requester expressed concern regarding the
procedure code for harvesting of the fat graft in the secondary
position driving the MS-DRG assignment versus the principal procedure
of the excision of pituitary gland.
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19847), we analyzed the codes provided by the requestor in the GROUPER
to determine if we could duplicate the requestor's findings. The
findings from our analysis were consistent with the requestor's
findings. Our clinical advisors reviewed this issue and agreed that it
should be the procedure code for excision of the pituitary gland that
is used to determine the MS-DRG assignment in this scenario and not the
harvesting of the fat graft procedure code.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule, we proposed
to move MS-DRGs 614 and 615 above MS-DRGs 622, 623, and 624 in the
surgical hierarchy to enable more appropriate MS-DRG assignment for
these types of cases.
We invited public comments on our proposal.
Comment: Commenters supported the proposal to move MS-DRGs 614 and
[[Page 38055]]
615 above MS-DRGs 622, 623, and 624 in the surgical hierarchy. Another
commenter expressed concern that the proposal to move MS-DRGs 614 and
615 above MS-DRGs 622, 623, and 624 in the surgical hierarchy was made
as the result of a single scenario and recommended that a more thorough
analysis be performed to determine the potential impact of such a
change prior to modifying existing GROUPER logic.
Response: We appreciate the commenters' support. In response to the
commenter who expressed concern that the proposal to move MS-DRGs 614
and 615 above MS-DRGs 622, 623, and 624 in the surgical hierarchy was
made as the result of a single scenario and that additional analysis
should be performed to determine potential impacts, we are unclear as
to what specific impacts the commenter is referring to and what type of
analysis the commenter is recommending. However, we did analyze claims
from the December 2016 update of the FY 2016 MedPAR file for MS-DRGs
614 and 615, as well as from MS-DRGs 622, 623 and 624, to determine the
volume of cases where procedure codes from both sets of MS-DRGs were
reported. Our findings are shown in the tables below.
MS-DRGs for Adrenal and Pituitary Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 614--All cases........................................... 1,526 5 $16,957
MS-DRG 615--All cases........................................... 1,007 2.4 10,680
----------------------------------------------------------------------------------------------------------------
MS-DRGs for Skin Grafts and Wound Debridement Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 622--All cases........................................... 1,289 10.7 $23,954
MS-DRG 623--All cases........................................... 4,423 6.3 12,522
MS-DRG 624--All cases........................................... 454 3.5 9,345
----------------------------------------------------------------------------------------------------------------
As shown in the tables above, there were a total of 1,526 cases in
MS-DRG 614 with an average length of stay of 5 days and average costs
of $16,957. There were a total of 1,007 cases in MS-DRG 615 with an
average length of stay of 2.4 days and average costs of $10,680. For
MS-DRG 622, there were a total of 1,289 cases with an average length of
stay of 10.7 days and average costs of $23,954. For MS-DRG 623, there
were a total of 4,423 cases with an average length of stay of 6.3 days
and average costs of $12,522. For MS-DRG 624, there were a total of 454
cases with an average length of stay of 3.5 days and average costs of
$9,345.
We then analyzed claims from the March 2017 update of the FY 2016
MedPAR file to determine the number of cases where a procedure code
from MS-DRG 614 or MS-DRG 615 was reported with a procedure code from
MS-DRGs 622, 623 or 624 on the same claim. Our findings are shown in
the table below.
MS-DRGs for Adrenal, Pituitary, Skin Grafts and Wound Debridement Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 614 procedures with MS-DRG 622 procedures................ 46 10.2 $12,977
MS-DRG 614 procedures with MS-DRG 623 procedures................ 240 4.4 11,540
MS-DRG 615 procedures with MS-DRG 624 procedures................ 125 2.9 14,494
----------------------------------------------------------------------------------------------------------------
As shown in the table above, there were a total of 46 cases
reporting procedures from MS-DRG 614 and 622 on the same claim with an
average length of stay of 10.15 days and average costs of $12,977.
There were a total of 240 cases reporting procedures from MS-DRG 614
and MS-DRG 623 on the same claim with an average length of stay of 4.42
days and average costs of $11,540. Lastly, there were a total of 125
cases reporting procedures from MS-DRG 615 and MS-DRG 624 on the same
claim with an average length of stay of 2.93 days and average costs of
$14,494.
We then examined the redistribution of cases that is anticipated to
occur as a result of the proposal to move MS-DRGs 614 and 615 above MS-
DRGs 622, 623, and 624 in the surgical hierarchy for Version 35 of the
ICD-10 MS-DRGs, by processing the claims data from the March update of
the FY 2016 MedPAR file through the ICD-10 MS-DRG GROUPER Version 34
and then processing the same claims data through the ICD-10 MS-DRG
GROUPER Version 35 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. We found that the number of cases moving out of MS-DRG
622 and into MS-DRG 614 is approximately 46 cases, the number of cases
moving out of MS-DRG 623 and into MS-DRG 614 is approximately 240 cases
and the number of cases moving out of MS-DRG 624 and into MS-DRG 615 is
approximately 125 cases. We believe that overall, the impact of this
change is limited because the subset of cases that would be
reclassified is approximately 6.7 percent of the total cases currently
grouping to MS-DRGs 622, 623 and 624. Additionally, as shown above, in
the analysis of claims where a procedure code from MS-DRG 614 or MS-DRG
615 was reported with a procedure code from MS-DRGs 622, 623, or 624 on
the same claim, the average costs for those cases are consistent with
the average costs for all cases in MS DRGs 614 and 615.
For issues pertaining to the surgical hierarchy, as with other MS-
DRG
[[Page 38056]]
related requests, we encourage commenters to submit requests to examine
ICD-10 claims data via the CMS MS-DRG Classification Change Requests
Mailbox located at [email protected] by November 1,
2017 for FY 2019 consideration.
After consideration of the public comments we received, we are
finalizing our proposal to move MS-DRGs 614 and 615 above MS-DRGs 622,
623, and 624 in the surgical hierarchy effective October 1, 2017.
12. Changes to the MS-DRG Diagnosis Codes for FY 2018
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 diagnosis. In FY 2008, we evaluated each
diagnosis code to determine its impact on resource use and to determine
the most appropriate CC subclassification (non-CC, 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. Additions and Deletions to the Diagnosis Code Severity Levels for FY
2018
We stated in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19847)
that the following tables identifying the proposed additions and
deletions to the MCC severity levels list and the proposed additions
and deletions to the CC severity levels list for FY 2018 are available
via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
Table 6I.1--Proposed Additions to the MCC List--FY 2018;
Table 6I.2--Proposed Deletions to the MCC List--FY 2018;
Table 6J.1--Proposed Additions to the CC List--FY 2018; and
Table 6J.2--Proposed Deletions to the CC List--FY 2018.
We invited public comments on our proposed severity level
designations for the diagnosis codes listed in Table 6I.1. and Table
6J.1. We noted that, for Table 6I.2. and Table 6J.2., the proposed
deletions were a result of code expansions. Therefore, the diagnosis
codes on these lists are no longer valid codes, effective FY 2018. For
example, diagnosis code O00.10 (Tubal pregnancy without intrauterine
pregnancy) is a current CC for FY 2017 under Version 34 of the ICD-10
MS-DRGs. Effective FY 2018, under Version 35 of the ICD-10 MS-DRGs,
this single code has been expanded into three diagnosis codes to
include laterality (left/right) and an unspecified option with the
addition of a sixth character. Therefore, diagnosis code O00.10 is
included in Table 6J.2. for deletion from the CC list because it is no
longer a valid code in FY 2018.
Comment: Commenters agreed with the proposed additions and
deletions to the MCC and CC List severity level designations for FY
2018. One commenter suggested that CMS also consider adding existing
diagnosis codes from subcategories L97.5 (Non-pressure chronic ulcer of
other part of foot) and L98.4 (Non-pressure chronic ulcer of skin, not
elsewhere classified) to the CC List. This commenter noted that new
diagnosis codes from these subcategories were proposed to be added to
the CC List. However, according to the commenter, existing codes from
these same subcategories are not currently included in the CC List even
though some of them represent a greater severity level than the new
codes that were proposed to be added to the CC List.
Response: We appreciate the commenters' support. In response to the
commenter who suggested that we consider adding existing diagnosis
codes in subcategories L97.5 and L98.4 to the CC list, we were unable
to fully evaluate this request for FY 2018 but will consider this
recommendation as part of our comprehensive review of the CC and MCC
lists. As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19848) and in the sections that follow, we have plans to conduct a
comprehensive review of the CC and MCC lists for FY 2019. Therefore, we
will be evaluating all of the ICD-10-CM diagnosis codes for this
effort.
After consideration of the public comments we received, we are
finalizing our proposed additions and deletions to the MCC severity
levels list and the proposed additions and deletions to the CC severity
levels list for FY 2018. We refer readers to the Tables 6I.1, 6I.2,
6J.1, and 6J.2 associated with this final rule, which are available via
the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
c. Principal Diagnosis Is Its Own CC or MCC
CMS' initial goal in developing the ICD-10 MS-DRGs was to ensure
that a patient case was assigned to the same MS-DRG, regardless of
whether the patient record was to be coded in ICD-9-CM or ICD-10. When
certain ICD-10-CM combination codes are reported as a principal
diagnosis, it implies that a CC or MCC is present. This occurs as a
result of evaluating the cluster of ICD-9-CM codes that would have been
coded on an ICD-9-CM record. If one of the ICD-9-CM codes in the
cluster was a CC or an MCC, the single ICD-10-CM combination code used
as a principal diagnosis also must imply that the CC or MCC is present.
The ICD-10-CM diagnosis codes to which this logic applies are
included in Appendix J of the ICD-10 MS-DRG Version 34 Definitions
Manual (which is available via the Internet on the CMS Web site at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending).
Appendix J includes two lists: Part 1 is the list of principal
diagnosis codes where the ICD-10-CM code is its own MCC. Part 2 is the
list of principal diagnosis codes where the ICD-10-CM code is its own
CC. Part 1 of Appendix J corresponds to Table 6L.--Principal Diagnosis
Is Its Own MCC List, and Part 2 of Appendix J corresponds to Table
6M.--Principal Diagnosis Is Its Own CC List.
We received a request to add the ICD-10-CM diagnosis codes for
acute myocardial infarction, decompensated heart failure and specified
forms of shock, which are currently designated as a CC or an MCC when
reported as a secondary diagnosis, to Table 6L.--Principal Diagnosis Is
Its Own MCC List. According to the requestor, the addition of these
codes to the list is necessary for bundled payment initiatives and so
that facilities that
[[Page 38057]]
accept these patients in transfer have resources to care for them.
As we stated in the proposed rule, the purpose of the Principal
Diagnosis Is Its Own CC or MCC Lists was to ensure consistent MS-DRG
assignment between the ICD-9-CM and ICD-10 MS-DRGs due to the clusters
and combination codes. There are a number of other ICD-10-CM
combination codes that, due to their prior designation as a CC or an
MCC when reported as a secondary diagnosis, are not on either of these
lists. Having multiple lists for CC and MCC diagnoses when reported as
a principal and/or secondary diagnosis may not provide an accurate
representation of resource utilization for the MS-DRGs. As discussed in
further detail below, we have plans to conduct a comprehensive review
of the CC and MCC lists for FY 2019. We believe the results of that
review will help to inform the future of these lists.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19848), we did not propose to add the ICD-10-CM diagnosis codes for
acute myocardial infarction, decompensated heart failure and specified
forms of shock to Table 6L.--Principal Diagnosis Is Its Own MCC List.
In addition, we did not propose any changes to Table 6L.--Principal
Diagnosis Is Its Own MCC List and Table 6M.--Principal Diagnosis Is Its
Own CC List. We invited public comments on our proposal to maintain the
existing lists of principal diagnosis codes in Tables 6L. and 6M for FY
2018.
Comment: Commenters supported the proposal to not make changes to
Table 6L and Table 6M. One commenter acknowledged that CMS is delaying
further modifications to Tables 6L. and 6M. until the severity level
(MCC and CC) analysis is performed for FY 2019. However, this commenter
requested that the proposed MS-DRG assignments for the new myocardial
infarction type 2 diagnosis codes be reviewed for more appropriate
assignments.
Response: We appreciate the commenters' support. In response to the
commenter's request that we review the proposed MS-DRG assignments for
the new myocardial infarction type 2 diagnosis codes for more
appropriate assignments, we point out that the codes identifying
myocardial infarction type 2 diagnoses were not finalized at the time
of publication of the FY 2018 IPPS/LTCH PPS proposed rule and,
therefore, were not included in Table 6A.--New Diagnosis Codes that was
associated with the proposed rule. As discussed in the section that
follows, we have made available the final tables associated with this
final rule via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. We refer readers to the final rule Table
6A.--New Diagnosis Codes for the MS-DRG assignments for the acute
myocardial infarction type 2 diagnosis codes for FY 2018, which are
based on our usual process of assigning new codes to their predecessor
code's MS-DRG assignment(s).
After consideration of the public comments we received, we are
maintaining the current code lists for Table 6L.--Principal Diagnosis
Is Its Own MCC and Table 6M.--Principal Diagnosis Is Its Own CC List
for FY 2018.
d. CC Exclusions List for FY 2018
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. As previously indicated,
we developed a list of diagnoses, using physician panels, to include
those diagnoses that, when present as a secondary condition, would be
considered a substantial complication or comorbidity.
In previous years, we made changes to the list of CCs, either by
adding new CCs or deleting CCs already on the list.
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.
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19848), for FY
2018, we proposed changes to the ICD-10 MS-DRGs Version 35 CC Exclusion
List. Therefore, we developed Table 6G.1.--Proposed Secondary Diagnosis
Order Additions to the CC Exclusions List--FY 2018; Table 6G.2.--
Proposed Principal Diagnosis Order Additions to the CC Exclusions
List--FY 2018; Table 6H.1.--Proposed Secondary Diagnosis Order
Deletions to the CC Exclusions List--FY 2018; and Table 6H.2.--Proposed
Principal Diagnosis Order Deletions to the CC Exclusions List--FY 2018.
Each of these principal diagnosis codes for which there is a CC
exclusion is shown in Table 6G.2. with an asterisk and the conditions
that will not count as a CC are provided in an indented column
immediately following the affected principal diagnosis. Beginning with
discharges on or after October 1 of each year, the indented diagnoses
are not recognized by the GROUPER as valid CCs for the asterisked
principal diagnoses. Tables 6G. and 6H. associated with the proposed
rule are available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
Comment: Commenters supported the proposed modifications to the CC
Exclusion List for FY 2018 as displayed in Table 6G.1., Table 6G.2.,
Table 6H.1., and Table 6H.2. that were associated with the proposed
rule and made available via the Internet on the CMS Web site.
Response: We appreciate the commenters' support.
We note that, for this FY 2018 IPPS/LTCH PPS final rule, we have
developed Table 6K.--Complete List of CC Exclusions. Table 6K.
corresponds to the Part 1 list of Appendix C in the ICD-10 MS-DRG
Definitions Manual as described above.
The complete documentation of the ICD-10 MS-DRG Version 35 GROUPER
logic, including the CC Exclusion List, is available via the Internet
on the CMS Acute Inpatient PPS Web page at: https://www.cms.gov/
Medicare/
[[Page 38058]]
Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
To identify new, revised and deleted diagnosis and procedure codes,
for FY 2018, we 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 the proposed rule and this
final rule.
These tables are not published in the Addendum to the proposed rule
or the final rule but are available via the Internet on the CMS Web
site 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.F.15. of
the preamble of this final rule, the code titles are adopted as part of
the ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee
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 2018 IPPS/LTCH PPS proposed rule (82
FR 19849), we invited public comments on the MDC and MS-DRG assignments
for the new diagnosis and procedure codes as set forth in Table 6A.--
New Diagnosis Codes and Table 6B.--New Procedure Codes. In addition, we
invited public comments on the proposed severity level designations for
the new diagnosis codes as set forth in Table 6A. and the proposed O.R.
status for the new procedure codes as set forth in Table 6B.
Comment: One commenter disagreed with the addition of new ICD-10-CM
diagnosis code R06.03 (Acute respiratory distress) as displayed in
Table 6A.--New Diagnosis Codes associated with the FY 2018 IPPS/LTCH
PPS proposed rule, stating that the terminology for this code title is
outdated. The commenter stated that physician documentation generally
supports either Acute Respiratory Distress Syndrome (ARDS) or Acute
Respiratory Failure (ARF). The commenter requested that new diagnosis
codes be created to avoid confusion and to support appropriate
physician documentation.
Response: As noted earlier and discussed in section II.F.15. of the
preamble of this final rule, the code titles are adopted as part of the
ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee
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. We also note that the condition of ARDS is
identified by ICD-10-CM diagnosis code J80 (Acute respiratory distress
syndrome) and ARF is identified in ICD-10-CM subcategory J96.0 (Acute
respiratory failure). Therefore, it is not necessary to submit a
request for new diagnosis codes to the ICD-10 Coordination and
Maintenance Committee.
Comment: Several commenters disagreed with the proposed Non-O.R.
designations for certain procedure codes displayed in Table 6B.--New
Procedure Codes associated with the FY 2018 IPPS/LTCH PPS proposed
rule. The commenters recommended that CMS consider revising the
designation of these procedure codes from Non-O.R. to O.R. The
commenters identified approximately 200 new procedure codes describing
the insertion, removal, or revision of ``other device'' in various body
parts that they stated require an O.R. setting or are most often
performed in the O.R. setting using sterile technique. The commenters
further stated that patients undergoing these procedures are placed
under general anesthesia and the procedures require significant time
and skill.
Response: We reexamined a significant portion of the procedure
codes listed in Table 6B.--New Procedure Codes that was associated with
the FY 2018 IPPS/LTCH PPS proposed rule that the commenters recommended
we consider revising from Non-O.R. to O.R. We note that we were unable
to fully reevaluate the complete list for FY 2018, but we plan to
conduct a review for FY 2019. Based upon our review, and upon further
consideration of whether these procedures would be performed in an O.R.
setting, we are revising the designation of the new procedure codes in
the following table from non-O.R. to O.R.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
00H03YZ................... Insertion of Other Device into Brain,
Percutaneous Approach.
00H04YZ................... Insertion of Other Device into Brain,
Percutaneous Endoscopic Approach.
00H63YZ................... Insertion of Other Device into Cerebral
Ventricle, Percutaneous Approach.
00H64YZ................... Insertion of Other Device into Cerebral
Ventricle, Percutaneous Endoscopic
Approach.
00HU0YZ................... Insertion of Other Device into Spinal Canal,
Open Approach.
00HV0YZ................... Insertion of Other Device into Spinal Cord,
Open Approach.
00HV3YZ................... Insertion of Other Device into Spinal Cord,
Percutaneous Approach.
00HV4YZ................... Insertion of Other Device into Spinal Cord,
Percutaneous Endoscopic Approach.
02H43YZ................... Insertion of Other Device into Coronary
Vein, Percutaneous Approach.
02H44YZ................... Insertion of Other Device into Coronary
Vein, Percutaneous Endoscopic Approach.
02H63YZ................... Insertion of Other Device into Right Atrium,
Percutaneous Approach.
02H64YZ................... Insertion of Other Device into Right Atrium,
Percutaneous Endoscopic Approach.
02H73YZ................... Insertion of Other Device into Left Atrium,
Percutaneous Approach.
02H74YZ................... Insertion of Other Device into Left Atrium,
Percutaneous Endoscopic Approach.
02HA3YZ................... Insertion of Other Device into Heart,
Percutaneous Approach.
02HA4YZ................... Insertion of Other Device into Heart,
Percutaneous Endoscopic Approach.
02HK3YZ................... Insertion of Other Device into Right
Ventricle, Percutaneous Approach.
02HK4YZ................... Insertion of Other Device into Right
Ventricle, Percutaneous Endoscopic
Approach.
02HL3YZ................... Insertion of Other Device into Left
Ventricle, Percutaneous Approach.
02HL4YZ................... Insertion of Other Device into Left
Ventricle, Percutaneous Endoscopic
Approach.
02HN3YZ................... Insertion of Other Device into Pericardium,
Percutaneous Approach.
02HN4YZ................... Insertion of Other Device into Pericardium,
Percutaneous Endoscopic Approach.
02HP0YZ................... Insertion of Other Device into Pulmonary
Trunk, Open Approach.
02HP3YZ................... Insertion of Other Device into Pulmonary
Trunk, Percutaneous Approach.
02HP4YZ................... Insertion of Other Device into Pulmonary
Trunk, Percutaneous Endoscopic Approach.
02HQ3YZ................... Insertion of Other Device into Right
Pulmonary Artery, Percutaneous Approach.
02HQ4YZ................... Insertion of Other Device into Right
Pulmonary Artery, Percutaneous Endoscopic
Approach.
[[Page 38059]]
02HR3YZ................... Insertion of Other Device into Left
Pulmonary Artery, Percutaneous Approach.
02HR4YZ................... Insertion of Other Device into Left
Pulmonary Artery, Percutaneous Endoscopic
Approach.
02HS3YZ................... Insertion of Other Device into Right
Pulmonary Vein, Percutaneous Approach.
02HS4YZ................... Insertion of Other Device into Right
Pulmonary Vein, Percutaneous Endoscopic
Approach.
02HT3YZ................... Insertion of Other Device into Left
Pulmonary Vein, Percutaneous Approach.
02HT4YZ................... Insertion of Other Device into Left
Pulmonary Vein, Percutaneous Endoscopic
Approach.
02HV3YZ................... Insertion of Other Device into Superior Vena
Cava, Percutaneous Approach.
02HV4YZ................... Insertion of Other Device into Superior Vena
Cava, Percutaneous Endoscopic Approach.
02HW0YZ................... Insertion of Other Device into Thoracic
Aorta, Descending, Open Approach.
02HW3YZ................... Insertion of Other Device into Thoracic
Aorta, Descending, Percutaneous Approach.
02HW4YZ................... Insertion of Other Device into Thoracic
Aorta, Descending, Percutaneous Endoscopic
Approach.
07HK0YZ................... Insertion of Other Device into Thoracic
Duct, Open Approach.
07HK4YZ................... Insertion of Other Device into Thoracic
Duct, Percutaneous Endoscopic Approach.
07HL0YZ................... Insertion of Other Device into Cisterna
Chyli, Open Approach.
07HL4YZ................... Insertion of Other Device into Cisterna
Chyli, Percutaneous Endoscopic Approach.
07HM0YZ................... Insertion of Other Device into Thymus, Open
Approach.
07HM4YZ................... Insertion of Other Device into Thymus,
Percutaneous Endoscopic Approach.
07HN0YZ................... Insertion of Other Device into Lymphatic,
Open Approach.
07HP0YZ................... Insertion of Other Device into Spleen, Open
Approach.
09HY0YZ................... Insertion of Other Device into Sinus, Open
Approach.
0BH04YZ................... Insertion of Other Device into
Tracheobronchial Tree, Percutaneous
Endoscopic Approach.
0BH14YZ................... Insertion of Other Device into Trachea,
Percutaneous Endoscopic Approach.
0BHK4YZ................... Insertion of Other Device into Right Lung,
Percutaneous Endoscopic Approach.
0BHK8YZ................... Insertion of Other Device into Right Lung,
Via Natural or Artificial Opening
Endoscopic.
0BHL4YZ................... Insertion of Other Device into Left Lung,
Percutaneous Endoscopic Approach.
0BHL8YZ................... Insertion of Other Device into Left Lung,
Via Natural or Artificial Opening
Endoscopic.
0BHQ4YZ................... Insertion of Other Device into Pleura,
Percutaneous Endoscopic Approach.
0BHQ8YZ................... Insertion of Other Device into Pleura, Via
Natural or Artificial Opening Endoscopic.
0BHT4YZ................... Insertion of Other Device into Diaphragm,
Percutaneous Endoscopic Approach.
0BPK4YZ................... Removal of Other Device from Right Lung,
Percutaneous Endoscopic Approach.
0BPK8YZ................... Removal of Other Device from Right Lung, Via
Natural or Artificial Opening Endoscopic.
0BPL4YZ................... Removal of Other Device from Left Lung,
Percutaneous Endoscopic Approach.
0BPL8YZ................... Removal of Other Device from Left Lung, Via
Natural or Artificial Opening Endoscopic.
0BPQ0YZ................... Removal of Other Device from Pleura, Open
Approach.
0BPQ4YZ................... Removal of Other Device from Pleura,
Percutaneous Endoscopic Approach.
0BPQ8YZ................... Removal of Other Device from Pleura, Via
Natural or Artificial Opening Endoscopic.
0BPT4YZ................... Removal of Other Device from Diaphragm,
Percutaneous Endoscopic Approach.
0BWK4YZ................... Revision of Other Device in Right Lung,
Percutaneous Endoscopic Approach.
0BWK8YZ................... Revision of Other Device in Right Lung, Via
Natural or Artificial Opening Endoscopic.
0BWL4YZ................... Revision of Other Device in Left Lung,
Percutaneous Endoscopic Approach.
0BWL8YZ................... Revision of Other Device in Left Lung, Via
Natural or Artificial Opening Endoscopic.
0BWQ4YZ................... Revision of Other Device in Pleura,
Percutaneous Endoscopic Approach.
0BWQ8YZ................... Revision of Other Device in Pleura, Via
Natural or Artificial Opening Endoscopic.
0BWT4YZ................... Revision of Other Device in Diaphragm,
Percutaneous Endoscopic Approach.
0HPT0YZ................... Removal of Other Device from Right Breast,
Open Approach.
0HPU0YZ................... Removal of Other Device from Left Breast,
Open Approach.
0HWT0YZ................... Revision of Other Device in Right Breast,
Open Approach.
0HWU0YZ................... Revision of Other Device in Left Breast,
Open Approach.
0JHS0YZ................... Insertion of Other Device into Head and Neck
Subcutaneous Tissue and Fascia, Open
Approach.
0JHT0YZ................... Insertion of Other Device into Trunk
Subcutaneous Tissue and Fascia, Open
Approach.
0JHV0YZ................... Insertion of Other Device into Upper
Extremity Subcutaneous Tissue and Fascia,
Open Approach.
0JHW0YZ................... Insertion of Other Device into Lower
Extremity Subcutaneous Tissue and Fascia,
Open Approach.
0TH58YZ................... Insertion of Other Device into Kidney, Via
Natural or Artificial Opening Endoscopic.
0TH98YZ................... Insertion of Other Device into Ureter, Via
Natural or Artificial Opening Endoscopic.
0THB8YZ................... Insertion of Other Device into Bladder, Via
Natural or Artificial Opening Endoscopic.
0TP58YZ................... Removal of Other Device from Kidney, Via
Natural or Artificial Opening Endoscopic.
0TW98YZ................... Revision of Other Device in Ureter, Via
Natural or Artificial Opening Endoscopic.
0TWB8YZ................... Revision of Other Device in Bladder, Via
Natural or Artificial Opening Endoscopic.
------------------------------------------------------------------------
After consideration of the public comments that we received, we are
finalizing the designation of the procedure codes listed in the table
above from non-O.R. to O.R., effective October 1, 2017.
We note that, historically, when new procedure codes were created,
they were proposed to be given the same O.R. designation as their
predecessor code. However, with the transition from ICD-9 to ICD-10,
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. 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, particularly
with the implementation of ICD-10. Therefore, we are soliciting
comments on what factors or criteria to consider in determining whether
a procedure should be designated as an O.R. procedure in the ICD-10-PCS
[[Page 38060]]
classification system. We encourage commenters to submit comments via
the CMS MS-DRG Classification Change Requests Mailbox located at
[email protected] by November 1, 2017 for FY 2019
consideration.
We are also making available on the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html the following final tables associated with
this final rule:
Table 6A.--New Diagnosis Codes-FY 2018;
Table 6B.--New Procedure Codes-FY 2018;
Table 6C.--Invalid Diagnosis Codes-FY 2018;
Table 6D.--Invalid Procedure Codes-FY 2018;
Table 6E.--Revised Diagnosis Code Titles-FY 2018;
Table 6F.--Revised Procedure Code Titles-FY 2018;
Table 6G.1.--Secondary Diagnosis Order Additions to the CC
Exclusions List--FY 2018;
Table 6G.2.--Principal Diagnosis Order Additions to the CC
Exclusions List--FY 2018;
Table 6H.1.--Secondary Diagnosis Order Deletions to the CC
Exclusions List--FY 2018;
Table 6H.2.--Principal Diagnosis Order Deletions to the CC
Exclusions List--FY 2018;
Table 6I.--Complete MCC List--FY 2018;
Table 6I.1.--Additions to the MCC List-FY 2018;
Table 6I.2.-Deletions to the MCC List--FY 2018;
Table 6J.--Complete CC List--FY 2018;
Table 6J.1.--Additions to the CC List-FY 2018;
Table 6J.2.--Deletions to the CC List -FY 2018;
Table 6K.--Complete List of CC Exclusions-FY 2018;
Table 6L.--Principal Diagnosis Is Its Own MCC List-FY
2018; and
Table 6M.--Principal Diagnosis Is Its Own CC List-FY 2018.
13. Comprehensive Review of CC List for FY 2019
In the FY 2008 IPPS final rule (72 FR 47153 through 47175), we
discussed our efforts to better recognize severity of illness which
began with a comprehensive review of the CC list and, ultimately, the
implementation of the MS-DRGs. Similar to the analysis that was
performed at that time, we are providing the public with notice of our
plans to conduct a comprehensive review of the CC and MCC lists for FY
2019.
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19849), as a result of the time that has elapsed since that review and
changes to how inpatient care is currently delivered, we plan to
analyze if further refinements to these lists are warranted. For
example, over the past several years, there has been a steady increase
in the proportion of cases grouping to the MS-DRGs with an MCC severity
level than had previously occurred. Our evaluation will assist in
determining if the conditions designated as an MCC continue to
represent significant increases in resource utilization that support
the MCC designation.
We currently utilize a statistical algorithm to determine the
impact on resource use of each secondary diagnosis. Each diagnosis for
which Medicare data are available is evaluated to determine its impact
on resource use and to determine the most appropriate CC subclass (non-
CC, CC, or MCC) assignment. In order to make this determination, the
average costs for each subset of cases is compared to the expected
costs for cases in that subset. The following format is used to
evaluate each diagnosis:
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Code Diagnosis Cnt1 C1 Cnt2 C2 Cnt3 C3
----------------------------------------------------------------------------------------------------------------
Count (Cnt) is the number of patients in each subset and C1, C2,
and C3 are a measure of the impact on resource use of patients in each
of the subsets. The C1, C2, and C3 values are a measure of the ratio of
average costs for patients with these conditions to the expected
average costs across all cases. The C1 value reflects a patient with no
other secondary diagnosis or with all other secondary diagnoses that
are non-CCs. The C2 value reflects a patient with at least one other
secondary diagnosis that is a CC but none that is an MCC. The C3 value
reflects a patient with at least one other secondary diagnosis that is
an MCC. A value close to 1.0 in the C1 field would suggest that the
code produces the same expected value as a non-CC 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 non-CC. Thus, a
value close to 2.0 suggests the condition is more like a CC than a non-
CC 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 non-CC. For example, a C1 value of 1.8
for a secondary diagnosis means that for the subset of patients who
have the secondary diagnosis and have either no other secondary
diagnosis present, or all the other secondary diagnoses present are
non-CCs, the impact on resource use of the secondary diagnoses is
greater than the expected value for a non-CC by an amount equal to 80
percent of the difference between the expected value of a CC and a non-
CC (that is, the impact on resource use of the secondary diagnosis is
closer to a CC than a non-CC).
We invited public comments regarding other possible ways we can
incorporate meaningful indicators of clinical severity.
We did not receive any public comments offering suggestions on
alternate ways to incorporate meaningful indicators of clinical
severity. Therefore, we expect to continue to utilize this same
statistical algorithm to determine the impact on resource use of each
secondary diagnosis to conduct our comprehensive review of the CC and
MCC lists for FY 2019.
14. Review of Procedure Codes in MS DRGs 981 Through 983; 984 Through
986; and 987 Through 989
Each year, we review cases assigned to MS-DRGs 981, 982, and 983
(Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC,
with CC, and without CC/MCC, respectively); MS-DRGs 984, 985, and 986
(Prostatic O.R. Procedure Unrelated to Principal Diagnosis with MCC,
with CC, and without CC/MCC, respectively); and MS-DRGs 987, 988, and
989 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with
MCC, with CC, and without CC/MCC, respectively) to determine whether it
would be appropriate to change the procedures assigned among these MS-
DRGs. MS-DRGs 981 through 983, 984 through 986, and 987 through 989 are
reserved for those cases in which none of the O.R. procedures performed
are related to the principal diagnosis. These MS-DRGs
[[Page 38061]]
are intended to capture atypical cases, that is, those cases not
occurring with sufficient frequency to represent a distinct,
recognizable clinical group.
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19849), we stated
that under the ICD-10 MS-DRGs Version 34, MS-DRGs 984 through 986 are
assigned when one or more of the procedures described by ICD-10-PCS
codes in Table 6P.2. that was associated with the FY 2018 proposed rule
(which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) are performed and are unrelated to the
principal diagnosis. All remaining O.R. procedures are assigned to MS-
DRGs 981 through 983 and 987 through 989, with MS-DRGs 987 through 989
assigned to those discharges in which the only procedures performed are
nonextensive procedures that are unrelated to the principal diagnosis.
We refer the reader to the FY 2017 IPPS/LTCH PPS final rule (81 FR
56847 through 56848) for a discussion of the movement and redesignation
of procedure codes from MS-DRGs 984 through 986 related to the
transition of the ICD-10 MS-DRGs.
Our review of MedPAR claims data showed that there are no cases
that merited movement or should logically be reassigned from ICD-10 MS-
DRGs 984 through 986 to any of the other MDCs for FY 2018. Therefore,
in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19849 through 19850),
for FY 2018, we did not propose to change the procedures assigned among
these MS-DRGs. We invited public comments on our proposal to maintain
the current structure of these MS-DRGs.
Comment: Commenters supported the proposal to maintain the current
structure of MS-DRGs 984 through 986 and not to reassign or change the
procedures assigned among these MS-DRGs to other MDCs.
Response: We appreciate the commenters' support.
After consideration of the public comments that we received, we are
finalizing our proposal to maintain the current structure of MS-DRGs
984 through 986 (Prostatic O.R. Procedure Unrelated to Principal
Diagnosis with MCC, with CC, and without CC/MCC, respectively) and not
to reassign or change the procedures assigned among these MS-DRGs to
other MDCs for ICD-10 MS-DRGs Version 35, effective October 1, 2017.
a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-DRGs 987
Through 989 Into MDCs
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 (Nonextensive 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 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 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.
As we indicated in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19850), upon review of the claims data from the December 2016 update of
the FY 2016 MedPAR file, we did not find any cases that merited
movement or that should logically be assigned to any of the other MDCs.
Therefore, for FY 2018, we did not propose to remove any procedures
from MS-DRGs 981 through 983 or MS-DRGs 987 through 989 into one of the
surgical MS-DRGs for the MDC into which the principal diagnosis is
assigned. We invited public comments on our proposal to maintain the
current structure of these MS-DRGs.
Comment: Commenters supported the proposal to maintain the current
structure of MS-DRGs 981 through 983 and MS-DRGs 987 through 989.
Response: We appreciate the commenters' support.
After consideration of the public comments that we received, we are
finalizing our proposal to not remove any procedures from 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 (Nonextensive O.R. Procedure Unrelated to Principal
Diagnosis with MCC, with CC, and without CC/MCC, respectively) into one
of the surgical MS-DRGs for the MDC into which the principal diagnosis
is assigned for ICD-10 MS-DRGs Version 35, effective October 1, 2017.
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
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, 984 through 986, or 987 through 989, to
ascertain whether any of those procedures should be reassigned from one
of those three groups of MS-DRGs to another of the three groups 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.
Based on the results of our review of the December 2016 update of
the FY 2016 MedPAR file, in the FY 2018 IPPS/LTCH PPS proposed rule (82
FR 19850), we proposed to reassign the procedure codes currently
assigned to MS-DRGs 984 through 986 (Prostatic O.R. Procedure Unrelated
to Principal Diagnosis with MCC, with CC and without CC/MCC,
respectively) to MS-DRGs 987 through 989 (Non-extensive O.R. Procedure
Unrelated to Principal Diagnosis with MCC, with CC and without CC/MCC,
respectively). As shown in the table below, we found a total of 1,001
cases in MS-DRGs 984 through 986 with an average length-of-stay of 7.5
days and average costs of $16,539. In MS-DRGs 987 through 989, we found
a total of 17,772 cases, with an average length of stay of 7.5 days and
average costs of $16,193.
[[Page 38062]]
O.R. Procedures Unrelated to Principal Diagnosis
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 984, 985 and 986 (Prostatic O.R. Procedure Unrelated to 1,001 7.5 $16,539
Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively)..................................................
MS-DRGs 987, 988 and 989 (Non[dash]extensive O.R. Procedure 17,772 7.5 16,193
Unrelated to Principal Diagnosis with MCC, with CC, and without
CC/MCC, respectively)..........................................
----------------------------------------------------------------------------------------------------------------
The claims data demonstrate that it is no longer necessary to
maintain a separate set of MS-DRGs specifically for the prostatic O.R.
procedures. The average length of stay of 7.5 days is identical in both
sets of MS-DRGs and the average costs are very similar with a
difference of only $346. As we discussed in the proposed rule, our
clinical advisors reviewed the data and support movement of these 1,001
cases into the nonextensive O.R. procedures MS-DRGs. They noted that
treatment practices have shifted since the inception of the prostatic
O.R. procedures grouping and the average costs are in alignment.
Therefore, for FY 2018, we proposed to reassign the prostatic O.R.
procedure codes from MS-DRGs 984 through 986 to MS-DRGs 987 through 989
and to delete MS-DRGs 984, 985 and 986 because they would no longer be
needed as a result of this proposed movement. We invited public
comments on our proposals.
Comment: Commenters supported the proposal to reassign the
prostatic O.R. procedure codes from MS-DRGs 984 through 986 to MS-DRGs
987 through 989 and to delete MS-DRGs 984, 985 and 986.
Response: We appreciate the commenters' support.
After consideration of the public comments that we received, we are
finalizing our proposal to reassign the prostatic O.R. procedure codes
from MS-DRGs 984 through 986 to MS-DRGs 987 through 989 (Non-extensive
O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC and
without CC/MCC, respectively) and to delete MS-DRGs 984, 985 and 986
(Prostatic O.R. Procedure Unrelated to Principal Diagnosis with MCC,
with CC and without CC/MCC, respectively) for ICD-10 MS-DRGs Version
35, effective October 1, 2017.
15. Changes to 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 National Center for Health Statistics (NCHS), the
Centers for Disease Control and Prevention (CDC), 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 Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/codes.html. The official
list of ICD-10-CM and ICD-10-PCS codes can be found on the CMS Web site
at: http://www.cms.gov/Medicare/Coding/ICD10/index.html.
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 at 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 2018 at a public meeting held on September 13-14,
2016, and finalized the coding changes after consideration of comments
received at the meetings and in writing by November 13, 2016.
The Committee held its 2017 meeting on March 7-8, 2017. The
deadline for submitting comments on these code proposals was April 7,
2017. It was announced at this meeting that any new ICD-10-CM/PCS codes
for which there was consensus of public support and for which complete
tabular and indexing changes would be made by May 2017 would be
included in the October 1, 2017 update to ICD-10-CM/ICD-10-PCS. As
discussed in earlier sections of the preamble of the proposed rule and
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 the proposed rule and this final rule, which are
available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
Because of the length of these tables, they are not published in the
Addendum to this final rule. Rather, they are available via the
Internet as discussed in section VI. of the Addendum to this final
rule.
We note that after publication of the FY 2018 IPPS/LTCH PPS
proposed rule, we were notified by the CDC of changes to the FY 2018
ICD-10-CM diagnosis codes that were listed in Table 6A.--New Diagnosis
Codes and Table 6C.-- Invalid Diagnosis Codes that were
[[Page 38063]]
associated with the proposed rule. Specifically, ICD-10-CM diagnosis
code K61.3 (Ischiorectal abscess) was listed in Table 6C. as an invalid
diagnosis, and diagnosis codes K61.31 (Horseshoe abscess) and K61.32
(Ischiorectal abscess, NOS) were listed in Table 6A. as new diagnosis
codes. The CDC informed us that they reversed their decision with
respect to these codes. Therefore, diagnosis codes K61.31 and K61.32
are not being created for FY 2018 and are not reflected in Table 6A.--
New Diagnosis Codes associated with this FY 2018 IPPS/LTCH PPS final
rule. In addition, diagnosis code K61.3 is no longer reflected in Table
6C. associated with this final rule as an invalid diagnosis. Diagnosis
code K61.3 will continue to be a valid code for FY 2018 in the ICD-10-
CM classification.
The CDC also informed us of changes to diagnosis code K61.5
(Supralevator abscess). This diagnosis code was listed as a new
diagnosis code in Table 6A.--New Diagnosis Codes that was associated
with the proposed rule. However, this decision was also reversed.
Therefore, diagnosis code K61.5 is not reflected in Table 6A.
associated with this FY 2018 IPPS/LTCH PPS final rule and will not be
reflected in the ICD-10-CM classification.
We also note that after publication of the FY 2018 IPPS/LTCH PPS
proposed rule, the CDC revised the title for diagnosis code O00.212
from ``Left ovarian pregnancy without intrauterine pregnancy'' to
``Left ovarian pregnancy with intrauterine pregnancy''. The description
of the code title changed from ``without'' to ``with'' for this
diagnosis code. This change will not be reflected in Table 6E.--Revised
Diagnosis Code Titles because it is a new diagnosis code effective FY
2018. Rather, the corrected code title description will appear in Table
6A.--New Diagnosis Codes associated with this FY 2018 IPPS/LTCH PPS
final rule. Furthermore, the CDC issued an ICD-10-CM Errata on June 27,
2017 regarding this code title change for diagnosis code O00.212. The
Errata document is available via the Internet on the CMS Web site at:
https://www.cms.gov/Medicare/Coding/ICD10/2018-ICD-10-CM-and-GEMs.html.
Live Webcast recordings of the discussions of procedure codes at
the Committee's September 13-14, 2016 meeting and March 7-8, 2017
meeting can be obtained from the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect/icd9ProviderDiagnosticCodes/03_meetings.asp. The minutes of the
discussions of diagnosis codes at the September 13-14, 2016 meeting and
March 7-8, 2017 meeting can be found at: http://www.cdc.gov/nchs/icd/icd10cm_maintenance.html. These Web sites also provide detailed
information about the Committee, including information on requesting a
new code, attending a Committee meeting, and timeline requirements and
meeting dates.
We encourage commenters to address suggestions on coding issues
involving diagnosis codes to: Donna Pickett, Co-Chairperson, ICD-10
Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo
Road, Hyattsville, MD 20782. Comments may be sent by Email to:
[email protected].
Questions and comments concerning the procedure codes should be
addressed to: Patricia Brooks, Co-Chairperson, ICD-10 Coordination and
Maintenance Committee, CMS, Center for Medicare Management, Hospital
and Ambulatory Policy Group, Division of Acute Care, C4-08-06, 7500
Security Boulevard, Baltimore, MD 21244-1850. Comments may be sent by
Email to: [email protected].
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 Public Law 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) 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
system by providing information on these new technologies at an earlier
date. Data will be available 6 months earlier than would be possible
with updates occurring only once a year on October 1.
While section 1886(d)(5)(K)(vii) of the Act states that the
addition of new diagnosis and procedure codes on April 1 of each year
shall not require the Secretary to adjust the payment, or DRG
classification, under section 1886(d) of the Act until the fiscal year
that begins after such date, we have to update the DRG software and
other systems in order to recognize and accept the new codes. We also
publicize the code changes and the need for a mid-year systems update
by providers to identify the new codes. Hospitals also have to obtain
the new code books and encoder updates, and make other system changes
in order to identify and report the new codes.
The ICD-10 (previously the ICD-9-CM) Coordination and Maintenance
Committee holds its meetings in the spring and fall in order to update
the codes and the applicable payment and reporting systems by October 1
of each year. Items are placed on the agenda for the Committee meeting
if the request is received at least 2 months prior to the meeting. This
requirement allows time for staff to review and research the coding
issues and prepare material for discussion at the meeting. It also
allows time for the topic to be publicized in meeting announcements in
the Federal Register as well as on the CMS Web site. Final decisions on
code title revisions are currently made by March 1 so that these titles
can be included in the IPPS proposed rule. A complete addendum
describing details of all diagnosis and procedure coding changes, both
tabular and index, is published on the CMS and NCHS Web sites in June
of each year. Publishers of coding books and software use this
information to modify their products that are used by health care
providers. This 5-month time period has proved to be necessary for
hospitals and other providers to update their systems.
A discussion of this timeline and the need for changes are included
in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance
Committee Meeting minutes. The public agreed that there was a need to
hold the fall meetings earlier, in September or October, in order to
meet the new implementation dates. The public provided comment that
additional time would be needed to update hospital systems and obtain
new code books and coding software. There was considerable concern
expressed about the impact this April update would have on providers.
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
[[Page 38064]]
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 are considered for an
April 1 update if a strong and convincing case is made by the requester
at the Committee's public meeting. The request must identify the reason
why a new code is needed in April for purposes of the new technology
process. The participants at the meeting and those reviewing the
Committee meeting summary report are provided the opportunity to
comment on this expedited request. All other topics are considered for
the October 1 update. Participants at the Committee meeting are
encouraged to comment on all such requests. There were no requests
approved for an expedited April l, 2017 implementation of a code at the
September 13-14, 2016 Committee meeting. Therefore, there were no new
codes implemented on April 1, 2017.
ICD-9-CM addendum and code title information is published on the
CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect/icd9ProviderDiagnosticCodes/01overview.asp#TopofPage. ICD-10-CM and
ICD-10-PCS addendum and code title information is published on the CMS
Web site at: http://www.cms.gov/Medicare/Coding/ICD10/index.html.
Information on ICD-10-CM diagnosis codes, along with the Official ICD-
10-CM Coding Guidelines, can also be found on the CDC Web site at:
http://www.cdc.gov/nchs/icd/icd10.htm. Information on new, revised, and
deleted ICD-10-CM/ICD-10-PCS codes is also provided to the AHA for
publication in the Coding Clinic for ICD-10. AHA also distributes
information to publishers and software vendors.
CMS also sends copies of 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.
The code titles are adopted as part of the ICD-10 (previously ICD-
9-CM) Coordination and Maintenance Committee 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.
The following chart shows the number of ICD-10-CM and ICD-10-PCS
codes and code changes since FY 2016 when ICD-10 was implemented.
Total Number of Codes and Changes in Total Number of Codes per Fiscal
Year ICD-10-CM and ICD-10-PCS Codes
------------------------------------------------------------------------
Fiscal year Number Change
------------------------------------------------------------------------
FY 2016
ICD-10-CM..................................... 69,823 ...........
ICD-10-PCS.................................... 71,974 ...........
FY 2017
ICD-10-CM..................................... 71,486 +1,663
ICD-10-PCS.................................... 75,789 +3,815
FY 2018
ICD-10-CM..................................... 71,704 +218
ICD-10-PCS.................................... 78,705 +2,916
------------------------------------------------------------------------
As mentioned 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.
At the September 12-13, 2016 and March 7-8, 2017 Committee
meetings, we discussed any requests we had received for new ICD-10-CM
diagnosis codes and ICD-10-PCS procedure codes that were to be
implemented on October 1, 2017. We invited public comments on any code
requests discussed at the September 12-13, 2016 and March 7-8, 2017
Committee meetings for implementation as part of the October 1, 2017
update. The deadline for commenting on code proposals discussed at the
September 12-13, 2016 Committee meeting was November 13, 2016. The
deadline for commenting on code proposals discussed at the March 7-8,
2017 Committee meeting was April 7, 2017.
Comment: One commenter stated that coding updates interfere with
consistent clinical vocabulary maintenance. The commenter pointed to
ICD-10-PCS code updates for FY 2018 which involve the addition of
specificity beyond what was included in the 2017 version of ICD-10-PCS.
The commenter stated that a core principle of clinical vocabulary
maintenance is that the meaning of a code should not change over time.
The commenter acknowledged that deadline for submitting comments on
code proposals for the FY 2018 ICD-10-PCS had passed. The commenter
stated that clinical vocabulary maintenance should be a primary
consideration of the ICD-10 Coordination and Maintenance Committee
before any further coding updates are proposed. The commenter looked
forward to working with the ICD-10 Coordination and Maintenance
Committee meeting on future code updates.
Response: CMS and CDC welcome the participation of the public at
the ICD-10 Coordination and Maintenance Committee meetings. CMS and CDC
encourage comments on any ICD-10-CM and ICD-10-PCS code updates
presented at the meetings. The ICD-10-CM and ICD-10-PCS coding systems
are not clinical vocabularies. The coding systems do not attempt to
clarify or standardize how physicians describe clinical conditions or
procedures. The ICD-10-CM and ICD-10-PCS coding systems are clinical
classification systems. Classification systems arrange and organize
like or related clinical conditions and procedures. The coding systems
assign codes to capture diagnoses and procedures as documented by
physicians. This can involve multiple diagnosis and procedure terms
being captured in a single code. It is recognized that not all
physicians use consistent terminology for identifying a condition or
procedure. The coding systems recognize this fact and develop codes
which capture this group of similar terms into a single code. The
coding systems should not be viewed as a means to standardize medical
terminology.
In response to public requests for updates to ICD-10-CM and ICD-10-
PCS, the ICD-10 Coordination and Maintenance Committee presents the
requested code updates and then solicits comments prior to making those
updates. The ICD-9-CM and ICD-10 coding systems have been updated
through the Coordination and Maintenance Committee since 1985, making
updates to the coding systems that capture advances in medicine and
changes in medical practices. The Committee will continue to meet to
allow the public to provide comments on any requests to update the ICD-
10-CM and ICD-10-PCS coding systems.
Comment: One commenter stated that it was a strong supporter of the
conversion from ICD-9-CM to ICD-10-CM, including the creation of the
new Section ``X'' codes to identify new medical services and
technologies, because the newer, more robust coding system will allow
for recognition of more technologies, procedures, and variations in
patients' conditions on Medicare claims, which in turn will support
greater specificity in MS-DRGs. However, the commenter asked that CMS
provide additional information about how the ``X'' codes will be used
and applied.
Response: We encourage the public to participate in the ICD-10
Coordination and Maintenance Committee meetings to offer comments on
code updates. Any new codes that are finalized prior to the IPPS/LTCH
PPS proposed rules, including ICD-10-PCS ``X'' codes, are included in
the Table 6 series in the
[[Page 38065]]
IPPS/LTCH PPS proposed rule along with their proposed MS-DRG
classifications. The public is offered the opportunity to comment on
those MS-DRG classifications. Any new codes that are finalized after
the IPPS/LTCH PPS proposed rule are included in the IPPS/LTCH PPS final
rule along with their MS-DRG classifications. We refer the commenter to
section II.H. of the preamble of this final rule for additional
discussion of the section ``X'' codes.
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 has been 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 2018
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19852 through
19853), for FY 2018, we did not propose to add any MS-DRGs to the
policy for replaced devices offered without cost or with a credit. We
proposed to continue to include the existing MS-DRGs currently subject
to the policy as displayed in a table in the proposed rule.
In the proposed rule, we solicited public comments on our proposal
to continue to include the existing MS-DRGs currently subject to the
policy for replaced devices offered without cost or with credit and to
not add any additional MS-DRGs to the policy. We noted that, as
discussed in section II.F.2.b. and in section II.F.5.a. of the preamble
of the proposed rule, we proposed to revise the titles for MS-DRG 023
and MS-DRGs 469 and 470. We referred readers to those discussions of
the specific proposed MS-DRG titles. We did not receive any public
comments opposing our proposal to continue to include the existing MS-
DRGs currently subject to the policy and to not add any additional MS-
DRGs. Therefore, we are finalizing the list of MS-DRGs displayed in the
table in the proposed rule and below, with conforming changes to the
finalized titles for MS-DRGs 023, 469, and 470, that will be subject to
the replaced devices offered without cost or with a credit policy,
effective October 1, 2017. As we indicated in the proposed rule, we
also will issue this final list of MS-DRGs subject to the payment
policy for devices provided at no cost or with a credit for FY 2018 to
providers through guidance and instructions in the form of a Change
Request (CR).
----------------------------------------------------------------------------------------------------------------
MDC MS-DRG MS-DRG title
----------------------------------------------------------------------------------------------------------------
Pre-MDC................................... 001 Heart Transplant or Implant of Heart Assist
System with MCC.
Pre-MDC................................... 002 Heart Transplant or Implant of Heart Assist
System without MCC.
1......................................... 023 Craniotomy with Major Device Implant or Acute CNS
Principal Diagnosis with MCC or Chemotherapy
Implant or Epilepsy with Neurostimulator.
1......................................... 024 Craniotomy with Major Device Implant or Acute
Complex CNS Principal Diagnosis without MCC.
1......................................... 025 Craniotomy & Endovascular Intracranial Procedures
with MCC.
1......................................... 026 Craniotomy & Endovascular Intracranial Procedures
with CC.
1......................................... 027 Craniotomy & Endovascular Intracranial Procedures
without CC/MCC.
1......................................... 040 Peripheral, Cranial Nerve & Other Nervous System
Procedures with MCC.
1......................................... 041 Peripheral, Cranial Nerve & Other Nervous System
Procedures with CC or Peripheral
Neurostimulator.
1......................................... 042 Peripheral, Cranial Nerve & Other Nervous System
Procedures without CC/MCC.
3......................................... 129 Major Head & Neck Procedures with CC/MCC or Major
Device.
3......................................... 130 Major Head & Neck Procedures without CC/MCC.
5......................................... 215 Other Heart Assist System Implant.
5......................................... 216 Cardiac Valve & Other Major Cardiothoracic
Procedure with Cardiac Catheterization with MCC.
5......................................... 217 Cardiac Valve & Other Major Cardiothoracic
Procedure with Cardiac Catheterization with CC.
5......................................... 218 Cardiac Valve & Other Major Cardiothoracic
Procedure with Cardiac Catheterization without
CC/MCC.
5......................................... 219 Cardiac Valve & Other Major Cardiothoracic
Procedure without Cardiac Catheterization with
MCC.
5......................................... 220 Cardiac Valve & Other Major Cardiothoracic
Procedure without Cardiac Catheterization with
CC.
5......................................... 221 Cardiac Valve & Other Major Cardiothoracic
Procedure without Cardiac Catheterization
without CC/MCC.
5......................................... 222 Cardiac Defibrillator Implant with Cardiac
Catheterization with AMI/Heart Failure/Shock
with MCC.
5......................................... 223 Cardiac Defibrillator Implant with Cardiac
Catheterization with AMI/Heart Failure/Shock
without MCC.
5......................................... 224 Cardiac Defibrillator Implant with Cardiac
Catheterization without AMI/Heart Failure/Shock
with MCC.
5......................................... 225 Cardiac Defibrillator Implant with Cardiac
Catheterization without AMI/Heart Failure/Shock
without MCC.
5......................................... 226 Cardiac Defibrillator Implant without Cardiac
Catheterization with MCC.
5......................................... 227 Cardiac Defibrillator Implant without Cardiac
Catheterization without MCC.
5......................................... 242 Permanent Cardiac Pacemaker Implant with MCC.
5......................................... 243 Permanent Cardiac Pacemaker Implant with CC.
5......................................... 244 Permanent Cardiac Pacemaker Implant without CC/
MCC.
5......................................... 245 AICD Generator Procedures.
5......................................... 258 Cardiac Pacemaker Device Replacement with MCC.
5......................................... 259 Cardiac Pacemaker Device Replacement without MCC.
5......................................... 260 Cardiac Pacemaker Revision Except Device
Replacement with MCC.
5......................................... 261 Cardiac Pacemaker Revision Except Device
Replacement with CC.
5......................................... 262 Cardiac Pacemaker Revision Except Device
Replacement without CC/MCC.
5......................................... 265 AICD Lead Procedures.
5......................................... 266 Endovascular Cardiac Valve Replacement with MCC.
5......................................... 267 Endovascular Cardiac Valve Replacement without
MCC.
[[Page 38066]]
5......................................... 268 Aortic and Heart Assist Procedures Except
Pulsation Balloon with MCC.
5......................................... 269 Aortic and Heart Assist Procedures Except
Pulsation Balloon without MCC.
5......................................... 270 Other Major Cardiovascular Procedures with MCC.
5......................................... 271 Other Major Cardiovascular Procedures with CC.
5......................................... 272 Other Major Cardiovascular Procedures without CC/
MCC.
8......................................... 461 Bilateral or Multiple Major Joint Procedures Of
Lower Extremity with MCC.
8......................................... 462 Bilateral or Multiple Major Joint Procedures of
Lower Extremity without MCC.
8......................................... 466 Revision of Hip or Knee Replacement with MCC.
8......................................... 467 Revision of Hip or Knee Replacement with CC.
8......................................... 468 Revision of Hip or Knee Replacement without CC/
MCC.
8......................................... 469 Major Hip and Knee Joint Replacement or
Reattachment of Lower Extremity with MCC or
Total Ankle Replacement.
8......................................... 470 Major Hip and Knee Joint Replacement or
Reattachment of Lower Extremity without MCC.
----------------------------------------------------------------------------------------------------------------
17. Other Policy Changes: Other Operating Room (O.R.) and Non-O.R.
Issues
a. O.R. Procedures to Non-O.R. Procedures
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19853), we have continued our efforts to address the recommendations
for consideration that we received in response to some of the proposals
set forth in the FY 2017 IPPS/LTCH PPS proposed rule pertaining to
changing the designation of ICD-10-PCS procedure codes from O.R.
procedures to non-O.R. procedures. As we stated in the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56871), we received requests and
recommendations for over 800 procedure codes that we were not able to
fully evaluate and finalize for FY 2017. We discuss these requests and
recommendations below.
As discussed in the proposed rule, we also are addressing separate
requests that we received regarding changing the designation of
specific ICD-10-PCS procedure codes. For each group summarized below,
the detailed lists of procedure codes are shown in Tables 6P.4a.
through 6P.4p. (ICD-10-CM and ICD-10-PCS Code Designations, MCE and MS-
DRG Changes--FY 2018) associated with the FY 2018 proposed rule and
this final rule (which are available via the Internet on the CMS Web
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
Comment: Some commenters expressed concern with the proposed
changes from O.R. procedures to non-O.R. procedures for such a large
number of procedure codes without having more detailed analysis of the
impact to specific MS-DRGs. The commenters stated that many of the
proposed changes for FY 2018 go beyond last year's changes when the
changes from O.R. procedures to non-O.R. procedures were done for
purposes of replicating the logic of the ICD-9 MS-DRGs.
Response: We acknowledge the concerns of the commenters regarding
the volume of proposed changes for procedures to be redesignated from
O.R. to non-O.R. As we stated in the FY 2018 IPPS/LTCH PPS proposed
rule, we continued our efforts to address the recommendations that we
received in response to some of the proposals set forth in the FY 2017
IPPS/LTCH PPS proposed rule pertaining to changing the designation of
ICD-10-PCS procedure codes from O.R. procedures to non-O.R. procedures.
We noted that those recommendations were for over 800 procedure codes
that we were not able to fully evaluate and finalize for FY 2017.
Therefore, we discussed the proposed changes for FY 2018.
The commenters are correct that the proposed changes for FY 2018 go
beyond the FY 2017 proposed (and finalized) MS-DRG updates to change
the designation of procedure codes from O.R. to non-O.R. that were done
for purposes of replicating the logic of the ICD-9 MS-DRGs. We stated
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56790) that some of the
issues evaluated for the FY 2017 MS-DRGs update continued to relate to
the need for the ICD-10 MS-DRGs to accurately replicate the logic of
the ICD-9-CM based version of the MS-DRGs. We noted that replication
was important because both the logic for the MS-DRGs and the data
source used to calculate and develop the relative payment weights were
based on the same MedPAR claims data. We further noted that the logic
for the proposed and final FY 2017 ICD-10 MS-DRGs was based upon the FY
2015 ICD-9-CM MedPAR claims data, which was also the data source used
to calculate and develop the FY 2017 relative payment weights. However,
for FY 2018 and future fiscal years, we are no longer replicating the
ICD-9 MS-DRGs. As discussed in the FY 2018 IPPS/LTCH PPS proposed rule
and this final rule, we are using ICD-10 coded claims data for the
first time to propose changes to the ICD-10 MS-DRG classifications and
to compute the relative weights. Therefore, our proposals and final
policies for FY 2018 are based solely on the ICD-10 claims data from
the FY 2016 MedPAR file.
As such, procedures that were designated as O.R. under ICD-9 will
not necessarily be appropriate to designate as O.R. under ICD-10.
Conversely, procedures that were not designated as O.R. under ICD-9 may
be appropriate to designate as O.R. under ICD-10. As discussed
elsewhere in this final rule, with the transition from ICD-9 to ICD-10,
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. Therefore, we are
soliciting comments 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 FY 2019 consideration.
Commenters should submit their recommendations to the following email
address: [email protected] by November 1, 2017.
(1) Percutaneous/Diagnostic Drainage
One commenter identified 135 ICD-10-PCS procedure codes describing
procedures involving percutaneous diagnostic and therapeutic drainage
of central nervous system, vascular and other body sites that generally
would not require the resources of an operating room and can be
performed at the bedside. The list includes procedure codes that
describe procedures
[[Page 38067]]
involving drainage with or without placement of a drainage device. We
stated in the proposed rule that we agreed with the commenter.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19853), we
proposed that the 135 ICD-10-PCS procedure codes listed in Table 6P.4a.
associated with the proposed rule (which is available via the Internet
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the 135 procedure codes describing percutaneous
diagnostic and therapeutic drainage of central nervous system, vascular
and other body sites. However, one commenter disagreed with
reclassifying procedure codes 009330Z (Drainage of Epidural Space with
Drainage Device, Percutaneous Approach) and 00933ZZ (Drainage of
Epidural Space, Percutaneous Approach) to non-O.R. procedures.
According to the commenter, these two codes are assigned for
percutaneous burr hole drainage of acute traumatic and nontraumatic
intracranial epidural hematomas, and for drainage of intracranial
epidural abscesses. The commenter noted that, although percutaneous
burr hole drainages are performed through smaller openings in the skull
than open burr hole drainages, they require drilling through the skull
under sterile technique and anesthesia for pain control. The commenter
also noted that similar procedure codes such as 009430Z (Drainage of
Subdural Space with Drainage Device, Percutaneous Approach) and 00943ZZ
(Drainage of Subdural Space, Percutaneous Approach) are currently
classified as O.R. procedures.
Response: We appreciate the commenters' support. In response to the
commenter who disagreed with reclassifying procedure codes 009330Z and
00933ZZ to non-O.R. procedures, upon further review and consideration,
for the reasons the commenter pointed out and consistent with the
current designation of procedure codes 009430Z and 00943ZZ, which are
classified as O.R. procedures, we believe it is appropriate to maintain
the current O.R. designation of procedure codes 009330Z and 00933ZZ.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of 133 ICD-10-PCS
procedure codes listed in Table 6P.4a. associated with this final rule
(which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html from O.R. procedures to non-O.R.
procedures, effective October 1, 2017. We also are finalizing the
designation of procedure codes 009330Z and 00933ZZ to remain O.R.
procedures for FY 2018. We note that, as shown in Table 6F.--Revised
Procedure Code Titles associated with this final rule, the titles for
procedure codes 009330Z, 00933ZZ, 009430Z and 00943ZZ are revised to
include the term ``intracranial.'' Effective October 1, 2017, the title
of ICD-10-PCS procedure code 009330Z is revised to read ``Drainage of
Intracranial Epidural Space with Drainage Device, Percutaneous
Approach''; the title of ICD-10-PCS procedure code 00933ZZ is revised
to read ``Drainage of Intracranial Epidural Space, Percutaneous
Approach''; the title of ICD-10-PCS procedure code 009430Z is revised
to read ``Drainage of Intracranial Subdural Space with Drainage Device,
Percutaneous Approach''; and the title of ICD-10-PCS procedure code
00943ZZ is revised to read ``Drainage of Intracranial Subdural Space,
Percutaneous Approach''.
(2) Percutaneous Insertion of Intraluminal or Monitoring Device
One commenter identified 28 ICD-10-PCS procedure codes describing
procedures involving the percutaneous insertion of intraluminal and
monitoring devices into central nervous system and other cardiovascular
body parts that generally would not require the resources of an
operating room and can be performed at the bedside. We stated in the
proposed rule that we agreed with the commenter. Therefore, in the FY
2018 IPPS/LTCH PPS proposed rule (82 FR 19853), we proposed that the 28
ICD-10-PCS procedure codes listed in Table 6P.4b. associated with the
proposed rule (which is available via the Internet on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We
invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the 28 procedure codes describing percutaneous insertion
of intraluminal or monitoring devices into central nervous system and
other cardiovascular body parts. However, one commenter disagreed with
changing the designation for 15 of the 28 listed procedure codes. The
commenter disagreed with changing the designation for ICD-10-PCS
procedure codes 00H032Z (Insertion of Monitoring Device into Brain,
Percutaneous Approach) and 00H632Z (Insertion of Monitoring Device into
Cerebral Ventricle, Percutaneous Approach). According to the commenter,
these two codes are assigned for inserting a monitoring device into the
brain or cerebral ventricle by a percutaneous burr hole which is most
often performed in the O.R. setting under sterile technique and
requires anesthesia for pain control. In addition, the commenter
disagreed with changing the designation for the following 13 ICD-10-PCS
procedure codes. The commenter stated that these intravascular
procedures are performed in specialized vascular suites and involve
insertion of a filter into the vena cava for prevention of pulmonary
emboli or the insertion of vascular stents for conditions such as
stenosis and other types of intraluminal devices into the great vessels
and are significant procedures that warrant an O.R. designation.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
02H43DZ................... Insertion of intraluminal device into
coronary vein, percutaneous approach.
02H63DZ................... Insertion of intraluminal device into right
atrium, percutaneous approach.
02H73DZ................... Insertion of intraluminal device into left
atrium, percutaneous approach.
02HK3DZ................... Insertion of intraluminal device into right
ventricle, percutaneous approach.
02HL3DZ................... Insertion of intraluminal device into left
ventricle, percutaneous approach.
02HP3DZ................... Insertion of intraluminal device into
pulmonary trunk, percutaneous approach.
02HQ3DZ................... Insertion of intraluminal device into right
pulmonary artery, percutaneous approach.
02HR3DZ................... Insertion of intraluminal device into left
pulmonary artery, percutaneous approach.
02HS3DZ................... Insertion of intraluminal device into right
pulmonary vein, percutaneous approach.
02HT3DZ................... Insertion of intraluminal device into left
pulmonary vein, percutaneous approach.
02HV3DZ................... Insertion of intraluminal device into
superior vena cava, percutaneous approach.
[[Page 38068]]
02HW3DZ................... Insertion of intraluminal device into
thoracic aorta, percutaneous approach.
06H03DZ................... Insertion of intraluminal device into
inferior vena cava, percutaneous approach.
------------------------------------------------------------------------
Response: We appreciate the commenters' support. In response to the
commenter who disagreed with changing the designation for 15 of the 28
procedure codes, upon further review and consideration, we agree that
the status of the above list of procedure codes, in addition to the two
procedure codes discussed earlier in this section (00H032Z and 00H632Z)
should be maintained as O.R. procedures due to the indications for
which these procedures may be performed and the risks involved.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of 13 ICD-10-PCS
procedure codes listed in Table 6P.4b. associated with this final rule
(which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R.
procedures, effective October 1, 2017. We also are finalizing
maintaining the designation of ICD-10-PCS procedure codes 00H032Z
(Insertion of Monitoring Device into Brain, Percutaneous Approach) and
00H632Z (Insertion of Monitoring Device into Cerebral Ventricle,
Percutaneous Approach) and the list of procedure codes shown in the
table above as O.R. procedures, effective October 1, 2017.
(3) Percutaneous Removal of Drainage, Infusion, Intraluminal or
Monitoring Device
One commenter identified 22 ICD-10-PCS procedure codes that
describe procedures involving the percutaneous removal of drainage,
infusion, intraluminal and monitoring devices from central nervous
system and other vascular body parts that generally would not require
the resources of an operating room and can be performed at the bedside.
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH PPS
proposed rule (82 FR 19854), we proposed that the 22 ICD-10-PCS
procedure codes listed in Table 6P.4c. associated with the proposed
rule (which is available via the Internet on the CMS Web site at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We
invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of 22 ICD-10-PCS procedure codes describing the
percutaneous removal of drainage, infusion, intraluminal and monitoring
devices from central nervous system and other vascular body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the 22 ICD-10-PCS
procedure codes listed in Table 6P.4c. associated with the proposed
rule and this final rule (which is available via the Internet on the
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html from O.R. procedures to non-O.R.
procedures, effective October 1, 2017.
(4) External Removal of Cardiac or Neurostimulator Lead
One commenter identified four ICD-10-PCS procedure codes that
describe procedures involving the external removal of cardiac leads
from the heart and neurostimulator leads from central nervous system
body parts that generally would not require the resources of an
operating room and can be performed at the bedside. These four ICD-10-
PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
00P6XMZ................... Removal of neurostimulator lead from
cerebral ventricle, external approach.
00PEXMZ................... Removal of neurostimulator lead from cranial
nerve, external approach.
01PYXMZ................... Removal of neurostimulator lead from
peripheral nerve, external approach.
02PAXMZ................... Removal of cardiac lead from heart, external
approach.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19854), we proposed that the four ICD-10-PCS
procedure codes shown in the table above be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of four ICD-10-PCS procedure codes that describe the
external removal of cardiac leads from the heart and neurostimulator
leads from central nervous system body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the four ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to
non-O.R. procedures, effective October 1, 2017.
(5) Percutaneous Revision of Drainage, Infusion, Intraluminal or
Monitoring Device
One commenter identified 28 ICD-10-PCS procedure codes that
describe procedures involving the percutaneous revision of drainage,
infusion, intraluminal and monitoring devices for vascular and heart
and great vessel body parts that generally would not require the
resources of an operating room and can be performed at the bedside. We
agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH PPS
proposed rule (82 FR 19854), we proposed that the 28 ICD-10-PCS
procedure codes listed in Table 6P.4d. associated with the proposed
rule (which is available via the Internet on the CMS Web site at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We
invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of 28 ICD-10-PCS procedure codes that describe the
percutaneous revision of drainage, infusion, intraluminal and
monitoring devices for vascular and heart and great vessel body parts.
Response: We appreciate the commenters' support.
[[Page 38069]]
After consideration of the public comments we received, we are
finalizing our proposal to change the designation for the 28 ICD-10-PCS
procedure codes listed in Table 6P.4d. associated with the proposed
rule and this final rule (which is available via the Internet on the
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R.
procedures, effective October 1, 2017.
(6) Percutaneous Destruction
One commenter identified two ICD-10-PCS procedure codes that
describe procedures involving the percutaneous destruction of retina
body parts that generally would not require the resources of an
operating room and can be performed at the bedside. These two ICD-10-
PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
085E3ZZ................... Destruction of right retina, percutaneous
approach.
085F3ZZ................... Destruction of left retina, percutaneous
approach.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19854), we proposed that the two ICD-10-PCS
procedure codes shown in the table above be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of two ICD-10-PCS procedure codes that describe the
percutaneous destruction of retina body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the two ICD-10-PCS
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(7) External/Diagnostic Drainage
One commenter identified 20 ICD-10-PCS procedure codes that
describe procedures involving external drainage for structures of the
eye that generally would not require the resources of an operating room
and can be performed at the bedside. We agreed with the commenter.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19854), we
proposed that the 20 ICD-10-PCS procedure codes listed in Table 6P.4e.
associated with the proposed rule (which is available via the Internet
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of 20 ICD-10-PCS procedure codes that describe external
drainage for structures of the eye.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation for the 20 ICD-10-PCS
procedure codes listed in Table 6P.4e. associated with the proposed
rule and this final rule (which is available via the Internet on the
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R.
procedures, effective October 1, 2017.
(8) External Extirpation
One commenter identified four ICD-10-PCS procedure codes that
describe procedures involving external extirpation of matter from eye
structures that generally would not require the resources of an
operating room and can be performed at the bedside. These four ICD-10-
PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
08C0XZZ................... Extirpation of matter from right eye,
external approach.
08C1XZZ................... Extirpation of matter from left eye,
external approach.
08CSXZZ................... Extirpation of matter from right
conjunctiva, external approach.
08CTXZZ................... Extirpation of matter from left conjunctiva,
external approach.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19854 through 19855), we proposed that the
four ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the four ICD-10-PCS procedure codes shown in the table
above that describe procedures involving external extirpation of matter
from eye structures.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the four ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to
non-O.R. procedures, effective October 1, 2017.
(9) External Removal of Radioactive Element or Synthetic Substitute
One commenter identified three ICD-10-PCS procedure codes that
describe procedures involving the external removal of radioactive or
synthetic substitutes from the eye that generally would not require the
resources of an operating room and can be performed at the bedside.
These three ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
08P0X1Z................... Removal of radioactive element from right
eye, external approach.
08P0XJZ................... Removal of synthetic substitute from right
eye, external approach.
08P1XJZ................... Removal of synthetic substitute from left
eye, external approach.
------------------------------------------------------------------------
[[Page 38070]]
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19855), we proposed that the three ICD-10-PCS
procedure codes shown in the table above be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the three ICD-10-PCS procedure codes shown in the table
above that describe the external removal of radioactive or synthetic
substitutes from the eye.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the three ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to
non-O.R. procedures, effective October 1, 2017.
(10) Endoscopic/Transorifice Diagnostic Drainage
One commenter identified eight ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice (via natural or
artificial opening) drainage of ear structures that generally would not
require the resources of an operating room and can be performed at the
bedside. These eight ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
09977ZX................... Drainage of right tympanic membrane, via
natural or artificial opening, diagnostic.
09978ZX................... Drainage of right tympanic membrane, via
natural or artificial opening endoscopic,
diagnostic.
09987ZX................... Drainage of left tympanic membrane, via
natural or artificial opening, diagnostic.
09988ZX................... Drainage of left tympanic membrane, via
natural or artificial opening endoscopic,
diagnostic.
099F7ZX................... Drainage of right eustachian tube, via
natural or artificial opening, diagnostic.
099F8ZX................... Drainage of right eustachian tube, via
natural or artificial opening endoscopic,
diagnostic.
099G7ZX................... Drainage of left eustachian tube, via
natural or artificial opening, diagnostic.
099G8ZX................... Drainage of left eustachian tube, via
natural or artificial opening endoscopic,
diagnostic.
------------------------------------------------------------------------
We stated in the proposed rule that we agreed with the commenter.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19855), we
proposed that the eight ICD-10-PCS procedure codes shown in the table
above be designated as non-O.R. procedures. We invited public comments
on our proposal.
Comment: Commenters supported the proposal to change the
designation of the eight ICD-10-PCS procedure codes shown in the table
above that describe drainage of ear structures.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the eight ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to
non-O.R. procedures, effective October 1, 2017.
(11) External Release
One commenter identified four ICD-10-PCS procedure codes that
describe procedures involving the external release of ear structures
that generally would not require the resources of an operating room and
can be performed at the bedside. These four ICD-10-PCS codes are shown
in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
09N0XZZ................... Release right external ear, external
approach.
09N1XZZ................... Release left external ear, external
approach.
09N3XZZ................... Release right external auditory canal,
external approach.
09N4XZZ................... Release left external auditory canal,
external approach.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19855), we proposed that the four ICD-10-PCS
procedure codes shown in the table above be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the four ICD-10-PCS procedure codes shown in the table
above that describe external release of ear structures.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the four ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to
non-O.R. procedures, effective October 1, 2017.
(12) External Repair
One commenter identified three ICD-10-PCS procedure codes that
describe procedures involving the external repair of body parts that
generally would not require the resources of an operating room and can
be performed at the bedside. These three ICD-10-PCS codes are shown in
the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
09QKXZZ................... Repair nose, external approach.
0CQ4XZZ................... Repair buccal mucosa, external approach.
0CQ7XZZ................... Repair tongue, external approach.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2019 IPPS/LTCH
PPS proposed rule (82 FR 19855), we proposed that the three ICD-10-PCS
procedure codes shown in the table above be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the three ICD-10-PCS procedure codes shown in the table
above that describe
[[Page 38071]]
external repair of body parts of various structures.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the three ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to
non-O.R. procedures, effective October 1, 2017.
(13) Endoscopic/Transorifice Destruction
One commenter identified eight ICD-10-PCS procedure codes that
describe procedures involving the endoscopic/transorifice destruction
of respiratory system body parts that generally would not require the
resources of an operating room and can be performed at the bedside.
These eight ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0B538ZZ................... Destruction of right main bronchus, via
natural or artificial opening endoscopic.
0B548ZZ................... Destruction of right upper lobe bronchus,
via natural or artificial opening
endoscopic.
0B558ZZ................... Destruction of right middle lobe bronchus,
via natural or artificial opening
endoscopic.
0B568ZZ................... Destruction of right lower lobe bronchus,
via natural or artificial opening
endoscopic.
0B578ZZ................... Destruction of left main bronchus, via
natural or artificial opening endoscopic.
0B588ZZ................... Destruction of left upper lobe bronchus, via
natural or artificial opening endoscopic.
0B598ZZ................... Destruction of lingula bronchus, via natural
or artificial opening endoscopic.
0B5B8ZZ................... Destruction of left lower lobe bronchus, via
natural or artificial opening endoscopic.
------------------------------------------------------------------------
We stated in the proposed rule that we agreed with the commenter.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19855
through 19856), we proposed that the eight ICD-10-PCS procedure codes
shown in the table above be designated as non-O.R. procedures. We
invited public comments on our proposal.
Comment: Some commenters agreed with the proposal to change the
designation of the eight ICD-10-PCS procedure codes that describe
procedures involving the endoscopic/transorifice destruction of
respiratory system body parts from O.R. procedures to non-O.R.
procedures. However, other commenters disagreed with the proposal.
These commenters believed that these procedures do, in fact, require
the resources of an operating room and stated that the suggestion that
these procedures can be performed at the bedside is clinically
inaccurate and misrepresents the nature of these procedures. According
to the commenters, the only instances in which these procedures would
be performed at the bedside would be if the patient was in the
intensive care unit and in emergent need of care. Otherwise, the
commenters indicated that providing these services at the patient's
bedside would not be appropriate. Commenters also noted that the
patients who undergo the above procedures typically have poor
respiratory function that requires treatment within an O.R. setting for
clinical and safety purposes. In addition, the commenters reported that
the administration of anesthesia during these procedures is critically
important. The commenters conducted an in-depth analysis to determine
the impact of the proposed change and noted that the resource
utilization associated with the inpatient claims reporting these
procedures more closely aligns with surgical MS-DRGs versus medical MS-
DRGs.
Response: We appreciate the commenters' support. In response to the
commenters who disagreed with changing the designation of the eight
ICD-10-PCS procedure codes that describe the endoscopic/transorifice
destruction of respiratory system body parts, we appreciate the
thorough review and analysis conducted in response to our solicitation
for comments on the proposal. Upon further review and consideration, we
agree that these procedures warrant an O.R. setting and assignment to
surgical MS-DRGs.
After consideration of the public comments we received, we are not
finalizing our proposal to change the designation of the eight ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to
non-O.R. procedures. The eight procedure codes shown in the table above
will maintain their O.R. designation for FY 2018.
(14) Endoscopic/Transorifice Drainage
One commenter identified 40 ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice (via natural or
artificial opening) drainage of respiratory system body parts that
generally would not require the resources of an operating room and can
be performed at the bedside. We agreed with the commenter. Therefore,
in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19856), we proposed
that the 40 ICD-10-PCS procedure codes listed in Table 6P.4f.
associated with the proposed rule (which is available via the Internet
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the 40 ICD-10-PCS procedure codes that describe
endoscopic/transorifice (via natural or artificial opening) drainage of
respiratory system body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the 40 ICD-10-PCS
procedure codes listed in Table 6P.4f. associated with the proposed
rule and this final rule (which is available via the Internet on the
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R.
procedures, effective October 1, 2017.
(15) Endoscopic/Transorifice Extirpation
One commenter identified nine ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice extirpation of
matter from respiratory system body parts that generally would not
require the resources of an operating room and can be performed at the
bedside. These nine ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0BCC8ZZ................... Extirpation of matter from right upper lung
lobe, via natural or artificial opening
endoscopic.
[[Page 38072]]
0BCD8ZZ................... Extirpation of matter from right middle lung
lobe, via natural or artificial opening
endoscopic.
0BCF8ZZ................... Extirpation of matter from right lower lung
lobe, via natural or artificial opening
endoscopic.
0BCG8ZZ................... Extirpation of matter from left upper lung
lobe, via natural or artificial opening
endoscopic.
0BCH8ZZ................... Extirpation of matter from lung lingula, via
natural or artificial opening endoscopic.
0BCJ8ZZ................... Extirpation of matter from left lower lung
lobe, via natural or artificial opening
endoscopic.
0BCK8ZZ................... Extirpation of matter from right lung, via
natural or artificial opening endoscopic.
0BCL8ZZ................... Extirpation of matter from left lung, via
natural or artificial opening endoscopic.
0BCM8ZZ................... Extirpation of matter from bilateral lungs,
via natural or artificial opening
endoscopic.
------------------------------------------------------------------------
We stated in the proposed rule that we agreed with the commenter.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19856), we
proposed that the nine ICD-10-PCS procedure codes shown in the table
above be designated as non-O.R. procedures. We invited public comments
on our proposal.
Comment: Commenters supported the proposal to change the
designation of the nine ICD-10-PCS procedure codes that describe
endoscopic/transorifice extirpation of matter from respiratory system
body parts. However, one commenter disagreed with the proposal.
According to the commenter, the codes describe endoscopic procedures
performed on the lung and are more invasive in comparison to
endobronchial procedures and they require specialized equipment. The
commenter also noted that time, skill, and duration of sedation are
increased for endoscopic lung procedures versus procedures performed on
the bronchus (endobronchial).
Response: We appreciate the commenters' support. In response to the
commenter who disagreed with our proposal, upon further review and
consideration, we agree that these procedure codes warrant an O.R.
setting.
After consideration of the public comments we received, we are not
finalizing our proposal to designate the nine ICD-10-PCS procedure
codes shown in the table above as non-O.R. procedures. These procedure
codes will remain designated as O.R. procedures for FY 2018.
(16) Endoscopic/Transorifice Fragmentation
One commenter identified 16 ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice fragmentation of
respiratory system body parts that generally would not require the
resources of an operating room and can be performed at the bedside.
These 16 ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0BF37ZZ................... Fragmentation in right main bronchus, via
natural or artificial opening.
0BF38ZZ................... Fragmentation in right main bronchus, via
natural or artificial opening endoscopic.
0BF47ZZ................... Fragmentation in right upper lobe bronchus,
via natural or artificial opening.
0BF48ZZ................... Fragmentation in right upper lobe bronchus,
via natural or artificial opening
endoscopic.
0BF57ZZ................... Fragmentation in right middle lobe bronchus,
via natural or artificial opening.
0BF58ZZ................... Fragmentation in right middle lobe bronchus,
via natural or artificial opening
endoscopic.
0BF67ZZ................... Fragmentation in right lower lobe bronchus,
via natural or artificial opening.
0BF68ZZ................... Fragmentation in right lower lobe bronchus,
via natural or artificial opening
endoscopic.
0BF77ZZ................... Fragmentation in left main bronchus, via
natural or artificial opening.
0BF78ZZ................... Fragmentation in left main bronchus, via
natural or artificial opening endoscopic.
0BF87ZZ................... Fragmentation in left upper lobe bronchus,
via natural or artificial opening.
0BF88ZZ................... Fragmentation in left upper lobe bronchus,
via natural or artificial opening
endoscopic.
0BF97ZZ................... Fragmentation in lingula bronchus, via
natural or artificial opening.
0BF98ZZ................... Fragmentation in lingula bronchus, via
natural or artificial opening endoscopic.
0BFB7ZZ................... Fragmentation in left lower lobe bronchus,
via natural or artificial opening.
0BFB8ZZ................... Fragmentation in left lower lobe bronchus,
via natural or artificial opening
endoscopic.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19856 through 19857), we proposed that the 16
ICD-10-PCS procedure codes shown in the table above be designated as
non-O.R. procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the16 ICD-10-PCS procedure codes that describe
endoscopic/transorifice fragmentation of respiratory system body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the 16 ICD-10-PCS
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(17) Endoscopic/Transorifice Insertion of Intraluminal Device
One commenter identified two ICD-10-PCS procedure codes that
describe procedures involving an endoscopic/transorifice (via natural
or artificial opening) insertion of intraluminal devices into
respiratory system body parts that generally would not require the
resources of an operating room and can be performed at the bedside.
These two ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0BH17DZ................... Insertion of intraluminal device into
trachea, via natural or artificial opening.
0BH18DZ................... Insertion of intraluminal device into
trachea, via natural or artificial opening
endoscopic.
------------------------------------------------------------------------
[[Page 38073]]
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19857), we proposed that the two ICD-10-PCS
procedure codes shown in the table above be designated non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the two ICD-10-PCS procedure codes that describe an
endoscopic/transorifice (via natural or artificial opening) insertion
of intraluminal devices into respiratory system body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the two ICD-10-PCS
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(18) Endoscopic/Transorifice Removal of Radioactive Element
One commenter identified two ICD-10-PCS procedure codes that
describe procedures involving the endoscopic/transorifice removal of
radioactive elements from respiratory system body parts that generally
would not require the resources of an operating room and can be
performed at the bedside. These two ICD-10-PCS codes are shown in the
table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0BPK71Z................... Removal of radioactive element from right
lung, via natural or artificial opening.
0BPK81Z................... Removal of radioactive element from right
lung, via natural or artificial opening
endoscopic.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19857), we proposed that the two ICD-10-PCS
procedure codes shown in the table above be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the two ICD-10-PCS procedure codes that describe
procedures involving the endoscopic/transorifice removal of radioactive
elements from respiratory system body parts. However, one commenter
disagreed with the proposal and asserted that endoscopic procedures
performed on the lung are more invasive than endobronchial procedures.
Response: We appreciate the commenters' support. In response to the
commenter who disagreed with our proposal, we recognize that endoscopic
procedures performed on the lung may be considered more invasive than
endobronchial procedures. However, according to the American Cancer
Society, in most cases, anesthesia is not needed when the applicator
and/or radioactive implant is removed, as it is usually done in the
hospital room.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of ICD-10-PCS
procedure codes 0BPK71Z and 0BPK81Z from O.R. procedures to non-O.R.
procedures, effective October 1, 2017.
(19) Endoscopic/Transorifice Revision of Drainage, Infusion,
Intraluminal or Monitoring Device
One commenter identified 18 ICD-10-PCS procedure codes that
describe procedures involving the revision of drainage, infusion,
intraluminal, or monitoring devices from respiratory system body parts
that generally would not require the resources of an operating room and
can be performed at the bedside. We agreed with the commenter.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19857), we
proposed that the 18 ICD-10-PCS procedure codes listed in Table 6P.4g.
associated with the proposed rule (which is available via the Internet
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the 18 ICD-10-PCS procedure codes that describe
procedures involving the revision of drainage, infusion, intraluminal,
or monitoring devices from respiratory system body parts. However, one
commenter disagreed with the proposal and recommended that CMS maintain
an O.R. designation of 12 of the 18 proposed codes. The commenter
stated that, although it is uncertain how often a device within the
lung would be revised versus removed and replaced, endoscopic
procedures performed on the lung are more invasive than endobronchial
procedures.
Response: We appreciate the commenters' support. In response to the
commenter who disagreed with 12 of the 18 procedure codes in our
proposal, we still believe our proposal is appropriate, given that
there are a wide range of procedures that may be performed and are
described as a revision of a drainage, infusion, intraluminal, or
monitoring device in the lung and generally do not require the
resources of an operating room.
After consideration of the public comments we received, we are
finalizing our proposal to designate the 18 ICD-10-PCS procedure codes
listed in Table 6P.4g. associated with the proposed rule and this final
rule (which is available via the Internet on the CMS Web site at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) as non-O.R. procedures, effective October
1, 2017.
(20) Endoscopic/Transorifice Excision
One commenter identified one ICD-10-PCS procedure code that
describes the procedure involving endoscopic/transorifice (via natural
or artificial opening) excision of the digestive system body parts that
generally would not require the resources of an operating room and can
be performed at the bedside. This code is 0DBQ8ZZ (Excision of anus,
via natural or artificial opening endoscopic). We agreed with the
commenter. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19857), we proposed that ICD-10-PCS procedure code 0DBQ8ZZ be
designated as a non-O.R. procedure. We invited public comments on our
proposal.
Comment: Commenters supported the proposal to change the
designation of ICD-10-PCS procedure code 0DBQ8ZZ.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of ICD-10-PCS
procedure code 0DBQ8ZZ (Excision of anus, via natural or artificial
opening endoscopic) from an O.R. procedure to a non-O.R. procedure,
effective October 1, 2017.
(21) Endoscopic/Transorifice Insertion
One commenter identified two ICD-10-PCS procedure codes that
describe procedures involving the endoscopic/transorifice (via natural
or artificial opening) insertion of intraluminal device into the
stomach that generally would not require the resources of an operating
room and can be performed at
[[Page 38074]]
the bedside. These two ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0DH67DZ................... Insertion of intraluminal device into
stomach, via natural or artificial opening.
0DH68DZ................... Insertion of intraluminal device into
stomach, via natural or artificial opening
endoscopic.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19857), we proposed that the two ICD-10-PCS
procedure codes shown in the table above be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the two ICD-10-PCS procedure codes that describe the
endoscopic/transorifice (via natural or artificial opening) insertion
of intraluminal device into the stomach.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the two ICD-10-PCS
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(22) Endoscopic/Transorifice Removal
One commenter identified six ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice (via natural or
artificial opening) removal of feeding devices that generally would not
require the resources of an operating room and can be performed at the
bedside. These six ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0DP07UZ................... Removal of feeding device from upper
intestinal tract, via natural or artificial
opening.
0DP08UZ................... Removal of feeding device from upper
intestinal tract, via natural or artificial
opening endoscopic.
0DP67UZ................... Removal of feeding device from stomach, via
natural or artificial opening.
0DP68UZ................... Removal of feeding device from stomach, via
natural or artificial opening endoscopic.
0DPD7UZ................... Removal of feeding device from lower
intestinal tract, via natural or artificial
opening.
0DPD8UZ................... Removal of feeding device from lower
intestinal tract, via natural or artificial
opening endoscopic.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19857 through 19858), we proposed that the six
ICD-10-PCS procedure codes shown in the table above be designated as
non-O.R. procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the six ICD-10-PCS procedure codes that describe the
endoscopic/transorifice (via natural or artificial opening) removal of
feeding devices.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the six ICD-10-PCS
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(23) External Reposition
One commenter identified two ICD-10-PCS procedure codes that
describe procedures involving external reposition of gastrointestinal
body parts that generally would not require the resources of an
operating room and can be performed at the bedside. These two ICD-10-
PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0DS5XZZ................... Reposition esophagus, external approach.
0DSQXZZ................... Reposition anus, external approach.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19858), we proposed that the two ICD-10-PCS
procedure codes shown in the table above be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the two ICD-10-PCS procedure codes that describe the
external reposition of gastrointestinal body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the two ICD-10-PCS
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(24) Endoscopic/Transorifice Drainage
One commenter identified eight ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice (via natural or
artificial opening) drainage of hepatobiliary system and pancreatic
body parts that generally would not require the resources of an
operating room and can be performed at the bedside. These eight ICD-10-
PCS codes are shown in the table below.
[[Page 38075]]
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0F9580Z................... Drainage of right hepatic duct with drainage
device, via natural or artificial opening
endoscopic.
0F958ZZ................... Drainage of right hepatic duct, via natural
or artificial opening endoscopic.
0F9680Z................... Drainage of left hepatic duct with drainage
device, via natural or artificial opening
endoscopic.
0F968ZZ................... Drainage of left hepatic duct, via natural
or artificial opening endoscopic.
0F9880Z................... Drainage of cystic duct with drainage
device, via natural or artificial opening
endoscopic.
0F988ZZ................... Drainage of cystic duct, via natural or
artificial opening endoscopic.
0F9D8ZZ................... Drainage of pancreatic duct, via natural or
artificial opening endoscopic.
0F9F8ZZ................... Drainage of accessory pancreatic duct, via
natural or artificial opening endoscopic.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19858), we proposed that the eight ICD-10-PCS
procedure codes shown in the table above be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the eight ICD-10-PCS procedure codes that describe
endoscopic/transorifice (via natural or artificial opening) drainage of
hepatobiliary system and pancreatic body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the eight ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to
non-O.R. procedures, effective October 1, 2017.
(25) Endoscopic/Transorifice Fragmentation
One commenter identified two ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice (via natural or
artificial opening) fragmentation of hepatobiliary system and
pancreatic body parts that generally would not require the resources of
an operating room and can be performed at the bedside. These two ICD-
10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0FFD8ZZ................... Fragmentation in pancreatic duct, via
natural or artificial opening endoscopic.
0FFF8ZZ................... Fragmentation in accessory pancreatic duct,
via natural or artificial opening
endoscopic.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19858), we proposed that the two ICD-10-PCS
procedure codes shown in the table above be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the two ICD-10-PCS procedure codes that describe
endoscopic/transorifice (via natural or artificial opening)
fragmentation of hepatobiliary system and pancreatic body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the two ICD-10-PCS
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(26) Percutaneous Alteration
One commenter identified three ICD-10-PCS procedure codes that
describe procedures involving percutaneous alteration of the breast
that generally would not require the resources of an operating room and
can be performed at the bedside. These three ICD-10-PCS codes are shown
in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0H0T3JZ................... Alteration of right breast with synthetic
substitute, percutaneous approach.
0H0U3JZ................... Alteration of left breast with synthetic
substitute, percutaneous approach.
0H0V3JZ................... Alteration of bilateral breast with
synthetic substitute, percutaneous
approach.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19858 through 19859), we proposed that the
three ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the three ICD-10-PCS procedure codes that describe
percutaneous alteration of the breast.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the three ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to
non-O.R. procedures, effective October 1, 2017.
(27) External Division and Excision of Skin
One commenter identified 41 ICD-10-PCS procedure codes that
describe procedures involving external division and excision of the
skin for body parts that generally would not require the resources of
an operating room and can be performed at the bedside. We agreed with
the commenter. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule
(82 FR 19859), we proposed that the 41 ICD-10-PCS procedure codes
listed in Table 6P.4h. associated with the proposed rule (which is
available via the Internet on the CMS Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-Service-Payment/
[[Page 38076]]
AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We
invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the 41 ICD-10-PCS procedure codes that describe external
division and excision of the skin for body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the 41 ICD-10-PCS
procedure codes listed in Table 6P.4h. associated with the proposed
rule and this final rule (which is available via the Internet on the
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R.
procedures, effective October 1, 2017.
(28) External Excision of Breast
One commenter identified six ICD-10-PCS procedure codes that
describe procedures involving external excision of the breast that they
believed would generally not require the resources of an operating room
and can be performed at the bedside. These six ICD-10-PCS codes are
shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0HBTXZZ................... Excision of right breast, external approach.
0HBUXZZ................... Excision of left breast, external approach.
0HBVXZZ................... Excision of bilateral breast, external
approach.
0HBWXZZ................... Excision of right nipple, external approach.
0HBXXZZ................... Excision of left nipple, external approach.
0HBYXZZ................... Excision of supernumerary breast, external
approach.
------------------------------------------------------------------------
We disagreed with the commenter because these procedure codes
describe various types of surgery performed on the breast or nipple
(for example, partial mastectomy) that would typically involve the use
of general anesthesia. Therefore, in the FY 2018 IPPS/LTCH PPS proposed
rule (82 FR 19859), we proposed that the six ICD-10-PCS procedure codes
shown in the table above remain designated as O.R. procedures. We
invited public comments on our proposal.
Comment: Commenters supported the proposal to maintain the current
designation of the six ICD-10-PCS procedure codes that describe
external excision of the breast. However, one commenter disagreed
specifically with the example of a partial mastectomy utilizing an
external approach. The commenter stated that the breast itself includes
glandular and ductal tissue, although it is assigned with skin to
Section 0H in the Medical and Surgical section of the ICD-10-PCS
classification. Therefore, according to the commenter, by definition, a
partial mastectomy, which involves excision of glandular/ductal tissue,
cannot be performed by an external approach because glandular tissue
cannot be removed through direct action upon the skin or mucous
membrane.
Response: We appreciate the commenters' support. In response to the
commenter who noted the example of a partial mastectomy that cannot be
performed by an external approach, we agree that the example may not
have been an appropriate illustration of an external approach according
to the ICD-10-PCS definitions. A more appropriate example would be an
excision of lesion of breast for the external approach. As the
commenter pointed out, the breast itself includes glandular and ductal
tissue, although it is assigned with skin to Chapter 0H. Because the
code title description does not specifically include the term ``skin,''
it can lead to confusion. We believe this area in the classification
may benefit from further review to determine if modifications are
warranted, in which case any proposals would be presented at a future
ICD-10 Coordination and Maintenance Committee meeting.
After consideration of the public comments we received, we are
finalizing our proposal to maintain the six ICD-10-PCS procedure codes
shown in the table above as O.R. procedures for FY 2018.
(29) Percutaneous Supplement
One commenter identified three ICD-10-PCS procedure codes that
describe procedures involving percutaneous supplement of the breast
with synthetic substitute that generally would not require the
resources of an operating room and can be performed at the bedside.
These three ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0HUT3JZ................... Supplement right breast with synthetic
substitute, percutaneous approach.
0HUU3JZ................... Supplement left breast with synthetic
substitute, percutaneous approach.
0HUV3JZ................... Supplement bilateral breast with synthetic
substitute, percutaneous approach.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19859), we proposed that the three ICD-10-PCS
procedure codes shown in the table above be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the three ICD-10-PCS procedure codes that describe
percutaneous supplement of the breast with synthetic substitute.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the three ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to
non-O.R. procedures, effective October 1, 2017.
(30) Open Drainage
One commenter identified 25 ICD-10-PCS procedure codes that
describe procedures involving open drainage of subcutaneous tissue and
fascia body parts that generally would not require the resources of an
operating room and can be performed at the bedside. The list includes
procedure codes for drainage with or without placement of a drainage
device. We stated in the
[[Page 38077]]
proposed rule that we agreed with the commenter. Therefore, in the FY
2018 IPPS/LTCH PPS proposed rule (82 FR 19859), we proposed that the 25
ICD-10-PCS procedure codes listed in Table 6P.4i. associated with the
proposed rule (which is available via the Internet on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We
invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the 25 ICD-10-PCS procedure codes that describe
procedures involving open drainage of subcutaneous tissue and fascia
body parts. However, one commenter disagreed with changing the
designation for 22 of the 25 procedure codes in the proposal from O.R.
to non-O.R. This commenter agreed with the proposal to change the
designation for 3 of the 25 procedure codes because these codes
specifically describe the objective of placing a drainage device. The
commenter noted that the other procedures described by the 22 procedure
codes are performed on deeper subcutaneous tissue and fascia, are more
invasive, and are most often performed in the O.R. setting under
general anesthesia. According to the commenter, these codes are
assigned when the primary objective of the procedure is to incise
through the skin into the subcutaneous tissue and/or fascia in order to
drain and clean out an abscess or hematoma (fluid collection). The
commenter also noted that CMS disagreed with the recommendation to
reclassify open extraction of subcutaneous tissue and fascia to non-
O.R. procedures as discussed with regard to Table 6P.4k associated with
the FY 2018 IPPS/LTCH PPS proposed rule and for the same reasons, the
commenter believed that open drainage of subcutaneous tissue and fascia
should not be changed from an O.R. procedure to a non-O.R. procedure.
Response: We appreciate the commenters' support. In response to the
commenter who noted that the procedures described by the 22 procedure
codes are performed on deeper subcutaneous tissue and fascia, are more
invasive, and are most often performed in the O.R. setting under
general anesthesia, upon further review and consideration, we agree
that it is appropriate to maintain the designation of the procedure
codes as O.R. procedures.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the following
three ICD-10-PCS procedure codes that were listed in Table 6P.4i.
associated with the proposed rule (which is available via the Internet
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to
non-O.R. procedures, effective October 1, 2017.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0J9100Z................... Drainage of Face Subcutaneous Tissue and
Fascia with Drainage Device, Open Approach.
0J9J00Z................... Drainage of Right Hand Subcutaneous Tissue
and Fascia with Drainage Device, Open
Approach.
0J9K00Z................... Drainage of Left Hand Subcutaneous Tissue
and Fascia with Drainage Device, Open
Approach.
------------------------------------------------------------------------
We are not finalizing our proposal to change the designation for
the remaining 22 ICD-10-PCS procedure codes that were listed in Table
6P.4i. associated with the proposed rule (which is available via the
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R.
procedures to non-O.R. procedures. Rather, these codes will maintain
their O.R. designation for FY 2018.
(31) Percutaneous Drainage
One commenter identified two ICD-10-PCS procedure codes that
describe procedures involving percutaneous drainage of subcutaneous
tissue and fascia body parts that generally would not require the
resources of an operating room and can be performed at the bedside.
These two ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0J9J3ZZ................... Drainage of right hand subcutaneous tissue
and fascia, percutaneous approach.
0J9K3ZZ................... Drainage of left hand subcutaneous tissue
and fascia, percutaneous approach.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19859), we proposed that the two ICD-10-PCS
procedure codes shown in the table above be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the two ICD-10-PCS procedure codes that describe
percutaneous drainage of subcutaneous tissue and fascia body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the two ICD-10-PCS
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(32) Percutaneous Extraction
One commenter identified 22 ICD-10-PCS procedure codes that
describe procedures involving percutaneous extraction of subcutaneous
tissue and fascia body parts that generally would not require the
resources of an operating room and can be performed at the bedside. We
agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH PPS
proposed rule (82 FR 19859 through 19860), we proposed that the 22 ICD-
10-PCS procedure codes listed in Table 6P.4j. associated with the
proposed rule (which is available via the Internet on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We
invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the 22 ICD-10-PCS procedure codes that describe
percutaneous extraction of
[[Page 38078]]
subcutaneous tissue and fascia body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the 22 ICD-10-PCS
procedure codes listed in Table 6P.4j. associated with the proposed
rule and this final rule (which is available via the Internet on the
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R.
procedures, effective October 1, 2017.
(33) Open Extraction
One commenter identified 22 ICD-10-PCS procedure codes that
describe procedures involving open extraction of subcutaneous tissue
and fascia body parts that the commenter believed would generally not
require the resources of an operating room and can be performed at the
bedside. We stated in the proposed rule that we disagreed with the
commenter because these codes describe procedures that utilize an open
approach and are being performed on the skin and subcutaneous tissue.
Depending on the medical reason for the open extraction, the procedures
may require an O.R. setting. Therefore, in the FY 2018 IPPS/LTCH PPS
proposed rule (82 FR 19860), we proposed that the 22 ICD-10-PCS
procedure codes listed in Table 6P.4k. associated with the proposed
rule (which is available via the Internet on the CMS Web site at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) remain designated as O.R. procedures. We
invited public comments on our proposal.
Comment: Commenters supported the proposal to maintain the
designation of the 22 ICD-10-PCS procedure codes that describe open
extraction of subcutaneous tissue and fascia body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to maintain the 22 ICD-10-PCS procedure codes
listed in Table 6P.4k. associated with the proposed rule and this final
rule (which is available via the Internet on the CMS Web site at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) as O.R. procedures for FY 2018.
(34) Percutaneous and Open Repair
One commenter identified 44 ICD-10-PCS procedure codes that
describe procedures involving percutaneous and open repair of
subcutaneous tissue and fascia body parts that generally would not
require the resources of an operating room and can be performed at the
bedside. We stated in the proposed rule that we agreed with the
commenter. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19860), we proposed that the 44 ICD-10-PCS procedure codes listed in
Table 6P.4l. associated with the proposed rule (which is available via
the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be
designated as non-O.R. procedures. We invited public comments on our
proposal.
Comment: Commenters supported the proposal to change the
designation of 44 ICD-10-PCS procedure codes that describe percutaneous
and open repair of subcutaneous tissue and fascia body parts from O.R.
to non-O.R. However, one commenter disagreed with changing the
designation of 22 of the 44 procedure codes. The commenter stated that
open repair of deeper subcutaneous tissue and fascia is much more
invasive and often performed in the O.R. setting under general
anesthesia. The commenter noted that patients who are admitted to the
inpatient setting following trauma often have multiple traumatic
injuries whereby extensive wound lacerations often require the O.R.
setting for complex repair and debridement under anesthesia.
Response: We appreciate the commenters' support. In response to the
commenter who disagreed with the proposal to change the designation of
22 of the 44 procedure codes, we agree that open repair of deeper
subcutaneous tissue and fascia is much more invasive and may be
performed in the O.R. setting under general anesthesia.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation for 22 procedure
codes that describe percutaneous repair of subcutaneous tissue and
fascia body parts listed in Table 6P.4l. associated with this final
rule (which is available via the Internet on the CMS Web site at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R.
procedures, effective October 1, 2017. We are not finalizing our
proposal to change the designation for the other 22 procedure codes
that describe open repair of subcutaneous tissue and fascia body parts
from O.R. procedures to non-O.R. procedures. Rather, they will maintain
their O.R. designation for FY 2018.
(35) External Release
One commenter identified 28 ICD-10-PCS procedure codes that
describe procedures involving external release of bursa and ligament
body parts that generally would not require the resources of an
operating room and can be performed at the bedside. We agreed with the
commenter. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19860), we proposed that the 28 ICD-10-PCS procedure codes listed in
Table 6P.4m. associated with the proposed rule (which is available via
the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be
designated as non-O.R. procedures. We invited public comments on our
proposal.
Comment: Commenters supported the proposal to change the
designation of the 28 ICD-10-PCS procedure codes that describe
procedures involving external release of bursa and ligament body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the 28 ICD-10-PCS
procedure codes listed in Table 6P.4m. associated with the proposed
rule and this final rule (which is available via the Internet on the
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R.
procedures, effective October 1, 2017.
(36) External Repair
One commenter identified 135 ICD-10-PCS procedure codes that
describe procedures involving external repair of various bones and
joints. We stated in the proposed rule that we believed that these
procedures generally would not be performed in the operating room. In
the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19860), we proposed that
the 135 ICD-10-PCS procedure codes listed in Table 6P.4n. associated
with the proposed rule (which is available via the Internet on the CMS
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R.
procedures. We invited public comments on our proposal.
[[Page 38079]]
Comment: Commenters supported the proposal to change the
designation of the 135 ICD-10-PCS procedure codes that describe
external repair of various bones and joints.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the 135 ICD-10-PCS
procedure codes listed in Table 6P.4n. associated with the proposed
rule and this final rule (which is available via the Internet on the
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R.
procedures, effective October 1, 2017.
(37) External Reposition
One commenter identified 14 ICD-10-PCS procedure codes that
describe procedures involving external reposition of various bones.
These 14 ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0NS0XZZ................... Reposition skull, external approach.
0NS1XZZ................... Reposition right frontal bone, external
approach.
0NS2XZZ................... Reposition left frontal bone, external
approach.
0NS3XZZ................... Reposition right parietal bone, external
approach.
0NS4XZZ................... Reposition left parietal bone, external
approach.
0NS5XZZ................... Reposition right temporal bone, external
approach.
0NS6XZZ................... Reposition left temporal bone, external
approach.
0NS7XZZ................... Reposition right occipital bone, external
approach.
0NS8XZZ................... Reposition left occipital bone, external
approach.
0PS3XZZ................... Reposition cervical vertebra, external
approach.
0PS4XZZ................... Reposition thoracic vertebra, external
approach.
0QS0XZZ................... Reposition lumbar vertebra, external
approach.
0QS1XZZ................... Reposition sacrum, external approach.
0QSSXZZ................... Reposition coccyx, external approach.
------------------------------------------------------------------------
We stated in the proposed rule that we believed that these
procedures generally would not be performed in the operating room.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19860), we
proposed that the 14 ICD-10-PCS procedure codes shown in the table
above be designated as non-O.R. procedures. We invited public comments
on our proposal.
Comment: Commenters supported the proposal to change the
designation of the 14 ICD-10-PCS procedure codes that describe
procedures involving external reposition of various bones.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the 14 ICD-10-PCS
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017. We note that, effective
October 1, 2017, the code titles for procedure code 0NS1XZZ (Reposition
right frontal bone, external approach) and procedure code 0NS7XZZ
(Reposition right occipital bone, external approach) have been revised
as reflected in Table 6F.--Revised Procedure Code Titles, and procedure
codes 0NS2XZZ (Reposition left frontal bone, external approach) and
0NS8XZZ (Reposition left occipital bone, external approach) have been
deleted as reflected in Table 6D. --Invalid Procedure Codes associated
with this final rule (which is available via the Internet on the CMS
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
(38) Endoscopic/Transorifice Dilation
One commenter identified eight ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice (via natural or
artificial opening) dilation of urinary system body parts that
generally would not require the resources of an operating room and can
be performed at the bedside. These eight ICD-10-PCS codes are shown in
the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0T767ZZ................... Dilation of right ureter, via natural or
artificial opening.
0T768ZZ................... Dilation of right ureter, via natural or
artificial opening endoscopic.
0T777ZZ................... Dilation of left ureter, via natural or
artificial opening.
0T778ZZ................... Dilation of left ureter, via natural or
artificial opening endoscopic.
0T7B7DZ................... Dilation of bladder with intraluminal
device, via natural or artificial opening.
0T7B7ZZ................... Dilation of bladder, via natural or
artificial opening.
0T7B8DZ................... Dilation of bladder with intraluminal
device, via natural or artificial opening
endoscopic.
0T7B8ZZ................... Dilation of bladder, via natural or
artificial opening endoscopic.
------------------------------------------------------------------------
We stated in the proposed rule that we agreed with the commenter.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19860
through 19861), we proposed that the eight ICD-10-PCS procedure codes
shown in the table above be designated as non-O.R. procedures. We
invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the eight ICD-10-PCS procedure codes that describe
procedures involving endoscopic/transorifice (via natural or artificial
opening) dilation of urinary system body parts. However, one commenter
disagreed with changing the designation for four of the eight procedure
codes. These four codes are shown in the table below:
[[Page 38080]]
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0T768ZZ................... Dilation of right ureter, via natural or
artificial opening endoscopic.
0T778ZZ................... Dilation of left ureter, via natural or
artificial opening endoscopic.
0T7B8DZ................... Dilation of bladder with intraluminal
device, via natural or artificial opening
endoscopic.
0T7B8ZZ................... Dilation of bladder, via natural or
artificial opening endoscopic.
------------------------------------------------------------------------
According to the commenter, these four endoscopic procedures
typically require the use of the operating room or a dedicated suite
with specialized equipment and anesthesia.
Response: We appreciate the commenters' support. In response to the
commenter who disagreed with changing the designation for four of the
eight procedure codes that are displayed above, upon further review and
consideration, we agree that these four procedures are appropriate to
designate as O.R. procedures for the reasons provided by the commenter.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation for four ICD-10-PCS
procedure codes describing a transorifice (via natural or artificial
opening) approach for dilation of urinary system body parts from O.R.
procedures to non-O.R. procedures as shown in the table below,
effective October 1, 2017.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0T767ZZ................... Dilation of right ureter, via natural or
artificial opening.
0T777ZZ................... Dilation of left ureter, via natural or
artificial opening.
0T7B7DZ................... Dilation of bladder with intraluminal
device, via natural or artificial opening.
0T7B7ZZ................... Dilation of bladder, via natural or
artificial opening.
------------------------------------------------------------------------
We are not finalizing our proposal to change the designation of
four procedure codes (0T768ZZ, 0T778ZZ, 0T7B8DZ, and 0T7B8ZZ) that
describe endoscopic dilation of urinary system body parts from O.R.
procedures to non-O.R. procedures. Rather, they will maintain their O.R
designation for FY 2018.
(39) Endoscopic/Transorifice Excision
One commenter identified three ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice (via natural or
artificial opening) excision of urinary system body parts that the
commenter believed would generally not require the resources of an
operating room and can be performed at the bedside. These three ICD-10-
PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0TBD7ZZ................... Excision of urethra, via natural or
artificial opening.
0TBD8ZZ................... Excision of urethra, via natural or
artificial opening endoscopic.
0TBDXZZ................... Excision of urethra, external approach.
------------------------------------------------------------------------
We disagreed with the commenter because, depending on the medical
reason for the excision, the procedures may require an O.R. setting.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19861), we
proposed that the three ICD-10-PCS procedure codes shown in the table
above remain designated as O.R. procedures. We invited public comments
on our proposal.
Comment: Commenters supported the proposal to maintain the
designation for three ICD-10-PCS procedure codes that describe an
endoscopic/transorifice (via natural or artificial opening) excision of
urinary system body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal for the three ICD-10-PCS procedure codes shown
in the table above to maintain the O.R. designation for FY 2018.
(40) External/Transorifice Repair
One commenter identified three ICD-10-PCS procedure codes that
describe procedures involving external and transorifice (via natural or
artificial opening) repair of the vagina body part that generally would
not require the resources of an operating room and can be performed at
the bedside. These three ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0UQG7ZZ................... Repair vagina, via natural or artificial
opening.
0UQGXZZ................... Repair vagina, external approach.
0UQMXZZ................... Repair vulva, external approach.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19861), we proposed that these three ICD-10-
PCS procedure codes shown in the table above be designated as non-O.R.
procedures. We invited public comments on our proposal.
[[Page 38081]]
Comment: Commenters supported the proposal to change the
designation for three ICD-10-PCS procedure codes that describe external
and transorifice (via natural or artificial opening) repair of the
vagina body part.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal for the three ICD-10-PCS procedure codes shown
in the table above to change the designation from O.R. procedures to
non-O.R. procedures, effective October 1, 2017.
(41) Percutaneous Transfusion
One commenter identified 20 ICD-10-PCS procedure codes that
describe procedures involving percutaneous transfusion of bone marrow
and stem cells that generally would not require the resources of an
operating room and can be performed at the bedside. We agreed with the
commenter. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19861), we proposed that the 20 ICD-10-PCS procedure codes listed in
Table 6P.4o. associated with the proposed rule (which is available via
the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be
designated as non-O.R. procedures. We invited public comments on our
proposal.
Comment: Numerous commenters expressed concern with the proposal
that involved 20 ICD-10-PCS procedure codes describing percutaneous
transfusion of bone marrow and stem cells. The commenters agreed that,
clinically, the proposal to designate these procedures as non-O.R. is
appropriate. However, the commenters objected to the notion that these
procedures would be reassigned to medical MS-DRGs with lower payment
rates as a result of the proposal. The commenters urged CMS to maintain
the current Pre-MDC logic for patients undergoing bone marrow
transplants and to maintain their respective MS-DRG assignments to MS-
DRG 014 (Allogeneic Bone Marrow Transplant); MS-DRG 016 (Autologous
Bone Marrow Transplant with CC/MCC and MS-DRG 017 (Autologous Bone
Marrow Transplant without CC/MCC).
Response: We acknowledge the concerns of the commenters. We agree
that it is important to maintain the current Pre-MDC logic for these
procedures while also appropriately designating them as non-O.R.
procedures.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation for the 20 ICD 10-PCS
procedure codes listed in Table 6P.4o. associated with the proposed
rule and this final rule (which is available via the Internet on the
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R.
procedures, effective October 1, 2017, and maintaining their assignment
to the Pre-MDC MS-DRGs 014, 016, and 017 for FY 2018.
(42) External/Percutaneous/Transorifice Introduction
One commenter identified 51 ICD-10-PCS procedure codes that
describe procedures involving external, percutaneous and transorifice
(via natural or artificial opening) introduction of substances that
generally would not require the resources of an operating room and can
be performed at the bedside. We agreed with the commenter. Therefore,
in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19861), we proposed
that the 51 ICD-10-PCS procedure codes listed in Table 6P.4p.
associated with the proposed rule (which is available via the Internet
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the 51 ICD-10-PCS procedure codes that describe
procedures involving external, percutaneous and transorifice (via
natural or artificial opening) introduction of substances.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the 51 ICD-10-PCS
procedure codes listed in Table 6P.4p. associated with the proposed
rule and this final rule (which is available via the Internet on the
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R.
procedures, effective October 1, 2017.
(43) Percutaneous/Diagnostic and Endoscopic/Transorifice Irrigation,
Measurement and Monitoring
One commenter identified 15 ICD-10-PCS procedure codes that
describe procedures involving percutaneous/diagnostic and endoscopic/
transorifice (via natural or artificial opening) irrigation,
measurement and monitoring of structures, pressures and flow that
generally would not require the resources of an operating room and can
be performed at the bedside. These 15 ICD-10-PCS codes are shown in the
table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
3E1N38X................... Irrigation of male reproductive using
irrigating substance, percutaneous
approach, diagnostic.
3E1N38Z................... Irrigation of male reproductive using
irrigating substance, percutaneous
approach.
3E1N78X................... Irrigation of male reproductive using
irrigating substance, via natural or
artificial opening, diagnostic.
3E1N78Z................... Irrigation of male reproductive using
irrigating substance, via natural or
artificial opening.
3E1N88X................... Irrigation of male reproductive using
irrigating substance, via natural or
artificial opening endoscopic, diagnostic.
3E1N88Z................... Irrigation of male reproductive using
irrigating substance, via natural or
artificial opening endoscopic.
4A0635Z................... Measurement of lymphatic flow, percutaneous
approach.
4A063BZ................... Measurement of lymphatic pressure,
percutaneous approach.
4A0C35Z................... Measurement of biliary flow, percutaneous
approach.
4A0C3BZ................... Measurement of biliary pressure,
percutaneous approach.
4A0C75Z................... Measurement of biliary flow, via natural or
artificial opening.
4A0C7BZ................... Measurement of biliary pressure, via natural
or artificial opening.
4A0C85Z................... Measurement of biliary flow, via natural or
artificial opening endoscopic.
4A1635Z................... Monitoring of lymphatic flow, percutaneous
approach.
4A163BZ................... Monitoring of lymphatic pressure,
percutaneous approach.
------------------------------------------------------------------------
[[Page 38082]]
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19861 through 19862), we proposed that the 15
ICD-10-PCS procedure codes shown in the table above be designated as
non-O.R. procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the 15 ICD-10-PCS procedure codes that describe
procedures involving percutaneous/diagnostic and endoscopic/
transorifice (via natural or artificial opening) irrigation,
measurement and monitoring of structures, pressures and flow.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the 15 ICD-10-PCS
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(44) Imaging
One commenter identified six ICD-10-PCS procedure codes that
describe procedures involving imaging with contrast of hepatobiliary
system body parts that generally would not require the resources of an
operating room and can be performed at the bedside. These six ICD-10-
PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
BF030ZZ................... Plain radiography of gallbladder and bile
ducts using high osmolar contrast.
BF031ZZ................... Plain radiography of gallbladder and bile
ducts using low osmolar contrast.
BF03YZZ................... Plain radiography of gallbladder and bile
ducts using other contrast.
BF0C0ZZ................... Plain radiography of hepatobiliary system,
all using high osmolar contrast.
BF0C1ZZ................... Plain radiography of hepatobiliary system,
all using low osmolar contrast.
BF0CYZZ................... Plain radiography of hepatobiliary system,
all using other contrast.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19862), we proposed that the six ICD-10-PCS
procedure codes shown in the table above be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the six ICD-10-PCS procedure codes that describe imaging
with contrast of hepatobiliary system body parts.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the six ICD-10-PCS
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(45) Prosthetics
One commenter identified five ICD-10-PCS procedure codes that
describe procedures involving the fitting and use of prosthetics and
assistive devices that would not require the resources of an operating
room. These five ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
F0DZ8ZZ................... Prosthesis device fitting.
F0DZ9EZ................... Assistive, adaptive, supportive or
protective devices device fitting using
orthosis.
F0DZ9FZ................... Assistive, adaptive, supportive or
protective devices device fitting using
assistive, adaptive, supportive or
protective equipment.
F0DZ9UZ................... Assistive, adaptive, supportive or
protective devices device fitting using
prosthesis.
F0DZ9ZZ................... Assistive, adaptive, supportive or
protective devices device fitting.
------------------------------------------------------------------------
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19862), we proposed that the five ICD-10-PCS
procedure codes shown in the table above be designated as non-O.R.
procedures. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of the five ICD-10-PCS procedure codes that describe the
fitting and use of prosthetics and assistive devices.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of the five ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to
non-O.R. procedures, effective October 1, 2017.
b. Revision of Neurostimulator Generator
We received a request to review three ICD-10-PCS procedure codes
that describe procedures for revision of a neurostimulator generator
that are currently designated as O.R. procedures and assigned to MS-
DRGs 252, 253 and 254 (Other Vascular Procedures with MCC, with CC and
without CC/MCC, respectively). The three codes are 0JWT0MZ (Revision of
stimulator generator in trunk subcutaneous tissue and fascia, open
approach), 0JWT3MZ (Revision of stimulator generator in trunk
subcutaneous tissue and fascia, percutaneous approach), and 0JWTXMZ
(Revision of stimulator generator in trunk subcutaneous tissue and
fascia, external approach).
The requester expressed concern with the MS-DRG assignments and
noted that although these codes are used to report revision of a
carotid sinus stimulator pulse generator and appropriately assigned to
MS-DRGs 252, 253 and 254 in MDC 5 (Diseases and Disorders of the
Circulatory System), they also are very frequently used for the
revision of the more common (for example, gastric, intracranial, sacral
and spinal) neurostimulator generators that would generally not require
the resources of an operating room.
The requestor also stated that the indication for revision of a
neurostimulator generator is typically due to a complication, which
would be reflected in a complication code such as ICD-10-CM diagnosis
code T85.734A (Infection and inflammatory reaction
[[Page 38083]]
due to implanted electronic neurostimulator, generator, initial
encounter) or T85.890A (Other specified complication of nervous system
prosthetic devices, implants and grafts, initial encounter). Because
both of these diagnosis codes are assigned to MDC 1 (Diseases and
Disorders of the Nervous System), when either code is reported in
combination with one of the three procedure codes that describe
revision of neurostimulator generator codes (currently assigned to MDC
5 (Diseases and Disorders of the Circulatory System)), the resulting
MS-DRG assignment is to MS-DRGs 981, 982 and 983 (Extensive O.R.
Procedure Unrelated to Principal Diagnosis with MCC, with CC and
without CC/MCC, respectively).
The requestor presented the following three options for
consideration.
Reclassify the ICD-10-PCS procedure codes from O.R.
Procedures to non-O.R. procedures that affect MS-DRG assignment only in
MDC 5. The requestor stated that, under this option, the procedure
codes would continue to appropriately group to MDC 5 when representing
cases involving carotid sinus stimulators and the other types of
neurostimulator cases would appropriately group to medical MS-DRGs.
Add the ICD-10-PCS procedure codes to MDC 1, such as to
MS-DRGs 040, 041 and 042 (Peripheral, Cranial Nerve and Other Nervous
System Procedures with MCC, with CC or Peripheral Neurostimulator and
without CC/MCC, respectively) under MDC 1. The requestor stated that
this option would resolve the inconsistency between a revision of a
carotid sinus stimulator generator being classified as an O.R.
procedure, while the other comparable procedures involving a revision
of a regular neurostimulator generator are not. The requestor also
stated that this option would preclude cases being assigned to MS-DRGs
981 through 983.
Stop classifying the ICD-10-PCS procedure codes as O.R.
procedures entirely. The requestor stated that, under this option, all
cases would then group to medical MS-DRGs, regardless of the type of
neurostimulator generator.
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19862 through 19863), we analyzed claims data for the three revision of
neurostimulator generator procedure codes from the December 2016 update
of the FY 2016 MedPAR file and identified cases under MDC 1 in MS-DRGs
025, 026, and 027 (Craniotomy and Endovascular Intracranial Procedures
with MCC, with CC and without CC/MCC, respectively); MS-DRGs 029 and
030 (Spinal Procedures with CC or Neurostimulators and Spinal
Procedures without CC/MCC, respectively); and MS-DRGs 041 and 042
(Peripheral, Cranial Nerve and Other Nervous System Procedures with CC
or Peripheral Neurostimulator and without CC/MCC, respectively). We
also identified cases in MS-DRGs 982 and 983 (Extensive O.R. Procedure
Unrelated to Principal Diagnosis with CC and without CC/MCC,
respectively). Lastly, we identified cases under MDC 5 in MS-DRGs 252,
253 and 254 (Other Vascular Procedures with MCC, with CC and without
CC/MCC, respectively). Our findings are shown in the table below.
MS-DRGs for Revision of Neurostimulator Generator
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 025--All cases........................................... 18,442 9.1 $29,984
MS-DRG 025--Cases with revision of neurostimulator generator.... 1 12.0 73,716
MS-DRG 026--All cases........................................... 8,415 5.6 21,557
MS-DRG 026--Cases with revision of neurostimulator generator.... 1 6.0 4,537
MS-DRG 027--All cases........................................... 10,089 2.9 17,320
MS-DRG 027--Cases with revision of neurostimulator generator.... 4 1.8 13,906
MS-DRG 029--All cases........................................... 3,192 5.9 23,145
MS-DRG 029--Cases with revision of neurostimulator generator.... 6 3.5 32,799
MS-DRG 030--All cases........................................... 1,933 2.9 14,901
MS-DRG 030--Cases with revision of neurostimulator generator.... 11 2.2 18,294
MS-DRG 041--All cases........................................... 5,154 5.5 16,633
MS-DRG 041--Cases with revision of neurostimulator generator.... 1 1.0 14,145
MS-DRG 042--All cases........................................... 2,099 3.2 13,725
MS-DRG 042--Cases with revision of neurostimulator generator.... 2 2.0 28,587
MS-DRG 982--All cases........................................... 15,216 6.6 17,341
MS-DRG 982--Cases with revision of neurostimulator generator.... 11 3.0 15,336
MS-DRG 983--All cases........................................... 3,508 3.2 11,627
MS-DRG 983--Cases with revision of neurostimulator generator.... 9 4.2 19,951
MS-DRG 252--All cases........................................... 33,817 7.6 23,384
MS-DRG 252--Cases with revision of neurostimulator generator.... 1 7.0 18,740
MS-DRG 253--All cases........................................... 27,456 5.5 18,519
MS-DRG 253--Cases with revision of neurostimulator generator.... 7 2.4 19,078
MS-DRG 254--All cases........................................... 13,036 2.9 13,253
MS-DRG 254--Cases with revision of neurostimulator generator.... 3 3.0 11,981
----------------------------------------------------------------------------------------------------------------
As shown in the table above, the overall volume of cases reporting
revision of neurostimulator generator is low, with a total of only 57
cases found across all of the MS-DRGs reviewed. The average length of
stay for these cases reporting revision of neurostimulator generators
is, in most cases, consistent with the average length of stay for all
cases in the respective MS-DRG, with the majority having an average
length of stay below the average length of stay of all cases in the
respective MS-DRG. Finally, the average costs for cases reporting
revision of neurostimulator generator reflect a wide range, with a low
of $4,537 in MS-DRG 026 to a high of $73,716 in MS-DRG 025. It is clear
that, for MS-DRG 025 where the average costs of all cases were $29,984
and the average costs of the one case reporting revision of a
neurostimulator generator was $73,716, this is an atypical case. It is
also clear from the data that there were other procedures reported on
the claims where a procedure code for a revision of a neurostimulator
generator was assigned due to the various MS-DRG assignments.
[[Page 38084]]
We stated in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19862
and 19863) that after review of the claims data and discussion with our
clinical advisors, we agreed with and supported the requestor's first
option--to reclassify the three ICD-10-PCS procedure codes for revision
of neurostimulator generators from O.R. procedures to non-O.R.
procedures that affect the assignment for MS-DRGs 252, 253 and 254 to
account for the subset of patients undergoing revision of a carotid
sinus neurostimulator generator specifically. In cases where one of the
more common (for example, gastric, intracranial, sacral and spinal)
neurostimulator generators are undergoing revision, in the absence of
another O.R. procedure, these cases would group to a medical MS-DRG. We
invited public comments on our proposal.
Comment: Commenters supported the proposal to reclassify the
procedures described by ICD-10-PCS procedure codes 0JWT0MZ, 0JWT3MZ,
and 0JWTXMZ from O.R. procedures to non-O.R. procedures that affect the
assignment for MS-DRGs 252, 253 and 254. One commenter agreed with
reclassifying procedures described by ICD-10-PCS procedure codes
0JWT3MZ and 0JWTXMZ from O.R. procedures to non-O.R. procedures.
However, this commenter disagreed with reclassifying the procedure
described by procedure code 0JWT0MZ and stated that the procedure
utilizes an open approach and may require an O.R. setting. The
commenter suggested that the procedure code should be retained as an
O.R. designation to group to surgical MS-DRGs.
Response: We appreciate the commenters' support. In response to the
commenter who disagreed with reclassifying the procedure described by
procedure code 0JWT0MZ from an O.R. procedure to a non-O.R. procedure,
we note that, as discussed earlier, the three ICD-10-PCS procedure
codes would be classified as non-O.R. procedures that affect MS-DRGs
252, 253, and 254 for revision of carotid sinus neurostimulator
generators. We also noted that the volume of cases reporting revision
of neurostimulator generator is low, with a total of only 57 cases
found across all of the MS-DRGs reviewed. The initial requestor pointed
out that these three procedure codes are very frequently used for the
revision of the more common (for example, gastric, intracranial,
sacral, and spinal) neurostimulator generators that would generally not
require the resources of an operating room. Therefore, we believe it is
appropriate to classify the three procedure codes as non-O.R.
procedures affecting MS-DRGs 252, 253, and 254 specifically.
After consideration of the public comments we received, we are
finalizing our proposal to reclassify the procedures described by ICD-
10-PCS procedure codes 0JWT0MZ (Revision of stimulator generator in
trunk subcutaneous tissue and fascia, open approach), 0JWT3MZ (Revision
of stimulator generator in trunk subcutaneous tissue and fascia,
percutaneous approach), and 0JWTXMZ (Revision of stimulator generator
in trunk subcutaneous tissue and fascia, external approach) from O.R.
procedures to non-O.R. procedures that affect the assignment for MS-
DRGs 252, 253, and 254 to account for the subset of patients undergoing
revision of a carotid sinus neurostimulator generator, effective
October 1, 2017.
c. External Repair of Hymen
We received a request to examine ICD-10-PCS procedure code 0UQKXZZ
(Repair Hymen, External Approach). This procedure code is currently
designated as an O.R. procedure in MS-DRGs 746 and 747 (Vagina, Cervix
and Vulva Procedures with CC/MCC and without CC/MCC, respectively)
under MDC 13. The requestor provided examples and expressed concern
that procedure code 0UQKXZZ was assigned to MS-DRG 987 (Non-Extensive
O.R. Procedures Unrelated to Principal Diagnosis with MCC) when
reported on a maternal delivery claim. The requestor noted that when a
similar code was reported with an external approach (for example,
procedure code 0UQMXZZ (Repair vulva, external approach)), the case was
appropriately assigned to MS-DRG 774 (Vaginal Delivery with
Complicating Diagnosis). The requestor stated that the physician
documentation was simply more specific to the location of the repair
and this should not affect assignment to one of the MS-DRGs for vaginal
delivery.
As we discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19863 through 19864), we reviewed claims data involving the examples
provided by the requestor involving ICD-10-PCS procedure code 0UQKXZZ
(Repair hymen, external approach). Our clinical advisors agreed with
the requestor that reporting of this procedure code should not affect
assignment to one of the MS-DRGs for vaginal delivery. We stated that,
as discussed in section II.F.15.a. of the preamble of the proposed
rule, we were proposing to change the designation for a number of
procedure codes from O.R. procedures to non-O.R. procedures. Included
in that proposal were ICD-10-PCS procedure codes 0UQGXZZ (Repair
vagina, external approach) and 0UQMXZZ (Repair vulva, external
approach). Consistent with the change in designation for these
procedure codes, we also proposed to designate ICD-10-PCS procedure
code 0UQKXZZ (Repair hymen, external approach) as a non-O.R. procedure.
The procedure by itself would generally not require the resources of an
operating room. If the procedure is performed following a vaginal
delivery, it is the vaginal delivery procedure code 10E0XZZ (Delivery
of products of conception) that determines the MS-DRG assignment
because this code is designated as a non-O.R. procedure affecting the
MS-DRG.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19864), we proposed to change the designation of ICD-10-PCS procedure
code 0UQKXZZ (Repair hymen, external approach) to a non-O.R. procedure.
We stated that this redesignation will enable more appropriate MS-DRG
assignment for these cases by eliminating erroneous assignment to MS-
DRGs 987 through 989. We invited public comments on our proposal.
Comment: Commenters supported the proposal to change the
designation of ICD-10-PCS procedure code 0UQKXZZ from an O.R. procedure
to a non-O.R. procedure.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to change the designation of ICD-10-PCS
procedure code 0UQKXZZ (Repair hymen, external approach) from an O.R.
procedure to a non-O.R. procedure, effective October 1, 2017.
d. Non-O.R. Procedures in MDC 17 (Myeloproliferative Diseases and
Disorders, Poorly Differentiated Neoplasms)
Under MDC 17 (Myeloproliferative Diseases and Disorders, Poorly
Differentiated Neoplasms), there are 11 surgical MS-DRGs. Of these 11
surgical MS-DRGs, there are 5 MS-DRGs containing GROUPER logic that
includes ICD-10-PCS procedure codes designated as O.R. procedures as
well as non-O.R. procedures that affect the MS-DRG. These five MS-DRGs
are MS-DRGs 823, 824, and 825 (Lymphoma and Non-Acute Leukemia with
Other O.R. Procedure with MCC, with CC and without CC/MCC,
respectively) and MS-DRGs 829 and 830 (Myeloproliferative Disorders or
Poorly Differentiated Neoplasms with Other O.R. Procedure with CC/MCC
and without CC/MCC, respectively). We
[[Page 38085]]
refer the reader to the ICD-10 Version 34 MS-DRG Definitions Manual
which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for the
complete list of ICD-10-PCS procedure codes assigned to these five MS-
DRGs under MDC 17.
We reviewed the list of 244 ICD-10-PCS non-O.R. procedure codes
currently assigned to these 5 MS-DRGs. Of these 244 procedure codes, we
determined that 55 of the procedure codes do not warrant being
designated as non-O.R. procedures that affect these MS-DRGs because
they describe procedures that would generally not require a greater
intensity of resources for facilities to manage the cases included in
the definition (logic) of these MS-DRGs. Therefore, in the FY 2018
IPPS/LTCH PPS proposed rule (82 FR 19864), we proposed that the 55 ICD-
10-PCS procedure codes listed in Table 6P.3c. associated with the
proposed rule (which is available via the Internet on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be removed from the logic for MS-DRGs
823, 824, 825, 829, and 830 as non-O.R. procedures affecting the MS-
DRG. We also proposed to revise the titles for these five MS-DRGs by
deleting the reference to ``O.R.'' in the title. Specifically, we
proposed to revise the titles for MS-DRGs 823, 824, and 825 to
``Lymphoma and Non-Acute Leukemia with Other Procedure with MCC, with
CC and without CC/MCC'', respectively, and we proposed to revise the
titles for MS-DRGs 829 and 830 to ``Myeloproliferative Disorders or
Poorly Differentiated Neoplasms with Other Procedure with CC/MCC and
without CC/MCC'', respectively. We invited public comments on our
proposals.
Comment: Commenters supported the proposal to remove the 55 ICD-10-
PCS procedure codes listed in Table 6P.3c. associated with the proposed
rule from the logic for MS-DRGs 823, 824, 825, 829, and 830 as non-O.R.
procedures affecting the MS-DRG. Commenters also supported the proposal
to revise the titles for MS-DRGs 823, 824, and 825, as well as for MS-
DRGs 829 and 830.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to remove the 55 ICD-10-PCS procedure codes
listed in Table 6P.3c. associated with the proposed rule and this final
rule (which is available via the Internet on the CMS Web site at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from the logic for MS-DRGs 823, 824, 825,
829, and 830 as non-O.R. procedures affecting the MS-DRG, effective
October 1, 2017. We also are finalizing our proposal to revise the
titles for MS-DRGs 823, 824, and 825 to ``Lymphoma and Non-Acute
Leukemia with Other Procedure with MCC, with CC and without CC/MCC'',
respectively, and to revise the titles for MS-DRGs 829 and 830 to
``Myeloproliferative Disorders or Poorly Differentiated Neoplasms with
Other Procedure with CC/MCC and without CC/MCC'', respectively,
effective October 1, 2017.
G. Recalibration of the FY 2018 MS-DRG Relative Weights
1. Data Sources for Developing the Relative Weights
In developing the FY 2018 system of weights, in the FY 2018 IPPS/
LTCH PPS proposed rule (82 FR 19864), we proposed to use two data
sources: Claims data and cost report data. As in previous years, the
claims data source is the MedPAR file. This file is based on fully
coded diagnostic and procedure data for all Medicare inpatient hospital
bills. The FY 2016 MedPAR data used in this final rule include
discharges occurring on October 1, 2015, through September 30, 2016,
based on bills received by CMS through March 31, 2017, 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
2016 MedPAR file used in calculating the relative weights includes data
for approximately 9,647,256 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 31, 2017 update of the FY 2016 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 2018 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. We note that the FY 2018
relative weights are based on the ICD-10-CM diagnoses and ICD-10-PCS
procedure codes from the FY 2016 MedPAR claims data, grouped through
the ICD-10 version of the FY 2018 GROUPER (Version 35).
The second data source used in the cost-based relative weighting
methodology is the Medicare cost report data files from the HCRIS.
Normally, we use the HCRIS dataset that is 3 years prior to the IPPS
fiscal year. Specifically, we are using cost report data from the March
31, 2017 update of the FY 2015 HCRIS for calculating the final FY 2018
cost-based relative weights.
2. Methodology for Calculation of the Relative Weights
As we explain in section II.E.2. of the preamble of this final
rule, we are calculating the FY 2018 relative weights based on 19 CCRs,
as we did for FY 2017. The methodology we used to calculate the FY 2018
MS-DRG cost-based relative weights based on claims data in the FY 2016
MedPAR file and data from the FY 2015 Medicare cost reports is as
follows:
To the extent possible, all the claims were regrouped
using the FY 2018 MS-DRG classifications discussed in sections II.B.
and II.F. 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 2016 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
[[Page 38086]]
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.
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 92.2 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 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 POA indicator 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 (that is, as if hospitals were not
participating in those models under the BPCI initiative). The BPCI
initiative, developed under the authority of section 3021 of the
Affordable Care Act (codified at section 1115A of the Act), is
comprised of four broadly defined models of care, which link payments
for multiple services beneficiaries receive during an episode of care.
Under the BPCI initiative, organizations enter into payment
arrangements that include financial and performance accountability for
episodes of care. For FY 2018, as we proposed, we are continuing to
include all applicable data from subsection (d) hospitals participating
in BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting
calculations. 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 Web
site at: http://innovation.cms.gov/initiatives/Bundled-Payments/index.html and to section IV.H.4. of the preamble of the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53341 through 53343).
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 2015 cost report data.
The 19 cost centers that we used in the relative weight calculation
are shown in the following table. The table shows the lines on the cost
report and the corresponding revenue codes that we used to create the
19 national cost center CCRs. In the FY 2018 IPPS/LTCH PPS proposed
rule, we stated that if stakeholders have comments about the groupings
in this table, we may consider those 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.
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3. Development of National Average CCRs
We developed the national average CCRs as follows:
Using the FY 2015 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. We then created CCRs for each provider for each cost
center (see prior table 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. We then 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
[[Page 38103]]
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 FY 2018 cost-based relative weights were then normalized by an
adjustment factor of 1.737382 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.
The 19 national average CCRs for FY 2018 are as follows:
------------------------------------------------------------------------
Group CCR
------------------------------------------------------------------------
Routine Days............................................ 0.458
Intensive Days.......................................... 0.373
Drugs................................................... 0.194
Supplies & Equipment.................................... 0.297
Implantable Devices..................................... 0.332
Therapy Services........................................ 0.321
Laboratory.............................................. 0.120
Operating Room.......................................... 0.191
Cardiology.............................................. 0.112
Cardiac Catheterization................................. 0.117
Radiology............................................... 0.153
MRIs.................................................... 0.079
CT Scans................................................ 0.038
Emergency Room.......................................... 0.171
Blood and Blood Products................................ 0.322
Other Services.......................................... 0.365
Labor & Delivery........................................ 0.412
Inhalation Therapy...................................... 0.169
Anesthesia.............................................. 0.089
------------------------------------------------------------------------
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. In the FY 2018 IPPS/LTCH PPS proposed
rule, we proposed to use that same case threshold in recalibrating the
MS-DRG relative weights for FY 2018. Using data from the March 2017
update of the FY 2016 MedPAR file, there are 7 MS-DRGs that contain
fewer than 10 cases. We note that two MS-DRGs that were included as
low-volume MS-DRGs in the proposed rule, MS-DRG 016 (Autologous Bone
Marrow Transplant with CC/MCC) and MS-DRG 017 (Autologous Bone Marrow
Transplant without CC/MCC), are no longer included in this list
because, as discussed in section II.F.17.a. of the preamble of this
final rule, we are maintaining the current Pre-MDC logic for the
procedures assigned to those MS-DRGs in FY 2018. For FY 2018, 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 FY 2017
relative weights by the percentage change in the average weight of the
cases in other MS-DRGs. The crosswalk table based on data from the
December 2016 update of the FY 2016 MedPAR file was included in the
proposed rule. We invited public comments on our proposals.
Comment: Some commenters requested a transition period for
substantial reductions in relative weights in order to facilitate
payment stability. Specifically, some commenters asked CMS to establish
a cap of 10 percent for the degree to which a payment weight may
decline in FY 2018 relative to FY 2017. Other commenters also suggested
the possibility of a phase-in or multi-year transition period in cases
of substantial fluctuation of payment rates. Commenters suggested that
large decreases appear to result from the transition from ICD-9 coding
to ICD-10 coding in the claims data used to establish the relative
weights. These commenters also expressed concern that the proposed
weights for MS-DRGs with significant reductions in relative weights
would be too low to cover the costs of caring for patients, while other
commenters expressed concern about access to such services.
Commenters also indicated that the reductions to MS-DRG relative
weights resulting from the transition from ICD-9 coding to ICD-10
coding are in contrast to the goal of ICD-10 to accurately replicate
ICD-9 assignments and avoid unintended payment redistribution. One
commenter asserted that because IPPS is a prospective payment system,
the future claims data should result in an upward adjustment to these
MS-DRGs for FY 2019. The commenter believed that hospitals should not
be penalized as significantly while the FY 2018 rates are in effect.
Response: In considering these public comments, we examined the MS-
DRGs with proposed relative weights that were significantly lower than
the FY 2017 relative weights. While we do not believe it is normally
appropriate to address relative weight fluctuations that appear to be
driven by changes in the underlying data, in this particular
circumstance, we share the commenters' concern that, for a limited
number of MS-DRGs, this may be more extensively related to the
implementation of ICD-10 coding and believe this issue requires further
analysis. In the interim, in response to these comments, we are
adopting a temporary one-time measure for FY 2018 for MS-DRGs where the
relative weight would have declined by more than 20 percent from the FY
2017 relative weight. We believe this policy is consistent with our
general authority to assign and update appropriate weighting factors
under sections 1886(d)(4)(B) and (C) of the Act. Specifically, for
these MS-DRGs, the relative weight will be set at 80 percent of the FY
2017 final relative weight, and we will revisit this issue in the FY
2019 rulemaking when additional ICD-10 claims data become available. We
believe that 20 percent strikes an appropriate balance between
addressing concerns that the relative weight changes for some MS-DRGs
may be more extensively related to the implementation of ICD-10 and the
fact that historically we occasionally have had appropriate relative
weight changes of this magnitude. Further analysis and data will enable
us to better determine the appropriateness of these changes, given the
unique circumstances of the ICD-10 implementation.
After consideration of the public comments we received, we are
finalizing our proposal, with the modification for recalibrating the
MS-DRG relative weights for FY 2018 at 80 percent of the FY 2017 final
relative weights, for those MS-DRGs where the relative weight would
have declined by more than 20 percent from the FY 2017 relative weight.
The crosswalk table for the low-volume MS-DRGs is shown below.
[[Page 38104]]
------------------------------------------------------------------------
Low-volume MS-DRG MS-DRG title Crosswalk to MS-DRG
------------------------------------------------------------------------
789................... Neonates, Died or Final FY 2017 relative
Transferred to weight (adjusted by
Another Acute Care percent change in
Facility. average weight of the
cases in other MS-DRGs).
790................... Extreme Immaturity or Final FY 2017 relative
Respiratory Distress weight (adjusted by
Syndrome, Neonate. percent change in
average weight of the
cases in other MS-DRGs).
791................... Prematurity with Final FY 2017 relative
Major Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
792................... Prematurity without Final FY 2017 relative
Major Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
793................... Full-Term Neonate Final FY 2017 relative
with Major Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
794................... Neonate with Other Final FY 2017 relative
Significant Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
795................... Normal Newborn....... Final FY 2017 relative
weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
------------------------------------------------------------------------
H. Add-On Payments for New Services and Technologies for FY 2018
1. Background
Sections 1886(d)(5)(K) and (L) of the Act establish a process of
identifying and ensuring adequate payment for 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. We note that,
beginning with discharges occurring in FY 2008, CMS transitioned from
CMS-DRGs to MS-DRGs.
The regulations at 42 CFR 412.87 implement these provisions and
specify 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. Below 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 a complete 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).
Under the first criterion, as reflected in Sec. 412.87(b)(2), a
specific medical service or technology will be considered ``new'' for
purposes of new medical service or technology add-on payments until
such time as Medicare data are available to fully reflect the cost of
the technology in the MS-DRG weights through recalibration. 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 technology 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 a technology 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: (1) Whether a product uses the same or a similar
mechanism of action to achieve a therapeutic outcome; (2) whether a
product is assigned to the same or a different MS-DRG; and (3) whether
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).
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 for
cases involving the new technology exceed certain threshold amounts.
Table 10 that was released with the FY 2017 IPPS/LTCH PPS final rule
contains the final thresholds that we used to evaluate applications for
new medical service and new technology add-on payments for FY 2018. We
refer readers to the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Tables.html to download and
view Table 10.
In the September 7, 2001 final rule that established the new
technology add-on payment regulations (66 FR 46917), we discussed the
issue of whether the Health Insurance Portability and Accountability
Act (HIPAA) Privacy Rule at 45 CFR parts 160 and 164 applies to claims
information that providers submit with applications for new medical
service and new technology add-on payments. We refer readers to the FY
2012 IPPS/LTCH PPS final rule (76 FR 51573) for complete information on
this issue.
Under the third criterion, Sec. 412.87(b)(1) of our existing
regulations provides that a new technology is an appropriate candidate
for an additional payment when it represents an advance that
substantially improves, relative to technologies previously available,
the diagnosis or treatment of Medicare beneficiaries. For example, a
new technology represents a substantial
[[Page 38105]]
clinical improvement when it reduces mortality, decreases the number of
hospitalizations or physician visits, or reduces recovery time compared
to the technologies previously available. (We refer readers to the
September 7, 2001 final rule for a more detailed discussion of this
criterion (66 FR 46902).)
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. Under Sec.
412.88, if the costs of the discharge (determined by applying 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), Medicare will make an add-on payment equal to the lesser of:
(1) 50 percent of the estimated costs of the new technology or medical
service (if the estimated costs for the case including the new
technology or medical service exceed Medicare's payment); or (2) 50
percent of the difference between the full DRG payment and the
hospital's estimated cost for the case. Unless the discharge qualifies
for an outlier payment, the additional Medicare payment is limited to
the full MS-DRG payment plus 50 percent of the estimated costs of the
new technology or new medical service.
Section 503(d)(2) of Public Law 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 Public Law 108-173,
add-on payments for new medical services or technologies for FY 2005
and later years have not been subjected to budget neutrality.
In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we
modified our regulations 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 amended Sec. 412.87(c) to specify that all applicants
for new technology add-on payments must have FDA approval or clearance
for their new medical service or technology by July 1 of each year
prior to the beginning of the fiscal year that the application is being
considered.
The Council on Technology and Innovation (CTI) at CMS oversees the
agency's cross-cutting priority on coordinating coverage, coding and
payment processes for Medicare with respect to new technologies and
procedures, including new drug therapies, as well as promoting the
exchange of information on new technologies and medical services
between CMS and other entities. The CTI, composed of senior CMS staff
and clinicians, was established under section 942(a) of Public Law 108-
173. The Council is co-chaired by the Director of the Center for
Clinical Standards and Quality (CCSQ) and the Director of the Center
for Medicare (CM), who is also designated as the CTI's Executive
Coordinator.
The specific processes for coverage, coding, and payment are
implemented by CM, CCSQ, and the local Medicare Administrative
Contractors (MACs) (in the case of local coverage and payment
decisions). The CTI supplements, rather than replaces, these processes
by working to assure that all of these activities reflect the agency-
wide priority to promote high-quality, innovative care. At the same
time, the CTI also works to streamline, accelerate, and improve
coordination of these processes to ensure that they remain up to date
as new issues arise. To achieve its goals, the CTI works to streamline
and create a more transparent coding and payment process, improve the
quality of medical decisions, and speed patient access to effective new
treatments. It is also dedicated to supporting better decisions by
patients and doctors in using Medicare-covered services through the
promotion of better evidence development, which is critical for
improving the quality of care for Medicare beneficiaries.
To improve the understanding of CMS' processes for coverage,
coding, and payment and how to access them, the CTI has developed an
``Innovator's Guide'' to these processes. The intent is to consolidate
this information, much of which is already available in a variety of
CMS documents and in various places on the CMS Web site, in a user-
friendly format. This guide was published in 2010 and is available on
the CMS Web site at: http://www.cms.gov/CouncilonTechInnov/Downloads/InnovatorsGuide5_10_10.pdf.
As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we
invite any product developers or manufacturers of new medical services
or technologies to contact the agency early in the process of product
development if they have questions or concerns about the evidence that
would be needed later in the development process for the agency's
coverage decisions for Medicare.
The CTI aims to provide useful information on its activities and
initiatives to stakeholders, including Medicare beneficiaries,
advocates, medical product manufacturers, providers, and health policy
experts. Stakeholders with further questions about Medicare's coverage,
coding, and payment processes, or who want further guidance about how
they can navigate these processes, can contact the CTI at
[email protected].
We note that applicants for add-on payments for new medical
services or technologies for FY 2019 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, along with a significant
sample of data to demonstrate that the medical service or technology
meets the high-cost threshold. Complete application information, along
with final deadlines for submitting a full application, will be posted
as it becomes available on the CMS Web site at: http://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 2019, the CMS Web site also will post the tracking
forms completed by each applicant.
2. Public Input Before Publication of a Notice of Proposed Rulemaking
on Add-On Payments
Section 1886(d)(5)(K)(viii) of the Act, as amended by section
503(b)(2) of Public Law 108-173, 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 or advancement. The process for evaluating new
medical service and technology applications requires the Secretary to--
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
[[Page 38106]]
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; and
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 2018 prior
to publication of the FY 2018 IPPS/LTCH PPS proposed rule, we published
a notice in the Federal Register on November 9, 2016 (81 FR 78814), and
held a town hall meeting at the CMS Headquarters Office in Baltimore,
MD, on February 14, 2017. 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
each of the FY 2018 new medical service and technology add-on payment
applications before the publication of the FY 2018 IPPS/LTCH PPS
proposed rule.
Approximately 66 individuals registered to attend the town hall
meeting in person, while additional individuals listened over an open
telephone line. We also live-streamed the town hall meeting and posted
the town hall on the CMS YouTube Web page at: https://www.youtube.com/watch?v=9niqfxXe4oA&t=217s. We considered each applicant's presentation
made at the town hall meeting, as well as written comments submitted on
the applications that were received by the due date of February 24,
2017, in our evaluation of the new technology add-on payment
applications for FY 2018 in the FY 2018 IPPS/LTCH PPS proposed rule.
In response to the published notice and the February 14, 2017 New
Technology Town Hall meeting, we received written comments regarding
the applications for FY 2018 new technology add-on payments. We note
that we do not summarize comments that are unrelated to the
``substantial clinical improvement'' criterion. As explained above and
in the Federal Register notice announcing the New Technology Town Hall
meeting (81 FR78814 through 78816), the purpose of the meeting was
specifically to discuss the substantial clinical improvement criterion
in regard to pending new technology add-on payment applications for FY
2018. Therefore, we did not summarize those written comments in the
proposed rule. As we did in the proposed rule, we are summarizing below
a general comment that we received prior to the issuance of the
proposed rule that did not relate to a specific application for FY 2018
new technology add-on payments. In addition, as we did in section
II.H.5. of the preamble of the proposed rule, we are summarizing
comments regarding individual applications, or, if applicable,
indicating that there were no comments received in response to the New
Technology Town Hall meeting notice, at the end of each discussion of
the individual applications.
Comment: One commenter recommended that CMS: (1) Prohibit local
MACs from denying coverage and add-on payments for new medical services
or technologies approved by the Secretary; and (2) broaden the criteria
applied in making substantial clinical improvement determinations to
require, in addition to existing criteria, that the Secretary consider
whether the new technology or medical service meets one or more of the
following criteria: (a) Results in a reduction of the length of a
hospital stay; (b) improves patient quality of life; (c) creates long-
term clinical efficiencies in treatment; (d) addresses patient-centered
objectives as defined by the Secretary; or (e) meets such other
criteria as the Secretary may specify.
Response: We appreciate the commenter's comments and will consider
them in future rulemaking.
3. ICD-10-PCS Section ``X'' Codes for Certain New Medical Services and
Technologies
As discussed in the FY 2016 IPPS/LTCH 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
Web site at: http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html, 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. Revision of the Reference to an ICD-9-CM Code in Sec. 412.87(b)(2)
of the Regulations
As we discussed in the FY 2018 IPS/LTCH PPS proposed rule (82 FR
19871), the existing regulations under Sec. 412.87(b)(2) state that a
medical service or technology may be considered new within 2 or 3 years
after the point at which data begin to become available reflecting the
ICD-9-CM 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). After CMS has recalibrated the
DRGs, based on available data, to reflect the costs of an otherwise new
medical service or technology, the medical service or technology will
no longer be considered ``new'' under the criterion of this section.
As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49454),
HIPAA covered entities are required, as of October 1, 2015, to use the
ICD-10 coding system (ICD-10-PCS codes for procedures and ICD-10-CM
codes for diagnoses), instead of the ICD-9-CM coding system, to report
diagnoses and procedures for Medicare hospital inpatient services
provided to Medicare beneficiaries as classified under the MS-DRG
system and paid for under the IPPS. The language in Sec. 412.87(b)(2)
only references an ``ICD-9-CM code.'' Therefore, in the FY 2018 IPPS/
LTCH PPS proposed rule (82 FR 19871), we proposed to revise the
regulations at Sec. 412.87(b)(2) to replace the term ``ICD-9-CM code''
with the term ``inpatient hospital code,'' as defined in section
1886(d)(5)(K)(iii) of the Act. Section 1886(d)(5)(K)(iii) of the Act
defines an ``inpatient hospital code'' as any code that is used with
respect to inpatient hospital services for which payment may be made
under this subsection of the Act and includes an alphanumeric code
issued under the International Classification of Diseases, 9th
Revision, Clinical Modification (``ICD-9-CM'')
[[Page 38107]]
and its subsequent revisions. We invited public comments on our
proposal.
We did not receive any public comments on this proposal. Therefore,
we are finalizing our proposal to revise the regulations at Sec.
412.87(b)(2) to replace the term ``ICD-9-CM code'' with the term
``inpatient hospital code'', as defined in section 1886(d)(5)(K)(iii)
of the Act.
5. FY 2018 Status of Technologies Approved for FY 2017 Add-On Payments
a. CardioMEMSTM HF (Heart Failure) Monitoring System
CardioMEMS, Inc. submitted an application for new technology add-on
payments for FY 2015 for the CardioMEMSTM HF (Heart Failure)
Monitoring System, which is an implantable hemodynamic monitoring
system comprised of an implantable sensor/monitor placed in the distal
pulmonary artery. Pulmonary artery hemodynamic monitoring is used in
the management of heart failure. The CardioMEMSTM HF
Monitoring System measures multiple pulmonary artery pressure
parameters for an ambulatory patient to measure and transmit data via a
wireless sensor to a secure Web site.
The CardioMEMSTM HF Monitoring System utilizes
radiofrequency (RF) energy to power the sensor and to measure pulmonary
artery (PA) pressure and consists of three components: An Implantable
Sensor with Delivery Catheter, an External Electronics Unit, and a
Pulmonary Artery Pressure Database. The system provides the physician
with the patient's PA pressure waveform (including systolic, diastolic,
and mean pressures) as well as heart rate. The sensor is permanently
implanted in the distal pulmonary artery using transcatheter techniques
in the catheterization laboratory where it is calibrated using a Swan-
Ganz catheter. PA pressures are transmitted by the patient at home in a
supine position on a padded antenna, pushing one button which records
an 18-second continuous waveform. The data also can be recorded from
the hospital, physician's office, or clinic.
The hemodynamic data, including a detailed waveform, are
transmitted to a secure Web site that serves as the Pulmonary Artery
Pressure Database, so that information regarding PA pressure is
available to the physician or nurse at any time via the Internet.
Interpretation of trend data allows the clinician to make adjustments
to therapy and can be used along with heart failure signs and symptoms
to adjust medications.
The applicant received FDA approval on May 28, 2014. After
evaluation of the newness, costs, and substantial clinical improvement
criteria for new technology add-on payments for the
CardioMEMSTM HF Monitoring System and consideration of the
public comments we received in response to the FY 2015 IPPS/LTCH PPS
proposed rule, we approved the CardioMEMSTM HF Monitoring
System for new technology add-on payments for FY 2015 (79 FR 49940).
Cases involving the CardioMEMSTM HF Monitoring System that
are eligible for new technology add-on payments are identified by
either ICD-10-PCS procedure code 02HQ30Z (Insertion of pressure sensor
monitoring device into right pulmonary artery, percutaneous approach)
or ICD-10-PCS procedure code 02HR30Z (Insertion of pressure sensor
monitoring device into left pulmonary artery, percutaneous approach).
With the new technology add-on payment application, the applicant
stated that the total operating cost of the CardioMEMSTM HF
Monitoring System is $17,750. Under Sec. 412.88(a)(2), we limit new
technology add-on payments to the lesser of 50 percent of the average
cost of the device or 50 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 CardioMEMSTM HF Monitoring
System is $8,875. We refer the reader to the FY 2015 IPPS/LTCH PPS
final rule (79 FR 49937) for complete details on the
CardioMEMSTM HF Monitoring System.
Our policy is that a medical service or technology may be
considered new 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 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).
With regard to the newness criterion for the
CardioMEMSTM HF Monitoring System, we considered the
beginning of the newness period to commence when the
CardioMEMSTM HF Monitoring System was approved by the FDA on
May 28, 2014. Because the 3-year anniversary date of the entry of the
CardioMEMSTM HF Monitoring System onto the U.S. market (May
28, 2017) would occur prior to the beginning of FY 2018, in the FY 2018
IPPS/LTCH PPS proposed rule (82 FR 19871-19872), we proposed to
discontinue new technology add-on payments for this technology for FY
2018. We invited public comments on this proposal.
Comment: Commenters agreed with our proposal to discontinue new
technology add-on payments for the CardioMEMSTM HF
Monitoring System.
Response: As we proposed, we are discontinuing new technology add-
on payments for the CardioMEMSTM HF Monitoring System for FY
2018. The 3-year anniversary date of the product's entry onto the U.S.
market occurred prior to the beginning of FY 2018. Therefore, the
technology is not eligible for new technology add-on payments for FY
2018 because the technology will no longer meet the ``newness''
criterion.
b. Defitelio[supreg] (Defibrotide)
Jazz Pharmaceuticals submitted an application for new technology
add-on payments for FY 2017 for defibrotide (Defitelio[supreg]), a
treatment for patients diagnosed with hepatic veno-occlusive disease
(VOD) with evidence of multiorgan dysfunction. VOD, also known as
sinusoidal obstruction syndrome (SOS), is a potentially life-
threatening complication of hematopoietic stem cell transplantation
(HSCT), with an incidence rate of 8 percent to 15 percent. Diagnoses of
VOD range in severity from what has been classically defined as a
disease limited to the liver (mild) and reversible, to a severe
syndrome associated with multi-organ dysfunction or failure and death.
Patients treated with HSCT who develop VOD with multi-organ failure
face an immediate risk of death, with a mortality rate of more than 80
percent when only supportive care is used. The applicant asserted that
Defitelio[supreg] improves the survival rate of patients diagnosed with
VOD with multi-organ failure by 23 percent.
Defitelio[supreg] received Orphan Drug Designation for the
treatment of VOD in 2003 and for the prevention of VOD in 2007. It has
been available to patients as an investigational drug through an
expanded access program since 2007. The applicant's New Drug
Application (NDA) for Defitelio[supreg] received FDA approval on March
30, 2016. The applicant confirmed that Defitelio[supreg] was not
available on the U.S. market as of the FDA NDA approval date of March
30, 2016. According to the applicant, commercial packaging could not be
completed until the label for Defitelio[supreg] was finalized with FDA
approval, and that commercial shipments of Defitelio[supreg]
[[Page 38108]]
to hospitals and treatment centers began on April 4, 2016. Therefore,
we agreed that, based on this information, the newness period for
Defitelio[supreg] begins on April 4, 2016, the date of its first
commercial availability.
The applicant received unique ICD-10-PCS procedure codes to
describe the use of Defitelio[supreg] that became effective October 1,
2016. The approved procedure codes are XW03392 (Introduction of
defibrotide sodium anticoagulant into peripheral vein, percutaneous
approach) and XW04392 (Introduction of defibrotide sodium anticoagulant
into central vein, percutaneous approach).
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for
Defitelio[supreg] and consideration of the public comments we received
in response to the FY 2017 IPPS/LTCH PPS proposed rule, we approved
Defitelio[supreg] for new technology add-on payments for FY 2017 (81 FR
56906). With the new technology add-on payment application, the
applicant estimated that the average Medicare beneficiary would require
a dosage of 25 mg/kg/day for a minimum of 21 days of treatment. The
recommended dose is 6.25 mg/kg given as a 2-hour intravenous infusion
every 6 hours. Dosing should be based on a patient's baseline body
weight, which is assumed to be 70 kg for an average adult patient. All
vials contain 200 mg at a cost of $825 per vial. Therefore, we
determined that cases involving the use of the Defitelio[supreg]
technology would incur an average cost per case of $151,800 (70 kg
adult x 25 mg/kg/day x 21 days = 36,750 mg per patient/200 mg vial =
184 vials per patient x $825 per vial = $151,800). Under Sec.
412.88(a)(2), we limit new technology add-on payments to the lesser of
50 percent of the average cost of the technology or 50 percent of the
costs in excess of the MS-DRG payment for the case. As a result, the
maximum new technology add-on payment amount for a case involving the
use of Defitelio[supreg] is $75,900.
Because the 3-year anniversary date of the entry of
Defitelio[supreg] onto the U.S. market will occur after FY 2018 (April
4, 2019), we proposed to continue new technology add-on payments for
this technology for FY 2018. We proposed that the maximum payment for a
case involving Defitelio[supreg] would remain at $75,900 for FY 2018.
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19872), we invited
public comments on our proposal to continue new technology add-on
payments for Defitelio[supreg].
Comment: One commenter agreed with CMS' proposal to continue new
technology add-on payments for Defitelio[supreg].
Response: We appreciate the commenter's support. We are finalizing
our proposal to continue new technology add-on payments for
Defitelio[supreg] for FY 2018. The maximum new technology add-on
payment for a case involving Defitelio[supreg] will remain at $75,900
for FY 2018.
c. GORE[supreg] EXCLUDER[supreg] Iliac Branch Endoprosthesis (Gore IBE
Device)
W. L. Gore and Associates, Inc. submitted an application for new
technology add-on payments for the GORE[supreg] EXCLUDER[supreg] Iliac
Branch Endoprosthesis (GORE IBE device) for FY 2017. The device
consists of two components: The Iliac Branch Component (IBC) and the
Internal Iliac Component (IIC). The applicant indicated that each
endoprosthesis is pre-mounted on a customized delivery and deployment
system allowing for controlled endovascular delivery via bilateral
femoral access. According to the applicant, the device is designed to
be used in conjunction with the GORE[supreg] EXCLUDER[supreg] AAA
Endoprosthesis for the treatment of patients requiring repair of common
iliac or aortoiliac aneurysms. When deployed, the GORE IBE device
excludes the common iliac aneurysm from systemic blood flow, while
preserving blood flow in the external and internal iliac arteries.
With regard to the newness criterion, the applicant received pre-
market FDA approval of the GORE IBE device on February 29, 2016. The
applicant submitted a request for an unique ICD-10-PCS procedure code
and was granted approval for the following procedure codes to describe
the use of this technology: 04VC0EZ (Restriction of right common iliac
artery with branched or fenestrated intraluminal device, one or two
arteries, open approach); 04VC0FZ (Restriction of right common iliac
artery with branched or fenestrated intraluminal device, three or more
arteries, open approach); 04VC3EZ (Restriction of right common iliac
artery with branched or fenestrated intraluminal device, one or two
arteries, percutaneous approach); 04VC3FZ (Restriction of right common
iliac artery with branched or fenestrated intraluminal device, three or
more arteries, percutaneous approach); 04VC4EZ (Restriction of right
common iliac artery with branched or fenestrated intraluminal device,
one or two arteries, percutaneous approach); 04VC4FZ (Restriction of
right common iliac artery with branched or fenestrated intraluminal
device, three or more arteries, percutaneous endoscopic, approach);
04VD0EZ (Restriction of left common iliac artery with branched or
fenestrated intraluminal device, one or two arteries, open approach);
04VD0FZ (Restriction of left common iliac artery with branched or
fenestrated, intraluminal device, three or more arteries, open
approach); 04VD3EZ (Restriction of left common iliac artery with
branched or fenestrated intraluminal device, one or two arteries,
percutaneous approach); 04VD3FZ (Restriction of left common iliac
artery with branched or fenestrated intraluminal device, three or more
arteries, percutaneous approach); 04VD4EZ (Restriction of left common
iliac artery with branched or fenestrated intraluminal device, one or
two arteries, percutaneous endoscopic approach); and 04VD4FZ
(Restriction of left common iliac artery with branched or fenestrated
intraluminal device, three or more arteries, percutaneous endoscopic
approach). These new ICD-10-PCS procedure codes became effective on
October 1, 2016. After evaluation of the newness, costs, and
substantial clinical improvement criteria for new technology add-on
payments for the GORE IBE device and consideration of the public
comments we received in response to the FY 2017 IPPS/LTCH PPS proposed
rule, we approved the GORE IBE device for new technology add-on
payments for FY 2017 (81 FR 56909). With the new technology add-on
payment application, the applicant indicated that the total operating
cost of the GORE IBE device is $10,500. Under Sec. 412.88(a)(2), we
limit new technology add-on payments to the lesser of 50 percent of the
average cost of the device or 50 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 GORE IBE device is $5,250.
With regard to the newness criterion for the GORE IBE device, we
considered the beginning of the newness period to commence when the
GORE IBE device received FDA approval on February 29, 2016. Because the
3-year anniversary date of the entry of the GORE IBE device onto the
U.S. market will occur after FY 2018 (February 28, 2019), in the FY
2018 IPPS/LTCH PPS proposed rule, we proposed to continue new
technology add-on payments for this technology for FY 2018. We proposed
that the maximum payment for a case involving the GORE IBE device would
remain at $5,250 for FY 2018. We invited public comments on our
proposal to continue
[[Page 38109]]
new technology add-on payments for the GORE IBE device.
Comment: Some commenters supported CMS' proposal to continue new
technology add-on payments for the GORE IBE device.
Response: We appreciate the commenters' support. We are finalizing
our proposal to continue new technology add-on payments for the GORE
IBE device for FY 2018. The maximum new technology add-on payment for a
case involving the GORE IBE device will remain at $5,250 for FY 2018.
d. Praxbind[supreg] Idarucizumab
Boehringer Ingelheim Pharmaceuticals, Inc. submitted an application
for new technology add-on payments for FY 2017 for Praxbind[supreg]
Idarucizumab (Idarucizumab), a product developed as an antidote to
reverse the effects of PRADAXAR (Dabigatran), which is also
manufactured by Boehringer Ingelheim Pharmaceuticals, Inc.
Dabigatran is an oral direct thrombin inhibitor currently
indicated: (1) To reduce the risk of stroke and systemic embolism in
patients who have been diagnosed with nonvalvular atrial fibrillation
(NVAF); (2) for the treatment of deep venous thrombosis (DVT) and
pulmonary embolism (PE) in patients who have been administered a
parenteral anticoagulant for 5 to 10 days; (3) to reduce the risk of
recurrence of DVT and PE in patients who have been previously treated;
and (4) for the prophylaxis of DVT and PE in patients who have
undergone hip replacement surgery. Currently, unlike the anticoagulant
Warfarin, there is no specific way to reverse the anticoagulant effect
of Dabigatran in the event of a major bleeding episode. Idarucizumab is
a humanized fragment antigen binding (Fab) molecule, which specifically
binds to Dabigatran to deactivate the anticoagulant effect, thereby
allowing thrombin to act in blood clot formation. The applicant stated
that Idarucizumab represents a new pharmacologic approach to
neutralizing the specific anticoagulant effect of Dabigatran in
emergency situations.
Idarucizumab was approved by the FDA on October 16, 2015. Based on
the FDA indication for Idarucizumab, the product can be used in the
treatment of patients who have been diagnosed with NVAF and
administered Dabigatran to reverse life-threatening bleeding events, or
who require emergency surgery or medical procedures and rapid reversal
of the anticoagulant effects of Dabigatran is necessary and desired.
The applicant received unique ICD-10-PCS procedure codes that
became effective October 1, 2016, to describe the use of this
technology. The approved procedure codes are XW03331 (Introduction of
Idarucizumab, Dabigatran reversal agent into peripheral vein,
percutaneous approach, New Technology Group 1) and XW04331
(Introduction of Idarucizumab, Dabigatran reversal agent into central
vein, percutaneous approach, New Technology Group 1).
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for
Idarucizumab and consideration of the public comments we received in
response to the FY 2017 IPPS/LTCH PPS proposed rule, we approved
Idarucizumab for new technology add-on payments for FY 2017 (81 FR
56897). With the new technology add-on payment application, the
applicant indicated that the total operating cost of Idarucizumab is
$3,500. Under Sec. 412.88(a)(2), we limit new technology add-on
payments to the lesser of 50 percent of the average cost of the
technology or 50 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 Idarucizumab is $1,750.
With regard to the newness criterion for Idarucizumab, we
considered the beginning of the newness period to commence when
Idarucizumab was approved by the FDA on October 16, 2015. Because the
3-year anniversary date of the entry of Idarucizumab onto the U.S.
market will occur after FY 2018 (October 15, 2018), in the FY 2018
IPPS/LTCH PPS proposed rule (82 FR 19873), we proposed to continue new
technology add-on payments for this technology for FY 2018. We proposed
that the maximum payment for a case involving Idarucizumab would remain
at $1,750 for FY 2018. We invited public comments on our proposal to
continue new technology add-on payments for Idarucizumab.
Comment: Several commenters supported CMS' proposal to continue new
technology add-on payments for Idarucizumab.
Response: We appreciate the commenters' support. We are finalizing
our proposal to continue new technology add-on payments for
Idarucizumab for FY 2018. The maximum new technology add-on payment for
a case involving Idarucizumab will remain at $1,750 for FY 2018.
e. Lutonix[supreg] Drug Coated Balloon PTA Catheter and
In.PACTTM AdmiralTM Paclitaxel Coated
Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter
Two manufacturers, CR Bard Inc. and Medtronic, submitted
applications for new technology add-on payments for FY 2016 for
LUTONIX[supreg] Drug-Coated Balloon (DCB) Percutaneous Transluminal
Angioplasty (PTA) Catheter (LUTONIX[supreg]) and IN.PACTTM
AdmiralTM Paclitaxel Coated Percutaneous Transluminal
Angioplasty (PTA) Balloon Catheter (IN.PACTTM
AdmiralTM), respectively. Both of these technologies are
drug-coated balloon angioplasty treatments for patients diagnosed with
peripheral artery disease (PAD). Typical treatments for patients with
PAD include angioplasty, stenting, atherectomy and vascular bypass
surgery. PAD most commonly occurs in the femoropopliteal segment of the
peripheral arteries, is associated with significant levels of morbidity
and impairment in quality of life, and requires treatment to reduce
symptoms and prevent or treat ischemic events.\1\ Treatment options for
symptomatic PAD include noninvasive treatment such as medication and
life-style modification (for example, exercise programs, diet, and
smoking cessation) and invasive options, which include endovascular
treatment and surgical bypass. The 2013 American College of Cardiology
and American Heart Association (ACC/AHA) guidelines for the management
of PAD recommend endovascular therapy as the first-line treatment for
femoropopliteal artery lesions in patients suffering from claudication
(Class I, Level A recommendation).\2\
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\1\ Tepe G, Zeller T, Albrecht T, Heller S, Schwarzwalder U,
Beregi JP, Claussen CD, Oldenburg A, Scheller B, Speck U., Local
delivery of paclitaxel to inhibit restenosis during angioplasty of
the leg, N Engl J Med 2008, 358: 689-99.
\2\ Anderson JL, Halperin JL, Albert NM, Bozkurt B, Brindis RG,
Curtis LH, DeMets D, Guyton RA, Hochman JS, Kovacs RJ, Ohman EM,
Pressler SJ, Sellke FW, Shen WK., Management of patients with
peripheral artery disease (compilation of 2005 and 2011 ACCF/AHA
guideline recommendations): A report of the American College of
Cardiology Foundation/American Heart Association Task Force on
Practice Guidelines, J Am Coll Cardiol 2013, 61:1555-70. Available
at: http://dx.doi.org/10.1016/j.jacc.2013.01.004.
---------------------------------------------------------------------------
According to both applicants, LUTONIX[supreg] and
IN.PACTTM AdmiralTM are the first drug coated
balloons that can be used for treatment of patients who are diagnosed
with PAD. In the FY 2016 IPPS/LTCH PPS final rule, we stated that
because cases eligible for the two devices would group to the same MS-
DRGs and we believe that these devices are substantially similar to
each
[[Page 38110]]
other (that is, they are intended to treat the same or similar disease
in the same or similar patient population and are purposed to achieve
the same therapeutic outcome using the same or similar mechanism of
action), we evaluated both technologies as one application for new
technology add-on payments under the IPPS. The applicants submitted
separate cost and clinical data, and we reviewed and discussed each set
of data separately. However, we made one determination regarding new
technology add-on payments that applied to both devices. We believe
that this is consistent with our policy statements in the past
regarding substantial similarity. Specifically, we have noted that
approval of new technology add-on payments would extend to all
technologies that are substantially similar (66 FR 46915), and we
believe that continuing our current practice of extending a new
technology add-on payment without a further application from the
manufacturer of the competing product or a specific finding on cost and
clinical improvement if we make a finding of substantial similarity
among two products is the better policy because we avoid--
Creating manufacturer-specific codes for substantially
similar products;
Requiring different manufacturers of substantially similar
products from having to submit separate new technology add-on payment
applications;
Having to compare the merits of competing technologies on
the basis of substantial clinical improvement; and
Bestowing an advantage to the first applicant representing
a particular new technology to receive approval (70 FR 47351).
CR Bard, Inc. received FDA approval for LUTONIX[supreg] on October
9, 2014. Commercial sales in the U.S. market began on October 10, 2014.
Medtronic received FDA approval for IN.PACTTM
AdmiralTM on December 30, 2014. Commercial sales in the U.S.
market began on January 29, 2015.
In accordance with our policy, we stated in the FY 2016 IPPS\LTCH
PPS final rule (80 FR 49463) that we believe it is appropriate to use
the earliest market availability date submitted as the beginning of the
newness period. Accordingly, for both devices, we stated that the
beginning of the newness period will be October 10, 2014.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for the
LUTONIX[supreg] and IN.PACTTM AdmiralTM
technologies and consideration of the public comments we received in
response to the FY 2016 IPPS/LTCH PPS proposed rule, we approved the
LUTONIX[supreg] and IN.PACTTM AdmiralTM
technologies for new technology add-on payments for FY 2016 (80 FR
49469). Cases involving the LUTONIX[supreg] and IN.PACTTM
AdmiralTM technologies that are eligible for new technology
add-on payments are identified using one of the ICD-10-PCS procedure
codes in the following table:
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
047K041................... Dilation of right femoral artery with drug-
eluting intraluminal device using drug-
coated balloon, open approach.
047K0D1................... Dilation of right femoral artery with
intraluminal device using drug-coated
balloon, open approach.
047K0Z1................... Dilation of right femoral artery using drug-
coated balloon, open approach.
047K341................... Dilation of right femoral artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous approach.
047K3D1................... Dilation of right femoral artery with
intraluminal device using drug-coated
balloon, percutaneous approach.
047K3Z1................... Dilation of right femoral artery using drug-
coated balloon, percutaneous approach.
047K441................... Dilation of right femoral artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous endoscopic
approach.
047K4D1................... Dilation of right femoral artery with
intraluminal device using drug-coated
balloon, percutaneous endoscopic approach.
047K4Z1................... Dilation of right femoral artery using drug-
coated balloon, percutaneous endoscopic
approach.
047L041................... Dilation of left femoral artery with drug-
eluting intraluminal device using drug-
coated balloon, open approach.
047L0D1................... Dilation of left femoral artery with
intraluminal device using drug-coated
balloon, open approach.
047L0Z1................... Dilation of left femoral artery using drug-
coated balloon, open approach.
047L341................... Dilation of left femoral artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous approach.
047L3D1................... Dilation of left femoral artery with
intraluminal device using drug-coated
balloon, percutaneous approach.
047L3Z1................... Dilation of left femoral artery using drug-
coated balloon, percutaneous approach.
047L441................... Dilation of left femoral artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous endoscopic
approach.
047L4D1................... Dilation of left femoral artery with
intraluminal device using drug-coated
balloon, percutaneous endoscopic approach.
047L4Z1................... Dilation of left femoral artery using drug-
coated balloon, percutaneous endoscopic
approach.
047M041................... Dilation of right popliteal artery with drug-
eluting intraluminal device using drug-
coated balloon, open approach.
047M0D1................... Dilation of right popliteal artery with
intraluminal device using drug-coated
balloon, open approach.
047M0Z1................... Dilation of right popliteal artery using
drug-coated balloon, open approach.
047M341................... Dilation of right popliteal artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous approach.
047M3D1................... Dilation of right popliteal artery with
intraluminal device using drug-coated
balloon, percutaneous approach.
047M3Z1................... Dilation of right popliteal artery using
drug-coated balloon, percutaneous approach.
047M441................... Dilation of right popliteal artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous endoscopic
approach.
047M4D1................... Dilation of right popliteal artery with
intraluminal device using drug-coated
balloon, percutaneous endoscopic approach.
047M4Z1................... Dilation of right popliteal artery using
drug-coated balloon, percutaneous
endoscopic approach.
047N041................... Dilation of left popliteal artery with drug-
eluting intraluminal device using drug-
coated balloon, open approach.
047N0D1................... Dilation of left popliteal artery with
intraluminal device using drug-coated
balloon, open approach.
047N0Z1................... Dilation of left popliteal artery using drug-
coated balloon, open approach.
047N341................... Dilation of left popliteal artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous approach.
047N3D1................... Dilation of left popliteal artery with
intraluminal device using drug-coated
balloon, percutaneous approach.
047N3Z1................... Dilation of left popliteal artery using drug-
coated balloon, percutaneous approach.
047N441................... Dilation of left popliteal artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous endoscopic
approach.
047N4D1................... Dilation of left popliteal artery with
intraluminal device using drug-coated
balloon, percutaneous endoscopic approach.
047N4Z1................... Dilation of left popliteal artery using drug-
coated balloon, percutaneous endoscopic
approach.
------------------------------------------------------------------------
[[Page 38111]]
As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49469),
each of the applicants submitted operating costs for its DCB. The
manufacturer of the LUTONIX[supreg] stated that a mean of 1.37 drug-
coated balloons was used during the LEVANT 2 clinical trial. The
acquisition price for the hospital will be $1,900 per drug-coated
balloon, or $2,603 per case (1.37 x $1,900). The applicant projected
that approximately 8,875 cases will involve use of the LUTONIX[supreg]
for FY 2016. The manufacturer for the IN.PACTTM
AdmiralTM stated that a mean of 1.4 drug-coated balloons was
used during the IN.PACTTM AdmiralTM DCB arm. The
acquisition price for the hospital will be $1,350 per drug-coated
balloon, or $1,890 per case (1.4 x $1,350). The applicant projected
that approximately 26,000 cases will involve use of the
IN.PACTTM AdmiralTM for FY 2016.
For FY 2016, we based the new technology add-on payment for cases
involving these technologies on the weighted average cost of the two
DCBs described by the ICD-10-PCS procedure codes listed above (which
are not manufacturer specific). Because ICD-10 codes are not
manufacturer specific, we cannot set one new technology add-on payment
amount for IN.PACTTM AdmiralTM and a different
new technology add-on payment amount for LUTONIX[supreg]; both
technologies will be captured by using the same ICD-10-PCS procedure
code. As such, we stated that we believe that the use of a weighted
average of the cost of the standard DCBs based on the projected number
of cases involving each technology to determine the maximum new
technology add-on payment would be most appropriate. To compute the
weighted cost average, we summed the total number of projected cases
for each of the applicants, which equaled 34,875 cases (26,000 plus
8,875). We then divided the number of projected cases for each of the
applicants by the total number of cases, which resulted in the
following case-weighted percentages: 25 percent for the LUTONIX[supreg]
and 75 percent for the IN.PACTTM AdmiralTM. We
then multiplied the cost per case for the manufacturer specific DCB by
the case-weighted percentage (0.25 * $2,603 = $662.41 for
LUTONIX[supreg] and 0.75 * $1,890 = $1,409.03 for the
IN.PACTTM AdmiralTM). This resulted in a case-
weighted average cost of $2,071.45 for DCBs. Under Sec. 412.88(a)(2),
we limit new technology add-on payments to the lesser of 50 percent of
the average cost of the device or 50 percent of the costs in excess of
the MS-DRG payment for the case. As a result, the maximum payment for a
case involving the LUTONIX[supreg] or IN.PACTTM
AdmiralTM DCBs is $1,035.72.
With regard to the newness criterion for the LUTONIX[supreg] and
IN.PACTTM AdmiralTM technologies, we considered
the beginning of the newness period to commence when LUTONIX[supreg]
gained entry onto the U.S. market on October 10, 2014. As discussed
previously in this section, 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 upcoming fiscal year. Because the 3-year anniversary date of the
entry of LUTONIX[supreg] onto the U.S. market (October 10, 2017) will
occur in the first half of FY 2018, in the FY 2018 IPPS/LTCH PPS
proposed rule (82 FR 19875), we proposed to discontinue new technology
add-on payments for both the LUTONIX[supreg] and IN.PACTTM
AdmiralTM technologies for FY 2018. We invited public
comments on this proposal.
Comment: Some commenters supported CMS' proposal to discontinue new
technology add-on payments for both the LUTONIX[supreg] and
IN.PACTTM AdmiralTM technologies for FY 2018.
Response: We appreciate the commenters' support. As we proposed, we
are discontinuing new technology add-on payments for both the
LUTONIX[supreg] and IN.PACTTM AdmiralTM
technologies for FY 2018. The 3-year anniversary date of the product's
entry onto the U.S. market occurs in the first half of FY 2018.
Therefore, the technology is not eligible for new technology add-on
payments for FY 2018 because the technology will no longer meet the
``newness'' criterion.
f. MAGEC[supreg] Spinal Bracing and Distraction System (MAGEC[supreg]
Spine)
Ellipse Technologies, Inc. submitted an application for new
technology add-on payments for FY 2017 for the MAGEC[supreg] Spine.
According to the applicant, the MAGEC[supreg] Spine has been developed
for use in the treatment of children diagnosed with severe spinal
deformities, such as scoliosis. The system can be used in the treatment
of skeletally immature patients less than 10 years of age who have been
diagnosed with severe progressive spinal deformities associated with or
at risk of Thoracic Insufficiency Syndrome (TIS).
The MAGEC[supreg] Spine consists of a (spinal growth) rod that can
be lengthened through the use of magnets that are controlled by an
external remote controller (ERC). The rod(s) can be implanted into
children as young as 2 years of age. According to the applicant, use of
the MAGEC[supreg] Spine has proven to be successfully used in the
treatment of patients diagnosed with scoliosis who have not been
responsive to other treatments.
The MAGEC[supreg] Spine initially received FDA clearance for use of
the predicate device, which used a Harrington Rod on February 27, 2014.
The applicant verified that, due to manufacturing delays, the
MAGEC[supreg] Spine was not available for implant until April 1, 2014.
Specifically, the complete MAGEC[supreg] Spine system was produced and
available for shipment for the first implant on April 1, 2014.
Therefore, the newness period for the MAGEC[supreg] Spine began on
April 1, 2014. Subsequent FDA clearance was granted for use of the
modified device, which uses a shorter 70 mm rod on September 18, 2014.
After minor modification of the product, the MAGEC[supreg] Spine
received FDA clearances on March 24, 2015, and May 29, 2015,
respectively.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for the
MAGEC[supreg] Spine and consideration of the public comments we
received in response to the FY 2017 IPPS/LTCH PPS proposed rule, we
approved the MAGEC[supreg] Spine for new technology add-on payments for
FY 2017 (81 FR 56891). Cases involving the MAGEC[supreg] Spine that are
eligible for new technology add-on payments are identified by ICD-10-
PCS procedure codes XNS0032 (Reposition of lumbar vertebra using
magnetically controlled growth rod(s), open approach); XNS0432
(Reposition of lumbar vertebra using magnetically controlled growth
rod(s), percutaneous endoscopic approach); XNS3032 (Reposition of
cervical vertebra using magnetically controlled growth rod(s), open
approach); XNS3432 (Reposition of cervical vertebra using magnetically
controlled growth rod(s), percutaneous endoscopic approach); XNS4032
(Reposition of thoracic vertebra using magnetically controlled growth
rod(s), open approach); and XNS4432 (Reposition of thoracic vertebra
using magnetically controlled growth rod(s).
With the new technology add-on payment application, the applicant
stated that the total operating cost of the MAGEC[supreg] Spine was
$17,500 for a single rod and $35,000 for a dual rod. It is historical
practice for CMS to make the new technology add-on payment based on the
average cost of the technology and not the maximum. For example, in the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53358), we approved new
technology add-on payments for
[[Page 38112]]
DIFICIDTM based on the average dosage of 6.2 days, rather
than the maximum 10-day dosage. The applicant noted that 20 percent of
cases use a single rod, while 80 percent of cases use a dual rod. As a
result, the weighted average cost for a single and dual MAGEC[supreg]
Spine is $31,500 (((0.2 * $17,500) + (0.8 * $35,000))). Under Sec.
412.88(a)(2), we limit new technology add-on payments to the lesser of
50 percent of the average cost of the device or 50 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 MAGEC[supreg]
Spine is $15,750. We refer the reader to the FY 2017 IPPS/LTCH PPS
final rule (81 FR 56888) for complete details on the MAGEC[supreg]
Spine.
With regard to the newness criterion for the MAGEC[supreg] Spine,
we considered the beginning of the newness period to commence when the
MAGEC[supreg] Spine was produced and available for shipment for the
first implant on April 1, 2014. As discussed previously in this
section, 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 upcoming
fiscal year. Because the 3-year anniversary date of the entry of the
MAGEC[supreg] Spine onto the U.S. market (April 1, 2017) would occur
prior to the beginning of FY 2018, in the FY 2018 IPPS/LTCH PPS
proposed rule (82 FR 19876), we proposed to discontinue new technology
add-on payments for this technology for FY 2018. We invited public
comments on this proposal.
Comment: Some commenters supported CMS' proposal to discontinue new
technology add-on payments for the MAGEC[supreg] Spine for FY 2018.
Some commenters supported the continuation of the new technology add-on
payments for MAGEC[supreg] Spine for FY 2018. The manufacturer also
requested that CMS extend new technology add-on payments for
MAGEC[supreg] Spine. The manufacturer provided the following reasons to
extend the new technology add-on payment:
Based on internal data, there have not been enough cases
to provide the stimulus that the new technology add-on payments program
intended.
The patient population for which the new technology add-on
payment applies is very small, estimated at less than or equal to 10
percent of the total annual cases.
The new technology add-on payment has been available for
approximately 9 months. Given the small number of patients, providers
have not had enough cases yet to utilize the new technology add-on
payments in the way the program intended.
Extension of the new technology add-on payment for FY 2018
would allow more patients to gain access to MAGEC[supreg] rods. The
manufacturer stated that this has clinical benefits as noted in the
literature, but also ultimately helps payers, including CMS. The
manufacturer stated that payer costs of treatment are reduced over the
course of care when MAGEC[supreg] rods are used vs. traditional growth
rods.
Extending the new technology add-on payment for
MAGEC[supreg] Spine has minimal budgetary impact due again to the small
patient population.
The manufacturer cited the importance of the new technology add-on
payments to MAGEC[supreg] Spine and stated that extending the new
technology add-on payment would help make the technology more
accessible.
Response: We thank the commenters for their comments. With regard
to the technology's newness, the timeframe that a new technology can be
eligible to receive new technology add-on payments ends when data
documenting the use and cost of the procedures become available.
Section 412.87(b)(2) states that, a medical service or technology may
be considered new within 2 or 3 years after the point at which data
begin to become available reflecting the ICD-9-CM code (or, as
finalized earlier in this section, 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). Section 412.87(b)(2) also states, after CMS has
recalibrated the DRGs, based on available data, to reflect the costs of
an otherwise new medical service or technology, the medical service or
technology will no longer be considered ``new'' under the applicable
criteria. Therefore, as discussed in the FY 2005 IPPS final rule (69 FR
49003), if the costs of the technology are included in the charge data,
and the MS-DRGs have been recalibrated using that data, the technology
can no longer be considered ``new'' for the purposes of this provision.
In addition, similar to our discussion in the FY 2006 IPPS final
rule (70 FR 47349), we do not believe that case volume is a relevant
consideration for making the determination as to whether a product is
``new.'' Consistent with the statute and our implementing regulations,
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, 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.
Therefore, based on all of the reasons stated above, the
MAGEC[supreg] Spine is no longer considered ``new'' for purposes of new
technology add-on payments for FY 2018. Therefore, we are finalizing
our proposal to discontinue making new technology add-on payments for
the MAGEC[supreg] Spine for FY 2018.
g. Vistogard\TM\ (Uridine Triacetate)
BTG International Inc., submitted an application for new technology
add-on payments for the VistogardTM for FY 2017.
VistogardTM was developed as an emergency treatment for
Fluorouracil toxicity.
Chemotherapeutic agent 5-fluorouracil (5-FU) is used to treat
specific solid tumors. It acts upon deoxyribonucleic acid (DNA) and
ribonucleic acid (RNA) in the body, as uracil is a naturally occurring
building block for genetic material. Fluorouracil is a fluorinated
pyrimidine. As a chemotherapy agent, Fluorouracil is absorbed by cells
and causes the cell to metabolize into byproducts that are toxic and
used to destroy cancerous cells. According to the applicant, the
byproducts fluorodoxyuridine monophosphate (F-dUMP) and floxuridine
triphosphate (FUTP) are believed to do the following: (1) Reduce DNA
synthesis; (2) lead to DNA fragmentation; and (3) disrupt RNA
synthesis. Fluorouracil is used to treat a variety of solid tumors such
as colorectal, head and neck, breast, and ovarian cancer. With
different tumor treatments, different dosages, and different dosing
schedules, there is a risk for toxicity in these patients. Patients may
suffer from fluorouracil toxicity/death if 5-FU is delivered in slight
excess or at faster infusion rates than prescribed. The cause of
overdose can happen for a variety of reasons including: Pump
malfunction, incorrect pump programming or miscalculated doses, and
accidental or intentional ingestion.
VistogardTM is an emergency treatment for Fluorouracil
toxicity and is a prodrug of uridine. Once the drug is metabolized into
uridine, it competes with the toxic byproduct FUTP in binding to RNA,
thereby reducing the impact FUTP has on cell death.
The VistogardTM received FDA approval on December 11,
2015. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56910), we stated
that we agreed with the manufacturer that, due to the
[[Page 38113]]
delay in availability, the date the newness period begins for
VistogardTM is March 2, 2016, instead of December 11, 2015.
The applicant noted that the VistogardTM is the first
FDA-approved antidote used to reverse fluorouracil toxicity. The
applicant received a unique ICD-10-PCS procedure code that became
effective October 1, 2016, to describe the use of this technology. The
approved procedure code is XW0DX82 (Introduction of Uridine Triacetate
into Mouth and Pharynx, External Approach, New Technology Group 2).
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for
VistogardTM and consideration of the public comments we
received in response to the FY 2017 IPPS/LTCH PPS proposed rule, we
approved VistogardTM for new technology add-on payments for
FY 2017 (81 FR 56912). With the new technology add-on payment
application, the applicant stated that the total operating cost of
VistogardTM is $75,000. Under Sec. 412.88(a)(2), we limit
new technology add-on payments to the lesser of 50 percent of the
average cost of the technology or 50 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 VistogardTM
is $37,500.
As noted previously, with regard to the newness criterion for the
VistogardTM, we considered the beginning of the newness
period to commence on March 2, 2016. Because the 3-year anniversary
date of the entry of the VistogardTM onto the U.S. market
(March 2, 2019) will occur after FY 2018, in the FY 2018 IPPS/LTCH PPS
proposed rule (82 FR 19876), we proposed to continue new technology
add-on payments for this technology for FY 2018. We proposed that the
maximum payment for a case involving the VistogardTM would
remain at $37,500 for FY 2018. We invited public comments on our
proposal to continue new technology add-on payments for the
VistogardTM.
Comment: The manufacturer commented that, as of April 1, 2017,
pricing for VistogardTM has changed. The manufacturer noted
that the wholesale acquisition cost (WAC) for VistogardTM is
now $80,260 for a 20-dose pack (or $4,013.00 per each 10g packet of
oral granules). Given the current price for VistogardTM, the
manufacturer requested that CMS revise the maximum payment per case to
$40,130, or 50 percent of the revised WAC.
Response: According to the manufacturer, as noted in the FY 2017
IPPS/LTCH PPS final rule (81 FR 56912), the WAC of
VistogardTM was $3,750.00 per each 10g packet of oral
granules. The recommended adult dosing per the VistogardTM
label is 10g (one packet every 6 hours for a minimum of 20 doses over 5
days). The total cost was 20 packets x WAC of $3,750.00 per packet,
which equaled $75,000 per patient.
Using the updated WAC provided by the manufacturer, we performed an
additional cost analysis to determine if Vistogard would meet the cost
criterion. We determined that the price increase would increase the
amount that the inflated average standardized case-weighted charge per
case exceeds the average case-weighted threshold amount. Therefore,
VistogardTM would still meet the cost criterion.
We are finalizing our proposal to continue new technology add-on
payments for VistogardTM for FY 2018. Using the revised
pricing, the maximum new technology add-on payment for a case involving
VistogardTM is $40,130 for FY 2018.
h. Blinatumomab (BLINCYTO[supreg])
Amgen, Inc. submitted an application for new technology add-on
payments for FY 2016 for Blinatumomab (BLINCYTO[supreg]), a bi-specific
T-cell engager (BiTE) used for the treatment of Philadelphia
chromosome-negative (Ph-) relapsed or refractory (R/R) B-cell precursor
acute-lymphoblastic leukemia (ALL), which is a rare aggressive cancer
of the blood and bone marrow. Approximately 6,050 individuals are
diagnosed with Ph- R/R B-cell precursor ALL in the United States each
year, and approximately 2,400 individuals, representing 30 percent of
all new cases, are adults. Ph- R/R B-cell precursor ALL occurs when
there are malignant transformations of B-cell or T-cell progenitor
cells, causing an accumulation of lymphoblasts in the blood, bone
marrow, and occasionally throughout the body. As a bi-specific T-cell
engager, the BLINCYTO [supreg] technology attaches to a molecule on the
surface of the tumorous cell, as well as to a molecule on the surface
of normal T-cells, bringing the two into closer proximity and allowing
the normal T-cell to destroy the tumorous cell. Specifically, the
BLINCYTO[supreg] technology attaches to a cell identified as CD19,
which is present on all of the cells of the malignant transformations
that cause Ph- R/R B-cell precursor ALL and helps attract the cell into
close proximity of the T-cell CD3 with the intent of getting close
enough to allow the T-cell to inject toxins that destroy the cancerous
cell. According to the applicant, the BLINCYTO[supreg] technology is
the first, and the only, bi-specific CD19-directed CD3 T-cell engager
single-agent immunotherapy approved by the FDA.
BLINCYTO[supreg] is administered as a continuous IV infusion
delivered at a constant flow rate using an infusion pump. A single
cycle of treatment consists of 28 days of continuous infusion, and each
treatment cycle is followed by 2 weeks without treatment prior to
administering any further treatments. A course of treatment would
consist of two phases. Phase 1 consists of initial inductions or
treatments intended to achieve remission followed by additional
inductions and treatments to maintain consolidation; or treatments
given after remission has been achieved to prolong the duration. During
Phase 1 of a single treatment course, up to two cycles of
BLINCYTO[supreg] are administered, and up to three additional cycles
are administered during consolidation. The recommended dosage of
BLINCYTO[supreg] administered during the first cycle of treatment is 9
mcg per day for the first 7 days of treatment. The dosage is then
increased to 28 mcg per day for 3 weeks until completion. During Phase
2 of the treatment course, all subsequent doses are administered as 28
mcg per day throughout the entire duration of the 28-day treatment
period.
With regard to the newness criterion, the BLINCYTO[supreg]
technology received FDA approval on December 3, 2014, for the treatment
of patients diagnosed with Ph- R/R B-cell precursor ALL, and the
product gained entry onto the U.S. market on December 17, 2014.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for
BLINCYTO[supreg] and consideration of the public comments we received
in response to the FY 2016 IPPS/LTCH PPS proposed rule, we approved
BLINCYTO[supreg] for new technology add-on payments for FY 2016 (80 FR
49449). Cases involving BLINCYTO[supreg] that are eligible for new
technology add-on payments are identified using one of the following
ICD-10-PCS procedure codes: XW03351 (Introduction of Blinatumomab
antineoplastic immunotherapy into peripheral vein, percutaneous
approach, New Technology Group 1), or XW04351 (Introduction of
Blinatumomab antineoplastic immunotherapy into central vein,
percutaneous approach, New Technology Group 1).
As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49449),
the
[[Page 38114]]
applicant recommended that CMS consider and use the cost of the full
28-day inpatient treatment cycle as the expected length of treatment
when determining the maximum new technology add-on payment for cases
involving the BLINCYTO[supreg], rather than the average cost of lesser
number of days used as other variables. For the reasons discussed, we
disagreed with the applicant and established the maximum new technology
add-on payment amount for a case involving the BLINCYTO[supreg]
technology for FY 2016 using the weighted average of the cycle 1 and
cycle 2 observed treatment length. Specifically, in the Phase II trial,
the most recent data available, 92 patients received cycle 1 treatment
for an average length of 21.2 days, and 52 patients received cycle 2
treatment for an average length of 10.2 days. The weighted average of
cycle 1 and cycle 2 treatment length is 17 days. We noted that a small
number of patients also received 3 to 5 treatment cycles. However,
based on the data provided, these cases do not appear to be typical at
this point and we excluded them from this calculation. We noted that,
if we included all treatment cycles in this calculation, the weighted
average number of days of treatment is much lower, 10 days. Using the
clinical data provided by the applicant, we stated that we believe
setting the maximum new technology add-on payment amount for a case
involving the BLINCYTO[supreg] technology for FY 2016 based on a 17-day
length of treatment cycle is representative of historical and current
practice. We also stated that, for FY 2017, if new data on length of
treatment are available, we would consider any such data in evaluating
the maximum new technology add-on payment amount. However, we did not
receive any new data from the applicant to evaluate for FY 2017.
In the application, the applicant estimated that the average
Medicare beneficiary would require a dosage of 9mcg/day for the first 7
days under the first treatment cycle, followed by a dosage of 28mcg/day
for the duration of the treatment cycle, as well as all days included
in subsequent cycles. All vials contain 35mcg at a cost of $3,178.57
per vial. The applicant noted that all vials are single-use. Therefore,
we determined that cases involving the use of the BLINCYTO[supreg]
technology would incur an average cost per case of $54,035.69 (1 vial/
day x 17 days x $3,178.57/vial). Under Sec. 412.88(a)(2), we limit new
technology add-on payments to the lesser of 50 percent of the average
cost of the technology or 50 percent of the costs in excess of the MS-
DRG payment for the case. As a result, the maximum new technology add-
on payment amount for a case involving the use of the BLINCYTO[supreg]
is $27,017.85.
With regard to the newness criterion for BLINCYTO[supreg], we
consider the beginning of the newness period to commence when the
product gained entry onto the U.S. market on December 17, 2014. As
discussed previously in this section, 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 upcoming fiscal year. Because the 3-year
anniversary date of the entry of the BLINCYTO[supreg] onto the U.S.
market will occur in the first half of FY 2018 (December 17, 2017), in
the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19877), we proposed to
discontinue new technology add-on payments for this technology for FY
2018. We invited public comments on this proposal.
Comment: Some commenters supported CMS' proposal to discontinue new
technology add-on payments for BLINCYTO[supreg]. The applicant (the
manufacturer) disagreed with the proposal to discontinue new technology
add-on payments for BLINCYTO[supreg]. The manufacturer stated that CMS
is discontinuing the new technology add-on payment in advance of the 3-
year statutory limit. The manufacturer requested that CMS reconsider
and extend the new technology add-on payments for FY 2018.
The manufacturer explained that the continuation of new technology
add-on payments for BLINCYTO[supreg] in FY 2018 is well within CMS'
statutory authority and would permit CMS to bolster its claims data for
rate-setting to ensure that it can meaningfully recalibrate the MS-DRG
weights to reflect the costs of BLINCYTO[supreg] in accordance with the
policy objectives of the statute. The manufacturer stated that section
1886(d)(5)(K) of the Act gives CMS authority to grant new technology
add-on payments to new technologies 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 2 years and not more than 3 years
beginning on the date on which an inpatient hospital code is issued
with respect to the service or technology.'' The manufacturer also
stated that the regulation at 42 CFR 412.87(b)(2) is phrased similarly
and reads that ``A medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM 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).
After CMS has recalibrated the DRGs, based on available data, to
reflect the costs of an otherwise new medical service or technology,
the medical service or technology will no longer be considered `new'
under the criterion of this section.''
The manufacturer stated that BLINCYTO[supreg] received FDA approval
on December 3, 2014, gained entry onto the U.S. market on December 17,
2014, and was issued an inpatient hospital code (ICD-10-PCS code) on
October 1, 2015. Therefore, the manufacturer asserted that, as of
October 1, 2017, BLINCYTO[supreg] will have received the new technology
add-on payment for the minimum permitted duration of 2 years, and is
eligible, by statute and regulation, for an additional year new
technology add-on payments.
The manufacturer also stated that CMS explained in the FY 2017
IPPS/LTCH PPS final rule (81 FR 56877) that ``a specific medical
service or technology will be considered `new' for purposes of new
technology add-on payments until such time as Medicare data are
available to fully reflect the cost of the technology in the MS-DRG
weights through recalibration'' and that only once the MS-DRGs have
been recalibrated to reflect the costs of a new medical technology
should new technology add-on payments cease. The manufacturer believed
that the above quoted regulation likewise links the termination of new
technology add-on payments to having data to incorporate the item into
the calibration of the inpatient payment groupings. The manufacturer
also cited the FY 2011 IPPS final rule (75 FR 50138) and stated that
CMS has acknowledged in previous rulemaking that, in some cases, there
may be valid reasons to extend new technology add-on payment status,
including, for example, when ``there may be few to no Medicare data
available for the new service or technology following FDA approval'' to
achieve the objective of appropriately recalibrating MS-DRG weights.
The manufacturer believed that if insufficient data are collected on
the technology to ``fully reflect the cost of the technology'' in the
MS-DRG weights, there would be a valid reason to continue the new
technology add-on payment.
The manufacturer stated that claims of BLINCYTO[supreg] in the FY
2016
[[Page 38115]]
MedPAR, which is used for FY 2018 MS-DRG recalibration, are
insufficient in number and do not fully reflect the cost of
BLINCYTO[supreg] in the MS-DRG recalibration. The applicant stated
that, in the FY 2016 MedPAR claims, there were a total of 145
BLINCYTO[supreg] claims eligible for the new technology add-on payment,
111 of which were distributed across 6 MS-DRGs that the technology most
frequently mapped to. The manufacturer noted that this claims volume
represents less than 1 percent of the over 10,000 patient discharge
claims for these 6 MS-DRGs. As a result of this low claims volume, both
objectively and relative to the frequency of the relevant MS-DRGs on
patient discharge claims, the manufacturer believed it is very unlikely
that the fundamental objective of the new technology add-on payment to
provide time to collect sufficient data to recalibrate MS-DRG weights
to ``fully reflect the cost of the technology'' can be achieved by
discontinuing the new technology add-on payment status for
BLINCYTO[supreg].
The manufacturer stated that it recognizes that CMS has a general
practice (not set forth in its regulations) for technologies that have
had new technology add-on payments for 2 fiscal years to only provide
an additional year of new technology add-on payment if the 3-year
anniversary of the product's FDA approval is during the second half of
the fiscal year unless CMS receives evidence of a documented delay in
making the product available on the market. The manufacturer believed
that this general practice should not be followed here because of the
paucity of data on BLINCYTO[supreg]. The manufacturer noted that CMS
does not apply the general practice when there is a delay in market
availability, ostensibly because that delay has an impact on the
availability of data for use in inpatient hospital payment rate
setting. The manufacturer asserted that when there is a paucity of data
from the first of the 2 years of the new technology add-on payment, CMS
should continue making new technology add-on payments for a third year
to ensure that when it incorporates the item into the inpatient payment
system, it has enough data to do so.
Further, the manufacturer noted that BLINCYTO[supreg] demonstrated
significant improvements in overall survival, complete remission, and
event-free survival in comparison to standard of care chemotherapy in
adult patients with Ph-R/R B-cell precursor ALL. The manufacturer
stated that extending new technology add-on payments for
BLINCYTO[supreg] would continue to support access to this novel
therapy.
Response: We thank the commenters for their comments. With regard
to the technology's newness, as discussed in the FY 2005 IPPS final
rule (69 FR 49003), the timeframe that a new technology can be eligible
to receive new technology add-on payments begins when data become
available. As the manufacturer noted in its comments, Sec.
412.87(b)(2) clearly states that a medical service or technology may be
considered new within 2 or 3 years after the point at which data begin
to become available reflecting the ICD-9-CM code (or, as finalized
earlier in this section, 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). Section 412.87(b)(2) also specifies that after CMS has
recalibrated the DRGs, based on available data, to reflect the costs of
an otherwise new medical service or technology, the medical service or
technology will no longer be considered ``new'' under the criterion of
the section. The period of newness 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 U.S. market, which is
when data become available. As the manufacturer noted, we considered
the newness period for BLINCYTO[supreg] to commence when the product
gained entry onto the U.S. market on December 17, 2014. We have
consistently applied this standard, and believe that it is most
consistent with the purpose of new technology add-on payments.
While CMS may consider a documented delay in a technology's
availability on the U.S. market in determining when the newness period
begins, its policy for determining whether to extend new technology
add-on payments for a third year generally applies regardless of the
claims volume for the technology after the start of the newness period.
Similar to our discussion earlier and in the FY 2006 IPPS final rule
(70 FR 47349), we do not believe that case volume is a relevant
consideration for making the determination as to whether a product is
``new.'' 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. Similarly, this
same determination is applicable no matter how many MS-DRGs the
technology is spread across. 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.
Based on the reasons stated above, BLINCYTO[supreg] is no longer
considered ``new'' for purposes of new technology add-on payments for
FY 2018. We are finalizing our proposal to discontinue making new
technology add-on payments for BLINCYTO[supreg] for FY 2018.
6. FY 2018 Applications for New Technology Add-On Payments
We received nine applications for new technology add-on payments
for FY 2018. Three applicants withdrew their applications prior to the
issuance of the FY 2018 IPPS/LTCH PPS proposed rule. Two applicants,
Kite Pharma and IsoRay Medical, Inc., in conjunction with GammaTile
LLC, withdrew their applications for KTE-C19 (axicabtagene ciloleucel)
and GammaTileTM, respectively, prior to the issuance of this
FY 2018 IPPS/LTCH PPS final rule.
In addition, in accordance with the regulations under Sec.
412.87(c), applicants for new technology add-on payments must have FDA
approval or clearance by July 1 of each year prior to the beginning of
the fiscal year that the application is being considered. One
applicant, Celator Pharmaceuticals, Inc. for VYXEOSTM, did
not receive FDA approval for its technology by July 1, 2017. Therefore,
VYXEOSTM is not eligible for consideration for new
technology add-on payments for FY 2018. We are not including in this
final rule the descriptions and discussions of this application which
was included in the FY 2018 IPPS/LTCH PPS proposed rule. We note that
we did receive public comments on this application. However, because
VYXEOSTM is ineligible for new technology add-on payments
for FY 2018 because it did not receive FDA approval by July 1, 2017, we
are not summarizing nor responding to public comments regarding the new
technology criteria for this application in this final rule. We note
that the applicant did request that we make an exception to the July 1
deadline if it were to receive FDA approval prior to the beginning of
FY 2018. However, we did not propose any changes to the regulations at
Sec. 412.87(c), and we believe the request is out of scope for this
final rule.
A discussion of the three remaining applications is presented
below.
a. Bezlotoxumab (ZINPLAVATM)
Merck & Co., Inc. submitted an application for new technology add-
on payments for ZINPLAVATM for FY 2018.
ZINPLAVATM is indicated to reduce
[[Page 38116]]
recurrence of Clostridium difficile infection (CDI) in adult patients
who are receiving antibacterial drug treatment for a diagnosis of CDI
who are at high risk for CDI recurrence. ZINPLAVATM is not
indicated for the treatment of the presenting episode of CDI and is not
an antibacterial drug.
Clostridium difficile (C-diff) is a disease-causing anaerobic,
spore forming bacteria that can affect the gastrointestinal (GI) tract.
Some people carry the C-diff bacterium in their intestines, but never
develop symptoms of an infection. The difference between asymptomatic
colonization and pathogenicity is caused primarily by the production of
an enterotoxin (Toxin A) and/or a cytotoxin (Toxin B). The presence of
either or both toxins can lead to symptomatic CDI, which is defined as
the acute onset of diarrhea with a documented infection with toxigenic
C-diff, or the presence of either toxin A or B. The GI tract contains
millions of bacteria, commonly referred to as ``normal flora'' or
``good bacteria,'' which play a role in protecting the body from
infection. Antibiotics can kill these good bacteria and allow the C-
diff bacteria to multiply and release toxins that damage the cells
lining the intestinal wall, resulting in a CDI. CDI is a leading cause
of hospital-associated gastrointestinal illnesses. Persons at increased
risk for CDI include people who are treated with current or recent
antibiotic use, people who have encountered current or recent
hospitalization, people who are older than 65 years, immunocompromised
patients, and people who have recently had a diagnosis of CDI. CDI
symptoms include, but are not limited to, diarrhea, abdominal pain, and
fever. CDI symptoms range in severity from mild (abdominal discomfort,
loose stools) to severe (profuse, watery diarrhea, severe pain, and
high fevers). Severe CDI can be life-threatening and, in rare cases,
can cause bowel rupture, sepsis and organ failure. CDI is responsible
for 14,000 deaths per year in the United States.
C-diff produces two virulent, pro-inflammatory toxins, Toxin A and
Toxin B, which target host colonocytes (that is, large intestine
endothelial cells) by binding to endothelial cell surface receptors via
combined repetitive oligopeptide (CROP) domains. These toxins cause the
release of inflammatory cytokines leading to intestinal fluid secretion
and intestinal inflammation. The applicant asserted that
ZINPLAVATM targets Toxin B sites within the CROP domain
rather than the C-diff organism itself. According to the applicant, by
targeting C-diff Toxin B, ZINPLAVATM neutralizes Toxin B,
prevents large intestine endothelial cell inflammation, symptoms
associated with CDI, and reduces the recurrence of CDI.
ZINPLAVATM binds to sites within the CROP domain, which
prevents Toxin B from binding to the host cell, thereby preventing the
inflammation and symptoms associated with CDI. ZINPLAVATM is
used concomitantly with standard of care (SOC) antibiotics. Typical
treatment of CDI includes antibiotic therapy using vancomycin,
metronidazole, fidaxomicin, or other antibiotics. Alternative therapies
include fecal microbiota transplant (FMT) and the use of probiotics.
The primary goal of CDI treatment is resolving the infection.
Antibacterial drug treatment remains the cornerstone of treatment of
CDI. However, this treatment option alone may not be adequate for
patients diagnosed with recurrent CDI. A major concern with respect to
a CDI is that even when treatment with an antibacterial drug of a
primary infection is successful, generally, 25 percent to 30 percent of
patients experience a recurrence of the infection within days or weeks
of the presenting episode's symptom resolution. The risk of recurrence
increases to 65 percent with subsequent CDI episodes. Disease
recurrence results from continued disruption of the intestinal
microbiota by SOC CDI antibiotics (or use of other antibiotics used to
treat non-gastrointestinal conditions), combined with persistence of
resistant C-diff spores (relapse) or acquisition of new spores from the
environment (reinfection).
Antibacterial drug use may inhibit the intestinal microbiota from
reestablishing itself, allowing C-diff spores potentially to germinate
and colonize the intestines when the antibacterial drug is
discontinued. If regrowth of C-diff overtakes the reestablishment of
the intestinal microbiota, then spore germination and toxin production
from vegetative C-diff may restart the cycle of CDI and the need for
subsequent treatment. These challenges highlight the need for
nonantibiotic therapies. ZINPLAVATM targets Toxin B rather
than the C-diff bacteria itself. According to the applicant, unlike
antibacterial drugs, ZINPLAVATM is a human monoclonal
antibody and does not affect the microbiota. According to the
applicant, ZINPLAVATM neutralizes C-diff Toxin B and reduces
recurrence of CDI. ZINPLAVATM is given concomitantly during
the course of SOC antibacterial treatment of a CDI..
With respect to the newness criterion, ZINPLAVATM
received FDA approval on October 21, 2016, for reduction of recurrence
of CDI in patients receiving antibacterial drug treatment for CDI and
who are at high risk of CDI recurrence. ZINPLAVATM became
commercially available on February 10, 2017. Therefore, the newness
period for ZINPLAVATM began on February 10, 2017.
The applicant submitted a request for a unique ICD-10-PCS procedure
code and was granted approval for the following procedure codes:
XW033A3 (Introduction of bezlotoxumab monoclonal antibody, into
peripheral vein, percutaneous approach, New Technology Group 3) and
XW043A3 (Introduction of bezlotoxumab monoclonal antibody, into central
vein, percutaneous approach, New Technology Group 3).
As discussed above, 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 regard to the first criterion, whether a product uses the same
or a similar mechanism of action to achieve a therapeutic outcome,
according to the applicant, ZINPLAVATM is a human monoclonal
antibody with an innovative mechanism of action. The applicant asserted
that ZINPLAVATM is a novel treatment, with a unique
mechanism of action relative to SOC CDI antibiotics that target C-diff.
The applicant explained that ZINPLAVATM is the first human
monoclonal antibody that targets and neutralizes C. diff Toxin B
because the technology specifically binds to and neutralizes C-diff
Toxin B (which is an exotoxin that contributes to intestinal tissue
damage and immune system effects that underlie the symptoms of CDI) and
inhibits binding of the toxin to mammalian cells. The applicant further
asserted that the administration of ZINPLAVATM, in addition
to standard of care antibacterial drug treatment, reduces CDI
recurrence by providing passive immunity against Toxin B resulting from
persistent or newly acquired C-diff spores. According to the applicant,
ZINPLAVATM is the only FDA-approved treatment indicated for
reducing CDI recurrence as adjunctive therapy in adult patients who are
receiving antibacterial drug treatment for CDI and who are at high risk
for CDI recurrence.
With respect to the second criterion, whether a product is assigned
to the same or a different MS-DRG, the applicant maintained that
patients who may be eligible to receive treatment using
ZINPLAVATM could be in an acute-care hospital setting for a
wide
[[Page 38117]]
variety of reasons and may develop a secondary CDI as a hospital-
acquired infection and, therefore, cases representing patients that may
be eligible for treatment using the technology can map to a wide range
of MS-DRGs. ZINPLAVATM is indicated for patients receiving
SOC treatment for CDI and who are at a high risk for CDI recurrence. In
order to identify the range of MS-DRGs for which cases representing
patients that may be eligible for treatment using ZINPLAVATM
may map to, the applicant identified all MS-DRGs containing cases that
represent patients presenting with CDI as a primary or secondary
diagnosis. The applicant used FY 2015 MedPAR data to map the identified
cases to 543 MS-DRGs, with 12 MS-DRGs accounting for approximately 40
percent of all cases. The applicant segmented these cases based on age
because patients 65 years and older are at higher risk for CDI
recurrence. Based on the FY 2015 MedPAR data, MS-DRG distribution was
found to be similar, irrespective of CDI status (primary or secondary),
for patients over 65 years of age and those under 65 years of age. The
top 7 MS-DRGs across both age groups account for nearly 54 percent
(over 65 years of age) and 49 percent (under 65 years of age). The
applicant further segmented these cases to determine if status of CDI
as a primary or secondary diagnosis influenced MS-DRG mapping.
Regardless of age, when CDI is the primary diagnosis, approximately 98
percent of patient cases map to the same 3 MS-DRGs: MS-DRG 371 (Major
Gastrointestinal Disorders and Peritoneal Infections with MCC); MS-DRG
372 (Major Gastrointestinal Disorders and Peritoneal Infections with
CC); and MS-DRG 373 (Major Gastrointestinal Disorders and Peritoneal
Infections without CC/MCC), respectively. Potential cases representing
patients who may be eligible for treatment with ZINPLAVATM
would be assigned to the same MS-DRGs as cases representing patients
who receive SOC treatment for a diagnosis of CDI.
With respect to the third criterion, whether the new use of the
technology involves the treatment of the same or similar type of
disease and the same or similar patient population, according to the
applicant, ZINPLAVATM is administered concomitantly or as
adjunctive therapy with SOC antibacterial treatment for recurrent CDI.
The applicant stated that ZINPLAVATM is indicated to reduce
recurrence of CDI in adult patients at high risk of CDI recurrence who
are receiving antibacterial drug treatment for CDI. According to the
applicant, the addition of ZINPLAVATM to SOC antibacterial
drug treatment reduces CDI recurrence by providing passive immunity
against Toxin B resulting from persistent or newly acquired C-diff
spores. ZINPLAVATM is used to reduce recurrence of the same
or similar type of disease (CDI) and to treat a similar patient
population receiving SOC therapy for the treatment of recurrent CDI.
We stated in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19879)
that, based on the applicant's statements presented above, because
ZINPLAVATM has a unique mechanism of action, we did not
believe that the technology is substantially similar to existing
technologies and, therefore, meets the newness criterion. We invited
public comments on whether ZINPLAVATM meets the newness
criterion.
Comment: The applicant submitted comments in agreement with CMS'
belief that ZINPLAVATM meets the newness criterion for new
technology add-on payments. The applicant reiterated that
ZINPLAVATM is the only FDA approved treatment indicated for
reducing CDI recurrence as adjunctive therapy in adult patients who are
receiving antibacterial drug treatment for CDI and who are at risk for
CDI recurrence. The applicant agreed that ZINPLAVATM is not
substantially similar to existing technologies and, therefore, meets
the newness criterion.
Response: We appreciate the comments submitted by the applicant on
whether ZINPLAVATM meets the newness criterion. After review
of the information provided by the applicant and consideration of its
comments, we believe that ZINPLAVATM meets the newness
criterion and we consider the technology to be ``new'' as of February
10, 2017, when the technology became commercially available.
With regard to the cost criterion, the applicant conducted the
following analysis to demonstrate that the technology meets the cost
criterion. In order to identify the range of MS-DRGs that cases
representing potential patients who may be eligible for treatment using
ZINPLAVATM may map to, the applicant identified all MS-DRGs
for patients diagnosed with CDI as a primary or secondary diagnosis.
Specifically, the applicant searched the FY 2015 MedPAR file for claims
that included target patients over 65 years of age and identified cases
reporting diagnoses of CDI by ICD-9-CM diagnosis code 008.45
(Intestinal infection due to Clostridium difficile) as a primary or
secondary diagnosis. This resulted in 139,135 cases across 543 MS-DRGs,
with approximately 40 percent of all cases mapping to the following 12
MS-DRGs: MS-DRG 177 (Respiratory Infections and Inflammations with
MCC); MS-DRG 193 (Simple Pneumonia and Pleurisy with MCC); MS-DRG
291(Heart Failure and Shock with MCC); MS-DRGs 371, 372, and 373 (Major
Gastrointestinal Disorders and Peritoneal Infections with MCC, with CC,
and without CC/MCC, respectively); MS-DRGs 682 and 683 (Renal Failure
with MCC and with CC, respectively); MS-DRG 853 (Infectious and
Parasitic Diseases with O.R. Procedure with MCC); MS-DRGs 870, 871, and
872 (Septicemia or Severe Sepsis with Mechanical Ventilation >96 Hours,
with MCC, and without MCC, respectively).
Using the 139,135 identified cases, the average unstandardized
case-weighted charge per case was $80,677. The applicant then
standardized the charges. The applicant did not remove charges for the
current treatment because, as discussed above, ZINPLAVATM
will be used concomitantly with SOC antibacterial treatments for the
treatment of CDI as an additive, or adjunctive treatment option, to
reduce the recurrence of CDI infection. The applicant then applied the
2-year inflation factor of 1.098446 from the FY 2017 IPPS/LTCH PPS
final rule (81 FR 57286) to inflate the charges from FY 2015 to FY
2017. The applicant noted that the anticipated price for
ZINPLAVATM has yet to be determined; therefore, no charges
for ZINPLAVATM were added in the analysis. Based on the FY
2017 IPPS/LTCH PPS Table 10 thresholds, the average case-weighted
threshold amount was $56,871. The inflated average case-weighted
standardized charge per case was $78,929. Because the inflated average
case-weighted standardized charge per case exceeds the average case-
weighted threshold amount, the applicant maintained that the technology
meets the cost criterion. The applicant noted that the inflated average
case-weighted standardized charge per case exceeds the average case-
weighted threshold amount without the average per patient cost of the
technology. As such, the applicant anticipated that the inclusion of
the cost of ZINPLAVATM, at any price point, will further
increase charges above the average case-weighted threshold amount. In
the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19879), we invited
public comments on whether ZINPLAVATM meets the cost
criterion.
Comment: The applicant submitted comments reiterating its cost
analysis
[[Page 38118]]
results. Specifically, the applicant stated that as indicated in the FY
2015 MedPAR data analysis summarized above, the average case-weighted
standardized charge per case exceeded the average case-weighted
threshold amount. As noted in the proposed rule, at the time the
applicant submitted its application, the applicant indicated that the
price of ZINPLAVATM had not yet been determined. However,
because the inflated average case-weighted standardized charge per case
exceeded the average case-weighted threshold amount without the average
per-patient cost of the technology, the applicant contended that the
inclusion of the cost of ZINPLAVA , at any price point, would further
increase charges above the average case-weighted threshold amount.
The applicant noted, in supplemental information submitted to CMS,
the wholesale acquisition cost (WAC) of ZINPLAVATM (which is
supplied as a 1000 mg/40 mL (25 mg/mL) solution in a single-dose vial)
is $3,800 per vial. The recommended dosage of ZINPLAVATM is
a single 10 mg/kg dose administered as an IV infusion based on patient
body weight. Because each vial contains 1,000 mg of
ZINPLAVATM, a single vial provides the complete recommended
dose for a single patient who weighs 100 kg or less.
As noted in the applicant's supplemental submission, to estimate
the anticipated average charge submitted by hospitals for
ZINPLAVATM, the applicant assumed that hospitals will mark
up the cost for ZINPLAVATM by 200 percent. A 200 percent
mark-up of the $3,800 WAC results in a total charge of $7,600 for
ZINPLAVATM. The applicant added the anticipated charge for
ZINPLAVATM of $7,600 to the previously determined inflated
average case-weighted standardized charge per case of $78,929. This
resulted in a revised inflated average case-weighted standardized
charge per case of $86,529, which still exceeds the average case-
weighted threshold amount of $56,871.
Response: After consideration of the comments we received, we agree
that ZINPLAVATM meets the cost criterion.
With respect to the substantial clinical improvement criterion, the
applicant asserted that the addition of ZINPLAVATM to SOC
antibacterial drug treatment reduces CDI recurrence because it provides
passive immunity against Toxin B resulting from persistent or newly
acquired C-diff spores.
The applicant conducted two Phase III studies, MODIFY I and MODIFY
II. The primary endpoint of the studies was recurrent CDI within 12
weeks after completion of treatment with ZINPLAVATM. The
first study design initially included actoxumab, an antitoxin A
monoclonal antibody treatment arm that was later discontinued due to a
high failure rate and increase in mortality compared to other treatment
arms.\3\ Clinical data on ZINPLAVATM is provided exclusively
from the FDA briefing document available on the FDA Web site at: http://www.fda.gov/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/Anti-InfectiveDrugsAdvisoryCommittee. Information is also provided in the
package insert by the manufacturer, Merck & Company, Inc. The FDA
briefing provided data on the safety and efficacy of
ZINPLAVATM. The FDA considered sustained clinical responses
defined as clinical cure of the initial CDI episode and the absence of
CDI recurrence as an appropriate endpoint to assess the efficacy of
ZINPLAVA\TM\ in the prevention of CDI recurrences.
---------------------------------------------------------------------------
\3\ Wilcox MH et al. Bezlotoxumab for Prevention of Recurrent
Clostridium difficile Infection. N Engl J Med. 2017 Jan
26;376(4):305-317.
---------------------------------------------------------------------------
In MODIFY I trial, the clinical cure rate of the presenting CDI
episode was lower in the ZINPLAVA\TM\ arm as compared to the placebo
arm, whereas in MODIFY II trial the clinical cure rate was lower in the
placebo arm as compared to the ZINPLAVA\TM\ arm. Additional analyses
showed that, by 3 weeks post study drug infusion, the clinical cure
rates of the presenting CDI episode were similar between treatment
arms.
In MODIFY I, the rate of sustained clinical response was
numerically in favor of ZINPLAVA\TM\ (60.1 percent) in comparison to
placebo (55.2 percent) with an adjusted difference and 95 percent CI of
4.8 percent (-2.1 percent; 11.7 percent). In MODIFY II, the proportion
of subjects with sustained clinical response in the ZINPLAVA\TM\ arm
(66.8 percent) was also higher than in the placebo arm (52.1 percent)
with an adjusted difference of 14.6 percent and 95 percent CI (7.8
percent; 21.4 percent). The treatment did not significantly decrease
mortality. Recurrence rates, including CDI-related hospital readmission
rates, reportedly were between 10 and 25 percent. No clinically
meaningful differences in the exposure of bezlotoxumab were found
between patients 65 years of age and older and patients under 65 years
of age.
In the Phase III trials, the safety profile of
ZINPLAVATM was similar overall to that of placebo. However,
heart failure was reported more commonly in the two Phase III clinical
trials of ZINPLAVATM-treated patients compared to placebo-
treated patients. These adverse reactions occurred primarily in
patients with underlying congestive heart failure (CHF). In patients
with a history of CHF, 12.7 percent (15/118) of ZINPLAVATM-
treated patients and 4.8 percent (5/104) of placebo-treated patients
had the serious adverse reaction of heart failure during the 12-week
study period. In addition, in patients with a history of CHF, there
were more deaths in ZINPLAVATM-treated patients (19.5
percent (23/118)) than in placebo-treated patients (12.5 percent (13/
104)) during the 12-week study period. We stated in the proposed rule
that we were concerned regarding the safety of ZINPLAVATM in
patients diagnosed with CHF. In regards to safety, data from the MODIFY
I and MODIFY II studies suggest few adverse events associated with
ZINPLAVATM, with no significant differences in the number of
serious adverse events, deaths or discontinuations of study drug that
occurred between the ZINPLAVATM and the placebo groups.
However, both the ZINPLAVATM and the ZINPLAVATM
plus actoxumab treatment groups experienced more episodes of cardiac
failure (defined as acute or chronic cardiac failure) then compared to
the placebo group (2.2 percent versus 1 percent). We stated in the
proposed rule that we were unsure if the cardiac failure reported in
the studies may be the result of a higher number of baseline patients
with heart failure in the treatment arms or the result of an adverse
effect to ZINPLAVATM. Therefore, we stated that we were
concerned with regard to the adverse event of cardiac failure of
ZINPLAVATM.
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19880), we
invited public comments on whether ZINPLAVATM meets the
substantial clinical improvement criterion. We noted that we did not
receive any written public comments in response to the New Technology
Town Hall meeting notice regarding the application of
ZINPLAVATM for new technology add-on payments.
Comment: The applicant submitted comments regarding the substantial
clinical improvement criterion. The applicant reiterated that the
addition of ZINPLAVATM to standard of care antibacterial
drug treatment reduces the risk of CDI recurrence in adult patients who
are at high risk for CDI recurrence because it provides passive
immunity against Toxin B resulting from persistent or newly acquired C.
difficile spores. The applicant noted CMS'
[[Page 38119]]
concern, as described in the proposed rule, regarding the reported
adverse event of cardiac failure with ZINPLAVATM. The
applicant provided additional information concerning serious adverse
events (SAEs) observed in the Phase III trials, and also included a
series of analyses performed in the 41 subjects with an SAE of cardiac
failure, as well as a discussion of analyses performed in a subset of
patients with a baseline history of CHF..
The applicant noted that SAEs were collected for the full 12-week
follow-up period in the both Phase III trials (P001 + P002). Amongst
the 2344 Phase III trial subjects, 29.8 percent of subjects experienced
an SAE during the 12-week follow-up period. According to the applicant,
the proportion of subjects with a SAE was lower in the active treatment
groups compared with placebo (bezlotoxumab, 29.4 percent; actoxumab +
bezlotoxumab, 27.3 percent; and placebo, 32.7 percent). The most
frequently reported SAEs across all treatment groups were CDI (4.7
percent), pneumonia (2.0 percent), sepsis (1.8 percent), cardiac
failure (1.7 percent), diarrhea (1.6 percent), and urinary tract
infection (1.5 percent). A higher percentage of subjects in the active
treatment groups reported SAEs of cardiac failure compared with placebo
(bezlotoxumab, 2.2 percent; actoxumab + bezlotoxumab, 2.2 percent; and
placebo, 0.9 percent), whereas a higher percentage of subjects reported
SAEs of CDI, pneumonia, and sepsis in the placebo group compared with
the bezlotoxumab and actoxumab + bezlotoxumab groups. The incidence for
other frequently reported SAEs was similar across groups. SAEs
generally reflected the underlying comorbidities and advanced age of
the subjects enrolled.
The applicant also further characterized the observed numerical
imbalance of subjects experiencing cardiac failure SAEs in
bezlotoxumab-containing versus placebo treatment groups, by performing
a series of analyses in the 41 subjects with an SAE of cardiac failure.
The applicant noted the baseline characteristics of the 41 subjects who
experienced an SAE of cardiac failure. As compared with the All
patients as treated (APaT) population for the integrated Phase III
trials (P001 + P002) dataset, the 41 subjects were older, almost all
were inpatients at the time of enrollment, had a higher incidence of
comorbid conditions (as evidenced by Charlson Comorbidity Index and
Horn's Index), and a higher incidence of severe CDI. Across the
treatment groups, nearly 90 percent had a medical history of including
at least one cardiac condition and approximately 70 percent had a
history of cardiac failure and/or cardiomyopathy. Therefore, the
applicant believed that any assessment of the safety profile of this
morbidly ill patient population must be interpreted with caution.
The applicant provided an analysis of the safety profile of the 41
subjects with cardiac failure SAEs with respect to timing to cardiac
failure SAE and death. In the placebo group, 5 of 7 subjects
experienced an SAE of cardiac failure before Week 4, while in the
bezlotoxumab and actoxumab + bezlotoxumab groups, the majority of such
events occurred after Week 4. None of the cardiac failure SAEs was
deemed drug related by the investigator. Among subjects with a cardiac
failure SAE, a higher proportion of subjects in the placebo group than
in the bezlotoxumab group died before Week 4. The applicant noted that
the events were often associated with concurrent conditions such as
infection and/or worsening CDI that are known to exacerbate CHF,
thereby further supporting the assessments that these events were not
drug related. Overall, according to the applicant, these findings do
not support a clear association between cardiac failure and
bezlotoxumab, especially recognizing the severe baseline morbidity of
the subjects and the lack of a temporal association of the event and
any associated death.
The applicant reiterated that heart failure is listed in the
warnings and precautions section of the prescribing information for
ZINPLAVATM to describe the higher incidence of heart failure
reported in the two Phase III trials in subjects who received
ZINPLAVATM compared with those who received placebo,
primarily in patients with underlying CHF. The warnings and precautions
section of the ZINPLAVATM label states, in part, that in
patients with a history of CHF, ZINPLAVATM ``should be
reserved for use when the benefit outweighs the risk.'' Although the
overall safety profile of ZINPLAVATM was found to be
acceptable, the FDA considered that this information was clinically
relevant. Furthermore, the applicant stated that ZINPLAVATM
has also recently been authorized for use by the European Medicines
Agency (EMA) and that there is no heart failure warning in the EU
prescribing information.
Response: We appreciate the additional information and analysis
provided by the applicant in response to our concerns regarding the
adverse event of cardiac failure. We are satisfied that the warnings
and precautions section of the drug's label clearly state that
``ZINPLAVATM should be reserved for use when the benefit
outweighs the risk'' for patients with a history of congestive heart
failure (CHF). We agree that ZINPLAVATM represents a
substantial clinical improvement over existing technologies because,
based on the studies provided by the applicant, it reduces CDI
recurrence by providing passive immunity against Toxin B resulting from
persistent or newly acquired C-diff spores. After consideration of the
public comments we received, we have determined that
ZINPLAVATM meets all of the criteria for approval of new
technology add-on payments. Therefore, we are approving new technology
add-on payments for ZINPLAVATM for FY 2018. Cases involving
ZINPLAVATM that are eligible for new technology add-on
payments will be identified by ICD-10-PCS procedure codes XW033A3 and
XW043A3.
In its application, the applicant estimated that the average
Medicare beneficiary would require a dosage of 10 mg/kg administered as
an IV infusion over 60 minutes as a single dose. According to the
applicant, the WAC for one dose is $3,800. Under 42 CFR 412.88(a)(2),
we limit new technology add-on payments to the lesser of 50 percent of
the average cost of the technology or 50 percent of the costs in excess
of the MS-DRG payment for the case. As a result, the maximum new
technology add-on payment amount for a case involving the use of
ZINPLAVATM is $1,900 for FY 2018. In keeping with the
current ZINPLAVATM label, CMS expects ZINPLAVATM
will be prescribed for adult patients who are receiving antibacterial
drug treatment for a diagnosis of CDI who are at high risk for CDI
recurrence, and after consideration of its current warnings and
precautions section which indicates for patients with a history of CHF,
ZINPLAVATM should be reserved for use when the benefit
outweighs the risk.
b. EDWARDS INTUITY EliteTM Valve System (INTUITY) and
LivaNova Perceval Valve (Perceval)
Two manufacturers, Edwards Lifesciences and LivaNova, submitted
applications for new technology add-on payments for FY 2018 for the
INTUITY EliteTM Valve System (INTUITY) and the Perceval
Valve (Perceval), respectively. Both of these technologies are
prosthetic aortic valves inserted using surgical aortic valve
replacement (AVR). We note that, while Edwards Lifesciences submitted
an application for new technology add-on payments for
[[Page 38120]]
FY 2017 for the INTUITY valve, FDA approval was not received by July 1,
2016, and, therefore, the device was not eligible for consideration for
new technology add-on payments for FY 2017.
Aortic valvular disease is relatively common, primarily manifested
by aortic stenosis. Most aortic stenosis is due to calcification of the
valve, either on a normal tri-leaflet valve or on a congenitally
bicuspid valve. The resistance to outflow of blood is progressive over
time, and as the size of the aortic orifice narrows, the heart must
generate increasingly elevated pressures to maintain blood flow.
Symptoms such as angina, heart failure, and syncope eventually develop,
and portend a very serious prognosis. There is no effective medical
therapy for aortic stenosis, so the diseased valve must be replaced or,
less commonly, repaired.
The INTUITY valve incorporates the expansion feature of a catheter
implanted valve, but is designed to be placed during cardiac surgery.
The manufacturer explained that the INTUITY valve requires fewer
stitches to hold the device in place because of the balloon expanded
design and, therefore, can be inserted more quickly than a standard
valve, and also facilitates minimally invasive cardiac surgery; that
is, use of a smaller incision to allow faster recovery. The
manufacturer of the INTUITY valve indicated that the device is
comprised of: (1) A bovine pericardial aortic bioprosthetic valve; (2)
a balloon expandable stainless steel frame; and (3) a textured sealing
cloth. The manufacturer of the Perceval valve indicated that the
Perceval valve device is comprised of: (1) Sizers used to determine the
correct size of the prosthesis; (2) a dual holder used for positioning
and deployment (available in two models, one for sternal approaches and
one for MIS); (3) a ``smart clip'' to assist during assembly of the
valve on the dual holder to prevent release during positioning; (4) a
dual collapser used to evenly reduce the diameter of the prosthesis
allowing it to mount onto the holder prior to implantation; (5) a dual
collapser base used to allow proper positioning; and (6) a postdilation
catheter used for in situ dilation of the prosthesis after implantation
(available in two models, one for sternal approaches and one for MIS).
According to both applicants, the INTUITY valve and the Perceval valve
are the first sutureless, rapid deployment aortic valves that can be
used for the treatment of patients who are candidates for surgical AVR.
The applicants indicated that the two new device innovations facilitate
MIS approaches through: (1) The device rapid deployment mechanisms; and
(2) the design of the prosthetic valve that allows for markedly fewer
to no sutures to securely fasten the prosthetic valve to the aortic
orifice. The applicants explained that both of these aspects of their
devices are credited with the reduction of operating time.
As noted, according to both applicants, the INTUITY valve and the
Perceval valve are the first sutureless, rapid deployment aortic valves
that can be used for the treatment of patients who are candidates for
surgical AVR. Because potential cases representing patients who are
eligible for treatment using the INTUITY and the Perceval aortic valve
devices would group to the same MS-DRGs, and we believe that these
devices are intended to treat the same or similar disease in the same
or similar patient population, and are purposed to achieve the same
therapeutic outcome using the same or similar mechanism of action, we
believe these two devices 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.
With respect to the newness criterion, the INTUITY valve received
FDA approval on August 12, 2016, and was commercially available on the
U.S. market on August 19, 2016. The Perceval valve received FDA
approval on January 8, 2016, and was commercially available on the U.S.
market on February 29, 2016. We believe that, in accordance with our
policy, it is appropriate to use the earliest market availability date
submitted as the beginning of the newness period. Therefore, we stated
in the proposed rule that based on our policy, with regard to both
devices, if the technologies are approved for new technology add-on
payments, we believe that the beginning of the newness period would be
February 29, 2016. In addition, both applicants indicated that ICD-10-
PCS code X2RF032 (Replacement of Aortic Valve using Zooplastic Tissue,
Rapid Deployment Technique, Open Approach, New Technology Group 2)
would identify procedures involving the use of the devices when
surgically implanted.
We previously stated that, because we believe these two devices are
substantially similar to each other, we believe it is appropriate to
evaluate both technologies as one application for new technology add-on
payment under the IPPS. The applicants submitted separate cost and
clinical data, and we reviewed and discuss each set of data separately.
However, we stated in the proposed rule that we intend to make one
determination regarding new technology add-on payments that will apply
to both devices. We believe that this is consistent with our policy
statements in the past regarding substantial similarity. Specifically,
we have noted that approval of new technology add-on payments would
extend to all technologies that are substantially similar (66 FR
46915), and we believe that continuing our current practice of
extending new technology add-on payments without a further application
from the manufacturer of the competing product, or a specific finding
on cost and clinical improvement if we make a finding of substantial
similarity among two products is the better policy because we avoid--
Creating manufacturer-specific codes for substantially
similar products;
Requiring different manufacturers of substantially similar
products to submit separate new technology applications;
Having to compare the merits of competing technologies on
the basis of substantial clinical improvement; and
Bestowing an advantage to the first applicant representing
a particular new technology to receive approval (70 FR 47351).
We explained in the proposed rule that if these substantially
similar technologies were submitted for review in different (and
subsequent) years, rather than the same year, we would evaluate and
make a determination on the first application and apply that same
determination to the second application. However, because the
technologies have been submitted for review in the same year, we
believe that it is appropriate to consider both sets of cost data and
clinical data in making a determination and we do not believe that it
is possible to choose one set of data over another set of data in an
objective manner.
As stated above, we believe that the INTUITY valve and the Perceval
valve are substantially similar to each other for purposes of analyzing
these two applications as one application. As we stated in the proposed
rule, we also need to determine whether the INTUITY valve and the
Perceval valve are substantially similar to existing technologies prior
to their approval by the FDA and their release on the market. 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
[[Page 38121]]
considered ``new'' for purposes of new technology add-on payments.
With respect to the first criterion, whether a product uses the
same or a similar mechanism of action to achieve a therapeutic outcome,
the applicant for the INTUITY valve asserted that its unique design,
which utilizes features that were not previously included in
conventional aortic valves, constitutes a new mechanism of action. The
deployment mechanism allows for rapid deployment. The expandable frame
can reshape the native valve's orifice, creating a larger and more
efficiently shaped effective orifice area. In addition, the expandable
skirt allows for structural differentiation upon fixation of the valve
requiring 3 permanent, guiding sutures rather than the 12 to 18
permanent sutures used to fasten standard prosthetic aortic valves. The
applicant for the Perceval valve described the Perceval valve's
mechanism of action as including: (a) No permanent sutures; (b) a
dedicated delivery system that increases the surgeon's visibility; (c)
an enabler of minimally invasive approach; (d) a complexity reduction
and reproducibility of the procedure; and (e) a unique device assembly
and delivery systems.
With respect to the second and third criteria, whether a product is
assigned to the same or a different MS-DRG and whether the new use of
the technology involves the treatment of the same or similar type of
disease and the same or similar patient population, the applicant for
the INTUITY valve indicated that the technology is used in the
treatment of the same patient population and potential cases
representing patients that may be eligible for treatment using the
INTUITY valve would be assigned to the same MS-DRGs as cases involving
the use of other prosthetic aortic valves (that is, MS-DRGs 216
(Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac
Catheterization with MCC), 217 (Cardiac Valve & Other Major
Cardiothoracic Procedures with Cardiac Catheterization with CC), 218
(Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac
Catheterization without CC/MCC), 219 (Cardiac Valve & Other Major
Cardiothoracic Procedures without Cardiac Catheterization with MCC),
220 (Cardiac Valve & Other Major Cardiothoracic Procedures without
Cardiac Catheterization with CC), and 221 (Cardiac Valve & Other Major
Cardiothoracic Procedures without Cardiac Catheterization without CC/
MCC).
The applicant for the Perceval valve also indicated that the
Perceval valve device is used in the treatment of the same patient
population and potential cases representing patients that may be
eligible for treatment using the technology would be assigned to the
same MS-DRGs (MS-DRGs 216 through 221) as cases involving the use of
other prosthetic aortic valves.
We stated in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19881)
that after considering the materials included with both applications,
we remained concerned as to whether the mechanism of action described
by the applicants represents an improvement to an existing surgical
technique and technology or a new technology. While the INTUITY and
Perceval valves address some of the challenges posed by implantation of
existing valves, including improving the visibility of the orifice and
the physiological function of the valves, we stated that we did not
believe that their mechanisms of action are fundamentally different
from that of other aortic valves. As one of the applicants stated in
its application, the goal of the prosthetic aortic valve is to mimic
the native valve that it has replaced via the incorporation of three
leaflets that open and close in response to pressure gradients
developed during the cardiac cycle. We stated that we believe that the
INTUITY and Perceval valves are the same or similar to other prosthetic
aortic valves used to treat the same or similar diagnoses.
In the proposed rule, we invited public comments on whether the
mechanism of action of the sutureless, rapid deployment of the INTUITY
and Perceval valves differs from the mechanism of action of standard
AVR valves and whether the technologies meet the newness criterion.
Comment: The applicant for the INTUITY valve, as well as several
physicians that have performed surgeries implanting the INTUITY, stated
that the mechanism of action differs from that of standard aortic
valves because of the expeditious implantation, rapid deployment, and
improved hemodynamics. The applicant also emphasized innovative aspects
about the INTUITY that were described in its application, such as the
flexible delivery system, the ability to reshape the native valve's
orifice, and the balloon expandable stented frame and subannular skirt.
The applicant emphasized that minimally invasive aortic valve
replacement has not been widely adopted because of greater technical
challenge and longer cross-clamp times, but that the INTUITY
facilitates minimally invasive surgery by addressing both of these
challenges.
One commenter, who also manufactures heart valves, indicated that
it shared CMS' concern about whether the mechanism of action
constitutes a new technology. This commenter indicated that prosthetic
aortic valves fall into two categories: Traditional, open surgical and
minimally invasive, and that differences in design of the valves are
intended to address challenges in surgical valve replacement, including
surgical technique, reduction in complications, improvement in
hemodynamics, or resistance to calcification. The commenter stated that
all prosthetic aortic valves are substantially similar to each other.
The commenter described the steps involved in placing surgical valves,
and indicated that the applicants' devices introduce a new technique
for securing a surgically implanted bioprosthetic heart valve to the
annulus and surrounding structures, but that the mechanism of action is
unchanged. The commenter also noted that rapid deployment surgical
aortic valves were introduced into clinical practice in 1963.
Response: We thank the commenters for the details and input on
whether INTUITY and Perceval meet the newness criterion. While we
appreciate the additional information provided by the commenter that
did not believe these valves represented a new technology, we believe
that based on comments from the manufacturer and physicians who have
used the INTUITY device, the mechanism of action for the INTUITY and
Perceval is different from other aortic valves. Specifically, as the
manufacturer and other physicians emphasized in their comments, the
technical features of the valve provide the ability to improve clinical
function beyond the opening and closing of the valve leaflets and allow
it to perform more efficiently than a standard valve. Thus, as these
commenters noted, a prosthetic aortic valve inserted using surgical AVR
with its insertion process improves the physiologic function of the
outflow track of the new valve. After further review of the information
provided by the applicant and consideration of the public comments we
received, we believe that INTUITY and Perceval meet the newness
criterion. Therefore, we consider the technology to be ``new'' as of
February 29, 2016, when the Perceval valve became commercially
available.
As we stated above, each applicant submitted separate analyses
regarding the cost criterion for each of their devices, and both
applicants maintained that their device meets the cost criterion. We
summarize each analysis below.
[[Page 38122]]
With regard to the cost criterion, the INTUITY valve's applicant
researched the FY 2015 MedPAR claims data file to identify cases
representing patients who may be potential recipients of treatment
using the INTUITY valve. The applicant identified claims that reported
an ICD-9-CM diagnosis code of 424.1 (Aortic valve disorder), in
combination with an ICD-9-CM procedure code of 35.21 (Replacement of
aortic valve with tissue) or 35.22 (Open and other replacement of
aortic valve). The applicant also identified cases with or without a
coronary artery bypass graft (CABG) using the ICD-9-CM procedure codes
in the table below.
------------------------------------------------------------------------
ICD-9-CM code Code description
------------------------------------------------------------------------
36.10..................... Aortocoronary bypass for heart
revascularization, not otherwise specified
36.11..................... (Aorto)coronary bypass of one coronary
artery.
36.12..................... (Aorto)coronary bypass of two coronary
arteries.
36.13..................... (Aorto)coronary bypass of three coronary
arteries.
36.14..................... (Aorto)coronary bypass of four or more
coronary arteries.
36.15..................... Single internal mammary-coronary artery
bypass.
36.16..................... Double internal mammary-coronary artery
bypass.
36.17..................... Abdominal-coronary artery bypass.
------------------------------------------------------------------------
The applicant identified a total of 25,173 cases that mapped to MS-
DRGs 216 through 221. Of these cases, the applicant identified 10,251
CABG cases and 14,922 non-CABG cases. According to the applicant,
patients that undergo a procedure without need of a concomitant CABG
are more likely to receive treatment with the INTUITY valve than
patients in need of a concomitant CABG. Therefore, the applicant
weighted the non-CABG cases at 90 percent of total cases and the CABG
cases at 10 percent of total cases under each of the six MS-DRGs. The
final case count is a weighted average of 14,455 cases.
The applicant calculated an average unstandardized charge per case
of $192,506 for all cases. The applicant then removed 100 percent of
the charges for pacemakers, investigational devices, and other implants
that would not be required for patients receiving treatment using the
INTUITY valve. The applicant standardized the charges and then applied
an inflation factor of 1.098446, which is the 2-year inflation factor
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57286), to update the
charges from FY 2015 to FY 2017. The applicant calculated the average
expected charge for the INTUITY valve based on the current list price
of the device. Although the applicant submitted data related to the
cost of the INTUITY valve, the applicant noted that the cost of the
device is proprietary information. To add charges for the device, the
applicant assumed a hospital mark-up of approximately 300 percent,
based on the current average CCR for implantable devices (0.331) as
reported in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56876). Based
on the FY 2017 IPPS/LTCH PPS Table 10 thresholds, the average case-
weighted threshold amount was $170,321. The applicant computed an
inflated average case-weighted standardized charge per case of
$194,291, which is $23,970 above the average case-weighted threshold
amount. Because the inflated average case-weighted standardized charge
per case exceeds the average case-weighted threshold amount, the
applicant maintained that the technology meets the cost criterion.
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19882), we
thanked the applicant for the analysis above. However, we indicated
that we would like more information from the applicant regarding how it
decided upon which cases to include in the sensitivity analysis, as
well as further details about how and on what basis the applicant
weighted CABG and non-CABG cases. We invited public comments on whether
the INTUITY valve meets the cost criterion. We summarize the public
comment we received from the applicant regarding its cost analysis
later in this section.
With regard to the cost criterion in reference to the Perceval
valve, the applicant conducted the following analysis. The applicant
examined FY 2015 MedPAR claims data that included cases reporting an
ICD-9 procedure code of 35.21 or 35.22, in combination with diagnosis
code: 424.1. Noting that MS-DRGs 216 through 221 contained 97 percent
of these cases, the applicant limited its analysis to these 6 MS-DRGs.
The applicant identified 25,193 cases across these MS-DRGs, resulting
in an average case-weighted unstandardized charge per case of $173,477.
The applicant then standardized charges using FY 2015 standardization
factors and applied an inflation factor of 1.089846 from the FY 2017
IPPS/LTCH PPS proposed rule (81 FR 25271). The applicant indicated that
the technology meets the cost criterion by applying the inflation
factor from the proposed rule and, therefore, would meet the cost
criterion by applying the higher inflation factor from the final rule.
Included in the average case-weighted standardized charge per case
were charges for the current valve prosthesis. Therefore, the applicant
removed all charges associated with revenue center 0278, and calculated
the adjusted average case-weighted standardized charge per case by
subtracting these charges from the standardized charge per case. The
applicant then added the charge for the new technology by taking the
anticipated hospital cost of the new technology and dividing it by the
national average implantable devices CCR of 0.331. The applicant then
added the charge for the new technology to the inflated average case-
weighted standardized charges per case to arrive at the final inflated
average case-weighted standardized charge per case, which was then
case-weighted based on the distribution of cases within the six MS-
DRGs. This resulted in an inflated average case-weighted standardized
charge per case of $206,109. Using the FY 2017 IPPS Table 10
thresholds, the average case-weighted threshold amount was $173,477.
Because the inflated average case-weighted standardized charge per case
exceeds the average case-weighted threshold amount, the applicant
maintained that the technology meets the cost criterion. In the FY 2018
IPPS/LTCH PPS proposed rule (82 FR 19882), we invited public comments
on whether the Perceval technology meets the cost criterion. We did not
receive any public comments concerning the costs for the Perceval
technology.
Comment: The applicant for the INTUITY valve stated that it based
its initial sensitivity analysis on 14,455 cases that reflected the
weighted mix of CABG and non-CABG cases, as the findings in European
trials indicated that INTUITY was predominantly performed on patients
who did not have a concomitant CABG during their inpatient stay. The
applicant stated that
[[Page 38123]]
because the INTUITY is intended for use in all surgical aortic valve
replacement procedures, regardless of whether the patient also receives
CABG, it reran the cost threshold analysis including all 25,173 target
cases in the FY 2015 MedPAR with an ICD-9-CM diagnosis code of 424.1
(Aortic valve disorder), in combination with an ICD-9-CM procedure code
of 35.21 (Replacement of aortic valve with tissue) or 35.22 (Open and
other replacement of aortic valve) that mapped to MS-DRGs 216 through
221. The applicant presented a summary table, which indicated that the
case weighted threshold was $173,463, the final inflated case weighted
standardized charge per case was $206,329, and the difference is
$32,866.
Response: We appreciate the applicant's submission of this
additional information. Based on review of the sensitivity analysis
included in the original application and subsequent analysis included
in the INTUITY applicant's public comment, as well as the cost analyses
set forth in both applicants' original applications as set forth above,
we have determined that both the INTUITY and the Perceval valve meet
the cost criterion.
With regard to substantial clinical improvement for the INTUITY
valve, the applicant asserted that several aspects of the valve system
represent a substantial clinical improvement over existing
technologies. The applicant believed that the flexible deployment arm
allows improved surgical access and visualization, making the surgery
less challenging for the surgeon, improving the likelihood that the
surgeon can use a minimally invasive approach. According to the
applicant, the assembly of the device only allows the correct valve
size to be fitted, which ensures that the valve does not slip or
migrate, which prevents paravalvular leaks and patient prosthetic
mismatch. The applicant indicated that the device improves clinical
outcomes for patients undergoing minimally invasive AVR and full-
sternotomy AVR. The applicant stated that the rapid deployment
technology enables reduced operative time, specifically cross-clamp
time, thereby reducing the period of myocardial ischemia. In addition,
the applicant indicated that the device offers a reduction in operative
time for full-sternotomy AVR. The applicant noted that clinical results
document significant patient outcome and utilization improvements,
including improved patient satisfaction, faster return to normal
activity, decreased post-operative pain, reduced mortality and
decreased complications, including need for reoperation due to
bleeding, reduced recovery time, reduced length of stay (both ICU and
overall), more access to minimally invasive surgery, and improved
hemodynamics.
The INTUITY valve has been tested clinically in several trials. In
the TRITON trial (Kocher et al., 2013 \4\), 287 patients diagnosed with
aortic stenosis underwent surgery in 1 of 6 European centers. The first
149 patients received the first generation Model 8300A valve, and the
next 138 patients received the second generation Model 8300AB. The
average age of the patients was 75.7 years. Early, 30-day mortality was
1.7 percent (5/287), the post-op valve gradient was low, and 75 percent
of the patients improved functionally. A total of 4 valves were
explanted in the final 30 days due to bleeding, and 3 were explanted
later for paravalvular leak, endocarditis, and aortic root aneurysms.
Follow-up extended to 3 years (mean 1.8 years).
---------------------------------------------------------------------------
\4\ Kocher AA, Laufer G, Haverich A, et al. One-year outcomes of
the surgical treatment of aortic stenosis with a next generation
surgical aortic valve (TRITON) trial: A prospective multicenter
study of rapid-deployment aortic valve replacement with the EDWARDS
INTUITY valve system. J Thorac Cardiovasc Surg 2013;145:110-116.
---------------------------------------------------------------------------
Implantation of the INTUITY valve using minimally invasive surgery
was compared with conventional aortic valve replacement via full
sternotomy in the CADENCE-MIS randomized trial (Borger et al., 2015
\5\) of 100 patients treated in 1 of 5 centers in Germany. The authors
found no significant difference in 30-day mortality, the need for
pacemaker implantation, significant paravalvular regurgitation, and
quality of life scores at 3 months. Aortic cross-clamp time was
significantly reduced from 54.0 to 41.3 minutes (p < 0.0001), and
cardiopulmonary bypass time was reduced from 74.4 to 68.8 minutes (p =
0.21). Early clinical outcomes were similar: No significant differences
in mortality, reoperation, or other clinical outcomes. The aortic valve
gradient was significantly lower in the MIS group: 8.5 versus 10.3
mmHg.
---------------------------------------------------------------------------
\5\ Borger MA, Moustafine V, Conradi L, et al. A randomized
multicenter trial of minimally invasive rapid deployment versus
conventional full sternotomy aortic valve replacement. Ann Thorac
Surg 2015; 99:17-25.
---------------------------------------------------------------------------
The TRANSFORM trial (Barnhart et al. 2017 \6\) was a single-arm,
non-randomized, multicenter trial, in which 839 patients underwent
rapid deployment AVR surgery. The average age of the patients was 73.5
years. The mean cross-clamp time and cardiopulmonary bypass times for
full sternotomy were 49.3 26.9 min and 69.2
34.7 min, respectively, and for MIS, 63.1 25.4 min and
84.6 33.5 min, respectively. The authors compared these
times to STS database comparators: For full sternotomy, 76.3 minutes
and 104.2 minutes, respectively, and for MIS, 82.9 minutes and 111.4
minutes, respectively. All cause early mortality was 0.8 percent, mean
EOA at 1 year was 1.7 cm\2\; mean gradient, 10.3 mmHg; and moderate and
severe PVL, 1.2 percent and 0.4 percent, respectively. The authors
indicated that the INTUITY valve ``. . . may lead to a relative
reduction in aortic cross-clamp time and cardiopulmonary bypass time''
and ``may confer benefits to patients, such as decreased mortality and
morbidity.'' The authors noted the possibility of potential bias
resulting from the level of experience of the study surgeons relative
to typical cardiac surgeons. In addition, long-term follow-up is not
available, and study comparators from the Society of Thoracic Surgeons
(STS) database were not matched.
---------------------------------------------------------------------------
\6\ Barnhart, G.A. et al. (2017). TRANSFORM (Multicenter
Experience with Rapid Deployment Edwards INTUITY Valve System for
Aortic Valve Replacement) US clinical trial: Performance of a rapid
deployment aortic valve. The Journal of Thoracic and Cardiovascular
Surgery, 153, 241-251.
---------------------------------------------------------------------------
In the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25057), after
reviewing the studies provided by the applicant with its application
for FY 2017, we expressed some specific concerns. We indicated that we
were concerned that the INTUITY valve does not have sufficient
advantages over alternative surgically implanted valves to constitute a
substantial clinical improvement. We noted that, while some of the
studies included with the application demonstrate reduced aortic cross-
clamp time, conventional aortic valve replacement was used in the
comparison group. Therefore, it is unclear whether the reduced aortic
cross-clamp time is associated with the use of the INTUITY valve or as
a result of the MIS surgery in general.
In response to these concerns, the INTUITY valve's applicant stated
that the INTUITY valve is associated with significant clinical benefits
outside of the benefits achieved by use of an MIS approach. The
applicant referenced the sub-study of the TRANSFORM trial, which
compared the MISAVR with the INTUITY valve to MISAVR with a
conventional valve, stating that the results indicated reduced cross-
clamp time and other benefits that are not simply a function of the MIS
approach. The applicant also referenced trials that indicated that the
INTUITY valve had excellent hemodynamic performance
[[Page 38124]]
(Haverich et al.,\7\ Borger et al.,\8\ Barnhart et al.,\9\) one of
which found a significant improvement in functional status (Haverich et
al.).
---------------------------------------------------------------------------
\7\ Haverich, A, et al. (2014), Three-year hemodynamic
performance, left ventricular mass regression, and prosthetic-
patient mismatch after rapid deployment aortic valve replacement in
287 patients. J Thorac Cardiovasc Surg, 148(6), 2854-60.
\8\ Borger MA, Moustafine V, Concadi L, et al. A randomized
multicenter trial of minimally invasive rapid deployment versus
conventional full sternotomy aortic valve replacement. Ann Thorac
Surg 2015; 99:17-25.
\9\ Barnhart, G.A. et al. (2017). TRANSFORM (Multicenter
Experience with Rapid Deployment Edwards INTUITY Valve System for
Aortic Valve Replacement) US clinical trial: Performance of a rapid
deployment aortic valve. The Journal of Thoracic and Cardiovascular
Surgery, 153, 241-251.
---------------------------------------------------------------------------
After considering the studies provided by the INTUITY valve
applicant, in the proposed rule, we stated that we were concerned about
the possibility of potential bias resulting from the level of
experience of the study surgeons relative to typical cardiac surgeons,
as well as the lack of long-term follow-up in these studies.
Comment: The applicant stated that there are three key points to
support the improved clinical performance of the INTUITY. First, there
is a sufficient body of evidence across multiple clinical studies
demonstrating improved clinical and hemodynamic performance versus
traditionally implanted surgical valves. Second, these improvements are
not simply a result of a minimally invasive surgical approach. Third,
collectively, these points validate the premise that the technical
features of the INTUITY are the primary contributor of the improved
clinical outcomes, and that non-INTUITY procedures done with a
minimally invasive surgical approach generally have longer cross-clamp
and operative times. Physicians that have implanted the INTUITY valve
also indicated that the INTUITY valve reduces cardiopulmonary bypass
time and cross-clamp time, both of which have been shown to reduce
complications.
The applicant also stated that its studies included surgeons with
varied degrees of experience, and that over 62 physicians participated
in the US INTUITY trials, which reduces the impact of surgeon bias and
allows for greater generalizability of results. The applicant stated
that while no study is free of bias, the INTUITY has been shown to have
consistent results in both clinical trials and the real-world setting.
The applicant further supplemented its application with recently
published 5-year follow-up data (Laufer et al., 2017),\10\ which found
sustained benefits, including effective orifice area (EOA)
improvements, low pressure gradients, and reductions in left
ventricular mass, as well as excellent survival rates.
---------------------------------------------------------------------------
\10\ Laufer, G et al. (2017). Long-term outcomes of a rapid
deployment aortic valve: Data up to 5 years. European Journal of
Cardiothorac Surgery, 2017 Apr 26.
---------------------------------------------------------------------------
A manufacturer that also manufactures heart valves stated that the
studies cited by the INTUITY applicant have potential bias resulting
from the level of experience of the study surgeons relative to typical
cardiac surgeons, as well as a lack of long-term follow-up. This
commenter noted that, in the CADENCE-MIS trial, key outcome measures
did not differ statistically significantly at 3 months between the
randomized arms of the study, but that the rate of pacemaker implants
was higher in the INTUITY group. This commenter noted that while
transaortic valve gradients are reported as significantly lower, the
study population was small, and that the comparator devices are not all
representative of best in class gradients. This commenter also pointed
to the high rate of pacemaker implants in the TRANSFORM trial, and
mentioned a recent manuscript that reported that early pacemaker
implantation after aortic valve replacement was associated with an
increased risk of death.\11\
---------------------------------------------------------------------------
\11\ Greason et al. (2017). Long-Term Mortality Effect of Early
Pacemaker Implantation after Surgical Aortic Valve Replacement. The
Society of Thoracic Surgeons.
---------------------------------------------------------------------------
Response: While we appreciate the concerns raised by one commenter
regarding the studies that examined the INTUITY valve, we believe the
manufacturer addresses our concerns.
With regard to substantial clinical improvement for the Perceval
valve, the applicant submitted several studies examining the Perceval
valve. The following discussion summarizes some of these studies.
Pollari and colleagues \12\ (2014) utilized a propensity score
analysis to examine 82 matched pairs as part of a larger trial that
included 566 patients treated with bioprosthetic aortic valve
replacement, 166 of which received treatment using the Perceval
sutureless valve and 400 of which received treatment using a stented
valve. Aortic cross-clamp, cardiopulmonary bypass, and operation times
were significantly shorter in the group that received treatment using
the Perceval sutureless valve. The Perceval sutureless group also had
shorter ICU stays, hospital stays, and intubation times, and lower
incidence of postoperative atrial fibrillation and respiratory
insufficiency. The authors noted that, despite the promising
preliminary results, longer follow-up is warranted before drawing
definite conclusions.
---------------------------------------------------------------------------
\12\ Pollari, F. (2014), Better short-term outcome by using
sutureless valves: A propensity-matched score analysis, Ann Thorac
Surg, 98; 611-6.
---------------------------------------------------------------------------
In a nonrandomized trial of 100 patients in a German hospital,
Santarpino and colleagues \13\ (2013) found that procedures completed
using the Perceval valve were associated with significantly shorter
cross-clamp and cardiopulmonary bypass times (40 13.8 and
69 19.1 versus 66 20.4 and 105
34.8) relative to conventional stented bioprosthetic valves, as well as
less frequent use of blood transfusions, shorter ICU stays and shorter
use of intubation. In contrast, Gilmanov and colleagues \14\ (2013)
found that a MIS approach resulted in improved outcomes, albeit longer
aortic cross-clamp times. A meta-analysis by Hurley and colleagues \15\
(2015) found reduced cross-clamp and cardiopulmonary bypass times, but
found a significantly higher permanent pacemaker rate with the use of
Perceval sutureless valves.
---------------------------------------------------------------------------
\13\ Santarpino, G. et al. (2013), The Perceval S aortic valve
has the potential of shortening surgical time: Does it also result
in improved outcome?, Ann Thorac Surg, 96, 77-81.
\14\ Gilmanov, D. (2013), Minimally invasive and conventional
aortic valve replacement: a propensity score analysis, Ann Thorac
Surg, 96, 837-843.
\15\ Hurley et al., ``A Meta-Analysis Examining Differences in
Short-Term Outcomes Between Sutureless and Conventional Aortic Valve
Prostheses,'' Innovations 2015; 10:375-382.
---------------------------------------------------------------------------
A study conducted by Dalen and colleagues \16\ (2015) used
propensity score matching to examine early post-operative outcomes and
2-year survival between 171 pairs of patients who underwent
ministernotomy using the Perceval device or a full sternotomy with
stented prosthesis. There were no differences in 30-day mortality or 2-
year survival between the groups. The aortic cross-clamp time and
cardiopulmonary bypass time were shorter, and there were fewer blood
transfusions in the group that received treatment using the Perceval
device. However, this group was also at higher risk for post-operative
permanent pacemaker implantation.
---------------------------------------------------------------------------
\16\ Dale[aacute]n, M. (2015), Aortic valve replacement through
full sternotomy with a stented bioprosthesis versus minimally
invasive sternotomy with a sutureless bioprosthesis, Eur J
Cardiothorac Surg 2015; doi:10.1093/ejcts/ezv014.
---------------------------------------------------------------------------
We stated in the proposed rule that, after reviewing the
publications submitted by the applicant, we are concerned that the lack
of randomization and blinded investigators may have influenced the
outcomes in many of the studies provided. For example, in the
discussion following
[[Page 38125]]
Santarpino et al.'s 2013 study, one of the participants suggested that
medical decision-making regarding ventilation times, ICU times, and
blood transfusions may be affected by the knowledge of investigators as
to which valve the patient received treatment using. Also, as indicated
above with respect to the INTUITY valve, the experience of the surgeons
in these studies may be confounding factors that may have influenced
the length of surgical procedures and/or surgical outcomes.
Comment: One manufacturer that produces heart valves stated that
the evidence for the Perceval device suffers from lack of randomization
and blinding of investigators. This commenter cited a brief by the
Health Technology Assessment Information Services of ECRI summarizing
the most recent evidence about the LivaNova Perceval valve. The brief
cited a range of values for clinical outcomes, suggesting the
importance in variation in technique. This commenter also compiled a
table of gradients for aortic heart valves, including those of the
applicants, and stated that the gradients are comparable to
conventional surgical devices but are not best-in-class.
Response: While we acknowledge the concerns raised by one commenter
regarding the Perceval valve, we recognize that studies in general may
have some limitations. We also note that the studies submitted by the
manufacturer indicate that the Perceval valve is associated with fewer
blood transfusions and significantly shorter aortic cross-clamp,
cardiopulmonary bypass, and operation times. The Perceval sutureless
group also had shorter ICU stays, hospital stays, and intubation times,
and lower incidence of postoperative atrial fibrillation and
respiratory insufficiency.
In the proposed rule, we invited public comments on whether rapid
deployment valves, specifically the INTUITY and Perceval valves, meet
the substantial clinical improvement criterion. We noted that we did
not receive any written public comments regarding the INTUITY and
Perceval valves in response to the New Technology Town Hall meeting
notice.
We agree with the manufacturers that the INTUITY and Perceval
valves represent a substantial clinical improvement for the following
reasons: The rapid deployment technology enables reduced operative time
for minimally invasive AVR and full-sternotomy AVR. Additionally, the
device improves cross-clamp time, thereby reducing the period of
myocardial ischemia. The improved patient outcomes were also reflected
in improved patient satisfaction, faster return to normal activity,
decreased postoperative pain, reduced mortality and decreased
complications, including need for reoperation due to bleeding, reduced
recovery time, reduced length of stay (both ICU and overall), and
improved hemodynamics. In addition, the newly published 5-year data
further support the substantial clinical improvement of this
technology.
For the reasons described above and after consideration of the
public comments we received, we have determined that the INTUITY and
Perceval valve meet all of the criteria for approval of new technology
add-on payments for FY 2018. Each of the applicants submitted cost
information for its valve. The manufacturer of the INTUITY valve stated
that the cost of the valve is $12,500. The applicant projected that
1,750 cases will involve the use of INTUITY in FY 2018. The
manufacturer of the Perceval valve stated that the cost of the valve is
$11,500. The applicant projected that 679 cases will involve the use of
the Perceval valve in FY 2018.
New technology add-on payments for cases involving these
technologies will be based on the weighted average cost of the two
valves described by the ICD-10-PCS procedure code X2RF032 (Replacement
of Aortic Valve using Zooplastic Tissue, Rapid Deployment Technique,
Open Approach, New Technology Group 2). Because ICD-10 codes are not
manufacturer specific, we cannot set one new technology add-on payment
amount for INTUITY and a different new technology add-on payment amount
for the Perceval valve; both technologies will be captured by using the
same ICD-10-PCS procedure code. As such, we believe that the use of a
weighted average of the cost of the standard valves based on the
projected number of cases involving each technology to determine the
maximum new technology add-on payment would be most appropriate. To
compute the weighted cost average, we summed the total number of
projected cases for each of the applicants, which equaled 2,429 cases
(1,750 plus 679). We then divided the number of projected cases for
each of the applicants by the total number of cases, which resulted in
the following case-weighted percentages: 72 percent for the INTUITY and
28 percent for the Perceval valve. We then multiplied the cost per case
for the manufacturer specific valve by the case-weighted percentage
(0.72 * $12,500 = $9,005.76 for INTUITY and 0.28 * $11,500 = $3,214.70
for the Perceval valve). This resulted in a case-weighted average cost
of $12,220.46 for the valves. Under Sec. 412.88(a)(2), we limit new
technology add-on payments to the lesser of 50 percent of the average
cost of the device or 50 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 INTUITY or Perceval valves is
$6,110.23 for FY 2018.
c. Ustekinumab (Stelara[supreg])
Janssen Biotech submitted an application for new technology add-on
payments for the Stelara[supreg] induction therapy for FY 2018.
Stelara[supreg] received FDA approval as an intravenous (IV) infusion
treatment of Crohn's disease (CD) on September 23, 2016, which added a
new indication for the use of Stelara[supreg] and route of
administration for this monoclonal antibody. IV infusion of
Stelara[supreg] is indicated for the treatment of adult patients (18
years and older) diagnosed with moderately to severely active CD who
have: (1) Failed or were intolerant to treatment using immunomodulators
or corticosteroids, but never failed a tumor necrosis factor (TNF)
blocker; or (2) failed or were intolerant to treatment using one or
more TNF blockers. Stelara[supreg] for IV infusion has only one
purpose, induction therapy. Stelara[supreg] must be administered
intravenously by a health care professional in either an inpatient
hospital setting or an outpatient hospital setting.
Stelara[supreg] for IV infusion is packaged in single 130mg vials.
Induction therapy consists of a single IV infusion dose using the
following weight-based dosing regimen: patients weighing less than (<)
55kg are administered 260mg of Stelara[supreg] (2 vials); patients
weighing more than (>) 55kg, but less than (<) 85kg are administered
390mg of Stelara[supreg] (3 vials); and patients weighing more than (>)
85kg are administered 520mg of Stelara[supreg] (4 vials). An average
dose of Stelara[supreg] administered through IV infusion is 390mg (3
vials). Maintenance doses of Stelara[supreg] are administered at 90mg,
subcutaneously, at 8-week intervals and may occur in the outpatient
hospital setting.
CD is an inflammatory bowel disease of unknown etiology,
characterized by transmural inflammation of the gastrointestinal (GI)
tract. Symptoms of CD may include fatigue, prolonged diarrhea with or
without bleeding, abdominal pain, weight loss and fever. CD can affect
any part of the GI tract including the mouth, esophagus, stomach, small
intestine, and large intestine.
Conventional pharmacologic treatments of CD include antibiotics,
mesalamines, corticosteroids,
[[Page 38126]]
immunomodulators, tumor necrosis alpha (TNF[alpha]) inhibitors, and
anti-integrin agents. Surgery may be necessary for some patients
diagnosed with CD in which conventional therapies have failed. The
applicant asserted that use of Stelara[supreg] offers an alternative to
conventional pharmacologic treatments, and has been shown to be
successful in the treatment of patients who have failed treatment using
the conventional agents currently being used for a diagnosis of CD,
including TNF[alpha] inhibitors.
Although the precise cause of CD is unknown, the environment,
genetics, and the patient's immune system are thought to play a role in
this form of inflammatory bowel disease (IBD). Conventional
pharmacologic therapy is directed against many different inflammatory
mediators that produce inflammation and ultimately lead to
gastrointestinal damage. The applicant asserted that it is of paramount
importance to have a variety of pharmacologic agents that can address
the proper inflammatory mediator for a particular patient. The
applicant also asserted that, while the currently available anti-
inflammatory agents used in the treatment of a diagnosis of CD are
excellent medications, these agents do not successfully treat all
patients diagnosed with CD, nor do they reliably sustain disease
remission once a response has been achieved. The applicant believed
that the use of Stelara[supreg] offers an alternative to currently
available treatment options.
With regard to the newness criterion, Stelara[supreg] is not a
newly formulated drug. Stelara[supreg], administered subcutaneously,
received FDA approval in 2009 (September 25, 2009) for the treatment of
moderate to severe plaque psoriasis in adults. Its IV use for the
treatment of patients diagnosed with CD was approved by the FDA in 2016
(September 23, 2016). With regard to the new use of an existing
technology, in the September 1, 2001 final rule (66 FR 46915), we
stated that if the new use of an existing technology was for treating
patients not expected to be assigned to the same MS-DRG as the patients
receiving the existing technology, it may be considered for approval,
but it must also meet the cost and substantial clinical improvement
criteria in order to qualify for the new technology add-on payment. We
do not believe that potential cases representing patients that may be
eligible for treatment with the new use of the Stelara[supreg] for IV
treatment of a diagnosis of CD would be assigned to the same MS-DRGs as
cases treated using the prior indications.
As discussed above, 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 regard to the first criterion, whether a product uses the same
or a similar mechanism of action to achieve a therapeutic outcome, we
stated in the proposed rule that we were concerned that
Stelara[supreg]'s mechanism of action does not appear to differ from
the mechanism of action of other monoclonal antibodies, which also
target unique gastrointestinal-selective cytokines. The applicant
believed that the Stelara[supreg] uses a different mechanism of action
than other medications currently available for the treatment of
patients diagnosed with CD. However, we stated that we believe that the
mechanism of action for the new use of the Stelara[supreg] may be
similar to the mechanism of action of other cytokine-selective
monoclonal antibodies that disrupt cytokine mediated signals crucial to
the inflammatory process in patients diagnosed with CD.
The applicant stated that the Stelara[supreg] is a human IgG1
monoclonal antibody that binds with specificity to the p40 protein
subunit, which is common to both the interleukin-12 (IL-12) and
interleukin (IL-23) cytokines. IL-12 and IL-23 are naturally occurring
cytokines that are involved in inflammatory and immune responses, such
as natural killer cell activation and CD4+ T-cell differentiation and
activation. In in vitro models, the Stelara[supreg] was shown to
disrupt IL-12 and IL-23 mediated signaling and cytokine cascades by
blocking the interaction of these cytokines with a shared cell-surface
receptor chain, IL-12R[beta]1. The cytokines IL-12 and IL-23 have been
implicated as important contributors to chronic inflammation. According
to the applicant, IV induction therapy quickly achieves optimal blood
levels of Stelara[supreg] so that blockade of IL-12 and IL-23 is most
effective. This level of blockade is not achieved with subcutaneous
administration.
The applicant further stated that other available CD anti-
inflammatory or immune modulator therapies do not target the IL-12/IL-
23p40 substrate. Rather, these therapies may target other integrin
pairs such as the alpha4- beta7 integrins. Therefore, the applicant
believed that the Stelara[supreg] drug is not substantially similar to
any other approved drug for the treatment of moderately to severely
active CD. As previously noted, the applicant asserted that, while the
currently available agents are excellent medications, these agents do
not successfully treat all patients diagnosed with CD, nor do these
agents reliably sustain remission once a clinical response has been
achieved. According to the applicant, the new use of the
Stelara[supreg] offers an alternative to currently available treatment
options, and has been shown to be successful in the treatment of
patients who have failed treatment with the conventional agents
currently being used for a diagnosis of CD, including TNF blockers. In
the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19885), we stated that
we are concerned that the Stelara[supreg]'s mechanism of action is
similar to that of other immune system suppressors used in the
treatment of patients diagnosed with moderately to severely active CD
because other cytokine-selective monoclonal antibodies also disrupt
cytokine mediated signals crucial to the inflammatory process in
patients diagnosed with CD.
With respect to the second criterion, whether a product is assigned
to the same or a different MS-DRG, the applicant maintained that MS-
DRGs 386, 387, and 385 (Inflammatory Bowel Disease with CC, without CC/
MCC, and with MCC, respectively) and MS-DRGs 330, 329 and 331 (Major
Small and Large Bowel Procedures with CC, without CC/MCC, and with MCC,
respectively) are used to identify cases representing patients who may
potentially be eligible for treatment using the Stelara[supreg]. The
applicant researched claims data from the FY 2015 MedPAR file and found
10,344 cases. About 85 percent of potentially eligible cases mapped to
MS-DRGs for inflammatory bowel disease and most of the remainder of
cases mapped to MS-DRGs for bowel surgery. In the proposed rule, we
stated that we believe that potential cases involving Stelara[supreg]
induction therapy may be assigned to the same MS-DRGs as cases
representing patients who have been treated using currently available
treatment options.
With respect to the third criterion, whether the new use of the
technology involves the treatment of the same or similar type of
disease and the same or similar patient population, according to the
applicant, currently available pharmacologic treatments include
antibiotics, mesalamines, corticosteroids, immunomodulators, tumor
necrosis alfa (TNF[alpha]) inhibitors and anti-integrins. The applicant
stated that the new use of the Stelara[supreg] for IV infusion is
indicated for the treatment of adults (18 years and older) diagnosed
with moderately to severely active CD
[[Page 38127]]
who have: (1) Failed or were intolerant to treatment with
immunomodulators or corticosteroids, but never failed treatment using a
TNF blocker; or (2) failed or were intolerant to treatment with one or
more TNF blockers. The applicant asserted that Stelara[supreg] for
induction therapy is not substantially similar to other treatment
options because it does not involve the treatment of the same or
similar type of patient population. Patients who are eligible for
treatment using the Stelara[supreg] induction therapy have failed other
CD treatment modalities. The applicant believed that the subset of
primary and secondary nonresponder patients to TNF inhibitor treatments
is a patient population unresponsive to, or ineligible for, currently
available treatments for diagnoses of moderate to severe CD. Based on
the indications for the use of Stelara[supreg], there is a class of
patients who failed, or were intolerant to, treatment using
immunomodulators or corticosteroids, but never failed treatment using a
TNF blocker. The applicant indicated that, for those patients who never
failed treatment with a TNF blocker, this class of patients can be
recognized as two separate patient populations: One population of
patients who have never received treatment using a TNF blocker, or the
other population of patients who have received and responded to
treatment using a TNF blocker. In the FY 2018 IPPS/LTCH PPS proposed
rule (82 FR 19885), we stated that we believe that, if the new use of
the Stelara[supreg] has the same mechanism of action as other immune
system suppressors such as TNF blockers, the patient population that
did not receive treatment using a TNF blocker may not be a new patient
population because those patients may be able to receive treatment
using, and would successfully respond to treatment using, a TNF
blocker. Moreover, if the mechanism of action is the same as other
immune system suppressors, we stated that we believe that the new use
of the Stelara[supreg] may be targeted at a new patient population in
some circumstances and instances, but we are concerned that it may not
be targeted at a new patient population in all circumstances and
instances.
In the proposed rule, we invited public comments on whether the
Stelara[supreg] meets the newness criterion.
Comment: Several commenters stated that Stelara[supreg] has a
different mechanism of action than other immune system suppressors. The
applicant also submitted comments acknowledging that CMS accurately
noted that other monoclonal antibodies targeting unique
gastrointestinal-selective cytokines are currently marketed for the
treatment of CD. The applicant noted that a critical differentiator is
that Stelara[supreg] targets the IL-12 and IL-23 regulatory cytokines
while other monoclonal antibodies used to treat Crohn's disease are
either TNF inhibitors or anti-integrin monoclonal antibodies. The
applicant stated that, as a result, Stelara[supreg] has a different
mechanism of action for reducing the inflammatory response in CD than
other monoclonal antibodies used to treat the disease. Furthermore, the
applicant stated that while many patients respond to TNF inhibition, 20
to 25 percent of them will not respond, regardless of the TNF inhibitor
employed or the dose provided. By targeting the IL-12 and IL-23
regulatory cytokines that may be responsible for the inflammation
producing the patient's symptoms, the applicant stated that
Stelara[supreg] has a different mechanism of action designed to treat
patients that failed other Crohn's disease treatments. The applicant
believed that this distinction makes Stelara[supreg] new and different
for treating some patients with Crohn's disease. The applicant provided
comments reflecting that clinicians have learned that different
patients with Crohn's disease require different types of cytokine
inhibition to target the inflammatory process in each particular
patient. The applicant believed that this is an example of personalized
medicine--choosing the right biologic for the right patient at the
right time. Therefore, according to the applicant, Stelara[supreg]'s
mechanism of action provides a treatment option for patients with CD
where others have been unsuccessful.
Response: We appreciate the comments we received from the applicant
on whether or not Stelara[supreg] meets the newness criterion.
After consideration of the public comments we received, we believe
that Stelara[supreg] has a unique mechanism of action because it is
unique from other immune system suppressors in that it targets the IL-
12 and IL-23 regulatory cytokines. Therefore, Stelara[supreg] meets the
newness criterion for new technology add-on payments.
With regard to the cost criterion, the applicant conducted the
following analysis to demonstrate that Stelara[supreg] meets the cost
criterion. The applicant searched claims from the FY 2015 MedPAR file
for cases with a principal ICD-9-CM diagnosis of 555.x (Regional
Enteritis), which are cases of a diagnosis of Crohn's Disease that may
be eligible for treatment using Stelara[supreg].
The applicant identified 10,344 cases that mapped to 35 MS-DRGs.
Approximately 85 percent of cases mapped to the following Inflammatory
Bowel MS-DRGs: MS-DRGs 385 (Inflammatory Bowel Disease with MCC), 386
(Inflammatory Bowel Disease with CC), and 387 (Inflammatory Bowel
Disease without CC/MCC). Similarly, 11 percent of the cases mapped to
the following MS-DRGs for bowel surgery: MS-DRGs 329 (Major Small and
Large Bowel Procedures with MCC), 330 (Major Small and Large Bowel
Procedures with CC), and 331 (Major Small and Large Bowel Procedures
without CC/MCC). The remaining cases (4 percent) represented all other
digestive system disorders.
Using the 10,344 identified cases, the average unstandardized case-
weighted charge per case was $39,935. The applicant then standardized
the charges. The applicant did not remove charges for the current
treatment because as discussed above Stelara[supreg] is indicated for
use in patients who fail other treatments. The applicant then applied
the 2-year inflation factor of 1.098446 from the FY 2017 IPPS/LTCH PPS
final rule (81 FR 57286) to inflate the charges from FY 2015 to FY
2017. The applicant then added charges for the Stelara[supreg]
technology. Specifically, the applicant assumed that hospitals would
mark up Stelara[supreg] IV to the same extent that they currently mark-
up Stelara[supreg] SC (J3357, ustekinumab, 1 mg). The applicant used
the actual hospital mark-up based on charges in the CY 2017 OPPS/ASC
proposed rule file (OPPS claims incurred and paid in CY 2015). Based on
the FY 2017 IPPS/LTCH PPS Table 10 thresholds, the average case-
weighted threshold amount was $55,023. The inflated average case-
weighted standardized charge per case was $69,826. Because the inflated
average case-weighted standardized charge per case exceeds the average
case-weighted threshold amount, the applicant maintained that the
technology meets the cost criterion. In the FY 2018 IPPS/LTCH PPS
proposed rule (82 FR 19886), we invited public comments on whether
Stelara[supreg] meets the cost criterion.
Comment: The applicant submitted public comments reiterating its
cost analysis results. According to the applicant, the inflated average
case-weighted standardized charge per case exceeds the average case-
weighted threshold amount. The applicant maintained that the technology
meets the cost criterion.
Response: After consideration of the public comments we received,
we agree that Stelara[supreg] meets the cost criterion.
With regard to the third criterion, whether a technology represents
a substantial clinical improvement over existing technologies,
according to the
[[Page 38128]]
applicant, the new use of the Stelara[supreg] has been shown to produce
clinical response and remission in patients diagnosed with moderate to
severe CD who have failed treatment using conventional therapies,
including antibiotics, mesalamine, corticosteroids, immunomodulators,
and TNF[alpha] inhibitors. Stelara[supreg] has been commercially
available on the U.S. market for the treatment of patients diagnosed
with psoriasis (PsO) since 2009 and the treatment of patients diagnosed
with psoriatic arthritis (PsA) since 2013, and the applicant has
maintained a safety registry, which enrolled over 12,000 patients since
2007. According to the applicant, the drug has been extremely well-
tolerated, and the safety profile in patients diagnosed with CD has
been consistent with that experienced in cases representing patients
diagnosed with PsO and PsA.
The applicant presented the results of three pivotal trials
involving over 1,300 patients diagnosed with moderate to severe CD. All
three trials utilized a multicenter, double-blind, placebo controlled
study design. There were two single-dose IV induction trials, which
included patients who had failed treatment using one or more TNF[alpha]
inhibitors (UNITI-1) (N = 741), and patients who had failed treatment
using corticosteroids and/or immunomodulators (UNITI-2) (N = 628).
Responders to the single IV induction dose were then eligible to be
enrolled in a maintenance trial (IM-UNITI) (N = 397), which began 8
weeks after administration of the single IV induction dose. IM-UNITI
patients were given subcutaneous Stelara[supreg] and were treated for
44 weeks. Over half of the patients treated with 90 mg of
Stelara[supreg] every 12 weeks were able to achieve remission; a highly
significant response compared to placebo, according to the applicant.
The results of these trials have been published by the New England
Journal of Medicine and the applicant provided the published
studies.\17\ The published study supported the applicant's assertion
that Stelara[supreg] single IV dose induces response and remission in
patients diagnosed with moderately to severely active CD that is
refractory to either TNF antagonists or conventional therapy. Of the
patients in the IM-UNITI trial receiving subcutaneous Stelara[supreg]
at 8 weeks or 12 weeks, 53.1 percent and 48 percent, respectively, were
in remission at week 44 as compared with 35.9 percent of those patients
receiving treatment using placebo.
---------------------------------------------------------------------------
\17\ Feagan, W.J., et al. (2016) Ustekinumab as Induction and
Maintenance Therapy for Crohn' Disease. The New England Journal of
Medicine. 2016 Nov 17; 3745(20):1946-60.
---------------------------------------------------------------------------
The applicant submitted published results of a multicenter, double-
blind, placebo controlled Phase III study of Stelara[supreg].\18\ In
the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19886), we indicated
that we were concerned that the study did not effectively establish the
need for Stelara[supreg] induction therapy. Also, the median age of
patients in the study was 37 years, and we stated that we were
concerned that the study did not include a significant amount of older
patients.
---------------------------------------------------------------------------
\18\ Ibid.
---------------------------------------------------------------------------
We also indicated that we were concerned that we do not have enough
information to determine that the new use of the Stelara[supreg] is a
substantial clinical improvement over existing technologies for the
treatment of moderate to severe CD. We noted that the UNITI-1, UNITI-2,
and IMUNITI trials were completed to evaluate efficacy and safety of
Stelara[supreg], not superiority of Stelara[supreg] to current
conventional therapy. Our concerns were based on a lack of head-to-head
trials comparing IV induction and maintenance Stelara[supreg] therapy
with conventional therapy in patients diagnosed with moderate to severe
CD that are also primary and secondary nonresponders to treatment using
TNF alpha inhibitor \19\ therapy. We recognized the subset of primary
and secondary nonresponder patients to TNF inhibitor treatments as a
patient population unresponsive to, or ineligible for, currently
available treatments for diagnoses of moderate to severe CD. However,
we stated that we believe that this primary and secondary TNF alpha
inhibitor non-responder patient population represents patients that
experience a gap in treatment for diagnoses of moderate to severe CD.
Specifically, we recognized the nonresponder patient population as
described by Simon et al.\20\ as those patients who are TNF inhibitor
immunogenicity failures, pharmacokinetic failures, and/or
pharmacodynamics failures. We also noted the supplement data in Feagan
et al.'s publication \21\ summarized the primary and secondary
nonresponders in UNITI-1. However, we stated that we were not clear how
the inclusion of the TNF alpha inhibitor intolerant patients with
primary and secondary TNF alpha inhibitor failure patients impacts the
final comparison of the placebo and treatment arms. In addition, we
noted that, in the UNITI-1, UNITI-2, and IMUNITI studies, all treatment
arms were allowed to continue conventional treatments for diagnoses of
CD throughout the study. We stated that we were concerned that it is
difficult to determine whether the new use of the Stelara[supreg]
represents a substantial clinical improvement over existing
technologies with the concomitant use of other conventional CD
medications throughout the duration of the UNITI-1, UNITI-2, and
IMUNITI studies.
---------------------------------------------------------------------------
\19\ Ibid.
\20\ Simon E.G., et al., (2016) Ustekinumab for the treatment of
Crohn's disease: can it find its niche? Therapeutic Advances in
Gastroenterology. 2016 Jan; 9(1):26-36.
\21\ Feagan, W.J., et al. (2016) Ustekinumab as Induction and
Maintenance Therapy for Crohn' Disease. The New England Journal of
Medicine. 2016 Nov 17; 3745(20):1946-60.
---------------------------------------------------------------------------
Also, as mentioned earlier, based on the indications for the use of
the Stelara[supreg], there is a class of patients who failed, or were
intolerant to, treatment with immunomodulators or corticosteroids, but
never failed treatment using a TNF blocker. According to the applicant,
for those patients who never failed treatment using a TNF blocker, this
patient population can be recognized as two separate patient
populations: One patient population representing patients who never
received treatment using a TNF blocker; or the other patient population
representing patients who received and responded to treatment using a
TNF blocker. In the patient population that did not receive treatment
using a TNF blocker, we stated that we were unsure if the new use of
the Stelara[supreg] represents a substantial clinical improvement
because it is possible that some patients will have a positive response
to treatment using a TNF blocker and will not respond successfully to
treatment using Stelara[supreg], or some patients may have a positive
response to both treatment using a TNF blocker and using
Stelara[supreg], or some patients may not respond to treatment using a
TNF blocker, but will have a positive response to treatment using
Stelara[supreg].
In the proposed rule, we invited public comments on whether the
Stelara[supreg] meets the substantial clinical improvement criterion.
We noted that we did not receive any written public comments in
response to the New Technology Town Hall meeting notice regarding the
application of Stelara[supreg] for new technology add-on payments.
Comment: The applicant submitted public comments addressing CMS'
concerns. The applicant stated that the first dose of any therapy may
be considered induction therapy. The applicant reiterated the results
of its early trials which demonstrated that
[[Page 38129]]
intravenous induction therapy was superior to subcutaneous
administration and that higher intravenous doses appeared to be more
efficacious than lower subcutaneous doses. The applicant noted that IBD
experts are generally in agreement that higher doses of biologics are
required at the outset to induce remission, while lower and less
frequent doses may be adequate to maintain remission in a maintenance
setting.
The applicant also submitted comments addressing CMS' concerns with
regards to the lack of head-to-head clinical trials comparing IV
induction and maintenance Stelara[supreg] therapy with conventional
therapy in patients diagnosed with moderate to severe CD that are also
primary and secondary nonresponders to treatment using TNF alpha
inhibitor therapy. The applicant stated that the UNITI trials were, in
fact, head-to-head trials--the placebo group was receiving active
treatment and was not truly a placebo group. Those patients continued
the conventional therapies they were taking prior to study entry. The
applicant noted that the UNITI induction trials covered the breadth of
CD patients and that the UNITI-2 population had failed either
corticosteroids and/or immunomodulators--these drugs are both
recognized as standard conventional therapy for CD according to the
applicant. The UNITI-1 population had failed at least one TNF
inhibitor; in fact, approximately 50 percent had failed greater than
one. This patient population, according to the applicant, is considered
to be the most difficult group to treat in that they had, in most
cases, already failed not only non-biologic therapy with
corticosteroids and/or immunomodulators, but TNF inhibitors as well.
The applicant summarized that the trials should be considered head-to-
head comparing Stelara[supreg] to conventional therapies.
Response: We appreciate the comments submitted by the applicant in
response to our concerns. After consideration of the public comments we
received, which clarify the placebo group as having received
conventional therapies and, therefore, the clinical trials did compare
Stelara[supreg] to existing therapies, we believe Stelara[supreg] meets
the substantial clinical improvement criterion because, according to
the studies provided by the applicant, Stelara[supreg] produced a
clinical response and remission in patients with moderate to severe
Crohn's Disease who have failed conventional therapies, including
antibiotics, mesalamines, corticosteroids, immunomodulators, and
TNF[alpha] inhibitors as outlined in their label. Specifically,
Stelara[supreg] targets cytokines IL-12 and IL-23 which are responsible
for inflammation in CD, offering a treatment option, otherwise not
available, for a specific patient population. Stelara[supreg] provides
a treatment option for this difficult-to-treat patient population.
We have determined that Stelara[supreg] meets all of the criteria
for approval of new technology add-on payments. Therefore, we are
approving new technology add-on payments for Stelara[supreg] for FY
2018. We expect that Stelara[supreg] will be administered for the
treatment of adult patients (18 years and older) diagnosed with
moderately to severely active CD who have: (1) Failed or were
intolerant to treatment using immunomodulators or corticosteroids, but
never failed a tumor necrosis factor (TNF) blocker; or (2) failed or
were intolerant to treatment using one or more TNF blockers. Cases
involving Stelara[supreg] that are eligible for new technology add-on
payments will be identified by ICD-10-PCS procedure code XW033F3
(Introduction of other New Technology therapeutic substance into
peripheral vein, percutaneous approach, New Technology Group 3). In its
application, the applicant estimated that the average dose of
Stelara[supreg] administered through IV infusion is 390 mg which would
require 3 vials of Stelara IV at a hospital acquisition cost of $1,600
per vial (for a total of $4,800). Under 42 CFR 412.88(a)(2), we limit
new technology add-on payments to the lesser of 50 percent of the
average cost of the technology or 50 percent of the costs in excess of
the MS-DRG payment for the case. As a result, the maximum new
technology add-on payment amount for a case involving the use of
STELARATM is $2,400 for FY 2018.
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 2018 hospital wage index based on the
statistical areas appears under section III.A.2. 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, and IV. The OMB control number for approved
collection of this information is 0938-0050.) This provision 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 2018 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 2018 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 hospitals participating in the Medicare program, in
order to construct an occupational mix adjustment to the wage index. A
discussion of the occupational mix adjustment that we are applying to
the FY 2018 wage index appears under sections III.E.3. and F. of the
preamble of this final rule.
2. Core-Based Statistical Areas (CBSAs) for the FY 2018 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, 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 2015) are based on revised OMB
delineations issued on February 28, 2013, in OMB Bulletin No. 13-01.
OMB Bulletin No.
[[Page 38130]]
13-01 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
provided guidance on the use of the delineations of these statistical
areas using standards published on June 28, 2010 in the Federal
Register (75 FR 37246 through 37252). We refer readers to the FY 2015
IPPS/LTCH PPS final rule (79 FR 49951 through 49963) for a full
discussion of our implementation of the OMB labor market area
delineations beginning with the FY 2015 wage index.
Generally, OMB issues major revisions to statistical areas every 10
years, based on the results of the decennial census. However, OMB
occasionally issues minor updates and revisions to statistical areas in
the years between the decennial censuses through OMB Bulletins. On July
15, 2015, OMB issued OMB Bulletin No. 15-01, which provides updates to
and supersedes OMB Bulletin No. 13-01 that was issued on February 28,
2013. The attachment to OMB Bulletin No. 15-01 provides detailed
information on the update to statistical areas since February 28, 2013.
The updates provided in OMB Bulletin No. 15-01 are based on the
application of the 2010 Standards for Delineating Metropolitan and
Micropolitan Statistical Areas to Census Bureau population estimates
for July 1, 2012 and July 1, 2013. In the FY 2017 IPPS/LTCH PPS final
rule (81 FR 56913), we adopted the updates set forth in OMB Bulletin
No. 15-01 effective October 1, 2016, beginning with the FY 2017 wage
index. For a complete discussion of the adoption of the updates set
forth in OMB Bulletin No. 15-01, we refer readers to the FY 2017 IPPS/
LTCH PPS final rule.
For FY 2018, we are continuing to use the OMB delineations that we
adopted beginning with FY 2015 to calculate the area wage indexes, with
updates as reflected in OMB Bulletin No. 15-01 specified in the FY 2017
IPPS/LTCH PPS final rule.
3. Codes for Constituent Counties in CBSAs
CBSAs are made up of one or more constituent counties. Each CBSA
and constituent county has its own unique identifying codes. There are
two different lists of codes associated with counties: Social Security
Administration (SSA) codes and Federal Information Processing Standard
(FIPS) codes. Historically, CMS has listed and used SSA and FIPS county
codes to identify and crosswalk counties to CBSA codes for purposes of
the hospital wage index. We have learned that SSA county codes are no
longer being maintained and updated. However, the FIPS codes continue
to be maintained by the U.S. Census Bureau. The Census Bureau's most
current statistical area information is derived from ongoing census
data received since 2010; the most recent data are from 2015. For the
purposes of crosswalking counties to CBSAs, in the FY 2018 IPPS/LTCH
PPS proposed rule (82 FR 19898 through 19899), we proposed to
discontinue the use of SSA county codes and begin using only the FIPS
county codes.
The Census Bureau maintains a complete list of changes to counties
or county equivalent entities on the Web site at: https://www.census.gov/geo/reference/county-changes.html. In our proposed
transition to using only FIPS codes for counties for the hospital wage
index, we proposed to update the FIPS codes used for crosswalking
counties to CBSAs for the hospital wage index to incorporate changes to
the counties or county equivalent entities included in the Census
Bureau's most recent list. Based on information included in the Census
Bureau's Web site, since 2010, the Census Bureau has made the following
updates to the FIPS codes for counties or county equivalent entities:
Petersburg Borough, AK (FIPS State County Code 02-195),
CBSA 02, was created from part of former Petersburg Census Area (02-
195) and part of Hoonah-Angoon Census Area (02-105). The CBSA code
remains 02.
The name of La Salle Parish, LA (FIPS State County Code
22-059), CBSA 14, is now LaSalle Parish, LA (FIPS State County Code 22-
059). The CBSA code remains as 14.
The name of Shannon County, SD (FIPS State County Code 46-
113), CBSA 43, is now Oglala Lakota County, SD (FIPS State County Code
46-102). The CBSA code remains as 43.
We believe that it is important to use the latest counties or
county equivalent entities in order to properly crosswalk hospitals
from a county to a CBSA for purposes of the hospital wage index used
under the IPPS. In addition, we believe that using the latest FIPS
codes will allow us to maintain a more accurate and up-to-date payment
system that reflects the reality of population shifts and labor market
conditions. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82
FR 19898 through 19899), we proposed to implement these FIPS code
updates, effective October 1, 2017, beginning with the FY 2018 wage
indexes. We proposed to use these update changes to calculate area wage
indexes in a manner that is generally consistent with the CBSA-based
methodologies finalized in the FY 2005 IPPS final rule and the FY 2015
IPPS/LTCH PPS final rule. We note that while the county update changes
listed earlier changed the county names, the CBSAs to which these
counties map did not change from the prior counties. Therefore, there
is no impact or change to hospitals in these counties; they continue to
be considered rural for the hospital wage index under these changes. We
invited public comments on our proposals.
We did not receive any public comments on our proposals. Therefore,
for the reasons discussed earlier, we are finalizing our proposal,
without modification, to discontinue the use of the SSA county codes
and begin using only the FIPS county codes for purposes of crosswalking
counties to CBSAs. In addition, we are finalizing our proposal, without
modification, to implement the latest FIPS code updates, as discussed
earlier, effective October 1, 2017, beginning with the FY 2018 wage
indexes. As we proposed, we will use these update changes to calculate
the wage indexes in a manner that is generally consistent with the
CBSA-based methodologies finalized in the FY 2005 IPPS final rule and
the FY 2015 IPPS/LTCH PPS final rule. For FY 2018, Tables 2 and 3
associated with this final rule and the County to CBSA Crosswalk File
and Urban CBSAs and Constituent Counties for Acute Care Hospitals File
posted on the CMS Web site reflect these county changes.
B. Worksheet S-3 Wage Data for the FY 2018 Wage Index
The FY 2018 wage index values are based on the data collected from
the Medicare cost reports submitted by hospitals for cost reporting
periods beginning in FY 2014 (the FY 2017 wage indexes were based on
data from cost reporting periods beginning during FY 2013).
1. Included Categories of Costs
The FY 2018 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
[[Page 38131]]
with comment period (72 FR 47315 through 47317)); and
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 other deferred compensation costs.
2. Excluded Categories of Costs
Consistent with the wage index methodology for FY 2017, the wage
index for FY 2018 also 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 2018 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).
3. 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.
C. Verification of Worksheet S-3 Wage Data
The wage data for the FY 2018 wage index were obtained from
Worksheet S-3, Parts II and III of the Medicare cost report (Form CMS-
2552-10) for cost reporting periods beginning on or after October 1,
2013, and before October 1, 2014. For wage index purposes, we refer to
cost reports during this period as the ``FY 2014 cost report,'' the
``FY 2014 wage data,'' or the ``FY 2014 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
2018 wage index includes FY 2014 data submitted to us as of June 14,
2017. As in past years, we performed an extensive review of the wage
data, mostly through the use of edits designed to identify aberrant
data.
We asked our MACs to revise or verify data elements that result in
specific edit failures. For the proposed FY 2018 wage index, we
identified and excluded 51 providers with aberrant data that should not
be included in the wage index, although we stated in the FY 2018 IPPS/
LTCH PPS proposed rule that if data elements for some of these
providers are corrected, we intend to include data from those providers
in the final FY 2018 wage index (82 FR 19899). We note that of the 51
hospitals that we excluded from the proposed wage index, some hospitals
had data that we did not expect to change or improve (for example,
among the reasons these providers were excluded are: They are low
Medicare utilization providers; they closed and failed edits for
reasonableness; or they have extremely high or low average hourly wages
that are atypical for their CBSAs). We also adjusted certain aberrant
data and included these data in the proposed 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 data verification of questionable data elements and to
transmit any changes to the wage data no later than March 24, 2017. In
addition, as a result of the April and May appeals processes, and
posting of the April 28, 2017 PUF, we have made additional revisions to
the FY 2018 wage data, as described further below. The revised data are
reflected in this FY 2018 IPPS/LTCH PPS final rule.
In constructing the proposed FY 2018 wage index, we included the
wage data for facilities that were IPPS hospitals in FY 2014, 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 believed 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). For the proposed
rule, we removed 7 hospitals that converted to CAH status on or after
January 22, 2016, the cut-off date for CAH exclusion from the FY 2017
wage index, and through and including January 23, 2017, the cut-off
date for CAH exclusion from the FY 2018 wage index. After excluding
CAHs and hospitals with aberrant data, we calculated the proposed wage
index using the Worksheet S-3, Parts II and III wage data of 3,325
hospitals.
Since the development of the FY 2018 proposed wage index, as a
result of further review by the MACs and the April and May appeals
processes, we received improved data for 15 hospitals and are including
the wage data of these 15 hospitals in the final wage index. However,
during our review of the wage data in preparation of the April 28, 2017
PUF, we identified and deleted the data of 2 additional hospitals whose
data we determined to be aberrant (unusually low average hourly wages)
relative to their CBSAs, and there was insufficient documentation
provided to explain their wage data. Finally, we learned that in the
proposed wage index, we inadvertently deleted the data of one hospital
when we should have deleted the data of a different hospital. We have
corrected this error, although because we were including one hospital
while deleting another, there was no effect on the number of hospitals
in the wage index. With regard to CAHs, we have since learned of 2
additional hospitals that converted to CAH status on or after January
22, 2016, the cut-off date for CAH exclusion from the FY 2017 wage
index, and through and including January 23, 2017, the cut-off date for
CAH exclusion from the FY 2018 wage index. Accordingly, we have removed
9 hospitals that converted to CAH status from the FY 2018 wage index.
The final FY 2018 wage index is based on the wage index of 3,336
hospitals (3,325 + 15-2-1 + 1-2 = 3,336).
For the final FY 2018 wage index, we allotted the wages and hours
data for a multicampus hospital among the different labor market areas
where its campuses are located in the same manner that we allotted such
hospitals' data in the FY 2017 wage index (81 FR 56915). Table 2, which
contains the final FY 2018 wage index associated with this final rule
(available via the Internet on the CMS Web site), includes separate
wage data for the campuses of 9 multicampus hospitals.
[[Page 38132]]
D. Method for Computing the FY 2018 Unadjusted Wage Index
1. Methodology for FY 2018
The method used to compute the FY 2018 wage index without an
occupational mix adjustment follows the same methodology that we used
to compute the wage indexes without an occupational mix adjustment
since FY 2012 (76 FR 51591 through 51593).
Comment: One commenter requested that CMS consider developing a
process for determining a wage index that would reward hospitals that
invest in the workforce and raise the wages of the lowest paid workers,
rather than relying primarily on the average hourly wages of the labor
market area as a whole.
Response: Section 1886(d)(3)(E) of the Act requires the Secretary
to adjust for area differences in hospital wage levels by a factor
reflecting the relative hospital wage level in the geographic area of
the hospital compared to the national average hospital wage level. The
statute does not direct the Secretary to develop a wage index that
rewards hospitals for workforce investment or other labor initiatives.
Comment: One commenter requested that CMS establish a floor wage
index for providers in Puerto Rico that is not lower than the ratio of
Puerto Rico nonhealth care wages to U.S. nonhealth care wages, using
data from the Occupational Employment Statistics (OES) of the U.S.
Bureau of Labor Statistics (BLS).
Response: We appreciate this comment. However, we consider it to be
outside the scope of the FY 2018 IPPS/LTCH PPS proposed rule.
Therefore, we are not responding to this comment at this time.
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 employment cost index (ECI) for compensation
for each 30-day increment from October 14, 2013, through April 15,
2015, for private industry hospital workers from the BLS' Compensation
and Working Conditions. 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 2018. 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.
Midpoint of Cost Reporting Period
------------------------------------------------------------------------
Adjustment
After Before factor
------------------------------------------------------------------------
10/14/2013......................... 11/15/2013............ 1.02310
11/14/2013......................... 12/15/2013............ 1.02155
12/14/2013......................... 01/15/2014............ 1.02004
01/14/2014......................... 02/15/2014............ 1.01866
02/14/2014......................... 03/15/2014............ 1.01740
03/14/2014......................... 04/15/2014............ 1.01615
04/14/2014......................... 05/15/2014............ 1.01482
05/14/2014......................... 06/15/2014............ 1.01339
06/14/2014......................... 07/15/2014............ 1.01193
07/14/2014......................... 08/15/2014............ 1.01048
08/14/2014......................... 09/15/2014............ 1.00905
09/14/2014......................... 10/15/2014............ 1.00761
10/14/2014......................... 11/15/2014............ 1.00614
11/14/2014......................... 12/15/2014............ 1.00463
12/14/2014......................... 01/15/2015............ 1.00309
01/14/2015......................... 02/15/2015............ 1.00155
02/14/2015......................... 03/15/2015............ 1.00000
03/14/2015......................... 04/15/2015............ 0.99845
------------------------------------------------------------------------
For example, the midpoint of a cost reporting period beginning
January 1, 2014, and ending December 31, 2014, is June 30, 2014. An
adjustment factor of 1.01193 would be applied to the wages of a
hospital with such a cost reporting period. Using the data as
previously described, the FY 2018 national average hourly wage
(unadjusted for occupational mix) is $42.1027.
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 share of 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. As we stated in the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56915 through 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)
(which is $42.1027 for this FY 2018 final rule) and the national wage
index, which is applied to the national labor share of the national
standardized amount. Therefore, for FY 2018, we did not propose a
Puerto Rico-specific overall average hourly wage or wage index.
2. Clarification of Other Wage Related Costs in the Wage Index
Section 1886(d)(3)(E) of the Act requires the Secretary to update
the wage index based on a survey of hospitals' costs that are
attributable to wages and wage-related costs. In the September 1, 1994
IPPS final rule (59 FR 45356), we developed a list of ``core'' wage-
related costs that hospitals may report on Worksheet S-3, Part II of
the Medicare hospital cost report in order to include those costs in
the wage index. Core wage-related costs include categories of
retirement cost, plan administrative costs, health and insurance costs,
taxes, and other specified costs such as tuition reimbursement. In
addition to these categories of core wage-related costs, we allow
hospitals to report wage-related costs other than those on the core
list if the other wage-related costs meet certain criteria. The
criteria for including other wage-related costs in the wage index are
discussed in the September 1, 1994 IPPS final rule (59 FR 45357) and
also are listed in the Provider Reimbursement Manual (PRM), Part II,
Chapter 40, Sections 4005.2 through 4005.4, Line 18 of the Medicare
cost report (Form CMS-2552-10, OMB control number 0938-0050).
Specifically, ``other'' wage-related costs are allowable for the wage
index if the cost for employees whose services are paid under the IPPS
exceeds 1 percent of the total adjusted salaries net of excluded area
salaries, is a fringe benefit as defined by the IRS and has been
reported to the IRS (as income to the employees or contractors), is not
being furnished for the convenience of the provider, and is not listed
on Worksheet S-3, Part IV.
We note that other wage-related costs are not to include benefits
already included in Line 1 salaries on Worksheet S-3, Part II (refer to
the cost report instructions for Worksheet S-3, Part II, Line 18, which
state, `` `Other' wage-related costs do not include wage-related costs
reported on line 1 of this worksheet.''). We also note that the 1-
percent test is conducted by dividing each individual category of the
other wage-related cost (that is, the
[[Page 38133]]
numerator) by the sum of the following lines on the Medicare hospital
cost report (Form CMS-2552-10): Worksheet S-3, Part II, Lines 11, 12,
13, and 14, Column 4, and Worksheet S-3, Part III, Line 3, Column 4
(that is, the denominator). The other wage-related costs associated
with contract labor and home office/related organization personnel are
included in the numerator because these other wage-related costs are
allowed in the wage index (in addition to other wage-related costs for
direct employees), assuming the requirements for inclusion in the wage
index are met. For example, if a hospital is trying to include a
parking garage as an other-wage related cost that is reported on the W-
2 or 1099 form, when running the 1-percent test, include in the
numerator all the parking garage other wage-related cost for direct
salary employees, contracted employees, and home office employees and
divide by the sum of Worksheet S-3, Part II, Lines 11, 12, 13, and 14,
Column 4, and Worksheet S-3, Part III, Line 3, Column 4. For the
category of parking other wage-related costs, the 1-percent test would
be run only one time, inclusive of other wage-related costs for
employee salaries, contracted employees, and home office employees. We
intend to clarify the hospital cost report instructions to reflect that
contract labor and home office/related organization salaries should be
added to the subtotal of salaries on Worksheet S-3, Part III, Line 3,
Column 4 (Line 3 is the difference of net salaries minus excluded area
salaries) for purposes of performing the 1-percent test. If a hospital
has more than one other wage-related cost, the 1-percent test must be
conducted separately for each other wage-related cost (for example,
parking and cafeteria separately; do not sum all the different types of
other wage-related costs together and then run the 1-percent test). If
the 1-percent test is met for a particular type of other wage-related
costs, and the other criteria listed earlier are met as well, the other
wage-related cost may be reported on Worksheet S-3, Part II, Line 18 of
the hospital cost report.
We originally allowed for the inclusion of wage-related costs other
than those on the core list because we were concerned that individual
hospitals might incur unusually large wage-related costs that are not
reflected on the core list but that may represent a significant wage-
related cost. However, as we discussed in the FY 2018 IPPS/LTCH PPS
proposed rule (82 FR 19900 through 19902), we are reconsidering
allowing other wage-related costs to be included in the wage index
because recent internal reviews of the FY 2018 wage data show that only
a small minority of hospitals are reporting other wage-related costs
that meet the 1-percent test described earlier. In the calculation of
the proposed FY 2018 wage index, for each hospital reporting other
wage-related costs on Line 18 of Worksheet S-3, we performed the 1-
percent test. We then made internal edits removing other wage-related
costs on Line 18 where hospitals reported data that failed to meet the
mathematical requirement that other wage-related costs must exceed 1
percent of total adjusted salaries net of excluded area salaries. After
this review, only approximately 80 hospitals of approximately 3,320
hospitals had other wage-related costs on Line 18 meeting the 1-percent
test. We believe that such a limited number of hospitals nationally
reporting and meeting the 1-percent test may indicate that other wage-
related costs might not constitute an appropriate part of a relative
measure of wage costs in a particular labor market area, a longstanding
tenet of the wage index. In other words, while other wage-related costs
may represent costs that may have an impact on an individual hospital's
average hourly wage, we do not believe that costs reported by only a
very small minority of hospitals accurately reflect the economic
conditions of the labor market areas in which those hospitals are
located. Therefore, it is possible that inclusion of other wage-related
costs in the wage index in such a limited manner may distort the
average hourly wage of a particular labor market area so that its wage
index does not accurately represent that labor market area's current
wages relative to national wages.
Furthermore, the open-ended nature of the types of other wage-
related costs that may be included on Line 18 of Worksheet S-3, in
contrast to the concrete list of core wage-related costs, may hinder
consistent and proper reporting of fringe benefits. Our internal review
indicates widely divergent types of costs that hospitals are reporting
as other wage-related costs on Line 18. We are concerned that
inconsistent reporting of other wage-related costs on Line 18 further
compromises the accuracy of the wage index as a representation of the
relative average hourly wage for each labor market area. Our intent in
creating a core list of wage-related costs in the September 1, 1994
IPPS final rule was to promote consistent reporting of fringe benefits,
and we are increasingly concerned that inconsistent reporting of wage-
related costs on Line 18 of Worksheet S-3 undermines this effort.
Specifically, we expressed in the September 1, 1994 IPPS final rule
that, since we began including fringe benefits in the wage index, we
have been concerned with the inconsistent reporting of fringe benefits,
whether because of a lack of provider proficiency in identifying fringe
benefit costs or varying interpretations across fiscal intermediaries
of the definition for fringe benefits in PRM-I, Section 2144.1 (59 FR
45356).
We believe that the limited and inconsistent use of Line 18 of
Worksheet S-3 for reporting wage-related costs other than the core list
might indicate that including other wage-related costs in the wage
index compromises the accuracy of the wage index as a relative measure
of wages in a given labor market area. Therefore, in the FY 2018 IPPS/
LTCH PPS proposed rule (82 FR 19901), we sought public comments on
whether we should, in future rulemaking, propose to only include the
wage-related costs on the core list in the calculation of the wage
index and not to include any other wage-related costs in the
calculation of the wage index.
Meanwhile, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19901
through 19902), we clarified that, under our current policy, an other
wage-related cost (which we define as the value of a benefit) must be a
fringe benefit as described by the IRS (refer to IRS Publication 15-B)
and must be reported to the IRS on employees' or contractors' W-2 or
1099 forms as taxable income in order to be considered an other wage-
related cost on Line 18 of Worksheet S-3 and for the wage index. That
is, other wage-related costs that are not reported to the IRS on
employees' or contractors' W-2 or 1099 forms as taxable income, even if
not required to be reported to the IRS according to IRS requirements,
will not be included in the wage index. This is consistent with current
cost report instructions for Line 18 of Worksheet S-3, Part II of the
Medicare cost report, Form 2552-10, which state that, to be considered
an allowable other wage-related cost, the cost ``has been reported to
the IRS.'' We will apply this policy to the process for calculating the
wage index for FY 2019, including the FY 2019 desk reviews beginning in
September 2017.
As we stated in the FY 2018 proposed rule, we believe this
clarification is necessary because some hospitals have incorrectly
interpreted prior manual and existing preamble language to mean that a
cost could be considered an other wage-related cost if the provider's
reporting (or not reporting) of the cost
[[Page 38134]]
was in accordance with IRS requirements, rather than if the cost was
actually reported on an employee's or contractor's W-2 or 1099 form as
taxable income. We believe that such an interpretation of our policy
would require an analysis of whether the reporting or not reporting of
the cost to the IRS was done properly in accordance with IRS
regulations and guidance in order to allow the cost as an other wage-
related cost. We believe that the determinations regarding the proper
or improper reporting of certain other wage-related costs to the IRS
for the purpose of inclusion in the Medicare wage index are impractical
for CMS and the MACs because we do not have the expertise and fluency
in IRS regulations and tax law sufficient to perform such technical
reviews of hospital wage-related costs. In contrast, our current policy
of including an amount as an other wage-related cost for wage index
purposes only if the amount was actually reported to the IRS on
employees' or contractors' W-2 or 1099 forms as taxable income is a
straightforward policy that we believe provides clarity to all involved
parties. The brightline test of allowing an other wage-related cost to
be included in the wage index only if it has been reported on an
employee's or contractor's W-2 or 1099 form as taxable income helps
ensure consistent treatment of other wage-related costs for all
hospitals. Considering the variety of types of costs that may be
included on Line 18 of Worksheet S-3 of the cost report for other wage-
related costs (assuming the 1-percent test is met and other criteria
are met), we believe that a straightforward policy that is simple for
hospitals and CMS to apply is particularly important.
In addition, we believe the policy we are clarifying that an other
wage-related cost can be included in the wage index only if it was
reported to the IRS as taxable income on the employee's or contractor's
W-2 or 1099, is consistent with CMS' longstanding position that a
fringe benefit is not furnished for the convenience of the employer or
otherwise excludable from income as a fringe benefit (such as a working
condition fringe) and that inappropriate types of costs may not be
included in the wage index. In response to a comment when we finalized
the criteria for other wage-related costs in the September 1, 1994 IPPS
final rule (59 FR 45359), we stated that ``items such as the
unrecovered cost of employee meals, tuition reimbursement, and auto
allowances will only be allowed as a wage-related cost for purposes of
the wage index if properly reported to the IRS on an employee's W-2
form as a fringe benefit.'' (We note that the September 1, 1994 IPPS
final rule does not mention the 1099 form for contractors, as contract
labor was not allowed at that time in the wage index. Consistent with
our treatment of costs for contract labor similar to that of employees
for the wage index, we are clarifying that the requirement that a cost
be reported to the IRS to be allowed as a wage-related cost for the
wage index also applies to contract labor, which must be reported on
the contractor's 1099 to be allowed as a wage-related cost for the wage
index.) We believe that requiring other wage-related costs to be
reported on employees' or contractors' W-2 or 1099 forms to be
allowable for Line 18 of Worksheet S-3 of the Medicare cost report is
consistent with the requirement that the cost is not being furnished
for the convenience of the employer. A cost reported on an employee's
or contractor's W-2 or 1099 form as taxable income is clearly a wage-
related cost that is provided solely for the benefit of the employee.
We believe that the requirement that other wage-related costs be a
benefit to the employee also guarantees that administrative costs such
as overhead and capitalized costs are excluded from other wage-related
costs in the wage index.
Therefore, for the reasons discussed above, as we discussed in the
FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19901 through 19902), we are
clarifying that a cost must be a fringe benefit as described by the IRS
and must be reported to the IRS on employees' or contractors' W-2 or
1099 forms as taxable income in order to be considered an other wage-
related cost on Line 18 of Worksheet S-3 and for the wage index. In
addition, as discussed earlier, in the proposed rule, we requested
public comments on whether we should consider in future rulemaking
removing other wage-related costs from the wage index.
Because some hospitals have incorrectly interpreted prior manual
and existing preamble language, as stated earlier, in the proposed rule
we restated the criteria from the September 1, 1994 IPPS final rule (59
FR 45357) for allowing other wage-related costs for the wage index,
with clarifications. The criteria follow below, and as stated in the
proposed rule, we intend to update the manual with these
clarifications: Other Wage-Related Costs. A hospital may be able to
report a wage-related cost (defined as the value of the benefit) that
does not appear on the core list if it meets all of the following
criteria:
The wage-related cost is provided at a significant
financial cost to the employer. To meet this test, the individual wage-
related cost must be greater than 1 percent of total salaries after the
direct excluded salaries are removed (the sum of Worksheet S-3, Part
II, Lines 11, 12, 13, 14, column 4, and Worksheet S-3, Part III, Line
3, Column 4).
The wage-related cost is a fringe benefit as described by
the IRS and is reported to the IRS on an employee's or contractor's W-2
or 1099 form as taxable income.
The wage-related cost is not furnished for the convenience
of the provider or otherwise excludable from income as a fringe benefit
(such as a working condition fringe).
We note that those wage-related costs reported as salaries on Line
1 (for example, loan forgiveness and sick pay accruals) should not be
included as other wage-related costs on Line 18.
Comment: One commenter fully supported CMS proposing in future
rulemaking to only include the wage-related costs on the core list in
the calculation of the wage index and not to include any other wage-
related costs in the calculation of the wage index. The commenter
reiterated CMS' observation that only a small minority of hospitals
benefit from the reporting of other wage-related costs, emphasizing
that the inclusion of other wage-related costs in the wage index in
such a limited manner distorts the average hourly wage of a particular
labor market area so that its wage index does not accurately represent
that labor market area's current wages relative to national wages.
Several commenters did not oppose CMS proposing in future rulemaking to
only include wage-related costs on the core list but requested that CMS
first consider convening stakeholders for additional input prior to the
removal of the item. Similarly, one commenter requested that CMS be as
transparent as possible and provide complete information on the impact
on the wage index for all areas of the country in future rulemaking if
CMS proposes to exclude other wage-related costs from the wage index
calculation.
Response: We appreciate the commenter's support for our proposing
in future rulemaking to consider only including the wage-related costs
on the core list in the calculation of the wage index and not to
include any other wage-related costs in the calculation of the wage
index. In response to the commenters who requested that CMS first
consider convening stakeholders
[[Page 38135]]
for additional input prior to the removal of other wage-related costs
(on Line 18 of Worksheet S-3) from the wage index, we are reassuring
the commenters that we would engage in notice-and-comment rulemaking in
order to solicit stakeholder input before removing Line 18 of Worksheet
S-3 from the wage index calculation. Similarly, we endeavor to be as
transparent as possible and, if appropriate, may consider providing
information on the impact on the wage index for all areas of the
country in future rulemaking if we propose to exclude other wage-
related costs from the wage index calculation.
Comment: Two commenters applauded CMS' goals of achieving a more
equitable and accurate wage index, but suggested that CMS address the
inadequacies in the current reporting requirements for noncore other
wage-related costs rather than consider eliminating Line 18 of
Worksheet S-3 of the Medicare cost report from the wage index. These
commenters asserted that all hospitals have noncore benefits. However,
the commenters added, the limited guidance and ``significant threshold
limitations'' in the current instructions prevent hospitals from
capturing these noncore benefits. Furthermore, the commenters
maintained that benefits are rapidly evolving into more nontraditional
structures and, therefore, a mechanism to capture these evolving
benefits is necessary for CMS to ensure an equitable survey. The
commenters submitted several suggestions to ensure open and transparent
reporting of other wage-related costs and to remove the onus from CMS
and the MAC to make determinations regarding the acceptability of other
wage-related costs. The commenters believed that clear and consistent
reporting guidelines create an equitable playing field for all
providers and stated that addressing the inadequacies in the current
reporting requirements for Line 18 is prudent. However, the commenters
suggested an approach different than CMS' clarifications of current
policy to more accurately identify and capture other wage-related
costs.
Response: We appreciate the feedback from commenters in favor of
our improving the current reporting requirements for noncore other
wage-related costs rather than considering eliminating Line 18 of
Worksheet S-3 from the wage index calculation. We are not eliminating
Line 18 from the wage index calculation at this time. Rather, in line
with the commenters' recommendation, we are clarifying the requirements
for Line 18 in this final rule to facilitate consistent and accurate
reporting of other wage-related costs for the wage index. We share the
commenters' interests in reporting guidelines that are clear,
consistent, and equitable. The commenters' specific suggestions and our
responses follow below:
Comment: Commenters suggested that CMS, with input from providers,
define a specific list of noncore benefits commonly shared by a large
number of providers for inclusion in the wage index, such as employee
parking and transit costs, uniform costs, and meal allowances. The
commenters suggested that CMS approach the identification of noncore
benefits with the same specificity as it does with core benefits in
order to ensure an equitable wage index, more easily address tax
issues, and allow more direct application of the employer convenience
test.
Response: We appreciate the commenters' suggestion and agree that
defined lists of allowable costs are generally helpful to support
consistent and equitable reporting. In fact, our intent in creating a
core list of wage-related costs in the September 1, 1994 IPPS final
rule was to promote ``more equitable and consistent reporting of wage-
related costs for all hospitals'' (59 FR 45356). When developing the
list of core wage-related costs, we stated that one or more of the
following criteria must be met to be considered a core wage-related
cost: The wage-related cost is provided at a significant financial cost
to the employer; the wage-related cost is of a type and nature that
would generally be offered as a fringe benefit by most employers; the
perceived value of this wage-related cost is of such importance that it
would influence an individual's employment decisions; and the wage-
related cost is a mandatory requirement under Federal or State law (for
example FICA, Federal and State unemployment, among others) (59 FR
45356).
If there are noncore benefits that are of a type and nature that
would generally be offered as a fringe benefit by most employers, as
the commenters suggested, we believe that perhaps these costs should be
added to the core list rather than defined separately as a list of
other wage-related costs. In future rulemaking, we may consider this
suggestion in the form of seeking hospitals' input on expanding the
core list of wage-related costs to include common wage-related costs
(such as parking) that are currently considered other wage-related
costs.
Comment: Commenters suggested that the taxable or nontaxable nature
of the benefit should not be a determinant for inclusion as a noncore
benefit. In the commenters' opinion, CMS made too broad a connection
between taxable reporting and the employer convenience test;
specifically, many employee benefits are not taxable due to dollar
threshold exclusions and public policy considerations by Congress and
the IRS. Furthermore, the commenters pointed out that evolving tax law
could cause volatility in the wage index because what is considered a
taxable benefit one year may not be taxable in the next year.
Rather, the commenters suggested that, in order for other wage-
related costs to be included in the wage index, CMS require other wage-
related costs to be reported to the IRS on the W-2, regardless of
whether the benefit is taxable or not (the W-2 allows for reporting of
both taxable and nontaxable benefits), and that CMS could then include
other wage-related costs in the wage index as long as those costs,
whether taxable or nontaxable, are reported on the W-2. The commenters
maintained that it should not be the responsibility of CMS or the MACs
to prove that the benefit has been handled appropriately for tax
purposes, and this requirement to include all taxable and nontaxable
costs on the W-2 in order to have those costs included in the wage
index would ensure that the benefit has been handled correctly for tax
purposes.
Response: In the proposed rule (82 FR 19902), we stated that
requiring other wage-related costs to be reported on employees' or
contractors' W-2 or 1099 forms to be allowable for Line 18 is
consistent with the requirement that the cost is not being furnished
for the convenience of the employer because, typically, a cost that is
for the convenience of the employer is not taxable as income to the
employee. This is not to say that all costs that are a benefit to the
employee are taxable. Indeed, in our clarification of the criteria for
allowing a cost as an other wage-related costs on Line 18 in the wage
index, we specifically stated that ``The wage-related cost is not
furnished for the convenience of the provider or otherwise excludable
from income as a fringe benefit (such as a working condition fringe)''
(emphasis added). That is, we recognize that being furnished for the
convenience of the provider is only one of many reasons that a cost may
be excludable from income as a fringe benefit.
While we understand that many employee benefits are not taxable due
to dollar threshold exclusions and public policy considerations by
Congress and the IRS, and thereby excluded from Line 18, we continue to
believe that a brightline test is necessary for consistent
[[Page 38136]]
treatment of other wage-related costs for all hospitals. Taken with the
commenter's suggestion that CMS allow taxable and nontaxable other
wage-related costs (assuming other criteria are met) as long as the
costs are reported on W-2s or 1099s, we understand that the commenter
is suggesting a different brightline test: That the cost be listed on
the W-2, regardless of whether the cost is taxable or tax-exempt. We
continue to believe that our clarification in the proposed rule is a
more straightforward policy than the commenter's suggestion for two
reasons. First, not all employers report nontaxable costs on an
employee's W-2, nor are they required to do so. Therefore, to allow
nontaxable costs so long as those costs are on an employee's W-2 would
create an uneven playing field with inconsistent treatment of
nontaxable costs. Second, a taxable benefit is typically income-related
and a benefit to the employee. While we understand that there may be
benefits to the employee that are tax-exempt due to a variety of public
policy considerations, we believe that costs should be taxable in order
to be incorporated as part of the wage index because the wage index is
a relative measure of salaries and wages.
Furthermore, we agree with the commenters' assertion that it should
not be the responsibility of CMS or the MACs to prove that the benefit
has been handled appropriately for tax purposes. Indeed, it is for that
reason that we clarified our current policy of allowing an amount as an
other wage-related cost for wage index purposes only if the amount was
actually reported to the IRS on employees' or contractors' W-2 or 1099
forms as taxable income. We stated in the proposed rule (82 FR 19901
through 19902) that other wage-related costs that are not reported to
the IRS on employees' or contractors' W-2 or 1099 forms as taxable
income, even if not required to be reported to the IRS according to IRS
requirements, will not be included in the wage index. We explained that
determinations regarding the proper or improper reporting of certain
other wage-related costs to the IRS for the purpose of inclusion in the
Medicare wage index are impractical for CMS and the MACs because we do
not have the expertise and fluency in IRS regulations and tax law
sufficient to perform such technical reviews of hospital wage-related
costs.
Comment: Commenters suggested that CMS change the 1-percent test to
a test in aggregate for the items on their recommended noncore list.
For benefits not specifically listed by CMS as noncore, the commenters
suggested that CMS continue using the current methodology, which
requires each individual benefit to meet the 1-percent test.
Response: We appreciate the commenters' suggestion. However, as we
stated earlier, if there are noncore benefits that are of a type and
nature that would generally be offered as a fringe benefit by most
employers, we believe that perhaps these costs should be added to the
core list rather than defined separately as a list of other wage-
related costs. In future rulemaking, we may consider this suggestion in
the form of seeking hospitals' input on expanding the core list of
wage-related costs to include common wage-related costs (such as
parking) that are currently considered other wage-related costs.
We continue to believe that it is appropriate for the 1-percent
test to be performed on individual, rather than aggregate, other wage-
related costs. In response to a public comment, in the September 1,
1994 IPPS final rule (59 FR 45358), we stated that ``[t]he provision to
include wage-related costs other than those reflected on the core list
is intended to recognize only those limited circumstances where a
hospital incurs any additional wage-related cost items that truly
represent a significant financial burden to the hospital, but that also
meet the current definition of a fringe benefit cost. We believe the 1-
percent threshold is an appropriate measure of significance, and that
the exclusion of any cost representing less than 1 percent of total
salaries would not significantly affect the hospital's overall average
hourly wage. We consider the 1-percent test critical in ensuring that
providers only include other wage-related costs that contribute
significantly to their wage costs and that are not accounted for in the
core list.'' We continue to believe that the 1-percent test performed
on individual costs ensures that the wage-related cost is provided at a
significant financial cost to the employer.
Furthermore, we believe that allowing the 1-percent test to be
performed on aggregate other wage-related costs (even on a limited list
of other wage-related costs, as the commenter suggests) would lead to
inequitable treatment of other wage-related costs. Hospitals with an
other wage-related cost comprising an identical percentage of total
adjusted salaries net of excluded area salaries could be treated
differently, depending on the presence or absence of additional other
wage-related costs to collectively ``pass'' the 1-percent test. For
example, parking costs totaling .08 percent of total salaries for one
hospital could be allowed (assuming the other criteria were met) if the
hospital also has additional noncore wage-related costs that combine to
exceed 1 percent, while another hospital with parking costs totaling
the identical .08 percentage of total salaries could have those costs
disallowed in absence of additional noncore wage-related costs to add
to the parking costs to exceed 1 percent of salaries.
We appreciate all of the comments submitted on this issue. We will
take these comments into consideration in determining whether to
propose in future rulemaking to remove other wage-related costs from
the wage index calculation. Meanwhile, as discussed earlier and in the
FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19900 through 19902), we are
again clarifying that a cost must be a fringe benefit as described by
the IRS and must be reported to the IRS on employees' or contractors'
W-2 or 1099 forms as taxable income in order to be considered an other
wage-related cost on Line 18 of Worksheet S-3 and for the wage index.
E. Occupational Mix Adjustment to the FY 2018 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, in order 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 2013 Occupational Mix Survey for the FY 2018 Wage Index
Section 304(c) 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. We collected data in 2013 to compute the occupational mix
adjustment for the FY 2016, FY 2017, and FY 2018 wage indexes. A new
[[Page 38137]]
measurement of occupational mix is required for FY 2019.
The 2013 survey included the same data elements and definitions as
the previous 2010 survey and provided for the collection of hospital-
specific wages and hours data for nursing employees for calendar year
2013 (that is, payroll periods ending between January 1, 2013 and
December 31, 2013). We published the 2013 survey in the Federal
Register on February 28, 2013 (78 FR 13679 through 13680). This survey
was approved by OMB on May 14, 2013, and is available on the CMS Web
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/Medicare-Wage-Index-Occupational-Mix-Survey2013.html. The 2013 Occupational Mix Survey
Hospital Reporting Form CMS-10079 for the Wage Index Beginning FY 2016
(in Excel format) is available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/Medicare-Wage-Index-Occupational-Mix-Survey2013.html. Hospitals were required to submit
their completed 2013 surveys to their MACs by July 1, 2014. The
preliminary, unaudited 2013 survey data were posted on the CMS Web site
on July 11, 2014. As with the Worksheet S-3, Parts II and III cost
report wage data, we asked our MACs to revise or verify data elements
in hospitals' occupational mix surveys that result in certain edit
failures.
2. Use of the 2016 Medicare Wage Index Occupational Mix Survey for the
FY 2019 Wage Index
As stated earlier, a new measurement of occupational mix is
required for FY 2019. The FY 2019 occupational mix adjustment will be
based on a new calendar year (CY) 2016 survey. The CY 2016 survey (CMS
Form CMS-10079) received OMB approval on September 27, 2016. The final
CY 2016 Occupational Mix Survey Hospital Reporting Form is available on
the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/2016-Occupational-Mix-Survey-Hospital-Reporting-Form-CMS-10079-for-the-Wage-Index-Beginning-FY-2019.html. Hospitals were required to submit their
completed 2016 surveys to their MACs by July 3, 2017. The preliminary,
unaudited CY 2016 survey data were posted on the CMS Web site on July
12, 2017. As with the Worksheet S-3, Parts II and III cost report wage
data, as part of the FY 2019 desk review process, the MACs will revise
or verify data elements in hospitals' occupational mix surveys that
result in certain edit failures.
3. Calculation of the Occupational Mix Adjustment for FY 2018
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19903), for FY
2018, 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 2018 wage index. 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 FY 2018 wage
index. For the proposed FY 2018 wage index, we used the Worksheet S-3,
Parts II and III wage data of 3,325 hospitals, and we used the
occupational mix surveys of 3,128 hospitals for which we also have
Worksheet S-3 wage data, which represented a ``response'' rate of 94
percent (3,128/3,325). For the proposed FY 2018 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).
Comment: One commenter stated that all hospitals should be
obligated to submit the occupational mix survey because failure to
complete the survey jeopardizes the accuracy of the wage index. The
commenter suggested that a penalty be instituted for nonsubmitters.
This commenter also requested that, pending CMS' analysis of the
Commuting Based Wage Index and given the Institute of Medicine's study
on geographic variation in hospital wage costs, CMS eliminate the
occupational mix survey and the significant reporting burden it
creates.
Response: We appreciate the commenter's concern about the accuracy
of the wage index. We have continually requested that all hospitals
complete and submit the occupational mix surveys. We did not establish
a penalty for hospitals that did not submit the 2013 surveys. However,
we are continuing to consider for future rulemaking various options for
ensuring full compliance with future occupational mix surveys.
Regarding the commenter's request that CMS eliminate the occupational
mix survey, this survey is necessary to meet the provisions of section
1886(d)(3)(E) of the Act, which requires us to measure the earnings and
paid hours of employment by occupational category.
After consideration of the public comments we received, for FY
2018, we are adopting as final our proposal to calculate the
occupational mix adjustment factor using the same methodology that we
have used since the FY 2012 wage index. For the final FY 2018 wage
index, we are using the Worksheet S-3, Parts II and III wage data of
3,336 hospitals, and we are using the occupational mix surveys of 3,138
hospitals for which we also have Worksheet S-3 wage data, which
represents a ``response rate'' of 94 percent (3,138/3,336). We note
that, in the proposed rule (82 FR 19903), we stated that we used the
occupational mix survey of 3,128 hospitals. The reason for the increase
in the number of hospitals from 3,128 to 3,138 is that 10 hospitals
that had been deleted from the proposed rule wage index and that are
now included in the final rule wage index had acceptable occupational
mix surveys to use for the final rule. Therefore, we have included the
occupational mix surveys of these 10 additional hospitals to calculate
the wage index for this final rule. For the final FY 2018 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 FY 2018 occupational mix adjusted national average
hourly wage is $42.0564.
F. Analysis and Implementation of the Occupational Mix Adjustment and
the FY 2018 Occupational Mix Adjusted Wage Index
As discussed in section III.E. of the preamble of this final rule,
for FY 2018, we are applying the occupational mix adjustment to 100
percent of the FY 2018 wage index. We calculated the occupational mix
adjustment using data from the 2013 occupational mix survey data, using
the methodology described in the FY 2012 IPPS/LTCH PPS final rule (76
FR 51582 through 51586). Using the occupational mix survey data and
applying the occupational mix adjustment to 100 percent of the FY 2018
wage index results in a national average hourly wage of $42.0564.
[[Page 38138]]
The FY 2018 national average hourly wages for each occupational mix
nursing subcategory as calculated in Step 2 of the occupational mix
calculation are as follows:
------------------------------------------------------------------------
Average
Occupational mix nursing subcategory hourly wage
------------------------------------------------------------------------
National RN............................................. $38.86637039
National LPN and Surgical Technician.................... 22.73227683
National Nurse Aide, Orderly, and Attendant............. 15.95002569
National Medical Assistant.............................. 17.96799473
National Nurse Category................................. 32.856948
------------------------------------------------------------------------
The national average hourly wage for the entire nurse category as
computed in Step 5 of the occupational mix calculation is $32.856948.
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 2013 occupational mix survey data, we determined (in
Step 7 of the occupational mix calculation) that the national
percentage of hospital employees in the nurse category is 42.6 percent,
and the national percentage of hospital employees in the all other
occupations category is 57.4 percent. At the CBSA level, the percentage
of hospital employees in the nurse category ranged from a low of 25.7
percent in one CBSA to a high of 73.5 percent in another CBSA.
We compared the FY 2018 occupational mix adjusted wage indexes for
each CBSA to the unadjusted wage indexes for each CBSA. As a result of
applying the occupational mix adjustment to the wage data, the final
wage index values for 222 (54.4 percent) urban areas and 23 (48.9
percent) rural areas will increase. The final wage index values for 110
(27.0 percent) urban areas will increase by greater than or equal to 1
percent but less than 5 percent, and the final wage index values for 6
(1.5 percent) urban areas will increase by 5 percent or more. The final
wage index values for 10 (21.3 percent) rural areas will increase by
greater than or equal to 1 percent but less than 5 percent, and no
rural areas' final wage index values will increase by 5 percent or
more. However, the final wage index values for 184 (45.1 percent) urban
areas and 24 (51.1 percent) rural areas will decrease. The final wage
index values for 85 (20.8 percent) urban areas will decrease by greater
than or equal to 1 percent but less than 5 percent, and no urban areas'
final wage index value will decrease by 5 percent or more. The final
wage index values of 8 (17.0 percent) rural areas will decrease by
greater than or equal to 1 percent and less than 5 percent, and no
rural areas' final wage index values will decrease by 5 percent or
more. The largest final positive impacts will be 17.4 percent for an
urban area and 2.9 percent for a rural area. The largest final negative
impacts will be 4.9 percent for an urban area and 2.4 percent for a
rural area. Two urban areas' final wage index, but no rural area wage
indexes, will remain unchanged by application of the occupational mix
adjustment. These results indicate that a larger percentage of urban
areas (54.4 percent) will benefit from the occupational mix adjustment
than will rural areas (48.9 percent).
G. Application of the Rural, Imputed, and Frontier Floors
1. Rural Floor
Section 4410(a) 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. This provision is referred to as the ``rural floor.''
Section 3141 of Public Law 111-148 also requires that a national budget
neutrality adjustment be applied in implementing the rural floor. Based
on the FY 2018 wage index associated with this final rule (which is
available via the Internet on the CMS Web site), we estimate that 366
hospitals will receive an increase in their FY 2018 wage index due to
the application of the rural floor.
2. Expiration of the Imputed Floor Policy
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 argued that they are disadvantaged by the absence of rural
hospitals to set a wage index floor for those States. Since its initial
implementation, we have extended the imputed floor policy seven times,
the last of which was adopted in the FY 2017 IPPS/LTCH PPS final rule
and is set to expire on September 30, 2017. (We refer readers to
further discussions of the imputed floor in the FY 2014, FY 2015, FY
2016, and FY 2017 IPPS/LTCH PPS final rules (78 FR 50589 through 50590,
79 FR 49969 through 49970, 80 FR 49497 through 49498, and 81 FR 56921
through 56922, respectively) and to the regulations at 42 CFR
412.64(h)(4).) Currently, there are three all-urban States--Delaware,
New Jersey, and Rhode Island--with a range of wage indexes assigned to
hospitals in these States, including through reclassification or
redesignation. (We refer readers to discussions of geographic
reclassifications and redesignations in section III.I. of the preamble
of this final rule.) In computing the imputed floor for an all-urban
State under the original methodology, which was established beginning
in FY 2005, we calculated the ratio of the lowest-to-highest CBSA wage
index for each all-urban State as well as the average of the ratios of
lowest-to-highest CBSA wage indexes of those all-urban States. We then
compared the State's own ratio to the average ratio for all-urban
States and whichever is higher is multiplied by the highest CBSA wage
index value in the State--the product of which established the imputed
floor for the State. As of FY 2012, there were only two all-urban
States--New Jersey and Rhode Island--and only New Jersey benefitted
under this methodology. Under the previous OMB labor market area
delineations, Rhode Island had only one CBSA (Providence-New Bedford-
Fall River, RI-MA) and New Jersey had 10 CBSAs. Therefore, under the
original methodology, Rhode Island's own ratio equaled 1.0, and its
imputed floor was equal to its original CBSA wage index value. However,
because the average ratio of New Jersey and Rhode Island was higher
than New Jersey's own ratio, this methodology provided a benefit for
New Jersey, but not for Rhode Island.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through
53369), we retained the imputed floor calculated under the original
methodology as discussed above, and established an alternative
methodology for computing the imputed floor wage index to address the
concern that the original imputed floor methodology guaranteed a
benefit for one all-urban State with multiple wage indexes (New Jersey)
but could not benefit the other all-urban State (Rhode Island). The
alternative methodology for calculating the imputed floor was
established using data from the application of the rural floor policy
for FY 2013. Under the alternative methodology, we first determined the
average percentage difference between the post-reclassified, pre-floor
area wage index and the post-reclassified, rural floor wage index
(without rural floor
[[Page 38139]]
budget neutrality applied) for all CBSAs receiving the rural floor.
(Table 4D associated with the FY 2013 IPPS/LTCH PPS final rule (which
is available via the Internet on the CMS Web site) included the CBSAs
receiving a State's rural floor wage index.) The lowest post-
reclassified wage index assigned to a hospital in an all-urban State
having a range of such values then is increased by this factor, the
result of which establishes the State's alternative imputed floor. We
amended Sec. 412.64(h)(4) of the regulations to add new paragraphs to
incorporate the finalized alternative methodology, and to make
reference and date changes. In summary, for the FY 2013 wage index, we
did not make any changes to the original imputed floor methodology at
Sec. 412.64(h)(4) and, therefore, made no changes to the New Jersey
imputed floor computation for FY 2013. Instead, for FY 2013, we adopted
a second, alternative methodology for use in cases where an all-urban
State has a range of wage indexes assigned to its hospitals, but the
State cannot benefit under the original methodology.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50589 through
50590), we extended the imputed floor policy (both the original
methodology and the alternative methodology) for 1 additional year,
through September 30, 2014, while we continued to explore potential
wage index reforms.
In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49969 through
49970), for FY 2015, we adopted a policy to extend the imputed floor
policy (both the original methodology and alternative methodology) for
another year, through September 30, 2015, as we continued to explore
potential wage index reforms. In that final rule, we revised the
regulations at Sec. 412.64(h)(4) and (h)(4)(vi) to reflect the 1-year
extension of the imputed floor. As discussed in section III.B. of the
preamble of that FY 2015 final rule, we adopted the new OMB labor
market area delineations beginning in FY 2015. Under the new OMB
delineations, Delaware became an all-urban State, along with New Jersey
and Rhode Island. Under the new OMB delineations, Delaware has three
CBSAs, New Jersey has seven CBSAs, and Rhode Island continues to have
only one CBSA (Providence-Warwick, RI- MA). We refer readers to a
detailed discussion of our adoption of the new OMB labor market area
delineations in section III.B. of the preamble of the FY 2015 IPPS/LTCH
PPS final rule. Therefore, under the adopted new OMB delineations
discussed in section III.B. of the preamble of the FY 2015 IPPS/LTCH
PPS final rule, Delaware became an all-urban State and was subject to
an imputed floor as well for FY 2015.
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49497 through
49498), for FY 2016, we extended the imputed floor policy (under both
the original methodology and the alternative methodology) for 1
additional year, through September 30, 2016. In that final rule, we
revised the regulations at Sec. 412.64(h)(4) and (h)(4)(vi) to reflect
this additional 1-year extension. Similarly, in the FY 2017 IPPS/LTCH
PPS final rule (81 FR 56921 through 56922), for FY 2017, we extended
the imputed floor policy (under both the original methodology and the
alternative methodology) for 1 additional year, through September 30,
2017. In that final rule, we revised the regulations at Sec.
412.64(h)(4) and (h)(4)(vi) to reflect this additional 1-year
extension.
The imputed floor is set to expire effective October 1, 2017, and
in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19905), we did not
propose to extend the imputed floor policy. In the FY 2005 IPPS final
rule (69 FR 49110), we adopted the imputed floor policy for all-urban
States under the authority of section 1886(d)(3)(E) of the Act, which
gives the Secretary broad authority to adjust 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 for area differences in hospital wage levels by a factor
(established by the Secretary). However, we have expressed reservations
about establishment of an imputed floor, considering that the imputed
rural floor methodology creates a disadvantage in the application of
the wage index to hospitals in States with rural hospitals but no urban
hospitals receiving the rural floor (72 FR 24786 and 72 FR 47322). As
we discussed in the FY 2008 IPPS final rule (72 FR 47322), the
application of the rural and imputed floors requires transfer of
payments from hospitals in States with rural hospitals but where the
rural floor is not applied to hospitals in States where the rural or
imputed floor is applied. For this reason, in the FY 2018 IPPS/LTCH PPS
proposed rule, we proposed not to apply an imputed floor to wage index
calculations and payments for hospitals in all-urban States for FY 2018
and subsequent years. That is, we proposed that hospitals in New
Jersey, Delaware, and Rhode Island (and in any other all-urban State)
would receive a wage index that is calculated without applying an
imputed floor for FY 2018 and subsequent years. Therefore, under our
proposal, only States containing both rural areas and hospitals located
in such areas (including any hospital reclassified as rural under the
provisions of Sec. 412.103 of the regulations) would benefit from the
rural floor, in accordance with section 4410 of Public Law 105-33. In
addition, we proposed to no longer include the imputed floor as a
factor in the national budget neutrality adjustment. Therefore, the
proposed wage index and impact tables associated with the FY 2018 IPPS/
LTCH PPS proposed rule (which are available via the Internet on the CMS
Web site) did not reflect the imputed floor policy, and there was no
proposed national budget neutrality adjustment for the imputed floor
for FY 2018. We invited public comments on our proposal not to extend
the imputed floor for FY 2018 and subsequent years.
We are presenting below summaries of the public comments we
received and our responses.
Comment: Several commenters supported CMS' proposal to allow the
imputed floor policy to expire. One commenter stated that the imputed
floor policy only benefited two States at the expense of other States
due to national budget neutrality. Another commenter stated the imputed
floor policy should only apply when required by statute.
Response: We appreciate the positions of commenters that support
the proposal not to extend the imputed floor. In the FY 2005 IPPS final
rule (69 FR 49110), we adopted the imputed floor policy for all-urban
States under the authority of section 1886(d)(3)(E) of the Act, which
gives the Secretary broad authority to adjust 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 for area differences in hospital wage levels
by a factor (established by the Secretary). Therefore, we believe that
we have the discretion to adopt a policy that would adjust wage indexes
in the stated manner. We adopted the imputed floor policy to address
concerns from hospitals in all-urban States and subsequently extended
it through notice-and-comment rulemaking. While we understand the
commenters' concerns that the application of the imputed floors
requires transfer of payments from hospitals in States with rural
hospitals but where the rural floor is not applied to hospitals in
States where the rural or imputed floor is applied, we also received
many comments expressing concern about discontinuing the imputed floor
(as further discussed below). As explained further below, we have
decided to
[[Page 38140]]
temporarily extend the imputed floor for 1 year while we continue to
consider the comments we received and assess whether to continue or
discontinue the imputed floor policy for the long term.
Comment: Several commenters disagreed with the proposal to allow
the imputed floor to expire, and stated that CMS should maintain the
status quo and continue to extend the imputed floor in 1-year
increments until the entirety of Medicare wage index reform is
complete. The commenters stated that, by eliminating the imputed floor
wage index, CMS is alleviating only a fraction of the combined payment
transfer from the application of the rural and imputed floors. The
commenters pointed out that, combined, hospitals in the three all-urban
States (New Jersey, Rhode Island, and Delaware) accounted for less than
10 percent of the 397 hospitals nationally that received either the
rural or imputed floor last year. The commenters conveyed that CMS
indicated in the FY 2014 and FY 2015 IPPS/LTCH PPS final rules, both of
which extended the imputed floor for an additional year, that CMS would
continue to explore potential wage index reform, and that, as of the FY
2018 IPPS/LTCH PPS proposed rule, such reform has not occurred.
Multiple commenters indicated that eliminating the imputed floor
would create the same uneven playing field that existed prior to 2005,
in response to which CMS initially established the policy. The
commenters stated that the anomaly originally cited by CMS (that is,
that hospitals in all-urban States with predominant labor market areas
do not have any type of protection, or ``floor,'' from declines in
their wage index) would exist again if the imputed floor policy were
discontinued.
One commenter indicated that the imputed floor is an equitable
measure established by CMS which provides relief to hospitals in all-
urban States. The commenter stated that this longstanding policy has
reduced volatility and increased the equitability of the wage index
system. The commenter believed that CMS should not remove the imputed
floor from all-urban States. Regarding CMS' concern with the payment
impact of the existing imputed floor policy on States with rural
hospitals that do not have urban hospitals that benefit from a rural
floor, the commenter believed this should be reviewed as part of a
comprehensive Medicare wage index reform. The commenter suggested that
CMS consider all recommended changes to the imputed floor as part of
wage index reform, and that the public have a chance to provide input
to CMS prior to finalizing any decisions regarding elimination of the
imputed rural floor. The commenter further suggested that if there is a
decision made to eliminate the imputed rural floor, the decision should
include a 2-year notification period to allow impacted hospitals
appropriate planning time. The commenter stated that CMS has extended
such advance notice, including changes concerning the wage index, for
this purpose in the past.
Several commenters stated they would like to make the imputed floor
wage index provision permanent in the FY 2018 IPPS/LTCH PPS final rule.
The commenters pointed out that CMS has upheld the imputed floor for
the past 12 years as a valuable method of maintaining equitable wage
index protections for all-urban States, consistent with those that
exist for States with rural areas. The commenters referenced CMS'
explanation from the FY 2005 IPPS final rule (69 FR 49110) for adopting
the imputed floor, such as: ``because there is no `floor' to protect
those hospitals not located in the predominant labor market area from
facing continued declines in their wage index, it becomes increasingly
difficult for those hospitals to continue to compete for labor.'' The
commenters stated it is imperative that the imputed floor policy be
made permanent to ensure that its State's hospitals are not
artificially disadvantaged simply because of geography and population.
In addition, the commenters stated that there are many Medicare
payment programs that redirect scarce Medicare funding to a class of
unique hospitals. Not all States have hospitals that benefit from these
programs. For example, the commenters stated that CMS makes payments to
CAHs at a rate of 101 percent of their cost. The commenters noted that
some States do not have any hospitals that qualify as a CAH and do not
benefit from this program. The commenters further stated that while
CAHs are paid outside the IPPS program, the dollars continue to come
from a finite Medicare trust fund. The commenters believed that this
represents a transfer of payments from hospitals in States without any
CAHs, such as all-urban States, into States with CAHs, similar to the
transfer of payments CMS cites as its rationale to discontinue the
imputed floor. The commenters indicated that there is precedent for CMS
to restore, in the final rule, policies or provisions that were
scheduled for elimination or discontinuation in the proposed rule. The
commenters pointed out that, in the FY 2012 IPPS/LTCH PPS proposed
rule, CMS stated that the imputed floor would expire on September 30,
2011. However, in the final rule, CMS announced that the imputed floor
provision was extended for 2 additional years, through FY 2013
(September 30, 2013).
One commenter supported the alternative methodology for calculating
the imputed rural floor in Rhode Island. According to the commenter,
the methodology has been used since FY 2013 and has been key for the
State's hospitals and maintaining access to care for residents of Rhode
Island. The commenter stated that the alternative methodology for
calculating the imputed floor appropriately addresses a hospital wage
index reclassification system that does not reflect Rhode Island's
characteristics. The commenter further expressed that the alternative
methodology for calculating the imputed rural floor protects its
hospitals from falling to some of the lowest reimbursement rates in the
country, at the same time while competing with some of the most highly
reimbursed urban hospitals. The commenter referenced FY 2013, where a
majority of hospitals in Rhode Island reported operating losses and a
cumulative operating margin of negative 2.0 percent. The commenter
pointed out that since implementing the alternative methodology for
calculating the imputed floor, there has been improvement in the
overall fiscal condition of Rhode Island's health care system.
According to the commenter, the alternative methodology provided nearly
$29 million to hospitals in Rhode Island last year. The commenter was
concerned that any discontinuation of this policy would be devastating
for a State still facing challenging economic conditions.
Response: While the commenters raised concerns that, if the imputed
floor were discontinued, hospitals in all-urban States would again be
disadvantaged by the absence of rural hospitals to set a wage index
floor for those States, as well as concerns about the fiscal impacts of
discontinuing the rural floor, we also have expressed concerns about
continuing the imputed floor policy. As we discussed in the FY 2008
IPPS/LTCH PPS final rule (72 FR 47322), the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51593), and the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19905), the application of the rural and imputed floors requires
transfer of payments from hospitals in States with rural hospitals but
where the rural floor is not applied to hospitals in States where the
rural or imputed floor is applied. While the three all-urban States may
count for a fraction of all States that
[[Page 38141]]
received the rural and imputed floor last year, the imputed rural floor
methodology still creates a disadvantage in the application of the wage
index to hospitals in States with rural hospitals but no urban
hospitals receiving the rural floor. As discussed below, given the many
comments we received both in support of and against our proposal to
discontinue the imputed floor, we believe it would be appropriate to
temporarily extend the imputed floor for an additional year, while we
continue to consider these comments and further assess the effects of
this policy and whether to continue or discontinue the policy for the
long term.
In response to the comment suggesting that we maintain the status
quo and continue to extend the imputed floor until wage index reform is
complete, we note that section 3137(b) of the Affordable Care Act
required the Secretary to submit to Congress a report that includes a
plan to reform the Medicare wage index applied under the IPPS. We
submitted the report to Congress on April 11, 2012, and have posted the
report and other information regarding wage index reform on the CMS Web
site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Reform.html. While in past years we have
stated that we continue to explore wage index reforms while extending
the imputed floor in increments (for example, 78 FR 50589 through 50590
and 79 FR 49969 through 49970), we note that it has already been many
years since our Report to Congress was issued with no new legislation
from Congress to comprehensively reform the wage index. Therefore, we
do not agree with the commenter that the imputed floor should continue
until such time as comprehensive wage index reform may be implemented.
In addition, we note that the imputed floor was originally
authorized for only 3 years. In the FY 2005 IPPS final rule (69 FR
49110), we indicated that during the 3 years that the policy is in
effect, we would determine whether to make additional changes to the
policy or eliminate it. Given that we had indicated in the FY 2005 IPPS
final rule that the provision was set to expire after 3 years, and that
we have temporarily extended the provision in increments for several
subsequent years due to the reasons discussed earlier, we believe that
hospitals in all-urban States should not rely on the policy to continue
permanently or until wage index reform is implemented. Furthermore,
because the policy has been temporarily extended in increments for
several years, we believe that hospitals have had ample notice that the
policy could ultimately expire, and thus should not rely on a
notification period as requested by the commenter. However, we would
provide the public a chance to provide input to CMS through the
rulemaking process prior to finalizing any decisions regarding
elimination of the imputed rural floor.
Finally, regarding the comparison made by commenters between the
CAH payment methodology and the imputed floor methodology with respect
to the transfer of payments, we disagree with this comparison. Because
there is no national budget neutrality requirement relating to CAH
payments (as there is with the imputed floor methodology), there is no
transfer of payments from hospitals in States without any CAHs to
hospitals in States with CAHs, similar to that which exists as a result
of the application of the imputed floor. Under sections 1814(l) and
1834(g) of the Act, payments made to CAHs for inpatient and outpatient
services are generally based on 101 percent of the reasonable costs of
the CAH in providing such services. Reasonable cost is defined in
section 1861(v)(1)(A) of the Act and determined in accordance with the
regulations under 42 CFR part 413.
Comment: One commenter stated that, in more recent years, the rural
floor wage index adjustment has been a cause for concern nationally
because urban hospitals in certain States have had their wage indexes
set equal to the highest wage index of any rural hospital in their
respective State. As a result, the commenter pointed out, hospitals in
such States draw Medicare money away from hospitals in other States.
The commenter reemphasized its previous recommendations, which were
also included in the MedPAC's 2007 Report to Congress, that Congress
repeal the existing hospital wage index. The commenter appeared to be
requesting support for legislation which would include: Removing the
more than 900 individual hospital reclassifications, and other
exceptions that occur each year, which are either stipulated in law or
implemented through regulation, and also giving the Secretary authority
to establish a new wage index system, using compensation data from all
employees, together with hospital industry-specific occupational
weights, and adjusting at the county level to smooth large differences
between counties; and a transition period to mitigate large changes in
wage index values. The commenter indicated that the system it proposed
is similar to recommendations made by the Institute of Medicine and
that its sets of recommendations would eliminate the need for the
system of geographic reclassification and exceptions that is currently
in place.
Response: We thank the commenter for its comments and its
recommendations regarding modifications to the hospital wage index.
However, we note that we do not have authority to repeal or revise the
existing wage index statutory provisions, including the rural floor
statutory provisions at section 4410(b) of the BBA and section 3141 of
the Affordable Care Act.
Comment: One commenter opposed the continued application of the
nationwide rural floor budget neutrality adjustment as described in the
proposed rule. The commenter recognized that the impetus for the policy
is a Federal statute, not regulation. The commenter discussed section
3141 of the Affordable Care Act which established a policy of national
budget neutrality for the application of the rural and imputed floors
to the Medicare wage index. The commenter conveyed that, coupled with
the orchestrated conversion of a single facility in Massachusetts--
Nantucket Cottage Hospital--from a CAH to an IPPS hospital, section
3141 of the Affordable Care Act allows hospitals to unfairly manipulate
the Medicare payment system and reward hospitals in Massachusetts and a
few other States at the expense of most other hospitals across the
nation. The commenter stated that the adverse consequences of
nationwide rural floor budget neutrality have been recognized and
commented upon by CMS, MedPAC, and many others over the past several
years. Until this policy is corrected, the commenter stated that the
Medicare wage index system cannot possibly accomplish its objective of
ensuring that payments for the wage component of labor accurately
reflect actual wage costs.
Other commenters stated ``that the current application of the rural
floor is broken'' and referenced how a single hospital can shift such a
large amount of payments and have it paid for by many other States in
the nation. The commenters explained that section 4410 of the BBA
established a rural floor. The commenters noted that, by careful
selection of specific hospitals converting from CAHs to hospitals paid
under the IPPS, States could game the system and exploit this
provision, shifting millions of dollars into that State. These
commenters stated that the most notable example of such gaming is a
hospital located on Nantucket Island off the coast of Massachusetts.
This single hospital sets the wage index for all hospitals in
Massachusetts. The commenters stated that, according to
[[Page 38142]]
rural floor impact statements provided by CMS in the annual IPPS final
rule from FY 2012 through FY 2017, this one hospital will bring a
projected $1.3 billion into the commonwealth of Massachusetts. The
commenter pointed out that the inequity of this provision recently was
highlighted in a March 2017 Office of Inspector General (OIG) report
showing how a single hospital overreported dollars and underreported
hours, driving up the average hourly wage. According to the commenter,
the OIG estimated that this error resulted in more than $133 million in
Medicare overpayments to be paid to Massachusetts hospitals. The
commenters ``urged CMS to establish a national wage index ceiling (for
example, 1.33) that can be used to increase the national wage index
floor to a reasonable level (for example, .874)''. In addition, the
commenters opposed the application of a nationwide rural floor budget
neutrality adjustment and requested that CMS overturn section 3141 of
the Affordable Care Act and restore integrity to the hospital wage
index system.
Response: We thank the commenters for their comments and
suggestions. Because there is no national wage index floor, we are not
clear what the commenter meant with respect to its request to establish
a national wage index ceiling that can be used to increase the national
wage index floor to a reasonable level. Therefore, we are unable to
respond to this suggestion made by the commenter. As we stated earlier,
section 4410 of the BBA requires the application of the rural floor and
section 3141 of the Affordable Care Act requires a uniform, national
budget neutrality adjustment for the rural floor. We do not have
authority to repeal or revise these laws.
Comment: One commenter suggested that CMS use its authority to
establish a temporary wage index floor for Puerto Rico in the interest
of preventing a decrease in Medicare payments due to Puerto Rico's
lower than national average wages.
Response: We appreciate the suggestions provided by the commenter
regarding a temporary wage index floor for Puerto Rico. However, this
comment is outside the scope of the proposed rule.
We appreciate the positions of commenters that both supported and
opposed the proposal to allow the imputed floor policy to expire. After
consideration of public comments we received, we believe extending the
imputed floor policy for 1 more year through FY 2018 is appropriate
while we continue to consider the many comments we received and whether
to continue or discontinue the imputed floor for the long term.
Therefore, we are extending the imputed floor policy under both the
original methodology and the alternative methodology for an additional
year, through September 30, 2018, and will address this issue again in
our FY 2019 rulemaking. We also are revising the regulations at
Sec. Sec. 412.64(h)(4) and (h)(4)(vi) to reflect the 1-year extension
of the imputed floor, through September 30, 2018.
The wage index and impact tables associated with this FY 2018 IPPS/
LTCH PPS final rule (which are available on the Internet via the CMS
Web site) reflect the continued application of the imputed floor policy
at Sec. 412.64(h)(4) and a national budget neutrality adjustment for
the imputed floor for FY 2018. There are 17 hospitals in New Jersey
that will receive an increase in their FY 2018 wage index due to the
continued application of the imputed floor policy under the original
methodology, and 10 hospitals in Rhode Island and 6 hospitals in
Delaware that will benefit under the alternative methodology.
3. State Frontier Floor for FY 2018
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 42 CFR 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 2018 IPPS/
LTCH PPS proposed rule (82 FR 19905), we did not propose any changes to
the frontier floor policy for FY 2018. We stated in the proposed rule
that 52 hospitals would receive the frontier floor value of 1.0000 for
their FY 2018 wage index. These hospitals are located in Montana,
Nevada, North Dakota, South Dakota, and Wyoming.
We did not receive any public comments on the application of the
State frontier floor for 2018. In this final rule, 49 hospitals will
receive the frontier floor value of 1.0000 for their FY 2018 wage
index. These hospitals are located in Montana, Nevada, North Dakota,
South Dakota, and Wyoming.
The areas affected by the final rural and frontier floor policies
for the FY 2018 wage index are identified in Table 2 associated with
this final rule, which is available via the Internet on the CMS Web
site.
H. FY 2018 Wage Index Tables
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49498 and 49807
through 49808), we finalized a proposal to streamline and consolidate
the wage index tables associated with the IPPS proposed and final rules
for FY 2016 and subsequent fiscal years. Prior to FY 2016, the wage
index tables had consisted of 12 tables (Tables 2, 3A, 3B, 4A, 4B, 4C,
4D, 4E, 4F, 4J, 9A, and 9C) that were made available via the Internet
on the CMS Web site. Effective beginning FY 2016, with the exception of
Table 4E, we streamlined and consolidated 11 tables (Tables 2, 3A, 3B,
4A, 4B, 4C, 4D, 4F, 4J, 9A, and 9C) into 2 tables (Tables 2 and 3). We
refer readers to section VI. of the Addendum to this final rule for a
discussion of the final wage index tables for FY 2018.
I. Revisions to the Wage Index Based on Hospital Redesignations and
Reclassifications
1. General Policies and Effects of Reclassification and Redesignation
Under section 1886(d)(10) of the Act, the Medicare Geographic
Classification Review Board (MGCRB) considers applications by hospitals
for geographic reclassification for purposes of payment under the IPPS.
Hospitals must apply to the MGCRB to reclassify not later than 13
months prior to the start of the fiscal year for which reclassification
is sought (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 42 CFR 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 hospitals reclassifying to rural areas under 42 CFR 412.103.
Hospitals that are geographically located in States without any rural
areas are ineligible to apply for rural reclassification in accordance
with the provisions of 42 CFR 412.103.
On April 21, 2016, we published an interim final rule with comment
period
[[Page 38143]]
(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 and 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. We exclude 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) for a full
discussion of the effect of simultaneous reclassifications under both
the Sec. 412.103 and the MGCRB processes on wage index calculations.
2. MGCRB Reclassification and Redesignation Issues for FY 2018
a. FY 2018 Reclassification 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.
At the time this final rule was constructed, the MGCRB had
completed its review of FY 2018 reclassification requests. Based on
such reviews, there are 374 hospitals approved for wage index
reclassifications by the MGCRB starting in FY 2018. Because MGCRB wage
index reclassifications are effective for 3 years, for FY 2018,
hospitals reclassified beginning in FY 2016 or FY 2017 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 245 hospitals approved for wage index reclassifications in
FY 2016 that will continue for FY 2018, and 246 hospitals approved for
wage index reclassifications in FY 2017 that will continue for FY 2018.
Of all the hospitals approved for reclassification for FY 2016, FY
2017, and FY 2018, based upon the review at the time of this final
rule, 865 hospitals are in a MGCRB reclassification status for FY 2018.
Under the regulations at 42 CFR 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 within 45 days
of the publication of CMS' annual notice of proposed rulemaking
concerning changes to the inpatient hospital prospective payment system
and proposed payment rates for the fiscal year for which the
application has been filed. (We note that in section III.I.4. of the
preamble of this final rule, we did not finalize our proposal to revise
the above described regulation text to specify that written notice to
the MGCRB must be provided within 45 days from the date of public
display of the proposed rule at the Office of the Federal Register.)
For information about 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).
Changes to the wage index that result from withdrawals of requests
for reclassification, terminations, wage index corrections, appeals,
and the Administrator's review process for FY 2018 are incorporated
into the wage index values published in this FY 2018 IPPS/LTCH PPS
final rule. These changes affect not only the wage index value for
specific geographic areas, but also the wage index value that
redesignated/reclassified hospitals receive; that is, whether they
receive the wage index that includes the data for both the hospitals
already in the area and the redesignated/reclassified hospitals.
Further, the wage index value for the area from which the hospitals are
redesignated/reclassified may be affected.
Comment: MedPAC and other commenters stated that the increasing
number of wage index reclassifications, along with other wage index
exceptions, raises questions regarding whether the current wage index
is equitably adjusting payments for local input costs of providing
patient care. One commenter stated that the increasing number of
hospitals that reclassify is a ``clear indication of the broken
system'' that needs to be replaced; another commenter requested general
wage index reform. MedPAC reiterated that recommendations included in
the Commission's 2007 Report to Congress and similar recommendations
made by the Institute of Medicine would eliminate the need for the
system of geographic reclassification and exceptions that is currently
in place. Specifically, MedPAC recommended that the Congress repeal the
existing hospital wage index, remove the more than 900 individual
hospital reclassifications and other exceptions that occur each year,
and give the Secretary the authority to establish a new wage index
system.
Response: We understand the commenters' concerns regarding the high
volume of MGCRB reclassifications. We appreciate MedPAC's
recommendation to repeal the current wage index statute. However,
repealing the wage index statute would require legislative action by
Congress. Specifically, 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 also appreciate the other commenters' requests
for wage index reform. We will take the requests into consideration and
may address this issue again in future rulemaking.
Applications for FY 2019 reclassifications are due to the MGCRB by
September 1, 2017 (the first working day of September 2017). We note
that this is also the deadline for canceling a previous wage index
reclassification, withdrawal, or termination under 42 CFR 412.273(d).
Applications and other information about MGCRB
[[Page 38144]]
reclassifications may be obtained, beginning in mid-July 2017, via the
Internet on the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Review-Boards/MGCRB/index.html, or by calling the MGCRB at
(410) 786-1174. The mailing address of the MGCRB is: 2520 Lord
Baltimore Drive, Suite L, Baltimore, MD 21244-2670.
Under previous regulations at 42 CFR 412.256(a)(1), applications
for reclassification were required to be mailed or delivered to the
MGCRB, with a copy to CMS, and were not allowed to be submitted through
the facsimile (FAX) process or by other electronic means. Because we
believed this previous policy was outdated and overly restrictive and
to promote ease of application for FY 2018 and subsequent years, in the
FY 2017 IPPS/LTCH PPS final rule (81 FR 56928), we revised this policy
to require applications and supporting documentation to be submitted
via the method prescribed in instructions by the MGCRB, with an
electronic copy to CMS. We revised Sec. 412.256(a)(1) to specify that
an application must be submitted to the MGCRB according to the method
prescribed by the MGCRB, with an electronic copy of the application
sent to CMS. We specified that CMS copies should be sent via email to
[email protected].
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56928), we
reiterated that MGCRB application requirements will be published
separately from the rulemaking process, and paper applications will
likely still be required. The MGCRB makes all initial determinations
for geographic reclassification requests, but CMS requests copies of
all applications to assist in verifying a reclassification status
during the wage index development process. We stated that we believed
that requiring electronic versions would better aid CMS in this
process, and would reduce the overall burden upon hospitals.
We did not receive any public comments on the requirements for
applications for FY 2019 reclassifications.
b. Extension of PRA Information Collection Requirement Approval for
MGCRB Applications
As stated earlier, 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
the regulations under 42 CFR 412.230 through 412.280. The information
collection requirements for the MGCRB procedures and criteria and
supporting regulations in 42 CFR 412.256 subject to the Paperwork
Reduction Act provisions were approved under OMB Control Number 0938-
0573 and expired on February 28, 2017. As discussed in the FY 2018
IPPS/LTCH PPS proposed rule (82 FR 19906 and 19907), an extension of
the collection was required in time for applications due to the MGCRB
by September 1, 2017 for FY 2019 reclassifications. A request for an
extension of the information collection requirements for the MGCRB
procedures and criteria and supporting regulations received approval by
OMB on June 30, 2017, and can be accessed at: https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201612-0938-023.
c. Deadline for Submittal of Documentation of Sole Community Hospital
(SCH) and Rural Referral Center (RRC) Classification Status to the
MGCRB
The regulations at 42 CFR 412.230(a)(3), consistent with section
1886(d)(10)(D)(i)(III) of the Act, set special rules for sole community
hospitals (SCHs) and rural referral centers (RRCs) that are
reclassifying under the MGCRB. Specifically, a hospital that is an RRC
or an SCH, or both, does not have to demonstrate a close proximity to
the area to which it seeks redesignation. If a hospital that is an RRC
or an SCH, or both, qualifies for urban redesignation, it is
redesignated to the urban area that is closest to the hospital. If the
hospital is closer to another rural area than to any urban area, it may
seek redesignation to either the closest rural or the closest urban
area.
In addition, section 1886(d)(10)(D)(iii) of the Act, as implemented
in the regulations at Sec. 412.230(d)(3)(i), provides an exception to
certain wage comparison criteria for RRCs and former RRCs reclassifying
under the MGCRB. Under Sec. 412.230(d)(3)(i), if a hospital was ever
an RRC, it does not have to demonstrate that it meets the average
hourly wage criterion at Sec. 412.230(d)(1)(iii), which would require
that the hospital's average hourly wage be at least 106 percent for
rural hospitals and at least 108 percent for urban hospitals of the
average hourly wage of all other hospitals in the area in which the
hospital is located. Rather, as codified at Sec. 412.230(d)(3)(ii),
consistent with our authority under section 1886(d)(10)(D)(i) of the
Act, if a hospital was ever an RRC, it is required to meet only the
criterion for rural hospitals at Sec. 412.230(d)(1)(iv), which
requires that the hospital's average hourly wage is equal to at least
82 percent of the average hourly wage of hospitals in the area to which
it seeks redesignation. The regulations at Sec. 412.96 set forth the
criteria that a hospital must meet in order to qualify as an RRC.
For a hospital to use the special rules at Sec. 412.230(a)(3) for
SCHs and RRCs, the existing regulation at Sec. 412.230(a)(3) requires
that the hospital be an active SCH or an RRC as of the date of the
MGCRB's review. In addition, for a hospital to use the RRC exceptions
at Sec. 412.230(d)(3), a hospital must either be an RRC at the time of
the MGCRB's review or have previously been classified as an RRC in the
past. In other words, under the existing regulations, if a hospital is
approved by CMS as an SCH or an RRC but the approval is not yet
effective at the time of the MGCRB's review, the hospital's status as
an SCH or an RRC would not be considered in the MGCRB's decision,
unless the hospital was a former RRC, in which case it would be able to
use the RRC exceptions at Sec. 412.230(d)(3).
The MGCRB currently accepts supporting documentation of SCH and RRC
classification (including, but not limited to, the CMS approval letter)
up until the date of MGCRB's review, which varies annually. A hospital
may apply at any time for classification as an SCH, and the
classification is effective 30 days after the date of CMS' written
notification of approval, in accordance with Sec. 412.92. Considering
that the MGCRB usually meets in early February, hospitals typically
seek to obtain SCH approval letters no later than early January (30
days prior to the date of MGCRB review) for the SCH status to be
effective as of the date of the MGCRB's review. However, consistent
with section 1886(d)(5)(C)(i) of the Act, a hospital must submit its
application for RRC status during the quarter before the first quarter
of the hospital's cost reporting period, to be effective at the
beginning of the next cost reporting period. The existing regulation at
Sec. 412.230(a)(3), combined with the statutory timeframe for RRC
classification, require that a hospital's cost reporting period as an
RRC begin on or before the date of the MGCRB's review in order to be
considered an RRC by the MGCRB for purposes of the special rules under
Sec. 412.230(a)(3). Similarly, in order to use the RRC exceptions
under Sec. 412.230(d)(3), a hospital's RRC status must be effective on
the date of the MGCRB's review, or (unlike Sec. 412.230(a)(3)) the
hospital must have had RRC status in the past. For example, a hospital
with a cost
[[Page 38145]]
reporting period beginning in March would obtain RRC approval, in
accordance with the statutory timeframe, during the December through
February quarter (potentially before the MGCRB's decision), but would
not be considered an RRC by the MGCRB because the approval would not be
effective until the next cost reporting period begins in March, after
the MGCRB's decision (unless, for purposes of Sec. 412.230(d)(3), the
hospital had previously been classified as an RRC in the past).
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19907 through 19908), the current practice of accepting documentation
of SCH and RRC approvals up until the date of MGCRB review does not
ensure adequate time for the MGCRB to include SCH and RRC approvals in
its review. We noted in the proposed rule that many hospitals now
obtain SCH or RRC status based on a Sec. 412.103 reclassification in
order to reclassify using the special rules and exceptions under the
MGCRB following the April 21, 2016 IFC (81 FR 23428), which revised the
regulations to allow hospitals nationwide to reclassify based on
acquired rural status. We stated in the proposed rule that we believe
the additional volume of SCH and RRC approvals submitted to the MGCRB
increases the need for an earlier deadline for documentation of SCH and
RRC classifications to be submitted to the MGCRB for purposes of the
special rules at Sec. 412.230(a)(3) and the exception for RRCs at
Sec. 412.230(d)(3). In addition, because the date of the MGCRB's
review varies annually, we stated in the proposed rule that we believe
hospitals would benefit from the certainty of a set date by which
documentation of RRC or SCH status must be submitted in order to have
that status considered by the MGCRB under Sec. 412.230(a)(3) and Sec.
412.230(d)(3).
Therefore, to ensure sufficient time for the MGCRB to include SCH
and RRC status approvals in its review and increase clarity for
hospitals, while allowing as much time and flexibility as possible for
hospitals applying for RRC status to be considered RRCs by the MGCRB,
in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19907 through 19908),
we proposed to revise the regulations at Sec. 412.230(a)(3) and Sec.
412.230(d)(3). We proposed to revise the regulations at Sec.
412.230(a)(3) in two ways. First, we proposed to establish a deadline
of the first business day after January 1 for hospitals to submit to
the MGCRB documentation of SCH or RRC status approval (the CMS approval
letter) in order to take advantage of the special rules under Sec.
412.230(a)(3) when reclassifying under the MGCRB. We stated that we
believe that this date of the first business day after January 1 would
provide sufficient time for the MGCRB to consider documentation of SCH
or RRC status approval in its review, without negatively affecting
hospitals seeking to obtain SCH or RRC status, as explained below.
Second, we proposed to revise Sec. 412.230(a)(3) to require hospitals
to submit documentation of SCH or RRC status approval (the CMS approval
letter) by the deadline above, rather than to have SCH or RRC
classification that is effective as of the date of MGCRB review, in
order to use the special rules for SCHs and RRCs under Sec.
412.230(a)(3). Likewise, we proposed to revise the regulations at Sec.
412.230(d)(3) so that a hospital qualifies for these RRC exceptions if
it was ever approved as a RRC. In other words, the exceptions at Sec.
412.230(d)(3) would continue to apply to hospitals that were ever
classified as RRCs, but consistent with our authority under section
1886(d)(10)(D)(i) of the Act to publish guidelines to be utilized by
the MGCRB, we proposed to also extend these exceptions to hospitals
that were ever approved as RRCs. Similar to Sec. 412.230(a)(3), we
also proposed to establish a deadline of the first business day after
January 1 for hospitals to submit documentation of RRC status approval
(the CMS approval letter) in order to take advantage of the exception
under Sec. 412.230(d)(3) when reclassifying under the MGCRB. We stated
in the proposed rule that these proposed revisions would more
appropriately allow the MGCRB to prepare for its review and would allow
hospitals obtaining SCH or RRC status approval as late as the first
business day after January 1 to have these classifications considered
by the MGCRB under Sec. 412.230(a)(3) and (d)(3), irrespective of the
effective date of these classifications. We stated that these proposals
would not substantially affect hospitals seeking SCH classification for
purposes of reclassifying under the MGCRB because a hospital must
obtain SCH status approval by early January under the existing
regulation in order to have that classification effective 30 days later
by the time the Board usually meets in early February. For hospitals
seeking RRC classification for purposes of reclassifying under the
MGCRB, however, the proposed deadline of no later than the first
business day after January 1, in concert with our proposal to accept
documentation of approval (the CMS approval letter) instead of
requiring the hospital to be an active RRC at the time of the MGCRB
review in order to take advantage of the special rules and exceptions
under Sec. 412.230(a)(3) and (d)(3), is beneficial. We stated that the
proposed revisions to the regulations at Sec. 412.230(a)(3) and (d)(3)
would accommodate more hospitals with various cost reporting year ends
by allowing hospitals with cost reporting periods beginning soon after
the MGCRB's decision to have RRC status approvals included in the
MGCRB's review. Under the proposals, the MGCRB would consider an RRC
status approval obtained as late as the first business day after
January 1 instead of requiring the RRC classification to be effective
by the time the Board meets, which has been in February in past years.
For example, under our proposal, a hospital with a cost reporting
period beginning as late as March, which could apply for RRC status
approval in accordance with the statutory timeframe starting in
December, would be considered an RRC by the MGCRB if it submits
documentation of approval of RRC status no later than the first
business day after January 1, even though the approval would not be
effective until after the MGCRB's decision.
For the reasons discussed earlier, consistent with our authority
under section 1886(d)(10)(D)(i) of the Act to publish guidelines to be
utilized by the MGCRB, we proposed to revise the regulations at Sec.
412.230(a)(3) to specify that, to be redesignated under the special
rules in that paragraph, the hospital must submit documentation of the
approval of SCH or RRC status to the MGCRB no later than the first
business day after January 1. In addition, we proposed conforming
revisions to paragraphs (a)(3)(i) and (ii) of Sec. 412.230 to reflect
that these paragraphs apply to hospitals with SCH and RRC approval as
specified above (and not only effective status). Specifically, we
proposed to revise Sec. 412.230(a)(3)(i) to specify that a hospital
that is approved as an RRC or SCH, or both, does not have to
demonstrate a close proximity to the area to which it seeks
redesignation; and to revise Sec. 412.230(a)(3)(ii) to specify that
this paragraph applies if a hospital that is approved as an RRC or SCH,
or both, qualifies for urban redesignation. We note that we proposed
additional revisions to Sec. 412.230(a)(3)(ii) as discussed in section
III.I.2.d. of the preamble of the proposed rule and this final rule.
In addition, for the reasons discussed above, consistent with our
authority under section 1886(d)(10)(D)(i) of the
[[Page 38146]]
Act to publish guidelines to be utilized by the MGCRB, we proposed to
revise the regulations at Sec. 412.230(d)(3). Specifically, we
proposed to add introductory language to Sec. 412.230(d)(3) to specify
that for the exceptions in this paragraph to apply, the hospital must
submit documentation of the approval of RRC status (current or past) to
the MGCRB no later than the first business day after January 1. In
addition, we proposed to revise Sec. 412.230(d)(3)(i) to specify that
if a hospital was ever approved as an RRC, it does not have to
demonstrate that it meets the average hourly wage criterion set forth
in Sec. 412.230(d)(1)(iii); and to revise Sec. 412.230(d)(3)(ii) to
specify that if a hospital was ever approved as an RRC, it is required
to meet only the criterion that applies to rural hospitals under Sec.
412.230(d)(1)(iv), regardless of its actual location in an urban or
rural area.
We invited public comments on these proposals.
Comment: One commenter did not disagree with the establishment of a
deadline for submitting documentation of SCH and RRC status to the
MGCRB because the commenter believed that the proposed deadline will
provide clarity to hospitals, the MGCRB, and CMS in this process and
will ensure adequate time for the MGCRB to include SCH and RRC
approvals in its review. However, the commenter urged CMS to also
establish a deadline of 30 days from receipt of request for SCH or RRC
status for CMS to respond. The commenter pointed out that while the
regulations specify effective dates for SCH and RRC status, the
regulations do not set a timeframe by which CMS must rule on an SCH or
RRC request. Therefore, the commenter stated, a hospital may face
uncertainty that CMS will respond to its request for SCH or RRC status
by the first business day in January, in time to submit to the MGCRB.
According to the commenter, absent a defined timeframe within which CMS
must respond to hospitals' requests for SCH and RRC status, hospitals
face a disadvantage in complying with the deadline of the first
business day in January for submitting documentation of SCH and RRC
status to the MGCRB.
Response: We appreciate the commenter's support for our effort to
provide clarity to all parties. The commenter is correct that the
regulations do not set a timeframe by which CMS must rule on an SCH or
RRC request. However, under section 1886(d)(5)(C)(i) of the Act, CMS
must make a final determination on a request for RRC status within 60
days after the date the request was submitted. We agree with the
commenter that, depending on the timeframe within which SCH and RRC
status approvals are issued, hospitals may face a disadvantage in
complying with the proposed deadline to submit SCH and RRC
documentation to the MGCRB. Thus, we believe that further consideration
is needed regarding the appropriate timeframe for such approvals to
avoid the disadvantage cited by the commenter. Accordingly, for FY
2018, we are not finalizing the proposed deadline of the first business
day after January 1 for hospitals to submit documentation of SCH and
RRC status to the MGCRB. We may revisit the deadline for submitting
documentation to the MGCRB in future rulemaking to give us the
opportunity to further consider the timeframe for CMS to respond to
applications for SCH and RRC status.
However, we believe that the proposal to require that a hospital
must be approved for SCH or RRC status, rather than have active RRC or
SCH status, in order to use the special rules for SCHs and RRCs and
exceptions for RRCs under Sec. Sec. 412.230(a)(3) and (d)(3), remains
beneficial for hospitals. While we are still concerned with providing
the MGCRB sufficient time to include SCH and RRC status approval in its
review, we believe finalizing our proposal to require that a hospital
be approved for SCH or RRC status, rather than have active RRC or SCH
status, in order to use the special rules for SCHs and RRCs and
exceptions for RRCs under Sec. Sec. 412.230(a)(3) and (d)(3) is
appropriate because it provides flexibility and accommodates more
hospitals. Therefore, as discussed further below, we are finalizing our
proposed changes to the regulations to specify that a hospital must be
approved as an SCH or RRC at the date of the MGCRB's review,
irrespective of effective date of SCH or RRC status. While
documentation of SCH and RRC status approval may include the CMS
approval letter, we are clarifying that other documents could also
serve this purpose as determined by the MGCRB, and that documentation
in addition to the CMS approval letter may be required. Questions about
acceptable supporting documentation should be directed to the MGCRB at
410-786-1174.
After consideration of the public comment we received, for the
reasons discussed earlier, we are not finalizing our proposed revisions
to the regulations at Sec. Sec. 412.230(a)(3) and (d)(3) to establish
a deadline of the first business day after January 1 for hospitals to
submit documentation of SCH and RRC status approval to the MGCRB.
However, consistent with our authority under section 1886(d)(10)(D)(i)
to publish guidelines to be used by the MGCRB, for the reasons
discussed earlier and in the FY 2018 IPPS/LTCH PPS proposed rule, we
are finalizing our proposal that a hospital must be approved for SCH or
RRC status, rather than have active SCH or RRC status in order to use
the special rules for SCHs and RRCs and exceptions for RRCs under
Sec. Sec. 412.230(a)(3) and (d)(3). Specifically, we are revising the
regulation at Sec. 412.230(a)(3) to specify that, to be redesignated
under the special rules in this paragraph, a hospital must be approved
as an SCH or RRC as of the date of the MGCRB's review. In addition, we
are finalizing, without modification, our proposed revisions to
paragraphs (a)(3)(i) and (ii) of Sec. 412.230 to reflect that these
paragraphs apply to hospitals with SCH and RRC approval (and not only
effective status). Specifically, we are revising Sec. 412.230(a)(3)(i)
to specify that a hospital that is approved as an RRC or SCH, or both,
does not have to demonstrate a close proximity to the area to which it
seeks redesignation; and revising Sec. 412.230(a)(3)(ii) to specify
that this paragraph applies if a hospital that is approved as an RRC or
SCH, or both, qualifies for urban redesignation. (We note that we are
making additional revisions to Sec. 412.230(a)(3)(ii) as discussed in
section III.I.2.d. of the preamble of this final rule).
In addition, for the reasons discussed earlier, while we are not
finalizing our proposed introductory language at Sec. 412.230(d)(3),
we are finalizing our proposed revisions to paragraphs (d)(3)(i) and
(ii) of Sec. 412.230, without modification, to reflect that these
paragraphs apply to hospitals with RRC approval (and not only effective
status). Specifically, we are revising Sec. 412.230(d)(3)(i) to
specify that if a hospital was ever approved as an RRC, it does not
have to demonstrate that it meets the average hourly wage criterion set
forth in Sec. 412.230(d)(1)(iii); and revising Sec. 412.230(d)(3)(ii)
to specify that if a hospital was ever approved as an RRC, it is
required to meet only the criterion that applies to rural hospitals
under Sec. 412.230(d)(1)(iv), regardless of its actual location in an
urban or rural area.
d. Clarification of Special Rules for SCHs and RRCs Reclassifying to
Geographic Home Area
Following issuance of the April 21, 2016 IFC (81 FR 23428),
hospitals may simultaneously be redesignated as rural under Sec.
412.103 and reclassified under the MGCRB. An urban hospital seeking
[[Page 38147]]
benefits of rural status, such as rural payments for disproportionate
share hospitals (DSH) and eligibility for the 340B Drug Pricing Program
administered by HRSA, without the associated rural wage index may be
redesignated as rural under Sec. 412.103 (if it meets the applicable
requirements) and also reclassify under the MGCRB to an urban area
(again, if it meets the applicable requirements). As discussed earlier
and in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56922 through
56927), a hospital with simultaneous Sec. 412.103 redesignation and
MGCRB reclassification receives the wage index of the CBSA to which it
is reclassified under the MGCRB while still maintaining Sec. 412.103
reclassified rural status for other purposes.
Hospitals that are redesignated under Sec. 412.103 may seek MGCRB
reclassification to their geographic home area. Such hospitals
automatically meet the criteria for proximity, but must still
demonstrate that they meet the wage comparison requirements using the
criteria for rural hospitals at Sec. 412.230(d). Specifically, a
hospital with a Sec. 412.103 redesignation seeking reclassification
under the MGCRB must demonstrate that its average hourly wage is at
least 106 percent of the average hourly wage of all other hospitals in
the area in which the hospital is located in accordance with Sec.
412.230(d)(1)(iii), and the hospital's average hourly wage is equal to
at least 82 percent of the average hourly wage of hospitals in the area
to which it seeks redesignation, in accordance with Sec.
412.230(d)(1)(iv). In this case, both the area in which the hospital is
located and the area to which it seeks redesignation are the geographic
home area. If a hospital with a Sec. 412.103 rural redesignation also
has SCH or RRC status based on its acquired rural status, the hospital
may use the exception at Sec. 412.230(d)(3) for RRCs seeking
reclassification under the MGCRB and the special reclassification rules
at Sec. 412.230(a)(3) for SCHs and RRCs. Specifically, under Sec.
412.230(d)(3)(ii), an RRC or former RRC must only demonstrate that its
average hourly wage is equal to at least 82 percent of the average
hourly wage of hospitals in the area to which it seeks redesignation.
In other words, a hospital with RRC status based on a Sec. 412.103
rural redesignation that is seeking additional reclassification under
the MGCRB to its geographic home area must only demonstrate that its
average hourly wage is equal to at least 82 percent of the average
hourly wage of hospitals in its geographic home area. The proximity
requirement is waived under Sec. 412.230(a)(3) for SCHs and RRCs, and
SCHs and RRCs are redesignated to the urban area that is closest to the
hospital (or if the hospital is closer to another rural area than to
any urban area, it may seek redesignation to either the closest rural
area or the closest urban area).
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19908 through 19909), the existing regulation at Sec.
412.230(a)(3)(ii) states that if an SCH or RRC qualifies for urban
redesignation, it is redesignated to the urban area that is closest to
the hospital. As currently worded, we believe it is unclear how this
provision would apply to a hospital with a Sec. 412.103 rural
redesignation and SCH or RRC status. If the urban area that is closest
to the hospital is interpreted to mean the hospital's geographic home
area, a hospital with a Sec. 412.103 rural redesignation and SCH or
RRC status would not be able to reclassify to any closest area outside
of the hospital's geographic home area, but would only be allowed to
reclassify to the geographic home area. Alternatively, if the urban
area that is closest to the hospital is interpreted to mean the closest
urban area to the hospital's geographic home area, the hospital would
seem to be precluded from reclassifying under the MGCRB to its
geographic home area. In other words, under the existing language of
this regulation, the urban area that is closest to the hospital can
either be interpreted to mean the hospital's geographic home area, or
the closest area outside of the hospital's geographic home area.
In the FY 2018 IPS/LTCH PPS proposed rule (82 FR 19909), we stated
that we believe it would be appropriate to revise Sec.
412.230(a)(3)(ii) to clarify that it allows for redesignation to either
the hospital's geographic home area or to the closest area outside of
the hospital's geographic home area. Prior to the April 21, 2016
interim final rule with comment period (IFC) (81 FR 23428), it was not
possible for a hospital with Sec. 412.103 rural redesignation to seek
reclassification to its geographic home area or to the closest area
outside its geographic home area under the MGCRB because dual
reclassification under Sec. 412.103 and under the MGCRB was not
permitted. However, the IFC allowed dual Sec. 412.103 and MGCRB
reclassifications, so a hospital may now reclassify to a rural area
under Sec. 412.103 and then reclassify back to its geographic home
area or another area under the MGCRB for wage index purposes (if it
meets all criteria). Thus, depending on the circumstances, a hospital
may seek to reclassify to either its geographic home area or the
closest area outside of its geographic home area.
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19909), we proposed to revise the regulations at Sec.
412.230(a)(3)(ii) to clarify that a hospital with a Sec. 412.103 rural
redesignation and SCH or RRC approval may reclassify under the MGCRB to
its geographic home area or to the closest area outside of its
geographic home area. Specifically, we proposed to revise Sec.
412.230(a)(3)(ii) to state that if a hospital that is approved as an
RRC or an SCH, or both, qualifies for urban redesignation, it is
redesignated to the urban area that is closest to the hospital or to
the hospital's geographic home area. If the hospital is closer to
another rural area than to any urban area, it may seek redesignation to
either the closest rural or the closest urban area.
Comment: Two commenters supported the clarification in the proposed
rule and stated that it provides clarity with respect to SCHs and RRCs
with Sec. 412.103 rural redesignation applying for MGCRB
reclassification based on special access rules. In addition, the
commenters stated that the proposed regulatory revision is consistent
with the regulations, past administrative decisions, and CMS' policy of
allowing a hospital with Sec. 412.103 rural redesignation to
reclassify under the MGCRB.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, for the
reasons discussed earlier and in the FY 2018 IPPS/LTCH PPS proposed
rule, we are finalizing, without modification, our proposed revision of
Sec. 412.230(a)(3)(ii) to clarify that a hospital with a Sec. 412.103
rural redesignation and SCH or RRC approval may reclassify under the
MGCRB to its geographic home area or to the closest area outside of its
geographic home area.
3. Redesignations Under Section 1886(d)(8)(B) of the Act
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 in order 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 out-migration
adjustment. In addition, 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
[[Page 38148]]
the publication of the proposed rule) to waive its urban status for the
full 3-year period for which its out-migration adjustment is effective.
(We note that, in section III.I.4. of the preamble of this final rule,
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.) 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
again clarified that such a request to waive Lugar status, received
within 45 days of the publication of the proposed rule, is valid for
the full 3-year period for which the hospital's out-migration
adjustment is effective. 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 publication of
the proposed rule for that particular fiscal year. We indicated that
such reinstatement requests may be sent electronically to
[email protected]. We wish to further clarify that both requests to
waive and to reinstate ``Lugar'' status may be sent to this mailbox. 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. As noted earlier, and discussed further in section
III.I.4. of this final rule, we are finalizing our proposal to revise
these notification timeframes, effective October 1, 2017, to 45 days
from the date of public display of the annual proposed rule.
We did not receive any public comments on this subject area in the
proposed rule.
4. Changes to the 45-Day Notification Rules
Certain Medicare regulations specify that hospitals have 45 days
from the publication of the annual proposed rule for the hospital
inpatient prospective payment system to inform CMS or the MGCRB of
certain requested reclassification/redesignation and out-migration
adjustment changes relating to the development of the hospital wage
index. Specifically, 42 CFR 412.64(i)(3)(iii), which provides for
adjusting the wage index to account for commuting patterns of hospital
workers, and 42 CFR 412.211(f)(3)(iii), which provides for the same
adjustment for hospitals in Puerto Rico, state that a hospital may
waive the application of this wage index adjustment by notifying CMS in
writing within 45 days after the publication of the annual notice of
proposed rulemaking for the hospital inpatient prospective payment
system. The regulations at Sec. 412.273(c) concerning withdrawing an
MGCRB application, terminating an approved 3-year reclassification, or
canceling a previous withdrawal or termination, also state
(specifically Sec. 412.273(c)(1)(ii) and (2)) that a request for
withdrawal or termination must be received by the MGCRB within 45 days
of publication of CMS' annual notice of proposed rulemaking concerning
changes to the inpatient hospital prospective payment system and
proposed payment rates. Similarly, the policy outlined in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51599 through 51600) allows 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 publication of the proposed rule.
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19910), we
proposed to revise the above described regulation text and policies as
follows to specify that written notification to CMS or the MGCRB (as
applicable) must be provided within 45 days from the date of public
display of the annual proposed rule for the hospital inpatient
prospective payment system at the Office of the Federal Register. 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 Web site in order to make the
decisions at issue. Specifically, we proposed to revise the regulations
at Sec. 412.64(i)(3)(iii) and Sec. 412.211(f)(3)(iii) to provide that
a hospital may waive the application of the wage index adjustment by
notifying CMS within 45 days of the date of public display of the
annual notice of proposed rulemaking for the hospital inpatient
prospective payment system at the Office of the Federal Register. In
addition, we proposed to revise the regulations at Sec.
412.273(c)(1)(ii) and (c)(2) to provide that a request for withdrawal
or termination of an MGCRB reclassification must be received by the
MGCRB within 45 days of the date of public display at the Office of the
Federal Register of the annual notice of proposed rulemaking concerning
changes to the inpatient hospital prospective payment system and
proposed payment rates for the fiscal year for which the application
has been filed (in the case of a withdrawal under Sec.
412.273(c)(1)(ii)), or for the fiscal year for which the termination is
to apply (under Sec. 412.273(c)(2)). We also proposed to revise our
policy outlined in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599
through 51600) (as described above) 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 IPPS proposed rule at the Office of
the Federal Register. We invited public comments on these proposals.
We did not receive any public comments on the proposed revisions to
Sec. 412.64(i)(3)(iii) or Sec. 412.211(f)(3)(iii) with regard to the
time period for hospitals to notify CMS of decisions about the out-
migration adjustment, or with regard to the proposed revision to the
policy outlined in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599
through 51600) concerning the time period for notifications by Lugar
hospitals regarding acceptance or nonacceptance of the out-migration
adjustment. However, we did receive public comments on our proposed
revisions to Sec. 412.273(c)(1)(ii) and (c)(2) regarding the time
period to request withdrawal or termination of an MGCRB
reclassification. These comments are summarized below.
Comment: Several commenters disagreed with the proposal to change
the 45-day notification requirement for MGCRB withdrawals and
terminations. They stated that 45 days from the date of public display
at the Office of the Federal Register would not give hospitals adequate
time to review the applicable data. The commenters pointed out that the
proposal would decrease the time period for providers to act by
approximately 14 days, which they claimed would ``unnecessarily
disadvantage'' hospitals in making the most beneficial reclassification
determinations for their wage index. In addition, a few commenters
presented scenarios whereby the proposal may require hospitals to
submit withdrawal or termination requests to the MGCRB prior to the
Administrator's decisions on MGCRB appeals. The commenters recommended
that CMS maintain its existing policy of 45 days after the proposed
rule is issued in the Federal Register for hospitals to request
[[Page 38149]]
withdrawal and termination of MGCRB reclassifications. One commenter
suggested that CMS also allow for an extension of the current deadline
to ensure providers have at least 15 days from the issuance of a CMS
Administrator decision to make withdrawal and termination requests.
Response: While the commenters are correct that requiring hospitals
to submit withdrawal or termination requests to the MGCRB within 45
days from the date of public display, rather than the date the proposed
rule is issued in the Federal Register, reduces the time for hospitals
to make such determinations, we do not agree that hospitals generally
would have inadequate time to review the applicable data. As discussed
in the proposed rule (82 FR 19910), 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 Web
site in order to make the decisions at issue under our proposals.
However, while we believe that hospitals generally would have adequate
time to make reclassification determinations under the proposal, we
acknowledge that hospitals may be disadvantaged if the Administrator's
decision on a hospital's appeal of an MGCRB decision has not been
issued prior to the proposed deadline for submitting withdrawal or
termination requests to the MGCRB. Specifically, the regulations at
Sec. Sec. 412.278(a) and (b)(1) provide that a hospital may request
the Administrator to review the MGCRB decision, and that such request
must be received by the Administrator 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 (except that the
Administrator may, it his or her discretion, for good cause shown, toll
such 90 days). 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. Therefore, in
order to further consider whether our proposed revisions to Sec.
412.273(c) may require hospitals to submit withdrawal or termination
requests to the MGCRB before the Administrator's decision on an appeal
is issued, we are not finalizing at this time our proposed change to
the 45-day notification rule at Sec. 412.273(c)(1)(ii) and (c)(2) for
requesting withdrawals and terminations of MGCRB reclassifications.
However, after consideration of these comments, we are revising our
regulations at Sec. Sec. 412.273(c)(1)(ii) and (c)(2) to ensure that
our current policy under those regulations is clear. Specifically, we
are revising Sec. Sec. 412.273(c)(1)(ii) and (c)(2) to clarify that,
under these regulations, a hospital's request to withdraw or terminate
an MGCRB reclassification must be received by the MGCRB within 45 days
of the date the annual notice of proposed rulemaking is issued in the
Federal Register. We believe that these revisions will provide for
greater clarification regarding how these provisions are applied. We
note that we are not providing for an extension of the current deadline
as one commenter suggested to allow providers to have at least 15 days
from the issuance of a CMS Administrator decision to withdraw or
terminate an MGCRB reclassification because we do not believe that an
extension is necessary under the current deadline under Sec. Sec.
412.273(c)(1)(ii) and (c)(2). Under the current deadline, a hospital
can plan its withdrawal or termination decisions for both potential
alternatives of the Administrator's decision on its appeal, and then
act immediately within the current 45-day timeframe as soon as the
Administrator's decision either to affirm or reverse the MGCRB's
decision is issued.
Comment: One commenter stated that CMS' policy that hospitals must
request to withdraw or terminate MGCRB reclassifications within 45 days
of the proposed rule is problematic because a hospital could terminate
a reclassification based on information in the proposed rule and, with
the publication of the final rule, discover that its original
reclassified status was more desirable. The commenter stated that
hospitals cannot make informed decisions concerning their
reclassification status based on values in a proposed rule that are
likely to change and, therefore, recommended that CMS revise its
existing policy to permit hospitals to withdraw or terminate their
reclassification status within 45 days after the publication of the
final rule.
Response: We maintain that information provided in the proposed
rule constitutes the best available data to assist hospitals in making
reclassification decisions. In addition, section 1886(d)(8)(D) of the
Act requires the Secretary to adjust the standardized amounts to ensure
that aggregate payments under the IPPS after implementation of the
provisions of certain sections of the Act, including section
1886(d)(10) of the Act for geographic reclassifications by the MGCRB,
are equal to the aggregate prospective payments that would have been
made absent these provisions. If hospitals were to withdraw or
terminate reclassification statuses after the final rule, as the
commenter suggested CMS permit, any resulting changes in the wage index
would not have been taken into account when calculating the IPPS
standardized amounts in the final rule in accordance with the statutory
budget neutrality requirement. Therefore, the values published in the
final rule represent the final wage index values reflective of
reclassification decisions.
While we are not finalizing, for the reasons discussed earlier, the
proposed changes to Sec. 412.273(c)(1)(ii) and (c)(2) concerning the
time period for requesting withdrawals and terminations of MGCRB
reclassifications, we are finalizing, without modification, our
proposed changes to Sec. 412.64(i)(3)(iii) and Sec.
412.211(f)(3)(iii) regarding the 45-day requirement for notifying CMS
of decisions to waive application of the out-migration adjustment, and
our proposed change to the policy outlined in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51599 through 51600) concerning the time period for
notifications by Lugar hospitals regarding acceptance or nonacceptance
of the out-migration adjustment. Unlike MGCRB decisions under Sec.
412.278, out-migration adjustment and Lugar status decisions are not
subject to Administrator's review. Therefore, hospitals deciding to
waive the out-migration adjustment under Sec. 412.64(i)(3)(iii) or
Sec. 412.211(f)(3)(iii) or Lugar hospitals deciding to accept or
decline the out-migration adjustment would not experience the same
potential disadvantage from implementation of the proposed revisions to
the 45-day notification rules. For decisions regarding the out-
migration adjustment and Lugar status, we continue to 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 Web site in order to make decisions. Therefore, we believe that
it is appropriate to finalize without modification our proposed changes
to Sec. 412.64(i)(3)(iii) and Sec. 412.211(f)(3)(iii) and our
proposed change to the policy outlined in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51599 through 51600) as discussed earlier.
In addition, as a courtesy, we will post on the CMS Web site at
https://www.cms.gov/Medicare/Medicare-Fee-
[[Page 38150]]
for-Service-Payment/AcuteInpatientPPS/wageindex.html the calendar
closing dates of the 45-day notification deadlines for waiving the out-
migration adjustment, for Lugar hospitals to notify CMS regarding
acceptance or nonacceptance of the out-migration adjustment, and for
requesting withdrawal or termination of an MGCRB reclassification. We
note that the MGCRB is independent of CMS and that the deadline for
withdrawals and terminations of MGCRB reclassifications posted on CMS'
Web site will be posted as a courtesy only. The MGCRB makes the final
decision regarding the date of the deadline and whether a request for
withdrawal or termination is timely. The public should confirm the
deadline for withdrawals and terminations of MGCRB reclassifications
with the MGCRB.
After consideration of the public comments we received, for the
reasons discussed earlier and in the FY 2018 IPPS/LTCH PPS proposed
rule, we are finalizing, without modification, the proposed changes to
the regulations at Sec. 412.64(i)(3)(iii) and Sec. 412.211(f)(3)(iii)
to provide that hospitals may waive the application of the out-
migration wage index adjustment within 45 days of the date of public
display of the annual notice of proposed rulemaking for the hospital
inpatient prospective payment system at the Office of the Federal
Register. We also are finalizing, without modification, the proposed
changes to the policy outlined in the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51599 through 51600), so that 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, must notify CMS within 45 days from the date
of public display of the IPPS proposed rule at the Office of the
Federal Register. For the reasons discussed earlier, we are not
finalizing, as proposed, the changes to the regulations at Sec.
412.273(c)(1)(ii) and (c)(2) concerning the timeframe for submitting a
request to the MGCRB to withdraw or terminate an MGCRB
reclassification. Rather, we are revising the regulations at Sec.
412.273(c)(1)(ii) and Sec. 412.273(c)(2) to clarify our current policy
under these regulations that a request for withdrawal or termination of
an MGCRB reclassification must be received by the MGCRB within 45 days
of the date the annual notice of proposed rulemaking is issued in the
Federal Register. Accordingly, a request for withdrawal or termination
of an MGCRB reclassification must still be received by the MGCRB within
45 days of issuance in the Federal Register of CMS' annual notice of
proposed rulemaking concerning changes to the inpatient hospital
prospective payment system and proposed payment rates. Finally, as
discussed earlier, as a courtesy (and independent of the MGCRB), we
will begin posting on the CMS Web site the annual calendar dates of the
45-day notification deadlines for (1) hospitals to notify CMS that they
are waiving the out-migration adjustment; (2) Lugar hospitals to notify
CMS that they qualify for and accept the out-migration adjustment or no
longer wish to accept the outmigration adjustment and elect instead to
return to deemed urban status; and (3) hospitals to request from the
MGCRB withdrawal or termination of an MGCRB reclassification.
J. 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 the 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 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 the FY 2016 and FY 2017 IPPS/
LTCH PPS final rules (80 FR 49501 and 81 FR 56930, respectively), the
same policies, procedures, and computation that were used for the FY
2012 out-migration adjustment were applicable for FY 2016 and FY 2017,
and in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19910), we
proposed to use them again for FY 2018. We have applied the same
policies, procedures, and computations since FY 2012, and we believe
they continue to be appropriate for FY 2018. 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.
For FY 2018, until such time that CMS finalizes out-migration
adjustments based on the next Census, the out-migration adjustment
continues to be based on the data derived from the custom tabulation of
the ACS utilizing 2008 through 2012 (5-Year) Microdata. For FY 2018, we
did not propose any changes to the methodology or data source that we
used for FY 2016 (81 FR 25071). (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).) We did not receive any
public comments regarding the FY 2018 out-migration adjustment. Thus,
for the reasons discussed earlier and in the FY 2018 IPPS/LTCH PPS
proposed rule, we are finalizing, without modification, our proposed
policies, procedures, methodology, and computation for the out-
migration adjustment. Table 2 associated with this final rule (which is
available via the Internet on the CMS Web site) includes the final out-
migration adjustments for the FY 2018 wage index.
[[Page 38151]]
K. Reclassification From Urban to Rural Under Section 1886(d)(8)(E) of
the Act, Implemented at 42 CFR 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 42 CFR 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. 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.
Hospitals must meet the criteria to be reclassified from urban to
rural status under Sec. 412.103, as well as fulfill the requirements
for the application process. There may be one or more reasons that a
hospital applies for the urban to rural reclassification, and the
timeframe that a hospital submits an application is often dependent on
those reason(s). Because the wage index is part of the methodology for
determining the prospective payments to hospitals for each fiscal year,
we believe there should be a definitive timeframe within which a
hospital should apply for rural status in order for the
reclassification to be reflected in the next Federal fiscal year's wage
data used for setting payment rates.
Therefore, after notice of proposed rulemaking and consideration of
public comments, in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56931
through 56932), we revised Sec. 412.103(b) by adding paragraph (6) to
specify that, in order for a hospital to be treated as rural in the
wage index and budget neutrality calculations under Sec. Sec.
412.64(e)(1)(ii), (e)(2), (e)(4), and (h) for payment rates for the
next Federal fiscal year, the hospital's filing date must be no later
than 70 days prior to the second Monday in June of the current Federal
fiscal year and the application must be approved by the CMS Regional
Office in accordance with the requirements of Sec. 412.103. We refer
readers to the FY 2017 IPPS/LTCH PPS final rule for a full discussion
of this policy. We clarified that the lock-in date does not affect the
timing of payment changes occurring at the hospital-specific level as a
result of reclassification from urban to rural under Sec. 412.103.
This lock-in date also does not change the current regulation that
allows hospitals that qualify under Sec. 412.103(a) to request, at any
time during a cost reporting period, to reclassify from urban to rural.
A hospital's rural status and claims payment reflecting its rural
status continue to be effective on the filing date of its
reclassification application, which is the date the CMS Regional Office
receives the application, in accordance with Sec. 412.103(d). The
hospital's IPPS claims will be paid reflecting its rural status on the
filing date (the effective date) of the reclassification, regardless of
when the hospital applies.
Comment: One commenter suggested that CMS' current policy that the
effective date of an urban to rural reclassification under Sec.
412.103 is the date the application is received by CMS be revised to
allow flexibility for a later date. Specifically, the commenter
requested that CMS allow hospitals to ask for an effective date anytime
from the date the application is received until up to 60 days after the
receipt of the application, to help hospitals that experience a short-
term reduction in payment from obtaining rural status before becoming
eligible for increased payment at a later time. The commenter stated
that amending the regulation in this way would accommodate the various
reasons why hospitals request rural status and will be more consistent
with the statutory language at section 1886(d)(8)(E) of the Act which
provides that the Secretary shall treat a hospital as rural ``not later
than 60 days after the receipt of an application.''
Response: We did not propose any such revisions to the policy at
Sec. 412.103 in the FY 2018 IPPS/LTCH PPS proposed rule, but instead
explained and clarified our existing policy. We appreciate the comments
and may consider the commenter's request in future rulemaking.
L. Clarification of Application Deadline for Rural Referral Center
(RRC) Classification
Section 1886(d)(5)(C)(i) of the Act, implemented at 42 CFR 412.96,
provides for the classification and special treatment of rural referral
centers (RRCs). The regulations at Sec. 412.96 set forth the criteria
that a hospital must meet in order to qualify as an RRC. Under Sec.
412.96(b)(1)(ii), a hospital may qualify as an RRC if it is located in
a rural area and has 275 or more beds during its most recently
completed cost reporting period. The hospital also can obtain RRC
status by showing that at least 50 percent of its Medicare patients are
referred from other hospitals or from physicians not on the staff of
the hospital, and at least 60 percent of the hospital's Medicare
patients live more than 25 miles from the hospital, and at least 60
percent of all the services that the hospital furnishes to Medicare
beneficiaries are furnished to beneficiaries who live more than 25
miles from the hospital (Sec. 412.96(b)(2)), or by showing that the
hospital meets the alternative criteria at Sec. 412.96(c). We refer
readers to 42 CFR 412.96 for a full description of the criteria for
classification as an RRC.
Consistent with section 1886(d)(5)(C)(i) of the Act, the hospital
must submit its application for RRC status during the last quarter of
the hospital's cost reporting period, to be effective with the
beginning of the next cost reporting period. Specifically, section
1886(d)(5)(C)(i) of the Act provides that an appeal allowed under this
paragraph must be submitted to the Secretary (in such form and manner
as the Secretary may prescribe) during the quarter before the first
quarter of the hospital's cost reporting period (or, in the case of a
cost reporting period beginning during October 1984, during the first
quarter of that period), and the Secretary must make a final
determination with respect to such appeal within 60 days after the date
the appeal was submitted. Any payment adjustments necessitated by a
reclassification based upon the appeal will be effective at the
beginning of such cost reporting period. Therefore, in the FY 2018
IPPS/LTCH PPS proposed rule (82 FR 19911), we clarified that
applications for RRC status must be submitted during this timeframe.
That is, applications for RRC status must be submitted during the last
quarter of the cost reporting period before the first quarter of a
hospital's cost reporting year. If approved, the RRC status is
effective with the beginning of the hospital's cost reporting period
occurring after the last quarter of the cost reporting period in which
the hospital submits an application.
We also clarified in the proposed rule that, while RRC applications
must be submitted only within the timeframe described above,
applications for urban-to-rural reclassification under Sec. 412.103
may be submitted at any time for the hospital to be approved for rural
reclassification. This includes hospitals seeking rural
reclassification under Sec. 412.103(a)(3), which states that a
hospital meets criteria for urban-to-rural
[[Page 38152]]
reclassification if the hospital would qualify as a RRC as set forth in
Sec. 412.96, or as an SCH as set forth in Sec. 412.92, if the
hospital were located in a rural area. A hospital seeking RRC status
based on a rural reclassification under Sec. 412.103, including Sec.
412.103(a)(3), must still submit an application for RRC status during
the last quarter of its cost reporting year before the next cost
reporting period in accordance with section 1886(d)(5)(C)(i) of the
Act. While the Sec. 412.103 rural redesignation would be effective as
of the date of filing the application, in accordance with Sec.
412.103(d), the RRC status would be effective beginning with the
hospital's cost reporting period occurring after the last quarter of
the cost reporting period in which the hospital submits an application.
Because a hospital may only apply for RRC status during the last
quarter of its cost reporting year in accordance with section
1886(d)(5)(C)(i) of the Act, hospitals seeking RRC status, in order to
reclassify through the MGCRB using the special rules for SCHs and RRCs
at Sec. 412.230(a)(3) and the exceptions at Sec. 412.230(d)(3) for
RRCs, may be disadvantaged due to their cost reporting year end. As
discussed in section III.I.2. of the preamble of the proposed rule, we
proposed to revise the regulations at Sec. 412.230(a)(3) and (d)(3) to
allow hospitals to submit documentation of the approval of SCH or RRC
status (as applicable) to the MGCRB no later than the first business
day after January 1. We stated in the proposed rule that we believe our
proposal to accept documentation of approval of RRC classification,
instead of requiring that the hospital be classified as a RRC at the
time of Board review, would accommodate more hospitals with various
cost reporting period endings. We refer readers to section III.I.2. of
the preamble of the proposed rule for further discussion of this
proposal. We note that, as discussed in section III.I.2. of the
preamble of this final rule, while we are finalizing our proposal that
a hospital must be approved for SCH or RRC status, rather than have
active SCH or RRC status, in order to use the special rules for SCHs
and RRCs and the exceptions for RRCs under Sec. 412.230(a)(3) and
(d)(3), we are not finalizing our proposal to establish a deadline of
the first business day after January 1 for hospitals to submit
documentation of SCH and RRC status approval to the MGCRB.
Comment: One commenter agreed that the specific timing is required
by the statutory language, but argued that CMS is applying a
``restrictive interpretation'' of the RRC application timing
requirements so that there is not a level playing field based solely on
cost report year-ends. The commenter suggested an interpretation of the
statute that it believes could allow hospitals seeking to obtain RRC
status for the purposes of an MGCRB application to be considered RRCs
even outside of the statutory timeframe. Specifically, the commenter
pointed to section 1886(d)(10)(D)(iii) of the Act, which states that,
in the case of a hospital that has ever been classified by the
Secretary as rural referral center, the MGCRB may not reject the
application on the basis of any comparison between the average hourly
wage of the hospital and the average hourly wage of hospitals in the
area in which it is located. According to the commenter, CMS'
determination that a hospital meets the rural redesignation
requirements under Sec. 412.103(a)(3) (that is, the hospital would
qualify as an RRC if it were located in a rural area) could be
considered sufficient classification to trigger the exemption from the
home area wage test and application of the special access rules.
Response: As discussed earlier, and as noted by the commenter, the
timeframe for applying for RRC status is set forth in the statute. We
recognize that certain hospitals may be disadvantaged due to their cost
reporting year end, and for that reason we proposed, and are finalizing
(as discussed in section III.I.2. of the preamble of this final rule)
revisions to the regulations at Sec. 412.230(a)(3) and (d)(3) to
reflect that these paragraphs apply to hospitals with RRC approval (and
not only effective status).
We do not agree with the commenter that CMS' determination under
Sec. 412.103(a)(3) that a hospital would qualify for RRC status if the
hospital were located in a rural area (which is one condition under
which a hospital can qualify for Sec. 412.103 rural redesignation) is
considered RRC classification. In fact, hospitals may obtain rural
reclassification under Sec. 412.103(a)(3), but not subsequently obtain
RRC status. Therefore, we do not believe that such a determination
under Sec. 412.103(a)(3) is sufficient to satisfy the requirements at
section 1886(d)(10)(D)(iii) of the Act.
M. Process for Requests for Wage Index Data Corrections
1. Process for Hospitals To Request Wage Index Data Corrections
The preliminary, unaudited Worksheet S-3 wage data files for the
proposed FY 2018 wage index were made available on May 16, 2016, and
the preliminary CY 2013 occupational mix data files on May 16, 2016,
through the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html.
On January 30, 2017, we posted a public use file (PUF) at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html containing FY 2018 wage index data available as of January
29, 2017. 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 l, 2013 through
September 30, 2014; that is, FY 2014 wage data), a tab with the
occupational mix data (which includes data from the CY 2013
occupational mix survey, Form CMS-10079), a tab containing the
Worksheet S-3 wage data of hospitals deleted from the January 30, 2017
wage data PUF, and a tab containing the CY 2013 occupational mix data
(if any) of the hospitals deleted from the January 30, 2017 wage data
PUF. In a memorandum dated January 27, 2017, we instructed all MACs to
inform the IPPS hospitals that they service of the availability of the
January 30, 2017 wage index data PUFs, and the process and timeframe
for requesting revisions in accordance with the FY 2018 Wage Index
Timetable.
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 our
Web site 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 about hospital issues and about the dates of the Hospital
Open Door Forums at the CMS Web site at: http://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/index.html.
In a memorandum dated May 16, 2016, we instructed all MACs to
inform the IPPS hospitals that they service of the availability of the
wage index data files and the process and timeframe for requesting
revisions. We also instructed the MACs to advise hospitals that these
data were also made available directly through their representative
hospital organizations.
If a hospital wished to request a change to its data as shown in
the May
[[Page 38153]]
16, 2016 wage data files and the May 16, 2016 occupational mix data
files, the hospital had to submit corrections along with complete,
detailed supporting documentation to its MAC by September 2, 2016.
Hospitals were notified of this deadline 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 4, 2016 was the date by when MACs notified State hospital
associations regarding hospitals that failed to respond to issues
raised during the desk reviews. The MACs notified the hospitals by mid-
January 2017 of any changes to the wage index data as a result of the
desk reviews and the resolution of the hospitals' revision requests.
The MACs also submitted the revised data to CMS by January 20, 2017.
CMS published the wage index PUFs that included hospitals' revised wage
index data on January 30, 2017. Hospitals had until February 17, 2017,
to submit requests to the MACs for reconsideration of adjustments made
by the MACs as a result of the desk review, and to correct errors due
to CMS' or the MAC's mishandling of the wage index data. Hospitals also
were required to submit sufficient documentation to support their
requests.
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 24, 2017. Under our
current policy, the deadline for a hospital to request CMS intervention
in cases where a hospital disagreed with a MAC's policy interpretation
was April 5, 2017. As discussed in the FY 2018 IPPS/LTCH PPS proposed
rule (82 FR 19912), beginning next year (that is, April 2018 for wage
data revisions for the FY 2019 wage index), we proposed to require that
a hospital that seeks to challenge the MAC's handling of wage data on
any basis (including a policy, factual, or any other dispute) must
request CMS to intervene by the date in April that is specified as the
deadline for hospitals to appeal MAC determinations and request CMS'
intervention in cases where the hospital disagrees with the MAC's
determination (the wage index timetable would be updated to reflect the
specified date). We note that, as we did for the FY 2017 wage index,
for the FY 2018 wage index, in accordance with the FY 2018 wage index
timeline posted on the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html, the April appeals have to be
sent via mail and email. We refer readers to the wage index timeline
for complete details.
We did not receive any public comments regarding our proposal
discussed above. Therefore, we are finalizing our proposal, without
modification, to require that, beginning next year (that is, April 2018
for wage data revisions for the FY 2019 wage index), a hospital that
seeks to challenge the MAC's handling of wage data on any basis
(including a policy, factual, or any other dispute) must request CMS to
intervene by the date in April that is specified as the deadline for
hospitals to appeal MAC determinations and request CMS' intervention in
cases where the hospital disagrees with the MAC's determination (as we
stated above and in the proposed rule, the wage index timetable will be
updated to reflect the specified date).
Hospitals were given the opportunity to examine Table 2, which was
listed in section VI. of the Addendum to the proposed rule and
available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html. 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 FY 2014 data used to construct the proposed FY
2018 wage index. We noted in the proposed rule (82 FR 19912) that the
proposed hospital average hourly wages shown in Table 2 only reflect
changes made to a hospital's data that were transmitted to CMS by early
February 2017.
We posted the final wage index data PUFs on April 28, 2017 on the
Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html. The April 2017 PUFs were 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 previously described (revisions submitted to CMS by
the MACs by March 24, 2017).
After the release of the April 2017 wage index data PUFs, changes
to the wage and occupational mix data could 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 24, 2017.
Requests for correction of errors that were not, but could
have been, identified during the hospital's review of the January 30,
2017 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 2017 final wage index data PUFs, a
hospital believed that its wage or occupational mix data were incorrect
due to a MAC or CMS error in the entry or tabulation of the final data,
the hospital was given the opportunity to notify both its MAC and CMS
regarding why the hospital believed 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 no later than May 30, 2017. Similar to
the April appeals, beginning with the FY 2015 wage index, in accordance
with the FY 2018 wage index timeline posted on the CMS Web site at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html, the May appeals were required to be sent via mail and email
to CMS and the MACs. We refer readers to the wage index timeline for
complete details.
Verified corrections to the wage index data received timely by CMS
and the MACs (that is, by May 30, 2017) were incorporated into the
final FY 2018 wage index in this FY 2018 IPPS/LTCH PPS final rule,
which is effective October 1, 2017.
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 2018 payment rates.
Accordingly, hospitals that did not meet the procedural deadlines set
forth above 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 set forth earlier (requiring requests
to MACs by the specified date in February and, where such requests are
unsuccessful,
[[Page 38154]]
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.
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 2017, they had the opportunity to detect any data
entry or tabulation errors made by the MAC or CMS before the
development and publication of the final FY 2018 wage index by August
2017, and the implementation of the FY 2018 wage index on October 1,
2017. 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 30,
2017, we retain the right to make midyear changes to the wage index
under very limited circumstances.
Specifically, in accordance with 42 CFR 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 30, 2017 for the FY 2018
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
Web site 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 42 CFR 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 30, 2017 deadline for the
FY 2018 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 30, 2017 deadline for the FY 2018 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; and 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 42 CFR
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.
2. Process for Data Corrections by CMS After the January Public Use
File (PUF)
The process set forth with the wage index timeline discussed in
section III.M.1. 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 in order
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. As
discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19913
through 19915), 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 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 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 that 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
[[Page 38155]]
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.D.2. of the preamble of the proposed rule (82 FR 19900 through
19902), in the calculation of the proposed FY 2018 wage index, upon
discovering that hospitals reported other wage-related costs on Line 18
of Worksheet S-3, despite those other wage-related costs failing to
meet the requirement that other wage related costs must exceed 1
percent of total adjusted salaries net of excluded area salaries, CMS
made internal edits to remove those other wage-related costs from Line
18. Conversely, 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 to 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 the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19914), we proposed a process for hospitals to request further review
of a correction made by CMS starting with the FY 2019 wage index. In
order to allow opportunity for input from hospitals concerning
corrections made by CMS after the posting of the January PUF, we
proposed a process similar to the existing process in which hospitals
may request corrections to wage index data displayed in the January
PUF. We stated in the proposed rule that instances where CMS makes a
correction to a hospital's data after the January PUF based on a
different understanding than the hospital about certain reported costs,
for example, could potentially be resolved using this proposed process
before the final wage index is calculated. We stated that we believe
this proposed process and timeline (as described below) would bring
additional transparency to instances where CMS makes data corrections
after the January PUF, and would 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.
Effective beginning with the FY 2019 wage index development cycle,
we proposed to use existing appeal deadlines (in place for hospitals to
appeal determinations made by the MAC during the desk review process)
for hospitals to dispute corrections made by CMS after posting of the
January PUF that do not arise from a hospital request for a wage data
revision. Starting with the April appeal deadline, hospitals would use
the soonest approaching appeal deadline to dispute any adjustments made
by CMS. However, if a hospital was notified of an adjustment within 14
days of an appeal deadline, the hospital would have until the next
appeal deadline to dispute any adjustments. We believe this would give
hospitals sufficient time to prepare an appeal of adjustments made by
CMS after the January PUF. Specifically, for any adjustments made by
CMS between the date the January PUF is posted and at least 14 calendar
days before the April appeals deadline, we proposed that hospitals
would have until the April appeals deadline (which, for example, is
April 5 in the FY 2018 Wage Index Timetable) to dispute the
adjustments. For any adjustments made by CMS between 13 calendar days
before the April appeals deadline and 14 calendar days before the May
appeals deadline, we proposed that hospitals would have until the May
appeals deadline (which, for example, is May 30 in the FY 2018 Wage
Index Timetable) to dispute the adjustments. In cases where hospitals
disagree with CMS adjustments of which they were notified 13 calendar
days before the May appeals deadline or later, the hospitals could
appeal to the PRRB with no need for further review by CMS before such
appeal.
We are using dates from the FY 2018 Wage Index Timetable in the
following example which was included in the proposed rule at 82 FR
19914 (we reiterate that this appeals process would be effective
beginning with the FY 2019 wage index cycle, but for illustrative
purposes, we are using dates from the FY 2018 Wage Index Timetable, the
most recently published wage index timetable): A hospital that is
notified by the MAC or CMS of an adjustment to its wage data after the
release of the January 30, 2017 PUF could use the April 5, 2017 appeals
deadline to dispute the adjustment. If the hospital is notified of an
adjustment by CMS or the MAC to its wage data after March 22, 2017
(that is, less than 14 days prior to the April 5 appeals deadline), it
could use the May 30, 2017 appeals deadline to dispute the adjustment.
If the hospital is first notified about the adjustment after May 16,
2017 (that is, less than 14 days prior to the May 30 deadline), and
disagrees with the adjustment, the hospital could appeal directly to
the PRRB.
As with the existing process for requesting wage data corrections,
we proposed that a hospital disputing an adjustment made by CMS after
the posting of the January PUF would be required to request a
correction by the first applicable deadline. For example, using the FY
2018 Wage Index Timetable for illustrative purposes only, if a hospital
was notified on March 20 of an adjustment to its data by CMS and did
not appeal by April 5, the hospital would not be able to appeal by May
30 or bring the case before the PRRB. That is, hospitals that do not
meet the procedural deadlines set forth earlier would not be afforded a
later opportunity to submit wage index data corrections or to dispute
CMS' decision with respect to requested changes. As with the existing
process for hospitals to request wage data corrections, our policy is
that hospitals that do not meet the procedural deadlines set forth
earlier would not be permitted to challenge later, before the PRRB, the
failure of CMS to make a requested data revision.
In summary, under the statute, CMS has discretion to make
corrections and revisions to hospitals' wage data throughout the
multistep wage index development process, and we proposed a pathway for
hospitals to request additional review of corrections to their wage
data made by CMS. Beginning with the development of the FY 2019 wage
index, we proposed a process whereby CMS could continue to correct data
after the posting of the January PUF, while allowing hospitals to
appeal changes made by CMS using existing deadlines from the process
for hospitals to request wage data corrections. As with the existing
process, a hospital would be required to appeal by the first applicable
deadline, if relevant, to maintain the right to appeal to the PRRB to
dispute a correction to its wage data made by CMS.
We invited public comments on our proposals.
Comment: Several commenters stated that CMS is proposing to limit
the time a provider has to dispute an adjustment once the January PUF
is posted. The commenters stated that, currently, hospitals have 1
month to request corrections for errors in the April 28 PUF. They
maintained that the reduced timelines will require hospitals to review
the posted PUF immediately to
[[Page 38156]]
ensure that the data are correct and take any necessary action to
correct. The commenters also noted that CMS has taken a more active
role in recent years in performing additional data analysis that
results in follow-up questions or requests to hospitals for supporting
data, which require time for hospitals to develop a response. One
commenter stated that, by reducing time, CMS will be placing an
administrative hardship on hospitals while they attempt to respond to
detailed audit requests. Some of the commenters were ``deeply
concerned'' that the short timeline CMS proposed to respond to detailed
requests will not allow for comprehensive analysis and a thorough
response. One commenter specifically requested that the dispute process
be expanded to 28 days prior to the appeal deadline, instead of the
proposed 14 days, to give hospitals enough time to collect data and
respond in a timely manner.
Response: We believe that the commenters misunderstood our proposal
as a change to the current process for hospitals to request wage data
corrections, rather than an additional process for disputing
corrections made by CMS after the January PUF that do not arise from a
hospital's request for wage data revisions. Under our proposal,
hospitals would still have approximately 1 month to request corrections
for errors in the April 28 PUF, in accordance with the wage index
timetable. Our proposal would create an additional process for
hospitals to appeal adjustments or corrections made by CMS or the MAC
after the normal desk review timeframe that do not arise from a
hospital's request for wage data revisions. Therefore, we do not agree
that this proposal requires hospitals to review the posted PUF any
earlier than hospitals would do so under the current policy, or that it
constitutes administrative hardship. Furthermore, we believe that,
rather than limiting hospitals, our proposal would provide additional
transparency and opportunities for hospitals to request further review
of CMS changes made after the January PUF where there is currently no
such established process.
Regarding the concerns that the proposed timeline is too short and
the suggestion that CMS expand the 14-day timeline to 28 days, we
continue to believe that our proposed timeline would give hospitals
sufficient time to prepare an appeal of adjustments made by CMS after
the January PUF. We believe that a hospital that was notified of an
adjustment at least 2 weeks before the upcoming deadline has enough
time to prepare an appeal by the upcoming deadline. Specifically,
starting with the April appeal deadline, hospitals would use the
soonest approaching appeal deadline to dispute any adjustments made by
CMS. However, if a hospital was notified of an adjustment within 14
days of an appeal deadline, the hospital would have until the next
appeal deadline to dispute any adjustments.
Comment: One commenter did not state a position on the proposal but
expressed the following concerns: First, that CMS should add the
particulars of this appeal process to the existing FY 2019 Wage Index
Timeline that is published and made available online each year by CMS;
second, that most adjustments to the wage data made by CMS on a routine
basis be performed much earlier in the process than these April and May
appeal deadlines, so that the proposed appeal process would be reserved
for ``rare and unusual circumstances requiring CMS' intervention and
adjustment to the data.'' Specifically, this commenter stated that it
would oppose a policy that gives CMS the latitude to indiscriminately
make adjustments to the hospital wage data this late in the process
where that adjustment was known of far ahead of time and/or could have
easily been made earlier in the process.
Response: We appreciate the commenter's concerns and suggestions.
In response to the commenter's first suggestion, we intend to add the
particulars of this appeal process to the existing Wage Index Timeline
that is published and made available online each year by CMS. Second,
while we maintain CMS' authority under section 1886(d)(3)(E) of the Act
to make corrections to hospitals' data to help ensure the accuracy of
the wage index, we note that routine adjustments to the wage data that
are known of far ahead of time and/or could easily be made earlier in
the process will continue to be performed earlier in the process than
these April and May appeal deadlines.
After consideration of the public comments we received, for the
reasons discussed earlier and in the FY 2018 IPPS/LTCH PPS proposed
rule, we are finalizing, without modification, our proposed process for
hospitals to dispute data corrections made by CMS after the January PUF
that do not arise from a hospital's request for wage data revisions.
Effective beginning with the FY 2019 wage index development cycle, we
will use existing appeal deadlines (in place for hospitals to appeal
determinations made by the MAC during the desk review process) for
hospitals to dispute corrections made by CMS after posting of the
January PUF that do not arise from a hospital request for a wage data
revisions. Starting with the April appeal deadline, hospitals must use
the soonest approaching appeal deadline to dispute any adjustments made
by CMS. However, if a hospital is notified of an adjustment within 14
days of an appeal deadline, the hospital has until the next appeal
deadline to dispute any adjustments, as discussed earlier. As with the
existing process for requesting wage data corrections, a hospital
disputing an adjustment made by CMS after the posting of the January
PUF will be required to request a correction by the first applicable
deadline. For example, using the FY 2018 Wage Index Timetable for
illustrative purposes only, if a hospital was notified on March 20 of
an adjustment to its data by CMS and did not appeal by April 5, the
hospital would not be able to appeal by May 30 or bring the case before
the PRRB. That is, hospitals that do not meet the procedural deadlines
set forth above will not be afforded a later opportunity to submit wage
index data corrections or to dispute CMS' decision with respect to
requested changes. Our policy is that hospitals that do not meet the
procedural deadlines set forth earlier will not be permitted to
challenge later, before the PRRB, the failure of CMS to make a
requested data revision.
N. Labor-Market Share for the FY 2018 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 which 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
[[Page 38157]]
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 resulted in a higher payment.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50596 through
50607), we rebased and revised the hospital market basket. We
established a FY 2010-based IPPS hospital market basket to replace the
FY 2006-based IPPS hospital market basket, effective October 1, 2013.
In that final rule, we presented our analysis and conclusions regarding
the frequency and methodology for updating the labor-related share for
FY 2014. Using the FY 2010-based IPPS market basket, we finalized a
labor-related share for FY 2014, FY 2015, FY 2016, and FY 2017 of 69.6
percent. In addition, in FY 2014, we implemented this rebased and
revised labor-related share in a budget neutral manner (78 FR 51016).
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.
For FY 2018, as described in section IV. of the preamble of the FY
2018 IPPS/LTCH PPS proposed rule (82 FR 19916 through 19929), we
proposed to rebase and revise the IPPS market basket reflecting 2014
data. We also proposed to recalculate the labor-related share for
discharges occurring on or after October 1, 2017 using the proposed
2014-based IPPS market basket. As discussed in Appendix A of the
proposed rule, we proposed this rebased and revised labor-related share
in a budget neutral manner. 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. We refer readers to section IV. of the preamble of
this final rule and Appendix A for our finalized policies for the 2014-
based IPPS market basket.
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. As
described in section IV. of the preamble of the proposed rule, we
proposed to include in the labor-related share the national average
proportion of operating costs that are attributable to 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
as measured in the proposed 2014-based IPPS market basket. Therefore,
for FY 2018, we proposed to use a labor-related share of 68.3 percent
for discharges occurring on or after October 1, 2017.
We refer readers to section IV.B.3. of the preamble of this final
rule for a discussion of our recalculation of the labor-related share
for discharges occurring on or after October 1, 2017 using the 2014-
based IPPS market basket.
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 2018, we did
not propose a Puerto Rico-specific labor-related share percentage or a
nonlabor-related share percentage in the FY 2018 IPPS/LTCH PPS proposed
rule (82 FR 19915).
Comment: Commenters suggested that CMS consider an approach that
will mitigate significant decreases in inpatient payments to hospitals
as a result of the proposed decrease in the labor-related share for FY
2018.
Response: As noted earlier, 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 which are
attributable to wages and wage-related costs of the DRG prospective
payment rates. In section IV.B.3. of the preamble of this final rule,
we discuss our recalculation of the labor-related share for discharges
occurring on or after October 1, 2017, using the 2014-based IPPS market
basket. We believe that the labor-related share calculated for FY 2018
accurately and appropriately reflects the proportion of hospitals'
costs that are attributable to wages and wage-related costs. Therefore,
we do not believe it is necessary or appropriate to mitigate the
effects of the labor-related share percentage finalized in this rule.
After consideration of the public comments we received, for the
reasons discussed in section IV.B.3. of the preamble of this final rule
and in the FY 2018 IPPS/LTCH PPS proposed rule, we are finalizing our
proposal to use a labor-related share of 68.3 percent for discharges
occurring on or after October 1, 2017, for all hospitals (including
Puerto Rico hospitals) whose wage indexes are greater than 1.0000.
Tables 1A and 1B, which are published in section VI. of the
Addendum to this FY 2018 IPPS/LTCH PPS final rule and available via the
Internet on the CMS Web site, reflect the national labor-related share,
which is also applicable to Puerto Rico hospitals. For FY 2018, 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 hospitals (including Puerto Rico hospitals) whose wage indexes
are greater than 1.0000, for FY 2018, we are applying the wage index to
a labor-related share of 68.3 percent of the national standardized
amount.
[[Page 38158]]
IV. Rebasing and Revising of the Hospital Market Baskets for Acute Care
Hospitals
A. Background
Effective for cost reporting periods beginning on or after July 1,
1979, we developed and adopted a hospital input price index (that is,
the hospital market basket for operating costs). Although ``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 market basket. Accordingly, the term
``market basket'' as used in this document refers to the hospital input
price index.
The percentage change in the market basket reflects the average
change in the price of goods and services hospitals purchase in order
to provide inpatient care. We first used the market basket to adjust
hospital cost limits by an amount that reflected the average increase
in the prices of the goods and services used to provide hospital
inpatient care. This approach linked the increase in the cost limits to
the efficient utilization of resources.
Since the inception of the IPPS, the projected change in the
hospital market basket has been the integral component of the update
factor by which the prospective payment rates are updated every year.
An explanation of the hospital market basket used to develop the
prospective payment rates was published in the Federal Register on
September 1, 1983 (48 FR 39764). We also refer readers to the FY 2014
IPPS/LTCH PPS final rule (78 FR 50596) in which we discussed the most
recent previous rebasing of the hospital input price index.
The hospital market basket is a fixed-weight, Laspeyres-type price
index. A Laspeyres-type 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 of goods and services (that
is, intensity) purchased over time are not measured.
The index itself is constructed in three steps, which are discussed
in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19916 through 19929)
and in this final rule. First, a base period is selected (in the
proposed rule, we proposed to use 2014 as the base period) and total
base period expenditures 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'' or ``expenditure weights.'' Second, each
expenditure 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 expenditure weight for each cost
category is multiplied by the level of its respective price proxy. The
sum of these products (that is, the expenditure 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 noted above, 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 provide
hospital services. The effects on total expenditures 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 (hospital inputs) to
furnish inpatient care between base periods.
We last rebased the hospital market basket cost weights effective
for FY 2014 (78 FR 50596), with FY 2010 data used as the base period
for the construction of the market basket cost weights. For the FY 2018
IPPS/LTCH PPS proposed rule, we proposed to rebase the cost structure
for the IPPS hospital index from FY 2010 to 2014, as discussed in the
proposed rule (82 FR 19916 through 19929) and below in this final rule.
B. Rebasing and Revising the IPPS Market Basket
The terms ``rebasing'' and ``revising,'' while often used
interchangeably, actually denote different activities. ``Rebasing''
means moving the base year for the structure of costs of an input price
index (for example, in the proposed rule, we proposed to shift the base
year cost structure for the IPPS hospital index from FY 2010 to 2014).
We note that we proposed to no longer refer to the market basket as a
``FY 2014-based'' market basket and instead referred to the proposed
market basket as simply ``2014-based''. We proposed this change in
naming convention for the market basket because the base year cost
weight data for the proposed market basket does not reflect only fiscal
year data. For example, the proposed 2014-based IPPS market basket uses
Medicare cost report data and other government data that reflect 2014
fiscal year, 2014 calendar year, and 2014 State fiscal year expenses to
determine the base year cost weights. Given that it is based on a mix
of classifications of 2014 data, we proposed to refer to the market
basket as ``2014-based'' instead of ``FY 2014-based'' or ``CY 2014-
based''.
``Revising'' means changing data sources or price proxies used in
the input price index. As published in the FY 2006 IPPS final rule (70
FR 47387), in accordance with section 404 of Public Law 108-173, CMS
determined a new frequency for rebasing the hospital market basket. We
established a rebasing frequency of every 4 years and, therefore, for
the FY 2018 IPPS update, we proposed to rebase and revise the IPPS
market basket from FY 2010 to 2014. We invited public comments on our
proposed methodology. A summary of the public comments we received and
our responses are included below under the appropriate subject area.
1. Development of Cost Categories and Weights
a. Use of Medicare Cost Report Data
The major source of expenditure data for developing the proposed
hospital market basket cost weights is the 2014 Medicare cost reports.
These 2014 Medicare cost reports are for cost reporting periods
beginning on and after October 1, 2013 and before October 1, 2014. We
note that while these dates appear to reflect fiscal year data, in
order to be classified as a ``2014 cost report,'' a hospital's cost
reporting period must begin between these dates. For example, we found
that of the 2014 Medicare cost reports for IPPS hospitals,
approximately 40 percent of the reports had a begin date on January 1,
2014, approximately 30 percent had a begin date on July 1, 2014, and
approximately 18 percent had a begin date on October 1, 2013. For this
reason, we are defining the base year of the market basket as ``2014-
based'' instead of ``FY 2014-
[[Page 38159]]
based''. We proposed to use 2014 as the base year because we believe
that the 2014 Medicare cost reports represent the most recent, complete
set of Medicare cost report data available to develop cost weights for
IPPS hospitals at the time of rulemaking. As was done in previous
rebasings, these cost reports are from IPPS hospitals only (hospitals
excluded from the IPPS and CAHs are not included) and are based on IPPS
Medicare-allowable operating costs. IPPS Medicare-allowable operating
costs are costs that are eligible to be paid under the IPPS. For
example, the IPPS market basket excludes home health agency (HHA) costs
as these costs would be paid under the HHA PPS and, therefore, these
costs are not IPPS Medicare-allowable costs.
We proposed to derive costs for eight major expenditures or cost
categories for the 2014-based IPPS market basket from the CMS Medicare
cost reports (Form 2552-10, OMB Control Number 0938-0050): Wages and
Salaries, Employee Benefits, Contract Labor, Pharmaceuticals,
Professional Liability Insurance (Malpractice), Blood and Blood
Products, Home Office Contract Labor, and a residual ``All Other''
category. The residual ``All Other'' category reflects all remaining
costs that are not captured in the other seven cost categories. We
proposed that, for the 2014-based IPPS market basket, we obtain costs
for one additional major cost category from the Medicare cost reports
compared to the FY 2010-based IPPS market basket--Home Office Contract
Labor Costs. We describe below the detailed methodology for obtaining
costs for each of the seven cost categories directly determined from
the Medicare cost reports. We received one specific comment on the
detailed methodology of the major cost weights, specifically for the
Home Office Contract Labor cost weight. We address this comment below.
(1) Wages and Salaries Costs
To derive wages and salaries costs for the Medicare allowable cost
centers, we proposed to first calculate total unadjusted wages and
salaries costs as reported on Worksheet S-3, part II. We then proposed
to remove the wages and salaries attributable to non-Medicare allowable
cost centers (that is, excluded areas) as well as a portion of overhead
wages and salaries attributable to these excluded areas. Specifically,
wages and salaries costs were equal to total wages and salaries as
reported on Worksheet S-3, Part II, Column 4, Line 1, less excluded
area wages and salaries (reported on Worksheet S-3, Part II, Column 4,
Lines 3 and 5 through 10) and less overhead wages and salaries
attributable to the excluded areas.
Overhead wages and salaries are attributable to the entire IPPS
facility. Therefore, we proposed to only include the proportion
attributable to the Medicare allowable cost centers. We proposed to
estimate the proportion of overhead wages and salaries that are not
attributable to Medicare allowable costs centers (that is, excluded
areas) by multiplying the ratio of excluded area wages and salaries (as
defined earlier) to total wages and salaries (Worksheet S-3, part II,
Column 4, Line 1) by total overhead wages and salaries (Worksheet A,
Column 1, Lines 4 through 18). A similar methodology was used to derive
wages and salaries costs in the FY 2010-based IPPS market basket.
(2) Employee Benefits Costs
We proposed to derive employee benefits costs using a similar
methodology as the wages and salaries costs; that is, reflecting
employee benefits costs attributable to the Medicare allowable cost
centers. First, we calculated total unadjusted employee benefits costs
as the sum of Worksheet S-3, Part II, Column 4, Lines 17, 18, 20, and
22. We then excluded those employee benefits attributable to the
overhead wages and salaries for the non-Medicare allowable cost centers
(that is, excluded areas). Employee benefits attributable to the non-
Medicare allowable cost centers were derived by multiplying the ratio
of total employee benefits (equal to the sum of Worksheet S-3, Part II,
Column 4, Lines 17 through 25) to total wages and salaries (Worksheet
S-3, Part II, Column 4, Line 1) by excluded overhead wages and salaries
(as derived above for wages and salaries costs). A similar methodology
was used in the FY 2010-based IPPS market basket.
(3) Contract Labor Costs
Contract labor costs 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 below. We proposed to derive contract labor costs for the
2014-based IPPS market basket as the sum of Worksheet S-3, Part II,
Column 4, Lines 11, 13 and 15. A similar methodology was used in the FY
2010-based IPPS market basket.
(4) 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 118.01. A similar methodology was used for
the FY 2010-based IPPS market basket.
(5) Pharmaceuticals Costs
We proposed to calculate pharmaceuticals costs using nonsalary
costs reported for the Pharmacy cost center (Worksheet A, Column 2,
Line 15) and Drugs Charged to Patients cost center (Worksheet A, Column
2, Line 73) less estimated employee benefits attributable to these two
cost centers. We proposed to estimate these employee benefits costs by
multiplying the ratio of total employee benefits (equal to the sum of
Worksheet S-3, Part II, Column 4, Lines 17 through 25) to total wages
and salaries (Worksheet S-3, Part II, Column 4, Line 1) by total wages
and salaries costs for the Pharmacy and Drugs Charged to Patients cost
centers (equal to the sum of Worksheet A, Column 1, Lines 15 and 73). A
similar methodology was used for the FY 2010-based IPPS market basket.
(6) Blood and Blood Products Costs
We proposed to calculate blood and blood products costs using
nonsalary costs reported for the Whole Blood & Packed Red Blood Cells
cost center (Worksheet A, Column 2, Line 62) and the Blood Storing,
Processing, & Transfusing cost center (Worksheet A, Column 2, Line 63)
less estimated employee benefits attributable to these two cost
centers. We estimated these employee benefits costs by multiplying the
ratio of total employee benefits (equal to the sum of Worksheet S-3,
Part II, Column 4, Lines 17 through 25) to total wages and salaries
(Worksheet S3, Part II, Column 4, Line 1) by total wages and salaries
for the Whole Blood & Packed Red Blood Cells and Blood Storing,
Processing, & Transfusing cost centers (equal to the sum of Worksheet
A, Column 1, Lines 62 and 63). A similar methodology was used for the
FY 2010-based IPPS market basket.
(7) Home Office Contract Labor Costs
We proposed to determine home office contract labor costs using
data reported on Worksheet S-3, Part II, Column 4, line 14.
Specifically, we proposed to determine the Medicare allowable portion
of these costs by multiplying them by the ratio of total Medicare
allowable operating costs (as defined in section IV.B.1.b. of the
preamble to the proposed rule and in section IV.B.1.b. of the preamble
of this final rule) to total operating costs (calculated as Worksheet
B, Part I, Column 26, Line 202, less Worksheet B,
[[Page 38160]]
Part I, Column 0, Lines 1 through 3). Home office contract labor costs
in the FY 2010-based IPPS market basket were calculated using the U.S.
Census Bureau's Bureau of Economic Analysis (BEA) Benchmark Input-
Output (I-O) data, as described in section IV.B.1.c. of the preamble to
the proposed rule and in section IV.B.1.c. of the preamble of this
final rule.
Comment: One commenter stated that the data reported on Worksheet
S-3, Part II, Column 4, Line 14 is not specific to home office costs
but can include costs to other related organizations. The commenter
recommended that if the intent is to only capture home office costs,
CMS use a different data source. However, if the intent is to capture
home office and other related organization costs, the commenter
recommended that the label applied to the major cost category be
altered to reflect the actual cost being utilized (for example, Home
Office/Related Party Contract Labor Costs).
Response: We agree with the commenter's suggestion to alter the
label for this cost category. The instructions for the Medicare cost
report (CMS form 2552-10) in the CMS Provider Reimbursement Manual,
Part 2 state that the costs included on this line represent salaries
and wage-related costs paid to personnel who are affiliated with a home
office and/or related organization, who provide services to the
hospital, and whose salaries are not included on Worksheet A, Column 1
(CMS Pub. 15-2, Section 4005.2). According to the CMS Provider
Reimbursement Manual, Part 1, an organization is defined as being
related to the provider when the provider to a significant extent is
associated or affiliated with, or has control of, or is controlled by,
the organization furnishing the services, facilities, or supplies (CMS
Pub 15-1, Section 1002.1).
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19923), the costs included in this proposed category for the 2014-based
IPPS market basket were previously obtained from the BEA Benchmark I-O
data using the costs from the NAICS 55 sector (Management of Companies
or Enterprises). The definition of the NAICS 55 sector from the BLS Web
site is: (1) Establishments that hold the securities of (or other
equity interests in) companies and enterprises for the purpose of
owning a controlling interest or influencing management decisions or
(2) establishments (except government establishments) that administer,
oversee, and manage establishments of the company or enterprise and
that normally undertake the strategic or organizational planning and
decision-making role of the company or enterprise. Establishments that
administer, oversee, and manage may hold the securities of the company
or enterprise. (https://www.bls.gov/iag/tgs/iag55.htm).
As was done for the FY 2010-based IPPS market basket when we used
the Benchmark I-O data, to calculate home office contract labor costs
using the Medicare cost reports, our intent is to capture both home
office and related organization compensation costs. Our proposed
methodology of using the Medicare cost report data meets our intention
and reflects the most current data on these expenses. We appreciate the
commenter's suggestion and will incorporate this suggestion by
finalizing the cost category label to be ``Home Office/Related
Organization Contract Labor'' so it is more consistent with the scope
of costs included in this category.
b. Final Major Cost Category Computation
After we derived costs for the seven major cost categories for each
provider using the Medicare cost report data as previously described,
we proposed to address data outliers using the following steps. First,
we divided the costs for each of the seven categories by total Medicare
allowable operating costs calculated for the provider to obtain cost
weights for each PPS hospital. We proposed that total Medicare
allowable operating costs were equal to noncapital costs (Worksheet B,
part I, Column 26 less Worksheet B, part II, Column 26) that are
attributable to the Medicare allowable cost centers of the hospital.
Medicare allowable cost centers were defined as Lines 30 through 35,
50, 51, 53 through 60, 62 through 76, 90, 91, 92.01 and 93.
For all of the major cost weights except the Home Office Contract
Labor cost weight, we then removed those providers whose derived cost
weights fall in the top and bottom 5 percent of provider-specific cost
weights to ensure the removal of outliers. After the outliers were
removed, we summed the costs for each category across all remaining
providers. We then divided this by the sum of total Medicare allowable
operating costs across all remaining providers to obtain a cost weight
for the proposed 2014-based IPPS market basket for the given category.
We note that, in the FY 2018 IPPS/LTCH PPS proposed rule, we
mistakenly referenced that we used the same trimming methodology for
the Home Office Contract Labor cost weight that we used for the other
major cost weights (a top and bottom 5 percent trimming methodology).
For the Home Office Contract Labor cost weight, we applied a 1-
percent top-only trimming methodology. This allowed all providers'
Medicare allowable costs to be included, even if their home office
contract labor costs were zero. We believe, as the Medicare cost report
data (Worksheet S-2, Part 1, Line 140) indicate, that not all IPPS
hospitals have a home office. IPPS hospitals 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, IPPS hospitals 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 Contract Labor costs to be included in the Home Office
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 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.
Table IV-01 in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19918) shows the major cost categories and their respective cost
weights as derived from the Medicare cost reports for the proposed
rule. Table IV-01 below provides these same major cost categories and
respective cost weights, with the change made to the Home Office
Contract Labor Cost category name as discussed earlier in our response
to public comments.
[[Page 38161]]
Table IV-01--Major Cost Categories as Derived From the Medicare Cost
Reports
------------------------------------------------------------------------
Proposed and
Major cost categories FY 2010 final 2014
------------------------------------------------------------------------
Wages and Salaries...................... 45.8 42.1
Employee Benefits....................... 12.7 12.0
Contract Labor.......................... 1.8 1.8
Professional Liability Insurance 1.3 1.2
(Malpractice)..........................
Pharmaceuticals......................... 5.4 5.9
Blood and Blood Products................ 1.1 0.8
Home Office/Related Organization - 4.2
Contract Labor*........................
``All Other'' Residual.................. 31.9 32.0
------------------------------------------------------------------------
*Home Office/Related Organization Contract Labor costs were included in
the ``All Other'' residual cost weight of the FY 2010-based IPPS
market basket.
From FY 2010 to 2014, the Wages and Salaries and Employee Benefits
cost weights as calculated directly from the Medicare cost reports
decreased by approximately 3.7 and 0.7 percentage points, respectively,
while the Contract Labor cost weight was unchanged. The decrease in the
Wages and Salaries cost weight occurred among most cost centers and in
aggregate for the General Service (overhead), Inpatient Routine
Service, Ancillary Service, and Outpatient Service cost centers.
Comment: One commenter expressed concerns that several of the
updated payment rates based on the proposed market basket do not
accurately account for the realities facing hospitals and health
systems. For example, the commenter believed the proposed market basket
cost weights for certain categories are too low. Specifically, the
weight for employee benefits that decreased from 12.7 percent to 12.0
percent, and the weight for pharmaceuticals that increased from 5.4
percent to 5.9 percent. The commenter further stated that hospitals,
similar to other employers, are experiencing significant increases in
costs for providing health care to their employees. The commenter
claimed that, in 2017 alone, employer-sponsored premiums increased by 3
percent nationally. The commenter further cited a study conducted for
the American Hospital Association and the Federation of American
Hospitals, which found that between FY 2013 and FY 2015, average annual
inpatient drug spending at community hospitals increased by 23.4
percent and average spending per admission increased 38.7 percent. The
commenter stated that Virginia hospitals saw a 9.6-percent increase in
spending on pharmaceuticals between 2014 and 2015 and a 41-percent
increase in the last 6 years. The commenter further stated that it is
important that CMS ensures any rebasing of the market basket adequately
accounts for these increased costs.
Response: As stated in the FY 2018 IPPS/LTCH PPS proposed rule (82
FR 19916), 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 provide
hospital services. The effects on total expenditures resulting from
changes in the mix of goods and services purchased subsequent to the
base period are not measured. Only when the index is rebased and
updated cost weights determined would changes in the quantity and
intensity be captured. 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 (hospital inputs) to
furnish inpatient care between base periods.
We used a similar methodology for calculating the Employee Benefits
and Pharmaceuticals cost weights as we used to derive the FY 2010-based
IPPS market basket. These data are obtained directly from the Medicare
cost reports completed by IPPS hospitals. In addition, in the FY 2018
IPPS/LTCH PPS proposed rule, we provided the specific fields from the
Medicare cost report that we were proposing to use to calculate the
cost weights. We did not receive any technical public comments on these
specific methodologies we proposed.
The change in the cost weight of a specific category from the
current index (FY 2010) to the rebased index (2014) is a function of
the growth rate of those specific expenses relative to other components
of the market basket. For pharmaceuticals, costs increased faster than
other components of the market basket between FY 2010 and 2014, which
is why the Pharmaceuticals cost weight increased from 5.4 to 5.9
percent. As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19917), the Pharmaceuticals cost weight does not include compensation
costs associated with hospital pharmacy employees; rather, these costs
are included in the compensation cost weight. The increase in
pharmaceutical costs over this period reflects changes in both the
price of prescription drugs, proxied by the Producer Price Index for
Prescription Drugs, as well the quantity and intensity of
prescriptions.
We note that, for the FY 2018 IPPS market basket update,
pharmaceuticals price growth contributes approximately 0.4 percentage
point to the FY 2018 IPPS market basket update of 2.7 percent, or
nearly 15 percent of the update. This large contribution (relative to
the base year cost weight) reflects not only a projected FY 2018
prescription drug price increase that is approximately 80 percent
faster than the weighted average price associated with the other
remaining market basket cost categories, but also that over the FY 2014
to FY 2017 time period, the pharmaceuticals prices are projected to
increase over 25 percent compared to the price increases of the other
market basket categories combined at approximately 5 percent. Thus, we
believe that the market basket is adequately reflecting the recent
trends in prescription drug price growth.
For employee benefits, costs increased over the FY 2010 to FY 2014
period but at a slower rate than other components of the market basket,
which resulted in a slight decrease in the proposed Employee Benefits
cost weight from 12.7 to 12.0 percent. The changes in employee benefit
costs over this period reflect not only the price changes associated
with employee benefits, which are proxied by the Employment Cost Index
for All Civilian Workers in Hospitals, but also any changes in the mix
of workers. For FY 2018, the price change in the benefits component for
the ECI for hospital workers is projected to be 2.6 percent.
After consideration of public comments we received, in this final
rule, we are finalizing our calculation of the major cost weights of
the 2014-based IPPS market basket as proposed. As
[[Page 38162]]
discussed above, we are making one revision to change the label of the
proposed ``Home Office Contract Labor'' category to ``Home Office/
Related Organization Contract Labor''. However, there is no effect on
the calculation of the major cost weight for this category or in how it
is apportioned between Professional Fees: Labor-Related and
Professional Fees: Nonlabor Related as described in detail in section
IV.B.3 of the preamble of this final rule.
As we did for the FY 2010-based IPPS market basket (78 FR 50597),
we proposed to allocate contract labor costs to the Wages and Salaries
and Employee Benefits cost weights based on their relative proportions
for employed labor 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 was 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.
Using the 2014 Medicare cost report data, this percentage was 78
percent. Therefore, we proposed to allocate approximately 78 percent of
the Contract Labor cost weight to the Wages and Salaries cost weight
and 22 percent to the Employee Benefits cost weight. The FY 2010-based
IPPS market basket also allocated 78 percent of the Contract Labor cost
weight to the Wages and Salaries cost weight.
Table IV-02 in the proposed rule (82 FR 19918) shows the Wages and
Salaries and Employee Benefits cost weights after contract labor
allocation for the FY 2010-based IPPS market basket and the proposed
2014-based IPPS market basket. This table is also included below to
reflect the final 2014-based IPPS market basket.
Table IV-02--Wages and Salaries and Employee Benefits Cost Weights After
Contract Labor Allocation
------------------------------------------------------------------------
Proposed and
FY 2010-based final 2014-
Major cost categories IPPS market based IPPS
basket market basket
------------------------------------------------------------------------
Wages and Salaries...................... 47.2 43.4
Employee Benefits....................... 13.1 12.4
------------------------------------------------------------------------
We did not receive any specific public comments regarding the
allocation of the Contract Labor cost weight to the Wages and Salaries
and Employee Benefits cost weights. In this final rule, we are
finalizing our methodology of allocating the Contract Labor cost weight
as we proposed.
c. Derivation of the Detailed Cost Weights
To further divide the ``All Other'' residual cost weight estimated
from the 2014 Medicare cost report data into more detailed cost
categories, we proposed to use the 2007 Benchmark I-O ``Use Tables/
Before Redefinitions/Purchaser Value'' for NAICS 622000, Hospitals,
published by the BEA. These data are publicly available at the
following Web site: http://www.bea.gov/industry/io_annual.htm. The BEA
Benchmark I-O data are generally scheduled for publication every 5
years on a lagged basis, with the most recent data available for 2007.
The 2007 Benchmark I-O data are derived from the 2007 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.\22\ 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 become available. Instead of using the
less detailed Annual I-O data, we proposed to inflate the detailed 2007
Benchmark I-O data forward to 2014 by applying the annual price changes
from the respective price proxies to the appropriate market basket cost
categories that are obtained from the 2007 Benchmark I-O data. In our
calculations for the proposed rule, we repeated this practice for each
year.
---------------------------------------------------------------------------
\22\ http://www.bea.gov/papers/pdf/IOmanual_092906.pdf.
---------------------------------------------------------------------------
We then calculated the cost shares that each cost category
represents of the 2007 data inflated to 2014. These resulting 2014 cost
shares were applied to the ``All Other'' residual cost weight to obtain
the detailed cost weights for the proposed 2014-based IPPS market
basket. For example, the cost for Food: Direct Purchases represented
7.3 percent of the sum of the ``All Other'' 2007 Benchmark I-O Hospital
Expenditures inflated to 2014. Therefore, the Food: Direct Purchases
cost weight represented 7.3 percent of the proposed 2014-based IPPS
market basket's ``All Other'' cost category (32.0 percent), yielding a
Food: Direct Purchases proposed cost weight of 2.3 percent in the
proposed 2014-based IPPS market basket (0.073 x 32.0 percent = 2.3
percent). For the FY 2010-based IPPS market basket (78 FR 50597), we
used the same methodology utilizing the 2002 Benchmark I-O data (aged
to FY 2010).
Using this methodology, we proposed to derive 18 detailed cost
categories from the proposed 2014-based IPPS market basket residual
cost weight (32.0 percent). These categories were: (1) Fuel: Oil and
Gas; (2) Electricity; (3) Water and Sewerage; (4) Food: Direct
Purchases; (5) Food: Contract Services; (6) Chemicals; (7) Medical
Instruments; (8) Rubber and Plastics; (9) Paper and Printing Products;
(10) Miscellaneous Products; (11) Professional Fees: Labor-Related;
(12) Administrative and Facilities Support Services; (13) Installation,
Maintenance, and Repair Services; (14) All Other: Labor-Related
Services; (15) Professional Fees: Nonlabor-Related; (16) Financial
Services; (17) Telephone Services; and (18) All Other: Nonlabor-Related
Services.
Similar to the 2013-based LTCH market basket, the proposed 2014-
based IPPS market basket does not include separate cost categories for
Apparel, Machinery and Equipment, and Postage. Due to the small weights
associated with these detailed categories and relatively stable price
growth in the applicable price proxy, we believed that consolidating
these smaller cost category weights with other cost categories in the
proposed market basket that experience similar price increases
eliminates unnecessary complexity to the market basket without having a
material impact on the total market basket increase. Therefore, we
proposed to include Apparel and Machinery and Equipment in the
Miscellaneous Products cost category and Postage in the All-Other:
Nonlabor-Related Services cost category. We note that the
[[Page 38163]]
machinery and equipment expenses are for equipment that is paid for in
a given year and not depreciated over the asset's useful life.
Depreciation expenses for movable equipment are reflected in the
proposed 2014-based Capital Input Price Index (described in section
IV.D. of the preamble of this final rule). For the proposed 2014-based
IPPS market basket, we also proposed to include a separate cost
category for Installation, Maintenance, and Repair Services in order to
proxy these costs by a price index that better reflects the price
changes of labor associated with maintenance-related services.
We did not receive any specific public comments on the derivation
of the detailed cost weights. In this final rule, we are finalizing our
methodology for deriving the detailed cost weights as we proposed.
2. Selection of Proposed Price Proxies
After computing the proposed 2014 cost weights for the IPPS market
basket, it was necessary to select appropriate wage and price proxies
to reflect the rate of price change for each expenditure category. With
the exception of the proxy for professional liability insurance (PLI),
all the proxies we proposed are based on Bureau of Labor Statistics
(BLS) data and are grouped into one of the following BLS categories:
Producer Price Indexes--Producer Price Indexes (PPIs)
measure price changes for goods sold in markets other than the retail
market. PPIs are preferable price proxies for goods and services that
hospitals purchase as inputs because PPIs better reflect the actual
price changes encountered by hospitals. For example, we proposed to use
a PPI for prescription drugs, rather than the Consumer Price Index
(CPI) for prescription drugs, because hospitals generally purchase
drugs directly from a wholesaler. The PPIs that we proposed to use
measure price changes at the final stage of production.
Consumer Price Indexes--Consumer Price Indexes (CPIs)
measure change in the prices of final goods and services bought by the
typical consumer. Because they may not represent the price faced by a
producer, we proposed to use CPIs only if an appropriate PPI is not
available, or if the expenditures are more like those faced by retail
consumers in general rather than by purchasers of goods at the
wholesale level. For example, the CPI for food purchased away from home
was proposed to be used as a proxy for contracted food services.
Employment Cost Indexes--Employment Cost Indexes (ECIs)
measure the rate of change in employee 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. Appropriately, they are not affected by shifts in
employment mix.
We evaluated the price proxies using the criteria of reliability,
timeliness, availability, and relevance. Reliability indicates that the
index is based on valid statistical methods and has low sampling
variability. Timeliness implies that the proxy is published regularly,
preferably at least once a quarter. Availability means that the proxy
is publicly available. Finally, relevance means that the proxy is
applicable and representative of the cost category weight to which it
is applied. We stated in the proposed rule that we believe the proposed
PPIs, CPIs, and ECIs selected meet these criteria.
a. Price Proxies for Each Cost Category
Below we present a detailed explanation of the price proxies that
we proposed for each cost category weight and a statement of our
finalized policies. We note that many of the proxies that we proposed
to use for the 2014-based IPPS market basket are the same as those used
for the FY 2010-based IPPS market basket.
(1) Wages and Salaries
We proposed to use the ECI for Wages and Salaries for All Civilian
Workers in Hospitals (BLS series code CIU1026220000000I) to measure the
price growth of this cost category. This is the same price proxy used
in the FY 2010-based IPPS market basket.
(2) Employee Benefits
We proposed to use the ECI for Total Benefits for All Civilian
Workers in Hospitals to measure the price growth of this cost 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 FY 2010-based
IPPS market basket.
(3) Fuel: Oil and Gas
We proposed to change the proxy used for the Fuel: Oil and Gas cost
category. The FY 2010-based IPPS market basket uses the PPI Industry
for Petroleum Refineries (BLS series code PCU32411-32411-) to proxy
these expenses.
For the proposed 2014-based IPPS market basket, we proposed to use
a blend of the PPI Industry for Petroleum Refineries (BLS series code
PCU32411-32411-) and the PPI Commodity for Natural Gas (BLS series code
WPU0531). Our analysis of the BEA 2007 Benchmark I-O data (use table
before redefinitions, purchaser's value for NAICS 622000 [Hospitals])
shows that petroleum refineries expenses account for approximately 70
percent and Natural Gas expenses account for approximately 30 percent
of the Fuel: Oil and Gas expenses. Therefore, we proposed a blended
proxy of 70 percent of the PPI Industry for Petroleum Refineries (BLS
series code PCU32411-32411-) and 30 percent of the PPI Commodity for
Natural Gas (BLS series code WPU0531). We stated in the proposed rule
that we believe that these two price proxies are the most technically
appropriate indices available to measure the price growth of the Fuel:
Oil and Gas cost category in the proposed 2014-based IPPS market
basket.
(4) Electricity
We proposed to use the PPI Commodity 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 FY 2010-based IPPS
market basket.
(5) Water and Sewerage
We proposed to use the CPI for Water and Sewerage Maintenance (All
Urban Consumers) (BLS series code CUUR0000SEHG01) to measure the price
growth of this cost category. This is the same price proxy used in the
FY 2010-based IPPS market basket.
(6) Professional Liability Insurance
We proposed to proxy price changes in hospital professional
liability insurance premiums (PLI) using percentage changes as
estimated by the CMS Hospital Professional Liability Index. To generate
these estimates, we collected commercial insurance premiums for a fixed
level of coverage while holding nonprice factors constant (such as a
change in the level of coverage). This is the same price proxy used in
the FY 2010-based IPPS market basket.
(7) Pharmaceuticals
We proposed 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 price proxy used in the
FY 2010-based IPPS market basket.
[[Page 38164]]
(8) Food: Direct Purchases
We proposed 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 FY 2010-based IPPS
market basket.
(9) Food: Contract Services
We proposed to use the CPI for Food Away From Home (All Urban
Consumers) (BLS series code CUUR0000SEFV) to measure the price growth
of this cost category. This is the same price proxy used in the FY
2010-based IPPS market basket.
(10) Chemicals
We proposed to continue to use a four-part blended index composed
of the PPI Industry for Industrial Gas Manufacturing (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 Soap and Cleaning Compound
Manufacturing (BLS series code PCU32561-32561-). We proposed to update
the blended weights using 2007 Benchmark I-O data, which we also
proposed to use for the proposed 2014-based IPPS market basket. The FY
2010-based IPPS market basket included the same blended chemical price
proxy, but used the 2002 Benchmark I-O data to determine the weights of
the blended chemical price index. The 2007 Benchmark I-O data have a
higher weight for organic chemical products and a lower weight for the
other chemical products compared to the 2002 Benchmark I-O data.
Table IV-03 in the proposed rule (82 FR 19920) shows the proposed
weights for each of the four PPIs used to create the blended index
compared to those used for the FY 2010-based IPPS market basket. This
table is also included below and reflects the final 2014-based IPPS
weights.
Table IV-03--Blended Chemical Weights
----------------------------------------------------------------------------------------------------------------
Proposed and
FY 2010-based final 2014-
Name IPPS weights Based IPPS NAICS
(%) weights (%)
----------------------------------------------------------------------------------------------------------------
PPI for Industrial Gas Manufacturing............................ 35 32 325120
PPI for Other Basic Inorganic Chemical Manufacturing............ 25 17 325180
PPI for Other Basic Organic Chemical Manufacturing.............. 30 45 325190
PPI for Soap and Cleaning Compound Manufacturing................ 10 6 325610
----------------------------------------------------------------------------------------------------------------
(11) Blood and Blood Products
We proposed to use the PPI Industry for Blood and Organ Banks (BLS
series code PCU621991621991) to measure the price growth of this cost
category. This is the same price proxy used in the FY 2010-based IPPS
market basket.
(12) Medical Instruments
We proposed to use a blended price proxy for the Medical
Instruments cost category. The 2007 Benchmark Input-Output data show an
approximate 50/50 split between Surgical and Medical Instruments and
Medical and Surgical Appliances and Supplies for this cost category.
Therefore, we proposed a blend composed of 50 percent of the PPI
Commodity for Surgical and Medical Instruments (BLS series code
WPU1562) and 50 percent of the PPI Commodity for Medical and Surgical
Appliances and Supplies (BLS series code WPU1563). The FY 2010-based
IPPS market basket used the single, higher level PPI Commodity for
Medical, Surgical, and Personal Aid Devices (BLS series code WPU156).
We stated in the proposed rule that we believe that the proposed price
proxy better reflects the mix of expenses for this cost category as
obtained from the 2007 Benchmark I-O data.
(13) Rubber and Plastics
We proposed to use the PPI Commodity for Rubber and Plastic
Products (BLS series code WPU07) to measure the price growth of this
cost category. This is the same price proxy used in the FY 2010-based
IPPS market basket.
(14) Paper and Printing Products
We proposed to use the PPI Commodity for Converted Paper and
Paperboard Products (BLS series code WPU0915) to measure the price
growth of this cost category. This is the same price proxy used in the
FY 2010-based IPPS market basket.
(15) Miscellaneous Products
We proposed 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 price proxy used in the FY 2010-
based IPPS market basket.
(16) Professional Fees: Labor-Related
We proposed 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. It
includes occupations such as legal, accounting, and engineering
services. This is the same price proxy used in the FY 2010-based IPPS
market basket.
(17) Administrative and Facilities Support Services
We proposed 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 price proxy used in the FY 2010-based IPPS market basket.
(18) Installation, Maintenance, and Repair Services
We proposed 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 new cost
category. Previously these costs were included in the All Other: Labor-
Related Services category and were proxied by the ECI for Total
Compensation for Private Industry Workers in Service Occupations (BLS
series code CIU2010000300000I). We believe that this index better
reflects the price changes of labor associated with maintenance-related
services and its incorporation represents a technical improvement to
the market basket.
[[Page 38165]]
(19) All Other: Labor-Related Services
We proposed 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 price proxy used in the FY 2010-based IPPS market
basket.
(20) Professional Fees: Nonlabor-Related
We proposed 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 price proxy that we proposed to use for the Professional
Fees: Labor-Related cost category and the same price proxy used in the
FY 2010-based IPPS market basket.
(21) Financial Services
We proposed 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 price proxy used in the FY 2010-based IPPS market
basket.
(22) Telephone Services
We proposed to use the CPI for Telephone Services (BLS series code
CUUR0000SEED) to measure the price growth of this cost category. This
is the same price proxy used in the FY 2010-based IPPS market basket.
(23) All Other: Nonlabor-Related Services
We proposed to use the CPI for All Items Less Food and Energy (BLS
series code CUUR0000SA0L1E) to measure the price growth of this cost
category. We believe that using the CPI for All Items Less Food and
Energy avoids double counting of changes in food and energy prices as
they are already captured elsewhere in the market basket. This is the
same price proxy used in the FY 2010-based IPPS market basket. We did
not receive any specific public comments on the price proxies we
proposed to use for the 2014-based IPPS market basket. In this final
rule, we are finalizing the use of these price proxies as we proposed.
After consideration of the public comments we received, we are
finalizing the 2014-based IPPS market basket as proposed.
Table IV-04 in the proposed rule (82 FR 19921) set forth the
proposed 2014-based IPPS market basket, including the cost categories
and their respective weights and price proxies. For comparison
purposes, the corresponding FY 2010-based IPPS market basket cost
weights also were listed. This table is also included below and
reflects the final 2014-based IPPS market basket.
Table IV-04--Proposed and Final 2014-Based IPPS Market Basket Cost Categories, Cost Weights, and Price Proxies
Compared to FY 2010-Based IPPS Market Basket Cost Weights
----------------------------------------------------------------------------------------------------------------
Proposed and
FY 2010-based final 2014-
Cost categories IPPS market based IPPS Proposed and final 2014-based
basket cost market basket IPPS market basket price proxies
weights cost weights
----------------------------------------------------------------------------------------------------------------
1. Compensation............................... 60.3 55.8
A. Wages and Salaries \1\................. 47.2 43.4 ECI for Wages and Salaries for
All Civilian Workers in
Hospitals.
B. Employee Benefits \1\.................. 13.1 12.4 ECI for Total Benefits for All
Civilian Workers in Hospitals.
2. Utilities.................................. 2.2 2.5
A. Fuel: Oil and Gas...................... 0.4 1.3 Blend of PPIs for Petroleum
Refineries and Natural Gas.
B. Electricity............................ 1.7 1.0 PPI Commodity for Commercial
Electric Power.
C. Water and Sewerage..................... 0.1 0.1 CPI for Water and Sewerage
Maintenance (All Urban
Consumers).
3. Professional Liability Insurance........... 1.3 1.2 CMS Hospital Professional
Liability Insurance Premium
Index.
4. All Other.................................. 36.1 40.5
A. All Other Products..................... 19.5 17.4
(1) Pharmaceuticals................... 5.4 5.9 PPI Commodity for
Pharmaceuticals for Human Use,
Prescription.
(2) Food: Direct Purchases............ 4.2 2.3 PPI Commodity for Processed
Foods and Feeds.
(3) Food: Contract Services........... 0.6 1.3 CPI for Food Away From Home (All
Urban Consumers).
(4) Chemicals......................... 1.5 0.9 Blend of Chemical PPIs.
(5) Blood and Blood Products.......... 1.1 0.8 PPI Industry for Blood and Organ
Banks.
(6) Medical Instruments............... 2.6 2.9 Blend of PPI for Surgical and
Medical Instruments and PPI for
Medical and Surgical Appliances
and Supplies.
(7) Rubber and Plastics............... 1.6 0.8 PPI Commodity for Rubber and
Plastic Products.
(8) Paper and Printing Products....... 1.5 1.5 PPI Commodity for Converted
Paper and Paperboard Products.
(9) Miscellaneous Products \2\........ 1.0 1.1 PPI Commodity for Finished Goods
less Food and Energy.
B. Labor-Related Services................. 9.2 12.5
(1) Professional Fees: Labor-Related.. 5.5 6.8 ECI for Total Compensation for
Private Industry Workers in
Professional and Related.
(2) Administrative and Facilities 0.6 1.0 ECI for Total Compensation for
Support Services. Private Industry Workers in
Office and Administrative
Support.
[[Page 38166]]
(3) Installation, Maintenance and 2.4 ECI for Total Compensation for
Repair Services. Civilian Workers in
Installation, Maintenance, and
Repair.
(4) All Other: Labor-Related Services. 3.1 2.3 ECI for Total Compensation for
Private Industry Workers in
Service Occupations.
C. Nonlabor-Related Services.............. 7.4 10.7
(1) Professional Fees: Nonlabor- 3.7 5.1 ECI for Total Compensation for
Related. Private Industry Workers in
Professional and Related.
(2) Financial Services................ 1.2 3.0 ECI for Total Compensation for
Private Industry Workers in
Financial Activities.
(3) Telephone Services................ 0.6 0.8 CPI for Telephone Services.
(4) All Other: Nonlabor-Related 1.9 1.7 CPI for All Items less Food and
Services \3\. Energy.
--------------------------------
Total............................. 100.0 100.0
----------------------------------------------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For presentational purposes, we are displaying
one decimal and therefore, the detail may not add to the total due to rounding.
\1\ Contract labor is distributed to wages and salaries and employee benefits based on the share of total
compensation that each category represents.
\2\ The FY 2010-based IPPS market basket Miscellaneous Products cost category also includes Apparel and
Machinery and Equipment cost categories. These costs were not broken out separately in the 2014-based IPPS
market basket.
\3\ The FY 2010-based IPPS market basket All Other: Nonlabor-Related Services cost category also includes the
Postage cost category. These costs were not broken out separately in the 2014-based IPPS market basket.
Table IV-05 in the proposed rule (82 FR 19922) compares both the
historical and forecasted percent changes in the FY 2010-based IPPS
market basket and the proposed 2014-based IPPS market basket. The
percent changes in the proposed rule were based on IHS Global Inc.'s
(IGI's) fourth quarter 2016 forecast with historical data through third
quarter 2016. The forecasted growth rates provided in Table IV-05 below
are based on IGI's more recent second quarter 2017 forecast with
historical data through first quarter 2017.
Table IV-05--FY 2010-Based and Proposed and Final 2014-Based IPPS
Hospital Operating Index Percent Change, FY 2013 Through FY 2020
------------------------------------------------------------------------
Proposed and
FY 2010-based final 2014-
Fiscal year (FY) IPPS market based IPPS
basket percent market basket
change percent change
------------------------------------------------------------------------
Historical data:
FY 2013............................. 2.0 2.0
FY 2014............................. 1.8 1.8
FY 2015............................. 1.8 1.6
FY 2016............................. 1.8 1.8
Average FYs 2013-2016............... 1.9 1.8
Forecast:
FY 2017............................. 2.6 2.7
FY 2018............................. 2.7 2.7
FY 2019............................. 2.9 2.9
FY 2020............................. 3.0 3.1
Average FYs 2017-2020............... 2.8 2.9
------------------------------------------------------------------------
Source: IHS Global Inc., 2nd Quarter 2017 forecast.
The percent change in the proposed and final 2014-based IPPS market
basket is, on average, 0.1 percentage point lower than the FY 2010-
based IPPS market basket over the FY 2013 to FY 2016 historical time
period and on average 0.1 percentage point higher over the FY 2017 to
FY 2020 forecasted time period. The difference in the average growth
rates is mostly a result of the lower compensation cost weight and the
revised price proxy for the Fuel, Oil and Gasoline cost category. As
stated in section IV.B.2. of the preamble of the FY 2018 IPPS/LTCH PPS
proposed rule (and in section IV.B.2.a. of the preamble of this final
rule), for the 2014-based IPPS market basket, we proposed to revise the
price proxy for the Fuel: Oil and Gas cost category to be a blend of
the PPI Industry for Petroleum Refineries (BLS series code PCU32411-
32411-) and the PPI Commodity for Natural Gas (BLS series code
WPU0531). The FY 2010-based IPPS market basket used only the PPI
Industry for Petroleum Refineries.
[[Page 38167]]
3. Labor-Related Share
Under section 1886(d)(3)(E) of the Act, the Secretary estimates
from time to time the proportion of payments that are labor-related.
Section 1886(d)(3)(E) of the Act states that the Secretary shall adjust
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.''
The labor-related share is used to determine the proportion of the
national PPS 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. For the FY 2018
IPPS/LTCH PPS proposed rule, we proposed (82 FR 19923) to include in
the labor-related share the national average proportion of operating
costs that are attributable to the following cost categories in the
proposed 2014-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. As noted in section
IV.B.1.c. of the preamble of the proposed rule, for the proposed 2014-
based IPPS market basket, we proposed the creation of a separate cost
category for Installation, Maintenance, and Repair Services. These
expenses were previously included in the All Other: Labor-Related
Services cost category in the FY 2010-based IPPS market basket, along
with other services, including, but not limited to, janitorial, waste
management, security, and dry cleaning/laundry services. Because these
services tend to be labor-intensive and are mostly performed at the
facility (and, therefore, unlikely to be purchased in the national
market), we continue to believe that they meet our definition of labor-
related services.
Similar to the FY 2010-based IPPS market basket, we proposed that
the Professional Fees: Labor-Related cost category includes expenses
associated with advertising and a proportion of legal services,
accounting and auditing, engineering, management consulting, and
management of companies and enterprises expenses. As was done in the FY
2010-based IPPS market basket rebasing, 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
poststratification 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; and
42 percent of management consulting services.
We proposed to apply each of these percentages to its respective
Benchmark I-O cost category underlying the professional fees cost
category. This is the methodology that we used to separate the FY 2010-
based IPPS market basket professional fees cost category into
Professional Fees: Labor-Related and Professional Fees: Nonlabor-
Related cost categories. We proposed to use the same methodology and
survey results to separate the professional fees costs for the proposed
2014-based IPPS market basket into Professional Fees: Labor-Related and
Professional Fees: Nonlabor-Related cost categories. We stated that we
believe these survey results are appropriate to use for the 2014-based
IPPS market basket as they empirically determine the proportion of
contracted professional services purchased by the industry that is
attributable to local firms and the proportion that is purchased from
national firms.
In the proposed 2014-based IPPS market basket, nonmedical
professional fees that were subject to allocation based on these survey
results represent 4.9 percent of total operating costs (and are limited
to those fees related to Accounting & Auditing, Legal, Engineering, and
Management Consulting services). Based on our survey results, we
proposed to apportion 3.1 percentage points of the 4.9 percentage point
figure into the Professional Fees: Labor-Related share cost category
and designate the remaining 1.8 percentage point into the Professional
Fees: Nonlabor-Related cost category.
Comment: Several commenters expressed concern about the methodology
CMS proposed to use to remove a portion of professional fees from the
labor-related share. Several commenters believed the Professional Fees
Survey that was gathered in 2008 is outdated. Some of those commenters
stated that it is inappropriate to use data gathered in 2008 to adjust
payments made in 2018. In addition, one commenter stated that the
survey was outdated because hospitals have reduced staff since 2008 and
rely more on consulting services for obtaining needed personnel
expertise. A few commenters stated that if CMS' intention is to update
the labor-related share to account for recent changes, it should also
update these survey data.
A few commenters reiterated how, in previous comments, they stated
that they did not believe the survey could be statistically
representative because it was based on 108 hospitals. The commenters
also stated that CMS failed to share data on the characteristics of the
hospitals that responded to the survey, selection bias, or survey
methodology. The commenters urged CMS not to use the results of this
survey to estimate the proportion of professional fees that are labor-
related. Several commenters urged CMS to continue to investigate
alternative methodologies for determining the proportion that is labor-
related before implementing any changes.
Response: We first utilized the Professional Fees Survey in the FY
2006-based IPPS market basket finalized in the FY 2010 IPPS/LTCH PPS
final rule (74 FR 43843). In response to our proposal to use this
Professional Fees Survey in the FY 2010 IPPS/LTCH PPS proposed rule,
commenters had similar requests for additional information on the
survey, specifically requesting the characteristics of the hospitals
that responded, possible selection bias, and survey methodology. For
the FY 2010 IPPS/LTCH PPS final rule (74 FR 43853), we provided
additional information on the Professional Fees Survey methodology,
sample selection, and methodology for deriving the final weights. The
FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19923) made note of this
information and provided the Federal Register reference for the FY 2010
IPPS/LTCH PPS final rule (74 FR 43850 through 43856). Therefore, we
disagree with the commenters' claim that we failed to share
characteristics of the hospitals that responded to the survey,
selection bias, and survey methodology.
With respect to the comment that the survey is outdated because
hospitals have reduced staff since 2008 and rely more on consulting
services for obtaining needed personnel expertise, the Professional
Fees Survey is not used
[[Page 38168]]
to determine the level of hospital staffing relative to contract
staffing. As stated above, the Medicare cost report data show that over
the FY 2010 to FY 2014 time period, the Wages and Salaries and Employee
Benefit cost weights decreased while the Labor-related services cost
weight increased. This supports the commenter's claim that hospitals
have reduced staff and are relying more on consulting services, and is
reflected in the hospital market basket. The Professional Fees Survey
is only used to determine the proportion of Professional Fees costs
that are purchased within a hospital's local labor market, a proportion
that we believe is unlikely to change significantly over time.
With respect to the commenters' concern regarding alternative
methodologies, we are not aware of any other currently available data
source regarding the proportion of Professional Fees that are labor-
related. Therefore, the only possible alternatives to the current
methods would be to assume that 100 percent of the accounting and
auditing services, engineering services, legal services, and management
consulting services are purchased in the national market or assume that
100 percent are purchased in the local labor market. Neither of these
approaches seems reasonable, given that the 2008 Professional Fees
Survey results in the assumption that 63 percent of those services are
purchased locally (in aggregate) and the remaining 37 percent are
purchased nationally. As stated in the FY 2018 IPPS/LTCH PPS proposed
rule, we continue to believe the survey results are appropriate to use
for the 2014-based IPPS market basket as they empirically determine the
proportion of contracted professional services purchased by the
industry that is attributable to local firms and the proportion that is
purchased from national firms. We will continue to explore options for
updating the Professional Fees Survey to reflect more recent data for
incorporation into future market basket rebasing and labor-related
share determinations. If conducted, we encourage providers to respond
to the survey, which would be announced in the Federal Register as done
previously. After consideration of the public comments we received, we
are finalizing the use of the Professional Fees Survey as proposed.
In addition to the professional services listed earlier, we also
proposed to classify a proportion of the home office/related
organization contract labor expenses (as this cost category has been
relabeled, as discussed earlier in section IV.B.1.a. of the preamble of
this final rule, and is referred to throughout this discussion) into
the Professional Fees: Labor-Related cost category as was done in the
previous rebasing. For the FY 2010-based IPPS market basket, we
obtained home office/related organization contract labor expenses from
the Benchmark I-O data for the NAICS 55 industry (Management of
Companies and Enterprises). As stated in section IV.B.1.a. of the
preamble to the FY 2018 IPPS/LTCH PPS proposed rule, for the 2014-based
IPPS market basket, we proposed to obtain these data from the Medicare
cost reports. We believe that many of the home office/related
organization contract labor expenses are labor-intensive and vary with
the local labor market. However, data indicate that not all IPPS
hospitals with home offices have home offices located in their local
labor market. Therefore, we proposed to include in the labor-related
share only a proportion of the home office/related organization
contract labor expenses based on the methodology described below.
For the FY 2010-based IPPS market basket, we used data primarily
from the Medicare cost reports and a CMS database of Home Office
Medicare Records (HOMER) (a database that provides city and state
information (addresses) for home offices). We determined the proportion
of costs that should be allocated to the labor-related share based on
the percent of hospital home office/related organization contract labor
compensation as reported in Worksheet S-3, Part II. Using this
methodology, we determined that 62 percent of hospitals' home office/
related organization contract labor compensation costs were for home
offices located in their respective local labor markets (defined as the
same Metropolitan Statistical Area (MSA)). Therefore, we classified 62
percent of these costs into the Professional Fees: Labor-Related
Services cost category and the remaining 38 percent into the
Professional Fees: Nonlabor-Related Services cost category for the FY
2010-based IPPS market basket. For a detailed discussion of this
analysis, we refer readers to the FY 2014 IPPS/LTCH PPS final rule (78
FR 50601).
For the proposed 2014-based IPPS market basket, we conducted a
similar analysis of home office data. For consistency, we believe that
it is important for our analysis on home office data to be conducted on
the same IPPS hospitals used to derive the proposed 2014-based IPPS
market basket cost weights. The Medicare cost report requires a
hospital to report information regarding their home office provider.
Approximately 64 percent of IPPS hospitals reported some type of home
office information on their Medicare cost report for 2014 (for example,
city, State, and zip code). Using the data reported on the Medicare
cost report, we compared the location of the hospital with the location
of the hospital's home office. We then proposed to determine the
proportion of costs that should be allocated to the labor-related share
based on the percent of total hospital home office/related organization
contract labor compensation costs (as reported in Worksheet S-3, Part
II) for those hospitals that had home offices located in their
respective local labor markets--defined as being in the same MSA. We
determined a hospital's and home office's MSAs using their zip code
information from the Medicare cost report. Using this methodology, we
determined that 60 percent of hospitals' home office/related
organization contract labor compensation costs were for home offices
located in their respective local labor markets. Therefore, we proposed
to allocate 60 percent of home office expenses to the labor-related
share.
In the proposed 2014-based IPPS market basket, home office/related
organization contract labor expenses that were subject to allocation
based on the home office allocation methodology represent 4.2 percent
of total operating costs. Based on the results of the home office
analysis discussed earlier, we proposed to apportion 2.5 percentage
points of the 4.2 percentage points figure into the Professional Fees:
Labor-Related cost category and designate the remaining 1.7 percentage
points into the Professional Fees: Nonlabor-Related cost category. In
summary, based on the two allocations mentioned earlier, we apportioned
5.6 percentage points 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 1.2 percentage point of total operating costs) resulting
in a Professional Fees: Labor-Related cost weight of 6.8 percent.
The FY 2018 IPPS/LTCH PPS proposed rule included Table IV-06 (82 FR
19924), which compared the proposed 2014-based labor-related share and
the FY 2010-based labor-related share. As discussed in section
IV.B.1.b. of the preamble of the FY 2018 IPPS/LTCH PPS proposed rule,
the Wages and Salaries and Employee Benefits cost weights reflect
contract labor costs. This
[[Page 38169]]
table is also included below and reflects the final 2014-based labor-
related share.
Table IV-06--Comparison of the FY 2010-Based Labor-Related Share and the
Proposed and Final 2014-Based Labor-Related Share
------------------------------------------------------------------------
Proposed and
FY 2010-based final 2014-
IPPS market based IPPS
basket cost market basket
weights cost weights
------------------------------------------------------------------------
Wages and Salaries...................... 47.2 43.4
Employee Benefits....................... 13.1 12.4
Professional Fees: Labor-Related........ 5.5 6.8
Administrative and Facilities Support 0.6 1.0
Services...............................
Installation, Maintenance, and Repair .............. 2.4
Services \1\...........................
All Other: Labor-Related Services....... 3.1 2.3
-------------------------------
Total Labor-Related Share........... 69.6 68.3
------------------------------------------------------------------------
Note: Detail may not add to total due to rounding.
\1\ Installation, Maintenance, and Repair Services costs were previously
included in the All Other: Labor-Related Services cost category of the
FY 2010-based IPPS market basket.
Using the cost category weights from the proposed 2014-based IPPS
market basket, we calculated a labor-related share of 68.3 percent,
approximately 1.3 percentage points lower than the current labor-
related share of 69.6 percent. Therefore, we proposed to use a labor-
related share of 68.3 percent for discharges occurring on or after
October 1, 2017. We continue to believe, as we have stated in the past,
that these operating cost categories are related to, influenced by, or
vary with the local markets. Therefore, our definition of the labor-
related share continues to be consistent with section 1886(d)(3) of the
Act. We note that section 403 of Public Law 108-173 amended sections
1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act to provide that the
Secretary must employ 62 percent as the labor-related share unless 62
percent would result in lower payments to a hospital than would
otherwise be made.
Comment: Several commenters stated that they were unable to
replicate or verify the proposed labor-related share. One commenter
stated that it is unclear how we determined that a reduction to the
labor-related share from 69.6 percent to 68.3 percent was warranted
since we did not release the base calculations. Several commenters
further stated that not having access to this information severely
limited their ability to comment sufficiently on this issue. The
commenters requested that CMS provide all information necessary to
replicate the agency's calculation of the labor-related share,
including, but not limited to, greater clarity of data sources used;
case counts at different points, such as number of providers after
trimming; provider level data illustrating what information was used in
the calculation; and the kinds of checks CMS made during calculations
to assess and ensure accuracy. The commenters requested that this
information be provided in advance of publication of the final rule.
Response: We disagree with the commenters' claim that we did not
provide sufficiently detailed information regarding our calculations of
the labor-related share. As stated in the FY 2018 IPPS/LTCH PPS
proposed rule (82 FR 19923), the labor-related share is derived using
the cost weights of the proposed 2014-based IPPS market basket. The FY
2018 IPPS/LTCH PPS proposed rule included a detailed description of the
data sources and methodology used to derive all of the market basket
cost weights.
Specifically, section IV.B.1.a. of the preamble of the proposed
rule (82 FR 19916) provided the detailed Medicare cost report
methodology used to calculate the major cost weights of the proposed
2014-based IPPS market basket (including the specific Medicare cost
report worksheets and trimming methodologies). Section IV.B.1.c. of the
preamble of the proposed rule (82 FR 19918) provided the specific
methodology and data source used to derive the remaining detailed cost
weights. Section IV.B.3. of the preamble of proposed rule (82 FR 19923)
provided information regarding how the Professional Fees cost category
was divided between Labor-related and Nonlabor-related services. The
data sources used to produce the market basket cost weights are
publicly available. In addition, contact information for CMS staff was
provided in the proposed rule to provide the opportunity to ask any
specific questions regarding the methodology.
We note that we provided a similar detailed description of the
methodologies used to derive the 2012-based IPF and 2012-based IRF
market baskets in the FY 2016 IPF PPS proposed rule and the FY 2016 IRF
PPS proposed rule, respectively. In those instances, stakeholders were
able to use the detailed description in the proposed rules to closely
replicate the proposed cost weights and suggest methodological changes
that were considered during final rulemaking.
Therefore, for the reasons stated earlier, we believe that there
was sufficient detail provided in the FY 2018 IPPS/LTCH PPS proposed
rule to describe the proposed methodology for deriving the market
basket cost weights and labor-related share.
Comment: Several commenters opposed the decrease in the labor-
related share from 69.6 percent to 68.3 percent, stating that reducing
the labor-related share further undervalues the very real differences
in hospital-specific costs. These commenters stated that such a change
to the labor-related share would specifically harm hospitals in higher-
cost urban areas that already experience some of the highest labor
costs in the country. Furthermore, they stated that they opposed
reducing the sensitivity of the prospective payment system to the
different circumstances of individual hospitals through the
introduction of an approach that would foster the development of a
reimbursement system that trends toward the mean despite unquestionable
differences in hospital costs. The commenters urged CMS to withdraw the
proposal to reduce the labor-related share for FY 2018.
Response: We disagree with the commenters' rationale for the
request to
[[Page 38170]]
withdraw the proposal to reduce the labor-related share. The
methodology used to derive the proposed labor-related share of 68.3
percent based on the proposed 2014-based market basket is the same
methodology used to determine the current labor-related share of 69.6
percent using the FY 2010-based IPPS market basket. The decrease in the
labor-related share of 1.3 percentage points stems from a decrease in
the Wages and Salaries and Employee Benefit cost weights (which were
derived from the Medicare cost reports), as discussed in the FY 2018
IPPS/LTCH PPS proposed rule (82 FR 19918), accounting for a decrease of
4.5 percentage points. This is partially offset by an increase in the
Labor-related services cost weight, accounting for an increase of 3.2
percentage points. As stated in the FY 2018 IPPS/LTCH PPS proposed
rule, the decrease in the Wages and Salaries cost weight from FY 2010
to FY 2014 occurred across most cost centers and in aggregate for the
General Service (overhead), Inpatient Routine Service, Ancillary
Service, and Outpatient Service cost centers.
Furthermore, the other components of the IPPS (including, but not
limited to, MS-DRG, wage index, disproportionate share hospital
adjustment, and indirect medical education adjustment) account for
variations in costs among individual hospitals. After consideration of
the public comments we received, we are finalizing our methodology for
calculating the labor-related share of 68.3 percent using the 2014-
based IPPS market basket cost weights.
C. Market Basket for Certain Hospitals Presently Excluded From the IPPS
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43857), we
adopted the use of the FY 2006-based IPPS operating market basket
percentage increase to update the target amounts for children's
hospitals, PPS-excluded cancer hospitals and religious nonmedical
health care institutions (RNHCIs). Children's hospitals and PPS-
excluded cancer hospitals and RNHCIs are still reimbursed solely under
the reasonable cost-based system, subject to the rate-of-increase
limits. Under these limits, an annual target amount (expressed in terms
of the inpatient operating cost per discharge) is set for each hospital
based on the hospital's own historical cost experience trended forward
by the applicable rate-of-increase percentages.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50603), under the
broad authority in sections 1886(b)(3)(A) and (B), 1886(b)(3)(E), and
1871 of the Act and section 4454 of the BBA, consistent with our use of
the IPPS operating market basket percentage increase to update target
amounts, we adopted the use of the FY 2010-based IPPS operating market
basket percentage increase to update the target amounts for children's
hospitals, PPS-excluded cancer hospitals, and RNHCIs that are paid on
the basis of reasonable cost subject to the rate-of-increase limits
under Sec. 413.40. In addition, as discussed in the FY 2015 IPPS/LTCH
PPS final rule (79 FR 50156 through 50157), consistent with Sec. Sec.
412.23(g), 413.40(a)(2)(ii)(A), and 413.40(c)(3)(viii), we also have
used the percentage increase in the FY 2010-based IPPS operating market
basket to update the target amounts for short-term acute care 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). These hospitals also are
paid on the basis of reasonable cost, subject to the rate-of-increase
limits under Sec. 413.40.
Due to the small number of children's and cancer hospitals and
RNHCIs and hospitals located outside the 50 States, the District of
Columbia, and Puerto Rico and because these facilities provide limited
Medicare cost report data, we are unable to create a separate market
basket specifically for these facilities. Due to the limited cost
report data available, we stated that we believe that the proposed
2014-based IPPS operating market basket most closely represents the
cost structure of children's hospitals, PPS-excluded cancer hospitals,
RNHCIs, and hospitals located outside the 50 States, the District of
Columbia, and Puerto Rico. We believe this is appropriate as the IPPS
operating market basket would reflect the input price growth for
providing inpatient hospital services (similar to the services provided
by the above excluded facilities) based on the specific mix of goods
and services required. Therefore, we proposed to use the 2014-based
IPPS market basket percentage increase to update the target amounts for
children's hospitals, PPS-excluded cancer hospitals, RNHCIs, and
hospitals located outside the 50 States, the District of Columbia, and
Puerto Rico that are paid on the basis of reasonable cost subject to
the rate-of-increase limits under Sec. 413.40. We stated that we
believe it is the best available measure of the average increase in the
prices of the goods and services purchased by children's hospitals, the
cancer hospitals, RNHCIs, and hospitals located outside the 50 States,
the District of Columbia, and Puerto Rico in order to provide care.
We did not receive any public comments on our proposal. Therefore,
we are adopting the use of the 2014-based IPPS market basket percentage
increase to update the target amounts for children's hospitals, PPS-
excluded cancer hospitals, RNHCIs, and hospitals located outside the 50
States, the District of Columbia, and Puerto Rico that are paid on the
basis of reasonable cost.
D. Rebasing and Revising the Capital Input Price Index (CIPI)
The CIPI was originally described in the FY 1993 IPPS final rule
(57 FR 40016). There have been subsequent discussions of the CIPI
presented in the IPPS proposed and final rules. The FY 2014 IPPS/LTCH
PPS final rule (78 FR 50603 through 50607) described the most recent
rebasing and revision of the CIPI to a FY 2010 base year, which
reflected the capital cost structure of IPPS hospitals available at
that time.
For the FY 2018 IPPS update, in the FY 2018 IPPS/LTCH PPS proposed
rule (82 FR 19925 through 19929), we proposed to rebase and revise the
CIPI to a 2014 base year to reflect a more current structure of capital
costs for IPPS hospitals. This proposed 2014-based CIPI was derived
using 2014 cost reports for IPPS hospitals, which includes providers
whose cost reporting period began on or after October 1, 2013, and
prior to September 30, 2014. While we proposed and finalized the title
of the current CIPI in the FY 2014 IPPS/LTCH proposed and final rules
as ``FY 2010-based CIPI'', for the proposed CIPI, we proposed to simply
refer to the proposed CIPI as ``2014-based CIPI'' (dropping the
reference to FY). As discussed in section IV.B. of the preamble of the
proposed rule, for the 2014-based IPPS operating market basket, we
proposed this change in naming convention for the market basket because
the base year cost weight data for the proposed market basket do not
reflect only fiscal year data. Similarly, the proposed 2014-based CIPI
uses Medicare cost report data and other government data that reflect
2014 fiscal year, 2014 calendar year, and 2014 State fiscal year
expenses to determine the base year cost weights and vintage weights.
Given that it is based on a mix of classifications of 2014 data, we
proposed to refer to the CIPI as ``2014-based'' instead of ``FY 2014-
based'' or ``CY 2014-based''. However, the methods and data used to
derive each of these CIPI are similar. As with the FY 2010-based index,
we proposed to develop two sets of weights to derive
[[Page 38171]]
the proposed 2014-based CIPI. The first set of weights identifies the
proportion of hospital capital expenditures attributable to each
expenditure category, while the second set of weights is a set of
relative vintage weights for depreciation and interest. The set of
vintage weights is used to identify the proportion of capital
expenditures within a cost category that is attributable to each year
over the useful life of the capital assets in that category. A more
thorough discussion of vintage weights is provided later in this
section.
Using 2014 Medicare cost reports, we were able to group capital
costs into the following categories: Depreciation, Interest, Lease, and
Other. For each of these categories, we proposed to determine what
proportion of total capital costs the category represents using the
data reported by IPPS hospitals on Worksheet A-7, which is the same
methodology used for the FY 2010-based CIPI. As shown in the left
column of Table IV-07 in the proposed rule (82 FR 19926), in 2014,
depreciation expenses accounted for 66.4 percent of total capital
costs, interest expenses accounted for 16.3 percent, leasing expenses
accounted for 11.8 percent, and other capital expenses accounted for
5.5 percent. This table is also listed below.
We also proposed to allocate lease costs across each of the
remaining capital cost categories as was done in the FY 2010-based
CIPI. This resulted in three primary capital cost categories in the
proposed 2014-based CIPI: Depreciation, Interest, and Other. Lease
costs are unique in that they are not broken out as a separate cost
category in the proposed 2014-based CIPI. Rather, we proposed to
proportionally distribute leasing costs among the cost categories of
Depreciation, Interest, and Other, reflecting the assumption that the
underlying cost structure of leases is similar to that of capital costs
in general. As was done for the FY 2010-based CIPI, we proposed to
assume that 10 percent of the lease costs as a proportion of total
capital costs represents overhead and to assign those costs to the
Other capital cost category accordingly. Therefore, we assumed that
approximately 1.2 percent (11.8 percent x 0.1) of total capital costs
represent lease costs attributable to overhead, and we proposed to add
this 1.2 percent to the 5.5 percent Other cost category weight. We then
proposed to distribute the remaining lease costs (10.6 percent, or 11.8
percent - 1.2 percent) proportionally across the three cost categories
(Depreciation, Interest, and Other) based on the proportion that these
categories comprise of the sum of the Depreciation, Interest, and Other
cost categories (excluding lease expenses). For example, the Other cost
category represented 6.3 percent of all three cost categories
(Depreciation, Interest, and Other) prior to any lease expenses being
allocated. This 6.3 percent is applied to the 10.6 percent of remaining
lease expenses so that another 0.7 percent of lease expenses as a
percent of total capital costs is allocated to the Other cost category.
Therefore, the resulting proposed Other cost weight is 7.4 percent (5.5
percent + 1.2 percent + 0.7 percent). This is the same methodology used
for the FY 2010-based CIPI. The resulting cost weights of the proposed
allocation of lease expenses were shown in the right column of Table
IV-07 in the proposed rule (82 FR 19926). This table is also included
below and reflects the final allocation of lease expenses.
Table IV-07--Proposed and Final Allocation of Lease Expenses for the
Proposed and Final 2014-Based CIPI
------------------------------------------------------------------------
Proposed and
final cost Proposed and
shares final cost
obtained from shares after
Cost categories medicare cost allocation of
reports lease expenses
(percent of (percent of
total capital total capital
costs) costs)
------------------------------------------------------------------------
Depreciation............................ 66.4 74.4
Interest................................ 16.3 18.2
Lease................................... 11.8 ..............
Other................................... 5.5 7.4
------------------------------------------------------------------------
Finally, we proposed to further divide the Depreciation and
Interest cost categories. We proposed to separate the 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 IPPS hospitals
(after the allocation of lease costs) that are attributable to building
and fixed equipment, which we hereafter refer to as the ``fixed
percentage.'' Based on Worksheet A-7 data from the 2014 IPPS Medicare
cost reports, we have determined that depreciation costs for building
and fixed equipment account for approximately 49 percent of total
depreciation costs, while depreciation costs for movable equipment
account for approximately 51 percent of total depreciation costs. As
was done for the FY 2010-based CIPI, we proposed to apply this fixed
percentage to the depreciation cost weight (after leasing costs are
included) to derive a Depreciation cost weight attributable to Building
and Fixed Equipment and a Depreciation cost weight attributable to
Movable Equipment.
To disaggregate the interest cost weight, we needed to determine
the percent of total interest costs for IPPS hospitals that are
attributable to government and nonprofit facilities, which we hereafter
refer to as the ``nonprofit percentage,'' because interest price
pressures tend to differ between nonprofit and for-profit facilities.
We proposed to use interest costs data from Worksheet A-7 of the 2014
Medicare cost reports for IPPS hospitals, which is the same methodology
used for the FY 2010-based CIPI. The nonprofit percentage determined
using this method is 86 percent. Table IV-08 in the proposed rule (82
FR 19927) provides a comparison of the FY 2010-based CIPI cost weights
and the proposed 2014-based CIPI cost weights. This table is also
included below and
[[Page 38172]]
reflects the final 2014-based CIPI cost weights.
After the capital cost category weights were computed, it was
necessary to select appropriate price proxies to reflect the rate-of-
increase for each expenditure category. We proposed to apply the same
price proxies as were used in the FY 2010-based CIPI, which are listed
below and provided in Table IV-08 in the proposed rule. We also
proposed to continue to vintage weight the capital price proxies for
Depreciation and Interest to capture the long-term consumption of
capital. This vintage weighting method is the same method that was used
for the FY 2010-based CIPI and is described below.
We proposed to continue to proxy the Depreciation--Building and
Fixed Equipment cost category by the BEA Chained Price Index for
Private Fixed Investment in Structures, Nonresidential, Hospitals and
Special Care (BEA Table 5.4.4. Price Indexes for Private Fixed
Investment in Structures by Type). As stated in the FY 2010 IPPS/LTCH
PPS final rule (74 FR 43860), for the FY 2006-based CIPI we finalized
the use of this index to measure the price growth of this cost
category. This BEA index is intended to capture prices for construction
of facilities such as hospitals, nursing homes, hospices, and
rehabilitation centers. For the Depreciation--Movable Equipment cost
category, we proposed to continue to measure the price growth using the
PPI Commodity for Machinery and Equipment (BLS series code WPU11). This
price index reflects price inflation associated with a variety of
machinery and equipment that would be utilized by hospitals including
but not limited to communication equipment, computers, and medical
equipment. For the Nonprofit Interest and For-profit Interest cost
categories, we proposed to continue to measure the price growth using
the average yield on domestic municipal bonds (Bond Buyer 20-bond
index) and the average yield on Moody's Aaa bonds (Federal Reserve),
respectively. As stated above, we proposed two proxies because interest
price pressures tend to differ between nonprofit and for-profit
facilities.
For the Other capital cost category (including insurances, taxes,
and other capital-related costs), we proposed to continue to measure
the price growth using the CPI for Rent of Primary Residence (All Urban
Consumers) (BLS series code CUUS0000SEHA), which would reflect the
price growth of these costs. We believe that these price proxies
continue to be the most appropriate proxies for IPPS capital costs that
meet our selection criteria of relevance, timeliness, availability, and
reliability.
Table IV-08--Proposed and Final 2014-Based CIPI Cost Weights and Price Proxies With FY 2010-Based CIPI Cost
Weights Included for Comparison
----------------------------------------------------------------------------------------------------------------
Proposed and
Cost categories FY 2010 cost final 2014 cost Proposed and final price proxy
weights weights
----------------------------------------------------------------------------------------------------------------
Total..................................... 100.0 100.0 ..................................
Depreciation.......................... 74.0 74.4 ..................................
Building and Fixed Equipment...... 36.2 36.7 BEA's Chained Price Index for
Private Fixed Investment in
Structures, Nonresidential,
Hospitals and Special Care.
Movable Equipment................. 37.9 37.7 PPI Commodity for Machinery and
Equipment.
Interest.............................. 19.2 18.2 ..................................
Government/Nonprofit.............. 17.1 15.7 Average Yield on Domestic
Municipal Bonds (Bond Buyer 20-
Bond Index).
For-Profit........................ 2.1 2.5 Average Yield on Moody's Aaa
Bonds.
Other................................. 6.8 7.4 CPI for Rent of Primary Residence.
----------------------------------------------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For presentational purposes, we are displaying
one decimal and therefore, the detail may not add to the total due to rounding.
Because capital is acquired and paid for over time, capital
expenses in any given year are determined by both past and present
purchases of physical and financial capital. We stated in the proposed
rule that the proposed vintage-weighted 2014-based CIPI 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 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.
Vintage weights are an integral part of the CIPI. Capital costs are
inherently complicated and are determined by complex capital 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 IPPS
capital costs. The CIPI reflects the underlying stability of the
capital acquisition process.
To calculate the vintage weights for depreciation and interest
expenses, we first needed a time series of capital purchases for
building and fixed equipment and movable equipment. We found no single
source that provides an appropriate time series of capital purchases by
hospitals for all of the above components of capital purchases. The
early Medicare cost reports did not have sufficient capital data to
meet this need. Data we obtained from the American Hospital Association
(AHA) did not include annual capital purchases. However, we were able
to obtain data on total expenses back to 1963 from the AHA.
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 then 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 2014. We proposed to separate
these depreciation expenses into annual amounts of building and fixed
[[Page 38173]]
equipment depreciation and movable equipment depreciation as determined
earlier. From these annual depreciation amounts, we derived annual end-
of-year book values for building and fixed equipment and movable
equipment using the expected life for each type of asset category. We
used the AHA data and similar methodology to derive the FY 2010-based
IPPS capital market basket (78 FR 50604).
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 2014-based CIPI. We proposed to calculate the expected lives
using Medicare cost report data. 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 27 years, and the average expected life of movable equipment to be
equal to 12 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 the FY 2010-based CIPI
was based on an expected average life of building and fixed equipment
of 26 years and an expected average life of movable equipment of 12
years. Multiplying these expected lives by the annual depreciation
amounts results in annual year-end asset costs for building and fixed
equipment and movable equipment. We then 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 described in the proposed rule, and this final rule. 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 purchases 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, 27 years, and in the
case of movable equipment, 12 years). For each asset type, we proposed
to use the time series of annual capital purchases amounts available
from 2014 back to 1964. These data allow us to derive twenty-five 27-
year periods of capital purchases for building and fixed equipment and
interest, and forty 12-year periods of capital purchases for movable
equipment. For each 27-year period for building and fixed equipment and
interest, or 12-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 27-year or 12-year period. This calculation was done for
each year in the 27-year or 12-year period and for each of the periods
for which we have data. We then calculated 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.
The vintage weights for the proposed 2014-based CIPI and the FY
2010-based CIPI were presented in Table IV-09 in the proposed rule (82
FR 19928). This table is also included below and reflects the final
2014-based CIPI.
Table IV-09--Proposed and Final 2014-Based CIPI and FY 2010-Based CIPI Vintage Weights
--------------------------------------------------------------------------------------------------------------------------------------------------------
Building and fixed equipment Movable equipment Interest
-----------------------------------------------------------------------------------------------
Year \1\ Proposed and Proposed and Proposed and
final 2014- FY 2010-based final 2014- FY 2010-based final 2014- FY 2010-based
based 27 years 26 years based 12 years 12 years based 27 years 26 years
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................................... 0.024 0.023 0.062 0.064 0.012 0.012
2....................................................... 0.025 0.024 0.064 0.068 0.014 0.013
3....................................................... 0.027 0.026 0.070 0.071 0.015 0.015
4....................................................... 0.028 0.028 0.074 0.073 0.017 0.017
5....................................................... 0.030 0.029 0.078 0.076 0.019 0.018
6....................................................... 0.031 0.031 0.082 0.078 0.021 0.021
7....................................................... 0.033 0.032 0.086 0.084 0.023 0.023
8....................................................... 0.034 0.034 0.088 0.088 0.025 0.025
9....................................................... 0.035 0.036 0.092 0.092 0.027 0.028
10...................................................... 0.036 0.038 0.097 0.098 0.029 0.030
11...................................................... 0.037 0.040 0.102 0.103 0.030 0.033
12...................................................... 0.039 0.041 0.105 0.106 0.033 0.036
13...................................................... 0.040 0.042 .............. .............. 0.035 0.038
14...................................................... 0.040 0.042 .............. .............. 0.037 0.040
15...................................................... 0.039 0.043 .............. .............. 0.037 0.043
16...................................................... 0.039 0.044 .............. .............. 0.040 0.045
17...................................................... 0.040 0.044 .............. .............. 0.041 0.047
18...................................................... 0.042 0.044 .............. .............. 0.045 0.048
19...................................................... 0.042 0.044 .............. .............. 0.048 0.051
20...................................................... 0.042 0.044 .............. .............. 0.050 0.052
21...................................................... 0.043 0.045 .............. .............. 0.052 0.056
22...................................................... 0.043 0.045 .............. .............. 0.054 0.057
[[Page 38174]]
23...................................................... 0.042 0.045 .............. .............. 0.055 0.060
24...................................................... 0.042 0.046 .............. .............. 0.057 0.062
25...................................................... 0.043 0.045 .............. .............. 0.059 0.064
26...................................................... 0.043 0.045 .............. .............. 0.061 0.066
27...................................................... 0.043 .............. .............. .............. 0.062 ..............
-----------------------------------------------------------------------------------------------
Total............................................... 1.000 1.000 1.000 1.000 1.000 1.000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers may not add to total due to rounding.
\1\ Vintage weight in the last year (for example, year 27 for the 2014-based CIPI) is applied to the most recent data point and prior vintage weights
are applied going back in time. For example, year 27 vintage weight would be applied to the 2018q3 fixed price proxy level, year 26 vintage weight
would be applied to the 2017q3 fixed price proxy level, and so forth.
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 IV-09 is applied to the most recent
data point. We have provided on the CMS Web site an example of how the
vintage weighting price proxies are calculated, using example vintage
weights and example price indices. The example can be found under the
following CMS Web site link: http://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.''
Comment: A few commenters supported the proposal to rebase the
CIPI.
Response: We appreciate the commenters' support.
We did not receive any detailed public comments on our methodology
for deriving the proposed 2014-based CIPI. After consideration of the
public comments we received, in this final rule, we are finalizing the
2014-based CIPI as proposed.
Table IV-10 in the proposed rule (82 FR 19929) compares both the
historical and forecasted percent changes in the FY 2010-based CIPI and
the proposed 2014-based CIPI. The percent changes in the proposed rule
were based on IGI's fourth quarter 2016 forecast with historical data
through third quarter 2016. The forecasted growth rates provided in
Table IV-10 below are based on IGI's more recent second quarter 2017
forecast with historical data through first quarter 2017.
Table IV-10--Comparison of FY 2010-Based and Proposed and Final 2014-
Based Capital Input Price Index, Percent Change, FY 2013 Through FY 2020
------------------------------------------------------------------------
Proposed and
Fiscal year CIPI, FY 2010- final CIPI,
based 2014-based
------------------------------------------------------------------------
Historical Data:
FY 2013............................. 1.1 1.0
FY 2014............................. 1.2 1.2
FY 2015............................. 1.2 1.1
FY 2016............................. 1.1 1.0
Average FYs 2013-2016............... 1.2 1.1
Forecast:
FY 2017............................. 1.2 1.1
FY 2018............................. 1.4 1.3
FY 2019............................. 1.4 1.4
FY 2020............................. 1.5 1.5
Average FYs 2017-2020............... 1.4 1.3
------------------------------------------------------------------------
Source: IHS Global Inc., 2nd quarter 2017 forecast.
IGI forecasts a 1.3 percent increase in the proposed and final
2014-based CIPI for FY 2018, as shown in Table IV-10. The underlying
vintage-weighted price increases for depreciation (including building
and fixed equipment and movable equipment) and interest (including
government/nonprofit and for-profit) based on the proposed 2014-based
CIPI were included in Table IV-11 of the proposed rule (82 FR 19929).
Again, the percent changes in the proposed rule were based on IGI's
fourth quarter 2016 forecast with historical data through third quarter
2016. The forecasted growth rates provided in Table IV-11 below are
based on IGI's more recent second quarter 2017 forecast with historical
data through first quarter 2017.
[[Page 38175]]
Table IV-11--Proposed and Final 2014-Based Capital Input Price Index Percent Changes, Total and Depreciation and
Interest Components--FYs 2013 Through 2020
----------------------------------------------------------------------------------------------------------------
Fiscal year Total Depreciation Interest
----------------------------------------------------------------------------------------------------------------
Historical Data:
FY 2013..................................................... 1.0 1.7 -2.5
FY 2014..................................................... 1.2 1.8 -1.8
FY 2015..................................................... 1.1 1.8 -2.7
FY 2016..................................................... 1.0 1.7 -3.0
Forecast:
FY 2017..................................................... 1.1 1.6 -2.2
FY 2018..................................................... 1.3 1.6 -1.3
FY 2019..................................................... 1.4 1.6 -0.5
FY 2020..................................................... 1.5 1.6 -0.1
----------------------------------------------------------------------------------------------------------------
Source: IHS Global Inc. 2nd quarter 2017 forecast.
Rebasing the CIPI from FY 2010 to 2014 decreased the percent change
in the forecasted update for FY 2018 by 0.1 percentage point, from 1.4
percent to 1.3 percent, as shown in Table IV-10. The lower FY 2018
update is primarily due to a change in the vintage weights for the
proposed and final 2014-based CIPI, which includes updating the asset
purchase data through 2014 and changing the building and fixed
equipment and interest asset lives from 26 years to 27 years. This
lower update is only partially offset by the change in the base year
weights, which produce a faster increase due to more weight being given
to the Depreciation cost category and less weight being given to the
Interest cost category. As shown in Table IV-11 in the proposed rule
(82 FR 19929) and this final rule, for FY 2018, vintage-weighted price
growth is projected to be positive for the Depreciation cost category
and negative for the Interest cost category.
V. Other Decisions and Changes to the IPPS for Operating System
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 general, the outlier threshold for
transfer cases, as described in Sec. 412.80(b), is equal to the fixed-
loss outlier threshold for nontransfer cases (adjusted for geographic
variations in costs), divided by the geometric mean length of stay for
the MS-DRG, and multiplied by the 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 directs us 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)).
2. Changes for FY 2018
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19929 through
19931), based on our annual review of MS-DRGs, we identified three MS-
DRGs that we proposed to be included on the list of MS-DRGs subject to
the special payment transfer policy. As we discussed in section II.F.
of the preamble of that proposed rule, in
[[Page 38176]]
response to public comments and based on our analysis of FY 2016 MedPAR
claims data, we proposed to make changes to MS-DRGs, effective for FY
2018.
As discussed in the preamble of the FY 2018 IPPS/LTCH PPS proposed
rule (82 FR 19850), we proposed to delete MS-DRGs 984, 985, and 986
(Prostatic O.R. Procedure Unrelated to Principal Diagnosis with MCC,
with CC and without CC/MCC, respectively) and reassign the procedure
codes currently assigned to these three MS-DRGs to MS-DRGs 987, 988,
and 989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis
with MCC, with CC and without CC/MCC, respectively).
In light of the proposed changes to the MS-DRGs for FY 2018,
according to the regulations under Sec. 412.4(d), we evaluated
proposed revised MS-DRGs 987, 988, and 989 (which would contain the
proposed reassigned procedures from MS-DRGs 984, 985, and 986) against
the general postacute care transfer policy criteria using the FY 2016
MedPAR data. 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 reassess MS-DRGs when
proposing reassignment of procedure or diagnosis codes that would
result in material changes to an MS-DRG. MS-DRGs 987, 988, and 989 are
currently subject to the postacute care transfer policy. We stated in
the proposed rule that as a result of our review, the proposed revised
MS-DRGs 987, 988, and 989 continue to qualify to be included on the
list of MS-DRGs that are subject to the postacute care transfer policy.
We did not propose to change the postacute care transfer policy status
for MS-DRGs 987, 988, and 989.
As discussed in section II.F.14.b. of the preamble of this FY 2018
IPPS/LTCH PPS final rule, we are finalizing the proposed revisions to
these MS-DRGs. Using the March 2017 update of the FY 2016 MedPAR file,
we developed the following chart which sets forth the most recent
analysis of the postacute care transfer policy criteria completed for
this final rule.
List of Revised MS-DRGs Subject to Review of Postacute Care Transfer Policy Status for FY 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent of
short-stay
Postacute care postacute care
transfers Short-stay transfers to Postacute care transfer
Revised MS-DRG MS-DRG title Total cases (55th postacute care all cases policy status
percentile: transfers (55th
1,418) percentile:
7.80629%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
987........................ Non-Extensive O.R. Procedure 8,485 4,395 1,117 13.16441 Yes.
Unrelated to Principal
Diagnosis with MCC.
988........................ Non-Extensive O.R. Procedure 8,876 3,774 817 9.20460 Yes.
Unrelated to Principal
Diagnosis with CC.
989........................ Non-Extensive O.R. Procedure 2,364 * 568 53 * 2.24196 Yes. **
Unrelated to Principal
Diagnosis without MCC/CC.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Indicates a current postacute care transfer policy criterion that the MS-DRG did not meet.
** As described in the policy at 42 CFR 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.
As we discussed in the proposed rule, we also determined that
proposed revised MS-DRGs 987, 988, and 989 would meet the criteria for
the MS-DRG special payment methodology. MS-DRGs 987, 988, and 989 are
not currently listed as being subject to the special payment policy.
Therefore, we proposed that these three proposed revised MS-DRGs would
be subject to the MS-DRG special payment methodology, effective FY
2018.
We did not receive any public comments on this proposal. Therefore,
we are finalizing the proposed changes to the special payment policy
status of MS-DRGs 987, 988, and 989. We note that, in a chart in the
proposed rule (82 FR 19931), we erroneously listed the geometric mean
length of stay for MS-DRG 988 as 8.6 days. The figure should have been
4.4 days (which, for this final rule, is revised to 4.3 days as a
result of the most recent data analysis). Regardless, because the
revised geometric mean length of stay is also greater than 4 days, MS-
DRG 988 qualifies for special payment policy status, and as described
in the policy at 42 CFR 412.4(d)(6)(iv), MS-DRGs 987 and 989 also
qualify, consistent with our proposal. Using the March 2017 update of
the FY 2016 MedPAR file, we developed the following chart which set
forth the most recent data analysis of the special payment methodology
criteria completed for this final rule.
List of Revised MS-DRGs Subject To Review of Special Payment Policy Status for FY 2018
----------------------------------------------------------------------------------------------------------------
50 percent of
Average average
Revised MS-DRG MS-DRG title Geometric mean charges of 1- charges for Special payment
length of stay day discharges all cases policy status
within MS-DRG
----------------------------------------------------------------------------------------------------------------
987................ Non-Extensive O.R. 7.9 $33,424 $52,050 Yes *.
Procedure Unrelated
to Principal
Diagnosis with MCC.
988................ Non-Extensive O.R. 4.3 34,443 28,404 Yes.
Procedure Unrelated
to Principal
Diagnosis with CC.
[[Page 38177]]
989................ Non-Extensive O.R. 2.2 0 0 Yes.*
Procedure Unrelated
to Principal
Diagnosis without
MCC/CC.
----------------------------------------------------------------------------------------------------------------
* As described in the policy at 42 CFR 412.4(d)(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.
The finalized special payment policy status of these three 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
via the Internet on the CMS Web site.
B. Changes in the Inpatient Hospital Update for FY 2018 (Sec.
412.64(d))
1. FY 2018 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.'' As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82
FR 19931 through 19933), for FY 2018, we are setting the applicable
percentage increase by applying the adjustments listed in this section
in the same sequence as we did for FY 2017. 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 are setting the applicable
percentage increase by applying the following adjustments in the
following sequence. 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) 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;
(b) 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;
(c) An adjustment based on changes in economy-wide productivity
(the multifactor productivity (MFP) adjustment); and
(d) An additional reduction of 0.75 percentage point as required by
section 1886(b)(3)(B)(xii) of the Act.
Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added
by section 3401(a) of the Affordable Care Act, state that application
of the MFP adjustment and the additional FY 2018 adjustment of 0.75
percentage point 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
2018 IPPS/LTCH PPS proposed rule (82 FR 19916 through 19923), we
proposed to replace the FY 2010-based IPPS operating market basket with
the rebased and revised 2014-based IPPS operating market basket for FY
2018. We proposed to base the proposed FY 2018 market basket update
used to determine the applicable percentage increase for the IPPS on
IHS Global Inc.'s (IGI's) fourth quarter 2016 forecast of the proposed
2014-based IPPS market basket rate-of-increase with historical data
through third quarter 2016, which was estimated to be 2.9 percent. We
proposed that if more recent data subsequently became available (for
example, a more recent estimate of the market basket and the MFP
adjustment), we would use such data, if appropriate, to determine the
FY 2018 market basket update and the MFP adjustment in this final rule.
We received public comments regarding the rebasing and revising of the
IPPS operating market basket and refer readers to section IV.B. of this
final rule for a complete discussion on the rebasing and revising of
the market basket. In section IV.B., we are finalizing our proposals
without modification and, therefore, are using the finalized rebased
and revised 2014-based IPPS market basket rate-of-increase for FY 2018.
Based on the most recent data available for this FY 2018 IPPS/LTCH
PPS final rule (that is, IGI's second quarter 2017 forecast of the
2014-based IPPS market basket rate-of-increase with historical data
through first quarter 2017), we estimate that the FY 2018 market basket
update used to determine the applicable percentage increase for the
IPPS is 2.7 percent.
For FY 2018, 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 standardized amount 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
MFP 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 Bureau of Labor
Statistics (BLS) publishes the official measure of private nonfarm
business MFP. We refer readers to the BLS Web site at http://www.bls.gov/mfp for the BLS historical published MFP data. MFP is
derived by subtracting the contribution of labor and capital input
growth from output growth. The projections of the components of MFP are
currently produced by IGI, a nationally recognized economic forecasting
firm with which CMS contracts to forecast the components of the market
baskets and MFP. As we discussed in the FY 2016 IPPS/LTCH PPS final
rule (80 FR 49509), beginning with the FY 2016 rulemaking cycle, the
MFP adjustment is calculated using the revised series developed by IGI
to proxy the aggregate capital inputs. Specifically, in order to
generate a forecast of MFP, IGI forecasts BLS aggregate capital inputs
using a
[[Page 38178]]
regression model. A complete description of the MFP projection
methodology is available on the CMS Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html. As discussed in
the FY 2016 IPPS/LTCH PPS final rule, if IGI makes changes to the MFP
methodology, we will announce them on our Web site rather than in the
annual rulemaking.
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19932), for FY
2018, we proposed an MFP adjustment of 0.4 percentage point. Similar to
the market basket update, for the proposed rule, we used IGI's fourth
quarter 2016 forecast of the MFP adjustment to compute the proposed MFP
adjustment. As noted previously, we proposed that if more recent data
subsequently become available, we would use such data, if appropriate,
to determine the FY 2018 market basket update and the MFP adjustment
for the final rule. Based on the most recent data available for this
final rule, we have determined an MFP adjustment of 0.6 percentage
point for FY 2018.
We did not receive any public comments on our proposal to use the
most recent available data to determine the final market basket update
and the MFP adjustment. Therefore, for this final rule, we are
finalizing a market basket update of 2.7 percent and an MFP adjustment
of 0.6 percentage point based on the most recent available data.
Based on the most recent data available for this final rule, as
described previously, we have determined four applicable percentage
increases to the standardized amount for FY 2018, as specified in the
following table:
FY 2018 Applicable Percentage Increases for The IPPS
----------------------------------------------------------------------------------------------------------------
Hospital Hospital Hospital did Hospital did
submitted submitted not submit not submit
quality data quality data quality data quality data
FY 2018 and is a and is not a and is a and is not a
meaningful EHR meaningful EHR meaningful EHR meaningful EHR
user user user user
----------------------------------------------------------------------------------------------------------------
Market Basket Rate[dash]of[dash]Increase........ 2.7 2.7 2.7 2.7
Adjustment for Failure to Submit Quality Data 0.0 0.0 -0.675 -0.675
under Section 1886(b)(3)(B)(viii) of the Act...
Adjustment for Failure to be a Meaningful EHR 0.0 -2.025 0.0 -2.025
User under Section 1886(b)(3)(B)(ix) of the Act
MFP Adjustment under Section 1886(b)(3)(B)(xi) -0.6 -0.6 -0.6 -0.6
of the Act.....................................
Statutory Adjustment under Section -0.75 -0.75 -0.75 -0.75
1886(b)(3)(B)(xii) of the Act..................
Applicable Percentage Increase Applied to 1.35 -0.675 0.675 -1.35
Standardized Amount............................
----------------------------------------------------------------------------------------------------------------
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19932), we
proposed to revise the existing regulations at 42 CFR 412.64(d) to
reflect the current law for the FY 2018 update. Specifically, in
accordance with section 1886(b)(3)(B) of the Act, we proposed to revise
paragraph (vii) of Sec. 412.64(d)(1) to include the applicable
percentage increase to the FY 2018 operating standardized amount 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 an MFP adjustment and less an
additional reduction of 0.75 percentage point.
We did not receive any public comments on our proposed changes to
the regulations at Sec. 412.64(d)(1)(vii) and, therefore, are
finalizing these proposed changes without modification in this final
rule.
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable
percentage increase to the hospital-specific rates for SCHs 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). Therefore, the update to the hospital-specific
rates for SCHs 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.
As discussed in section V.H. of the preamble of the FY 2018 IPPS/
LTCH PPS proposed rule and in this final rule, section 205 of the
Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L.
114-10, enacted on April 16, 2015) extended the MDH program (which,
under previous law, was to be in effect for discharges on or before
March 31, 2015 only) for discharges occurring on or after April 1,
2015, through FY 2017 (that is, for discharges occurring on or before
September 30, 2017). Therefore, under current law, the MDH program will
expire at the end of FY 2017.
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19932), for FY
2018, we proposed updates to the hospital-specific rates applicable to
SCHs based on IGI's fourth quarter 2016 forecast of the proposed 2014-
based IPPS market basket update with historical data through third
quarter 2016. Similarly, we used IGI's fourth quarter 2016 forecast of
the MFP adjustment. We proposed that if more recent data subsequently
became available (for example, a more recent estimate of the market
basket increase and the MFP adjustment), we would use such data, if
appropriate, to determine the update in the final rule.
We did not receive any public comments with regard to our proposal.
Therefore, we are finalizing the proposal to determine the update to
the hospital-specific rates for SCHs in this final rule using the most
recent data available.
For this final rule, based on the most recent available data, we
are finalizing the following updates to the hospital-specific rates
applicable to SCHs (using IGI's second quarter 2017 forecast of the
2014-based IPPS market basket update and the MFP adjustment): An update
of 1.35 percent for a hospital that submits quality data and is a
meaningful EHR user; an update of 0.675 percent for a hospital that
fails to submit quality data and is a meaningful EHR user; an update of
-0.675 percent for a hospital that submits quality data and is not a
meaningful EHR user; and an update of -1.35 percent for a hospital that
fails to submit quality data and is not a meaningful EHR user.
2. FY 2018 Puerto Rico Hospital Update
As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56937
through 56938), prior to January 1, 2016, Puerto Rico hospitals were
paid based on 75 percent of the national
[[Page 38179]]
standardized amount and 25 percent of the Puerto Rico-specific
standardized amount. Section 601 of Public Law 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 under the amendments to section
1886(d)(9)(E) of the Act, there is no longer a need for us to determine
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. Accordingly, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19932 through 19933), for FY 2018, we proposed an applicable percentage
increase of 1.75 percent to the standardized amount for hospitals
located in Puerto Rico. We did not receive any public comments on our
proposal. Based on the most recent available data, we are finalizing an
applicable percentage increase of 1.35 percent to the standardized
amount for hospitals located in Puerto Rico.
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 Puerto Rico hospitals that are not
meaningful EHR users, effective FY 2022. Accordingly, because the
provisions of section 1886(b)(3)(B)(ix) of the Act are not applicable
to hospitals located in Puerto Rico until FY 2022, the adjustments
under this provision are not applicable for FY 2018.
C. Change to Volume Decrease Adjustment for Sole Community Hospitals
(SCHs) and Medicare-Dependent, Small Rural Hospitals (MDHs) (Sec. Sec.
412.92 and 412.108)
1. Background
Sections 1886(d)(5)(D) and (d)(5)(G) of the Act provide special
payment protections under the IPPS to sole community hospitals (SCHs)
and Medicare-dependent, small rural hospitals (MDHs), respectively.
Section 1886(d)(5)(D)(iii) of the Act defines an SCH in part as a
hospital that the Secretary determines is located more than 35 road
miles from another hospital or that, by reason of factors such as
isolated location, weather conditions, travel conditions, or absence of
other like hospitals (as determined by the Secretary), is the sole
source of inpatient hospital services reasonably available to Medicare
beneficiaries. The regulations at 42 CFR 412.92 set forth the criteria
that a hospital must meet to be classified as a SCH. For more
information on SCHs, we refer readers to the FY 2009 IPPS/LTCH PPS
final rule (74 FR 43894 through 43897).
Section 1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital
that is located in a rural area, has not more than 100 beds, is not an
SCH, and has a high percentage of Medicare discharges (that is, not
less than 60 percent of its inpatient days or discharges during the
cost reporting period beginning in FY 1987 or two of the three most
recently audited cost reporting periods for which the Secretary has a
settled cost report were attributable to inpatients entitled to
benefits under Part A). The regulations at 42 CFR 412.108 set forth the
criteria that a hospital must meet to be classified as an MDH. The MDH
program is not authorized by statute beyond September 30, 2017.
Therefore, beginning October 1, 2017, 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.
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).
2. Changes to the Volume Decrease Adjustment Calculation Methodology
for SCHs
Section 1886(d)(5)(D)(ii) and section 1886(d)(5)(G)(iii) of the Act
require that the Secretary adjust the payments made to an SCH and MDH,
respectively, as may be necessary to fully compensate the hospital for
the fixed costs it incurs in providing inpatient hospital services,
including the reasonable cost of maintaining necessary core staff and
services, when it experiences a decrease of more than 5 percent in its
total number of inpatient discharges due to circumstances beyond its
control. These adjustments are known as ``volume decrease
adjustments.''
The regulations governing volume decrease adjustments are found at
42 CFR 412.92(e) for SCHs and Sec. 412.108(d) for MDHs. As noted
earlier, the MDH program is set to expire as of October 1, 2017. As
such, we proposed that if the MDH program ends up being extended by
law, similar to how it was extended by section 205 of the MACRA (Pub.
L. 114-10) and prior legislation, the proposed changes to the volume
decrease adjustment methodology and the proposed amendment to Sec.
412.92(e)(3) for SCHs would also be made to the parallel requirements
for MDHs under Sec. 412.108(d)(3).
To qualify for a volume decrease adjustment, the SCH must: (a)
Submit documentation demonstrating the size of the decrease in
discharges and the resulting effect on per discharge costs; and (b)
show that the decrease is due to circumstances beyond the hospital's
control. If an SCH demonstrates to the MAC's satisfaction that it has
suffered a qualifying decrease in total inpatient discharges, the MAC
determines the appropriate amount, if any, due to the SCH as an
adjustment.
As we have noted in Section 2810.1 of the Provider Reimbursement
Manual, Part 1 (PRM-1) and in adjudications rendered by the PRRB and
the CMS Administrator, under the current methodology, the MAC
determines a volume decrease adjustment amount not to exceed a cap
calculated as the difference between the lesser of (1) the hospital's
current year's Medicare inpatient operating costs or (2) its prior
year's Medicare inpatient operating costs multiplied by the appropriate
IPPS update factor, and the hospital's total MS-DRG revenue for
inpatient operating costs (including outlier payments, DSH payments,
and IME payments). In determining the volume decrease adjustment
amount, the MAC considers the individual hospital's needs and
circumstances, including the reasonable cost of maintaining necessary
core staff and services in view of minimum staffing requirements
imposed by State agencies; the hospital's fixed costs (including
whether any semi-fixed costs are to be considered fixed) other than
those costs paid on a reasonable cost basis; and the length of time the
hospital has experienced a decrease in utilization.
[[Page 38180]]
We have set forth interpretive guidance regarding volume decrease
adjustments in the preambles to various rules and in Section 2810.1 of
the PRM-1. The adjustment also has been the subject of a series of
adjudications, rendered by the PRRB and the CMS Administrator. For
example, we refer readers to Greenwood County Hospital Eureka, Kansas,
v. Blue Cross Blue Shield Association/Blue Cross Blue Shield of Kansas,
2006 WL 3050893 (PRRB August 29, 2006); Unity Healthcare Muscatine,
Iowa v. Blue Cross Blue Shield Association/Wisconsin Physicians
Service, 2014 WL 5450066 (CMS Administrator September 4, 2014); Lakes
Regional Healthcare Spirit Lake, Iowa v. Blue Cross Blue Shield
Association/Wisconsin Physicians Service, 2014 WL 5450078 (CMS
Administrator September 4, 2014); Fairbanks Memorial Hospital v.
Wisconsin Physician Services/BlueCross BlueShield Association, 2015 WL
5852432 (CMS Administrator, August 5, 2015); St. Anthony Regional
Hospital v. Wisconsin Physicians Service, 2016 WL 7744992 (CMS
Administrator October 3, 2016); and Trinity Regional Medical Center v.
Wisconsin Physician Services, 2017 WL 2403399 (CMS Administrator
February 9, 2017). In those adjudications, the PRRB and the CMS
Administrator have recognized that: (1) The volume decrease adjustment
is intended to compensate qualifying SCHs for their fixed costs only,
and that variable costs are to be excluded from the adjustment; and (2)
an SCH's volume decrease adjustment should be reduced to reflect the
compensation of fixed costs that has already been made through MS-DRG
payments.
However, some hospitals have recently expressed concerns regarding
the exact calculations that the MACs use when determining the volume
decrease adjustment. The issue also has been addressed in some recent
decisions of the PRRB. As the above referenced Administrator decisions
illustrate and explain, under the current calculation methodology, the
MACs calculate the volume decrease adjustment by subtracting the
entirety of the hospital's total MS-DRG revenue for inpatient operating
costs, including outlier payments and IME and DSH payments in the cost
reporting period in which the volume decrease occurred, from fixed
costs in the cost reporting period in which the volume decrease
occurred, minus any adjustment for excess staff. If the result of that
calculation is greater than zero and less than the cap, the hospital
receives that amount in a lump-sum payment. If the result of that
calculation is zero or less than zero, the hospital does not receive a
volume decrease payment adjustment.
Under the IPPS, MS-DRG payments are not based on an individual
hospital's actual costs in a given cost reporting period. However, the
main issue raised by the PRRB and individual hospitals is that, under
the current calculation methodology, if the hospital's total MS-DRG
revenue for treating Medicare beneficiaries for which it incurs
inpatient operating costs (consisting of fixed, semi-fixed, and
variable costs) exceeds the hospital's fixed costs, the calculation by
the MACs results in no volume decrease adjustment for the hospital. In
some recent decisions, the PRRB has indicated that it believes it would
be more appropriate for the MACs to adjust the hospital's total MS-DRG
revenue from Medicare by looking at the ratio of a hospital's fixed
costs to its total costs (as determined by the MAC) and applying that
ratio as a proxy for the share of the hospital's MS-DRG payments that
it assumes are attributable (or allocable) to fixed costs, and then
comparing that estimate of the fixed portion of MS-DRG payments to the
hospital's fixed costs. In this way, the calculation would compare
estimated Medicare revenue for fixed costs to the hospital's fixed
costs when determining the volume decrease adjustment.
We continue to believe that our current approach in calculating
volume decrease adjustments is reasonable and consistent with the
statute. The relevant statutory provisions, at sections
1886(d)(5)(D)(ii) and 1886(d)(5)(G)(iii) of the Act, are silent about
and thus delegate to the Secretary the responsibility of determining
which costs are to be deemed ``fixed'' and what level of adjustment to
IPPS payments may be necessary to ensure that total Medicare payments
have fully compensated an SCH or MDH for its ``fixed costs.'' These
provisions suggest that the volume decrease adjustment amount should be
reduced (or eliminated as the case may be) to the extent that some or
all of an SCH's or MDH's fixed costs have already been compensated
through other Medicare subsection (d) payments. The Secretary's current
approach is also consistent with the regulations and the PRM-1. Like
the statute, the relevant regulations do not address variable costs,
and the regulations and the PRM-1 (along with the Secretary's preambles
to issued rules (48 FR 39781 through 39782 and 55 FR 15156) and
adjudications) all make it clear that the volume decrease adjustment is
intended to compensate qualifying SCHs and MDHs for their fixed costs,
not for their variable costs, and that variable costs are to be
excluded from the volume decrease adjustment calculation. Nevertheless,
we understand why hospitals might take the view that CMS should make an
effort, in some way, to ascertain whether a portion of MS-DRG payments
can be allocated or attributed to fixed costs in order to fulfill the
statutory mandate to ``fully compensate'' a qualifying SCH for its
fixed costs.
Accordingly, after considering these views, in the FY 2018 IPPS/
LTCH PPS proposed rule (82 FR 19933), we proposed to prospectively
change how the MACs calculate the volume decrease adjustments and
require that the MACs compare estimated Medicare revenue for fixed
costs to the hospital's fixed costs to remove any conceivable
possibility that a hospital that qualifies for the volume decrease
adjustment could ever be less than fully compensated for fixed costs as
a result of the application of the adjustment. We proposed that, in
order to estimate the fixed portion of the Medicare revenue, the MACs
would apply the ratio of the hospital's fixed costs to total costs in
the cost reporting period when it experienced the volume decrease to
the hospital's total Medicare revenue in that same cost reporting
period. We proposed to revise the regulations at 42 CFR 412.92(e)(3) to
reflect our proposed change in the MAC's calculation of the volume
decrease adjustment that would apply prospectively to cost reporting
periods beginning on or after October 1, 2017, and to reflect that the
language requiring that the volume decrease adjustment amount not
exceed the difference between the hospital's Medicare inpatient
operating costs and the hospital's total DRG revenue for inpatient
operating costs would only apply to cost reporting periods beginning
before October 1, 2017, but not to subsequent cost reporting periods.
Under the proposed methodology, if a hospital's total MS-DRG payment is
less than its total Medicare inpatient operating costs, the sum of any
resulting volume decrease adjustment payment and its MS-DRG payment
would never exceed its total Medicare inpatient operating costs due to
the fact that the fixed cost percentage is applied to the MS-DRG
payment in calculating the volume decrease adjustment amount. By taking
the ratio derived from the subset of fixed costs to total costs and
applying that same ratio to the MS-DRG payment, we ensure that the sum
of a hospital's IPPS payment
[[Page 38181]]
and its volume decrease adjustment payment would never exceed its total
Medicare inpatient operating costs, thus negating the need for a cap
calculation. Thus, the proposed methodology would render the current
volume decrease adjustment cap calculation obsolete. Conversely, if a
hospital's total MS-DRG payment is greater than its total Medicare
inpatient operating costs, calculating a volume decrease adjustment
using the proposed methodology would result in a negative payment
amount, which would yield a volume decrease adjustment payment of zero.
Finally, if a hospital's total MS-DRG payment is equal to its total
Medicare inpatient operating costs, calculating a volume decrease
adjustment using the proposed methodology would also yield a volume
decrease adjustment payment of zero. Furthermore, we believe that
because a hospital could not foresee a decrease in its volume from one
year to the next and would therefore not plan for a volume decrease
adjustment, the volume decrease adjustment payment should therefore not
be limited to a cap that is based on the previous year's costs. For
these reasons, we proposed to remove the cap calculation from the
volume decrease adjustment calculation methodology in future periods.
We believe that this new approach to calculating the volume decrease
adjustment, like the current methodology, is reasonable and consistent
with the statute.
We proposed that these proposed changes in the MAC's calculation of
the volume decrease adjustment would be prospective, effective for cost
reporting periods beginning on or after October 1, 2017. We indicated
in the proposed rule that if these proposed changes are adopted, we
also intended to update Section 2810.1 of the PRM-1 to reflect the
changes in the calculation of the volume decrease adjustment by the
MAC. For volume decrease adjustments for earlier cost reporting
periods, we stated that the current calculation methodology would
continue. In addition, we stated that we were not proposing to change
any part of the methodology, criteria, rules, or presumptions we
consider and apply in determining whether to classify a given cost as
fixed, semi-fixed, or variable for purposes of the volume decrease
adjustment.
In the proposed rule, we presented the following example to
illustrate the calculation of the volume decrease adjustment by the MAC
under our proposed change. We note that, as presented in our proposed
rule, the example may have implied that under the proposed methodology,
the MACs would apply the ratio of the hospital's Medicare fixed costs
to total Medicare costs, rather than ``the ratio of the hospital's
fixed costs to total costs in the cost reporting period when it
experienced the volume decrease to the hospital's total Medicare
revenue in that same cost reporting period,'' as stated elsewhere in
the preamble (82 FR 19934). We have modified the example below to
address this inconsistency and to clarify our intent by including
additional details to more clearly illustrate how Medicare fixed costs
and the fixed MS-DRG revenue are calculated and used in the
calculation, including to reflect that this same ratio, that is, the
hospital's fixed inpatient costs to total inpatient costs, is applied
to total Medicare costs to arrive at fixed Medicare costs, as under the
current methodology.
Example: In its cost reporting period beginning October 1, 2017,
Hospital A has total Medicare inpatient operating costs equaling
$1,600,000 and total MS-DRG revenue (including outlier payments, IME
and DSH) of $1,400,000. The MAC determines that the hospital qualifies
for a volume decrease adjustment for this cost reporting period. The
MAC classifies $2,720,000 of Hospital A's total (Medicare and non-
Medicare) costs as fixed and $480,000 as variable. Hospital A's fixed
cost ratio is therefore .85 = $2,720,000/($2,720,000 + $480,000) =
$2,720,000/$3,200,000. The MAC applies this ratio to the (1) total MS-
DRG revenue of $1,400,000 to estimate the hospital's fixed MS-DRG
revenue to be $1,190,000 and (2) total Medicare inpatient operating
costs to estimate the hospital's fixed Medicare costs to be $1,360,000.
The volume decrease adjustment payment is then calculated by comparing
the fixed MS-DRG revenue of $1,190,000 to the Medicare fixed costs of
$1,360,000, resulting in a volume decrease adjustment payment of
$170,000 ($1,360,000 minus $1,190,000).
Under the current methodology used by the MACs, Hospital A would
receive no volume decrease adjustment payment because its total MS-DRG
revenue from Medicare of $1,400,000 exceeded the hospital's Medicare
fixed costs of $1,360,000. Furthermore, under the current methodology,
but not under our proposed methodology, it is possible that a hospital
would still receive no volume decrease adjustment payment even if its
Medicare fixed costs exceeded its total MS-DRG revenue if those fixed
costs exceeded the previous year's costs updated for inflation.
We also proposed changes to an adjustment that might be made to a
hospital's staffing costs in calculating the volume decrease
adjustment. The statute and regulations and the PRM-1 imply, and we
have expressly indicated in prior rulemaking, most recently in the FY
2006 rulemaking, our belief that not all staff costs can necessarily be
considered fixed costs (71 FR 48056 through 48060). Therefore, we
currently require a hospital, when applying for a volume decrease
adjustment, to demonstrate that it appropriately adjusted the number of
staff in inpatient areas of the hospital based on the decrease in the
number of inpatient days but not beyond minimum levels as required by
State or local laws. If a hospital does not appropriately adjust its
number of staff, the cost of maintaining those staff members is
deducted from the total volume decrease adjustment payment. In
reviewing the volume decrease adjustment calculation, we have also
weighed the administrative burden on the hospital of making this
demonstration to CMS, as compared to an assumption that it is likely
that a hospital would, in its normal course of business, adjust its
staffing levels as revenue declines. In the absence of evidence to
contrary, we believe that a hospital would adjust its staffing levels
as revenue declines rather than maintain those staffing levels for the
sole purpose of potentially having those staffing costs eventually
reflected in a Medicare volume decrease adjustment payment that the
hospital may or may not qualify for when it files its cost report.
Therefore, we proposed to modify the volume decrease adjustment process
to no longer require that a hospital explicitly demonstrate that it
appropriately adjusted the number of staff in inpatient areas of the
hospital based on the decrease in the number of inpatient days and to
no longer require the MAC to adjust the volume decrease adjustment
payment amount for excess staffing. We proposed that these changes
would be effective for cost reporting periods beginning on or after
October 1, 2017.
Comment: Commenters supported CMS' proposed changes to the volume
decrease adjustment methodology to (1) apply the ratio of the
hospital's fixed costs to total costs in the cost reporting period when
it experienced the volume decrease to the hospital's total Medicare
revenue in that same cost reporting period; (2) remove the cap
calculation from the volume decrease adjustment calculation methodology
in future periods; (3) no longer require that a hospital explicitly
demonstrate that it appropriately adjusted the number of
[[Page 38182]]
staff in inpatient areas of the hospital based on the decrease in the
number of inpatient days; and (4) no longer require the MAC to adjust
the volume decrease adjustment payment amount for excess staffing.
However, commenters suggested that CMS apply these proposals
retrospectively with a gamut of suggestions as to the specific types of
volume decrease adjustment determinations for which to apply the
proposed methodology: Pending volume decrease adjustment
determinations; volume decrease adjustment determinations currently
under appeal; unsettled cost reports; volume decrease adjustment
determinations that are still within the PRRB appeal timeline; volume
decrease adjustment determinations for which the MAC has issued a
recoupment demand; volume decrease adjustment determinations for all
open cost reports, regardless of whether an appeal was made; and all
open cost reports, including those for which a volume decrease
adjustment was not requested.
Some commenters asserted that what CMS outlined in the proposed
rule as its ``current methodology'' was not, in fact, the current
methodology being applied consistently across the board and that
applying that methodology to pending volume decrease adjustment cases
would amount to retroactive rulemaking. The commenters added that the
proposed methodology, or the ``proxy methodology,'' is not, in fact,
new because it has been referenced in PRRB decisions and has been used
by some MACs at times. Other commenters stated that critical funding to
hospitals for pending volume decrease adjustment determinations should
not be at risk due to a lack of standardization across CMS and MAC
decisions.
Response: We appreciate the commenters' support of our proposed
changes to the volume decrease adjustment methodology. We disagree with
the commenters' assertion that the methodology that we outlined as our
``current methodology'' is not current but a new methodology that we
are introducing as ``current.'' While there may have been
inconsistencies in volume decrease adjustment determinations made by
some MACs, inconsistent MAC determinations and PRRB decisions that are
subsequently reversed by the Administrator do not establish agency
policy nor bind the agency. Furthermore, our current methodology has
been upheld by the PRRB in Greenwood County Hospital Eureka, Kansas, v.
Blue Cross Blue Shield Association/Blue Cross Blue Shield of Kansas,
2006 WL 3050893 (PRRB, August 29, 2006) and clearly outlined in the
Administrator's decisions in Unity Healthcare Muscatine, Iowa v. Blue
Cross Blue Shield Association/Wisconsin Physicians Service, 2014 WL
5450066 (CMS Administrator September 4, 2014); Lakes Regional
Healthcare Spirit Lake, Iowa v. Blue Cross Blue Shield Association/
Wisconsin Physicians Service, 2014 WL 5450078 (CMS Administrator
September 4, 2014); Fairbanks Memorial Hospital v. Wisconsin Physician
Services/BlueCross BlueShield Association, 2015 WL 5852432 (CMS
Administrator, August 5, 2015); St. Anthony Regional Hospital v.
Wisconsin Physicians Service, 2016 WL 7744992 (CMS Administrator
October 3, 2016); and Trinity Regional Medical Center v. Wisconsin
Physician Services, 2017 WL 2403399 (CMS Administrator February 9,
2017), to name a few. For these reasons, we disagree with the
commenters that our current policy was not the established policy, and
we believe that applying this policy does not constitute retroactive
rulemaking. Indeed, some of these same commenters are currently
awaiting a court decision in a pending appeal in which they challenged
the exact methodology which they claim in their comments is not
``current policy'' but a redefined ``new policy.''
We also do not agree that we should apply our proposed methodology
retroactively. The IPPS is a prospective system and, absent
legislation, a judicial decision, or other compelling considerations to
the contrary, we generally make changes to IPPS regulations effective
prospectively based on the date of discharge or the start of a cost
reporting period within a certain Federal fiscal year. We believe
following our usual approach and applying the new methodology for cost
reporting periods beginning on or after October 1, 2017 would allow for
the most equitable application of this methodology among all IPPS
providers seeking to qualify for volume decrease adjustments. For these
reasons, we are finalizing that our proposed changes to the volume
decrease adjustment methodology will apply prospectively for cost
reporting periods beginning on or after October 1, 2017.
Comment: One commenter suggested that, because CMS did not issue
updated core staffing factors for FY 2012 or later, the proposed change
to no longer require a hospital to explicitly demonstrate that it
appropriately adjusted the number of staff in inpatient areas of the
hospital based on the decrease in the number of inpatient days and to
no longer require the MAC to adjust the volume decrease adjustment
payment amount for excess staffing be effective for cost reporting
periods beginning on or after October 1, 2011.
Response: We appreciate the commenter's support of our effort to
streamline the volume decrease adjustment determination process by
eliminating the core staffing adjustment. However, we disagree with the
suggestion to apply this change retroactively. As noted earlier, the
IPPS is a prospective system and we generally make changes effectively
prospectively. The absence of updated core staffing data does not
undermine the policy that we expressly indicated in prior rulemaking.
Therefore, we do not see any compelling reason to apply this change
retrospectively.
Comment: Some commenters addressed areas of volume decrease
adjustment policy for which we did not propose any changes. These
included waiving the requirement for hospitals to demonstrate that the
decrease in discharges was beyond the hospital's control; to no longer
require the removal of variable costs and calculate the volume decrease
adjustment by subtracting the MS-DRG payment from total inpatient
costs; shortening the timeline in which MACs need to make volume
decrease adjustment determinations; and stopping MACs from rejecting
requests for volume decrease adjustments before an NPR is issued.
Response: We appreciate the commenters' concerns. However, because
we did not make any proposals related to these specific policy areas
and we consider these comments to be out of the scope of the proposed
rule, we are not addressing them in this final rule.
After consideration of the public comments we received, we are
finalizing our policies as proposed, with one modification to our
proposed amendment to Sec. 412.92(e)(3) to reflect these policies. We
are finalizing our proposal to prospectively require that the MACs
compare Medicare revenue allocable to fixed costs from the cost
reporting period in which the hospital experienced the volume decrease
to the hospital's fixed costs from that same cost reporting period when
calculating a volume decrease adjustment and that the cap will no
longer be applied to the volume decrease adjustment calculation
methodology. We proposed to revise the regulations at Sec.
412.92(e)(3) to reflect these changes. However, our proposed regulatory
text did not precisely capture the new calculation methodology that we
described in the preamble to the proposed rule, and which we are now
finalizing, in one respect. Specifically,
[[Page 38183]]
the preamble to the proposed rule stated that, under the proposed
change in the MAC's calculation of the volume decrease adjustment, ``in
order to estimate the fixed portion of the Medicare revenue, the MACs
would apply the ratio of the hospital's fixed costs to total costs in
the cost reporting period when it experienced the volume decrease to
the hospital's total Medicare revenue in that same cost reporting
period'' (82 FR 19934). By contrast, the proposed regulatory text in
the proposed rule stated that the ratio to be applied by the MAC would
be ``the ratio of the hospital's fixed Medicare inpatient operating
costs to its total Medicare inpatient operating costs'' (82 FR 20161).
Therefore, consistent with the proposed policy which we are now
finalizing, we are deleting the two instances of the words ``Medicare''
that appear in the clause quoted in the preceding sentence.
Accordingly, as finalized, the second sentence of Sec. 412.92(e)(3)
specifies that, effective for cost reporting periods beginning on or
after October 1, 2017, the MAC determines a lump sum adjustment amount
equal to the difference between the hospital's fixed Medicare inpatient
operating costs and the hospital's total MS-DRG revenue based on MS-
DRG-adjusted prospective payment rates for inpatient operating costs
(including outlier payments for inpatient operating costs determined
under subpart F of Part 412 and additional payments made for inpatient
operating costs for hospitals that serve a disproportionate share of
low-income patients as determined under Sec. 412.106 and for indirect
medical education costs as determined under Sec. 412.105) multiplied
by the ratio of the hospital's fixed inpatient operating costs to its
total inpatient operating costs. We also are finalizing our proposal to
prospectively modify the volume decrease adjustment process to no
longer require that a hospital explicitly demonstrate that it
appropriately adjusted the number of staff in inpatient areas of the
hospital based on the decrease in the number of inpatient days and to
no longer require the MAC to adjust the volume decrease adjustment
payment amount for excess staffing. These changes will be effective for
cost reporting periods beginning on or after October 1, 2017. As we
noted earlier, we proposed that if the MDH program ends up being
extended by law, similar to how it was extended by section 205 of the
MACRA (Pub. L. 114-10) and prior legislation, these changes to the
volume decrease adjustment methodology and the amendment to Sec.
412.92(e)(3) for SCHs would also be made to the parallel requirements
for MDHs under Sec. 412.108(d)(3). To that end, we are modifying the
regulations at Sec. 412.108(d)(3) by modifying the introductory
paragraph to cross-reference the requirements found at Sec.
412.92(e)(3). This will allow for consistency in the regulations
governing volume decrease adjustments should the MDH program be
extended.
D. Rural Referral Centers (RRCs) Annual Updates to Case-Mix Index 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 some special treatment under both the DSH payment
adjustment and the criteria for geographic reclassification.
Section 402 of Public Law 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 Public Law 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), 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 47089), 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
(c)(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
The hospital's 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.
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 2018 is based on the CMI values of all urban hospitals
nationwide, and the regional median CMI values for FY 2018 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 2016 (October 1, 2015 through September 30, 2016),
and include bills posted to CMS' records through March 2016.
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19936), 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,
2017, they must have a CMI value for FY 2016 that is at least--
1.6635 (national--all urban); or
The median CMI value (not transfer-adjusted) for urban
hospitals
[[Page 38184]]
(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 proposed median CMI values by region were set forth in the
proposed rule (82 FR 19936). We stated in the proposed rule that we
intended to update these proposed CMI values in the FY 2018 final rule
to reflect the updated FY 2016 MedPAR file, which will contain data
from additional bills received through March 2017. We did not receive
any public comments on our proposal. Based on the latest available data
(FY 2016 bills received through March 2017), 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, 2017, they must have a CMI value for FY 2016 that
is at least--
1.6638 (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 table below:
------------------------------------------------------------------------
Case-mix index
Region value
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)................. 1.4192
2. Middle Atlantic (PA, NJ, NY)......................... 1.5133
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).. 1.5405
4. East North Central (IL, IN, MI, OH, WI).............. 1.5896
5. East South Central (AL, KY, MS, TN).................. 1.5086
6. West North Central (IA, KS, MN, MO, NE, ND, SD)...... 1.6344
7. West South Central (AR, LA, OK, TX).................. 1.6950
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............ 1.7580
9. Pacific (AK, CA, HI, OR, WA)......................... 1.6473
------------------------------------------------------------------------
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 2018 IPPS/LTCH
PPS proposed rule, for FY 2018, we proposed to update the regional
standards based on discharges for urban hospitals' cost reporting
periods that began during FY 2015 (that is, October 1, 2014 through
September 30, 2015), which were the latest cost report data available
at the time this proposed rule was developed. Therefore, 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, 2017, must have, as the number of discharges for
its cost reporting period that began during FY 2015, at least--
5,000 (3,000 for an osteopathic hospital); or
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 2018 IPPS/LTCH PPS proposed rule at 82 FR
19936.) In the proposed rule, we stated that we intended to update
these numbers in the FY 2018 final rule based on the latest available
cost report data.
We did not receive any public comments on our proposal.
Based on the latest discharge data available at this time, that is,
for cost reporting periods that began during FY 2015, the final median
number of discharges for urban hospitals by census region are set forth
in the following table.
------------------------------------------------------------------------
Number of
Region discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)................. 8,080
2. Middle Atlantic (PA, NJ, NY)......................... 9,988
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).. 10,552
4. East North Central (IL, IN, MI, OH, WI).............. 8,181
5. East South Central (AL, KY, MS, TN).................. 8,647
6. West North Central (IA, KS, MN, MO, NE, ND, SD)...... 7,709
7. West South Central (AR, LA, OK, TX).................. 5,325
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............ 8,735
9. Pacific (AK, CA, HI, OR, WA)......................... 9,101
------------------------------------------------------------------------
We note that the median number of discharges for hospitals in each
census region is greater than the national standard of 5,000
discharges. Therefore, 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.
E. Payment Adjustment for Low-Volume Hospitals (Sec. 412.101)
1. Expiration of Temporary Changes to Low-Volume Hospital Payment
Policy
Under section 1886(d)(12) of the Act, as amended, most recently by
section 204 of the Medicare Access and CHIP
[[Page 38185]]
Reauthorization Act of 2015 (MACRA), Public Law 114-10, the temporary
changes in the low-volume hospital payment policy originally provided
by the Affordable Care Act and extended through subsequent legislation
are effective through FY 2017. Beginning with FY 2018, the preexisting
low-volume hospital payment adjustment and qualifying criteria, as
implemented in FY 2005 and discussed later in this section, will
resume. We discuss the payment policies for FY 2018 in section V.E.3.
of the preamble of this final rule.
2. Background
Section 1886(d)(12) of the Act, as added by section 406(a) of
Public Law 108-173, provides for a payment adjustment to account for
the higher costs per discharge for low-volume hospitals under the IPPS,
effective beginning FY 2005. Sections 3125 and 10314 of the Affordable
Care Act amended section 1886(d)(12) of the Act by modifying the
definition of a low-volume hospital and the methodology for calculating
the payment adjustment for low-volume hospitals, effective only for
discharges occurring during FYs 2011 and 2012. Specifically, the
provisions of the Affordable Care Act amended the qualifying criteria
for low-volume hospitals to specify, for FYs 2011 and 2012, that a
hospital qualifies as a low-volume hospital if it is more than 15 road
miles from another subsection (d) hospital and has less than 1,600
discharges of individuals entitled to, or enrolled for, benefits under
Medicare Part A during the fiscal year. In addition, the statute, as
amended by the Affordable Care Act, provides that the low-volume
hospital payment adjustment (that is, the percentage increase) is
determined using a continuous linear sliding scale ranging from 25
percent for low-volume hospitals with 200 or fewer discharges of
individuals entitled to, or enrolled for, benefits under Medicare Part
A in the fiscal year to 0 percent for low-volume hospitals with greater
than 1,600 discharges of such individuals in the fiscal year. The
temporary changes to the low-volume hospital qualifying criteria and
the payment adjustment originally provided by the Affordable Care Act
were extended by subsequent legislation, most recently through FY 2017
by section 204 of the MACRA. (We refer readers to the FY 2017 IPPS/LTCH
PPS final rule (81 FR 56941 through 59943) for a detailed summary of
the applicable legislation.) Under current law, beginning with FY 2018,
the preexisting low-volume hospital qualifying criteria and payment
adjustment, as implemented in FY 2005 and described in this section,
will resume. The regulations implementing the low-volume hospital
adjustment provided by section 1886(d)(12) of the Act are located 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 this section. Therefore, the additional payment
adjustment is based on the per discharge amount paid to the qualifying
hospital under section 1886 of the Act. In other words, the low-volume
add-on payment amount is based on total per discharge payments made
under section 1886 of the Act, including capital, DSH, IME, and
outliers. For hospitals paid based on the hospital-specific rate, the
low-volume add-on payment amount is based on either the Federal rate or
the hospital-specific rate, whichever results in a greater operating
IPPS payment.
Section 1886(d)(12)(C)(i) of the Act defines a low-volume hospital,
for fiscal years other than FYs 2011 through 2017, as a subsection (d)
hospital (as defined in paragraph (1)(B)) that the Secretary determines
is located more than 25 road miles from another subsection (d) hospital
and that has less than 800 discharges during the fiscal year. Section
1886(d)(12)(C)(ii) of the Act further stipulates that the term
``discharge'' means an inpatient acute care discharge of an individual,
regardless of whether the individual is entitled to benefits under
Medicare Part A. Therefore, for fiscal years other than FYs 2011
through 2017, the term ``discharge'' refers to total discharges,
regardless of payer (that is, not only Medicare discharges).
Furthermore, section 1886(d)(12)(B) of the Act requires, for discharges
occurring in FYs 2005 through 2010 and FY 2018 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. Section
1886(d)(12)(B)(iii) of the Act limits the applicable percentage
increase adjustment to no more than 25 percent.
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 to low-
volume hospitals where there is empirical evidence that higher
incremental costs are associated with low numbers of total discharges.
In the FY 2006 IPPS final rule (70 FR 47432 through 47434), we stated
that multivariate analyses supported the existing low-volume adjustment
implemented in FY 2005.
3. Payment Adjustment for FY 2018 and Subsequent Fiscal Years
In accordance with section 1886(d)(12) of the Act, beginning with
FY 2018, the low-volume hospital definition and payment adjustment
methodology will revert back to the statutory requirements that were in
effect prior to the amendments made by the Affordable Care Act and
extended by subsequent legislation. Therefore, effective for FY 2018
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. As discussed earlier, 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 and as discussed earlier, 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 and 799
discharges do not receive a low-volume hospital adjustment.)
As described earlier, for FYs 2005 through 2010 and FY 2018 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
[[Page 38186]]
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 2017, 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.
For FY 2018 and for subsequent fiscal years, in addition to a
discharge criterion, the eligibility for the low-volume payment
adjustment is also dependent upon the hospital meeting the mileage
criterion specified at Sec. 412.101(b)(2)(i). Specifically, to meet
the mileage criterion to qualify for the low-volume payment adjustment
for FY 2018 and subsequent fiscal years, a hospital must be located
more than 25 road miles from the nearest subsection (d) hospital. 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).
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275
and 50414) and subsequent rulemaking, most recently in the FY 2017
IPPS/LTCH PPS final rule (81 FR 56942 through 56943), we discussed the
process for requesting and obtaining the low-volume hospital payment
adjustment. In order to qualify for the low-volume hospital payment
adjustment, a hospital must provide to its MAC sufficient evidence to
document that it meets the discharge and distance requirements. The MAC
will determine, based on the most recent data available, if the
hospital qualifies as a low-volume hospital, so that the hospital will
know in advance whether or not it will receive a payment adjustment.
The MAC and CMS may review available data, in addition to the data the
hospital submits with its request for low-volume hospital status, in
order to determine whether or not the hospital meets the qualifying
criteria.
In order to receive a low-volume hospital payment adjustment under
Sec. 412.101, a hospital must notify and provide documentation to its
MAC that it meets the mileage criterion. The use of a Web-based mapping
tool as part of documenting that the hospital meets the mileage
criterion for low-volume hospitals is acceptable. The MAC will
determine if the information submitted by the hospital, such as the
name and street address of the nearest hospitals, location on a map,
and distance (in road miles, as defined in the regulations at Sec.
412.101(a)) 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 low-
volume mileage criterion. In addition, the MAC will refer to the
hospital's most recently submitted cost report to determine whether or
not the hospital meets the discharge criterion. A hospital should refer
to its most recently submitted cost report for total discharges
(Medicare and non-Medicare) in order to decide whether or not to apply
for low-volume hospital status for a particular fiscal year. A hospital
must continue to meet the qualifying criteria at Sec. 412.101(b)(2)(i)
as a low-volume hospital (that is, the discharge criterion and the
mileage criterion) in order to receive the payment adjustment in that
year; that is, low-volume hospital status is not based on a ``one-
time'' qualification (75 FR 50238 through 50275).
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19938), in order to be a low-volume hospital in FY 2018 and subsequent
fiscal years, in accordance with our previously established procedure,
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 25-percent, low-volume,
add-on 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
25-percent, low-volume, add-on 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.
Specifically, for FY 2018, a hospital must make a written request
for low-volume hospital status that is received by its MAC no later
than September 1, 2017, in order for the 25-percent, low-volume, add-on
payment adjustment to be applied to payments for its discharges
beginning on or after October 1, 2017 (through September 30, 2018).
Under this procedure, a hospital that qualified for the low-volume
hospital payment adjustment for FY 2017 may continue to receive a low-
volume hospital payment adjustment for FY 2018 without reapplying if it
meets both the discharge criterion and the mileage criterion applicable
for FY 2018. As in previous years, in the FY 2018 IPPS/LTCH PPS
proposed rule (82 FR 19938), we proposed that such a hospital must send
written verification that is received by its MAC no later than
September 1, 2017, stating that it meets the mileage criterion
applicable for FY 2018. For FY 2018, 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
applicable for FY 2018 (that is, less than 200 discharges total,
including both Medicare and non-Medicare discharges). If a hospital's
request for low-volume hospital status for FY 2018 is received after
September 1, 2017, and if the MAC determines the hospital meets the
criteria to qualify as a low-volume hospital, the MAC will apply the
25-percent, low-volume, add-on payment adjustment to determine the
payment for the hospital's FY 2018 discharges, effective prospectively
within 30 days of the date of the MAC's low-volume hospital status
determination. We noted that this process mirrors our established
application process but is updated to ensure that providers currently
receiving the low-volume hospital payment adjustment verify that they
meet both the mileage criterion and the discharge criterion applicable
for FY 2018 to continue receiving the adjustment for FY 2018. For
additional information on our established application process for the
low-volume hospital payment adjustment, we refer readers to the FY 2017
IPPS/LTCH PPS final rule (81 FR 56942 through 56943).
Comment: A few commenters expressed concern about the financial
impact of the expiration of the temporary changes to the low-volume
hospital payment adjustment provided for by the Affordable Care Act and
extended through subsequent legislation (most recently the MACRA). Some
commenters supported legislative action that would make permanent these
changes to the low-volume hospital payment adjustment. Other commenters
requested that CMS use the existing statutory authority to make the
low-volume adjustment to qualifying hospitals that have less than 800
total discharges rather than only to qualifying hospitals that have
less than 200 total discharges. These commenters did not provide any
data analysis in support of
[[Page 38187]]
their comments to expand the low-volume hospital adjustment to
qualifying hospitals that have less than 800 total discharges.
One commenter questioned whether CMS would be making any claims
processing or cost report changes in light of the expiration of the
temporary changes to the low-volume hospital payment adjustment.
Response: As noted earlier in the preamble of this final rule and
as discussed in response to public comments in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53408 through 53409) and the FY 2014 IPPS/LTCH
PPS final rule (78 FR 50612 through 50613), to implement the original
low-volume hospital payment adjustment provision, and as mandated by
statute, we developed an empirically justified adjustment based on the
relationship between costs and total discharges of hospitals with less
than 800 total (Medicare and non-Medicare) discharges. Specifically, we
performed several regression analyses to evaluate the relationship
between hospitals' costs per case and discharges, and found that an
adjustment for hospitals with less than 200 total discharges is most
consistent with the statutory requirement to provide for additional
payments to low-volume hospitals where there is empirical evidence that
higher incremental costs are associated with lower numbers of
discharges (69 FR 49101 through 49102). Based on these analyses, we
established a low-volume hospital policy under which qualifying
hospitals with less than 200 total discharges receive a payment
adjustment of an additional 25 percent. (Section 1886(d)(12)(B)(iii) of
the Act limits the applicable percentage increase adjustment to no more
than 25 percent.) 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, because we are not aware
of any analysis or empirical evidence that would support expanding the
originally established a low-volume hospital adjustment policy, we did
not make any proposals regarding the low-volume hospital payment
adjustment for FY 2018 and are not making any changes to the low-volume
hospital payment adjustment policy in this final rule.
Therefore, the low-volume hospital definition and payment
adjustment methodology will revert back 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
(most recently the MACRA).
With regard to the comment regarding revisions to claims processing
or the cost report, any such changes will be addressed through
subregulatory guidance or other avenues, as appropriate.
After consideration of the public comments we received, we are
finalizing our proposals as described above, without modification.
As described earlier, for FYs 2005 through 2010 and FY 2018 and
subsequent fiscal years, the discharge determination will be 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 hospital 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. As we noted in the proposed rule,
for FYs 2011 through 2017, 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 a discharge
criterion, the eligibility for the low-volume hospital payment
adjustment also will be dependent upon the hospital meeting the mileage
criterion specified at Sec. 412.101(b)(2)(i). Specifically, to meet
the mileage criterion to qualify for the low-volume hospital payment
adjustment for FY 2018 and subsequent fiscal years, a hospital must be
located more than 25 road miles from the nearest subsection (d)
hospital.
For FY 2018, as discussed in the proposed rule, we will continue to
use the established process for requesting and obtaining the low-volume
hospital payment adjustment. That is, in order to receive a low-volume
hospital payment adjustment under Sec. 412.101, a hospital must notify
and provide documentation to its MAC that it meets the discharge and
distance requirements. The MAC will determine, based on the most recent
data available, if the hospital qualifies as a low-volume hospital, so
that the hospital will know in advance whether or not it will receive a
payment adjustment. The MAC and CMS may review available data, in
addition to the data the hospital submits with its request for low-
volume hospital status, in order to determine whether or not the
hospital meets the qualifying criteria. (For additional details on our
established process for the low-volume hospital payment adjustment, we
refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56942
through 56943).)
Consistent with our previously established procedure, for FY 2018,
a hospital must make a written request for low-volume hospital status
that is received by its MAC no later than September 1, 2017, in order
for the 25-percent low-volume hospital payment adjustment to be applied
to payments for its discharges beginning on or after October 1, 2017
(through September 30, 2018). Under this procedure, a hospital that
qualified for the low-volume hospital payment adjustment for FY 2017
may continue to receive a low-volume hospital payment adjustment for FY
2018 without reapplying if it meets both the discharge criterion and
the mileage criterion applicable for FY 2018. As in previous years,
such a hospital must send written verification that is received by its
MAC no later than September 1, 2017, stating that it meets the mileage
criterion applicable for FY 2018. In addition, for such a hospital,
this written verification must also state, based upon the most recently
submitted cost report, that the hospital meets the discharge criterion
applicable for FY 2018 (that is, less than 200 discharges total,
including both Medicare and non-Medicare discharges). If a hospital's
request for low-volume hospital status for FY 2018 is received after
September 1, 2017, and if the MAC determines the hospital meets the
criteria to qualify as a low-volume hospital, the MAC will apply the
25-percent low-volume hospital payment adjustment to determine the
payment for the hospital's FY 2018 discharges, effective prospectively
within 30 days of the date of the MAC's low-volume hospital status
determination.
In the FY 2016 IPPS interim final rule with comment period (80 FR
49594 through 49597 and 49767), we made conforming changes to the
regulations at 42 CFR 412.101 to reflect the extension of the changes
to the qualifying criteria and the payment adjustment methodology for
low-volume hospitals through FY 2017 in accordance with section 204 of
the MACRA. Under these revisions, beginning with FY 2018, consistent
with current law, the low-volume hospital qualifying criteria and
payment adjustment methodology will return to the criteria and
methodology that were in effect prior to the amendments made by the
Affordable Care Act (that is, the low-volume hospital payment policy in
effect for FYs 2005 through 2010). Therefore, no
[[Page 38188]]
further revisions to the policy or to the regulations at Sec. 412.101
are required to conform them to the statutory requirement that the low-
volume hospital policy in effect prior to the Affordable Care Act will
again be in effect for FY 2018 and subsequent years.
As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19938), for this reason, we did not propose specific amendments to the
regulations at Sec. 412.101 to reflect the expiration of the temporary
changes to the low-volume hospital payment adjustment policy originally
provided for by the Affordable Care Act, but we proposed that if these
temporary changes to the low-volume hospital payment policy were to be
extended by law, similar to extensions provided most recently through
FY 2017 by MACRA, we would make conforming changes to the regulations
at Sec. 412.101(b) through (d), as appropriate, to reflect any such
extension. Because, as of the time of the development of this final
rule, these temporary changes to the low-volume hospital payment policy
have not been extended by law, we are not making any such conforming
changes. As noted previously, any changes to the cost report will be
addressed through subregulatory guidance or other avenues, as
appropriate.
4. Parallel Low-Volume Hospital Payment Adjustment Regarding Hospitals
Operated by the Indian Health Services (IHS) or a Tribe
As previously stated, section 1886(d)(12)(C) of the Act and our
regulations at 42 CFR 412.101(b)(2) require that, in order to qualify
for the low-volume hospital payment adjustment, a hospital must be
located more than a specified number of miles from the nearest
subsection (d) hospital (referred to as the mileage criterion). Section
1886(d)(1)(B) of the Act defines a ``subsection (d) hospital'' as a
hospital located in one of the 50 States or District of Columbia, other
than the specified excluded types of hospitals. As stated in prior
rulemaking (for example, 79 FR 50153 (August 22, 2014), 78 FR 61194 and
61196 (October 3, 2013), 78 FR 50710 (August 19, 2013), 78 FR 27623
(May 10, 2013), 77 FR 53397 (August 31, 2012), 77 FR 27965 (May 11,
2012), 75 FR 50307 (August 16, 2010)), CMS considers IHS and Tribal
hospitals to be subsection (d) hospitals. However, in the FY 2018 IPPS/
LTCH PPS proposed rule (82 FR 19939), we stated that, given the unique
nature of IHS and Tribal hospitals and the populations they serve, as
discussed below, we believe it would be appropriate to provide
additional flexibility in determining eligibility for the low-volume
hospital payment adjustment for IHS and Tribal hospitals and non-IHS
hospitals that are located less than the specified mileage from one
another. Specifically, we proposed that, for an IHS or Tribal hospital,
only its proximity to other IHS or Tribal hospitals would be used to
determine if the mileage criterion is met. Similarly, for a non-IHS
hospital, only its proximity to other non-IHS hospitals would be used
to determine if the mileage criterion is met.
Except for emergencies and a few other limited special cases, those
individuals who are not members of a federally recognized Tribe are not
eligible for treatment at IHS or Tribal hospitals. Therefore, such a
hospital is not a valid option for the general Medicare population,
including local residents who are not members of a federally recognized
Tribe or not otherwise eligible for IHS services. Therefore, we stated
that we believe it would be appropriate to not consider IHS and Tribal
hospitals when evaluating whether a non-IHS hospital meets the mileage
criterion.
Likewise, we stated that we believe it would be appropriate to not
consider non-IHS hospitals when evaluating whether an IHS or Tribal
hospital meets the mileage criterion. The principal mission of the IHS
is the provision of health care to American Indians and Alaska Natives
throughout the United States. In carrying out that mission, IHS
operates under two primary authorizing statutes. The first statute, the
Snyder Act, authorizes IHS to expend such moneys as Congress may
determine from time to time appropriate for the conservation of the
health of American Indians or Alaska Natives. We refer readers to 25
U.S.C. 13 (providing that the Bureau of Indian Affairs (BIA) will
expend funds as appropriated for, among other things, the conservation
of health of American Indians and Alaska Natives); and 42 U.S.C.
2001(a) (transferring the responsibility for American Indian and Alaska
Native health care from BIA to HHS). The second statute, the Indian
Health Care Improvement Act (IHCIA), established IHS as an agency
within the Public Health Service of HHS and provides authority for
numerous programs to address particular health initiatives for American
Indians and Alaska Natives, such as alcohol and substance abuse and
diabetes (25 U.S.C. 1601 et seq.).
IHS and Tribal hospitals are charged with addressing the health of
American Indians and Alaska Natives and are uniquely situated to
provide services to this population. For this reason, we stated that we
believe it would be appropriate to not consider the non-IHS hospitals
when evaluating whether an IHS or Tribal hospital meets the mileage
criterion.
Because IHS and Tribal hospitals are subsection (d) hospitals, in
the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19339), we proposed to
use our authority under section 1886(d)(5)(I)(i) of the Act to provide
an adjustment equal to the applicable low-volume adjustment provided
for under section 1886(d)(12) of the Act for an IHS or Tribal hospital
whose sole disqualifier for the low-volume hospital adjustment is its
proximity to a non-IHS hospital, and for a non-IHS hospital whose sole
disqualifier is its proximity to an IHS or Tribal hospital. Such an
adjustment would provide that, practically speaking, an IHS or Tribal
hospital would be able to receive a low-volume hospital adjustment
based on its distance to the nearest IHS or Tribal hospital, and a non-
IHS hospital would be able to qualify to receive a low-volume hospital
adjustment based on its distance to the nearest non-IHS hospital. We
believe it is appropriate to apply this authority here, given the
unique characteristics of IHS and Tribal hospitals, as discussed above.
To implement this proposed adjustment, we proposed to revise 42 CFR
412.101 by adding paragraph (e) to provide that, for discharges
occurring in FY 2018 and subsequent years, only the distance between
IHS or Tribal hospitals would be considered when assessing whether an
IHS or Tribal hospital meets the mileage criterion under Sec.
412.101(b)(2). Similarly, only the distance between non-IHS hospitals
would be considered when assessing whether a non-IHS hospital meets the
mileage criterion under Sec. 412.101(b)(2).
Comment: Commenters supported the proposed parallel adjustment so
that, for discharges occurring in FY 2018 and subsequent years, only
the distance between IHS or Tribal hospitals would be considered when
assessing whether an IHS or Tribal hospital meets the mileage criterion
under Sec. 412.101(b)(2), and similarly, only the distance between
non-IHS hospitals would be considered when assessing whether a non-IHS
hospital meets the mileage criterion under Sec. 412.101(b)(2). Several
commenters urged CMS to apply this proposal retroactively as, according
to some commenters, they did not believe CMS has always considered IHS
and Tribal hospitals to be subsection (d) hospitals for purposes of the
low-volume payment adjustment, while other commenters believed that IHS
and Tribal hospitals are not ``like'' hospitals. Some commenters asked
CMS to state in
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its final rule that the proposed addition of paragraph (e) to Sec.
412.101 is a codification and clarification of existing policy
regarding dissimilar hospitals, and that under that policy it is proper
to approve a low-volume hospital adjustment to a hospital despite its
proximity to an IHS or Tribal hospital. In general, commenters pointed
to one or more of the following reasons in support of their assertion
that the proposed rule is a codification and clarification of existing
policy rather than a new policy: (1) Published CMS and MAC guidance
that commenters claim has provided for a ``like hospital'' standard
since the implementation of the adjustment (for example, Transmittal
1347, Change Request 8627 (February 14, 2014)); (2) a hospital that is
within 15 miles of an IHS hospital and also has sole community hospital
status indicates that such hospitals and IHS facilities are not ``like
hospitals''; (3) assertions that some MACs had, at times for some cost
reporting periods (or portions thereof), allowed non-IHS hospitals
whose sole disqualifier was proximity to an IHS or Tribal hospital to
receive a low-volume hospital adjustment; and (4) two Departmental
Appeals Board decisions for cases which involved CAH designation not
eligibility for a low-volume hospital adjustment (Cibola General
Hospital, DAB No. 2387 (2011) and La Paz Regional Hospital, DAB CR 2883
(2013)), that commenters asserted found that ``IHS facilities should be
disregarded in determining a hospital's eligibility for Medicare
program classifications that are based on proximity to other Medicare
hospitals.''
Response: We appreciate the commenters' support of our proposal.
Because we have consistently considered IHS and Tribal hospitals to be
subsection (d) hospitals, as noted in the preambles of the above cited
rules, we believe it is inappropriate to apply this parallel adjustment
retroactively. While CMS may have in certain instances used terms such
as ``like'' in place of ``subsection (d)'' when issuing subregulatory
guidance for the low-volume hospital adjustment and there may have been
inconsistencies in low-volume hospital adjustment determinations made
by some contractors, these factors do not establish agency policy or
bind the agency. Indeed, CMS' regulations at Sec. 412.101(b)(2)
clearly refer to the proximity to the nearest subsection (d) hospital,
consistent with section 1886(d)(12)(C)(i) of the Act, but neither the
statutory nor the regulatory provisions that govern the low-volume
hospital adjustment refer to a ``like'' hospital standard. The SCH
regulations at Sec. 412.92(a), by comparison, expressly refer to
proximity to a ``like'' hospital (as defined at Sec. 412.92(c)(2)),
consistent with section 1886(d)(5)(D)(iii) of the Act.
Moreover, the DAB decisions cited by the commenters concerned the
certification of a hospital for CAH status, not the requirements for
determining proximity to a subsection (d) hospital for purposes of the
low-volume hospital payment adjustment. To the extent that these
decisions could be interpreted to mean that the DAB has held that IHS
hospitals may not, by implication, be subsection (d) hospitals, we
reiterate that CMS has a longstanding policy of considering IHS and
Tribal hospitals to be subsection (d) hospitals (as noted in the
preambles to the rules cited above). As a result, we believe that it is
necessary to amend the regulation governing the low-volume hospital
payment adjustment in order to provide flexibility in determining
eligibility for the adjustment. Therefore, after consideration of the
public comments we received, we are finalizing this proposal, including
our proposed revisions to 42 CFR 412.101, without modification.
F. Indirect Medical Education (IME) Payment Adjustment Factor for FY
2018 (Sec. 412.105)
Under the IPPS, an additional payment amount is made to hospitals
with residents in an approved graduate medical education (GME) program
in order to reflect the higher indirect patient care costs of teaching
hospitals relative to nonteaching hospitals. The payment amount is
determined by use of a statutorily specified adjustment factor. The
regulations regarding the calculation of this additional payment, known
as the IME adjustment, are located at Sec. 412.105. We refer readers
to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full
discussion of the IME adjustment and IME adjustment factor. 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. Accordingly, in the FY 2018 IPPS/LTH PPS proposed
rule (82 FR 19940), we stated that, for discharges occurring during FY
2018, the formula multiplier is 1.35. We estimate that application of
this formula multiplier for the FY 2018 IME adjustment will result in
an increase in IPPS payment of 5.5 percent for every approximately 10
percent increase in the hospital's resident-to-bed ratio.
Comment: One commenter stated that it appreciated that the
resident-to-bed ratio is statutorily required for purposes of
calculating the IME adjustment. The commenter requested that, in order
to respond to physician shortages, policymakers provide additional
funding to train future physicians and urged CMS to consider additional
funding that would supplement the current IME adjustment factor.
Response: We appreciate the commenter's comment. As noted above,
the IME adjustment factor is statutory and the calculation of the IME
payment is also specified in statute. Accordingly, for discharges
occurring during FY 2018, the formula multiplier is 1.35.
G. Payment Adjustment for Medicare Disproportionate Share Hospitals
(DSHs) for FY 2018 (Sec. 412.106)
1. 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 needy 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 most common, 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
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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.
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 Sec. 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, 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. (For purposes of this final rule,
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.
As provided by section 3133 of the Affordable Care Act, section
1886(r) of the Act requires that, for FY 2014 and each subsequent
fiscal year, a subsection (d) hospital that would otherwise receive DSH
payments made under section 1886(d)(5)(F) of the Act receives two
separately calculated payments. Specifically, section 1886(r)(1) of the
Act provides that the Secretary shall pay to such subsection (d)
hospital (including a Pickle 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. We refer to this payment as the ``empirically justified
Medicare DSH payment.''
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 FYs 2014 through 2017, 1 minus the
percent change in the percent of individuals under the age of 65 who
are uninsured, determined by comparing the percent of such individuals
who were uninsured in 2013, the last year before coverage expansion
under the Affordable Care Act (as calculated by the Secretary based on
the most recent estimates available from the Director of the
Congressional Budget Office before a vote in either House on the Health
Care and Education Reconciliation Act of 2010 that, if determined in
the affirmative, would clear such Act for enrollment), and the percent
of individuals who were uninsured in the most recent period for which
data are available (as so calculated) minus 0.1 percentage point for FY
2014, and minus 0.2 percentage point for FYs 2015 through 2017. For FYs
2014 through 2017, the baseline for the estimate of the change in
uninsurance is fixed by the most recent estimate of the Congressional
Budget Office before the final vote on the Health Care and Education
Reconciliation Act of 2010, which is contained in a March 20, 2010
letter from the Director of the Congressional Budget Office to the
Speaker of the House. (The March 20, 2010 letter is available for
viewing on the following Web site: https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/costestimate/amendreconprop.pdf.)
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), minus 0.2
percentage point for FYs 2018 and 2019.
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.''
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
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capital IPPS DSH payment provided under the regulations at 42 CFR part
412, subpart M, which were 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 the periods selected
in order to develop such estimates.
2. Eligibility for Empirically Justified Medicare DSH Payments and
Uncompensated Care Payments
As indicated earlier, 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 in order 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 payment made to a subsection (d) hospital under section 1886(r)(1)
of the Act, the Secretary shall pay to such subsection (d) hospitals an
additional amount. Because section 1886(r)(1) of the Act refers to
empirically justified Medicare DSH payments, the additional payment
under section 1886(r)(2) of the Act is limited to hospitals that
receive empirically justified Medicare DSH payments in accordance with
section 1886(r)(1) of the Act 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
provided 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 for the applicable fiscal year (using the most recent data that
are available). We indicated that our final determination on the
hospital's eligibility for uncompensated care payments will be based on
the hospital's actual DSH status at cost report settlement for that
payment year.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY
2015 IPPS/LTCH PPS final rule (79 FR 50006), we specified our policies
for several specific classes of hospitals within the scope of section
1886(r) of the Act. We refer readers to those two final rules for a
detailed discussion of our policies. In summary, we specified 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 the new
payment methodology (78 FR 50623 and 79 FR 50006).
Maryland hospitals are not eligible to receive empirically
justified Medicare DSH payments and uncompensated care payments under
the payment methodology of section 1886(r) of the Act because they are
not paid under the IPPS. As discussed in the FY 2015 IPPS/LTCH PPS
final rule (79 FR 50007), effective January 1, 2014, the State of
Maryland elected to no longer have Medicare pay Maryland hospitals in
accordance with section 1814(b)(3) of the Act and entered into an
agreement with CMS that Maryland hospitals will be paid under the
Maryland All-Payer Model. However, under the Maryland All-Payer Model,
Maryland hospitals still are not paid under the IPPS. Therefore, they
remain ineligible to receive empirically justified Medicare DSH
payments or 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 payments. 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
Federal fiscal year (based on the best available data at that time)
subject to settlement through the cost report, and if they receive
interim empirically justified Medicare DSH payments in a fiscal year,
they also will receive interim uncompensated care payments for that
fiscal year on a per discharge basis, subject as well to settlement
through the cost report. 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).